SCO v. Novell

SCO v. Novell is a lawsuit brought by the SCO Group against Novell. After the SCO Group initiated their Linux campaign, they made several statements that they were the owners of Unix, probably meaning (though never explicitly said) that they were the owners of the copyrights of the original AT&T source code and derivatives. Novell claimed these statements were false, and that they actually still owned Unix. After Novell registered the copyrights to some key Unix products, SCO filed suit against Novell, claiming slander of title. On August 10, 2007, a major portion of the case (the fact that Novell had the copyright to UNIX, and that the SCO Group had improperly kept money that was due to Novell) was decided in Novell's favor. The court also ruled that "SCO is obligated to recognize Novell's waiver of SCO's claims against IBM and Sequent". After the ruling, Novell announced they have no interest in suing people over Unix and stated "We don't believe there is Unix in Linux". [ [ Memorandum and Decision Order in SCO v. Novell] ] [ Memorandum and Decision Order Civil Case No. 2:04CV139DAK] ] [ [,135959-c,unix/article.html Novell Won't Pursue Unix Copyrights] August 15, 2007] On July 16, 2008, the court issued an order awarding Novell $2,547,817 and ruling that SCO was not authorized to enter into the 2003 agreement with Sun.cite web
title=Findings of Fact, Conclusions of Law, and Order
organization=United States District Court for the District of Utah
date=July 16, 2008


On September 19, 1995, the Santa Cruz Operation and Novell agreed to an Asset Purchase Agreement (APA). [cite web
title=Asset Purchase Agreement
date=September 19, 1995
] The APA transferred certain rights regarding Unix and UnixWare from Novell to Santa Cruz, and made Santa Cruz Novell's agent for the collection for certain royalties. These rights included the right to develop and market new versions of UnixWare, and the right to license SVRX (System V Release X) UNIX incidentally or with Novell's permission. In 2000 Caldera acquired the Server Software and Services divisions of Santa Cruz Operation, as well as UnixWare and OpenServer technologies; they assumed Santa Cruz's role in the APA. Two years later Caldera changed its name to The SCO Group.

Background information

The conflict between SCO and Novell originated in 2003, after SCO filed suit against IBM and claimed that it owned Unix. Novell publicly responded to these allegations on May 28, 2003 by claiming that it never sold the copyrights of Unix to SCO’s predecessor, Santa Cruz Operation. On June 6, 2003, SCO held a press conference in which it revealed a second amendment to the "asset purchase agreement between Novell and Santa Cruz Operation". SCO claimed this amendment supports its claim that SCO did receive the copyrights to Unix. In response, Novell issued a press release in which it stated:

While SCO publicly claimed victory, behind the scenes a series of heated letters were sent back and forth. These letters reveal that Novell continued to believe that it was still the legal owner of the Unix copyrights. On October 14, 2003, Novell registered several key Unix copyrights. After their registration became public knowledge Novell issued a press release on December 22, 2003, stating:

On January 13, 2004, Novell launched its Linux indemnification program and publicly released the letters that were sent between SCO and Novell in the previous months. SCO responded the same day with a press release that reiterated its earlier claim and announced that it was preparing to file a lawsuit against Novell.

The lawsuit

On January 20, 2004, SCO filed a "Slander of Title" lawsuit against Novell. This lawsuit, filed in Utah State court, requested a preliminary and permanent injunction. The injunction would require Novell to assign to SCO all copyrights that Novell registered and that Novell would retract all claims they previously made.

Novell successfully "removed" the lawsuit, transferring it to the Federal court system. Four days later, on February 10, 2004 Novell filed a motion to dismiss the case. Novell requested dismissal for failure to state a claim upon which relief can be granted. In support of its motion Novell argued that:
* SCO did not show a valid transfer of copyright ownership, because the Asset Purchase Agreement is merely a promise to assign and that the Agreement is - by law - not sufficient to transfer the copyrights to SCO.
* SCO did not specify specific special damages.

In response, SCO filed several memoranda in opposition to Novell's motion to dismiss. Additionally, SCO filed a motion to remand (move) the case back to State court. Novell countered that resolution of the case would require interpretation of copyright law, which would require it to be tried in federal court.

On May 9, 2004, Judge Dale A. Kimball heard arguments of both parties and took both motions under advisement. On June 10, 2004 Judge Kimball denied SCO's motion to remand and partially granted Novell's motion to dismiss, on a pleading technicality. The case was dismissed without prejudice, which would allow SCO to amend their complaint to include properly pleaded special damages.

On July 9, 2004, SCO filed an amended complaint.

On July 29, 2005, Novell filed a countersuit against SCO claiming Slander of Title, Breach of Contract, Failure to Remit Royalties and Failure to Conduct Audit Obligations. Novell sought damages in excess of SCO's net worth, and, as SCO was quickly burning through its assets and cash on hand, Novell asked the court to sequester this money from SCO so that it would not be spent before the resolution of the case. Novell also asked the court to attach SCO's assets pending adjudication of their claims. If Novell wins this motion it would force SCO to file for bankruptcy. They accused SCO of accepting Unix SVR4 licensing money from Microsoft and Sun Microsystems without remitting back to Novell the full 100% of the monies (after which Novell would pay SCO its 5% administration fee). They also mentioned at the beginning of the counterclaim that SCO asked Novell to go in together with them on the Linux IP Infringement Licensing Plan. When Novell refused, SCO asked Novell to turn the copyrights over to SCO, a request Novell also refused.

