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Here's SCO's Memorandum in Opposition to IBM's Motion for Summary Judgment on its Claim for Copyright Infringement (IBM's Eighth Counterclaim) as text. The wonderful Steve Martin did the HTML for us and Appendix A [PDF] as well. My thanks this time to Groklaw member rsi also for the OCR Steve worked from. Steve sent me this note with it:

Sorry the HTML took so long, but (a) three pages of case citations were a bear to format, and (b) frankly, in reading through this while marking it up I had to stop after just about every paragraph and pick my jaw up off the floor.

I think you'll find your jaws dropping quite often as you read it, also, if you know anything about the GPL and how it is supposed to work, as you watch SCO, in this devilish document, struggle to twist and bend the GPL's terms and conditions. Here's one small example of its failure to comprehend even the easy parts:

18. IBM does not allege, and there is no evidence, that SCO copied, distributed, or modified Linux when it allegedly posted the image file, used Linux internally, or ran its website.

First, you can't put Linux on your website without copying it (which is illegal under copyright law unless you have a license) and it certainly is distribution, because.... duh... people -- as in any Tom, Dick and Harry -- can download it from your website.

That's enough right there. Copy. Distribute. No GPL license. Go directly to jail. Do not collect $200. Wouldn't it be nice if litigation was as prompt and decisive as a Monopoly game?

And note on page 3 of Appendix A where SCO says it is undisputed that no one is obligated to accept the terms of the GPL, but if they wish to "copy, distribute or modify any GPL software" they must accept its terms, because, "nothing else grants you permission to modify or distribute the [IBM Copyrighted Works] or its derivative works." SCO wrote: "Undisputed" and that is its doom.

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Brent O. Hatch (5715)
Mark F. James (5295)
HATCH, JAMES & DODGE
[address]
[phone]
[fax]

Stuart H. Singer (admitted pro hac vice)
BOIES, SCHILLER & FLEXNER LLP
[address]
[phone]
[fax]

Robert Silver (admitted pro hac vice)
Edward Normand (admitted pro hac vice)
BOIES, SCHILLER & FLEXNER LLP
[address]
[phone]
[fax]

Stephen N. Zack (admitted pro hac vice)
BOIES, SCHILLER & FLEXNER LLP
[address]
[phone]
[fax]

Attorneys for The SCO Group, Inc.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH

THE SCO GROUP, Plaintiff/Counterclaim-Defendant v. INTERNATIONAL BUSINESS MACHINES CORPORATION, Defendant/Counterclaim-Plaintiff

SCO'S MEMORANDUM IN OPPOSITION TO IBM'S MOTION FOR SUMMARY JUDGMENT ON ITS CLAIM FOR COPYRIGHT INFRINGEMENT (IBM'S EIGHTH COUNTERCLAIM) FILED IN REDACTED FORM [ORIGINALLY FILED UNDER SEAL] Case No. 2:03CV0294DAK Honorable Dale A. Kimball Magistrate Judge Brooke C. Wells

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Table of Contents

Table of Authorities			i
Preliminary Statement			1
Statement of Facts			3
I.	SCO HAS COMPLIED WITH THE GPL		3
	A.	SCO's Linux Distributions Complied with the GPL	3
	B.	SCO Has Continued to Comply with the GPL	6
II.	SCO HAS NOT REPUDIATED OR BREACHED THE GPL		7
	A.	SCO Did Not Repudiate the GPL	7
	B.	SCO Did Not Breach the GPL	8
III.	SCO'S LINUX DISTRIBUTIONS PREDATED THE ALLEGED REPUDIATION AND BREACH		10
IV.	LINUX IS A DERIVATIVE WORK BASED ON SCO'S UNIX SYSTEM V		12
V.	IBM COMES TO THE COURT WITH UNCLEAN HANDS		13
VI.	IBM IS NOT ENTITLED TO THE INJUNCTION IT SEEKS		15
Standard of Decision			16
Argument			16
I.	THE GPL AUTHORIZED SCO'S DISTRIBUTION AND USE OF LINUX		18
	A.	SCO's Linux Distributions Complied with the GPL	18

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	B.	SCO Has Continued to Comply with the GPL	19
II.	SCO HAS NOT REMOTELY REPUDIATED OR BREACHED THE GPL		20
	A.	SCO Has Not Repudiated the GPL	21
	B.	SCO Has Not Breached the GPL	23
III.	IBM'S CLAIM OF RETROACTIVE TERMINATION IS UNTENABLE UNDER THE WELL-ESTABLISHED CASE LAW AND THE GPL		25
IV.	BECAUSE LINUX is AN UNAUTHORIZED DERIVATIVE OF SCO'S UNIX SYSTEM V, IBM CANNOT ASSERT ITS ALLEGED COPYRIGHTS		26
V.	IBM'S PROPOSED INTERPRETATION OF THE GPL RUNS COUNTER TO PUBLIC POLICY AND THE LAW		28
VI.	IBM'S MOTION ALSO FAILS BECAUSE IBM COMES TO THE COURT WITH UNCLEAN HANDS		30
	A.	IBM's Contributions to Linux Violate SCO's Rights	30
	C.	IBM Sought Evidence for Its Claims by Hacking Into SCO's Website	31
VII.	IBM IS NOT REMOTELY ENTITLED TO INJUNCTIVE RELIEF		32
CONCLUSION			35

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Table of Authorities

Cases
Allegro Corp. v. Only New Age Music, Inc., No. Civ. 01-790-HU, 2003 WL 23571745 (D. Or. Jan. 23, 2003)	16, 17
Amoco Oil Co. v. Premium Oil Co., 313 F. Supp. 2d 1233 (D. Utah 2004)	21
AOL, Inc. v. LCGM, Inc., 46 F. Supp. 2d 444 (E.D. Va. 1998)	32
Bd. of Dirs. and Officers, Forbes Fed. Credit Union v. Nat'l Credit Union Admin., 477 F.2d 777 (10th Cir. 1973)	30
Blackhawk-Cent. City Sanitation Dist. v. Am. Guar. & Liab. Ins. Co., 214 F.3d 1183 (10th Cir. 2000)	16
Boyer v. Bd. of County Comm'rs of Johnson County, 922 F. Supp. 476 (D. Kan. 1996)	16
Concrete Mach. Co., Inc. v. Classic Lawn Ornaments, Inc., 843 F.2d 600 (1st Cir. 1988)	29
Creative Computing v. GetLoaded.com LLC, 386 F.3d 930 (9th Cir. 2004)	32
David v. City & County of Denver, 101 F.3d 1344 (10th Cir. 1996)	16
Dow Chem. Co. v. United States 226 F.3d 1334 (Fed. Cir. 2000)	21, 23
Estate of Harris v. Harris, 218 F.3d 1140 (10th Cir. 2000)	23
Fisher v. Oklahoma Health Care Auth., 335 F.3d 1175 (10th Cir. 2003)	33
Fleming v. Miles, 181 F. Supp. 2d 1143 (D. Or. 2001)	31
Ford v. United States, 273 U.S. 593 (1927)	18
Foresight Res. Corp. v. Pfortmiller 719 F. Supp. 1006 (D. Kan. 1989)	17
Gates Rubber Co. v. Bando Chem. Indus., Ltd., 9 F.3d 823 (10th Cir. 1993)	17

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Gemveto Jewelry Co., Inc. v. Lambert Bros., Inc., 542 F. Supp. 933 (S.D.N.Y. 1982)	32
Grady v. de Ville Motor Hotel, 415 F.2d 449 (10th Cir. 1969)	29
Graham v. James, 144 F.3d 229 (2d Cir. 1998)	17
Grundberg v. Upjohn Co., 140 F.R.D. 459 (D. Utah 1991)	29
Guthart v. White, 263 F.3d 1099 (9th Cir. 2001)	30
Hicks v. City of Watonga, 942 F.2d 737 (10th Cir. 1991)	16
I.M.S. Inquiry Mgmt. Sys., Ltd. v. Berkshire Info. Sys., Inc., 307 F. Supp. 2d 521 (S.D.N.Y. 2004)	32
Indep. Serv. Orgs. Antitrust Litig., 964 F. Supp. 1469 (D. Kan. 1997)	16
Jacob Maxwell, Inc. v. Veeck, 110 F.3d 749 (11th Cir. 1997)	25
Justine Realty Co. v. Am. Nat'l Can Co., 976 F.2d 385 (8th Cir. 1992)	29
Lantec Inc. v. Novell, Inc., 306 F.3d 1003 (10th Cir. 2002)	21
Lawser v. Poudre Sch. Dist., 171 F. Supp. 2d 1155 (D. Colo. 2001)	23
MCA Television, Ltd. v. Public Interest Corp., 171 F.3d 1265 (11th Cir. 1999)	25
NLRB v. Local 32B-32J Serv. Employees Int'l Union, 353 F.3d 197 (2d Cir. 2003)	30
NYNEX Corp. v. Discon, Inc, 525 U.S. 128 (1998)	29
Palladium Music, Inc. v. Eatsleepingmusic, Inc., 398 F.3d 1193 (10th Cir. 2005)	26
Prairie Band Potawatomi Nation v. Wagnon, 402 F. 3d 1015 (10th Cir. 2005)	33
Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co, 324 U.S. 806 (1945)	30
Rixon, Inc. v. Racal-Milgo, Inc., 551 F. Supp. 163 (D. Del. 1982)	31

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Rogers v. United States, 281 F.3d 1108 (10th Cir. 2002)	23
Russ Berrie & Co. v. Jerry Elsner Co., 482 F. Supp. 980 (S.D.N.Y. 1980)	31
San Juan New Materials High Tech, Inc. v. Int'l Trade Comm'n, 161 F.3d 1347 (Fed. Cir. 1998)	29
Seneca-Cayuga Tribe of Okla. v. Nat'l Indian Gaming Comm'n, 327 F.3d 1019 (10th Cir. 2003)	19
Stenograph L.L.C. v. Bossard Assocs., Inc., 144 F.3d 96 (D.C. Cir. 1998)	17
Tempo Music, Inc. v. Myers, 407 F.2d 503 (4th Cir. 1969)	30, 31
United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940)	29
Worden & Co. v. Cal. Fig Syrup Co., 187 U.S. 516 (1903)	31
Worthington v. Anderson, 386 F.3d 1314 (10th Cir. 2004)	31
Statutes
17 U.S.C. § 103(a)	26
Other Authorities
18 Am. Jur. 2d Copyright § 220	30
3 Melvin B. Nimmer, Nimmer on Copyright	25
4 Melvin B. Nimmer, Nimmer on Copyright	30
Fed. R. Civ. P. 8(e)(2)	23

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Plaintiff, the SCO Group, Inc. ("SCO"), respectfully submits this Memorandum in Support of its Motion for Partial Summary Judgment on IBM's Eighth Counterclaim (the "counterclaim").

Preliminary Statement

IBM's counterclaim and this motion are thinly veiled attempts to retaliate against SCO for defending its UNIX rights.

The counterclaim alleges that SCO's distribution and use of Linux infringed IBM's alleged copyrights in sixteen works (the "works") that IBM contributed to Linux under the GNU General Public License and Lesser General Public License (collectively, the "GPL"). In its motion, IBM concedes that the GPL authorized SCO's use of the works, but claims that SCO lost that authorization by allegedly repudiating and breaching the GPL. As argued in SCO's pending motion for summary judgment on the sixth, seventh, and eighth counterclaims, IBM's position should be rejected as a matter of law and its counterclaim dismissed. SCO here reiterates those arguments and presents additional factual and equitable grounds for denying this motion.

IBM first filed this motion on August 16, 2004. At that time, IBM argued that SCO infringed IBM's alleged copyrights by distributing the works in SCO Linux Server 4.0 and SCO OpenLinux 3.1.1 Asia (the "Linux distributions"), and by distributing Linux files to customers on a secure website subsequent to the dates of the alleged repudiation and breach. In its opposition papers, SCO argued (among other things) that IBM had hacked into that website to

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obtain those files as purported evidence for its motion. In the pending motion, IBM has dropped SCO's distribution of files on its secure site as a basis for the counterclaim.¹

IBM's motion for summary judgment should be denied for at least the following reasons:

First, SCO has fully complied with, and has not repudiated or breached, the GPL. SCO has used and distributed Linux in compliance with the terms of the GPL, and nothing in the GPL prohibits SCO from licensing its UNIX intellectual property that IBM and others unlawfully contributed to Linux. SCO's assertion of defenses (to this very counterclaim) against the enforceability of supposed restrictions in the GPL does not constitute repudiation under any authority. SCO has complied with the GPL as a matter of law and therefore IBM's motion may properly be denied and SCO's granted on this basis alone.

Second, even if SCO had somehow repudiated or breached the GPL, there is no authority for IBM's theory that the alleged repudiation or breach —— which postdated SCO's suspension of its Linux distributions — retroactively terminated SCO's rights to distribute Linux under the GPL. That theory is plainly inconsistent with both the case law and the GPL itself. Accordingly, IBM's motion again fails as a matter of law, and SCO's motion should be granted.

Third, because Linux is an infringing derivative work of SCO's UNIX System V, IBM cannot assert rights in Linux under Tenth Circuit law.

