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Novell's Letters - Why They Contest SCO's Copyright
Monday, December 22 2003 @ 05:10 PM EST

Here are the letters between Novell and SCO regarding ownership of copyrights on UNIX, referred to by Novell in their press release today. My impression is that while Novell carefully details its objections to SCO's claims, SCO's reply is vaguely threatening without ever being specific as to why they don't agree with Novell.

You can find links to the documents referred to in the letters in Legal Docs. The Asset Purchase Agreement is here: http://www.groklaw.net/article.php?story=2003111023050367

And Amendment 2 is here:
http://edgar.sec.gov/Archives/edgar/data/1102542/000104746903037863/a2123204zex-99_1.htm#toc_ke2800_2

Our thanks to Niels Leenheer for transcribing the letters so quickly.

June 26, 2003

Via Telefacsimile (801) 765-1313 and certified mail

Darl McBride
President and Chief Executive Officer
The SCO Group
355 South 520 West
Lindon, UT 84042

Re: Asset Purchase Agreement Between The Santa Cruz Operation, Inc. and
Novell, Inc., September 19, 1995

Dear Darl:

I write to address SCO's recent statements (to the press, in a securities
filing, in your amended complaint in the IBM case, and in other materials)
that SCO owns all of the intellectual property rights associated with UNIX
and UnixWare. For example, your June 6 press release states that SCO owns
"all rights to the UNIX and UnixWare technology," and the description of
your "SCOsource" program on your Web site states that SCO owns "the patents,
copyrights and core technology associated with the UNIX System."

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.

We are still reviewing the Asset Purchase Agreement and other background
materials to determine the actual scope of rights transferred to SCO. In the
meantime, we wish to make clear that we do not agree with SCO's public
statements on this matter.

Sincerely,

[signature]
Joseph A. LaSala, Jr.
Sr. Vice President,
General Counsel and Secretary

-------------------------------------------

VIA FACSIMILE AND CERTIFIED MAIL
RETURN RECEIPT REQUESTED

August 4, 2003

Mr. Darl McBride
President and Chief Executive Officer
The SCO Group
355 South 520 West
Lindon, UT 84042

Dear Mr. McBride:

This is further to my letter of June 26, 2003 concerning ownership of the
copyrights in UNIX, and follows your recent announcement that SCO has
registered its claim to copyrights in UNIX System V with the U.S. Copyright
Office.

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
exclusive rights associated with a particular copyrighted computer program.

Unless and until SCO is able to establish that some particular copyright
right is "required" for SCO to exercise its rights under the APA, SCO's
claim to ownership of any copyrights in UNIX technologies must be rejected,
and ownership of such rights instead remains with Novell.

Sincerely,

[signature]
Joseph A. LaSala, Jr.

--------------------------------------

Via Telecopy and Certified Mail

September 10, 2003

Mr. Joseph A. LaSala, Jr.
Novell, Inc.
404 Wyman Street, Suite 500
Waltham, MA 02451

Dear Mr. LaSala,

I write in response to your letters to Darl McBride of August 4, 2003, and
August 20, 2003. Please direct all future correspondence to The SCO Group,
Inc. to my attention.

We have reviewed and considered your letters 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.

In addition, it appears that Novell is acting in concert with IBM to destroy
the value of the 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.

Thank you for your attention to this matter. Please feel free to call if you
have any questions.

Sincerely,

[signature]
Ryan Tibbitts
General Counsel
The SCO Group, Inc.

  


Novell's Letters - Why They Contest SCO's Copyright | 111 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Institutional vagueness
Authored by: Anonymous on Monday, December 22 2003 @ 06:59 PM EST
Once more we see what seems to be chronic institutional vagueness on SCO's
part. Novel's letters contain an explicit argument based on particular wording
in Amendment 2. The response by SCO can simply be sumarized as, "we
don't agree." They suggest that Novell go back to the Amendment, but
offer no guidance as to their thinking; just an off-hand suggestion that amounts
to "find it yourself." This is the same form of dicussion that
typifies the IBM law suit and the SCO repsonse to discovery requests.

