Microsoft Asks for Vista Suit’s Dismissal

Pre-trial discovery in the “Windows Vista Capable” lawsuit has ended – but that’s just the start of the legal maneuvering in what may be Microsoft’s most vexing case.

Microsoft’s attorneys filed a pair of motions on Thursday asking the judge to decertify the case’s class action status as well as to dismiss the suit altogether, claiming that the plaintiffs have not proved their case.

The motions came on the heels of Federal Judge Marsha Pechman’s unsealing of hundreds of pages of e-mails in the Vista Capable lawsuit in recent days. Such filings are not uncommon, according to analysts.

If the judge agrees to dismiss the suit, there will be no trial. If she decertifies the case’s class action status, that could make it much more difficult for individuals who feel they were fooled into buying PCs during the 2006 holiday season, to collect damages.

Microsoft’s latest filings claim that the plaintiffs’ expert witness, an economist, admits that there is no way to place a monetary value on the theoretical damage done to individuals who bought PCs under the Vista Capable program. That, it says, indicates that there is no “class” that may have been swindled, and that there is no way to measure whether the program itself was deliberately deceptive and injured buyers.

Of course, Judge Pechman could also grant neither motion, which, from her earlier rulings – including certifying the suit for class action status back in February – appears as likely as any other outcome.

However, although the e-mails demonstrated much passionate debate and discussion among Microsoft (NASDAQ: MSFT) employees from mid-level managers up to senior executives. The e-mails also show the tension between Microsoft employees and those at other companies, notably Intel and HP.

Still, even with so many pages of raw e-mails, it may still be difficult to prove that the company deliberately gypped unsuspecting consumers.

Next page: The heart of the matter

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The heart of the matter

The suit revolves around the question of whether Microsoft deliberately loosened the standards on which computers qualified as Vista Capable. The stated goal of the Vista Capable logo stickers affixed to computer boxes was to assure customers that, if they bought a Windows XP PC prior to delivery of Vista, the PC was capable of running Vista, or of being upgraded to run Vista.

Also clearly discussed in e-mails, however, was the fear that consumers simply might not buy new PCs during the 2006 holiday sales season since they came with XP, and not Vista, which wouldn’t ship until after the new year. So another stated reason in the e-mails for the sticker program was to keep the bottom from falling out of the PC market at the end of 2006.

As it turned out, relaxation of the certification standards for the sticker, specifically to accommodate the Intel 915 integrated graphics chipset meant that those PCs could only run the bare bones, lowest cost edition of Vista.

That release, called Vista Home Basic, does not feature Vista’s most visible new feature – the Aero Glass graphical user interface. Because of that fact, the plaintiffs claim they were tricked into buying computers that would not be able to run Aero Glass. What’s more, they claim that an edition of Vista that doesn’t run Aero Glass isn’t really Vista, and so the promotion was intentionally deceptive.

Microsoft’s legal team, of course, disagrees in the filings.

“The fact that Windows Vista Home Basic lacks some features available in premium editions of Windows Vista (as Microsoft always disclosed) shows only that Microsoft properly markets Windows Vista Home Basic as a distinct budget edition,” the company’s motion to dismiss states.

Additionally, in support of the request for dismissal, the motion claims that the plaintiffs’ expert, economist Dr. Keith Leffler, “cannot quantify any increase in demand or PC prices” caused by the alleged intentional mislabeling of PCs during the 2006 holiday sales season.

In fact, the unsealed e-mails, most from before Vista’s launch in January 2007, demonstrated angst among both the rank and file, as well as with executives involved in developing and promoting Vista.

In e-mails, Jim Allchin, then co-president of the platforms and services group, and the Microsoft executive in charge of Vista, was horrified that the standards had been relaxed and demanded unsuccessfully that they be retightened. Allchin retired right after Vista shipped.

Microsoft CEO Steve Ballmer had a phone conversation with Intel CEO Paul Otellini regarding the changes, but claims to have no specific knowledge of the changes or details of discussions regarding the Vista Capable program.

Late Friday afternoon, Judge Pechman ruled that the plaintiffs’ legal team can depose Ballmer regarding that conversation and other aspects of the case. Microsoft had filed a motion in mid-November asking the judge to block the deposition request. However, the plaintiffs came back with a request for a three-hour deposition with Ballmer on his schedule and in a venue of his choosing.

Microsoft officials declined to comment on the current filings or the suit in general.

The case is currently scheduled for trial on April 13, 2009.

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