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Fourth, IBM's proposed interpretation of the GPL should be rejected as against public policy and the law. The GPL, should not be read to interfere with SCO's right to enforce its own intellectual property rights, or to allow a competitor to decide what SCO may charge for an intellectual property license.

Fifth, IBM comes to the Court with unclean hands. IBM seeks to enforce its alleged copyrights after having itself misappropriated SCO's proprietary source code, and after attempting to obtain purported evidence for its claims by hacking into SCO's website.

For the foregoing reasons, IBM is also not entitled to the injunctive relief it seeks.

Statement of Facts

I. SCO HAS COMPLIED WITH THE GPL

A. SCO's Linux Distributions Complied with the GPL

1. IBM's counterclaim alleges that SCO infringed IBM's alleged copyrights by "copying, modifying, sublicensing and/or distributing Linux products except as expressly provided under the GPL." (IBM Ex. 4 ¶ 159)²

2. IBM alleges that SCO copied and distributed fifteen of the sixteen works verbatim in SCO Linux Server 4.0 and the remaining work also verbatim in SCO Open Linux 3.1.1 Asia.

3. IBM alleges, without support for the allegation, that "[i]n developing SCO Linux Server 4.0, SCO made certain modifications and additions to the Linux 2.4.19 kernel, such that SCO Linux 4.0 is a derivative work of the Linux 2.4.19 kernel within the meaning of the GPL."

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4. In purported support of that allegation, IBM cites (at 11) to IBM Exhibit 352, a SCO Linux Server 4.0 product announcement listing modifications and additions made to the Linux 2.4.19 kernel. These modifications and additions were made by SuSE, the UnitedLinux integrator, in developing UnitedLinux Version 1.0. (Ex. 233 ¶ 19.) They were not made by SCO. (Id.)

5. Pursuant to the UnitedLinux agreements, SCO received the UnitedLinux Version 1.0 program from SuSE and redistributed that software verbatim (that is, as received) in SCO Linux Server 4.0. (Id. ¶ 20.)

6. In particular, SCO redistributed SCO Linux Server 4.0 in three compact disks. (Id. ¶ 21.) SCO received two of these disks from SuSE and redistributed them without changing their content. (Id.) The third disk was designated by UnitedLinux as a value-add disk for each member, and it was on this disk that SCO included some additional open source packages. The entire Linux kernel was included in the two unmodified disks. (Id.)

7. SCO thus made no modifications or additions to the Linux kernel, including the works. (Id. ¶ 22.)

8. Sections 1 and 3 of the GPL authorize the use and distribution of the GPL-licensed program verbatim. (IBM Ex. 128 §§ 1, 3.)

9. Section 1 of the GPL authorizes the general public to copy and distribute verbatim copies of the source code of the licensed program, subject to certain notice publication requirements. (Id. § 1.) Section 1 expressly permits the charging of fees for transfer of the software and for warranty protection. (Id.)

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10. Section 3 of the GPL authorizes the general public to copy and distribute verbatim copies of the licensed program in object code or executable form, subject to the condition that the program is accompanied by the source code or by an offer to provide the source code. (Id. § 3.) Section 3 allows a licensee to comply with this condition by "offering access to copy from a designated place." (Id.) It is undisputed that SCO offered access to the Linux source code on its website.

11. Section 2 of the GPL states that if a licensee modifies the licensed work, the modified work must be licensed at no charge. (Id. § 2.) In contrast to Section 2 (which authorizes the copying of modified works), Section 1 (which authorizes verbatim copying) does not require no-charge licensing. (Id. §§ 1-2.)

12. SCO complied with the requirements of the GPL, including Sections 1 and 3, in its Linux distributions. (IBM Ex. 284 ¶ 9.) Indeed, even though Sections 1 and 3 would not have prohibited SCO from doing so, SCO has not sought to collect royalties or licensing fees for Linux, including any of IBM's allegedly copyrighted works. (Id. ¶ 9.)

13. IBM does not even address, let alone dispute, SCO's full compliance with Sections 1 and 3 of the GPL.

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B. SCO Has Continued to Comply with the GPL

14. In its 2004 motion for summary judgment on this counterclaim, IBM argued that SCO infringed its alleged copyrights by making Linux files available on a secure website after the alleged breach and repudiation. IBM has now abandoned that argument. Instead, IBM (at 11-12) identifies other purported grounds for the counterclaim.

15. First, IBM alleges that it recently downloaded an arcane Linux file from SCO's ftp site.

REDACTED

16. Second, IBM alleges that "apparently" SCO "continues to use Linux internally and uses Linux to run its website."

REDACTED

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17. In any event, Section 0 of the GPL provides: "Activities other than copying, distribution and modification are not covered by this license; they are outside of its scope. The act of running the program is not restricted . . . ." (IBM Ex. 128 § 0.)

18. IBM does not allege, and there is no evidence, that SCO copied, distributed, or modified Linux when it allegedly posted the image file, used Linux internally, or ran its website.

II. SCO HAS NOT REPUDIATED OR BREACHED THE GPL

19. IBM alleges that SCO has repudiated and breached the GPL and thereby lost any right under the GPL to use and distribute Linux. SCO has not repudiated or breached the GPL.

A. SCO Did Not Repudiate the GPL

20. IBM argues (at 18) that SCO repudiated the GPL by asserting defenses against this very counterclaim. But IBM does not anywhere assert that SCO or any of its officers, agents, or representatives at any time communicated to anyone that SCO would not perform its obligations under the GPL.

21. SCO has never repudiated the GPL, and SCO has always endeavored to comply with its GPL obligations. (IBM Ex. 300 at 210-11; IBM Ex. 284 ¶ 9; IBM Ex. 324 at 200-01.)

22. Indeed, SCO has also expressly relied on the GPL as a source of legal rights by asserting, for example, that "IBM's claims are barred by license" (that is, the GPL), (IBM Ex. 5 at 19), and that SCO has acted "within the contractual rights granted to it concerning software made freely available by IBM under the GPL." (Ex. 153 at 20.)

23. REDACTED

SCO asserted as its

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Fourth Affirmative Defense that "IBM's claims are barred by license" (IBM Ex. 5 at 19), and as its Eleventh Affirmative Defense that "SCO has acted legally and properly at all relevant times and IBM is therefore barred from any relief whatsoever" (Id. at 20). In a portion of SCO's Response to IBM's Third Set of Interrogatories that IBM does not cite, SCO explains that it has acted "within the contractual rights granted to it concerning software made freely available by IBM under the GPL." (Ex. 153 at 20.)

B. SCO Did Not Breach the GPL

24. IBM alleges that SCO has breached the GPL by imposing "further restrictions" on Linux users.

25. Section 4 of the GPL states that a licensee's use of licensed material beyond the scope of the GPL will "automatically terminate" the licensee's rights under the GPL (but the GPL does not say when such a termination becomes effective, and it provides no mechanism by which the licensee is put on notice of an alleged unauthorized use of the licensed material). (IBM Ex. 128 § 4.)

26. Section 6 of the GPL states: "Each time you redistribute the Program (or any work based on the Program), the recipient automatically receives a license from the original licensor to copy, distribute or modify the Program subject to these terms and conditions. You may not impose any further restrictions on the recipients' exercise of the rights granted herein." (Id. § 6.)

27. IBM argues (at 19) that SCO's right to use and distribute Linux under the GPL "automatically terminated" when SCO began offering its Intellectual Property License for UNIX (the "UNIX License") beginning on August 5, 2003. Specifically, IBM contends that the UNIX

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License imposed "further restrictions" (and thereby breached Section 6 of the GPL) by allegedly licensing Linux only in object code format, prohibiting end-users from further sublicensing or distributing Linux, and by charging fees for Linux.

28. However, the UNIX Licenses on their face license and charge for the use of UNIX software, not Linux or any IBM-copyrighted work. (See, e.g., IBM Ex. 401; IBM Ex. 403.) The UNIX Licenses contain a release of claims, covenant not to sue, and waiver of any infringement claims SCO may have against the licensee, all based on the licensee's use of UNIX. (Ex. 49 ¶ 30.)

29. For example, IBM labels the UNIX License that SCO sold to Questar as a Linux license.

REDACTED

30. The licensing clauses of all the UNIX Licenses are worded similarly. (Ex. 49 ¶ 30.) The UNIX Licenses thus are agreements pertaining to UNIX and not to Linux. (Id.; IBM Ex. 324 at 181-82.)

31. SCO has not sought to collect royalties or licensing fees for, or to impose any restrictions on, the use of Linux or any of IBM's allegedly copyrighted works. (IBM Ex. 284 ¶

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9; Ex.49 ¶ 30.) SCO has never attempted to license or sublicense Linux or any IBM copyrighted work, or any other GPL-licensed source code. (Ex. 49 ¶ 30.)

32. Section 0 of the GPL provides: "Activities other than copying, distribution and modification are not covered by this license; they are outside of its scope." (IBM Ex. 128 § 0.) Nothing in the GPL prohibits the licensing of other intellectual property that may pertain to the program licensed under the GPL. In fact, Section 7 of the GPL expressly contemplates that "the Program" may implicate other intellectual property rights. (Id. § 7.)

33. In any event, Section 6 applies only to restrictions placed by the GPL licensee on users to whom the licensee itself has distributed the GPL-licensed program. Section 6 states that each time "you redistribute the Program (or any work based on the Program), the recipient automatically receives a license from the original licensor to copy, distribute or modify the Program subject to these terms and conditions. You may not impose any further restrictions on the recipients' exercise of the rights granted herein." (Id. § 6.)

34. SCO has not attempted to sell a UNIX License to anyone who received a Linux distribution from SCO. (IBM Ex. 284 ¶ 8.) Rather, SCO agreed to hold its Linux customers harmless from any SCO intellectual property issues regarding Linux. (Id.)

III. SCO'S LINUX DISTRIBUTIONS PREDATED THE ALLEGED REPUDIATION AND BREACH

35. SCO distributed SCO Linux Server 4.0 from November 19, 2002, until May 14, 2003. (IBM Ex. 284 ¶¶2-3; IBM Ex. 324 at 186; IBM Ex. 296 at 16, 37, 57.)

36. Once SCO arrived at the conclusion that Linux was tainted with misappropriated material, SCO suspended its sales of Linux products pending clarification of the intellectual property issues. (IBM Ex. 284 ¶ 3; IBM Ex. 324 at 179, 186; IBM Ex. 300 at 208-10.) On May

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14, 2003, SCO suspended all sales and marketing of its entire Linux product line. (IBM Ex. 284 ¶ 3; IBM Ex. 324 at 179, 186; IBM Ex. 296 at 16, 37, 48, 51.)

37. After May 14, 2003, SCO entered into no further obligations to sell SCO Linux Server 4.0 or any other Linux product. (IBM Ex. 284 ¶ 3; IBM Ex. 296 at 53.) SCO, however, owed obligations to users who had already purchased SCO's Linux products. In the Product Announcement for Linux Server 4.0 of November 19, 2002, for example, SCO had promised its customers the "SCO Linux Update Service" for twelve months, including access to "an up-to-date repository of UnitedLinux and other updates for their system." (IBM Ex. 352 at SCO1270434.)

38. Accordingly, after May 14, 2003, SCO made a limited number of sales to existing customers pursuant to its contractual obligations.³ (IBM Ex. 284 ¶¶ 3-5; IBM Ex. 324 at 188-89; IBM Ex. 296 at 72-73; Ex. 49 ¶¶ 12-14; IBM Ex. 300 at 221-23.) The last sale of Linux Server 4.0 was on May 31, 2004. (IBM Ex. 284 ¶ 4; IBM Ex. 311 at 60.) Over two months had passed after SCO suspended its Linux distributions in May 2003 before SCO offered its UNIX Licenses on August 5, 2003 (IBM Ex. 284 ¶ 6) and before IBM registered any of its alleged copyrights to the works.

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39. Section 4 of the GPL provides that in the event of a licensee's breach and termination, sublicenses previously granted by that licensee remain in full force and effect. (IBM Ex. 128 § 4.)

IV. LINUX IS A DERIVATIVE WORK BASED ON SCO'S UNIX SYSTEM V

40. Linux is a derivative work based on SCO's UNIX System V, Release 4 ("SVr4"). (Ex. 276 at 31-33.) Linux is substantially similar to SVr4. (Id.)

41. IBM's experts do not dispute that Linux is a derivative of SVr4, id., and they admit that Linux is a "Unix-like system." (Ex. 22 at 135.)

42. IBM internal documents also confirm that Linux is a derivative work based on SVr4.

REDACTED

43.

REDACTED

44.

REDACTED

45.

REDACTED

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REDACTED

46. The website www.kernel.org, the primary site for the Linux kernel, states that "Linux is a clone of the operating system Unix" and that Linux "has all the features you would expect in a modern fully-fledged Unix." (Ex. 334 at 2.)

V. IBM COMES TO THE COURT WITH UNCLEAN HANDS

47. SCO suspended its distribution of its Linux products for business reasons. (IBM Ex. 330 at 67-68.) SCO sought to avoid the incongruity of perpetuating the unauthorized distribution of its proprietary technology that, unbeknown to SCO, IBM and others had contributed to Linux. (Id.; IBM Ex. 284 ¶3).

