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MS case totters in Caldera action – $1.77bn damages?

Tin hats for the attorneys as another blocking attempt falls

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MS on Trial Caldera has won a further round in its private antitrust suit against Microsoft. MS is making nine tries at killing the action by dividing its dismissal motion up into chunks and fighting each one of them, in the hope of narrowing the charges. The latest defeat concerned Microsoft's desire to have excluded any consideration of actions in Europe and Japan. But it turns out that Microsoft's lawyers have done a sloppy job and misstated the law concerning Caldera's sales of DR-DOS outside the US. Perhaps Microsoft should be negotiating a refund from the fees charged by its lawyers. Caldera argued that American damages stemmed from Microsoft's actions outside the US, prompting Judge Benson to say: "If this is not a case of antitrust standing, then I don't know what is" when he denied Microsoft's motion from the bench. Microsoft either fundamentally misunderstood Caldera's claims, or has chosen to ignore them, Caldera said in its Memorandum. Caldera was not making any claim for damages suffered by DRI's European or Japanese subsidiaries, but only for the loss of revenue to DRI and Novell in the US. Perhaps the weakest part of Microsoft's argument was that its own expert witness, Professor Elzinga, conceded that the relevant geographical market was the world. Another goof by Microsoft's lawyers was their failure to understand the Foreign Trade Antitrust Improvements Act, which everybody knows has nothing to say about the issue of the standing of a party. The Act only deals with whether the court properly has jurisdiction with respect to the defendant's conduct. DRI was engaged in export commerce since it received agreed royalties from its overseas subsidiaries. A footnote in the Memorandum refers to an Exhibit 4 (which is not disclosed and is under seal), but it does confirm Caldera's base-case claim for damages. These are put at $590 million, which would be tripled to $1.77 billion. Only $11.9 million of the base claim is for the period prior to Novell's acquisition of DRI, so even if Caldera loses on this point (and wins on the others), it would only reduce the award by a paltry $35.7 million. Interestingly, some of the arguments by Caldera are under Utah state law rather than federal law. Caldera claims Microsoft improperly interfered with Novell's [the previous owner of DR-DOS] economic relationships. If found guilty, this could be very expensive for Microsoft under Utah law, and result in punitive damages being awarded. Microsoft's last ditch stand is to claim that the state-law claim was filed too late, since DRI/Novell was aware of the allegedly illegal tactics in 1991, and Caldera did not acquire DR-DOS until 1996. Hang on, says Caldera: Microsoft was engaging in a pattern of misconduct, and therefore the filing deadline is extended as a result of the harm suffered. Judge Benson has asked for additional briefs on this, and will hold a further hearing in mid-August. So bad does the Caldera case now look for Microsoft that even its PR machine is feeling chastened and not offering any of its usual black-is-white denials. ® Complete Register Trial coverage

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