decoration decoration
Stories

GROKLAW
When you want to know more...
decoration
For layout only
Home
Archives
Site Map
Search
About Groklaw
Awards
Legal Research
Timelines
ApplevSamsung
ApplevSamsung p.2
ArchiveExplorer
Autozone
Bilski
Cases
Cast: Lawyers
Comes v. MS
Contracts/Documents
Courts
DRM
Gordon v MS
GPL
Grokdoc
HTML How To
IPI v RH
IV v. Google
Legal Docs
Lodsys
MS Litigations
MSvB&N
News Picks
Novell v. MS
Novell-MS Deal
ODF/OOXML
OOXML Appeals
OraclevGoogle
Patents
ProjectMonterey
Psystar
Quote Database
Red Hat v SCO
Salus Book
SCEA v Hotz
SCO Appeals
SCO Bankruptcy
SCO Financials
SCO Overview
SCO v IBM
SCO v Novell
SCO:Soup2Nuts
SCOsource
Sean Daly
Software Patents
Switch to Linux
Transcripts
Unix Books
Your contributions keep Groklaw going.
To donate to Groklaw 2.0:

Groklaw Gear

Click here to send an email to the editor of this weblog.


Contact PJ

Click here to email PJ. You won't find me on Facebook Donate Paypal


User Functions

Username:

Password:

Don't have an account yet? Sign up as a New User

No Legal Advice

The information on Groklaw is not intended to constitute legal advice. While Mark is a lawyer and he has asked other lawyers and law students to contribute articles, all of these articles are offered to help educate, not to provide specific legal advice. They are not your lawyers.

Here's Groklaw's comments policy.


What's New

STORIES
No new stories

COMMENTS last 48 hrs
No new comments


Sponsors

Hosting:
hosted by ibiblio

On servers donated to ibiblio by AMD.

Webmaster
TSG Tells Bankruptcy Court: Collecting Novell's SVRX $$ Has Stopped ~ by pj
Sunday, July 31 2011 @ 01:37 PM EDT

SCO has just filed a "Notice of Intent to Abandon Property" [PDF], telling the court that it's not worth the trouble to collect the SVRX royalties for Novell any more and SCO Japan has told licensees to stop paying them. Objections are to be filed by August 12.

The argument is that SCO Japan was sold to UnXis, and SCO put all the Novell SVRX money in SCO Japan, and now the Ch. 11 Trustee, Edward Cahn, says he no longer has the staff to do it, and because the amount TSG could get from its administrative fee is so low, he's decided it makes sense to just stop collecting the money. SCO Japan has already informed licensees not to keep paying those royalties, so they didn't wait for the court to rule. It's a done deal, and now they ask for the rubber stamp from the court. Then again, when does the bankruptcy court say no to any SCO plans?

The judge ruled that SCO could sell its business to UnXis without Novell approval, because in his eyes the 1995 APA [PDF] that made SCO collect those funds in the first place isn't executory, so I thought it was dead in the water already. When the judge made that ruling about the APA, Novell, under the new management at Attachmate, didn't bother to appeal, even though it had asked for more time to do so. That made me conclude that the lawyers did what they were supposed to, but someone not a lawyer decided not to go on. So I'm not sure what they can do now, or if they will even bother. Maybe they anticipated this day, decided it wasn't worth the money to take it to the next level. Or maybe there's a plan I can't imagine. SCO didn't get famous for contract interpretation or honoring its obligations, and if it can dance around a courtroom to finesse you out of your money, guess what happens? But Novell didn't play its part when it could have, so why should we care? I confess, I don't.

Here's the filing:

07/29/2011 - 1306 - Notice of Intent to Abandon Property and Setting Time for Objection (Hearing Date: 8/15/11 at 11:00 a.m.; Objection Deadline: 8/12/11 at 4:00 p.m.) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Attachments: # 1 Certificate of Service) (Fatell, Bonnie) (Entered: 07/29/2011)

Here's what it says about collecting the money:
Prior to the Sale, the Debtors, and subsequently the Trustee, operated the Business, which included, in part, collecting certain royalties from SVRX software licensees (“Licensees’) and remitting the royalties to Novell, Inc. (“Novell”) and in return, the Debtors were entitled to payment of an administrative fee from the royalties. Substantially all of the SVRX royalties were paid into the account of a foreign subsidiary, SCO Japan, Ltd. (“SCO Japan”)....

