Microsoft Defends Settlement Plan

BALTIMORE – A proposed settlement to end a private, consumer lawsuit against Microsoft would help poor schools get used computers and free software to close the digital divide, the software giant said Monday.

The settlement, which would provide more than $1 billion in Microsoft software, computers and training, is "very fair and even generous," Microsoft lawyer Tom Burt said.

Microsoft defended the proposal at a hearing in Baltimore before U.S. District Judge J. Frederick Motz, who is expected to decide by the end of the year whether to accept the plan. The class action lawsuit contends that Microsoft abused its monopoly power and overcharged people for Windows, Office and other software.

Some companies like Apple Computer as well as scores of educators and parents contend that the deal would reward the company by increasing Microsoft's market share in schools — at the expense of competitors like Apple.

"The education market is very robust," Apple general counsel Nancy Heinen said. "Why would you let a monopolist get a better foothold?"

Burt argued, however, that schools would be able to make their own technology choices. "This is going to be a platform-neutral settlement that is not going to be influenced by Microsoft," he said.

During the hearing, Microsoft offered several changes to the settlement to address the criticism that began when the proposal first was unveiled last month. Among the new Microsoft ideas:

— Changing the way the foundation that will oversee the money will pick its board members. Microsoft said two software makers would join the foundation: Connectix, which makes a program that lets Windows software work on rival Apple computers, and education software maker Key Curriculum Press.

— Allowing the foundation, not Microsoft, to oversee the distribution of $90 million in teacher training funds that are part of the settlement.

Microsoft said the settlement has the support of the National Education Association, the United Negro College Fund and other education groups.

The $1 billion in software, computers and training would go to more than 16,000 of the nation's poorest schools.

Burt said he hopes more companies will join the foundation and stressed that schools will be able to make their own technology choices.

"This is not a settlement that imposes any solutions on local schools," he said. "The eligible schools are enabled to implement local technology plans."

Motz repeatedly expressed concerns about the structure of the settlement and the possibility that it might unduly benefit Microsoft.

Burt called that concern "at most insignificant" and claimed that Microsoft could give more in software than it could in a lump sum to the foundation, as Apple suggested.

Lawyers for California consumer groups suing Microsoft object to the settlement. They cite competition concerns and say the $1 billion settlement would barely dent the $45.9 billion the company owes consumers.

To counter that claim, Microsoft presented an economist, Robert Hall of Stanford University. Hall testified that because of added features and lower overall prices of Microsoft software, the consumer groups shouldn't get any damages at all.

More than 200 educators, parents, technology experts and private citizens have written to Motz. The vast majority oppose the settlement's terms — although many say they would welcome some sort of plan to settle the case by giving schools badly needed technology resources.

"I believe Microsoft's intent was positive and they truly believed that they had a solution that would be acceptable and useful to schools," said Bill Fiske of the Rhode Island Department of Education. "Sadly, you mix in a little bit of corporate arrogance and a misunderstanding of the educational environment and you end up with a solution that horrifies everyone."

Apple's Heinen said she is pleased with the response from educators.

"We're encouraged that the amount of money being offered is astronomical but (the educators) still value choice," Heinen said.

The settlement effort of the private class-action lawsuit comes as Microsoft continues to attempt to reach a deal with nine states seeking a remedy against the software giant for violating antitrust laws.