BALTIMORE – A federal judge said he will rule by mid-December on whether to accept or reject a proposed $1 billion settlement of consumer class-action lawsuits against Microsoft Corp.
U.S. District Judge J. Frederick Motz, who is overseeing the lawsuits, held a preliminary hearing Tuesday on the proposal to settle claims that Microsoft abused its monopoly power and overcharged people for Windows, Office and other software.
Educators, lawyers and technology experts - some supporting and some opposing the settlement - argued the settlement's merits for more than 10 hours.
During the hearing, an economist said his initial estimates for $2.1 billion in damages was wrong.
Keith Leffler, a University of Washington economist testifying on behalf of the settlement, told U.S. District Court Judge J. Frederick Motz, that his estimate should have been $5.15 billion, or more than two times the initial amount.
Motz, for his part, was stunned, but had his concerns allayed when lawyers who negotiated the settlement said they didn't use Leffler's figures in deciding how much Microsoft should have to pay in the settlement.
Under the proposal unveiled last week, Microsoft and some plaintiffs agreed the company would provide more than $1 billion worth of Microsoft software, refurbished personal computers and other resources to more than 16,000 of the nation's poorest schools.
Motz can accept or reject the proposed settlement, although his decision could be appealed. He told the court Tuesday that he would make a ruling by "mid-December," but said that deadline could stretch up to Dec. 21, the Friday before Christmas.
Lawyers for Microsoft ran out of time to make their case Tuesday. Motz scheduled a second day of arguments for Dec. 10.
David Tulchin, Microsoft's lead lawyer, said he would make a strong case for the settlement in the next hearing.
"The settlement is a great settlement for the kids and the country," Tulchin said. "It helps 7 or 8 million kids in the poorest schools get the benefit of technology they wouldn't otherwise have."
Critics contend the proposal will only serve to enhance Microsoft's access in schools while providing inadequate funding to meet the poorest schools' needs.
Apple Computer Inc.'s Steve Jobs has tempered his blunt criticism of Microsoft in recent years after his archrival invested millions in his company, but he blasted the proposed settlement Tuesday.
"We're baffled that a settlement imposed against Microsoft for breaking the law should allow, even encourage, them to unfairly make inroads into education - one of the few markets left where they don't have monopoly power," Jobs said in a statement.
Lawyers and experts representing California plaintiffs criticized the settlement before Motz, agreeing with Jobs that it would give Microsoft a competitive advantage and arguing that schools wouldn't get enough funding to support their donated computers and software.
"I believe the program as designed is a recipe for disaster," said Jeffrey K. Mackie-Mason, a University of Michigan economist who spoke for the California plaintiffs.
But lawyers who negotiated the settlement with Microsoft and their experts said the settlement would help poor students close the ``digital divide'' that separates them from affluent students.
"We think it potentially could be stupendous," said Glen Bull, an education professor specializing in technology issues at the University of Virginia.
Apple, which says it controls about 47 percent of the K-12 education market, filed a brief arguing that the settlement would only further Microsoft's monopoly power - the concern that prompted the lawsuits in the first place.
"We don't think the antitrust settlement should have anticompetitive effects," George Riley, a lawyer representing Apple told Motz.
Lawyers who support the settlement said it would not favor Microsoft because other software and computers, including from Apple, would be available for poor schools, and decisions on supplying them would be left to an independent foundation. But opponents said cash-strapped schools would naturally choose Microsoft products because the settlement calls for them to be provided free.
Microsoft and Apple, once fierce rivals, have been on relatively friendly terms since 1997, when Microsoft made a $150 million investment in its rival to help keep Apple afloat. Apple's overall share of the desktop operating system market is down to just 4 percent, while Microsoft's Windows controls more than 90 percent of the market.
Analyst Rob Enderle of Giga Information Systems said he wasn't surprised that Apple is responding so aggressively. "Apple is clearly the company that could be the most damaged" by the proposal, he said.
Michael Hausfeld, one of the lawyers who negotiated the settlement, said if consumers pursued their claim against Microsoft and eventually won the case, they would stand to recover as little as $6 each, before court costs were deducted.
The class-action settlement hearing came as Microsoft continues to attempt to reach a deal with nine states seeking a remedy against the software giant for violating antitrust laws.
However, Connecticut Attorney General Richard Blumenthal became the latest official to back away from the proposed settlement in that case - already agreed to by the Justice Department and nine other states - saying Tuesday it "has too many gaps and ambiguities."
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