Filed: May 03, 2011
Latest Update: Feb. 22, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 10-1482 NOVELL, INCORPORATED, Plaintiff - Appellant, v. MICROSOFT CORPORATION, Defendant - Appellee. Appeal from the United States District Court for the District of Maryland, at Baltimore. J. Frederick Motz, District Judge. (1:05-cv-01087-JFM) Argued: March 22, 2011 Decided: May 3, 2011 Before SHEDD and DUNCAN, Circuit Judges, and HAMILTON, Senior Circuit Judge. Reversed and remanded by unpublished opinion. Judge Duncan wrote
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 10-1482 NOVELL, INCORPORATED, Plaintiff - Appellant, v. MICROSOFT CORPORATION, Defendant - Appellee. Appeal from the United States District Court for the District of Maryland, at Baltimore. J. Frederick Motz, District Judge. (1:05-cv-01087-JFM) Argued: March 22, 2011 Decided: May 3, 2011 Before SHEDD and DUNCAN, Circuit Judges, and HAMILTON, Senior Circuit Judge. Reversed and remanded by unpublished opinion. Judge Duncan wrote ..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 10-1482
NOVELL, INCORPORATED,
Plaintiff - Appellant,
v.
MICROSOFT CORPORATION,
Defendant - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. J. Frederick Motz, District Judge.
(1:05-cv-01087-JFM)
Argued: March 22, 2011 Decided: May 3, 2011
Before SHEDD and DUNCAN, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Reversed and remanded by unpublished opinion. Judge Duncan
wrote the majority opinion, in which Judge Shedd joined. Senior
Judge Hamilton wrote a dissenting opinion.
ARGUED: Charles J. Cooper, COOPER & KIRK, PLLC, Washington,
D.C., for Appellant. David Bruce Tulchin, SULLIVAN & CROMWELL,
New York, New York, for Appellee. ON BRIEF: Jeffrey M. Johnson,
David L. Engelhardt, DICKSTEIN SHAPIRO LLP, Washington, D.C.; R.
Bruce Holcomb, ADAMS HOLCOMB LLP, Washington, D.C.; David H.
Thompson, Howard C. Nielson, Jr., David Lehn, COOPER & KIRK,
PLLC, Washington, D.C., for Appellant. Richard J. Wallis,
Steven J. Aeschbacher, MICROSOFT CORPORATION, Redmond,
Washington; Steven L. Holley, SULLIVAN & CROMWELL, New York, New
York; G. Stewart Webb, VENABLE LLP, Baltimore, Maryland, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
DUNCAN, Circuit Judge:
This appeal arises out of the district court’s grant of
summary judgment in favor of Microsoft Corp. (“Microsoft”) in an
action against it by software company Novell, Inc. (“Novell”).
Although the underlying lawsuit involves complex issues of
antitrust law, the primary question before us is one of contract
interpretation: whether a 1996 contract between Novell and a
third company divested Novell of its right to bring the present
claim. Concluding that Novell retained ownership of the claim,
which is not otherwise barred by res judicata, we remand for
further proceedings.
I.
A.
A detailed discussion of Novell’s underlying antitrust
action can be found in our prior opinion in this case. See
Novell, Inc. v. Microsoft Corp., 505 F.3d 302, 305-10 (4th Cir.
2007). We focus here on those facts necessary to an explication
of the parties’ present dispute.
Between 1994 and 1996, Novell owned certain “office-
productivity” software applications. Id. at 305. These
applications included “WordPerfect, a word-processing
3
application, and Quattro Pro, a spreadsheet application.” 1 Id.
(footnotes omitted). During this period, Novell also owned a
variety of products comprising its desktop operating system
(“DOS”) business, 2 including “an operating system known as Novell
DOS.”
Id. at 306 n.10.
Novell believed, and the Utah Court of Appeals would later
find, that its DOS products were “the target of anticompetitive
practices by Microsoft in the early 1990s.” Novell, Inc. v.
Canopy Group, Inc., 92 P.3d 768, 770 (Utah App. Ct. 2004).
