All SCO is really after here is delay, they tell her, to put off as long as possible any resolution of its copyright allegations, so it can continue to spread FUD:

"SCO's June 17 effort to explain away the numerous inconsistent statements it has made to this Court and to other federal courts around the country again make plain SCO's litigation strategy. SCO's ultimate objective is to delay for as long as possible resolution of the copyright claims that are at the heart of each of the pending lawsuits. By avoiding final adjudication of its copyright claims, SCO can continue to foster fear, uncertainty, and doubt in the marketplace about the long-term viability of Linux. SCO thereby seeks either to discourage users from adopting and implementing that operating system or to induce them to pay SCO a punitive licensing fee."

They point out all the inconsistencies in what SCO has told different courts at different times and compare the inconsistencies, and that's a nice word for it, in SCO's position even with this same judge by highlighting that the June 17 letter "purporting to clarify its position" contradicts what SCO wrote in its prior filed Memorandum in Opposition to Red Hat's pending Motion for Reconsideration.

Red Hat reminds the judge that SCO told her in the Memorandum that the IBM case would resolve matters, because the case involved the question of whether there is UNIX code in Linux and because IBM's 10th counterclaim squarely addresses the matter of copyright infringement. (Red Hat doesn't mention now that SCO is fighting like crazy to get that counterclaim dismissed or stayed, but they have earlier done so.) Yet, they point out, in the June 17 letter, SCO writes that they've discovered others besides IBM have infringed SCO's copyrights, and that "non-IBM conduct is conduct that SCO's complaint in Utah -- by its express terms -- does not challenge or encompass."

Well, Your Honor, Red Hat says in effect, we're not IBM, and we need our matter resolved, and here SCO is admitting that the IBM case won't resolve the issues involving non-IBM parties. That would be us. So which is it? What they told you in the June 17 letter? Or what they told you originally? Or what they told you in the Memorandum? It can't all be true, because the various assertions are mutually exclusive. At a minimum, they argue, even if she doesn't lift the stay, SCO should be blocked from filing any further end user lawsuits until the more basic questions are answered.

OK, Red Hat next says, which is it? They are telling *you* that copyright infringement by IBM is a central issue in the Utah case. But they are telling Utah *simultaneously* that copyright has nothing to do with it, that SCO's claims against IBM have to do with contract breaches, not copyright violations except for IBM's continued use of AIX and Dynix after SCO's purported "termination". SCO's own wording to Utah is that their 2nd Amended Complaint "does not contain a claim against IBM for copyright infringement arising out of its use, reproduction or improvement of Linux." If that is so, what they told you, Your Honor, would be, shall we delicately say, inconsistent? And if what they told Utah is true, we deserve a lifting of the stay, because it's obvious that the IBM case can't resolve any Red Hat copyright infringement issues. The IBM litigation has been going on for more than a year, and SCO "has yet to identify the necessary link between the parts of Linux that SCO claims infringe its copyrights and the specific UNIX code over which it claims copyright protection." Um, duh.

Second, they show her more inconsistencies by quoting from the AutoZone case, where SCO argued at length that none of the other cases, including IBM's, could settle all the issues (which is the opposite of what SCO told the Red Hat judge):

"None of [the other] actions are likely to be outcome determinative of issues in this litigation and, therefore staying this litigation in favor of those actions will not promote judicial efficiency."

SCO also told the Nevada court that it was vital that the AutoZone case should not be stayed. Apply all their arguments to us, and you'll get it right, Red Hat is saying. If SCO argues that case shouldn't be stayed until after the IBM litigation is finished, and it's only against a car parts company, a simple end user, how much less should Red Hat's case be stayed, when it's involving a developer and distributor to many end users?

SCO will say anything, Red Hat tells the judge, in case she hasn't grasped that yet from this letter and from IBM pointing out the same character flaw, with evidence of their own, and she shouldn't endorse their bad behavior:

"In summary, it is apparent from SCO's own inconsistent statements that it will make whatever factual and legal assertion serves its interest without regard to directly inconsistent positions it takes or contrary statements it previously made in other related cases. In the Red Hat case pending before this Court, SCO argued in favor of a stay on the grounds that Red Hat's Complaint seeking a declaration of non-infringement will be substantially addressed by resolution of the copyright claims in the IBM suit. However, SCO moved to dismiss or stay resolution of those very claims in the IBM suit. SCO then simultaneously proceeded with its litigation against AutoZone, an end user of the Linux software, and claims a stay of the copyright claims in that litigation would be unwarranted because the IBM suit will not address all relevant copyright issues. SCO's June 17 letter to this Court cannot reconcile these utterly conflicting contentions."

