Novell Makes Closing Arguments at Microsoft Antitrust Trial

Novell Inc. (NOVL) and Microsoft Corp. made closing arguments today in Novell’s case claiming the world’s largest software maker unfairly used its monopoly on personal computer operating systems to suppress WordPerfect, a rival word-processing program.

In defending the case in federal court in Salt Lake City, Microsoft called Chairman Bill Gates as a witness last month. Gates testified that he “absolutely” denied the central allegation of Novell’s suit: that in 1994, in developing the Windows 95 operating system, Microsoft blocked an element of the software to thwart Novell’s WordPerfect and Quattro Pro programs.

Novell is seeking as much as $1.3 billion in damages, which would be tripled under antitrust law. The company “wanted nothing more than to compete on the merits of its products,” the company’s lawyer, Jeffrey Johnson, told the jury.

A decision to restrict outside programmers’ access to “extensions,” or programming code -- a decision that Novell claims deliberately targeted WordPerfect and made it impossible to run properly on Windows -- was made at a 1993 “high-level executive retreat” at Hood Canal, Washington, Johnson told jurors.

Gates’s testimony that the extensions were “trivial and unimportant -- hardly worth his time” doesn’t withstand scrutiny, Johnson said. Johnson revisited testimony and e-mails presented at trial to argue the decision was a “purely predatory action.”

‘It Was Important’

“He wasn’t telling the truth,” Johnson said, referring to Gates’s testimony. “It was important to him.”

Novell, which was bought by Seattle-based Attachmate Corp. in April, has argued that WordPerfect’s share of the word- processing market fell to less than 10 percent in 1996 from almost 50 percent in 1990.

Its value dropped from $1.2 billion in May 1994 to $170 million in 1996, when it was sold to Ottawa-based Corel Corp., said Novell. The company settled separate antitrust claims against Microsoft for $536 million in 2004.

David B. Tulchin, a lawyer representing Microsoft, told jurors that Novell “showed you not one document in which Novell complained to Microsoft” about the blocked extensions in 1994 or 1995. A juror might conclude that a company facing $1 billion of damages without the code at issue would “speak up,” he said.

‘Boggles the Mind’

“The essence of Novell’s claim is once an operating system company sends out a beta version of the operating system, the company that sent out that operating system is frozen -- can’t make a change” without facing liability if it does, Tulchin said. The argument “boggles the mind,” he said.

“We will never know” what would’ve happened if Novell had asked Bill Gates to maintain access to the extensions, Tulchin said. “They never did ask. Microsoft thought Novell was not using them.”

Jurors are scheduled to begin deliberations later today or tomorrow.

The case is Novell Inc. v. Microsoft Corp. (MSFT), 04-01045, U.S. District Court, District of Utah (Salt Lake City).

To contact the reporter on this story: Joel Rosenblatt in Salt Lake City federal court at 7129 or jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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