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The Hearing on AutoZone's Emergency Motion for a Stay -- transcript
Friday, September 10 2004 @ 12:39 PM EDT

I've had a chance to listen to audio of yesterday's hearing on AutoZone's emergency motion for a stay. Here is a transcript. As you will see, the judge, Judge Robert Jones, has a much clearer grasp of what he is dealing with this time compared with the last hearing.

While he did deny AutoZone's emergency motion for a stay of discovery, he states that if the Novell case ends up being a win for Novell, the AutoZone case is dead in the water. His reasoning on the discovery going forward is this: he granted AutoZone's earlier motion for a stay of this case until IBM, Red Hat and Novell are all settled, so he feels he has an obligation to give SCO an opportunity to establish, if they can, that the stay he is ordering is going to do them harm, irreparable harm. If it were you, and you had a valid claim, you'd want a judge to do exactly that for you. He mentions that it is in his mind a constitutional predicate to the stay. It is his job to look out for the rights of both sides, and he can't assume either side is just gaming the system , at least not this early in the process.

Now we know SCO better and longer than he does, but you can see that he's working on his degree in the subject. Note that he laughs at one point, talking about SCO's troubles if it loses the Novell motion. But basically, he told AutoZone that limited discovery will go forward, as a matter of fairness, but that all the issues they raised in the hearing will be addressed if SCO brings a motion for a preliminary injunction.

Note that SCO's discovery effort includes a deposition of Jim Greer, who already stated publicly that he didn't use SCO's static shared libraries when overseeing the migration to Linux for AutoZone. SCO's attorney then asks if the judge will order a stay of discovery until that deposition can be heard on the 24th. He couches it as a way to "expedite" matters.

A stay to expedite. Now I've heard everything.

It seems AutoZone has served them with discovery requests and they haven't answered them, and they haven't served discovery on AutoZone yet either. The attorney says: "I mean, we were going to serve, you know, request for admissions, interrogatories, document requests. We have them. We haven't served them. I wanted to see what happened today." Um. It's been 30 days, fellows. That excuse doesn't match the calendar. In short, they didn't, apparently, really get started yet on much of anything. Judge Jones doesn't seem to connect those dots, but it may resonate later as he thinks about what they said. The rest of us already probably notice SCO's typical delay shuffle.

The judge gets the real purpose of the request and let's them know that there will be no holding off and that SCO has to respond to AutoZone's discovery requests too. So SCO lost that point, and Uriah Heep-like sits down. It was only trying to help, don't you know. The judge tells him to take the matter up with the other side, so if AutoZone were to agree, that would be different. SCO knows that, so they really were reaching for more candy than they were entitled to. You can see the judge does not miss it.

What I note is that their discovery of Greer will include not just discovery about the use of the shared libraries but methods, structures, etc. If Greer convinces them there was no infringement, they will not file for a preliminary injunction. I believe Judge Jones may be the only person on Planet Earth who entertains the thought that SCO will ever ask for a preliminary injunction in this case. Even SCO seems to be foreshadowing that they won't.

I have to say I am very heartened by the hearing. This judge is no dummy and this time, when AutoZone persisted in its argument about SCO's need to establish ownership of copyrights, he finally did correct himself and say that if Novell wins, then he agrees with AutoZone that it's curtains for SCO in the AutoZone case too. Why he doesn't stay discovery while that matter is being heard appears to be this: he has granted AutoZone a stay so those other issues can be decided elsewhere. If he then also makes SCO prove copyright ownership prior to limited discovery, it makes no sense to him. SCO has to get that established in the Novell case, not here in the AutoZone case, he indicates.

It doesn't make full sense to me that SCO gets to go forward anywhere until that is established, but I'm just a paralegal. It may just be that the judge, Solomon-like, has to figure out how to divide the baby. He's working with what is before him.

However, AutoZone raises the issue that doing discovery without any proof or good-faith basis for even bringing a claim is unusual, to say the least. If the whole world followed that procedure, it would be like the Salem witch trials, where accusations fly on the basis of a hunch or maliciousness, and then there you are, stuck in the middle of a legal process. And as you have seen, once in it, it's hard to extricate yourself from the sticky legal swamp. He seemed to feel SCO had presented sufficient -- minimally -- to proceed with discovery. I can't see his reasoning, because if you acknowledge that Novell winning its motion means that the AutoZone case is over, then that is an acknowledgement that they do need to be the copyright owner to proceed. I gather the dispute was about when you establish that -- before or after discovery. And judges, subject to the appeal process, get to decide such questions.

