Here is the transcript of the April 21, 2005 hearing in SCO v. IBM. We have many volunteers to thank for the text and HTML, including some anonymous contributors. A special thanks to Steve Martin, who did the final version, and to Josh Watson, Simon Gibbs,
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
THE SCO GROUP, INC.,
BEFORE THE HONORABLE DALE A. KIMBALL
APRIL 21, 2005
REPORTER'S TRANSCRIPT OF PROCEEDINGS
Reported by: KELLY BROWN, HICKEN CSR, RPR, RMR
|FOR THE PLAINTIFFS:
HATCH, JAMES & DODGE, PC
BY: BRENT O. HATCH
Attorney at Law
BOIES, SCHILLER & FLEXNER, LLP
BY: EDWARD J. NORMAND
Attorneys at Law
FOR THE DEFENDANT:
SNELL & WILMER, LLP
BY: TODD M. SHAUGHNESSY
Attorney at Law
CRAVATH, SWAINE & MOORE LLP
BY: DAVID R. MARRIOTT
Attorney at Law
SALT LAKE CITY, UTAH, THURSDAY, APRIL 21, 2005
* * * * *
THE COURT: We're here this afternoon in the matter
of The SCO Group vs. International Business Machines
Corporation, 2:03-CV-294. For plaintiff, Mr. Brent Hatch and
Mr. Sean Eskovitz and Mr. Edward Normand; correct?
MR. NORMAND: Correct, Your Honor.
THE COURT: For defendant, Mr. David Marriott and
Mr. Todd Shaughnessy.
MR. MARRIOTT: Good afternoon, Your Honor.
THE COURT: Good afternoon.
All right. We have SCO's motion to compel IBM to
produce Mr. Palmisano for deposition; SCO's motion for leave
to file a third amended complaint, which might touch on the
question of defendant wanting or not wanting to narrow the
Ninth Counterclaim; and proposed scheduling orders from
Now, the first and third of those motions clearly
have no confidentiality problems. The second one, the motion
for leave to file a third amended complaint, there might be
some alleged confidential information there, but you can argue
it in a way that doesn't refer directly to it. You can refer
to it in exhibits and so on. So I'm sure for the happy
conclusion of the spectators, the courtroom will not be
All right. Let's take up the motion to compel.
Who's going to argue that?
MR. ESKOVITZ: I will, Your Honor.
THE COURT: And you are?
MR. ESKOVITZ: I'm Sean Eskovitz.
THE COURT: You are Mr. Eskovitz.
MR. ESKOVITZ: And, Your Honor, in connection with
both of the motions that will be argued this afternoon, we
submitted to the Court two separate binders of exhibits that
will come up during the argument.
THE COURT: And you've given them to opposing
counsel, no doubt?
MR. ESKOVITZ: We have.
THE COURT: Thank you.
MR. ESKOVITZ: Your Honor, SCO seeks to depose
sam Palmisano because before he became IBM's chairman and CEO,
he personally spearheaded IBM's multi-billion dollar strategic
decision to shift the focus of its operating system business
from Unix to Linux, and that strategy is at the center of
SCO's claims in this case. Specifically, SCO alleges that in
order to carry out his strategy of quickly upgrading Linux
into an operating system that could compete with Unix, SCO's
product for business users, IBM took the shortcut of
misappropriating SCO's intellectual property in Unix and
contributing Unix' enterprise strength features into Linux.
Now, Mr. Palmisano spearheaded that IBM Linux
strategy when he was the vice-president in charge of IBM's
computer server group in late 1999 and early 2000, years
before he was installed as the company's CEO and chairman.
But IBM has attempted to shield Mr. Paul Palmisano from
deposition based on his current positions.
They've refused to produce Mr. Palmisano on two
grounds. First, they've argued that he has no knowledge
regarding any specific issues that are relevant to this
lawsuit; and they've also argued in the alternative that any
knowledge he has can be obtained by deposing other individuals
within IBM. And those objections are wrong as a matter of
fact and as a matter of law. And as I'll detail in this
argument, Mr. Palmisano clearly has knowledge regarding
specific relevant issues about IBM Linux strategy and with
respect to the legal position that IBM has taken. They
incorrectly base their refusal to produce Mr. Palmisano on an
inapposite body of case law that merely stands for the
proposition that in garden variety lawsuits where a party
should not be permitted to harass or interfere with the other
party's operations simply by attempting to take the deposition
of the highest executive of the company, who may have nothing
to contribute with respect to the matters at issue in the
lawsuit. And that doctrine has no application here.
Mr. Palmisano, as we'll detail, made key senior
policy decisions regarding Linux and had direct responsibility
for IBM Linux-related activities that are at issue in this
case, all while he was vice-president at IBM before he took
over his current responsibilities.
THE COURT: If I let you depose him, how long do
you want to take?
MR. ESKOVITZ: That was exactly my next point, Your
Honor, which is we would comply with the Court's restrictions.
It would be a seven-hour deposition one day. The deposition
could be done with a maximum of convenience. Our offices are
actually in Armonk, New York, which IBM is headquartered and
Mr. Palmisano has his office. He literally needs to cross the
street or we'll cross the street to depose him. And we can
schedule his deposition with him with advance notice to
accommodate his schedule. So it really is a minimum burden.
THE COURT: You're just happy neighbors there; is
MR. ESKOVITZ: That's right, Your Honor. It's a
small town. We all get along.
I forgot to mention, under all the applicable case
law, Mr. Palmisano's personal knowledge of IBM's intent and
motive with respect to the Linux strategy requires that he
give deposition testimony. As an initial matter, it is well
settled that -- and this is documented in Exhibit A that was
submitted to the Court in connection with this motion.
THE COURT: You don't trust our water here?
MR. ESKOVITZ: I don't want to spill it, Your
Honor. I'm prone to that.
THE COURT: Go ahead. I'm sorry.
MR. ESKOVITZ: It well goes without saying that an
order barring litigants to take a deposition is an
extraordinary form of relief. And the parties seeking such an
order under the case law that we cited in Exhibit A
establishes that the parties seeking to quash a deposition
notice bears the burden of showing that the proposed deponent
has nothing to contribute.
And that is particularly true with respect to the
case law cited in Exhibit B, when the deposition that is
sought relates to the issues of a company's motivation and
intent with respect to implementing a relevant corporate plan
or strategy. The courts recognize that when it comes to the
matter of corporate motivation, the high-level executive who
proved the strategy or implemented the strategy is the person
with the most probative information to give on a deposition.
And constructive on that point is the Travelers
Rental vs. Ford Motor Company case, which we cited in our case
and also in Exhibit B. And the Court recognizes in that case,
District of Massachusetts case, that:
Those with greater authority may have
the last word on why, in this case the Ford
Company, formulated and/or administered the
plan in the manner in which the lower level
executives describe it as being formulated
and/or administered. And as the ultimate
authority, their views as to why may be of
far greater probative value on the issues of
intent and motive than the views of the lower
IBM has told us that they have hundreds of
individuals working on their Linux strategy. And we have, in
fact, deposed some of those. But those individuals are not in
a position to tell us why Mr. Palmisano approved the strategy
that he approved. And that is unique knowledge that
Mr. Palmisano has that no lower level executive is going to be
able to give us in a deposition. And it is precisely the
situation where courts permit high-ranking executives to be
deposed. And certainly, as a matter of law, high-ranking
corporate executives are not immune from deposition.
It's precisely -- this is precisely the kind of
case in which such depositions are appropriate because, as I
said, first, Mr. Palmisano was personally involved in
formulating and approving the Linux strategy; and, second,
that strategy is relevant to numerous issues in this case.
And I'll take those two points in turn.
First, there can really be no dispute that while he
was an IBM vice-president Mr. Palmisano was personally
involved in and indeed spearheaded IBM's strategy to embrace
Linux and guided IBM's Linux-related efforts.
In Exhibit C that we've handed up to the Court,
there's a New York Times article from March 2000 that featured
Mr. Palmisano explaining his role in connection with what it
described as IBM's ambitious Linux strategy. The article
describes Mr. Palmisano as the leader of that ambitious
strategy, the IBM senior executive who pushed both
emphatically for the Linux initiative. It quotes
Mr. Palmisano's hand-picked Czar from the technology side of
the Linux operation as referring to IBM's Linux strategy as
Sam's bet. And the article quotes Mr. Palmisano --
THE COURT: Sam's bet?
MR. ESKOVITZ: Sam's bet. It was Mr. Palmisano's
bet on Linux on behalf of IBM.
And the article quotes Mr. Palmisano as describing
that Linux strategy, and this is important to the King Czar
case, as driving the Linux momentum at the front because, in
his view, moving quickly was imperative for IBM.
And as I explained, and I'll get into more, the
fact that IBM's motive here was to upgrade Linux as quickly as
it possibly could in order to begin to recoup the billions of
dollars that they invested into that strategy, it's critical
to proof of our contract claim as well as defenses to the
copyright claims in this case and for other independent
At Exhibits D and E of the book that Your Honor has
are IBM's own descriptions of Mr. Palmisano's contributions.
And they credit him in Exhibit D with leading IBM's adoption
of the Linux operating environment; and in Exhibit E, as
spearheading when he was head of IBM's server and enterprise
storage businesses, a major initiative to embrace Linux across
IBM's server line.
And, indeed, shortly after IBM adopted
Mr. Palmisano's Linux strategy in January of 2000,
Mr. Palmisano, this is in Exhibit F, publicly announced that
IBM would take the lead in the industry by making IBM
technologies available to the Linux and open source
And as I alluded to earlier, we have taken the
deposition of other IBM executives with respect to the Linux
strategy, and particularly Mr. Wladawsky-Berger, who I
described earlier and the New York Times described as IBM's
technical Linux Czar. And Mr. Wladawsky-Berger testified in
his deposition, and these are excerpted in Exhibit F, that he
reported and made his recommendations directly to
Mr. Palmisano; that Mr. Palmisano made the decision that IBM
should embrace Linux; and that Mr. Palmisano believed that
IBM's Linux strategy was a high priority, important effort for
So I don't think there's really much dispute here
that Mr. Palmisano was directly involved and, as the New York
Times described, spearheaded, and as IBM itself describes,
spearheaded the strategy. So the question is, what relevance
does the strategy have to SCO's claims?
And as I alluded to earlier, there are several
independent bases on which the strategy is relevant. The
first one I described already, which is that the corporate
motive and intent of IBM in throwing its weight and billions
of dollars that have been publicly reported behind Linux is
the reason why IBM took the shortcuts that SCO claims it did
and misappropriated SCO's code in order to upgrade Linux as
quickly as it could to make it enterprise-hardened, is the
word that has been described in the industry, to make it a
viable competitor with Unix as quickly as possible. To turn
it from a hobbyist's interest into something that -- operating
system that would appeal to sophisticated businesses.
Second, and maybe even more directly, SCO has tort
claims including a claim for unfair competition in its
complaint, and it's in Exhibit G. We cite some case law for
the Court, these are in the our briefs, as well, that it is an
element of SCO's unfair competition claim to show IBM's bad
faith or IBM's corporate intent, its motive. And that's
obviously also relevant to SCO's claim for punitive claims
under its tort claims.
With respect to the unfair competition claim, SCO
specifically alleges that IBM has engaged in a course of
conduct that is intentionally and foreseeably calculated to
undermine and/or destroy the economic value of Unix and to
seize the value of Unix for its own benefit and for the
benefit of its Linux distribution partners. Obviously, the
evidence that Mr. Palmisano can give as to why IBM and why he
on behalf of IBM proof of Linux strategy is evidence that goes
to IBM's intent with respect to the tort claims of punitive
And finally and independently with respect to
damages, the evidence of IBM's corporate intent or motive is
relevant to the benefit that IBM receives by being able to
shortcut the development process and being able to rely on
misappropriated Unix code in developing Linux.
It bears noting in connection with the relevance
point that Mr. Palmisano's Linux documents have already been
the subject of two separate court orders from Judge Wells
compelling their production. And those orders recognize the
relevance of the high-level documents and Linux -- and IBM's
Linux strategy to the claims in this case.
Specifically in March 2003, the Court ordered IBM
to produce all the documents and materials generated by and in
the possession of employees that have been and that are
currently involved in the Linux project. And the Judge
specifically provided that IBM was to produce materials and
documents relating to IBM's Linux strategy from Mr. Palmisano
and other high-level executives. However, among other
deficiencies in IBM's production, they have not produced a
single e-mail or other correspondence discussing Linux from
Mr. Palmisano's files.
We renewed our motion to compel. Counsel for IBM
represented to the Court that it would look again for relevant
documents, even though it had already been ordered to do so in
March of 2003, and Judge Wells ordered IBM to produce
affidavits from the high-level executives concerning the
efforts with respect to document production. After that
order, IBM produced additional documents from
Mr. Wladawsky-Berger file, but still has not produced any
correspondence or e-mails relating to Linux from
Mr. Palmisano's own files. They did not produce any
explanation as to why they have not produced any of those
documents. And in response to the Court's order, they simply
produced a very source affidavit from Mr. Palmisano that says
he gave his lawyers unrestricted access to his files. But
again, no explanation as to why these e-mails had not been
So to date, despite these two prior court orders on
this issue, IBM has not provided any explanation for this
shortcoming in its document production from Mr. Palmisano.
