I'm not sure this counts as backing. The guy threatened a class action lawsuit, and they backed down. This could also mean either it was cheaper to pay $400 than defend against such a suit or that there was merit in the suit and the guy could have gotten a lot more.

He credibly threatened a lawsuit. That is, he made it apparent in his letter that he was familiar with consumer law through the information he presented to them. I doubt a letter that said "I dropped my Kindle, send me $400 or I sue" would have the same effect.

True, but having to threaten a lawsuit in order to get a refund hardly counts as the company "backing their product".

Agreed. And to think I was downvoted for my screed against puffery: http://news.ycombinator.com/item?id=887482

Good point, that is an important distinction. In the end tho, I think the equation is still the same:

if Pr(d|r)*Cost(d) > $request then pay him

Where d is dealing with the guy, r is the reasonableness of his request, and pr is the probability function.

There are also signalling aspects to paying and going to court.

Please explain further.

The comment by dschobel explains most of what I meant:

"It's a calculated risk. Some companies refuse to settle for certain classes of litigation in the hope that it will deter people from bringing frivolous suits down the road even if it means paying more in legal costs up front."

On the other hand, not going to court with a customer also sends a signal.

I see, thanks!

It's a calculated risk. Some companies refuse to settle for certain classes of litigation in the hope that it will deter people from bringing frivolous suits down the road even if it means paying more in legal costs up front.