Thanks to Groklaw's Chris Brown, we now have transcripts of all three summary judgment hearings in SCO v. IBM. This is the one from the first hearing, on March 1st. In that hearing, Judge Dale Kimball heard arguments on two motions, SCO's Motion for Summary Judgment on SCO's Third Cause of Action For Breach of Contract [PDF] and IBM's Motion for Summary Judgment on SCO's Contract Claims [PDF].
Steve Martin did the HTML for us, removing the line numbers for the sake of our readers who are blind and depend on screen readers. I am so grateful to them both for doing the heavy lifting for me. In the first motion, we finally find out what "negative know how" means on Planet SCO. The second motion is the one about SCO's copyright infringement claim regarding IBM continuing to distribute AIX after SCO purported to terminate IBM's irrevocable and perpetual license for allegedly violating SCO's trade secrets, which SCO later admitted in open court Unix System V doesn't have. Yes, it's all profoundly silly, but it's very interesting, and if I had to characterize the dominant theme of both motions, it would be JFS. IBM informs the court that JFS isn't from Unix. It doesn't come from AIX even. What IBM donated to Linux came from OS/2. So even if SCO had a trade secret or contract leg to stand on, it has no control or rights with regard to JFS.
IBM opens by explaining to the court what SCO's theory of the contract is, namely that if IBM wrote its own code, if it was ever put with Unix System V code in a distribution, IBM thereby lost control of it and SCO got to swallow it up, like some bottom feeding sea creature. Further, SCO got to gobble up IBM's modifications and derivative works too, even if IBM spent millions on development. And they call the GPL "viral"! SCO, by its theory, would control pretty much all the code in the known universe, no matter who wrote it, and most of the programmers in the world too. Who'd ever sign such a deal? Not IBM, for sure, as David Marriott demonstrates by playing clips from various depositions for the court.
SCO's Stuart Singer seems confused on some dates and some tech. He says this, in his opening: The UNIX operating system developed by AT&T was its crown jewel. It is the operating system of choice for mission critical application, and it became in the 1990s the leading operating system worldwide.
Now, major computer companies like IBM wanted to adopt that system for their own hardware. They had a choice. They could come up with their own operating system. In fact, IBM tried. It is called OS2. It failed. IBM, like others, struck a deal with AT&T. Give us access to your source code so that we can develop our own flavor of UNIX that will run better on our hardware. But from the Comes v. Microsoft exhibits, we've learned that OS/2 certainly had not failed by 1985, the date of the IBM/AT&T agreement as it was still being developed and strategized over and released in 1990, so Mr. Singer has it backwards. So often, SCO's side makes these kinds of mistakes. I've often wondered if that is part of why they present absurd theories. He says this about derivative works: What they could not do is exactly what IBM has done here, give away that head start by open sourcing of derivative technology that they would never have had if it weren't for access in the first place to System V, and to allow a jump-start to Linux, which has had a tremendous effect on SCO's business. IBM didn't need Unix System V to write JFS. Do you need to have Unix System V to write RCU? Remember that IBM patented RCU. Marriott already told the court that *nothing* at issue here is from Unix System V: Now, we'll come back to those technologies in detail, but let me make a few things absolutely clear about those technologies from the outset. None of that material, Your Honor, is UNIX System V source code, methods or concepts. None of that material is a modification or a derivative work of Unix System V. None of it was contributed to Linux by reference to UNIX System V, which this is original IBM work created independent of UNIX System V. IBM's David Marriott explains the negative know-how business: Lastly, Your Honor, the negative know-how category.
This is a category of 11 items of supposedly misused information. We lay this out at tab 64. There are two basic brands of claim as it relate to these 11 items. One of them concerns experience. Here is what SCO's claim is as it relates to the experience. It says, as we show at tab 65, Judge, it says IBM has breached its contract by permitting IBM developers exposed to DYNIX PTX methods and concepts to contribute to Linux in the same area for each developer's work. So anybody that had any exposure to DYNIX can't work in connection with any other operating system in that area. That is the claim.
With respect to the negative know-how, which also appears at 65, the gist of the claim is that people who had some knowledge about DYNIX told people who were working on Linux not to do certain things in DYNIX that they don't think worked. SCO has identified 16 supposed wrongdoers as it relates to these 11 categories....
And for that, SCO wants billions in damages? First, Marriott points out, all those folks have provided declarations: Here is what they said. They didn't make any contributions to the files or the directories listed, or they didn't base their contributions to the list of files on UNIX System V in making the contributions. And second, the contracts don't speak about negative know how at all: First, Your Honor, the agreements which SCO contends were breached, Your Honor, do not contain any provision which would allow it to preclude IBM employees from using their experience and their general know-how in working on projects other than the one on which they are presently working. There
is no connection drawn in SCO's interrogatory answers or in its paper between the contract and this claimed notion of misuse of experience....
For two of these items, and, again, this is undisputed, for two of these items, Your Honor, 188 and 187, the technology which SCO alleges was misused didn't even exist in DYNIX. For another two of the items, 43 and 94, the
material had nothing to do with DYNIX PTX. It was discoverable outside of IBM. For five of the items there is absolutely no evidence that the alleged wrongdoers had any experience in the technology area where they were supposed to have misused it in some other area. SCO admits that with respect to four of them. With respect to items 23 and 90, Your Honor, for two of the items the material was disclosed in marketing materials, and in footnote ten of SCO's opposition papers, it says that any such disclosure -- if the material is inactionable anyway. Finally, item 189, Your Honor, was based on knowledge available in public literature.
In fact, he continues, SCO already admitted that there are no trade secrets, and it dropped that claim, so where do they get off now trying to "protect" any supposed secret knowledge, whether negative or not? Not to mention that Magistrate Judge Brooke Wells told SCO to provide specificity, and to date that hasn't happened. For that reason alone, IBM says it deserves to prevail. Finally, SCO's theory reaches an absurd result, in that if their theory is accepted, programmers ever exposed to Unix System V would be pretty much unemployable in their field of skill and expertise from that day forward: If SCO's theory is correct that anybody with any experience, not just with UNIX System V, but any modification or derivative work of UNIX System V, is severely constrained in their employment, and that is contrary to public policy as the cases in our papers make clear....
SCO's theory is, finally, inconsistent with IBM's rights of ownership. It admits that IBM owns the material at issue. It admits that ownership carries with it the exclusive right to distribute, and yet they take the position, Your Honor, that would nullify as a practical matter IBM's rights of ownership. This is all truly absurd, the result, IBM says, of "a distorted reading of Section 2.01 of the agreement", none of which applies to the code at issue, since they are not "resulting material" as defined in the agreement. Finally, SCO's CEO Darl McBride, in his deposition, contradicted SCO's argument about controlling AIX, Marriott points out in arguing the second motion: Mr. McBride, the CEO of the SCO group, Your Honor, testified in his deposition in a way that is completely contrary to the proposition that SCO can control anything and everything that is in the AIX operating system. He said the following, quote, I am sure there are things inside of AIX that were not derived from System V or from one of our contractual arrangements, that they would be free to do whatever they wanted. Both JFS, developed for OS/2, and RCU, patented by IBM, would seem to fall under that very McBride umbrella. Marriott: SCO's theory depends on the proposition that AIX is a derivative work of AT&T's UNIX System V software, for which we don't believe there is adequate evidence in the record, despite Mr. Singer's assertions to the contrary, but assume that it is, Your Honor, the JFS contribution came from IBM's OS2 operating system and it did not come from IBM's AIX operating system.
Not only that, but if SCO did have any rights in JFS, it handed them over to UnitedLinux. I'm afraid SCO's experts, once again, come off looking not so expert: The individual identified by SCO as having made these supposedly improper contributions have offered their testimony, the people in the best position to know that it came from OS2 and not from IBM's AIX operating system. SCO's claim that it came from IBM's AIX operating system, Your Honor, is mistaken for the reasons which we set out at tab 13 of our book. It relies principally if not entirely upon the testimony of SCO's Dr. Ivie, and that analysis, Your Honor, relies upon evidence that was required to be put in SCO's final disclosures, and that it didn't put in those final disclosures, and that Magistrate Judge Wells struck at a hearing late last year, an issue in which SCO has taken an appeal.
The only evidence they purport even to offer, Your Honor, that could competently demonstrate that and they argue is that of Mr. Ivie. Mr. Ivie's testimony was untimely provided and it can't support the motion. In any event, Your Honor, Mr. Ivie's testimony is not competent evidence that JFS came from the AIX operating system as opposed to the OS2 operating system. Dr. Ivie says that there is a similarity between the JFS contribution and the JFS that is in AIX. Well, that is not a surprising similarity, Your Honor, because the JFS contribution in AIX came from IBM's OS2 operating system, so the similarity on which he relies for these opinions is not
a similarity that has any probative effect. That is point one, Your Honor, as to why the JFS contribution allegations fail. And whatever does SCO mean by calling Paul McKenney, as you will see, an "IBM secret programmer"? You see how SCO's theories over and over hit the rocks? Or as Marriott puts it, they fall flat? I've concluded that either SCO never understood the tech, or they are pretending not to, in hopes the judge won't know the difference. I don't know what to say about the experts, because without reading what they wrote, it's impossible to know, and I have found it best not to rely solely on SCO's characterizations of anything. I sincerely hope Judge Kimball follows that same careful course and checks every word for accuracy. SCO's Mr. Singer, as always, is very persuasive, and if one knew nothing about the tech, he might prevail. But then he says such silly things sometimes, it undercuts his arguments, if you do know the tech. When you read his argument about what Linux needs to run, you'll guffaw. But as for any predictions, the attorneys refer to so many documents that we can't see, it's not actually reasonable to predict anything. Remember that all SCO needs to do is raise one pertinent fact in dispute. It's a very low bar. If you held a gun to my head and said I had to predict or else, I'd say if the judge understands the tech, he'll rule for IBM on the first motion, and the second motion is such a slam dunk, I don't see any way SCO can prevail.
Wait a sec. We have these transcripts *before* PACER does. Uh oh. Shoutout to the SCO Smear-Groklaw Brigade. How in the world could Groklaw have these documents before they are digitally available to the world? Did IBM send them to us? No, you silly wabbits. Here's how we do it. You start with a paralegal who has filed many court documents and thus knows how the system works. Add thousands of volunteers in every state willing to trudge to the courthouse. Pick a couple of volunteers in Utah, explain the system, and ask them to go to the courthouse, get to know the very pleasant clerks and court reporters, and pick up the documents. When necessary pay for them. These transcripts, for example, cost Groklaw $254, which the Groklaw community's generous contributions paid for. See the tip boxes? By the way, thank you, everyone.
It's a technique any journalist could follow, if they knew how and had volunteers in every state, like Groklaw does. There's really no mystery.
That's America, for you. The public gets to know what is going on in the legal process, even if they have no in with anybody, no pull, no inside track. And may I just mention here that from our experience, the court personnel in Utah are about as nice as they come? Of course, dealing with court clerks in New York City might have tilted my expectations of courtesy. You know who you are. : )
But let me say this: if SCO or IBM or Novell ever wanted to send me free copies of their filings, as a journalist I'd be very grateful, and if it could be plain text, well, that would be heaven. And if SCO ever wants to donate money to Groklaw, hey, why not? Joke, joke.
Of course, the latest smears are not true, to be serious for a minute. Groklaw isn't a front for anybody. Groklaw is trying to speak as an independent voice for the one group that isn't directly represented in this litigation, the Linux and FOSS community. You know. The guys who wrote the code being fought over? Or we thought it was that code. It turns out it wasn't at all. SCO just got media interest by making such a claim. Now, in the end game, it's all about "negative know how" and JFS that IBM wrote itself and methods and concepts and various other litigious spinach. But at the beginning, the whole world thought it was about Linux, and if Groklaw had thought the parties could represent the community's interests fully, there would have been no need for Groklaw.
Chris made a PDF, showing the line numbers, for those who want to see it exactly as it is in the original form, and of course, as always, for anything that matters, that's the version to go by. As for perceived errors, it is what it is. We don't change so much as a comma in the transcripts, even if we see what we think is an obvious error. Our job is to present the document exactly as is, with the only exception being that we do remove the line numbering, in honor of our readers who are blind and need to use screen readers. If the numbers are left in, it's very hard for them to follow along. So what I'm saying is that there is no need to list corrections for material in the transcripts, unless you wish to present a factual correction for the record. My stuff is fully correctable, as always. I will just mention that on page 65, Marriott mispoke (or it was recorded incorrectly), when he says, "There is absolutely no evidence that IBM has continued to distribute AIX." Rather, if you recall from the declarations submitted as exhibits and IBM's brief, it's Dynix that IBM didn't continue to distribute and in fact had stopped distributing before SCO even raised the issue in the litigation. IBM still distributes AIX. Remember that transcribers have a really hard job, having to capture every word in real time, and people sometimes talk very fast or not so clearly, and there are proper names that they must guess how to spell, if the lawyers don't think to tell them. I want to personally thank them for the job they do, and I'm very thankful that the US court system allows the public to follow cases that matter to them, even if we are nobody.
You'll notice they begin by talking about timing, taking some time from this hearing to add it to the next one. Yes, that means exactly what you think, that the lawyers practice in advance what they intend to say and time it, knowing they must stay within firm time constraints. Why do courts do that? Because otherwise, some lawyers will talk on and on forever. Actually, SCO's Brent Hatch goes a bit overtime on the second motion. Speaking of long-winded, I'll have to pass on commenting on the other two transcripts today, and leave them for when and if I get another wind. This one has me tuckered out, even with Chris and Steve's wonderful help, and for sure, SCO got one thing right: the motion papers and briefs in this litigation are longer than War and Peace.
****************************** IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH
CENTRAL DIVISION
THE SCO GROUP, |
) |
|
Plaintiff, |
) |
|
vs. |
) |
CASE NO. 2:03-CV-294DAK |
INTERNATIONAL BUSINESS |
) |
|
MACHINES CORPORATION, |
) |
|
Defendant. |
) |
|
_______________________________ |
) |
|
BEFORE THE HONORABLE DALE A. KIMBALL
------------------------------------
March 1, 2007
Motion Hearing
Ed Young
Court Reporter
[address]
1
APPEARANCES
For Plaintiff: |
BRENT HATCH
[address]
EDWARD NORMAND
[address]
STUART SINGER
[address] |
For Defendant: |
DAVID MARRIOTT
MICHAEL BURKE
[address]
AMY SORENSON
TODD SHAUGHNESSY
[address] |
2
March 1, 2007 2:30 p.m.
PROCEEDINGS
THE COURT: We're here this afternoon in the matter of SCO
v. IBM, 2:03-CV-294.
For plaintiff Mr. Brent Hatch and Mr. Edward Normand and Mr.
Stuart Singer.
MR. SINGER: Good afternoon, Your Honor.
THE COURT: Good afternoon.
For defendant, Mr. David Marriott and --
MR. MARRIOTT: Good afternoon.
THE COURT: -- Ms. Amy Sorenson, Mr. Michael Burke and Mr.
Todd Shaughnessy.
MR. SHAUGHNESSY: Good afternoon, Your Honor.
THE COURT: I understand that you want more time on
Wednesday. We can start at 2:00 on Wednesday, so you have the extra
20 minutes that somebody is asking for.
MR. SINGER: We appreciate that, Your Honor.
MR. MARRIOTT: Thank you, Your Honor.
THE COURT: 2:00 on Wednesday.
I have a jury out, and if a verdict comes in, then you can all
go somewhere else while we get the jury back in to take the
verdict. That has to take precedence. Sorry about that.
First we have IBM's motion on summary judgment on
3
SCO's contract claims, and SCO's motion for partial summary
judgment or SCO's third cause of action for breach of contract. 45
minutes per side.
Who is going first?
MR. MARRIOTT: I believe that is me, Your Honor.
THE COURT: Go ahead.
No one is required to take all of the time asked for, but --
MR. MARRIOTT: Thank you.
THE COURT: You, of course, can.
