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SCO's Reply Memo in Support of Motion for SJ on IBM's 6th, 7th, 8th CCs as text
Saturday, January 13 2007 @ 01:11 AM EST

Here's SCO's Reply Memorandum in Support of its Motion for Summary Judgment on IBM's Sixth, Seventh and Eighth Counterclaims [PDF] as text, in which SCO tries to wiggle out of the GPL pickle it's in. So you can follow along the winding road of SCO's arguments, here's the GPLv2 and the FAQ. There is a wealth of resources about the GPL on Groklaw's permanent GPL page. You probably also want to reread the SCOsource license.

SCO's argument goes something like this:

1. Materials SCO contributed to Linux SCO released under the GPL and they fully complied with its terms;
2. The UNIX stuff was put in there beginning in 1992 but they didn't know about it, and they didn't do it, and hence there was no copyright notice on that Unix material of theirs, so no one, including Linus, had the right to release Linux from that day forward, by SCO's reading of the GPL, if IBM's interpretation of the GPL is right;
3. SCO isn't repudiating the GPL by saying it is unenforceable -- it's a matter of interpretation;
4. SCO never tried to sell a SCOsource license to anyone it had earlier sold Linux to;
5. The first time SCO tried to license its Unix materials in Linux, it used the SCOsource license, not the GPL, and as copyright holder, it has the right to use any license it wishes.

So SCO wraps up its arguments like this:

Therefore, SCO did not breach the GPL and was authorized, under the terms of the GPL, to distribute the code properly contributed by IBM. Accordingly, absent any breach with respect to its UNIX material, or any other material, in Linux, SCO's motion for summary judgment on IBM's Sixth, Seventh, and Eighth Counterclaims should be granted.

Then for good measure, it argues that even if they were violating, the GPL is against public policy if IBM's interpretation of it is correct. What? You say that makes no sense?

How are they are they wrong? Let me count the ways.

One is not allowed to intermingle GPL and nonGPL code. Period. They forgot that part. You also can't place further restrictions on code that is GPLd. SCOsource purported to restrict by seat and you could only run binary, you didn't get the source, and you couldn't modify:

2.0 GRANT OF RIGHTS AND OBLIGATIONS SCO MAKES NO GRANT OF RIGHTS OF ANY KIND WITH RESPECT TO ANY SOFTWARE OTHER THAN THE SCO PRODUCT COVERED BY THIS AGREEMENT. THIS AGREEMENT DOES NOT INCLUDE ANY RIGHTS TO ACCESS, USE, MODIFY OR DISTRIBUTE ANY SCO SOURCE CODE IN ANY FORM UNDER ANY LICENSING ARRANGEMENT....

2.3 Provided Company provides the Linux System information and pays SCO the applicable right-to-use license fees required as included Section 1 of Exhibit A to this Agreement, SCO grants Company the right to use all, or portions of, the SCO Product only as necessary to use the Linux Operating System on each Linux System for which the appropriate CPUs have been licensed from SCO. Company must take reasonable means to assure that the number of CPUs does not exceed the permitted number of CPUs. Such right is granted to use the SCO Product in conjunction with the Linux Operating System solely in Object Code format.

SCO refused to identify which code in Linux was theirs, so in effect this was a limitation on all the code in Linux. As IBM has already told the court in its memo in opposition, "Despite its dramatic public claims, SCO has failed to identify any code allegedly owned by SCO and copied by IBM into Linux. By contrast, undisputed facts establish that SCO literally copied, without alteration, hundreds of thousands of lines of code developed and copyrighted by IBM."

If we look behind the curtain, the real point of SCOsource, in my opinion, was to make Linux cost something and to limit downstream freedoms. That is, of course, the same thing the Novell-Microsoft patent agreement achieves for Microsoft -- a per seat restriction, an expense for patents that makes Linux cost more, and a loss of ability to give those downstream the same rights you have. So Microsoft got from Novell essentially what SCO was trying for with SCOsource. That is why the community is so upset with Novell and why GPLv3 will attempt to block this agreement.

Of course, there is no evidence that SCO is the copyright holder in the first place, and there are copyright notices for the code for the true copyright holders, except on things that are public domain, but even if SCO were the copyright holder, it lacks, under the terms of the GPL, the right to put its code into a GPL program under a license that isn't compatible with the terms of the GPL. That's the sticky wicket SCO can't squeeze through. The minute it allegedly realized that there was code of theirs allegedly in Linux, it had to either GPL it, with an appropriate copyright notice, or remove it. It did neither. At that moment, it was in violation of the GPL for continuing to distribute.

And as for SCOsource, SCO appears to think that because they didn't sell it to previous Linux customers that it gets away with it. But in fact, although it didn't sell it to them, it did give it to them allegedly for the money already paid, and that is a violation right there. Plus, they blocked sublicensing in SCOsource, which you can't do to code in a GPL program.

SCO argues that the requirements of Section 2(b) of the GPL apply only to folks who have modified the code, not to mere distributors, and it claims that "it is undisputed that SCO did not modify Linux". Ha ha. Not so.

