Hey, Californian! Does Microsoft owe you?

By Byron Acohido, USA TODAY

SEATTLE - When Rick Peltz got word last year that Microsoft (MSFT) had agreed to pay $1.1 billion to settle a class-action antitrust lawsuit in California, he did some quick math.

Peltz figured his Encino, Calif.-based real estate company stood to get a $45 refund for each of its 350 Windows PC workstations, or $15,750.

Then Peltz learned Microsoft's agreement went so far as to refund 22% of every dollar that California consumers and businesses spent on its desktop software from Feb. 18, 1995, to Dec. 15, 2001. During those seven years, Marcus & Millichap Real Estate Investment Brokerage had upgraded its Windows PCs at least three times. Suddenly, Peltz was looking at $47,250.

"We saw it was worthwhile and moved to take full advantage of it," says Peltz, chief information officer of the company.

Comparatively few Californians have done likewise. Though Microsoft last fall mailed settlement notices to 17 million California consumers and businesses, fewer than 1 million have bothered to file claims.

With a filing deadline on the horizon and more than $1 billion of Microsoft's cash up for grabs, a statewide marketing blitz is underway to alert Californians about the rare chance to grab free tech dollars. The deadline for filing had been set for March 15, but Microsoft expects it to be extended to April 28.

Microsoft granted the big refund rather than go to trial over allegations that it used its dominant market share of desktop PC software to overcharge for its products. It even agreed to distribute two-thirds of any unclaimed benefits to underprivileged California schools. Typically, class-action defendants get to keep 100% of unclaimed benefits, says Microsoft spokesman Jim Desler.

Even so, a cottage industry has sprung up to rally Californians to grab every penny. "If you do nothing, Microsoft gets to keep a third of your claim," says attorney Richard Grossman of Townsend and Townsend and Crew, the San Francisco law firm that negotiated the settlement. "So make a claim."

That message is being reinforced in direct and online ads, and as part of a telemarketing campaign to encourage companies, agencies and charities to tap the Microsoft mother lode.

California's push could show class-action plaintiffs in eight states and Washington how to get the most out of similar, though less lucrative, settlements. The software maker has agreed to pay refunds totaling $450 million, split among the nine entities. It also negotiated to keep 50% of unclaimed benefits in those places. California could also help frame the outcome of class-action lawsuits that remain on course for trials in Arizona, Iowa, Massachusetts, Minnesota, New Mexico and Vermont.

"Microsoft is facing good lawyers ... who now have a substantial basis for being able to say to Microsoft, 'You have to do at least as well with us, and if you don't, we are quite prepared to take this case as far as we need to take it,' " says Martha Gifford, antitrust co-chair at New York City-based Proskauer Rose. It is not involved in the cases.

California's activism springs from several unique provisions: Terms cover consumers and companies. Claims can be filed several ways. Payoffs can be sizeable, typically $100 or more for consumers and thousands for companies.

That sets it apart from many class-action settlements. Typically, consumers get payoffs of less than $20. Often, they must wade through dense paperwork. As a result, it's not unusual for a large percentage of a judgment to go unclaimed and revert to the defendant, legal experts say.

Junk mail junkie

Microsoft might be paying out fewer California claims had it never mailed a settlement notice to Howard Yellen, a San Francisco attorney and entrepreneur who enjoys reading junk mail.

Last September, Yellen spent an hour poring over a Microsoft claims form and literature. He discovered numerous ways to claim refunds, ranging from $5 to $29, for certain Microsoft products.

The simplest way: sign a statement that he purchased up to five eligible products, qualifying for as much as $100 in refunds.

He could claim more by documenting purchases.

Payment would come in the form of vouchers that work like rebate coupons. To cash in, the holder must first buy new software or computer hardware, then submit the receipt accompanied by the voucher to Microsoft. The new products could come from a variety of suppliers.

By submitting a $29 voucher along with a receipt for a new $200 printer, for instance, Yellen could expect a $29 check from Microsoft. He could use his vouchers any time in the next four years.

