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2000 Caldera-Microsoft Settlement Surfaces in Novell v. Microsoft Antitrust Lawsuit
Saturday, September 06 2008 @ 08:22 AM EDT

The Novell/Canopy/Caldera/DR DOS story continues, and Novell and Microsoft are in the middle of it all, battling in discovery in the Novell v. Microsoft antitrust litigation -- that is the litigation over WordPerfect currently before the US District Court in Maryland in pretrial discovery.

Microsoft politely asked for [PDF] all documents "relating to Novell's sale of PC operating systems claims to Caldera and Novell's involvement with Caldera's case against Microsoft", as well as "all documents produced by parties and third parties" in the Novell v. Canopy case.

Why? Because it is its theory, which it wants to do discovery to demonstrate, that Novell sold all its antitrust claims to Caldera, and that would kill off the two remaining claims Novell has brought against Microsoft in the antitrust case. Microsoft, not satisfied with what Novell produced or its reasons for refusing to produce some documents, brought a Motion to Compel Discovery [PDF] [Memorandum in Support (PDF)], and it has just been granted [PDF].

In Novell's opposition [PDF] to the motion, it attached some exhibits, one of which is the settlement agreement [PDF] in the Caldera v. Microsoft litigation, as Exhibit K.

Finally, we get to read it, all except the exact figure that Microsoft paid to Caldera. But Microsoft does say, in the memorandum in support, on page 9, that Novell got "tens of millions of dollars" from the settlement, and a transcript [PDF] of a hearing in the Caldera litigation hints strongly, on page 9, that Novell contracted to get 20% of any recovery, so you can get an idea of how large the settlement figure was that Canopy received. I know some of you have wondered if that success inspired Caldera to sue IBM to try to get lightning to strike twice. The exhibits are where all the history comes out.

For example, we get to see Microsoft's 1997 subpoena [PDF] to Novell in the Caldera case. And we find pieces of the APA between Caldera and Novell quoted here and there, although the document itself is under seal, I gather.

Novell argued against Microsoft's motion to compel, saying that the documents that Microsoft is asking for, it already got in the prior litigation (see also its Novell's Response [PDF] to Microsoft's Local Rule 104.7 Certificate [PDF], where it outlines its position regarding discovery requests and this letter [PDF] dated June 16, 2008.) Either Microsoft had the documents already, it argues, or it misrepresents what was already produced here, or it is asking for materials that are irrelevant and which will increase Novell's costs of discovery a great deal. Not only Novell's. In a footnote, Novell says Microsoft has also subpoenaed four third parties. And you can see in an order [PDF] regarding a Novell Motion to Intervene in Caldera v. Microsoft, the judge ruled that Novell had no litigation interest. As for the Canopy litigation, Novell says in responding to discovery requests [PDF] in In re Microsoft Corp. Antitrust Litigation on page 11 that the court in the Canopy case already ruled that Novell didn't transfer its claims.

You can read how Microsoft answered Novell's arguments in its reply memorandum [PDF]. There was a conference call on August 27 [PDF], and then the judge denied [PDF] Novell's motion for summary judgment on Microsoft's affirmative defenses, but said Novell will be free to renew its motion after the discovery is complete.

We find out from the 1998 hearing transcript not only how much Canopy, as Caldera's successor in interest, apparently had contracted to pay Novell if it won, but also we confirm that it was Microsoft that paid money in the settlement, something that the press release announcing the settlement didn't reveal, and we also learn that the settlement required confidentiality from Caldera/Canopy regarding how much Microsoft paid, and we get a clearer picture of the famous destruction of the sealed court documents that were turned into toilet paper in 2003. Remember? Destruction of sealed documents was part of the settlement, although one copy of all the filings could be retained by the outside law firm. The toilet paper destruction came later, in 2003, and that means we are still in the dark about how that came to be.

This is what is so great about litigation, though: eventually you find out pretty much everything. And now, thanks to Microsoft prevailing on a motion to compel, we are probably going to find out even more.

Judge J. Frederick Motz's ruling is found in a letter to the parties, but it's an official ruling, and here's the meat of the decision:

Dear Counsel:

I have reviewed the memoranda submitted in connection with Microsoft's motion to compel production of documents. Counts I and VI assert claims for harm allegedly caused by Microsoft to Novell's application software products for the purposed of obtaining and maintaining Microsoft's monopoly power in the Intel-compatible operating systems market. DOS was a competitor in that market, and it too may thus also have been harmed by Microsoft's alleged anti-competitive conduct against Novell's application software products. Therefore, depending upon how the term "indirectly" in the assignment from Novell to Caldera is construed, it may be that the claims asserted by Novell in Counts I and VI are "associated directly or indirectly with any of the DOS products or Related Technology." Asset Purchase Agreement paragraph 3.1 (July 23, 1996).