MR. MARRIOTT: We have prepared a book of exhibits, if I
may approach for the Court's convenience?
THE COURT: Sure.
MR. MARRIOTT: We have a copy for counsel.
THE COURT: Thank you.
MR. MARRIOTT: Referring Your Honor to tab one, if I may,
of the book, there are four contracts that underlie SCO's claims
for breach of contract: The IBM software agreement, the IBM
sublicensing agreement, the Sequent software agreement, and the
Sequent sublicensing agreement. And SCO has a separate claim or
count with respect to each of those four contracts. IBM is, we
respectfully submit, entitled to summary judgement with respect to
each of those counts for at least four reasons which are set out at
tab two of our book.
THE COURT: And they are also in your briefs.
4
MR. MARRIOTT: And they are also in our briefs.
What we would like to do, with the Court's permission, is focus
in the few minutes that we have on the first three of those
reasons. And then I would like to focus, Your Honor, on the
particular technologies which are at issue on this motion, those
things which SCO contends were contributed improperly by IBM to
Linux. Those appear, Your Honor, at tab four of the book.
Let me make clear, if I may, from the outset, something about
those four items of technology. First is the JFS contribution,
which is a contribution SCO contends was made by IBM to Linux in
violation of the IBM agreements. That is the first category.
The next three categories are the RCU contribution, the LTP
contribution, and certain negative know-how and experience. The
allegation by SCO is that those contributions were contributed by
IBM to Linux in violation of the Sequent agreements. Now, we'll
come back to those technologies in detail, but let me make a few
things absolutely clear about those technologies from the outset.
None of that material, Your Honor, is UNIX System V source code,
methods or concepts. None of that material is a modification or a
derivative work of Unix System V. None of it was contributed to
Linux by reference to UNIX System V, which this is original IBM
work created independent of UNIX System V. That brings me,
Judge,
5
to the first of the four points I would like to underscore.
First, Your Honor, is that SCO can't establish a breach of
contract and that is true for three reasons. The first reason is
the plain language of these agreements forecloses SCO's theory.
Second is that the parol evidence, the overwhelming parol evidence
forecloses the theory. The third is that SCO's theory is patently
unreasonable, as I intend to demonstrate and, therefore, untenable
under the controlling cases.
As I said, there are four contracts at issue. Two of those are
the sublicensing agreements. SCO has not offered in its papers a
shred of evidence to demonstrate that IBM breached the sublicensing
agreement. It has not identified which provision it breached. It
has not identified any evidence of breach and it has not explained
a breach. For that reason alone, the two counts related to those
contracts, counts two and four, are disposed of without further
analysis.
That leaves the remaining two claims concerning the software
agreements. Your Honor, let me take the three points as to why
summary judgment is appropriate as to each of those. First, the
plain language. There is no dispute here that the contracts at
issue concern software product, AT&T's UNIX System V material.
There is also no dispute that IBM has not contributed to Linux any
UNIX System V material. The entire case as it concerns SCO's
contracts turns on the so-called
6
Section 2.01 of the agreement, the resulting material
provision.
That section, however, Your Honor, speaks about the licensee
having the right to prepare modifications and derivative works,
provided the resulting materials are treated under the contract as
confidential. You'll see that language at tab nine of the book. It
is undisputed, as I said at the outset, that none of the four
categories of material at issue is resulting material. None of it
is a modification and derivative work of System V. For that reason
alone the claim fails.
Now, faced, Your Honor, with that fact, SCO contends that
Section 2.01 not only gives it rights with respect to UNIX System
V, and modifications and derivative works, but anything that ever
touches or is in any way associated with the modification and
derivative works of UNIX System V. That we respectfully submit
stretches the meaning and the language of Section 2.01 to an absurd
degree.
If I may illustrate, Your Honor. If you imagine and if you look
at the demonstrative to Your Honor's left and to my right, that is
a depiction of the Linux operating system. You'll see a series of
circles with particular chunks or pieces in it. Imagine you have a
product, Your Honor, with 1,000 different pieces to it. Those
pieces represent various components of the system. So imagine you
have this and this is
7
Your Honor's product and you have 990 of these pieces, if there
are 1,000, and they are Your Honor's. They are your own original
work.
Well, imagine that you want to license from others additional
material and to add them to your product, and you take the
additional ten that make up the 1,000 and you license them to party
A and party B and party C. Let's just assume that one of the items
that Your Honor licenses from a third party is licensed from SCO.
It is AT&T's UNIX System V software. Let's assume that the
contracts mean what SCO says they mean. Your Honor, under SCO's
theory of the case, not only is Your Honor -- this is your product
which you have licensed other people's materials in part, ten of
the 990, under SCO's theory, Your Honor, not only are you required
to keep confidential the one part of the 1,000 that you licensed
from SCO, you're required to keep confidential the entirety of the
product, so as to keep confidential the one.
That does not make SCO's case, Your Honor, because IBM has
neither disclosed the one, nor has it disclosed in entirety of the
product. So SCO's theory goes to another level. It says you are
required, owner of this product, the 1,000 items, to keep
confidential anything and everything that is in it, even if you
take it out, and even if you license it from a third party who says
to you you can do with it what you want, and even if you take out
the one item, Judge, and put it
8
on the shelf, that material and those 1,000 items, 990 of which
are your original work under SCO's theory are controlled by them.
You might own them, they say, but they control them.
If you take it out, take out your one and you put it in another
product, under their theory they also control the other product,
and whatever the other components are in that product. That, Your
Honor, we would respectfully submit is not a reasonable
construction of Section 2.01 of the agreement.
The second point I want to make concerns the parol evidence. The
overwhelming parol evidence here, Your Honor, compels the
conclusion that SCO's theory is not a reasonable construction of
the agreement. By the plain language, Your Honor, parol evidence
ought not to be considered. In the event that Your Honor considers
it, we would submit, and it is overwhelmingly in favor of IBM's
construction, there are ten individuals, and we called them
involved persons in our papers, who were involved in the execution
and the negotiations of these agreements, five of them from
AT&T, three of them from IBM, two of them from Sequent. They
appear on the scene before Your Honor. Those individuals have
offered specific, and we believe undisputed testimony, that refutes
SCO's theory of the case. If we may share with Your Honor some
clips from their depositions.
Mr. Wilson.
(WHEREUPON, the following deposition clips were
9
played.)
MR. WILSON: The only part of the derivative work that would have
to be protected under the software agreement would be that portion
of the software product that would be contained in a derivative
work.
To the extent that modifications of derivative work contained
portions of the software product, they were to protect the software
product portion under the terms of the license agreement, that
portion which was theirs, whatever, they can do whatever.
The intent was to make sure that we protected the software
product. To the extent that they used that software product and
created works which were original works, that was up to them to do
what they pleased with those things.
When you say those things, you mean that portion of a derivative
work that they had developed and that in your view they owned; is
that correct?
That's correct.
MR. MARRIOTT: That was the head of AT&T's licensing
business.
(WHEREUPON, the following deposition clips were played.)
Mr. Wilson.
If they created a derivative work and the derivative work
contained zero content of the software product, then they
10
could do as they wish. If that contained portions of the
software product, then they had to abide by the terms and
conditions of the agreement with regard to that portion that
contained the derivative work, contained the software product. Our
agreements only went to the software product itself, not to their
original created works.
MR. MARRIOTT: This is the man for AT&T that signed
--
(WHEREUPON, the following deposition clips were played.)
David Frasure.
With respect to the agreements that IBM entered into with
AT&T, is it your understanding that AT&T through those
agreements had any right to control IBM's use of source code that
it developed on its own?
They had no right to control that software that was developed by
IBM.
With respect to the agreements that Sequent entered into with
AT&T, is it your understanding that AT&T through those
agreements, gained any right to control Sequent's use of the source
code that it developed on its own?
They did not gain any rights to control the software developed
by Sequent.
Was it the case that from AT&T Technologies' perspective
that the licensee could do whatever it wanted with
11
the source code it developed?
Yes.
Michael DeFazio.
The basic idea is that the AT&T USL, Novell code was owned
and protected by Novell. The code developed by our licensees was
owned and controlled by them. When the two went together to market
our rules prevailed. When the two were separate our rules prevailed
on ours, and their rules prevailed on theirs.
Would you agree, Mr. DeFazio, that the agreements did not and do
not give AT&T, USL and Novell or any of their successors or
assigns the right to assert ownership or control over modifications
and derivative works prepared by its licensees, except to the
extent of the original UNIX System V source code included in such
modifications and derivative works?
That's correct.
Stephen Vukasonvich.
And any code that IBM modified, in your view, under this
provision, IBM thereafter owned?
They owned any modification. They owned their code that they
developed, and we owned our code.
Ira Kistenberg.
By the terms of Section 2.01, did AT&T intend to restrict
Sequent's rights to disclose code that Sequent
12
developed on its own?
If Sequent developed it on its own, AT&T had no rights to
it.
My question is simply whether it was AT&T's understanding
that Sequent would own the modifications and the derivative works
that they prepared based on UNIX System V.
They owned it to do what they want with it, yes.
Were licensees of AT&T free to use and to disclose the
modifications or derivative works they created provided they did
not use or disclose any portion of licensed UNIX System V source
code?
Yes.
Thomas Cronan.
In my discussions with AT&T what they were trying to protect
were several derivative works. They were trying to protect their
own System V code. They felt like they had to protect anything that
was shipped around with their code in it. If we separated out our
cord from their code they didn't need to protect it. That was our
discussion.
Richard McDonough.
Another huge issue for us was ownership of whatever we
developed, and we wanted to make it clear that whatever we
developed we owned. We weren't making any claim to the code that
AT&T owned and developed itself, but we wanted to make certain
that anything we or our subcontractors or anybody
13
working for us developed, we owned and had the right to use and
license.
I would just say that there is no way on God's green earth that
I would have entered into an agreement where somebody else owned
what IBM was investing tens of millions of dollars in developing.
An agreement never would have happened. So we had to make it clear
that whatever IBM developed IBM owned.
Jeffrey Mobley.
My understanding was that we were free to do whatever we wanted
to do with the products we were developing.
David Rodgers.
My understanding of the license is that the UNIX System V code
had to be maintained as the AT&T private property and withheld
from disclosure, but if there were other elements of the software
product created by Sequent, that those were Sequent's to dispose of
as it chose.
Roger Swanson.
Those parts of the source code that we wrote were not required
to be kept confidential under the terms of the agreement, but we
could do with them as we saw fit.
The aspects of the derivative works that we developed, we could
choose to disclose or not disclose. We had the ownership, we had
the control. That was my understanding.
Once, again, that's precisely what our understanding
14
was, that once we had made modifications, we still had an
obligation to protect that part of the UNIX System V material,
according to the restrictions of the agreement, but that work that
we had developed ourselves, the source code that we developed, was
not included as a part of those confidentiality restrictions.
(WHEREUPON, the deposition clips were concluded.)
MR. MARRIOTT: These witnesses, Your Honor, have offered
substantial additional testimony, and it is in the papers, and we
have provided CD's in the book, and we have provided Your Honor
with three hours of the same, should you feel like you need to see
that.
THE COURT: I appreciate that.
MR. MARRIOTT: I thought you might.
In an attempt to avoid summary judgment, Your Honor, SCO has
pointed to the declarations of a number of witnesses. They appear
at tab 13 of the book. These people have the use of the contracts,
which they never communicated to IBM as they were not a part of the
negotiations, and a number of them were not employed by AT&T at
the time the agreement were executed. Their testimony, we submit,
is no impediment to the entry of summary judgment. As overwhelming
parol evidence, the testimony of those who negotiated and executed
these agreements, who communicated their views to IBM, is we submit
overwhelming in favor of IBM and against SCO's theory.
15
You looked like you had a question.
THE COURT: I don't.
MR. MARRIOTT: The third reason, Your Honor, why the
contract claims fail is that SCO's theory is, as we show in the
book at tabs 19 through 23, we think unreasonable as a matter of
law. It is inconsistent with IBM's ownership rights, it is contrary
to copyright law, it is against public policy, and it leaves in
circumstances I'll explore later, an absurd result.
The second point, Your Honor, independent of what we believe is
the undisputed evidence of no breach, that I want to emphasize here
is that SCO is estopped from pursuing its theory of the case. For
almost two decades following the execution of these agreements,
some of these representatives of AT&T and USL and Novell and
others, told IBM and other licensees that they could do as they
wished with their own original works, so long as they protected
AT&T's UNIX System V software.
Mr. Wilson, the head of the licensing business, said he on
numerous occasions did that. Mr. Frasure, who executed the
agreement on behalf of IBM, as you'll see at tabs 25 and 26 of your
book, said, quote, that he personally, quote, assured licensees in
no uncertain terms that they could do as they wished with their
original works. He, quote, often told people that UNIX licensees
could freely use and disclose their original or homegrown UNIX
method, code and concepts.
Mr. Green, another AT&T representative, also at USL
16
and Novell, has testified that, quote, more times than I could
remember, close quote, licensees were told that they could do as
they wished with their original works.
Ms. Tilley of AT&T, then USL, then Novell, said that
representatives of AT&T and USL and Novell, quote, consistently
informed licensees that they owned their code and that they could
do with it as they wished.
Mr. Crab, formerly of Santa Cruz and then of Caldera, said that
while at Santa Cruz, Santa Cruz told licensees that they were free
to do as they wished with their own code, modifications and
derivative works, so long as they protected AT&T's System V
source code.
AT&T and its licensees, Your Honor, took AT&T's
licensees like IBM and Sequent, took AT&T at their word. They
publicly disclosed their own original works in the time following
the execution of these agreements. Examples of those disclosures
are in the papers we have provided. There is a cart with books in
front of Your Honor in which repeated disclosures were made over
decades of the code and the methods and the concepts of AT&T's
UNIX System V software. And, Your Honor, of the modifications and
supposed derivative works of that. Hundreds of books have been
written on the subject. Those disclosures are no different, Your
Honor, than the kinds of disclosures that SCO has included in its
final disclosures.
Neither AT&T nor its successors raised any objection
17
to those disclosures until this lawsuit became a glimmer in the
eye of current management. SCO's former CEO, Ransom Love, has
testified that, quote, after Caldera acquired ownership of UNIX
code, and this is at tab 29, even though we were aware that IBM was
disclosing homegrown code, we made a conscious decision to take no
action against such disclosures. IBM, Sequent and other licensees
no doubt reasonably relied on the repeated statements by AT&T
and its successors that they could do as they wished with their own
works so long as they protected AT&T. IBM and Sequent built
businesses, Your Honor, on that proposition and invested hundreds
of millions of dollars in the idea that they would actually control
their own stuff.
Estoppel can, no question, be in certain circumstances a fact
intensive inquiry. It is not always appropriate for summary
judgment. Courts can and they do enter summary judgment on grounds
of estoppel, and I would respectfully submit, Your Honor, that if
there is a case for it, this is it.
Third point, Your Honor, the alleged breaches here have been
waived. They have been waived for three reasons. They have been
waived because the repeated statements of AT&T and its
successors over nearly two decades not only amount to estoppel but
they amount to waiver. I won't repeat that ground.
The second reason why there is waiver here, Your
18
Honor, is that Novell, the supposed predecessor interest to SCO,
exercised its rights under an asset purchase agreement with the
Santa Cruz Operation, Inc. to waive the alleged breaches here. I
will come back to that.
The second item I would like to focus on, Your Honor, is SCO's
own conduct which we believe results in a waiver of alleged
breaches here.
First, Your Honor, with respect to Novell. Section 4.16B. If you
look at tab 36 of the book, Your Honor, after the commencement of
this case Novell exercised its rights under Section 4.16B of the
asset purchase agreement to cause a waiver of the alleged breaches
here. The asset purchase agreement says that seller, in this case
it was Novell, shall amend -- in addition, seller in its sole
discretion, 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.
In the event that the buyer fails to take such action, the
seller, Novell, shall be authorized and is granted the right to
take that action on the buyer's behalf. Well, it is undisputed here
that Novell, following the commencement of this case, exercised its
rights under 4.16B. In the dissent letter it asked SCO to waive,
and SCO declined to waive and Novell took that action. The only
issue is whether Novell has the right to do that.
