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Judge Denies SCO Motion To Stay DaimlerChrysler Until IBM Decided - Updated
Tuesday, November 30 2004 @ 07:50 AM EST

The judge in the SCO v. DaimlerChrysler case, the Honorable Rae Lee Chabot, has denied a SCO motion [PDF] for a stay of their case until after the IBM case is decided, I have just been informed by the Clerk of the Court. The hearing was on November 24.

Another loss for SCO. What? No SCO press release?

The case is now set to go forward on January 7 at 8:30 AM. Hopefully, some of you will be able to attend the hearing.

Their motion told the judge that it would be "a waste of valuable judicial and attorney resources to proceed with a case evaluation and a trial on SCO's remaining damage claim as to timeliness, followed by an appeal of this Court's order regarding the sufficiency of DCX's certification, when these issues may become moot upon the conclusion of the pending summary judgment proceeding in the IBM case."

They should have thought of that before they filed the lawsuit, I'm thinking.

Note that they mention appealing the DC judge's order, wherein she ruled DC had complied sufficiently with the certification requirements under their license, if not -- perhaps -- in a timely fashion. I gather they would have liked to postpone that expense for now, because it all becomes moot if they lose in the IBM case. If, in contrast, in a remote-hope scenario, they win, they think they would have a much better shot in an appeal of what they describe as her "narrow" ruling about what certification efforts licensees owe to SCO and probably a better chance with her on the timeliness question. They perhaps also would have liked to avoid another headline about a loss in yet another court, which seems very possible.

If IBM wins, I guess they hoped DC would just fade away. I gather they would rather go out with a whimper than with a media bang.

Naturally, DC had zero interest in any stay and when SCO asked them to consent, they declined. They told SCO that unless SCO goes forward now, "then it insists that SCO dismiss its remaining claim with prejudice." DC has probably had a belly full of SCO already, and they naturally would like this settled and done with.

I think we may be seeing the first indication of what happens when you put a cap on legal fees. Moral of the story? Pay your lawyer. So, January 7 at 8:30 AM it is.

Update: I have the court's recorder's transcript on paper. I've hand typed it, and I'll put it after the motion.

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

STATE OF MICHIGAN

IN THE CIRCUIT COURT FOR THE COUNTY OF OAKLAND

___________________________________

THE SCO GROUP, INC.,
a Delaware corporation,

Plaintiff,

vs.

DAIMLERCHRYSLER
CORPORATION, a Delaware
corporation,

Defendant.

__________________________________

Case No. 04-056587-CK
Hon. Rae Lee Chabot

Hearing Date: November 24, 2004

_______________________________________

JOEL H. SERLIN (P20224)
BARRY M. ROSENBAUM (P26487)
Attorneys for Plaintiff
[address, phone]

JAMES P. FEENEY (P13335)
THOMAS S. BISHOFF (P53753)
STEPHEN L. TUPPER (P53918)
Attorney for Defendants
[address, phone]

______________________________________

MOTION FOR STAY OF PROCEEDINGS

NOW COMES Plaintiff The SCO Group, Inc., by and through its attorneys, Seyburn, Kahn, Ginn, Bess & Serlin, P.C., and moves this Honorable Court to stay the proceedings in this matter for a period of time to be determined by the Court for the following stated reasons:

1. On March 3, 2004, Plaintiff The SCO Group, Inc. ("SCO") filed a Complaint in this matter alleging that Defendant DaimlerChrysler Corporation ("DCX") had breached a license agreement between the parties, governing the use of SCO's UNIX computer operating system.

2. Specifically, SCO alleged that DCX, as an end-user had failed to comply with the agreement's certification requirements governing its use of the UNIX operating system, by failing to respond to SCO's request that DCX so certify its compliance with the terms of the license agreement between the parties.

3. On August 9, 2004, this Court, pursuant to a motion filed by DCX, entered an Order Granting in Part and Denying in Part Defendant's Motion for Summary Disposition ("Order"), holding that DCX had satisfied its certification obligation, but finding an issue of fact as to whether DCX had been timely in serving its certification upon SCO.

