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To read comments to this article, go here
Want to Buy SCO's Software Business?
Monday, August 09 2010 @ 10:33 PM EDT

SCO would like to sell it. "As is, where is", they say. It defines what it is selling as "essentially all of the Debtors' software business assets". Excluded is SCO Japan and SCO Canada and the litigation rights regarding Novell, SUSE, IBM, Red Hat, etc. You also don't get "Seller’s rights and obligations with respect to the SVRX Licenses (as defined in the Santa Cruz-Novell APA)". So... you buy the business, but SCO then contacts all your customers every month or so to collect money for Novell? Caveat emptor, y'all.

"Additional Disclosure Schedules may be added Upon Finalization of Agreement," SCO says. Like... um... the buyer? Little details like that? I mean who'd want the business on these terms, I wonder? Ralph Yarro? Darl? Whoever it is, he or she is ready to roll:

At the Trustee’s request, OPA has begun the process of marketing the Debtors’ business by preparing a due diligence room and marketing materials, identifying potential purchasers and engaging in preliminary discussions with certain interested parties. Immediately upon approval of this Motion, OPA is poised to commence the sale process without delay.
So. An auction. Kind of like Jeapordy, though, with certain interested parties ready to hit the buzzer. But, you may say, what about Novell? It blocked SCO earlier from selling these same assets:
14. Before the appointment of the Trustee, the Debtors attempted to sell their assets and were met with objections by Novell, based on, inter alia, the uncertainty of the Debtors’ rights in the UNIX and UnixWare copyrights in light of the then pending Utah Litigation. Now that the 10th Circuit, the District Court on remand and the jury have ruled and the Debtors’ interest in the Acquired Assets is clarified, the Trustee seeks to sell the Acquired Assets to maximize value for the estates.
What about the appeal? Isn't SCO planning to win? What happens to the assets is SCO were to win? I guess then Novell can't get them to pay off their damages, as the assets transfer without encumbrances. Oh, say. Another smooth move from SCO. SCO wanted payment of the costs to Novell to wait for an appeal, but the assets it wants to transfer asap. SCO really doesn't want to pay Novell, I guess. It sees the handwriting on the wall, and it wants the software business off the table and in a friendly pocket. That's how it looks to me.

It also wants to hire a firm, King & McCleary, to do taxes for SCO. It believes SCO lacks the employees necessary to do the job. And the job is federal and state tax returns for *2008* and 2009:

Based upon the status of these chapter 11 cases and the state of the Debtors' businesses, the Trustee believes that the engagement of King & McCleary is necessary in order to bring the Debtors into compliance with applicable non-bankruptcy law. Specifically, the Trustee does not believe that the Debtors have the necessary staff to perform the Tax Services internally.
2008? It proposes August 23rd be the date for a hearing on this motion. "Stalking Horse Identified, if any" on October 11, with the qualified bid deadline set for October 5. The documents says there could be one or more buyers. Then the auction on November 1 and a projected closing date of November 30.

Here are the filings:

08/09/2010 - 1140 - Motion to Approve // Motion for an Order Authorizing the Engagement of King & McCleary, LLC to Perform Certain Tax Return Services Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Hearing scheduled for 8/23/2010 at 03:00 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. Objections due by 8/16/2010. (Attachments: # 1 Notice # 2 Exhibit A # 3 Proposed Form of Order # 4 Certificate of Service) (Fatell, Bonnie) (Entered: 08/09/2010)

08/09/2010 - 1141 - Motion to Approve Sale // Motion Of The Chapter 11 Trustee For Order (1) Authorizing The Marketing, Auction And Sale Of Substantially All Of The Debtors Software Business Assets Consistent With Form Asset Purchase Agreement And Free And Clear Of Liens, Claims And Encumbrances, (2) Authorizing Assumption, Assignment, And Sale Of Certain Executory Contracts And Unexpired Leases, (3) Approving Bidding Procedures In Connection With Auction, (4) Establishing Sale Hearing Date And (5) Granting Related Relief Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Hearing scheduled for 8/23/2010 at 03:00 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. Objections due by 8/16/2010. (Attachments: # 1 Notice # 2 Exhibit 1 - APA # 3 Exhibit 2 # 4 Exhibit 3 - Sale Procedures Order # 5 Certificate of Service) (Fatell, Bonnie) (Entered: 08/09/2010)

Here's an interesting couple of paragraphs from the proposed APA about intellectual property and licenses:
4.8 Licenses and Permits. Seller possesses all material licenses, permits, approvals and notifications, governmental or otherwise, necessary for the operation of the Business, all of which are set forth in Schedule 4.8, except where the failure to have such license, permit or approval would not have a material Adverse Effect on the Business. Except as set forth in Schedule 4.8, all of such licenses, permits, approvals and notifications are freely assignable and transferable to Buyer at the Closing and will continue to be in full force and effect after such transfer.

