SCO has filed its "renewed" motion for judgment "as a matter of law", with its supporting memorandum. They ask the judge to rule over the heads of the jury and decide that the jury "simply got it wrong" when it ruled that SCO didn't get the copyrights in 1995 from Novell. In the alternative, they'd like a new trial.
See, this is the problem with loaning money to SCO. They don't ever want this dance to end. The rest of the world gets it. SCO lost, by judge (Dale Kimball) and now by jury. They'd like this to be over. And us, the musicians, so to speak, at the dance? We're tired and we want SCO to stop already so we can pack up and go home and get some sleep. And no, this isn't normal, stretching a case that was hopeless from day one into what looks to become a more than decade-long event.
And can you imagine the international outcry if the judge were to grant a request like this?
Here they are:
SCO told the world that it wanted its day in court. When Judge Kimball ruled against SCO on summary judgment and then after a bench trial of the remaining issues, it howled to the Court of Appeals that it wanted a jury trial instead. It got it. The jury told SCO the same thing Judge Kimball told them: they don't own the copyrights they've been trying to bully the Linux world with since 2003. The market tells them the same thing. Now they want a new judge to overrule the jury, or they want a new jury and a do over.
04/27/2010 - 871 - MOTION for Judgment as a Matter of Law filed by Plaintiff SCO Group. (Hatch, Brent) (Entered: 04/27/2010)
04/27/2010 - 872 - MEMORANDUM in Support re 871 MOTION for Judgment as a Matter of Law filed by Plaintiff SCO Group. (Hatch, Brent) (Entered: 04/27/2010)
SCO has now lost in every courtroom it has entered, except bankruptcy court which we've learned is tilted all a debtor's way. But everywhere else, it's been lose, lose. So what is the real point of this litigation? Seriously. Who would take it this far, and to what end? I'm starting to wonder if it's at least in part an effort to avoid sanctions, to make the case look at least plausible. After all, companies have spent millions in defending against what have turned out to be false claims of infringement of copyrights that SCO never even owned. That is the kind of thing that keeps lawyers up at night.
Or maybe it's as simple as the memorandum of law implies: SCO wants the copyrights because it can't sue without them. And it wants to sue some more. For some evidence contradicting some of SCO's arguments, see the previous article, if you are new.
And as if SCO were not annoying enough, Microsoft just announced it believes Android violates its patents, and they don't want others to "free ride" on Microsoft's innovations. Interesting timing. Right after SCO's attack on Linux failed at trial, here comes Microsoft with another way to attack Linux.
Puh lease. If you put Google and Microsoft side by side and asked anyone in any town in any country on planet earth which company is the most innovative, who do you think would win? Patents, software patents, in our view are about blocking innovation by attacking new companies who actually do innovate, for the benefit of old and sluggish monopolies who would rather not. Remember how long it took for Microsoft to update anything in IE, and only did so when Mozilla came along? And Android is Linux. Microsoft hates Linux. Unless it can be made into a cash cow for Microsoft, I suppose. That was SCO's dream too. Still is, I gather.
Dear U.S. Supreme Court, The transcripts from the SCO v. Novell trial are now beginning to work their long, long way through the process of making them public eventually. There is a transcript for each day of trial, and they all say pretty much the same thing, so I'll just show you one. The full list will be on the Novell Timeline page:
Please can you stop the patent madness? In re Bilski gives you the opportunity.
Forces are using IP laws to try to destroy Linux, and it's a better mousetrap. Isn't the public to be allowed to choose a better mousetrap when one comes along?
Is the purpose of IP law to enable established companies to sue into smithereens anyone new who comes along and tries to offer the public a better mousetrap? Because, sadly, that is what is currently happening.
The rest just say "jury trial before Judge Ted Stewart". We'll get them all as soon as they let us.
04/19/2010 - 854 - **RESTRICTED DOCUMENT** NOTICE OF FILING OF OFFICIAL TRANSCRIPT for dates of March 8, 2010-Jury Trial-Jury Selection before Judge Ted Stewart, re 567 Notice of Appeal,. Court Reporter/Transcriber Patti Walker, CSR, RPR, CP, Telephone number (801)364-5440.
NOTICE RE REDACTION OF TRANSCRIPTS: Within 7 business days of this filing, each party shall inform the Court, by filing a Notice of Intent to Redact, of the parties intent to redact personal data identifiers from the electronic transcript of the court proceeding. The policy and forms are located on the court's website at www.utd.uscourts.gov. Please read this policy carefully. If no Notice of Intent to Redact is filed within the allotted time, this transcript will be made electronically available on the date set forth below.
Here's the Memorandum in Support:
Brent O. Hatch (5715)
Mark F. James (5295)
HATCH, JAMES & DODGE, PC
Stuart Singer (admitted pro hac vice)
Sashi Bach Boruchow (admitted pro hac vice)
BOIES SCHILLER & FLEXNER LLP
David Boies (admitted pro hac vice)
Robert Silver (admitted pro hac vice)
Edward Normand (admitted pro hac vice)
BOIES SCHILLER & FLEXNER LLP
Attorneys for Plaintiff, The SCO Group, Inc.
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
THE SCO GROUP, INC., by and through the
Chapter 11 Trustee in Bankruptcy, Edward N.
NOVELL, INC., a Delaware corporation,
SCO'S MEMORANDUM IN SUPPORT
OF ITS RENEWED MOTION FOR
JUDGMENT AS A MATTER OF LAW
OR, IN THE ALTERNATIVE, FOR A
Civil No. 2:04 CV-00139
Judge Ted Stewart
TABLE OF CONTENTS
|TABLE OF AUTHORITIES
||SCO IS ENTITLED TO JUDGMENT AS A MATTER OF LAW
||SCO Acquired the Copyrights Required to Exercise
Rights in the UNIX and UnixWare Technologies It Acquired
||The Copyrights Are Required for SCO to Exercise Its
Ownership Rights in
The UNIX and UnixWare Technologies It Acquired
||IN THE ALTERNATIVE, SCO IS ENTITLED TO A NEW
||SCO Acquired the UNIX and UnixWare Copyrights
||The Intent of the Negotiators and Principals Regarding the
||The Parties' Course of Performance
||The Copyrights Are Required for SCO to Exercise Its
Rights in the UNIX and UnixWare Technologies It Acquired
TABLE OF AUTHORITIES
Allied Chem. Corp. v. Daiflon, Inc.,
449 U.S. 33
Black v. Heib's Enters., Inc.,
805 F.2d 360 (10th Cir.
Brown v. McGraw-Edison Co.,
736 F.2d 609 (10th Cir.
Caruolo v. John Crane, Inc.,
226 F.3d 46 (2d Cir.
Children's Broadcasting Corp. v. Walt Disney Co.,
357 F.3d 860 (8th Cir.
Davis v. Blige,
505 F.3d 90 (2d Cir.
Flying J Inc. v. Comdata Network, Inc.,
405 F.3d 821 (10th Cir.
Gasperini v. Ctr. for Humanities, Inc.,
518 U.S. 415
Giles v. Rhodes,
171 F. Supp. 2d 220 (S.D.N.Y.
ITOFCA, Inc. v. Megatrans Logistics, Inc.,
322 F.3d 928 (7th Cir.
J.I. Case Credit Corp. v. Crites,
851 F.2d 309 (10th Cir.
Relational Design & Tech., Inc. v. Brock,
No. 91-2452-EEO, 1993 WL 191323 (D. Kan. May 25,
Shaw v. AAA Eng'g & Drafting,
213 F.3d 519 (10th Cir.
Shugrue v. Cont'l Airlines, Inc.,
977 F. Supp. 280 (S.D.N.Y.
Siemens Med. Solutions USA, Inc. v. Saint-Gobain Ceramics
& Plastics, Inc.,
615 F. Supp. 2d 884 (N.D. Iowa
Silvers v. Sony Pictures Entmt., Inc.,
402 F.3d 881 (9th Cir.
Tanberg v. Sholtis,
401 F.3d 1151 (10th Cir.
The SCO Group, Inc. v. Novell, Inc.,
578 F.3d 1201 (10th Cir.
Traicoff v. Digital Media, Inc.,
439 F. Supp. 2d 872 (S.D. Ind.
Vanmeveren v. Whirlpool Corp.,
65 Fed. Appx. 698 (10th Cir.
Wagner v. Live Nat'l Motor Sports, Inc.,
586 F.3d 1237 (10th Cir.
1 Copyright Throughout the World § 19:29
1 The Law of Copyright § 4:44
17 U.S.C.A. §
3 Patry on Copyright § 7:2
Copyrights and Copywrongs: The Rise of Intellectual Property
How It Threatens Creativity, 3 J. High Tech. L. 1
Fed. R. Civ. P.
