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SCO's Memo in Support of its Motion for Reconsideration or Clarification
Sunday, September 02 2007 @ 11:42 PM EDT

Here is SCO's Memorandum in Support of its Motion for Reconsideration or Clarification of the Court's August 10, 2007 Order as text. We have Groklaw member brindabrain to thank this time for doing the HTML work for us. Here's the motion [PDF] it supports.

Yes, friends, SCO would like the judge to reconsider. They think he misunderstood the facts, or else they misunderstood his ruling, and so we have a chance to hear them tell us again that they think they owe Novell nothing from the 2003 Sun and Microsoft agreements, something the judge has already ruled differently on, and if he thinks they do, they'd like him to clarify. Count yourself fortunate, since they held themselves to only that one issue, in view of the nearness of trial. SCO's position is:

The plain language of the APA and the evidence in the record both support the conclusion that Novell has no interest in royalties SCO receives under UnixWare Licenses, even when an incidental license to SVRX products is included therein.

SCO now wishes to call the Sun and Microsoft licenses UnixWare Licenses. I'll take you through some history on that, but what stands out to me in this filing is what seems to me a strategic mistake on SCO's part, a surprising admission found in footnote 1:

1In fact, UnixWare is not a separate system, but rather is just the latest version of SVRX; much of the code in UnixWare previously appeared in previous SVRX releases or is based on code from previous SVRX releases.

That happens to be true, from all I can see from the research I've done so far, and from my research, I don't find a lot of updates to UnixWare after 1995. But it's saying to my mind that SCO has very little, maybe nothing, to use from UnixWare against anyone as far as any conceivable copyright infringement accusations regarding post-1995 UnixWare is concerned. But more significantly, I view it as an indication that SCO indeed does owe Novell for the Sun and Microsoft licenses. Let me show you my reasoning.

I don't know why they would make such an admission now that the court has ruled that the UNIX and UnixWare copyrights were retained by Novell in 1995, unless SCO was working so fast it didn't think it through to the end. But I think it inevitably will come back to haunt them.

SCO characterizing the Sun and Microsoft agreements as UnixWare licenses, with only incidental SVRX aspects, is not what they told the SEC, of course. Here's what I remember them saying, in, for example, the 10 K for 2003:

SCOsource Business

Background

We acquired our rights relating to the UNIX source code and derivative works and other intellectual property rights when we purchased substantially all of the assets and operations of the server and professional services groups of The Santa Cruz Operation, Inc. in May 2001. The Santa Cruz Operation (now known as Tarantella, Inc.) had previously acquired such UNIX source code and other intellectual property rights from Novell in September 1995, which were initially developed by AT&T Bell Labs. Through this process, we acquired all UNIX source code, source code license agreements with thousands of UNIX vendors, all UNIX copyrights, all claims for violation of the above mentioned UNIX licenses and copyrights and other claims, and the control over UNIX derivative works. The UNIX licenses we obtained have led to the development of several proprietary UNIX-based operating systems, including but not limited to our own UnixWare and OpenServer products, Sun's Solaris, IBM's AIX, SGI's IRIX, Hewlett-Packard's UX, Fujitsu's ICL DRS/NX, Siemens' SINIX, Data General's DG-UX, and Sequent's DYNIX/Ptx. These operating systems are all derivatives of the original UNIX source code owned by us.

The success of our SCOsource business depends on our ability to protect our proprietary UNIX source code as well as our copyrights and other intellectual property rights.

The Linux IP licenses were described as being about UNIX, not UnixWare also:

Warning Letters to Linux End Users.

In response to our belief that parts of our UNIX source code and derivative works have been inappropriately included in the Linux operating system, in May 2003, we sent letters to approximately 1,500 large corporations notifying them that using the Linux operating system may violate our asserted intellectual property rights. Subsequently, we began contacting Linux end users about their use of Linux, and in December 2003, we began sending additional letters to selected Fortune 1000 Linux end users specifically asserting that using the Linux operating system in a commercial setting violates our rights under the United States Copyright Act, including the Digital Millennium Copyright Act, because certain copyrighted application binary interfaces, or "ABI Code," have been copied from our copyrighted UNIX code base and derivative works and contributed to Linux without proper authorization and without copyright attribution. In the letter we also warned Linux end users that we intend to take appropriate actions to protect our rights and that they may not use our copyrighted code except as authorized by us.

Linux End User Intellectual Property ("IP") License Initiative. In August 2003, we first offered to Linux end users our IP license in the United States and recently began offering the license in countries outside the United States. The license permits the use of our intellectual property, in binary form only, as contained in the Linux operating system. By purchasing the license, customers will properly compensate us for our UNIX intellectual property as currently found in Linux.

And here's the description of SCOsource in the 10K for the fiscal year ended October 31, 2005:

SCOsource Business

Background

We acquired our rights relating to the UNIX source code and derivative works and other intellectual property rights when we purchased substantially all of the assets and operations of the server and professional services groups of The Santa Cruz Operation, Inc. in May 2001. The Santa Cruz Operation had previously acquired such UNIX source code and other intellectual property rights from Novell in 1995, which technology was initially developed by AT&T Bell Labs. Through this process, we acquired all UNIX source code, source code license agreements with thousands of UNIX vendors, certain UNIX intellectual property, all claims for violation of the above mentioned UNIX licenses and copyrights and other claims, and the control over UNIX derivative works. The UNIX licenses we obtained have led to the development of several proprietary UNIX-based operating systems, including but not limited to our own UnixWare and OpenServer products, IBM’s AIX, Sequent’s DYNIX/Ptx, Sun’s Solaris, SGI’s IRIX and Hewlett-Packard’s HPUX. These operating systems are all derivatives of the original UNIX source code owned by us.

The success of our SCOsource business depends on our ability to protect and enforce our rights to proprietary UNIX source code, copyrights and other intellectual property rights. To protect our proprietary rights, we rely primarily on a combination of copyright laws, contractual rights and an aggressive legal strategy.

During the year ended October 31, 2003, we commenced our first SCOsource initiative in which we began reviewing the status of our existing UNIX license agreements with UNIX vendors and to identify those in the software industry that may be using our intellectual property without obtaining the necessary licenses. As part of this process, we became aware that parts of our proprietary UNIX source code and derivative works had been included in the Linux operating system without attribution or our authorization in violation of our intellectual property rights. We filed a complaint against IBM in March 2003 alleging that IBM breached its license agreement with us related to its efforts to promote and support the Linux operating system. In addition to our action against IBM, we have filed other complaints against Novell, AutoZone, and DaimlerChrysler. In our litigation with Novell, we seek relief for, among other things, Novell’s alleged bad faith efforts to interfere with our ownership and enforcement of our copyrights related to our UNIX source code. A related lawsuit was filed against us by Red Hat. We describe our legal actions in more detail below under Part I, Item 3 of this Form 10-K.

In August 2003, we offered to Linux and other end users a license to use our UNIX intellectual property. The SCOsource intellectual property (“IP”) license permits the use of our UNIX intellectual property, in binary form only, as contained in the Linux operating system. By purchasing the license, customers will properly compensate us for our UNIX intellectual property as currently found in Linux. The SCOsource IP license was created in response to requests to provide a licensing program for those in the industry using our UNIX intellectual property to allow them to continue to run their mission-critical business solutions running in other environments.

See the word UnixWare anywhere at all? Neither do I.

When talking about the legal efforts against IBM, SCO talked exclusively about UNIX, not Unixware:

Item 3. Legal Proceedings

IBM Corporation

On or about March 6, 2003, we filed a civil complaint against IBM in the United States District Court for the District of Utah, under the title The SCO Group, Inc. v. International Business Machines Corporation, Civil No. 2:03CV0294. In this action we claim, among other things, that IBM breached its UNIX source code licenses (both the IBM and Sequent Computer Systems, Inc. “Sequent” licenses) by disclosing restricted information concerning the UNIX source code and derivative works and related information in connection with its efforts to promote the Linux operating system. Our complaint includes, among other things, claims for breach of contract, unfair competition, tortious interference and copyright infringement. As a result of IBM’s actions, we are requesting damages in an amount to be proven at trial and seeking injunctive relief.