SCO then accurately quotes the GPL section 6:

With respect to those who received Linux from SCO, section 6 of the GPL makes clear that a GPL licensee cannot impose additional restrictions on those who received the GPL Program from the GPL licensee, stating that the licensee "may not impose any further restrictions on the recipients' exercise of the rights granted herein."

Like Novell, this is the part SCO forgot to abide by, but it dances around the requirement like this: we are not a licensor, because we didn't know our Unix stuff was in there and we never put a copyright notice on it.

Do you see now why the GPLv3 needs to happen? Folks are starting to get cute with the GPLv2, which couldn't happen to a "perfect" license, and although they will fail, the fact is it needs to be made crystal-clear obvious, not so good-hearted men and women will abide by it -- they already do -- but so you don't have to go through nuisance lawsuits with those wishing to get cute. IBM has to actually answer this malicious drivel, and that costs money. It's a waste of time and resources to prove to those yearning to avoid the GPL that in fact they can't get away with it.

Here's a clue for SCO: if you were the copyright holder, and you discovered materials that shouldn't be in Linux, you had the right to have it removed. Alternatively you could have GPLd it. Those are the only two choices. The Linux community offered to remove it, if you would prove ownership and inappropriateness and you refused to cooperate. Instead, you offered the SCOsource thingie, and that's not an option under the GPL. And you continued to distribute, and not just to former customers either.

Like they don't know that. There is a material misquote from the GPL. SCO quotes from section 4, but it leaves out a "not". It reads like this:

4. You may not copy, modify, sublicense, or distribute the Program except as expressly provided under this License. Any attempt otherwise to copy, modify, sublicense or distribute the Program is void, and will automatically terminate your rights under this License. However, parties who have received copies, or rights, from you under this License will not have their licenses terminated so long as such parties remain in full compliance.

SCO leaves out the first "not", so it reads "You may..." I know. Innocent mistake, I'm sure.

Here's another stunner. Now SCO doesn't say that Linus used Minix to write the Linux kernel; he purportedly used Sun manuals:

"Linus Torvalds, who does not own any UNIX copyrights, used the copyrighted manuals for the UNIX-derivative operating system developed by Sun, a UNIX licensee, to develop the Linux kernel."

Nothing like introducing a new fact in dispute in support of your own summary judgment motion. Update: Preliminary digging indicates to me that once again SCO has fallen into the BSD pit. In 1982, Sun released SunOS, which was based on BSD, not Unix System V. It wasn't until 1992, according to Levenez, that Sun, in collaboration with AT&T, combined BSD and System V to make Solaris. Linus, however, began to write the kernel in 1991 and it was posted on the Internet that year, which is before Solaris was released, and he's on record as saying that he wanted to make it as close to SunOS as possible. This timeline says Sun announced Solaris in 1991, as does Sun's timeline, but it still places it after the first release of the Linux kernel. It also states that Linus used Tanenbaum's 1987 book, Bach's 1986 book, and the Jolitz articles starting to run in Dr Dobbs" which would be about SunOS, one presumes. Even if Linus did use Sun manuals, if they were based on BSD, he was free to copy the code verbatim, if he so desired.

But the biggest problem SCO has is something it didn't address, namely that it violated IBM's rights on IBM's code that IBM did choose to place in Linux under the GPL. That GPL violation SCO says absolutely nothing about.

So, does SCO believe this legal spinach? I doubt it. But it has to say something. It would like this put out of the case on summary judgment, as opposed to having to present these silly arguments to a jury, and I certainly don't blame them for that.

The part that puzzles me is this: if it were IBM's motion, it would be helpful for SCO to raises facts in dispute. But this is SCO's motion, so it's hard to figure out how they expect that to be helpful. I've explained before that a motion for summary judgment can only be victorious when there are no facts in dispute. Law.com's definition of summary judgment is clear:

"n. a court order ruling that no factual issues remain to be tried and therefore a cause of action or all causes of action in a complaint can be decided upon certain facts without trial. A summary judgment is based upon a motion by one of the parties that contends that all necessary factual issues are settled or so one-sided they need not be tried. The motion is supported by declarations under oath, excerpts from depositions which are under oath, admissions of fact and other discovery, as well as a legal argument (points and authorities), that argue that there are no triable issues of fact and that the settled facts require a summary judgment for the moving party. The opposing party will respond by counter-declarations and legal arguments attempting to show that there are 'triable issues of fact.' If it is unclear whether there is a triable issue of fact in any cause of action, then summary judgment must be denied as to that cause of action. The theory behind the summary judgment process is to eliminate the need to try settled factual issues and to decide without trial one or more causes of action in the complaint. The pleading procedures are extremely technical and complicated and are particularly dangerous to the party against whom the motion is made."

And here's an added detail from 'Lectric Library:

"'Each element must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation.' Id. In order to defeat a summary judgment motion, the nonmoving party may not simply rely on his pleadings but must present some evidence on every material issue for which he will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)."

