FOR IMMEDIATE RELEASE
First of Five Hearings on Partial Summary Judgment
Begin Today in U.S. District Court in Salt Lake City
Salt Lake City, UT -- July 24, 1996--
Calderaョ, Inc., a Utah-based software developer, said today it has filed
an antitrust lawsuit against Microsoftョ Corp. seeking treble damages,
as well an injunction to halt ウillegal conduct by Microsoft calculated
and intended to prevent and destroy competition in the computer software
industry.イ
The lawsuit, filed late Tuesday in the U.S. District Court in Salt Lake
City, echoes many of the charges made by the U.S. Department of Justice
in its 1994 antitrust complaint against Microsoft, including violations
of the Sherman Act. In the complaint, Caldera states that Microsoftケs
anti competitive conduct includes unfair pricing practices and license
agreements, as well as false statements and ウvaporwareイ announcements
intended to dissuade consumers from purchasing products in competition
with Microsoftケs MS-DOSョ software.
ウUnless restrained by order of this court, Microsoft will permanently
destroy competition in the DOS Market in the microcomputer software industry,
and Caldera will be artificially and illegally prevented from realizing
the full financial potential of the DOS Business,イ the complaint says.
Caldera, which designs, develops and markets system software products,
today acquired the DR DOSョ operating system and DR DOS-related assets,
including this claim, from Novellョ, Inc. Raymond J. Noorda, former chief
executive officer of Novell, Inc., is the majority owner of Caldera.
In 1991, while Mr. Noorda was CEO of Novell, that company purchased Digital
Research Inc.ョ (DRI), developers of the DR DOS software technologies.
According to the lawsuit, Microsoftケs practices ウhave had the effect of
excluding competitors [including DR DOS] from the DOS Market, a market
in which Microsoft has monopoly power.イ The lawsuit continues, ウas a direct
and proximate result of [Microsoftケs] predatory acts and practices, the
DR DOS business which Caldera has acquired is being and will continue
to be immediately and irreparably injured through.. the loss of profits
... sales ... market presence ... [and] market share that might otherwise
have been achieved in a freely competitive market,イ as well as ウthe substantial
reduction in the value of the DR DOS business assets.イ
Calderaケs lawsuit states, ウAs outlined in the Justice Departmentケs complaint,
through various unfair and predatory acts, Microsoft has willfully maintained
a monopoly of the market for MS-DOS operating systems software and functionally
equivalent operating system software.イ
According to the Justice Department complaint, ウMicrosoftケs exclusionary
contracting practices have had the effect of excluding competitors on
a basis other than competition on the merits and have thereby allowed
Microsoft illegally to perpetuate its monopoly in the PC operating system
market. Through the unlawful acts and practices described ... [in the
antitrust action], Microsoft has harmed competition, consumers and innovation...イ
Microsoft settled the U.S. governmentケs charges against it by signing
a consent decree in 1994. In the consent decree, Microsoft neither admitted
nor denied guilt, but did agree to end certain practices, including so-called
per-processor license agreements, certain multi-year license agreements
and highly restrictive confidentiality agreements with software developers
who create programs to work with MS-DOS and Windows.
Stephen D. Susman, of Susman Godfrey in Houston, one of the law firms
representing Caldera, said, ウIt is my belief, from reading the governmentケs
antitrust complaint against Microsoft, that it recognized the need to
open the market to Microsoft competitors.イ
Mr. Susman added, ウIt is our intention to finish the job the Justice Department
left unfinished when it settled its antitrust complaint through a consent
decree.イ
Microsoftケs ウconduct has had a direct, substantial and adverse effect
on competition by raising barriers to entry to competing DOS Software,
foreclosing competition with Microsoft on the basis of price and performance,
and stifling innovation,イ the complaint says. ウBuyers of PCケs and software
have thus been forced to pay higher prices for less innovative, inferior
products.イ
Calderaケs lawsuit, in addition to asking for treble damages, pursuant
to the Clayton Act, seeks permanent injunctive relief :
The lawsuit explains that, ウIn September, 1994, as
a result of Microsoftケs predatory and anti-competitive conduct ... Novell
announced that it would cease the marketing and development of DR DOS.イ
Mr. Noordaケs long-term interest in nurturing competitive alternatives
in the software industry fit closely with the desires of Calderaケs chief
executive, Bryan Sparks, to pursue the DR DOS business and the legal action
against Microsoft to help open the way for Caldera and other companies
to compete against the software giant.
