Microsoft may be colluding with PC makers to make Windows refunds impossible, or near impossible. At least that's what a number of consumers are saying who have tried to get their refunds. And some lawyers are beginning to agree.
"Prosecutors in a class-action suit could probably make a reasonable case that there is collusion between [PC] manufacturers and Microsoft," said attorney Erwin Shustak. Shustak weighed in after learning of a grassroots movement that is setting out to test the end-user refund (EULA) that Microsoft promises with its Windows operating system.
Organizers of the Windows Refund Center are calling on PC users to request refunds en masse on 15 February, a day they have dubbed Windows Refund Day. Their message: The Windows end-user license agreement is scarcely honored by Microsoft and the PC manufacturers who are supposed to carry it out.
"[Lawyers could make the case] that there is a conspiracy to potentially violate the terms of the license being offered by not having the system in place to refund the money," Shustak said.
Shustak is chief litigator at San Diego corporate finance law firm Shustak, Jalil & Heller. He and others think that the issue has a strong bearing on the antitrust issues at the heart of the Microsoft case now underway in Washington.
Microsoft retorts that critics are twisting the meaning of the software license to make unfair charges against the company.
"All this is a tempest in a teapot," said Microsoft spokesman for legal affairs, Adam Sohn. The license simply means that "if users will not use [Windows] according to the law then there is a recourse for that. It's being turned into something else."
Roots of the refund issue
The saga began last February, when Geoffrey Bennett, an Australian user of the Linux operating system, purchased a Toshiba laptop, which came with Windows 95. Fine print on Bennett's end-user license offered him a refund, if he didn't want, or didn't use, the pre-installed software.
But Bennett didn't get his check without a four-month fight, and Shustak said the paper trail over the issue raises questions about whether manufacturers and Microsoft are making good on the license's legal obligations.
"I expected it to be difficult," Bennett told Wired News via email. "But since the license agreement said that I could get a refund, I was determined to get some sort of compensation."
Bennett's saga inspired the Windows Refund Day consumer effort. Should participants encounter the kind of resistance that Bennett did, organizers and attorney Shustak say the issue could lead to lawsuits against Microsoft and PC manufacturers.
"I can imagine Microsoft in effect trying to change the future and the past by saying it never meant that you could just return the software," said Matt Jensen, who lent his organizing efforts to Windows Refund Day. "And then there could be legal action from everyone who's just bought a computer."
Windows Refund Day has already prompted plans by Linux enthusiasts in Northern and Southern California to visit Microsoft's California offices to demand refunds on 15 February.
One computer technology lawyer adamantly disagrees with Jensen and Shustak, however. He says that any refund problems PC buyers may have encountered so far are a matter of sheer numbers.
"What these individuals have identified is a business problem -- because few, if any, attempt to return their Windows operating system," said Peter Brown of the New York-based technology law firm Brown, Raysman, Millstein, Felder, and Steiner LLP. "If enough people do it, I'm certain Microsoft and its distributors will find a method of compensating them if they don't want the Windows operating system."
"You can make arguments on both sides," added Karen Boudreau, a technology law attorney based in Lewiston, Maine.
As a licensor, Microsoft is bound to provide a refund clause to its licensees, since most license agreements must legally provide an opt-out clause. Microsoft's typical end-user license agreement reads, " ... promptly contact PC Manufacturer for instructions on return of the unused product(s) for a refund."
Microsoft's Sohn says the intention of the refund clause is simple. If users don't agree to the terms of the Windows license, Microsoft and the OEM [original equipment manufacturer] don't want to license you to use that software. "The purpose of that license clause is not to let people go in and take Windows back. The assumption is that you're buying a Windows PC because that's what was sold to you."
But critics insist that if vendors are able to decline Windows refund requests, the net result is that consumers pay the price. Literally.
The case in point
When Geoffrey Bennett sent a letter in February 1998 to Toshiba's Australian offices, Toshiba representatives told him he could return his notebook computer for a refund, but not the operating system software by itself.
According to Bennett's documentation of the correspondence, Toshiba's Laurence White wrote to Bennett, "As you can see in the wording of the [license agreement] text, you need to contact a vendor for instructions, and Toshiba is unwilling to refund the cost of the operating system."