For these reasons I conclude that Microsoft is entitled to the discovery that it is seeking, and that its motion to compel should be granted.

In short, he accepted Microsoft's argument. The settlement agreement references that APA. The very opening words, in the WHEREAS section, tells us that under the APA, Caldera acquired from Novell all of Novell's "right, title and interest in and to any and all claims or causes of action held by Novell" as of July 23, 1996 "associated directly or indirectly with any of the DOS-Products or Related Technology", including "all such claims formerly held by Digital Research, Inc."

So, what the judge appears to be saying is that if Novell's claims I and VI are associated directly or indirectly to that APA, it may be curtains for those claims. Novell's complaint is here, if you want to refresh your memory about the two surviving claims. The APA, we find out in a footnote on page 7 of Microsoft's Memorandum in Support of its Motion to Compel, was attached to Microsoft's motion to dismiss, back when the case was still in Utah at the beginning, but unfortunately, it was filed under seal, so we can't read it all.

But here's the oddest part. The settlement agreement between Caldera and Microsoft said it settled "all the Novell Claims and all claims asserted in the Action, or which could have been asserted in the Action, or based on the facts asserted in the Action." Caldera was to file a stipulation dismissing the action (p. 3) after which the agreement would "constitute full satisfaction of the Novell Claims and all claims asserted, or that could have been asserted, in the Action by Caldera and each of its parents, subsidiaries and affiliates."

Caldera was supposed to destroy "all Confidential Discovery Materials (as defined in the Protective Order entered in the Action on March 27, 1997, as thereafter amended)" within 30 days of the payment by Microsoft. And Caldera had to promise not to support any effort to get the court to unseal any documents.

Then in paragraph 6, we find the operative paragraph that the judge is likely thinking about:

6. Caldera hereby releases and discharges Microsoft and its subsidiaries and affiliates, and the present or former officers, directors, employees, representatives, agents, trustees or other legal representatives, successors and assigns of each of them, of and from any and all claims, counterclaims, actions, causes of action, suits, rights, debts, obligations, damages, liabilities, and demands that each of them ever had or has, in law or in equity, known or unknown, as of the date of this Agreement, including without limitation any that have been asserted in the Action or that are based on, arise from or otherwise relate directly or indirectly to the facts alleged in the Action, including without limitation the Novell Claims."

Caldera, on page 6, represented that it had all rights, title and interest in and to the claims being settled, that it didn't have to ask for the consent or approval of Novell to do so, and further that "without any limitation whatsoever" Caldera indemnified Microsoft "against any and all liability, costs and expenses, including, without limitation, Microsoft's attorneys' fees, arising out of any claims pursued by Novell, or any assignee of Novell (whether actual or alleged), raising any of the Novell Claims or any claim asserted in the Action or that could have been asserted in the Action."

Thorough. You can see Microsoft wished to have this brought to a full stop, with nothing to rise from the dead in the future. The very muted press release announcing the settlement, but giving absolutely no details about it, is on page 12.

I think from all this you can discern why Microsoft would want to know precisely how involved Novell was in that litigation. It is Microsoft's theory, as it explains in its Memorandum in Support of its Motion to Compel, that "Novell participated in Caldera's lawsuit against Microsoft to an extent that Novell and Caldera were in privity, thereby precluding Counts I and VI on the separate ground of res judicata." I'll translate. That means that the claims were already litigated and settled, if they were in privity, meaning so closely associated, with Novell so actively involved even if not a party formally to the litigation, that it doesn't matter who owns the claims, Caldera or Novell, since a resolution of the claims back then, including all available claims either could have brought on the same issues, would settle them all and close the door completely.

All the alleged acts Novell complains of in the current antitrust litigation happened prior to 1996, Microsoft points out, the date of the Novell sale of WordPerfect and Quatro Pro to Corel. Four months later, Novell sold to Caldera its antitrust claims. That very day, Caldera filed suit against Microsoft. Microsoft's version of the history of the Caldera litigation can be found in this memo. Its theory is that because the claims Caldera brought assert the same things, that Microsoft caused the same competitive harm that Novell now is alleging in this antitrust litigation, namely harm to "competition in the manufacture, sale and distribution of operating system software" by monopolizing the market in violation of 15 U.S. C. Section 2 and by entering into "exclusive dealing arrangements" with others, Novell's claims were already handled in the Caldera settlement.

