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SCO's Opening Brief in Support of its Motion to Dismiss
Wednesday, September 17 2003 @ 10:34 PM EDT

Here you are, thanks to a friend of Groklaw who went to Delaware for us, SCO's Motion to Dismiss [PDF] Red Hat's Complaint [PDF]. This is the legal document where they tell the judge why they think their motion should succeed.

Please notice that in footnote 15, SCO calls SCOsource a "right to use license":

SCO has never asserted in any statement that individual, non-corporate users of Linux may be liable to SCO, or otherwise would need to purchase a right to-use-license.


***************************

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

RED HAT, INC.

Plaintiff,

v.

THE SCO GROUP, INC.,

Defendant.

_____________________

Civil Action No. 03-772-SLR

____________________

DEFENDANT THE SCO GROUP, INC.'S
OPENING BRIEF IN SUPPORT OF ITS MOTION TO DISMISS

Jeffrey Moyer (#3309)
Steven J. Fineman (#4025)
Richards, Layton & Finger, P.A.
[address, phone]
Attorneys for Defendant The SCO Group, Inc.

OF COUNSEL:

Stephen N. Zack
Mark J. Heise
Boies, Schiller & Flexner LLP
[address, phone]

Dated: September 15, 2003

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES....................ii

NATURE AND STAGE OF PROCEEDINGS..........1

SUMMARY OF ARGUMENT .....................1

STATEMENT OF FACTS.......................3

ARGUMENT.................................6

DECLARATORY JUDGMENT ACT.....................6

A. Red Hat Cannot Establish an "Actual Controversy" as Required
by 28 U.S.C. §2201...........................7
1. Counts I and II must be dismissed because Red Hat cannot
establish a "reasonable apprehension" that SCO will sue it
for copyright infringement or misappropriation.............9
B. Even if the Court Determines Subject Matter Jurisdiction Exists,
the Court should Exercise its Discretion and Decline to Consider the Case....15
II. RED HAT'S CLAIMS FALL OUTSIDE THE SCOPE OF THE LANHAM ACT
AND RELATED STATE LAW CLAIMS AND ARE BARRED BY THE FIRST
AMENDMENT...........................16
A. The Public Statement are Fully Protected Speech Under the First
Amendment.................................17
1. Nature of the Speech......................19

2. Governmental Interests Served by Regulating the Speech
in Question..............................23

CONCLUSION...............................28

i

TABLE OF AUTHORITIES

Aetna Life Ins. Co. v. Haworth,
300 U.S. 227 (1937)............................... 7

Avery Dennison Corp. v. Acco Brands, Inc.,
2000 U.S. Dist. LEXIS 3938 (C.D. Cal. February 22, 2000)............. 21, 22, 25

BASF Corp. v. PPG Industries,
1991 WL 354884 (D N.J. February 11, 1991)..................... 12

B.P. Chemicals, Ltd. v. Union Carbide Corp.,
4 F.-3d. 975 (5th Cir. 1993)......................... 8

Board of Trustees v. Fox,
492 U.S. 469 (1989)....................... 17

Bolger v. Youngs Drug Products Corp,
463 U.S. 60 (1983)............................. 18, 23

Bonterra America v. Bestmann,
907 F.Supp. 4 (D.D.C. 1995)..................... 12, 13

CAE Screenplates Inc. v. Beloit Corp.,
957 F.Supp. 784 (E.D. Va. 1997).................. 8, 9, 13

Central Hudson Gas & Electric Corp. v. Public Service Comm'n.,
447 U.S. 557 (1980)..................... 18

City of Cincinnati v. Discovery Network, Inc...................... 18
507 U.S. 410 (1993)

City of Pittsburgh v. West Penn Power Co.,
147 F.3d 256 (3d Cir. 1998).................... 6

Diagnostic Unit Inmate Council v. Films Inc.,
88 F.M. 651 (8th Cir. 1996)..................... 8, 8, 9

Doug Grant, Inc. v. Greate Bay Casino Corp.,
232 F.3d 173 (3d Cir. 2000).................. 6

Emerson v. Thiel College,
296 F.3d 184 (3d Cir. 2002)..................... 5

Gordon and Breach Science Publishers, S.A. v. American Institute of Physics,
859 F.Supp. 1521 (S.D.N.Y. 1994).................. 17, 18, 23

Interdynamics, Inc. v. Firma Wolf,
698 F.2d 157 (3d Cir. 1983) ......................8

International Harvester v. Deere & Co.,

ii

623 F.2d 1207 (7th Cir. 1980)..................... 8, 14

International Med. Prosthetics Research Assoc. v. Gore Entrp. Holdings,
787 F.2d. 572 (Fed. Cir. 1986)........................ 8

Kewanee Oil Co. v. Bicron Corp.,
416 U.S. 470 (1974)............................ 14

Maryland Cas. Co. v. Pacific Coal & Oil Co.,
312 U.S. 270 (1941)....................... 7

Mikohn Gaming Corp. v. Acres Gaming, Inc.,
165 F.3d 891 (Fed. Cir. 1988).................... 20, 21, 22

Phillips Plastics Corp. v. Kaisha,
57 F.3d 1051 (Fed. Cir. 1995).....................14

Public Affair Assoc. v. Rickover,
369 U.S. 111 (1962)............................ 8, 14

Riley v. National Fed'n of the Blind,
487 U.S. 781 (1988)............................ 123, 24

Shearin v. Baldwin,
1988 Del. Super. LEXIS 243 (July 5, 1988)....................25

Shell Oil Co. v. Amoco Corp.,
970 F.2d 885 (5th Cir. 1992).......................... 8, 9

Symbol Technologies, Inc. v. Proxim, Inc.,
2003 WL 21840774 (D. Del. July 30, 2003).................. 19, 20, 22

United States v. Edge Broadcasting Co.,
509 U.S. 418 (1993)............................ 17, 18

Village of Schaumberg v. Citizens for a Better Environment,
444 U.S. 620 (1980)...................... 23

Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Counsel,
425 U.S. 748 (1976)....................... 17

iii

OTHER AUTHORITIES

15 U.S.C. § 1125.............................17

17 U.S.C. § 101.................................19, 19, 24

17 U.S.C. § 106...............................24

17 U.S.C. § 401-412............................ 24

17 U.S.C. § 502............................... 24

17 U.S.C. § 50.................................24

Restatement (Second) Torts § 586.....................25

Restatement (Second) Torts § 587.....................24, 25

iv

NATURE AND STAGE OF PROCEEDINGS

Red Hat, Inc. ("Red Hat") filed suit against The SCO Group, Inc. ("SCO") on August 4, 2003. Red Hat seeks a declaratory judgment that Linux software distributed by it does not infringe or violate certain of SCO's intellectual property rights in a software product known as UNIX. Red Hat also seeks damages and injunctive relief against SCO under the Lanham Act and related state law claims, alleging deceptive trade practices, unfair competition, tortious interference with prospective business opportunities and trade libel and disparagement arising out of certain public statements made by SCO.

Pursuant to a stipulation entered by the parties and signed by the Court, SCO's response to Red Hat's Complaint is due on September 15, 2003. This Motion to Dismiss, pursuant to Rules 12(b)(1) and (6) of the Federal Rules of Civil Procedure, is SCO's response to Red Hat's Complaint. In a separate but related case, SCO has sued International Business Machines Corporation ("IBM") in the U.S. District Court, District of Utah (the "SCO v. IBM Case"). In that action, which was filed five months before this case, SCO contends that IBM has breached its UNIX license with SCO by improperly using UNIX software code and methods to enhance the functionality of Linux.

SUMMARY OF ARGUMENT

1. Red Hat's claims under Counts I and II of the Complaint seek declaratory relief that a software product distributed by Red Hat known as "Linux" software does not infringe or violate any of SCO's intellectual property rights in UNIX. These claims fail for lack of subject matter jurisdiction under the Declaratory Judgment Act, 28 U.S.C. § 2201, because Red Hat cannot satisfy its burden of establishing an "actual controversy" as required by the Declaratory Judgment Act. Specifically, Red Hat cannot identify any express or

implied threats to enforce SCO's intellectual property rights against Red Hat. In fact, SCO has never threatened to sue Red Hat. Based on its wholesale failure to establish "reasonable apprehension" of being sued. Red Hat fails to meet the core jurisdictional requirement for an action under the Declaratory Judgment Act. Red Hat's legal action does nothing more than seek general guidance for the marketplace as to the legal rights SCO has with respect to Linux software. This is an impermissible use of the Declaratory Judgment Act.

2. Additionally, even if Red Hat were able to successfully establish the jurisdictional requirements for declaratory relief, this Court should decline to exercise jurisdiction because there is no practical reason to do so. The infringement and misappropriation issues Red Hat seeks to adjudicate in this case are currently before U.S. District Judge Dale A. Kimball in the SCO v. IBM Case pending in Utah Federal District Court.

3. Red Hat's claims under Counts III through VII seeking tort damages and injunctive relief based upon SCO's so-called "campaign" of filing suit against IBM and publicly discussing that case and other potential legal liabilities are barred by the First Amendment to the U.S. Constitution and by the common law doctrine of litigation immunity. The nature of SCO's statements complained of by Red Hat do not give rise to liability under the Lanham Act or the associated state law claims. Further, any governmental interest served under the Lanham Act is heavily outweighed by fundamental governmental interests in protecting copyright interests, ensuring full and free access to courts, providing litigation immunity, promoting judicial economy and fairness in litigation, and safeguarding freedom of speech and the press. Therefore, Counts III through VII must be dismissed with prejudice.

2

STATEMENT OF MATERIAL FACTS

The following facts are taken from Red Hat's Complaint, documents to which it refers, documents that the Complaint incorporates by reference, and other materials on which this Court may properly rely. SCO accepts as true the allegations in Red Hat's Complaint only for the purposes of the present motion. Facts also are presented from the Amended Complaint in the SCO v. IBM Case and from IBM's Answer and Counterclaim to supplement the record in ways consistent with the standard of review on a motion to dismiss.

The Parties

Red Hat and SCO are companies that provide computer software to large and mid-size corporations. Red Hat Complaint, ¶¶ 24, 25, 30, 33.1 SCO owns all right, title and interest in and to computer software known as UNIX System V and UnixWare, together with related copyrights ("UNIX"). ¶¶ 5, 18, 33; see also SCO v. IBM Amended Complaint ¶¶ 1, 2, 60-63.2 SCO licenses UNIX software to its corporate customers for a fee. SCO also licenses UNIX software to other software companies, who then modify UNIX to their own needs and sublicense UNIX to their own corporate customers, also for a fee. ¶ 18; SCO ¶ ¶ 2, 4. IBM is one of the major licensees of UNIX. IBM licenses UNIX from SCO, modifies it to its own needs, and sublicenses UNIX under its own brand known as AIX. SCO ¶ 26.

Red Hat is one of many companies that distributes a software program called "Linux." ¶ 28. Linux was developed under an "open source development model"3 that prohibits proprietary

3

ownership or control by anyone. ¶ ¶ 22, 26, 32. Therefore, Red Hat has no ownership or proprietary interest in Linux. ¶ 32.

The SCO v. IBM Litigation

IBM has implemented a program to "exploit its expertise in AIX to bring Linux up to par with UNIX." SCO ¶97. SCO contends that these efforts are contrary to IBM's obligations under its UNIX licensing agreements. SCO filed suit to vindicate its rights on March 7, 2003. ¶ 41. SCO filed an Amended Complaint on July 22, 2003. As an additional step to protect its rights, SCO terminated IBM's UNIX rights under the authority of SCO's UNIX agreements with IBM. SCO ¶¶ 119-121. IBM requested two extensions of time to answer SCO's Amended Complaint, and in its August 6, 2003, Answer it denied SCO's allegations and in turn counterclaimed against SCO for breach of contract, Lanham Act violations, unfair competition, intentional interference with prospective economic relations, unfair and deceptive trade practices, breach of the General Public License ("GPL") under which Linux is licensed, and four patent infringement claims. IBM Answer and Counterclaim in SCO v. IBM's Exhibit B.

