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Judge Stewart Rules on Novell's Motions: No and Mostly No - Updated
Thursday, January 28 2010 @ 05:41 PM EST

Well, here we go. The new judge in the redo of SCO v. Novell, the Hon. Ted Stewart, has issued his decision on the two Novell summary judgment motions, and I've only skimmed them, but it looks like if it's Novell, he says mostly no and if it favors SCO he says yes, which is what I expected. That means the hearing set for February 4 has been cancelled. No oral argument. Weird. And he ruled on a motion that I don't see anyone asking him to decide.

Here's the Memorandum Decision and Order Denying Novell's Rule 60(b) Motion for Relief from Final Judgment [PDF]. Here's Rule 60(b). He says they should have appealed the matter. That's the motion about the money from Microsoft and the other SCOsource licensees.

Then here's the Memorandum Decision and Order Granting in Part and Denying in Part Novell's Motion for Summary Judgment on SCO's First Claim for Slander of Title Based on Failure to Establish Special Damages [PDF]. That's the motion mooted when Novell won another summary judgment motion in August of 2007. The latter just means that it has to go to trial, not that there is a final decision. But if you don't mind me asking, who asked the court to rule on this motion?

But it's still odd on first reading, in that SCO did mention slander of title in its appeal brief, but I don't remember the appeals court saying that was overturned. Here's all I see SCO saying about that topic in its brief:

B. Novell's Slander of Title.

On May 28, 2003, the day on which SCO announced its quarterly earnings and a few weeks after SCO had sued IBM over violations of its Software and Sublicensing Agreements, Novell publicly claimed that it — not SCO — owned the UNIX copyrights, an assertion that Novell had not made in any context since signing the APA more than seven years earlier. (05875;10026;04695;05896.) In an open letter published on its website, Novell CEO Jack Messman described Novell as "an ardent supporter of Linux" and asserted that "SCO is not the owner of the UNIX copyrights." (05874-75.)

Nine days later, after SCO had faxed a copy of Amendment No. 2 to Mr. Messman, Novell immediately issued a press release, admitting:

Amendment #2 to the 1995 SCO-Novell Asset Purchase Agreement was sent to Novell last night by SCO. To Novell's knowledge, this amendment is not present in Novell's files. The amendment appears to support SCO's claims that ownership of certain copyrights for UNIX did transfer to SCO in 1996. (05889 (emphasis added).) Novell has admitted that it had made its initial announcement without considering the APA as amended by Amendment No. 2 and without consulting the people who had negotiated the APA or its amendments. (05895-96.) Novell subsequently sought to retract the retraction, and stated that Amendment No. 2 "raises as many questions about copyright transfers as it answers." (07895.)
Within two hours of Novell's public claim that it owns the UNIX copyrights, SCO's stock plummeted, even though SCO had announced record revenues that day. (13137-38¶¶6-9.) In discovery, SCO learned that the timing of Novell's announcement was not "entirely coincidental," as Mr. Messman had claimed. (13800;10025-26;10029.) Novell Vice Chairman Chris Stone had informed Maureen O'Gara, a journalist who has covered the computer industry since 1972, that Novell intentionally was making the announcement on the day of SCO's earnings report to "confound SCO's stock position" and "upset the stock price." (10025-26;10029.) According to her testimony, Mr. Stone leaked this information "with laughter" and "chortling." (10029.) Novell's claim that Amendment No. 2 was "not present in Novell's files" also proved to be false. Mr. Messman later admitted that a signed copy of Amendment No. 2 had been present in Novell's files all along, and that Novell had published its initial ownership claims knowing that it had, at least, an unsigned copy of the Amendment. (09379.)
But Judge Stewart has just ruled that a dip in stock value isn't special damages. And here's what SCO asked to appeal, and I don't see one word about slander of title:
For the foregoing reasons, SCO respectfully requests that the Court reverse the district court's summary judgment rulings that (1) Santa Cruz did not acquire the UNIX and UnixWare copyrights under the APA; (2) in the alternative, SCO is not entitled to specific performance, requiring the transfer of those copyrights now; (3) Novell has the right under the APA to force SCO to waive claims against IBM for its breach of UNIX Software and Sublicensing Agreements; (4) Novell is not required to comply with the covenant of good faith and fair dealing in exercising its 4.16(b) rights under the APA; and (5) Novell is entitled to royalties from post-APA licenses related to SVRX, including the Sun Agreement, and that the Court remand the case for further proceedings consistent with its decision.10
Judge Kimball said that even if SCO did own the copyrights, Novell still wasn't guilty of slander of title. So I don't quite see how SCO could later ask for any damages, no matter what happens. I'll double check, and I'll swing back by after I have a chance to read them more carefully.

Update: Here's what Judge Kimball wrote, and my memory was correct:

SCO's motion for summary judgment on copyright ownership is brought with respect to its First Claim for Relief for slander of title, its Second Claim For Relief for breach contract, its Fifth Claim for Relief for unfair competition, and Novell's First Claim for Relief for slander of title. SCO's motion for partial summary judgment on its own claims is denied. SCO's motion with respect to Novell's slander of title claim focuses only on the title/ownership issue. A slander of title claim involves a false statement disparaging title, that is made with malice and that causes actual or special damages. First Sec. Bank of Utah, 780 P.2d at 1256-57. Because SCO has not moved on the elements of malice or special damages, the court has no present basis for dismissing Novell's claim. Accordingly, the court denies SCO's motion for summary judgment on the Novell's slander of title claim.

II. Novell's Summary Judgment Motions on Special Damages and the Copyright Ownership Portions of SCO's Unfair Competition Claim and Breach of Implied Covenant

Novell's motion for summary judgment on SCO's slander of title claim for failure to establish special damages is now moot because the claim has been dismissed on other grounds. Novell is also entitled to summary judgment on the copyright ownership portion of SCO's unfair competition and implied covenant of good faith claims because SCO cannot establish that Novell's assertion that it owns the UNIX and UnixWare copyrights was false.

