Did SCO get Linux-mob justice?
Once in awhile a judicial ruling comes down that’s so wrong at such a basic level that you’re just left scratching your head.
When U.S. District Judge Dale A. Kimball of Salt Lake City threw out most of SCO Group’s (SCOX) case against Novell (NOVL) on August 10 — effectively dooming most of SCO’s claims in closely related cases against IBM Corp. (IBM), AutoZone (AZO), and Red Hat (RHT), too — his 102-page ruling was greeted with widespread rejoicing and I-told-you-so’s. (I was headed out of the country for vacation at the time and am only now digging out from under.)
Understandably, few people mourned SCO’s humiliating defeat. In a series of incendiary lawsuits and letter demands in 2003, SCO sought licenses from at least 1,500 companies that used or distributed Linux, claiming that, by doing so, they were either breaching UNIX-related contracts or infringing UNIX copyrights, both of which SCO claimed to own. The demands enraged not just the Linux developer community, but many Fortune 500 companies that had become big Linux users and champions. (For a feature story I wrote about the disputes in May 2004, click here.)
Still, as a piece of judicial craftsmanship, Kimball’s work falls squarely within that rare category I describe in the first sentence of this post. Here’s Kimball’s ruling. (Novell and SCO declined to comment for this article, citing the imminence of the trial of the few remaining issues in the case, which starts September 17.)
The problem is not that Judge Kimball’s view of the facts is wrong; it might not be. His judgments about which testimony to believe and which not to believe are, in fact, plausible. So are the inferences he draws from that testimony about how he should interpret the monumentally gnarly, self-contradictory, and, in my humble opinion, ambiguous 1995 contract that lies at the heart of the case. If SCO had asked to have its case tried before a judge (a “bench trial”), and if judge Kimball had then held that trial — so he could see the witnesses testify in the flesh and make informed judgments about their live demeanor — his ruling would make perfect sense and I’d have no objection to it.
But SCO didn’t ask for a bench trial, and Judge Kimball never held one. SCO asked for a jury trial, and Judge Kimball was, therefore, only ruling on Novell’s pretrial motion for summary judgment. And as any second-semester law student knows, a judge can grant such a motion only when, as innumerable courts in every state and federal jurisdiction have repeatedly written, “the evidence, viewed in the light most favorable to the party opposing the motion [i.e., SCO, in this situation], shows there are no genuine issues of material fact.” (If that weren’t the rule, our Seventh Amendment right to a civil jury trial would be a hollow joke.)
In ruling on such a motion, a judge cannot “act as the jury and determine witness credibility, weigh the evidence, or decide upon competing inferences,” according to the well-worn case law. You will find these or equivalent boilerplate recitations of the applicable law pasted somewhere into damn near every summary judgment ruling you will ever come across, with one conspicuous exception: Judge Kimball’s August 10 ruling in the SCO case. (After the ruling, the only claims left in the case were of a nature that do not entitle a party to a jury, and on Friday, September 7, Kimball granted Novell’s request to hold a bench trial on those. But there’s no dispute that SCO would have been entitled to a jury on the claims that were tossed out.)
For those who came in late, the case is principally about an “asset purchase agreement” signed in September 1995 in which Novell sold something — nobody’s sure exactly what any more — to a company called Santa Cruz Operation for $125 million plus certain royalty streams. (Santa Cruz later sold whatever-it-was-that-it-obtained-from-this purchase to a company called Caldera, which later changed its name to SCO.) SCO says Santa Cruz (and, ultimately, SCO) got from Novell the entire UNIX operating system business, including copyrights, while Novell says that Novell actually withheld the UNIX copyrights at the last minute, and only sold Santa Cruz, essentially, a license to take the UNIX code, use it, and make and sell new products out of it.
The then-CEOs of both Santa Cruz and Novell (yes, of Novell too) each supported SCO’s position in their testimony — i.e., the position Judge Kimball rejected without even letting a jury hear it. Each former CEO said that it was his understanding that Novell had sold Santa Cruz the entire UNIX operating system business, including copyrights. Here’s how Novell’s then CEO Robert Frankenberg testified:
Q. Was your initial intent in the transaction that Novell would transfer copyrights to UNIX and UnixWare technology to Santa Cruz?
A. Yes.
Q. Was that your intent at the time when the APA was signed?
A. Yes.
Q. Was it your intent when that transaction closed?
A. Yes.
Q. And did that remain your intent, as you view it, at all relevant times?
A. Yes.
Q. That never changed?
A. No.
That was also the view of Novell’s (yes, Novell’s) then chief negotiator, Ed Chatlos. In fact, it appears to have been the understanding of nearly every negotiator on both sides of the table, with two important exceptions.
The exceptions were Novell’s then-general counsel David Bradford and Novell’s then outside counsel Tor Braham, of Wilson Sonsini Goodrich & Rosati, who each testified that toward the end of the negotiations Bradford told Braham to withhold the Unix copyrights from the deal, either because Santa Cruz couldn’t pay enough money or because they feared Santa Cruz might go bankrupt.
This understanding was news to Burt Levine, another member of Novell’s inhouse legal team, however, who said he had also reviewed and revised drafts of the contract.
Q. Mr. Levine, from the time of the [asset purchase agreement] in 1995 until you left Santa Cruz in 2000, did you ever hear anyone, whether inside or outside of Santa Cruz or inside or outside of Novell, say that Novell had retained the UNIX or UnixWare copyrights?
A. No.
Q. If you had heard anyone make such a statement, would that have been a surprise to you?
A. Very much so, yeah.
The Bradford/Braham recollection was also contradicted by a member of Santa Cruz’s inhouse legal team at the time, paralegal Kimberlee Madsen, who was closely involved in the meetings and negotiations. “It was always my understanding,” Madsen wrote in her declaration, “that the UNIX source code and its copyrights were part of the assets Santa Cruz purchased and were transferred to Santa Cruz at the closing in December 1995. I do not recall anyone in the negotation teams ever saying, or suggesting, that Novell would retain any UNIX copyrights. The negotiation team for Santa Cruz never discussed the possibility, as far as I am aware, that Novell sought to retain any UNIX copyright.”
Again, in choosing to believe that Bradford and Braham were more credible, closer to the action, remembered the situation better, or what have you, Judge Kimball drew plausible and defensible inferences — for a juror. But a judge isn’t allowed to do that in ruling on a summary judgment motion.
Likewise, Judge Kimball weighed the credibility of then-Novell CEO Frankenberg’s testimony, and found it wanting. He writes that Frankenberg was “self-contradictory” at times (he cites no examples), and that portions of his testimony were contradicted by certain board minutes. Fine. Then let a jury sort out those contradictions. As a judge ruling on a summary judgment motion, Kimball’s not allowed to make determinations about credibility.
Similarly, Judge Kimball appears to have discounted then-Novell-chief-negotiator Chatlos’s credibility because, as the judge noted, Chatlos’s wife currently works for SCO. Okay, I can see why you might reach that (rather cynical) conclusion — but only if you’re a juror.
Kimball also appeared to discount paralegal Madsen’s testimony because she was a lowly paralegal, whereas Bradford was a general counsel and Braham a partner at a big firm. Fine, but only if you’re a juror.
Were there any conceivable reasons why a juror might have chosen to give former-Novell-general-counsel Bradford — who, Judge Kimball says, “oversaw the negotiation and drafting” of the contract — less credence than Judge Kimball chose to? Well, come to think of it, there was. Though he doesn’t mention it, Judge Kimball did have before him a May 17, 2007, declaration from Lee Johnson, a longtime friend of Bradford’s, who swore that he had repeatedly asked Bradford about the 1995 contract after the dispute first arose. “Without exception,” Johnson wrote, “[Bradford] has told me that he was not significantly involved in that transaction and did not know much about it. . . . I even . . . specifically recall asking, ‘How could you not know who owns the copyrights given your position at Novell at the time?’ David’s response was . . . : ‘I was busy on more important things and was not involved in that level of detail in the Santa Cruz transaction.’
“The Johnson affidavit then goes on to allege that, after Johnson found out about Bradford’s testimony in the case — the testimony that Judge Kimball ultimately so heavily relied upon — Johnson confronted Bradford about the apparent shift in his recollection. “In response,” Johnson wrote, “he left me a voice message where he specifically stated that he did not remember any of this but he had gone back and read the agreements a few times and concluded that this must have been what happened. In other words, he does not remember this at all but has now convinced himself that this is what happened.”
Would a juror be entitled to disregard Johnson’s testimony? Of course. Maybe Johnson’s a crank. Maybe he has some sort of pecuniary interest in the case. And why didn’t Johnson save the voicemail message if this really happened? Those are all good questions for the jury to ask and answer.
