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First Reports from the SCO v. IBM Hearing
Tuesday, June 08 2004 @ 04:27 PM EDT

Frank Sorenson just left the hearing. He'll be writing up more as soon as he can, but the quick bottom line is that Judge Kimball took both motions, the Motion to Bifurcate and the Motion to Amend the Scheduling Order, under advisement. He mentioned the Novell matter and says there should be a ruling within days. One of the new SCO lawyers handled the Motion to Bifurcate the 3 Patent Counterclaims, so that's what he is for.

Here's Frank's eyewitness account, with more details to follow.

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

Short story: Judge Kimball heard arguments on both the Motion to Bifurcate the 3 Patent Counterclaims (argued by Fred Frei for SCO and David Marriott for IBM), as well as the Motion to Amend the Scheduling Order and extend Discovery by 9 1/2 months (argued by Brent Hatch for SCO and David Marriott for IBM).

Judge Kimball took both under advisement. He acknowledged the importance of both this ruling and the ruling from the Novell hearing (which he recognized he had not ruled on yet), and said that he would try to "get a ruling out within a few days."

Also, apparently, the flurry of motions last week on delaying the depositions resulted in a phone conference yesterday (Monday) with Judge Wells. I don't know the real result of the conference. However, evidently the Frasure deposition took place this morning (if I understood correctly).

I'll write up more, and send as soon as I can.

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

UPDATE:

Here is a bit more from Frank, and more to come:

Okay, this is going to be sketchy, as I couldn't catch everything as it was happening. I'll just describe the general arguments as best I can.

There were numerous attorneys present, at least 5 for each side, and they outnumbered the geeks. Judge Kimball had The SCO Group begin with their motion to Bifurcate the Patent Counterclaims.

Fred Frei (the newly added lawyer) argued for SCO. SCO wishes to sever the 3 patent counterclaims, but IBM doesn't believe it's necessary. They believe the patent counter claims differ from the rest of the case. The patents are highly technical, cover 4 SCO products that are alleged infringing, and even have little to do with each other.

Judge Kimball: It sounds like you're arguing to separate each of the patent claims.

Frei: Not making that argument at this time. By our estimates, the patent counterclaims could use up to their own 5 week trial, 60-70 depositions, and will involve their own separate discovery and defenses: validity, non-infringement, enforceability, laches, estoppel, etc.

Judge Kimball: I'm no fan of duplicative testimony.

Frei: We would need to fit our interrogatories and depositions in with the remainder of the case. SCO has already served 22 of their 25 interrogatories, and won't be able to work in the number of depositions needed. The patent counterclaims will take a lot of preparation. There is a risk of prejudice to SCO by confusion of the jury by the claims that we have infringed (quotes IBM filing that despite SCO's claims to uphold intellectual property, SCO is infringing IBM's patents and copyrights).

Judge Kimball: Assuming I don't sever, would there be any difference in the trial time (between 2 5-week trials and 1 10-week trial)?

Frei: Not really. We believe we can't proceed on the patent counterclaims within the current case.

David Marriott: There is no question that the court _can_ sever the patent counterclaims. We disagree that there is a massive reason to do so. With the patent counterclaims, the burden is on us, and we feel we can do it in the allotted time. There is no reason to separate right now, and we ask that the court defer judgment on this.

Judge Kimball asks if Marriott is referring to Dismissal without prejudice.

Marriott: Correct.

Frei: We have 10 pages of unenforceability defenses on one of the patents. We need lots of discovery from the 7 inventors, the patent attorneys, the patent examiners, etc. We have the burden of proof on our defenses.

2d UPDATE:

Mark Belnap also attended the hearing, and he reports some more details:

Today's hearing was not as well-attended as some in the past. I don't know whether people are realizing that landmark decisions are not being made at the actual event, or whether they get good enough feedback through our second-hand reports and later the transcripts. IBM had a contingent of 5 lawyers David Marriott, Todd Shaugnessy, Amy Sorensen and two others that I didn't recognize. SCO had a group of 6, Brent Hatch, Robert Silver, Frederick Frei, and 3 others whose faces were familiar. (You must realize that I am a geek and don't associate names with faces very well--If they were introduced by zip code I would have a better chance of remembering them.) In addition John Mullen of Novell was also in attendence. Other than that there were 8 "lay" people present besides the court staff.