Even if the court had found that SCO owned the copyrights, Novell would still be entitled to summary judgment on the copyright ownership portions of SCO's claims of unfair competition and breach of the implied covenant of good faith and fair dealing....

Even if this court had ruled in SCO's favor on the copyright ownership issue, there is no evidence to demonstrate that Novell's position was contrary to its own understanding of the contractual language or objectively unreasonable given the history of the dispute between the parties.

See what I mean? So, where are the possible damages? Here's the appeals court decision, so you can also check it. Here's what was remanded for trial:
VI. Conclusion

For the foregoing reasons, we AFFIRM the district court's judgment with regards to the royalties due Novell under the 2003 Sun-SCO Agreement, but REVERSE the district court's entry of summary judgment on (1) the ownership of the UNIX and UnixWare copyrights; (2) SCO's claim seeking specific performance; (3) the scope of Novell's rights under Section 4.16 of the APA; (4) the application of the covenant of good faith and fair dealing to Novell's rights under Section 4.16 of the APA. On these issues, we REMAND for trial.

Anybody see anything about slander of title? And there is this footnote:
1 The district court also issued a number of rulings regarding specific arguments made in support of both parties' claims and counterclaims. To the extent that those rulings do not directly affect the substance of this appeal, we do not address them.
Maybe oral argument would have helped. It could be me, but from all I'm seeing so far, I think the judge simply goofed. He's new, and it's a very complicated case, but I think he thinks the slander of title claim was also remanded.

If I'm right, we can expect Novell to bring a motion to reconsider or some reasonable facsimile. An appeal is also possible.

[ Update: I believe I am right that he thinks the slander of title claim is still to be litigated. He writes:

Defendant seeks summary judgment on Plaintiff's claim for slander of title....

Here, both the issue of ownership of title and slander of title will be decided in this action.

But that's not the case, as I understand it. This motion was about special damages, and the weird part is I don't see anyone asking him to rule on this. And what I see in the appeals court ruling is about the covenant of good faith and fair dealing, not slander of title. The motion for summary judgment on the claim itself was already won long ago. And while our eyewitnesses heard the lawyers at the last status hearing talking with the clerk about a possible motion from Novell on no malice regarding the slander of title claim, they never filed any, and this motion, #277, isn't about no malice. So how exactly does this get back on the table with no one asking for it to be there?

On the other hand, let's assume that I'm wrong, and that the slander of title claim is going to trial and I just don't realize it. Then what? Then it would mean that SCO gets to relitigate its issues, but without Novell having the same opportunity, and with a judge referencing words from Darl McBride as if that established reality. On the plus side, because Judge Stewart ruled that a dip in the stock price isn't special damages, it means MOG won't be testifying to that nonsense she was ready to testify about. But what it means in the big picture is that SCO, or more likely the financial backers of this push, would like to get from Novell money it claims it would have gotten from SCOsource licensees, had Novell not made its claim to own the copyrights. I have concluded that they just want money, and they don't much care how they get it or from whom, as long as they get it.

It all reinforces, to me, Novell's other request, that the court put the IBM and Novell cases together under the new judge handling the IBM case. This case is too complicated. The rulings also do nothing to clear the air with respect to the feelings among many that this particular judge has too close ties to Senator Orrin Hatch, father of SCO's attorney, Brent Hatch, to be able to avoid bias, conscious or not. Fasten your seat belts, ladies and gentlemen. We're in for a bumpy flight.]

Here's the docket:

01/28/2010 - 620 - MEMORANDUM DECISION denying 608 Motion to Set Aside Judgment. Signed by Judge Ted Stewart on 01/28/2010. (asp) (Entered: 01/28/2010)

01/28/2010 - 621 - MEMORANDUM DECISION granting in part and denying in part 277 Motion for Summary Judgment ; The hearing set for February 4, 2010, is STRICKEN. Signed by Judge Ted Stewart on 01/28/2010. (asp) (Entered: 01/28/2010)

Here are the reasons Novell listed in its long-ago, mooted and now resurrected motion that was just decided, as to why SCO had failed to establish special damages:
Special damages are “out-of-pocket losses” that must be the “direct and immediate” result of the slander of title. Special damages must also consist of “a realized or liquidated” pecuniary loss. SCO cannot meet its burden of establishing special damages on the following grounds:

First, SCO’s allegation that its SCOsource licensing program was harmed by Novell’s assertion of rights does not support a claim for special damages as a matter of law. Given the evidence SCO has put forward demonstrating public skepticism regarding its infringement claim, SCO cannot establish that any failure of its licensing program “resulted from” the alleged slander and not some other cause. Moreover, SCO cannot establish that it was harmed by Novell’s assertion of ownership because if the alleged “cloud” on its title is removed, SCO will remain in possession of the copyrights and will be able to pursue any legitimate claim to royalties. SCO cannot support a claim for special damages based on the present failure of its licensing program as a matter of law.

Second, SCO’s allegation that Novell’s statements hurt SCO’s stock price states a claim that has been repeatedly rejected as the basis for a claim for special damages. Harm to a plaintiff’s stock price is not the “direct and immediate” result of a slander, and it is not a “realized or liquidated” pecuniary loss and cannot support a claim for special damages as a matter of law.

Third, SCO’s assertion that it is entitled to attorneys fees to clear its title in this action is a claim that has been rejected in this Court and others around the country, and cannot be sustained as a matter of law.

Fourth, SCO has not produced any evidence of any pecuniary loss based on its efforts to research and pursue copyright registration, or to counter Novell’s statements with its customers. SCO cannot support its burden of showing special damages because it has failed to meet its evidentiary burden.

For all of the above reasons, Novell is entitled to summary judgment on SCO’s slander of title claim on the grounds that SCO cannot establish special damages.

These are the points the judge goes through point by point, but he doesn't mention at all the fact that Judge Kimball said no matter what, SCO could not prevail on its slander of title claims. Like I say, oral argument probably would have helped. Depending on what one's goals are, I suppose.

We have updated our Transcripts page, so it's easier to find things. We'll be adding a section next on Orders, to help everyone keep track of it all.

