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IBM's Memo Attaching & in Support of Proposed Scheduling Order
Wednesday, March 30 2005 @ 12:42 AM EST

Here is IBM's Memorandum Attaching and in Support of IBM's Proposed Scheduling Order, as text. I did the text and HTML myself, because every time I tried to read it, I got caught in a mental loop, so typing it out helped me to get the message loud and clear, which I believe is this: IBM is asking the court to please bring this circus to some kind of a foreseeable end. Specifically, they want the court to force SCO to finally tell them with specificity exactly what it is IBM is accused of doing, and they'd like the Court to set deadlines for both parties to disclose the particulars of their claims. And they would like SCO to do it before discovery is ended. Sounds reasonable to you and me, right? SCO begs to differ.

IBM tells the Court that by now, this case should be getting more focused and narrower. That is how it works in litigation, but instead, all this time into the suit, IBM still has no clue what code it is alleged to have misused, and they'd like the Court to set a day for SCO to have to tell. We also get a glimpse at the grounds IBM is apparently using to oppose SCO's attempt to amend its complaint. It seems the Project Monterey contract stipulated that any breach must be brought within two years, it had to be brought in New York State, and a jury trial was contractually waived.

In her January 18 Order, Judge Wells told SCO and IBM to get together and try to work out a new scheduling order and submit it to the court together. Of course, they can't agree on anything. Her encouraging words to shake hands and act like little gentlemen -- or good sportsmanlike football players -- fell on deaf ears, because there are some issues they can't resolve without her, so they are submitting dueling scheduling orders instead. Footnote 1 informs us that even what they initially agreed on, SCO now has backed away from and no longer will agree to. So essentially, nothing is agreed to, but IBM doesn't know why, and so it submitted the scheduling order that the parties originally agreed to. I'm sure Judge Wells will be thrilled. Additionally, IBM is asking for oral argument. So heigh ho, heigh ho, it's back to court we all go.

IBM would like interim dates, by which time SCO has to tell them what IBM has exactly done to misuse their materials. Line by line, they want some specificity, so they can do discovery on SCO's claims, if SCO ever makes any specific claims. What exactly are they supposed to have misused? They want it finally "identified by version, file and line of code" -- methods and concepts too, pretty please.

SCO, on the other hand, wants to reveal the allegedly infringing code after discovery is over, according to IBM. They are in a hard position, though. SCO apparently brought the lawsuit without any concrete evidence, and they still don't have any, as IBM reminds the court Judge Kimball said in his February Order. Now they are awaiting more code, so they can try to prove the methods and concepts claim, and so it's a matter where each side wants time to suit their needs. SCO wants all the time it can get, presumably, to go over the code. And IBM is sick of all this by now, and they'd like some light at the end of the tunnel, so they know they won't spend the rest of their natural born lives waiting for SCO to find some proof of something. SCO at the moment may not know the answer to IBM's question and won't know, until they pore over the code with a fine-toothed comb for 25 man-years, or whatever. So they want time. Not that this is a new desire on their part. IBM is concerned that without a Court-imposed deadline, SCO won't tell until it's too late for IBM to defend itself properly. Its suspicions are heightened because this is a SCO sticking point, but it won't give a reason. Here is how IBM describes it:

SCO, by contrast, insists on a schedule that would allow it to keep IBM in the dark about its claims and deny IBM the right to prepare its defenses to those claims. SCO's proposal, if accepted, would result in further unnecessary disputes and delay.

IBM objects to three of the provisions SCO seeks to include in the scheduling order. SCO seeks to include provisions that would (1) foreclose IBM's motion for reconsideration without substantive review by the Court; (2) re-open the pleadings more than one year after expiration of the deadline for amending pleadings; and (3) require the parties and the Court to participate in monthly status conferences -- on no particular subject -- that would merely invite unnecessary disputes. There is no need for the provisions SCO proposes. In fact, they would operate merely to short circuit existing orders and procedures that are already in place. SCO's proposed provisions should not be included in the scheduling order. . . .

SCO reinforced our concern by refusing to agree to a schedule that would require either an interim or a final disclosure of the Allegedly Misused Material. Although the parties met and conferred regarding their respective proposals, SCO did not offer a reason for its objection to IBM's proposal.

