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Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal - Updated 5Xs
Monday, March 07 2011 @ 05:51 PM EST

Judge Kevin Gross, presiding over the SCO bankruptcy, has just approved the sale of SCO's assets to unXis:

03/07/2011 - 1252 - Memorandum Opinion Re Sale Motion (related document(s) 1141 ) (MDW) (Entered: 03/07/2011)

03/07/2011 - 1253 - Order (WITH REVISIONS) (A) Approving the Sale Of Substantially All Of The Debtors Software Product Business Assets Free And Clear Of All Liens, Claims, Interests And Encumbrances, (B) Approving Assumption, Assignment, And Sale Of Certain Executory Contracts And Unexpired Leases, and (C) Granting Related Relief (related document(s) 1141 ) Order Signed on 3/7/2011. (MDW) (Entered: 03/07/2011)

He ruled that the 1995 APA [PDF] is not executory. I trust you are not surprised. He telegraphed his intentions, to me anyway, at the hearing.

I expect Novell will immediately appeal. You will notice that on page 11 of the Order there is a 14-day waiting period, so it can do so, something Novell requested at the hearing. When the judge said he'd have to make sure Novell had that time, I knew how he would rule.

Interestingly, in SCO's current appeal of its loss to Novell in the Utah trial, it argues that Novell must hand over the copyrights to SCO under the APA, which would make the APA an executory contract with a remaining obligation on Novell's part, something Judge Gross has just decided Novell doesn't have any of. So I take this new argument by SCO in bankruptcy as an indication it knows it can't prevail in the appeal. Either that or they boldly tell two different courts contradictory things. It wouldn't be the first time.

I know also that some of you have lost all respect for the US legal system, as a result of watching the shenanigans in bankruptcy court. And today's ruling will not restore your faith, for sure. All I can say is bankruptcy court is a cesspool. But wait for the appeal to be decided. Frankly, if this is not overturned on appeal, I'll be surprised. Everything has gone the way it should outside of bankruptcy court, has it not? So stay tuned. I confess I have lost respect for Blank Rome for the latest strategy. The judge might not know any better, but they have to, I think.

The order in effect allows the new owners to sell UNIX SYSV without having to pay Novell anything, because Judge Gross doesn't realize that it is a requirement under the APA, having believed William Broderick's statements in his Declaration [PDF] and at the hearing, I guess. SCO thus skips out on having to pay the $3 million it owes to Novell, since the judge apparently thinks that isn't a material breach or obligation. And unXis gets the benefits of the business, but not the liabilities. Nice cynical work. Gross also believed that sublicensing was the normal course for Novell and SCO since 1995, and that is laughable. It's all laughable. Unless you are throwing up by now. Broderick attached ten exhibits to his Declaration, supposedly showing a course of sublicensing, but except for the unXis deal, none of them were like the unXis sublicensing deal. [See update below.]

Judge Gross opens his Memorandum by stating that he's in too much of a rush to tell the entire history of the case. Perhaps he's embarrassed. So let me fill in. When the bankruptcy began, SCO had enough to pay all its creditors. Now it is insolvent, which it was not when it entered Chapter 11 bankruptcy protection, and it will now cease to exist, leaving all the creditors with their empty hands out. Where did the millions go? To the lawyers and accountants and professional advisers, whose conduct is impressively cynical, I must say. Even in the sale, a fair chunk of the deal goes to them. Here's what SCO Operations and SCO Group had [PDFs] in October of 2007, right after it applied for bankruptcy protection.

But truthfully, do you care if SCO behaves badly or if unXis does? What is the difference? Novell cares, of course. It's out millions, thanks to Judge Gross's handling of this case.

The judge also relies on a case, Exide, which you can read about in this Groklaw article, at the end. It was a case about trademarks, not copyrights, and that makes a significant difference in bankruptcy law, although not to Judge Gross. It also was a case that was decided based on New York law. The APA is California-based, with its own rules. So, in short, I think the judge erred.

Here's an analysis of Exide by a couple of attorneys at Skadden Arps, Mark S. Chehi and Robert A. Weber, "Third Circuit Does Not Permit Debtor to Reject Non-Executory Trademark License Agreement":

The Bankruptcy Code generally protects licensees of intellectual property by restricting the ability of debtor licensors to “reject” licenses of intellectual property they have granted to third party licensees. See 11 U.S.C. § 365(n). Importantly, however, trademarks are excluded from the Bankruptcy Code’s definition of “intellectual property.” Accordingly, bankruptcy courts have held that, because trademarks are not intellectual property, Chapter 11 debtors may assume or reject trademark license agreements like any other executory contract.2 In Chapter 11 cases, debtor companies that have licensed trademarks to others may seek to reject such trademark licenses and extinguish licensee rights by using a debtor’s broad power to reject executory contracts.3

A recent Third Circuit Court of Appeals decision, Exide Technologies v. EnerSys Delaware Inc., ___ F.3d ___, 2010 WL 2163190, Case No. 08-1872 (3d Cir. June 1, 2010), focuses on a critical limitation on a debtor’s right to reject a trademark license — namely, that the license arrangement must be “executory” in order to be rejected. If a non-debtor licensee has substantially performed its material obligations under a license agreement, the license may not be executory. If not executory, the license cannot be rejected by a Chapter 11 debtor.

It was a case where Exide had licensed the EXIDE trademark, and it wanted later to toss the license agreement out in bankruptcy. It wasn't allowed to, and in the course of deciding the matter on appeal, the court provided a definition of executory contract in bankruptcy:
Quoting its prior decisions, the Third Circuit panel instructed that an executory contract is a contract under which, as of the commencement of a Chapter 11 case, “the obligation of both the bankrupt and the other party to the contract are so far underperformed that the failure of either to complete performance would constitute a material breach excusing the performance of the other.” Thus, “unless both parties have unperformed obligations that would constitute a material breach if not performed, the contract is not executory” under Section 365 of the Bankruptcy Code. “[T]he time for testing whether there are material unperformed obligations on both sides is when the bankruptcy petition is filed,” and the inquiry requires consideration of “contract principles under relevant nonbankruptcy law.”

In vacating the District Court that affirmed the Bankruptcy Court order authorizing Exide’s rejection of the trademark license to EnerSys, the Third Circuit applied New York8 contract law, including its “substantial performance” doctrine, to determine whether a breach by EnerSys of its remaining obligations under the license would constitute a material breach that would excuse Exide from further performance of its obligations.9 The Third Circuit observed that under New York law, when a breaching party “has substantially performed” before breaching, “the other party’s performance is not excused.” Citing Hadden v. Consolidated Edison Co., 312 N.E.2d 445 (N.Y. 1974), the Third Circuit recognized and applied the multi-factor test in New York for determining when a party has rendered substantial performance. That test considers “the ratio of the performance already rendered to that unperformed, the quantitative character of the default, the degree to which the purpose of the contract has been frustrated, the willfulness of the default, and the extent to which the aggrieved party has already received the substantial benefit of the promised performance.”

The Third Circuit decided that the Bankruptcy Court had “failed to properly measure whether either party had substantially performed” under New York law. Based upon the record on appeal, the appellate panel determined that “EnerSys has substantially performed its obligations” under the 1991 trademark license agreement because, among other things, EnerSys had paid the $135 million purchase price in the 1991 transaction, had operated and used the licensed “Exide” mark for 10 years, and had assumed certain Exide liabilities as part of the 1991 transaction. The Third Circuit rejected Exide’s argument that EnerSys’ ongoing, unperformed obligations under the trademark license (including a limitation on use of the Exide mark to industrial batteries, a quality control requirement, and certain indemnification and further assurances obligations) outweighed the importance of EnerSys’ performance prior to the bankruptcy petition date. Accordingly, the Third Circuit concluded that the license agreement was not executory and could not be rejected by Exide as a Chapter 11 debtor-in-possession.