It begins to appear that the dysfunction at SCO is institutional rather
situational. SCO should regard the copyright issue as core to their success, but
you could never guess this from their public or apparently private utterances.
The letter to Novel can't construed as public posturing and it didn't serve to
boost their stock price.

[ Reply to This | # ]

Novell's Letters - Why They Contest SCO's Copyright
Authored by: blacklight on Monday, December 22 2003 @ 07:02 PM EST
Novell's (re)-registration of its AT&T UNIX codebase copyrights definitely
takes the wind out of the SCO Group's sails. I don't see any possibility that
the SCO Group could sue any end user successfully, given the existence of the
Novell UNIX copyrights. Those end users who doen't have the expertise on the
UNIX codebase and the UNIX license contracts or the cash to mount an effective
defense will be tremendously helped by Novell's actions: they need only tell
the judge that the SCO Group is not in a position to assert its copyrights to
anyone, given that they are in dispute.

The Novell re-registered copyrights are the end of the road for the SCO Group.
Assuming (and this is a purely arbitrary assumption) that the SCO Group somehow
manages to show that the copyrights were indeed transferred to it, these
copyrights are stil subject to an IBM validity challenge because they apparently
cover very old code.

[ Reply to This | # ]

Summary: not looking good for SCO
Authored by: Nathan Hand on Monday, December 22 2003 @ 07:34 PM EST

So here's a quick summary. People, please add anything I have missed.

  1. SCO claims that "MIT mathematicians" found significant overlap between UNIX and Linux with "spectral analysis". The MIT mathematicians seem to be imaginary (pun!) and are not mentioned in court filings.
  2. SCO threatens to revoke IBM's UNIX license and thereby destroy their AIX business. Nothing happens. The date that SCO "drew in the sand" comes and goes without a peep.
  3. SCO claims copyright ownership of UNIX for months in the press. Turns out this was in dispute all along and there's a good chance SCO has no copyright claims. Novell produces documents showing the transfer never occurred (not in the sense that SCO claims).
  4. SCO claims ownership over the "UNIX(r) operating system" and is told by The Open Group (the actual trademark owners) to stop misrepresenting their rights. SCO ignores TOG and continues overstating their ownership to the press.
  5. SCO shows selected analysts the proof that millions of lines of code have been copied. Almost a year later, IBM still hasn't seen a single line identified. SCO now claims they don't have any proof until IBM produces AIX code in discovery.
  6. SCO claims that their lawyers are acting on a pure contigency basis. This claim is repeated by analysts like DiDio who say it strengthens SCO's case. Their SEC filings prove SCO was lying; the lawyers have been charging by the hour.
  7. SCO claims 4 straight quarters of profitability ("a year") yet they posted a loss of $1.6 million this quarter. Then you realise they're not including the $9 million paid to lawyers; is that even legal?
  8. SCO finally shows a single unambiguous code that they claim is illegally copied from UNIX. They're header files. They're straight from the POSIX and C specifications. It's public domain knowledge and has been that way for decades.

Is there anything that SCO has done that hasn't been an absolute farce? This is incredible. Almost a year down the track and their claims are getting even sillier.

Even worse, why aren't the press journalists and analysts tearing SCO to shreds? I would have thought the press would love this kind of mess; there's plenty of material in there to hang SCO and watch them twitch. Where are the difficult questions? Where's the investigation into SCO's dubious SEC filings? Why does the mainstream press do little more than swallow SCO's story and label Linux users as "terrorists"?

[ Reply to This | # ]

Novell's Letters - Why They Contest SCO's Copyright
Authored by: Anonymous on Monday, December 22 2003 @ 07:39 PM EST
The statement in Amendment No. 2 that Novell is referring to seems vague or odd
to me. I've been trying to figure out a situation where SCO would need a
copyright(s) "to exercise its rights with respect to the acquisition of
UNIX and UnixWare technologies," and I've come up blank. Can anybody
throw out a scenario where SCO might, indeed, be able to demonstrate such a
need?

