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What *Is* Slander of Title, Anyway?
Wednesday, February 11 2004 @ 06:12 PM EST

Now that the Novell lawsuit is heating up, I guess it's time to explain what slander of title is. A lot of people have never heard of it. Frankly, I had never heard of it outside of real estate matters, so I did some research.

This dispute, as you know, centers around who really owns the copyright on Unix and UnixWare and both parties claim they do. So I also researched the issue of how copyrights are validly transferred. SCO is claiming that Amendment 2 to their Asset Purchase Agreement was such a copyright transfer; Novell disputes that.

Is a contract sufficient to transfer a copyright? And did SCO goof by suing for slander of title instead of breach of contract? Here is what I found out in my research.

As always, check with your own attorney in your own state for any specific case, as what I found is general information only, and it's paralegal research to boot, not a legal opinion. It is enough to give us some idea of what is going on in the SCO v. Novell matter.

First, what is slander of title? Normally a claim you find in real estate matters, it's "false, unjustified statements regarding another person's title to property". There are elements you must prove to win:

A cause of action for slander of title occurs when there is a false and malicious statement made to disparage a person's title to real estate. The elements of slander of title are: (1) falsity of the statement made; and (2) malice.
The exact elements required can vary from state to state, but they are generally similar. A Utah case showing the elements needed in that state for a slander of title action is First Sec. Bank of Utah, N.A. v. Banberry Crossing, 780 P.2d 1253 (Utah 1989):
[t]o prove slander of title, a claimant must prove that (1) there was a publication of a slanderous statement disparaging claimant’s title, (2) the statement was false, (3) the statement was made with malice, and (4) the statement caused actual or special damages.
If you own a house, and I go down and file a false lien against your house, you can sue me for slander of title, because I have cast a cloud over your unobstructed right to that house. There is such a thing as libel not only to your personal reputation but also to the reputation of property. You can read a bit more on that here if you are interested.

But if it's instead a good-faith conflict, in which each side thinks it really does own the house, well, that's a different kettle of fish. It still needs to get worked out in the courts, but it isn't slander of title, because it's not malicious to assert what you believe are your legal rights. And malice is normally a necessary element in a slander claim. The malicious claim must be intentional:

To recover in an action for slander of title, a party must allege and prove:

(i) the utterings and publishing of disparaging words;
(ii) that they were false;
(iii) that they were malicious;
(iv) that special damages were sustained thereby;
(v) that the plaintiff possessed an estate or interest in the property disparaged; and
(vi) the loss of a specific sale.

Malice as a basis for recovery of actual damages in a slander of title case means merely that the acts must have been deliberate conduct without reasonable cause. A patent may well be the subject of a slander of title action as Prosser and Keeton state that intangible interest such as "trademarks, copyrights [and] patents" may be the subject of the tort.

As compared to other "injurious falsehood" causes of action, slander of title or property differs in that there is no presumption of damages. The plaintiff must show that he or she sustains special damage proximately, naturally and reasonably resulting from the alleged slander. Attorneys' fees are not recoverable in slander of title actions, and neither damages to reputation nor consequential mental damages are recoverable in action for slander of title. The plaintiff must prove the loss of a specific sale, i.e., that a pending sale was defeated by the slander. However, the reasonable expense of litigation necessary to remove the doubt, or cloud, from the property or title thereto has been held to be recoverable. Additionally, punitive damages are also recoverable in an action for slander of title. Thus, as was the case with a defamation cause of action, a plaintiff should allege that defendant's actions were both intentional and with malice.

Here is a case where Francis Ford Coppola sued Warner Bros. for, among other things, slander of title, and he lost. One reason he lost that part of his action was absence of malice. That wasn't a Utah case, but it has a bearing, obviously, on SCO's case against Novell in the sense that in Utah too, malice must be proven. It's why some are questioning SCO's choice of slander of title.

