SCOsource Slide Show placed on SCO website (perhaps by Rush Limbaugh)

GROKLAW ^ | 10-2-2003

[shadowman99]

Here they go again. SCO has brazenly put up on their website the Powerpoint presentation from SCOForum 2003. And you don't need to sign an NDA to view it. It appears to be setting forth their legal position, including some cases that they seem to believe support them. Let's see if they do. And let's take a look and see what we can learn about the way they view their case.

While it is missing whatever it was they said during the presentation at SCOForum, leaving some question marks in the air, it contains the following, which I will analyze point by point:

1. It says on page 2 that "Linux is an unauthorized derivative of UNIX". I don't believe that is true, not unless you accept SCO's novel and expansive definition. If it were true, why did Darl McBride say that Linux doesn't owe its code to UNIX?

2. It claims on page 3: "SCO Owns All UNIX System V Source Code" and so far so good, but then it adds that this means, according to the Novell Assett Purchase Agreement, that they own "All rights and ownership of UNIX and UnixWare..." Do they now claim they own BSD, which is UNIX? If not, how can they claim they own "all rights and ownership of UNIX" ? Novell could only sell them assets it itself owned, and did they own all of UNIX? In the context of the asset purchase agreement, both sides knew what the expression UNIX meant in that narrow reference, but in using it in the slide, I hope they explained that it doesn't mean they own all UNIX. Maybe they should put up some explanation on their website, so visitors aren't confused.

3. On page 6, 7, and 17, they seem to be indicating that AT&T licensed to IBM only the right to use the code in-house, including all derivative code. If that were true, why would IBM be interested in licensing it? And why would Caldera have worked with IBM on Project Monterey and encouraged IBM to contribute to the project, if IBM had no rights under the software agreement with AT&T except to use the source code in-house? Perhaps in the spoken remarks this was explained. This section was quite puzzling. They don't mention their own Exhibit C, the AT&T-IBM agreement which granted IBM rights to derivative works in paragraph 9:

""Nothing in this agreement shall prevent Licensee from developing or marketing products or services employing ideas, concepts, knowhow or techniques relating to data processing embodied in software products subject to this agreement, provided that licensee shall not copy any code from such software products into any such product or in connection with any such service and employees of licensee shall not refer to the physical documents and materials comprising software products subject to this agreement when they are developing any such products or services or providing any such services."

4. Page 8 lists all the types of copyright infringement they claim, literal copying, obfuscation, derivative works and non-literal transfers.

5. Page 9 says that "the example being presented is just one of many" showing that "direct System V Code has been copied into Linux kernel releases 2.4X and 2.5x". I thought after the show flopped, they said it wasn't an example of copyright infringement. I'm getting confused. They also cite the case Dun & Bradstreet Software Services, Inc. v. Grace Consulting, Inc., 307 F.3d 197 (3rd Cir. 2002). I take it that means they think it applies to this point and we may expect them to use it in support of their case. So what does the case say? Here's a description of what that case found, on West Case Update:

"Consultants to Software Users May Not Copy and Resell Software

"Defendant's copying of the software, which it incorporated into its own programs and sold to customers, was not de minimis. That software would not work without the Geac software in it. Further, the claim that the licensing agreement allowed copying of the software is wrong. The license allowed use of the software, not copying for commercial use by others. The Copyright Act does not preempt Geac's claim of trade secret misappropriation since the consultant violated its duty of trust and confidentiality when working on the software."

And here is another such explanation from Copyright/Internet Law Update February 2003 as to what this case means:

"NO PREEMPTION OF TRADE SECRETS CLAIM

"The source code and the object code constitute literal elements of a computer program and are protected by copyright law. An employee of computer consultant who, by virtue of his confidential position, gained access to client's source code and customer list can be sued not only for copyright infringement, but also for misappropriation of trade secrets. The Copyright Act does not preempt the trade secrets claim because breach of confidentiality is an extra element to be proven. Dun & Bradstreet Software Services, Inc. v. Grace Consulting, Inc., 307 F.3d 197 (3rd Cir. 2002)."

Here's a description of the facts of the case:

"Defendant Grace marketed a program that 'updated' a program authored by plaintiff Geac that prepares year-end tax reports. Through the use of 'copy and call' commands, Grace’s program retrieved data and ran code from Geac’s product. The court found that use of these commands constituted infringement, even if text was not inserted from one program into the other, and the two programs remained separated in memory. The court rejected Grace’s argument that 'custom and practice' could justify infringement, holding that 'purported industry custom and usage' can never modify an unambiguous license agreement that forbids copying. The court also found that copying could not be excused by concerns of 'intraoperability' — the need to design different computer programs to work together."