Mr. Noorda said that competition is necessary for the growth of the market.
He added, ウThis lawsuit is about injury to competition. In my opinion,
the antitrust decree was too little too late. It is my belief that if
Caldera is successful, the entire computer industry -- not just Caldera
-- will benefit.イ Mr. Sparks said, ウThe industry demands an open marketplace.
Itケs simply free enterprise. No single organization should have absolute
power over the free market process.
ウCalderaケs business philosophy,イ Mr. Sparks continued, ウis to dramatically
level the technology playing field, giving independent developers open
access to system software technologies.イ The Caldera complaint continues,
ウ... By the mid-1980s, MS-DOS had become entrenched as the standard in
the DOS Market .... Not surprisingly, in view of Microsoftケs monopoly
power and the absence of competition, the price of MS-DOS in the OEM [original
equipment manufacturers] channel escalated from 2ドル-5 per copy in the 1981-1982
period to 25ドル-28ドル per copy by 1988. ウAt the same time, for much of the
1980s, Microsoft did almost nothing to improve MS-DOS ... Microsoftケs
inaction was remarkable given that improvements in hardware technology
and applications software had created a demand among PC users for an enhanced
operating system,イ the lawsuit continues.
As these demands escalated, the suit explains, ウa number of OEMs approached
DRI and requested that it develop a version of DOS that would fill the
gaps in functionality that plagued MS-DOS. ... Accordingly, in 1987 DRI
began planning for a new version of DOS, to be called DR DOS. ウThe result
of DRI's initial development effort was a product designated as DR DOS
3.31, introduced on May 28, 1988. DR DOS 3.31 was followed quickly by
enhanced versions of the product. Thus DR DOS 5.0, introduced in May 1990,
and DR DOS 6.0, introduced in September 1991, were significantly superior
to then-existing versions MS-DOS in many areas.イ
The Caldera suit continues, ウIndustry experts responded enthusiastically
to DR DOS. DR DOS 5.0 received several awards including the 1990 BYTE?
Award of Distinction and Finalist in the 1990 PC Magazine? Award for Technical
Excellence. DR DOS 6.0 similarly received a number of industry awards,
including the 1991 BYTE Award of Excellence, BEST of COMDEX (Fall 1991),
and the Infoworld Buyers Assurance Seal.
ウThe technical superiority of DR DOS resulted in a rise in sales from
about 15ドル million in fiscal year 1990 to 30ドル million in fiscal year 1991.
Notwithstanding Microsoftケs anticompetitive conduct, DR DOS sold well
in the retail distribution channel, but due to Microsoftケs exclusive dealings
and other predatory conduct, it was largely locked out of the OEM channel.イ
The suit goes on, ウMicrosoft refused to tolerate this challenge to its
monopoly position in the DOS Market.... DR DOS posed a particularly significant
threat to Microsoft because it was compatible with applications written
for MS-DOS; and ... Microsoft could not claim that DR DOS infringed upon
any proprietary technology it owned.
ウMicrosoft's principal defense against any competitive threat, including
DR DOS, was the wall of 継er processorケ licenses that it had begun to
construct in 1988, the year that DR DOS was first released to the market.
Under per processor licenses, OEMs were required (must to agree)to pay
Microsoft a royalty on every PC they sold regardless of whether it contains
Microsoftケs MS-DOS, some other software developerケs DOS Software or no
operating system software. This royalty system effectively imposed a tax
in favor of Microsoft whenever an OEM sold a PC equipped with any operating
system other than MS-DOS. Given the razor-thin margins on the sale of
PCケs, this royalty scheme caused OEMs to ship MS-DOS exclusively.
ウMicrosoft compounded this per processor licensing scheme by insisting
on long-term licenses of MS-DOS from its OEM customers, contracts that
tended to be longer than typical product cycles. Microsoft also obtained
large 荊ake or payケ minimum commitment licenses that also effectively
foreclosed the ability of competitors such as Novell to sell competing
DOS Software products to OEMs, and engaged in other licensing practices
that had the effect of coercing OEMs to deal exclusively with Microsoft.イ
ウIn the fall of 1991, Microsoft announced to the market that DR DOS would
not be compatible with the next release of Windows known as Windows 3.1
.... The market perceived that it was critical for an operating system
to support Windows; therefore Microsoftケs statements that DR DOS could
not do so substantially undercut Novellケs efforts to penetrate the DOS
Market.イ
Microsoft reinforced this misleading impression of incompatibility between
DR DOS and Windows 3.1, when, ウbeginning in December, 1991, Microsoft
released beta versions of Windows 3.1 containing code that generated error
messages when Windows 3.1 ran on top of DR DOS rather than MS-DOS.
