Wednesday, April 21, 2010

Final Claims Dismissed in Novell’s Antitrust Suit Against Microsoft

This posting was written by Cheryl Beise, Editor of CCH Guide to Computer Law.

Software developer Novell, Inc. could not pursue two claims remaining in an antitrust action against Microsoft because Novell transferred the claims to a third party in an asset purchase agreement, the federal district court in Baltimore has ruled.

Novell alleged that Microsoft’s anticompetitive conduct in 1994-1996 damaged Novell’s ability to market its office productivity applications, including WordPerfect and Quattro Pro. In 2007, the district court dismissed as time-barred Novell’s claims alleging anticompetitive conduct in the office productivity applications market (2007-2 Trade Cases ¶75,901, CCH Computer Cases ¶49,423).

Novell’s remaining monopolization and restraint of trade claims, alleging harm in the operating systems market, were allowed to proceed because they were tolled during the pendency of the government’s action against Microsoft.

Assignment of Claims

In an Asset Purchase Agreement dated July 23, 1996, Novell assigned to Caldera, Inc., claims “held by Novell at the Closing Date and associated directly or indirectly with any of the DOS Products.”

Novell contended that the agreement meant to assign only claims for harm inflicted on the DOS products themselves, not on the operating system market, which comprised the actual market in which the DOS Products competed. However, the plain language of the assignment clause did not limit its application to claims inflicting “harm” on the DOS products; rather, it assigned claims “associated” with the DOS products, according to the court.

The APA assignment language encompassed the present claims because they were “associated directly or indirectly with the DOS Products.”


Despite finding that Novell lacked standing to pursue the claims at issue, the court nevertheless addressed the merits of each claim. If Novell had not transferred the claims to Caldera, Novell’s restraint of trade claim would have been decided in favor of Microsoft, but its monopolization claim would have proceeded to trial.

Novell alleged that Microsoft violated Sec. 2 of the Sherman Act by exclusive dealing—entering into “agreements with OEMs and others not to license or distribute Novell's office productivity applications.” To be considered “exclusive,” an agreement must expressly preclude a party from doing business with the defendant's competitors or engage in other conduct that has the practical effect of exclusivity.

Microsoft's agreements with computer manufacturers (OEMs) did not foreclose a substantial share of the software applications market, and its agreements with distributors were not exclusive or otherwise anticompetitive—they simply provided modest rebates for increased sales and “blended share” of Microsoft products.

With regard to its Sherman Act Sec. 1 claim, Novell’s evidence raised sufficient factual issues to preclude summary judgment. Although a monopolist generally has a right to refuse to cooperate with a competitor, Novell’s evidence suggested more, including that Microsoft acted out of predatory motives and affirmatively misled Novell about Windows 95 functionality and licensing.

The opinion, In re Microsoft Corp. Antitrust Litigation, is reported at CCH Guide to Computer Law ¶49,927. It will appear in CCH Trade Regulation Reporter.

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