STEPHEN D. SUSMAN |
PARKER C. FOLSE III |
SUSMAN GODFREY L.L.P. |
SUSMAN GODFREY L.L.P. |
1000 Louisiana, Suite 5100 |
1201 Third Avenue, Suite 3120
|
Houston, Texas 77002-5096 |
Seattle, Washington 98101 |
Telephone: (713) 651-9366 |
Telephone: (206) 516-3880 |
|
RALPH H. PALUMBO |
M. LAURENCE POPOFSKY |
LYNN M. ENGEL |
ROBERT D. FRAM |
HELLER EHRMAN WHITE & McAULIFFE |
HELLER EHRMAN WHITE & McAULIFFE |
6100 Columbia Center |
333 Bush Street |
701 Fifth Avenue |
San Francisco, California 94104 |
Seattle, Washington 98104-7098 |
Telephone: (415) 772-6000
|
Telephone: (206) 447-0900 |
|
MAX D. WHEELER (A3439) |
STEPHEN J. HILL (A1493) |
RYAN E. TIBBITTS (A4423) |
SNOW, CHRISTENSEN & MARTINEAU |
10 Exchange Place, Eleventh Floor |
Post Office Box 45000 |
Salt Lake City, Utah 84145 |
Telephone: (801) 521-9000 |
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
CALDERA, INC., |
|
|
Plaintiff, |
|
vs. |
MICROSOFT CORPORATION, |
|
|
Defendant. |
TABLE OF CONTENTS
-
NATURE OF CASE
-
THE PARTIES
-
JURISDICTION AND VENUE
-
PERSONAL COMPUTER TECHNOLOGY AND THE PERSONAL COMPUTER
INDUSTRY
-
Introduction of the PC
-
The Importance of the Operating System Software
-
The Emergence of Graphical User Interfaces ("GUIs")
-
Software Distribution Channels
-
MICROSOFT'S GROWTH AND DOMINATION
-
THE DR DOS CHALLENGE
-
MICROSOFT'S PREDATORY RESPONSE TO DR DOS
-
RELEVANT MARKETS
FIRST CLAIM FOR RELIEF
MONOPOLIZATION OF THE DOS MARKET
(Violation of Sherman Act, Section 2)
SECOND CLAIM FOR RELIEF
ILLEGAL TYING
(Violation of Sherman Act, Section 1)
THIRD CLAIM FOR RELIEF
EXCLUSIVE DEALING
(Violation of Sherman Act, Section 1)
FOURTH CLAIM FOR RELIEF
(Tortious Interference With Economic Relations)
PRAYER FOR RELIEF
COMPLAINT
Plaintiff Caldera, Inc., ("Caldera") brings this action against defendant
Microsoft Corporation ("Microsoft") for damages and injunctive relief under
the antitrust laws of the United States, and for damages in tort, and demands
trial by jury, complaining and alleging as follows:
I. NATURE OF CASE.
-
This action challenges illegal conduct by Microsoft calculated and intended
to prevent and destroy competition in the computer software industry. As
the United States Department of Justice alleged in United States vs.
Microsoft, Civil No. 94-1564 (D.D.C., Complaint filed July 15, 1994),
Microsoft has violated Sections 1 and 2 of the Sherman Act, 15 U.S.C.
§§ 1 and 2. As outlined in the Justice Department's complaint,
through various unfair and predatory acts, Microsoft has willfully maintained
a monopoly of the market for MS-DOS operating system software and functionally-
equivalent software (the "DOS Market"). (For purposes of this complaint,
MS-DOS and competing functionally-equivalent operating system software will
be referred to as "DOS Software.") Such software is designed to run on personal
computers using Intel x86 or Intel x86-compatible microprocessors ("PCs").
The Intel x86 class of microprocessors includes Intel 286, 386, 486, Pentium
and Pentium Pro microprocessors, as well as microprocessors manufactured
by other companies that use a substantially similar architecture and instruction
set.
