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IBM's Amended Redacted Memo in Support of Motion for SJ on SCO's Interference Claims
Saturday, October 07 2006 @ 08:59 PM EDT

Another IBM filing, this one 72 pages, IBM's Amended Redacted Memorandum in Support of its Motion for Summary Judgment on SCO's Interference Claims (SCO's Seventh, Eighth and Ninth Causes of Action [PDF]. As the documents get longer and longer, so do the names. Do you realize this is item 836 on this enormous docket?

Well, if SCO's not tired and IBM's not tired, then neither are we. So, first, for understanding, here is SCO's Second Amended Complaint. And here's the first one, which IBM references also. Essentially, SCO alleged that IBM somehow induced Novell to get copyrights on Unix, to waive any alleged breach on IBM's part, all in violation of the APA, and SCO also says that IBM told HP and other companies at Linuxworld in 2003 that IBM wasn't going to do any business with SCO and neither should they.

That's in the complaint. But IBM goes on to recount how SCO's claims kept morphing and expanding and contracting, without IBM ever being able to find out exactly what SCO was alleging IBM had done. In interrogatories and depositions and various communications, the story kept changing, and IBM details for the court how hard it's tried to find out what its crimes actually are.

SCO lists various numbers of companies that IBM allegedly interfered with so that SCO's relationship with the companies was harmed. One of them is Oracle, by the way, which may explain another reason Oracle got subpoenaed. Or SCO sorta kinda tried to subpoena them, but couldn't get it right, if you remember that Keystone Kops episode.

So, in IBM's Preliminary Statement in their memo supporting their request that the court grant them summary judgment on these claims, IBM writes:

SCO's Seventh, Eighth and Ninth Causes of Action allege that IBM has interfered with SCO's contracts and business relationships with customers, business partners and other entities. As shown in detail below, SCO's description of these claims has shifted throughout the pretrial proceedings, explanding, contracting, and again expanding (at times wildly), with the only constant thing being SCO's failure to provide any clear identification of the specific contracts or business relationships that were supposedly injured or the acts of IBM that allegedly caused such injury. Although it appeared that SCO was attempting simply to avoid disclosing its evidence (at least until trial), it is now clear that what SCO has been seeking to disguise is the lack of any support for these claims at all.

Yes, it isn't just code that SCO isn't providing specifics about. It's the alleged interference. Which businesses did IBM interfere with? IBM asked SCO to tell it in interrogatories. SCO kept changing the list, and there were no specifics provided, despite several court orders.

So, having failed to get answers from interrogatories, despite the orders, IBM tried deposing folks that SCO provided to testify on the alleged interference with 14 companies IBM listed in its notice, deposing Jeff Hunsaker and Ryan Tibbits. However, IBM found Hunsaker "not prepared" to answer its questions with the kind of detailed and specific information IBM was asking for.

So SCO handed over two documents, and IBM deposed Darl McBride. IBM asked him if the 13 companies in the documents were the only companies with which IBM was alleged to have interfered, and he ended up listing 10 "acts" involving 43 entities, and while the section is redacted, it ends by telling that at the deposition, "Mr. McBride could not identify all of the members of these groups." So it sounds like business groups, not just businesses, unless Mr. McBride didn't know what he was talking about, I suppose.

I suggest that possibility because IBM wrote to SCO to object to McBride's apparent attempt to expand the claims in his testimony, noting he wasn't able to testify from first-hand experience, and SCO immediately backed off and said Mr. Tibbits would testify on those matters and they'd be consistent with the numbers on the IBM interrogatories, the depositions, and the two documents SCO provided the day before McBride's deposition. So, it sounds like an Oops.

But then, at the Tibbits deposition, SCO produced a spreadsheet, listing interferences SCO was alleging "and currently investigating," and there were some 250 entities in at least 7 countries listed, but again, no meaningful details about exactly how IBM was alleged to have globally interfered or how SCO was harmed. Mr. Tibbits essentially just read from the spreadsheet, IBM claims, or speculated in his answers.

So after interrogatories and now three depositions, IBM was still in the dark as to what it had allegedly done, except that they now knew that SCO was alleging that IBM's sales force was allegedly persuading SCO's customers that "SCO has no viability" and that there was IBM direct pressure to stop dealing with SCO. But again, no specifics.

But here's an intriguing sentence:

31. Mr. Tibbits, SCO's Rule 30(b)(6) witness on SCO's relationship with BayStar, also testified that all he knew about IBM's alleged interference with BayStar was as briefly stated in SCO's Exhibit 90.

Woah. IBM is alleged to have interfered with SCO's love pact with BayStar? Man, this case never gets boring. Yes, on page 21, IBM reveals that SCO alleged that it was IBM that got BayStar to threaten litigation against SCO and to terminate its business relationship with SCO. BayStar denies it, as you will see, as does IBM.