On or about March 6, 2003, we notified IBM that they were not in compliance with our UNIX source code license agreement and on or about June 13, 2003, we delivered to IBM a notice of termination of their UNIX source code license agreement, which underlies IBM’s AIX software. On or about August 11, 2003 we sent a similar notice terminating the Sequent source code license. IBM disputes our right to terminate those licenses. In the event our termination of those licenses is valid we believe IBM is exposed to substantial damages and injunctive relief based on its continued use and distribution of the AIX operating system. On June 9, 2003, Novell sent us a notice purporting to waive our claims against IBM regarding its license breaches. We do not believe that Novell had the right to take any such action relative to our UNIX source code rights.

In contrast, when describing the Novell litigation in the following section, SCO mentions both UNIX and UnixWare:

Novell, Inc.

On January 20, 2004, we filed suit in Utah state court against Novell, Inc. for slander of title seeking relief for its alleged bad faith effort to interfere with our ownership of copyrights related to our UNIX source code and derivative works and our UnixWare product. After removal to federal court, the case is now pending in the United States District Court for the District of Utah under the caption The SCO Group, Inc. v. Novell, Inc., Civil No. 2:04CV00139. In the lawsuit, we requested preliminary and permanent injunctive relief as well as damages. Through these claims, we seek to require Novell to assign to us all copyrights that we believe Novell has wrongfully registered, prevent Novell from representing any ownership interest in those copyrights and require Novell to retract or withdraw all representations it has made regarding its purported ownership of those copyrights and UNIX itself.

Those claims are precisely what SCO just lost in the August 10th ruling. And now that it has lost on the issue of copyrights, it would like to describe the 2003 Sun and Microsoft licenses as being about UnixWare. If they are, I suggest they'd best tell the SEC, who may be under a misapprehension or need clarification. Joke. Joke.

If you continue reading, you will note that SCO also says that it sued AutoZone and DaimlerChrysler over UNIX copyrights, not UnixWare. UnixWare to be sure is a Unix product, but it's not what IBM licensed from AT&T. As SCO describes it, it's their version of UNIX, just like AIX is IBM's.

SCO's 2006 10K talks also about what SCOsource was about, and it's the first time that I can find of a mention of UnixWare being even peripherally involved:

We developed our SCOsource business as part of our ongoing efforts to establish and protect our intellectual property rights, particularly relating to our ownership of the original UNIX source code. This business’ primary objective is to protect and defend our UNIX intellectual property rights....

SCOsource Business

Background

We acquired our rights relating to the UNIX (including UnixWare) source code and derivative works and other intellectual property rights when we purchased substantially all of the assets and operations of the server and professional services groups of The Santa Cruz Operation, Inc. in May 2001. The Santa Cruz Operation had previously acquired such UNIX source code and other intellectual property rights from Novell in 1995, which technology was initially developed by AT&T Bell Labs. Through this process, we acquired all UNIX source code, source code license agreements with thousands of UNIX vendors, certain UNIX intellectual property, all claims for violation of the above mentioned UNIX licenses and copyrights and other claims, and the control over UNIX derivative works. The UNIX licenses we obtained have led to the development of several UNIX-based operating systems, including but not limited to our own UnixWare and OpenServer products, IBM’s AIX, Sequent’s DYNIX/Ptx, Sun’s Solaris, SGI’s IRIX and Hewlett-Packard’s HP-UX. These operating systems are all derivatives of the original UNIX source code owned by us.

The success of our SCOsource business depends on our ability to protect and enforce our rights to proprietary UNIX source code, copyrights and other intellectual property rights. To protect our proprietary rights, we rely primarily on a combination of copyright laws, contractual rights and related claims.

That is the closest they ever came to even mentioning UnixWare, and it's hardly direct. SCO describes its business as being divided in two parts: "As indicated in Item 1, we have two business segments: UNIX and SCOsource." Where did Sun and Microsoft monies belong? In the SCOsource bucket:

Our profitability for the year ended October 31, 2003 resulted primarily from our SCOsource business.

And once again, it's only in connection with Novell that SCO mentions UnixWare directly:

In an effort to reinforce our ownership rights in UNIX, we brought suit against Novell on January 20, 2004 for slander of title seeking relief for, among other things, Novell's alleged bad faith efforts to interfere with our copyrights related to our UNIX source code and derivative works and our UnixWare products. We also plan to continue to pursue our litigation against IBM, and have announced that we expect in the near term to commence our first legal action against an end user violating our intellectual property and contractual rights.

Could "derivative works" mean UnixWare? Not according to the clear distinction made in the 2004 10K:

As a further response to our SCOsource initiatives and claim that our UNIX source code and derivative works have inappropriately been included in Linux, Novell has publicly asserted its belief that it owns certain copyrights in our UNIX source code, and it has filed 15 copyright applications with the United States Copyright Office related to UNIX. Novell also claims that it has a license to UNIX from us and the right to authorize its customers to use UNIX technology in their internal business operations. Specifically, Novell has also claimed to have retained rights related to legacy UNIX SVRx licenses, including the license with IBM. Novell asserts it has the right to take action on behalf of SCO in connection with such licenses, including termination and waiver rights. Novell has purported to veto our termination of the IBM, Sequent and SGI licenses. We have repeatedly asserted that we obtained the UNIX business, source code, claims and copyrights when we acquired the assets and operations of the server and professional services groups from The Santa Cruz Operation (now Tarantella, Inc.) in May 2001, which had previously acquired all such assets and rights from Novell in September 1995 pursuant to an asset purchase agreement, as amended. In January 2004, in response to Novell’s actions, we brought suit against Novell for slander of title seeking relief for Novell’s alleged bad faith effort to interfere with our copyrights and contract rights related to our UNIX source code and derivative works and our UnixWare products. Our lawsuit against Novell is also described in more detail in Item 3 of Part I of this Form 10-K.

And then, after listing the three items, (1) UNIX source code, (2) and derivative works, (3) and our UnixWare products, notice which two are connected to Linux users in SCOsource:

Notwithstanding our assertions of full ownership of UNIX-related intellectual property rights, as set forth above, including copyrights, and even if we are successful in our legal action against Novell and end users such as AutoZone and DaimlerChrysler, the efforts of Novell and the other Linux proponents described above may cause Linux end users to be less willing to purchase from us our SCOsource IP licenses authorizing their use of our intellectual property contained in the Linux operating system, which has and may continue to adversely affect our revenue from our SCOsource initiatives. These efforts of Linux proponents also may increase the negative view some participants in our marketplace have regarding our SCO Litigation and regarding our SCOsource initiatives and may contribute to creating confusion in the marketplace about the validity of our claim that the unauthorized use of our UNIX source code and derivative works in Linux infringes on our copyrights. Increased negative perception and potential confusion about our claims in our marketplace could impede our continued pursuit of our SCOsource initiatives and negatively impact our business.

And then, when discussing the future of SCOsource, notice which two of the three are mentioned in the context of the Sun and Microsoft money:

Our future SCOsource licensing revenue is uncertain.

We initiated the SCOsource licensing effort in fiscal year 2003 to review the status of UNIX licensing and sublicensing agreements. This effort resulted in the execution of two significant vendor license agreements during fiscal year 2003 and generated $25,846,000 in revenue. During fiscal year 2004, our SCOsource licensing revenue declined significantly and was only $829,000. Due to a lack of historical experience and the uncertainties related to SCOsource licensing revenue, we are unable to estimate the amount and timing of future SCOsource licensing revenue, if any. If we do receive revenue from this source, it may be sporadic and fluctuate from quarter to quarter. Our SCOsource initiatives are unlikely to produce stable, predictable revenue for the foreseeable future. Additionally, the success of these initiatives may depend on the strength of our intellectual property rights and contractual claims regarding UNIX, including the strength of our claim that unauthorized UNIX source code and derivatives are prevalent in Linux.

