Judge nixes class-actions in Microsoft WGA lawsuit

Computerworld - A federal judge has killed class-action allegations in a lawsuit that accused Microsoft of misleading consumers when it fed them anti-piracy software under the auspices of a critical security update, according to court documents.

The move means that Microsoft will not be faced with millions in potential damages. Last fall, Microsoft's lawyers argued that a class-action lawsuit could involve "tens of millions" of customers who might be owed "hundreds of millions of dollars" if the company lost the case.

A class-action would have let virtually anyone who owned a Windows XP PC in mid-2006 to join the case without having to hire an attorney.

In an order filed on Jan. 15, U.S. District Court Judge Richard Jones denied several motions by the plaintiffs, including one that would have let them modify their complaint a third time, which in turn put an official end to their attempts to turn the case into a class-action lawsuit.

The three-and-a-half-year-old lawsuit claims Microsoft duped customers by labeling its Windows Genuine Advantage (WGA) software a critical security update, failed to tell them that WGA collected information from their PCs, then frequently "phoned home" that data to Microsoft's servers.

In June 2006, Microsoft began pushing WGA to Windows XP users via Windows Update, the company's default update service, as a "high priority" update that was automatically downloaded and installed to most machines.

Shortly after that, Microsoft acknowledged that WGA transmitted information whenever a user logged on to Windows XP. Under pressure from critics, it later reduced the frequency of the anti-piracy checks.

Microsoft relies on WGA, and its successor, Windows Activation Technologies (WAT), to detect bootlegged copies of Windows. If the software sniffs out a counterfeit, it posts nagging messages on the screen.

Microsoft had opposed the class-action certification last September, at the time calling the lawsuit "fictional," "demonstrably false" and from an "alternate universe."

Last month, the plaintiffs withdrew most, but not all, of their class action allegations, but said they were reserving the right to revisit one of those claims, breach of contract, because an earlier court decision related to that charge is currently on appeal.

In his order of last week, Jones said that all class allegations had to be withdrawn because they "need not be included for appellate purposes and would create unnecessary confusion if they were included."

Jones also said that Microsoft could demand compensation for the money it spent contesting the class-action charges, even though the plaintiffs withdrew most of those allegations prior to trial.

"While Plaintiffs maintain a 'no harm, no foul' perspective, it is too late for that argument," Jones said. "If Plaintiffs had withdrawn their class-certification motion before Microsoft had prepared its Opposition, that would be a 'no harm, no foul' situation. But here, the 'harm' was irreversibly inflicted when Plaintiffs' motion required Microsoft to prepare a defense."

Microsoft has until Feb. 12 to submit its expense list to the court.

Jones also rejected the plaintiffs' motion to add a misrepresentation charge to the lawsuit, and said that they could not change the complaint to seek additional forms of relief from injunction. Earlier this month, Microsoft had called those moves "a cynical attempt to game the system."

The case was once scheduled to go to trial on Jan. 25, but Jones asked counsel for both parties to suggest a new calendar.

Microsoft's anti-piracy software has often made news. In August 2007, a day-long server outage riled thousands of users who were mistakenly fingered for running counterfeit copies of Windows. More recently, hackers revealed ways to bypass Windows 7's activation process.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, send e-mail to gkeizer@ix.netcom.com or subscribe to Gregg's RSS feed .

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