• False or misleading product preannouncements, which were employed to freeze DR DOS out of prospective accounts. Microsoft's vaporware campaign began in 1990 when it preannounced MS-DOS 5.0 in order to stall sales of DR DOS 5.0. The campaign continued in September 1992 with premature and misleading preannouncements regarding MS-DOS 6.0. By 1993, the vaporware regarding Windows 95 had begun, which continued until at least 1994. (See Consolidated Statement 83-109, 307-319, 353-374, 402-404.)

• Unlawful tying arrangements between MS-DOS and Windows in an effort to preclude DR DOS from prospective accounts that needed or wanted to include Windows with DOS. This culminated with the release in August 1995 of Windows 95, which was falsely represented to be a stand-alone operating system that did not require DOS. (See Consolidated Statement 60-68, 110-118, 155-161, 281-291, 320-340, 375-382, 391-404.)

• Creating and planting "fear, uncertainty and doubt" about DR DOS in the market for DOS, through various means, with the goal of driving potential customers away from DR DOS. These acts occurred on an ongoing basis from 1989 until at least 1994. (See Consolidated Statement 38-51, 119-129, 195-280, 383-386.)

• Threatening and intimidating potential DR DOS customers to insure that the customers remained loyal to MS-DOS. (See Consolidated Statement 285-291, 375-382.)

These facts create genuine issues of material fact that preclude summary judgment on the tortious interference claim. As was stated in Leigh Furniture Co. v. Isom, 657 P.2d 293, 306 (Utah 1982), "Driving away an individual's existing or potential customers is the archetypical injury this cause of action was devised to remedy." Caldera clearly has submitted enough evidence to proceed to trial on this claim.

Microsoft also claims that Caldera has not pleaded a claim for "improper purpose" because it did not allege, in so many words, that Microsoft's predominant purpose was to injure Caldera. (Microsoft memorandum at p. 4.) Caldera's First Amended Complaint ("FAC") sets forth in great detail Microsoft's various willful and intentional acts that establish that its predominant purpose was to destroy DR DOS. These allegations include:

Through various unfair and predatory acts, Microsoft has willfully maintained a monopoly of the market for MS-DOS operating system software and functionally equivalent software (the "DOS Market"). (FAC 1.)

Microsoft has erected artificial barriers to the entry and growth of competing operating systems vendors through its contractual relations with original equipment manufacturers (OEMs) of PCS and other predatory conduct, which have had the effect of excluding competitors from the DOS Market, a market in which Microsoft has monopoly power. (FAC 3.)

Microsoft refused to tolerate this assault on its monopoly position in the DOS Market for at least two (to Microsoft) compelling reasons: . . . . (to control the O/S standard and reap monopoly profits). (FAC 42.)

Microsoft's purpose was to freeze the OEM and retail channels with fear, uncertainty and doubt about DR DOS releases, thus squelching sales. (FAC 52.)

Microsoft's dominant purpose in combining the functionality of Windows and MS-DOS in Windows 95 was to tie together and compel the purchase as a package of two products--Windows and MS-DOS--that previously were marketed separately and were distinguishable in the eyes of buyers. Thus, excluding competition in the DOS Market was the dominant purpose of this technological tie, rather that the creation of technological benefits. (FAC 61.)

There is no legitimate business justification or purpose for Microsoft's (monopolization) conduct. Microsoft has not used the least restrictive means for achieving its business objectives. (FAC 73.)

There is no legitimate business justification for Microsoft's exclusive dealing arrangements. (FAC 90.)

Paragraph 95 concludes:

Microsoft was and is maliciously motivated and knew, or in the exercise of reasonable care should have known, that its actions would damage and continue to damage the DR DOS business and existing and prospective contractual relations with DR DOS customers, and has acted in conscious disregard of this effect.

The undisputed facts submitted by Caldera in the Consolidated Statement establish Microsoft's ill will and desire to injure DRI and Novell through anticompetitive means in order to further its monopolistic desires. There was no legitimate business justification for Microsoft's actions. This evidence of Microsoft's intent to injure DRI and Novell comes from the very top of Microsoft. For example, when the illegal merger of Windows and DOS was first discussed within Microsoft, Nathan Myryvold, Microsoft's principal technical strategist, counseled Microsoft executives as follows:

Benefits

The good points of this approach are:

--- The MONEY! This obviously will give tremendous systems revenue.

--- It should give great apps revenue---this is something like a 5X - 10X

increase in the total number of platforms on which we can sell our apps.