4.9 Intellectual Property. Except as set forth in Schedule 4.9, Seller owns, or has the right to use, all Intellectual Property used in the conduct of the Business as currently conducted that is material to Seller, taken as a whole. Except as would not reasonably be expected to have a Material Adverse Effect, Intellectual Property used in the conduct of its Business as currently conducted that is material to Seller (a) does not, to the knowledge of Seller, infringe on or otherwise violate the rights of any Person and (b) is in accordance with any applicable Contract pursuant to which Seller acquired the right to use any Intellectual Property.

It doesn't own the copyrights, and yet whoever buys the software business is told it has all it needs. So. Did some SCOfolk fib about how necessary it is to own copyrights to run a software business?

Here's the APA's disclaimer:

4.10 Disclaimer. THIS IS AN “AS IS, WHERE IS” SALE. EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 4, NONE OF SELLER NOR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, REPRESENTATIVES OR THE TRUSTEE OR ITS AFFILIATES, AGENTS OR REPRESENTATIVES, MAKES OR HAS MADE ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WRITTEN OR ORAL, AT LAW OR IN EQUITY, IN RESPECT OF SELLER, THE ACQUIRED ASSETS OR THE BUSINESS. SELLER DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, INCLUDING AS TO THE CONDITION, VALUE OR QUALITY OF THE ACQUIRED ASSETS OR THE BUSINESS, MERCHANTABILITY, USAGE, TITLE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. EXCEPT AS SET FORTH IN THIS SECTION 4, THE CONDITION OF THE BUSINESS AND THE ACQUIRED ASSETS SHALL BE “AS IS” AND “WHERE IS”.
Here's what you get:
ACQUIRED ASSETS

[List to be Completed, Reviewed and Revised by SCO Personnel as appropriate and is subject to change]

(a) UnixWare Operating System Products
  • SCO UnixWare 7 Release 7.1.4
  • SCO UnixWare 7 Release 7.1.3
  • SCO UnixWare 7 Release 7.1.2
  • SCO UnixWare 7 LKP

(b) OpenServer Operating System Products

  • SCO OpenServer Release 6.0
  • SCO OpenServer Release 5.x (including all prior versions and releases)

(c) Layered Operating System Products

  • SCO UnixWare and OpenServer Development Kits (all version)
  • SCO Office
  • SCO Open UNIX Development Kit
  • SCO UnixWare 7 Online Data Manager
  • SCO UnixWare 7 Disk Mirroring
  • SCO UnixWare “OS Compatible” Requirements o SCO UnixWare OpenServer Kernel Personality (OKP)

(d) Mobility

  • Internal use of SCO Mobile Server
  • Internal use of HipCheck
You also get some trademarks. Here's the "Third Party Software":

Component Third Party Licensor
Adobe Flash Player California Software Labs
Advanced Server & LAN Manager- AFPS ATT
Backup Edge Microlite
Binary Drivers in UnixWare various OEMs and IHVs
C++ Compiler, Debugger, C++ Expression Evaluation EDG
Cheyenne Arcserve Computer Associates
Compaq Hot Plug PCI Software HP (Compaq)
DSHM – Dynamic Shared Memory Libraries EMC (was Data General)
I2O Symbios
Java Sun
License Key Management (ifor_LS, brand, PMD/SLD, License Manager) Isogon (Gradient)
Merge 5.3 and Me4rgePRO Win4Lin
Microsoft Xenix Code in old SVRX Microsoft
NetScape Components AOL
NetWare Novell
Office Mail Server Bynari
Open Desktop Secureware Hewlett-Packard
PP Sun
Reliant HA Siemens
SGI NFB Graphics Driver DDX Layer SGI
Sound Drivers 4Front Technology
TCX MySQL Database TCX
TriTeal CDE Desk Top TriTeal
Various Open Source utilities and commands such as perl and shell utilities, lynx and gzip code. Open Source
Veritas File System Veritas
Veritas Volume Manager Veritas
The sale also includes billing records, correspondence, "data (only to the extent that such data that contains personally identifiable information that may be lawfully transferred)", internal documentation, and "files relating to the Acquired Assets (only to the extent that any such materials or files exist)" but excluding things like seller's minute books, membership interest books and related organizational documents and also excluding "Seller's files, books and records relating to the Excluded Assets or to Seller's Obligations not included in the Assumed Obligations".

