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Novell Cleared To Sue Microsoft Over WordPerfect

A U.S. appeals court has cleared the way for Novell Inc. to sue Microsoft for unfair competition in the office productivity software market.

The U.S. Court of Appeals for the Fourth Circuit in Northern Maryland issued an opinion on Tuesday that reverses an earlier district court's finding that Novell could not sue Microsoft over the issue. The case's history spans more than a decade. It specifically involves WordPerfect and Quattro Pro office productivity software, which Novell owned in 1994 before selling those products to Corel Corp. in 1996.

WordPerfect once had a strong foothold in the market, constituting nearly 50 percent of the word-processing market in 1990. However, by 1996, WordPerfect's marketshare had declined to less than 10 percent, according to a Bloomberg article. Microsoft Word currently dominates the word-processing software market.

In addition to WordPerfect and Quattro, Novell's dispute centers on its DR-DOS operating system, which Novell sold to Caldera Inc. in July 1996 as part of a strategy to avoid legal retaliation from Microsoft. Novell was pursuing private antitrust claims against Microsoft, so it sold "DR-DOS and related PC operating system software" to Caldera to avoid "any antitrust litigation related to those products," according to the Fourth Circuit Court's opinion document (PDF, courtesy of Groklaw).

Caldera sued Microsoft in July 1996 over alleged harm to DR-DOS. Microsoft settled with Caldera in January 2000, paying the company $280 million. Caldera then distributed $35.5 million of that settlement money to Novell.

Appeals Court Review

The issue before the appeals court was whether the Caldera settlement also included the associated office productivity software, WordPerfect and Quattro Pro. Much of the testimony in the case focused on the meaning of the phrase, "associated directly or indirectly," that was used in the Caldera DR-DOS settlement. The appeals court ultimately decided that the settlement just involved DR-DOS and some associated programs that weren't productivity software. That decision frees Novell to sue Microsoft over the office productivity software competition claims.

The appeals court did exclude one claim in Novell's appeal related to its GroupWise software. GroupWise is Novell's suite of e-mail, task management and calendar applications. The appeals court decided that such a suite could not be considered productivity software. It excluded the GroupWise from the appeal because Microsoft was not "provided fair notice of GroupWise claims."

Microsoft spokesperson Kevin Kutz issued a statement on Tuesday expressing the company's displeasure at the court's reversal decision. However, he noted that some of the claims had been pared down by the appeals court.

"We are disappointed with the Fourth's Circuit's decision to reverse in part the district court's summary judgment ruling which dismissed these very old claims, although we are pleased that at this point only one part of one of Novell's claims remains," Kutz stated. "We still are convinced that this lingering claim does not have any merit, and we are considering our next steps."

Novell, which is currently being acquired by Attachmate Corp., did not respond to a request for a comment on the court's decision. Attachmate's plans to acquire Novell were announced back in November.

Microsoft is currently engaged in trying to buy some of Novell's patents through a CPTN Holdings umbrella group. This group also includes participation by Apple, EMC and Oracle, and seeks to purchase 882 of Novell's patents for about $450 million in cash. The U.S. Department of Justice has already announced a partly favorable review of the acquisition terms.

Linux on the Line?

If all of that isn't complicated enough, Groklaw, a legal watchdog site favoring open source software and Linux, has suggested a possible ominous endgame resulting from Attachmate's acquisition of Novell. A Groklaw blog post on Tuesday noted that Novell's lawyers did well defending Linux intellectual property against patent infringement claims by The SCO Group. It turns out that The SCO Group is the successor company to Caldera, which Novell used as a legal shield back in July 1996. The SCO Group later made the claim that Linux operating systems were using SCO's UNIX System V source code, and that all Linux OSes were derived from UNIX.

The Groklaw post noted that employee cuts by Attachmate, in which about 800 people in Provo, Utah alone were let go, have included Novell lawyers that defended against SCO claims. Those cuts could affect future legal challenges to Linux, Groklaw contended.

"Maybe they [the Novell lawyers] did so well, someone who wanted SCO to win decided to buy Novell and make them stop," Groklaw speculated.