The issues in the SCO v. IBM litigation involve many companies in the software and computing industry. Competing principles of open source versus proprietary software have come into focus and have attracted a great deal of attention from news media, industry analysts, and numerous companies. In response to this interest, SCO tried to provide substantial information, while remaining true to its contractual obligations to keep UNIX code confidential. ¶¶ 1, 2, 7. 37, 42, 45, 49-54, 66. To this end, SCO representatives have given interviews and made public statements about the case, and in several of those interviews and statements they have mentioned, or have been asked about, Red Hat and other Linux distributors. On May 12, 2003, SCO took an additional step to educate the Global 1,500 companies through a direct

4

mailing discussing SCO's intellectual property rights. ¶ 42; May 12, 2003, Letter.4 This letter refers to the SCO v. IBM Case and names IBM and Linux, but does not mention Red Hat or any other Linux distributor, nor does it propose any commercial transaction. See, May 12, 2003, Letter, Exhibit C. In addition, in order to provide end users with the ability to run Linux without violating any of SCO's intellectual property rights, SCO announced a licensing program in July 2003.

The Red Hat v. SCO Dispute

Red Hat has not been satisfied to await the outcome of the SCO v. IBM Case. ¶ 56. Instead, it sent SCO a letter on July 18, 2003, asking SCO to "fully explain the bases, if any, for its public allegations concerning Red Hat Linux." July 18, 2003, Letter. SCO CEO Darl McBride telephoned Red Hat CEO Matthew Szulick on July 31 to discuss Red Hat's letter. According to Red Hat's Complaint, on July 31, 2003, SCO merely offered it an "unneeded Unix license." ¶11. Then, on August 4, 2003, Red Hat filed its Complaint against SCO in the instant action. Concurrent with filing the Complaint, Red Hat issued a press release announcing its lawsuit against SCO and explaining the reason for the lawsuit.5 Red Hat claimed in the August 4, 2003 press release that "in its role as an industry leader," to fulfill its responsibility to "ensure [that] the legal rights of users are protected," and to defend "the worldwide Linux industry,"6 it had filed the present Complaint against SCO. ¶ 13. No reference was made to any threat or apprehension of threat of being sued by SCO

5

ARGUMENT

A complaint will not withstand attack under Federal Rule of Civil Procedure 12(b)(6) unless the material facts, as alleged, in addition to inferences drawn from those allegations, provide a basis for recovery. Emerson v. Thiel College, 296 F.3d 184, 188 (3d Cir. 2002). While all of the allegations in the complaint must be taken as true, the Court "need not accept as true unsupported conclusions and unwarranted inferences." Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173, 183-84 (3d Cir. 2000). As the Third Circuit has observed "[c]ourts have an obligation in matters before them to view the complaint as a whole and to base rulings not upon the presence of mere words but, rather, upon the presence of a factual situation which is or is not justiciable. [Courts are to] draw on the allegations of the complaint, but in a realistic, rather than a slavish, manner." Id., quoting City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 263 n.13 (3d Cir. 1998). Based on the facts Red Hat alleges in its Complaint, dismissing this case on a 12(b) motion is particularly appropriate for the reasons set forth in this Memorandum.

I. THIS COURT LACKS SUBJECT MATTER JURISDICTION UNDER THE
DECLARATORY JUDGMENT ACT.

In Counts I and II of their Complaint, Red Hat seeks declaratory judgments. In Count I, Red Hat begins by requesting a declaratory judgment that "it does not infringe any SCO copyright." Then, in a sweeping effort to obtain a declaratory judgment on behalf of the entire Linux industry, Red Hat seeks a declaration that "any SCO copyright to cover Linux software is unenforceable." Finally, again on behalf of the entire Linux industry, Red Hat requests the declaration that "SCO is equitably estopped from asserting any SCO copyright with respect to any Linux software."7 These broad claims for declaratory relief far exceed the scope and

6

purpose of the Declaratory Judgment Act. More importantly, Red Hat fails to establish the existence of an "actual controversy" as required by the Declaratory Judgment Act, and therefore this Court lacks subject matter jurisdiction to adjudicate these claims.

In Count II, entitled "Declaratory Judgment of No Misappropriation of Trade Secrets," Red Hat seeks similarly sweeping declarations. Specifically, Red Hat seeks a declaration "that it has not misappropriated any SCO trade secret, that any SCO trade secret claimed to cover UNIX software found in Linux is invalid, that the source code for the Linux kernel and operating system are public and cannot constitute a trade secret and that SCO is equitably estopped from asserting any SCO trade secret with respect to any Linux software."' Red Hat, however, has never had any license from SCO providing access to SCO's trade secrets or other confidential information and, to SCO's knowledge, has not stolen or otherwise misappropriated any of SCO's trade secrets or confidential information. Therefore, unlike companies that have contractual obligations to SCO, Red Hat has no legal or factual basis for apprehension of suit by SCO with respect to trade secrets or confidential information it has licensed from SCO, and its claims in Count II can be summarily dismissed.

A. Red Hat Cannot Establish an "Actual Controversy" as Required by 28
U.S.C. $ 2201.

The Declaratory Judgment Act limits the use of declaratory judgments to cases of "actual controversy." 28 U.S.C. § 2201; Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-40 (1937). Generally, the presence of an "actual controversy" within the Act depends on "whether the facts alleged, under all circumstances, show that there is a substantial controversy between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941). The plaintiff, as the party seeking to invoke the court's jurisdiction, bears the burden of proving

7

by a preponderance of evidence that an "actual controversy" existed not only at the time of the complaint's filing but also throughout the pendency of the action." CAE Screenplates Inc. v. Beloit Corp., 957 F.Supp. 784, 788 (E.D. Va. 1997); International Med. Prosthetics Research Assoc. v. Gore Entrp. Holdings, 787 F.2d. 572, 575 (Fed. Cir. 1986). When factual questions concerning jurisdiction have been raised, the court need not accept the allegations of the complaint as true, but may look behind the complaint and view the evidence to determine whether a controversy actually exists. International Harvester v. Deere & Co., 623 F.2d 1207, 1210 (7th Cir. 1980). Significantly, even when it is determined that an actual controversy exists, federal courts may decline to exercise that discretionary jurisdiction. Public Affair Assoc. v. Rickover, 369 U.S. 111, 112 (1962) ("The Declaratory Judgment Act was an authorization, not a command. It gave federal courts competence to make a declaration of rights; it did not impose a duty to do so.").

In deciding whether to allow a claim for declaratory relief to proceed in patent and copyright cases, federal courts have widely used a two-step analysis in determining whether an "actual controversy" exists. See, e.g., Diagnostic Unit Inmate Council v. Films Inc., 88 F.3d. 651, 653 (8th Cir. 1996); ("In patent and copyright cases, there is an actual controversy if defendant in a declaratory judgment lawsuit has either expressly or impliedly charged defendant with infringement.") B.P. Chemicals, Ltd. v. Union Carbide Corp., 4 F.3d. 975, 978 (5th Cir. 1993); Interdynamics, Inc. v. Firma Wolf, 698 F.2d 157, 166-70 (3d Cir. 1983); International Harvester, supra. First, defendant's conduct must have created a reasonable apprehension on the plaintiffs part that it will face a suit for infringement. This test is an objective one, focusing on whether the defendant's conduct rose to a level sufficient to indicate an intent to enforce its patent or copyright. See Shell Oil Co. v. Amoco Corp., 970 F.2d 885, 888 (5th Cir. 1992);

8

Diagnostic Unit, 88 F.3d at 653. To assess the defendant's conduct, courts look initially for a specific and express charge of infringement and, if none is found, then to the "totality of the circumstances." Shell Oil, 970 F.2d at 888 ("We must look for any express charges of infringement, and if none, then to the totality of the circumstances."). Second, plaintiff must have engaged in allegedly infringing acts or possessed the capability and definite intention to engage immediately in such acts. CAE Screenplates, 957 F.Supp. at 789; Diagnostic Unit, 88 F.3d at 653. This second prong, in essence, prohibits declaratory judgment plaintiffs from seeking advisory opinions on their potential liability for initiating some future activities.

1. Counts I and II must be dismissed because Red Hat cannot establish a
"reasonable apprehension" that SCO will sue it for copyright
infringement or misappropriation.

Stripped of its rhetoric, Red Hat's Complaint fails to establish a "reasonable apprehension" that it will be sued by SCO for copyright infringement or misappropriation. SCO has not threatened Red Hat with a claim for copyright infringement or misappropriation. Further, Red Hat has not identified facts supporting such a threat. The inquiry consequently becomes whether Red Hat's allegations of the "totality of circumstances" provide a "reasonable apprehension" that it will face such a suit. The answer to that question is a resounding "no."

As a preliminary observation, its August 4, 2003 press release (see, footnote 5, supra.) reveals that Red Hat's real motive for filing suit against SCO was to somehow vindicate the entire Linux industry. Further, in paragraph 13 of the Complaint, Red Hat alleges:

In light of SCO's consistent refusal to identify any specific source code in the public LINUX kernel or operating system that SCO is currently claiming infringes its intellectual property rights, Red Hat brings this action.
This allegation reveals that Red Hat's action does nothing more than seek an advisory opinion of

9

this Court regarding SCO's intellectual property rights, something that is clearly prohibited under the Declaratory Judgment Act.

The examples Red Hat uses to claim apprehension of suit belie its assertion. As detailed below, when the entire quotes, not the biased excerpts that have been placed out of context, are carefully examined, the conclusion is undeniable that Red Hat has no reasonable apprehension that it will be sued for copyright infringement or misappropriation.

In paragraph 50, for example, Red Hat identifies a quote from Darl McBride, the Chief Executive Officer of SCO, in which he says simply "[t)here will be a day of reckoning for Red Hat ...when this is done." ¶ 50 (emphasis added). On its face, this quote makes clear that any action against Red Hat would take place only when litigation against IBM is completed. Moreover, when this quote is read in the context of the very next sentence, which Red Hat failed to provide, there is no doubt as to SCO's intentions: "But we are focused on the IBM situation." CRN article attached as Exhibit E. With the quote presented in context there can be no legitimate claim by Red Hat of "reasonable apprehension" of suit by SCO. Lest there be any doubt about Red Hat's complete lack of a "reasonable apprehension" of being sued, SCO's Vice President Chris Sontag was asked in an interview to explain Mr. McBride's comment about "a day of reckoning:"

What he meant was that if SCO prevails in their lawsuit with IBM, companies like Red Hat and SuSE may need to revisit their distributions and remove any UNIX system code from their distributions and compensate SCO in some way for the software code that they benefited from by using our UNIX code."
Mozilla Article attached as Exhibit F. Nothing in that statement indicates that SCO is intending to sue Red Hat for infringement or misappropriation. Instead, it makes the rather unremarkable observation that if SCO prevails in its litigation against IBM, there will be ramifications to other

10

companies in the Linux industry.

Red Hat apparently was aware that Mr. McBride's statement had been clarified. Indeed, when Red Hat presented the foregoing quote of Mr. Sontag, it intentionally deleted the reference showing that the comment was an explanation of Mr. McBride's statement about a "day of reckoning." ¶ 52. Whatever Red Hat's motivation for its selective editing, it remains clear that nothing in any of these quotes gives rise to a "reasonable apprehension" of suit by SCO.

In its quest for claiming a "reasonable apprehension," Red Hat next incorrectly attributes a quote to Chris Sontag. Specifically, in paragraph 50, Red Hat claims Mr. Sontag said that SCO "may bring subsequent actions against Linux software developers such as Red Hat ...." There are two significant flaws with Red Hat's use of this "quote." First, it is not a statement that Chris Sontag made. According to the CNETnews.com article from which the quote came, the quote was the reporter's interpretation of Mr. Sontag's statement.8 More importantly, when the statement and Mr. Sontag's actual statements are read together, it is clear that Mr. Sontag's comments do not give rise to "reasonable apprehension" on the part of Red Hat:

SCO may also amend its complaint to bring additional causes of action against IBM, he added, and bring subsequent actions against Linux software developers such as Red Hat and SuSE.

"The fact that there are other companies infringing our contract ...(means) there could be other complaints," Sontag said.

In particular, Sontag said that a "major" hardware vendor inserted code protected by SCO's UNIX intellectual-property rights into a Linux product.

Article attached as Exhibit G.

