Judge OKs Part of Novell's Suit Against Microsoft

A U.S. District Court judge let stand two of the six counts in Novell Inc.'s antitrust lawsuit against Microsoft Corp., which accused the software giant of damaging Novell's business through monopolistic behavior. The remaining counts were dismissed.

In a ruling on June 10, Judge Frederick Motz of the U.S. District Court for the District of Maryland denied Microsoft's motion to dismiss two counts in Novell's lawsuit, which claims that Microsoft illegally damaged efforts by Novell to market its WordPerfect word-processing and Quattro Pro spreadsheet applications. The products are now owned by Corel Corp.

The two remaining counts are based on allegations that Microsoft illegally used its monopoly in the operating system market and that Microsoft entered into exclusionary agreements with computer makers.

Microsoft argued that Novell's claims aren't legitimate because its office productivity packages didn't compete in the operating system market, where the government's case had proved a Microsoft monopoly.

But Motz suggested that Microsoft knew of the effect its operating system monopoly had on other software, citing a 1997 e-mail from Microsoft Office division chief Jeff Raikes to investor Warren Buffet.

In the e-mail, 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. ... And success in those businesses will help increase the opportunity for future pricing discretion."

The four counts thrown out by Motz had alleged that Microsoft held monopolies in the word-processing and spreadsheet application markets. The ruling stated that those allegations were never asserted in the U.S. Department of Justice's antitrust case against Microsoft, and Novell's civil antitrust case is based on that case.

The DOJ's case ended with a judge-approved settlement in November 2002.

Further Litigation

Novell filed the WordPerfect-related antitrust lawsuit in November 2004 , within days of settling with Microsoft over antitrust claims related to Novell's NetWare network operating system product. Microsoft agreed to pay Novell $536 million in that settlement.

Motz rejected Microsoft's argument that Novell doesn't have a legitimate claim to damages related to WordPerfect because Novell sold the rights to the package.

Novell merged with WordPerfect Corp. in June 1994. In a related transaction at the same time, Novell purchased Quattro Pro from Borland International. The combined value of WordPerfect and Quattro Pro at the time of the transactions was more than $1 billion, according to Novell. Less than two years later, Novell sold WordPerfect and Quattro Pro to Corel for approximately $170 million.

Gross is a reporter for the IDG News Service.

Copyright © 2005 IDG Communications, Inc.

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