'Special master' says NTC should pay Novell Inc. $25.9 million in damages

By Matthew Brown
Associated Press Writer

June 26 1998

A court-appointed "special master" has recommended computer giant Novell Inc. receive $25.9 million in damages in a trademark infringement case against another Utah-based company.

The proposed award against Network Trade Center Inc. must still be approved by U.S. District Judge J. Thomas Greene, who had earlier found NTC liable for damages.But Novell, based in Provo, isn't completely satisfied. The leading manufacturer of computer networking software will ask Greene for more because of NTC's efforts to destroy evidence by shredding documents and hiding financial information "in the rafters" of its offices, according to court documents.

"We will ask Judge Greene to treble the amount of lost profits because of the intentional willful conduct" of NTC, Jeff Hunt, an attorney representing Novell in the case, said Thursday.

Novell sued Sandy-based NTC in 1995 for trademark infringement, unfair competition and false advertising. The complaint alleged NTC was reselling an upgrade of Novell's NetWare software without a license and marketing the product to first-time users as the original software.

In a summary judgment last year against NTC, Greene found the unauthorized use of Novell's trademark deceived buyers into believing they would get the benefits of a licensed product.

But when buyers tried to register the NetWare or called Novell with questions, they learned they had been sold an unlicensed version. At the same time, distributors that had "played by the rules" felt betrayed and accused the company of letting NTC resell an upgrade as the original software, court documents said.

Novell said it had warned NTC to stop the unauthorized sale of NetWare, but it said the warning was ignored.

NTC unsuccessfully argued it had done nothing wrong by selling the software upgrade.

"We have received more calls on this case than any other," said Ron Barker, spokesman for Novell's anti-piracy group, which investigated some 1,200 cases last year.

The company declined further comment on the NTC case until Greene decides damages.

David Nuffer, a St. George attorney and federal magistrate appointed by Greene as special master to determine damages, found that NTC had made $6.9 million off its scheme, while it cost Novell $20.2 million in lost profits. Nuffer added another $837,996 to cover Novell's advertising costs and lost "goodwill," as well as an undetermined amount of attorneys fees and costs.

But Novell wants to triple the net $25.9 million award because NTC founder and president Mark Bondiett admitted to destroying evidence that would have given Novell more precise information on the impact of the trademark infringement.

"Bondiett, while in the act of consulting with his attorney and preparing to respond to a request for production of documents in this lawsuit, shredded financial documents," the report said.

Information about the alleged destruction of evidence came from two former NTC employees - David Babbel and Keith Utz - who testified before Nuffer in April.

Utz testified that Bondiett asked him to hide the company's file server containing NTC financial information "in the rafters of NTC's offices," the special master report said.

Timothy Willardson, an attorney for NTC, said the shredded financial information amounted to credit card receipts, which were routinely destroyed to protect buyers.