11

The actual quotes attributed to Mr. Sontag indicate that at least one other company (besides IBM) with whom SCO has a license agreement is in violation of that license agreement. Red Hat does not have any such license agreement and it has not alleged that it has any such license agreement with SCO. Under these circumstances, Red Hat is well aware it is not the unidentified "major" hardware vendor. Thus, there is nothing in this article presented by Red Hat to provide Red Hat with a "reasonable apprehension" of being sued for infringement or misappropriation.

In paragraphs 56 through 58 of its Complaint, Red Hat points to the pre-suit letter it wrote to SCO. This letter and SCO's response certainly do not provide a "reasonable apprehension" that Red Hat may be sued. In its Complaint, Red Hat outlines the letter it sent to SCO in which Red Hat demanded that SCO identify the infringing code "and noted that SCO had `failed to provide any details' in support of its allegations so that Red Hat could refute them." ¶ 56 (emphasis added). While Red Hat identified its desire to refute SCO's allegations, it never mentioned either in its letter or in reaction to SCO's response to its letter any fear that it would be sued. Rather, according to its allegations, Red Hat received "a telephone call seeking to have Red Hat pay for an unneeded UNIX license." ¶ 11. Two business days later, Red Hat filed suit. "The unavoidable inference is that plaintiff, recognizing that it did not have a reasonable basis for apprehension of suit, intentionally attempted to goad defendant's counsel into threatening a lawsuit." BASF Corp. v. PPG Industries, 1991 WL 354884 *9 (D N.J. February 11, 1991).9

Courts confronted with far more compelling examples of purported "reasonable apprehension" have rejected such claims. In Bonterra America v. Bestmann, 907 F.Supp. 4, 7 (D.D.C. 1995), for example, the "totality of circumstances" was (1) an offer from the defendant

12

patent holder of a non-exclusive license; (2) statements allegedly made to plaintiffs customer and/or marketing representative that certain of plaintiffs products violated defendant's patent; and (3) a letter to the same person from defendant's attorney in which the attorney declined to answer legal questions about defendant's patent and directed the person to seek his own counsel regarding such questions. Id. The court further noted the absence of allegations that may have supported jurisdiction:
No allegations have been made by [plaintiff] that [defendant] has contacted [plaintiff] and informed it that its products are in violation of the patent. No allegations have been made that [defendant] has conveyed to [plaintiff] either expressly or implicitly that it intends to sue to enforce its patent, and no allegations have been made that [defendant] has ever before sued another entity for infringement.
Id.

Red Hat's Complaint suffers from the same infirmities found by the court in Bonterra America to preclude subject matter jurisdiction. There are no allegations that SCO has contacted Red Hat and informed it that its product violates SCO's copyrights. Nor has SCO done so. There are no allegations that SCO has conveyed to Red Hat either expressly or implicitly that it intends to sue Red Hat to enforce its copyrights. Nor has SCO done so. There are no allegations that SCO has sued any other entity for infringement. - Nor has SCO done so. Under these circumstances, the declaratory judgment claims fail for lack of subject matter jurisdiction. See also CAE Screenplates, 957 F.Supp. at 790 (series of letters between patentee's counsel and putative infringer's counsel concerning putative infringer's demands for license, fears of putative infringer's customers about patent, and patentee's history of patent litigation did not give putative infringer objective, reasonable apprehension of infringement suit, as required for subject matter jurisdiction and declaratory judgment action for a non-infringement, unenforceability and

13

invalidity of patent); Phillips Plastics Corp. v. Kaisha, 57 F.3d 1051, 1053 (Fed. Cir. 1995) ("The offer of a patent license does not create an actual controversy").

Red Hat's allegations directed solely to its claim for a declaratory judgment for "no misappropriation of trade secrets" also do not provide proof of an "actual controversy." Red Hat certainly has not alleged it has been threatened with such an action. Similarly, the "totality of circumstances" do not imply such a threatened action. As to any threats by SCO, real or perceived, they are found in paragraph 51 of its Complaint. There, Red Hat claims SCO has asserted Red Hat wrongfully misappropriated portions of SCO's proprietary UNIX software. However, the purported factual support for this proposition incorporated in Plaintiffs allegations eviscerates this pronouncement. Specifically, Red Hat notes that Darl McBride stated that "IBM took chunks [of code] out of [Project] Monterey, and gave it away. You can find it in Red Hat ...Linux." ¶ 51 (emphasis added). As this quote makes clear, any claim for misappropriation asserted by SCO would not be made against Red Hat, but instead would be made against IBM, as SCO has done in the litigation pending in federal court in Utah.

In addition to this lack of a threat, there is a simple factual hurdle that precludes any "reasonable apprehension" of suit against Red Hat. Red Hat, unlike IBM, has never signed a license agreement giving it access to SCO's confidential trade secrets in System V source code. A fundamental principle of trade secret law is that "[t]he protection accorded the trade secret holder is against the disclosure or unauthorized use of the trade secret by those to whom the secret has been confided under the express or implied restriction of nondisclosure or nonuse." Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 475 (1974) (emphasis added). In the absence of access to the confidential UNIX System V source code or the improper taking of that source code Red Hat cannot legally be in a position of "reasonable apprehension" that it may be sued

14

for misappropriation of trade secrets.

B. Even if the Court Determines Subject Matter Jurisdiction Exists, the
Court Should Exercise its Discretion and Decline to Consider the Case.

It is clear that Red Hat has not established (and cannot establish) a reasonable apprehension of suit by SCO for infringement or misappropriation. Nonetheless, even if Red Hat could satisfy the prerequisites, this Court has the discretion to decline to exercise its jurisdiction. Rickover, supra; International Harvester, 623 F.2d at 1217. The previously filed SCO v. IBM Case addresses most, if not all, of the issues of copyright infringement and misappropriation. If these issues are decided against SCO in that case, then Red Hat's lawsuit becomes unnecessary. Certainly, Red Hat's "need for declaratory relief does not outweigh the interests in judicial expediency and in avoiding unnecessary federal court decisions." International Harvester, 623 F.2d at 1218. This Court, therefore, should decline jurisdiction, if it exists, in this case and dismiss Counts I and II of the case.

15

II. RED HAT'S CLAIMS FALL OUTSIDE THE SCOPE OF THE LANHAM ACT
AND RELATED STATE LAW CLAIMS AND ARE FULLY PROTECTED
SPEECH UNDER THE FIRST AMENDMENT.

Red Hat's claims for relief under the Lanham Act and related state law claims, as set forth in Counts III through VII of the Complaint, contain only legal conclusions in the body of each count, without reference to specific averments of fact. Therefore, it is necessary to glean factual support for each of these claims from the Background Facts contained in paragraphs 1 through 69 of the Complaint. A complicating factor is that many of the "Background Facts" are argument and ad hominem attacks, rather than averments of factual conduct.

Nevertheless, the Background Facts generally condense into five public statements made by SCO that relate to Red Hat's claims: (1) Linux software versions 2.4 and 2.5 contain intellectual property owned or controlled by SCO,10 (2) IBM has improperly contributed UNIX intellectual property into Linux,11 (3) SCO intends to protect and defend its intellectual property rights,12 (4) legal liability for use of infringing versions of Linux may rest with end users,13 and (5) corporate end users can avoid potential legal liability to SCO by acquiring a right-to-use license14 (collectively, the "Public Statements").

16

-16- 1 SCO's Public Statements fall outside the scope of the Lanham Act and related state law claims and are protected under the First Amendment to the U.S. Constitution. The Public Statements also address or relate to pending or potential litigation and are privileged under the common law doctrine of litigation immunity. Therefore, Counts III through VII of Red Hat's Complaint fail to state claims upon which relief may be granted and must be dismissed with prejudice.

A. The Public Statements are Fully Protected Speech Under the First
Amendment.

Red Hat's claims under the Lanham Act and related state laws are based on the Public Statements summarized above. The question on this Motion to Dismiss is whether the Public Statements could legitimately be considered "False Advertising in Violation of § 43(a) of the Lanham Act," as pled by Red Hat in the Complaint. For the reasons detailed below, the answer to this question must be "no."

For a representation to be actionable under the Lanham Act, it must be made "in commercial advertising or promotion." 15 U.S.C. § 1125(a)(1)(B). Congress intended § 43(a) of the Lanham Act to extend only to false and misleading speech that is encompassed within the "commercial speech" doctrine developed by the United States Supreme Court. Gordon and Breach Science Publishers, S.A. v. American Institute of Physics, 859 F.Supp. 1521, 1535-36 (S.D.N.Y. 1994). "Commercial speech" is protected under a lesser standard than other forms of constitutionally guaranteed speech. See, e.g., United States v. Edge Broadcasting Co., 509 U.S. 418 (1993); Board of Trustees v. Fox, 492 U.S. 469 (1989). As a result, the government may regulate commercial speech in ways that it may not regulate other forms of speech. See, e.g., Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Counsel, 425 U.S. 748, 770-73

17

(1976).

One definition of "commercial speech" set forth by the U.S. Supreme Court is "speech proposing a commercial transaction." Edge Broadcasting, supra, at 426. An alternative definition, also set forth by the U.S. Supreme Court, is "expression related solely to the economic interests of the speaker and its audience." City of Cincinnati v. Discovery Network, Inc. 507 U.S. 410, 422 (1993). Notwithstanding these different definitions of "commercial speech," the Supreme Court cautions that distinguishing between commercial and noncommercial speech is not susceptible to the drawing of bright lines. Id. See also Gordon and Breach, 859 F. Supp. at 1537-38. "The protection available for particular commercial expression turns on the nature both of the expression and of the governmental interests served by its regulation." Bolger v. Youngs Drug Products Core, 463 U.S. 60, 68 (1983), quoting Central Hudson Gas & Electric Corp. v. Public Service Comm'n., 447 U.S. 557, 563 (1980). The prohibition against use of a bright-line test ensures that restrictions on speech are carefully evaluated and that speech deserving of greater constitutional protection is not inadvertently suppressed:

We conclude that ... the articles' commercial or noncommercial nature cannot be determined simply through the application of the bright-line test of whether they "propose a commercial transaction" (or alternatively, whether they "do no more than propose a commercial transaction" [citation omitted]. In cases such as this where commercial and noncommercial speech are closely intertwined, our task is not to apply bright-line tests but rather to "examine restrictions on speech carefully to ensure that speech deserving of greater constitutional protection is not inadvertently suppressed."
Gordon and Breach, 859 F.Supp. at 1540 n. 7, quoting Discovery Network, 507 U.S. at 423. Thus, the inquiry to determine whether speech is "commercial" under the Lanham Act requires an analysis of both the nature of the particular speech in question, and the governmental interest served by regulating that type of speech.

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1. Nature of the Speech.

In the instant case, the speech in question is set out in SCO's Public Statements. The nature of the Public Statements concerns (a) rights under the Copyright Act, 17 U.S.C. § 101 et seq., (b) contract and copyright claims against IBM, (c) potential copyright liability of corporate end users of Linux versions 2.4 and 2.5, and (d) licensing options for corporate end users to avoid potential copyright liability.15 The nature of this particular speech can be generally categorized as follows: ownership of intellectual property rights, violation of those rights by others, pending and potential litigation, ways to avoid intellectual property infringement claims without litigation, and a licensing offer that is compatible with, not competitive to, Red Hat products.

On the issues of ownership of intellectual property rights, public statements of ownership in those rights and infringement by others, this Court's decision in Symbol Technologies, Inc. v. Proxim Inc., 2003 WL 21840774 (D. Del. July 30, 2003)16 clearly demonstrates the protections afforded to such speech. Symbol Technologies involved the filing of a patent infringement case. The plaintiff filed its complaint for infringement, and also issued a press release in connection with the complaint, publicly asserting patent infringement claims against the defendant. In response, the defendant filed a counterclaim for, inter alia, Lanham Act violations, together with unfair competition and tortious interference claims under Delaware law. This Court reviewed these alleged violations on a summary judgment motion, summarized as follows:

In its counterclaims, defendant first asserts that this press release constituted unfair competition under § 43(a) of the Lanham Act, 15 U.S.C. §1125 (a). (D.I. 6 at 11) It alleges that the press release contains materially false and misleading statements stating that defendant infringed four patents owned by plaintiff and that plaintiff would obtain injunctive relief against Proxim's Home-RF products. (Id. at 12) Defendant also alleges that plaintiffs press release was made in bad faith because plaintiff knew that

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defendant's products did not infringe the asserted patents. Rather, the press release was meant to mislead and deceive defendant's investors, suppliers, distributors, retailers and other business partners. (Id. at 13) Finally, defendant asserts that ultimately, plaintiff's press release caused the failure of defendant's Home-RF product line and caused defendant substantial financial loss. Defendant next asserts that plaintiffs press release also violates Delaware's common laws governing unfair competition and tortious interference with actual and prospective contractual relations, (Id. at 14) Again, defendant alleges that plaintiffs press release was intended to dissuade defendant's business partners from doing business with it and to push defendant's Home-RF products out of the market.
Id at *3.

