Legal Update

A former employee has filed a class-action discrimination suit against Microsoft. Monique Donaldson filed the case in U.S. District Court for Western Washington, claiming “a pattern and practice of race and sex discrimination against African Americans and female salaried employees.” Donaldson is represented by Cohen, Milstein, Hausfeld & Toll, a firm that recently won a record US$176 million judgment against Texaco in a race discrimination suit and is also participating in a class-action antitrust suit against Microsoft.

A U.S. Tax Court ruling on Microsoft’s foreign sales could affect software companies that have export earnings prior to 1997. Microsoft sought to eliminate US$19 million in tax liability for the years 1987-1991, arguing that it should benefit from tax breaks covering sales of copyrighted materials by “foreign sales corporations” (a special class of foreign subsidiary). The court ruled that these tax breaks were intended specifically for the music industry, and did not cover Microsoft before 1997, when the U.S. Congress explicitly extended them to software. The ruling could also affect Microsoft competitor Oracle, which has US$20 million at stake in a similar case. Microsoft can appeal the ruling to the U.S. Court of Appeals.