10th Circuit Affirms Judgment in Favor of Microsoft in Novell Case

On Sept. 23, 2013, the 10th U.S. Circuit Court of Appeals affirmed a judgment as a matter of law (following a jury trial) dismissing Novell’s monopolization claim against Microsoft. (See Novell, Inc. v. Microsoft Corp., 2013 U.S. App. LEXIS 19463 (10th Cir. Sept. 23, 2013)). Novell had alleged that Microsoft’s decision in the 1990s not to provide Novell with certain “beta” software and “application programming interfaces” allowed Microsoft’s Office software to leapfrog Novell’s WordPerfect software in the marketplace and constituted an unlawful refusal to deal with a competitor. In rejecting that claim, the 10th Circuit held, among other things, that Microsoft’s decision  to maximize its “immediate and overall profits” could not constitute a refusal to deal in violation of Sherman Act Section 2 under Verizon Communications v. Law Offices of Curtis V. Trinko, 540 U.S. 398 (2004).

Microsoft’s decision allowed it to win significant profits in the sale of its Office applications. The 10th Circuit rejected the argument that a refusal-to-deal claim could be maintained if there was evidence of a design to forgo short-term profits in one line of business (operating systems) without consideration of short-term gains in another (applications). “Parsing profits from different product lines would defeat [the point of the Trinko inquiry into forgoing profitability], holding firms liable for making moves that enhance their overall efficiency, if at the expense of a particular business line. It would risk as well returning us to a day when larger firms had to forgo immediate overall gains in order to subsidize a less efficient rival that happens to do business only in one particular product line. And it would present a serious administration challenge to say the least.” The court’s decision is available here.