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Novell Responds to SCO's Notice of Voluntary Dismissal/Final Judgment Language - as text
Saturday, November 01 2008 @ 04:18 PM EDT

Novell has filed its Response to SCO's Notice of Voluntary Dismissal. It's ascerbic and funny as can be. It shows the court each and every tricky bit it thinks SCO might just be angling for.

I saw in the email exchange between the SCO and Novell attorneys that were attached to the David Melaugh Declaration that SCO has stepped on Novell's last nerve with its trickiness. And here we see the result. Novell points out each and every conceivable thing SCO might be trying for, leaving nothing for SCO to try later.

Novell begins by pointing out that in their meet and confer, Novell told SCO that SCO had no valid claims based on post-APA UNIX or UnixWare (despite all Darl's flying flags for the media), but SCO wouldn't agree. Now they have finally conceded that point:

After equivocating for months before both this Court and the Bankruptcy Court, SCO now concedes it has no claims against Novell based on post-APA UNIX or UnixWare. SCO therefore proposes to dismiss that portion of its breach of contract, copyright infringement, and unfair competition claims with prejudice, relinquishing any supposed right it might have had to re-assert such claims following appeal. As that is the very result Novell proposed to SCO during the meet and confer process that lead up to these motions. Novell has no objection to such a dismissal.
Novell does have some objections to SCO's proposed final order language, though. Novell met with SCO and tried to reach an agreement, but of course *that* didn't work. So Novell now submits its own language for the order, language that would close some tricky back doors it thinks SCO just might have tried to include.

It would like, for example, this phrase added to clarify the nature of the dismissal of SCO's claims: "without the possibility of renewal following appeal." Whatever might Novell think SCO could be secretly thinking of trying after the appeal? They have SCO's number, I'm thinking.

You can't blame Novell for being disgusted, really. SCO just never quits trying for some advantage, by hook or by crook. I've done the emails as text, to show you what I mean, and I'll post them next, probably tomorrow. I want to work on the complete text of this Response first.

Here are today's filings:

10/31/2008 - 563 - RESPONSE re 561 Notice of Voluntary Dismissal, filed by Defendant Novell, Inc.. (Attachments: # 1 Text of Proposed Order Novell Proposed Final Judgment, # 2 Exhibit Judgment Redline)(Sneddon, Heather) (Entered: 10/31/2008)
And here, thanks to Steve Martin, is the Response as text, followed by the redline version of the proposed order, showing the changes Novell suggests for wording:

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

MORRISON & FOERSTER LLP
Michael A. Jacobs, pro hac vice
David E. Melaugh, pro hac vice
[address]
[phone]
[fax]

ANDERSON & KARRENBERG
Thomas R. Karrenberg, #3726
Heather M. Sneddon, #9520
[address]
[phone]
[fax]

Attorneys for Defendandt and Counterclaim-Plaintiff Novell, Inc.

IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION

THE SCO GROUP, INC., a Delaware corporation,
Plaintiff and Counterclaim- Defendant,

v.

NOVELL, INC., a Delaware corporation,
Defendant and Counterclaim- Plaintiff.
NOVELL'S RESPONSE TO SCO'S
NOTICE OF VOLUNTARY
DISMISSAL



Case No. 2:04CV00139

Judge Dale A. Kimball

(1)

After equivocating for months before both this Court and the Bankruptcy Court, SCO now concedes it has no claims against Novell based on post-APA UNIX or UnixWare. SCO therefore proposes to dismiss that portion of its breach of contract, copyright infringement, and unfair competition claims with prejudice, relinquishing any supposed right it might have had to re-assert such claims following appeal. As that result is the very result Novell proposed to SCO during the meet and confer process that led up to these motions, Novell has no objection to such a dismissal.

Novell does have several objections to the SCO's Proposed Final Judgment. Novell and SCO met and conferred regarding these changes, but SCO was not able to respond to Novell in a timely fashion. Novell therefore submits its own Proposed Final Judgment, the differences in which are detailed below and reflected on the attached redline.

A. Paragraph 3: Clarifying Nature of Dismissal

Novell proposes to add the text "without the possibility of renewal following appeal" to the description of SCO's dismissal of the post-APA portions of its claims. As SCO does not contest that is the effect of the dismissal, this change should not be controversial.

