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The 1998 IBM-Santa Cruz Project Monterey Agreement
Wednesday, November 09 2005 @ 01:27 PM EST

Here we have the 1998 IBM-Santa Cruz Project Monterey agreement [PDF]. It was filed as an exhibit, a paper exhibit, by IBM (to #527, a redacted version of #345, part of IBM's opposition to SCO's failed attempt to file a 3rd Amended Complaint) and a volunteer picked it up for us.

One interesting find is that while the IA-32 product was predominantly SCO Unixware 7 code with IBM licensed additions and joint project work, the IA-64 product was defined like this:

1.10 "IA-64 Product" shall mean the UNIX operating system that is designed to run on Intel architecture and compatibles and which consists of IBM's AIX operating system with the addition of Licensed SCO Materials and any additional Project Work developed under this Agreement.

What else stands out like a beacon? That methods are expressly free to be used. On page 20:

11.5 Scope of Licenses.

All licenses granted to IBM and SCO under this Section 11.0 shall be worldwide, irrevocable (subject to Section 15.0, "Termination"), nonexclusive, nontransferable; shall include the right to make, have made, use, have used, lease, sell or otherwise transfer any apparatus, and to practice and have practiced any method. All such licenses shall include the right of the grantee to grant revocable or irrevocable sublicenses at grantee's discretion to its Subsidiaries, of the same or lessor scope as granted here, without other permission or accounting. Except to the extent that royalties may be due under the Agreement, the licenses stated in this Section 11.0 shall be fully paid up.

That isn't even the best.

After all SCO's whining about IBM quitting the project, note what the contract permitted IBM to do, on page 28:

Freedom to Market

Subject to the terms and conditions of this Agreement, both parties shall have full freedom and flexibility in the design and implementation of its marketing programs for any deliverables, including, without limitation, the decision of whether to market or discontinue marketing any particular Deliverable, the selection of marketing channels, the timing and sequence of announcements and roll-out programs, the determination of pricing strategy, the specification of license terms, and the offering of such Deliverables in connection with or as part of other software products and systems with any computer hardware equipment. Nothing in this Agreement shall be construed as an obligation, guarantee or commitment by either party that any Deliverable shall be announced or marketed, or that any marketing effort will be productive of any level of sales. . . .

15.2 Change of Control

Notwithstanding Section 15.1, IBM shall have the right to terminate this Agreement immediately upon the occurrence of a Change of Control of SCO which IBM in its sole discretion determines will substantially and adversely impact the overall purpose of the cooperation set forth by this Agreement and applicable Project Supplements ...

This contract expressly defines "Derivative work" in terms of copyright law on page 1. Either party was essentially free to do whatever it liked with its own project work, or with jointly created project work. The material SCO licenced to IBM is licensed very freely. The reverse is not true. I'd characterize the contract as strongly favoring IBM, frankly, but at the moment, that is a good thing. IBM is allowed to do almost anything it likes with this material, including sublicensing source code, with the restriction that it could not allow the licensee to further sublicence the source. However, there is no restriction on the dissemination of any methods and concepts within oldSCO's source code. That is significant, because that's about all that is left of SCO's theory of their case, as far as I can understand their theory.


The 1998 IBM-Santa Cruz Project Monterey Agreement | 146 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections here
Authored by: MathFox on Wednesday, November 09 2005 @ 01:32 PM EST
If there are any

When people start to comment on the form of a message, it is a sign that they
have problems to accept the truth of the message.

[ Reply to This | # ]

Off topic thread
Authored by: MathFox on Wednesday, November 09 2005 @ 01:35 PM EST
For open source and legal news not related to the article.
Please post links in HTML

When people start to comment on the form of a message, it is a sign that they
have problems to accept the truth of the message.

[ Reply to This | # ]

The 1998 IBM-Santa Cruz Project Monterey Agreement
Authored by: Anonymous on Wednesday, November 09 2005 @ 01:37 PM EST
dum de dum dum. The drums are beating and it looks like IBM has the pipers
ready to march right over SCO.


