A lawsuit that accused Microsoft of misleading consumers to download and install an update for Windows Genuine Advantage (WGA) under the guise that it was critical security update, has been thrown out of court.

The case was already getting shaky. A federal judge refused to certify the lawsuit as a class action, which would have meant anyone who owned a Windows XP PC in mid-2006 could join the case without having to hire a lawyer.

The plaintiffs and Microsoft agreed to drop the lawsuit and now the Judge has officially thrown it out anyway. This move means that Microsoft avoided hundreds of millions in potential damages.

It's well worth noting that more than three years ago, beta versions of WGA "phoned home" once every day and privacy advocates fumed. In June 2006, after Microsoft began pushing WGA to Windows XP users via Windows Update as a "high priority" update, a suit was filed alleging that WGA was spyware.

Microsoft used WGA to detect pirated copies of Windows and inform the user that the software is counterfeit, nagging them with messages and eventually locking down.