Microsoft sued over unified communications deal

Microsoft has been sued by a small Wisconsin business for allegedly misrepresenting the capabilities of its Live Communications Server product, selling the company more licenses than it needed and not providing a refund or other products to solve its original problem.

Imagineering International filed its lawsuit in December in the Fond de Lac County circuit court in Wisconsin, accusing Microsoft of breach of contract and breach of warranties, among other offenses.

Imagineering claims Microsoft failed to resolve problems the company had with deploying an enterprise version of Live Communications Server, then did not replace the product with a revamped version, Office Communications Server (OCS), as Microsoft had promised.

Microsoft also never provided Imagineering with a refund for the products and licenses it purchased, after requiring Imagineering to destroy its licenses and the software as a condition of receiving a credit toward OCS, said Jeff MacMillan, president and CEO of Imagineering.

Imagineering, a 23-person IT consulting firm and reseller, had been a Microsoft partner for about 10 years at the time it purchased the products and licenses, he said. The company has since terminated its partnership with Microsoft.

Rather than responding in the same court, Microsoft filed papers Wednesday with the U.S. District Court for the Eastern District of Wisconsin in Milwaukee to move the case from the county court to the federal court, citing Imagineering's request for damages that exceed US$50,000 as one reason.

Cases heard in federal courts also tend to take longer to be resolved, and plaintiffs can lose some of their claims in summary judgment, said Michael Kuborn, an attorney representing Imagineering from the Curtis Law Office in Oshkosh, Wisconsin.

A lawyer representing Microsoft did not respond to a phone call requesting comment. A Microsoft spokesperson said via e-mail Friday that Microsoft is reviewing the allegations and will make its response in court.

Imagineering alleges in its complaint that on Oct. 7, 2005, it purchased Microsoft's LCS software, 1,500 Client Access Licenses and 1,500 External Connector Licenses for a total of $70,776. At the time LCS was Microsoft's software for providing a unified communications system, which links a company's voicemail, telephone system, e-mail and other employee communications services on the same software infrastructure.

MacMillan said Friday that Microsoft representatives had informed him that LCS had the capabilities his company needed to create a unified communications platform out of its disparate systems for telephony, voicemail, fax and e-mail. Microsoft also said it would provide remote desktop capability, which was key to Imagineering's deployment, he said.

Imagineering purchased the product and licenses mainly for an in-house deployment, but if that proved successful, the company planned to sell a similar offering to customers, MacMillan said.

The number of licenses his company needed to purchase seemed high for a company with only 23 employees. However, Microsoft employees brokering the deal said Imagineering would need licenses not only for its own employees using the new system but also for any customers who wanted to access it.

After Imagineering secured the product from Microsoft, it had trouble deploying the product, and so in October of 2005 it contacted Microsoft technical support, MacMillan said. "They determined we were given bad presale information and that the product would not work the way we had been told it would," he said.

Microsoft also informed Imagineering that it did not need licenses for its customers and had indeed purchased too many, he said.

The companies worked together to come up with a solution, which MacMillan said was to give Imagineering a credit equal to what it paid Microsoft to purchase the follow-up version of LCS, OCS, from Microsoft distributor TechData once that product was available. TechData also would provide Imagineering with the licenses it would need for its deployment, he said.

Microsoft released OCS in late 2007. Around that time, MacMillan said he contacted TechData about acquiring the product and the licenses, per the company's agreement with Microsoft. TechData informed him that it had no record of such a deal, he said.

MacMillan said he contacted Microsoft and again worked with it to try to resolve the situation. In February 2008 Microsoft informed Imagineering that it would give it "no more than $27,000" in credit to purchase additional hardware it would need to deploy OCS -- a more complex product than LCS -- as well as the license to deploy it, according to court documents and MacMillan. Imagineering was given seven days to accept or reject the offer, according to court documents.

At that point, MacMillan said, he was frustrated and disappointed at how Microsoft handled the situation.

"They've welched on every deal they put into place ... and then said, 'You paid $70,000, we'll give you $20,000, that will have to be good enough, you can accept it or you can reject it,'" he said. "We had to reject that."

Imagineering still has not successfully implemented a unified communications platform, MacMillan said, and does not have the money to do so. "The $70,000 we spent on this was basically what we had for the project," he said. "It's actually an extraordinary amount of money to us."

Imagineering is seeking a refund from Microsoft for the original amount it paid the company, punitive damages and attorney fees.