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Hatch's Letter to Judge Kimball -- Is IBM's 10th CC Permissive or Compulsory?
Wednesday, September 01 2004 @ 01:35 AM EDT

Here is another paper exhibit, thanks to Frank Sorenson, a letter sent on June 10 by Brent Hatch to Judge Kimball, in which he responds to IBM attorney David Marriott's letter to the judge stating that he had mispoken at the June 8 hearing, when he said the 10th counterclaim was not compulsory. You will remember that IBM, in its Supplemental Memorandum in Opposition to SCO's Motion to Dismiss or Stay Count 10 of IBM's 2nd Amended Counterclaims, referred to Marriott's letter in footnote 1. And it answered this "letter brief" of Mr. Hatch in detail.

Hatch here argues at length that it shouldn't be compulsory; that it's a permissive counterclaim. SCO very much did not wish to keep the 10th counterclaim in the main case. Remember that this letter was written prior to Autozone being stayed, so they were still trying to tell Judge Kimball that IBM's 10th counterclaim should be stayed (or even better, dismissed) until after the Autozone case could be heard. They lost that battle. So now all they have is a motion to dismiss.

Some of the urgency you perceive in this letter stems from SCO's worry that IBM's asking for partial summary judgment on their 10th counterclaim could impact on all the end user lawsuits SCO dreams about when building their castles in Spain.

Well, maybe not Spain. That is one of the branches they just told us they are having to close.

Hatch tells the judge that IBM is trying to sweep into the case new claims and theories attributed to SCO that do not belong in the case, and he suggests that it would greatly prolong the case if the claims were to be adjudicated as part of the IBM lawsuit. SCO, he asserts, is only bringing contract claims against IBM. How can IBM now try to get a clean bill of health for the contributions of all contributors to Linux?

As if SCO hadn't spent the last year and a half telling the world that IBM's contributions to Linux affected every end user on earth. Now they'd like the mirror image of that claim ruled extraneous to the case.

IBM in its Supplemental Memorandum answered like this, in part:

"In its June 10, 2004 letter brief to the Court, SCO suggests for the first time that IBM's Tenth Counterclaim should be dismissed or stayed because it is a permissive rather than a compulsory counterclaim. SCO is wrong. IBM's Tenth Counterclaim 'arises out of the transaction or occurrence that is the subject' of SCO's claims against IBM and is therefore a compulsory counterclaim. Fed. R. Civ. P. 13(a). Thus, in addition to the reasons set forth in IBM's initial opposition papers, IBM's Tenth Counterclaim should not be dismissed or stayed because it is compulsory.

"The crux of SCO's lawsuit is that 'a significant amount of UNIX protected code and materials are currently found in Linux ... in violation of SCO's contractual rights and copyrights.' (Second Am. Compl. 79.) SCO has asserted contract claims against IBM, and a claim for copyright infringement alleging that IBM has infringed, and has induced the infringement of, copyrights SCO purports to hold to certain versions of UNIX software. IBM's Tenth Counterclaim seeks a declaration that IBM's Linux activities (including IBM's participation in the development of Linux, IBM's internal copying and use of Linux, and IBM's provision of Linux to customers as part of its hardware and service offerings) do not infringe or induce others to infringe those very copyrights. Thus, IBM's Tenth Counterclaim arises out of SCO's claim that materials in Linux infringe its alleged UNIX copyrights. . . .

"Irrespective of the specific code that SCO presently contends to be at issue in its claims (which SCO has yet even to identify fully for IBM, more than a year after it commenced the case), IBM's Tenth Counterclaim is logically related to and raises the same basic issues of fact and law as SCO's claims: (1) whether SCO owns valid copyrights to certain UNIX software, and (2) whether code in Linux infringes (i.e., is identical or substantially similar to) any protectable expressions in the UNIX code to which SCO claims copyright ownership. If IBM had not asserted its Tenth Counterclaim in this case, it would have been precluded from asserting the claim in a subsequent suit. Accordingly, there can be no doubt that IBM's Tenth Counterclaim is compulsory. . . .

"SCO argues that IBM's Tenth Counterclaim is not compulsory because it involves 'wholly separate and new issues' related to 'the conduct of third parties' and not to 'conduct unique to IBM'. The argument has no merit. IBM's Tenth Counterclaim seeks a declaration of non-infringement only with respect to IBM's own conduct relating to Linux. As stated in IBM's counterclaims, IBM (like many others), has contributed to the development of Linux and regularly (as part of its business) makes copies of Linux. IBM simply seeks a declaration that IBM's contribution to, and copying of, Linux does not infringe the UNIX copyrights SCO claims to own.