Novell’s board of directors was concerned, however, that “if
they brought suit against Microsoft in a private antitrust
action, Microsoft would retaliate with further unfair practices
that could neutralize the value of any antitrust recovery.”
Id.
To guard against such an eventuality, Novell sought to
effectuate a sale that would obligate the purchaser to sue
1
Both word-processing applications and spreadsheet
applications are computer software. The former “enables an end-
user to create, edit, and print text-based documents,” and the
latter allows “an end-user to organize and manipulate
quantitative data.” Novell, Inc., 505 F.3d at 305 n.2 & n.3.
2
“An operating system is software that controls the
computer’s resources, including memory, disk space, keyboards,
and the central processing unit. An operating system also
facilitates communication between the computer’s resources and
software applications, including word-processing and spreadsheet
applications.” Novell, Inc., 505 F.3d at 305 (footnote
omitted).
4
Microsoft, allow Novell to share in the recovery, and also
obscure Novell’s role in the action against Microsoft. Id.
To that end, on July 23, 1996, Novell executed an Asset
Purchase Agreement (“the Agreement”) with Caldera, Inc.
(“Caldera”). Under the terms of the Agreement, Novell
“transfer[red] to Caldera specified assets and liabilities
comprising the DOS Business, including the products associated
with the DOS Business” and “assign[ed] to Caldera certain
related rights and agreements.” J.A. 1963. In exchange,
Caldera paid Novell a purchase price of $400,000.
Novell’s sale of assets was designed to divest the company
of its various DOS products and assign the rights to any
antitrust litigation related to those products. Specifically,
the Agreement provided that “Novell shall grant, transfer,
convey, and assign to Caldera all of Novell’s right, title, and
interest in and to any and all claims or causes of action held
by Novell at the Closing Date and associated directly or
indirectly with any of the DOS Products or Related Technology.”
J.A. 1966-67. As defined in the Agreement, “DOS Products”
included a list of thirteen products, 3 consisting of “seven
3
The thirteen enumerated products were: CP/M, Concurrent
DOS, DR DOS 6.0, DR DOS 5.0, Multiuser DOS, Novell DOS 7.0,
PALMDOS, GEM, GEM Draw, GEM Wordchart, GEM Graph, GEM
Programmers Toolkit, and Draw Plus.
5
versions of Novell’s DOS operating system and six DOS-based
software applications.” Appellant’s Br. at 12. The Agreement
also defined “Related Technology,” explaining that the term
encompassed “all existing technology . . . necessary to the
performance by the DOS Products of their intended functions or
purposes.” J.A. 1965.
As contemplated, Caldera filed suit against Microsoft the
same day the Agreement was signed, alleging harm to “DR DOS and
related PC operating system software.” J.A. 1955. Three and
one-half years later, in January 2000, Microsoft settled
Caldera’s lawsuit. In exchange for being released from
Caldera’s claims against it, Microsoft paid Caldera $280
million. Per their agreement, Caldera provided Novell with
about $35.5 million of this settlement. 4
B.
In November 2004, Novell filed the six-count antitrust
action underlying this appeal. 5 As relevant here, Count I
asserted that Microsoft had “engag[ed] in anticompetitive
4
Novell sued Caldera’s successor in interest seeking a
larger share of the settlement and ultimately received an
additional $17.65 million. See generally Novell, Inc., 92 P.3d
at 768.
5
The complaint was originally filed in the federal district
court for the district of Utah. In May 2005, the Judicial Panel
on Multidistrict Litigation transferred the suit to the district
of Maryland.
6
conduct to thwart the development of products that threatened to
weaken the applications barrier to entry” to the operating
systems market. 6 J.A. 100. Specifically, it contended that
Microsoft’s conduct had damaged “Novell’s WordPerfect word
processing applications and its other office productivity
applications in violation of Section 2 of the Sherman
[Antitrust] Act, 15 U.S.C § 2.” Id. In Count VI, Novell
alleged that Microsoft had made exclusionary agreements with
original equipment manufacturers, which restricted the licensing
of Novell’s software applications, in unreasonable restraint of
trade.
