Microsoft Files Summary Judgment Motions in Caldera Lawsuit

REDMOND, Wash., Feb. 12, 1999 — Microsoft Corp. has asked the U.S. District Court in Salt Lake City to dismiss many of the claims asserted by a Utah company in a recent antitrust lawsuit. Microsoft has filed nine partial summary judgment motions that go to the heart of the allegations brought by the Provo-based Caldera Inc.

“There is simply no factual basis for Caldera’s claims,”
said Tom Burt, associate general counsel for Microsoft.
“Many of Caldera’s allegations merely recycle claims that the Federal Trade Commission and Department of Justice reviewed years ago and decided were groundless. Caldera bought these claims from Novell in 1996. After nearly three more years of investigation, Caldera still has no evidence to support its claims.”

Microsoft’s summary judgment motions refute Caldera’s claims that the Microsoft® Windows® 95 operating system was an illegal
“tie” of the MS-DOS® operating system and earlier versions of Windows, and that Windows 95 did not benefit consumers. Microsoft’s motions also urge the court to dismiss Caldera’s other claims, including its allegation that Microsoft intentionally designed Windows 3.1 to be incompatible with Novell Inc.’s DR DOS operating system.

In a recent decision in a similar case, the U.S. Court of Appeals in Washington, D.C., specifically rejected the type of technological tying claim now raised by Caldera. In its opinion, the appeals court specifically cited the integration of MS-DOS and Windows into Windows 95 as an example of technological innovation that clearly benefited consumers. The appeals court agreed with earlier decisions from many other courts in holding that such technological tying is not a violation of antitrust laws. These decisions undermine Caldera’s claims in regard to Windows 95.

“Consumers around the world have made Windows 95 one of the most successful software products in history because it provided great new features and functionality that made personal computer software easier to install, use and understand,”
Burt said.
“Consumers have shown their overwhelming support for the innovations in Windows 95. There is no basis in law or fact for Caldera’s claims, and we are asking the District Court to dismiss those claims now.”

Microsoft has also filed the following partial summary judgment motions:

  • A motion urging the District Court to dismiss the allegation that Microsoft designed the software code in Windows 3.1 intentionally to create incompatibilities with
    DR DOS. This allegation is false. The handful of specific examples of claimed incompatibilities Caldera has raised have been shown to be problems that Microsoft did not create or the result of improvements and enhancements to the software for the benefit of consumers. Caldera’s own witnesses admit that there are technical justifications for the changes made by Microsoft, and that Caldera’s predecessor only had to make minor modifications to its product to make it run with Windows.

  • A motion urging the court to dismiss Caldera’s allegation that Microsoft deliberately caused false error messages to occur in Windows 3.1 for customers using DR DOS, in order to undermine consumer confidence in DR DOS. The facts show that no such messages appeared in any commercially released version of Windows. Microsoft simply included test code in the third beta release of Windows 3.1 that checked a beta tester’s PC for MS-DOS. If the tester’s PC was not running a recent version of MS-DOS, a
    “nonfatal error”
    message appeared asking the tester to call beta support. The tester could then continue using the machine – without calling for support. The error message did not contain any reference to the operating system and was included to determine if the test code was working properly. The test code was not functional in the commercial release of Windows 3.1, so no such error message was ever displayed to users of that product. While Microsoft chose not to use the test code in the final product, in reality DR DOS was not fully compatible with Windows 3.1.

  • A motion urging dismissal of Caldera’s claim that Microsoft’s per-processor licensing contracts prevented Caldera’s predecessors from licensing their DR DOS operating system in the OEM channel. These licensing contracts are lawful and reasonable arrangements. OEMs had a variety of licensing options available from Microsoft, and per-processor licensing in no way prevented an OEM from licensing and shipping a different operating system. Over the period in question, only a minority of Microsoft’s license agreements were per-processor license agreements. Kenneth Arrow, the economic expert for the U.S. Department of Justice, testified that these license agreements had little or no economic impact during the time they were used.

  • A motion urging the court to dismiss Caldera’s complaint that it was wrongful for Microsoft to refuse to provide Caldera’s predecessors with a beta test version of Windows 3.1. There is no basis for Caldera’s claim that a company must disclose its intellectual property to a competitor before the commercial release of a new product. Indeed, the settled case law is just the opposite. As is common in all industries, Microsoft did not provide beta test versions of products under development to many companies that competed against those products.

  • A motion urging dismissal of Caldera’s so-called
    claims against Microsoft. Announcements of planned products are a common occurrence and important in the software industry. Many software companies use product preannouncements to inform their customers about new products and to advise other software developers and PC manufacturers of new features likely to be included, so those companies can take advantage of the features in their own products. The planned release date for MS-DOS 5.0, which is the basis of Caldera’s claim, was believed to be accurate when announced and was consistent with internal Microsoft projections. The release of MS-DOS 5.0 slipped from late 1990 to June 1991 because of several factors – including decisions to make additional improvements to the product and to subject it to the most rigorous beta test program that had been used to date – all in order to ensure that this first retail upgrade version of MS-DOS was as reliable and beneficial to customers as possible. Caldera has failed to show that Microsoft did not believe the announcements to be accurate when made.

  • A motion requesting summary judgment on Caldera’s state law claim. The previous owner of these claims, Novell, developed these allegations in 1991-92, when it sought to have the Federal Trade Commission and the U.S. Department of Justice investigate Microsoft. Therefore the claims should be dismissed because they are barred by Utah’s statute of limitations.

  • A motion seeking the dismissal of Caldera’s claims regarding product disparagement. Caldera asserts that various statements made by Microsoft employees were wrongful and often labels them
    FUD, a common sales practice term that refers to
    “fear, uncertainty and doubt,”
    is used to describe the efforts of one company to raise issues of fact about a feature of or situation concerning a competitor’s alleged product. FUD is a lawful and appropriate sales tactic, and none of Microsoft’s statements about
    DR DOS, such as its being risky, a clone or untested by Microsoft, were false or could form the basis of a disparagement claim. These statements were intended to compare products and present the type of information about competing products that the market seeks out.

  • A motion seeking summary judgment on claims that have nothing to do with commerce in the United States. Caldera does not have the legal right to pursue those claims, nor could such claims be brought under U.S. law.

“Our motions make powerful points that show why these claims are completely without merit and should be dismissed by the court,”
Burt said.
“Caldera bought its claims from Novell and filed this lawsuit the same day in an effort to rewrite the rules of competition in the software industry. Caldera is challenging Microsoft’s right to improve its products to benefit its customers. We are asking the court to dismiss these claims and let both parties return to the business of making great new software for our customers.”

The lawsuit is currently scheduled for trial starting in June 1999.

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