Microsoft Loses at Supreme Court

Microsoft Canada had been illegally overcharging for its Intel-compatible PC operating systems and software since 1988. This was claimed in a class action lawsuit against Microsoft Corporation, Microsoft Canada Co. and the Attorney General of Canada (Intervener), by Pro-Sys Consultants Ltd. and Neil Godfrey at the Supreme Court of Canada.

Indirect purchasers[1], such as themselves, they claimed, were wrongfully paying the exorbitant charges, as a result.

By way of background, the Supreme Court of British Columbia found that the certification requirements set out in the Class Proceedings Act had been met and certified the class action. A majority of the Court of Appeal allowed Microsoft’s appeal, set aside the class action certification and dismissed the action, determining that indirect purchase actions were not available under Canadian law.

In what could turn out to be a groundbreaking decision, the Supreme Court of Canada (SCC) allowed the appeal and held that indirect purchasers have a cause of action against the party who effectuated the overcharge at the top of the distribution chain and that indirect purchaser actions should not be barred altogether solely because of the likely complexity associated with proof of damages.

Commentators are torn as to the significance of this decision, however. At the moment, it merely means that indirect purchasers have a cause of action and can pursue it through class action proceedings.

The types of products and commercial relationships that this case may affect in the future are unknown but potentially widespread. Whether these actions will prove to be successful is a completely different story.

The SCC opined that issues such as double recovery (due for example by proceedings in other jurisdictions) could complicate matters. The implications of this decision will be interesting to follow, and the Knowledge Bureau Report will be sure to keep you informed.

Greer Jacks is updating jurisprudence in EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.