It’s not hard to predict what any appellate lawyer hired to defend Judge Kimball’s ruling would say in its defense. He’d argue that, notwithstanding some unnecessary verbiage, all Judge Kimball really did was decide that the contract itself was so unamibuous on its face that all of the “extrinsic evidence” — the testimony from the CEOs, the other negotiators, Bradford, Braham, Johnson, Madsen — was all irrelevant. Kimball does, in fact, reach that conclusion in the end. Since the contract language was not in question, and not reasonably susceptible to any other interpretation than the one Novell now gives it, Judge Kimball ruled, he could properly grant Novell summary judgment.
But that argument is wrong for at least two reasons: First, from the opinion it’s apparent that Kimball didn’t have the foggiest idea what the parties were up to with this contract — and who could blame him? — until he waded deeply into all the extrinsic evidence. Having done so, he then decided that Bradford’s and Braham’s testimony seemed to make the most sense over all. But having used the extrinsic evidence to figure out a plausible hypothesis for what the contract might mean, he can’t then proclaim the contract to have been “unambiguous” all along, entitling him to disregard all the diametrically conflicting evidence he had to discount and discard in the process of reaching his conclusion. That’s like using a rope ladder to climb up into a helicopter, and then pulling up the ladder so no one else can climb up after you. (Okay, not a perfect metaphor, but I think you see what I’m getting at.)
Second, the language of the contract is ambiguous. What it gives in one provision, it takes back in the next. It’s not fully consistent with either party’s claims, and never will be.The asset purchase agreement says that Novell sold to Santa Cruz “all rights and ownership of UNIX … including source code . . ., such assets to include without limitation” a long list of specific products. SCO argues (and presented an industry expert who said) that if you’re buying “all rights and ownership” of a software business “without limitation,” you’re obviously buying the copyrights. This contractual language is also inconsistent on its face with Novell’s claim that it was only selling a license to use UNIX for limited purposes.
On the other hand, Novell rightly points to another page of the contact, which lists five categories of assets that are to be “excluded” from the deal. Three of the first four categories concern NetWare products — a software business that Novell was unquestionably retaining control of — while the fifth says “all copyrights and trademarks, except for the trademarks UNIX and UnixWare.” SCO claims that “all copyrights” here was supposed to mean “all NetWare copyrights,” and that the rest of the contract would make no sense if Novell was also retaining the UNIX copyrights, too. Novell, on the other hand, says “all copyrights” means “all copyrights,” and, therefore, we just don’t need to worry about what “all rights and ownership of UNIX . . . without limitation” could have meant on the earlier page.
Looks like ambiguity to me, confirmed in spades by the highly conflicting extrinsic evidence that Judge Kimball allowed into evidence and then laboriously waded into and picked his way through before deciding in the end that, you know what?: This contract really has only one possible interpretation!
Readers may have long ago wondered why I’m getting so worked up about this. After all, you may be thinking, if Kimball’s ruling is really as bad as I say, won’t it just get reversed on appeal? Well, that’s the thing. SCO’s got about $10 million in cash and it’s burn rate seems to be about $1 million per quarter. It’s not just fighting Novell and IBM, it’s fighting the clock. Kimball’s ruling could be the coup de grâce. (On Friday Judge Kimball squelched SCO’s long-shot attempt to seek an immediate appeal of his August 10 ruling, so SCO will need to wait until the trial is complete before it can start the appeals process.)
Litigants, especially unpopular ones, are entitled to their day in court. In this case, the last word on SCO’s controversial claims should have been delivered by a jury, not by Dale Kimball.
Documenting everything is what a wise inventor, businessman, and lawyer would do to prevent speculation, misunderstandings, and disputes from breaking the business.
SCO must deal with a world which is about more than profit by looking at the future. Patents, copyrights, and trade secrets are not as certain or strong and many would like to believe. In both patents and copyrights I have seen public domain works which came before them and appeared to invalidate the more recent patents or copyrights.
Do businessmen and lawyers take the time to truly understand what is in the public domain or protected by someone else before making big decisions? No, it seems they often hope to deal with it after the fact or let someone else clean up the mess. When things are not certain, it seems that being a bully replaces sound judgment as demonstrated by SCO.
As an inventor I have given away inventions to the public domain, like the parabolic discone, because it was not worth my time to protect and enforce a specialized patent. If I did patent, then lawyers and businessmen would worry about their share like SCO, leaving little for the actual intelligence which designed the product.
Decisions like made by SCO carry costs which can outweigh any gain they could imagine. For example, laws may be re-written to change the outcome of future similar issues in their business. Requiring better documentation would help those acting in good faith be better protected from those looking for loopholes to make easy money.
The SCO situation is something I can tell my congress people. We need to try harder on ethics, or the real inventors will simply give up. Then what will business and lawyers do, or our national security?
The title reference to Linux-mob mentality is a reference to something that, in its intensity, emotion and insularity, is real and distinctive about a segment of the Linux community. There is a portion of that community that listens only to itself, and that passes innumerable emails and postings and comments to one another to reassure each other that they are right and that SCO is evil incarnate and that anyone who says something that could be seen as useful to SCO in any remote way must also be evil incarnate, on the take, owned by MSFT or some such silly thing.,
Well, Ron you’re really taking the high road by resorting to name calling: “the linux mob” Give me a break. PJ at Groklaw is the most even tempered, fair reporter covering the SCO saga, and the information that she has provided was instrumental in derailing the public perception of SCO’s viability, and her weapon was: the truth.
What is happening is this: a new form of production has arisen called open source. It is deeply threatening to companies like Microsoft, in that it is in the process of demonetizing PC operating system and application suite market. So there is a huge amount of money that will be lost to a clear example of creative destruction. Get over it.
If Section 204(a) of the Copyright Act, requiring a written instrument to convey the copyright, was as decisive as some people are arguing, Kimball’s ruling would be 3 pages long, not 102 pages long.
I beg to differ. Just listing the eight motions and cross-motions he had to deal with ran over onto page two. By the end of the background section, he was on page 42.
Whether your statement was sincerely meant, resulted from careless typing, was an exercise in flippancy, or whatever, I can’t take it seriously, and it leaves me disinclined to address the remainder of your comment, other than to express appreciation for its improved civility.
ted–
If Section 204(a) of the Copyright Act, requiring a written instrument to convey the copyright, was as decisive as some people are arguing, Kimball’s ruling would be 3 pages long, not 102 pages long. SCO had argued (and presented caselaw tending to support the contention) that if a contract is a “bill of sale” of a business, the copyrights that are part of that business don’t have be listed and identified individually, and Judge Kimball APPEARS TO HAVE AGREED. That’s why he never even brings Section 204(a) up until after he has finished discussing the APA (having construed it to confer a mere implied license to use Unix software and not a bill of sale of the Unix business) and has begun discussing Amendment No. 2, which is signed almost a year later. (See pp. 57-59 of his opinion.) He then rules that Amendment No. 2 is insufficient to meet the demands of Section 204(a), but he appears to realize and acknowledge that the APA would be. Here’s the key language (p. 59): “Unlike the APA, Amendment No. 2 was not accompanied by a separate “Bill of Sale” transferring any assets. Nor did Amendment No. 2 purport to retroactively change the
scope of the assets transferred by the Bill of Sale that was executed in connection with the APA in December 1995. Amendment No. 2 states that it ‘amended’ the APA ‘[a]s of the 16th day of October, 1996.’ Thus, Amendment No. 2 did not retroactively cause the Bill of Sale to transfer copyrights that were expressly excluded from transfer by the APA and Amendment No. 1.”
Kimball’s opinion that the APA was a bill of sale that did not include the Unix copyrights, however, was informed by his early forbidden analysis of pages 16-24 of the ruling, and elsewhere, in which he makes judgments about the credibility of the witnesses who testified before him and draws adverse factual inferences against SCO that aren’t permitted on a motion for summary judgment.
(i actually posted this comment previously, but i somehow inadvertently appended it to the wrong post.)
Show us the 204(a) writing.
Even if Judge Kimball were, inappropriately, to admit the parol evidence at issue, and
even if he were to give weight to recollections from before it became apparent that Santa Cruz could not afford the originally-proposed deal, and
even if he were to find that evidence favored The SCO Group,
that still would not mean that the excluded copyrights had transferred.
Copyrights simply do not transfer without a 204(a) writing.
Instead of cherry-picking intemperate remarks from the comments (and making some of your own), how about addressing the issues brought up by serious commenters?
How about explaining to us why you feel that the parol evidence rule does not apply in this case, or at least giving some evidence that you actually understand the parol evidence rule(s)?
How about demonstrating that you at least understand what a 204(a) writing is, even if you can’t exhibit a relevant one?
