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SCO'S MEMORANDUM IN SUPPORT OF MOTION TO DISMISS/STAY COUNT 10 OF IBM's 2ND AMENDED COUNTERCLAIMS - as text
Sunday, May 02 2004 @ 02:26 PM EDT

Here it is as text, SCO's MEMORANDUM IN SUPPORT OF MOTION TO DISMISS OR TO STAY COUNT TEN OF PLAINTIFF IBM'S SECOND AMENDED COUNTERCLAIMS AGAINST SCO. Have you noticed how long the titles are becoming? A whole lot of motion practice going on.

SCO dropped its "the GPL is unconstitutional" affirmative defense and now, in this document, they try to get IBM's Counterclaim Ten dismissed or stayed by claiming that they have brought no copyright infringement claim against IBM for "IBM's Linux activities" after all. They are not suing IBM for "IBM's use, reproduction and improvement of Linux":

"The only copyright claim SCO has asserted against IBM is primarily for IBM's continuing use of AIX and Dynix after SCO terminated IBM's UNIX licenses. See Second Amended Complaint, Count V. The Second Amended Complaint, however, does not contain a claim against IBM for copyright infringement arising out of its use, reproduction or improvement of Linux. With SCO's Second Amended Complaint being the final amendment and not containing a claim for infringement arising out of IBM's Linux Activities, the need for IBM's Tenth Counterclaim seeking such a declaratory judgment is nil."

After the past year's media circus, you have it straight from the horse's mouth. The only copyright infringement claim they assert against IBM is for using and distributing AIX and Dynix after SCO "terminated" IBM's license, a termination that Novell told us they overruled. That's it, folks. What does that tell you?

It tells me that they looked and have failed to find copyright-infringing code in Linux that they can pin on IBM, except maybe for their unusual derivative code theory relating to AIX and Dynix. I believe only BayStar still thinks that will fly. I have my doubts even they do.

They do claim in footnote 3 that they are litigating against IBM regarding its improvements to Linux, in a claim that "arises out of IBM's distribution of AIX and Dynix." But if you put that sentence together with the above, you see that they are only talking about post-"termination" use and distribution of AIX and Dynix. I know. It makes no sense. The footnote alone should defeat the motion, by admitting that there is an issue that would not be decided by the AutoZone case. But the real problem is, if they say it all clearly, the counterclaim won't be dismissed or stayed, so they present the court with some doubletalk. It's not about IBM's improvements in Linux when they want Counterclaim 10 dropped, but it is kinda, sorta about that with respect to Counterclaim 9, which they don't want dropped.

To say it clearly, I think you'd have to say: "Please dismiss this counterclaim, because if IBM wins it, and we think they will, then all our AutoZone and son of AutoZone end user lawsuits might die. The whole world will laugh at us, and besides, our case against IBM could blow up. Plus, it would kill our FUD. If you can't bring yourself to dismiss it, please stay it while we waste some more time in Nevada, so the real issues won't be litigated anywhere soon and we can threaten end users a little longer."

You think they'll send Congress another letter, correcting the false impression they created about "piracy" and other nonsense in the letter they sent them? Of course not. FUD is designed to linger in the air, like the smell of smoke from somebody's cigarette. I'd have a few choice words on the subject, but I'm confident IBM will mop up the floor with them by the time this is done. Imagine how they must feel, accused internationally of a "crime", with letters to Congress, no less, and press conferences, and road shows, all making them look like copyright infringers who "stole" SCO's code. And now, after discovery, it's "never mind". Nothing but a contract dispute.

Wall Street obviously thinks it's all baloney, as you will see by this story about the recent Linux on Wall Street Show & Conference. Somebody needs to send a memo to Henning Kagermann, the CEO of SAP, though, who is "wary of open source" because of IP worries. Or so he claims:

"Kagermann stood alongside Dell CEO Michael Dell at a press conference in New York to promote a new alliance between their companies. The arrangement involves increased service and support for customers running SAP applications on either of the two OS's that Dell ships: Windows or Linux. But Kagermann expresses caution when it comes to the second of those options. 'I'm not sure personally about the future of open source,' he says.

"Kagermann's concerns are rooted in the intellectual property issue. Without directly mentioning SCO Group's legal campaign against Linux distributors and users, Kagermann says, 'There are some open questions for me. They start on the legal side. A few things could happen that could kill Linux.'

"Like what? If software companies using open source were forced to extract code from their products because of an IP violation, 'then people like us will be extremely carefuly in using open source,' he says. Kagermann acknowledges his views on open-source and IP are influenced by the fact that SAP is Europe's largest commercial software company."

