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SCO's Missing Risk Factor
Wednesday, January 07 2004 @ 10:40 PM EST

The impact of the Novell letters, letters Novell last month made public after Groklaw broke the story that Novell had registered copyrights on UNIX with the US Copyright Office, is starting to show up in the media. Here is a commentary in Australia's The Age today, "Did SCO actually buy what it thought it bought?" The conclusion the author reaches after looking carefully at the letters' discussion of Amendment 2, is that the Novell claim leaves the rest of us "probably a little safer than we thought we were."

Speaking of the Novell letters, I have a question. Did SCO neglect to list them as a risk factor in its recent SEC filings?

Here is why Deutsche Bank's Brian Skiba on November 18 said he confirmed his buy rating and $45 price target on SCOX:

Reason 1: Our core investment proposition remains intact. We continue to view SCOX as synthetic call option on a very large intellectual property issue around Linux adoption and a lawsuit against IBM.

Reason 2: Near term catalysts exist. Over the very near term, we believe the company will finalize the contract with its tenacious law firm, Boies, Schiller and Flexner. This will set the backdrop for a stepped up litigious game plan against corporate Linux end users, which we believe could occur as soon as the end of this month. These lawsuits could encourage other corporate end-users to sign license arrangement with SCOX.

Of course, Mr. Skiba might not have known about Novell's registering for copyrights on UNIX when he wrote those words. For that matter, did he know that the SCO-Novell dispute over who has valid copyright on UNIX was still ongoing? Did he know Novell had sent SCO those letters?

Here's why he, and you, might not have known. If you look through the SCO SEC filings as I have been doing, you may find, as I have been finding so far, that SCO appears not to have listed receiving those letters from Novell or mentioned that Novell was still contesting SCO's copyright claims on UNIX as a risk factor in their recent filings.

That seems like a singular omission. SCO did have those letters since last summer and knew their copyright claims were being contested, as Novell points out. Isn't that a risk factor that ought to be listed?

How is a girl supposed to know whether to invest in a company without all the risk factors being revealed? For that matter, how is an analyst supposed to accurately rate a stock without being told all the risk factors?

I don't know if Mr. Skiba was informed of those letters from Novell challenging SCO's copyright claims, but I don't see any reference to them in his November report. I'm guessing it will all come out in the wash in the IBM trial, at a minimum, which by now I'm thinking SCO may be dreading like a trip to the dentist for a root canal.

By the way, SCO has a new page for analysts covering SCO. There are three of them listed, Skiba, Dion Cornett and Matthew Kelly, CF, also at DB. Here is what SCO would like to say about them:

Disclaimer: SCO is followed by the analyst(s) listed on this page. Please note that any opinions, estimates or forecasts regarding SCO's performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of SCO or its management. SCO does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations.

Here's my list of all the opportunities SCO had to mention the Novell letters they received contesting SCO's copyright claim. I searched all of them for 'Novell' and 'copyright' and I couldn't find any mention of the conflict between Novell and SCO over copyright or that SCO had received letters from Novell contesting SCO's rights to copyright of Unix in any of these documents or events:

1. I found no mention of it in the Dec. 8, 2003 8K;

2. I couldn't find any mention of it during the November 19 teleconference;

3. I couldn't find any mention of it in the November 18 8K;

4. I couldn't find any mention of it in the November 17, 2003 S-3;

5. I couldn't find any mention of it in the November 17, 2003 8K. Here is what it did say:

As part of the expanded scope, the firm has been engaged to support SCO regarding issues relating to copyrighted UNIX code incorporated into Linux without authorization or appropriate copyright notices. Code that has been identified includes Unix System V code as well as copyrighted code included in the 1994 settlement between Unix Systems Laboratories, Inc. and Berkeley Software Design, Inc. SCO acquired this code and associated copyrights in 1995 from Novell.[emphasis added]

6. I couldn't find any mention of it in the October 16, 2003 8K, but here is what it says about copyright in an exhibit attached to the 8K, the agreement between SCO and BayStar and Royal Bank of Canada, on pages 8 and 9:

(l) Intellectual Property. Each of the Company and its Subsidiaries owns or is duly licensed (and, in such event, has the unfettered right to grant sublicenses) to use all patents, patent applications, trademarks, trademark applications, trade names, service marks, copyrights, copyright applications, licenses, permits, inventions, discoveries, processes, scientific, technical, engineering and marketing data, object and source codes, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) and other similar rights and proprietary knowledge (collectively, “Intangibles”) necessary for the conduct of its business as now being conducted and as presently contemplated to be conducted in the future. Section 3(l) of the Disclosure Schedule sets forth a list of all material patents, patent applications, trademarks, trademark applications, copyrights, licenses, sublicenses, and copyright applications owned and/or used by the Company in its business. Neither the Company nor any Subsidiary of the Company infringes or is in conflict with any right of any other person with respect to any third party Intangibles. Neither the Company nor any of its Subsidiaries has received written notice of any pending conflict with or infringement upon such third party Intangibles. Purchaser is aware of and acknowledges the pending and threatened litigation regarding Company’s intellectual property rights disclosed in the Select SEC Documents. Neither the Company nor any of its Subsidiaries has entered into any consent agreement, indemnification agreement, forbearance to sue or settlement agreement with respect to the validity of the Company’s or its Subsidiaries’ ownership of or right to use its Intangibles. The Intangibles of the Company and its Subsidiaries are valid and enforceable and no registration relating thereto has lapsed, expired or been abandoned or canceled or is the subject of cancellation or other adversarial proceedings, and all applications therefor are pending and in good standing, except where such abandonment or cancellation would not result in a Material Adverse Effect. The Company and its Subsidiaries have complied, in all material respects, with their respective contractual obligations relating to the protection of the their respective Intangibles used pursuant to licenses. Except as set forth in Section 3(l) of the Disclosure Schedule or in the Select SEC Documents, to the Company’s knowledge, no person is infringing on or violating the Intangibles owned or used by the Company or its Subsidiaries." [emphasis added]

7. I found nothing mentioned in the SCO-Bay Star-Royal Bank of Canada Registration Rights Agreement, filed October 16. It says this:

The Company shall make available for inspection by (i) each Investor, (ii) any underwriter participating in any disposition pursuant to any Registration Statement, (iii) one firm of attorneys and one firm of accountants or other agents retained by the Investors, and (iv) one firm of attorneys retained by all such underwriters (collectively, the "Inspectors") all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector to enable such Inspector to exercise its due diligence responsibility, and cause the Company's officers, directors and employees to supply all information which any Inspector may reasonably request for purposes of such due diligence;. . .[emphasis added]

8. I found nothing mentioned in their October 14, 2003 Amendment No. 2 to Form S-3;

9. I couldn't find any mention of it in their August 5 teleconference;

10. I couldn't find any mention of it in their July 31, 2003 10Q, which was certified by McBride and Bench, each of whom certified the following:

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

11. I couldn't find any mention of it in their July 31, 2003 10Q;

12. I couldn't find any mention of it in their July 8, 2003 S-3.

I struck out on SEC filings. So, then I checked the Groklaw quote database and Google. Maybe McBride or somebody mentioned it to the media. Nothing. Except for the original spat between SCO and Novell in May, with SCO producing Amendment 2, which it said trumped Novell's claim, with a threat of taking Novell to court, I couldn't find a single quotation later where McBride acknowledged that this issue was still ongoing or that SCO had received the letters from Novell after the May incident. Instead, here is what he said, from our Quote Database, so scroll to the dates listed:

"We stopped our battle with IBM for basically four days; we stamped out the Novell attack and put that one behind us. Now we're back on what our original focus was, which is resolving the issues we have with IBM."-- Darl McBride, CNET News, 2003-06-16

"It threw Novell out in front of the bus a couple of weeks ago and Novell got run over. It's a unique situation when a company as powerful as IBM has somebody coming at it with such strong claims as we have in a very public forum."-- Darl McBride, V3.co.uk interview, 2003-06-30

"Yeah well, the Novell thing. They came out and made a claim that held up for maybe four days and then we put that to bed. If you go back and talk to Novell I guarantee what they'll say, which is they don't have a claim on those copyrights anymore."-- Darl McBride, ZDNet interview by Dan Farber, video, 2003-07-21

Yet, In Novell's statement, it said that "SCO has been well aware that Novell continues to assert ownership of the Unix copyrights." Novell sent the first letter June 26, 2003, the second on August 4, 2003, and SCO responded on September 10, 2003, suggesting Novell look at Amendment 2.

Here are the letters, if you want to review them.