Here's where Microsoft gets a bit icky, by my lights. It told the court the following about the dustup between Canopy and Novell:

Novell and Caldera's successor, The Canopy Group ("Canopy"), later battled in the Utah courts over the spoils of Microsoft's settlement of the case. At issue was whether Novell's share of Microsoft's settlement payment should be calculated as a percentage of (i) the payment minus Caldera's attorneys' fees (as Canopy contended), or (ii) the payment before any deductions (as Novell contended). The parties engaged in extensive discovery, which revealed that Novell and Caldera "had entered into contemporaneous oral agreements not embodied in the final written contracts," i.e., not embodied in the Asset Purchase Agreement, License Agreement, or Reservation of Rights. Novell, Inc. v. Canopy Group, 92 P. 3d at 771. Under one of those oral agreements, Novell bound Caldera to sue Microsoft. Id. The Utah Court of Appeals even determined that in the written contracts, Novell deliberately "obfuscate[d] its role in the Microsoft litigation by using 'unclear and general terms.'" 92 P.3d at 774.

We have that ruling as text here. It's almost like Microsoft says, but not precisely:

12 Canopy produced a great deal of evidence to establish that the written agreements do not contain all the terms to which the parties agreed, such as Canopy's obligation to sue Microsoft. It argues further that the agreements themselves purposely obfuscated Novell's entitlement to a recovery from Microsoft by dealing with Novell's entitlement in very broad, general terms.

13 Canopy's evidence and arguments, however, do not negate Canopy's concession that it entered into written agreements that provide for the payment of royalties by Canopy to Novell. Canopy's evidence clearly shows the parties participated in prolonged negotiations to settle their disagreements regarding the deductions and Novell's overall percentage. Canopy's evidence may or may not establish the existence of a prior agreement.

The Court of Appeals did say this, however:

3 Accordingly, Novell entered into negotiations with Caldera, Inc., the predecessor in interest to Canopy, to sell DR DOS to Canopy.(1) The main purposes of this sale were to obligate Canopy to bring suit against Microsoft, to allow Novell to share in the recovery, and at the same time to obfuscate Novell's role in the action against Microsoft. Novell insisted that its role be completely undetectable to avoid retaliation from Microsoft.

And Microsoft wants to do discovery about that paragraph, as you can see on page 10, although I couldn't help but notice that it left out the sentence about why Novell didn't want Microsoft to know about its role, namely its fear of retaliation by Microsoft.

Microsoft quotes Novell as refusing to turn over those and other documents on the grounds that the Court already ruled that Novell didn't convey its claims in ruling on Microsoft's Rule 12(b)(6) motion, something Microsoft disputes. It wants to do discovery about any and all verbal agreements associated with the Canopy deal.

Of course, back when Novell tried to avoid turning over attorney work product in the Caldera litigation, Microsoft opposed on the grounds that Novell had sold everything and walked away, other than a financial royalty interest, just another little irony. You can read about that in the hearing transcript. In fairness, back then it didn't know about the Canopy-Novell deal. It was only when the Court of Appeal ruling was published that we all learned the role that Caldera played for Novell.

I never would have noticed the exhibits, had it not been for three Groklaw members. Steve Martin noticed that there were new documents in the Novell v. Microsoft case that we didn't have in our permanent timeline page on that litigation, and Erwan volunteered to update the page, which he has done, and then fortuitously another longtime member donated what I needed to get all the documents. Thank you all. When I saw what there was, such an historical goldmine, I couldn't believe it, and I couldn't wait to share it with you. Thank you to everyone that helps Groklaw do what it does, because now we get to know the rest of the story.


2000 Caldera-Microsoft Settlement Surfaces in Novell v. Microsoft Antitrust Lawsuit | 214 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections Here
Authored by: entre on Saturday, September 06 2008 @ 08:37 AM EDT
If needed.

[ Reply to This | # ]

OT, the Off Topic Thread
Authored by: Erwan on Saturday, September 06 2008 @ 08:46 AM EDT
Please stay off topic, as usual.


[ Reply to This | # ]

News picks discussions here.
Authored by: Erwan on Saturday, September 06 2008 @ 09:03 AM EDT
Please, don't forget to quote the article's title.