I see absolutely no hostility in this hearing toward either side on the part of this judge. None. This is just how argument goes in a court room. They know the legal issues, and as soon as a judge knows what his decision is, he says so. They have a lot of cases, all day, day after day. It's just how it is. It's a time issue. It was absolutely typical. It's not like on TV, you know. But while I see no hostility, I do see this judge is catching on.

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

[gavel sound]

Judge Jones: Good morning. Welcome. Thank you. This is United States District Court.

You're here on SCO vs. AutoZone. Your appearances, please.

David Stone: David Stone from Boies, Schiller & Flexner, for Plaintiff SCO, Your Honor.

David Stewart: David Stewart with Alston & Bird, for AutoZone.

Judge Jones: Uh huh.

James Pisanelli: James Pisanelli, Schreck Brignone, for AutoZone.

Judge Jones: Thank you.

Ryan Tibbitts: Ryan Tibbits. I'm General Counsel for the SCO Group.

Judge Jones: OK. All right. We did have an emergency motion. I'll let you address that, please, if you would.

Stewart: Thank you, Your Honor. We appreciate you hearing us so quickly on this motion. We've stated in detail in our moving papers the basis for our motion, so for the sake of brevity I won't repeat all those . . .

Judge Jones: I hope not.

Stewart: What I'd like to do is just address a couple of the high points of the motion, and then there is one additional issue I'd like to address that is raised by the statement that SCO recently served on AutoZone that wasn't addressed in our motion but that I do believe is relevant in terms of the Court's consideration of its motion.

The Court will recall that on July 12, the Court heard argument on AutoZone's motion to stay this case in favor of the pending Red Hat, Novell, and IBM cases. In defense of that motion, SCO said that AutoZone had engaged in unique infringements of the Unix code when AutoZone migrated from Unix to Linux, that those issues are not at issue in the other three cases, and that SCO is suffering irreparable harm.

As a result of those arguments, the Court, through an order dated August 6, provided the parties with the opportunity to conduct expedited discovery in advance of the filing of a motion for preliminary injunction, but in clarifying what this discovery was to go to at the July 12th hearing, we understood the Court to make clear to SCO that it should not be going down the road of expedited discovery if it doesn't have a good-faith basis for a motion and if it doesn't intend to file that motion, and specifically . . .

Judge Jones: Yeah, I . . . you know, I've stayed the action, except to preserve their right to get an injunction unless they're, you know. . . The claim is irreparable harm. That's the claim.

Stewart: Right.

Judge Jones: And they've given you at least enough of a basis in the statement. Why shouldn't I let them, especially since it's limited by time, just let them finish that up and put on the request if they're going to ask for one?

Stewart: Well, Your Honor, a couple of reasons for that. Although SCO, in its statement, has purported to identify a basis on which they'd move for preliminary injunction, when you really take a look at what they've said in their statement, they haven't. It's the same amorphous, vague allegations that they've set forth in their Complaint.

For example, they allege that they have a reason to believe that AutoZone infringed static shared libraries when it migrated from Unix to Linux. My understanding is that there are between a couple of dozen to a hundred or more shared libraries in Unix. SCO has yet to identify even a single library that it believes that AutoZone has infringed in the migration.

Judge Jones: Shouldn't it be able to look at the code, to see which ones do or don't?

Stewart: Well, Your Honor, our understanding of the pleading requirements in the Federal Rules is they've got to have a good-faith basis to believe that that infringement occurred before they can even assert a claim. They have yet to identify any cogent reason why it is that AutoZone could not have written around those libraries. In AutoZone's. . . AutoZone has publicly stated that it wrote around all those libraries. It didn't need them. There is no allegation by SCO at all about why that's not plausible.

So what we've got is a hunch, a feeling. Frankly, it appears to me that what's really going on is that SCO just doesn't believe that AutoZone's IT department is technically sophisticated enough to be able to write around this code. So they've got a hunch that maybe something there is infringing. But it's my understanding, Your Honor, of the federal pleading requirements, that's not enough to plead a claim, let alone move for preliminary injunction or preserve or to pursue a motion for preliminary injunction, or pursue expedited discovery.