In June 2005, the district court granted Microsoft’s motion
to dismiss Counts II, III, IV, and V as untimely. However, it
6
The “applications barrier to entry” refers to the role
software applications can play in insulating an operating system
marketer from competition. We discussed this barrier to entry
in detail in our previous decision in this case, explaining,
the “applications barrier to entry”-stems from two
characteristics of the software market: (1) most
consumers prefer operating systems for which a large
number of applications have already been written; and
(2) most developers prefer to write for operating
systems that already have a substantial consumer base.
This “chicken-and-egg” situation ensures that
applications will continue to be written for the
already dominant Windows, which in turn ensures that
consumers will continue to prefer it over other
operating systems.
Novell, Inc., 505 F.3d at 306 (quoting United States v.
Microsoft Corp.,
253 F.3d 34, 55 (D.C. Cir. 2001)).
7
found that Novell had antitrust standing to proceed on Counts I
and VI. In doing so, the court expressly rejected Microsoft’s
argument that Novell had assigned its claims under Count I to
Caldera as part of the sale of the DOS products. The court
explained:
The fallacy in [Microsoft’s] argument is that the
claim asserted in Count I, while arising from
Microsoft’s monopoly in the operating system market,
is for damage not to DOS or any other operating system
but for damage to applications software. It is a far
stretch to infer (and Microsoft has presented nothing
to establish) that simply because DOS competed in the
operating system market, such a claim was either a
“direct” or “indirect” claim intended to be
transferred from Novell to Caldera.
J.A. 108 (emphasis added). The district court subsequently
granted Microsoft’s request that it certify its ruling for
interlocutory review.
In October 2007, we affirmed the district court’s dismissal
of Counts II, III, IV, and V, as well as its determination that
Novell had standing to bring Counts I and VI. See Novell, Inc.,
505 F.3d at 322-23. In a brief footnote, we acknowledged
Microsoft’s assertion that Novell had assigned its claims under
Counts I and VI to Caldera and the district court’s rejection of
that argument.
Id. at 306-07 n.10. However, because the issue
was not before us, we declined to reach it.
Id. at 307 n.10
(observing that our narrow grant of interlocutory appeal did not
include issues related to the transfer of Counts I and VI).
8
Following our decision, the parties completed discovery on
Counts I and VI and filed cross-motions for summary judgment.
On March 30, 2010, the district court granted Microsoft’s motion
for summary judgment.
As to both Count I and Count VI, the district court
reversed its earlier interpretation of the Agreement. It
specifically concluded that its prior determination that Novell
did not assign its claims under these counts to Caldera because
they focused on harm to its software applications rather than
operating systems was wrong. The court now felt that the
reference to “associated” claims encompassed Counts I and VI,
because, inter alia, “the reason Microsoft allegedly engaged in
the conduct causing the damage [asserted in those counts] was to
obtain and maintain its monopoly in the operating system market-
-the market in which the DOS Products competed.” J.A. 371.
However, out of an abundance of caution, recognizing that
we might disagree with its new interpretation, the district
court nonetheless proceeded to “address the substantive
viability of Novell’s claims” to facilitate our review of their
merits on appeal. J.A. 369. It concluded that, if Novell had
not assigned Counts I and VI to Caldera, only Count I would have
survived summary judgment. The court found, however, that
Novell had failed to adequately plead harm to the software
9
application “GroupWise” in Count I and so dismissed that portion
of its allegations. This appeal followed.
II.
On appeal, Novell renews its argument that the Agreement
did not transfer its Count I claims related to the office
productivity applications. Novell further disputes Microsoft’s
assertion that Novell’s participation in Caldera’s settlement
precludes it from litigating Count I under principles of res
judicata. It also contests Microsoft’s claim that there are, in
any event, no disputed issues of material fact as to Count I.
Finally, Novell urges that its complaint provided sufficient
notice of its allegations related to GroupWise. 7
We consider each argument in turn. In doing so, we review
the grant of summary judgment de novo and affirm only if there
is no issue of material fact and Microsoft is entitled to
judgment as a matter of law. Robinson v. Clipse, 602 F.3d 605,
607 (4th Cir. 2010).
