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Order from 12/20/05 Hearing - No 100% Transfers of Business in Novell to SC or SC to Caldera
Monday, March 20 2006 @ 12:57 PM EST

Here's the Order [PDF] by Magistrate Judge Brooke Wells from the hearing on December 20, 2005 on IBM's motion to compel a recalcitrant SCO to hand over what SCO claimed were privileged materials and on SCO's New Renewed Motion to Compel Discovery. We know the outcome, because Judge Wells announced her decisions on both motions at the hearing from the bench. But now we have it in writing. IBM won its motion, and the order includes the following priceless gem:
1. In the Novell to Santa Cruz transaction, Novell did not transfer to Santa Cruz the entirety of Novell's business;
2. In the Santa Cruz to Caldera transaction, Santa Cruz did not transfer to Caldera the entirety of Santa Cruz's business;

I say priceless, because that is the big buh-bye to SCO's attempt to get the UNIX SYSTEM LABORATORIES trademark based on their bold assertion that there was a complete continuity of business from AT&T to SCO.

You'll recall their application read like this, in part:

Because UNIX SYSTEM LABORATORIES is now part of the Applicant, this trademark should be sent on to publication. In 1992, Novell purchased UNIX SYSTEM LABORATORIES and all of the UNIX assets, including all trademarks owned by UNIX SYSTEM LABORATORIES. In 1995, The Santa Cruz Operation, Inc. purchased all of the UNIX assets from Novell. As part of the transaction, Novell assigned the UNIX and UNIXWARE trademarks to The Santa Cruz Operation. In 2001, The Santa Cruz Operation completed the sale of, inter alia, the UNIXWARE technologies to Caldera Systems, Inc. Caldera subsequently changed its name to The SCO Group. Because of this, the mark should be allowed to go on to publication.

Judge Wells has ruled that this is not the case. I have no doubt that the Open Group will make sure that this Order reaches the USPTO.

There likely will be implications for SCO from this Order in every lawsuit they have pending, I would guess, except DaimlerChrysler maybe, because they've told the same story across the board. For example, the AutoZone complaint claims:

11. Through a series of corporate acquisitions, SCO presently owns all right, title and interest in and to UNIX and UnixWare operating system source code, software and sublicensing agreements, together with copyrights, additional licensing rights in and to UNIX and UnixWare, and claims against all parties breaching such agreements....

18. SCO and its predecessors in interest created the Copyrighted Materials as original works of authorship, and, as such, the Copyrighted Materials constitute copyrightable subject matter under the copyright laws of the United States.

Maybe. Maybe not. The burden is now on SCO to prove exactly what they got, in the face of an order that clearly says they did not get everything. SCO used similar language and more in the Second Amended Complaint against IBM. But now, it is all very much on the table. I notice that in SCO's Answer to Novell's Counterclaims, after repeating similar language, SCO says this:

15. Admits that, to help bridge the gap between the purchase price of the UNIX business and the price Santa Cruz could afford, the parties agreed to a narrow exception to the complete transfer of the UNIX business; that pursuant to this exception Novell retained the right to continue receiving royalties that SCO collected from then-existing SVRX licensees for their distribution of binary (object) code versions of System V products pursuant to sublicensing agreements; and that Novell retained the right to conduct audits, and direct Santa Cruz to take certain actions, to protect that future binary royalty stream. SCO, however, denies each and every other allegation of 15; and to the extent 15 purports to state a legal conclusion, states that no response is required.

So, judging from that paragraph, did they know Novell didn't transfer everything to Santa Cruz? It seems obvious to me. Now it's official and the judge has ruled that not everything transferred. Why they imagined they could tell a story like that to the Trademark Office and the court is hard to fathom.

So, one fib down and some more to go.

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

SNELL & WILMER L.L.P.
Alan L. Sullivan (3152)
Todd M. Shaughnessy (6651)
Amy F. Sorenson (8947)
[address, phone, fax]

CRAVATH, SWAINE & MOORE LLP
Evan R. Chesler (admitted pro hac vice)
David R. Marriott (7572)
[address, phone, fax]

Attorneys for Defendant/Counterclaim-Plaintiff
International Business Machines Corporation

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH

______________________________

THE SCO GROUP, INC.,

Plaintiff/Counterclaim-Defendant,

v.

INTERNATIONAL BUSINESS MACHINES
CORPORATION,

Defendant/Counterclaim-Plaintiff.