So at this point, we're more than thirty days into the ninety-day expedited discovery process, we don't have an identification yet of a single line of code that's been infringed, a single section of any manual that's been infringed, or even a cogent theory about why it is that that could have been infringed. So what SCO wants to do is root around in expedited discovery, figure out if it has a claim, and then bring a motion that it flat-out states that, as of today, it does not know whether a motion for preliminary injunction is warranted.

In that context Your Honor, we'd submit that they haven't shown that they're suffering the kind of irreparable harm that justifies staying this case when seminal issues of fact and law at issue in this case are also being decidedin the three other cases.

And that gets to the additional point that I wanted to makethis morning. On page 3 of SCO's statement, it identifies the copyright registrations that cover the copyrights that it's alleging that AutoZone infringed in the migration. Now, those registration certificates are important, because, as the court knows, this court doesn't have subject matter jurisdiction to entertain a copyright claim unless those copyrights have been registered with the Copyright Office.

Those registration certificates are also significant, because the threshold element that SCO must establish on its copyright infringement claims is that it owns the copyrights that it's seeking to enforce against AutoZone. All four of the copyright registrations . . .

Judge Jones: Why are you arguing this issue now?

Stewart: Well, I apologize, Your Honor . Where I'm heading with this is that a seminal issue on this motion is directly at play in the Novell case, in a motion that's going to be heard very shortly. I'll hustle through this point.

The... all four of these copyright registration certificates relate to Unix System V. It's undisputed in this case and in all the other cases that SCO does not own the copyrights in any Unix System V materials unless Novell assigned the copyrights to SCO.

Novell says it didn't. Because of public statements by Novell to that extent, SCO filed the Novell lawsuit. So . . .

Judge Jones: What did it assign? This is all background, and it really doesn't belong on our record here this morning, but just for interest, what did it assign? Forward, or prior, or nothing?

Stewart: My understanding is that it assigned the right to revenue streams down the road and the right perhaps to make enhancements. Now, SCO can address those issues better than I can.

Judge Jones: Gee, I hope not, because it's not an issue before us. [ laughter]

Stewart: But, well, the issue is this, Your Honor. They can't get a preliminary injunction unless they can show that they own the code.

Judge Jones: That's not true. But we. . . you know, the point is, I've stated I'm going to defer to the Utah court, for heaven's sakes. I'm going to defer on that. The only question is whether there's irreparable injury to be suffered by them in such deferral. That's the only question. And they have the heavy burden, obviously, but they have to meet it.

Stewart: Well, I may have misunderstanded where we're heading. . .

Judge Jones: OK. I'm going to deny the motion. I'm sorry. I was going to ask you if you need to, but I'm not getting answers to the questions, and the obvious, the obvious conclusion to me after reading the pleadings is, I gave them this right for the very purpose, and as a -- in essence almost a due process constitutional predicate to granting a stay of the action here -- that they do have at least the opportunity to pursue injunctive relief for irreparable injury that would incur while the stay is in existence.

That's why I did it, and obviously, as a predicate to that, they have to have some right of discovery. They've got to have the ability to ask you, "What is your code?", so that they can tell me whether there is any irreparable injury that's going to occur. So, as far as I can see it, based on their statement, they've given you enough, at least as minimal of what I required or had in contemplation, when I made the ruling.

So I think I have to deny your request. It's not a big suffering that you're going through, especially where I've granted your motion to stay. You just have to submit yourself to that darned little period of the discovery, so that they can frame it, if they're able to -- it's their burden -- for the court on preliminary injunction request. So I think that's the basis that I would have to deny you your request.

Stewart: Your Honor, the point about the copyrights, if I could just finish that quickly, because I want to make sure I understand where we're heading with the motion that you envision. And my understanding is that, to show irreparable harm, they've got to show . . . they've got to state at least a reasonable basis for a claim for copyright infringement.

Judge Jones: I'm not going to give you the standard at this juncture. I haven't -- don't even have them having filed a motion yet.

Stewart: Well, Your Honor, it would involve the merits of the copyright claim.

Judge Jones: Right.

Stewart: Which necessarily means that they have to show that they own the copyrights . . .

Judge Jones: If you get a ruling out of the Utah -- as far as I'm willing to go out on a limb is to say if you get a ruling from the Utah court in the meantime they don't own any copyrights, then, of course, they've got an additional burden on such a motion [laughs], and I think they realize that.

But if all you're going to tell me is, you know, they've got to establish it first here in this court, where I've already granted the stay so that we can defer to the ruling of the Utah court, that doesn't make any sense.

