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More filings in Novell: SCO's Reply Memo re June 4 Motion (258) & Exhibits
Wednesday, May 30 2007 @ 03:50 PM EDT

More filings by SCO in Novell, including a Reply Memorandum [PDF] and a Supplemental Declaration by Edward Normand [PDF] with exhibits regarding SCO's Motion for Partial Summary Judgment on its 1st, 2nd and 5th Causes of Action and for Summary Judgment on Novell's 1st Counterclaim [PDF]. That last is the one on slander of title.

So the theme, once again, is who owns the copyrights? Did the APA and Amendments (and Bill of Sale, according to SCO) give the UNIX copyrights to Santa Cruz, or does Novell still own them? Here's Novell's Memorandum in Opposition [PDF] to this motion, and I have it as text now and will be posting it next.

I see one header in the Reply Memo, "The Testimony of Attorneys David Bradford and Tor Braham Regarding the Original APA Is Beside the Point." No kidding? Considering they were the two lawyers for Novell on the deal in question in this litigation, that should be fascinating. Let's look and see how SCO is thinking and whether it makes sense.

First, I see in the exhibits some interesting items:

  • The Santa Cruz EU complaint about Xenix and Microsoft's alleged anticompetitive restrictions on Unix as per an early contract which came to a head back in the 90's has shown up, but I don't know why yet. But it's Exhibit 7, the actual application.
  • I see Exhibit 6 is a letter to the Justice Department explaining the dispute in detail. We've read the media coverage about the Xenix story, but now we get to see Santa Cruz's view of it in depth.
  • There is also a declaration by Ralph Yarro, but I can't find it. I notice that Exhibit 3 has two blanked out exhibits. It doesn't say redacted or sealed, just blank pages, so I am not certain but it could be that is where the Yarro declaration went. If not, this is a heads up to Ted that I don't see the Yarro declaration among the filings. I'm guessing it could be about the incident Novell brought up about him allegedly going to Novell to ask for the copyrights in 2003, mentioned in Novell's opposition memo.
  • And there's another Sandeep Gupta declaration, this one about finding Santa Cruz copyright notices showing a 1996 date. Of course, there would be. He didn't look for Novell copyright notices, I guess, but if he had, I believe he'd find them with even a 1998 date, as we've mentioned over the weekend and earlier reported in depth in 2004.

Now, let's look at SCO's logic in this filing. We now have lawyers for both parties strongly asserting to the court that the "plain language of the APA" clearly gives copyrights to their client. But notice the level of argument from SCO's side, just one sample:

Under Section 1.1(a) of the APA, Novell and Santa Cruz agreed that on the Closing Date Novell would “sell, convey, transfer, assign and deliver” and Santa Cruz would “purchase and acquire” at minimum “all right, title and interest in and to the assets and properties” identified in Schedule 1.1(a) of the APA. (Id.) In turn, Schedule 1.1(a) identifies seven categories of “assets and properties” transferred to Santa Cruz, including:
All rights and ownership of UNIX and UnixWare, including but not limited to all versions of UNIX and UnixWare and all copies of UNIX and UnixWare (including revisions and updates in process) and all appropriate technical, design, development, installation, operations and maintenance information concerning UNIX and UnixWare, including source code,” source code products, binary products releases, and products under development . . . including, without limitation:

(Id. (emphasis added).) The APA thus provides for the transfer – without limitation – of all right, title, and interest in the UNIX and UnixWare source code and products, and all rights and ownership of UNIX and UnixWare, including a non-exhaustive list of assets and properties. In providing for the transfer of all rights, Section 1(a) and Item I include the copyrights.

