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AutoZone Files Answer to Complaint and Motion to Dismiss in Part
Monday, August 31 2009 @ 10:54 PM EDT

AutoZone has filed its answer [PDF] to SCO's complaint [PDF] and has filed a motion to dismiss in part [PDF] SCO's claims for actual damages, statutory damages and attorneys' fees. That means they would like to pare this thing down, to the degree possible right away, because that keeps expenses down. Discovery is the major expense of litigation, and the fewer issues there are, the less you spend. And it narrows a great deal what SCO could ever win from this litigation, even if it could prevail.

The Answer says none of SCO’s legal rights have been violated, so SCO isn't entitled to *any* relief on its claims. And interestingly, AutoZone "denies that this Court has jurisdiction over SCO’s claims related to UNIX System V and UnixWare" -- no doubt we'll be hearing more about this -- and "denies that this District is the most convenient forum as no relevant witnesses or documents are located in this District." So, I gather they are still interested in leaving Las Vegas and having the case heard elsewhere, like where AutoZone and all their witnesses are located.

And significantly, "AutoZone denies that Santa Cruz purchased the UNIX technology from Novell, Inc. or that SCO acquired this technology from Santa Cruz." So SCO will have to prove all that in this court of law, because AutoZone is directly challenging the chain of ownership. As for files like CompX and DecompX that AutoZone had, AutoZone doesn't know if it is true that SCO owns any proprietary code in them. Let SCO prove that too. In any case, even if they did, AutoZone’s alleged use of any such code "is lawful use based on agreements and licenses with third-parties."

Here's the PACER entry:

08/31/2009 - 107 - ANSWER to 106 Amended Complaint filed by Autozone, Inc.. Certificate of Interested Parties due by 9/10/2009. Discovery Plan/Scheduling Order due by 10/15/2009.(Wilmer, Nikki) (Entered: 08/31/2009)

08/31/2009 - 108 - MOTION to Dismiss in Part Plaintiff's Claims for Actual Damages, Statutory Damages and Attorneys' Fees by Defendant Autozone, Inc.. Responses due by 9/18/2009. (Wilmer, Nikki) (Entered: 08/31/2009)

The basis for AutoZone's motion to dismiss in part is simple: SCO didn't register the copyrights in time to claim attorneys' fees or statutory damages, AutoZone says:
SCO claims to own copyrights in the works set forth in Paragraph 44 of the Amended Complaint (the “Works”). SCO claims that AutoZone has infringed SCO’s copyrights in the Works, and SCO prays for statutory damages pursuant to 17 U.S.C. § 504(a) and attorneys' fees pursuant to 17 U.S.C. § 505 as relief on this claim. (See Amended Complaint, ¶ 55, Prayer for Relief, §§ 2, 3.)
Section 412 of the Copyright Act provides that no award of statutory damages or of attorney’s fees, as provided by sections 504 and 505, shall be made for — ... (2) any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work.
17 U.S.C. § 412.

SCO’s Amended Complaint contains no allegation that it secured registration for the Works prior to the alleged acts of infringement or within three months of first publication of the Works (nor could it again amend its Amended Complaint to so plead). Because these are predicate elements to an award of statutory damages and attorneys’ fees under the Copyright Act, SCO’s Complaint fails to set forth a valid cause of action for the requested relief, and SCO’s request for the relief should be dismissed.

What does this mean? If AutoZone is successful in its motion, it means SCO will have to prove precisely how it was damaged, to the dollar, as a result of things like AutoZone having CompX and DecompX on a server it forgot about and wasn't using any more.

That might be a tad difficult to calculate, don't you think?

There are more files at issue, and if this motion succeeds, they will be the heart of the matter.

The second basis for the motion to dismiss in part is based on SCO's claim that AutoZone infringed SCO's alleged copyrights in Mexico, not just in the US. But Autozone points out that the US Copyright Act doesn't apply to Mexico, with an exception that doesn't apply for the damages, actual or statutory, that SCO is claiming, so that claim about Mexico should also be dismissed, AutoZone says:

As a general matter, the U.S. Copyright Act does not apply extraterritorially. See Subafilms Ltd v. MGM-Pathe Commn'ns Co., 24 F.3d 1088 (9th Cir. 1994). A limited exception to this rule exists in the Ninth Circuit for the recovery of profits attributable to infringement in the United States that has consequences extraterritorially. See Los Angeles News Service v. Reuters, 340 F.3d 926, 931 (9th Cir. 2003). That exception does not apply to the recovery of damages, which are specifically excluded. Id. (“We conclude therefore that the Copyright Act does not provide LANS recovery for actual damages resulting from Reuters's and Visnews's infringement."). Here, SCO’s Amended Complaint pleads generally for recovery of actual damages or, in the alternative, statutory damages on its copyright claim, including for damages that it has allegedly suffered as a result of AutoZone’s copying and use of certain software in Mexico. (See Amended Complaint, ¶ 32.) Because SCO is not entitled to recovery of such damages as a matter of law, SCO’s prayer for such damages should be dismissed pursuant to Fed. R. Civ. P. 12(b)(6).
My first thought on reading the two documents is that the new Chapter 11 trustee will naturally notice that whatever SCO could conceivably gain from this lawsuit, if AutoZone's motion succeeds, shrinks to very little, even if SCO were to prevail. Is it worth pursuing? It's up to him, not SCO's prior management. They adore suing, regardless of the odds, but the trustee likely hasn't got the same zeal for antiLinux ideology. And proving actual damages means a lot of discovery on SCO's part, digging and digging, checking everything, trying to prove harm, dollars and cents, in a farce like this. It's a bit comical to think about.

Bottom line? SCO will have to prove that it owns what it claims was infringed, and remember this judge already ruled that the parties must proceed on the basis of the Utah District Court's ruling in August of 2007. Now that the appeals court has ruled that parts of that decision should instead be decided by a jury, it raises the question, what happens now? I gather AutoZone expects to start from scratch, and make SCO prove everything it claims, which it so far has been unable to do anywhere, with very little hope of gaining financially even in SCO's best-case scenario.

By the way, just to show you how appeals work, I'd like to show you another case, where the 9th Circuit Court of Appeals overturned a lower court's decision, sent matters back to a trial, and the final decision was exactly what the first court had ruled anyway. The point is, just because a case is remanded doesn't at all indicate that the outcome will be the least bit different. Here's a description of the case, from IBM's annual report for 2008:

In October 2003, a purported collective action lawsuit was filed against IBM in the United States District Court for the Northern District of California by 10 former IBM employees alleging, on behalf of themselves and allegedly similarly situated former employees, that the company engaged in a pattern and practice of discriminating against employees on the basis of age when it terminated employees, both in connection with reductions in force and individualized determinations (Syverson v. IBM). Initially, the District Court dismissed the lawsuit on the basis of release agreements signed by all the plaintiffs. On appeal, the Ninth Circuit reversed the trial court’s finding that the release barred these claims, and in January 2007, after denial of IBM’s petition for rehearing, the matter was returned to the trial court for further proceedings. On October 3, 2007, the court dismissed with prejudice plaintiffs’ claim for relief under the Older Workers Benefit Protection Act, and dismissed with leave to amend plaintiffs’ claim asserting disparate impact age discrimination with respect to individualized terminations. On November 6, 2007, plaintiffs filed a Third Amended Complaint, amending the disparate impact claim. IBM filed its answer on November 26, 2007. On January 29, 2009, the case was dismissed with prejudice.
See? The appeals court's job is to make sure the law is followed the way they think it should be. They don't weigh facts and evidence as to who should win. So in this case, the lower court dismissed the plaintiffs' claims, saying all the plaintiffs had signed a release. The appeals court said that wasn't the right basis for a dismissal, so it sent the case back to the trial court. That court then dismissed, but let the plaintiffs come up with another complaint alleging other claims, and they did. But the end result was exactly the same as if the appeals court hadn't done anything. The case was dismissed with prejudice.

See? That's how litigation is. You have to stand back a little and look at the general flow of the river, not every little twist and turn and bend in it.

Here is the Answer as text:

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

James J. Pisanelli, Esq., Bar No. 4027
Nikki L. Wilmer, Esq., Bar No. 6562
BROWNSTEIN HYATT FARBER SCHRECK, LLP
[address]
[phone]
[fax]
[email addresses]

David J. Stewart, Esq.
Georgia Bar No. 681149
ALSTON & BIRD LLP
[address]
[phone]
[email address]

Attorneys for Defendant AutoZone, Inc.

UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA



THE SCO GROUP, INC.

Plaintiff,

v.

AUTOZONE, INC.