[ Reply to This | # ]

The 1998 IBM-Santa Cruz Project Monterey Agreement
Authored by: capt.Hij on Wednesday, November 09 2005 @ 01:43 PM EST
So... In public SCO says that this is about linux. In court SCO says this is
about breaking a contract, but SCO signed a contract with IBM that gave
everything away (including the contents of the refrigerator in the company
kitchen). Who was stupid enough to do that? Up until now I thought that the
shareholder law suit thing was a bit overblown, but if this is true then I would
think that anybody who bought shares in SCO has a legitimate beef.

[ Reply to This | # ]

The 1998 IBM-Santa Cruz Project Monterey Agreement
Authored by: irtza on Wednesday, November 09 2005 @ 01:44 PM EST
How does current law handle issues where a company may have 2 licenses with
another company covering the same intellectual property. As in this case, where
IBM signed a contract for Unix that SCO aquired, but SCO made this other
agreement that involves that same copyrighted material. Does project Monterey
take precedent since it is a newer? And how does IBM's withdrawl from the
project affect this? I understand that rights were non-revocable, but does
withdrawl from the agreement somehow void any rights granted or does IBM have
the right to withdraw from some obligations w/o affecting the overall contract?

Also, since SCO's case doesn't seem to have much merit, why is this necessary?
I understand, that in court they have to look at all this, but considering that
they had an extreme view on what a derivative work is, wouldn't IBM be able to
win off of that alone?

[ Reply to This | # ]

Disagree with P.J.... unusual but it happens.
Authored by: Anonymous on Wednesday, November 09 2005 @ 01:48 PM EST

P.J. has:

"do almost anything it likes with this material, including sublicensing source code, with the restriction that it could not allow the licensee to further sublicence the source"
One identified item:
"All such licenses shall include the right of the grantee to grant revocable or irrevocable sublicenses at grantee's discretion to its Subsidiaries, of the same or lessor scope as granted here, without other permission or accounting."
I'm sure I must be missing something as IANAL and I haven't actually read the contract yet, just P.J.'s article. But doesn't the "at grantee's discretion...the same or lessor scope as granted" indicate that IBM could allow the licensee to further sublicense the code if IBM chose?


[ Reply to This | # ]

Section 2.0 - Ownership
Authored by: Anonymous on Wednesday, November 09 2005 @ 02:00 PM EST

Is a good section:

(a) Joint Ownership

All IBM and SCO jointly created Project Work shall be jointly owned by SCO and IBM, including ownership of associated copyrights or confidential information. Each party shall be free in all respects to exercise or dispose of any or all of its ownership rights in the jointly created Project Work without accounting to the other party.

(b) Sole Ownership

1. IBM (or its third party suppliers) retains sole ownership of IBM Project Work and IBM Licensed Materials.

Which would seem to dictate that JFS (or any other code not contributed by SCO and not contributed by SCO suppliers), would belong to IBM, and only IBM, with no SCO control whatsoever.

[ Reply to This | # ]

Red Dress Time
Authored by: jcjodoin on Wednesday, November 09 2005 @ 02:23 PM EST
This is awesome. I think it might be Red Dress time "real
soon now".

IANAL, etc.


[ Reply to This | # ]

SCO's defense...
Authored by: Jude on Wednesday, November 09 2005 @ 02:28 PM EST
"Your Honor, that can't be what the contract says because nobody in their
right mind would sign a contract that says that."

Of course, IBM will probably just point out that SCO is a bunch of knuckleheads,
and the judge will probably be about ready to accept such an argument.

[ Reply to This | # ]

The 1998 IBM-Santa Cruz Project Monterey Agreement
Authored by: Benanov on Wednesday, November 09 2005 @ 02:33 PM EST
"including sublicensing source code, with the restriction that it could not
allow the licensee to further sublicence the source."

That means the SCO code isn't suitable for release under the GPL, so IBM
couldn't have legally used it in GPL'd projects without breaking the contract.

This might be what they're screaming Breach of Contract about. Good old
sublicensing. (MS XML anyone?)

However, a lot of this would depend upon IBM legal not being careful. I have a
few friends who worked for IBM, and legal is apparently very very careful and

That popping sound you hear is just a paradigm shifting without a clutch.