So you can decide if IBM met its burden, you can find both IBM's Memo in Opposition to this motion and SCO's memo in support of its motion here. And so you recall what IBM's counterclaims are, here's SCO's description from its memo in support:

1. IBM's Sixth Counterclaim, for breach of the GNU General Public License, alleges that SCO has breached the GPL by "among other things, copying, modifying, sublicensing or distributing programs licensed under the GPL, including IBM contributions, on terms inconsistent with the GPL, and seeking to impose additional restrictions on the recipients of programs licensed under the GPL, including IBM contributions, distributed by SCO." (IBM's 2d Am. Counterclaims ¶ 145.) The counterclaim also alleges that SCO's license under the GPL "terminated" because of this alleged breach. (IBM's 2d Am. Counterclaims ¶ 146.)

2. IBM's Seventh Counterclaim, for promissory estoppel, seeks to recover damages resulting from IBM's reliance on SCO's promise not to breach the GPL. (IBM's 2d Am. Counterclaims ¶¶ 148-53.)

3. IBM's Eighth Counterclaim, for copyright infringement, alleges that SCO has infringed upon IBM's copyrights by "copying, modifying, sublicensing and/or distributing Linux products except as expressly provided under the GPL." (IBM's 2d Am. Counterclaims ¶ 159.)

Finally, IBM references its Statement of Undisputed Facts in its Memorandum in Support of its Motion for Summary Judgment on SCO's Copyright Claim, which mainly deal with IBM's rights to contribute the code it contributed to Linux, so you'd need to read that also to evaluate if IBM has presented evidence and facts in support of its opposition to SCO's motion. To me, it's so obvious, but maybe SCO hopes the judge won't be as familiar with the GPL. But he can read. So why SCO chose these GPL counterclaims to target with a motion for summary judgment is beyond my comprehension. Maybe it's just to make IBM work and spend money. Or maybe it's another attempt to slip Dr. Cargill's findings in through a side door. One thing is for sure, SCO doesn't comprehend the GPL as written, or doesn't want to, and all my remedial classes were for naught.

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

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

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

Devan V. Padmanabhan (admitted pro hac vice)
John J. Brogan (admitted pro hac vice)
DORSEY & WHITNEY LLP
[address, phone, fax]

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

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

Attorneys for The SCO Group, Inc.

__________________________

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH

_________________________

THE SCO GROUP,

Plaintiff/Counterclaim-Defendant

v.

INTERNATIONAL BUSINESS
MACHINES CORPORATION,

Defendant/Counterclaim-Plaintiff

_________________________

SCO'S REPLY MEMORANDUM IN
SUPPORT OF ITS MOTION FOR
SUMMARY JUDGMENT ON IBM'S
SIXTH, SEVENTH AND EIGHTH
COUNTERCLAIMS

Case No. 2:03CV0294DAK
Honorable Dale A. Kimball
Magistrate Judge Brooke C. Wells

TABLE OF CONTENTS

TABLE OF AUTHORITIES ........................................................................................................... i

PRELIMINARY STATEMENT .................................................................................................... 1

ARGUMENT.................................................................................................................................. 4

I. THE RECORD SHOWS THAT, AS A MATTER OF LAW, SCO HAS COMPLIED WITH THE GPL. .......................................................................................... 4

A. In Licensing Its UNIX Material, SCO Did Not Improperly Restrict the Distribution or Use of Any GPL Program. ............................................................. 4

1. SCO Did Not Make Its UNIX Material Subject to the GPL....................... 4

2. IBM Does Not Allege That SCO Improperly Restricted The Use or Distribution of Any GPL Program..............................................................5

3. SCO Did Not Restrict the Use or Distribution of Linux by Anyone Who Had Received Linux from SCO.........................................................6

II. IBM’S INTERPRETATION OF THE GPL TO ENCOMPASS THE ENTIRETY OF LINUX IS WRONG.....................................................................................................8

III. THE RECORD SHOWS THAT, AS A MATTER OF LAW, SCO HAS NOT REPUDIATED THE GPL................................................................................................10

CONCLUSION.............................................................................................................................15

i

TABLE OF AUTHORITIES Cases Amoco Oil Co. v. Premium Oil Co.,
313 F. Supp. 2d 1233 (D. Utah 2004)............................................................................... 11

Conrad Bros. v. John Deere Ins. Co.,
640 N.W.2d 231 (Iowa 2001) ........................................................................................... 13

Dow Chem. Co. v. United States,
226 F.3d 1334 (Fed. Cir. 2000)................................................................................... 11, 13

Estate of Harris v. Harris,
218 F.3d 1140 (10th Cir. 2000) ........................................................................................ 14

I.A.E. Inc. v. Shaver,
74 F.3d 768 (7th Cir. 1996) ................................................................................................ 9

In re Midway Airlines,
180 B.R. 851 (Bankr. N.D. Ill. 1995) ............................................................................... 13

Kaydon Acquisition Corp v. Custom Mfg., Inc.,
301 F. Supp. 2d 945 (N.D. Iowa 2004)............................................................................. 13

Kepner-Tregoe, Inc. v. Leadership Software, Inc.,
12 F.3d 527 (5th Cir. 1994) ................................................................................................ 9

Kimel v. Mo. State Life Ins. Co.,
71 F.2d 921 (10th Cir. 1934) ...................................................................................... 12, 13

LAK, Inc. v. Deer Creek Enters.,
976 F.2d 328 (7th Cir. 1992) ............................................................................................ 12

