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Novell Files Suit Against Microsoft over WordPerfect
Friday, November 12 2004 @ 06:46 PM EST

Well, they dood it. Just like they said they would, Novell has filed a complaint in US District Court for the District of Utah, Central Division, against Microsoft. You can get the complaint from Novell's website.

It's filed under the Clayton Act, 15 U.S.C. ß15, "for damages suffered by Novell by reason of the anticompetitive conduct of Microsoft in violation of Sections 1 and 2 of the Sherman Act 15 U.S.C.ßß 1, 2." You can read the Clayton Act here and the Sherman Act on the Dept. of Justice's Anti-Trust page. They are both anti-trust statutes.

The complaint alleges:

"5. Microsoft abused its monopoly power in the PC operating systems market to suppress the sales of WordPerfect and Novell's related office productivity applications. Microsoft targeted these applications because of their potential to provide Microsoft's competitors with a way across the barriers to entry that protected Microsoft's existing operating systems monopoly. In addition, and just as importantly, WordPerfect and Novell's other applications were leaders in the additional markets that Microsoft sought to monopolize.

"6. Microsoft thus attacked Novell with some of the same anticompetitive acts for which Microsoft was held liable in United States v. Microsoft Corp, 87 F.Supp.2d 30 (D.D.C. 2000), aff'd in part, rev'd in part, 253 F.3d 34 (D.C. Cir.), cert. denied 534 U.S. U.S. 952 (2001)(the "Government Suit"). Those anticompetitive acts included integrating browsing functions into the Windows operating system in an exclusionary manner, entering agreements in restraint of trade, and otherwise using the Windows monopoly to exclude competing applications from important channels of distribution.

7. Bill Gates, Microsoft's Chairman and Chief Executive Officer, targeted Novell's applications by name in documents recording Microsoft's anticompetitive schemes, in which he explained that the integration of browsing functions into Windows, coupled with Microsoft's refusal to publish certain of these functions, was a primary strategy for excluding Novell's applications from the markets. He candidly admitted that Microsoft's own products could not compete without the benefit of these anticompetitive acts.

8. By reason of Microsoft's anticompetitive acts, WordPerfect's share of the word processing market, which was nearly 50 percent in 1990, fell to approximately 30 percent in 1994, and to less than 10 percent by the time Novell sold WordPerfect and the related applications in 1996. Over the same period of time, and due to the same anticompetitive acts, Microsoft Word's share of the word processing market rose from less than 20 percent prior to 1990 to a monopoly share of approximately 90 percent by 1996. As a result, Novell suffered lost profits and goodwill during the period in which it owned the rights to WordPerfect and related office productivity applications, and the value of these assets declined by approximatelly $1 billion between May 1994 and their sale in March 1996."

Peter Galli has Microsoft's reaction. Or you can read their press release in full. Here is the heart of it:

"Through this lawsuit, Novell seeks to blame Microsoft for its own mismanagement and poor business decisions. The record is clear that bad decisions and business mistakes are the reasons WordPerfect fell out of favor with consumers. Itís also unfortunate, and surprising, that Novell has just now chosen to litigate over a business it owned for a very short time and that it sold more than eight years ago.

"Prior to Novellís purchase of WordPerfect in 1994, WordPerfect had already begun to decline. Indeed, Novellís stock dropped 15 percent the day after it announced the acquisition. WordPerfect deliberately chose not to develop a version for early versions of Windowsģ in the hope that depriving Windows of a key application would limit the success of Windows. This and other missteps led to a decline in WordPerfect popularity that resulted in Novell selling it for approximately one-eighth of what was paid for it only 20 months earlier.

"There are other fundamental flaws in Novellís complaint. Given that Novell hasnít owned WordPerfect for eight years, their claims should be barred by the legal doctrine called the Statute of Limitations.

"It is also surprising that Novell seeks to use the Courtís findings in the Department of Justice case against Microsoft. That case had nothing to do with WordPerfect or any other office productivity software, and focused almost exclusively on other markets and technologies. In fact, Novell was barely mentioned during the U.S. antitrust trial. Moreover, the U.S. antitrust laws do not support Novellís claims that a company is required to share its inventions and trade secrets with its competitors.."

I can see it now. Someday, if Microsoft really does force companies into patent agreements with them and then starts attacking Linux with "patent infringement" lawsuits, either directly or using a patent shell, it could be Novell v. Microsoft, or USA v. Microsoft all over again.

