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Microsoft’s ongoing legal woes deepened last week in South Florida when Miami’s Ivax Corp., the maker of generic drugs, hit the embattled software titan with an antitrust lawsuit in federal court. Ivax’s suit in Miami claims that Microsoft’s anti-competitive business practices “artificially” inflated prices, causing licensees to overpay for computer operating systems and software applications, such as word processing and spreadsheet programs. “Microsoft has used its monopoly power to injure licensees, primarily by charging supra-competitive prices for its operating system software,” says Ivax’s 49-page complaint, which alleges repeated violations of the Sherman Antitrust Act by Microsoft. The suit seeks class action status. If granted by U.S. District Judge Ursula Ungaro-Benages of the Southern District of Florida, that would allow Ivax and its attorneys to represent the interests of countless other corporations and individuals worldwide who have licensed Microsoft Windows or other software directly from Microsoft since November 1995. Ivax’s lawyers are Jay B. Shapiro, the managing partner of Miami’s Stearns Weaver Miller Weissler Alhadeff & Sitterson, and prominent antitrust lawyer Michael D. Hausfeld, a partner in Washington, D.C.’s Cohen, Milstein, Hausfeld & Toll. “During the relevant time period, Microsoft has entered into millions of licenses,” says the complaint that’s signed by Shapiro. “For example, from 1990 to the present, Microsoft distributed over 300 million copies of its operating system software in the U.S.” Ivax’s complaint doesn’t specify any losses, or the alleged losses of others, but seeks to recover both actual damages and triple punitive damages from the Redmond, Wash.-based company. Microsoft earned $7.5 billion last year on revenues of $25.3 billion. The worldwide popularity of Microsoft Windows suggests that, if proven, those alleged overcharges could amount to hundreds of millions of dollars. “It’s fair to say the class will be seeking very substantial damages,” says Shapiro. Microsoft spokesman Jim Desler declined to comment on the specifics of Ivax’s lawsuit. But he said, “We believe, and there is general agreement, that we have offered businesses high volume and low prices. We think many customers have benefited from that, as well as the great features of functionalities of our products.” Ivax’s suit is related to multidistrict federal civil litigation brought by more than 100 software purchasers, and competitors who claim to have been harmed by Microsoft’s business tactics. The consolidated claims are now pending in the Baltimore courtroom of U.S. District Judge J. Frederick Motz. The Cohen Milstein law firm is a co-lead counsel in the case. What’s different about Ivax’s lawsuit, says Shapiro, is that it is the first antitrust suit brought by a large customer that bought its licenses directly from Microsoft under the terms of a volume agreement. “A lot of corporations do that,” says Shapiro. “If they got a volume discount it doesn’t change the fact they were overcharging them for the licenses.” Ivax also asks Ungaro-Benages to block Microsoft from further “predatory” behavior and award it “reasonable attorneys fees.” Ivax, a multinational corporation with $272.2 million in revenues in the first three months of this year, represents a formidable, if smaller, adversary for Microsoft. Ivax’s chairman and CEO, Dr. Phillip Frost, is an entrepreneur in the mold of Microsoft founder and chairman Bill Gates. The private antitrust suit, filed Wednesday, mirrors accusations of anti-competitive practices that have been leveled against Microsoft in recent years by the U.S. and by attorneys general of as many as 20 states. In 1999, after a bench trial in Washington, D.C., U.S. District Judge Thomas Penfield Jackson ruled that Microsoft held a monopoly and had engaged in anti-competitive practices. Jackson, agreeing with a Justice Department recommendation, said Microsoft should be split in two, with one company owning the Windows operating system, and another taking the rest of Microsoft’s business, including software applications and Internet software. In June 2001, however, the U.S. Court of Appeals for the D.C. Circuit scotched the imposition of Justice’s reorganization plan. But the court upheld Jackson’s finding that Microsoft had violated the Sherman Antitrust Act. In November, Justice entered into a consent decree with Microsoft. The deal committed Microsoft to make portions of its computer code for Windows available to competitors and prohibits Microsoft from retaliating against computer makers that install software from Microsoft’s competitors. Florida, eight other states and the District of Columbia refused to settle the litigation, seeking instead tougher remedies against Microsoft. U.S. District Judge Colleen Kollar-Kotelly, of the District of Columbia, heard final arguments on alternative remedies in June but has not yet issued a ruling. Ivax’s complaint details the history of accusations against Microsoft, including the key findings of Justice Department antitrust lawyers and district and appellate courts in Washington. “Beginning in the late 1980s and continuing through the present, Microsoft engaged in a series of predatory acts designed to, and which did, eliminate competition and prevent entry in the operating system software market,” says the complaint. “Software companies offering superior operating systems and/or lower prices … were not able to compete with Microsoft because of Microsoft’s unlawful conduct. Microsoft has had no significant competitor in the operating system software market since DRI [Digital Research Inc.] and IBM were eliminated as meaningful competitors in 1994.” Digital Research had the DOS operating system. IBM’s system was called OS/2. Indeed, says the complaint, Microsoft’s share of Intel-compatible personal computer operating systems in recent years has been “at least 95 percent.” The complaint says Microsoft has similarly dominated in PC software with its word processing product, Word, and its spreadsheet application, Excel, which have 86 percent and 87 percent shares of the market, respectively. In a similar way, the complaint says, Microsoft eliminated other competitive threats, like those represented by the Internet browsing company Netscape, and Sun Microsystem’s Java programming language.

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