Further research revealed a richer vein. Yellen discovered there were multiple ways companies could claim thousands of dollars worth of vouchers.

The quickest: request an inspection of Microsoft's records to determine how many licenses for refund-eligible products a company held during the period covered by the settlement.

Microsoft spokesman Desler says the software maker put "tremendous effort" into designing user-friendly settlement notices. Compared with the norm, Microsoft's claims process is "straightforward, clear and relatively easy," he says. Plaintiff's attorney Grossman concurs. "Filing a claim is easy," he says. "Most businesses will recover tens or hundreds of thousands of dollars; some will recover millions. Even the smallest businesses can recover thousands of dollars."

But Yellen found Microsoft's notices to be "very detailed and legalistic," and concluded they were destined to go largely unheeded. In October, he raised $750,000 in start-up capital and opened a consultancy called Settlement Recovery Center. Three months later, SRC's cramped San Francisco office has become a beehive of activity. Dozens of workers make telemarketing calls, distribute direct-mail flyers and manage ads. SRC's pitch: It will assemble proof-of-purchase documentation and process Microsoft refund claims for companies for a 30% contingency fee.

"A lot of our clients have 400 to 500 employees, and we're looking at getting them $75,000 to $90,000," Yellen says.

Sherwood Partners founder Marty Pichinson, renowned across Silicon Valley for handling the liquidation of 150 start-ups since 1999, recently retained SRC to see if his creditor clients have anything coming from Microsoft.

SRC is tracking former bookkeepers, checking with software resellers and analyzing Microsoft licensing archives. It wants to document any Microsoft software purchased by Pichinson's dead dot-coms. Yellen estimates there might be as many as 80,000 liquidated Windows PCs for which Microsoft could owe millions in refunds.

Any vouchers SRC can reel in could be sold or donated to charity by the creditors. Microsoft declined comment on SRC's activities. "I do anticipate something positive coming back," says Pichinson. "If the money is sitting there, then we have an obligation to get some value for the creditors we represent."

Charities get into the act

Yellen recently brainstormed a way to boost consumer claims while at the same time giving non-profit groups wider access to Microsoft's cash.

SRC's DonateDirect program organizes fundraisers in which donors are advised how to file a sworn-statement claim for a $100 refund, then transfer the voucher to the charity of their choice. SRC supplies claim forms and literature designed to demystify the claims process, then channels the vouchers to the designated charity.

Moss Beach Homes, a statewide social service agency, recently began distributing SRC-supplied packets to spur voucher-donations for places such as San Francisco's Sunset Neighborhood Beacon Center. There, elderly citizens learn how to use PCs, and children participate in after-school activities.

"Our equipment gets high wear and tear," says Michael Funk, the center's director. "To be able to use vouchers to upgrade or replace equipment is really critical."

SRC recently launched pilot fundraisers at three San Francisco-area charter schools. It hopes to go to hundreds more across the state. It is also pitching DonateDirect campaigns to churches, synagogues, alumni associations, labor unions and civic groups.

Instead of selling cookies or holding a raffle, such groups could tap into thousands of dollars worth of donated vouchers. Their part: Ask members, students and staff to distribute DonateDirect information packets. "We're trying to make it easy to aggregate individual claims into something meaningful," Yellen says. SRC takes a 25% cut from its non-profit clients.

The visibility of the California refunds has served to remind some tech buyers that Microsoft has a near monopoly of desktop PC software. Some, such as Marcus & Millichap's Peltz, remain loyal.

"At this point, we will probably reinvest our vouchers in Microsoft products because of the stability we have in our environment," Peltz says.

But discontent has begun to steep among others for whom the refund provides an impetus to seek out Microsoft alternatives.

Robb Good, technology director for San Diego-based Sundt Construction, anticipates getting as much as a $20,000 refund from Microsoft. He plans to use it to replace Microsoft programs with competing products from Novell.

"It's worth the trouble just to make a statement to Microsoft," Good says. "They've got such a monopoly, it's time we all tell them, 'Hey, we want to be treated fairly.'"