-
Microsoft has erected artificial barriers to the entry and growth of competing
operating systems vendors through its contractual relations with original
equipment manufacturers (OEMs) of PCs and other predatory conduct, which
have had the effect of excluding competitors from the DOS Market, a market
in which Microsoft has monopoly power. These practices have included the
following:
-
License agreements which required OEMs to pay royalties to Microsoft not
only when they sold PCs containing Microsoft's MS-DOS, but also when they
sold PCs containing competing DOS Software or no DOS Software ("per processor
licenses");
-
Unreasonably long terms for license agreements with OEMs for the use of
Microsoft's MS-DOS software;
-
In lieu of and in addition to per processor licenses, pricing schemes and
other license terms and enforcement practices that effectively have required
OEMs to purchase their entire DOS Software requirements from Microsoft;
-
Tying arrangements under which Microsoft required OEMs to purchase MS-DOS
to the exclusion of competing DOS Software products, in particular DR DOS
and Novell DOS, in order to obtain its Windows software programs or to be
given access to other essential information, product support and service;
-
False public statements by Microsoft executives, and Windows error messages,
which have misled the market as to possible incompatibility problems between
Microsoft's Windows software programs and non-Microsoft DOS Software, in
particular DR DOS and Novell DOS; and
-
False public statements by Microsoft executives concerning future product
features and anticipated shipment dates, known in the industry as "vaporware,"
timed to match announcements or releases of new versions of competing DOS
Software, in particular DR DOS and Novell DOS.
These practices have had the purpose and effect of freezing out competing
DOS Software products, in particular DR DOS and Novell DOS, and thereby
entrenching Microsoft as the dominant provider of DOS Software.
-
Microsoft's 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. Buyers of PCs and software have thus been forced to pay higher
prices for less innovative, inferior products.
-
Caldera, has acquired from Novell, Inc. ("Novell"), its DR DOS- and Novell
DOS-related assets, including this claim (the "DR DOS Business"), pursuant
to an Asset Purchase Agreement dated July 23, 1996. (For simplicity's sake,
DR DOS and Novell DOS are referred to generically herein as "DR DOS.") Caldera
is therefore entitled to recover damages from Microsoft for its anticompetitive
and illegal conduct. Moreover, 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.
-
The United States District Court for the District of Columbia entered a Final
Judgment in United States v. Microsoft on August 21, 1995, which barred
certain of Microsoft's anticompetitive practices, including per processor
licenses, licences exceeding one year in length, licenses prohibiting or
restricting OEMs from licensing or distributing non-Microsoft operating systems,
license agreements conditioning an OEM's license of one Microsoft operating
system product upon the license of another Microsoft product or upon the
OEM not licensing a non-Microsoft product, minimum commitment licenses, and
licenses requiring royalty payments to Microsoft other than on a per-copy
or per-system basis. Pursuant to 15 U.S.C. § 16(i), the statute of
limitations has been suspended as a result of United States v.
Microsoft.
II. THE PARTIES.
-
Plaintiff Caldera is a Utah corporation. Caldera's principal place of business
is located at 633 South 550 East, Provo, Utah 84606. Caldera develops, markets,
sells, licenses and services software used with PCs.
-
Pursuant to the Asset Purchase Agreement with Novell, Caldera is in the business
of developing, marketing, selling, licensing and servicing DR DOS products.
Caldera competes with Microsoft in the sale, distribution and support of
DOS Software and other software products via the Internet, as well as through
traditional OEM, distributor, retailer and value-added reseller channels.
-
Defendant Microsoft is a Delaware corporation. Microsoft's principal place
of business is located at One Microsoft Way, Redmond, Washington, 98052.
-
Microsoft is the world's largest independent software company with fiscal
1996 sales totaling $8.67 billion. Microsoft's net income reached $2.20 billion
in 1996, up from $1.453 billion the prior year, an increase of 52%. Over
the last 5 years, Microsoft's average annual growth rate has been 33%. Operating
system sales increased 53% during fiscal year 1996 over fiscal year 1995.
