Canadian businesses and consumers who indirectly purchased Microsoft’s operating systems and other software can now take part in a class action lawsuit alleging the vendor overcharged for its products, the Supreme Court of Canada ruled on Thursday.
The ruling over turns a 2011 ruling in the Court of Appeal for British Columbia that decided a class action lawsuit against Microsoft Corp. could not proceed. That court ruled only direct buyers of Microsoft’s software could sue for damages. Since many consumers or businesses buy products such as Windows from resellers or OEMs, they could not take part in a class action against the vendor. But with that decision reversed, Microsoft is again involved in a class action proceeding that will begin a long and complex discovery process before trial dates are set.
Vancouver-based Pro-Sys Consultants Ltd. and Vancouver resident Neil Godfrey brought the original class action lawsuit against Microsoft Corp. and Microsoft Canada Co. alleging that beginning in 1988, Microsoft engaged in unlawful conduct by overcharging for its “Intel-compatible PC operating systems and Intel-compatible PC applications software,” according to a court document.
On Thursday, the Supreme Court considered the case alongside two other cases that involved examination of the issue of whether indirect buyers (purchased a product from a vendor through a reseller) could sue the original vendor if they suffered harm, says Reider Mogerman, partner with Vancouver-based Camp Fiorante Matthews Mogerman. The law firm is involved in all three cases.
The ruling is a “comprehensive victory” for his clients at Pro-Sys, Mogerman says in a phone interview with ITBusiness.ca. “It allows consumers to sue Microsoft if they can prove they did something wrong.”
Microsoft responded to a request for interview with a statement provided by David Howard Microsoft Corp.’s corporate vice president and deputy general counsel.
“We are pleased that the court dismissed part of the matter and we are confident that we will prevail when the case is considered on the merits,” he writes.
The court did dismiss an aspect of the claim that involved a constructive trust claim that normally applies to property that is traced to unjust enrichment, Mogerman says, and judges decided that since this case only involves money, it did not apply here. “That is a minor set back,” he says.
The allegations made against Microsoft are that it engaged in a series of unlawful and anti-competitive acts that allowed it to charge illegally-inflated prices, according to the Pro-Sys court factum filing. It alleges Microsoft worked with computer manufacturers in an unlawful conspiracy.
“It starts with the per-processor agreement that Microsoft entered into with the big OEMs,” Mogerman says. “Until very recently Microsoft had certain rules with the OEMs which we allege were anti-competitive.”
That agreement required OEM partners to pay Microsoft for each processor it sold, despite whether it used their software or not, Mogerman says. “That essentially closed out competition for a long time.”
Similar cases involving Microsoft have already taken place in many U.S. state courts, according to the Pro-Sys factum, and several have been settled before achieving class certification.
Microsoft’s argument before the Supreme Court involved making the case that indirect purchasers couldn’t sue because it could lead to a scenario of multiple recovery, according to its factum filed in court. Meaning that both the direct purchaser and indirect purchaser would sue for the same amount.
The case against Microsoft compiled by Pro-Sys is connected to antitrust findings against Microsoft that stretch back to famous court decisions made in the U.S. and European Union. A 1999 ruling in the case of United States vs. Microsoft Corp. by Judge Thomas Penfield Jackson stated Microsoft’s dominance of the PC market based on x86 chips constituted a monopoly. In 2004, the EU ordered Microsoft to pay a $794 million USD fine and gave it 90 days to produce a version of Windows that did not contain Windows Media Player.
While the case relates only to British Columbia citizens, separate class action filings against Microsoft have also been made in Ontario and Quebec, Mogerman says. The finding of the B.C. case will apply to those as well, he says.
