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Novell's Redacted Reply Memo re SCO's Lack of Slander of Title Special Damages
Friday, June 08 2007 @ 08:20 AM EDT

This is the redacted Novell Reply Memorandum in Support of Novell's Motion for Summary Judgment on SCO's First Claim for Slander of Title Based on Failure to Establish Special Damages [PDF].

That is one of the motions argued on May 31st, so we're getting to see it only after the fact. But it's fascinatingly blunt. "After three years of litigation, SCO seeks more than $100 million in 'special damages' based on nothing but some hearsay accounts of what mostly unidentified third parties supposedly said about unspecified potential licenses." Oof.

Special damages must be based on "realized" losses, and SCO doesn't have any evidence of such, Novell argues.

Oh, you mean dashed daydreams of - ka-ching! - castles in the air don't count?

No, they don't, says Novell and it points out on page 17 of the PDF that special damages must be proven, not just implied:

SCO contends that "many potential licensees never contacted SCO at all because of Novell's false claims, or did not identify Novell even though they were deterred by Novell's false claims." (Opp'n at 2.) SCO does not identify these putative customers by name, does not explain its bases for assuming that any of them would have agreed to accept a license, does not proffer any evidence of how much each or any of these entities would have supposedly paid, and does not show how much profit SCO would have supposedly realized from any of the transactions. Given this complete absence of any identifying evidence on the more than one thousand entities who never responded to its licensing solicitation letters, SCO cannot prove it suffered any "special damages" for this category of potential customers.

Putative unidentified lost customers. That, I believe, is what one case Novell cites called a record "barren with respect to evidence."

And to prove special damages, Novell continues, not only must you be specific, the damage must be irrevocable. This is, to me, a very funny argument to watch play out, from SCO's side. Because they brought up the slander of title and applied what is normally a real estate issue to IP, they are now in the very peculiar situation where they must argue, under the special damages rules, that they can never go after their victims in the future, even if they were to prove they own the copyrights and that copyrighted code is in Linux. To so argue is to state that the world is perfectly safe from them no matter what happens, and of course, I agree. But Novell quotes from a 2006 SCO 10K where SCO said the setback due to Novell's copyright claim was only a temporary problem. And so SCO finds itself having to announce, if it wishes to go after special damages, that it is holding no threat against Linux now. It's funny what can happen to you in a court of law if you don't look before you leap.

Normally, Novell explains, special damages are due when a house sale is lost irrevocably, or the value is less on sale after the title is cleared, not if it's merely delayed by a cloud over the title which upon being cleared leads to the house selling at full price or more. Simple logic should win the day there. How are you harmed, if you end up making more money or the same?

So here, SCO is having to argue against Novell's point that if SCO wins, it surely has copyrights worth even more than when this farce began, because the uptake of Linux in the interim has been huge, which creates more potential SCOsource victims it can go after, not to mention the crafty ones who told SCO they couldn't buy a SCOsource license *until* the Novell copyright claim was sorted out, instead of just showing them to the door. That "until" is SCO's problem with proving special damages, Novell argues. If you remember, SCO argued at the hearing that HP setting up indemnification means that SCO has lost that opportunity there forever. Of course, Novell counters that SCO can surely sue for copyright infringement and get its beelions that way.

Another problem SCO has, Novell says, is it never gave the court a valuation amount for the copyrights. Methinks that may have something to do with having no assets valuation on copyrights on SEC filings before or after the alleged transfer, at least none that I ever found. You'd expect that, at least, wouldn't you, if they were part of the deal? Any of the deals? And Novell says it didn't give the court any value of any lost "opportunities" either, so how can special damages even be calculated, even if they existed?

Well, on page 10 of the PDF, we learn SCOsource folks tried to get Dell to sign up too. Funny. And now they are selling Ubuntu Linux. They did bend for Microsoft's equivalent of SCO's SCOsource, but Dell always was a willing partner of Microsoft, shall we say. SCO also went after Merrill Lynch. And on page 22 we learn SCO claims that the following said they'd decline for the moment due to Novell's competing copyright claims: Merrill Lynch, Sherwin Williams, Ford, Morgan Stanley, Google, Raytheon, the Department of Defense, Cisco, and Just Sports USA. SCO never lacked guts. What it lacks is evidence. Novell says that while SCO has claimed all these folks turned them down, it provides no declarations or depositions or anything from any of them. Maybe it's more of the "we told them we'd call later but when we did, no one answered the phone" SCOsource syndrome.

