Herb Jackson of Renaissance Ventures must be the last loyal SCO soldier.
He's been marching in step with SCO's dreams since 2003, and here he is six years later, like a straggling but still fanatically loyal Japanese soldier from World War II who hasn't been told that the war is over, or has been told but refuses to believe it, still living in a cave on Guam or in the jungles of the Philippines, shooting at anything that moves. Someone needs to fly in his former commanding officer to let Jackson know the fight really is over.
Just kidding around. But it's true that he has filed an objection to the various motions to convert SCO's Chapter 11 cases to Chapter 7, a letter to the court. You remember Mr. Jackson, I'm sure. His company published a report in 2003 predicting that IBM would surely buy SCO to make the litigation stop. It also said there was a market for SCO's shared libraries. So you might consider Jackson's track record in the prediction business, when evaluating his current projections. Renaissance Ventures and "affiliated investors" have owned around 2 percent of SCO since 2003, the letter reveals. They had a lawyer -- I wonder who? -- look at SCO's claims, and they decided its claims have merit. To this very day, they think investing in SCO is reasonable.
Here's the docket entry:
06/05/2009 - 783 - Objection to Motion To Convert Chapter 11 Cases to Chapter 7. (Herb Jacobs, Managing Director). (related document(s) 750 , 751 , 753 ) Filed by Renaissance Ventures, LLC (BMT) (Entered: 06/08/2009)
Here's part of that 2003 Renaissance Ventures report:
We believe management's forecasted $10 million of SCOsource revenue in 2Q represents near-term settlement of possible license violations in arrears (related to heretofore unlicensed use of the SCOsource shared libraries) from one or more large vendors of Linux solutions, but we are unable to glean more specifics at this time. . . .
Funny, huh? SCOsource died a horrible death, AutoZone and Daimler Chrysler paid them nothing to date, and SCO is currently on life support, you might say, and that's simply because no one actually needs Unix libraries to switch to Linux. They never did and they never will. So because Jackson didn't have the tech right, it threw off his projected economic figures. That must be very distressing, if you invested heavily in SCO. What's 2 percent of SCO worth nowadays?
SCO management also stated . . . that the vast majority of interactions with customers and other software vendors with respect to the SCOsource initiative were positive. Our view is that lumpy, and possibly large, bookings of SCOsource license fees will continue for several quarters while these negotiated settlements of prior license violations in arrears work their way through the pipeline. SCO's resulting balance sheet should soon look a lot prettier, though we doubt the market will value such lumpy SCOsource fees as part of a consistent and predictable earnings stream -- until all or most SCOsource arrearages are cleared and these license fees become part of normalized product revenue.. . .
We currently estimate the net present value of SCOsource 'Extraordinary Items' (arrearages settlements related to prior license violations . . . to be $35.8 million or $3.18 per share, exclusive of the company's current cash generating status and its earnings power based on current and new products.
In talking about SCO's threat to IBM that it would revoke IBM's license, there was this prediction:
At the end of SCO's 100-day fuse on SCO’s contractual cure, on June 13, 2003, SCO has the specific authority per the license agreement to revoke IBM’s AIX/UNIX licenses and require IBM to return or destroy all copies of its software products subject to the license. We believe the aforementioned contractual cure would be upheld by the court and mandated upon IBM, and would then wreak havoc on IBM's large corporate customers bringing serious injury to IBM's business reputation and customer relationships, unless the matter is settled prior to trial. We believe the business risk to IBM is too high. Therefore, we believe IBM will settle the case prior to trial.Obviously that prediction didn't come true either. I don't know who the lawyer was they used to analyze SCO's claims, but something went very wrong.
Did it bother him that the marketplace would be thrown into chaos because of SCO? After all, one of SCO's arguments in opposition to the motions to convert is that it would be disruptive to SCO's customers. On the contrary. Renaissance Ventures saw it as a business opportunity for SCO:
One possible outcome of the IBM lawsuit is the death of Linux, in which case, we believe, SCO owns the bulk of the intellectual property -- the 'root of the UNIX tree' -- for the world's dominant, hardened enterprise operating system. Certainly software markets would be in disarray, but given the practical alternative to unplugging the lights, we believe a worst-case scenario of the world abandoning Linux and flocking back to UNIX would not be so bad for SCO. That's one way to compete. Your money or your life as your business plan.