Notice that the reason the court reached this conclusion was that New York law applied. That is not the case in SCO's bankruptcy with respect to the APA. The 1995 APA chose California as the applicable law:
9.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.
As to the claim that the APA is not executory because Novell has no obligations toward SCO, the APA [PDF] requires Novell to pay SCO an administrative fee on all SVRx royalties, and there is no cutoff date on that obligation. And of course SCO has the obligation to collect the royalties and pay 100% of them to Novell. Section 1.2(b):
(b) Royalties. Buyer agrees to collect and pass through to Seller one hundred percent (100%) of the SVRX Royalties as defined and described in Section 4.16 hereof. Seller agrees to pay Buyer an administrative fee of five percent (5%) of the SVRX Royalties. Seller and Buyer further acknowledge and agree that Seller is retaining all rights to the SVRX Royalties notwithstanding the transfer of the SVRX Licenses to Buyer pursuant hereto, and that Buyer only has legal title and not an equitable interest in such royalties within the meaning of Section 541(d) of the Bankruptcy Code. For purposes of administering the collection of SVRX Royalties, the Parties acknowledge that the royalties shall continue to be recognized as royalties by Seller on an ongoing basis and the parties shall take such commercially reasonable steps as may be necessary to effectuate the foregoing for financial accounting and tax purposes. In addition, Buyer agrees to make payment to Seller of additional royalties retained by Seller in respect of the transfer of UnixWare and on account of Buyer's future sale of UnixWare products. The amounts and timing of additional royalties to be paid in connection with Buyer's sale of the UnixWare products are identified in detail on Schedule 1.2(b) hereto. Seller shall be entitled to conduct periodic audits of Buyer concerning all royalties and payments due to Seller hereunder or under the SVRX Licenses, provided that Seller shall conduct such audits after reasonable notice to Buyer and during normal business hours and shall not be entitled to more than two (2) such audits per year. The cost of any such audit shall be borne by Seller, unless such audit reveals a payment shortfall in excess of 5% of amounts due hereunder in which case the cost of such audit shall be borne by Buyer.
The APA also shows obligations by Novell regarding the license back:
1.6 License Back of Assets. Concurrent with the Closing, Buyer shall execute a license agreement under which it shall grant to Seller a royalty-free, perpetual, worldwide license to (i) all of the technology included in the Assets and (ii) all derivatives of the technology included in the Assets, including the "Eiger" product release (such licensed back technology to be referred to collectively as "Licensed Technology"). Seller agrees that it shall use the Licensed Technology only (i) for internal purposes without restriction or (ii) for resale in bundled or integrated products sold by Seller which are not directly competitive with the core products of Buyer and in which the Licensed Technology does not constitute a primary portion of the value of the total bundled or integrated product. The license agreement shall include reasonable provisions concerning Buyer's obligation to provide documentation and support for the Licensed Technology. The license agreement shall also provide Seller with an unlimited royalty-free, perpetual, worldwide license to the Licensed Technology upon the occurrence of a Change of Control of Buyer described in Section 6.3(c) hereof. In the event of a Change of Control of Seller (as defined in Section 6.6 hereof, the license granted pursuant to the license agreement shall be limited to Seller's products either developed or substantially developed as of the time of the Change of Control.
Also the Technology License Agreement, part of the APA, includes this obligation:
IV. REIMBURSEMENT TO SCO FOR CERTAIN PAYMENT OBLIGATIONS

In the event that the exercise of any of NOVELL's licenses specified in Section II above results in an obligation on the part of SCO to remit any payment to a third party under an Assigned Vendor Agreement, NOVELL shall reimburse SCO for the amount of any such payment remitted by SCO to such third party.

It also includes a no assignment without consent clause:
VII. ASSIGNMENT

A. Neither party hereto may assign this Agreement or any of its rights hereunder to any other person or entity without the prior written consent of the other party; provided, however, that either party may assign its rights and delegate its obligations under this Agreement to its corporate parent, another subsidiary of such parent, or a third party transferee of substantially the entire portion of such party's business to which this agreement relates.

B. Subject to Paragraph A of this Section, this Agreement shall be binding upon and shall inure to the benefit of the successors and permitted assigns of NOVELL and SCO and is not intended to confer upon any other person any rights or remedies hereunder.

The Schedules to the APA also had Seller obligations to help pay for development of the contemplated software, codenamed Eiger, and if unXis is purporting to be trying to restore UnixWare and OpenServer to their "prior glory", it follows they may indeed plan to fulfill that goal, which involves creating a merged UnixWare/OpenServer 64-bit product.

[ Update 3: If you recall, back in 2009, when unXis tried to buy SCO's assets, it put out a press release that SCO put on its website that said that among other goals, it would be doing the following:

  • OpenServer and UnixWare product lines will be kept up to date and maintained into the future with new product roadmaps.

  • Significant investment will be put into "virtualization" products.

  • Significant investment will be made to develop and market a next generation UNIX operating system platform.
Given the realities of the marketplace, I think we may assume they mean some kind of merged 64-bit product. - End Update.]

There was an Operating Agreement associated with the APA, that sets forth what the merged product was to be. Among other things:

I. OBJECTIVES. The Parties objectives in entering into this Operating Agreement are as follows:
a. Provide seamless UnixWare and OpenServer customer migration.

b. Provide a clear migration path for customers to a P7 based 64-bit UNIX system product.

That has not, to date, happened. SCO doesn't have any 64-bit products, making this an unfulfilled contractual term.

According to SCO in its appeal, Amendment 2, should SCO ever require copyrights, requires Novell to provide them. If so, that would be an executory contract's unfulfilled obligation. So here's Amendment 2, and you'll see all the obligations:

A. With respect to Schedule 1.1(b) of the Agreement, titled "Excluded Assets", Section V, Subsection A shall be revised to read:

All copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the Agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies. However, in no event shall Novell be liable to SCO for any claim brought by any third party pertaining to said copyrights and trademarks.

B. Except as provided in Section C below, and notwithstanding the provisions of Article 4.16, Sections (b) and (c) of the Agreement, any potential transaction with an SVRX licensee which concerns a buy-out of any such licensee's royalty obligations shall be managed as follows:

1. Should either party become aware of any such potential transaction, it will immediately notify the other in writing.

2. Any meetings and/or negotiations with the licensee will be attended by both parties, unless agreed otherwise. Novell's participation will be by personnel who are engaged in corporate business development.

3. Any written proposal to be presented to the licensee, including drafts and final versions of any proposed amendments to the SVRX licenses, will be consented to by both parties prior to its delivery to the licensee, unless agreed otherwise.

4. Prior to either parties' unilateral determination as to the suitability of any potential buy-out transaction, the parties will meet face to face and analyze the potential merits and disadvantages of the transaction. No such transaction will be concluded unless the execution copy of the amendment is consented to in writing by both parties, and either party will have the unilateral right to withhold its consent should it judge, for any reason whatsoever, the transaction to be contrary to its economic interests and/or its business plans and strategy.

5. This Amendment does not give Novell the right to increase any SVRX licensee's rights to SVRX source code, nor does it give Novell the right to grant new SVRX source code licenses. In addition, Novell may not prevent SCO from exercising its rights with respect to SVRX source code in accordance with the Agreement.

6. The parties agree that no member of Novell's sales force will receive a bonus, commission, quota attainment credit, or other type of sales incentive as a result of the buy-out of an SVRX license.

C. Novell may execute a buy-out with a licensee without any approval or involvement of SCO, and will no longer be bound by any of the requirements stated in Section B. above, if: (i) SCO ceases to actively and aggressively market SCO's UNIX platforms; or (ii) upon a change of control of SCO as stated in schedule 6.3(g) of the Agreement.

D. Novell and SCO agree to indemnify and hold harmless the other from and against any and all losses, liabilities, judgments, and costs incurred ("Liability") if either causes the other to incur Liability under Section 10 of Amendment No. X to Software Agreement SOFT-00015 as amended, Sublicensing Agreement SUB-00015A as amended, Software Agreement SOFT-00015 Supplement No. 170 as amended, and Substitution Agreement XPER-00015B ("Amendment No. X").

See some ongoing obligations? Heh heh. Of course you do.

Update: To show you what I mean about the exhibits, here they are, and see if you notice that only the first one, the one from SCO to unXis, is a sublicense agreement, with the rest being license agreements, until exhibit 10, which is a fax prior to the APA that mentions sublicensing agreements but doesn't specify what it was for (remember that Novell had book publisher contracts, not just code agreements) nor does it show us one:

  • Exhibit 1, The proposed Sublicense Agreement between SCO and UnXis:
    SUBLICENSE AGREEMENT

    This Sublicense Agreement is made and entered into on the _ _ day of ,2011, by and between The SCO Group, Inc. (referred to herein as "Sublicensor"), a corporation of the State of Delaware, with its place of business at 333 South 520 West, Suite 170, Lindon, Utah 84042-1911, U.S.A., and unXis, Inc. (referred to herein as ("Sublicensee"), a Delaware corporation with its place of business at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19807.

    WHEREAS, by an Asset Purchase Agreement, dated as of January 19, 2011 (the "Purchase Agreement"), among the Buyer and the Seller, as defined therein, the Buyer has agreed to purchase the Acquired Assets from the Seller; and

    WHEREAS, as a part of the purchase price for the Acquired Assets, the Seller has agreed to grant a nonexclusive sublicense to the Licensed Properties, as defined in the Purchase Agreement.

    NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and in the Purchase Agreement, and intending to be legally bound, the parties agree to the following terms and conditions:

  • Exhibit 2, AT&T/Sun Microsystems License Agreement:
    AT&T INFORMATION SYSTEMS INC.
    SOFTWARE AGREEMENT

    1. AT&T INFORMATION SYSTEMS INC., a Delaware corporation ("AT&T-IS"), having an office at 100 Southgate Parkway, Morristown, New Jersey 07960, and SUN MICROSYSTEMS. INC., a California corporation having an office at 2550 Garcia Avenue. Mountain View, California" 94043,

    for itself and its SUBSIDIARIES (collectively referred to herein as "LICENSEE") agree that, after execution of this Agreement by LICENSEE and acceptance of this Agreement by AT&T-IS, the terms and conditions set forth on pages 1 through 8 of this Agreement shall apply to use by LICENSEE of SOFTWARE PRODUCTS that become subject to this Agreement.

  • Exhibit 3, USL.AMADA Software Agreement:
    UNIX SYSTEM LABORATORIES, INC.
    SOFTWARE AGREEMENT

    1. UNIX SYSTEM LABORATORIES, INC., a Delaware corporation ("USL"), having an office at 190 River Road, Summit, New Jersey 07001, and U. S. AMADA, LTD., a California having an office at 7025 Firestone Boulevard, Buena Park, California 90621, for itself and its SUBSIDIARIES (collectively referred to herein as "LICENSEE") agree that, after execution of this Agreement by LICENSEE and acceptance of this Agreement by USL, the terms and conditions set forth on pages 1 through 6 of this Agreement shall apply to use by LICENSEE of SOFTWARE PRODUCTS that become subject to this Agreement.

    2. USL makes certain SOFTWARE PRODUCTS available under this Agreement. Each such SOFTWARE PRODUCT shall become subject to this Agreement on acceptance by USL of a Supplement executed by LICENSEE that identifies such SOFTWARE PRODUCT and lists the DESIGNATED CPUs therefor. The first Supplement for a specific SOFTWARE PRODUCT shall have attached a Schedule for such SOFTWARE PRODUCT. Any additional terms and conditions set forth in such Schedule shall also apply with respect to such SOFTWARE PRODUCT. Initially, Supplement(s) numbered 1 are included in and made part of this Agreement.

  • Exhibit 4, Novell/Super Computers International 1995 Software Agreement:
    NOVELL, INC.
    SOFTWARE AGREEMENT

    1. NOVELL, INC., a Delaware Corporation ("Novell"), having an office at 190 River Road, Summit, New Jersey 07901, and LICENSEE, as defined in the signature block of this Agreement, for itself and its SUBSIDIARIES agree that, after LICENSEE's execution and NOVELL's acceptance of this Agreement, the terms and conditions set forth in this Agreement shall apply to use by LICENSEE of SOFTWARE PRODUCTS that become subject to this Agreement.

    2. NOVELL makes certain SOFTWARE PRODUCTS available under this Agreement. Each such SOFTWARE PRODUCT shall become subject to this Agreement on NOVELL's acceptance of a Supplement executed by LICENSEE that identities such SOFTWARE PRODUCT and lists the DESIGNATED CPUs therefor. The first Supplement for a specific SOFTWARE PRODUCT shall have attached a Schedule for such SOFTWARE PRODUCT. Any additional terms and conditions set forth in such Schedule shall also apply with respect to such SOFTWARE PRODUCT.

  • Exhibit 5, Santa Cruz/Samsung 1997 Software Agreement:
    THE SANTA CRUZ OPERATION, Inc.
    SOFTWARE AGREEMENT 1. The SANTA CRUZ OPERATION, INC. ("SCO"), a California corporation, having an office at 400 Encinal Street, Santa Cruz, California 95061-1900, and SAMSUNG ELECTRONICS CO., LTD. ("SAMSUNG") as defined in the signature block of this Agreement, for itself and its SUBSIDIARIES agree that, after SAMSUNG's execution and SCO's acceptance of this Agreement, the terms and conditions set forth in this Agreement shall apply to use by SAMSUNG of SOFTWARE PRODUCTS that become subject to this Agreement.

    2. SCO makes certain SOFTWARE PRODUCTS available under this Agreement. Each such SOFTWARE PRODUCT shall become subject to this Agreement on SCO's acceptance of a Supplement executed by SAMSUNG that identifies such SOFTWARE PRODUCTS and lists the DESIGNATED CPUs therefor. The first Supplement for a specific SOFTWARE PRODUCT shall have attached a Schedule for such SOFTWARE PRODUCT. Any additional terms and conditions set forth in such Schedule shall also apply with respect to such SOFTWARE PRODUCT….

    II. GRANT OF RIGHTS

    2.01 SCO grants to SAMSUNG a personal, nontransferable and nonexclusive right to use in the Republic of Korea each SOFTWARE PRODUCT identified in the one or more Supplements hereto, solely for SAMSUNG's own internal business purposes and solely on or in conjunction with DESIGNATED CPUs for such SOFTWARE PRODUCT. Such right to use includes the right to modify such SOFTWARE PRODUCT and to prepare derivative works based on such SOFTWARE PRODUCT, provided that any such modification or derivative work that contains any part o f a SOFTWARE PRODUCT subject to this agreement is treated hereunder the same as such SOFTWARE PRODUCT. …

    7.08 Neither this Agreement nor any rights hereunder, in whole or in part, shall be assignable or otherwise transferable by SAMSUNG and any purported assignment or transfer shall be null and void.

    7.09 Except as provided in Section 7.0S(b), nothing in this Agreement grants to SAMSUNG the right to sell, lease or otherwise transfer or dispose of a SOFTWARE PRODUCT in whole or in part.

  • Exhibit 6, Caldera/Cisco 2002 Reference Software Agreement:
    CALDERA INTERNATIONAL, INC.
    REFERENCE SOFTWARE AGREEMENT

    This Agreement is between Caldera International, Inc. for itself or its Subsidiaries (collectively referred to herein as ("Caldera"), a corporation of the State of Delaware, with its place of business at 355 South 520 West, Suite 100, Lindon. Utah 84042 USA, and Cisco Systems ("Licensee"), with its place of business at 6450 Wedgwood Road, Maple Grove, Minnesota 55311.

    Subject to the terms and conditions of this Agreement, Caldera will provide Licensee the right to acquire certain Reference Software Products. Each such Reference Software Product that is identified in an Exhibit to this Agreement is made part hereof.

  • Exhibit 7, SCO Group/Northrop Grumman 2003 Reference Software Agreement:
    THE SCO GROUP, INC.
    REFERENCE SOFTWARE AGREEMENT

    This Agreement is between The SCO Group. Inc. for itself or its Subsidiaries (collectively referred to herein as ("SCO"), a corporation of the State of Delaware, with its place of business at 355 South 520 West, Suite 100, Lindon, Utah 84042 USA, and Northrop Grumman Space and Mission Systems Corp, acting through its Space Technology sector, having a place of business at One Space Park, Redondo Beach, California, for itself, its subsidiaries, its affiliates and its consultants ("Licensee")".

    WHEREAS, SCO is a licensor, manufacturer and distributor of SCO, third party Open Source software and related products, materials and services, and

    Subject to the terms and conditions of this Agreement, SCO will provide Licensee the right to acquire certain Reference Software Products. Each such Reference Software Product that is identified in an Exhibit to this Agreement is made part hereof.

  • Exhibit 8, Caldera/Samsung 2002 Source for Support Agreement:
    SOURCE FOR SUPPORT AGREEMENT

    This Agreement is made and entered into on the date last executed by and between Caldera International, Inc. for itself or its Subsidiaries (collectively referred to herein as "Caldera"), a corporation of the State of Delaware, with its place of business at 355 South 520 West, Lindon, Utah 84042. U.S.A. and Samsung Electronics Co., Ltd.. (hereinafter "Licensee") a Korean corporation, with a place of business at 20F Daechi Building, #889-11, Daechi 4-dong, Kangnam-gu, Seoul, Korea.

    This Agreement is available only to companies who have previously executed and retained in force agreements with The Santa Cruz Operation, Inc. ("Caldera") to distribute Packaged Product Copies and who have executed and retain in force agreements with Caldera for Packaged Product Copies support.

    NOW THEREFORE, the parties agree as follows:

    I. The parties agree that, after Licensee's execution and Caldera's acceptance of this Agreement, the terms and conditions set forth in this Agreement shall apply to use by Licensee of Source Code Product(s) that become subject to this Agreement.

  • Exhibit 9, Caldera/Trusted Systems on the Net 2002 Reference Software Agreement:
    CALDERA INTERNATIONAL,INC.
    REFERENCE SOFTWARE AGREEMENT

    This Agreement is between Caldera International, Inc. for itself or its Subsidiaries (collectively referred to herein as ("Caldera"), a corporation of the State of Delaware, with its place of business at 355 South 520 West, Suite 100, Lindon, Utah 84042 USA, and Trusted Systems on the Net., Co., Ltd. ("Licensee"), a corporation of Korea, with its place of business at 204 ETRl TBI, Acun-dong 1, Yusung-gu, Taejon, Korea.

