Novell Sues Microsoft Over Cereal Box Campaign

Company claims Microsoft made a series of false and disparaging statements against its products in recent marketing campaign.

Novell Inc. on Monday filed suit in the Salt Lake City District Court against Microsoft Corp. for "making and distributing false and misleading statements about Novell and its products in violation of state and federal laws," Joe LaSala, a Novell senior vice president and its general counsel, told eWEEK late Monday.

The brouhaha revolves around what Novell claims are a series and pattern of false and disparaging statements by Microsoft against Novell products. The latest incident involves a Microsoft marketing campaign where a large number of Novell customers across the country received a container shaped like a breakfast cereal box.

The box had the name "Microsoft Server Crunch," and on it were printed a number of "false and misleading statements," which questioned the expiration date of the NetWare platform and claimed that "as a result of the recent Cambridge Technology Partners merger, Novell is shifting its focus from software development to consultancy services."

"Youre left with a server platform without the full support of its manufacturer. Which means increasing costs as it rapidly becomes obsolete, forcing you to implement time-consuming retrofits," the statements on the boxes are alleged to have said.

An angry LaSala said Microsoft had also included a CD containing Microsoft Services for NetWare Version 5.0 in the box. "We do not know exactly how many of our customers have received this package, but we have had many complaints from them since early September," LaSala said. "The questions and statements contained in that package are unfair, completely false and misleading.

"Microsoft has tried to create a fictitious end of life for NetWare to create fear and uncertainty within Novells customer base and to discourage future customers from doing business with us," he said.

In compliance with a Utah statute that formed part of its lawsuit, Novell, of Provo, Utah, notified Microsoft of its concerns and gave the company a chance to prepare and distribute a corrective statement. "We had a back and forth with them on that subject," LaSala said.

"We felt the statement they told us they were ultimately going to disseminate to our customers was inadequate under the statute. There was also no indication that they were willing to stop the dissemination of false information about Novell and its products," he said.

Microsoft told Novell that it would immediately begin to send all who received the Server Crunch box a communication that included the following statement: "You received recently from Microsoft Corporation a Server Crunch package ... that contained certain statements about Novell and Novell NetWare. Microsoft hereby clarifies and corrects those statements. ... Novell advises that it is growing and expanding its software business while adding significant resources to its existing consulting services business as a result of the recent merger. Microsoft has no other information that Novell is not currently supporting fully its server platform and hereby retracts any statement on its Server Crunch package to the effect that Novells merger will cause its server platform customers now or in the future to be left without Novells full support or will require costly time-consuming retrofits," the suit alleges.

But that was inadequate for Novell. "Quite frankly, we feel enough is enough. There are laws in this country and in the state of Utah that prevent companies from disseminating false information about their competitors. We want the court to force Microsoft to recall the boxes, we want a meaningful corrective statement that goes beyond the one theyve already issued, and we want monetary damages, but have not yet determined the monetary value of that as yet," LaSala said.

And so Novell filed suit on Monday. The company is also seeking injunctive relief from the court and on Tuesday will file a motion requesting a temporary restraining order against the further dissemination of false information about Novell and its products, he said.

Microsoft Crossed the Line

"While corporate America has long grown used to Microsofts bullying business tactics, with this campaign Microsoft has crossed well over the line," LaSala said. "These misrepresentations about Novell, its products and product support go far beyond comparative advertising, and we believe are clear violations of state and federal law," he said.

Microsoft spokesman Dan Leach said the Redmond, Wash., company had not yet seen the complaint and so could not comment.

Novells LaSala added that this was not the first time Microsoft had "used misleading statements to confuse Novell customers and the market." He cited an incident in April in which Microsoft published an article on MSN Money Central and which was subsequently posted on that falsely stated, "Novell recently announced that it is moving out of the software business and into the network consulting and services business." Novell demanded that Microsoft alter this, and the statement was "eventually modified," LaSala said.

Responding to the issues raised in the latest Microsoft marketing campaign, LaSala said there was no expiration date for NetWare, which remains Novells flagship networking platform. Development of NetWare 6.1 and future releases of NetWare have been under way for more than a year.

LaSala cited comments from International Data Corp. analyst Dan Kusnetzky that back up his statements. "IDCs system software group expects that Novells NetWare will be a player in the server operating environment market throughout IDCs current forecast period--calendar years 2001 through 2005," Kusnetzky said. "The new features in Novells NetWare 6 clearly show that Novell has a vision of how it can add value to its customers networks as their applications evolve from the traditional client/server model to a broader Web services model."

LaSala added that consulting has been a key part of Novells business for many years, and its acquisition of Cambridge Technology Partners has elevated the companys ability to meet the e-business needs of customers and deliver the e-business solutions customers are looking for.

"In no way, however, does this remove Novells focus from software development," LaSala said. "Cambridge consultants help clients solve complex business problems using best-of-breed technology, and in many cases that is Novell technology. In fact, it is anticipated that the expansion of consulting services at Novell will result in increased software sales and development for the company."