48. After suspending its marketing and distribution of its Linux products in May 2003, SCO permitted secure access to Linux patches via its website after August 5, 2003, because of SCO's pre-existing contractual obligations with its customers and with the UnitedLinux consortium. (IBM Ex. 324 at 190-91, 194; Ex. 49 ¶ 17-19.)

49. In accordance with its UnitedLinux agreements, SCO provided customers who had purchased SCO Linux Server 4.0 a password to enter at a log-in screen on SCO's download site so that only they could have access. (IBM Ex. 324 at 195; IBM Ex. 311 at 37-38; Ex. 49 ¶¶ 17-19.)

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50. The only way a non-customer was able to access the Linux 4.0 code on SCO's download site was to bypass the security system by hacking into the system. (Ex. 49 ¶¶ 20-21.) In addition, the download site contained an explicit notice that access to the Linux files was limited to SCO customers. (Id. ¶ 28.)

51. On several occasions between October 31 and December 1, 2003, IBM accessed the SCO log-in site but did not obtain access to the SCO Linux Server 4.0 files. (Id. ¶ 25.) After news of a bug in the site's security system was reported on internet websites, IBM exploited the bug to bypass the system, hack into SCO's website, and download those files. (Id. ¶¶ 22-27.) IBM has used those files as purported evidence for this counterclaim and for its pending motion for summary judgment on SCO's contract claims. (See Ex. 335 at 19; See IBM's Memorandum in Support of Its Motion for Summary Judgment on SCO's Contract Claims (Sept. 25, 2006) at 107.)

52. SCO removed all Linux code from its website promptly after the expiration of the last of its contractual obligations, on December 31, 2004. (IBM Ex. 284 ¶ 11; IBM Ex. 324 at 191, 194; IBM Ex. 311 at 37-38, 121; Ex. 49 ¶ 17.)

53. Prior to the filing of its counterclaim on August 6, 2003, IBM never provided SCO with any notice of its claim that SCO's rights under the GPL had terminated or that SCO was infringing IBM's copyrights. (IBM Ex. 284 ¶ 12.)

54. All of SCO's Linux distributions (both prior to and after May 2003) were made under the GPL, with no charge of any nature for royalties or licensing fees. (Id. ¶ 9.)

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VI. IBM IS NOT ENTITLED TO THE INJUNCTION IT SEEKS

55. Even though SCO suspended its Linux distributions over three years ago, IBM argues (at 22) that it will suffer irreparable harm if it is not granted an injunction. IBM cites a footnote on a SCO webpage as the only factual basis for its claim of irreparable harm.

56. IBM states that "SCO has assured its customers up to the very present that it will continue to support existing SCO Linux and Caldera OpenLinux customers.'"

57. On the basis of that fact alone, IBM concludes (at 22) that "there is a substantial likelihood of further infringement" by SCO.

58. The part of the notice quoted by IBM actually states: "SCO has suspended new sales and distribution of SCO Linux until the intellectual property issues surrounding Linux are resolved. SCO will, however, continue to support existing SCO Linux and Caldera OpenLinux customers consistent with existing contractual obligations." (IBM Ex. 48.)

59. As indicated by the first sentence, which IBM does not quote, the footnote is simply outdated. (Ex. 233 at 26.) It was intended for customers visiting the webpage in 2003, when SCO announced the suspension of its Linux products. (Id.)

60. It is undisputed that the last of SCO's contractual obligations to Linux customers ended nearly two years ago. (Id.; IBM Ex. 284 ¶ 11; IBM Ex. 324 at 191, 194; IBM Ex. 311 at 37-38, 121; Ex. 49 ¶ 17.)

61. SCO has no "existing" Linux customers or "existing" contractual obligations to former Linux customers. (Ex. 233 at 27.) SCO does not provide customer support for Linux and has no plans to provide such support. (Id. at 28.)

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Standard of Decision

The standards for summary judgment under Federal Rule of Civil Procedure 56 are stringent. "Summary judgment should not be granted unless the evidence, viewed in the light most favorable to the party opposing the motion, shows there are no genuine issues of material fact and the moving party is due judgment as a matter of law." Blackhawk-Cent. City Sanitation Dist. v. Am. Guar. & Liab. Ins. Co., 214 F.3d 1183, 1188 (10th Cir. 2000).

It is axiomatic that the "moving party carries the burden of showing beyond a reasonable doubt that it is entitled to summary judgment," and that "the court must review the record in the light most favorable to the opposing party." Hicks v. City of Watonga, 942 F.2d 737, 743 (10th Cir. 1991). Thus, the Court "must resolve factual disputes and draw inferences" in favor of the non-moving party, Rogers v. United States, 281 F.3d 1108, 1113 (10th Cir. 2002), and the Court may not "act as the jury and determine witness credibility, weigh the evidence, or decide upon competing inferences." Boyer v. Bd. of County Comm'rs of Johnson County, 922 F. Supp. 476, 484 (D. Kan. 1996). In short, summary judgment may not be granted unless "the uncontroverted material facts establish that the moving party is entitled to judgment as a matter of law." David v. City & County of Denver, 101 F.3d 1344 (10th Cir. 1996).

Argument

In order to prevail on its counterclaim, IBM bears the burden of proving that SCO violated the Copyright Act. See Allegro Corp. v. Only New Age Music, Inc., No. Civ. 01-790-HU, 2003 WL 23571745, at *10 (D. Or. Jan. 23, 2003) (Ex. A); Indep. Serv. Orgs. Antitrust Litig., 964 F. Supp. 1469, 1472 (D. Kan. 1997). This requires proof that SCO's actions were unauthorized. See Gates Rubber Co. v. Bando Chem. Indus., Ltd., 9 F.3d 823, 832 (10th Cir.

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1993) ("Once the plaintiff has shown that it holds a valid copyright, it must next prove that the defendant unlawfully appropriated protected portions of the copyrighted work." (emphasis added)); Foresight Res. Comm. v. Pfortmiller, 719 F. Supp. 1006, 1011 (D. Kan. 1989) ("In general, a prima facie case of copyright infringement consists of proof that the plaintiff owns a valid copyright and the defendant has engaged in unauthorized copying.").

In view of SCO's undisputed reliance on the GPL, IBM bears the burden of proving that SCO violated that license. See Allegro, 2003 WL 23571745, at *10 ("To prevail on their counterclaim of copyright infringement under a license, defendants must prove 1) ownership of copyright, and 2) 'copying' of protectible expression beyond the scope of the license."); see also Graham v. James, 144 F.3d 229, 236 (2d Cir. 1998) (noting that "the copyright owner bears the burden of proving that the defendant's copying was unauthorized under the license"); Stenograph L.L.C. v. Bossard Assocs., Inc., 144 F.3d 96, 99 (D.C. Cir. 1998) (explaining copyright plaintiff must prove defendant's copying of protected expression exceeded scope of "the license possessed by the defendant").

IBM's counterclaim fails at least for the following reasons. First, SCO's use and distribution of Linux were authorized by the GPL. SCO's Linux distributions complied fully with the GPL, and where IBM claims that SCO has continued to use Linux, IBM's claims are without merit, either because SCO has not made the use of Linux that IBM identifies or because SCO has in any event always complied with, and never repudiated or breached, the GPL. Second, neither the case law nor the GPL supports IBM's claim of repudiation and breach, and retroactive termination and infringement. Third, because Linux is an infringing derivative work based UNIX System V, IBM cannot assert rights in Linux. Fourth, IBM's motion should be

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rejected because its proposed reading of the GPL runs counter to public policy and the law. Fifth, IBM comes to the Court with unclean hands.

For the foregoing reasons, IBM also cannot remotely establish that it is entitled to the injunctive relief it seeks.

I. THE GPL AUTHORIZED SCO'S DISTRIBUTION AND USE OF LINUX

A. SCO's Linux Distributions Complied with the GPL

Section 1 of the GPL authorizes the public to "copy and distribute verbatim copies" of source code licensed thereunder, subject only to certain notice publication requirements. (¶ 9.) SCO complied with these requirements, and thus was entitled to copy and redistribute any material IBM licensed under the GPL. (¶¶ 1-13.)

SCO redistributed only verbatim copies of the program it received from SuSE. (¶¶ 1-7.) Section 3 authorizes a party to copy and distribute the licensed program verbatim in object code or executable form under the terms of Section 1, as long as the party accompanies the program with the source code or with an offer to provide the source code. (¶ 10.) Section 3 allows a licensee to comply by "offering access to copy from a designated place" (such as an internet site). (¶ 10.) SCO's distributions of Linux fully complied with this requirement. It is undisputed that SCO offered access to the Linux source code on its website. (¶ 10.)

IBM reads into the GPL a prohibition against fees other than those expressly provided for in the GPL. Section 1 expressly permits the charging of fees for transfer of the software and for warranty protection. (¶ 9.) Nothing in the GPL, however, suggests that other types of fees are prohibited. IBM's proposed interpretation is inappropriate and even "dangerous" in the construction of contracts and statutes. Ford v. United States, 273 U.S. 593, 612 (1927); Seneca-

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Cayuga Tribe of Okla. v. Nat'l Indian Gaming Comm'n, 327 F.3d 1019, 1034-35 & n.26 (10th Cir. 2003). Section 2(b), which prohibits licensing fees where the licensee distributes modified works, shows that the drafters of the GPL knew how to write a fee prohibition where it was their intent to do so. (¶ 11.)

SCO complied with all the GPL's requirements and therefore was authorized, as a matter of law, to distribute the works.

B. SCO Has Continued to Comply with the GPL

Despite the purported evidence that IBM obtained in 2003 by hacking into SCO's website and filed with this motion in 2004, IBM has dropped its allegation that SCO infringed its copyrights by making Linux files available on its secure site. (¶ 14.) Instead, IBM alleges that it recently downloaded an arcane image file from SCO's ftp site and that "apparently" SCO continues to use Linux internally and to run its website. (¶¶ 15-16.) These allegations fail as a matter of law.

First, even if these allegations were all true, SCO in each instance made proper use of Linux under the GPL. (¶¶ 17-18.) Section 0 of the GPL provides: "Activities other than copying, distribution and modification are not covered by this license; they are outside of its scope. The act of running the Program is not restricted . ..." (¶¶ 17-18.) IBM does not assert, nor is there any evidence, that in any of the alleged instances SCO copied or distributed Linux. Even if SCO had, those copies and distributions would have been verbatim and therefore in compliance with the GPL. See Part I. A., above.

Second, IBM's allegations fail on the facts.

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• SCO does not currently use, or plan to use, Linux for customer support. (¶¶ 60-61.) In concluding (at 12) that SCO "apparently" uses Linux for customer support, IBM quotes a footnote on a SCO webpage that states: "SCO has suspended new sales and distribution of SCO Linux until the intellectual property issues surrounding Linux are resolved. SCO will, however, continue to support existing SCO Linux and Caldera OpenLinux customers consistent with existing contractual obligations." (¶¶ 55-58.) As indicated by the first sentence, which IBM does not even acknowledge, the footnote is simply dated (¶ 59.) It is undisputed that the last of SCO's contractual obligations to Linux customers ended nearly two years ago. (¶ 60.) That is, SCO plainly has no "existing" Linux customers or even "existing" contractual obligations to former Linux customers, and SCO does not provide customer support for Linux and has no plans to provide such support. (¶¶ 60-61.)


• SCO's website is hosted by a third-party vendor who makes its own choice of the operating system on which it will run its servers. SCO does not use Linux "to run its website." (¶ 16.)

II. SCO HAS NOT REMOTELY REPUDIATED OR BREACHED THE GPL

IBM alleges that SCO retroactively lost the right to redistribute Linux by repudiating and breaching the GPL in defending its UNIX rights. There is plainly no basis for the claim that SCO repudiated or breached the GPL, and even if there were, both the case law and the GPL reject the concept of retroactive termination and infringement.

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A. SCO Has Not Repudiated the GPL

IBM contends that SCO was not authorized to redistribute IBM's allegedly copyrighted material because SCO has since "repudiated" the GPL. SCO has not repudiated the GPL. (¶¶ 20-23.)

"A repudiation occurs when a party to a contract makes an overt communication of intention or an action which renders performance impossible or demonstrates a clear determination not to continue with performance." Amoco Oil Co. v. Premium Oil Co., 313 F. Supp. 2d 1233, 1238 (D. Utah 2004) (quotation and citation omitted); see also Lantec Inc. v. Novell, Inc., 306 F.3d 1003, 1014-15 (10th Cir. 2002). A party repudiates a contract when it "refuses to perform and communicates that refusal distinctly and unqualifiedly to the other party." Dow Chem. Co. v. United States, 226 F.3d 1334, 1344 (Fed. Cir. 2000).

IBM does not even allege that SCO has made any such refusal, far less communicated it to anyone. On the contrary, in the very materials IBM cites, SCO Vice President Christopher Sontag confirms that SCO "treated [the GPL] as an obligation for which it needed to abide by," and SCO "made our best efforts to abide by all of the obligations of the GPL agreement." (¶ 23.) IBM's argument fails without more.