I can't explain the apparently missing risk factor. I am providing the entire list so that others can review and check my research, but I've been unable to find SCO listing the Novell letters or mentioning that this dispute was still ongoing after they received the letters from Novell. Maybe some of you can find something I have overlooked. If you do, please let me know and I'll put it up here as an update.


  


SCO's Missing Risk Factor | 364 comments | Create New Account
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SCO's Missing Risk Factor
Authored by: shaun on Thursday, January 08 2004 @ 12:28 AM EST
Novell will just reclaim all rights to UNIX from SCO for breach of contract and
then open whatever they can.

--Shaun

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: jmccorm on Thursday, January 08 2004 @ 12:51 AM EST
I certainly can't tell if Novell is overstating their case, or SCO. SCO
doesn't have any credibility, but then again, I've heard almost nothing from
Novell. But their actions speak pretty loudly they they registered copyrights on
SysV just after SCO got around to it. I wish I had more details that would make
me lean even further to Novell.

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: Anonymous on Thursday, January 08 2004 @ 01:04 AM EST

It is alarming how very little the public - outside the Linux community - knows about the risks associated with an investment in SCOX. If I'm a clueless, or novice, non-geek investor here's what I see:

SCO is Ranked 75 In Deloitte Technology Fast 500.

Darl McBride is in CRN's Top 25 IT Executives of the Year for 2003.

Deutsche Bank gives SCOX a buy rating and a $45 price target.

There's no mention made about the dispute over their IP claims, just talk about vigorous enforcement.

I thought all of this stuff was covered in the Securities Exchange Act of 1934?

In the spirit of cooperation, I've prepared a list of proposed disclosures that the SCO Group is welcome to use under the Creative Commons license to update their filings on an as needed basis.

Warnings to investors about these events seem to be missing from their SEC filings:

Novell announces Netware 7 will offer Linux kernel - 16 April 2003.

Novell is a co-signor of the three-way contract at dispute in SCO v IBM.

Novell claimed the relevant SCO Group copyrights in writing - 28 May 2003.

Novell has waived SCO's claimed rights to terminate IBM's AT&T licenses - on 12 June 2003.

Novell disputes SCO Group claims under APA Amendment 2 - 26 June and 4 August 2003.

Novell purchased Ximian - 4 August 2003

Novell files copyright registrations on System V and declarations on Ancient UNIX - September and October 2003

Novell purchases SuSE Linux (United Linux) - 4 November 2003

Novell denies SCO's claims to a non-compete clause - seems to have worldwide perpetual rights to UNIX - 18 November 2003.

Novell claims it owns the UNIX copyrights and has registrations - 22 December 2003.

Hpoe this Helps!

---
"Ideas once placed before the public without the protection of a valid patent are subject to appropriation without significant restraint" - Justice O'Connor

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: newt_eye on Thursday, January 08 2004 @ 01:07 AM EST
Pamela points out a key element in judging SCO's claims: they're not paying
attention to their responsibilities as a publicly traded company. This was first
obvious when Baystar and RBC got shocked by having a huge chunk of their
investment summarily handed over to Boies. That was bad form and bad faith and
bad judgement. It clearly woke Baystar and RBC up to the point that they had
better be more on top of these slicksters.

Now, when the whole house of cards depends on SCO's claims of owning Unix
copyrights that have been misappropriated, the fact that those claims are
disputed are clearly a whopping risk of the business plan. It's one thing for
there to be risks involved in the claim that there has been illegal copying of
SCO's software. It's entirely another for the ownership itself to be in
dispute. We've known about the dispute for some time but PJ points out that SCO
has failed to inform investors that the disputed ownership is a risk.

[ Reply to This | # ]

Blatant
Authored by: webster on Thursday, January 08 2004 @ 01:10 AM EST
This article is a further attempt here to undermine SCO. It suggests that SCO
has filed inaccurate SEC Reports. It calls into question the accountability of
SCO spokesmen, It invites shareholders to demand accountability, it undermines
analysts who have had a misleading, incomplete picture. It totally swamps the
foundation of SCO's claims against IBM or anybody else...

---
webster

Recent Windows refugee

[ Reply to This | # ]

  • Blatant - Authored by: cybervegan on Thursday, January 08 2004 @ 02:28 AM EST
  • Blatant - Authored by: belzecue on Thursday, January 08 2004 @ 02:34 AM EST
    • Blatant - Authored by: gvc on Thursday, January 08 2004 @ 06:31 AM EST
      • Blatant - Authored by: Anonymous on Thursday, January 08 2004 @ 08:42 AM EST
        • Blatant - Authored by: Anonymous on Thursday, January 08 2004 @ 09:26 AM EST
          • Blatant - Authored by: gvc on Thursday, January 08 2004 @ 10:13 AM EST
            • Blatant - Authored by: Anonymous on Thursday, January 08 2004 @ 12:49 PM EST
            • Blatant - Authored by: markhb on Thursday, January 08 2004 @ 02:35 PM EST
  • Blatant - Authored by: shareme on Thursday, January 08 2004 @ 06:08 AM EST
  • How about "parody"? - Authored by: Anonymous on Thursday, January 08 2004 @ 10:17 AM EST
  • Blatant - Indeed! - Authored by: Anonymous on Thursday, January 08 2004 @ 10:52 AM EST
  • Blatant - Authored by: Anonymous on Thursday, January 08 2004 @ 11:44 AM EST
  • sounds like PR from the White House.. - Authored by: Anonymous on Thursday, January 08 2004 @ 12:32 PM EST
  • Blatant - Authored by: Anonymous on Thursday, January 08 2004 @ 02:04 PM EST
    • Blatant - Authored by: Anonymous on Thursday, January 08 2004 @ 07:38 PM EST
      • Blatant - Authored by: BrianW on Thursday, January 08 2004 @ 08:33 PM EST
    • Blatant - Authored by: Anonymous on Friday, January 09 2004 @ 12:16 AM EST
SCO's Missing Risk Factor
Authored by: LHJ on Thursday, January 08 2004 @ 01:20 AM EST

I want to add just two little things. First, Ryan Tibbits, the lawyer who wrote the September 10 letter to Novell, was awarded close to $1M in options on September 11 as disclosed in this Form 3. (Looks like the URL will be mangled.)

The other point that I wanted to make is that McBride's July 21 statement guaranteeing that Novell has no claim is part of a larger interview conducted by ZDNet.

McBride: [...] That... what that does is it creates copyright violations inside of there, some of it coming straight from our source tree. So yes there are direct line-by-line codes.

Q: Well Novell would say you don't actually own those copyrights fully.

McBride: Yeah well, the Novell thing. They came out and made a claim that held up for maybe four days and then we put that to bed. If you go back and talk to Novell I guarantee what they'll say, which is they don't have a claim on those copyrights anymore.

Q: Well, that's not exactly what they're saying at this point. But I think it's pretty clear that one of the issues here is saying that the open source community is purposely putting code into their open source Linux that is code that is not their own. Is that something that you're actually saying in your complaint, and will you end up suing the various Linux providers?

McBride: What we're saying right now is that we're seeing a lot of code. Let's go to the basis here. [Rest nonresponsive]

This is a 21 minute video interview and this exchange is about 27 seconds. The interviewer clearly seemed to be aware that Novell was disputing SCO's claims privately, but McBride contradicted him. Unfortunately, I haven't seen any follow-up.

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: belzecue on Thursday, January 08 2004 @ 01:27 AM EST
SCO investors (short or long) should go here to report this omission to the SEC.

I'll leave it to you to decice which form (complaint type) to use. Be sure to provide a link to PJ's article here.

[ Reply to This | # ]

Heh,heh,heh...hehehehehehe....HAHAHAHA...
Authored by: rand on Thursday, January 08 2004 @ 01:28 AM EST
Y'know, SCO Group probably didn't even know about the Novell copyright registrations until the news showed up on Groklaw. Before Dec. 8 they were probably blissfully unaware.

Oh, and you can add the Dec. 22 8-k to the list.

---
The Wright brothers were not the first to fly an aircraft...they were the first to LAND an aircraft. (IANAL and whatever)

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: Anonymous on Thursday, January 08 2004 @ 01:52 AM EST

It is alarming how very little the public - outside the Linux community - knows about the risks associated with an investment in SCOX. If I'm a clueless, or novice, non-geek investor here's what I see:

SCO is Ranked 75 In Deloitte Technology Fast 500.

Darl McBride is in CRN's Top 25 IT Executives of the Year for 2003.

Deutsche Bank gives SCOX a buy rating and a $45 price target.

To a casual observer, there doesn't seem to be any mention made about the dispute over their IP claims, just talk about vigorous enforcement.

I thought all of this stuff was covered in the Securities Exchange Act of 1934?