Both the requirement for a 204(a) writing and the parol evidence rule were brought up in these comments back in September, by people who were quite civil about it. You have not addressed either. I trust that you would if you could, but the facts appear to be against you. Why don’t you surprise us, though, and:
Show us the 204(a) writing.
Roger,
I have an engineering degree and software is my big deal, my bread and butter.
SCO set out to scam IBM and citizens of the wider planet earth, they are criminals, they are liars and thieves. They coveted IBMs bank balance and tried to make some easy bucks. If there were a law that said that the CEO and those board members who voted to initiate the scam, must be line up before the gallows and hung by the neck until dead, should their scam fail:: Would SCO have been so bold?
Roger, you are a guy that must have two winkies because you can’t be that silly and play with one.
I have a huge difficulty understanding you because the situation is so black and white. I cannot help get the feeling that somewhere in the shadows, there is a Microsoft in the background funneling $1,000 bills into your pocket. When someone comes out with the rubbish that you just did, I immediately start looking for another angle. Its possible that you are just plain ignorant when it comes to this area of engineering, its possible that you are just plain stupid and like to hear your own voice. You could be like the double minded researcher who observes something for 30 years but never comes to the knowledge of truth. The last option is that you are on the take and your article was designed to please who ever is paying you?? I don’t know what to think.
Kevin
… there certainly is a mob mentality in a certain segment of the Linux community and it is deplorable.
The deplorable mentality is that of the executives of SCO who would like to claim assets which do not belong to them.
It is no different than claiming that you have the deed to another person’s home, your only evidence being that you traded baseball cards with the original owner of the home when you were both in kindergarten.
SCO never produced PROOF OF OWNERSHIP of the copyrights, therefore SCO can not claim to own it.
Take this as another example:
I claim I own your car Mr. Parloff, because I have a contract with CarCompany A who you also bought a car from. I claim I have the title to your car to prove it. At court I don’t produce the title to the car. Should you have to continue to defend (spending time and money) my baseless claim? Or should you get a summary judgment dismissing my complaint?
You have completely missed the mark with this article.
“How SCO got screwed?”… really??
What evidence did they EVER have?
They never had any evidence to begin with?
Allow me to correct your title: “How could SCO have been screwed, by anyone but themselves?”
The title reference to Linux-mob mentality is a reference to something that, in its intensity, emotion and insularity, is real and distinctive about a segment of the Linux community. There is a portion of that community that listens only to itself, and that passes innumerable emails and postings and comments to one another to reassure each other that they are right and that SCO is evil incarnate and that anyone who says something that could be seen as useful to SCO in any remote way must also be evil incarnate, on the take, owned by MSFT or some such silly thing. Since you are exposed only to your own distortions and misunderstandings, your views harden and become progressively more adamant and angry, whether they stood originally on a sound basis or not. Any message or messenger from the outside that threatens to require reassessment throws the world into an uproar. If you look back at the first 100 or so comments to this article you’ll see what I’m talking about. (E.g., ” we ALL know who pays YOUR wages,” “I have never read such a load of spin-doctored bovine excrement in my entire life,” “Tim Forbes [sic] and his puppies have been anti-linux since I can remember and they obviously know so little about it,” ; “This is the most moronic coverage of SCO yet. I bet the author was buying stock”; “The author of this article has obviously been talking to Darl!”; “The author apparently skipped class the last four years”;”of all the articles that I have read about the SCO case this is probably the clearest ‘bought and paid for’ one that I have seen to date. I hope you enjoy your 30 pieces of silver and fortune.com just lost an avid reader. Absolutely unbelievable that your tripe should make it past the editors”; “I maintain that Parloff’s opinion piece is part of an orchestrated press campaign. . . . Parloff has telephone access to David Boies . . . I think it is defendable supposition that Parloff’s opinion piece on Judge Kimball decision was vetted through David Boies”; “By the way - how much is Darl paying you?”; “Oh dear Roger, trying to garner microsoft pr dept karma and a free laptop ?”; “the above article is just more FUD. That is all the feeding of this Troll I will do”; ” You just don’t care about little facts like that instead trying to spin out useless FUD”; “If you’re simply trolling for hits, then please post something on ‘Britney sucks’ or ‘my cat ate my toaster’ etc.”; “Why havn’t you read Judge Kimball’s rulings, and all the documents it was based on before blogging about it? Was it too much work?”; “I noticed that SCOX stock was up 12% today. . . . I then went looking for news that could have affected the stock price and discovered with this, um, work of journalism”; “I just want to know one thing, and I KNOW you won’t answer it… exactly how much did you get for selling your soul and your journalistic integrity?”; “Do you get paid to drive the stock price up??? There is no there other reason anyone would be so naive”; “You troll for hits with cheap, lazy, attention getting titles and you’ll be outed as an idiot who doesnt grasp basic terms in the english language.”; “I sure hope people do not rely on Forbes [sic] for accurate analysis of any topic that they bet their own personal money on. Their record in loudly backing SCO (starting at when they were worth $30 a share, till now, as they approach delisting) has been quite dismal.”; “SCO and its allies are furiously spewing out misinformation about the recent decisions in this case, and it appears that Mr. Parloff has fallen for it.”; “His emphasis on this is a good indication that this article was coached as part of a broader press campaign playing out in other forums.. . . I am most interested in learning if this press campaign is a Utah exclusive , or if Boies’ law firm has a hand in conducting it”; “I would also suggest you look at the background on the hack, Roger Parloff, that Fortune had write the latest dribble.”; “This factually inaccurate article by Fortune is incompetent”; and so forth and so on.)
The refusal to read or consider seriously, let alone credit anything that might tend to support SCO’s position on any matter no matter how trivial, and, indeed, the refusal to seek comment from SCO or its lawyers before assuming the worst about any action it takes or allegedly took, leads to systematic distortion and to basic misunderstandings, like the ones I discuss in the special Addendum to Groklaw Readers in the post at
http://legalpad.blogs.fortune.cnn.com/2007/11/29/stay-lifted-in-sco-v-novell-case/
So there is a mob mentality. The term Linux-mob is certainly overbroad, since at this point almost everyone except Microsoft is a champion and user of Linux, including most Fortune 500 companies. Still, I think people know what I’m talking about.
Originally I called the piece “How SCO got screwed,” but an editor thought that was coarse so I looked for somethiing else. Maybe i should have stayed with the original.
Some people have asked how the Linux-mob as i have defined it could have possibly played any role in the outcome of the case. This is a fair criticism, because my train of mind on that had been, indeed, highly speculative–maybe too speculative. But when I saw an experienced judge making such clearly forbidden credibility judgments — like noting that Chatlos’s wife worked for SCO and suggesting that, therefore, he wasn’t worthy of belief — i thought something unusual had clearly happened. many federal judges are overworked and heavily reliant on clerks, who are fresh out of law school. law students are young and idealistic and they do know about sites like Groklaw and they know who ’s working for which judge and which cases they’re working on, and they are still young enough to care about peer pressure. i was a law clerk and i remember the heady feeling, and remember the thrill of trying to do Right and single-handedly save the world. So i could see a young, idealistic law clerk saying to himself, gee, maybe i can single-handedly save the Linux community with a clever, envelope-pushing, summary judgment ruling right here and now. But that would be a mistake. It’s vital that an emotional case like this one — which has been the subject of so much misinformation and disinformation and gossip and rumor — be decided by 12 people (or maybe 6 to 8, for a civil case) who have never heard of Groklaw and, preferably, never heard of SCO or Linux.
Did anything like that thinking process really happen inside Kimball’s chambers? i have no idea. something unusual happened. maybe i should have kept the title “How SCO got screwed.”
but there certainly is a mob mentality in a certain segment of the Linux community and it is deplorable.
Mr Parloff
you are entitled to fair and reasoned argument. You are not entitled to malice aforethought.
Your headline association of Linux users and mob justice is unnecessary, deeply offensive and nothing less than malice. Shame on you.
Anthony.
“Linux” is a piece of software, not a corporation. Therefore “Linux” had no place in SCO’s demise. Frankly, SCO shot itself in the foot, asserting ownership over property to which it had no rights, and claiming infringements and violations of its intellectual property which were baseless and did not exist.
I am sure that the many Fortune-reading investors who held SCOX and rode it to the floor may be unhappy with the Judge’s ruling, but it does not change the facts of the case. SCO didn’t need a lynch-mob (Linux or otherwise), it managed that step all by itself.
I stopped reading when you started quoting testimony from the former CEOs as to their intent in drafting the agreement.
The agreement was drafted by lawyers in deeply accented legalese ™. It’s well established that while intent of the signers overrides the actual wording of a contract between laymen, when both parties are represented by competent council and the agreement is drafted and reviewed by both sets of attorneys, what’s on paper is all that matters.
SCO would now have to sue it’s former attorney for misconduct in drafting an agreement which goes contrary to their wishes and advising them to sign. It’s a tough call and one that would also be thrown out but that’s how far off they are at this point.
