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To read comments to this article, go here
SCO Asks to Amend Complaint in Novell Litigation
Tuesday, January 03 2006 @ 09:43 PM EST

SCO is asking the court [PDF] to allow it to file a Second Amended Complaint [PDF]. The court doesn't have to say yes, but I expect it will.

I guess SCO felt it had to do something, Novell's Answer with Counterclaims [PDF; text] being such a killer document. And in fact, SCO says it "seeks leave to file a Second Amended Complaint in significant part in consideration of the counterclaims that Novell asserted in its Answer and Counterclaims."

And so we see SCO asking the court to let it amend its complaint to up the ante on its side by adding four new claims, in addition to the original slander of title claim. They are finally asking for specific performance of the contract, which is what most lawyers I know thought they should have asked for in the beginning, as alternative relief, part of one breach of contract claim, but what they really ask for is an injunction to block Novell "from copying, reproducing, modifying, sublicensing, and/or distributing SCO's UNIX and UnixWare," by which they mean they are alleging their Most Holy UNIX IP is in SuSE Linux. On that foundation SCO's places its new claims of breach of contract based on Novell allegedly violating a clause that said Novell couldn't compete with SCO's Unix offerings and a claim of unfair competition.

SCO also claims copyright infringement, "based on, among other things, Novell's' unauthorized distribution, in its Linux offerings, of UNIX technology outside of the limited license by which SCO's predecessor licensed back to Novell the UNIX technology it transferred to SCO pursuant to the APA." Yeah, right. So two breach of contract claims, one copyright infringement, and one unfair competition.

Of course, they still claim slander of title, which is what they soooo wanted to stick with. SCO has done everything in its power to avoid a straight-up copyright decision. They didn't originally file any copyright infringement claim against IBM either, if you recall, despite their trash talk to the press. And as Lewis Mettler has repeatedly pointed out on Lamlaw, they only wanted to talk copyright with folks who were not in a position to prove in a court of law one way or the other who owned the copyrights, like poor AutoZone, a car parts company that surely had no way to know if SCO was the copyright owner or not.

Novell is the right party to settle that issue, an issue SCO has spent years, literally, trying to avoid settling, but Novell aggressively forced them to by their counterclaims, and so here we are, off to the races at last. In SCO's legalese: "These claims thus essentially relate to the same subject matter as Novell's counterclaims." Amen, brother.

If IBM wins, this all dies, of course, but hey, it doesn't hurt to try. Even a jockey who knows his horse doesn't stand a chance still has to ride the nag around the track when the bugle sounds.

Here's how the proposed Second Amended Complaint explains the part about the noncompetition clause:

118. In addition, under the specific terms and conditions set forth in the TLA and for the limited purpose of the TLA, SCO granted Novell a non-exclusive license to the technologies covered by SCO's copyrights in UNIX and UnixWare. Novell expressly covenanted not to use those technologies in a general-purpose operating system that competes with SCO's core application server products or in a product wherein that intellectual property constitutes a primary portion of the value of the product. Novell has infringed and is infringing SCO's copyrights by unsing, copying, reproducing, modifying, sublicensing, and distributing SCO's copyrighted intellectual property outside of the limited license provided by the TLA.

We have the Motion transcribed, thanks to the wonderful Steve Martin, but if anyone has time to do Exhibit A, the proposed Second Amended Complaint, that would be greatly appreciated. The most interesting part of it is Exhibit B:

EXHIBIT B

Novell's unauthorized copying in its use and distribution of SuSE Linux includes but is not limited to the appropriateion of the following data structures and algorithms contained in or derived from SCO's copyrighted material:

1. SuSE's implementation of the "Read/Copy/Update" algorithm
2. SuSE's implementation of NUMA Aware Locks
3. SuSE's implementation of the distributed lock manager
4. SuSE's implementation of reference counters
5. SuSE's implementation of asynchronous I/O
6. SuSE's implementation of the kmalloc data structure
7. SuSE's implementation of the console subsystem
8. SuSE's implementation of IRQs
9. SuSE's implementation of shared memory locking
10. SuSE's implementation of semaphores
11. SuSE's implementation of virtual memory
12. SuSE's implementation of IPC's
13. SuSE's implementation of load balancing
14. SuSE's implementation of PIDs
15. SuSE's implementation of numerous kernel internals and APIs
16. SuSE's implementation of ELF
17. SuSE's implementation of STREAMS
18. SuSE's implementation of dynamic linking
19. SuSE's implementation of kernel pre-emption
20. SuSE's implementation of memory mapping
21. SuSE's implementation of ESR
22. SuSE's implementation of buffer structures
23. SuSE's implementation of process blocking
24. SuSE's implementation of numerous header files

ELF again. Sheesh. How many times do we have to explain that to them? Anyway, time to go over the list with a fine-toothed comb, guys. Even if the judge were to refuse to allow them to amend their complaint, which at this early stage is unlikely, this list is very likely the same list we'll find in IBM.