In the spirit of cooperation, I've prepared a list of disclosures that the SCO Group is welcome to use under the Creative Commons license. They can check and update their filings on an "as needed" basis to see if investors have been informed about these sort of things:

Novell announces Netware 7 will offer Linux kernel - 16 April 2003.

Novell is a co-signor of the three-way contract at dispute in SCO v IBM.

Novell claimed the relevant SCO Group copyrights in writing - 28 May 2003.

Novell has waived SCO's claimed rights to terminate IBM's AT&T licenses - on 12 June 2003.

Novell disputes SCO Group claims under APA Amendment 2 - 26 June and 4 August 2003.

Novell purchased Ximian - 4 August 2003

Novell files copyright registrations on System V and declarations on Ancient UNIX - September and October 2003

Novell purchases SuSE Linux (United Linux) - 4 November 2003

Novell denies SCO's claims to a non-compete clause - seems to have worldwide perpetual rights to UNIX - 18 November 2003.

Novell claims it owns the UNIX copyrights and has registrations - 22 December 2003.

Hope this Helps!

---
"Ideas once placed before the public without the protection of a valid patent are subject to appropriation without significant restraint" - Justice O'Connor

[ Reply to This | # ]

Groklaw FUD
Authored by: webster on Thursday, January 08 2004 @ 02:00 AM EST
F - SCO has much more to fear than anyone should fear them. Groklaw has pointed
out their flaws, malice and crass manipulations. They have much to be
accountable for and some big boy opponents to see that they pay. They have to
show far more substantial claims than have been suggested so far. Such material
does not exist in Linux. They must fear the outrage of the Court.

U - Groklaw has explained the uncertainty of their legal arguments, the
uncertainty of their code claims, the uncertainty even that it is their code.
It has shown the certain method of the Linux Kernal development and the safe way
in which software development is sanitized. It has stemmed the tide of SCO
attacks and raised the confidence level in open source software. No matter
what, the future of Linux is certain. The future of Linux is certain. Even SCO
some unwitting contractual breach in court, they have precluded themselves from
significant damages. The spectacular details and extent of their unraveling
remains uncertain but fascinating. Will the fortunes and freedoms of SCO
perpetrators be unbroken?

D - Groklaw has caste doubt, strong skepticism, even laughability on the known
specific claims of SCO. They have to prove their case by clear and convincing
evidence. Groklaw has unearthed a mountain of doubt. It's not their code,
they gave it away, they GPL'd it, they don't have the copyright, it is only
headers, error numbers, ABI, Posix. Indeed, if it ever begins trial, you can be
sure every juror will be 'voir dired" thoroughly on their familiarity
with Groklaw and Linux. There will be little SCO" lcan argue without
doubt.

---
webster

Recent Windows refugee

[ Reply to This | # ]

Whoa nelly
Authored by: JMonroy on Thursday, January 08 2004 @ 04:19 AM EST
Wow... damning evidence, and no-one does it justice better than PJ.

This is exactly what is needed to show the SEC that "The SCO Group" has now conducted itself in a manner worthy of an investigation. Not that this wasn't the case before, but in my estimation, this evidence, if it pans out, should be the beginning of the end of SCO.

[ Reply to This | # ]

OT: SCO owns HP-UX, AIX and C++
Authored by: BsAtHome on Thursday, January 08 2004 @ 05:41 AM EST

I just reread Linus' comments on the 65 files and came to read the comments on that piece. There was a reference to an article from August 15, 2002 with Darl McBride at LinuxWorld. The article is at zdnet.

The amazing part is that he says:

SCO Unix--in terms of the Unix timeline, the thread that runs through the middle of these is really SVRx. All of the subsequent Unix licensing that happened broke off from that. We own all that intellectual property and have relationships with a lot of vendors. If people want to come and see the original HP-UX source code, they come to us. We get several dozen requests a month just to come in and see AIX or HP-UX code base. And C++ programming languages, we own those, have licensed them out multiple times, obviously. We have a lot of royalties coming to us from C++. It was interesting to see the depth of Caldera's intellectual capital.

The absolutely amazing part is that SCO is that they get royalties from C++. I am sure that C++ was Bjarne Stroustrup's child... I think that one conclusion could be that McBride is just extremely careless when he talks in public. He says one thing, but it really means something else. I see this also as his defence when asked in court:

Judge: What did you mean by ...
McBride: Well, eh, I was merely trying to indicate that we have some relation here, nothing serious, we are dealer of third party products and, well, I would say that it makes us owner of the product in some sense. It depends on how you read the comment.

---
SCOop of the day, Groklaw Rulez

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: PeteS on Thursday, January 08 2004 @ 06:25 AM EST
As others have pointed out, these omissions (in particular the fact that the
copyrights are now in dispute) have a direct bearing on the ability of SCO to
gain revenues by leveraging their litigation against end users.

Before getting flamed for that, let me say I am only repeating McBride's words,
not our analysis of what SCOX has.

Now, an omission of this nature, which bears directly on the ability of SCOX to
gain revenues, appears to directly contravene at least one of the Securites
acts, because the company has not openly stated it's true risk position.

Note that the Sarbanes-Oxley act (which requires publicly traded companies to
certify their financial reports amongst many other things) can open the door to
criminal liability for failure to disclose material risk factors. This was
passed in the wake of Enron et. al. specifically to force companies to 'put it
on the line' in regard to their financial reports.

That opens the door directly for SEC action, based on an investor complaint.

Now, the first thing is to make sure the financial reporters know there is a
significant missing risk factor in the SCOX SEC filings, it seems.



---
Artificial Intelligence is no match for natural stupidity

[ Reply to This | # ]

An Obvious Question
Authored by: shareme on Thursday, January 08 2004 @ 06:29 AM EST
When the orginal sale occurred between Novell and SCO(Cladera) was there any
mention of the fact that Novel owened the copyrights in SEC filings?

and if not how does this impact SEc filing rulews and SCO?

---
Sharing and thinking is only a crime in those societies where freedom doesn't
exist.

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: nvanevski on Thursday, January 08 2004 @ 06:38 AM EST
Great piece of info, PJ. How long does it take from reporting this to SEC, to
actual investigation? :)

BTW, have you thought to hire yourself a bodyguard?
McBride does not seem like a considerate guy ...

[ Reply to This | # ]

Another Missing Risk Factor
Authored by: maroberts on Thursday, January 08 2004 @ 06:45 AM EST
They seem to have missed out the fact that PJ and cohorts of willing helpers are
digging out every ounce of legal dirt they can find about SCO... :-)

[ Reply to This | # ]

C++ preprocessor - cfront
Authored by: pbarritt on Thursday, January 08 2004 @ 07:20 AM EST
Someone in the AT&T chain of successors owns the copyright
to the C++ preprocessing program, cfront. This was (is?)
the program that transforms C++ source code to C source
code. It was used for a lot of years before the advent
of native code C++ compilers. Owning the copyright to this
program is probably not the same as "owning" C++ itself;
that is unless you ask SCO.


---
just an idiot looking for a village...

[ Reply to This | # ]

RBC gets its money back?
Authored by: overshoot on Thursday, January 08 2004 @ 07:31 AM EST
One wonders whether Baystar/RBC would seek relief for misrepresentation on
owns or is duly licensed (and, in such event, has the unfettered right to grant sublicenses) to use all patents, patent applications, trademarks, trademark applications, trade names, service marks, copyrights, copyright applications
considering that TSG has always been restricted by the original asset purchase agreement in its sublicensing of SVRx?

[ Reply to This | # ]

SCO != Santa Cruz Operation
Authored by: delboy711 on Thursday, January 08 2004 @ 08:02 AM EST

" SCO acquired this code and associated copyrights in 1995 from Novell."

Even in legal documents SCO continue the pretence that they are the company who entered a legal agreement to buy UNIX from Novell.
As has been pointed out many times, The company formerly known as Caldera, now called The SCO Group bought Unix from the Santa Cruz Operation on May 2001 (http://en.wikipedia.org/wiki/SCO_UNIX)

Whether any agreements made between Novell and Santa Cruz operation apply to the SCO Group is questionable, and SCOG should certainly not be putting blatent untruths into SEC filings.

[ Reply to This | # ]

APA Questions:
Authored by: kalimar on Thursday, January 08 2004 @ 08:21 AM EST
From the APA between SCO and Novell:
Schedule 1.1(b) Excluded Assets (Page 2 of 2)

V. Intellectual Property:

A. All copyrights and trademarks, except for the trademarks UNIX and UnixWare.

B. All Patents
Given the explicit statement that all copyrights and trademarks are excluded from the agreeement except the trademarks for UNIX and UnixWare, wouldn't that mean that the copyrights for UNIX and UnixWare were excluded, except where (according the Amendment 2) SCO demonstrated a need for them? Has anyone seen or heard SCO demonstrate such a need?