There's a very funny footnote on that same page 10, footnote 2:

Obvious questions arise: Would HP be willing to pay SCO exactly what it sought in 2003? Might HP be willing to pay SCO more now, given that SCO would have established in a court of law its ownership of the UNIX copyrights? Or, would HP now -- for some unexplained reason -- only be willing to pay less ? If so, couldn't SCO recover what it seeks by suing HP for copyright infringement? SCO never entertains these questions and so has not shown any realized loss.

I get the impression Novell is mocking SCO, and the implication I get is that the only way SCO would lose irrevocably is if it was all a scam and there is no way to fool anyone any more. After all, HP set up indemnification for its customers, not for itself.

I get the impression also from footnote 3, despite the heavy redaction, and pages 13 and 14 that Novell was not impressed with two of SCO's experts:

Platitudes about REDACTED -- absent any real analysis or facts -- do not create a genuine issue of material fact.... Second, Dr. Pisano offers no facts to support his conclusion about the REDACTED. His unsupported, uncorroborated bare opinion cannot raise a genuine factual issue.

Litigants and their experts must be like dogs and their owners. Owners pick pets that look like them. Litigants must choose experts who act like them.

Novell says that Darl McBride's testimony "is also legally irrelevant and factually unsupported. As a legal matter, Mr. McBride's testimony misses the point.... There are evidentiary defects in Mr. McBride's testimony as well. REDACTED. His testimony is unspecific, speculative, vague, and not tied to the issue at hand..." Etc. I believe they are saying that it has no legal weight. I have to share with you my Freudian slip. When I typed up "McBride's testimony", I typed it first as "testimoney".

As for SCO's dealings with Regal Entertainment that came to nought, there is no evidence that SCO offers that can be used:

Finally, SCO's only evidence about any potential transaction with Regal Entertainment is the testimony of its salesman Phil Langer from his deposition in the IBM case. (Opp'n at 14.) Novell was not present at that deposition in a separate litigation, and Mr. Langer's testimony is inadmissible double hearsay -- both because he gave the testimony in another case, and because he is purporting to recount a third-party's out-of-court statements.

Double hearsay. What? SCO's lawyers don't know that they needed to depose him again in the Novell litigation if they wanted it to maybe count for something? They are lawyers. It must be awful having to represent SCO in this motion. (If you'd like to read how Boies and the DOJ once argued against Microsoft on the subject of double hearsay, here you go.)

And on page 12 we learn that SCO has argued that real property and IP are different. Hey. Tell me about it. Then on page 16 of the PDF, Novell in footnote 6 points out that Novell invited SCO in 2004 to bring a declaratory judgment action to resolve who owned the copyrights once and for all, then and there. SCO didn't:

6 During the briefing on Novell's motion to dismiss SCO's slander of title claim in 2004, Novell invited SCO to bring a declaratory judgment action to resolve the parties' ownership dispute. (Reply in Support of Novell's Motion to Dismiss Amended Complaint (11/8/04) (PACER No. 56) at 24.) If SCO had done so, it could have had its ownership claim adjudicated without having to plead and prove tort elements like malice, causation, and special damages. In addition, if SCO prevailed, it could have tested its ability to license in the crucible of the marketplace. Rather than speculating now about what might happen if SCO prevails and why, SCO could have actually gone to the Linux end-users and vendors it believes infringe, and -- were it successful, with a judgment establishing title in hand -- demanded licenses. SCO declined Novell's invitation and, as a result, SCO now has to prove "special damages" by establishing a "realized loss." Summary judgment is the result.

I think here the court will read this to be saying that SCO had no confidence it would prevail in a declaratory judgment action. If they really thought they owned the copyrights and could prove it, why didn't they take that earlier opportunity? Now, because they didn't, they are stuck having to prove special damages, and they haven't, Novell argues.

