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Up Pops the Proposed Patent Buyer: BlackMaple, LLC - Updated 2Xs
Tuesday, December 04 2007 @ 08:52 PM EST

They saved the best filings for late in the day, and here they are. A new agenda for tomorrow's hearing -- the issues with Boies Schiller have been resolved, and SCO says it thinks it has resolved all the Cattleback issues, but I doubt it, since the matter is still marked "going forward".

But the big news is that we find out the identity of the proposed buyer of Cattleback's patent from a Declaration of Justin Basara [PDF] of Ocean Tomo: it's BlackMaple, LLC. Another potential buyer who bid higher dropped out, due to "potential encumbrances". And what might be the "potential encumbrances"?

7. The original high bidder backed out after discovering, among other things, that Microsoft Corporation potentially had a license to the patent.

Potentially? This is getting more and more fascinating. And who, you may ask, is BlackMaple? According to Erik Hughes's Declaration [PDF], he had never heard of BlackMaple, except he knows it's a Delaware LLC, it's his "understanding" that there are no SCO friends or relatives there, and he does "not know who the beneficial owner(s) of Blackmaple is/are." Why, though, isn't it a SCO executive making these statements, like Darl McBride, for example? But Hughes can tell you this: "the Patent is not a key asset backing up any particular product or business of SCO." If that is so, it doesn't match what SCO and Microsoft told us about the patent they announced Microsoft had licensed in 2003 from SCO.

SCO's press release said this:

SCO Licenses UNIX Patents and Source Code to Microsoft

LINDON, Utah, May 19, 2003 -- The SCO® Group (SCO) (Nasdaq: SCOX), the owner of the UNIX® operating system, today announced it has licensed its UNIX technology including a patent and source code licenses to Microsoft® Corporation. The licensing deal ensures Microsoft's intellectual property compliance across all Microsoft solutions and will better enable Microsoft to ensure compatibility with UNIX and UNIX services.

And Microsoft issued a statement too:

According to a statement from Microsoft, the company will license SCO's Unix patents and the source code. That code is at the heart of a high-stakes, billion-dollar lawsuit between SCO and IBM, which is aggressively pushing Linux as an alternative to Windows in corporate back shops.

So in 2003, it was all about Unix and "at the heart" of the "high-stakes" litigation. Now, it's nothing, peripheral. Who needs it? Not about Unix. Not a key asset backing up any SCO business or product.

So what might a confused observer conclude? That someone speaketh with forked tongue? Puh-lease. If you can't trust SCO and Microsoft to tell the truth, who *can* you trust? Well, then, that public companies don't do a lot of due diligence before they do multi-million-dollar deals? Or maybe that after the August 10th Utah ruling, somebody realized the patent wasn't about Unix after all? Who knows? But something in the public record isn't syncing up.

Update: There is another problem in this story. If you go to USPTO's PAIR site and search for this patent by number and then look at the transaction history, this is what you will see:

Do you see that SCO applied for and received small entity status? Now look here, at Bitlaw's explanation, and I read it as saying that to qualify for the lower fees, the patent must not be licensed, or if it is encumbered or licensed, it must be to another small entity:

§1.27 Definition of small entities and establishing status as a small entity to permit payment of small entity fees; when a determination of entitlement to small entity status and notification of loss of entitlement to small entity status are required; fraud on the Office.

(a) Definition of small entities. A small entity as used in this chapter means any party (person, small business concern, or nonprofit organization) under paragraphs (a)(1) through (a)(3) of this section....

(2) Small business concern. A small business concern, as used in paragraph (c) of this section, means any business concern that:

(i) Has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey, or license, any rights in the invention to any person, concern, or organization which would not qualify for small entity status as a person, small business concern, or nonprofit organization; and

(ii) Meets the size standards set forth in 13 § 121.801 through 121.805 to be eligible for reduced patent fees. Questions related to standards for a small business concern may be directed to: Small Business Administration, Size Standards Staff, 409 Third Street, SW., Washington, DC 20416.