[ Reply to This | # ]

Haiku here
Authored by: Crocodile_Dundee on Saturday, September 06 2008 @ 10:07 AM EDT
Are we the best friends?
Or the worst of enemies?
Only time^h^h^h^hmoney will tell.

That's not a law suit. *THIS* is a law suit!

[ Reply to This | # ]

once more to the well
Authored by: grouch on Saturday, September 06 2008 @ 10:54 AM EDT
Would it be a case of going too often to the well to state "a pox on both their houses"?

From my point of view, Microsoft still has not paid for all of their deliberate damage against others even up through the time at issue (the damage without compensation just gets worse after that time)*. However, if Novell was in fact a silent, secret partner to the Caldera action, then they've already agreed to the settlement terms of that litigation.

*One example:

After downloading Media Player and installing it on a system already equipped with the RealNetworks' RealPlayer, attempts to use RealPlayer failed and an error message was displayed. The error message is fairly brief, and just reads "Can not play back file. The format is not supported." This fails to give users any information about how to remedy the situation and make RealPlayer function again, Glaser said.

Glaser, who spent 10 years at Microsoft as a vice president for multimedia and consumer systems but left five years ago, said he was extremely reluctant to testify before the committee, but that unless the actions taken by Microsoft are remedied, the computing world will be "less friendly, less useful to customers, and will slow down technical innovation."

-- RealNetworks: Microsoft playing unfair -- Margret Johnston, IDG News Service, 1998 -07-24

MS Vista fits Mr. Glaser's dire prediction exactly -- "less friendly, less useful to customers, and [a] slow down [of] technical innovation."

Where would we be by now without FOSS developers and what they've produced?

Where's that pox when you need it?

-- grouch

GNU/Linux obeys you.

[ Reply to This | # ]

Thank You, Steve, Erwan, and Unknown
Authored by: Anonymous on Saturday, September 06 2008 @ 11:00 AM EDT
I'm thinking we could use a small statue in an out-of-the-way location in an
obscure park in a very small city, to honor the heroes of Groklaw. (Humility and
all that.) Course it would actually have to be a big statue to hold all the


[ Reply to This | # ]

This is an important discovery
Authored by: Aladdin Sane on Saturday, September 06 2008 @ 12:26 PM EDT

I thank all those involved with bringing this information to light.

This article may belong in "Groklaw's Greatest Hits" up there with the unhiding of the 1994 USL-Regents of UCal Settlement Agreement by Groklaw community participation.

As this information trickles up to the surface, we are empowered, not only technically, but legally, to use our computers to their full potential.

As PJ said before, "And so the bullying by secrecy is over."

"The choice to exact consideration in the form of compliance with the open source requirements..., is entitled to no less legal recognition." --US CAFC

[ Reply to This | # ]

Is this really the death knell for Novell? I'm not so sure
Authored by: Anonymous on Saturday, September 06 2008 @ 12:48 PM EDT
As PJ notes, WordPerfect and Quattro were sold to Corel but there is no
indication that Novell also sold lawsuit or other rights to recovery from damage
done in the *application* market by Microsoft antics.

Second, I was a user of DRDOS, and don't recall Caldera ever sold or owned
WordPerfect, or that it even ran on versions of DR-DOS (at least after the
Caldera sale). In part this might have been due to the graphics and printer
drivers, but also because of the horrendously buggy DRDOS extended memory
management prior to getting fixed by Coupard (sp?) and others in Europe. I seem
to recall that happened after the DRDOS sale.

At most then, it would seem that Novell's failing in the DRDOS market - which is
clearly due to Microsoft actions - might have limited their use of resources to
fix the related OS issues that kept WP from running.

An interesting twist: during about the same time period, Microsoft was pulling
the plug on OS/2 by means of very underhanded and slimy tactics. WP *did* run
on OS/2, and I owned a copy of that for years. Novell was being mislead into
supporting WP on OS/2 (a much more appropriate platform than DRDOS for such
work), and as DRDOS was being killed off, Microsoft then killed off OS/2 and WP
and other applications. Could Novell now bring IBM into the fray, and finally
get some justice for what Microsoft did to OS/2? Now *that* would be

Third, nobody in their right mind would think that OS == Applications (OK,
Microsoft would, but I did say "in their right mind"). So depending
on the APA, including the oral agreements (if any), and lacking any specific
transfer of or mention of WordPerfect or other applications in either the APA or
the settlement agreement, how does this help Microsoft at all? They seem like
two very different cases and causes of action, and there doesn't seem to be a
res judicata connection at all (to me).