[ Reply to This | # ]

The 1998 IBM-Santa Cruz Project Monterey Agreement
Authored by: RFD on Wednesday, November 09 2005 @ 02:41 PM EST
There ia an additional provision that may be important--22.12:
22.12 Assignment

Neither party may assign, or otherwise transfer, its rights or delegate any of its duties or obligation under this Agreement without the prior written consent of the other party.....

It continues with some exceptions, but I suspect that IBM will take the position that the Santa Cruz--Caldera deal was a sale of assets, amd not a change of control, and that The SCO Group is not a successor to Santa Cruz as a party to the Project Monterey agreement.

This involves some of the same issues as the fight over the privilege logs.

Eschew obfuscation assiduously.

[ Reply to This | # ]

Didn't We Already See This?
Authored by: Steve Martin on Wednesday, November 09 2005 @ 02:53 PM EST

PJ, forgive me for being obtuse (I'm at work currently and can't sit down and read this all the way through), but didn't we already see the Monterey Agreement back in March of 2004? Your story on it is here. (If I'm mistaken, please forgive me.)

"When I say something, I put my name next to it." -- Isaac Jaffee, "Sports Night"

[ Reply to This | # ]

IBM-Santa Cruz Project Monterey
Authored by: rsteinmetz70112 on Wednesday, November 09 2005 @ 03:51 PM EST
IBM agreeing to involve SCO in Project Monterey was very much a coup for SCO and
was primariliy based, I beleive, on the vestiges of USL SCO acquired from
Novell. There were still some remains of ATT which would have contributed
greatly to the project in terms of a communal memory of what had gone before.
They could also contribute to making AIX more Unix compatible. IBM certainly
could have done the work themselves but by involving SCO IBM could lay claim to
being the most advanced Unix and also the latest in a long line of superior Unix
operating systems. SCO got a stronger relationship with IBM and the ability to
sell their products into IBM accounts. But more than that they got to be
associated with Big Blue, which gave them credibility in the market at a time
SCO needed to move upstream and when many in the industry viewed SCO as a
company which would soon die a natural death.

SCO clearly saw that Linux was going to take all of their low end customers who
were not taken by Microsoft. Their solution was to move Unixware into mid-sized
companies as a sort of low-end enterprise solution on IA-32 hardware, with the
option to move up to IA-64 as that market developed and the hardware became more
affordible. This is similar to Sun's move from being a workstation company to a
server company.

The deal makes perfect sense when seen like that. Everybody wins, assuming Intel
can execuite their IA-64 stratgey. The problem was that Intel pretty much
failed, delivering poorly performing products late and at high prices.

Rsteinmetz - IANAL therefore my opinions are illegal.

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

[ Reply to This | # ]

Never let your opponent surprise the Judge
Authored by: AllParadox on Wednesday, November 09 2005 @ 03:52 PM EST
I hold it as a matter of faith that my pleadings describe *all* the relevant
facts. If there are contracts that apply, cite and attach them as exhibits.
Where certain clauses seem to suggest problems, cite facts to rebut the
implication. IIRC, I think I had to learn this the hard way, because it was
contrary to advice from more seasoned counsel. This is the "Grasp the
Thistle Firmly" approach.

This is not exactly required by the Rules.

The value is that you, as initial presenter, get dibbies on the best
explanation. Also, if the Judge thinks you knew about it and addressed it, he
is much more likely to accept your argument, even if you are wrong.

If the finder-of-fact, usually a judge, gets an inkling that you are either
fast-and-loose with the facts, or that you did not bother to pull up all
relevant material while preparing documents, then things are very much more
difficult. For most Judges the biggest problem is not that they are being lied
to. People lie to them constantly. They don't like it, but it is there. The
biggest problems is that you, as counsel, have not prepared properly. This
leaves the judge feeling very exposed. He is left wondering what obvious
obstacle you missed through negligence, and how embarrassed he is going to be
when the rest of the world finds it.

The attorneys for "The SCO Group" have apparently pushed both Judges
far beyond "inkling". Reminds me of the fellow whose reputation for
truth and veracity was so bad, he had to have someone else call his own dog.
(Thank you, FastEddy)

"The SCO Group" claims that IBM's alleged contract violations were not
excused by this contract.