The only time, Novell says, you can be as vague as SCO is here about special damages is when it is impossible to identify particular customers lost. SCO has pages and pages of customers listed and what happened when they were contacted. They sent mass mailings, so they knew who were their potential customers. Or as Novell puts it, quoting, I gather, from the Sontag deposition, "SCO created a Global 1500 list of 'the largest potential commercial users of [] Linux who would most likely have the greatest concern about issues related to.... our possible intellectual property issues' and sent demand letters to each of them." Then salespeople had spreadsheets, which we saw as Exhibit 46, tracking all their contacts. So if there were any actual special damages to be found, SCO would know exactly where to find it:

After over three years of litigation, SCO could have -- and should have -- sought out these potential customers, and provided declaration or deposition testimony from them. But it didn't. This evidentiary gap is fatal to SCO's claim.

Instead, SCO apparently argued that no minimum amount of damages is necessary to satisfy the special damages requirement. True, says Novell, on page 25 of the PDF. This is uncontroversial. "The key here is that, for SCO, the existence of any damages remains "speculative and uncertain." Further, SCO would have to be able to prove there was no other cause for their lack of success, and that would be an uphill climb for SCO:

To the contrary, the evidence that the losses were the result of multiple causes is so overwhelming that no reasonable fact-finder could find that the failure of SCO's licensing business was the direct and immediate result of Novell's actions alone.

I'll say. And words fail me to describe to you how funny this paragraph is to me:

Novell understands that, notwithstanding its interrogatory response (and complaint) alluding to harm to its stock value, SCO now concedes that it is not seeking to include the drop in its market capitalization as a measure of special damages.... SCO offers no authority -- and we are aware of none -- that would treat an item of loss that is concededly not special damages as "evidence" of special damages.

It's even funnier because in fact SCO brought it up at oral argument on the 31st. The one thing SCO could have used to prove special damages, namely costs to research and review copyright registrations and respond to Novell's statements to third parties, SCO didn't present any evidence to demonstrate. Instead they argued, Novell says, that legal fees of the litigation are their specials. But if you could prove special damages by bringing slander of title litigation, where you necessarily will have legal fees, then there would be no slander of title case without special damages, and that would eviscerate the rule that you are required to plead and prove them. If SCO had brought an action to quiet title, it could have used attorney's fees as specials, but it didn't. It brought a slander of title claim, and it's stuck with it now.

Reviewing the oral arguments, SCO mainly said it wants a jury to decide this. Well, yes. They always do.

Pacer also shows the following:

06/07/2007 - 357 - CERTIFICATE OF SERVICE by SCO Group Regarding SCO's Expert Reports (Normand, Edward) (Entered: 06/07/2007)

I don't know who Mr. Moxley is, as he is new to this litigation and didn't appear in the IBM case as an expert, unless he is this attorney who is past president of the Utah State Bar.


Novell's Redacted Reply Memo re SCO's Lack of Slander of Title Special Damages | 407 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Off Topic Here
Authored by: jplatt39 on Friday, June 08 2007 @ 08:30 AM EDT
You know the drill.

[ Reply to This | # ]

Corrections Here
Authored by: jplatt39 on Friday, June 08 2007 @ 08:31 AM EDT
If any

[ Reply to This | # ]

Novell's Redacted Reply Memo re SCO's Lack of Slander of Title Special Damages
Authored by: AceBtibucket on Friday, June 08 2007 @ 08:48 AM EDT
I am fascinated by one thought, "We can't show any damages but somebody
owes us big time." Is their main hope at this point that, somehow, they
will get to a trial and try to confuse the jurors? While all of this is truly
fascinating--in the same sense as watching a PBS special on a snake attacking a
bird--how much patience does Jusge Kimbal have to show?

[ Reply to This | # ]

Novell's Redacted Reply Memo re SCO's Lack of Slander of Title Special Damages
Authored by: tangomike on Friday, June 08 2007 @ 08:50 AM EDT
From the outset of this suit there have been puzzled comments by people who know
something of the law about why 'slander of title'? Novell makes it clear that
TSCOG was NOT interested in resolving this dispute.

Besides raising the perceived threat to Linux, could this have been a place
holder pending the passing of Yarro's law?

