decoration decoration

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

Groklaw Gear

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

To read comments to this article, go here
SCO Proposes Selling its Mobility "Business"... to Darl McBride - Updated 3Xs
Saturday, February 27 2010 @ 01:45 PM EST

SCO's Chapter 11 Trustee Edward Cahn not only proposes to let Ralph Yarro "loan" some money to the company at what Novell calls egregiously inequitable terms -- inequitable to everyone but Ralph Yarro and the gang, that is -- but now he proposes to sell SCO's "mobility business", which not long ago SCO said was worth millions, if I recall correctly, to another SCO insider, Darl McBride, for $35,000.

Here's the only reasonable explanation. Judge Cahn's evil twin has kidnapped his brother, thrown him in the dungeon of the castle, welded an iron mask on him, and the Pretender is now signing all these proposals and filing them with the court.


. . . Well....Sorta kidding.

Are they seriously proposing these deals? I mean, really? Really? It feels like a stickup. Wait. Maybe this isn't about money. Here, in my eyes, is what may be the operative sentence from the operative paragraph of the proposed APA:

6.1. Transition and Cooperation.From and after the Closing Date, (a) Seller shall not take any action, alone or together with others, which obstructs or impairs the smooth transition by Buyer of the Acquired Assets; and (b) Seller shall promptly provide access to Buyer to all correspondence, papers, documents and other items and materials received by Seller found to be in its possession which pertain to the Acquired Assets.
Hopefully, someone will sit with him at the table while he goes through those documents. We wouldn't want any of them to go missing by accident.

McBride, I've heard, always talked about the importance of having an exit strategy. Guess when the APA says the closing date will be? March 1. Why, that's just before the trial in Utah in SCO v. Novell. If the closing hasn't happened by April 1, by which time the trial will be over, the deal is terminable. That timing sounds really odd. So, by the closing, would all those papers be in Darl's possession, no longer in SCO's? Just before the trial?

I think Cahn is thinking about some other end game possibilities. The next paragraph has McBride releasing SCO, its subsidiaries or affiliates, and Cahn from any possible lawsuits other than a shareholder lawsuit or litigation over this contract.

Here it all is:

02/26/2010 - 1066 - Motion For Sale of Property under Section 363(b) / Motion Of The Chapter 11 Trustee For Order Under 11 U.S.C. Sections 105(A), 363, And 365 And Fed. R. Bankr. P. 2002, 6004, 6006 And 9014 (A) Approving The Sale Of Mobility Business Free And Clear Of All Liens, Claims, Interests And Encumbrances Pursuant To 11 U.S.C. Section 363, (B) Authorizing And Approving The Assumption And Assignment Of Certain Executory Contracts In Connection Therewith, And (C) Granting Related Relief Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Attachments: # 1 Notice # 2 Exhibit A # 3 Exhibit B # 4 Exhibit C Part 1 # 5 Exhibit C Part 2 # 6 Exhibit C Part 3# 7 Exhibit C Part 4 # 8 Exhibit C Part 5 # 9 Exhibit C Part 6 # 10 Exhibit D # 11 Certificate of Service) (Fatell, Bonnie) (Entered: 02/26/2010)

02/26/2010 - 1067 - Motion to Shorten / Motion Of Chapter 11 Trustee To Shorten Notice And Response To Trustees Motion For Order Under 11 U.S.C. Sections 105(A), 363, And 365 And Fed. R. Bankr. P. 2002, 6004, 6006 And 9014 (A) Approving The Sale Of Mobility Business Free And Clear Of All Liens, Claims, Interests And Encumbrances Pursuant To 11 U.S.C. Section 363, (B) Authorizing And Approving The Assumption And Assignment Of Certain Executory Contracts In Connection Therewith, And (C) Granting Related Relief (related document(s) 1066 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Hearing scheduled for 3/15/2010 at 10:00 AM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. Objections due by 3/8/2010. (Attachments: # 1 Proposed Form of Order) (Fatell, Bonnie) (Entered: 02/26/2010)

Cahn says that SCO looked at the mobility business, and the company lacks the capital to really develop the business, which SCO has been telling us about for years but which it now describes as "in the early stages of product development", so they decided to try to sell it or if they couldn't find a buyer, to just shut it down. They now say they found a buyer, MIH, Mobility Inc. Holdings, which seems to be affiliated with Darl, or at least if the deal goes through, and they'd like to sell to MIH "or another higher and better bidder". Like SCO's litigation victims, maybe, totally freaked out by a possible sale to Darl?

