Verne Kopytoff, Chronicle Staff Writer
Thursday, May 16, 2002

America Online has agreed to pay $15.5 million to settle a class-action lawsuit over complaints that the company's software cut off access to other Internet service providers.

The settlement would end litigation aimed at AOL's 5.0 Software, released in 1999. After installing the software, many consumers reported having trouble logging on to rival Internet services.

"We believe the settlement is reasonable and equitable," said A.J. De Bartolomeo, a San Francisco attorney representing the plaintiffs.

Nicholas Graham, a spokesman for America Online, said the settlement is not an admission of wrongdoing and called his company's software reliable. He added that "AOL agreed to resolve these cases to avoid protracted litigation."

The settlement, which was disclosed publicly May 9, still faces the approval of a federal judge in Miami. Under the plan, consumers would be paid about $8.1 million, with the rest going mostly to the attorneys.

Plaintiffs originally charged that many consumers who installed AOL 5.0 software had trouble logging onto other Internet service providers. They said the problem occurred when consumers selected AOL as their default Internet program during installation.

But in the settlement, the two sides in the suit agreed that default settings were a normal practice in the Internet industry. They added that AOL had been providing users information on how to change them.

Another part of the suit focused on consumers who had trouble connecting to the Internet because they were using outdated Windows computer operating systems. Soon after the suit was filed, AOL began providing links for users to update their Windows systems, apparently to the plaintiffs' satisfaction.

The final complaint in the suit was that installing AOL 5.0 caused computers to become unstable. In the settlement, the plaintiffs said that after consulting with computer experts, they believe that argument has "little probability of success" in court.

AOL, which has 34.6 million subscribers, has issued new generations of software since 5.0. Its most recent version is AOL 7.0.

In the new versions, AOL has added language to pop-up messages that appear when users install software, to minimize any confusion. For example, one message specifically asks users whether they want AOL to become their default Internet setting for Web pages, e-mail and newsgroups.

As part of the settlement, AOL has agreed to keep the new language on future versions of its software until May 2003.

Consumers interested in participating in the settlement can get information on the Web at www.50softwaresettlement.com. Claims must be made by Sept. 6.

Payouts will be graduated, based on how much proof AOL users provide about their difficulties with 5.0 software. The maximum award will be $250.