decoration decoration
Stories

GROKLAW
When you want to know more...
decoration
For layout only
Home
Archives
Site Map
Search
About Groklaw
Awards
Legal Research
Timelines
ApplevSamsung
ApplevSamsung p.2
ArchiveExplorer
Autozone
Bilski
Cases
Cast: Lawyers
Comes v. MS
Contracts/Documents
Courts
DRM
Gordon v MS
GPL
Grokdoc
HTML How To
IPI v RH
IV v. Google
Legal Docs
Lodsys
MS Litigations
MSvB&N
News Picks
Novell v. MS
Novell-MS Deal
ODF/OOXML
OOXML Appeals
OraclevGoogle
Patents
ProjectMonterey
Psystar
Quote Database
Red Hat v SCO
Salus Book
SCEA v Hotz
SCO Appeals
SCO Bankruptcy
SCO Financials
SCO Overview
SCO v IBM
SCO v Novell
SCO:Soup2Nuts
SCOsource
Sean Daly
Software Patents
Switch to Linux
Transcripts
Unix Books
Your contributions keep Groklaw going.
To donate to Groklaw 2.0:

Groklaw Gear

Click here to send an email to the editor of this weblog.


Contact PJ

Click here to email PJ. You won't find me on Facebook Donate Paypal


User Functions

Username:

Password:

Don't have an account yet? Sign up as a New User

No Legal Advice

The information on Groklaw is not intended to constitute legal advice. While Mark is a lawyer and he has asked other lawyers and law students to contribute articles, all of these articles are offered to help educate, not to provide specific legal advice. They are not your lawyers.

Here's Groklaw's comments policy.


What's New

STORIES
No new stories

COMMENTS last 48 hrs
No new comments


Sponsors

Hosting:
hosted by ibiblio

On servers donated to ibiblio by AMD.

Webmaster
AutoZone Will File to Correct SCO's "Material Misstatements"
Friday, June 03 2005 @ 02:15 AM EDT

This isn't a surprise, not after reading SCO's Report Regarding Discovery in the SCO v. Autozone case yesterday: AutoZone has issued a statement that it will file a document to correct the record in SCO v. AutoZone:

"AutoZone will file a response with a court to correct the record regarding what we believe to be material misstatements contained in the recent SCO filing," AutoZone spokesman Ray Pohlman said in a statement.

Them's fightin' words. If there are material misstatements, it's of note that there is a similar paragraph about the AutoZone case in an 8K filed with the SEC June 1st.

Here's what SCO says about the AutoZone case in the 8K, and it's essentially what Darl McBride read in the financial conference call this week too:

The Company has concluded the initial discovery allowed by the court and filed its report with the court on May 27, 2005. Contrary to AutoZone's own statements to the court, the Company found through discovery, including depositions and other admissions of AutoZone, many instances of copying of programs containing SCO OpenServer code. AutoZone has represented that it has now removed all of the SCO code and proprietary information it copied or used in its migration to Red Hat Linux. Because AutoZone represents it has removed or otherwise is not using SCO code and proprietary information, the Company currently does not intend to move for a preliminary injunction. AutoZone does not admit that it violated the Company's rights or caused the Company damage in that migration process, which are still points of dispute between the parties. Given the stay issued by the court in the case, the Company reserves the right to pursue infringement and damages in the future based on these issues and other issues stayed by the Court.

Matt Whipp, in PCPro's coverage of the financial conference call, notes that while Darl McBride speaks positively about SCO's Unix business, a recent SEC filing indicates that the company expects Unix to continue to decline in the marketplace.

Analyst Gary Barnett of Ovum says SCO's Unix business is in "a steady but terminal decline":

Notwithstanding the caveat that anything can happen in a courtroom, we believe that it is extraordinarily unlikely that SCO will prevail.

The apparently significant reduction in the company's net losses belies the fact that SCO over the first six months of this fiscal year the company has spent $1million less on R&D and nearly $4million less on sales and marketing. While this might be characterised as prudent cost management we think it signifies the fact that SCO's primary mission is not the development and sale of Unix and that the company sees relatively little up-side in competing with Linux anywhere but in the courts. . . .

