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A Chart of Novell's Counterclaims and SCO's Reply
Saturday, May 20 2006 @ 01:47 PM EDT

Here's the chart I told you I was working on of Novell's Counterclaims matched with SCO's Reply to Novell's Counterclaims [PDF], paragraph by paragraph. The Counterclaims are taken from Novell's Answer to SCO's Second Amended Complaint and Counterclaims, and they are found after paragraph 149. The numbering then begins again with 1 for the counterclaims.

I see a couple of interesting things, and I'm only up to paragraph 7. As you will see, I think Novell is saying that the USL to Novell deal was not a 100% transfer. This might impact on SCO's right to sue over the Sequent license. It's a bit complicated to explain but if you hang in there for the complete explanation, I'll try to explain what I think I see.

You know how we've seen that Boies Schiller fights hard over every little detail? I see that Novell's attorneys are the same. They raise every possible issue, missing no detail whatsoever. Lawyers have a choice. They can choose to battle over what they think matters most and let some lesser points slide, or they can sink their teeth into everything and give up nothing at all without a fight. Here I'm seeing two bulldogs. So this should be some battle of the titans.

The SCO litigation is endlessly fascinating to me. Just when I think everything's been said -- with the exception of what specific code SCO is talking about, of course, which we never seem to get to -- something new pops up.

First, though, in paragraph 3, we see that SCO is not admitting Novell's assertion that the UnitedLinux agreements require arbitration of certain claims. SCO was supposed to file its response to Novell's Motion to Stay Claims Raising Issues Subject to Arbitration and its Motion for a More Definite Statement on Friday, and I have no doubt they did, but it's not in Pacer yet. That doesn't mean they didn't file it. Novell filed a document in early April, for example, that didn't show up until May, so there can be a time lag between filing with the court and a document showing up in Pacer. But clearly, from this document, we see a hint that SCO is going to oppose the stay and the arbitration.

Paragraph 7

Now to the interesting detail in paragraph 7, where Novell says this:

In 1993 AT&T sold its UNIX assets, held by its subsidiary UNIX System Laboratories ("USL"), to Novell. This transfer of assets to Novell included UNIX copyrights, trademarks and all active UNIX licensing agreements, including contracts relating to the most recent versions of the UNIX operating system called UNIX System V. At the time there had been several major releases of System V, including Releases 1, 2, 3 and 4, also referred to as SVR1, SVR2, SVR3 and SVR4, or generically as SVRx.

I see two things. First, it says UNIX copyrights transferred; it doesn't say *all* UNIX copyrights transferred. And it says "active UNIX licensing agreements" were included in the transfer. SCO disagrees that only "active" UNIX licensing agreements passed from AT&T's subsidiary USL to Novell. Why might this matter? It may indicate that Novell's position is that AT&T may have retained some interest here, which could impact on SCO's right to enforce certain licensing agreements. SCO's assertion in its Second Amended Complaint in SCO v. IBM is that the AT&T-Novell deal was a total transfer and that is where it gets its right to sue:

47. During or about 1993, SCO's predecessor in interest, Novell, Inc. ("Novell"), acquired from AT&T all right, title and interest in and to the UNIX software code, the AT&T Software and Sublicensing Agreements, the copyrights and related and ancillary products. For branding purposes, Novell renamed UNIX as "UnixWare."

Novell is here indicating that it plans to prove that this is not the case. SCO also claimed in that complaint that the Novell to SCO transfer was a 100% transfer, but Magistrate Judge Brooke Wells has already ruled that it was not and that the SCO to Caldera transaction wasn't either. Now Novell is indicating that neither was the AT&T(USL)-to-Novell deal, that only "active" license agreements transferred. I don't remember seeing that issue raised before in this litigation.

Copyright Issues

We know there is an issue over copyright ownership, with both Novell and SCO filing more or less identical copyright registrations. But to this day, the US Copyright Office still lists Unix System Laboratories as the Claimant and American Telephone & Telegraph Company as the Author of the copyright for TXu-510-028, for UNIX, 5th edition, "Computer program; with programmer's manual by K. Thompson, D. M. Ritchie." The title on the application is "UNIX operating system," created in 1973 and registered in 1992. Did this copyright transfer to Novell or not?

The earliest copyright I see Novell registered is for System V, release 2, judging from their page listing their copyright registrations. Novell and SCO are asserting identical copyright registrations, but what about the listed AT&T copyright? Here it is as a PDF, but you can search the Copyright Office by Registration Number TXu-510-028 and you'll find it for yourself. 6th edition is TXu--511-236. Or search for TXu-301-868 and see what you find, or for "Unix operating system". There are others listed on Groklaw's Contracts page in the copyrights section. AT&T/USL are listed for the copyright for TXu-516-704, UNIX operating system, Ed. 32V and for TXu-516-705, UNIX operating system, Ed.7 too.

This falls in the Holy Methods and Concepts category, and I hope one of you will take the time to put these copyrights and manuals into our Unix Books methods and concepts database. But it also raises the issue of whether the AT&T/USL-Novell deal transferred everything or not. Novell is saying not, and SCO says it did. These copyright registrations tilt more toward Novell's position, I'd say.

Right to Enforce

But this dispute in paragraph 7 raises a different issue. SCO, in its Second Amended Complaint in the IBM litigation says that its right to sue IBM stems from the following:

31. SCO is the sole and exclusive owner of all Software and Sublicensing Agreements that control use, distribution and sublicensing of UNIX System V and all modifications thereof and derivative works based thereon. SCO is also the sole and exclusive owner of copyrights related to UNIX System V source code and documentation and peripheral code and systems related thereto.

If they don't have any rights to enforce licenses regarding earlier versions of UNIX on contracts that did not pass to Novell, it could matter very, very much. To illustrate, you'll remember that IBM's original license was entered into in 1985 for System V, version 2.0 and in 1989, the parties worked out a letter agreement for System V release 3.1, as you can see from this letter agreement [PDF], and then Amendment X brought it up to 3.2, so theoretically, just looking at the facts to this point, it could impact whether SCO has any rights of enforcement regarding the original agreement. However, in the case of IBM, I don't think AT&T retained the IBM agreements, because in Amendment X, signed by SCO, Novell and IBM in October of 1996, the recitals include the following:

AT&T Technologies, Inc. ("AT&T") and IBM entered into various software license agreements concerning the Software Product: UNIX System V, Release 3.2, which are Software Agreement SOFT-00015 as amended, Sublicensing Agreement SUB-00015A as amended, Software Agreement SOFT-00015 Supplement No. 170 as amended (or any other Supplements that pertain to prior versions or releases of the Software Product), and Substitution Agreement XFER-00015B (the "Related Agreements"). Novell acquired AT&T's rights under the Related Agreements. In an agreement between Novell and SCO dated September 19, 1995 (the "Asset Purchase Agreement"), SCO purchased, and Novell retained, certain rights with respect to the Related Agreements.

However, while it wouldn't help IBM regarding its license, it could impact on SCO's rights to enforce the Sequent licenses, I think, and since most of SCO's surviving claims in its Second Amended Complaint relate to Sequent's Dynix, referencing these very documents, this detail could prove significant indeed. Is there any proof that Sequent's 1985 contract [PDF] was later transferred to Novell? Paragraph 7 raises that question, and I think SCO will now have to try to prove that it did. Sequent had a 1983 agreement for System V, release 2.0, as you can see by the reference in this Substitution Agreement dated January 1986 [PDF]. Perhaps the 1985 agreement brought it up to 3.X. The document we have doesn't indicate. But my understanding is that Sequent's NUMA code is derived from BSD, not System V, and BSD, after the USL-UCal Regents settlement agreement in 1994 was freely available. Sequent and IBM merged in the fall of 1999, which is after the USL-Novell 1993 asset transfer, but the question I see, taken from Novell's paragraph 7, is: was the Sequent license on the early releases still "active" and hence part of the transfer? Or not? I have no idea, but in this little detail, I see a world of possibilities.

You may notice the wording SCO uses at the beginning, "Admits, based on the Court's Order dated June 9, 2004, that the Court has jurisdiction over SCO's Second Amended Complaint..." and again admits jurisdiction over the counterclaims. If you'd like to read that order, here it is. It denied SCO's motion to remand the case to state court.

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

Novell Counterclaims SCO Reply

PARTIES
1 Counterclaim-plaintiff Novell, Inc. ("Novell") is a Delaware corporation that was incorporated in 1983. Its headquarters and principal executive offices are located in Waltham, Massachusetts. Novell's principal product development facility is located in Provo, Utah. Novell also has offices in numerous cities worldwide. Admits the allegations of ¶ 1, except denies knowledge sufficient to form a belief as to the truth of the allegations of the third sentence of ¶ 1.
2 Counterclaim-defendant The SCO Group, Inc. ("SCO") is a Delaware corporation with its principle place of business in Utah County, State of Utah. Admits the allegations of ¶ 2.

JURISDICTION
3 This Court has original jurisdiction over SCO's Second Amended Complaint pursuant to 28 U.S.C. §§ 1331 and 1338(a). However, SCO's copyright claim raises issues subject to arbitration under the contracts the SCO's alleged predecessor-in-interest, Caldera, signed in May 2002 in becoming a member of UnitedLinux (the "UnitedLinux agreements"). The Court should not exercise its jurisdiction until after these issues are finally adjudicated by arbitration. In this regard, Novell has simultaneously filed a motion to stay these proceedings, pursuant to the Federal Arbitration Act. Admits, based on the Court's Order dated June 9, 2004, that the Court has jurisdiction over SCO's Second Amended Complaint; admits that Caldera signed certain UnitedLinux agreements in becoming a founding member of UnitedLinux in May 2002; admits that on April 10, 2006, Novell re-filed its Counterclaims and filed a motion to stay these proceedings; denies each and every other allegation of ¶ 3; and to the extent ¶ 3 purports to state a legal conclusion, states that no response is required.
4 This Court has jurisdiction over Novell's counterclaims pursuant to 28 U.S.C. § 1331 (federal question), 28 U.S.C. § 1338(a) (arising under the Federal Copyright Act), 28 U.S.C. § 1367(a) (supplemental jurisdiction) and 28 U.S.C. §§ 2201(a) and 2202 (declaratory judgement). Novell's slander of title claim involves questions of, and arises under, federal law. This Court has supplemental jurisdiction over Novell's state law claims of breach of contract, accounting, restitution and slander of title. Admits, based on the Court's Order dated June 9, 2004, that the Court has jurisdiction over Novell's counterclaims.

VENUE
5 Venue is proper in this judicial district pursuant to 28 U.S.C. §§ 1391(b), 1391(c) and 1400(a), in that SCO resides or may be found in this district and is subject to personal jurisdiction in this district, except that venue is not proper for those SCO claims that raise issues subject to arbitration under the UnitedLinux agreements signed by Caldera in May 2002. Admits that venue is proper in this judicial district for the reasons set forth in ¶ 5; and to the extent that ¶ 5 purports to state a legal conclusion, states that no response is required.