6. Slide 15 shows some bar charts "proving " that "Obfuscated System V Code Has Been Copied into Linux...". Maybe this is the work of those spectral analysts? You think? Maybe you had to be there.

7. Page 18 cites three cases to prove that you can't step outside the scope of a license grant for derivative works. That is true, as far as it goes, but where, oh, where, is the Exhibit C from their Complaint, that seemed to grant IBM certain rights in derivative works? Not a sign of it in the slides. Maybe they just told the audience about it. You say you think they should explain it in the slides that are up on their website and that the slides seem to imply that no such Exhibit C exists or that it has no bearing on this issue? Are you thinking that maybe somebody might be induced to buy their stock without having the full picture?

Here are the three cases:

Stewart v. Abend, (US 1990) which they say stands for the proposition that "Use is infringing if one who employs the [derivative] work does not have a valid license or assignment for use of the pre-existing work". You can find this case here. It's a case mentioned briefly on page 32 of "Opposition of Defendant Napster, Inc. to Plaintiff's Motion for Preliminary Injuction" in the Napster case. I mention this because it was only when I went back and reread the case that I remembered that Fenwick & West worked with Boies on the Napster case, as you can see for yourself on page 36. Now, that's not a crime, by any means, but I will remember this next time I read remarks from Fenwick attorneys in the media about SCO. Sooner or later, it all becomes clearer.

The case had to do with a dispute under the old copyright law involving the movie, "Rear Window", wherein the author of the original story died before he could register for a copyright renewal. What was at issue was whether the derivative work could continue to be used. The court found the dead owner's estate had the right to decide new terms upon renewal of the copyright, that the right of renewal is contingent, and that this affected the derivative rights holder's right to release the movie and exploit the original story in a derivative work.

However, I'm thinking maybe SCO didn't remember this part of the Supreme Court's finding:

"The aspects of a derivative work added by the derivative author are that author's property, but the element drawn from the pre-existing work remains on grant from the owner of the pre-existing work. See Russell v. Price, 612 F.2d 1123, 1128 (CA9 1979) (reaffirming 'well-established doctrine that a derivative copyright protects only the new material contained in the derivative work, not the matter derived from the underlying work'), cert. denied, 446 U.S. 952 (1980); see also Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 547 (1985) ('The copyright is limited to those aspects of the work - termed "expression" - that display the stamp of the author's originality'). . . see also 17 U.S.C. 3 (1976 ed.) (copyright protection of a work extends to 'all matter therein in which copyright is already subsisting, but without extending the duration or scope of such copyright'). This well-settled rule also was made explicit in the 1976 Act:

"'The copyright in a compilation or derivative work extends only to the material contributed by the author of such work, as distinguished from the preexisting material employed in the work, and does not imply any exclusive right in the preexisting material. The copyright in such work is independent of, and does not affect or enlarge the scope, duration, ownership, or subsistence of, any copyright protection in the pre-existing material.' 17 U.S.C. 103(b)."

Gilliam v. ABC, (2nd Cir. 1999) "One who obtains permission to use copyrighted [work] in production of derivative work may not exceed specific purpose for which permission is granted. Transfer in excess of license was a nullity."

That's their characterization of what the case means. But this case seems a rather odd choice. This was a case cited by US Court of Appeals' Judge Jackson in the US v. Microsoft antitrust matter, which is no doubt one reason it readily came to mind in Boies' law firm when helping to design the slide show. Here is Microsoft's attempt to rely on this case. And here is the DOJ view of the case. And here is what the judge wrote in his Conclusions of Law:

" In Gilliam, the Second Circuit found, on appeal from a denial of a preliminary injunction, that a broadcaster's extensive editing of a series of 'Monty Python' skits could infringe the copyright holder's rights. 538 F.2d at 23. But the court did 'not accept appellants' assertion that any editing whatsoever would constitute infringement.' Id. Rather, the court said that 'licensees are entitled to some small degree of latitude in arranging the licensed work for presentation to the public in a manner consistent with the licensee's style or standards.' Id. The court found likely infringement there because the unauthorized editing deleted 27% of the program, and therefore amounted to a 'mutilation of [the] work' that deleted 'essential elements in the schematic development of a story line.' Id. at 24-25."

And here is where the judge said Microsoft's reliance on this case wasn't such a good idea, especially with respects to computer software:

"In addition to claiming a fight to 'exclude' licensees as it sees fit, Microsoft cites the Second Circuit's opinion in Gilliam v. ABC, 538 F.2d 14 (2d Cir. 1976), recognizing a copyright holder's 'moral right of integrity' where a copyrighted work was significantly changed, or ,'mutilated,' but still promoted under its original name. But the Gilliam court acknowledged the lack of statutory or doctrinal support in copyright law for the fight it recognized, see Gilliam, 538 [begin page 30] F.2d at 24 , and ultimately grounded its decision in trademark law. Id. at 24-25. Several subsequent decisions considering Gilliam have declined to endorse the 'moral right' argument Microsoft advances. See, e.g., Halicki v. United Artists Communications, Inc., 812 F.2d 1213, 1214 (9th Cir. 1987); Weinstein v. University of Illinois, 811 F.2d 1091, 1095 n.3 (7th Cir. 1987); Paramount Pictures Corp. v. Video Broad. Sys, Inc., 724 F. Supp. 808, 820 (D. Kan. 1989).