Meanwhile, here's the heart of what they are hoping to ask for, followed by the Motion as text:

Alternative Breach of Contract Claim Seeking Specific Performance ...

107. In light of these continuing claims by Novell, SCO is entitled (as an alternative to its other claims for relief) to an order directing Novell to specifically perform its obligations under Sections 1.7(c), 4.9, and 4.12, by taking the actions necessary to effectuate the intended purposes of the APA and consummate the transactions contemplated therein.

108. In particular, SCO is entitled to an order directing Novell to execute documents (and take any other actions) necessary to transfer to SCO (a) the copyrights, and (b) the UNIX and UnixWare business, without subjecting any portion of that business, other than the SVRX binary royalty stream, to Sections 4.16, 1.2(b), and 1.2(f) of the APA....

116 Novell has infringed and continues to infringe SCO's copyrights by copying, reproducing, modifying, sublicensing, and/or distributing Linux products containing unauthorized contributions of SCO's copyrighted intellectual property.

117. Novell's unauthorized copying in its use and distribution of SuSE Linux includes but is not limited to the appropriation of numerous data structures and algorithms contained in or derived from SCO's copyrighted material. A partial listing of these data structures and algorithms is provided at Exhibit B.

V. PRAYER FOR RELIEF

Wherefore, Plaintiff SCO prays this Court enter judgment for SCO and against Novell: ...

3. granting preliminary and permanent injunctive relief (a) requiring Novell to assign to SCO any and all copyrights Novell improperly registerd in UNIX and UnixWare following the Asset Purchase Agreement: (b) preventing Novell from representing in any forum that it has any ownership interest whatsoever in those copyrights; and (c) requiring Novell to retract or withdraw all representations it has made regarding its purported ownership of the copyrights;

4. granting preliminary and permanent injunctive relief preventing Novell from copying, reproducing, modifying, sublicensing, and/or distributing SCO's UNIX and UnixWare;

5. ordering Novell, as an alternative, to specifically perform its obligations under the APA by taking the actions necessary to effectuate the purposes of the APA and consummate the transactions contemplated therein....

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

Brent O. Hatch (5715)
Mark F. James (5295)
HATCH, JAMES & DODGE
[address]
[phone]
[fax]

Robert Silver (admitted pro hac vice)
Edward Normand (admitted pro hac vice)
BOIES, SCHILLER & FLEXNER LLP
[address]
[phone]
[fax]

Stephen N. Zack (admitted pro hac vice)
BOIES, SCHILLER & FLEXNER LLP
[address]
[phone]
[fax]

Stuart Singer (admitted pro hac vice)
BOIES, SCHILLER & FLEXNER LLP
[address]
[phone]
[fax]

Attorneys for Plaintiff, The SCO Group, Inc.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION


THE SCO GROUP, INC.,
a Delaware corporation,

Plaintiff,

v.

NOVELL, INC.,
a Delaware corporation,

Defendant.

PLAINTIFF'S MOTION FOR
LEAVE TO FILE SECOND
AMENDED COMPLAINT

Case No. 2:04CV00139

Judge: Dale A. Kimball

1

Plaintiff, The SCO Group, Inc. ("SCO"), respectfully moves for leave to file a Second Amended Complaint (attached hereto as Exhibit A) pursuant to Federal Rule of Civil Procedure 15(a).

Under Rule 15, which governs the amendment of pleadings, "leave shall be freely given when justice so requires." "The liberal granting of motions for leave to amend reflects the basic policy that pleadings should enable a claim to be heard on its merits." Calderon v. Kansas Dep't of Soc. and Rehab. Servs., 181 F.3d 1180, 1185-86 (10th Cir. 1999) (citing Foman v. Davis, 371 U.S. 178, 182-83 (1962)). The liberal standard governing amendments is intended to "safeguard a plaintiff's opportunity to test" its "claims on the merits." Bauchman v. W. High Sch., 132 F.3d 542, 559 (10th Cir. 1997) (citing Foman, 371 U.S. at 182). The Court should grant leave to amend unless the non-moving party shows that the proposed amendment is unduly and inexplicably delayed, prompted by bad faith, would unduly prejudice the opposing party, or would be futile." Foman, 371 U.S. at 182; accord Las Vegas Ice and Cold Storage Co. v. Far W. Bank, 893 F.2d 1182, 1185 (10th Cir. 1990).