Our success may not be completely linear in the market size, but it sure helps.

Those two are huge and obvious wins, and are the main reason to do this. The

strategic side is:

. . .

---- We put a bullet in the head of our would be competitors on Dos like DRI,

Desqview, dos extenders etc.

Exhibit 24; Consolidated Statement 65-66 (emphasis added).

In September of 1991, in response to the release of DR DOS 6.0, Jim Allchin, a Microsoft executive, ranted:

We must slow down Novell. . . . As you said Bill, it has to be dramatic. . . .

We need to slaughter Novell before they get stronger.

Exhibit 175; Consolidated Statement 193.

In early 1992, as Novell was reeling from the effects of the beta blacklist and the compatibility scares that Microsoft was spreading relative to DR DOS and Windows 3.1, Novell made a proposal to Microsoft to improve the cooperation between the companies (which would in turn benefit consumers). In discussing this proposal, Microsoft representatives expose the spite they had for Novell:

Silverberg:

You'll enjoy this. We just got from Novell a proposal for a new project:

"Under this Development Project, known as Corvette, Microsoft will license EMM386 and HIMEM memory managers in their Source Code to Novell and will provide technical support to Novell in Novell's effort to make DR-DOS compatible with all current and future version of Microsoft Windows 3.1 and Windows NT."

Cole:

I'm rolling on the ground laughing . . . . .) :

Barrett:

And I thought them Utah folks were drug free . . .

Allchin:

I hate them.

Exhibits 281, 282, 283; Consolidated Statement of Facts 217.

In July 1993, Bill Gates told his executives he was "keen" to hurt Novell:

Who at Microsoft gets up every morning thinking about how to compete with these guys in the short term--specifically cut their revenue. Perhaps we need more focus on this.

. . .

After their behavior in this FTC investigation, I am very keen on this.

Exhibit 368 (emphasis added); Consolidated Statement 348.

Later in 1993, Jim Allchin offered the following drastic, if not final, solution:

This really isn't that hard. If you're going to kill someone there isn't much reason to get all worked up about it and angry--you just pull the trigger. Any discussions beforehand are a waste of time. We need to smile at Novell while we pull the trigger.

Exhibit 383; Consolidated Statement of Facts 352.

Microsoft was obsessed with desire to destroy DR DOS and thereby seriously harm DRI and Novell. Yet this was not a struggling company fighting for its life, but a monopolist willing to do anything to "kill" its competition. There was no legitimate business reason for Microsoft to act in this way. Caldera has submitted evidence that creates questions of fact as to the elements of a tortious interference claim according to Utah law.

B. Caldera has met the requirements of Rule 9(b), Fed. R. Civ. P.

As it has done in several of its other motions, Microsoft argues that Caldera's tortious interference claim has not been pleaded with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure. (Microsoft Memorandum at p. 4, n. 1.) Caldera has responded to this argument in several of its briefs. (See Caldera Inc.'s Memorandum in Opposition to Defendant's Motion for Partial Summary Judgment on "Product Disparagement" Claims at pp. 48-51; Caldera Inc.'s Memorandum in Opposition to Defendant's Motion for Partial Summary Judgment on Plaintiff's "Product Preannouncement" Claims at pp. 1-3.) In order to avoid belaboring the point with the Court, those arguments are only summarized here:

Microsoft waived this defense by not raising the issue in its responsive pleadings or by prior motion. Microsoft was required to demand a cure to this alleged problem by either filing a Rule 12 motion prior to or simultaneous with its answer, or by alerting Caldera to the problem in an affirmative defense. It did neither.

Rule 9(b) does not apply to a claim for tortious interference with prospective economic relations.

Caldera has not asserted a fraud claim. To the extent that Caldera relies upon concealment to toll the statute of limitations, the First Amended Complaint pleads the circumstances required by Rule 9(b) as follows:

FAC 26: "Even Windows 95 incorporates DOS technology, albeit in a manner designed to eliminate any customer's ability to make a choice of DOS Software distinct from the choice of graphical interface. Thus, although Windows 95 does not appear to the user to run on top of MS-DOS, it in fact does."

FAC 46: Vaporware announcements were knowingly false or misleading;

FAC 61: Various misleading statements and actions regarding

Windows 95; and

FAC 94: "Microsoft, through various improper means as alleged

above, has wilfully and intentionally sought to damage existing and prospective business relations of DRI, Novell and Caldera. Microsoft, through various false statements, cover-ups, encrypted code, and other fraudulent and deceptive means, has sought to conceal the true nature and extent of such conduct, thus tolling the applicable statute of limitations."