By not including the terms in the amended pleadings, they tacitly admit that the
terms apply, and that they did not want the Judge to see the terms, given the
strength of the language of the term provisions,.

I personally find the two year limit to be distressing, for "The SCO
Group". That does not mean two years until the lawsuit is filed, it means
two years until the particulars are filed as part of a claim. I have not yet
performed a detailed comparative analysis of Plaintiff's claims and this
contract, but IIRC, the second amended claims were enough different from the
earlier versions that the earlier claims did not toll the contractual two-year

Obviously, anything IBM did more than two years before the filing of this
lawsuit is exempt.

Please try to keep in mind that the current claims by "The SCO Group"
are founded in contract, and this "Monterey" contract apparently gives
away almost everything not covered by the initial IBM-AT&T contract.

Also, some of Plaintiff's current discovery is based on allegations that Linux
code is somehow derived from SysV through AIX. This contract explicitly states
that IBM owns things like JFS (Journaling File System) that IBM wrote. This
takes the air out of "methods and concepts" as argument.

If I were "The SCO Group", I would seal allegations of "217"
circumstances of contract violations, too. They won't last two days in the full
glare of daylight.

Pleadings are sealed only with the consent of the Court. Best thing Kimball
could do right now is just unseal the 217, on his own motion.

LawGrokkers would save him a lot of work, in a hurry.

PJ deletes insult posts, not differences of opinion.

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

[ Reply to This | # ]

I think SCO Actually Have a Valid Point
Authored by: Anonymous on Wednesday, November 09 2005 @ 05:10 PM EST
I think SCO may have a valid point hear that some of you may be missing.

The clause covering methods is very broad,but I do not think it confers a right
on IBM to actually give methods conceived and owned by SCO away for free.

Of course this assumes that SCO actually owned some 'method" in the first
place and IBM contributed that method to Linux.

The intent of the contract was that both parties would profit. I don't think
anyone contemplated at the time that after the contract was terminated, one
party would give away some of the results (as opposed to sell) and thereby club
the other party's product to death. I think both parties were contemplating a
licence fee type business model and whoever drafted the agreement did not
consider that one party might embrace open source.

To put it another way, suppose I invent a wonder drug that cures obesity and I
licence it to Glaxo/Roche/Lilly in the expectation that it will be
commercialised if the tests show it works. The trials show it doesn't work very
well and commercialisation fails. But then Glaxo/Roche/Lilly discovers it cures
ingrown toenails, however for reasons of their own they decide to give away the
formula for free, stop paying for patents or not prosecute anyone who infringes.
Do I have a case? You bet I have! Actual licence agreements have performance
clauses to stop this sort of thing. Good clauses spell out the rights of the
parties AFTER the agreement is terminated. I'm not sure the IBM/SCO contract
contemplated one party giving away something that was actually valuable for

[ Reply to This | # ]

My Favorite Quote
Authored by: rsteinmetz70112 on Wednesday, November 09 2005 @ 05:10 PM EST
From the Side Letter;
9. Amend Section 7.06(a) by replacing such section with the following:

--7.06(a) LICENSEE agrees that it shall hold SOFTWARE PRODUCTS subject to this Agreement in confidence for AT&T. LICENSEE further agrees that it shall not make any disclosure of such SOFTWARE PRODUCTS to anyone, except to employees of LICENSEE to whom such disclosure is necessary to the use for which rights are granted hereunder. LICENSEE shall appropriately notify each employee to whom any such disclosure is made that such disclosure is made in confidence and shall be kept in confidence by such employee. Nothing in this agreement shall prevent LICENSEE from developing or marketing products or services employing ideas, concepts, know-how or techniques relating to data processing embodied in SOFTWARE PRODUCTS subject to this Agreement, provided that LICENSEE shall not copy any code from such SOFTWARE PRODUCTS into any such product or in connection with any such service and employees of LICENSEE shall not refer to the physical documents and materials comprising SOFTWARE PRODUCTS subject to this Agreement when they are developing any such products or service or providing any such service.

ideas, concepts, know-how or techniques == methods and concepts

This pretty much rules out the methods and concepts.
This also pretty much refutes the contention the the side letter was not intended to amend the Agreement.