When you read Novell's letters, do you get the impression that they feel they actually *do* own the copyrights? Note particularly the dates May 28, June 6 and 26, August 4, and October 9 to follow the copyright argument. If so, where is there slander of title, without the necessary element of malice? It's not slander if the party has some colorable claim. Monday, Novell filed a Motion to Dismiss, and from news reports, I gather they are pinning the motion on the lack of specific damages, but there may be more to the motion. Once I see it, we'll be able to see if that is the only basis for the motion.

What about the copyright issue, though? Who owns the copyrights here anyway? To delve into it deeply, you would need to read the contracts involved. SCO highlights particularly Amendment 2 to the Asset Purchase Agreement, but Novell points out that there were other documents, Amendment 1, the Schedules, and a Technology License Agreement, although the latter does not pertain to the copyright issue per se.

Novell isn't saying SCO has no rights. It is saying it retained certain rights, that SCO needed to assert a need for copyrights and that it never did that, that there were, in other words, conditions that SCO has not satisfied. Because they did not satisfy the conditions, the copyrights never transferred. In an interview on Bloomberg News today, Novell CEO Jack Messman said this:

We also sold them the business. We didn't sell them the copyright. That's why we filed for the copyrights. They dispute that, but we'll get in - the lawsuit will resolve that, and we think we're going to be winners.

So that is their position. Why didn't SCO sue for breach of contract, then, if their position is correct and copyrights were supposed to transfer and Amendment 2 is the contract that was to make that happen? No one I have talked to can figure that out. Since SCO alleges that the copyrights were to have transferred under the Asset Purchase Agreement, why *not* sue for breach of contract and ask the judge to enforce the contract?

SCO has been claiming that its rights to Unix are absolute, but all the while it has been in hot and heavy correspondence with Novell in which Novell contested their rights strongly. That fact alone, the fact that Novell firmly asserted what they claim to be their rights, indicates that SCO may have great difficulty persuading a judge that malice is involved. If you have read the contract documents, you already know it is far from obvious that Novell has no legitimate claim. On the contrary, you might even conclude that their claim seems stronger than SCO's. So where is the necessary element of malice?

SCO registered for copyrights, and so did Novell, but for SCO to have copyrights, it would need to show that Novell transferred those rights to them. And it had to have been in writing, because copyright law requires copyright transfers to be in writing and "signed by the owner of the rights conveyed or such owner's duly authorized agent." For example, a friend of mine just registered a copyright in some music he wrote, and he made a mistake in the form, and he got a letter from the US Copyright Office that included this sentence: "Copyright belongs initially to the author. It may be transferred to another person or organization by a written agreement or by operation of law. For registration purposes, the copyright claimant is either (1) the author or (2) the person or organization that has obtained ownership of all rights under the copyright." Here, that would mean Novell, who would have to transfer by writing to SCO. There is no official form for such transfer; normally it is effectuated by contract.

Here are some examples of copyright transfer forms some have used, to give you an idea, here and here and here and here.

So is Amendment 2 a contract? Well, it's an amendment to one, yes. Is a contract enough to transfer a copyright? Yes. Is it clear on its face that it did mean to effectuate such a transfer? Obviously Novell doesn't think so.

Lewis Mettler, Esq. of Lamlaw raised this question when SCO first filed it slander of title action: if SCO in the end fails to establish copyright ownership, after publicly claiming copyright ownership for nearly a year and maybe even suing an end user for copyright infringement in the meanwhile, and it turns out it was without any reasonable basis, is SCO opening itself up to becoming a defendant in a future slander of title action itself?

The answer to that may be found in the Coppola case, and it turns on the issue of whether SCO ever had any reasonable basis for its claims to begin with. Here is what the court wrote in that case:

We have concluded that the underlying claim of Warner in and to any Coppola 'Pinocchio' project was legally tenable or colorable. We do not decide whether Warner's claim was legally viable or enforceable -- only that it was legally tenable, not totally and completely without merit.

History will decide, as the cases work their way through to decisions whether SCO had a colorable claim, one "not totally and completely without merit".


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