Now, that doesn't mean that there was no UnixWare component to the Sun and Microsoft license agreements. Given that royalties were to end on UnixWare sales in 2002, no doubt they'd try to make the agreements as much about that as possible. But, is that what SCO told the SEC? From the beginning, SCO stressed UNIX source code, not UnixWare, and mostly it never mentioned UnixWare at all in connection with SCOsource, not until it filed at the beginning of this year. Now, the licenses are supposedly all about UnixWare and only incidentally about SVRX. Well, we'll see, but it's not the impression that SCO gave me.

Of course the SCOsource story keeps changing. We're used to that. You may remember that in SCO's Answer to Novell's Counterclaims, SCO denied that the Microsoft and Sun license agreements were SCOsource licenses at all:

50. Admits that SCO, through its SCOsource division, entered into agreements related to UNIX and Unixware with Sun Microsystems, Inc., and Microsoft Corporation (in that order) and that the Microsoft agreement covered UNIX compatibility products; but denies each and every other allegation of ¶50, including the allegation that the Sun and Microsoft agreements were part of the SCOsource licensing program.

I guess that story bit the dust. But as you see they do mention UnixWare, so I wanted to be fair and point it out. The Morgan Keegan letters that came to light when SCO filed them as exhibits to its 2003 10K called both the Sun and Microsoft licenses part of the SCOsource licensing program, so that was that. In any case, in the 10-Q for the quarterly period ended April 30, 2003, SCO said this:

Our fiscal year ended October 31, 2003 was the first full year we were profitable in our operating history. Our profitability in fiscal year 2003 resulted primarily from our SCOsource licensing initiatives. . . .

We initiated the SCOsource licensing effort in fiscal year 2003 to review the status of UNIX licensing and sublicensing agreements. This effort resulted in the execution of two significant vendor license agreements during fiscal year 2003 and generated $25,846,000 in revenue. . . .

The SCOsource revenue generated in the third quarter and first three quarters of fiscal year 2003 was from two contracts executed with Sun Microsystems (“Sun”) and Microsoft Corporation (“Microsoft”).

You can find many more examples in this article I did back in 2005, describing the agreements as being part of SCOsource and describing SCOsource like this, in this example from the 2003 10Q:

During the quarter ended April 30, 2003, we recognized $8,250,000, or 39 percent of our quarterly revenue, from our intellectual property licensing initiative, SCOsource, launched in January 2003.

One of the assets we acquired from Tarantella was the intellectual property rights to UNIX. These rights had initially been developed by AT&T Bell Labs and over 30,000 licensing and sublicensing agreements have been entered into with approximately 6,000 entities. These licenses led to the development of several proprietary UNIX-based operating systems, including our own SCO UnixWare and SCO OpenServer, Sun’s Solaris, IBM’s AIX, SGI’s IRIX, HP’s UX, Fujitsu’s ICL DRS/NX, Siemens’ SINIX, Data General’s DG-UX, and Sequent’s DYNIX/Ptx. We believe these operating systems are all derivatives of the original UNIX source code owned by us.

We initiated the SCOsource effort to review the status of these licensing and sublicensing agreements and to identify others in the industry that may be currently using our intellectual property without obtaining the necessary licenses. This effort resulted in the execution of two license agreements during the April 30, 2003 quarter. The first of these licenses was with a long-time licensee of the UNIX source code which is a major participant in the UNIX industry and was a “clean-up” license to cover items that were outside the scope of the initial license. The second license was to Microsoft Corporation (“Microsoft”), and covers Microsoft’s UNIX compatibility products, subject to certain specified limitations. These license agreements will be typical of those we expect to enter into with developers, manufacturers, and distributors of operating systems in that they are non-exclusive, perpetual, royalty-free, paid up licenses to utilize the UNIX source code, including the right to sublicense that code.

The amount that we receive from any such licensee will generally depend on the license rights that the licensee previously held and the amount and level of our intellectual property the licensee desires to license. The two licensing agreements signed by us to date resulted in revenue of $8,250,000 during the April 30, 2003 quarter and provide for an aggregate of an additional $5,000,000 to be paid to us over the next three quarters. These contracts do not provide for any payments beyond 2003, except that Microsoft was granted the option to acquire expanded licensing rights, at its election, that would result in additional payments to us if exercised. In connection with the execution of the first license agreement, we granted a warrant to the licensee to purchase up to 210,000 shares of our common stock, for a period of five years, at a price of $1.83 per share. This warrant has been valued, using the Black-Scholes valuation method, at $500,000. Because the warrant was issued for no consideration, $500,000 of the license proceeds have been recorded as warrant outstanding and the license revenue reduced accordingly.

Now, I know this has been a long route to get where I'm going, but notice, as we tie this all back to footnote 1, what Judge Kimball wrote in his order:

The conversion of an SVRx customer to UnixWare will validly occur and result in the UnixWare based revenue flowing to SCO, without giving rise to a continued obligation to make payment to Seller of royalties due under the SVRx licenses, only if the following are true (note: if the customer continues to sell their SVRx based product separately, then these SVRx revenues continue to flow to Novell): .... (ii) The product is derived from a source version of UnixWare . . . and (i) none of the original SVRx code provided by Novell to the customer, under the SVRx license, is included in the new product or (ii) [Santa Cruz] shall demonstrate to [Novell]'s reasonable satisfaction that an insignificant amount of original SVRx code is so included and the adoption of UnixWare is so substantial as to constitute a valid conversion. Id. Therefore, even where a customer moves to a UnixWare product, SCO's SVRX Royalty obligations to Novell can continue unless there is no SVRX code or only an insignificant amount of SVRX code in the product. It is undisputed that some of the original SVRX code is included in the Sun and Microsoft Agreements. And, based on the arguments presented in this motion, it is also clear that SCO has not demonstrated to Novell's satisfaction that the amount of original SVRX code in these licenses is insignificant. Moreover, whether or not Novell's present satisfaction is reasonable, which could present a question of fact, the language suggests that SCO was obligated to present the information to Novell before the customer would be considered validly converted. The facts here demonstrate that Novell was not made aware of the 2003 Sun and Microsoft Agreements. Therefore, SCO never attempted to validly convert Sun or Microsoft. Under Schedule 1.2(b), then, Sun and Microsoft would not be considered validly converted.

So, the only way SCO could convert Sun or Microsoft to UnixWare, according to Judge Kimball, even if SCO had properly notified Novell, which it failed to do, would be if what was licensed included no SVRX code or only insignificant amounts. Now, read footnote 1 again:

1In fact, UnixWare is not a separate system, but rather is just the latest version of SVRX; much of the code in UnixWare previously appeared in previous SVRX releases or is based on code from previous SVRX releases.

So, for the licenses to be UnixWare and not just SVRX licenses, since SCO doesn't dispute some SVRX component, wouldn't SCO have to prove that whatever part of the license agreement that was about UnixWare was about code distinguishable from the part of UnixWare that is directly SVRX code or derivative of it? Wouldn't it have to be unique code in UnixWare? And what exactly would that be? I've been researching that, what was new after 1995 in UnixWare, and I'll tell you what I found in a separate article, but it's not much, from what I've found so far. Further, Sun has stated that it wanted things like a license to Xenix, to open source OpenSolaris. Is that post-1995 UnixWare code? Hardly. You see the pickle I think SCO is in? I think it has to show at trial that Sun and Microsoft needed something uniquely in UnixWare. What in the world might that be?

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

Brent O. Hatch (5715)
Mark F. James (5295)
HATCH, JAMES & DODGE, PC

David Boies (admitted pro hac vice)
Robert Silver (admitted pro hac vice)
Edward Normand (admitted pro hac vice)
BOIES SCHILLER & FLEXNER, LLP

Devan V. Padmanabhan (admitted pro hac vice)
DORSEY & WHITNEY LLP

Stephen N. Zack (admitted Pro Hac Vice)
BOIES SCHILLER & FLEXNER LLP

Stuart Singer (admitted pro hac vice)
BOIES SCHILLER & FLEXNER, LLP


Attorneys for Plaintiff, The SCO Group, Inc.

_________________________________________________

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH

THE SCO GROUP, INC., a Delaware corporation,
Plaintiff/Counterclaim-Defendant,
vs.

NOVELL, INC., a Delaware corporation,

Defendant/Counterclaim-Plaintiff.

