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The SCO Attempt to Amend its Novell Complaint - Why Now?
Saturday, January 07 2006 @ 11:05 AM EST

The media is beginning to react to SCO's request to the court to amend its complaint against Novell to include a copyright infringement claim and some contract-related claims. For example, here is Matthew Aslett's very thorough account, and here's Stephen Shankland's. Why now, everyone is asking?

For example, in Shankland's article, he quotes an attorney who is deeply puzzled and wonders if SCO will even be allowed to do it:
"It doesn't make sense, unless the strategy was to bring added pressure on Novell to settle," said Brian Ferguson, an intellectual property attorney with McDermott, Will & Emery who has been monitoring the SCO case. "Usually you have your claims well put together before you bring the lawsuit."

Trying to add the new claims won't be easy, he added. "They're going to have a very long row to hoe to prove to the court that they should be able to amend the complaint to add these claims when they could have and should have been brought when they filed the original lawsuit," Ferguson said. "Most courts do not look favorably on this type of action."

I had written I thought the request would be granted, because the Novell litigation is still in the early phase (it just feels like it's been going on forever, but mostly what's happened so far has been motion practice) but I generally bow to contrary opinions by lawyers, unless SCO is paying them, or at least highlight them, so I thought I should include that quotation here, so you know it looks like I may be wrong.

I believe I can shed light on this mystery of why now, though, thanks to a recent survey by Merrill Lynch, reported by Heise:

11 percent of CIOs said that vendors had either pointed out to them the legal risk supposedly inherent in the use of Linux or used this alleged fact, most frequently in the case of Microsoft (7 percent), to try and put pressure on them.

So, we can call a spade a spade, thanks to Merrill Lynch: Microsoft is apparently using the litigation to advance its own software in a very ugly way. Questions about antitrust violations flood my brain. What does it mean, Microsoft used the supposed legal risk to "try and put pressure on them"? I don't believe it means pressure to buy their software. If any of you know more details about what kind of pressure Microsoft is trying to bring to bear, Groklaw is interested in knowing more details. I've heard rumors, but it would be useful to have concrete facts. Of course, now that Merrill Lynch has published the survey, any party to litigation that has an interest in the subject of any Microsoft involvement in the SCO litigation could just go to Merrill Lynch and start sending subpoenas, I would imagine.

But anyway, the longer it takes, the more Microsoft benefits, I gather, or at least that is the proposition. SCO may be committing suicide by litigation, but someone else is trying to benefit, according to these CIOs. Whether Microsoft helped plan everything, or just saw an opportunity and hitched a ride en route, or are keeping SCO going with money transfusions is yet to be known, but in time, it is likely to all come out. What we now know for sure, though, is that CIOs are reporting Microsoft is trying to benefit from the "legal uncertainty" regarding Linux, an "uncertainty" created -- apparently out of thin air, from all I can see -- by SCO. What isn't going to show up in the survey, I suspect, are all the times Microsoft succeeded in making sales that way.

So SCO has now thrown up in the air some new claims against Novell. And this is going to take a while. The new claims are in a case that won't be decided for a long time, since discovery in that case has just begun. Remember the extended discovery in the IBM litigation? Get it now? In the IBM case, SCO eventually ran into a judge's astonishment at a lack of evidence for copyright infringement claims, and I don't doubt the Novell case will end the same way, but in the meantime, for the two years or whatever it takes to get to the end of discovery, the claims float in the air, and CIOs will get pressured.

Is it working? Not according to the Merrill Lynch survey:

A survey among 75 CIOs (Chief Information Officers) from the United States and 25 from Europe undertaken by Merrill Lynch seems to indicate that the legal wrangling surrounding Linux is unable to dent the success of the open-source system. Although more than half the number of persons questioned said they were unsure whether legal uncertainties with regard to Linux obtained or not, a good 80 percent of them said that this legal state of affairs constituted no obstacle to their application of the system.

If the PIPE Fairy reads this survey that shows CIOs are overwhelmingly not buying into the "legal uncertainty" message, will she stop leaving money under SCO's pillow?

Lamlaw has an interesting take:

Nothing is getting easier here for SCO.  There are reasons why this course of action was not first taken by SCO lawyers.  Maybe they (SCO lawyers) thought they could not prove they had the copyrights.  Do you suppose?  Maybe they (SCO lawyers) thought they would not be successful in getting a court to order Novell to assign SCO the copyrights.  Do you suppose?  Maybe they (SCO lawyers) thought that SCO management would not pay them the millions upfront without some showing of how SCO is going to increase their revenue fairly quickly.  Do you suppose?  After all the extortion plan promised an immediate increase in revenue without having to prove anything at all.  Maybe they (SCO lawyers) thought that creating a real stink in the courts would precipitate a juicy settlement without the associated obligation to prove basis rights.  Do you suppose?

And now Novell will be asking the court to set aside $30-40 million just in case Novell is right about those license revenues.  SCO management has often said they have enough money to pay their lawyers.  But they have not said they have enough to pay Novell the license fees it is due plus their lawyers.  Sounds like insolvency to me.


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