Here's IBM's Unsealed Sur-Reply Memorandum in Further Opposition to SCO's Motion for Leave to File a 3rd Amended Complaint[PDF], as text. We earlier discussed this Sur-Reply here. Additional arguments were raised by both parties in the April 21 hearing on SCO's motion. IBM in this document argues, among other things, that SCO ought not to be allowed to amend their complaint to add a claim of copyright infringement based on their allegation that IBM had no right to use SVR4 code in AIX 5L on POWER. IBM points out that SCO (and oldSCO) knew or ought to have known years ago that Project Monterey was designed to be used on POWER and that it had SVR4 code in it: SCO knew or should have known the facts relating to its proposed copyright claim many years ago -- long before the deadline for the amendment of pleadings and even before SCO filed its original complaint. Nothing in SCO's reply papers justifies its delay in seeking to add the proposed claim IBM presents evidence of that knowledge or of SCO's obligation to investigate, arguing that it's too late now to bring it up, when no one objected at the time or even earlier in this litigation, as in this paragraph: The evidence makes perfectly clear that SCO knew IBM included SVR4 code in its AIX for Power product (as the parties to Project Monterey agreed IBM was permitted to do). For example, in an August 11, 2000 e-mail, John Boland of The Santa Cruz Operation, Inc. ("Santa Cruz"), SCO's alleged predecessor-in-interest, distributed internally a press release prepared by IBM announcing the upcoming release of AIX 5L for Power and IA-64. (See Declaration of Todd M. Shaughnessy, dated Nov. 30, 2004, "Shaughnessy Decl." Ex. 10.) The press release makes clear that AIX 5L for Power, like AIX 5L for IA-64, contained "key technologies" from "UnixWare" and "UNIX System 5 [SVR4]". (Id. at SCO1374969-70 (emphasis added).) In particular, the release noted that "[a]mong the UNIX System V technologies to be incorporated in this release is the SVR4 printing subsystem". (Id. at SCO1374970 (emphasis added).) Further, IBM says that allowing SCO to assert its claim would be "unduly prejudicial to IBM", because it would "deny IBM its rights under the venue and limitations provisions" of the agreement that oldSCO and IBM signed, and further they say the proposed claim would complicate the case, requiring substantial additional discovery and prolonging the whole SCO v. IBM litigation. IBM has likely had enough of these proceedings. I know most of us are sick of the discovery phase and would like to see matters move forward at a snappier speed than its current glacial pace. The prejudice issue came up in the April 21st hearing, with SCO's attorney saying that IBM hadn't raised an argument of undue prejudice (page 74). IBM's attorney, on page 84, reminded the court that when he began speaking at the hearing on this motion, he said that he wouldn't be making all their arguments orally, since they had already made them in writing. This Sur-Reply, for one, makes that very argument. Just one more tricky-icky moment in the SCO v. IBM litigation. SCO's attorneys certainly can be assumed to have read this Sur-Reply, which clearly makes the argument that IBM would be prejudiced by SCO being permitted to amend its complaint.
SCO has claimed that it didn't know about IBM including SVR4 code in its AIX for Power products until recently, and offered a declaration from an employee, Jay Petersen, that he didn't know about the documents IBM brought forward until he read them in IBM's legal filings. Also, SCO argued that they aren't Santa Cruz -- *now* they tell us -- and so they can't be charged with knowing what Santa Cruz knew. They, SCO, didn't know back in the day, even if Santa Cruz did, they asserted. IBM counters: That is wrong as a matter of law. The case law is clear that SCO is charged with what Santa Cruz knew or should have known. I don't think we need to impute knowledge to them. In this article on Sunday, Groklaw presented evidence that executives, including the CEO, at Santa Cruz knew as far back as 1998, regardless of what Mr. Petersen did or did not know. Additionally, in the article, we showed that one of the members of the Board of Directors of SCO Group, R. Duff Thompson, was on the Board of Directors of Santa Cruz, and that attached to the Santa Cruz 10K for the year ending September 1999, was a document signed by Mr. Thompson. The 10K has a "Brief History of SCO Products" timeline, and for the year 1998, it mentions Project Monterey and says the product was designed for use on "Intel IA-32, Intel IA-64 and IBM microprocessor systems that range from entry-level servers to large enterprise environments." The 10K for the fiscal year ended September 1998 said so too. Presumably, then-Caldera/nowSCO read the 10Ks prior to the purchase, as part of their due diligence, but even if they failed to do so, they have on their Board someone who absolutely had every reason to know that Project Monterey was designed to run on POWER. I am repeating the information because it was added as an update to that article, and some might have missed it, and because it is so powerful on the point of whether today's SCO, SCO Nouveau, as one wit on Yahoo SCOX Finance Message Board calls them, knew that Project Monterey's very purpose was to run on POWER, from the beginning of the project or if they only just learned it in discovery, as SCO is boldly claiming. Had they asked Mr. Thompson, or had he raised his hand to speak, I believe they could have learned of it any day at all since 1998, unless we are asked to believe that a member of the Board of Directors doesn't read 10Ks or knows so little about computers, despite sitting on the Board of a software company, that he has no idea what "IBM microprocessor systems" means and felt no need to inquire. IBM also presents evidence, particularly in the footnotes, that it was public knowledge that IBM was using SVR4 code in its POWER products. Note that IBM states it isn't addressing the merits of SCO's proposed amended complaint in this document. It is merely arguing whether SCO should be allowed to file a 3rd amended complaint. If SCO is allowed to file, then IBM will deal with the merits, if that is the right word to use for a claim that seems to me so singularly lacking in that very thing. My thanks to Janne Kalliomäki and to Vidar for doing all the work of transcribing and the HTML. Whenever I see legal filings that start with a table of contents, my heart sinks, and when I saw this one, with such a long one, I thought, "I so hope someone volunteers to transcribe this." And up popped Janne and Vidar, with it all done for us. Thank you so much. ********************************
SNELL & WILMER L.L.P.
Alan L. Sullivan (3152)
Todd M. Shaughnessy (6651)
Amy F. Sorenson (8947)
[Address, phone, fax]
CRAVATH, SWAINE & MOORE LLP
Evan R. Chesler (admitted pro hac vice)
David R. Marriott (7572)
[Address, phone, fax]
Attorneys for Defendant/Counterclaim-Plaintiff
International Business Machines Corporation
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
THE SCO GROUP, INC.
Plaintiff/Counterclaim-Defendant,
v.
