Microsoft ditches two more private lawsuits

The software giant may have lost the initial round in its federal antitrust case, but it has scored two more victories in private lawsuits.

4 min read
Microsoft may have lost the initial round in its federal antitrust case, but the software giant today scored two more victories in private lawsuits.

The count is now 7-0 in favor of Microsoft.

Rhode Island and Texas threw out cases alleging that Microsoft overcharged consumers for copies of Windows 95 and 98. Courts in Hawaii, Iowa and Kentucky threw out cases last month, following Microsoft victories in Oregon and Nevada.

The timing is a psychological and potential public relations boost for the Redmond, Wash.-based software maker, as it prepares to file the last legal brief before the Supreme Court decides jurisdiction in the government antitrust case.

Microsoft still awaits the fate of another 62 cases consolidated in a Baltimore court that could substantially reduce the more than 130 private antitrust cases still pending against the company. Earlier this month, Microsoft lawyers asked U.S. District Judge J. Frederick Motz to throw out the cases.

Lawyers started filing the private lawsuits in November after U.S. District Judge Thomas Penfield Jackson issued findings of fact that found Microsoft is a dangerous monopoly that had harmed consumers.

In the lawsuits, plaintiffs allege Microsoft used its monopoly power to overcharge consumers for Windows 95 and 98. As a monopoly Microsoft would have no compulsion to price its product fairly as dictated by competition. During trial testimony in the antitrust trial brought by the Justice Department and 19 states, the government introduced economic information suggesting that Microsoft overcharged consumers as much as $40 for every copy of Windows sold.

Microsoft's exposure in the approximately 130 remaining 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, said Bill Kovacic, a professor at the George Washington University School of Law.

While Microsoft's string of victories is impressive, the company "is winning on a technicality and has yet to argue any of the cases on their merits," Kovacic said.

Microsoft's success has been in 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, which protects antitrust violators from being sued by multiple parties for a single wrongdoing, only parties who directly bought a product can file lawsuits in federal and most state courts. Because Microsoft sold the bulk of Windows 95 and 98 copies to PC makers and retailers and not consumers, most people cannot sue Microsoft directly.

"For the most part, you're dead under federal law unless you bought the product directly," said Bob Lande, a professor at the University of Baltimore Law School.

But some states, such as California, allow indirect purchasers to sue antitrust violators, setting the stage for high-profile court cases during the next 12 months or so.

Special coverage: Breakup Today's win is good for Microsoft, but Motz throwing out the consolidated 62 cases would be better. "The psychological advantage would be tremendous," Lande said. "It would make it much more difficult for lawyers to take on similar cases."

To spur its winning streak, Microsoft has been quietly getting cases filed in state court bumped to federal court, where it faces an easier time. State courts tend to favor plaintiffs more than do federal courts and award more generous damages, Lande said.

In other legal proceedings, Microsoft tomorrow will file a last legal brief before the Supreme Court decides whether to take its appeal directly. In an earlier brief, the software maker asked the high court to give the U.S. Court of Appeals for the District of Columbia Circuit first crack at the case.

In a filing last week, the government urged the Supreme Court to accept the case under the Expediting Act, a law allowing cases of national significance to skip over the regular appellate process.

Microsoft is expected to rebut government counterarguments against the software maker. In its first filing, Microsoft said that procedural errors, bias on the part of Jackson, and the enormous size of the court record warranted a review by the appeals court. The government argued that these issues were insignificant and that Microsoft had misconstrued the facts.

Jackson in June ordered that Microsoft be broken into separate operating system and software applications companies, but he stayed the order pending appeal.

The Supreme Court is expected to decide on jurisdiction by early October. If the high court takes the case now, it could issue a ruling by June, effectively ending the proceeding. Should the Supreme Court send the case back to the appeals court, it is expected to take nine to 12 months before it issues a ruling.

The case would then likely be appealed to the Supreme Court through the normal process, with a final ruling expected by about June 2002.