And to help you follow along as to what the motion about slander of title damages was about, or was supposed to be about, here are the briefs, all PDFs:

Update: I couldn't help but notice something in Justice J. Stevens' dissent in the recently decided [PDF] case, United v. Federal Election Commission. I normally don't mention cases that are not about copyright, patents or whatever, and Groklaw doesn't cover politics or get involved in politics, but his dissent is happily useful in explaining to you that courts normally, including the Supreme Court itself, won't decide a matter not properly brought before it. His dissenting opinion begins on page 91, like this:

The Court’s ruling threatens to undermine the integrity of elected institutions across the Nation. The path it has taken to reach its outcome will, I fear, do damage to this institution. Before turning to the question whether to overrule Austin and part of McConnell, it is important to explain why the Court should not be deciding that question.

Scope of the Case

The first reason is that the question was not properly brought before us. In declaring §203 of BCRA facially unconstitutional on the ground that corporations’ electoral expenditures may not be regulated any more stringently than those of individuals, the majority decides this case on a basis relinquished below, not included in the questions presented to us by the litigants, and argued here only in response to the Court’s invitation. This procedure is unusual and inadvisable for a court.2 Our colleagues’ suggestion that “we are asked to reconsider Austin and, in effect, McConnell,” ante, at 1, would be more accurate if rephrased to state that “we have asked ourselves” to re consider those cases.

2 See Yee v. Escondido, 503 U. S. 519, 535 (1992) (“[U]nder this Court’s Rule 14.1(a), only questions set forth in the petition, or fairly included therein, will be considered by the Court” (internal quotation marks and alteration omitted)); Wood v. Allen, ante, at __ (slip op., at 13) (“[T]he fact that petitioner discussed [an] issue in the text of his petition for certiorari does not bring it before us. Rule 14.1(a) requires that a subsidiary question be fairly included in the question presented for our review” (internal quotation marks and brackets omitted)); Cooper Industries, Inc. v. Aviall Services, Inc., 543 U. S. 157, 168–169 (2004) (“We ordinarily do not decide in the first instance issues not decided below” (internal quotation marks omitted)).

That's how it's supposed to work. Evidently Justice Stevens feels that isn't how it worked in that case. And to be real about the courts, there are wrongly decided cases all the time, all up and down the chain. People do their best, and that still happens, and it will always still happen. It's the human condition. But his words should should help you to understand the depths of my puzzlement about Judge Stewart deciding a motion that I see no record of anyone bringing before him to decide, and without any oral argument despite the suddenly changed circumstances since the motion was briefed, on an issue that as far as I can see SCO didn't raise on appeal and which the appeals court seems to have let stand. I'll stay tuned for later developments and explanations, and if I'm all wet on this point, I will tell you that too. There may be an explanation I just don't see. I'm only human too, after all. But with the information we have publicly available, I just don't see how this can be right.

Update: And look at what Judge Stewart wrote about Novell wanting to litigate the issue of the SCOsource money:

Here, the argument raised by Defendant in its Motion could have, and should have, been raised on appeal. Defendant could have easily argued to the Tenth Circuit that, if this Court's decision concerning the ownership of the copyrights was reversed, the decision concerning royalties should similarly be reversed. They did not. The Court cannot ignore Defendant's decision not to address this issue on appeal.
But my point is, SCO didn't raise the slander of title issue on appeal either, as I read it. So what's good for the goose should be good for the gander.

And here is the order on the Rule 60(b) motion, as text, and I'll add the other one as soon as I have it done - it's done:

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

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

THE SCO GROUP, INC., a Delaware
corporation,

Plaintiff and Counterclaim Defendant,

vs.

NOVELL, INC., a Delaware corporation,

Defendant and Counterclaim Plaintiff.

________________________________

Case No. 2:04-CV-139 TS

MEMORANDUM DECISION AND
ORDER DENYING NOVELL'S
RULE 60(b) MOTION FOR RELIEF
FROM FINAL JUDGMENT

____________________________________

This matter is before the Court on Novell's Rule 60(b) Motion for Relief from Final Judgment. Defendant asks this Court to set aside the Judgment as it relates to the Court's finding that Novell was not entitled to royalties from certain licenses because those licenses were not SVRX licenses. Defendant argues that this conclusion rested on the Court's prior conclusion that Plaintiff did not own the copyrights at issue. As that decision has now been reversed, Defendant argues that the decision relating to the royalties must also be reversed. Plaintiff argues that Defendant's Motion is barred by the mandate rule, is not permitted under Rule 60, and fails on the merits. The Court agrees that Defendant's Motion is barred by the mandate rule and, for the reasons discussed below, the Court will deny Defendant's Motion.

1

I. BACKGROUND

As the Tenth Circuit stated:
This case primarily involves a dispute between SCO and Novell regarding the scope of intellectual property in certain UNIX and UnixWare technology and other rights retained by Novell following the sale of part of its UNIX business to Santa Cruz, a predecessor corporate entity to SCO, in the mid-1990s.1
Both parties claim that they are the rightful owner the UNIX and UnixWare copyrights. Pursuant to the Tenth Circuit's decision, that issue will be for the jury to decide.

Defendant now seeks to set aside this Court's previous decision concerning Defendant's entitlement to certain royalties. Defendant argues that Judge Kimball's decision concerning those royalties was premised on the decision that it, not Plaintiff, was the owner of the copyrights at issue. Because that decision has now been reversed, Defendant seeks relief from Judge Kimball's decision on the issue of royalties.