-
The Microsoft products chiefly at issue here are MS-DOS, which runs on the
Intel x86 class of microprocessors, and Windows, a graphical user interface
(GUI), which runs on top of MS-DOS and other DOS Software.
III. JURISDICTION AND VENUE.
-
This Court has jurisdiction over this matter pursuant to Section 4 of the
Sherman Act, 15 U.S.C. § 4, Sections 4 and 16 of the Clayton Act, 15
U.S.C. §§ 15 and 26, and 28 U.S.C. §§ 1331, 1337 and
1367.
-
Venue is proper in this district under 15 U.S.C. §§ 15, 22 and
26, and under 28 U.S.C. § 1391(b) and (c) because (i) defendant Microsoft
transacts business and is found within this district, (ii) plaintiff's principal
place of business is within this district, and (iii) a substantial portion
of the events giving rise to the claim herein occurred within this district.
IV. PERSONAL COMPUTER TECHNOLOGY AND THE PERSONAL COMPUTER INDUSTRY.
A. Introduction of the PC
-
IBM was among the first United States companies to introduce microcomputers
for personal use. IBM introduced the IBM personal computer in 1981. It was
quickly dubbed the "PC," a term now used (in this Complaint and generally)
to refer to any personal computer that is IBM-compatible, whether manufactured
by IBM or not, i.e., personal computers that use Intel x86-class
microprocessors.
-
The components of a PC are the hardware (which includes the microprocessor,
the memory and the disk drive), software (which includes the operating system,
other low level programs, and various applications programs), and peripherals
(which include the display screen, keyboard and printer).
-
IBM's hardware architecture design was based on a microprocessor chip designed
and manufactured by Intel. So-called "clone" PC manufacturers also utilize
Intel x86-class microprocessors.
-
The dominant operating system on Intel x86-class microprocessors is Microsoft's
MS-DOS.
B. The Importance of the Operating System Software
-
The software on a PC can be divided into three basic categories: operating
system software (e.g., MS-DOS), graphical user interface (GUI) software and
applications software.
-
Applications software gives the PC its functionality and consumer utility.
Application software provides the PC with instructions for the performance
of tasks selected by the user. Primary examples of application software are
word processing, spreadsheet, and database programs.
-
The operating system controls the basic functions of the PC and facilitates
interaction between application programs and hardware. Operating system software
performs the following functions:
-
controlling the allocation and usage of computer hardware components such
as central processing unit, memory, disk space and peripheral devices;
-
facilitating the execution of applications software by responding to requests
or "calls" made by the application programs during their operation that require
various hardware components to perform particular functions;
-
managing the flow of data and communication among various PC components.
-
The operating system constitutes the critical layer of software in every
PC. All other software programs installed by a PC user must work with, and
therefore be compatible with, the particular operating system running on
the PC.
-
In writing applications for a particular operating system, applications
developers refer to a set of ground rules for that operating system, known
as the Application Programming Interfaces (or APIs). APIs tell the application
developer what the operating system will do in response to a defined set
of requests or "calls." As long as an application is written in accordance
with the rules set by the API, the application will run with a given operating
system.
-
Particular operating systems can only work with a certain type of microprocessor.
For example, MS-DOS will operate only on PCs, i.e., machines that
contain Intel x86-class microprocessors. MS-DOS will not run on machines
manufactured by Apple Computer, which operate on a non-Intel microprocessor
platform.
C. The Emergence of Graphical User Interfaces ("GUIs").
-
MS-DOS is character-based, i.e., most of the visual displays generated by
MS-DOS are limited to blinking cursors, letters and numbers. To have the
computer perform certain tasks -- such as opening a new file -- the user
must issue instructions by typing in the correct sequence of letters and
numbers or by using rudimentary mouse functions.
-
Graphical user interface or GUI screen displays include icons or symbols
to represent programs, functions or information. A GUI, together with a "mouse"
pointing device, allows the user to instruct the computer to perform specific
functions by merely pointing to and "clicking" on certain graphical images,
symbols or words.