Is Microsoft grasping at straws?

[ Reply to This | # ]

Is M$ Battling Linux Or Just getting Ready To Battle G$$gle
Authored by: Anonymous on Saturday, September 06 2008 @ 01:18 PM EDT
M$ must go to a soothe sayer with a crystal ball, now and then and look at the
future. And the future is looking more and more like <Chrome/Google Apps et
al.> And maybe all of the latter in Open Source, at some point. Why would
anyone pay for more software (and hardware?) when <Chrome/Google Apps et
al.> is totally together - beyond Beta?.

So is M$ just getting into position for a future battle(s) with G$$gle.

[ Reply to This | # ]

2000 Caldera-Microsoft Settlement Surfaces in Novell v. Microsoft Antitrust Lawsuit
Authored by: Anonymous on Saturday, September 06 2008 @ 02:21 PM EDT
Novell got 20% of the settlement with Caldera. Novell got 10's of millions.
Caldera stock holders got zero. Someones pockets got awfully heavy. Interesting
that the amount does not show up on any public corporate accounting.

[ Reply to This | # ]

Novell/Canopy/Caldera/Microsoft - No honor among corporate thieves
Authored by: vb on Saturday, September 06 2008 @ 02:40 PM EDT
Wikipedia says that "the British East India Company would come to symbolize
the dazzingly rich potential of the corporation, as well as new methods of
business that could be both brutal and exploitive".

It's not too hard to find present day examples of brutal and exploitive
corporate behavior. Lawsuits really bring out the ugly side of corporations.

[ Reply to This | # ]

Novell trying to have lightning strike twice.
Authored by: Anonymous on Saturday, September 06 2008 @ 06:12 PM EDT
That sums it up quite nice.

[ Reply to This | # ]

Authored by: Anonymous on Saturday, September 06 2008 @ 08:39 PM EDT
Novell insisted that its role be completely undetectable to avoid retaliation from Microsoft
Is this Microsoft's *real* motivation for doing the deal with Novell...??

[ Reply to This | # ]

Ransom Love severance agreement
Authored by: Anonymous on Sunday, September 07 2008 @ 12:20 AM EDT
This is supposed to be an example agreement.

But the names and circumstances seem very real.


THIS AGREEMENT (this "Agreement") is made and entered into this 24th day of July, 2002, by and between CALDERA INTERNATIONAL, INC., a Delaware corporation ("Caldera"), and RANSOM LOVE, an individual ("Mr. Love"), based on the following:


7.2 Obligations of Caldera. Caldera agrees to keep the facts of and terms of this Agreement confidential, except as required by law, and further agrees that it will refrain from making derogatory or disparaging statements about Mr. Love, Mr. Love's conduct and performance while employed by Caldera or making such statements as may serve to undermine Mr. Love's professional image.


11. Noncompetition. Mr. Love shall not, for a period of six months after June 26, 2002, engage in, support, or facilitate: (i) the development, creation, marketing, sales, promotion, distribution, licensing, or commercialization of any Linux product which competes with any Linux product of Caldera; or (ii) any business involving the commercial distribution of any existing or future version of Linux. Said six month period shall be extended by any period of time during which Mr. Love is not in compliance with this obligation. This paragraph 11 shall be limited to the geographic markets in or to which the products or services of Caldera are now or hereafter marketed, distributed, licensed, used, sold, commercialized, or delivered. Notwithstanding the forgoing, the provisions of this paragraph 11 will not apply to the acceptance by Mr. Love of a position with UnitedLinux, LLC. Mr. Love acknowledges that this paragraph 11 is reasonable and is necessary for the legitimate protection of Caldera, and will not deprive Mr. Love of a reasonable opportunity to practice his profession or trade


No mention of UNIX in the non-compete section. No mention of precious UNIX IP.

[ Reply to This | # ]

reason for destruction of sealed court documents
Authored by: emacsuser on Sunday, September 07 2008 @ 07:47 AM EDT
"we get a clearer picture of the famous destruction of the sealed court documents that were turned into toilet paper in 2003 .. we are still in the dark about how that came to be"

It came about as control of the documents came under new SCO and before they announced they were sueing Linux, and Microsoft bought a UNIX license and Baystar' invested in the company .. :)

SCO pulps Caldera-MS trial archives

Mic rosoft documents soon will be flushed right down the toilet

[ Reply to This | # ]

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