Defendant did not raise this issue on appeal. The Tenth Circuit's mandate states:

For the foregoing reasons, we AFFIRM the district court's judgment with regards to the royalties due Novell under the 2003 Sun-SCO Agreement, but REVERSE the district court's entry of summary judgment on (1) the ownership of the UNIX and UnixWare copyrights; (2) SCO's claim seeking specific performance; (3) the scope of Novell's rights under Section 4.16 of the APA; (4) the application of the covenant of good faith and fair dealing to Novell's rights under Section 4.16 of the APA. On these issues, we REMAND for trial.2

II. DISCUSSION

The mandate rule is an "important corollary" to the law of the case doctrine.3"The mandate rule is a 'discretion-guiding rule' that 'generally requires trial court conformity with the

2

articulated appellate remand,' subject to certain recognized exceptions."4 The mandate rule "provides that a district court must comply strictly with the mandate rendered by the reviewing court."5While "a district court is bound to follow the mandate, and the mandate 'controls all matters within its scope, . . . a district court on remand is free to pass upon any issue which was not expressly or impliedly disposed of on appeal.'"6 However, the mandate rule prevents a court from considering an argument that could have been, but was not, made on appeal.7

3

Here, the argument raised by Defendant in its Motion could have, and should have, been raised on appeal. Defendant could have easily argued to the Tenth Circuit that, if this Court's decision concerning the ownership of the copyrights was reversed, the decision concerning royalties should similarly be reversed. They did not. The Court cannot ignore Defendant's decision not to address this issue on appeal.

Further, the Court must take into consideration the limited nature of the mandate. As set forth above, that mandate is as follows:

For the foregoing reasons, we AFFIRM the district court's judgment with regards to the royalties due Novell under the 2003 Sun-SCO Agreement, but REVERSE the district court's entry of summary judgment on (1) the ownership of the UNIX and UnixWare copyrights; (2) SCO's claim seeking specific performance; (3) the scope of Novell's rights under Section 4.16 of the APA; (4) the application of the covenant of good faith and fair dealing to Novell's rights under Section 4.16 of the APA. On these issues, we REMAND for trial.8
This is not a general mandate.9The mandate is very specific. The Tenth Circuit has remanded this matter to the Court for trial on those four specific issues identified in the mandate. Because of the specific nature of the mandate, the Court is not free to explore matters outside of it. Even if the Court could do so, the Court is not inclined to allow the parties to litigate this case anew.

"[A] district court may deviate from the mandate `under exceptional circumstances, including (1) a dramatic change in controlling legal authority; (2) significant new evidence that was not earlier obtainable through due diligence but has since come to light; or (3) if blatant error

4

from the prior . . . decision would result in serious injustice if uncorrected.'"10 None of these circumstances are present here.

The Court further finds that those cases cited by Defendant are unconvincing in that they are dissimilar to the facts presented here and/or do not apply the mandate rule as adopted in the Tenth Circuit.

It is therefore

ORDERED that Novell's Rule 60(b) Motion for Relief from Final Judgment (Docket No. 608) is DENIED. The hearing set for February 4, 2010, is STRICKEN.

DATED January 28, 2010.

BY THE COURT:

___[signature]______ TED STEWART
United States District Judge

5

1 The SCO Group, Inc. v. Novell, Inc., 578 F.3d 1201, 1204 (10th Cir. 2009).

2 Id. at 1227.

3 Huffman v. Saul Holdings Ltd. P'ship, 262 F.3d 1128, 1132 (10th Cir. 2001).

4 United States v. Hicks, 146 F.3d 1198, 1200 (10th Cir. 1998) (quoting United States v. Moore, 83 F.3d 1231, 1234 (10th Cir. 1996)).

5 Huffman, 262 F.3d at 1132 (quotation marks and citation omitted).

6 Procter & Gamble Co. v. Haugen, 317 F.3d 1121, 1126 (10th Cir. 2003) (quoting Newball v. Offshore Logistics Int'l, 803 F.2d 821, 826 (5th Cir. 1986)).

7 United States v. Webb, 98 F.3d 585, 589 (10th Cir. 1996) (noting that because an issue was not appealed the district court's ruling became final and court did not err in declining to address it on remand); see also Doe v. Chao, 511 F.3d 461, 465 (4th Cir. 2007) (stating that "any issue that could have been but was not raised on appeal is waived and thus not remanded"); United States v. Lee, 358 F.3d 315, 324 (5th Cir. 2004) ("All other issues not arising out of [the appellate] court's ruling and not raised in the appeals court, which could have been brought in the original appeal, are not proper for reconsideration by the district court below."); S. Atl. Ltd. P'ship of Tenn, LP v. Riese, 356 F.3d 576, 584 (4th Cir. 2004) (stating that "the mandate rule forecloses litigation of issues decided by the district court but foregone on appeal or otherwise waived") (quotation marks and citation omitted); United States v. Husband, 312 F.3d 247, 250 (7th Cir. 2002) ("[A]ny issue that could have been but was not raised on appeal is waived and thus not remanded."); United States v. Stanley, 54 F.3d 103, 107 (2d Cir. 1995) (holding that mandate rule prevents district court from revisiting issue not raised in initial appeal); United States v. Bell, 988 F.2d 247, 250 (1st Cir. 1993) ("The black letter rule governing this point is that a legal decision made at one stage of a civil or criminal case, unchallenged in a subsequent appeal despite the existence of ample opportunity to do so, becomes the law of the case for future stages of the same litigation, and the aggrieved party is deemed to have forfeited any right to challenge that particular decision at a subsequent date."); Williamsburg Wax Museum, Inc. v. Historic Figures, Inc., 810 F.2d 243, 250 (D.C. Cir. 1987) ("Under law of the case doctrine, a legal decision made at one stage of the litigation, unchallenged in a subsequent appeal when the opportunity to do existed, become the law of the case for future stages of the same litigation, and the parties are deemed to have waived the right to challenge that decision at a later time."); 5 Am. Jur. 2d Appellate Review ¶ 741 ("[A] court on remand may refuse to consider matters that could have been appealed, but were not.")

8 The SCO Group, Inc. 578 F.3d at 1227.

9 Procter & Gamble Co., 317 F.3d at 1125 ("[W]hen the remand is general, however, the district court is free to decide anything not foreclosed by the mandate.") (quotation marks and citation omitted).

10 Huffman, 262 F.3d at 1133 (quoting Webb, 98 F.3d at 587).

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

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

THE SCO GROUP, INC., a Delaware
corporation,

Plaintiff and Counterclaim Defendant,

vs.