These facts are remarkably similar to those alleged in the instant case, with the significant difference that SCO has not accused Red Hat of infringement. This Court entered summary judgment in Symbol Technologies, dismissing the Lanham Act and state law claims and adopting the test for evaluating public statements to the industry about pending patent infringement matters set forth by the Federal Circuit in Mikohn Gaming Corp. v. Acres Gaming, Inc., 165 F.3d 891, 897 (Fed Cir. 1998). The Mikohn Gaming case similarly dealt with public statements about patent infringement allegations issued by a party prior to full and final resolution of the infringement claims at issue. The Federal Circuit ruled:

Communication to possible infringers concerning patent rights is not improper if the patent holder has a good faith belief in the accuracy of the communication. Although "bad faith" may encompass subjective as well as objective considerations, and the patent holder's notice is not irrelevant to a determination of bad faith, a competitive commercial purpose is not of itself improper, and bad faith is not supported when the information is objectively accurate. In general, a threshold showing of incorrectness or falsity, or disregard for either, is required in order to find bad faith in the communication of information about the existence or pendency of patent rights. Indeed, a patentee, acting in good faith on its belief as to the nature and scope of its rights, is fully permitted to press those rights even though he may misconceive what those rights are. Consequently, patentees do not violate the

20

rules of fair competition by making accurate representations, and are allowed to make representations that turn out to be inaccurate provided they make them in good faith.
Id. at * 4.

Under the Mikohn Gaming rule adopted by this Court, the only threshold SCO faces with respect to the SCO Public Statements is the threshold of good faith. The question of good faith pleading regarding SCO's intellectual property rights with respect to Linux, and attendant infringement of the Linux 2.4 kernel software, is squarely before the Utah Court in the SCO v. IBM Case. This issue should not be allowed to go forward as a collateral attack against SCO in the instant case.

Public statements that discuss pending or potential litigation in direct communication to customers are not in the nature of a "proposal for a commercial transaction" under the Lanham Act. In a factually similar case, the court in Avery Dennison Corp. v. Acco Brands, Inc., 2000 U.S. Dist. LEXIS 3938 (C.D. Cal. February 22, 2000)17 found that demand letters to customers which contained allegedly false and misleading statements about the nature of the defendant's legal claims failed to give rise to a Lanham Act claim, as a matter of law. The court reasoned:

The Letters did not ask the recipients not to buy Acco's products; rather they asked the recipients not to use the allegedly infringing packaging in their catalogs ... From a reading of the content of the Bohrer Letters, it is clear that these letters consisted of "cease and desist" language rather than any marketing or sales pitch.

As such, this Court concludes that the Bohrer Letters do not constitute an advertisement as a matter of law. Furthermore, in examining the disputed communication in light of its surrounding circumstances, this Court concludes that the Letters do not constitute commercial speech. As Avery argues, the central message of the Letters was that Avery believed its legal rights were being violated and that it did not want the recipients of the letters to continue that violation.

Id. at *23-24

21

Avery Dennison is persuasive in the instant case. Here, as in Avery Dennison, the speech in question includes statements of legal rights and alleged violations of those rights by others. These statements are not a "marketing or sales pitch" they are in the nature of legal demands. Legal demands and assertions do not rise to the level of an "advertisement" or "commercial speech" under the Lanham Act. The Avery Dennison court entered a ruling to this effect as a matter of law. This Court should reach the same conclusion and rule that the SCO Public Statements related to legal rights and violation of those rights by others do not, as a matter of law, give rise to Lanham Act claims.18 SCO's statements about the right-to-use intellectual property license offered by SCO to large corporations ("RTU License") involves additional inquiry. The RTU License has the following characteristics: it is offered for simultaneous use with any Linux 2.4 operating system, not a replacement for Linux; it releases the licensee from any past or future liability it may have to SCO for infringing use of any Linux product; it covenants not to sue the licensee for any infringement of SCO's intellectual property rights that might otherwise arise from running Linux. ¶ ¶ 61, 62. This RTU License does not fall within the Lanham Act for three distinct reasons: first, it is a reasonable extension of SCO's legal claims involving current or potential litigation, and therefore should be treated under the rationale of Mikohn Gaming, supra, and Avery Dennison, supra; second, its salient features are a release of liability and covenant not to sue customers who run Linux, which are distinctly protected legal statements; and third, it does not compete with Linux, but rather depends entirely on the acceptance and licensing of Linux by customers. Because SCO's RTU License depends on the continued licensing of Linux by customers for its ongoing success, and because the RTU License principally involves a legal release and covenant not to sue, this Court should rule that it falls outside of Lanham Act

22

coverage.

For the above reasons, the Public Statements made by SCO do not have the fundamental characteristics of commercial speech required to support a Lanham Act claim. This is particularly apparent when the Public Statements are evaluated in context of the governmental interests that relate thereto. When evaluated against the relevant governmental interests, it is clear that the Lanham Act coverage does not extend to the Public Statements under the fundamental test for commercial speech articulated in Bolger v. Youngs, 463 U.S. at 68; and explained in Gordon and Breach, 859 F.Supp. at 1535-40.

2. Governmental Interests Served by Regulating the Speech in Question.

The governmental interests in regulating speech under the Lanham Act must be balanced against the weight of other governmental regulations that already exist with respect to that speech. Clearly, the governmental interest in regulating commercial speech under the Lanham Act is to prevent false and misleading advertisement. So long as other governmental regulations do not counterbalance this interest, commercial speech that otherwise meets the required elements of proof will be subject to the Lanham Act. However, when speech has some commercial characteristics but is also directly implicated by other significant governmental regulations, the elements of commercial speech are "inextricably intertwined" with protected speech, and therefore fall outside Lanham Act coverage. See e.g., Riley v. National Fed'n of the Blind, Inc., 487 U.S. 781, 796 (1988) (theological component of speech was "inextricably intertwined" with its commercial nature and therefore not subject to Lanham Act); and Village of Schaumburg v. Citizens for a Better Env't., 444 U.S. 620 631-37 (1980) (mandated disclosure of administrative costs was "inextricably intertwined" with noncommercial charitable solicitation and therefore subject to heightened First Amendment scrutiny). Thus, when speech with commercial characteristics is "inextricably intertwined" with otherwise fully protected speech, courts are to treat all aspects of the subject speech as fully protected expression. Riley

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v. National Federation of the Blind, 487 U.S. at 795-96.

There are four primary governmental interests implicated by regulating the speech in question (the SCO Public Statements). These governmental interests are compelling in their own right and are inextricably intertwined throughout the entirety of the SCO Public Statements. Individually and collectively these governmental interests require treatment of SCO's Public Statements as fully protected speech under the First Amendment, falling outside of the Lanham Act. The first governmental interest implicated by regulating the SCO Public Statements is the exclusive set of rights granted to copyright holders under the Copyright Act, 17 U.S.C. § 101 et seq. The Copyright Act grants certain exclusive rights to owners of copyrights, including the right to reproduce the copyrighted works, prepare derivative works thereof and authorize reproduction and derivative works by others. 17 U.S.C. § 106. The Copyright Act authorizes such acts as public registration and notice (17 U.S.C. § 401-412), legal action for damages (17 U.S.C. § 503) and injunctive relief (17 U.S.C. § 502). It would be anathema for copyright holders to be prohibited from speaking about the nature and extent of their rights under the Copyright Act. Therefore, the Copyright Act provides a significant governmental interest that weighs against Lanham Act relief with respect to statements made about the nature and extent of SCO's copyrights.

The second governmental interest implicated by regulating the SCO Public Statements is the constitutional guarantee to free and uninhibited access to courts. This governmental interest is embodied in the litigation privilege recognized at common law. The Restatement of Law, Second, Torts §587 recognizes this principle as follows:

A party to a private litigation or a private prosecutor or defendant in a criminal prosecution is absolutely privileged to publish defamatory matter concerning another in communications preliminary to a proposed judicial proceeding, or in the institution of or during the course and as a part of, a judicial proceeding in

24

which he participates, if the matter has some relation to the proceeding.
Under the Restatement position, the only condition to absolute immunity for parties involved in pending or potential litigation is that published statements must bear "some relation to the proceeding." Various versions of the Restatement position on litigation immunity have been widely adopted by state and federal courts throughout the United States, including Delaware. See, e.g., Shearin v. Baldwin, 1988 De. Super. LEXIS 243 (July 5, 1988).19 Shearin v. Baldwin involved attorney litigation immunity under Restatement (Second) §586, which appears to be identical in principle to Restatement §587 that extends to litigants. In Shearin v. Baldwin, the Delaware Superior Court found that:
Delaware law recognizes the common law rule, protecting "statements of judges, parties, witnesses and attorneys offered in the course of judicial proceedings from a cause of action in defamation." Nix v. Sawyer, Del. Super. 466 A.2d 407, 410 (1983) and cases there cited; Hoover v. Van Stone, 540 F. Supp. 1118, 1121 (D. De. 1982). "The privilege affords absolute protection upon a showing that: (1) statements issued as part of a judicial proceeding; (2) the alleged defamation is relevant to a matter at issue in the case." Id at 410; Restatement (Second) of Torts §586 (1977) n.2 Comment (a) of the official comment to this section of the Restatement explains that this absolute privilege is founded on a public policy of providing attorneys with a great degree of freedom in their efforts to obtain justice for their clients and, therefore, applies to communications incident to the institution and conduct of litigation, and to conferences and other communications preliminary to the formal commencement of judicial proceedings.
Id. at p. 3 (emphasis added). See also Avery Dennison, at p. 5 (applying California law, the principal purpose of litigation immunity is to afford litigants the "utmost freedom of access to the courts without fear of being harassed subsequently be derivative tort actions .... If this Court were to impose tort liability based on the Letters, then it would inhibit trademark holders from attempting to protect the rights granted it under the Lanham Act.") SCO's Public Statements fall

25

squarely in the rule of Shearin v. Baldwin and the rationale of Avery Dennison. SCO has an absolute privilege to make statements related to litigation, both inside and outside the courtroom. All of SCO's Public Statements relate to pending or potential litigation, or matters related thereto. Even the RTU Licensing offer to customers was related to actual and potential legal proceedings. SCO is entitled to an absolute privilege to have made the Public Statements. The governmental interest in protecting the litigation privilege and allowing free and unfettered access to courts without the fear of being harassed subsequently in derivative tort actions overrides any governmental interest in the Lanham Act with respect to SCO's Public Statements. Here, without any allegation- that SCO's Public Statements are defamatory, it is even more compelling that the absolute litigation privilege applies.

The third governmental interest implicated by regulating the SCO Public Statements is the Judicial Code set forth in Title 28 of the United States Code. This governmental interest relates to regulation of litigation and court proceedings in an efficient and fair manner. The U.S. Court for the District of Utah already has before it the question of whether Linux software infringes SCO's intellectual property rights. SCO's allegations in the SCO v. IBM Case are subject to the normal standards of good faith pleading that govern litigation proceedings and are within the jurisdiction of the Utah Federal District Court. As noted above, this Court has already adopted the decision of the Federal Circuit in Mikohn Gaming. Under Mikohn Gaming, the only threshold SCO faces with respect to the SCO Public Statements is the threshold of good faith. Because the question of good faith pleading regarding SCO's intellectual property rights is pending before the Utah Court in the SCO v. IBM Case, no governmental interest is served by exercising jurisdiction over SCO's Public Statements in the instant case. Rather, in the interest of judicial economy and fair litigation, Red Hat should be precluded from bringing its Lanham Act claims and related state law claims in this action.