I've added my own emphasis in red, to show you the trick. Note that the words "at minimum" are SCO's lawyers' words, not the APA's. Ditto the phrase "non-exhaustive list". If you notice, the SCO quotation ends with a colon. If you had never read the APA, this all might sound good. Plausible at least. But if you have read it, and I know Judge Kimball has, then you already know that the APA this is quoting from had a section listing Excluded Assets, right after the clause SCO is quoting from in part here as if it were the whole story. And just to remind you, that APA section reads in relevant part like this:

Schedule 1.1(b) Excluded Assets (Page 2 of 2)

V. Intellectual Property:

A. All copyrights and trademarks, except for the trademarks UNIX and UnixWare.

So how can they, with a straight face, say that there were no limitations? I'll tell you the arguments, but I can't imagine, at least on my cursory reading so far, it convincing the judge, so I must assume it's either for the peanut gallery or presented with panache to sound as strong as possible to anyone who doesn't look too closely at the details. I don't think that is a description of Judge Dale Kimball. Do you?

SCO has a separate argument regarding Amendment 2, something like Amendment 2 fixed the "error" about excluding copyrights, and it replaced this Excluded Assets clause, but even if you were to accept that the APA didn't mean what it says, the above argument contradicts itself, particularly when you read Amendment 2. If everything transferred, as above argued by SCO without limitation, then why does even Amendment 2 have this clause:

A. With respect to Schedule 1.1(b) of the Agreement, titled "Excluded Assets", Section V, Subsection A shall be revised to read:

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. However, in no event shall Novell be liable to SCO for any claim brought by any third party pertaining to said copyrights and trademarks.

Obviously, Amendment 2 thought there was still a valid section called Excluded Assets in the APA, it didn't excise it from the agreement, and we know that the clause read that all copyrights were excluded. This Amendment doesn't say that the APA or Amendment 1 or the Bill of Sale transferred the copyrights so we can throw the Excluded Assets section out. So that says to me that the Bill of Sale had not already transferred the copyrights, or this Amendment 2, revising the language about copyrights, wouldn't even be needed. Yet it defines what copyrights are not excluded, which tells me that all copyrights * are* still excluded, except for what is specifically described, any SCO can demonstrate it needs for its business. It doesn't list any of those or itemize in any way. And it doesn't say they were transferring that day or had already transferred or anything like that. Now, Amendment 2 was executed long after the APA, Amendment 1 and the Bill of Sale, as I'll show you in a minute, which raises another discussion. But here, it's enough to see that you can't logically argue that there were absolutely no limitations, because even Amendment 2, foggy as it may be to my poor, tired and hurried brain, at least clearly has some kind of limitation language.

SCO logic only works if you just read and stop thinking. There is so much panache, sometimes you do, or can be tricked into just accepting some passing detail as asserted. Or it might work, if you haven't read the documents and can't be bothered to do so. As I say, I think this is maybe more for the peanut gallery.

There were, obviously, limitations. One might argue sensibly about what they consisted of and present convincing arguments and evidence to try to prevail on that, but not that there weren't *any*. Patents, as everyone including SCO agrees, didn't go to Santa Cruz. The UNIX trademark didn't. It went to the Open Group. We all know that, including the judge. So arguing that there was a transfer without limitation -- well, it leaves the audience with a curled lip. Me, anyway. I'm from the school that says if you find out you're wrong about something in civil litigation, you should just say so and not waste everyone's time with more and more abstruse arguments. I feel that if you can only win if everyone is completely confused, maybe you don't deserve to win.

The next sentence is, "There can be no question that the transfer of the copyrights took place." No? Then why are we all here? And why would SCO think it's wise to say that to a judge who has already expressed that he didn't yet see such a conveyance? I am mystified.

Next SCO claims that the Bill of Sale was signed on the "Closing Date". Which one? The actual sentence is:

"On the Closing Date, Novell and Santa Cruz executed the Bill of Sale, which provides: In accordance with [Section] 1.1(a) of the Agreement, Seller, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, does hereby transfer, convey, sell, assign and deliver to Buyer, without recourse, representation or warranty except as otherwise expressly provided in the Agreement, all of the Assets. (Ex. 3 (emphasis added).) The Bill of Sale thus effectuated the transfer, conveyance, sale, assignment, and delivery to Santa Cruz of “all of the Assets.”