IBM therefore has come up with a phased deadline process:

Specifically, IBM proposes an interim deadline of June 11, 2005, by which the parties would identify the Allegedly Misused Material known to them as of that date, and a final deadline of August 11, 2005, by which the parties would identify any and all material that the other party is alleged to have misused. All fact discovery would close on August 11, 2005, except as to defenses to claims relating to the Allegedly Misused Material. The only fact discovery that would be permitted thereafter would be fact discovery relating to defenses to claims relating to the Allegedly Misused Material. No party could contend that another party misused material not identified by the August 11 deadline; no expert could opine as to the misuse of material not identified by the deadline.

Can you imagine having to force the party suing you to tell you what your offense allegedly is? That is usually the first thing they want to tell you, and plaintiffs normally want to tell the judge all about it. But here, IBM is having to petition the Court to try to find out what they are accused of. It's unique, in my experience.

There is one other intriguing element in this memorandum. If you note footnote 5, we get a big hint as to what SCO's request to amend its complaint yet again is all about. We've had a number of hints that it's about Project Monterey. Here's the footnote:

5. As is explained in IBM's opposition to SCO's motion to amend, if SCO wishes to bring the claim it seeks to assert against IBM, then it can seek to assert the claim in the Court in which it is contractually bound to proceed (a New York court).

It does sound like IBM is opposing SCO's request to amend its complaint on the grounds that any Project Monterey complaints are supposed to be brought in the State of New York, where I do believe they eat litigants like SCO for breakfast. That Project Monterey contract has a choice of law/venue clause, choosing New York, and that isn't all it says:

22.3 Choice of Law/Venue

This Agreement shall be governed by, and the legal relations between the parties hereto shall be determined in accordance with, the substantive laws of the State of New York, without regard to the conflict of laws principles of such State, as if this Agreement was executed in and fully performed within the State of New York. Each party hereby waives any right to a trail by jury in any dispute arising under or in connection with this Agreement, and agrees that any dispute hereunder shall be tried by a judge without a jury. Any legal or other action related to a breach of this Agreement must be commenced no later than two (2) years from the date of the breach in a court sited in the State of New York.

Hmm. No jury trial. Now wouldn't that be a hoot? And within two years of the breach you had to bring suit, which SCO didn't, as IBM points out by saying that their request is "untimely", and where? In Utah? No. In the State of New York.

Now this is just an educated guess, but it sounds like the parties are dueling about whether SCO can even bring Project Monterey into this lawsuit in Utah. I'd surely like to see what SCO is coming up with to argue they have the right to ignore this rather clear paragraph, lovers of contracts and sticklers for every jot and tittle that they are. I am wondering too if IBM is pointing out that SCO is not the Santa Cruz Operation, the party that signed the agreement with IBM, but Caldera/SCO.

IBM attaches its proposed scheduling order as an exhibit, but it adds in footnote 2 that if IBM's motion for reconsideration is denied or if SCO is allowed to amend the complaint, then a new, extended schedule will be necessary.

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

SNELL & WILMER L.L.P.
Alan L. Sullivan (3152)
Todd M. Shaughnessy (6651)
Amy F. Sorenson (8947)
[address, phone, fax]

CRAVATH, SWAINE & MOORE LLP
Evan R. Chesler (admitted pro hac vice)
David R. Marriott (7572)
[address, phone, fax]

Attorneys for Defendant/Counterclaim-Plaintiff
International Business Machines Corporation

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH

THE SCO GROUP, INC.,

Plaintiff/Counterclaim-Defendant,


v.

INTERNATIONAL BUSINESS MACHINES
CORPORATION,

Defendant/Counterclaim-Plaintiff.
MEMORANDUM ATTACHING AND IN
SUPPORT OF IBM'S PROPOSED
SCHEDULING ORDER


ORAL ARGUMENT REQUESTED

Civil No. 2:03CV-0294 DAK

Honorable Dale A. Kimball

Magistrate Judge Brooke C. Wells

1

Pursuant to the Court's January 18, 2005 Order, defendant/counterclaim-plaintiff International Business Machines Corporation ("IBM") respectfully submits this memorandum attaching and in support of its proposed scheduling order.

