Novell has filed its opposition [PDF] to Microsoft's renewed motion for judgment as a matter of law in the WordPerfect antitrust case. It's 160 pages long, just the memorandum, plus 4 exhibits and appendix after appendix -- 54 in all. This document [PDF] is a list of what is in all of the appendices.
Microsoft's motion was 137-pages long, if you recall. And this is bigger. It's, frankly, amazing.
I'd say in a quick look that this is Novell letting the judge know that he can't just hand Microsoft a favor, and that if he does, Novell is ready to appeal.
I would really appreciate your help digesting all of this. I'll start on the memorandum of law and the exhibits so I can write about it with some analysis that makes sense, I hope, but after you read the memorandum in the PDF format, if something in an appendix triggers a memory of another exhibit not on the list that you read or transcribed that relates to it, from our
Comes v. Microsoft exhibits transcription project, highlight it by all means.
Jump To Comments
First, the filings:
It will take a while to work our way through these. If you notice something of interest, do please leave a comment, to make sure I don't miss anything. We will eventually have the memorandum as text for you, thanks to Steve Martin and Erwan, who have come up with a transcribing system that even when we are buried in a blizzard of filings makes this doable. I have asked Steve to write it up for us, so the rest of you can use their system too, if you wish to help down the road. And he will, but not today! For sure, not today.
03/09/2012 - 501 - MEMORANDUM in Opposition re 396 MOTION for Judgment as a Matter of Law (Renewed)filed by Plaintiff Novell. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D)(English, Maralyn) (Entered: 03/09/2012)
03/09/2012 - 502 - APPENDIX to 501 Memorandum in Opposition to Motion filed by Plaintiff Novell .(Attachments: # 1 Appendix 1-17, # 2 Appendix 31-50, # 3 Appendix 51-62, # 4 Appendix 63-84, # 5 Appendix 87-117, # 6 Appendix 125-130, # 7 Appendix 131-144, # 8 Appendix 148, # 9 Appendix 154-162A, # 10 Appendix 168 part 1, # 11 Appendix168 part 2, # 12 Appendix 168 part 3, # 13 Appendix 174 part 1, # 14 Appendix174 part 2, # 15 Appendix 174 part 3, # 16 Appendix 174 part 4, # 17 Appendix174 part 5, # 18 Appendix 174 part 6, # 19 Appendix 174 part 7, # 20 Appendix174 part 8, # 21 Appendix 174 part 9, # 22 Appendix 174 part 10, # 23 Appendix174 part 11, # 24 Appendix 174 part 12, # 25 Appendix 174 part 13, # 26 Appendix174 part 14, # 27 Appendix 174 part 15, # 28 Appendix 179-202, # 29 Appendix207-219, # 30 Appendix 220-224, # 31 Appendix 225, # 32 Appendix 227-248, # 33 Appendix 259-268, # 34 Appendix 273, # 35 Appendix 279-361, # 36 Appendix364-374, # 37 Appendix 378 part 1, # 38 Appendix 378 part 2, # 39 Appendix 378 part 3, # 40 Appendix 379, # 41 Appendix 388 part 1, # 42 Appendix 388 part 2, # 43 Appendix 388 part 3, # 44 Appendix 388 part 4, # 45 Appendix 391, # 46 Appendix 395, # 47 Appendix 400, # 48 Appendix 410-504, # 49 Appendix 515-531, # 50 Appendix 554, # 51 Appendix 560-604, # 52 Appendix DX3-131A, # 53 AppendixDX168-230, # 54 Appendix DX231-370)(English, Maralyn) (Entered: 03/09/2012)
I know many of you were very deeply disappointed by Novell's prior executives selling the FOSS community out. I was too. But this isn't about that. This case is about antitrust law, and because the US is a country that follows a case law system, it means that every case matters, because other judges will have to follow what the ultimate decision in this case is, if the facts are similar, assuming it survives appeal.
You may have noticed that antitrust complaints against Microsoft are already filed by Barnes & Noble with the Department of Justice regarding the new patent strategy against Android. As the Microsoft-Nokia-MOSAID patent machinery gets into full gear, I expect more will be filed, frankly. And that is why this case matters, no matter how you feel about either party.
It's how the case affects what future judges and juries have to follow as the rules of antitrust law that matters. And you never know what a case decision will be or how it will affect the future until it plays out. So yes, I'd say the community has an interest in how this case plays out, and most particularly because the judge has shown what I viewed as an inclination to toss the case out at any possible excuse. And keep in mind that there has been a distinct shift in how the US Department of Justice handles antitrust concerns in this administration compared to the last. So please do set aside your disgust with what has happened, and look only at the issues in the case, not who is bringing them to court. That's what I'm doing, and I know I am right to keep on plugging away on this case. And I double dog dare you to read it all, including the exhibits, and not care whether a company can act like this, assuming you read the documents as I do, and never have to make it right.
For now, here's the table of contents to the Novell memorandum, just to give you an overview:
TABLE OF CONTENTS
TABLE OF AUTHORITIES ..........................V
SUMMARY OF THE ARGUMENT .......................2
I. NOVELL’S COMPLAINT.......................10
II. MICROSOFT’S MOTION TO DISMISS ...................12
III. SUMMARY JUDGMENT PROCEEDINGS......................13
IV. COLLATERAL ESTOPPEL EFFECT OF THE GOVERNMENT CASE ...........16
V. TRIAL ..........................................17
STATEMENT OF FACTS..............................20
I. NOVELL’S OFFICE PRODUCTIVITY APPLICATIONS AND SUITE THREATENED
MICROSOFT’S MONOPOLY POWER IN THE PC OPERATING SYSTEMS
A. WordPerfect’s Success On The Windows Platform ..................20
II. MICROSOFT’S ANTICOMPETITIVE CONDUCT ...........................46
B. WordPerfect Posed An Even Greater Threat To Microsoft After The
Merger With Novell......................24
C. Microsoft’s Monopoly Power In The PC Operating Systems Market Is
Protected By An Applications Barrier To Entry.......................27
D. Novell’s Office Productivity Applications And Suite Were “Middleware”
With The Potential To Weaken The Applications Barrier To Entry .........28
1. Middleware Could Reduce the Applications Barrier to Entry.............28
E. Novell’s Key Franchise Applications Had The Potential To Weaken The
2. Microsoft Reasonably Feared Novell as a Middleware Vendor................31
3. Novell’s Office Productivity Applications and Suite Were
4. Novell’s Cross-Platform Office Productivity Applications and Suite
Could Have Helped Alternative Operating Systems Compete with
Applications Barrier To Entry .........................44
A. The Namespace Extension Functionality In Windows 95..................46
III. MICROSOFT’S ANTICOMPETITIVE CONDUCT DELAYED NOVELL’S OFFICE
B. The Hood Canal Plan ..................................46
C. Microsoft Evangelizes The Namespace Extension APIs..................51
D. Microsoft De-Documents The Namespace Extension APIs ..................59
PRODUCTIVITY APPLICA TIONS AND SUITE FOR WINDOWS 95 .........66
A. Microsoft’s De-Documentation Of The Namespace Extension APIs Left
Novell With No Real Choice ......................66
B. Microsoft’s Conduct Maintained And Extended The Applications Barrier To
Entry Protecting Microsoft’s Monopoly Power....................70
I. THE COURT MAY GRANT MICROSOFT’S MOTION ONLY IF THE EVIDENCE SO
OVERWHELMINGLY FAVORS MICROSOFT AS TO PERMIT NO OTHER
RATIONAL CONCLUSION ..............................71
II. A REASONABLE JURY COULD FIND THAT MICROSOFT’S CONDUCT
VIOLATED SECTION 2 OF THE SHERMAN ACT .........................73
A. The Substantive Sherman Act Standards Do Not Depend On Whether
III. A REASONABLE JURY COULD FIND THAT MICROSOFT’S
Damages Or Injunctive Relief Is Sought ......................75
B. A Reasonable Jury Could Find That Microsoft Engaged In “Anticompetitive Conduct” ...................................80
1. Novell Made a Prima Facie Showing of Harm to Competition................83
a. Microsoft’s conduct as a whole harmed competition in the PC
2. Microsoft Cannot Establish as a Matter of Law That Its Conduct Was
operating systems market....................................84
b. The conduct “directed at” Novell, in and of itself, harmed
c. Microsoft’ s defenses are without merit..........................................97
Justified by a Non-Pretextual, Legitimate Business Justification............101
a. Microsoft’s claim that a poorly written program using the
3. Monopolists May Not Contract Their Way Out of Section 2
namespace extension APIs could crash the Windows 95 shell
b. Microsoft’s claim that the namespace extension APIs were not
compatible with future versions of Windows under
development is pretextual ...............................106
c. Microsoft’s claim that the namespace extension APIs were
“trivial” and did not achieve the functionality that Bill Gates
had hoped for is pretextual............................107
ANTICOMPETITIVE CONDUCT CAUSED NOVELL INJURY AND AWARD
A. Microsoft’s Conduct Caused Antitrust Injury To Novell ....................................110
IV. EVEN IF NOVELL’S CLAIM IS ANALYZED UNDER ASPEN SKIING,
1. Novell Established Injury in Fact ........................111
B. Novell’s Injury Was Of A Type That The Antitrust Laws Were Intended To
2. Novell Established Material Causation...........................111
C. A Reasonable Jury Would Have Ample Evidence From Which It Could
Determine Novell’s Damages..............................118
1. Quantification of Damages ..................................118
2. Disaggregation of Damages..................................120
JUDGMENT AS A MATTER OF LAW WOULD BE IMPROPER ........................123
A. Microsoft And Novell/WordPerfect Have A Long History Of Cooperation.......127
V. NOVELL’S CLAIM IS APPROPRIATELY BEFORE THE COURT...........................130
B. Microsoft Terminated Its Course Of Dealing With Novell When It
De-Documented The Namespace Extension APIs ...........................128
C. There Is No Requirement That Novell Must Prove Microsoft Denied Novell
Access To Information “Available To All Other Consumers”............................130
A. Microsoft Cannot Now Raise Any Grounds For Judgment As A Matter Of
Law That Were Not Raised In Its Rule 50(a) Motion Before The Case Was
Submitted To The Jury................................................131
B. Issues Resolved By The Fourth Circuit Are Law Of The Case And Cannot Be
Relitigated Before This Court After Remand ........................132
C. Even If Microsoft’s Arguments Were Not Barred By Waiver Or Law Of The
Case, They Would Fail As A Matter Of Law ......................134
1. Novell Did Not Sell Its Claim in Count I to Caldera...............................134
2. Novell’ s Count I Claim Includes PerfectOffice .......................................136
a. Microsoft’s attempt to limit Novell’s case based on a prior
3. Novell’ s Claim Is Not Time-Barred ...............................................142
Settlement Agreement and an overly restrictive interpretation
of the Complaint is without merit .................................136
b. The Court has not excluded Novell’s theory that PerfectOffice
was a combination of Novell’s middleware technologies ...........138
And here's the list of exhibits in the appendices:
And here it is, as text:
Email from Bill Gates (Oct. 3, 1994)..........................................PX 1
Memorandum regarding Operating System Strategy (May 18, 1989) ............................PX 3
IBM New Release (Nov. 13, 1989) ...........................................PX 4
Email chain, including email from Cameron Myhrvold (Jan. 20, 1990).........................PX 6A
Memorandum regarding Strategic Planning (Apr. 30, 1990) ..........................................PX 7
Memorandum from Laura Jennings (Apr. 15, 1992).....................................PX 17
Email chain, including email from Michael Mathieu (Mar. 23, 1993)............................PX 31
Email from Jim Allchin (Mar. 26, 1993) ...........................................PX 32
Memorandum regarding Revenge of the Server (Apr. 4, 1993)......................................PX 33
Email from Bill Gates (May 4, 1993) ...............................................PX 44
Email from Paul Maritz (May 19, 1993) ..............................................PX 47
Memorandum regarding Systems Retreat (June 8, 1993)...........................PX 50
Presentation Slides (undated)......................................................PX 51
Email from Dennis Adler with attachment (June 14, 1993) ............................................PX 52
Email chain, including email from John Ludwig (June 15, 1993)...................................PX 54
Email from Tom Evslin (June 16, 1993) ...............................PX 55
Email from Tandy Trower (June 23, 1993) .........................................PX 56
Office Shell Ideas and Issues (July 2, 1993).................................PX 61
Email chain from Bob Muglia (July 3, 1993) ..........................................PX 62
Trip Report – Chicago User Interface Design Preview (July 8-9, 1993).........................PX 63
Email chain, including email from Brad Silverberg (July 13, 1993)...............................PX 64
Email chain, including email from Brad Silverberg (July 30, 1993)...............................PX 72
Introduction to the Chicago Project (Sept. 1993) ............................................................PX 77
Trip Report, Win32 Developers Workshop (Sept. 9-10, 1993).......................................PX 78
Email chain among Microsoft executives (Sept. 24, 1993) .............................................PX 82
Email chain, including email from Doug Henrich (Sept. 25, 1993) ................................PX 84
Email chain between James Allchin and Brad Silverberg (Oct. 1, 1993)........................PX 87
Email chain, including email from Brad Silverberg (Oct. 1, 1993).................................PX 88
Email regarding Novell AppWare (Oct. 7, 1993).................................PX 90
Email regarding Lotus Notes (Oct. 9, 1993)..................................PX 91
Email chain from Paul Maritz with attachment (Oct. 13, 1993)......................................PX 94
Email from Steven Sinofsky (Nov. 5, 1993)..............................PX 102
Email chain, including email from David Cole (Nov. 18, 1993).....................................PX 105
PC Computing WordPerfect 6.0 Review (Dec. 1993)........................................PX 110
Presentation Slides: New Windows Chicago UI (Dec. 1993) .........................................PX 113
Email chain, including email from David Cole (Dec. 2, 1993) .......................................PX 114
WordPerfect for Windows “Eliot” (Jan. 4, 1994)........................PX 117
1994 Business Plan (Jan. 18, 1994) ...............................................PX 125
Email from Brad Silverberg (Jan. 19, 1994)...............................PX 127
Email chain, including email from Brad Silverberg (Jan. 20, 1994) ...............................PX 129
Email chain, including email from Joe Belfiore (Jan. 27, 1994) .....................................PX 130
Memorandum regarding Chicago Evangelism (Jan. 29, 1994) .......................................PX 131
Email chain between Bill Gates and Brad Silverberg (Apr. 1, 1994)..............................PX 134
Email chain among Microsoft executives (Feb. 8, 1994) ................................................PX 139
Email from David Cole (Feb. 10, 1994) ............................................PX140 3
Email chain, including email from Satoshi Nakajima (Feb. 17, 1994)............................PX 142
Email from Steven Sinofsky (Feb. 22, 1994) .........................................PX 144
Memorandum regarding First Wave (Mar. 6, 1994)..............................PX 148
Email from Bill Gates with attachment (Mar. 23, 1994) .................................................PX 154
Email chain, including email from Bill Hennigsgaard (Mar. 24, 1994) ..........................PX 156
Email chain, including email from Bill Gates (Mar. 30, 1994) .......................................PX 162A
Excel 95 Specification (Apr. 8, 1994) .............................................PX 168
Novell, Inc. S-4 Registration Statement (Apr. 22, 1994).................................................PX 174
Review of Objectives for FY94 Q4 (June 1994) .............................................................PX 179
M6 Header File (June 9, 1994) ....................................................PX 181
Email from Tammy Steele (June 15, 1994)..................................PX 184
Email chain regarding PerfectOffice (June 30, 1994) .....................................................PX 191
Email from Scott Raedeke (June 30, 1994) ......................................PX 192
Email chain, including email from Scott Raedeke (July 4, 1994) ...................................PX 193
Business Review Exercise (July 15, 1994) ........................................PX 198
Business Review Exercise Summary (July 19, 1994) .....................................................PX 200
Presentation Slides: Recruiting Developers for Office (July 22, 1994)...........................PX 201
Email chain, including email from Joe Belfiore (July 26, 1994).....................................PX 202
Network Applications: Strategic Direction for WordPerfect, the Novell
Applications Group (Sept. 1994) ...................................PX 207
Email from Paul Maritz with attachment (Sept. 19, 1994)...........................PX 212
Email from Brad Struss (Sept. 22, 1994)............................PX 215
Email from Jim Allchin (Sept. 27, 1994)...............................PX 216
Email chain, including email from Brad Silverberg (Oct. 3, 1994).................................PX 219
Email chain, including email from Brad Silverberg (Oct. 5, 1994).................................PX 220
Email from Sean Nolan with attachment (Oct. 5, 1994)..................................................PX 221
Email chain, including email from Bill Gates (Oct. 5, 1994)..........................................PX 222
Email from Satoshi Nakajima (Oct. 10, 1994) ...........................PX 224
Email chain, including emails from Brad Stuss and Scott Henson..................................PX 225
M7 Header File (Oct. 28, 1994).......................................PX 227
Email chain between Brad Struss and Kelly Sonderegger (Nov. 23, 1994) ....................PX 236
Email from Dave Miller (Nov. 29, 1994) ..................................PX 238
Memorandum regarding Novell at COMDEX (Nov. 30, 1994)......................................PX 239
Email from Richard Greene with attachment (Dec. 2, 1994) ..........................................PX 241
Email chain, including email from Joe Belfiore (Dec. 6, 1994) ......................................PX 243
Email from Brad Struss with attachment (Dec. 15, 1994)...............................................PX 248
Email chain, including emails from Dennis Adler
and Brad Struss (Jan. 4, 1995) ..................................PX 259
Novell – Netscape Software License Agreement (Feb. 2, 1995).....................................PX 268
Memorandum regarding Office Three-Year Plan (Mar. 1995) .......................................PX 273
Email chain, including email from Joe Belfiore (Mar. 10, 1995)....................................PX 279
InfoWorld PerfectOffice Review (Apr. 24, 1995)...........................................................PX 297
PerfectFit 95 Panic Mode Modifications (July 28, 1995)................................................PX 322
Email chain, including emails from Brad Silverberg and Brad Struss (Aug. 11, 1995) ........................................PX 324
Microsoft Office Compatible Program Document (Sept. 20, 1995)................................PX 333
Web-like Shell: Architecture (Nov. 8, 1995)............................................PX 344
Microsoft Systems Journal Article (July 1996) ............................................PX 355
Email from Jeff Raikes (Aug. 17, 1997)................................PX 360
Email chain, including email from Warren Buffett (Aug. 21, 1997)...............................PX 361
Namespace Extension APIs Patent (Nov. 3, 1998)..............................................PX 364
Eclipse InForms, PerfectFit 3.0 Integration Software Requirement Specification (June 19, 1995).........................................................PX 368
PerfectFit 95 Architecture (May 26, 1995).............................................PX 371
Storm, New Features (June 29, 1995)...........................................PX 374
WordPerfect for Windows 6.0, Competitive Analysis (undated)....................................PX 378
Office ’96 Chicago Explorer Superset and Replacement (undated)................................PX 379
Chicago Reviewer’s Guide (undated)..................................PX 388
Novell Corporate Update (Apr. 19, 1995) ..............................................PX 391
PerfectOffice Product Sales Guide (Sept. 1, 1994)..........................................................PX 395
Office ’96 Chicago Explorer Superset and Replacement (undated)................................PX 400
Developing Custom Solutions for PerfectOffice (undated)..........................PX 410
Strategy Paper, WordPerfect Novell Applications Group (undated)...............................PX 412
Welcome to the Future of Solutions Development (undated) .........................................PX 414
Email chain, including email from Brad Silverberg (Sept. 28, 1993) .............................PX 473
Email chain among Microsoft executives (Sept. 24, 1993) .............................................PX 483
Email chain, including email from Brad Silverberg (Jan. 3, 1994) .................................PX 488
Email chain, including email from Brad Silverberg (Jan. 26, 1994) ...............................PX 489
Email chain, including email from Brad Silverberg (Mar. 18, 1994) .............................PX 490
Email regarding Novell Windows World Recap (May 3, 1995) .....................................PX 492
Email regarding First Wave Program (Apr. 11, 1994) .....................................PX 504
Email regarding WordPerfect Status (Nov. 5, 1993)................................PX 515
Memorandum regarding DRG Business Plan (Apr. 7, 1994)..........................................PX 517
Memorandum regarding Distributed Computing Strategy (Jan. 13, 1991) .....................PX 524
Email with attachment, “How to be a great app in the Chicago Shell”
(Sept. 7, 1994)..................................................PX 529
Email chain, including email from Bill Gates (Nov. 8, 1994).........................................PX 530
Memorandum regarding AppWare (Oct. 13, 1993)........................................PX 531
Microsoft Office Draft Marketing Plan (undated) ......................................PX 554
Memorandum regarding Workgroup Mission Plan (Feb. 6, 1994) .................................PX 560
IDC Report, The Word Processing Software Market Review and Forecast 1994-1999:
DOS, Windows, OS/2, and Macintosh (undated) ............................PX 599A
Extending the Shell’s Namespace (Apr. 23, 1996)..........................................PX 604
Tab Email chain, including email from Brad Struss (Oct. 12, 1994) .....................................DX 3
Memorandum regarding Integration Plan (Aug. 3, 1994) ...............................................DX 4
Email chain, including email from Bill Gates (Nov. 8, 1994).........................................DX 82
Email from Brad Struss (Nov. 12, 1994) ............................................DX 84
Email chain, including email from Joe Belfiore (Mar. 21, 1996)....................................DX 131A
Email regarding First Wave Program (May 18, 1994) ....................................................DX 168
October 1994 Status Report (Oct. 1994)......................................DX 205
Novell Employee Self-Review (Mar. 10, 1995) ..............................................................DX 217
Notes from Storm Coordination Meeting (Feb. 2, 1995).................................................DX 219
Email from Bruce Brereton (Dec. 23, 1995)............................................................DX 230
Development Project Status (Jan. 11, 1996)....................................................DX 231
1994 Product Plans: Executive Summary (Aug. 13, 1993) .............................................DX 370
MAX D. WHEELER (3439)
MARALYN M. ENGLISH (8468)
SNOW, CHRISTENSEN & MARTINEAU
JEFFREY M. JOHNSON (admitted pro hac vice)
PAUL R. TASKIER (admitted pro hac vice)
ADAM PROUJANSKY (admitted pro hac vice)
JAMES R. MARTIN (admitted pro hac vice)
DICKSTEIN SHAPIRO LLP
R. BRUCE HOLCOMB (admitted pro hac vice)
ADAMS HOLCOMB LLP
JOHN E. SCHMIDTLEIN (admitted pro hac vice)
WILLIAMS & CONNOLLY LLP
Attorneys for Novell, Inc.
UNITED STATES DISTRICT COURT
for the District of Utah
NOVELL'S OPPOSITION TO MICROSOFT'S RENEWED MOTION
FOR JUDGMENT AS A MATTER OF LAW
Case No. 2:04-cv-01045-JFM
Hon. J. Frederick Motz
TABLE OF CONTENTS
|TABLE OF AUTHORITIES
|SUMMARY OF THE ARGUMENT
||MICROSOFT'S MOTION TO DISMISS
||SUMMARY JUDGMENT PROCEEDINGS
||COLLATERAL ESTOPPEL EFFECT OF THE GOVERNMENT
|STATEMENT OF FACTS
||NOVELL'S OFFICE PRODUCTIVITY APPLICATIONS AND
THREATENED MICROSOFT'S MONOPOLY POWER IN THE PC OPERATING
||WordPerfect's Success On The Windows Platform
||WordPerfect Posed An Even Greater Threat To
Microsoft After The Merger With Novell
||Microsoft's Monopoly Power In The PC Operating
Systems Market Is
Protected By An Applications Barrier To Entry
||Novell's Office Productivity Applications And Suite
With The Potential To Weaken The Applications Barrier To Entry
||Middleware Could Reduce the Applications Barrier to
||Microsoft Reasonably Feared Novell as a Middleware
||Novell's Office Productivity Applications and Suite
||Novell's Cross-Platform Office Productivity
Applications and Suite
Could Have Helped Alternative Operating Systems Compete with
||Novell's Key Franchise Applications Had The
Potential To Weaken The
Applications Barrier To Entry
||MICROSOFT'S ANTICOMPETITIVE CONDUCT
||The Namespace Extension Functionality In Windows
||The Hood Canal Plan
||Microsoft Evangelizes The Namespace Extension
||Microsoft De-Documents The Namespace Extension
||MICROSOFT'S ANTICOMPETITIVE CONDUCT DELAYED
OFFICE PRODUCTIVITY APPLICATIONS AND SUITE FOR WINDOWS 95
||Microsoft's De-Documentation Of The Namespace
Extension APIs Left
Novell With No Real Choice
||Microsoft's Conduct Maintained And Extended The
Applications Barrier To
Entry Protecting Microsoft's Monopoly Power
||THE COURT MAY GRANT MICROSOFT'S MOTION ONLY IF THE
SO OVERWHELMINGLY FAVORS MICROSOFT AS TO PERMIT NO OTHER
||A REASONABLE JURY COULD FIND THAT MICROSOFT'S
VIOLATED SECTION 2 OF THE SHERMAN ACT
||The Substantive Sherman Act Standards Do Not Depend
Damages Or Injunctive Relief Is Sought
||A Reasonable Jury Could Find That Microsoft Engaged
||Novell Made a Prima Facie Showing of Harm to
||Microsoft's conduct as a whole harmed competition in the PC
operating systems market
||The conduct "directed at" Novell, in and of itself, harmed
||Microsoft's defenses are without merit
||Microsoft Cannot Establish as a Matter of Law That
Its Conduct Was
Justified by a Non-Pretextual, Legitimate Business
||Microsoft's claim that a poorly written program using the
namespace extension APIs could crash the Windows 95 shell
||Microsoft's claim that the namespace extension APIs were
compatible with future versions of Windows under
development is pretextual
||Microsoft's claim that the namespace extension APIs were
"trivial" and did not achieve the functionality that Bill Gates
had hoped for is pretextual
||Monopolists May Not Contract Their Way Out of
||A REASONABLE JURY COULD FIND THAT MICROSOFT'S
ANTICOMPETITIVE CONDUCT CAUSED NOVELL INJURY AND AWARD
||Microsoft's Conduct Caused Antitrust Injury To
||Novell Established Injury in Fact
||Novell Established Material Causation
||Novell's Injury Was Of A Type That The Antitrust
Laws Were Intended To
||A Reasonable Jury Would Have Ample Evidence From
Which It Could
Determine Novell's Damages
||Quantification of Damages
||Disaggregation of Damages
||EVEN IF NOVELL'S CLAIM IS ANALYZED UNDER ASPEN
JUDGMENT AS A MATTER OF LAW WOULD BE IMPROPER
||Microsoft And Novell/WordPerfect Have A Long
History Of Cooperation
||Microsoft Terminated Its Course Of Dealing With
Novell When It
De-Documented The Namespace Extension APIs
||There Is No Requirement That Novell Must Prove
Microsoft Denied Novell
Access To Information "Available To All Other Consumers"
||NOVELL'S CLAIM IS APPROPRIATELY BEFORE THE
||Microsoft Cannot Now Raise Any Grounds For Judgment
As A Matter Of
Law That Were Not Raised In Its Rule 50(a) Motion Before The Case
Submitted To The Jury
||Issues Resolved By The Fourth Circuit Are Law Of
The Case And Cannot Be
Relitigated Before This Court After Remand
||Even If Microsoft's Arguments Were Not Barred By
Waiver Or Law Of The
Case, They Would Fail As A Matter Of Law
||Novell Did Not Sell Its Claim in Count I to
||Novell's Count I Claim Includes PerfectOffice
||Microsoft's attempt to limit Novell's case based on a prior
Settlement Agreement and an overly restrictive interpretation
of the Complaint is without merit
||The Court has not excluded Novell's theory that
was a combination of Novell's middleware technologies
||Novell's Claim Is Not Time-Barred
TABLE OF AUTHORITIES
|A.I.B. Express, Inc. v. FedEx Corp.,
358 F. Supp. 2d 239 (S.D.N.Y. 2004)
|Abbott Labs. v. Teva Pharm. USA, Inc.,
432 F. Supp. 2d 408 (D. Del. 2006)
|Am. Prof'l Testing Serv., Inc. v. Harcourt Brace Jovanovich
Legal & Prof'l Publ'ns, Inc.,
108 F.3d 1147 (9th Cir. 1997)
|Angelico v. Lehigh Valley Hosp., Inc.,
184 F.3d 268 (3d Cir. 1999)
|Aspen Highlands Skiing Corp. v. Aspen Skiing Co.,
738 F.2d 1509 (10th Cir. 1984), aff'd, 472 U.S. 585 (1985)
|Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,
472 U.S. 585 (1985)
|Associated Gen. Contractors of Cal., Inc. v. Cal. State
Council of Carpenters ("AGC"),
459 U.S. 519 (1983)
|Aventis Envtl. Sci. USA LP v. Scotts Co.,
383 F. Supp. 2d 488 (S.D.N.Y. 2005)
|Ball Mem'l Hosp., Inc. v. Mut. Hosp. Ins., Inc.,
784 F.2d 1325 (7th Cir. 1986)
|BanxCorp v. Bankrate Inc.,
No. 07-3398 (ES)(CLW), 2011 WL 6934836 (D.N.J. Dec. 30, 2011)
|Barry Wright Corp. v. ITT Grinnell Corp.,
724 F.2d 227 (1st Cir. 1983)
|Blue Shield of Va. v. McCready,
457 U.S. 465 (1982)
|Bradley v. United States,
161 F.3d 777 (4th Cir. 1998)
|Brentwood Acad. v. Tenn. Secondary Schs. Athletic
No. 3:97-1249, 2008 U.S. Dist. LEXIS 55312 (M.D. Tenn. July 18,
|Brooke Grp. Ltd. v. Brown & Williamson Tobacco
509 U.S. 209 (1993)
|Brown v. Presbyterian Healthcare Servs.,
101 F.3d 1324 (10th Cir. 1996)
|Caldera, Inc. v. Microsoft Corp.,
72 F. Supp. 2d 1295 (D. Utah 1999)
|80, 81, 84, 85
|Capps v. Sullivan,
13 F.3d 350 (10th Cir. 1993)
|Caribbean Broad. Sys., Ltd. v. Cable & Wireless
148 F.3d 1080 (D.C. Cir. 1998)
|Christy Sports, LLC v. Deer Valley Resort Co.,
555 F.3d 1188 (10th Cir. 2009)
|City of Anaheim v. S. Cal. Edison Co.,
955 F.2d 1373 (9th Cir. 1992)
|City of Mishawaka, Ind. v. Am. Electric Power Co.,
616 F.2d 976 (7th Cir. 1980), overruled on other grounds by City
of Columbia v.
Omni Outdoor Adver., Inc., 499 U.S. 365 (1991)
|Cnty. of Suffolk v. Stone & Webster Eng'g Corp.,
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|Cont'l Ore Co. v. Union Carbide & Carbon Corp.,
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|Conwood Co. v. U.S. Tobacco Co.,
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|Creative Copier Servs. v. Xerox Corp.,
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|CTC Commc'ns Corp. v. Bell Atl. Corp.,
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|Cytologix Corp. v. Ventana Med. Sys., Inc.,
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|Data Gen. Corp. v. Grumman Sys. Support Corp.,
36 F.3d 1147 (1st Cir. 1994), abrogated on other grounds by
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|Eastman Kodak Co. v. Image Tech. Servs., Inc.,
504 U.S. 451 (1992)
|Elliott Industries Ltd. Partnership v. BP America Production
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|Fleischman v. Albany Med. Ctr.,
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|Flying J Inc. v. TA Operating Corp.,
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|Foremost Pro Color, Inc. v. Eastman Kodak Co.,
703 F.2d 534 (9th Cir. 1983), overruled on other grounds by
Hasbrouck v. Texaco, Inc., 842 F.2d 1034 (9th Cir. 1987)
|Four Corners Nephrology Assocs., P.C. v. Mercy Medical
Center of Durango,
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|Fox Midwest Theatres, Inc. v. Means,
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|Full Draw Prods. v. Easton Sports, Inc.,
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|GAF Corp. v. Eastman Kodak Co.,
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|Gen. Indus. Corp. v. Hartz Mountain Corp.,
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|Guides, Ltd. v. Yarmouth Grp. Prop. Mgmt., Inc.,
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|71, 72, 114
|Hertz Corp. v. Enter. Rent-A-Car Co.,
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|Hewlett-Packard Co. v. Boston Scientific Corp.,
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|Huffman v. Saul Holdings Ltd. P'ship,
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aff'd sub nom. Am. Banana Co. v. J. Bonafede Co., 407 F.
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|Instructional Sys. Dev. Corp. v. Aetna Cas. & Sur.
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|95, 100, 101
|Intergraph Corp. v. Intel Corp.,
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|Int'l Travel Arrangers, Inc. v. W. Airlines, Inc.,
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|Italian Colors Rest. v. Am. Express Travel Related Servs.
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|JamSports & Entm't LLC v. Paradama Prods., Inc.,
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|Kerman v. City of New York,
374 F.3d 93 (2d Cir. 2004)
|Klay v. All Defendants,
389 F.3d 1191 (11th Cir. 2004)
|Lantec, Inc. v. Novell, Inc.,
146 F. Supp. 2d 1140 (D. Utah 2001), aff'd, 306 F.3d 1003 (10th
|Law v. NCAA,
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|8, 118, 119
|LePage's, Inc. v. 3M (Minn. Mining & Mfg. Co.),
324 F.3d 141 (3d Cir. 2003) (en banc)
|Marshall v. Columbia Lea Reg'l Hosp.,
474 F.3d 733 (10th Cir. 2007)
|MetroNet Servs. Corp. v. Qwest Corp.,
383 F.3d 1124, 1132 (9th Cir. 2004)
|Midwest Underground Storage, Inc. v. Porter,
717 F.2d 493 (10th Cir. 1983)
|Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
473 U.S. 614 (1985)
|Morgan v. Ponder,
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|Multistate Legal Studies, Inc. v. Harcourt Brace Jovanovich
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63 F.3d 1540 (10th Cir. 1995)
|Neumann v. Reinforced Earth Co.,
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|New York v. Microsoft Corp.,
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|Newcal Indus., Inc. v. Ikon Office Solution,
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|Nobody in Particular Presents, Inc. v. Clear Channel
311 F. Supp. 2d 1048 (D. Colo. 2004)
|Novell, Inc. v. Microsoft Corp.
429 F. App'x 254 (4th Cir. 2011)
|15, 134, 135
|Novell, Inc. v. Microsoft Corp.,
505 F.3d 302 (4th Cir. 2007)
|Novell, Inc. v. Microsoft Corp. (In re Microsoft Corp.
699 F. Supp. 2d 730 (D. Md. 2010), rev'd in part,
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|Novell, Inc. v. Microsoft Corp. (In re Microsoft Corp.
No. 1:05-cv-01087, 2005 WL 1398643 (D. Md. June 10, 2005),
aff'd, 505 F.3d 302 (4th Cir. 2007)
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|Perma Life Mufflers, Inc. v. Int'l Parts Corp.,
392 U.S. 134 (1968), overruled on other grounds by
Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752
|PSI Repair Servs., Inc. v. Honeywell, Inc.,
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|Realcomp II, Ltd. v. FTC,
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|Reazin v. Blue Cross & Blue Shield of Kan.,
635 F. Supp. 1287 (D. Kan. 1986), aff'd, 899 F.2d 951 (10th Cir.
|Reazin v. Blue Cross & Blue Shield of Kansas,
899 F.2d 951 (10th Cir. 1990)
|Reazin v. Blue Cross & Shield of Kan., Inc.,
663 F. Supp. 1360 (D. Kan. 1987), aff'd, 899 F.2d 951 (10th Cir.
|27, 74, 117
|Redel's Inc. v. Gen. Electric Co.,
498 F.2d 95 (5th Cir. 1974)
|Reeves v. Sanderson Plumbing Prods., Inc.,
530 U.S. 133 (2000)
|71, 72, 73
|Reibert v. Atl. Richfield Co.,
471 F.2d 727 (10th Cir. 1973)
|Rochester Drug Coop. v. Braintree Labs.,
712 F. Supp. 2d 308, 318-19 (D. Del. 2010)
|Rohrbaugh v. Celotex Corp.,
53 F.3d 1181 (10th Cir. 1995)
|Roth v. Naturally Vitamin Supplements, Inc.,
No. CV-04-2135-PHX-FJM, 2007 WL 2020114 (D. Ariz. July 6,
|S. Pac. Commc'ns Co. v. Am. Tel. & Tel. Co.,
740 F.2d 980 (D.C. Cir. 1984)
|Sharp v. United Airlines, Inc.,
967 F.2d 404 (10th Cir. 1992)
|Shaw v. AAA Eng'g & Drafting, Inc.,
213 F.3d 519 (10th Cir. 2000)
|Smith v. United States,
555 F.3d 1158 (10th Cir. 2009)
|SmithKline Beecham Corp. v. Apotex Corp.,
383 F. Supp. 2d 686 (E.D. Pa. 2004)
|Spirit Airlines, Inc. v. Nw. Airlines, Inc.,
431 F.3d 917 (6th Cir. 2005)
|Taylor Publ'g Co. v. Jostens, Inc.,
216 F.3d 465 (5th Cir. 2000)
|Telex Corp. v. IBM Corp.,
510 F.2d 894 (10th Cir. 1975)
|Town of Concord, Mass. v. Boston Edison Co.,
915 F.2d 17 (1st Cir. 1990)
|Transamerica Computer Co. v. IBM Corp.
(In re IBM Peripheral EDP Devices Antitrust Litig.),
481 F. Supp. 965 (N.D. Cal. 1979), aff'd, 698 F.2d 1377 (9th Cir.
|U.S. Football League v. Nat'l Football League,
842 F.2d 1335 (2d Cir. 1988)
|United Int'l Holdings, Inc. v. Wharf (Holdings)
210 F.3d 1207 (10th Cir. 2000), aff'd, 532 U.S. 588 (2001)
|United States v. Alvarez,
142 F.3d 1243 (10th Cir. 1998)
|United States v. Dentsply Int'l, Inc.,
399 F.3d 181 (3d Cir. 2005)
|81, 82, 83
|United States v. E.I. du Pont de Nemours & Co.,
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|United States v. Grinnell Corp.,
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|United States v. Jordan,
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|United States v. Microsoft Corp.,
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|United States v. Microsoft Corp.,
231 F. Supp. 2d 144 (D.D.C. 2002),
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|United States v. Microsoft Corp.,
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|United States v. Microsoft Corp.,
87 F. Supp. 2d 30 (D.D.C. 2000),
aff'd in relevant part and rev'd in part, 253 F.3d 34 (D.C.
|United States v. Microsoft Corp.,
84 F. Supp. 2d 9 (D.D.C. 1999)
|United States v. Syufy Enterprises,
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|United States ex rel. Staley v. Columbia/HCA Healthcare
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|Verizon Communications, Inc. v. Law Offices of Curtis V.
540 U.S. 398 (2004)
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|Washington Alder LLC v. Weyerhaeuser Co.,
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|Weese v. Schukman,
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aff'd sub nom. Confederated Tribes of Siletz Indians of Or. v.