Lantec Inc. v. Novell, Inc.,
306 F.3d 1003 (10th Cir. 2002) ........................................................................................ 11

Lawser v. Poudre Sch. Dist.,
171 F. Supp. 2d 1155 (D. Colo. 2001).............................................................................. 14

i

Moncrief v. Williston Basin Interstate Pipeline Co.,
880 F. Supp. 1495 (D. Wyo. 1995)................................................................................... 13

Twentieth Century Music Corp. v. Aiken,
422 U.S. 151 (1975)............................................................................................................ 9

Federal Rules of Civil Procedure

Fed. R. Civ. P. 8(e)(2)................................................................................................................... 14

Other Authorities

4 Arthur L. Corbin, Corbin on Contract § 973 at 911 (1951)....................................................... 12

ii

Plaintiff, The SCO Group, Inc. ("SCO"), respectfully submits this Reply Memorandum in Further Support of Its Motion for Summary Judgment on IBM's Sixth, Seventh and Eighth Counterclaims.

PRELIMINARY STATEMENT

This Motion concerns IBM's Sixth, Seventh and Eight Counterclaims all counterclaims predicated on SCO's alleged violations of the General Public License (GPL). As SCO showed in its Opening Memorandum and as shown below, IBM's arguments fail as a matter of law, and SCO is entitled to summary judgment, for several reasons.1

First, SCO has fully complied with the GPL. Contrary to IBM's assertions, SCO did not undertake a distribution of its UNIX material under the GPL or breach the GPL by selling a license that allowed end-users to use the UNIX material in Linux. A copyright owner may enforce its copyrights in material in a GPL-licensed program where the owner has not placed a copyright notice in the program agreeing to the use of the copyrighted material therein. By its plain terms, the GPL does not even "apply" to material that lacks such a notice.

By expressly requiring such a notice, the GPL makes clear that it does not purport to preclude an owner from enforcing his copyright in material improperly contributed to the program by someone else. Neither SCO nor any other owner of the UNIX material in Linux placed any copyright notice for that material in Linux or released that material into the public

1

domain. SCO thus never agreed to the distribution of its UNIX material pursuant to the GPL and remained free to license that material in Linux to end-users for a fee, as it did.

Second, even if SCO's licenses with Linux end-users were treated (incorrectly) as licenses for the right to use the entirety of Linux, nothing in the GPL prohibits SCO from offering such a license. Section 6 of the GPL expressly applies only to restrictions placed by the licensee on users to whom the licensee itself has distributed the GPL-licensed program. It is undisputed that SCO did not sell, or even attempt to sell, a UNIX license to any party who received a Linux distribution from SCO. IBM cites (in a footnote) Section 2(b) of the GPL in contending that SCO was obligated to cause Linux as a whole to be licensed to "all third parties," but Section 2 expressly applies only where the GPL licensee has made modifications to the program. It is undisputed that SCO did not make any modifications to Linux.

IBM thus conflates SCO's role as a former distributor of Linux and its role as the owner of the UNIX intellectual property rights. As a Linux distributor, SCO needed to comply with the GPL, and it has done so. In enforcing its UNIX intellectual property rights, SCO has not precluded anyone who has received Linux from SCO from exercising their rights under the GPL.

Third, IBM proposes an unreasonable interpretation of the GPL, which if accepted would mean that IBM and others have been in breach of the GPL for years. IBM argues that GPL licensees have been (purporting to) license the entirety of Linux, including the UNIX material therein, for many years. Yet the UNIX material in Linux has never contained the requisite copyright notice. Linus Torvalds nevertheless began distributing such UNIX material in Linux under the GPL in 1992. If IBM is correct and Mr. Torvalds and his successors have been purporting to distribute the entirety of Linux pursuant to the GPL, they were in plain breach of

2

Section 0; and Mr. Torvalds's misuse of the UNIX material resulted in an "automatic" termination of his right to distribute not just the UNIX material, but also any other part of Linux. Similarly, by IBM's argument, the GPL licenses of Linux end-users were terminated when they used or modified Linux, because the UNIX material therein does not contain the requisite copyright notice, and under Section 4 anyone who has received a copy of Linux must "remain in full compliance" with its terms. These extreme results are reasons for rejecting IBM's argument that the entirety of Linux, including the UNIX material therein, falls under the GPL.

Fourth, SCO has not "repudiated" the GPL. SCO clearly states in its pleadings, for example, that "IBM's claims are barred by license" (that is, the GPL) and that SCO has acted "within the contractual rights granted to it concerning software made freely available by IBM under the GPL." SCO's assertion of defenses regarding the unenforceability of GPL provisions as IBM has interpreted them does not constitute a repudiation. IBM even argues that SCO "continues to repudiate" the GPL in disputing IBM's interpretation of particular GPL provisions. The fact is that IBM's interpretation of selected provisions of the GPL would violate well-established rules of construction. IBM cannot bootstrap a claim of repudiation onto the parties' disagreement over the meaning of certain provisions of the GPL.

There is thus no basis for IBM's assertion that SCO has "refused to perform" under the GPL; there is only a disagreement between the parties as to the interpretation of several GPL provisions. The Court should resolve that dispute in SCO's favor as a matter of law, based on the plain language of the GPL and a logical construction of the license.