Deja moo - I've heard that bull before.

[ Reply to This | # ]

Double hearsay?
Authored by: jog on Friday, June 08 2007 @ 08:52 AM EDT
Wasn't there a motion to allow SCO v IBM
filings to be used in SCO v Novell?

[ Reply to This | # ]

Frivolous & FUD
Authored by: Jamis on Friday, June 08 2007 @ 09:05 AM EDT
"Then on page 16 of the PDF, Novell in footnote 6 points out that Novell
invited SCO in 2004 to bring a declaratory judgment action to resolve who owned
the copyrights once and for all, then and there. SCO didn't:"

I'd say this is just more identification that SCO's law suits are merely
frivolous and the intent is to provide FUD against Linux and open source.

[ Reply to This | # ]

Novell's Redacted Reply Memo re SCO's Lack of Slander of Title Special Damages
Authored by: Anonymous on Friday, June 08 2007 @ 09:14 AM EDT
Of course they (SCO) wouldn't take the fast route of a declaratory judgement.
It doesn't stall for the necessary amount of time.

Going after big names is the only real way to manage either their protection
scheme, or failing that leveraging the FUD along with the Pump 'n' Dump. If you
go after "mom & pop gizzard" shops who are not widely known, you
don't get the "big media" coverage necessary for the FUD fall-back...
and the pump 'n' dump.

I was involved in a real-estate issue some years ago and the topic of
"Slander of Title" came up... and when I researched it, I thought that
it was potentially very difficult to bring forward the necessary "special
damages." My situation got resolved out of court. So, when SCO came up
with Slander of Title against Novell, my first thought was what the heck? It
made no sense, because the first thing you have to prove is title ownership...
and then all the other hoopla. Only in the context of FUD and delay (and the
continued confusion over the title) does this approach begin to make sense. And
in that guise, it's worked. They've managed to obfuscate title ownership (in a
legal sense) for three years. These antics of SCO and BS&F go beyond
nuisance suits.


[ Reply to This | # ]

Novell's Redacted Reply Memo re SCO's Lack of Slander of Title Special Damages
Authored by: Anonymous on Friday, June 08 2007 @ 09:56 AM EDT
I'm reminded of Kung Pao: Enter the Fist.

SCO: I call this the 'My face to your foot technique.' How'd you like it?

Novel: I'm sure on some planet your technique is very impressive. Unfortunately, this is Earth.

[ Reply to This | # ]

Delay = damage
Authored by: Anonymous on Friday, June 08 2007 @ 09:58 AM EDT
Most accountants will treat deferred earnings as a loss on the basis that the
money could have been earning interest. This isn't even a stretch - it is fairly
standard accounting practice. Hence it seems to me that SCO has a quite valid
way around this special damages obstacle if it is clever enough to use it,
although the amount of such damages would be small.
justice. In a situation of real slander of title (i.e. in another case)

[ Reply to This | # ]

Testimoney is when you get paid for talking a load of
Authored by: billyskank on Friday, June 08 2007 @ 10:20 AM EDT
well, you know... ;)

It's not the software that's free; it's you.

[ Reply to This | # ]

Keyboard alert!!!
Authored by: jbeadle on Friday, June 08 2007 @ 11:09 AM EDT
I have to share with you my Freudian slip. When I typed up "McBride's testimony", I typed it first as "testimoney".

Thanks, PJ - I needed that!!


[ Reply to This | # ]

Beautiful, but...
Authored by: Anonymous on Friday, June 08 2007 @ 11:30 AM EDT
I mean no disrespect to the Novell legal team, nor to those with FAR more
knowledge of law than this amateur, but since when in this whole convoluted
series of legal maneuverings has the quality of the filings, or even the facts,
had much of a bearing on the decisions?

Over and over again I see garbage from SCOX and well thought-out filings from
IBM and Novell only to have Kimball ignore reason and have his decision hinge on
some small issue that is only really tangential to the true case at large. I
understand that these kinds of cases can take a long time, but if there is to be
any closure whatsoever and some heading to a resolution, decisions must be made
and they must have to do with what the case is really about (if a litigant keeps
shifting what a case seems to be about, again, it is up to the judge to force
them to pin it down).