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grounds sub nom.
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|Wichita Clinic, P.A. v. Columbia/HCA Healthcare
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|Z-Tel Commc'ns, Inc. v. SBC Commc'ns, Inc.,
331 F. Supp. 2d 513 (E.D. Tex. 2004)
|Zapata Gulf Marine Corp. v. Puerto Rico Mar. Shipping
No. 86-2911, 1989 U.S. Dist. LEXIS 13650 (E.D. La. Nov. 14,
|Zenith Radio Corp. v. Hazeltine Research, Inc.,
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|15 U.S.C. § 2
|15 U.S.C. § 4
|15 U.S.C. § 15(a)
|Fed. R. Civ. P. 49
|Fed. R. Civ. P. 50
|Fed. R. Civ. P. 56
|1 ABA Section of Antitrust Law, Antitrust Law
Developments (6th ed. 2007)
|ABA Section of Antitrust Law, Model Jury Instructions in
Civil Antitrust Cases, 2005
|William F. Adkinson et al., Enforcement of Section 2 of the
Sherman Act: Theory and
Practice at 2 (Working Paper for FTC and DOJ Hearings on
Section 2 of the
Sherman Act: Single-Firm Conduct as Related to Competition Nov. 3,
|2A Phillip E. Areeda et al., Antitrust Law (3d ed.
|2B Phillip E. Areeda & Herbert Hovenkamp, Antitrust
Law (3d ed. 2011)
|3 Phillip E. Areeda & Herbert Hovenkamp, Antitrust
Law (3d ed. 2011)
||27, 75, 79, 80
|3 Phillip E. Areeda & Herbert Hovenkamp, Antitrust
|Ankur Kapoor, What Is the Standard of Causation of
Monopoly?, Antitrust Vol. 23
|M. Sean Royall, Disaggregation of Antitrust Damages, 65
Antitrust L.J. 311 (1997)
|Gregory J. Werden, Identifying Exclusionary Conduct Under
Section 2: The "No
Economic Sense" Test, 73 Antitrust L.J. 413 (2006)
|9B Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure
(3d ed. 2011)
|71, 72, 73
Contrary to the required standard under Federal Rule of Civil
Procedure 50, Microsoft's Renewed Motion for Judgment as a Matter
of Law presents the evidence in the light most favorable to
Microsoft, indulges every inference in Microsoft's favor, ignores
voluminous contrary evidence, and resolves every evidentiary
conflict in favor of Microsoft. The law is clear, however, that
this Court must consider the entire trial record, view the evidence
in the light most favorable to Novell, draw every reasonable
inference in Novell's favor, resolve all evidentiary conflicts in
favor of Novell, and deny Microsoft's motion unless the evidence so
overwhelmingly favors Microsoft as to permit no other rational
Applying the proper standard to the facts in the record, it is
beyond debate that a reasonable jury could find in Novell's favor.
As the Court and the parties know, 11 out of 12 jurors who heard
the evidence at trial were prepared to find in Novell's favor. All
12 jurors agreed that Microsoft had engaged in anticompetitive
conduct and that Novell had proved causation (Questions 1 through 3
on the verdict form). There is certainly no basis to conclude that
these jurors were unreasonable. The Court correctly denied
Microsoft's motion for judgment as a matter of law at the close of
Novell's case, and nothing has occurred since that ruling that
would justify granting Microsoft's renewed motion now. To the
contrary, the jury result only confirms the conclusion that a
reasonable jury, considering all of the evidence, could find in
This is a straightforward case governed by the same antitrust
principles that resulted in liability in United States v. Microsoft
Corp. (the "Government Case"). Novell presented facts from which a
reasonable jury could conclude that Microsoft, which indisputably
possessed monopoly power in the PC operating systems market,
willfully maintained that power through
anticompetitive conduct (rather than competition on the merits),
and that this conduct proximately caused injury to Novell's
business. No more is required. Although Microsoft disputes much of
the evidence Novell presented at trial, the law is clear that all
such evidentiary disputes must be resolved in Novell's favor on the
present motion.1 The Court should therefore deny
Microsoft's Renewed Motion for Judgment as a Matter of Law.
SUMMARY OF THE ARGUMENT
During the development of Windows 95 (codenamed "Chicago"),
Microsoft engaged in anticompetitive conduct which severely delayed
the release of Novell's office productivity applications for
Windows 95. Microsoft evangelized Windows 95 to independent
software vendors ("ISVs") like Novell by, among other things,
promoting the enhanced functionality of certain namespace extension
application programming interfaces ("APIs") that were to be
included in the operating system. After Novell reasonably relied on
the namespace extension APIs in developing its applications and
suite for Windows 95, Microsoft withdrew support for those APIs,
forcing Novell to spend considerable time, effort, and expense in
re-engineering its products. The delays caused by Microsoft's
anticompetitive conduct irreparably harmed Novell's office
productivity applications and led Novell to sell those applications
in March 1996 to Corel Corporation for approximately $146 million,
at a loss of more than $1 billion.
Part I (Rule 50(b) Standard): In ruling on a
motion for judgment as a matter of law, the Court reviews all the
evidence in the record, construing it and all inferences most
Novell, and should refrain from making credibility
determinations or weighing the evidence. To succeed on its Rule
50(b) motion, Microsoft must establish that the evidence "so
overwhelmingly favors" Microsoft that no rational person could find
for Novell. Shaw v. AAA Eng'g & Drafting, Inc., 213 F.3d
519, 529 (10th Cir. 2000). A Rule 50 motion may not be granted
unless there is only one conclusion that a reasonable jury could
have reached. This is a very heavy burden, one which Microsoft not
only cannot meet, but does not even acknowledge in its motion.
Part II (Microsoft's Conduct Violated The Sherman
Act): Because Microsoft is an admitted monopolist and there
is no dispute regarding the relevant market, this trial presented
only two overarching questions: (1) whether Microsoft's conduct
violated Section 2 of the Sherman Act and, if so, (2) whether that
conduct proximately caused injury to Novell. The first question
focuses on the effects of Microsoft's conduct on competition; the
second focuses on the effects of that conduct on Novell. These two
questions cannot be conflated. Part II of Novell's argument
addresses the first question; Part III addresses the second.
In the Tenth Circuit, as in the D.C. Circuit, conduct is deemed
anticompetitive when it harms the competitive process and the
monopolist cannot show that it acted with a legitimate business
justification. A plaintiff makes a prima facie showing of
harm to competition when it introduces evidence of conduct that
impaired the opportunities of rivals, was not competition on the
merits, or was more restrictive than reasonably necessary for
competition on the merits, and which appeared to be reasonably
capable of contributing significantly to maintaining monopoly
power. Multistate Legal Studies, Inc. v. Harcourt Brace
Jovanovich Legal & Prof'l Publ'ns, Inc., 63 F.3d 1540, 1550
(10th Cir. 1995). Once a plaintiff makes its prima facie
case, the burden shifts to the monopolist to establish a
non-pretextual, pro-competitive justification for its
conduct. If the monopolist cannot meet that burden, then the
conduct is found to be anticompetitive. The D.C. Circuit used this
same analytical framework in the Government Case to find that
Microsoft committed a dozen separate Section 2 violations on
similar — indeed related — facts.
Recognizing that the D.C. Circuit considered and rejected many
of the same arguments that Microsoft advances here, Microsoft
attempts to distinguish the D.C. Circuit's decision in the
Government Case on the ground that the Government sought only
injunctive relief, not damages. A careful review of the federal
antitrust statutory scheme, the D.C. Circuit's opinion, and the
district court's subsequent remedies decision, however, establishes
that the law provides a single set of standards to determine
whether conduct violates the Sherman Act, regardless of whether
damages or injunctive relief is sought. Determining an appropriate
equitable remedy presents an entirely different question that lies
within the discretion of the court, and courts exercise that
discretion to narrowly tailor the relief to fit the wrong. Thus, in
the Government Case, the
D.C. Circuit ruled that the drastic remedy of divestiture should
not be imposed without a stronger causal connection between the
illegal conduct and Microsoft's ongoing monopoly power than was
needed just to prove liability under Section 2. In confirming the
district court's many findings of fact establishing liability, the
D.C. Circuit explained that "causation affords Microsoft no defense
to liability for its unlawful actions." United
States v. Microsoft Corp., 253 F.3d 34, 80 (D.C. Cir. 2001)
(emphasis added). The same reasoning applies here. Unlike equitable
actions, courts do not have flexibility to determine the
appropriate remedy in private damages claims because Congress
decided that treble damages are necessary to deter anticompetitive
conduct. Courts use antitrust standing analysis to determine which
plaintiffs are permitted to bring damages claims. Traditional
concepts of proximate causation
further ensure that the antitrust violation materially caused
the plaintiff's injuries. In fact, the only authority that
Microsoft cites in its attempt to distinguish the Government Case
is an excerpt from a treatise chapter that deals with proximate
causation of the plaintiff's injury, not whether the
challenged conduct caused the defendant's monopoly to be
maintained. See Microsoft's Memorandum in Support of Its
Renewed Motion for Judgment as a Matter of Law ("Microsoft Mem.")
In its 2007 decision, the Fourth Circuit noted that Novell's
"claims echo the government's theory" in the Government Case.
Novell, Inc. v. Microsoft Corp., 505 F.3d 302, 309 (4th Cir.
2007). This Court also has correctly observed that Microsoft's
conduct to thwart Novell's office productivity applications was not
significantly different from Microsoft's efforts to thwart
Netscape's Navigator web browser and Sun's Java technologies.
Novell introduced and proffered substantial evidence to show that
all of Microsoft's conduct was part of a common plan.
Even if one looks only at the conduct "directed at" Novell, a
rational juror could conclude that Novell made a prima facie
showing that Microsoft's exclusion of Novell's office productivity
applications strengthened and extended the applications barrier to
entry. As explained in the Government Case and in trial testimony,
the applications barrier to entry protected Microsoft's monopoly
power and prevented potential operating systems from entering the
market. "Key franchise" applications and middleware such as
WordPerfect, however, could reduce the barrier and help enable
consumers to consider non-Windows operating systems. By thwarting
the development and distribution of Novell's office productivity
applications (and related middleware, e.g., PerfectFit, AppWare,
and OpenDoc), Microsoft maintained and extended that barrier to
Microsoft incorrectly argues that Novell must show that its
office productivity applications would have completely eradicated
the applications barrier to entry or would have single-handedly
"induced users to move to operating systems other than Windows."
Microsoft Mem. at 82. Microsoft is wrong in two respects. First, as
a matter of law, conduct that helps maintain an entry barrier harms
competition and is capable of "contributing" to monopoly power.
Second, as the D.C. Circuit ruled, "neither plaintiffs nor the
court can confidently reconstruct a product's hypothetical
technological development in a world absent the defendant's
exclusionary conduct" and requiring such proof would only encourage
monopolists to take "more and earlier anticompetitive action."
Microsoft, 253 F.3d at 79. Tenth Circuit law is in accord.
Microsoft may mock the D.C. Circuit's "edentulous" causation test,
but it makes perfect sense not to immunize a monopolist from
liability for conduct targeting "nascent" threats, if the
monopolist cannot justify that conduct as pro-competitive. At that
point, the monopolist bears the uncertain consequences of its own
Microsoft's myopic argument that its conduct could not have
harmed competition — because Windows 95's market share would
have increased "but for" the de-documentation of the namespace
extension APIs — is actually a critical concession that
Microsoft sacrificed short-run profits for a long-term gain,
consistent with its pattern of engaging in conduct that it could
not justify on any ground other than it "operated to reinforce
[its] monopoly power." United States v. Microsoft Corp., 84
F. Supp. 2d 9, 28 at ¶ 67 (D.D.C. 1999) [hereinafter
"Finding(s) of Fact"]. Antitrust law assumes that when monopolists
forgo short-term profits, they do so only in exchange for an
offsetting benefit; otherwise, their conduct would be economically
irrational. Here, the evidence at trial showed that Microsoft
planned to offset its short-term losses with ownership of the key
franchise applications and elimination of the middleware threats,
the effect of artificially maintaining and increasing barriers
to entry in the PC operating systems market, and without any
legitimate pro-competitive justification.
Microsoft's inability to establish a legitimate pro-competitive
justification is highly significant because it proves that
Microsoft was not competing on the merits. It was not trying to
design a better product or increase output. To the contrary, former
Microsoft President and CEO Bill Gates admitted that he acted to
deter innovation solely because Microsoft was not ready to compete
on the merits with Novell. The evidence exposed Microsoft's
"justifications" as pretextual. At best, Microsoft's proffered
justifications create a question of fact unsuitable for a Rule 50
Part III (Causation And Damages): Novell had every
right to rely on Microsoft's commitment to document and support the
namespace extension APIs. Novell reasonably based its development
plans on Microsoft's commitment given the long history of
cooperation between the two parties, and there was ample evidence
that Novell would have released its Windows 95 applications within
90 days of the release of Windows 95 had Microsoft not decided to
break its commitment. Mr. Gates' decision to renege on Microsoft's
commitment (without any nonpretextual, pro-competitive
justification) left Novell with no practical ability to release a
marketable product within the critical 90-day window of opportunity
for new applications. Microsoft's claim that Novell is responsible
for those delays rests entirely on disputed facts.
Microsoft's assertion of a black letter rule that a plaintiff
must either be a consumer or a competitor to have antitrust
standing relies on a misreading of a single case and ignores Tenth
Circuit and Supreme Court precedent. Microsoft's claim that Novell
failed to cite a case in which a private antitrust plaintiff
obtained a money judgment based on a "cross-market" theory of
anticompetitive harm is equally unavailing. The Government Case was
a "cross-market" case
and there is no reason to reject that decision simply because
the United States sought equitable relief. Moreover, Novell has
repeatedly cited Reazin v. Blue Cross & Blue Shield of
Kansas, Inc., 899 F.2d 951 (10th Cir. 1990), a Tenth Circuit
case in which a hospital obtained a money judgment for an antitrust
claim against Blue Cross. The evidence showed that Blue Cross
viewed the hospital's affiliation with a health maintenance
organization as a potential threat to its monopoly in the private
healthcare financing market. The Tenth Circuit specifically
affirmed the hospital's standing even though the hospital did not
compete in the market for private healthcare financing. Id.
If the jury finds that Microsoft engaged in anticompetitive
conduct that proximately caused antitrust injury to Novell, it will
have established Novell's right to recover damages. Courts accept a
degree of uncertainty in fixing the amount of damages and will not
reject them so long as the calculation is not based on
"'speculation or guesswork.'" Law v. NCAA, 5 F. Supp. 2d
921, 929 (D. Kan. 1998) (citations omitted). Thus, the question of
damages should not be determined in a Rule 50(b) motion. In any
event, Novell's damages expert properly calculated damages under
several different theories and provided the jury with a reasonable
basis to determine Novell's damages.
Part IV (Under Aspen Skiing, Judgment As A Matter Of Law
Would Be Improper): Although Novell's case is not a
unilateral-refusal-to-deal case that would be governed by
Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko,
LLP, 540 U.S. 398 (2004), and Aspen Skiing Co. v. Aspen
Highlands Skiing Corp., 472 U.S. 585 (1985), applying the
Aspen Skiing framework reaches the same result — that
Microsoft's conduct harmed competition and Novell — through a
very similar analysis. Microsoft's long-standing course of dealing
with Novell/WordPerfect, and its commitment to provide the
namespace extension APIs, demonstrate
that Microsoft's course of dealing was profitable and therefore
pro-competitive. Microsoft's admission that it lost customers by
reneging on its commitment is more than sufficient to establish a
prima facie case of harm to competition and shift to
Microsoft the burden of establishing a pro-competitive,
non-pretextual justification for its conduct. The
unilateral-refusal-to-deal cases relied on by Microsoft all involve
situations in which the monopolist increased its
short-term profits and the monopolist's conduct was therefore
rational quite apart from any potential effect on preserving
Part V (Novell's Claim Is Properly Before The
Court): Microsoft waived many of the issues it now seeks to
raise by failing to raise them in its Rule 50(a) motion.
Specifically, Microsoft has waived its arguments that (1) Novell
sold its claim to Caldera in the Asset Purchase Agreement, (2)
Novell's claim is barred by the NetWare Settlement Agreement, and
(3) Novell's claim is barred by the statute of limitations.
Furthermore, even if Microsoft had not waived these issues, each
has already been definitively ruled on by the Fourth Circuit, and
therefore Microsoft's arguments are barred by the law of the case
doctrine. Microsoft has not shown, nor can it show, any exceptional
circumstances that would require the Fourth Circuit's rulings on
any of these issues to be revisited.
In any event, even assuming that Microsoft had not waived these
issues and that the law of the case doctrine did not apply here,
Microsoft's arguments still should be rejected because they are
substantively meritless. First, Novell did not, through the Asset
Purchase Agreement, sell its claim to Caldera. Microsoft's argument
hinges on the same mistaken interpretation of "association" that
the Fourth Circuit found lacked logical limiting principles. More
to the point, a mere utterance of the term "DOS" during the trial
— in reference to WordPerfect's installed base — does
not create an association to the products explicitly identified as
the subject of
Novell's Asset Purchase Agreement with Caldera. Second, the
NetWare Settlement Agreement does not bar Novell's claim. That
agreement expressly preserved Novell's right to introduce any and
all factual evidence in support of its claims, which is exactly
what Novell has done. The evidence adduced at trial supports the
claim stated in Novell's Complaint and therefore Microsoft's
argument that Novell's claim was released under the NetWare
Settlement Agreement is without merit. Finally, the statute of
limitations does not bar Novell's claim. Microsoft's argument on
this issue suffers from two fundamental flaws: first, Microsoft
mischaracterizes the arguments made by Novell's counsel during
trial, and second, Microsoft continues to misinterpret the findings
in the Government Case. The portions of statements of Novell's
counsel relied on by Microsoft are taken out of context and do not
support Microsoft's statute of limitations argument. Moreover,
Novell's middleware and key franchise applications theories are
perfectly consistent with the findings in the Government Case.
I. NOVELL'S COMPLAINT
On November 12, 2004, Novell filed a Complaint alleging in Count
I that Microsoft unlawfully maintained its monopoly in the PC
operating systems market through anticompetitive conduct targeting
Novell's office productivity applications. Compl. ¶¶
More specifically, the Complaint alleges that Microsoft viewed
Novell's office productivity applications, including WordPerfect
and Quattro Pro, as a threat to Microsoft's PC operating systems
monopoly power in two ways. First, Novell's office productivity
and acted as "middleware," a category of software that
threatened Microsoft's monopoly power, as shown in the Government
Case. Compl. ¶¶ 43-51; Microsoft, 253 F.3d at
53-54. Second, Novell's office productivity applications, as
popular and important cross-platform applications available on
operating systems other than Windows, could have helped reduce the
applications barrier to entry protecting Microsoft's monopoly
power. Compl. ¶ 52; Microsoft, 253 F.3d at 55.
The Complaint outlines the Government Case against Microsoft in
detail, noting that "Microsoft's Windows monopoly was threatened by
'middleware' such as Netscape Navigator . . . and Sun Microsystems'
implementation of the 'Java' technologies." Compl. ¶ 44. It
also reiterates the courts' determination that "Microsoft engaged
in anticompetitive conduct designed to exclude such middleware from
installation on PCs using the dominant Windows operating system, on
which any middleware would depend for survival until sufficient
competing operating systems could emerge" and that Microsoft was
found to have "violated Section 2 of the Sherman Act 'by preventing
the effective distribution and use of products that might threaten
[its] monopoly'" in a dozen ways. Id. (quoting
Microsoft, 253 F.3d at 58).
The Complaint goes on to state that "[f]or related reasons,
Novell's WordPerfect and other office productivity applications
posed a significant threat to the applications barrier to entry
that protected the Windows monopoly." Compl. ¶ 45.
Specifically, the Complaint notes that Novell developed a "strategy
to provide cross-platform functionality to applications (including
its office productivity applications)," using cross-platform
middleware technologies such as "OpenDoc" and "AppWare." Compl.
¶¶ 47, 51. The Complaint describes Novell's strategy of
combining WordPerfect, AppWare, and OpenDoc as being nearly
identical to Netscape's and Sun's strategy of coupling Navigator
and Java to form a middleware platform with the potential to erode
the applications barrier to entry protecting Microsoft's PC
dominance. Compl. ¶¶ 47, 48, 51. "Like the
Netscape-Java combination, the combination of WordPerfect, a
popular application, with the system-neutral OpenDoc-protocol and
AppWare development environment, threatened Microsoft's operating
systems monopoly." Compl. ¶ 51.
II. MICROSOFT'S MOTION TO DISMISS
In January 2005, Microsoft moved to dismiss Novell's Complaint.
On Count I, Microsoft argued that Novell had sold its claim when it
transferred its DR-DOS (a PC operating system) business to Caldera.
Microsoft also argued that Novell lacked antitrust standing to
bring Count I because Novell was neither a competitor nor a
consumer in the PC operating systems market.3
On June 10, 2005, the Court held that Novell continued to own
the claim set forth in Count I because that claim is for damage to
Novell's applications software rather than to DR-DOS, and it would
be a "far stretch" to infer otherwise. Novell, Inc. v. Microsoft
Corp. (In re Microsoft Corp. Antitrust Litig.), No.
1:05-cv-01087, 2005 WL 1398643, at *1 (D. Md. June 10, 2005),
aff'd, 505 F.3d 302 (4th Cir. 2007). The Court also
confirmed that Novell had antitrust standing to bring Count I, as
the law does not require a plaintiff to be a competitor or a
consumer in the relevant market.4 Id. at *2-3.
At Microsoft's request, the Court certified this case for
interlocutory appeal. The Fourth Circuit granted Microsoft's appeal
request only as to the issue of standing.5 See Fourth Circuit Order
(Jan. 31, 2006) (attached as Ex. A). The Fourth Circuit affirmed
the District Court and remanded the case for further proceedings.
Novell, 505 F.3d at 305.
III. SUMMARY JUDGMENT PROCEEDINGS
On remand, the parties undertook a lengthy discovery process
that included dozens of depositions and the exchange of millions of
pages of documents. Fact discovery closed in the spring of 2009 and
was immediately followed by expert discovery. The parties submitted
nine expert reports, and experts were deposed in August and
After the close of expert discovery, the parties briefed motions
for summary judgment. Novell renewed an earlier motion for summary
judgment on certain Microsoft affirmative defenses based on
Microsoft's allegation that Novell had sold its Count I claim to
Caldera. See Novell Mem. in Supp. of Renewed Mot. for Summ.
J. at 1 (Oct. 7, 2009) (D. Md. Dkt. # 102-1). Novell argued,
relying on the Court's earlier ruling, that nothing in its
transaction with Caldera regarding DR-DOS transferred claims
related to the office productivity applications. Id.
Microsoft opposed Novell's motion and cross-moved for summary
judgment, arguing that Novell had sold the claim set forth in Count
I to Caldera. See Microsoft Mem. in Opp'n to Novell's
Renewed Mot. for Summ. J. & in Supp. of Microsoft's Cross-Mot.
for Summ. J. at 1-2 (Nov. 13, 2009) (D. Md. Dkt. # 104-2).
Microsoft also moved for summary judgment on the merits, arguing
that no genuine issues of material fact existed and that Microsoft
was entitled to a judgment in its favor as a matter of law.
See Microsoft Mem. in Supp. of Mot. for Summ. J. (Oct. 7,
2009) ("Microsoft Summ. J. Mem.") (D. Md. Dkt. # 101-2). In
particular, Microsoft argued that Novell could not substantiate a
Section 2 claim because Novell's allegations fell outside of the
construct set forth in Aspen Skiing, and instead more
closely resembled the allegations deemed insufficient in
Trinko. See Microsoft Summ. J. Mem. at 29-35.
Microsoft also contended that Novell could not
provide facts sufficient for a jury to conclude that Microsoft's
conduct harmed competition in the PC operating systems market.
Id. at 23-29.
In March 2010, the Court entered summary judgment against Novell
on Count I, holding that Novell had sold any claims associated with
the PC operating systems market in its transaction with Caldera for
DR-DOS. Novell, Inc. v. Microsoft Corp. (In re Microsoft Corp.
Antitrust Litig.), 699 F. Supp. 2d 730, 735 (D. Md. 2010),
rev'd in part, 429 F. App'x 254 (4th Cir. 2011). The Court
also held, however, that but for the sale-of-claims issue, Count I
set forth a triable claim that could not be resolved as a matter of
In holding that Count I presented a triable claim that could not
be resolved as a matter of law, the Court noted that Novell's
allegations of anticompetitive conduct go beyond a mere refusal to
cooperate that would be barred by Trinko because "Novell has
presented evidence that Microsoft affirmatively misled Novell about
Windows 95." Id. at 746. Moreover, the Court held, even
assuming Microsoft's conduct could properly be characterized as a
refusal to cooperate, "there is a question of fact about whether it
was anticompetitive under Aspen and Trinko."
Id. The Court also held Novell had presented evidence of
Microsoft's "predatory motives" and a fair inference could be drawn
that Microsoft "'sacrifice[d] short-run benefits and consumer
goodwill in exchange for a perceived long-run [anticompetitive
impact].'" Id. (second brackets in original) (citation
The Court also found that Novell had raised a genuine issue of
fact as to whether Microsoft's conduct "directed at" Novell
significantly contributed to harming the PC operating systems
market. Id. at 749. Specifically, the Court stated:
Novell has no obligation to create some "hypothetical market
place," in which none of the other ISVs or applications had been
weakened by anticompetitive conduct, and then prove that the
conduct at issue would still have significantly contributed to
anticompetitive harm in that hypothetical market. It would be
contrary to the purpose of § 2 to immunize a monopolist for
anticompetitive conduct, which in fact significantly contributed to
anticompetitive harm, simply because that harm was caused by
conduct directed at multiple small threats, none of which could
prove that the conduct directed at any single firm would have by
itself significantly contributed to the defendant's monopoly if
none of the other small firms had been similarly weakened. . . .
Rather, Novell need only prove that the conduct that harmed its
software applications contributed significantly to Microsoft's
monopoly in the PC operating system market considering all the
characteristics of that market at the time, including the condition
of other ISVs and applications.
Id. at 749-50 (citations omitted).
Novell appealed, arguing that it did not sell the claim set
forth in Count I to Caldera. See Novell Appellant Br. at 2-3
(Sept. 7, 2010) (relevant portions attached as Ex. B). In
opposition, Microsoft argued that the Court's judgment should be
affirmed on the same grounds on which it had been decided, or on
the alternative grounds that Count I was barred by res judicata and
that Novell could not prove as a matter of law that Microsoft's
conduct harmed competition in the PC operating systems market.
See Microsoft Appellee Br. at 1-3 (Sept. 17, 2010) (relevant
portions attached as Ex. C).
The Fourth Circuit reversed this Court's ruling regarding the
sale-of-claims issue and remanded for further proceedings, holding
that Novell did not sell the claim set forth in Count I.
Novell, 429 F. App'x at 255. Additionally, the Fourth
Circuit found that Microsoft's res judicata argument was meritless
and rejected Microsoft's arguments that it was entitled to judgment
as a matter of law on the ground that Novell could not prove harm
to competition in the PC operating systems market, finding that
Novell's Count I claim was "appropriate for trial." Id. at
IV. COLLATERAL ESTOPPEL EFFECT OF THE GOVERNMENT CASE
In the Government Case, the United States alleged that Microsoft
had violated both federal and state antitrust laws by engaging in
anticompetitive conduct to protect its monopoly power in the PC
operating systems market. See Microsoft, 253 F.3d at 47.
After a bench trial, Judge Thomas Penfield Jackson issued 412
Findings of Fact. See Microsoft, 84 F. Supp. 2d 9. Based on
those Findings of Fact, Judge Jackson issued Conclusions of Law
holding that Microsoft (1) illegally maintained its monopoly in the
PC operating systems market, (2) unlawfully attempted to monopolize
the web browser market, and (3) entered into an illegal tying
arrangement by bundling Internet Explorer with Windows. See
United States v. Microsoft Corp., 87 F. Supp. 2d 30, 35-56
(D.D.C. 2000), aff'd in relevant part and rev'd in part, 253
F.3d 34 (D.C. Cir. 2001). As a remedy for this conduct, Judge
Jackson ordered that Microsoft be separated into two companies, one
with responsibility for the operating systems business and the
second with responsibility for the applications business.
Microsoft, 253 F.3d at 45 (citing United States v.
Microsoft Corp., 97 F. Supp. 2d 59, 64-65 (D.D.C. 2000)).
Microsoft appealed Judge Jackson's decision and the United
States Court of Appeals for the District of Columbia Circuit
affirmed Judge Jackson's determination that Microsoft had illegally
maintained its monopoly in the PC operating systems market through
twelve types of anticompetitive conduct. See id. at 51,
58-80. The D.C. Circuit, however, reversed Judge Jackson's ruling
with respect to the tying and attempted monopolization claims, as
well as eight other types of conduct he had determined were
anticompetitive. See id. at 46, 64-97. In addition, the D.C.
Circuit reversed Judge Jackson's order of divestiture, in part
because the Government needed to prove more than just liability to
justify such a drastic remedy — it had to prove a clearer
indication of a significant causal connection between the
and maintenance of monopoly power. Id. at 80, 106-07.
Nevertheless, the D.C. Circuit did not set aside any of Judge
Jackson's Findings of Fact, as Microsoft had requested. See
id. at 116. Some of those Findings of Fact have collateral
estoppel effect in this case. See, e.g., Holley Aff., Ex. B
to Microsoft Mem. (Dkt. # 495-3).
Trial began with jury selection on October 17, 2011 and then
proceeded with Novell's case-in-chief. Novell called four fact
witnesses to testify live: (1) Adam Harral, the lead software
architect on the PerfectFit 95 team responsible for developing
shared code for PerfectOffice and Novell's office productivity
applications; (2) Greg Richardson, a software developer on the
shared code/PerfectFit 95 team; (3) Gary Gibb, the Director for the
PerfectOffice 95 suite; and (4) Robert "Bob" Frankenberg, former
CEO of Novell during the period that Novell owned WordPerfect and
the other office productivity applications. Novell also designated
and presented to the jury portions of eleven depositions of former
Microsoft executives and employees.7 Finally, Novell presented the testimony
of three expert witnesses: (1) Dr. Roger Noll, an expert in
antitrust economics who testified that, based on his analysis,
Microsoft's conduct against Novell harmed competition in the PC
operating systems market; (2) Ronald Alepin, an expert in computer
software development and computer system design who testified about
the invalidity of Microsoft's purported technical justifications;
and (3) Dr. Frederick Warren-Boulton, an expert in antitrust
economics who quantified the damages attributable to Microsoft's
At the close of Novell's case-in-chief, Microsoft moved for
judgment as a matter of law under Federal Rule of Civil Procedure
50(a) on the grounds that (1) Novell allegedly failed to present
evidence that the withdrawal of support for the namespace extension
APIs enabled Microsoft to unlawfully maintain its monopoly in the
PC operating systems market; (2) Novell allegedly could not prove
harm to competition in the PC operating systems market because both
its key franchise applications theory and its middleware theory of
liability were inconsistent with the evidence presented at trial;
and (3) Novell's claim purportedly failed because Microsoft's
withdrawal of support for the namespace extension APIs was
allegedly not anticompetitive conduct under the antitrust laws.
See Microsoft's Mem. in Supp. of Its Mot. for J. as a Matter
of Law at 2-10 (Nov. 17, 2011) (Dkt. # 298). The Court refused to
grant Microsoft's motion.
Microsoft then presented its defense, calling fourteen witnesses
to testify. Five of these witnesses were current or former
Microsoft employees: (1) Bill Gates, the former President and CEO,
and current Chairman of the Board of Directors, of Microsoft; (2)
Brad Struss, the former Microsoft Developer Relations Group ("DRG")
executive with responsibility for interacting with Novell; (3)
Robert "Bob" Muglia, a former Microsoft Senior Vice President and
Program Manager for Windows NT; (4) Satoshi Nakajima, a former
Microsoft developer who created, developed, and helped implement
the namespace extension APIs; and (5) Joseph Belfiore, a current
Microsoft executive who was responsible for the Windows 95 shell
development during the relevant period. Microsoft also called six
former WordPerfect/Novell employees: (1) Craig Bushman, who was
involved in international marketing; (2) Nolan Larsen, the Director
of Human Factors at Novell during the relevant time; (3) Karl Ford,
a developer on the user interface for WordPerfect for Windows 95;
(4) David Acheson, a former salesman with a break in his employment
during critical months in 1995 and 1996; (5) David LeFevre, a
executive at Novell who later went to work for Microsoft on the
Office team; and (6) Willard "Pete" Peterson, a former Chief
Operating Officer of WordPerfect who left the company in 1992, well
before Novell's acquisition.8 Finally, Microsoft called three experts to
testify: (1) Dr. Kevin Murphy, Microsoft's antitrust economics
expert; (2) Dr. John Bennett, Microsoft's technical expert; and (3)
Professor Glenn Hubbard, Microsoft's damages expert.
After almost two months of trial, the Court instructed the jury
on the morning of December 14, 2011 and provided them with an
eight-question verdict form. Questions 1 through 3 of the verdict
form focused on whether Microsoft's withdrawal of support for the
namespace extension APIs caused injury to Novell's business and was
anticompetitive.9 Questions 4 and 5 provided the jurors with
alternative standards for finding harm to competition in the PC
operating systems market, which the parties disputed. Questions 6
and 7 required the jurors to identify on which Novell theory they
would premise liability — whether Novell's applications
constituted a middleware threat to Microsoft's PC operating systems
monopoly or a threat as key franchise applications. Question 8
asked the jurors to decide on the amount of damages to which Novell
was entitled. After receiving these instructions and the verdict
form, the jury began deliberations.
On December 15, 2011, after the jury indicated some difficulty
in reaching agreement, the Court issued a mild "Allen
charge" to reinvigorate deliberations, a tactic that appeared to
successful. The next day, the parties were again confronted with
juror notes indicating a potential impasse. Novell's attorneys
requested that, in light of the millions of dollars expended by
each party through two months of trial, the Court issue a stronger
"Allen charge" and allow the jury to return for one more day
of deliberation after a weekend of reflection. The Court decided
instead to discharge the jury on the afternoon of December 16,
2011, the third day of deliberations, and to declare a
After discharging the jury, the Court spoke privately with the
jurors about their deliberations, and then permitted the jurors to
speak to counsel for the parties. Eleven members of the jury
indicated that they would have found in favor of Novell. All twelve
agreed that Microsoft had engaged in anticompetitive conduct that
caused injury to Novell (Questions 1 through 3 on the verdict
STATEMENT OF FACTS
I. NOVELL'S OFFICE PRODUCTIVITY APPLICATIONS AND SUITE
THREATENED MICROSOFT'S MONOPOLY POWER IN THE
PC OPERATING SYSTEMS MARKET
A. WordPerfect's Success On The Windows Platform
The WordPerfect word processor was one of the best-selling PC
software applications ever introduced. WordPerfect was available in
23 languages and resided on all of the most widely used computer
platforms and operating systems, including DOS, Windows, UNIX,
Apple/Macintosh, and DEC's VAX/VMS. PX 174 at NOV00364208.
Microsoft's lengthy historical discussion of WordPerfect sheds
little light on the state of WordPerfect when Novell purchased it
in June 1994. Although WordPerfect was delayed in releasing a
product for Windows 3.0, by 1994 it was positioned to be very
successful on Windows 95. Indeed,
WordPerfect's sales on the Windows platform increased every year
between 1991 and 1994. Tr. 4093:11-4094:23 (LeFevre).
WordPerfect began developing applications for Windows as soon as
Windows 3.0 was released in 1990. Tr. 4183:3-7 (Middleton).
WordPerfect "worked really hard" to release WordPerfect 5.1 for
Windows 3.0 in 18 months and it was "a very successful
release."10 Tr. 4212:3-20 (Middleton). The delay in
releasing WordPerfect 5.1 did not make it impossible for
WordPerfect to succeed on the Windows platform. Tr. 4704:12-20
(Peterson). In 1991 and 1992, WordPerfect's installed base on
Windows and DOS exceeded Microsoft Word's installed base by
millions of users. Tr. 4705:3-24 (Peterson); see also PX 125
at NOV-B01491186 (noting IDC estimates showed that WordPerfect's
DOS and Windows installed base at the end of 1992 was 3.8 million
more users than Microsoft Word's installed base). In fact, by 1992
Mr. Peterson estimated that WordPerfect had garnered 40% market
share on the Windows platform. Tr. 4677:6-11 (Peterson).
By the time WordPerfect released 5.2, in November 1992, "which
was an improvement on [5.1]," WordPerfect "had done a lot of things
right. We were behind, but we were catching up and we felt good
about that." Tr. 4212:18-20 (Middleton). In 1993, WordPerfect's
installed base on Windows and DOS exceeded Microsoft Word's
installed base on Windows and DOS. PX 599A at NWP00044129. By June
1993, WordPerfect for Windows had sold 3.4 million units. PX 125 at
When WordPerfect released version 6.0 for Windows in October
1993, both the industry and Microsoft quickly understood that the
product would be a success. PC Computing Magazine named
WordPerfect 6.0 the MVP for word processors in 1993, stating that
it was "a computer user's garden of unearthly delights . . . adding
functions available in its chief rival, Microsoft Word for Windows,
and then some." PX 110 at 2; see also Tr. 542:2-21 (Harral)
(discussing PX 110); Tr. 3990:3-17 (Acheson).
An internal Microsoft document titled "WordPerfect for Windows
6.0, competitive product analysis" took a "comprehensive look at
WordPerfect for Windows 6.0 and how it compares to Word for Windows
6.0" and found that "[t]he industry generally lauded WordPerfect's
robust and feature-filled Windows word processor, as it seems like
WordPerfect finally created an application that exploited the
Windows platform." PX 378 at MX 2175197. WordPerfect 6.0's success
was due in part to its standout technology, "QuickFinder[,] and
[its] ability to create a directory from the Open File dialog box."
Id. at MX 2175202. Microsoft conceded that "users love both"
and that while Microsoft's "file management and search capabilities
were improved with Word 6.0, this is definitely an area of
unmatched strength for WordPerfect." Id. (emphasis
added); see also Tr. 3990:6-12 (Acheson) (WordPerfect 6.0
was a "best of breed word processor application" and "was better
than any other word processor out there including Microsoft
WordPerfect 6.0's success also was demonstrated by its sales.
