Microsoft has won the first round of an overcharging lawsuit brought by several Calfornian cities.

A federal judge yesterday granted a motion by Microsoft for dismissal because government agencies are not allowed to sue under one of the laws they invoked and because they were seeking damages over too broad a time period.

But Judge Frederick Motz did give the plaintiffs permission to amend the anti-trust part of their claims. "I would characterise this as a minor setback," said Matt Dorsey, a spokesman for the office of the San Francisco City Attorney, one of the plaintiffs. "We will be consulting with our fellow plaintiffs, but we are committed to go forward with the case on anti-trust claims."

In the class action case, the cities and counties accused Microsoft of unfair anti-competitive behaviour and unfair business practices in violation of California law. The governmental bodies sought monetary damages.

The lawsuit is similar to an earlier class action suit filed on behalf of California consumers. That suit ended in a $1.1 billion settlement reached in January 2003. Under the settlement terms, Microsoft agreed to provide vouchers to California consumers who purchased Microsoft products between 1995 and 2001.

The latest suit was brought on 27 August 2004, by the counties of Santa Clara, Los Angeles, San Mateo, San Francisco and Contra Costa as well as the City of Los Angeles and the City of San Francisco.