Defendants
______________________________________
)
)
)
)
)
)
)
)
)
)
Case No. 2:04-cv-0237-RCJ-GWF


DEFENDANT AUTOZONE, INC.'S
ANSWER TO PLAINTIFF'S FIRST
AMENDED COMPLAINT

(JURY DEMAND)

Defendant AutoZone, Inc. ("AutoZone"), for its Answer and Affirmative Defenses to the First Amended Complaint of Plaintiff The SCO Group, Inc. ("SCO"), responds as follows:

I. NATURE OF THIS ACTION

1. AutoZone admits that it uses one or more versions of the Linux operating system. AutoZone denies each and every remaining allegation contained in Paragraph 1.

2. AutoZone denies the allegations contained in Paragraph 2.

(1)

3. AutoZone admits that SCO purports to bring claims under the Copyright Act and contract law but denies that any of SCO's legal rights have been violated or that SCO is entitled to any relief on its claims. AutoZone denies each and every remaining allegation contained in Paragraph 3.

II. PARTIES, JURISDICTION AND VENUE

4. AutoZone admits the allegations contained in Paragraph 4.

5. AutoZone admits the allegations contained in Paragraph 5.

6. AutoZone denies that this Court has jurisdiction over SCO's claims related to UNIX System V and UnixWare. AutoZone is without knowledge or information sufficient to form a belief as to whether this Court has subject matter jurisdiction over SCO's claims as alleged in Paragraph 6, and the same is therefore denied.

7. AutoZone admits the allegations contained in Paragraph 7.

8. AutoZone admits the allegations contained in Paragraph 8, however, AutoZone denies that this District is the most convenient forum as no relevant witnesses or documents are located in this District.

II. FACTUAL BACKGROUND

9. AutoZone admits the allegations contained in Paragraph 9.

10. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 10, and the same are therefore denied.

11. AutoZone admits that the UNIX operating system was developed at least in part by AT&T Bell Laboratories and that AT&T at least in part developed updated versions of the UNIX operating system. AutoZone denies each and every remaining allegation contained in Paragraph 11.

12. AutoZone admits that AT&T licensed UNIX to third parties. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the remaining allegations contained in Paragraph 12, and the same are therefore denied.

13. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 13 and the same are therefore denied.

(2)

14. AutoZone admits that Novell acquired certain rights from AT&T related to the UNIX operating system, including certain copyrights. AutoZone denies each and every remaining allegation contained in Paragraph 14.

15. AutoZone denies the allegations contained in Paragraph 15.

16. AutoZone admits that the Federal District Court for the District of Utah ruled on summary judgment on August 10, 2007 in the Novell v. SCO litigation. AutoZone states that the court's order speaks for itself; however, contrary to SCO's allegation, the Court ruled that SCO does NOT own rights to UNIX. AutoZone further admits that SCO appealed the district court's decision to the United States Court of Appeals for the Tenth Circuit and also admits that oral arguments were held on that appeal on May 6, 2009. AutoZone denies each and every remaining allegation contained in Paragraph 16.

17. AutoZone admits the allegations contained in Paragraph 17.

18. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 18 and the same are therefore denied.

19. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 19 and the same are therefore denied.

20. AutoZone admits that it has used and copied Linux in certain of its business operations. AutoZone further admits that it continues to use and copy Linux in connection with its business operations. AutoZone denies each and every remaining allegation contained in Paragraph 20.

21. AutoZone denies that Santa Cruz purchased the UNIX technology from Novell, Inc. or that SCO acquired this technology from Santa Cruz. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the remainder of the allegations contained in Paragraph 21, and the same are therefore denied.

22. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 22 and the same are therefore denied.

(3)

23. AutoZone admits that Santa Cruz and AutoZone entered into an Authorized Industry Reseller Agreement on May 14, 1990. AutoZone responds that the language of the AIRA speaks for itself.

24. AutoZone responds that the language of the AIRA speaks for itself, but AutoZone denies the allegations contained in the first sentence of Paragraph 24.

25. AutoZone admits the allegations contained in Paragraph 25.

26. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 26 and the same are therefore denied.

27. AutoZone responds that the language of the CSLA speaks for itself.

28. AutoZone responds that the language of the CLSA speaks for itself, but AutoZone denies the allegations contained in the second sentence of Paragraph 28.

29. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 29, and the same are therefore denied.

30. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in the first sentence of Paragraph 30, and the same are therefore denied. AutoZone denies each and every remaining allegation contained in Paragraph 30.