Fed. R. Civ. P.
Fed. R. Civ. P.
Restatement (Second) of Contracts §
Plaintiff/Counterclaim-Defendant, The SCO Group, Inc. ("SCO"),
respectfully submits this Renewed Motion for Judgment as a Matter
of Law or, in the Alternative, for a New Trial.1
The jury verdict in this case is the type for which Rule 50(b)
and Rule 59 exist. The jury simply got it wrong: The verdict cannot
be reconciled with the overwhelming evidence or the Court's clear
instructions regarding the controlling law. The jury answered "no"
to the single question: "Did the amended Asset Purchase Agreement
transfer the UNIX and UnixWare copyrights from Novell to SCO?" We
do not know whether the verdict resulted from misapprehension of
the jury instructions, confusion about the meaning of prior
judicial decisions that Novell read into the record for the
ostensible purpose of challenging SCO's damages theory, Novell's
persistent efforts to focus the jury on the old language of the
Asset Purchase Agreement ("APA") which was replaced by a binding
amendment, or other factors.
Whatever the explanation for the verdict, the evidence
demonstrated that ownership of the UNIX and UnixWare copyrights is
required for SCO to exercise the complete ownership rights in the
UNIX and UnixWare technologies (including the source code) it
acquired under the APA, and that the amended APA provides that such
copyrights were transferred. That record compels judgment as a
matter of law for SCO under Rule 50(b). At a minimum, the verdict
is clearly against the substantial weight of the evidence,
necessitating a new trial under Rule 59.
Amendment No. 2, together with the APA, means that SCO acquired
the copyrights "required for SCO to exercise its rights with
respect to the acquisition of UNIX and UnixWare technologies." The
Tenth Circuit's opinion supports that reading, and at trial the
chief negotiator and sole drafter of the Amendment for
Novell admitted it. There is no reasonable
interpretation of Amendment No. 2 to the contrary. For a variety of
reasons, it stretches reason beyond the breaking point to
characterize the Amendment as merely "affirming" that SCO had
received some sort of "license" under the APA. In the hundreds of
pages of agreements, press releases, SEC filings, letters, and
other contemporaneous documentation, there is not one word of a
license from Novell to SCO for use of the UNIX and UnixWare
The evidence further demonstrated beyond any reasonable dispute
that the UNIX and UnixWare copyrights were required for SCO
to exercise its full ownership rights with respect to the UNIX and
UnixWare technologies. The evidence in SCO's favor on this obvious
point is overwhelming. The UNIX and early UnixWare technology lies
at the heart of SCO's subsequent versions of UnixWare, including
the current version of UnixWare. Without copyright ownership SCO
cannot assert rights or bring suit to protect that technology
against misuse by third parties, and without the ability to protect
the technology, SCO cannot maintain its UNIX business or exercise
the full ownership rights to exploit, develop, and defend the core
UNIX source code. While SCO could physically continue to sell its
UnixWare and OpenServer products without copyright ownership, SCO
could not fully maintain its UnixWare business without the ability
to enforce the copyrights in the core UNIX technology.
In addition, SCO indisputably acquired "[a]ll of Seller's claims
arising after the Closing Date against any parties relating to any
right, property or asset included in the Business." (APA Schedule
1.1(a), Item II.) SCO thus acquired, among other claims, all of the
Novell otherwise would have, relating to the use or misuse of
the UNIX and UnixWare source code — including all copyright
claims concerning that source code. The law requires that SCO own
the UNIX and UnixWare copyrights to prosecute such claims.
At a minimum, the verdict is clearly against the weight of the
evidence. While there was some evidence by Novell witnesses to the
contrary, the significantly more substantial and more persuasive
evidence was that in the sale of a software business and source
code, the parties did not agree that the seller could withhold the
copyrights reflecting ownership of that source code. The business
negotiators agreed that the parties intended for SCO to acquire the
copyrights, and the course of performance after the APA was signed
confirms that intent. An exclusion of the copyrights in the
original APA nevertheless resulted, from either a mistake
(negotiators who understood the exclusion to refer solely to
Novell's NetWare copyrights) or a last-minute, overzealous decision
between Novell's general counsel and its outside counsel (who
admitted that they never asked the business negotiators whether any
such exclusion was part of the deal). Regardless, Amendment No. 2
replaced the exclusion, and it did not merely preserve a status quo
in which SCO had acquired some sort of "license."
I. SCO IS ENTITLED TO JUDGMENT AS A MATTER OF LAW
Rule 50 requires that the verdict be set aside if there was not
a "legally sufficient evidentiary basis" for a "reasonable jury" to
have reached that verdict. Fed. R. Civ. P. 50(a)(1). Rule 50 is
satisfied where the "evidence points but one way," Wagner v.
Live Nat'l Motor Sports, Inc., 586 F.3d 1237, 1244 (10th Cir.
2009), or "the evidence so overwhelmingly favors the moving party
as to permit no other rational conclusion," Shaw v. AAA Eng'g
& Drafting, 213 F.3d 519, 529 (10th Cir. 2000); see,
e.g., Vanmeveren v. Whirlpool Corp., 65 Fed. Appx. 698,
700-01 (10th Cir. 2003); J.I. Case Credit Corp. v. Crites,
851 F.2d 309, 311-16 (10th Cir.
1988). At the close of all the evidence, SCO moved for judgment
on its claim to copyright ownership under Rule 50(a) on the grounds
that ownership of the copyrights was required for SCO to exercise
its rights in connection with its acquisition of the UNIX and
UnixWare technologies, and now renews the motion under Rule 50(b)
because the verdict cannot be squared with the overwhelming
evidence and the law.2
A. SCO Acquired the Copyrights Required to Exercise SCO's
Rights in the UNIX and UnixWare Technologies It
The only reasonable interpretation of Amendment No. 2 — an
interpretation that Novell's own negotiator of the Amendment
adopted at trial — is that SCO acquired all copyrights
"required for SCO to exercise its rights with respect to the
acquisition of UNIX and UnixWare technologies."
SCO acquired the "Business" of developing, licensing, and
supporting UNIX and UnixWare software products, including the sale
of both source and binary code licenses. (Ex. 1 (APA), Recital A.)
The APA effectuated that asset transfer by specifying a schedule of
transferred assets, Schedule 1.1(a) (the Assets Schedule), and a
schedule of excluded assets, Schedule 1.1(b) (the Excluded Assets
Schedule). (Id. § 1.1(a).)
The Assets Schedule covers copyrights by providing for the
transfer of "All rights of ownership" in, among other things, the
source code for all then-extant versions of UNIX and UnixWare.