-
In 1985, Microsoft introduced its GUI software, called Windows.
-
Although sometimes referred to as an operating system, all versions of Windows,
excluding Windows NT and Windows 95, interface with and "run on top of" DOS
Software. Windows adds a GUI interface between DOS and the user. Windows
takes advantage of more sophisticated microprocessors and increased memory
capacity to generate complex visual displays as part of its graphical user
interface.
D. Software Distribution Channels
-
The customer base for DOS Software consists primarily of PC manufacturers,
i.e., OEMs. This is commonly referred to as the OEM channel. DOS Software
is also sold at retail, primarily as an upgrade. Because virtually all PCs
are sold with operating system software installed, however, there is little
opportunity for vendors of DOS Software to make significant sales in retail
channels. Hence, by controlling the OEM channel, Microsoft is able to control
distribution.
-
OEM licenses for DOS Software (and also Windows software products) typically
permit the OEM, through the use of a "golden master" diskette supplied by
the software developer (such as Microsoft), to reproduce and install the
software on each PC. By contrast, applications programs are generally
manufactured onto separate disks and sold in boxes through retail channels.
V. MICROSOFT'S GROWTH AND DOMINATION.
-
In 1981, IBM contracted with Microsoft to design and develop the operating
system software for the IBM PC. Since it had practically no background in
operating systems, Microsoft entered into an arrangement with a company known
as Seattle Computer Products (SCP) to acquire rights to a program under
development by SCP known as "QDOS" for Quick and Dirty Operating System.
-
QDOS borrowed heavily from an operating system developed by Digital Research,
Inc. ("DRI") called CP/M.
-
Microsoft changed the name of QDOS to MS-DOS, for Microsoft-Disk Operating
System. Under its arrangement with IBM, Microsoft retained the right to license
MS-DOS to other PC manufacturers. IBM called its version of the product PC
DOS.
-
MS-DOS was originally designed to run on the Intel 8088 microprocessor. Microsoft
has introduced several versions of MS-DOS since 1981, which have run on the
Intel x86 class of microprocessors.
-
Because Microsoft distributes MS-DOS (and Windows) predominantly through
the OEM channel, its costs of sale are minimal. Once Microsoft delivers a
master copy of a disk containing the MS-DOS (or Windows) program to a given
OEM, it incurs little or no additional costs of sale. OEMs, on the other
hand, must copy and package disks, prepare product literature, and ship product
to customers.
-
By the mid-1980's, MS-DOS had become entrenched as the standard in the DOS
Market, generating millions of dollars of revenues to Microsoft. Not
surprisingly, in view of Microsoft's monopoly power and the absence of
competition, the price of MS-DOS in the OEM channel escalated from $2-$5
per copy in the 1981-1982 period to $25-$28 per copy by 1988.
-
At the same time, for much of the 1980s, Microsoft did almost nothing to
improve MS-DOS. Microsoft released MS-DOS 3.0 in August 1984, but did not
release MS-DOS 4.0 until June 1988, a month after DRI released DR DOS 3.31.
Microsoft did not issue an improved release until June 1991, when MS-DOS
5.0 appeared in response to DR DOS 5.0 (which was released in April 1990).
VI. THE DR DOS CHALLENGE.
-
Microsoft'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. By 1987, users were seeking:
-
The ability to support larger disk drives. Although larger hard disks
were becoming available, Microsoft did nothing to improve MS-DOS so that
it could support such hard disks until Compaq developed its own version of
MS-DOS with such functionality.
-
Improved memory management. Microsoft did nothing to improve memory
management so that larger applications programs (such as popular desktop
publishing applications) could run on a computer with relatively limited
memory.
-
Loading the operating system on a ROM chip. Even though it had become
technologically feasible to install certain portions of operating systems
on a "read only memory" (ROM) chip, a feature that would improve the function
of the program, Microsoft did nothing to create a "ROM-able" version of MS-DOS.