4. The remaining claim is scheduled for case evaluation on November 30, 2004 and trial on January 11,, 2005.

5. SCO is currently engaged in litigation in the United States District Court for the District of Utah with International Business Machines Corporation ("IBM") over the interpretation of a license agreement between SCO and IBM that is substantially similar to the license agreement in the case before this Court. That case is SCO Group, Inc. v. International Business Machines Corporation, No. 2:03CV294.

6. IBM has argued that the license agreements, contrary to their express terms, protect against only the literal copying of UNIX source code, while SCO argued that the protections sweep broader, to protect, among other things, all modifications and derivatives prepared by licensees based on the original UNIX source code. IBM has filed a motion for summary judgment based on its interpretation of the license agreements, which motion is currently being briefed. No hearing date has been set on the motions, but it is likely that they will be heard sometime early next year.

7. A ruling in the IBM case will provide important guidance concerning the obligations of end users like DCX under the certification requirement at issue here. Specifically, as noted above, a resolution of the contract-interpretation issue currently pending in the IBM case will permit all parties to know with some certainty the scope of the obligations and restrictions under the license agreements to which licensees must certify their compliance.

8. Given this court's narrow interpretation of the certification requirement contained in the license agreement, it may no longer be productive for SCO to attempt to gather information from UNIX end users by means of requests for certification until a ruling on the contract issue in the IBM case is forthcoming.

9. Moreover, if SCO's interpretation of the license agreement is rejected by the court in the IBM case, SCO may choose never to litigate the sufficiency and timeliness of certification prepared by DCX and other end users of the UNIX operating system.

10. SCO is engaged in two other disputes relating to its UNIX rights in federal court in Nevada and Delaware. Both of these cases have been stayed by the respective federal judges pending the resolution of the key issues in the IBM case. Copies of the stay orders from these Courts are attached hereto.

11. In the two cases that have been stayed, SCO has been filing court-ordered periodic reports on the progress of the IBM case.

12. It would be a waste of valuable judicial and attorney resources to proceed with a case evaluation and a trial on SCO's remaining damage claim as to timeliness, followed by an appeal of this Court's order regarding the sufficiency of DCX's certification, when these issues may become moot upon the conclusion of the pending summary judgment proceeding in the IBM case.

13. Courts have the inherent power to control their dockets, and a motion for stay is directed to the courts's sound discretion. Amersham International, PLC f. Corning Glass Works, 618 F Supp 507, 509 (ED Mich, 1984).

14. SCO requested that DCX consent to a stay of proceedings in October 2004, but DCX indicated it would not consent to a stay; DCX has further stated that if SCO does not intend to pursue the claim as to the timeliness of DCX's certification at this time, then it insists that SCO dismiss its remaining claim with prejudice.

WHEREFORE, Plaintiff The SCO Group, Inc. respectfully requests that this Honorable Court stay the proceedings in this matter for a period of time to be set by the Court.

Respectfully submitted,

SEYBURN, KAHN, GINN,
BESS AND SERLIN, P.C.

By: ____[signature]_____
Barry M. Rosenbaum (P26487)
Attorneys for Plaintiff
[address, phone]

Dated: November 17, 2004
Steven I. Froot, Esq.
Co-Counsel for Plaintiff
[address, phone]

Mark J. Heise, Esq.
Co-Counsel for Plaintiff
[address, phone]

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

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

STATE OF MICHIGAN

6th JUDICIAL CIRCUIT COURT FOR THE COUNTY OF OAKLAND

SCO,

Plaintif,

v

DAIMLER CHRYSLER,

Defendant.

________________

File No. 2004-05687-CK

MOTION FOR STAY OF PROCEEDINGS
BEFORE THE HONORABLE RAE LEE CHABOT, CIRCUIT COURT JUDGE

Pontiac, Michigan - Wednesday, November 24, 2004

APPEARANCES:

For the Plaintiff:
Barry M. Rosenbaum (P26487)
[address, phone]

For the Defendant:
James Feeney (P13335)
[address, phone]

Pontiac, Michigan

Wednesday, November 24, 2004

THE CLERK: Now calling 2004-056587-CK, SCO versus Daimler Chrysler.

