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To read comments to this article, go here
Sale Motion Re-notice on Mobility Sale & Dueling Definitions in Utah
Thursday, March 04 2010 @ 01:34 PM EST

SCO's Chapter 11 Trustee Edward Cahn has filed the obligatory notice regarding his intention to sell the mobility assets to Darl McBride. If anyone has a counteroffer, it provides information on what to do. Also, if anyone has a mobility contract with SCO, it will be going to Darl, so if they don't want that to happen or have an objection to the listed cure amount, the notice tells them what to do to file their objection. Otherwise, if no objections are filed, the judge can just sign the deal and Darl is good to go.

There's a paragraph in the deal that might interest you regarding copyrights, a list of what he doesn't get. I put it in the original article about the proposed sale, as an update, but let's highlight it again.I've seen a lot of you noticed that McBride was buying the entire business without getting the copyrights, so I thought you'd want to see SCO's argument.

Here it is:

(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.

Ask your lawyer, but to me that seems to say he can't inject himself into the current or any future litigation over UNIX or UnixWare IP claims or any "Linux violates those copyrights" or any future such claims. If so, that is probably good news to you in that he's out of that picture, except maybe as a shareholder of SCO. But that also means someone else can someday buy them, should SCO ultimately prevail, or, as per the Yarro loan, benefit from them in some litigious way.

It does speak to SCO's claim in the SCO v. Novell litigation that you need copyrights to run a software business. I gather not, since he wants to run the mobility business with just a license to use the code, even though he is buying the business. I know.

SCO is now offering a new argument, or at least one which I first spotted in their proposed jury instructions, that there is some magical difference between licenses and implied licenses. If you want to read about that in detail, it's in their Proposed Jury Instructions, which I added as an update here. Here's what SCO would like the jury to be instructed as instruction No. 6:

SCO'S PROPOSED INSTRUCTION NO. 6:
The Element of Copyright Ownership: Relevance of Copyright Ownership

With respect to who owns the property at issue, and your consideration of the amended Asset Purchase Agreement, you should consider the nature of a copyright.

Copyright is the exclusive right to copy. The owner of a copyright has the exclusive right to make and distribute copies of the copyrighted work, to display publicly the copyrighted work, and to license the right to use the copyrighted work to other people. The owner of a copyright also has the exclusive right to bring claims in court to enforce the copyright against people who are infringing on the copyright. The owner can also license that right to someone else, but only through an express, exclusive license.

You therefore should also consider the issue of a "license" to use copyrighted material. There are different types of licenses. One distinction is between "express" and "implied" licenses.

An "express" license is found in a contract that clearly states that one party to the contract has a "license."

An "implied" license is found in a contract that does not use the word "license," but from whose terms you can conclude that one party has the right to use the copyrighted material.

Implied licenses usually are found where one party has created a work at the other's request and handed it over, intending that the other copy and distribute it.

Another distinction, which is related to the difference between an "express" and an "implied" license, is the difference between an "exclusive" and a "non-exclusive" license to use copyrighted material.

An exclusive license means that only the exclusive licensee can use the copyrighted material, whereas an implied license means that several licensees can use the copyrighted material.

The distinction between an "exclusive" and a "non-exclusive" license to use copyrighted material is relevant for two mains reasons.

First, an implied license can only be non-exclusive.

Second, an implied licensee, because he is a non-exclusive licensee, cannot bring lawsuits to enforce the copyrights against people who may be violating them.

Gillespie v. AST Sportswear, Inc., 2001 WL 180147, at *7 (S.D.N.Y. Feb. 22, 2001)

SHL Imaging, Inc. v. Artisan House, Inc., 117 F. Supp. 2d 301, 316 (S.D.N.Y. 2000)

Schiller v. Schmidt, Inc. v. Nordisco Corp., 969 F.2d 410, 413 (7th Cir. 1992)

SmithKline Beecham Consumer Healthcare, L.P. v. Watson Pharms., Inc., 211 F.3d 21, 25 (2d Cir. 2000)

R. Ready Prods., Inc. v. Cantrell, 85 F. supp. 2d 672, 684 n.1 (S.D. Tex. 2000)

Novell's Competing Instructions: 10-12

To figure out if any of it is so or just what SCO wants decided without actually establishing it, you'd need to read the cases, none of which, I can't help but notice, are either Utah or California cases, so although I haven't read the cases yet, I already know that Novell is more on target in that sense, as I'll show you in a moment.