NOVELL, INC., a Delaware corporation,

Defendant and Counterclaim Plaintiff.

_______________________

Case No. 2:04-CV-139 TS

MEMORANDUM DECISION AND
ORDER GRANTING IN PART AND
DENYING IN PART NOVELL'S
MOTION FOR SUMMARY
JUDGMENT ON SCO'S FIRST
CLAIM FOR SLANDER OF TITLE
BASED ON FAILURE TO
ESTABLISH SPECIAL DAMAGES

_________________________________

This matter is before the Court on Novell's Motion for Summary Judgment on SCO's First Claim for Slander of Title Based on Failure to Establish Special Damages. In this Motion, Defendant seeks summary judgment on Plaintiff's claim for slander of title. Defendant argues that Plaintiff has failed to establish special damages, a necessary element of a slander of title action. For the reasons discussed below, the Court will grant the Motion in part and deny it in part.

1

I. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law."1 In considering whether genuine issues of material fact exist, the Court determines whether a reasonable jury could return a verdict for the nonmoving party in the face of all the evidence presented.2 The Court is required to construe all facts and reasonable inferences in the light most favorable to the nonmoving party.3

II. FACTUAL BACKGROUND

Simply stated, Plaintiff's slander of title claim is as follows. Plaintiff claims that it is the rightful owner of the UNIX and UnixWare copyrights under the terms of the Asset Purchase Agreement and various Amendments thereto. Defendant, in response, has disputed Plaintiff's claims of ownership and has publicly claimed that it, not Plaintiff, is the true owner of the copyrights in question. Defendant's claim of ownership and statements refuting Plaintiff's claim of ownership are the slanderous statements alleged by Plaintiff.

Plaintiff argues that they have lost sales because of Defendant's alleged slanderous statements. Plaintiff's claims of lost sales revolve around its SCOSource Initiative. Under the SCOSource Initiative, Plaintiff sought to offer licenses to those it believed were infringing on its

2

intellectual property rights.4 Plaintiff claims that Defendant's alleged slanderous statements concerning the ownership of the copyrights caused the SCOSource Initiative to fail. Specifically, Plaintiff asserts that it was unable to enter into licensing agreements with various companies because those companies refused to enter into licensing agreements as a result of the ownership dispute.5 Plaintiff further argues that it was forced to accept lower prices from those who did enter into agreements.

The majority of the evidence supporting Plaintiff's argument on this point comes from the statements of those that were involved in the development and implementation of the SCOSource Initiative.

SCO Vice President of Marketing Jeff Hunsaker testified that Novell's claims of ownership of the copyrights impacted the SCOsource business. Mr. Hunsaker testified that, because of Novell's claims, "the SCOsource licensing opportunities were killed, were negated before they even really got off the ground."6 Mr. Hunsaker further testified:

We put together the SCOsource licensing agreement, and that gave us the opportunity to go after new customers, anyone that uses Linux, and that's a huge marketplace, to sell them that license. We had buyers, we had pipelines. And then Novell, based on their timing and everything else, came out and said, "Sorry, we own it." Then, "We don't own it," and then, "We do own it." And so

3

everyone that we dealt with said, "Sorry, guys. We're not interested in talking until you get your act together and figure this out with Novell."7

Mr. Hunsaker specifically mentioned that, because of Novell's statements, Google, the Pentagon, and HP stated "'Until you can resolve this, we are not interested in moving forward with any SCOsource licensing.'"8 Mr. Hunsaker also testified about the frustrations that Larry Gasparro, an SCOSource salesperson, was having: "he was frustrated with the claims that Novell was making and how it impacted our business and opportunities, which were formidable for SCOsource licenses, with some very large customers that were shot dead."9

Chris Sontag, head of the SCOSource division, testified:

[I]t started to become apparent in late 2003, early 2004, that we were getting highly impacted by Novell's statements that people could easily use as an excuse, the question on copyright ownership, as a reason why they would not need to take what I consider an insurance policy on IP protection. So that cloud that was created substantially impacted our licensing opportunity and I believe ultimately, by this time frame, was substantially impacting even the placeholder numbers or forecasted, you know, limited forecasting numbers that were put in to future budgets.10

Mr. Sontag was asked if he believed "that SCOsource initiatives would have led to more revenues if not for Novell's statements about copyrights?"11 To which he responded: "Absolutely." Sontag further testified:

4

In discussion with potential licensees that I either had directly or for which I received copies of correspondence or write-ups of the discussion that occurred with other people such as the SCOsource sales people, I was aware of a number of situations and times where the person was right in front of me saying, "Well, there's questions about who even owns the copyrights so therefore I don't feel like I need to take a license for your SCO UNIX intellectual property or the right to use a license until that's resolved." And I would do my best to try and explain that I thought it was a baseless set of statements on the part of Novell. But in may cases, people I talked to would say, "Well, until its resolved, I'm still not going to act upon this."12

When asked to identify specific companies that identified the copyright dispute as a reason for not entering into a license agreement, Mr. Sontag was able to identify Morgan Stanley or another Wall Street firm and Google.13

In his declaration, Mr. Sontag describes his negotiations with Hewlett Packard for a SCOSource license.14Mr. Sontag stated that those negotiations were fruitful and that SCO and HP were near a deal, but that negotiations began to fall apart in the fall of 2003.15 Mr. Sontag states that "HP began mentioning Novell's claims, and the problems those claims created for the deal."16 Sontag further states that "[t]his retrenchment by HP coincided precisely with the time period in which I began to hear from other companies Novell was directly relaying to them its claim that SCO did not own the UNIX copyrights."17