SCO'S MOTION FOR
RECONSIDERATION OR
CLARIFICATION OF THE COURT'S
AUGUST 10, 2007 ORDER


Civil No. 2:04 CV-00139

Judge Dale A. Kimball
Magistrate Brooke C. Wells


Plaintiff/Counterclaim-Defendant, the SCO Group, Inc. ("SCO"), respectfully moves this court to reconsider or clarify its Memorandum Decision and Order of August 10, 2007, as explained and for the reasons set forth in SCO's Memorandum in support of this motion.

DATED this 31st day of August, 2007.

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

BOIES, SCHILLER & FLEXNER LLP
David Boies
Robert Silver
Stuart H. Singer
Stephen N. Zack
Edward Normand

DORSEY & WHITNEY LLP
Devan V. Padmanabhan

Counsel for The SCO Group, Inc.

By: ___/s/ Edward Normand___________

2

CERTIFICATE OF SERVICE

Plaintiff/Counterclaim-Defendant, The SCO Group, Inc., hereby certifies that a true and correct copy of SCO'S MOTION FOR RECONSIDERATION OR CLARIFICATION OF THE COURT'S AUGUST 10, 2007 ORDER was served on this 31st day of August, 2007, via CM/ECF to the following:

Thomas R. Karrenberg
John P. Mullen
Heather M. Sneddon
ANDERSON & KARRENBERG
[address]

Michael A. Jacobs
Matthew I. Kreeger
Kenneth W. Brakebill
David E. Melaugh

MORRISON & FOERSTER
[address]

3

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

Brent O. Hatch (5715)
Mark F. James (5295)
HATCH, JAMES & DODGE, PC

David Boies (admitted pro hac vice)
Robert Silver (admitted pro hac vice)
Edward Normand (admitted pro hac vice)
BOIES SCHILLER & FLEXNER, LLP

Devan V. Padmanabhan (admitted pro hac vice)
DORSEY & WHITNEY LLP

Stephen N. Zack (admitted Pro Hac Vice)
BOIES SCHILLER & FLEXNER LLP

Stuart Singer (admitted pro hac vice)
BOIES SCHILLER & FLEXNER, LLP


Attorneys for Plaintiff, The SCO Group, Inc.

______________________________________________________________________________

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH

THE SCO GROUP, INC., a Delaware corporation,
Plaintiff/Counterclaim-Defendant,
vs.

NOVELL, INC., a Delaware corporation,

Defendant/Counterclaim-Plaintiff.

SCO'S MEMORANDUM IN SUPPORT
OF ITS MOTION FOR
RECONSIDERATION OR
CLARIFICATION OF THE COURT'S
AUGUST 10, 2007 ORDER


Civil No. 2:04 CV-00139

Judge Dale A. Kimball
Magistrate Brooke C. Wells


Plaintiff/Counterclaim-Defendant, The SCO Group, Inc.("SCO"), respectfully submits this Memorandum in support of SCO's Motion for Reconsideration or Clarification of the Court's Order dated August 10, 2007 (the "Order").

ARGUMENT

Although SCO respectfully disagrees with a number of the factual and legal findings in the Order, considering the approaching trial date, SCO confines this Motion to a single issue that bears on the issue of SVRX Royalties due Novell. That issue is the Court's determination (at 95) that while the Asset Purchase Agreement ("APA"), as amended by Amendment No. 1, allowed SCO to enter into new or amended licenses of SVRX "incidentally involved through its rights to sell and license UnixWare Software," such incidental licensing of SVRX components constituted an "SVRX License" on which royalties were due to Novell.

On reconsideration, relief is appropriate "where the court has misapprehended the facts, a party's position, or the controlling law." Servants of the Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000).

Reconsideration of this issue is appropriate because the parties' arguments and memoranda regarding SVRX Royalties centered on whether SVRX Licenses were limited to existing licenses at the time of the APA and licenses of binary code. SCO also argued that any license to SVRX products included in the Sun and Microsoft Agreements was incidental to the core UnixWare License, and that SCO was therefore entitled to the payments from those Agreements as UnixWare Royalties. (SCO Memorandum in Opposition Opp. to Novell's Motion for Partial Summary Judgment or Preliminary Injunction and in Support of SCO's Cross-Motion for Summary Judgment or Partial Summary Judgment at 40-41.) In response, Novell

2

principally argued that "SVRX is central, and not incidental, to the Sun and Microsoft Agreements," and that Novell was therefore entitled to the payments from those Agreements as SVRX Royalties. (Novell Reply to SCO's Opp. to Novell's Motion for Partial Summary Judgment or Preliminary Injunction at 7.) Although Novell asserted that it should receive the royalties even if the licensing of SVRX was incidental, that was not the central argument. SCO nonetheless presented evidence not only that the Sun and Microsoft Agreements' licensing of SVRX was only incidental to a UnixWare license, but also that the APA should not be construed as making such incidental licenses of SVRX subject to a separate royalty to Novell, apart from whatever royalty Novell was entitled to pursuant to the UnixWare royalty provisions.

In the discussion below, SCO points to that evidence and argument. At a minimum, a triable issue exists as to whether SVRX licensing incidental to a UnixWare license constitutes a separate "SVRX License" as to which Novell is entitled to royalties. SCO further suggests that, at a minimum, it would be appropriate for the issue of whether the Microsoft and Sun Agreements license SVRX in only an incidental manner be submitted to the jury so that if SCO's position were determined to be correct, no retrial of that issue would be required.

Insofar as SCO has misapprehended the Court's ruling on this issue, this Motion should be treated as a request for clarification.

I. SCO IS ENTITLED TO ROYALTIES FROM UNIXWARE LICENSES THAT
LICENSE SVRX INCIDENTALLY.

The plain language of the APA and the evidence in the record both support the conclusion that Novell has no interest in royalties SCO receives under UnixWare Licenses, even when an incidental license to SVRX products is included therein.

3

A. The Plain Reading of the APA Grants SCO the Royalties from UnixWare
Licenses that License SVRX Incidentally.

In its Order, the Court (at 93) recognizes that the APA "makes a clear distinction between royalties from SVRX Licenses and UnixWare licenses." The APA further recognizes that SCO can include in a UnixWare License an "incidental" license of SVRX, where SVRX was routinely listed in a UnixWare License's list of licensed prior products.1(APA Section 4.16(b); Amend. No. 1 ¶ J.) The Court (at 93) found that the provision of "Section 4.16(b) regarding the incidental licensing of SVRX technology with UnixWare" was particularly relevant to Novell's claim for royalties from the Sun and Microsoft Agreements.

Section 4.16(b) of the APA, as amended by amendment No. 1, ¶ J, provides that SCO "shall have the right to enter into amendments of the SVRX Licenses (i) as may be incidentally involved through its rights to sell and license UnixWare software." That provision, as amended, also allows SCO to enter into "new SVRX Licenses" in the same situation. That provision does not indicate that the inclusion of such an incidental license to SVRX in a UnixWare License alters that license's status as a UnixWare License or changes the royalty rights of either party. Nowhere in the APA is there any statement that a license of SVRX incidental to a UnixWare License triggers not only whatever royalty obligation exists as a UnixWare License, but also a royalty as an SVRX License.2

The APA, as amended, is therefore at least "reasonably susceptible" to the interpretation

4

that the only royalty due from a UnixWare license that incidentally licensed SVRX is enumerated in Section 1.2(b) and Schedule 1.2(b), which govern the parties' royalty rights and obligations under UnixWare Licenses. Those provisions state that "no royalties shall be payable in connection with any of the UW [UnixWare] Products" unless certain specified conditions are satisfied; Novell does not dispute that it has not satisfied those conditions.

B. The APA's Failure to Specify Any Method for Calculating an Incidental SVRX
Royalty Right Demonstrates That Novell Never Received Such a Right.

