Thousands of California schools will receive free software, hardware, and computerized professional development resources as part of a $1.1 billion settlement that Microsoft Corp. reached with consumers who had accused the software giant of violating the state’s antitrust and unfair competition laws.

Under the agreement, announced Jan. 10, proceeds of the settlement will be distributed in the form of vouchers redeemable for computers and software products.

The settlement stems from a class-action lawsuit filed in 1999 on behalf of California consumers and businesses and covers those who bought Microsoft’s operating system, productivity suite, spreadsheet, or word processing software between February 1995 and December 2001.

Lawyers for both sides said the deal, which must be approved by a judge, could benefit more than 13 million consumers and 3 million children in 4,700 schools. Details about how consumers could take advantage of the voucher offers would only be spelled out after a judge approves the agreement, Microsoft lawyers said.

The settlement requires Microsoft to provide $1.1 billion in vouchers, equivalent to 28.4 percent of all the money that California consumers and businesses paid for Microsoft products from February 1995 to December 2001

Consumers and businesses may use the refund to purchase desktop, laptop, or tablet computers that run on Microsoft Windows or any other operating system, including rivals from Apple Computer or Linux. They may also purchase monitors, scanners, pointing devices, keyboards, or other hardware, as well as software from any provider.

Two-thirds of any unclaimed portion of the settlement amount will go to California’s poorest schools in the form of software, hardware, and money for technology programs, under the terms of the agreement.

Schools will be eligible for settlement allocations only if 50 percent or more of the student body receives free or reduced-price lunch, said Mary Cullinane, Microsoft’s K-12 segment manager.

Once business and consumer plaintiffs have received their portions of the settlement, eligible schools will be allowed to apply for whatever funds are left over, Cullinane said.

Schools will submit technology orders to the district, and the district then will communicate those orders up to the company. “It would be an administrative nightmare if schools were allowed to make requests on their own,” she said.

Schools can use the allocations to purchase a wide range of platform-neutral technologies, from hardware and software needs to computerized programs from improved teacher training and professional development, Cullinane said.

Similar antitrust class-action lawsuits have been filed in 16 other states.

“California represented by far the largest number of remaining lawsuits and by far the largest number of consumers affected,” Microsoft general counsel Brad Smith said. “We feel very good that we’ve put these cases behind us in California, and we feel confident about resolving other cases as well.”

The Redmond, Wash.-based company would not say whether it was negotiating agreements similar to the California settlement with the other states.

But according to Cullinane, “[Microsoft is] always open to looking at reasonable ways to resolve disputes.”

The private antitrust lawsuits are separate from a case Microsoft settled last year with the Justice Department and several states.

The antitrust lawsuit filed in California by a private San Francisco-based law firm was scheduled to go to trial next month. The final cost of the settlement will depend on the number of California consumers who submit claims during a four-month submission period later this year.

Critics immediately blasted the deal, saying California “sold out” to the software giant in part because of a $34.6 billion budget deficit and the continuing economic downturn.

“This seems to be a country where you can buy justice pretty easily these days, especially in these hard-hit economic times when the price of justice goes down,” said John Perry Barlow, co-founder and vice chairman of the Electronic Frontier Foundation. “If there’s ever been a company that abused antitrust law to the detriment of consumers and the economy, it is Microsoft.”


Microsoft Corp.

California Department of Education

Electronic Frontier Foundation