-
Improved user interface. MS-DOS required users to master rather arcane
programming commands in order to perform various operations. Microsoft failed
to make its commands more user-friendly or to provide any "help" screen for
users to enable them to determine which commands they should execute.
-
Because of these deficiencies, 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. At the same time, there were a number of OEMs who simply
could not get Microsoft to deal with them (irrespective of product features).
Many of these OEMs indicated to DRI that they would be seriously interested
in an alternative DOS Software product. Accordingly, in 1987 DRI began planning
for a new version of DOS, to be called DR DOS.
-
DRI designed DR DOS to be the functional equivalent of MS-DOS, i.e., to support
the same API set. DRI was able to accomplish this largely because of its
experience in the development of CP/M, from which QDOS and MS-DOS derived.
-
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 of MS-DOS in many areas, including (a) memory
management, (b) a ROM-able core of the operating system, (c) user-friendly
commands and on-screen help resources, (d) a graphical user interface option,
(e) extended disk commands, (f) password protection, and (g) the ability
to store twice as much information on a hard disk through disk compression
technology.
-
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.
-
The technical superiority of DR DOS resulted in a rise in sales from about
$15 million in fiscal year 1990 to $30 million in fiscal year 1991,
notwithstanding Microsoft's anticompetitve conduct. DR DOS sold well in the
retail distribution channel, but due to Microsoft's exclusive dealings and
other predatory conduct, it was largely locked out of the OEM channel.
VII. MICROSOFT'S PREDATORY RESPONSE TO DR DOS.
-
Microsoft refused to tolerate this PCs to its monopoly position in the DOS
Market for at least two (to Microsoft) compelling reasons: (i) Microsoft's
DOS Market monopoly enabled it to control the standards or APIs to which
all applications for IBM-compatible PCs had to be written; and (ii) MS-DOS
enabled Microsoft to collect enormous amounts of money from its license of
MS-DOS at negligible ongoing cost or risk.
-
DR DOS posed a particularly significant threat to Microsoft because (i) it
was compatible with applications written for MS-DOS; and (ii) since both
DR DOS and MS-DOS were technological successors to CP/M, Microsoft could
not claim that DR DOS infringed upon any proprietary technology it owned.
-
Microsoft's principal defense against any competitive threat, including DR
DOS, was the wall of "per processor" 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 to pay Microsoft a royalty on every
PC they sold regardless of whether it contained Microsoft's MS-DOS, some
other software developer'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 PCs, this royalty scheme caused OEMs
to ship MS-DOS exclusively.
-
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 "take
or pay" 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.
-
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.
-
On July 17, 1991, DRI, finding it difficult to compete in the face of Microsoft's
onslaught, announced its agreement to be acquired by Novell. The merger was
completed October 28, 1991. With the financial, research and development,
and marketing support of Novell, DR DOS could have obtained a significant
share of the DOS Market, but for Microsoft's anticompetitive conduct.
-
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,
scheduled for release in April 1992. The market perceived that it was critical
for an operating system to support Windows; therefore Microsoft's statements
that DR DOS could not do so substantially undercut Novell's efforts to penetrate
the DOS Market.
-
To reinforce the impression that DR DOS would be incompatible with Windows
3.1, beginning in December of 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.
-
Even though the Windows 3.1 beta release was at that time the largest such
release in history, Microsoft refused to provide a Windows 3.1 beta to Novell.
Microsoft's refusal to do so was another predatory effort to impede Novell's
ability to test DR DOS with Windows 3.1 and thereby hamper Novell's ability
to offer a Windows 3.1-compatible release of DR DOS to the market. In fact,
when Windows 3.1 was finally released to the market, Novell was able to release
an enhanced version of DR DOS supporting Windows 3.1 without substantial
technical difficulty.
-
Microsoft also informed certain OEM 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.
-
Similarly, Microsoft established a pricing structure for Windows that made
it prohibitive to buy that product in the absence of MS-DOS. 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.
-
Microsoft's most devastating tactic, however, was its massive expansion of
per processor licenses in the OEM channel. Following the announcement of
Novell'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's sales force found the OEM channel virtually
impenetrable; they were thwarted in account by account by Microsoft's
per-processor license wall.
