decoration decoration

When you want to know more...
For layout only
Site Map
About Groklaw
Legal Research
ApplevSamsung p.2
Cast: Lawyers
Comes v. MS
Gordon v MS
IV v. Google
Legal Docs
MS Litigations
News Picks
Novell v. MS
Novell-MS Deal
OOXML Appeals
Quote Database
Red Hat v SCO
Salus Book
SCEA v Hotz
SCO Appeals
SCO Bankruptcy
SCO Financials
SCO Overview
SCO v Novell
Sean Daly
Software Patents
Switch to Linux
Unix Books
Your contributions keep Groklaw going.
To donate to Groklaw 2.0:

Groklaw Gear

Click here to send an email to the editor of this weblog.

To read comments to this article, go here
Today We Are Five & What Happened at the Summary Judgment Hearing April 30
Friday, May 16 2008 @ 12:12 PM EDT

Today is our anniversary, guys. Unbelievably, Groklaw is five years old today. And we're still standing, still here, still working together. I know. Amazing. Who knew we'd still be together after five years?

We have the transcript of the summary judgment motions that were argued on April 30th, in the middle of the SCO v. Novell trial. But there's an odd notice on the Docket list. We actually have had the transcript for a couple of days, but there is this notice on the court's docket:

**RESTRICTED DOCUMENT** TRANSCRIPT of Proceedings held on April 30, 2008-Motion for Summary Judgment before Judge Dale A. Kimball. Court Reporter/Transcriber Laura W. Robinson, CSR, RPR, CP, [Telephone number].

NOTICE RE REDACTION OF TRANSCRIPTS: Within 7 calendar days of this filing, each party shall inform the Court, by filing a Notice of Intent to Redact, of the parties intent to redact personal data identifiers from the electronic transcript of the court proceeding. The policy and forms are located on the court's website at Please read this policy carefully. If no Notice of Intent to Redact is filed within the allotted time, this transcript will be made electronically available on the date set forth below. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 6/4/2008. Redacted Transcript Deadline set for 6/16/2008. Release of Transcript Restriction set for 8/12/2008. (jmr)

So that is the holdup. I'm trying to find out if we can publish the version we purchased. I think the notice is something Utah does for all transcripts now, and I see nothing in the transcript that would qualify as something secret. But out of respect, I'm waiting until I can make sure. However, while we wait, there is nothing stopping me from telling you what I read, and once the ban is lifted, I'll provide the PDF.

So here's what I gleaned from the transcript:

I enjoyed reading this transcript more than any of the other trial transcripts. If you only had time to read one transcript, this is the one, since it sums up the two sides' positions.

Something happened at this hearing that's a first in my experience. When the judge asked Novell how long it would need to argue its motion, Morrison & Foerster's Michael Jacobs said, "Five minutes." Even the judge, the Hon. Dale A. Kimball, seemed surprised. I've never heard a lawyer say he only needs five minutes if he has a hour available, should he want it. It made me smile.

SCO's lawyer, Stuart Singer, then was asked how much time he needed, and he says he was going to say ten minutes, but now he'll try to cut it down. So, it's all very friendly. The only reason the transcript isn't two paragraphs or so each is because SCO's Ted Normand says he needs 20 minutes for the second motion, SCO's motion. I think that might be because he has to argue the very opposite of Stuart Singer, who has just claimed that Novell shouldn't win because they didn't try to stop SCO from doing SCOsource and never complained to them about it at the time, so estoppel blocks Novell's requested relief. Poor Mr. Normand then has to stand up and argue that Novell definitely has repudiated the Sun and Microsoft SCOsource agreements. Definitely. No doubt about it. It's SCO in a nutshell. Alice in Wonderland to the end. Most of his minutes are spent on the pointless argument that Novell shouldn't get the money; it should be repaid to Sun and Microsoft. If I were the judge, I'd be very interested to know why SCO is so fixated on that point. What's the game here? And here's my favorite SCO argument:

We read the court's August 2007 order as leaving open for determination in this trial as to whether we owe Novell money.

Here. Read the order yourself:

Finally, the court concludes, as a matter of law, that the only reasonable interpretation of all SVRX Licenses includes no temporal restriction of SVRX Licenses existing at the time of the APA. The court further concludes that because a portion of SCO's 2003 Sun and Microsoft Agreements indisputably licenses SVRX products listed under Item VI of Schedule 1.1(a) to the APA, even if only incidental to a license for UnixWare, SCO is obligated under the APA to account for and pass through to Novell the appropriate portion relating to the license of SVRX products. Because SCO failed to do so, it breached its fiduciary duty to Novell under the APA and is liable for conversion.

The court, however, is precluded from granting a constructive trust with respect to the payments SCO received under the 2003 Sun and Microsoft Agreements because there is a question of fact as to the appropriate amount of SVRX Royalties SCO owes to Novell based on the portion of SVRX products contained in each agreement.