    WHEREAS, Caldera is a licensor, manufacturer and distributor of Caldera, third party Open Source software and related products, materials and services, and

    Subject to the terms and conditions of this Agreement, Caldera will provide Licensee the right to acquire certain Reference Software Products.

  • Exhibit 10, November 1995 Fax from Louis Ackerman at Novell to Steve Sabbath at Santa Cruz:
    F*A*X

    DATE: November 22, 1995

    ATTENTION: Steve Sabbath

    COPY TO: Kelly Hicks

    RE: SOW FOR LICENSING & CONTRACT MANAGEMENT

    Steve,

    I have received your November 17, 1995 SO. I can agree to work within your parameters, and still meet Novell's post closing deliverables. (These are the notification of licensee and assignment of licenses, and the delivery of hard copies of the agreements to SCO). Bob Rosenberg has had discussions with Kelly Hicks to identify the banks to be used for deposits, wire transfers, etc.

    I am assuming that there are no systems required by SCO for licensing since these are are not included in your SOW. I have asked Burt to craft a formal agreement that will permit the Contract Managers you have designated to execute the agreements on behalf of SCO, and that will insulate Novell from liability to either SCO or the customer for any agreement executed by the Contract Managers on SCO's behalf.

    I have also asked John Maciaszek to investigate the approval process we should use on any agreement requiring the use of non-standard terms and conditions. I would prefer that there be a method in place that has an SCO employee authorizing any agreement that uses non-standard T's & C's since these will be executed by Novell employees. Currently Novell has a two signature approval on any Special or Standard Pricing Letter where the Director in charge of the Business Unit that owns the product signs off in addition to the Regional Controller.

    Would you also please confirm that SCO intends to:

    1. Use the standard Software Agreement and Sublicensing Agreement currently used by Novell, with the exception of the necessary name and address changes, for any new customers,

    2. Use the current UnixWare product schedules with the necessary name and address changes where appropriate, and

    3. Use the existing schedules for SVRx and Auxiliary Products with the necessary name and address changes where appropriate.

    Best Regards,

    Louis S. Ackerman [fax, voice, email]

    Copies To:
    S. Adams
    W. Bauer
    W. Broderick
    S. Jonas
    B. Levine
    J. Maciaszek
    R. Rosenberg

    As you can see, only the unXis agreement talks about sublicensing. All the other agreements talk about licenses to use software products, and none of them were involving a sale of assets.

    By the way, I can't help but notice paragraph 10 of the Order on page 9, which says unXis is to satisfy any cure amounts associated with assumed contracts up to $50,000, and SCO "shall be responsible for promptly satisfying any cure amounts associated with the Assumed Contracts in excess of Buyer's $50,000.00 Cure Limit."

    I'm sure SCO will get right on that. But what is the next sentence about? "Buyer shall be permitted, up to one day prior to closing, to remove any contract from the list of Assumed Contracts whereupon such contract shall remain with the estate and no cure amounts shall be due and payable in connection with this Order or sale of the software product business." Paragraph 11 says the parties can modify the APA or any related agreements if they sign a written document and provided that the changes are not material and don't change "the economic substance of the transactions contemplated hereby."

    Worse, the bankruptcy judge says he'll keep jurisdiction until the cases are closed or dismissed, so enforcement is under his umbrella.

    He says nothing is due to HP, no cure amounts, and HP "consents" to the deal, including the transfer of the Release HP got from SCO in 2003.

    The Order says the APA is attached, but it's not. But you can find the APA [PDF] and some analysis here. You can find a list of other rulings from Judge Gross here and some case summaries here. He is fairly new to the bench, appointed in 2005. Wikipedia has some information on the Midway Games bankruptcy, and it includes this snippet about Judge Gross, who presided:

    On January 29, 2010, the bankruptcy court dismissed claims brought by Midway creditors in May 2009 for fraud and breach of duty against Sumner Redstone, Shari Redstone and Midway directors, concerning his 2008 loans to the company and his subsequent sale of his 87% stake in the company to Mark Thomas, which increased Midway's net debt and wiped out the company's net operating losses and other tax assets. Judge Kevin Gross wrote that his decision was "not an endorsement of any of the defendants' actions.... The defendants oversaw the ruin of a once highly successful company, only to hide behind the protective skirt of Delaware law, which the court is bound to apply."
    Like I said, Delaware bankruptcy court is a cesspool.

    Update 2: I woke up realizing that the sublicenses mentioned in Exhibit 10 must be referencing the third-party software in OpenServer and UnixWare. If you look at the copyrights file in each, you'll see a very long list.

    For just one small example, at SCOForum 2004, they showed a graphic regarding a tool kit in UnixWare 7 that included the GNU Tool Chain. SCO, obviously, didn't write that, so on any transfer, it would have to sublicense:

    OpenServer 6 had the GNU Development Tools, including the GNU g77 FORTRAN compiler and the GNU-based GNAT Ada 95 compiler, none of which SCO wrote or owns. And UnixWare 7 has Java, Apache, Perl PHP, PostgresSQL, and a number of other applications in it, none of which are SCO's:

    And here's a chart [PDF] SCO offered on its Benelux website of what is in OpenServer 5.0.7 compared to OpenServer 6.0. You'll see both include things like Mozilla, Apache, Samba, cups, MySQL, FAT32, VFAT, KDE and HP MSA 1000, none of which SCO developed. Hence they'd need sublicenses to transfer OpenServer with those materials inside. On page 2, if you translate from the Dutch, it says "SCO OpenServer Release 6 supports UnixWare applications and is installed with the KDE desktop."

    This technical paper [PDF] explains that OpenServer 6 incorporated the UnixWare 7 kernel, SVR5, as it states on page 8: "SCO OpenServer 6 is built from the System V Release 5 (SVR5) UNIX kernel." Again, though, it allowed for up to 32 CPUs. It had extensions to the Single UNIX Specification "to support 64-bit filesystems on 32-bit systems", instead, as you can see on page 10. You could run Windows XP and 2000 applications on it, with a tool they called MergePro.

    At that same 2004 SCOforum, Darl announced SCO hoped to merge UnixWare and OpenServer and created a merged 64-bit product by 2006. So it certainly hadn't yet happened. It was to be named Diamond. Here's a graphic Eric Hughes showed of the plan:

    The merged product was supposed to be on SVR6, Hughes said:

    But although SCO announced Diamond, it was cancelled and never happened. Both OpenServer and UnixWare are still on SVR5. In 1998, SCO announced plans for the merged product, once Intel had Merced ready, and they did a kind of a merge of UnixWare with some OpenServer materials, but mostly they did things like LKP and OKP, to make it possible to run applications on other operating systems. And Merced, if you recall, kept not being ready. It's why Project Monterey eventually died. And so the merged product contemplated by the APA has yet to be produced.

    Update 4: I see there are suggestions on what I should title the book I eventually write about the SCO saga. My personal favorite title:

    Trial By Escher, Möbius, & Klein:
    A case of law twisted into injustice

    "M. C. Escher" (Wikipedia article)
    "Möbius strip" (Wikipedia article)
    "Klein bottle" (Wikipedia article)

    I had never heard of a Klein bottle. Hilariously, it's defined like this: "In mathematics, the Klein bottle (pronounced /ˈklaɪn/) is a non-orientable surface, informally, a surface (a two-dimensional manifold) in which notions of left and right cannot be consistently defined." Hahahaha. I so love doing Groklaw with you guys.

    Update 5: I have the audio now, and I'll write more about it after I've listened to all of it, but in listening to Broderick's testimony, he is actually talking about sublicense agreements as agreements a licensee had to get on top of the license agreement if they wished to modify and sell a binary of their own. How that makes unXis a sublicensee of SCO is beyond me, but that is what he says. You can see in Amendment 2 a reference to a sublicensing agreement, in the context of IBM: "Sublicensing Agreement SUB-00015A", which you can read here. It's on top of IBM's license agreement, SUB-00015. But in that case, the licensee also got the sublicense agreement, so it could distribute. So IBM or whoever took a license, and then to distribute to customers it took a sublicensing agreement. Now there is a missing step. Where is the unXis license agreement? It doesn't have one. It skips to the sublicensing agreement. It's totally different than what was normal procedure.

    The Memorandum Opinion Re Sale Motion as text:

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

    IN THE UNITED STATES BANKRUPTCY COURT
    FOR THE DISTRICT OF DELAWARE

    In re:

    The SCO GROUP, INC., et. al.,

    Debtors.

    ______________

    Chapter 11

    Case No. 07-11337 (KG)

    Re Dkt No. 1141

    ________________

    MEMORANDUM OPINION RE SALE MOTION

    The Court held an evidentiary hearing on March 2, 2011, on the motion of the Chapter 11 Trustee for Debtors to authorize the sale of subtantially all of Debtors' software product business assets (excluding certain specified assets) (the "Software Business") and related relief (the "Motion").1 The necessity of an immediate ruling precludes a detailed recitation of the intricate and interesting history of Debtors' disputes, particularly with Novell, Inc. ("Novell"). The Court will therefore limit its discussion to only the critical facts and law.

