updated 5/2/2006 9:08:47 PM ET 2006-05-03T01:08:47

Microsoft Corp. will pay $70 million to thousands of California government agencies in the latest legal settlement spurred by price-gouging allegations against the world's largest computer software maker.

The proposed truce covers a wide range of taxpayer-backed agencies — from local school districts to regional transportation systems — that bought Microsoft products dating back to 1995.

(MSNBC is a Microsoft-NBC joint venture.)

If the settlement gains court approval later this year, Microsoft will divide the $70 million among the eligible government agencies as they buy computers, printers and software, including brands that compete against Microsoft.

The proposed payments are similar to a $1.1 billion pool that Microsoft set up for California consumers and businesses in 2004 after settling a lawsuit alleging the software maker had abused its power in the computing industry to inflate prices.

Although Microsoft has consistently defended its prices as fair and reasonable, government regulators, customers and business rivals have long insisted that the software maker leveraged its Windows operating system — the brains of most personal computers — to build an unfair market advantage.

The backlash unleashed a tidal wave of lawsuits, including a closely watched antitrust case filed by the U.S. Justice Department. That showdown culminated in a 2002 settlement.

Redmond, Washington-based Microsoft spent billions resolving other suits brought by rivals like AOL Time Warner Inc. and Sun Microsystems Inc., as well as other government entities.

Led by the cities of San Francisco and Los Angeles, the California government agencies filed their suit in 2004. The counties of Santa Clara, San Mateo, Los Angeles and Contra Costa also joined in the action.

In a statement Tuesday, Microsoft denied it did anything wrong. "We value our relationship with these cities and counties and are pleased to reach a settlement that allows us all to focus on the future," said Tom Burt, Microsoft's deputy general counsel.

San Francisco lawyer Richard Grossman, who represented the government agencies, said his clients were "delighted" with the settlement.

The agreement still requires the approval of U.S. District Judge J. Frederick Motz in Baltimore. The California agencies originally sued in San Francisco Superior Court, but the case was transferred to Maryland, where Motz is overseeing several other similar suits against Microsoft.

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