________________________________

ORDER

Civil No. 2:03CV0294DAK

Honorable Dale A. Kimball

Magistrate Judge Brooke C. Wells

On December 20, 2005, Defendant/Counterclaim-Plaintiff International Business Machines Corporation ("IBM's") Motion to Compel Production of Documents from SCO's Privilege Log (Docket No. 514) and Plaintiff/Counterclaim-Defendant The SCO Group, Inc.'s ("SCO") New Renewed Motion to Compel Discovery (Docket No. 537) came on for hearing before this court. Ted Normand and Brent Hatch appeared for SCO. David Marriott and Todd Shaughnessy appeared for IBM. Based upon the memoranda, exhibits, and the arguments of counsel, and good cause appearing, the Court hereby orders as follows:

A. IBM's Motion to Compel Production of Documents from SCO's Privilege Log (Docket No. 514):

With regard to IBM's Motion to Compel the Production of Documents from SCO's Privilege Log, the Court finds as follows:

1. In the Novell to Santa Cruz transaction, Novell did not transfer to Santa Cruz the entirety of Novell's business;

2. In the Santa Cruz to Caldera transaction, Santa Cruz did not transfer to Caldera the entirety of Santa Cruz's business;

3. The declaration of Mr. Broderick is insufficient, by itself, to establish continuity of the business, and Mr. Broderick's declaration is contrary to statements made by him during his deposition;

4. SCO has not carried its burden of showing a sufficient continuity of the business; and

5. Any attorney-client privilege or work product protection that may have existed with respect to the documents on SCO's privilege log that were identified by IBM as part

2

of its motion, was waived in connection with either or both the Novell to Santa Cruz and Santa Cruz to Caldera transactions.

Accordingly, it is HEREBY ORDERED that IBM's motion is granted. SCO shall produce to IBM the documents at issue no later than January 6, 2006.

B. SCO's New Renewed Motion to Compel (Docket No. 537):

With regard to SCO's New Renewed Motion Compel, Docket No. 537, the Court finds as follows:

1. IBM has acted in good faith in terms of its reasonable search for documents as they relate to Mr. Palmisano and Mr. Wladawsky-Berger; and

2. The Court's March 3, 2004, Order Regarding SCO's Motion to Compel Discovery and IBM's Motion to Compel Discovery should have explicitly indicated that IBM undertake a reasonable search for responsive documents from the files of Paul Horn and Nick Bowen;

3. Accordingly, SCO's motion is granted in part and denied in part, as follows:

IT IS HEREBY ORDERED that IBM provide declarations from Paul Horn and Nick Bowen regarding the nature of the search that has been conducted with respect to the documents in their files, and that such declarations be filed no later than January 6, 2006;

IT IS FURTHER ORDERED that SCO may take the depositions of Messrs. Horn and Bowen on this topic, and such depositions shall not count against the 50 depositions SCO is permitted under the Court's prior orders; and

IT IS FURTHER ORDERED that except as set forth above, SCO's New Renewed Motion to Compel is DENIED.

3

DATED this 10th day of March, 2006.

BY THE COURT

___[signature]____
U.S. Magistrate Judge
Brooke C. Wells

APPROVED AS TO FORM AND CONTENT:

HATCH, JAMES & DODGE, P.C.
Brent O. Hatch
Mark F. James

By /s/Brent O. Hatch
Counsel for Plaintiff/Counterclaim-Defendant

4

CERTIFICATE OF SERVICE

I hereby certify that on the 9th day of March, 2006, a true and complete copy of the foregoing was sent by U.S. Mail, postage prepaid, to the following:

Brent O. Hatch
Mark F. James
HATCH, JAMES & DODGE, P.C.
[address]

Stephen N. Zack
Mark J. Heise
BOIES, SCHILLER & FLEXNER LLP
[address]

Robert Silver
Edward Normand
BOIES, SCHILLER & FLEXNER LLP
[address]

By /s/ Todd M. Shaughnessy

5


  


Order from 12/20/05 Hearing - No 100% Transfers of Business in Novell to SC or SC to Caldera | 177 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Order from 12/20/05 Hearing - No 100% Transfers of Business in Novell to SC or SC to Caldera
Authored by: Anonymous on Monday, March 20 2006 @ 01:04 PM EST
Great news.

[ Reply to This | # ]

Time Machine!
Authored by: Anonymous on Monday, March 20 2006 @ 01:12 PM EST
That is fantastic news. Now that the rulings (be they minor ones!) are finally starting, things just keep looking worse and worse for SCO and better and better for "everyone else". I particularly am finding it hilarious how we have this consistent and odd pattern in the discovery: SCO keeps falling over themselves in the court and the press to assert over and over that IBM is not complying with discovery and is being obstructionist. But every time the court talks, they assert that IBM is being a model citizen with respect to discovery, and SCO is not complying with discovery and being obstructionist...

I do find it a bit humorous, though, that the issued order was released so long after the actual hearing. Just because it's funny to see a ruling dated March 20, 2006 and ordering IBM to produce something "no later than January 6, 2006". Are gaps of this length common?

