Ottawa-based Corel is embroiled in furious litigation with its one-time ally in Redmond, and is accusing the Canadian government of unfair bias and violation of internal and international trade agreements.
The upshot is that the Canadian International Trade Tribunal is investigating a decision by Revenue Canada and other departments to buy Microsoft Word instead of Corel's WordPerfect, which the Canadian company acquired from Novell in 1996.
A war of words with Microsoft which started three years ago has escalated into a bitter battle for survival and the beleaguered Corel, a loss-maker since 1996, now holds a mere nine per cent of the US software market, comprehensively dwarfed by Microsoft's 90 per cent.
Ronald Lunau is Corel's lawyer and a partner with Gowling, Strathy and Henderson. He says his client alleges that the tax authority, Revenue Canada, and the federal procurement department, the Department of Public Works, violated the law on competitive tendering.
"In 1996 Revenue Canada sidestepped competitive bidding by using an authority called a standing order. This was an existing authority that allows government departments to purchase up to a dollar amount without open tender. It used the standing order to break software orders down into chunks, and in then September 1996, it purchased 25,000 Microsoft software licenses."
Lunau explains that the Treasury Board became aware that departments were using the standing order to bypass competitive tendering. In August 1997, the Board stated that the practice was not consistent with the intent of the legislation, and a 10-licence limit replaced the previous dollar limit.
"After that it should have been difficult to make any significant purchase, but six months later, Revenue Canada purchased 5,000 new licences in a $3m (Canadian) deal. By early 1998, Revenue Canada had huge numbers of Microsoft licences - in effect, it had created a departmental standard," says Lunau.
The Department of Public Works advised Revenue that they should have acquired the software licences through competitive tendering, and it issued a Request for Proposals to potential suppliers.
"The terms and conditions of the RFP stated that any potential supplier must carry the costs of converting the huge installed base and the costs of training. Because of the way Revenue Canada had acquired the licenses, Public Works decided that an automatic $3 million should be added to the Microsoft tender as recognition that other vendors were handicapped."
Corel was unhappy with the decision and argued that $3m wasn't enough to create an equal playing field, says Lunau, continuing: "The terms and conditions also said that suppliers must bid independently for the costs of conversion and training. Microsoft, as the installed supplier, had no overheads, and Corel argues that conversion and training could be the most significant costs."
Soon after this the Department of Public Works issued a revision that any bidder must be compliant with SAP's financial applications, which was not mandatory in the first RFP. This decision ruled out any bid from Corel.
"It was then that we filed for an injunction, a Stop Award order, which meant the contract couldn't be awarded until the Trade Tribunal completes its investigation. Revenue claimed its tax raising abilities would be severely affected and the government then stated that the procurement was urgent. That certificate of urgency overrules the Stop Award."
The investigation is still underway, and the Tribunal can decide on several courses. It can even hold a public hearing.
Lunua concluded: "I can't think of an instance when the Tribunal did hold a public hearing, but this really is an unusually complex case."
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