This seems way too cut and dry, which makes me think I'm missing something.

[ Reply to This | # ]

Explanation of financial risk
Authored by: LegalEaglet on Thursday, January 08 2004 @ 08:35 AM EST
>"Reason 1: Our core investment proposition
>remains intact. We continue to view SCOX as
>synthetic call option on a very large
>intellectual property issue around Linux
>adoption and a lawsuit against IBM.

For those who don't have a background in stochastic calculus or financial
mathematics, perhaps some clarification of what is meant by "synthetic
call option" is in order. The accounting equation is

Assets = Liability + Equity

Now financial analysts have recognised that the shares are effectively a
calculated bet over the time-discounted net worth of a company
(assets-debt)/equity. The legal uncertainty raised by SCO is that they are
asserting ownership of derivative Unix products and any resulting licensing
stream which could be realised as a tangible asset. An option is the right but
not the obligation to buy a % of the assets at a known price.

If you're an adherent of the efficient market hypothesis then you can
conceptualise the sharemarket as a price discovery mechanism that incorporates
the best known information about the business activity (could also apply to
non-profits such as Social Policy Bonds see
http://www.geocities.com/socialpbonds/). If people with "hidden"
knowledge dispute the valuation on the assets (ie advocate that Linux is a
social good/service and thus create an easement over any intellectual property)
then they could place a counter-bet by issuing put options.

I believe there was a science-fiction book based on ideas-market (see
http://hanson.gmu.edu/ideafutures.html) which talked about how society would
operate. You had people constructing special synthetic events and triggering
those would cause payouts. In other words, you put your money where your mouth
is. Of course people could indulge in some really strange fantasies such as
settling scientific debates (cf Lessig job if failure of spam bounty) or even
the date when say a well-known software companies would file for bankruptcy.


---
Cyberlaw - Smacking electronic nuisances
http://www.bakercyberlawcentre.org/spam/

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: tzicha on Thursday, January 08 2004 @ 08:41 AM EST

It seems odd, but there are only two reasons I can undertand SCOs ommision:

  1. SCO doesn't consider these a risk.
  2. SCO somehow was ignorant of the entire dispute and Novell's registering of the copyrights

Plausibility however is another factor, and neither of the above reasons seems plausible. Even if SCO possessed some secret knowledge, a "silver bullet" if you will, that they are witholding for trial to prove indisputably ownership of the copyrights, until such knowledge is made public they are still required to list the copyright dispute as a risk, correct?

That would disprove reason 1. With the publication of Novell's letters to SCO, even if SCO were unaware of the registration of the copyrights by Novell, certainly they were aware that Novell continues to dispute the ownership, thus dispelling reason 2.

[ Reply to This | # ]

Safer than I thought I was?
Authored by: Anonymous on Thursday, January 08 2004 @ 09:02 AM EST
I don't think I can be any safer than I thought I was.

[ Reply to This | # ]

"Ancient" Unix Code release
Authored by: greg_T_hill on Thursday, January 08 2004 @ 09:08 AM EST
I've wondered if Caldera ever conducted any discussions with
Novell prior to publishing the "Ancient Unix" code on the internet
and releasing it under a BSD-type license. This was done under
Ransom Love, who seemed to have an understanding of the
extent and limitations to the rights Caldera had aquired. He
acknowledged that there were third party copyrights in SysV
which prevented them from doing the same with that code. Any
record of such discussion would be interesting.

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: elrond_2003 on Thursday, January 08 2004 @ 09:42 AM EST
Schedule 1.1(b) Excluded Assets (Page 2 of 2)

V. Intellectual Property:

A. All copyrights and trademarks, except for the trademarks UNIX and UnixWare.

#include IANAL
Novell asserts that it, not SCO, owns the copyrights (and, presumably, the code and trade secrets)in question.
If true, it would appear that SCO lacks standing to sue IBM (or anyone else) for any misuse of UNIX code, copyrights,trademarks, or trade secrets. Can IBM insert another affirmative defense at this point? Lack of standing should warrant a dismissal with predjudice at least.

---
free as in speech.

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: jmr on Thursday, January 08 2004 @ 10:26 AM EST

Speaking of risks there is an InternetWeek article raving about the big risks of using Open Source products.

You guessed right, just another grain of FUD from people that can't even read or understand a simple license as GPL. Or maybe they think their readers are either lazy, gulible or just plain stupid so they cannot read and understand theirselves either.

jmr

[ Reply to This | # ]

Should Baystar and RBC file fraud complaints?
Authored by: Thomas Frayne on Thursday, January 08 2004 @ 10:29 AM EST
It looks like SCO lied in their agreements with Baystar and RBC. I wonder if
they should be filing fraud complaints?

[ Reply to This | # ]

Original SCO -> Caldera transfer documents
Authored by: gvc on Thursday, January 08 2004 @ 10:31 AM EST
I haven't heard one iota about the legal basis for the transfer from Santa Cruz Op to Caldera of whatever Novell transferred to Santa Cruz.

Tarantella's history page says a terse Sale of operating system divisions to Caldera Systems, Inc.. Here's a more detailed press release from the time.

Presumably there are SEC filings and shareholder reports lurking someplace, not to mention the actual sale agreement. Does anybody have leads on these?

[ Reply to This | # ]

More SCO doubts in the press
Authored by: tcranbrook on Thursday, January 08 2004 @ 10:45 AM EST
This article, Did SCO actually buy what it thought it bought?, from the Australian press, sounds like it could have come from Groklaw pages.

"So, in the light of these Linux lawsuits, where does this leave the rest of us? Probably a little safer than we thought we were. Novell is running long and strong on detail, SCO just as long and strong on rhetoric! When one lawyer quotes details and the other is doing little more than flapping his arms, I tend to go with the details. We await the result of this week's code demonstration with interest - you will recall early last month, a Utah judge ordered SCO to show "within 30 days, the code from the Linux kernel to which it says it has rights." Is there any offending code in the kernel? And more importantly, does SCO have rights to the code at all?

[ Reply to This | # ]

  • A good article - Authored by: Anonymous on Thursday, January 08 2004 @ 04:39 PM EST
Comment from Skiba?
Authored by: Anonymous on Thursday, January 08 2004 @ 10:52 AM EST
PJ,

Did you try to get a comment from Skiba on this? Might be
interesting to hear what he has to say on this.

[ Reply to This | # ]

Groklaw is also a risk factor
Authored by: Anonymous on Thursday, January 08 2004 @ 10:54 AM EST
Maybe SCO needs to list Groklaw as a risk factor, too.

[ Reply to This | # ]

Pump 'n dump
Authored by: Anonymous on Thursday, January 08 2004 @ 11:06 AM EST
Considering how they are operating, it should be obvious
that SCO is very much into P'nD. This just keeps adding to
it.

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: zjimward on Thursday, January 08 2004 @ 11:22 AM EST

Please excuse the size of this listing.

This is a list of Novell's Unix system V copyrights:
(Notice who is listed as the author on the copyright application.)

1. Registration Number: TX-5-786-811
Title: Unix system V : release 4.2.
Description: Computer program.
Note: Printout only deposited.
Claimant: Novell, Inc.
Created: 1992
Published: 25Jun92
Registered: 10Dec03
Author on © Application: Unix System Laboratories, Inc., employer for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: additions & revisions.
Special Codes: 1/C

2. Registration Number: TX-5-786-812
Title: Unix system V : release 4.1.
Description: Computer program.
Note: Printout only deposited.
Claimant: Novell, Inc.
Created: 1991
Published: 27Jun91
Registered: 10Dec03
Author on © Application: Unix System Laboratories, Inc., employer for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: additions & revisions.
Special Codes: 1/C

3. Registration Number: TX-5-786-813
Title: Unix system V : release 4.0.
Description: Computer program.
Note: Printout only deposited.
Claimant: Novell, Inc.
Created: 1989
Published: 3Nov89
Registered: 10Dec03
Author on © Application: Unix System Laboratories, Inc., employer for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: additions & revisions.
Special Codes: 1/C

4. Registration Number: TX-5-789-380
Title: UNIX System V/386 release 4, version 3.
Description: Computer program.
Note: Printout (71 p.) only deposited.
Claimant: Novell, Inc.
Created: 1989
Published: 15Oct89
Registered: 22Sep03
Author on © Application: UNIX System Laboratories, Inc., employer for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: additional, new & rev. progamming text.
Special Codes: 1/C