The fourth governmental interest implicated by regulating the SCO Public Statements is

26

the constitutional guarantee of a free and impartial press under the First Amendment. As noted in Red Hat's Complaint, the press has taken a keen interest in the issues raised in the SCO v. IBM Case. Indeed, SCO's Public Statements are also part of a wider debate in the technology and music industries about the scope of intellectual property protection in a digital age. As open source software development becomes prevalent and digital music can be downloaded for free, many people are simply ignoring copyright and patent laws. Many public commentators recognize this disintegration of property rights as a danger to our economic system. In a small way, SCO's Public Statements are part of this debate. This is an additional factor that weighs in favor of holding SCO's Public Statements as fully-protected speech, not subject to the Lanham Act or associated state law claims. It would pervert the First Amendment to allow the Lanham Act to chill broad debate about the relative merits, and problems, with open source software.

27

CONCLUSION

Red Hat is not in reasonable apprehension of being sued by SCO for infringement or misappropriation. In fact. Red Hat's stated purpose for its declaratory relief claims is to seek an advisory opinion from this Court regarding SCO's intellectual property claims. This is an entirely impermissible use of the Declaratory Judgment Act. Red Hat cannot establish subject matter jurisdiction to support its claims for declaratory relief, and Counts I and II of the Complaint must be dismissed for lack of jurisdiction.

Red Hat's claims under Counts III through VII seek to impose liability for actions and expression that do not give rise to liability under the Lanham Act or the associated state law claims. Further, any governmental interest served under the Lanham Act is heavily outweighed by fundamental governmental interests in protecting copyright interests, ensuring full and free access to courts, providing litigation immunity, promoting judicial economy and fairness in litigation, and safeguarding freedom of speech and the press. Therefore, Counts III through VII must be dismissed, with prejudice.

[signature]

Jeffrey Moyer (#3309)
Steven J. Fineman (#4025)
Richards, Layton & Finger, P.A.
[address, phone]
Attorneys for Defendant The SCO Group, Inc.

OF COUNSEL:

Stephen N. Zack
Mark J. Heise
Boies, Schiller & Flexner LLP
[address, phone]

Dated: September 15, 2003

28

CERTIFICATE OF SERVICE

I hereby certify that on September 15, 2003 true and correct copies of the foregoing were caused to be served on counsel of record at the following addresses in the manner indicated:

BY HAND DELIVERY

Josy W. Ingersoll
Adam W. Poff
Young, Conaway, Stargatt & Taylor
[address]

BY FIRST CLASS U.S. MAIL

William F. Lee
Mark G. Matuschak
Michelle D. Miller
Doland R. Steinberg
Hale and Dorr, L.L.P.
[address]

[signature]
Steven J. Fineman (#4025)


1Hereinafter, all references to the Red Hat Complaint will be designated as " ¶ ____."

2 Hereinafter, all references to the SCO v. IBM Amended Complaint will be designated as "SCO ¶ ___." The SCO v. IBM Amended Complaint is attached as Exhibit A. All exhibits described herein are attached to the Declaration of Mark J. Heise filed contemporaneously herewith.

3 Under the open source development model numerous, perhaps hundreds, of different software developers each contribute parts of the software code base. These code contributions are assembled into a single working software product. Open source development is traditionally done as a hobby, without compensation to the software developers. Its goal is to make free software that everyone can use and share without restriction and without paying a licensing fee.

4 The May 12, 2002 letter is attached as Exhibit C.

5 The Press Release is attached as Exhibit D.

6http://www.redhat.com/about/presseenter/ 2003/press_sco.html

7 These requests are consistent with Red Hat's stated intentions in its press release filed on the date suit was filed: "Red Hat today made two significant announcements to protect Red Hat Linux customers and the worldwide Linux community," i.e., the filing of the lawsuit and pledging a fund to pay the legal expenses of anyone who actually may be sued for infringement by SCO under specified conditions.

8Nonetheless, even if Mr. Sontag did make such a statement or one similar to it, it is merely consistent with the earlier comments that if SCO is successful against IBM, it may bring subsequent actions against Red Hat and SuSE. Again, such comments do not give rise to an immediate need for declaratory relief.

9 Opinion attached as Exhibit H.

10 ¶ ¶ 1, 40, 59 and 66.

11 ¶ ¶ 2,41 and 51.

12¶ ¶ 42 and 52.

13 ¶ ¶ 2, 4 and 42.

14 ¶ ¶ 38 and 60. 15 SCO has never asserted in any statement that individual, non-corporate users of Linux may be liable to SCO, or otherwise would need to purchase a right to-use-license.

16 Case attached as Exhibit I.

17 Case attached as Exhibit J.

18 SCO recognizes that Symbol Technologies, Mikohn Gaming and Avery Dennison were decided on motions for summary judgment. However, based on the facts as presented in Red Hat's Complaint in the instant case, this Court is likewise in a position to rule on the issues of the protected speech as a matter of law on this Motion to Dismiss.

19 Case attached as Exhibit K.


  


SCO's Opening Brief in Support of its Motion to Dismiss | 148 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: brenda banks on Wednesday, September 17 2003 @ 11:15 PM EDT
SCO owns all right, title and interest in and to computer software known as UNIX
System V and UnixWare, together with related copyrights ("UNIX"). 5,
18, 33; see also SCO v. IBM Amended Complaint 1, 2, 60-63.2 SCO licenses UNIX
software to its corporate customers for a fee

owns all?
also it talks about ibm asking for delays?
when did ibm ask for a delay in the sco vs ibm?

regards br3n

---
br3n

[ Reply to This | # ]

SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: Anonymous on Wednesday, September 17 2003 @ 11:23 PM EDT
Thanks to our friend in Delaware for getting the document.

One major point of interest is that this is the first legal document that SCOG
has filed that cites previous cases.

We can now discuss the legal merits of SCOG's case, instead of speculating the
'marketing' language that they use in their press releases and interviews.

The game has started.

D.

[ Reply to This | # ]

SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: brenda banks on Thursday, September 18 2003 @ 12:02 AM EDT
Open source development is traditionally done as a hobby, without compensation
to the software developers. Its goal is to make free software that everyone can
use and share without restriction and without paying a licensing fee.

without restriction?

br3n

---
br3n

[ Reply to This | # ]

HP angle
Authored by: Anonymous on Thursday, September 18 2003 @ 12:04 AM EDT
Off topic, but have to post it somewhere

I've been researching the HP angle that has been mentioned in previous
threads.

So far I have found press releases and other articles, that mention HP's
involvement in developing a 64 bit UNIX.

The earliest I have found is a Novell press release from 1995, that says HP is
to develop a 64 bit Linux. Old SCO is also mentioned in the same press release
(HP get just a sentence or two). Check Novell's press release archive to see
it.

There are numerous articles from 1996 on that mention HP's working on a 64 bit
UNIX. THe project is called "Gemini" and then "Gemini
II" (I'm not sure if this means the original Gemini was done). These
articles mostly mention Old SCO too, for example HP's Gemini project was
discussed at SCOforum 1996.

From the articles it seems clear that HP is the lead in developing the 64 bit
UNIX. From the ones I have seen, it is not clear if HP is the only party
actively developing it - or whether Old SCO were involved in development too.

What rights, if any, HP got to the 64 bit developments is not stated in any of
the news stories I have yet found.

Opinion/Speculation: I personally would find it surprising if HP didn't get
some (all?) rights in code that HP wrote or primarily wrote.

If somebody really wants to dig into this, I'd suggest digging thru Novell's
10-Qs and 10-Ks from 1994 to 1996 might be a good place to start - as it MIGHT
be mentioned there.



[ Reply to This | # ]

  • Typo correction: - Authored by: Anonymous on Thursday, September 18 2003 @ 12:06 AM EDT
  • HP angle - Authored by: Alex on Thursday, September 18 2003 @ 01:18 AM EDT
    • HP angle - Authored by: Anonymous on Thursday, September 18 2003 @ 03:28 AM EDT
  • HP angle - Authored by: Dick Gingras on Thursday, September 18 2003 @ 02:37 AM EDT
  • HP angle - Authored by: PJ on Thursday, September 18 2003 @ 08:09 PM EDT
Case law is not on point
Authored by: skidrash on Thursday, September 18 2003 @ 12:06 AM EDT
Saying that all Linux users must pay SCO is not relevant to the SCO vs IBM
lawsuit.

Maybe the precedents allow SCO to comment publicly about IBM's alleged
misconduct but it does not allow SCO to damage any and all other business SCO
feels like damaging during the conduct of the case.

And filing a lawsuit does not provide blanket immunityfor any anti-business
activity (speech or otherwise) one cares to engage in during the timespan of the
suit. In other words, filing a lawsuit does not put all other law on hold for
the appellant.

[ Reply to This | # ]

SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: Anonymous on Thursday, September 18 2003 @ 12:26 AM EDT
1. SCO (McBride) offered a license to Red Hat on July 31

2. SCO (McBride) said in August 5 teleconference that Red Hat infringes.

3. They may have said it elsewhere too. They also sent a letter saying counter
claims would include copyright infringement.

IANAL, but 1+2 or perhaps 1+3 should met the requirements for declarative
judgement

4. SCO threatens to invoice Linux users (how many times!) including Red Hat
users. They even said they would do it by end of October 2003. They also said
the alternative to paying the invoice is litigation.

IANAL, but 4 should be enough to show SCO is not waiting on the result of the
IBM case, but is damaging Red Hat's business now.

[ Reply to This | # ]

Couple of comments...
Authored by: Anonymous on Thursday, September 18 2003 @ 12:29 AM EDT

In one part of the filing, SCO said that Red Hat had no proprietary interest in Linux. Poppycock and balderdash! Portions of the kernel carry a Red Hat copyright (much of it from Alan Cox but there are many others). By their making contributions to the kernel, and making money from the support of the kernel, Red Hat has a vital interest in this matter. (IMHO)

This argument of SCO's needs to be responded to. Does Red Hat now respond to this filing by SCO? Or does the judge review the two documents and render a decision?

In another part (a footnote near the very end), it said that traditionally, open source work is done as a hobby... A sly attempt to make a point like ``Your Honor... these people are mere hobbyists. We, on the other hand, are a serious business. Who do think has more at stake here?'' Well, that `hobbyist' label might have been true at one time. But Red Hat, Suse, and other distribution vendors, as well as companies like IBM (and probably HP, SGI, etc.) have full time people that work on Linux. I'm sure their efforts are not viewed as a hobby by their employers. I'm betting they all receive patchecks.

SCO document was rather longwinded in some areas (legal arguments can sometimes makes my eyes glaze over). Can anyone summarize -- perhaps paragraph by paragraph -- what they're rambling on about?

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SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: shaun on Thursday, September 18 2003 @ 12:31 AM EDT
Off Topic but I got this from IceWalkers then ZDNet UK:

http://news.zdnet.co.uk/software/0,39020381,2101037,00.htm

It is a definite exercise in FUD from MS but Lineo handled it well and basicaly
told MS where to put it :)

--Shaun

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SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: Anonymous on Thursday, September 18 2003 @ 12:34 AM EDT
I wonder how SCO's argument for commercial speech = advertising and
promotional speech relates to SCO Forum speeches? And letters to the
global 1500...that was just a 1st Amendment outburst...nothing
commercial there...like get ready for invoices?

On Yahoo! SCOX finance board, SCOX stock boosters typically assume a
minimum 10% compliance (purchase of licenses) by all users of Linux in
the first year or so of invoicing, with more later, as justification for a SCOX

stock price projections to triple digits or more. SCO invoicing users is sort

of like getting direct bills from Elvlis Presley estate for 50's and 60's
Elvis
songs you bought from Time-Life collections. SCO seems to still be on
crack. SCO threatening to invoice users who buy their Linux distribution
from Red Hat or SuSE certainly has a chililng effect on Red Hat or SuSE's
business since it creates uncertainty about additional costs. SCO can't
excuse itself by confusing module copyright ownership versus distribution
ownership with the wave of a hand that nobody owns anything in Linux.
Getting the ownership model right is at the heart of this problem SCO is
attempting to create in the media and now courts. Red Hat will need to
carefully explain the relationship between distribution and module
ownership so that they can affirm their standing, but I'm sure the judge will
be listening.