First, judging from what has happened so far, there don't appear to be any such issues, just contract claims against anyone foolhardy enough to enter a contractual relationship with SCO. Is he predicting an IBM-related pulling out of code? Second, IP violations occur every day in the proprietary world, judging by the constant stream of lawsuits they file against each other. To pretend this is an issue that is Linux-specific is cynical or just wrong, depending on his motives and level of education. It could just be that his company is well-named.

Linux community code appears to be purer than the driven snow, cleaner than anybody's code, as far as infringement is concerned. Stop and think. For an entire year, SCO has been in discovery, with access to AIX and Dynix, and they already had System V code and full access to publicly accessible Linux code, and they failed to find any copyright infringement on IBM's part other than the contested license issue. Could there be a more ringing endorsement of Linux's purity than that? Obviously, the international band of Linux kernel authors have behaved honorably and respectfully of other people's intellectual property rights. Even in a worst-case scenario, if IBM were found guilty of violating their license with SCO, all that would prove is that the Open Source methodology is safe, but you'd best beware of large corporations.

I see the moral of this story as being that the Open Source community has been certified as more upright than the proprietary side. That is SCO's achievement. Thanks, SCO, BayStar and all your helpers, for spending all those millions to prove to the world we are not pirates and that the community never stole any code. Do you believe that if we were given a year to sort through Microsoft code and look for IP violations we wouldn't find any? Or SCO's? Now there's a pleasant mental image, huh?

My point is, the dark side tried and failed. They told the world that there was a problem, due to the open nature of Linux. They alleged there *must* be copyright violations, because of the open source method of development. Maybe they thought that because they steal code and hide it, we do too. But they were wrong. The community lives by a different ethical standard. And due to the open nature of Linux, everyone in the world having access to the code 24/7, how stupid would you have to be to steal someone's code and try to put it in Linux? It's just OldThink. Linux is counterintuitive to OldThinkers. Now, SCO is back-pedalling, because it's time to put up or shut up in court in the IBM case.

SCO, in this document, pretends that they believe copyright infringement has happened and that all that will be resolved in the AutoZone case:

"In the AutoZone case referred to in IBM's Second Amended Counterclaims, the issues of whether the use and reproduction of Linux infringes SCO's copyrights is squarely at issue."

That's just trying to move the pea to a different shell in the game. And it's not true. It's not squarely at issue. AutoZone is an auto parts company. They don't contribute to the Linux kernel in any way. They can't, therefore, be a primary copyright infringer. Somehow, SCO wants us all to believe that there is no primary infringer yet proven but end users are guilty of copyright infringement for using the software. They skipped the essential Whodunnit part. If there is infringement, somebody must have infringed. Who? They told us for a year that it was IBM. But now they seem to be backing off except for contract claims. They told us SGI, but they never sued them. They threatened Red Hat but then begged the court to drop that case. So who is the infringer, the "pirate" here?

To pretend that an end user lawsuit can resolve *all* copyright infringement issues is ridiculous. Maybe they are hoping the judge is too busy to read carefully. But the elephant on the table is, if there was copyright infringement, who did it? Where is it? And why isn't SCO suing *them*? You know they would if they could.

I honestly don't see how any of this can be resolved by AutoZone. They couldn't be more in the dark about the Linux kernel. How can they prove if there has been infringement or not? No doubt that is why SCO would like IBM to wait for that case to go first. But if AutoZone goes first, then the decision about contributory infringement will be decided before any court has decided whether there has been primary copyright infringement by IBM or anybody else and before any court has decided whether SCO owns the copyrights or Novell does. That is, to say the least, backwards. Things are looking mighty bleak for the SCOfolk if this is their best shot. And every day in every way, SCO's claims are getting smaller and smaller.

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

Brent O. Hatch (5715)
Mark R. Clements (7172)
HATCH, JAMES & DODGE, P.C.
[address, phone, fax]

Stephen N. Zack (admitted pro hac vice)
Mark J. Heise (admitted pro hac vice)
David K. Markarian (admitted pro hac vice)
BOIES, SCHILLER & FLEXNER LLP
[address, phone, fax]

Attorneys for Plaintiff


IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION

THE SCO GROUP, INC.,

Plaintiff,

v.