3

ARGUMENT

I. THE RECORD SHOWS THAT, AS A MATTER OF LAW,
SCO HAS COMPLIED WITH THE GPL.

IBM alleges that SCO breached the GPL in licensing its UNIX material. SCO shows below that IBM's argument fails as a matter of law.

A. In Licensing Its UNIX Material, SCO Did Not Improperly
Restrict the Distribution or Use of Any GPL Program.

1. SCO Did Not Make Its UNIX Material Subject to the GPL.

The GPL explicitly states that it "applies to any program . . . which contains a notice placed by the copyright holder saying it may be distributed under the terms of this General Public License." (GPL § 0 (emphasis added).2) IBM acknowledges (at 1) that in a free-software model, it is the "copyright owners" who choose to make their source code available for others under a free-software license.3

4

The undisputed evidence is that none of the copyright holders of UNIX contributed UNIX code for distribution under the GPL. (Declaration of Dr. Thomas A. Cargill (SCO Ex. 11)4 ¶¶ 2, 17.) That is, there is no evidence that any UNIX copyright holder (SCO, Caldera International, Inc., or The Santa Cruz Operation, Inc.) contributed UNIX material into Linux for distribution under the GPL, let alone with a copyright notice. Consequently, the GPL does not apply to the UNIX material.5

The licenses that IBM challenges were ones in which, as IBM acknowledges, SCO licensed the UNIX material in Linux. SCO's licensing activities with regard to its copyrighted UNIX code do not and cannot constitute a breach of the GPL, which by its express terms does not even apply to such material.

2. IBM Does Not Allege That SCO Improperly Restricted
The Use or Distribution of Any GPL Program.

IBM does not allege that SCO breached the GPL by restricting the use or distribution of any material other than the UNIX material in Linux. With respect to the IBM Copyrighted Works, for example, that material was contributed to Linux by IBM the copyright holder for distribution under the GPL. IBM does not allege that SCO breached the GPL based on its

5

distribution of the properly contributed IBM code. Indeed, the undisputed evidence is that SCO did not breach the GPL in distributing IBM's (or anyone else's) code under the GPL.

_______________

In sum, given that SCO's copyrighted material fell outside of the scope of the GPL, it was within SCO's rights to license the intellectual property misappropriated by Linux, which is precisely what it did. (IBM Exs. 578, 607.) Therefore, SCO did not breach the GPL and was authorized, under the terms of the GPL, to distribute the code properly contributed by IBM. Accordingly, absent any breach with respect to its UNIX material, or any other material, in Linux, SCO's motion for summary judgment on IBM's Sixth, Seventh, and Eighth Counterclaims should be granted.

3. SCO Did Not Restrict the Use or Distribution of
Linux by Anyone Who Had Received Linux from SCO.

SCO complied with the plain terms of the GPL in offering its UNIX licenses even if, contrary to fact, the GPL applied to the UNIX material in Linux. With respect to those who received their version of Linux from someone other than SCO, IBM contends (at n.13) that "Section 2(b) clearly states that when a GPL licensee such as SCO distributes software subject to the GPL, it must license that software under the GPL to 'all third parties'." Section 2(b), however, applies only to a work that was modified by a licensee.6It is also undisputed that SCO did not modify Linux. In paragraph 17 of its opposition memorandum, IBM states that SCO "made certain modifications and additions to the Linux 2.4.19 kernel" and cites a Product Announcement. However, the Product Announcement does not state that SCO made any

6

modifications and additions. SCO did not in fact make any modifications or additions to Linux; rather, SCO redistributed Linux 2.4.19 as is on two disks that it received from SuSE. (SCO Ex. 233 ¶¶ 18-23.) IBM presents no evidence otherwise.

With respect to those who received Linux from SCO, section 6 of the GPL makes clear that a GPL licensee cannot impose additional restrictions on those who received the GPL Program from the GPL licensee, stating that the licensee "may not impose any further restrictions on the recipients' exercise of the rights granted herein." Section 6 also makes clear that the license granted by the licensee is from the "original licensor." As noted, the UNIX material that is the subject of SCO's license was not contributed to Linux by any UNIX copyright holder. As such, with respect to the UNIX material covered by SCO's license, there was no "original licensor."

It is undisputed that SCO did not attempt to sell a license to any party who received a Linux distribution from SCO. IBM contends (at 17) that "anyone who received a Linux distribution from SCO paid a fee for the use of SCO Linux." That is wrong. SCO indisputably did not sell or attempt to sell a UNIX license to Linux customers by agreeing to hold them harmless from any SCO intellectual property issues. In addition, the source IBM cites does not support IBM's assertion (at 17) that SCO provided a compliance license to such customers "in partial consideration for the fees SCO already charged for its Linux products." In the deposition that IBM cites, of Lawrence Gasparro, Mr. Gasparro testified regarding the compliance agreement that "we would have made this available at no charge to this customer." (IBM Ex. 303 at 288.)

