High Court hears Microsoft argument to dismiss £270m lawsuit

The UK's High court last week heard Microsoft's plea to strike out a lawsuit one of its resellers filed last year over alleged anti-competitive practices.

UK-based ValueLicensing says Microsoft is trying to kill off the pre-owned software market.

While Microsoft seemed to acknowledge that there were some concerns around competition law that needed to be addressed against its US and Ireland operations, its lawyers argued that there weren't reasonable grounds for a claim against its UK unit, which did nothing more than market the licenses.

"How is that capable of being an abuse?" Robert O'Donoghue QC reportedly asked the court. "How is contacting for payments an abuse?"

ValueLicensing's lawyers has urged the Court to dismiss Microsoft's attempts to strike out the suit.

Founded in 2009, Derby-based ValueLicensing is a software licence reseller that specialises in procuring pre-owned Microsoft software licences from businesses and selling them across the UK and Europe.

The firm buys licences from businesses that no longer need them, either due to moving their IT to the cloud or after becoming insolvent. Its client base is made up primarily of public sector bodies, including local councils and NHS trusts.

In April last year, ValueLicensing filed a £270 million antitrust lawsuit against Microsoft in the UK High Court, accusing the US firm of trying to kill competition in the secondhand software market.

The company claimed that it had lost hundreds of millions of pounds in revenue since 2016 because Microsoft pressures companies in the UK and EEA not to sell licences they no longer require, imposing anticompetitive contractual clauses on customers and restricting the resale of perpetual licences as a condition for a discount on its cloud-based software, such as Office 365.

The reseller said that Microsoft's practice has removed the majority of preowned licences from the market, preventing prospective enterprise clients from purchasing perpetual licences from firms like ValueLicensing, and thereby raising the cost of ownership.

It also claimed that Microsoft has been abusing its market dominance and pseudo-monopoly on office software to unfairly inflate the pricing of software services like Office 365.

ValueLicensing requested that the High Court grant damages for the loss it has incurred as a consequence of Microsoft's behaviour.

It also wants Microsoft to abolish its policy of prohibiting the transfer of perpetual licences, as well as the non-disclosure and discount agreements that enable the practise to continue.

The firm said the lost desktop product sales in the UK and EEA as a consequence of Microsoft's activities since 2016 would have resulted in an estimated gross profit of around £270 million. It even believes that number could go higher, saying, 'Losses are continuing and ValueLicensing reserves the right to amend the scope of the claim.'

However, Microsoft claimed in court last week that just a small percentage of the licences obtained by ValueLicensing between October 2018 and August 2020 were from enterprises in the UK.

ValueLicensing responded that its ability to acquire licenses had been significantly diminished as a consequence of Microsoft's practices.

The question of whether a UK court has jurisdiction to hear the claim was also raised during last week's hearing, especially if Microsoft succeeds in getting its UK unit struck off the claim.

The software giant said Microsoft Ireland would be the "obvious" forum, considering the fact that it is the entity through which the company issues licences in the UK and EEA.

ValueLicensing rejected the claim, stating that the UK was a key affected market and that the bulk of its claims are governed by English law.

The case continues.