Settlement Lets Novell, Network Avoid Ruling in Trademark Case
BY SHEILA R. McCANN
THE SALT LAKE TRIBUNE
Novell Inc. and Network Trade Center Inc. have agreed to settle a trademark infringement dispute out of court, cutting a deal to let Network dodge a $26 million judgment and enable Novell to erase a judge's adverse copyright ruling.
Novell's 1995 lawsuit against Network, a former mail-order software distributor based in Sandy, alleged the company was selling Novell's NetWare network operating system software without authorization.
A federal judge found Network was selling less-expensive upgrades of the computer networking software as original versions intended for first-time buyers. Network's advertising did not explain the upgrades could not be registered with Novell in Provo, and would not be eligible for technical support and other benefits, U.S. District Judge J. Thomas Greene found.
Network also did not have authorization to use Novell's trademarks in its advertising, the judge decided, and ruled Network had engaged in unfair competition. He rejected Novell's copyright infringement claim.
Greene awarded Novell $25.9 million in damages last year. A final judgment was entered in February and both companies appealed to the 10th U.S. Circuit Court of Appeals in Denver.
But the companies since have worked out a private deal, and recently asked Greene to consider erasing his copyright ruling as part of the deal's terms. Greene agreed in a decision signed last week, clearing the way for the companies to withdraw their appeal.
The whopping judgment "has substantially devastated and destroyed" Network and its sole director, Mark Bondiett, Greene noted. Network has been unable to conduct any software business and Bondiett has faced severe economic difficulties.
Greene found "exceptional circumstances" warranted vacating his copyright ruling. The settlement will release Network and Bondiett from the crushing judgment, he said.
Plus, it stops costly collection measures undertaken by Novell and appeal expenses for both firms. It is the most realistic route for Novell to recover any part of the judgment, Greene said.
Jeffrey J. Hunt, Novell's attorney, said the settlement's exact terms are confidential but added Bondiett has agreed to make a "substantial cash payment."
Network attorney James C. Bradshaw said Bondiett believed "it's a good agreement for both sides." Bondiett is involved in other business ventures and does not now intend to resurrect the Network software firm, Bradshaw said.
The deal also will allow Novell, a frequent litigator over alleged infringement, to eliminate any precedent set by the adverse copyright ruling, the judge said. Those financial and legal benefits for the companies outweigh any harm the judicial system may suffer by losing the precedent, Greene decided.
Novell had argued Network violated copyright law by making unauthorized sales of the upgrade to consumers who did not qualify for them and did not have valid licenses. The sales meant copyright law was violated when buyers loaded the software on their computers, Novell argued.
Greene had disagreed, finding buyers are owners -- not licensees -- and are entitled to use software they purchase.
The distinction was crucial for Novell, Hunt said. "The foundation of this industry is licensing," he said. "We license the use of our software, we don't sell it. It was important to us to protect and defend that legal principle."
The antagonism between Bondiett and Novell generated several lawsuits, including Bondiett's unsuccessful attempt to stop Novell's 1996 annual stockholders meeting.
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