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Microsoft class-action suit dismissed

A federal appeals court in Virginia dismisses a class-action suit against Microsoft, HP and Dell. The judges rule that there's no proof of any anti-competitive activity.

Microsoft won a courtroom victory on Monday when a federal appeals court threw out a private antitrust suit against the software maker.

The Fourth Circuit Court of Appeals, in Richmond, Va., ruled 2-1 that Gravity had no legitimate claim against defendants Microsoft, Hewlett-Packard and Dell Computer.

Gravity filed a class-action suit in February 1999 claiming that its own litigation support software was being undermined by Microsoft's alleged monopoly and refusal to release details about its programming hooks in Windows. In addition, Gravity argued that all three companies and NEC Packard Bell were guilty of "conspiratorial conduct" to lock up the market for operating system software, word-processing software and spreadsheet software in violation of the Sherman Act.

U.S. District Judge J. Frederick Motz of Baltimore threw out the case in January 2001. Gravity tried again, asking to file a new lawsuit that mentioned only Microsoft, Dell and Compaq Computer (now part of HP).

Motz denied the request, a ruling that the appeals court affirmed. "Although Gravity alleges that Microsoft's agreements with Compaq and Dell individually produced anti-competitive effects, it does not provide any factual basis to support this allegation," the appeals court ruled.

Because Gravity failed to argue--let alone prove--that Compaq and Dell had unreasonable market power, the lawsuit could not proceed, the court said. "Gravity has provided allegations of Microsoft?s market power in the relevant software markets, in the form of Microsoft?s shares in these markets. Gravity failed, however, to allege facts regarding Compaq?s or Dell?s market share and concedes that the PC market is 'fiercely competitive' and, therefore, that neither Compaq nor Dell has power in the PC market."

Gravity's suit was one of approximately 64 antitrust lawsuits filed against Microsoft, most of which came soon after a federal appeals court found that the software giant was liable in an antitrust case brought by the U.S. Justice Department. Gravity's suit was not consolidated with the others because it was the only one that named the three computer makers as defendants.

Judge Roger Gregory dissented in part, saying that Gravity's accusations of wrongdoing were legally substantive enough to deserve an airing in court. "These allegations are plainly sufficient to state a claim under the Sherman Act," he said.

"The most unfortunate aspect of this case is that, to the extent Gravity's claims have merit, consumers will be left uncompensated," Gregory wrote. "Even more, raising the procedural bar for consumers' claims may further stifle technological innovation."

In the federal antitrust case, U.S. District Judge Colleen Kollar-Kotelly is weighing two matters that in theory are separate and moving on adjacent tracks: whether to approve a settlement signed by the Justice Department and Microsoft, and how to punish Microsoft in the case brought by the state attorneys general who have refused to settle. The longer Kollar-Kotelly takes to issue a ruling, legal experts believe, the more likely she is to combine the two matters.