Microsoft created these error messages solely for the purpose of creating
the impression that DR DOS would be incompatible with Windows in order
to dissuade customers from purchasing DR DOS.イ Calderaケs lawsuit also
states that Microsoft ウrefused to provide a Windows 3.1 beta to Novell.
Microsoftケs refusal to do so was another predatory effort to ... hamper
Novellケs ability to offer a Windows 3.1-compatible release of DR DOS to
the market.イ
Microsoft officials made ウfalse public statements,イ the suit also states,
ウconcerning future product features and anticipated shipment dates, known
in the industry as 計aporware,ケ timed to match announcements or releases
of new versions of competing DOS Software, in particular DR DOS.イ For
instance, ウMicrosoft responded to DR DOS 5.0 by announcing, in May 1990,
that it intended to issue a new release of MS-DOS, to be called MS-DOS
5.0, that would mirror the technical advantages already present in DR
DOS 5.0. Microsoft indicated that the new release of MS-DOS would be available
within a few months. Industry experience indicates that it would have
been near-impossible for Microsoft to develop and release a commercial
version of its product matching the features of DR DOS 5.0 within that
period. Nonetheless, Microsoft repeated this vaporware announcement throughout
the summer and into the fall of 1990. In fact, MS-DOS 5.0 was not released
until June 1991 and, when finally released, it did not offer the features
Microsoft had promised.イ
Microsoft unfairly used ウother pricing tactics,イ Calderaケs complaint charges.
ウMicrosoft also informed certain PC manufacturers that they could not
obtain Windows or be given access to essential information, product support
and service if they did not purchase and ship MS-DOS, to the exclusion
of DR DOS.
ウSimilarly, Microsoft established a pricing structure for Windows that
made it prohibitive to buy that product in the absence of MS-DOS.イ
For example, certain Korean OEMs were informed that the price of Windows
without MS-DOS would be double the price of Windows with MS-DOS.
ウMicrosoft's most devastating tactic, however, was its massive expansion
of per processor licenses in the OEM channel. Following the announcement
of Novellケs acquisition of DRI, Microsoft substantially stepped up its
efforts to coerce OEMs to enter into per-processor licenses or comparably
exclusionary MS-DOS licenses. Thereafter, Novellケs sales force found the
OEM channel virtually impenetrable... thwarted in account by account by
Microsoftケs per-processor license wall.イ
ウThe combined effect of Microsoftケs anticompetitive practices on DR DOS
was devastating. DR DOS sales plummeted during fiscal year 1992, totaling
15ドル.5 million in the first quarter, 13ドル.7 million in the second quarter,
6ドル.9 million in the third quarter, and 1ドル.4 million in the fourth quarter
(which ended October 31, 1992).
ウMicrosoft continued with its predatory practices throughout 1992 and
up to the present day. Microsoft has employed another tactic for locking
OEMs exclusively to MS-DOS, namely, 慶liff pricing,ケ through which a commercially
reasonable price is provided to OEMs if and only if they commit to obtain
all of their requirements for operating system software from Microsoft.
ウAlthough various governmental agencies, including the United States Department
of Justice, have sought to bar certain of Microsoft's predatory practices
such as the per-processor license, Microsoft has been permitted to employ
its 慶liff pricingケ practice with impunity.イ Caldera intends ウto reintroduce
the full line of DR DOS products to the market and to offer additional
product features,イ the company said in its complaint.
# # #
Caldera designs, develops and markets to consumers
and businesses a line of full-featured, economical system software as
alternatives to such products as Microsoftケs Windows NTョ, Sun Solarisョ
and SCO UNIXョ. It uses its own technological and marketing resources to
leverage technologies ? including the Linux operating system ? created
by independent developers worldwide. Calderaケs web site is at http://www.caldera.com.
PRESS CONTACT:
Caldera, Inc.
Lyle Ball
Tel: (801) 426-5001x305
Fax: (801) 426-6166