Caldera has alleged sufficient circumstances to meet the requirements of Rule 9(b).

II. CALDERA'S TORTIOUS INTERFERENCE CLAIM IS NOT BARRED BY THE APPLICABLE STATUTE OF LIMITATION.

Microsoft argues that various statutes of limitation apply to Caldera's tortious

interference claim:⁽²⁾ the one-year statute of limitation (78-12-29(4)) for libel and slander claims; the three-year statute of limitation (78-12-26(3)) for fraud claims; and the four-year statute of limitation (78-12-25(3)) for everything else. The one-year and three-year statutes do not apply to this case. Caldera has not asserted any fraud claims, nor has it asserted a libel or slander claim. As Caldera shows in its Memorandum in Opposition to Defendant's Motion for Partial Summary Judgment on "Product Disparagement" Claims, Microsoft tries to pigeonhole Caldera's FUD claims into a commercial disparagement claim. (See Caldera memorandum at pp. 1-5, 36-41.) Microsoft fails in this attempt. Caldera's so-called FUD claims relate to a range of anticompetitive acts that Microsoft used to illegally maintain its monopoly, not just libel or slander. Id.

Caldera does allege that Microsoft misled the market and the public about many things, including, but not limited to, its product release dates, the quality and compatibility of DR DOS, the quality of MS-DOS, and the fact that Windows 95 is, in fact, MS-DOS with a Windows GUI, rather than a new operating system. Caldera claims (FAC 94) that Microsoft concealed its actions and the truth from the public and from DRI and Novell. That concealment tolls the statute of limitation on several of Caldera's claims. Those allegations do not, however, plead a fraud claim to which the three-year statute of limitation would apply.

A. The tortious interference claim is governed by the four-year statute of limitation.

Microsoft offers no authority for its argument that anything other than the four-year statute of limitation applies to a tortious interference claim. Microsoft does, however, acknowledge that the only time this issue has been before a Utah appellate court, the court applied the four-year statute of limitation to a tortious interference claim. (Microsoft memorandum at p. 6, citing Anderson v. Dean Witter Reynolds, Inc., 920 P.2d 575, 578 (Utah Ct. App. 1996).) In Anderson, there was no dispute about the fact that the four-year statute of limitation applied. See 920 P.2d at 578.

Other courts have rejected the approach suggested by Microsoft. For example, in Rolite, Inc. v. Wheelabrator Environmental Systems, Inc., 958 F. Supp. 992 (E.D. Pa. 1997), plaintiff sued Wheelabrator for antitrust violations and several state law claims, including unfair competition, defamation, commercial disparagement and tortious interference with prospective business advantage. Wheelabrator moved to dismiss the state law claims based on the one-year statute of limitation for defamation. Wheelabrator claimed that the "gravamen" of Rolite's claims was the defamation claim so all of the claims should be barred by the one-year limitation period. Id. at 1008-1009.

The court held that the claims in Rolite's complaint, when viewed in their entirety, were primarily based upon unfair competition, rather than defamation. The court found that the injury Rolite complained of was not a general injury to reputation, as it would be in a defamation action, but the injury complained of was that defendants' actions "caused customers/potential customers not to deal with Rolite. . . . Rolite's claims seek to protect its economic interests, not its reputation." Id. at 1011 (emphasis added). See also Bio/Basics Intern. v. Ortho Pharmaceutical Corp., 545 F. Supp. 1106, 1109-10 n.1 (S.D.N.Y. 1982) (holding that one-year defamation statute of limitation did not apply to tortious interference claim where plaintiff's allegations state a "paradigmatic tortious interference claim"); McCulley-Smith Assoc., Inc. v. Armour and Co., 358 F. Supp. 331 (W.D. Pa. 1973) (holding that one-year defamation statute of limitation did not apply to tortious interference claims, where all elements of tortious interference claim were pleaded). As in Rolite, the gravamen of Caldera's claims is not a defamation claim, so the defamation statute does not apply. The undisputed and obvious focus of Caldera's claims is that Microsoft, through illegal and anticompetitive means, and with improper purpose, caused potential customers to stay away from DR DOS.

