Minnesota Lawyer Blog

If you’ve ever wondered why a new copy of Microsoft’s Vista operating systems costs $300, a clue might lie in the size of the war chest the software giant must maintain for its legal fees.

A Wisconsin judge ruled this week that Minneapolis attorneys with national law firm Zelle, Hoffman, Voelbel, Mason & Gette were entitled to $4.2 million in legal fees and expenses stemming from its work in an antitrust suit against Microsoft that was settled in 2006. Microsoft challenged the fees, saying the Zelle firm had misrepresented the hours they spent working on the case.

The Wisconsin class action suit was settled for $223.8 million. A similar suit based in Minnesota was settled for $174.5 million.

Earlier this year, the Software Freedom Law Center did a projection of how much Microsoft users are being asked to share in the company’s legal costs. The group took the total of $4.3 billion dollars in legal costs incurred by Microsoft from 2001 to 2004 and divided it by estimated sales of the Windows XP operating system over the same period — about 200 million copies — to come up with a figure of $21.50 per user that goes toward Microsoft’s defense of patent suits and other legal costs.

An Iowa judge has approved a $179.95 million class-action settlement against Microsoft brought by Minneapolis attorney Richard Hagstrom and Iowa lawyer Roxanne Conlin. The settlement was announced last spring but just approved last week. The terms of the deal, according to the Associated Press, include:

-- $75 million in legal fees and costs (over and above the $179.95 for class members);
-- Cash to individuals and vouchers to government and business claimants;
-- $1 million to the Iowa Department of Education to administer the funds;
-- $1 million to Iowa Legal Aid for a program to reduce domestic violence; and
-- Two cy pres funds for the Iowa public schools for computers and software.

The settlement resembles the 2004 settlement Hagstrom negotiated in Minnesota, for which he was named a Minnesota Lawyer Attorney of the Year.

In that case, Microsoft agreed to provide Minnesota consumers and businesses with $174.5 million in vouchers for technology purchases from any manufacturer. Unclaimed vouchers were donated to Minnesota schools. In addition, Hagstrom negotiated cash payments of $2.5 million to the Minnesota Legal Aid Society and $2.5 million in cash and the same amount in technology vouchers to the University of Minnesota.

That case was the first state suit against Microsoft to go to trial, as well as the first “indirect purchaser” class action — that is a suit on behalf of consumers who did not purchase goods directly from the manufacturer being sued — certified in Minnesota.

Minneapolis attorney Richard Hagstrom does not care what Peter Lattman or anyone else at the Wall Street Journal Law Blog has to say about anything, let alone the $75 million fee that Microsoft Corp. has agreed to pay Hagstrom and the other plaintiff’s counsel in an antitrust class action in Iowa against the software behemoth. Lattman hasn’t shown much interest in Hagstrom’s point of view in the past, he told Minnesota Lawyer. “He has one agenda and one agenda only.”

In this and in other cases against Microsoft, Hagstrom has argued that the company charges too much for software because it is virtually a monopoly.

The WSJ appears to take a dim view of the case -- who knew? In reporting the fee award the WSJ quoted earlier remarks made in connection with another case by Microsoft lawyers about plaintiff’s lawyers and boundless greed and pointedly noted that the named plaintiffs in the case will receive $10,000.

Microsoft will also pay up to $180 million to consumers who claim their refunds. The company will donate 50 percent of the unclaimed refunds to purchase computers for rural and disadvantaged schools in Iowa In addition, it will make payments of $1 million to the Iowa Department of Education to administer the computer vouchers and $1 million to the Iowa Legal Aid Society. Hagstrom pointed out that Microsoft agreed to the fee award, probably because it had paid its own lawyers a lot more. Over 100,000 hours have been clocked on the Iowa case, which has lasted more than six years.

Hagstrom is now heading north into Canada to take on Microsoft, where he says the antitrust law is “fairly similar.”