Microsoft acknowledged that "WordPerfect's word processing sales
still rival those of Word," and that "WordPerfect for
Windows unit shipments increased by 60% while Word's increased
only by 6%." PX 378 at MX 2175197. In fact, WordPerfect word
processor revenues exceeded $300 million in 1993. Tr. 3992:9-11
(Acheson). Microsoft clearly understood that "WordPerfect's success
up to now shows it is making inroads in the Windows market and not
just by converting their DOS installed base," PX 378 at MX 2175197,
and that by 1993, WordPerfect had "largely caught up," PX 62 at FL
AG 0019001. By 1994, WordPerfect had sold more than 15 million
copies of WordPerfect worldwide.11 PX 125 at NOV-B01491186; PX 174 at
WordPerfect continued to make improvements to its word
processors with each additional release. Tr. 1256:18-20
(Frankenberg). By early 1994, WordPerfect faced a "huge potential
growth" opportunity in converting its "WPDOS user base as they
transition to the Windows environment." PX 125 at NOV-B01491186. In
April 1994, WordPerfect released WordPerfect 6.0a for Windows,
which also was well received in the marketplace. PC Computing
Magazine named WordPerfect 6.0a as the 1994 MVP award winner
and chose WordPerfect 6.0a over Microsoft Word for Windows as the
best word processor of 1994. Tr. 1257:19-1258:5 (Frankenberg). Even
Mr. Gates was dumbfounded and frightened by WordPerfect's
technological advances in WordPerfect 6.0a: "I'm amazed at their
responsiveness. This is very scary and somewhat depressing. This is
as much as we plan to do for 1995. A lot of work in this release."
PX 162A at MX 6009686.
B. WordPerfect Posed An Even Greater Threat To Microsoft
Merger With Novell
In June 1994, Novell merged with WordPerfect and acquired
Quattro Pro from Borland. Mr. Frankenberg, Novell's CEO at the time
of the merger, estimated that in 1994, WordPerfect's installed base
was "in excess of 20 [m]illion users." Tr. 1011:4-20 (Frankenberg).
As late as January 1994, close to 75% of the market had yet to
adopt a suite. PX 412 at NOV 00498191; PX 395 at NWP00008283; Tr.
1009:6-20 (Frankenberg). "Traditionally, the word processor, more
than any other application, ha[d] played the largest role in
influencing the purchasing decision of a potential suite." PX 412
at NOV 00498191; see also Tr. 1009:21-1010:18 (Frankenberg).
In the United States, 65% of the installed base for word processing
in 1994 was WordPerfect, in comparison to Microsoft Word, which
accounted for only 22.6%. PX 125 at NOV-B01491186. Thus, "[a]s the
leading vendor of word processing software, WordPerfect ha[d]
direct access to the largest user base of potential suite customers
in the industry." PX 412 at NOV 00498191. This gave WordPerfect a
"distinct advantage . . . of being able to go to the largest
install[ed] base and with the most important application [to]
convince them to use our suite rather than Lotus's or Microsoft's."
Tr. 1009:21-1010:18 (Frankenberg).
After the merger, Microsoft perceived Novell as even more of a
threat. Mr. Gates feared that "[t]he merger of Novell-WordPerfect
and acquisition of Quattro Pro" would change Microsoft's
"competitive framework substantially" because "[t]he already
intensely competitive software business has become even more
competitive." PX 154 at MX 9037683. Specifically, Mr. Gates
recognized that if "Novell executes well they will be able to turn
their Office suite into a serious contender which could force price
and volume cuts in our Office business." Id. He predicted
that Novell would "be able to set more standards for workgroups,
management, image systems, and all of the services they have
been moving towards." Id. By maximizing the penetration of
its suite, Microsoft believed Novell could control operating system
standards. PX 156.
In December 1994 — less than six months after the merger
— Microsoft's fears were realized when the Novell/WordPerfect
team successfully released the blockbuster suite PerfectOffice 3.0.
InfoWorld, whose reviews Mr. Gates testified were the "most
watched and the most important at the time," Tr. 2732:4-6 (Gates),
reported that "PerfectOffice nearly lives up to its name," and was
"a terrific assortment of programs that offers more integration
than we've seen so far in any high-end office suite," and rated it
higher than Microsoft Office. PX 297 at NOV 00012602, 604.
Microsoft's own evaluation of PerfectOffice was just as strong:
"The current suite of applications in PerfectOffice are world class
and there is reason for us to follow the progress of this suite
very carefully, especially given the strength of Novell's
networking and sales force." PX 273 at FL AG 0047311. Microsoft was
amazed that Novell could "do so much in so little time." PX 193 at
WordPerfect 6.1, which was part of PerfectOffice 3.0, also
received stellar reviews.12 InfoWorld stated that WordPerfect 6.1
was an "excellent application that has an honest chance of
unseating Microsoft Word for the top spot among word processing
packages." PX 241 at MS-PCA 1421359. Even Microsoft noted that
WordPerfect 6.1 had a number of "glitzy features," PX 239 at FL AG
0100542, and an internal Microsoft evaluation of the product even
commented that the "discipline and focus of [WordPerfect 6.1] show
that WordPerfect clearly has its act together and will remain a
formidable competitor to Word for years to come," PX 241
at MS-PCA 1421358-59. Microsoft also correctly recognized that
"'document management' is rapidly evolving into an important
component in the office computing environment," and that office
productivity applications depend on effective document management
for their success. PX 273 at FL AG 0047302. Microsoft internally
admitted that it was "behind in this category, only now responding
to WordPerfect's Quick Finder technology" and WordPerfect's file
open dialog, which was "winning rave reviews." Id.; PX 168
at MS 0171028. After observing a demo of the WordPerfect 6.1
product at COMDEX, Microsoft's Dale Christensen similarly noted in
a memorandum to executives that WordPerfect 6.1 "guarantees that
Wordperfect will be a significant competitor in word processing for
the conceivable future." PX 239 at FL AG 0100542.
PerfectOffice 3.0's and WordPerfect 6.1's successes in the
industry reviews were matched by their sales. WordPerfect's word
processing market share on Windows from 1991 to 1994 had
historically been between 20% and 30%. Tr. 4540:25-4541:16
(Hubbard). In 1994, Novell captured 25% of the suite market in just
three months. Tr. 1018:25-1019:6 (Frankenberg); PX 492 at FL AG
0080063. While PerfectOffice's market share on Windows decreased in
1995 to 8%, Tr. 1915:16-22 (Noll), that decrease is reasonable
given that the market stalled in anticipation of Windows 95, Tr.
1077:1-24 (Frankenberg); Tr. 4095:9-17 (LeFevre), and as a result
of Microsoft's anticompetitive conduct, Novell was forced to sell
its 16-bit suite product in a 32-bit marketplace. Nevertheless, in
1995, WordPerfect's word processor revenues exceeded $250 million.
Tr. 1251:5-8 (Frankenberg).
C. Microsoft's Monopoly Power In The PC Operating Systems
Protected By An Applications Barrier To Entry
It is undisputed that Microsoft enjoyed monopoly power in the PC
operating systems market, meaning it had "the power to control
prices or exclude competition." United States v. E.I. du Pont de
Nemours & Co., 351 U.S. 377, 391 (1956). Barriers to entry
are created by any market condition that makes entry more costly or
time-consuming. S. Pac. Commc'ns Co. v. Am. Tel. & Tel.
Co., 740 F.2d 980, 1001 (D.C. Cir. 1984). Barriers to entry
chiefly deter potential competitors from entering the market in a
serious way because rivals will only enter a market if they believe
that their expected profits will exceed the costs of entry.
See Finding of Fact ¶ 36. Without barriers to entry,
the self-correcting forces of the marketplace will limit a
monopolist's power in the relevant market. See Image Technical
Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1207-08 (9th
Cir. 1997); 3 Phillip E. Areeda & Herbert Hovenkamp,
Antitrust Law ¶ 634b (3d ed. 2011) ("If the law can
prevent 'artificial' barriers to such new entry, then the
self-correcting forces of the marketplace will impede the
attainment and maintenance of monopoly except where the monopolist
is beyond cavil because it was, and continues to be, so efficient
and progressive as to outcompete all actual and potential
rivals."); see also Tr. 1770:9-13, 1959:201960: 10,
1930:23-1931:10 (Noll). Barriers to entry are therefore critical to
maintaining monopoly power. 2B Phillip E. Areeda & Herbert
Hovenkamp, Antitrust Law ¶ 420b (3d ed. 2011); see
also Reazin v. Blue Cross & Shield of Kan., Inc.,
663 F. Supp. 1360, 1436 (D. Kan. 1987) ("'[T]he lower the barriers
to entry, and the shorter the lags of new entry, the less power
existing firms have.'" (citation omitted)), aff'd, 899 F.2d
951 (10th Cir. 1990).
It also cannot be disputed that an "applications barrier to
entry" protected Microsoft's monopoly power at all relevant times
in this case. Findings of Fact ¶¶ 36, 39. This barrier
from what is known as the "chicken-and-egg problem": consumers
will only use operating systems for which there is a large and
varied set of high-quality, full featured applications (including
key franchise applications) that will be supported in the future.
Software developers write applications to the dominant platform
first and will re-engineer their applications for other platforms
only if there is sufficient demand to offset the costs of
re-engineering and supporting their applications on other operating
systems. While many firms were technologically and financially
capable of entering the operating systems market, their ability to
meet demand was useless because the applications barrier to entry
thwarted demand for anything other than niche systems. Finding of
Fact ¶ 30.
D. Novell's Office Productivity Applications And Suite Were
The Potential To Weaken The Applications Barrier To Entry
WordPerfect and its shared code "PerfectFit," as well as AppWare
and OpenDoc in the PerfectOffice suite, were "middleware" because
they relied on interfaces provided by the underlying Windows
operating system while simultaneously exposing their own APIs to
developers. See Finding of Fact ¶ 28. Novell's office
productivity applications and shared code technologies were
popular, were cross-platform, and exposed a wide range of APIs and
sophisticated functionality to developers.
1. Middleware Could Reduce the Applications Barrier to
Microsoft argues that Novell has failed to establish that
"WordPerfect, AppWare, OpenDoc and PerfectFit" or "some combination
of them" were middleware that could have affected competition in
the PC operating systems market. Microsoft Mem. at 6. Microsoft's
definition of middleware, however, rests on a deeply flawed
interpretation of the opinions in the Government Case and of Dr.
Noll's testimony in this case.
The Government sued Microsoft under the theory that middleware
could reduce the "chicken-and-egg problem," Finding of Fact ¶
39, by taking over some of the platform functionality provided by
Windows and thereby "weaken the applications barrier to entry."
Finding of Fact ¶ 68. Judge Jackson defined "middleware" as
software that "relies on the interfaces provided by the underlying
operating system while simultaneously exposing its own APIs to
developers." Finding of Fact ¶ 28. The D.C. Circuit agreed,
writing that middleware simply refers to "software products that
expose their own APIs." Microsoft, 253 F.3d at 53 (citing
Finding of Fact ¶ 28).
The Government focused its attention on two specific types of
middleware software: Netscape's Navigator and Sun's Java
technologies. Id. Judge Jackson and the D.C. Circuit found
that both Navigator and Java were middleware
products. Id. (citing Finding of Fact ¶ 28). In fact,
Microsoft's counsel admitted that Navigator posed a potential
threat to Windows before the D.C. Circuit. Id. at 79.
Judge Jackson found that Navigator had three attributes that
gave it "the potential to diminish the applications barrier to
entry." Finding of Fact ¶ 69. First, the Navigator browser was
a complement to Windows and had the potential to gain widespread
use. Id. Complementing Windows thus makes a middleware
product more likely, not less likely, to diminish the
applications barrier to entry. Cf. Microsoft Mem. at 87-90.
Second, Navigator exposed "a set (albeit a limited one) of APIs"
which provided platform capabilities. Finding of Fact ¶ 69.
Third, Navigator was cross-platform. Id. Similarly, the Java
technology exposed its own APIs and had the potential to reduce
porting costs. See Findings of Fact ¶¶ 68, 77.
Although a potential threat, neither Navigator nor Java exposed
enough APIs to support the development of "full-featured
applications that will run well on multiple operating systems
without the need for porting." Finding of Fact ¶ 74. In
fact, both products were at least "several years" away from
evolving into a real threat to the applications barrier to entry,
if at all. Findings of Fact ¶¶ 28, 29.
Novell's software had all of the characteristics of middleware.
Like Navigator and Java, Novell's office productivity applications
would complement Windows. See Tr. 265:25-267:8, 268:1-270:25
(Harral); Tr. 638:7-12 (Richardson); Tr. 1227:1-6, 1227:15-18
(Frankenberg); Tr. 1664:23-1665:11, 1666:4-1667:23 (Alepin).
Novell's office productivity applications were also very popular
and had the potential to gain widespread use on Windows 95 due to
WordPerfect's existing installed base. See, e.g., PX 378; PX
412; PX 599A; Tr. 830:22-23, 831:9-11 (Gibb) (describing
WordPerfect as "very popular" and agreeing that WordPerfect had a
"big loyal base of customers"); PX 414 at NOV-B00668860 (noting
that with PerfectFit, developers could develop programs for more
than 18 million people who use WordPerfect and other products in
the PerfectOffice suite); Tr. 1009:6-1010:18, 1011:4-20
(Frankenberg) (explaining that Novell had a large opportunity to
gain market share in suites given its installed base of millions of
users); see also discussion supra Facts Part
Further, Novell's office productivity applications, and the
PerfectFit and AppWare technology integrated and bundled with them,
exposed a large set of APIs to software developers. See,
e.g., PX 371 at 6-8 (indicating PerfectFit Shared Code 2.3 had
1555 APIs, with more to be added in PerfectFit 95); PX 368 at 15-17
(same); PX 191 at FL AG 0099045-47; Tr. 1405:4-1406:16,
1408:8-1409:10, 1410:8-14 (Alepin). In addition, WordPerfect and
PerfectFit were cross-platform on a variety of operating systems,
and Novell planned to make PerfectOffice for Windows 95
cross-platform as well. Finally, Novell's AppWare and OpenDoc
technologies, when integrated and bundled with Novell's office
allowed developers to create their own cross-platform software
applications. See, e.g., PX 410 at NOV-B00656847, 54-56; PX
90 at MS-PCA 2410390; PX 412 at NOV 00498197, NOV 00498202-03; Tr.
1013:19-1015:11, 1016:9-1017:19 (Frankenberg); Tr. 1408:8-1409:10
(Alepin). In fact, unlike Navigator and Java, AppWare allowed for
the development of fully portable stand-alone programs. See
infra Facts Part I.D.3. Even if developers only partially
relied on the APIs exposed by Novell's office productivity
applications, these middleware technologies, either alone or in
combination with AppWare and OpenDoc, would reduce porting costs
and lessen the applications barrier to entry. See, e.g.,
Finding of Fact ¶ 74 (even partial reliance on Java APIs
reduces porting costs and encourages cross-platform applications
2. Microsoft Reasonably Feared Novell as a Middleware
There is substantial contemporaneous evidence in the record that
Microsoft viewed Novell's middleware technologies as a potential
threat to its continued monopoly power in the PC operating systems
According to Microsoft, Novell was well positioned to threaten
the Windows monopoly even before Novell acquired WordPerfect
because "they have an installed base; they have a channel; they
have marketing power, they have good products. AND they want our
position. They want to control the APIs, middleware, and as many
desktops as they can in addition to the server market they already
own." PX 32 at MS7079459. Microsoft considered Novell "THE
competitor to fight against" because, in the words of senior
Microsoft executive Jim Allchin, "[t]hese guys are really good."
Novell was "dangerous not only because of [its NetWare product]
but because they are intent on becoming a 'CROSS-PLATFORM' PLATFORM
company." PX 33 at MS 5011635.
In contrast, Microsoft did not have sufficient "ability to
differentiate its applications from the competition" and did not
"have credible products to counter Notes and Novell." Id. at
MS 5011640. In Microsoft's view, Novell's "strong cross-platform
API push" was an "insidious" and ever-present threat to Microsoft's
continued dominance, see id. at MS 5011648, and Microsoft
executives continually voiced their fears that competitors would
use middleware products to undercut Windows:
What I see is that our competitors will try to turn windows into
the new unix — in a bad way. [T]he unix that Frankenberg
called the "[B]osnia [H]erzegovina of operating systems." [T]hat
is, they will "adopt" windows and then split the windows standard.
[T]hey will take the win 3.1 level of api as the standard and then
build their own middleware layers on top . . . . [T]hey hope to
create mass confusion about exactly what the windows api's are, and
take them out of microsoft's ownership. . . . If they can freeze
"windows" at 3.1 (or nt) level api, then they can be the provider
of value added services. [I]t gives them more freedom to clone
windows — the definition of "windows" is static. [F]or
[N]ovell, it makes it easier for them to slip dr dos underneath.
[I]t lets them position themselves as the supplier of connectivity
services for windows to servers — the "middleware" which
builds on windows and thus takes ownership away from us. [T]his
effort to balkanize windows is a clear threat . . . .
PX 44 at MS7080466-67. Mr. Gates "totally agree[d]" with this
view. Id. at MS7080466.
Similarly, in an internal Microsoft email thread dated June 15,
1993, senior Microsoft executive Brad Silverberg wrote "our
competitors are going to do everything they can to fragment
windows, they will build their own middleware to claim api
ownership." PX 54 at MS 0185884. In response, Microsoft executive
John Ludwig wrote to Brad Silverberg, David Cole, Paul Maritz, and
others: "[O]ur worst nightmare is novell/lotus being successful at
establishing their 'middleware' as a standard. [O]urs ought to be
ubiquitously available to forestall this. [O]ur huge advantage
vis-Ã -vis novell is our end-user franchise, we
shouldn't cast aside this advantage." Id.
A few months later, Mr. Silverberg wrote that "Novell is coming
at us from every direction possible and has a very concerted,
multilayer attack strategy, including the political system. I would
[also] include [as competitors] other companies who are intent on
building 'middleware,' which is just system software by another
name." PX 88 at MSC 090001843-44. Mr. Silverberg cautioned that
Microsoft should not continue to "vastly underestimate the
competitive situation for operating systems" that middleware
represented because "[e]ach competitor can exploit a weakness, and
they are getting better every day." Id.
3. Novell's Office Productivity Applications and Suite Were
Shared code was a component of the WordPerfect word
processor13 that was shared among the word processor
and other WordPerfect Corporation products for efficiency purposes.
Tr. 206:3-207:5 (Harral). WordPerfect had been working on shared
code since as early as 1991. Tr. 210:24-211:3 (Harral). Each
product had an application "engine" that was built on top of the
shared code layer, which could then move between any operating
system platform where shared code resided. Tr. 206:3-207:5
(Harral). Because multiple product engines shared a common layer of
code, their behaviors would be the same and they would all operate
in a similarly integrated way. Id. Shared code eventually
started to take on file handling and file management functionality,
such as providing dialogs for opening and saving files. Tr.
WordPerfect had traditionally published or provided to third
parties portions of the shared code. Tr. 218:21-219:16 (Harral).
Over time, WordPerfect began to publish all of its shared code, and
promoted it explicitly to ISVs as a resource that could be written
to and that would
enable them to use the same code base across different operating
systems. Tr. 218:21-219:16 (Harral). When Novell acquired
WordPerfect, Novell branded the shared code as "PerfectFit."
Id.; Tr. 786:16-787:2 (Gibb). PerfectFit became a part of
the PerfectOffice suite and shipped with PerfectOffice. Tr.
212:16-19, 390:24-391:2 (Harral).
All the functionality that PerfectFit provided to WordPerfect,
including file viewers, file converters, button bars, and menus,
was available to third-party developers as well. Tr. 226:9-19
(Harral). WordPerfect offered "a PerfectFit Software Developers Kit
(SDK) to [third parties] that include[d] a broad range of developer
tools including PerfectScript, shared programming code, and APIs."
See PX 207 at NOV 00498183. PerfectFit offered third-party
developers a (1) common look and feel (menus, icons, toolbars); (2)
common dialogues (File Open, Save, Save As); (3) common tools
(Speller, Thesaurus, Grammar Checker, File Manager); (4) common
automation (QuickCorrect, QuickHelp, QuickMenus); (5) common
scripting language (record and play back across applications); and
(6) common code (shared between applications). See PX 395 at
The common scripting language in shared code, called
PerfectScript, gave third-party developers the ability to call
scriptable components and to capture and replay tasks performed in
WordPerfect. Tr. 227:23-229:10 (Harral). WordPerfect also contained
the WordPerfect Open API ("WOAPI"), which allowed developers to
intercept certain commands and insert new code to customize
WordPerfect functionality. Tr. 229:12-230:23 (Harral); see
also PX 410 at NOV-B00656859. WOAPI was supported on the
Windows, DOS, and UNIX versions of WordPerfect and other
applications. See PX 192 at MX 9037665. WordPerfect also
exposed Writing Tools APIs that were supported on the Windows and
UNIX versions of WordPerfect. Id. PerfectFit, PerfectScript,
and WOAPI were all technologies that were included in the
WordPerfect word processor. Tr. 230:24-231:3 (Harral). These
technologies were also included within the PerfectOffice suite. Tr.
231:4-6 (Harral). In using these features, third-party developers
would write their own applications with shared code using the
shared code libraries, which contained the shared code APIs that
could be called. Tr. 226:20-227:13 (Harral). Third parties would
simply write their applications against the shared code layer and
associated APIs, and then compile their programs using the shared
code libraries for use in their products. Id. As a result of
using shared code, application developers (at least for the
functionality utilized) did not have to understand the underlying
operating systems on which their programs ran. Tr. 1016:3-8
Novell started a program called PerfectFit Partners to market
shared code to developers outside the company who wished to license
it. Tr. 225:6-17 (Harral); Tr. 784:9-24 (Gibb); PX 192 at MX
9037665. PerfectFit Partners included at least 1,000 member
companies. See Tr. 887:17-25, 888:13-15 (Gibb); see
also PX 333 at MS-PCA 1985716. Two teams within Novell, the
shared code team and the documentation team, worked together to
document the shared code so that third parties could use it. Tr.
225:18-226:8 (Harral); Tr. 784:9-24 (Gibb). Novell also provided
support, similar to Microsoft's Premier Support, to developers
utilizing shared code in their products. Tr. 225:18-226:8
WordPerfect and its shared code was indisputably middleware
because it exposed its own APIs to software developers. Tr.
783:5-18 (Gibb); Tr. 1404:19-1406:16, 1408:8-1409:23, 1410:8-14
(Alepin); see also Tr. 236:2-6 (Harral); Microsoft,
253 F.3d at 53; Finding of Fact ¶ 28. It was software that sat
"in the middle" between the application core and the operating
system and provided features that would help programs work through
problems and achieve needed functionality. Tr. 233:15-234:19
(Harral). Developers would purchase or license the
shared code as middleware so that they could use its features in
their products instead of having to incur the costs to develop
these features themselves, which could in some cases take years.
Id. Microsoft recognized that PerfectOffice was an emerging
middleware platform. For example, Cameron Myhrvold wrote in 1994
that "[Microsoft] is in a platform war with Office just as we are
with Windows" because "Lotus and Novell/WP are building competing
application 'platforms.'" See PX 201 at MX 6046625.
Microsoft was particularly concerned about Novell providing
"PerfectFit Technology and WP 'SDKs' & WP 'Windows Open API'"
to ISVs and including "Visual App Builder [AppWare] in
PerfectOffice." See id. at MX 6046634.
AppWare, which was part of the PerfectOffice suite, was both
middleware — because it provided APIs to developers —
and an interface that allowed the use of these APIs. Tr.
1406:11-16, 1408:8-1409:10, 1410:8-14 (Alepin); Tr. 236:2-8
(Harral). It was a graphical and object-oriented application
development tool (formerly known as Visual AppBuilder) that allowed
developers to build stand-alone programs. PX 410 at NOV-B00656854.
Developers could use AppWare in PerfectOffice to build applications
that integrated with PerfectOffice or were completely stand-alone
programs independent of PerfectOffice. Id. Developers could
quickly build fully portable software by linking components called
AppWare Loadable Modules ("ALMs").14 PX 412 at NOV 00498203; see
also Tr. 1408:8-1409:10 (Alepin) (noting that if a programmer
uses AppWare defined programming interfaces his "application will
be portable across multiple platforms"). As Dr. Noll explained,
"anybody who writes a program using
AppWare, therefore is writing a program that is cross-platform,
and, by doing so, reducing the applications barrier to
entry."15 Tr. 1771:2-11 (Noll).
AppWare enabled cross-platform development by taking
WordPerfect's shared code and other technologies and presenting
them in a conceptual way that allowed non-programmers to write
programs. Tr. 234:22-236:1 (Harral). In fact, using AppWare in
PerfectOffice enabled users to build applications through a simple
interface by combining and connecting different ALM icons. PX 412
at NOV 00498203. In total, the combination of WordPerfect and
AppWare exposed more programming interfaces to third-party
developers than Netscape Navigator exposed. Tr. 1410:8-14
Senior Microsoft executive Paul Maritz thought of AppWare as an
explicit attempt by Novell to develop a layer that would provide
all of the services required by applications. Dep. of P. Maritz,
May 24, 1994 (played Oct. 25, 2011) at 108:1-11 (Dkt. # 283). He
claimed internally that Novell's goal with AppWare was for
third-party software developers to know only about AppWare and
obtain all the services that their applications needed from
AppWare. Id. Microsoft viewed AppWare as one of its most
serious long-term threats because AppWare held the potential to
allow Novell to incrementally obtain what would amount to an
operating system over time. Id. at 108:12-21. In fact, Mr.
Silverberg believed that AppWare had already become the equivalent
of an operating system by 1994:
Q. What is your understanding of AppWare?
A. AppWare is an [operating] system. AppWare
contains all of the functions of an operating system and is a
wonderful attempt by Novell to again reduce Windows or anything
underneath it to a commodity so it could then
get applications completely dependent on AppWare, have no
dependence on Microsoft or other pieces underneath it, so they can
then supply their own pieces underneath it and thus eliminate
— as Mr. Noorda has stated, his goal is a Windows-free
Tr. 932:18-933:1 (Silverberg) (emphasis added).
Similarly, Mr. Silverberg wrote that Novell's strategy with
AppWare "will be an incremental, insidious one." See PX 127
at MS 5064010. Microsoft viewed AppWare as "dangerous," stating
that AppWare "might be [the] first viable platform for commercial
cross-platform development" and "could in the long run blur the o/s
API line and [squeeze] us into the camp of BIOS builders."
See PX 90 at MS-PCA 2410390. AppWare was "scary" because "it
is just another windowing API, and a fairly complete one.
This is direct competition to Windows." PX 102 at
MS7096165 (emphasis added).
Microsoft's Mr. Ludwig recognized in October 1993 that AppWare
was a very real competitive threat, writing that "[t]he AppWare
Foundation provides a 'common, cross-platform set of APIs . . .
(which) allows developers to maintain a single-source base for all
development platforms.' Basically, this layer virtualizes all
services of the underlying OSes on which it is hosted, insulating
the developer from differences in these platforms." See PX
531 at MS 0115590-91. According to Mr. Ludwig, "[t]he AppWare
Foundation is an entirely new [operating system] API.
It offers virtually all the services of the OSes it is hosted upon,
but with a brand new and different API set." Id. (emphasis
added). Likewise, a February 22, 1994 email forwarded by Microsoft
executive Steven Sinofsky to Mr. Gates states that "AppWare's
cross-platform nature makes it total goodness in the eyes of the
customer. We need to take it seriously, make sure we understand it,
create a cohesive competitive statement, and distribute appropriate
info to combat the threat." See PX 144 at MS 5036490.
In the spring of 1995, Novell outlined a comprehensive plan to
provide OpenDoc software development through AppWare. See PX
391 at NOV-B01192363. OpenDoc was an industry-standard architecture
for component software that was backed by numerous industry-leading
software and systems vendors. Id. It enabled developers to
use interchangeable components to construct applications that could
be shared across hardware and operating system platforms, including
Macintosh, OS/2, Windows, and UNIX. Id.
Just as with WordPerfect, PerfectFit, and AppWare, Microsoft
feared the threat posed by OpenDoc. See Tr. 933:2-9
(Silverberg); Dep. of P. Maritz, May 24, 1994 (played Oct. 25,
2011) at 104:10-106:6. For example, in an email dated December 29,
1993, Mr. Silverberg wrote, "[Component Integration Laboratories]
is a group consisting of IBM, Novell, Apple, Oracle, WordPerfect,
XSoft and Taligent intent on building a competitive OS's to ours.
OpenDoc, for example, is part of their effort." See PX 488
at MS-PCA 2608514. Microsoft was so concerned with OpenDoc as a
competitive operating system technology that it wanted to impose a
nondisclosure agreement so that OpenDoc developers within
WordPerfect and other companies would not receive Microsoft's
operating system betas. See, e.g., PX 489. Mr. Silverberg in
particular wanted to "exclude those people who are working on
competitive os efforts, such as opendoc and os/2, from access to
chicago [Windows 95]." See PX 490 at MS-PCA 2618244.
4. Novell's Cross-Platform Office Productivity Applications
and Suite Could
Have Helped Alternative Operating Systems Compete with
WordPerfect was a cross-platform application during the relevant
time period. For example, WordPerfect architect Adam Harral
testified at trial that the company had written WordPerfect to over
a dozen different operating systems, including DEC, NeXT,
Macintosh, Amiga, DOS, Windows, and OS/2. Tr. 216:3-18
Gary Gibb also testified that WordPerfect Corporation's
technology was specifically developed to run on many different
operating systems and that the company had several
platform-specific groups, including a Mac group, a VAX/VMS group, a
UNIX group, an OS/2 group, and a NeXT group. Tr. 776:2-18,
777:17-778:8, 781:14-782:2 (Gibb). Mr. Gibb noted that when he
worked in "engine" development, WordPerfect released versions of
its word processing software for all the major operating systems
available. Tr. 777:7-16 (Gibb). The whole point of the engine group
itself, according to Mr. Gibb, was to create a core engine of
software that could be leveraged across multiple operating systems
in a functionally consistent way — allowing documents to be
exchanged successfully, among other things. Id. Dr. Murphy
admitted that, at least by design, once the shared code running
under WordPerfect was made cross-platform, the other applications
that relied on shared code would also be cross-platform. Tr.
In addition, Mr. Frankenberg testified that WordPerfect had a
Q. To your knowledge, did WordPerfect have experience in working
with 32bit systems prior to Microsoft's development of Chicago?
A. Yes. WordPerfect ran on a number of other 32-bit systems
including digital equipment corporations, [VAX], operating [VAX]
systems and several Unix16 systems. So they were well acquainted
with the 32-bit development.
Q. And during your tenure with Novell, did WordPerfect continue
to develop versions of WordPerfect for multiple operating
A. Yes, we did.
Q. And during your tenure, did Novell also develop a version of
WordPerfect for the Linux17 operating system?
A. Yes, we did.
Q. Given that Microsoft had a monopoly in PC operating systems
using Intel Processors at this time, why did Novell continue to
develop cross-platform versions of WordPerfect?
A. Well, there were two main reasons. One reason was that our
customers, as I mentioned a moment ago, wanted to have one word
processor that could work across their work station or their PCs or
their larger systems. The other reason was to provide some
real competition in the operating system
Tr. 994:12-18, 995:24-997:5 (Frankenberg) (emphasis added).
Mr. Frankenberg also testified that, in 1994, Novell's "next
generation" WordPerfect office productivity suite (codenamed
"Tapestry") was already under development and also intended to be
cross-platform. Tr. 997:24-998:10 (Frankenberg). Thus, during Mr.
Frankenberg's entire tenure, from spring of 1994 to summer of 1996,
Novell actively developed WordPerfect and shared code for
non-Windows platforms — including Linux, an Intel-compatible
PC operating system alternative to Windows.
In addition to the testimony outlined above, numerous exhibits
admitted into evidence establish that WordPerfect was a
cross-platform application during the relevant time period. For
example, as of August 13, 1995, WordPerfect was running on DOS,
Windows, Macintosh, OS/2, and UNIX. See DX 370 at NOV
00062681-82, 89-90. WordPerfect's goal was to "[b]e number #1 in
market share in the DOS, Windows, UNIX, and OS/2 markets, and
number #2 in market share in the Mac and VMS markets for shipments
during 1994." Id. at NOV 00062687.
In 1994, a WordPerfect for Windows Marketing Business Plan noted
that WordPerfect had deep experience with "OS/2, Unix, Mac, NT" and
that WordPerfect should "[t]out engine
concept; we understand cross-platform." PX 125 at NOV-B01491192.
WordPerfect's goal was to "leverage our years of developing
WordPerfect in the multi user environments of UNIX, Data General,
VAX and IBM Mainframe as a strength for our NT version of
WordPerfect." Id. at NOV-B01491203.
Reflecting this strong cross-platform presence, WordPerfect's
April 22, 1994 Registration Statement filed with the United States
Securities and Exchange Commission states that "WordPerfect is now
available in 23 languages and on all of the most widely used
computing platforms and operating systems, including DOS,
MS Windows, UNIX, Apple/Macintosh and DEC's VAX/VMS." PX 174 at
NOV00364208 (emphasis added). As of July 19, 1994, WordPerfect was
developing new versions of WordPerfect, Quattro Pro, and
Presentations for DOS, as well as new versions of WordPerfect for
Macintosh, UNIX, and OpenVMS. PX 200 at NOV-25-006587-90.
Following the merger in 1994, a Novell/WP/QP Integration Plan
noted under "Business Applications" that "[d]evelopment includes
PerfectOffice, WordPerfect for Windows, DOS, Macintosh and UNIX,
Presentations, Electronic Publishing tools, the PerfectOffice
engine group and Tapestry." DX 4 at NOV-25-006572. By October 1994,
WordPerfect had shipped WordPerfect Windows 5.2+ and WordPerfect
UNIX 6.0 (SCO) and was moving ahead with other WordPerfect for
UNIX, DOS, and VMS products as well. See DX 205 at
NOVB15912823-24. In fact, WordPerfect UNIX (SunOS, Solaris) was
released to manufacturing on June 7, 1994, WordPerfect 6.0 UNIX
(SCO, Intel) was released to manufacturing on October 6, 1994, and
WordPerfect 6.1 DOS was released to manufacturing on August 10,
1995. See DX 231 at NOV00161055.
Similarly, WordPerfect's PerfectFit and WOAPI technologies were
available for Windows, DOS, and UNIX. See PX 192 at MX
9037665. Novell also intended to make OpenDoc cross-platform and
was "committed to deliver OpenDoc for Windows in 1995, which will
provide users with a clear advantage for component software and
distributed cross-platform object support, as well as
cross-application integration." PX 395 at NOV 00019492; see
also PX 412 at NOV 00498197.
Even Microsoft recognized that "WordPerfect Strengths" included
"[c]ross-platform compatibility" and that "[a] consistent use of
the cross-platform positioning could neutralize Word's Windows
leadership." PX 554 at MS-PCA 1330664; see also PX 560 at
MS7059705. Indeed, in assessing the competitive situation presented
by WordPerfect for Windows 6.0, Microsoft noted that "WordPerfect
is also available on UNIX and the Macintosh. They also have worked
to make 6.0a run as well on OS/2 as its WordPerfect for OS/2
predecessor. No one else has the same breadth across
platforms for word processors." PX 378 at MX 2175209
Likewise, Novell intended to continue developing cross-platform
office productivity applications well into the future. Mr. Harral
testified that Novell intended to make the entire PerfectOffice
suite cross-platform after the initial release of PerfectOffice 95
to make it available on DOS, OS/2, Macintosh, UNIX, and Linux
platforms. Tr. 371:13-372:7 (Harral). Mr. Gibb testified that "we
wanted to make everything cross-platform and go across the
different operating systems." Tr. 787:11-15 (Gibb). Even Dr. Murphy
acknowledged the testimony that Novell planned to release
PerfectOffice across multiple platforms. Tr. 4912:13-18
Microsoft cannot dispute the collaterally estopped finding that
numerous companies existed with the technical and financial
capability to easily expand their output to create
competition in the operating systems market if the applications
barrier were sufficiently lowered.18 Finding of Fact ¶ 30. As Judge
Jackson noted, however, the ability to meet a large demand is
useless if demand for the product is small and during the relevant
time period signs indicated that demand for alternative operating
systems was "severely constrained" by the applications barrier to
entry. Id. Mr. Gates testified that from 1995 to 1999, he
believed that Windows faced competition from Apple's Mac OS, Be's
BeOS, various versions of UNIX, and IBM's OS/2 Warp, in addition to
Linux. Tr. 2852:20-2853:2 (Gates); see also Tr. 4900:6-13
(Murphy) (acknowledging the existence of Windows competitors).
Dr. Murphy testified that by 1998, Linux had between five to ten
million users and had become increasingly competitive with
Microsoft Windows in particular segments and that Linux was
comparable in size, capability, and complexity to Microsoft's
Windows 98 and Windows NT. Tr. 4896:19-4897:8, 4900:14-21 (Murphy).
Dr. Murphy accepted that consumers might reasonably choose a
WordPerfect version written for Linux instead of Windows, because
Linux was free. Tr. 4899:25-4900:5 (Murphy).
E. Novell's Key Franchise Applications Had The Potential To
Applications Barrier To Entry
Microsoft cannot deny that it viewed ownership of the word
processing and suite markets as critically important to maintaining
the applications barrier to entry. In an email sent to investor
Warren Buffett, senior Microsoft executive Jeff Raikes wrote:
If we own the key "franchises" built on top of the operating
system, we dramatically widen the "moat" that protects the
operating system business . . . . We hope to make a lot of money
off these franchises, but even more important is that they
should protect our Windows royalty per PC.
PX 360 at MS-PCA 1301176 (emphasis added).
"The 'moat' refers to the applications barrier to entry."
Novell, 505 F.3d at 317. Because consumers buy computers to
run applications, not to run operating systems, Microsoft could
keep consumer demand focused on Windows if Microsoft controlled the
office suite, word processing, and spreadsheet markets. Tr.
1387:1-1388:8 (Alepin); see also Tr. 290:5-19 (Harral); Tr.
1969:1-6 (C. Myhrvold); Finding of Fact ¶ 37; cf. Tr.
1718:21-1719:5 (Noll). According to Mr. Gibb, word processing and
spreadsheet applications amounted to 80 to 90 percent of everything
people did on personal computers in the mid 1990s. Tr. 782:3-12
(Gibb). Even if 70,000 applications were written for a rival
operating system, if that rival could not offer word processing,
spreadsheets, or suites, then it would not be able to attract
significant consumer demand. See, e.g., Microsoft, 253 F.3d
at 55; Tr. 1969:1-6 (C. Myhrvold).
Other internal Microsoft documents confirm Mr. Raikes' admission
that by owning key franchises, Microsoft helps maintain the
applications barrier to entry protecting its monopoly power. For
example, as early as 1989, Mr. Gates recognized that "a strong
applications business is extremely helpful to
[Microsoft's operating] systems strength." PX 3 at X 159503
(emphasis added). Similarly, Mr. Allchin admitted that
"[a]pplications drive the world. Applications are the reason that
the VAX was so successful. Applications make people switch computer
systems and vendors." PX 524 at MS 0119615.
As discussed more fully below, Mr. Raikes' email does more than
express a theory. Microsoft actually used its control of the key
franchise office suite market "'as a club'" to
control a potential operating systems competitor, Apple.
See Microsoft, 253 F.3d at 73 (citation omitted). At trial,
Dr. Noll explained that the strength of the applications barrier to
entry was directly proportional to Microsoft's strength in the
applications market, and "the more market share [Microsoft] can
gain in applications, the greater the barrier to entry of new
operating systems will be." Tr. 1740:20-1741:5 (Noll).