While the language of the Excluded Asset Schedule originally
copyrights from the transferred assets, that language was
replaced by Amendment No. 2. Item I of Schedule 1.1(a) identifies
the full scope of the transferred assets as consisting of:
All rights and ownership of UNIX and UnixWare,
including but not limited to all versions of UNIX and UnixWare
and all copies of UNIX and UnixWare (including revisions and
updates in process), and all technical, design, development,
installation, operation and maintenance information concerning UNIX
and UnixWare, including source code, source documentation,
source listings and annotations, appropriate engineering notebooks,
test data and test results, as well as all reference manuals and
support materials normally distributed by Seller to end-users and
potential end-users in connection with the distribution of UNIX and
UnixWare, such assets to include without limitation the
Item I then proceeds to identify by name or reference all UNIX and
UnixWare source code products and binary products.
As the Tenth Circuit recognized in its decision remanding the
case for trial, the specific, catch-all phrase "All rights and
ownership of UNIX and UnixWare" includes the copyrights of UNIX and
UnixWare — the core intellectual property on which the UNIX
and UnixWare licensing business depends. The SCO Group, Inc. v.
Novell, Inc., 578 F.3d 1201, 1213-14 (10th Cir. 2009). A
transfer of "all right, title and interest to computer programs and
software can only mean the transfer of the copyrights as well as
the actual computer program or disks." Shugrue v. Cont'l
Airlines, Inc., 977 F. Supp. 280, 286 (S.D.N.Y. 1997) (emphasis
added); see also ITOFCA, Inc. v. Megatrans Logistics,
Inc., 322 F.3d 928, 931 (7th Cir. 2003) (transfer of "all
assets" to a business includes copyrights); Relational Design
& Tech., Inc. v. Brock, No. 91-2452-EEO, 1993 WL 191323, at
*6 (D. Kan. May 25, 1993) (transfer of "all rights" in a program
includes copyrights). In addition, the "without limitation"
language makes clear that the list of Items that follow in the
Assets Schedule is non-exhaustive. Where copyrights are one of the
"rights and ownership" of UNIX and UnixWare covered by Item I of
Schedule 1.1(a), such copyrights need not have been expressly
included under the intellectual property subheading in
Item V of the Schedule. When Novell and SCO agreed to remove the
language excluding copyrights from the APA by executing Amendment
No. 2, the effect was that copyrights were included under "rights
and ownership" in the Assets Schedule, as the Tenth Circuit
indicated. SCO, 578 F.3d at 1213-14 ("[A]ny change to the
set of Excluded Assets in Schedule 1.1(b) necessarily implicated
those copyrights actually transferred under Schedule 1.1(a).").
The inclusion of copyrights in the sale of the source code is
logical. Indeed, it is difficult to comprehend that a party would
or could transfer "all rights and ownership of" source code while
retaining the copyrights. In a licensing arrangement, the licensor
does not transfer all rights and ownership of the source
code. Here, where Novell sold "all" ownership, it logically follows
that the copyright ownership would be included in the sale. This
common-sense proposition is reflected in the testimony of numerous
witnesses, addressed below, who spoke to what they saw as the
obvious inclusion of copyrights in the sale of the UNIX and
UnixWare source code. Indeed, the only alternative interpretation
that Novell offered at trial — that Amendment No. 2 "affirms"
that SCO obtained a "license" to copyrighted material that SCO
requires — finds no support in the plain language. As the
Tenth Circuit observed: "Whatever the Amendment means, it refers to
the ownership of copyrights, not to licenses." SCO,
578 F.3d at 1216 (emphasis added).
With respect to the extrinsic evidence, moreover, Novell's own
chief witness for and negotiator of Amendment No. 2 ultimately
acknowledged that copyrights that are required for SCO to exercise
its rights in the UNIX and UnixWare technologies it had acquired
were transferred, not licensed, to SCO. Alison Amadia
confirmed on cross-examination that "if there are copyrights that
are required for SCO to exercise its rights, like the UNIX and
trademarks, they were transferred." (2177:15-18
(emphasis added).)3 Ms. Amadia's testimony is consistent with
Novell's official position, as expressed in a press released dated
June 6, 2003, that the ownership of required copyrights "did
transfer" to SCO under the amended APA. (Ex. 97 (emphasis
Meanwhile, SCO's negotiator and general counsel Steve Sabbath
testified that "the intent was clearly to me that all the
copyrights for the UNIX and UnixWare were to be transferred
to Santa Cruz Operation" and that the Excluded Asset Schedule was
intended to exclude the Netware copyrights. (900:23-901:9.) Mr.
Sabbath further testified that SCO "bought the UNIX business from
Novell, all copyrights pertaining to that business came with the
product. Amendment Number 2 was meant to confirm that." (911:6-14.)
Even Ms. Amadia acknowledged that Mr. Sabbath told her that the
copyrights had been excluded as a result of a "typographical error
in the original APA" that required correction.
The testimony of the only other Novell witness on Amendment No.
2, James Tolonen, cannot support a contrary result. Mr. Tolonen did
not participate in the drafting or negotiation of the language, and
while Mr. Tolonen expressed the view that he did not intend
Amendment No. 2 to transfer copyrights, that absolutist view cannot
be squared with the plain language of the Amendment. Nor can it be
reconciled with what the Tenth Circuit stated:
Although Amendment No. 2 did not purport to amend
Schedule 1.1(a), this does not mean that the balance of assets
transferred to SCO remained unchanged. The transaction was
structured such that SCO would acquire "all of Seller's right,
title and interest in and to the assets . . . identified on
Schedule 1.1(a)," but that "the Assets to be so purchased not
include those assets (the 'Excluded Assets') set forth on Schedule
1.1(b)." Schedule 1.1(a), in turn, provided that SCO would receive
"[a]ll rights and ownership of UNIX and UnixWare . . . including
all source code," a broad set of assets limited only by Schedule
1.1(b). As a result, any change to the set of Excluded
Assets in Schedule 1.1(b) necessarily implicated those copyrights
actually transferred under Schedule 1.1(a).
SCO, 578 F.3d at 1213-14, 1216 (emphasis added).
* * *
Whatever the Amendment means, it refers to the ownership of
copyrights, not to licenses.
Novell further argued that Amendment No. 2 must not concern any
transfer of copyrights because the Amendment is merely a "promise
to sell," because it did not have a separate Bill of Sale, or
because the Amendment was "effective" as of the date of the APA.
Those arguments could not reasonably or properly support the
verdict. The Tenth Circuit's opinion rejects these arguments,
holding that the parties did not need to execute a separate bill of
sale to satisfy Section 204(a) of the Copyright Act, SCO,
578 F.3d at 1213-14, and dismissing the idea that the date of
Amendment No. 2 deprives it of its obvious role in modifying the
assets being transferred through the APA. Id. By the end of
trial Novell sought to refashion these contentions as
"contract" arguments, but they are no more tenable as such.
There is no requirement in the law for a separate bill of sale to
make effective an amendment to schedules of assets being
transferred. See id.
Under Novell's interpretation, in short, the relevant language
of Amendment No. 2 serves no substantive purpose at all. It
is unreasonable as a matter of law for the Court to permit the jury
to interpret Amendment No. 2 in a way that gives it no meaning
beyond the terms of the unamended APA.
B. The Copyrights Are Required for SCO to Exercise Its
Ownership Rights in
The UNIX and UnixWare Technologies It Acquired.
In remanding for trial, the Tenth Circuit pointed to the
importance of copyright ownership for SCO to protect the value of
the assets it had acquired under the APA:
SCO indisputably acquired certain assets under the APA.
SCO's claim, as we understand it, is that copyrights are necessary
to protect the value of the assets themselves, and are therefore
necessary to prosecute seller's claims "relating to any . . .
asset" included in the Business. Novell has not explained, for
instance, what recourse SCO had under Novell's theory of the
transaction if a third party had copied and attempted to resell the
core UNIX assets Santa Cruz received in the deal.
