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Novell Writes to SCO Again and Also Files Notice of Removal to Transfer to Federal Court
Tuesday, February 10 2004 @ 05:25 PM EST

Novell has done it again. Another letter to SCO, and some documentary proof that SCO's interpretation of 2.01 of the Asset Purchase Agreement is wrong, all wrong, from Novell's standpoint. Novell has the new correspondence on its web site as well as the attached proof, bringing us up to February 6. It's dynamite, once again.

Unless I am missing something, I think the ballgame is over for SCO as far as their legal theory about derivatives having to be kept confidential and not being allowed to be donated to Linux. Novell by this letter "hereby directs SCO to waive any purported right SCO may claim to require Sequent (or IBM as its successor) to treat Sequent Code as subject to the confidentiality obligations or use restrictions of Sequent's SVRX license." They have until noon, February 11, to comply. This could be part of why SCO has been so quiet of late. The theory of their case may just have blown up in their face. Of course, SCO has a different interpretation of the Asset Purchase Agreement, which you can read in the correspondence on Novell's site.

Also, and I've been expecting this. Novell has filed with the local Utah state court a Notice of Removal. It points out that to get the SCO v. Novell lawsuit settled involves interpretation of copyright law, which is federal law. Consequently, Novell asks that the case be transferred to federal court. Anyone in the mood to transcribe it?

Here's the letter. I am definitely getting to like Novell.

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

Joseph A. La Sala, Jr.
Senior Vice President
General Counsel and Secretary

NOVELL VIA FACSIMILE AND CERTIFIED MAIL
RETURN RECEIPT REQUESTED

February 6, 2004

Mr. Ryan E. Tibbitts
General Counsel
The SCO Group
[address]
RE: Sequent Computer Systems

Dear Mr. Tibbitts:

On May 29, 2003, SCO sent a letter to Sequent Computer Systems providing notice that it would terminate Sequent's SVRX license agreement as of Secptember 2, 2003 if Sequent did not remedy certain alleged breaches of the license agreement. On August 11, 2003, SCO sent another letter to Sequent purporting to terminate Sequent's SVRX license agreement. IBM, on behalf of Sequent, responded to these letters by letter of August 14, 2003.

As it has with IBM and other SVRX licensees, SCO appears to be taking the position that code developed by Sequent, or licensed by Sequent from a third party, which Sequent incorporated in its UNIX variant but which itseld foes not contain proprietary UNIX code supplied by AT&T under the license agreement between AT&T and Sequent ("Sequent Code"), must nevertheless be maintained as confidential and may not be contributed to Linux. As we have said before, SCO's position defies both logic and the terms of the SVRX license agreement.

SCO cites, as support for its position, section 2.01 of Sequent agreement, which, like other SVRX licenses, provides as follows:

Such right to use includes the right to modify such SOFTWARE PRODUCT and to prepare derivative works based on such SOFTWARE PRODUCT, provided the resulting materials are treated hereunder as part of the original SOFTWARE PRODUCT.

As we have said, however, this provision merely confirms that AT&T retained ownership of its code even if it was incorporated in a derivative work, and does not purport to impose confidentiality or use restrictions on Sequent Code.

In fact, SCO's interpretation of section 2.01 is plainly contrary to the position taken by AT&T, as author of and party to the SVRX licenses. AT&T clarified the meaning of section 2.01 in its $ echo publication, which AT&T described as its own newsletter "to reach all UNIX System V licensees through one defined medium" and "keeps them abreast of any product announcements, policy changes, company business and pricing structures."

Specifically, in an edition of $ echo dated April 1985 (the same month that the Sequent license agreement was signed), AT&T announced that changes would be made to the SVRX license agreement "to clarify ownership of modifications or derivative works prepared by a licensee." AT&T said this and other announced changes were "in response to direct feedback from AT&T licensees and [were] intended to make the contracts more responsive to the needs of the licensees." AT&T then followed up by adding to section 2.01 a sentence clarifying that AT&T "claims no ownership interest in any portion of such a modification or derivative work that is not part of a SOFTWARE PRODUCT." Even more clearly, the August 1985 edition of $ echo explained that this "sentence was added to assure licensees that AT&T will claim no ownership in the software that they developed -- only the portion of the software developed by AT&T." Copies of the April and August 1985 editions of $ echo are enclosed for your convenience.

For these reasons, and the reasons stated in our October 7, 2003 letter to you about IBM-developed code, SCO's position on Sequent Code is unsupportable.

Under Section 4.16(b) of the Asset Purchase Agreement, Novell retains the right, at Novell's "sole discretion and direction," to require SCO to "amend, supplement, modify or waive any rights under, or . . . assign any rights to, any SVRX License to the extent so directed in any manner or respect by [Novell]." That section further provides that to the extent SCO "shall fail to take any such action concerning the SVRX Licenses" as directed by Novell, Novell "shall be authorized, and hereby is granted, the rights to take any action on [SCO's] own behalf."

Accordingly, pursuant to Section 4.16(b) of the Asset Purchase Agreement, Novell hereby directs SCO to waive any purported right SCO may claim to require Sequent (or IBM as its successor) to treat Sequent Code as subject to the confidentiality obligations or use restrictions of Sequent's SVRX license.

Novell directs SCO to take these actions by noon, MDT, February 11, 2004, and to notify Novell that it has done so by that time.

Sincerely,

Joseph A. LaSala, Jr.

cc: Mr. Darl McBride
Mr. Ronald A. Lauderdale,
Vice President and Assistant General Counsel, IBM


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