Vista-downgrade lawsuit revised; Microsoft now accused of price-gouging

It focuses on rules forcing users to buy priciest Vista editions before downgrading

The California woman suing Microsoft Corp. over Windows Vista's downgrade rights revised her lawsuit yesterday to focus her charges on the requirement that users buy the most expensive versions of Vista if they want to replace that operating system with Windows XP.

Originally filed Feb. 11 in a Seattle federal court by Los Angeles resident Emma Alvarado, the lawsuit was re-submitted Thursday. In the amended complaint, Alvarado repeated her charges that Microsoft violated Washington state's unfair business practices and consumer protection laws by restricting computer makers' ability to offer XP on new PCs after Vista's early 2007 launch.

"Downgrade" describes the Windows licensing rights that allow users in some circumstances to replace newer versions of Windows with an older edition without having to pay for another license. In effect, the license for the newer Windows is transferred to the older edition.

The revised lawsuit spells out in much greater detail how Microsoft allegedly profits from its Vista downgrade practices. In particular, the complaint now highlights the rules that limit downgrades to Windows XP Professional, and then, only from PCs that have Vista Business or Vista Ultimate pre-installed.

"Although many consumers would prefer to purchase a new PC pre-installed with the Windows XP operating system or at least not pre-installed with the Vista operating system, Microsoft has used its market power to take advantage of consumer demand for the Windows XP operating system by requiring consumers to purchase a PC that includes a license for the use of the Vista operating system and to pay money (as part of the overall purchase price of the PC) to downgrade to the Windows XP Professional operating system," the suit stated.

"To make matters worse, Microsoft requires consumers to purchase a PC that includes a license to either Vista Business or Vista Ultimate -- versions of the Vista operating system that: (a) are premium, more expensive versions of the home versions of the Vista operating system, and (b) include specialized applications that are neither needed nor wanted by an ordinary consumer seeking to purchase a PC primarily for personal, non-business use," the filing continued.

The suit also noted that Windows XP Professional, the only version of that line that users are allowed to downgrade to, is a premium edition with a higher price tag.

Alvarado claimed that Microsoft dreamed up those rules to boost Vista sales figures and profits.

"Microsoft appears to have conceived and implemented the 'right' for consumers to 'downgrade' to the Windows XP Professional operating system in order to: (a) maintain and/or inflate its sales figures for the Vista operating systems (particularly the Vista Business and Vista Ultimate versions ... and (b) recoup its substantial investment in the development and production of the Vista operating system by forcing consumers to purchase the premium, more expensive versions of the Vista operating system (Vista Business or Vista Ultimate) in order to 'downgrade' to the Windows XP operating system," the lawsuit read.

She also accused Microsoft of gouging consumers with its downgrade practices. "Prior to permitting the consumer to 'downgrade' to Windows XP Professional, Microsoft first mandates that the consumer 'upgrade' from Vista Home Basic or Vista Home Premium to either Vista Business or Vista Ultimate -- thereby forcing the consumer to incur an unnecessary expense of $130, perhaps more or less, depending on the retail outlet, and creating revenue for Microsoft in the same amount," her revised lawsuit said.

The $130 figure cited by Alvarado was the same as noted by Dell Inc. last year when it responded to reports that it was charging customers $150 to downgrade a new computer to XP. Dell countered that while it did charge $20 to install XP on the machine and cover the cost of the additional media, $130 was the price of upgrading the PC from the standard Home Premium to the more expensive Business edition.

"Microsoft mandates that customers who want to downgrade to XP must purchase the license to Vista Business or Vista Ultimate," said Dell spokesman David Frink last December. "[That's] typically about a $130 premium, though some retail outlets charge more."

When Alvarado's suit was first filed last month, Microsoft denied it made money on downgrades.

"Microsoft does not charge or receive any additional royalty if a customer exercises those [downgrade] rights," said Microsoft spokesman David Bowermaster in a February e-mail.

Bowermaster repeated that today. "Microsoft does not charge for downgrades," he said in an e-mail Friday. "Some Windows Vista licenses, including Windows Vista Business and Ultimate, include downgrade rights to various versions of Windows XP. If a customer exercises those rights, Microsoft does not charge or receive any additional royalty."

Alvarado is seeking compensatory damages and wants the case granted class-action status.

Copyright © 2009 IDG Communications, Inc.

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