-
The combined effect of Microsoft's anticompetitive practices on DR DOS was
devastating. DR DOS sales plummeted during fiscal year 1992, totaling $15.5
million in the first quarter, $13.7 million in the second quarter, $6.9 million
in the third quarter, and $1.4 million in the fourth quarter (which ended
October 31, 1992).
-
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, "cliff pricing" 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.
-
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 "cliff pricing" practice with impunity.
-
Novell introduced its final version of the product, Novell DOS 7.0, in the
summer of 1993. In September 1994, as a result of Microsoft's predatory and
anticompetitive conduct described herein, Novell announced that it would
cease the marketing and development of DR DOS.
VIII. RELEVANT MARKETS.
-
There are two relevant product markets: (i) the DOS Market; and (ii) the
market for graphical user interfaces that run on top of DOS Software (the
"GUI Market").
-
The relevant geographic market is the United States. Microsoft sells and
licenses MS-DOS throughout the United States. The major developers of other
DOS Software are exclusively U.S. companies.
-
Microsoft has monopoly power in the DOS Market and the GUI Market. In fact,
according to the Justice Department's complaint, "Microsoft has monopoly
power in the relevant market and has had monopoly power since at least the
mid-1980s. For almost a decade Microsoft has retained an extremely high market
share -- consistently in excess of 70%." Microsoft's MS-DOS and Windows are
the de facto software standards for the Intel x86 class of microprocessors.
-
Microsoft's control of MS-DOS and Windows standards for Intel x86-class
microprocessors provides it with several significant advantages over competitors,
including the following:
-
Because of Microsoft's large installed base, for competing DOS Software products
to have any chance of commercial success, they must provide the functionality
of Microsoft's MS-DOS so that they can support graphical user interfaces
and applications written for MS-DOS;
-
Because Microsoft has early access to its own MS-DOS and Windows APIs, it
can develop and deliver complementary products to market more quickly than
competitors whose complementary software products must be compatible with
Microsoft's products;
-
By changing APIs, or refusing to support certain APIs in newer versions of
its MS-DOS and Windows products, Microsoft can render competitors' complementary
products technologically incompatible; and
-
Microsoft has power over OEMs, such that they can influence OEMs' decisions
whether to purchase software products offered by Microsoft competitors.
As a result of these and other advantages, Microsoft holds and has exercised
power to exclude competitors and increase prices in the DOS Market and the
GUI Markets.
FIRST CLAIM FOR RELIEF
MONOPOLIZATION OF DOS MARKET
(Violation of Sherman Act, Section 2)
-
Caldera incorporates by reference and realleges the averments of ¶¶
1-60 as if fully set forth herein.
-
Microsoft has monopolized the DOS Market in violation of § 2 of the
Sherman Act. There is no legitimate business justification or purpose for
Microsoft's conduct. Microsoft has not used the least restrictive means for
achieving its business objectives.
-
The aforesaid conduct of defendant Microsoft has produced and, unless restrained
by Order of this Court, will continue to produce the following anticompetitive
effects, among others:
-
Competition in the manufacture, sale and distribution of operating system
software, particularly DOS Software, has been unreasonably restrained and
eliminated, and has been monopolized by defendant Microsoft;
-
Competition with defendant Microsoft in the DOS Market, including competition
by Novell and Caldera, has been or will be eliminated;
-
Barriers to entry in the DOS Market have been raised to a virtually
insurmountable level, thereby assuring continued unlawful maintenance of
Microsoft's monopoly and Microsoft's ability to exercise its monopoly power
to control prices and eliminate competition; and
-
Innovation and the development of new and more efficient operating system
software has been retarded and is in danger of ceasing.