7
Novell’s opening brief did not argue that the district
court erred by granting summary judgment as to Count VI, and
Novell confirmed in oral argument that it was not pursuing this
claim.
10
A.
We first address whether Novell assigned the claims it
seeks to bring to Caldera. As the Agreement specified that it
is “governed in all respects” by Utah law, J.A. 1980, we begin
our analysis by outlining that state’s legal framework.
1.
When construing an agreement, Utah courts “look to the
language of the contract to determine its meaning and the intent
of the contracting parties,” and “‘consider each contract
provision . . . in relation to all of the others, with a view
toward giving effect to all and ignoring none.’” Café Rio, Inc.
v. Larkin-Gifford-Overton, LLC, 207 P.3d 1235, 1240 (Utah 2009)
(quoting Green River Canal Co. v. Thayn,
84 P.3d 1134, 1141
(Utah 2003)) (alteration in original). In conducting their
assessment, Utah courts consider “the reasonable expectations of
the parties, looking to the agreement as a whole and to the
circumstances, nature, and purpose of the contract.” Green
River Canal
Co., 84 P.3d at 1142 (quoting Peirce v. Peirce,
994
P.2d 193, 198 (Utah 2000)).
Utah’s approach to the issue of ambiguity in a contract is
somewhat unique. See Daines v. Vincent, 190 P.3d 1269, 1276
(Utah 2008) (citing the Utah Supreme Court’s efforts “to
establish a balanced, ‘better-reasoned’ approach to an analysis
of facial ambiguity that would allow judges to ‘consider the
11
writing in the light of the surrounding circumstances’”)
(quoting Ward v. Intermountain Farmers Ass’n, 907 P.2d 264, 268
(Utah 1995)). Utah courts employ a two-step approach to
determine whether a contract is facially ambiguous. First, they
assess “any relevant and credible extrinsic evidence offered to
demonstrate that there is in fact an ambiguity.” City of
Grantsville v. Redevelopment Agency of Tooele City,
233 P.3d
461, 470 (Utah 2010) (internal quotations omitted); see also
Ward, 907 P.2d at 268 (reasoning that absent such evidence “the
determination of ambiguity [would be] inherently one-sided,
namely, it [would be] based solely on the extrinsic evidence of
the judge’s own linguistic education and experience” (internal
quotation marks omitted)). They then determine whether
“competing interpretations are reasonably supported by the
language of the contract.”
Daines, 190 P.3d at 1277 (internal
quotation marks omitted). Although the process allows extrinsic
evidence on the question of ambiguity, the Utah Supreme Court
has cautioned that “a finding of ambiguity will prove to be the
exception and not the rule.”
Id. at 1277 n.5.
2.
Against the backdrop of Utah’s principles of contract
interpretation, we now consider the relevant provisions of the
Agreement. The parties dispute whether the language “associated
directly or indirectly with any of the DOS Products or Related
12
Technology,” J.A. 1967, transferred Novell’s claim of harm to
its office productivity software. We conclude that it did not.
Microsoft argues that the phrase “associated directly or
indirectly” is to be read broadly and, consequently, forecloses
Novell’s present claims. In support of its contention that the
Agreement transferred these claims to Caldera, Microsoft cites
six “associations” between the DOS products and the office
productivity software, most prominently that Count I “links
injury allegedly inflicted by Microsoft on [software products]
with harm to competition in the PC operating system market, and
thus with DR DOS, which competed in that market.” 8 Appellee’s
Br. at 34 (emphasis added).
Microsoft’s argument is not without some intuitive merit.
The phrase “associated directly or indirectly” can be read
8
The five additional purported “associations” identified by
Microsoft are: (1) despite Novell’s claim that it was no longer
marketing its operating system when the conduct alleged in Count
I began, the value of its DOS products would still have been
affected by Microsoft’s alleged efforts to bolster the
applications barrier to entry; (2) despite the limited volume of
sales, Novell sold DOS products during the period at issue, and
the value of those products was affected by the conduct alleged
in Count I; (3) Caldera’s suit against Microsoft sought
injunctive relief in the form of disclosure of technical data
that would have “addressed much of the alleged conduct
underlying Count I,” Appellee’s Br. at 37; (4) the conduct
alleged in Count I was supposed to have occurred in a market
that Microsoft dominated because of anticompetitive behavior
toward Novell’s DOS products; and (5) Microsoft targeted Novell
in part because Novell had entered the DOS business.