I find it amazing how much better informed those making comments are than the author of this blog. He should read them, perhaps he can learn some of the actual FACTS regarding this case.
I would also suggest that Roger Parloff owes some folks an apology, especially since his blog is supposed to be about legal matters, which Mr. Parloff is clearly not discussing.
Of course if his real desire was to generate page hits, well done! I hope it impresses your bosses (just don’t let them read the comments because they make you look rather clueless).
Roger, every law student familiar with summary judgment is also familiar with the parole evidence rule. You should be angry that Judge Kimball let this case, particularly discovery, get out of hand and inappropriately addressed it where the parole evidence rule should have applied.
The contract is plainly unambiguous, as Kimball rightly found. I note that you included a lot of foggily-remembered testimony by people who in many cases were not directly involved in the negotiations, but not the clear text of the asset purchase ammendment, which is very plain in context.
Of course FORTUNE’s legal hack had to whine about the ruling, after all it offends his employer. The idea that a consortium that gives away code can defeat a for-profit corporation is abhorrent to his political sensibilities.
Parloff, of course, sees no problem with the fact that SCO of 2003 wasn’t at all an operating systems company, having failed at that business. Instead it was merely a shell company taken over by Utah money-men specifically for the purpose of serving as a base from which to serve thousands of companies with legal blackmail.
What raises Parloff’s ire is really the fact that for once for-profit legal harassment has failed. After all it constitutes such a huge economic engine, why should issues such as the gross misuse of the judicial system bother a legal commentator?
I’m just happy that SCO’s defeat has irritated Parloff so much. Serves him right.
Once in awhile a pundit is so wrong at such a basic level that you’re just left scratching your head.
“Did SCO get Linux-mob justice?”
Are you asking if SCO got lynched by a mob of people? How was Linux involved with this decision? It is disgraceful that you would compare this decision with mob justice. Do you understand that mob justice is strongly associated with lynchings of black men in the south?
you haven’t explained why you disagree with my critique.
In the absence of a 204(a) writing your “critique” is nugatory.
Show us the 204(a) writing — then we’ll talk.
What complete and utter tripe. As an attorney, I am disgusted that a fellow J.D. would so willingly ignore the actual merits of the case - and for what? Sensational journalism?
You should be ashamed of yourself. Times like these show whether you are truly an independent thinker, or a tool for others.
“the evidence, viewed in the light most favorable to the party opposing the motion [i.e., SCO, in this situation], shows there are no genuine issues of material fact.” (If that weren’t the rule, our Seventh Amendment right to a civil jury trial would be a hollow joke.)
Judge Kimball followed the Federal Rules of Civil Procedure to the T. The plaintiff produced no valid evidence to bolster its arguments nor rebut the arguments of the defendants. The defendants were entitled to summary judgment as a matter of law.
This article is a hollow joke. Over analysis of something you don’t understand.
Mr. Parloff,
Your “critique” does not follow the law. “Memories” cannot be used to contradict written contracts.
Further, judges decide matters law. Contracts are matters of law. Juries decide facts.
Kimball’s ruling cites how SCO was asking for the copyrights from Novell, revealing clearly that SCO themselves did not own them.
Lastly, as other posters have asked, since you claim SCO’s owns the copyrights, where is the 204(a) document that clearly shows the transaction, as this documentation is required by law.
I don’t disagree with Mr Parloff’s position here. But as one of the millions of people who have effectively been denied their day in court because of inability to wait the endless months and years with the clock ticking down, it pains me not at all that the same thing happened to SCO. Let’s get down to brass tacks: SCO’s use of the courts was, in the end, merely a business tactic. As such, they should have based their action on a business plan that allowed their use of the courts to come to fruition.
I’m not going to disagree with your interpretation of the ruling. It’s a free country and heaven knows you’re entitled to your opinion, but wasn’t the basis of the case on who owned the copyrights?
In this case it seems clear who owned the copyrights to UNIX and UnixWare, that being Novell. You even have the statement about it ; “…while the fifth says “all copyrights and trademarks, except for the trademarks UNIX and UnixWare.” It no more, or less, matters what SCO wants or thinks the contract should say, it’s what the letter of the contract is that matters. That’s what Novell was arguing and they were correct.
“Just another Microsoft shill looking for way to spin the losing issue.”
Jeez, Roger. You should know better than to criticize someone’s religion.
OT: perhaps light grey text on a white background is not the best choice of colors?
Donovan–
your comment merely repeats Kimball’s conclusion; we all know what kimball concluded. i explained why i disagree with his analysis. you haven’t explained why you disagree with my critique.
So your problem is that the Judge is not following due process to the letter of the law when it is abundantly obvious that the parties involved are co-operating outside of reach of the letter of the law.
Is is not the judges responsibility to strive to achieve the spirit of the law within rational constraints???
Randy Rumormill states:
But the fact remains that SCO whether anyone likes it or not, purchased UNIX and all rights.
Really? then they can provide the 204(a) writings transering copyright?? when where they entered into evidence? See, there’s the rub. There are no 204(a) writings. The APA (as amended) doesn’t rise to the level of a 204(a) writing.
No 204(a) writting, no copyright transfer. Period. Ergo, Santa Cruz didn’t purchase “all rights”. Further, there should be additional 204(a) writtings between Santa Cruz (nee Tarantella, now a Sun Microsystems subsidary) and Caldera (DBA The SCO Group).
And as James Graves points out, Novell didn’t really own significant parts of the codebase - much of that was written pre-Berne Convention and failed to contain a copyright notice. This is why the USL v. Board of UC Regents was settled so quietly.
No, Novell couldn’t sell the copyrights - that could be considered fraud. But they could sell the rights to continue development, and to service the existing UNIX market, and allow the Santa Cruz Operation to gain new clients. That’s what they bought.
Further, the notion that Santa Cruz bought the whole thing for $125-150 million when Novell had paid roughly $1 billion only 4 years earlier strikes me as…unreasonable.
Roger, I’m really sorry but your conclusions about the Hon. Dale Kimball’s decision in SCO v. Novell, and tangentially SCO v. IBM, are completely wrong. Judge Kimball correctly ascertained that SCO has absolutely no claims to make, that SCO does not own any of the copyrights they claim to own, and that therefore there are no issues to bring before a jury. There was, and is, no question about what the APA and its amendments transferred to SCO re Unixware: the right to sell, and that is about it. Since the APA and amendments are quite clear about SCOs lack of standing due to their lack of ownership of any copyrights involved, there is nothing for a jury to hear.
Let me repeat that: THERE ARE NO CLAIMS for a jury. All of SCOs claims were clearly meritless from the outset, and all Judge Kimball did was give us the benefit of not dragging this case out any longer than it needed to go.
Your assessment is completely off-base, given that there are no claims for a jury to even examine, and I think you should probably write a retraction and apology to PJ, Groklaw, the Free/Open Source (nee “Linux” 
community, and all Americans everywhere for the tripe you trot out as “indignation.”
this sounds like FUD! so, why slur linux community when its all about IBM , Novell, unix ? you have an extremely poor knowledge about the case. its really ironical that SCo did not even to this day produce the millions of lines of code that was supposed to be in linux. where is it mr. smarty pants ?
Since when does a CEO actually know the definitive details of what a company actually owns ?
Just another Microsoft shill looking for way to spin the losing issue.
Look, we get it, Fortune magazine loves SCO. I should hope that Parloff, a writer who makes money from the Copyright of his words, would understand Copyright 101. There is no such thing as an “implied transfer of copyright”. this is not a matter for a jury to decide, it is quite clear in the law that unless there is a specific, written transfer of copyright, then there is no transfer. period.
Why is Fortune and every other business magazine so determined that SCO must be right? Are you required to check all common sense and knowledge of elementary intellectual property law at the door and issued stock options and cheerleader uniforms?
Judge Kimball has ruled based on questions of law; not questions of fact. Yes, he discusses facts in order to explain his legal conclusions, but the only subject of disagreement seems to be that SCO says “We bought copyright” and Novell says “No you didn’t.” This is not a question of fact. It is a question of law. It is entirely appropriate for a judge to rule on a question of law, and I really hope that the parties will disagree on a question of law before approaching a court.
Many people and companies are sued or threated with lawsuits and settle or are unable to appeal unfavorable decisions for financial reasons. This is the fault of our civil judicial system, not individual judges. This is where reform is needed.
In defense of Parloff, it’s more than a bit hasty to jump from the fact that he did not accurately summarize Judge Kimball’s ruling to the supposition that he is bought and paid for by SCO (or other entities).
1) SCO’s press releases on trial matters have far exceeded Novell plus IBM plus AutoZone. In 2004, Roger was in the SCO waiting room and found evidence that they are press fetishists.