    The Court entered a sales procedure order on August 23, 2010 (D.I. 1161), pursuant to which the Trustee conducted an auction. unXis, Inc. ("unXix") was the successful bidder and agreed to pay $600,000 in cash and warrants. A second bidder submitted a bid of only $18 in cash. The Trustee seeks the Court's approval of the sale to unXis.

    The lone objector to the Motion, Novell, raises the following arguments:

    1. In litigation between Debtors and Novell2, it was determined that Debtors were licensees, not owners, of UNIX software copyrights. Therefore, if unXis is to operate the Software Business it is purchasing, Debtors must assume and assign the original asset purchase agreement (the "1995 APA") which provided Debtors with the license. Debtors must assume the entirety of the 1995 APA, the benefits and the burdens, and all of the contracts which constitute an integrated transaction. Before they can do so, Debtors must cure the breach of the 1995 APA by paying the $3 million owned Novell.

    2. Any assumption and assignment requires Novell's consent.

    3. The Trustee must provide adequate assurance of future performance.

    The Trustee responds to the Novell arguments with the assertion that he is only selling what Debtors own. The Trustee cites findings of fact and conclusions of law ("F&C") and holdings of the District Court, which include the following:

    a. Novell sold Debtors the UnixWare business.

    b. Debtors had the right to license the UNIX technology.

    c. "the copyrights are not required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies. SCO did not acquire the entire UNIX business from Novell, but only acquired the UnixWare business while undisputed evidence is that SCO did not need the UNIX and UnixWare copyrights in order to operate its UnixWare product business. Further, ownership of the copyrights in not required for SCO to protect its own code."

    F&C ¶¶ 72, 79, 80, 123-130.

    2

    It is clear from the foregoing that the Trustee is trying to sell only the rights Debtor received in the 1995 APA, the development. unXis is therefore receiving only the rights that the District Court determined Debtors have -- nothing more and nothing less. Debtors have sublicensed the materials in the ordinary course of its business without Novell's permission or insistence that it had to give its permission, since 1995. Thus, Debtors are seeking authority to sell property of the estate. The Trustee concedes that if it does not own an asset, he is not selling it. Novell's consent is therefore not necessary. Moreover, the parties established a course of conduct precluding consent. Broderick Declaration.

    The Court is also satisfied, contrary to Novell's argument, that the 1995 APA is not an executory contract requiring assumption, or an integrated transaction requiring assumption of all related contracts. See In re Exide Techs., 340 B. R. 222, 229 (Bankr. D. Del. 2006), aff'd, 607 F. 3d 957 (3d Cir. 2010). The Third Circuit Court of Appeals in Exide was very clear. "[U]nless both parties have unperformed obligations that would constitute a material breach if not performed, the contract is not executory under §365." In re Columbia Gas, 50 F.3d 233, 239 (3d Cir. 1995). Novell does not have any unperformed obligations.

    The Court understands Novell's desire to punish Debtors for years of expensive and painful litigation. Here Novell's objection to the Motion will not prevail. The Motion seeks the Court's approval of Debtors' business judgment. The Court will enter an Order granting the Motion.

    Dated: March 7, 2011.

    [signature]
    KEVIN GROSS, U.S.B.J.

    ___________
    1 The full title of the Motion is "Motion of Chapter 11 Trustee for Order (1) Authorizing the Marketing, Auction and Sale of Substantially all of the Debtors' Software Business Assets Consistent with Form Asset Purchase Agreement and Free and Clear of Liens, Claims and Encumbrances, (2) Authorizing Assumption, Assignment, and Sale of Certain Executory Contracts and Unexpired Leases, (3) Approving Bidding Procedures in Connection with Auction, (4) Establishing Sale Hearing Date and (5) Granting Related Relief.(D. I. 1141).

    2 The litigation between Debtors and Novell, Case No. 2:04-CV-13QTS, was pending in the United States District Court for the District of Utah (the "District Court" and the "District Court Action").


  


Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal - Updated 5Xs | 589 comments | Create New Account
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Judge Gross Approves Sale of SCO's Assets to UnXis
Authored by: Anonymous on Monday, March 07 2011 @ 06:00 PM EST
That's gross, really. I can't believe it.

How is the proceeding now, if (and I guess it will) Novell appeals?

I am against violence, so sbdy should take gross out and shout at him (shout,
not shoot)!

[ Reply to This | # ]

Corrections thread
Authored by: Anonymous on Monday, March 07 2011 @ 06:03 PM EST
...Not that there is too much to correct here - spelling-wise...

Ruling-wise is a different matter entirely, of course.

(I checked my blood for drugs but didn't find any - so I guess I read this
article correctly. Nice reality :-( ....)

At least the market for popcorn and beer won't fail immediately ;-)

[ Reply to This | # ]

Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal
Authored by: Anonymous on Monday, March 07 2011 @ 06:04 PM EST

Gee, another rigged court that we "have" to respect.

[ Reply to This | # ]

Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal
Authored by: tanner andrews on Monday, March 07 2011 @ 06:13 PM EST

Pray tell: how well does a sublicense from SCO to this new lot work, if SCO folds up and disappears up its own wazoo?

---
I am not your lawyer; please ignore above message.

[ Reply to This | # ]

Desire for Punishment
Authored by: DaveJakeman on Monday, March 07 2011 @ 06:17 PM EST
The Court understands Novell's desire to punish Debtors for years of expensive and painful litigation.
Nothing to do with Novell wanting its $3 million then.

[ Reply to This | # ]

Somebody take me out back and shoot me... (n/m)
Authored by: Anonymous on Monday, March 07 2011 @ 06:18 PM EST
MSS2

(Note well: This is not a literal request. Hey, no, it's just a metaphor! Let
go of me! Help!)

[ Reply to This | # ]

The court understands...
Authored by: Anonymous on Monday, March 07 2011 @ 06:21 PM EST
The Court understands Novell's desire to punish Debtors for years of expensive and painful litigation. Here Novell's objection to the Motion will not prevail.

Including this statement just seems petty to me. I think any reasonable person could see where there could be some argument over whether or not the APA is executory.

[ Reply to This | # ]

SysV license
Authored by: Anonymous on Monday, March 07 2011 @ 06:24 PM EST
Who do the existing SysV licenses pay now?

Does the money get forwarded to Novell?

[ Reply to This | # ]

Corrections Thread
Authored by: bugstomper on Monday, March 07 2011 @ 06:25 PM EST
Please summarize the correction in the Title box error->correction or
s/error/correction/ to make it easy to scan the list and avoid duplicates

[ Reply to This | # ]

Off Topic threads
Authored by: bugstomper on Monday, March 07 2011 @ 06:26 PM EST
Here's the place to post off-topic comments.

[ Reply to This | # ]

Chapter 7
Authored by: Anonymous on Monday, March 07 2011 @ 06:36 PM EST
If SCO was going to sell all assets to unXis, why didn't Judge Gross allow it to
go into Chapter 7 - Liquidation like it should have in the first place?

Justice seems to be a sham.

[ Reply to This | # ]

Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal
Authored by: Anonymous on Monday, March 07 2011 @ 06:49 PM EST
Surprised? No.

Tufty

[ Reply to This | # ]

Will Novell appeal everything or just this?
Authored by: Oliver on Monday, March 07 2011 @ 06:51 PM EST
So if (or possibly when) Novell appeals, do they have to
appeal everything that has gone against them, or just this
ruling? Or could they do either? I.e. if they don't appeal
everything then do they lose the opportunity to do so?

If they do appeal everything the appeal might be quite
interesting reading.

[ Reply to This | # ]

SCO lost
Authored by: Anonymous on Monday, March 07 2011 @ 06:53 PM EST

Gross struck out the language in the proposed order that would have waived the statutory two-week delay. If Novell applies to the Delaware district order for a stay pending appeal, and gets it, then the sale is effectively dead, because Novell could delay it for years (having learned from a master.)

[ Reply to This | # ]

Judge Gross plays fast and loose ....
Authored by: nsomos on Monday, March 07 2011 @ 06:59 PM EST
I seem to recall there were multiple objection to the
motion. While all but one were dealt with at the hearing,
I suppose I shouldn't be surprised that Gross writes
"The lone objector to the Motion, Novell," as if there
had been no other objections.

After all, it seems that Gross plays rather fast and loose.

[ Reply to This | # ]

Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal
Authored by: Anonymous on Monday, March 07 2011 @ 06:59 PM EST
If I understand the ruling correctly, the judge decided that the APA is not an
executory contract because Novell has no obligations under the APA.

But is Novell not required to give SCO 5% of the UNIX royalties to SCO? Wouldn't
that constitute an obligation under the APA?