Mr. Wladawsky-Berger, and the Court has the testimony,
testified that he communicated by e-mail to Mr. Palmisano.
And in Exhibit H that the Court has, IBM produced at least one
such document, but not from Mr. Palmisano's file. So we have
at least an indication, a confirmation of Mr. Wassenberger's
testimony from IBM's production that, in fact, Mr. Palmisano
communicated about the Linux strategy in writing --
THE COURT: You mean Exhibit I?
MR. ESKOVITZ: I believe I'm going to get to
Exhibit I -- I'm sorry. You're right. Sorry, Your Honor.
Exhibit I is the IBM-produced document. And Exhibit J is
another e-mail that we found on the Internet from
Mr. Palmisano relating to the Linux strategy. Neither of
these documents were produced from IBM's -- from
Mr. Palmisano's files. We still have not received from
Mr. Palmisano's files any such Linux-related correspondence.
We have a third motion to compel such documents,
which are currently pending before the Court. But what's
important for these purposes is that for the very same reasons
that the Court has seen fit to order IBM now twice to produce
these Linux documents, because it's the same reason why
Mr. Palmisano's testimony is relevant to this case, he was a
key decisionmaker. And frankly, Your Honor, given the
difficulty that we've had getting documents and getting
straight answers about why these shortcomings persist with
respect to the production, we should be permitted to explore
the adequacy of Mr. Palmisano's document production, as well.
As I alluded to earlier, IBM's argument essentially
relies on an inapposite body of case law in which parties
resisting high-level depositions establish that the potential
deponent either had no personal knowledge of the events at
issue frequently in the cases of discrimination cases or
unfair termination cases where there were no corporate
strategies that were at issue, or at least identify the
particular witnesses who could provide the testimony that was
being offered. For example, where a plaintiff is looking for
financial information, and the defendant says, you can get
that from our accountants or from our CFO. You don't need the
CEO for this.
Again, Mr. Palmisano is the only person who can
explain his reasons, his motives for adopting the policy that
he adopted. And unlike many of the cases in which IBM relies
on, they have not provided any affidavits from Mr. Palmisano
disclaiming relevant knowledge, and they haven't identified
who these witnesses would be. They've said there's hundreds
of people who are involved with the Linux strategy.
And finally, I should note that IBM had served
notice on SCO for our CEO. We intend to produce him. And I
don't see any real reason for, you know, IBM's CEO being
treated any differently.
So Mr. Palmisano is an important witness in the
case. He's got relevant testimony to give. The case law
establishes that that relevant testimony requires him to sit
for a deposition. There's no basis for IBM certainly to
resist that deposition, and they certainly haven't met their
burden of showing good cause that Mr. Palmisano has nothing to
contribute. Thank you.
THE COURT: Thank you, Mr. Eskovitz.
MR. MARRIOTT: Good afternoon, Your Honor.
THE COURT: Good afternoon.
MR. MARRIOTT: As much as we disagree with SCO with
respect to their claims, Your Honor, we recognize that IBM
must provide, and, indeed, we have provided, some measure of
discovery with respect to their claims. We have, in fact,
provided substantial discovery. IBM has produced millions of
pages of paper. It's produced hundreds of millions of lines
of source code. And it's made available for deposition very
high-level executives, including the head of IBM software
business, Steve Mills; Irving Wladawsky-Berger, the person SCO
describes to people as IBM's Linux Czar; and the head of IBM's
Linux technology center, Dan Frye.
Now, we recognize that a person is not protected
from deposition merely by virtue of being a CEO or chairman of
a Fortune 100 Company. But the circumstanced in this case, we
respectfully submit, are such that it does not make sense that
Mr. Palmisano be deposed, certainly not at this juncture of
the case. In our judgment, a CEO of a Fortune 100 Company
like Mr. Palmisano should not be deposed, except where the
information they haven't provided is directly relevant in a
case, where they have in this case as described, has unique
personal knowledge and the information sought is not available
from others, such as the other 300,000-plus persons who are
employed at IBM.
THE COURT: SCO says unlike the unusual cases where
the CEO is protected from deposition, here this particular CEO
had some direct involvement with the set of problems that form
the basis of this case.
MR. MARRIOTT: Well, Your Honor, I appreciate
that's the contention that SCO makes. It's SCO's formulation,
however, that there is virtually no circumstance under which a
CEO would not be subject to deposition because under the SCO
view of the world, any person, any CEO who has any personal
knowledge of those things over which that person is in charge.
And there's no question, and I'll come to it momentarily,
Mr. Palmisano has some knowledge with respect to Linux. We
all, indeed, now have some knowledge with respect to Linux.
But there's nothing that is unique, Your Honor, about
Mr. Palmisano's knowledge with respect to Linux.
Whether or not Mr. Palmisano should be deposed is,
of course, a matter committed to Your Honor's discretion. And
I would like just in a few minutes offer two reasons why we
believe the Court should exercise its discretion not now to
require Mr. Palmisano's deposition. First, Your Honor, is
that there is persuasive authority, notwithstanding
Mr. Eskovitz' contention of the contrary that the deposition
of an apex employee, that is, the CEO or chairman of a company
like IBM, should not be deposed except where that person has
unique personal knowledge.
THE COURT: I do know what apex means.
MR. MARRIOTT: Pardon?
THE COURT: I know what apex means.
MR. MARRIOTT: I wasn't doubting you did, Your
In the words of the Baine case, which we cite at
Pages 6 and 8 of our brief, quote, the legal authority is
fairly unequivocal, close quote, on this point. Moore's
Federal Practice says, Your Honor, federal courts, quote:
Often are reluctant to permit apex
depositions of the highest level corporate
officers or managers or who are unlikely to
have personal knowledge of the facts sought
by the opposing party, close quotes.
And in the Cardenas case, which we cite on Pages 3
and 4 of our brief, the courts says, the courts, quote:
Frequently restrict efforts to depose
senior executives where the party seeking a
deposition can obtain the same information with
less intrusive means or where the party has not
established the executive has some unique
knowledge pertinent to the issues in the case.
And, Your Honor, SCO has made a number of arguments
to suggest that that is not a unique personal knowledge, the
controlling standard. In fact, in its papers at Page 8 in its
opening brief, SCO suggests that it is well-settled that a
company's CEO is subject to deposition where his knowledge is,
quote, even arguably relevant, close quote.
And that simply is not the test. None of the cases
cited by SCO suggest that is the test. Indeed, some of the
cases cited by SCO, such as the Six West case, which is cited
on Page 9 of its brief, makes it quite clear that a unique set
of personal knowledge is what the test is.
SCO suggests in Footnote 3 and Mr. Eskovitz said
again here this afternoon that the doctrine of limiting these
depositions to those persons who have unique personal
knowledge is somehow inapplicable in cases of this kind. And
it applies to cases that Mr. Eskovitz describes as garden
variety cases, Your Honor.
In SCO's brief, it says the doctrine is limited to
personal injury, employment, and contract cases. This is,
Your Honor, in an important respect a contract case. And the
only case on which SCO relies for the proposition that the
doctrine set out, for example, in the Cardenas case is somehow
limited to cases of this kind is the Bridgestone/Firestone
case. In Bridgestone/Firestone, the Court there observed
nothing other than that a rigid rule is applicable in cases - -
in cases of whether apex depositions should be taken. In that
case, Your Honor, the Bridgestone/Firestone case, the Court
allowed deposition to proceed, but only after substantial
discovery, most depositions had been completed, and only after
the plaintiff filed a list of specific questions about
which - - subjects about which it would question the witnesses
in court, in where we would submit there is a greater showing
of knowledge, of unique knowledge on the part of the CEO.
THE COURT: Greater than here, you mean?
MR. MARRIOTT: Greater than here, Your Honor.
SCO suggests that IBM bear a heavy burden, which is
rarely ever met, to avoid deposition of this content. The
cases cited by the parties, Your Honor, as I understand,
regarding this were a little more than the proposition that
the party seeking a particular form of relief bears the burden
to establish a basis for that relief. Parties seeking to
compel a deposition bears the burden to establish a basis for
compelling a deposition. Parties seeking a protective order
bears the burden of establishing a basis for a protective
In this case, SCO seeks to compel the deposition of
Mr. Palmisano. And in our judgment, as we read the cases,
SCO, therefore, then bears the burden. In the Cardenas case,
which we cite, the plaintiff there, like SCO here, moved to
compel the deposition of executives. In that case, it was
three executives of Prudential. And applying the unique
personal knowledge test, the magistrate judge in that case
denied the motion on the grounds that the plaintiff had failed
to show that the executives, quote, possessed any information
that could not be obtained from lower level employees or other
sources, much less their knowledge of plaintiff's allegations
was unique. The District Court then upheld the Court's
decision in Cardenas.
Most of the cases, Your Honor, on which SCO relies
for the proposition that IBM here bears a heavy burden are not
even apex deposition cases. After stating the general
proposition that parties seeking a form of relief bears a
burden to establish the relief, a number of those cases
actually preclude depositions.
For example, SCO relies upon Simmons v. Willis for
the proposition that courts, quote, rarely will grant a
protective order that totally prohibits a deposition, close
Not only was the Simmons case not an apex
deposition case, Your Honor, it is a case in which the Court
ordered that the deposition sought not to take place. The
courts also granted protective orders in a number of the other
cases that SCO cites, such as Frideros, Medlin, Motsinger,
Snowden and Cotracom.
Your Honor, the second point that I wish to make,
and then I will sit down, is that Mr. Palmisano here does not
have any unique personal knowledge and it hasn't been shown to
that effect. Mr. Palmisano didn't draft, he didn't execute,
he didn't negotiate the agreements that IBM is alleged to have
breached. The agreements were executed in the office in order
of 20 years ago by individuals who don't even report to
Mr. Palmisano is obviously familiar with IBM'S
Linux strategy, but there is no showing here that. he has any
personal knowledge about that strategy that is unique and that
is unknown by other individuals within IBM. He's not a
computer programmer, and he certainly has no particular
knowledge of the technology contributions that Mr. Palmisano
alleged to have made to the Linux operating system in
violation of either contract copy reference --
THE COURT: Is it relevant that you're going to
depose SCO's CEO?
MR. MARRIOTT: I don't think it's relevant, Your
Honor. It is true that we intend to depose Mr. McBride. And
with respect to Mr. McBride and Mr. Eskovitz, I think there is
a big difference between Mr. Palmisano and Mr. McBride.
Mr. McBride is a CEO of a company that by my count has
slightly over 100 employees. Mr. Palmisano is a leader of a
company that has more than 300,000 employees. Mr. McBride, as
I would see it, is uniquely positioned to address the
questions at issue in this case including issues in our
counterclaims that go directly to Mr. McBride's public
statements about SCO's alleged evidence.
Mr. Palmisano, by contrast, Your Honor, while he
has some knowledge in actually Linux' operating system and
some involvement there, he doesn't have a perspective with
respect to IBM's strategy with respect to Linux, the issue on
which SCO intends to acquire discovery I think in any way
distinguishes on him.
In its opening papers, Your Honor, SCO indicated
that it required Mr. Palmisano's deposition with respect to
two causes of action, two sets of causes of action: SCO's
contract claims against IBM; and IBM's claims in a declaration
of non-infringement with respect to IBM's Linux strategy. For
the first time in its reply papers and again here today, SCO
suggests that there are additional claims to which
Mr. Palmisano's testimony would be relevant.
But whatever the claims are, Your Honor,
specifically the testimony that SCO contends it requires from
Mr. Palmisano relates to IBM's so-called Linux strategy. And
in SCO's words, it wishes to depose Mr. Palmisano regarding,
quote, IBM's strong financial motivation to use shortcuts in
order to promote Linux' commercial appeal.
Although, Your Honor, IBM's motivation for
promoting and contributing to Linux is not an element of any
of SCO's claims, and although I submit it is of marginal
relevance to any of the elements of the claims in the case, we
have nevertheless produced thousands of pages of paper
relating to that strategy. There is an enormous body of
information in the public domain with respect to that
strategy, as indicated by SCO's own papers, which go on at
some length about their version of IBM strategy. And IBM has
made available for deposition, Your Honor, three very
high-level executives who have to the extent SCO has
propounded questions about IBM's Linux strategy undertaken to
Putting aside, Your Honor, that strategy is of
marginal relevance, putting aside that there's an enormous
body of information available about it, there is no showing
here that Mr. Palmisano has any unique perspective. And
again, under the scope and view of unique perspective,
everyone has a unique perspective, and everyone would be
subject to deposition. In the line of cases that suggests
that some unique perspective is required are just dead wrong,
because in their view, those cases would be wrongly decided.
There are an enormous number of people -- there are
a lot of people, not to overstate it, at IBM, Your Honor, who
devote their time and their talents and their energies to
Linux, and there is no reason why SCO ought not be required at
least in the first instance to undertake to obtain the
information they seek from those individuals. They have taken
by my count something like three depositions, the individuals
that I mentioned, all high-level executives, about Linux, and
that's it. There are many others, Your Honor, who they can
learn information about IBM's Linux strategy without troubling
Mr. Palmisano about a deposition.
