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SCO Files Opposition to Novell's Evidentiary Objections
Wednesday, June 20 2007 @ 03:20 PM EDT

SCO has filed a Memorandum in Opposition to Novell's Evidentiary Objections with exhibits. It's all under seal, but it will help us understand a couple of things.

Actually, SCO filed the exhibits in the wrong place in what I believe is a kind of Freudian slip. They filed the exhibits as Docket number 1070 in SCO v. IBM by mistake. The clerk fixed it with instructions to "the parties" to please pay attention. But if you remember, at the last hearing in SCO v. Novell, Stuart Singer twice said IBM when he meant to say Novell. And now there is this little goof. It's not of major importance, but it tells me what SCOfolk have on their minds, most likely. And that is that what happens in the Novell case can be curtains for SCO in the IBM case. It doesn't matter as much to IBM, because their position is they haven't infringed anything, no matter who owns it. But if the court rules that SCO never got any copyrights, it could be The End -- That's Aaall, SCOFolks. I don't think it would be just the IBM case either.

I expect AutoZone might be interested to learn if SCO never had any copyrights. If you recall, there was extensive discussion as to whether AutoZone should be enjoined from using Linux. Although SCO ultimately decided not to ask for a preliminary injunction, the fact that Autozone was put through all that is certainly going to annoy Autozone, if it turns out that SCO never had the copyrights to even make such a request. That's not even going into the free-floating threats SCO threw in to its notification that it wouldn't seek an injunction:

Based upon the foregoing, although SCO reserves all of its rights to pursue damages against AutoZone for the extensive copying and alleged copyright or related violations that have occurred, based on AutoZone's sworn representations that it has removed and is not currently using programs or files containing SCO proprietary materials in any of its Linux operating system servers and will not do so in the future, SCO does not believe preliminary injunctive relief is necessary at this time. SCO has reason to believe that AutoZone may also be violating SCO's copyrights and other intellectual property rights as a result of its use of the Linux operating system itself. However, it is SCO's understanding that the Court has stayed discovery and other proceedings relating to these issues pending further order of the Court and/or the resolution of the SCO v. IBM and/or Red Hat v. SCO matters which implicate these issues. Accordingly, SCO reserves its right to pursue appropriate remedies for these alleged violations once the Court has lifted the stay on these proceedings.

SCO threatened the world with the DMCA. That can have consequences, if they never owned any copyrights, I would think. Do you remember the case, Online Policy Group v. Diebold? Diebold was found guilty of copyright abuse, of violating section 512(f) of the DMCA, which makes it unlawful to make bogus DMCA takedown threats, and it had to pay damages. Remember the July 21, 2003 conference call, the one where David Boies joined SCO executives in making the DMCA threat known? Here's a snip of it:

McBride: Yes, so again back on the first point here on the IBM case. That was a contracts issue, and very clearly, you know, we feel good about where that case is going. We're making good headway there.

Today's announcement really is a new front that we're opening up. The first case has to do with people that we have relationships with, ie, contracts. In this case with copyrights, we have broad enforcement capability with those that we may not have direct relationships with. And so, as we go forward ... again our goal is not to litigate. We've had a lot of ... we've had dozens of people that have come to our source code viewing center in Lindon, UT, to take a look with their own eyes, and people have weighed in and everybody that's come out of there who made the trek has come to the same conclusion which is "Yeah, we've got a problem here in Linux."

Rather than going out and saying, well let's just go sue everybody now, we're coming out with a well thought-out, a carefully planned program that will help deal with the next issue that end users have, which is, "OK, I've seen the code, and I understand their problems, now what do you want me to do?" Well, the answer is real simple. We have a solution here for you that gets you clean, gets you square with the use of Linux without having to go into the courtroom.

Boies: Just to follow up on that, obviously at some point if people not come forward, or this was not otherwise resolved, there would have to be the possibility of some case by case litigation, although I think that it is unlikely that you would have to have very many of those cases before some resolution was reached. I think with respect to the first part of your question, it is not necessary to resolve the IBM case before resolving, or if it were to come to that, litigating with the customers. The issue with IBM is a contract issue originally. There may also be copyright issues with respect to IBM. But whether or not the IBM issue is resolved, does not give the individual customers the right to engage in conduct in the interim. If the conduct is improper, the conduct is improper, even if it has not been held to be improper yet in the IBM case....

McBride: Yeah, with respect to the infringing code, the ... we see, of the three different types that are out there. You have the direct, line by line code that is showing up in there, and it's very stark. When you lay down the UnixWare code base, and you lay down the Linux code base, and you look at them straight across, you can see absolute 100 direct line by line copying that's taken place, including developer comments, errors, typos that were in the developer comments, you know, and so it's very stark. That type of code has come from various vendors, and that type of code is coming from vendors primarily other than from IBM.

