Microsoft issued a legal response Friday to digital-media giant RealNetworks' charge that Microsoft illegally leveraged its OS dominance to gain market share for Windows Media Player (WMP) and its other Windows Digital Media products. Microsoft argues that its behavior "constitutes permissible competitive activity" and is therefore legal; the company also accused RealNetworks of launching its antitrust lawsuit to gain its own market share. RealNetworks filed its lawsuit against Microsoft in December, accusing Microsoft of predatory conduct.
   "The digital-media marketplace is characterized by intense competition and a continual stream of new technology and innovations and companies entering the market each week," Microsoft's statement said. "This is a case where a leading firm is seeking to use antitrust laws to protect and increase it market share and to limit the competition it must face." Earlier, Microsoft also complained that RealNetworks filed its antitrust suit in San Jose, California--in the heart of Silicon Valley, where most of Microsoft's competitors are based--and not in Washington, where both Microsoft and RealNetworks are based. Microsoft has asked the court to move the case to a less hostile environment.
   RealNetworks' complaint centers around the suddenly age-old argument of product bundling. The company says that by bundling WMP with Windows and making it a feature that users can't remove, Microsoft is violating the terms of its antitrust settlement with the US government and unfairly making it difficult for competitors such as RealNetworks to make headway in the digital-media market. Microsoft's legal response noted that users can hide WMP, if desired, by using a new feature the company introduced in Windows XP Service Pack 1 (SP1). Microsoft also argued that integrating digital-media technologies in Windows has fostered rapid innovation and hasn't harmed competition.
   Microsoft's response indicates that the company intends to defend its ability to bundle digital-media technologies in Windows, although Microsoft faces a similar legal battle in Europe, thanks to an antitrust fight that also revolves around the company's media player. The European Union (EU) recently shot down a Microsoft settlement attempt that would have required PC makers to include RealNetworks' media player and other competitive products on a separate CD-ROM with all Windows PCs. The EU argued that consumers rarely use such CD-ROMs and that including a CD-ROM with new PCs would thus do little to reverse Microsoft's ill-gotten market share.