INTERNATIONAL BUSINESS MACHINES CORPORATION,
Defendant/Counterclaim-Plaintiff.
|
IBM'S UNSEALED SUR-REPLY
MEMORANDUM IN FURTHER
OPPOSITION TO SCO'S MOTION FOR
LEAVE TO FILE A THIRD AMENDED
COMPLAINT
[Docket 407]
Civil No. 2:03CV0294 DAK
Honorable Dale A. Kimball
Magistrate Judge Brooke C. Wells
|
TABLE OF CONTENTS
Preliminary Statement .................................................................................................................... |
1 |
Argument ................................................................................................................................. |
2 |
I. SCO'S UNDUE DELAY IN SEEKING TO AMEND ITS COMPLAINT BARS
A FINDING OF GOOD CAUSE UNDER RULE 16(b) ..................................................... |
2 |
II. SCO'S MOTION SHOULD ALSO BE DENIED UNDER RULE 15(a) ........................... |
7 |
A. SCO's Proposed Claim Is Unduly Delayed, And Allowing SCO To Assert
It Here Would Impose Undue Prejudice On IBM ...................................................
|
7 |
B. SCO's Proposed Copyright Claim Is Futile ......................................................
|
9 |
1. Section 22.3 Is Applicable To The Proposed Claim ....................................
|
9 |
2. IBM Has Not Waived The Right To Enforce The Venue Provision .........
|
13 |
3. The Limitations Provision Bars SCO's Proposed Claim ...........................
|
15 |
Conclusion ........................................................................................................................... |
16 |
i
TABLE OF AUTHORITIES
Cases |
Altech Controls Corp. v. E.I.L. Instruments, Inc.,
33 F. Supp. 2d 546 (S.D. Tex. 1998) ............................................................................ |
6 |
Braintree Labs., Inc. v. Nephro-Tech, Inc.,
31 F. Supp. 2d 921 (D. Kan. 1998) .................................................................... |
7, 8-9 |
The Bremen v. Zapata Offshore Co.,
407 U.S. 1 (1972) ....................................................................................................... |
14-15 |
Brink's Inc. v. City of New York,
528 F. Supp. 1084 (S.D.N.Y. 1981) ...................................................................... |
10 |
Cambridge Nutrition A.G. v. Fotheringham,
840 F. Supp. 299 (S.D.N.Y. 1994) ........................................................................ |
11 |
Campbell v. Bartlett,
975 F.2d 1569 (10th Cir. 1992) .............................................................................. |
14 |
Digital Envoy, Inc. v. Google, Inc.,
319 F. Supp. 2d 1377 (N.D. Ga. 2004) .............................................................. |
12 |
Direct Mail Prod. Servs. Ltd. v. MBNA Corp., No. 99-10550,
2000 WL 1277597 (S.D.N.Y. Sept. 7, 2000) ..................................................... |
12 |
Dominion Video Satellite, Inc. v. Echostar Satellite Corp.,
269 F.3d 1149 (10th Cir. 2001) ............................................................................. |
14 |
D'Zurella v. Kansas, No. 90-3202,
930 F.2d 33, 1991 WL47101 (10th Cir. Mar. 18, 1991) ........................................... |
8 |
Entous v. Viacom Int'l, Inc.,
151 F. Supp. 2d 1150 (C.D. Cal. 2001) ............................................................. |
16 |
Fireman's Fund Ins. Co. v. Warehouse No. 1, Inc., No. 89-4069,
1989 U.S. Dist. LEXIS 13507 (S.D.N.Y. Nov. 14, 1989) ........................................ |
10 |
General Motors Acceptance Corp v. Clifton-Fine Cent. Sch. Dist.,
647 N.E.2d 1329 (N.Y. 1995) ............................................................................. |
13 |
Harbor Court Assocs. v. Leo A. Daly Co.,
179 F.3d 147 (4th Cir. 1999) ..................................................................... |
16 |
Hasse v. American Photograph Corp.,
299 F.2d 666 (10th Cir. 1962) ............................................................................. |
14 |
ii
In re Indep. Servs. Orgs. Antitrust Litig.,
85 F. Supp. 2d 1130 (D. Kan. 2000) ................................................................... |
15 |
In re Indep. Servs. Orgs. Antitrust Litig.,
114 F. Supp. 2d 1070 (D. Kan. 2000) ......................................................................... |
5 |
J T Gibbons, Inc. v. Sara Lee Corp., No. 93-4050,
1995 WL 619770 (E.D. La. Oct. 19, 1995) ........................................................ |
3 |
Jackson Jordan, Inc. v. Plasser Am. Corp.,
219 U.S.P.Q. 922 (E.D. Va. 1983) .............................................................................. |
5 |
Jacobsen v. Deseret Book Co.,
287 F.3d 936 (10th Cir. 2002) .................................................................................. |
5 |
Keating, v. Baskin-Robbins USA Co., No. 99-0148,
2001 IVL 407017 (E.D.N.C. Mar. 27, 2001) ........................................................... |
12 |
Kepner-Tregoe, Inc. v. Executive Dev., Inc.,
79 F. Supp. 2d 474 (D.N.J. 1999) ................................................................................... |
6 |
Konstant Prods. Inc. v. Frazier Indus. Co., Inc., No. 91-4491,
1993 U.S. Dist. LEXIS 7957 (N.D. Ill. June 7, 1993) ................................ |
4 |
Kreinik v. Showbran Photo, Inc.,
2003 WL 22339268 (S.D.N.Y. Oct. 14, 2003) ...................................................... |
8 |
Lowden v. Northwestern Nat'l Bank & Trust Co.,
84 F.2d 847 (8th Cir. 1936) .................................................................................... |
3 |
McGarvey v. Citibank (N.D.) N.A., No. 95-0123,
1995 WL 404866 (N.D. Ill. July 5, 1995) ........................................................................ |
9 |
Mead v. Future Med. Publ'g. Inc., No. 98-0554,
1999 WL 1939256 (M.D.N.C. Feb. 22, 1999) ........................................................ |
12 |
Medinol Ltd. v. Boston Sci. Corp.,
346 F. Supp. 2d 575 (S.D.N.Y. 2004) ......................................................................... |
14 |
MGA, Inc. v. Centri-Spray Corp.,
639 F. Supp. 1238 (E.D. Mich. 1986). .................................................................... |
4 |
Monsanto Co. v. McFarling,
302 F.3d 1291 (Fed. Cir. 2002) ............................................................................... |
12 |
Nassau Trust Co. v. Montrose Concrete Prods. Corp.,
436 N.E.2d 1265 (N.Y. 1982) ........................................................................ |
13-14 |
iii
Nelson v. A.O. Smith Harvestore Prods., Inc., No. 86-4230,
1990 WL 192738 (D. Kan. Nov. 30, 1990) ................................................................ |
9 |
Oriskany Cent. Sch. Dist. v. Edmund J. Booth Architects,
206 A.D.2d 896 (N.Y. App. Div. 1994) ............................................................... |
16 |
Ory v. McDonald,
68 U.S.P.Q.2d 1812 (C.D. Cal. 2003) ........................................................................... |
4 |
Pearson v. Central Ill. Light Co.,
210 F.2d 352 (7th Cir. 1954) ............................................................................. |
6 |
Phelps v. Hamilton,
166 F.R.D. 489 (D. Kan. 1996) .................................................................... |
7 |
Pickering v. USX Corp.,
758 F. Supp. 1460 (D. Utah 1990) ............................................................ |
9 |
Raymond Int'l, Inc. v. City of New York,
511 F. Supp. 773 (S.D.N.Y. 1981) .............................................................................. |
10 |
Ripley v. Aetna Ins. Co.,
30 N.Y. 136 (N.Y. 1864) .. ....................................................................... |
10 |
Roboserve, Inc. v. Kato Kagaku Co., Ltd.,
78 F.3d 266 (7th Cir. 1996) ...................................................................... |