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SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: brenda banks on Thursday, September 18 2003 @ 12:37 AM EDT
SCO's Public Statements are also part of a wider debate in the technology and
music industries about the scope of intellectual property protection in a
digital age. As open source software development becomes prevalent and digital
music can be downloaded for free, many people are simply ignoring copyright and
patent laws. Many public commentators recognize this disintegration of property
rights as a danger to our economic system. In a small way, SCO's Public
Statements are part of this debate. This is an additional factor that weighs in
favor of holding SCO's Public Statements as fully-protected speech, not subject
to the Lanham Act or associated state law claims. It would pervert the First
Amendment to allow the Lanham Act to chill broad debate about the relative
merits, and problems, with open source software.


there it is
the RIAA statements
this has all been planned and orchestrated
every word every action
they think they have us beat cause they planned this

br3n

---
br3n

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cited cases not on point
Authored by: skidrash on Thursday, September 18 2003 @ 12:41 AM EDT
I re-read my post and I wasn't clear enough.
How can they compare a prior case where a single press release was put out with the current conduct of SCO?
Next, the NDA thing, pretending to be open but "cannot be due to contractual obligations". That's SCO's problem, not RH's.
Like I posted a while ago, I'm more than ever convinced it's completely about FUD and nothing but FUD fo as long as the eye can see.
Looks like they're looking for the judge to rubber-stamp SCO's right to make as many wild accusations SCO cares to make.
Their 10Q openly signals to SUN and MS (no backroom deals necessary) that they are going to continue to FUD, and that they're running out of money, so please send more MS, and this filing openly signals that they're going to push the anti-open-source message to the max.
Keeping my fingers crossed that RH has much better case law in their response, that their response is being triple-checked as I type and will be filed tomorrow morning.
......
looks like I still need to brainstorm what to do about SCO.
Time to solicit more info for these pages -
law enforcement and
licensing faq

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more attempted confusion and conflation
Authored by: skidrash on Thursday, September 18 2003 @ 12:44 AM EDT
of copyright and "ip".

None of this is about copyright but they're pretending they're contributing to
the public debate on copyright.

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Flaws in argument
Authored by: Anonymous on Thursday, September 18 2003 @ 01:22 AM EDT
OK, I actually read through the entire thing. The principle flaw is this: Red Hat is both a distributor and a user of Linux. SCO claims their speech is protected because they are talking about future litigation against Linux users. But given that Red Hat is a Linux user, they have been implicated in future litigation brought by SCO.

Furthermore, they claim that their run time license is complementary offering to Linux, rather than a competing product. But this falls flat on its face given that the licenses effect is to cripple the one most valuable aspect of the Linux product--its freedom.

And yet furthermore, an interesting contradiction is found in their response. First, they claim that Red Hat should have no expectation of litigation given that they are just a distributor, and are not responsible for the original insertion of infringing code. But then they claim that their speech is protected because it is a "good faith" attempt to extract settlement agreements from end users. But the end users are not party to the infringement either. End users have even less liability, in any way that I can see, than the distributors. And given that Red Hat is a distributor, they should expect to have more liability than the class of people that SCO has explicitly threatened to sue. This means that either they are lying when they say that Red Hat has no reasonable fear of litigation, or that their claims of infringement are made in bad faith!

-jqtechworker

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SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: Anonymous on Thursday, September 18 2003 @ 02:14 AM EDT
"Further, any governmental interest served under the Lanham Act is heavily
outweighed by fundamental governmental interests in protecting copyright
interests, ensuring full and free access to courts, providing litigation
immunity, promoting judicial economy and fairness in litigation, and
safeguarding freedom of speech and the press. Therefore, Counts III through VII
must be dismissed with prejudice."

What a load! The SCO copyrights are not even being litagated before the Utah
Court. They have already taken a second bite of the apple there, in filing their
amended complaint. I don't see how they can ask for litagation immunity when
they have avoided any copyright claims on both occasions. Their contract claims
in that case are for code they publicly admit that IBM owns. The pronouncements
made at SCO Forum had nothing to do with the facts or the law in the IBM case,
or access to the courts. On the matter of misappropriation of trade secrets, the
argument that Red Hat has no confidential relations with SCO can just as easily
be applied to most of those 1500 commercial Linux end-users. They don't need to
license SCO or IBM's open source "trade secrets". The 1500 warning
letters have no parallel to Dennison where the intent was to stop infringing
use. SCO wants to sell licenses, not identify and stop the use of any
infringing code they specifically own. They apparently don't trust the courts
in Utah to assess damages against IBM in the contract case, so they have gone
after Red Hat's customers on a different basis. SCO obviously doesn't care if
all of the code even has anything to do with IBM. The code fragments shown at
the Las Vegas "promotional event" certainly don't. Neither of those
code fragments actually came from IBM. I believe in judicial economy too, but if
you are going to kill two birds with one stone, let's make sure they are at
least charged with the same capital offense first.

The promotional T-Shirts "Got Unix in Your Linux, I saw it at SCO Forum
2003" had nothing to do with any code or copyright infringement claims
pending in the IBM case. Access to the courts and free speech don't require
"sponsors" like Intel or HP. Promotional events like SCO Forum do
(and are certainly subject to the Lanham Act 43(a) "advertising or
promotion" clause). Are the press interested
in the SCO Forum because they are bloodhounds after a great story, or were some
of them there on an all expense paid SCO promotional junket?

SCO sets up a strawman and claims that Red Hat can't ask for a declaratory
judgment for the entire Linux Community. Then they attempt to use the same lame
argument themselves by saying the issue of misappropriated code in
"Linux" is before the Utah court. Red Hat asked for a
"declaratory judgment that no Linux version sold used or distributed by
Red Hat, or used by Red Hat's customers infringes any right that SCO might have
pursuant to section 106 of the Copyright Act.." That's an entirely
seperate matter from the IBM contract case or anything to do with the whole
Linux community. Once again, SCO's own defective slide show evidence proves
that IBM and Red Hat are simply not conjoined twins.

Red Hat employs certain Linux kernel programmers "for hire", like
Mr. Alan Cox. How can they lack standing for a hearing on the facts for a
declaratory judgment on copyright infringement of the kernel code developed by
those employees (SMP) at Red Hat's expense? Red Hats copyrights and trademarks
certainly don't depend entirely on the facts that are before the Utah court.

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SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: Anonymous on Thursday, September 18 2003 @ 02:36 AM EDT
In a separate but related case, SCO has sued International Business Machines Corporation ("IBM") in the U.S. District Court, District of Utah (the "SCO v. IBM Case"). In that action, which was filed five months before this case, SCO contends that IBM has breached its UNIX license with SCO by improperly using UNIX software code and methods to enhance the functionality of Linux.

2. Additionally, even if Red Hat were able to successfully establish the jurisdictional requirements for declaratory relief, this Court should decline to exercise jurisdiction because there is no practical reason to do so. The infringement and misappropriation issues Red Hat seeks to adjudicate in this case are currently before U.S. District Judge Dale A. Kimball in the SCO v. IBM Case pending in Utah Federal District Court.

Lies, damned lies.

Red Hat is one of many companies that distributes a software program called "Linux." 28. Linux was developed under an "open source development model' '3 that prohibits proprietary ownership or control by anyone. 22, 26, 32. Therefore, Red Hat has no ownership or proprietary interest in Linux. 32.

They do have non-proprietary ownership and interest.

Red Hat, however, has never had any license from SCO providing access to SCO's trade secrets or other confidential information and, to SCO's knowledge, has not stolen or otherwise misappropriated any of SCO's trade secrets or confidential information. Therefore, unlike companies that have contractual obligations to SCO, Red Hat has no legal or factual basis for apprehension of suit by SCO with respect to trade secrets or confidential information it has licensed from SCO, and its claims in Count II can be summarily dismissed.

This explains that a hypothetical SCO v. Red Hat trade secret claim would be meritless (which is what Red Hat itself says). Why can't Red Hat fear a frivolous suit from SCO?

In paragraph 50, for example, Red Hat identifies a quote from Darl McBride, the Chief Executive Officer of SCO, in which he says simply "[t)here will be a day of reckoning for Red Hat ...when this is done." 50 (emphasis added). On its face, this quote makes clear that any action against Red Hat would take place only when litigation against IBM is completed. Moreover, when this quote is read in the context of the very next sentence, which Red Hat failed to provide, there is no doubt as to SCO's intentions: "But we are focused on the IBM situation." CRN article attached as Exhibit E. With the quote presented in context there can be no legitimate claim by Red Hat of "reasonable apprehension" of suit by SCO. Lest there be any doubt about Red Hat's complete lack of a "reasonable apprehension" of being sued, SCO's Vice President Chris Sontag was asked in an interview to explain Mr. McBride's comment about "a day of reckoning:"

What he meant was that if SCO prevails in their lawsuit with IBM, companies like Red Hat and SuSE may need to revisit their distributions and remove any UNIX system code from their distributions and compensate SCO in some way for the software code that they benefited from by using our UNIX code."

And, of course, they will do that out of the goodness of their heart and solidarity with IBM, not because you will sue (or threaten to sue) them!

These guys have some nerve -- they are saying that Red Hat can't reasonably expect to be sued because SCO has made it clear that it will only go after Red Hat after it's finished with IBM. Why does being sued in three years not count? Because Red Hat should know that SCO won't be around that long?

The previously filed SCO v. IBM Case addresses most, if not all, of the issues of copyright infringement and misappropriation.

More damned lies.

If these issues are decided against SCO in that case, then Red Hat's lawsuit becomes unnecessary.

This is actually true, but only because SCO will be dead then.

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RedHat shakes the tree, apples fall
Authored by: DrStupid on Thursday, September 18 2003 @ 04:02 AM EDT
From discussion of the motion on this and the previous post, I picked up two
main points:

"Redhat has never had a license from SCO providing access to SCO's trade
secrets or other confidential information and to SCO's knowledge, has not
stolen or otherwise misappropriated any of SCO's trade secrets or confidential
information."

This from a legal document by SCO. This effectively concedes the point about
trade secrets we've made since day one, that only those who have a contractual
relationship with SCO (or its predecessors in interest) relating to SysV could
have any liability relating to trade secrets.

Therefore, end users are also not liable.

Next, not from the filing but from Stowell:

"Unlike commercial end-users, Red Hat is a Linux distributor and therefore
won't have to pay license fees."

To me this sentence establishes once and for all that SCO *know* they have no
case against end users.

We already know (see above) they cannot be liable for trade secrets claims.

We already know they cannot be liable for patent claims, since SCO hold no
patents relevant to the kernel, nor do they hold the UNIX patents.

That only leaves copyright. But if copyright is involved, Red Hat (as a
distributor) is *more* liable for licence fees than anyone else.

There are no other grounds on which SCO can demand licence fees from anyone with
whom they have no previous contractual relationship.

I hope that if nothing else, RedHat push the copyright angle in their response
to SCO's motion and thus force SCO to admit they have no basis for a copyright
action.

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Link to Court Docket
Authored by: Anonymous on Thursday, September 18 2003 @ 07:16 AM EDT
http://www.utd.uscourts.gov/documents/ibm_hist.html

History of court dockets for IBM-SCO case. Hree's wher eyou can seei fi anyone
has filed motions for discovery, etc.

Interesting bit:
Filed: 09/09/03
Entered: 09/10/03 Add party (Private)
Docket Text: Added party Canopy Grp

So either IBM or SCO asked to add Canopy ... which one was it? And as plaintiff
to the suit, or co-defendant to the countersuit? Inquiring minds want to know.

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URL
Authored by: paulb on Thursday, September 18 2003 @ 07:50 AM EDT
Comment on the motion here

"Red Hat said it sued because after SCO failed to respond to its requests for information supporting SCO's claims of ownership and instead, allegedly requested Red Hat pay a licensing fee.

But SCO, in Monday's legal papers, disputed Red Hat's allegations, saying Red Hat so far, has no grounds to fear being sued by SCO for copyright infringement or misappropriation.

That's because Red Hat, unlike IBM, has "never had any license from SCO providing access to SCO's trade secrets or other confidential information, and to SCO's knowledge, has not stolen or misappropriated any of SCO's trade secrets or other confidential information," SCO said.

