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Minutes of the Marathon July 27 SCO Hearing and More Bankruptcy Filings
Tuesday, July 28 2009 @ 02:58 PM EDT

The minutes from yesterday's hearing in the SCO bankruptcy are in, with all the participants listed. And the judge has already denied SCO's request for expedited handling of the motion to shorten notice on its motion to sell the marketing of its Java patent.

Please note that we are continuing to update yesterday's coverage of the marathon bankrupcy hearing, as more reports are filed. The hearing lasted until a little after 10PM at night, so it was almost 12 hours' long. The judge will rule on SCO's fate in a week. The minutes just say everything was taken under advisement. But our reporters say he said he'd rule by a week, so it could even be sooner, but no later.

Here's the docket, and you'll note that there is a mistake in describing the #874 entry, which is replicated in the title of the document, but the text clears it up:

872 - Filed & Entered: 07/27/2009
Application to Employ (B)
Docket Text: Application to Employ -Application for Approval of Employment of Global IP Law Group, LLC As Marketing Consultant In Connection With The Sale Of Debtors' Patent- Global IP Law Group, LLC as Exclusive Marketing Consultant Filed by Pachulski Stang Ziehl & Jones LLP. (Attachments: # (1) Exhibit A # (2) Exhibit B # (3) Exhibit C -Affidavit of David Berten# (4) Proposed Form of Order # (5) Affidavit of Service) (Makowski, Kathleen)

873 - Filed & Entered: 07/27/2009
Terminated: 07/28/2009
Motion to Shorten (B)

07/28/2009 - 874 - Order Denying Fourth Motion by Debtors Under Section 1121(d) for Extension of Exclusivity Deadlines. (Related Doc # 872 , 873 ) Order Signed on 7/28/2009. (BAM) (Entered: 07/28/2009)

07/27/2009 - 875 - Minutes of Hearing held on: 07/27/2009 Subject: Sale Hearing and Motion to Convert. (vCal Hearing ID (95534)). (related document(s) 867 ) (SS) Additional attachment(s) added on 7/28/2009 (SS). (Entered: 07/28/2009)

The exhibit to #875 tells us who was in attendance at the hearing yesterday:
Leslie Bayles, Bryan Cave, for unXis, Inc.
Arthur Spector, Berger Singerman, for SCO
Laurie Selber Silverstein, Potter, Anderson, for IBM
Richard Levin, Cravath, IBM
David Marriott, Cravath, IBM
Michael Reynolds, Cravath, IBM
Sean Greecher, Young Conoway, for Novell
Adam Lewis, Morrison & Foerster, Novell
Michael Jacobs, Morrison & Foerster, Novell
Mauricio Gonzalez, Boies Schiller, SCO
Franklin Caplan, Berger Singerman, SCO
Jason Cyrulnik, Boies Schiller, SCO
Ted Normand, Boies Schiller, SCO
Kenneth Nielsen, SCO Group, for SCO
Christopher Donoho, Lovells LLP, for "LNS Inc."
Ryan Tibbitts, SCO Group
Jeff Hunsaker, SCO Group
Darl McBride, SCO Group
William Harrington, US Trustee, for UST
James O'Neill, Pachulski Stang, for SCO
Douglas A. Bates [by phone], Berger Singerman, SCO
Amish Doshi [by phone], Day Pitney, for Oracle
Alan P. Petrofsky [by phone], pro se, "Interested Party, Alan P. Petrofsky, LISTEN ONLY"
And Groklaw was there, of course, and many others. But the above are all the lawyers and witnesses. I see Lovells sent a lawyer on the claim that Microsoft just transferred to "LNS Inc.", as the sign-in sheet shows it. The Assignment of Claim says LNS LLC. Well, who can keep track of all the fast-moving details, eh?

