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Tarent v. SCO - What's Happening in Germany?
Tuesday, November 13 2007 @ 04:02 PM EST

I'll bet you'd like it if someone explained to you what is going on in Germany in the Tarent/SCO dustup. So here goes.

It's taken me a while to write about what is going on in Germany, for two reasons -- the laws in Germany are unknown to me and because of the language barrier, almost unknowable. So I wanted to wait until a lawyer there could explain it to me. What I did know about the law there made me cautious. For one thing, while you can talk about a case in public, you'd best be accurate. Privacy laws in Germany are very much stricter than in the US, for another thing. And there are rather strict ideas about copyright on even a letter. In the US we are blessed with fair use, which gives one a little more wiggle room. There is, in addition, no PACER in Germany where the whole world can just go and read rulings. Some are available, some are not, as it varies from court to court, and some are OK to make available but only with the names blocked out. In this case, that seems out of the question, since you'd know the names of the parties even if I did that.

But now I have had the opportunity to speak with a lawyer in Germany about it, Till Jaeger, the lawyer for Tarent, and I also have obtained the letter [PDF] that was sent to SCO by Tarent. It's in German, so I also arranged for an English translation for us. I have also the letter SCO sent back, and I'll tell you what it says. I'll explain what it all means, too, as best I can, thanks to having had it explained to me. Just reading it, even in translation, was not enough for me to understand it all, and perhaps you too.

First, the explanation. In Germany, it is common practice to send "legal warning" letters as the final step before going to court in most cases of civil law. If a person or company says or does something that violates someone's perceived rights, he or she can send an "Abmahnung" (similar to a cease and desist letter, but with some special elements) to them in which you ask them to sign a strafbewehrte Unterlassungsklärung (a declaration of discontinuance with a penalty clause).

This cease and desist letter has in fact been sent, as I'll show it, and it aims at giving SCO the opportunity to issue a declaration according to which they state they will cease and desist from alleging that Linux contains unauthorized SCO IP and promise to pay a contractual penalty of EUR 20.000 for each instance in which they do so contrary to what they promise. The reason you go through this process is the following: For a preliminary injunction to be granted, the court will, as a precondition for granting the injunction, look at whether there is a risk of future infringement. If your opponent has already issued a declaration to cease and desist, such risk will not be found to exist.

That is what Tarent did back in 2003, send that kind of cease and desist letter, and it has just done again. Why again? Tarent had to resend this letter because Tarent waived its rights after an earlier preliminary injunction granted against SCO GmbH in 2003 issued. The reason was that SCO had issued a declaration to cease and desist to Linuxtag e.V. and, therefore, the risk of future infringement had ended at that point. SCO had to pay the costs of the preliminary injunction, and Tarent waived its rights (because it is assumed that a serious declaration to cease and desist issued to a third party is sufficient and that the infringer is, therefore, not required to issue such declarations to all claimants individually).

You can skip this step of sending a cease and desist letter, but there is a risk if you don't send the letter that you will end up having to bear the costs of the preliminary injunction proceedings even if you get the injunction you apply for.

This letter also includes an amount of money that that has to be paid for each future violation of the declaration, if any should occur. Usually, it also contains a bill from the lawyer of the person sending the letter, based on the value of the issue. There is usually a very tight deadline included. In the case of SCO and Tarent, the deadline was November 12. SCO acted within a day, though, and removed the offending web site material long before the deadline, and sent their declaration letter agreeing to a higher penalty in the future should they ever say the same things again. So, there is no court date as of now.

There could be haggling over SCO paying Tarent's legal costs, if they wish to haggle, but that's it. There is a tactic, I'm told, which may or may not apply to this case: If the value of a claim (Streitwert) is, for example 250.000 EUR, then refusing to sign a declaration will possibly lead to a dispute before court, based on the Streitwert of 250.000 Euro, which will result in high legal fees. One tactic some have used is to sign a slightly modified declaration but refusing to pay the other side's attorney fees and penalties. If the other party wants to get those fees, too, they will have to have a legal dispute with a much lower Streitwert. Overall, the legal matter does not really change but the risk of losing a lot of money is much lower.

The bottom line here so far? SCO would have to pay Tarent even more money next time, EUR 20.000, should there ever be a repeat offense.