31. AutoZone admits that on August 6, 2004, this Court allowed the parties to take limited expedited discovery. AutoZone further admits that certain SCO compiled programs were discovered on AutoZone's servers during discovery. AutoZone admits that once discovered, these programs were deleted and/or replaced with Linux compiled versions of the files. AutoZone denies each and every remaining allegation contained in Paragraph 31.

32. AutoZone admits that its 30(b)(6) representative provided the testimony cited in Paragraph 32, and responds that such testimony speaks for itself. AutoZone denies each and every remaining allegation contained in Paragraph 32.

33. AutoZone denies that it violated SCO's alleged contract and copyright rights as set forth in Paragraph 33.

  1. Answering the allegations of Paragraph 33(a), AutoZone admits that in October 2004, upon searching its AutoZone store servers, 1,681 COFF files

    (4)

    were found on 387 machines. AutoZone denies each and every remaining allegation contained in Paragraph 33(a) and further denies SCO's legal rights have been violated or that SCO is entitled to any relief on its claim.

  2. Answering the allegations of Paragraph 33(b), AutoZone admits the allegations in Paragraph 33(b) but denies SCO's legal rights have been violated or that SCO is entitled to any relief on its claim.

  3. Answering the allegations of Paragraph 33(c), AutoZone admits that it used Compx and Decompx on certain machines in its stores. Because AutoZone does not have the source code for these third-party programs, it is without knowledge or information as to the truth of the allegation that these programs contained proprietary SCO code and this allegation is therefore denied. AutoZone further admits that it deleted the Compx and Decompx files in October 2004. AutoZone admits that upon deletion, the replenishment system, a program used by AutoZone store servers to order and receive new inventory from distribution centers, failed in 650 of its stores. AutoZone denies each and every remaining allegation contained in Paragraph 33(c) and further denies SCO's legal rights have been violated or that SCO is entitled to any relief on its claim.

  4. Answering the allegations of Paragraph 33(d), AutoZone admits that its machine load computer had a program on it called dexpand.x that was compiled under OpenServer. AutoZone denies each and every remaining allegation contained in Paragraph 33(d) and further denies SCO's legal rights have been violated or that SCO is entitled to any relief on its claim.

  5. Answering the allegations of Paragraph 33(e), AutoZone admits that 1,130 SCO compiled programs were loaded onto its Spirit Server. AutoZone denies each and every remaining allegation contained in Paragraph 33(e) and further denies SCO's legal rights have been violated or that SCO is entitled to any relief on its claim.

    (5)

  6. Answering the allegations of Paragraph 33(f), AutoZone admits that fifteen SCO Extensible Linking Format and Xenix files were identified on AutoZone's store load machine. AutoZone further admits that its counsel stated that "these files likely also exist on all 3,500 AutoZone store servers." AutoZone denies each and every remaining allegation contained in Paragraph 33(f) and further denies SCO's legal rights have been violated or that SCO is entitled to any relief on its claim.

  7. Answering the allegations of Paragraph 33(g), AutoZone admits that it has a Linux development machine known as "Wrangler." AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 33(g) and the same are therefore denied. AutoZone further denies SCO's legal rights have been violated or that SCO is entitled to any relief on its claim.

  8. Answering the allegations of Paragraph 33(h), AutoZone admits that it utilized a machine called Vision to test certain of its programs during its migration to Linux. AutoZone denies each and every remaining allegation contained in Paragraph 33(h). AutoZone further denies SCO's legal rights have been violated or that SCO is entitled to any relief on its claim.

34. AutoZone admits that certain persons involved in the Linux migration did not directly consult copyright counsel or review licenses when making the transition to Linux, nor were they obligated to do so. AutoZone denies each and every remaining allegation contained in Paragraph 34.

35. AutoZone denies the allegations contained in Paragraph 35.

36. AutoZone denies the allegations contained in Paragraph 36.

37. AutoZone denies the allegations contained in Paragraph 37.

38. AutoZone denies the allegations contained in Paragraph 38.

39. AutoZone denies the allegations contained in Paragraph 39.

40. AutoZone denies the allegations contained in Paragraph 40

(6)

FIRST CAUSE OF ACTION

41. AutoZone repeats and realleges its answers to Paragraph 1 -40 as though fully set forth herein.

42. AutoZone denies the allegations contained in Paragraph 42.

43. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 43 and the same are therefore denied.

44. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 44 and the same are therefore denied.

