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To read comments to this article, go here
Order from 12/20/05 Hearing - No 100% Transfers of Business in Novell to SC or SC to Caldera
Monday, March 20 2006 @ 12:57 PM EST

Here's the Order [PDF] by Magistrate Judge Brooke Wells from the hearing on December 20, 2005 on IBM's motion to compel a recalcitrant SCO to hand over what SCO claimed were privileged materials and on SCO's New Renewed Motion to Compel Discovery. We know the outcome, because Judge Wells announced her decisions on both motions at the hearing from the bench. But now we have it in writing. IBM won its motion, and the order includes the following priceless gem:
1. In the Novell to Santa Cruz transaction, Novell did not transfer to Santa Cruz the entirety of Novell's business;
2. In the Santa Cruz to Caldera transaction, Santa Cruz did not transfer to Caldera the entirety of Santa Cruz's business;

I say priceless, because that is the big buh-bye to SCO's attempt to get the UNIX SYSTEM LABORATORIES trademark based on their bold assertion that there was a complete continuity of business from AT&T to SCO.

You'll recall their application read like this, in part:

Because UNIX SYSTEM LABORATORIES is now part of the Applicant, this trademark should be sent on to publication. In 1992, Novell purchased UNIX SYSTEM LABORATORIES and all of the UNIX assets, including all trademarks owned by UNIX SYSTEM LABORATORIES. In 1995, The Santa Cruz Operation, Inc. purchased all of the UNIX assets from Novell. As part of the transaction, Novell assigned the UNIX and UNIXWARE trademarks to The Santa Cruz Operation. In 2001, The Santa Cruz Operation completed the sale of, inter alia, the UNIXWARE technologies to Caldera Systems, Inc. Caldera subsequently changed its name to The SCO Group. Because of this, the mark should be allowed to go on to publication.

Judge Wells has ruled that this is not the case. I have no doubt that the Open Group will make sure that this Order reaches the USPTO.

There likely will be implications for SCO from this Order in every lawsuit they have pending, I would guess, except DaimlerChrysler maybe, because they've told the same story across the board. For example, the AutoZone complaint claims:

11. Through a series of corporate acquisitions, SCO presently owns all right, title and interest in and to UNIX and UnixWare operating system source code, software and sublicensing agreements, together with copyrights, additional licensing rights in and to UNIX and UnixWare, and claims against all parties breaching such agreements....

18. SCO and its predecessors in interest created the Copyrighted Materials as original works of authorship, and, as such, the Copyrighted Materials constitute copyrightable subject matter under the copyright laws of the United States.

Maybe. Maybe not. The burden is now on SCO to prove exactly what they got, in the face of an order that clearly says they did not get everything. SCO used similar language and more in the Second Amended Complaint against IBM. But now, it is all very much on the table. I notice that in SCO's Answer to Novell's Counterclaims, after repeating similar language, SCO says this:

15. Admits that, to help bridge the gap between the purchase price of the UNIX business and the price Santa Cruz could afford, the parties agreed to a narrow exception to the complete transfer of the UNIX business; that pursuant to this exception Novell retained the right to continue receiving royalties that SCO collected from then-existing SVRX licensees for their distribution of binary (object) code versions of System V products pursuant to sublicensing agreements; and that Novell retained the right to conduct audits, and direct Santa Cruz to take certain actions, to protect that future binary royalty stream. SCO, however, denies each and every other allegation of 15; and to the extent 15 purports to state a legal conclusion, states that no response is required.

So, judging from that paragraph, did they know Novell didn't transfer everything to Santa Cruz? It seems obvious to me. Now it's official and the judge has ruled that not everything transferred. Why they imagined they could tell a story like that to the Trademark Office and the court is hard to fathom.

So, one fib down and some more to go.

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

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

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

Attorneys for Defendant/Counterclaim-Plaintiff
International Business Machines Corporation

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH

______________________________

THE SCO GROUP, INC.,

Plaintiff/Counterclaim-Defendant,

v.