MR. ROSENBAUM: Morning, your Honor.

THE COURT: You guys again.

MR. ROSENBAUM: It's been a few months. Barry Rosenbaum and Steven Freud appearing on behalf of the Plaintiff, your Honor.

MR. FEENEY: James Feeney appearing on behalf of Daimler Chrysler.

MR. ROSENBAUM: Well, your Honor, this is our motion for stay of proceedings in this matter. We're seeking to stay the case until a federal court in Utah in the matter of SCO Group versus IBM rules on a pending motion for summary judgment scheduled -- well, it's supposed to be heard early next year. Let me say right out of the shoot that Daimler Chrysler claims in their -- in their response that this Court does not have the right to stay these proceedings unless the other case has identical parties and identical issues. As we've indicated in our reply memorandum, that is clearly not the law in Michigan. There is no such requirement in seeking a stay. As Daimler concedes in its response, this Court has the inherent power to manage its own docket for --

THE COURT: Okay, but let me say this, the only issue before this Court now is the timeliness issue.

MR. ROSENBAUM: That's correct, your Honor.

THE COURT: I don't think that's the issue in Utah.

MR. ROSENBAUM: It's not the issue, but there is a practical reason why disposition in Utah will impact on further proceedings, and the understanding that the only issue before this Court is the timeliness issue, there is, of course, still we have to deal with the effects of this Court's ruling last July, which was the major ruling in this case dealing with the certification.

THE COURT: Right, I've already decided it.

MR. ROSENBAUM: You have decided that but what we're hoping to avoid, your Honor, if possible, is having to immediately take an appeal from that ruling if we dispose of this case now. And if, in fact, this case ends up being dismissed --

THE COURT: If we dispose of this case now, you mean dismiss it?

MR. ROSENBAUM: Dismiss it, yes, your Honor. We would --

THE COURT: Okay.

MR. ROSENBAUM: -- then have to go forward on an appeal.

THE COURT: Right.

MR. ROSENBAUM: -- in order to avoid the collateral estoppel effects of your ruling -- possible collateral estoppel effects.

THE COURT: Okay.

MR. ROSENBAUM: Possible.

THE COURT: Okay.

MR ROSENBAUM: Let me qualify that.

THE COURT: Yes.

MR. ROSENBAUM: So, what we're suggesting to the Court, as two other federal courts have done, and we've indicated that there are two other cases involving the SCO Group and other end users that have been stayed by the respective federal judges pending the outcome in IBM because the core issue in the IBM case is so critical and so crucial, that it may impact on whether or not the cases go forward in these other matters. In particular, in our case we're dealing with a certification requirement which is a information-gathering. The issue in IBM goes to the actual scope of the licensing agreement, the right to use the UNIX system.

THE COURT: Right.

MR. ROSENBAUM: And I'm going to make it into as simple terms as I can, Mr. Freud as a much greater knowledge of the detail, but as I understand it in the IBM case, what's going to be decided by the motion for summary judgment is whether or not restrictions that come along with the license are going to be broadly contstrued in favor of the SCO Group, then the certification requirement becomes very, very important in terms of gathering information to find out how end users, such as Daimler Chrysler, are using the UNIX system.

If, on the other hand, the judge in Utah decides that the license restrictions and use of the license is to be very narrowly construed --

THE COURT: Right.

MR. ROSENBAUM: -- then of course the certification requirement becomes less valuable because the rights that we have are going to be diminished as a result of that ruling in Utah. And if, in fact, the certification becomes less valuable, there's not as much incentive, if you will, for us to -- for SCO to go ahead and challenge this Court's ruling where you narrowly construed the certification requirement.

THE COURT: Okay, I understand.

MR. ROSENBAUM: And that's why -- and it's not like, your Honor, we've -- we've spent months and months in litigation and hundreds of thousands --

THE COURT: Right.

MR. ROSENBAUM: -- of dollars in attorney fees, both sides did nothing after this Court's ruling because you dealt with a major issue in this case.

