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Published in Print: January 23, 2002, as Microsoft's Technology-Giveaway Plan Rejected

Microsoft's Technology-Giveaway Plan Rejected

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A federal district judge in Baltimore has found significant flaws in a Microsoft Corp. proposal to funnel more than a billion dollars worth of software, reconditioned computers, and technology training to about 14,000 needy schools around the country.

Yet even though he rejected the plan, which was the company's attempt to settle more than 100 private antitrust lawsuits filed against it, Judge J. Frederick Motz seemed to accept the proposal's fundamental premise. He said he would allow Microsoft, and a group of lawyers suing the software giant, another chance to bring a revised settlement proposal to the court. Both sides said they would explore that option.

"The judge's opinion offers a number of different approaches we are thinking about, and we are considering those," Tom Burt, Microsoft's deputy general counsel for litigation, said in a conference call with reporters after the Jan. 11 ruling.

The plan, first unveiled in November, would have ended all of the private antitrust lawsuits alleging that millions of consumers have been overcharged for Microsoft software. Courts sometimes allow class-action cases like these to be settled to serve a social purpose—such as supporting education—when it is impractical to identify the individuals who may be entitled to damages, lawyers say.

These private cases are separate from the antitrust litigation against the company initiated by the U.S. government and 18 states and the District of Columbia.

Under the rejected proposal, Microsoft would have paid for the creation of a new charitable foundation that would have distributed technology and training to about 14,000 schools over five years. ("Microsoft Deal Calls for $1 Billion School Effort," Nov. 28, 2001.) Microsoft would have provided up to $400 million for the foundation to disburse, plus $80 million to support a program run by Microsoft to refurbish used computers, load them with software, and give them to schools. The company would also have provided as much as $1 billion in software, a value based on the products' discounted price for the school market.

Other software companies had vigorously opposed the plan, saying it would flood the schools with free Microsoft products, which would hurt sales by smaller software-makers. And Apple Computer Inc. argued that its business would be harmed by the refurbished computers, because most of them would not be Apple machines.

Criticism of the Plan

State and local school leaders also criticized the limited role that the plan gave them in making decisions about the kinds of technology that it would make available to their schools.

Although educators praised the goal of directing technology into low-income schools, many rejected Microsoft's claim that the proposal would not favor the use of certain brands of computers and software vendors, said Glenn M. Kleiman, the vice president of the Education Development Center Inc., a nonprofit education research organization based in Newton, Mass. Mr. Kleiman wrote a letter to Judge Motz signed by 56 educational technology experts and advocates outlining objections to the plan.

Microsoft and the plaintiffs' lawyers made changes to try to allay those concerns, but the judge wrote in a ruling on Jan. 11 "that the charitable foundation contemplated by the agreement is not sufficiently funded" to meet its goal of benefiting society and to ensure that the program "would not have anti-competitive effects."

The judge seemed to have been swayed by the arguments of educational technology officials. "It did look to me like the judge certainly understood the issues," said Helen Soulé, who is Mississippi's educational technology director, and who signed the letter sent by Mr. Kleiman to Judge Motz.

Mr. Kleiman said that even if the settlement had been approved, it would likely have faced legal challenges by some dissenting plaintiffs.

Vol. 21, Issue 19, Page 3

Web Resources
  • Read the opinion issued by the U.S. District Court for the State of Maryland in the Microsoft settlement offer. View links to all the district court documents relating to the January 11 opinion. (Requires Adobe's Acrobat Reader.)
  • Read Microsoft's statement in reaction to the district court's January 11 decision.
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