In addition, SCO has not repudiated the GPL as a source of legal rights. IBM misapprehends the significance of the assertions SCO has made in its pleadings regarding the enforceability of the GPL. IBM ignores those assertions that directly contradict its characterization of SCO's supposed "repudiation": SCO asserts as its Fourth Affirmative Defense that "IBM's claims are barred by license," and as its Eleventh Affirmative Defense that "SCO has acted legally and properly at all relevant times and IBM is therefore barred from any

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relief whatsoever" (¶ 23). In a portion of SCO's Response to IBM's Third Set of Interrogatories that IBM does not cite, SCO explains that it has acted "within the contractual rights granted to it concerning software made freely available by IBM under the GPL." (¶ 23.) SCO thus has not remotely, as IBM alleges (at 17), "disclaimed the GPL as a source of legal rights".

IBM also ignores the context in which SCO has made its forward-looking assertions regarding the enforceability of the GPL. In its Seventh Counterclaim, IBM asserts a state law claim for breach of contract based on the GPL. In response, SCO asserted the following affirmative defenses:

• "The GPL is selectively enforced by the Free Software Foundation such that enforcement of the GPL by IBM or others is waived, estopped or otherwise barred as a matter of equity." (IBM Ex. 7 at 16; accord IBM Ex. 5 at 20; Ex. 153 at 39; and


• "The General Public License ('GPL') is unenforceable, void and/or voidable, and IBM's claims based thereon, or related thereto, are barred." (IBM Ex. 5 at 20; accord Ex. 153 at 38.)

IBM cites Dow Chemical purportedly to support its contention (at 18) that SCO's "assertions do amount to a repudiation of the contract." That case — the only one cited by IBM in

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its sections on repudiation and breach — does not remotely support that contention. First, Dow Chemical does not depart from, but rather affirms, the rule that a repudiation "occurs when one party refuses to perform and communicates that refusal distinctly and unqualifiedly to the other party." Dow Chemical, 226 F.3d at 1344. There, the trial court found that defendant wrote letters to plaintiff stating no royalties were due, in fact did not pay royalties for many years, did not intend to pay any royalties, and later also contested the validity of the patent and license at issue. The Court affirmed the finding of repudiation. Nothing in the opinion, however, suggests that contesting the validity of the license alone ——without the overt acts of refusing and failing to pay royalties — was a repudiation. Second, nothing in that case even suggests that a party risks a repudiation if it asserts the enforceability of the license at issue as an affirmative defense against an infringement claim. IBM's reliance on Dow Chemical is misguided.

IBM's argument would fail, moreover, even if the Court accepted IBM's mischaracterization of SCO's assertions. IBM at most points to instances of permissible pleading in the alternative. See Fed. R. Civ. P. 8(e)(2); see, e.g., Lawser v. Poudre Sch. Dist., 171 F. Supp. 2d 1155, 1158 (D. Colo. 2001) (Rule 8(e)(2) "specifically provides that a party may plead in the alternative, even where the alternative claims are inconsistent"). Nor has IBM even claimed that it changed its position or relied on any of SCO's statements. See Estate of Harris v. Harris, 218 F.3d 1140, 1153 (10th Cir. 2000).

B. SCO Has Not Breached the GPL

IBM's contention that SCO breached the GPL by licensing its UNIX intellectual property fails for any of the following independently sufficient reasons.

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First, nothing in the GPL warrants that Linux is beyond the reach of patents, copyrights, or other intellectual property. (See IBM Ex. 128 § 11-12.) On the contrary, Section 7 of the GPL expressly contemplates and warns of that possibility. (¶ 32.) The UNIX Licenses grant rights for the use of the UNIX technologies that SCO believes IBM and others have wrongfully contributed to Linux. (¶¶ 28..31.)

Second, nothing in the GPL — which by its very terms is limited to "copying, distribution and modification" of Linux — precludes SCO from issuing licenses to its UNIX software. (¶ 32.)

Third, even if a license to SCO's UNIX intellectual property were necessary to the use of Linux, nothing in the GPL prohibits SCO from offering such a license. (¶¶ 32-34.) Section 6 applies only to restrictions placed by the licensee on users to whom the licensee itself has distributed the GPL-licensed program. Section 6 states that each time "you redistribute the Program (or any work based on the Program), the recipient automatically receives a license from the original licensor to copy, distribute or modify the Program subject to these terms and conditions. You may not impose any further restrictions on the recipients' exercise of the rights granted herein." (¶ 33.)

It is undisputed that SCO did not sell, or even attempt to sell, a UNIX License to any party who received a Linux distribution from SCO. (¶ 34.) That is, SCO entered into a UNIX License only with parties who had previously obtained Linux from a third party. (¶ 34.) Accordingly, even if the UNIX Licenses were deemed to impose restrictions on the use of Linux, those restrictions were not prohibited by Section 6, which prohibits the distributor's imposition of further restrictions on its "recipients" of the GPL-licensed program.

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III. IBM'S CLAIM OF RETROACTIVE TERMINATION IS UNTENABLE UNDER THE WELL-ESTABLISHED CASE LAW AND THE GPL

Even if SCO had somehow repudiated or breached the GPL, neither the case law nor the GPL supports the concept of retroactive termination.

First, the copyright cases expressly discussing the issue have rejected the notion of "retroactive" breach, termination, and infringement. In MCA Television, Ltd. v. Public Interest Corp., 171 F.3d 1265 (11th Cir. 1999), for example, the court explained:

The notion that MCA had the power retroactively to rescind the contract makes a mockery of that contractual agreement and would put any contracting party in PIC's position in terror of upsetting the licensor in any way for fear of being declared in breach, having the contracted-for licenses "retroactively revoked," and being sued both for breach of contract and in copyright for statutory damages that can far outweigh contractually negotiated licensing fees.

Second, Section 4 of the GPL provides that in the event of a licensee's breach and termination, sublicenses previously granted by that licensee remain in full force and effect. (¶ 40.) Since the GPL effectively ratifies sublicenses granted prior to the alleged breach, IBM cannot complain that the initial grant was unauthorized.

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The premise of IBM's copyright infringement claim — repudiation and breach of the GPL and retroactive termination — fails as a matter of law. Accordingly, the claim must also fail as a matter of law.⁴

IV. BECAUSE LINUX IS AN UNAUTHORIZED DERIVATIVE OF SCO'S UNIX SYSTEM V, IBM CANNOT ASSERT ITS ALLEGED COPYRIGHTS

IBM contends that by distributing Linux, SCO infringed IBM's alleged copyrights in code it contributed to Linux. However, because Linux is a derivative work unlawfully derived from SCO's System V, Tenth Circuit law precludes IBM from asserting its claim of copyright infringement based on those contributions.

The Copyright Act and the Tenth Circuit both make clear that a party may not create an unlawful derivative work, copyright it, and then assert the copyright against the author of the pre-existing work. "[P]rotection for a work employing preexisting material in which copyright subsists does not extend to any part of the work in which such material has been used unlawfully." 17 U.S.C. § 103(a). The Tenth Circuit has interpreted this language to mean that an infringing derivative work cannot be copyrighted. Palladium Music, Inc. v. Eatsleepingmusic, Inc., 398 F.3d 1193, 1197 (10th Cir. 2005) ("A work can generally be copyrighted as derivative work only if the new work was produced with permission of the copyright owner of the preexisting work or its duly authorized licensee.").

In Palladium, the Tenth Circuit affirmed the district court's grant of summary judgment against plaintiff's infringement claim. Id. at 1194. The Court concluded that "[plaintiff]

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Palladium's copyrights in the sound recordings at issue are invalid and unenforceable" because the sound recordings were "based" on preexisting copyrighted works and Palladium had failed to obtain licenses from the copyright owners. Id. at 1198-99.

In this case, the expert reports and IBM's internal documents support the conclusion that Linux is a derivative of SCO's UNIX System V:

• Expert Thomas Cargill concluded that Linux is substantially similar to, and a derivative work based on, SCO's UNIX System V, Release 4 ("SVr4"). (¶ 40.)

• IBM's experts do not dispute that Linux is a derivative of SVr4, and they admit that Linux is a "Unix-like system." (¶ 41.)

• The IBM document entitled "What Makes Linux Different" boasts that Linux is "Derived from UNIX" and that Linux works because "UNIX was a pre-write of Linux". (1142.)

• An IBM internal presentation boasts that "UNIX was a pre-write of Linux" and that Linux is a "UNIX-like operating system." (1143.)

• The script for an IBM broadcast entitled "Linux in the Marketplace" states: "As many of you know, Linux is a Unix-like operating system that was originally developed by Linus Torvalds." That script goes on to say that "Linux has its roots in UNIX" and "Linux is based on UNIX" and therefore "UNIX skills are easily transferable to Linux." (¶44.)

• An IBM-sponsored white paper declares: "Comparing the 10 most favorable attributes of Unix to those of Linux, we see that there is more commonality, with four common attributes on both operating environments' top 10 lists, which underscores

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  the similarity between the two environments." The same paper boasts that "[b]ecause the Linux products in most cases originate from the same code base as the Unix products, the Linux executables carry forward." (¶ 45.)

• Indeed, the website www.kernel.org, the primary site for the Linux kernel, states that "Linux is a clone of the operating system Unix" and "has all the features you would expect in a modern fully-fledged Unix". (¶ 46.)

SCO owns and has registered the copyrights to SVr4.⁵ It is undisputed that SCO, as the copyright holder, has not authorized the use of Linux, and therefore Linux is an unauthorized derivative work that infringes on SCO's copyrights in SVr4. Under Palladium, IBM's copyright in material in Linux is invalid because Linux as a whole, including the works, is an infringing derivative work of SCO's UNIX System V. (¶¶ 40-46.) Therefore, IBM cannot assert any alleged rights in Linux material, particularly against SCO, the owner of the pre-existing work on which Linux is based.

V. IBM'S PROPOSED INTERPRETATION OF THE GPL RUNS COUNTER TO PUBLIC POLICY AND THE LAW

SCO's previous arguments easily suffice to resolve the pending motion, but there are additional reasons why IBM's position must be rejected.

First, the GPL should not be read to interfere with SCO's right to enforce its own intellectual property rights. Nothing in the GPL expressly forbids a party from licensing its own software or entering into settlements to resolve potential infringement of such rights. (¶¶32-33.) Any construction of the GPL to do so should be rejected as inconsistent with the public policy in

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favor of protecting intellectual property, San Juan New Materials High Tech, Inc. v. Int'l Trade Comm'n, 161 F.3d 1347, 1363 (Fed. Cir. 1998); Concrete Mach. Co., Inc. v. Classic Lawn Ornaments, Inc., 843 F.2d 600, 612 (1st Cir. 1988), as well as the public policy favoring and encouraging settlements, Grady v. de Ville Motor Hotel, 415 F.2d 449, 451 (10th Cir. 1969); Grundberg v. Upjohn Co., 140 F.R.D. 459, 468 (D. Utah 1991); see also Justine Realty Co. v. Am. Nat'l Can Co., 976 F.2d 385, 391 (8th Cir. 1992).

Second, the GPL should not be read to allow a competitor to regulate what may be charged for an intellectual property license. In arguing that SCO breached the GPL by collecting "royalties and licensing fees in excess of the fees permitted by the GPL," IBM has sought in essence an interpretation for the GPL that fixes limits on the amounts that may be charged for unmodified works, even though the parties to the agreement are competitors. Agreements between competitors that fix a maximum price that may be charged for products are per se illegal under antitrust law. NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 133 (1998); United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 218 (1940).

In addition to its inapplicability shown above, IBM's interpretation of Section 2 (the only GPL provision requiring licensing "at no charge") would render that Section illegal and unenforceable. The general counsel for the Open Source Initiative acknowledges in his recent treatise: "There is also a problem that may prevent enforcement of the GPL's at no charge provision. It may be an illegal restraint of trade in some countries. Ordinarily, companies are

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allowed to set their own prices, and it is improper for a GPL licensor to restrain that in any way." (Ex. 341 at 132.)

It is a "well settled principle that where a contract is susceptible of two interpretations, preference will be given to the interpretation which does not violate the law." Bd. of Dirs. and Officers, Forbes Fed. Credit Union v. Nat'l Credit Union Admin., 477 F.2d 777, 784 (10th Cir. 1973); accord NLRB v. Local 32B-32J Serv. Employees Int'l Union, 353 F.3d 197, 202 (2d Cir. 2003); Guthart v. White, 263 F.3d 1099, 1104 (9th Cir. 2001). Accordingly, the Court should not construe the GPL as IBM suggests.

VI. IBM'S MOTION ALSO FAILS BECAUSE IBM COMES TO THE COURT WITH UNCLEAN HANDS

IBM's motion also fails for unclean hands. As a general matter, the doctrine of unclean hands "closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief, however improper may have been the behavior of the defendant." Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945). In the copyright context, the doctrine applies when the "plaintiff's transgression is of serious proportions and relates directly to the subject matter of the infringement action." Tempo Music, Inc. v. Myers, 407 F.2d 503, 507 & n.8 (4th Cir. 1969); see also 4 Nimmer, supra, § 13.09; 18 Am. Jur. 2d Copyright § 220.