2) Roger Parloff simply doesn’t have the time to do in-depth coverage of reading the hundreds of pages of Pacer filings.
3) It’s more work to be your own editor as with a blog. Roger’s May 17, 2004 article reads as much more balances with more of the opinion content coming from named sources.
So I think that the evidence shows that in contrast to the above guesses that Roger is “evil” or “bought and paid for” or “trolling for web hits,” is that he is simply not applying the highest possible standards to his blog postings. In short, he is being lazy to a normal human extent. (And not the good type of lazy that Larry Wall writes about.) So please try to forgive your fellow human and we can hope he once again sees the following points.
1) Copyrights cannot be transfered by a mere contract.
2) California law that excludes extrinsic evidence in contract interpretation trumps any witnesses.
3) The witnesses presented by SCO were not of a very good quality. The were more character witness than eyewitness.
I have never read such a load of spin-doctored bovine excrement in my entire life. Innuendo regarding vague wordsmithing, biased perspectives, selective references and unsupported witness testimony aside, the APA was a well-crafted legal document. “Excluded Assets” are exactly that - can this be defined any clearer?
May I suggest for those who wish an better understanding of this case, with all available documentation (that which SCO hasn’t attempted to hide under court seal), as well as supporting legal references and resources - peruse http://www.groklaw.com
This article so reeks of another SCO [hmmmm, M$?] “Get the FUD” campaign….
You see, Mr Parloff - we ALL know who pays YOUR wages
It’s actually quite simple. Why SCO brought up so much oral testamony, it never mattered at all.
What mattered was that the language of the contract didn’t say that the copyright transfered. That was without doubt and there are rules that the language of the contract prevails anything anybody could say about intent.
So the judge had an easy time, because after step 1, review of the contract, everything was clear already.
I have to say it, I wonder how Tim Forbes and Dan Lyons are going to spin this one?
I guess Roger Parloff is going to handle the pouting for them.
Tim Forbes and his puppies have been anti-linux since I can remember and they obviously know so little about it.
What about all of us ‘Crunchies’ that ‘didn’t know how real business works’.
Where is the bravado of all of those ZD-Net and Forbes spin-meisters?
It’s interesting how four years later all of the ‘Sandal wearing crunchies’ who are ‘brain washed religious zealots’ for daring to demand a choice on what OS we use are going about our lives and SCO is pretty much the recipient of the karmic retribution they so richly deserve.
Translation: It was a bad business idea to attempt to co-opt something you didn’t create as opposed to working on your software and services offerings.
I put SCO right up there with people that create those ‘One off’ websites that are misspellings of popular websites to get people to click on them and try to sell them airline tickets and viagara. From the looks of things, young Darl (and perhaps a few pouting journalists) will be needing both soon.
Cheers,
Nick
I can see your point, but the inflammatory lead is just the type of baiting that SCO was (in)famous for in the Linux community. The SCO legal team has recourse, as you know, through the appeals channel, and could in due time reverse this decision based on the points you’ve summarized. The unfortunate fact you’ve left out is that SCO has made its own bed and now must lie in it.
Had SCO produced the evidence of the alleged theft of code back when it was asked for, this would not be an issue. To now blame the “Linux-mob” for SCO’s situation is more than disingenuous; it is blind to history.
Consider this my last month of my Forbes subscription.
hmmm Darl attempts to hold everyone hostage and extort monies and lost.
Most of this could have been avoided with some due diligence before hand with Novell. One would think that one would want to have one’s facts straight BEFORE trying these billion dollar payday law suites.
Really with the logic SCO was holding out, there is no reason to go bankrupt. They OWE Novell big and they should pay up NOW NOW NOW. Darl, get your mower tuned up and report to Novell to start mowing the lawn till your debt is payed. Then on to every SCO shareholder you just hoodwinked.
I for one ain’t buying that they paid all that money to buy the house ( Unix ) only to discover later they only leased it essentially. SCO legal resources were asleep at the wheel??????? Sorry Roger, I can’t buy that.
Perhaps you’re right. Maybe Judge Kimball should have let the copyright issue go before a jury. But even if SCO owns the copyrights, it doesn’t make much difference. They still haven’t proved copyright infringement against IBM, and they still owe Novell 95% of the royalties, and they still end up in bankruptcy.
So it really doesn’t much matter in the end. The bankruptcy court’s duty is to ensure that the creditors get paid, and not to let SCO waste money appealing a moot point.
Some of this is beyond silly.
1) What on earth could
“all of Seller’s right, title and interest in and to the assets and properties of Seller relating to the Business (collectively the “Assets” identified on Section 1.1 (a) hereto. Notwithstanding the foregoing, the Assets to be so purchased shall not include those assets (the “Excluded Assets” set forth on Schedule 1.1 (b):”
mean except that what follows notwithstanding dominates what precedes it? It is in no way unclear or ambiguous. I don’t think it even rises to the level of unusual. It’s not hidden, either, since it’s the following sentence.
2 The argument that the exclusion of all copyrights is vague, because it doesn’t say which copyrights is an attempt to turn the 402 writing requirement on its head, but if you actually read the APA, there’s no mystery. the included asset schedule 1.1(a) and the excluded asset schedule 1.1(b) have a parallel structure, which makes sense if b is intended to exclude from what a includes so in 1.1 (a) we have:
“V. Intellectual property - Trademarks UNIX and UnixWare as and to the extent held by Seller (excluding any compensation Seller receives with respect of the license granted to X/Open regarding the UNIX trademark).”
and in b an equivalent IP section:
“V. Intellectual Property:
A. All copyrights and trademarks, except for the trademarks UNIX and
UnixWare.
B. All Patents”
SCO has never argued it received any patents or additional trademarks, so clearly they didn’t get all right title and interest to the IP. SCO had no good answer for why this exclusion that works so well for the other IP, fails for copyrights.
Santa Cruz wasn’t a believer in the APA conveying the copyrights, or they wouldn’t have had it amended to read:
“V. Intellectual Property:
A. All copyrights and trademarks, except for the [...] copyrights and trademarks owned by Novell as of the date of the Agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies. However, in no event shall Novell be liable to SCO for any claim brought by any third party pertaining to said copyrights and trademarks.
B. All Patents ”
While this has a number of legal problems, it isn’t a joke to argue it conveyed copyrights, merely wrong.
But arguing the original APA did - that’s a joke. Let’s just let it die along with whatever enormous sum SCO payed Novell for UNIX, when really Santa Cruz bought it for stock and SCO (then called Caldera) bought it from them for what ended up being around $27 million which bought not just SVRX, but OpenServer, the channel and the physical assets. So Darl has at the very least added a zero to what SCO payed for SVRX.
when u sell something it is lock stock and barrel that means unconditional just the options becareful of the contract also when selling anything make sure the contract is unconditional
mike
Randy R. dusts off the tired old insinuation that Santa Cruz must have got more value “for a price tag of $125 million.” The APA is clear that the only price was 6,127,500 newly-minted shares of Santa Cruz stock, which IIRC was valued at just under $38 million on the day of the transaction. I think he must be spreading the mistake that the additional royalty payments made through SCO, which were Novell’s before and after the deal was cut, were somehow part of the price.
It’s a bit of fast-talking that has confused more than one casual listener. But the principle is simple: you can’t buy something by paying someone their own money. If I sell you my wallet for $30, but tell you that you have to give back me the $100 bill inside it too, would you go around saying that you spent $130 on the wallet? Apparently, Darl would.
That said, let’s put the actual price tag in perspective. The Novell-AT&T deal for the copyrights (such as they were) was reported to be worth around $1 billion.
Novell’s asking price for the business with copyrights was reported to be $600 million.
If Novell had sold everything to Santa Cruz, they would have marked it down by more than 96%. If a car lot discounts a car by 96%, you’ll be lucky if it has a chassis and tires. Do *not* expect an engine.
An interesting thing to impugn Novell’s character. Novell does have a history of a particular kind of allegation against its executives — that they try to talk down one or more of the company’s assets, get them sold out of the company for a song, and somehow end up on the receiving end of them. I don’t know if that’s what happened in this case, but if it did, it was not the last time for Novell. So then, why is it you’re shocked that someone might have looked out for Novell’s stockholders for a change?
And what’s with this 9 witnesses to 2? What a laughable measure! While you’re at it, why not point out a taller stack of motion papers served? Or more lawyers? Or flashier bow-ties?
Randy R. sounds familiar. Do you do investor relations?
I’ll have to agree with Novell that “all copyrights” means “all copyrights”.
SCO’s attorney wasn’t on the ball if he or she read that part of the contract and didn’t interpret it correctly.
Legal contracts are written in either black or white and no Grey areas unless explicitly noted in that contract.