If there is any doubt as to which statute of limitation applies, Utah courts have directed, "The general rule covering situations of this type is stated in 34 Am.Jur., Limitation of Actions, 50 to be: 'If a substantial doubt exists as to which is the applicable statute of limitations, the longer rather than the shorter period of limitation is to be preferred.'" Hardinge Co. v. Eimco Corp., 1 Utah 2d 320, 323, 266 P.2d 494, 496 (Utah 1954). See also State v. Parker, 872 P.2d 1041, 1044 n.3 (Utah Ct. App. 1994) (reaffirming the rule as stated in Hardinge.)

The Court should apply the four-year statute of limitation.

B. Microsoft's actions were part of a continuing tort which tolls the statute of limitation.

Microsoft's scheme to destroy DR DOS and continue its monopoly of the DOS market was conceived and carried out on a continuous basis and through various means from 1988 until 1995 when Windows 95 was finally released. Microsoft's actions constitute a "continuing wrong" that tolls the statute of limitation until the date of the last act in the scheme. In Tiberi v. Cigna Corp., 89 F.3d 1423 (10th Cir. 1996), the court held:

Under the continuing wrong doctrine . . . 'where a tort involves a continuing or repeated injury, the cause of action accrues at, and limitations begin to run from, the date of the last injury.' 54 C.J.S. Limitations of Actions 177 (1987). In other words, 'the statute of limitations does not commence until the wrong is over and done with.'

.

Id. at 1430-1431 (footnote and citation omitted). See also Chicksaw Telephone Co. v. Southwestern Bell Mobile Systems, No. 96-6357, 113 F.3d 1245, 1997 WL 290951,

(CA-10/DOK May 27, 1997) (table of decisions without full opinion in Federal Reporter;

see copy of unpublished opinion attached as Exhibit B to this memorandum).

In the situation of a continuing wrong, as is the case here, any overt act on the part of the defendant will restart the statute of limitations. Eichman v. Fotomat Corp., 880 F.2d 149, 160 (9th Cir.1989).

Utah recognizes the continuing wrong doctrine as a defense to a statute of limitations bar. Walker Drug Co., Inc. v. La Sal Oil Co., 902 P.2d 1229 (Utah 1995) (applying doctrine in nuisance and trespass case). The doctrine has been applied in other jurisdictions in a tortious interference context. Whelan v. Abell, 953 F.2d 663 (D.C. Cir. 1992). The Court held:

Under District of Columbia law, a plaintiff establishes a continuing tort by showing '(1) a continuous and repetitious wrong, (2) with damages flowing from each act as a whole, rather than from each individual act, and (3) at least one injurious act within the limitation period.'

Id. at 673 (citation omitted).

The facts here show that each of those elements have been met. Microsoft's wrongful acts continued from 1988 to 1995. (Consolidated Statement 34-417.) Caldera is claiming damages from Microsoft's acts as a whole, rather than each specific act. (See Report of William E. Wecker, Record Support-Consolidated Statement, Vol.7.) In addition, at least one injurious act occurred within the limitation period, which commenced on July 23, 1992--four years prior to the date the complaint was filed:

Long term per processor licenses and other exclusionary licenses were in effect until 1994. (Report of Dr. Jeffrey J. Leitzinger pp. 14-15 and Exhibit 9, attached thereto, Record Support-Consolidated Statement, Vol. 7; Consolidated Statement 408-413.)

Microsoft FUD began in 1989 and continued until at least 1994 with Brad Silverberg's exchanges with Andrew Schulman regarding the AARD code. (Consolidated Statement 240-242.)

Microsoft vaporware began in 1990 and continued until 1994 with its various announcements regarding Windows 95. (Consolidated Statement 83-109, 353-374.)

The Win/DOS tie, which was conceived as early as 1990, was completed in 1995 with the release of Windows 95. (Consolidated Statement 155-161, 391-400.)

Microsoft's threats, intimidation and retaliation vis-a-vis potential DR DOS customers began in at least 1991 and continued into 1994. (Consolidated Statement 285-291, 375-382.)

The facts of this case clearly fit Caldera's claims into the continuing wrong doctrine articulated in Whelan v. Abell, 953 F.2d 663 (D.C.Cir.1992), and other cases.

C. Microsoft's concealment of its actions tolls the statute of limitation.

As an alternative and supplement to the continuing wrong doctrine, Caldera submits that Microsoft's efforts to conceal its tactics from DRI and Novell toll the statute of limitations

in this case. This Court has held,

In this circuit, for a statute of limitation to be equitably tolled on grounds of fraudulent concealment, a party must show three 'elements':

(1) the use of fraudulent means by the party who raises the ban of the statute; (2) successful concealment from the injured party; and (3) that the party claiming fraudulent concealment did not know or by the exercise of due diligence could not have known that he might have a cause of action.

