In lawsuit obsessed America, it isn’t unusual to hear about wacky lawsuits where someone sued somebody for really odd reasons. A few days ago, I came across a news story about Microsoft suing this college kid at Kent State university for causing irreparable injury to its business reputation and goodwill by selling the ‘unopened’ Microsoft software on eBay.

Whenever I read something I always try to be on a lookout for business lessons that I can learn, if any, from what I am reading. While reading this article I spotted a few things that an entrepreneur can learn from it.

But before that, let me give you a background of the suit.

The day was September 27 when David Zamos, 21, Kent State biochemistry major enrolled as a guest student at the University of Akron, auctioned his unopened copy of Office XP Pro for $112.50 on eBay.

However, when Dave put another auction on eBay to sell Microsoft Windows, it was taken down by a “Microsoft investigator” by accusing him of infringing on the company’s copyright.

Pirated software being sold on auction sites like eBay is indeed a huge problem for software makers. If you are wondering that David was just another fly trying to make a quick buck by selling illegal software but thwarted by Microsoft, then you are not quite right.

Actually, while attending Akron University, Zamos purchased educational editions of Microsoft Windows and Office XP Pro for a discounted price of $60 at the school’s computer store.

After finding that he would have to format his computer, which would wash out years of term papers and other date, he decided not to go ahead with the upgrade and return the purchased software.

When Dave went back to the University store to return the software, he was in for a surprise. He was told that the university had an agreement with Microsoft because of which they could not accept returns on the company’s software.

$60 was a big sum for a person whose yearly income is about $3,500. So he decided to go ahead and ask Microsoft directly for a refund, knowing they offer a 30 day money back guarantee to their customers.

Zamos’ request was denied as Microsoft waited till 34th day to respond. Dave was smart to send his letter by certified mail, so he knows when Microsoft got it.

Not willing to accept the loss, he decided to recover his money by auctioning the software on eBay. And that is when the problems started. Seeing his auction, one of Microsoft Investigator complained to eBay about it, who in turn took it off.

Having no idea where he was wrong, he researched Microsoft’s resale policy posted on eBay. This policy stated that qualified end users, may resell and purchase software through eBay.

Thinking that qualified end users meant anyone associated with an educational institution, he began communicating with Cameron Alston, Microsoft’s San Francisco lawyer, about the issue who defended Microsoft’s right to shut down his auction citing cases of piracy.

Dave replied to Mr. Alston’s letter asking him how his situation had anything to do with the cases of piracy. Not getting any response from him, he sent a counterclaim to eBay, which allowed him to repost his sale.

His auctions made him a profit of $143.50 from the sale. However, Microsoft could not stand these unfair business practices being conducted by the evil student from Akron University so they sued him.

Because neither he nor his father could afford an intellectual property lawyer so Dave decided to represent himself. When he sat to research the case, he found that the basis Microsoft was suing him on were pretty baseless.

1. Microsoft claimed “irreparable injury to its business reputation and goodwill,” however David wasn’t selling any pirated or stolen software neither was he falsely representing Microsoft nor reproducing its trademark nor repackaged its goods, as the lawsuit suggested.

2. Microsoft accused Zamos of unfair competition, claiming that his $143.50 in profits forced the company to sustain “substantial impact.” Eh? $143.50 must have made a huge dent on $38 billion sales of Microsoft.

Perhaps Microsoft has gotten soo used of hearing the word unfair competition (think US Govt v/s Microsoft and European Union v/s Microsoft) that everything looks like unfair competition to them.

But whatever, law is law. Break it, you get sued.

3. Microsoft claimed that Zamos was not a licensed “qualified end user,” because he’d never signed the agreement that would allow him to resell his software. David responded with a claim that he couldn’t sign the agreement until he loaded the software.

In fact, Zamos accused Microsoft of deceptive sales practices, as the agreement had been hidden from him.

After that started a series of filings, 37 in total, each of which was dismissed by Microsoft. Judge had to finally order both sides to stop submitting any more paperwork.

After this David did what Microsoft would have never imagined, he requested a trial by jury. Not interested in burning thousands of dollars, Microsoft offered to drop their suit, if Zamos dropped his countersuit.

Zamos offered to agree to the settlement if Microsoft apologized and reimburse $40 he spent on Kinko’s copies. Realizing Microsoft would not apologize, he went to press.

What Microsoft initially thought to be a slam-dunk case had now turned into a PR mess for the company. Realizing the gravity of situation, the company’s senior lawyers moved in a settled the case while getting Zamos to sign a non-disclosure agreement.

So that was the whole case I summarised for you by getting my facts from various sources. If you want a more blow-by-blow account, you can read this excellent article.

Now what lessons can this whole situation teach you, as an entrepreneur?

1. Whenever faced with a problem, don’t lose your cool. Getting excited clouds your ability to think rationally and, in turn, the ability to take decisions.

2. If you ever get sued be sure to read each and everything clause in the lawsuit. Then fight back for any and every clause that you fight back for.

Don’t let the fact that the other party has big-pay-cheque lawyers fighting for them scare you.

3. If you know you are right, excuse my language, deface the bastards. Go to press, start a blog about it and do everything you can to tell the world how you are being harassed.

Being the first one to make the hue and cry always helps, no matter if it is a legal fight or real fight.

But this one comes with a warning attached : know you limits. Don’t do or say anything that can be used against you in the court of law.

4. If you are suing someone, make sure you get the facts against the person, in your case, right. And, if you can, be the first one to make a hue-and-cry first (think press and blogs ) about the whole situation.

I might get flamed by a lot of people for making this suggestion, but, by doing it the right way without further aggravating the other party / making it a prestige issue for them, it has always worked for me.

Conclusion- Okay, I was extremely candid about the lessons I learnt from reading this article but I am no lawyer. If you ever get sued, the best possible thing to do would be to consult an attorney.

But whatever, never let anyone scare you and use you.

Let me tell you another thing, most lawsuit threats are just that – threats. If someone is trying to use you by threatening to sue you, tell him or her to go ahead and do so. 99.9% times you will find that you did not get sued. I know it’s true because I have got such threats so many times that I can’t even keep the count but I haven’t been sued once.

Want some more examples of how people try to scare small flies with lawsuits? Make a visit to this site. Trust me, you will love it.