What would have happened if SCO had not taken down the materials from its German website and sent the declaration? The next step in the process, should a party receiving the letter fail to respond appropriately, is to go to court and get a temporary injunction [einstweilige Verfügung] . This is technically something you can do without communicating with the violator first, as I said, but it has become common practice. If the court agrees with the information you submit to the court, it is not necessary to hear from the other party, but the court may schedule an oral hearing and of course, the other party may appeal any preliminary injunction that issues.

This rapid process is viewed as useful because it gives reasonable protection to people in a very short time while standard cases in civil law may last for years. And in Germany, it is illegal to allege detrimental facts about the products of your competitors, if you are not able to show that you are right. And please, have in mind that SCO GmbH and SCO Group are different companies, the former being a German company, a wholly owned subsidiary of the US company.

So that is the Tarent story. However, that isn't the end of conceivable troubles for SCO Germany from the website event. As you know, back in 2003, Tarent was not the only entity involved. There were and are others, like Linuxtag e.V. and Univention, who conceivably could ask for the contractual penalty agreed to back then or apply for a court punishment (they may have already done so). As far as I know there is still a preliminary injunction in full force and effect. The Tarent situation of waiver is unique to it, as I understand all this.

Going back now to 2003, some companies and organizations (LinuxTag e.V. which organizes Linux exhibitions) and Tarent and Univention felt that SCO Germany's statements about Linux, UNIX, IP and so on was hurting their business, so they went to SCO and said basically to put up or shut up. SCO refused to submit proof to their claims, so the only other option was shut up. The entities obtained the injunction in 2003 from the court, forcing SCO to sign declarations of discontinuance.

Four years later, SCO Germany published the same statements again. Now, what if it was just a mistake? Under German law, as I understand it, it doesn't matter why it happened again, only that it did, if it was wilful or due to negligence. In the US, we have something called strict liability -- that no matter whether you meant well or were the meanest snake slithering down the highway, it doesn't matter. The only questions the court asks are, did it happen? Was it you? In Germany, however, there is liability in the case of willfulness and negligence only. But the courts, I'm told, are very strict regarding negligence.

So in this case, it does not matter whether it was a technical glitch, goof, or a Linux ninja sysadmin -- what can't be altered is that SCO had the obligation to install proper procedures to prevent the company from making the statements again.

In the case of Tarent vs. SCO, we see that SCO quickly realized that the least damaging option was to quickly sign the new declaration (with an increased penalty). If a mistake it was, the law views it that it was committed negligently. In 2003 SCO had to pay EUR 10.000 because of the "mistake". Therefore they have to make sure to not make the mistake again. Unless they have money to throw around. Snark.

Here's the translation of Tarent's letter, and you'll see it was sent to Michael Olson, reported to no longer be the CEO of SCO Germany. SCO's answer, which I won't hazard to print, said the following: that it would refrain from making the claim that Linux contains wrongfully obtained intellectual property of SCO, that end users of Linux are liable for violating SCO's IP, or that Linux is an unauthorized derivative of UNIX. Well, shut my mouth, as we say in the US. SCO also agreed to pay 20.000 EUR for each time they ever do say any of the above in the future, and they provided the information that the SCO lawyer believed that Mr. Olson had left the company by the time of the recent claimed event, but they'd check and get back on that detail.

Now, we are hearing that Jean Acheson, SCO's newly minted comptroller is the CEO in Germany. No doubt she was anointed to fill that desirable position *after* the events that might lead to personal liability for the CEO of SCO Germany. No one, in such a scenario, is personally liable, then? Well, this letter doesn't say so, but IIRC there were actually four names listed for that role for SCO Germany, three in addition to Mr. Olson. Heise showed a comment by Detlef Borchers, a reporter for Heise, that Steven Sabbath, Frank Putnam, Henry Goldstein and Olson were the current CEOs for SCO Germany. I have no idea if that is so, personally; a Groklaw member called SCO Germany and asked who was the CEO and they wouldn't or didn't give any name. Another called earlier, and he was told it was Mike Olson, as I earlier reported. You can search the Handelsregister, but it's a paid service by the German government, and if there are changes happening as we speak, they won't show there yet. At this point, I guess we could say that only God knows, and Darl maybe too. There may be a singular lack of interest in being CEO there currently, in that German law makes the CEO personally liable for damages against the company, I'm told, which probably explains the musical chairs.