Courts have declined in cases that I would submit
are not any different from this case to permit apex
depositions. I mentioned the Cardenas case. You mentioned a
couple others. In the Consolidated Rail case, the Court
deferred the depositions of a party's chairman, president,
CEO, as well as senior vice-president of operations and
vice-president of labor relations. We produced vice-president
level depositions here, Your Honor. In that case, depositions
were put in multiple lawsuits involving breach of contract
regarding freight charges, quote, until it has been
demonstrated that they have some unique personal knowledge
pertinent to the issues in the case, close quote.
In the Stone v. Morton case, Judge Boyce granted a
protective order preventing plaintiffs from deposing one of
Morton International's vice-president in light of his lack of
knowledge of facts relative to the action because the
plaintiff had not exhausted other methods of discovery.
The Evans v. Allstate case, the Court precluded
depositions of Allstate's chairman, president, CEO, as well as
chief financial officer and senior vice-president where,
quote, Allstate has already provided adequate information or
the information can alternatively be obtained from other
sources without apex officers.
In Harris v. Computer Associates, the Court
precluded a deposition of an executive computer associate.
And in doing that, the Court observed, quote, when a
vice-president can contribute nothing more than a lower-level
employee, good cause is shown not to take the deposition,
In Baine v. General Motors, the Court quashed a
deposition of a GM vice-president for failure to show the
information sought could not be obtained from other witnesses,
interrogatories and a 30(b)6 deposition.
In Mulvey v. Chrysler, the Court found, quote, an
orderly discovery process is best served by resorting to
interrogatories at this time, without prejudice to a
subsequent deposition, close quote.
And finally, Your Honor, in the Hughes v. General
Motors, the Court denied a motion to take the deposition of
GM's president because it found no good cause in that
The cases, Your Honor, on which SCO relies are, I
respectfully submit, distinguishable. Mr. Eskovitz mentioned
the Travelers case. It was specifically an antitrust case.
And the Court granted deposition, Your Honor, only after at
least once deferring the deposition until other depositions in
the discovery had been taken.
In summary, Your Honor, respectfully, we believe
Mr. Palmisano's deposition ought not be allowed and certainly
not ought to be allowed now, and if it ever were to be
allowed, it ought to be limited to three hours. Thank you,
THE COURT: Thank you, Mr. Marriott.
Mr. Eskovitz, you get to reply.
MR. ESKOVITZ: Thank you, Your Honor.
Your Honor, significantly during Mr. Marriott's
argument, we didn't hear any attempt to dispute all of the
materials that were presented to the Court, many of which come
from IBM's own mouth concerning Mr. Palmisano's personal
involvement in spearheading, improving, implementing IBM's
Linux strategy. That's a critical fact that distinguishes
this case from many, in fact, all of the cases that
Mr. Marriott and a litany of cases that Mr. Marriott has
discussed in his argument and cited in his brief. And
although Mr. Marriott again repeats the idea that the strategy
is not relevant to any of the issues in this case because it
is not an element to any of the issues, he ignores the fact
that the intent or motive of the company is an element of
SCO's tort claim for unfair competition. And even if it's not
an element, it still is relevant, it's obviously important to
the contract claims, to SCO's damages claims, to punitive
damages under SCO's tort claim.
So just to, you know, brush aside this testimony as
irrelevant because it's not an element of a claim, which, in
fact, it is, kind of misses the boat here. So the two really
undisputable facts that I think dictates Mr. Palmisano's
deposition in this case is that he personally spearheaded the
strategy, and the strategy is relevant.
And the Travelers case is right on point here
because it talks about the importance of high-level executive
depositions when, in fact, that corporate strategy is at
issue. When the corporation's intent or motive in
implementing a strategy is at issue, what Mr. Palmisano
decided or why Mr. Palmisano decided it is the most probative
evidence of IBM's intent in this case.
If Mr. Marriott claims that under our standard,
under our standard, there would be - - every case would lead to
a deposition of a high-level executive, and that certainly is
not the case. In fact, I would suggest that under
Mr. Marriott's standard, there would never be an instance in
which a high-level executive could be deposed, not even when
the strategy that they approved is at issue in this case could
that executive be deposed under IBM's standard.
To the contrary, the cases in which Mr. Marriott
relies on, and I'll go through on particular ones, if the
Court is interested in them, but they're all distinguishable
on the basis that the executives did not have any relevant
information. They were termination cases where the executives
had nothing to do with the termination or the role of
supervising an employee. They're not the kind of cases where
the corporate strategy or corporate intent or motive with
respect to strategies are at issue.
And Mr. Marriott on the one hand says, you know,
we've already deposed a lot of senior executives at IBM, and
on the other hand says, we should go depose more of them. We
have got a limited number of depositions in this case.
Mr. Palmisano is the person who spearheaded and executed this
policy. We've already asked Mr. Wladawsky-Berger and Mr. Frye
a number of questions, and they pointed the finger at
Mr. Palmisano as the person who made the decision, as
Mr. Wladawsky-Berger put in the New York Times article, as
Sam's Bet. This is Mr. Palmisano's strategy.
And significantly, and this is a point that IBM
ignores in its papers and ignores in its argument, this is
Mr. Palmisano's bet while he was the vice-president at IBM
before he became IBM's CEO chairman. The fact that IBM has
now elevated him to these positions should not shield him from
discovery on the decisions that he made while he was the
person spearheading their computer server group. And I think
that point IBM has lost in the shuffle is important for the
Court's consideration, as well.
Mr. Marriott made a number of arguments. And if
the Court is interested, I can discuss them in detail, about
the law that is applicable. I think even under IBM --
THE COURT: You don't need to discuss them.
MR. ESKOVITZ: The burden obviously shouldn't
depend on who filed the motion and doesn't depend obviously on
the cause of actions that are at issue. It's the relevance of
the corporate motivation and corporate intent with respect to
strategies to the claims in the case, whatever they are.
And, frankly, Your Honor, I was blown away by
Mr. Marriott's argument that a different standard ought to
apply for the two CEOs in this case because of the size of the
parties involved. I respectfully suggest just as IBM intends
to depose Mr. McBride on issues of damages on SCO's business
model and other issues, just for the same reason
Mr. Palmisano should be subject to deposition, particularly
since these were decisions that he made before he became IBM's
CEO and chairman.
THE COURT: Thank you.
MR. ESKOVITZ: Unless the Court has questions.
THE COURT: Thank you.
Let's move to the motion for leave to file amended
complaint. Who's going to argue that?
MR. NORMAND: I will, Your Honor.
THE COURT: Mr. Normand?
MR. NORMAND: Yes.
Good afternoon, Your Honor. May it please the
Court, I'm Ted Normand.
The SCO Group has sought leave to file a third
amended complaint to add a new claim of copyright
infringement. The facts forming the basis for the new claims
are based on documents that we requested before the amendment
deadline in this case that IBM produced after the amendment
deadline. I'd like to describe those basic facts very
quickly, Your Honor.
In the late 1990s, SCO's predecessor in interest,
Santa Cruz Operation, owned the source code in Unix System V
Version 4 or SVR-4. IBM gained access to that source code
through a joint development arrangement in Santa Cruz called
Project Monterey. Under Project Monterey a project to create
an AIX For Itanium Product that could operate on a new
hardware - -
THE REPORTER: Could you speak up a little more?
THE COURT: She's having trouble hearing you.
THE REPORTER: Just speak up a little more. You're
dropping your voice, and I'm having trouble hearing you.
MR. NORMAND: With that access, Your Honor, to the
SVR-4 source code, IBM copied over 200,000 lines of source
code into different versions of IBM's AIX For Power products.
And the point of our claim is IBM did so without
authorization, and that the documents we've uncovered in the
last six to eight months showed that IBM knew it was copying
We've set out a basic chronology of those facts in
tab binders that Your Honor has. And I will try to walk the
line that Your Honor described in terms of describing the
documents that we've submitted in the binder that form the
basis of the new complaint. And I'd like to walk through
those very quickly, Your Honor.
THE COURT: Okay.
MR. NORMAND: Tab 2, Your Honor, an IBM internal
e-mail shows that IBM knows that if it cancelled Project
Monterey, it would not have the rights to the SVR-4 code that
it put into its product.
Tab 3, Your Honor, IBM internal e-mail shows that
IBM knows that it could use the SVR-4 code only on the AIX For
Itanium products, not on the AIX For Power products into which
IBM copied code.
Tabs 4 and S need to be read together, Your Honor.
IBM internal e-mail pointing out that compilers are not
included in the PRPQ. PRPQ is an acronym for "Program Request
For Pricing Quote." It's a reference to the draft AIX For
Itanium product that IBM was creating through Project
Internal IBM e-mail in response to that e-mail. In
response to the assertion that the compiler would not be
included in a PRPQ,
I think the compiler must be available in
some form, or SCO won't buy it.
Tab 6, internal IBM e-mail. IBM is concerned that
if they don't call the PRPQ a generally availability product,
they won't have the rights to use the SVR-4 code.
MR. MARRIOTT: Your Honor, I apologize for
interrupting. My concern is just that we've moved to quoting
from the documents, which as they themselves indicate marked
confidential under the protective order.
THE COURT: Well, you can read -- why don't you
characterize it rather than quote it.
MR. NORMAND: Yes, Your Honor. I was making an
effort to paraphrase the documents.
Tab 7, Your Honor, IBM internal e-mail drawing a
distinction between the internal position that IBM has reached
with respect to Project Monterey and the external position
that IBM should take to the world on whether Project Monterey
These documents and others like them, Your Honor,
form the basis for our proposed amendment. In response, IBM
has not even attempted to oppose the merits of the claim.
Instead, IBM has raised several procedural road blocks why we
should not be able to bring the amendments, and I think
they're wrong in each count.
First, there is no undue burden to IBM. As the
Supreme Court has noted, Rule 15 is designed to facilitate the
amendment of pleadings except where prejudice to the opposing
party would result.
There is no prejudice here. Indeed, IBM's main
argument in its opposition brief was that the addition of
SCO's claim would interfere with what IBM called its
entitlement to a prompt resolution of the litigation. The
magistrate's court discovery orders from January and from
yesterday I think have mooted that part of IBM 's undue
prejudice argument. And this Court, of course, denied summary
judgment motions and ruled that no summary judgment will be
filed until after the close of fact discovery.
IBM's other argument for its claim of undue burden
was that SCO's proposed claim required additional discovery.
As an initial matter, Your Honor, the adverse party's burden
of undertaking discovery does not constitute undue burden for
purposes of Rule 15. And that is particularly true here where
SCO will not need to take substantial new discovery on its
claim where given the new period for fact discovery in this
matter, which we think should be extended even further in
light of the magistrate's court's order from yesterday, IBM
would have more time to take discovery in SCO's new copyright
claim than it would have had before the amendment deadline.
And where given the new period for fact discovery, SCO's
pursuit of the new claim will not prolong discovery. In each
of those respects, there's no undue burden to IBM.
In addition, Your Honor, the subject matter of
Project Monterey specifically is already involved in the case,
has been for sometime and has been with respect to at least
three separate claims. First, Project Monterey is involved in
this case by virtue of SCO's own contract and copyright. SCO
will show that IBM not only misappropriated source code in AIX
that IBM licensed, but that it misappropriated source code
that it had not licensed and contributed such source code to
Linux. IBM ignores this point in its briefing.
The second way that Project Monterey is already
part of the case, Your Honor, is our claim for unfair
competition, which Mr. Eskovitz mentioned. In that claim, we
allege that IBM was engaged in a course of conduct that was
intentionally and foreseeable calculated to undermine and/or
destroy the economic value of Unix by misappropriation of
source code, including specifically in Project Monterey. And
that's at Tab 8 of the binder, Your Honor.
By way of example and in response to IBM's
interrogatories, and this is at Tab 9, Your Honor, SCO has
stated IBM made and continued to make investments in the
development of Linux and secretly advanced and promoted in the
development of Linux without disclosing such activities to SCO
including under Project Monterey.
SCO also stated that IBM's conduct forming the
basis of a claim of unfair competition included using
products, methods and know-how jointly developed by SCO and
IBM in Project Monterey. And we noted in that interrogatory
response, Your Honor, that SCO needs to take discovery of IBM
where activity of this sort is typically done behind closed
doors. And the documents we walked through, Your Honor, show
In addition, Your Honor, Project Monterey is
already involved in this lawsuit by virtue of IBM's Ninth
Counterclaim, which is very (unintelligible)
THE COURT: Which is what?
MR. NORMAND: Very broad, Your Honor.
And we quote that in the tabloids. Ninth
IBM is entitled to a declaratory judgment that IBM
does not infringe, induce the infringement of or contribute to
the infringement of any SCO copyright through the
reproduction, improvement and distribution of AIX and Dynix,
and that some or all of SCO's purported copyrights in Unix are
invalid and unenforceable.
