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SCO Finally Shows its Legal Strategy Going Forward ~pj
Tuesday, June 25 2013 @ 12:28 PM EDT

SCO was ordered by the judge, the Hon. David Nuffer, to tell him what claims it believes survived SCO's massive loss to Novell, in order to go forward in SCO v. IBM, and it has now done so.

Thanks to the judge's order, we finally learn what SCO has in mind, and I've emphasized part of it:

The Novell judgment has no bearing on the following claims, which therefore remain ripe for adjudication: SCO’s Unfair Competition claim (Count VI) concerning the Project Monterey joint venture; SCO’s Interference with Contract claim (Count VII), which (among other things) alleges that IBM interfered with contracts pursuant to which SCO licensed post-1995 UNIX products to third parties; and SCO’s claim for Interference with Business Relationships (Count IX), which alleges that IBM interfered with SCO’s market position and business relationships.
All right, SCO is saying, we don't have the copyrights. But we had contracts. The "among other things" means they have more in mind they don't wish to tell us about yet, as is SCO's wont. It's about post-1995 SCO products and Project Monterey and IBM allegedly turning folks against SCO. Like they needed to turn anyone away from SCO. When a company shoots itself in the foot by suing its own customers right and left, it tends to create an atmosphere of alarm and distrust, resulting in others putting space between them and the foot-shooter.

IBM gets to respond next, and I expect them to say that SCO has zero claims left standing. And then we'll get to IBM's counterclaims, at last. Here's a chart of all the summary judgment motions left hanging when SCO filed for bankruptcy protection.

And by the way, the Project Monterey claim is supposed to be mostly dead, at a minimum, in that the contract was over so many years ago, the statute of limitations already ran out, with the then-judge in the case ruling that SCO knew or could have known about the issues it raised long ago. So I'm not sure what the plan is here, but with SCO it is bound to be something no one else would even try. David Boies is known as a gambler, and it shows. Groklaw has a page dedicated to Project Monterey, listing every article we ever did that mentioned it, if you are the deep-diving sort.

The filing:

06/24/2013 - 1119 - NOTICE OF FILING of The SCO Group, Inc.'s Statement in Compliance with the Court's Order Reopening the Case re 1115 Order on Motion for Miscellaneous Relief, filed by Plaintiff SCO Group. (Attachments: # 1 Exhibit A - Proposed Judgment Dismissing SCO's Claims Mooted by the Final Judgment in SCO v. Novell)(Hatch, Brent) (Entered: 06/24/2013)

If you'd like to read SCO's Second Amended Complaint, it's here. If you prefer charts, here's one with SCO's claims on the left and IBM's responses on the right. Aren't you glad we did all this work at the time? How in the world would we understand a thing now, if we didn't have this treasure trove to rely on? There's another chart you might like, showing all of IBM's summary judgment motions and the 597 exhibits in support of each one from 2006.

Let's remind ourselves of what the claims are that SCO asserts are still relevant. Count VI reads like this:

SIXTH CAUSE OF ACTION
(Unfair Competition)

181. Plaintiff incorporates and re-alleges paragraphs No. 1-180, above.

182. Plaintiff and its predecessors have built the UNIX System V Technology, the Unix Software Code, SCO OpenServer, UnixWare and their derivatives through very substantial efforts over a time span in excess of 20 years and expenditure of money in excess of $1 billion.

183. IBM has engaged in a course of conduct that is intentionally and foreseeably calculated to undermine and/or destroy the economic value of UNIX anywhere and everywhere in the world, and to undermine and/or destroy plaintiff’s rights to fully exploit and benefit from its ownership rights in and to UNIX System V Technology, the Unix Software Code, SCO OpenServer, UnixWare and their derivatives, and thereby seize the value of UNIX System V Technology, the Unix Software Code, SCO OpenServer, UnixWare and their derivatives directly for its own benefit and indirectly for the benefit of its Linux distribution partners.

184. In furtherance of its scheme of unfair competition, IBM has engaged in the following conduct:

a) Misappropriation of source code, methods, trade secrets and confidential information of plaintiff;

b) Breach of contract;

c)Violation of confidentiality provisions running to the benefit of plaintiff;

d) Inducing and encouraging others to violate confidentiality provisions;

e)Contribution of protected source code and methods for incorporation into one or more Linux software releases, intended for transfer of ownership to the general public;

f) Use of deceptive means and practices in dealing with plaintiff with respect to its software development efforts; and

g) Other methods of unlawful and/or unfair competition.