In December, Darl McBride approached the Ocean Park people, to discuss maybe buying the "mobility business", and soon he delivered a draft letter of intent. For about a month, OPA and Darl, equity holder and exCEO, "engaged in arms-length negotiations" about the proposed sale.

Are you with me so far?

So here comes the good part. They decided it would be better to "pursue a private sale... rather than incur the expense and delay" of a public sale and auction. OPA then looked around and tried to find another buyer who might pay more, but alas, the "competitive sale process" was a failure. No one wanted to buy this wonderful business Darl's been telling us all about for years and years.

Go figure.

Here's what OPA did to try to rustle up a better buyer. They made a list of 12 possible buyers, appropriately called "Targets". Heh heh. So for two whole weeks, OPA contacted 11 targets by email or phone -- or even both! those busy bees -- eleven because one "target" couldn't be reached. Probably on a camel heading back to the warm oil wells of Saudi Arabia or something. Just kidding. But seriously, what kind of legitimate buyer or entity would be unreachable for two whole weeks considering that these zealous OPA folks were emailing away night and day and calling on the phone too?

OPA hasn't given up,though. No siree. They will be placing an ad in a Salt Lake City newspaper, according to Exhibit A, announcing this proposed deal and inviting anyone to contact OPA if they don't want to miss this wonderful opportunity. Isn't that how fabulous businesses are usually sold? They tell the court that this two-week effort is proof that the mobility business "has been marketed adequately." Maybe if your real goal is marketing to IBM and Novell. Otherwise, I think they should just list it on eBay. They'd likely get a better offer.

So, assuming nobody else wants to buy, the APA, attached as Exhibit C, sets the terms. Uh oh. Darl, for $35,000 gets "certain Intellectual Property". You know what that may mean. Lawsuits ahoy, m'hearties. Lets see. Mobility products. I know. Maybe MIH could sue Apple for using OSX.

You think I'm kidding.

He gets also some contracts (specifically one with Franklin Covey and one described as "iPhone Application Program with Apple"), and you know what he said contracts are good for, and he'll also "enter into a Source Code License Agreement with SCO".

OK. Put your bets on the table. Who will sue the other for breach of the license first? My money's on Darl. I've seen him run around that track.

No. No. Infringement! Copyrights. It has to be. IP is a waste if you can't sue somebody in the SCO way of thinking. Would this not be UNIX-related IP? What could be better? Heaven only knows that IP is good for at least 7 years of litigation. I know. They could sue Google. Think as big as the sky, why don't they? Everyone else sues Google. Talk about your deep pockets.

The actual copyrights are listed in Exhibit 9, but the copyright registrations are not provided, but what I'm saying is this: since we have no idea what code is inside these proprietary products, like Shout and HipCheck, but we know they are Unix-based, or at least that is what I recall SCO telling us, how do we know that there is no spillover that could, in Darl's lovely universe, seem useful in pursuing deep pockets companies over "infringement" of those Unix copyrights? Like IBM, for example, or you, if you have any money. At a minimum, I'd want him to sign a release disclaiming any such possibility, because if he doesn't, obviously $35,000 isn't the right price or even a reasonable price. Or only if there's a lien, or Novell agrees or something. You could get more on eBay just from people wanting to block him. Groklaw could buy it, take up a collection, whatever it took.

Wait. Is this the actual purpose of this proposed deal? To get some money from potential victims of this serial litigation machine by threatening to sell to Darl? Hmm. Is that ethical?

