Case: 10-1482 Document: 35 Date Filed: 09/17/2010 Page: 1 No. 10-1482 IN THE United States Court of Appeals FOR THE FOURTH CIRCUIT dNOVELL, INCORPORATED, Plaintiff-Appellant, —v.— MICROSOFT CORPORATION, Defendant-Appellee. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BRIEF OF APPELLEE MICROSOFT CORPORATION RICHARD J. WALLIS DAVID B.TULCHIN STEVEN J. AESCHBACHER Counsel of Record MICROSOFT CORPORATION STEVEN L. HOLLEY One Microsoft Way SULLIVAN & CROMWELL LLP Redmond, Washington 98052 125 Broad Street (425) 882-8080 New York, New York 10004 (212) 558-4000 G. S TEWART WEBB VENABLE LLP 750 East Pratt Street, Suite 900 Baltimore, Maryland 21202 (410) 244-7400 Attorneys for Microsoft Corporation September 17, 2010 Case: 10-1482 Document: 35 Date Filed: 09/17/2010 Page: 2 UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT DISCLOSURE OF CORPORATE AFFILIATIONS AND OTHER INTERESTS Only one form needs to be completed for a party even if the party is represented by more than one attorney. Disclosures must be filed on behalf of all parties to a civil, agency, bankruptcy or mandamus case. Corporate defendants in a criminal or post-conviction case and corporate amici curiae are required to file disclosure statements. Counsel has a continuing duty to update this information. No. _______ Caption: __________________________________________________ Pursuant to FRAP 26.1 and Local Rule 26.1, ______________________ who is _______________________, makes the following disclosure: (name of party/amicus) (appellant/appellee/amicus) 1. Is party/amicus a publicly held corporation or other publicly held entity? YES NO 2. Does party/amicus have any parent corporations? YES NO If yes, identify all parent corporations, including grandparent and great-grandparent corporations: 3. Is 10% or more of the stock of a party/amicus owned by a publicly held corporation or other publicly held entity? YES NO If yes, identify all such owners: 4. Is there any other publicly held corporation or other publicly held entity that has a direct financial interest in the outcome of the litigation (Local Rule 26.1(b))? YES NO If yes, identify entity and nature of interest: 5. Is party a trade association? (amici curiae do not complete this question) YES NO If yes, identify any publicly held member whose stock or equity value could be affected substantially by the outcome of the proceeding or whose claims the trade association is pursuing in a representative capacity, or state that there is no such member: 6. Does this case arise out of a bankruptcy proceeding? YES NO If yes, identify any trustee and the members of any creditors’ committee: CERTIFICATE OF SERVICE ************************** I certify that on _________________ the foregoing document was served on all parties or their counsel of record through the CM/ECF system if they are registered users or, if they are not, by serving a true and correct copy at the addresses listed below: _______________________________ ________________________ (signature) (date) Case: 10-1482 Document: 35 Date Filed: 09/17/2010 Page: 3 TABLE OF CONTENTS Page STATEMENT OF THE ISSUES ............................................................................ 3 STATEMENT OF THE CASE ............................................................................... 4 A. Novell’s Complaint ............................................................................ 4 B. Microsoft’s 2005 Motion to Dismiss ................................................. 6 C. Discovery ............................................................................................ 8 D. The Motions for Summary Judgment ................................................ 8 STATEMENT OF FACTS ................................................................................... 12 A. Novell’s Sale of Antitrust Claims to Caldera ................................... 12 B. Caldera’s Lawsuit Against Microsoft .............................................. 16 1. The Claims Asserted by Caldera ........................................... 16 2. Novell’s Participation in the Caldera Litigation ................... 18 3. The Settlement of the Caldera Litigation .............................. 19 C. Count I of Novell’s Complaint ......................................................... 19 1. Development of Windows 95 ................................................ 21 2. Namespace Extension APIs ................................................... 22 3. Custom Print Processor .......................................................... 23 4. Windows 95 Logo Licensing Program .................................. 24 D. Novell’s Untimely Added Groupware Allegations .......................... 25 SUMMARY OF ARGUMENT ............................................................................ 