II. MICROSOFT'S ANTICOMPETITIVE CONDUCT
A. The Namespace Extension Functionality In Windows
In Windows 95, Microsoft combined the Windows 3.1 File Manager
and Program Manager into one application called the Windows
Explorer. See, e.g., Tr. 3748:4-21 (Nakajima); PX 77 at IBM
7510172819. For the first time in Windows' history, users could
access all of their drives, folders, and files — regardless
of whether their files existed on local or network drives —
from one location. See, e.g., PX 388 at MSC 00762776. This
hierarchy of drives, folders, and files was called the system
namespace and it was accessible to users from within the Windows
Explorer and from the Windows 95 common file open dialog. See,
e.g., PX 259 at MX 5121912. The namespace extension APIs
allowed developers to create custom folders to be displayed within
(1) the Windows 95 namespace accessible from the Windows Explorer,
(2) the Windows 95 common file open dialog, and (3) ISVs' custom
file open dialogs. Tr. 259:24265: 3, 272:1-4, 274:21-275:3
(Harral); Tr. 741:22-742:11 (Richardson); Tr. 3794:3-12 (Nakajima);
B. The Hood Canal Plan
As early as 1989, Bill Gates recognized that Microsoft's
strength in the PC operating systems market was dependent on its
applications' strength. PX 3 at X 159503; Tr. 2992:5-9 (Gates). By
1993, it had become apparent to many Microsoft executives that it
was "crucial" for
Microsoft's operating systems business and its applications
business to "leverage" each other in order to "avoid
'commodization.'" PX 47 at MS7085723. In response, Microsoft held a
high-level executive retreat in June 1993 at Mr. Gates' estate,
called Hood Canal, which was focused on designing a plan to
leverage Microsoft's operating systems technology for the benefit
of its applications. This retreat was the genesis of Microsoft's
scheme to withhold extensible interfaces within Chicago from its
competitors. Tr. 3444:1-13 (Muglia).
The plan hatched at Hood Canal, called the "Radical Extreme" or
"Office Shell Plan," was to ship Chicago with limited
extensibility, withholding the extensible shell for Office. PX 51
at MS-PCA 2535292; PX 61 at MS 0097121; PX 55 ("A very interesting
plan was developed and tentatively adopted to bundle the
extensibility of Chicago shell and some of the shell sizzle with
Office rather than release Chicago itself. This makes these
features a compelling reason to buy Office rather than icing on the
cake of an OS we can't make as much profit on."). Specifically, the
Office Shell Plan called for Chicago's Explorer to be
non-extensible, allowing Office to be first to take advantage of
"Explorer extensions to browse into app document types: OLE Objects
in Docfiles, Excel workbooks, ClipArt files, etc." PX 61 at MS
0097124. The excuse Microsoft planned to give its competitors for
making Chicago non-extensible was that "we couldn't get it done in
time." PX 51 at MS-PCA 2535292.
The purpose of the Office Shell Plan was to give Microsoft's
applications "a very significant lead over [Microsoft's]
competitors, and make [Microsoft's] competitors' products look
'old,'" which would allow Microsoft to "lock in users, lock out
competition." PX 61 at MS 0097122-23. Conversely, Microsoft
understood that making Chicago's extensibility available to its
competitors would force Word and Excel to "battle against their
competitors on even turf. Given that Lotus and WordPerfect have
largely caught up, [Word and Excel] almost certainly
lose ground — if not in market share, then in margins." PX
62 at MX 1389851. Mr. Gates, appreciating that Microsoft's
applications had a unique opportunity to "fully exploit [their]
advantage" by integrating with the operating system, PX 50 at FL AG
0103212, personally embraced the Office Shell Plan. PX 52 at
MS7089441 ("Billg sez do it!").
Not everyone within Microsoft, however, agreed with Mr. Gates.
For example, Tandy Trower wrote to Bill Gates, Brad Silverberg,
Paul Maritz, and others regarding the plan:
This strategy signals a sign of weakness. This stinks of
"proprietary-ness," something that we have been critical of others
for embracing . . . . It just doesn't appear to me to be a smart
strategy. It seems contrived and the possible repercussions not
worth the risk. In the twelve years I have been here, I've always
taken pride in the fact that we excelled by doing things better
than our competition, not by withholding some functionality that we
might uniquely leverage.
PX 56 at MS7080520.
Microsoft makes much of the fact that the Office Shell Plan, as
outlined at Hood Canal, did not go forward. See Microsoft
Mem. at 114-15. However, the plan ultimately advanced by Mr. Gates
in PX 1 — to withhold the namespace extension APIs for the
purpose of using these "critical interfaces" in an Office Explorer
to advantage Office at the expense of Lotus and WordPerfect —
was substantially identical in scope and purpose to the Hood Canal
scheme. See PX 61. Thus, the Hood Canal scheme perfectly
illustrates Mr. Gates' mindset and purpose in ultimately denying
Novell and other ISVs this important technology.
On July 8 and 9, 1993, Microsoft held a Chicago User Interface
Design Preview for third-party ISVs, including WordPerfect, where
Joe Belfiore demonstrated the new Chicago shell. PX 63 at
NOV-B06507474, 80. A few days later, Mr. Silverberg recounted
third-party ISVs strenuously urging Microsoft to make the
extensibility within the Chicago shell available:
They *really* want extensibility. They continued to press for
this in every way, whether cabinet extensibility so they could put
their own right pane handler; add
properties to prop sheets; hook find file; etc. What's more,
they were afraid and angry that Microsoft would use the hooks for
its own purposes (apps, mail, etc) but not provide to isv's. This
was a very hot button.
On September 9 and 10, 1993, Microsoft held a "Win32 Developers
Workshop Featuring Chicago." See, e.g., PX 78. During the
workshop, Mr. Belfiore demonstrated how Microsoft's mail client
(codenamed "Capone") could integrate into the Windows Explorer
using the namespace extension APIs. Id. at NOV00721981. When
Mr. Belfiore told WordPerfect that there were no plans to allow
ISVs to extend the Explorer in the same way, WordPerfect complained
that "this was an unacceptable situation." Id.
As a result of ISVs' complaints, a debate erupted within
Microsoft in September 1993 over whether Microsoft should publish
the namespace extension APIs because Capone was using them. The
debate is understandable given Microsoft's strict rule that if
Microsoft's applications use APIs, then the APIs must be published
to ISVs. Tr. 3814:5-22 (Nakajima). Although Mr. Gates was "very
aware" that many Microsoft executives believed they had "to publish
whatever api's capone uses," see, e.g., PX 84 at MS 5043513;
PX 483 at MS 5033031 ("If we use them we have to publish them."),
Mr. Gates maintained his position not to publish Chicago's
extensibility to ISVs. PX 483 at MS 5033031 ("I went over this in
some detail with Bill yesterday and he says 'no' since capone is
part of Chicago.").
The head of the Developer Relations Group, Doug Henrich,
immediately recognized that not publishing the namespace extension
APIs would raise serious public relations concerns:
I think this is problematic from a PR and ISV issue . . . .
Several big and small email vendors will be upset, and this will
play out as an unfair advantage issue with the press. I think we
want to avoid this.
PX 84 at MS 5043512. In fact, Lotus' CEO, Jim Manzi, had already
voiced concerns to Mr. Gates. Id. at MS 5043511. Other
Microsoft executives, including Jonathan Lazarus, VP of Strategic
Relations, were more blunt in responding to Mr. Gates' decision,
stating "this is D U M B!!!" PX 82 at MS 5042220.
By the end of September 1993, despite Mr. Gates' desire to deny
ISVs the namespace extension APIs, the decision was made to
document them, as well as the other Chicago shell extensions. The
decision to publish the namespace extension APIs was not made
lightly. Microsoft took several different factors into
consideration in making its decision, including: (1) how beneficial
the APIs would be to the end user; (2) how beneficial the APIs
would be to ISVs; (3) the degree to which the namespace extension
APIs' functionality would work well with ISVs' variable code; (4)
Microsoft's technology road map; and (5) what Microsoft expected to
happen in the future. Tr. 4319:9-4321:14 (Belfiore). By September
27, 1993, Mr. Silverberg reported that Microsoft had "decided [the
APIs] were A-list," which meant the APIs would be fully documented
and fully supported, not only in the current version of Windows but
in future releases as well. PX 473; Tr. 4317:24-4318:1 (Belfiore);
Tr. 3452:21-23 (Muglia); Tr. 3803:13-18 (Nakajima).
Microsoft made the decision to fully document and fully support
the namespace extension APIs with full knowledge that ISVs would
take advantage of them in their new products for Windows 95. For
example, Mr. Allchin, the head of Windows NT, recognized that
publishing the namespace extension APIs would "give competitors
an advantage over Microsoft Apps because Ray [Ozzie of Lotus] and
everyone else will use the extensions before our apps group (for
sure Office). [P]retty damn discouraging." PX 87 at MS 7094469. Mr.
Gates was aware that the decision had been made to document the
APIs and that they were subsequently partially documented in the
M6 beta release of Windows 95. See PX 94 at MS 704891; PX
140 at MS 5036029.
C. Microsoft Evangelizes The Namespace Extension APIs
Microsoft has a long-standing history of evangelizing its
operating systems to ISVs, including WordPerfect. That course of
dealing was not only mutually profitable for Microsoft and ISVs,
but also necessary. As Cameron Myhrvold explained, Microsoft
encouraged WordPerfect and other ISVs to develop products for the
Windows platform "[b]ecause that's the way you sell operating
systems. If you want a popular operating system, it is pretty much
wholly dependent on what applications run for it and how compelling
those applications are." Tr. 1969:1-6 (C. Myhrvold). Additionally,
as found in the Government Case, "Microsoft continually releases
'new and improved' versions of its PC operating system. Each time
it does, Microsoft must convince ISVs to write applications that
take advantage of new APIs, so that existing Windows users will
have an incentive to buy an upgrade." Finding of Fact ¶ 44. As
a result, "Microsoft works closely with ISVs to help them adapt
their applications to the newest version of the operating system."
Accordingly, it was in Microsoft's legitimate business interest
to give ISVs early access to Windows 95, including new interfaces,
so that ISVs could release their applications with Windows 95. Tr.
3488:19-3489:19 (Muglia). To ensure that a critical mass of quality
applications would be available on Windows, Microsoft formed the
Developer Relations Group ("DRG"). See, e.g., Tr.
3245:23-3246:5 (Struss). DRG was tasked with "evangelizing"
Microsoft's technologies, which meant that DRG would speak to other
individuals or groups "to get them excited" about Microsoft's
products. See Tr. 3246:6-15 (Struss); see also Tr.
251:5-253:2 (Harral) (defining evangelism). Brad Struss, a former
technical evangelist and DRG
manager, testified that the group's objective was to get ISVs on
board with Microsoft's upcoming operating systems and involved in
developing applications to support those new operating
systems.19 Tr. 3245:23-3246:5, 3248:12-17,
3250:3-10 (Struss). As a means of achieving its objective, DRG
provided ISVs with a host of technical and marketing incentives.
See Tr. 3250:11-15 (Struss). Microsoft's cooperation with
WordPerfect stretches back to the 1980s and MS-DOS, and continued
into the mid-1990s with Microsoft's evangelism of Windows 3.1 and
Because of the significance of the release of Windows 95, DRG
spearheaded a special marketing program called the First Wave
Program.20 See Tr. 3251:5-15 (Struss). The
program launched in the first half of 1994, Tr. 3251:2-4 (Struss),
and was designed by DRG to drum up a critical mass of major
applications supporting the key features necessary to make Windows
95 successful. See PX 148 at MS-PCA 2150196. Hence,
Microsoft sought firm commitments from the most important ISVs to
ship their applications within 90 days of the release of Windows
95. Id. at MS-PCA 2150197; PX 248 at MX 7155007-09; Tr.
282:17-283:13 (Harral); Tr. 3250:1624 (Struss). In fact, to become
a First Wave member, ISVs were required to ship within 90
days of the Windows 95 release. Tr. 3283:13-16 (Struss).
Microsoft set the 90-day period because it understood that having
key applications available with the release of Windows 95 would
incentivize users to upgrade to the new operating system. Tr.
In return, Microsoft promised to provide the limited group of
First Wave members with special technical and marketing assistance
aimed at improving members' applications for
Windows 95 and maximizing their chances of success. Tr.
3250:11-15 (Struss); see also PX 148 at MS-PCA 2150196,
198-201; Tr. 302:13-15 (Harral). Microsoft's technical assistance
included "early access to software development kits" and
invitations to small conferences and seminars highlighting the new
operating system. Tr. 3252:3-10 (Struss). DRG also provided ISVs
with pre-release versions of Windows 95, which were "required" so
that ISVs could (1) understand the functionality available on
Windows 95, (2) build applications that ran on Windows 95, and (3)
test those products. Tr. 3256:7-12 (Struss). On the marketing side,
Microsoft incentivized ISVs with participation in the Windows 95
logo program and trade shows. Tr. 3252:15-18 (Struss).
Before the Novell acquisition, Microsoft specifically targeted
WordPerfect as a "key" ISV critical to the success of Windows 95,
PX 131 at MS-PCA 1673787, and invited WordPerfect into the First
Wave Program, Tr. 3253:21-25 (Struss). See also PX 131 at
MS-PCA 1673787; PX 515. By June 1994, WordPerfect had joined the
First Wave Program and begun receiving regular Chicago status
updates from Microsoft. See, e.g., PX 184; PX 248 at MX
7155006. WordPerfect also attended multiple meetings, events, and
conferences related to the Windows 95 platform. See Tr.
3258:1-14 (Struss); PX 63; PX 78; PX 105; PX 515. Additionally,
Microsoft provided beta releases of Chicago to enable WordPerfect
to build software for the platform. Tr. 301:13-15, 303:23-304:18
(Harral); see also PX 181 (M6 beta documentation that
includes the namespace extension APIs). WordPerfect (and later
Novell) also paid for Microsoft's "Premier Support" service, which
enabled ISVs to ask technical questions of Microsoft's own
developers during the development process. Tr. 328:2-329:12
In November 1993, shortly after Microsoft's decision to publish
the namespace extension APIs, David Cole, the group manager for
Chicago, and other Microsoft employees traveled to WordPerfect's
campus to personally evangelize the namespace extension
functionality. PX 105. Microsoft informed WordPerfect of its
"deci[sion] to document the shell extensions" and WordPerfect was
"very enthusiastic." Id. at MS 7086583; Tr. 289:14-22
(Harral). Microsoft promised to provide WordPerfect with
information that would enable WordPerfect to integrate its own
technologies into the Windows 95 Explorer. PX 105 at MS 7086583;
Tr. 287:1-8, 290:25-291:9, 293:15-294:7 (Harral). WordPerfect
talked at length with Microsoft about its plans to integrate its
document management system, clip art libraries, and QuickFinder
technologies into the Windows Explorer. PX 105; Tr. 284:12-287:8,
Microsoft's evangelism of the namespace extension functionality
went beyond WordPerfect to the entire ISV community. In December
1993, Microsoft held a Professional Developers Conference where Mr.
Belfiore presented a slideshow detailing to all ISVs, including
WordPerfect, how they could create custom namespaces within the
Windows 95 Explorer, as well as access Microsoft's new namespaces,
such as Network Neighborhood, My Briefcase, and Recycle
PX 113; Tr. 294:8-17 (Harral) (the presentation was distributed
among developers and managers at WordPerfect). Mr. Belfiore
evangelized email and document management functionalities as good
uses for the namespace extension APIs — two namespaces Mr.
Belfiore knew WordPerfect wanted to create. PX 113 at 20; Tr.
4333:8-4335:6 (Belfiore) (discussing PX 113 and PX 105); Tr.
589:17-25, 590:22-591:21, 592:9-593:19 (Richardson).
Mr. Belfiore also recommended that if ISVs created their own
custom file open dialogs (as did Microsoft Office), they should
recreate the full Windows 95 namespace accurately, including
Network Neighborhood, My Briefcase, and Recycle Bin. PX 113 at 23;
Tr. 4335:7-4336:8 (Belfiore) (discussing PX 113).
Microsoft believed that the namespace extension functionality
was critical to the success of Windows 95. For example, Mr. Gates
[T]he hierarchical view (scope pane) view is critical. The
ability to see the real name space of the system where we are
putting everything only exists there — the ability to move
things around easily only come from there. The tree view is central
to our whole strategy — email, [document libraries],
applications, file system . . . .
PX 134. Mr. Gates "loved hierarchy" and "was really enamored
with the Windows Explorer and its ability to browse information
from any source, no matter where it was." Tr. 3519:7-17 (Muglia);
see also Tr. 3532:19-3533:1 (Muglia); Tr. 3831:22-3832:8
In January 1994, Mr. Belfiore identified the namespace extension
functionality as important technology to a writer at PC
Magazine writing an article on Chicago. PX 130 at MX 7141158.
In June 1994, Microsoft touted the ability of the Chicago Explorer
to allow users to browse the entire namespace and allow ISVs to
integrate their own custom folders as one of the reasons Chicago
was so much more advanced than the Mac. PX 202 at MS-PCA 1982100;
Tr. 4357:9-4359:8 (Belfiore). In Microsoft's Chicago Reviewer's
Guide, distributed to thousands of ISVs, Microsoft described the
Chicago Explorer as the "single view on a world of information,"
the very eyes of Chicago. PX 388 at MSC 00762776.
WordPerfect understood that the namespace extension
functionality was a "key element" in developing new products for
Windows 95. Tr. 265:25-266:3 (Harral). Shared code developer Greg
Richardson testified that WordPerfect "saw pretty quickly" that the
functionality presented a "very powerful new paradigm" which
would enable WordPerfect to "present very useful functionality to
our users [by] making their experience of using our products
better." Tr. 591:14-592:3 (Richardson). Using this powerful new
technology, WordPerfect planned to integrate its SoftSolutions
document management system, QuickFinder technology, graphical
library, and Internet functionality into both the Windows 95
Explorer and WordPerfect's custom file open dialog.22 Tr.
268:19-269:17 (Harral); Tr. 593:9-11, 594:8-18 (Richardson).
WordPerfect's planned uses for the namespace extension APIs were
intended, and indeed recommended, by Microsoft.23
Novell's shared code group planned to tightly integrate the
namespaces with WordPerfect and the other applications within
PerfectOffice. For example, WordPerfect's document management
system, SoftSolutions, was a key differentiation feature for the
word processor because it allowed users to manage different
versions of documents both in the file system and in WordPerfect
itself. Tr. 242:4-244:6 (Harral). Similarly, WordPerfect's
QuickFinder technology had historically been "very tightly
integrat[ed]" into the WordPerfect word processing application. Tr.
612:23-613:21 (Richardson). Specifically, users used QuickFinder to
open and retrieve documents within WordPerfect. Id. Novell
never intended to add new "products" to Windows 95, but rather to
integrate its key technologies into WordPerfect and Quattro Pro
namespaces within the file open dialog, thereby increasing the
functionality of PerfectOffice as a whole.24 Id.
Microsoft's argument that WordPerfect, as a standalone
application, did not need the namespace extension APIs grossly
mischaracterizes Mr. Harral's testimony and completely disregards
Mr. Richardson's testimony. See Microsoft Mem. at 20 (citing
Tr. 327:10-21 (Harral)). Contrary to Microsoft's
mischaracterization, Mr. Harral simply testified that the
WordPerfect word processing development group (which was separate
from the shared code group) did not need to create any namespace
extensions because it planned to rely on the namespace extensions
being developed by the shared code team. Tr. 327:1-9 (Harral)
(noting that the WordPerfect development group would be interested
in doing shell extensions for property sheets, but that most of the
extensions they needed to rely on for things like the document
management system would be provided by the shared code team).
Moreover, on cross-examination, Mr. Richardson disagreed with
Microsoft's characterization of Mr. Harral's testimony,
I believe that what [Adam Harral] is saying is that there wasn't
a Namespace that the WordPerfect development group was responsible
for providing. That's how I would interpret his response, that the
shared code group was providing all the NameSpace extensions that
were required by the WordPerfect application, but the WordPerfect
developers, themselves, were not responsible for providing a
Tr. 666:8-667:4 (Richardson).
In June 1994, Microsoft published partial documentation for the
namespace extension APIs in its Chicago M6 beta release, which it
shipped to approximately 20,000 sites worldwide. PX 179 at MX
2217526; PX 181; Tr. 303:16-305:6, 317:6-12 (Harral); Tr.
1417:20-1418:4 (Alepin). The documentation was considered
"preliminary" because it gave ISVs (including Novell/WordPerfect)
the "means for commencing development on the NameSpace extensions,"
but was "insufficient" to complete development.25 Tr. 1417:20-1418:20
(Alepin). Mr. Harral explained that the partial documentation for
the namespace extension APIs contained in the M6 beta was "machine
computer documentation" that generally provided only "what the
machine needs to know," but that developers needed additional
documentation to know how the "computer definitions are meant to be
used." Tr. 304:19-305:6, 317:6-318:6 (Harral) (referencing PX
The purpose of documenting APIs was "to put a stake in the
ground" so that ISVs could rely on those APIs in developing quality
products for Windows 95. Dep. of J. Raikes, Jan. 27, 2009 (played
Oct. 27, 2011) at 161:5-25 (Dkt. # 281). WordPerfect indeed relied
on these APIs in designing, developing, and coding its applications
for Windows 95. WordPerfect's shared code engineers immediately
started coding their applications to the namespace extension APIs
using the M6 partial documentation and availed themselves of
Microsoft's Premier Support when the partial documentation required
supplementation. Tr. 320:1-321:21, 331:7-19 (Harral); Tr.
667:12-668:3 (Richardson). Mr. Harral in particular recalled having
conversations with Premier Support specifically about the namespace
extension APIs. Tr. 330:4-331:6 (Harral).
Mr. Harral also testified that Premier Support informed him that
the full documentation for the namespace extension APIs would be
forthcoming in the M7 beta release of Chicago. Tr. 318:722
(Harral). By October 1994, WordPerfect's shared code team was 80%
finished with "hooking up the shared code into the Windows 95
system." Tr. 321:22-322:8 (Harral). If Microsoft had published the
full documentation for the namespace extension APIs in its M7 beta
as promised, the WordPerfect shared code team would have been
completely finished by December 1994. Tr. 318:7-22, 322:9-323:14
D. Microsoft De-Documents The Namespace Extension
On September 20, 1994, Mr. Gates watched Novell's CEO Bob
Frankenberg give a demonstration of Novell's new technology at the
Agenda '95 conference in Scottsdale, Arizona. Mr. Frankenberg
demonstrated both Novell's new shell technology, Corsair, which
exposed cross-platform APIs on the Macintosh, UNIX, and Windows,
and Novell's ability to launch the Internet directly from a
WordPerfect hyperlink. PX 222. Mr. Frankenberg's presentation
confirmed to Mr. Gates that "Novell [was] a lot more aware of how
the world [was] changing than I thought they were," and reinforced
to Mr. Gates the importance of Microsoft's shell integration.
Two weeks later, on October 3, 1994, Mr. Gates made the decision
to withdraw support for the namespace extension APIs. There is no
ambiguity in Mr. Gates' email about why he made this decision:
I have decided that we should not publish these extensions. We
should wait until we have a way to do a high level of integration
that will be harder for the likes of Notes, WordPerfect to achieve,
and which will give Office a real advantage.
PX 1 (emphasis added). Mr. Gates admitted that even though it
was "very late in the day to [be] making changes to Chicago" and
that the APIs were "a very nice piece of work," Microsoft
could not "compete with Lotus and WordPerfect/Novell without
this." Id. Implicit in Mr. Gates' statements is that
Microsoft could not compete on the merits with Lotus
Mr. Gates' ultimate goal of "hav[ing] Office '96 sell better"
because of "shell integration work," id., was understood and
affirmed by others within Microsoft. One day later, Mr. Belfiore
forwarded Mr. Gates' email to the Windows 95 Program Management
listserv, explaining that the main reason for de-documenting the
namespace extension APIs was "because it [would] add work to the
Ren group." PX 243 at MX 5066942. The Ren group's "goal will be to
ship a replacement explorer in office96." Id. The Ren group,
which was the codename for the product that became Outlook, was
part of the Office group at that time. Tr. 4362:19-4363:3
Other evidence confirms that the Office group intended to use
the de-documented namespace extension APIs in order to achieve a
higher level of integration that would be harder for Lotus or
Novell to achieve, and which would give Office a real advantage.
The Office '96 Specification detailed that the Office '96 Explorer
would "superset and replace the Chicago explorer to become the
single place where users can find and manipulate all of their
information irrespective of its type, including all documents and
files; in addition to personal information such as appointments,
task lists and mail." PX 379 at MS-PCA 1566798. The "crucial
interfaces" needed for this work were the namespace extension APIs.
On October 10, 1994, Mr. Nakajima confirmed that "[b]ased on the
recent decision, we are hiding one of [the] shell mechanisms . . .
. I marked all those interfaces and definitions ';Internal' so that
we don't put them in the SDK header files any more." PX 224. Mr.
Nakajima made the following changes to the Windows 95 interfaces:
"IShellFolder" and "IEnumIDList" became "read-only" and could not
be implemented in a customized way, and the "name space
extension mechanism," which consisted of "IShellBrowser,"
"IShellView," "IPersistFolder," and "ICommDlgBrowser," became
private. Id. In Microsoft's next beta release (M7), the
shlobj.h SDK header file contained no documentation on the
namespace extension APIs, and the APIs were no longer supported by
Microsoft.26 See generally PX 227.
The record is replete with evidence that Microsoft's conduct
regarding the namespace extension APIs involved intentionally
deceiving ISVs, including Novell. First, the evidence shows that
Mr. Gates embraced the "Radical Extreme" Plan hatched at the Hood
Canal retreat to ship an extensible shell in Office (rather than in
Chicago) in order to advantage Microsoft over its competitors. In
accord with the Radical Extreme Plan, Microsoft evangelized the
namespace extension APIs to ISVs and then withdrew them for the
express purpose of giving Office '96 a real advantage. The Radical
Extreme Plan and Mr. Gates' ultimate decision were substantially
identical in scope and purpose.27 Moreover, both relied on a completely
fabricated excuse that Microsoft was unable to complete the work on
the namespace extension APIs.28 Mr. Gates hoped that his decision would
help "Office '96 sell better because of the shell integration
work." PX 1. Indeed, within months of Mr. Gates' October 1994
decision, the Microsoft Office group
was using the namespace extension APIs to create an Office '96
Explorer. See PX 379 at MSPCA 1566798.
Second, Microsoft deceived ISVs when it failed to reveal the
raging debate between the Chicago and Cairo29 teams regarding future
support of the namespace extension APIs, while simultaneously
evangelizing the APIs and inducing ISVs to rely on them. Mr. Muglia
testified at length that the Chicago and Cairo teams "fought like
cats and dogs" — beginning before Microsoft's initial
evangelization of the namespace extension APIs in early 1993,
continuing unabated through the M6 beta release, and ending only
when Mr. Gates made his decision on October 3, 1994 to withdraw
support for the functionality. See, e.g., Tr. 3383:14-24,
3397:9-20, 3406:11-21, 3408:24-3409:4, 3414:2-10 (Muglia). Despite
the internal turmoil, DRG — the public face of Microsoft
— aggressively evangelized the namespace extension APIs
without even a hint to ISVs that the internal debate could lead to
those APIs being removed. Tr. 3287:53288: 2, 3300:25-3304:23
(Struss); Tr. 4283:10-15 (Belfiore).
The third form of deception was Microsoft's cover-up following
Mr. Gates' decision to de-document the namespace extension APIs.
Novell told Microsoft prior to October 3, 1994 that there would be
"hell to pay in the press" if Microsoft changed the namespace
extension APIs. PX 215 at MX 6109494. And Mr. Silverberg informed
Mr. Gates two days after his decision that there would be a
"firestorm of protest" from ISVs who were using the namespace
extension APIs, including WordPerfect, Lotus, Symantec, and Oracle:
"These companies will not be bashful about expressing their
displeasure." PX 220 at MX 5103185. Mr. Silverberg predicted
that Mr. Gates' decision would play out on "page one of the
weeklies," and would "lead to calls for the DOJ to investigate."
DRG was tasked with avoiding these consequences at all costs.
Telling ISVs the truth — that Mr. Gates had de-documented the
namespace extension APIs to give Office a real advantage —
was not an option. Fearing what would happen "if/when the press
gets wind of this," DRG carefully prepared a script designed to
deceive ISVs and the press about why Microsoft was withdrawing
support for the namespace extension APIs:
We are faced with the challenge of going to our ISVs and telling
them about BillG's recent decision to return the namespace
extensions to their original system-level status (notice the
wording — Let's try not to use the word "undocumented" or
private APIs. This has a negative connotation to most ISVs).
PX 225 at MX 6055840.30
DRG's script was designed to avoid an adverse press reaction.
For example, Mr. Struss emphasized that DRG should work on building
a list of ISVs for press references in case the press caught wind
of Mr. Gates' decision. Id. Indeed, Microsoft hoped to
forestall premature press coverage by "stressing to ISVs the
confidentiality of this" and emphasizing that their conversations
were "obviously covered by [a] mutual non-disclosure agreement."
Id. at MX 6055840-41. The script also instructed ISVs to
keep Mr. Gates' decision "close to their chests" and requested that
they "not post any questions about this on Compuserve" in an effort
to keep the decision confidential. Id. at MX 6055842.
DRG's script was also designed to mislead ISVs about the real
reasons for Mr. Gates' decision. The script emphasized that "the
number one question [from ISVs] will be: 'Why have
you decided to do this?' The answer is: Because they (the APIs)
make it very difficult to support long-term. We don't want to send
ISVs down a dead-end path." Id. at MX 6055841. DRG was
instructed to "emphasize this part very strongly." Id. at MX
6055842. Contrary to what ISVs were told, there was nothing
"dead-end" about the namespace extension APIs: the APIs were never
changed and were never removed from Windows 95 or future versions
of Windows. Id. at MX 6055841. Similarly, ISVs were told
that Microsoft's own applications would be "required to stop" using
the APIs. Id. Yet Microsoft continued to use the namespace
extension APIs in its applications and in Windows 95 itself. To
avoid this issue, the script instructed "PLEASE DO NOT MENTION
IN ANY OF YOUR CONVERSATIONS." Id. at MX 6055840.
Microsoft also misled ISVs with pretextual technical
justifications. The first reason Microsoft gave to ISVs for
de-documenting the namespace extension APIs was "compatibility."
Id. at MX 6055843. However, the unrebutted evidence is that
prior to Mr. Gates' decision, the namespace extension
APIs ran on Windows NT and "there was no remaining concern about
compatibility." Tr. 3825:4-7, 3826:12-18 (Nakajima); Tr. 3513:12-18
(Muglia). The second reason given to ISVs was "system robustness."
PX 225 at MX 6055843. Notwithstanding that Mr. Gates did not
mention robustness in his October 3, 1994 email, to the extent
robustness was an issue it was resolved within a month of Mr.
Gates' decision and many months before the release of Windows 95.
Tr. 3837:16-24 (Nakajima); Tr. 3525:25-3626:5 (Muglia); Tr.
4369:23-4370:2 (Belfiore). The third reason given to ISVs was "ship
schedule," which was reminiscent of the excuse conjured at the Hood
Canal retreat: "we couldn't get it done in time." PX 225 at MX
6055843; PX 51 at MS-PCA 2535292. In fact, the namespace extension
were "essentially done" in early 1994 after "many months of
tuning," and no changes were made to them through their
republication in 1996. PX 139; PX 142. Finally, Microsoft attempted
to persuade ISVs that Microsoft would provide "equivalent visual
functionality" that would give ISVs the "same look and feel" as the
namespace extension functionality. PX 225 at MX 6055843. In
reality, all Microsoft provided was "window dressing," Tr.
348:12-349:18 (Harral), which Marvel did not use.
Microsoft's deception was a great success. There was no
"firestorm of protest" or "hell to pay in the press" for Microsoft.
Instead, Novell and other ISVs reasonably believed Microsoft when
it warned ISVs that the namespace extension APIs may stop working
"in future releases of Windows 95 (or even between interim beta
builds)," and that ISVs that chose to use the APIs would "be
completely at their own risk." PX 225 at MX 6055844. For a few
months, Novell continued to ask for more information about the
namespace extension APIs,32 but, as described below, Microsoft
effectively foreclosed Novell's ability to implement them.
III. MICROSOFT'S ANTICOMPETITIVE CONDUCT DELAYED NOVELL'S
OFFICE PRODUCTIVITY APPLICATIONS AND SUITE FOR WINDOWS 95
A. Microsoft's De-Documentation Of The Namespace Extension
APIs Left Novell
With No Real Choice
Faced with the de-documentation of the namespace extension APIs,
Novell had three theoretical options. Tr. 342:6-344:7 (Harral). The
first option was to continue using the now-unsupported APIs based
on the partial documentation Microsoft provided in the M6 beta
release of Chicago. Id. Novell's second option was to see if
it could somehow fit within the common framework provided by
Microsoft — that is, use the Microsoft-provided common file
open dialog — even though doing so would result in
significantly reduced functionality that could have negatively
impacted WordPerfect's customers and Novell's relationship with
them. Id. The third option was to try to recreate the
functionality that was lost as a result of Microsoft's decision to
de-document the namespace extension APIs. Id. Novell's top
priority was to release a marketable product within the critical
window of opportunity after the Windows 95 release. Tr. 796:10-18,
797:5-8 (Gibb). The evidence at trial showed that none of the three
options would allow Novell to meet that priority.
Initially, Novell explored the first option by continuing to use
the now-unsupported namespace extension APIs. Tr. 344:8-345:7
(Harral). In traveling down that road, however, Novell found that
Microsoft had erected roadblocks that Novell could not surmount.
For example, Microsoft's Premier Support refused to provide any
assistance at all with respect to the Windows 95 shell, let alone
assistance in using the now de-documented namespace extension APIs.
Tr. 345:8-346:11 (Harral). Novell concluded that it was futile to
continue using the unsupported APIs given the obstacles to doing
so, and therefore, it reasonably determined that option one was not
Novell then considered trying to use the Windows 95 common file
open dialog. In doing so, Novell needed to evaluate whether the
features and functionality it would lose by using Microsoft's
inferior dialog would have a serious impact on the quality of the
product and the user experience, and ultimately, its marketability.
While the common dialog might have been easier to develop with
(because it was already created), it possessed significant
limitations, including "impos[ing] the standards of the operating
system" on developers. Tr. 271:17-25 (Harral).
WordPerfect's file open dialog was also different from
Microsoft's common file open dialog in several ways. Tr.
247:10-251:4 (Harral). First, it was "very robust." Tr. 273:5-16
(Harral). For example, WordPerfect enabled users to name their
files using more than eight characters. Tr. 249:15-20 (Harral). Its
file open dialog also displayed a substantial amount of information
about each file so users could search more easily and find what
they were looking for. See Tr. 250:15-24 (Harral). Another
compelling feature of WordPerfect's custom file open dialog was
that it provided users with a list of "commonly visited" places
that was populated based on the users' activities, as well as a
file viewer that was built into the custom file open dialog. Tr.
Ultimately, WordPerfect needed to support the features that it
had historically provided and which its users expected. Tr.
273:10-274:20 (Harral). Novell concluded that losing features that
had been in use for ten years and alienating its installed base was
not a real option at all. Tr. 346:12-347:4 (Harral). Customers
bought WordPerfect in part because of its enhanced file management
capabilities and were accustomed to "living" in WordPerfect. See
id. Mr. Harral testified that choosing to use the common file
open dialog was an unacceptable option because it "would have been
a choice to have disenfranchised our customer base." Tr. 504:1-14
(Harral). Similarly, Mr. Richardson testified that:
[T]he common dialog wouldn't even give [WordPerfect] the level
of functionality we had in our last release in Windows or that we
had on our DOS card. It was a huge step backwards for us. And
we felt it simply wasn't an option. If we were to go with that
option we didn't really have a product.
Tr. 630:1-6 (Richardson) (emphasis added); see also Tr.
629:11-12 (Richardson) (PerfectOffice "wouldn't be functional
enough to be considered a reasonable product in Windows 95.").
Moreover, Novell could not have added any of its custom
namespaces to the Windows 95 common file open dialog. Tr. 629:19-21
(Richardson). Mr. Gibb testified that using the Windows common file
open dialog would have been a "huge step back for [WordPerfect's]
customers." Tr. 847:25-848:7 (Gibb). Dr. Noll perhaps said it best
when he described the Hobson's choice that Novell faced between
releasing late or using Microsoft's common dialog: "[T]hey had two
different ways to commit suicide." Tr. 1902:4-15 (Noll).
Consequently, Novell abandoned the second option (which was no
option at all) and began to evaluate what it would take to
implement the third option, in which Novell would replicate the
namespace extension APIs' functionality inside of WordPerfect's
custom file open dialog. Tr. 350:8-352:3 (Harral).
After the de-documentation of the namespace extension APIs,
Novell's management continued to seek the assistance of Microsoft's
Premier Support to resolve the issue. Tr. 349:19-350:7 (Harral).
Mr. Harral personally complained about the de-documentation of the
namespace extension APIs to Premier Support, as that was the
primary avenue of communication open to him.33 Tr. 354:9-14 (Harral).
By January 1995, however, Novell had moved to trying to
reproduce the lost functionality. Tr. 350:8-352:3 (Harral). In
order to solve the problem, Novell efficiently re-allocated
resources so that the team could split up the problem and work as
quickly as possible. Id. The team worked around the clock,
and 80-hour weeks were common. Tr. 354:1-5 (Harral). Even at this
breakneck pace, it took the shared code team almost a year to
complete a new custom file open dialog that could mimic the
interfaces and functionality that had been promised and then taken
away by Microsoft. Tr. 347:13-18 (Harral). This issue was the
reason that Novell was unable to release its PerfectOffice suite
(and WordPerfect) within 90 days after the release of Windows
Tr. 804:20-805:7 (Gibb).
B. Microsoft's Conduct Maintained And Extended The
Applications Barrier To
Entry Protecting Microsoft's Monopoly Power
Every additional sale of Microsoft's office productivity
applications at the expense of Novell's applications increased the
applications barrier to entry protecting Microsoft's monopoly
power. Tr. 1759:15-1760:1, 1760:14-1761:2 (Noll). The trial
evidence revealed that Microsoft substantially increased its market
share in those applications following its exclusion of Novell.
In 1994, Microsoft's market share for word processing software
was around 65% and its market share in spreadsheets was around 68%.
Tr. 1761:12-16 (Noll). WordPerfect's installed base for word
processing in 1994 was virtually the same as Microsoft's, with
Microsoft having an aggregate 37% share and Novell having an
aggregate 36.4% share. See PX 599A at NWP00044129. Novell's
installed base in 1994 on Windows was around 7 million users, and
its total installed base across all operating systems was around 15
million users. Id.
By 1997, Microsoft had dramatically increased its total share to
about 90% of the office productivity software market. PX 360 at
MS-PCA 1301176. Microsoft had succeeded in widening the "moat"
protecting its PC operating systems monopoly.