We believe that the most likely outcome in SCO's case against IBM is failure and our advice to existing users of SCO's technology is to make plans to migrate away from it.

There is another new SEC filing, POST-EFFECTIVE AMENDMENT NO. 2 TO FORM S-3 ON FORM S-1, also filed on June 1st, in which SCO says this:

The success of our UNIX business will depend on the level of commitment and certification we receive from industry partners and developers. In recent years, we have seen hardware and software vendors as well as software developers turn their certification and application development efforts toward Linux and elect not to continue to support or certify to our UNIX operating system products. If this trend continues, our competitive position will be adversely impacted and our future revenue from our UNIX business will decline. The decline in our UNIX business may be accelerated if industry partners withdraw their support from us for any reason, including our SCOsource initiatives.

If the market for UNIX continues to contract, our business will be harmed.

        Our revenue from the sale of UNIX products has declined over the last several years. This decrease in revenue has been attributable primarily to increased competition from other operating systems, particularly Linux. Our sales of UNIX products and services are primarily to existing customers. If the demand for UNIX products continues to decline, and we are unable to develop UNIX products and services that successfully address a market demand, our UNIX revenue will continue to decline, industry participants may not certify to our operating system and products, we may not be able to attract new customers or retain existing customers and our business and results of operations will be adversely affected. Because of the long adoption cycle for operating system purchases and the long sales cycle of our operating system products, we may not be able to reverse these revenue declines quickly. . . . Revenue from our UNIX business decreased by $2,577,000, or 23 percent, for the first quarter of fiscal year 2005 compared to the first quarter of fiscal year 2004. The revenue from this business has been declining over the last several quarters primarily as a result of increased competition from alternative operating systems, particularly Linux. If revenue from our UNIX business continues to decline and we are unable to generate positive cash flow, our UNIX business will be adversely impacted.

        We have decreased our operating costs and increased our gross margin percentage. Operating costs for our UNIX business decreased from $11,085,000 for the first quarter of fiscal year 2004 to $7,038,000 for the first quarter of fiscal year 2005. These cost reductions have primarily been attributable to reduced headcount and continued operational efficiencies generated in our UNIX business as well as from the consolidation of certain facilities.

        In our UNIX business, we have reduced the number of full-time equivalent employees from 292 as of January 31, 2004, to 165 as of January 31, 2005. We have taken these headcount reductions and reduced other discretionary spending while still maintaining a worldwide presence. Based on our cost-cutting actions, we anticipate that our UNIX business will continue to generate positive cash flow throughout fiscal year 2005.

The decrease in revenue in the UNIX business of $2,577,000 for the first quarter of fiscal year 2005 compared to the first quarter of fiscal year 2004 was primarily attributable to continued competition from other operating systems, particularly Linux. We anticipate that for the remainder of fiscal year 2005 our UNIX business and the related revenue from the UNIX business will face significant competition from Linux and other operating systems.

        Sales of our UNIX products and services during the first quarter of fiscal year 2005 were primarily to pre-existing customers. Our UNIX business revenue depends significantly on our ability to market our products to existing customers and to generate upgrades from existing customers. Our UNIX revenue may be lower than currently anticipated if we are not successful with our existing customers, or if we lose the support of any of our existing hardware and software vendors or our key industry partners withdraw their marketing and certification support or direct their support to our competitors. This may occur as a result of the decline of our UNIX business and our SCOsource initiatives.


  


AutoZone Will File to Correct SCO's "Material Misstatements" | 391 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections go here
Authored by: Anni on Friday, June 03 2005 @ 02:23 AM EDT
guess I have to start the comments with this.

---
Organic chemistry is the study of carbon compounds;
Biochemistry is the study of carbon compounds that crawl.

[ Reply to This | # ]

OT goes here
Authored by: Anni on Friday, June 03 2005 @ 02:26 AM EDT
... and continue with this thread. There. Done it.
Remember to use HTML mode for your posts and make links clickable.

---
Organic chemistry is the study of carbon compounds;
Biochemistry is the study of carbon compounds that crawl.