19
I respectfully submit, Your Honor, that the plain language of
Section 4.16B gives Novell that right. SCO has raised a number of
arguments in opposition, some as to the parol evidence, and some as
to the plain language of the agreement. We deal with those
arguments in our papers and at tabs 38 and 39 of the book. Time
won't allow me to repeat them here.
Let me just say this about SCO's argument. SCO's reliance on the
parol evidence is we submit impermissible, Your Honor, because the
plain language controls, and the parol evidence cannot be used to
alter the plain language of the agreement. As to the plain language
of the agreement, what SCO says in effect, Your Honor, is that
Novell had waiver rights, but it doesn't have waiver rights to the
agreement that are at issue in this case, the agreements that IBM
is supposed to have breached. The waiver rights by the terms of
Section 4.16B relate to SVRX licenses. The question is, are the
agreements at issue here SVRX licenses? As we show at tab 40 in
Your Honor's book, I submit there is no question that they are.
SVRX stands, Your Honor, simply for System Y release. There is no
question that the agreements IBM is supposed to have breached are
SVRX licenses. They are agreements licensing System V releases.
In a letter from SCO's CEO to the CEO of Novell, following
Novell's exercise of its rights under 4.16B,
20
Mr. McBride acknowledged that the agreements at issue in this
case are SVRX licenses. He said, and I quote, in your June 9
letter, you, referring to Novell, attempt to assert claims on
behalf of IBM and with respect to its SVRX licenses with SCO. In
SCO's opposition papers, Your Honor, in connection with this exact
motion, at paragraph 201, SCO acknowledges that the agreements at
issue are SVRX licenses. It says, quote, effective June 13, 2003,
SCO terminated IBM's SVRX license. Effective July 30, 2003, SCO
terminated the Sequent SVRX license. Novell has waived the alleged
breaches at issue.
The next waiver issue I would like to discuss, Your Honor,
concerns SCO's conduct. This is summarized at tab 41. SCO shipped
the exact four categories of code material we're talking about,
Your Honor, in its own product. It shipped it in its United Linux
product, and it shipped it in that United Linux product pursuant to
the terms of the General Public License or the GPL. Each of those
acts resulted in a waiver of the alleged breaches. Let me tell you
why.
First, United Linux. If you look at tab 43 of the book, Your
Honor, SCO was part of an initiative known as United Linux. As a
part of that initiative SCO and its partners assigned any
intellectual property rights they had, with the exception that is
not relevant here, to the material that ended up in United Linux
product. The material at issue here is in the United Linux product.
If you take a look at, Your Honor,
21
tab 44 of the book, you'll see the language of the United Linux
agreements. The United Linux Joint Development Contract says that
all intellectual property rights in the software developed
pursuance to the JDC, other than the preexisting technology and
enhancements, shall be assigned by the members, which SCO is one,
and any individual member to the LLC and shall be owned by the
LLC.
Well, SCO's Linux IV product was, Your Honor, software developed
pursuant to the JDC. We show that at tabs 44 and 46 of the book.
Again, the items of information that is supposedly misused here was
in that product. Any rights SCO had to the material at issue, Your
Honor, and we respectfully submit they had none, but any rights
they had were assigned by them to the United Linux LLC, and they
are in no position now to assert any claim of breach with respect
to it.
With respect to the GPL, the General Public License, again, SCO
shipped the material at issue in products that were licensed under
the GPL. What does the GPL say? The GPL says, among other things,
that if you distribute copies of the program covered by the GPL
product or for a fee you must give the recipients all the rights
that you have. You must make sure that they too receive and can get
the source code. You give them the right to make copies and to
distribute verbatim copies. So the very material that supposedly
represents the breach was put by them in a United Linux product and
shipped
22
under the General Public License under those terms. That, too,
Your Honor, represents a waiver.
Now, if I may, as time is short, with respect to the technology
items at issue, and let me say this again, there are four of them.
I would point you to tab 53 of the book where they are listed. The
facts related to these four technology area are at tab 54 of the
book. These four items of technology have one thing in common. That
one thing is dispositive of SCO's claims. That one thing is that
none of those four categories of material is resulting material.
Under their theory of the case, Judge, IBM's liability depends at a
minimum on it being resulting material. They are not, therefore,
the claims fail. None of the four categories include System V
methods or concepts, none of them are modifications and derivative
works of UNIX System V. They are original IBM works, just as in my
example of the 990 original works of Your Honor, and SCO has under
the plain language of the agreement, we submit, no right to control
them.
There are four, as I said, Your Honor. The JFS contribution is
at issue in the next motion, and with Your Honor's permission, I
will argue that in that connection. Let me just focus on the three
remaining ones, the RCU contribution, the LTP contribution, and the
negative know-how experience. The RCU contribution is at tab 58.
Putting aside the fact that it is not resulting material, and
putting aside
23
the fact that SCO has waived any right to pursue it, SCO's claim
with respect to the RCU contribution is barred by the statute of
limitation. The statute of limitations under New York law, which
controls, is six years. RCU was disclosed in a patent application
in 1993 and the patent issued in 1995.
Under SCO's mistaken theory of the contract, Your Honor, IBM's
filing of the patent application amounts to a disclosure. The
statute of limitations ran before the commencement of this claim
and the claim is barred.
In any event, the witnesses, the only individuals identified by
SCO as having anything to do with that, and whose pictures and
testimony appear at tab 60, have debunked SCO's claims.
The LTP contribution. Again, putting aside the fact that it is
not resulting material, putting aside the fact of waiver and
estoppel, SCO's claim with respect to the LTP contribution fails,
Your Honor, because it depends on the proposition that the LTP
contribution came from the DYNIX operating system, which SCO
contends is a modification and derivative work. It didn't.
The LTP contribution was not part of the DYNIX operating system.
The evidence, which we set out at tab 62 of the book, makes that
perfectly clear. It was not a part of it and under their own theory
it fails.
Lastly, Your Honor, the negative know-how category.
24
This is a category of 11 items of supposedly misused
information. We lay this out at tab 64. There are two basic brands
of claim as it relate to these 11 items. One of them concerns
experience. Here is what SCO's claim is as it relates to the
experience. It says, as we show at tab 65, Judge, it says IBM has
breached its contract by permitting IBM developers exposed to DYNIX
PTX methods and concepts to contribute to Linux in the same area
for each developer's work. So anybody that had any exposure to
DYNIX can't work in connection with any other operating system in
that area. That is the claim.
With respect to the negative know-how, which also appears at 65,
the gist of the claim is that people who had some knowledge about
DYNIX told people who were working on Linux not to do certain
things in DYNIX that they don't think worked. SCO has identified 16
supposed wrongdoers as it relates to these 11 categories.
Those individuals, Your Honor, as I will come to, have offered
undisputed testimony that debunks SCO's claim. The claims as to
these 11, Your Honor, fail for three quick reasons, and I will sit
down.
First, Your Honor, the agreements which SCO contends were
breached, Your Honor, do not contain any provision which would
allow it to preclude IBM employees from using their experience and
their general know-how in working on projects other than the one on
which they are presently working. There
25
is no connection drawn in SCO's interrogatory answers or in its
paper between the contract and this claimed notion of misuse of
experience.
Second, Your Honor, though Magistrate Judge Wells allowed SCO to
pursue, and declined to throw out in the discovery phase SCO's
claim as to these 11 items, she made it perfectly clear in her
order, which we have set out in your Honor's binder, that these
claims were subject to being, in her judgment, at least, disposed
of on summary judgment.
Your Honor ordered SCO to provide particularity as to these
claims as did Magistrate Judge Wells. That has never been provided,
and for that reason alone they are out.
Finally, careful consideration of these items shows that the
claim falls apart. If you look at tab 70, Your Honor, you will see
the pictures of each of the 16 individuals who are at issue and
what it is they said in testimony that is unrebutted by SCO. Here
is what they said. They didn't make any contributions to the files
or the directories listed, or they didn't base their contributions
to the list of files on UNIX System V in making the
contributions.
You will want to look item by item. Your Honor, look at tab 71.
For two of these items, and, again, this is undisputed, for two of
these items, Your Honor, 188 and 187, the technology which SCO
alleges was misused didn't even exist in DYNIX. For another two of
the items, 43 and 94, the
26
material had nothing to do with DYNIX PTX. It was discoverable
outside of IBM. For five of the items there is absolutely no
evidence that the alleged wrongdoers had any experience in the
technology area where they were supposed to have misused it in some
other area. SCO admits that with respect to four of them. With
respect to items 23 and 90, Your Honor, for two of the items the
material was disclosed in marketing materials, and in footnote ten
of SCO's opposition papers, it says that any such disclosure -- if
the material is inactionable anyway. Finally, item 189, Your Honor,
was based on knowledge available in public literature.
As is summarized in tab 72 of the book, SCO's negative know-how
claims and its experience claims we think underscore the absurdity
of the position. If SCO's theory is correct that anybody with any
experience, not just with UNIX System V, but any modification or
derivative work of UNIX System V, is severely constrained in their
employment, and that is contrary to public policy as the cases in
our papers make clear.
The only conceivable reason, the only conceivable reason why
AT&T could have wanted to protect IBM, and in my example Your
Honor's original works, was to protect the one item that you put in
your product. SCO has acknowledged, Your Honor, and it did it early
in the case, that there are no secrets in UNIX System V. They said
that in open court and
27
they withdrew their trade secrets claim.
SCO's theory is, finally, inconsistent with IBM's rights of
ownership. It admits that IBM owns the material at issue. It admits
that ownership carries with it the exclusive right to distribute,
and yet they take the position, Your Honor, that would nullify as a
practical matter IBM's rights of ownership.
Thank you.
THE COURT: Thank you. Mr. Singer.
MR. SINGER: Thank you, Your Honor. We also have arguments
books, if I might approach?
THE COURT: Please.
MR. SINGER: Your Honor, I would like to begin with why
these contract claims matter. The UNIX operating system developed
by AT&T was its crown jewel. It is the operating system of
choice for mission critical application, and it became in the 1990s
the leading operating system worldwide.
Now, major computer companies like IBM wanted to adopt that
system for their own hardware. They had a choice. They could come
up with their own operating system. In fact, IBM tried. It is
called OS2. It failed. IBM, like others, struck a deal with
AT&T. Give us access to your source code so that we can develop
our own flavor of UNIX that will run better on our hardware.
AT&T agreed but subject to very strong
28
restrictions, and not just on the original System V code, but on
what they knew IBM and others would do with it, the so-called
modified and derivative works.
They required that those modified and derivative works be
treated just like the original software code in language that is as
plain as can be in the relative agreements that are enforceable
today. That is why we are here.
AT&T preserved its head start in developing UNIX while
allowing companies to, for a royalty, develop their own systems
that were UNIX systems that, of course, would pay royalties for the
object code that would run the various machines. What they could
not do is exactly what IBM has done here, give away that head start
by open sourcing of derivative technology that they would never
have had if it weren't for access in the first place to System V,
and to allow a jump-start to Linux, which has had a tremendous
effect on SCO's business. SCO was the inheritor of AT&T's UNIX
business. SCO dominated with UNIX on the Intel chip platform
market, and it had 80 percent of the market in the late 1990s.
It did ventures with IBM, as you'll hear more about this on
Monday when we have our unfair competition argument, but a joint
venture project, Monte Ray, to use SCO's know-how in that field to
develop joint products. IBM then decided to abandon project Monte
Ray, and instead to devote technology to Linux and to disclose
proprietary UNIX technology. At tab one
29
we just touch on a little bit of that, which is the experts',
Mr. Rochkind's and Mr. Ivie's conclusions that IBM's disclosures is
what turned Linux into a strong enterprise system.
If you turn to the third page, in tab one you see a graphic
where IBM's own document shows it directed the strength of AIX and
PTX, which is DYNIX, into Linux as their proposed UNIX strategy.
You have a summary of the vast amount of technology just on the
issues which are still subject to the Court's order in the case,
substantial amounts of technology that have been contributed. You
have Mr. McKenney, who is an IBM secret programmer, who expressly
stated in a document that we will mine key ideas from AIX and DYNIX
PTX, and that this will make Linux more disruptive to proprietary
operating systems like SCO's business. And the reason they can do
this is because they have access to DYNIX PTX source code and
access to top operating system experts in AIX and DYNIX.
The result, which is depicted graphically on the last slide in
section one, is the rapid decline in SCO's open server UNIX new
license revenue following those technologies being distributed in
early 2000. That is why these contract claims matter a great
deal.
I would like to address at the outset why a trial is needed, and
why this is not a matter for summary judgment. One might think that
that is obvious just from IBM's presentation.
30
There are hundreds of pages of briefs, reply papers and addendum
that are longer, I think, than War and Peace. 40,000 pages of
exhibits. We counted 100 plus new cases just cited in their reply
brief. That does not sound like a summary judgment case to us, Your
Honor. It does not sound like a case where you can look at the
plain language and you can say SCO does not have a contract
claim.
I think that it is also clear when we look at the extrinsic
evidence that IBM is so heavily relying upon, and because you're
talking about both things that occurred over two decades ago, in
part, and because you're talking about terms that are not clearly
defined, like what does someone mean when they say an original IBM
work? What do they mean when they say, as you heard on the screen,
that it was developed without relying on System V?
Let's take a look at some of those witnesses just at the front
end, and their changes of opinion at different points in the case.
If you look at tab two, the first slide is Otis Wilson. He says, as
you heard, his beliefs as set forth in a declaration that IBM and
Sequent are free to open source all of AIX and DYNIX except the
original System V code. 14 years ago, however, he gave strikingly
different and contradictory testimony in a case, USL versus
Berkeley, where he said that anything that that university created
with the exposure to licensed software based on, contained a part
of, was a
31
derivative work and had to be treated as a licensed software,
which is, of course, what the plain language of the agreement
says.
He also wrote that in a 1987 document. He also confirmed that
that testimony was correct at his deposition, and he acknowledged
it was no different in intent between a standard operating license
and the educational license at issue in that case.
On the next page we talk about Mr. Kistenberg, another one of
the IBM acknowledged involved persons. He negotiated the Sequent
deal on behalf of Sequent. They have a declaration from Mr.
Kistenberg that said no one at AT&T had intended to assert
control over the portion of derivative work that did not contain
System V code. He told a different story in his deposition.
In fact, he said in his deposition that he told IBM's counsel
that his understanding was that the UNIX software given to any of
the licensees, that any time they used the source code to develop
derivative products, that that was a part of the System V source
code, and that they could not turn around and give it to X, Y, Z
companies. He states that clearly at various places in his
deposition. He says in his deposition that he would never have
signed that declaration if he knew the use that IBM would try to
interpret his words to mean.
Mr. Chatlos, in fact, did exactly that. When he was
32
confronted with a proposed IBM declaration following the
meeting, he said he would sign one that actually reflected what he
had discussed, but that the ones presented to him didn't do that
and he refused to sign.
Mr. Bouffard had his declaration submitted by IBM and, again on
the key point we're talking about, these are not collateral points,
but it is the key points that IBM wants you to overturn the plain
language of the agreement and go with extrinsic evidence on. They
have a declaration from Mr. Bouffard. He gives a later declaration
to SCO which clarifies that when he said there was no right to
control or own the modifications, he meant that AT&T couldn't
appropriate such material, and said to IBM give us the AIX and we
want to sell it for our benefit. And that he did not mean that IBM
had the right to disclose the protected added on material and other
code that was in the derivative product. That is directly contrary
to his declaration and the position that IBM takes in this
case.
Just recently in the Novell case, he gave a deposition and that
is the next page which is excerpted here, where he was asked by
Novell's counsel as to how it came to be that he signed the
declaration that said that ownership and control was with IBM, and
he explained that his IBM declaration wasn't written by him, that
they went around and around in negotiating the language, and that
finally he was worn down.