There was only one exclusion in that contract and it was for “Trademarks” for Unix “not” copyrights.
This exclusion is clear and irrefutable but SCO can use the rest of its’ money trying to make it disappear.
SCO’s McBride should have been replaced long ago with someone willing to take care of business and profit with the tools they had instead of trying to profit by litigation.
Did SCO get Linux-mob justice?
No, no they didn’t.
SCO files for Bankruptcy, Friday Sept 14 at about 1 PM EDT. Trading halted.
This is the most moronic coverage of SCO yet. I bet the author was buying stock.
How come SCO had to pay 95% of the money from Unix sales to Novel if they owned it all.
I don’t understand the reliance in the article on the phrase “without limitation”. As used in context, that phrase is clearly referring to the list of products being listed, NOT the rights being conferred.
It is also not ambiguous to have one part (Schedule 1.1(a)) list some assets, while another part (Schedule 1.1(b)) take some of those assets off the table. What would be the purpose of 1.1(b) if it didn’t take away some of what was listed in 1.1(a)? All you’d do is list 1.1(a) and by implication anything not on it is “excluded”. The ONLY reason for a list of excluded assets (such as the copyrights) is to REDUCE the scope of the list of included assets. No ambiguity involved whatsoever.
In 1.1, where it references 1.1(a) and 1.1(b), it clearly says, in the same section, “notwithstanding the foregoing, the Assets to be purchased shall not include … [what's listed in 1.1(b)]“. Again, how is that in any way ambiguous?
I’m not a lawyer, but I can read (ahem).
U.S. Copyright Law states:
Ҥ 204. Execution of transfers of copyright ownership
(a) A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.”
So, if SCO wishes to prove they purchased the copyrights to UNIX, they merely have to produce this “instrument of conveyance” and enter it as evidence. Slam dunk, they win.
Uh, oh… it appears that, like the “millions of lines of stolen UNIX code,” unicorns, bigfeet, little green men from Mars, and principled legal writers at “Fortune,” this “instrument of conveyance” has gone missing. Too bad. And it was just what SCO needed, too. Isn’t that the damnest luck?
In recent weeks there has been much debate over SCO Group vs. Novell regarding the purchase of UNIX. Throughout these debates there has been much confusion, emotion, and most of all misinformation. I have yet to see any column or report by a qualified contract/tort attorney and many have misinterpreted Judge Kimball’s ruling. In some of these discussions, the term license, transfer, and conversion are used without regard for their actual meaning in terms of the Asset Purchase Agreement (APA). One thing is for certain, not one person can explain this huge quagmire of differing public opinion.
I have read so many posting and viewed many of the court documents, including the APA. One thing keeps coming back around and continues to cause questions to be raised. If the APA signed in 1995 was not for the purchase of UNIX and it was not a license to use, develop, and sell UNIX derivatives, then what exactly was the purpose for the APA? Quite frankly, I haven’t the foggiest idea. However, I have put into words my views and questions for rhetorical purpose, and present them for everyone to read and ponder.
1) The term, “All rights and ownership” is used in the APA under Schedule 1.1(a) Assets. While this may seem pretty straight forward wording, it is quashed by a later section, Schedule 1.1(b) Excluded Assets where it states, “All copyrights and trademarks, except for the trademarks UNIX and UnixWare”. After typing the “all rights and ownership” into a search engine, I found quite a number of contracts, and agreements which use this exact wording. Moreover, this term is most often found where somebody is passing on or allowing ownership of something to pass on to another. For an example, in work-for-hire contracts where an independent designer or developer is doing work for a company and the company wants to retain ownership of that work. This is quite common in the IT world. I have found numerous entries in SEC filings where the term is used when a company purchases assets of another. I have found this terminology in land rights, software rights, and financial rights documents. If this wording is not strong enough to demonstrate ownership of a purchased asset in the case of SCO Group vs. Novell, then what force does this terminology have in virtually every other contract or official document? In other words, what rights are obtained or retained if the Federal Courts view it as unenforceable?
2) The wording of the Schedule 1.1(b) Excluded Assets where it states, “All copyrights and trademarks, except for the trademarks UNIX and UnixWare” does not specifically state the copyrights to anything. It is probably one of the most ambiguous parts of the APA. Is Novell claiming copyrights of Stephen King’s novels? Perhaps it is referring to the copyrights to John Fogerty’s recent album (watch out John, we know what happened last time). This “claim” is vague at best. The only specificity is the reference to “trademarks UNIX and UnixWare”. That is a far cry from the copyright of “UNIX”. If “UNIX” and “UnixWare” were specifically noted in the Trademark exclusion, why not note it for the Copyright? Was that intentional? Is that not considered ambiguous?
3) The Federal Parks Service (FPS) web site, http://npsfocus.nps.gov/docs/guide/PublishingPolicy_Copyright.html recognizes and acknowledges “contractor” rights to copyright. However, they believe that if the “Contract specifies that all rights and ownership are transferred to the NPS” that, “metadata” is “public domain”. In other words, the Federal government views copyright passed on by the terminology “All rights and ownership” does in fact include copyright. This may seem to some a leap of faith; however, the FPS continues to use work that was contracted out to non-employees on their web site (e.g. Pictures) and claims public domain base on that specific wording.
4) If Judge Kimball’s ruling is allowed to stand, that would open the doors for many, many others to file claims against former employers, management companies, and even the federal government for copyright violations. As it appears under Judge Kimballs ruling, any contract or agreement that relies strictly on the wording, “All rights and ownership” could in fact be ruled as not including copyright. Once again, using Judge Kimball’s reasoning, that particular wording is moot if there fails to be compelling evidence that the entity who believes they are covered by “All rights and ownership” does not have explicit rights to copyright.
5) There has been debate whether Novell had performed a “transfer” of the copyright to SCO Group of UNIX, as referred to in “1.1 Purchase of Assets (a) Purchase and Sale of Assets. On the terms and subject to the conditions set forth in this Agreement, Seller will sell, convey, transfer, assign and deliver to Buyer and Buyer will purchase and acquire from Seller on the Closing Date (as defined in Section 1.7), all of Seller’s right, title and interest in and to the assets and properties of Seller relating to the Business (collectively the “Assets” identified on Schedule 1.1 (a) hereto.” It goes on to state, “Notwithstanding the foregoing, the Assets to be so purchased shall not include those assets (the “Excluded Assets” set forth on Schedule 1.1 (b)”. Now this is where it gets tricky. In the included “Assets” under Schedule 1.1(a) Assets it clearly states, “…and all
technical, design, development, installation, operation and maintenance information concerning UNIX and UnixWare, including source code…” If one does not own the source code, that is, as the Federal Courts have stated, “…Source code represents the same instructions in a specialized programming language, such as BASIC, C, or Java…” , “…individuals fluent in a computer programming language, source code is the most efficient and precise means by which to communicate ideas…”, “Likewise, computer source code, though unintelligible to many, is the preferred method of communication among computer programers.” (Peter D. Junger v. Secretary of State et al). In gerneal, source code is a text or “…programming statements that are created by a programmer with a text editor…” Novell’s copyright registration is for “Text of computer program” (see http://www.novell.com/licensing/indemnity/legal.html). Therefore, using the same degree of reason as the courts, Novell owns the “text” of UNIX. However, that “text” is also called “source code” and it was specifically transferred to SCO Group (Caldera) by the APA as noted previously. Here is where Judge Kimball erred in his summary judgment. The Copyright Act clearly states, “A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.” In other words, when Novell transferred the “source code”, they inadvertently transferred that copyright, though they did not use the word “copyright”. In fact, there is no requirement under the Copyright Act to specifically state copyright.
6) If Novell were the actual owner of UNIX, and claims that SCO Group is required to pay royalties under California law, there are a few issues that first need to be ironed out. Under California Business and Professions Code, section 21752 in regards to royalties, there “shall” be certain conditions. Those conditions are that the contract “be in writing”, “be signed by the parties”, and must include “proprietor’s name and business address”, name and location of “each place of business”, the “duration of the contract” and a “schedule of rates and terms of the royalties”. This could pose some difficulty for Novell since as far as I have read; there are a couple elements that were not addressed in the APA (which technically is not a contract for royalties) which should have been included such as duration of the contract. This all depends on whether Novell is even entitled to royalties payments over the SVRX.