FACTS

A. UNIX
6 UNIX is the name of a computer operating system originally developed beginning in the late 1960s by a group of software engineers at AT&T's Bell Laboratories. Over time, AT&T licensed its UNIX family of operating systems to universities, corporations, other entities and individuals. Admits the allegations of ¶ 6.
7 In 1993 AT&T sold its UNIX assets, held by its subsidiary UNIX System Laboratories ("USL"), to Novell. This transfer of assets to Novell included UNIX copyrights, trademarks and all active UNIX licensing agreements, including contracts relating to the most recent versions of the UNIX operating system called UNIX System V. At the time there had been several major releases of System V, including Releases 1, 2, 3 and 4, also referred to as SVR1, SVR2, SVR3 and SVR4, or generically as SVRx. Admits the allegations of ¶ 7, except denies the allegations that AT&T transferred to Novell only "active" UNIX licensing agreements.

B. Linux
8 Linux is the name of a computer operating system, originally developed beginning in the early 1990s when Linus Torvalds, an undergraduate student at the University of Helsinki, began writing the Linux kernel, or the core of the Linux operating system. He released the first version of the Linux kernel on the Internet in 1991. Since then, thousands of software programmers around the world have engaged in a collaborative effort to further develop Linux. Admits that Linus Torvalds purportedly developed the Linux operating system by consulting and referring to other materials; admits that numerous other parties have also contributed to Linux, including parties who wrongfully contributed SCO's UNIX intellectual property; but denies information or knowledge sufficient to form a belief as to the truth of each and every other allegation of ¶ 8.
9 Linux was developed as open-source software and has become a popular alternative to proprietary operating systems. Unlike with other major operating systems, the underlying source code of Linux is available to the public. Admits the allegations of the first sentence of ¶ 9, but denies the second sentence of ¶ 9 to the extent it alleges that SCO intellectual property in Linux is legally and properly available to the public.

C. The Asset Purchase Agreement Between Novell and The Santa Cruz Operation, Inc.
10 In 1995, Novell and a company called The Santa Cruz Operation, Inc. ("Santa Cruz") entered into negotiations over the sale of certain business assets of Novell relating to its UNIX and UnixWare software products. Admits that in 1995, Novell ("Seller") and The Santa Cruz Operation, Inc. ("Santa Cruz") entered into negotiations resulting in the transfer to Santa Cruz of "all of Seller's right, title and interest in and to the assets and properties of Seller relating to the [UNIX and UnixWare] Business" (the "UNIX business"), including the copyright in UNIX and UnixWare; but denies each and every other allegation of ¶ 10.
11 Santa Cruz was a California corporation that was incorporated in 1979. It was founded as a UNIX system porting and consulting company and began to ship its first product, a packaged version of the UNIX operating system, in 1983. In 1993 Santa Cruz completed an initial public offering and became a publicly-listed company on the NASDAQ Stock Exchange. Admits that Santa Cruz was founded and operated as a UNIX development, porting, distribution, support, and consulting company; and admits the other allegations of ¶ 11.
12 On September 19, 1995, Novell and Santa Cruz executed an Asset Purchase Agreement ("APA"). The APA provided each party with certain rights and obligations. Admits the allegations of ¶ 12.
13 The parties entered into two Amendments to the APA. On December 6, 1995, Novell and Santa Cruz executed "Amendment No. 1." Novell and Santa Cruz subsequently executed "Amendment No. 2" on October 16, 1996. Admits the allegations of ¶ 13.
14 Under the APA and its Amendments, Santa Cruz obtained a variety of assets, including assignment of tens of thousands of contracts and licenses, various trademarks, source code and binaries to UnixWare products, and physical assets such as furniture and personal computers. Santa Cruz also obtained the right to develop a "Merged Product," a derivative work that would run on Intel platforms. Admits that the APA transferred to Santa Cruz "all of Seller's right, title and interest in and to the assets and properties of Seller relating to the [UNIX and UnixWare] Business," including (among other things) the copyrights in UNIX and UnixWare, the assignment of thousands of contracts and licenses, source code and binary code to UNIX and UnixWare; and the other assets listed in the first sentence of ¶ 14; admits that Santa Cruz agreed to complete (subsequent to the transaction set forth in the APA) a "Merged Product" for the Intel platform; but denies each and every other allegation of ¶ 14.
15 Santa Cruz did not have the financial capacity to pay the purchase price contemplated by Novell for these acquired assets and rights. In order to bridge the price gap and consummate the transaction, Novell and Santa Cruz agreed that Novell would receive Santa Cruz stock and retain certain rights as protection. For example (and as discussed further below), Novell retained the right to receive royalty payments under SVRX licenses, prior approval rights relating to new SVRX licenses and amended SVRC licenses, the right to direct Santa Cruz to take certain actions relating to SVRX licenses and the right to conduct audits of the SVRX license program. Santa Cruz assumed several related obligations. 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 then collected from then-existing SVRX licenses 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 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.
16 One such obligation that Santa Cruz assumed under the APA was responsibility for administering the collection of royalty payments from SVRX licenses. The APA provided that Santa Cruz shall collect and pass through to Novell 100% of the SVRX royalties. In return, Novell agreed to pay Santa Cruz an administrative fee of 5% of those royalty amounts. Santa Cruz also agreed to pay additional royalties relating to other products. Admits the allegations of the first three sentences of ¶ 16 to the extent those allegations refer only to the SVRX binary royalty stream (as described in ¶ 15, above); and admits the allegations of the last sentence of ¶ 16.
17 Novell retained certain assets under the APA. Schedule 1.1(b), which lists "Excluded Assets" under the agreement, specifies that Novell retained "all copyrights and trademarks, except for the trademarks UNIX and UnixWare," "all patents," and "all right, title and interest to the SVRX Royalties, less the 5% fee for administering the collection thereof." Admits the allegations of ¶ 17, except denies the allegation that Novell retained, or that the parties to the APA intended for Novell to retain, the copyrights in UNIX and UnixWare under Schedule 1.1(b) or any other schedule or provision of the APA.
18 Novell also retained rights to supervise Santa Cruz's administration of SVRX licenses. Novell retained the "sole discretion" to direct Santa Cruz to amend, supplement, modify, waive or assign any rights under or to the SVRX licenses; if Santa Cruz fails to take any such action, the APA specifically granted Novell the right to take these actions on behalf of Santa Cruz. Novell retained the right to veto Santa Cruz's attempts to amend SVRX licenses, subject to two exceptions, as noted below. Novell also retained the right to veto Santa Cruz's attempts to enter into new SVRX licenses, subject to one exception, as noted below. Admits that Novell retained certain rights to audit Santa Cruz's administration of the SVRX binary royalty stream; denies each and every other allegation of ¶ 18; and to the extent ¶ 18 purports to state a legal conclusion, states that no response is required.
19 The APA gave Novell the right to confirm Santa Cruz's compliance with its contractual obligations under the SVRX licensing program. The APA explicitly provided that Novell "shall be entitled to conduct periodic audits" of Santa Cruz "concerning all royalties and payments due to Seller hereunder or under the SVRX Licenses." The APA required Santa Cruz to "diligently seek to collect all such royalties, funds and other amounts when due" and to "investigate and perform appropriate auditing and enforcement." The APA also required Santa Cruz to provide Novell monthly reports detailing the SVRX royalties it received. Admits the allegations of ¶ 19 only to the extent they refer to the rights and obligations of the parties with respect to the SVRX binary royalty stream (as described in ¶ 15, above).
20 Novell and Santa Cruz were the only parties to the APA and its Amendments. SCO was not a party to the APA or its Amendments. SCO was originally incorporated on August 21, 1998 as a company called Caldera Systems, a developer and provider of Linux-based business solutions. SCO purports to be the successor in interest to Santa Cruz under the APA and its Amendments. This dispute is about Novell's rights under the APA and whether SCO breached its obligations as the alleged successor of Santa Cruz. Admits the allegations of the first three sentences of ¶ 20, but denies each and every other allegations of ¶ 20.
21 D. Novell's Ownership of the UNIX Copyrights
The APA transferred certain assets from Novell to Santa Cruz. However, as specified by Section V.A of Schedule 1.1(b) to the APA, certain assets were excluded from the transfer. Among the "Excluded Assets" from the APA asset transfer were "[a]ll copyrights and trademarks, except for the trademarks UNIX and UnixWare."
D. Novell's Alleged Ownership of the UNIX Copyrights
Admits that the APA transferred to Santa Cruz all of Novell's right, title, and interest in and to Novell's assets and properties relating to the UNIX business; admits that certain limited assets were excluded from the transfer, but denies each and every other allegation of ¶ 21, including the allegation that the APA did not transfer to Santa Cruz the copyrights in UNIX and UnixWare.
22 The APA as executed on September 19, 1995 therefore does not transfer any copyrights. Denies the allegations of ¶ 22; and to the extent ¶ 22 purports to state a legal conclusion, states that no response is required.
23 Novell and Santa Cruz later executed Amendment No. 2 to the APA. Amendment No. 2 modifies Section V.A of Schedule 1.1(b) to provide that Excluded Assets include:

All copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the Agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies.

Admits that Novell and Santa Cruz executed Amendment 2 to the APA; and to the extent ¶ 23 purports to state a legal conclusion, states that no response is required.
24 Neither Amendment No. 2 nor the APA as modified by Amendment No. 2 were intended to, nor do they actually, transfer ownership of the UNIX or UnixWare copyrights owned by Novell at the time of the APA and its Amendments ("UNIX Copyrights"). Denies the allegations of ¶ 24; and to the extent ¶ 24 purports to state a legal conclusion, states that no response is required.
25 Neither Amendment No. 2 nor the APA as modified by Amendment No. 2 qualify as "an instrument of conveyance, or a note or memorandum of the transfer" under 17 U.S.C. § 204(a) for at least the following reasons:
a. Amendment No. 2 merely amends the schedule of excluded assets and therefore does not, itself, constitute a transfer of any asset.

b. Neither Amendment No. 2 nor the modified APA identifies "the copyrights and trademarks owned by [Novell] as of the date of the Agreement required for Santa Cruz to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies."

c. Neither Amendment No. 2 nor the modified APA contains any language suggesting a contemporaneous transfer of any copyright. To the contrary, the APA provides only that certain assets "will" be transferred.

d. Neither Amendment No. 2 nor the modified APA provides a date for any purported transfer of copyrights.