As a result of the sale of the Business, the transfer of the foreign subsidiaries, including SCO Japan Ltd., to the Buyer, and the termination of all of the employees from the Debtors’ estates, the Trustee is no longer in a position to continue to collect the SVRX royalties nor the administrative fee associated with such collection.. The collection of the SVRX royalties results in a de minimis benefit to the estate (approximately $30,000 in gross administrative fees were earned in the first quarter of 2011 and the fully-loaded cost of collecting these royalties might be greater than these fees). Accordingly, the Trustee has concluded that it is in the best interest of the Debtors’ estates to abandon its interest in the administrative fee associated with collection of the SVRX royalties as such amount has inconsequential value, the royalties are burdensome and costly to collect and there is no benefit to the Debtors’ estates.

Instructions have been provided to the Licensees that SCO Japan is no longer collecting SVRX royalties and to the extent any amounts are received, the Buyer, which now owns the SCO Japan bank accounts, has been instructed to return royalty payments to the Licensees.

That makes it sound like SCO Japan collected the money, then paid them to the Trustee, and he had to pay to Novell, although it's not altogether clear. And he'd rather not be bothered. And if you were Edward Cahn, and you thought it likely that the appeal will not go SCO's way, would you want to have to handle this administrative function until the day you died? Probably you'd prefer to clear the deck.

And if there is one thing the bankruptcy court in Delaware is good at, it's clearing the debtor's deck of pesky responsibilities other people in good faith relied on when the debtor earlier promised to fulfill them.

Is the agreement partly invalid and partly valid? And if partly valid, what parts are still valid and on whom? As I pointed out at the time, the judge ruled that Novell had no further obligations under the APA, which I don't believe is factually true, but that is why he said it wasn't executory, despite IP contracts normally being ones you can't toss overboard. Here's a lawyer explaining what an executory contract normally is. But simultaneously, SCO is telling the court of appeals that Novell is obligated to hand over the copyrights because of the wording of the APA plus Amendment 2. So, go figure. It's like a Rubik's cube. Somebody can figure it out. But I never could. You need a cynical mind, and I never mastered that. Nor do I want to. I mean, seriously, do you *want* to learn how to think like SCO? It might stick, and then where would you be?


  


TSG Tells Bankruptcy Court: Collecting Novell's SVRX $$ Has Stopped ~ by pj | 116 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections thread
Authored by: nsomos on Sunday, July 31 2011 @ 01:41 PM EDT
Please post any corrections here.
A summary in posts title can be helpful.

[ Reply to This | # ]

  • Novell -> SCO - Authored by: Anonymous on Monday, August 01 2011 @ 03:18 AM EDT
Off Topic
Authored by: jsoulejr on Sunday, July 31 2011 @ 01:57 PM EDT
n/t

[ Reply to This | # ]

News Picks
Authored by: jsoulejr on Sunday, July 31 2011 @ 02:02 PM EDT
n//t

[ Reply to This | # ]

COMES
Authored by: jsoulejr on Sunday, July 31 2011 @ 02:03 PM EDT
n/t

[ Reply to This | # ]

TSG Tells Bankruptcy Court: Collecting Novell's SVRX $$ Has Stopped ~ by pj
Authored by: Anonymous on Sunday, July 31 2011 @ 02:51 PM EDT
fading to whimpering oblivion...

[ Reply to This | # ]

TSG Tells Bankruptcy Court: Collecting Novell's SVRX $$ Has Stopped ~ by pj
Authored by: Anonymous on Sunday, July 31 2011 @ 03:05 PM EDT
There seems to be some irony here. That SCO needed the copyrights to pursue
litigation on one hand, but now legal licenses aren't worth collecting ?

[ Reply to This | # ]

Novell shoud buy-out the existing licensees
Authored by: ChrisP on Sunday, July 31 2011 @ 04:32 PM EDT
According to Amendment 2 of the APA section 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."