IBM lists SVR-4 code as one of the copyrights for
which IBM seeks a declaration of non-infringement. In short,
IBM asks the Court to declare that IBM has not infringed any
SCO copyrighting in developing AIX And in SCO's proposed new
copyright claim, we seek to prove such infringement.
In fact, IBM has acknowledged that Project Monterey
is already subject matter specifically in the lawsuit. For
one thing, in response to our document requests, IBM produced
the Project Monterey documents. In addition, Your Honor, and
by way of example, in response to one of our interrogatories,
IBM identified 19 Project Monterey witnesses who may have
knowledge concerning certain issues in this lawsuit and
identified Project Monterey as those persons subject to area
SCO has also noticed and deposed two witnesses
almost exclusively regarding the subject matter of Project
Monterey and IBM's interpretation of the joint development
agreement that was the basis for the relationship between IBM
and Santa Cruz under Project Monterey.
Finally, of how, Your Honor, IBM has acknowledged
that Project Monterey is already in this lawsuit is the very
first deposition that was taken in this case. And we quote
part of the transcript of that deposition at Tab 12. The
deposition concerned Project Monterey. Toward the end of the
deposition, counsel for IBM specifically asked the witness
whether the witness knew that IBM did, in fact, release a
product, a Monterey product, worldwide to customers. In other
words, Your Honor, at the very time, the very first deposition
in this case, IBM was asking witnesses questions to set up
IBM's assertion that its release of the Monterey product was a
worldwide product giving IBM authorization to copy the SVR-4
And I can tell you at the time, Your Honor, we
didn't appreciate the important question. In retrospect, you
see what a defensive question it was, that IBM knew Project
Monterey was an issue in the case and was trying to collect
evidence to defend its pretextual release of the Monterey
product in 2001. At the time of the deposition, we had asked
for the Project Monterey documents before the discovery --
before the amendment deadline, Your Honor, and yet, we didn't
get the documents until after the amendment deadline. All of
the foregoing, Your Honor, shows that SCO's copyright claim
would not unduly prejudice IBM.
Very briefly, Your Honor, the question of good
faith, which is a factor in the Rule 15. The facts forming
the basis of SCO's claim are based on the documents that we've
uncovered in the last to six eight months. IBM's main
argument is that if our motion were granted, we would no doubt
immediately following the granting of the motion would request
for additional discovery. That was IBM's sole argument for
claiming that our motion was made in bad faith. Of course,
the magistrate court orders have mooted that argument. I
won't dwell on the point, but I will point out in our opening
brief, we pointed out by the time this motion was argued,
either Your Honor or the magistrate court would have decided
whether fact discovery would be extended. So the suggestion
that we filed our motion to trump the Court's decision of
whether to extend the discovery schedule is an inaccurate one.
I think it's clear, Your Honor, that we don't
propose the amendment in bad faith and that the amendment
would not unduly prejudice IBM. IBM further argues that SCO
has delayed in proposing the amendment and that the amendment
would be futile. We think both of those arguments are
incorrect, taking the argument as to the delay first. IBM
first argues that Rule 16 applies because deadline for
amendment has passed. As Your Honor mentioned, there is a
relationship between the issue of the scheduling order and our
motion to amend, I'd be happy to address that issue.
I will move now to the issue of the scheduling
order or briefing. I can say we think there are good reasons
and independent reasons why IBM's Rule 16 argument does not
make sense. First, we've proposed a new amendment deadline.
We think a new amendment deadline makes sense for at least two
reasons. One, the appointment of the deadline is to allow the
parties to conform the evidence to their claims. Two, the
question of whether a prejudice results from a deadline not at
IBM will have more time under the new discovery
schedule to take discovery on our new claim than it would have
had under the old schedule. Under the schedule we proposed,
even the Court -- the magistrate court's order yesterday,
there will be six, seven, eight months of fact discovery even
after the proposed amendment deadline. Under the previous
order, I think it was five-and-a-half or six months of
discovery that would follow the amendment deadline. As a
practical matter, Your Honor, we think we will succeed for
As a logical matter, we also think Rule 16 doesn't
apply for the following reason. If there is no undue delay by
SCO under Rule 15 because SCO's amendment is based on the
documents that SCO obtained in discovery, then Rule 16 cannot
bar the amendment. That is because it is undisputed that IBM
produced the documents after the amendment deadline, but that
we requested the documents before the amendment deadline. So
if there is no undue delay under Rule 15, there's no place for
Rule 16. It doesn't apply. We asked for the documents
before. We got them afterwards. We also asked for the
documents two or three months into the case, Your Honor, in
June of 2003.
So the relevant analysis of Rule 15, which I'll
turn to now, Your Honor I'm sure is familiar with the refrain
from liberal granting of motions to amend, reflect the basic
policy that pleadings should enable the claims to be heard on
THE COURT: I have heard that before.
MR. NORMAND: I suspected it.
The rule for undue delay is the following, Your
Honor. Where the parties seeking amendment knows or should
have known of the facts upon which the proposed amendment is
based but failed to include them in the original complaint,
the motion to amend is subject to denial.
Our claim is based on facts in the documents that
we saw for the first time since the last amendment deadline.
Those documents show, as I described, Your Honor, that IBM
copied more than 200,000 lines of the SVR-4 code into IBM's
AIX For Power product without authorization. And that during
the project, IBM knew that its limited release of the AIX For
Itanium product did not authorize IBM to copy the code as it
had done. As soon as we reviewed those documents and
undertook an investigation, we brought a proposed claim, and
IBM doesn't argue that we weren't diligent in acting after we
received the production that they produced after the amendment
Given these basic facts, our amendment is not
unduly delayed. It's not delayed at all. The function of
Rule 15, which provides generally the amendment of pleadings,
is to enable a party to assert matters that were overlooked or
were unknown at the time he interposed the original complaint
or answer. The Court admitted there is no delay if the
plaintiff uncovered the facts supporting the amendment during
And we cited in our brief two cases that we think
are good examples in particular of that. The Journal
Publishing case from the Southern District of New York, a
three-and-a-half year lapse between the original complaint and
the amended complaint were justified where the plaintiffs
proposed amended complaint was based at least in part on
documents that came to light during discovery.
The Koch case, District of Kansas, there is no
undue delay to seek leave to amend if plaintiffs acquire
knowledge of the facts behind the new claim only through
As we see it, Your Honor, IBM would have this Court
apply a standard whereby as soon as the plaintiff in
litigation had any conceivable basis for bringing a claim, it
would be obligated to assert that claim rather than await the
production of documents that the plaintiff has requested and
expect to bear on the issue. Again, we take it that that is
the point of the amendment deadline. That is not standard and
one that IBM opposes that the Court should impose. And,
indeed, the very point of Rule 15 is to impose a different
standard. Under the precedent, the plaintiff should be
entitled to a critical mass of evidence of high probative
value supporting the claim. And that's a quote from the
case -- one of the tabs to the binder.
And we think, Your Honor, that IBM's own cases make
that point. And we discussed these cases and distinguished
them in detail in our reply brief. I'll mention a few of
them. In particular, from the 10th Circuit, in the Panis
case, 10th Circuit 1995, the plaintiff's proposed amendments
were not based on new evidence. In the Pallottino case, 10th
Circuit, 1994, the proposed amendment was not based on new
evidence. In the Frank case, 10th Circuit, 1993, plaintiff's
counsel conceded that the failure to amend was strategic
decision. In the Woolsey case, 10th Circuit, 1991,
plaintiff's counsel acknowledged that no new evidence that was
unavailable at the time of the original filing had come to
plaintiff's attention. Those cases make the point that focus
on undue delay is on the plaintiff in litigation and
plaintiff's efforts to find the documentation to support the
IBM's response to these points is to argue that the
question of undue delay requires the Court to impute to the
SCO Group the limited knowledge that certain employees of
SCO's predecessor Santa Cruz might have regarding the same
general subject matter, that is, Project Monterey and products
Now, IBM does not argue, nor present any evidence
that Santa Cruz or the SCO Group had concluded it actually had
a copyright infringement arising out of Project Monterey. And
IBM does not argue, nor present any evidence that anyone from
Santa Cruz or the SCO Group knew anything about IBM's internal
views of its pretextual release as reflected in the documents
that were produced. What the evidence does show is that those
key facts were hidden from view until discovery in this case.
And one of the internal IBM documents that I cited
earlier illustrates the point, and we'll quote, Your Honor, at
Tab 7, but it is the document, internal IBM e-mail that
expressly draws the distinction between the internal position
that IBM has taken on Project Monterey is not worth pursuing.
And in the e-mail the author said, we need to take an external
position, and the external position is that Project Monterey
goes on. We're still working on the AIX For Itanium product.
That is the kind of information that the world and that we
were aware of, the external position.
The excerpt from the first deposition taken in this
case, and I also mentioned earlier, further illustrates the
point. While IBM was asking witnesses questions to defend its
worldwide release, IBM had documents in its possession
reflecting the fact that IBM itself did not regard the
Monterey product release as one that would authorize IBM to
copy the SVR-4 system.
Although SCO had served numerous document requests,
IBM would not produce the documents in response to those
requests until after the amendment deadline. IBM relies on
several documents with respect to Santa Cruz' supposed
knowledge. We believe those documents are not compelling, and
they fall into two basic categories. One, documents that SCO
did not see and Santa Cruz did not see and had no reason to
see, such as private consulting for its software announcements
and memoranda for IBM licensees and manuals that IBM's
technical support organization published for IBM licensees.
Santa Cruz was not an IBM licensee.
The second category of documents show what products
certain people envisioned would be created in Project
Monterey. These are not documents that reflect any actual
knowledge on the part of anyone at Santa Cruz about any claim
for copyright infringement. These facts are no grounds for
the Court to conclude there has been any undue delay on the
part of the SCO Group.
And it's worth pointing out, Your Honor, because I
will briefly get to the point, IBM can and does raise such
arguments in support of the statute of limitations argument on
futility. These are accrual arguments that are subject to
different standards. And we put cases in the binder that show
the courts analyze the question of undue delay distinctly from
the question of whether the limitations period. I won't dwell
on that point, Your Honor, but I do think there are important
policy differences between Rule 15 and the application of the
statute of limitations. I quoted Wright, et al, earlier, the
function of Rule 15, to enable a party to assert matters that
were overlooked or unknown, the purpose of policy underlying
all statutes of limitations. And this is from a Utah Supreme
Court case in the last few months, Your Honor. To promote
justice by preventing surprises through the revival of claims
that have been allowed to slumber until evidence has been
lost, memories have faded, and witnesses have disappeared.
None of those things is true here.
In addition, Your Honor, there's essentially a
policy for statute of limitations conflicts with the policy
under Rule 15, which is to promote claims to be brought even
if they were overlooked. That's not the case here, but right
from the middle to point out the policy.
IBM's next claim under Rule 15 is that our claim
would be futile. And we think that's wrong, as well. As an
initial matter, an amendment is futile only if the proposed
amendment could not have withstood a motion to dismiss.
That's the general standard. I'm sure the Court has heard
that one, as well.
SCO alleges that only through copyright to the
SVR-4 code that IBM copied in excess of 200,000 lines of that
code into the AIX For Power product. IBM did it without
authorization, that those are the elements of copyright
infringement. IBM does not dispute the merits of those
allegations, but they made several procedural arguments.
IBM first invokes a statute of limitations
provision in the joint development area for JDA. That
Any legal or other action relating to a breach of
disagreement must commence no later than two years from the
date of the breach.
And the Court cited that in the state of New York.
Now, IBM does not dispute that the Court must strictly
construe a contractual provision modifying a statute of
limitations, which it does. In fact, under a reasonable
instruction, let alone a strict instruction, IBM's
interpretation of Section 22.3 does not make sense. It cannot
THE REPORTER: Excuse me. Cannot encompass?
MR. NORMAND: SCO's copyright claim.
The reading that IBM offers fails to reconcile
other provisions in the JDA and creates an unreasonable
result. First, IBM actually ignores parts of the provision
interpreting Section 22.3. That is, IBM does not even argue
that the accrual portion of Section 22.3 applies to SCO's
You'll note that the portion of the provision, Your
Honor, saying that the claim under Section 22.3 must be
commenced no later than two years from the date of the breach.
IBM ignores that part of the rule because it creates an
unreasonable result. IBM argues that the rule of the accrual
should be the rule of accrual for the copyright act. And we
think the reason that IBM does that is because when you read
the provision as a whole, it would mean that under IBM's
interpretation, Section 22.3 would eliminate both the rule for
when a copyright claim accrues as well as the rule that the
plaintiff can bring a copyright claim on the defendant's
continuing infringement. That is not a reasonable reading.
If the scope of Section 22.3 were as broad as IBM
argues, the copyright claim would have to be commenced within
two years of the breach of the contract. Under that reading,
if during Product Monterey IBM copied SCO's code but then
waited two years to release the part containing the code,
SCO's claim would have been time-barred. We think that's an
unreasonable result. IBM relied only on the first part of the
language of Section 22.3 because it knows the section read as
a whole, it creates an unreasonable result.