Denies the allegations of ¶ 25 (including the subparagraphs a-d); and to the extent ¶ 25 (including subparagraphs a-d) purports to state a legal conclusion, states that no response is required.
26 Title to the UNIX Copyrights therefore remains with Novell. Denies the allegations of ¶ 26; and to the extent ¶ 26 purports to state a legal conclusion, states that no response is required.
27 By and during early 2003, SCO repeatedly asked Novell to transfer the UNIX Copyrights to SCO. In doing so, SCO conceded that title to the UNIX Copyrights remains exclusively with Novell. Novell rejected all of SCO's requests. Denies the allegations of ¶ 27.

E. The Sale of Certain Santa Cruz Assets to Caldera Systems
28 During the second quarter of its fiscal year 2000, Santa Cruz restructured its business into three divisions: the Server Software division, the Professional Services division and the Tarantella division. The Server Software division included Santa Cruz's UNIX-related business. Admits the allegations of ¶ 28.
29 On August 1, 2000, Santa Cruz entered into an agreement with Caldera Systems, under which Caldera Systems acquired Santa Cruz's Server Software and Professional Services divisions. With the acquisition, Caldera Systems planned to add Santa Cruz's UNIX server solutions and services to its Linux business. Admits the allegations of the first sentence of ¶ 29, but denies each and every other allegation of ¶29.
30 On May 7, 2001, pursuant to an amendment to the agreement between Santa Cruz and Caldera Systems, Caldera International ("Caldera") was formed as a holding company to own Caldera Systems, including the assets, liabilities and operations of Santa Cruz's Server Software and Professional Services divisions. Admits the allegations of ¶ 30.
31 F. Caldera's Financial Woes and Its Shift in Business Strategy Under New Leadership
Prior to Caldera's acquisition of Santa Cruz's Server Software and Professional Services divisions, substantially all of Caldera's revenue was derived from sales of Linux products and services. However, Caldera had been unsuccessful in creating a profitable Linux business.
F. Caldera's Financial Position and Business Strategy
Admits that Caldera (like, on information and belief, Novell and nearly all other companies) did not produce a profitable Linux business; and admits the other allegations of ¶ 31.
32 After the acquisition of Santa Cruz's Server Software and Professional Services divisions, most of Caldera's total revenue came from UNIX products and services, ranging from 90 to 95% of Caldera's revenue during fiscal years 2001 and 2002. But Caldera's revenue from the sale of UNIX-based products declined in the fiscal quarters following the acquisition. Caldera experienced significant decreases in actual and forecasted revenue of the acquired Santa Cruz operations. Admits that, after Caldera's acquisition of Santa Cruz's Server Software and Professional Services divisions, most of Caldera's revenue came from UNIX products and services, including approximately 90% of its total revenues at the end of fiscal year 2001 and 95% of its total revenues at the end of fiscal year 2002; admits that (at least in part because of the unauthoried use of SCO's proprietary UNIX code and other protected materials in Linux) Caldera's actual and forecasted revenues from the sale of UNIX-based products declined in the fiscal quarters following the acquisition; but denies each and every other allegation of ¶ 32.
33 Caldera incurred substantial financial losses during its fiscal years 2000, 2001 and 2002. Caldera suffered losses from operations totaling $32 million in 2000, $133 million in 2001 and $24 million in 2002. Admits the allegations of ¶ 33.
34 In June 2002, Caldera hired Darl McBride as its President and Chief Executive Officer. Mr. McBride was responsible for the company's strategic direction and planning. Admits that Caldera hired Darl McBride as its President and Chief Executive Officer in June 2002 and that Mr. McBride was responsible for Caldera's strategic direction, with input from other executives of the company; but denies each and every other allegation of ¶ 34.
35 On our about the time of Mr. McBride's arrival at Caldera, Caldera began to pursue a new business strategy for the company, launching a rebranding effort of its products and services as well as its corporate image. Admits the allegations of ¶ 35.
36 On August 26, 2002, Caldera announced that it would change its name to The SCO Group, Inc. ("SCO"), pending shareholder approval. On or about that time, Caldera then began doing business as SCO. Caldera soon thereafter changed it trading symbol on the NASDAQ Stock Exchange from "CALD" to "SCOX." Caldera's name change was formalized on May 16, 2003, when Caldera's shareholders approved an amendment to Caldera's certificate of incorporation that changed the company's name to SCO. Admits the allegations of ¶ 36.
37 As part of Caldera's rebranding efforts and shift in business strategy, Caldera purportedly initiated a review of its intellectual property rights. This effort culminated in the launching of a licensing initiative, which it called SCOsource, in January 2003. SCOsource, as described in further detail below, was an effort by Caldera to expand the revenue base of a company that had never before been profitable. Admits that SCO launched the SCOsource initiative to review, enforce, and defend SCO's ownership of its UNIX intellectual property (including copyrights); admits that SCO announced the SCOsource initiative in January 2003 but did not enter into an agreement under its licensing program until August 2003; and denies each and every other allegation of ¶ 37.
38 G. SCO's Requests to Novell to Participate in a Licensing Scheme and To Transfer the UNIX Copyrights
In late 2002, SCO repeatedly contacted Novell in connection with SCO's soon-to-be-announced SCOsource campaign. SCO requested copies of certain documentation concerning rights to UNIX, including the agreement between Novell and Santa Cruz. SCO also expressed its interest in a campaign to assert UNIX infringement claims against users of Linux. SCO asked Novell to partner with SCO in a Linux licensing program, under which SCO contemplated extracting a license fee from Linux end users to use the UNIX intellectual property purportedly contained in Linux. Novell refused to participate.
G. Communications Between SCO and Novell in Late 2002 and Early 2003
Admits that in late 2002, as part of the review of its intellectual property, SCO contacted Novell to confirm SCO's understanding that the UNIX and UnixWare copyrights had been transferred under the APA and to ask if Novell had documents concerning the APA; admits that Novell counsel and other employees repeatedly and successively asked SCO to call again at a later time after Novell had had the opportunity to research the matter; admits that in early 2003, Novell counsel agreed to sign a letter stating that the APA transferred all right, title, and interest in and to the copyrights associated with the AT&T SVRX software agreements; admits that SCO sent Novell counsel a draft of that letter but Novell responded that it was no longer interested in UNIX and would not sign; admits that Novell did not sign the letter and ceased communications with SCO; further admits that during the aforementioned conversations Novell never asserted its purported, or challenged SCO's, ownership of the UNIX and UnixWare copyrights; but denies each and every other allegation of ¶ 38.
39 In aid of its scheme, SCO requested that Novell transfer its UNIX Copyrights to SCO and thereby acknowledged that it did not own the UNIX Copyrights. SCO contacted Novell on multiple occasions by and during early 2003. For example, SCO's CEO, Darl McBride, repeatedly contacted Novell and asked Novell to amend the Novell-Santa Cruz agreement to give SCO the UNIX Copyrights. Novell rejected all of these requests. Admits that (at Novell's request, as described in ¶ 38 above) SCO contacted Novell on multiple occasions in early 2003; but denies each and every other allegation of ¶ 39.
40 H. SCO's Scheme To Claim Ownership of the UNIX Copyrights
Notwithstanding Novell's rejections, SCO embarked on an aggressive campaign in which it falsely asserted ownership over these copyrights via public statements, a series of letters to Linux end users, several lawsuits against Linux distributors and end users, and a licensing program purporting to offer SCO's Intellectual Property Licenses for Linux.
H. SCO's Efforts to Protect Its Intellectual Property
Denies the allegations of ¶ 40.
41 SCO's misleading and wrongful public assertions of ownership include the following:

a. On March 7, 2003, SCO stated in a press release, "In 1995, SCO purchased the rights and ownership of UNIX and UnixWare that had been originally owned by AT&T. This included source code, source documentation, software development contracts, licenses and other intellectual property that pertained to UNIX-related business. ... 'SCO is in the enviable position of owning the UNIX operating system,' said Darl McBride, president and CEO, SCO."

b. On May 14, 2003, SCO stated in a press release, "[SCO], the owner of the UNIX operating system, today warned that Linux is an unauthorized derivative of UNIX and that legal liability for the use of Linux may extend to commercial users."

c. On June 6, 2003, SCO stated in a press release, "[SCO], the owner of the UNIX® operating system, today confirmed its previously stated ownership of UNIX copyrights. As SCO has consistently maintained, all rights to the UNIX and UnixWare technology, including the copyrights, were transferred to SCO as part of the Asset Purchase Agreement between Novell and SCO dated September 19, 1995. Any question of whether the UNIX copyrights were transferred to SCO under the Assert Purchase

Agreement was clarified in Amendment No. 2 to the Asset Purchase Agreement dated October 16, 1996. 'This amendment simply confirms SCO's long stated position that it owns all copyrights associated with the UNIX and UnixWare businesses,' said Chris Sontag, senior vice president and general manager, SCOsource intellectual property division, SCO.

...

'SCO is the owner of the UNIX operating system, as well as all of the UNIX contracts, claims and copyrights necessary to conduct that business,' said Sontag. 'None of the litigation we are currently involved with asserts claims based on copyrights. Because others have called into question SCO's ownership of the UNIX and UnixWare copyrights, we are satisfied that we have now proven without a doubt that SCO owns those copyrights.'"

d. During at least June and July, 2003, SCO wrongfully registered copyrights in UNIX and UnixWare releases owned by Novell. These registrations related to UNIX System V release 3.0, UNIX System V release 3.1, UNIX System V release 3.2, UNIX System V release 3.2/386, UNIX System V release 4.0, UNIX System V release 4.1, UNIX System V release 4.1ES, UNIX System V release 4.2, UNIX System V release 4.2MP, and UnixWare 7.1.3.

e. On January 13, 2004, SCO stated, "[SCO] today reiterated its ownership of UNIX intellectual property, source code, claims and copyrights and has made all of the documents surrounding the companies' ownership of UNIX and UnixWare available for public viewing at www.sco.com/novell."

f. On January 28, 2004, in its Form 10-K filed with the United States Securities and Exchange Commission, SCO stated, "We own the UNIX operating system and are a provider of UNIX-based products and services.

...

We acquired our rights to the UNIX source code and derivative works and other intellectual property rights when we purchased substantially all of the assets and operations of the server and professional services groups of The Santa Cruz Operation, Inc., in May 2001. The Santa Cruz Operation (now know as Tarantella, Inc.) had previously acquired such UNIX source code and other intellectual property rights from Novell in September 1995, which were initially developed by AT&T Bell Labs. Through this process, we acquired all UNIX source code, source code license agreements with thousands of UNIX vendors, all UNIX copyrights, all claims for violation of the above mentioned UNIX licenses and copyrights and other claims, and control over UNIX derivative works...."