At least you'll understand why SCO so wants their expert, G. Gervaise Davis III, to get on the stand and tell the jury he's never in all his born days seen this or that happen in copyright practice. This is what I expect them to argue at trial, that the APA's implied license never happens in real life, so it can't mean that. Novell asked that he be disqualified, but the judge denied that motion for Daubert hearing [PDF]. So we'll get to watch that all play out. Or, I hope we will. Two Groklaw members who planned to attend the trial in Utah suddenly can't go, so if there is any way you can, even for a day, please email me. Or just go. You might get to watch Davis say all those things in real life, and then can observe live how Novell handles him on cross-examination. It'd be a crying shame to have gaps in our coverage. So if there is a way any of you can attend, please find it.

SCO references Novell's proposed jury instructions 10-12, where Novell has competing language on this topic, so here they are:

Novell's Proposed Instruction No. 10:
Definition of Copyright

Copyright is the exclusive right to copy. Upon obtaining a copyright, an author automatically acquires certain rights that are inherent in the very nature of a copyright. Specifically, the copyright owner obtains the following six exclusive rights of copyright:

(1) the right to make additional copies, or otherwise reproduce the copyrighted work;

(2) the right to recast, transform, adapt the work, or otherwise prepare derivative works based upon the copyrighted work;

(3) the right to distribute copies of the copyrighted work to the public by sale or other transfer of ownership;

(4) the right to perform publicly a copyrighted work;

(5) the right to display publicly a copyrighted work; and

(6) the right to perform a sound recording by means of digital audio transmission.

It is the owner of a copyright who may exercise these exclusive rights to copy. The term "owner" may include the author of the work, an assignee, or a licensee. In general, copyright law protects against production, adaptation, distribution, performance, and display of substantially similar copies of the owner's copyrighted work without the owner's permission. An owner may enforce these rights to exclude others in an action for copyright infringement. Even though one may acquire a copy of the copyrighted work, the copyright owner retains rights and control of that copy, including uses that may result in additional copies or alterations of the work.

AUTHORITY: Ninth Circuit Model Civil Jury Instructions, Section 17.1.

SCO'S COMPETING INSTRUCTION: NO. 6


Novell's Proposed Instruction No. 11:
Divisibility of Copyright Ownership

The various rights included in a copyright are divisible and any of the exclusive rights comprised in a copyright may be transferred or licensed (on an exclusive or non-exclusive basis) to other parties.

AUTHORITY: Kalantari v. NITV, Inc., 352 F.3d 1202, 1207-08 (9th Cir. 2003) ("Upon obtaining a copyright, an author automatically acquires certain rights that are inherent in the very nature of a copyright. Specifically, the copyright owner obtains the six exclusive rights of copyright... as well as the right to transfer any or all of those rights."); Bagdadi v. Nazar, 84 F.3d 1194, 1197-98 (9th Cir.1996) ("[T]he various rights included in a copyright are divisible and ... 'any of the exclusive rights comprised in a copyright ... may be transferred ... and owned separately'") (citing 17 U.S.C. Section 201(d)(2) ["Any of the exclusive rights comprised ina copyright ... may be transferred ... and owned separately. The owner of any particular exclusive right is entitled, to the extent of that right, to all of the protection and remedies accorded to the copyriht owner by this title"]); Ninth Circuit Model Civil Jury Instructions, Section 17.11.

SCO'S COMPETING INSTRUCTION: No. 6


Novell's Proposed Instruction No. 12:
Transfer of Copyright Ownership Must Be in Writing

If the owner of a copyright seeks to transfer or sell ownership of that copyright, the transfer of copyright ownership must be in writing and signed by the party from whom the copyright is transferred. The purpose of this requirement is to protect copyright holders from people or companies who mistakenly or fraudulently claim transfers of copyright.