SCO said Red Hat's fears were premature because any further action by SCO would depend largely on the outcome of its lawsuit with IBM.

"We've had issues with Linux, but never attacked Red Hat," said SCO spokesman Blake Stowell. "Unlike commercial end-users, Red Hat is a Linux distributor and therefore won't have to pay license fees."

I guess I don't follow Blake's reasoning: Red Hat doesn't have a contract with SCO, never stole anything, but has to wait until the IBM case is settled before they know whether they will be sued? And yet Red Hat doesn't have anything to worry about because they are a commercial distributor? I feel I'm being hit with the Chewbacca defense. My head is getting warm . . .

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OFF TOPIC
Authored by: brenda banks on Thursday, September 18 2003 @ 08:11 AM EDT
is history being made? http://www.bayarea.com/mld/cctimes/business/6800752.htm

br3n

---
br3n

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  • OFF TOPIC - Authored by: Harry Clayton on Thursday, September 18 2003 @ 12:44 PM EDT
  • OFF TOPIC - Authored by: Anonymous on Thursday, September 18 2003 @ 01:36 PM EDT
    • OFF TOPIC - Authored by: inc_x on Friday, September 19 2003 @ 04:30 AM EDT
  • OFF TOPIC - Authored by: ChrisP on Thursday, September 18 2003 @ 05:23 PM EDT
Does SCO have any credibility left?
Authored by: Anonymous on Thursday, September 18 2003 @ 09:23 AM EDT
Anybody remember McBride's original promise regarding their response to Red Hat's lawsuit?

Matthew J. Szulik
CEO
RED HAT, INC.
1801 Varsity Drive
Raleigh, NC 27606

Dear Matthew,

Attached is the letter I discussed with you during our July 31, 2003 telephone conversation. Instead of actually sending the letter, I thought it was best to telephone you and speak in person to see if we could resolve the issues between our companies short of litigation. We left the conversation with a preliminary agreement to meet and continue our discussions further.

To my surprise, I just discovered that your company filed legal action against The SCO Group earlier today. You, of course, mentioned nothing of this during our telephone conversation. I am disappointed that you were not more forthcoming about your intentions. I am also disappointed that you have chosen litigation rather than good faith discussions with SCO about the problems inherent in Linux.

Of course, we will prepare our legal response as required by your complaint. Be advised that our response will likely include counterclaims for copyright infringement and conspiracy.

I must say that your decision to file legal action does not seem conducive to the long-term survivability of Linux.

Yours truly

Darl C. McBride
President & CEO


or this in the same URL?

SCO has consistently stated that our UNIX System V source code and derivative UNIX code have been misappropriated into Linux 2.4 and 2.5 kernels. We have been showing a portion of this code since early June. SCO has not been trying to spread fear, uncertainty and doubt to end users. We have been educating end users on the risks of running an operating system that is an unauthorized derivative of UNIX. Linux includes source code that is a verbatim copy of UNIX and carries with it no warranty or indemnification. SCO's claims are true and we look forward to proving them in court.

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SCO Regional newsletters
Authored by: geoff lane on Thursday, September 18 2003 @ 09:34 AM EDT
I don't recall these being mentioned here before, but SCOs archive of regional
newsletters is still online.

http://www.sco-regional.com/newsletter/newsletter-archive/

Of particular interest are the early issues that illustrate just how much SCO
was promoting it's Linux based products in 2002.

Grab copies before they get bowdlerised.

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Check out the B argument
Authored by: BubbaCode on Thursday, September 18 2003 @ 09:41 AM EDT
If <b>A.</b> fails (SCO presents no threat) SCO argues
<b>B.</b> The IBM suit covers all the issues, hence dismiss this in
favor of the IBM suit.

My bet is that this will either be delayed or dismissed. SCO swears they won't
sue RedHat so what's the problem. They may have said so in the past but there
is no danger now. (so the thinking will go).

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Sontag threated RH with legal action:
Authored by: Anonymous on Thursday, September 18 2003 @ 09:59 AM EDT
You can find Sontag's original quote here.

vunet: What you are saying then is: if there is Unix code put into Linux by IBM, and SuSE is using Linux, they would therefore be liable by default?
Sontag: Yes.

vunet: Would that also be true of Red Hat?
Sontag: The same issue in terms of inappropriate intellectual property in Linux being distributed by any commercial distribution would provide them with the same issue. So Red Hat, SuSE or any other commercial distribution would have equal liability.

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SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: Anonymous on Thursday, September 18 2003 @ 10:08 AM EDT
1. Another threat against RH. RH case not covered by IBM according to SCO.

http://www.vnunet.com/Analysis/1140828

My understanding is that SuSE says it is protected from anything you are
claiming. Have you got a comment on this as you are part of the UnitedLinux
consortium?
I have reviewed the agreements we have with SuSE. I would not characterise them
in any form whatsoever as providing SuSE with any rights to our Unix
intellectual property. They are dead wrong on that issue.

What you are saying then is: if there is Unix code put into Linux by IBM, and
SuSE is using Linux, they would therefore be liable by default?
Yes.

Would that also be true of Red Hat?
The same issue in terms of inappropriate intellectual property in Linux being
distributed by any commercial distribution would provide them with the same
issue. So Red Hat, SuSE or any other commercial distribution would have equal
liability.


2. http://www.vnunet.com/News/1142810

Red Hat maintained that it is especially concerned about the impact of SCO's
claims on many of its customers.

SCO has already sent letters to 1,500 large companies using Linux warning them
that they may be held liable for using any version of Linux that contains SCO
code.

"SCO has brought our customers into this process. It is threatening them
with extortion from unfounded and baseless claims and we had to step forward on
their behalf to establish the truth," said Szulik.

For its part, SCO has reiterated that its claims are true, that it looks forward
to proving them in court and may now file additional lawsuits.


3. I think there are some Stowell quotes where he says the
end-users/invoices/SCO-IP licenses are independent of the result of the IBM
case, and even SCO would pursue this even if SCO lose the IBM case.

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"good faith?" I'm really wondering about
Authored by: skidrash on Thursday, September 18 2003 @ 11:56 AM EDT
Can RH attack the "good faith" assertion?

Because in fact SCO has taken every opportunity to mislead, misdirect and
outright lie about the issues.

copyright trumps gpl?

Using the same press conference in which they announced SysV copyright
registration to announce Linux licensing, a blatant attempt at unjustified,
bad-faith conflation of the 2 issues. And also using that conference to issue
threats, threatening to "aggressively protect our copyrights in the
courts"

At every opportunity SCO speaks of "aggressively protecting our copyrights
in UNIX" and "charging for our IP in Linux.", again
conflating, in bad faith and perhaps outright fraud, SysV copyrights with Linux
licensing and Linux "IP violations"

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Interesting McBride interview from July 21st
Authored by: Anonymous on Thursday, September 18 2003 @ 11:58 AM EDT
Face-To-Face with Darl McBride

It's old but you get to see Darl lie thru his teeth, besides, it's one of the few in which the journalist actually asked difficult questions.

He talks alot about RedHat on it.

He also talks about registering copyrights and how that prepares the way for copyright lawsuits.

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SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: Anonymous on Thursday, September 18 2003 @ 12:01 PM EDT
Red Hat is one of many companies that distributes a software program called "Linux." 28. Linux was developed under an "open source development model' '3 that prohibits proprietary ownership or control by anyone. 22, 26, 32. Therefore, Red Hat has no ownership or proprietary interest in Linux. 32.

What do they mean? Investing into Linux development and copyright ownership is not an ownership or interest?

I wonder if this gives a hint on how they plan to attack the GPL. Looks like an argument that the kernel constitute a single program but the development model do not allow to identify a single copyright owner, therefore the kernel cannot be copyrighted.

I don't say I agree with this. I just imagine they may want to make this argument. It looks like it would be important for Red Hat and IBM lawyers to explain the concepts of files and modules.

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From SCO's Linux IP Lincense FAQ
Authored by: Anonymous on Thursday, September 18 2003 @ 12:09 PM EDT
  • Why doesn’t SCO offer an IP License for Linux to the Linux distribution companies so that they can bundle SCO IP with their Linux distribution?
    The SCO compliance program is an end-user program for the right to use SCO IP in binary format. The IP License for Linux does not grant distribution rights, nor does it grant any rights associated with source code. SCO doesn’t offer a license to cure the infringement on the part of the Linux distributor because SCO’s source license agreement directly conflicts with the GPL.

So are they saying that RedHat does not infringe, or that it infringes but they don't have a license for them because such a license would conflict with the GPL?

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Threat to whom?
Authored by: inc_x on Thursday, September 18 2003 @ 12:16 PM EDT
I think the idea here is that RedHat wants a judgements
because its customers are threathened, while SCO says that a
judgement is not appropriate because SCO does not threathen
RedHat itself.

Is there a legal basis for a judgement on the ground that SCO
threathens RedHat customers?

It seems to me that SCO may have done that very deliberately
then in order to be able to spread FUD as long as possible
without actually having to show any evidence.

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Attention Red Hat and PJ
Authored by: Anonymous on Thursday, September 18 2003 @ 12:42 PM EDT
Attention Red Hat and PJ - I think this needs some prominence!!

This is a copy of a DrStupid post, that is hidden in some deeply nested
discussion:

~~
http://www.computerworld.com/softwaretopics/os/linux/story/0,10801,84617,00.html
?from=imutopstory

Is a link to Stowell stating that losing the IBM case wouldn't stop SCO sueing
others.
~~

My point being that SCO argues Red Hat's issues are being addressed in the IBM
case - clearly they're not

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Link to RedHat's original complaint?
Authored by: inc_x on Thursday, September 18 2003 @ 01:04 PM EDT
Is there a link somewhere to RedHat's original complaint?

[ Reply to This | # ]

Court Evaluates Meaning of "Derivative Work" in an Open Source License
Authored by: Anonymous on Thursday, September 18 2003 @ 01:10 PM EDT
"The first court case involving the Gnu Public License (GPL) has been
filed in Federal Court in Massachusetts, and all lawyers who counsel clients on
open source matters should be aware of its existence, even though the case
itself has so far provided little substantive help with open source
interpretation issues. The case, Progress Software Corp. v. MySQL AB, Civil
Action No. 01-11031 PBS, was filed on June 15, 2001. The plaintiff, Progress, is
a U.S. software company that signed an interim agreement with a small Swedish
software company, MySQL, to nonexclusively market the MySQL software product.
The MySQL software had been originally released by MySQL years earlier under the
GPL."

http://articles.corporate.findlaw.com/articles/file/00050/008924

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SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: Anonymous on Thursday, September 18 2003 @ 01:28 PM EDT
OT, I know, but where else to post...

Mostly about our not-so-popular m$nopolist,
but tounge-in-cheek and with a nice conclusion!

http://techrepublic.com.com/5100-6313_11-5068625.html

Enjoy! -r :-)

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SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: Anonymous on Thursday, September 18 2003 @ 01:44 PM EDT
so what happens next here? Sorry for all the questions below... but I'd
appreciate any answers that anybody might be able to supply.

<p>Presumably RH will reply to the motion to dismiss. What's the
timeframe for that? And will there be an opportunity for TSG to reply to RH's
reply? How long can this motion be spun out before there is a judgement?

<p>Suppose TSG's motion to dismiss fails, what happens then? Do TSG have
to file another response to the original request for declaratory judgement, and
what would the content of that likely be?

<p>sorry again for all the questions... and thanks in advance for any
answers.

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Letter to Utah County Herald Reporter...
Authored by: Anonymous on Thursday, September 18 2003 @ 02:02 PM EDT
For those interested, there is a story posted to the following URL:

http://www.harktheherald.com/article.php?sid=95051&mode=thread&order=0
< br> This is unfortunately, typical of the news coverage coming out of the Utah Valley. The local press is cheerleading for something they know very little about.

In essense, the author did not do her home work as per norm. I sent off a letter to her today - but don't expect a response back.

Here is the response I sent:

Ms. Leong,

I have read with some interest and disappointment your article in the Daily Herald concerning the RedHat v SCO filings in DE.

