EarthLink sues Microworkz, which aims to sue back –

Internet service provider EarthLink Network Inc. yesterday said it has sued low-cost PC maker Inc. for allegedly breaching a distribution agreement between the companies.

Microworkz responded by saying it intends to sue EarthLink right back.

Under the terms of the pair's distribution pact, Microworkz distributed EarthLink's Internet access software with a $299, no-frills PC called the Webzter. EarthLink terminated the distribution agreement Thursday, saying Microworkz hadn't upheld its side of the contract.

The following day, EarthLink filed a lawsuit in the Federal District Court for the Middle District of California, charging Microworkz with failing to deliver payments that were part of the distribution agreement. The payments were based on EarthLink software distributed with Microworkz PCs, and the lawsuit seeks payment of those unpaid fees, EarthLink said in a statement.

Microworkz responded today by saying it will file its own lawsuit next week against EarthLink. Its lawsuit will accuse EarthLink of supplying faulty software and failing to educate its technical support staff about Microworkz's Webzter program.

"The resulting EarthLink sign-up chaos slowed shipping of Webzter machines to a crawl, damaging and its customers," Microworkz said in a statement released today.

EarthLink, in Pasadena, Calif., didn't immediately return a call seeking comment on Microworkz's intention to countersue.

This hasn't been a banner year so far for Microworkz. The company's luck started to turn sour after its CEO hinted in June that the vendor was close to signing a deal with America Online Inc. to offer AOL's Internet access software with its new PC, the $199 iToaster.

AOL wouldn't confirm the talks, and nothing appears to have come of them since. But shortly afterward, reports emerged that complaints had been filed about Microworkz with consumer watchdog group the Better Business Bureau and with the attorney general's office in the company's home state of Washington. Microworkz is based in Lynnwood, Wash.

In a report, the bureau asserted that Microworkz had an "unsatisfactory business record." In particular, the report cited "a pattern of not responding in a timely manner to customer complaints," alleging non-delivery of products and failure to produce refunds.

Microworkz said at the time that the troubles stemmed from its switching to new, larger premises while it was rolling out the Webzter.

In a letter to its customers on Friday, Microworkz said it has decided to discontinue the Webzter to focus instead on the iToaster. Both Microworkz and EarthLink said they will continue to support customers who bought the Webzter bundled with EarthLink's Internet access software.

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