Preliminary Statement

In its January 18 Order, the Court directed the parties to meet and confer and to submit a proposed scheduling order on or before March 25, 2005. The parties met and conferred and reached agreement on elements of a proposed schedule. 1 Because the parties have been unable to agree in all respects, however, they are submitting competing scheduling proposals. We respectfully submit that the Court should enter IBM's proposed scheduling order, attached as Exhibit A, as the final scheduling order in the case. 2

SCO objects to only one substantive feature of IBM's proposal: that the Court set deadlines for both parties to disclose the particulars of their claims (first by an interim deadline and then by a final deadline) before the close of all fact discovery. IBM proposes that the parties disclose the precise contours of their claims at a time when they will be able to take discovery with respect to those claims and properly prepare them for trial. SCO, by contrast, insists on a

2

schedule that would allow it to keep IBM in the dark about its claims and deny IBM the right to prepare its defenses to those claims. SCO's proposal, if accepted, would result in further unnecessary disputes and delay.

IBM objects to three of the provisions SCO seeks to include in the scheduling order. SCO seeks to include provisions that would (1) foreclose IBM's motion for reconsideration without substantive review by the Court; (2) re-open the pleadings more than one year after expiration of the deadline for amending pleadings; and (3) require the parties and the Court to participate in monthly status conferences -- on no particular subject -- that would merely invite unnecessary disputes. There is no need for the provisions SCO proposes. In fact, they would operate merely to short circuit existing orders and procedures that are already in place. SCO's proposed provisions should not be included in the scheduling order.

Argument

I. THE COURT SHOULD ENTER A SCHEDULING ORDER IMPOSING A DEADLINE FOR THE PARTIES TO IDENTIFY ALLEGEDLY MISUSED MATERIAL.

From the beginning of this litigation, IBM has endeavored to learn the specific identity of the material (including source code, methods, concepts and so on) that IBM is alleged to have misused. To that end, IBM has met and conferred with SCO and filed two motions to compel, resulting in discovery orders requiring SCO to disclose its alleged evidence. Yet, as the Court recognized in its February 9 Order, SCO has failed to adduce any evidence that IBM has infringed SCO's alleged copyrights. (See 2/9/05 Memorandum Decision and Order at 10 ("it is astonishing that SCO has not offered any competent evidence to create a disputed fact regarding whether IBM has infringed SCO's alleged copyrights through IBM's Linux activities").) That is so despite SCO's repeated public statements that it has mountains of evidence of IBM's alleged misconduct. (Id. at 8-9 (listing certain of SCO's public statements about its alleged evidence).)

3

As a result, IBM has long been concerned that, absent a final, court-imposed deadline for the parties specifically to identify the materials they contend one another misused (the "Allegedly Misused Material"), SCO will not disclose the identity of the Allegedly Misused Material until it is too late for IBM to prepare a defense with respect to that material. SCO reinforced our concern by refusing to agree to a schedule that would require either an interim or a final disclosure of the Allegedly Misused Material. Although the parties met and conferred regarding their respective proposals, SCO did not offer a reason for its objection to IBM's proposal. There is not, we submit, any good reason for not imposing firm deadlines, in advance of the close of all fact discovery, for the parties to disclose the Allegedly Misused Material. 3

If and when SCO properly identifies the Allegedly Misused Material, IBM will obviously need to take discovery with respect to that material. For example, if SCO were to identify Linux code that it contends is derived from AIX, Dynix, or UNIX System V and was improperly contributed to Linux, then IBM would need to take discovery to determine the facts relating to the code in question, including but not limited to (i) who wrote the code, when, how, and why, (ii) whether and to what extent it is in the public domain and (iii) whether and to what extent it is protectable by contract or copyright. Unless the Court imposes a deadline by which the parties must identify the Allegedly Misused Material, then they may not learn the identity of the material they are alleged to have misused until after the close of fact discovery and potentially even expert discovery when it would be too late to prepare a defense to claims relating to the material.

4

Under IBM's proposal, the parties would be required specifically to identify the Allegedly Misused material on a staged basis before the close of all discovery. 4 Specifically, IBM proposes an interim deadline of June 11, 2005, by which the parties would identify the Allegedly Misused Material known to them as of that date, and a final deadline of August 11, 2005, by which the parties would identify any and all material that the other party is alleged to have misused. All fact discovery would close on August 11, 2005, except as to defenses to claims relating to the Allegedly Misused Material. The only fact discovery that would be permitted thereafter would be fact discovery relating to defenses to claims relating to the Allegedly Misused Material. No party could contend that another party misused material not identified by the August 11 deadline; no expert could opine as to the misuse of material not identified by the deadline.