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

Sent in advance via Telefax
Fax no: 06172-[redacted]
Numer of pages: 6

Munich, 7th of November 2007

Tarent GmbH vs. The SCO Group GmbH
Our case numer: 910/07
Secretary: [redacted]

Dear Mr. Olson,

In the above referenced matter, we inform you that we are legal counsel for the Tarent GmbH, [address redacted]. Attached to this letter is a copy of a power of attorney [Vollmacht] to our name.

As you may know, our client obtaind a preliminary injunction at the [Landgericht (court of the state)] Munich I on June 4, 2003 against The SCO Group GmbH, in which you were enjoined from making the following claims in the course of business:

1. that the software "Linux" contains wrongfully obtained intellectual property of SCO's.

[pg 2]

2. that end users of "Linux" can be made liable for violations of SCO's intellectual property, and/or

3. that the software "Linux" is an unauthorised derivative of UNIX,

as long as this is not proven by you to be true.

In a letter dated July 2, 2003 our client stated that they waived rights from this preliminary injunction, except rights from the decision on fees, because you made a declaration of cease and desist [Unterlassung] to a third party to the Linuxtag e.V..

Today, our client noticed that you make the claims we object to [beanstandet] again on your website. The following text can be obtained on the Website https://www.sco.de/scosource/letter_to_partners.html :

"As we have progressed in our discovery related to this action, SCO has found compelling evidence that the Linux operating system contains unauthorized SCO UNIX intellectual property (IP)."
it is stated further on the website,
"if a customer refuses to compensate SCO for its UNIX intellectual property found in Linux by purchasing a license, then SCO may consider litigation."
and
"All commercial users of any version of Linux need a SCO IP License."

[pg 3.]

These claims are identical to the statements which were online on your website before and which were subject to a preliminary injunction [Ordnungsmittelverfahren] in the year 2003.

Our client develops among other things software for the operating system GNU/Linux and is offering services in this sector of the market. The focus of its development are databases, desktop, and web applications for companies and governmental offices. In connection with consulting services and quality management, our client offers a full service in the business sector for the operating system GNU/Linux.

The mentioned claims and public statements have had tremendously negative effects on the business of our client. Your claims defer customers of our client from continuing the usage of the software Linux and therefor also from asking for the services our client offers in the sector of software development for GNU/Linux. Your actions are considered to be a "Anschwrzung" [slander] as defined by 4 Nr. 8 UWG (Gesetz gegen den Unlauteren Wettbewerb - unfair competition act) and are [wettbewerbswidrig], as long as you can't prove these statements to be true. Also, these claims violate 4 Nr. 10 when it comes to preventing revenue [Absatzbehinderung] and disruption of business [Betriebsstring]. It does not matter whether you have done these things [wettbewerbswidrigen] intentionally or not. After the order enjoining such statements [Ordnungsmittelverfahren=enforcement procedures] in the year 2003, you should have taken any necessary measures to prevent your website from presenting the forbidden statements again. As CEO you are also personally liable for the anticompetitive [wettbewerbswidrige] action.

There is reason to suspect the danger of repetition of these actions, as they have happened before. This danger of repetition can only be removed outside court by you signing a declaration to cease and desist [Unterlassungs und Verplichtungserklrung] which is properly agreeing to the penalty for any failure to abide [strafbewehrt].

[pg. 4] We have attached a declaration of cease and desist [strafbewehrte Unterlassungs- und Verpflichtungserklrung] and ask you to sign this so as to make it legally binding and send it back to us. A determined penalty of 20.000 EUR can be explained by the fact that the money penalty [Ordnungsgeld] of 10.000 did not prevent you from further violations and therefore a higher penalty amount is necessary to prevent any further repetition.

[sentence unclear] You have until the deadline of Monday, November 12, 2007, 12 o'clock to sign the required declaration or alternatively to bring proof of the claimed facts. Sending it by fax is fine, as long as the original will be sent by mail afterwards immediately.

Additionally, you have the obligation to cover our legal fees according to Section 12 paragraph 1, sentence 2 UWG. We ask you to confirm this obligation by signing the declaration of cease and desist [strafbewerhte unterlassungs- und verlichtungserklrung] within the deadline set.

In case the declaration of cease and desist [Unterlassungs- and Verpflichtungsklrung] does not arrive, or proof is not presented, by the deadline in the alternative, we will advise our client to go to court immediately and without any further notice.

Yours,

Dr. Till Jaeger,
Attorney


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