7

II. IBM'S INTERPRETATION OF THE GPL TO ENCOMPASS
THE ENTIRETY OF LINUX IS WRONG.

IBM proposes an unreasonable interpretation of the GPL, which if accepted would mean that IBM and others have been in breach of the GPL for years. IBM argues that GPL licensees have been (purporting to) license the entirety of Linux, including the UNIX material therein, for many years. Yet the UNIX material in Linux has never contained the requisite copyright notice. IBM's argument that SCO breached the GPL by offering licenses for the UNIX material in Linux would effectively allow parties to misappropriate code into a GPL-licensed work and preclude the copyright owner from protecting its rights. The GPL plainly does not preclude a copyright owner from protecting its copyrights in such code.

Linus Torvalds, who does not own any UNIX copyrights, used the copyrighted manuals for the UNIX-derivative operating system developed by Sun, a UNIX licensee, to develop the Linux kernel. (SCO Ex. 169 at 82.) Mr. Torvalds released the first version of the Linux kernel under the GPL. (IBM SJ Mem. at 6, ¶ 19.) The GPL unambiguously provides:

You may copy, modify, sublicense, or distribute the Program except as expressly provided under this License. Any attempt otherwise to copy, modify, sublicense or distribute the Program is void, and will automatically terminate your rights under this License. However, parties who have received copies, or rights, from you under this License will not have their licenses terminated so long as such parties remain in full compliance.

(GPL § 4.) Mr. Torvalds was not the copyright holder to the UNIX source code when he included material from UNIX in Linux; those copyrights were held by SCO and its predecessors in interest. (See SCO Exs. 258-67.)

IBM has previously suggested that some of the UNIX material had previously been published, but that assertion does not constitute support of IBM's claims of breach of the GPL.

8

In addition, the fact that a third party made copyrighted material publicly available does not divest the copyright owner of its interest in the copyrighted material. Indeed, it is the very fact that copyrighted works are made available that necessitates their protection. See Kepner-Tregoe, Inc. v. Leadership Software, Inc., 12 F.3d 527, 537 (5th Cir. 1994) ("[P]rotected expression does not lose its protection simply because it is widely disseminated."); Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 n.6(1975) (copyright protection ensures "that men of ability, who have employed their time for the service of the community, may not be deprived of their just merits, and the reward of their ingenuity and labour.") (quoting Cary v. Longman, 1 East *358, 362 n. (b), 102 Eng. Rep. 138, 240 n. (b) (1801)).

Accordingly, if IBM is correct in asserting that Mr. Torvalds and his successors have purported to include the entirety of Linux pursuant to and subject to the terms of the GPL, then they have plainly breached Section 0 of the GPL, requiring the copyright owner's notice and permission. Section 0 of the GPL codifies the basic principle that an individual can only give away the rights that he himself possesses. I.A.E. Inc. v. Shaver, 74 F.3d 768, 775 n.7(7th Cir. 1996) ("In its simplest form, a license means only leave to do a thing which the licensor would otherwise have a right to prevent."). Since the UNIX material in Linux was not contributed by a UNIX copyright holder, Section 0 was not followed. Accordingly, by IBM's argument, any right to sublicense or distribute Linux was void and automatically terminated. Since Mr. Torvalds was the first individual in the Linux GPL licensing chain, every subsequent transfer was also void. Even if the transfers themselves were not void, moreover, under Section 4 any parties who do not "remain in full compliance" with the GPL, such as by using and distributing under the GPL material to which the GPL does not apply, will have their licenses automatically terminated.

9

IBM explicitly asserts (at 28) the foregoing interpretation of how the breach and termination provisions of the GPL function. IBM also implicitly argues (at 29-30) that the Linux kernel stands or falls as a whole:

SCO, therefore, knew or should have known that it was distributing IBM's Copyrighted Works without a license to do so, and was thus infringing IBM's copyrights in those works (as well as copyrights held by so many others in other works contributed to and comprising parts of Linux).

That is, if SCO's attempt to license the misappropriated portions of the UNIX material were to negate SCO's license to all Linux code under the GPL, then surely the misappropriation of the UNIX material into the GPL invalidates the whole of Linux as well. (Conversely, if breaching the GPL with respect to a portion of a work does not invalidate the GPL as to the remainder of the work, then IBM cannot claim that SCO's purported breach invalidated SCO's license to the IBM-copyrighted material.) In addition, since IBM (as it says of SCO, at 29) is "an experienced participant in the software industry . . . [and] had copies of the GPL and regularly licensed software to others under the terms of the GPL," the Court should impute to IBM the knowledge that it was distributing SCO's copyrighted UNIX material without a license. These extreme results are reasons for rejecting IBM's argument that the entirety of Linux, including the UNIX material therein, falls under the GPL.

III. THE RECORD SHOWS THAT, AS A MATTER OF LAW,
SCO HAS NOT REPUDIATED THE GPL.

IBM's contention that SCO has "repudiated" the GPL is wrong as a matter of law. "A repudiation occurs when a party to a contract makes an overt communication of intention or an action which renders performance impossible or demonstrates a clear determination not to continue with performance." Amoco Oil Co. v. Premium Oil Co., 313 F. Supp. 2d 1233, 1238

10

(D. Utah 2004) (quotation and citation omitted); see also Lantec Inc. v. Novell, Inc., 306 F.3d 1003, 1014-15 (10th Cir. 2002). A party repudiates a contract when it "refuses to perform and communicates that refusal distinctly and unqualifiedly to the other party." Dow Chem. Co. v. United States, 226 F.3d 1334, 1344 (Fed. Cir. 2000).