5

SCO CEO Darl McBride also testified in his deposition concerning the impact of Defendant's statements on the SCOSource Initiative.18 As discussed in more detail below in relation to his declaration, Mr. McBride testified that HP cited the copyright issue as an issue which prevented HP from entering into a license.19 Mr. McBride also testified that there were other instances in which the dispute over the ownership of the copyrights affected SCO's ability to enter into SCOSource Licenses. Mr. McBride stated that "there were a number of customers that came back and cited as problematic the Novell copyright issue."20 McBride specifically cited Google as an example.21 Mr. McBride also stated that an investment bank (either Morgan Stanley, Lehman Brothers, or Merrill Lynch), the Pentagon, Wyndham Hotels, Regal Entertainment, and Just U.S.A. Sports as companies that cited the copyright dispute as an issue.22 Mr. McBride further stated "that the Novell claims were what eventually got us to just shutter up the SCOsource licensing division for a number of years."23

In his Declaration, Mr. McBride discusses the negotiations between SCO and Dell for a SCOSource license.24 Mr. McBride states that Dell's general counsel "expressed concern over

6

Novell's ongoing claim that SCO did not own the UNIX copyrights. Their interest in the deal precipitously declined and the deal fell apart shortly thereafter."25

SCO General Counsel Ryan Tibbits testified that when SCO was working on the SCOSource program, "the Novell copyright dispute was continually thrown back in our face."26 Mr. Tibbits testified that, in meetings with the Department of Defense, it was indicated that they would have taken a license if not for Novell's actions.27 Instead, they stated "'As soon as you--the issues are cleared up, come and see me and I'll have to do a deal with you.'"28 Mr. Tibbits further identified a New Mexico power utility as an entity that refused a license in part because of the copyright ownership issues.29 Mr. Tibbits identified Cisco as another company that identified the ownership of the copyrights as an issue.30 Mr. Tibbits also identified Google as a company that expressed concern over the copyright dispute.31

SCOSource salesperson Larry Gasparro testified that SCO's licensing program was "dramatically" affected by Novell's claim of ownership of the copyrights.32

7

SCOSource salesperson Phil Langer testified that Novell's statements questioning SCO's ownership of the copyrights negatively impacted his ability to sell licenses.33 Mr. Langer testified that "all the licensees, potential licensees became very interested in, well, if you don't own it, we're not going to by a license from you, which really, you know, put a hold on selling licenses."34 When asked if he was unable to sell licences because of Novell's statements, Mr. Langer responded: "Yes. I mean, it put a pretty big dampening effect on how we were able to approach people when the intellectual property you're trying to license to them is in question of ownership."35 Mr. Langer testified bluntly that "[o]nce the questioning of the ownership came out, the pipeline was killed."36 Mr. Langer testified, specifically, that Regal Entertainment Group, cited the dispute of ownership of the copyrights as a reason not to seek a license, stating that "we can't buy your intellectual property because there's not clear title on it."37

Gregory Pettit, SCO's regional director of intellectual property licensing, testified that Novell's claims of ownership made it difficult to enter into licenses with Raytheon and other companies.38 Mr. Pettit identified the questions raised by Novell as causing "great difficulty, if not impossibility, in selling any licenses[.]"39

8

The parties have both submitted numerous letters sent by various companies to SCO in response to the SCOSource Initiative. Those letters provide some support for those statements made by those involved with the SCOSource Initiative.40 Many of those letters mention the ongoing dispute between SCO and Novell concerning the ownership of the UNIX and UnixWare copyrights. Though, as Defendant points out, many of those letters also leave open the possibility of further discussion once the dispute between the parties is resolved.

Plaintiff has also submitted declarations from two experts: Gary Pisano and Christine Botosan. In his Declaration, Professor Pisano concludes

that Novell's conduct had a substantial impact on SCO's ability to sell the SCOsource Intellectual Property License for Linux (also known as a "right to use" or "RTU" license). It is my opinion that, but for Novell's actions, SCO would have been able to sell significantly more SCOsource RTU licenses to the relevant Linux market than it was able to sell after Novell's statements.41

Professor Pisano also opines

that even a court's determination that SCO owns the UNIX copyrights probably would not restore SCO to the position they were in before Novell's statements. As a practical matter, SCO's ability to sell SCOsource licenses in the future is highly uncertain. Nearly four years have passed since Novell's first attack on SCO's copyright ownership, and technology markets change rapidly. Based on my expertise in high technology industries, and my research and analysis in this case, I have no reason to believe that a court decision vindicating SCO's ownership rights would allow SCO simply to recover its losses through SCOsource sales at this time.42

In her Declaration, Professor Botosan states:

I estimate the financial impact of Novell's statements by using SCO's financial records and internal projections, as well as several external analyst forecasts, to

9

calculate the projected revenue from SCOsource vendor licenses and SCOsource right to use licenses. In order to calculate SCO's damages, I compare the projected SCOsource revenue to the actual revenue realized by SCO over the relevant time period, and then deduct incremental expenses to arrive at SCO's lost profits. I have also relied upon the opinions of Professor Gary Pisano who has studied the expected demand for SCOsource products had Novell's slander of title not occurred. My forthcoming report will provide the details of my analysis in support of my opinion that SCO's damages resulting from the slander of title by Novell exceed $100 million.43

Another potential source of special damages are attorney's fees associated with removing the cloud on the title. In connection with this, Plaintiff has submitted the Declaration of Paul T. Moxley. Mr. Moxley provides the following opinions:

a. Substantial amounts of the work performed to date by SCO's attorneys was necessary in order to eliminate the "cloud" on the title and undo the harm caused by Novell's false assertions.

b. SCO has also incurred substantial legal fees and costs which were necessary to defend against Novell's counterclaim for slander of title.

c. Substantial costs and expenses were incurred by SCO to obtain expert opinions with respect to damages suffered, which are necessary to undo the harm caused by the slander.

d. To the extent some of the fees, costs and expenses are related either to other claims pursued by SCO or to the defense of other counterclaims asserted by Novell, those amounts may be apportioned and segregated from the amounts billed. That work is ongoing and my final analysis will be included in my expert report.44

III. DISCUSSION

Defendant makes four arguments in its Motion for Summary Judgment. First, Defendant argues that Plaintiff's allegations that the SCOSource Initiative was harmed by Defendant's actions fails because Plaintiff cannot establish that Defendant was the cause of the failure. Defendant further argues that, if Plaintiff prevails, it will be able to pursue its claim to royalties.