[ Reply to This | # ]

AutoZone Will File to Correct SCO's "Material Mistatements"
Authored by: analyzer on Friday, June 03 2005 @ 02:30 AM EDT
Do TSG just vomit paperwork in the hope that no-one has time to read it??

[ Reply to This | # ]

Let's review
Authored by: belzecue on Friday, June 03 2005 @ 02:34 AM EDT
- $1million less on R&D and nearly $4million less on sales and marketing

[SCO has given up developing and promoting their products]

- revenue from UNIX business decreased by $2,577,000, or 23 percent, for the
first quarter of fiscal year 2005

[Customers have given up buying SCO's products]

- reduced the number of full-time equivalent employees from 292 as of January
31, 2004, to 165 as of January 31, 2005

[SCO has given up, period]

[ Reply to This | # ]

AutoZone Will File to Correct SCO's "Material Mistatements"
Authored by: Anni on Friday, June 03 2005 @ 02:44 AM EDT
'Material mistatements' indeed. Look at this spin:
"Contrary to AutoZone's various statements to the court, SCO found through discovery, including sworn depositions, many instances of copying of programs containing SCO OpenServer code,"
And then watch them whine:
In recent years, we have seen hardware and software vendors as well as software developers turn their certification and application development efforts toward Linux and elect not to continue to support or certify to our UNIX operating system products. If this trend continues, our competitive position will be adversely impacted and our future revenue from our UNIX business will decline. The decline in our UNIX business may be accelerated if industry partners withdraw their support from us for any reason, including our SCOsource initiatives.
My bold. So, they almost admit that their SCOsource project kicks their business in the head. When do they admit that suing their customers could cause a small dent too?

---
Organic chemistry is the study of carbon compounds;
Biochemistry is the study of carbon compounds that crawl.

[ Reply to This | # ]

Question for Finacial Types.
Authored by: Anonymous on Friday, June 03 2005 @ 03:50 AM EDT
If the 8k matches the report to the court how will a ruling on material
misstatements from the court affect SCO's tenuous relations with the SEC?

And for legal types, would this statement foreshadow a motion for summary
judgement, or what kind of motion?

SJG

[ Reply to This | # ]

Like a record stuck in the groove
Authored by: DaveJakeman on Friday, June 03 2005 @ 04:22 AM EDT
Tedious repetition in the SEC filing: our business is in decline and it's all
the fault of Linux; our business is in decline and it's all the fault of Linux.

Our business is in decline because we bite the hands that feed us and our only
creative output is PR and litigation.

---
Should one hear an accusation, first look to see how it might be levelled at the
accuser.

[ Reply to This | # ]

...but not all...
Authored by: Anonymous on Friday, June 03 2005 @ 07:19 AM EDT
AutoZone Will File to Correct SCO's "Material Mistatements"

...or rather a small portion of SCO's "Material Mistatments" as related to a particular filing in the Autozone action.

[ Reply to This | # ]

Oh, and did we mention Linux?
Authored by: dsblank on Friday, June 03 2005 @ 08:36 AM EDT
It seems strange that they mention Linux so much as the leading cause of their
problems. I guess they would claim that Linux's success is based on their own
code, and so are planning ahead to make their arguments about damages.

It reads like the ugly stepsisters suing Cinderella, and blaming her for their
woes.

[ Reply to This | # ]

AutoZone Will File to Correct SCO's "Material Mistatements"
Authored by: LPrecure on Friday, June 03 2005 @ 08:38 AM EDT
Could this be part of a plan?

(I know, I'm accusing SCO of having a plan, but, . . .)

SCO claims to have "millions of lines of discovery" of AZ crimes.

AZ runs down to the courthouse to complain about the slander.

SCO claims "Well, Your Honor, aparantly we have a difference of opinion as
to whether these discovery materials represent evidence of a crime. Move to
re-open the case."

Just a thought.

[ Reply to This | # ]

AutoZone Will Correct SCO's "Material Mistatements"
Authored by: rsteinmetz70112 on Friday, June 03 2005 @ 08:39 AM EDT
Hopefully AutoZone will lay it out in enough detail for us to follow up. They
could always reply in the language of a reply to a suit and simply deny the
allegations without really explaining why to indicate a controversy still
exists. SCOG tried very hard to make it sound like AutoZone had admitted
wrongdoing.