Seems to me this should apply and Novell gets a decent sized payout for the
future value of the existing licenses, if they can be bothered to negotiate and
collect.

---
SCO^WM$^WIBM^W, oh bother, no-one paid me to say this.

[ Reply to This | # ]

An so it goes on.
Authored by: SilverWave on Sunday, July 31 2011 @ 04:48 PM EDT
:-|

---
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 | # ]

This is the Beginning of the End.
Authored by: Anonymous on Sunday, July 31 2011 @ 05:26 PM EDT
Edward Cahn, says he no longer has the staff to do it, and because the amount TSG could get from its administrative fee is so low, he's decided it makes sense to just stop collecting the money.

It makes sense, when you consider that in the past the collection of fees would simply have been an additional duty for SCO's accounting staff. Now that the software business has been sold, the rump of SCO would either have to hire new staff exclusively for this task, or else outsource this to someone else (likely over the objections of Novell).

There is also the factor that Unxis will have all the records, so "rump SCO" would have to get the records from them, check all the details carefully (with Novell demanding audits every step of the way), so it's not likely to go smoothly.

I suspect that Attachmate will be happy to either take the license collection business back, or transfer it to Unxis. Since Unix licenses are more or less a "legacy" type business, that customer list is probably valuable in itself if you have other "legacy" type software to sell (which is what Attachmate does).

I would not be surprised if Novell has long wanted to get the business out of SCO's mits, since 95% of the money belongs to Novell. I also suspect that this is simply the next step in finally winding up affairs.

[ Reply to This | # ]

$600,000
Authored by: rsteinmetz70112 on Sunday, July 31 2011 @ 08:22 PM EDT
If SCO collected $30,000 the the gross receipts would be $600,000 or about $2.4
million per quarter.

Seems among the stuff Attachmate bought was that that income.

See among the things UnXis bought SCO Japan and the $30,000 fee.

If so I think Attachmate may want their money.

Which brings up a couple of questions:

If you don't pay the fees can you still keep using the software?

If SCO Japan was sold to UnXis, why is Kahn issuing them instructions?

---
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 | # ]

Chicken Feed
Authored by: Anonymous on Sunday, July 31 2011 @ 08:30 PM EDT
$30k to SCO at 5% for one quarter = $2.4 Million to Novell per year. I'm
feeling very old if that chicken feeds not worth fighting over.

[ Reply to This | # ]

instructed to return royalty payments to the Licensees.
Authored by: Anonymous on Sunday, July 31 2011 @ 11:08 PM EDT
I can understand stopping, but why return what you've already
collected? Processing it costs too much?

[ Reply to This | # ]

Would'nt Unxis now be responsible for this?
Authored by: Anonymous on Sunday, July 31 2011 @ 11:14 PM EDT
Mr. Bolandz may want to find out.

[ Reply to This | # ]

TSG Tells Bankruptcy Court: Collecting Novell's SVRX $$ Has Stopped ~ by pj
Authored by: Anonymous on Monday, August 01 2011 @ 12:52 AM EDT
I might not be thinking straight here, but isn't this set of curcumstances the
exact reason that the APA had Novell retaining the SVRx copyrights?

i.e. Novell's agent ceases to collect the royalties, but as Novell owns the
copyrights they can step in and put subsititute agreements in place.

[ Reply to This | # ]

Cahn's True Colours
Authored by: sproggit on Monday, August 01 2011 @ 02:21 AM EDT
Let's assume, just for one moment, that Attachmate/Novell decided that they
really wanted their money. After all, it rightfully belongs to them.

What can they do?

They could try and force TSG to honour their responsibilities under the
contract. Hmm... Good luck with that - this is the same TSG that witheld income
from the same arrangement and has sold out the business to Unxis without (so far
as I can tell) Novell's position.

They could write to Cahn, demand list of all licensees and monthly charges, and
then try and step in to that space and demand the revenue directly from those
licensees. I suspect someone, somewhere, would cry foul.

Maybe its just the case that the parties that bought Novell absolutely intended
to see Novell ground into the dust so that their support of Linux would falter.
So parties hostile to Linux would first want to kill off that support before
they mount their next attack.