A. IBM's Contributions to Linux Violate SCO's Rights

The Tenth Circuit has recently affirmed the following tenet of the unclean hands doctrine: "Where a plaintiff interferes with the defendant's ability to comply with his or her responsibilities, a court of equity will not turn a blind eye to the net effect on the parties'

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equitable relationship." Worthington v. Anderson, 386 F.3d 1314, 1321-22 (10th Cir. 2004). The court further and specifically affirmed in that case that the unclean hands doctrine applies where "the plaintiff's own machinations had prevented the defendant from meeting the conditions of its licensing agreement." Id. at 1321; see, e.g., Tempo Music, 407 F.3d at 507-08 (applying doctrine of unclean hands in holding that it would be inequitable to permit the plaintiff to recover for copyright infringement that occurred, "in part at least," by the plaintiff's "dereliction"). It is also well established in the intellectual-property context that the defense will apply if the claimant made "any material false statement in connection with the property which he seeks to protect." Worden & Co. v. Cal. Fig Syrup Co., 187 U.S. 516, 528 (1903).

SCO determined to offer its UNIX License, beginning in August 2003, because IBM and others had misappropriated SCO's proprietary source code into Linux. (See ¶¶ 36, 47.)

REDACTED

C. IBM Sought Evidence for Its Claims by Hacking Into SCO's Website

Another well-established basis for the application of the doctrine in the context of the Copyright Act arises when the claimant has obtained evidence by improper means.⁶

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SCO provided its customers who purchased SCO Linux Server 4.0 with a password to enter at a log-in screen so that only they could access the source code via the Internet. (¶¶ 47-50.) After news of a bug in the website's security system was reported on internet websites, IBM exploited the bug to bypass SCO's security system, hack into SCO's computers, and download the posted Linux files. (¶ 51.) IBM has attempted to use these files as purported evidence supporting not only this counterclaim but also its pending motion for summary judgment on SCO's contract claims. (¶ 51.)

The Computer Fraud and Abuse Act, 18 U.S.C. § 1030(a)(2)(C), makes it a felony for any person to access another person's computer, via the internet or otherwise, unless authorized to do so. See, e.g., Creative Computing v. GetLoaded.com LLC, 386 F.3d 930 (9th Cir. 2004); I.M.S. Inquiry Mgmt. Sys., Ltd. v. Berkshire Info. Sys., Inc., 307 F.Supp. 2d 521, 523-24, 526 (S.D.N.Y. 2004) (citing cases); AOL, Inc. v. LCGM, Inc., 46 F. Supp. 2d 444, 450 (E.D. Va. 1998). By improperly obtaining purported evidence for its claims, IBM comes to the Court with unclean hands foreclosing the relief it seeks.

VII. IBM IS NOT REMOTELY ENTITLED TO INJUNCTIVE RELIEF

IBM argues (at 21) that it is "entitled to summary judgment granting an injunction against further violations of its copyrights." For the foregoing reasons, IBM cannot establish that SCO has violated its copyrights, and even if IBM could, its claim that SCO continues and threatens to infringe its copyrights is specious.

For a party to obtain a permanent injunction, it must prove: (1) actual success on the

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merits; (2) irreparable harm unless the injunction is issued; (3) the threatened injury outweighs the harm that the injunction may cause the opposing party; and (4) the injunction, if issued, will not adversely affect the public interest. Fisher v. Oklahoma Health Care Auth., 335 F.3d 1175, 1180 (10th Cir. 2003); Prairie Band Potawatomi Nation v. Wagnon, 402 F. 3d 1015, 1019 (10th Cir. 2005). IBM simply cannot prove any of these elements.

First, for the reasons set forth in the previous sections of this brief, IBM is not entitled to summary judgment and therefore cannot at this stage establish success on the merits. SCO has always complied with the GPL, and there is no merit in law or fact for the argument that SCO has lost the right to use and distribute Linux under the GPL. See Argument, Parts I-III, above. Indeed, as set forth in SCO's own motion for summary judgment on the sixth, seventh, and eighth counterclaims, SCO is entitled to judgment as a matter of law — not IBM.

Second, IBM argues (at 22) that it will suffer irreparable harm unless the injunction is granted because "SCO has assured its customers up to the very present that it will 'continue to support existing SCO Linux and Caldera OpenLinux customers.'" On the basis alone of that quotation of a footnote on a SCO webpage, see ¶¶ 55-58, IBM concludes that "there is a substantial likelihood of further infringement" by SCO. This argument is specious on several levels.

First, as previously explained, even if (contrary to fact) SCO had continued to use or provide Linux for customer support after its obligations to its customers ended in 2004, SCO could have properly done so because it has fully complied with, and has not repudiated or breached, the GPL. (¶¶ 1-34) Second, as a factual matter, IBM quotes from a dated webpage, intended for customers visiting the page in 2003. (¶ 59.) Third, even if the quotation were

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directed at current visitors to the webpage, the quotation in no way represents a threat of irreparable harm to IBM. It is undisputed that SCO has no "existing" Linux customers, let alone any "existing" contractual obligations to provide its former Linux customers support. (¶ 61.) As SCO has repeatedly stated in sworn statements and pleadings, its contractual obligations to former Linux customers ended nearly two years ago. (¶ 61.)

Third, the threatened injury to IBM cannot possibly outweigh any harm to SCO, because, as explained, there is no threat of injury to IBM.

Fourth, no public interest is at issue where SCO has not infringed, and does not threaten to infringe, IBM's alleged copyrights.

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CONCLUSION

SCO respectfully submits, for all of the reasons stated above and as set forth in Appendix A hereto, that this Court should deny IBM's Motion for Summary Judgment on Its Claim for Copyright Infringement (IBM's Eighth Counterclaim).

DATED this 11th day of November, 2006.

By (signature)

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

BOIES, SCHILLER & FLEXNER LLP
Robert Silver (admitted pro hac vice)
Stephen N. Zack (admitted pro hac vice)
Stuart H. Singer (admitted pro hac vice)
Edward Normand (admitted pro hac vice)

Attorneys for The SCO Group, Inc.

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1. Instead, IBM now strains to unearth new instances of SCO's use of Linux subsequent to the alleged repudiation and breach. IBM alleges (at 11-12) that it recently downloaded an arcane Linux image file from SCO's ftp site, suggests that SCO continued to sell Linux installations to existing customers even after those dates, and supposes that SCO continues to use Linux internally for customer support and to run its website. These allegations appear intended to deflect attention from the dispositive facts, namely, that SCO's Linux distributions complied with the GPL and in any event SCO suspended its Linux distributions before the alleged repudiation and breach. In addition, SCO fully complied with the GPL in any use it made of Linux after suspending its Linux distributions.

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2. The documents, declarations, and depositions supporting SCO's response are appended to the November 11, 2006 Declaration of Brent O. Hatch, and are cited herein as "Ex. __." Where exhibits attached to IBM's September 25, 2006 Declaration of Todd M. Shaughnessy are referenced herein, they are cited as "IBM Ex. __."

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3. SCO recognized revenue for a negligible number of Linux sales after August 5, 2003, pursuant to existing contractual obligations with Linux customers, typically commitments to provide updates of the product for a pending customer deployment or rollout. (IBM Ex. 324 at 188-89; IBM Ex. 300 at 221-22.) Indeed, sales and returns of Linux Server 4.0 after that date combined to produce negative net revenues. (IBM Ex. 284 ¶ 4.) IBM does not expressly challenge these sales. Even if the challenge is implicit in its papers, those sales cannot support IBM's motion for the reasons set forth herein.

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4. IBM does not expressly challenge the negligible sales that SCO recognized after the alleged repudiation and breach. Even if the challenge is implicit in IBM's papers, those sales cannot support IBM's motion for the other reasons set forth herein, including most basically that SCO fully complied with the GPL.

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5. See SCO's Memorandum in Opposition to IBM's Motion for Summary Judgment on Its Claim for Declaratory Judgment of Non-Infringement (IBM's 10th Counterclaim) (Nov. 11, 2006) ¶¶ 48-69.)

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6. See, e.g., Fleming v. Miles, 181 F. Supp. 2d 1143, 1154 (D. Or. 2001) (holding copyright registrant who denied existence of competing registration in his registration application could not recover damages for alleged infringement by competing registrant); Russ Berrie & Co. v. Jerry Elsner Co., 482 F. Supp. 980, 987-88 (S.D.N.Y. 1980) (declining to enforce copyright because the owner's knowing failure to disclose material facts in registration applications constituted "reason for holding the registration invalid and thus incapable of supporting an infringement action, or denying enforcement"); Rixon, Inc. v. Racal-Milgo, Inc., 551 F. Supp. 163, 171 (D. Del. 1982) ("Unclean hands in the procurement of a patent from the Patent and Trademark Office or in prior enforcement action, for example, may render the patent unenforceable."); see also Nimmer, supra, § 13.09[B] (the doctrine applies where the claimant "obtained information as to the nature of defendant's work through unfair means"); see also Gemveto Jewelry Co., Inc. v. Lambert Bros., Inc., 542 Supp. 933, 939 (S.D.N.Y. 1982).

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Appendix A

Response to IBM's Statement of Undisputed Facts⁷

A. Open Source Software and the General Public License

1. Historically, most important commercial software has been developed by companies who have made very large investments in the development process, and have commonly sought to recoup that investment through licensing fees. (Ex. 226 ¶ 4.)

Undisputed.

2. As computer systems have continued to grow in power, and the functions demanded of software systems have grown ever more complicated, the investment required to develop and bring to market a major new software product such as an operating system has escalated, while the difficulty of making these systems reliable and "bug free" has likewise escalated. (Ex. 226 5.)

Undisputed.

3. The so-called "Free Software" movement introduced a new model of software development and of compensation for investments in development. This model was pioneered by Richard Stallman and the Free Software Foundation ("FSF). (Ex. 226 ¶ 6; Ex. 398 at 1-10.)

Depending on the meaning of the undefined term "Free Software," disputed to the extent the statement suggests that software licensed under the GPL may not be distributed for fees other than those expressly permitted by the GPL (¶ 32.) Disputed to the extent the statement suggests, without substantiation, that all "open source" licenses require that licensed material be made freely available to others by the licensee. Disputed to the extent the cited material does not support the assertion that the Open Source movement introduced a new model of compensation for investments in development. Disputed to the extent the statement asserts that the Open Source movement introduced a model of compensation for investment in development, in that

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(among other things) the Open Source model requires software developers to give away their intended contributions to open source; the GPL does not warrant the licensed materials; and SCO has been damaged by the unauthorized use in Linux of SCO's proprietary technology. (See, e.g., SCO's Memorandum in Opposition to IBM's Motion for Summary Judgment on Its Contract Claims (Nov. 11, 2006) ¶¶ 192-97; IBM Ex. 128 Preamble, §§ 11-12.)

4. At a high level, the paradigm of "free" software is that copyright owners make their source code available to others to use, modify, and distribute on a royalty-free basis, in exchange for the reciprocal right to use, modify and distribute any additions or improvements contributed by those licensees and sublicensees, on the same royalty-free basis. (Ex. 226 6; Ex. ¶¶ 22-24.)

Disputed to the extent the statement suggests that software licensed under the GPL may not be distributed for fees other than those expressly permitted by the GPL. (¶¶ 32.) Disputed to the extent the statement suggests that all "open source" licenses require that licensed material be made freely available to others by the licensee. (See, e.g., Ex.387; Ex. 388.)

5. This new licensing paradigm has unleashed a wave of global, collaborative software creativity, as networks of developers, who in many cases have no commercial affiliations with each other, continually contribute improvements and "bug fixes" to open source software packages. (Ex. 226 ¶ 7.) The development of the Linux operating system is the best known but by no means the only product of this new development model; the SAMBA software suite (file and print services) and the Apache web server software are other widely used creations of "Free Software" collaborations. (Ex. 290 ¶ 33.)

Disputed to the extent the cited material (Exhibit 226) does not reflect the personal knowledge but rather the inadmissible opinion or speculation of the person whose declaration is the basis for the statement. Depending on the meaning of the undefined term "Free Software," disputed to the extent the statement suggests that software licensed under the GPL may not be distributed for fees other than those expressly prohibited by the GPL. (¶¶ 8-11, 32.) Disputed to the extent the statement suggests that Linux, SAMBA, and Apache are made available under the

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same terms. (See, e.g., Ex. 128; Ex. 388.)

6. The "Free Software" development model is relatively new, but it is neither utopian nor anarchical; it requires legal structures and protection to function successfully. The most widely used legal license agreement that makes the Free Software model possible is the so-called GNU General Public License or "GPL". (Ex. 398 at 1-10.) This license was developed by Richard Stallman and its first version first published in 1989; its current version was promulgated in 1991. (Ex. 398 1-6; Ex. 128.) Neither IBM nor SCO had any involvement in the development of the terms of the GPL.

Disputed to the extent the first sentence of the statement makes bare allegations and reflects opinion or speculation. Depending on the meaning of the undefined term "Free Software," disputed to the extent the statement suggests that software licensed under the GPL may not be distributed for fees other than those expressly permitted by the GPL. (¶¶ 8-11, 32.) Disputed to the extent that the statement suggests that the GPL or the Open Source development model ensures that code contributed to Linux is unencumbered. (¶¶ 32, 36, 47.)

7. There is a variant of the GPL referred to as the "Lesser General Public License" or "LGPL". (Ex. 129.) The LGPL states that it is designed for use with "some specially designated software packages — typically libraries". (Ex. 129, Preamble.) However, the terms of the LGPL are identical to those of the GPL in all respects material to the present motion, and the GPL and LGPL are referred to collectively as the "GPL" in the present motion.

Undisputed.

