Antitrust Case Over MS-DOS Still Awaits Trial

Puget Sound Business Journal - June 5, 1998

Before Windows, there was MS-DOS. And long before the Department of Justice filed the antitrust action over Microsoft Corp.'s Windows 98, a small software company with Seattle attorneys had launched its own antitrust case against the Redmond giant's marketing tactics for DOS. The 2-year-old private antitrust suit, which claims Microsoft illegally drove out a product competing with the MS-DOS operating system, could get a boost from the federal case filed last month, according to some observers. Caldera, Inc., a software company based in Provo, Utah, accuses Microsoft of unfairly undermining the competing operating system, DR-DOS, through licensing agreements, pricing schemes and misleading public statements. The suit was filed in U.S. District Court in Salt Lake City in 1996, says Microsoft. Caldera also accused the software giant of cornering the market for operating systems in the early 1990s by forcing computer makers to install MS-DOS in order to get early versions Windows, which initially was a separate program, running on top of the DOS operating system. "The government's case could be quite helpful to Caldera," said Garth Saloner, a professor of strategy and economics at the Stanford University School of Business in Palo Alto, Calif. DR-DOS was discontinued in September 1994, shortly after its developer, Digital Research, Inc., was purchased by Novell Inc. Caldera acquired it from Novell. A Microsoft spokesman declined to comment on the case. Caldera has attorneys from three law firms working on the lawsuit, including The Summit Law Group in Seattle and the Seattle office of Susman Godfrey L.L.P., which is based in Houston. The lead attorney for Caldera's lawsuit is Steve Susman, a founder of Susman Godfrey and one of the best trial lawyers in the country, according to one leading antitrust lawyer in Seattle. Susman launched his antitrust career in 1980 by winning a $500 million settlement and verdict in a price-fixing case against the Corrugated Container Corp. In Seattle, attorney Parker Folse is handling the case for Susman Godfrey, especially on issues that involve discussions with Microsoft. Ralph Palumbo is working on the lawsuit for the Summit Law Group, which opened its doors 15 months ago. Palumbo was one of 11 attorneys who resigned from Heller Ehrman White & McAuliffe to start Summit. Palumbo and his colleague, Lynn Engel, brought the Caldera case with them to Summit when they left Heller Ehrman to start the new firm. Caldera also is represented by the law firm of Snow, Christensen & Martineau in Salt Lake City. The case is scheduled for trial in June of next year. Attorneys for both sides are now in the discovery phase of the case, and plaintiffs' attorneys have taken between 40 and 50 depositions, people familiar with the lawsuit say. Caldera's case appears to be the only private antitrust lawsuit against Microsoft. But the case is important because, if Caldera wins, it could establish anti-competitive behavior by Microsoft earlier in the evolution of the personal computer. Caldera also could benefit from government antitrust actions against Microsoft, antitrust experts say. The federal government and 20 state attorneys general on May 18 filed two antitrust lawsuits against Microsoft in the U.S. District Court for the District of Columbia. The court later consolidated the cases and scheduled a trial for September. If the government proves that Microsoft has a monopoly in operating systems, it would be easier for Caldera to argue that Microsoft became a monopoly in part by driving DR-DOS out of the marketplace. The monetary stakes could be huge. If Caldera can prove that it lost part of the market for operating systems because of unfair competition from Microsoft, the Utah company can ask for triple damages under federal law. Caldera's attorneys must show, however, that consumers would have kept buying DR-DOS if Microsoft had not struck back. And if Microsoft argues successfully that DR-DOS died on its own accord, Saloner said, then nobody can blame the Redmond company for killing it. The story is currently unavailable via the Puget Sound Business Journal Web site. The story appeared in the print version of the Puget Sound Business Journal on June 5, 1998.