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Microsoft settles $1.1bn California class actions

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ComputerWire logo Microsoft Corp and lawyers representing Californian businesses and consumers have announced that they have reached a settlement valued at $1.1bn in a series of class action lawsuits alleging that Microsoft violated California's antitrust and competition laws, writes Matthew Aslett.

The estimated $1.1bn payout will be made to Californians who purchased Microsoft operating system, productivity, word processing or spreadsheet software between February 1, 1995 and December 15, 2001. It will be paid in the form of vouchers that eligible consumers will be able to use to buy desktop hardware, laptops, tablet PCs, software and peripheral devices from any vendor.

In addition, two-thirds of the value of any unclaimed proceeds will be donated to Californian schools in the form of vouchers and free software, while one-third will be retained by Microsoft. "Any platform, any manufacturer, that hardware or software that runs on any of that hardware, the vouchers - both the consumer's vouchers and the school's voucher - can be used for those purposes," confirmed Microsoft deputy general counsel, Tom Burt on a conference call.

Under the terms of the settlement agreement, which will be filed with the Californian Superior Court later this month for approval by Superior Court Judge Paul Alvarado, Microsoft has not admitted any fault or violation of Californian law, hence its decision to retain one-third of any unclaimed settlement proceeds.

"As part of the settlement negotiation, certainly Microsoft does not believe that we have acted wrongfully, that we have damaged consumers, and we believe that many consumers will agree with us about that," said Burt. "And so we think it is a fair aspect of the settlement for some portion of the unclaimed funds to be returned to Microsoft."

It is estimated by Microsoft that the holders of over 50 million licenses will be eligible to take advantage of the settlement. Vouchers are due to become available for a four-month period after the settlement is finally approved - which is likely to be late summer or early fall - and class members will have four years to use the vouchers. The value of the vouchers will depend on the products purchased by class members, but will range from $5 to $29.

Having reached a settlement agreement with California, Microsoft still faces class action cases in 16 other states and the District of Columbia. The $1.1bn agreed in the California case is already above the $660m charge taken by Microsoft last year to match its estimated class action settlement costs, although the company expects it to be by far the largest payout it has to make.

"Of the states that have cases pending against plus the District of Columbia, California accounts for roughly 40% of the total numbers of personal computers," said Brad Smith, Microsoft senior vice president and general counsel. He said the company would outline during its earnings call on January 16 whether the value of this settlement will lead to an additional charge for the company.

In addition to the $1.1bn settlement cost, Microsoft will also have to pay attorneys' fees to the plaintiffs as awarded by the court, added Burt.

The California settlement came almost a year to the day after Microsoft's proposed national settlement was rejected by District Judge Fredrick Motz. That settlement would have seen Microsoft donate cash, software, hardware and support to poor US schools and was rejected by lawyers in California on the grounds that it allowed Microsoft to pay back only a fraction of what it actually owed consumers.

Class action suits against Microsoft are still pending in Arizona, New Mexico, South Dakota, North Dakota, Kansas, Iowa, Minnesota, Wisconsin, Tennessee, Mississippi, Florida, Montana, North Carolina, Vermont, Massachusetts, West Virginia, and the District of Columbia.

© ComputerWire

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