Lawyers Begin Test of Microsoft's Mettle

WASHINGTON -- The first step in launching what was to become the biggest-ever civil antitrust case against a technology company will come in a federal courtroom in Baltimore on Friday when a judge will lay the ground rules in more than two dozen cases against Microsoft Corp.

The civil class-action suits, brought by some of the powerful liability lawyers who targeted the big tobacco companies and breast-implant maker Dow Corning, represent only one-fifth of the more than 130 cases that have been filed against the software giant. They contend that Microsoft's software monopoly resulted in millions of consumers being overcharged for Windows.

The private antitrust suits represent a crucial test of the financial and legal resources of Microsoft. The company already is fighting a big breach of contract lawsuit brought by arch-rival Sun Microsystems Inc., 23 class-action lawsuits that have been consolidated in San Francisco Superior Court and is pursuing a critical appeal of its breakup and other antitrust sanctions ordered last week by U.S. District Court Thomas Penfield Jackson.

Because Windows runs more than 90 percent of all personal computers, the potential pool of plaintiffs is huge and the financial liability for Microsoft could be enormous.

"The potential exposure for them is catastrophic if everybody wins every lawsuit," said Herbert Hovenkamp, a University of Iowa law professor whose treatise on antitrust law was frequently cited in the government's antitrust trial against Microsoft. While Hovenkamp said that is unlikely to happen, federal and state laws give aggrieved consumers and rivals strong legal advantages against Microsoft.

Friday, U.S. District Court Judge Frederick Motz was expected to determine how to coordinate pretrial work for 27 lawsuits f which have been consolidated into one for the time being f that are expected to seek billions of dollars in damages against Microsoft for overcharging consumers.

Jackson's finding that Microsoft is an abusive monopoly can be used as grist for allegations by computer users and other potential plaintiffs that Microsoft overcharged them for its flagship Windows software.

The federal Clayton Act allows direct purchasers to recover three times their actual damages. In addition, some states allow consumers to sue on antitrust grounds if they purchased Microsoft software through a middle man f such as a computer maker like Dell Corp. f rather than from a retailer.

In effect, the laws give private antitrust plaintiffs a huge tactical advantage. To avoid any financial liability for its antitrust transgressions, experts say Microsoft must win the antitrust case on appeal and dispatch its lawyers across the country to win each of the more than 130 private antitrust lawsuits that have been filed in such remote places as Tierra Amarilla, New Mexico, and Howell, Michigan.

"There is no margin for error," said William Kovacic, a law professor at George Washington University.

Microsoft executives dispute allegations that they overcharged customers and expressed confidence that plaintiffs will be unable to prove the charges. Plus, Microsoft is well-armed to financially combat the suits, having amassed about $21 billion in cash. And company officials are buoyed by recent court rulings against private antitrust suits.

An Oregon state judge this week threw out a lawsuit against Microsoft that claimed the company overcharged consumers for its Windows 98 operating system. But some legal analysts and officials familiar with the cases discount their effect on the 27 lawsuits being organized in federal court in Baltimore. The decision came almost a year after a Connecticut jury said Microsoft did not break antitrust laws in its dealings with a small software technology rival called Bristol Technologies Inc.

Experts say the Oregon decision was based on a U.S. Supreme Court ruling that consumers cannot sue a company under antitrust laws if they did not purchase a product directly from the company. Oregon does not specifically allow such lawsuits. Consumers suing in states that do allow such claims may receive more favorable judicial review.

Bristol lost its case largely because of the timing. "People filing cases now definitely enjoy an advantage because of Judge Jackson's ruling," said Keith Blackwell, the company's president. "We didn't have the luxury of waiting."