Caldera, Inc. v. Microsoft Corp.

In 1981, Microsoft Corp. (defendant) developed a computer operating system known as MS-DOS. Operating systems were essential to the use of personal computers (PCs), and PC manufacturers like IBM helped make MS-DOS the industry standard, other than in Apple computers. By 1987, a predecessor of Caldera, Inc. (plaintiff) began selling a product called DR DOS that directly competed with MS-DOS, and in 1990 an updated version of DR DOS came out. According to Caldera, Microsoft was alarmed at the prospect of losing its monopoly in the operating-system market and began to engage in a series of anticompetitive practices, such as spreading fear and uncertainty regarding Caldera’s products. Microsoft was in the process of developing a graphical-user-interface (GUI) operating system, called Windows, and Microsoft allegedly purposefully designed Windows so that DR DOS would be incompatible. Microsoft had monopolistic power in the GUI market, i.e., in Windows. Caldera claimed that Microsoft used its monopoly in Windows to require computer manufacturers to purchase MS-DOS and thereby illegally maintain its monopoly in the operating-system market. For the 10 years before 1995, MS-DOS and Windows were sold separately. Thereafter, Microsoft released Windows 95, which combined the functions of Windows and MS-DOS into one product. Windows 95 was extremely popular and, after its release, ran on most new PCs. According to Microsoft, Windows 95 offered many advantages over the previous versions of Windows and MS-DOS. Caldera sued Microsoft, alleging violations of the Sherman Antitrust Act. Specifically, Caldera alleged that Windows 95 was an illegal tie of two separate products formerly sold as MS-DOS and Windows. Caldera’s expert testified that Windows 95 was not an integrated software product but merely updated versions of the two previous products and that MS-DOS would have its own market except for Microsoft’s anticompetitive conduct. Microsoft moved for partial summary judgment on the issue of whether Windows 95 was an illegal tying arrangement.