Imposing an interim deadline, as IBM's proposal does, allows the parties to undertake discovery relating the Allegedly Misused Material as soon as possible, without having to wait until the final deadline for disclosing Allegedly Misused Material. There is no reason to defer discovery relating to the parties' defenses, which cannot reasonably be undertaken until the Allegedly Misused Material has been identified, any longer than necessary. Imposing a final deadline, before the close of all fact discovery, for the parties to disclose all of the Allegedly

5

Misused Material, ensures that the parties learn what each other's case is about at a time when they can take fact discovery necessary to prepare a defense. If the Court does not impose a real deadline by which the parties must disclose the Allegedly Misused Material and then allow discovery with respect to the material disclosed, then IBM will remain in the dark as to the particulars of SCO's claims and be denied the opportunity to take discovery regarding the material that IBM is alleged to have misused.

Moreover, requiring the parties to disclose the Allegedly Misused Material before the close of all fact discovery will allow the parties to engage in meaningful expert discovery and refine the issues in dispute for summary adjudication. The parties may or may not require the assistance of experts to identify the material they contend one another misused. If they do, then their experts can assist them in making their disclosures. Expert discovery is not the time, however, for identifying the Allegedly Misused Material. It should be done in advance of expert reports so that the parties' experts can focus on what is really in dispute. It would make no sense, and would plainly be unfair, to allow either party to identify the Allegedly Misused Material for the first time by way of the report of one of its experts.

In sum, the Court should set deadlines for both parties to disclose the particulars of their claims (first by an interim deadline and then by a final deadline) before the close of all fact discovery. It is difficult to imagine how such a requirement could prejudice SCO, particularly since SCO has been ordered (twice) to provide this information to IBM.

II. THE PROVISIONS SCO SEEKS TO INSERT INTO THE SCHEDULE ARE EITHER UNNECESSARY OR INAPPROPRIATE.

As stated, SCO's proposal includes three provisions not included in IBM's proposal. Those provisions seek to (1) deny IBM the relief sought by its motion for reconsideration of the Court's January 18 Order; (2) re-open the pleadings more than a year after the expiration of

6

the deadline for amending pleadings; and (3) require monthly status conferences -- on no particular subject -- that would merely encourage unnecessary disputes. None of these provisions is either necessary or appropriate.

First , SCO includes in its proposal a provision requiring IBM to complete on or before May 3, 2005 production of the discovery ordered by the Court on January 18, 2005. There is already an order in place requiring IBM to complete that production (insofar as it is not the subject of IBM's motion for reconsideration) by May 3, 2005. (See 3/17/05 Order Re IBM's Motion for 45-Day Extension to Comply with 1/18/05.) There is therefore no reason for the scheduling order to address the issue as well. SCO failed to offer any reason for this redundant provision during the parties' meet-and-confer; we assume, however, that SCO seeks this provision solely to secure an order requiring IBM to produce the discovery at issue in IBM's motion for reconsideration. The Court already has addressed that issue as well, however. In its March 17, 2005, order, the Court expressly ruled that "IBM shall not be required to produce [the discovery at issue on its motion for reconsideration] until the Court has ruled on that motion". (Id.) Accordingly, there is no reason for the scheduling order to include a provision requiring IBM to complete production of the discovery required by the January 18 Order on or about May 3, 2005.

Second, SCO seizes upon the Court's request that the parties submit a new scheduling order as an opportunity to reopen the pleadings. The deadline for amending the pleadings passed more than one year ago, without any request by SCO to extend it. Yet SCO proposes that the parties be allowed until June 17, 2005, to submit new pleadings. In an Order dated June 10, 2004, the Court ruled that it would not change the scheduling order in the case "absent extremely compelling circumstances". There is no reason -- and certainly there are not extremely compelling circumstances -- for the Court to reopen the deadline for amending the pleadings.