I. THE COURT MAY GRANT MICROSOFT'S MOTION ONLY IF THE
EVIDENCE SO OVERWHELMINGLY FAVORS MICROSOFT AS TO PERMIT
NO OTHER RATIONAL CONCLUSION
When the district court declines to grant a party's motion for
judgment as a matter of law under Rule 50(a) of the Federal Rules
of Civil Procedure before the case is submitted to the jury, that
party may renew the motion under Rule 50(b) after trial. "The
standard for granting a renewed motion for judgment as a matter of
law under Rule 50(b) is precisely the same as the standard for
granting the pre-submission motion under Rule 50(a). Thus, the
post-verdict motion for judgment can be granted only if the prior
motion should have been granted." 9B Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure § 2537
(3d ed. 2011) (footnotes omitted). In ruling on the motion, the
Court reviews all the evidence in the record. Reeves v.
Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000);
Guides, Ltd. v. Yarmouth Grp. Prop. Mgmt., Inc., 295 F.3d
1065, 1073 (10th Cir. 2002).
A party may not assert new grounds for relief in its post-trial
Rule 50(b) motion that were not raised in its Rule 50(a) motion
filed before the case was submitted to the jury. Marshall v.
Columbia Lea Reg'l Hosp., 474 F.3d 733, 738-39 (10th Cir.
2007); United Int'l Holdings, Inc. v. Wharf (Holdings) Ltd.,
210 F.3d 1207, 1228-29 (10th Cir. 2000), aff'd, 532 U.S. 588
(2001); see also Advisory Committee Notes to 2006 Amendment
to Fed. R. Civ. P. 50. Any issues or grounds not present in the
original motion for judgment as a matter of law are waived, and
cannot be raised in the renewed motion after trial — even if
the party raised the same issues in its answer to the complaint or
motion for summary judgment. Marshall, 474 F.3d at 738.
"'[J]udgment as a matter of law is appropriate only if the
evidence points but one way and is susceptible to no reasonable
inferences which may support the nonmoving party's
position.' This is a difficult and high standard for the movant
to satisfy." Smith v. United States, 555 F.3d 1158, 1162
(10th Cir. 2009) (citation omitted). "Judgment as a matter of law
is improper unless the evidence so overwhelmingly favors the moving
party as to permit no other rational conclusion." Shaw, 213
F.3d at 529; see also Weese v. Schukman, 98 F.3d 542, 547
(10th Cir. 1996) ("A motion for a judgment as a matter of law is
cautiously and sparingly granted and then only when the court is
certain the evidence 'conclusively favors one party such that
reasonable men could not arrive at a contrary verdict.'" (citation
Microsoft's discussion of the Rule 50 standard omits any mention
of how the Court should address conflicting evidence or inferences
derived from the evidence. But the law is clear: In ruling on a
motion for judgment as a matter of law, the court "review[s] all
the evidence in the record, construing it and all inferences drawn
therefrom most favorably to the nonmoving party, and refrain[s]
from making credibility determinations or weighing the evidence."
Guides, 295 F.3d at 1073. "'Credibility determinations, the
weighing of the evidence, and the drawing of legitimate inferences
from the facts are jury functions, not those of a judge.'"
Reeves, 530 U.S. at 150-51 (citation omitted). When faced
with conflicting evidence on a particular issue, the court must
resolve all conflicts in favor of the nonmoving party and disregard
all evidence favorable to the moving party except evidence that
"'is uncontradicted and unimpeached.'" Id. at 151 (citation
"The fundamental principle [in ruling on a Rule 50 motion] is
that there must be a minimum of judicial interference with the
proper functioning and legitimate province of the jury." 9B Wright
& Miller, Federal Practice and Procedure § 2524.
Thus, courts have long
been "in essential agreement" that the critical question in
resolving a Rule 50 motion is "'whether the evidence is such that,
without weighing the credibility of the witnesses or otherwise
considering the weight of the evidence, there can be but one
conclusion as to the verdict that reasonable [persons] could have
reached.'" Id. (alteration in original) (citation omitted).
Although Microsoft makes much of its argument that there must be
"substantial" evidence in support of the nonmoving party's
position, "[i]t is very doubtful that the adjective ['substantial']
adds anything of value" to the "reasonable person" test set forth
above, particularly in light of case law defining "'substantial'
evidence" as "evidence that would lead reasonable people to
different conclusions." Id.
"The legal standard for granting judgment as a matter of law is
identical to the standard for granting summary judgment under Fed.
R. Civ. P. 56." Brown v. Presbyterian Healthcare Servs., 101
F.3d 1324, 1329 (10th Cir. 1996); see also Reeves, 530 U.S.
at 150. Because the standards under Rule 50 and Rule 56 are
identical, the law of the case doctrine dictates:
[W]hen the court of appeals has remanded a case for trial after
ruling that summary judgment in favor of a given party was
inappropriate because the evidence indicated the existence of
genuine issues of material fact to be resolved by the jury, the
district court cannot properly, on remand, grant judgment as a
matter of law to that party on the basis of trial evidence that is
not substantially different.
Kerman v. City of New York, 374 F.3d 93, 110 (2d Cir.
2004) (emphasis added). Because the evidence Novell presented at
trial is not substantially different from the evidence Novell
presented during summary judgment proceedings, Microsoft's motion
should be denied.
II. A REASONABLE JURY COULD FIND THAT MICROSOFT'S CONDUCT
VIOLATED SECTION 2 OF THE SHERMAN ACT
As it has throughout the case, Microsoft jumbles the accepted
legal framework in Sherman Act cases, making it far more
complicated than necessary. Novell's theory of the case
is entirely in line with the Government Case and with Tenth
Circuit precedent. There is no reason to depart from established
antitrust principles to evaluate the evidence.
Only two overarching questions must be answered. First, did
Microsoft's conduct violate Section 2 of the Sherman Act? Second,
did that conduct proximately cause injury to Novell? The first
question focuses on the effects of the challenged conduct on
competition; the second focuses on the effects of the conduct on
To answer the first question, Novell must show that (1)
Microsoft possessed monopoly power in the PC operating systems
market and (2) willfully maintained that power through
anticompetitive conduct, rather than through development of a
superior product, business acumen, or historic accident. United
States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966). Several
critical components of this test have already been established as a
matter of law. Microsoft does not, and cannot, contest that it had
monopoly power at all relevant times, meaning that Microsoft had
the power to "control prices or exclude competition," id. at
571, at the time it engaged in the challenged conduct and long
thereafter. In addition, Microsoft does not dispute that the
relevant market consists of Intel-compatible PC operating systems.
A relevant market is defined by the barriers to entry that protect
it because the relevant market includes all products to which
consumers could turn in response to an increase in price or
reduction in output. Microsoft, 253 F.3d at 51-52. Defining
the relevant market is critical to measuring a monopolist's ability
to lessen or destroy competition. Walker Process Equip., Inc. v.
Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965);
Reazin, 663 F. Supp. at 1396 ("'[T]he purpose of inquiries
into market definition and market power is to determine whether an
arrangement has the potential for genuine adverse effects on
competition . . . .'" (citation omitted)). In most Section 2 cases,
monopoly power and relevant market are hotly contested
issues. Here, however, the only question is whether Microsoft
willfully maintained its monopoly power through anticompetitive
In the Tenth Circuit, acts are anticompetitive when they
"'impair opportunities of rivals and are not competition on the
merits or are more restrictive than reasonably necessary for such
competition,' if the conduct appears 'reasonably capable of
contributing significantly to creating or maintaining monopoly
power.'" Multistate Legal Studies, 63 F.3d at 1550 (citation
omitted); see also 3 Phillip E. Areeda & Herbert
Hovenkamp, Antitrust Law ¶ 651a (3d ed. 2011) (defining
"monopolistic conduct" as "acts that: (1) are reasonably capable of
creating, enlarging or prolonging monopoly power by impairing the
opportunities of rivals; and (2) that either (2a) do not benefit
consumers at all, or (2b) are unnecessary for the particular
consumer benefits claimed for them, or (2c) produce harms
disproportionate to any resulting benefits").
To answer the second question, Novell must show (1) that
Microsoft's antitrust violation proximately caused injury to
Novell's business and (2) that the injury was the type of harm that
the antitrust laws were intended to prevent. Novell, 505
F.3d at 311; Reazin, 899 F.2d at 973. These two overarching
questions cannot be conflated. See Angelico v. Lehigh Valley
Hosp., Inc., 184 F.3d 268, 273, 275 n.2 (3d Cir. 1999) ("The
District Court erred by incorporating the issue of anticompetitive
market effect into its standing analysis, confusing antitrust
injury with an element of a claim under section 1 of the Sherman
Act . . . .").
A. The Substantive Sherman Act Standards Do Not Depend On
Or Injunctive Relief Is Sought
Contrary to Microsoft's assertion that the Government Case
should be distinguished because the United States sought equitable
relief, a careful review of the federal antitrust statutory scheme,
the D.C. Circuit's opinion in the Government Case, and Judge
subsequent remedies decision confirms that the law provides a
single set of standards to determine Sherman Act Section 2
liability whether damages or injunctive relief is sought.
Section 2 of the Sherman Act makes it illegal to monopolize
trade or commerce. 15 U.S.C. § 2. Section 4 of the Sherman Act
gives the United States the authority to "institute proceedings in
equity to prevent and restrain such violations," 15 U.S.C. §
4, and vests the federal courts with authority to issue "'such
orders and decrees as are necessary or appropriate'" to accomplish
the objectives of the antitrust laws, including injunctions
forbidding repetition of past violations and divestiture to restore
competitive conditions. 1 ABA Section of Antitrust Law,
Antitrust Law Developments 703 (6th ed. 2007) (citation
The Sherman Act does not provide a private right of action.
Instead, Section 4 of the Clayton Act provides a treble damages
claim to "any person who shall be injured in his business or
property by reason of anything forbidden in the antitrust laws." 15
U.S.C. § 15(a). Establishing a Section 2 violation is thus a
condition precedent for both government equitable
enforcement and private treble damages actions. See, e.g., Full
Draw Prods. v. Easton Sports, Inc., 182 F.3d 745, 750 (10th
Cir. 1999). In government enforcement actions, equitable principles
determine the scope of relief. In private damages claims, treble
damages are mandatory, but courts use prudential rules of standing
to decide whether a particular victim should be allowed to maintain
a private action. The Government Case confirms these
In the Government Case, Microsoft argued (just as it does here)
that the plaintiffs could not prove a Section 2 violation because
the district court did not find sufficient evidence that, but for
Microsoft's conduct, Navigator and Java would have "'ignited
genuine competition'" in the PC operating systems market.
Microsoft, 253 F.3d at 78 (quoting Finding of Fact ¶
411). The D.C. Circuit rejected Microsoft's argument, emphasizing
the distinction between establishing
liability and establishing the facts necessary to support the
equitable remedy of divestiture. Id. at 79-80. The D.C.
Circuit wrote: "To require that § 2 liability turn on a
plaintiff's ability or inability to reconstruct the hypothetical
marketplace absent a defendant's anticompetitive conduct would only
encourage monopolists to take more and earlier anticompetitive
action." Id. at 79. The D.C. Circuit explained (and this
Court rightly agreed in its summary judgment opinion) that "it
would be inimical to the purpose of the Sherman Act to allow
monopolists free reign to squash nascent, albeit unproven,
competitors at will — particularly in industries marked by
rapid technological advance and frequent paradigm shifts."
Id.; see also Novell, 699 F. Supp. 2d at 749.
After moving from the issue of Section 2 liability to the issue
of the appropriate equitable remedy, the D.C. Circuit held that
courts should require "'a clear indication of a significant
causal connection between the conduct and creation or maintenance
of the market power'" before ordering "radical structural relief,"
such as divestiture. Microsoft, 253 F.3d at 80, 106 (quoting
3 Areeda & Hovenkamp, Antitrust Law ¶ 653b, at
91-92 (1996)). As the D.C. Circuit explained, "divestiture is a
remedy that is imposed only with great caution, in part because its
long-term efficacy is rarely certain." Id. at 80. In
addition, the goal of divestiture is to eliminate monopoly power
acquired in violation of the Sherman Act and therefore particularly
strong proof is required to establish the link between monopoly
power and the unlawful conduct. Microsoft, 253 F.3d at 103,
106-07; Grinnell, 384 U.S. at 577.
To be clear, the D.C. Circuit wrote: "[T]hese queries [regarding
Microsoft's request for a stronger causal connection between the
conduct and maintenance of monopoly power] go to questions of
remedy, not liability. In short, causation affords Microsoft
no defense to liability for its unlawful actions undertaken to
maintain its monopoly in the operating system market."
Microsoft, 253 F.3d at 80 (emphasis added). As a result,
the D.C. Circuit affirmed that Microsoft's conduct violated Section
2 of the Sherman Act, but vacated the remedies decree and
instructed the lower court to order divestiture only if the
Government could prove a more significant causal connection between
the challenged conduct and maintenance of monopoly power than
required by Section 2. Id. at 106. As Judge Kollar-Kotelly
wrote in United States v. Microsoft Corp., the D.C. Circuit
"appears to have identified a proportionality between the severity
of the remedy and the strength of the evidence of the causal
connection. . . . [Therefore,] the court crafting a remedy must
assess the strength of the causation evidence that established
liability and 'tailor' the relief accordingly." 231 F. Supp. 2d
144, 164 (D.D.C. 2002) (citations omitted), aff'd sub nom.
Massachusetts v. Microsoft Corp., 373 F.3d 1199 (D.C. Cir.
While Congress gave courts flexibility to determine the
appropriate remedy for equitable enforcement actions, it did not do
so for private damages claims. Although Microsoft characterizes
treble damages as "punitive," Microsoft Mem. at 83, Congress
determined that they are the appropriate remedy to deter
monopolists from "test[ing] the limits of the law."36
Microsoft, 253 F.3d at 49; see also Perma Life Mufflers,
Inc. v. Int'l Parts Corp., 392 U.S. 134, 139 (1968) (treble
damages actions function as "an ever-present threat to deter anyone
contemplating business behavior in violation of the antitrust
laws"), overruled on other grounds by Copperweld Corp. v.
Independence Tube Corp., 467 U.S. 752 (1984).
Indeed, damages are the only remedy sufficient to deter
monopolists from taking "more and earlier anticompetitive action,"
Microsoft, 253 F.3d at 79, to eliminate potential and
nascent threats. An injunction against continuation of the conduct
would be virtually meaningless, because by that time the
monopolist's goal has been accomplished. If Microsoft's argument
were correct, then Netscape and Sun would be unable to pursue
damages claims notwithstanding the considered decision of the D.C.
Circuit. That is not the law. The Fourth Circuit, in fact,
indicated that it would have granted standing to Netscape and Sun
to pursue damages claims, just as it ruled that Novell has standing
to pursue damages. Novell, 505 F.3d at 314 n.22.
Any concerns that private parties will flood the courts with
tenuous damage claims are addressed by prudential standing rules.
The courts grant standing only to those persons who can show a
clear nexus between the substantive antitrust violation and the
injury. See Associated Gen. Contractors of Cal., Inc. v. Cal.
State Council of Carpenters ("AGC"), 459 U.S. 519, 529-35
(1983); Novell, 505 F.3d at 310-11; Full Draw, 182
F.3d at 750. This is consistent with Paragraph 657a of the
Antitrust Law treatise (titled "Causation and Injury in § 2
Cases: 'Disaggregation' of Damages"), which is, ironically, the
only authority that Microsoft cites in support of its incorrect
argument that the standards of proof applied by the D.C. Circuit
cannot be applied here. As it has consistently done throughout this
case, Microsoft muddles two forms of very different "causation,"
(1) proximate causation in the conventional tort sense, linking the
Sherman Act violation to the plaintiff's injury and (2) the much
more limited concept of monopoly causation as discussed in the
Government Case, linking the monopolist's conduct to the
monopolist's maintenance of monopoly power. Paragraph 657a only
addresses proximate cause in the conventional tort sense and makes
clear that standing rules prevent unfair "piggybacking,"
[T]he damage plaintiff must demonstrate not only that the
defendant has violated the antitrust laws, but also that the
plaintiff's business or property in fact suffered compensable
injury as the result of that violation and that this injury is also
injury to competition and "antitrust injury." Proper
adherence to that principle would moderate the treble damage
consequences of finding "exclusionary" conduct.
3 Areeda & Hovenkamp, Antitrust Law ¶ 657a (emphasis
added) (footnote omitted). Similarly, the treatise states that
where a government action is permissible, then "suit by private
plaintiffs must also be allowed unless they lack
standing."" 2A Phillip E. Areeda et al. ¶ 335f (3d ed. 2011)
Accordingly, Novell respectfully asks this Court to reject once
and for all Microsoft's argument that the Government Case's holding
with respect to Section 2 liability applies only to equitable
enforcement actions. On all issues relating to liability, the
Government Case's holdings apply with equal force here, and should
be deemed dispositive of the arguments raised by Microsoft.
B. A Reasonable Jury Could Find That Microsoft Engaged In
"Whether any particular act of a monopolist is exclusionary,
rather than merely a form of vigorous competition, can be difficult
to discern: the means of illicit exclusion, like the means of
legitimate competition, are myriad." Microsoft, 253 F.3d at
58; see also Caldera, Inc. v. Microsoft Corp., 72 F. Supp.
2d 1295, 1306 (D. Utah 1999) ("Anticompetitive conduct describes a
wide variety of behavior including espionage, sabotage, predatory
pricing, fraud, price discrimination, price-fixing, bid-rigging,
illegal tying arrangements, product disparagement and a host of
other activities that improperly stifle competition.");37 Caribbean
Broad. Sys., Ltd. v.
Cable & Wireless PLC, 148 F.3d 1080, 1087 (D.C. Cir.
1998) ("'Anticompetitive conduct' can come in too many different
forms, and is too dependent upon context, for any court or
commentator ever to have enumerated all the varieties. It is a fair
inference from the case law, however, that the allegations made
here — namely, that the defendants made fraudulent
misrepresentations to advertisers and sham objections to a
government licensing agency in order to protect their monopoly
— bring the defendants' conduct well within that
In the Tenth Circuit, conduct is deemed "anticompetitive" when
(1) it harms the competitive process and (2) the monopolist cannot
show that it acted with a legitimate business justification. See
Microsoft, 253 F.3d at 59 ("[I]f a plaintiff successfully
establishes a prima facie case under § 2 by
demonstrating anticompetitive effect, then the monopolist may
proffer a 'procompetitive justification' for its conduct.");
Multistate Legal Studies, 63 F.3d at 1550 ("A defendant may
avoid liability by showing a legitimate business justification for
the conduct.").38 Actions that would be lawful in a
competitive market can be deemed anticompetitive when undertaken by
a monopolist. See, e.g., Eastman Kodak Co. v. Image Tech.
Servs., Inc., 504 U.S. 451, 488 (1992) (Scalia, J., dissenting)
("Behavior that might otherwise not be of concern to the
antitrust laws — or that might even be viewed as
procompetitive — can take on exclusionary connotations when
practiced by a monopolist."); United States v. Dentsply Int'l,
Inc., 399 F.3d 181, 187 (3d Cir. 2005) ("Behavior that
otherwise might comply with antitrust law may be impermissibly
exclusionary when practiced by a monopolist."); Microsoft,
253 F.3d at 69-71; Multistate Legal Studies, 63 F.3d at
In its summary judgment opinion and jury instructions, this
Court treated anticompetitive conduct and harm to competition as
distinct inquiries. Novell, 699 F. Supp. 2d at 744; Jury
Instructions Given by the Court at 10-11 (Dec. 19, 2011) (Dkt. #
388). Novell respectfully disagrees with that division. Conduct
that harms the competitive process is, by definition,
"anticompetitive" if the monopolist cannot demonstrate a legitimate
business justification. See, e.g., Eastman Kodak, 504 U.S.
at 483-85 (if valid business reasons do not justify conduct that
tends to impair the opportunities of rivals, it violates Section
2); Multistate Legal Studies, 63 F.3d at 1550.
1. Novell Made a Prima Facie Showing of Harm to
A plaintiff makes out a prima facie case of harm to
competition by adducing evidence that the defendant's conduct would
result in decreased output, higher prices, diminished quality,
reduced innovation, or increased entry barriers. See
generally 2B Phillip E. Areeda & Herbert Hovenkamp,
Antitrust Law ¶ 403b (3d ed. 2011); Fleischman v.
Albany Med. Ctr., 728 F. Supp. 2d 130, 163 (N.D.N.Y. 2010). As
discussed above, entry barriers "are factors ... that prevent new
rivals from timely responding to an increase in price above the
competitive level." Microsoft, 253 F.3d at 51; see
also Tr. 1721:21-1722:13 (Noll); Finding of Fact ¶ 36.
The effects of conduct should be viewed "over the long run."
Aspen Skiing, 472 U.S. at 608.40 Conduct that prevents rivals
from effectively competing with a monopolist harms competition
because it prolongs consumers' exposure to the harmful effects of
monopoly. William F. Adkinson et al., Enforcement of Section 2
of the Sherman Act: Theory and Practice
at 2 (Working Paper for FTC and DOJ Hearings on Section 2 of the
Sherman Act: Single-Firm Conduct as Related to Competition Nov. 3,
While Microsoft would like to pigeonhole this case into the
category of unilateral-refusal-to-deal cases arising from
Trinko and Aspen Skiing, those cases do not apply
where the monopolist acts affirmatively to exclude potential
competition. Christy Sports, LLC v. Deer Valley Resort Co.,
555 F.3d 1188, 1196-97 (10th Cir. 2009) (Aspen Skiing would
not apply if "by first inviting an investment and then disallowing
the use of the investment the resort imposed costs on a competitor
that had the effect of injuring competition in a relevant
market."); Multistate Legal Studies, 63 F.3d at 1553 n.12
(rejecting Aspen Skiing analysis because plaintiff's
complaint went beyond merely alleging refusal to cooperate and
included allegations that monopolist deliberately acted to harm
a. Microsoft's conduct as a whole harmed competition in the PC
It is well established that, in determining whether the
defendant's conduct is anticompetitive, the defendant's conduct
should be viewed as a whole. LePage's, Inc. v. 3M (Minn. Mining
& Mfg. Co.), 324 F.3d 141, 162 (3d Cir. 2003) (en banc)
("The relevant inquiry is the anticompetitive effect of [the
defendant's] exclusionary practices considered together. . . .
[T]he courts must look to the monopolist's conduct taken as a whole
rather than considering each aspect in isolation."); see also
Cont'l Ore Co. v. Union Carbide & Carbon Corp., 370 U.S.
690, 699 (1962); Aspen Highlands Skiing Corp. v. Aspen Skiing
Co., 738 F.2d 1509, 1522 n.18 (10th Cir. 1984), aff'd,
472 U.S. 585 (1985); Novell, 699 F. Supp. 2d at 745, 750;
Caldera, 72 F. Supp. 2d at 1307 n.6. Thus, the effects of the
conduct should be evaluated on "an aggregate
basis." 1 ABA Section of Antitrust Law, Antitrust Law
Developments 244 (6th ed. 2007); see also City of Anaheim v.
S. Cal. Edison Co., 955 F.2d 1373, 1376 (9th Cir. 1992) ("[I]t
would not be proper to focus on specific individual acts of an
accused monopolist while refusing to consider their overall
combined effect. . . . We are dealing with what has been called the
'synergistic effect' of the mixture of the elements."); City of
Mishawaka, Ind. v. Am. Electric Power Co., 616 F.2d 976, 986
(7th Cir. 1980) ("It is the mix of the various ingredients of
utility behavior in a monopoly broth that produces the unsavory
flavor."), overruled on other grounds by City of Columbia v.
Omni Outdoor Adver., Inc., 499 U.S. 365 (1991); Caldera,
72 F. Supp. 2d at 1313 ("Caldera's claim of unlawful predatory
conduct is based on the aggregate effect of all of Microsoft's
Accordingly, it is Novell's position that the jury should have
been allowed to consider Microsoft's de-documentation of the
namespace extension APIs as part of a larger scheme to eliminate
threats to Microsoft's monopoly power, including its efforts to
keep Navigator, Java, and other applications from achieving the
critical mass necessary to reduce Microsoft's monopoly power in the
operating systems market. See, e.g., Novell, 699 F. Supp. 2d
at 749 n.20 (rejecting Microsoft's argument that its conduct toward
Novell was "fundamentally different than the anticompetitive
conduct Microsoft directed against other ISVs and applications");
Microsoft, 87 F. Supp. 2d at 38 ("Microsoft strove over a
period of approximately four years to prevent middleware
technologies from fostering the development of enough
full-featured, cross-platform applications to erode the
applications barrier."). Under this view, the jury could find a
Section 2 violation if it found that (1) Microsoft's withdrawal of
support for the namespace extension APIs was part of the same
scheme to eliminate applications that it believed could erode the
applications barrier to entry as was Microsoft's conduct intended
Navigator and Java and (2) Microsoft did not meet its burden of
establishing a legitimate business justification for its
de-documentation of the APIs. See, e.g., Abbott Labs. v. Teva
Pharm. USA, Inc., 432 F. Supp. 2d 408, 428 (D. Del. 2006)
("Plaintiffs are entitled to claim that individual acts are
antitrust violations, as well as claiming that those acts as a
group have an anticompetitive effect even if the acts taken
separately do not."); Washington Alder LLC v. Weyerhaeuser
Co., No. CV 03-753-PA, 2004 WL 1068791, at *1 (D. Or. May 7,
2004) (rejecting defendant's attempt to "compartmentaliz[e] each
alleged anticompetitive act and analyz[e] it in a vacuum instead of
considering the cumulative impact of those acts" and holding
defendant's prior anticompetitive conduct in log market could be
considered as part of "overall scheme" to monopolize lumber
market).42 Moreover, the Government Case found that
"each type of middleware contributed to the threat posed by the
entire category." Finding of Fact ¶ 68; see also
Finding of Fact ¶ 77 (Navigator's and Java's potential to
"hasten the demise of the applications barrier to entry" was a
"combined effort" resulting from the "symbiosis" between the two
technologies, which exceeded the potential independently held by
As this Court recognized in its summary judgment opinion, the
law will not permit a monopolist to eliminate multiple small
threats which, combined, would pose a threat to its
monopoly even if each would not do so independently.
Novell, 699 F. Supp. 2d at 749 n.20 (noting economist's
position that "'[i]n a 1000-firm market, the harm to any one
competitor would not cause harm to competition, but that is
irrelevant to ascertaining whether the entire pattern of conduct
against all 1000 firms caused anticompetitive harm'" and
Microsoft's apparent concession that, "under some circumstances,
the anticompetitive harm caused by a defendant's anticompetitive
conduct toward multiple small competitors could be aggregated to
reach a significant contribution finding in the relevant market"
The jury heard abundant evidence that Mr. Gates and other senior
Microsoft executives viewed Novell/WordPerfect as one of several
threats to Microsoft's continued monopoly power during the relevant
time period. See, e.g., PX 17 (Microsoft threatened by
Lotus); PX 31 (Microsoft threatened by Lotus); PX 32 (Microsoft
threatened by Novell and Lotus); PX 33 (Microsoft threatened by
Novell, Lotus, and IBM); PX 54 (Microsoft threatened by Novell and
Lotus); PX 72 (Microsoft threatened by Novell and Lotus); PX 88
(Microsoft threatened by IBM, Novell, Apple, Sun, HP (UNIX), Novell
UNIX, and SCO); PX 91 (Microsoft threatened by Novell and Lotus);
PX 127 (Microsoft threatened by Novell, IBM, Sun, Lotus, and
Apple); PX 201 (Microsoft threatened by Novell/WordPerfect and
Lotus). In his email de-documenting the namespace extension APIs,
Mr. Gates expressly linked WordPerfect and Lotus.43 Mr. Gates was also
aware that Novell was integrating Internet and web browsing
WordPerfect (this functionality would eventually be provided by
Netscape Navigator, which was bundled with PerfectOffice44). See
b. The conduct "directed at" Novell, in and of itself,
Alternatively, even considering only Microsoft's conduct
directed at Novell, the evidence of harm to competition still
overwhelmingly favors Novell. The jury had more than sufficient
evidence to conclude that (1) Microsoft's conduct caused Novell's
applications to be late to market during a critical window of
opportunity and therefore WordPerfect lost substantial market share
and the ability to help attain the critical mass necessary to lower
the applications barrier to entry; and (2) WordPerfect's lost
market share harmed competition by artificially widening the
applications barrier to entry.45 Under this view, Microsoft's overall
pattern of behavior gives increased plausibility to Novell's claim.
See Z-Tel Commc'ns, Inc. v. SBC Commc'ns, Inc., 331 F. Supp.
2d 513, 534 (E.D. Tex. 2004).
By eliminating WordPerfect, Microsoft manipulated the supply
side and the demand side dynamics of the industry. On the supply
side, excluding WordPerfect harmed competition in the same way that
exclusion of Navigator and Java harmed competition: it prevented a
technology from fostering the development of applications that
could erode the applications barrier to entry for potential
operating system competitors.
On the demand side, it limited customer choice because consumers
focus on applications, not operating systems. A key franchise like
WordPerfect constrained Microsoft's market power in the PC
operating systems market by providing a non-Microsoft word
processor for potential entrants, thus lowering the barrier to
entry for companies considering entering the PC operating systems
market. Dr. Noll explained that the underlying operating system did
not materially influence the choice of consumers who used
cross-platform word processors like WordPerfect or Ami Pro. Tr.
1732:20-1733:17 (Noll). The evidence at trial showed that
WordPerfect was an extremely popular application in the mid-1990s,
and Microsoft considered WordPerfect to be a Tier "A" ISV. PX 517
Microsoft's motion is premised on the fundamentally wrong
assertion that Novell must prove that its business applications
would have "induced PC users to move to operating systems other
than Windows" or changed the "competitive landscape in the PC
operating system market," or that "end-users would abandon Windows
for other operating systems." Microsoft Mem. at 62, 67. But the law
does not impose any such burden on Novell. Microsoft, 253 F.3d at
79. It must only show that its business applications could have
diminished or weakened the applications
barrier to entry. Findings of Fact ¶¶ 68-69. As a matter
of law and logic, lower barriers to entry decrease a monopolist's
power to control prices or exclude competition, and vice versa. Dr.
Noll agreed, testifying that the substantial increase in
Microsoft's market share for office productivity applications
between 1994 and 1997, and the corresponding decline in sales of
Novell's office productivity applications, "increased the
applications barrier to entry and
necessarily contributed to Microsoft's continued power to
control prices or exclude competition." Tr. 1761:12-1762:22,
1763:2-13, 1831:5-1832:25 (Noll).
Contrary to Microsoft's assertions, Dr. Noll has never imposed a
requirement that middleware must be cross-platform and "available
on all or nearly all PCs" before it could weaken the applications
barrier to entry. See Microsoft Mem. at 6. To the contrary,
Dr. Noll testified that those characteristics were necessary to
"completely destroy" the applications barrier to entry," but it "is
not correct to say that something less than that couldn't increase
competition" by weakening, though not eliminating, the applications
barrier to entry. Tr. 1926:17-22 (Noll); cf. Finding of Fact
¶ 74 (acknowledging that the applications barrier to entry
would incrementally erode as Sun moved closer to its goal of
"'write once, run anywhere'"). Dr. Noll further explained:
[I]t's a continuous relationship, that the higher the fraction
of functions that can be accessed through the middleware, the more
the porting costs have been reduced and, hence, the more the
middleware affects competition. So that's why it's a continuous
process. It's not an either/or process. Middleware
can begin to have an effect on competition in the operating system
market if it starts to be used because it's reducing porting costs
and, therefore, increasing the number of applications that are
cross-platform, and thereby reducing the applications barrier to
Tr. 1958:4-1959:5 (Noll) (emphasis added).
Even Dr. Murphy recognized that this process is a continuum: the
more that applications are written in whole or even in part to
middleware, the more the applications barrier to entry is reduced.
Tr. 4922:22-4923:6 (Murphy). Dr. Murphy admitted that complete
destruction of the applications barrier to entry is not necessary
because simply reducing the entry barrier is
sufficient to engender more competition in the PC operating systems
market. See Tr. 4923:7-24 (Murphy).
Quantitatively, the elimination of WordPerfect unquestionably
caused more harm to the competitive process than at least some of
the acts directed against Navigator and Java that harmed
competition in the Government Case.46 For example, the D.C. Circuit found
that conduct preventing the distribution of Navigator on some 5
million Macintosh computers harmed competition. By comparison,
Microsoft's conduct here resulted in at least 7 million fewer
WordPerfect licenses being sold. Tr. 1824:17-1926:22
(Noll).47 As a matter of law, that evidence alone
is more than sufficient for a reasonable jury to find harm to
competition. Similarly, the D.C. Circuit found that Microsoft's
threats to Intel to stop working with Sun on cross-platform
software exerted the necessary effect on competition to impose
liability even without quantifying its effect. See
Microsoft, 253 F.3d at 77-78.
The Government Case, in fact, provides concrete evidence that
Microsoft's exclusion of WordPerfect did preserve
Microsoft's monopoly power.48 In 1997, Apple's business was in decline
and ISVs were questioning the wisdom of continuing to spend time
and money developing applications for the Mac operating system.
Microsoft, 253 F.3d at 73. By that time, with WordPerfect
marginalized, some 90% of Mac users running a suite of office
productivity applications used Microsoft's version of Office for
the Mac operating system. Id. Had Microsoft announced that
it was ceasing development of Mac Office, customers, developers,
and investors would have viewed the announcement as Apple's death
notice. Id. In other words, by seizing control of the office
suite market, Microsoft furthered its ability to exclude
competition in the PC operating systems market — which is
the touchstone of monopoly power. When Apple refused Microsoft's
demand that it stop installing Navigator on the Mac operating
system, one Microsoft executive wrote that it should use its
control of the Office suite "'as a club'" to force Apple to exclude
Netscape Navigator. Id. (citation omitted). Ultimately,
Apple had to agree to Microsoft's demand because Apple had no
viable alternative to Office. Id.; see also Tr. 1010:7-18
(Frankenberg) (word processors were the most frequently used
applications). Just as Mr. Raikes wrote, Microsoft's ownership of a
key franchise strengthened its monopoly power.
Microsoft incorrectly argues that its conduct could not harm
competition because Windows' market share would have been higher
had it fully documented and published the APIs. Microsoft Mem. at
87-90. Microsoft's argument should be rejected for a number of
First, when a monopolist engages in conduct that makes no
economic sense apart from its harmful effect on competition, that
fact is viewed as strong evidence of anticompetitive conduct, not
the opposite. See Multistate Legal Studies, 63 F.3d at 1550
(conduct constituting an "'abnormal response to market
opportunities'" is presumptively anticompetitive (citation
omitted)); Gen. Indus. Corp. v. Hartz Mountain Corp., 810
F.2d 795, 804 (8th Cir. 1987) (equating conduct "without legitimate
business purpose" with conduct "that makes sense only because it
eliminates competition"); Neumann v. Reinforced Earth Co.,
786 F.2d 424, 427 (D.C. Cir. 1986) (conduct that would not be
considered profit maximizing except for the expectation that actual
rivals will be driven from the market or the entry of potential
rivals blocked or delayed so that the monopolist will gain or
retain market share or rivals will be chastened sufficiently to
abandon competitive behavior the monopolists finds threatening to
its monopoly power); BanxCorp v. Bankrate Inc., No. 07-3398
(ES)(CLW), 2011 WL 6934836,
at *20 (D.N.J. Dec. 30, 2011); Aventis Envtl. Sci. USA LP v.
Scotts Co., 383 F. Supp. 2d 488, 516 (S.D.N.Y. 2005);
Transamerica Computer Co. v. IBM Corp. (In re IBM Peripheral EDP
Devices Antitrust Litig.), 481 F. Supp. 965, 1007-08 (N.D. Cal.
1979) (Conduct is illegal where "[t]he only purpose served and the
only effect of the degradation was the preclusion of competition. .
. . The law need not tolerate deliberate acts where the only
purpose and effect is to use monopoly power to gain a competitive
advantage."), aff'd, 698 F.2d 1377 (9th Cir. 1983); ABA
Section of Antitrust Law, Model Jury Instructions in Civil
Antitrust Cases, 2005 Edition, Instruction 10, at C-27 (2005);
Gregory J. Werden, Identifying Exclusionary Conduct Under
Section 2: The "No Economic Sense" Test, 73 Antitrust L.J. 413,
Antitrust law assumes that monopolists act rationally and that
short-term losses will be offset by long-term gains. Thus, there
are many cases like this one in which liability is imposed even
though the monopolist's conduct caused a short-term loss in market
share. Ball Mem'l Hosp., Inc. v. Mut. Hosp. Ins., Inc., 784
F.2d 1325, 1336 (7th Cir. 1986) ("Market share reflects current
sales, but today's sales do not always indicate power over sales
and price tomorrow."). In Reazin, for example, the
monopolist explicitly understood that its conduct would result in
lost sales and that it would not see any anticompetitive benefits
for at least two or three years. Reazin v. Blue Cross & Blue
Shield of Kan., Inc., 635 F. Supp. 1287, 1309 (D. Kan. 1986),
aff'd, 899 F.2d 951 (10th Cir. 1990); see also Multistate
Legal Studies, 63 F.3d at 1553 & n.12 (bar exam preparation
company would have had more customers had it not created schedule
conflicts). Similarly, in Aspen Skiing, the resort owner
would have had higher sales but for the fact that it canceled the
all-resort pass and refused the plaintiff's offer to buy all of the
available tickets at retail prices. See infra Argument Part
As shown above, in the but-for world, Novell/WordPerfect,
Netscape, Sun, Lotus, and Apple all (and each of them) could have
diminished the applications barrier to entry and therefore
constrained Microsoft's market power. Thus, while Microsoft might
have been able to achieve the same market share had it not excluded
WordPerfect (and Navigator and Java), it would have had to do so by
competing on the merits — lowering prices or improving its
product — instead of simply relying on the applications
barrier to entry. See, e.g., Tr. 1930:23-1931:10 (Noll).
The cases on which Microsoft relies for its contrary argument
all involved situations in which the monopolist's conduct produced
short-term gains, not losses. In Christy Sports, for
example, the resort owner sought to recoup part of its investment
in its resort by enforcing a covenant preventing another ski-rental
business, which had not paid the resort owner anything for a
decade, from operating on its property. 555 F.3d at 1197. And in
Four Corners Nephrology Assocs., P.C. v. Mercy Medical Center of
Durango, 582 F.3d 1216, 1225 (10th Cir. 2009), a hospital
recouped part of its investment in a new medical practice —
and arguably prevented the practice from going bankrupt — by
giving exclusive privileges to its own practice. Therefore,
Microsoft's admission that Windows 95 would have been a better and
more desirable product had it fulfilled its promise to provide the
APIs is reason enough to conclude that Microsoft's exclusion of
WordPerfect was anticompetitive.
Second, the Tenth and D.C. Circuits have both rejected the
argument that a plaintiff must show with precision that it would in
fact have facilitated competition but for the challenged conduct.
In Multistate Legal Studies, for example, the monopolist
owned a bar exam review course and intentionally created scheduling
conflicts with a rival to discourage students from taking the
rival's workshop. 63 F.3d at 1552-53. The monopolist argued that
the conflict only
made it more inconvenient for students to take both courses, but
the Tenth Circuit said the relevant inquiry is not whether the
conduct would actually eliminate competition, but whether it was
"reasonably capable of contributing significantly" to a
monopolization attempt. Id. at 1553.49
The Government Case is particularly compelling in this regard.