AUTHORITY: The SCO Group, Inc. v. Novell, Inc., 578 F.3d 1201, 1211-12 (10th Cir. 2009) (citing 17 U.S.C. Section 204(a) (1994) (copyright transfer is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent)); Konigsberg Int'l, Inc. v. Rice, 16 F.3d 355, 357 (9th Cir. 1994) ("[A] transfer of a copyright is simply 'not valid' without a writing."}.

SCO'S COMPETING INSTRUCTION: No. 6

Notice Novell's authorities are all 9th or 10th Circuit? The reference to Ninth Circuit Model Civil Jury Instructions is a nice touch too. They cite that way because the law of the contract is California and the case is being tried in Utah, 10th Circuit. California is 9th Circuit, as you can see on this chart, and you'll see SCO's cases, in contrast, are all NY, 2nd Circuit, or Texas, 5th, or the 7th, the midwest. When I see that, I usually take it as an indication that there aren't any cases at all in the appropriate circuits. But I see Novell found some cases in the right circuits. Does that mean SCO missed them? I doubt it, although anything is possible. They maybe saw them but they realized they just didn't help them, and instead of admitting that and deciding not to put forward an argument that they couldn't find support for, if that is what happened, they looked for cases elsewhere. But as I understand it, you are only supposed to look for cases elsewhere if there aren't any cases *at all* in your circuit, not if you have found cases but they tell you that your position is all wet.

I expect SCO to argue that they don't want the appeals court's ruling in SCO v. Novell even mentioned to the jury, let alone handed to them on a platter like this. Those arguments are yet to be made, but look for them next.

Remember how I always told you that definitions are super important, that in a contract, that's the first place I look for any hidden tricks? See what I mean now about definitions?

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

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

In re
The SCO GROUP, INC., et al.,1
Debtors.

Chapter 11

Case No. 07-11337 (KG)
(Jointly Administered)

Re: Dkt. Nos. 1066 & 1067
Hearing Date: 3/15/2010 at 9:00 a.m. (ET)
Objection Deadline: 3/11/2010 at 4:00 p.m. (ET)

RE-NOTICE OF MOTION OF THE CHAPTER 11 TRUSTEE FOR
ORDER UNDER 11 U.S.C. 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. 363, (B) AUTHORIZING AND APPROVING THE
ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS IN
CONNECTION THEREWITH, AND (C) GRANTING RELATED RELIEF

TO: Parties required to receive notice pursuant to Del. Bankr. L.R. 2002-1.

PLEASE TAKE NOTICE that on February 26, 2010, Edward N. Cahn, Chapter 11 Trustee for the above-captioned debtors (collectively, the "Debtors"), filed the MOTION OF THE CHAPTER 11 TRUSTEE FOR ORDER UNDER 11 U.S.C. 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. 363, (B) AUTHORIZING AND APPROVING THE ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS IN CONNECTION THEREWITH, AND (C) GRANTING RELATED RELIEF (Dkt. No. 1066) (the "Motion") together with a companion MOTION OF CHAPTER 11 TRUSTEE TO SHORTEN NOTICE AND RESPONSE to the Motion (Dkt. No. 1067) (the "Motion to Shorten") with the United States Bankruptcy Court for the District of Delaware, 824 Market Street, Wilmington, Delaware 19801 (the "Bankruptcy Court").

PLEASE TAKE FURTHER NOTICE that on March 1, 2010 the Bankruptcy Court entered an order granting the Motion to Shorten (Dkt. No. 1072). Accordingly, the Chapter 11 Trustee is hereby re-noticing the Motion which is scheduled for hearing on March 15, 2010 at 9:00 a.m. (EST). Any responses or objections to the Motion must be filed with the Bankruptcy Court in accordance with the local rules and served upon the undersigned counsel on or before March 11, 2010 at 4:00 p.m. (EST).