5. Registration Number: TX-5-789-381
Title: UNIX System V/386 release 4.2.
Description: Computer program.
Note: Printout (71 p.) only deposited.
Claimant: Novell, Inc.
Created: 1992
Published: 25Jun92
Registered: 22Sep03
Author on © Application: UNIX System Laboratories, Inc., employer for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: additional, new & rev. progamming text.
Special Codes: 1/C

6. Registration Number: TX-5-789-382
Title: UNIX System V/386 release 4, version 4.
Description: Computer program.
Note: Printout (71 p.) only deposited.
Claimant: Novell, Inc.
Created: 1990
Published: 7Feb90
Registered: 22Sep03
Author on © Application: UNIX System Laboratories, Inc., employer for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: additional, new & rev. progamming text.
Special Codes: 1/C

7. Registration Number: TX-5-803-363
Title: UNIX System V : release 3.2.
Description: Computer program.
Note: Printout (source code) only deposited.
Claimant: Novell, Inc.
Created: 1988
Published: 14Apr88
Registered: 14Oct03
Date in © Notice: notice: 1984
Author on © Application: program: UNIX System Laboratories, Inc., employer
for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: additions & revisions.
Miscellaneous: C.O. corres.
Special Codes: 1/C

8. Registration Number: TX-5-803-364
Title: UNIX System V : release 3.0.
Description: Computer program.
Note: Printout (source code) only deposited.
Claimant: Novell, Inc.
Created: 1986
Published: 23May86
Registered: 14Oct03
Date in © Notice: notice: 1984
Author on © Application: program: UNIX System Laboratories, Inc., employer
for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: additions & revisions.
Miscellaneous: C.O. corres.
Special Codes: 1/C

9. Registration Number: TX-5-803-365
Title: UNIX System V : release 3.1.
Description: Computer program.
Note: Printout (source code) only deposited.
Claimant: Novell, Inc.
Created: 1987
Published: 30Apr87
Registered: 14Oct03
Date in © Notice: notice: 1984
Author on © Application: program: UNIX System Laboratories, Inc., employer
for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: additions & revisions.
Miscellaneous: C.O. corres.
Special Codes: 1/C

10. Registration Number: TX-5-803-366
Title: UNIX System V : release 4.1ES.
Description: Computer program.
Note: Printout (source code) only deposited.
Claimant: Novell, Inc.
Created: 1991
Published: 27Jun91
Registered: 14Oct03
Author on © Application: program: UNIX System Laboratories, Inc., employer
for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: additions & revisions.
Special Codes: 1/C

11. Registration Number: TX-5-803-367
Title: UNIX System V : release 3.2/386.
Description: Computer program.
Note: Printout (source code) only deposited.
Claimant: Novell, Inc.
Created: 1988
Published: 18Jul88
Registered: 14Oct03
Author on © Application: program: UNIX System Laboratories, Inc., employer
for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: additions & revisions.
Special Codes: 1/C

12. Registration Number: TX-5-820-488
Title: UNIX system V release 3/386.
Description: Computer program.
Note: Printout (50 p.) only deposited.
Claimant: Novell, Inc.
Created: 1987
Published: 1Jan87
Registered: 14Oct03
Author on © Application: computer program: UNIX System Laboratories, Inc.,
employer for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: revisions & additions.
Special Codes: 1/C

13. Registration Number: TX-5-820-489
Title: UNIX system V release 4.2MP.
Description: Computer program.
Note: Printout (50 p.) only deposited.
Claimant: Novell, Inc.
Created: 1995
Published: 1Jan95
Registered: 14Oct03
Author on © Application: computer program: UNIX System Laboratories, Inc.,
employer for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: revisions & additions.
Special Codes: 1/C

14. Registration Number: TX-5-820-490
Title: UNIX system V release 2.
Description: Computer program.
Note: Printout (50 p.) only deposited.
Claimant: Novell, Inc.
Created: 1984
Published: 1Apr84
Registered: 14Oct03
Author on © Application: computer program: UNIX System Laboratories, Inc.,
employer for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: revisions & additions.
Special Codes: 1/C

15. Registration Number: TX-5-820-491
Title: UNIX system V release 4.1ES/386.
Description: Computer program.
Note: Printout (50 p.) only deposited.
Claimant: Novell, Inc.
Created: 1991
Published: 27Jun91
Registered: 14Oct03
Author on © Application: computer program: UNIX System Laboratories, Inc.,
employer for hire.
Previous Related Version: Prev. reg. 1992, TXu 510-028.
Claim Limit: NEW MATTER: revisions & additions.
Special Codes: 1/C

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: Anonymous on Thursday, January 08 2004 @ 11:34 AM EST
It will be interesting to see if SCO includes the Novell copyright dispute in
their annual report to the SEC, due on or about Jan 22. To some extent, they
are damned if they do, and damned if they don't.

If they do list the copyright controversy as a risk factor, then they are
implicitly admitting that there was a pre-existing risk factor which they did
not disclose. The point of the risk factor disclosure is not to just list the
things everybody knows about, but to reveal to the investor community all
significant risks. If they list it now, it would make the impression that they
were in fact trying to conceal the fact that the copyrights were in dispute.

If they don't list it, then it would appear to be a wilful breach of the SEC
rules. That can't be good.

Unfortunately, there is a third alternative, which they will no doubt take.
They will simply say that they forgot, or made a mistake. While in a perfect
world the SEC documents would be infallibly accurate and complete, everybody
knows that they are riddled with mistakes of omission and commission. A
favorite example of mine is the 11/26/03 RedHat S3 filing with the SEC that
contained the line "While we are not a party to any legal proceedings with
the SCO Group, ..." I interpreted this to mean that Red Hat had settled
their dispute with SCO, but when PJ (blessedly thorough and direct as she is)
called Red Hat, they said it was "just a mistake." It's almost
certain that it was, in fact, a mistake, as the Red Hat v. SCO lawsuit continues
in Delaware. The Red Hat quarterly report filed with the SEC yesterday,
01/07/04, corrects that mistake, and records the current state of the lawsuit
(Red Hat and SCO are still waiting for the judge to respond to SCO's request
for dismissal.)

Thad Beier

[ Reply to This | # ]

IBM unveils Linux-based system for retail sales
Authored by: Anonymous on Thursday, January 08 2004 @ 11:41 AM EST
Looks like SCO has acompetitor :
NEW YORK, Jan 8 (Reuters) - International Business Machines Corp. (NYSE:IBM -
News) on Thursday announced plans for a retail sales system, which includes
everything from the cash register to the computers that store data, based on a
version of the Linux operating system from SuSE Linux.

http://biz.yahoo.com/rc/040108/tech_ibm_linux_1.html

[ Reply to This | # ]

50 Million might be in jeapordy
Authored by: pooky on Thursday, January 08 2004 @ 12:13 PM EST

Well, I don’t know what will come of this for SCOG in a court room or with the SEC, but if I were them I would be REAL concerned about what RBC and Baystar might come back with.

“Neither the Company nor any Subsidiary of the Company infringes or is in conflict with any right of any other person with respect to any third party Intangibles” --SCO 10/16/03 SEC Filing

Unfortunately we can’t tell exactly what date the parties signed the agreement since it’s not listed, but it has to be close to the 10/16/03 filing date with the SEC. Given the fact that the 1st letter to SCO from Novell is dated 6/26/2003 which officially informs SCO that Novell disputes the claims, SCO may have a very big problem.

“we wish to make clear that we do not agree with SCO's public statements on this matter.” --Novell to SCO 6/26/03

We dispute SCO's claim to ownership of these copyrights...

“In other words, under the Asset Purchase Agreement and Amendment No. 2, copyrights were not transferred to Santa Cruz Operation unless SCO could demonstrate that such a right was "required for [Santa Cruz Operation]" to exercise the rights granted to it in the APA. Santa Cruz Operation has never made such a demonstration, and we certainly see no reason why Santa Cruz Operation would have needed ownership of copyrights in UNIX System V in order to exercise the limited rights granted SCO under the APA. Nor is there any reason to think that a transfer of the copyrights required for SCO to exercise its APA rights necessarily entails transfer of the entire set of exclusive rights associated with a particular copyrighted computer program”
--Novell to SCO 8/4/03

Undeniably Novell has informed SCO of the dispute. It would seem to me that an answer back saying “We have reviewed and considered your letters in detail and disagree with your analysis and conclusions. Your current interpretation of the agreements, which appears to be of recent vintage, ignores certain provisions of the relevant documents and does not consider the agreements between Novell and SCO as a whole. We respectfully suggest that you carefully review all of the agreements in their entirety, particularly Amendment No. 2.-–SCO to Novell 9/10/2003

No matter who is right, there is an unresolved dispute between the companies, and this is a matter that clearly was discussed and SCO attested to in the agreement with RBC and BayStar, whom believe from their agreement that SCO has undisputable claims since no one is disputing them.