As discussed above, although the D.C. Circuit expressly recognized
that the plaintiffs could never confidently reconstruct the but-for
world, it found that a monopolist that has harmed the competitive
process and engaged in conduct other than competition on the merits
must "'suffer the uncertain consequences of its own undesirable
conduct.'" Microsoft, 253 F.3d at 79 (citation omitted).
Even though the United States did not present any testimony from
other operating system vendors that Navigator or Java had the
potential to create greater competition among operating systems,
the D.C. Circuit affirmatively ruled that neither application would
"'ignited genuine competition,'" agreed that the record
contained sufficient evidence that Navigator and Java "showed
potential as middleware platform threats," and sustained liability.
Id. at 78-79 (citation omitted); see also Realcomp II,
Ltd. v. FTC, 635 F.3d 815, 830 (6th Cir.) (The "'exclusion of
nascent threats'" is "especially pernicious because of the emerging
competitive impact" those threats represent. (quoting
Microsoft, 253 F.3d at 79)), cert. denied, 132 S. Ct.
Third, even if one applied a more stringent causation standard,
there is still more than enough evidence for the jury to rule
against Microsoft. By definition, if conduct artificially extends
barriers to entry, then it contributes to the monopolist's
continued market power because monopoly power is defined, in part,
by the presence of barriers to entry. Reazin, 899 F.2d at
968 ("'[S]ubstantial market power can persist only if there are
significant and continuing barriers to entry'" (citation omitted)).
One could simply ask: Would Microsoft's monopoly power be enhanced
or diminished by the exclusion of WordPerfect (and Navigator and
Java)? The answer is plain. It is the flip side of a finding that
Microsoft's conduct prevented the development of technologies that
could lower barriers to entry into the PC operating systems market.
See Microsoft, 253 F.3d at 56 ("Because the applications
barrier to entry protects a dominant operating system irrespective
of quality, it gives Microsoft power to stave off even superior new
rivals."); see also LePage's, 324 F.3d at 159 ("When a
monopolist's actions are designed to prevent one or more new or
potential competitors from gaining a foothold in the market by
exclusionary, i.e. predatory, conduct, its success in that goal is
not only injurious to the potential competitor but also to
competition in general.").
In addition, Microsoft's argument ignores its own documents and
the statements by its own executives which provide all the evidence
necessary for a jury to conclude that the
exclusion of Novell/WordPerfect harmed competition and
contributed to Microsoft's monopoly power. See, e.g., PX 1;
PX 361 at MS-PCA 1301180; see also PX 220; PX 324. Evidence
of the monopolist's intent is relevant to predict the consequences
of the challenged conduct. Microsoft, 253 F.3d at 59;
Aspen Skiing, 472 U.S. at 603. Given the overwhelming
evidence that Microsoft believed at the time that Novell posed a
threat to its monopoly power, it cannot credibly argue the opposite
now to escape liability. The contemporaneous perceptions of
Microsoft's executives are the best evidence.
c. Microsoft's defenses are without merit
Microsoft also argues that monopolists may (1) deceive
competitors without ever violating the Sherman Act; (2) use their
intellectual property for anticompetitive purposes with impunity;
(3) withdraw technical support for any reason, without regard to
the effects on competition; and (4) engage in patently harmful
conduct if it can be characterized as an "ordinary practice" for
non-monopolists. As shown below, each of the cases that Microsoft
cites for these unprecedented assertions was decided by applying
the traditional Section 2 framework and failed because either the
monopolist provided a legitimate business justification or the
plaintiffs could not establish that the conduct harmed competition
in the first instance.
"Deception": The idea that the antitrust laws
would encourage monopolists to deceive competitors or third parties
is inherently wrong. There are, in fact, numerous cases involving
deceptive conduct by a monopolist that has been found to violate
the antitrust laws, including cases like this where a monopolist
induces reasonable reliance and then engages in affirmative conduct
to sabotage a competitor for the purpose of protecting its monopoly
In the Government Case, for example, the D.C. Circuit found
Microsoft liable for failing to fulfill a public commitment to
cooperate with Sun and other developers to promote cross
platform applications when it voluntarily provided development
tools to developers without disclosing that those tools would
inevitably result in applications that worked only on Windows. The
D.C. Circuit found that the conduct violated Section 2 because it
harmed the competitive process in a manner not attributable either
to the superiority of the operating system or to the acumen of its
makers, without ever discussing Microsoft's supposed duty to deal
with Sun. Microsoft, 253 F.3d at 77; see also Newcal
Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1044-52
(9th Cir. 2008) (defendant defrauded customers by misleading them
as to contract extensions so as to shield its customers from
competition); Conwood Co. v. U.S. Tobacco Co., 290 F.3d 768,
788 (6th Cir. 2002);50 Caribbean Broad. Sys., 148 F.3d
1080 (antitrust claim predicated on the monopolist's
misrepresentations); Int'l Travel Arrangers, Inc. v. W.
Airlines, Inc., 623 F.2d 1255, 1260-73 (8th Cir. 1980)
(deceptive advertising campaign by monopolist was intended to
prevent competitive threat); W. Duplicating, Inc. v. Riso Kagaku
Corp., No. Civ. S98-208 FCD GGH, 2000 WL 1780288, at *7 (E.D.
Cal. Nov. 21, 2000) (defendant engaged in deceptive conduct,
including misleading "FUD" marketing campaign, to eliminate
competition); In re Warfarin Sodium Antitrust Litig., No.
MDL 98-1232-SLR, 1998 U.S. Dist. LEXIS 19555, at *33-35 (D. Del.
Dec. 7, 1998) (defendant made false and misleading statements to
the public regarding lower-cost competitor), rev'd in part on
other grounds, 214 F.3d 395 (3d Cir. 2000).
None of these cases require proof of an intentional plan
(although there is abundant evidence in the record from which a
jury could reasonably conclude that Mr. Gates always
intended to deny ISVs the namespace extension APIs). Instead,
the focus of the inquiry is always on the anticompetitive effect of
the monopolists' conduct and the monopolists' proffered
justifications for it. Microsoft's cases stand for the unremarkable
proposition that the Sherman Act does not prohibit conduct which is
otherwise deceptive, malicious, harsh, unfair, or independently
tortious unless it harms competition. Indeed, every
one of Microsoft's cited cases turned on the fact that the
record failed to show harm to competition as opposed to harm to a
single competitor (except Microsoft cites In re Warfarin Sodium
Antitrust Litigation, 1998 U.S. Dist. LEXIS 19555, at *27-28,
which found that supplying fraudulent information to agencies
supported a Section 2 claim).51
Intellectual property: Microsoft's argument that
it cannot be found liable for violating the Sherman Act because the
namespace extension APIs were its "intellectual property" is
indistinguishable from the same argument it raised, and lost, in
the Government Case. The D.C. Circuit wrote that Microsoft's
argument "border[ed] upon the frivolous" and "is no more correct
than the proposition that use of one's personal property, such as a
baseball bat, cannot give rise to tort liability." Microsoft, 253
F.3d at 63. As this Court properly instructed the jury,
"intellectual property rights do not confer a privilege to violate
the antitrust laws."
Tr. 5349:16-18; see also Microsoft, 253 F.3d at 63. While
innovation is a form of competition on the merits, a monopolist may
maintain its monopoly power only through the pro-competitive use of
that innovation — for example, providing a better or less
expensive product. See Foremost Pro Color, Inc. v. Eastman Kodak
Co., 703 F.2d 534, 544-45 (9th Cir. 1983), overruled on
other grounds by Hasbrouck v. Texaco, Inc., 842 F.2d 1034 (9th
Cir. 1987); GAF Corp. v. Eastman Kodak Co., 519 F. Supp.
1203, 1227 (S.D.N.Y. 1981).
Withdrawal of technical support: Microsoft wrongly
cites Intergraph Corp. v. Intel Corp., 195 F.3d 1346 (Fed.
Cir. 1999), for the proposition that "withdrawal of technical
support is not anticompetitive." Microsoft Mem. at 98.
Intergraph does not stand for this proposition. Instead,
applying standard Section 2 analysis, the Federal Circuit found
that (1) the defendant did not have monopoly power in the relevant
market, which had no significant barriers to entry, id. at
1355, 1364; (2) the plaintiff failed to show that the challenged
conduct could harm competition, id. at 1359, 1362, 1367; and
(3) therefore the defendant did not need to establish a
pro-competitive business justification for its conduct as would
otherwise be required, id. at 1359. Nothing in that case
suggests that monopolists can withdraw technical support for
illegitimate reasons if the conduct harms competition.
Ordinary industry practice: At trial, Microsoft
sought a jury instruction that its conduct could not be deemed
anticompetitive if its conduct was "not inconsistent with software
industry practice." Microsoft's Proposed Final Jury Instructions,
Ex. A at 7 (Dec. 5, 2011) (Dkt. # 330). This Court correctly
rejected it. Jury Instructions Given by the Court at 7-11 (Dec. 19,
2011). Microsoft tries to revive this argument by relying on
Telex Corp. v. IBM Corp., 510 F.2d 894, 925-26 (10th Cir.
1975), but fails to mention that the Tenth Circuit revisited
Telex in Instructional Systems Development Corp. v. Aetna
Casualty & Surety Co., 817 F.2d 639,
649 (10th Cir. 1987), to clarify that Telex held only
that ordinary business practices did not become anticompetitive
merely because they were undertaken by a monopolist.
In that case, the Tenth Circuit used standard Section 2 analysis to
find that a monopolist's short-term price cutting may be unlawful
when it is used to secure long-term monopoly profits, particularly
when coupled with evidence of bribery, disparagement, and lawsuit
abuse. 817 F.2d at 648-49.52
In fact, evidence at trial established that Microsoft's decision
to withdraw functionality (as opposed to fixing bugs) was highly
unusual. The purpose of releasing a beta version to ISVs is to
identify bugs and "hammer out the problems; not at that point, to
do new features or change features." Tr. 303:3-15, 336:6-12
(Harral); Tr. 1389:7-25 (Alepin). As Mr. Harral testified, in his
31 years of experience in the software industry, "an operating
system vendor removing a major feature from a published beta
[would] be an extraordinary event." Tr. 335:4-8, 336:6-12 (Harral).
Mr. Alepin characterized the decision as "exceptional." Tr.
2. Microsoft Cannot Establish as a Matter of Law That Its
Justified by a Non-Pretextual, Legitimate Business
After the plaintiff makes a prima facie showing of harm
to competition, the burden shifts to the monopolist to prove a
non-pretextual, legitimate business justification for its conduct.
Microsoft, 253 F.3d at 59; see also Multistate Legal
Studies, 63 F.3d at 1550. A monopolist may not, however,
justify its conduct simply by asserting that it wanted to preserve
its market power, see Microsoft, 253 F.3d at 72, or that it
wanted to underwrite its short-term losses with monopoly profits in
Microsoft has put forth what it claims are three legitimate
business justifications for its decision to withdraw support for
the namespace extension APIs: (1) a poorly designed application
written to use the namespace extension APIs could crash the Windows
95 shell; (2) the namespace extension APIs were not compatible with
future versions of Windows that were then being developed; and (3)
the namespace extension APIs were trivial and did not achieve the
functionality for which Bill Gates had hoped.
As an initial matter, whether Microsoft has met its burden of
proving that its purported justifications are legitimate and
non-pretextual is a question of fact to be determined by the jury
and is not a proper basis for judgment as a matter of law. See,
e.g., JamSports & Entm't LLC v. Paradama Prods., Inc., 336
F. Supp. 2d 824, 843 (N.D. Ill. 2004) (whether the defendant had
"'valid business reasons'" for its conduct is a question of fact
and jury can look to monopolist's intent to determine whether its
conduct had a purpose other than excluding competition (citation
The fact that Mr. Gates' email directing his subordinates to
de-document the namespace extension APIs makes no mention of any of
these three alleged justifications is, in and of itself, sufficient
to create a question of fact. The trial record further refutes
Microsoft's proffered justifications in all other respects.
a. Microsoft's claim that a poorly written program using the
namespace extension APIs could crash the Windows 95 shell is
Microsoft claimed at trial that a poorly written program using
the namespace extension APIs could crash the entire shell because
those APIs run in the same process as the Windows 95 shell
(sometimes described as running "in-process").54 Mr. Gates, however, not
only failed to mention this alleged issue in his email ordering
de-documentation, but he admitted that there was nothing "wrong
with the extensions" and that they were "a very nice piece of
See PX 1; see also Tr. 3079:23-3080:17 (Gates); Tr.
3329:15-20 (Struss). Satoshi Nakajima, the inventor of the
namespace extension APIs, corroborated this when he testified about
"the real reason" rather than the "surface reason" that Mr. Gates
de-documented the namespace extension APIs. Tr. 3775:15-3776:19
The record further shows that this supposed robustness concern
did not prevent Microsoft from fully documenting and publishing the
same APIs after its conduct caused Novell to sell
WordPerfect.56 See, e.g., PX 355 at 4-5; PX 604
at 2-3; DX 131A at 3. Microsoft's own expert admitted this fact.
Tr. 5061:4-5062:4 (Bennett).57
Microsoft also continued using the namespace extension APIs in
its own products, subjecting Windows 95 to the same alleged
concerns it now claims justified de-documentation.58 For example, Microsoft
allowed its MSN client (codenamed "Marvel") to continue to use the
namespace extension APIs even after the APIs were de-documented.
Tr. 5071:3-13 (Bennett); see also Tr. 3787:22-3788:20
(Nakajima); Tr. 4324:21-23 (Belfiore); PX 324 at MS98 0120900 01;
PX 530. Similarly, Microsoft's Office team continued to incorporate
the namespace extension APIs in its development plans for future
versions of Office, including Office '96.59
PX 379 at MS-PCA 1566800-01, 804. In addition, the record shows
that Microsoft continued to use the namespace extension APIs in the
development of Internet Explorer,60 see, e.g., Tr. 3802:5-8,
3850:8-12 (Nakajima); PX 344 at MS-PCA 1085016, and Athena
(Microsoft's Internet Mail and News client), PX 344 at MS-PCA
1085016; see also Tr. 3852:18-3853:24 (Nakajima).
Internally, Microsoft's executives voiced concern over the
continued use of the namespace extension APIs by Microsoft after
they were de-documented. In an August 1995 email, Microsoft's Scott
Henson wrote to other top Microsoft executives to voice a "STRONG
concern" for the ISVs because "approximately a year ago [Microsoft]
told ISVs that a set of interfaces (known as namespace extensions)
were no longer going to be a part of the standard Win32 API set"
and were instead moved to an unsupported status. See PX 324
at MS98 0120901. Upon finding out that Microsoft's Athena product
used the namespace extension APIs, Mr. Henson stated that:
This is the EXACT thing we told ISVs they could (and
should) not do! In short we have a product that will be
sold in the very near future that will implement interfaces that we
told ISVs they should not use because we would not be able to
support them moving forward. In the meantime we were developing a
product that did exactly that. I can't even express how BAD
this is! We loose [sic] everything when we do this! Credibility,
trust, leverage, the works! ... Assuming that we are going
to support these APIs as a part of the standard Win32 API set we
should document them — QUICK! Our ISVs are already months
Id. (emphasis added).
This evidence could lead a reasonable jury to believe that
Microsoft's explanation is simply a pretext and undermines its
credibility with regard to other explanations.
b. Microsoft's claim that the namespace extension APIs were
compatible with future versions of Windows under development is
The evidence rebuts Microsoft's assertion that it withdrew the
namespace extension APIs due to supposed incompatibilities with
future versions of Windows, specifically Windows NT and Cairo, in
First, the Windows 95 shell was developed with future operating
systems in mind. See, e.g., PX 324 at MS98 0120900. In late
1993, Paul Maritz (one of Microsoft's most senior executives)
informed Bill Gates that the Windows 95 shell extensions, which
included the namespace extension APIs, would use a "lighter weight
OLE implementation" that would ensure their compatibility with
Cairo. See PX 94 at MS7048981. To achieve this goal, Mr.
Nakajima spent weeks re-architecting the namespace extension APIs
to use a new lightweight OLE implementation that Cairo would
support. See PX 114 at MS7083975. When Mr. Nakajima
completed his work, Microsoft's Brad Silverberg (the executive in
charge of Windows 95 development) wrote that he was "very proud of
the way the team has architected the extension mechanism to use OLE
interfaces but have a lightweight implementation underneath." PX
129 at MS 5064050. Mr. Silverberg was clear, in both
contemporaneous documents and later testimony, that the Windows 95
shell and namespace extension APIs were developed with Windows NT
in mind. See, e.g., PX 324 at MS98 0120900; Dep. of B.
Silverberg, Jan. 22, 2009 (played Oct. 25, 2009) at 134:11-135:8
(Dkt. # 278). In fact, Mr. Silverberg testified that the Windows 95
shell ported to Windows NT "super easily." Dep. of B. Silverberg,
Jan. 22, 2009 (played Oct. 25, 2011) at 134:11-135:8.
Second, when Mr. Gates decided in September 1994 to
simultaneously scrap the Cairo project and use the Windows 95 shell
codebase as the codebase for Windows NT — two weeks prior to
his decision to de-document the namespace extension APIs — he
mooted any compatibility issues between the namespace extension
APIs and Cairo or Windows NT, and thus any such issues could not
have been the basis for the de-documentation. See, e.g., PX
212; PX 216. Microsoft's witness Bob Muglia testified that upon
cancellation of the Cairo shell in September 1994, "[t]here was no
remaining concern about compatibility." Tr. 3513:12-18
c. Microsoft's claim that the namespace extension APIs were
"trivial" and did not achieve the functionality that Bill Gates
hoped for is pretextual
The evidence at trial also refuted Microsoft's assertion that
the namespace extension APIs were "trivial and unimportant," see
Dep. of B. Gates, May 19, 2009 (played on Oct. 19, 2011) at
259:15-260:4 (Dkt. # 277), and that the APIs did not achieve the
functionality that Mr. Gates intended for them.
Contemporaneous documents and testimony adduced at trial reveal
that Mr. Gates viewed the namespace extension APIs as much more
than trivial. For example, in 1994, he referred to the
hierarchical/tree view used by the namespace extension APIs as
"critical" and "central to [Microsoft's] whole strategy."
See PX 134 at MSC 00795586. Additionally, Mr. Muglia
testified that he recalled that Mr. Gates viewed these APIs as
important. See Tr. 3532:19-3533:1 (Muglia). Similarly, while
working with the namespace extension APIs after
de-documentation, the Office '96 team described IShellFolder and
IShellView as "crucial interfaces" for their development of an
Office Shell. See PX 400 at MS-PCA 1566793.
Similarly, several ISVs had a deep interest in using the
namespace extension APIs. For example, after the namespace
extension APIs were demonstrated at a Microsoft design conference
(but before they were documented), ISVs requested that Microsoft
publish them. See, e.g., PX 64 at MS7093163; PX 84 at MS
5043511. After Microsoft partially documented the namespace
extension APIs in June 1994, a September 1994 report prepared by
Microsoft's Scott Henson indicates that a number of ISVs were using
or planned to use them. See PX 215 at MX 6109491-92. In
addition, Novell's witnesses testified extensively regarding their
planned uses of the namespace extension APIs.
That the namespace extension APIs achieved significant
functionality is further demonstrated by the fact that Microsoft
sought and eventually received a patent for those APIs. See
PX 364. Moreover, as shown above, Microsoft itself extensively used
the namespace extension APIs in its own products. For instance, Mr.
Henson's September 1994 report details the activities of several
Microsoft groups that were actively using or planning to use the
namespace extension APIs, including Marvel, Access, Capone, and
See PX 215 at MX 6109491; see also PX 219 at MX
5117033. The Marvel team in particular described the
de-documentation of the namespace extension APIs as a "bombshell."
PX 221 at MX 5103234. Furthermore, Microsoft's Athena PIM also used
the namespace extension APIs, a fact that Messrs. Henson and Struss
noted with great concern in an August 1995 email. PX 324 at MS98
0120900-01. That same email also demonstrates that the namespace
extension APIs achieved
the functionality that Mr. Gates envisioned. Id. at MS98
0120901 (noting that Athena not only used "the namespace extensions
but they are also displaying themselves in the scope (left) pane
and view (right) pane").
3. Monopolists May Not Contract Their Way Out of Section 2
Because the Sherman Act serves to protect the public interest,
it is well settled that a monopolist may not avoid liability by
relying on contractual provisions purporting to waive or disclaim
future liability. See, e.g., Italian Colors Rest. v. Am. Express
Travel Related Servs. Co. (In re Am. Express Merchs.' Litig.),
634 F.3d 187, 197 (2d Cir. 2011) (noting the "firm principle of
antitrust law that an agreement which in practice acts as a waiver
of future liability under the federal antitrust statutes is void as
a matter of public policy"); Redel's Inc. v. Gen. Electric
Co., 498 F.2d 95, 99 (5th Cir. 1974) ("The prospective
application of a general release to bar private antitrust actions
arising from subsequent violations is clearly against public
policy. . . . Releases may not be executed which absolve a party
from liability for future violations of our antitrust laws.");
Fox Midwest Theatres, Inc. v. Means, 221 F.2d 173, 180 (8th
Cir. 1955) ("Any contractual provision which could be argued to
absolve one party from liability for future violations of the
anti-trust statutes against another would to that extent be void as
against public policy. Such a release, if recognized as having any
validity of that nature, could therefore itself operatively serve
as a contract in restraint of trade."); Flying J Inc. v. TA
Operating Corp., No. 1:06-CV-30-TC, 2008 WL 4923041, at *4 (D.
Utah Nov. 14, 2008) ("a prospective release of antitrust claims
would be void as against public policy"); see also Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
637 n.19 (1985) (stating that if contractual clauses operated "as a
prospective waiver of a party's right to pursue statutory remedies
violations, we would have little hesitation in condemning the
agreement as against public policy").
Microsoft's reliance on language in the Beta Release Agreement
disclaiming liability is therefore flawed as a matter of law.
See supra Argument Part II.B.1.c. Further, while there may
be circumstances where a beta version must be changed in order to
address bugs identified during the testing process, there is no
evidence that Microsoft received any negative feedback from ISVs
regarding the namespace extension APIs after it released partial
documentation in its M6 beta release. Tr. 3826:23-3827:12
III. A REASONABLE JURY COULD FIND THAT MICROSOFT'S
ANTICOMPETITIVE CONDUCT CAUSED NOVELL INJURY AND AWARD
A. Microsoft's Conduct Caused Antitrust Injury To
As discussed above, the United States is authorized to bring an
equitable enforcement action without showing that the monopolist
proximately caused an injury. By contrast, a private antitrust
plaintiff must also prove (1) that the violation caused it injury
in fact; (2) that the violation was a material cause of its injury;
and (3) that the injury is the kind of injury that the antitrust
laws were intended to prevent and "'flows from that which makes
[the] defendants' acts unlawful.'" Novell, 505 F.3d at 311
(alteration in original) (citation omitted); see also
Reazin, 899 F.2d at 960-61.
In 2007, the Fourth Circuit ruled that Novell's allegations were
sufficient to establish antitrust standing — a doctrine that
includes proximate causation and antitrust injury, and prudential
principles that ensure the plaintiff should be permitted to bring a
private damages claim for the challenged conduct. Novell,
505 F.3d at 310 n.16 (citing AGC, 459 U.S.
at 535 n.31).62 Antitrust standing permits private
lawsuits only for those plaintiffs that can establish that they
were direct, not remote, victims of the violation and will best
fulfill the public's interest in enforcing the antitrust laws.
AGC, 459 U.S. at 542. The Fourth Circuit thus confirmed that
Novell's asserted injuries are "antitrust injuries" and that
Novell's claim is little different from the claims that Netscape
and Sun could have properly asserted. Novell, 505 F.3d at
314 & n.22.
1. Novell Established Injury in Fact
Proving the fact of damage does not require Novell to prove the
dollar value of its injury. It requires only that Novell prove that
it suffered some injury as a result of the antitrust violation.
Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S.
100, 114 n.9 (1969) (The plaintiff's "burden of proving the fact of
damage under § 4 of the Clayton Act is satisfied by its proof
of some damage flowing from the unlawful [conduct]; inquiry beyond
this minimum point goes only to the amount and not the fact of
damage."). In this case, the question is whether Microsoft's
conduct caused any lost sales. As discussed in detail above, Novell
established that it lost sales when it could not timely release
PerfectOffice and WordPerfect due to Microsoft's withdrawal of
support for the namespace extension APIs.
2. Novell Established Material Causation
While Novell was required to show that Microsoft's conduct was a
"material" cause of its injury, Novell was not required to prove
that the antitrust violation was the sole cause of its injury, nor
must Novell eliminate all other possible causes of injury.
Zenith Radio, 395 U.S. at 114 n.9 ("[A] plaintiff need not
exhaust all possible alternative sources of injury in fulfilling
burden of proving compensable injury under [Clayton Act] §
4."); U.S. Football League v. Nat'l Football League, 842
F.2d 1335, 1377 (2d Cir. 1988) ("'An antitrust plaintiff is not
required to show that the defendants' acts were a greater cause of
the injury than other factors. Plaintiffs need only show that their
injury to some degree resulted from defendants' violation.'"
(citation omitted)); Reibert v. Atl. Richfield Co., 471 F.2d
727, 731 (10th Cir. 1973) (There must be "a causal connection
between an antitrust violation and an injury sufficient [for the
trier of fact] to establish the violation as a substantial factor
in the occurrence of damage.").
The Fourth Circuit explained that the causal link between
Microsoft's anticompetitive conduct and the loss in value of
Novell's office productivity applications is straightforward.
Novell, 505 F.3d at 316. Preventing Novell from timely
releasing PerfectOffice and WordPerfect for Windows 95 "naturally
tended to decrease Novell's market share and consequently decrease
the value of its applications." Id. In addition,
de-documenting the namespace extension APIs "would have put Novell
at a competitive disadvantage vis-à-vis Microsoft's
office-productivity applications, leading naturally to a loss of
market share for Novell." Id.
Whether Microsoft's conduct was a material factor in causing the
delay in WordPerfect's release is a question of fact for the jury
that is not an appropriate basis for granting Microsoft's motion.
As this Court is aware, the jury indicated unanimous
agreement for Novell on Questions 1 through 3 of the jury verdict
form regarding causation because the evidence plainly demonstrated
that Microsoft's conduct was a material factor in causing Novell's
injuries. Accordingly, a legally sufficient evidentiary basis
exists for a reasonable jury to find that Microsoft's conduct was a
material factor in causing Novell's injuries.
Nevertheless, Microsoft asserts that (1) the Non-Disclosure
Agreement should have made Novell aware that Microsoft could modify
Windows 95 at any time and (2) purported delays in
developing Quattro Pro were responsible for Novell's injuries.
As discussed above, nothing in the Non-Disclosure Agreement warned
Novell that Microsoft would change its product without legitimate
justification. The evidence established, in fact, that Novell had a
reasonable basis to expect Microsoft to follow through on its
commitment because vendors rarely, if ever, remove functionality
from a beta-version release.
With regard to Quattro Pro, the evidence is equally clear. Gary
Gibb, the director for the PerfectOffice 95 suite (codenamed
"Storm"), testified that he monitored the progress of all of the
suite's components, Tr. 786:6-8, 795:2-13 (Gibb), held weekly
meetings attended by all of the PerfectOffice 95 sub-teams (and
their directors) including Quattro Pro, and tracked Quattro Pro's
progress to ensure that it was on the same "critical path" as the
suite's other components, Tr. 795:2-796:1, 807:1-13 (Gibb). While
Novell initially was concerned that Quattro Pro might delay its
suite for Windows 95, that concern never came to pass. Tr.
806:15-25 (Gibb). Mr. Gibb testified that the Quattro Pro team
turned out to be "a pleasant surprise," given that they were "very
conservative in their estimates" of completing the product but
ultimately "over delivered." Id.
Mr. Gibb testified that the delays were the result of delays in
the development of shared code — the group dealing with the
namespace extension APIs — and that Quattro Pro was
"absolutely" not responsible for the development delays, stating
"every week, week after week it was shared code. Shared code. It
was not Quattro Pro." Tr. 904:5-10 (Gibb) (emphasis added). Mr.
Gibb further testified that the resignation of Quattro Pro
developers in December 1995 could
not have affected the suite's development schedule,63 because
Quattro Pro was already code complete by then. Tr.
Witnesses from both sides testified that Mr. Gibb was best
situated to know if Quattro Pro delayed the release of
PerfectOffice 95. See Tr. 550:15-23 (Harral); Tr.
1242:10-1243:14 (Frankenberg); Tr. 3715:19-24 (Ford); Tr.
3216:17-20 (Bushman); Tr. 3648:11-16, 3651:7-14 (Larsen). Microsoft
argues that Mr. Gibb's testimony does not rise to the level of
"substantial evidence" required to defeat a motion for judgment as
a matter of law, Microsoft Mem. at 116-17, but its argument ignores
the well-settled law that the Court must view the evidence in the
light most favorable to the nonmoving party. See, e.g.,
Guides, 295 F.3d at 1073.
While Mr. Gibb's testimony is enough to create an issue of fact,
substantial additional record evidence corroborates him. For
example, in her self-evaluation, Quattro Pro's lead developer and
manager, Dorothy Wise, contemporaneously noted that her team
localization work a full month early on February 28,
Compare DX 217 at NOV-B074668933 with DX 219 at
NOV-B06655277; see also DX 231 at NOV00161054 (confirming
that Quattro Pro was code complete in August 1995).66 The record
evidence shows that by December 1995 and early 1996, the Quattro
Pro team's work was limited to fixing bugs. Tr. 809:17-23
B. Novell's Injury Was Of A Type That The Antitrust Laws Were
The Fourth Circuit confirmed that the harm Novell alleged was
"plainly an injury to competition that the anti-trust laws
were intended to forestall." Novell, 505 F.3d at 316.
Novell's injuries were, in fact, an integral aspect of the
anticompetitive conduct. See, e.g., Reazin, 899 F.2d at 962
("'Where the injury alleged is so integral an aspect of the
[violation] alleged, there can be no question but that the loss was
precisely "the type of loss that the claimed
violations ... would be likely to cause."'" (ellipsis in
original) (citations omitted)). The Fourth Circuit's ruling is, in
and of itself, dispositive.
Microsoft seeks to avoid the Fourth Circuit's ruling by
attempting to impose a consumer-or-competitor rule of standing,
asserting that Novell has cited no case where a private antitrust
plaintiff obtained money damages based on a "cross-market" theory
of anticompetitive harm. Microsoft is wrong in at least two
respects. First, as discussed above, it incorrectly presumes that
the rules for proving harm to competition are different for private
damage claims than for government enforcement actions. The
Government Case provides the most apt example of a "cross-market"
Second, Microsoft ignores Reazin, 899 F.2d 951. In that
case, the defendant Blue Cross was a traditional third-party
medical insurer that, through special enabling legislation,
monopolized the market for private healthcare financing in the
area. It perceived a threat to its monopoly when a local health
maintenance organization ("HMO") purchased the largest hospital in
the area, Wesley, and sought through that combination to offer a
different type of healthcare financing by combining the HMO concept
with hospital ownership. Id. at 954-55. The plaintiffs
alleged that Blue Cross "determined to 'hurt' Wesley and thereby
send a message to other hospitals not to do business with entities
Blue Cross believed were competitors." Id. at 954. Blue
Cross terminated its contract with Wesley and rewarded Wesley's
competitor hospitals with better payment terms, which increased
Wesley's cost of doing business and caused a shift of Blue Cross
patients from Wesley to Wesley's competitors. Id. at 954-55.
The jury found that Blue Cross's conduct directed at Wesley
restricted the access of healthcare consumers to healthcare
financing arrangements involving entities other than Blue Cross and
deprived them of
benefits of competition in that market, "'thereby restraining
competition in the health care financing market'" and awarded
damages. Id. at 965 (quoting 663 F. Supp. at 1413).
In its motion for judgment notwithstanding the verdict, Blue
Cross argued that Wesley could not establish antitrust standing and
injury because it "'was not in the relevant market selected by the
court, health care financing, either as a consumer or as a
competitor.'" Id. at 962 (citation omitted). The Tenth
Circuit disagreed, noting that Blue Cross perceived Wesley's
affiliation with an HMO as a threat to its monopoly power and that
was the precise reason that Blue Cross targeted Wesley. Id.
at 962-63. The Tenth Circuit found that the anticompetitive conduct
was an integral aspect of Blue Cross' plan to eliminate competitive
threats in the healthcare financing market, that Wesley was the
direct victim of Blue Cross' actions, and that there was evidence
that Blue Cross specifically intended to harm Wesley. Id. at
963. The Tenth Circuit further observed that the threat to Blue
Cross's monopoly power did not come from existing competitors, but
from "'alternative delivery systems.'" Id. at 965 (quoting
663 F. Supp. at 1413). The Tenth Circuit added that "an antitrust
plaintiff need not necessarily be a competitor or consumer,"
id. at 963, and that it was "aware that the Supreme Court
may be concerned about reading section 4 of the Clayton Act too
broadly [but] [w]e do not believe we have done so in this case,"
id. at 962 n.16 (citing AGC, 459 U.S. at 529-30 &
Reazin is directly on point. It involved a cross-market
theory of anticompetitive harm and resulted in damages. Here, as in
Reazin, the monopolist reasonably perceived a threat from a
plaintiff outside of the relevant market and engaged in
anticompetitive conduct specifically targeting that plaintiff to
prevent it from facilitating that threat. Just as in Reazin,
the incumbent monopolist had a greater incentive to "parry
threats from outside the field instead of from within."
Novell, 505 F.3d at 319. Microsoft's argument that the Tenth
Circuit in Elliott
Industries Ltd. Partnership v. BP America Production Co.,
407 F.3d 1091 (10th Cir. 2005), reversed Reazin and instead
imposed a bright-line consumer-or-competitor rule cannot withstand
scrutiny, nor can it overturn the Supreme Court's precedent in
AGC, 459 U.S. 519, and Blue Shield of Virginia v.
McCready, 457 U.S. 465, 472 (1982), which explicitly declined
to impose such a rule. In Elliott, the plaintiff failed to
allege any antitrust injury resulting from conduct that harmed
competition. 407 F.3d at 1125. Notably, the Tenth Circuit cited
Reazin with approval. Id. at 1124.
Accordingly, the Fourth Circuit's ruling in this case, Tenth
Circuit precedent, the Government Case, and the jury's agreement on
causation all support a finding of proximate causation and
C. A Reasonable Jury Would Have Ample Evidence From Which It
Determine Novell's Damages
1. Quantification of Damages
The method of computing damages is not suited for a Rule 50(b)
motion where proximate causation and injury in fact have already
been established. See, e.g., Roth v. Naturally Vitamin
Supplements, Inc., No. CV-04-2135-PHX-FJM, 2007 WL 2020114, at
*1 (D. Ariz. July 6, 2007). By definition, if the jury concludes
that Microsoft's conduct caused some injury to Novell, then damages
are appropriate. The only question is, how much? Even if this Court
chooses to consider the issue, the jury was provided with ample
evidence to determine the amount of damages.
When a plaintiff proves the existence of an injury, jurors are
entitled to make a just and reasonable estimate of damages.
Law, 5 F. Supp. 2d at 929. Damages need not be determined
with mathematical certainty. Id. Once an antitrust violation
has been established, a damages
award will not be questioned so long as it is not based on
"'speculation or guesswork.'" Id. (citations omitted).
Courts accept a degree of uncertainty in fixing the amount of
damages because "'[t]he vagaries of the marketplace usually deny us
sure knowledge of what plaintiff's situation would have been in the
absence of the defendant's antitrust violation'" and "'it does not
come with very good grace' for the wrongdoer to insist upon
specific and certain proof of the injury which it has itself
inflicted." Id. (citations omitted).
Dr. Warren-Boulton measured damages in several different ways,
each of which is independently appropriate and which, cumulatively,
reinforce each other. First, he calculated the loss in the value of
the WordPerfect business attributable to the extensive delay caused
by Microsoft's anticompetitive conduct. Tr. 2094:2-2098:19
(Warren-Boulton). Microsoft's expert, Professor Glenn Hubbard, used
virtually the same methodologies. Tr. 4481:19-4482:16 (Hubbard).
Second, Dr. Warren-Boulton analyzed the market's reaction to
Novell's October 6, 1995 announcement that it would not release its
Windows 95 suite until early 1996 to assess the financial effect of
Microsoft's anticompetitive conduct. Tr. 2096:19-2098:19
(Warren-Boulton). Third, Dr. Warren-Boulton projected the market
share that WordPerfect would have attained absent the
anticompetitive activity, and then projected Novell's profits
accordingly. Tr. 2196:132199: 20, 2202:8-2203:7, 2431:3-19
(Warren-Boulton). Professor Hubbard used a very similar
methodology. Tr. 4482:21-4487:5, 4493:1-3 (Hubbard).
Dr. Warren-Boulton constructed his damages estimates based on
the assumption that Novell would have released PerfectOffice within
"a sufficiently short time period" after Microsoft publicly
released Windows 95, namely by the end of November 1995. Tr.
2421:122423: 1, 2423:13-20 (Warren-Boulton). Dr. Warren-Boulton
expressly relied on the testimony of Novell's developers in
estimating when Novell would have released its products for Windows
but for the de-documentation of the namespace extension APIs.
Tr. 2417:22-2418:21, 2420:162421: 1, 2423:8-12, 2425:10-16
(Warren-Boulton). The testimony of the Novell developers is crystal
clear that WordPerfect's goal was "to ship within 90 days of the
release of Windows 95." Tr. 282:20-21 (Harral); see also Tr.
797:9-12, 805:23-806:14 (Gibb). This goal was consistent with
Microsoft's First Wave Program, which was a program designed to get
a "critical mass of ... key Chicago applications to ship within 90
days of Chicago's shipment." PX 148 at MSPCA 2150196; see
also Tr. 282:17-283:16 (Harral); Tr. 3250:16-24 (Struss). As a
member of the First Wave Program, WordPerfect was "contractually
committed" to release its Chicago applications within 90 days of
Windows 95's release. PX 117 at NOV-B00833356; see also Tr.
3252:23-25, 3283:6-12 (Struss).
Contrary to Microsoft's suggestion, Novell's developers never
testified that they planned, or needed, to release their
applications within 60 days of Windows 95's release (although the
jury reasonably could find that PerfectOffice would have been
released within 60 days but for Microsoft's conduct).67
2. Disaggregation of Damages
Microsoft incorrectly argues that Dr. Warren-Boulton failed to
"disaggregate," or account for factors other than Microsoft's
anticompetitive conduct, in estimating damages. As a matter of both
law and fact, Microsoft is wrong. Legally, disaggregation issues
arise when a plaintiff
challenges more than one type of conduct and the jury can
conclude that some, but not all, of the challenged conduct was
unlawful. See, e.g., ILC Peripherals Leasing Corp. v. IBM
Corp., 458 F. Supp. 423, 434 (N.D. Cal. 1978), aff'd sub
nom. Memorex Corp. v. IBM Corp., 636 F.2d 1188 (9th Cir. 1980);
M. Sean Royall, Disaggregation of Antitrust Damages, 65
Antitrust L.J. 311, 311 (1997) ("[W]here an antitrust plaintiff
challenges multiple discrete acts or practices as
unlawful, damages cannot be proved in the aggregate." (emphasis
added)). In that situation, the jury should be given a reasonable
basis to estimate damages attributable to each type of unlawful
conduct, if practical. See ILC Peripherals Leasing, 458 F.