The absence of any provision delineating a different royalty provision for UnixWare Licenses that license SVRX incidentally demonstrates the parties' intent to have those licenses treated like all UnixWare Licenses under the terms of Schedule 1.2(b). The APA is silent on what amount of a royalty would be paid to Novell if the only licensing of SVRX is incidental to a UnixWare License. If the APA had intended to subject that incidental piece to SVRX Royalty obligations, it would have explained how such an additional royalty was to be calculated. Being incidental to a UnixWare license, the SVRX component of such a license would not have a separate price. The absence of such a mechanism for calculating a royalty amount is proof that no separate royalty on the SVRX aspect of a UnixWare License was contemplated.3

To the extent that the Court finds that the APA is ambiguous regarding the treatment of UnixWare Licenses that include incidental licenses to SVRX products, the only permissible


5

inferences on summary judgment must be made in SCO's favor.4

C. The Extrinsic Evidence Confirms That Novell Is Not Entitled to Royalties
from UnixWare Licenses That License SVRX Incidentally.

The record also contains evidence that the parties' intent and course of performance was to treat UnixWare Licenses that licensed SVRX incidentally as subject only to the contingent interest Novell retained in UnixWare Royalties, which expired in 2002.

First, the record demonstrates that UnixWare Licenses routinely included incidental licenses to SVRX, and the SVRX components of UnixWare were listed in a manner similar to what was done in the Sun and Microsoft agreements. Before selling the UNIX and UnixWare business to SCO in 1995, for example, Novell itself included incidental licenses to SVRX in its own UnixWare Licenses. (SCO Reply (1/31/07) at 6.) Similarly, Santa Cruz included incidental licenses to SVRX in UnixWare Licenses that it entered into after it acquired the UNIX and UnixWare business from Novell in 1995. (Id)

The evidence shows that, despite that standard practice, Novell has never sought SVRX royalties from any UnixWare Licenses that licensed SVRX incidentally until this litigation. The evidence in the record also demonstrates that Novell was aware of many such licenses through audits of SCO's royalty reports. (SCO Opp. Mem. (12/12/06) ¶ 60.) Moreover, during several of these years, in which SCO publicly filed financial statements, Novell was a significant shareholder of SCO and held a board seat where it was privy to all aspects of SCO's business. Novell nevertheless failed to proffer any evidence that it had requested (or was entitled to request) SVRX royalties from UnixWare Licenses that Santa Cruz or SCO entered into since the

6

transfer of the business in 1995. Such course of performance evidence is recognized as the best evidence of the parties' intentions.5The Order does not address such evidence.

Second, the uncontroverted testimony demonstrates that the parties always treated revenues from UnixWare Licenses that included incidental licenses to SVRX as UnixWare revenues under Schedule 1.2(b) of the APA, not as SVRX Royalties.

Jean Acheson served as former Novell Contract Administrator, SCO Revenue Manager, and currently serves as SCO Director of Revenue. (Acheson Decl. (12/11/06) ¶ 2.) In those capacities, Ms. Acheson was "responsible for tracking and transmitting the royalty payments that SCO collects on behalf of Novell and that are due to Novell." (Id) Ms. Acheson testified that "the fact that a license to current technology included an incidental license to old technology in no way entitled Novell to revenue from that license," and that accordingly, Santa Cruz and SCO "never included such revenues when transmitting royalty payments to Novell, and Novell never requested them, until 2003." (Id ¶ 12.)

John Maciaszek has been involved in the UNIX business for almost two decades. (Maciaszek Decl. (12/11/06) ¶ 2.) He testified that Novell's interest in UnixWare Licenses that included an incidental license for prior SVRX products was always treated under the UnixWare Royalty provisions of Schedule 1.2(b), and that interest "expired in 2002." (Id ¶ 27.)

Bill Broderick has also been involved in the UNIX business for almost two decades, working for USL, Novell, Santa Cruz, and SCO. (Broderick Decl. (12/11/06) ¶ 2.) He similarly testified that Novell's interest in UnixWare Licenses that included an incidental license for prior


7

SVRX products was the UnixWare royalty interest that "expired in 2002" under Schedule 1.2(b). (Id ¶ 31.) This evidence is accepted as true on summary judgment.

8

CONCLUSION

SCO respectfully submits, for the reasons set forth above, that the Court should reconsider and clarify that if the jury finds that if SCO has licensed SVRX technology as incidental to a UnixWare license, that there is no separate royalty payable, or at a minimum, should leave this issue open for trial.

DATED this 31st day of August, 2007.

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

BOIES, SCHILLER & FLEXNER LLP
David Boies
Robert Silver
Stuart H. Singer
Stephen N. Zack
Edward Normand

DORSEY & WHITNEY LLP
Devan V. Padmanabhan

Counsel for The SCO Group, Inc.

By: ___/s/ Edward Normand___________




1 In fact, UnixWare is not a separate system, but rather is just the latest version of SVRX; much of the code in UnixWare previously appeared in previous SVRX releases or is based on code from previous SVRX releases.

2 The issue is not resolved by the use of the capitalized term "SVRX License" in Amendment No. 1, as it would make sense for the agreement to use that as the identified term to designate that products may be incidentally licensed whether or not a separate royalty on such incidental licensing as intended.

3 Cf. In re Mason, 46 B.R. 119, 121-22 (Bankr. Mich. 1985) (declining to develop an apportionment formula when the parties failed to expressly delineate a formula in the underlying contract, and denying creditor's claim for purchase-money security interest in debtor's stereo because "a regard for workable guidelines in transactions of this sort suggests that in the absence of a clear contractual or statutory basis for determining the extent of a creditor's remaining purchase-money interest, the entire transaction should be declared to be nonpurchase-money").

4 See, e.g., Williams v. Tim Dahle Imports, Inc., No. 2:03CV46 DAK, 2007 WL 752170, at *1 (D. Utah Mar. 7, 2007) (Ex. A) (all inferences drawn in favor of non-moving party); McReynolds v. Wynn, No. 2:05CV122 DAK, 2006 WL 456256, at *2 (D. Utah Feb. 23, 2006) (Ex. B.) (same).

5 See, e.g., Universal Sales Corn., Ltd. v. Cal. Press Mfg. Co., 128 P.2d 665, 672 (Cal. 1942) (stating that "a practical construction placed by the parties upon the instrument is the best evidence of their intention."); accord Hernandez v. Badger Constr. Equip. Co., 28 Cal. App. 4th 1791, 1814-15 (1994).


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CERTIFICATE OF SERVICE

Plaintiff/Counterclaim-Defendant, The SCO Group, Inc., hereby certifies that a true and correct copy of SCO'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR RECONSIDERATION OR CLARIFICATION OF THE COURT'S AUGUST 10, 2007 ORDER was served on this 31st day of August, 2007, via CM/ECF to the following:

Thomas R. Karrenberg
John P. Mullen
Heather M. Sneddon
ANDERSON & KARRENBERG
[address]

Michael A. Jacobs
Matthew I. Kreeger
Kenneth W. Brakebill
David E. Melaugh

MORRISON & FOERSTER
[address]

10


  


SCO's Memo in Support of its Motion for Reconsideration or Clarification | 222 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Post corrections here
Authored by: alisonken1 on Sunday, September 02 2007 @ 11:51 PM EDT

And put correction note in subject line to help PJ.


---
- Ken -
import std_disclaimer.py
Registered Linux user^W^WJohn Doe #296561
Slackin' since 1993
http://www.slackware.com
http://www.mutagenix.org

[ Reply to This | # ]

Off topic here
Authored by: bbaston on Sunday, September 02 2007 @ 11:51 PM EDT
Thanks.

---
IMBW, IANAL2, IMHO, IAVO
imaybewrong, iamnotalawyertoo, inmyhumbleopinion, iamveryold

[ Reply to This | # ]

[NP] Newspicks here
Authored by: grouch on Monday, September 03 2007 @ 12:20 AM EDT
It helps to post the title and a clicky.
Thanks!


---
-- grouch

"People aren't as dumb as Microsoft needs them to be."
--PJ, May 2007

[ Reply to This | # ]

Another worry for SCO: false swearing on copyright applications
Authored by: bbaston on Monday, September 03 2007 @ 12:25 AM EDT
Off topic perhaps, but this article triggered my memory of past discussions at Groklaw, addressing Novell's formal applications for UNIX copyrights. Novell did so AFTER tSCOg committed fraudulent application.

