MS ANTITRUST - Judge throws out parts of Novell lawsuit

A judge dismisses four counts of Novell's antitrust lawsuit against Microsoft, but allows two counts to move forward.

A U.S. district court judge has thrown out four counts in Novell's antitrust lawsuit against Microsoft, but let stand two other counts accusing the software giant of damaging Novell's business through monopolistic behavior.

In a ruling Friday, 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 Microsoft illegally damaged its efforts to market the WordPerfect word processing application and the Quattro Pro spreadsheet application. Motz let stand two counts based on allegations that Microsoft illegally used its monopoly in the operating system market and on exclusionary agreements with OEMs (original equipment manufacturers).

But Motz threw out four other counts alleging Microsoft monopolies in the word processing and spreadsheet application markets, saying those allegations were never asserted in the U.S. Department of Justice's (DOJ's) antitrust case against Microsoft, upon which Novell's civil antitrust case is based. The DOJ's case ended with a judge-approved settlement in November 2002.

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

Representatives of Microsoft and Novell were not immediately available for comment Monday.

Microsoft argued in its motion to dismiss that Novell doesn't have a legitimate claim to damages related to WordPerfect because Novell has sold the rights to the package. But Motz rejected that argument.

Novell merged with WordPerfect in June 1994. In a related transaction at the same time, Novell purchased Quattro Pro, a spreadsheet product, from Borland International. The combined value of WordPerfect and Quattro Pro at the time of the transactions was over US$1 billion, according to Novell. WordPerfect and Quattro Pro were then sold to Corel in March 1996 for approximately US$170 million.

Microsoft also argued that Novell's claims aren't legitimate because its office productivity packages did not compete in the operating system market, where the government's case proved a Microsoft monopoly. But Motz suggested that Microsoft knew of the effect its operating system monopoly had on other software products. Motz, in his ruling, quoted a 1997 e-mail from Microsoft Office division chief Jeff Raikes to investor Warren Buffet:

"If we own the key 'franchises' built on top of the operating system, we dramatically widen the 'moat' that protects the operating system business," Raikes wrote. "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 lawsuit will move forward at a later date.

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