33
He said it wound up being a negotiation of my words rather than
a document of my words.
Your Honor, this and the other extrinsic evidence is exactly why
we have trials. We want to subject these witnesses to the crucible
of cross-examination, and then the truth we believe will emerge.
That cannot be shortcut in this case.
I would also like to talk about the assertion that was made that
the particular derivative works at issue in this case are just
things that were dropped in and had no basis related to System V.
That is manifestly not the case. I would like to move all the way
to tab 50, if you would, in the binder which we provided.
This deals with AIX. It is an excerpt from the report of Mr.
Evan Ivie, who was formerly the head of the computer science
department at Brigham Young. He has worked on UNIX all the way back
to AT&T. He is a distinguished expert in the field. He has
studied this, and as his report and underlying testimony show, half
of the JFS files were based on System V source code. If you turn to
the second page there we go into a little more detail. Mr. Hatch in
the argument later this afternoon will even have even more detail
on this. He points out that in 1990 or 1991 the first JFS was based
on the preexisting system that was derived from UNIX source code
licensed from AT&T, and that approximately half of those files
were based on UNIX System V source code. How does he know
34
that? Because if you go back into the discovery of that, they
have origin codes where IBM is included within AIX indicating that
those came from System V.
Now, there is a dispute as to whether or not IBM created the JFS
system that was contributed to Linux in a clean room environment
from OS2, their own operating system.
THE COURT: Hang on a second.
MR. SINGER: Do you need a moment?
THE COURT: Go ahead, Mr. Singer.
MR. SINGER: Your Honor, that is a disputed fact as to
whether or not it came out of 0S2 because we have competent expert
testimony saying it came from System V.
In addition, we have admissions, such as an IBM programmer, who
said, and this is also at tab 50, that the System V file system is
where this stuff, referring to JFS, where this originated. It
couldn't be more black and white than that.
Mr. Davidson's declaration is also further support of the fact
that JFS is not some system that just was dropped into AIX and had
no relationship to System V and now they are seeking protection
over it. It itself was derived from System V.
At tabs 51 and 52 we have a similar analysis with respect to the
origins and the relationship of DYNIX RCU. These are not things
that were just dropped in and that were
35
extracted to give to Linux. These were interwoven with the DYNIX
operating system. DYNIX wouldn't operate without them, and those
were operating in a DYNIX environment, and they are by every
meaning of the word derivatives.
Now, Your Honor, I would like to go back now to the legal
argument and begin with the fact that there are four claims. We
disagree with IBM on the issue regarding sublicensing contracts.
They had no separate agreement about it in their initial brief.
They said, which we agreed, that they depend on the original
underlying primary source code agreement and, therefore, if there
is a breach of the software agreement, there is also a breach of
the sublicensing agreement for distributing material in violation
of the software agreement, and Section 3.03 of the sublicensing
agreement makes that clear.
Now, there are four and only four legal arguments made by IBM in
their summary judgment briefing, their initial briefing, not their
reply brief. I will deal with those here. We urge the Court to
disregard all the new and additional arguments put into the reply
papers that were not raised in the initial papers.
Turning to the plain language, Section 2.01 says that the right
being given to IBM includes the right to modify the software
product and to prepare derivative works based on such software
product provided the resulting material, which we
36
submit are the derivative works, are treated hereunder as a part
of the original software product. That means treated just like the
System V code.
What does that language not say? It does not say what IBM
suggests. It does not say that IBM is free to take any part of this
and distribute it to whomever they wish in source code form. The
contract between what IBM's position in this case is, and what the
agreement says, could not be clearer than just contrasting the two.
In IBM's brief they say that IBM owns and is free to disclose any
material that Sequent created so long as it does not contain UNIX
System V material, and, as we have seen, that is simply not what
2.01 says.
Section 7.06, another part of that agreement, also makes it
clear that the licensee has to hold all parts of the software
product subject to this agreement and in confidence for AT&T,
that it may distribute products only to third parties having
licenses of equivalent scope, and that the licensee may obtain
materials based on the software products subject to this agreement
from such a third party, and use such materials, provided that the
licensee treats such materials as if they were a part of the
software product. Think about what that means. IBM is restricting
itself to use materials based on a software product, not the
software product as they say just System V, but just based on that
from a third party, but can only use those materials if they treat
them as part of the
37
software product itself. That is just like 2.01 suggests.
Now, what IBM does not spend any time on are the side letter and
amendment X, which clarified and modified in certain respects the
IBM AT&T agreement but not the Sequent agreement. We have dealt
with that in our briefs because those support our position. They
gave ownership rights over derivative works to IBM, but did not
give them a release from the control rights and they could not
disclose the source code to others. That was clear under 706(a)
which appears in the '85 letter. These are by way of tab 8 in the
book. The 1987 letter continues to protect all parts of derivative
works. It indicated that a third-party breach of derivative works
cannot do so if it is based on all or any portion of such a
derivative work, which is inconsistent with the position IBM takes
here today.
In 1996 they had an amendment X which had an illustration
attached at 3.7, and that illustration was that if company A, a
sublicensee, is a general computer system manufacturing system, and
it said IBM may not distribute source copies to that company for
purposes of making modifications to adapt the sublicensed product
as a general operating system for the company's general computer
hardware system. But yet they maintain here that they can open
source that to the world to come up with competing operating
systems. Their position simply cannot be squared with the plain
language of the agreement.
38
There would be no purpose for the language we saw in 2.01
talking about the derivative works if all that was protected was
the original course code. You wouldn't need that. The source code
would then have its own protection. The only sense that makes is if
the derivative works, the resulting work is protected.
Now, Your Honor, there is no factual dispute that AIX and DYNIX
PTX are derivative works within the meaning of Section 2.01. At tab
10 in the binder we provide the expert testimony on that point, and
admissions from both Sequent and IBM people that these are
derivative operating systems based on System V. We would submit
that the combination of that plain language, and the expert
testimony together with the plain meaning of the Sequent agreement,
is why we're entitled to partial summary judgment on Sequent on the
ground, one, that Section 2.01 means what it says, that the
derivative work has to protect like the original product and, two,
that DYNIX is in fact a derivative of System V, because that is not
disputed at either the expert level or the level of the admissions
which we have put into the record and excerpted at tab 10.
Your Honor, for that reason we don't believe it is necessary to
turn to parol evidence in this case. There is an integration clause
that would even exclude doing so. However, the parol evidence is
sharply disputed and it would require a trial. If one turns to tab
13, and I have already touched on
39
this subject with respect to certain declarations from the very
witnesses who IBM relies upon, but beyond that there are over 20
witnesses, 20 witnesses who are involved with AT&T and Novell
and Santa Cruz in the negotiations, in the administration, in the
enforcement of these agreements, who contradict IBM's contract
interpretation.
I don't have time to go through here now all of this testimony
that is in the record and excerpted at tab 14, but it is directly
on point.
Mitzi Bond, for example --
THE COURT: You said 14. Do you mean 13?
MR. SINGER: It is 13 that I am referring to right now,
Your Honor.
THE COURT: Okay.
MR. SINGER: Behind tab 13, which is the chart, there are
excerpts from each of this witnesses and declarations or
depositions.
Just to touch on one, Mr. Guffey, who during the relevant time
period, '80 to '85, was the head of the software services division
which included UNIX, and he said I believe that the members of my
division and other AT&T employees involved in licensing UNIX
share the foregoing understanding because it was a common subject
in training and discussion. The licensee was obligated to keep all
parts of those modifications and derivative works confidential,
including the
40
methods and concepts embodied in those modification and
derivative works, just as the licensee was required to keep all
parts of the UNIX software product confidential.
If one turns to Burn Levine, who was an attorney at the time
involved with these agreements at AT&T, and he said nothing in
the agreement reduced AT&T's protection for UNIX software, and
that it was not limited to the disclosure of just little source
code.
Beyond those witnesses, let's turn to some of the very witnesses
who IBM relies upon. If we turn to tab 16, we have again Mr.
Kistenberg who says exactly the opposite of what IBM relies upon in
connection with the testimony that you have heard earlier from IBM.
If we turn to tab 17 you have Mike DeFazio who was there and he
supports IBM's position, but he concedes that he really relied on
Martin Pfeffer who was the general counsel, who had primary
responsibilities for supervising the drafting of these agreement,
and Mr. Pfeffer supports our position.
You have at tab 18 Otis Wilson, and Mr. Wilson, as we have seen,
contradicted his position that he takes now, closer to the time in
the USL case, where he gave sworn testimony and where he said
anything that created an exposure to the licensed software or was
based on or was a derivative work had to be treated in that
way.
We have seen with respect to David Frasure, tab 19,
41
another one of the individuals up on the scene, that he
specifically said in the USL versus Berkeley case that the UNIX
source code had been instrumental in its development, and that that
is why it cannot be freely distributed by Berkeley.
Mr. Vuksanovich, the other gentleman up there at tab 20, says
that if there is a single line of UNIX source code in a
modification or derivative work, then that modification or
derivative work has to be treated like the software product that
has been licensed under the agreement. He agreed with that. So
clearly this is a case where both the subsequent UNIX agreement and
the testimony requires a trial.
One final point on that, which is at tab 23. That is that there
are documents from IBM that are also inconsistent with what IBM
maintains today. This was an analysis of these very agreements done
by IBM. We put the whole document behind tab 23 for the Court to
read. This analysis was done in 1989, and specifically concluded
that all copies of the derivative works of UNIX source code must be
treated in exactly the same manner as the UNIX source code as
received from AT&T. Nowhere in this document is there any
mention that they could extract parts of the modifications and the
derivatives and do with them what they would. That is something
that is a position taken in this litigation.
Your Honor, they talk about the parade of horribles that will
occur if this interpretation is afforded. That is
42
simply not the case. There are only two derivative works at
issue, AIX and DYNIX. IBM can use that technology to market
product, and they can come up with their own independent operating
system, and their employees are not restricted in their work, they
simply can't open source the result of that work if it is based on
System V.
So the consequences of agreeing with our interpretation is
simply that our contract is upheld, we receive damages, we receive
an injunction against further violations to prevent this head start
from being dissipated and being given away to Linux. No other
company that we're aware of has done what IBM had tried to do, even
though there have been many licensees. None of them have come in
here and open sourced their source code in the manner that IBM has
to enhance Linux.
Your Honor, we have put in the book as well the various legal
authorities as to why this interpretation is reasonable. There has
been a dispute of experts between Mr. Willick, who they submit, and
Mr. Popono, who is a professor at Harvard Business School, and at
trial I think that will be interesting testimony, and certainly not
something that the Court needs to deal with on summary
judgment.
Now, with respect to estoppel, at tab 27 we include the fact
that estoppel is an issue of fact that we would submit is
inherently unsuited for summary judgment. The requirements
43
are that there be some concealment of a material fact by us, and
some lack of knowledge regarding these contracts by IBM. That
simply is not feasible in this situation.
First of all, you have an integration clause which said that the
parties can only change the agreement by a signed agreement in
writing. IBM knows that even if it were true that some people told
them, well, disregard this and don't believe that, they knew that
the only thing they could rely on was a change in writing, and that
is in the agreement, and that we submit is why IBM went to the
trouble of getting those side letters in 1985 and 1987 and
negotiating amendment X in 1996. That is how these things are
changed.
The case law we cite at tab 28 in our brief say that that is an
integral matter for an estoppel claim. Certainly there can be no
concealment of material facts when what allegedly is being
concealed is the plain language of the contract. Now, beyond that
there is no competent evidence that establishes that AT&T or
any of its successors told IBM or Sequent that they could simply do
as they wished.
That library shelf of books which was brought in here, there is
nothing shown that the specific technology that is at issue in this
case is disclosed there. Many of those, we would submit all of
those, have copyright notices, so to the extent there is
information it is still protected by our copyrights. They talk
generally about System V but don't
44
disclose the information here. They are welcome to roll in that
cart we submit to the jury in this case and make that argument, but
that is certainly not a part of a summary judgment proceeding.
Now, as to the witnesses who they claim say that AT&T gave
them these assurances to do as they wished, that is sharply
disputed. Your Honor, turn to tab 30, if you would, in the binder.
You see there over a dozen witnesses on those two pages that flatly
dispute that they or anyone they worked with at AT&T or Novell
or Santa Cruz ever told licensees that they could disregard the
plain language of those agreements. At a minimum, even if that is a
legally tenable argument for estoppel, it is subject to a factual
dispute.
Your Honor, specifically, Doug Michels testified, and this is at
tab 31, that when there was a concern at Santa Cruz that IBM
announced support for Linux, he went to talk to IBM and they
assured Santa Cruz, which is now SCO, that they would not
commercially harden Linux, and that they would not substantially
encroach on Santa Cruz's core market, so that there was nothing
here we had to worry about. Now they claim that is estoppel and
waiver. I submit that there cannot be any evidence of reliance
because IBM gave those rights no consideration at all.
First of all, let's look at the fact, and they talk about this
in connection with waiver, with the distribution of
45
Linux, but who was distributing what when? When did IBM make
their Linux decision? IBM decided to pursue Linux and to distribute
technology beginning in '98, and they started the Linux Technology
Center in '99, and the first disclosures were at the end of '99 and
into 2000. At that time period, up to May of 2001, these copyrights
and contracts were owned by Santa Cruz which was not in the Linux
business. Caldera, which was in the Linux business, did not own
them. Caldera acquired them afterwards, after they had already made
this decision and gone forward.
But beyond that, Mr. Frye, who is the very head of the IBM Linux
Technology Center, specifically denied that he ever gave any
consideration to any of these issues with SCO. That is at tab
32.
Your Honor, in addition, at tab 34 you have Mr. Sandve's e-mail
from IBM, and Mr. Sandve specifically states, because he was asked
by one of his superiors, why can't we let you look at the AIX
source code? He says it was because of the 5.3 source code license,
and that it would take 50 to $80 million to buy it from SCO even if
SCO would deal with it right now. All these assertions of estoppel
and waiver are at a minimum factual issues which have to be decided
at trial.
Very briefly with respect to the issue of Novell waiving our
rights.
By the way, one last point on IBM's suggestion that
46
Mr. Love waived his rights and that SCO made a knowing waiver.
Mr. Love, who IBM did not disclose to the Court, is a paid IBM
consultant, he contradicted that in a subsequent declaration,
saying that there was never an investigation while he was the
C.E.O. of these property rights. We have submitted declarations,
and this is at tab 40, from other members of the board of directors
and management directly contradicting his testimony.
So all of these issues, and the United Linux issue they raise,
and it is treated in the copyright argument which you'll hear later
in the week, and they incorporated that in their briefs and we
incorporated it in our briefs, and that will be later this week,
and so will the issues concerning the other waiver argument they
made about our distribution of Linux. At a minimum there are
factual issues that preclude an estoppel and waiver argument.
I would like to talk about the issue of Novell's purported
waiver of SCO's rights. This interpretation would make a mockery,
Your Honor, of the very asset purchase agreement that was signed by
the parties, where it gave the whole business to SCO. The Court
will remember the argument about this in the Novell case a few
weeks ago, and yet they maintain that they can come in here and
they can prevent SCO from enforcing its intellectual property
rights by a contorted interpretation of Section 4.16. First of all,
this issue is
47
resolved in the Novell trial.
Secondly, their position is simply flat wrong. If one turns to
tab 43, and Your Honor has seen this section, but 4.16 defines the
SVRX licenses for purposes of this agreement under item six of the
schedule. That schedule does not list these IBM agreements in item
six. It lists them as a different item, item three. That is where
the software and sublicensing agreements at issue here are listed.
At a minimum, there is an ambiguity in that issue.
At tab 46 we present for the Court testimony from the lead
negotiators and the businesspeople on both sides of the issue who
agree that Novell had no ability to waive IP rights with respect to
the source code license at issue here. That was limited to protect
their binary royalties, which were bought out in 1996, and had no
continuing role. Both Chatlook and Wilt, who were the negotiators
for Novell and Santa Cruz respectfully, and the other individuals
on these pages all agree, and more testimony is being developed
every week in the Novell case supporting this position, that they
had no ability to waive these rights.
