Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Supreme Court will not consider Microsoft’s refusal to deal with Novell, (Apr 28, 2014)

By Jeffrey May, J.D.

The U.S. Supreme Court has let stand a decision of the U.S. Court of Appeals in Denver, rejecting Novell, Inc.'s refusal to deal claims against Microsoft Corporation for allegedly forestalling competition from Novell’s WordPerfect word processing applications in the 1990s. The Court today denied Novell's petition for certiorari, which was filed on February 28 (Novell, Inc. v. Microsoft Corp., Dkt. 13-1042).

Novell had alleged that Microsoft sought to eliminate the threat to its monopoly in the Intel-compatible personal computer (PC) operating systems market posed by Novell. According to Novell, Microsoft destroyed the competitive viability of Novell’s PerfectOffice applications suite and WordPerfect word processing application—the only significant competitor to Microsoft Word—by inducing Novell to rely on certain features of Microsoft’s operating system and then withdrawing access to those features. In its suit, Novell contended that Microsoft had an affirmative duty to continue sharing its intellectual property and that the firm’s decision to withdraw that assistance amounted to an unlawful refusal to deal.

In September 2013, the Tenth Circuit held that Microsoft’s unilateral refusal to deal with independent software vendors, such as Novell, did not amount to unlawful monopolization (2013-2 Trade Cases ¶78,523). Judgment as a matter of law in favor of Microsoft (2012-2 Trade Cases ¶77,979) was affirmed.

According to the appellate court, Novell presented no evidence from which a reasonable jury could infer that Microsoft’s discontinuation of the voluntary and profitable relationship with Novell suggested a willingness to sacrifice short-term profits in a manner that was irrational but for its tendency to harm competition. Microsoft’s decision appeared to have come about as a result of a desire to maximize the company’s immediate and overall profits.

In its petition, Novell contended that the Tenth Circuit’s decision established antitrust immunity for a monopolist that refused to deal without a legitimate business justification, where the conduct was immediately profitable and did not entail any short-term sacrifice of profits by the monopolist. Novell argued that this short-term profit sacrifice test conflicted with the U.S. Supreme Court’s decision in Aspen Skiing Co. v. Aspen Highlands Skiing Corp. (472 US 585, 1985-2 Trade Cases ¶66,653) and other Supreme Court precedent, and created a split among the circuits. The Tenth Circuit decision purportedly conflicted with decisions of the First, Second, and Eleventh Circuits, which did not require short-term profit sacrifice as a prerequisite to liability.

Chief Justice John Roberts did not take part in the consideration or decision of the petition.

Attorneys: David Boies (Boies, Schiller & Flexner LLP) for Novell, Inc. David B. Tulchin (Sullivan & Cromwell LLP) for Microsoft Corp.

Companies: Microsoft Corp.; Novell, Inc.

News: Antitrust