They ask that the stay be lifted. All she has to do is lay out both letters, and all the pleadings, and she'll get it. Are SCO's words being misconstrued, as they claim? Or are they telling situational stories that are inconsistent, as Red Hat claims? I don't find it hard to determine the answer to that question, because I've followed every detail of this case from the beginning. The question is, will she take the time and effort to look at all the details? It's always hard to get a human to admit they need to change their thinking. But judges do it all the time. It's a skill they must practice all the time on the job, so if they persuade her to stop and really look, they have given her abundant reason to lift this stay. But even if she doesn't, she must know now who she is dealing with, and, next time, I don't think she'll be quite so inclined to take SCO's word for anything.

Welcome to the club, Your Honor.

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

Young, Conaway, Stargatt & Taylor, LLP
[letterhead]

July 6, 2004

BY HAND DELIVERY

The Honorable Sue L. Robinson
United States District Court for the
District of Delaware
[address]

Re: Red Hat, Inc. v. SCO Group, Inc.
Civil Action No. 03-772-SLR

Dear Chief Judge Robinson:

Red Hat, Inc. submits this letter pursuant to the Court's April 6, 2004 Order requesting a quarterly update on the status of various related litigation matters. Although Red Hat is not a party to these other related cases (and on that basis has urged the Court to reconsider its order staying this Red Hat litigation), Red Hat offers the following summary based upon publicly available information.

However, as an initial matter, Red Hat will address the letter submitted by SCO to this Court on June 17, 2004 purporting to clarify its position with respect to the various related lawsuits that are pending in courts around the country. That letter contradicts statements that SCO has made in this case in opposing Red Hat's pending Motion for Reconsideration. For example, in its Opposition to Red Hat's Motion for Reconsideration, SCO stated:

[T]he IBM case will address a central issue in this case: whether Linux contains misappropriated UNIX code. As noted in the Court's Order, this issue is raised by SCO's claim for breach of contract arising from IBM's contributions of code to Linux in violation of its contractual obligations. This issue is also raised directly by IBM's Tenth Counterclaim against SCO, which seeks a declaratory judgment that "IBM does not infringe, induce infringement of, or contribute to the infringement of any SCO copyright through its Linux activities, including its use, reproduction and improvement of Linux, and that some or all of SCO's purported copyrights in Linux are invalid and unenforceable." . . . There is no doubt that, as it is presently constituted, the IBM case will address central issues raised in this lawsuit. Therefore, it would be a "waste of judicial resources," and resources of the parties, to litigate this case while a substantially similar question is being litigated in federal district court in Utah.

(SCO's Opp. to Mot. for Reconsideration at 3-4.) In its June 17, 2004 letter to this Court, however, SCO acknowledges that it has conducted "further investigation of improper contributions to Linux by parties other than IBM . . . [and] [t]hat non-IBM conduct is conduct that SCO's complaint in Utah -- by its express terms -- does not challenge or encompass." (6/17/04 Letter from Jack B. Blumenfeld, Esq. to The Hon. Sue L. Robinson at 2 (emphasis added).) This assertion alone calls into question the continued appropriateness of the stay in this case.

SCO's June 17 effort to explain away the numerous inconsistent statements it has made to this Court and to other federal courts around the country again make plain SCO's litigation strategy. SCO's ultimate objective is to delay for as long as possible resolution of the copyright claims that are at the heart of each of the pending lawsuits. By avoiding final adjudication of its copyright claims, SCO can continue to foster fear, uncertainty, and doubt in the marketplace about the long-term viability of Linux. SCO thereby seeks either to discourage users from adopting and implementing that operating system or to induce them to pay SCO a punitive licensing fee.

At bottom, SCO's inconsistent statements support reconsideration of this Court's stay -- particularly in light of SCO's assertion of copyright claims against a Linux end user. At a minimum, SCO should not be permitted to pursue litigation against individual end users in light of its position claiming that a stay of this case -- against a Linux developer and distributor -- is warranted.

1. SCO Group, Inc. v. International Business Machines Corp.

In March 2003, SCO filed a Complaint against IBM asserting breach of contract and various state law claims arising out of IBM's alleged misappropriation of SCO's purported confidential information for use in the Linux operating system. Although SCO did not assert copyright infringement against IBM at that time, it subsequently amended its Complaint to add such a claim. On March 29, 2004, IBM amended its counterclaims against SCO seeking, inter alia, a declaratory judgment that IBM is not infringing any of SCO's copyrights through its use, reproduction and improvement of Linux and that SCO's asserted copyrights are invalid and unenforceable.