BIFURCATION

Mr. Frei argued for SCO on the Motion to Bifurcate. His basic premise was that the patent counterclaims were complicated and unrelated to the rest of the case. Judge Kimball asked a number of probing questions. For instance he asked whether SCO wanted to separate each patent claim into individual trials themselves if they were so unique [no--not yet] and what was the difference between two 5-week trials and one 10-week trial [easier on the confused jurors]. Frei mentioned that the patent claims themselves would need more than the 40 agreed-upon depositions, it would be more like 60-70 at which point Judge Kimball noted dryly that: "You are describing a law firm billings dream," which got a chuckle.

Mr. Marriott argued that IBM only needed around 5 depositions for the patents and didn't know why SCO should need 60-70. He repeated the contention in the brief that this could be properly decided at a later stage of the trial.

Mr. Frei rebutted with the argument that SCO had a much greater burden of proof in defending against the patent claims because IBM had a presumption of having a valid patent and it was up to SCO to disprove that.

AMEND SCHEDULING

Mr. Hatch argued SCO's position on this motion. He mentioned that the case had changed significantly since the scheduling order. He did mention the delay due to discovery being stayed and even got it right (3 months rather than the 4 claimed in earlier briefs). He mentioned that they are still working through Judge Wells on discovery issues and they are not yet ready to begin depositions. He did claim that IBM moved source code copyrighted by them into Linux. [mb -- I don't know whether this was just a blunder in not being able to keep their theory of the case straight, whether they consider AIX code to be under SCO copyright, or whether they actually found something]

Then it was Mr. Marriott's turn. He had obviously prepared for this one as he laid out exactly what he was going to say and then proceeded to dig in. He talked about what an OS is and gave an exhibit with a sample of source code [mb--I assume it is from Linux, he said it was 3070 lines, I'll leave it as an exercise to the reader... :) ] At a few points Judge Kimball asked questions, to bring the argument back to the scheduling order. Mr. Marriott brought out three stacks of colored bound papers as a visual aid. The blue stack represented SysV and was about one inch high. The red stack represented commercial Unices (AIX, Solaris, HP-UX, etc.) and was about 4 inches high. The white stack represented Linux and was about 8 inches high. He referred to these visual aids throughout his presentation.

He was also trying to show how the claims in the case had changed from the beginning, but rather than show that a delay resulted from the addition of the new claims, he pointed out the time that had been wasted by the evolution and obscurity of SCO's original claims. He gave four specific reasons why the scheduling order should not be amended:

1) There are issues at stake that are important and deserve expeditious resolution. (used Darl quote on the fate of the IT industry)

2) It would be prejudicial to IBM and their customers. ($50 Billion + $1B/week, issues in Delaware and Nevada and the current court in Utah that are tied or attempted to be tied to this case)

3) SCO has not proceeded diligently ("mountains of evidence" "can go to trial on what we have now", trade secrets dropped)

4) Two years specified by the existing schedule is enough (SCO now has 14 lawyers listed on the case.)

Then Mr. Marriott continued with a number of points that are familiar to regular Groklaw readers: Clarified Judge Wells' decision, that she has not established a "procedure" to get all of AIX. Mentions that HP and SUN are clean without extensive discovery, etc.

When it was Mr. Hatch's turn to rebut, he was fumbling with some papers and getting passed notes, and the judge asked him if he was ready or needed a little more time. He said that it would take an extension of 9 more months just to clarify the mistakes put forth by Marriott. (That set the tone for his comments.) He basically said that IBM was not acting properly and allleged impropriety in their actions and basically seemed to be to call Mr. Marriott a liar. [mb-Later on he said that he had nothing but respect for the IBM lawyers and thought that everyone would litigate the matter vigorously as they should.] He brought up a memo that was produced in the deposition in NC this morning that had not been presented to them in discovery. He shuffled the red and blue piles into the white pile and complained that IBM wouldn't tell them which code was infringing but wanted them to figure it out themselves.