Let's break the list down by interest:

FOR SCO, LAWYERS:
Arthur Spector, Berger Singerman, for SCO
Mauricio Gonzalez, Boies Schiller, SCO
Franklin Caplan, Berger Singerman, SCO
Jason Cyrulnik, Boies Schiller, SCO
Ted Normand, Boies Schiller, SCO
James O'Neill, Pachulski Stang, for SCO
Douglas A. Bates [by phone], Berger Singerman, SCO

FOR SCO, WITNESSES:
Kenneth Nielsen, SCO Group, for SCO
Ryan Tibbitts, SCO Group [He was there as a lawyer too, of course.]
Jeff Hunsaker, SCO Group
Darl McBride, SCO Group

FOR IBM:
Laurie Selber Silverstein, Potter, Anderson, for IBM
Richard Levin, Cravath, IBM
David Marriott, Cravath, IBM
Michael Reynolds, Cravath, IBM

FOR NOVELL:
Sean Greecher, Young Conoway, for Novell
Adam Lewis, Morrison & Foerster, Novell
Michael Jacobs, Morrison & Foerster, Novell

FOR uNXIS:
Leslie Bayles, Bryan Cave, for unXis, Inc.

FOR ORACLE:
Amish Doshi [by phone], Day Pitney, for Oracle

FOR LNS:
Christopher Donoho, Lovells LLP, for "LNS Inc."

FOR U.S. TRUSTEE'S OFFICE:
William Harrington, US Trustee, for UST

FOR HIMSELF:
Alan P. Petrofsky [by phone], pro se, "Interested Party, Alan P. Petrofsky, LISTEN ONLY"

Here's SCO's press release about getting 10,000 customers for its iPhone app, "The SCO Group Achieves Milestone of 10,000 Mobile Solutions Users and Prepares to Release Two New Mobile Applications". Uh huh. FCTask sells for $5.99. We're talking iPhone apps, are we not? Here's the meat of the press release, because historians won't believe it otherwise:

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

LINDON, Utah, July 24 /PRNewswire-FirstCall/ -- The SCO Group, Inc., (PinkSheets: SCOXQ) a leading provider of UNIX(R) software technology and mobility solutions, today announced that it has reached a significant milestone within its mobile technology business. Ranking as high as #13 on Apple's App store for paid productivity applications, FC Tasks(TM), sold under the FranklinCovey Products brand, and FC Mobilelife(TM) have surpassed 10,000 customers.

Designed specifically for Apple's popular iPhone(R) and iPod Touch(R), FC Tasks, which is marketed exclusively by FranklinCovey Products is an easy-to-use, feature-rich task management tool that incorporates proven FranklinCovey planning methodology. FC Tasks quickly manages daily personal and professional tasks from an iPhone and iPod Touch with this application available from the world leaders in time management. FC Tasks, based on popular demand, will also be available for select, popular BlackBerry models in the coming weeks.

"This is a significant milestone for our application business," said Jeff Hunsaker, president and chief operating officer, SCO Operations. "Effective task management from mobile devices gives users greater productivity anywhere, anytime and enhances the communication experience of iPhone and iPod Touch users," said Hunsaker.

FC Tasks sells for $5.99 from Apple's App Store. For more information about FC Tasks, visit http://www.fcmobilelife.com/products/fctasks.php

FC Mobilelife(TM), available for download at www.fcmobilelife.com, enables smart phone and PC users to communicate with powerful multimedia blogs, set goals and appointments real-time, as well as create and delegate task lists whenever and wherever. Unlike any other current solutions, FC Mobilelife allows users to setup appointments and meetings with confidence and check team members' calendars through its unique busy search function right from the convenience of their BlackBerry(R) and Windows(R) smartphones. FC Mobilelife has a free trial version as well as several paid, professional license editions.

SCO also announces an upcoming release of a new mobile application, FranklinCovey Mobilelife Goals. FC Goals incorporates the FranklinCovey methodology of setting and tracking goals into a powerful, new iPhone and iTouch application. FC Goals allows users to set and achieve goals whenever and wherever you are. Its unique multimedia capabilities allow you to add audio and multi-media to goal tracking and visually view percentages completed within the application.

"FC Goals provides iPhone and iTouch users with the capability of being connected to their goals in a mobile environment using a powerful, visually-pleasing interface," said Shaun Cutler, director of product management, SCO. "Also, with its new Spoken Goals feature, users can instantly add audio goals while on the go," said Cutler.