On January 3, 2006, SCO filed a proposed amended complaint containing the original slander of title claim, as well as several new claims, including unfair competition, copyright infringement and breaching a purported no-compete agreement.

On April 10, 2006, SuSE (part of Novell) filed a Request for Arbitration with the Secretariat of the ICC International Court of Arbitration in Paris, France. Years earlier SCO (then named Caldera) had signed contracts with SuSE (now owned by Novell) involving UnitedLinux. In this contract the UnitedLinux members agreed that each member would have broad licenses to exploit and distribute Linux products that include UnitedLinux technology, and they agreed to arbitration of disagreements. This request by SuSE was in response to SCO's amended complaint against Novell alleging copyright infringement. The arbitration process has relatively strict timelines, unlike the U.S. courts' procedures. Novell filed a "Motion to Stay Claims Raising Issues Subject to Arbitration" in the U.S. courts, saying that four of five SCO claims (including copyright infringement) have been brought to arbitration, and thus can be stayed in the U.S. court until the Arbitration Tribunal renders its decision. Novell also filed an "Answer to SCO's 2d Amended Complaint and Counterclaims", claiming a large number of affirmative defenses, one of which accuses SCO of conducting fraud on the U.S. copyright office.

On September 22, 2006, Novell sought leave to file amended counterclaims. Through discovery, Novell had obtained copies of Unix licensing agreements between SCO and Microsoft and Sun, and alleged that upon review of the agreements, it was determined that they breached the APA. The added claims were conversion and breach of fiduciary duty. Judge Dale Kimball granted Novell's motion, as it was stipulated to by SCO.

On September 29, 2006, Novell filed a Motion for Summary Judgment, or if that was rejected, then for a Preliminary Injunction. Novell has alleged that SCO, through their agreements with Sun and Microsoft, licensed them Novell's property without paying Novell the owed royalties. Novell asked for SCO to be forced to turn the royalties over to Novell, or, in the alternative, be forced to put the money into a Collective Trust.

On August 10 2007, Judge Dale Kimball, hearing the SCO v. Novell case, ruled that "...the court concludes that Novell is the owner of the UNIX and UnixWare Copyrights". Novell were awarded summary judgments on a number of claims, and a number of SCO claims were denied. SCO was instructed to account for and pass to Novell an appropriate portion of income relating to SCOSource licences to Sun Microsystems and Microsoft. A number of matters are not disposed of by Judge Kimball's ruling, and the outcome of these are still pending.

On September 17, 2007, a trial in SCO v. Novell was expected to begin in order to determine how much money SCO owed Novell. However, on September 14, 2007 SCO Group filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. [ [ The SCO Group Files Chapter 11 to Protect Assets as It Addresses Potential Financial and Legal Challenges] . The SCO Group, Inc. press release, September 14, 2007] As a result of the petition for bankruptcy, all pending litigation was automatically stayed as per U.S.C. § 362.

On November 27, 2007 Judge Gross (bankruptcy judge) lifted the stay so as to allow determination of any money owed, but retained jurisdiction over any constructive trust which might be appropriate.

On April 30, 2008 In accordance with the agreement between the parties, and for the purposes of this trial, Novell is the plaintiff and SCO the defendant to determine how much money SCO owed Novell. Novell states that they seek the recovery of $19,979,561 from SCO based on its licenses to Microsoft, Sun, and others. [ [ First Word from Day 1 of the Novell v. SCO Trial] April 30, 2008]

On July 16, 2008, the court issued an order that, "awards Defendant and Counterclaimant Novell $2,547,817 on its Sixth, Seventh, and Eighth Claims for Unjust Enrichment, Breach of Fiduciary Duty, and Conversion. On Novell’s Fourth Claim for Relief, for the reasons stated above, the court concludes that SCO was entitled to enter into the 2003 Microsoft Agreement and the Other SCOsource Licenses, but was not authorized to enter into the 2003 Sun Agreement based on its amendment of the provisions concerning Sun's SVRX confidentiality requirements under the 1994 Agreement."

The decision, which is appeallable, granted Novell the 2.5 million dollar award specified due to the 2003 Sun Agreement's modification of the 1994 confidentiality provisions. These modifications permitted the release of OpenSolaris. Any awards for costs and pre-judgement interest are yet to be determined.

ee also

*SCO-Linux controversies
*Caldera OpenLinux


External links

* [ Novell's Unique Legal Rights] - Novell's official page about this lawsuit
* [ Novell-SCO Timeline] at Groklaw
* [ Groklaw's Legal documents section for SCO vs Novell] - An archive of court documents related to this lawsuit
* [ Novell Files Arbitration Request in Paris - The Jacobs Declaration]
* [ Novell Files Motion to Stay, Answer with Counterclaims etc.]

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