---
Rsteinmetz

"I could be wrong now, but I don't think so."
Randy Newman - The Title Theme from Monk

[ Reply to This | # ]

O'Gara again.
Authored by: Anonymous on Friday, June 03 2005 @ 09:05 AM EDT
She states;"Interestingly, Greer says in his deposition that he had a nice little chat about his Groklaw posting with an IBM attorney named Cook whose phone number was supplied by PJ, who runs the Groklaw site. So?"Link

[ Reply to This | # ]

AutoZone Will File to Correct SCO's "Material Mistatements"
Authored by: Anonymous on Friday, June 03 2005 @ 09:28 AM EDT
I think darl has been in the Utah sun too long - either that or I want what he
has been smoking.

You go autozone - you go.

[ Reply to This | # ]

SCO's "Material Mistatements"
Authored by: DannyB on Friday, June 03 2005 @ 09:29 AM EDT
I think that SCO should be given credit for recognizing something of strategic
importance.

They are finally learning how to speak effectively.

In a teleconference, you can whine on and on about whatever you want to.
Distract from your dismal results to spend the bulk of time talking about a
womon who runs a blog, etc. (last time) You can refuse to take questions about
anything except your dismal results. (this time) Yet you can still then give
all kinds of misstatements.

You can fib, lie, distort and mislead in court and you'll never be called on it.
Courts will tolerate any amount of lying. (Pardon my cynical belief, that that
is the opinion I have formed.)

BUT... the SEC won't tolerate it. So you have to tell the truth, or some shade
of it in your SEC filings.

Do I have it just about right?

---
The price of freedom is eternal litigation.

[ Reply to This | # ]

Business strategy: annoy developers, sue customers
Authored by: tz on Friday, June 03 2005 @ 09:51 AM EDT
They wonder why no one is attempting UNIX certification for their platform?

All the neat UNIX stuff is now in the opensource world - Gnome and KDE for
desktops, OpenOffice, FireFox. I can't think of any significant product that
developers try to certify on proprietary UNIX (SCO, Solaris, or others), though
some might just work to get it ported to one or more.

Apple at least tries to play nice even if they still don't quite get the rules -
Mac OS X works well as a BSDish GNU (with fink) X platform that happens to run
the iWhatever apps.

So, does SCO have all these wonderful cutting edge proprietary applications? Or
are they merely a legacy UNIX (not unlike DOS) that some old systems that would
be difficult or expensive to replace still require? And hoping someone stuck
with one will keep up the current FOSS stuff so you can browse with something
better than lynx on the console, or an ancient version of Netscape.

(And they can't even use GPL software since they repudiated the GPL - or didn't
- I can't quite figure out if they can distribute GPL stuff that would run on
their machine or not).

Oh, and if you try to move off, you might get sued. Send nasty dunning letters
to your best customers. What marketing school teaches the best way to win new
customers is with "ugly lawyer letters"?

[ Reply to This | # ]

AutoZone Will File to Correct SCO's "Material Mistatements"
Authored by: prhodes on Friday, June 03 2005 @ 10:14 AM EDT
"AutoZone will file a response with a court to correct the record..."

Any significance to the fact that Autozone used the word "a" instead of "the" in this quote? Could they be planning a countersuit in a different court?

-Phil

[ Reply to This | # ]

What this really means is SCOG could have been a going concern.
Authored by: skidrash on Friday, June 03 2005 @ 10:45 AM EDT
If they can restructure UNIX to throw off money, with much less cash flowing in
than 3 years ago, then all that talk about being forced into bankruptcy unless
they launced the suits was just hoooooo-ey.

Were it not for Darl's over-reaching ambition,

Christensen's
Yarro's
Darl's

predisposition to abusing the courts, SCOG could still be a reasonable business,
just not a rich one.

[ Reply to This | # ]

Where are the depositions?
Authored by: Anonymous on Friday, June 03 2005 @ 10:47 AM EDT
Will we be able to get our greedy little hands on the depositions in this AZ
case?

