Exclusives

Microsoft Settles Minnesota Case in Mid-Trial

Halting in mid-trial the only state-level antitrust case to make it to court, Microsoft and consumers in the state of Minnesota have reached a tentative agreement to settle all claims against the computer software giant.

Terms of the settlement will not be announced until details are finalized and approved by the judge in the case, the two sides said. The agreement put an abrupt halt to the five-week-old trial, making it just the latest in a long line of settlements Microsoft has struck to put legal actions against it to rest.

The plaintiffs had been seeking more than US$400 million in damages, although state law left open the possibility that a jury could award a far higher amount.

Calling Witnesses

Microsoft could not be reached for comment on the decision to settle. The company issued a brief statement saying terms of the deal will be presented to the court “in early summer.”

Although the Minnesota case, which sought damages on behalf of consumers who claimed they were overcharged because the Windows operating system was the only choice they were given when they purchased a computer, was almost identical to several already settled, it was being closely watched because the plaintiff’s lawyers had made it known they intended to call chairman Bill Gates and president Steve Ballmer as witnesses.

Their testimony could have been important because it would have been able to build on the extensive record of the U.S.-versus-Microsoft trial, possibly forcing the two executives into an uncomfortable position. The federal trial ended with a settlement between Microsoft and the Department of Justice.

Minimizing Distractions

Microsoft clearly has made a concerted effort to settle as many cases as possible. The biggest recent example was a $2 billion settlement with Sun Microsystems, which was followed almost immediately by a $440 million patent-infringement settlement deal with InterTrust.

Directions on Microsoft analyst Matt Rosoff told the E-Commerce Times that unlike the Sun Microsystems and InterTrust settlements, which augmented Microsoft’s menu of features, putting consumer suits like the Minnesota case on the shelf is more about ensuring that distractions are kept to a minimum.

“Gates and Ballmer want all hands working on making the software better,” Rosoff said. “If they’re testifying in a trial, that’s a major distraction and also probably a black eye from a public-relations standpoint as well. This takes all that off the table.”

What, Us Worry?

Forrester Research analyst Paul Jackson told the E-Commerce Times that even the European Union’s case against Microsoft — which, along with RealNetworks’ $1 billion civil lawsuit, is among the largest cases outstanding against the software giant — may not represent a real risk to the company’s ability to operate.

“The worst-case scenarios still seem to result in Microsoft being able to remain competitive,” Jackson said, adding that with Microsoft’s massive cash reserves, even a string of billion-dollar settlements would not break the bank.

Jackson noted that if the Minnesota settlement mimics earlier agreements to settle state cases, it likely will mean hundreds of millions of dollars’ worth of computing vouchers for consumers and donated equipment for schools and libraries.

“The motivation to settle probably isn’t fear of the outcome as much as a desire to be proactive, which allows Microsoft to improve its image as it settles these cases,” he added.

Next Up: Lindows?

Microsoft still faces a number of legal actions, including several in which it is the plaintiff, most notably a copyright battle against Lindows.com.

Lindows recently moved to limit the fronts it might have to battle Microsoft on, saying it will change its product’s name outside the United States. On Tuesday, Lindows informed the U.S. Securities and Exchange Commission that it intends to conduct an initial public offering.

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