14 |
Robshaw v. Health Mgmt., Inc.,
98 A.D.2d 986 (N.Y. App. Div. 1983) ......................................................... |
11 |
Rockwell Int'l Corp. v. Goss Graphic Sys., Inc., No. 00-8763,
2001 WL 293818 (S.D.N.Y. Mar. 27, 2001) ............................................................ |
12 |
Rogen v. Memry Corn.,
886 F. Supp. 393 (S.D.N.Y. 1995) .. ........................................................ |
14 |
Ronnen v. Ajax Elec. Motor Corp.,
671 N.E.2d 534 (N.Y. 1996) ......................................................................... |
10-11 |
Schock v. United States,
21 F. Supp. 2d 115 (D. R.I. 1998) ............................................................ |
6 |
Soot v. Gen. Elec. Co.,
681 F. Supp. 157 (S.D.N.Y. 1987) ................................................... |
6 |
Stevens v. Northwest Ind. Dist. Council, United Bhd. of Carpenters,
20 F.3d 720 (7th Cir. 1994) ....................................................... |
9 |
iv
Steward v. Up N. Plastics, Inc.,
177 F. Supp. 2d 953 (D. Minn. 2001) .............................................. |
14-15 |
Technology Express, Inc. v. FTF Bus. Sys. Corp., No. 99-1 1692,
2000 WL 222628 (S.D.N.Y. Feb. 25, 2000) .................................................... |
15 |
Tokio Marine & Fire Ins. Co., Ltd. v. Nippon Express U.S.A., Inc.,
118 F. Supp. 2d 997 (C.D. Cal. 2000) .............................................................. |
15 |
Turtur v. Rothschild Registry Int'l, Inc.,
26 F.3d 304 (2d Cir. 1994) .......... .............................................. |
11 |
Wanlass v. Gen. Elec. Co.,
148 F.3d 1334 (Fed. Cir. 1998) .................................................................. |
5,6 |
Ward Enters., Inc. v. Bang & Olufsen Am., No. 02-7640,
2004 WL 830461 (N.D. Ill. Apr. 15, 2004) ................................................... |
11 |
Warnaco Inc. v. VF Corp.,
844 F. Supp. 940 (S.D.N.Y. 1994) ..................................................................... |
12 |
Warner & Swasey Co. v. Salvagnini Transferica S.P.A.,
633 F. Supp. 1209 (W.D.N.Y. 1986) .......................................................... |
12 |
Weaver v. Univ. of Cincinnati,
758 F. Supp. 446 (S.D. Ohio 1991) ........................................................................ |
9-10 |
Wood v. Santa Barbara Chamber of Commerce, Inc.,
705 F.2d 1515 (9th Cir. 1983) ................................................................ |
6 |
YWCA v. HMC Entm't, Inc., No. 91-7943,
1992 WL 279361 (S.D.N.Y. Sept. 25, 1992) ............................................. |
12 |
Zions First Nat'l Bank v. Allen,
688 F. Supp 1495 (D. Utah 1988) ............................................................. |
14 |
Other Authorities |
DUCivR 7-1(b)(3) ............................................................................................................ |
9 |
5A Charles A. Wright & Arthur R. Miller,
Federal Practice & Procedure 1397 (1990) ............................................ |
14 |
v
Defendant/Counterclaim-Plaintiff International Business Machines Corporation ("IBM")
respectfully submits this sur-reply memorandum in further opposition to Plaintiff/Counterclaim-Defendant The SCO Group, Inc.'s ("SCO") Motion for Leave to File a Third Amended
Complaint.
Preliminary Statement
SCO seeks improperly to extend and expand this case just as it should be coming to a
close. SCO asks the Court to add a complicated, new claim that cannot (by contract) be brought
in this Court and that SCO could seek to file in another forum without causing much of the
prejudice threatened by the present motion. SCO's motion to amend should be denied for two
primary reasons.
First, SCO's motion should be denied because SCO cannot establish good cause under
Rule 16 of the Federal Rules of Civil Procedure for its failure to make this motion before the
deadline for amending the pleadings. SCO's reply papers dismiss the documentary evidence
showing that it knew of the proposed claim years ago on the grounds that it is unclear or
ambiguous, and on the grounds that SCO knew nothing of the evidence in any event. As we
show below, SCO's papers distort the record. There is no reasonable doubt that SCO knew of
the proposed claim years ago. Moreover, even if the documentary evidence were ambiguous and
SCO did not actually know of the proposed claim, it clearly should have known of the claim. At
a minimum, SCO was on inquiry notice, based upon the public record and the documents in
SCO's own files, of a claim it failed to investigate. Having failed to investigate the proposed
claim, SCO cannot establish good cause to bring it at this late date in this litigation. (See
Section I below.)
Second, SCO's motion should be denied under Rule 15 of the Federal Rules of Civil
Procedure because (1) it is unduly delayed; (2) adding the proposed claim would be unduly
prejudicial to IBM; (3) denying the motion would result in no prejudice to SCO as it could seek
1
to bring the claim in another forum; and (4) the proposed claim is futile insofar as it is barred by
contractual venue and limitations provisions. SCO's reply papers raise new and contradictory
arguments that, in the end, fail to support its motion for leave to amend. (See Section II below.)
While the proposed claim is demonstrably without merit, we do not dwell on its
shortcomings here. Despite SCO's invitation, the Court cannot resolve the claim on the merits in
deciding this motion. The primary issue here is whether SCO should be allowed to amend its
complaint to add a claim that will complicate and delay an already complicated case, where that
claim could be - indeed, by contract, must be - asserted in a New York forum and there would
be no prejudice to SCO in requiring it to assert the claim there.
Argument
I. SCO'S UNDUE DELAY IN SEEKING TO AMEND ITS COMPLAINT BARS A
FINDING OF GOOD CAUSE UNDER RULE 16(b).
As explained in IBM's opposition papers, SCO knew or should have known the facts
relating to its proposed copyright claim many years ago - long before the deadline for the
amendment of pleadings and even before SCO filed its original complaint. Nothing in SCO's
reply papers justifies its delay in seeking to add the proposed claim. Nor does anything in SCO's
reply papers establish the good cause necessary for it to prevail on this motion.
SCO relies on two primary arguments to explain away its delay in seeking to bring the
proposed claim. First, SCO dismisses the evidence that it knew of the proposed claim years ago
on the grounds that the evidence is unclear or ambiguous.
1
There is nothing unclear or
2
ambiguous about the evidence submitted with IBM's opposition brief, much of which comes
right out of SCO's files and/or was produced by it in this litigation. The evidence makes
perfectly clear that SCO knew IBM included SVR4 code in its AIX for Power product (as the
parties to Project Monterey agreed IBM was permitted to do). For example, in an August 11,
2000 e-mail, John Boland of The Santa Cruz Operation, Inc. ("Santa Cruz"), SCO's alleged
predecessor-in-interest, distributed internally a press release prepared by IBM announcing the
upcoming release of AIX 5L for Power and IA-64. (See Declaration of Todd M. Shaughnessy,
dated Nov. 30, 2004, "Shaughnessy Decl." Ex. 10.) The press release makes clear that AIX 5L
for Power, like AIX 5L for IA-64, contained "key technologies" from "UnixWare" and "UNIX
System 5 [SVR4]". (Id. at SCO1374969-70 (emphasis added).) In particular, the release noted
that "[a]mong the UNIX System V technologies to be incorporated in this release is the SVR4
printing subsystem". (Id. at SCO1374970 (emphasis added).)