So who is the correct party to bring the complaint that tSCOg filed false copyright applications?

And in case someone doubts this was fraud, remember this:

According to information revealed in court, tSCOg filed its copyright applications after KNOWING there was "considerable doubt" according to internal advice given to Darl McBride.

It appears almost certain that the specific intent was to give an air of legitimacy to their copyright claims. They gamed the system to create an impression that was false, and they knew it.

Specifically, can't Darl McBride go to jail for false swearing on a copyright application? ;)

---
IMBW, IANAL2, IMHO, IAVO
imaybewrong, iamnotalawyertoo, inmyhumbleopinion, iamveryold

[ Reply to This | # ]

Bam... Bam!
Authored by: Anonymous on Monday, September 03 2007 @ 12:29 AM EDT
Wow... The way I read this, it was almost as if I could
hear the hammer falling over and over... And at the
end... Kaboooom!

Gotta love it, though... Watching SCO squirm as they get
caught in each lie.

You're awesome, PJ! :)

WizLayer

[ Reply to This | # ]

    What's unique to Unixware?
    Authored by: kawabago on Monday, September 03 2007 @ 12:37 AM EDT
    Edge Click, the new mobile business product from SCO. It's the click that is
    the key. You have to click something when you use gui software so you are
    infringing on SCO's Edge Click product. Ipods click too! SCO Has done a complete
    end run around IBM and Apple. By taking control of the click they control the
    world! It'll be worth billions. Why everyone in the world will have to pay SCO
    every time they click their mouse. Even a click to make the payment will
    generate another charge! It's the greatest money maker ever!

    Oh, and if that doesn't work, SCO's going into toll bridges. You see SCO traded
    a Scosource license for the deed to the Brooklyn Bridge! Rumour has it they may
    have picked up the Statue of Liberty too! Isn't it amazing the bargains you can
    pick up on the streets of NYC!

    [ Reply to This | # ]

    SCO's Backward Logic
    Authored by: DarkPhoenix on Monday, September 03 2007 @ 12:49 AM EDT
    " SCO now wishes to call the Sun and Microsoft licenses UnixWare Licenses.
    I'll take you through some history on that, but what stands out to me in this
    filing is what seems to me a strategic mistake on SCO's part, a surprising
    admission found in footnote 1:

    1In fact, UnixWare is not a separate system, but rather is just the latest
    version of SVRX; much of the code in UnixWare previously appeared in previous
    SVRX releases or is based on code from previous SVRX releases.

    That happens to be true, from all I can see from the research I've done so far,
    and from my research, I don't find a lot of updates to UnixWare after 1995. But
    it's saying to my mind that SCO has very little, maybe nothing, to use from
    UnixWare against anyone as far as any conceivable copyright infringement
    accusations regarding post-1995 UnixWare is concerned. But more significantly, I
    view it as an indication that SCO indeed does owe Novell for the Sun and
    Microsoft licenses."

    Yes, from our viewpoint this seems true. But I believe what SCO is trying to
    get at here is that since Unixware = SVRX, the Microsoft and Sun licenses are
    actually Unixware licenses, and since the judge ruled they get to keep all the
    money from Unixware, they're trying to say this means they should keep 100% of
    the money in the Microsoft and Sun deals.

    ---
    Please note that sections in quotes are NOT copied verbatim from articles, but
    are my interpretations of the articles.

    [ Reply to This | # ]

    frustrated pipe fairy?
    Authored by: grouch on Monday, September 03 2007 @ 12:59 AM EDT
    Somehow I missed this part before:

    These contracts do not provide for any payments beyond 2003, except that Microsoft was granted the option to acquire expanded licensing rights, at its election, that would result in additional payments to us if exercised. In connection with the execution of the first license agreement, we granted a warrant to the licensee to purchase up to 210,000 shares of our common stock, for a period of five years, at a price of $1.83 per share. This warrant has been valued, using the Black-Scholes valuation method, at $500,000. Because the warrant was issued for no consideration, $500,000 of the license proceeds have been recorded as warrant outstanding and the license revenue reduced accordingly.

    Was that "option to acquire expanded licensing rights" a way for continued funding of the litigation express, if it hadn't started coming apart on the tracks? How about those 210,000 shares of common stock over five years? That warrant would run out about next year, wouldn't it? Just idly speculating about what might have been, if not for a bit of light shown in dark alleys.

    ---
    -- grouch

    "People aren't as dumb as Microsoft needs them to be."
    --PJ, May 2007

    [ Reply to This | # ]

    The view isn't as bright closer to Sun
    Authored by: gdt on Monday, September 03 2007 @ 01:02 AM EDT

    In a eWeek interview Sun's CEO says they purchased device drivers. See http://www.eweek.com/ article2/0,1895,1496519,00.asp, which says in part

    We took a license from AT&T initially for $100 million as we didn't own the IP. The license we took also made clear that we had rights equivalent to ownership. When we did the deal with SCO earlier this year we bought a bunch of drivers and when we give money to a company oftentimes we get warrants, which is part of the negotiations. I have warrants in 100 different companies, we have a huge venture portfolio. I can't do anything about the perception that's out there and to be blunt, I don't care as those people aren't going to drive our future—customers are.

    Because of the age of AT&T System V and thus the outdated hardware it originally run on, it is highly likely that SCO developed, and thus owned the copyrights to, the device drivers which Sun acquired.

    We all suspect that Sun sent SCO this money to fund SCO's anti-Linux litigation. If Sun's description of the deal is reflected in the legal documents of the sale it looks to me like the excuse SCO concocted with Sun will prevent Novell from claiming most of those funds.

    There may very well be an argument about operating system copyrights and the extent to which device drivers are derived works. Just not in the operating system where we were expecting this argument to eventually be litigated :-)

    [ Reply to This | # ]

    SCO's Memo in Support of its Motion for Reconsideration or Clarification
    Authored by: Khym Chanur on Monday, September 03 2007 @ 03:11 AM EDT

    SCO is asking for clarification? SCO? Aaahahahaha!!

    ---
    Give a man a match, and he'll be warm for a minute, but set him on fire, and he'll be warm for the rest of his life. (Paraphrased from Terry Pratchett)

    [ Reply to This | # ]

    SCO's product offerings
    Authored by: Just_Bri_Thanks on Monday, September 03 2007 @ 03:34 AM EDT
    The initial release of this product went mostly without fanfare, but it seems
    that TSCOG has leveraged their synergies and become the world's leading
    manufacturer of foot-gun ammunition.

    ---
    Bri. Just Bri. Thank you.
    (With a long i sound.)
    Without qualification, certification,
    exception, or (hopefully) bias.

    [ Reply to This | # ]

    SCO's Memo in Support of its Motion for Reconsideration or Clarification
    Authored by: Anonymous on Monday, September 03 2007 @ 03:39 AM EDT
    Insofar as SCO has misapprehended the Court's ruling on this issue, this Motion should be treated as a request for clarification.

    Duh, of course SCO misapprehended and it's not because they don't know how to read.

    * What kind of clarification should they get?

    * What if they misapprehend the clarification?

    [ Reply to This | # ]

    Working Backwards From The Other End...
    Authored by: sproggit on Monday, September 03 2007 @ 05:38 AM EDT
    It occurred to me that we might get an insight into what, for example, SCO and Microsoft thought they reached agreement on - simply by looking at the "output" from a Microsoft perspective. I remembered at the time that Microsoft's press release talked about the license as something that would enable them to build a better "Windows Services For Unix" Product. So I checked around and found the following.

    Let's start here , with a page from Wikipedia. This gives an overview of both the history and features of the SFU (Services For Unix) offering.

    As you review, please note two key points. Firstly, note that the product is itself known by Microsoft as "Services For Unix" and not "Services for Unixware". Secondly, please scroll all the way to the section describing the different product releases. You will note that SFU provides support for the following : Solaris 2.6, HP-UX 10.2, AIX 4.2, Tru64 UNIX 5.0, Red Hat Linux 5.1 (for SFU 2.0); Solaris 7 & 8, AIX 5L 5.2, and HP-UX 11i (for SFU 3.0). Nowhere does it mention that it supports UnixWare, which I find quite interesting...