Denies the allegations of the introductory sentence of ¶ 41.
a. Admits the allegations of subparagraph 41(a).

b. Admits the allegations of subparagraph 41(b).

c. Admits the allegations of subparagraph 41(c).

d. Admits that in 2003 and 2004, SCO properly registerd its copyrights in UNIX and UnixWare, including its copyrights in the UNIX and UnixWare releases listed in subparagraph 41(d); denies each and every other allegation of subparagraph 41(d); and to the extent subparagraph 41(d) purports to state a legal conclusion, states that no response is required.

e. Admits the allegations of subparagraph 41(e).

f. Admits the allegations of subparagraph 41(f).

42 As part of SCO's scheme to claim ownership of the UNIX copyrights, SCO has falsely claimed that Novell acquiesced to SCO's claims. For example, on July 21, 2003, Darl McBride stated in a public interview:

Interviewer: Well, Novell would say that you actually don't own those copyrights fully.

McBride: Yeah, well, the Novell thing, they, they came out and made a claim that held up for about four days and then we put that one to bed. If you go talk to Novell today, I'll guarantee you what they'll say, which is they don't have a claim on those copyrights.

Admits that on or about July 21, 2003, Darl McBride made the statement quoted in part in ¶ 42; but denies each and every other allegaton of ¶ 42.
43 Novell has not acquiesced to SCO's claims, as recited in SCO's own Amended Complaint. (Amended Complaint ¶ 19(d)-(e).) To the contrary, Novell was vigorously contesting those claims in private correspondence with SCO at the very same time SCO was publically claiming otherwise. For example:

a. On May 12, 2003, SCO's CEO Darl McBride sent Novell a letter asserting that it owned the UNIX copyrights and that Linux end users were infringing those copyrights.

b. On May 28, 2003, Novell's CEO, Jack Messman, responded by letter, asserting in no uncertain terms that "SCO is not the owner of the UNIX copyrights."

c. After SCO registered its claim to the UNIX copyrights with the U.S. Copyright Office, Novell's General Counsel, Joseph LaSala wrote to SCO, again disputing its claim to ownership of the copyrights. In his August 4, 2003, letter, LaSala stated, "We dispute SCO's claim to ownership of these copyrights."

Denies that Novell did not acquiesce to SCO's ownership claims during the years between the execution of the APA (in September 1995) and about May 2003; further denies, as described below in SCO's response to subparagraph 43(b), that Novell did not acquiesce to SCO's ownership claims in June 2004.

a. Admits that on May 12, 2003, Darl McBride sent Novell a letter setting forth the statements therein.

b. Admits that, in response to Mr. McBride's May 2003 letter, Novell CEO Jack Messman sent SCO a May 28, 2003 letter (published in several newspapers and other publications) stating that "SCO is not the owner of the UNIX copyrights" -- a statement that Novell recanted in a June 6, 2003 press release stating that Amendment No. 2 to the APA "appears to support SCO's claim that ownership of certain copyrights for UNIX did transfer to SCO in 1996."

c. Admits the allegatons of ¶ 43(c), including the fact that Mr. LaSala's August 4, 2003 letter to SO purported to recant the recantation in Novell's June 6, 2003 press release.

44 In September and October 2003, Novell attempted to protect its rightful ownership of the UNIX Copyrights, and to correct SCO's erroneous registrations claiming ownership, by filing its own copyright registrations. Admits that in September and October 2003, Novell (wrongfully) obtained copyright registrations for UNIX-related products; denies each and every other allegation and the characterizations in ¶ 44; and to the extent ¶ 44 purports to state a legal conclusion, states that no response is required.
45 I. SCO's Scheme To Extract Licensing Fees from Novell, the Linux Community and UNIX Vendors
A significant aspect of SCO's rebranding efforts and new business strategy was its adoption of a scheme to extract "licenses" from the UNIX and Linux communities based on claims to own intellectual property specifically reserved to Novell, i.e., the UNIX Copyrights. SCO proceeded on its own in this scheme after Novell rebuffed SCO's overtures to participate.
I. The SCOsource Initiative
Denies the allegations of ¶ 45; and to the extent ¶ 45 purports to state a legal conclusion, states that no response is required.
46 On January 22, 2003, SCO publicly announced its licensing scheme as part of its "SCOsource" program. In connection with this announcement, SCO's CEO, Darl McBride, commented that "SCO owns much of the core UNIX intellectual property, and has full rights to license this technology and enforce the associated patents and copyrights." Admits that SCO announced its SCOsource initiative on January 22, 2003, and that in connection with that announcement, Darl McBride made the statement quoted in part in ¶ 46; but denies each and every other allegation and the characterizations in ¶ 46.
47 Under the SCOsource licensing program, SCO seeks to enter into license agreements with UNIX vendors and offers Intellectual Property Licenses to Linux end users ("Intellectual Property Licenses"). The purported purpose of these licenses is to allow UNIX vendors to use SCO's UNIX intellectual property and to permit Linux end users to "properly compensate us for our UNIX intellectual property as currently found in Linux." One term of SCO's Intellectual Property Licenses for Linux is that licensees "will be held harmless against past and future copyright violations based on their use of SCO's intellectual property ... in Linux distributions...." Admits that the SCOsource licensing program allows Linux end-users to enter into intellectual property agreements that properly compensate SCO for its UNIX intellectual property found in Linux; admits that the terms of the SCOsource agreements are as stated therein; but denies each and every other allegation of ¶ 47.
48 SCO charges a sizeable licensing fee for SCO's Intellectual Property Licenses for Linux. For example, for a server with 8 CPUs, the initial licensing fee is $4,999, with $1,079 payable every year after that. Admits that SCO charges market price (including appropriate discounts) for its intellectual property licenses; but denies each and every other allegation and the characterization in ¶ 48.
49 As part of its SCOsource initiative, SCO filed a lawsuit against IBM on March 7, 2003, asserting, among other things, UNIX Copyrights that SCO does not own. SCO has alleged that it owns the UNIX Copyrights and that IBM's contributions to Linux and use of Linux infringe these copyrights. Admits that on March 7, 2003, SCO filed a lawsuit against IBM based on the allegations set forth in SCO's pleadings in that lawsuit; denies each and every other allegation of ¶ 49; and to the extent ¶ 49 purports to state a legal conclusion, states that no response is required.
50 As part of the SCOsource program, SCO entered into at least two license agreements. These licenses related to the use of UNIX technology by the licensees. The first of these licenses was with Sun Microsystems, Inc. ("Sun"). The second license was with Microsoft Corporation ("Microsoft") and purportedly covers Microsoft's UNIX compatibility products. On information and belief, through these licenses SCO broadened the rights of Sun and Microsoft to use SVRX code. Admits that SCO, through its SCOsource division, entered into agreements related to UNIX and UnixWare with Sun Microsystems, Inc., and Microsoft Corporation (in that order) and that the Microsoft agreement covered UNIX compatibility products; but denies each and every other allegation of ¶ 50, including the allegation that the Sun and Microsoft agreements were part of the SCOsource licensing program.
51 The Sun and Microsoft licenses resulted in significant revenue for SCO and produced the first profitable quarter in SCO's history. During the fiscal quarter ended April 30, 2003, SCO recognized $8,250,000 in revenue from these two new licenses. In addition, these licenses accounted for $25,846,000 of SCO's revenue in fiscal year 2003. Admits that the Sun and Microsoft agreements in part produced the profitable quarter; admits the allegations of the second sentence of ¶ 51; but denies each and every other allegations and the characterizations in ¶ 51.
52 As part of the SCOsource program, in May 2003, SCO sent letters to 1,500 of the world's largest corporations threatening suit based on its alleged ownership of the UNIX Copyrights ("End Users Letters"). On May 12, 2003, SCO sent one of these letters to IBM, and sent another letter to Novell. On information and belief, all of the End User Letters were nearly identical in content to the IBM and Novell letters. Admits that, in May 2003, SCO sent 1,500 end-user corporations (including IBM and Novell) a letter setting forth the statements therein; denies each and every other allegation of ¶ 52; and to the extent ¶ 52 purports to state a legal conclusion, states that no response is required.
53 In the End User Letters, SCO made the false and misleading statement that "SCO holds the rights to the UNIX operating system software originally licensed by AT&T to approximately 6,000 companies and institutions worldwide (the 'UNIX Licenses')." Admits that SCO made statements (correctly quoted in part in ¶ 53) in the May 2003 letters; denies each and every other allegation of ¶ 53; and to the extent ¶ 53 purports to state a legal conclusion, states that no response is required.
54 In the End User Letters, SCO also made the unsupported assertion that "We [SCO] have evidence that portions of UNIX System V software code have been copied into Linux and that additional other portions of UNIX System V software code have been modified and copied into Linux, seemingly for the purposes of obfuscating their original source." Admits that SCO made statements (correctly quoted in part in ¶ 54) in the May 2003 letters; denies each and every other allegation of ¶ 54; and to the extent ¶ 54 purports to state a legal conclusion, states that no response is required.
55 After setting forth these alleged facts in the End User Letters, SCO erroneously concluded that "Linux infringes on our UNIX intellectual property and other rights." According to SCO, end users of Linux were liable for this alleged infringement whether or not they participated in any contribution of UNIX System V software code into Linux. Admits that SCO made statements (correctly quoted in part in ¶ 55) in its May 2003 letters to end-users; denies each and every other allegation and the characterizations in ¶ 55; and to the extent ¶ 55 purports to state a legal conclusion, states that no response is required.
56 As set forth in detail above, besides sending the End User Letters, SCO has made numerous public statements that it owns the UNIX Copyrights and that end users of Linux are liable for infringement of those copyrights. For instance, contrary to the express terms of the APA, SCO has stated on its website that "only SCO is in a position to license the use of this infringing intellectual property." The Court itself has noted SCO's "barrage of public statements about pursuing alleged infringers of its alleged intellectual prroperty." The SCO Group Inc. v. Intl'l Bus. Machs., Case No. 2:03CV294 DAK, Memorandum Decision and Order at 5 (Feb. 9, 2004). Admits that SCO has publicly stated that it owns the UNIX copyrights and that Linux end-users may be liable for infringement of those copyrights; admits that it has stated on its website that "only SCO is in a position to license the use of this infringing intellectual property"; admits that the Court's February 8, 2005 Order in the SCO v. IBM case sets forth the statements therein; denies each and every other allegation and the characterizations in ¶ 56; and to the extent ¶ 56 purports to state a legal conclusion, states that no response is required.
57 Shortly after the inception of its letter writing campaign, SCO brought suit against Autozone and Daimler Chrysler, both Linux end users. In these lawsuits, SCO has made substantially the same allegations as set forth in its letters. In the Autozone lawsuit, SCO has made substantially the same allegations as set forth in its letters. In the Autozone lawsuit, SCO has alleged that "[Autozone] uses one or more versions of the Linux operating system technology." In the Daimler-Chrysler lawsuit, SCO has alleged that Daimler-Chrysler's use of the Linux operating system violates the UNIX license between Daimler-Chrysler and SCO. Admits that SCO has filed lawsuits against Autozone, Inc., and Daimler Chrysler Corporation, based on the allegations set forth in its pleadings in those lawsuits; but denies each and every other allegation and the characterizations in ¶ 57.
58 Novell has established a Linux Indemnification Program under which it offers indemnification for copyright infringement claims made by third parties against qualifying, registered Novell customers of the SUSE LINUX Enterprise Server 8, SUSE LINUX Enterprise Server 9, SUSE LINUX Retail Solution, and Novell Linux Desktop products. Admits that Novell has established an indemnification program with numerous restrictions (including, for example, the requirement that the Linux customer buy a new upgrade) and limitations (including, for example, on the dollar amount of the indemnification); but denies information or knowledge sufficient to form a belief as to the truth of the other allegations of ¶ 58.
59 SCO has continued to pursue its SCO source initiative with other industry participants that it believes will lead to additional licensing agreements. On information and belief, via this campaign, SCO has convinced several Linux end users to participate in its licensing program, obtaining purported licenses to use "SCO's intellectual property contained in Linux," and thereby avoid suit by SCO. In fiscal year 2004, SCO generated additional revenue from sales of its SCOsource Intellectual Property Licenses. Admits that, in an effort to protect its UNIX copyrights, SCO has negotiated and continues to negotiate intellectual property agreements with Linux end-users; admits that such agreements generated revenue in fiscal year 2004; and denies each and every other allegation and the characterizations in ¶ 59.
60 J. SCO's Breaches of the Asset Purchase Agreement
SCO's misguided campaign has led SCO to breach various obligations that Santa Cruz assumed under the APA and its Amendments.
J. Novell's Allegations that SCO Breached the Asset Purchase Agreement
Denies the allegations of ¶ 60; and to the extent ¶ 60 purports to state a legal conclusion, states that no response is required.
61 Novell has performed its obligations under the APA and its Amendments. Denies the allegations of ¶ 61; and to the extent ¶ 61 purports to state a legal conclusion, states that no resonse is required.
62 SCO or Santa Cruz has received adequate consideration for its duties under the APA and its Amendments. Denies the allegations of ¶62; and to the extent ¶ 62 purports to state a legal conclusion, states that no response is required.
63 Breach of Section 1.2(b)'s and 1.2(f)'s Audit Provisions
Section 1.2(b) of the APA gives Novell broad audit rights relating to the administration of the SVRX licensing program. It reads in pertinent part:

[Novell] shall be entitled to conduct periodic audits of [SCO] concerning all royalties and payments due to [Novell] hereunder or under the SVRX Licenses, provided that [Novell] shall conduct such audits after reasonable notice to [SCO] and during normal business hours and shall not be entitled to more than two (2) such audits per year.

Admits that Section 1.2(b) of the APA provides in part:
Seller shall be entitled to conduct periodic audits of Buyer concerning all royalties and payment due to Seller hereunder or under the SVRX Licenses, provided that Seller shall conduct such audits after reasonable notice to Buyer and during normal business hours and shall not be entitled to more than two (2) such audits per year.

SCO denies each and every other allegation and the characterization in ¶ 63, including that under the APA, Novell had audit rights other than with respect to the administration of the SVRX binary royalty stream; and to the extent ¶ 63 purports to state a legal conclusion, states that no response is required.

64 Further, section 1.2(f) of the APA obligates SCO to provide Novell monthly reports detailing the SVRX royalties that SCO received. Admits that Section 1.2(f) of the APA provides in part:
Within one (1) calendar month following each calendar month in which SVRX Royalties [and royalties from Royalty-Bearing Products as contemplated in Schedule 1.2(b) hereof] are received by Buyer, Buyer shall provide to Seller, in electronic file format, a report detailing all such royalties.

SCO denies each and every other allegation of ¶ 64.

65 On July 11, 2003 Novell notified SCO that it intended to conduct an audit beginning on August 18, 2003 covering the period beginning January 1, 1998 through June 30, 2003. Admits the allegation of ¶ 65.
66 By reply correspondence dated July 17, 2003, SCO accepted Novell's right to an audit. Novell's audit began during the week of August 25, 2003. Admits the allegations of ¶ 66.
67 As part of Novell's aforementioned audit rights, on Novemeber 21, 2003, Novell sought the following categories of information and documentation relating to:

a. Any amendments and modifications to SVRX licenses, and in particular the amendments to the Sun and Microsoft SVRC licenses. Novell specifically requested (1) "copies of the Sun and Microsoft amendments to verify SCO's compliance" with the APA and (2) "a detailed explanation of SCO's positions" if SCO contends that either of the two exceptions to the prohibition on unilateral amendments by SCO were applicable.

b. Any buy-out of SVRX licenses, and in particular any information concerning any buy-out of Sun's and Microsoft royalty obligations under their SVRX licenses. Novell specifically requested that SCO identify any potential buy-out transactions so that Novell could verify SCO's compliance with the APA.

c. Any new SVRX licenses, and in particular SCO's Intellectual Property Licenses for Linux. Novell specifically requested (1) "copies of all SCO Intellectual Property Licenses for Linux, and any other agreements connected with attempts by SCO to enter into new SVRX Licenses, so Novell can verify SCO's compliance" with the APA and (2) "a detailed explanation of SCO's position" if SCO contends that the exception to the prohibition on new SVRX licenses by SCO was applicable.

d. Any SVRX to UnixWare Conversions. Novell specifically requested that SCO (1) identify and provide documentation for any allegedly valid conversions and (2) "explain in detail" how the alleged conversion complies with the APA and (3) provide "a detailed explanation of SCO's position" if SCO contends that any of the exceptions to the prohibition on conversion by SCO were triggered.

Admits that Novell sent SCO a November 21, 2003 letter (correctly quoted in part in ¶ 67) requesting the information set forth therin; denies each and every other allegation of ¶ 67 (including subparagraphs a-d); and to the extent ¶ 67 (including subparagraphs a-d) purports to state a legal conclusion, states that no response is required.
68 Novell renewed its November 21, 2003 demand on December 29, 2003 and again on February 4, 2004. Admits that Novell sent letters to SCO on December 29, 2003, and on February 4, 2004, referencing Novell's November 21, 2003 letter.
69 On February 5, 2004, SCO conveyed its refusal to provide the information identified in Paragraph 68. Admits that SCO responded to Novell's letters as set forth in SCO's letter dated February 5, 2004; but denies each and every other allegation of ¶ 69.
70 On March 1, 2004, Novell again contacted SCO for the above categories of information: "In order to complete our audit, we need the Sun, Microsoft and any other Intellectual Property Licenses for Linux. Stated more categorically, we need all agreements in which SCO purported to grant rights with respect to Unix System V." Novell noted that SCO's Intellectual Property Licenses for Linux appeared to be SVRX Licenses since they purported to grant rights relating to UNIX System V or UnixWare. Admits that Novell sent SCO a March 1, 2004 letter (correctly quoted in part in ¶ 70), requesting the information set forth therein; denies each and every other allegation of ¶ 70; and to the extent ¶ 70 purports to state a legal conclusion, states that no response is required.
71 Novell again sent a letter to SCO on April 2, 2004 urging a response. Admits that Novell sent a letter to SCO on April 2, 2004, requesting the information set forth therein.
72 On November 17, 2004, Novell contacted SCO yet again:

We have communicated with SCO several times about our concerns with SCO's handling of UNIX licenses, including the license with Sun. In these communications, we have noted that our audit rights under the Asset Purchase Agreement require SCO to provide Novell with copies of any UNIX agreements (including amendments) SCO has reached with Sun. We have sent you letters twice on this issue (in March and April 2004), and have not received an adequate response.

...

Accordingly, we must once again insist that you provide us with copies of any agreements with Sun (including amendments) that relate to UNIX. We would appreciate a response by Friday, December 3, 2004.

Admits that Novell sent SCO a November 17, 2004 letter (correctly quoted in part in ¶ 72) requesting the information set forth therein.
73 Despite Novell's repeated requests, SCO has never provided copies of the Sun and Microsoft licenses, or amendments, or copies of SCO's Intellectual Property Licenses for Linux or other agreements connected with attempts by SCO to enter into new or amended SVRX licenses. SCO also never provided any explanation why SCO was not obligated under the APA to seek Novell's consent to amend or otherwise enter into new SVRX agreements. As a result, Novell has been unable to verify SCO's compliance with the APA, as Novell is entitled under the APA. Admits that SCO responded to Novell as set forth in SCO's letters; but denies each and every other allegation and the characterizations in ¶ 73; and to the extent ¶ 73 purports to state a legal conclusion, states that no response is required.
74 Breach of Obligation To Remit Royalties Under Sections 1.2(b) and 4.16(a)
Sections 1.2(b) and 4.16(a) of the APA obligate SCO to remit 100% of "all royalties, fees and other amounts due under all SVRX Licenses" to Novell. "SVRX Licenses" are in turn defined to include "[a]ll contracts relating to" the various UNIX System releases and auxiliary products enumerated at Schedule 1.1(a)(VI) and Attachment A to Amendment No. 1. Under the APA, Novell has "all right, title and interest to the SVRX Royalties, less the 5% fee for administering the collection thereof."
Admits that SCO was obligated to remit "all royalties, fees and other amounts due under all SVRX Licenses (as listed in detail under item VI of Schedule 1.1(a) hereof and referred to herein as 'SVRX Royalties"); admits that the term "SVRX Licenses" is not listed in a "Definitions" or "Recitals" section of the APA. SCO denies each and every other allegation of ¶ 74, including any attempt by Novell to define the term "SVRX Licenses" to include anything other than royalties that SCO collected from then-existing SVRX licensees for their distribution of binary-code versions of System V products pursuant to sublicensing agreements.
75 SCO has failed to remit to Novell all royalties owed under §§ 1.2(b) and 4.16(a) of the APA. Denies the allegations of ¶ 75; and to the extent ¶ 75 purports to state a legal conclusion, states that no response is required.
76 As SCO admitted in its February 5, 2004 letter to Novell, SCO has entered into "new" agreements with Sun and Microsoft. Admits that SCO entered into agreements with Sun and Microsoft, but denies each and every other allegation and the characteriations in ¶ 76.
77 On information and belief, these new agreements are "contracts relating to" the various UNIX System releases and auxiliary products enumerated at Schedule 1.1(a)(VI) and Attachment A to Amendment No. 1. The new agreements are therefore SVRX Licenses under the APA. Denies the allegations of ¶ 77; and to the extent ¶ 77 purports to state a legal conclusion, states that no response is required.
78 SCO has not remitted any royalties from its new SVRX Licenses with Sun or Microsoft. Admits that SCO has not remitted royalties from its licenses with Sun and Microsoft; denies each and every other allegation of ¶ 78, including the allegation that SCO entered into "SVRX Licenses" with Sun or Microsoft; and to the extent ¶ 78 purports to state a legal conclusion, states that no response is required.
79 In addition, SCO has entered into Intellectual Property Licenses with a variety of parties. For example, on March 1, 2004, SCO announced an intellectual property licensing agreement with "EV1Servers.Net" that purportedly grants that company a site license to use SCO's intellectual property on all Linux servers managed by EV1Servers.Net in its hosting facilities. Admits that SCO has entered into intellectual property agreements, the terms of which are set forth therein; but denies each and every other allegation of ¶ 79.
80 On information and belief, SCO's Intellectual Property Licenses are "contracts relating to" the various UNIX System releases and auxiliary products enumerated at Schedule 1.1(a)(VI) and Attachment A to Amendment No. 1. The Intellectual Property Licenses are therefore SVRX Licenses under the APA. SCO has not remitted any royalties from these SVRX Licenses. Denies the allegations of ¶ 80; and to the extent ¶ 80 purports to state a legal conclusion, states that no response is required.
81 Among other changes to the APA, Amendment No, 1 added § 1.2(e), which provides that SCO has a right to retain all "source code right to use fees attributable to new SVRX Licenses approved by [Novell] pursuant to Section 4.16(b)." Admits that Amendment No. 1 to the APA added Section 1.2(e) (correctly quoted in part in ¶ 81); but denies each and every other allegation of ¶ 81; and to the extent ¶ 81 purports to state a legal conclusion, states that no response is required.
82 SCO has neither sought nor obtained Novell's approval to enter into any new SVRX license. Therefore, none of SCO's new SVRX Licenses fall within § 1.2(e)'s exception to SCO's general duty to remit 100% of SVRX royalties to Novell. Admits the allegations of the first sentence of ¶ 82; but denies the second sentence of ¶ 82 to the extent it alleges that the intellectual property licenses and Sun and Microsoft agreements required Novell's prior approval or were "SVRX Licenses"; and to the extent ¶ 82 purports to state a legal conclusion, states that no response is required.
83 Breach of Section 4.16(b)'s Obligations
Section 4.16(b) of the APA reads in pertinent part:

In addition, at [Novell's] sole discretion and direction, [SCO] shall amend, supplement, modify or waive any rights under, or shall assign any rights to, any SVRX License to the extent so directed in any manner or respect by [Novell].
Admits that Novell correctly quotes in part Section 4.16(b) of the APA, but denies that this is the only pertinent part of that section.
84 SCO has threatened to cancel or terminate various parties' SVRX licenses and has purported to cancel or terminate certain parties' SVRX licenses. For example, on March 6, 2003, SCO sent a letter to IBM threatening to cancel or terminate IBM's SVRX license. On May 29, 2003, SCO sent a similar letter to Sequent Computer Systems ("Sequent"). Admits that SCO sent letters to various companies, including IBM and Sequent, settling forth the statements therein; but denies each and every other allegation in ¶ 84, including the allegation that the licenses referenced in those agreements were "SVRX Licenses."
85 SCO subsequently purported to cancel or terminate IBM's SVRX licenses as of June 13, 2003. On August 11, 2003, SCO sent a letter to Sequent similarly purporting to terminate Sequent's SVRX licenses. Admits that SCO terminated its software license agreements with IBM and Sequent; admits that it sent Sequent an August 11, 2003 letter of termination; but denies each and every other allegation in ¶ 85, including especially the allegation that the terminated licenses were "SVRX Licenses."
86 SCO did not obtain Novell's prior written consent to cancel or terminate either SVRX license. Accordingly, on June 9, 2003, and again on October 7, 2003, Novell directed SCO to waive any purported right SCO claimed to have to terminate IBM's SVRX licenses. On February 6, 2004, Novell similarly directed SCO to waive certain of its purported rights under the IBM and Sequent SVRX licenses. Admits that SCO did not seek Novell's prior written consent to terminate the IBM and Sequent licenses; admits that Novell sent letters to SCO on June 9, 2003 and October 7, 2003, setting forth the statements therein; but denies each and every other allegation of ¶ 86, including especially the allegation that the terminated licenses were "SVRX Licenses."
87 Following SCO's failure to take the actions identified in the preceding paragraphs, Novell elected to take actions on SCO's behalf, as Novell is empowered to do by § 4.16(b). Section 4.16(b) of the APA provides in pertinent part:

In the event that [SCO] shall fail to take any such action concerning the SVRX Licenses as required herein, [Novell] shall be authorized, and hereby is granted, the rights to take any action on [SCO's] own behalf.

Admits that Novell correctly quotes in part Section 4.1(b) of the APA, but denies that this is the only pertinent part of that section; denies each and every other allegation of ¶ 87; and to the extent ¶ 87 purports to state a legal conclusion, states that no response is required.
88 After SCO conveyed its refusal on February 11, 2004 to waive its purported rights against Sequent, Novell on the same day waived SCO's purported right to revoke any rights under Sequent's SVRX licenses. Similarly, on October 11, 2003, Novell waived certain of SCO's purported rights under IBM's SVRX licenses. Denies the allegations of ¶ 88; and to the extent ¶ 88 purports to state a legal conclusion, states that no response is required.
89 SCO refuses to acknowledge Novell's right to take such actions on its own behalf. Admits that SCO refuses to acknowledge Novell's purported right to take certain actions on "its own behalf"; denies the allegation that Novell has that right; and to the extent ¶ 89 purports to state a legal conclusion, states that no response is required.
90 Under Section 4.16(b) of the APA, SCO shall not amend or modify any SVRX license "without the prior written consent of [Novell]." As modified by Amendment 1, Section 4.16(b) of the APA provides further that:

Notwithstanding the foregoing, [SCO] shall have the right to enter into amendments of the SVRX Licenses (i) as may be incidentally involved through its rights to sell and license UnixWare software or the Merged Product .. or future versions of the Merged Product, or (ii) to allow a licensee under a particular SVRX License to use the source code of the relevant SVRX product(s) on additional CPU's or to receive an additional distribution, from [SCO], of such source code.

In addition, [SCO] shall not, and shall have no right to, enter into new SVRX Licenses except in the situation specified in (i) of the preceding sentence as otherwise approved in writing in advance by [Novell] on a case by case basis.

Admits that Section 4.16(b) of the APA (correctly quoted in part in ¶ 90) sets forth the terms therein; but denies each and every allegation of ¶ 90, including any attempt by Novell to define the term "SVRX Licenses" to include anything other than royalties that SCO collected from then-existing SVRX licenses for their distribution of binary-code versions of System V products pursuant to sublicensing agreements.
91 On information and belief, SCO has entered into new SVRX Licenses with Sun, Microsoft and others (through, for example, SCO's Intellection Property Licenses with Linux end users or UNIX vendors), or otherwise amended the Sun and Microsoft SVRX license. Admits that SCO entered into agreements with Linux end-users, Sun, Microsoft, and others; but denies each and every other allegation in ¶ 91, including the allegation that those agreements are "SVRX Licenses".
92 SCO never sought advance approval from Novell to enter into these new SVRX Licenses or amendments thereof. SCO also never explained why under the APA it was not obligated to obtain Novell's advance approval. Admits that SCO never sought approval from Novell to enter into the intellectual property licenses or Sun and Microsoft agreements; denies each and every other allegation of ¶ 92; and to the extent ¶ 92 purports to state a legal conclusion, states that no response is required.
93 Under the APA, SCO also had no authority to enter into the Sun and Microsoft SVRX Licenses, or the Intellectual Property Licenses with Linux end users and UNIX vendors. Denies the allegations of ¶ 93; and to the extent ¶ 93 purports to state a legal conclusion, states that no response is required.

FIRST CLAIM FOR RELIEF
(Slander of Title)
94 Novell incorporates by reference all prior paragraphs as if they were set forth here in full. Repeats and re-alleges its answers to the allegations of ¶ ¶ 1-93 as if fully set forth herein.
95 SCO made its public statements claiming ownership of the UNIX Copyrights, and improperly registered its claim to UNIX Copyrights, with knowledge that title to these copyrights remains with Novell. Denies the allegations of ¶ 95; and to the extent ¶ 95 purports to state a legal conclusion, states that no response is required.
96 SCO made such statements maliciously, in bad faith, and with intentional disregard for the truth. Denies the allegations of ¶ 96; and to the extent ¶ 96 purports to state a legal conclusoin, states that no response is required.
97 SCO made such statements with the intent to cause customers and potential customers of Novell not to do business with Novell, to slander and impugn the ownership rights of Novell in UNIX and UnixWare, and to attempt, in bad faith, to block Novell's ability to exercise its copyrights therein. Denies the allegations of ¶ 97; and to the extent ¶ 97 purports to state a legal conclusion, states that no response is required.
98 SCO's slander of Novell's title has resulted in special damages including, inter alia, Novell's costs and fees in preparing and filing copyright registrations and declarations correcting SCO's erroneous registrations claiming ownership of Novell's intellectual property and in prosecuting this action. Denies the allegations of ¶ 98; and to the extent ¶ 98 purports to state a legal conclusion, states that no response is required.

SECOND CLAIM FOR RELIEF
(Breach of Contract)
99 Novell incorporates by reference all prior paragraphs as if they were set forth here in full. Repeats and re-alleges its answers to all prior paragraphs as if those answers were fully set forth herein.
100 Pursuant to its audit rights under the APA, Novell requested certain information from SCO to verify SCO's compliance with the APA, including:

a. Any amendments and modifications to SVRX licenses, and in particular the amendments to the Sun and Microsoft SVRX licenses, including a copy of these amendments and a detailed explanation on SCO's position if SCO contends that either of the two exceptions to the prohibition on unilateral amendments by SCO was applicable;

b. Any buy-out or potential buy-out of SVRX licenses, and in particular any information concerning any buy-out of Sun and Microsoft's royalty obligations under their SVRX licenses;

c. Any new SVRX licenses, and in particular SCO's new SVRX agreements with Sun and Microsoft and SCO's Intellectual Property Licenses with Linux end users or UNIX vendors, including copies of these agreements and a detailed explanation of SCO's position if SCO contends that the exception to the prohibition on new SVRX Licenses by SCO was applicable; and

d. Any SVRX to UnixWare Conversions, including documentation for any allegedly valid conversions, a detailed explanation of how the alleged conversion complies with the APA and a detailed explanation of SCO's position if SCO contends that any of the exceptions to the prohibition on conversion by SCO were triggered.