SCO, 578 F.3d at 1218 n.4. Now, after trial, there is still
no cogent explanation from Novell as to how SCO could protect its
property against third parties that "copied and attempted to resell
the core UNIX assets Santa Cruz received in the deal." Id.
That failure renders the jury verdict on copyright ownership
If SCO does not own the copyrights, it cannot enforce them in
court. Davis v. Blige, 505 F.3d 90, 98 (2d Cir. 2007) (owner
of a copyright has the exclusive right to bring suit to enforce the
copyrights); Silvers v. Sony Pictures Entmt., Inc., 402 F.3d
881, 885 (9th Cir. 2005) (copyright owner cannot transfer its
accrued copyright infringement claims without also transferring the
copyrights); 1 Copyright Throughout the World § 19:29
(2009); Copyrights and
Copywrongs: The Rise of Intellectual Property and How It
Threatens Creativity, 3 J. High Tech. L. 1 (2003); 3 Patry
on Copyright § 7:2 (2010) (explaining that "copyright is
not just a bundle of rights; it is also the ability to enforce
those rights"); accord Jury Instruction No. 34A.6 More importantly,
whatever the particular "license" theory Novell means to support,
it offered no argument that it gives SCO the right to bring
claims to enforce the copyrights, and there would be no support in
the law for that argument.
In addition, the substantial, unrefuted testimony is that SCO
required the ability to enforce the copyrights in order to exercise
its ownership rights in the specific UNIX and UnixWare technologies
listed in the Assets Schedule and acquired through the APA, the
touchstone under Amendment No. 2. Given the technological reality
of UnixWare's development and ancestry, without copyright
ownership, SCO does not have the right to enforce in court the
copyrights at issue in the UNIX and UnixWare technology, and thus
to protect the core technology in UnixWare. The evidence included
the unequivocal testimony of witnesses who have been involved in
the various aspects of the UNIX and UnixWare business, including
former Novell and current SCO UNIX Contracts Manager William
Broderick (666:9-21; 667:16- 668:6); Santa Cruz General Counsel
Steven Sabbath (913:1-15; 914:17-915:5); former SCO CEO Darl
McBride (997:11-23); former Novell and current SCO UNIX Product
Manager & OEM Relations Manager John Maciaszek
(1686:25-1687:24); and former Santa Cruz Manager of Law and
Corporate Affairs Kimberlee Madsen (780:23-24; 802:23-803:1;
865:16-21; 866:18- 21; 875:7-14; 884:21-885:21). There is no
support in the evidence that a software company that
owns and licenses source code need not protect that underlying
source code and intellectual property as part of its
As a technological matter, the evidence was undisputed that the
UNIX and early UnixWare technology lies at the heart of SCO's
current version of UnixWare. The source code of the versions of
UnixWare that SCO acquired in 1995 (and built its business around
licensing in the ensuing years) consists almost entirely of prior
"UNIX" source code (1732:1-11 (Nagle), 1781:21-26 (Nagle)), and the
current version of UnixWare that SCO sells still consists in
significant part of that "UNIX" source code (1784:20-22 (Nagle)).
UnixWare was a "version of UNIX is — [that] was essentially
rebranded and some cosmetic and a few minor features added to it to
create UnixWare 2.0. UnixWare 2.0 is almost entirely UNIX System V
release 4.2." (1732:1-11 (Nagle).) Thus, "90, 95 percent" of
UnixWare was older UNIX code that existed prior to the APA. (1782:6
(Nagle).) UnixWare is not simply a separate, stand-alone version or
block of UNIX that can be detached from the UNIX code and run on
its own; it is the latest release of UNIX. Neither the early
version of UnixWare nor the latest version of UnixWare would work
if the "UNIX" source code were removed. (1784:7-22 (Nagle).) All of
this testimony went unrebutted.
In addition to requiring copyright ownership to protect the
intellectual property contained within UNIX and UnixWare, SCO also
requires the copyrights to facilitate certain types of source code
licensing, which was an indisputable portion of the UNIX and
SCO acquired. Such source code licensing was historically part
of the UNIX and UnixWare business; SCO's business included entering
into new source code licenses, as contemplated by the APA; and the
copyrights were needed for such licensing to occur, as there was
nothing in the APA which granted a license for such activity.
(2543:21-2544:3 (Frankenberg); 241:19-242:3 (Thompson); 666:9-21
(Broderick); 667:16-668:6 (Broderick); 503:9-11 (Michels); 504:6-7
(Michels); 442:15-443:6 (Wilt); 912:21-913:6 (Sabbath);
The record contains many examples of the need for SCO's
copyright ownership. After the parties executed Amendment No. 2,
for example, SCO took the position in a formal petition against
Microsoft Corporation in the European Union that SCO had acquired
the UNIX copyrights and was the UNIX copyright holder. (Ex. 127
§§ 3.4, 4.9.) Copyright ownership was part and parcel of
SCO's petition, and there can be no reasonable question that
bringing the petition was part of SCO's pursuit and maintenance of
its UNIX-based business.8 The same is true for the settlement
agreement that resolved the dispute. (Ex. 199, Recital B.)
Even if SCO could physically continue to sell certain of its
UnixWare and OpenServer products without copyright ownership, as
Mr. McBride suggested, Amendment No. 2 requires Novell to transfer
the UNIX and UnixWare copyrights if they are required for SCO to
exercise any of its ownership rights in connection with the UNIX
and UnixWare business it acquired.9
Novell presented no evidence that SCO's acquisition of
the UNIX and UnixWare business was limited to creating a merged
product, or limited to the business of selling binary versions of
UNIX, a business that Santa Cruz could already operate as a UNIX
licensee prior to the APA. While it is true that Novell retained
the right to receive certain royalties and reserved certain rights
to protect that royalty stream, this does not transform the APA
into a licensing arrangement whereby SCO could develop and market
only UnixWare and serve as an agent to collect royalties. Even with
respect to such royalties, moreover, the APA is clear that legal
title to the royalties transferred to SCO. (Ex. 1 (APA) §
In addition, among the "rights and ownership" in UNIX and
UnixWare that SCO acquired are all of Novell's claims relating to
the UNIX and UnixWare source code. Item II of the Assets Schedule
identifies "All of Seller's claims arising after the Closing Date
against any parties relating to any right, property or asset
included in the Business" as having transferred to SCO. SCO thus
acquired all of the claims, which Novell otherwise would have,
relating to the use or misuse of the UNIX and UnixWare source code.
(See id. Schedule 1.1(a), Items I.A-D, II, IV.)
Ownership of the copyrights is required to prosecute such
claims.10 A copyright owner cannot transfer its
copyright claims without also transferring the copyrights.
Silvers v. Sony Pictures Entmt., Inc., 402 F.3d 881, 885
(9th Cir. 2005).
Novell presented no evidence at trial from which a
reasonable jury could reach a contrary conclusion.11 Novell presented no
evidence at all that in order to bring copyright claims relating to
the UNIX and UnixWare source code, SCO's ownership of the
copyrights somehow was not "required."
II. IN THE ALTERNATIVE, SCO IS ENTITLED TO A NEW
A party's Rule 50(b) motion may include "an alternative or joint
request for a new trial under Rule 59." Fed. R. Civ. P. 50(b). The
decision whether to grant a new trial under the Rule lies within
the broad discretion of the trial judge. Gasperini v. Ctr. for
Humanities, Inc., 518 U.S. 415, 433 (1996) (the authority of
trial judges to grant new trials "is large"). Indeed, as the
Supreme Court has explained, the authority to grant new trials "is
confided almost entirely to the exercise of discretion on the part
of the trial court." Allied Chem. Corp. v. Daiflon, Inc.,
449 U.S. 33, 35 (1980). Accordingly, decisions to grant a new trial
have been deemed "virtually unassailable on appeal." Children's
Broadcasting Corp. v. Walt Disney Co., 357 F.3d 860, 867 (8th
SCO moves, in the alternative, for a new trial on the lower,
Rule 59 standard that the verdict was against the weight of the
evidence presented at trial. A district court may grant a new trial
"for any reason for which a new trial has theretofore been granted
in an action at law in federal court," Fed. R. Civ. P. 59(a),
including specifically "on the grounds that the jury verdict is
against the weight of the evidence." Black v. Heib's Enters.,
Inc., 805 F.2d 360, 363 (10th Cir. 1986); Brown v.