INTERNATIONAL BUSINESS MACHINES
CORPORATION,

Defendant/Counterclaim-Plaintiff.

________________________________

ORDER

Civil No. 2:03CV0294DAK

Honorable Dale A. Kimball

Magistrate Judge Brooke C. Wells

On December 20, 2005, Defendant/Counterclaim-Plaintiff International Business Machines Corporation ("IBM's") Motion to Compel Production of Documents from SCO's Privilege Log (Docket No. 514) and Plaintiff/Counterclaim-Defendant The SCO Group, Inc.'s ("SCO") New Renewed Motion to Compel Discovery (Docket No. 537) came on for hearing before this court. Ted Normand and Brent Hatch appeared for SCO. David Marriott and Todd Shaughnessy appeared for IBM. Based upon the memoranda, exhibits, and the arguments of counsel, and good cause appearing, the Court hereby orders as follows:

A. IBM's Motion to Compel Production of Documents from SCO's Privilege Log (Docket No. 514):

With regard to IBM's Motion to Compel the Production of Documents from SCO's Privilege Log, the Court finds as follows:

1. In the Novell to Santa Cruz transaction, Novell did not transfer to Santa Cruz the entirety of Novell's business;

2. In the Santa Cruz to Caldera transaction, Santa Cruz did not transfer to Caldera the entirety of Santa Cruz's business;

3. The declaration of Mr. Broderick is insufficient, by itself, to establish continuity of the business, and Mr. Broderick's declaration is contrary to statements made by him during his deposition;

4. SCO has not carried its burden of showing a sufficient continuity of the business; and

5. Any attorney-client privilege or work product protection that may have existed with respect to the documents on SCO's privilege log that were identified by IBM as part

2

of its motion, was waived in connection with either or both the Novell to Santa Cruz and Santa Cruz to Caldera transactions.

Accordingly, it is HEREBY ORDERED that IBM's motion is granted. SCO shall produce to IBM the documents at issue no later than January 6, 2006.

B. SCO's New Renewed Motion to Compel (Docket No. 537):

With regard to SCO's New Renewed Motion Compel, Docket No. 537, the Court finds as follows:

1. IBM has acted in good faith in terms of its reasonable search for documents as they relate to Mr. Palmisano and Mr. Wladawsky-Berger; and

2. The Court's March 3, 2004, Order Regarding SCO's Motion to Compel Discovery and IBM's Motion to Compel Discovery should have explicitly indicated that IBM undertake a reasonable search for responsive documents from the files of Paul Horn and Nick Bowen;

3. Accordingly, SCO's motion is granted in part and denied in part, as follows:

IT IS HEREBY ORDERED that IBM provide declarations from Paul Horn and Nick Bowen regarding the nature of the search that has been conducted with respect to the documents in their files, and that such declarations be filed no later than January 6, 2006;

IT IS FURTHER ORDERED that SCO may take the depositions of Messrs. Horn and Bowen on this topic, and such depositions shall not count against the 50 depositions SCO is permitted under the Court's prior orders; and

IT IS FURTHER ORDERED that except as set forth above, SCO's New Renewed Motion to Compel is DENIED.

3

DATED this 10th day of March, 2006.

BY THE COURT

___[signature]____
U.S. Magistrate Judge
Brooke C. Wells

APPROVED AS TO FORM AND CONTENT:

HATCH, JAMES & DODGE, P.C.
Brent O. Hatch
Mark F. James

By /s/Brent O. Hatch
Counsel for Plaintiff/Counterclaim-Defendant

4

CERTIFICATE OF SERVICE

I hereby certify that on the 9th day of March, 2006, a true and complete copy of the foregoing was sent by U.S. Mail, postage prepaid, to the following:

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

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

Robert Silver
Edward Normand
BOIES, SCHILLER & FLEXNER LLP
[address]

By /s/ Todd M. Shaughnessy

5


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