THE COURT: Right.

MR. ROSENBAUM: Not to diminish the significance of timeliness, the reason we filed the case in the first place is because we were -- received no response whatsoever from Daimler Chrysler to our letter asking them to certify. They didn't respond at all.

So in effect, when we filed our lawsuit they did respond and our case -- you know, the reason we filed the lawsuit then was validated. But at this point in time, in light of this Court's ruling, it just doesn't make practical sense for us to either proceed to trial on the timeliness case or, more importantly, for us to take an immediate appeal if this case were dismissed of your ruling on the scope of the certification.

So for those reasons, we're asking that the Court stay the proceeding. We would periodically report as is the requirement in the other two federal cases I've cited.

THE COURT: Right.

MR. ROSENBAUM: And keep the Court apprised of what's going on in Utah.

THE COURT: I understand. Thank you.

MR. ROSENBAUM: Thank you, your Honor.

MR. FEENEY: Morning, your Honor. Your Honor, simply stated, the reasons that they want a stay are tactical. They're tactical from the point of view of the Plaintiff. They're entirely tactical. It's not about legal mootness, it's not about identicality of issues. The Utah case, in and of itself, will have zero legal effect on what happens here. The only issue before the Court now is timeliness. We have a case evaluation for which we have filed our statement next Tuesday at 1:20. We've got a January trial date. We didn't start the lawsuit, we have the right to have it resolved. If they don't -- if they disagree with the Court's ruling form last July, they ought to either dismiss this case and take an appeal, or litigate the timeliness issue and take an appeal.

The only advantage here to a stay is to favor the tactical consideration of SCO and there's no other practical reason to do it and we'd ask you to deny the motion.

THE COURT: Anything further?

MR. ROSENBAUM: Well yes, your Honor, I mean --

THE COURT: I knew I was going to regret leaving that timeliness issue in there. I should have found a way to deal with it.

MR. ROSENBAUM: Well, as I've indicated, dismissal is not the preferred option. I mean, yes, it's a question of tactics. We're asking for what we think would be best for all parties. A stay means neither party spends anymore time or money on this matter, at least in the short term, including the Court.

THE COURT: I understand your purpose is economy of, you know, assets, working hours, yeah.

MR. ROSENBAUM: Resources. The Court's resources as well. It may be, and I emphasize "may," I'm certainly not going to guarantee it, but depending on the -- on what happens in Utah, it may be that this case ends up being dismissed voluntarily at some point down the line. But it may not be that case, your Honor, and in the meantime, we ought to give the court in Utah, which has the primary issue involving the UNIX license, the opportunity to rule and having -- and again, it's going to be short term. At least -- at the very least this is an '04 case, at the very least we could put a stay on --

THE COURT: I'm not -- I'm not convinced it's going to be short term.

MR. ROSENBAUM: But it could be. It could be. And --

THE COURT: I'm not --

MR. ROSENBAUM: -- your HOnor, if it's not -- if it's not so we come back in January or February and the Court said, you know, this case in Utah isn't going anywhere, I want to -- you guys have to either dismiss it or go to trial on the timeliness. I don't think a few months, your Honor, is that onerous of a request under the circumstances.

THE COURT: I don't know. Okay, here is my view on this. I guess one of the things that concerns me when I look at this is that the issue that I would be staying this action for is not my issue. The only issue I have is timeliness. That's the only issue. I decided the other one and I understand you don't want to spend assets appealing me right now, but I also agree with the Defendants that they did not ask to be invited into court. They have a right, now that they have been, to have this issue resolved. And I understand it's going to go on in other forums, you know, after I'm done, but that's the way it works. I'm not convinced that there is a reason for a stay and I'm going to deny the motion.

MR. ROSENBAUM: Your Honor, may we approach the Bench --

THE COURT: Yes.

MR. ROSENBAUM: -- on the scheduling issue? Thank you.

(Bench Conference held from 9:01:06 a.m. to 9:02:35 a.m.)

(At 9:02:38 a.m., hearing concluded)


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