Admits that Novell sent SCO a November 21, 2003 letter requesting the information set forth therein, but denies each and every other allegation in ¶ 100 (including subparagraphs a-d).
101 Under the APA, SCO was obligated to provide this information. SCO substantially and materially breached §§ 1.2(b) and 1.2(f) of the APA by refusing to do so.. Denies the allegations of ¶ 101; and to the extent ¶ 101 purports to state a legal conclusion, states that no response is required.
102 On information and belief, SCO's breaches of §§ 1.2(b) and 1.2(f) of the APA have caused Novell damage in an amount to be later proven. In addition, these breaches have caused Novell special damages, including, inter alia, the costs associated with making repeated requests for information necessary to confirm SCO's compliance with its contractual obligations to administer SVRX licensing program, conducting further reviews of the limited information provided by SCO, and attempting to estimate royalties owing based upon incomplete information provided. Denies the allegations of ¶ 102; and to the extent ¶ 102 purports to state a legal conclusion, states that no response is required.
103 The legal remedies available to Novell for future failures by SCO to comply with its audit obligations under §§ 1.2(b) and 1.2(f) of the APA may be inadequate. Therefore, Novell seeks an order from this Court compelling SCO's specific performance of its aforementioned audit obligations under §§ 1.2(b) and 1.2(f). Denies the allegations of ¶ 103; and to the extent ¶ 103 purports to state a legal conclusion, states that no response is required; and states that Novell is not entitled to the relief it seeks in ¶ 103.

THIRD CLAIM FOR RELIEF
(Breach of Contract §§ 1.2(b) & 4.16(a) of the Asset Purchase Agreement)
104 Novell incorporates by reference all prior paragraphs as if they were set forth here in full. Repeats and re-alleges its answers to all prior paragraphs as if those answers were fully set forth herein.
105 SCO has substantially and materially breached §§ 1.2(b) and 4.16(a) of the APA by failing to remit all royalties owed to Novell, including any royalties SCO obtained from its new SVRX Licenses with Sun or Microsoft or from its Intellectual Property Licenses with Linux end users or UNIX vendors. Denies the allegations of ¶ 105; and to the extent ¶ 105 purports to state a legal conclusion, states that no response is required.
106 On information and belief, SCO's breaches of §§ 1.2(b) & 4.16(a) of the APA have caused Novell damage in an amount to be later proven. These breaches have caused Novell special damages, including, inter alia, the costs associated with attempting to ascertain from SCO the royalty amounts due to Novell and the unpaid royalty amounts. Denies the allegations of ¶ 106; and to the extent ¶ 106 purports to state a legal conclusion, states that no response is required.
107 The legal remedies available to Novell for future failures by SCO to comply with its royalty obligations under §§ 1.2(b) & 4.16(a) of the APA may be inadequate. Therefore, Novell seeks an order from this Court compelling SCO's specific performance of its remittance obligations under §§ 1.2(b) & 4.16(a) of the APA. Denies the allegations of ¶ 107; to the extent ¶ 107 purports to state a legal conclusion, states that no response is required; and states that Novell is not entitled to the relief it seeks in ¶107.
108 In addition, Novell seeks an order from this Court imposing a constructive trust on revenues received by SCO from its new SVRX Licenses with Sun and Microsoft and from its Intellectual Property Licenses with Linux end users and UNIX vendors. Creation of this trust is necessary to protect Novell from SCO's wrongful retention of monies owing Novell due to SCO's failure to perform its remittance obligations under §§ 1.2(b) & 4.16(a) of the APA. As set forth above, Novell owns "all right, title and interest" to these royalties, less SCO's 5% administrative fee. Denies the allegations of ¶ 108; to the extent ¶ 108 purports to state a legal conclusion, states that no response is required; and states that Novell is not entitled to the relief it seeks in ¶108.
109 This trust should be imposed for the additional reason that SCO is quickly dissipating its assets. On information and belief, SCO's revenues are declining, its operational losses are increasing and its cash is dwindling quickly. SCO expects to have only $11 million in cash remaining for its business operations as of October 31, 2005, just a fraction of the revenue it purportedly generated as a result of the Sun and Microsoft licenses.. Admits that SCO completed the fiscal year ending in October 2005 with approximately $13.3 million in cash designated for its business operations in fiscal year 2006; denies each and every other allegation in ¶109; to the extent ¶109 purports to state a legal conclusion, states that no response is required; and states that Novell is not entitled to the relief it seeks in ¶109.
110 Novell also seeks an order from the Court attaching SCO's assets pending adjudication of this claim because SCO is quickly dissipating its assets. Denies the allegations of ¶110; to the extent ¶110 purports to state a legal conclusion, states that no response is required; and states that Novell is not entitled to the relief it seeks in ¶110.

FOURTH CLAIM FOR RELIEF (Declaratory Relief: Rights and Duties under § 4.16(b) of the Asset Purchase Agreement)
111 Novell incorporates by reference all prior paragraphs as if they were set forth here in full. Repeats and re-alleges its answers to all prior paragraphs as if those answers were fully set forth herein.
112 Under § 4.16(b) of the APA, Novell has the right, at its sole discretion, to direct SCO to waive any rights under any SVRX Licenses. In the event that SCO fails to take any such action at Novell's direction, § 4.16(b) gives Novell the right to take any action on SCO's own behalf. SCO refused to perform its corresponding duties under § 4.16(b) and substantially and materially breached § 4.16(b) by:

a. Purporting to cancel or terminate SVRX licenses, including the IBM and Sequent SVRX licenses, and then refusing to waive these purported rights as directed by Novell; and

b. Refusing to recognize actions taken by Novell on SCO's behalf pursuant to § 4.16(b), including Novell's waiver of SCO's purported claims against IBM and Sequent.

Denies the allegations of ¶112; and to the extent ¶112 purports to state a legal conclusion, states that no response is required.
113 Novell seeks a declaration pursuant to 28 U.S.C. § 2201 that:
a. Under § 4.16(b) of the APA, Novell is entitled, at its sole discretion, to direct SCO to waive its purported claims against IBM, Sequent and other SVRX licensees; and

b. Under § 4.16(b) of the APA, Novell is entitled to waive on SCO's behalf SCO's purported claims against IBM, Sequent and other SVRX licensees, when SCO refuses to act as directed by Novell; and

c. SCO is obligated to recognize Novell's waiver of SCO's purported claims against IBM and Sequent.

Denies the allegations of ¶113; to the extent ¶113 purports to state a legal conclusion, states that no response is required; and states that Novell is not entitled to the relief it seeks in ¶113.
114 Under § 4.16(b) of the APA, SCO is obligated to seek Novell's prior approval to enter into new SVRX Licenses or amendments of SVRX Licenses, subject to limited exception. SCO did not perform its corresponding duties under § 4.16(b) and substantially and materially breached § 4.16(b) by:

a. Purporting to enter into new SVRX licenses without Novell's prior approval, including agreements with Sun, Microsoft and other licensees of SCO's Intellectual Property Licenses, without demonstrating that either of two limited exceptions was applicable; and

b. Purporting to enter into amendments of SVRX Licenses without Novell's prior approval, including agreements with Sun, Microsoft and other licensees of SCO's Intellectual Property Licenses, without demonstrating that a limited exception was applicable.

.
Denies the allegations of ¶114; and to the extent ¶114 purports to state a legal conclusion, states that no response is required.
115 Novell seeks a declaration pursuant to 28 U.S.C. § 2201 that:

a. Under § 4.16(b) of the APA, 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 of SCO's Intellectual Property Licenses; and

b. Under § 4.16(b) of the APA, SCO is obligated to seek Novell's prior approval to enter into new SVRX licenses or amendments to SVRX licenses, unless SCO can demonstrate to Novell that any exceptions to the prohibitions against new licenses and amendments by SCO are applicable.

Denies the allegations of ¶115; to the extent ¶115 purports to state a legal conclusion, states that no response is required; and states that Novell is not entitled to the relief it seeks in ¶115.
116 Novell pleads in the alternative for a declaration pursuant to 28 U.S.C. § 2201 that SCO had no authority to enter into the Sun and Microsoft SVRX Licenses, as well as the Intellectual Property Licenses with Linux end users and UNIX vendors. Denies the allegations of ¶116; to the extent ¶116 purports to state a legal conclusion, states that no response is required; and states that Novell is not entitled to the relief it seeks in ¶116.

FIFTH CLAIM FOR RELIEF (Declaratory Relief: Rights and Obligations Under the APA's Covenant of Good Faith and Fair Dealing)
117 Novell incorporates by reference all prior paragraphs as if they were set forth here in full. Repeats and re-alleges its answers to all prior paragraphs as if those answers were fully set forth herein.
118 The APA incorporates a covenant of good faith and fair dealing whereby each party agrees to work with the other to fulfill the purposes of the contract Admits the allegations of ¶118.
119 The APA granted Novell broad audit rights to verify SCO's compliance with the APA, as well as rights to approve (subject to limited exception) new SVRX licenses and amendments to SVRX licenses. The APA also granted Novell the right to direct SCO to amend, supplement, modifiy or waive any rights under any SVRX license, and to act on SCO's behalf if SCO fails to take such direction.. Denies the allegations of ¶119; and to the extent ¶119 purports to state a legal conclusion, states that no response is required.
120 Under the APA, SCO was obligated to administer the SVRX License Program, subject to the additional duties provided in §§ 1.2(b), 1.2(f) and 4.16. Admits that, under the APA, SCO was obligated to administer the intended binary royalty stream described in ¶15, above; denies each and every other allegation of ¶120; and to the extent ¶120 purports to state a legal conclusion, states that no response is required.
121 SCO failed to abide by these obligations under the APA and therefore substantially and materially breached the APA's covenant of good faith and fair dealing.. Denies the allegations of ¶121; and to the exttent v121 purports to state a legal conclusion, states that no response is required.
122 Novell seeks a declaration pursuant to 28 U.S.C. § 2201 that SCO is obligated under the APA to:

a. Comply with Novell's exercise of its audit rights under §§ 1.2(b) and 1.2(f) by providing information requested concerning new SVRX licenses and amendments to SVRX licenses;

b. Seek Novell's prior approval before entering into new SVRX licenses or amendments to SVRX licenses, or otherwise demonstrate that an exception to the prohibition against new licenses or amendments by SCO is applicable;

c. Amend, supplement, modify or waive any rights under SVRX License to the extent so directed in any manner or respect by Novell in its sole discretion; and

d. Accept actions taken by Novell on SCO's behalf when SCO fails to take such action in (c) above as directed by Novell.

.
Denies the allegations of ¶122; to the extent ¶122 purports to state a legal conclusion, states that no response is required; and states that Novell is not entitled to the relief it seeks in ¶122.