McGraw-Edison Co., 736 F.2d 609, 616 (10th Cir. 1984). "The
focuses on whether the verdict is clearly, decidedly or
overwhelmingly against the weight of the evidence." Black,
804 F. 2d at 362.
A district court therefore may weigh evidence and consider the
credibility of witnesses when exercising its broad discretion to
determine whether a new trial is warranted. Tanberg v.
Sholtis, 401 F.3d 1151, 1160 (10th Cir. 2005); see,
e.g., Caruolo v. John Crane, Inc., 226 F.3d 46, 54 (2d
Cir. 2000) ("Unlike a motion for judgment as a matter of law, a
motion for a new trial may be granted even if there is substantial
evidence to support the jury's verdict."); Giles v. Rhodes,
171 F. Supp. 2d 220, 229 at n.5 (S.D.N.Y. 2001) (trial judge may
consider "credibility and the weight of the evidence"). In
addition, after a long and complicated trial such as this, a trial
judge should be especially vigilant in examining the verdict.
See, e.g., Siemens Med. Solutions USA, Inc. v.
Saint-Gobain Ceramics & Plastics, Inc., 615 F. Supp. 2d
884, 899 (N.D. Iowa 2009).
A. SCO Acquired the UNIX and UnixWare
SCO's request for a new trial incorporates not only all of the
points set forth in Section I above, but also the overwhelming
weight of the evidence, summarized below, that a transfer of
copyrights was intended.
1. The Intent of the Negotiators and Principals Regarding
A total of ten witnesses — including multiple witnesses
from each of the SCO and Novell sides of the transaction
— testified to their intent and understanding that Novell had
sold and Santa Cruz had acquired the UNIX and UnixWare copyrights
under the APA:
Novell President and CEO Robert Frankenberg. Mr.
Frankenberg testified that it was the intent at the beginning of
the transaction, throughout the transaction, and when the
transaction closed, to sell the copyrights in UNIX and UnixWare and
to exclude the NetWare copyrights because Novell was retaining the
Netware business. (176:9- 177:3; 2558:17-2559:7.) He also testified
that no other member of his board of directors had the authority to
negotiate a deal apart from what the executives had
negotiated across the table from SCO. (178:4-11.) And he
testified that Messrs. Tolonen, Bradford, and Braham had no
authority to decide whether copyrights would be part of the deal,
as the deal had already been negotiated with SCO before those
individuals even began their involvement in the process of
documenting the deal. (2541:18-2542:4.)
Novell Senior Vice President Duff Thompson. Mr. Thompson
testified that Novell told SCO that it was selling all of the UNIX
and UnixWare business "lock, stock and barrel, the whole thing"
including the copyrights. (230:15-231:13.) He further testified
that he never asked the attorneys documenting the deal from
Novell's end to change the deal so that the UNIX and UnixWare
copyrights would be retained. (233:1-15.)
Novell Senior Director and Chief Negotiator Ed Chatlos.
Mr. Chatlos testified that he participated in the face-to-face
negotiations with SCO, including weekly travel from New Jersey to
California for three months. (351:2-7.) He testified that "the deal
with SCO was to include the copyrights" for UNIX and UnixWare and
to exclude the copyrights for the Netware business that Novell was
not selling, and that he understood Schedule 1.1(b)'s original
exclusion of copyrights to be referring to the NetWare copyrights.
(352:5-17; 359:20-362:3.) He further testified that holding back
the UNIX and UnixWare copyrights would have been inconsistent with
the directives he was given by Mr. Thompson and the directives and
authority given to the lawyers documenting the deal.
(354:16-355:5.) Mr. Chatlos also testified that the deal he
negotiated included the UNIX and UnixWare copyrights and that
changing the deal to exclude the copyrights "would have been
Novell Vice President of Strategic Relations Ty
Mattingly. Mr. Mattingly testified that during the months of
negotiations that he attended, no one from Novell ever suggested
that Novell was retaining the UNIX and UnixWare copyrights and that
the copyrights the parties intended to withhold were the Netware
copyrights for the Netware business that Novell was retaining.
Novell In-House Counsel Burt Levine. Mr. Levine was
involved in review of the very asset schedules that originally
included language excluding copyrights. He testified that that
language did not reflect Novell's intent and that, under the APA,
SCO "obtained a full right, title and interest in ownership" in
UNIX and UnixWare that "would automatically convey the copyright
along with the rest of the business assets." (522:3-14.) Indeed, he
characterized the idea that Novell would sell the business while
withholding the copyrights as not being "ethical."
Santa Cruz President and CEO Alok Mohan. Mr. Mohan
testified that the deal "absolutely" included the UNIX copyrights
as part of the business that SCO was acquiring. (461:19-462:9.)
Like Novell's own witnesses, he testified that SCO's understanding
was that it was acquiring the business "lock, stock, and barrel."
(464:4-19.) He testified that no one from Novell ever said to him
prior to the execution of the APA that Novell intended to retain
any UNIX or UnixWare copyrights. (467:24-468:6.)
Santa Cruz Vice President of Business Development Jim
Wilt. Mr. Wilt testified that it was his "intent on behalf of
SCO to acquire, through the APA, Novell's entire UNIX and UnixWare
business, including the UNIX and UnixWare source code and all
associated copyrights" and that he believed that Novell's intent
was to sell those assets and rights as well. (445:21-446:5.) He
testified that if Novell had ever said that it was retaining the
UNIX and UnixWare copyrights that would have been "extremely
remarkable and probably would have ended the negotiations." (443:7-
Santa Cruz Assistant Negotiator Kimberlee Madsen. Ms.
Madsen testified that it was SCO's intent to acquire the UNIX and
UnixWare copyrights as part of the business and that it was her
understanding and belief after the transaction was completed that
SCO had acquired those copyrights. (783:3-784:4; 788:24-789:5;
814:24;815:3.) She also testified that Mr. Seabrook's report to the
SCO board of directors never suggested that Novell had retained any
UNIX or UnixWare copyrights. (788:5- 8;788:20-23.) She further
testified that no one from Novell had ever said that Novell would
retain any UNIX or UnixWare copyrights. (783:3-784:4.) She further
testified that during the 1996 dispute with Novell concerning its
conduct with respect to IBM, Novell never asserted that it had
retained ownership of the UNIX and UnixWare copyrights.
SCO General Counsel Steve Sabbath. Mr. Sabbath testified
that "the intent was clearly to me that all the copyrights for UNIX
and UnixWare were to be transferred to Santa Cruz Operation" and
that the Excluded Assets Schedule was intended to exclude the
Netware copyrights. (900:23-901:9.) He further testified that when
SCO "bought the UNIX business from Novell, all copyrights
pertaining to that business came with the product. Amendment Number
2 was meant to confirm that." (911:6- 14.)
Santa Cruz Founder and Vice President Doug Michels. Mr.
Michels testified that "of course" SCO bought the UNIX and UnixWare
copyrights and that, had any of his executives suggested otherwise,
he would have "laughed them out of [his] office." (501:1-18.)
Novell continued to argue through trial that much of the
foregoing testimony was irrelevant and inadmissible, but that is
contrary to the Tenth Circuit's decision, SCO, 578 F.3d at
1210-18, and this Court's rulings on motions in limine. (Order on
Defendant's Motions in Limine 12 to 19, Docket No. 717.)
