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Oracle and Novell File Reservations of Rights RE SCO's Bankruptcy Sale Plan
Monday, August 16 2010 @ 08:04 PM EDT

Oracle, as well as Novell, have both filed a Reservation of Rights objecting to SCO's Motion in bankruptcy court to sell off all the assets, all but the litigation and whatever is on the list of excluded assets. If you recall, Oracle made an appearance in connection with an earlier SCO sales scheme, and now it says SCO needs to tell it more detailed information about the new plan and amend it, if any Oracle contracts are involved. "At this time, Oracle does not consent to any proposed assignment or transfer of use via the Sale Motion or otherwise, as proposed transfers must be in compliance with the license terms," Oracle tells the court. It has copyrights and patents on this software, it points out. Not that it needs to mention that this week. We are aware.

Here are the filings:

08/16/2010 - 1150 - Reservation of Rights by Oracle America, Inc. Regarding the Chapter 11 Trustee's Motion for Order (a) Authorizing the Marketing, Auction and Sale of Substantially all of the Debtor's Software Business Assets Consistent with Form Asset Purchase Agreement and Free and Clear of Liens, Claims and Encumbrances; (b) Authorizing Assumption, Assignment, and Sale of Certain Executory Contracts and Unexpired Leases; (c) Approving Bidding Procedures in Connection with Auction; (d) Establishing Sale Hearing Date and (e) Granting Related Relief Filed by Oracle USA, Inc.. (Attachments: # 1 Certificate of Service # 2 Service List) (Huggett, James) (Entered: 08/16/2010)

08/16/2010 - 1151 - Reservation of Rights of Novell, Inc. In Response to the Debtors' Motion for Authority to Sell Filed by Novell, Inc., SUSE Linux GmbH. (Greecher, Sean) (Entered: 08/16/2010)

Oracle says the Sales Motion should be denied with respect to any transfer of Oracle agreements, but going beyond, the Bankruptcy Code sets out "specific prerequisites that must be met before the trustee/debtor can assume and assign an executory contract, including (a) curing (or providing adequate assurance of a prompt cure of) an defaults under the subject contracts" and providing assurance of future performance. Without those two things, SCO can't just hand the executory contracts over to anybody, and Oracle reserves the right to be heard.

Novell/SUSE also reserve rights, but over everything. It believes some of the contracts it has with SCO would be subject to the SCO Motion and the proposed APA, but no one can tell, because there is a lack of specificity. Novell did notice some disturbing language:

3. In addition, pursuant to paragraph 2.2 of the APA, the Debtors plan to grant perpetual, non-exclusive, royalty-free licenses to use the Licensed Properties. Paragraph 1.34 of the APA defines Licensed Properties as "all copyrights and other Intellectual Property used by [the Debtors] in the Business that [the Debtors do] not own, including the copyrights owned by Novell, Inc." (emphasis added). Therefore, the APA in its current form has the effect of granting one or more Novell licenses to the Buyer."
Lacking any further specificity, Novell, like Oracle, reserves all rights. If in the future, it is learned that what is proposed is the assumption and assignment of Novell contracts, it would be subject to Novell's consent, "as well as the cure of any outstanding defaults". Heh heh. So Novell reserves the right to object.

If SCO's plan is, instead, to assign the contracts without Novell's consent, then Novell's position is that the APA is objectionable. It believes SCO "may be prohibited from transferring licenses from Novell that relate to the Novell Santa Cruz APA unless the Debtors assume that agreement. To do so, the Debtors would have to cure any outstanding defaults."

Novell wants to be paid. It seems, by my reading, that Novell suspects SCO wants to skip town, so to speak, on the midnight train, without paying them first. Or ever.

Finally, Novell points out that SCO can't sell what it doesn't own. Ownership is now an issue on appeal, and if SCO loses, it doesn't own certain of the assets, and "Novell hereby reserves the right to object to the Transaction on the basis that the Debtors do not have a property interest in certain of the Acquired Assets."

So both are reserving rights, but the underlying issue is that both would like more info. But I think it's interesting to see what Oracle said in its earlier notice:

Neither this Request for Special Notice nor any subsequent appearance, pleading, claim or suit is intended or shall be deemed to waive Oracle's and/or Oracle Credit Corporation's (i) right(s) to have final orders in non-core matters entered only after de novo review by a district judge; (ii) right(s) to trial by jury in any proceeding so triable herein or in any case, controversy or proceeding related hereto; (iii) right(s) to have the reference withdrawn by the United States District Court in any matter subject to mandatory or discretionary withdrawal; or (iv) other rights, claims, actions, defenses, setoffs or recoupments to which Oracle and Oracle Credit Corporation are, or may be, entitled under agreements, in law, or in equity, all of which rights, claims, actions, defenses, setoffs, and recoupments expressly are reserved.
They didn't waive a thing, including de novo review by a district judge, among other rights. Wouldn't it be nice if that happened -- that everything Judge Gross has let slide on by ended up with another judge in district court instead of Alice in Wonderland's bankruptcy court in Delaware?

If Oracle accomplishes something like that, I'd certainly be thrilled. My readers are losing faith in the US legal system.

Those of you who prefer a simple universe with white hats and black hats clearly identifiable will now be confused. But in this fact pattern, as I did in the MySQL issue, I say go, Oracle.

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