After he finished Judge Kimball looked at Marriott and said that it looked like he wanted to say something, but if he did then SCO would also get a chance to respond. So he gave them each another 30 seconds.

Mr. Marriott quickly ran through a bullet point list of responses to everything that Hatch had just brought up. He said that if SCO is complaining about not having time to digest the 15 boxes of patent discovery they just obtained, then why did they want millions of more lines of AIX code?

Mr. Hatch had a fairly generic response that they just needed more time and the schedule should be extended.

Judge Kimball finished up by noting the desire of everyone to get a decision and said that he would try to get a ruling out in the next "few days".

OTHER COMMENTS:

In one of Mr. Hatch's speeches he mentioned a hearing yesterday with Judge Wells. When I asked one of the lawyers about it after the hearing he said that yes, there was a teleconference yesterday.

All in all, I'm feeling encouraged. It's never bad when a judge says to the other side, "Assuming I don't do what you want, then what?" So when Judge Kimball said to Frei, "Assume I don't sever...", I take that as encouraging, but not dispositive. We'll just have to wait and see. IBM can survive no matter what, I believe, but still...

If you'd like to see a picture, here is his judical bio. As you will see, he has a very pleasant face, and we've already seen he has a good sense of humor. The most important thing is, he understands complicated technical subjects and that is vital.

ANOTHER UPDATE FROM FRANK:

SCO's Motion to Amend the Scheduling Order

Brent Hatch argued for SCO. The Scheduling Order was set when the case was much different. No counterclaims, much simpler case. The schedule has been affected by the counterclaims and by Judge Wells' stay of discovery for 3 months.

Another case, Caldera v. Microsoft, still required 3 extensions to the trial date. To date, virtually no depositions have taken place. IBM has now double-booked depositions, presenting an onerous schedule. We need to notice our depositions, and will need to 3- and 4-track them on the current schedule. We need a reasonable timeline. We don't feel we are prepared to begin scheduling depositions right now. IBM casts the blame on us for delays.

From the very beginning, this case has been about source code. We didn't begin to receive source code from IBM until a year after the case began. [Quotes from a CRN article about IBM contributing to Linux]. In response to one of our interrogatories, we received a list of 7200 names, without more information.

There have been motions to compel and there will be more motions to compel. We're also asking the court to delay the depositions until September (working with Judge Wells). I'm arguing as if the patent claims are separated. If the patent claims are not separated, the case will be even more complex and longer.

Marriott: Acknowledges this is not an ordinary case, otherwise we wouldn't be here arguing scheduling issues. First, like to talk about operating systems as background. There are 3 operating system categories of importance here [Mr. Marriott pulls out several stacks of paper booklets]:

* UNIX family of operating systems (short stack of booklets of blue paper)
* Operating Systems, such as AIX, created by companies such as IBM, possibly including some UNIX source code (medium-sized stack of booklets of bright red paper) * Linux operating systems (tall stack of booklets of white paper)

Initially, the case was about taking source code from UNIX and putting it into Linux [Marriott rips blue paper out of of one of the UNIX booklets and puts it on top of the stack of booklets of white papers (it stands out)]. SCO believes that since some source code from UNIX was used in AIX [Marriott rips out a piece of blue paper, places it on stack of red binders], they have the right to control what happens with all of AIX, and that any contribution by IBM to Linux [Marriott rips out piece of red paper, places on top of white Linux stack] is improper.

There are 4 reasons the Scheduling Order should hold:

1 - The issues here are important and should be handled expeditiously. SCO claims the "future of the global economy hangs in the balance." If the issues are that important, they should be addressed quickly.

2 - Delay would be prejudicial to IBM and to the interests of justice. SCO has claimed up to $50 billion damages, and the possibility of $1 billion a week.

3 - From our perspective, SCO has not proceeded with diligence. From the beginning of the case, they made claims of "Mountains of Code," "truckloads," "enough to go to trial now," etc. In the 15 months of this case, SCO has not noticed a single deposition. Rather SCO seeks additional delay.

