Microsoft Corp. said last night that it settled the largest consumer antitrust lawsuit against it by agreeing to give as many as 13 million California residents and businesses who purchased Microsoft software a total of $1.1 billion in vouchers that could be used to buy any computer hardware or software.
The class-action case, which had been scheduled for trial in San Francisco next month, was the most serious threat to the company among similar lawsuits that are pending in 17 states and the District of Columbia. They were filed after rulings by federal courts in 2000 and 2001 that Microsoft broke U.S. antitrust laws by illegally protecting its Windows operating system monopoly.
The settlement still needs the approval of California Superior Court Judge Paul H. Alvarado.
"This is a significant step forward in our work to resolve our antitrust issues," said Microsoft general counsel Bradford L. Smith. He said that if the judge approves the deal, California residents would have four months to file claims.
People who purchased any Microsoft software in February 1995 through December 2001 could file claims and have up to four years to use vouchers given by Microsoft. The value of the vouchers would be based on a negotiated formula for each type of software purchased.
Eugene Crew, lead attorney for the California plaintiffs, said the settlement was a victory for consumers who contended that they were overcharged for software because of Microsoft's predatory behavior. Crew said going to trial would have posed great risks to Microsoft because the California case went well beyond the violations Microsoft was found to have committed in the case brought by the Justice Department.
Businesses, which purchase multiple licenses for Microsoft software, stand to collect significant benefits.
Crew said that to help consumers document the value of their Microsoft purchases, the company agreed to allow them to search its registration database. The company also would attempt to contact all affected parties.
The California case involved Microsoft software other than Windows and the Internet Explorer browser, such as Word and Excel, and went back as far as 1988. The federal case was limited to conduct between 1995 and 1998.
A year ago, a federal judge in Baltimore rejected as inadequate a national settlement in the various class-action cases. Smith said the company has resolved cases in 17 other states.
The California settlement was significant not only because its case was the largest of the class-action suits, but also because the state has the most favorable laws for plaintiffs in antitrust cases, Smith said.
Smith said that if there is money left from the $1.1 billion after all claims have been filed, one-third of it would revert to the company and two-thirds would pay for software and computer services for disadvantaged schools in California.
Microsoft still faces other antitrust challenges. Also yesterday, U.S. District Judge J. Frederick Motz in Baltimore rejected Microsoft's bid to dismiss a private lawsuit brought against the company by Sun Microsystems Inc., though he narrowed it. A decision in a major case in the European Union is pending.