Intel is sitting pretty compared to what's about to happen to MSFT.........
Posted at 12:02 p.m. PST Saturday, November 13, 1999
New Microsoft war to open
Tobacco-war lawyers preparing
to file a wave of private
litigation
BY DAVID SEGAL
Washington Post
The lawyers who attacked Big Tobacco have discovered a new
villain: Microsoft.
Less than a week after a federal judge branded the software giant a brute and monopolist, veterans
from the cigarette wars are plotting to sue the company in a wave of private litigation. If the onslaught
unfolds as expected, teams of lawyers will turn Microsoft into the next Philip Morris, tangling the
company in courts nationwide.
''We're looking at it, we're seriously looking at it,'' said Stanley Chesley, a prominent class-action
tobacco lawyer. ''Millions of people bought Windows, and if the company overcharged consumers,
it should be held responsible.''
Lawyers have been emboldened by a blunt ruling by Thomas Penfield Jackson, the federal judge
hearing the government's antitrust suit against Microsoft Corp. Jackson issued findings of fact Nov. 5
concluding that Microsoft ruthlessly exploited its market power to strong-arm corporate customers
and competitors alike. Jackson also determined that a range of Microsoft tactics stifled innovation,
reduced consumer choice and led to higher prices.
Some parts of the legal community see Jackson's words as the combination to a padlocked fortune.
Antitrust law grants triple damages to plaintiffs who prevail, so if consumers overpaid for copies of
Windows by just $10 apiece, verdicts could easily wind up in the billions of dollars, say specialists.
Typically, private lawyers must spend fortunes marshaling the manpower and research needed to
prove a company is a monopolist and bully. With Jackson's ruling in hand, plaintiffs could effectively
piggyback off the government's research and its experts' opinions.
''It makes a hell of a road map,'' said John Coale, a Washington plaintiffs' lawyer who played a
leading role in negotiating the $260 billion tobacco settlement in 1998.
One suit already
One company has already found its way to the courthouse. On Monday, Seastrom Associates, a
small advertising firm, filed suit in New York seeking class status for all the state's consumers,
alleging Microsoft abused its power by overcharging for Windows.
Microsoft officials say the contemplated suits are baseless and ironic, given Jackson's findings that
the company charges less than its rivals, such as IBM, in the operating system market.
''We think it's a sad day for consumers when there's litigation threatened against a company that
brought enormous innovation to the market place and helped drive down prices,'' said Microsoft
spokesman Mark Murray, adding that the court's findings ''do not have any weight or bearing on any
other lawsuit until they are entered in a final ruling by Judge Jackson.''
But some lawyers don't plan to wait the months it might take for Jackson to issue his conclusions of
law. Some contend that the findings of fact alone could be deployed in private litigation; judges, they
maintain, are granted discretion about what is allowed into evidence and many might conclude that
the findings are carefully enough considered to stand on their own.
Most lawyers, however, are likely to pounce after Jackson's conclusion and remedies are
announced, figuring that those will hold more sway then with other judges. Indeed, the threat of an
outpouring of lawsuits is one reason experts believe Microsoft might try to settle the case in the
coming months.
Regardless, Microsoft won't be an easy target. One lawyer estimated that a national class action
would cost at least $3 million, a price that might daunt all but firms with the deepest pockets.
Then there is the matter of finding plaintiffs. Antitrust law generally blocks actions by indirect
purchasers of products, so anyone whose version of Windows came pre-loaded into their computers
would likely be prohibited from suing. That leaves the multitudes who purchased the Windows 98
upgrade in retail stores. And at least one lawsuit has been filed alleging that computer makers
conspired with Microsoft to inflate prices, a theory that would bring millions of computer buyers into
any class of litigants.
Other possible plaintiffs could include companies that lost market share or were put out of business
by Microsoft. Jackson repeatedly asserted that Microsoft stifled innovation, statements that could
buttress claims of lost profits by, for instance, rival makers of spreadsheets.
Making a case
''You can imagine a software maker arguing, 'We had a very viable program here, and through your
monopolization of the operating system you stomped all over it,' '' said Michael Williams of PM
Industrial Economics, a San Francisco consulting firm. ''The company then says, 'But for Microsoft's
actions we would have earned X.' ''
The problem is that many of Microsoft's rivals also have agreements with the company and are
unlikely to jeopardize their commercial relationships with a lawsuit. Corel Corp., for instance, would
seem a possible litigant because its product, WordPerfect, has lost market share to Microsoft's own
word-processing product. But Corel also joint-partners with Microsoft on Visual Basic, a
programming language, and isn't considering litigation any time soon.
''We compete with Microsoft, but we also cooperate with them,'' said Catherine Hughes, Corel's
spokeswoman.
Computer makers, too
Computer makers themselves could get into the action. According to experts, companies such as
Gateway Inc. and Dell Computer Corp. could allege that they lost money because Microsoft exerted
strict control over the desktop space that users see when they log on to their computers. Lawyers
might argue that those start-up screens, viewed every day by countless consumers, could have
generated advertising revenue for the companies.
But the Dells of the world also need peace with Microsoft, which, after all, sells a product that nearly
all of its customers demand. Officials at Gateway and International Business Machines Corp.
declined comment. Dell and Compaq Computer Corp. officials did not return calls.
Still, dozens of companies could ready to allege that they've been mortally wounded by Microsoft.
''Antitrust doesn't require you to be dead and buried six feet under the ground to get some relief and
compensation,'' said Keith Shugarman of Goodwin, Proctor & Hoar. ''Companies don't need to
wait for Microsoft to drive them out of business to sue.''
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