BRIDGEPORT, Conn. - Microsoft Corp. must pay $1 million in punitive damages for deceiving a small software company, a judge ruled yesterday, issuing a sharply worded reminder that Microsoft's legal problems extend well beyond the U.S. government antitrust case.
Singling out Chairman Bill Gates, U.S. District Judge Janet C. Hall said the world's largest software maker was "reckless and wanton" in its dealings with Bristol Technology Inc. The judge said Microsoft violated Connecticut's unfair trade practices law by reneging on promises to support Bristol's program for letting software run on multiple computer operating systems.
Hall's ruling marks a dramatic turn in the case because a jury previously awarded Bristol only $1 in compensatory damages. Hall's 103-page opinion also hints that she might order a new trial on antitrust allegations, which the jury rejected and which offer the prospect of much larger damages.
"We're increasingly optimistic about our chances on a motion for new trial," said Bristol's lawyer John L. Altieri Jr.
"Microsoft has been through hell in a handbasket in terms of the [Justice Department] case," said Christian Koch, an analyst at Trusco Capital Management, which owns more than 4 million shares of Microsoft. "If they can get through that, this won't matter, so this is just kind of a small little spot on their overall story."
Microsoft said it probably will appeal. "We believe this ruling contradicts the jury's decision," said spokesman Jim Cullinan.
Hall's decision is viewed as significant in part because the case involves different technology than does the Justice Department's landmark case.
Although Judge Hall said her ruling wasn't influenced by U.S. District Judge Thomas Penfield Jackson in the government case, she reached conclusions that were strikingly similar. Both judges said Microsoft used deception and bullying tactics to enhance its market position.
Bristol claims that Microsoft used Bristol to get a foothold in the market for technical workstations and server operating systems. The suit says Microsoft initially supported Bristol's Wind/U product, which lets users run Windows applications on computers using the Unix operating systems.
Once Microsoft's Windows NT software had become established in the server and workstation business, Bristol alleges, the software giant changed course and refused to provide Bristol with crucial application programming interfaces, the codes that let programs run smoothly on Windows.
In her opinion, Hall largely agreed with those allegations, saying Microsoft became concerned that Wind/U would bolster Unix. She cited an internal Microsoft memo saying the company feared "losing the franchise" if it continued to cooperate with Bristol.
"Microsoft's deceptive statements regarding the viability and scope of the Wise Program are, at their core, like a classic 'bait-and-switch' tactic," Hall wrote. The judge cited a 1996 speech in which she said Gates, mentioning Bristol specifically, promised to support the Wise program.
Hall also issued an injunction barring Microsoft from making deceptive statements about the Wise program in the future, although she rejected Bristol's request to order corrective advertising by Microsoft. The judge could decide on Bristol's motion for a new trial on the antitrust issues in the next several weeks.
Bristol, a privately held company that had planned an initial public offering before its relationship with Microsoft soured, originally sought as much as $263 million in the jury trial. The Danbury, Conn., company is still seeking more than $6 million in attorneys fees.
Microsoft shares rose 38 cents to $70.19 yesterday.