Hahahaha. Just checking to see if you are still paying attention.

Footnote 3 suggests that "parties in interest are advised to review the APA in its entirety." I'll say. Let's do.

What's the consideration? The purchase price, the princely sum of $35,000, and if MIH has annual gross revenues reaching the amount of $1,000,001 -- and no doubt that happy day is right around the corner -- Darl's company pays SCO some money, the wording of which I can't understand, but since I doubt it will ever happen, who cares? But some of you may want to know:

e. In addition to payment of the Purchase Price, the APA provides for up to an aggregate of $60,000 in "Income Participation" payments to Debtors when the annual Gross Revenue earned by MIH from the Mobility Business reaches $1,000,001 with no more than $30,000 paid in any given year; ...
Since SCO is likely to have gone out of business long before this event occurs, no need to parse it out too carefully, but I think it's saying all MIH can ever owe is $60,000 grand total ever, payments to be spaced out over two years. Oh, one more piece of consideration:
f. In further consideration for the purchase of the Mobility Business Assets, McBride will grant a release to the Debtors, the estates and the Trustee and all Seller Parties (as defined in the APA). See APA 6.2.
Since Darl is an equity holder and was the CEO, "McBride may be an insider", they disclose. You think? But, but, they swear on their mother's grave that all negotiations were "at arms-length and in good faith." So, Cahn tells the court, the sale "is reasonable and appropriate" under 105(a) and 363(b).

How do they measure that, I wonder? I mean, what's the ruler's edge for measuring good faith? The document tells us, and this is the scary part. It's, according to 363(b)(1) "a matter within the Court's discretion, giving due consideration to the sound business judgment of the proponent of the sale." And according to 105(a) "the court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code]."

Well, that's that, then.

Are we in Second Life or something? I mean, can we fly and leap over buildings with a single bound and buy hotels on Park Place and stuff? This is a real bankruptcy? Involving real money? Are you positive? How can you tell?

It's obvious a bankruptcy court judge in Delaware can do whatever he pleases, to hear them tell it, and he answers to no one, since the bankruptcy code says he can do whatever seems right in his own eyes. But wait. I want to ask you something. If, as the company keeps assuring the world, it's just about to hit the jackpot in court next month, why can't it develop the mobility business itself, using the windfall it's allegedly about to win? I mean, if lack of capital is the reason they feel they can't develop this asset, which currently isn't worth much, judging by the purchase price, why wouldn't it make sense to hold on to it, win big in court, get the copyrights, sue the Linux world, and then use their unimaginable wealth to develop this wonderful business?

What? Too linear in my thinking? Oh, and Cahn wants the court to hurry up and shorten the time to get this deal done. Let me ask a question. Is the sudden urgency indicating that SCO now realizes it is more than likely to lose the case against Novell next month? It's either that or they just want to do the right thing by the business. Oh, and the deal once approved means that the business and this intellectual property is now free and clear, with no one able to go after it to satisfy any claim. Like the pizza joint SCO stiffed when it went bankrupt. Or... Novell, for instance.

Oh, no. I fear my curled lip is stuck.

P.S. I believe it was Judge Gross who ruled not that long ago that the mobility business was virtually worthless. So in his eyes, $35,000 may seem like better than nothing. That's the really sad part. By separating all the individual parts of what SCO is doing, instead of looking at the big picture --what SCO has tried to do to Linux and to the market -- each small step can be legally justified by someone somewhere. But step back, and then I think you have to ask, what is Judge Cahn thinking? Do judges have an ethical responsibility to look at the ethics of a matter? Here's one judge who says they do. Why, really, is he proposing these deals? And why does McBride want this "business" really? After all the years of development effort that have shown such small results, where's the value in this picture?

Update: I notice one other thing. Cahn references 363(m), saying MIH should have the benefit of it. Here's how it reads:

(m) The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal.
And an anonymous comment caught my eye:
So how many billable hours does it take to line up 12 possible buyers, call them all, and describe the deal. How many hours to draw up all this paper work on the sale.