2
Second, SCO contends that even if the documentary evidence showed that IBM included
SVR4 code in its AIX for Power product, SCO did not know about it. (See SCO Reply Br. at 8.)
SCO relies primarily on the declaration of Jay Petersen, a SCO employee who says that he
personally did not know about the documents, at least until he read about them in IBM's
opposition brief. (See Petersen Decl. ¶¶ 11, 12.) As an initial matter, Mr. Petersen cannot testify
as to what SCO or Santa Cruz did not know; he can properly speak only to what he knew.
3
Further, whether Mr. Petersen personally knew of the documents says nothing about whether
3
SCO knew about IBM's use of SVR4 code in the AIX for Power product. Mr. Petersen's lack of
knowledge in no way undermines the force of the documents (submitted with IBM's opposition
brief) showing that others at SCO knew that IBM included SVR4 code in the AIX for Power
product.
4
Recognizing that Santa Cruz knew that AIX for Power included SVR4 code, SCO states
that it cannot be charged with the knowledge of Santa Cruz. (See SCO Reply Br. at 7 (stating
that many of the documents were "from the files of [Santa Cruz], [] which SCO did not see at the
time").) That is wrong as a matter of law. The case law is clear that SCO is charged with what
Santa Cruz knew or should have known. See, e.g., Ory v. McDonald, 68 U.S.P.Q. 2d 1812, 1817
(C.D. Cal. 2003) (stating that "a successor-in-interest is charged with the knowledge and dilatory
conduct of its predecessors" (internal quotation omitted)); Konstant Prods. Inc. v. Frazier Indus.
Co., Inc., No. 91-4491, 1993 U.S. Dist. LEXIS 7957, at *47 (N.D. Ill. June 7, 1993) (ruling that
defendant was "charged with the knowledge of [its predecessor-in-interest] and the consequences
of his dilatory conduct") (attached as Exhibit B); MGA, Inc. v. Centri-Spray Corp., 639 F. Supp.
1238, 1242 (E.D. Mich. 1986) (finding that successor-in-interest is charged with "consequences
of [predecessor-in-interest's] knowledge and dilatory conduct").
Even if (contrary to fact) the information in the public domain and SCO's own files was
ambiguous and SCO did not know that the AIX for Power product included SVR4 code, the
4
proposed amendment is unduly delayed and SCO's motion should be denied. SCO does not
dispute that IBM's use of SVR4 code in the AIX for Power product has long been a matter of
public record (whether or not SCO had actual knowledge of it); nor does SCO dispute that the
documents in its own files were at least ambiguous as to whether the AIX for Power product
included SVR4 code.
5
These facts are fatal to SCO's motion.
Contrary to SCO's contention, both the public record (including IBM's marketing of the
AIX for Power product as including SVR4 code) and the documents in SCO's files (even if
ambiguous) triggered a duty to investigate IBM's use of SVR4 code in its AIX for Power
product.
6
See Wanlass v. Gen. Elec. Co., 148 F.3d 1334, 1338 (Fed. Cir. 1998) (finding that
"sales, marketing, publication, or public use of a product similar to or embodying technology
5
similar to the patented invention, or published descriptions of the defendant's potentially
infringing activities, give rise to a duty to investigate"); Kepner-Tregoe, Inc. v. Executive Dev.,
Inc., 79 F. Supp. 2d 474, 488 (D.N.J. 1999) (finding that plaintiff reasonably should have
discovered alleged infringement where defendant "published, promoted, and sold its materials in
the public domain . . . especially in light of the fact that the two companies competed within a
highly specialized service industry" because reasonable copyright holder, "motivated by his
interest in recovering for and preventing infringement, keeps abreast of the activities of those in
his field of endeavor").
7
A party that fails to comply with its duty to investigate "is charged with knowledge of
facts constituting infringement which could have been discovered in the exercise of reasonable
diligence." Soot v. Gen. Elec. Co., 681 F. Supp. 157, 166 (S.D.N.Y. 1987); see Wanlass, 148
F.3d at 1338 (finding that "constructive knowledge of the infringement may be imputed to the
patentee even where he has no actual knowledge of the sales, marketing, publication, public use,
or other conspicuous activities of potential infringement if these activities are sufficiently
prevalent in the inventor's field of endeavor"); Wood v. Santa Barbara Chamber of Commerce,
Inc., 705 F.2d 1515, 1521 (9th Cir. 1983) (finding that "equity will impute to a litigant
knowledge of facts that would have been revealed by reasonably required further investigation").
Even if SCO did not have actual knowledge of the conduct underlying the proposed claim, it
6
would have known about it if it had properly discharged its duty to investigate. Having failed to
exercise reasonable diligence, SCO cannot establish good cause for its delay in bringing the
proposed claim.
II. SCO'S MOTION SHOULD ALSO BE DENIED UNDER RULE 15(A).
A. SCO's Proposed Claim Is Unduly Delayed, And Allowing SCO To Assert It Here
Would Impose Undue Prejudice On IBM.
As stated in IBM's opposition brief (and discussed above), SCO knew or should have
known of the alleged infringement many years ago and in any case before it commenced this
action and before the deadline for amending pleadings. Allowing SCO to assert its proposed
claim would be unduly prejudicial to IBM. Putting aside the fact that allowing the claim to
proceed in Utah would deny IBM its rights under the venue and limitations provisions of the
JDA (discussed below), the proposed claim would complicate this case, require substantial
additional discovery and significantly prolong these proceedings.
SCO's reply papers do not undertake to show that denial of SCO's motion would result in
prejudice to SCO. It would not. Denial of SCO's motion would not be an adjudication on the
merits and would therefore be without prejudice to SCO's right to seek to assert the proposed
claim in an appropriate forum in New York (as required by the JDA). See Braintree Labs., Inc.
v. Nephro-Tech, Inc., 31 F. Supp. 2d 921, 924 (D. Kan. 1998) (denying motion to amend
complaint, noting that plaintiff failed to "identify what, if any, harm will result if it is required to
commence a separate action"); Phelps v. Hamilton, 166 F.R.D. 489, 492 (D. Kan. 1996)
(denying motion to amend complaint, stating that plaintiff may raise its proposed claim "by
filing a new complaint").
The only arguments offered by SCO to show that the proposed amended complaint would
not be prejudicial to IBM are unavailing. First, SCO contends that IBM would not be prejudiced
by the addition of the proposed claim on the grounds that IBM's Ninth Counterclaim
7
"encompasses SCO's copyright claim". (SCO Reply Br. at 13.) As we have repeatedly advised
SCO, however, IBM's Ninth Counterclaim was not intended to and does not encompass SCO's
proposed claim.
8
Even if (contrary to IBM's intent) the Ninth Counterclaim could be construed
as SCO suggests, IBM has stipulated to the limited scope of the claim and submitted a proposed
order to that effect.
Second, SCO does not dispute that its proposed claim would require additional
discovery.
9
Rather, it contends that the need for additional discovery is not an adequate basis for
a finding of prejudice.