FC Goals will be available for sale through the Apple App store and is estimated to sell for $4.99.


  


Minutes of the Marathon July 27 SCO Hearing and More Bankruptcy Filings | 239 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections thread
Authored by: Just_Bri_Thanks on Tuesday, July 28 2009 @ 03:01 PM EDT
please put the nature of the error in the title of the thread.

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

[ Reply to This | # ]

Off topic
Authored by: Just_Bri_Thanks on Tuesday, July 28 2009 @ 03:02 PM EDT
On topic posts will incur a severe (verbal) beating.

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

[ Reply to This | # ]

News picks discussions
Authored by: Just_Bri_Thanks on Tuesday, July 28 2009 @ 03:04 PM EDT
For those fascinating things you see on the right hand side of
the main page. Instructions for click-able links are in red
text on the reply screen.

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

[ Reply to This | # ]

After Yesterday
Authored by: rsteinmetz70112 on Tuesday, July 28 2009 @ 03:14 PM EDT
I can't see how the judge can avoid appointing a trustee to go in and figure out
what is really happening at SCO.

---
Rsteinmetz - IANAL therefore my opinions are illegal.

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

[ Reply to This | # ]

Observations from Yesterday
Authored by: RFD on Tuesday, July 28 2009 @ 03:32 PM EDT
Some observations from the hearing, in no particular order:


Hans Bayer emails—The arguments over the admissibility of these emails centered
over the inflammatory statements Hans Bayer made about Darl's “weird dream” and
his fixation on the litigation. There did not seem to be any doubt the the
emails were genuine, but Mr. Bayer was expressing his opinion and not speaking
for SCO, and that the emails did not present “facts” to which he could speak to
from personal knowledge. Judge Gross ruled that they were more prejudicial than
probative. Some of the emails were withdrawn and not at issue—but I cannot give
you specifics. Even though they were not admitted into evidence, Judge Gross
read them and they do tend to rebut Mr. Spector's attempt to paint IBM and
Novell as the “bad guys”--there are clearly some within SCO that question SCO's
litigation-at-any-cost strategy.


The Payments to Mr. Norris—The payment of $100k from SCO Japan appears to have
been for a real marketing study, and according to Mr. Norris, was the basis for
his belief that the Unix business was viable. He used it to help line up
potential investors. The payment of $100k from Mr. McBride was, according to Mr.
Norris, compensation to him for his efforts to try to arrange a deal. This was
in conflict with Mr. McBride's testimony, but since the payment was arranged
through Mr. Robins, Mr. McBride may not have known what it was really for. In
his summary, Mr. Marriott stated that much of IBM's concerns about these
payment's had been allayed. I doubt that this issue will have much impact on
Judge Gross' decision. The fact that SCO did not disclose its prior relationship
with Mr. Norris does still raise questions about SCO's “good faith”, however.


The Sale Motion—I doubt it will be approved. SCO has filed an amendment that has
not been reviewed, and it was only briefly mentioned at the hearing. SCO has
provided no evidence that it would bring fair value. Problems remain with
“Executory Contracts”, especially the Novell-Santa Cruz APA. After the hearing,
I overheard someone from SCO express doubt that they would “get the sale
motion.” Judge Gross seemed very attentive to Mr. Harrington when he expressed
reservations about a “private sale” instead of an auction. If there is a sale of
the Unix business, I suspect bids will be solicited—there seems to be several
potential buyers—possibly by a Chapter 11 trustee.


Mr. Spector—His folksy style may be wearing thin. He tended to drone on and on.
Twice during the summation Judge Gross cut him off for taking too much time.

---
Eschew obfuscation assiduously.

[ Reply to This | # ]

Judge rules in a week?
Authored by: Anonymous on Tuesday, July 28 2009 @ 04:22 PM EDT
Is that a real week, or a Judge Gross week (which apparently is about a month)?