To be sure, Novell presented pieces of evidence at trial to
support its version of events, but that evidence cannot overcome
the overwhelming evidence in SCO's favor.
The Existence of Amendment No. 2. Novell presented
testimony regarding the intent of Tor Braham and highly equivocal
testimony from David Bradford that the original exclusion of
copyrights in the APA was intentional. The problem with that
position — even putting aside the evidence that they lacked
the authority to exclude the copyrights — is simply that the
language of Amendment No. 2 indisputably replaced, as a matter of
law, the old language in the Excluded Assets Schedule of the APA.
SCO, 578 F.3d at 1210-11. The new language controls this
Court's interpretation of the deal. Id. If Braham and
Bradford's testimony had truly reflected the intent of the parties
to the APA, Amendment No. 2 would not exist.
The Forthright Negotiator Rule. As noted above, Ms.
Amadia conceded on cross- examination that Novell
"transferred" to SCO — not licensed —
"copyrights that are required for SCO to exercise its rights" in
connection with its acquisition of the UNIX and UnixWare business.
(2178:11-18; 2176:13-21; 2148:18-23; 2177:25-2178:3.)
Even if the Court were to focus solely on Ms. Amadia's initial
testimony that she intended that Amendment No. 2 would only affirm
that there was some sort of license (testimony that she recanted at
trial), that view must be rejected because of "the forthright
negotiator rule" of contract interpretation, which the Tenth
Circuit has explained:
Where the parties assign different meaning to a term,
it is interpreted in accordance with the meaning attached by one of
them if at the time the agreement was made . . . (a) that party did
not know of any different meaning attached by the other, and the
other knew the meaning attached by the first party; or (b) that
party had no reason to know of any different meaning attached by
the other, and the other had reason to know the meaning attached by
the first party.
Flying J Inc. v. Comdata Network, Inc., 405 F.3d 821, 837
(10th Cir. 2005) (citing Restatement (Second) of Contracts
§ 201(2)). Under this rule, Amendment No. 2 must be
interpreted in accordance with the meaning attached by SCO (Mr.
Sabbath), since Ms. Amadia knew or at least
"had reason to know" that Mr. Sabbath intended the Amendment to
confirm that the UNIX and UnixWare copyrights were transferred to
SCO. Indeed, Ms. Amadia admitted that she understood that
Mr. Sabbath's understanding was that "the purpose of the
Amendment was to clarify that the UNIX and UnixWare copyrights had
transferred,." (2169:17-2179:1.)12 Rather than refuse to make any change to
the language of the APA or propose language expressly affirming the
grant of a license, Ms. Amadia drafted language that removed
the copyright exclusion. She claimed to have done so in order to
avoid a confrontation with Mr. Sabbath. But this is exactly what
the "forthright negotiator" rule addresses, and Novell should
therefore be bound to the interpretation that Mr. Sabbath held that
Amendment No. 2 fixed the "clerical error" (2140:2-3;
2184:25-2185:1; 2140:20) that had existed in the APA, and confirmed
the transfer of the copyrights.13
Meeting of the Novell Board of Directors. Notwithstanding
Novell's heavy focus on the Novell board of directors, their action
did not constitute negotiations of the agreement between the
parties. Of course, the language at issue in the board's resolution
excluding copyrights (taken directly from the old language in the
APA) was replaced by Amendment No. 2. Moreover, the only term sheet
provided to the directors did not even make the directors aware of
the fact that copyrights were being retained — while
identifying other assets (like patents) that
were being retained. (Ex. 754; 678:3-681:18 (Mattingly);
2450:6-2451:1 (Bradford); 2470:10- 2471:1 (Bradford).)14 The minutes
of the meeting of the Santa Cruz board did not reflect that there
was any actual discussion of any retention of copyrights. (Ex. 29;
784:23-788:23 (Madsen).) Mr. Frankenberg further testified that if
an exclusion of the UNIX copyrights had been discussed at the
Novell meeting, he would have remembered that because the exclusion
would be "ludicrous" and that was not the intent of the deal.
(2543:12-2544:6.) There is no legal requirement that the Novell
board subsequently approve the terms of Amendment No. 2, duly
signed by a Novell officer, in order for that Amendment to be
binding on the parties.
Novell's Outside Counsel. Similarly, even taking the
testimony in isolation from Amendment No. 2, the evidence that Tor
Braham, David Bradford, or James Tolonen intended in the fall of
1995 to retain the copyrights for Novell is insufficient. Mr.
Frankenberg testified not only that he never intended to retain the
UNIX or UnixWare copyrights for Novell (2558:17- 2559:2), but also
that to the extent anyone below him had determined to retain the
UNIX and UnixWare copyrights for Novell, however well intentioned
that decision may or may not have been, no such person had
the authority to do so. (2559:3-7.) The stated purpose for
excluding the copyrights—protecting Novell's royalty
rights—makes no sense because Novell had already
"bulletproofed" those rights in Section 1.2(b) of the APA, and
there was no explanation that copyright ownership was needed to
enhance that protection. (2404:17-2406:16 (Braham).) Moreover, it
does not appear that Novell ever expressly drew SCO's attention to
the copyright exclusion language that had been added in the
schedule of excluded assets, which would explain why there was no
forcible "pushback" from SCO on the point. Mr. Braham testified
could recall a discussion about "the entire schedule of excluded
assets," but that he did not actually know that he and any Brobeck
lawyer ever discussed that exclusion. (2403:6-25.) While he
"thought the other side was talking about the copyright exclusion,"
he did not recall the Brobeck attorney "mentioning that
specifically." (2428:23-2429:4.)15 The absence of any direct negotiations
over the copyright exclusion language in the original APA, coupled
with the subsequent replacement of that language a year later in
Amendment No. 2 and the testimony of ten witnesses on both sides of
the transaction, requires finding that the verdict was against the
weight of the evidence.
2. The TLA Reflects That Copyrights
Novell's assertion (at 5 of its Proposed Findings of Fact and
Conclusions of Law) that the Technology License Agreement ("TLA")
"did not grant Novell a license to any of the Excluded Assets
because Novell retained them" begs the question. The TLA's grant of
a license back to the technology at the time of the APA would have
been unnecessary had Novell retained the copyrights and simply
granted SCO a license to use the technology.
The plain, undisputed terms of the TLA give Novell a
license-back to use the "Licensed Technology," and the "Licensed
Technology" includes the then-existing and prior versions of UNIX
and UnixWare source code. (Ex. 162 (TLA) § II.A; Ex. 1 (APA)
§ 1.6, Schedule 1.1(a) Item I.) The TLA thus gives Novell a
license-back to use the UNIX and UnixWare source code
in Novell's own products, subject to certain limitations. (Ex.
162 (TLA) § II.) If Novell had retained the UNIX and UnixWare
copyrights, it would not have needed any license-back to use the
UNIX and UnixWare source code in Novell's own products. (See
107:23-108:1 (Frankenberg); 847:4-7 (Madsen).) Indeed, the evidence
showed that Novell itself thinks that it is reasonable to read the
TLA as inconsistent with a reading of the APA under which the UNIX
and UnixWare copyrights were retained. (1965:4-1966:4 (LaSala).)
The TLA also identified SCO as the "owner" of the Licensed
Technology. (Ex. 162 (TLA) § III.)
Novell has suggested that the license-back was necessary because
it would permit Novell to use in its products the technology in the
"Merged Product" that SCO was to develop after the execution of the
APA. But the TLA gives Novell a license-back to much more than just
the source code in the Merged Product; it gives Novell such a
license for the existing UNIX and UnixWare source code itself. (Ex.