8. The mere fact of publishing a copyrighted work does not give others the right to use, copy, modify, or distribute that work. A software developer who elects to publish copyrighted software subject to the GPL, however, offers to all (the "General Public") a royalty free license to use, copy, modify, and distribute. (Ex. 128 §§ 2, 4-6; see also Ex. 129 §§ 2, 8-10.)

Undisputed.

9. The GPL makes clear that no one is obligated to accept the terms of the GPL, but must do so if they wish to copy, distribute or modify any GPL software: "You are not required to accept this License .. . . However, nothing else grants you permission to modify or distribute the [IBM Copyrighted Works] or its derivative works." (Ex. 128 § 5 (emphasis added); see also Ex. 129 § 9.)

Undisputed.

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10. At its simplest level, the GPL provides that anyone may help themselves to the benefit of copying, modifying, distributing the work on a royalty free basis, provided they agree to distribute that work -- and to license any derivative works -- only under the terms of the GPL. (Ex. 128 §§ 2, 4-6; see also Ex. 129 §§ 2, 8-10.) As the "Preamble" to the GPL states:

Our General Public Licenses are designed to make sure that you have the freedom to distribute copies of software .... To protect your rights, we need to make restrictions that forbid anyone to deny you these rights . . . . These restrictions translate into certain responsibilities for you if you distribute copies of the software, or if you modify it. For example, if you distribute copies of [a program licensed under the GPL] . you must give the recipients all the rights that you have. (Ex. 128, Preamble; see also Ex. 129, Preamble.)

Disputed to the extent the last quoted sentence in the statement actually states: "For example, if you distribute copies of such a program, whether gratis or for a fee, you must give recipients all the rights that you have." (Ex. 128, Preamble.) Disputed to the extent the statement suggests, without substantiation, that the GPL requires that a party who redistributes GPL-licensed software give to recipients rights other than those it acquired under the GPL and did not independently possess.

11 . The GPL expressly prohibits the imposition of any "further restrictions" on the recipient's rights granted under the GPL. The collection of any licensing fees or royalties is expressly prohibited by the GPL:

You must cause any work that you distribute or publish, that in whole or in part contains or is derived [a GPL licensed program] or any part thereof, to be licensed as a whole at no charge to all third parties under the terms of this agreement. (Ex. 128 § 2; see also Ex. 129 § 2.)

Disputed to the extent the statement asserts that the GPL prohibits SCO from licensing its UNIX intellectual property wrongfully contributed to Linux; nothing in the GPL warrants that Linux is beyond the reach of patents, copyrights, or other intellectual property, and Section 7 of the GPL expressly contemplates and warns of that possibility. (¶ 32.) Disputed to the extent the statement asserts that the no-charge requirement of Section 2 of the GPL (which governs the

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licensing of modifications of the GPL-licensed program) applies to the redistribution of verbatim copies of the GPL-licensed program under Sections 1 and 3. (¶¶ 8-11, 32.)

Disputed to the extent the statement asserts that the purported prohibition (which is not found in the GPL) against charging for verbatim copies of the GPL-licensed program constitutes a "further restriction" under Section 6 of the GPL. (¶¶ 8-11, 24-34.) Disputed to the extent the statement suggests that SCO entered into its UNIX Licenses with its "recipients," that is, parties who received a Linux distribution from SCO. ¶¶ 33-34.)

12. The GPL uses the term "derivative work" in accordance with its definition under copyright law. (Ex. 128 § 0; see also Ex. 129 § 0.) A "derivative work" means "a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast". 17 U.S.C. § 101.

Undisputed.

13. The GPL permits a licensee to collect a fee to cover the cost of "the physical act of transferring a copy", and permits a licensee to charge fees for service and warranty protection. (Ex. 128 § 1; see also Ex. 129 § 1.)

Undisputed.

14. The LGPL similarly states that with respect to any "work based on the [LGPL-licensed] Library", "You must cause the whole of the work to be licensed at no charge to all third parties under the terms of this License." (Ex. 129 § 2(c).)

Disputed to the extent the statement asserts that the GPL prohibits SCO from licensing its UNIX intellectual property that has been wrongfully contributed to Linux; nothing in the GPL warrants that Linux is beyond the reach of patents, copyrights, or other intellectual property, and Section 7 of the GPL expressly contemplates and warns of that possibility. (¶ 32.) Disputed to the extent the statement asserts that the no-charge requirement of Section 2 of the GPL (which governs the licensing of modifications of the GPL-licensed program) applies to the redistribution of verbatim copies of the GPL-licensed program under Sections 1 and 3. (¶¶ 8-11, 32.)

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15. The GPL expressly states:

You may not copy, modify, sublicense, or distribute the [GPL licensed] Program except as expressly provided under this License. Any attempt otherwise to copy, modify, sublicense, or distribute the Program is void, and will automatically terminate your rights under this License. (Ex. 128 § 4; see also Ex. 129 § 8.)

Undisputed.

16. In other words, one who attempts to help himself to copyrighted software owned by others and made available under the GPL, while attempting to sublicense or distribute derivative works on terms other than those of the GPL, is not licensed under the GPL, and is infringing if he makes any use of the GPL-licensed software. (Id.)

Disputed because the statement draws a legal conclusion instead of stating a fact. Disputed because the cited materials do not state that legal conclusion. Disputed to the extent the statement seeks to summarize the GPL.

B. Linux.

17. The development of Linux began when an undergraduate student at the University of Helsinki, Linus Torvalds, set out to create a new, free operating system. In 1991, Torvalds began developing the core of the operating system, known as the "kernel", and some months later posted news of his project to Internet newsgroups, inviting volunteers to assist in his efforts. (Ex. 272 ¶¶ 3-4.)

Disputed to the extent that the statement suggests that Linux is an original work instead of a unauthorized derivative work based on UNIX System V. (¶¶ 40-46.)

18. With the Internet providing for a distributed collaboration, other programmers joined to write the code making up the kernel. Torvalds directed the collaboration to a version 1.0 release of the Linux kernel in 1994 and has continued to maintain the kernel development since. (Id. ¶ 5.)

Disputed to the extent the statement suggests that Linux is an original work instead of an unauthorized derivative work based on UNIX System V. (¶¶ 40-46.)

19. Commencing in 1991, Torvalds released Linux subject to the GPL, and since that

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time Linux has only been made available pursuant to the terms of the GPL. (Ex. 573 at SCO1304374.) In addition, Linux contributors including IBM have included explicit statements within code modules they contributed to Linux emphasizing that those modules are copyrighted by their original contributor, and are made available only under the terms of the GPL. (Ex. 89; Ex. 90; Ex. 91; Ex. 92; Ex. 93; Ex. 94; Ex. 95; Ex. 96; Ex. 97; Ex. 98; Ex. 99; Ex. 100; Ex. 101; Ex. 102; Ex. 103; Ex. 104.)

Undisputed.

20. Since the release of Linux version 1.0, developers around the world have contributed to the ongoing development of Linux, under the terms of the GPL, representing an enormous investment and value available without license fee to all who accept and abide by the terms of the GPL. (See Ex. 5 ¶¶ 23, 26, 27; Ex. 364; Ex. 105 at 15, 23, 26; Ex. 194 ¶ 5.)

Disputed to the extent the statement suggests that Linux development has taken place without the unauthorized use of UNIX technology. (¶¶ 36-47.) Disputed to the extent the statement suggests, without substantiation, that the value of Linux as an enterprise operating system derives only from any proper contributions made to Linux under the GPL.

21. A number of companies distribute Linux on a commercial basis. (Ex. 105 at 5-8, 26.) These distributors offer a variety of commercial Linux products, which typically comprise the Linux kernel, low level applications that run on the kernel and provide additional system functions, and whatever else the distributor chooses to combine into an installable software product. (See Ex. 105 at 5-8.) Major businesses have been built on providing business-quality support and service for "free" software, a well-known example being that of the Red Hat Corporation, which sells services in connection with Linux, although it distributes Linux under the terms of the GPL (as it must), and thus charges no license fees for its Linux "distribution". (Ex. 111 at 12-13; Ex. 8 ¶ 32.)

Disputed to the extent the last sentence of the statement suggests that Red Hat distributes verbatim copies of the Linux kernel, instead of (as the second sentence indicates) a derivative work which, under Section 2 of the GPL, must be distributed at "no charge." (¶¶ 8-11.)

22. SCO was founded in 1994 under the name Caldera, Inc., as a commercial distributor of Linux products. (Ex. 105 at 29-31.) Over the years, SCO has developed and marketed a number of software products containing Linux code, including Caldera Network Desktop, OpenLinux and SCO Linux. (Ex. 105 at 30-31; Ex. 296 at 13:17 - 17:18, 34:12 - 36:17.)

Undisputed.

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C. IBM's Contributions to Linux

23. Among the companies that have made contribution that have become part of Linux is IBM. (See Ex. 5 ¶ 45; Ex. 167 ¶ 7.) IBM has made extensive contributions of computer code developed by IBM to the Linux kernel. (Ex. 167 ¶¶ 5-7; Ex. 5 ¶¶ 20, 108.) IBM holds copyrights, including registered copyrights, on many of its contributions to Linux. (Ex. 167 ¶ 5.)

Disputed to the extent the statement suggests that IBM did not improperly contribute to Linux and release under the GPL proprietary SCO materials that were derived from UNIX source code or were subject to confidentiality restrictions in IBM's UNIX licensing agreements with SCO, or both. (¶¶ 36, 47.) Disputed to the extent the statement asserts that IBM has valid copyrights to the materials it contributed to Linux and released under the GPL, including the works, which assertion is a legal conclusion and not a statement of fact.

24. IBM contributions to Linux on which IBM holds registered copyrights include the works listed in Table 1 below (collectively, the "IBM Copyrighted Works"). The length of each of the Copyrighted Works is as indicated in Table 1, and the copyright registration for each of these Copyrighted Works, together with a copy of the work or relevant portions of the work, are submitted as exhibits as indicated in Table 1 :

??	Products Copying IBM's Works	Lines of Code	Title of Work	Registration	Registration Date
89	SCO Linux Server 4.0	289,943	Enterprise Volume Management System	TX 5-757-696	8/15/2003
90	SCO Linux Server 4.0	2,048	Enterprise Class Event Logging	TX 5-757-698	8/15/2003
91	SCO Linux Server 4.0	2,411	Dynamic Probes	TX 5-757-698	8/15/2003
92	SCO Linux Server 4.0	19,042	Linux Support Power PC64	TX 5-757-699	8/15/2003
93	SCO Linux Server 4.0	366,407	Omni Print Driver	TX 5-757-700	8/15/2003
94	SCO Linux Server 4.0	9,914	Journaled File System	TX 5-757-701	8/15/2003

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95	SCO Linux Server 4.0	1,851	Next Generation Posix Threading	TX 5-757-702	8/15/2003
96	SCO Linux Server 4.0	4,302	Linux Kernel Support for JFS	TX 5-856-466	2/2/2004
97	SCO Linux Server 4.0	57,670	Linux Kernel S390 Support	TX 467	2/2/2004
98	SCO Linux Server 4.0	2,554	Linux Kernel Support for Service Processor	468	2/2/2004
99	SCO Linux Server 4.0	2,277	Kernel Support for Memory Expansion Technology	TX 469	2/2/2004
100	SCO Linux Server 4.0	7,455	Linux Kernel Support for IBM eServer iSeries Devices	TX 470	2/2/2004
101	SCO Linux Server 4.0	1,122	Kernel Support for PCI Hotplug	TX 471	2/2/2004
102	SCO Linux Server 4.0	364	Linux Kernel Support for pSeries Hypervisor Terminal	TX 472	2/2/2004
103	SCO Linux Server 4.0	4,412	Linux Kernel PPC64 Support	TX 473	2/2/2004
104	SCO Linux Server 4.0	2,523	Kernel Support for Mwave Modem	TX 474	2/2/2004

(Ex. 73; Ex. 74; Ex. 75; Ex. 76; Ex. 77; Ex. 78; Ex. 79; Ex. 80; Ex. 81; Ex. 82; Ex. 83; Ex. 84; Ex. 85; Ex. 86; Ex. 87; Ex. 88; Ex. 89; Ex. 90; Ex. 91; Ex. 92; Ex. 93; Ex. 94; Ex. 95; Ex. 96; Ex. 97; Ex. 98; Ex. 99; Ex. 100; Ex. 101; Ex. 102; Ex. 103; Ex. 104; Ex. 167 ¶ 9.)

Disputed to the extent the statement suggests that IBM did not improperly contribute to Linux and release under the GPL proprietary SCO materials (including at least some of the works) that were derived from UNIX source code or were subject to confidentiality restrictions in IBM's UNIX licensing agreements with SCO, or both. (¶¶ 36, 47.) Disputed to the extent the statement suggests that IBM has valid copyrights to materials it contributed to Linux and

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released under the GPL.

25. The registration of each of these IBM Copyrighted Works was made within five years of the first publication of the relevant work. (Ex. 167 ¶ 5.)

Disputed to the extent IBM has not substantiated the statement.