[ Reply to This | # ]

Novell's Letters - Why They Contest SCO's Copyright
Authored by: Anonymous on Monday, December 22 2003 @ 07:40 PM EST
SCO has a problem. They have to demonstrate that a copyright was required for
them to exercise their rights in the original contract. As the contract and the
Unixware business existed for several years without the need for additional
copyrights, can SCO show that one of their rights within the original Novell
contract was to shakedown otherwise non-offending similar operating systems due
to alleged similarities in the source code, and hence they need a copyright or
two now. I doubt it. IANAL, but I think this is going to be a major problem
for SCO.

There had to be a reason that old SCO agreed to only receive limited copyrights
under limited circumstances -- go back to the meeting of the minds and think of
what was exchanged. I don't think that this current circumstance was ever
implied in the contract. What did old SCO buy -- the old Unix business --
that's it. Novell was probably protecting themselves from this type of
eventuality (an overbroad IP grab affecting their business) when they limited
the IP transfer. SCO's in trouble.

[ Reply to This | # ]

Amendment 2 technicality?
Authored by: JMonroy on Monday, December 22 2003 @ 07:45 PM EST
The Amendment 2 states (regarding excluded assets):

"All copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the Agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies."

I may be wrong, but didn't Novell just register some copyrights? Does that imply that Novell didn't technically own them in the eyes of the law until they registered the copyrights?

Making another leap - does the above highlighted clause then null and void any copyright claim by SCO since "Novell didn't own the copyrights as of the date of this agreement?" I know it sounds crazy, but you can never second-guess legalese.

[ Reply to This | # ]

SCO Group - Core competencies
Authored by: the_flatlander on Monday, December 22 2003 @ 08:01 PM EST
Well, let's see....

Darl ain't a lawyer, he's admitted that, publicly, and, were there any doubt,
his published remarks regarding the U.S. Constitution and the intentions of the
framers abolishes that neatly.

He isn't a programmer, or he'd never, ever have bothered to claim copyright on
a header file that identifies a single genericly named variable. (Really, I've
been having a hard time with that one all day. There just doesn't seem to be
enough oxygen in the air for me to catch my breath.)

He isn't a great leader, unless this brief bubble in the company's stock price
counts as success, because by now it is obvious to all but the most pointy
haired bosses, there is no beef behind all that B.S.

Their Lawyer, in their letter to Linux Users, threatened them with BSD's
copyright?!?! This made sense to them?

Acid, imho, only large doses of acid could account for the trip those folks have
taken. Dropping acid must be the thing they do best....

I'm lost. What is it they do for a living there?

TFL

[ Reply to This | # ]

Novell's Letters - Why They Contest SCO's Copyright
Authored by: KentWA on Monday, December 22 2003 @ 08:05 PM EST
Could this be the opening shots in the third legal front? Is Novell getting
ready to follow Red Hat's lead and assert their own rights. If you follow the
bouncing ball of Novells recent actions you can be lead to that conclusion.

[ Reply to This | # ]

Novell's Letters - Why They Contest SCO's Copyright
Authored by: frumpus on Monday, December 22 2003 @ 08:42 PM EST
"I write in response to your letters to Darl McBride of August 4, 2003,
and August 20, 2003."

Does anybody have any idea what Ryan Tibbitts is talking about? Is he just
mis-stating the dates of the letters of June 26 and August 4?

[ Reply to This | # ]

Next step: Novell revokes SCO rights?
Authored by: Anonymous on Monday, December 22 2003 @ 08:48 PM EST
Looks like Novell is posturing to pull everything back from SCO. They'd seem
to have at least 3 good avenues:

1) SCO doesn't own the rights they claim to have and probably filed for them
improperly (illegally?); filing for copyrights on material they don't own,
without at least first getting clarification? Is it misrepresentation, fraud,
or perjury?