B. Paragraph 4: Reporting the Court's True Holding as to 2003 Sun Agreement

Having reviewed the Court's Findings of Fact, Conclusions of Law, and Order (Docket No. 542, "Order"), the parties propose different text for Paragraph 4 of the final judgment. The division concerns the Court's holding as to the 2003 Sun Agreement.

(2)

The relevant test proposed is as follows:

Novell Text SCO Text
... In addition, pursuant to the Court's Findings of Fact, Conclusions of Law, and Order dated July 16, 2008, SCO was not authorized under the APA to amend, in the 2003 Sun Agreement, Sun's 1994 SVRX buyout agreement with Novell, and SCO needed to obtain Novell's approval before entering into the amendment; but SCO was fully authorized under the APA to enter into the 2003 Microsoft Agreement and the SCOsource Agreements with Linux end-users without any approval by Novell. ... In addition, pursuant to the Court's Findings of Fact, Conclusions of Law, and Order dated July 16, 2008, SCO was not authorized under the APA to amend, in the 2003 Sun Agreement, the confidentiality provisions of Sun's 1994 SVRX buyout agreement with Novell, and SCO needed to obtain Novell's approval before entering into the amendment; but SCO was fully authorized under the APA to enter into other parts of the 2003 Sun Agreement without any approval by Novell, and was also fully authorized under the APA to enter into the 2003 Microsoft Agreement and the SCOsource Agreements with Linux end-users without any approval by Novell.

This text arises from the Court's holding on Novell's Fourth Claim, seeking declaratory relief. That count presents a binary choice: did SCO have authority to enter into the 2003 Sun Agreement or not? (Docket No. 142, 123.) The Court's answer is straightforward:

  1. Section B of Amendment 2 prohibits unilateral agreements "concerning" buyouts.
  2. "There are no exceptions to this provision." (Order at 35.)
  3. The 2003 Sun Agreement "concerns" a buy-out.
  4. SCO was therefore without authority to enter into the 2003 Sun Agreement.
On that basis, the Court found:
There is no dispute that Sun's 1994 Agreement with Novell was a "buy-out" of Sun's SVRX royalty obligations as that term is used in Amendment No. 2. Sun's 2003 Agreement explicitly acknowledges that it is intended to "amend and restate" the 1994 buy-out agreement, including expansion of Sun's existing license rights to permit opensource licensing of SVRX code. The Court concludes that Sun's 2003 Agreement License, therefore, "concerns" a buy-out, and SCO was required to follow the additional restrictions imposed by Amendment No. 2 on transactions that concern buy-outs. SCO did not comply with these terms. The Court thus concludes and declares that SCO was without authority to enter into the 2003 Sun Agreement under Amendment 2, Section B, of the APA.

(3)

(Order at 36 (emphasis added).)

In meet and confer, SCO cited a variety of text from elsewhere in the Order that SCO claims supports the language of its proposed final judgment. SCO's arguments confuse a basis of the Court's holding with the holding itself. SCO would have the Court declare that, in some respects SCO was authorized to enter into the 2003 Sun Agreement while in other respects it was not. That would, in effect, have the Court to split the 2003 Sun Agreement into two agreements the Sun agreement SCO was authorized to enter into, and the Sun agreement SCO wasn't. The Court has repeatedly rejected such "agreement splitting" in the past. (See, e.g., Order, Docket No. 452, at 16 (rejecting argument that license could be simultaneously both an SVRX License and not-an-SVRX-License).) Put another way, what SCO hopes for is essentially an advisory opinion: if the 2003 Sun Agreement had not excised the 1994 Sun buy-out's confidentiality requirements, would SCO have been authorized to enter into it? That is not the question posed by Novell's Fourth Claim, is not a question posed by any actual agreement before the Court, and is therefore not a question appropriate to address on final judgment.

C. Paragraph 10: Punitive Damages are not "Dismissed"

SCO proposes to "dismiss" Novell's claim for punitive damages. Those damages are a remedy, the entitlement to which derives from Novell's actual claims, which are addressed in Paragraphs 4-9 of the Proposed Final Judgment. This is simply a technical change, however. Novell does not dispute that, under the terms of the parties' stipulation, it could not (and did not) seek punitive damages at the bench trial. As that event has passed, the stipulation is no longer relevant and need not be repeated in the Court's Final Judgment.