It appears that MOG has and that they say some pretty inflammatory
things.....how come she has them and we don't?

[ Reply to This | # ]

AutoZone Will File to Correct SCO's "Material Mistatements"
Authored by: urzumph on Friday, June 03 2005 @ 10:54 AM EDT
I have a question for any lurking legal-eagles.
I have been reading SCO's Autozone report, and it seems obvious to me that the SCO attourney really doesn't understand any of the technical side of what is happening.

(Which leads to some interesting statements, like (paraphrasing) "Here is an email. What are they saying?".)

What I would like to know is if it is normal for attournies to go into depositions so ill prepared. I would have thought that having to ask the witness the difference between static and shared libraries would leave you very open to being played by the witness.

As an aside, the person who did the transcript is obviously not a techie either, because in one section, the witness is supposed to have said they use compx and decompx to convert between 'big Indian' and 'little Indian' formats (obviously, they mean Big and Little Endian formats.)

[ Reply to This | # ]

Need SCO Developer Kit License
Authored by: gvc on Friday, June 03 2005 @ 10:59 AM EDT
If you read the SCO depositions, their argument is pretty transparent. As for
the IBM case, there's one really tortured and overreaching legal argument
embellished with a huge smoke screen.

The crux of SCO's argument is:

- Binaries compiled by their development kit (compiler + static libraries)
can only be run on (or indeed, copied to) licensed OpenServer machines.

Autozone's rebuttal is:

- The developer kit license places no such restriction on programs created
using it.

To cut to the chase we need a copy of the SCO developer kit license. Autozone's
copy would be best, but I suspect that the license is pretty standard. Anybody
happen to have one?

While I haven't seen the license, I'd be surprised if it restricts distribution
of resulting binaries. Some closed and open-source licenses have tried to
enforce such restrictions, to be met with an outcry. The general idea is that
if you use the developer kit to develop something, what you develop is yours
with no strings attached.

---

In reading the documents, I also discovered a secondary argument being developed
by SCO:

- The programs were initially developed using OpenServer, and then ported to
Linux. Since the Linux implementation was not "clean room" it must
embody methods & concepts that could have been gleaned only through the
initial OpenServer development. Sound familiar?

[ Reply to This | # ]

A rough translation of "Material Mistatements"
Authored by: AllParadox on Friday, June 03 2005 @ 11:04 AM EDT
Lawyers are taught not to use the words "liar" or "lying".

The simple reason is that it has an electric effect on listeners, all out of
proportion to the plain meaning. Many audiences will simply tune out the
speaker, the moment the word comes out. I have seen other lawyers make the
mistake, and the effect really is that serious.

In the absence of the l**r word, attorneys use other phrases.

"Material Mistatement" is one of the most common. In plain English,
it means "Liar, Liar, Pants on fire".

Because there are specific ethical restrictions on dishonest conduct, the very
use of the phrase is a serious allegation of professional misconduct. One would
not make this statement about an opponent that mis-stated a sentence or short
paragraph, but was otherwise properly professional. The risk of offending the
judge, with unreasonably harsh responses, is simply too great.

---
PJ deletes insult posts, not differences of opinion.

AllParadox; retired lawyer and chief Groklaw iconoclast. No legal opinions,
just my opinion.

[ Reply to This | # ]

AutoZone Will File to Correct SCO's "Material Misstatements"
Authored by: Anonymous on Friday, June 03 2005 @ 11:29 AM EDT
All AutoZone has to do is gather all the quotes about infringing code in the IBM
case that turned out not to be true!

[ Reply to This | # ]

AutoZone Will File to Correct SCO's "Material Misstatements"
Authored by: daWabbit on Friday, June 03 2005 @ 11:58 AM EDT
When, oh when, will clue Darl in that a print statement is a feature of the
language and NOT copied from his precious IP?

---
"There ain't no reason I should work this hard when I can live off the chickens
in my neighbor's yard" -Bruno Wolfe

[ Reply to This | # ]

OT: Microsoft "Groktalks"
Authored by: belzecue on Friday, June 03 2005 @ 12:24 PM EDT
PJ, looks like the Vole has embraced and extended you... Um, I think next they try to distinguish you, right? ;-)

[ Reply to This | # ]

I have been thinking
Authored by: Tufty on Friday, June 03 2005 @ 02:30 PM EDT
Yes, really.