Rsteinmetz - IANAL therefore my opinions are illegal.

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

[ Reply to This | # ]

This is for Monterey, right? Monterey's already been tossed.
Authored by: Anonymous on Wednesday, November 09 2005 @ 06:11 PM EST
This is all about Project Monterey, right?

I was under the impression that SCO's bid to add Project Monterey to the suit
was denied.

Thus this contract is irrelevent to the case, right?

Unix System V, AIX, Sequent's stuff and Linux are the only software involved,

Or am I just missing something?


[ Reply to This | # ]

The 1998 IBM-Santa Cruz Project Monterey Agreement
Authored by: Anonymous on Wednesday, November 09 2005 @ 06:48 PM EST
Under Paragraph 15.4.c it sounds like IBM gets to keep all of the rights granted
in this contract even if the contract is terminated. Can this be true? It
sounds like this contract gave away the store and closed the billing department
at the same time.

[ Reply to This | # ]

This makes perfect sense
Authored by: Anonymous on Wednesday, November 09 2005 @ 08:54 PM EST
IBM is a 350,000 person company. SCOG was 350 (or at most 3,500 in their
wildest dreams). I.e. 0.1% to 1.0% of IBM.

Why the heck would IBM have ***EVER*** let themselves be hornswaggled by crooks
like SCOG? Answer: they wouldn't. I wouldn't give Brent Hatch, Ryan Tibbits,
Keith McBride, or any other hired liars a snowballs chance in hell against IBM,
now, or when Monterrey agreements were made.

The benefit to IBM was low-end visibility probably. Nothing more, and it didn't
matter about tossing a bone to SCO at the time. That is PAINFULLY clear in the
agreement, who put in what, the extent of rights, etc. Still, IBM wisely
foretold that liars and thieves like Darl and Ralph might try to abuse *ANY*
agreement, and wrote to block them. If SCO had stayed, they might have
benefitted. When they sold to liars and crooks IBM did the right thing by
pulling out - as they were CLEARLY permitted to do and probably based on IBM
past experiences with other crooks who try to abuse agreements. SCOG got what
they deserved - NOTHING.

[ Reply to This | # ]

The 1998 IBM-Santa Cruz Project Monterey Agreement
Authored by: Anonymous on Wednesday, November 09 2005 @ 10:26 PM EST
Eh, not quite, SCO was not in the desktop business.
Small server business and POS terminals.

Caldera, who later bought SCO, was in the desktop business.
Caldera however didn't seem too concerned about IA64. They started crying
because IBM was not going to package, market, and sell IA64 for them. There were
no coattails to ride. I think I have heard comments from the Caldera side that
nobody really needs 64 bit.

Which is true for POS terminals. But false for enterprise scale apps and large

[ Reply to This | # ]

Project Monterey Agreement gives IBM everything...
Authored by: Anonymous on Thursday, November 10 2005 @ 02:33 AM EST
The 1998 Project Monterey Agreement is still valid. It was never terminated.
It went into hibernation when there was no longer a viable reason to continue
developing it.

As far as I know, IBM never explicitely presented Santa Cruz/Tarentella with a
termination document regarding the Project Monterey Agreement. Why
would IBM do so when the contract gives IBM the right to do anything they
wanted with UnixWare and Unix System V. It clarifies the AT&T contract
rights given to IBM.

This contract is very valid in the current litigation. It covers all of SCO's
complaints. SCO cannot argue about methods and concepts since the
contract gave IBM the rights to methods and concepts. SCO cannot argue
about derivatives since the contract gave IBM broad rights to derivatives and
explicitely defines derivatives according to copyright law.

This contract kills all of SCO's allegations.

IBM should use this in its current prosecution of SCO.

[ Reply to This | # ]

Transcription thread
Authored by: gormanly on Thursday, November 10 2005 @ 11:23 AM EST
I can't see a transcription thread, so I'm hereby starting it off.

I'll take the 1st 10 pages for now.

[ Reply to This | # ]

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