Microsoft unfairly labeled PCs "Windows Vista Capable" even when the computers could only run the most basic form of the operating system, according to a lawsuit filed against the software giant on Thursday.

Prior to the availability of Vista, Microsoft launched a marketing campaign that allowed PC makers to place a sticker on computers alerting potential buyers that they could upgrade to Vista when it became available. However, "a large number" of those PCs were only capable of running the Home Basic version of Vista, which lacks many of the features, such as media center and enhanced graphics, that Microsoft advertises as included in Vista, the suit alleges.

The lawsuit, filed in the U.S. District Court for the Western District of Washington, seeks class action status and asks for damages. The suit notes that the amount in controversy exceeds $5 million and that the size of the class likely exceeds 10,000 people.

Many of the machines with the Vista label cannot run or poorly run Home Premium, the least expensive version of Vista that includes most of the heavily advertised features, the suit says.

In addition, when Microsoft later offered buyers of "Windows Vista Capable" computers free or reduced-price upgrades to Vista, the company offered Home Basic to many customers. "In sum, Microsoft engaged in bait and switch--assuring consumers they were purchasing 'Vista Capable' machines when, in fact, they could obtain only a stripped-down operating system lacking the functionality and features that Microsoft advertised as 'Vista'," the suit reads.

Microsoft argues that it "conducted a broad effort to educate computer manufacturers, retailers and consumers about the hardware requirements to run different versions of Windows Vista," said Jack Evans, a Microsoft spokesperson. That program is well-documented, and the information can still be found online. The company will present this information and address other issues in the suit in court, he said.