Now I don’t know what was actually said at the meetings between these entities and SCO. However if I were RBC and BayStar, I would go back and reconsider my analysis of the performance of SCO given the newly revealed information. This information a) affects their ability to litigate against end users of Linux and b) affects the scope of expanding the lawsuit against IBM, both factors are of PRIME importance regarding SCO’s future stock value.

In other words, if you had known that Novell was disputing the rights SCO publicly claims to have and will use against others, would you have invested in this stock? Are you willing to invest $50 million in a company that deceived you? What else have they lied about?

-pooky

---
Veni, vidi, velcro.
"I came, I saw, I stuck around."
IANAL, etc...

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: markybob on Thursday, January 08 2004 @ 12:56 PM EST
quoting a good friend of mine...
"I think the purchase should be court-ordered unmade. Novell should get everything back and SCO should get their money back with a reasonable interest. Obviously the buyer/seller agreement was never resolute. They're not satisfied? Return it for a full refund."

[ Reply to This | # ]

Don't just post, contact the SEC
Authored by: Anonymous on Thursday, January 08 2004 @ 01:29 PM EST
If the SEC gets 100 complaints about this, maybe they'll finally do something.

Sarbanes-Oxley Act, Section 302(a2):

SEC. 302. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.
(a) Regulations Required.--The Commission shall, by rule, require ... that the
principal executive officer or officers and the principal financial officer or
officers, or persons performing similar functions, certify in each annual or
quarterly report filed or submitted under either such section of such Act
that--
(2) based on the officer's knowledge, the report does not contain any untrue
statement of a material fact OR OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER
TO MAKE THE STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THE
STATEMENTS WERE MADE, NOT MISLEADING;
(emphasis added)

http://corporate.findlaw.com/industry/corporate/docs/publ107.204.html

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: Dan M on Thursday, January 08 2004 @ 01:46 PM EST
“Neither the Company nor any Subsidiary of the Company infringes or is in
conflict with any right of any other person with respect to any third party
Intangibles” --SCO 10/16/03 SEC Filing

Never mind Novell! Taken at their word that SCOG does not recognize the GPL as a
valid license, they have undeniably infringed the copyrights of all GPL code
that they have distributed.

[ Reply to This | # ]

SCO's Missing Risk Factor
Authored by: Anonymous on Thursday, January 08 2004 @ 01:47 PM EST
It seems to me that the Amendment 2 is being interpreted to mean: We receive
all rights to the UNIX and UNIXware that are necessary in the execution of our
businness. Since our business is UNIX copyright infrigment litigation and
extortion, we claim that all of those copyrights are necessary and are therefore
ours.

Of course, SCO doesn't want to admit that in a letter to Novell.

Just my own two bits.

-WWW

Creative Spelling Copyright 2004. May use with persimmons.

[ Reply to This | # ]

McBride knew about Novell suit on Dec 22, 2003
Authored by: Anonymous on Thursday, January 08 2004 @ 02:06 PM EST
At the very end of the teleconference, after the questions part, McBride mumbled
something like 'GoodBUY and don't worry about Novell suit, we are on top of
it.'. He also mentioned something about SCO ammendment from May 28 that solved
this issue once and for all in favor of SCO.

[ Reply to This | # ]

Missing Dec 22nd conf call
Authored by: Anonymous on Thursday, January 08 2004 @ 02:07 PM EST
I just wanted to make a note.

Dec 22nd was an investors conf call where McBride did allude to the ongoing
dispute as Novell had just registered for its copyrights. The comment was at
the end where McBride said that Novell "snuck in the back door", and
said that they believed that they were fraudlent registrations....

[ Reply to This | # ]

OT: Another missing risk factor
Authored by: Anonymous on Thursday, January 08 2004 @ 02:12 PM EST
ATTENTION PJ

“Neither the Company nor any Subsidiary of the Company infringes or is in conflict with any right of any other person with respect to any third party Intangibles” --SCO 10/16/03 SEC Filing

They are accused of infringing a bunch of IBM copyrights

They are accused of infringing 4 IBM patents

They might have (we don't know if they had any cease and desist letters) have been accused of infringing additional Linux copyrights.

It seems there is a risk factor here, that they forgot to state too - in addition to the Novell copyright claim.

[ Reply to This | # ]

APA Chunnel
Authored by: rcorg on Thursday, January 08 2004 @ 02:23 PM EST

Novell-SCO 1995 APA Article 4.16; Schedules 1.1a,b, as modified by Amendments 1 & 2; and Exhibit 99.2. These are, IMHO, the contractual elements at the epicenter of this entire matter. We must turn to these sources to assess SCO's claim to SVRX copyright ownership. Absent this ownership, the entire SCO house of cards collapses. On the other hand, so long as SCO can make a credible argument for their ownership claim, the entire phantasmagorical drama - viral source code, etc. - will continue to play out its convoluted trajectory. And yes, SCOX stock will very likely continue to increase in value, if only as a result of purely speculative trading.

Unfortunately, the APA and its amendments most assuredly do not resolve the SVRX copyright ownership question, as evidenced by the subsequent copyright filings and exchange of letters by Novell and SCO. SCO's letters are consistent with what we all have come to know and love about these folks. But I find the Novell letter dated 4 August 2003 remarkably weak in its defense of Novell's claim to copyright ownership. If SCO, as affirmed in the Novell letter, is entitled to copyrights necessary for the "exercise of rights granted to it in the APA", then SCO might reasonably claim copyright ownership as necessary to enforce SVRX licnesing, as per APA Article 4.16! This seems to be precisely SCO's position.

The corporate legal minds who crafted the APA, evidently unable to reach a settlement with respect to SVRX copyright ownership, built the contractual equivalent of the Channel Tunnel: SCO can drive a train through it in one direction claiming SVRX copyright ownership; Novell can drive a train through it in the other direction claiming retention of SVRX copyright ownership. And as with the Chunnel, there is a third tube, where the rest of us can wander back and forth looking for the proverbial "light at the end..."

[ Reply to This | # ]

  • APA Chunnel - Authored by: fjaffe on Thursday, January 08 2004 @ 03:42 PM EST
    • APA Chunnel - Authored by: Anonymous on Thursday, January 08 2004 @ 04:57 PM EST
      • APA Chunnel - Authored by: Anonymous on Thursday, January 08 2004 @ 05:04 PM EST
        • APA Chunnel - Authored by: fjaffe on Thursday, January 08 2004 @ 05:29 PM EST
        • APA Chunnel - Authored by: Anonymous on Thursday, January 08 2004 @ 05:57 PM EST
        • APA Chunnel - Authored by: gdeinsta on Thursday, January 08 2004 @ 09:51 PM EST
  • APA Chunnel - Authored by: valdis on Friday, January 09 2004 @ 12:39 AM EST
  • APA Chunnel - Authored by: Anonymous on Saturday, January 10 2004 @ 12:12 AM EST
We should build a list of SCO FUD.
Authored by: penfold on Thursday, January 08 2004 @ 02:53 PM EST
I think it would be helpful to build a list maybe similar to the table that was
built comparing IBM inqueries, and SCO responses.

I think it would be beneficial to highlight their claims, and the date it was
first made, then have a column indicating if the claim is awaiting proof, or has
been proven true or false and the date of such proof.

I got this idea from an ad I found on page 95 of CRN from SCO about SCOFORUM.
Oddly enough, it sounds a LOT like Microsoft's "Get the facts" ad
campaign. I'm sure this is just a coinecidence and does not imply any influence
of one corporation on another. </tinfoil hat on>

Here's the text of the ad:

"Got Unix(r) in your Linux(r)?

FACT: SCO owns the legal copyright to Unix System V.
FACT: SCO owns all claims arising out of violations by Unix licenesees.
FACT: SCO has proof of direct copying of System V into Linux.
See it for yourself at SCOFORUM 2003, sign up at www.sco.com/2003forum.

"Fact or FUD? You be the judge. For the first time in a public forum,
David Boies, Managing Partner, Boies, Schiller, & Flexner LLP, will explain
SCO's intellectual property claims and how SCO's legal actions will impact
your UNIX/Linx(r) business. SCOForum 2003, at teh MGM Grand in Las Vegas Aug
17-19, is SCO's annual technology conference showcasing the products and
business solutions of the SCO Group and its strategic business partners.

"Learn from Darl McBride, president and CEO, about SCO's method for
holding harmless commercial customers of Linux. Examine the future roadmap for
UNIX, new vertical solutions, and strategies for the rising demand for Web
Services. Participate in two days of breakout sessions covering products,
services, and development tools that will help you to reach your business
goals."