[ Reply to This | # ]

A McBride Moment
Authored by: Anonymous on Tuesday, July 28 2009 @ 04:47 PM EDT

McBride:

We're selling each license at $4.99 per copy. We'll be successful at selling 12 Billion copies of it. By our calculations, we'll be worth $59.8 Billion in just a couple months!
Reporter:
Wonderful, everyone should buy your stock!
Reality:
    With a World population of 6.7 Billion, the "analysts" and "reporters" kind of forgot to ask what McBride based his projections on.....

RAS

[ Reply to This | # ]

iFart Outsells SCO Mobile
Authored by: Anonymous on Tuesday, July 28 2009 @ 05:02 PM EDT

Among the iPhone apps you can buy are several that do nothing except make farting noises. The leader in that market is iFart, which has sold more copies in one day than SCO Mobile has sold in total (13,274 in a single day for iFart, versus 10,000 combined total sales for SCO Mobile). MacRumors.com

That ought to put SCO's mobile business in perspective. Almost all of the people developing apps for the iPhone are doing it as either a hobby, or as a part time money losing small business. A few exceptionally successful people are making enough to run a small one or two man business out of their homes. I can't see this as a viable business for a company that has to pay managers and executives.

[ Reply to This | # ]

SCO VINDICATED!!
Authored by: Anonymous on Tuesday, July 28 2009 @ 05:37 PM EDT
They got another week!

I can see the press release now...

Following a tense hearing in bankruptcy court, Darl McBride said "The judge
could have shut us down, but he didn't. Obviously he sees the value in our
plan, and recognizes the mechanations of IBM and Novell for what they are. This
really confirms what we've been telling the world all along. With this victory,
and our successful appeal in the 10th circuit, we're over the hump, and looking
forward to our day in court.

[ Reply to This | # ]

  • Ooohhh... you're good! - Authored by: Anonymous on Tuesday, July 28 2009 @ 06:37 PM EDT
    • Grammar? Spelling? - Authored by: Anonymous on Tuesday, July 28 2009 @ 07:38 PM EDT
      • ROFL n/t - Authored by: Anonymous on Wednesday, July 29 2009 @ 12:33 AM EDT
So what are the odds??
Authored by: LaurenceTux on Tuesday, July 28 2009 @ 05:40 PM EDT
Ive got 3 Sickles and 8:1 odds that TSCO will be effectively dead when Judge
Gross files.

[ Reply to This | # ]

SCO conversion - to 501c
Authored by: vb on Tuesday, July 28 2009 @ 05:58 PM EDT

I find it odd that Yarro offered $200K for nothing in return. At the end of his
30 day offer - what goods or services will have been conveyed to him?

That is not the way for-profit business works. Is the judge suppose to believe
that SCO is moving forward, even for 30 days, supported by charitable
contributions?

Is SCO going to convert to 501c (non-profit) so that Yarro can deduct the $200K
from his taxes?

[ Reply to This | # ]

Franklin-Covey brand?
Authored by: Anonymous on Tuesday, July 28 2009 @ 06:29 PM EDT
Makes it sound like its just a brand name for some SCO product trading and they
get to keep all $5.99 x 10,000 as income ...

Frannklin-Covey is an established retailer of binders/pens/breifcases etc
http://shopping.franklinplanner.com/shopping/index.jsp?

I would guess SCO get .. what 50%? after FC and the iPhone apps store have had
their cut? maybe less? ... its not a whole hill of beans.

30K income versus ... development costs of?

[ Reply to This | # ]

FC Tasks
Authored by: Anonymous on Tuesday, July 28 2009 @ 06:32 PM EDT
So they sold 10,000 copies..
If I read the bit from the trial correctly Franklin Covey gets 60% of that. So
SCOXE got $4,000.

This is something to brag about???

[ Reply to This | # ]

"Uh huh. FCTask sells for $5.99" - Sorry PJ, you are not getting it!
Authored by: Anonymous on Tuesday, July 28 2009 @ 07:52 PM EDT
> Uh huh. FCTask sells for $5.99. We're talking iPhone apps, are we not?

Sorry PJ, you are not getting it!

SCO's mobile offerings never were primarily about some measly $5.99 Iphone
clients, but about the neccessary server infrastructure running on Industrial
Strength SCO UNIX.