I find the lack of research disconcerting as the story contains factual errors that need clarification:

"A controversial legal battle has intensified between Lindon-based Linux software vendor SCO Group Inc. and a group of software developers over ownership rights to the freely-distributed Linux operating system. "

This is a false statement. SCO is not in a legal dispute with a "group" of software developers. They are being sued for a declaratory judgement by RedHat Inc. a Delaware corporation. SCO, I might add, is also incorporated in the state of DE. They are not a Utah Corporation.

Second false assumption: The issue in dispute is not ownership rights to Linux. The issue is that RedHat asserts that SCO has made false and trade libelous statements about their claims to Linux, has damaged RedHat's reputation and business, is in violation of the Lanham Act, and has threatened to sue them over claims of System V source code in the Linux Kernel. Additionally they are seeking a declaratory judgment concerning their version of Linux as not violating any PROVEN copyright claims asserted by SCO.There are a total of 7 claims that specifically state the problem. I suggest you look them up and read about them, then go find a lawyer to explain specifically what copyright is, what patents are and what intellectual property is.

If you want to read the RedHat filing, I will be more than happy to send you a PDF copy. If you want to read SCO's response and some deconstruction on the matter, I suggest you look at GROKLAW (www.groklaw.com).

"At issue is the scope of intellectual property protection in a digital age. "

SCO likened its battle over Linux with the open-source community -- a group of software developers worldwide that developed software for free distribution -- to a wider ongoing debate in the music and technology industries over online file-swapping.

The music industry, in an aggressive campaign to discourage piracy through fears of expensive civil penalties or settlements, last week filed 261 copyright lawsuits across the nation against Internet users that trade songs online.

"As open-source software development becomes prevalent and digital music can be downloaded for free, many people are simply ignoring copyright and patent laws," SCO said in its lawsuit. "Many public commentators recognize this disintegration of property rights as a danger to our economic system. In a small way, SCO ... is part of this debate."

That is SCO market speak that has been disseminated by SCO spokespeople in order to build a PR case for their side of the story. SCO would like to think they are part of the debate. They are not even relevant to the RIAA and Intellectual Property debates currently happening at the national and international levels. What they are getting traction on, is annoying people enough that they are being litigated against in numerous places, such as Austria, Germany, Poland, and pending complaints in Australia. There are people here in the US looking for ways to file suit against them as well for violating the copyrights owned by Linux authors and investigate them for stock irregularities. This is in addition to a current class action suit against the company for IPO irregularities back when it was called Caldera Intl.

The immediate issue is a dying company that could not successfully sell Unix products, nor could they successfully sell a Linux product. As a last ditch effort to bring the company to profitability, SCO followed the Canopy model of sue and annoy to make money. SCO can claim they own the Brooklyn Bridge and they are fighting a divine war for God and Country, but it does not change the fact they are a dying business trying to prop themselves up and their stock price through litigation.

The real issue at hand is the tectonic shift in the IT world from proprietary software business models to open source ones. This threatens SCO existing business model, their executives refuse to understand the new open source model, and SCO as a result is fighting for relevance in a changing world. (emphasis mine).

SCO further riled the open-source community by warning several thousand commercial users of Linux operating system they could be exposed to intellectual property lawsuits -- a risk that could be removed if they paid a license fee.

The number is 1500 companies, of which some are RedHat clients. BTW, you have just pointed out in print the basic definition of "extortion". SCO has not proven they own anything in Linux, yet they demand protection money from litigation. And, if you read the license they offer, there is no indemnification from prosecution - so of what value is the money paid? At the very least it can be construed and argued as deceptive trade practices.

Secondly, Linux is distributed under the General Public License, which, if you read the terms, it states that a license like SCO's invalidates the terms of the GPL, and therefore revokes rights and privileges granted under that License. Hence, SCO is now in the cross hairs of the thousands of copyright owners, who granted distribution and modification rights under the GPL, but retain the original copyright for their work.

Regards,

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When you write to your state AG etc...
Authored by: Anonymous on Thursday, September 18 2003 @ 03:46 PM EDT
Don't forget to mention that SCO shamelessly calls their license a right-to-use license in their own legal filing. Since the only IP types that require a right to use are patents and trademarks, SCO knows or should know that their demands are baseless.

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New SEC Filing
Authored by: Alex on Thursday, September 18 2003 @ 03:57 PM EDT
I'm not very good at Finance. Can anyone interpret this? Also, what about the
pricing?

Follow the link from the Yahoo finance board. Click on the top listing under
Form Type which should read "S-3/A"

<a href=
"http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=16006
84464&tid=cald&sid=1600684464&mid=43542">Click
Here</a>

Alex

[ Reply to This | # ]

  • New SEC Filing - Authored by: Anonymous on Thursday, September 18 2003 @ 04:05 PM EDT
  • New SEC Filing - Authored by: Anonymous on Thursday, September 18 2003 @ 04:13 PM EDT
  • New SEC Filing - Authored by: mec on Friday, September 19 2003 @ 12:19 AM EDT
  • New SEC Filing - Authored by: mec on Friday, September 19 2003 @ 12:21 AM EDT
FSF offensive, please
Authored by: Anonymous on Thursday, September 18 2003 @ 05:39 PM EDT
I'm sorry but I am getting sick and tired of listning to SCO and all their
shifting explanations and FUD.

I think it is time for the community to go offensive.

IANAL but if SCO is attempting to license linux under a more restrictive license
than the GPL they are (as far as I understand) in direct violation of the GPL
and as a consequence will lose all rights to distribute any part of the linux
kernel. Failing to comply with these terms constitutes a violation of copyright
law and SCO would thus be infringing the copyright of all kernel developers.

I sincerely hope that such a case will be made the second SCO sends invoices to
anyone.

I am convinced that IBM will be the end of SCO and I dearly hope that IBM will
be capable of including the Canopy group, Microsoft and perhaps SUN in the case
if they are the real puppet masters. Someone has to pay for this!

I just cannot stand having to live through another couple of years of baseless
accusations against linux put forward by SCO.

I hope the FSF will fight back with legal means and that a trust will be created
for this purpose. I'd be happy to spare a few dollars (paypal power)!

./ Kristoffer, Denmark.

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Tee shirts are bad enough.
Authored by: dmomara on Thursday, September 18 2003 @ 07:18 PM EDT
If you recall there was coverage of a "SCO protest and anti-protest"
in Lindon.

Some pictures were posted and others are online at:
http://www.karlrees.com/sco/scotesters/

In particular the "anti protest" plackards are at:
http://www.karlrees.com/sco/scoAntiProtest/index.html

Unfortunately these are _not_ intended as satire by the producers.

There is a group shot of some protesters and an "infiltrator"
holding a SCO provided plackard at:
http://www.karlrees.com/sco/scoProtesters/scoProtesters-Pages/Image6.html

The man on the left, kneeling has neglected to cover his face adequately (its
better than you think.)

I hope that these actions on the part of SCO principals will be brought to the
attention of the court, and to Redhat council. I am upset at these
disparagements of myself, my family and my employer (an FFRDC.)
As a taxpayer I am further angered by Stowell's statements of aim to extract
"licensing fees" from governmental users of Linux.

[ Reply to This | # ]

That license undermines SCO's motion?
Authored by: Anonymous on Thursday, September 18 2003 @ 09:28 PM EDT
Age article
http://www.theage.com.au/articles/2003/09/19/1063625187672.html

Quote: "SCO did not want to prevent customers from using Linux, so the
company has offered a licensing program that it felt was fair and equitable to
the commercial Linux user and SCO."

IANAL, I have been thinking about that license. I think it can NOT be seen as
good faith attempt to resolve issues with users (if there are any)

Why?

Because it says, or effectively says, that the licensee is no longer allowed to
participate in *ANY* Open Source development.

It is one thing for SCO to attempt to resolve issues relating code that they
claim to be theirs in GPL (although whether the code is theirs remains
unproven), and even to ask the licensee not to use what is SCO's alleged code.

However it is quite another to bar the licensee from working on Open Source
completely. In particular, this would bar the licensee from working with Red
Hat - and SCO must know that (perhaps even worded it that way deliberately)
because SCO is very aware of Red Hat's business... SCO and Red Hat were in
competition for many years.

So this issue, would pertain to (a) is the license good faith, and (b)
potentially Red Hat's standing

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A strategic thought
Authored by: mec on Friday, September 19 2003 @ 01:21 AM EDT
Some people have the idea that the SCO versus IBM suit is a strategic move in a
PR campaign. I'm one of those people. There's a more extreme school that
says the *only* point of the IBM suit is to play a strategic role in the PR
campaign.

Always remember that SCO gets paid for this PR campaign, and that it's the only
SCO line of business that makes money rather than loses it.

So SCO can say any damn thing they want in the IBM suit, as long as it makes PR
sense. They even get us anti-SCO folks to chase their legal will-o-the-wisps.
So what if we point out all the ways that SCO will lose in 2005; your boss is
still putting that Linux project on ice and spending the IT budget on Microsoft
and Sun instead.

However, SCO can not treat the Red Hat case as a PR venue. If they lose the Red
Hat case then their bubble collapses big time. Hence they have to treat it as a
real law suit and take real legal positions, unlike the IBM case.

That's my theory about why SCO is making PR-negative statements such as: Red
Hat is immune to trade secret lawsuits from us because Red Hat never signed a
contract with us. Very good law, but it's hurting their PR.

Also, I think I see why SCO sent a partial copy of the filing to journalists,
while not making the whole filing available on a convenient web page (as SCO
does with the IBM lawsuit). Red Hat is really gonna put SCO's feet to the
fire.

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SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: Anonymous on Friday, September 19 2003 @ 12:56 PM EDT
I have been thinking about the brief.

** IANAL, and this is all my IANAL opinion, but I'm basically with gumout **

The trouble with SCO's motion is it introduces all kinds of new
"facts", disputes some of Red Hat's "facts", etc. For
example:

- What the GPL means
- What various press articles said/meant
- What interest Red Hat have in Linux
- Why Red Hat is pursuing the case
- etc etc

These issues of dispute about particular "facts" would in my opinion
be more properly dealt with at trial, than in pre-trial motion to dismiss. A
pre-trial motion to dismiss, is supposed to say, even if all Red Hat's facts
are true, then there is no case because of these issues of law.

The court has discretion on the declarative judgement issues, so could decline
to take them anyway. That's up to the court. However the argument that the
issues are being dealt with in SCO v IBM is clearly not being addressed in that
case, as it doesn't involve a copyright claim, nor does it involve Linux
distributor (IBM doesn't distribute Linux).

The issues on Lanham Act, etc., would be most properly dealt with at a trial.

So, in my opinion, IANAL, the motion to dismiss will fail on all the
non-declarative issues, and possibly on the declarative issues too.

The question that I have, is what happens after that. I am not aware of SCO
filing a response to the specific Red Hat claims - do they get another chance
(and more time) to do that too?

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SCO's Opening Brief in Support of its Motion to Dismiss
Authored by: Anonymous on Friday, September 19 2003 @ 02:13 PM EDT
A thought about the RedHat lawsuit.

SCO has been distributing Linux for years. Since RedHat has been involved with
Linux for many years, I assume that it has contributed a lot of code. That
means that SCO has been distributing RedHat code. And if the GPL is invalid, as
SCO claims, then isn't it violating RedHat's IP rights?

[ Reply to This | # ]

'... and of sufficient immediacy...'
Authored by: belzecue on Friday, September 19 2003 @ 11:53 PM EDT
from http://www.patentoutline.com/outline/dja.htm (props to the person who
posted it elsewhere on GL):

"The facts must show that there is a substantial controversy between
parties having adverse legal interests and of sufficient immediacy and reality
to warrant an issuance of a declaratory judgment action. Arrowhead Indus. Water,
6 USPQ2D 1685 (Fed. Cir. 1988)."

The worrisome bit is 'sufficient immediacy'. SCO say that there's no issue
with RH, and even if there were to be an issue then it would wait until after
the IBM case in 2005. SCO don't say they won't sue RH, just that they won't
sue until at least 2005. On that basis there is no 'immediacy' to the action.
If RH were to show immediate and substantial harm to their business, it might
be a different story, but their latest figures show they are doing fine (albeit
they probably would be doing a lot better if not for SCO's slash and burn
tactics).

Just seems that the immediacy aspect could be the thing to get the judgement
dismissed.

[ Reply to This | # ]

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