As we all know, the "proof" given in SCOFORUM was eviserated within
hours of release, and now has been compelled to turn over the information given
to IBM. Since IBM requested "all documents relating to SCOFOURM" I
wonder if SCO is obligated to hand over this ad and it's history to IBM as
well? Afterall, it could prove interesting find out who actually thought it up
and wrote it down.



---
I'm not kidding, that boy's head is like Sputnik; spherical but quite pointy at
parts! He'll be crying himself to sleep tonight, on his huge pillow.

[ Reply to This | # ]

Speaking of risks...
Authored by: turambar386 on Thursday, January 08 2004 @ 02:54 PM EST
I found this interesting tidbit from SCOG's past:

Caldera could be prevented from selling or developing its products if the GNU general public license and similar licenses under which its products are developed and licensed are not enforceable

The Linux kernel and certain other components of Caldera's products have been developed and licensed under the GNU General Public License and similar licenses. These licenses state that any program licensed under them may be liberally copied, used, modified and distributed freely, so long as all modifications are also freely made available and licensed under the same conditions. Caldera knows of no instance in which a party has challenged the validity of these licenses or in which these licenses have been interpreted in a legal proceeding. To date, all compliance with these licenses has been voluntary. It is possible that a court would hold one or more of these licenses to be unenforceable in the event that someone were to bring a claim asserting proprietary rights in a program developed and distributed under them.

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SCO's Missing Risk Factor
Authored by: Dan M on Thursday, January 08 2004 @ 03:04 PM EST
“Neither the Company nor any Subsidiary of the Company infringes or is in
conflict with any right of any other person with respect to any third party
Intangibles” --SCO 10/16/03 SEC Filing

I just came from the Yahoo message boards where I was reminded of the fact that
IBMs' counterclaims include patent violations!

Has SCOG filled that compliance report writer position yet? They may well use
this as an excuse for poorly researched reports.

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SCO's Missing Risk Factor
Authored by: jkondis on Thursday, January 08 2004 @ 03:09 PM EST
The purchase agreements clearly state that all license fees are to go to Novell
(%100), after which Novel (seller) agrees to pay (old) SCO 5% as a commission.

Isn't this a risk factor that they should have mentioned??? Even if
Caldera/SCOG collects SCOSource license fees, they have to pay 95% of it to
Novell! (It's obvious to those here that the sale allowed (old) SCO to work on
their own version of Unix, while at the same time selling the source to others
for a %5 commission.)

That could also explain why they won't take money for SCOSource licensing,
since Novell would pounce on that immediately for their 95%...

...J

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SCO's Missing Risk Factor
Authored by: Anonymous on Thursday, January 08 2004 @ 03:24 PM EST
CFRONT is available from Lucent Technologies Bell Labs
Innovations.

http://www.lucentssg.com/displayProduct.cfm?prodid=56

It has no price associated with it, nor is it available
for download. Once could infer it isn't actively being
marketed.

There is a package called PRETTY - pretty printer for
CFRONT and C code, which has a note indicating it is
presumed to be derived from CFRONT. PRETTY is available
for free download after opening an acocunt to access
the secure server. The license terms for it are more
liberal than the GPL.

The point being SCO can't claim ownership of CFRONT,
it's owned by Bell Labs. And even if the ownership
could be disputed, parts of it have been distributed
liberally.

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Serche la Canopy
Authored by: star-dot-h on Thursday, January 08 2004 @ 04:33 PM EST
'scuse my French but it seems to me that SCO has been dead for a long time now
but that Canopy have been milking its corpse for far too long now. Thanks Ray
Noorda. So, how many companies is Canopy involved with? How many boards do Darl
and Ray sit on? How soon before Groklaw discovers some serious mis-doings in
that group!?

<a
href="http://zgp.org/linux-elitists/20031013115453.GI7916@leitl.org.html&
quot;>Here's a start</a>.

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Old SCO bought "source-license business"
Authored by: Tsu Dho Nimh on Thursday, January 08 2004 @ 04:38 PM EST
Some sharp-eyed Yahoo lad posted this link to tghe OLD SCO's filings ... http://www.sec.gov/Archives/edgar/data/851560/0000891618-96-003164.txt th e link

"In fiscal year 1996, SCO acquired the UnixWare(R) and UNIX System V Release 4 source-license business from Novell, Inc."

Since introducing its first operating software in 1983, SCO has shipped over 2.1 million licenses to multi-user computer environments worldwide." ... YIKES, that's a huge list of potential leaks for Caldera/SCO

" Because customers are increasingly reluctant to be restricted to a single computer vendor, the Company has designed its software products to support industry-accepted open systems standards. Open systems are those systems which conform to established industry standards such as XPG-4, Spec 1170, DCE and OSF/Motif(R) from The Open Group, POSIX(R) from IEEE, and Federal Information Processing Standard (FIPS) from the National Institute of Standards (NIST). SCO continuously works with standards organizations such as The Open Group to assure continued conformance to open systems standards." ... and they admit they code to standards, which means the header files are just POSIX-compliant, not copied.

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Seemingly SCO is on drugs...
Authored by: Anonymous on Thursday, January 08 2004 @ 05:06 PM EST
...but that is not really likely. More likely is some back chamber deal with MS
to try and hold the ongoing Linux movement with a last resort attack as long as
they can, or to put it in medical terms: keep the comatose patient alive as long
as possible (or until someone switches off the power, whatever happens first).
My conclusion: As soon as this 'legal' struggle ends, Linux will gain a
momentum capable of sweeping Windoze away like a tsunami, at least in business
environments. I myself will keep my windows partition, because I have that
machine anyway and thus it is much cheaper than a Playstation. The ikportant
stuff (in my case) is done with OS/2, but this could easily be replaced by Linux
(rather than MS), if I wouldn't feel so comfortable with it. Anyway, I can live
without Windows for the serious stuff, and I figure anybody can. Let MS stick to
the xbox corner, Windows is not too bad for gaming (and almost nobody can force
me to abandon Windows 98 in favour of XP just for gaming, I don't need their
support, so why should I).
Still feeling save without Windows 2000/XP...

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Professional Help
Authored by: kberrien on Thursday, January 08 2004 @ 05:19 PM EST
Who owns the copyrights is such a key issue, shouldn't we seek professional
observations.

I would be very interested in a review by a contract lawyer of the purchase
documents available. Enough IANAL. Early on in this case, we seemed to have a
fair amount of input from some real lawyers (the promisory escopel concept
description comes to mind -- sp!), what happened to them all?

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  • Professional Help - Authored by: Anonymous on Friday, January 09 2004 @ 08:37 AM EST
Speaking of copyrights....
Authored by: geoff lane on Thursday, January 08 2004 @ 05:32 PM EST
Time to update the copyright notice at the bottom of the Groklaw page :-)

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OT: The Age Article Links to GrokLaw
Authored by: DaveAtFraud on Thursday, January 08 2004 @ 06:13 PM EST
Everybody kind of charged off on the risk factor discussion but the article at
The Age was really quite well done... right down to linking to Groklaw at the
bottom of the article for the actual agreements.

:-)

I didn't pay that much attention to it either but the same article just got
posted on slashdot so The Age now gets to experience a good slashdotting. I
guess that also means that GrokLaw had the link posted about 20 hours before
someone on slashdot found it and submitted it.

---
Quietly implementing RFC 1925 wherever I go.

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FUD Alert...Fight Back!
Authored by: Jim Bengtson on Thursday, January 08 2004 @ 06:35 PM EST
Protecting Against Open Source Legal Risks by Michael Overly, writing for Optimize Magazine
"In other words, you should be very concerned about the spread of open source, including Linux, in your company, as it may expose your business to considerable risks. Your company could become an unwitting victim to the fallout of the SCO/IBM intellectual-property dispute. This risk is exacerbated by the nature of the open-source culture, which freely modifies and distributes the software but without standard warranties, indemnities, and other contractual protections. And in another twist, numerous commercial applications come with embedded open-source software. However, the vendor often hasn't notified the licensee that open-source programs are part of its commercial application.

Companies, therefore, should act immediately to limit and manage their risk. They must put in place rigorous managerial controls to regulate the use of open-source software by their personnel. In addition, they should make a vigorous effort to identify the open-source code embedded in the commercial software they buy."
I urge everyone to write to the author and publisher educate them on the nature of the SCO lawsuit. Start by pointing them to Groklaw!

Optimize Magazine
"Optimize's mission is to provide 70,000 Business Technology Executives with business thought leadership and practical knowledge to bridge the gap between business strategy and execution."