But still no real specificity on the rest. So here's IBM, wondering how many entities are there and who are they? It spoke with SCO's counsel, who said they'd decided to limit it to maybe ten, possibly five. SCO would give IBM an updated interrogatory response reflecting this soon. IBM warned SCO that if it failed to do so, IBM would bring the matter to the judge. But when SCO next filed its Final Disclosures, it didn't include the updated interrogatory response.

The next day, SCO told IBM the final number would be six, BayStar, HP, Oracle, AutoZone, Intel and Novell.

So now we know why SCO was so thrilled to do discovery in AutoZone and what that phony baloney case was likely all about.

The next month, after the Final Disclosures, SCO served on IBM a revised interrogatory response. It identified *150* entities IBM allegedly interfered with, and 6 companies or entities IBM allegedly interfered with by direct contacts, namely BayStar, HP, Computer Associates, Oracle and Intel and an "OpenSource conference in Scottsdale, Arizona."

I don't think interference with anything Open Source can be laid at IBM's door. SCO did that all by its lonesome. SCO says that it and HP still have a "good business relationship" but HP provides less support than in 2002.

As for the Arizona conference, SCO means the one that John Terpstra was hosting in the spring of 2004. SCO's story is that Darl had an oral agreement with Terpstra to speak at the conference, but IBM allegedly told Terpstra it didn't want Darl to speak at the conference and would withdraw its support if he did.

The essence of SCO's interference gripe, though, is that IBM encouraged companies to migrate to Linux rather than use SCO's Unix products. High crimes and misdemeanors indeed. IBM "enabled" them to switch. Dear SCO: That's called competing in business. There's no law against that.

SCO provides an enjoyable list of some 19 customers SCO lost because they moved to Linux, including KMart, Safeway, Shaw's Supermarkets, Target, and AutoZone.

Anyway, to get back to our hilarious narrative, IBM next tried to depose Tibbits a second time, as recently as June 30, 2006. Tibbits narrowed SCO's claims, saying it was dropping its tortious interference claims with respect to five of the 19 "former SCO customers" in its last supplemental response to the interrogatory. The five dropped would be Avnet, Frazee Paints, Save Mart, Snyder Drug Stores and Target -- "because these companies had not switched to a Linux platform at all."

You know SCO. Claim first, research later.

So that left 14 vague interference claims entities, the seven identified entities that IBM allegedly directly contacted or SCO alleges specific interfering conduct, BayStar, HP, Computer Associates, Oracle, Intel, Novell, and that conference, and some 156 "other Linux users" who were somehow influenced by the marketplace to switch, or maybe they did. SCO says they make the claim only on information and belief.

I'll mention that it's my understanding that you can't prevail against a summary judgment motion with "information and belief" materials. It has to be actual facts. SCO has to raise a genuine issue of fact to survive this motion, and supposings and maybes and probably won't cut it, as IBM carefully shows, with cases to back up the position.

How would one quantify the damages due to SCO from that missed opportunity for Darl to speak at an Open Source conference? One can't help but wonder. Did he think he'd rake in some business at an Open Source conference, pushing Unix, after going for Linux's throat with his fangs? Apparently so, because IBM is alleged to have interfered with SCO's ability to "generate potential new business and establish goodwill in the open source community."

Say, what? In 2004, do you remember SCO trying to establish goodwill in the community? Me neither. It was actively suing DaimlerChrysler and AutoZone, opposing Red Hat's request to the judge to reconsider and let the case go forward, threatening legal activity in Spain, Germany, and the UK, issuing subpoenas to FSF, and Darl attended the Novell BrainShare conference that spring, but secretly, under cover, all the while FUDding away to such a degree Red Hat brought it to the court's attention. None of that was endearing to the Open Source community.

Sometimes I wonder if news can't make it over the Wasatch Mountains. SCO seems so cut off from reality. If you don't remember all that history, just go to our Archives and look by dates at that time period. I think it would be hard to find conduct more offensive to the FOSS community than what we watched back then.

OK, so now IBM knows the list of entities, but where's the evidence? "SCO has not identified any evidence of improper conduct by IBM that interfered with any of its contracts or business relationships and it cannot do so, for at least the reasons explained below:

Bay Star: no one from IBM ever communicated with anyone at BayStar. Larry Goldfarb, managing member of BayStar, provides a sworn declaration stating that this is true. BayStar dumped SCO because its stock price, financial performance, and the viability of its UNIX products all appeared to be in decline. Not only did the stock price decline, but Goldfarb says, "I was also very concerned about SCO's high cash burn rate and whether its UNIX products were viable in the marketplace."

But wait. There's more. It seems Microsoft's conduct suggested that it might not guarantee BayStar's investment after all, as it had promised by its senior VP of corporate development and strategy, Goldfarb stating, "Mr Emerson and I discussed a variety of investment structures wherein Microsoft would 'backstop,' or guarantee in some way, BayStar's investment.... Microsoft assured me that it would in some way guarantee BayStar's investment in SCO." But after the investment was made, "Microsoft stopped returning my phone calls and emails, and to the best of my knowledge, Mr. Emerson was fired from Microsoft."