On April 23, 2004, SCO filed a Motion to Dismiss or Stay IBM's counterclaim. In its June 17 letter to this Court, SCO claimed that it "continues to believe that IBM's violations of its license obligations and U.S. copyright law through its improper contributions of SCO's intellectual property to Linux -- the issues that SCO's complaint in Utah presents -- are of paramount importance and will continue to dominate." (6/17/04 Letter at 2). To the Court in Utah however, SCO asserted in its Motion that the "primary" claims asserted against IBM are its "breach of contract and other direct claims." (Mem. in Support of Mot. to Dismiss at 2.) SCO further asserted that "[t]he only copyright claim SCO has asserted against IBM is primarily for IBM's continuing use of AIX and DYNIX after SCO terminated IBM's UNIX licenses . . . . The Second Amended Complaint does not contain a claim against IBM for copyright infringement arising out of its use, reproduction or improvement of Linux." (Id. at 3 (emphasis added).)

IBM opposed SCO's Motion to Dismiss, and has filed a Cross-Motion for Partial Summary Judgment on Its Claim for Declaratory Judgment of Non-Infringement. The primary basis for IBM's motion is that, after more than a year of litigation, two orders to compel, and affidavits from SCO certifying its compliance with discovery, SCO has yet to identify the necessary link between the parts of Linux that SCO claims infringe its copyrights and the specific UNIX code over which it claims copyright protection. Oral argument on IBM's motion is scheduled for August 4, 2004.

2. SCO Group, Inc. v. AutoZone, Inc.

On March 3, 2004, SCO filed suit in the United States District Court for the District of Nevada against AutoZone, Inc., an end user of Linux software, alleging infringement of SCO's UNIX copyrights. In response to the Complaint, AutoZone filed a motion seeking, inter alia , to stay the action pending resolution of the instant Red Hat case, the IBM case and the dispute between Novell and SCO regarding ownership of UNIX copyrights. In opposing AutoZone's motion to stay, SCO has contended: (1) that a stay would not conserve judicial resources because "there are a great many bases on which those other actions could be decided, including but not limited to decisions in SCO's favor, which would still require all of SCO's copyrighted claims relating to infringing use of Linux to be litigated," (Opp. to Motion to Stay at 4); and (2) a stay of the AutoZone action would cause "severe prejudice" to SCO, (id. at 11). In alleged support of these arguments, SCO made a host of factual and legal assertions that directly contradict the assertions it has made in support of a stay in the Red Hat case before this Court, including :

• "[The party seeking the stay must demonstrate 'a clear case of hardship or inequality' to itself if this action continues. If there is even a 'possibility' that the stay would work damage on [the party opposing the stay], the stay should be denied." (Opp. Motion to Stay at 12);

• "None of [the other] actions are likely to be outcome determinative of issues in this litigation and, therefore staying this litigation in favor of those actions will not promote judicial efficiency." (Opp. to Motion to Stay at 14);

• "The IBM litigation pending in federal district court in Utah is, in large part, a breach of contract action." (Opp. to Motion to Stay at 16);

• "[T]here are various procedural and substantive issues that could resolve the IBM litigation without implicating the issues to be litigated in this case." (Opp. to Motion to Stay at 17);

• Cases cited by other parties in support of a stay are inapposite because "[e]ach case was stayed in favor of parallel litigation between the same parties and involving identical or virtually identical issues." (Opp. to Motion to Stay at 17 (emphasis in original)); and

• "In short, there is no basis to delay this litigation. None of the other three litigations (to which AutoZone is not a party) will necessarily resolve this matter." (Opp. to Motion to Stay at 18).

AutoZone's motion is currently pending.

In summary, it is apparent from SCO's own inconsistent statements that it will make whatever factual and legal assertion serves its interest without regard to directly inconsistent positions it takes or contrary statements it previously made in other related cases. In the Red Hat case pending before this Court, SCO argued in favor of a stay on the grounds that Red Hat's Complaint seeking a declaration of non-infringement will be substantially addressed by resolution of the copyright claims in the IBM suit. However, SCO moved to dismiss or stay resolution of those very claims in the IBM suit. SCO then simultaneously proceeded with its litigation against AutoZone, an end user of the Linux software, and claims a stay of the copyright claims in that litigation would be unwarranted because the IBM suit will not address all relevant copyright issues. SCO's June 17 letter to this Court cannot reconcile these utterly conflicting contentions.

In sum, the Court should not sanction SCO's inconsistent assertions and conduct by continuing to stay this Action. If, as SCO argues, a stay is inappropriate in the AutoZone case, involving an end user, despite the IBM litigation, a stay most certainly is also inappropriate in this case, involving a developer and distributor to many end users.

Very truly yours,

________[signature]______
Josy W. Ingersoll (No. 1088)
JWI:eag

cc: Peter T. Dalleo, Clerk
Mark G. Matuschak, Esq.
Michelle D. Miller
Stephen N. Zack, Esq.
Jack B. Blumenfeld, Esq.