13
broadly. Caldera’s DOS claims and Novell’s software application
claims are certainly “associated” in some sense of the word;
both sets of products have roles to play--although distinct
roles to be sure--in the operating systems market. The
elasticity of the phrase is not, however, unlimited.
We conclude that Microsoft’s argument fails for two
reasons. First, Utah law mandates that we not read contractual
provisions in isolation. We instead consider the disputed
language in the context of the agreement in which it appears.
See Café Rio, 207 P.3d at 1240.
Here, the disputed language is cabined by reference to a
specific set of property, transferring claims “associated
directly or indirectly with any of the DOS Products or Related
Technology.” J.A. 1967 (emphasis added). The Agreement
precisely delineated what that property consisted of, by
identifying thirteen products, none of which is the office
productivity software that forms the basis of the present claim.
Viewed in this context, Microsoft’s expansive reading of the
disputed provision is antithetical to the carefully limited
“circumstances, nature, and purpose” of the Agreement. Peirce,
994 P.2d at 198; see also Green River Canal
Co., 84 P.3d at
1142; cf. Grynberg v. Questar Pipeline Co.,
70 P.3d 1, 8 (Utah
2003) (“[W]hen two statutory provisions appear to conflict, the
more specific provision will govern over the more general
14
provision.”) (quoting Perry v. Pioneer Wholesale Supply Co., 681
P.2d 214, 216 (Utah 1984)).
More fundamentally, Microsoft’s preferred reading lacks a
logical limiting principle. Given operating systems’ ubiquitous
role in personal computing, it is difficult to imagine a piece
of hardware or software that could not be somehow “associated”
with Novell’s DOS products under Microsoft’s capacious theory.
Tellingly, Microsoft’s counsel was unable to articulate
meaningful boundaries for the company’s reading at oral
argument. Counsel argued only that the disputed language would
not extend to “causes of actions associated in such a far-
reaching way that it would be illogical to connect them to DR-
DOS.” We agree that the language of the contract must be
cabined by the limits of logic. However, given the context in
which the disputed phrase appeared, we believe Microsoft’s
reading exceeds those boundaries.
As the district court initially recognized, the express
purpose of the Agreement was to assign to Caldera the rights and
liabilities associated with “the DOS Products or Related
Technology,” J.A. 1967, a carefully delineated term. The
precise phrasing of the contract entitled Caldera to sue (and
share the recovery with Novell) for claims involving its
operating system products, but did not preclude Novell from
suing for separate harm to the separate interest in the software
15
applications it retained. Indeed, our prior decision was
premised on the severability of harms to software from harms to
DOS products, as we anchored our standing analysis in Novell’s
ability to articulate discrete antitrust harms to its office
productivity applications, though those products did not
themselves compete with operating systems. See Novell, Inc.,
505 F.3d at 320. The dissent’s characterization to the
contrary, it is the notion that an Agreement that purported to
transfer a specific set of property in fact evinced Novell’s
intent to transfer claims for a wholly separate property
interest that, in this context, makes little sense.
To the extent that Utah law endorses review of extrinsic
evidence, the available materials only reinforce our conclusion
that the Agreement unambiguously supports Novell’s reading. As
Novell notes, the record includes affidavits and testimony from
Caldera’s negotiator, Novell’s general counsel, and Novell’s
CEO, which attest to the absence of any intention to convey
Novell’s present claims. For instance, Caldera’s negotiator’s
affidavit states:
Neither party contemplated that claims “directly or
indirectly” related to “the DOS Products or Related
Technology” would include Novell’s antitrust claims
for harm to its business applications. Any suggestion
that the Asset Purchase Agreement conveyed claims for
harm to Novell’s applications would be contrary to the
parties’ intentions and what I and my client, Caldera,
understood was actually being conveyed to it.
16
J.A. 5024 (emphasis added).