2) Novell told SCO to waive any purported misdeeds by IBM, as allowed under the
APA. The clause seems intended to avoid a 'land-grab', which SCO appears to
be trying. SCO refused to abide, thus violating the terms of the APA?

3) Under APA, purchase of SCO by Caldera, regardless of the name change to SCOG,
seems to have effectively cancelled the agreement and may give Novell rights to
reclaim the code.

INAL, but there doesn't seem to be any way for SCO to avoid being chewed up.
They now have a fight on at least 3 fronts (not counting the formidable PJ, or a
judge who wants some real answers within a few weeks). FSF, TOG or OSDL may
join the fray. If SCO sues somebody as threatened, it could get real ugly -
especially if they go after former employees (who have answers but may be
holding back to avoid the hassle of dealing with SCO and Canopy. Do they know
the "connection" to people who are allegedly funding this?).

I've wondered why they didn't sue Hellwig. Yes, it could be that they know
they won't get much; my guess is they're afraid of what he'd put in a
(publicly accessible) response. *THAT* could be interesting, especially if it
has attached affidavits from other SCO, Caldera, Lineo, etc., people.

[ Reply to This | # ]

Is this how its going to be?
Authored by: penguinroar on Monday, December 22 2003 @ 09:30 PM EST
I find all this very intriguing and comforting in a way. Now it seems Novell is
opening up yet another front. One very interesting trend would be if this
becomes more common later on in linux life. That the various companies
using/selling/distributing linux starts to cooperate in times of attack. Imagine
this down the road if even more companies start using linux.

Even Microsoft would be getting a hard time if both small and bigger companies
would be gathered around a common goal. Until now they have mostly been fighting
against eachother without any common goal since MS has been the goalkeeper.

With linux they have a common interest that unite them over one common issue. I
think this is very interesting indeed.

Sorry, ranting away as usual.

You know, "to think before you talk is like wiping your ass before you
take a dump", thats my motto.

;D



---
Free market != greed.

[ Reply to This | # ]

They are all out to get us
Authored by: Anonymous on Monday, December 22 2003 @ 10:43 PM EST
"In addition, it appears that Novell is acting in concert with IBM to
destroy
the value of the SCO UNIX and UnixWare intellectual property acquired from
Novell in the Asset Purchase Agreement. SCO is not going to let this
happen."

Paranoid much? SCO is the one who is clearly out to get someone.

[ Reply to This | # ]

4.16 (b) gives Novell broad powers - why not use them?
Authored by: Anonymous on Tuesday, December 23 2003 @ 03:05 AM EST
Section 4.16 (b) of the APA says "at Seller's sole discretion and
direction, Buyer shall amend, supplement, modify or waive any rights
under, or shall assign any rights to, any SVRX License to the extent so
directed in any manner or respect by Seller." Novell used this clause to
negate SCO's "cancellation" of IBM's license. Why not go further,
and direct SCO to amend IBM's SVRX contract so that what IBM gave to
Linux - NO MATTER WHAT IT WAS OR WHETHER IBM HAD A RIGHT TO DO SO
UNDER IBM'S ORIGINAL CONTRACT - is within the bounds of the amended contract,
PERIOD (or that any other action taken by IBM was within the contract).
Can't Novell absolutely end SCO's suit against IBM by such an action?

WB

[ Reply to This | # ]

Novell's Letters - Why They Contest SCO's Copyright
Authored by: caliboss on Tuesday, December 23 2003 @ 03:10 AM EST
You read it here first!

I predict that by the end of January 2004, Boies's law firm will be sueing SCO for misrepresentation and deleterious actions to damage their own stock value.

---
Grok the Law / Rock the World

[ Reply to This | # ]

Vague arguments indicator of.....
Authored by: nedwidek on Tuesday, December 23 2003 @ 09:53 AM EST
no position.