185. IBM’s unfair competition has directly and/or proximately caused significant foreseeable and consequential harm to plaintiff in the following particulars:
a) Plaintiff’s revenue stream from UNIX licenses for Intel-based processing platforms has decreased substantially;

b) As Intel-based processors have now become the processing platform of choice for a rapidly-increasing customer base of enterprise software users, plaintiff has been deprived of the opportunity to fairly exploit its market-leading position for UNIX on Intel-based processors, which revenue opportunity would have been very substantial on a recurring, annual basis but for IBM’s unfairly competitive practices;

c) Plaintiff stands at imminent risk of being deprived of its entire stream of all UNIX licensing revenue in the foreseeably near future;

d) Plaintiff has been deprived of the effective ability to market and sell its new UNIX-related improvements, including a 32-bit version of UNIX for Intel processors developed prior to Project Monterey, and its new web-based UNIX-related products, including UNIX System V Release 6;

e) Plaintiff has been deprived of the effective revenue licensing opportunity to transfer its existing UNIX System V Release 4 and Release 5 customer base to UNIX System V Release 6; and

f) Plaintiff has been deprived of the effective ability to otherwise fully and fairly exploit UNIX’s market-leading position in enterprise software market, which deprivation is highly significant given the inability of Microsoft Windows to properly support large-scale enterprise applications.

186. As a result of IBM’s unfair competition and the marketplace injury sustained by plaintiff as set forth above, plaintiff has suffered damages in an amount to be proven at trial, but no less than $1 billion, together with additional damages through and after the time of trial foreseeably and consequentially resulting from IBM’s unfair competition in an amount to be proven at the time of trial.

188.[sic] IBM’s unfairly competitive conduct was also intentionally and maliciously designed to destroy plaintiff’s business livelihood and all opportunities of plaintiff to derive value from its UNIX-based assets in the marketplace. As such, IBM’s wrongful acts and course of conduct has created a profoundly adverse effect on UNIX business worldwide. As such, this Court should impose an award of punitive damages against IBM in an amount to be proven and supported at trial.

I think you can see pretty easily that this claim is mostly, if not all, dead. All that SCO lists as surviving is the Project Monterey part. IBM will certainly point out that SCO was never in the Project Monterey agreement with IBM. Santa Cruz was, and when it sold to Caldera, later to be called SCO, it broke the terms of the agreement, IBM long ago informed the court. SCO tries to tell it the other way, just as it rounded up ex-Novell executives willing to pretend that SCO got the UNIX copyrights when in reality it did not.

I'll move on to the next claim before my blood pressure gets too high. But I'll just say that in a world filled with corruption, it nevertheless still bothers me a lot when people go into court and testify to things that are not so. And my personal view is that law firms shouldn't help them, because it undermines respect for the law, and that's not the proper role for a lawyer.

Here's SCO's claim VII:

SEVENTH CAUSE OF ACTION
(Interference with Contract)

187 [sic]. Plaintiff incorporates and re-alleges by reference paragraphs 1-186, [sic]above.

188.[sic] SCO has contracts with customers around the world for licensing of SCO OpenServer and UnixWare.

189.[sic] IBM knew and should have known of these corporate software licensing agreements between SCO and its customers, including the fact that such agreements contain confidentiality provisions and provisions limiting use of the licensed object-based code.

190.[sic] IBM, directly and through its Linux distribution partners, has intentionally and without justification induced SCO’s customers and licensees to breach their corporate licensing agreements, including but not limited to, inducing the customers to reverse engineer, decompile, translate, create derivative works, modify or otherwise use the UNIX software in ways in violation of the license agreements. These customers include Sherwin Williams, Auto Zone, among others.

191.[sic] IBM’s tortious interference has directly and/or proximately caused significant foreseeable damages to SCO, including a substantial loss of revenues.

192[sic]. IBM’s tortious conduct was also intentionally and maliciously designed to destroy plaintiff’s business livelihood and all opportunities of plaintiff to derive value from its UNIX-based assets in the marketplace. As such, this Court should impose an award of punitive damages against IBM in an amount to be proven and supported at trial.

Do you see SCO's problem here? It's that all the evidence from discovery resulted only in claims about code donated to UNIX. And SCO doesn't own that. And as for the contractual element, the AutoZone litigation showed that SCO was whistling past the graveyard. There was no there there. And that is why I despise SCO for keeping this empty litigation going. Part of why.

