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Hardware maker Palm is the target of a class-action lawsuit filed last week by two customers after the company revealed that one of its handheld devices couldn't display as many colors as advertised.

The suit, filed last Thursday in the Superior Court of the State of California County of Santa Clara, alleges that Palm used "fraudulent, unfair, deceptive, and false advertising" to market its m130 handheld.

Palm had marketed the m130 as a device that could display more than 65,000 colors, a screen display targeted for use with 16-bit applications. Earlier in July the company disclosed that the m130 actually used a display designed for 12-bit applications, but used a technique known as "dithering" to produce 58,621 color combinations. Dithering involves blending nearby pixels to create the appearance of more colors.

Palm had apologized to customers about the color fiasco when it was first revealed, but hadn't determined how or if it would compensate customers who purchased the m130 under false pretenses, Marlene Somsak, a spokesperson for Palm said in an earlier interview. The company couldn't be reached for comment Wednesday.

Somsak says Palm is devising a compensation package for customers who purchased the m130, though details of that package have not been finalized. The process is being slowed down because the compensation must be applicable in all of the markets where the devices are sold.

"This has to be implemented with an appropriate compensation that we can put into effect around the world," Somsak says.

Palm says that as of Wednesday it had not yet been served with the lawsuit. Somsak also notes that the company has received just eight calls through its customer service department about the issue.

Plaintiffs' Demands

Two plaintiffs who are named in the class-action case--Jonathan Lipner, of Lafayette Hill, Pennsylvania, and Yansu Ouyang, of Castro Valley, California--argue in a filing with the court that the marketing mishap reveals a pattern of unfair and deceptive marketing practices by the Milpitas, California, hardware maker.

Plaintiffs are seeking refunds for all customers who purchased an m130, attorney fees, and an undetermined reward for damages, according to the text of the lawsuit.

It is estimated that Palm has sold 400,000 m130 devices worldwide since it was released in March, according to Todd Kort, principal analyst with Dataquest, a division of research company Gartner. He notes that the shortage of colors would not be apparent to most customers and was likely not intentional.

"It's not a huge problem but it's always disconcerting when some company is found misrepresenting it's products," Kort says.

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