"Moreover, whatever policy justifications that may exist for a moral right of integrity in works of art are substantially weaker when the work at issue is a computer program, whose value lies in its functionality, not its artistry. The Copyright Act itself expressly allows owners of a copy of a computer program to 'adapt' it in certain circumstances without the copyright owner's permission. See 17 U.S.C. § 117; see also Aymes v. Bonelli, 47 F.3d 23 (2d Cir. 1995). Although Microsoft undoubtedly enjoys some 'right against mutilation' in its software, there are significant factual questions dispute on this issue, chief among them the extent of copyright protection in the specific portions of the software plaintiffs seek to modify."

See an application to the SCO-IBM fact pattern that would be helpful to SCO? See any application between this Monty Python case, about editing to such an extent the artistic integrity of the original work was impaired, and what IBM is charged with? I don't know what they said verbally while showing this slide, but was their characterization of the case accurate, in your opinion? Could they be planning on arguing that you aren't allowed to alter any copyrighted code? This would be a novel use, I expect, but SCO folks are so inventive, don't you find? That wouldn't work anyway, because Judge Jackson went on to shoot down Microsoft's attempt to use Gilliam to justify forbidding OEM modifications, writing:

"Assuming the Gilliam line of cases is correct, it does not support Microsoft's claimed right to prohibit any modification of its software program. Rather, those cases recognize that some modifications are permissible. As the Supreme Court reiterated in Sony, copyright protection "reflects a balance of competing claims upon the public interest." 464 U.S. at 431." Maybe Boies now finds himself in the surreal position of trying to argue against an order in a case he earlier won.

Liu v. Price Waterhouse, (7th Cir.) "Copyright in derivative work used outside scope of license grant reverted to owner of original program."

You can read this case here and here and about it here. The lower courts' rulings were controversial, and it has traveled up to the Supreme Court, but I don't find any decision as of yet, not on Findlaw or in Cornell's LII database. It seems odd to cite a controversial case that has yet to be decided by the Supreme Court as one of the cases supporting your position. If you are interested, some supporting briefs are here. Here's a page where some attorneys, or so they appear, discussed whether it was rightly decided, in which the facts of the case are explained. It's a transfer of copyrights case. Here's a snip:

"While the Copyright Act makes authors of derivative works the presumptive owners of copyright rights in their contribution, it also allows parties to adjust those rights by contract. Here, the jury found that the parties to the letter agreement did just that-agreed that Price Waterhouse would hold the copyright in the derivative work. Because of the ambiguity in the letter agreement, it was necessary and proper for the jury to consider 'the parties' intent in entering into the letter agreement in order to determine the respective rights of Price Waterhouse, Yang and the subsequent authors of the derivative work, even though those subsequent authors, the Sky Company Programmers, did not sign the letter agreement. "

How SCO feels this case supports their position is hard to figure, unless Exhibit C is irrelevant and they plan on asserting the license terms of the original agreement are the whole story. It's a copyright case involving a Chinese firm, hired to do work which then hired others to do the work. Here's what The BNA's Patent Trademark & Copyright Journal says:

". . .petition for certiorari was filed Feb. 14 in Liu v. Price Waterhouse LLP (U.S., No. 02-1213) appealing the Seventh Circuit's ruling that ambiguities in a contract to produce an upgraded computer program made it appropriate to weigh the parties' intent and find that the owner of the original program, rather than the author of the derivative work, retained rights to the new work. 302 F.3d 749, 64 USPQ2d 1463 (7th Cir. 2002) (64 PTCJ 464, 9/27/02) . The petition asks whether the copyright in a lawfully created derivative work can initially vest in the owner of the preexisting work rather than the statutory author of the derivative work absent a signed writing memorializing a transfer of ownership."

8. Page 19 lists all the "examples of significant infringing derivative works contributions to Linux 2.4x and Linux 2.5x "-- NUMA, RCU, JFS, XFS, Schedulers, LinuxPPC 32- and 64-bit support, and Enterprise Volume Management System.

9. Page 20 lists exactly how many lines of code are involved. For RCU, they say there are 46 files, 109,688 lines; NUMA, 101 files, 56,587; JFS, 44 files, 32,224 lines; XFS, 173 files, 119,130 lines; SMP, 1,185 files; 829,393 lines.

