Today, March 1st, Judge Kimball heard oral arguments on IBM's Motion for Summary Judgment on SCO's Third Cause of Action For Breach of Contract and IBM's Motion for Summary Judgment on SCO's Copyright Claim. While I'd reported that the last hearing in SCO v. Novell had the highest turnout so far, this one easily eclipsed that. Both parties had a full house of lawyers and aides of perhaps 9 or so on each side. With an above-average number of spectators, Judge Kimball's courtroom was pretty packed.

First Motion - Contract Claim

IBM speaks first

The contract claim was heard first, with IBM's David Marriott arguing. He identified the four contracts underlying SCO's breach of contract claim. He cited the four technologies of JFS, RCU, LTP, and "Negative Know-How".

Mr. Marriott said that there are several reasons IBM is entitled to summary judgment on this motion.

The first reason he wanted to make clear at the outset is that none of those are Unix System V technologies, that they are independent, original software created without reference to Unix. None are a modification or derivative work of System V.

He explained how SCO contends they control IBM's original software since it touched, peripherally, software derived from SCO's Unix. He then presented a video montage of deposition excerpts from individuals who were party to the original software agreements at issue. This included 5 people from AT&T/USL/Novell, 3 from IBM, and 2 from Sequent. Each deponent stated that AT&T's code is AT&T's and that code developed by the licensee was its own. Further they stated that the licensee maintains control of its own original code, not AT&T. This video was probably 5-8 minutes long, although Mr. Marriott indicated he's presented Judge Kimball with a disk containing about another 3.5 hours should he wish to review it.

He explained, using a graphical chart representation of Linux code (titled: Linux Kernel v. 2.6.11.8 "Woozy Beaver") how JFS constitutes but a part of the total system. He likened SCO's claim to one where an automaker licenses technology for a chassis from a company for use in its car and then claims to control the entire car right down to the fuzzy dice on the mirror, claiming such automaker would then be prohibited from taking the Sony radio out of the car to use elsewhere.

He said that SCO's interpretation is contrary to copyright law and would lead to absurd results.

The second reason is that SCO is estopped from pursuing because for twenty years the contract was interpreted by both parties in a manner contrary to SCO's interpretation. Further those alleged breaches have been waived for the same reasons. Mr. Marriott also claimed that Novell, under rights granted under the APA, waived the alleged breaches on SCO's behalf.

Also, SCO shipped each of the four technologies as part of its Linux product, distributed under the terms of the GPL. The United Linux agreements required assignments of any copyrights owned in the United Linux code to United Linux LLC. He said the GPL authorizes and requires making the source code available, also constituting a waiver. He reiterated, however, that the four elements at issue are IBM's original code.

He claimed SCO's RCU allegation is additionally barred by the statute of limitations under New York law, that the RCU technology was revealed in a 1993 patent application (granted in 1994). The LTP allegation fails because SCO claims it came from Dynix, which it did not. Of the "negative know-how" claims, several are based on IBM employees having "experience" with Unix. He pointed out the agreements do not preclude IBM employees from such disclosures. Further, Judge Wells ruled SCO did not provide particularity on these items and excluded them.

SCO's turn

SCO's Stuart Singer argued next. He stated that the Unix operating system was AT&T's crown jewel, that SCO licensed Unix technology to vendors desiring to develop their own flavor of Unix under strict non-disclosure terms.

He said that a trial on SCO's claims is required and gave several reasons: That there are 40,000 pages of exhibits. That contrary to IBM's earlier video presentation, he said that 14 years ago, Otis Wilson provided quite different testimony in the USL v. BSDI case, that Mr. Wilson stated that anything written with reference to Unix System V must be protected. He claimed that IBM submitted declarants with depositions that did not match their words. That in one instance a declarant refused to sign at all, and in another IBM and the individual went back and forth many times until he was worn down and signed anyway. He said that this must go to trial to allow cross-examination of witnesses such that the truth may be found.

Mr. Singer said that there is a disputed fact about JFS, whether it originated in OS/2 or System V. He said SCO has testimony that JFS originated in AIX.

Using an enlarged excerpt of the contract language, he read Sections 2.01 and 7.06 and said that they are contrary to IBM's interpretation.

Mr. Singer said that SCO does not believe they need to rely on parole evidence to support their arguments but the parole evidence indicates there are differences of testimony, which calls for a trial. He said the contract contains an integration clause that prevents the use of parole evidence.

Regarding Novell's purported waiver he said that this interpretation would make a mockery of the terms of the APA. He showed contract verbiage that he claimed would not make sense if Novell were permitted to make such a waiver.

He argued IBM's RCU patent protects IBM's use of the technology preventing use by others, thus preserving it for IBM, not Open Sourcing it.

Mr. Singer used only half an hour of his permitted 45 minutes and asked that the balance of time be reserved for rebuttal.

IBM responds

Mr. Marriott then reiterated that what IBM is alleged to have improperly disclosed is not part of some derivative work. It is original code of IBM's.

Regarding Otis Wilson's testimony, he quoted him stating in USL v. BSDI (and also 14 years later) where he said USL had no desire to control licensees' original work.

He said that the contract's integration clause does not undermine the declarations and actions of participants' interpretation of the agreements of the last twenty years.