I realize the lawyers all love this (complicated, many billable hours, an
education on how to fool a federal judge) but in a real justice system (or legal
system) decisions have to be made and they should make sense consistent with the
mores and morals and ideas of the society in which the court resides.

I just don't see that happening here. Every motion seems to go into the
"advisement" limbo, seemingly never to be seen again. Good, logical
arguments are given no more credence than nonsense that should never have been
put before the court. Giving a litigant their fair chance in court is not
without limits and clear abuse must be dealt with (eg, discovery abuses). And
when delay so strongly benefits one side, taken with everything else, it gives
the impression there is something other than the clean interests of justice at

[ Reply to This | # ]

Choosing Your Pet
Authored by: DaveJakeman on Friday, June 08 2007 @ 11:34 AM EDT
Litigants must choose experts who act like them.
My impression so far is that litigants choose lawyers that act like them. Maybe it's both.

Only two things are infinite: the universe and human stupidity and I'm not sure about the former. -- Einstein

[ Reply to This | # ]

Authored by: Anonymous on Friday, June 08 2007 @ 11:52 AM EDT
I just want to say that I haven't often found the docs genreated by this case
funny, but I kept on laughing out loud with this one. Huge case of schedenfreude
on my part.


[ Reply to This | # ]

Novell's Redacted Reply Memo re SCO's Lack of Slander of Title Special Damages
Authored by: bb5ch39t on Friday, June 08 2007 @ 12:00 PM EDT
PJ said: "How are you harmed, if you end up making more money or the same?"

I can think of a way that somebody can be harmed by this. As an example. Suppose that I have a terminal illness, but there is a experimental treatment that may save my life. But my insurance refuses to pay because it is experimental. So, I decide to sell my house to pay. But somebody somehow ties up the sale by clouding my title and I die because I cannot sell in a timely manner. That is one way. Now, could a business die if they are trying to sell something and another company clouds the issue such that the sales are inhibited ("wait and see")? Maybe.

OK, I don't think that is the case in this instance. But there may be times where a delay is deadly.

Just had to say it. I know some/most will disagree. Especially in this instance.

[ Reply to This | # ]

SCO should have worked more
Authored by: GLJason on Friday, June 08 2007 @ 12:32 PM EDT

I think that SCO might have actually been able to prove special damages if they tried, but they failed to do so. They submitted no declarations or deposition testimony from potential licensees and didn't seem to actually calculate the losses from them.

It all depends on how SCOSource would have worked. Would they license per CPU per year, or give a perpetual license for X CPUs? If they would license per year, then they could have suffered actual losses. Irrespective of whether they could still license the copyrights, they would have lost the revenue in the meantime.

This is like renting a property. Let's say I have a rental property that I could charge $1,000 a month for. Now let's say that someone challenges my title to the property and that causes people not to rent the property. It doesn't matter that after the title is cleared and the market has gone up I can rent the property for $1,200 a month, I have still lost the revenue for the time when the property sat there without a tenant.

[ Reply to This | # ]

Linux Foundation Engineer moves to Microsoft/Novell Integration lab (news!)
Authored by: Anonymous on Friday, June 08 2007 @ 12:50 PM EDT
Todd Bishop's blog in the Seattle PI for news that Microsoft has brought someone
aboard to serve as its Director of Linux Interoperability and head up the
Microsoft/Novell Interoperability Lab. "...his name will be familiar to
people in the open-source community. In an e-mail late Thursday night, a
Microsoft representative said the role will be filled by Tom Hanrahan, who was
most recently the director of engineering at the Linux Foundation, the group
created through the recent combination of the Free Standards Group and the Open
Source Development Labs."

[ Reply to This | # ]

There was a special damages that SCO could have claimed
Authored by: Anonymous on Friday, June 08 2007 @ 01:07 PM EDT
Yes, there is one category of damages that may qualify for
special damages. SCO could have stated that copyright
claims against GNU/Linux have a three year time limit if
the copyright owner does not try and mitigate damages.
Since SCO did not try and mitigate copyright damages any
copyright claims against GNU/Linux expired last year and
any hope of selling SCOSource licenses ended at the same
time. Of course, this would also force them to admit that
SCOSource is dead.