"I hope you can understand our position. Toshiba must pay Microsoft at point of manufacture and cannot get a refund from Microsoft, so we can't refund you."
Bennett replied that the agreement between Toshiba and Microsoft was irrelevant to his request. White reiterated the company's position and referred Bennett to the company's legal department.
But the company contacted Bennett soon thereafter with a sudden about-face. On 21 May, 1998, nearly four months after his original request, Toshiba's General Affairs Division agreed to refund him AUS$110 for not using Microsoft's software.
Attorney Shustak reads political meaning into Toshiba's sudden flip-flop.
"The timing [of Toshiba's turnaround] is more than propitious," Shustak said. He suggested that Toshiba's legal department, when apprised of Bennett's pursuit, didn't want to add fuel to the already-spreading fire of the Microsoft antitrust case.
"Microsoft is in the middle of a case for corporate survival. I'm sure [the order to pay Bennett] flowed down from the legal department. They didn't want to create another problem there."
Toshiba executives involved in the correspondence did not answer emails from Wired News. But Toshiba America provided the following statement.
"Toshiba America Information Systems currently sells all notebook and desktop computers with a Microsoft operating system based on customer demand. We deliver computing solutions and do not provide refunds on any one component of a PC, including the operating system. We have been unable to confirm the accuracy of Geoffrey D. Bennett's claim about the refund he received from Toshiba Australia, and we can not comment on their policies."
Toshiba is not alone
Like Toshiba, Dell Computer will only allow a refund for a complete Dell system -- hardware and software -- in the event of Windows refund request, according to Dell Manager of Corporate Public Relations T.R. Reid. He said it was part of Dell's quality assurance policy and Dell's alone.
"It's not part of our contract with Microsoft to handle it that way," Reid said.
PC maker Gateway provides a warranty agreement to its customers that says "in all cases where software programs have been pre-loaded on the Product [the Gateway computer], you agree that by turning on the Product, you accept the terms and conditions of the end-user license agreements."
A June 1998 survey of 12 PC manufacturers by then University of California Los Angeles undergrad David Chun found that no manufacturer would provide a customer with refunds if Windows was returned following a sale.
"None would offer a discount if I returned Windows and asked for a refund," Chun reported in his survey. He queried sales representatives at companies including Gateway, Dell, Micron, IBM, Packard Bell, Hewlett-Packard, Toshiba, NEC, and Sony.
Representatives for Gateway -- as well as PC maker Compaq -- said company personnel would not be able to answer refund policy questions in time for this story.
Collusion a la Kafka?
James Love, executive director of Ralph Nader's Consumer Project on Technology, said his organization has been contacted by a number of Toshiba customers who had experiences much like Bennett's. Love's group is currently working on a letter to inform the governments of the European Union on the difficulty of buying a computer without Windows.
He thinks fallout from Bennett's story could help prompt the Justice Department to examine what Love considers Microsoft's monopolistic operating system practices in its antitrust suit against the company. That suit now centers on the company's browser bundling practices.
"We find that sometimes these simple cases kind of drive home the point in a way that more complicated cases don't. You walk someone through the Kafka-like nature of the deal and you see that it's a monopoly," Love said.
"You've got to buy [Windows] whether you like it or not? If that's not a monopoly I don't know what is."
"To make an economic argument that somehow there is no availability of non-Windows PCs ignores the fact that OEMs are free to license what they want and will do so if there is enough market demand," Microsoft's Sohn said.
Still, attorney Shustak says the apparent gulf between the license's terms and practical reality of consumers' experiences renders the Windows refund clause "illusory."
"Microsoft says [to users like Bennett], 'We'll give you money back if you give back [Windows]. And then you contact Toshiba, and Toshiba says 'We can't give you your money back because we already paid Microsoft,'" Shustak said.
"It's that sort of collusion or tacit understanding that pretty much assures that Microsoft never really is called upon to honor its contract," he said.
"And at the same time [the arrangement] ensures that Windows is the operating system on virtually every PC."