26. IBM made its Copyrighted Works publicly available by posting them on the Internet as part of the Linux development process. (Ex. 167 ¶ 7.) Subsequently, each of IBM's Copyrighted Works was incorporated into SCO's Linux products, as indicated in Table 1. Each of the IBM Copyrighted Works is licensed to others (including SCO) only under the terms of the GPL or the LGPL. (Ex. 167 ¶ 7.) All of the IBM Copyrighted Works are licensed under the GPL, except IBM's "Omni Print Driver" and IBM's "Next Generation Posix Threading", which are licensed under the LGPL. (Ex. 89; Ex. 90; Ex. 91; Ex. 92; Ex. 93; Ex. 94; Ex. 95; Ex. 96; Ex. 97; Ex. 98; Ex. 99; Ex. 100; Ex. 101; Ex. 102; Ex. 103; Ex. 104; Ex. 167 ¶ 7.)

Undisputed.

27. There is no claim in this case that the IBM Copyrighted Works represent intellectual property of SCO. With respect to most of the IBM Copyrighted Works, there is no claim that IBM violated any contractual obligations to SCO by contributing such code into Linux. (See e.g., Ex. 54.)

Disputed to the extent the statement asserts that "there is no claim that the IBM Copyrighted Works represent intellectual property of SCO." (¶¶ 36, 40-47.)

28. With respect to a few of the IBM Copyrighted Works, SCO does claim that IBM was contractually barred from contributing certain of the IBM Copyrighted Works to Linux. (See. e.g. Ex. 54, Item No. 1 (claiming contractual rights over IBM's JFS).) It is undisputed, however, that all of the listed works were developed by IBM, not by SCO, that they are intellectual property of IBM, and that IBM holds valid, registered copyrights in these works. (Ex. 167 ¶¶ 4-5.)

Disputed to the extent the statement asserts that "all of the listed works were developed by IBM, not by SCO" and are "intellectual property of IBM," in that at least some of the works were derived from UNIX source code or were made with the benefit of SCO's intellectual property. (¶¶ 36, 40-47.) Disputed to the extent the statements purports to state facts that are not material to this motion. Disputed to the extent the statement asserts that IBM holds valid copyrights in the works, which assertion is a legal conclusion and not a statement of fact.

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D. SCO's Extensive Use of Linux and of IBM's Copyrighted Code Included in Linux.

29. As noted above, SCO (first under the name Caldera) was founded as a commercial distributor of Linux products. (Ex. 105 at 29-31.) Like other Linux distributors, SCO was barred by the GPL from charging license fees for distributing Linux, but sought to profit selling software products and services in conjunction with Linux. (Ex. 128 §§ 2-3; Ex. 129 §§ 2, 4; Ex. 4 at 29-31.)

Disputed to the extent the statement suggests that the GPL bars SCO (or any licensee) from charging fees for its own intellectual property included in Linux without authorization or for verbatim distributions of the GPL-licensed program. (¶¶ 8-11, 32.)

30. In November, 2002, SCO began distributing a product it called "SCO Linux Server 4.0, powered by UnitedLinux", which included the Linux 2.4.19 kernel. (Ex. 296 at 15:7-18, 35:12-36:17, 92:1-22; Ex. 486 at 908; Ex. 284 ¶ 3; Ex. 352 at SCO1270432.) SCO Linux Server 4.0 contained, verbatim, the entirety of each of the IBM Copyrighted Works listed in Table 1 above, with the exception of IBM's copyrighted "Omni Print Driver". (Ex. 167 ¶ 9; Ex. 89; Ex. 90; Ex. 91; Ex. 92; Ex. 93; Ex. 94; Ex. 95; Ex. 96; Ex. 97; Ex. 98; Ex. 99; Ex. 100; Ex. 101; Ex. 102; Ex. 103; Ex. 104; Ex. 405; Ex. 69 ¶ 13.) SCO has admitted this without qualification. (See Ex. 45, Nos. 108-117.)

Disputed to the extent the word "admitted" suggests that SCO has acknowledged any wrongdoing in its distribution of Linux. See Argument, Part I, above.

31. SCO also distributed a product it called "OpenLinux 3.1.1 Asia". (Ex. 406; Ex. 69 ¶ 13.) SCO OpenLinux 3.1.1 Asia contained, verbatim, the entirety of IBM' s "Omni Print Driver". (Ex. 69 ¶¶ 3, 13; 167 ¶ 9; Ex. 93; Ex. 406.)

Undisputed.

32. In copying these IBM Copyrighted Works into SCO Linux products, SCO repeatedly copied over 783,000 lines of code to which IBM holds the copyrights, and which were made available and came into possession only pursuant to the GPL. (Ex. 167 ¶¶ 4 - 11.)

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33. REDACTED

Disputed because the cited materials do not support the statement. Disputed to the extent the statement suggests that SCO has not identified Linux as a whole to be an unauthorized derivative work based on UNIX System V. (¶¶ 40-46.)

34. SCO Linux Server 4.0 also contains extensive amounts of code to which parties other than IBM or SCO hold the copyrights, and which were made available and came into SCO's possession only pursuant to the GPL. (Ex. 352 at SCO1270432.)

Disputed because the cited material does not support the statement.

35. In developing SCO Linux Server 4.0, SCO also made certain modifications and additions to the Linux 2.4.19 kernel, such that SCO Linux Server 4.0 is a derivative work of the Linux 2.4.19 kernel within the meaning of the GPL. (Ex. 352 at SCO1270430.) As noted previously, the GPL requires that "You must cause any work that you distribute or publish, that in whole or in part contains or is derived from the Program [the Linux 2.4.19 kernel] to be licensed as a whole at no charge to all third parties under the terms of this License." (Ex. 128 § 2(b).)

Disputed to the extent the statement asserts that SCO made any modifications or additions to the Linux 2.4.19 kernel in developing SCO Linux Server 4.0. (¶¶ 1-7.) Disputed to the extent the statement asserts that SCO Linux Server 4.0 is a derivative work of the Linux 2.4.19 kernel under the meaning of the GPL (or any definition). (¶¶ 1-7.) Disputed in that the cited exhibit does not support the assertion that "[i]n developing SCO Linux Server 4.0, SCO also made certain modifications and additions to the Linux 2.4.19 kernel, such that SCO Linux Server 4.0 is a derivative work of the Linux 2.4.19 kernel within the meaning of the GPL." (¶¶ 3-7.) Disputed to the extent the statement suggests that Section 2 of the GPL, which governs the copying and distribution of derivative works, applies to SCO's redistribution of the GPLIicensed program verbatim in its SCO Linux Server 4.0 products. (¶¶ 8-13.)

36. Pursuant to its business strategy, over time SCO distributed copies of SCO Linux

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Server 4.0 and SCO OpenLinux 3.1.1 to customers. (Ex. 284 ¶¶ 4-7.) In making and distributing each and every one of these copies, SCO literally copied the IBM Copyrighted Works. (Ex. 167 ¶ 11.)

Undisputed.

37. In addition, as recently as August 11, 2006, SCO still posted copied Linux files on its own Internet website, including copies of the IBM Copyrighted Works (including at least Linux Kernel 5390 Support, Linux Kernel Support, and Linux Kernel Support for Mwave Modem) and made them available to others to copy at will. (Ex. 215 ¶ 110; Ex. 226 ¶¶ 13-16.)

Disputed to the extent the statement asserts that SCO distributed Linux files on its Internet website as recently as August 11, 2006, in that SCO has not knowingly made Linux code available on its website after December 31, 2004, when its contractual obligations with its Linux customers ended. (¶¶ 35-38.) Disputed to the extent the statement and cited material suggest (but do not state) that the Linux files that IBM allegedly downloaded from SCO's website on August 11, 2006, included the works that are the purported basis for the counterclaim. Disputed to the extent the statement suggests that the files were reasonably accessible. (¶ 15.) Disputed to the extent the statement suggests that anyone, other than purportedly IBM on August 11, 2006, accessed and downloaded any Linux files from SCO's website after December 31, 2004. (¶ 15; see also Ex. 324.)

38. SCO profited by selling services and other software in conjunction with SCO Linux Server 4.0 and SCO OpenLinux 3.1.1. (Ex. 106 at 5-6; Ex. 111 at 6-7.)

Disputed in that SCO did not profit "by selling services and other software in conjunction with SCO Linux Server 4.0 and SCO OpenLinux 3.1.1." (See e.g., Ex. 384 at 35; Ex. 385 at 35.)

39. To the present, SCO apparently continues to possess and use copies of Linux, including the IBM Copyrighted Works, internally. While SCO claims that it has "suspended new sales and distribution of SCO Linux" during this litigation, it assures its install base of SCO Linux customers up to the very present that "SCO will, however, continue to support existing

13

SCO Linux and Caldera OpenLinux customers consistent with existing contractual obligations." (Ex. 48.) REDACTED

Disputed to the extent the statement suggests that SCO's assertion that it has suspended all sales and marketing of its Linux products is inconsistent with its statements that it would continue to support its Linux customers pursuant to existing contractual obligations. (¶¶ 35-39.) Disputed to the extent the statement suggests that SCO continues to make Linux available to its customers pursuant to contractual obligations. (¶¶ 55-61.) Disputed to the extent the statement suggests that SCO would have breached the GPL had it continued to make Linux available to its customers. Disputed to the extent the statement suggests that SCO is unauthorized under the GPL to use and posses Linux internally (or otherwise, according to the terms of the GPL). (¶¶ 1-13.) Disputed to the extent the statement asserts that SCO uses Linux to run its website. (¶ 16.) Disputed to the extent the statement suggests that SCO provides or plans to provide Linux support. (¶ 61.)

E. SCO's Blatant Violations of the GPL and Resulting Loss of License Rights.

40. SCO continued to copy and distribute all of the IBM Copyrighted Works, and to profit from selling services and other software in conjunction with its distribution of IBM's Copyrighted Works, even after SCO repudiated and breached the GPL — its sole source of any rights to copy, modify, distribute, or sublicense Linux or the IBM Copyrighted Works. (Ex. 353; Ex. 112 at 2; Ex. 33 at Tab 121; Ex. 296 at 92; Ex. 486; Ex. 284 ¶¶ 4, 7; Ex. 226; Ex. 215 ¶ 110.)

Disputed to the extent the statement asserts that SCO has profited "from selling services and other software in conjunction with its distribution of IBM's Copyrighted Works". (See, e.g., Ex. 384 at 35; Ex. 385 at 35.) Disputed to the extent the statement asserts that SCO "repudiated and breached the GPL," which assertion is a legal conclusion, not a statement of fact, let alone a statement of an undisputed fact. Disputed to the extent the statement asserts that SCO continued

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to distribute SCO Linux Server 4.0 or SCO Open Linux 3.1.1 Asia — the allegedly infringing products, which SCO stopped selling and marketing in May 2003 — after the dates of the actions that IBM has identified as constituting the alleged repudiation and breach of the GPL by SCO (the sale of the UNIX Licenses starting in August 2003, and the assertion of its affirmative defenses to the eighth counterclaim in pleadings and deposition testimony after IBM filed that counterclaim.) (¶¶ 35-39.) See also IBM statements of fact 41 and 44, below.

41. As early as August 2003, SCO began publicly declaring that the GPL was unenforceable. (Ex. 330 at 268:3-270:24; Ex. 392.)

Disputed to the extent that the statement assets that SCO's assertions regarding the unenforceability of the GPL constituted a repudiation of the GPL, which assertion is a legal conclusion.

42. In this litigation, SCO has repeatedly repudiated the GPL.

1. SCO asserts that the GPL "is unenforceable, void and/or voidable" (Ex. 5 at 20 (Sixth Affirmative Defense)); "violates the U.S. Constitution, together with copyright, antitrust and export control laws" (Ex. 7 at 16 (Eighth Affirmative Defense); Ex. 300 at 213:15-20); is unenforceable or inapplicable in this litigation (Ex. 5 ¶¶ 24, 28, 155, 157; and is preempted by federal copyright law and unenforceable under state law. (Ex. 36 at 38-39.)


2. In interrogatory responses, SCO again asserted that "SCO maintains that the GNU General Public License )'GPL') is not enforceable". (Ex. 36 at 20.)


3. c. SCO also claims that all rights to enforce the GPL are waived and that all potential claimants are estopped from enforcing the GPL – in other words, that the GPL is a nullity. (Ex. 5 at 20 (Seventh Affirmative Defense); Ex. 300 at 213:14 –215:7.)

Disputed to the extent the statement asserts that "SCO has repeatedly repudiated the GPL," which assertion is a conclusion of law rather than a statement of fact, let alone an one. (See ¶¶ 20-23.) Disputed to the extent that statement asserts that the cited statements by SCO

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constitute, either individually or collectively, repudiations of the GPL; that assertion is a conclusion of law and not a statement of fact, let alone an undisputed one. (See ¶¶ 20-23; Argument Part II, above.)

43. By May of 2003, SCO began overtly and explicitly asserting rights over Linux inconsistent with rights and obligations under the GPL, including by seeking license fees from users of Linux and imposing restrictions on users of Linux that are prohibited by the terms of the GPL. SCO took the position that use of Linux (which SCO had both received and distributed under the terms of the GPL) was not authorized without a paid license from SCO, and began threatening and initiating litigation against companies that used Linux:

1. In May 2003, SCO sent letters to Fortune 1000 companies (including IBM) claiming that "Linux is, in material part, an unauthorized derivative of UNIX". SCO further stated that "[we] believe that Linux infringes on our UNIX intellectual property and other rights" and "intend to aggressively protect and enforce these rights". (Ex. 141.)