10

Second, Defendant argues that Plaintiff's argument concerning a diminution in stock price is not a form of special damages. Third, Defendant argues that Plaintiff's claim for attorney's fees as a form of special damages must be rejected. Fourth, Defendant argues that Plaintiff has not produced evidence of any pecuniary loss based on its efforts to research and pursue copyright registration.

"To prove slander of title, a claimant must prove that (1) there was a publication of a slanderous statement disparaging claimant's title, (2) the statement was false, (3) the statement was made with malice, and (4) the statement caused actual or special damages."45

A slander of title action requires proof of actual or special damages, presumed or general damages are insufficient.46

The special damage rule requires the plaintiff to establish pecuniary loss that has been realized or liquidated, as in the case of specific lost sales. This means that general, implied or presumed damages of the kind formerly available in cases of personal defamation are not sufficient as a ground for recovery in a disparagement claim.47 "Special damages are ordinarily proved in a slander of title action by evidence of a lost sale or the loss of some other pecuniary advantage. Absent a specific monetary loss flowing from a slander affecting the saleability or use of the property, there is no damage."48" It is not sufficient

11

to show that the [property's] value has dropped on the market, as this is general damage, not a realized or liquidated loss."49

A. LOST SALES

Both parties agree that lost sales constitute special damages. The disagreement here is whether Plaintiff has presented sufficient evidence of lost sales and whether Defendant's actions were the "direct and immediate" cause of those lost sales and whether those lost sales alleged by Plaintiff are "realized and liquidated."

Based on the evidence set forth above, the Court finds that Plaintiff has presented sufficient evidence of lost sales to survive summary judgment. The Court further finds that there are genuine issues of material fact as to whether Defendant's actions were the "direct and immediate" cause and whether those lost sales are "realized and liquidated." Therefore, the Court must deny Defendant's Motion as it relates to lost sales.

B. STOCK PRICE

Defendant argues that Plaintiff's claim that Defendant's actions resulted in a diminution of its stock price is not an appropriate claim for special damages. Plaintiff states that it is not seeking the decline in its stock price as damages. The Court agrees that decline in stock price is not an appropriate claim for special damages.50 Therefore, to the extent that Plaintiff is seeking to recover its decline in stock price as a form of special damages, Defendant's Motion will be granted.

12

C. ATTORNEY'S FEES AND COSTS

Under Utah law, attorney fees are "recoverable as special damages if incurred to remove a cloud placed by the defendant on the title."51 However, when "attorney fees were not incurred to clear title or to undo any harm created by whatever slander of title occurred, there [are] no special damages."52 Defendant argues that Plaintiff's attorney's fees in pursuing this slander of title action are not recoverable. Plaintiff argues that, although this is a slander of title action rather than a quiet title action, "[t]he present action is the vehicle by which SCO's title will be cleared."53

The Supreme Judicial Court of Maine succinctly stated the majority rule as follows:

We adopt the majority position that attorney fees incurred in removal of a cloud on a title caused by a spurious and vexatious deed do constitute proof of special damages in a slander of title action even in the absence of proof of an impairment of vendibility. In doing so, however, we emphasize that the costs of litigation and attorney fees in the action for slander of title itself cannot constitute the required special damages. The prevailing party in a slander of title action may recover as special damages those attorney fees and expenses incurred to remove the cloud on the title but not those incurred to prosecute the slander of title action.54

In the instant action, there are two sets of attorney's fees: those associated with removing the alleged cloud on the title of the copyrights and those associated with bringing the action for slander of title. As set forth above, the Declaration of Paul T. Moxley states as follows:

a. Substantial amounts of the work performed to date by SCO's attorneys was necessary in order to eliminate the "cloud" on the title and undo the harm caused by Novell's false assertions.

13

b. SCO has also incurred substantial legal fees and costs which were necessary to defend against Novell's counterclaim for slander of title.

c. Substantial costs and expenses were incurred by SCO to obtain expert opinions with respect to damages suffered, which are necessary to undo the harm caused by the slander.

d. To the extent some of the fees, costs and expenses are related either to other claims pursued by SCO or to the defense of other counterclaims asserted by Novell, those amounts may be apportioned and segregated from the amounts billed. That work is ongoing and my final analysis will be included in my expert report.55

To the extent that Plaintiff can segregate and identify those attorney's fees associated with removing the cloud placed on the title of the copyrights, those fees would be considered special damages. However, those amounts that were not associated with removing the cloud placed on the title would not.

Defendant argues that courts refuse to award attorney's fees as special damages in cases where the claim to settle ownership and the slander of title claim are brought in the same case. Defendant's argument is without merit. For example, in Colquhoun v. Webber, a case cited by Defendant, the plaintiffs had brought an action raising, among other claims, claims for both quiet title/declaratory judgment and slander of title.56 The trial court granted plaintiffs summary judgment and awarded special damages in the amount associated with the slander of title claim.57 The court on appeal reversed the damage award.58 The court found that the costs associated with the action for slander of title did not constitute special damages.59 Rather, the court held that "the

14

prevailing party in a slander of title action may recover as special damages those attorneys fees and expenses accruing from removing the cloud on the title."60 The trial court had awarded special damages based on the cost of prosecuting the slander of title action.61 The court emphasized that "[i]t is the costs of prosecution of the counts which cleared the Colquhouns' title, i.e. the quiet title counts and the declaratory judgment count which are appropriately characterized as "special damages" and for which Webber should bear liability."62 The court vacated the damage award and remanded for a redetermination.63

Colquhoun shows that courts do, in fact, allow for recovery of special damages in cases involving both slander of title and claims to settle the issue of ownership. This is the situation before the Court. Here, both the issue of ownership of title and slander of title will be decided in this action. Therefore, those attorney's fees and costs associated with removing the cloud from the title are appropriately considered and may be recoverable as special damages.