See how they totally ignore the phrase in red that qualifies "all of the Assets", the part about "without ... representation...except as otherwise expressly provided" in the APA? Also, it's clear that it's talking about the later Closing Date, when the TLA and Bill of Sale were executed, not the APA closing date. In saying "the Assets" it refers to the language of the APA, which has its own representations as to what transferred, and if we look at the APA, there are limitations. The Bill of Sale can't and doesn't remove them. I'll show you what I mean. Let's look a little closer at that Bill of Sale and see some parts SCO didn't quote and when it was executed. Here's the language that follows the part that SCO did quote:

Excepted from the transfer of Assets pursuant to the preceding sentence are the rights reserved by Seller pursuant to that certain Technology License Agreement between Seller and Buyer dated as of December 6, 1995.

How can SCO, then, argue that all of the Assets transferred without limitation? They themselves argue later that one must, under California law, read the APA and the TLA together. And as you see, the TLA had rights reserved by Seller. It says so right there in black and white. So the TLA doesn't stand for the proposition that this was a transfer of assets without limitation, not to me anyway. The Bill of Sale continues:

Seller does not sell to Buyer and Buyer does not purchase from Seller any interest in any of Seller's assets other than the Assets.

Again, it stresses that this deal did have limitations on what would transfer. Buyer got only what is listed in the agreement as "the Assets". But here's the killer clause, as far as SCO's argument is concerned, to my eyes:

It is acknowledged and agreed that this Bill of Sale is intended only to document the sale and assignment of the Assets to Buyer, and that the Agreement is the exclusive source of the agreement and understanding between Seller and Buyer respecting the Assets. Nothing in this Bill of Sale shall limit, expand or otherwise affect any of the representations, warranties, agreements or covenants contained in the Agreement. If any provision of this Bill of Sale is construed to conflict with any provision of the Agreement, the provision of the Agreement shall control.

Could it get any clearer than that? The Bill of Sale can't add to or affect the Agreement. If there were to be any confusion about which controls in a dispute, the Bill of Sale doesn't control. It so obviously is saying that not everything was given to Santa Cruz, that what is excluded in the Technology License Agreement (you can find the Schedules, including copyrights on a pile of manuals and user guides here) and the APA is specifically still excluded, and further that the Bill of Sale was not to be used to change a word in the agreement or to expand it. It can't make the agreement more complete. It can't change any prior understanding. How can it be what transfers, therefore? It says itself it is merely to document what happened in the agreement, whose language is complete and final.

Now about those dates. Keep in mind that the APA was not dated December 6, 1995. The TLA was and the Bill of Sale was, but the agreement that started this whole journey was months before, on September 19, 1995. So how could the Bill of Sale be the instrument of conveyance when it didn't occur until months later? And in what qualified sense, then, can it be said that the Bill of Sale was executed on the date of the agreement? Only if you mean the later TLA agreement as opposed to the original APA. See what I mean? You just have to look really closely at everything SCO says to grasp all the finer details.

Furthermore, the TLA says this:


This Agreement and the Asset Purchase Agreement constitute the entire understanding between the parties with respect to its subject matter, and supersede all prior understandings, both written and oral, between them relating to such subject matter.

That means the Bill of Sale is excluded from this deal. The APA and the TLA stand alone, together, from the date of the TLA onward, namely December of 1995, as being the entire deal, and the TLA says that it includes Amendment 1 as well. So if you wish to understand the APA deal, that is where you look, not to the Bill of Sale. Since the Bill of Sale was signed the same day as the TLA, obviously it was intentionally not included in the documents that would "constitute the entire understanding between the parties".

Amendment 1 includes some language, by the way, confirming restrictions on Santa Cruz's right to enter into new SVRX licenses.

Logic alone tells you, after you read all the documents, that obviously Novell was not transferring *everything* it had to Santa Cruz, without limitation, as SCO argues, and we see that Novell wished to retain control over what it retained.