[ Reply to This | # ]

I shouldnt be but I am shocked.
Authored by: Anonymous on Monday, March 07 2011 @ 07:06 PM EST
I really and truly hope that Novell has finally been pushed on
an issue they will appeal.

Failing to appeal this ruling will effectively lose control of
the UNIX business and in this last roll of the dice it could
be argued that SCO will have done more damage to Novell than
if they had substantially succeeded at trial.

---
Clocks
"Ita erat quando hic adveni."

[ Reply to This | # ]

Is Judge Gross a patent examiner, too?
Authored by: Anonymous on Monday, March 07 2011 @ 07:15 PM EST
We've seen actions like this all too often by the Patent Office:

"Hmmm... I have no clue about this... I'll just OK it and let some (other)
court handle it."

Sheesh.

[ Reply to This | # ]

Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal
Authored by: FoxyLad on Monday, March 07 2011 @ 07:37 PM EST
Wow. This might be "just" bankruptcy court, but it is beyond belief
what SCOG is getting away with. Cancelling hearings when it wants, avoiding
chapter 7 for years, and now being allowed to sell something it doesn't own...
just wow.

I'm not from the US, but I am starting to have dealings there. This parody of
justice is giving me serious second thoughts - if the bankruptcy court is able
to bilk another US company with such impunity, what would it do to a foreign
company? It seems that any company can have it's intellectual property swiped in
broad daylight, and in front a judge no less. With no recourse other than years
of legal wrangling that will impoverish the company, and with no certain
outcome.

Who'd choose to do business in the US any more?

---
All generalisations are dangerous... including this one.

[ Reply to This | # ]

Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal
Authored by: Anonymous on Monday, March 07 2011 @ 07:43 PM EST
"some of you have lost all respect for the US legal system,"

There is a higher probability of justice with ^ guns at high
noon than there is in the US legal system.

[ Reply to This | # ]

Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal
Authored by: Anonymous on Monday, March 07 2011 @ 08:16 PM EST
The Moral here - is avoid doing business IN UTAH or with businesses based in
UTAH.

[ Reply to This | # ]

Judge Gross needs to be removed from the bench.
Authored by: Kilz on Monday, March 07 2011 @ 08:24 PM EST
I wonder how a bankruptcy judge can be removed?

[ Reply to This | # ]

Did this kangaroo court...
Authored by: Anonymous on Monday, March 07 2011 @ 08:25 PM EST

...just give SCO everything they lost in all the other courts?

[ Reply to This | # ]

dead if you do and dead if you don't
Authored by: Anonymous on Monday, March 07 2011 @ 08:25 PM EST
actually I think this works out pretty well. if Judge Gross had found for Novell
then SCO would have found another trick in its bag of tricks to keep this going
in bankruptcy court until they found some way around the problem or most likely
died.

as is by the time the appeal is heard the only way they will be able to finance
the case is by sending out the remaining staff to street corners across the
country with tin cups. To put it another way still dead.

[ Reply to This | # ]

SCO - mission accomplished
Authored by: Anonymous on Monday, March 07 2011 @ 08:36 PM EST
DELAY!!!

They're not through spending...

Administratively Insolvent = We're broke, but Novell's money isn't quite gone
yet.

[ Reply to This | # ]

  • Next up: - Authored by: Anonymous on Monday, March 07 2011 @ 11:59 PM EST
Perhaps the good judge has a point
Authored by: jbb on Monday, March 07 2011 @ 08:58 PM EST
Since SCO stopped sending royalty payments to Novell years ago, there is no 5% for Novell to give back to SCO. It is also perfectly clear that UnXis will be run by the same dirty rotton SCOundrels who will continue to stiff Novell so even going into the future there will never be a 5% payment back from Novell.

---
[ ] Obey DRM Restrictions
[X] Ignore DRM Restrictions

[ Reply to This | # ]

Too bad didn't think of this earlier ...
Authored by: Anonymous on Monday, March 07 2011 @ 09:18 PM EST
but SCO could have included the State of Delaware in the asset
list to be sold and may have prevailed.

[ Reply to This | # ]

SCO: The new definition of the Sebonian Bog
Authored by: brindafella on Monday, March 07 2011 @ 09:41 PM EST

I just ran across an interesting piece of legal arcanae (read 'obscurity').

The Serbonian Bog is an area on the Mediterranean coast of Egypt where, it is said, whole armies have disappeared over the millenia. Because it is lightly covered by sands blown from the desert, it appears to be solid ground; however, it is actually a morass where people, animals, vehicles, etc, sink and are lost.

The analogy has been used by various legal people including US Supreme Court justices during judgements.

All this sounds like the legal cases and tactics of SCO.

Hence, my mentioning the Serbonian Bog.

[ Reply to This | # ]

he Court understands Novell's desire to punish Debtors
Authored by: Anonymous on Monday, March 07 2011 @ 10:07 PM EST
"The Court understands Novell's desire to punish Debtors for years of
expensive and painful litigation. Here Novell's objection to the Motion will not
prevail. The Motion seeks the Court's approval of Debtors' business judgment.
The Court will enter an Order granting the Motion."

Hard to believe he actually included this in his decision.

[ Reply to This | # ]

Judge orders conversion of Novells property
Authored by: Anonymous on Monday, March 07 2011 @ 10:15 PM EST
So a while back when SCO made deal with Microsoft and SUN another court found
that SCO had overstepped the bounds of its duties under the contract with Novell
and had actually committed conversion.

Now a Judge orders the essentially the same thing SCO did before
"On page 8, in the paragraph numbered 6, it states that Unxis is receiving
a "royalty-free right and sublicense to use the Licensed Properties, [...]
which shall include the copyrights owned by Novell[...]"

Is this not court ordered conversion ?

[ Reply to This | # ]

"The judge might not know any better, but they have to, I think."
Authored by: Anonymous on Monday, March 07 2011 @ 11:23 PM EST
What do you mean by that, PJ?

"The judge might not know any better, but they [Blank Rome] have to, I
think."

[ Reply to This | # ]

Appeal to whom?
Authored by: Anonymous on Monday, March 07 2011 @ 11:35 PM EST
If Novell appeals, to whom do they appeal? It has to be some other court than
this one, doesn't it?

[ Reply to This | # ]

News Picks thread
Authored by: artp on Tuesday, March 08 2011 @ 12:07 AM EST
I couldn't find one, anonymous or otherwise, anywhere in the replies. Please
shoot me down if I am wrong. [Hopefully in the non-anonymous Corrections Thread,
where I can remove this before it becomes a problem.]

Are we all confused yet ?

Oh, URLs, please.

---
Userfriendly on WGA server outage:
When you're chained to an oar you don't think you should go down when the galley
sinks ?

[ Reply to This | # ]

MEMORANDUM OPINION RE SALE MOTION
Authored by: The Mad Hatter r on Tuesday, March 08 2011 @ 12:08 AM EST

This is the single most fascinating document that I've read yet on Groklaw. And also the most disturbing. Yes, there have been other rulings that I've thought were not quite right, but they were explainable - most of the time they came up because the judge in question hadn't had enough experience with The SCO Group yet, like when Magistrate Judge Brooke Wells gave SCO discovery in the IBM case that went far further than I thought was necessary.

Given time she learned what sort of an organization she was dealing with, and clamped down.

You would think that after 3 1/2 years that Judge Gross would know what he's dealing with. Maybe he does, and just wants it out of his court. I don't know. But reading this, was, well, disturbing beyond belief.
The Court held an evidentiary hearing on March 2, 2011, on the motion of the Chapter 11 Trustee for Debtors to authorize the sale of subtantially all of Debtors' software product business assets (excluding certain specified assets) (the "Software Business") and related relief (the "Motion").1 The necessity of an immediate ruling precludes a detailed recitation of the intricate and interesting history of Debtors' disputes, particularly with Novell, Inc. ("Novell"). The Court will therefore limit its discussion to only the critical facts and law.
The necessity of an immediate ruling - what interesting words. I'm not sure how often companies stay in Chapter 11 for 3 1/2 years. For that matter, I'm not sure how many companies in Chapter 11 lose money the way that The SCO Group has. I've seen a lot of Chapter 11 cases both as vendor, and as customer, and I've never seen anything like this.

I was thinking of making further comments on the text, but it was doing interesting things to my blood pressure, and since my wife and puppies expect me to be alive in the morning I'd better stop now.

Besides, my protagonist is scheduled to kill at least one more person before I go to bed. He's a murderous little guy.

---
Wayne

http://madhatter.ca/

[ Reply to This | # ]

Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal - Updated
Authored by: mashmorgan on Tuesday, March 08 2011 @ 12:26 AM EST
I always thought the USA legal system was a bit "Dodgy",

This definitely confirms IT

[ Reply to This | # ]

Is bankruptcy court the "turkey farm" of the federal bench?
Authored by: Anonymous on Tuesday, March 08 2011 @ 12:51 AM EST
I am now inclined to believe the bankruptcy bench does not attract the greatest
legal minds in our federal judiciary. This strikes me as behavior of a judge who
is in over his head.