    So let's try something else. If you look at here, you will find a Microsoft "primer" to the "Services for Unix" product set. To be fair, it seems to have been written prior to the release of Windows Server 2003 [there are no references to the 2003 product on the the page, just Windows 2000]. This is also interesting, since one has to wonder what extra value Microsoft added to SFU after paying TSG for access to all that precious IP.

    But it gets even more interesting.

    If you go here you will find, towards the bottom of the page, a comments section that includes the following text:

    Richard R Charron writes: "I installed MS Services for UNIX 3.0 at a client's site, fired up a C Shell, did a "strings * | grep -i bsd" and what do you know... OpenBSD!"

    If you check the dates and names of the last commiters you discover that the 3.X versions of the SFU libraries are directly copied and derived from the OpenBSD.


    In other words, as recently as the 3.0 release, Microsoft were clearly using the OpenBSD version of Unix for the source code. This, in fact, makes sense, when you think about their oft-quoted preference for the BSD license terms in preference to the GPL. Again, to be fair, I must point out that the release date of SFU3.0 was in fact 2002, prior to the start of the SCOvsIBM court case and a lot earlier than the latest licensing of code between TSG and Microsoft. But you can't help wonder exactly what Microsoft have done with the precious IP they paid all that money for...

    Much more importantly, however, and despite the best and loudest protestations from The SCO Group, there does not appear to be any significant references on these sites to "Unixware". Just "Unix".

    This is just a half-hearted attempt by SCO to string things along. Kinda like giving themselves enough rope to hang by.

    [ Reply to This | # ]

    Why Such a big fight over Musika?
    Authored by: Anonymous on Monday, September 03 2007 @ 06:33 AM EDT
    If he really tells the jury that 2+2=4, then why is he so harmful that SCO feel
    the need to put up a fight.

    Could a clue be in this excerpt from 425?

    "Mr. Musika also used his accounting expertise to reconcile the SCOSource
    revenues SCO disclosed in its discovery responses with those reported in SCO's
    public S.E.C. filings"

    [ Reply to This | # ]

    SCO's Memo in Support of its Motion for Reconsideration or Clarification
    Authored by: Steve Martin on Monday, September 03 2007 @ 07:01 AM EDT

    SCO also argued that any license to SVRX products included in the Sun and Microsoft Agreements was incidental to the core UnixWare License, and that SCO was therefore entitled to the payments from those Agreements as UnixWare Royalties.

    I had mentioned this before in another post, but I think it bears repeating here in this context: this is not what they told the SEC:

    We initiated the SCOsource effort to review the status of these licensing and sublicensing agreements and to identify others in the industry that may be currently using our intellectual property without obtaining the necessary licenses. This effort resulted in the execution of two license agreements during the April 30, 2003 quarter. The first of these licenses was with a long-time licensee of the UNIX source code which is a major participant in the UNIX industry and was a “clean-up” license to cover items that were outside the scope of the initial license. The second license was to Microsoft Corporation (“Microsoft”), and covers Microsoft’s UNIX compatibility products, subject to certain specified limitations. These license agreements will be typical of those we expect to enter into with developers, manufacturers, and distributors of operating systems in that they are non-exclusive, perpetual, royalty-free, paid up licenses to utilize the UNIX source code, including the right to sublicense that code.
    So, no mention of UnixWare at all; rather, they claimed that Microsoft's license covered their UNIX compatibility products, licensed Microsoft to "utilize the UNIX source code", and licensed them to "sublicense that" UNIX source code. It doesn't sound to me at all like the Microsoft deal was a UnixWare license with "incidental" UNIX benefits. Then again, what do I know? IANAL. But we do know that some pretty sharp lawyers on the Morrison Foerster side have seen the actual text of the Microsoft deal, so I guess they would know better than would I.

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

    [ Reply to This | # ]

    sco would get away better if they tell the truth
    Authored by: Anonymous on Monday, September 03 2007 @ 07:07 AM EDT
    M$ and Sun didn't buy any IP rights.
    They paid SCO to kill Linux.
    SCO should finally tell the truth, to avoid paying Novell anything :)
    Afterall, M$ already went one step higher on the food chain by marrying (could
    have used a not so nice word here) Novell.

    [ Reply to This | # ]

    Maybe it's this...
    Authored by: Anonymous on Monday, September 03 2007 @ 07:13 AM EDT
    Sun must have had a System V licence since it switched from BSD to SysVR4 (which
    it co-developed) around 1990. So their additional licence from SCO must be for
    things newer than that. The added value in Unixware may not be a large part of
    the whole system, but perhaps SCO will argue that it *is* a large part of the
    changes since Sun's original licence.

    [ Reply to This | # ]

    Not Validly Converted
    Authored by: Anonymous on Monday, September 03 2007 @ 07:36 AM EDT
    PJ Quotes Judge Kimball as writing: "the language suggests that SCO was
    obligated to present the information to Novell before the customer would be
    considered validly converted. The facts here demonstrate that Novell was not
    made aware of the 2003 Sun and Microsoft Agreements. Therefore, SCO never
    attempted to validly convert Sun or Microsoft. Under Schedule 1.2(b), then, Sun
    and Microsoft would not be considered validly converted." If they remain
    SVRX licensees, though, wouldn't Novell get to keep 95% of the license fees?
    Would the proportion of old to new code even matter?

    [ Reply to This | # ]

    Why are there two products?
    Authored by: Anonymous on Monday, September 03 2007 @ 07:58 AM EDT
    SCO also acquired the UnixWare operating system from Novell, at which time it renamed SCO UNIX as SCO OpenServer. They were eventually able to re-use some code from that version of UnixWare in later releases of OpenServer. SCO released several versions of UnixWare, notably version 7.x starting in 1997, which featured a "merge" of UnixWare 2 and OpenServer 5.
    wiki
    If they included the SVR5 code in UnixWare, why have two products?

    [ Reply to This | # ]

    An opportunity here?
    Authored by: Anonymous on Monday, September 03 2007 @ 08:07 AM EDT
    Does anyone know if there are any Microsoft or Sun people on the list to
    testify. It seems that suddenly and rather strangely what is left of the case
    now revolves around the exact composition of the Microsoft and Sun deals. Hence
    it would be entirely proper to have someone from Microsoft or Sun on the stand
    testifying as to what on Earth they thought they were buying when they did these
    deals with SCO.

    That could be EXTREMELY interesting!

    The Halloween memos seem to indicate that what Microsoft at least actually
    thought it was buying here was a lawsuit to generate FUD about linux. (What Sun
    thought it was doing I have NO idea). Wouldn't it be cool if this could come out
    at trial.

    I'm not sure if Novell with its new cosy arrangement with Microsoft would be
    interested in pushing things to that conclusion, but there is a possibility here
    to drag Microsoft into the courtroom and ask it questions which, if answered
    honestly, are likely to have rather embarrassing answers.

    It once served SCOs purposes to portray these deals as SCOsource (and therefore
    UNIX) deals. Now it seeks to portray them as Unixware deals. In reality however
    these deals were not Unix deals - that was just the pretext. They were FUD
    deals. It is poetic justice that the pretext is now coming back to haunt them.

    [ Reply to This | # ]

    "Yo, Ho! All Together!"
    Authored by: TheBlueSkyRanger on Monday, September 03 2007 @ 09:01 AM EDT
    Hey, everybody!

    I wonder if this is an admission that SCO management and BSF are not only
    talking, but working with each other. You know how there is occassional
    speculation that one side or the other is running the show, BSF for their
    reputations or SCO for their lives. Coming up with this attempted dodge doesn't
    sound like something a legal team would cook up, but software people.

    I'm just thinking this isn't a case of one side saying to the other, "I'm
    taking control of this Hindenburg of a lawsuit," but the two of them on
    pretty good terms and trying to dig themselves out as best as they can.