45. AutoZone denies the allegations contained in Paragraph 45

46. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 46 and the same are therefore denied.

47. AutoZone states that Paragraph 47 contains purported statements of law, and, as such, neither an admission or denial is required as to these statements.

48. AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 48 and the same are therefore denied.

49. AutoZone denies the allegations contained in Paragraph 49.

50. AutoZone admits that it implemented one or more versions of the Linux operating system. AutoZone denies each and every remaining allegation contained in Paragraph 50.

51. AutoZone denies the allegations contained in Paragraph 51.

52. AutoZone denies the allegations contained in Paragraph 52.

53. AutoZone admits that it does not own any copyright to the Copyrighted Materials. AutoZone is uncertain as to what the phrase "as part of a Linux implementation" means and as such AutoZone is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph 53 and the same are therefore denied. AutoZone denies each and every remaining allegation contained in Paragraph 53.

(7)

54. AutoZone denies the allegations contained in Paragraph 54.

55. AutoZone denies the allegations contained in Paragraph 55.

56. AutoZone denies the allegations contained in Paragraph 56.

SECOND CAUSE OF ACTION

57. AutoZone repeats and realleges its answers to Paragraph 1-56 as though fully set forth herein.

58. AutoZone denies the allegations contained in Paragraph 58.

59. AutoZone denies the allegations contained in Paragraph 59.

60. AutoZone denies the allegations contained in Paragraph 60. Except as expressly admitted, AutoZone denies each and every allegation contained in SCO's First Amended Complaint.

AFFIRMATIVE DEFENSES

FIRST DEFENSE

SCO has failed to state a claim upon which relief can be granted.

SECOND DEFENSE

SCO's claims are barred, in whole or in part, by the doctrine of laches.

THIRD DEFENSE

SCO's claims are barred, in whole or in part, by the doctrine of collateral estoppel.

FOURTH DEFENSE

SCO's claims are barred because one or more of the copyright registrations upon which it relies are invalid.

(8)

FIFTH DEFENSE

AutoZone's alleged use of the Copyrighted Material is lawful use based on agreements and licenses with third-parties.

DATED this 31st day of August, 2009.

/s/ Nikki L. Wilmer
James J. Pisanelli
Nevada Bar. No. 4027
Nikki L. Wilmer
Nevada Bar. No. 6562
BROWNSTEIN HYATT FARBER SCHRECK, LLP
[address]
[phone]
[email addresses]

David J. Stewart
Georgia Bar No. 681149
ALSTON & BIRD LLP
[address]
[phone]
[email addresses]
Attorneys for Defendant AutoZone, Inc.

(9)

CERTIFICATE OF SERVICE

I am employed by the law firm of Brownstein Hyatt Farber Schreck, LLP in Clark County. I am over the age of 18 and not a party to this action. My business address is [address].

On the August 31, 2009, I served the document(s), described as: DEFENDANT AUTOZONE, INC'S ANSWER TO PLAINTIFF'S FIRST AMENDED COMPLAINT (JURY DEMAND)

by placing the original a true copy thereof enclosed in a sealed envelope addressed as follows:
a. ECF System (You must attach the "Notice of Electronic Filing", or list all persons and addresses and attach additional paper if necessary)
b. BY U.S. MAIL. I deposited such envelope in the mail at Las Vegas, Nevada. The envelope(s) were mailed with postage thereon fully prepaid.
I am readily familiar with Brownstein Hyatt Farber Schreck, LLP. practice of collection and processing correspondence for mailing. Under that practice, documents are deposited with the U.S. Postal Service on the same day which is stated in the proof of service, with postage fully prepaid at Las Vegas, Nevada in the ordinary course of business. I am aware that on motion of party served, service is presumed invalid if the postal cancellation date or postage meter date is more than one day after the date stated in this proof of service.
c. BY PERSONAL SERVICE.
d. BY DIRECT EMAIL
e. BY FACSIMILE TRANSMISSION

I declare under penalty of perjury that the foregoing is true and correct.

Date: August 31, 2009

/s/ Carol E. Jorvig
An employee of Brownstein Hyatt Farber Shreck, LLP

(10)

Stanley W. Parry
Ballard Spahr Andrews & Ingersoll, LLP
[email]

Stephen N Zack
Boies, Schiller & Flexner, LLP
[email]

Richard J. Pocker
Boies Schiller & Flexner, LLP
[email]

(11)


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