INTERNATIONAL BUSINESS
MACHINES CORPORATION,

Defendant.
MEMORANDUM IN SUPPORT OF
MOTION TO DISMISS OR
TO STAY COUNT TEN
OF PLAINTIFF IBM'S
SECOND AMENDED COUNTER-
CLAIMS AGAINST SCO


Case No. 2:03CV0294 DAK

Hon. Dale A. Kimball

Magistrate Judge Brooke Wells

Plaintiff/Counter-Defendant The SCO Group, Inc. ("SCO"), by and through undersigned counsel, hereby submits its Memorandum in Support of its Motion to Dismiss or Stay Count Ten of Counter-Plaintiff IBM's Second Amended Counterclaims Against SCO.

INTRODUCTION

On March 29, 2004, Defendant/Counter-Plaintiff International Business Machines Corp. ("IBM") filed its "Second Amended Counterclaims Against SCO." In Count Ten of that pleading, IBM added an entirely new claim seeking a declaratory judgment "that IBM does not infringe, induce infringement of, or contribute to the infringement of any SCO copyright through its Linux activities, including its use, reproduction and improvement of Linux, and that some or all of SCO's purported copyrights in UNIX are invalid and unenforceable." 173. In other words, IBM is seeking to declare that a person or entity using Linux does not infringe upon SCO's copyrights and that some or all of SCO's copyrights are invalid or unenforceable. This precise issue will be litigated in a case filed by SCO against AutoZone in federal district court in Nevada; a case filed prior to IBM filing its Tenth Counterclaim. See The SCO Group Inc. v. AutoZone, Inc., Case No. CV-S-04-0237-DWH-LRL (D. Nev. 2004). This newly added counterclaim raises issues separate and apart from the primary breach of contract and other direct claims and counterclaims in this case. [1] Given this fact, and to avoid multiple suits determining substantially similar issues, this Court should decline to exercise jurisdiction over and dismiss Counterclaim Ten. In the alternative, Counterclaim Ten should be stayed pending the outcome in the prior filed AutoZone case.

ARGUMENT

The federal declaratory judgment statute provides "[i]n a case of actual controversy within its jurisdiction . . . any court in the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. 2201. While this statute vests the federal courts with power and competence to issue a declaration of rights, see Public Affairs Assocs., Inc. v. Rickover, 369 U.S. 111, 112 (1962)(per curiam), the question of whether this power should be exercised in a particular case is vested in the sound discretion of the district courts. Id.; see also St. Paul Fire and Marine Ins. Co. v. Runyon, 53 F. 3d 1167, 1168 (10th Cir. 1995); Sierra Club v. Yeutter, 911 F.2d 1405, 1420 n.8 (10th Cir. 1990). Stated differently, "[t]he Declaratory Judgment Act was an authorization, not a command. It gave federal courts competence to make a declaration of rights; it did not impose a duty to do so." Public Affair Assoc. v. Rickover, 369 U.S. 111, 112 (1962). Accordingly, any review of this Court's decision to abstain from exercising federal declaratory judgment jurisdiction is limited to deciding whether the court abused its discretion. Runyon, 53 F. 3d at 1168.

Count Ten Raises Issues That Are Not At Issue Here And That Are
Redundant of Those Presented In A Prior Filed Action and Therefore
Should Be Dismissed or Stayed.

The only copyright claim SCO has asserted against IBM is primarily for IBM's continuing use of AIX and Dynix after SCO terminated IBM's UNIX licenses. See Second Amended Complaint, Count V. The Second Amended Complaint, however, does not contain a claim against IBM for copyright infringement arising out of its use, reproduction or improvement of Linux. With SCO's Second Amended Complaint being the final amendment and not containing a claim for infringement arising out of IBM's Linux Activities, the need for IBM's Tenth Counterclaim seeking such a declaratory judgment is nil.

Although SCO has not sued IBM for copyright infringement arising out of "IBM's use, reproduction and improvement of Linux" (171), IBM's Tenth Counterclaim nonetheless seeks a "Declaratory Judgment of Noninfringement of Copyright" arising out of IBM's Linux activites. ( 173). However, as IBM acknowledges in its counterclaim, SCO filed an earlier copyright action arising from another company's similar act of using Linux. ( 79-80). This earlier filed copyright claim by SCO against another user of Linux implicates the same question presented by IBM's counterclaim: Whether Linux infringes SCO's copyrights? Indeed, as detailed below, that case also will determine the enforceabaility of SCO's claims of infringement arising from the use of Linux, including the enforceability of SCO's copyrights. Moreover, the precise issue of copyright infringement arising from the use of Linux is the sole issue in that case, unlike here, where there exist many complex claims. Under these circumstances, this Court should dismiss or stay Count Ten of IBM's Second Amended Counterclaims.