SIXTH CLAIM FOR RELIEF (Restitution/Unjust Enrichment)
123 Novell incorporates by reference all prior paragraphs as if they were set forth here in full. Repeats and re-alleges its answers to all prior paragraphs as if those answers were fully set forth herein.
124 SCO has been unjustly enriched by retaining in part or in full portions of all SVRX Royalties to which Novell was entitled under the APA. Denies the allegations of ¶124; and to the extent ¶124 purports to state a legal conclusion, states that no response is required.
125 In addition, SCO has been unjustly enriched by retaining a 5% administrative fee for administering the SVRX License Program but having failed to fulfill its administrative auditing duties under the APA. Denies the allegations of ¶125; and to the extent ¶125 purports to state a legal conclusion, states that no response is required.
126 Novell seeks restitution of all monies constituting SCO's unjust enrichment. To the extent ¶126 purports to state a legal conclusion, states that no response is required; and states that Novell is not entitled to the relief it seeks in ¶126.
127 Novell seeks an order from this Court imposing a constructive trust on revenues SCO unjustly received by failing to perform its administrative auditing and remittance obligations under the APA. Denies the allegations of ¶127; to the extent ¶127 purports to state a legal conclusion, states that no response is required; and states that Novell is not entitled to the relief it seeks in ¶127.

SEVENTH CLAIM FOR RELIEF (Accounting)
128 Novell incorporates by reference all prior paragraphs as if they were set forth here in full. Repeats and re-alleges its answers to all prior paragraphs as if those answers were fully seet forth herein.
129 Under the APA, Novell and SCO shared the stream of revenues from the SVRX licenses. In particular, SCO agreed to collect and pass through to Novell 100% of the SVRX royalties as defined and described in Section 4.16 hereof, while Novell agreed to pay an administrative fee of 5% of the SVRX Royalties. SCO was also responsible for making additional royalties and payments to Novell. Admits that, under Section 4.16 of the APA, SCO agreed to collect and pass through to Novell 100% of the royalties paid by then-existing SVRX licensees for their distribution of binary-code versions of System V products pursuant to sublicensing agreements; admits that, under Section 4.16, Novell agreed to pay SCO 5% of such binary royalties as an administrative fee; admits that SCO was responsible for making additional payments to Novell for products unrelated to the SVRX licenses and this litigation; denies each and every other allegation of ¶129; and to the extent ¶129 purports to state a legal conclusion, states that no response is required.
130 Under section 1.2(b) of the APA, Novell was entitled to "periodic audits" of SCO concerning "all royalties and payments due to [Novell] ...." Under section 4.16(a), SCO was required to "diligently seek to collect all [SVRX] royalties ... and [to] investigate and perform appropriate auditing and enforcement under [the SVRX] licenses." SCO was also required to provide regular audit reports to Novell regarding the SVRX royalties and the other royalties under section 1.2(f) of the APA. Admits the allegations of ¶130 to the extent the terms "SVRX royalties" or "SVRX licenses" refer only to the intended binary royalty stream described in ¶15 and ¶129, above; and to the extent ¶130 purports to state a legal conclusion, states that no response is required.
131 Under the APA, the amounts due Novell were determined and verified on the basis of the audits required under the APA. The right to an accounting of the royalties and payments due to Novell under the SVRX licenses and other provisions of the APA was inherent in the APA. Admits the allegations of the first sentence of ¶131 to the extent they refer to the intended binary royalty stream described in ¶15 and ¶129, above, and to payments for products unrelated to the SVRX licenses and this litigation; denies each and every other allegation of ¶131; and to the extent ¶131 purports to state a legal conclusion, states that no response is required.
132 SCO has failed to fulfill its duties under the audit provisions of the APA, and substantially and materially breached those provisions. Denies the allegations of ¶132; and to the extent ¶132 purports to state a legal conclusion, states that no response is required.
133 Between the time the APA was concluded and the present, there have been hundreds of customers responsible for making royalty payments to SCO under the SVRX Licenses or under other agreements relating to royalty bearing products. SCO was obligated under the APA to receive and administer these royalty payments and share them with Novell. Admits the allegations of ¶133 only to the extent the phrase "royalty payments to SCO under the SVRX Licenses" is limited to the binary royalties described in ¶¶15 and 129, above.
134 Under the APA, royalty payments under the SVRX licenses or other agreements relating to royalty bearing products were to be paid to Novell through SCO. The amount of royalties was calculated through a specified formula. Admits the allegations of ¶134 only to the extent the phrase "royalty payments under the SVRX licenses" refers only to the binary royalty stream described in ¶¶15 and 129, above.
135 On information and belief, SCO has entered into new and/or amendments of the SVRX licenses with Sun and Microsoft, as well as with Linux end users under SCO's Intellectual Property Licenses. SCO failed to seek approval to enter into these licenses, and explain why it was not obligated to obtain Novell's advance approval. Despite repeated requests by Novell to SCO to obtain the underlying information and documentation to verify SCO's APA compliance as part of the audit, SCO failed to report these licenses. This failure to report consitutes a substantial and material breach of the APA. Admits that SCO did not seek Novell's approval before entering into the intellectual property agreements or Sun and Microsoft agreements; admits that SCO did not report those agreements to Novell because they are not "SVRX Licenses" as intended under the APA; denies each and every other allegation and the characterizations in ¶135; and to the extent ¶135 purports to state a legal conclusion, states that no response is required.
136 On information and belief, SCO has received royalties under the SVRX licenses which it consummated with Sun and Microsoft, as well as from Linux end users under SCO's Intellectual Propert Licenses. SCO has not passed on to Novell the required 100% of the royalties it has received under these licenses. This failure to pay royalties also constitutes a substantial and material breach of the APA. Denies the allegations of ¶136; and to the extent ¶136 purports to state a legal conclusion, states that no response is required.
137 Because SCO has refused to provide Novell with a copy of these licenses, Novell is unable to allege with particularity the precise payment terms of the licenses or the corresponding amounts payable to Novell under these licenses pursuant to the APA. Without an accounting, it is therefore impracticable for Novell to name a fixed sum that is owing with respect to these licenses. Denies the allegations of ¶137; and to the extent ¶137 purports to state a legal conclusion, states that no response is required.
138 Given the large number of customers currently responsible for making royalty payments to SCO under the SVRX licenses or under other agreements relating to royalty bearing products, the complexity of the formulas by which these royalty payments are calculated, and the fact that SCO receives directly all these royalty payments without immediate notice to Novell, it is impracticable for Novell to name a fixed sum that is owing with respect to these royalty payments without an accounting. Admits that the binary royalty payments due to Novell under the APA are calculated by formula and that SCO directly receives those payments; denies each and every other allegation and the characterizations in Denies the allegations of ¶138; and to the extent ¶138 purports to state a legal conclusion, states that no response is required.
139 Novell therefore seeks an accounting for monies owed to Novell under the APA. Denies the allegation that SCO owes Novell monies under the APA, and states that Novell is not entitled to an accounting.

V. PRAYER FOR RELIEF
- WHEREFORE, Novell prays for judgement as follows: -
140 For actual and special damages, in an amount to be proven at trial, caused by SCO's slander of Novell's title to the UNIX Copyrights; States that the enumerated ¶¶140-55 of Novell's Prayer for Relief include requests for relief as to which no response is required. To the extent a response is required, SCO denies that Novell is entitled to the requested or any relief. -
141 For punitive damages in an amount to be proven at trial for SCO's malicious and willful conduct in slandering Novell's title to the UNIX Copyrights as alleged herein; -
142 For preliminary and permanent injunctive relief requiring SCO to withdraw its improperly registered claims to UNIX Copyrights; -
143 For actual and special damages, in an amount to be proven at trial, caused by SCO's breaches of §§ 1.2(b), 1.2(f) and 4.16 of the APA; -
144 For specific performance of future compliance with SCO's audit obligations under §§ 1.2(b) and 1.2(f) of the APA; -
145 For specific performance of future compliance with SCO's royalty obligations under §§ 1.2(b) and 4.16(a) of the APA; -
146 For an order imposing a constructive trust on the revenues remitted to SCO under new or amended SVRX Licenses; -
147 For an order attaching SCO's assets pending adjudication of Novell's contract claims; -
148 For declaratory relief pursuant to 28 U.S.C. § 2201 establishing Novell's rights and SCO's obligations under § 4.16(b), as well as SCO's authority to undertake certain actions under § 4.16(b); -
149 For preliminary and permanent injunctive relief enforcing Novell's contractual rights under the APA, including injunctive relief barring SCO from taking actions inconsistent with or in violation of §§ 1.2(b), 1.2(f), 4.16(a) and 4.16(b); -
150 For declaratory relief pursuant to 28 U.S.C. § 2001 establishing Novell's rights and SCO's obligations under the covenant of good faith and fair dealing in the APA; -
151 For an order of restitution of all monies constituting SCO's unjust enrichment; -
152 For an accounting of the royalties remitted to SCO under the SVRX licenses and the monies owing to Novell under the APA; -
153 For pre-judgment interest on any monetary recovery; -
154 For Novell's reasonable expenses and costs incurred, including without limitation attorneys' fees, in defending against the Second Amended Complaint; and -
- - GENERAL DENIAL
SCO denies each and every allegation in Novell's Counterclaims that is not specifically admitted herein.
- - AFFIRMATIVE DEFENSES
SCO hereby asserts the following separate defenses to the purported causes of action in Novell's Counterclaims, without assuming any burden of proof that rests with Novell with respect to such defenses.
- - First Defense - Novell's slander-of-title counterclaim is barred by the absolute and conditional privileges enjoyed by SCO.
- - Second Defense - Novell's slander-of-title counterclaim is barred by the First Amendment to the United States Constition.
- - Third Defense - Novell's counterclaims are barred, in whole or in part, by the doctrine of waiver.
- - Fourth Defense - Novell's counterclaims are barred, in whole or in part, by the doctrines of laches and delay.
- - Fifth Defense - Novell's counterclaims are barred, in whole or in part, by the doctrine of estoppel.
- - Sixth Defense - Novell's counterclaims are barred, in whole or in part, by the doctrine of unclean hands.
- - Seventh Defense - Novell's counterclaims are barred, in whole or in part, by the applicable statute of limitations.
- - Eighth Defense - Novell has failed to mitigate its alleged damages, and accordingly, any damages awarded to Novell should be reduced to the extent of its failure to mitigate.
- - Ninth Defense - Novell's counterclaims are barred, in whole or in part, by lack of causation. To the extent that Novell alleges (contrary to fact) that it has suffered damages, such damagees were not proximately caused by any act or omission of SCO, or were not reasonably foreseeabale, or both.
- - Tenth Defense - Novell's Answer and Counterclaims fails to state a claim upon which relief can be granted.
- - WHEREFORE, plaintiff and counterclaim-defendant SCO demands judgment dismissing Novell's counterclaims with prejudice, along with such other and further relief as the Court deems just and proper.


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