ValueLicensing Issues Summary Judgement Application In Competition Claim Against Microsoft

In the application filed on 14 December, ValueLicensing is asking the CAT to make orders striking out parts of Microsoft’s Amended Defence, specifically two of its alternative defences and its purported reservation of rights to plead foreign law, on the basis that they have no real prospect of success.

While Microsoft’s primary defences are matters for trial, Microsoft is alternatively contending that first, any abuse of dominance by it was “objectively justified” and that the contractual terms at issue were “necessary and reasonable” and second, that any appreciable anti-competitive effects were “outweighed by and proportionate to” certain benefits (efficiencies).

In its arguments, ValueLicensing insists that Microsoft was required to set out the factual basis for these alternative defences. In its order dated 19 May 2023, the CAT had ordered Microsoft to provide responses to certain ValueLicensing information requests “with sufficient particularity” for ValueLicensing to be able to understand Microsoft’s case. But seven months later, ValueLicensing alleges that Microsoft has still not provided the relevant information.

On the issue of applicable law, ValueLicensing is arguing that its claim is governed by English law up until 31 December 2020 when Brexit occurred, but for events giving rise to damage after Brexit, it is the law of the country of the market concerned, i.e. the laws of the UK and the EEA member states. Microsoft says that the applicable rules are all materially identical, because, after Brexit only English law applies.

ValueLicensing is also alleging that Microsoft has not complied with CAT’s 19 May 2023 order, which required Microsoft to stipulate any material respect in which it intended to rely on any rule of foreign law that materially departs from UK or EU law. Microsoft has not done so and continues to reserve its rights to plead foreign law.

ValueLicensing’s application for summary judgment must be determined by the full Tribunal which will possibly be between March and June next year.

Separately, the next Case Management Conference is still to be listed but is likely to occur early in 2024 before the hearing on the summary judgment application. Disclosure is scheduled for late March 2024 and trial for 2025.

Jonathan Horley, founder and Managing Director of ValueLicensing said: “Microsoft has had ample time and opportunity to come forward with the specific factual information required to underpin its objective justification defence, its efficiency defence, and its case on foreign law.”

ValueLicensing is a re-seller of pre-owned software licenses including Microsoft Windows and Microsoft Office. Such “second hand” software licenses can be lawfully re-sold where they comply with the conditions set out the CJEU in UsedSoft GmbH v Oracle International Corp C-128/11 (3 July 2012). One such condition is that the holder of copyright (here, Microsoft) has obtained “appropriate remuneration” for the software license from the original acquirer of the license.

ValueLicensing’s case suing Microsoft for £270m in damages for alleged anti-competitive behaviour is summarised in its Re-Amended Particulars of Claim filed with the CAT on 14 June 2023. The case was originally filed in the High Court nearly three years ago, in April 2021, then transferred to the CAT in November 2022.

ValueLicensing is alleging that Microsoft has stifled the supply of pre-owned Microsoft licences in the UK and the EEA. ValueLicensing alleges that in abusing the power of its dominant market position, and in entering into agreements which prevented, restrained or distorted competition, Microsoft imposed anticompetitive contractual clauses on public and private sector organisations. The clauses restricted customers from reselling their Microsoft perpetual licenses in return for securing discounts on their Microsoft subscription licences.

The net result has been higher prices and less choice for customers, who have been steered into cloud-based Office365 and Azure subscriptions.

Such customers include enterprise businesses and publicly funded organisations including NHS Trusts, Local Councils and across the UK Civil Service, which rely on the pre-owned Microsoft software licenses market to keep operating costs as low as reasonably possible. ValueLicensing’s CAT claim covers perpetual licences for desktop software (Windows, Office and related products), but there may also have been damage relating to licences for other products.