In Re Microsoft Corp. Antitrust Litig.Novell Inc v. Microsoft Corp.

• Decision Date: 30 March 2010
• Docket Number: No. MDL 1332.,Civil No. JFM-05-1087.,MDL 1332.
• Citation: 699 F.Supp.2d 730
• Parties: In re MICROSOFT CORP. ANTITRUST LITIGATION.Novell, Inc.v.Microsoft Corp.
• Court: U.S. District Court — District of Maryland

699 F.Supp.2d 730

In re MICROSOFT CORP. ANTITRUST LITIGATION.Novell, Inc.v.Microsoft Corp.

No. MDL 1332.

Civil No. JFM-05-1087.

United States District Court D. Maryland.

March 30, 2010.

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Jeffrey M. Johnson, David Leo Engelhardt, Milton A. Marquis, R. Bruce Holcomb, Dickstein Shapiro LLP, Washington, DC, Max D. Wheeler, Stanley J. Preston, Snow Christensen and Martineau, Salt Lake City, UT, Michael Edmund Jacobs, Zelle Hofmann Voelbel & Mason LLP, Minneapolis, MN, for Novell, Inc.

David B. Tulchin, Jennifer L. Murray, Steven L. Holley, Sullivan and Cromwell, New York, NY, Alexander W. Major, G. Stewart Webb, Jr., Venable LLP, Baltimore, MD, James S. Jardine, John W. Mackay, Mark M. Bettilyon, Mark W. Pugsley Ray Quinney and Nebeker, Salt Lake City, UT, Joseph John Reilly, Sullivan and Cromwell LLP, Washington, DC, Robert A. Rosenfeld, Heller Ehrman White McAuliffe LLP, San Francisco, CA, Thomas W. Burt, Redmond, WA, for Microsoft Corp.

OPINION

J. FREDERICK MOTZ, District Judge.

This lawsuit, brought by Novell, Inc. against Microsoft, Corp., is the last action pending in MDL 1332 In re Microsoft Corp. Antitrust Litigation. Earlier in the litigation, on an interlocutory appeal, the Fourth Circuit affirmed a ruling I had made dismissing Counts II through V of Novell's complaint on limitations grounds. These Counts asserted antitrust claims for harm caused to Novell's software applications as a result of Microsoft's monopolization and attempted monopolization of the word processing and spreadsheet markets. The Fourth Circuit held (as had I) that these claims were not tolled during the pendency of the action brought by the United States against Microsoft because, unlike the government case, they were based upon conduct committed by Microsoft in the software applications, not the operating system, market.

Two claims, asserted respectively in Counts I and VI, remain pending: (1) Microsoft violated § 2 of the Sherman Act by taking anticompetitive actions against, and causing damage to, software applications owned by Novell for the purpose of obtaining and maintaining its monopoly in the operating system market; and (2) Microsoft violated § 1 of the Sherman Act by entering into agreements with third parties “not to license or distribute Novell's office productivity applications or to do so only on terms that materially disadvantaged those products.”

Discovery on the remaining claims has been completed, and the parties have filed cross-motions for summary judgment. The motions raise two questions: (1) whether Novell continues to own the claims it now asserts or transferred them to Caldera, Inc., and (2) if Novell does continue to own the claims, whether they are viable under the Sherman Act. For the reasons stated in this Opinion, I find that Novell no longer owns the claims and may not pursue them here. As a matter of strict analysis, that is the end of the case. However, in light of the age of MDL 1332 in general and of this lawsuit in particular, I will also address the substantive viability of Novell's claims. This will enable the Fourth Circuit, upon an appeal of my rulings, to address the antitrust issues presented, in the event that it disagrees with my conclusion relating to the claims ownership issue. As to the antitrust claims, I find that, had Novell not assigned them to Caldera, Count I would have survived Microsoft's summary judgment motion but Count VI would not have survived Microsoft's motion.

I.

A motion for summary judgment should be granted when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The materiality of facts is determined by the underlying substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine dispute about a material fact exists “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. When considering a motion for summary judgment, a district court draws reasonable inferences and views the evidence in the light most favorable to the non-moving party. Thompson Everett, Inc. v. Nat'l Cable Adver., L.P., 57 F.3d 1317, 1323 (4th Cir.1995). Although “[t]he summary judgment standard does not differ when applied to antitrust claims .... ‘because of the unusual entanglement of legal and factual issues frequently presented in antitrust cases, the task of sorting them out may be particularly well-suited for Rule 56 utilization.’ ” Bepco, Inc. v. Allied-Signal, Inc., 106 F.Supp.2d 814, 822 (M.D.N.C.2000) (quoting Thompson Everett, 57 F.3d at 1322).