SCO's final reserved rebuttal time

Mr. Singer rebutted, saying his "short answer" is that JFS, RCU, and LTP are not like dice on a dashboard; they are integral to Linux. If they are incidental, take them out and see if Linux works. He quoted Linus Torvalds in a Linux version release stating that RCU was fundamental to that release.

Judge Kimball took the arguments under advisement. He then said he would hear the next motion on the copyright claim in 30 minutes at 4:30 pm. The courtroom mostly emptied and a jury was brought in to render their verdict in a criminal case.

Motion 2, summary judgment on SCO's copyright claim

IBM first

When court reconvened, argument was heard on IBM's request for summary judgment on SCO's copyright claim in which SCO claims IBM infringed its copyright by continuing to distribute AIX after SCO purportedly terminated their rights to do so.

Mr. Marriott presented five reasons IBM should be granted summary judgment. SCO cannot prove infringement. SCO has not demonstrated a predicate breach, SCO cannot terminate, SCO cannot prove it holds the copyrights at issue, and SCO misused its copyrights.

He said that since the beginning of the case IBM requested, and Judge Wells ordered, that SCO identify the code IBM is alleged to have infringed. He briefly reviewed the history of interrogatories, motions and orders to compel. He said that SCO has not identified such.

He said that SCO has not demonstrated a predicate breach of contract to terminate.

Saying that the copyright claim turns on JFS, he says that JFS came from IBM's OS/2 operating system, not their AIX product, that there is no AIX code, method, or concept in JFS, that IBM owns JFS and SCO concedes this. IBM maintains copyrights to this code and IBM can do what it wants with its copyrighted code.

He explained how Novell waived SCO's right to terminate and that Novell retained the right to do so for SVRx licenses. He said that the agreement Novell had with Santa Cruz allocated 95% of the royalty stream to Novell and that it's no surprise that Novell would retain a mechanism in the agreements to protect that income. Mr. Marriott said that IBM's contract is an SVRx license and that even SCO's Mr. McBride acknowledges in a letter to Novell that the license in question is an SVRx license.

Mr. Marriott stated that SCO assigned any copyrights it held in the Linux product to United Linux LLC. SCO, in its product announcement for the United Linux product touted the inclusion of JFS.

The IBM contracts, excluding the side letter, say that the only grounds for termination must relate to a material breach. JFS is not SVRx code and therefore cannot be a material breach.

He asserted that IBM has an "irrevocable and perpetual" license. He gives numerous synonyms for irrevocable and perpetual and asserts that the terms are clear and unambiguous.

The original agreement (before amendment) gave the terms required to terminate, that SCO's notice letter accused IBM of misappropriating SCO's trade secrets. In open court, SCO has admitted there are no trade secrets in SVRx and subsequently withdrew that claim. IBM sent a letter to SCO requesting details of the alleged breach. SCO's Darl McBride replied with a letter saying they could only answer after IBM gave them more info, that SCO was asking IBM to tell them what they did wrong.

SCO therefore did not use their best effort and good faith to resolve the dispute.

SCO's turn

SCO's Brent Hatch replied. He said that the side letter is to buy out the royalty stream, that IBM would pay no additional royalty. That's what was being modified and perpetually, etc. was the royalty stream. It did not modify the contract's termination cluase. The contract does not use the words irrevocable, perpetual, fully paid up license. It says "irrevocable, perpetual, fully paid up rights to exercise." It says, as the wording goes on to say, that it does not modify the other terms of the contract (which includes the ability to terminate).

The agreement terms mean SCO cannot simply terminate the agreement willy-nilly, and that if IBM lived up to the terms, SCO cannot terminate it. But if IBM breaches the terms then SCO has its option to terminate.

Mr. Hatch talked at length about how SCO first found out IBM's intentions regarding Linux and SCO's notice.

He says JFS2 included files with source code originating in System V. That according to Mr. Baker's testimony, the first thirty files were from AT&T. Mr. Hatch claimed IBM is trying to rewrite history. In an email/note in CMVC, Mr. Baker says that over half the JFS files derived from the System V code.

He hands out exhibit 806, an internal IBM email and directs the court to the 3rd page. He reads that "we at IBM would like to make JFS available to Linux for several reasons." That the number one reason identified is the Linux community's need for a journaling file system. He says this doesn't sound like dice on a dash board as Mr. Marriott stated.

IBM's turn

IBM's Mr. Marriott replied, saying that contrary to Mr. Hatch's claim, there are not 294 items at issue -- there is just JFS.

Mr. Marriott said that Mr. Hatch implied that he'd conceded that AIX is a derivative of UNIX. He did not.

The testimony upon which SCO relies, saying that JFS came from AIX, was struck by Judge Wells. The overwhelming testimony of those involved say it originated in OS/2.

The email cited by SCO says that someone in the Linux community desired a journaling file system -- it is just that, a desire. The fact that someone found a technology desirable does not mean IBM breached a contract.

With regard to good faith, this court two years after the supposed termination expressed astonishment that SCO had not provided evidence, yet they assert IBM knew from before the case.

SCO responds

SCO's Brent Hatch replied, saying the testimony IBM wishes you to ignore is of the signatory to the agreement.

He says that regarding United Linux what Mr. Marriott fails to tell you is that SCO entered into an agreement to build something on the existing kernel. He says that IBM put JFS into the kernel unbeknownst to SCO, and IBM is saying that somehow this causes SCO to waive it.

Judge Kimball took this under advisement and said he looks forward to seeing us next Monday at 2:30pm.