That was made clear as well in an amendment in writing to the
APA. It is amendment number two, which is at tab 44. It says that
Novell has no right to increase any SVRX licensee's rights to
source code, and may not prevent SCO from exercising its rights
with respect to SVRX source code in
48
accordance with the agreement.
So their position, which may or may not be related to the fact
that IBM paid Novell about $50 million right at about the time of
this waiver, is not supported by the plain language. It is not
supported by the extrinsic evidence. It is contrary to the entire
purpose of the agreement. In any event, it will be resolved in the
Novell trial.
Briefly on the statute of limitations, their final argument,
that breach arose from open sourcing to Linux. That is not the same
thing as a patent which restricts the use to IBM. Only IBM could
use it. That would be consistent with our agreement because IBM has
the right to use it. Open sourcing, which is what occurred during
the period when the statute of limitations had not run, it occurred
only a few years ago, that is what gives rise to our cause of
action. IBM's patent, therefore, does not begin the statute of
limitations. Their cases do not support that proposition.
Your Honor, at tab 49 we briefly point out what the Court is
well aware of, the fact that you cannot raise new legal arguments
in a reply brief for the first time. All of these arguments that we
heard at the end of Mr. Marriott's presentation about this specific
technology are not the four arguments listed in their reply brief.
We are not charged with anticipating everything they might draw
from all of the factual material.
49
So in addition to the fact that that is new, we have put in
testimony related to each of these technologies at tabs 50, 51 --
these are all in the record -- 52, which indicates that there is a
factual dispute at a minimum with respect to these technologies
issues, rather than the legal issues which they base their initial
legal brief on, but now presumedly they have found some reason to
want to raise new issues in reply.
Your Honor, we have established, as I mentioned earlier, that
our cross motion for summary judgment should be granted. Their only
real argument with respect to that is that you should not issue
partial summary judgment. They note that the courts are in disarray
on that issue. We believe that the better authority is that you can
and should issue such a partial summary judgment. Alternatively,
under Rule 56(d) you're entitled, in fact, directed to make such
findings if the facts are not in dispute.
I would like to save the balance of my time for my rebuttal on
the cross motion.
THE COURT: Go ahead, Mr. Marriott.
MR. MARRIOTT: Thank you, Your Honor.
First, with respect to the plain language, the provision on
which SCO relies, Your Honor, says simply that resulting materials
are to be treated hereunder like software product. Whatever
precisely that means, Your Honor, the categories of information
that IBM is supposed here to have
50
improperly disclosed are not resulting materials. And,
therefore, the limitation, whatever precisely it is, on materials
covered by Section 2.01 is inapplicable.
Again, we're talking -- Your Honor, if I may approach with a
chart?
THE COURT: You may.
MR. MARRIOTT: If this is the one item, Your Honor, that
you licensed as your product as I described previously from SCO,
and that is subject to the terms of their agreement, we didn't
disclose that. Nor, Your Honor, did we disclose the derivative
work. The allegation is that IBM took pieces out of its own
original works and used them as it wished. Some of them got put in
different products. That, they say, is a violation of the
agreement.
That disclosure reveals nothing about this, and that disclosure
does not compromise the entirety of the product so that there would
be some reason to be concerned about that. Taking this out and
putting it here, Your Honor, does not mean that that might be a
derivative work, or it might not, and you have to look at that
particular thing. Is that a derivative work? Under SCO's theory you
might have an obligation to limit what you do. If what you take out
is not a derivative work, Your Honor, then it is not subject to the
provisions of 2.01 of the agreement.
2.01, if it means anything, Your Honor, it relates to
51
precise terms, resulting materials. The things which IBM has
alleged to have taken out, that are not modifications or derivative
works or resulting material, can't possibly have been distributed
in violation of Section 2.01 of the agreement.
Parol evidence, Your Honor. Mr. Singer points to, as I suggested
he would, a long list of individuals who he says have offered
testimony to support SCO's case. He pointed to the testimony from
Mr. Wilson who he says, for example, has offered contradictory
testimony in a case in 1991. Your Honor, time won't allow for a
line by line recitation of that. Let me, if I may approach, with
one example.
In 1992 in the litigation to which Mr. Singer refers and to
which he claims Mr. Wilson offered inconsistent testimony, Mr.
Wilson offered testimony that is perfectly consistent with the
testimony he and the other individuals who negotiated the agreement
in this case have given. If you look, Your Honor, at page 47, he
says, quote, we did not -- we, AT&T, did not want to have any
rights or ownership to anything they created. And yet SCO says that
while we, IBM, may own our stuff, they control it. Mr. Wilson said
that in 1992 in the litigation in which Mr. Singer claims he
offered inconsistent testimony.
If you turn to page 76 from that same case, Mr. Wilson said,
quote, the intent is what I have stated many times earlier. In
other words, the intent is such that we protect
52
our intellectual property, and assert no rights in the
licensee's intellectual property. Yet SCO asserts the right forever
to control IBM works original to it, the disclosure of which
couldn't possibly disclose anything owned by SCO.
Your Honor, the parol evidence offered by SCO is no impediment
to the entry of summary judgment, because the individuals upon
which it relies didn't negotiate and execute the agreement. Your
Honor can look at those and decide if there is any contradiction.
That testimony is overwhelmingly in favor of IBM's
construction.
To decline summary judgment here, Your Honor, is to basically
say that a reasonable jury could project the testimony of the
individuals who negotiated and executed the agreements on behalf of
IBM, and accept in its stead the subjective understanding of
individuals who might have been employed at AT&T along with
hundreds of thousands of others, but who never communicated their
subjective intent to IBM as part of any negotiations. Under New
York law, Your Honor, that testimony is not capable of altering the
plain language of the agreement of impeding the entry of summary
judgment.
The reasonableness of SCO's claim -- Your Honor, if that
operating system, if the DYNIX operating system, if the AIX
operating system were a General Motors car, and if the chassis of
that car, Your Honor, were licensed under the agreements as SCO
interprets them, that SCO, Your Honor, would
53
not only control the car in its entirety, but IBM would be
unable to take the dice off of the mirror of the car and do what it
wanted with those. It would be unable to take the radio
manufactured by Sony and put it in another car. It couldn't take
glass manufactured by PPG and put it in another car. The design of
the car could never be used in connection with any other
vehicle.
Estoppel. The cases are clear, Your Honor, that estoppel can be
entered at the summary judgment phase of the case. AT&T and its
successors, again, as we laid out, said over the course of decades
that IBM could do and other licensees could do as they wished. The
mere fact that SCO has produced a number of witnesses who say they
never said that, and they never heard that, does not make
incompetent the sworn testimony of the numerous people laid out in
our book.
The fact that these books, Your Honor, some of them may have a
copyright notice on them does not in any way mean that there wasn't
the disclosures of the supposed secrets which SCO claims it seeks
to protect. The integration clause to which Mr. Singer refers, Your
Honor, has no bearing on testimony as to statements made over the
course of decades that followed the execution of the agreement.
Section 4.16B. Mr. Singer says that IBM's interpretation of
4.16B makes a mockery of the agreement. Your Honor, under that
agreement Novell retained the right to 95
54
percent of the royalties with respect to the licenses. It is
hardly a surprise that Novell would retain the right to waive or to
supplement or to change conduct that SCO might engage in that could
compromise Novell's interests. Mr. Singer refers to amendment
number two and suggests that that somehow is inconsistent.
Amendment number two, Your Honor, relates to prospective buyouts.
There is no prospective buyout at issue here. There is no buyout at
issue here. IBM's rights to continue to distribute AIX were already
bought out.
United Linux. Mr. Singer didn't to my knowledge address United
Linux, and it was raised in our papers, and we'll discuss it on the
7th, Your Honor, in a different context independent of what it
means in the context of IBM's claim for a declaration of
non-infringement, it precludes SCO's claims here. A general public
license on that is similarly deferred. It has independent meaning
here to which SCO has not responded.
As to the four categories of alleged or misused information, Mr.
Singer suggested that that is somehow new in the reply papers, Your
Honor. I respectfully refer the Court to the statement of
undisputed facts in our opening papers. It is not new. It was laid
out and supported there by undisputed testimony. If it is new, Your
Honor, it is curious that Mr. Singer's binder would have included a
set of materials that supposedly refute the testimony there.
These specific items at issue here, about which SCO
55
seems to skirt, Your Honor, are items which when examined
preclude SCO's claims. Mr. Singer refers to the RCU contribution
and he says it is not barred by the statute of limitations because
the disclosure was in a patent application, and a patent
application is subject to certain protections. Your Honor, this
case is not about misusing a patent, it is about disclosure.
Whether or not a person could practice an invention, which is set
out in a patent, is irrelevant to whether the information which
supposedly is secret, and supposedly had to be kept confidential,
was out there sufficient to start the running of the statute of
limitations. The claim as to RCU is barred.
Mr. Singer said nothing, Your Honor, as a consequence about the
Linux technology project contribution, except to suggest that
experts had dealt with it. The expert testimony on which Mr. Singer
relies, Your Honor, is not only mistaken, but it is testimony that
Magistrate Judge Wells precluded SCO from proceeding as to because
it was not disclosed with particularity in the final
disclosures.
The e-mail on which SCO's expert, Mr. Rochkind, relies in saying
that the Linux LTP contribution was actually from DYNIX is talking
about a different set of LTP code than that which is at issue in
this case. Mr. Rochkind's testimony is unsupportive of SCO's
position.
Thank you, Your Honor.
56
THE COURT: Thank you.
Mr. Singer.
MR. SINGER: Your Honor, I suppose the short answer is
that if DYNIX RCU does not matter, and if JFS does not matter and
if they are like the dice on a car, then let's take them out. Let
them go into Linux and take them out. Let them go into DYNIX and
AIX and take them out and see what happens to those systems then.
These are interwoven, as our experts have indicated, with the very
operations of those systems, and those systems as a whole are
derivative of and they would not exist but for System V.
Beyond that, we have shown direct links with respect to JFS to
System V. I quoted Mr. Ivie's testimony and it is in record. I
didn't hear Mr. Marriott say anything about it. It is interesting
that JFS was said by IBM people at the time, and this is in the
record, to be the most important contribution to Linux.
With respect to RCU, at tab 51 you have testimony from Mr.
Rochkind, an acknowledged UNIX expert, showing that it is in Linux
and that the DYNIX code is a derivative of System V, and that RCU
is interwoven. So you can't simply take it out. By the way, he also
noted in his report that Linus Torvell wrote that RCU was, quote,
fundamental in summarizing Linux 2.543 which was the first version
to have that contribution from IBM. He said the most fundamental
stuff is
57
probably RCU and a program called Low Profile.
These are not dice hanging down on the dashboard, these are
integral contributions that are integral to DYNIX and AIX, and they
are derivative of our protected technology, and now they have been
wrongly disclosed.
The second point which has been made is that the plain language
does not support this, but they can't get around the fact that the
plain language in both that agreement and the subsequent agreement
never provide anywhere an invitation to IBM to disclose materials
that they add to these derivative products that is not in someway
based on these derivative products. What we have are snippets of
testimony from these witnesses, that I submit really depend on what
they mean when they are being asked about original software
products or IBM's derivative products, and when you focus on the
precise issue, as the testimony we presented here throughout,
indicates that they say that it was the intent of AT&T to
protect that. That testimony, if you need to get to extrinsic
evidence, is fully admissible and at tab 14.
We submit that the cases from the Second Circuit, saying if
there is ambiguity, the Court should accept any available extrinsic
evidence, and that when you are dealing with form agreements and
how they are interpreted generally is relevant, and these are form
agreements, and that the course of conduct under them is a strong
indication of intent, aside from
58
the fact that virtually everyone up there who they call and
admit are involved persons have given contradictory testimony.
With respect to 4.16B -- well, first, with respect to the issue
of estoppel, the integration clause does more, Your Honor, than
simply say that parol evidence should be considered. This
integration clause says any changes to the agreement must be made
in writing. IBM knew that and they got changes in writing, they
just didn't give them the rights, which IBM says that they have
now, to do anything they wish with those products, and that is why
you have not heard very much in this argument about those side
letters or amendment X.
What that integration clause means is IBM cannot come into court
years later and say, oh, we relied on the fact that someone else
distributed a book that had a little bit of UNIX in it or something
and, therefore, we have the right to disregard our contract. Or
that we heard a licensee was told by someone that you could do it
with a derivative product. That is directly in the face of the
integration clause that says if you want a change, you get it
signed in writing. Beyond that, there is a tremendous dispute where
we have a dozen witnesses who were there that said those things
were never said to licensees.
With respect to the Novell waiver, I didn't hear anything about
the fact that 4.16B's definition of the SVRX license refers only to
item six and that the IBM agreements in
59
issue here are in item three and are expressly not covered. That
was made clear in amendment two. He says, well, amendment two is
dealing with future buyouts. Amendment two was entered into at the
same time in 1996 and IBM bought out its remaining royalty
obligations. After that there was absolutely no interest Novell had
with respect to how IBM acted under those agreements.
Last issue. There are 281 fact statements they make, 40,000
pages of exhibits, and we are not charged with responding to every
legal argument in our opposition that might have been made from
those. We entered with four legal arguments in the initial brief.
The fact that they have not extracted three new arguments about
RCU, about these tests and others, are not properly considered on
this motion for summary judgment and they were not a part of their
initial papers. And because we submitted as a part of the record
all of our expert reports, it happens that there is a part of the
expert reports that contradict those, and now they are wanting the
Court on summary judgment to make rulings about the weight to be
given to those expert reports, and we think that is purely
inappropriate.
Your Honor, I heard virtually nothing about our cross motion
with respect to DYNIX, and there is no dispute that DYNIX is, in
fact, a derivative product of System V. If the Court agrees with us
and the plain language of 2.01, then that
60
limited but appropriate partial summary judgment should be
entered.
Thank you very much.
THE COURT: Thank you. Thanks to you both.
I'll take these contract motions under advisement. I have a jury
I have to deal with. Realistically I think we're looking at about
4:30 to continue with our motion.
We'll be in recess on this matter.
(Recess)
THE COURT: Welcome back, everyone. Sorry about the
delay.
We'll now take up IBM's motion for summary judgment on SCO's
copyright claim.
Are you arguing this, Mr. Marriott?
MR. MARRIOTT: I am, Your Honor.
THE COURT: You asked for 30 minutes each on this,
right?
MR. MARRIOTT: That sounds familiar, Judge.
THE COURT: Go ahead.
MR. MARRIOTT: On the grounds that IBM breached its
contractual obligations, and this is IBM, Your Honor, not Sequent,
SCO purported to terminate IBM's license to continue to use its AIX
product, to distribute that product, and it demanded that IBM shut
down its AIX business, which over the course of decades it has
invested hundreds of millions of
61
dollars in. We declined to do that and SCO amended its complaint
and asserted copyright infringement. That is the claim that is at
issue with this motion.
There are five reasons why summary judgment should be entered in
favor of IBM on this motion. One, SCO can't identify and prove
unauthorized copying by IBM. Two, SCO can't establish a predicate
breach of contract. Three, SCO cannot terminate and did not
properly terminate IBM's license. Four, SCO can't prove that it
owns the allegedly infringed copyrights. Five, SCO has misused
those alleged copyrights. With Your Honor's permission I want to
focus on just the first three of those. By the parties in agreement
and by order of the Court, the remaining two, four and five, will
be addressed at the hearing on May 7th.
With that, Your Honor, point one, SCO can't show unauthorized
copying by IBM. This is summarized at tab two of the book which I
would like to approach and provide Your Honor.
THE COURT: Sure.
MR. MARRIOTT: We have a copy for counsel.
As you know, Your Honor, IBM repeatedly asked over the course of
this litigation for SCO specifically to identify the allegedly
misused information, and the Court repeatedly ordered SCO to do
that as we show at tab 3 of the book. In a December 2003 order,
Magistrate Judge Wells ordered SCO to identify and state with
specificity, and this is at tab three,
62
the source codes that form the basis of their action against
IBM.