Here's SCO's Claim IX:

NINTH CAUSE OF ACTION
(Interference with Business Relationships)

208. Plaintiff incorporates and re-alleges by reference paragraphs 1-207, above.

209. SCO had existing or potential economic relationships with a variety of companies in the computer industry, including but not limited to Hewlett Packard.

210. IBM has intentionally interfered with plaintiff's existing or potential economic relations. For example, at Linux World in January, 2003 IBM representatives contacted various companies with whom SCO had existing or potential economic relations. These IBM representatives said that IBM was discontinuing doing business with SCO and that these other companies, some of whom are business partners with IBM, also should discontinue doing business with SCO.

211. IBM, as the world's largest information technology company, as well as the world's largest business and technology services provider ($36 billion), and the world's largest IT financier ($35 billion in assets), has considerable clout with these companies that it told to stop doing business with SCO.

212. IBM's intentional interference was for an improper purpose and/or by improper means.

213. IBM's intentional interference has directly and/or proximately caused significant forseeable damages to SCO.

214. IBM's tortious conduct was also intentionally and maliciously designed to destroy plaintiff's business livelihood. As such, this Court should impose an award of punitive damages against IBM in an amount to be proved and supported at trial.

All of the above companies, and more, testified that it was not true. It never happened. Nobody had to tell people that SCO was dangerous to do business with. SCO was suing its own customers. Like IBM, for example, and making wild claims about Linux that were out-and-out lies, as it developed, but which everyone, including me, knew were not going to stand the test of time. And they didn't. Shame on Microsoft and Sun for giving these people money which SCO used to pursue its fanciful claims. One of SCO's claims was that by distributing Linux for free, it was unfair competition. Sound familiar? That's one of the complaints Microsoft, Oracle and the misnamed FairSearch have lodged against Google. What a coincidence.

And now that Microsoft and Oracle are partners in the cloud, think about the history when you are trying to decide who to trust, if anyone, with your stuff.

Now they'll probably sue me for interference with business relationships.

Sigh. I hate these litigious hijinks. Speaking of which, this claim is the one that SCO brought under a Utah law it itself sponsored after it sued IBM. I always called it Yarro's Law, and you can read about it here, if you scroll down or just search for Yarro.

The final list of those allegedly turned away from SCO were BayStar, HP, Computer Associates, Oracle and Intel and an "OpenSource conference in Scottsdale, Arizona." They all denied it, including the arranger of the conference, John Terpstra.

Right. IBM ruined SCO's reputation in the Linux community. Puh-lease. It was its then-CEO Darl McBride who told the world that he knew if he litigated, the community would hate him, and he decided not to sit around the fireside with us because he cared about the shareholders more. Remember that? "The last time I checked the CEO was in charge of shareholder value, not standing around the campfire singing Kumbaya with the Linux world," he said.

And here's how IBM responded [text; PDF] at the time in its still-pending-after-all-these-years motion for summary judgment:

SCO's Seventh, Eighth and Ninth Causes of Action allege that IBM has interfered with SCO's contracts and business relationships with customers, business partners and other entities. As shown in detail below, SCO's description of these claims has shifted throughout the pretrial proceedings, expanding, contracting, and again expanding (at times wildly), with the only constant thing being SCO's failure to provide any clear identification of the specific contracts or business relationships that were supposedly injured or the acts of IBM that allegedly caused such injury. Although it appeared that SCO was attempting simply to avoid disclosing its evidence (at least until trial), it is now clear that what SCO has been seeking to disguise is the lack of any support for these claims at all....

1) Of the companies SCO mentioned specifically by name, the companies or entities all deny any such interference and there's absolutely no evidence on SCO's side to support its allegations. And as for the alleged interference with the Unix on Intel market, Utah law doesn't recognize activities regarding an entire market as a basis for recovery for "intentional" interference;

2) Utah law, which IBM says applies to the interference claims because if there had been any injury, it would have been there that it would have been felt, requires SCO to prove that IBM's allegedly tortious acts were undertaken with an improper purpose or by improper means, which is not the case, IBM sums up. In fact, SCO's own experts have acknowledged that IBM's support for Linux was motivated by "compelling competitive reasons and undertaken for the purpose of protecting IBM's legitimate, long-range economic interests";

3) There's no causal link shown by SCO between anything IBM has done and any specific injury to SCO. If SCO is experiencing a deteriorating business, its own witnesses and documents show it's because of a variety of factors having nothing to do with IBM, including "decisions made by SCO management."