There is no evidence that SCO has made any such refusal, far less communicated it to anyone. On the contrary, in the very materials IBM cites, SCO Vice President Christopher Sontag confirms that SCO "treated [the GPL] as an obligation for which it needed to abide by," and SCO "made our best efforts to abide by all of the obligations of the GPL agreement."7(IBM Ex. 300 at 213.) In addition, SCO has not repudiated the GPL as a source of legal rights. IBM misapprehends the significance of the assertions SCO has made in its pleadings regarding the enforceability of the GPL. IBM ignores those assertions that directly contradict its characterization of SCO's supposed "repudiation": SCO asserts as its Fourth Affirmative Defense that "IBM's claims are barred by license," and as its Eleventh Affirmative Defense that "SCO has acted legally and properly at all relevant times and IBM is therefore barred from any relief whatsoever." In a portion of SCO's Response to IBM's Third Set of Interrogatories that IBM does not cite, SCO explains that it has acted "within the contractual rights granted to it

11

concerning software made freely available by IBM under the GPL." SCO thus has not disclaimed the GPL as a source of legal rights.

IBM also ignores the context in which SCO has made its forward-looking assertions regarding the enforceability of the GPL. SCO has made statements in its pleadings denying the applicability or enforceability of the GPL as IBM interprets it and for those who would use the GPL to shelter their otherwise improper activities; SCO has not asserted that the GPL did not authorize the licensees thereunder to copy and distribute the licensed material. Such defensive assertions in litigation do not constitute a decision to "repudiate" the contract at issue. None of SCO's assertions could reasonably be construed to preclude SCO from arguing (and proving) that, under the GPL, SCO was authorized to copy and distribute the material at issue.

IBM even argues that SCO "continues to repudiate" the GPL in disputing IBM's interpretation of particular GPL provisions. The fact is that IBM's interpretation of selected provisions of the GPL would violate public policy and well-established rules of construction. The GPL should not be read to interfere with SCO's right to enforce its own intellectual property rights. IBM cannot bootstrap a claim of repudiation onto the parties' disagreement over the meaning of certain provisions of the GPL. See LAK, Inc. v. Deer Creek Enters., 976 F.2d 328, 331-32, 335 (7th Cir. 1992) (finding that "[s]tating a position based on a reasonable interpretation of the contract and refusing to accede to the other party's, as [defendant] did, does not, without more, amount to a `clear manifestation of intent not to perform in accordance with any other interpretation'" and is therefore not a repudiation) (quoting 4 Arthur L. Corbin, Corbin on Contract § 973 at 911 (1951)); Kimel v. Mo. State Life Ins. Co., 71 F.2d 921, 923 (10th Cir. 1934) ("An offer to perform in accordance with the promisor's interpretation of the contract

12

although erroneous, if made in good faith, is not such a clear and unequivocal refusal to perform as amounts to a renunciation giving rise to an anticipatory breach."); Kaydon Acquisition Corp v. Custom Mfg., Inc., 301 F. Supp. 2d 945, 962 (N.D. Iowa 2004) (holding that when "'two parties differ as to the interpretation of a contract, the mere demand by one party that the contract be performed according to its interpretation does not in and of itself constitute repudiation'") (quoting Conrad Bros. v. John Deere Ins. Co., 640 N.W.2d 231, 241-42 (Iowa 2001)); accord Moncrief v. Williston Basin Interstate Pipeline Co., 880 F. Supp. 1495, 1506 (D. Wyo. 1995) (quoting Kimel, 71 F.2d at 923); see also In re Midway Airlines, 180 B.R. 851, 924 (Bankr. N.D. Ill. 1995) (noting that "although parties may differ on interpretation of a contract, a mere offer by one to perform in accordance with its interpretation does not itself constitute an anticipatory repudiation").

IBM's citation to Dow Chemical does not support its argument. First, Dow Chemical does not depart from, but rather affirms, the rule that a repudiation "occurs when one party refuses to perform and communicates that refusal distinctly and unqualifiedly to the other party." Dow Chem., 226 F.3d at 1344. There, the trial court found that defendant wrote letters to plaintiff stating no royalties were due, in fact did not pay royalties for many years, did not intend to pay any royalties, and later also contested the validity of the patent and license at issue. The Court affirmed the finding of repudiation. Nothing in the opinion, however, suggests that contesting the validity of the license alone without the overt acts of refusing and failing to pay royalties was a repudiation. Second, nothing in that case even suggests that a party risks a repudiation if it asserts the enforceability of the license at issue as an affirmative defense against an infringement claim. IBM's reliance on Dow Chemical is misguided.

13

IBM's argument would fail, moreover, even if the Court accepted IBM's mischaracterization of SCO's assertions. IBM at most points to instances of permissible pleading in the alternative. See Fed. R. Civ. P. 8(e)(2); see, e.g., Lawser v. Poudre Sch. Dist., 171 F. Supp. 2d 1155, 1158 (D. Colo. 2001) (Rule 8(e)(2) "specifically provides that a party may plead in the alternative, even where the alternative claims are inconsistent"). Nor has IBM even claimed that it changed its position or relied on any of SCO's statements. See Estate of Harris v. Harris, 218 F.3d 1140, 1153 (10th Cir. 2000).