Magistrate Judge Wells further ordered that SCO provide detailed
answers to IBM's interrogatories as set out and requested in the
interrogatories. She said, for example, that SCO was to identify
and state -- SCO was to respond fully and in detail as stated in
IBM's first set. Interrogatory one said identify with specificity
all of the confidential or priority information that plaintiff
alleges or contends IBM misappropriated or misused.
Interrogatory four, likewise, Judge, asked that SCO describe in
detail the date of any alleged misuse or misappropriation, and the
specific manner in which IBM is alleged to have engaged in the
misuse or misappropriation. Magistrate Judge Wells reiterated that
order in March of 2004, and then Your Honor set interim and final
deadlines for final disclosures, and at this point SCO was required
finally to identify with specificity the allegedly misused
information.
THE COURT: And you say they have not done that?
MR. MARRIOTT: They have not done that, Your Honor.
If you turn in the book to tab four, you will see that in
connection with our summary judgment papers, Your Honor, we set out
in paragraph 69 the following. Dispute the Court's orders, SCO has
never described by version final line of coding any material
allegedly infringed by IBM's
63
post-termination AIX and DYNIX activity. Moreover, SCO has
declined to provide full and detailed responses to IBM's
interrogatories directed at SCO's allegations of unauthorized
copying.
In response, Your Honor, SCO does not dispute that. It says
instead, simply, that, in effect, that it was not required to do
that. The Court has since made it abundantly clear in a series of
orders that, in fact, SCO was required to do that, Your Honor, and
it has still never done that. For that reason, alone summary
judgment on this claim should be entered in IBM's favor. The orders
of the Court were clear that neither party could proceed with
respect to any material that wasn't identified as directed by the
Court, and SCO has not done that and the claim, Your Honor, should
go for that reason alone.
Point two, SCO can't establish a predicate breach of contract,
as we summarize at tab seven of our book. SCO's copyright claim
here, Your Honor, depends on whether it can show that IBM breached
one of its licensing agreements with AT&T. It is on that basis
that SCO purports to terminate IBM's license. If there is no breach
of contract, no predicate breach, then the copyright claim fails as
a matter of law. The problems with SCO's contract claims have been
discussed at length in the papers and in the argument, and I don't
intend to repeat all of those here, but --
64
THE COURT: Good.
MR. MARRIOTT: Your Honor will recall that I said by way
of footnote in connection with the past argument that I would dwell
in this argument on the JFS language.
THE COURT: I do remember that.
MR. MARRIOTT: The one of the four not addressed
there.
Your Honor, SCO's contract claim involves, as I have previously
indicated, four contracts. Two of them are for IBM and two for
Sequent. The Sequent contracts are irrelevant to this predicate
breach of contract. The Sequent contracts were about the
distribution of DYNIX, not AIX. There is absolutely no evidence
that IBM has continued to distribute AIX. This is all about the IBM
agreements with AT&T and not the Sequent agreements.
As I previously indicated, SCO has offered no evidence and Mr.
Singer did not point, Your Honor, to a shred of evidence that IBM
breached the sublicensing agreement. SCO's entire case depends upon
the IBM software agreement as it relates to this purported cause of
action for copyright infringement. In its final disclosures, Your
Honor, the only contribution identified as having been made to
Linux in violation of SCO's rights is the JFS contribution. This
claim turns entirely on that.
So with that, Your Honor, let me suggest that there
65
are at least two reasons, and one of them has a lot of sub
reasons, why SCO's claims with respect to JFS fail as a matter of
law. The first of those reasons, Your Honor, is that SCO's
allegations of breach with respect to JFS simply lack merit, and
the second is that the alleged breach, even if it were a breach, is
immaterial as a matter of law and, therefore, can't substantiate
the kind of breach necessary to establish a breach of contract.
Let's take the first of those, SCO's allegations with respect to
JFS lack merit. That is true, Your Honor, for at least six reasons,
and I am going to quickly run through those.
THE COURT: They are at tab ten, right?
MR. MARRIOTT: They are at tab ten, Your Honor. Apparently
the binder is not as difficult to follow as --
THE COURT: Not if I can figure it out. That is right.
MR. MARRIOTT: The first reason, Your Honor, the JFS
contribution did not come from AIX, it came from IBM's OS2
operating system. SCO's theory depends on the proposition that AIX
is a derivative work of AT&T's UNIX System V software, for
which we don't believe there is adequate evidence in the record,
despite Mr. Singer's assertions to the contrary, but assume that it
is, Your Honor, the JFS contribution came from IBM's OS2 operating
system and it did not come from IBM's AIX operating system.
66
The undisputed evidence shows that. If you look at tab 11, Your
Honor, you will see evidence to this effect. The individual
identified by SCO as having made these supposedly improper
contributions have offered their testimony, the people in the best
position to know that it came from OS2 and not from IBM's AIX
operating system. SCO's claim that it came from IBM's AIX operating
system, Your Honor, is mistaken for the reasons which we set out at
tab 13 of our book. It relies principally if not entirely upon the
testimony of SCO's Dr. Ivie, and that analysis, Your Honor, relies
upon evidence that was required to be put in SCO's final
disclosures, and that it didn't put in those final disclosures, and
that Magistrate Judge Wells struck at a hearing late last year, an
issue in which SCO has taken an appeal.
The only evidence they purport even to offer, Your Honor, that
could competently demonstrate that and they argue is that of Mr.
Ivie. Mr. Ivie's testimony was untimely provided and it can't
support the motion. In any event, Your Honor, Mr. Ivie's testimony
is not competent evidence that JFS came from the AIX operating
system as opposed to the OS2 operating system. Dr. Ivie says that
there is a similarity between the JFS contribution and the JFS that
is in AIX. Well, that is not a surprising similarity, Your Honor,
because the JFS contribution in AIX came from IBM's OS2 operating
system, so the similarity on which he relies for these opinions is
not
67
a similarity that has any probative effect. That is point one,
Your Honor, as to why the JFS contribution allegations fail.
Point two. For this I refer Your Honor to tab 14 of our book.
SCO's claim fails unless the JFS contribution was resulting
material. Their entire theory depends upon, we think, a distorted
reading of Section 2.01 of the agreement. But in any case, it
depends upon the JFS contribution being resulting material. As I
said in the prior argument, it is not. The undisputed evidence
demonstrates that there is no UNIX System V method, code or concept
in that JFS contribution, and that it was created independent of
UNIX System V, and the people who created it, Your Honor, the
people who supposedly made the contributions have offered testimony
to that effect.
The only thing on which SCO relies in this connection is the
testimony of Mr. Ivie, which testimony again, Your Honor,
Magistrate Judge Wells could not properly be relied upon because it
was not properly disclosed in the final disclosures.
Point three. As I said in the last argument, Your Honor, IBM
owns the JFS contribution. There is not any dispute about that. IBM
owns it. IBM has copyrights in that distribution, and SCO concedes
that, as you see, at page 15 of the book. It further concedes in
its opposition papers that, quote, under the Copyright Act,
copyright ownership consists of exclusive rights to, among other
things, reproduce, prepare derivative works, and distribute a work.
IBM owns the
68
contributions and the notion that SCO can control it effectively
guts IBM's rights of ownership. If IBM's rights of ownership mean
anything, Your Honor, it means that IBM has the right to do what a
copyright holder under the copyright laws has the right to do.
Mr. McBride, the CEO of the SCO group, Your Honor, testified in
his deposition in a way that is completely contrary to the
proposition that SCO can control anything and everything that is in
the AIX operating system. He said the following, quote, I am sure
there are things inside of AIX that were not derived from System V
or from one of our contractual arrangements, that they would be
free to do whatever they wanted. That appears, Your Honor, in Mr.
McBride's deposition which is IBM Exhibit 330, page 231, lines 18
through 23.
Fourth point, Your Honor. Novell waived SCO's right to terminate
IBM's license pursuant to 4.16B of the asset purchase agreement. We
discussed this briefly in the last argument. As we discussed there,
the APA expressly gave Novell the right to waive alleged breaches
with respect to SVRX licenses. The only issue, Your Honor, is
whether the licenses in question are SVRX licenses. There is
absolutely no question that they are. Mr. Singer made reference to
a schedule in which he says there is some lack of reference to the
IBM agreements being SVRX licenses. Let me walk you through that,
Your Honor, if I may.
69
If you don't have the book from the last argument, it is at tab
40 of that book, and I have a copy to hand up.
THE COURT: I might have it.
MR. MARRIOTT: At tab 40 of that book, Your Honor, we
walked through why it is that the licenses in question here are
SVRX licenses. Let's take that given Mr. Singer's focus on that
issue. The first sentence of the asset purchase agreement, 4.16A,
states that SVRX licenses are those licenses listed in detail under
item six of Schedule 1.A hereof. Item 1.A of the asset purchase
agreement provides a list of the SVRX licenses that related to
various UNIX System V software releases, including System V
releases 2.0 and so on. As well as, quote, all prior UNIX system
releases and versions preceding UNIX System V release 2.0.
The supplements, Your Honor, to the IBM Sequent agreements which
are at issue in this motion identify the licensed software product
as consisting of various UNIX System V releases. Again, as I said
in the last hearing, Mr. McBride in a letter to the C.E.O. of
Novell conceded that the licenses at issue here are SVRX licenses.
In SCO's own opposition papers in connection with this case
acknowledge that the licenses at issue are SVRX licenses. There is,
we respectfully submit, no genuine issue on that question, and as a
result the only real argument that SCO has made in opposition with
respect to 4.16B falls flat.
70
Fifth point, Your Honor, with respect to the JRS contribution.
SCO assigned its rights to the JFS contribution to United Linux, as
is illustrated at tab 19 of the book. We discussed this briefly in
connection with the prior motion hearing, Your Honor. But the flaws
in SCO's case are particularly pronounced as they relate to the JFS
contribution.
Again, as a member of the United Linux initiative, SCO assigned
all rights, all intellectual property rights that it had with the
exception of those specifically carved out to the United Linux LLC.
SCO's product -- SCO's Linux IV included the JFS contribution. The
JFS contribution was not on the list of exclusions and, in fact,
Your Honor, the JDC itself specifically refers to JFS as a part of
the joint development product. And then SCO in its product
announcement for its United Linux product touted the product as
including the JFS contribution. Any claim to the JFS contribution,
Your Honor, is gone pursuant to SCO's assignment of rights under
the United Linux agreement.
Sixth point. SCO licensed the JFS contribution and the GPL, the
General Public License. This is the same basic point as before.
Again, the contribution was included in their product, and the GPL
is clear as to what it means, the license in the GPL, and any claim
as to that is gone.
Now, I said there were two points with respect to -- two general
points with respect to JFS. The first is that
71
SCO's allegations related to JFS lack merit. That is the sixth
point I just listed. There is an additional point, Your Honor. That
is that even if there were merit to SCO's allegations of breach
relating to the JFS contributions, the alleged breach is material.
Assuming SCO has the right to terminate, as we'll talk about in
connection with my next point, it does not, but assuming that it
did have that right, the right to terminate applies only with
respect to breaches that are material breaches of the
agreement.
The IBM side letter, which Mr. Singer suggests in the last
argument IBM had ignored, expressly says that breaches can be used
as a basis for termination only if they are material breaches. In
the case law, Your Honor, which we lay out at tab 31 of the book,
indicates that breaches that are sufficient to permit termination
must be material breaches. A material breach is a breach that
frustrates the core of the contract. The cases describe it that it
goes to the very purpose or the root of the agreement.
The JFS contribution here, Your Honor, could not possibly have
gone to the root of an agreement between IBM and AT&T in 1985
that concerned the protection of AT&T's UNIX System V software.
The JFS contribution, Your Honor, again, which is owned by IBM and
copyrighted by IBM, represents 01 percent of the Linux Kernel.
There are as we show at tab 40 -- at tab 34 of this book, a large
number of file systems, as much
72
as Mr. Singer suggests in the last argument that the JFS is the
next greatest thing to sliced bread, that there were 40 some file
systems in the Linux operating system, Your Honor. The JFS
contribution could not possibly be considered a material breach of
the contract, especially when IBM owns it and when there is no UNIX
System V code in it, and when the protections of the software
agreement as between IBM and AT&T, if they meant anything, were
about ultimately protecting AT&T's UNIX System V source code.
They have conceded there is no UNIX System V -- there is no trade
secret in UNIX System V. And yet the contribution of IBM's own
original work could go to the root of an agreement that was about
protecting not IBM's original works, but the UNIX System V
software? The arguments, Your Honor, which SCO makes in this regard
are dealt with in our papers, and they are dealt with at tab 35 of
the book if Your Honor wishes to look at them there.
The third point and final point that I wish to make this
afternoon, is that SCO cannot establish a predicate -- rather
cannot establish that it properly terminated IBM's license. That is
true for two reasons. The first reason, Your Honor, is that IBM has
pursuant to an amendment to its original agreement with AT&T a
perpetual and irrevocable license. That is point one. Point two,
Your Honor, is that even if under the language of the original
agreement the license could be terminated, SCO failed to abide by
the requirements for
73
termination. I will talk Your Honor through those.
Let me take now, if I may, each of those in turn. First the
irrevocable and perpetual license. Referring Your Honor to tab 37
of the book, the plain language of amendment X granted IBM a
perpetual and irrevocable license. Amendment X says, and I quote,
IBM will have the irrevocable, fully paid up perpetual right to
exercise all of its rights under the agreement. The meaning of the
term irrevocable and perpetual is no mystery. They are clear and
they are unambiguous, and some of the definitions of those terms,
Your Honor, appear at tab 38 and tab 39 of the book, from a variety
of dictionaries.
For example, irrevocable is defined to mean impossible to
retract or revoke, that which cannot be abrogated, annulled, or
withdrawn, not revocable, irreversible, final, unmodifiable,
indistinguishable, unalterable, immovable.
THE COURT: I see one that says lasting for eternity. Are
you claiming that here?
MR. MARRIOTT: I like that idea, Your Honor, lasting for
eternity. A lasting irrevocable license that lasts for eternity, in
a sense, Your Honor.
Similarly, with respect to perpetual, which is actually the
definition for lasting for eternity, it is also defined, Your
Honor, as continuous, without interruption, everlasting, eternal,
lasting or destined to last forever.
Accordingly, Your Honor, on the plain language of the
74
agreement IBM has a perpetual and irrevocable license. It does
not have a terminable license as SCO suggests, as is required for
it to have terminated IBM's license, which is the predicate to this
claim of breach of contract.
Now, the second point here, Your Honor, is that even if the
license were revocable, even if it were not perpetual, and even if
SCO could do as it purports to have done here to terminate it,
there are under the terms of the agreement before it was amended,
to give IBM an irrevocable and perpetual license, requirements that
have to be satisfied. Prior to being able to terminate IBM's
license, SCO had to give IBM, and we lay this out at tab 45, SCO
had to give IBM notice, it had to give IBM an opportunity to cure,
and it had to exercise its good faith best efforts to avoid
termination.
As shown at tab 46, Your Honor, the case law in New York which
controls this agreement is clear that where there are provisions of
this kind, that the plaintiff must satisfy the requirements to
provide notice and cure and an opportunity for cure and meet its
duty of good faith best efforts to resolve the agreement short of
termination before it can in fact terminate. SCO couldn't satisfy
any of those three, Your Honor, and for that reason, summary
judgment should be entered in IBM's favor as well.
Let me take those each briefly. Notice, SCO's notice letter,
Your Honor, which was filed with its complaint in this
75
action, which we have attached in the book at tab 48, accused
IBM of improperly disclosing, of misappropriating even SCO's trade
secrets. Well, again, Your Honor, as I have now said at least
twice, SCO has conceded that there are no trade secrets in UNIX
System V. It made that concession in open court after it purported
to terminate IBM's license. The notice letter says you
misappropriated our trade secrets, stop or we're going to terminate
your license.