For its part, Microsoft cites extrinsic evidence that,
prior to its agreement with Caldera, Novell contemplated a jury
“piggyback[ing]” damages in the applications market to a DOS-
related antitrust suit. J.A. 1443. Microsoft claims that that
suit was ultimately brought by Caldera as Novell’s “proxy.”
Appellee’s Br. at 42. It further urges that the fact that
Caldera sought injunctive relief that would have indirectly
benefited Novell’s applications business demonstrates that the
parties’ “assignment was intended to encompass all claims
arising out of Microsoft’s allegedly anticompetitive conduct.”
Id. at 41.
We do not find Microsoft’s showing persuasive. Indeed,
Microsoft’s extrinsic evidence is equally susceptible to the
opposite reading, that is, that Caldera’s failure to seek
damages for harm to office productivity applications indicates
that neither party contemplated the transfer of claims related
to that discrete set of property--a conclusion that is entirely
consistent with the testimony on which Novell relies. Having
considered both parties’ extrinsic evidence in the context of
the contractual provisions discussed above, we do not believe
that Microsoft’s “competing interpretation[]” is “reasonably
supported by the language of the [Agreement].” City of
Grantsville, 233 P.3d at 471 (quoting
Daines, 190 P.3d at 1269).
17
In short, our reading of the entire Agreement, as well as
the extrinsic evidence persuades us that the district court’s
initial interpretation was correct: the Agreement conveyed
claims “associated” with an expressly enumerated body of
property that did not include Novell’s office productivity
applications. The mere existence of a possible conceptual link
between the DOS products and those applications does not mean
that the Agreement divested Novell of the claims alleged in
Count I.
B.
Microsoft’s res judicata argument also lacks merit.
Microsoft urges in particular that Novell’s participation in the
Caldera litigation, and acceptance of a portion of the
settlement in that case, precludes it from asserting additional
claims, which Microsoft alleges arise out of the same basic core
of operative facts. See Laurel Sand & Gravel, Inc. v. Wilson,
519 F.3d 156, 162 (4th Cir. 2008) (“The test for deciding
whether the causes of action are identical for claim preclusion
purposes is whether the claim presented in the new litigation
arises out of the same transaction or series of transactions as
the claim resolved by the prior judgment.” (internal quotations
omitted)); see also 1616 Reminc Ltd. P’ship v. Commonwealth Land
Title Ins. Co.,
778 F.2d 183, 187 (4th Cir. 1985).
18
Nonmutual claim preclusion is generally disfavored. See
18A C.A. Wright, et al., Federal Practice & Procedure § 4464.1,
at 713-15 (2d ed. 2002). Microsoft nevertheless argues that the
Caldera settlement falls within exceptions to that principle,
which allow nonparty claim preclusion when there are
“substantive legal relationship[s] between the person to be
bound and a party to the judgment,” or when the nonparty was
“adequately represented by someone with the same interests who
[wa]s a party to the suit.” Taylor v. Sturgell, 553 U.S. 880,
894 (2008) (internal quotations omitted) (second alteration in
original). We disagree.
Microsoft’s somewhat confusing assertion that Novell’s
assignment of some of its claims to Caldera was sufficient to
establish a “substantive legal relationship” between them is
unpersuasive. It relies entirely on easily distinguishable
caselaw that concerns situations in which a subsequent suit
raises “identical issues.” See Appellee’s Br. at 47-48 (quoting
Pelt v. Utah, 539 F.3d 1271, 1290 (10th Cir. 2008)). As
discussed above, Caldera’s suit addressed a distinct set of
harms from those addressed in Count I: the former concerned DOS
products, the latter software applications. Any appearance of
identicality between the claims is a product of the level of
generality at which Microsoft seeks to frame them. See, e.g.,
Appellee’s Br. at 50 (“Both suits allege that Microsoft engaged
19
in anticompetitive conduct in the PC operating system market.”);
see also id. (claiming only that the two suits are “strikingly
similar”). While both suits implicated Microsoft’s desire to
control the operating system market, overlapping motivation for
separate harms is insufficient to render those harms identical
for purposes of claim preclusion.
