Novell Files False Advertising Suit Against Microsoft

Networking services firm Novell is suing Microsoft over what it said are “false and misleading” statements made during a recent marketing push by the Redmond, Wash.-based software giant.

Provo, Utah-based Novell said that it seeks unspecified monetary damages and “corrective” advertising in a suit filed in U.S. District Court in Salt Lake City.

The charge stems from a Microsoft marketing campaign designed to woo customers of Novell’s NetWare product to its own Microsoft Services for NetWare offering. The campaign, run in August, consisted of a marketing gimmick shaped like a breakfast cereal box, and labeled “Microsoft Server Crunch.” Inside the box were marketing materials for Microsoft software and consulting services.

At issue were statements on the box that suggested that Novell, which acquired systems integrator Cambridge Technology Partners in July, is seeking to exit the network software market to focus on IT consulting — and thus would be a bad infrastructure partner.

Copy on the box reads, in part, “What’s the expiration date on that NetWare platform? … “As a result of the recent Cambridge Technology Partners merger, Novell is shifting its focus from software development to consultancy services. … You’re 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.”

A spokesman from Microsoft confirmed that the campaign did run, and that the company had taken steps last month to address Novell’s complaints about the statements.

“The box itself made some representations that Novell took issue with,” said Microsoft spokesman Jim Desler. “We received [a notice] from Novell in September, and … sought to address Novell’s concerns and resolve any issues or problems by discontinuing the distribution of the cereal box and sending a follow-up communication to any consumers that received our marketing material.”

But the efforts evidently have not placated Novell, which in a statement said that there is no expiration date for NetWare, and the product “has been and continues to be Novell’s flagship software offering,” with a new version of the product currently under development.

“These questions and statements are completely false and misleading,” said Stewart Nelson, who is executive vice president and chief operating officer at Novell. “Microsoft has tried to create a fictitious ‘end of life’ for NetWare to create fear and uncertainty within Novell’s customer base and to discourage future customers from doing business with Novell.”

“While corporate America has long grown used to Microsoft’s bullying business tactics, with this campaign Microsoft has crossed well over the line,” Nelson added. “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.”

Additionally, Novell said that an earlier Microsoft publicity effort had attempted to make similar suggestions, using an article posted on Microsoft-owned MSN MoneyCentral that stated that Novell “announced that it is moving out of the software business and into the network consulting and services business.”

The story also appeared on TheStreet.com. In response to a demand from Novell, Microsoft eventually modified the statement, Novell said.

Desler couldn’t confirm the earlier marketing effort, and said that Microsoft hadn’t received a copy of the lawsuit by press time, adding that the company hopes Novell would reconsider its position.

“We regret any inconvenience to these customers and hope that Novell will view our efforts to address their concerns in good faith,” he said.

At any rate, this isn’t the first time that Microsoft has been faced with charges of false advertising. Last year, the company settled charges brought against it by the Federal Trade Commission, which had claimed that Microsoft had made deceptive advertising claims about its interactive television unit’s WebTV product.

Five months later, the software giant again offered to settle a separate charge by the FTC, concerning ads for Microsoft’s PocketPC PDA operating system. That campaign, entitled “Can Your Palm Do That?” had targeted users of devices based on Palm Inc.’s rival operating system.

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