-
As a direct and proximate result of the predatory acts and practices alleged
above, the DR DOS Business, which plaintiff Caldera has acquired, is being
and will continue to be immediately and irreparably injured through the
following:
-
The loss of profits that otherwise would have been earned from the sale of
DR DOS and related PC operating system software;
-
The loss of sales of DR DOS and related PC operating system software that
otherwise would have been made;
-
The loss of market presence for DR DOS, as well as the loss of market share
that might otherwise have been achieved in a freely competitive market;
-
The substantial reduction in the value of the DR DOS Business assets;
-
The loss of good will in the DR DOS Business as a going concern; and
-
The loss to the DR DOS Business of skilled engineering, product development
and marketing personnel and the erosion of its sales and service organization.
-
The precise amount of damages that Caldera is entitled to recover as a result
of the foregoing injuries to the DOS Business has not yet been ascertained.
-
In addition, defendant Microsoft's monopolization of the DOS Market is an
ongoing wrong causing the DR DOS Business incalculable and irreparable injury
for which there is no adequate remedy at law. Unless defendant Microsoft
is restrained by an appropriate Order of this Court, Caldera will be unable
to compete fully and fairly in the DOS Market.
SECOND CLAIM FOR RELIEF
ILLEGAL TYING
(Violation of Sherman Act, Section 1)
-
Caldera incorporates by reference and realleges each and every allegation
contained in ¶¶ 1-66 as if fully set forth herein.
-
Microsoft has coerced OEMs to enter into unreasonable and anticompetitive
tying arrangements in the form of licenses to MS-DOS. In furtherance of its
illegal tying arrangements, Microsoft engaged in the following conduct, among
other things:
-
Demanded that OEMs license MS-DOS in order to obtain a license to Windows;
-
Set royalty rates on unbundled Windows licenses, i.e., licenses to use Windows
only without a license to MS-DOS, such that the only viable economic option
for OEMs was to license both MS-DOS (the tied product) and Windows (the tying
product) from Microsoft;
-
Conditioned access to the Windows product as well as critical technical
information, product support and service for both MS-DOS and Windows on the
purchase of MS-DOS to the exclusion of DR DOS; and
-
Tied MS-DOS and Windows technologically by deliberately creating technological
incompatibilities offering no technical benefit solely for the purpose of
creating the impression that DR DOS was incompatible with Windows.
-
Many OEMs did not and do not wish to license MS-DOS from Microsoft on the
terms imposed and many users would have preferred to run DR DOS with Windows
but for the fears of incompatibility created by Microsoft.
-
Microsoft has appreciable market power in the GUI Market due to, among other
things, (i) its dominant market share; (ii) its copyrighted Windows product;
and (iii) its unique MS-DOS-compatible graphical user interface.
-
Novell competed with Microsoft in attempting to license its DR DOS operating
system to OEMs and in attempting to license DR DOS directly to end users
at retail. As a direct result of Microsoft's tying arrangements as described
above, Novell and other competitors were foreclosed from selling DOS Software
to a substantial portion of the market.
-
Microsoft's illegal tie-ins have resulted in actual substantial foreclosure
of DR DOS from the DOS Market. Competition in the DOS Market has been reduced
because of Microsoft's anticompetitive conduct.
-
Microsoft's tying arrangements constitute contracts in unreasonable restraint
of trade in or affecting a substantial volume of interstate commerce in violation
of Section 1 of the Sherman Act, 15 U.S.C. §1.
-
The DR DOS Business, now owned by Caldera, suffered injury by reason of these
acts. The precise amount of damages has not yet been ascertained.
THIRD CLAIM FOR RELIEF
EXCLUSIVE DEALING
(Violation of Sherman Act, Section 1)
-
Caldera incorporates by reference and realleges the averments of ¶¶
1-74 as if fully set forth herein.
-
Microsoft has coerced OEMs to enter into long-term exclusive dealing arrangements
for MS-DOS. These exclusive dealing contracts have taken the form of
per-processor licenses, cliff pricing, volume discounts, coercive royalty
schedules and other licensing terms and practices having the purpose and
the practical effect of forcing OEMs to purchase all of their DOS Software
requirements from a single seller -- Microsoft.