    Dobre utka,
    The Blue Sky Ranger

    [ Reply to This | # ]

    Maybe SCO was right
    Authored by: Anonymous on Monday, September 03 2007 @ 09:29 AM EDT
    Should the judge reconsider SCO's theory that everything that ever came
    incontact with unix code belongs to the original copyright holder.
    The remaining incidental claims in IBM case would fall away
    The unixware would belong to Novell, so regardless of portions the Sun and MS
    licences would be voided opening up copyright claims there.

    [ Reply to This | # ]

    SCO's Memo in Support of its Motion for Reconsideration or Clarification
    Authored by: blacklight on Monday, September 03 2007 @ 09:54 AM EDT
    According to SCOG, the judge misunderstood the facts, he misunderstood the law,
    and he misunderstood his own ruling. What else did the judge misunderstand? :)


    ---
    Know your enemies well, because that's the only way you are going to defeat
    them. And know your friends even better, just in case they become your enemies.

    [ Reply to This | # ]

    Unixware must be deployed
    Authored by: gvc on Monday, September 03 2007 @ 10:42 AM EDT
    From the APA:

    "if the customer continues to sell their SVRx based product separately,
    then these SVRx revenues continue to flow to Novell"

    "the adoption of UnixWare is so substantial as to constitute a valid
    conversion"

    As far as I'm aware, no evidence has been presented that Sun or Microsoft
    *adopted* UnixWare at all; that their SVRx-based products (Solaris, WUS, Linux,
    whatever) are entirely *separate* from UnixWare.

    The UnixWare aspect of the licenses is a sham. One that was anticipated and
    disallowed by the APA.

    [ Reply to This | # ]

    Move over, Wookie Defense!
    Authored by: DMF on Monday, September 03 2007 @ 11:40 AM EDT
    1In fact, UnixWare is not a separate system, but rather is just the latest version of SVRX; much of the code in UnixWare previously appeared in previous SVRX releases or is based on code from previous SVRX releases.

    [sound of jaw hitting floor]

    They can't be that crazy. Wait a minute! Maybe they can!

    I can see it now: SCO moves to disqualify BSF as insane and incompetent, using such gems panned by Groklaw as evidence. If granted it could back the process up several years.

    BSF might even go along with it! They keep the $$ and get out from under this losing case. All it takes is a brief moment of embarrassment by a universally-despised client, easily countered by a razor-tongued statement. Probably escape sanctions, too.

    SCO obviously never intended to win the case. Its reward has to be elsewhere. (Though who knows, maybe the Nazgul would lose interest.) SCO would accomplish what they've been after all along — postpone losing. Without BSF they might stretch out the remaining cash to cover it.

    Wheels within wheels within wheels...

    [ Reply to This | # ]

    source vs UnixWare binary
    Authored by: Anonymous on Monday, September 03 2007 @ 12:40 PM EDT
    Has SCO ever sold Unixware as source code? If not there would seem to be a very
    clear line between SysV source code license holders and Unixware install and run
    customers.

    And Sun and Microsoft clearly did not get binary Unixware.

    [ Reply to This | # ]

    SCO's Memo in Support of its Motion for Reconsideration or Clarification
    Authored by: Anonymous on Monday, September 03 2007 @ 12:45 PM EDT
    PJ, you wrote regarding the possibility of the Judge scrutinizing the SUN/MS
    motivation in his analysis:

    "The thing is, unless a contract is unclear, you
    don't consider parol evidence. And the judge
    doesn't think the contracts are unclear, just
    what amount is owed."

    Except....except--- you have to remember, PJ -- even if the MS/SUN license
    contracts are 'clear' on their face as to certain provisions or allocations,
    then any implications and limitations on the Judge's analyisis that this
    'clarity' imposes are limits ONLY on the contractual relationship between SCO
    and MS/SUN.

    But THAT relationship is not the one the Judge is deciding.

    And what I'm saying is, if these SUN/MS licenses were required (under the terms
    of the Novell/Santa Cruz contract) to be approved by Novell, and if SCO ignored
    that requirement, well -- then the Judge will be permitted (and required) to
    penetrate beyond the limits of the supposedly 'clear' language of these
    licenses, and look deeper to the true intent (since that clarity could have been
    a mere contrivance by SCO and its licensees to deprive Novell of its due
    apportionment).

    Moreover, it gets even better (meaning worse for SCO) that that -- because the
    Judge is required to do that deep dive analysis with a view that gives Novell
    the benefit of every doubt, as this is the consequence of SCO having breached
    its fiduciary duties by failing to get consent and by intermingling/converting
    Novell's $$.

    So this is going to get very delicious.

    LEXLAW

    [ Reply to This | # ]

    Not trying to downplay or troll, but...
    Authored by: Anonymous on Monday, September 03 2007 @ 01:36 PM EDT
    After your quote from the 10k filing from Oct 31, 2005, you say:
    See the word UnixWare anywhere at all? Neither do I.
    It is actually there, near the bottom of the first paragraph:
    The UNIX licenses we obtained have led to the development of several proprietary UNIX-based operating systems, including but not limited to our own UnixWare and OpenServer products, IBM’s AIX, Sequent’s DYNIX/Ptx, Sun’s Solaris, SGI’s IRIX and Hewlett-Packard’s HPUX. These operating systems are all derivatives of the original UNIX source code owned by us.
    Thought I'd point that out. Other than that, I think you are doing an excellent job, and I hope SCO goes away so we can focus on more pressing issues (OOXML).

    [ Reply to This | # ]

    Did scox tell the SEC (and investors) a different story?
    Authored by: Anonymous on Monday, September 03 2007 @ 01:42 PM EDT
    I think scox classified their "sco source" revenues differently than
    UnixWare revenues in the SEC filings.

    Is scox now saying that they have been lying to investors about this for the
    last 4.5 years?

    Maybe it wouldn't matter, since scox has clearly been on the SEC reports about
    being the "owner of the UNIX operating system."

    [ Reply to This | # ]

    SCO's Memo in Support of its Motion for Reconsideration or Clarification
    Authored by: Anonymous on Monday, September 03 2007 @ 11:58 PM EDT
    Ooh, the irony. It's Novell's turn to say, "we found a mountain of SVRX
    code in Unixware".

    [ Reply to This | # ]

    Definition: Incidental
    Authored by: Hyrion on Tuesday, September 04 2007 @ 12:22 AM EDT

    Here we go again. Better get SCOGs definition of "incidental" as I'm willing to bet they're currently saying:

    See? Right here in the contracts, it says SVRX is incidental.... No, you shouldn't measure it that way. Just because SVRX is 90% of the code licensed by line count, it's still incidental because the contract says it was.
    Mind you... to be fair, I suppose if SVRX is serious bloat-ware you couldn't quite measure it by line count.

    ---
    IANAL - But I am very curious and like to research.
    There are many kinds of dreams. All can be reached if a person chooses.
    RAS

    [ Reply to This | # ]

    SCO's Memo in Support of its Motion for Reconsideration or Clarification
    Authored by: Anonymous on Tuesday, September 04 2007 @ 08:08 PM EDT
    TSCOG only has copyrights on code that TSCOG or Tranatella wrote, code that
    specifically isn't derived from SVRx code and that is new to the system and
    original in content (ie not a rehash of some older SVRx code). Given the
    development resources available to both companies I bet the amount of code that
    wasn't SVRx or derived from SVRx was insignificant, not only that but SCO admits
    that in their footnote.

    TSCOG is trying to convince the Judge that somehow all the SVRx code transformed
    into Unixware and that TSCOG owns it all. They even go so far as to say the SVRx
    code in Unixware is incidental to the Unixware code. They are in essence trying
    to convince him that in fact they still own all the code, not because Novell
    owns SVRx but because it's all now magically Unixware code (even though that
    flies in the face of copyright law and derivative works). What's even more
    astonishing is that this is the exact opposite of the argument that they took
    with IBM by claiming any code that touched SVRx was theirs to control by saying
    that any code that was SVRx magically transformed into Unixware and SVRx doesn't
    exist anymore.

    But they have to latch onto that idea that SVRx is incidental as the Judge said
    that's the only way they get to keep all the money. Hopefully the Judge notes
    their little footnote and reverses his ruling on the constructive trust as SCO
    has admitted their is no such thing as Unixware, it's all SVRx.

    [ Reply to This | # ]

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