II.

Under an Asset Purchase Agreement (“APA”) dated July 23, 1996, Novell assigned to Caldera claims “held by Novell at the Closing Date and associated directly or indirectly with any of the DOS Products ...” ¹ The term “DOS Products” was defined in the APA to include Novell's PC operating systems DR DOS and Novell DOS, among other products. Novell had previously sold to Corel Corporation its Business Applications Division, which encompassed various software applications, including WordPerfect (its word processing program), Quattro Pro (its spreadsheet program), and PerfectOffice (a combination of WordPerfect and Quattro Pro). In its agreement with Corel, Novell expressly retained “the antitrust claims for harm that Microsoft caused” to those products.

In my earlier opinion dismissing Counts II through V, I ruled that Novell did not assign to Caldera the claims asserted in Counts I and VI because those claims focused upon harm suffered by Novell's software applications, not upon harm suffered by the operating systems transferred to Caldera. In reaching that conclusion I stated, “[i]t is a far stretch to infer (and Microsoft has presented nothing to establish) that simply because DOS competed in the operating system market, such a claim [for damage to software applications] was either a ‘direct’ or ‘indirect’ claims intended to be transferred from Novell to Caldera.” In re Microsoft Corp. Antitrust Litig., Civ. JFM-05-1087, 2005 WL 1398643, *1 (D.Md. June 10, 2005). The Fourth Circuit did not review that ruling because it was not certified for interlocutory appeal. Novell, Inc. v. Microsoft Corp., 505 F.3d 302, 306 n. 10 (4th Cir.2007).

Upon further reflection I have decided that my earlier ruling was wrong. Although the claims asserted by Novell in Counts I and VI are for damage caused to it software applications, the reason Microsoft allegedly engaged in the conduct causing the damage was to obtain and maintain its monopoly in the operating system market-the market in which the DOS Products competed. Novell's theory as to those claims is that Microsoft intentionally took actions against Novell's applications because (1) if those applications had retained their popularity, consumers might insist upon purchasing operating systems with which the applications were compatible, thereby threatening Windows 95's market power; and (2) “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.

In short, Counts I and VI assert claims for damage inflicted upon Novell's software applications through the prism of the operating system market. Hybrid in nature, the claims were ingeniously designed to survive Microsoft's anticipated limitations defense by permitting Novell to argue that the pendency of the government case against Microsoft-which was based upon Microsoft's antitrust violations in the operating system market-tolled limitations. ² Successful though that argument has been in defeating Microsoft's limitations defense, it is fatal to Novell's position on the claims ownership issue. By associating claims for harm to applications with the operating system market in which the DOS products competed, the argument establishes that the claims were transferred by Novell to Caldera under the APA.

Reduced to its essence, Novell's primary contention is that all that the APA meant to assign was claims for harm inflicted upon the DOS products.³ As previously indicated, I accepted this argument when making my prior ruling. However, that is not what the APA itself actually says was assigned. The assignment clause does not mention “harm” but rather “associat[ion].” Under Utah law, which the parties agree applies to this action by virtue of a choice of law provision contained in the APA, a court “look[s] to the language of the contract to determine its meaning and the intent of the contracting parties.” Café Rio, Inc. v. Larkin-Gifford-Overton, LLC, 207 P.3d 1235, 1240 (Utah 2009). “Only if the language of the contract is ambiguous will ... [a court] consider extrinsic evidence of the parties' intent.” Id. Accord WebBank v. Am. Gen. Annuity Serv. Corp., 54 P.3d 1139, 1144-45 (Utah 2002).⁴ Here, there is no ambiguity in the APA. It encompasses all claims “associated directly or indirectly” with the DOS Products.⁵

Novell also relies upon the proposition stated in Restatement (Second) of Contracts Section 201(1) (1981), that “[w]here the parties have attached the same meaning to a promise or agreement or a term of art, it is interpreted in accordance with that meaning.” Novell's contention that this rule would be adopted by the Utah Supreme Court is somewhat questionable in light of the fact that the case upon which Novell relies Flying J Inc. v. Comdata Network, Inc., 405 F.3d 821, 834 n. 6 (10th Cir.2005), predicts that the Utah Supreme Court would adopt Section 201(3)(b), not Section 201(1), of the Restatement (Second).⁶ In any event, under the Restatement rule, in determining the subjective intent of the parties to a contract, a court ordinarily looks only to their contemporaneous...