We are also not convinced that Caldera could have served as
an adequate representative of Novell’s interests. As the
district court noted, “Caldera could not have asserted on behalf
of Novell claims Caldera did not possess.” 9 J.A. 376 n.9.
Moreover, as a practical matter, only Novell had the incentive
to recover for damages to its office productivity applications.
On these facts, res judicata simply does not apply.
C.
Microsoft’s claim that there are no remaining disputed
issues of material fact is also unavailing. Microsoft asserts
that Count I’s antitrust allegations are fatally flawed, as
Novell cannot make the required showing that Microsoft’s conduct
9
For the same reason, we reject Microsoft’s argument that
Novell’s initiation of a separate action constitutes claim-
splitting. Caldera could not have sought damages for harm to
the office productivity applications in its initial suit, as it
did not own those applications. As a result, Novell did not
have a “full and fair opportunity” to litigate its present
claims in that action. Taylor, 553 U.S. at 892; Pueschel v.
United States,
369 F.3d 345, 356 (4th Cir. 2004).
20
toward its office productivity applications helped maintain
Microsoft’s monopoly power. In support of its argument,
Microsoft cites Novell’s expert in antitrust economics’
testimony that, in a hypothetical market where Microsoft had
only targeted Novell, “there would have been no adverse effect
of knocking Novell out of the industry.” J.A. 392.
Microsoft’s claim mischaracterizes the impact of the
expert’s testimony. As the district court explained, Novell’s
expert’s opinion about a hypothetical market leaves ample room
for “a finding that Microsoft’s actions toward Novell were a
significant contributor to anticompetitive harm in the PC
operating system market in light of the weakened state of other
applications and [independent software vendors].” J.A. 393
(emphasis added). That issue is appropriate for trial.
D.
Finally, we reject Novell’s argument that claims related to
“GroupWise” software were adequately pleaded in Count I. To
satisfy the pleading requirements, a “complaint ‘need only give
. . . fair notice of what the claim is and the grounds upon
which it rests.’” Coleman v. Md. Court of Appeals, 626 F.3d
187, 190 (4th Cir. 2010) (quoting Erickson v. Pardus,
551 U.S.
89, 93 (2007) (per curiam)); see also Fed. R. Civ. P. 8(a)(2)
(noting that a complaint must contain “a short and plain
statement of the claim showing that the pleader is entitled to
21
relief”). Novell concedes that its complaint does not reference
GroupWise. It nonetheless argues that it should not be
penalized for having used the umbrella term “office productivity
applications” to describe the software at issue. This claim
lacks merit.
Given the fairly generous standards of notice pleading, the
fact that GroupWise was not mentioned in Novell’s lengthy
complaint is not necessarily dispositive. However, Novell did
not simply fail to mention GroupWise in its complaint. Rather
its pleading expressly characterized what the term “office
productivity applications” was intended to encompass,
explaining: “Word processing and spreadsheet applications are
sometimes referred to herein as ‘office productivity
applications.’” J.A. 51. This description, by its terms,
excludes GroupWise, which “is a software program that combines
e-mail, calendar, appointment scheduling, and task management
functions.” Action Tech., Inc. v. Novell Systems, Inc., Nos.
97-1460, 97-1481, 1998 WL 279359, at *2 (Fed. Cir. May 27, 1998)
(unpublished). We cannot conclude, under these circumstances,
that Microsoft was provided fair notice of GroupWise claims.
Nor are we persuaded by Novell’s assertion that because
Microsoft included GroupWise in its discovery requests, it was
not prejudiced by any defects in Novell’s pleading. As the
district court found, “[w]hat material is subject to discovery
22
and what conduct may serve as the basis of a claim are two
distinct inquiries with different standards.” J.A. 383. We are
disinclined to penalize Microsoft for having prudently sought
broader discovery than may have been necessary.
III.
For the foregoing reasons we reverse the grant of summary
judgment as to Count I and remand for further proceedings.