The fact that Section 22.3 clearly does provide for
a discovery rule of accrual -- excuse me -- that Section 22.3
does not provide for a discovery rule of accrual is a reason
to reject items of interpretation, not to parse the language
as IBM has.
In addition, Your Honor, IBM's interpretation fails
to reconcile other provisions of the JDA. You'll see at
Tab 19, Your Honor --
THE COURT: 20.1.
MR. NORMAND: 20.1. The entire liability of each
party for any cause whatsoever regardless of the form of
action, whether in contract or tort.
Section 20.1 shows the parties knew how to include
in broad fashion any claims under the agreement, which is
effectively the interpretation IBM gives of Section 22.3.
It's not reasonable to give different conditions the same
In addition, Your Honor, we think these arguments
made clear that Section 22.3 can reasonably be interpreted as
SCO's (unintelligible). We think that the provision is clear
in our favor. At an absolute minimum, the provision is
ambiguous. And because it's ambiguous, the Court cannot
resolve the party's intent and, therefore, cannot preclude
SCO's amendment at this stage of the proceedings.
Given that Section 22.3 does not apply, Your Honor,
we enter into the world of accrual of copyright claim and
statute of limitations of copyright claim. There shouldn't be
any dispute on this point. Under the copyright act, every
court that has addressed the issue has concluded that the
copyright claim in which claims based on infringement that
occurred in the previous four years under the statute of
limitations. i think it's actually three years, Your Honor.
IBM argues that there's some dispute in the case
law as to the doctrine of continuing infringement. That's
wrong. There's a dispute as to whether a copyright claim of
who brings a claim 10 years after the copyright claim has
accrued can recover damages for the entire 10-year period.
There is no dispute under the case law that plaintiff
who brings a copyright claim can recover the damages for the
infringement that has occurred the previous three years.
Where the copyright claim accrual and limitations period
applies, there is no question that our amendment is not shield
IBM argues that venue is improper in this court.
Given that Section 22.3 does not apply, that argument fails.
Finally, Your Honor, I think it is worth noting IBM
dismisses too quickly a case showing very clearly that the
District Court always has the discretion to determine that the
interest of judicial economy regarding pending litigation can
override the forum selection. In the Steward case from the
District of Minnesota, 2001, the Court declined to transfer
the litigation to the locale specified in the forum selection
clause because the Court preferred to have both cases
adjudicated simultaneously before the Court that is intimately
familiar with the issues in the case. We think that is the
case here, Your Honor.
The discovery that SCO must pursue to defend
against IBM's Ninth Counterclaim, for example, includes the
precise Project Monterey activities underlined in SCO's
proposed amendment. The fact that in this case the documents
regarding Project Monterey have already been produced and are
being reviewed, and presumably there will be a supplemental
production, the parties have already taken other discovery
regarding Project Monterey, such as the three depositions I
referred to. The subject matter and many specifics of Project
Monterey have already been part of the lawsuit and been made
part of the lawsuit. And whether or not SCO's new claims in
the case, SCO will present the facts of IBM's conduct in
copying Project Monterey. Your Honor, in the interest of
judicial economy clearly shows that SCO's new claim should not
be split from this litigation.
In short, Your Honor, SCO proposes a good faith
meritorious claim on the basis of facts that SCO uncovered
only recently in discovery in this matter and that SCO could
not have recovered without that discovery or before the
deadline for the amendment of the pleadings. We proposed a
claim that concerns the very same subject matter that is
already at issue in the case including by virtue of IBM's
counterclaims. We propose a claim with approximately six to
eight months of fact discovery remaining, depending on how
Your Honor rules on the issue of scheduling orders.
Under the circumstances, Your Honor, we submit the
Court should permit SCO to bring its copyright claim.
THE COURT: Thank you, Mr. Normand.
MR. MARRIOTT: Your Honor, there are a number of
reasons why the Court should deny SCO's application to amend.
I'd like to focus on just two of them without diminishing the
importance of those other reasons which I think are adequately
addressed in our briefs.
THE COURT: All right.
MR. MARRIOTT: Before I come to those, Your Honor,
two quick points. We believe that SCO's predecessor in
interest, Santa Cruz Operation, Inc., granted to IBM and that
IBM has a license to use Unix System V Release 4 code, SVR-4
code, in its AIX For Power product. SCO devoted some portion
of its presentation to its view of the merits of whether IBM
has that license. The Court cannot resolve that question on
this motion. I don't intend to try Your Honor's patience with
inquiring into the merits, except to say we believe that the
evidence will show that we have that license.
Second, Your Honor, as another preliminary matter,
let me just say just a word about the standards that apply to
this motion. There are three. The first, Your Honor, rose
out of this Court's order of June 10, 2004. The deadline, as
Mr. Normand indicates, for amending the pleadings has passed.
It passed more than a year ago. As a result, this motion is
untimely, unless SCO can satisfy first the requirement of this
Court's order of June 10. In the order dated June 10, Your
Honor said that the scheduling order will not be modified
again except upon a showing of extremely compelling
circumstances. Absent a showing of extremely compelling
circumstances, the motion should be denied.
Second standard, Your Honor, that relates to this
claim is Rule 16(b). Rule 16(b) provides that an amendment
shall not be permitted after the deadline for amending the
pleadings has passed, except upon a showing of good cause.
And as Your Honor knows, the central inquiry there is whether
the parties seeking to amend after the deadline has acted in
The third standard, Your Honor, is the standard
that Mr. Normand focuses on primarily. That is Rule 15 and
Rule 15 (a), the rule the Court need not reach. But if it
chooses to reach Rule 15, Rule 15 would not permit an
amendment where there has been undue delay where there would
be prejudice to the party opposing the amendment, which bad
faith with an ulterior motive where the proposed amendment is
futile or should have been and must be brought in another
First point, Your Honor, which I would like to make
is that SCO has known about the proposed claim, that is to
say, its claim that IBM has included Unix System V Version 4
code and IBM AIX For Power product for many years, and it has
done nothing about it. If SCO, Your Honor, knew or should
have known that IBM included -- that IBM included in AIX For
Power SVR-4 code and it knew that before the deadline for
amending the pleadings passed, then this motion fails. If it
knew before the deadline passed for amending the pleadings
that IBM included that code, Unix System V Release 4 code in
its AIX Power Product, then it can't establish good cause, it
can't satisfy the requirements of Rule 15, it certainly can't
establish compelling circumstances, let alone extremely
SCO contends, Your Honor, that it did not know and
had no reason to know that IBM included SVR-4 code in its AIX
For Power product because in SCO's words, IBM's conduct was,
quote, an egregious clandestine violation, close quote. And
IBM, quote, took affirmative steps, close quote, to prevent
SCO from discovering this alleged clandestine conduct,
Those allegations are false. And with the Court's
permission, I intend to show that SCO's internal documents,
Your Honor, documents in its possession for many years and in
possession of its predecessor interest, show it to be false.
I will show also, Your Honor, that the public record makes
perfectly clear that SCO and the world knew and understood
that IBM had included SVR-4 code in its AIX For Power product.
The showing I intend to make, Your Honor, again is not based
on the Monterey licensing agreement, so we think it will
totally support cur position. This showing is based upon
their documents and the public record.
If I may approach.
THE COURT: Yes.
MR. MARRIOTT: Your Honor, beginning at Page 2, we
lay out at least eight indications in the public record and in
SCO's own documents, documents found in its files, that IBM
included SVR-4 code in its AIX For Power product. One,
indication one, the purpose of Project Monterey, Your Honor,
was to create a family of operating systems, including the AIX
For Power product. It was not, as the SCO brief suggests, a
simple afterthought. And I refer the Court to the last bullet
on the page, a SCO presentation at a SCO partner conference in
the year 2000.
Project Monterey in the presentation said, quote:
To establish high-volume, enterprise class
Unix platform through...Single scalable Unix
product line family for IA-32, IA-64 and IBM
In a joint IBM/SCO presentation, Your Honor, it
states IBM and SCO - quote:
IBM and SCO join forces to deliver the most
advanced family of Unix products in the world
including AIX, PPC
That's Power PC product
At Page 2 of our book, Your Honor, the second
indication found in SCO's documents that it knew or should
have known Project Monterey's combined features from both AIX
and UnixWare. If you look, for example, at the last quote on
Page 3, Your Honor, May 2, 2001, print-out of the web page for
the AIX 5L product, which website was jointly sponsored by IBM
and SCO, that is to say, the Santa Cruz Operation, Inc., so
its predecessor. This is a document produced by SCO to us in
this litigation. AIX is, quote, for both Intel Itanium- and
IBM Power-based systems, close quote. AIX 5L is taking IBM's
AIX Unix operation system and combining it with the best
technologies from SCO's UnixWare operating system.
The third indication, Your Honor, is found at
Page 4 of the book. SCO provided IBM with UnixWare/SVR-4 code
for inclusion into IBM's AIX For PowerPC Product. A SCO
e-mail dated 10-23-98 states, quote:
UnixWare for AI32 and AIX PPC continue to be
developed and controlled by SCO and IBM
respectfully. The only difference here is each of
us now has access to technology from both UnixWare
and AIX which can be added to the existing product
lines to increase compatibility and improve the
Next bullet, SCO e-mail dated 9-7-99. Quote:
SCO is providing UnixWare technology to IBM
for inclusion in AIX. Thus users should think of AIX,
paren, on PowerPC, close paren, SCO'S UnixWare on IA32
and Monterey on IA64 as becoming the same operating
system over the next two years.
Indication four, Your Honor, Page 5 of our book.
IBM communicated to SCO regarding the inclusion of
Unixware/SvR4 code in AIX For Power.
And IBM-SCO Family Unix Technical Proposal, dated
9-2-98, produced by SCO in the case states that technology
from UnixWare 7 would be incorporated in both AIX or IA-64 and
AIX For Power.
And IBM presentation also produced by SCO states
that the Project Monterey strategy includes a plan to
aggressively grow and enhance AIX-Power offering by including,
quote, contributions from SCO's UnixWare and Sequent's
It lists SVR-4 Print Subsystem as among the common
subsystems in the Project Monterey product line, including AIX
And finally, SCO e-mail dated 8-11-00, distributing
text of a press release prepared by IBM: refers to AIX 5L
running on both Power, the allegedly infringing product,
running on both Power in IA64 and notes, quote, that among the
Unix System 5 technologies to be incorporated in this release
is the SVR-4, the allegedly infringed technology, printing
Fifth indication, Your Honor, in the documents is
that SCO was aware of the specific UnixWare/SVR-4 code that
would be included in AIX For Power. An IBM-SCO family Unix
technology proposal, again produced by SCO in the litigation,
lists specific technology from UnixWare 7, the allegedly
infringed product in part, to be incorporated into both AIX
for IA64 and AIX For Power. Included are, quote, proc
filesystem and SVR-4 Printing subsystem/printcap files, the
allegedly infringed product listed in the proposed amended
A joint SCO/IBM document comparing AIX For Power
and AIX for IA64:
Notes that the SVR-4 print subsystem is common
between the two products
A SCO-IBM agreement overview, dated 11-4-98 lists,
quote, common features/technology, close quote, between
UnixWare 7, Monterey 1A64, and AIX For PowerPC, including,
again, SVR-4 print subsystem, one of the allegedly infringed
The sixth indication. SCO and IBM marketed AIX For
Power - - SCO and IBM marketed AIX For Power as a product that
would include UnixWare/SVR-4 technology.
A SCO presentation to its Data Center Acceleration
Program, dated l1-4-98.
SCO supplying IBM. SCO, present sentence,
supplying IBM with UnixWare 7 APIs and technologies for AIX.
It describes AIX on PowerPC as, quote, AIX with UnixWare,
SCO presentation at SCO partner conference 2000.
Refers to technology exchanges between AIX, UnixWare and
Dynix. And notes that the Project Monterey strategy includes
the plan to, quote, aggressively grow and enhance AIX-Power
offering, close quotes, by including, quote, enhancements from
SCO's UnixWare and IBM NUMA-Q Dynix/ptx.
Seventh, and nearly final indication for today,
Your Honor, IBM specifically announced the inclusion of
Unix/SVR-4 technologies in AIX 5L For Power.
In March 2001, a document entitled, Printing for
Fun and Profit under AIX 5L, it's noted that the addition of
the SVR-4 print subsystem, the allegedly infringing product --
alleged infringed product, rather, is in this release of AIX,
it devotes more than 150 pages for the SVR-4 print subsystem.
IBM 4-17-01 software announcement for AIX 5L For
Power, includes a section titled, SVR-4 Printing Subsystem.
A 2001 AIX 5L for Power Version 5.1 release notes
includes a section of instructions on how to use SVR-4
The eighth indication, Your Honor, is that
contemporaneous industry reports noted the inclusion of
Unixware/SVR-4 code in AIX For Power.
And August 8, 2000 -- this is Page 9 in the book.
August 8, 2000, "The Register" refers to AIX 5L as an
operating system that runs on both the IA64 and Power
architectures and that included contributions from, quote, SCO
UnixWare and Unix System V standard technologies, quote close.