Supp. at 434. That is not the case here. There is substantial
evidence showing that Novell's damages are attributable to the
delay caused by Microsoft's anticompetitive conduct. Novell, of
course, does not attribute any damages to the harm caused by
Microsoft's exclusion of Navigator, Java, Lotus, and others.
Thus, any dispute that Microsoft has with Dr. Warren-Boulton's
methodology goes to the weight of his testimony, not to its
admissibility. In re High Pressure Laminates Antitrust
Litig., No. 00 MDL 1368(CLB), 2006 WL 931692, at *2 (S.D.N.Y.
Apr. 7, 2006) (denying defendant's motion to exclude expert
testimony, stating: "'It is true that Dr. Rausser utilized numerous
factors to support his ultimate conclusions and that he did not
disaggregate these factors or potential lawful behavior of the
Defendants. However, these issues concern the weight that the jury
may choose to give Dr. Rausser's testimony.'" (citation omitted));
see also In re Sulfuric Acid Antitrust Litig., 446 F. Supp.
2d 910, 923 (N.D. Ill. 2006); Aventis Envtl. Sci. USA LP,
383 F. Supp. 2d at 514.68
Factually, Dr. Warren-Boulton accounted for factors other than
Microsoft's conduct. For example, Dr. Warren-Boulton determined
that Novell overpaid for WordPerfect and Quattro Pro by about $421
million, or 27% of the total purchase price. Tr. 2115:8-10
(Warren-Boulton). Microsoft's expert, by contrast, asserted that
Novell overpaid by nearly $1.35 billion, or more than 87% of the
purchase price. Tr. 4466:1-16 (Hubbard); see also Tr.
2115:14-2116:1 (Warren-Boulton). Dr. Warren-Boulton also considered
the effect of events occurring prior to the acquisition and
Novell's alleged mismanagement of the business. First, Dr.
Warren-Boulton concluded that Novell's dramatic drop in revenues on
Windows 95 could not be attributed in any way to WordPerfect's
transition from DOS to Windows 3.0. Tr. 2169:13-2170:20,
2173:6-2174:16 (Warren-Boulton). Specifically, Dr. Warren-Boulton
determined that even though WordPerfect was late to Windows 3.0, it
did "quite well" on that platform, and furthermore, even if
WordPerfect had failed to transition well to Windows 3.0, the
market's reaction was already factored into the purchase price
Novell paid for WordPerfect. Tr. 2173:6-2174:16 (Warren-Boulton).
Second, Dr. Warren-Boulton rejected Microsoft's argument that
Novell's alleged poorly managed acquisition of UNIX Systems
Laboratories caused the market to devalue WordPerfect in the hands
of Novell, noting the lack of any contemporaneous evidence
supporting Microsoft. Tr. 2176:1-15 (Warren-Boulton). Third, Dr.
Warren-Boulton relied on the overwhelming evidence (detailed
supra Facts Part I.A-B) in concluding that Novell's
PerfectOffice suite was positioned very well to be successful on
Windows 95. Tr. 2177:9-2179:23 (Warren-Boulton). Finally, Dr.
Warren-Boulton determined that Novell's investments in research and
development and Novell's reorganization post-merger, if anything,
increased Novell's value. Tr. 2181:6-2184:1, 2186:2-2187:2
(Warren-Boulton). Thus, Dr. Warren-Boulton properly evaluated and
accounted for Microsoft's alternative
explanations for the decline in the value of Novell's office
productivity applications. Tr. 2186:16-2187:2 (Warren-Boulton).
IV. EVEN IF NOVELL'S CLAIM IS ANALYZED UNDER ASPEN
JUDGMENT AS A MATTER OF LAW WOULD BE IMPROPER
In this Court's summary judgment decision, the Court correctly
recognized that Microsoft's affirmative anticompetitive conduct
takes Novell's claim out of the unilateral-refusal-to-deal
paradigm. But the Court further held, assuming arguendo that
this case presented only a unilateral-refusal-to-deal, that
Novell's claim should still go to the jury. At trial, this Court
properly instructed the jury that "under certain circumstances the
refusal to cooperate with rivals can constitute anticompetitive
conduct, such as when a monopolist has ended a voluntary, and thus
presumably profitable course of dealing." Tr. 5349:18-21. The
evidence presented at trial firmly established the facts necessary
to prove unlawful monopolization under Aspen Skiing.
Microsoft nevertheless argues that the Supreme Court's decision in
Trinko requires judgment to be entered as a matter of law
for Microsoft. Microsoft's argument cannot be sustained.
Trinko presented a unique factual scenario. The
Telecommunications Act of 1996 imposed on Verizon an obligation to
share its telephone network with competitors to promote competition
for telephone services. Trinko, 540 U.S. at 402. A putative
class of telephone customers alleged that Verizon breached the duty
imposed by the Telecommunications Act to share its network with
rivals. Id. at 404. The Supreme Court ruled that, under the
circumstances and given the regulatory scheme created by the Act,
Verizon did not owe any antitrust duty to share its network.
Id. at 411. Trinko is merely an application of the
standard antitrust analysis. Id. at 407. The Supreme Court
observed that the opportunity to charge monopoly prices induces
risk-taking that produces innovation and economic growth, which is
good for competition. Id.
To "safeguard the incentive to innovate," a plaintiff must show,
in addition to possession of monopoly power, "an element of
anticompetitive conduct" — in other words, that the
monopolist's conduct harmed competition and that the harm outweighs
the pro-competitive benefits. Id.
If Novell sought to impose liability on Microsoft for simply
declining requests to make the namespace extension APIs available,
then Trinko might be analogous (and Novell would have
released its suite on time in any event because it would not have
relied on Microsoft's promises). But in cases like Aspen
Skiing, a preexisting, voluntary course of dealing is presumed
to be profitable, and the unilateral cessation of that course of
dealing demonstrates a monopolist's willingness to forsake
short-term profits to increase its long-term monopoly power.
Id. at 409. As discussed above, where conduct makes no
economic sense except for the preservation of monopoly power, then
it is fair to conclude that it harms competition.
The two Tenth Circuit cases cited by Microsoft, Christy
Sports, 555 F.3d 1188, and Four Corners Nephrology, 582
F.3d 1216, are in accord. In Christy Sports, a ski-rental
company alleged that a resort owner, Deer Valley, owed a duty to
provide rental space on the resort owner's property. The Tenth
Circuit disagreed. First, it found that the alleged product market
— rental of skis at Deer Valley's mid-mountain village
— was implausible because Deer Valley catered to
"destination" skiers who chose their resort based on the total
experience, not just the price of rental skis at a mid-mountain
village. Christy Sports, 555 F.3d at 1193-94 ("Consumers do
not travel to Deer Valley for rental skies, just as they do not
attend Yale to live in an Eero Saarinen-designed dormitory.").
Thus, there were no barriers to entry protecting Deer Valley's
power in the market for destination ski resorts and no reason to
believe that Deer Valley could behave like a monopolist in a highly
competitive market. Id. at 1195. Alternatively, and by
same reasoning, id. at 1196, the Tenth Circuit found that
it could characterize its decision as a failure to show that the
conduct harmed competition. The Tenth Circuit found that providing
ski resorts the flexibility to determine how they will recoup their
investments would benefit competition overall by inducing entrants
into the ski resort business. Id. at 1195. The Tenth Circuit
confirmed that it might reach a different result if the plaintiff
had been able to prove that Deer Valley ended a profitable course
of dealing, demonstrating "'a willingness to forsake short-term
profits to achieve an anticompetitive end.'" Id. at 1197
(quoting Trinko, 540 U.S. at 409). The plaintiff, however,
had not paid Deer Valley anything for 10 years before Deer Valley
decided to enforce its contract rights. See id. at 1191.
In Four Corners Nephrology, the facts were even less
favorable for the plaintiff. That case involved the provision of
kidney dialysis and other outpatient nephrology services in the
Four Corners area (where Colorado, Utah, New Mexico, and Arizona
meet). Four Corners Nephrology, 582 F.3d at 1217. For years,
the plaintiff, Dr. Bevan, operated the only practice in the area,
requiring some patients to travel extensively to receive treatment
(dialysis requires treatment three times per week). Id. at
1217-18. Due in part to the travel issues and the high prevalence
of kidney disease in the area, a hospital in Durango, Colorado
(Mercy Medical Center) and a local Indian tribe invested
significant resources to establish and develop nephrology and
kidney dialysis services in the area. Id. at 1218. Mercy
tried repeatedly to hire Dr. Bevan but when unable to do so, hired
someone else. Id. Mercy recognized that its new practice
would likely be unprofitable for several years and set aside $2.5
million to protect its investment. Id.
Dr. Bevan then filed an application to join Mercy's active staff
and twice lied about his residence to try to establish that he
lived within 30 minutes of the hospital (as required by
Mercy's bylaws). Id. In response, Mercy designated its
new practice as the sole provider of nephrology services at Mercy,
explaining that it needed to protect its investment and that it had
reason to believe that Dr. Bevan wanted to drive Mercy's nephrology
services out of business to eliminate competition. Id. at
1218-19. Dr. Bevan sued Mercy, arguing that it was attempting to
monopolize the market for nephrology services in the Durango area.
Id. at 1219.
The trial court granted summary judgment for Mercy and the Tenth
Circuit affirmed because Dr. Bevan was unable to show any
preexisting voluntary course of profitable dealing. The Tenth
Circuit agreed that Mercy had a right to recoup its considerable
investment by being the exclusive provider of such services at the
hospital and that consumers benefited from the investment.
Id. at 1223-24 Under the circumstances, imposing a duty on
the hospital to grant access to a doctor who declined to work for
the hospital would "deter future investments of the sort the
hospital and tribe made in this case — and thus to undermine,
rather than promote, investment, innovation, and consumer choice,
as the Supreme Court feared in Trinko." Id. at 1224.
As noted above, Trinko and Christy Sports both
involved conduct that provided short-term benefits, not losses.
Here, Microsoft essentially admits that it sacrificed short-term
profits, see Microsoft Mem. at 87-90, and there is abundant
evidence that the decision to withdraw support for the namespace
extension APIs was driven by a desire to exclude competition, see,
e.g., PX 1; PX 360. And unlike Mercy in Four Corners
Nephrology, Microsoft has never argued that it hoped to recover
its investment in Windows 95 by withdrawing support for those APIs.
In fact, unless the jury believes Microsoft's pretextual
justifications, Microsoft's conduct makes no economic sense except
insofar as it harmed competition. The antitrust laws prohibit such
A. Microsoft And Novell/WordPerfect Have A Long History Of
Microsoft and WordPerfect had a preexisting, voluntary, and
mutually profitable course of dealing. Because "people buy
computers to run applications not to run operating systems," Tr.
1387:2-1388:8 (Alepin); see also Tr. 1969:1-6 (C. Myhrvold),
Microsoft initially wanted to cooperate with ISVs such as
WordPerfect to ensure Windows' success.69 After establishing its own
word processing and suite products and gaining monopoly power in
the operating systems market, however, Microsoft's incentives
changed because it no longer needed competing applications to sell
its operating systems. To the contrary, Microsoft viewed rival
applications as impediments to its long-run monopoly power.
As shown, Microsoft's argument that its business relationship
with Novell was "temporary" and "subject to change in accordance
with [Microsoft's] 'business judgment,'" Microsoft Mem. at 102, is
factually incorrect. It is also legally insufficient and this Court
properly rejected it. Compare Microsoft's Proposed Final
Jury Instructions, Ex. A at 8 (Dec. 5, 2011) (Dkt. # 330)
with Jury Instructions Given by the Court at 7-11 (Dec. 19,
2011) (Dkt. # 388) (denying Microsoft's request that the jury be
instructed that in order to find for Novell it must find that the
business relationship between Microsoft and Novell "was not
temporary and subject to Microsoft's business judgment"). A
"temporary" course of dealing, even where it involves "business
judgment" in the sense that Microsoft uses these terms, is
sufficient to support a finding of harm to competition. Christy
Sports recognized that a monopolist could be held liable for a
single series of acts — inviting an investment and then
disallowing use of that investment. 555 F.3d at 1196. Four
Corners Nephrology characterized
the relationship in Aspen Skiing as a "short-term
business relationship," 582 F.3d at 1225, and Trinko
characterized the course of dealing in Aspen Skiing as
"voluntary," 540 U.S. at 409. The fact that the relationship could
change does not immunize Microsoft from liability for taking part
in conduct that is anticompetitive. And there is abundant evidence
in the record that Microsoft's decision to de-document the
namespace extension APIs was done without a valid business reason,
which Christy Sports identified as the "critical fact" under
Aspen Skiing. 555 F.3d at 1197.
B. Microsoft Terminated Its Course Of Dealing With Novell
De-Documented The Namespace Extension APIs
Mr. Gates' decision to withdraw support for the namespace
extension APIs terminated Microsoft's course of dealing with regard
to those APIs. Moreover, Microsoft ceased to provide other, related
support. For example, in November 1994, Novell's Kelly Sonderegger
pressed Microsoft's Brad Struss for more documentation on the
namespace extension APIs; Struss provided little more than a
boilerplate response that the functionality was "no longer
available." PX 236 at NL2 0004273; PX 259. Similarly, Novell's Rich
Hume tried and failed to obtain additional information about the
namespace extension APIs. See PX 238. At trial, Mr. Harral
testified that he continued to seek information about the namespace
extension APIs from Microsoft's Premier Support to no avail. Tr.
345:8-346:11 (Harral). Mr. Harral testified that not only did
Premier Support refuse to provide information about the
de-documented namespace extension APIs, but it also steadily
decreased the amount of information it provided about
documented portions of the Windows 95 shell.
Id. Thus, not only did Microsoft terminate its course of
dealing with respect to the namespace extension APIs, but it also
made it more difficult for Novell to deal with documented portions
of Windows 95.
Microsoft denies that it "terminated" its profitable business
relationship with Novell, arguing that Microsoft "continued to
provide information and assistance to Novell." Microsoft Mem. at
93. Microsoft's argument is unavailing. As shown, it is undisputed
that Microsoft stopped working with Novell to implement the
namespace extension APIs. That, alone, is sufficient. See
Creative Copier Servs. v. Xerox Corp., 344 F. Supp. 2d 858,
866-67 (D. Conn. 2004) (holding claim of anticompetitive conduct
could stand where parties agreed to deal with each other and
actually did deal with each other for some time; defendant stopped
dealing or made it difficult for plaintiff to deal with defendant
by, among other things, delaying the shipment of parts, raising
prices, and refusing to sell copiers to plaintiff's customers; and
that cessation served no business purpose); see also MetroNet
Servs. Corp. v. Qwest Corp., 383 F.3d 1124, 1132 (9th Cir.
2004) ("An offer to deal with a competitor only on unreasonable
terms and conditions can amount to a practical refusal to deal
[within the Aspen Skiing exception]."); A.I.B. Express,
Inc. v. FedEx Corp., 358 F. Supp. 2d 239, 250-51 & n.86
(S.D.N.Y. 2004) (holding plaintiff sufficiently alleged
anticompetitive conduct where defendant did not refuse to deal with
plaintiff entirely, but refused to deal on same terms as offered
over prior five-year course of dealing); Nobody in Particular
Presents, Inc. v. Clear Channel Commc'ns, Inc., 311 F. Supp. 2d
1048, 1112-14 (D. Colo. 2004) (radio station deemed to have denied
access to concert promoter even though station still permitted
promoter to purchase ads and support). Further, the courts focus on
the act of "termination" to determine whether the monopolist was
discontinuing a practice that was presumably profitable, not to
implement formalistic distinctions. Here, Microsoft's admission
that its decision caused it short-term losses confirms that the
preexisting arrangement was profitable.
C. There Is No Requirement That Novell Must Prove Microsoft
Access To Information "Available To All Other Consumers"
Microsoft argues that Novell must be able to prove that
Microsoft denied Novell access to information that was available to
all other consumers. This is not the law, as this Court recognized
in denying Microsoft's request for an instruction. Compare
Microsoft's Proposed Final Jury Instructions, Ex. A at 8 (Dec. 5,
2011) (Dkt. # 330) with Jury Instructions Given by the Court
at 7-11 (Dec. 19, 2011) (Dkt. # 388). A finding of anticompetitive
conduct does not require that a particular rival be singled out for
disparate treatment; finding that Microsoft engaged in
anticompetitive conduct does not turn on whether Microsoft treated
various competitors differently or the same with respect to the
namespace extension APIs even under the unilateral-refusal-to-deal
paradigm. Aspen Skiing does not require that a monopolist
treat one rival differently than others in order to impose
Microsoft's incorrect assertion that disparate treatment is
required is based on a distortion of a passage in Four Corner
Nephrology, in which the Tenth Circuit noted that a factor in
the Supreme Court's conclusion that the defendant in Aspen
Skiing had no legitimate justification for ending its course of
dealing with the plaintiff was the fact that the defendant "even
refused to sell lift tickets to [the plaintiff] at the retail rates
available to consumers," 582 F.3d at 1224. Thus, the Tenth Circuit
recognized that it was the absence of a legitimate business
justification for ending the voluntary course of dealing that
resulted in liability in Aspen Skiing — not a failure
to treat all competitors the same way, as Microsoft erroneously
V. NOVELL'S CLAIM IS APPROPRIATELY BEFORE THE COURT
Microsoft also argues (1) that Novell sold its claim to Caldera
in the Asset Purchase Agreement, (2) that Novell's claim is barred
by the NetWare settlement agreement, and (3) that
Novell's claim is barred by the statute of limitations.
Microsoft waived these arguments because it did not raise them in
its Rule 50(a) motion before the case was submitted to the jury.
Moreover, consideration of these arguments is barred by the law of
the case doctrine. Finally, even apart from these fatal flaws,
Microsoft's arguments are without merit.
A. Microsoft Cannot Now Raise Any Grounds For Judgment As A
Matter Of Law
That Were Not Raised In Its Rule 50(a) Motion Before The Case Was
To The Jury
Microsoft is precluded from asserting any grounds for judgment
as a matter of law in the present motion that were not raised in
its Rule 50(a) motion before the case was submitted to the jury.
The present motion is a renewal, pursuant to Fed. R. Civ. P. 50(b),
of the motion for judgment as a matter of law filed by Microsoft
pursuant to Fed. R. Civ. P. 50(a) before the submission of the case
to the jury. "Because the Rule 50(b) motion is only a renewal of
the preverdict [Rule 50(a)] motion, it can be granted only on
grounds advanced in the preverdict motion." Advisory Committee
Notes to 2006 Amendment to Fed. R. Civ. P. 50. "[A] renewed motion
under Rule 50(b) cannot assert grounds for relief not asserted in
the original [Rule 50(a)] motion." Marshall, 474 F.3d at
738-39. "'[A] posttrial motion for judgment as a matter of law can
properly be made only if, and to the extent that, such a motion
specifying the same grounds was made prior to the submission of the
case to the jury.'" Id. at 739 (citation omitted). This rule
"'"protect[s] the Seventh Amendment right to trial by jury, and
ensur[es] that the opposing party has enough notice of the alleged
error to permit an attempt to cure it before resting."'" Id.
(citations omitted). Thus, the failure to raise an issue in a Rule
50(a) motion precludes the defendant from raising the issue in its
Rule 50(b) motion, even if the same issue was raised in the
defendant's answer, or in a summary judgment motion. Therefore, by
not raising in its Rule 50(a) motion its current arguments that
Novell sold its claim to Caldera in the Asset Purchase
Agreement, that Novell's claim (which includes allegations
relating to PerfectOffice) is barred by the NetWare settlement
agreement, and that Novell's claim is barred by the statute of
limitations, Microsoft has waived these grounds and is barred from
raising them in its renewed motion for judgment as a matter of law
pursuant to Rule 50(b).
B. Issues Resolved By The Fourth Circuit Are Law Of The Case
And Cannot Be
Relitigated Before This Court After Remand
Microsoft seeks to relitigate issues that were previously
resolved by the Fourth Circuit. These arguments also are barred by
the law of the case doctrine. "The law of the case 'doctrine posits
that when a court decides upon a rule of law, that decision should
continue to govern the same issues in subsequent stages in the same
case.'" Huffman v. Saul Holdings Ltd. P'ship, 262 F.3d 1128,
1132 (10th Cir. 2001) (citation omitted). "The doctrine has
particular relevance following a remand order issued by an
appellate court." Id. After remand, the court of appeals'
ruling "is not subject to further adjudication" in the district
court because "'[w]hen a case is appealed and remanded, the
decision of the appellate court establishes the law of the case,
which must be followed by the trial court on remand.'" Orient
Mineral Co. v. Bank of China, No. 2:98-CV-238BSJ, 2010 WL
624868, at *14 (D. Utah Feb. 19, 2010) (citation omitted),
aff'd, 416 F. App'x 721 (10th Cir.), cert. denied,
132 S. Ct. 250 (2011).
The rule that the court of appeals' decision is not subject to
further adjudication "applies to all 'issues previously decided,
either explicitly or by necessary implication.'" Rohrbaugh v.
Celotex Corp., 53 F.3d 1181, 1183 (10th Cir. 1995) (citation
omitted). "An argument is rejected by necessary implication when
the holding stated or result reached is inconsistent with the
argument." United States v. Jordan, 429 F.3d 1032, 1035
(11th Cir. 2005) ("We did not address that argument in so many
words, or in any words for that matter, but we did reject it
necessary implication,' which is enough under our decisions to
bring the law of the case doctrine to bear in this appeal."
A district court may only depart from the court of appeals'
decision after remand "'under exceptional circumstances,'" none of
which are present here: "'(1) a dramatic change in controlling
legal authority; (2) significant new evidence that was not earlier
obtainable through due diligence but has since come to light; or
(3) if blatant error from the prior . . . decision would result in
serious injustice if uncorrected.'" Huffman, 262 F.3d at
1133 (alteration in original) (citation omitted).70 In the MDL context, a
remand to a transferee court in a different circuit with a
different interpretation of controlling law than the transferor
court does not constitute the sort of change in controlling law
that would permit departure from the law of the case doctrine.
"There is no authority for the proposition that a circuit split
qualifies as a change in controlling law. Rather, 'federal law is
presumed to be consistent and any inconsistency is to be resolved
by the Supreme Court.'" United States ex rel. Staley v.
Columbia/HCA Healthcare Corp., 587 F. Supp. 2d 757, 762 (W.D.
Va. 2008) (quoting Bradley v. United States, 161 F.3d 777,
782 n.4 (4th Cir. 1998)); see also In re Microsoft Corp.
Antitrust Litig., 127 F. Supp. 2d 702, 718 n.15 (D. Md. 2001)
(Motz, J.) ("I further note that, as the parties have stated, I
must apply Fourth Circuit law as the transferee court in an MDL
proceeding. If these cases are returned to transferor courts,
presumably the rulings I make in this opinion will be binding under
the doctrine of the law of the case, particularly if the Fourth
Circuit reviews these rulings on
interlocutory appeal." (citations omitted)), aff'd sub nom.
Kloth v. Microsoft Corp., 444 F.3d 312 (4th Cir. 2006).
Moreover, "'a legal decision made at one stage of litigation,
unchallenged in a subsequent appeal when the opportunity to do so
existed, becomes the law of the case for future stages of the same
litigation, and the parties are deemed to have waived the right to
challenge that decision at a later time.'" Capps v.
Sullivan, 13 F.3d 350, 353 (10th Cir. 1993) (citation omitted).
The reason for this rule is that "'[i]t would be absurd that a
party who has chosen not to argue a point on a first appeal should
stand better as regards the law of the case than one who had argued
and lost.'" Cnty. of Suffolk v. Stone & Webster Eng'g
Corp., 106 F.3d 1112, 1117 (2d Cir. 1997) (citation omitted).
In Rohrbaugh, the Tenth Circuit held that the plaintiffs had
"waived their right to challenge the correctness of the holdings in
[the prior court of appeals' decision] by failing to seek review of
that decision when they had the opportunity to do so." 53 F.3d at
1184; see also Klay v. All Defendants, 389 F.3d 1191, 1199
(11th Cir. 2004) ("[Defendants'] failure to seek en banc
review or certiorari with respect to these issues caused our
previous ruling to become law of the case."). Similarly, in the
present case, Microsoft did not seek review of the Fourth Circuit's
decision in the Supreme Court, and thus waived any right to
challenge the correctness of the Fourth Circuit's decision.
C. Even If Microsoft's Arguments Were Not Barred By Waiver Or
Law Of The
Case, They Would Fail As A Matter Of Law
1. Novell Did Not Sell Its Claim in Count I to
Microsoft's argument that Novell sold its claim to Caldera still
"lacks a logical limiting principle," as the Fourth Circuit noted
in rejecting that argument. Novell, 429 F. App'x at 260. The
"association" on which Microsoft focuses — the reference to
WordPerfect's large installed
base on the "DOS" platform — is simply a
re-characterization of the same argument Microsoft previously
advanced and lost. Microsoft's new twist does nothing to alter the
Fourth Circuit's analysis.
In support of its argument, Microsoft cites a single snippet of
testimony from Dr. Noll as evidence that "Novell expressly relied
on the success of its products on DOS operating systems in order to
support its theories of harm to the PC operating system market."
See Microsoft Mem. at 132. First, Microsoft's argument
ignores the Fourth Circuit's holding that the term "associated" in
the Novell-Caldera Asset Purchase Agreement ("APA") is logically
cabined by the products that were the subject of the APA. See
Novell, 429 F. App'x at 260. No version of WordPerfect,
regardless of whether that version ran on MS-DOS, DR DOS, or
Windows, is listed among the products explicitly defined in the APA
as "DOS Products" or "Related Technologies." APA §§ 2.6,
2.11 (Microsoft Mem. Ex. P). As before, Microsoft's "expansive
reading of the disputed provision is antithetical to the carefully
limited 'circumstances, nature, and purpose' of the [Asset
Purchase] Agreement." Novell, 429 F. App'x at 260 (citations
Second, the testimony from Dr. Noll on which Microsoft relies is
focused on WordPerfect's installed base on MS-DOS rather than DR
DOS. See Tr. 1923:21-1925:7 (Noll). Therefore, Microsoft
essentially argues that a reference to the MS-DOS versions of
WordPerfect is sufficient to demonstrate an association with the DR
DOS Products and Related Technologies that Novell transferred in
the APA. Such an argument goes too far and reflects precisely the
Fourth Circuit's concern that "it is difficult to imagine a piece
of hardware or software that could not be somehow 'associated' with
Novell's DOS products under Microsoft's capacious theory."
Novell, 429 F. App'x at 260. Novell's reliance on evidence
of WordPerfect's installed base,
which necessarily includes all of the operating
systems for which Novell sold versions of the word processor, does
not demonstrate any greater "association" than did Microsoft's
original theory, which hinged on the prism of the PC operating
systems market at issue in Novell's claim.71
In any event, the premise of Dr. Noll's testimony has not
injected some new evidence into the case. To the contrary,
WordPerfect's success in the early 1990s has always been based in
part on the MS-DOS versions of the word processor. See,
e.g., Compl. ¶ 32. Novell has always relied on the
popularity and cross-platform nature of WordPerfect. It is
therefore unreasonable to assume the discussion of WordPerfect's
cross-platform popularity would exclude reference to WordPerfect's
For all of these reasons, the Court should reject Microsoft's
argument that Novell has transferred its claim to Caldera under the
APA. Microsoft's expansive interpretation of the language in that
agreement runs afoul of the Fourth Circuit's legal ruling on the
2. Novell's Count I Claim Includes PerfectOffice
a. Microsoft's attempt to limit Novell's case based on a
Settlement Agreement and an overly restrictive interpretation
the Complaint is without merit
On November 8, 2004, four days before Novell filed its Complaint
in the United States District Court for the District of Utah,
Novell and Microsoft settled claims unrelated to this case dealing
with Novell's network operating system business. See
generally Nov. 8, 2004 Settlement Agreement ("Settlement
Agreement") (Microsoft Mem. Ex. A). The Settlement Agreement
preserved Novell's right to bring claims set forth in a draft
complaint that matched
the claims described in the filed Complaint. Id. ¶
2(a). The Settlement Agreement also preserved Novell's ability to
introduce any and all evidence relevant to these claims, expressly
stating that: "Nothing herein shall limit Novell's right to present
any facts relevant to" the claims in the draft complaint.
Id. (emphasis added).
Microsoft argues that the Complaint alleged harm to Novell's
WordPerfect and Quattro Pro products "and no other."72 Microsoft
Mem. at 12 n.7. Further, it argues that Novell cannot now "base its
claim on harm to PerfectOffice, nor can Novell now base its claim
on harm to products such as Soft Solutions document management
system and QuickFinder search engine." Id. at 127. In the
paragraphs outlining its claim for monopolization of the PC
operating systems market, Novell broadly alleges, however, that "as
a direct, foreseeable, and proximate result of Microsoft's
misconduct, Novell was damaged by, without limitation, lost sales
of office productivity applications and a diminution in the value
of Novell's assets, reputation, and goodwill in amounts to be
proven at trial." Compl. ¶ 155.
Because Paragraph 155 includes damages for lost sales of office
productivity applications, it necessarily encompasses PerfectOffice
because PerfectOffice contains WordPerfect and Quattro Pro bundled
together. The Fourth Circuit recognized this in its 2007 decision,
when it wrote that "WordPerfect and Quattro Pro are
'office-productivity applications,' which Novell marketed together
as an office-productivity package called 'PerfectOffice.'" Novell,
505 F.3d at 305. Novell's claim for damages also seeks recovery for
the "diminution in the value of Novell's assets." Compl. ¶
155. PerfectOffice was one such asset whose value was diminished
due to Microsoft's anticompetitive conduct.
The Complaint focuses broadly on how Microsoft's conduct had a
negative effect on Novell's ability to distribute and sell office
productivity applications, and how Microsoft's conduct caused
financial harm to Novell. See, e.g., Compl. ¶¶ 56,
64, 78, 79, 112, 149-150, 153, 155. PerfectOffice during the
relevant time period was the primary way Novell distributed,
marketed, and sold WordPerfect and Quattro Pro.
Microsoft also argues, in an attempt to limit the scope of
Novell's evidence, that Novell is bringing "claims" for harm to
what Microsoft asserts are two separate products, SoftSolutions and
QuickFinder. Microsoft Mem. at 128-30. Both the document management
software, SoftSolutions, and the search technology, QuickFinder,
however, were integrated into WordPerfect's file open dialog. The
Settlement Agreement in no way precludes Novell from presenting
facts and evidence related to the harm caused by Microsoft in the
development of WordPerfect's shared code and the integration of
technologies into WordPerfect's file open dialog.
Additionally, Microsoft ignores the existence of OpenDoc and
AppWare, even though the Complaint extensively discusses how
Microsoft's conduct harmed complementary technologies of
WordPerfect, including OpenDoc, AppWare, and QuickFinder. Compl.
¶¶ 45-47, 49-51, 84-85, 87-88, 94-95. Novell should be
allowed to build a middleware theory related to WordPerfect, its
shared code, AppWare, and OpenDoc, based on PerfectOffice, which
was a combination of these technologies.
b. The Court has not excluded Novell's theory that PerfectOffice
a combination of Novell's middleware technologies
Microsoft's argument that this Court has excluded Novell's
theory about PerfectOffice as middleware, "alone or in combination
with Java and Netscape," Microsoft Mem. at 127-28, is a
blatant mischaracterization of the Court's rulings. Neither the
Court's October 6, 2011 ruling nor its handling of Mr. Alepin's
testimony indicated that PerfectOffice, by itself,
was excluded from this case.
First, the Court's October 6, 2011 ruling limited Novell's
middleware theory only "to th[e] extent" that Novell's "claim now
is that PerfectOffice combined, bundled with Netscape and/or Java
is . . . the middleware threat." Oct. 6, 2011 Hr'g Tr. 65:3-20. The
Court did not exclude "PerfectOffice, alone or in combination with
Java and Netscape," as Microsoft now posits.73 Microsoft Mem. at 127. In
fact, the Court explicitly stated, "if the only mistake in the
complaint was not to mention that Quattro Pro and WordPerfect,
together known as Perfect Office, that seems to me to be nothing."
Oct. 6, 2011 Hr'g Tr. 65:6-8 (emphasis added). Indeed, there is
little more to it than that.
Moreover, although the Court limited Mr. Alepin's testimony
while he was on the witness stand, the Court declined to rule on
Microsoft's more sweeping Motion to Strike Alepin's Testimony (Nov.
10, 2011) (Dkt. # 274), a motion premised on the ground that Novell
was not permitted to pursue a claim for PerfectOffice as
middleware. When Microsoft sought to argue the motion before the
Court, the Court asked:
[W]hat is the big deal about this? I mean, I understand that
there is a difference between bundling Netscape and PerfectOffice
and I think I have ruled on that. I think I understand that
PerfectOffice is all over this case, whether you want it or
not. You [Microsoft] have put it in about whether to develop the
suite or not, and I think everybody understands what PerfectOffice
Tr. 1865:8-18. The Court's incredulity is understandable.
Evidence about PerfectOffice was frequently admitted at trial, and
as the Court noted, Microsoft itself raised the issue of suites. In
particular, Microsoft raised the questions of whether Novell was
late in developing suites and whether Novell was able to integrate
the products within a suite, questions that Novell needed to answer
for causation purposes. For that additional reason, facts relating
to Novell's PerfectOffice are properly in this case.
When the parties finally did argue Microsoft's Motion to Strike
Alepin's Testimony, the Court decided to "reserve on this because
there seems to be a dispute about what the state of the evidence
is." Tr. 2071:4-13. The Court went on to note its own view that
"It's clear that the state of the evidence is that PerfectFit, the
shared code, was always in WordPerfect. This is much ado about
nothing."74 Id. For Microsoft to imply that
the Court somehow ruled on this issue in the past or that this
issue has been decided is not only disingenuous, but entirely
In any event, the Court was correct in stating that
"PerfectOffice is all over this case." Tr. 1865:8-18. As discussed
above, Novell alleged in its Complaint that the combination of
WordPerfect, AppWare, and OpenDoc posed a competitive threat to
Microsoft's PC operating systems monopoly.75 See Compl.
¶¶ 50-51. Similarly, in opposing Microsoft's motion
dismiss, Novell stated that it "bundled its WordPerfect and
Quattro Pro applications into a 'suite' and engineered them to
exploit the capabilities of Novell's existing cross-platform
technologies, such as OpenDoc and AppWare." Pl.'s Mem. in Opp'n to
Def.'s Mot. to Dismiss at 5 (Feb. 22, 2005) (Dkt. # 24).
The Court also acknowledged in its summary judgment opinion that
PerfectOffice has a place in this case. There, the Court described
PerfectOffice as "a combination of WordPerfect and Quattro Pro" and
noted that one aspect of Novell's theory was that Microsoft
intentionally took action against Novell's applications because
"'PerfectOffice,' developed by Novell, constituted (or nearly
constituted) 'middleware,' which could have been effectively used
with any operating system and that therefore would have
'commoditized' Windows 95 and undermined the monopoly Microsoft
enjoyed in the operating system market." Novell, 699 F.
Supp. 2d at 735-36. Novell also fully briefed this issue in
response to Microsoft's motions in limine and supplemental
Finally, the record at trial has confirmed Novell's arguments.
First, the record made clear that PerfectOffice included
WordPerfect, Quattro Pro, and AppWare. See, e.g., Tr.
1008:1-7 (Frankenberg). Additionally, a significant aspect of
Novell's middleware threat, shared code — also known as
PerfectFit — has long been a component of WordPerfect and was
included in PerfectOffice. See Tr. 216:19-218:3,
218:21-219:14 (Harral). In fact, PerfectOffice shipped
with both PerfectFit/shared code and AppWare. Tr. 212:16-19,
230:24-231:6, 236:7-8 (Harral). Other testimony acknowledged that
both PerfectFit and AppWare were forms of middleware. See
Tr. 233:13-236:6 (Harral); Tr. 1015:8-1016:19 (Frankenberg).
In sum, there is no question that PerfectOffice is properly a
part of this case and that Novell has not released its claim in
3. Novell's Claim Is Not Time-Barred
In what can only be described as grasping at straws, Microsoft
asserts that based on the evidence presented at trial, Novell's
claim no longer bears any relation to the Government Case, and is
therefore time-barred. This assertion, however, is based on a
mischaracterization of the evidence and other fundamental flaws in
Microsoft's arguments. Put simply, Novell's claim continues to bear
a strong relation to the Government Case and is not
The first argument Microsoft offers in support of its position
that Novell's case now fundamentally differs from the Government
Case relates to statements taken from 7 scattered pages of
transcript out of the 5,000 plus pages generated in two months of
trial. Microsoft Mem. at 134-35. In doing so, Microsoft ignores the
thousands of pages of testimony elicited and argument given by
Novell's counsel throughout the trial demonstrating that Novell's
claim is the same as it has always been.
More to the point, the quoted statements of Novell's counsel on
which Microsoft relies are presented without any reference to the
actual context in which they were offered during trial. For
example, although Microsoft quotes Novell's counsel's statement
that Microsoft devised a plan to "gain a very significant lead over
Microsoft's applications competitors," Microsoft Mem. at 134
(citing Tr. 5163-64), the quote ignores the preceding argument that
explains how Microsoft's plan was based on leveraging its
operating systems technology for the benefit of its
applications, Tr. 5163:5-8. In other words, Novell's counsel was
describing a way in which Microsoft planned to abuse its PC
operating systems monopoly power to protect its key franchise
applications, thereby widening the "moat" surrounding its
In another example, Microsoft cites a statement made by Novell's
counsel during summation describing Mr. Gates' October 3, 1994
decision as a "purely predatory" one designed to "give Office a
real advantage." Microsoft Mem. at 134 (citing Tr. 5184). This has
always been a component of Novell's argument. It
simply means that, again, Microsoft abused its PC operating systems
monopoly power to strengthen the key franchise applications that
widened the "moat" — i.e., increased the barriers to entry
— surrounding Microsoft's PC operating systems monopoly. That
Microsoft's conduct affected applications as well as operating
systems does not transform Novell's claim from one based in the PC
operating systems market to one based in an applications market.
Indeed, as previously noted, the same facts support Court I
(monopoly maintenance in the operating systems market) and Counts
II and V (monopolization and attempted monopolization of the
applications markets). See Compl. ¶¶ 151-173.