1 (APA) § 1.6, Schedule 1.1(a) Item I; Ex. 162 (TLA) §
II.A.) Where the APA refers to the TLA and vice versa and the two
agreements are obviously related agreements (Ex. 1 (APA) §
1.6; Ex. 162 (TLA) § I), it would be unreasonable to read the
amended APA in a manner that renders it inconsistent with the
unambiguous terms of the TLA.
3. The Parties' Course of Performance.
In addition to the foregoing, a wealth of extrinsic evidence of
the parties' course of performance prior to any litigation further
demonstrated that SCO had acquired the UNIX and UnixWare
copyrights. That course of performance is further compelling
grounds for concluding that the parties intended for SCO to acquire
the UNIX and UnixWare copyrights. The undisputed evidence at trial
reflected the following facts of the parties' (and even third
parties') "practical construction" of the amended APA:
At Novell's direction, Novell's own engineers placed SCO
copyright notices on source code for the existing versions of
UnixWare — versions on which SCO had done
no work at all. (1727:19-25 (Nagle); 1733:9-25 (Nagle); Ex. 655;
1704:18-1705:7 (Maciaszek); 1723:14-20 (Maciaszek).) Novell also
replaced the "Novell" copyright notice on the CD for the current
version of the UnixWare product with a "Santa Cruz" copyright
notice. (1725:1-1728:21 (Nagle); 1723:9-1736:17 (Nagle); Ex. 35.)
Because SCO had done no additional work on UnixWare at the time
Novell added the SCO copyright notices, these actions can only be
understood as consistent with a change in ownership of the
then-existing copyrights to UnixWare.
The participants in the transition of the UNIX and UnixWare
business from Novell to SCO — individuals who had not
participated in the negotiations — understood SCO to have
acquired the UNIX and UnixWare copyrights, including because no one
ever suggested otherwise. (547:11-16 (Broderick); 1671:22-1672:18
(Maciaszek); 1676:17-20 (Maciaszek).) Novell presented no evidence
that any such participants believed that Novell continued to own
any such copyrights.16
In sorting through the materials in its former offices to
determine what to keep and what not to keep, moreover, Novell
turned over to SCO the copyright registration certificates for UNIX
and instructed its transition team to retain only materials
pertaining to the businesses it was retaining, Netware and Tuxedo.
In early 1996, Novell sent thousands of letters explaining that
it had transferred to SCO Novell's "existing ownership interest in
UNIX System-based offerings and related products," specifically
identifying such products as including "All Releases of UNIX System
V and prior Releases of the UNIX System" and "All UnixWare Releases
up to and including UnixWare Release 2 (encompassing updates and
upgrades to these releases as well." (586:4-15 (Broderick); Ex.
580.) In one such letter, which was co-signed by Novell and SCO,
Novell further explained that "Novell's right as licensor under
such agreements have been assigned to the Santa Cruz Operation" and
that "the ownership of the UNIX operating system has been
transferred from Novell, Inc. to the Santa Cruz Operation." (Ex.
751; 1682:23- 1684:10 (Maciaszek); 1684:24-1685:7
In concert with these letters, Novell representatives visited
OEM licensees, including in Europe, to reiterate the statements in
those letters and personally inform the licensees that "SCO had
acquired all ownership rights in the business," without "any
limitation ever." (1678:4-16 (Maciaszek); 1680:22-1681:22
(Maciaszek); 1684:4-17 (Maciaszek).)
Novell, SCO, and IBM engaged in a protracted dispute and
negotiation throughout 1996 regarding the scope of Novell's rights
under the APA. SCO's evidence showed that Novell never contended
that it owned the copyrights during that dispute, and Novell
presented no evidence to the contrary. (802:3-7 (Madsen).)
During the dispute among the three corporations in 1996, even
IBM took the position that SCO could protect itself through
its ownership of the UNIX copyrights, asserting that "SCO is
protected by copyright." (Ex. 123.). SCO's evidence showed that
Novell never contended otherwise, and Novell presented no evidence
to the contrary. (802:3-13 (Madsen).)
Just months after Amendment No. 2 was signed, SCO, through the
law firm that had represented SCO in connection with the Novell/SCO
APA, took the position in formal litigation against Microsoft
Corporation in the European Union that SCO had acquired the UNIX
copyrights and was the UNIX copyright holder. (807:3-811:20
(Madsen); Ex. 127 §§ 3.4, 4.9.) Novell presented no
evidence to call into question the nature of SCO's assertions in
In resolving the foregoing dispute, SCO entered into a
settlement agreement with Microsoft in which SCO again stated that
it had acquired the UNIX copyrights and was the UNIX copyright
holder. (811:21-813:24 (Madsen).) The document states: "SCO has
acquired AT&T's ownership of the copyright in the UNIX System V
Operating System Program." (Ex. 199 Recital B.) Novell again
presented no evidence to call into question the nature of SCO's
assertion in that settlement.
All of this evidence is particularly relevant here because the
parties' course of performance is the "best evidence" of the
parties' contractual intent. SCO, 578 F.3d at 1217.
B. The Copyrights Are Required for SCO to Exercise Its
Rights in the UNIX and UnixWare Technologies It
There was a surfeit of specific testimony, such as set forth
above, concerning SCO's need of the copyrights to run its UnixWare
business. Mr. Frankenberg called it "ludicrous to think about
selling software without selling the copyrights. If you don't have
the copyrights, you don't have the ability to freely use what you
bought." (2543:21-2544:3.) Similarly, Mr. Thompson testified that
"[i]t is hard for me to imagine any instance in which we are
selling them the entire
business, to go forward with this business in the future,
without giving them the underlying intellectual property rights
that they needed to do so." (241:19-242:3.) In a case where
witnesses from both sides of the deal, with involvement in various
aspects of the UNIX business, specifically testified that SCO
required the UNIX and UnixWare copyrights to run its business and
protect the intellectual property at the heart of that business, a
jury verdict to the contrary simply cannot stand.18
SCO respectfully submits, for the reasons stated above, that the
Court should grant SCO's motion for judgment as a matter of law or,
in the alternative, grant SCO a new trial.
DATED this 27th day of April, 2010.
By: /s/ Brent O. Hatch
HATCH, JAMES & DODGE, P.C.
Brent O. Hatch
Mark F. James
BOIES, SCHILLER & FLEXNER LLP
Stuart H. Singer
Counsel for The SCO Group, Inc.
CERTIFICATE OF SERVICE
I, Brent O. Hatch, hereby certify that on this 27th day of
April, 2010, a true and correct copy of the foregoing SCO'S
MEMORANDUM IN SUPPORT OF ITS RENEWED MOTION FOR JUDGMENT AS A
MATTER OF LAW OR, IN THE ALTERNATIVE, FOR A NEW TRIAL was filed
with the court and served via electronic mail to the following
Sterling A. Brennan
David R. Wright
Kirk R. Harris
Cara J. Baldwin
WORKMAN | NYDEGGER
Thomas R. Karrenberg
Heather M. Sneddon
ANDERSON & KARRENBERG
Michael A. Jacobs
Eric M. Aker
Grant L. Kim
MORRISON & FOERSTER
Counsel for Defendant and Counterclaim-Plaintiff Novell,
By: /s/ Brent O. Hatch
Brent O. Hatch
HATCH, JAMES & DODGE, P.C.
||These motions and SCO's Proposed Findings on its claim for
specific performance all relate to the ownership of the UNIX and
UnixWare copyrights. SCO believes the appropriate order of
consideration is for the Court first to decide the Rule 50(b)
motion which, if granted, would set aside the jury determination on
ownership of the copyrights as a matter of law; if that were not
granted, to consider SCO's alternative motion for a new trial under
Rule 59; and if neither of these post-trial motions were granted,
to determine SCO's claim for specific performance to receive
transfer of the UNIX and UnixWare copyrights at this time.