June 2001, report by Andrews Consulting Group
describes AIX 5L as, quote, a single Unix for both PowerPC and
IA64, close quote. And notes that, quote, AIX 5L supports a
number of Unix System V Release 4, SVR-4, commands and
utilities, especially in the printing subsystem, close quote.
And finally, September 24, 2001, article, notes
that AIX 5L, quote, can be used with both IBM PowerPC
processors and the merging Intel 1A64 Itanium chips and that
AIX 5L, the allegedly infringing product, included a SVR-4
compatible printing subsystem, the allegedly infringed
What's more, Your Honor, SCO contends that it
should be allowed to amend because it just discovered evidence
of the alleged infringement after it says the deadline passed
for amending the pleadings. And SCO attaches to its opening
brief and it includes in the book that it provided the Court
today six documents, and it references IBM's AIX For Power
code. And Mr. Normand said by my count today no less than
five times, IBM produced these documents for the very first
time after the deadline passed for amended pleadings. That's
false. Three of the six documents, which Mr. Normand refers
to, were produced before the deadline for amending the
pleadings. Three of the six.
And when it comes to the scheduling order, Your
Honor, I have a handout which lays out the chronology. It may
make more sense to talk about it there in greater detail. It
shows the dates on which it was produced and a cover letter of
their production. Let me take one example. This is Exhibit 6
of SCO's opening brief, a piece of this allegedly newly
discovered evidence. It deserves special mention.
The document was produced, Your Honor, not among
millions of pages of paper, as counsel would have the Court
believe. It was produced on a single CD with less than a box
of documents on November 11, 2003, nearly three months before
the deadline for amending the pleadings. SCO's newly
discovered evidence, Your Honor, is not so new.
On this record, I would respectfully submit that
there is no basis for SCO's proposed amendment. SCO fails to
establish good cause. It fails to satisfy the requirements of
15(a), and it certainly fails to establish compelling
circumstances, again let alone extremely compelling
circumstances, as this Court's June 10, 2004, order requires.
In fact, Your Honor, SCO cannot establish a good cause. To
quote the Court on deadlines, which is cited in our papers,
the good cause standard primarily considers the diligence of
the party seeking the amendment.
This party, which had these documents in its files
for years, has acted with anything, we respectfully submit,
but diligence. The courts, Your Honor, have refused to
find -- putting aside the Court's June 10 order, the courts
have refused to find good cause under circumstances no
different than these. And I direct the Court to Pages 10 and
11 of the book where we cited a number of cases where the
court commonly refused to permit pleadings after the deadline
for amendment of pleadings.
In the Sipp case, for example, the 10th Circuit
affirmed its denial of a motion to file less than a year after
the original complaint. This motion was filed 19 months after
the original complaint and only two months after the
expiration of deadline of any pleadings. This motion was
filed nine months after the deadline for amending the
And the Court can see for itself the results of the
Brown, Schwinn, Doelle and Proctor & Gamble case. Of course,
I know the Court is familiar, I know, with the Proctor &
The Court need not reach Rule 15(a) --
THE COURT: I'm a lot more familiar than I ever
wanted to be with Proctor & Gamble.
MR. MARRIOTT: The Court need not reach 15(a)
because SCO can't satisfy Rule 16(b), Your Honor. But if the
Court does reach 15(a), the result there is the same. And
Page 13 in our book, we lay out a number of cases in which
courts have declined under Rule 15(a) to allow it in because
it was untimely.
In the Frank case, for example, the 10th Circuit
affirmed a denial of a motion to amend when the plaintiff's
motion was filed four months after the Court's deadline for
amending pleadings. And the plaintiff knew or should have
known of the proposed claim long before that date.
Now, Your Honor, SCO offered by my count three
reasons to explain its delay. First of all, Your Honor, it
seeks to dismiss the documents, to which I've just referred as
ambiguous. In its papers, it says that the AIX 5L reference
might not really be AIX For Power, it might be AIX for IA64
only. It says also that the SVR, that is the System V
technology, might not have been SVR-4, which it contends IBM
doesn't have a license to, but it might just have been SVR-3,
which it acknowledges IBM had a license to.
The documents, Your Honor, which I've just reviewed
and which we highlight in some limited way on Page 14 are
abundantly clear that the references here are not to AIX for
IA64 only, but to AIX For Power. And the documents make
abundantly clear that the technology issue is not just SVR-3,
but it's SVR-4. And I won't read them all to Your Honor, but
you can see them on Page 14.
Now, SCO contends, Your Honor, that it didn't know
about this evidence. And for that proposition, it relies upon
the declaration that it submits from one of its employees,
Mr. Jay Peterson. And respectfully, Your Honor,
Mr. Peterson's declaration isn't worth much. It is based on
speculation, it is based on improper legal conclusion, and it
lacks foundation. Mr. Peterson is in no position to testify
what people in the Santa Cruz Operation, Inc., many years ago
as a collective group knew or did not know. Mr. Peterson can
speak to what Mr. Peterson knows and what Mr. Peterson doesn't
know. And what Mr. Peterson knows and doesn't know, frankly,
is of little consequence in the face of the evidence here that
both the Santa Cruz Operation, Inc., and SCO knew that AIX For
Power included SVR-4 code. Mr. Peterson's professed ignorance
cannot be reconciled with the documentary evidence before the
Now, finally, Your Honor, SCO suggests that in its
papers, that it can't be charged here with the responsibility
and the knowledge of its alleged predecessor in interest in
the Santa Cruz Operation, Inc. It can't have it both ways,
Your Honor. From the beginning of this litigation, the SCO
grouping has pretended that there is no distinction between it
and the Santa Cruz Operation, its predecessor in interest.
And I direct, Your Honor, for example to Page 15 of
the book. In SCO's initial complaint, it alleged that it
performed the activities undertaken by the Santa Cruz
Operation, Inc. It blurred the distinction, it said, quote;
From and after September 1995, SCO
dedicated significant amounts of funding
and a large number of Unix software engineers,
many of whom were original AT&T Unix software
engineers, to upgrading UnixWare for high-performance
computing on Intel processors, close quotes.
In furtherance of Project Monterey, SCO
expended substantial amounts of money and
dedicated a significant portion of SCO's
development team to completion of the project.
Your Honor, in 1995, the SCO Group didn't exist.
In 1995, its predecessor Caldera Systems, Inc., didn't exist.
Santa Cruz Operation, Inc., and the SCO Group are not, not
withstanding its prior contentions, the same company. They
are nevertheless predecessors in interest, Your Honor. And
the law is abundantly clear, we laid the cases out at
Page 16 in the book, that a party is charged with the
knowledge what its predecessor in interest knew or should have
Even if, Your Honor, even if they didn't know what
the documents included, even if you credited Mr. Peterson's
declaration, even if they were allowed selectively to identify
themselves with the Santa Cruz Operation, Inc., the proposed
amendment here is untimely and shouldn't be allowed. A
proposed claim is untimely if the moving party should have
known about the claim.
And you can see the cases that support that
proposition in 17. Frank v. US West, 10th Circuit, said,
It is well-settled in this circuit that
the untimeliness alone is a sufficient reason to
deny leave to amend, especially when the party
filing the motion has no adequate explanation
for the delay.
Las Vegas Ice, Your Honor, reaches the similar
The law is clear here, that the SCO Group had a
duty to investigate. Those cases are laid out at Page 18.
SCO's own cases, Your Honor, indicate, as laid out in Page 19,
that, in fact, it had a duty to investigate.
A party who fails to comply with its duty to
investigate is charged with knowledge of the facts
constituting the infringement, as indicated in the cases laid
out at Page 20.
The most basic of public investigations, the most
basic of internal investigations would have shown, indeed, I
submit did show that IBM included SVR-4 code in its AIX For
Power product years ago. They knew it, Your Honor, and this
claim is untimely both under Rule 15, Rule 16 and certainly
this Courts order of June 10th.
The second point, Your Honor, the last point which
I intend to make, is that the proposed claim here is not a
claim which may properly be brought in this court.
Section 22.3 of the JDA, and I refer you to Page 21 of the
book, provides, quote:
Any legal or other action related to a
breach of disagreement must be commenced no
later than two years from the date of the
breach in a court cited in the state of New York.
It is undisputed that this proposed claim is a
legal or other action. It is equally undisputed,
notwithstanding - - it is equally clear, Your Honor, that the
proposed claim here is related to a breach of disagreement.
I refer you to the next slide, Page 22 of the book,
wherein SCO in the proposed amended complaint and in its
opening brief on this motion acknowledge that the proposed
claim is a claim relating to a breach of the agreement. SCO's
proposed third complaint says, quote:
IBM converted SCO's copyrighted code for
IBM's own use in violation of the specific
restrictions of the parties' Joint Development
SCO's opening brief states that IBM, quote, ignored
the JDA's restrictions in violation -- I apologize, Your
Honor. It states that IBM ignored the JDA's restrictions on
its use of SCO's SVR-4 code and released an Itanium product
that did not satisfy the conditions of a product release.
You know, SCO obviously didn't bring the claim in
New York. That is reason enough under this provision for this
claim not to be included in this case. It offers in its
papers, Your Honor, two arguments as to why that shouldn't be
the case and said barely a word about it today.
The first argument Mr. Normand mentioned today
is -- the only argument that Mr. Normand mentions today is
that Section 22.3, which we just read, is inapplicable. They
took the opposite position, Your Honor, in their opening
brief, the opposite position. In their opening brief, they
acknowledge that that section applied here. They brought it
up in their opening brief.
The law is clear, Your Honor, that a court
generally refuses to consider arguments raised for the first
time in a reply brief, which this argument of inapplicability
is; and in any event, it is a reversal of position, which the
courts also decline to consider. And the authorities for that
proposition are set out at Slide 23.
Pickering v. USX Corp., refusing to rule on
arguments raised for the first time in reply memorandum.
Weaver v. University of Cincinnati, stating that
the Court would address only the merits of defendants'
original contention where defendants shifted their argument in
their reply brief.
Even if, Your Honor, they hadn't conceded the
applicability in their prior papers of Section 22.3, even if
that were true, and it's not, that section plainly applies
here, Your Honor, a contract must be construed to give meaning
to all the terms. That Section 22.3 is an important term of
the contract. Cases to that effect are laid out at Tab 24.
Courts have construed, Your Honor, language
comparable to the related-to language here to include
non-contract claims, such as SCO's proposed copyright claim.
At Page 25, you'll see, for example, the Turtur
decision, Your Honor, Second Circuit, holding that, quote,
rising out of or related to, close quote, language to apply to
a tort as well as a contract claim.
In the Ward case, the Court found that the, quote,
scope of a relating-to language is broad and intended to cover
a much wider scope of disputes, not just those arising under
the agreement itself.
Courts, Your Honor, have even interpreted more
restrictive language, like "arising under" as opposed to
"related to" to encompass claims of the kind here used in the
forum selection clause. And those cases are laid out in
In Monsanto, Your Honor, the Court held, the
Federal Circuit, held that if patent claims were subjected to
forum selection clause applicable to, quote, all disputes
arising under the contract.
Second, Your Honor, SCO contends that IBM ought not
be allowed to enforce this amending provision here because IBM
has waived its rights to the provision. Two arguments they
make. First one is the argument was waived because IBM failed
to assert the defense in its responsive pleadings. That's
wrong for three reasons.
First, Your Honor, SCO didn't raise the argument in
its opening brief. It's improper for the reasons that I've
already stated. Second, we haven't submitted a responsive
pleading. The complaint hasn't been allowed in the case yet.
Third, Your Honor, we have submitted in the case in connection
with their other three complaints four responsive pleadings.
In every one of those pleadings, notwithstanding their
contentions to the contrary, and this is laid out, Your Honor,
at Page 28 of our book, notwithstanding what their brief says,
in every one of our responsive pleadings, we have asserted a
defense of improper venue.
The second and last argument they make with respect
to waiver, Your Honor, is that the claim is waived somehow by
virtue of IBM'S assertion of its Ninth Counterclaim. Your
Honor, Section 22.1 of the Joint Development Agreement and
that's wrong, by the way, Section 22.1 of the Joint
Development Agreement, which is set out at Page 29 of the
book, expressly provides:
No waiver of any portion of this agreement
shall be effective unless it is set forth in a
writing which refers to the provisions so affected
and is signed by an authorized representative of
There is no such writing.
Second, to establish waiver, they've got to show a
voluntary and intentional abandonment of a known right. Cases
to that effect are set out at 30. There has been no knowing
and intentional abandonment of a known right. And the case
law, Your Honor, indicates that the mere assertion of a
counterclaim, as we show at Page 31, is an insufficient basis
for final waiver.
Finally, they suggest that the Ninth Counterclaim
somehow encompasses the proposed claim. That isn't right,
Your Honor. The Ninth Counterclaim was intended to be narrow
in scope. The Ninth Counterclaim could not have been as broad
as they contend because, A, the Court wouldn't have subject
matter jurisdiction over it, IBM couldn't have brought a Ninth
Counterclaim seeking a declaration of non-infringement with
respect to the conduct at issue in their proposed complaint
because we hadn't been sued for that, one; and they had never
threatened to sue us for that, two. We lacked a reasonable
apprehension suit. There would have been no subject matter
jurisdiction with respect to a claim of that kind. And in any
event, the claim that they contemplate having somehow been
swept up in Ninth Counterclaim is a claim that must be
brought, if at all, in New York by virtue of the agreement
that IBM entered into with its partner in Monterey, the Santa
Cruz Operation, Inc.
