Posted on 01/08/2004 7:00:50 AM PST by ShadowAce
Just before Christmas last year, Novell announced publicly that SCO had known for some time that it did not receive all rights and ownership to UNIX technologies, despite public statements to the contrary. Novell has made public correspondence between lawyers representing both Novell and SCO. Read these in their entirety - they are quite enlightening.
These letters finally start getting to the heart of the mysterious "Amendment No. 2" which SCO referred to publicly in a press release dated June 6, claiming it transferred "everything" to them and which Novell claimed never existed - Novell's legal team is adamant that no copy ever existed in their files. Bruce Lowry, director of public relations at Novell told me today, "We've acknowledged publicly that Amendment 2 is valid, although we have not said we agree with SCO's interpretation of Amendment 2. As we said on December 22, we believe we've retained the ownership of UNIX copyrights and have registered those with the US Copyright Office."
In two letters sent to Darl McBride, president and CEO of SCO, dated June 26 and August 4, 2003, Joseph A. LaSala, Novell's general counsel specifically refutes recent claims by SCO regarding transfer and ownership of "all rights to the UNIX and UnixWare technology" as announced in the June 6 press release.
On June 26, LaSala wrote: "SCO's statements are simply wrong. We acknowledge, as noted in our June 6 public statement, that Amendment No. 2 to the Asset Purchase Agreement appears to support a claim that Santa Cruz Operation had the right to acquire some copyrights from Novell. Upon closer scrutiny, however, Amendment No. 2 raises as many questions about copyright transfers as it answers. Indeed, what is most certainly not the case is that "any question of whether UNIX copyrights were transferred to SCO as part of the Asset Purchase Agreement was clarified in Amendment No. 2 (as SCO stated in its June 6 press release). And there is no indication whatsoever that SCO owns all the patents associated with UNIX or UnixWare."
Clearly, this is saying that although SCO received the software, it did not get the full suite of patents and copyrights pertaining to UNIX. A second letter, on August 4, also written by LaSala, seeks to clarify the interpretation of Amendment No. 2.
"We dispute SCO's claim to ownership of these copyrights. The asset Purchase Agreement, in Schedule 1.1(b), contains a general exclusion of copyrights from the assets transferred to Santa Cruz Operation. Amendment No. 2 provides an exception to that exclusion, but only for 'copyrights … required for [Santa Cruz Operation] to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies.
"In other words, under the Asset Purchase Agreement and Amendment No. 2, copyrights were not transferred to Santa Cruz Operation unless SCO could demonstrate that such a right was 'required for [Santa Cruz Operation]' to exercise the rights granted to it in the APA. Santa Cruz Operation has never made such a demonstration, and we certainly see no reason why Santa Cruz Operation would have needed ownership of copyrights in UNIX System V in order to exercise the limited rights granted SCO under the APA. Nor is there any reason to think that a transfer of the copyrights required for SCO to exercise its APA rights necessarily entails transfer of the entire set of rights associated with a particular copyrighted computer program."
Now, LaSala is telling SCO that not only are there very few reasons for gaining some of the copyrights in UNIX, they have never even used those reasons to ask for them! Novell is being very specific here - it is quoting clauses and giving reasonable interpretations. On September 10, Ryan Tibbitts, SCO's general counsel replied, essentially disagreeing with LaSala.
"We have reviewed and considered your letter in detail and disagree with your analysis and conclusions. Your current interpretation of the agreements, which appears to be of recent vintage, ignores certain provisions of the relevant documents and does not consider the agreements between Novell and SCO as a whole. We respectfully suggest that you carefully review all of the agreements in their entirety, particularly Amendment No. 2," Tibbitts wrote.
"In addition, it appears that Novell is acting in concert with IBM to destroy the value of SCO UNIX and UnixWare intellectual property acquired from Novell in the Asset Purchase Agreement. SCO is not going to let this happen. Further, we request that Novell abide by the terms of the agreement, including all amendments."
So, here we have SCO replying with a lot of "arm waving." It has not refuted anything that LaSala has said but simply offered a blind interpretation that Novell must be wrong, presumably because Novell's view is not the same as SCO's. It seems to me that what SCO has is basically a Sale and Marketing agreement; they can sell it and profit from those sales. But they don't own it. Unfortunately, that's not what they thought they had.
Finally, SCO plays its trump card and goes crying to the umpire saying it's not fair. SCO complains that Novell is colluding with IBM to destroy the value of SCO UNIX and UnixWare. Unfortunately, if Novell owns these products (and it appears they do), then all SCO is doing is diluting the value of a suite of products that SCO doesn't even seem to want to sell. Its main thrust is to extract value from a competing product - Linux - by legal stand-over tactics.
So, in the light of these Linux lawsuits, where does this leave the rest of us? Probably a little safer than we thought we were. Novell is running long and strong on detail, SCO just as long and strong on rhetoric! When one lawyer quotes details and the other is doing little more than flapping his arms, I tend to go with the details. We await the result of this week's code demonstration with interest - you will recall early last month, a Utah judge ordered SCO to show "within 30 days, the code from the Linux kernel to which it says it has rights." Is there any offending code in the kernel? And more importantly, does SCO have rights to the code at all?
The original agreement is here.
Regardless of whether SCO might prevail in this dispute with Novell, it is still a fact that SCO is unlikely get very far with a copyright infringement suit against a linux user or distributor when the copyrights it claims to own are in dispute and registered at the Copyright Office by two separate companies. That dispute will have to be resolved at trial before any copyright infringement suit could proceed. Such a trial is unlikely to occur before 2005 or 2006. SCO did not disclose this as a "risk item" in any of its subsequent filings with the SEC. Nor has it mentioned this dispute when touting the revenue potential of its linux licensing program. At least one securities analyst has written a glowing report on SCO based at least partly on the claim by SCO that it owns these copyrights, and would begin enforcing them -- and selling "linux licenses" -- this month. Now it turns out that SCO was withholding a material fact which it knew, and which makes the revenue potential of "enforcing copyrights" far more problematic than SCO averred. At least one lawyer is bound to see a shareholder's lawsuit in that. The SEC might even get off its duff and look into what these guys at SCO have been doing. |
You keep saying this, but a jury will hear this same evidence that we are seeing now. They will discuss the same issues we are discussing. The ONLY difference is that their opinion will carry legal weight, while our discussions provide some insight into the jury trial that we will not be able to attend (due to geography, etc).
In other words, what do you expect from a public discussion forum, anyway? Legal weight?
Until what case goes to trial? SCO has filed no case against anyone alleging copyright infringement. They keep saying they are going to, Real Soon Now, but they've been saying that for months.
Now they have the problem that if they ever do sue anyone for copyright infringement, all the defendant has to do is point to the fact that two companies have registered the same copyrights; ownership of the copyrights is in dispute. Why try the infringement case before we even know whether SCO owns these copyrights? Maybe their claim to ownership is fraudulent. Let them go establish their ownership, and then they can sue people for infringement.
They just got their "licensing revenue" kicked down the calendar about three years. And now they have another trial they have to win before they can collect.
I used to hope this would be over quickly, but now I'm learning to enjoy watching them be tortured.
Not only that, they represented to Baystar and RBC that they owned the copyrights, in order to get that $50M shot in the arm... of which 20% went straight to the lawyers... one wonders if the financiers are having second thoughts yet.
Yeah, this is getting really interesting.
They should kiss the 50 million gone!!!!
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Pamela Jones at Groklaw raises the interesting point that in June, and again in August, Novell advised SCO in writing that Novell intended to dispute SCO's claim to ownership of certain copyrights in UNIX.