4 - The current schedule affords both sides over 2 years. SCO has requested lots of documents and we have produced over 3 million pages. By our count, 14 lawyers have made appearances for SCO. With as many lawyers and law firms as are involved, we believe that there are enough attorneys to handle everything. If only 10 of those lawyers were involved in taking depositions, that only requires each lawyer to be involved in 4 depositions each month. The 9 1/2 month delay would result in each attorney being involved in only 0.5 depositions per month.

When Judge Wells entered the stay, we didn't sit around doing nothing for 3 months. We were interviewing people and finding documents that were responsive to the document requests. The very next day after Judge Wells lifted the stay, we produced.

When we entered the initial scheduling order, we contemplated that counterclaims would be filed, and have a hard time believing that SCO's counsel didn't do so as well. SCO's claims that IBM has delayed are mistaken. IBM has now produced the source code for all the AIX and Dynix releases, yet SCO claims to need more. We believe that the schedule should hold, and the case should not be delayed 9 1/2 months.

Hatch: It will take 9 1/2 months to correct all of Mr. Marriott's mistakes. We've also had arguments before Judge Wells about the depositions, particuly the Frasure deposition. (Apparently, SCO was unhappy about how the Frasure deposition was handled).

IBM furnished to us a list of 7200 names, but for all we know, this could include secretaries, janitors, and the donut boy. [Hatch begins referring back to the Software Agreement, and reads the section about treatment of 'derivative works'.]

[Hatch becomes animated, and goes over to the stacks of booklets of colored paper.] Not everything is out in the open. IBM isn't just contributing their code to Linux, they're taking code and hiding it [Hatch grabs some pieces of UNIX (blue) and AIX (red) and shoves them into the Linux (white) stack.]

Marriott indicates he would like to respond.

Judge Kimball: Well, if I let you talk, I have to let him talk again too.

[Marriott sits back down]

Judge Kimball: Okay, 30 seconds each.

Marriott: [stands again and speaks very briefly]

Hatch: [spoke very briefly]

Judge Kimball: I realize the importance of these issues, and I hope to get a ruling out in the next few days.

MORE:

And now, Elizabeth Sorenson gives us her view of the day's events, and between the three, I think it gives us the flavor of the day. Elizabeth is the only one who noticed that Mr. Hatch wore a bow tie. She also gives me this description of the judge: "I think Judge Kimball is just the kind of person who does not give anything away. I think the only comments he made that gave any indication of how he thinks were when he said that appellate courts often say things that may not work in real trials and that he was not a fan of duplicate testimony. I think all his other comments were because he is a good-humor guy who is really fair. He asked both sides a number of questions that seemed to indicate a real curiosity in finding out what each side thought about various issues. " And with that, here are her notes:

First issue, the bifurcation of the patent claims:

Frei: - His summary of IBM's arguments, discusses patent claims and how impact the case and why should be separate.

- Hits the judge with a lot of numbers, x number of claims, 3 different methods, 3 different kinds of hardware, 4 different SCO products, etc.

Judge: - Sounds like you are arguing to separate the patents from each other.

Frei: - Not at this time. (quotes an appellate judge ruling)

Judge: - Appellate courts are fond of saying things that may not work in real trials.

Frei: - Just for the patent stuff, will take a 5 week trial and 60-70 depositions.

- We have to look at validity, non-infringement, latches, estoppel, waiver... (lists what sounds like a bunch of possible defenses)

Judge: - I'm no fan of duplicate testimony.

Frei: - patent stuff is all separate from the rest of the stuff.

- obviousness, enforceability, and [??] are the focus of our case

- 70 patent depositions

Judge: - Is that a law firm billings dream?

Frei: - risk of confusion with the jury, IBM claiming that SCO does not respect IP

Marriott: - (quick bang, bang summary of IBM's arguments against bifurcation) Don't decide now, when we don't even know which issues will be tried.

- We need about 5 depositions for the patent stuff, SCO may need to depose the 7 inventors, we don't see why 60-70 depositions needed.

Frei: - we have to prove invalidity

- our defenses are estoppel, waiver, and laches

- we have the burden of proof on most of those issues

[It sounded to me that Frei wanted to do the patent stuff all on its own. Not so much that he wanted to seperate from a sinking ship, but more that he just didn't want to deal with the mess that the rest of the case is turning out to be.]