||On March 26, 2010, the day the jury received the case, the
Court denied SCO's Rule 50(a) motion as "moot." While that would
have been true of a motion directed to Novell's slander of title
claim, SCO's Rule 50(a) motion was directed to SCO's claim relating
to copyright ownership (the sole question on which the jury
returned a verdict). The motion may now be renewed under Rule
50(b). If granted, the motion would then require a new trial
limited to whether slander of title occurred and whether (and to
what extent) SCO suffered damages.
||Indeed, to give Amendment No. 2 a contrary interpretation the
jury would had to have ignored the evidence — as to
which there is no contrary evidence — that the
Amendment confirmed the transfer of the UNIX and UnixWare
trademarks by referring to them as ones "required for SCO to
exercise its rights with respect to the acquisition of UNIX and
UnixWare technologies." (2176:5-24 (Amadia); 2177:25-218:18
(Amadia).) Where Amendment No. 2 changes the APA to make no
distinction between trademarks and copyrights, and where Novell
admitted that the trademarks referenced in Amendment No. 2 were not
being licensed, but were in fact transferred, no reasonable juror
could conclude that the same language used to describe the
copyrights could mean something different.
||Novell subsequently tried to change its position and argued
that Amendment No. 2 gave SCO the right to acquire copyrights if it
could demonstrate that such copyrights were required. (Ex. 105.)
That revised position is one basis for SCO's alternative claim for
||Ms. Amadia's testimony about what Mr. Sabbath told her at the
time is consistent with Mr. Sabbath's deposition testimony as
opposed to the IBM declaration that Mr. Sabbath stated did not
accurately reflect his testimony. (927:14-25 (Sabbath);
928:19-929:2 (Sabbath)), and that is not affirmative evidence in
||Novell's former General Counsel took the position that SCO
acquired only an "implied license," and Novell chose not to assert
any contrary theory. (1975:14-22.) Ms. Amadia, for example,
acknowledged that with an implied license, SCO cannot enforce the
UNIX and UnixWare copyrights in court. (2157:8-12.)
||SCO's need to bring copyright enforcement actions does not turn
on the existence of the SCOsource program whose demise Novell
focused on at trial. Mr. Tibbitts explained that if SCO "could not
protect" the "core intellectual property" in UnixWare, then "this
venerable UNIX business that has been around for many years that
many customers around the world are using would simply die off, and
we have got to have that intellectual property to protect those
crown jewels." (1845:21-1846:1.)
||While the petition against Microsoft is clear course of
performance evidence that SCO had acquired the copyrights, the
petition is also probative evidence that SCO required ownership of
the copyrights to exercise its rights in connection with its UNIX
and UnixWare business.
||Mr. Tibbitts testified about a proposed deal, in connection
with SCO's Chapter 11 reorganization proceedings, where SCO would
have sold certain aspects of the UNIX product business, but kept
other aspects, including IP licensing rights and SCO's legal claims
based on the unauthorized use of the UNIX and UnixWare
technologies. (1850:20-1851:18.) Because the law requires ownership
of the UNIX and UnixWare copyrights in order to pursue the claims
SCO would have kept, the proposed deal contemplated that the
copyrights would remain with SCO until it completed prosecuting
those claims. That deal was thus consistent with the reading of
Amendment No. 2 that SCO, as the party who indisputably acquired
those claims under the APA, required ownership of the UNIX and
||Novell's suggestion in its Proposed Findings of Facts and
Conclusions of Law (at 35) that there are no such "claims" is
flatly wrong. The evidence at trial, for example, showed claims SCO
pursued post-closing against Microsoft (807:3-811:20 (Madsen); Ex.
127 §§ 3.4, 4.9; Ex. 199 Recital B), expressly referring
to ownership of copyrights. The copyright claims relating to
alleged Linux infringement are another obvious example.
||To the contrary, Novell's former General Counsel Mr. LaSala
admitted both generally that "the agreements speak to what
copyrights SCO requires in order to exercise its rights under the
agreement" and specifically that "SCO has the rights to bring
claims to protect its business." (1976:25-1977:7.)
||Ms. Amadia's testimony is therefore consistent with Mr.
Sabbath's testimony that the parties understood that copyrights
were to transfer and that a declaration provided to IBM's counsel,
to the extent it was inconsistent, did not accurately reflect his
testimony. (927:14-25 (Sabbath); 928:19-929:2 (Sabbath).)
||There is no evidence that Mr. Sabbath believed the final
language of Amendment No. 2 had a meaning different than the
language he had initially proposed. Indeed, the Tenth Circuit
specifically acknowledged, citing Mr. Sabbath's testimony, that the
SCO could have found "the final language equally sufficient for its
purposes, given its insistence that all the UNIX copyrights were
required for it to exercise its rights under the deal." SCO,
578 F.3d at 1216.
||David Bradford's testimony was completely equivocal. He did not
recall the issue until reviewing documents and then reviewed only
an incomplete set of documents, not containing Amendment No. 2.
(2434:24-2435:15; 2438:5-16; 2441:7-10; 2444:12-21;
||The evidence thus does not support Novell's argument that SCO's
attorneys understood the copyrights to have been excluded from the
deal. There is no evidence that the issue was ever discussed in the
meeting of Santa Cruz's board of directors, and there is no
evidence that the outside attorneys for SCO ever discussed that
particular exclusion with Novell's outside attorneys.
(2428:23-2429:4 (Braham).) One of Novell's witnesses did take the
position that SCO "had Brobeck, Phleger as their voice" in the
negotiations of the APA (2358:13-21 (Braham)), and the evidence
showed that the Brobeck law firm put its name to the SCO filing
from early 1997 in which SCO expressly represented that it had
acquired the UNIX copyrights and was the UNIX copyright owner. (Ex.
127 §§ 3.4, 4.9, signature block.)
||In fact the only testimony regarding the transition meetings
reflected that Novell representatives told SCO that Novell had sold
UNIX and that the copyright notices had to be changed. (548:10-17
(Broderick); 1704:18-1705:7 (Maciaszek); 1723:14-1728:21 (Nagle);
1732:12-1737:13 (Nagle); 1775:15-1776:16 (Nagle).) There was no
evidence that Novell ever told anyone in these meetings that Novell
was retaining any UNIX or UnixWare copyrights.
||Novell argued at trial that these letters did not need to tell
customers about Novell's claimed copyright exclusion, but the
evidence showed otherwise. In addition to the plain fact that
Novell's assertion of ownership transfer would have been inaccurate
if Novell had retained the copyrights, such an exclusion would have
been relevant to customers. Mr. Maciaszek testified, for example,
that among the "things a customer does need to know" is "who can
enforce the copyrights in the contracts" that SCO now owned.
||See, e.g., Broderick (666:9-21; 667:16-668:6) (SCO
"would be out of business" if it couldn't protect its software
"through copyrights"); Michels (502:24-503:14) (copyrights "so
essential" to a software business they are "like breathing
oxygen"); Wilt (442:15-443:6) (copyrights "such a fundamental part
of an asset purchase that if you didn't have copyrights and such go
along with it, there was no asset purchase"); Madsen (780:23-24;
802:23-803:1; 865:16- 21; 866:18-21; 875:7-14; 884:21-885:21) (SCO
"required all" the UNIX and UnixWare copyrights; copyrights
"essential" to "protect and enforce [SCO's] intellectual property
rights" in UNIX); Sabbath (913:1-15; 914:17-915:5) ("you would need
all the copyrights and binaries and source code"); McBride
(997:11-23) (ownership of the UNIX copyrights "absolutely"
"required for SCO's business"); Maciaszek (1687:16-24) ("the
copyrights are required to operate SCO's business"); Tibbitts
(1844:25-1845:18) ("copyrights are critical for us to run the
business that was purchased from Novell in '95, both the SCOsource
business and the right to protect that core UNIX intellectual