10
(See SCO Reply Br. at 14.) The law is clear, however, that the need for
additional discovery can cause prejudice sufficient to justify denial of a motion to amend, as is
the case here. See, e.g., D'Zurella v. Kansas, No. 90-3202, 930 F.2d 33, 1991 WL 47101, at **1
(10th Cir. Mar. 18, 1991) (Table) (identifying "prejudice to defendants from the need to
undertake additional discovery" as part of rationale for affirming denial of motion to amend
complaint) (attached as Exhibit C); Braintree Labs., 31 F. Supp. 2d at 923-24 (finding undue
prejudice where allowing additional claim "would necessitate additional discovery previously
8
uncontemplated by defendants"); Nelson v. A.O. Smith Harvestore Prods., Inc., No. 86-4230,
1990 WL 192738, at *2 (D. Kan. Nov. 30, 1990) (finding that "additional discovery or
preparation which would be required as a result of the belated addition of new claims is
recognized as a source of prejudice justifying denial of a motion to amend") (attached as Exhibit
D).
B. SCO's Proposed Copyright Claim Is Futile.
In its opening brief, SCO acknowledged that Section 22.3 of the JDA, which includes
venue and limitations restrictions, applies to its proposed claim. (SCO Mem. at 5.) SCO argued
only that IBM had waived the right to enforce Section 22.3 by asserting its Ninth Counterclaim.
For the first time in its reply brief, SCO argues (contrary to its prior position) that Section 22.3 is
inapplicable and that IBM waived the right to enforce the venue provision by failing to raise "the
'defense of improper venue' in its responsive pleading." (SCO Reply Br. at 16.) These
arguments are unavailing.
1. Section 22.3 Is Applicable To The Proposed Claim.
As an initial matter, courts generally refuse to consider arguments raised in a reply brief
that either are raised for the first time in the reply or reflect a change in position from that stated
in the party's opening brief. See DUCivR 7-l(b)(3) (stating that "reply memorandum must be
limited to rebuttal of matters raised in the memorandum opposing the motion"); Pickering v.
USX Corp., 758 F. Supp. 1460, 1461 n.2 (D. Utah 1990) (refusing to rule on argument raised for
first time in reply memorandum); Stevens v. Northwest Ind. Dist. Council, United Bhd. of
Carpenters, 20 F.3d 720, 728 n.18 (7th Cir. 1994) (finding argument in reply brief to be waived
where party "change[d] their approach in their reply brief').
11
The Court should decline to
9
consider SCO's argument that Section 22.3 is inapplicable because SCO not only raised the
argument for the first time in its reply brief but the argument also reflects a change of position by
SCO.
Even if SCO had not conceded the applicability of Section 22.3 in its opening brief,
Section 22.3 plainly applies to the proposed claim. Section 22.3 expressly governs "[a]ny legal
or other action related to a breach of this Agreement". (Shaughnessy Decl. Ex. 1 §22.3.) The
copyright claim that SCO seeks to add is plainly a legal claim "related to [an alleged] breach" of
the JDA. Not only is the "related to a breach" language broad enough to encompass SCO's
claim for copyright infringement, but also the JDA expressly contemplates copyright claims
arising under the JDA.
12
In arguing that Section 22.3 does not apply, SCO reads language out of the clause "any
legal or other action related to a breach of this Agreement" and pretends the clause refers only to
a claim for breach of contract.
13
(SCO Reply Br. at 15.) Contrary to SCO's approach, the law
requires that a contract be construed to give meaning to all of its terms. See, e.g., Ronnen v.
10
Ajax Elec. Motor Corp., 671 N.E.2d 534, 536 (N.Y. 1996); Robshaw v. Health Mqmt., Inc., 98
A.D.2d 986, 986 (N.Y. App. Div. 1983).
Moreover, SCO's new argument ignores both its proposed pleading and its opening brief
in connection with this motion, which make clear that the proposed copyright claim is a legal
claim "related to a breach" of the JDA. SCO alleges that IBM infringed SCO's purported
copyrights by exceeding the scope of its rights under, and thereby breaching, the JDA. For
example, in its proposed complaint, SCO states that "IBM converted SCO's copyrighted code for
IBM's own use, in violation of the specific restrictions of the parties' Joint Development
Agreement". (Third Am. Compl. ¶ 217 (emphasis added).) In its opening brief, SCO states that
IBM "ignored the [JDA's] restrictions on its use of SCO's SVR4 code" and released an Itanium
product that "did not satisfy the conditions of a 'Product Release'" under the Project Monterey
agreements. (SCO Mem. at 10, 12.)
Courts have construed language comparable to the "related to" language at issue here to
include non-contract claims such as SCO's proposed copyright claim.
14
See. e.g., Turtur v.
Rothschild Registry Int'l, Inc., 26 F.3d 304, 309-10 (2d Cir. 1994) (holding "arising out of or
relating to" language to apply to tort as well as contract claims); Ward Enters., Inc. v. Bang &
Olufsen Am., No. 02-7640, 2004 WL 830461, at *2 (N.D. Ill. Apr. 15, 2004) (finding that "the
scope of 'relating to' language is broad and is intended to cover a much wider scope of disputes,
not just those arising under the agreement itself' (internal quotation omitted)) (attached as
Exhibit G); Cambridge Nutrition A.G. v. Fotheringham, 840 F. Supp. 299, 300-02 (S.D.N.Y.
11
1994) (applying forum selection clause referring to "any claim, dispute or controversy relating to
this Agreement" to tort claim for unfair competition).
15
In fact, courts have construed more restrictive language to include non-contract claims
such as SCO's proposed copyright claim. See. e.g., Monsanto Co. v. McFarling, 302 F.3d 1291,
1294-96 (Fed. Cir. 2002) (holding patent claims were subject to forum selection clause
applicable to "all disputes arising under" contract); Rockwell Int'l Com. v. Goss Graphic Sys.,
Inc., No. 00-8763, 2001 WL 293818, at *1-2 (S.D.N.Y. Mar. 27, 2001) (applying forum
selection clause using "arising out of this Agreement" language to copyright claim because
resolution of claims "relate to the interpretation of the Agreement") (attached as Exhibit J);
Warner & Swasey Co. v. Salvagnini Transferica S.p.A., 633 F. Supp. 1209, 1211-12 (W.D.N.Y.
1986) (finding "on the basis of an alleged breach" language in forum selection clause applicable
to claim for patent infringement).
16
12
2. IBM Has Not Waived The Right To Enforce The Venue Provision.
Recognizing that Section 22.3 applies, SCO contends that IBM has waived its right to
enforce the venue provision. SCO argues, for the first time in its reply brief, that IBM has
waived the right to enforce the venue provision on the grounds that IBM did not raise the
"'defense of improper venue' in its responsive pleading". (SCO Reply Br. at 16.)
Putting aside the fact that SCO raises this argument for the first time in its reply brief,
which (as discussed above) is by itself fatal, IBM has not yet filed its responsive pleading since
the proposed complaint has not been filed. Moreover, IBM has in fact asserted a defense of
improper venue in each of its answers to each of SCO's complaints:
- IBM's answer to SCO's original complaint, filed on April 30, 2003, stated in its
seventh affirmative defense: "[SCO's] claims are improperly venued in this
district". (Docket No. 13, at 15.)
- IBM's amended answer to SCO's original complaint, filed on May 20, 2003,
included a ninth affirmative defense, which stated: "[SCO's] claims are
improperly venued in this district". (Docket No. 15, at 17.)