It is apparent to me that Judge Kimball is merely a bench judge. He has no background in computer science, nor does he have any experience in Copyright or Patent law as a professional attorney. He is a Political Science major and was “appointed” to the bench. His lack of experience in technical matters related to technologies is obvious. There is at least one case that was overturned by the Federal Court of Appeals for his ruling which would have allowed pharmaceutical companies to produce and market drug as a “dietary supplement” and bypass FDA regulation and approval. The Court of Appeals overturned Kimballs ruling and stated, “The district court based its decision on the determination that § 321(ff)(3)(B) refers unambiguously to finished drug products, rather than their individual constituents. Thus, it was unnecessary for the district court to reach a number of issues raised by both parties.” Sound familiar? It seems once Judge Kimball convinces himself, there is no need to listen any further. Furthermore, Judge Kimball seems to have a problem with ambiguous and unambiguous wording in federal law and contracts. I have now doubt that this case, if properly argued in the Federal Court of Appeals will be overturned and integrity will once again be awarded to the federal court system. Furthermore, it is imperative that his ruling be overturned if organization such as Microsoft, Novell, and Sun Microsystems want to protect their outsourced software development from claims of copyright violation by contracted authors.
TYPO IN TITLE?
“Did SCO get Linux-mob justice?”
should surely have read
“Did the (SCO) mob get Linux justice?
This was a bogus lawsuit if ever there was one, with an extortion racket, and stock pump scam thrown in.
The author of this article has obviously been talking to Darl! Sounds like the same story Darl has been telling since the crushing ruling.
All SCO presented were a bunch of witnesses that were not involved in the actual drafting of the agreement that *thought* they were getting copyrights, when the signed agreement specifically excludes copyrights!
What a hoot!
The sad part is that this whole case - and all the time and resources that it has consumed - is merely a sideline to determine whether SCO even has the standing to continue its lawsuits against IBM and others.
Over four years ago SCO claimed in no undertain terms that they had proof of multiple blatant cases of code being copied from UNIX to Linux and sued not only the alleged perpretrators but also third parties who could not have known that the products they were using might be infringing. They also leveraged Fear, Uncertainty and Doubt to extract money from Linux users and provide cover for Linux adversaries like Microsoft to fund an anti-Linux campaign without attracting more antitrust attention.
Yet four years and countless man-hours of discovery later, SCO has yet to publicly disclose any of the allegedly blatant infractions or show any hint of readiness to try their claims in court.
At the very worst, SCO’s actions could be nothing more than a kamikaze attack on Linux on behalf of Microsoft and Sun (before they found the Linux religion.)
At the very least, their earlier claims were misleading, if not fraudulent.
In the mean time, McBride & co. are exaggerating the value of a troubled company and, I’m sure, collecting a nice salary for their efforts. If any of them have been selling their stock at current artificially inflated prices, then the SCO Group would be my favorite candidate for the title of “Most Elaborate Pump-and-Dump Scam.”
One thing is for certain: win or lose this case, there will be lawsuits from SCOX shareholders when they find out that they have been conned into investing in a shaky - and shady - company.
Did SCO get Linux-mobbed? That question is irrelevant. The better question is whether the SEC and Justide Department should be putting together a case against McBride & co. for fraud, stock manipulation, deceptive business practices, and extortion over the past few years… perhaps a RICO charge would be approrpiate.
There’s so much wrong, it’s hard to know where to begin, but here’s Kimball on the copyrights.
” The Copyright Act requires a signed written instrument to transfer ownership of copyrights. Section 204(a) states: “A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent. 17 U.S.C. § 204(a). This requirement is meant to “enhance[] predictability and certainty of copyright ownership.” Effects Assoc. v. Cohen, 908 F.2d 555, 557 (9th Cir. 1990).
Section 204 is a prerequisite to a valid transfer of copyright ownership, and not merely an evidentiary rule. A transfer of copyright is simply “not valid” without the required written instrument. Konisberg Int’l, Inc v. Rice. 16 F.3d 355, 357 (9th Cir. 1994). Further, unlike a statute of frauds, Section 204 is not subject to equitable defenses, such as estoppel, because such defenses would “undermine the goal of uniformity and predictability in the field of copyright ownership and transfer.” Pamfiloff v. Giant Records, Inc., 794 F. Supp. 933, 937 (N.D. Cal. 1992).
“As with all matters of contract law, the essence of the inquiry here is to effectuate the intent of the parties. Accordingly, even though a written instrument may lack the terms `transfer’ and copyright,’ it still may suffice to evidence their mutual intent to transfer the copyright
58
interest.” Nimmer on Copyrights § 10.03[2]. SCO contends that, under the applicable authority, the language identifying the Assets by reference in Section 1.1(a) of the APA, as amended by Amendment No. 2, meets the statutory requirements.
Amendment No. 2 does not include any provision that purports to transfer ownership of copyrights. It merely revised the definition of the intellectual property category of the Excluded Assets schedule. Unlike the APA, Amendment No. 2 was not accompanied by a separate “Bill of Sale” transferring any assets. Nor did Amendment No. 2 purport to retroactively change the scope of the assets transferred by the Bill of Sale that was executed in connection with the APA in December 1995. Amendment No. 2 states that it “amended” the APA “[a]s of the 16th day of October, 1996.” Thus, Amendment No. 2 did not retroactively cause the Bill of Sale to transfer copyrights that were expressly excluded from transfer by the APA and Amendment No. 1.
Furthermore, Amendment No. 2 also did not amend Schedule 1.1(a). It is undisputed that the Bill of Sale transferred the Assets contained on Schedule 1.1(a). Even after the execution of Amendment No. 2, however, Schedule 1.1(a) did not include any language regarding copyrights.
Also, significantly, Amendment No. 2 did not identify which copyrights, if any, were “required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies.” The written instrument required by Section 204 should contain sufficient information “to serve as a guidepost for the parties to resolve their disputes.” Konisberg Int’l, 16 F.3d at 357. Amendment No. 2 does not meet these standards. SCO now claims that Santa Cruz required ownership of all of Novell’s UNIX and UnixWare copyrights to exercise its rights regarding the UNIX assets it acquired under the APA. Novell, in contrast, contends that Santa Cruz did not need to own these copyrights because Santa Cruz already had a license to the
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copyrights.
Where the plain language does not resolve the issue, among the relevant extrinsic evidence courts review to determine such “mutual intention” is “the surrounding circumstances under which the parties negotiated or entered into the contract” and “the object, nature and subject matter of the contract.” Morey v. Vannucci, 64 Cal. App. 4th 904, 912 (1998). The contract may be explained by reference to the circumstances under which it was made. Cal. Civ. Code § 1647.
In this case, the extrinsic evidence surrounding Amendment No. 2 strongly favors Novell’s position that Amendment No. 2 was merely affirming Santa Cruz’s implied license to use the UNIX and UnixWare copyrights. Santa Cruz’s in-house counsel, Steve Sabbath, approached Novell’s in-house counsel, Allison Amadia, about obtaining the UNIX and UnixWare copyrights. Amadia testifies that she then reviewed the APA and spoke with Braham to learn about the history of the agreement and the intent of the parties.
Santa Cruz’s first proposed draft of Amendment No. 2 referred to copyrights “owned by Novell as of the date of this Amendment, which pertain to the UNIX and UnixWare technologies and which SCO has acquired hereunder.” This proposed language clearly intended to transfer the UNIX and UnixWare copyrights through the amendment. However, Novell rejected Santa Cruz’s proposed language. Amadia testifies that she told Sabbath that while Novell was willing to affirm that Santa Cruz had a license under the original APA to use the UNIX and UnixWare copyrights in its business, it was not willing to transfer ownership of the copyrights. As a result, the final version of Amendment No. 2 does not refer to any specific copyrights and does not refer to Santa Cruz’s “acquisition” of any copyrights.
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This extrinsic evidence is consistent with the language of the Amendment, which reads like an implied license. It is also consistent with the fact that the parties did not amend Schedule 1.1(a) when they executed Amendment No. 2. No specific copyrights were, therefore, included as Assets to be transferred on Schedule 1.1(a). As in interpreting the original APA, “the whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.” Cal. Civ. Code § 1641. Construing the language of Amendment No. 2 to be an affirmation of an implied license to the copyrights does not put the amended Excluded Assets Schedule at odds with the transferred Asset Schedule 1.1(a).
There is also significant evidence that Santa Crux did not “require” the UNIX and UnixWare copyrights. Santa Cruz had been able to pursue its UNIX business from December 6, 1995 until October 16, 1996, without any problems due to its lack of ownership of the copyrights. Santa Cruz indisputably did not own the copyrights during those ten months. While SCO has submitted testimony from witnesses stating generally that the copyrights were necessary to running a software business, none of those witnesses give specific examples of how a lack of copyright ownership impeded Santa Cruz’s ability to exercise its rights under the APA. The APA conferred an implied license on Santa Cruz to use Novell’s copyrights as needed to implement the purposes of the APA. That implied license allowed SCO to license the copyrights to others. Because Santa Cruz already had that license, it did not require ownership of the copyrights. Therefore, even if Amendment No. 2 had a means of conveyance or conveyance language, Amendment No. 2 would not have transferred the UNIX and UnixWare copyrights as there is no evidence that any of the copyrights were “required.”