"Either there is code in Linux that infringes SCO's purported UNIX copyrights (because it is identical or substantially similar to protected UNIX code) as SCO contends, or, as IBM believes, there is not. Whether any allegedly infringing code in Linux was contributed by parties other than IBM, and whether those parties might as a result also be liable to SCO for copyright infringement, breach of contract or some other claim, is of little moment to IBM's Tenth Counterclaim. SCO's lamentations about the 'sweeping breadth' of IBM's counterclaim are therefore unfounded.

"Contrary to SCO's suggestion, IBM's Tenth Counterclaim does not require adjudication of the conduct of countless third parties or contemplate extensive additional litigation. Whether IBM's Linux activities infringe SCO's purported UNIX copyrights involves an assessment of IBM's conduct and can indeed must be resolved in a single litigation. Under SCO's theory, by contrast, each segment of infringing code in Linux would be addressed in a series of 'mini-litigations' against each individual contributor of code to Linux, such that no single alleged infringer would ever be entitled to a declaration of non-infringement as to all the code in Linux. That makes no sense. As SCO would have it, IBM (and many others throughout the world) could be subjected to a virtually endless torrent of litigation brought by SCO, because SCO could file new claims each time SCO purports to find additional infringing code that has been present in Linux all along. The efficiencies associated with addressing IBM's Tenth Counterclaim in this lawsuit, and resolving once and for all whether IBM's Linux activities infringe SCO's alleged copyrights in contrast to the inefficiency of SCO's proposed course of action supports the conclusion that IBM's Tenth Counterclaim is compulsory."

Of course, an endless torrent of litigation brought by SCO is exactly what SCO has been dreaming about; hence their distress in this letter. The case they cite, Driver Music Co. v. Commercial Union Ins. Cos, can be found here. IBM answered with so many cases, I haven't finished reading them all yet, but their position is simply worded: "It is axiomatic that counterclaims relating to the same copyrights that are the subject of a plaintiff's claims are logically related to the plaintiff's claims and are therefore compulsory."

It needs to be pointed out that IBM probably doesn't care much who owns the copyrights, SCO or Novell. Other than the joy of shutting SCO up, which can't be altogether discounted, it doesn't matter to IBM, because they are asking that the court declare that they are not violating *the* copyrights, no matter who owns them, that there is no infringing code in Linux, and if they get that declared by the court, who cares who owns the copyrights? Of course, life would likely get simpler if SCO doesn't or can't prove it owns the copyrights, but even if Novell were to turn traitor and hand over all the copyrights, or Judge Kimball turned out to be in Hatch's back pocket and he awarded the copyrights to SCO in some horrible nightmare, it makes no difference to IBM if there is no infringing code in Linux. It only matters to SCO's cases.

It's the same with IBM's 10th Counterclaim. They aren't harmed a bit even if their motion is denied, other than the annoyance factor. It only means they might have to wait a bit before bringing another motion, like after discovery is more complete, or worst case, they will have to wait until trial to win. They can't "lose" that motion in that sense. In fact, if all they get out of it is the discovery information they have gleaned, they have already gotten a leg up. So almost everything is on the table for SCO, and virtually nothing but the ineffable anguish of having to deal with SCO a little bit longer for IBM, which, if they like eating their dish of vengeance cold, might not be a problem.


Law Offices

June 10, 2004

Via Hand Delivery

Honorable Dale A. Kimball
United States District Court for the District of Utah

Re: The SCO Group v. International Business Machines Corporation,
Civil No. 2:303cv0294

Dear Judge Kimball:

We write in response to David Marriott's June 9 letter to the Court regarding IBM's Tenth Counterclaim in the above-captioned matter, submitted to the Court and received by us this morning. In that letter, Mr. Marriott contends that IBM's Tenth Counterclaim is compulsory. This distinction bears on SCO's pending Motion to Dismiss or Stay the Tenth Counterclaim as well as on the Motion to Amend the Scheduling Order. Although SCO will brief the issue in detail in support of the Motion to Dismiss to be argued on August 4, the pendency of the motion to revise the scheduling order requires us to respond to Mr. Marriott's letter here. The position Mr. Marriott has taken assumes a substantially inaccurate view as to what SCO's case is (and is not) about, and this issue directly affects the efficient organization of the case -- a matter directly before the Court on the pending m otion to amend the scheduling order.