I'm willing to bet that Judge Gross is smarter than me. He may see the futility
of his decision ending this case. So he issues a readily appealable decision.
The one chance his decision does stand relies upon the discretion of a
reasonable party.

I might be tempted to leave my integrity in the hands of a deep pocketed
advocate for a particularly disagreeable case, contesting paltry sums, were I a
judge with way too many cases. 'course my integrity ain't nothin' to write home
about.

Is this a symptom of the backlog of acceptance of judicial nominees in the
Senate?

[ Reply to This | # ]

Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal - Updated
Authored by: jmoellers on Tuesday, March 08 2011 @ 02:31 AM EST
I may have mentioned this earlier, but I think that many of the decisions of the
various judges in the various SCO cases are based upon the fear that the whole
case may have to be re-done because at some point or another, SCO claims that it
was not treated fairly. So, the judges rule in their favor just to have the
rulings overturned! In the end, SCO cannot claim to be treated unfairly!
Not that this makes the whole kaboodle more tasteful.

[ Reply to This | # ]

February - Whoops, make that March!
Authored by: Anonymous on Tuesday, March 08 2011 @ 03:02 AM EST
So was Judge Gross's order written well in advance of the hearing on March 2nd.
Indeed, prior to February 15th per chance?

1) At the end of the order, "February" has been crossed out in pen and
replaced with "March" in hand writing.

2) Clause I refers to the "... February 16, 2011 Sale Hearing, ...".
Wasn't that hearing postponed?

Thus Judge Gross appears to have decided his view in advance of any arguments
Novell presented. Wow.

[ Reply to This | # ]

*TILT* Judge Gross Approves Sale *TILT*
Authored by: SilverWave on Tuesday, March 08 2011 @ 03:10 AM EST
Ah ha :-|

No surprise really.

---
RMS: The 4 Freedoms
0 run the program for any purpose
1 study the source code and change it
2 make copies and distribute them
3 publish modified versions

[ Reply to This | # ]

PJ, I hope you're planning for the future...
Authored by: Anonymous on Tuesday, March 08 2011 @ 04:09 AM EST
Seriously, the whole SCO saga is worth writing a book about, in whodunit style.
Wouldn't that be a nice way to educate the public, and a few politicians, about
some obvious deficiencies of the US judicial system? Not to mention the clear
demonstration that Linux is "clean", a few considerations on the
current state of IP law, and how some corporations prefer to compete using dirty
tricks rather than good products...

[ Reply to This | # ]

Logic disconnect
Authored by: eggplant37 on Tuesday, March 08 2011 @ 06:29 AM EST
From the ruling: "The Trustee concedes that if it does not own an
asset, he is not selling it."

How then can the Trustee sell something it does not own?? How does
this sale get carried out to sell all the assets and remaining
business, but include things that the Trustee or the Debtor do not
own?

I don't get it. Someone please explain it to me like I'm 4-year-
old.

[ Reply to This | # ]

Take him out back...
Authored by: Anonymous on Tuesday, March 08 2011 @ 06:34 AM EST
I liked Anon's comment at the top - take him out back and
shout at him.

[ Reply to This | # ]

  • Better yet ... - Authored by: Anonymous on Wednesday, March 09 2011 @ 11:47 AM EST
Where Is The U.S. Trustee?
Authored by: lnuss on Tuesday, March 08 2011 @ 07:57 AM EST
Or has that supposed overseer been dropped?

---
Larry N.

[ Reply to This | # ]

Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal - Updated
Authored by: Pogue Mahone on Tuesday, March 08 2011 @ 08:52 AM EST
If the APA is non-executory, just exactly what has SCO sold?

As I understand it, the APA is the only agreement that gives SCOG the right to
use the SVR4 sourcecode on which Unixware is based. Without that agreement, the
assets are useless. SCOG cannot sublicense anything that they themselves don't
have a license to use. It's true that the oldSCO Unix was based on SVR3, which
may be the subject of a different license, but oldSCO Unix must be pretty well
dead by now.

If this is all true, maybe Novell will let the decision stand (along with all it
implies wrt. handing over copyrights in the "other" case). SCO goes to
the wall, and Novell waits to see what Unxis does. Any attempt to distribute
anything Unixwarey and they get sued till they glow.

---
delta alpha victor echo at foxtrot echo november dash november echo tango dot
delta echo

I'm not afraid of receiving e-mail from strangers.

[ Reply to This | # ]

Sorry, but this thread should be deleted.
Authored by: Anonymous on Tuesday, March 08 2011 @ 09:16 AM EST
While I believe that this thread isn't actually intending to make death threats,
and that it's actually throwing His Honor's [oh, that hurts] own words back at
him...

I think it would be too easy for readers to get the wrong idea. I also think
it's inviting posts from a fringe element that may lack restraint.

We of Groklaw, as a community, are better than this... aren't we? =/

[ Reply to This | # ]

Another reason why the APA is executory ...
Authored by: nsomos on Tuesday, March 08 2011 @ 09:52 AM EST
As I recall Novell can periodically ask for audits of
how SCOG is doing with the royalty collections.
From the APA ...
--------------------------
Seller shall be entitled to conduct periodic audits of Buyer concerning all
royalties and payments due to Seller hereunder or under the SVRX Licenses,
provided that Seller shall conduct such audits after reasonable notice to Buyer
and during normal business hours and shall not be entitled to more than two (2)
such audits per year.
--------------------------------

This auditing activity itself, is probably sufficient
to make the APA executory. It is not a payment as such,
but is an activity that SCO must submit to when Novell
requests.

[ Reply to This | # ]

What a good advertisment for the USA
Authored by: cricketjeff on Tuesday, March 08 2011 @ 10:44 AM EST
Why would any non-US company ever again sign a contract with an American
enterprise? Why would anyone, US citizen or not, ever again invest in a US
business? Even if, as I sincerely hope it is, this is reversed on appeal the
case so far makes it clear that the bankruptcy courts in the US have no interest
in facts, equity or justice. It appears all you have to do to steal huge sums of
money perfectly legally in the land of the free is to claim to be bankrupt.

A very very sad state of affairs.

---
There is nothing in life that doesn't look better after a good cup of tea.

[ Reply to This | # ]

Novell has 14 Days to Appeal - Now What?
Authored by: rsteinmetz70112 on Tuesday, March 08 2011 @ 11:46 AM EST
What does Novell need to do in those 14 days?

Merely file a notice they intend appeal or must they file a more substantial
brief giving all of the legal arguments and citations?

---
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 | # ]

Thin silver lining.
Authored by: Ian Al on Tuesday, March 08 2011 @ 12:53 PM EST
It occurs to me that the unXis $600k will have to stay in trust for years while
the Novell appeal plays out. I hope it wasn't a loan. That could be expensive.
Particularly if it came from Fat Tony!

In any case, the real value of those funds will reduce according to the US
inflation rate.

The only way to clear the trust is to withdraw the sale proposal. I have not
seen anything in the terms of auction (OK, I didn't look) that says that the
sale can be cancelled if there are inequitable delays in closing the sale.

Perhaps unXis should sue Cahn to get there money back. No wait, the suit would
be frozen by the bankruptcy.

Would the $600k be stuck in the fund for all eternity with it being impossible
to dispose of the sold assets any other way and thus impossible to close SCO?

I do hope that Novell would not find every way of delaying the outcome of the
appeal just because of their 'desire to punish Debtors for years of expensive
and painful litigation'. The Debtors, of course, are now Cahn and the SCO
lawyers.

---
Regards
Ian Al
SCOG: Intentionally left Blank Rome upt

[ Reply to This | # ]

Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal - Updated 4Xs
Authored by: Anonymous on Tuesday, March 08 2011 @ 01:38 PM EST
Someone buy PJ a nice Klein bottle (maybe this one). Though maybe a Cup of Tantalus is more fitting for someone who's watched SCO all these years.

[ Reply to This | # ]

Möbius strip
Authored by: JamesK on Tuesday, March 08 2011 @ 01:39 PM EST
Having worked with Teletype equipment for several years, I had ample material
for making Möbius strips. I often showed them to co-workers, who'd never heard
of them. I was about 10 or so, when I first heard of them.

BTW, I seem to recall reading that if you could put two of them together, edge
to edge, you'd have a Klein bottle.


---
IANALAIDPOOTV

(I am not a lawyer and I don't play one on TV)

[ Reply to This | # ]

What's it called...
Authored by: Anonymous on Tuesday, March 08 2011 @ 03:59 PM EST
...when the court has such contempt for the law?

There are (admittedly rare) times when "contempt of court" is
justified. Is it in this case?

John Galt was right. It's crap like this, that led me to leave the world of I.T.
Sadly, there is no shortage of evidence that it was the right decision.