- IBM's answer to SCO's amended complaint, filed on August 6, 2003, stated in its
ninth affirmative defense: "SCO's claims are improperly venued in this district".
(Docket No. 27, at 17.)
- IBM's answer to SCO's second amended complaint, filed on March 26, 2004,
included an eighth affirmative defense, which stated: "SCO's claims are
improperly venued in this district". (Docket No. 126, at 23.)
SCO's reply papers also reiterate its argument that IBM has waived the right to enforce the
venue provision by asserting its Ninth Counterclaim. (See SCO Reply Br. at 17.) As discussed
above, however, IBM's Ninth Counterclaim is not seeking the declaration SCO imagines, and
IBM stipulated to the narrow scope of the claim. Moreover, to establish a waiver of the venue
provision, SCO must show "the voluntary and intentional abandonment of a known right".
General Motors Acceptance Corp. v. Clifton-Fine Cent. Sch. Dist., 647 N.E.2d 1329, 1331 (N.Y
1995); accord Nassau Trust Co. v. Montrose Concrete Prods. Corp., 436 N.E.2d 1265, 1269-70
13
(N.Y. 1982). The mere assertion of a counterclaim does not preclude a party from asserting a
forum selection clause.
17
That is especially so here, where Section 22.11 of the JDA states
unambiguously that "[n]o . . . waiver of any provision of this Agreement shall be effective unless
it is set forth in a writing which refers to the provisions so affected and is signed by an
authorized representative of each Party."
18
(Shaughnessy Decl. Ex. 1 §22.11.) IBM has never
executed such a writing setting forth its intention to waive Section 22.3 of the JDA, and thus
cannot be held to have waived its rights under that provision.
19
Finally, SCO claims that "the interests of judicial economy in favor of pending litigation
can override a forum-selection clause". (SCO Reply Br. at 17.) To avoid application of the
forum selection clause, SCO, at a minimum, had to show, but failed to show, that requiring it "to
proceed in the selected forum will be so gravely difficult and inconvenient that the clause, for all
practical purposes, will deprive the moving party of his or her day in court." Zions First Nat'l
Bank v. Allen, 688 F. Supp 1495, 1498 (D. Utah 1988) (citing The Bremen v. Zapata Offshore
14
Co., 407 U.S. 1, 15 (1972)). Courts have held interests-of-judicial-economy arguments like that
offered by SCO insufficient to overcome a forum selection clause. See Technology Express, Inc.
v. FTF Bus. Sys. Corp., 99-11692, 2000 WL 222628, at *2 (S.D.N.Y. Feb. 25, 2000) (applying
forum selection clause in spite of defendant's argument that application would result in
inconvenience of litigating related matters in multiple forums) (attached as Exhibit M); Tokio
Marine & Fire Ins. Co., Ltd. v. Nippon Express U.S.A. (Illinois), Inc., 118 F. Supp. 2d 997, 1000
(C.D. Cal. 2000) (holding that "potential for duplicative litigation . . . does not outweigh the
strong policy favoring enforcement of forum selection clauses").
20
3. The Limitations Provision Bars SCO's Proposed Claim.
SCO contends that the limitations provision is no impediment to its claims because its
claim did not accrue until 2004, when SCO claims it first learned of IBM's infringement. (See
SCO Reply Br. at 15-16.) As SCO acknowledges, however, a copyright claim accrues when the
alleged copyright holder "knows or reasonably should have known of the infringement". (SCO
Reply Br. at 15 (quoting In re Indep. Servs. Orgs. Antitrust Litig., 85 F. Supp. 2d 1130, 1174 (D.
Kan. 2000)).) As is discussed above, SCO clearly knew or should have known of the alleged
infringement more than two years before it commenced this action. Thus, the limitations
provision bars the proposed claim.
As a fallback position, SCO argues that "the principle of continuing infringement" should
govern SCO's copyright claim. (SCO Reply Br. at 16.) As SCO acknowledges, however, that
doctrine has not been recognized in the Tenth Circuit. (See SCO Reply Br. at 16.) And even if it
15
applied in the Tenth Circuit, the doctrine could not properly be used to negate the terms of the
JDA. See Oriskany Cent. Sch. Dist. v. Edmund J. Booth Architects, 206 A.D.2d 896, 897 (N.Y.
App. Div. 1994) (ruling that contract provision prescribing "when the period of limitations will
commence . . . will govern in the absence of duress, fraud or misrepresentation" (citations
omitted)); Harbor Court Assocs. v. Leo A. Daly Co., 179 F.3d 147, 151 (4th Cir. 1999) (finding
contractual accrual provision valid and applicable, noting that "the only courts to consider a
contractual accrual date provision have all enforced it" (citing cases)); Entous v. Viacom Int'l,
Inc., 151 F. Supp. 2d 1150, 1156 (C.D. Cal. 2001) (finding that contractual accrual rule
preempted application of Copyright Act's accrual rules). The JDA clearly imposes a two-year
limitations period; it does not recognize a "continuing infringement" exception.
Conclusion
For the foregoing reasons, IBM respectfully requests that the Court limit this case to the
claims and counterclaims that were timely pled and allow this case to proceed toward resolution
by denying SCO's Motion for Leave to File a Third Amended Complaint.
DATED this 18th day of February, 2005.
|
SNELL & WILMER L.L.P.
_(signature)_
Alan L. Sullivan
Todd M. Shaughnessy
Amy F. Sorenson
CRAVATH, SWAINE & MOORE LLP
Evan R. Chesler
David R. Maniott
Attorneys for Defendant/Counterclaim-Plaintiff
International Business Machines Corporation |
16
Of counsel:
INTERNATIONAL BUSINESS
MACHINES CORPORATION
Donald J. Rosenberg
Alec S. Berman
[address, phone]
Attorneys for Defendant/Counterclaim-Plaintiff
International Business Machines Corporation
17
CERTIFICATE OF SERVICE
I hereby certify that on the 18th day of February, 2005, a true and correct copy of the
foregoing was sent by U.S. Mail, postage prepaid, to the following:
Brent O. Hatch
Mark F. James
HATCH, JAMES & DODGE, P.C.
[address]
Stephen N. Zack
Mark J. Heise
BOIES, SCHILLER & FLEXNER LLP
[address]
Robert Silver
Edward Normand
Sean Eskovitz
BOIES, SCHILLER & FLEXNER LLP
[address]
18
CERTIFICATE OF SERVICE
I hereby certify that on the _(4th)_ day of May, 2005, a true and correct copy of the
foregoing was sent by U.S. Mail, postage prepaid, to the following:
Brent O. Hatch
Mark F. James
HATCH, JAMES & DODGE, P.C.
