New MS suits opening Pandora's Box?

When it got socked with two private antitrust lawsuits last week, Microsoft Corp. (Nasdaq:MSFT) waved the filings away as rehashes of old complaints. But legal experts say they wouldn't be surprised if other parties soon bring similar complaints against the software giant.

The two suits -- one filed in federal court on behalf of FortWorth, Texas-based Gravity Inc., the other in California Superior Court in San Francisco on behalf of computer user Charles Lingo -- seek monetary damages from Microsoft, which it claims overbilled customers and suppressed competition.

Lawyers for the plaintiffs are asking that the suits cover people who bought products such as Windows, Word, Excel and Office on Intel Intel (Nasdaq:INTC) computers from May 19, 1994 through the present. They cite much of the evidence already introduced by government attorneys during the Microsoft antitrust trial in Washington.

Attorneys in the federal case also are asking Judge Thomas Penfield Jackson, who presides over the government's lawsuit against Microsoft, to hear the case. (For a detailed description of the suits, click here.)

An X on its jersey
Antitrust experts said the private suits could open the floodgates for similar complaints. So-called tag-along lawsuits are commonly filed after government antitrust cases, Southwestern University School of Law professor and former FTC staff attorney Warren Grimes said.

For example, IBM Corp. IBM (NYSE:IBM) became the target of many private suits in the 1970s following a government antitrust lawsuit.

"Microsoft has an 'X' written on the back of its jersey," Grimes said. "Sometimes the government just conducts an investigation and that spawns private suits. Clearly, they've gone farther here."

The DOJ and 19 state attorneys general are in the throes of an intense trial, charging Microsoft leveraged its dominance in operating systems to move into other markets. Microsoft has strongly denied the government's allegations.

Microsoft spokesman Tom Pilla, who declined to speculate on future suits, criticized the private antitrust suits for stealing entire phrases from DOJ filings, calling them a "rehash" of the same allegations. "These suits appear to be nothing more than an exercise in plagiarism," he said.

Timing couldn't be better
Though companies such as Sun Microsystems Inc. (Nasdaq:SUNW), Danbury, Conn.-based Bristol Technology Inc., and Boulder, Colorado-based Blue Mountain Arts have also filed suits alleging various types of anti-competitive practices, last week's Lingo suit is among the first - if not the first - private suit brought on behalf of consumers.

The timing of last week's suits couldn't be better for attorneys looking to cash in on anti-Microsoft sentiment. The company has been bombarded with negative publicity surrounding testimony in the DOJ trial. Government prosecutors have introduced documents to support their claim that computer makers felt bullied by Microsoft. Lawyers in private suits could use such evidence to bolster their own case.

What's more, refund fever is gaining ground among Microsoft's critics. Sites are popping up all over the Web detailing protracted attempts to obtain refunds from Microsoft and computer makers for unwanted versions of Windows.

Just last week retired engineer Lingo, the plaintiff in the state antitrust suit, was part of Monday's Windows Refund Day. During the event, supporters of alternative operating systems such as Linux, OS/2, and FreeBSD marched on Microsoft offices across the country, demanding their money back for unused copies of Windows. They didn't get any refunds, but some participants threatened class action suits much like the ones filed last week.

Some attorneys think plaintiffs have a better chance of prevailing under state law because some federal antitrust laws make it harder for people to sue a company that doesn't sell them a product directly. Under such laws, someone who buys Windows from a computer maker isn't entitled to sue Microsoft.

But about half of all states don't have such prohibitions, including California. Filing a tag-along suit could be especially tempting to attorneys in those states. Antitrust experts think Microsoft will ask the court to move the recently filed state suit to federal courts in the coming weeks.

Don't expect refunds soon
As for getting a refund, consumers shouldn't expect one anytime soon, if ever, antitrust experts said. First, the courts have to decide where, if, and under which laws the cases can go forward. After that, a legal battle could take years, followed by appeals. Plus, Microsoft would have to lose. And then there's the matter of the class. A judge must decide whether to grant class action status -- and whom to include in the class.

Grimes said a judge could restrict the class to people like Lingo, who don't want Windows on their computers.

"I wonder how many other consumers out there don't want to buy Windows," Grimes said. "I don't know how many people share this particular plaintiff's view."