10. Page 22 lists an example of "non-literal transfers -- methods and concepts", an email from an IBM employee in which he shares a thought. Somebody call the High Technology Crime Brigade, because they need to come a-running. People are sharing ideas, for crying out loud. SCO owns those thoughts. Boies certainly has come full circle from Napster to taking such a position as this. And what about paragraph 9 of their Exhibit C, which says, "Nothing in this agreement shall prevent Licensee from developing or marketing products or services employing ideas, concepts, knowhow or techniques relating to data processing embodied in software products subject to this agreement, provided that licensee shall not copy any code from such software products into any such product or in connection with any such service and employees of licensee shall not refer to the physical documents and materials comprising software products subject to this agreement when they are developing any such products or services or providing any such services."

11. Page 23 lists the difference between the 2.2 kernel and, significantly enough, the 2.6 kernel, and they assert there is no way that it could have been done "without direct access to 25 years of UNIX development expertise."

12. Page 24 talks about copyright damages, although SCO hasn't to date sued anyone for that. They make the words red that say that a copyright owner gets actual damages and any additional profits of the infringer. Unfortunately for SCO, copyright infringement is what IBM has charged them with, so I hope they are ready to fork over their profits from that infringement, should they be found guilty.

13. Page 26 explains the SCOsource Linux Licensing Program, and you can almost hear the violins start to play as they state that the license is "designed to provide immediate relief to Linux end-users." Of course, the license doesn't include source code, modification, or distribution rights, they say, without seeming to realize that there may be some GPL issues here. Well, IBM is going to give them their PhD in the GPL when they get to court.

They also include all the comparisons of the code, which have been ridiculed from here to Mars, but nothing makes SCO ashamed, so you can gaze at it to your heart's content, and if you are clueless or in a SCO-induced fugue state, you might think it means something. SCO and all their lackeys seem to rely quite heavily on cluelessness to win the day. However, one thing is for sure. Judge Kimball is not clueless.

One other thing, the Register is reporting that HP is still funding the SCO City to City tour, though it would rather you didn't know about it. If this proves to be true, please spare me any email about how HP is actually very supportive of GNU/Linux, and they really mean it, and their indemnification offer wasn't to support SCO, and how it's purely coincidental that they offer indemnification at the same time that SCO calls for it, and a Fenwick attorney talks about expecting IBM to follow HP's lead, and the ever-so "fair and balanced" Rob Enderle says we should smarten up and definitely offer indemnification if we want to win against SCO, and all the other "analysts" are starting to sing the indemnification chorus again. HP at best seems to be trying to play both sides, which isn't good enough. I'm not buying so much as a printer from them, let alone a computer with GNU/Linux software petrified in a HP indemnification prison. That's petrified in the sense of turning organic matter into stone.

None of these singers of SCO's songs understand what GNU/Linux is or the connection between its openness and the ability to modify it and its excellence. They think of software as a product you can stuff in a box and sell like a toaster. If they read this sentence, they won't know what I am talking about. They don't care if they eviscerate Linux. In contrast, IBM has taken a powerful stand, so I'll buy anything they are selling for the rest of my life, as I have the opportunity.

I'm remembering a scripture that says that God is loyal to those who are loyal. That's a pretty good rule for humans too, and if enough of us show loyalty to those who are proving loyal to the community, we can be a force for change even amongst amoral business types who think only of money and the bottom line.

By the way, Sun seems to be having some money troubles, according to the Register. The article states they have revised their fourth quarter financial figures downward:

"Sun has been struggling to reach profitability over the last couple of years, as the company has been hit hard by a slowdown in hardware spending. In recent quarters, main rival IBM has managed to scoop up some of Sun's share in the prized market for Unix servers. In addition, analysts charge that Linux servers pose a threat to Sun's Unix business. . . .

"The earnings revision, however, comes as a major blow. Sun has wiped out one of its few profitable quarters in recent memory. The company is also saying that things are looking worse than expected. The first fiscal quarter report is due out in mid-October."

See what I mean about things eventually getting clearer?

What SCO and Sun and, yes, HP appear to have forgotten is that we, as home users and as executives on the job, make decisions that affect which of them makes money from hardware, software, and services. Here's a story of one New Zealand organization that just switched from SCO to Linux, and why. We are the bottom line.

Groklaw © Copyright 2003 Pamela Jones. All trademarks and copyrights on this page are owned by their respective owners. Comments are owned by the individual posters. This work is licensed under a Creative Commons License

[shadowman99]

SCO had the powerpoint presentation on their website briefly, then I imagine one of their lawyers freeked and made them bring it down. The contents were modified since it was shown in Vegas.

Rush refuses to comment, despite media presure.

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