Actually, SCO at one point included Groklaw as one entity IBM allegedly tried to turn against SCO. However, then they dropped Groklaw from the ever-changing list. Can you imagine?

I can tell you, with all sincerity, that I never desired a relationship with SCO or had one to ruin, and that I despised SCO all on my own from the first day I heard about their attacks on Linux. Then there was the libel against me in public and the stalking and the threats and the emails pretending to be fans and trying to locate me. Oh, and trying to get the court to gag Groklaw. And after all that, they had the *nerve* to claim IBM interfered with my relationship with SCO.

SCO has no shame. No news there.

In truth, I agreed with Richard Stallman long before that happened that Caldera was a parasite on the FOSS community, and Caldera's SCO persona demonstrated he was right, as he usually is about such things.

Here's how SCO responded to IBM's summary judgment motion on this claim. It's on this level: SCO did not encourage its customers to use Linux instead of UNIX:

SCO supported its customers’ use of Linux as a complement or addition to its UNIX operating systems, but only at the customer’s request, not at SCO’s encouragement.
That is, of course, a very large pile of sliced baloney. At one point, in fact, Caldera sold *only* Linux. And when it bought some UNIX assets, the idea at the time was to move UNIX customers to Linux. Proof from this TechWeb article back in 2001 [full article]:
Caldera Systems Inc. will soon close its acquisition of SCO's Unix business—and jump start its strategy of moving SCO customers to Linux.

Caldera is confident it can move SCO customers to Linux. "We have brick-and-mortar businesses using Unix applications today," said Ransom Love, Caldera president and CEO. "We can move them to Linux and the Internet using Caldera technologies."

Until customers migrate, Caldera, Orem, Utah, will offer Linux as a low-end OS, with UnixWare as a high-end alternative for customers who need more power and for those wary of open-source software. SCO offers technology called Lxrun that lets Linux apps run on UnixWare. Caldera also plans to migrate clustering technology from UnixWare to Linux to make Linux more powerful.

Duh.

If you'd like to compare what SCO thought remained in the case after the Novell victory on summary judgment on August 10 of 2010 (which is when, by the way, SCO should have quit this entire farce and any normal litigant probably would have, seeing the finger writing on the wall), here's what they said in 2007 in answer to that same question:

Sixth Cause of Action Unfair Competition

SCO alleges that IBM has engaged in unfair competition in several respects. The Order does not bear on SCO's allegations (as described in SCO's Second Amended Complaint, interrogatory responses, and/or prior memoranda in the case) that IBM has engaged in unfair competition through its misconduct in connection with Project Monterey and by inducing companies to breach their corporate licensing agreements with SCO. This claim remains ripe both with respect to SCO's ownership of post-1995 UnixWare copyrights and because SCO's ownership of any UNIX or UnixWare copyrights is not necessary for SCO to pursue the claim.

Seventh Cause of Action Interference with Contract

SCO alleges that IBM has induced companies to breach their corporate licensing agreements with SCO. The Order does not bear on this claim.

Ninth Cause of Action Interference with Business Relationships

SCO alleges that IBM interfered with SCO's actual and prospective business relationships with a variety of companies. The Order does not bear on this claim.

SCO's Claim for Copyright Infringement

In its Order dated February 9, 2005, the Court agreed with IBM's arguments on the question and found that SCO had asserted a general Linux copyright claim in this case. As the Court further noted in the same Order, "IBM's Tenth Counterclaim appears to be broader in scope that SCO's claims." The Order as pertaining to ownership of copyrights bears on this claim inasmuch as it would bar SCO from pursuing such claims as the purported owner of all UNIX and UnixWare copyrights. SCO submits that the Order does not preclude SCO from pursuing copyright infringement claims insofar as it occupies the position of an exclusive licensee from Novell, or as the owner of the post-1995 UnixWare copyrights.

Here's what IBM said back then, which may give us foregleams of what they'll say next:
As is discussed below: (1) the Novell Decision effectively forecloses all of SCO's claims; (2) requires summary judgment in favor of IBM on several of its counterclaims and strengthens IBM's remaining counterclaims; and (3) impacts all of the pending motions.
There was a hearing back in the day on some of SCO's claims about interference and unfair competition, which you can read about here. Some of the claims are dead and buried now, but you may find the interference materials of interest.


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