-
The effect of Microsoft's exclusive dealing arrangements was to effectively
foreclose a substantial number of prospective customers, particularly OEMs,
from purchasing DR DOS. OEMs who would like to have licensed DR DOS have
been precluded from doing so by their per processor and other exclusive licenses
with Microsoft.
-
The actual and probable effect of Microsoft's exclusive dealing arrangements
has been to raise prices above the competitive level and substantially lessen
competition in the DOS Market. Microsoft possesses monopoly power and has
used and, continues to use, exclusive dealing arrangements with OEMs to raise
barriers to entry and foreclose actual and potential competition.
-
There is no legitimate business justification for Microsoft's exclusive dealing
arrangements.
-
The above-described exclusive dealing arrangements imposed by Microsoft
constitute contracts in unreasonable restraint of trade in or affecting a
substantial volume of interstate commerce in violation of Section 1 of the
Sherman Act, 15 U.S.C. § 1.
-
Caldera's DOS Business has been injured by reason of these acts. The precise
amount of damages has not yet been ascertained.
FOURTH CLAIM FOR RELIEF
TORTIOUS INTERFERENCE WITH ECONOMIC RELATIONS
-
Caldera incorporates by reference and realleges the averments of ¶¶
1-81 as if fully set forth herein
-
Microsoft, through various improper means as alleged above, has willfully
and intentionally sought to damage Novell's and DRI's existing and prospective
business relations. Microsoft, through various false statements, cover-ups,
encrypted code, and other fraudulent and deceptive means, has sought to conceal
the true nature and extent of such conduct, thus tolling any applicable statute
of limitations.
-
Microsoft was and is maliciously motivated and knew, or in the exercise of
reasonable care should have known, that its actions would damage and continue
to damage the DR DOS Business and existing and prospective contractual relations
with DR DOS customers, and has acted in conscious disregard of this effect.
-
As a proximate result of this intentional interference by Microsoft, the
DR DOS Business has suffered special damages in the form of lost sales and
profits. Caldera, having acquired the DR DOS Business from Novell, is entitled
to recover such damages from Microsoft, the amount of which has not yet been
ascertained.
-
Caldera, due to Microsoft's willful, malicious and intentionally fraudulent
conduct, manifesting a knowing and reckless indifference to, or a reckless
disregard of, DRI's and Novell's rights, is entitled to an award of punitive
damages in sufficient amount to dissuade Microsoft from similar future conduct.
PRAYER FOR RELIEF
-
For compensatory damages in an amount to be proven at trial.
-
For an order trebling the amount of compensatory damages awarded pursuant
to Section 4 of the Clayton Act, 15 U.S.C. § 15.
-
For an award of punitive damages.
-
For an order granting permanent injunctive relief requiring that defendant
Microsoft hereinafter refrain from the use of per processor licenses on MS-DOS
or any other operating system software that is competitive with, or an intended
replacement for, DOS Software, including Windows 95 and Windows NT.
-
For an order granting permanent injunctive relief requiring that defendant
Microsoft hereinafter refrain from licensing practices and pricing policies
which have the purpose and effect of causing exclusive dealing.
-
For an order granting permanent injunctive relief requiring Microsoft, for
a period of ten years, to disclose to Caldera all APIs for any operating
system it produces, as well as any modifications, enhancements, updates,
or new versions of such operating systems at the time that such products
are released for beta testing.
-
For an order granting permanent injunctive relief prohibiting Microsoft from
including code in any software products that has the sole or primary purpose
of creating real or perceived incompatibility between Microsoft's products
and Caldera's products.
-
For an order granting permanent injunctive relief as may be reasonably necessary
or appropriate to eliminate the effects of Microsoft's violations of the
antitrust laws and to restore effective competition in the computer software
industry.
-
For the award to plaintiff of its attorneys' fees and costs of suit.
-
For such other and further relief as the Court deems just and equitable.
Dated this 23 day of July, 1996.
SNOW, CHRISTENSEN & MARTINEAU
Attorneys for Plaintiff |