Love the part about only to the extent that they exist.

Here's what you don't get, the excluded assets:

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

(ii) all of Seller’s rights and obligations with respect to the SVRX Licenses (as defined in the Santa Cruz-Novell APA);

(iii) SCO Japan, Ltd., a Japanese corporation, and SCO Canada Company, a Canadian corporation;

(iv) (a) cash and cash equivalents and marketable securities (including cash in transit and cash and marketable securities in lock boxes or on deposit with or otherwise held by any financial institution); (b) accounts receivable (including accounts receivable for services rendered through the Closing Date with respect to which invoices are mailed after the Closing Date) and other trade receivables; and (c) all prepaid premiums and other prepayments and deposits with respect to the Company’s Employee Benefit Plans (if any), the Company’s insurance policies, and any other Contracts not purchased by Buyer;

(v) all rights of Seller in the Licensed Properties; and

(vi) all of Seller’s claims, causes of action and other legal or equitable rights and remedies (A) against Buyer with respect to the transactions contemplated by this Agreement and (B) relating to all rights and interests in all litigation claims pending or that may be asserted in the future, against International Business Machines Corporation, Novell, Inc., SUSE Linux GmbH or others, and (C) relating to every claim of any nature whatsoever, known or unknown that has been or may be asserted against RedHat, Inc. or others relating to or arising from all licensing, covenant not to sue rights, releases or other claims relating to any allegations that Linux violates SCO’s Unix or UnixWare intellectual property, contract or other rights.

The list of assets being licensed by third parties includes GPL'd code, like lynx, assuming they mean the browser. If so, they can't transfer it under the terms that the documents assert that they intend to, I don't think, because Exhibit C, the License Agreement, states that you don't get sublicensing rights:
1.1 Licensor grants to Licensee a personal, nontransferable (EXCEPT AS PROVIDED IN Section 9), nonexclusive, non-sublicensable (except as provided herein), royalty free right and license to use the Licensed Properties in accordance with this Agreement, including the right to modify and create derivative works of such Licensed Properties.

1.2 Licensee shall not have the right to, and agrees that it shall not, license, distribute or otherwise provide, disclose or transfer the Licensed Properties, in whole or in part, to any third party except as provided below in this Section 1. Licensee shall maintain the Licensed Properties in strict confidence in accordance with the confidentiality provisions of this Agreement.

Section 9 just says you can sell this business on to another buyer. And none of the above can be done to GPL code. Anyway, with GPL code, you get your license from the original licensor, not any middle men, even if you get the code from a middle man. And if it's modified by the middle man, GPLv2 requires this, as explained in the FAQ:
GPLv2 says that modified versions, if released, must be “licensed … to all third parties.” Who are these third parties?

Section 2 says that modified versions you distribute must be licensed to all third parties under the GPL. “All third parties” means absolutely everyone—but this does not require you to *do* anything physically for them. It only means they have a license from you, under the GPL, for your version.

So you couldn't require that the code be nonsublicensable or that it must be kept confidential, etc., as per SCO's draft. Note this section of the GPLv2:
6. Each time you redistribute the Program (or any work based on the Program), the recipient automatically receives a license from the original licensor to copy, distribute or modify the Program subject to these terms and conditions. You may not impose any further restrictions on the recipients' exercise of the rights granted herein. You are not responsible for enforcing compliance by third parties to this License.
But then SCO never did grok the GPL. If they'd understood it, they wouldn't have tried SCOsource, which conflicts with the GPL, as IBM will point out in a court of law, if and when it gets the opportunity at trial, because its counterclaims include some tied to SCOsource.

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