The issue is how much. Not whether or not. It's so SCO. Quintessential SCO, to read those words in the order and then stand before the judge who wrote them and claim the trial is about whether SCO owes Novell any money or not.

If you sat them down and threatened to torture them if they didn't tell the truth, they'd probably tell you that it is the truth, that they argue it's a de minimis amount owed, if anything, and hence they owe nothing. That's technically true, that statement, in that it matches their position, if you look at it like that. But it is misleading about what the order says. For real. So, why would they change their spots now? I just feel sorry for the Boies boys, having to stand up in public and say things like that. Actually, they don't *have* to.

Then SCO asks for reconsideration of the 2007 order! They already submitted a motion asking for that precise relief and were denied. Very bold. They base their request, in part, aside from just panache on the fact that they say Novell didn't turn over their letters to Sun and Microsoft until April 29th, the day the trial started. That's "crucial new evidence", you see. Like SCO didn't know about it already and couldn't have brought it to the court's attention in their motion for reconsideration. Normand argues:

And second, Novell's production yesterday of the September 2007 letters is crucial new evidence. I think that would have been very relevant for the court to know if at the time of the summary judgment ruling it had been made clear that Novell had rejected these agreements and at the same time was acknowledging the possibility of remittance.

They are a scream. But if I had to say something like that, I'd need a drink afterward. More seriously, it's not true that Novell never protested against SCOsource. SCO seems to have issues with short term memory, but as I recall they brought SCO v. Novell in the first place because Novell announced to the world that they owned the Unix copyrights and were nixing SCO's behavior. The letters Novell sent privately to SCO in addition were eventually made publicly available by Novell on its website, for crying out loud. We have their PDFs as text here. The very first letter Jack Messman, then CEO, sent to SCO on May 28, 2003, after he read SCO's "Letter to Linux Customers", ended like this:

SCO's actions are disrupting business relations that might otherwise form at a critical time among partners around Linux technologies, and are depriving these partners of important economic opportunities. We hope you understand the potential significant legal liability SCO faces for the possible harm it is causing to countless customers, developers and other Linux community members. SCO's actions, if carried forward, will lead to the loss of sales and jobs, delayed projects, cancelled financing, and a balkanized Linux community.

We, like others, are concerned about the direction of SCO's campaign. For now, we demand that SCO either promptly state its Linux infringement allegations with specificity or recant the accusation made in your letter. Further, we demand that SCO retract its false and unsupported assertions of ownership in UNIX patents and copyrights or provide us with conclusive information regarding SCO's ownership claims. In the future, we hope SCO will adhere to standards of strict accuracy when stating its rights in UNIX.

And as for demanding its share, Novell absolutely did so, contrary to SCO's argument at this hearing. For example, here's a portion of a letter from then General Counsel Joseph LaSala to Darl McBride back on June 24, 2003:

It has come to our attention that SCO may have violated these provisions. In particular, SCO reported in a recent securities filing that SCO has established a program to review existing licenses, and enter into new licenses, relating to UNIX and that this effort "resulted in the execution of two license agreements" during the quarter ended April 30, 2003. The securities filing states:
The first of these licenses was with a long-time licensee of the UNIX source code which is a major participant in the UNIX industry and was a "clean-up" license to cover items that were outside the scope of the initial license. The second license was to Microsoft Corporation ("Microsoft"), and covers Microsoft's UNIX compatibility products, subject to certain specified limitations. These license agreements will be typical of those we expect to enter into with developers, manufacturers, and distributors of operating systems in that they are non-exclusive, perpetual, royalty-free, paid up licenses to utilize the UNIX source code, including the right to sublicense that code.

SCO's actions regarding the licenses referenced in the securities filings and SCO's plans for future licenses cannot be reconciled with Novell's rights and SCO's obligations under the Asset Purchase Agreement provisions quoted above.

Therefore, we demand as follows:

1. Immediately provide to Novell copies of the two agreements in question, and any other agreements in which SCO purports to amend, modify or waive rights under any SVRX license (including any transaction that concerns a buy-out of licensee royalties) or to enter into any new SVRX license, together with any explanation you might offer as to why you believe these agreements are permissible under the Asset Purchase Agreement.

2. Effective immediately, do not enter into any further agreement in which SCO purports to amend (except for amendments permissible under the penultimate sentence of Section 4.16(b)), modify or waive rights under any SVRX license (including any transaction that concerns a buy-out of licensee royalties) or to enter into any new SVRX license.

3. Effective immediately, comply with SCO's obligations under Amendment No. 2 for management of any potential transaction with any SVRX licensee that concerns a buy-out of such licensee's royalty obligations, including immediately ceasing all negotiations and other communications with licensees concerning any such transaction without Novell's prior written consent and continued participation.

Once we have the relevant information, we can address the resolution of any violation of the Asset Purchase Agreement, including payment of SVRX royalties and other amounts owed to Novell based on the above-mentioned license agreements.


