A small Provo company is taking computer industry behemoth Mi-cro-soft Corp. to court for business practices it says have frozen its competing product out of the market.
The antitrust lawsuit filed by Caldera Inc. late Tuesday in U.S. District Court in Salt Lake City seeks treble damages for lost business and restraints on Microsoft's licensing and pricing practices.Caldera designs, develops and markets system software products. The majority owner of Caldera is Ray Noorda, former CEO of Novell Inc.
On the same day it filed suit against Microsoft, Caldera acquired the DR DOS product and assets from Novell, which prompted the antitrust suit. DR DOS is a computer operating system that competes with Microsoft's MS DOS. Novell bought the product from Digital Research Inc. in 1991.
While Novell owned the product, the U.S. Justice Department conducted an antitrust investigation into Microsoft's business conduct. Microsoft signed a consent decree in 1994 that settled the investigation. Microsoft did not admit or deny guilt.
But the Washington company did agree to end certain practices, including per-processor license agreements, certain multiyear license agreements and highly restrictive confidentially agreements with software developers who create programs to work with its operating systems.
Caldera's suit picks up where the Justice Department's antitrust investigation stopped, said Stephen D. Susman of Susman Godfrey in Houston, one law firm representing Caldera.
"It is my belief, from reading the government's antitrust complaint against Microsoft, that it recognized the need to open the market to Microsoft competitors," he said.
That hasn't happened, and according to the suit, Microsoft's conduct has essentially barred any competing DOS product from entering the market.
"This lawsuit is about injury to competition," Ray Noorda said in a press release issued by Caldera. "In my opinion, the antitrust decree was too little, too late.
"If Caldera is successful, the entire computer industry, not just Caldera, will benefit," he said.
Because of Microsoft's action, Caldera maintains, buyers of PCs and software have been forced to pay higher prices for less innovative, inferior products.
When it was first released, DR DOS was a superior product to MS-DOS, Caldera maintains. In fact, initial development of DR DOS was spurred by computer manufacturers who wanted an operating system that would plug gaps in MS-DOS.
The first version of DR DOS was released in May 1988 and quickly followed by enhanced versions in 1990 and, finally, with DR DOS 6.0 in 1991.
DR DOS received rave reviews, winning awards from BYTE and PC magazines as well as a Best of COMDEX award in 1991.
Its technical quality was reflected in sales, Caldera's suit states. Sales increased from $15 million in fiscal 1990 to $30 million in fiscal 1991.
Microsoft's reaction to DR DOS, Caldera says, was to erect a "wall of per processor license" agreements. The agreements required computer manufacturers to pay Microsoft a royalty on every PC they sold whether it used MS-DOS, another operating system or no operating system at all.
"This royalty system effectively imposed a tax in favor of Microsoft whenever (a computer manufacturer) sold a PC equipped with any operating system other than MS-DOS," Caldera's suit states.
And that encouraged PC makers to rely solely on MS-DOS, excluding any other operating systems.
One of Microsoft's dirty deeds came in 1991, Caldera says, when it announced that DR DOS was incompatible with its yet-to-be released Windows 3.1, a graphic operating system. That substantially undercut Novell's efforts to get into the market with DR DOS.
Even worse, Microsoft released beta versions of Windows 3.1 that were programmed to generate error messages when it was used with DR 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," the suit states.
The combined effect of Microsoft's practices on DR DOS was devastating. Sales plummeted in fiscal 1992 from $15.5 million in the fisrt quarter to $1.4 million in the fourth quarter.
Caldera CEO Bryan Sparks told the Deseret News his company bought DR DOS because it believes the product is still a superior DOS operating system for which there is much demand in certain business settings, such as medical offices.
He said the company will shortly release updated versions of DR DOS.