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Novell Files Answer and Counterclaims, and Tells Us the Rest of the SCO Story
Friday, July 29 2005 @ 07:37 PM EDT

I know you are waiting with eager anticipation, because today is the day Novell was to file its answer to SCO's slander of title complaint. I have verified that they have done so. Here is what I know so far, with the document to follow as soon as possible. UPDATE: Here it is [PDF], Novell's Answer and Counterclaims.

Here's the big news. Novell tells the court that SCO contacted Novell after Darl McBride took the helm, and they asked Novell to go in with them in a "Linux licensing program". Novell refused to participate, calling it a "scheme". It was in that context that SCO asked Novell to give them the Unix copyrights. They repeatedly made such requests, asking Novell to amend the Novell-Santa Cruz agreement to give SCO the copyrights. Novell repeatedly said no.

The next biggest news is Novell is bringing Microsoft and Sun Microsystems into the picture. It looks like we will eventually find out what role they played, if any. Novell tells us that it began an audit of SCO's activities in July of 2003, which it was entitled to do under the contract, but SCO refused to turn over requested information regarding Sun Microsystems' and Microsoft's licenses or any others under the SCOsource program. Novell says that SCO had no authority to enter into new SVRX licenses with Sun, Microsoft, or anybody else and they noted that the IP License for Linux SCO was offering appeared to be SVRX licenses, because they purported to grant rights related to UNIX System V or UnixWare. SCO never turned over anything, and that is the foundation of Novell's breach of contract claim, and it leads to the breach of obligation to remit royalties claim. SCO never asked Novell for permission to enter into any new SVRX licenses, so none of the new licenses, Novell asserts, falls within 1.2(e)'s exception to SCO's general duty to remit 100% of SVRX royalties to Novell. They are asserting their rights to all but 5% of what Sun and Microsoft paid.

They ask the court for specific performance, to compel SCO to comply with its audit *and remittance* obligations. Specific performance is legalese when you are asking the court to make the other party to a contract do what it said it would. They also ask the court to set up a constructive trust for SCO to deposit the revenues from Sun, Microsoft, and all revenue from its "Intellectual Property Licenses with Linux end users and UNIX vendors," to protect Novell from "SCO's wrongful retention of monies owing Novell due to SCO's failure to perform its remittance obligations." That should get the SCO lawyers to wake up with a start. Do you think SCO is finally sorry it started down this road? I'll bet the lawyers are, even if SCO isn't. Novell has just handed them a lot of work to do, with uncertainty as to getting paid for it. That uncertainty is also why Novell asks the court to order a trust be established, because, Novell says, SCO is quickly dissipating its assets.

Discovery, here we come. We'll get to see those Sun, Microsoft and SCOsource licenses yet, methinks. If the court sustains these claims, all the SCOsource money SCO ever got or ever could get would go to Novell, with a small handling fee to them for their trouble. Actually not even that. Novell says SCO was unjustly enriched by keeping the revenue but not fulfilling its administrative, remittance and audit obligations, so they don't deserve the 5% either. Novell is aiming its arrows straight at SCO's heart, where it lives, namely its pocketbook. Oh, my, oh, my. Not to the moon after all?

Novell lists a number of affirmative defenses and several counterclaims, including slander of title. Yay. At last. I was pretty sure that was going to show up.

Novell's affirmative defenses are:

  • Privilege
  • Estoppel
  • Unclean Hands
  • Laches
  • Comparative Fault
  • Failure to Mitigate
  • No Causation
  • Claims barred in whole or in part by the First Amendment to the US Constitution.

Here's what they ask for in the Wherefore clauses:

  • That SCO take nothing by the Amended Complaint
  • That the Court enter judgment in favor of Novell and against SCO, dismissing with prejudice the Amended Complaint and each of its causes of action
  • That the Court award Novell its reasonable expenses and costs incurred, including without limitation attorneys' fees, in defending against the Amended Complaint
  • actual and special damages caused by SCO's slander of Novell's title to the UNIX copyrights
  • punitive damages for "SCO's malicious and wilful conduct in slandering Novell's title"
  • preliminary and permanent injunctive relief requiring SCO to withdraw its improperly registered claims to UNIX copyrights and to withdraw all other representations it has made regarding its purported ownership of the UNIX copyrights
  • actual and special damages caused by SCO's breach of contract
  • specific performance of future compliance with SCO's audit obligations
  • specific performance of future compliance with SCO's royalty obligations
  • an order imposing a constructive trust on the revenues remitted to SCO under new or amended SVRX Linceses
  • an order attaching SCO's assets pending adjudication of Novell's contract claims
  • declaratory relief establishing Novell's rights and SCO's obligations under the contract regarding section 4.16(b)
  • preliminary and permanent injunctive relief enforcing Novell's rights under the APA, including injunctive relief barring SCO from taking actions inconsistent with or in violation of sections 1.2(b), 1.2(f), 4.16(a) and 4.16(b)
  • for declaratory relief establishing Novell's rights and SCO's obligations under the covenant of good faith and fair dealing in the APA
  • an order of restitution of all monies constituting SCO's unjust enrichment
  • for an accounting of the royalties remitted to SCO under the SVRX licenses and the monies owing to Novell under the APA
  • for pre-judgment interest on any monetary recovery
  • any other relief the Court thinks is appropriate
They also ask for a declaration that Novell is entitled to direct SCO to waive claims against IBM, Sequent, and other SVRX licensees and that SCO is obligated to recognize the waiver of SCO's claims against IBM and Sequent. They also seek a declaration that SCO was obligated to seek Novell's prior approval to enter into new SVRX licenses or amendments to SVRX licenses, including SCO's agreements with Sun, Microsoft and other licensees. In the alternative, Novell asks for a declaration that SCO had no authority to enter into the Sun and Microsoft licenses or any IP licenses with Linux end users and UNIX vendors. Then they ask for a declaration that SCO is obligated to comply with Novell's audit demands.

Its Counterclaims:

  • breach of contract
  • accounting
  • restitution
  • slander of title
There is more about exactly what the deal was between Novell and Santa Cruz, about the amendments (Amendment 2 was merely an amendment to the schedule of excluded assets, Novell says, and so doesn't qualify as an instrument of copyright conveyance, it doesn't identify copyrights necessary at that time for Santa Cruz to "exercise its rights", and there's no language in it or the modified APA suggesting a contemporaneous transfer of any copyright, and nowhere is there any date for any purported transfer of copyrights, and by repeatedly asking Novell in 2003 to transfer the copyrights to SCO, it conceded Novell's rights), and yes, Novell tells the court that The SCO Group was not a party to the agreement between Novell and Santa Cruz, and by the way, Novell retained all copyrights in that deal. So the later deal between Santa Cruz and Caldera is clarified. Santa Cruz couldn't pass along to Caldera, now The SCO Group, what it never received. Why didn't they get the copyrights? They were short on money. Aren't you glad? If you wish to review the contract, don't forget we have them all on our permanent Contracts page.

And now we know Novell is a hero in this saga, and I am going out to buy the latest SUSE Linux this exact minute, even though I already have it. I hope you do too, even if you don't need it. Imagine if Novell had said yes. They accuse SCO of knowingly making public statements of ownership to the media and in SEC filings that were false regarding their purported ownership of the copyrights, and the document lists some of the worst examples. Yoo hoo, Red Hat. I believe you have some Lanham Act claims? I think you're going to enjoy this document.

Remember I told you that Novell had hired a litigator, Kenneth Brakebill? He is listed on this Answer and Counterclaims. Welcome, Mr. Brakebill.


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