Breaking news: A federal judge in Seattle this afternoon granted class-action status to a lawsuit alleging that Microsoft deceived consumers prior to Windows Vista's launch by touting PCs as "Windows Vista Capable" even if they could only run Windows Vista Home Basic. The suit alleges that Vista Home Basic isn't a real version of the operating system, because it lacks the operating system's signature features.

However, the ruling by U.S. District Judge Marsha Pechman also sets certain limits on the types of consumers who can be included in the class, and the legal theories the plaintiffs can use. Among other things, she writes that the plaintiffs' lawyers must, within 30 days, add as a named plaintiff a consumer who bought a PC as part of the Windows Vista "Express Upgrade" program, if they want to pursue that portion of the case. The Express Upgrade program gave consumers who bought PCs during the 2006 holiday season, prior to Windows Vista's release, the right to free or low-priced upgrades to Windows Vista after it came out.

Here's the judge's opinion: PDF, 25 pages.

The ruling clears the way for the class action to proceed toward trial. Microsoft has disputed the allegations. See this earlier story on the arguments made during the hearing over class certification.

Update, 5:30 p.m.: Microsoft's statement, via spokesman Jack Evans: "We are currently reviewing the court's ruling. We believe the facts will show that Microsoft offered different versions of Windows Vista, including Windows Vista Home Basic, to meet the varied needs of our customers purchasing computers at different price points."

Update, 6 p.m.: An important legal nuance: Pechman said that the plaintiffs could not pursue a class action on the basis that consumers had been deceived because "an individualized analysis is necessary to determine what role Microsoft's 'Windows Vista Capable' marketing program played in each class members' purchasing decision."

However, she wrote, they can still pursue allegations that Microsoft was unjustly enriched, but under the alternative theory that people paid more for their PCs than they otherwise would have.

Pechman's ruling explains that theory: "Using this 'price inflation' or 'market' theory of causation, Plaintiffs argue that Microsoft artificially inflated demand for computers only capable of running Vista Home Basic, causing Plaintiffs to pay more for those PCs than they would have without the 'Windows Vista Capable' campaign."

P-I reporter Joseph Tartakoff contributed to this post.