Michael Overly is a partner in the Los Angeles office of Foley & Lardner (a national law firm). A member of the E-Business & Information Technology Group, his practice focuses on drafting and negotiating technology related agreements, outsourcing agreements, information security agreements, e-commerce agreements, and technology use policies. He counsels clients in the areas of information security, electronic commerce, multi-media, online law and privacy issues.
Optimize Magazine Media Schedule
Bio at Foley & Lardner

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OT but important......
Authored by: Anonymous on Thursday, January 08 2004 @ 07:11 PM EST
What does a smear campaign look like ?
Read this :
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1600684464&a
mp;tid=cald&sid=1600684464&mid=78887

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SCO's Missing Risk Factor
Authored by: suppafly on Thursday, January 08 2004 @ 07:13 PM EST
<i>Of course, Mr. Skiba might not have known about Novell's registering
for copyrights on UNIX when he wrote those words. For that matter, did he know
that the SCO-Novell dispute over who has valid copyright on UNIX was still
ongoing? Did he know Novell had sent SCO those letters?
</i><br>
Someone should send him a register letter outlining those findings.

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Dumb question
Authored by: Anonymous on Thursday, January 08 2004 @ 07:25 PM EST
How does the question of copyright ownership affect SCO's actions? In other
words, which of the following is implied by Novell's claims to ownership:

- SCO can't sue for breach of contract
- SCO can't sue for license violation (is this the same thing as above?)
- SCO can't sue for copyright infringement (which they are threatening to do,
both explicitly and, through their Linux licensing program, implicitly)
- SCO can't sue for revealing trade secrets

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Analysis of SCO-Novell Copyright Dispute
Authored by: mitphd on Thursday, January 08 2004 @ 10:23 PM EST
Here's my take on the conflicting copyright claims from SCO and Novell. (IANAL, so take it for what it's worth.)

The basis for all of SCO's UNIX rights is its Asset Purchase Agreement (APA) with Novell. The original APA specifically excludes

All copyrights and trademarks, except for the trademarks UNIX and UnixWare.
This is nice and clear. However, Amendment 2 changes this to:
All copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the Agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies.
The amended text anything but clear. Let's try to make sense of it.

What is SCO's 'acquisition of UNIX and UnixWare technologies'? Let's look at the APA to see what SCO actually bought. The Recitals at the very beginning tell us:

A. Seller is engaged in the business of developing a line of software products currently known as Unix and UnixWare, the sale of binary and source code licenses to various versions of Unix and UnixWare, the support of such products and the sale of other products which are directly related to Unix and UnixWare (collectively, the "Business").

B. The Boards of Directors of each of Seller and Buyer believe it is in the best interests of each company and their respective stockholders that Buyer acquire certain of the assets of, and assume certain of the liabilities of Seller comprising the Business (the "Acquisition").

So, SCO bought the 'Business'. The 'Business' consists of:
  1. developing Unix and Unixware
  2. sale of binary and source licenses to Unix and Unixware
  3. support of Unix and Unixware
  4. sale of directly related products
(N.B., I know that they are using the term 'Unix' incorrectly, and that it's really a generic term for a class of operating systems, but let's leave that argument for another day.)

So, what copyrights are required for SCO to exercise its rights to the 'Business'? A copyright is not necessary for development, support, or sale of related products. The only thing that might 'require' a copyright is the sale of licenses, since enforcement of copyright might be required to impel prospective customers to buy licenses.

So, the major dispute is whether SCO 'requires' the copyrights in order to conduct its business of selling binary and source code licenses for Unix and Unixware. Unfortunately, one can argue both ways. SCO can argue that without copyright enforcement powers, it can never achieve the maxomum potential of the licensing business. Novell can argue that copyright is not 'required' but merely desirable. Copuyright would only be 'required' if Novell were remiss in enforcing the copyrights in the code SCO was licensing, and we have seen no evidence of this. (BTW, the IBM contract is irrelevant to this point, since ultimate control of it and all other pre-existing license contracts was retained by Novell via section 4.16(b) of the APA. I really don't see how SCO can proceed with its contract claims against IBM after Novell has waived them.)

So, my decisive opinion as to the competing copyrights is: I don't know. I lean toward Novell's side, but I admit a certain bias. I don't really think that either SCO or Novell could be convicted of fraudulent registration of copyright, because they both have plausible arguments in their favor. What it does mean is that Novell has just put a big question mark on any copyright suit by SCO.

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McBride's Tenure at Novell
Authored by: CyberCFO on Thursday, January 08 2004 @ 10:56 PM EST
I just realized something and pardon me if someone else has noticed this.

Didn't Darl McBride work at Novell when the Unixware business was sold to SCO.
IIRC, Darl ended his Novell employment sometime in 1996 and the Novell-SCO APA
was signed in 1995.

Is there any significance to this?

/g

---
/g

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SCO's Missing Risk Factor
Authored by: Anonymous on Friday, January 09 2004 @ 03:01 AM EST
Nice work, PJ. You've just proved that SCO committed securities law
violations!

Who wants to report them to the SEC?

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A suggestion
Authored by: Anonymous on Friday, January 09 2004 @ 05:11 AM EST
How about setting up a service on this site to sell one SCO share to people ?
Then we can all buy one each, and send a complaint to the SEC.

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Caldera's agreement with oldSCO
Authored by: turambar386 on Friday, January 09 2004 @ 09:59 AM EST

I thought I'd start a fresh thread for this. Somewhere in the middle of these comments we were discussing if and how the Caldera aquisition of some of SCO affected the contracts with Novell.

A lengthy document that contains a copy of the agreement with all three amendments as well as both company's SEC filings at the time is here. It references an exhibit (13.15A) that should contain a list of the assets transfered, but the exhibit is not part of the document nor have I been able to find it.

What I have found is an old FAQ that states:

What part of the Server Software Division is included in the deal?

Employees, the UNIX® and related intellectual properties, including the UnixWare® technology, facilities, legal entities, customer relationships, channel relationships, and all products except for SCO OpenServer™ intellectual property rights.

I have also found a press release from Feb 2001 announcing that Caldera was after all going to aquire the OpenServer product line as well.

This seems to me to pretty much settle the question that Caldera did indeed acquire all UNIX rights, properties, and contractual obligations to Novell from SCO.

One question pops into my mind from this, which is that one of TSCOG's complaints is that IBM stole their UNIX on Intel trade secrets. Since oldSCO's involvement with Project Monterey would have been transfered to Caldera along with the Server group, does anyone know how easy/hard it is to maintain a trade secret during a merger like this one?

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Stories on Yahoo Finance
Authored by: Anonymous on Friday, January 09 2004 @ 01:21 PM EST

I find it at least a bit interesting, that none of the recent stories regarding Novell's and SCO's recent copyright spat(s) (just the ones in the last couple of months), are listed on the Yahoo Finance page for SCOX:

http://finance.yahoo.com/q?s=SCOX

From what I see there, if any investor uses that page for the main or only source of information regarding SCOX, then they are grossly uninformed, in the extreme.

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SCO's Missing Risk Factor
Authored by: Electric Dragon on Friday, January 09 2004 @ 01:49 PM EST
Skiba says:
We continue to view SCOX as synthetic call option on a very large intellectual property issue around Linux adoption and a lawsuit against IBM.
In this he is technically correct - SCOX stock is a gamble on the outcome of the lawsuit. Where he differs from the FOSS community is in the assessment of the odds that the current stock price offers. It's like if I saw a tip in the sports pages: "Today's racing tip is Sad Ken in the 3.30 at Chepstow - a cert at 20/1". However on examining what others know and have found out about the horse it turns out to have only 3 legs, to be blind and suffering chronic asthma. Meanwhile one of the other horses in the same race is a thoroughbred champion and another is a hot prospect with several recent wins. I might conclude that even a 20/1 chance is hopelessly optimistic and that 10,000/1 would be more likely.

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SCO's Missing Risk Factor
Authored by: Ikarius on Monday, January 12 2004 @ 04:19 PM EST
It's only a missing risk factor if they loose. And if they loose this, they
loose any hope of cashing in on System V, so the company will be sunk anyhow.

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Question about Risk Factors
Authored by: Diogenese on Wednesday, January 14 2004 @ 11:28 AM EST
I have been checking through the various available online sources for an answer
to this and cannot find one:

A number of people (both here and on the Yahoo SCOX board) have suggested that
leaving out a risk factor is an SEC violation. Everything I have read seems to
indicate that it is not. Risk factors in forward looking statements seem to be
to protect the company from shareholder lawsuits.

Which makes the omission important, but not criminal as far as I can see, and
not an SEC violation.

Obviously IANAL. But I would be interested if anybody has a definitive answer,
rather than an opinion on the subject.

Thanks,

Dio

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