[address]
Stephen N. Zack
Mark J. Heise
BOIES, SCHILLER & FLEXNER LLP
[address]
Robert Silver
Edward Normand
Sean Eskovitz
BOIES, SCHILLER & FLEXNER LLP
[address]
19
1 Specifically, SCO argues that (1) references to AIX 5L in many of the documents were
ambiguous as to whether the document was referring to AIX 5L for Itanium (for which product
SCO concedes IBM had a license to use SVR4 code) or AIX for Power; and (2) references in
many of the documents to "System V" were ambiguous because it is a generic term which could
have been referring to System V Release 3 (for which SCO concedes IBM had a license), rather
than System V Release 4. (See SCO Reply Br. at 8-9.) The argument is baseless. Putting aside
SCO's sophisticated knowledge, as an alleged successor of a partner in Project Monterey and
alleged owner of UNIX, of AIX 5L and System V, each of the documents submitted with IBM's
opposition brief expressly references (generally multiple times) both the fact that AIX 5L
operated on IBM's Power processor and the fact that it contained System V Release 4 (SVR4)
code.
2 Similarly, an August 2000 report prepared by IDC on the beta release of AIX 5L "for Power
Architecture systems" lists the "Unix SVR4 printing subsystem" as one of the features included
in the AIX 5L beta release. (Shaughnessy Decl. Ex. 13 at SCO1294139-40 (emphasis added).)
3 See, e.g., Lowden v. Northwestern Nat'l Bank & Trust Co., 84 F.2d 847, 853 (8th Cir. 1936)
(finding that bank employee "could not . . . testify as to what other officers of the bank knew or
did not know"); J T Gibbons, Inc. v. Sara Lee Corn., No. 93-4050, 1995 WL 619770, at *4 (E.D
La. Oct. 19, 1995) (finding that affiant is "unable to competently testify as to what another
person . . . knew, did not know, or should have known") (attached as Exhibit A).
4 To further support the proposition that SCO did not know that IBM included code from SVR4
in the AIX for Power product, Mr. Petersen states that "SCO was neither an IBM support
provider nor have [sic] any IBM hardware or software for which it needed support" and therefore
had no reason to see the industry reports or product guides that describe AIX. (Petersen Decl. ?
14.) This is a frivolous assertion. IBM licensed code from AIX to Santa Cruz as part of Project
Monterey, and SCO purports to have acquired Santa Cruz's rights. Whether or not Santa Cruz or
SCO supported IBM hardware or software, Santa Cruz was IBM's partner in Project Monterey
and marketed products in competition with AIX (as did SCO). Moreover, SCO cannot credibly
contend that it had no reason to see industry reports or product guides that describe AIX when it
was not only an industry participant but IBM's partner in the development of AIX 5L, produced
product information and industry reports about AIX 5L in this litigation, and at least co-sponsored
a website describing AIX for Power. (See, e.g., Shaughnessy Decl. Ex. 10, 11, 13.)
5 Instead, SCO argues that it was "reasonably entitled to believe" that IBM would not use SVR4
code in its AIX for Power product and that SCO did not have a duty to investigate whether IBM
had done so. SCO seeks to buttress this argument with the fact that IBM did not execute a
proposed Supplement C to the JDA, which according to SCO would have given IBM a license to
use SVR4 code in the AIX for Power product. (See SCO Reply Br. at 10.) As an initial matter,
whether or not IBM executed the proposed Supplement C is irrelevant to whether it had a
license. IBM had a license to use SVR4 code in the AIX for Power product entirely independent
of proposed Supplement C. In any event, the significance, if any, of IBM's not signing proposed
Supplement C concerns the merits of SCO's proposed claim, not whether the claim can properly
be added to this case, and thus is immaterial to this motion. Moreover, whatever the significance
of proposed Supplement C, the fact remains, as discussed herein, that SCO knew or should have
known, based on the documentary evidence alone, that IBM included SVR4 code in the AIX for
Power product.
The only case on which SCO relies to support the argument, In re Indep. Serv. Orgs. Antitrust
Litig., 114 F. Supp. 2d 1070 (D. Kan. 2000), is inapposite. The court in that case stated only that
"[c]opyright holders should not be forced to conduct investigations every time they exercise their
right to refuse to license a copyrighted product." Id. at 1112. The court did not hold that
copyright holders should never be required to conduct investigations. The law clearly imposes a
duty to investigate. SCO's duty to investigate here is not based on the fact that IBM did not sign
proposed Supplement C; rather, it is based on the documentary evidence.
6 SCO cites two cases for the proposition that it did not have a "duty to investigate" potential
infringement. (See SCO Reply Br. at 6-7.) Not only do these cases not support SCO's
proposition, they stand for the opposite proposition, i.e., where, as here, a copyright holder
possesses evidence of the alleged infringement, it does in fact have a duty to investigate. See
Jacobsen v. Deseret Book Co., 287 F.3d 936, 950 (10th Cir. 2002) (finding that copyright holder
must "exercise reasonable diligence in protecting his rights" (internal quotation omitted));
Jackson Jordan, Inc. v. Plasser Am. Corp., 219 U.S.P.Q. 922,926 (E.D. Va. 1983) (stating that
"it is well settled that a patent holder is charged with a duty of diligent inquiry").
7 See also Altech Controls Corp. v. E.I.L. Instruments, Inc., 33 F. Supp. 2d 546, 551-52 (S.D.
Tex. 1998) (finding that "in view of the prior [business] relationship between the parties and the
limited size of the industry, and evidence that Plaintiffs were aware of [defendant's] alleged
infringing products, if that awareness was not actual knowledge, but merely constructive
knowledge, . . . Plaintiffs had a duty to investigate"); Pearson v. Central Ill. Light Co., 210 F.2d
352, 356-57 (7th Cir. 1954) (ruling that plaintiff is charged with "such knowledge as he might
have obtained upon inquiry, provided the facts already known by him were such as to put upon a
man of ordinary intelligence the duty of inquiry" (internal quotation omitted)); Schock v. United
States, 21 F. Supp. 2d 115, 119-20 (D.R.I. 1998) (finding that a plaintiff assumes a "duty to
investigate where there was some warning that there might have been an injury" and that the
"triggering warning need not alert the plaintiff to both injury and cause, but it must suggest that
something is wrong" (emphasis added)).
8 IBM'S Ninth Counterclaim seeks only a declaration that IBM's continued distribution of its
AIX product, after SCO's purported termination of IBM's AT&T Unix License, does not
infringe SCO's alleged copyrights. The counterclaim does not seek a declaration that IBM's use
in its AIX for Power product of code from Project Monterey does not infringe SCO's alleged
copyrights. IBM had no reason to seek such a declaration at the time it asserted its Ninth
Counterclaim; SCO had not then alleged that the inclusion of Project Monterey code in the AIX
for Power product infringes SCO's alleged copyrights.
9 SCO impliedly acknowledges that the proposed claim would require additional discovery when
it states that "prosecution of SCO's proposed claim would require the presentation of
substantially the same evidence that SCO would adduce in order to defend against IBM's Ninth
Counterclaim". (SCO Reply Br. at 13 (emphasis added).)
10 The only case cited by SCO, Kreinik v. Showbran Photo, Inc., No. 02-1172, 2003 WL
22339268 (S.D.N.Y. Oct. 14, 2003), does not stand for this proposition. In Kreinik, the court
expressly identified "whether the assertion of the new claim would . . . require the opponent to
expend significant additional resources to conduct discovery and prepare for trial" as a factor
evidencing undue prejudice. Id. at *10. Further, that case is inapposite because the court found
that the additional claims sought to be added would neither require "substantial additional
discovery" nor "call for a great expenditure of resources or significantly prolong the dispute."
Id.