Now discussing changing the scheduling order:

Hatch: - (with bow tie, as always)

- this is our first request for extension of discovery and trial date

- when setting up the original schedule, we had no idea there would be 14 counterclaims

- we are all good and aggressive attorneys, there has been considerable amount of jockeying around, taking up time

- there was a 3-month discovery stay

- the amount of discovery left to do requires double-booking

Judge: - that's the dream I was referring to earlier

Hatch: - so many depositions, and we need time to assimilate each one

- we may ask for more discovery depending on how things go

- we are still working with the Magistrate Judge to get the documents we need, and then we still need to assimilate them

- IBM's argument that the delays are our fault are misguided and an attempt to taint the record

Judge: - So, essentially you still haven't gotten what you think you need...

Hatch: - well, we're fighting on that one, and will continue to fight

- there will be more motions to compel

- we don't have what we need to even begin depositions

Marriott: - I think everyone agrees that this is not an ordinary case

- I will first give some background on Operating Systems, then discuss our 4 reasons why the present schedule should hold, then respond to the 3 grounds for changing the order put forth by SCO

- a computer is basically a "lump of metal on the desk" without the operating system

- describes source code

- we are discussing 3 different classes of operating systems, Unix, stuff written by companies like IBM with the permission of AT&T, and Linux. This stack (small stack of blue paper) represents Unix, this stack (bigger stack of red paper) represents operating systems written under contract with AT&T, and this stack (huge stack of white paper) represents Linux written by thousands of programmers throughout the world

Judge: - at some point you're going to tell me how this relates to the scheduling order?

Marriott: - Yes, your Honor, I'll skip the rest of this if you wish.

Judge: - Proceed, but make it quick

Marriott: - (quickly finishes explaining each of the 3 stacks)

- (covers the 4 points why scheduling should not change --

1: issues are important and should be expedited,
2: delay is prejudical to IBM and contrary to the public interest,
3: SCO has not been diligent,
4: allows over two years of time to litigate these claims)

- we produced all the patent documents yesterday, less than 15 boxes

- yes, there is more discovery to do, but with 14 lawyers that have filed notice for appearance for SCO, there shouldn't be any problem finishing discovery on time

- (refutes SCO's 3 arguments, as follows)

- 1: the 3-month stay, yes there was a stay, but it was their fault

- 2: IBM's counterclaims, yes, we did counterclaims after the scheduling order was set, but they cannot have been a surprise, most of the counterclaims were responsive

Judge: - Was counterclaim 10 compulsory?

Marriott: - No.

- 3: SCO claims we have been delaying, but we haven't, we have not been compelled to do anything

- (at some point along here, Marriott did some math with the number of attorneys and the number of depositions, saying that even if this many attorneys needed to be at each deposition, then each group will only need to do 1.5 depositions per month with the new scheduling order)

- in conclusion, here is SCO's exhibit from an earlier hearing (summarizes the core of the case)

- (exhibit shows SCO/Unix as the parent, with child HP not infringing, child Sun not infringing, child AIX contributing JFS and NUMA to Linux, and child Dynix contributing RCU and AIO to Linux, marks these 4 contributions as improper)

[Hatch focused on the scheduling change only moving the trial back 5 months, Marriott focused on the 9 1/2 month extension of discovery.]

Hatch: - (acting really angry) - They are playing big-firm games

- IBM is witholding information

- just this morning in the deposition they pull out a document that we have never seen before

- if they really want to move things forward, they should stop playing games

- (goes over to Marriott's stack of colored papers, picks up big sections of red and blue paper and sticks it in the middle of the white paper) they make it sound like it is one page of stuff, but really they are taking whole sections of code and hiding it here (really shoves more red and blue paper into the white)

- with the current order, we have to do 40 depositions a month, and that is really unreasonable

- (now more calm) Marriott and Shaughnessy are "lawyers of the first rate" (I think he wanted to smooth things over after basically calling them conniving liars at the beginning of his tirade)

Marriott: - (obviously ready to stand up)

Judge: - Mr. Marriott, you obviously have something to add.

