Microsoft asks judge to dismiss 62 antitrust suits

Lawyers started filing the lawsuits in November after U.S. District Judge Thomas Penfield Jackson issued "findings of fact" determining that Microsoft is a dangerous monopoly.

In the lawsuits, plaintiffs allege that Microsoft used its monopoly power to overcharge consumers for Windows 95 and 98. During trial testimony in Microsoft's antitrust battle with the Justice Department and 19 states, the government introduced economic information suggesting the software company overcharged consumers as much as $40 for every copy of Windows sold.

In related news today, the European Union opened an antitrust case against Microsoft, claiming it is abusing its market position in computer operating systems software to dominate the market.

Yesterday, U.S. District Court Judge J. Frederick Motz in Baltimore received Microsoft's latest motion on the antitrust suits and is expected to issue a ruling in the coming weeks. If he sides with Microsoft, as expected, it will cut by nearly half the number of private suits pending against the company.

A panel of judges in April consolidated the bulk of the federal suits in U.S. District Court in Baltimore. Many of the others were filed in state courts.

In the Justice Department case, Jackson ruled in June that Microsoft had used illegal and unfair tactics against rivals to sustain monopoly power for its Windows operating system, used in most personal computers, and ordered the company broken up.

The plaintiffs in the private antitrust lawsuits hope to use testimony and documents from the government's antitrust case, as well as Jackson's findings of fact and "conclusions of law," as the bulk of evidence in their lawsuits, said Bob Lande, a University of Baltimore Law School professor.

Microsoft has had great success getting judges to dismiss the cases, not on their merits but on a technicality: a 1977 U.S. Supreme Court ruling known as Illinois Brick.

Based on the precedent, only those parties that directly bought the products can sue the antitrust violator. Because Microsoft sold the bulk of Windows 95 and 98 copies to PC makers and retailers, consumers cannot sue the software company in federal court or in most states.

"Unless you're a direct purchaser of the product, you're essentially dead under federal law," Lande said.

So far, five states--Hawaii, Iowa, Kentucky, Nevada and Oregon--have thrown out private antitrust suits under Illinois Brick. But in some states, among them California, plaintiffs can sue Microsoft even if they are not the direct purchasers of Windows.

"This brief focuses on dismissing the majority of the 62 cases currently part of the MDL (multi-district litigation) process based on the Supreme Court precedent set in Illinois Brick," Microsoft spokesman Jim Cullinan said. "We have already had five identical lawsuits dismissed...and believe that most of the 62 cases can also be dismissed based on the same legal precedent."

This is one reason a win in Baltimore is so important to Microsoft, Lande said.

"Under the caveat (that) some of the cases are frivolous and would have been thrown out anyway, it's got to be a major, major psychological advantage to Microsoft," Lande said. "That's going to discourage other plaintiff attorneys from even trying."

More than 25 of the cases consolidated in Baltimore started at the state level, but Microsoft convinced judges to remand them to the federal level, "where the judges are less parochial," Lande said. Microsoft is also fearful of cases filed in state courts, where antitrust laws make it easier for consumers to recover big damages, say legal experts.

The real test will come if and when cases are actually tried on their merits. But even then, plaintiffs face an uphill battle. Because Jackson ruled that Microsoft illegally maintained its monopoly rather than unlawfully obtaining it, lawyers face a difficult time determining the period of time that consumers were overcharged, and thus a tough time figuring out damages.

History is on Microsoft's side, said Bill Kovacic, a professor at George Washington University Law School. More than 40 lawsuits filed against IBM during its 13-year antitrust battle with the government led to payouts of less than $50 million on potential claims of $4 billion.

Microsoft's exposure in the approximately 130 antitrust suits is potentially more than $7 billion, according to a formula developed by Robert Hall, an economist with the Hoover Institute at Stanford University. But Microsoft's liability could be more than three times that when accounting for the breadth of the violations. That sum could grow if more companies that bought Windows 95 or 98 directly or that Jackson found to have been wronged by Microsoft sue the software maker, analysts say.

At the same time that Microsoft battles pricing lawsuits, the company in an unprecedented move said this week it will offer the Windows 98 upgrade, Windows Me, for an introductory price of $59. Microsoft typically offers Windows upgrades for around $89 on the street. Windows Me goes on sale Sept. 14.