It then admits after it has terminated IBM's license that there
are no trade secrets in UNIX System V. It withdraws its claim for
trade secret misappropriation.
Opportunity to cure. Because it never disclosed with any
meaningful particularity what it was it was complaining about, Your
Honor, IBM was never given an opportunity to cure the alleged
breach. In fact, Your Honor, if I may approach --
THE COURT: You may.
MR. MARRIOTT: Thank you.
Following SCO's letter of March 6th in which it indicated that
it was going to terminate IBM's license, IBM sent SCO a letter and
said, well, what is it that you contend we did? Please tell us what
it is you claim that we need to do to cure this alleged breach. The
response that we received, Your Honor, from Mr. McBride, the C.E.O.
of the company said, quote, if you would like further written
information regarding IBM's past and continuing violations, we need
more information
76
from you. So rather than provide IBM a meaningful opportunity to
cure, Your Honor, we were told that before we would learn anything
more about what we supposedly had done, we would need to tell SCO
what it is that we, in fact, had done.
Finally, Your Honor, with respect to good faith and best
efforts, again, as you know, and I reluctantly repeat what has been
said so many times before, IBM has repeatedly asked SCO in this
litigation what it is that we supposedly did. SCO has repeatedly
refused to provide IBM that information and, instead, Your Honor,
played what I think is a game of where is the pea? It has required
motion after motion to figure out what exactly it was that IBM
supposedly did.
It was only after IBM filed motions to compel that we finally
learned something of consequence about the JFS contribution, about
which so much still remains a mystery. It simply cannot be, Your
Honor, that SCO provided by way of its notice letter, proper
notice, a notice 100 days before the supposed termination, that it
gave IBM a reasonable opportunity to cure, and that it exercised
its good faith best efforts, not just good faith efforts, it is
good faith best efforts, and I would respectfully submit that no
reasonable juror could conclude in this instance that SCO exercised
its good faith best efforts to provide IBM information sufficient
to allow a cure of the supposed breach.
In summary, Your Honor, summary judgment should be
77
entered in favor of IBM on this motion for five reasons. The
three I touched upon here are that SCO can't establish unauthorized
copying by IBM, they can't show a predicate breach of contract, and
IBM's license is in any event not a terminable license, and
certainly not one that satisfies the conditions to terminate.
Thank you.
THE COURT: Thank you, Mr. Marriott.
Mr. Hatch.
MR. HATCH: Thank you, Your Honor. Good to be here.
Let me start with what I think is really one of the more obvious
ones, and it is IBM's claim that these contracts are not
terminable. I think we need to know more than look at the plain
language of the agreement. And, again, I didn't want to disappoint,
so I have a book as well.
THE COURT: I am sure that you do.
MR. HATCH: I just want to be clear that we understand
what contract we are talking about. In 1985 the parties, AT&T,
its predecessor to SCO, and IBM entered into two main agreements.
One is the software agreement which covers how the source code
itself would be handled. The same day a sublicense agreement was
entered into which allowed IBM to relicense certain products it
had, machine readable binary code, and it did not have source code
in it. The termination rights that we're talking about here come
from section six in
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the source code agreement, Section 2.07 and 3.03 of the
sublicensing agreement.
Now, if you wouldn't mind turning to tab six, that just shows
from the software agreement, Section 6.03. As you can see there, if
the licensee fails to fulfill one or more of its obligations under
this agreement, AT&T may upon its election, in addition to
other remedies it may have, at any time terminate all the rights
granted by it hereunder, and it gives a notice provision. Now,
there are similar provisions in the sublicensing agreement.
Now, on the same day, to make it even more complex, because
these were essentially form agreements, agreements that had in
large part been used with other parties. We often forget, and Mr.
Singer alluded to it, but there are similar agreements have been
done with many other companies. IBM is the first one that has taken
the approach that we're hearing today. So IBM wanted some
concessions. Instead of changing the formal contract, they entered
into a side letter that exact same day.
The side letter modified both the software agreement and the
sublicensing agreement. What is important about that is when it
modified the agreement, it expressly called out and identified the
sections in the two contracts it was modifying, so it would be very
clear what it was modifying. If Your Honor would turn to tab seven,
this is one such section in the side
79
letter. You'll notice here that, lo and behold, this is actually
a modification of the termination rights in both of these two main
agreements, Section 6.03 of the software agreement and Section 2.07
and 3.03 of the sublicensing agreement. So the parties clearly knew
and understood, and the plain language was if we're going to modify
it, we're going to identify it so you know exactly what we're
modifying. Here you'll notice that it goes to the notice and cure
provision that Mr. Marriott talked about, so they thought it was
important enough to refer that expressly and that explicitly, even
when it was something as minor as changing the notice from 60 days
to 100 days. It wasn't even a big part of the contract, and yet
they used that type of expressivity.
Now, if we go to amendment ten, which is where they claim this
was all modified, and if Your Honor does not mind, I would like to
use an actual copy of it if we can, instead of the slides and the
book.
THE COURT: Okay.
MR. HATCH: Now, this particular amendment ten came to be
several years later in 1996. The purpose of it was very clear. As
IBM had grown tired of trying to manage and account for the
royalties that were due under the underlying agreements, they
wanted to buy out the royalty stream and have it paid all up front,
paid at once. Okay. The first underlining that you see that I have
in the recitals makes it
80
very clear that that is what this amendment is about. It says in
an effort to simplify the royalty requirements contained in the
related agreements, the following modifications to the terms and
conditions of the related agreements have been mutually agreed to
by the parties. So that is putting in context what is happening
here.
Now, you'll notice, and it is very interesting here, that the
section in which they claim they get a non-terminable right, and,
one, it does not mention that word, two, it is unlike the side
letter where specific sections of the agreement, the termination
sections were agreed to, so the parties know what is being
modified, it just says no additional royalty. That is what was at
issue here.
Just to juxtapose that, if you look at paragraph two on the next
page, you'll see that when they wanted to modify 2.05B and 2.05C of
the sublicensee agreement they called it out so everyone would know
what was being modified. Now, what was being modified here wasn't a
section but a schedule of royalties, and they were paying them up
in full. They were given an irrevocable, fully paid up perpetual
right to exercise rights. So it is very clear, and that should
really be the end of it, is that in the plain language, this is not
modifying any termination rights in the contract, otherwise they
would have said so.
The plain language of that provision cannot be read
81
to suggest that it completely eliminated the termination
provisions, the material termination provisions of both the
software agreement and the sublicense agreement without a mention
of it. This is all being read into it by IBM today.
Now, that should be enough, but let's look at the language
itself. IBM has raised the issue that somehow irrevocable and fully
paid up and perpetual really mean non-terminable. Well, if you will
notice here, what it really does say is it does not say here that
they are given an irrevocable license. They read that, and they say
that in the briefs, but that is not the wording here. The wording
is they have been given an irrevocable and fully paid up perpetual
right to exercise their rights, in other words, under the related
agreement. Okay. In other words, as is set out in the recitals they
don't have to pay anything else. No matter what we do, we cannot
require them to pay extra money. This is being paid up now, and if
we decide this is a bad deal ten years from now, we can't require
them to start paying royalty payments again or another up-front
payment or anything of that nature. That is what perpetual and
irrevocable means. They do not mean non-terminable. They could have
said that and they didn't.
Now, we did one other thing, and if you look in that same
section, and it actually goes on to the second page, and it goes on
because the drafters of this agreement wanted to
82
make it very clear that they really weren't going beyond giving
them an irrevocable right and a perpetual right not to pay royalty
payments. They wanted to make it clear that it is not affecting
anything else. It says notwithstanding the above, the irrevocable
nature of the above rights will in no way be construed to limit,
and now we are talking about very broad language, it is not going
to limit SCO's rights to enjoin or otherwise prohibit IBM from
violating any of Novell's or SCO's rights under this amendment ten
or the related agreement. One of their rights certainly is
termination, but this is broad language because it is saying this
contract cannot be read to give you additional rights other than
the ones expressly set forth. It never addressed termination.
Now, they say enjoin means all that you can do is court action.
You can seek an injunction for court action. Well, that is not what
that means. In a normal sense of the words, parties when they
contract with each other quite often use as authority the contract
language itself, and bring back, especially a contract that lasts
as long as one like this, to the knowledge of people saying, by the
way, you're doing something that you ought not to be doing. The
authority that is cited is the contract itself.
Even if that were the case, it says or otherwise prohibited.
With the or being used as the alternative, and to have any meaning
at all, it is clearly a broad provision here
83
that SCO has the right, has kept all of its rights under the
contract and has the ability to do whatever it needs to enforce
those rights, including breach.
Now, IBM's reading would make all of that just superfluous. The
parties knew that, and if we look at one point in time, of course,
Novell sold its rights out and the technology licensing agreement
to Santa Cruz, a predecessor to SCO as well. IBM objects to this
because they were not a party, but this was involving the same
licensing agreement and rights, and I have a copy at tab 11, and
you'll notice there that the same parties here, which were Novell
and Santa Cruz, that when they wanted to make something
non-terminable they knew how to do it. They used that language and
they said that. They said it was a non-exclusive, non-terminable
worldwide fee license.
So if we look at just the plain language, what IBM is asking you
to do is to read things into it. They are not making a plain
language argument. They are trying to change the language.
Now, we went to Nimmer & Dodd. Nimmer, as you know, has
written a case book on copyrights, but he also with Mr. Dodd did a
treatise called Modern Licensing Law. He addressed this exact
point. At tab 10, the highlighted part, the license contains terms
that provide that it is irrevocable or perpetual. We understand
these terms to mean that the license
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cannot be terminated by the licensor or otherwise and except for
breach by the licensee. In other words, SCO in this instance can't
take an act to then revoke the rights, revoke the charge in the
amendment that they do not have to pay any more royalties, but if
IBM breaches the agreement, then that is totally within their
control. IBM argued in the brief that this just gives SCO
willy-nilly to be able to cancel any time they want and ruin their
investment. That is absolutely not true and they can't point to any
language that allows us to do that. It is totally in IBM's control.
If you fail the terms of the agreement, they go forward. If they
breach it, we have our remedies.
Now, that being a pretty strong statement from Professor Nimmer,
they filed an affidavit from Professor Nimmer trying to say, well,
it didn't quite mean that. Well, there are a couple of problems
with that. One, not the least of which is that he is giving expert
opinions without any chance to cross-examine, and he has also
determined that apparently Mr. Nimmer has represented to us that he
is a paid consultant of IBM and that was not disclosed when he gave
the declaration. I don't think he's trying to get out of the
wording that he put in his treatise has any application
whatsoever.
Importantly, in their brief, and some of these arguments I just
don't understand, but IBM in its brief said, well, we shouldn't
listen to what Mr. Nimmer said in his text,
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in his treatise that he put out for peer review and put out into
the world because he is just summarizing cases. Well, our view is
that his book is there and it is called Modern Licensing Law, and
it is there to set forth industry practices, and for the industry
to rely on and to understand what terms mean. If he is summarizing
cases, then I guess IBM is saying, well, that is the law pronounced
by the court, so I didn't know how that helps them in any way.
Now, even if somehow Your Honor still said this is ambiguous,
okay, I think if it becomes really unclear, then it is not a matter
for summary judgment. Unless the extrinsic evidence is clear, which
we think it is, the extrinsic evidence that we have put forward is
a number of people, none of whom were employed by SCO, they are all
people who were involved in the initial transactions and negotiated
it and set it forth, and what was the meaning? The fact that they
don't say non-terminable, can we read that in as evidence as to
what they intended?
Well, I think what is most telling of that, if you turn to tab
20, is Steven Sabbath. Mr. Sabbath was Santa Cruz's vice president
of law and corporate affairs. He was Santa Cruz's signatory to
amendment X. He was asked the question, and he said as I said
before the phrase irrevocable, fully paid up and perpetual, you
usually see that strung together. Commercial lawyers don't define
it. It's, you know,
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like the sun and the moon. I mean you don't have to define it.
We know what it is.
Then Mr. Marriott, who I believe was the one taking this
deposition, said and that is because irrevocable means what it
means in the ordinary sense of the term. He said, yes, it does not
mean non-terminable in the event of, you know, breach or default.
It just means you're getting -- you pay on time, and we can't
change our mind on you and terminate unless you pay more. We can't
charge more. It is perpetual. It is forever. It is a one-time fee.
Okay. It does not mean anything more than that.
Kimberly Madsen, a manager, at tab 21, and she was a manager in
the Santa Cruz law department and was there at the time, said that
I did not understand amendment ten to preclude termination for
breach.
Alok Mohan at tab 23, the president and chief executive officer
of Santa Cruz, and a high level participant in the negotiations,
said that that language did not preclude termination for breach. No
one else during the negotiations contradicted that.
Doug Michels at tab 22, and he was a senior executive and later
the CEO, he makes it very clear that I would not have agreed to the
terms of amendment X if it had been explained to me that way.
Now, IBM just raised with you a concept that I kind
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of enjoyed. I have to really work to be able to remember it, but
it is unexpressed subjective intent. They claim that, well, gee, if
Santa Cruz meant something else they should have told us. Well, the
people who are trying to read a word in here that is not there, it
is not SCO, it is IBM. If anybody had an unexpressed subjective
intent it was them, because if they meant that language to mean
something different than what it means by its plain language, and
what Nimmer meant and what he understood and what businesspeople
understood, and they never raised it in these meetings, as
indicated by Mr. Michels and others there, then that is unexpressed
subjective intent. They are putting new words in and trying to give
words different meanings.
Now, even Novell's people have the same thing. When Mr. Singer
went through Mr. Bouffard's testimony, and at tab 19 is what he
said, and he was the other side of that from Novell, he said it was
not my view that Santa Cruz was precluded from terminating UNIX
source code. He said the otherwise language includes terminating
IBM UNIX license agreement for IBM's actual breaches. We have plain
language and we have authority and we have law and we have
extrinsic evidence, all of which point directly to the fact that
IBM is trying to read into this contract things that don't exist
there.
Now, I think we cover pretty well in our brief the arguments Mr.
Marriott raised on notice and opportunity to
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cure. I am not sure how serious an argument that can really be.
I will just say this: What they forget is that there were a number
of meetings, a number of meetings prior to the letter giving notice
of potential termination if they did not cure. What basically
happened in those meetings, and what I want to show you is kind of
how, in a bit, how that started, but if you turn to tab 69, in
January of 2003 this is how IBM starts this. In large part SCO
starts to became aware of what IBM is up to.
At Linux World New York, which is, as I understand it, the
world's largest trade show for Linux, the largest conference, Mr.
Steven Mills, who was a senior executive at IBM, indicated, and
this is from the Computer Reseller News, but in this deposition he
confirmed that he said these things. He said IBM will exploit --
that is an interesting choice of words -- exploit its expertise in
AIX to bring Linux up to par with UNIX.
Then further down he says our deep experience with AIX and its
250-member open source development team -- well, we have found out
in discovery that 250-member team are the people who got the UNIX
source code and were under the obligations of confidentiality, and
they got SCO's copyrighted works and now they are changing. They
are taking all that knowledge and they are now considered their
250-man open source development team, and he says the road to get
there is well understood. Well, they have a great jump-start. Then
he ends it by saying that
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what their goal is is to obliterate UNIX.
Well, they now say, well, gee, if you had just given us a better
notice and an opportunity to cure, maybe we could have gone through
these things, but through several meetings prior to the filing of
the complaint and giving the notice letter, Mr. McBride and others
had met with senior people at Novell, and they were basically told,
and a lot of this is out of Mr. McBride's affidavit and other
places in the record and in our briefs, that if SCO goes forward,
we're going to talk to your partners and we're going to destroy
your business. As a matter of fact, Karen Smith, an IBM vice
president, went to HP and attempted to get them to withdraw
support. That is going to be the subject of another motion that I
think we're hearing Monday. That is the tone of it.
The thing that is kind of important to note is that the notice
and opportunity to cure we're supposed to give them is not that we
won't file suit because we gave them that. But in every instance
they said to us, in essence, it is futile, we're fixed, it is
unequivocal, we know what we're going to do. It does not matter. We
followed the letter of the law and we gave them the letter and gave
them 100 days' notice. They knew what it was about.
