Judge Throws Out 38 Antitrust Suits Against Microsoft

Microsoft Corp. won a major legal victory Friday when a federal judge threw out 38 private antitrust cases that accused the software giant of overcharging customers for its flagship Windows operating system.

U.S. District Judge J. Frederick Motz in Baltimore dismissed the lawsuits, filed by private citizens, because they did not purchase Windows directly from Microsoft but from computer makers such as Gateway Inc. and Dell Computer Corp.

Microsoft could have faced hundreds of millions of dollars in damages because consumers can recover as much as three times the amount of money they were overcharged for a product.

The ruling is the latest in a string of defeats for consumers who have brought private antitrust suits in hopes of winning damages from Microsoft.

More than 130 private antitrust cases have been filed against Microsoft since another federal judge, Thomas Penfield Jackson, in June ordered the breakup of Microsoft in a landmark case being pursued by the Justice Department and 19 states. About 80 of the cases are still active, according to Microsoft officials, who said they were pleased with Friday’s ruling.

“We don’t believe these lawsuits were being brought on behalf of consumers,” Microsoft spokesman Mark Murray said. “They are instead a classic example of plaintiffs’ attorneys going after a successful company.”

Attorneys for the consumers could not be reached for comment. In interviews last summer, they said they targeted Microsoft because of evidence in the government antitrust trial that the company overcharged for Windows.

The consumers have been hamstrung by conflicting state antitrust laws as well as a U.S. Supreme Court ruling. The 1977 high court decision restricts damage claims against antitrust violators by purchasers who are not direct customers of the defendant.

“Indirect purchasers under federal law are going to have a hard time winning,” said Herbert Hovenkamp, a University of Iowa law professor whose treatise on antitrust law is frequently cited in litigation. “And Microsoft has been very successful in getting most states” whose laws are silent on the question “to follow the federal law.”

Microsoft’s victory came as the Justice Department submitted arguments to the U.S. Court of Appeals presiding over the government’s antitrust case against Microsoft.

In a 150-page brief, the government devoted nearly 40 pages to defending the handling of the case by Judge Jackson, who harshly criticized Microsoft in press interviews after ordering the software giant broken up in June.

Microsoft, which appealed the breakup order to the pro-business U.S. Court of Appeals in Washington, alleged in court papers filed in November that Jackson was biased. Microsoft cited several newspaper interviews in which Jackson assailed Microsoft’s credibility. “If someone lies to you once, how much else can you credit as the truth?” Jackson told one paper.

In a new book recounting his reaction to being reversed by the appeals court in 1998 after Jackson ruled that Microsoft had violated a 1995 consent decree, Jackson voiced even more pointed criticism of the U.S. Court of Appeals that is now weighing Microsoft’s antitrust appeal.

“I take mild offense at their reversal of my preliminary injunction in the [related Microsoft] consent-decree case, where they went ahead and made up about 90% of the facts on their own,” Jackson is quoted as saying by author Ken Auletta in his book “World War 3.0: Microsoft and Its Enemies,” to be released next week.

The government Friday cited other, milder Jackson remarks in its brief and said that “taken in their entirety, Jackson’s comments demonstrate neither bias nor the appearance of bias.” The government cited a Financial Times article quoting Jackson as saying he was still “full of admiration” for Microsoft’s accomplishments.

Experts say it is unlikely the appeals court will reverse Jackson’s ruling against Microsoft based solely on his controversial comments.