Where, as here, the motion to amend is filed even before any discovery has been produced, there is no undue delay, bad faith, or undue prejudice to the other side. See, e.g., FDIC v. Grant, 8 F.Supp. 2d 1275, 1288 (N.D. Okla. 1998) (granting motion to file second amended complaint "at a time when no discovery has taken place"); Mask v. Johnson, No. 96 Civ. 6167 (DC), 1997 WL 662337, at *2 (S.D.N.Y. Oct. 22, 1997) (attached hereto as Exhibit B)(granting motion where "no discovery has yet commenced in the case"); Taylor v. Florida State Fair Auth., 875 F. Supp. 812, 815 (M.D. Fla. 1995)(granting motion to amend where "[a]lthough the parties have completed the case management report, discovery has not yet commenced" and trial was not scheduled for over a year). See generally Atiya v. Salt Lake County, 988 F.2d 1013, 1018 (10th

2

Cir. 1993)(affirming district court's decision granting leave to amend where the amendment "did not occur on the eve of trial and did not delay a determination of the dispute").

In addition, during the course of their negotiation of the Attorneys' Planning Report that the parties submitted to the Court and which provided the basis for the Magistrate Judge's Case Management Order (Dec. 6, 2005) (attached hereto as Exhibit C), counsel for SCO informed counsel for Novell that SCO intended to file a second amended complaint (and counsel for Novell did not object). Indeed, the parties agreed in their Attorneys' Planning Meeting Report (Dec. 1, 2005) (attached hereto as Exhibit D) that "the cutoff date for amending pleadings is March 7, 2006." The Case Management Order provides that each party shall have until March 7, 2006, to file a motion to amend pleadings. Trial is scheduled for June 2007 almost eighteen (18) months from now.

SCO seeks leave to file a Second Amended Complaint in significant part in consideration of the counterclaims that Novell asserted in its Answer and Counterclaims (July 29, 2005) (attached hereto as Exhibit E). In that pleading, Novell brings seven causes of action: a claim for slander of title, two claims for breach of the Asset Purchase Agreement ("APA") between the parties, two claims for declaratory relief pursuant to the APA, a claim for restitution/unjust enrichment relating to the APA, and a claim for accounting under the APA. Novell's counterclaims thus significantly expand the scope of the litigation, such that it is sensible for SCO to add the new claims in the Second Amended Complaint, relating primarily to the APA and to Novell's conduct in connection with the parties' differing interpretations of that Agreement.

SCO's proposed Second Amended Complaint reasserts SCO's slander-of-title claim. In addition, in keeping with the expanded scope of the litigation, the Second Amended Complaint asserts the following claims:

3

  • Breach of contract based on Novell's violation of the non-compete provisions and covenant of good faith and fair dealing in the APA and related agreement with SCO, by, among other things, making unauthorized distributions of SCO's UNIX technology in competition with SCO's own UNIX offerings.

  • An alternative breach-of-contract claim seeking specific performance of Novell's obligations under the APA (which transferred the UNIX business and technology to SCO, including the associated copyrights) to take any action necessary to effectuate the purposes of that Agreement and consummate the transactions contemplated therein.

  • Copyright infringement based on, among other things, Novell's' unauthorized distribution, in its Linux offerings, of UNIX technology outside of the limited license by which SCO's predecessor licensed back to Novell the UNIX technology it transferred to SCO pursuant to the APA.

  • Unfair competition based on, among other things, Novell's' false claims of copyrights and ownership in UNIX; misappropriation of UNIX technology in Linux; and wrongful attempts to thwart SCO's claims and rights to enforce its UNIX intellectual property.

These claims thus essentially relate to the same subject matter as Novell's counterclaims. See, e.g., LeaseAmerica Corp. v. Eckel, 710 F.2d 1470, 1474 (10th Cir. 1983) (no prejudice where te amended complaint referred "to the same chattels, the same consideration, and the same transaction" already at issue in the case); Kreinik v. Showbran Photo, Inc., No. 02 Civ. 1172 (RMB)(DF), 2003 WL 22339268, at *10 (S.D.N.Y. Oct. 14, 2003) (attached hereto as Exhibit F) (plaintiff's amendment would not cause the defendant any prejudice where those claims relate to the defendant's counterclaims). SCO respectfully submits, moreover, that all of the previous and new claims in its Second Amended Complaint are well pleaded, not futile.

4

SCO respectfully submits that, under the circumstances, the Court should grant SCO's motion for leave to file the Second Amended Complaint.

Dated this 30th day of December, 2005.

By: (signature of Mark F. James)
HATCH JAMES & DODGE
Brent O. Hatch
Mark F. James

BOIES, SCHILLER & FLEXNER LLP
Stephen N. Zack
Robert Silver
Stuart Singer
Edward Normand

Attorneys for Plaintiff

5

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on this 30th day of December, 2005, I caused to be mailed a true and correct copy of the foregoing via first class U.S. Mail, postage prepaid, to the following:

Thomas R. Karrenberg
John P. Mullen
Heather M. Sneddon
ANDERSON & KARRENBERG
[address]

Michael A. Jacobs
Ken W. Brakebill
MORRISON & FOERSTER
[address]

(signature of Mark F. James)

6


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