But hold on, what about all the existing Unix clients? When the Unix *business*
was sold to Attachmate, surely with that came responsibility for patches, new
device drivers and the like? [ After all, wasn't that what TSGs developers have
been doing these past few years? ] So if you are any of the [small thousands]
of worldwide customers of Unix, where do you go for support? [ Answer: if you
hadn't seen this coming, more fool you...]

I am just very disappointed to see a retired judge, someone who was charged with
upholding the law, choose to completely ignore the law when it suits him. It may
be only one incident on which to base a judgment, but the evidence of the record
does not paint Edward Cahn in a very favourable light. In fact, the evidence
shows that his primary interest seems to be ensuring that his employer got paid.


And how cynical is that?

[ Reply to This | # ]

TSG Tells Bankruptcy Court: Collecting Novell's SVRX $$ Has Stopped ~ by pj
Authored by: Anonymous on Monday, August 01 2011 @ 05:10 AM EDT
So they admittedly funnelled the Novell royalties to SCO Japan?
SCO Japan was not part of the bankrupcy, and when TSG sold SCO Japan to Unxis,
did they not sell it including royalties that belong to Novell?
Is this not yat another an example of conversion? And why should this not be
bankrupcy fraud?

[ Reply to This | # ]

If I thought like TSG ...
Authored by: Steve Martin on Monday, August 01 2011 @ 07:10 AM EDT

It might stick, and then where would you be?

Probably in (a) court, (b) bankruptcy, or (c) all of the above.

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

[ Reply to This | # ]

The value of Unix Royalties .. TSG Tells Bankruptcy Court: ... Has Stopped ~ by pj
Authored by: Anonymous on Monday, August 01 2011 @ 07:24 AM EDT
So lets see, it is worth while to collect $677 dollars for every user, Android
phone user, Tom Tom user, Baracuda user, and half the flat screen users, but
there is only 300 thousand a quarter available in Unix royalties.

Can't say I can make much sense of this. How exactly do they plan on handling
the millions of checks people are suppossed to send them when they can't even
handle well documented user payments?

Stupid.

[ Reply to This | # ]

Toddlers think like SCO
Authored by: vb on Monday, August 01 2011 @ 01:49 PM EDT
They do whatever that want whenever they want.
One minute later, they might do something completely opposite.
It's a fruitless effort to ask them to explain their actions.
They can't be sorry for being themselves.

For reference, the Toddler Rules ..

1. If I like it, it's mine.
2. If it's in my hand, it's mine.
3. If I can take it from you, it's mine.
4. If I had it a little while ago, it's mine.
5. If it's mine, it must NEVER appear to be yours in anyway.
6. If I'm doing or building something, all the pieces are mine.
7. If it looks just like mine, it is mine.
8. If I saw it first, it's mine.
9. If you are playing with something and you put it down, it automatically
becomes mine.
10. If it's broken, it's yours.

[ Reply to This | # ]

Just to get this straight...
Authored by: Anonymous on Tuesday, August 02 2011 @ 01:20 AM EDT
SCO was given permission by Novell to sell Novell's property and collect a five
percent commission to do so.

Then SCO refused to pay the ninety-five percent to Novell and simply kept it
all.

Then SCO tried to say they owned it anyway, got their butt thoroughly kicked in
many courts, but decided they'd sell Novell's property to someone else.

Then the bankruptcy judge signed off on all of this and said that the new
company doesn't owe Novell a penny and Novell is cool with that.

So why exactly has this been in court for all these years? Novell could have
folded years ago and got the same result for a lot less money.

[ Reply to This | # ]

TSG Tells Bankruptcy Court: Collecting Novell's SVRX $$ Has Stopped ~ by pj
Authored by: Sunny Penguin on Thursday, August 04 2011 @ 07:35 AM EDT
Does this mean any copyrights on UNIX user manuals are being abandon?

---
/FL

[ Reply to This | # ]

Groklaw © Copyright 2003-2013 Pamela Jones.
All trademarks and copyrights on this page are owned by their respective owners.
Comments are owned by the individual posters.

PJ's articles are licensed under a Creative Commons License. ( Details )