Did Novell mention Groklaw as another reason SCO was unable
to sell SCOSource licenses? Novell cannot be responsible
for the failure of SCOSource due to Groklaw so SCO would
have to identify who didn't buy because of Novell's actions
and who didn't buy because of Groklaw.


[ Reply to This | # ]

Valuations ... PJ, this is gold!
Authored by: Anonymous on Friday, June 08 2007 @ 02:19 PM EDT
"Methinks that may have something to do with having no assets valuation on copyrights on SEC filings before or after the alleged transfer, at least none that I ever found. You'd expect that, at least, wouldn't you, if they were part of the deal?"

PJ, you've hit the nail on the head. Our company, like all companies, lists the value of owned copyrights and trademarks explicitly in corporate assets in the financial statements each year. Lack of these in the statements indicates clearly that they did not believe that they owned the copyrights.


[ Reply to This | # ]

Microsoft FINFlash elaborates on patent issues
Authored by: horsten on Friday, June 08 2007 @ 05:49 PM EDT
This posting is a pure plug for my posting under "Off Topic", I just
want to make sure that people read that because I think it is very important.
Feel free to delete this if it is out of order.

[ Reply to This | # ]

Am wondering who is actually winning these cases :)
Authored by: dmarker on Friday, June 08 2007 @ 08:04 PM EDT

For the 1st couple of years I believed IBM & Linux were losing out - also
the way the case was being dragged millimeter by milimeter had me convinced
tSCOg was playing for time & the more the better.

But in the past 6-9 months I am now thinking that the winner is ...
Open Source Movement

The reasons for this are that, Groklaw's ability to publish all the legal
nastiness shown by tSCOg and the Microsoft involvement in the tSCOg funding, has
drawn the Open Source Movement together in a way that may be impossible to now

IBM has gone from being a 'pariah' to Unix folk to being an undeniable knight in
shining amour and as an ex IBMer who spent years battling the anti-IBM Unix
groundswell, it is to me an astounding shift. At IBM in the 1990s in regard to
Unix & the general Unix community, we could do nothing right despite our own
conviction that IBM was truly a part of Unix history having worked with Bell
Labs in the early 1980s to develop a true multi-tasking version of Unix to run
on IBM System 370 mainframes, then introduced the many variants of AIX.

Linux on the other hand is going to come out set in steel when these cases are
completed (we all know they are won).
Microsoft must now face the groundswell for a Linux desktop that is surely going
to at last gain traction (despite all the promises in the past 10 years MS just
got stonger & Linux desktop limped along). Linux's win & GPL3 effort may
at last change things.

And Groklaw will go down in history for many things among which will be the
focus it was able to add to the Open Source Community.

So who is winning the glory from these cases now ?

Be your own judges.

Doug M

[ Reply to This | # ]

If SCO said the moon is made of green cheese, would Novell or IBM have to disprove it?
Authored by: Anonymous on Friday, June 08 2007 @ 08:45 PM EDT

I'm still amazed that Novell and IBM are having to disprove the obvious and
write mini-lessons from law school into their briefs, lecturing SCO on 1-L

I don't want to know what they would have to do if SCO argued that the moon is
made of green cheese.

[ Reply to This | # ]

Novell's Redacted Reply Memo re SCO's Lack of Slander of Title Special Damages
Authored by: gbl on Saturday, June 09 2007 @ 01:13 PM EDT
If you have a slam-dunk case, you do not want to take your chances with a jury. Juries are just plain weird (I've been on a couple and have seen it from that side of the court.) In fact, it would be stupid to get anywhere close to the court. You make the other side a deal they cannot refuse. You may not get billions and billions, but you will get pretty rich.

If you have a joke of a case, then run, do not walk, to the court room because if you have an acknowledged star advocate on your team you want to get him into action in front of a jury as soon as possible.

So why is TSG so very scared of court? On every possible occasion there is delay. All I can assume is that not only is their case a joke, but there is a large risk of something very, very nasty happening.

If you love some code, set it free.

[ Reply to This | # ]

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