Amendment 2, in case you are keeping track of all the dates, wasn't signed until the 16th day of October, 1996. So, if we follow SCO's logic, no copyrights transferred on the date of the APA in September of 1995. That didn't happen until December of 1995, with the Bill of Sale. What in the world was Santa Cruz using, then, in the interim, if it's true as they allege that they wouldn't be able to run the business without the copyrights? And if Amendment A is what finally made it all official that the copyrights were intended to transfer, now you have Santa Cruz in the Unix business for more than a year without copyrights, or maybe they got them by the Bill of Sale, but if they did and note that would still be months after the APA, then why was Amendment 2 needed to do that? Just saying.

You can find all these contracts, and many more, on Groklaw's Contracts page.

Oh, I almost forgot. Here's why SCO says David Bradford's and Tor Braham's declarations are beside the point:

The testimony of Messrs. Bradford and Braham relates to the language in the Excluded Assets Schedule of the APA that the parties replaced via Amendment No. 2, and is thus irrelevant. (See Part I.A, above. 7 ) Because the language relied upon by Messrs. Bradford and Braham was replaced, their testimony as to what they sought to accomplish by the supplanted language is of no import, and fails to create any genuine dispute of material fact.

Well, I don't think so, since their testimony expresses that Amendment 2 did no such thing, and that in fact Novell had absolutely no intention of tranferring the copyrights by the APA. But there you are. I haven't finished reading this entire piece of work, but if I notice more things to share with you, I will later. Now I want to post this and then the Novell counterarguments in its opposition memo as text.

There is a deadline now of June 4th for oral argument on this motion. I'm thinking this might be the reason there were corrections yesterday on the schedule. In the original schedule, the motion would have been argued tomorrow, and Novell wouldn't even have had time to do more than skim this document, let alone go through all the exhibits. Oodles of exhibits to slog through, which I haven't done thoroughly yet myself. We haven't got the last two documents from Pacer uploaded yet, but we will, and I didn't want you to have to wait. They are just a motion to file excess pages and an order saying OK.

As always, the list of what the exhibits are can be found in the declaration, in this case the Supplemental Declaration of Edward Normand, although I had trouble matching it all up, partly because the Pacer notations seem off.

Here's the full list from Pacer:

05/29/2007 - 346
REPLY to Response to Motion re 258 MOTION for Summary Judgment (Partial) on SCO's First, Second and Fifth Causes of Action and for Summary Judgment on Novell's First Counterclaim MOTION for Summary Judgment (Partial) on SCO's First, Second and Fifth Causes of Action and for Summary Judgment on Novell's First Counterclaim filed by Plaintiff SCO Group. (Normand, Edward) (Entered: 05/29/2007)

05/29/2007 - 347
DECLARATION of Edward Normand re 346 Reply Memorandum/Reply to Response to Motion, filed by SCO Group. [Attachments: # Exhibit 1 (Exhibits 1-2), # Exhibit 2 (Exhibit 3), # Exhibit 3 (Exhibits 4-12), # Exhibit 4 (Exhibits 13-14), # Exhibit 5 (Exhibit 15 Part 1), # Exhibit 6 (Exhibit 15 Part 2), # Exhibit 7 (Exhibit 15 Part 3), # Exhibit 8 (Exhibit 15 Part 4), # Exhibit 9 (Exhibit 15 Part 5), # Exhibit 10 (Exhibits 16-19_, # Exhibit 11 (Exhibits 20-26), # Exhibit 12 (Exhibits 27-34), # Exhibit 13, #Exhibit 14]

05/29/2007 - 348 - MOTION for Leave to File Excess Pages re Docket Entry 346 filed by Plaintiff SCO Group. (Attachments: # 1 Text of Proposed Order) Motions referred to Brooke C. Wells.(Normand, Edward) (Entered: 05/30/2007)

05/30/2007 - 349 - ORDER granting 348 Motion for Leave to File Excess Pages. Signed by Judge Dale A. Kimball on 5/30/07 (alt) (Entered: 05/30/2007)

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