Lawsuit targets Microsoft over Vista-to-XP downgrades

A California woman has sued Microsoft Corp. over the $59.25 fee she was charged to “downgrade” Windows Vista on a new laptop to the older Windows XP, federal court documents show.

The lawsuit, filed Wednesday in a Seattle federal court, is Microsoft's latest legal problem related to Windows Vista, which has faced scrutiny for nearly two years in the better-known “Vista Capable” case.

Los Angeles resident Emma Alvarado charged Microsoft with multiple violations of Washington state's unfair business practices and consumer protection laws over its policy of barring computer makers from continuing to offer XP on new PCs after Vista's early-2007 launch. Alvarado is seeking compensatory damages and wants the case declared a class-action suit.

According to Alvarado, Microsoft coerced computer makers into “agreeing to restrictive and anticompetitive licensing terms” for XP. “Microsoft did so in order to maintain, protect and extend its market power in operating systems software into the next generation of personal computing, to lessen competition, to promote Vista and to enhance its monopoly position,” her lawsuit claimed.

Irked at having to pay a fee for downgrading a new Lenovo notebook to XP, Alvarado said that Microsoft had used its position as the dominant operating system maker to “require consumers to purchase computers pre-installed with the Vista operating system and to pay additional sums to 'downgrade' to the Windows XP operating system.”

“Downgrade” describes the Windows licensing rights that Microsoft gives users, who are allowed under special circumstances to replace newer versions of Windows with an older edition without having to pay for another license. In effect, the license for the newer Windows is transferred to the older edition.

After Vista's launch, PC makers stopped or significantly curtailed sales of machines with XP, but users — and eventually resellers as well — began to take advantage of downgrade rights as Vista's reputation slid. By Microsoft's rules, only buyers of PCs with pre-installed editions of Vista Business and Vista Ultimate could downgrade, and then only to Windows XP Professional.

As more users demanded downgrades, Microsoft allowed computer makers to install XP Professional at the factory. The computer makers charged a variety of fees for the service. Last December, Dell Inc. came under fire for adding $150 to the price of a downgraded PC: Dell said $20 was for the actual downgrade and another $130 to cover the additional cost of replacing the usual Vista Home Premium — the most popular edition — with Vista Business or Vista Ultimate.

Microsoft has extended XP availability several times. In October 2008, for instance, it added six months to the time when it makes XP media available to large computer makers.

Alvarado's lawsuit said that Microsoft's extensions were “likely due to the tremendous profits that Microsoft has reaped from its 'downgrade' option.”

Her lawyers also argued that Microsoft's practice is anticompetitive and monopolistic, and resulted in consumers paying higher prices for their PCs. “They have been forced to pay substantially more to acquire the Windows XP operating system than they would have to pay in a competitive marketplace,” the complaint read.

Microsoft said it was premature to comment, as it had not yet been served with the lawsuit.