Documents Show Novell Had Microsoft
on Its Mind
Microsoft filed a handful
of Novell documents in a
Utah federal court lawsuit to buttress its demand for more. The internal memos
offer a glimpse into Novell's strategy on Microsoft between 1992 and 1994.
-- Novell hired London law firm Lovell White Durrant to assess its legal
options against Microsoft's marketing tactics. In a February 1992 memo, the
law firm said the ''most effective remedy'' likely would be based on the
European Commission's (EC) competition rules. Its preliminary
recommendation was to launch a ''two-pronged attack,'' filing a complaint with
the commission and pursuing a lawsuit.
Collecting evidence of anti-competitive behavior would be crucial, it added,
but no steps that might alert Microsoft should be taken. Novell filed a complaint
with the EC in 1993.
-- While assessing possible evidence, the law firm points to a January 1992
letter faxed from Microsoft sales representative Ellen Taylor in England to
customer Diamond Trading. Taylor wrote that the letter was to confirm
Microsoft was ''unable to supply you Windows as a single product.'' Windows
was available only in a package with MS-DOS, version 5, she wrote.
Novell has seized on the letter as evidence Microsoft was tying the two
products to prevent customers from buying competing operating systems, such
as its DR-DOS.
But Microsoft attorneys argue the fax is misleading. Diamond Trading was
later sent a correction, and Microsoft officers have testified there was no such
tying policy, lawyer James Jardine has explained in court. Microsoft founder Bill
Gates addressed the Diamond Trading fax in his deposition, and ''he said it was
a mistake,'' Jardine said.
-- After the Federal Trade Commission deadlocked on whether to file a
complaint against Microsoft, Washington, D.C., attorney Sturgis M. Sobin
outlined insider strategies for bringing up another vote in a February 1993
memo. There were rumors that a commissioner, ''one of the two votes against
us,'' was leaving, he said.
Sobin said he raised the idea of a private Novell suit, but the response from
FTC staff was ''still negative.'' A Novell suit ''would probably take much of the
wind out of the sails'' of an FTC action, he was told.
-- Four months later, Sobin sent a memo to one of Novell's in-house lawyers,
asking her to get an affidavit from a computer hardware manufacturer to help
''swing a third vote'' on the FTC.
Sobin was seeking a statement to support Novell's arguments that companies
were decreasing their purchases of Novell's software because they were
concerned it was incompatible with Microsoft's products.
-- After another FTC vote ended in a second deadlock, Novell general
counsel David Bradford wrote a memo on Aug. 2, 1993, summarizing
comments he was providing to the media.
Bradford said he was telling reporters that Novell had not ruled out a lawsuit,
but added, ''Novell believes that this is an industry-wide issue and that pitting
Novell against Microsoft in a narrow legal dispute may not bring about the
broad-based remedies the industry is seeking.''
-- In the same memo, Bradford said he is confirming that Microsoft had
offered to buy Novell. Other court documents claim the offers were made in late
1989, abandoned over antitrust concerns, and then again in July 1991, after
Novell announced it was acquiring Digital Research Inc. (DRI) and its operating
system, DR-DOS. There was an offer in writing dated Feb. 12, 1992, Bradford
noted.
''Think of the competitive implications of a combined Novell/Microsoft
corporation,'' Bradford mused in his memo. ''There would be one network
operating system, one DOS operating system, and an undeniable ability to
leverage monopolies in both operating system markets to dominate the software
applications field.''
The Novell board was concerned the merger would run into opposition from
the government and IBM, Bradford said, but added: ''Gates stated that he
knew how to handle both.''
Bradford added he was not telling the media of Novell's subsequent
suspicions that the offer was actually a move to slow its integration of DRI and
development of DR-DOS. Bradford speculated Gates proposed the deal
because it had ''no real possibility'' of government approval. ''. . . The
government would turn the transaction down,'' Bradford wrote. ''The
government would then be in a position of saying they took strong action against
Microsoft and the FTC would back away from the remainder of their
investigation.''
Microsoft denies similar allegations in its answer to Caldera's suit.
-- Sheila R. McCann
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