[ Reply to This | # ]

Update 5 - "It doesn't have one."
Authored by: SpaceLifeForm on Tuesday, March 08 2011 @ 07:39 PM EST
Exactly. But, then years from now, after
many have forgotten, they will argue in
some court, "oh, we must have gotten a license,
otherwise, how else could we do our business?".

Sound familiar?



---

You are being MICROattacked, from various angles, in a SOFT manner.

[ Reply to This | # ]

What do you get when you merge one and one.
Authored by: Ian Al on Wednesday, March 09 2011 @ 04:16 AM EST
The SCO answer is two. I got quite excited at PJ's reporting Darl as saying at
the 2004 SCOForum that OpenServer and UnixWare would be merged, but that it
never happened.

The non-executory APA between Novell and Santa Cruz says that only the merged
product could be sold without Novell agreement and with Santa Cruz getting all
the royalties.

Could all the UnixWare product sold to date require royalties to be forwarded to
Novell and 5% returned to SCO?

That would put the tiger amongst the ostriches.

However, sometimes the APA is not very specific. I think the merged product in
the APA refers to both UnixWare and OpenServer being on SVr5.

Shame; that would have been a Mobius twist worthy of a novel.

---
Regards
Ian Al
SCOG: Intentionally left Blank Rome upt

[ Reply to This | # ]

Established business practices
Authored by: Anonymous on Wednesday, March 09 2011 @ 07:31 AM EST
So the fact that SCO has not paid their contractual royalties for umpteen
years, makes OK to just fahgedaboudit. That is the established business
plan. Can I not pay my taxes for several years and be forgiven? I think all
I have to do is find a lawyer that want to share my unpaid taxes and I am
in like flint. Pay the lawyer one years' taxes and then litigate forever.

[ Reply to This | # ]

    Update 5
    Authored by: jesse on Wednesday, March 09 2011 @ 07:36 AM EST
    The missing license may just mean that they cannot rebuild a binary kit.

    Mostly useless, but I believe this may be how some hardware vendors sell
    prepackaged systems. The binary kit is loaded on a disk and sold "as
    is".

    If they plan on doing any improvements, then they will have to get a license to
    the source code, which still resides with Novell.

    [ Reply to This | # ]

    COMES transcriptions here
    Authored by: kattemann on Wednesday, March 09 2011 @ 09:04 AM EST
    Post transcriptions here, with simple html markup but posted as plain text.
    Thank you.

    [ Reply to This | # ]

    SCO's darkest hour memorialised in its own license
    Authored by: soronlin on Wednesday, March 09 2011 @ 11:18 AM EST
    An excerpt from Exhibit 1: the SCO-UnXis license:
    1. GRANT OF RIGHTS
    1.1 Sub licensor grants to Sublicensee a personal, nontransferable (except as provided in Section 9), nonexclusive, non-sublicenseable (except as provided herein), royalty free right and sublicense to use the Licensed Properties, as defined in the Purchase Agreement, which shall include the copyrights owned by Novell, Inc., as determined in the Memorandum Decision and Order Denying SCO's Renewed Motion for Judgment as a Matter of Law, or in the Alternative, for a New Trial and by the Findings of Fact and Conclusions of Law of the United States District Court of Utah on June 10, 2010, in accordance with this Agreement, including the right to modify and create derivative works of such Licensed Properties.

    [ Reply to This | # ]

    Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal - Updated 5Xs
    Authored by: chad on Wednesday, March 09 2011 @ 11:22 AM EST
    Here's the part that has kept me mystified. Never minding all the hoop-jumping
    and misdirection about the sale is the question: Why would any entity want to
    buy SCO?

    With the existence of FreeBSD and at least three full-featured Linux server
    distributions, how can they imagine there is a market for SysV at this point?

    [ Reply to This | # ]

    Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal - Updated 5Xs
    Authored by: Anonymous on Wednesday, March 09 2011 @ 12:32 PM EST
    > I know also that some of you have lost all respect for the US legal system,
    as a result of watching the shenanigans in bankruptcy court. And today's ruling
    will not restore your faith, for sure. All I can say is bankruptcy court is a
    cesspool. But wait for the appeal to be decided. Frankly, if this is not
    overturned on appeal, I'll be surprised.

    I hope you are right, but even if appeals court overturns this decision, it'd do
    NOTHING to restore my respect.

    The whole SCO saga could still be summarized as "given unlimited time and
    money, you have a fighting chance to have US courts make a reasonable
    decision". (and, no, you have no chance of being compensated).

    Does it have ANYTHING to do with justice? Would an individual stand a chance?
    Would a small company survive such an assault? Or would it settle/lose/go
    bankrupt? How is it different from a plain criminal extortion?


    And note, that the saga has been unfolding not in a single court, but in 5 or so
    courts. The picture has been the same everywhere.

    [ Reply to This | # ]

    How will we know if Novell Appeals?
    Authored by: Anonymous on Wednesday, March 09 2011 @ 12:49 PM EST
    Will a motion or something be put in the chapter 11 record
    indicating that an appeal is pending at the district court
    level?

    Despite Novell having gone so far this time as to mention an
    appeal and still having a week and a half roughly in which
    to do so, what are the realistic odds that they will bother?

    Despite our assertions to the contrary, no prior action of
    the court unsupported by the facts and the law has been
    appealed by Novell.

    ---
    Clocks
    "Ita erat quando hic adveni."

    [ Reply to This | # ]

    How big a project is it to build a "merged" 64-bit OS?
    Authored by: YurtGuppy on Wednesday, March 09 2011 @ 02:00 PM EST
    Sounds like a big project to me.
    Sounds like unXis will need some more money.



    ---
    every guppy is a half-full kind of guy

    [ Reply to This | # ]

    non-compete clause
    Authored by: Anonymous on Wednesday, March 09 2011 @ 02:01 PM EST
    I believe the APA also had a non-compete clause. If that is all null and void
    then the Linux arm of Novell is free to move in with upgrade and migration plans
    for all the current UniXs customers.

    I believe the non-compete clause was part of what SCO was screaming about in the
    SuSE arbitration. Would be a shame that SCO was (again) found to be scream over
    executory provisions of a contract they claim is non-executory.

    There could be a "let me count the ways" article on how the APA is
    executory.

    [ Reply to This | # ]

    So Judges Favour Better Liars
    Authored by: Anonymous on Wednesday, March 09 2011 @ 02:05 PM EST
    Either PJ hasn't an inkling - is clueless - of what this case is all about (it's
    in the details my dear Watson) OR judges will believe any lie conjured up by
    lawyer(s) (best liar or more liars - wins?) OR is it that "The Chamber Of
    Commerce" dictates how judges think and rule?

    [ Reply to This | # ]

    Catch 22?
    Authored by: jacks4u on Wednesday, March 09 2011 @ 04:51 PM EST
    I just had a wild thought: is this an attempt to place Novell in a catch 22
    position, in that the finding in Utah severely limited SCO's rights. If now,
    Novell argues they can't exercise what SCO feels are it's remaining rights, then
    the Utah Judge was in error???

    Not sure how that would be argued, or in what forum, but this is the thing
    that's been in the back of my mind for some time.

    We'll see...

    [ Reply to This | # ]

    • Catch 22? - Authored by: Anonymous on Wednesday, March 09 2011 @ 05:12 PM EST
    Judge Gross Approves Sale of SCO's Assets to UnXis; Gives Novell 14 Days to Appeal - Updated 5Xs
    Authored by: Anonymous on Wednesday, March 09 2011 @ 04:57 PM EST
    I am literally Four days away from purchasing an American light aircraft in
    America. I live in Australia.

    I've decided not to proceed on the basis that there is obviously no legal
    protection available to me.

    [ Reply to This | # ]

    Court conversion?
    Authored by: kh on Wednesday, March 09 2011 @ 10:33 PM EST
    So the BK court and the trustee got away with $3Million or so of Novell's money
    that SCO had converted. How does that work?

    Does Novell have any comeback at all?

    [ Reply to This | # ]

    We can only hope Judge Gross will read what PJ has prepared in this article
    Authored by: iraskygazer on Friday, March 18 2011 @ 11:42 PM EDT
    PJ,
    Wow, lots of effort went into this article. Thank you for such tedious
    effort.
    I wish the judge would read this article, realize the mistake he has made with
    his decision and reverse the action. Conversion of Novell's property is patently
    immoral. Simply giving property of one entity to another entity, just because
    you can, doesn't mean that you should. The ramifications of this conversion
    decision will ripple through the legal realm for many more years if it were to
    stand on appeal. Why would any corporation behave, in legal terms, if they can
    simply request that a judge give them property. There is no other judge in the
    past 8 years that ever viewed the APA and amendment as giving SCO any copyrights
    beyond what they needed to operate and the produce Unixware product line.

    [ Reply to This | # ]

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