The cases relied upon by Defendant are inapposite. C.P. Interests, Inc. v. California Pools, Inc.,64 applies Texas law, which provides "that attorneys fees are not considered a form of pecuniary loss and do not constitute special damages."65 This is clearly not the law in Utah. Lee

15

v. Washington Square Homeowners' Ass'n, Inc.,66 applying Georgia law, also takes a position inconsistent with Utah law by stating that "[c]osts of litigation and attorney fees arising from slander of title do not constitute . . . special damages."67 Hicks v. McLain's Bldg. Materials, Inc.,68 also applies Georgia law which is inconsistent with Utah law.69 In Sannerud v. Brantz,70 the court found that there was insufficient evidence to support a claim in a defamation of title action and noting that the Wyoming Supreme Court had suggested that attorney's fees were not recoverable in a defamation of title action.71 This is not a defamation of title claim.

D. RESEARCHING COPYRIGHT REGISTRATIONS

Defendant's final argument is that Plaintiff has not produced evidence that it has incurred attorney's fees in researching and reviewing the copyright registrations. Plaintiff has not responded to this argument and it is, therefore, waived. Defendant's Motion will be granted to the extent that Plaintiff is seeking special damages related to the researching and reviewing copyrights that are not associated with those attorney's fees and costs allowable, as set forth above.

16

IV. CONCLUSION

It is therefore

ORDERED that Novell's Motion for Summary Judgment on SCO's First Claim for Slander of Title Based on Failure to Establish Special Damages (Docket No. 277) is GRANTED IN PART AND DENIED IN PART as set forth above. The hearing set for February 4, 2010, is STRICKEN.

DATED January 28, 2010.

BY THE COURT:

____[signature]___________
TED STEWART
United States District Judge

17

1 Fed.R.Civ.P. 56(c).

2 See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Clifton v. Craig, 924 F.2d 182, 183 (10th Cir. 1991).

3 See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Wright v. Southwestern Bell Tel. Co., 925 F.2d 1288, 1292 (10th Cir. 1991).

4 See James Decl. Ex. 47 (letter from SCO to Linux users).

5 Docket No. 96 at ¶ 10 ("Novell's false and misleading representations that it owns the copyrights have directly caused and continue to cause significant irreparable harm to SCO's valuable UNIX and UnixWare copyrights, its business, and its reputation, and has caused third parties to refuse to enter into license agreements with SCO relating to SCO's UNIX and UnixWare business."); id. at ¶ 39(b) ("Potential customers have informed SCO that they will not enter into agreements to license SCO's UNIX technologies because of the cloud surrounding SCO's ownership of UNIX created by Novell's false public representations that it, and not SCO, owns UNIX.").

6 Brakebill Decl. Ex. 31 at 151:19-21.

7 Id. at 162:17-163:2.

8 Id. at 206:4-14; see also id. at 229:8-13 (stating that Google, the Pentagon, and Hewlett Packard were companies that cited Novell as a reason for declining a license); see id. at 230:3- 231:3.

9 James Decl. Ex. 62 at 232:4-8.

10 Id. Ex. 60 at 115:9-21.

11 Id. at 116:9-12.

12 Id. at 117:9-23.

13 Id. at 119:18-120:7.

14 Id. Ex. 80 at ¶¶ 8-15.

15 Id.

16 Id. at ¶14.

17 Id.

18 Brakebill Decl. Ex. 63; James Decl. Ex. 61.

19 Brakebill Decl. Ex. 63 at 130-34.

20 Id. at 135:10-11.

21 Id. at 135:20-136:4.

22 Id. at 137:2-19.

23 Id. at 219:16-18.

24 James Decl. Ex. 81 at ¶ 9.

25 Id.

26 Id. Ex. 59 at 113:1-2.

27 Id. Ex. 63 at 20:18-22.

28 Id. at 20:22-24.

29 Id. at 26:7-24.

30 Id. at 32:12-33:3.

31 Id. at 37:15-20.

32 Id. Ex. 56 at 330:5-7.

33 Id. Ex. 58 at 127:6-9.

34 Id. at 135:18-21.

35 Id. at 136:1-4.

36 Id. at 137:14-15.

37 Id. at 140:16-141:6.

38 Id. Ex. 57 at 167:12-15.

39 Id. at 167:21-25.

40 See Brakebill Decl. Exs. 48-53; James Decl. Exs. 48, 49, 86, 88.

41 James Decl. Ex. 71, ¶ 6.

42 Id. at ¶ 11.

43 Id. Ex. 87 at ¶ 6.

44 Id. Ex. 72 at ¶ 8.

45 First Sec. Bank of Utah, N.A. v. Banberry Crossing, 780 P.2d 1253, 1256-57 (Utah 1989).

46 Id. at 1257.

47 Id. (quoting W. Keeton, Prosser and Keeton on the Law of Torts, at 971 (5th ed.1984)).

48 Bass v. Planned Mgmt. Servs., Inc., 761 P.2d 566, 568 (Utah 1988).

49 Valley Colour, Inc. v. Beuchert Builders, Inc., 944 P.2d 361, 364 (Utah 1997).

50 See Computerized Thermal Imaging, Inc. v. Bloomberg, L.P., 2001 WL 670927, *3-4 (D. Utah 2001), aff'd, 312 F.3d 1292 (10th Cir. 2002).

51 Bass, 761 P.2d at 569.

52 Id.

53 Docket No. 307 at 39.

54 Colquhoun v. Webber, 684 A.2d 405, 411 (Me. 1996) (citations omitted).

55 James Decl. Ex. 72 at ¶ 8.

56 Colquhoun, 684 A.2d at 408.

57 Id. at 413

58 Id.

59 Id.

60 Id.

61 Id.

62 Id.

63 Id.

64 238 F.3d 690 (5th Cir. 2001).

65 Id. at 695.

66 615 S.E.2d 210 (Ga. Ct. App. 2005).

67 Id. at 214.

68 433 S.E.2d 114 (Ga. Ct. App. 1993).

69 Id. at 116.

70 879 P.2d 341 (Wyo. 1994).

71 Id. at 345.


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