If you can’t beat ’em, join ’em.
Novell put aside its Linux-versus-Windows crusade long enough to negotiate a half-billion-dollar payoff to drop antitrust complaints in the U.S. and abroad involving Microsoft.
Microsoft said the latest settlements are part of an ongoing plan to resolve litigation. Analysts and an attorney involved in the case said the moves are pragmatic for a company looking to put litigation costs and years of courtroom battles behind it regarding monopoly abuse charges, both in the U.S. and Europe.
In a deal announced Monday, Microsoft and Novell resolved all antitrust claims relating to its NetWare operating system, which competes with enterprise Windows, with Novell getting a $536 million check. It also withdrew from further participation in the European Commission’s antitrust actions against Microsoft
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“We have dedicated a great deal of energy and focus to resolve conflicts of the past. As part of this effort, we realize that reaching common ground with even our most ardent critics is an important step in this process,” said a Microsoft spokesperson in an e-mailed statement.
Stacey Quandt, an analyst with the Robert Frances Group, said the NetWare dispute isn’t a huge one for Novell. “Netware is increasingly less relevant, since Novell’s strategic focus is on Linux.” Novell still has support and maintenance contracts with customers, but “there is no longer a big market for NetWare,” she added. Novell moved into open source software late in 2003, when it bought SuSE Linux, maker of a Linux operating system, and Ximian, a provider of Linux desktop, management and groupware technologies.
“This is emphatically not a business agreement,” said Directions on Microsoft analyst Matt Rosoff. “It looks like Novell still will take Microsoft to court over Word Perfect and Office.”
Novell general counsel Joseph LaSala confirmed there’s more litigation to come. “We have had extensive discussions with Microsoft to resolve our differences [with the WordPerfect business], but despite our best efforts, we were unable to agree on acceptable terms,” LaSala said in a statement. “We intend to pursue our claims aggressively toward a goal of recovering fair and considerable value for the harm caused to Novell’s business.”
Novell is expected to claim that Microsoft unfairly limited competition in the office productivity application marketplace during the time Novell owned the WordPerfect word processing and Quattro Pro spreadsheet applications.
Meanwhile, Rosoff said Microsoft’s NetWare settlement isn’t just a PR move.
“Microsoft is acknowledging the possibility that Novell had some legitimate claims that might have resulted in a costly court battle and would have kept the issues in the public eye and in the media,” he said. “Microsoft is trying to put the Department of Justice and all related cases behind it.”
Gordon Haff, an analyst with the IT research firm Illuminata, said the settlement is part of Microsoft’s housekeeping efforts to clean up litigation.
“Microsoft, for a good six to 12 months, obviously has been pretty intent on getting all the legal issues off the table,” Haff said. “Compared to some of its settlements, this is relatively inexpensive.” Haff saw some potential for interoperability agreements between Microsoft and Novell as a result of the accord, even though nothing so far has come from Microsoft’s settlement with Sun Microsystems . “I see the cooperation/interoperation, at least for now, being a secondary effect of the settlement,” he said. “Trading money for getting all these distractions off the table is the primary outcome.”
In a related announcement on Monday, Microsoft said it had joined the Computer & Communications Industry Association (CCIA), a trade group that piled on in the U.S. Department of Justice’s antitrust action against the world’s largest software company. According to Microsoft, the CCIA also was one of the instigators of the European Union Competition Commission’s investigation into its practices. That investigation led to a ruling that Microsoft had abused its monopoly power, a decision Microsoft is now appealing.
According to the agreement, the CCIA will drop its push to have the U.S. Supreme Court reverse the Department of Justice’s antitrust settlement with Microsoft. It also will no longer participate as an intervener on behalf of the European Commission in Microsoft’s appeal of the Commission’s ruling.
Microsoft will reimburse the association for some of its legal expenses and also provide “substantial” but unspecified support for new CCIA projects.
Pragmatic is the word for the settlement, according to Glenn Manishin, a partner in the law firm of Kelley Drye. Manishin represented the CCIA’s interests in the U.S. antitrust hearings against Microsoft.
“It’s been a long and grueling fight,” he said. “The chances of having the Supreme Court accept a review [of the U.S. case] and make a change that would have a significant practical effect in the U.S. marketplace in the reasonable future were relatively small. As a practical reality, there wasn’t a heck of a lot that could be done any more in the U.S.”
Manishin said that Microsoft’s name on the trade group’s roster would enhance its lobbying ability, at least on issues about which the CCIA and Redmond can agree.
Said Directions on Microsoft’s Rosoff, “The CCIA has kind of recognized that the U.S. antitrust case is not going anywhere further. They and Microsoft are looking at the overall landscape, and they believe there are opportunities to influence government policy and regulation.”
The CCIA does have some clout, even without Microsoft. In 2002, it got the IRS to back off on a plan to provide free electronic filing of personal tax returns. The CCIA claimed the government would be competing with private companies that sell tax preparation software. It brokered an agreement whereby such vendors agreed to offer some segments of the populace, such as those with low incomes and seniors, free or discounted e-filing services and online tax prep applications, instead of free e-filing for all.
In a 1999 statement following settlement talks in the DoJ’s antitrust suit, Ed Black, CEO of the Washington, D.C.-based organization, called Microsoft “cavalier and disdainful,” and said, “arrogance and mistakes have exposed Microsoft’s intentions and brutal behavior for all to see.”
On Monday, the CCIA released a statement indicating that all might not be forgiven.
“Neither CCIA nor Microsoft is retracting or changing positions taken in the past. The decisions made are practical ones based on the status and prospects of the various proceedings and the opportunity to promote common industry objectives in the future,” the statement read.
The organization listed open source, copyright policy, patent reform, standards policy and competition policy as areas where the group’s official positions and Microsoft’s might conflict. The CCIA said it had planned no further legal actions against Microsoft, but the settlement doesn’t preclude it.
It was unclear to observers what, if any, effect Novell’s and the CCIA’s withdrawal from participation in the EU case might have.
EU spokesperson Maria Torres said in an e-mailed statement, “Anti-trust enforcement by the Commission does not hinge upon complaints by individual parties, but is geared towards protecting the consumer’s interests. Therefore, the Commission is free to examine the facts in the CCIA complaint on its own initiative.”
A litigator familiar with the EU proceedings said that while the CCIA definitely helped spark the EU’s antitrust investigation, its withdrawal as an intervener would probably have little effect on the appeal. “As with any government agency, the EU is almost beholden on the private sector to help martial evidence,” he said. Third parties that can help regulators understand a particular industry and the breadth of the harm may make a significant difference in such investigations. “But once that train has started,” he said, “it will go forward — even if some private parties jump off. ”
There is one lone litigant with which Microsoft hasn’t settled: Real Networks .
“Microsoft’s announced payments to Novell and CCIA do not change
the anti-competitive conduct condemned by the commission,” said Dave Stewart, Real Networks deputy general counsel. ‘We continue to support the commission.”
Stewart could not say whether Microsoft had approached his company about settling its own antitrust case. Real’s suit against Microsoft claims that bundling Windows Media Player with Internet Explorer shut its own RealPlayer out of the market.
Will Redmond whisper settlement offers in Real’s ear? The saga will be continued.