(1)

PLEASE TAKE FURTHER NOTICE that the Motion seeks approval of the sale of certain assets related to The SCO Group, Inc.'s ("SCO") mobile productivity solutions and tools business to allow mobile devices to access corporate data (collectively, the "Mobility Business") to Me Inc Holdings, LLC ("MIH") pursuant to the terms and conditions of that certain Asset Purchase Agreement (the "APA") by and between SCO, the Buyer and Darl McBride, a copy of which is attached to the Motion as Exhibit B.

PLEASE TAKE FURTHER NOTICE that any party wishing to submit a competing offer for the Mobility Business must submit a non-contingent offer, marked APA to show any revisions, and evidence of financial wherewithal to close on the transaction on or before March 11, 2010 at 4:00 p.m. (prevailing Eastern Time) to: (i) The SCO Group, Inc., 333 South 520 West, Suite. 170, Lindon, Utah 84042, Attn: Ryan Tibbitts; (ii) Blank Rome LLP, 1201 N. Market Street, Suite 800, Wilmington, DE 19801, Attn: Bonnie Glantz Fatell, Esq.; (iii) Ocean Park Advisors, LLP, 6033 West Century Blvd. Suite 1290, Los Angeles, CA 90045, Attn: Mark Fisler.

PLEASE TAKE FURTHER NOTICE that, by the Motion, the Trustee seeks to potentially assume and assign the executory contracts listed on Schedule 2.1(a) to the APA. The Trustee has served counterparties to such executory contracts with a notice of assumption and assignment and of the proposed cure amounts relating to such executory contracts (the "Assumption Notice"). The Trustee attached to the Assumption Notice, the Debtors' calculation of the undisputed cure amounts which the Trustee believes must be paid to cure all prepetition defaults under all executory contracts (the "Cure Amount"). The Trustee has requested that if a non-debtor party to any executory contract disputes the Cure Amount or objects to the assumption and/or assignment of an executory contract that such party be required to file an objection (the "Cure Objection") on or before 4:00 p.m. (prevailing Eastern Time) on March 8, 2010 this Motion (the "Cure Objection Deadline") and to serve a copy of the Cure Amount Objection so as to be received no later than 4:00 p.m. (prevailing Eastern Time) on the same day, upon (i) The SCO Group, Inc., 333 South 520 West, Suite. 170, Lindon, Utah 84042, Attn: Ryan Tibbitts; (ii) Blank Rome LLP, 1201 N. Market Street, Suite 800, Wilmington, DE 19801, Attn: Bonnie Glantz Fatell, Esq.; (iii) Office of the United States Trustee for the District of Delaware, 844 King Street, Suite 2207, Wilmington, DE 19801, Attn: Joseph J. McMahon, Jr., Esq.; and (iv) Holland & Hart LLP, 60 E. South Temple, Suite 2000, Salt Lake City, Utah 84111, Attn: Marc Porter (collectively, the "Notice Parties").

IF NO OBJECTIONS ARE TIMELY FILED AND SERVED IN ACCORDANCE WITH THIS NOTICE, THE BANKRUPTCY COURT MAY GRANT THE RELIEF REQUESTED BY THE MOTION WITHOUT FURTHER NOTICE OR HEARING.

2

IN THE EVENT THAT ANY OBJECTION OR RESPONSE IS FILED AND SERVED IN ACCORDANCE WITH THIS NOTICE, A HEARING ON THE MOTION WILL BE HELD BEFORE THE HONORABLE KEVIN GROSS AT THE BANKRUPTCY COURT ON MARCH 15, 2010 AT 9:00 A.M. (EST).

Dated: March 3, 2010
Wilmington, Delaware

Respectfully submitted,

BLANK ROME LLP

/s/ Bonnie Glantz Fatell
Bonnie Glantz Fatell (No. 3809)
[address]
[phone]
[fax]

Counsel for Edward N. Cahn, Chapter 11 Trustee

3

1 The Debtors and the last four digits of each of the Debtors' federal tax identification numbers are as follows: (a) The SCO Group, Inc., a Delaware corporation, Fed. Tax Id. #2823; and (b) SCO Operations, Inc., a Delaware corporation, Fed. Tax Id. #7393.


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