I doubt that Microsoft would qualify. So either SCO perpetrated a fraud on the USPTO, which hardly seems likely, although who knows, really? or Microsoft didn't license this patent. The form you have to fill out to qualify for small entity status actually requires you to state that no one has any rights in the invention other than you, or you have to list any others with some proof that they qualify. Stats brought this to my attention a couple of days ago, but it didn't click until I saw that the high bidder thought Microsoft might have a license. But if they do, SCO surely doesn't qualify for small entity status, unless there is more to this complex area of law than I know currently. I don't know if, for example, SCO can just fix this now, by paying the higher fee, or if "fraud on the office" means something more serious. For sure, though, it's a question mark on this part of the new story. I guess only Microsoft can tell us if they do or don't think they have a license to this patent, and if so on what basis, but the paperwork filed with the USPTO by SCO no doubt also speaks. (end update)

So the high bidder dropped out. But BlackMaple still is interested, according to the Declaration of Justin Basara [PDF] of Ocean Tomo. The purchase agreement between BlackMaple and Cattleback is attached as Exhibit 2 [PDF] and the Assignment Agreement is Exhibit 3. Exhibit 2 is signed by Jonathan Brandl, the CFO. And the header to the letter says "BlackMaple, LLC, c/o Gina Leong of San Diego, CA". However, that appears to be part of the secrecy maneuvers. Groklaw's chrisbrown already found this, which lists a Gina Leong as a paralegal at Morrison & Foerster in San Diego. I do love it when a paralegal is the star for a day. She may not be enjoying it quite so much, and I'm betting the next time a boss asks her to put her name on something, she will tell him, "How about we use yours, instead?"

It's actually a nonbinding preliminary proposal, and there is a confidentiality clause on page 2. Brandl signed Exhibit 3 as well. For SCO, it's Bert Young on Exhibit 2; Ryan Tibbitts on 3. Wait a second. Young signed on September 26, 2007, which is after SCO filed for bankruptcy. Hmm. Exhibit 3 was signed in November. I don't know why the exhibits start at number 2; probably at the last minute someone thought better of whatever Exhibit 1 was going to be.

Here are all the filings:

250 - Filed & Entered: 12/04/2007
Declaration in Support
Docket Text: Declaration in Support Supplemental Declaration of Kent M. Bowman as Proposed Accountant for Debtors Pursuant to 11 U.S.C. Section 327 (related document(s)[158] ) Filed by The SCO Group, Inc.. (Attachments: # (1) Exhibit A # (2) Certificate of Service and Service List) (O'Neill, James)

251 - Filed & Entered: 12/04/2007
Declaration in Support
Docket Text: Declaration in Support Declaration of Erik Hughes in Support of Debtors' Motion for Approval of Compromise of Incipient Controversy (related document(s)[194] ) Filed by The SCO Group, Inc.. (Attachments: # (1) Exhibit 1 # (2) Certificate of Service and Service List) (O'Neill, James)

252 - Filed & Entered: 12/04/2007
Declaration in Support
Docket Text: Declaration in Support Declaration of Justin Basara in Support of Motion (related document(s)[194] ) Filed by The SCO Group, Inc.. (Attachments: # (1) Exhibit 2 # (2) Exhibit 3# (3) Certificate of Service and Service List) (O'Neill, James)

253 - Filed & Entered: 12/04/2007
Notice of Matters Scheduled for Hearing (B)
Docket Text: Amended Notice of Agenda of Matters Scheduled for Hearing (related document(s)[239] ) Filed by The SCO Group, Inc.. Hearing scheduled for 12/5/2007 at 10:00 AM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. (Attachments: # (1) Certificate of Service and Service List) (O'Neill, James)

Old timers will remember earlier Erik Hughes performances, but for those who may be new:

Erik Hughes Deposition Excerpts - as text

Erik Hughes Deposition: LKP Did Include Linux Kernel Code

Erik W. Hughes' Dec. '04 Declaration - "SCO Never Repudiated the GPL"

Ah, yes. Never repudiated the GPL. Do you love it?

Update 2: SCO has now filed an amended Erik Hughes Declaration:

254 - Filed & Entered: 12/04/2007
Declaration in Support
Docket Text: Amended Declaration in Support of Erik Hughes In Support Of Debtors' Motion for Approval of Compromise of Incipient Controversy (related document(s)[194] ) Filed by The SCO Group, Inc.. (Attachments: # (1) Exhibit # (2) Affidavit of Service) (O'Neill, James)

In the amended version, Mr. Hughes adds this:

14. This sales process was in the late spring of 2007, well before the negative August 10, 2007 ruling.

15. SCO's 10k paints the most credible, error free view of SCO's financial solvency at the time of the transfer of the Patent to Cattleback.

Since it mentions its 10k, here it is, but it is for the fiscal year ended October 31, 2006, so I'm not sure how it gives a picture of the spring of 2007. So here's the 10Q for the period ending July 31, 2007. SCO filed quite a few exhibits with that 10K, actually, mostly all certifications. But here's the list of subsidiaries. No Cattleback.


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