Microsoft still facing long list of legal woes

Microsoft's settlement with RealNetworks on Tuesday eliminates one lingering headache for the embattled software maker but other legal migraines remain.

Most prominent is the European Union's ongoing pursuit of Microsoft through the courts. In March 2004, then-European competition commissioner Mario Monti levied a €497m ($596m) fine after ruling the company had unfairly wielded its market power against rivals.

RealNetworks was the largest corporation participating in the European Union's antitrust prosecution and must withdraw from those proceedings under the terms of the settlement. But RealNetworks' absence is not likely to make a difference during Microsoft's appeal.

Thomas Vinje, an antitrust attorney with Clifford Chance in Brussels, Belgium, said: "The settlement strengthens the Commission's case. Real has already provided evidence for the case, and that record is complete and in Luxembourg."

Vinje predicted the EC will continue to scrutinise Microsoft's adherence to its ruling even though RealNetworks has dropped out. "Nothing changes," he said. "The EC will vigorously pursue this case as they had before. The only thing that happened is they did make Real's US antitrust case go away."

The European Union's ruling requires Microsoft to provide key technical details to server software makers and to offer a version of Windows without Media Player. That was in part designed to help RealNetworks' competing RealPlayer application. (Microsoft has appealed the requirement to the Court of First Instance in Luxembourg but no date has been set for a hearing.)

Tuesday's announcement highlights the divide-and-conquer legal strategy Microsoft has doggedly followed while defending itself from antitrust claims. Though technical details of the settlements have varied, two things have remained constant: a fat cheque from Microsoft and a mandatory withdrawal from the European complaint process.

When Microsoft agreed to pay Novell $536m last November, the condition was that Novell agree to drop out of the European proceedings. The same requirement attached to the $1.95bn deal with Sun Microsystems and the $750m peace treaty with AOL Time Warner. Microsoft also settled a lawsuit with IBM.

The Computer and Communications Industry Association (CCIA) - another critic that was a vocal agitator in Europe - also cashed a hefty cheque, and CCIA president Ed Black received a pay raise from $200,000 to nearly $1m per year.

In a telephone interview on Tuesday, Microsoft general counsel Brad Smith acknowledged the European antitrust process may have spurred the RealNetworks lawsuit toward a settlement: "To some degree those hearings also helped to sharpen those issues."

Remaining Microsoft foes pursuing their complaints in Europe include VideoBanner.com (formerly AudioBanner.com); the Software and Information Industry Association in Washington, DC; the Free Software Foundation Europe; and the European Committee for Interoperable Standards. FSF Europe says it is "worried that the loopholes in the [EU's March 2004] decision can be exploited by Microsoft's lawyers".

For the world's most famous antitrust defendant, other possible legal woes remain.

EU competition commissioner Neelie Kroes told The International Herald Tribune last month: "We have had informal complaints, and we are using our time now to look at them. We're not going to wait and do nothing."

There's the Kai-Fu Lee case involving a bitter employment dispute with Google (which Microsoft characteristically offered to settle). A federal judge in Baltimore has permitted portions of a subsequent lawsuit filed by Novell to proceed.

Microsoft lost a round last month when the US Patent Office reaffirmed the Eolas web-browsing patent, and pen-computing pioneer Go sued Microsoft in July on antitrust grounds.

And the software titan remains such a tempting bull's-eye that it's likely to face a continued barrage of lawsuits, said one attorney who specialises in antitrust matters.

The attorney said: "They're a big company and have a dominate position in the OS business, so they will always be a target."

Microsoft has been hit with antitrust lawsuits, including from Real Networks, over the bundling issue with Windows. But it's unlikely the Justice Department or Federal Trade Commission will take action against the software giant for bundling issues, since the US settlement already exists to address them, the attorney said. "I think the agencies will wait to see something more substantial, not the same music as in the old cases," said the attorney, who was previously an antitrust lawyer for the federal government.

CNET News.com's Ina Fried contributed to this report

Dawn Kawamoto writes for CNET News.com