[ Reply to This | # ]

Corrections thread
Authored by: ThrPilgrim on Monday, March 20 2006 @ 01:14 PM EST
put em here so we can find them

[ Reply to This | # ]

OT here
Authored by: Waterman on Monday, March 20 2006 @ 01:14 PM EST
So they're all in one place.

[ Reply to This | # ]

SCOGs house of cards
Authored by: Anonymous on Monday, March 20 2006 @ 01:19 PM EST
Is this the first real card to be removed from the structure of their argument?
I know to a lot of us it seems like their entire litigation is being kept aloft
by their sheer will alone. Will this cause the whole house of cards to come
tumbling down?

[ Reply to This | # ]

They imagined they could tell a story like that to the Trademark Office and the court is hard to
Authored by: Anonymous on Monday, March 20 2006 @ 01:28 PM EST
Not really hard ...

"I thought I could get away with it."

and

"I'm entitled" (remember the 2nd house comment - a "right"
to buy a 2nd house?

Through all of this I get that Darl and Yarro both attended certain types of
seminars and took in the lesson

"do anything with enough authority and most people will just cave in"


or (and this is clearly evident in Yarro's behavior vis-a-vis the Noorda
family)

"Grab everything. Any way you can. By the time someone tries to object
you've got enough resources to bury him."

When no one caved in (for example with the Linux licenses) Darl really started
losing it, as became evident in the conference calls - there's still some
bluster there, but NONE of the bluster that was there in late 2003 and all of
2004.

[ Reply to This | # ]

Order from 12/20/05 Hearing - No 100% Transfers of Business in Novell to SC or SC to Caldera
Authored by: Anonymous on Monday, March 20 2006 @ 01:31 PM EST
the order includes the following priceless gem:

1. In the Novell to Santa Cruz transaction, Novell did not transfer to Santa Cruz the entirety of Novell's business;
2. In the Santa Cruz to Caldera transaction, Santa Cruz did not transfer to Caldera the entirety of Santa Cruz's business;

Is it unusual for the Magistrate Judge (vs. the Judge) to rule on something that seems so significant to SCO's case? Is she ruling on this because of the "15. Admits" part -- SCO has already admitted #1?

[ Reply to This | # ]

How can you order to produce documents before Jan. 6 on March 10th? n/t
Authored by: Frankie on Monday, March 20 2006 @ 01:35 PM EST
I am confused...

[ Reply to This | # ]

Dates are interesting
Authored by: PeteS on Monday, March 20 2006 @ 01:49 PM EST
:: Accordingly, it is HEREBY ORDERED that IBM's motion is granted. SCO shall
produce to IBM the documents at issue no later than January 6, 2006 ::

Not long after this, IBM served a veritable flurry of subpoenas - it makes me
think there was sufficient information in the production ordered for IBM to
really go for the jugular.

PeteS


---
Artificial Intelligence is no match for Natural Stupidity

[ Reply to This | # ]

I had to...
Authored by: PeteS on Monday, March 20 2006 @ 01:57 PM EST
get out my HP48G to figure out the answer to this:

So, one fib down and some more to go.

:)

PeteS

---
Artificial Intelligence is no match for Natural Stupidity

[ Reply to This | # ]

Order from 12/20/05 Hearing - No 100% Transfers of Business in Novell to SC or SC to Caldera
Authored by: Anonymous on Monday, March 20 2006 @ 02:02 PM EST
My goodness! All these companies are conspiring against poor SCO! SCO thought
they owned the world. Perhaps only Microsoft does...

SCO, meet a brick wall. Brick wall, meet SCO.

[ Reply to This | # ]

Order from 12/20/05 Hearing - No 100% Transfers of Business in Novell to SC or SC to Caldera
Authored by: tredman on Monday, March 20 2006 @ 02:22 PM EST
What strikes me the most about this order is that, in the grand scheme of
things, it's really a very very minor point. However, the ripple effect, not
only throughout this case, but also the other cases, is still going to be felt
pretty profoundly. It's going to bolster the opinion that SCOX is either not
forthcoming about its assets, or really doesn't know exactly what it owns.
Either way, it doesn't bode well for the folks in Lindon.

---
Tim
"I drank what?" - Socrates, 399 BCE

[ Reply to This | # ]

One fib down ...
Authored by: Anonymous on Monday, March 20 2006 @ 02:25 PM EST

Does anyone here have an accurate track of how many "fibs" they appear
to have told - actual (allegedly) false statements to the court rather than just
minor courtroom spin - AllParadox maybe?

It'd be great to have a separate page where we keep track of them as the judges
bounce them one by one!

[ Reply to This | # ]

*golf clap*
Authored by: desertrat on Monday, March 20 2006 @ 02:28 PM EST
Jolly good, well done, old chap!