2. In a May 14, 2003 press release, SCO stated that "Linux is an unauthorized derivative of UNIX and that legal liability for the use of Linux may extend to commercial users". SCO warned that non-SCO Linux customers could face liability for using Linux software "to run their business". (Ex. 356.)


3. In a July 21, 2003 press release, SCO announced that it would be offering licenses to Linux end users, who could otherwise "face liability for running [Linux] in their organizations". (Ex. 357.)


4. On August 5, 2003, SCO announced "the availability of the SCO Intellectual Property License for Linux". (Ex. 362.)


5. In a December 22, 2003 press release, SCO announced that it had "commenced providing notification to selected Fortune 1000 Linux end users" that their distribution or redistribution of Linux containing code on which SCO purported to hold copyrights would constitute infringement. (Ex. 363.)


6. In connection with its December 22 press release, SCO released a template of a letter dated December 19, 2003, sent to "Linux User". In that letter, SCO wrote that "the use of the Linux operating system in a commercial setting violates our rights under United States Copyright Act, including the Digital Millennium Copyright Act" and that "we will take appropriate actions to protect our rights". (Ex. 142.)

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1. REDACTED


2. On March 3, 2004, SCO sued Autozone, Inc, in the United States District Court for the District of Nevada, alleging that Autozone, through its use of Linux, is infringing copyrights SCO purports to hold on UNIX, and sought to collect, as "damages", license fees and royalties in excess of that permitted to be collected by the GPL or LGPL. (Ex. 9.)


3. On August 10,2004, SCO was reported to be threatening to raise the price of its licenses "which it says companies running Linux need to buy in order to avoid being sued". (Ex. 381.)

Disputed to the extent the statement asserts that "SCO began overtly and explicitly asserting rights over Linux inconsistent with rights and obligations under the GPL," which assertion is a legal conclusion and not a statement of fact, let alone an undisputed one. (See ¶¶ 20-34.) Disputed to the extent the statement suggests that SCO licensed, charged fees for, or imposed restrictions on the use of Linux. (¶¶ 24-34.) Disputed to the extent the statement asserts that the GPL prohibits SCO from licensing its UNIX intellectual property wrongfully contributed to Linux; nothing in the GPL warrants that Linux is beyond the reach of patents, copyrights, or other intellectual property, and Section 7 of the GPL expressly contemplates and warns of that possibility. (¶¶ 24-34.) Disputed to the extent the statement asserts that the no-charge requirement of Section 2 of the GPL (which governs the licensing of modifications of the GPL-licensed program) applies to SCO's redistribution of verbatim copies of the GPL-licensed program under Sections 1 and 3. (¶¶ 8-13.)

Disputed to the extent the statement asserts that the purported prohibition (which is not found in the GPL) against charging for verbatim copies of the GPL-licensed program constitutes

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a "further restriction" under Section 6 of the GPL. (¶¶ 8-13, 24-34.) Disputed to the extent the statement asserts that the purported prohibition (which is not found in the GPL) against licensing one's own intellectual property constitutes a "further restriction" under Section 6 of the GPL. (¶¶ 33-34.) Disputed to the extent the statement suggests that SCO entered into its UNIX Licenses with its "recipients," that is, parties who received a Linux distribution from SCO. (¶¶ 33-34.) Disputed to the extent that SCO statement seeks to summarize or paraphrase the referenced letters.

44. As a result of this campaign of fear, uncertainty and doubt (a tactic known in the industry as "FUD"), SCO succeeded in actually collecting license fees from a number of Linux users, in excess of the fees permitted by the GPL to be collected for the "physical act of transferring a copy" of the code or for warranty protection (Ex. 128 §§ 1-3; Ex. 129 §§ 1-2, 4), for a so-called "SCO Intellectual Property License for Linux". (Ex. 575.) SCO claimed that this license was necessary for "commercial use of the Linux 2.4 and later versions" (id.):

Disputed because the cited materials do not support (and indeed are wholly unrelated to) the assertion that SCO's actions in any way amounted to a "campaign of fear, uncertainly and doubt". Disputed because the cited materials do not support (and indeed are wholly unrelated to) the assertion that SCO succeeded in collecting any alleged fees "as a result of" the alleged campaign. Disputed to the extent the statement asserts that SCO charged fees in excess of the those permitted by the GPL, which assertion is a conclusion of law and not a statement of fact, let alone an undisputed one. (¶¶ 8-13, 24-34.) Disputed to the extent the statement asserts that the GPL prohibits SCO from licensing its UNIX intellectual property wrongfully contributed to Linux; nothing in the GPL warrants that Linux is beyond the reach of patents, copyrights, or other intellectual property, and Section 7 of the GPL expressly contemplates and warns of that possibility. (¶¶ 24-34.) Disputed to the extent the statement asserts that the no-charge requirement of Section 2 of the GPL (which governs the licensing of modifications of the GPL-

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licensed program) applies to SCO's redistribution of verbatim copies of the GPL-licensed program under Sections 1 and 3. (¶¶ 8-13.)

Disputed to the extent the statement asserts that the purported prohibition (which is not found in the GPL) against charging for verbatim copies of the GPL-licensed program constitutes a "further restriction" under Section 6 of the GPL. (¶¶ 8-13, 24-34.) Disputed to the extent the statement asserts that the purported prohibition (which is not found in the GPL) against licensing one's own intellectual property constitutes a "further restriction" under Section 6 of the GPL. (¶¶ 24-34.) Disputed to the extent the statement suggests that SCO entered into its UNIX Licenses with its "recipients," that is, parties who received a Linux distribution from SCO. (¶¶ 33-34.)

Disputed to the extent the statement asserts that "SCO claimed that this license was necessary for 'commercial use of the Linux 2.4 and later versions' because the cited material does not support that assertion.

1. On March 1, 2004, SCO sold Everyones Internet, Ltd. what SCO representatives described as a "Linux license" or "Linux IP license", telling Everyones Internet that this license was required "to use the SCO IP" on Everyones Internet's Linux servers. (Ex. 224 12; Ex. 404.)


2. REDACTED


3. REDACTED


4. REDACTED

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1. In fact, SCO's entire division is dedicated to selling licenses that "give end users the right to use the SCO intellectual property contained in Linux". (Ex. 366.)

Disputed because the cited materials do not support (and indeed are wholly unrelated to) the assertion that SCO's actions in any way amounted to a "campaign of fear, uncertainly and doubt". Disputed because the cited materials do not support (and indeed are wholly unrelated to) the assertion that SCO succeeded in collecting any alleged fees "as a result of" the alleged campaign. Disputed to the extent the statement asserts that SCO charged fees in excess of the those permitted by the GPL, which assertion is a conclusion of law and not a statement of fact, let alone an undisputed one. (¶¶ 8-11, 24-34.) Disputed to the extent the statement asserts that the GPL prohibits SCO from licensing its UNIX intellectual property wrongfully contributed to Linux; nothing in the GPL warrants that Linux is beyond the reach of patents, copyrights, or other intellectual property, and Section 7 of the GPL expressly contemplates and warns of that possibility. (¶ 32.) Disputed to the extent the statement asserts that the no-charge requirement of Section 2 of the GPL (which governs the licensing of modifications of the GPL-licensed program) applies to SCO's redistribution of verbatim copies of the GPL-licensed program under Sections 1 and 3. (¶¶ 8-11.)

Disputed to the extent the statement asserts that the purported prohibition (which is not found in the GPL) against charging for verbatim copies of the GPL-licensed program constitutes a "further restriction" under Section 6 of the GPL. (¶¶ 8-13, 24-34.) Disputed to the extent the statement asserts that the purported prohibition (which is not found in the GPL) against licensing one's own intellectual property constitutes a "further restriction" under Section 6 of the GPL. (¶¶ 24-34.) Disputed to the extent the statement suggests that SCO entered into its UNIX Licenses with its "recipients," that is, parties who received a Linux distribution from SCO. (¶¶

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33-34.)

Disputed to the extent the statement asserts that "SCO claimed that this license was necessary for 'commercial use of the Linux 2.4 and later versions'" because the cited material does not support that assertion. Disputed to the extent the statement purports to establish that the UNIX Licenses licensed Linux by quoting selectively from some of them, without referencing the grant-of-rights portions, which make clear that the UNIX Licenses are licenses "to use SCO IP Rights" and expressly exclude Linux. (¶¶ 28-31.)

45. In its "SCO Intellectual Property License for Linux" SCO purported to license only the use of Linux in object code format, thus prohibiting the use, modification, or distribution of the Linux source code.

1. The stated mission of SCO's SCOSource division is to sell licensees the right to use "the SCO intellectual property contained in Linux, in binary format only". (Ex. 366.)


2. In an August 5, 2003 press release, SCO announced that the license it was offering "permits the use of intellectual property, in binary form only, as contained in Linux distributions". (Ex. 362.)


3. REDACTED


4. REDACTED

Disputed to the extent the statement asserts that the UNIX Licenses licensed Linux. (¶¶ 28-31.) Disputed to the extent the statement asserts that the UNIX Licenses prohibited "the use, modification, or distribution of the Linux source code." (¶¶ 28-31.) Disputed to the extent the statement suggests that the GPL prohibits SCO from licensing its UNIX intellectual property wrongfully contributed to Linux, where nothing in the GPL warrants that Linux is beyond the

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reach of patents, copyrights, or other intellectual property, and Section 7 of the GPL expressly contemplates and warns of that possibility. (¶¶ 7, 11-12, 24-34.) Disputed to the extent the statement asserts that the purported prohibition (which is not found in the GPL) against licensing one's own intellectual property constitutes a "further restriction" under Section 6 of the GPL. (¶¶ 24-34.) Disputed to the extent the statement asserts that the purported prohibition (which is not found in the GPL) against licensing one's own intellectual property in binary form only constitutes a "further restriction" under Section 6 of the GPL. (¶¶ 24-34.) Disputed to the extent the statement suggests that SCO entered into its UNIX Licenses with parties who received a Linux distribution from SCO. (¶¶ 33-34.)

46. REDACTED

Disputed to the extent the statement asserts that the referenced Questar agreement or any another UNIX License granted a license "to use Linux" or to Linux. (¶ 28-31.) Disputed to the extent the statement suggests that the GPL prohibits SCO from licensing its UNIX intellectual property wrongfully contributed to Linux, where nothing in the GPL warrants that Linux is beyond the reach of patents, copyrights, or other intellectual property, and Section 7 of the GPL expressly contemplates and warns of that possibility. (¶¶ 7, 11-12, 24-34.) Disputed to the extent the statement asserts that the purported prohibition (which is not found in the GPL) against licensing one's own intellectual property constitutes a "further restriction" under Section 6 of the GPL. (¶¶ 24-34.) Disputed to the extent the statement asserts that the purported prohibition (which is not found in the GPL) against licensing one's own intellectual property in

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binary form only constitutes a "further restriction" under Section 6 of the GPL. (¶¶ 24-34.) Disputed to the extent the statement suggests that SCO entered into its UNIX Licenses with parties who received a Linux distribution from SCO. (¶¶ 33-34.)

47. Despite its actions and statements inconsistent with and repudiating the GPL, however, SCO continued to make available copies of the IBM Copyrighted Works, each of which explicitly stated that it was licensed under the terms of the GPL. (Ex. 353; Ex. 112 at 2; Ex. 33 at Tab 121; Ex. 296 at 92; Ex. 486; Ex. 284 ¶¶ 4,7; Ex. 226; Ex. 215 ¶ 110.)

Disputed to the extent the statement asserts that SCO took actions and made statements "inconsistent with and repudiating the GPL," which assertion is a legal conclusion, not a statement of fact, let alone an undisputed one. (See ¶¶ 20-34.) Disputed to the extent the cited materials do not support the assertion that "SCO continued to make available copies of the IBM Copyrighted Works" after the "actions inconsistent and repudiating the GPL". Disputed to the extent that the SCO products that IBM accuses in its motion of infringing on its alleged copyrights were not sold and marketed after the alleged acts of repudiation and breach. (¶¶ 3539.) See IBM statements of fact 41 and 44, above.

Disputed to the extent the statement asserts that SCO has posted Linux files on its Internet website as recently as August 11, 2006, in that SCO has not knowingly made Linux code available on its website after December 31, 2004, when its contractual obligations with its Linux customers ended. (¶¶ 35-38.) Disputed to the extent the statement and cited material suggest (but do not state) that the Linux files that IBM allegedly downloaded from SCO's website on August 11, 2006, included the works that are the purported basis for the counterclaim. Disputed to the extent the statement suggests that the files were easily accessible to the general public. (¶ 15; see Ex. 324.) Disputed to the extent the statement suggests that anyone, other than purportedly IBM on August 11, 2006, accessed and downloaded any Linux files from SCO's

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website after December 31, 2004. (¶ 15; see Ex. 324.)

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CERTIFICATE OF SERVICE

David Marriott, Esq. ([email])
Cravath, Swaine & Moore LLP
[address]

Todd Shaughnessy, Esq. ([email])
Snell & Wilmer LLP
[address]

/s/ Edward Normand

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⁷ In citing its basis for disputing an IBM statement of fact, SCO cites herein either the paragraphs in SCO's Statement of Facts above or directly to exhibits, or both.

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