Novell Can Proceed with Antitrust Claim Against Microsoft

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Novell, Inc. did not assign to a third party an antitrust claim based on alleged harm to office-productivity applications resulting from Microsoft Corporation’s alleged anticompetitive conduct, the U.S. Court of Appeals in Richmond, Virginia, has ruled.

The court reversed summary judgment in favor of Microsoft (2010-1 Trade Cases ¶76,983) on Novell’s claim that Microsoft “engage[d] in anticompetitive conduct to thwart the development of products that threatened to weaken the applications barrier to entry” to the operating systems market. Specifically, Novell contended that Microsoft’s conduct had damaged Novell’s WordPerfect word processing applications and its other office productivity applications in violation of Section 2 of the Sherman Act.

Statute of Limitations

Unlike other claims asserted by Novell, this count was not time-barred, because the statute of limitations was tolled during the pendency of the government’s case against Microsoft for antitrust violations in the operating systems market.

A 1996 Asset Purchase Agreement (APA), under which Novell sold its various DOS products to Caldera, Inc. and assigned the rights to any antitrust litigation related to those products, did not assign claims related to office-productivity applications, the court ruled.

The term “DOS Products” was defined in the APA to include Novell’s PC operating systems DR DOS and Novell DOS, among other products. The APA conveyed claims “associated” with an expressly enumerated body of property that did not include Novell’s office productivity applications. The mere existence of a possible conceptual link between the DOS products and those applications did not mean that the agreement divested Novell of the claim based on harm to related to office-productivity applications, the court explained.

Claim Preclusion

The court also rejected Microsoft’s res judicata defense. Nonmutual claim preclusion was generally disfavored, but Microsoft still argued that Novell’s assignment of some of its claims to the third part was sufficient to establish a substantive legal relationship between them that fell within exceptions to that principle.

Microsoft also contended that the claims arose out of the same basic core of operative facts. However, Caldera’s suit addressed a distinct set of harms from those addressed in the present dispute. While both suits implicated Microsoft’s desire to control the operating system market, overlapping motivation for separate harms was insufficient to render those harms identical for purposes of claim preclusion. Moreover, Caldera likely would not have served as an adequate representative of the complaining company’s interests. As a practical matter, only Novell had the incentive to recover for damages to its office productivity applications.

Dissent

A dissent contended that because Novell’s claim was premised on Microsoft’s anticompetitive conduct in the operating systems market, the claim was “associated directly or indirectly with” DR DOS. According to the dissent, “the majority ignore[d] the plain, patently broad language in the APA, choosing instead to craft its own narrow reading of the phrase.”

The decision is Novell Inc. v. Microsoft Corp., 2011-1 Trade Cases ¶77,434.