7

That is especially so since SCO clearly seeks this adjustment solely as a means to gain an advantage in connection with its pending -- and untimely -- motion for leave to file an amended complaint. 5 At this state, the case should be getting smaller, not bigger.

Third, SCO seeks to require the Court and the parties to participate in monthly status conferences. During the parties' meet-and-confer, SCO offered no valid reason for including such a requirement. IBM is willing to participate in status conferences if the Court believes they are necessary, but we respectfully submit there is no reason for monthly status conferences. If SCO wishes to bring an issue to the Court's attention, it can do so by filing an appropriate motion after satisfying its obligation to meet and confer with IBM. Requiring the parties to participate in monthly status conferences would merely invite unnecessary disputes. Indeed, we believe, respectfully, that a monthly status conference would multiply not decrease discovery issues -- inviting the parties to raise issues with the Court without first properly propounding discovery requests, conferring in good faith regarding disagreements, and submitting appropriate briefing.

8

Conclusion

For the foregoing reasons, IBM respectfully requests that the Court enter IBM's proposed schedule as the final scheduling order in the case.

DATED this 25th day of March, 2005.

SNELL & WILMER L.L.P.

___[signature]____
Alan L. Sullivan
Todd M. Shaughnessy
Amy F. Sorenson

CRAVATH, SWAINE & MOORE LLP
Evan R. Chesler
David R. Marriott

Attorneys for Defendant/Counterclaim-Plaintiff
International Business Machines Corporation

Of counsel:

INTERNATIONAL BUSINESS MACHINES CORPORATION
Donald J. Rosenberg
Alec S. Berman
[address, phone]

Attorneys for Defendant/Counterclaim-Plaintiff
International Business Machines Corporation

9

1During several lengthy phone conversations, local counsel for IBM and local counsel for SCO discussed each of the scheduling deadlines, making clear they would need to confer with their respective co-counsel before finally agreeing. Local counsel reached a tentative agreement on everything other than the four issues addressed in this memorandum. Local counsel for IBM then contacted counsel for SCO and informed him that these tentative deadlines were acceptable to IBM. This afternoon, counsel for SCO informed us that SCO would not agree to these tentative deadlines. The proposed scheduling order submitted herewith includes the tentative deadlines, and though we do not know what SCO finds objectionable about them, they represent a compromise and we respectfully submit they are reasonable.

2 In the event the Court were to deny IBM's motion for reconsideration of the January 18 Order and require IBM to provide discovery from the files of thousands of individuals or to grant SCO's motion to amend its complaint yet again and allow SCO to expand the case, IBM's proposed schedule would obviously have to be modified. In such circumstances, the proposed deadlines would need to be extended.

3 IBM's proposal imposes a reciprocal disclosure obligation. We are not suggesting that the Court impose on SCO an obligation that would not also be imposed on IBM. The reason SCO is uninterested in IBM being required to disclose the material it alleges SCO has misused is that IBM has already done so with great particularity.

4For this purpose, the Allegedly Misused Material must be identified by version, file and line of code. For example, to the extent a party contends the other party has infringed its copyrights, the accusing party must identify and match up the allegedly infringing and allegedly infringed material by version, file and line of code. To the extent a party contends that the other party has breached its contractual obligations by contributing code to Linux, the accusing party must identify the material alleged to have been contributed improperly by version, file and line of code, and to the extent the allegedly contributed material is not Unix System V code, but is any sense alleged to have been based on or resulted from Unix System V code, the version, file and line of Unix System V code from which the allegedly contributed material is alleged to derive or result.

5 As is explained in IBM's opposition to SCO's motion to amend, if SCO wishes to bring the claim it seeks to assert against IBM, then it can seek to assert the claim in the Court in which it is contractually bound to proceed (a New York court).


CERTIFICATE OF SERVICE OF CLERK

I hereby certify that on the 25th day of March, 2005 a true and correct copy of the foregoing was served by U.S. Mail, postage prepaid, to the following:

Brent O. Hatch
Mark F. James
HATCH JAMES & DODGE
[address]

Stephen N. Zack
Mark J. Heise
BOIES SCHILLER & FLEXNER
[address]

Robert Silver
Edward Normand
Sean Eskovitz
BOIES SCHILLER & FLEXNER
[address]

____[signature]____
Amy F. Sorenson

10


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