For these reasons, the court concludes that Amendment No. 2 did not transfer the UNIX
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and UnixWare copyrights to SCO. Even if the Amendment met the requirements of Section 204, the extrinsic evidence demonstrates that the parties intended only to affirm the implied license granted under the original APA. Furthermore, SCO has not provided evidence that it required ownership of the copyrights to exercise its rights under the APA. Accordingly, the court concludes that Novell is the owner of the UNIX and UnixWare copyrights.
This court’s conclusion that Novell owns the UNIX and UnixWare copyrights impacts several of the claims asserted by both parties and several pending motions. Novell’s motion on the copyright issue is brought with respect to SCO’s First Claim for Relief for slander of title and Third Claim for Relief for specific performance. Novell is entitled to summary judgment on SCO’s First Claim for Relief for slander of title because SCO cannot demonstrate that Novell’s assertions of copyright ownership were false. First Sec. Bank of Utah v. Banberry Crossing, 780 P.2d 1253, 1256-57 (Utah 1989). In addition, Novell is entitled to summary judgment in its favor on SCO’s Third Claim for Relief seeking an order directing Novell to specifically perform its alleged obligations under the APA by executing all documents needed to transfer ownership of the UNIX and UnixWare copyrights to SCO. Neither the original APA nor Amendment No. 2 entitle SCO to obtain ownership of the UNIX and UnixWare copyrights. “
Well, the author may have read the decision, but he obviously failed to read the APA.
This “intent” that these CEOs so fervently attest to was disclosed in a series of depositions falling under the heading “extrinsic evidence”. And as Judge Kimball goes to great length to explain, “extrinsic evidence’ may only be considered when the language of the agreement is unclear or ambiguous.
And there was nothing ambiguous about the transferred assets including everything except the exclusions in the aptly named excluded assets list. And there was nothing unclear or ambiguous in the part of that list that specifically excluded “all copyrights and patents”.
Goodbye intent, goodbye extrinsic hearsay. Kimball nailed that one on the head.
The author apparently skipped class the last four years.
The reason the APA was so strangely worded was that initially Santa Cruz did intend to buy Unix from Novell as part of the deal. However when it turned out that Santa Cruz could not cough up enough money to buy the copyrights, they were excluded from the sale not by rewriting the contract, but by adding an addendum which excluded copyrights, patents etc.
Also the reason why the judge took Novell’s witnesses as correct and SCO’s witnesses as false is because Novell’s witnesses were actually involved in the negotiation and drafting of the contracts, and their statements agreed with what was actually written in the contract, and also with what all parties to the contract indicated they understood by the contract by their actions (eg: paying Novell 95% of Unix royalties and keeping a 5% collection fee, not transferring copyrights etc.). On the other hand, none of the witnesses SCO called were actually involved in the contract drafting or negotiations but only claimed to know of it second hand.
The reason the Judge rejected a jury trial, was because the issues remaining to be contested in the trial are inherently equitable claims which do not warrant a jury trial.
I think the Judge did a very good job . are
“Novell tranfers all rights to SCO except copyrights”
What it gives in the first six words of the sentence, it takes back in the last two words.
of all the articles that I have read about the SCO case this is probably the clearest ‘bought and paid for’ one that I have seen to date. I hope you enjoy your 30 pieces of silver and fortune.com just lost an avid reader. Absolutely unbelievable that your tripe should make it past the editors.
To quote Brad Lam from lamlaw.net
You know you hired a dumb or fraudulent lawyer when you are only left to defend how much you owe the other party. And you brought the law suits. Or, worse yet, you paid your lawyers a huge fee to get you into serious liabilities.
This was simply a fraudulent lawsuit. Period… End of Story… and they got caught…. BAD.
The article states: ‘The asset purchase agreement says that Novell sold to Santa Cruz “all rights and ownership of UNIX … including source code . . ., such assets to include without limitation” a long list of specific products.”
This quote from the APA is taken from Schedule 1.1(a) which outlines what IS being transferred.
However the first reference to Schedule 1.1(a) is in Article I, The Acquisition, 1.1 Purchase of Assets:
“(a) Purchase and Sale of Assets. On the terms and subject to the
conditions set forth in this Agreement, Seller will sell, convey,
transfer, assign and deliver to Buyer and Buyer will purchase and
acquire from Seller on the Closing Date (as defined in Section 1.7), all
of Seller’s right, title and interest in and to the assets and
properties of Seller relating to the Business (collectively the
“Assets” identified on Schedule 1.1 (a) hereto. Notwithstanding the
foregoing, the Assets to be so purchased shall not include those assets
(the “Excluded Assets” set forth on Schedule 1.1 (b).”
Obviously, not all of the Assets were transferred and some were excluded.
SCO even admitted that Patents were not transferred, and they are listed just before Copyrights.
There is nothing “inconsistent” or “ambiguous” about the APA, only SCO’s attempts to re-write it to meet their needs.
As far as the witnesses having more impact than the written document, the Judge had this to say on page 53 of the Decision:
‘The parol evidence rule precludes SCO from relying on extrinsic evidence to try to rewrite the exclusion of “all copyrights” from APA because the language is unambiguous and not reasonably susceptible to SCO’s interpretation. Moreover, even if the court considered the extrinsic evidence, there is significant evidence that the exclusion “all copyrights” was deliberate and consistent with the basic objectives of the APA. While there is no specific evidence that business executives negotiated the issue of copyrights, the changes to the drafts of the agreement show that a significant change occurred. Novell has provided extrinsic evidence supporting the change in the language and the fact that it was relayed to SCO, whereas SCO has failed to present any evidence from witnesses on its side of the transaction who had any involvement with the actual drafting or negotiation of the language in the contract.’
The Judge even noted on page 27 of the Decision that ‘The Assignment Agreement states that Santa Cruz “has no knowledge of any fact that would prevent [Caldera's] registration of any Rights related or appurtenant to the Inventions and Works or recording the transfer of Rights hereunder (except that Assignor may not be able to establish a chain of title from Novell Inc. but shall diligently endeavor to do so as soon as possible).”‘
So when Caldera sold the “Business”, there was a clear doubt about the “chain of title”.
Also, SCO knew BEFORE they started the legal actions that they were on thin ice. On page 28 of the Decision, the Judge noted:
‘On January 4, 2003, McBride received an email from Michael Anderer, a consultant for SCO retained to examine its intellectual property. Supp. Brakebill Decl. Ex. 12. Anderer stated that the APA “transferred substantially less” of Novell’s intellectual property than Novell owned. Anderer noted that Santa Cruz’s “asset purchase” from Novell “excludes all patents, copyrights, and just about everything else.” Id. Anderer cautioned that “[w]e really need to be clear on what we can license. It may be a lot less than we think.”‘
There are contract issues between SCO and Novell that are under arbitration. Judge Kimball is not ruling on those.
Some points about the Unix copyrights:
1. A lot of Unix was not copyrighted by ATT, therefore was not sold to Novell, and couldn’t be sold to SCO. See BSD.
2. In order to transfer whatever copyrights Novell had to SCO, there would need to be a legal writing doing that. There was not, so whether or not the amendments to the APA required the transfer, it was not done.
3. SCO couldn’t afford an outright purchase, so Novell retained a lot of rights and SCO gave up some (95%) of the existing revenue stream. The original APA definitely did not call for transfering copyrights to SCO. The amendments to the APA were more ambiguous, but did not explicitly transfer the copyrights.
I maintain that Parloff’s opinion piece is part of an orchestrated press campaign. SCOX and Boies were temporarily disorganized and demoralized by Kimball’s August decision; but since August 29th they have been attempted to spin their defeat through interviews and leaked briefs. http://news.google.com/news?q=mcbride+sco
Parloff has telephone access to David Boies. This is to be expected in a pre-eminent business law journalist. However the recent context of Parloff’s interaction with Boies is disturbing.
In late April 2007, Parloff blogged about trying to arrange a business engagement between Boies and MSFT General Counsel Brad Smith to fight Google acquisitions. http://legalpad.blogs.fortune.com/2007/04/24/in-google-doubleclick-inquiry-david-boiess-firm-represents-att/
Following that incident, Parloff published a magazine and blog account of MSFT patent claims against Linux. This account included high level and detailed interviews and briefs with Ballmer, Brad Smith and a second tier executive. Parloff’s article is nuanced and impartial (it includes profiles of Moglen and Stallman); but the initiative to arrange legal engagements demonstrates a certain comfort with MSFT. http://legalpad.blogs.fortune.com/tag/microsoft/
I think it is defendable suppos
How much SCOX stock DO you own? Really? How much did you own when you wrote this protective POS? A whole lot, I’d guess. No one else agreed with you (that didn’t own stock…