I recently had a disagreement with an action my home owners association had
planned to take. When the matter was raised in the monthly meeting they made
vague assurances about having the right to take the action. So I wrote a letter
complete with quotes and references to sections of the covenants, by-laws, and
articles of incorporation. They took the letter to their lawyer whose simple
decision on the matter was "He's right."

Looks like we've got the same thing going on here.

[ Reply to This | # ]

Novell's LettersSweet Irony
Authored by: Anonymous on Tuesday, December 23 2003 @ 11:01 AM EST
What would be some really interesting press as well as a major bombshell to SCO?
Since Novell appears to own the copyrights to Unix Systems V, it would be an
SCO nightmare if Novell would release all of that code under the GPL or BSD
license right now.

[ Reply to This | # ]

The original agreement and the amendment
Authored by: rsmith on Tuesday, December 23 2003 @ 12:20 PM EST

The original agreement listed the copyrights in the excluded assets:

Schedule 1.1(b) Excluded Assets (Page 2 of 2) V. Intellectual Property: A. All copyrights and trademarks, except for the trademarks UNIX and UnixWare.

This is pretty clear. Copyrights are not part of the deal. As I read it, SCO gets the right to sell SysV and UnixWare licenses. Duh.

Now comes amendment No.2, making things murkier. It says:

With respect to Schedule 1.1(b) of the Agreement, titled "Excluded Assets", Section V, Subsection A shall be revised to read: All copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the Agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies. ...

I think this situation is comparable to an author giving a publisher persmission to print and sell his books while he retains the copyright. If my interpretation is correct, SCO has the right so sell licenses to SysV and UnixWare. It does not need the copyrights for that, and so, as per amendment 2, doesn't get them.

I guess that Novell was quite pissed when SCO took no notice when Novell waived IBM, as it is allowed to do per section 4.16(b), and decided to slap them with a clue-by-four.

---
Never ascribe to malice that which is adequately explained by incompetence.

[ Reply to This | # ]

Novell's Letters - Why They Contest SCO's Copyright
Authored by: pooky on Tuesday, December 23 2003 @ 02:35 PM EST
What's nice about this as that, as specious as SCOG's arguments are over
copyright violations by end users, anyone who SCO sues will simply tell the
court that the ownership of the copyrights is contested by Novell, litigation on
hold or dismissed outright until that is resolved.

I'll bet SCOG will focus a ton of their attention in this direction since it
probably will stop them from suing an end user until it's resolved.

SCO 0, Novell/IBM/SuSE/Rest of Intelligent Universe 4

-pooky

---
IANAL, etc...

[ Reply to This | # ]

Conspiracy? No!
Authored by: ChrisP on Tuesday, December 23 2003 @ 09:45 PM EST
Mr Tibbitts writes:

"In addition, it appears that Novell is acting in concert with IBM to
destroy the value of the 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."

And Darl has recently reiterated the conspiracy charge.

Consider what Novell have noticeably done so far in relation to the suits.
Repudiated the cancellation of the AIX license and registered some copyrights,
and in soing so, they are indeed "abid[ing] by the terms of the agreement,
including all amendments."

SCO Amended Complaint Exhibit C: Letter Agreement (February 1, 1985)
http://www.groklaw.net/article.php?story=20031115193755436

"A. Software Agreement
8. Regarding Section 7.05, we will cooperate with you in defending litigation
arising from your use of SOFTWARE PRODUCTS (or sublicensing of SUBLICENSED
PRODUCTS under the Sublicensing Agreement), but the extent of such cooperation
cannot be determined until such litigation arises."

Just more SCOG FUD I guess.

---
SCO^WM$^WIBM^W dammit, no-one paid me to say this.

[ Reply to This | # ]

  • Conspiracy? No! - Authored by: Anonymous on Wednesday, December 24 2003 @ 10:16 AM EST
    • Conspiracy? No! - Authored by: Anonymous on Wednesday, December 24 2003 @ 10:23 AM EST
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