11 See also McGarvey v. Citibank (N.D.) N.A., No. 95-0123, 1995 WL 404866, at *4 (N.D. Ill.
July 5, 1995) (stating that plaintiffs "attempt to change the definition [of a key term] in his reply
is unacceptable" and refusing to consider the modified argument) (attached as Exhibit E);
Weaver v. Univ. of Cincinnati, 758 F. Supp. 446, 450 n.2 (S.D. Ohio 1991) (stating that court
would "address only the merits of defendants' original contention" where defendants "shift[ed]
their argument" in their reply brief).
12 Although Section 22.3 does not expressly mention a claim for copyright infringement, Section
20.1 expressly excepts claims for copyright infringement from the $5 million limitation on
liability for actual damages. (See Shaughnessy Decl. Ex. 1 ß 20.1.) Thus, the JDA expressly
contemplated that copyright claims, related to a breach of the JDA, might arise. The fact that the
parties expressly excepted copyright claims from the $5 million limitation provision in Section
20.1, but did not except copyright claims from the forum and limitations provisions in Section
22.3, demonstrates that the parties intended Section 22.3 to govern copyright claims.
13 SCO has not cited (and cannot cite) any authority to support its proposed rewrite of the JDA.
SCO cites three cases for the proposition that a limitations provision must be strictly construed.
(See SCO Reply Br. at 15.) None of those cases holds that a court should read language out of a
contract. Indeed, they hold that contractual limitations provisions should be enforced provided
the prescribed period is reasonable, as it is here. See Brink's Inc. v. City of New York, 528 F.
Supp. 1084, 1086 (S.D.N.Y. 1981) (quoting Riplev v. Aetna Ins. Co., 30 N.Y. 136, 163 (N.Y.
1864)); Fireman's Fund Ins. Co. v. Warehouse No. 1, Inc., No. 89-4069, 1989 U.S. Dist. LEXIS
13507, at *11 (S.D.N.Y., Nov. 13, 1989) (attached as Exhibit F); Raymond Int'l, Inc. v. City of
New York, 511 F. Supp. 773, 776 (S.D.N.Y. 1981).
14 SCO attempts to distinguish the cases cited in IBM's opposition brief on the grounds that the
forum selection clause in those cases employed broader language (e.g., "all disputes arising out
of this Agreement") than the "related to a breach" language in the JDA. Not only is this
supposed distinction without a difference, but also (as stated) SCO's proposed claim is, by its
own admission, premised on IBM's alleged "violation of the specific restrictions of the parties'
Joint Development Agreement". (Proposed Third Am. Compl. ¶ 217.)
15 See also Diqital Envoy, Inc. v. Google, Inc., 319 F. Supp. 2d 1377, 1380-81 (N.D. Ga. 2004)
(applying forum selection clause to claims for misappropriation of trade secrets and unfair
competition where clause covered "[a]ny lawsuit regarding this Agreement"); Keating v. Baskin-
Robbins USA, Co., No. 99-0148, 2001 WL 407017, at *8 (E.D.N.C. Mar. 27,2001) (finding that
one-year contractual limitation period, which stated that it applied to "[a]ny and all claims and
actions arising out of or relating to [the parties'] agreement", barred claims for unfair and
deceptive trade practices, fraud and negligent misrepresentation) (attached as Exhibit H); YWCA
v. HMC Entm't, Inc., No. 91-7943,1992 WL 279361, at *1, 4 (S.D.N.Y. Sept. 25, 1992)
(holding claim seeking declaratory judgment with respect to potential unfair competition,
trademark infringement misappropriation and unfair competition claims "arises under this
agreement" and, thus, was subject to forum selection clause) (attached as Exhibit I).
16 See also Direct Mail Prod. Servs. Ltd. v. MBNA Corp., No. 99-10550, 2000 WL 1277597, at
*6 (S.D.N.Y. Sept. 7. 2000) (applying forum selection clause to reach copyright claims, where
clause stated merely that exclusive jurisdiction was in foreign court, because "analysis of the
copyright infringement claims will inevitably require reference to rights and duties defined in the
Agreement") (attached as Exhibit K); Mead v. Future Med. Publ'g, Inc., No. 98-0554, 1999 WL
1939256, at *4 n.7 (M.D.N.C. Feb. 22, 1999) (applying forum selection clause to copyright
claim where clause referred to disputes "arising herefrom") (attached as Exhibit L); Warnaco
Inc. v. VF Corp., 844 F. Supp. 940, 947, 949-50 (S.D.N.Y. 1994) (applying forum selection
clause to trademark claims where clause referred to "[a]ny dispute or issue arising hereunder,
including any alleged breach").
17 See Campbell v. Bartlett, 975 F.2d 1569, 1574 n.8 (10th Cir. 1992) (following "the rule that by
filing a compulsory counterclaim a party does not waive Rule 12(b) objections" (citing 5A
Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure 1397 (1990)); Hasse v. Am.
Photograph Corp., 299 F.2d 666, 668-69 (10th Cir. 1962); Rogen v. Memry Corp., 886 F. Supp.
393, 396 (S.D.N.Y. 1995) (stating that "the fact that [the defendant] filed a counterclaim and
participated in discovery does not render its objections to venue abandoned" (citing cases)).
18 Provisions like Section 22.11 have been held enforceable. See, e.g., Dominion Video Satellite,
Inc. v. Echostar Satellite Corp., 269 F.3d 1149, 1158 (10th Cir. 2001) (finding that parties'
course of dealings insufficient to overcome nonwaiver provision); Roboserve, Inc. v. Kato
Kanaku Co., Ltd., 78 F.3d 266, 277-78 (7th Cir. 1996) (finding conduct of parties insufficient to
warrant waiver where contract required waiver to be in writing); Medinol Ltd. v. Boston Sci.
Corp., 346 F. Supp. 2d 575, 609 & n.8 (S.D.N.Y. 2004) (finding that "[l]imitations on waiver are
enforceable" and conduct of party insufficient to overcome provision requiring waiver to be in
writing).
19 SCO asks the Court to ignore Section 22.11 on the grounds that "as a matter of federal
procedure", it is somehow irrelevant. (SCO's Reply Br. at 16.) The sole case on which SCO
relies for this proposition, Steward v. Up North Plastics, Inc., 177 F. Supp. 2d 953, 958 (D.
Minn. 2001), is inapposite. That court's discussion of waiver, in dicta, merely indicated that the
contractual nonwaiver provision in that case was insufficient to overcome the party's conduct
expressing an intent to waive the forum selection provision where the party affirmatively stated
that venue was proper in its pleadings and conducted substantial discovery and motion practice
regarding the claims subject to the forum selection clause. Id.
20 The only case cited by SCO to support its judicial economy argument, Steward, 177 F. Supp.
2d at 959 (discussed in note 19 above), is not helpful to SCO's cause. In Steward, the court
denied a motion to transfer claims that had already been pending before the court for two years,
finding that the court's familiarity with the specific facts of the claims and the fact that another
case pending before the court involved "the same operative facts, the same antitrust claims and
the same defendants" weighed against transferring the case in spite of the forum selection clause
Id. In contrast, SCO's proposed claim is not currently pending before the Court, no motions on
the merits of the claim have been filed and it involves a different set of operative facts and legal
theories than the claims currently before this Court.
|