With respect to the next category of code we would call the derivative works area, we're seeing a lot code that has come in in just the last year or two, and that has to do with a lot of the SMP, high-end scalable technologies, the NUMA technologies or non-uniform memory access, RCU, read copy update. All of these are technologies that allow you to really take a multi processor configuration and go big time with it. In the early days of Linux and the 2.2 kernel, before it really grew up, you would get two to four processors running simultaneously. And now when we go to 2.4 kernel, you see 16-way, 32-way configurations. With the new 2.6 kernel coming out, it even jumps up higher that that. So you see incredible, enterprise level scalability going on.

Now the other thing that's interesting here is when you compare the amount of source code that was contributed by vendors, in 2.2 kernel versus 2.4 which just came out a couple of years ago you see in the 2.2 area, there was literally no contributions, and since 2.4 has come out, the number of files -- not just lines of code -- but the number of files that has been contributed by our Unix vendors is in the hundreds.

So, that's the second bucket, and then the third bucket is one of non-literal infringing areas of methods and concepts that are still protected under our rights, and that's a broader bucket beyond the first two.

With respect to the pricing, we're talking to customers beginning this week. We're going to get out with more details, publication of that pricing model later, but we can tell you it's benchmarked off from our UnixWare licensing structure that's out there today....

Waters: The copyright, that's right. What are the penalties for breeching that? What sort of extra claims do you think you have here, and against whom, and how are you going to make those stick?

Boies: Well, the copyright laws provide a wide range of penalties. There are statutory penalties that permit you to recover a amount per violation without having to prove actual damages. In addition, if you can prove actual damages, you are entitled to recover those as well. There are also additional penalties for what are described as willful violations. And I think one of the points of what the company is doing is to try to make sure people are aware of their obligations in the hopes that they will decide that they do not want to knowingly violate the copyright laws....

Mina: Yeah, quick question, and I'm not sure how you can answer this, but what is the implication for some of the Linux distributors like a Red Hat. What does this mean for them?

McBride: Well, this is a complicated arena we're talking about here. You have code that is protected under our source code agreements with vendors that is going into the holder of Linux, into Linus Torvalds and then it varies. Surrounded by the open source development labs, you have OSDL, then it goes on down the line to a distributor of Linux, then it goes on the line down to a hardware vendor of Linux. You know, after many machinations it finally ends up in the hands of an end user.

You know, David, as I understand the copyright side of this, we have broad rights against anybody who's touching that. Well clearly it starts with the end user cause that's where the [inaudible, 21:24] is being held. And you know, no decisions have been made about where we would go if we don't get recourse from the path we're going now. My understanding is it's fairly broadly available to us.

Boies: It is, and under the copyright law, you may sue both for infringement and for what is called contributory infringement. Which is that if anyone contributes to somebody else's infringement, that is somebody who can be sued directly under the copyright laws. So that if a third party distributor was found to have engaged in conduct that contributed to an end user's infringement, that person would also be liable, under the copyright laws.

As you see, Red Hat was painted as liable for infringement or contributory infringement. If it turns out that SCO never owned the copyrights, well... we could be talking some money changing hands. If SCO has any left. Then think of all the things SCO publicly accused IBM of doing, which they already have mentioned in their counterclaims. So you can understand why SCO would have IBM on the brain and cares so much about the Novell outcome.

And now that SCO has filed its opposition, we can better understand something else, why Judge Dale Kimball at the May 31st hearing mentioned that he assumed that Novell would not be arguing the evidentiary objections that day and Novell's Michael Jacobs answered, "That's correct". They will another day. But at that point, SCO hadn't had time yet to file an opposition. Now it has.

The interchange at the hearing went like this, the second time Singer said IBM instead of Novell:

MR. SINGER: Now, what does IBM rely upon to try to deal with this overwhelming testimony?

THE COURT: Novell?

MR. SINGER: Did I say "IBM?"

THE COURT: Yes.

MR. SINGER: I meant Novell. IBM has echoed the same arguments.

THE COURT: But he said IBM once, too.

MR. SINGER: Okay. So we're even.

THE COURT: Let's try to keep all the parties straight.

I've gone over the transcript, and I can't find Novell's Mr. Jacobs saying IBM when he meant Novell. [Update: Two things. First, our eyewitness at the hearing tells me that this doesn't come across on paper in quite the same way as in real life. In real life, he says, they were all joking about it and being pleasant. Also, one of our eagle eyes has spotted one place where Jacobs said IBM instead of SCO: "So, back to the dispute. IBM has threatened to terminate -- I'm sorry. SCO has threatened to terminate IBM's SVRX license." So it's very possible that Judge Kimball, who misses absolutely nothing, was referring to that, although it's not a perfect equivalent.]

But I find Singer doing so earlier. What does it mean? Maybe that Kimball misremembered. At one point he corrected Jacobs as to what document he meant. Certainly it could also just mean that he's a very nice person from all we can see, and he wanted to put Mr. Singer at ease. We've seen Kimball do that kind of thing in the past. He is the type of judge that seems to create an atmosphere where each side can do their best work, without fear or extra worries. But honesty compels me to tell you that I think it also means he likes Stuart Singer. Some of you were upset with me for saying that Singer is very skilled. But he is. And my job is to tell you the truth. He's SCO's best weapon, in my view, since this all began. I report what I see accurately. And the guy is really good at what he does. That is the truth. I'd enjoy to see him at work when he has the facts and the law more on his side. You might wish he wasn't skilled. But he is, and it's a factor. Just so you know.