Marrriott: - Yes, your Honor

Judge: - (with a twinkle in his eye) But if I let you speak, then I'll have to let him speak again (pointing to Hatch)

Marriott: - (sits back down)

Judge: - Oh, go ahead. You have 30 seconds, and then you (nods to Hatch) will have 30 seconds.

Marriott: - (quickly corrects several issues raised by Hatch)

Hatch: - (it sounded like he said, in a good-humored way, that Marriott just said a bunch of lies, but I was too shocked to write down the words)

- (Someone sitting behind us quietly laughed at what Hatch was saying)

Judge: - I know this is important, so I'll try to issue a ruling in the next couple of days.

I find it a little disturbing that the Judge apparently asked whether IBM was compelled to produce discovery. I gather SCO, just as they did in their Reply Memorandum on amending of the scheduling order, is trying to deny dragging their heels and pretending that both sides were compelled to produce discovery equally and that in fact IBM is delaying.

[Correction: I have since writing this heard from the Sorensons and some others who clarified for me what the judge was asking here. One comment left on Groklaw explains it clearly:

"A compulsory counterclaim is one that is so related to the existing claims that it only makes sense for the other party to bring it up during the existing court action. Under the language of Federal Rule of Civil Procedure 13(a), 'if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim' the counterclaim must be made during the existing litigation or not at all."

Here is Rule 13(a) of the Federal Rules of Civil Procedure:

"A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. But the pleader need not state the claim if (1) at the time the action was commenced the claim was the subject of another pending action, or (2) the opposing party brought suit upon the claim by attachment or other process by which the court did not acquire jurisdiction to render a personal judgment on that claim, and the pleader is not stating any counterclaim under this Rule 13."

It's in contrast to 13(b) Permissive Counterclaims:

"A pleading may state as a counterclaim any claim against an opposing party not arising out of the transaction or occurrence that is the subject matter of the opposing party's claim."

Take a look at the link for more. Here is a case where the issue is discussed at some length. The judge enumerates a four-point test to determine if a counterclaim is compulsory, and one point is whether the same evidence will prove or disprove the claim and the counterclaim.]

Those of us who have been watching closely will surely know that is not the case, but Judge Kimball hasn't been watching as closely as we have, obviously. He has had other cases to attend to, while Judge Wells was handling matters. Now, Kimball has to ask, "Was counterclaim 10 compulsory?" And IBM's Marriott has to point out, No.

I think it's fair to say that lawyers who act angry in front of judges usually are not. They are using what they think will work. They are paid to do that. I gather SCO is worried about how they look in the record so far. My guess is the new attorneys are making some suggestions. It's like the SCO team woke up from a fugue state and are now alarmed to notice they don't look so good. Rather than improve, they pretend things were not what they were. Sadly, sometimes that works with judges, because they are overworked and can't follow all the fine points sometimes.

I think, though, this judge will pay attention to detail as we go along, and he won't miss much, judging from his earlier work. I don't get the impression that this has happened yet, and the question to Mr. Marriott about what the stack of papers had to do with the scheduling order indicates to me a level of negativity. How deep it goes or whether in fact I am reading it right from afar, I can't say, but he can't help but be at least somewhat affected by hearing Mr. Hatch's rant about IBM and Mr. Marriott, if Elizabeth was so shocked by it she couldn't take notes for a while. When you read SCO's Reply Memorandum, didn't you read it with two reactions? -- First, you read it knowing what baloney it was, because you were there every inch of the way and saw all the "mistakes" in what SCO wrote, right? And second, didn't you think about how it would hit an observer with no history or foundation knowledge? It sounded plausible, then, didn't it? Well, it may be that Judge Kimball suffers a bit from the no-history issue, and some of what SCO said might resonate a bit as a result at first. But give it time. What they are shines through in everything they do. He'll see it eventually.

We'll be ordering a transcript eventually, so then you'll be able to analyze everything for yourselves. I do want to thank our volunteers for being our eyes and ears today. I know I have a much better feeling for what happened today than I ever could have otherwise. Thanks, everyone. And don't forget, Michigan.


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