Well, not to try to teach Mr. Goldfarb anything, since he's the businessman, not I, but isn't relying on Microsoft in business a proven way to get burned? That's what I've been reading, anyway. In any case, now we know the rest of the story about BayStar. Good for Mr. Goldfarb, for providing this declaration. He didn't have to do that. He does give Microsoft an out, of course. They will likely say that they were not involved as a company. It was a rogue employee, who got fired.

Other reasons:

Computer Associates, Oracle and Intel: IBM never stated to them at LinuxWorld 2003 it was cutting off its ties with SCO or that they should do the same. All of them have provided declarations so stating, and so has Karen Smith, the former IBM respresentative accused. Does SCO just make stuff up? or are there paranoid tendencies here?

There's more. It turns out that it was SCO itself that "supported the migration of Computer Associates, Oracle and Intel products to Linux, partnering with each of these companies to provide Linux solutions to their end users." A former SCO employee, Gregory Anderson, states that any change in those relationships had to do with SCO's [alleged] decision not to continue to distribute Linux products."

That word in brackets tells a story.

Yet more reasons IBM says SCO is all wet:

HP: HP provides a declaration as well, by the way. And any of us, and that includes me, who despised them for continuing to partner with SCO may need to repent in sackcloth and ashes, because as a result of not breaking off the relationship, IBM is now defended from the false charge of interfering with SCO's relationship with HP.

Terpstra: As for the Arizona conference, Terpstra rescinded the invitation because of complaints from other participants, not IBM, who wasn't involved in that conference in any way. IBM was invited, Terpstra states in a declaration, but they didn't want to participate, but they never said anything about McBride. Others surely did though, threatening not to participate if McBride was a speaker, so he called McBride and told him.

Novell: As for Novell, there's a declaration from Novell's lawyer, Joseph LaSala, saying that IBM didn't induce anything. Novell got the copyrights, because Novell owns them. It waived because it has the right to and it was in Novell's interest to do so. IBM didn't ask for that or ever "express a desire that Novell breach, or take any action contrary to, the APA, Amendment X, or any other agreement between Novell and Santa Cruz or Novell and SCO."

That's legalese, which I translate as essentially that they talk, but IBM didn't induce Novell to do anything it shouldn't, according to Novell's understanding of the various agreements.

One more reason:

Why IBM supported Linux: As to why IBM supported Linux, it's purpose had nothing to do with ill will to SCO. It wanted to make money, for competitive reasons. As for SCO's amorphous claims, not one of SCO's experts "attempts to quantify or even address the alleged damages allegedly caused by IBM..." There were factors adversely affecting Santa Cruz's business since 1999, at least, that had nothing to do with IBM. SCO, IBM quotes from an article, couldn't get new customers even when Linux was new, didn't have credentials, and was relatively unproven. After Caldera bought what it bought, it was basically trying to keep the customers it had as opposed to getting new ones for UnixWare and OpenServer. As for its Linux products, they were more expensive than the competition. The company did that, kept Linux at a comparative price with the Unix products because otherwise they would "devalue our UNIX business."

This is a quotation from Exhibit 308, the sealed transcript of a November 2004 deposition of Philip E. Langer. IBM doesn't say it, but there were other reasons folks didn't warm to Caldera's Linux business, including their mixing of proprietary and free software and their odd licensing and per seat pricing.

IBM says it is entitled to summary judgment for three independent reasons:

1) Of the 7 companies SCO at least mentioned specifically by name -- in the first complaint there were 7, then 12 were named in interrogatory responses and then later only 7 again listed in SCO's amended responses but not the same 7, and a mere 3 in the still later second amended complaint plus the Novell allegations -- the companies or entities all deny any such interference and there's absolutely no evidence on SCO's side. And as for the alleged interference with the Unix on Intel market, Utah doesn't recognize activities regarding an entire market as a basis for recovery for "intentional" interference;

2) Utah law, which IBM says applies to the interference claims, because if there had been any injury, it would have been there that it would have been felt, requires SCO to prove that IBM's allegedly tortious acts were undertaken with an improper purpose or by improper means, which is not the case with IBM. In fact, SCO's own experts have acknowledged that IBM's support for Linux was motivated by "compelling competitive reasons and undertaken for the purpose of protecting IBM's legitimate, long-range economic interests";

3) There's no causal link between anything IBM has done and any specific injury to SCO. If SCO is experiencing a deteriorating business, its own witnesses and documents show it's because of a variety of factors having nothing to do with IBM, including "decisions made by SCO management."

I'll say. You can't sue your own customers and expect business to pick up. Business 101. And if you sue in hopes of a big payday instead of building your business, and put all your eggs in the litigation lottery basket, you aren't likely to win on interference claims, because you shot your business's own foot off. After 72 pages of details elaborating on the above, IBM asks that the court dismiss these three SCO claims with prejudice "and as a matter of law."


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