Joseph A. LaSala, Jr.

And it's also not true that Novell hasn't been harmed by the Sun and Microsoft agreements. There is no way, Novell witnesses testified, that Novell would have agreed to Sun open sourcing Solaris, for example, because it placed it in direct competition with Linux. That is harm. You can verify that by reading the closing arguments by Novell at trial and in the testimony of Joseph LaSala on day one of the trial.

As for SCO's argument that Novell shouldn't get to "hold" the money, that it should be restored to the SCOsource licensees, Jacobs just points out the simple fact that none of them showed up asking for their money back. And then he says something that would make me very nervous if I were Sun:

Number one, the third parties aren't here. In the cases that SCO is advancing in the sections of restatement that SCO is talking about, we're talking about three way disputes. We should not be ourselves penalized for proceeding step wise to determine -- to be absolutely sure that SCO didn't have the authority to enter into these agreements before we go off and create our own imbroglio in the computer industry by filing lawsuits and creating uncertainty about whether code is infringing or isn't infringing.

So the fact that we have decided to proceed, if you will, between SCO and Novell first, means that our situation is different from the situations that SCO is citing in the case law....

Novell is ultimately going to have to work out with Sun and with Microsoft and the SCO source licensees exactly what happened here and exactly what should follow as a consequence.

In other words, Novell asks, why is SCO arguing their case? They are not here asking for restitution. If they are unhappy about Novell getting money from SCO, it's a matter for discussion or dispute between Novell and the third parties later, after the court clarifies whether SCO had the right to enter into SCOsource licenses, that it isn't an issue for SCO and Novell to sort out now. Novell would like a court ruling first, and then it can decide what to do next. After all, SCO doesn't stand in Sun's or Microsoft's shoes, Jacobs says.

Er.... That depends on how you define your terms and in what context you speak, eh? Heh heh. Anyway, I think you will love reading how Jacobs responds to SCO's cases, beginning on page 22. He also says this, so I don't think Sun needs to hyperventilate just yet:

There are all sorts of intermediate scenarios between Novell saying at the end of all of this oh yeah those agreements are fine, no problem. And by the way, whatever we said about SCO breaching, whatever we said about their breach of our fiduciary duties, whatever the court's findings that they breached, oh, this is all retroactive, a ratification back to 2003.

SCO then responds in a way that explains to me why they never offered any financial breakdown on what SCO thinks it owes Novell. I discern it's because it's SCO's position that they don't have to account to Novell unless or until Novell ratifies:

They're affected because if you ratify, you're in the principal agent box. It is at that point once the principal has ratified the agent's act, once the principal has ratified the agent's act, the agent is subject to a fiduciary duty to account to the principal.

If I've understood the argument, it's taking a very big chance. Novell's Jacobs has just explained to the judge that it isn't disputing that Novell and SCO are in a principal/agent relationship. On that fiduciary basis, SCO does need to account. Perhaps SCO is gambling that it will make sense to an appeals court.

One final note for history: SCO dropped its laughable claim of "unclean hands" against Novell. It should never, in my view, have made such a claim, but in any case SCO is "not pursuing that aspect of the defense" any more. That was for the peanut gallery.

If I were IBM, I'd be smiling, though. SCO has now said in open court that the older UNIX code has almost no value, and since SCO sued IBM for gazillions for allegedly misusing that older UNIX code, back when SCO was telling the world that it owned it, I'd call that home free for IBM. Like they are worried anyway.

And frankly no one much cares what happens with these two motions, because, as Jacobs puts it, events have overtaken the motions. They were already in the trial while arguing the motions, and there's no way the motions could be decided in advance of the trial, so they just had to soldier on.

Why did the judge schedule it this way? Just a guess, but remember all the motion prancing and dancing in SCO v. IBM and in this litigation too with the sur-sur-replies and the motions for reconsideration and/or clarification and requests for final orders so SCO could run to appeals court? That happened in SCO v. Novell too, although in a shorter time framework, so you have to look to the IBM case to see the Boies Schiller guys really show you how to dance The Motion. Whether or not it was the judge's intention to detour around all that, it is the effect. There is no point filing motions as a delay mechanism, when you know they won't be heard until the trial is already under way. Capice? Wink, wink. Just a guess, though. Of course, SCO managed to ask for reconsideration live and on their dancing feet at this hearing.

You can find all the links to the filings for the two motions here.

One final point. At the beginning of the hearing, Judge Kimball says, "... I see all the usual suspects here and present." Whatever do you suppose Judge Dale Kimball had on his mind that made him humorously open up like this? Or am I getting too Freudian in my dotage?

  View Printable Version

Groklaw © Copyright 2003-2013 Pamela Jones.
All trademarks and copyrights on this page are owned by their respective owners.
Comments are owned by the individual posters.

PJ's articles are licensed under a Creative Commons License. ( Details )