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CONCLUSION

SCO respectfully submits, for all of the reasons stated above, that this Court should grant SCO's Motion for Summary Judgment on IBM's Sixth, Seventh and Eighth Counterclaims.

DATED this 12th day of January, 2007

By:/s/ Brent O. Hatch

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

BOIES, SCHILLER & FLEXNER LLP
Robert Silver (admitted pro hac vice)
Stephen N. Zack (admitted pro hac vice)
Stuart H. Singer (admitted pro hac vice)
Edward Normand (admitted pro hac vice)

DORSEY & WHITNEY LLP
Devan Padmanabhan (admitted pro hac vice)
John J. Brogan (admitted pro hac vice)

Attorneys for The SCO Group, Inc.


1 In previous briefing, SCO has presented additional grounds for denying IBM's September 2006 motion for summary judgment regarding its Sixth, Seventh and Eighth Counterclaims and claims for relief thereunder. Those grounds include IBM's mistaken argument for retroactive copyright infringement; the status of Linux as a derivative work of UNIX System V; IBM's misinterpretation of the proper operation of the automatic-termination provision of the GPL; the absence of any compensable harm as a result of SCO's alleged copyright violations; the lack of any entitlement to the injunctive relief that IBM seeks; and IBM's unclean hands.

2 The website describing the terms and operation of the GPL, www.gnu.org, contains detailed instructions regarding "How to use the GPL." The gnu.org website explains that

the process involves adding two elements to each source file of your program: a copyright notice (such as '"Copyright 1999 Linda Jones"), and a statement of copying permission, saying that the program is distributed under the terms of the GNU General Public License. . . . The copyright notice should include the year in which you finished preparing the release (so if you finished it in 1998 but didn't post it until 1999 use 1998). You should add the proper year for each release: for example, "Copyright 1998, 1999 Linda Jones" if some versions were finished in 1998 and some were finished in 1999. . . The copying permission statement should come right after the copyright notices.

How to use the GPL or LGPL, http://www.gnu.org/licenses/gpl-howto.html.

3 Indeed, in response to SCO's lawsuit, leaders in the free-software community stated that they would remove the improper UNIX material in Linux. If IBM's argument regarding the GPL were correct, then the SCO material would not need to be removed.

4 The documents, declarations, and depositions supporting SCO's reply are appended to the November 11, 2006 Declaration of Brent O. Hatch, and are cited herein as "SCO Ex.__." Where exhibits attached to IBM's September 25, 2006 Declaration of Todd M. Shaughnessy and November 10, 2006 Declaration of Todd M. Shaughnessy are referenced herein, they are cited as "IBM Ex. __."

5 With respect to IBM's arguments (at 23-24) that SCO violated the GPL, for example, IBM notes that the sections at issue grant rights regarding "the Program." Absent the proper inclusion of the UNIX material and copyright notice, the UNIX material was not part of "the Program" by the express terms of the GPL. Accordingly, in imposing restrictions on the extent to which certain Linux users could copy and distribute the UNIX material, SCO was not restricting use of "the Program" under the GPL.

6 The www.gnu.org website confirms that "Section 2 says that modified versions you distribute must be licensed to all third parties under the GPL." Frequently Asked Questions about the GNU GPL, http://www.gnu.org/licenses/gpl-faq.html (emphasis added).

7 IBM's reliance on Darl McBride's testimony is misplaced. Under Tenth Circuit law, "[a]nticipatory repudiation requires more than statements [that] a party . . . has misgivings about a contract." Lantec, Inc., 306 F.3d at 1014 ; accord Amoco Oil Co., 313 F. Supp. 2d at 1238 . Mr. McBride's testimony at most reveal his misgivings as to the GPL, which as a matter of law is not enough to support a repudiation. Moreover, Mr. McBride's testimony as to his views on the GPL neither demonstrate any intent to breach the GPL nor demonstrate any determination (much less a clear determination) not to continue with performance under the GPL. In fact, when asked by IBM whether "[h]as SCO, to the best of your knowledge complied with the terms of GPL," Mr. McBride answered "[f]rom my understanding, we haven't done anything that would violate the GPL." (McBride Dep. (IBM Ex. 330; 270:25-271:5.) Consistent with Mr. McBride's testimony and as explained above, SCO has performed under the GPL and has not breached it.

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CERTIFICATE OF SERVICE

Plaintiff/Counterclaim-Defendant, The SCO Group, Inc., hereby certifies that a true and correct copy of the foregoing SCO'S REPLY MEMORANDUM IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT ON IBM'S SIXTH, SEVENTH AND EIGHTH COUNTERCLAIMS was served on Defendant/Counterclaim-Plaintiff, International Business Machines Corporation, on this 12th day of January, 2007, via CM/ECF to the following:

David Marriott, Esq.
Cravath, Swaine & Moore LLP
[address]

Todd Shaughnessy, Esq.
Snell & Wilmer LLP
[address]

By /s/ Brent O. Hatch

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