We submit that IBM's Tenth Counterclaim is permissive. A counterclaim is compulsory only if the resolution of the plaintiff's claim would preclude the defendant from bringing its claim. See Driver Music Co. v. Commercial Union Ins. Cos., 94 F.3d 1428, 1435-36 (20th Cir. 1996). None of the claims in SCO's complaint could operate in that manner with respect to the Tenth Counterclaim, including because that counterclaim would add to the case a broad new range of issues about the improper contributions to Linux by many entities other than IBM. Those issues plainly do not arise out of the same transaction or occurrence as SCO's claims.

SCO has asserted claims against IBM based on IBM's own conduct. The principal, although not exclusive, claims are contractual. All claims address IBM's improper contributions to Linux, in violation of SCO's contract and other rights. All of SCO's claims address only IBM's improper contributions, and have nothing to do with the improper contributions (known or unknown) of any other entity.

If IBM's Tenth Counterclaim sought nothing more than a declaration that IBM had no liability with respect to these claims advanced by SCO, it would not unmanageably broaden the case -- and it would also be essentially irrelevant.

IBM's own contributions to Linux are at the center of the lawsuit SCO brought. By contrast, IBM's new focus would sweep in the wide range of new issues involving potential IBM liability as an end-user of a program which contains infringing contributions to Linux made by others. (Linux was developed by the contributions of thousands of programmers operating without any screen or check.).

SCO has not brought into this action these issues concerning the contributions of others, and SCO has no obligation to do so. These issues are plainly separate from what IBM itself is responsible for having done, and the forced addition of these issues here would slow down and encumber the process of reaching a decision on the merits of the propriety of what IBM has done. [1]

For example, adjudicating these wholly separate and new issues would require one mini-litigation after another to determine the nature and circumstances of each third-party's contribution to Linux (as distinct from IBM's contributions). As SCO establishes each such improper contribution, each such third-party contributor will contest that showing, effectively creating the need for one litigation after another (within the sweeping scope of IBM's new claim), based on one instance of improper contribution after another.

Given these facts, IBM's Tenth Counterclaim cannot be compulsory. The "activities relating to Linux" that it seeks to place in issue have nothing to do with the conduct unique to IBM that SCO challenges in this lawsuit. They do not arise out of the same transaction or factual nexus, because they do not involve improper contributions to Linux by IBM. If IBM were correct, then SCO would have to add claims relating to the conduct of third parties here simply because it has sued IBM based on conduct unique to IBM. According to IBM's logic, if SCO does not do this, SCO would lose those unrelated claims forever. Similarly, according to IBM's logic, if IBM does not add the encumbrances of its Tenth Counterclaim, and SCO wins as to IBM's own conduct, then IBM would also automatically be liable for the actions of many unrelated third parties in improperly contributing to Linux merely because IBM -- like numerous other entities -- uses Linux. These positions cannot withstand analysis and do not remotely satisfy the black-letter test governing what constitutes a compulsory counterclaim.

The same sweeping breadth of IBM's Tenth Counterclaim that establishes its non-compulsory character reinforces a point of critical importance to the scheduling amendment motion. The addition of all of these new and unrelated issues to the present case would unavoidably encumber its progress and impede its efficient adjudication on the merits of the propriety of IBM's own, challenged conduct. IBM's efforts on March 29 of this year to sweep into this case all of the issues relating to all of the contributions of others to Linux could not help but preclude efficient and orderly progress toward the resolution on the merits of the propriety of IBM's own contributions to Linux. (See SCO's Reply Memorandum in Support of Its Motion to Amend the Scheduling Order dated may 28, 2004, at 16 & n.20.)

For the reasons set forth above and in support of the pending Motion to Amend the Scheduling Order, IBM's Tenth Counterclaim is permissive.

Respectfully submitted,

BY: _____[signature]____
Brent O. Hatch

Robert Silver

Attorneys for Plaintiff The SCO Group, Inc.

c: Todd Shaughnessy

[1] IBM asserted otherwise during the June 8 hearing via their chart enumerating claims and counterclaims -- where it stated that its counterclaims correlated to what it called a SCO "Theory No. 2". The chart was simply mistaken. In asserting that the breadth of IBM's Tenth Counterclaim matched and was justified by any SCO theory, IBM was asserting that SCO had a theory other than a theory addressed to IBM's own improper contributions to Linux. IBM did not offer any basis for that claim, there is no such basis, and the claim is simply inaccurate.

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