Take Google, for example.

They have about a billion customers, and well "north of" 100K
servers.

Once FC Mobile Apps reach a billion users, that's 100K Unixware licenses at
roughly $1000 per CPU - or even more for multiprocessor machines (Google
currently runs mostly duals, but is rumored to contemplate upgrading).

We are talking about more than $100 Million in licensing fees, plus an annual
fee of around 20% of that sum for support contracts.

Bayer was right, this is a great scam: Due to increased unfair open source
competition and the "giveaway culture" of the internet, SCO, which
retains the
mobile Apps, will soon be forced to give them away for free, while UNXIS will
be raking it in from the server licenses.

No wonder Darl gave a loan to Robbins (out of his own pocket!) in the hope of
getting a cut of the huge future profits!



[ Reply to This | # ]

A trustee: if not now, when?
Authored by: vb on Tuesday, July 28 2009 @ 10:22 PM EDT
I was thinking about how Judge Gross seems reluctant to appoint a trustee to run
SCO. My reading between the lines indicates a degree of foot stomping by the US
Trustee representative. I would guess that the US Trustee is used to getting
what it wants without begging, whining, or pleading. But they are not getting
what they want in this case. The Judge is making them jump through hoops.

Of course, we have no idea what hoops the Judge wants the US Trustee to jump
through before he agrees to an appointment.

For an exercise, complete Judge Gross's hypothetical statement:

" I won't appoint an trustee until .... "

[ Reply to This | # ]

direction from here ...
Authored by: nola on Wednesday, July 29 2009 @ 12:57 AM EDT
IBM is never going to see any money from SCO. Neither is Novell, probably.

So IBM's beneficial outcome is
1. ensure a judicial declaration of non-infringement for Linux
2. produce SCO-powder for shipment to Mordor
3. direct potential litigants to observe (2)

They're not going to let this "go away" and the counterclaims with it.


This is a sufficiently significant commercial case that IBM will take it all the

way to the Supreme Court, if need be. Judge Gross cannot be unaware of this,
although such a thing would not ever have been said. It doesn't need to be -
they all "just know".

Of course, some cases end in compromise where nobody gets all they want,
but nobody is shut out so far that they'll appeal. I can't see that option here
-
there's no compromise position. IBM has to have a Linux declaration and SCO
has to die in order for it to happen.






[ Reply to This | # ]

New favorite from the hearing!
Authored by: Anonymous on Wednesday, July 29 2009 @ 01:03 AM EDT

Well.... I suppose they covered up the payment from McBride to put down a deposit for the sale as best they could:

Norris: I told Mr. McBride I would not work on this deal any further without some kind of compensation.
I left out the rest, choosing the - what I think - best morsel.

Overall, a nice little dance that paints a circumstantial picture that's an explanation for the money McBride provided to Robbins who then paid Norris.

I think perhaps Norris messed up strategically though. Claiming that he'd no longer receive any funds from McBride without compensation - wouldn't that clarify he was an agent of SCOG?

However, on an earlier question:

Norris: We want the business, not the litigation.
Oooppps!

RAS

[ Reply to This | # ]

So how does Ch7 go down ....
Authored by: Anonymous on Wednesday, July 29 2009 @ 01:06 AM EDT
Does the judge publish a ruling and the trustee knock on
the door and ask for the key? or does the judge tip his
hand to the trustee so he can show up as a surprise, ruling
in hand, with US Marshals and a crow bar

Do they run the company out of Delaware? or does the
trustee move to Utah?

[ Reply to This | # ]

Minutes of the Marathon July 27 SCO Hearing and More Bankruptcy Filings
Authored by: Anonymous on Wednesday, July 29 2009 @ 02:59 AM EDT

Standard marketing procedure is to find a category — however narrowly drawn — in which you are #1, then gloat about that.

If the best they can manage is #13 even after defining the category quite narrowly then they are in serious trouble.

Also take note also that this was the peak, so they may not have been there for very long.

[ Reply to This | # ]

  • #13 - Authored by: _Arthur on Wednesday, July 29 2009 @ 03:33 PM EDT
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