All the companies I've known that have made drastic cuts in marketing have gone
to the wall, rapidly. Something I would have expected to see, by now, would be
announcements of pre-orders for their new product. Release 3 weeks away, big
bash, get the excitement up, good news for the quarterly, huzzah. Nothing.
Silence. New release coming out and marketing cut - hmmm.


---
There has to be a rabbit down this rabbit hole somewhere!
Now I want it's hide.

[ Reply to This | # ]

A tale of caution
Authored by: Tufty on Friday, June 03 2005 @ 03:12 PM EDT
This case illustrates how easily code is spread viraly (sp). I don't mean
viruses and attacks. I mean the code being picked up like bits of DNA and moved
around. Libraries left in place, one version instead of another, inadvertant
file copying. Control needs to be super strict, development systems treated as
level 4 isolation cells.

It is why companies have to keep tight control of software on site and users
loading software themselves, even bits of software such as where did that
library you compiled come from? It is a nightmare and a good example why IP is
going down the wrong track. A few lines of code creeping into millions of lines
of code over thousands of programs like a virus getting into a cell. Then
spreading over hundreds of systems. This could destroy a company. Suppose
Autozone had to shut off the computers under an injunction how long would they
last?

I have seen people writing here about not needing to control software so tightly
on Linux and FOSS. Others who say it is hard to do certain things because they
don't really know what is on thousands of computers. It is why BSA etc can
threaten companies with audits - they KNOW they will find an infringement.

While we argue the merits and facts of the case please take one lesson. Make
very sure what software you run on what hardware and make sure it's controlled
tightly. Just an old copy you meant to delete can trip you up. Even in FOSS you
may find code that has been inadvertently copied, think about the use of
libraries in the case.

Just a thought.


---
There has to be a rabbit down this rabbit hole somewhere!
Now I want it's hide.

[ Reply to This | # ]

What are her sources?
Authored by: kberrien on Friday, June 03 2005 @ 04:28 PM EDT
She seems to have a lot of information, even as if she's read the depositions.
Where did she get this stuff? Perhaps its out there and I've missed it (I
haven't been looking...).

[ Reply to This | # ]

Ah, just file suit.
Authored by: darkonc on Friday, June 03 2005 @ 06:03 PM EDT
Filings are generally considered priviledged, but public comments about filings are not. Even the priviledge associated with filings is not considered absolute at least not in Canada.
Where the occasion is shown to be privileged, the bona fides of the defendant is presumed and the defendant is free to publish, with impunity, remarks which may be defamatory and untrue about the plaintiff. The privilege is not absolute, however, and can be defeated if the dominant motive for publishing the statement is actual or express malice. Malice is commonly understood, in the popular sense, as spite or ill-will. However, it also includes any indirect motive or ulterior purpose that conflicts with the sense of duty or the mutual interest which the occasion created. Malice may also be established by showing that the defendant spoke dishonestly, or in knowing or reckless disregard for the truth. Qualified privilege may also be defeated when the limits of the duty or interest have been exceeded. The fact that an occasion is privileged does not necessarily protect all that is said or written on that occasion. The information communicated must be reasonably appropriate in the context of the circumstances existing on the occasion when that information was given.
  (emphasis mine)
In the case mentioned above, the Church of Scientology had slandared a crown attorney by filing a (generally false) suit, and then Church counsel stood on the courthouse steps, read from and expounded upon the filings to assembled press.

The trial court found against both counsel and the Church to the combined sum of abut $1.6M. The Supreme Court of Canada affirmed that finding.

---
Powerful, committed communication. Touching the jewel within each person and bringing it to life..

[ Reply to This | # ]

Groklaw © Copyright 2003-2013 Pamela Jones.
All trademarks and copyrights on this page are owned by their respective owners.
Comments are owned by the individual posters.

PJ's articles are licensed under a Creative Commons License. ( Details )