Second, Microsoft argues that Novell's key franchise theory was
somehow at odds with the Government Case's description of the
applications barrier to entry. Microsoft Mem. at 135. Microsoft's
argument suffers from a broken syllogism. That the applications
barrier to entry is comprised of thousands of applications does not
militate the conclusion that a small number of popular applications
— like Novell's WordPerfect and PerfectOffice suite and
accompanying middleware — could not weaken or lessen that
barrier. A wall may be made of thousands of bricks, but putting a
hole in that wall does not require every brick to be removed. And
as stated above, this is perfectly consistent with the evidence
presented by Novell at trial as to how its key
franchise applications could weaken the applications barrier to
entry protecting Microsoft's PC operating systems monopoly power.
See supra Facts Part I.
Third, Microsoft asserts that Novell's case no longer bears any
relation to the Government Case because Novell has supposedly
refused to accept the definition of middleware as it is set forth
in Finding of Fact ¶ 28 and embraced by Novell's Complaint.
This argument is based on the faulty assumption that it is
Microsoft's interpretation of that definition, rather than
Novell's, that is accurate. As described above, Microsoft's
interpretation of Finding of Fact ¶ 28 is wholly at odds with
the outcome of the Government Case. See supra Facts Part
I.D. Novell's definition of middleware comports with Finding of
Fact ¶ 28 and the definition embraced in Novell's Complaint.
Therefore, Novell's case continues to bear a strong relation to the
Government Case and is not time-barred.
For the foregoing reasons, Microsoft's Renewed Motion for
Judgment as a Matter of Law should be denied.
Dated: March 9, 2012
SNOW, CHRISTENSEN & MARTINEAU
By: /s/ Maralyn M. English
Max D. Wheeler
Maralyn M. English
DICKSTEIN SHAPIRO LLP
Jeffrey M. Johnson
Paul R. Taskier
James R. Martin
ADAMS HOLCOMB LLP
R. Bruce Holcomb
WILLIAMS & CONNOLLY LLP
John E. Schmidtlein
Attorneys for Novell, Inc.
CERTIFICATE OF SER VICE
I hereby certify that, on the 9th day of March, 2012, I
electronically filed the foregoing document with the Clerk of the
Court using the CM/ECF system which will send notification of such
filing to all counsel of record.
By: /s/ Maralyn M. English
Maralyn M. English
Microsoft also argues that the Court should grant its motion so
that the Tenth Circuit can determine the correct causation standard
to be applied in this case. As discussed below, the Tenth Circuit
has already resolved this question. See infra Argument Part
II. Nevertheless, if there is any doubt about the correct legal
standard, the Court has already employed a perfectly appropriate
procedure by submitting questions to the jury under alternative
causation standards. See Fed. R. Civ. P. 49.
Counts II through V alleged that Microsoft unlawfully
monopolized or attempted to monopolize the word processing and
spreadsheet applications markets through the same acts underlying
Count I. Compl. ¶¶ 156-173. Count VI alleged that
Microsoft's exclusionary agreements unreasonably restrained trade.
Compl. ¶¶ 174-177. These Counts are no longer part of
In addition, Microsoft argued that Counts II through VI were
barred by the statute of limitations. See Microsoft Mem. in
Supp. of Mot. to Dismiss at 1 (Jan. 7, 2005) (Dkt. # 19).
Additionally, the Court found that the statute of limitations
for Count VI was tolled, and therefore, the claim was timely.
Novell, 2005 WL 1398643, at *1. Counts II through V, however, were
deemed untimely and dismissed. Id. at *3-5.
Novell cross-appealed the dismissal of Counts II through V.
The Court also dismissed Novell's GroupWise allegations due to
lack of notice, and granted summary judgment against Novell on
Specifically, Novell presented the deposition testimony of Bill
Gates, James Allchin, Doug Henrich, John Ludwig, Cameron Myhrvold,
Paul Maritz, Scott Raedeke, Jeff Raikes, Russell Siegelman, Brad
Silverberg, and Steven Sinofsky.
Microsoft also played videotaped portions of the transcripts of
two witnesses — a former WordPerfect/Novell employee, Charles
Middleton, and former Microsoft employee, Cameron Myhrvold.
Novell was not required to prove that Microsoft possessed
monopoly power in the PC operating systems market because that fact
was established in the Government Case, see, e.g., Finding of Fact
¶ 33, and granted collateral estoppel effect prior to trial,
Letter from Court (Oct. 4, 2011) (Dkt. # 163).
While Microsoft claims WordPerfect was to blame for being late
to Windows in the early 1990s, the contemporaneous evidence
indicates that Microsoft hatched a plan to "giv[e] a competitive
advantage to [its] own apps" by telling "ISVs to develop for OS/2"
while simultaneously developing its own applications for Windows.
PX 6A. Under Microsoft's direction, "[s]oftware developers, other
than those with current Windows products under way, who are
targeting both environments, [were] recommended to start with
OS/2." PX 4 at IBM 7510089982 (emphasis added); see
also Tr. 4700:8-14 (Peterson). Internally, however, Microsoft
understood that it had "an enormous, one-time opportunity to
pre-empt [its] traditional applications competitors (Lotus,
WordPerfect, Aldus)" on "the Windows platform, in terms of both
creating sockets as well as taking possession of those sockets with
our Windows applications." PX 7 at X 194848-49. Microsoft described
this "headfake" as the "single largest opportunity for the company
to exploit in FY91" — it was a "once in a lifetime
opportunity." Id. at X 194848.
Some documents indicate that the number was much higher. In
fact, a WordPerfect for Windows business review exercise written in
July 1994 indicates that WordPerfect for DOS alone had "one of the
largest installed base of any application ever developed
(approximately 17 million WPDOS installed customers worldwide)." PX
198 at NOV-25-006605.
Both Mr. Ford and Mr. LeFevre agreed with the reviews:
WordPerfect was "the best word processor." Tr. 3714:15-20 (Ford);
Tr. 4110:12-19 (LeFevre).
Shared code amounted to around one-third of the WordPerfect word
processor. Tr. 217:24-218:3 (Harral).
PerfectOffice Professional came with a library of PerfectOffice
ALMs. See PX 412 at NOV 00498203.
Because AppWare enabled cross-platform development, it was a
technology with the potential to enable users to select operating
systems other than Windows when they made their next computer
purchase. Tr. 1772:8-1773:18 (Noll).
Mr. Gates testified that Microsoft's operating system products
competed against UNIX-based operating systems from a wide range of
companies, including IBM, AT&T, Hewlett Packard, Sun
Microsystems, Novell, and the Santa Cruz Operation, and that
variants of UNIX were gaining increasing acceptance as desktop
operating systems. Tr. 2845:16-2846:1 (Gates).
Craig Bushman acknowledged that the Linux operating system was a
competitor to Microsoft and competed directly with Windows. Tr.
On November 20, 2011, just after the close of Novell's
case-in-chief, but before the start of Microsoft's defense, Novell
moved to reopen its case-in-chief to supplement the record with
three Microsoft 10-K filings and the written testimony from the
Government Case of two Microsoft witnesses. See Novell's
Mot. to Reopen Its Case-in-Chief & Supplement the Record (Nov.
20, 20110) (Dkt. # 307). This evidence established that in the
1994-1996 time period, and immediately thereafter, there were
alternative operating systems in the relevant market for which
WordPerfect could have developed (and in many cases did develop)
software, and that several of these alternatives competed with
Windows. The Court denied Novell's motion. Tr. 5100:6-7.
Former Microsoft executive Bob Muglia similarly acknowledged
that Microsoft's systems group wanted all developers writing to
Windows to support the platform in the best possible way even
if those developers also competed with Microsoft's
applications. Tr. 3477:3-8 (Muglia).
Microsoft began promoting Windows 95 in 1993. Tr. 3258:1-8
Later, in February 1994, Mr. Belfiore recommended that ISVs
should "[c]onsider a major redesign of [their] user interface to
take advantage of the new emphasis on . . . shell integration,"
including using the namespace extension APIs to integrate "special
folder[s]" into the Windows 95 Explorer. PX 529 at MX
While the shared code team primarily intended to provide
services to WordPerfect via the file open dialog, and not to extend
the Windows Explorer, Microsoft designed the namespace extension
functionality to allow ISVs' new namespaces to also appear within
the Windows 95 Explorer. Tr. 613:7-18, 697:3-16 (Richardson).
Novell saw this additional way of accessing the Novell namespaces
and their functionality as a desirable added benefit to consumers.
Tr. 613:7-18 (Richardson).
See Tr. 3846:4-3847:6, 3867:15-18 (Nakajima) (document
management system); Tr. 3851:23-3852:1, 3867:24-3868:2 (Nakajima)
(Internet browser); Tr. 3867:19-23 (Nakajima) (clip art).
The shared code team's other planned namespaces (such as the
spell checker and clip art library) are also part of the overall
word processing application. These functionalities were also
available as separate objects, which could be called by all the
PerfectOffice applications. By separating the components of its
suite in an object-oriented way, to then be integrated into Windows
95's object-oriented shell, WordPerfect was following exactly the
new paradigm that Microsoft had evangelized. Tr. 1666:4-1667:24
(Alepin); Tr. 587:10-588:10, 589:1-11 (Richardson).
Novell's technical expert explained that "documentation is built
up over time in part" in response to questions developers are
asking and particular problems that arise in the development
process, and therefore, documentation "evolves through the beta
process to the . . . final product." Tr. 1419:4-21 (Alepin).
As a result, developers, including Novell's, could no longer
compile software source code calling the namespace extension APIs
using M7 beta header files (and subsequent Windows 95 beta header
files) because they no longer contained references to the namespace
extension APIs. Tr. 1565:3-1567:8, 1569:25-1570:15, 1656:12-18
Compare PX 61 at MS 0097121 ("Chicago + 6 months —
Office ships with optimized shell . . . Pros: Office gets a big
jump on competitors in creating apps optimized for the new shell.")
with PX 1 ("Our goal is to have Office '96 shell better
because of the shell integration work."); compare PX 61 at
MS 0097121 ("This should still give Microsoft apps a significant
development lead.") with PX 1 ("We should wait until we have
a way to do a high level of integration that will be harder for the
likes of Notes, WordPerfect to achieve, and which will give Office
a real advantage . . . . We can't compete with Lotus and
WordPerfect/Novell without this.").
Compare PX 51 at MS-PCA25335292 ("we couldn't get it done
in time") with PX 225 at MX 6055843 (too much development
and testing time needed "to support these API's").
Cairo was Microsoft's codename for a future version of the
Windows operating system, but it was never released.
Scott Henson was not shy in emphasizing the importance of this
script to DRG: "THIS IS IMPORTANT! PLEASE READ THIS ENTIRE DOCUMENT
CAREFULLY BEFORE YOU DO ANYTHING ELSE!" PX 225 at MX 6055840.
Marvel was the codename for Microsoft's MSN client.
For example, in November 1994, Novell's Kelly Sonderegger
pressed Brad Struss for more documentation, see PX 236, and his
answer admittedly "sidestepp[ed] the question," stating that the
functionality available in the M6 beta was "no longer available."
PX 236 at NL2 0004273; PX 259 at MX 5121911-12. By this time, of
course, Microsoft had made semantic changes to the functionality
provided in M6 to avoid any robustness issues. Novell's Richard
Hume also sought additional information on the namespace extension
APIs in November 1994 and was told by Microsoft that the APIs were
"internal because they don't want to support them long-term." PX
238. Additionally, shared code developer Adam Harral continued to
seek information about the namespace extension APIs from
Microsoft's Premier Support to no avail. Tr. 345:8-346:11 (Harral).
And at the highest ranks, Mr. Frankenberg complained repeatedly to
Mr. Gates about undocumented APIs in 1995, and Mr. Gates refused to
discuss the issue. See infra note 33.
Microsoft contends that there is no evidence that Novell
complained about Microsoft's withdrawal of support for the
namespace extension APIs. As the Court is aware, there is
substantial evidence to the contrary, although much of it was not
permitted to be shown to the jury. See Novell's Mot. to
Overrule Microsoft Objs. to Docs. Concerning Commc'ns with DOJ
(Oct. 23, 2011) (Dkt. # 247); Novell's Letter to the Court
regarding Frankenberg/Gates Correspondence (Nov. 20, 2011) (Dkt. #
First, Novell complained to the Department of Justice ("DOJ")
about Microsoft's actions. See, e.g., PX 317 (Ex. to Dkt. #
247); PX 320 (Ex. to Dkt. # 247). For example, a July 1995 email
prepared by the head of development for Novell's Business
Applications Division lists several issues that Novell planned to
raise with DOJ, including that "MS removed the ability to hook into
the Explorer. That is why we are doing our Open Dialog/Name space
browser from scratch." PX 317 at NOV 00516407. The same document
also references Novell's difficulty in tying QuickFinder into the
Windows 95 shell subsequent to Microsoft's de-documentation of the
namespace extension APIs. Id. Similarly, another July 1995
email between Novell's in-house lawyers described several issues,
including de-documentation of the namespace extension APIs, to be
raised with DOJ during a conference call that same day. PX 320.
Mr. Frankenberg also complained directly to Mr. Gates about
undocumented APIs, although Mr. Gates rebuffed Mr. Frankenberg's
entreaties for discussion. Tr. 1029:12-1030:3, 1241:17-1242:9
(Frankenberg). Documentary evidence — in the form of letters
— corroborates Mr. Frankenberg's testimony. Although these
letters were not admitted at trial, they were raised during oral
argument on Microsoft's initial Rule 50 motion and provided to the
Court at its request. Tr. 2682:11-22; Novell's Letter to the Court
regarding Frankenberg/Gates Correspondence (Dkt. # 306). Microsoft
subsequently withdrew its designation of those documents as
exhibits. See Microsoft Letter Withdrawing Defendant's
Exhibits 215A Through 215G (Nov. 29, 2011) (attached as Ex. D). The
first salient letter from Mr. Frankenberg to Mr. Gates, dated June
23, 1995, noted that "It is [Novell's] view that Microsoft's OS's
contain undocumented calls, features, and other interfaces that are
made available to its own applications developers to give
competitive advantages to its applications products." DX 215D at DB
0041 (Ex. to Dkt. # 306). Nonetheless, Mr. Gates refused to
acknowledge the issue in his July 1995 response. See DX 215E
at 3 (Ex. to Dkt. # 306). Mr. Frankenberg again raised the point in
August 1995, and again, Mr. Gates refused to address the issue in
his response. DX 215F (Ex. to Dkt. # 306). Knowing that such
documents exist, it is disingenuous for Microsoft to argue that
Novell remained silent.
Corel finally shipped a suite for Windows 95 in 1996, after
Novell sold WordPerfect to Corel. Tr. 804:13-19 (Gibb). That
product was still inferior to the one that Novell would have
released but for Microsoft's withdrawal of support for the
namespace extension APIs. See Tr. 355:7-14 (Harral) (noting
that because of Microsoft's anticompetitive conduct, it was not
until Corel's WordPerfect Suite 8 for Windows 98 that a WordPerfect
product was released that contained all the features and
functionality that Novell originally envisioned for its Windows 95
product prior to Microsoft's decision to withdraw support for the
namespace extension APIs).
Even evidence in favor of the moving party that is
"'uncontradicted and unimpeached'" may be disregarded on a Rule 50
motion if it does not come from "'disinterested witnesses.'"
Reeves, 530 U.S. at 151 (citation omitted).
Treble damages also serve a remedial purpose and act as an
incentive for the private bar to enforce the antitrust laws.
Novell, 505 F.3d at 317 ("'[I]n enacting § 4[,]
Congress sought to create a private enforcement mechanism that
would . . . deprive [violators] of the fruits of their illegal
actions, and would provide ample compensation to the victims of
antitrust violations.'" (second brackets in original) (quoting
Blue Shield of Va. v. McCready, 457 U.S. 465, 472
Chief Judge Dee Benson of the District of Utah explained that
the easiest way to define what Section 2 prohibits may be by
[A] monopolist may engage in all of the same procompetitive
activities that allowed it to become a legal monopolist in the
first place. These would include building a better or less
expensive product, engaging in better public relations, employing
effective (and honest) advertising campaigns, and developing
aggressive and effective marketing techniques. . . . Conversely, a
monopolist may not engage in any activities other than those that
are procompetitive . . . .
Caldera, 72 F. Supp. 2d at 1306.
See also United States v. Dentsply Int'l, Inc., 399 F.3d
181, 187, 196-97 (3d Cir. 2005) (applying burden-shifting
approach); In re Fresh Del Monte Pineapples Antitrust
Litig., No. 04-md-1628 (RMB)(MHD), 2009 WL 3241401, at *6
(S.D.N.Y. Sept. 30, 2009) (same), aff'd sub nom. Am. Banana Co.
v. J. Bonafede Co., 407 F. App'x 520 (2d Cir. 2010);
Brentwood Acad. v. Tenn. Secondary Schs. Athletic Ass'n, No.
3:97-1249, 2008 U.S. Dist. LEXIS 55312, at *19 (M.D. Tenn. July 18,
2008) (same); In re eBay Seller Antitrust Litig., 545 F.
Supp. 2d 1027, 1032-33 (N.D. Cal. 2008) (same).
Olympia Equipment Leasing Co. v. Western Union Telegraph
Co., 797 F.2d 370 (7th Cir. 1986), on which Microsoft relies,
is not to the contrary. That case held that a monopolist "'is
permitted and indeed encouraged to compete aggressively on the
merits.'" Id. at 375 (citation omitted). Anticompetitive
conduct such as that at issue in this case is not competition on
the merits. Moreover, Olympia Equipment recognized that,
while monopolists generally "are not required to help their
competitors," they must nevertheless "refrain from anticompetitive
acts such as denial of access to essential facilities." Id.
Microsoft's reliance on United States v. Syufy
Enterprises, 903 F.2d 659 (9th Cir. 1990), is also misplaced.
The court in Syufy Enterprises merely rejected the argument
that effective competition on the merits is an antitrust violation.
Id. at 668-69. If a monopolist, rather than "provid[ing]
lesser service at a higher price," instead acts consistently with a
competitive market "out of fear perhaps that potential competitors
are ready and able to step in," then "the purpose of the antitrust
laws is amply served." Id. However, where — as here
— a monopolist does not engage in competition on the merits,
but instead engages in conduct to thwart potential competitors from
stepping in, the monopolist is liable under the antitrust laws.
See also Spirit Airlines, Inc. v. Nw. Airlines, Inc., 431
F.3d 917, 931, 935-36 (6th Cir. 2005) (assessing defendant's
conduct during the period after the predatory scheme had forced
plaintiff from the market to ascertain whether the scheme had an
anticompetitive effect); Dentsply Int'l, 399 F.3d at 191
(foreclosure of potential competition); Microsoft, 253 F.3d
at 54, 72 (foreclosure of competition that was not an imminent
threat); Westwood Lumber Co. v. Weyerhaeuser Co., No. CV
03-551-PA, 2003 U.S. Dist. LEXIS 27213, at *13 (D. Or. Dec. 29,
2003) ("The Westwood Plaintiffs could offer evidence of Defendant's
earlier conduct bearing upon the period at issue in this case . . .
to show Defendant's intent to monopolize, its possession of
monopoly power and ability to influence prices, the manner in which
Defendant obtained and maintained its monopoly, and the harm to
competition."), aff'd sub nom. Confederated Tribes of Siletz
Indians of Or. v. Weyerhaeuser Co., 411 F.3d 1030 (9th Cir.
2005), vacated and remanded on other grounds sub nom.
Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S.
312 (2007); Zapata Gulf Marine Corp. v. Puerto Rico Mar.
Shipping Auth., No. 86-2911, 1989 U.S. Dist. LEXIS 13650, at *8
(E.D. La. Nov. 14, 1989) (evidence postdating plaintiff's
withdrawal from market of (1) demise of subsequent would-be
competitors and (2) subsequent increase in defendants' prices was
relevant to whether earlier conduct directed at plaintiff was
This document is available at
See also Rochester Drug Coop. v. Braintree Labs., 712 F.
Supp. 2d 308, 318-19 (D. Del. 2010) (holding plaintiff sufficiently
alleged anticompetitive conduct consisting of "multifaceted scheme"
to unlawfully maintain monopoly by enforcing invalid patent and
declining to "analyze whether each facet of this scheme constitutes
a separate antitrust violation"); In re Gabapentin Patent
Litig., 649 F. Supp. 2d 340, 358-59 (D.N.J. 2009) ("If a
plaintiff can allege that a series of actions, when viewed
together, were taken in furtherance and as an integral part of a
plan to violate the antitrust laws, that series of actions, as an
overall scheme, may trigger antitrust liability."); SmithKline
Beecham Corp. v. Apotex Corp., 383 F. Supp. 2d 686, 702 (E.D.
Pa. 2004) (refusing to dismiss antitrust counterclaims based on
"larger scheme to maintain [a] monopoly," because of court's
obligation to "consider the anticompetitive effect of [the] acts as
a whole," even though certain elements of the scheme did not
independently produce an antitrust injury).
See PX 1 ("We should wait until we have a way to do a
high level of integration that will be harder for the likes of
[Lotus] Notes, WordPerfect to achieve, and which will give Office a
real advantage," and "We can't compete with Lotus and
WordPerfect/Novell without this. Our goal is to have Office '96
sell better because of the shell integration work.").
See Tr. 593:20-596:7 (Richardson) (explaining how
WordPerfect integrated Netscape Navigator functionality); see
also PX 268 (a software license agreement between Novell and
Netscape which allowed Novell to reproduce, distribute, combine,
and integrate Netscape into its products); PX 374 at NOV-B13465526
(noting that PerfectOffice for Windows 95's QuickFinder technology
would work with Netscape so users could search for words or phrases
and go directly to the website where the words or phrases were
In this regard, the Court's prior observation that there may be
a third level of causation is accurate. The chain of causation
would be: (1) Did the conduct cause Novell's applications' delay
and loss of market share?; (2) Was the exclusion of WordPerfect
reasonably capable of contributing significantly to Microsoft's
monopoly power?; and, if the jury answers these affirmatively, (3)
Did the conduct cause antitrust injury to Novell? See, e.g.,
Ankur Kapoor, What Is the Standard of Causation of
Monopoly?, Antitrust Vol. 23 at 38 (Summer 2009).
Novell also argues that elimination of WordPerfect harmed
competition in exactly the same way as in the Government Case, by
eliminating a distribution channel for Navigator and Java.
See also Novell's Proffer of Evidence Regarding the
Testimony of Professor Roger G. Noll at 7 (Nov. 17, 2011) (Dkt. #
296) ("Noll Proffer").
The jury was precluded from hearing this evidence. Novell
proffered it on November 17, 2011. See Noll Proffer.
In adopting and applying the "reasonably capable" test, the D.C.
Circuit relied on two treble damages cases: Data Gen. Corp. v.
Grumman Sys. Support Corp., 36 F.3d 1147, 1182 (1st Cir. 1994)
(cited by this Court in its summary judgment opinion), abrogated
on other grounds by Reed Elsevier, Inc. v. Muchnick, 130 S. Ct.
1237 (2010), and Morgan v. Ponder, 892 F.2d 1355, 1361-63
(8th Cir. 1989). There are many other cases using the same or
similar standard. See, e.g., Taylor Publ'g Co. v. Jostens,
Inc., 216 F.3d 465, 475 (5th Cir. 2000); PSI Repair Servs.,
Inc. v. Honeywell, Inc., 104 F.3d 811, 822 (6th Cir. 1997);
Town of Concord, Mass. v. Boston Edison Co., 915 F.2d 17, 21
(1st Cir. 1990); Instructional Sys. Dev. Corp. v. Aetna Cas.
& Sur. Co., 817 F.2d 639, 649 (10th Cir. 1987); S. Pac.
Commc'ns Co. v. Am. Tel. & Tel. Co., 740 F.2d 980, 999 n.19
(D.C. Cir. 1984); Barry Wright Corp. v. ITT Grinnell Corp.,
724 F.2d 227, 230 (1st Cir. 1983) (Breyer, J.) (cited in the
Government Case); Hertz Corp. v. Enter. Rent-A-Car Co., 557
F. Supp. 2d 185, 193 (D. Mass. 2008); Cytologix Corp. v. Ventana
Med. Sys., Inc., Nos. 00-12231-RWZ, 01-10178-RWZ, 2006 WL
2042331, at *4 (D. Mass. July 20, 2006); Z-Tel Commc'ns, Inc. v.
SBC Commc'ns, Inc., 331 F. Supp. 2d 513, 522 (E.D. Tex. 2004);
Nobody in Particular Presents, Inc. v. Clear Channel Commc'ns,
Inc., 311 F. Supp. 2d 1048, 1105 (D. Colo. 2004); Lantec,
Inc. v. Novell, Inc., 146 F. Supp. 2d 1140, 1145 (D. Utah
2001), aff'd, 306 F.3d 1003 (10th Cir. 2002);
Hewlett-Packard Co. v. Boston Scientific Corp., 77 F. Supp.
2d 189, 197 (D. Mass. 1999); CTC Commc'ns Corp. v. Bell Atl.
Corp., 77 F. Supp. 2d 124, 144 (D. Me. 1999); Wichita
Clinic, P.A. v. Columbia/HCA Healthcare Corp., No. 96-1336-JTM,
1997 WL 225966, at *7 (D. Kan. Apr. 8, 1997). Novell could supply
the Court with additional decisions upon request.
Microsoft admits — as it must — that a number of
other cases have based antitrust liability on a monopolist's false
or misleading statements or actions, but attempts to distinguish
these on the ground that they involved deception
about competitors rather than of
competitors. Microsoft offers no logical reason why the antitrust
laws should immunize anticompetitive conduct when a competitor is
deceived, while imposing liability for anticompetitive conduct when
a third party is deceived about a competitor — and none of
the cases Microsoft cites make such a distinction.
Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp.,
509 U.S. 209, 224 (1993) ("That below-cost pricing may impose
painful losses on its target is of no moment to the antitrust laws
if competition is not injured . . . ."); Intergraph Corp. v.
Intel Corp., 195 F.3d 1346, 1355, 1359, 1364 (Fed. Cir. 1999)
(record contained no evidence of harm to competition); Am.
Prof'l Testing Serv., Inc. v. Harcourt Brace Jovanovich Legal &
Prof'l Publ'ns, Inc., 108 F.3d 1147, 1151 (9th Cir. 1997)
(Plaintiff must make a "'preliminary showing of significant and
more-than-temporary harmful effects on competition (and not merely
upon a competitor or customer)' before these practices can rise to
the level of exclusionary conduct." (citation omitted)); Midwest
Underground Storage, Inc. v. Porter, 717 F.2d 493, 498 (10th
Cir. 1983) (evidence failed to show harm to competition); New
York v. Microsoft Corp., 224 F. Supp. 2d 76, 139 (D.D.C. 2002)
(Harm to competitors "is not condemned by the Sherman Act in the
absence of harm to the competitive process and thereby harm to
consumers."), aff'd sub nom. Massachusetts v. Microsoft
Corp., 373 F.3d 1199 (D.C. Cir. 2004).
The Tenth Circuit confirmed that its ruling was based on the
"reasonably capable of contributing significantly to creating or
maintaining monopoly power" causation standard. Instructional
Sys. Dev., 817 F.2d at 649.
Although Novell does not have an applications market claim as a
legal matter, the effect of Microsoft's conduct on complementary
markets cannot be ignored as a matter of antitrust economics
because evaluating the total effect of that conduct on consumers,
on balance, is the "right test." Tr. 1962:14-1965:25 (Noll).
Therefore, even assuming that Microsoft made up for its sacrificed
short-term profits in the operating systems market by increasing
its short-term profits in the applications market, that result does
not make Microsoft's conduct pro-competitive. As Dr. Noll
explained, "the increased profitability in market share of
Microsoft Office also has to be decomposed into that part, which is
superior efficiency, and that part which is the result of
anticompetitive conduct." Tr. 1963:12-17 (Noll). Here, it is clear
that any increase in the sales of Office that Microsoft gained from
disadvantaging its competitors by withdrawing support for the
namespace extension APIs was not a result of any superior
efficiency, but rather of Microsoft's anticompetitive intent to
disadvantage middleware and key franchise applications threats to
its operating systems monopoly.
Microsoft also argues that Novell's witnesses agreed that
Microsoft's robustness justification is legitimate. However,
Microsoft distorts the relevant testimony by taking it out of
context. For example, while Dr. Noll testified that operating
system stability was one reason for "not documenting an API," his
testimony analyzed the theory of refusing to document an API in the
first instance, rather than withdrawing support for an API that had
already been documented and evangelized to ISVs. See Tr.
1872:1-1873:23 (Noll). Similarly, Microsoft cites Mr. Richardson
for his agreement that the namespace extension APIs ran in the
shell's process, but Microsoft conveniently omits the continuation
of that testimony, in which Mr. Richardson noted that the system
retained other extensions and mechanisms that suffered from the
same alleged shortcoming. See Tr. 756:23-758:3
While arguing the flaws of the namespace extension APIs,
Microsoft mischaracterizes Mr. Nakajima's testimony regarding his
decision not to defend the namespace extension APIs at a meeting in
1994. Microsoft Mem. at 28. Mr. Nakajima decided not to defend the
APIs because he was busy preparing to ship Windows 95 and because
he did not like the "kind of politics and meetings" the Cairo group
created. Tr. 3772:14-3773:21 (Nakajima).
Assuming arguendo that Microsoft was initially concerned
about the namespace extension APIs' robustness, that concern was
remedied when Microsoft created the non-rooted option for namespace
extensions within a month after Mr. Gates decided to withdraw
support for the APIs. See, e.g., DX 82; DX 84 at MX 9025187;
Tr. 3837:2-24 (Nakajima); Tr. 3525:25-3526:24 (Muglia); Tr.
4369:14-4370:2 (Belfiore). Likewise, Microsoft was able to ensure
that the namespace extension APIs ran robustly on Windows NT by
March 1995, a full year in advance of the release of Windows NT
4.0. See PX 279 at MS-PCA 1405389 ("there shouldn't be any
issues with shell extensions being run robustly on NT. The big ones
(namespace extensions) end up in a separate process.").
For the same reason, Microsoft's arguments about the unlimited
number of third-party namespaces that could be added rings
particularly hollow. After re-documenting the namespace extension
APIs, Microsoft imposed no limits on the number of ISVs that could
use the mechanism.
Microsoft points to DX 3 (the same document as PX 225,
referenced above) as evidence of a contemporaneous document raising
robustness concerns, but DX 3 was authored after Mr.
Gates decided to de-document the namespace extension APIs, and so
does not prove that the concern arose prior to
de-documentation. Moreover, the purported "robustness" concerns
raised in DX 3 indicate only decreased reliability, and not the
grave situation that Microsoft now claims required
de-documentation. DX 3 at MX 6055843.
One Microsoft Office planning document, revised in November and
December 1994, after Mr. Gates' decision to de-document the
namespace extension APIs, refers to IShellFolder and IShellView as
"crucial interfaces." PX 379 at MS-PCA 1566800-01. This document
also details Microsoft's plan to have Office "superset and replace
the Chicago Explorer to become the single place where users can
find and manipulate all their information irrespective of its
type," id. at MS-PCA 1566798, which is consistent with Mr.
Gates' goal of de-documenting the namespace extension APIs to "give
Office a real advantage," PX 1.
One document drafted by Mr. Nakajima, entitled "Web-like Shell:
Architecture," outlines plans to integrate the namespace extension
APIs with Internet Explorer in November 1995, more than a year
after Mr. Gates decided to de-document those interfaces. See
PX 344 at MS-PCA 1085016.
In addition, the namespace extension APIs, far from being
"trivial and unimportant," were an essential technology that
Microsoft used to integrate numerous components into Windows 95.
For example, Mr. Nakajima noted with pride that he utilized the
namespace extension APIs to integrate the separate File Manager,
Program Manager, and Control Panel functionality in Windows 3.1
into a consolidated viewer called the Windows Explorer in Windows
95 and said he later used the APIs to integrate Internet Explorer
into Windows. Tr. 3747:24-3748:21, 3788:24-3789:9, 3801:23-3802:12
Antitrust standing cannot be established without showing
proximate cause and antitrust injury, but the existence of an
antitrust injury does not automatically confer standing. Sharp
v. United Airlines, Inc., 967 F.2d 404, 406 (10th Cir.
Had the Court permitted Novell to put on a rebuttal case, Mr.
Gibb would have testified that: (1) he regularly interacted with
Quattro Pro developers before, during, and after the December 1995
resignation incident; (2) the Quattro Pro code was complete and
ready for beta testing months before the December 1995
resignations; (3) pre-release versions of Quattro Pro were sent to
journalists to be reviewed in the fall of 1995 and Quattro Pro 7.0
was demonstrated at COMDEX in November 1995; (4) he traveled to
Scotts Valley, California after the resignations in January 1996;
(5) the Quattro Pro code was not missing in January 1996; (6) the
work done in Scotts Valley in January 1996 involved bug fixes and
not the development of new features for Quattro Pro; and (7) had
the shared code team completed its work in late 1994 or early 1995,
Novell would have shipped PerfectOffice 95 within 60 to 90 days of
the release of Windows 95, even if that meant shipping English
versions first and foreign language versions later. Novell's
Proffer in Resp. to Microsoft Mem. to Preclude "Improper Rebuttal"
at 4-5 (Dec. 13, 2011) (Dkt. # 375). This evidence would have
further refuted the testimony of Microsoft's witnesses.
Microsoft's reliance on a single document, DX 230, and the
testimony of Mr. Frankenberg is insufficient to support judgment in
Microsoft's favor as a matter of law. DX 230 discusses the
resignation of developers but nowhere says that the Quattro Pro
version planned for inclusion in PerfectOffice 95 was far from
finished. And, as the Court knows, Mr. Frankenberg has no real
knowledge of the Quattro Pro issues. See Tr. 1146:6-11,
2904:7-10, 1242:10-1243:14 (Frankenberg).
DX 217 also disproves Microsoft's argument that problems
localizing the 16-bit version of Quattro Pro led to delays in
developing the version for Windows 95. While localization problems
seem to have persisted beyond February 1995, those issues did not
affect the main Quattro Pro development team, which had completed
its work in late February 1995. See DX 217 at
NOV-B07466893-94. The remaining localization issues did not involve
the core Quattro Pro development team, but rather the logistical
aspect of product localization that was handled elsewhere in
Novell. Tr. 3178:18-3179:17 (Bushman) (testifying about translation
efforts of the localization team, which was run by Mary
Microsoft has suggested that DX 231 is somehow inconsistent with
Novell's position because the document contains a code-complete
date for "PerfectFit (FIGS)" on October 31, 1995. See
Microsoft Letter (Dec. 13, 2011) (citing DX 231 at NOV00161054).
Mr. Gibb testified, however, that Novell planned to move to the
beta testing phase with a placeholder for the custom file open
dialog because of the difficulties Novell faced in completing that
component of the suite. Tr. 907:5-908:10 (Gibb) (referring to PX
322 at NOV-B01491965-66). That Novell developers continued working
on PerfectFit, knowing the custom file open dialog was far from
complete, hardly undercuts Novell's arguments as to what the
but-for world would have looked like had shared code been completed
in late 1994. This point is equally applicable to the Quattro Pro
team, which, while code complete, would not sit idly by waiting for
the shared code team to deliver the file open dialog. Moreover, the
fact that DX 231 lists an "RTM" (release to manufacturing) date of
March 31, 1996 — which was only a projection at the time DX
231 was authored — is consistent with Novell's argument that
the suite was delayed into the spring of 1996.
Dr. Warren-Boulton's testimony mentioning a 60-day time period
is clarified in the context of his testimony regarding the First
Wave Program: "It is my understanding that the relationship is such
that if you get it out within the prescribed time period, and I
understand it is an agreement, we agree to get an application out
within I think it is 60 days in order to be part of
the whole hype of Windows 95, if you make it in that window you're
in pretty good shape." Tr. 2418:22-2420:11 (Warren-Boulton)
(emphasis added). The First Wave Program required ISVs to release
their products within 90 days, not within 60 days of
Windows 95's release. See, e.g., PX 148; PX 248; PX 504; DX
Microsoft appears to complain that Dr. Warren-Boulton failed to
testify about the cause of the PerfectOffice development delays.
That is a fact question reserved for the jury. As a damages expert,
Dr. Warren-Boulton properly assumed that Microsoft's conduct caused
the development delays. Absent that finding, of course, the jury
would never need to consider his testimony.
See Tr. 1387:2-1388:8 (Alepin); Tr. 290:5-19 (Harral);
Tr. 1969:1-6 (C. Myhrvold) ("[I]f you want a popular operating
system, it is pretty much wholly dependent on what applications run
for it and how compelling those applications are.").
The exception that permits a departure from the law of the case
doctrine when the decision is clearly erroneous and would work a
manifest injustice is "rarely, if ever, invoke[d]." United
States v. Alvarez, 142 F.3d 1243, 1247 (10th Cir. 1998). "In
fact, in the only case we found in which a panel used this
exception, the en banc court subsequently reversed the panel."
Id. (citations omitted).
Microsoft's broad reading of the APA would essentially mean that
any reference to "DOS" on the part of a Novell lawyer or witness
would demonstrate the requisite "association" showing that Novell's
current claim was transferred. Such an approach is illogical.
Microsoft never explicitly raised at summary judgment its
argument that Novell released any claims related to PerfectOffice,
waiting instead until the motions in limine stage to raise
In contrast to its argument here, Microsoft acknowledged that
the PerfectOffice middleware theory this Court excluded was based
on the combination of PerfectOffice, Java, and Navigator, as
opposed to PerfectOffice standing alone. See Supplemental
Mem. in Supp. of Microsoft's Mot. in Limine to Exclude Evid. of
Novell's New Middleware Theory at 1 (Oct. 10, 2011) (Dkt. # 200).
Similarly, in another brief filed by Microsoft, it acknowledged
that the Court granted its motion "in part" in excluding Novell's
middleware theory only to the extent it was based on a combination
of PerfectOffice, Java, and Navigator. Microsoft's Oct. 13, 2011
Mem. at 1 (Dkt. # 228).
The Court noted that Microsoft's lawyer disputed the state of
the evidence and requested clarification as to the dispute. Tr.
2071:4-13. Microsoft's motion was not raised again.
Microsoft argues that, because the Complaint does not define or
reference an office productivity suite market, PerfectOffice cannot
be contemplated by the allegations therein. Microsoft Mem. at 127.
This argument, however, proves only that Novell did not bring a
claim for harm in the office productivity suite market. This
undisputed fact is irrelevant. The focus of Novell's current claim
is on Microsoft's conduct in the PC operating systems
market, and Microsoft's targeting of competing middleware
products such as Novell's WordPerfect and AppWare, both parts of
the PerfectOffice suite. Moreover, Microsoft's reference to the
NetWare settlement is unavailing, as that document states clearly
that, despite Novell's release, "Nothing herein shall limit
Novell's rights to present any facts relevant to its WordPerfect
claims." Settlement Agreement at 2.
See, e.g., Pl.'s Mem. in Opp'n to Def.'s Mot. in
Limine to Exclude Evid. of Novell's New Middleware Theory (Oct.
4, 2011) (Dkt. # 196) (filed under seal); Pl.'s Mem. in Resp. to
Def.'s Supplemental Mem. in Supp. of Its Mot. in Limine to
Exclude Evid. of Novell's New Middleware Theory (Oct. 11, 2011)
(Dkt. # 205) (filed under seal).