Microsoft challenges 'Vista Capable' class action

Wants to put the kibosh on document disclosure, reputation besmirchment

Microsoft Corp. on Friday asked that a lawsuit claiming that it duped consumers in a Windows Vista marketing program be suspended while the company appeals a judge's decision to grant the case class-action status.

If granted, the motion would also postpone any new disclosures of potentially embarrassing company e-mails. Last month, the release of similar documents showed that top-level company executives struggled with the new operating system on machines labeled "Vista Capable," and that partners such as Dell Inc. warned Microsoft that the campaign would confuse consumers.

Friday, Microsoft petitioned the Ninth Circuit Court of Appeals to hear its challenge of the case's class-action status, which was granted two weeks ago by U.S. District Court Judge Marsha Pechman. The company also filed a separate motion with Pechman on Thursday, asking her to stay the lawsuit's proceedings pending the appeal.

"Continued proceedings here would cost Microsoft a substantial sum of money for discovery and divert key personnel from full-time tasks," said Charles Wright, an attorney for Microsoft, in the motion to suspend the case. "[It] would intrude on sensitive pricing decisions and strategies by OEMs, wholesalers and retailers; and would jeopardize Microsoft's goodwill with class members -- all with respect to claims that might not proceed on a class basis at all."

The papers filed with Pechman claimed that Microsoft had already produced nearly 50,000 pages of internal documents as part of the lawsuit's discovery process. Continuing the case pending appeal would likely mean disclosing even more documents. If the class-action status is denied on appeal, the money spent digging up messages and memos would have been wasted, and any negative publicity would generated needlessly, Microsoft argued.

The company painted a picture of business secrets made public and damage done to its reputation. "Plaintiffs' discovery almost surely will involve intrusion into the most sensitive pricing decisions of the OEMs, wholesalers and retailers who sell the PCs at issue and set their prices," said the motion. "Continued discovery thus will disrupt Microsoft's relationships with its business partners, a disruption that will be unnecessary if the Ninth Circuit reverses."

Wright also contended that because the plaintiffs will have to do a national search for consumers who can join the class action, Microsoft might get a black eye for no reason. "The result will be nationwide publicity that impugns the [Windows Vista Capable] program," read the filing. "Although Microsoft fully expects to vindicate the program in the course of this litigation, allowing notice to proceed in the face of the pending appeal will jeopardize Microsoft's goodwill based on an order that, Microsoft respectfully contends, might be held erroneous from its inception."

The company's petition to the Ninth Circuit spelled out two questions it thinks the appellate court should consider. The first was Pechman's decision to base the call for class-action status on Washington state law because Microsoft is headquartered there. The second questions Pechman's approval of a "price inflation" theory, which argues that PC buyers paid more than they would have without the Vista Capable program, since Microsoft's marketing boosted demand and increased the prices of systems that could run the lowest-priced and lowest-powered version of the operating system, Vista Home Basic.

Microsoft said it hoped to have a ruling on its appeal within 90 days, which would push back several tentative deadlines in the lawsuit, including a trial start in October, if the stay request is granted.

All of this new legal maneuvering revolves around a lawsuit filed nearly a year ago claiming that Microsoft misled PC buyers during the months leading up to Vista's release. Many of the machines that boasted the Vista Capable sticker, the lawsuit charged, were able to run only Home Basic, a version the plaintiffs said was not the "real" Vista because it omitted some of the most heavily promoted elements of the new operating system, including the Aero interface.

Microsoft has consistently disputed the charges, saying that Vista Home Basic was a "major advancement" over Windows XP and part of its efforts to offer multiple versions of the new operating system.

While it didn't repeat those claims in its filings last week with Pechman and the Ninth Circuit Court, Microsoft did argue that the "balance of hardship" was on it, not the plaintiffs, and so the stay should be granted.

"Microsoft's interest in avoiding unnecessary litigation costs; preserving the time of its employees; insulating OEMs, wholesalers and retailers from discovery into confidential pricing policies; and maintaining its goodwill far outweighs the interest of class members in relief they never expected before filing this action," Microsoft said.

Copyright © 2008 IDG Communications, Inc.

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