Now Judge Kimball clearly enjoys Jacobs too. And he's not the type of judge who will decide a case based on which lawyer he enjoys the most. He decides based on the law, as he reads it. But we saw his enjoyment of Jacobs' presentation outstandingly at the May 31st hearing and I highlighted it at the time. And you can see it in this interchange from the June 4 hearing as well:

MR. JACOBS: Now, the plain language of Amendment No. 2 is that this paragraph 5, first of all, relates to buyouts because it's indented from Section B of Amendment No. 2, and, secondly, it's internal to the amendment. This amendment does not give Novell the right -- well, we have never claimed that Amendment No. 2 gave Novell some rights with respect to SVRX licensee source code.

And then it says: Novell may not prevent SCO from exercising its rights with respect to SVRX source code in accordance with the agreement.

Again, we have never argued that we were trying to prevent SCO to exercise some right with respect to SVRX source code that was granted by the Asset Purchase Agreement. So the plain language of Amendment No. 2 defeats SCO's argument. But, if you look at the draft that was sent over by Steve Sabbath of Santa Cruz in 1996, and you look at the -- at the out-to-the-margin paragraph underneath C, SCO -- Santa Cruz proposed Amendment No. 2 to say: As stated in Amendment Number 1 to the agreement, Novell has no rights or interest in the source code pertaining to the SVRX licenses.

THE COURT: Your argument is that that didn't survive?

MR. JACOBS: I'm sorry?

THE COURT: Your argument is that that didn't make it into the final agreement?

MR. JACOBS: Exactly. And we know what it means -- clearly we know what it means to say what the APA said versus what this amendment says. Moreover, it's quite clear what's happening by way of, again, the geography of the amendment, that it's moving into an indented position enumerated under B.

Jacobs is making an arcane point and the judge is right there with him, getting the point almost before it's made.

My point is that lawyers can fight hard for their clients and still be friendly. That may or may not be the case here, but it's how it often is. You see lawyers after a case is finished going out for a bite to eat together. I guess it's like boys fighting in the playground. When they are finished, they can dust each other off and walk off friends. And judges naturally like to watch skilled lawyers at work, particularly if they themselves are skilled.

And we are privileged to be watching some of the best lawyers in the world.

Here are the docket entries:

IBM:

06/18/2007 - 1070 - Disregard this entry. Wrong case number was placed on document. This will be filed in case number 2:04cv139. **SEALED DOCUMENT** EXHIBITS to SCO's Memorandum in Opposition to Novell's Evidentiary Objections to SCO's Exhibits Submitted in Support of its Summary Judgment Oppsitions Filed May 18, 2007 Incorporating by Reference Novell's Evidentiary Objections to SCO's Summary Judgment Exhibits filed by Plaintiff SCO Group. No attachment - document retained in the sealed room. (blk) Additional attachment(s) added on 6/19/2007 - cover sheet of document (blk). (Entered: 06/19/2007)

06/19/2007 - 1071 - Modification of Docket: Document 1070 was entered on this case because it is the case number put on the pleading by counsel. The clerk has been informed that the case number is incorrect. Counsel are advised to review pleadings before filing them to ensure that the case information is correct, as the clerk will docket it on the case number given on the document. re 1070 Sealed Document. The Clerk will docket this document on case number 2:04cv139. (blk) (Entered: 06/19/2007)

Novell:

06/18/2007 - 361 - NOTICE OF CONVENTIONAL FILING of SCO's Memorandum in Opposition to Novell's Evidentiary Objections to SCO's Exhibits Submitted in Support of Its Summary Judgment Oppositions Filed May 18, 2007, Incorporating by Reference Novell's Evidentiary Objections to SCO's Summary Judgment Exhibits (Filed Under Seal) filed by Plaintiff SCO Group re [350] Sealed Document,, (James, Mark) (Entered: 06/18/2007)

06/18/2007 - 362 - **SEALED DOCUMENT** MEMORANDUM IN OPPOSITION to Novell's Evidentiary Objections to SCO's Exhibits Submitted in Support of its Summary Judgment Oppositions Filed May 18, 2007, Incorporating by Reference Novell's Evidentiary Objections to SCO's Summary Judgment Exhibits, re [350] Sealed Objections, filed by Plaintiff SCO Group. No attachment - document retained in sealed room. (blk) (Entered: 06/19/2007)

06/18/2007 - 363 - **SEALED DOCUMENT** EXHIBITS to SCO's Memorandum in Opposition to Novell's Evidentiary Objections to SCO's Exhibits Submitted in Support of its Summary Judgment Oppsitions Filed May 18, 2007 Incorporating by Reference Novell's Evidentiary Objections to SCO's Summary Judgment Exhibits filed by Plaintiff SCO Group re [362] Sealed Document filed by Plaintiff SCO Group. No attachment - document retained in the sealed room. (blk) (Entered: 06/19/2007)


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