Here is what they said. Instead of trying to negotiate with us
and to try and cure it -- as a matter of fact, at one point they
said we can't meet with you now. We
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will meet with you in three months. At tab 77 this is what their
response was. This is an IBM press release from the 16th of June of
2003. In the second paragraph it says from the outset, it does not
say we just came up with this, from the outset IBM's position on
this lawsuit has been unequivocal. IBM's licenses are irrevocable
and perpetual and fully paid up and cannot be terminated. IBM will
defend itself vigorously. The matter will be resolved in the normal
legal process. In other words, they are now saying there is nothing
to negotiate. There is nothing to talk about. The dispute is fixed
as of that moment.
In the next paragraph, and this comes up a little later, you'll
remember that Mr. Marriott indicated that, well, we didn't know it
was about AIX. Here it is in June, their notice, their press
release to the world says IBM will continue to ship, support and
develop AIX. They knew that is what the issue was from day one. Now
they are saying we never disclosed and they didn't know. That is
just simply not true.
Let me move quickly to JFS. Mr. Marriott talked at length about
that. IBM claims that JFS came from OS2. They gave you a graph. I
would like you to look at the one that we prepared as well from our
expert report. It is at tab 49. Using IBM documents that were
produced in discovery, and this is probably the best graphic --
THE COURT: Go ahead.
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MR. SINGER: -- depiction that I can give you, the file
system that we're talking about began in UNIX System V. It was
owned by AT&T the predecessor of SCO. IBM licensed that
initially and put it in AIX version two back in the early nineties.
Eventually IBM modified and improved the AIX system's version 3.1,
and as derivative works, and Mr. Singer has talked about it, used
the file system to create a journal file system.
We know from, and they say we have no evidence, but if you go to
the very next tab, and since time is short I will just do a few of
these things, but we know where these things came from. Your Honor,
they say we have not produced anything. Even if we exclude the
things that Judge Wells excluded, which we disagree with, and this
is just disclosure number one, we made 294 disclosures of taken
material and misused materials that are still in this case. The
things I'm pulling from here would be from just this first
disclosure. It is a pile that is about this big.
Mr. Baker, who was an IBM executive, in his deposition said
would it surprise you -- because they say this came from OS2. On
the chart we are not even to there yet. Would it surprise you if
half of the C files in JFS 3.1 have the original code three and are
therefore based in part on UNIX source code licensed from AT&T?
The answer, no, it wouldn't surprise me. Then if you go down to the
bottom quote, it says,
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so it appears as though JFS two, and if you look at the chart
that is what was in OS2. It is their derivative work that
originally starts from System V and comes through its improvements
and through to the end, and it says it appears that JFS continued
to have and continued to include files that were based upon, at
least in part, AT&T's UNIX source code, right? Answer, it
appears to be that way. Well, why does he say that, Your Honor?
Well, if we go to disclosure one, and we look at the files, and if
you look at tab 37, and here it is just talking about JFS, there
were identified to be 62 C files in JFS. You'll see that the top 30
came from AT&T. How do we know that? Well, the comments, I
believe it is from CMVC that the programmers wrote, they state the
origin. The origin says origin three. All 30 of these, almost half
of our entire JFS originated from AT&T.
Now, we just heard IBM say it came solely from OS2. That is
because they want to write out the prior history. They want to draw
a line in history and don't look in front of it.
Your Honor, I will give you this. This is an extra copy. What
I'm reading from is from tab nine of the first disclosure.
From Mr. Baker's testimony that we just read, you'll notice --
let's see. Mr. Baker is talking about some of this stuff, and
you'll remember that at tab 44 Mr. Baker identified that his user
ID was 905. The question was asked, if your
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using ID was 905 for the CMVC, and that is where the programmers
recorded their notes, would you agree that this -- he is referring
to the exhibit at tab 45 -- is a comment you made into the CMVC at
that time? Answer, yes.
Now, this is just one example of many from an IBM programmer.
You'll see Exhibit 887 and it is an e-mail from Baker, and from CMC
where he is making comments, and 905 is his number, and what he is
saying here is making a comment to the people in his division. The
same is true in the System V file system where this stuff
originates. He does not say OS2. The only way it could be OS2 is if
you drew a line and forgot all the previous stuff and where it
started.
As we go down that list, over half, according to the testimony
of just Mr. Baker who was an IBM employee, over half of JFS as it
ended up in Linux came from and originated from the source code
here that they were not allowed to give away by contract.
Now, Your Honor, if you thumb through this book you'll see, and
there are numerous pages, and I have put a bunch of them at tabs 38
through 42 or so, but you'll see here there is a lot of red. They
say we don't disclose anything. These are all disclosures where it
is either verbatim or near verbatim. The AIX, that we just learned
from IBM's own mouth is derived from the System V code, is being
taken almost wholesale and put into Linux. They say there is
nothing. That
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is just simply not the case.
Now, I think the last point is Mr. Marriott indicated, well, it
is not material. This JFS stuff just does not matter.
If I can approach?
THE COURT: Yes.
MR. HATCH: This is an internal IBM e-mail. If you look on
the fourth page, and now they are saying that JFS is .01 percent,
and I think during the contract argument I heard him call it just
the fuzzy dice on the dash of a car. Well, let's see what they say
when they are not talking to the Court. Let's look and see what
they are talking about when they are trying to develop a product
and make money.
On the third page of this, it says we, IBM, would like to make
JFS available to the open source community for several reasons. I
have highlighted the number one reason, a lack of a journal file
system on the Linux platform was chosen as the number one
deficiency by the Linux community. That does not sound immaterial
to me. It sounds a lot more than fuzzy dice.
There are several instances where I disagree with Mr. Marriott.
I think he misquoted Mr. McBride. He quoted Mr. McBride for the
proposition that he said that they could do whatever they wanted
with their code, and I think, just like we saw earlier today with
the clips, not everything was read. Mr.
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McBride's actual testimony was the exact opposite of that. He
said my view of that is that IBM is free to contribute anything
they owned to Linux, and that is about as far as IBM went today,
except they didn't read the rest of it, except as it relates to
either source code that we own or a derivative of that code. So he
is saying exactly what we are saying here, and they're trying so
cite and smear Mr. McBride as saying something totally opposite to
what is in the case.
Your Honor, I think based on that, there clearly is no basis for
IBM to get summary judgment granted here and I submit it.
Thank you.
THE COURT: Thank you. Mr. Marriott.
MR. MARRIOTT: Thank you, Your Honor.
Mr. Hatch said a number of things, Your Honor, which I think
simply are not factually correct. I would point the Court to the
papers for that other than take too much time here.
THE COURT: He went overtime so if you want to you can,
too.
MR. MARRIOTT: I appreciate that, Your Honor.
Contrary to what Mr. Hatch suggests, there are not 294 items of
allegedly misused information in this case. There is only one of
them, the first item in their final disclosures
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that is in any way relevant to this motion. That is the JFS
contribution. The reference to the 294 is, at a minimum, grossly
overstated.
Mr. Hatch suggests that I misrepresented the testimony of Mr.
McBride. I gave Your Honor a cite and I urge you to look at the
cite for yourself. There is nothing misrepresented about it. Mr.
McBride said that he is sure that there are things in AIX which IBM
could properly contribute to Linux.
If that is true, Your Honor, and I think Mr. McBride is right,
if that is true it is completely inconsistent with their theory of
the case, that once you touch something they call it a modification
and a derivative work and it is forever controlled by them and IBM
can't without their permission disclose it.
Mr. Hatch suggested that IBM conceded -- apparently I conceded
at the last argument that AIX is a derivative work of AT&T's
UNIX System V. I didn't concede that, Your Honor. The evidence in
the record does not demonstrate that.
Let me come to the points, if I may, Your Honor, that were
raised in my opening arguments and those to which Mr. Hatch
responded and did not respond. I began, Your Honor, by pointing out
that SCO had failed entirely to comply with the Court's order to
identify with specificity what it is specifically that represents
the infringing material here,
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because of IBM's continued distribution of AIX. You heard not a
word from Mr. Hatch on that. It is not there. Because of the
Court's orders the claim should be dismissed for that reason
alone.
With respect to the JFS contribution, Your Honor, I offered two
reasons -- six reasons why the JFS allegation lacks merit and one
reason as to immateriality. Mr. Hatch, so far as I could tell,
addressed one, Your Honor, of the six arguments as to JFS. As to
that argument he pointed the Court to the testimony principally of
SCO's expert Mr. Ivie, who has offered testimony to be sure that
JFS comes from the AIX operating system. The testimony on which
they rely was struck by Magistrate Judge Wells.
In any event, Your Honor, it is simply incorrect. If you look at
the witnesses who would have personal knowledge to speak to this,
people who actually were involved with the contribution, whose
testimony is set out in our book, they say in unequivocal terms
that it was from the OS2 operating system, not from the AIX
operating system.
Immateriality, Your Honor. Mr. Hatch suggests that the alleged
breach here is somehow a material breach because there is an
internal IBM e-mail from some person saying it looks like the Linux
community thinks there is a need for a journal file system. That
does not say anything about whether the specific contribution here
was a material breach of the
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agreement. The fact that someone might like a certain technology
in Linux is entirely a separate question from whether the
supposedly improper contribution here was a material breach of the
agreement.
Again, as we say in our opening papers, Your Honor, there are 40
plus file systems in the Linux operating system. The JFS
contribution represented less than .01 percent. It cannot be, Your
Honor, that that represents a material breach when it is owned by
IBM and reveals nothing of SCO's code.
With respect, Your Honor, to amendment X and the perpetual and
irrevocable license, Mr. Hatch suggests that IBM seeks to rewrite
the provision of that agreement. He began his presentation with
respect to references to the history of the negotiations. I would
respectfully submit that that description, Your Honor, was riddled
with errors and inaccuracies, and I would simply point the Court to
the papers and to the sworn testimony of the people who were
actually involved in the discussions as to what the purpose of that
licensing agreement was, and why it was IBM sought what it sought,
and why it was given. Mr. Hatch focused on the language in the
agreement that concerns a fully paid up royalty. That suggests that
amendment X was only about fully paid up royalties. I would point
the Court to the agreement, which you can read for yourself, and
see that it was about a heck of a lot more than a fully paid up
royalty.
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It is not IBM, Your Honor, that seeks to read anything into the
agreement. On the contrary, it is SCO that seeks to read out of the
agreement the words perpetual and irrevocable. The notion that
IBM's license is terminable here is absolutely at odds with the
idea that it has a perpetual and irrevocable license. You cannot
have a license that is perpetual and irrevocable and at the same
time terminable. That makes no sense, Your Honor. It would strain
the simple meaning of the words perpetual and irrevocable beyond
recognition.
Mr. Hatch points to an excerpt from a treatise from Professor
Nimmer and suggests that somehow that is indicative of what the
plain meaning of the agreement is. It is not, Your Honor. It is not
parol evidence here and, in any event, as Mr. Nimmer says in his
declaration, the citation is a citation that is misplaced. Whatever
it is, it is not capable of altering the plain and simple language
of this agreement.
Parol evidence, Your Honor. The Court need not and, indeed,
should not even reach parol evidence on this motion. The language
of this is clear. If you do, however, I would respectfully submit
that the only parol evidence that matters is that which was
communicated. That is what New York law provides, Your Honor. While
Mr. Hatch referred to testimony and viewpoints of certain people
from Santa Cruz, they didn't negotiate this agreement with IBM. The
agreement was
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negotiated between Novell and IBM and between Novell and Santa
Cruz. The Sabbath testimony to which Mr. Hatch refers was never
communicated to IBM. The record does not reflect that it was.
Finally, Your Honor, with respect to notice and cure and good
faith, I think the record is as set out in the papers and speaks
for itself. A complaint was filed accusing IBM of the
misappropriation of trade secrets. After the termination of the
agreement, SCO concedes there are no trade secrets in UNIX System
V. This Court in connection with one of IBM's summary judgment
motions, year after the filing of this case, maybe not years, but
almost two years after the filing of this case, expressed
astonishment at the idea that despite the public assertions of SCO,
there had been no production of evidence to support its
allegations. The idea that IBM knew before the filing of the suit,
which is what Mr. Hatch suggested, precisely what it is we
supposedly did here, and how it is we were to cure it, simply is
not supported by the record.
Summary judgment should be entered in favor of IBM, Your
Honor.
Thank you.
THE COURT: Mr. Hatch, briefly.
MR. HATCH: I will keep it brief this time.
Your Honor, it is kind of interesting, and I'll make
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just a couple quick points. He is now saying that we should read
out all of the Santa Cruz people. What relevance do they have?
Well, if you look at the agreement, it is because they are a party
and a signatory. Mr. Sabbath is a signatory for Santa Cruz right
here. IBM is so desperate here that they want to say you shouldn't
even listen to anything that he has to say because he is not
relevant. Well, he was sure relevant to the agreement at the time
they signed it.
Mr. Marriott has also thrown up, and I think he did in the
contract case as well, a real red herring here. They say what SCO
is trying to do is control. You can't control what we did. Well,
what controls them is not SCO, it is their contractual obligations.
They made a deal that said if you'll give us source code, we'll
keep it confidential. If we develop something with that source
code, we will keep the drive source code confidential as well. That
was their choice. The contract did that, not SCO.
Now, if they have got a big picture, and Mr. Marriott is really
correct that it is just the fuzzy dice on the dashboard, then take
them, the fuzzy dice off the dashboard. They won't do that. They
say, well, it is not material. This JFS stuff is not important, but
they won't take it out. They knew, as the internal memo we gave you
specifically said that, that it was the -- I can't read this
note.
THE COURT: You're going to have a hard time
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commenting on it until you can read it.
MR. HATCH: The book that I gave you and this item one,
the thick disclosure --
THE COURT: Right.
MR. HATCH: Mr. Marriott kind of alluded to that, and I
don't know what he was talking about, but he alluded to Judge Wells
striking Ivie and striking things. Striking stuff from IBM. That
has never been struck. I don't know what he is talking about
there.
They want to get away from all of that verbatim copying that we
have shown from AIX and Linux, but that hasn't been struck and it
is there and that is in the case. There are 294 disclosures that
are like that that are in the case. Some are relevant to other
points, I agree with that, but if there is one, just one that I
showed you, that in and of itself creates enough of a fact issue
for us to go forward. Dr. Ivie talked about it and it is there and
it has not been stricken. IBM did not even move to have it
stricken. I leave you with that.
One quick point. He brought United Linux and I forgot to address
that. That is real interesting and that is really kind of almost a
little too cute for this case. What he fails to tell you with
United Linux, is he is saying there is a waiver argument there, but
what he falls to tell you is that SCO entered into agreements with
other people to build
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something on the existing Linux Kernel. In other words, they
were going to put things in and then give it to the open source
community. Then he said when you put it in, it was all waived.
Well, he says this and his brief is very, very ambiguous on this,
and so I think it is important for Your Honor to understand this,
because they say it in a way that makes it sound like the stuff
that SCO put in on top of that Kernel to build a new product is
what we waived.
What was waived, of course, was the whole thing, but what they
don't tell you is unbeknownst, and to be fair there are comments
either way, but the JFS system was put into the Kernel and SCO was
unaware of that. That was put in there by IBM. That is essentially
saying IBM can take something in violation of the contract and plug
it into a document, and if SCO does not find it out and it uses
that and puts it in, that somehow it was waived something. Waiver
requires knowledge and that is not here. At the very least it is
hotly disputed. I think they were somewhat disingenuous on that as
well.
Thank you, Your Honor.
THE COURT: Thank you.
Well, not surprisingly I will take these motions under
advisement and look forward to seeing all or most of you again on
Monday at 2:30.
Thank you.
We'll be in recess.
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MR. SINGER: Thank you, Your Honor.
MR. MARRIOTT: Thank you, Your Honor.
(Proceedings concluded.)
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