It's $35k minus whatever of Darl's fees they are going to pay. They are likely to spend more than that in Blank-Rome legal time doing the leg work.

The question becomes not is the sale good for the estate. But was pursuing it in the first place any good? Will more be spent on the lawyers fees than will be made by selling the asset? Is there a profit to the estate in this action? Is the trustee acting in the best interests of the creditors here?

[Update 2: Get a load of the assets going for $35,000. Not only do some copyrights and the source code go to the buyer, but there are 12 servers in the deal, 13 domain names, and 10 developer smartphonees. You find the list in Exhibit C Part 6, which begins with a list of the source code products involved in this transaction, but I notice something else. The deal is supposed to be, if approved, between SCO Group, MIH,LLC and Darl McBride. That is typical of a deal with an LLC, which, being a limited liability company with unknown resources, might shut down and then there is no way to enforce. So often you'll see that someone with the LLC has to personally sign the deal too, so there is someone to sue, if necessary. But in this case, although all three are named in the Agreement, I see only two signature lines, Cahn (with Bonnie Fatell signing for him by permission) and MIH, LLC, with Darl signing as President, but I don't see Darl's signature line as obligating himself as an individual, outside of the LLC.

[ Update 3: I had time to carefully peruse the deal. Here's a reassuring paragraph, the excluded assets list:

(c) Excluded Assets. Notwithstanding anything to the contrary contained in Section 2.1(a) or elsewhere in this Agreement, the following Assets of Seller (collectively, the "Excluded Assets") are not part of the transactions contemplated hereunder, are excluded from the Acquired Assets and shall remain the property of Seller after the Closing:
(i) any and all assets of Seller other than the Acquired Assets, including United States Patent Number 6,931,544 and Seller's ownership, intellectual property and all other rights in and to (A) the UNIX systems and assets, including UnixWare and OpenServer and (B) U.S. Patent Application No. 11/533,347 SCO Mobile Server, SDK HipCheck and all predecessors of the same.

(ii) all rights of Seller under this Agreement and all agreements contemplated hereby; and

(iii) all Seller's claims, causes of action and other legal rights and remedies (A) against Buyer with respect to the transactions contemplated by this Agreement and (B) relating to the Excluded Assets or to Seller's Obligations not included in the Assumed Obligations, including all rights and interests in all litigation claims pending or that may be known or unknown that has been or may be asserted against Red Hat or others relating to or arising from all licensing or covenant not to sue rights relating to claims that Linux violates SCO Unix and UnixWare intellectual property or contract rights against any other third parties.

So at least Darl can't interject himself into the litigation. End Update 3.]

Here's the assets list and the agreement:



  • SCO Mobile Server
    J2EE jboss application that provides network solution for creation of Mobile applications and a deployable server for running mobile applications accessible via a Windows Mobile of J2ME capable phone which communicates with both HipCheck Agent and a HipCheck Client.

  • SCO Mobile Server SDK
    Development Kit

  • HipCheck
    The applications that allow users to remotely monitor and manage the basic health of UNIXTM and Windows systems through smartphones, including Windows Mobile and Java-enabled smartphones. "HipCheck Products" includes the "HipCheck Agent", "HipCheck Client" and the "Mobile Server for HipCheck".

  • Prototypes/Demos associated with the SCO Mobile Server
    Siemens/Fujitsu Hardware Monitoring (HipCheck)

    Siemens PG Call Home

  • Me Inc Server (Software) and Shout Server (Software)
    These are customized early versions of what ultimately became the SCO Mobile Server.



This Agreement is made and entered into as of February __, 2010, by and between The SCO Group, Inc., Inc., (referred to herein as ("Seller"), a corporation of the State of Delaware, with its place of business at [address in Utah], and me Inc Holdings, LLC (referred to herein as ("Buyer"), a Delaware limited liability company with its place of business at [address in Utah].

