Microsoft settles embarrassing antitrust suit in Iowa

Microsoft's revealing antitrust suit finally settled

Microsoft Wednesday said it has agreed to settle a class-action lawsuit in Iowa that, during its trial phase, had resulted in the unearthing of numerous internal documents and e-mails that were embarrassing to the company.

Plaintiffs in the case, known as Comes. vs. Microsoft Corp., had sought as much as US$330 million in damages to compensate Microsoft users in Iowa who allegedly were overcharged for software as a result of anticompetitive practices by the company. The terms of the settlement aren't being disclosed pending preliminary approval of the deal by the Iowa state-court judge who is overseeing the case. A hearing on the settlement is scheduled for April 20, according to Microsoft and attorneys for the plaintiffs.

The trial, which began in mid-November, was a treasure trove of cringeworthy comments and messages from Microsoft employees. The documents entered as evidence included a 2004 internal e-mail in which Jim Allchin, then Microsoft's Windows development chief, complained about the progress of Windows Vista and said that he would buy a Macintosh if he wasn't a Microsoft employee.

After the e-mail came to light in December, Allchin said in a blog posting that he had been "purposefully dramatic" in an effort to get the attention of top executives Bill Gates and Steve Ballmer.

The plaintiffs in the Iowa case also publicized the transcript of a 1996 speech by a Microsoft technical evangelist, who referred to independent software developers as "pawns" and compared wooing them to write applications for Windows and the company's other software platforms with convincing someone to have a one-night stand. And they highlighted a 2003 e-mail exchange between Allchin and another Microsoft executive about the possibility of the company introducing a rival to the iPod or seeking a partnership with Apple.

In addition, the lawyers for the plaintiffs last month claimed to have evidence that Microsoft was withholding key application programming interfaces from competing software vendors, which would be a violation of the company's 2002 antitrust settlement with the U.S. Department of Justice.

The 7-year-old case is one of the last of a spate of antitrust suits filed against Microsoft in state courts in the wake of the DOJ's federal suit to be resolved. A lawsuit in Mississippi is the only other one still scheduled to go to trial.

"We are confident that the settlement is in the best interests of all members of the class, and we are deeply grateful for the quality and fairness of the judicial process in Iowa," said Roxanne Conlin, lead counsel for the plaintiffs, as part of a joint statement with Microsoft.

Under the settlement, unspecified compensation will be paid to individuals and businesses in Iowa who bought Windows and specified other Microsoft products, including Word, Excel and Office, between May 1994 and last June. Details on how to file claims will be announced in the spring, according to the joint statement.

Half of any unclaimed proceeds will go to the Iowa Department of Education to fund purchases of computer hardware and software for schools in the state. "One of the best aspects of resolving this case is that we can provide much-needed resources to underprivileged schools," said Rich Wallis, Microsoft's associate general counsel. "We're happy to have this matter behind us so we can focus on the future and build the next generation of products and innovations that enrich the lives of people around the world."

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Eric Lai

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