In summary, Your Honor, the motion should be
denied. It should be denied because they've known about this
claim from the very beginning of the case, and it should be
denied because there is a forum selection clause here which
requires this claim to be asserted in New York, not in the
state of Utah.
THE COURT: If I let them amend as they want to do,
would it affect your motion to narrow the Ninth Counterclaim?
MR. MARRIOTT: Would it affect the motion? Your
THE COURT: In other words, would you still want me
to grant that motion?
MR. MARRIOTT: Your Honor, the motion with respect
to the Ninth Counterclaim is intended simply to reflect IBM's
intent to filing a motion.
THE COURT: All right. So I'll call it a motion to
MR. MARRIOTT: Call it a motion to clarify. The
motion frankly is of little consequence. It doesn't make much
difference. SCO doesn't really care, Your Honor, about that
motion except for purposes of being able to argue in this
connection that somehow the claim is waived.
THE COURT: But my question to you is, if I let
them amend, do you care about your motion?
MR. MARRIOTT: I don't care about the motion, Your
THE COURT: Okay. Thank you.
MR. MARRIOTT: Thank you.
THE COURT: Reply, Mr. Normand?
I assume you'll be brief and efficient.
MR. NORMAND: Thank you, Your Honor, I'll make an
effort to be brief and efficient. Mr. Marriott has raised
some new issues, some new documents and some arguments that
I'm hearing for the first time.
Just to clear the field, to begin with, Your Honor,
the question of when documents were produced, I think we're
going to have a factual dispute with IBM about that. I do not
purport to have personal knowledge about when documents were
produced, but it is my understanding that the documents had
been produced after the amendment deadline. If we're
incorrect, we're incorrect. It stands that several of the
documents at least, as Mr. Marriott concedes, were produced
after the deadline. And this goes to the point of plaintiff's
entitlement to collect a core critical mass of highly
privilege documents. There is no question that some of the
very important documents were produced after the deadline.
And we have not purported to present to the Court with all of
As an overarching matter, Your Honor, there is no
argument of undue prejudice from IBM. And under the Supreme
Court precident and under a lot of other precidents, that's
the primary overriding factor. There is no undue prejudice.
IBM makes a series of arguments about Rule 16. We
think those arguments misconstrue the case law and are
overstated. Let me note from the onset, Your Honor, that, as
I noted in my opening argument, there is no place for Rule 16
here. There may not be a place for Rule 16 because there may
be a new amendment deadline.
Even if there is not a new amendment deadline, the
question, then, is Rule 16, because there is no question that
many of the documents, at least, even pending this dispute
with IBM over the timing of production of documents, there's
no question that some of the documents were produced after the
deadline. If there's been no undue delay and Rule 15 is prior
to the deadline, Rule 16 has been placed. In any event, the
questions under Rule 16 as we cite in the briefs is whether
the plaintiff uncovered previously unknown facts during the
discovery that would support an additional cause of action.
The question is whether the supporting facts did not surface
when the last amendment deadline had passed.
Now, with regard to another matter, IBM spends a
lot of time going through the documents, the documents that we
had not seen before, internal documents from Santa Cruz. We
think that misses the point entirely. There is evidence that
people at Santa Cruz might have known that as part of the
Project Monterey the parties intended to allow copying to
happen. IBM, first of all, argues that there was an
authorization, but they don't point to the Court or to us any
basis for that supposed authorization.
Santa Cruz understood that the product was to be
developed. Santa Cruz understood that there would be sharing
of the code as part of the project, but there is no allegation
and no proof that anyone at Santa Cruz or SCO actually knew
they had a claim. More importantly, IBM's arguments ignore
the key evidence that we've uncovered. It is highly relevant
that IBM itself thought and its product release did not
authorize itself to use the code. And I'd like to walk the
Court through that in a little bit more detail.
SCO must prove that IBM's copying was unauthorized.
Part of that proof is the question of the operation of the
JDA. Very relevant evidence as to the operation of the JDA is
how IBM thought the JDA operated. Accordingly, very relevant
evidence to our claim is IBM's view that it was not authorized
under the JDA to undertake the copying it did. There is just
no question that that evidence is relevant. IBM's argument
produces the claim that the evidence is irrelevant, that it
added nothing, that we could have brought a copyright claim
without knowing that IBM thought that the release was
pretextual. I don't think that's true to the extent that an
argument is an accrual argument. And I'll address that in a
moment, Your Honor.
IBM tends to confront the three reasons that we've
offered for why we think it is appropriate. Some of the
reasons are ones that IBM has frankly mischaracterized. They
first discussed the documents and say that we dismissed the
documents. As I said, that misses the point that as many of
the documents that are released, they did not either attempt
or give any basis for thinking they have copyright claims.
And none of the documents suggest that anyone at Santa Cruz
knew that IBM itself regards itself as having lack of
authorization of the copying of the code. That is a critical
aspect of the claim we propose to bring. It is an aspect that
we could not have discovered possibly until we reviewed the
documents in this litigation.
Argument -- IBM then argues the issue of whether we
should be imputed to have what little knowledge Santa Cruz
might have had about the subject matter of the claim. We
think IBM misses the point there, as well, Your Honor. IBM
cites no case for its proposition and for purposes of Rule 15
that plaintiff should have knowledge of its predecessor
imputed to it. These are the cases that IBM cites, cases in
which the defense of laches had already barred the
predecessor's claims when the predecessor purported to assign
the claims to the successor. Those cases make sense. If
laches were to preclude the predecessor's lawsuit, he should
not be permitted to escape his untimeliness by selling or
giving his patent or other intellectual property rights to a
successor to then try to file a timely lawsuit.
SCO does not seek to gain any rights that Santa
Cruz did not have. The only issue here is whether SCO can
bring a new claim as an amendment in this proceeding. IBM
cites no cases to support its oral argument that knowledge of
Santa Cruz, however limited, should be imputed to us.
IBM illustrates what I think is its failure to
confront our main argument where it says the most basic of
public and internal investigations would have revealed the
basis for our proposed claim. That is not true. It's not
remotely true. We would not have known even with the most
intense investigation that IBM itself viewed itself as
unauthorized to publish and to copy code as it did. That's
critical evidence, Your Honor.
IBM argues that we acknowledged in our opening
brief the JDA applied. That's not true, Your Honor. Here's
the statement we made in our opening brief.
SCO recognizes that the parties' JDA for
Project Monterey contains a forum selection
clause for New York courts.
We acknowledge that the JDA contained a forum
selection clause. We weren't obligated to raise every
argument, Your Honor, in which 22.3 would not apply.
We're also at the height of formality here, Your
Honor. IBM filed an ex-parte motion for leave to file a
surreply after they concluded that when we raised the issue of
waiver in the applicability provision in our reply brief, they
argue that we raised that for the first time. They got
permission to file a surreply. They filed a 16-page surreply,
and we're here arguing the points before Your Honor. I think
it's an incorrect argument, and in any event, a technical one
that shouldn't preclude the consideration of merits.
As to the interpretation, Your Honor, of
Section 22.3 of the JDA, IBM ignores again our main argument,
which is by their own lights, the provision doesn't make any
sense. They leave the accrual portion of the provision out
because it would give the provision an unreasonable reading.
They cite several cases that they say support their arguments,
that in light or analogous provisions a forum selection clause
We think those cases make our point. In contrast
to those cases, Section 22.3 does not encompass all claims
relating to or arising under the agreement or concerting the
parties' rights and duties under the agreement. That is not
the scope of this provision. That's the scope of 20.1. It's
a reason not to give the reading of 22.3 that IBM does.
IBM argues that there's been no waiver of the
provision. We think that's wrong, Your Honor, for one basic
reason, which is the scope of the Ninth Counterclaim. I
quoted the Ninth Counterclaim before, and it is extremely
broad. It asks for a declaration of non-infringement. it
does so in plain language. It was a counterclaim that
exceeded the scope, as Mr. Marriott concedes, as praise as
written that he exceeds the scope of our claims. That makes
it not a compulsory counterclaim, as Mr. Marriott again
explicitly concedes, but a permissible counterclaim. Parties
pursue litigation from one forum constitutes the waiver of
that party's ability to enforce the forum selection clause to
The Ninth Counterclaim is permissive. None of
SCO's claims required any fact finder to determine whether
IBM's development of AIX violated any SCO copyrights. We
think the precident makes clear that the defendant waives any
venue objections when it objects to new issues in the case.
10th Circuit held long ago in Thompson, 1962, that the filing
of a counterclaim can constitute the waiver of a forum
IBM cites a more recent 10th Circuit case,
Campbell, I believe it's Campbell, in which the Court
concludes that if the counterclaim was compulsory, it would
not be a waiver. But the rule as it stands and as we can
prove from a variety of precidents is that the defendant
voluntarily submits himself to the forum through filing a
permissible counterclaim. We think the plain language of the
Ninth Counterclaim makes it clear that it's permissive.
I'll address in a moment, Your Honor, the question
of whether IBM's re-interpretation of its Ninth Counterclaim
makes any sense. I want to address IBM's brief argument on
the non-waiver provision in the JDA. We cited the case in our
briefs that show where the party's conduct constitutes a
waiver generally of venue objection, even if there is a
no-waiver condition in the contract, that is not a right to
the waiver, constitute a waiver, both of the no-waiver
provision and of the venue objection generally in federal
The cases IBM cites don't support its argument. In
the Roboserve case, the Seventh Circuit case, the Court
acknowledged only that the waiver of authority in Illinois
holds that, Waiver Only in Writing provisions can be waived by
words and deeds of the parties. And I think IBM's Ninth
Counterclaim constitutes a deed by which IBM intends to inject
new issues into the case.
IBM argues that its Ninth Counterclaim shouldn't be
read as written. IBM says its Ninth Counterclaim is not
intended to encompass SCO's claims. And it's filed a motion
styled, A Motion For Entry of Order Limiting the Scope of the
Ninth Counterclaim. The motion is fully briefed. I take it,
Your Honor, it will be heard another time.
But in sum, in our Opposition to that motion, we
point cut that among other things, IBM filed that motion only
having seen after the October 2004 hearing before the
magistrate court the evidence of its violation of SCO's
copyrights and the evidence that it knew it was not authorized
to use SCO's code.
IBM doesn't seek leave to amend the counterclaim
but seeks leave to ask the Court to enter an unprecedented
order that would retroactively limit the scope of
(unintelligible) It's unprecedented. IBM cites
unprecedented to support a motion. And the motion directly
contradicts IBM's argument to this Court in September of 2004,
as Your Honor may recall, with respect to our motion to
dismiss IBM's Tenth Counterclaim as a permissive one. IBM
argued at that point that what you should control is the plain
language of the scope of our copyright claim. In our view,
our copyright claim was more narrow than IBM interpreted it to
be. And we argued that the plain language didn't support
IBM's agreement. And IBM argued that the plain language had
to control. And the Court adopted, as we understand the
Court's order, that rule, that the plain language of the
counterclaim would control and the plain language of SCO's
allegations would control. I don't see why a different rule
would apply in this instance.
In short, Your Honor, IBM'S argument ignores the
crucial fact that there is no undue prejudice, IBM's argument
deduces the claim without any citation or precident or
authority remotely analogous, that Santa Cruz' limited
knowledge should be imputed to us. And we think those
arguments are wrong.
And as a last point, Your Honor, the question of
the extent of Santa Cruz' knowledge is a statute of
limitations accrual question. It is not a question that is
relevant to the policies of Rule 15. At the very least, Your
Honor, the question of when a claim (unintelligible) is a fact
question, and we cited cases in our brief showing that it is a
fact question, not only requiring discovery, but is one that
cannot be resolved in summary judgment. An intense fact
question. And to the extent that the document, the new
document that IBM submitted suggests that Santa Cruz had a
certain level of knowledge of copying, which is different from
the question of any knowledge of IBM's knowingly unauthorized
copying, that IBM acknowledged the copying was unauthorized,
that is a fact question. And the fact that Mr. Marriott has
brought in new documents, ones that we have not seen before,
only highlights what that question is. It is no basis for
(unintelligible) . Thank you, Your Honor.
THE COURT: Thank you.
MR. MARRIOTT: May I have just a moment, Your
Honor? I can segway easily, if you like, into the scheduling
THE COURT: But you want -- well, the scheduling
discussion is not going to be very lengthy.
MR. MARRIOTT: Perhaps not.
THE COURT: You want to say something? You want to
reply to his reply?
MR. MARRIOTT: I would if I could.
THE COURT: How long?
MR. MARRIOTT: Three minutes.
THE COURT: Then he still gets the last word. It's
MR. MARRIOTT: That's fine with me.
MR. NORMAND: Your Honor, that's fine.
THE COURT: I'll give you two minutes.
MR. MARRIOTT: Okay. Thank you.