WHEREAS, by an Asset Purchase Agreement, dated as of February __, 2010 (the "Purchase Agreement"), among the Buyer, the Seller and Darl McBride, the Seller has agreed to sell and assign the Acquired Assets to the Buyer; and

WHEREAS, the parties hereto desire to execute this Agreement to further evidence the assignment by Seller and assumption by Buyer;

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and intending to be legally bound, the parties hereto agree as follows:

1. Definitions. Except as otherwise provided herein, all capitalized terms contained and not defined herein (including the recitals hereto) shall have herein the respective meanins ascribed to them in the Purchase Agreement.

2. Assignment. Seller hereby sells, transfers, conveys, assigns and sets over to Buyer, its successors and assigns, all of the Acquired Assets, including, without limitations, all Assumed Contracts.

3. Assumption of Assumed Obligations. Buyer hereby assumes and undertakes to pay, perform and discharge the Assumed Obligations.

4. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of law.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.



By: [signature: "Edward Cahn w/permission by Bonnie Fatell"]
Name: Edward Cahn
Title: Chapter 11 Trustee



By: [signature]
Name: Darl McBride
Title: President


Asset ClassPurchase Price Allocation
Class I-
Class II-
Class III-
Class IV-
Class V$10,000
Class VI$20,000
Class VII$5,000

Me Inc Server (Software)
except those parts excluded in Sec. 2.1(c)(i)
Source code copyright
Shout Server (Software)
except those parts excluded in Sec. 2.1(c)(i)
Source code copyright
Shout PostcardSource code copyright;
Server running the application
Shout MarketingSource code copyright;
Server running the application
Shout 119 (need to locate)source code copyright
Shout coupon (need to locate)Source code copyright
MyCoSource code copyright
MIGsSource code copyright;
Server running the application

FC Products
Asset Type
FCmobilelifeSource code copyright;
Server running the webstore
Server running the application
Server running the databases
Server running the license application
FCtasks for iPhoneSource code copyright
FCgoals for iPhoneSource code copyright
FCtasks for BlackberrySource code copyright

Mobile Prototypes/Demos

Asset Type
Snowplow (still need to
locate in UT source repository)
Source code copyright
GrassrootsSource code copyright
Mobile OESource code copyright
MPSEB Indian utility co.
meter reading
Source code copyright
Delhi traffic policeSource code copyright
Citibank demoDocumentation
DispraxScreen shot mockups
Jackson BuildersDocumentation
Aston VillaSource code copyright
NREGA employment
Source code copyright
smnp hardware monitoringSource code copyright
NDPL PowerSource code copyright
PG Call HomeSource code copyright

Domain Names (which shall include sub and pre domain names that tie to the root domain)

Servers - Buyer to arrange pickup. SCO will provide a clean shutdown and disconnect from SCO infrastructure on pickup date. SCO will also provide consultation on bringing the servers back up in their new environment. All servers are in SCO Utah data center.

Siple (FCML App Server)
Berkner (FCML Webstore)
Uther (FCML Stage App Server)
Lancelot (FCML Stage Webstore)
Labs1 (mice1 and *
Labs3 (Shoutpostcard)
Buru (MIGs Server)
Melville (email blaster for Shout Marketing)
Saturn (Me Inc. Jira database and Me Inc. wiki)
Midb (database server for FCML webstore and other me-inc apps)
Jas (license application server - database on midb)
Licdev (license application server for Uther)

Developer Test Phones:

Blackberry Bold
2 x T-Mobile Wing
Nokia N90
Pantech (model C810)
BlackBerry 8100
Samsung SGH-i607
Palm Tero 700p
2 x BlackBerry 8300
BlackBerry 8800

Assumed Contracts:

Business Cooperation Agreement by and between The SCO Group, Inc. and FranklinCovey Product Sales, Inc., dated March 3, 2008.

iPhone Application Program with Apple

  View Printable Version

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

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