D. Paragraph 11: Case not "Closed"

Novell's Proposed Final Judgment excises "this case is closed." It is Novell's understanding that the clerk closes a case and that it is not necessary to do so by way of final

(4)

judgment. Novell intends to seek its costs, and does not want any claim that the "closure" of this case prevents Novell from pursuing its rights as the prevailing party.

E. Paragraph 11: Execution not "Stayed"

In meet and confer, SCO was unable to explain what it means by the last sentence of its proposed Paragraph 11, "Execution shall be stayed until relief from the automatic stay is obtained from the United States Bankruptcy Court for the District of Delaware in the case entitled In re: The SCO Group, Inc, Case No. 07-11337(KG)."

The text might be surplusage, simply restating the fact that, under bankruptcy law, Novell cannot collect its judgment except by way of those methods permitted by the bankruptcy code. If the language is surplusage, it can be excised without incident.

What Novell suspects is that SCO included this text in the hope it might influence a dispute due to be resolved in the Bankruptcy Court. Novell and SCO dispute whether Novell is entitled to the return of its money held in trust by SCO now or after appeal. As that is a matter the parties agree is reserved to the Bankruptcy Court, it is inappropriate to address it here, especially in Final Judgment.

What is clear from meet and confer with SCO is that SCO believes the "stay" of the "execution" of Final Judgment does not stand in the way of its appeal. Given the vague nature of this text, its effect on appeal is not obvious SCO may find itself having advocated language that prevents the very result it has told the world it is pursuing with all possible vigor.

F. Typographical Changes

As the redline reflects, Novell also makes certain typographical changes to Paragraphs 2, 3, 7, and 9. These are not intended to affect the meaning of the judgment and should not be controversial.

(5)

DATED: October 31, 2008

ANDERSON & KARRENBERG

By: /s/ Heather M. Sneddon
Thomas R. Karrenberg
Heather M. Sneddon

- and -

MORRISON & FOERSTER LLP
Michael A. Jacobs, pro hac vice
David E. Melaugh, pro hac vice

Attorneys for Defendant and
Counterclaim-Plaintiff Novell, Inc.

(6)

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on this 31st day of October, 2008, I caused a true and correct copy of the foregoing NOVELL'S RESPONSE TO SCO'S NOTICE OF VOLUNTARY DISMISSAL to be served to the following:

Via CM/ECF:

Brent O. Hatch
Mark F. James
HATCH JAMES & DODGE, P.C.
[address]

Stuart H. Singer
William T. Dzurilla
Sashi Bach Boruchow
BOIES, SCHILLER & FLEXNER LLP
[address]

David Boies
Edward J. Normand
BOIES, SCHILLER & FLEXNER LLP
[address]

Devan V. Padmanabhan
John J. Brogan
DORSEY & WHITNEY, LLP
[address]

Via U.S. Mail, postage prepaid:

Stephen Neal Zack
BOIES, SCHILLER & FLEXNER LLP
[address]

/s/ Heather M. Sneddon

(7)

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

MORRISON & FOERSTER LLP
Michael A. Jacobs, pro hac vice
David E. Melaugh, pro hac vice
[address]
[phone]
[fax]

ANDERSON & KARRENBERG
Thomas R. Karrenberg, #3726
Heather M. Sneddon, #9520
[address]
[phone]
[fax]

Attorneys for Defendandt and Counterclaim-Plaintiff Novell, Inc.

IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION

THE SCO GROUP, INC., a Delaware corporation,
Plaintiff and Counterclaim- Defendant,

v.

NOVELL, INC., a Delaware corporation,
Defendant and Counterclaim- Plaintiff.
[NOVELL PROPOSED] FINAL
JUDGMENT



Case No. 2:04CV00139

Judge Dale A. Kimball

(1)

Whereas by Memorandum Decision and Order dated August 10, 2007, the Court having ruled on the parties' summary judgment motions, and the matter having come before the Court for trial on April 29 and 30 and May 1 and 2, 2008, and the Court having issued its Findings of Fact, Conclusions of Law, and Order dated July 16, 2008, and the parties having stipulated or moved to dismiss the claims remaining after the foregoing Orders, and the Court having considered the submissions of the parties concerning the entry of Final Judgment, and good cause appearing, it is ORDERED, ADJUDGED, AND DECREED that:

1. SCO's claims for Slander of Title (Count I) and Specific Performance (Count III) are dismissed pursuant to the Court's Memorandum Decision and Order dated August 10, 2007.