In re Commercial Explosives Litigation, 945 F. Supp. 1489, 1492 (D. Utah 1996) (citations omitted). Similarly, the Utah Supreme Court has held that a statute of limitation is tolled by defendant's acts of concealment if plaintiff shows (1) defendant took affirmative steps to conceal the plaintiff's cause of action; and (2) given defendant's actions, a reasonable plaintiff would not have discovered the claim earlier. Aurora Credit Services, Inc., v. Liberty West Dev., Inc., 970 P.2d 1273, 1278-79 (Utah 1998). The Aurora court further explains, "the application of the fraudulent concealment doctrine, a legal rule, to any specific set of facts, 'is necessarily a matter left to trial courts and finders of fact.'" Id. at 1279 (citation omitted). Caldera satisfies these standards in this case, and, therefore, the issue must go to the trier of fact for determination.

DRI and Novell had some knowledge of Microsoft's anticompetitive actions. Even at that time, however, Microsoft went to great lengths to conceal the truth, including the scope and severity of its actions. For example, the AARD code incident was concealed, encrypted and covered up until Andrew Schulman exposed the scheme in September 1993. Microsoft continued the cover-up when Brad Silverberg publicly responded to Mr. Schulman with misleading information. (Consolidated Statement 223-242; Report of Dr. Lee A. Hollaar, Record Support-Consolidated Statement, Vol 6, pp. 13-14.) Even Microsoft's expert, Jerry Hausman knew of the cover-up:

My memory is that it (the AARD code) said this program or operating system has not been tested with Windows 3.1, and that was pretty much all it said, as I remember, and then it wasn't until a couple of years later, that somebody writing for Doctor Dobbs' Journal sort of deconstructed what had happened, but it wasn't public knowledge at that time.

(Deposition of Jerry Hausman at p. 205; excerpt attached as Exhibit B to this memorandum.)

Microsoft further concealed the incompatibilities it was creating for DR DOS. (Consolidated Statement 243-264.) In order to cover its tracks on this issue, Microsoft concocted the "Roger Sour" incident and then lied to DRI about it. (Consolidated Statement 255-261.) Indeed, the entire purpose of the beta blacklist was to hinder DRI and Novell from discovering what Microsoft was doing with Windows 3.1 to thwart compatibility with DR DOS.

The coverup of the Win/DOS merge commenced in 1992 and continued until Caldera was able to analyze Windows 95 in this case and show how DOS is still intact in Windows 95. (Consolidated Statement 320-340, 391-404; Report of Dr. Lee A. Hollaar, Record Support-Consolidated Statement, Vol.6. pp. 15-26.) This coverup included the final episode of

vaporware in this case--as Microsoft used vaporware regarding Windows 95, and the claim that no DOS would be needed, to preempt Novell DOS 7.0 in 1992-1993. (Consolidated Statement 353-374.) This issue of concealment must go to the jury for determination.

Also, in 1992, as part of its effort to conceal what it was doing, Microsoft even directed its sales staff to destroy documents that "could be problematic in the event of an investigation." (Deposition of Stephanie Reichel pp. 264-280, Record Support-Consolidated Statement, Vol. 2.) Documents were, in fact, destroyed or deleted as a result of this directive. Id. at 270. These acts raise a jury question on the concealment issue.

D. Microsoft's tortious acts which occurred from July 23, 1992 to the present are not barred by the statute of limitation.

Microsoft argues, "By the time Novell and DRI filed their memorandum before the FTC, in January of 1992, (see Ex. 5) all claims and causes of action encompassed in Caldera's amended complaint had clearly accrued. Because even Utah's four-year statute of limitations expired [sic; commenced?] on July 23, 1992, four years prior to the filing of the complaint, Caldera's claim is barred." (Microsoft memorandum at p. 7.)

If the statute of limitation bars claims on Microsoft's tortious acts prior to July of 1992, and it was not tolled, as set forth above, Caldera's claims regarding the tying of Windows and DOS, and the attendant vaporware, the retaliatory ties and continuing FUD regarding the alleged incompatibilities of DR DOS, as well as the claims regarding anticompetitive licenses that were in use post-July 1992, are still timely. The post-July 1992 tortious acts of Microsoft are not barred. Microsoft has not offered any explanation or authority to support summary judgment on Caldera's post-July 1992 claims.