Stewart: If I could give you one more statement and then I promise I'll shut up...

Judge Jones: OK.

Stewart: If the court in Utah rules that Novell did not assign the copyrights, there is no case. This case is over.

Judge Jones: Sounds likely. I'm not so ruling, yet, because I don't have anything in front of me, but that sounds -- sounds to me like you're right on.

Stewart: And there is a motion to dismiss pending in the Novell case right now. It's not scheduled for argument, but it will decide whether Novell wins on the pleadings, and if it does . . .

Judge Jones: I was going to ask you, out of interest, the status. You're not yet with me at the point where you're required to file your written status report, I assume, but I was just curious, and you've partially answered the question. The Utah court has before it the issue of the ownership and then also a separate motion to dismiss.

Stewart: It does, Your Honor.

Judge Jones: Uh-huh. And what about the court, is it New Jersey or Delaware?

Stewart: The Delaware case, the Red Hat case, is still stayed. The IBM case is teed up for arguments on the 15th on motions for summary judgment that IBM has filed, and -- I have to confess, I don't know everything that's going to be heard at that argument on the 15th. If there are additional issues then SCO would . . .

Judge Jones: OK, I was just curious as to the background. Are there other Linux users that are being sued or . . . around the country, or are there other potential federal lawsuits or actual existing federal lawsuits?

Stewart: SCO filed a lawsuit against DaimlerChrysler, another end user. It had a different basis.

Judge Jones: So it's an ongoing course of litigation that was all the more reason to defer to the first court that had the issue squarely before it. OK, did you want to add or make further comment?

Stone: Your Honor, I hesitate since, where you've already denied the motion, but I'm going to plunge into uncharted waters. Can I stand up for a second?

Judge Jones: Sure. Please.

Stone: Judge, we have all along and since said in our papers, we're trying to reduce the burden to the parties and AutoZone, by focusing in on these issues. And I have suggestion which may do that, may address some of their concerns. I think it would certainly help us expedite this matter.

They have offered us an individual, his name is Greer, who apparently was the mastermind behind this migration for them. I don't believe he works for them any more, but he's agreed to appear for a deposition.

If we -- and we've already set the date, for the 24th actually, subject to this, obviously, argument -- what I suggest we should do, and I guess what I'd ask the court, in essence, to order, but this is my suggestion, is that we be permitted to take that deposition, and take seven hours. My clients have told me that we should be able to know, with much more certainty whether there's a concern there or not.

If at the end of that deposition they convince us that they've, as he says, written around our code, didn't use our methods and concepts, or structures and whatever, then we will so advise the court that we won't move for preliminary injunction. The case would still exist because we're still suing them on the issue of the Linux issue.

If, on the other hand, you know, if we confirm some of these issues that we've talked about, we may advise them, and then the reciprocal discovery could go forward at that point on those issues, with those issues being more focussed. So, I guess what I'm suggesting -- they've served us with a lot of discovery that basically. Until we take that deposition, we can't really answer with specificity anyway. We can answer what we know. That would address their burden -- our burden, frankly -- and give everybody a . . . .

Judge Jones: Well, the corollary of this, of course, is that you have, during this short period, you have to submit yourself fully, too. And if you're suggesting hold off, please, uh ...

Stone: I'm suggesting we . . . I mean, we were going to serve, you know, request for admissions, interrogatories, document requests. We have them. We haven't served them. I wanted to see what happened today.

Judge Jones: Yeah.

Stone: But, I guess my suggestion is since we're talking about the 24th, which is only a couple weeks from now, if we hold off on that and just have those dates run from after we take that deposition that would hopefully help everybody focus on this one issue, and then if there is an issue, then we can all take the reciprocal discovery that's necessary.

Judge Jones: That's a very complicated question and you need to address it to the other side first.

Stone: That's fine.

Judge Jones: See if there's any disputes. All I'm doing today is just denying the emergency motion.

Stone: Right. Thank you, Your Honor. I'm just trying to address their concern.

Judge Jones: No, I appreciate that. OK. Thank you very much. Can I have a simple order, please?

Stone: Your Honor, I'll submit the order.

Judge Jones: OK. Thank you.

Stewart: Thank you, Your Honor.

Judge Jones: Thank you very much for your time.

Stone: Thank you for your time, Your Honor.

Clerk/Guard: All rise.


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