What say we nip in to the 19th hole for a celebratory snifter!


:)

[ Reply to This | # ]

Order from 12/20/05 Hearing - No 100% Transfers of Business in Novell to SC or SC to Caldera
Authored by: Ribbit on Monday, March 20 2006 @ 02:52 PM EST
Of course, the question of the day is "What did transfer in those transactions?"

[ Reply to This | # ]

Part B - The part Granted is not much.
Authored by: rsteinmetz70112 on Monday, March 20 2006 @ 03:10 PM EST
As I understood what IBM said in the hearing, they did undertake a reasonable
search of all executives but provided affidavits only for the executives
specifically named, Palmisano and Wladawsky-Berger.

IBM was then required to provide affidavits from Horn and Bowden. Since IBM had
already searched their files I doubt that was much of a burden. The only think
SCOG really got was two more depositions and those were limited to the
production of documents.

---
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 | # ]

Why all the fuss?
Authored by: Alan(UK) on Monday, March 20 2006 @ 03:32 PM EST
Taking it in context:

With regard to IBM's Motion to Compel the Production of Documents from SCO's Privilege Log, the Court finds as follows:

1. In the Novell to Santa Cruz transaction, Novell did not transfer to Santa Cruz the entirety of Novell's business;

2. In the Santa Cruz to Caldera transaction, Santa Cruz did not transfer to Caldera the entirety of Santa Cruz's business;

3. The declaration of Mr. Broderick is insufficient, by itself, to establish continuity of the business, and Mr. Broderick's declaration is contrary to statements made by him during his deposition;

4. SCO has not carried its burden of showing a sufficient continuity of the business; and

5. Any attorney-client privilege or work product protection that may have existed with respect to the documents on SCO's privilege log that were identified by IBM as part of its motion, was waived in connection with either or both the Novell to Santa Cruz and Santa Cruz to Caldera transactions.

Surely Judge Wells (in 1 & 2) is merely stating known, obvious, and undisputed facts in order to justify her conclusions (in 5). Novell obviously still exists and the Santa Cruise Operation continued to exist as Tarantella until recently.

Judge Wells makes no judgement here as to whether the UNIX business was transferred as a whole or not - it is simply irrelevant to the matter in hand.

[ Reply to This | # ]

What business?
Authored by: leopardi on Monday, March 20 2006 @ 05:19 PM EST
Reading the ruling in isolation, that is without reference
to what is being ruled on, and knowing a minimum of
pertinent facts, the "transfer of business" pronouncements
seem either obvious or ambiguous.

They are obvious if you take "Novell's business" to mean
all business conducted by Novell, eg. Netware, and do the
same for Santa Cruz, eg. Tarantella. They are ambiguous if
you take "Novell's business" to mean anything else, since
"Novell's business" is not defined anywhere in the ruling.

In fact, if you define "Novell's business" as "exactly the
business which was transferred in the deal between Novell
and Santa Cruz" then you can be sure that there *was* 100%
transfer of that business, even though you have still not
properly defined exactly what the business is or does.

[ Reply to This | # ]

I havent been this happy since....
Authored by: Torinir on Monday, March 20 2006 @ 05:53 PM EST
Though the PIPE fairy has plenty of gold doubloons to go around. :-p

[ Reply to This | # ]

Order from 12/20/05 Hearing - No 100% Transfers of Business in Novell to SC or SC to Caldera
Authored by: Anonymous on Monday, March 20 2006 @ 06:53 PM EST
Captain Darl

wake up

iceberg ahead

[ Reply to This | # ]

Transfers of dumb question: Business in Novell to SC or SC to Caldera
Authored by: Anonymous on Tuesday, March 21 2006 @ 06:19 AM EST


Is Judge Wells also dropping a subtle hint about their awareness of the
relationship between Santa Cruz Operation and The SCO Group by expliciting
referring to the seperate transactions?

[ Reply to This | # ]

What if...?
Authored by: Anonymous on Tuesday, March 21 2006 @ 05:01 PM EST
One of the negative possible outcomes of the case mentioned (much) earlier was
the case being thrown out without a decision.
What if...SCO produces nothing with regard to Unix ownership? Dismissal or
judgement?

[ Reply to This | # ]

Order from 12/20/05 Hearing - No 100% Transfers of Business in Novell to SC or SC to Caldera
Authored by: Anonymous on Thursday, March 23 2006 @ 04:23 AM EST
Someone please help here ... this order was in refernece to IBM vs SCO ... yet
the ruling that not everything was transfered would appear to be a ruling in
favor of novell in SCO vs Novell.

Is the later now over? or has the judge forgotten that "not everything was
transfered" is exactly whats in dispute with sco vs novell.

[ Reply to This | # ]

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