Judge Questions $1-Billion Microsoft Donation Offer

BALTIMORE â€”  A U.S. judge on Monday questioned whether Microsoft Corp.’s $1-billion plan to equip needy schools with computers should be revised to avoid harming competition in the education market.

U.S. District Judge J. Frederick Motz appeared to share concerns raised by Apple Computer Inc. that the agreement would flood schools with refurbished personal computers running Microsoft’s Window’s operating system and other software.

Motz also said he might have to subtract the value of the donated software as well as the value of goodwill the settlement generates for Microsoft.

“If Microsoft is generating goodwill out of this, it should put more into this,� Motz told Robert Hall, an economist testifying in favor of the settlement on Microsoft’s behalf.

“Why isn’t the best solution to just put the entire value� of the $1-billion settlement into a fund to buy computers and software for the schools and “then let Microsoft compete for its own money back?� Motz asked Monday.

Microsoft and a group of class-action attorneys are pushing a deal that would require the company to spend more than $1 billion to put software and computers into some of the poorest U.S. schools.

Microsoft offered the plan to resolve 150 lawsuits accusing it of using its Windows monopoly to overcharge consumers. But some lawyers in the case, including several representing California consumers, say the deal is a fraction of what Microsoft owes.

Critics also say the settlement helps the No. 1 software company make further inroads into the school market, where Apple has traditionally been strong.

“The education market is very robust,� Apple general counsel Nancy Heinen said. “Why would you let a monopolist get a better foothold?�

But Microsoft deputy general counsel Tom Burt said the software giant could help more schools under the proposed settlement, distributing more software at lower cost than if the same schools went out and bought programs on the open market.

Burt also accused Apple of trying to take Microsoft’s settlement money and get it spent on Apple products.

“Microsoft believes this settlement fully maximizes the value of this case,� he said.

During the hearing, Microsoft offered several changes to the settlement to address the criticism that began when the proposal first was unveiled last month. Among the new Microsoft ideas:

* Changing the way a foundation that will oversee the money picks its board members. Microsoft said two software makers would join the foundation: Connectix, which makes a program that lets Windows software work on rival Apple computers, and education software maker Key Curriculum Press.

* Allowing the foundation, not Microsoft, to oversee the distribution of $90 million in teacher training funds that are part of the settlement.

Microsoft said the settlement has the support of the National Education Assn., the United Negro College Fund and other education groups.

The company is “ready to step up� and settle all the cases to avoid the expense and distraction of defending the lawsuits, including a group of class-action cases filed in state courts in California and North Carolina, Burt said.

Lawyers for those plaintiffs have asked Motz to disapprove of the settlement or to exempt their lawsuits. Motz is expected to decide by the end of the year whether to accept the plan.

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Reuters, Associated Press and Bloomberg News were used in compiling this report.