In the AutoZone case referred to in IBM's Second Amended Counterclaims, the issues of whether the use and reproduction of Linux infringes SCO's copyrights is squarely at issue. A copy of the Complaint in that action is attached as Exhibit A (of which this Court can take judicial notice). [2] In that case, SCO has alleged that AutoZone "has infringed and will continue to infringe SCO's copyrights in and relating to Copyrighted Materials by using, copying, modifying, and/or distributing parts of the Copyrighted Materials, or derivative works based on the Copyrighted Materials in connection with its implementations of one or more versions of the Linux operating system, inconsistent with SCO's exclusive rights under the Copyright Act." AutoZone Complaint, 21. Thus, in defending against a claim of infringement based on its use of Linux, AutoZone will be litigating the same issues that IBM seeks to inject in this case through Count Ten. [3]

Determining in this case the enforceability of SCO's copyrights and whether Linux infringes SCO's copyrights at the same time the issue is being litigated in the federal court in Nevada would entail unnecessary duplication of judicial efforts and run the risk of varying adjudications. With an actual case or controversy regarding whether Linux infringes upon SCO's copyrights pending in another courthouse, this Court should dismiss Count Ten or stay it until the Nevada court has resolved the issue of whether use of Linux infringes SCO's copyrights. Certainly, two federal courts should not simultaneously be determining whether the same copyrights are infringed. This is precisely why federal courts, as noted above, have discretion to entertain declaratory judgment requests. Here, with the plethora of complex issues already pending in this action, this Court should exercise its discretion on this declaratory judgment claim and dismiss Count Ten.

If this Court is inclined to retain jurisdiction over Count Ten, then it should stay the action pending the outcome of the previously filed Nevada action. The stay that SCO seeks here is virtually identical to that sought in Apex Hosiery Co. v. Knitting Machines Corp., 90 F. Supp. 763 (D. Del. 1950). In that case, Apex brought suit against Knitting Machines for a declaratory judgment on the validity of certain patents. The federal court noted that there was a prior filed suit already pending against another user of similar machinery where the validity of the patents would be heard. Noting that "the needless and burdensome trouble and expense of litigating two identical suits at the same time and at different places [could] be obviated," the court ruled that the Apex case should be stayed. Id. These same issues appear here and compel that IBM's later filed, redundant claim be stayed.

CONCLUSION

Count Ten presents issues already before another federal court, and, on that basis, should be dismissed or, at a minimum, stayed pending the outcome of the prior filed AutoZone case pending in Nevada.

DATED this 23rd day of April, 2004.

Respectfully submitted,

By: ____[signature]_____
HATCH, JAMES & DODGE, P.C.
Brent O. Hatch
Mark F. James

BOIES, SCHILLER & FLEXNER LLP
Stephen N. Zack
Mark J. Heise
David K. Markarian

Counsel for Plaintiff/Counterclaim defendant


  1. These copyright claims, likewise, have nothing to do with the patent counterclaims, which are separate and apart from all other claims in the case and therefore are the subject of a pending motion for separate trial.

  2. Federal Rule of Evidence 201; see also St Louis Baptist Temple, Inc. v. F.D.I.C., 605 F.2d 1169, 1172 (10th Cir. 1979)(holding that federal courts may take notice of proceedings in other courts, both within and outside of the federal judicial district if those proceedings have a direct relation to matters at issue). In addition, because IBM relied upon the AutoZone filing in the Second Amended Counterclaim, this Court may properly consider that Complaint filed in AutoZone in ruling on the motion to dismiss. GFF Corp. v. Associated Wholesale Grocers, Inc., 103 F.3d 1381, 1384 (10th Cir. 1997)(stating, "[I]f a plaintiff does not incorporate by reference or attach a document to its complaint, but the document is referred to in the complaint and is central to the plaintiff's claim, a defendant may submit an indisputably authentic copy to the court to be considered on a motion to dismiss.").

  3. The only issue that arguably would not be decided by the federal court in Nevada is whether IBM's improvements to Linux infringe upon SCO's copyrights. If this Count Ten was merely based on infringement arising from IBM's improvements to Linux, then SCO would not have sought dismissal or a stay. In fact, the issue of the impropriety of IBM's improvements to Linux is part of the basis for IBM's Ninth Counterclaim, also titled "Declaratory Judgment of Noninfringement of Copyrights," which arises out of IBM's distribution of AIX and Dynix. ( 165). SCO did not move to dismiss or stay that count.


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