REVERSED AND REMANDED
23
HAMILTON, Senior Circuit Judge, dissenting:
Between 1994 and 1996, Novell owned WordPerfect, a word
processing software application, and Quattro Pro, a spreadsheet
software application. In Counts II through V of its complaint,
Novell sought damages for Microsoft’s alleged monopolization
(and attempted monopolization) of the word processing and
spreadsheet software application markets, in which WordPerfect
and Quattro Pro competed. These claims, all parties agree, are
barred by the applicable statute of limitations under the
Sherman Act. Count I, which is the subject of this appeal,
seeks damages for the same claims that are time-barred in Counts
II through V. More specifically, Novell alleges in Count I that
Microsoft’s antitrust violations in the operating systems
market, which tolled the statute of limitations during the
pendency of the government’s case against Microsoft for
antitrust violations in such market, damaged their word
processing and spreadsheet software applications. The flaw in
Count I is obvious: because the claim is premised on Microsoft’s
anti-competitive conduct in the operating systems market, Count
I necessarily is a claim “associated directly or indirectly
with” DR DOS. (J.A. 1966-67).
To be sure, the majority recognizes that the phrase
“‘associated directly or indirectly’ [contained in the Asset
Purchase Agreement (APA)] can be read broadly” to cover the
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claim asserted in Count I. Ante at 13-14. However, the
majority ignores the plain, patently broad language in the APA,
choosing instead to craft its own narrow reading of the phrase,
for two reasons.
First, the majority states that the phrase at issue “is
cabined by reference to a specific set of property” that was
transferred in the APA. Ante at 14. As its reasoning goes,
because word processing and software applications were not part
of this specific set of property, such applications could not be
directly or indirectly related to the specific set. Such
reasoning is flawed for the simple reason that it reads out the
word “indirectly” from the APA. The word “indirectly” was
inserted into the APA for an obvious reason—to allow Caldera to
proceed with a claim against Microsoft that was not envisioned
by the parties, but nevertheless related in some indirect manner
to the DR DOS operating system. Count I fits perfectly under
the APA’s “indirect” umbrella. The claim is premised on harm
caused, not in the software applications market in which both
WordPerfect and Quattro Pro competed, but rather in the
operations systems market in which both Microsoft’s Windows 95
and DR DOS competed. Thus, at the very least, the harm to
WordPerfect and Quattro Pro caused by Microsoft’s monopolization
of the operating systems market is indirectly (even perhaps
directly) associated with DR DOS.
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And it should come as no surprise that the term
“indirectly” made its way into the APA. All encompassing words
such as “indirectly” are commonly used in asset purchase
agreements to cover such unforeseen events, and courts should
read such terms broadly to ensure clarification and protection
to the rights of all parties to a contract. Yet, the majority
takes the opposite tack, reading an extremely broad term
narrowly. Put simply, common sense tells us that a claim that
only exists by virtue of Microsoft’s alleged monopolization of
the operating systems market is a claim “indirectly” related to
the DR DOS operating system.
Second, the majority relies on certain flimsy extrinsic
evidence, which, according to it, “attest[s] to the absence of
any intention to convey Novell’s present claims.” Ante at 16.
Such evidence includes the affidavits and testimony of Novell’s
general counsel, Novell’s CEO, and Caldera’s chief negotiator.
Any examination of such evidence must be viewed with extreme
caution, as it is undisputed that: (1) Novell sold DR DOS, in
part, to allow another party, such as Caldera, to proceed
against Microsoft in an antitrust action; and (2) Novell and
Caldera worked in tandem in the Caldera action to litigate
against Microsoft. More importantly, as the able district judge
handling the case below recognized, such extrinsic evidence is
“ambiguous and inconclusive,” (J.A. 374), as neither party
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contemplated the existence of the Count I claim until it became
apparent that the claims in Counts II through V were time-
barred. However, the absence of such contemplation does not
inject any ambiguity into the APA, because, as the district
judge aptly observed, Novell unmistakably assigned “claims for
damage inflicted upon Novell’s software applications through the
prism of the operating system market,” (J.A. 371), such that the
harm to the software applications were indirectly associated
with the operating market in which DR DOS competed. (J.A. 371).
In sum, because I believe the district judge correctly
granted summary judgment in favor of Microsoft on Count I, in
its thorough and convincingly written opinion, I respectfully
dissent.
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