He wasn't exactly correct in his predictions, was he? I mention that, because his objection letter to the court paints what I'd describe as a rather rosy picture of SCO's future. He seems to think the appeals court will definitely rule SCO's way. I'm starting to wonder if they think the fix is in.
The name Herb Jackson resurfaced in 2007 in an itemized Berger Singerman's bill. That was during the scurrying about trying to get the York deal done. Remember this? It's a screenshot from page 18 of that bill:
Herb Jackson *at* SCO? I've always wondered what that meant.
Anyway, he sent his letter to the court, with a CC to SCO and Joseph J. McMahon, Jr., the lawyer handling this case for the US Trustee's Office. Jackson remains loyal, but what he writes is, to put it kindly, hyperbole at best. Here's the creepy part of the letter that has me wondering why SCOfolk seem so certain the appeals court will help them out:
This ruling will likely clear up a great deal of uncertainty in the information technology industry with respect to core Unix technology ownership and whether final adjudication might synch with widespread industry belief and business practices between the body of licensees prior to 2003, both in the US and internationally. This underscores the importance of this litigation and the value of its final resolution beyond just the parties of claimants and shareholders....
"May consider"? When will he know? Time to hop off the fence, I'd say, if they intend to provide funds, since later may be too late. Not that I care. Just saying this is mighty vague.
A 10th Circuit ruling in favor of SCO would validate the merits of SCO's intellectual property litigation versus all parties, possibly negate the majority of creditors' claims in these consolidated cases and lead to the greatest economic return to all stakeholders.
Accordingly we strongly oppose the efforts to convert SCO's Chapter 11 cases to Chapter 7 or any other plan of liquidation prior to the ruling by the 10th Circuit Court of Appeals. If the appellate court rules favorably to SCO, we or other investors known to us may consider providing additional funding to enable SCO to grow its business and continue pursuing its substantial claims in order to best maximize shareholder value.
As for his upbeat predictions, even if SCO wins something on appeal, all it can win is the right to go back to Utah and try its case in front of a jury. That's the relief it is asking for. That doesn't mean the jury wouldn't agree with the judge in the end. It's happened before. SCO cited a case in its Response where that happened, actually, the IFPC case [PDF], which you can read all about in the previous article. I still can't believe SCO cited that case, because the court ruled that a speculative lawsuit wasn't enough to pin a bankrupt's hopes on. I think two footnotes in that ruling answer Jackson eloquently:
4 "However honest in its efforts the debtor may be, and however sincere its motives, the District Court is not bound to clog its docket with visionary or impracticable schemes for resuscitation." Tennessee Pub. Co. v. American Nat. Bank, 299 U.S. 18, 22, 57 S.Ct. 85, 87 (1936).
If he plans on funding more litigation, he'd best put his wallet on the table now, so it can be "clearly in sight".
5 A reorganization plan under chapter 11 must be more than a nebulous speculative venture and must have a realistic chance of success which would lead to rehabilitation, and if outside financing is needed, it must be clearly in sight. In re K.C. Marsh Co., Inc., 12 B.R. 401 (Bankr. D. Mass. 1981). The Bankruptcy Code does not guarantee successful reorganization, nor does it provide a framework within which the debtor may indefinitely operate; rather, it only provides a breathing period for the debtor to seek to reorganize. In re Jones, 115 B.R. 351 (Bankr. N.D. Fla. 1990).
And on what basis does he assume that the appeals court will be a "final" resolution. You know as well as I do that if SCO loses the appeal, they won't just drop it. Neither will Novell, for that matter. They will ask for an en banc rehearing or petition the Supreme Court, don't you think? This case won't be over for a long, long time.
But that doesn't mean there is uncertainty in the marketplace. SCO lost that battle years ago, and although Jackson seems not to have been clued in, that FUD war was over long ago. Tell him, somebody. His side lost.