The European Court of First Instance has upheld a staggering £345m fine on Microsoft for breaking competition law. It was ruled the American giant had abused its dominance of the market for PC operating systems through its Windows software.

Is this the end of Microsoft's dominance, or is it merely a levelling of a playing field that will threaten other big players and help smaller technology companies avoid being trampled underfoot?

The story is that in 1998, Sun Microsystems complained to the competition authorities that Microsoft had refused to provide it with interface information to allow it to develop server products that would operate with Windows.

Microsoft said the information was secret and it was not prepared to give it to others so they could develop competing products.

In 2000, the European Commission also started investigating the effects of the incorporation into Windows 2000 of Microsoft's Windows Media Player (WMP).

This component came bundled free with Windows and quickly took over from erstwhile market leaders such as RealPlayer and QuickTime.

In 2004, the commission decided that Microsoft's refusal to supply interface information between Windows software and non-Microsoft operating systems was part of a broader strategy deliberately intended to exclude competitors from the market.

The commission also found that by attaching WMP to Windows 2000, Microsoft had artificially reduced competitor incentives to develop competing software and this ultimately reduced consumer choice.

It was these decisions by the commission that have now been upheld by the court.

The court's view was that in order to be able to compete viably with Windows work group server operating systems, competing systems had to be able to interact with Windows on an equal footing.

This did not mean, as Microsoft had complained, that essential source code would have to be revealed.

But it would be necessary for the company to give its competitors a detailed technical description of certain rules of interconnection and interaction that can be used within the Windows work group networks to deliver work group services'.

This means Microsoft is now forced to reveal some of its secrets and must license some of its intellectual property to its competition.

Usually, an owner of a technical secret or intellectual property can use it - or refuse to use it - as they see fit, but there are exceptional cases' where, if the owner is dominant in its market, the European Court will order otherwise.

For an exceptional case' to arise: o The refusal to grant a licence must relate to a product or service vitally necessary to a particular activity.

o The refusal must be of such a kind as to exclude any effective competition in its neighbouring market.

o The refusal must prevent the appearance of a new product for which there is potential consumer demand.

The court also found the bundling of WMP into Windows was an abuse since: o The tying product (the operating system) and tied products (the media player) were two separate products.

o Microsoft was dominant in the market for the tying product.

o Consumers could not choose to buy Windows without WMP, and WMP could not be uninstalled from Windows.

o The practise was to the detriment of the competition.

o There was no objective justification for the bundling.

Perhaps surprisingly, none of this is new law. The rules on inter-operability of software products have been around since the mid-1980s.

The decision on WMP has merely confirmed a previous European court decision on refusals to license intellectual property which also dates from about 20 years ago. These rules do not only apply to software - the previous court decision related to copyright in TV listings magazines.

All types of technology are covered by these rules. The key element is that a company has to be dominant in the relevant market, but dominance' usually means having about only 40 per cent or more of a market, so it is a threshold that can easily be reached in new and innovative industries.

Microsoft can appeal to the full European Court of Justice, but it is doubtful that the main decisions will be overturned.

The judgement in this case confirms that if you are a successful company, with a significant share of your market, then you need to be careful how you treat your competitors who can come knocking on your door demanding access to your secret technology.

The Commission is already looking hard at the likes of Intel, Apple and at Microsoft's new product, Vista.

And if you are a smaller player dominated by a Microsoft or similar big beast, a careful application of the competition laws may well reap dividends, and help level an otherwise daunting playing field.

o Contact: Simon Smith, 01865 253284, simon.smith@bllaw.co.uk