2. SCO's claims for Breach of Contract (Count II), Copyright Infringement (Count IV), and Unfair Competition (Count V) are dismissed pursuant to the Court's Memorandum Decision and Order dated August 10, 2007, insofar as these claims are based on ownership of pre-APA UNIX and UnixWare copyrights.

3. SCO's The remaining portions of SCO's claims, for Breach of Contract (Count II), Copyright Infringement (Count IV), and Unfair Competition (Count V), are voluntarily dismissed with prejudice, without the possibility of renewal following appeal.

4. With respect to Novell's claims for Declaratory Relief (Count IV), pursuant to the Court's Memorandum Decision and Order dated August 10, 2007, Novell is entitled to direct SCO to waive claims against IBM, Sequent, and other SVRX licensees; Novell is entitled to waive such claims on SCO's behalf; and SCO is obligated to recognize such a waiver. In addition, pursuant to the Court's Findings of Fact, Conclusions of Law, and Order dated July 16, 2008, SCO was not authorized under the APA to amend, in the 2003 Sun Agreement, the confidentiality provisions of Sun's 1994 SVRX buyout agreement with Novell, and SCO needed to obtain Novell's approval before entering into the amendment; but SCO was fully authorized under the APA to enter into other parts of the 2003 Sun Agreement without any approval by Novell, and was also fully authorized under the APA to enter into the 2003 Microsoft Agreement and the SCOsource Agreements with Linux end-users without any approval by Novell.

(2)

5. With respect to Novell's claims for Constructive Trust/Restitution/Unjust Enrichment (Count VI), Breach of Fiduciary Duty (Count VII), and Conversion (Count VIII), pursuant to the Court's Findings of Fact, Conclusions of Law, and Order dated July 16, 2008, Judgment is hereby entered in favor of Novell for $2,547,817, for the revenues from the 2003 Sun Agreement attributable to the unauthorized amendment of the SVRX confidentiality provisions in Sun's 1994 SVRX buyout agreement with Novell. Pursuant to the parties' agreement reflected in Novell's Unopposed Submission Regarding Prejudgment Interest dated August 29, 2008, that award is increased by $918,122 in prejudgment interest through August 29, 2008, plus $489 per diem thereafter until the date of this Judgment.

6. Further with respect to Novell's claim for a Constructive Trust (Count VI), as reported in Novell's Submission Regarding the Entry of Final Judgment dated August 29, 2008, the parties have reached an agreement as to the amount of the constructive trust ($625,486.90), and the parties will be reporting that amount to the Bankruptcy Court in the related bankruptcy proceeding, if they have not already done so.

7. Novell's claims for Accounting (Count IX) are is mooted by the Court's Memorandum Decision and Order dated August 10, 2007.

8. Pursuant to the parties' Joint Statement dated August 17, 2007, and Supplemental Joint Statement dated August 24, 2007, Novell's claims for Slander of Title (Count I), Breach of Contract (Count II), and Declaratory Relief (Count V) are voluntarily dismissed, with the right to pursue these claims only in this action, should there be a subsequent adjudication or trial in this action.

9. Pursuant to the Court's Order dated September 7, 2007, granting Novell's Motion to Voluntarily Dismiss Its Third Claim for Relief dated August 24, 2007, Novell's claims claim for Breach of Contract (Count III) are is voluntarily dismissed, with the right to pursue these claims this claim only in this action, should there be a subsequent adjudication or trial in this action.

(3)

10. Pursuant to the parties' Joint Statement dated August 17, 2007, Novell's claims for punitive damages under any claim are dismissed, with the right to seek such relief only in this action, should there be a subsequent adjudication or trial in this action.

11. For the reasons set forth above and in the Court's Orders referenced above, this case is closed. Execution shall be stayed until relief from the automatic stay is obtained from the United States Bankruptcy Court for the District of Delaware in the case entitled In re: The SCO Group, Inc, Case No. 07-11337(KG).

DATED: ________________, 2008

BY THE COURT:


____________________________
Judge Dale A. Kimball
United States District Court Judge

(4)


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