First, Mr. Normand suggests that he heard nothing
from IBM with respect to prejudice. As I said at the outset,
Your Honor, we are not making here all of our arguments.
There is no question that it would be prejudice to IBM if this
motion would be allowed. If it would be allowed, it would be
prejudice because the forum selection clause would be read out
of the contract. There would be prejudice because new issues
would be inserted in this case which are otherwise not here.
Like, for example, whether IBM has a license to include Unix
System VR-4 code into this product. That issue is not in this
case. That is the central issue in all likelihood in their
The proposed claim, Your Honor, concerns a contract
between IBM, a New York corporation, and the Santa Cruz
Operation, Inc., a California corporation, not the SCO Group,
Inc., a Utah based company.
SCO suggests, Your Honor, by way of its inquiry in
SCO's arguments that a party is not on notice for purposes of
inquiry notice unless that party has all of the evidence,
which we indicate the alleged underlying violation. That's
wrong, Your Honor. If that were the rule, there would be no
inquiry notice as a test.
Mr. Normand suggests that Rule 15 somehow is
oblivious to whether a party knew or should have known.
That's a fact question he says the Court couldn't possibly
resolve in this posture. Courts resolve that question all the
time in this juncture, Your Honor. If Mr. Normand were right
that that was a fact question and the Court couldn't hear it
and consider it, we would never have these decisions laid out
in our book in which courts have denied amendments because the
party should have known of the alleged misconduct.
With respect to the scheduling points, Your Honor,
I guess my question is whether the Court intends to hear any
argument with respect to that. If it does not, I'd like to
show one other exhibit, which I think is of some consequence
THE COURT: Consequence to this motion?
MR. MARRIOTT: It is.
THE COURT: Or referring to schedule?
MR. MARRIOTT: It is the consequence of both.
THE COURT: Well, show it. We're going to have a
brief discussion about scheduling.
Now, tell me how this is of consequence to this
MR. MARRIOTT: I will, Your Honor. It is of
consequence to this motion because this chronology which lays
out the events concerns both. The reason it relates to
scheduling, Your Honor, because one of the scheduling
questions is whether the Court should enter an order which
includes a new deadline for filing amended pleadings.
THE COURT: Yeah, that is one of the questions.
MR. MARRIOTT: Pardon?
THE COURT: That is one of the questions.
MR. MARRIOTT: That is one of the questions. And
that question is also obviously relevant to the motion that
SCO should be allowed to amend its complaint. The documents
that SCO contends is the newly discovered evidence are
indicated here with asterisks, Your Honor. At the tabs,
you'll see the correspondence which indicates when these newly
discovered pieces of the evidence were produced. There is a
factual record, and it is right here. And this is the record
that indicates when the documents were produced. Three of the
six, as I say, were produced before the close of fact
Your Honor, the code in question, IBM AIX For Power
product, was produced to SCO in March of 2004, as indicated on
this document. SCO says in its papers that it was relatively
easy to determine from those -- from that code that IBM
infringed because it says that IBM copied hundreds of
thousands of lines of code, to put that code into its AIX For
Power product. SCO had that discovery, Your Honor, by
March 4th. On April 5th, it filed a motion seeking to amend
the scheduling orders. In that motion to amend, which is laid
out here in the book, Your Honor, it asks for date after date
after date for events in this case. Not a single one of those
dates concerns a date for amending pleadings.
The parties appeared before the Court on June 8th,
2004, for a hearing with respect to the scheduling order, at
which point SCO had had the allegedly critical documents, at
which point all of the allegedly critical documents were in
its possession, some for more than six months, the code which
he said was -- well, that it easily determined was in
possession. And nothing was said at that hearing about a
need, Your Honor, to amend the schedule to have a new date for
which to file an amended pleading. That is indicative of
there not being either good cause or extraordinarily good
circumstances. Thank you.
THE COURT: Thank you.
MR. NORMAND: Thank you, Your Honor. I won't dwell
on the point. As I said, I don't know personally whether what
IBM has represented about the documents is accurate. To the
extent Your Honor thinks it might be relevant, we ask for the
opportunity to respond to the submission that they made.
Mr. Marriott said earlier that, I think he said three of the
six were produced in November of 2003; three of the most
relevant were not. Even as to those that were produced, we
received them only a few months before the original amendment
of pleadings. Thank you, Your Honor.
THE COURT: Thank you.
All right. Now who's going to talk now about
scheduling? Mr. Marriott?
MR. MARRIOTT: Yes, sir.
THE COURT: Who over here?
MR. NORMAND: Your Honor, I will.
THE COURT: All right. Now, I have your proposed
schedules. Talk to me briefly, each of you, about what
difference in your proposed, if any, the magistrate's order
entered yesterday may make and what difference - - what your
proposals would be if I allowed plaintiff to amend or if I
didn't allow plaintiff to amend.
MR. NORMAND: Yes, Your Honor. We have a revised
scheduling order. May I approach?
THE COURT: Yes. Have you given Mr. Marriott a
copy of it?
MR. MARRIOTT: He has, Your Honor.
THE COURT: Okay. This is your proposed revision;
MR. NORMAND: Yes, Your Honor.
THE COURT: And this is after the order yesterday
by Magistrate Wells?
MR. NORMAND: Yes, Your Honor. The modifications
to the scheduling order - -
THE COURT: Would this be affected by my ruling on
the motion to amend?
MR. NORMAND: It would not, Your Honor. It
proposes an amendment deadline.
THE COURT: Okay.
MR. NORMAND: You see near the top of the page,
Your Honor, amendment deadline of June 17, 2005.
THE COURT: Okay.
MR. NORMAND: The differences between this revised
schedule and the schedule we submitted several weeks before
the magistrate's court order relate to merely timing.
THE COURT: Relate to what?
MR. NORMAND: Timing. The magistrate court order
gave IBM, as we understand it, as of yesterday --
THE COURT: Most schedules do relate to timing.
MR. NORMAND: Then I'm right.
THE COURT: You are right. You are certainly --
I'll take judicial notice of the correctness of your last
Excuse me. Go ahead.
MR. NORMAND: Thank you, Your Honor. I have that
going for me.
The magistrate court's order gave IBM 90 days from
yesterday to comply with the discovery order the magistrate
court had originally entered in January. Accordingly, we've
changed our schedule in roughly proportional fashion, moved
dates back. Of course, we moved the fact discovery deadline
back 54 days, as indicated in the footnote, And we've moved
most of the other dates back about 90 days. We don't presume
to take a full 90 days that the Court has given. We would
take 70 days. We think that the delay in the production is
relevant to our ability to structure the order as we
originally proposed it.
THE COURT: Thank you.
MR. MARRIOTT: Your Honor, I believe that
Magistrate Judge Wells' order doesn't change much of our
proposed schedule, except that I would suggest that by
adjusting outward the dates two months would accommodate the
Court's order of yesterday.
With respect to the other question, adding that
complaint, Your Honor, would from our perspective complicate
the case and require a line of discovery which was otherwise
not contemplated and which is otherwise not necessary and
would require a minimum of nine months additional time.
THE COURT: Have you looked at this?
MR. MARRIOTT: I was handed that at the beginning
of the hearing, Your Honor. I have not studied that.
THE COURT: All right. Thank you.
Now, do either of you -- is there -- would you be
able to sleep tonight based on what you've told me about
scheduling? I don't want you to go home and say, oh, gee, I
wish I would have said that when we talked about scheduling.
That happened to me a few times when I was practicing. Why
didn't I say X? So is there something else you want to say
MR. NORMAND: Well, I know if I don't say
something, Mr. Eskovitz will tell me I should have said
something. Two main points --
THE COURT: That's reason enough. You don't want
your partners calling you in the middle of the night.
MR. NORMAND: Thank you, Your Honor.
Mr. Marriott first said he doesn't see how the
magistrate's court order changes their proposed schedule.
We'll point out that their proposed schedule from a few weeks
ago presupposed that they would win a motion for
The other point, Your Honor, is the reasons I
outlined my argument on the motion to amend, to the extent to
the nine-month discovery schedule that IBM proposes for fact
discovery, which is what I heard Mr. Marriott say, to the
extent that that is premised on Project Monterey discovery, we
think that has to be incorrect. Project Monterey is in the
suit. We don't, SCO, need to take substantial additional
discovery. And there's a six- to eight-month discovery under
our schedule that we think is plenty to accommodate Project
Monterey. Thank YOU,
THE COURT: Thank you.
Mr. Marriott, do you want to sleep well tonight?
MR. MARRIOTT: I do, Your Honor. Project Monterey
is not in the case in the sense in which they propose to put
it in the case, the words mentioned in the case to be sure.
The issues presented by their motion is not here, and I think
an additional nine months would be required with respect to
I don't think, to respond briefly to what
Mr. Normand said about my comment about Judge Wells' order, I
don't think that doesn't affect the case at all. I think I
said it would shift about two months in the proposed dates.
The one thing which I'd like to mention with
respect to the proposed schedule is set out in the papers, but
I think it deserves special emphasis. We believe that it is
critical that the Court enter a proposed scheduling order that
includes a provision which requires both parties to disclose
the allegedly misused material, whatever it is, by a date
certain, and that the parties then have an opportunity
subsequent to the disclosure of that allegedly misused
material to take discovery with respect to that material.
The Linux Operating System, Unix System V, AIX, and
Dynix, include collectively hundreds of millions of lines of
code, Your Honor. When they identified that which IBM has
alleged to have misused, we're going to need to take discovery
with respect to that identified code. We're going to need to
take discovery with respect to who and when, where, why, how.
We're going to need to take discovery with respect to whether
it's subject to contracts, whether it's subject to copyright
principles. We're going to need to take discovery with
respect to whether it's in public domain, and if so, to what
Your Honor, our proposal is that the Court impose
an interim deadline, by which the parties disclose, I
understand already should have been done, if the parties have
additional information they disclose that and that there be a
final deadline. And after that deadline, the target is fixed.
The experts are not permitted to disclose additional
information in their reports or other pretrial submissions.
They're not allowed an opportunity to add additional uses
about that which was supposedly misappropriated. The target
That's the only way, Your Honor, if there's allowed
to be a period of brief fact discovery after that we can
properly prepare our defense. The only other alternative,
Your Honor, is to undertake that kind of investigation with
respect to the hundreds of millions of lines of code in issue
in the case under a hypothetical, yet unasserted theories of
liability. That is impossible, and any scheduling order we
respectfully submit should include that kind of provision.
Now, they've made various arguments against it,
Your Honor. We've laid out in our papers why none of them are
respectfully are any good. If as they contend we will get
this information in the ordinary course, which is their
argument, then they ought to have no difficulty agreeing to a
schedule in which there is that kind of provision.
And respectfully, the reason that they don't
particularly care about that provision is that IBM has
disclosed to them 700,000-plus lines of code, line for line
match up that we contend that they infringed in our copyright
claim. That we don't have. That we want. That we think we
need in order for this case to progress. Thank you.
THE COURT: Thank you.
MR. NORMAND: Thank you, Your Honor. The parties
do disagree over the structure of the fact discovery. We have
proposed that the fact discovery in this case proceed as it
does in every other civil case, with mutual discovery. IBM
wants a period of unilateral discovery to begin very shortly.
They want that period to begin on August 11th. That's not
enough time for us to review the code.
IBM's unilateral discovery proposal fails for
several other reasons in addition, Your Honor. First, our
schedule conforms that mutual discovery contemplated in the
federal rules and the one that was structured in the previous
schedule orders. And we think it would be odd if that
framework changed as a result of - - as reflected in the
magistrate court's January order, IBM's failure to produce
relevant evidence for over a year.
IBM can prepare a defense to SCO's claims during
the period of mutual fact discovery. IBM has served
interrogatories on SCO, and SCO is under an obligation to
respond to those interrogatories. We will do so as soon as we
can. If it arises that IBM is of the view that it has not
received our responses to their interrogatories in enough time
to complete discovery, that is an issue to raise with the
Court at that point. The Court is full of arsenal of measures
it can take to allow more time or to preclude us from
using evidence if we haven't produced responses to those
interrogatories in time.
IBM's argument suffers we think also from a very
fundamental flaw. No one knows better than IBM what they
contributed to Linux, how it was derived, how it was created.
The notion that IBM is flying blind is absurd.
Thank you, Your Honor.
THE COURT: Thank you.
All right. Thank you all. I'll take these motions
under advisement and get a ruling out in due course.
Court will be in recess.
(whereupon, the court proceedings were concluded.)
* * * * *
STATE OF UTAH
COUNTY OF SALT LAKE
I, KELLY BROWN HICKEN, do hereby certify that I am
a certified court reporter for the State of Utah;
That as such reporter, I attended the hearing of
the foregoing matter on April 21, 2005, and thereat reported
in Stenotype all of the testimony and proceedings had, and
caused said notes to be transcribed into typewriting; and
the foregoing pages number from 3 through 96 constitute a full,
true and correct report of the same.
That I am not of kin to any of the parties and have
no interest in the outcome of the matter;
And hereby set my hand and seal, this day of
(space for signature)
KELLY BROWN HICKEN, CSR, RPR, RMR