Microsoft also has a transcript of the announcement they made about the earlier settlement with Novell and CCIA, and here's a bit on their motivation:

"We and Novell were not able to reach agreement on one other claim that Novell asserted in these negotiations. That is a claim relating to Novell's ownership of the WordPerfect business for a bit under two years, from 1994 to 1996. We did not regard that claim as being of anything close to a similar magnitude and in general we believe that the claim doesn't have merit and is barred by the statute of limitations at this point, but we've all resolved to turn to the courts for an answer on the WordPerfect claim.

"We also announced today an agreement with CCIA. Under the terms of that agreement, CCIA similarly is withdrawing from all further participation in the European Union litigation, both the interim measures case and the merits case. In addition, CCIA is withdrawing a complaint that it has pending before the European Commission regarding Windows XP. That complaint, as many of you may know, was a principal obstacle to our ability to negotiate a settlement with the European Commission this past March. We were able to reach agreement with the Commission on all of the issues in the present case that is now before the Court of First Instance, but we were not able to reach agreement on the issues in the CCIA complaint. The CCIA complaint has now been withdrawn. CCIA also agreed not to seek review by the Supreme Court of the U.S. lawsuit.

"We're also delighted to have the opportunity to join CCIA as a member and to work with CCIA on a wide variety of issues that we believe are important to the future of our industry.

"Putting the two things together, I would note two important aspects of today's agreements. First, these agreements represent another substantial milestone in Microsoft's resolving the issues that have divided our industry over the past decade. The agreement literally brings to a close, finally, the longstanding U.S. antitrust lawsuit that began in 1998. There had been three parties that had remained in that lawsuit. The State of Massachusetts had previously announced that it would not seek Supreme Court review. Another trade association, SIIA, had allowed its deadline to file review with the Supreme Court to lapse and it did not seek review. CCIA had requested and received from the Supreme Court an extension of time under which it could file with the Supreme Court. Today's settlement means that it is not filing. Today's settlement means that the longstanding antitrust litigation in the U.S. is now over. We, of course, have a very important Consent Decree and we are very focused on complying with that but the litigation phase is now complete.

"Similarly, this case represents an important milestone in our reaching agreement with the competitors that have been active in the European proceedings. In our minds there were five entities that were very broadly involved in the European case. We have now reached agreement with four of them. We have reached agreement with AOL-Time Warner, now Time Warner in May of 2003, we reached agreement with Sun Microsystems in April 2004, today we are announcing agreement with Novell and CCIA. That really leaves only one entity that at least in our minds has been involved in a very broad way, and that is Real Networks. It means that Real Networks is now really standing alone in terms of continuing with the litigation path in Europe and elsewhere.

"We believe that this sends a strong message that we and other companies in our industry do have the capacity now to sit down face to face and resolve the kinds of thorny antitrust issues that in the past were left instead to the government to resolve. We think that's important in Europe as well as in the United States and elsewhere and we're very pleased with this type of additional progress.

"The second major theme in my mind that is quite important is the foundation this creates for our industry to work together on the important issues of the future. These agreements help unite our industry on the key issues that will affect our ability to grow and create jobs in the United States and around the world.

"We are all looking to the next four years of an administration in Washington and the next five years with officials in the European Commission soon to take office in Brussels.

"And as we look on both continents to these next number of years, it's clear that there are a number of issues that will be very important for our industry: We need to ensure strong support for research and development, as well as strong support for the types of immigration policies that will enable software developers to continue to come work for companies in the United States.

"We need to take the kinds of steps that will broaden Internet access and protect the consumer privacy and security rights that are important to giving consumers confidence in using the Internet.

"As we increasingly lay to rest the issues that have divided our industry over the past decade, it creates the foundation for us to work in a stronger manner as an industry to address the economic and other issues that will be important in the future, so we're very pleased by that aspect of this as well.

"Reflecting the progress that we have continued to make in resolving the antitrust issues, we have reached a point where for the first time we believe we can estimate as a company the additional exposure that is reasonably possible that Microsoft will incur as a result of all of the remaining antitrust cases and claims, and therefore we included in our press release the point that we are estimating that it's reasonably possible that Microsoft will incur additional exposure of up to $950 million for the remaining antitrust cases and claims. That includes all of the remaining cases such as the Real Networks case and the Burst case. It includes the remaining class action litigation in the United States. It includes all other claims of which we are aware. So that too reflects I think the significant progress that today's agreements represent."

I am guessing that "strong support for research and development" is code for patents. Incidentally, Nokia has quit CCIA over their agreement with Microsoft. The CCIA explains itself here and in their press release.


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