26 ARGUMENT ........................................................................................................ 29 Case: 10-1482 Document: 35 Date Filed: 09/17/2010 Page: 4 I. Novell Assigned the Claims Asserted in Counts I and VI to Caldera ........ 29 A. The APA Unambiguously Assigned the Claims Asserted in Counts I and VI to Caldera ............................................................... 30 1. The APA Assigned All Claims Arising out of Allegedly Anticompetitive Conduct by Microsoft in the PC Operating System Market ...................................................... 31 2. The District Court Correctly Found Several Grounds of “Association” Between Novell’s Claims and DR DOS ........ 35 B. Federal Common Law Does Not Mandate a Different Interpretation of the APA ................................................................. 38 C. Extrinsic Evidence Confirms that Novell Assigned the Claims Asserted in Counts I and VI ............................................................. 40 1. Extrinsic Evidence Demonstrates that Novell Intended to Assign All Claims Arising out of Microsoft’s Allegedly Anticompetitive Conduct in the PC Operating System Market ....................................................................... 41 2. The Affidavits Submitted by Novell Do Not Support Novell’s Interpretation of the APA ........................................ 42 3. The Contracting Parties’ Course of Conduct Does Not Support Novell’s Interpretation of the Assignment ............... 45 II. The Claims Asserted in Counts I and VI Also Are Barred by the Doctrine of Res Judicata ............................................................................ 45 A. Novell and Caldera Were in Privity with Respect to the Caldera Litigation ............................................................................ 47 1. The Substantive Legal Relationship Between Novell and Caldera Establishes Privity .................................................... 47 2. Novell’s Interests Were Adequately Represented in the Caldera Litigation .................................................................. 48 B. Novell’s Claims Arise out of the Same Cause of Action Asserted in the Caldera Litigation ................................................... 49 -ii- Case: 10-1482 Document: 35 Date Filed: 09/17/2010 Page: 5 C. The District Court Was Incorrect in Disregarding Microsoft’s Res Judicata Defense ....................................................................... 52 III. The Alleged Harm to WordPerfect and Quattro Pro Had No Adverse Effect on Competition in the PC Operating System Market ...................... 54 IV. There Is No Basis for Overturning the District Court’s Grant of Summary Judgment on Count VI ............................................................... 58 V. Novell May Not Now Seek Redress for Alleged Harm to GroupWise ..... 59 CONCLUSION ..................................................................................................... 62 -iii- Case: 10-1482 Document: 35 Date Filed: 09/17/2010 Page: 6 TABLE OF AUTHORITIES Page(s) CASES Arizona v. California, 530 U.S. 392 (2000) ........................................................................................... 47 Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519 (1983) ........................................................................................... 40 Barclay White Skanska, Inc. v. Battelle Mem’l Inst., 262 F. App’x 556 (4th Cir. 2008) ...................................................................... 61 Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) ..................................................................................... 57, 58 Café Rio, Inc. v. Larkin-Gifford-Overton, LLC, 207 P.3d 1235 (Utah 2009) .................................................................... 30, 31, 41 Caldera, Inc. v. Microsoft Corp., 181 F.R.D. 506 (D. Utah 1998) ......................................................................... 18 Caldera, Inc. v. Microsoft Corp., 72 F. Supp. 2d 1295 (D. Utah 1999) .................................................................. 12 Christiansen v. Farmers Ins. Exchange, 540 F.2d 472 (10th Cir. 1976) ........................................................................... 53 Crystal Imp. Corp. v. AVID Identification Sys., Inc., 582 F. Supp. 2d 1166 (D. Minn. 2008) .............................................................. 51 Deasy v. Hill, 833 F.2d 38 (4th Cir. 1987) ............................................................................... 61 Erickson v. Bastian, 102 P.2d 310 (Utah 1940) .................................................................................. 44 Gardner v.