Here, thanks to feldegast, is the text version of Novell's redacted Memorandum in Support of Novell's Motion for Summary Judgment on SCO's First Claim for Slander of Title and Third Claim for Specific Performance [PDF]. Here's the Motion this supports, and some explanation about it can be found in this article from Saturday, which includes a bit about the other three powerful summary judgment motions Novell filed last Friday. This is the motion that the amazing Tor Braham Declaration, which hits the ball right out of the park, is supporting also. I see a new lawyer has been added to the Novell team from Morrison & Foerster, Grant L. Kim.
I've added him to our permanent Litigation Cast of Characters page where you can find information on all the lawyers in the SCO saga. Actually, he's appeared before, but it whizzed right past me at the time because I was on my health break and not even thinking about SCO. Lo and behold, Mr. Kim appears to be on the team handling the arbitration in Europe, and you'll see how appropriate that is from his biographical information, where arbitration is one of his listed areas of expertise. He's listed as "Of Counsel". What does that mean? Here's a page that explains what "of counsel" normally means. He has been brought in, I gather, because he has specialized skills Morrison & Foerster believes will be useful in this case. Lots of lawyers have never handled an arbitration, especially not a multi-country one, so it's a specialty. It's like being a specialist in the medical world. If you want your nose done, you want to find someone who has done them before, often enough and in demand enough to specialize, and whose work didn't leave patients looking like Michael Jackson. The law is the same -- when you have a particular problem, you look for someone who knows how to fix that exact problem. If it's complex enough, you want a heavy hitter in that particular complexity. Enter Mr. Kim. Of counsel, as I understand the term, means there is a close relationship between the individual lawyer and the firm, and that they use him when they need him, for high-level questions and issues in his areas of expertise, in Mr. Kim's case listed as "international arbitration, intellectual property litigation, and other commercial disputes". Sometimes when lawyers retire, they become of counsel to the firm, because their accumulated knowledge is too great to lose, but he's too young for that. So that tells me he is so skilled in the areas he specializes in that he's the guy the lawyers in the firm go to with their questions and problems to solve in those areas. I'd call his type of job Lawyer Heaven, where you go when you're too good to use for the low-level stuff any more. He's not a partner, responsible for managing the firm or the cases, or an associate, someone who does the leg work, so he doesn't get assigned to cases in the usual way. But the firm relies on his expertise and experience and he can be brought in when you need heavy guns. His biographical information is definitely impressive, particularly because he clearly is a tech guy, on top of all his other skills.
Also, I note that he is a California lawyer, and the APA is a California document, as you'll recall, from Novell's point of view, which comes into play here in the slander of title matter and in the unfair competition/breach of contract issues (see also the Novell Memorandum in Support of Motion for Partial Summary Judgment on the Copyright Ownership Portions of SCO's Second Claim for Breach of Contract and Fifth Claim for Unfair Competition [PDF] also discussed briefly on Saturday, where you'll find arguments relating to California law). It never hurts to have someone on board who knows all the ins and outs of a particular state's laws and procedures that apply to your case, particularly, ahem, when the other side would like to use a Utah law passed just for you. One notation in his bio says that on one patent case, he was responsible for the following: Second chair for trial of a patent infringement action in the International Trade Commission. Responsible for all validity issues, including cross-examination of experts. The Administrative Law Judge rejected all invalidity arguments asserted by the opposing party. Hmm. Validity issues. That could prove handy down the road, if Microsoft keeps going on its antiLinux path. Here's a page that explains patent validity. To cross examine patent experts and get all of their arguments tossed means he has to know more about the subject than the experts. Like I say, a good name to remember. I can't help but reflect, once again, how privileged we are to be able to watch such fine lawyers at work doing what they do right before our eyes in real time. It's what I love about doing Groklaw the most, and I know law schools around the country will be using this litigation for years to come to teach students what these lawyers are demonstrating so ably.
As I mentioned, the Tor Braham Declaration is offered in support of this motion, but there are others too -- the Allison Amadia Declaration (with Exhibit 1 and
Exhibit 2), David Bradford Declaration [PDF] (with Exhibit 1, Exhibit 2, and Exhibit 3, and the Jay Tolonen Declaration, the first two being articles and the rest PDFs). There are 11 exhibits to the Tor Braham Declaration:
I think that should just about do it. Whew. Four substantive articles in two days.
On a weekend.
If I were a committee of IBM lawyers, that might not be so impressive. But since it's just Me, Myself & I, I think "we" deserve a small medal. One for feldegast too. A big thank you to Erwan also, for bringing the Novell Timeline up to date. It isn't easy keeping up with these lawyers, that's for sure. So, with that, then, I give you the Novell legal team, demonstrating to the court all the ways that the APA and any or all of its amendments never results in a copyright conveyance instrument and precisely how the APA is not "'reasonably
susceptible' to SCO's proposed interpretation." ****************************
MORRISON & FOERSTER LLP
Michael A. Jacobs (pro hac vice)
Kenneth W. Brakebill (pro hac vice)
Grant L. Kim (pro hac vice)
[Address]
[Phone]
[Fax]
ANDERSON & KARRENBERG
Thomas R. Karrenberg, #3726
John P. Mullen, #4097
Heather M. Sneddon, #9520
[Address]
[Phone]
[Fax]
Attorneys for Defendant & Counterclaim-Plaintiff Novell, Inc.
IN THE UNITED STATES
DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION |
THE SCO GROUP, INC., a Delaware
corporation,
Plaintiff and Counterclaim-
Defendant,
vs.
NOVELL, Inc., a Delaware corporation,
Defendant and Counterclaim-
Plaintiff. |
MEMORANDUM IN SUPPORT OF
NOVELL'S MOTION FOR SUMMARY
JUDGMENT ON SCO'S FIRST CLAIM
FOR SLANDER OF TITLE AND THIRD
CLAIM FOR SPECIFIC
PERFORMANCE
[REDACTED pursuant to the August 2,
2006 Stipulated Protective Order]
Case No. 2:04CV00139
Judge Dale A. Kimball
|
TABLE OF CONTENTS
|
Page |
TABLE OF AUTHORITIES |
iv |
1. STATEMENT OF ISSUES |
1 |
II. INTRODUCTION |
1 |
III. STATEMENT OF UNDISPUTED FACTS |
3 |
|
A. |
The APA Expressly Excluded "All
Copyrights" from the Assets to
be Transferred by Novell to Santa Cruz. |
3 |
|
B. |
Novell Deliberately Excluded Copyrights from
the Transferred
Assets to Protect its Right to Receive SVRX and UnixWare
Royalties and its Continuing Interest in the UNIX Business |
5 |
|
C. |
The Lists of Transferred Assets Were Revised
to Include a
Copyright Exclusion and Then Exchanged By the Parties Before
the APA Was Signed. |
9 |
|
D. |
Amendment No. 1 Made Further Revisions to the Lists of
Transferred Assets, But Not to the Copyright Exclusion. |
12 |
|
E. |
The Bill of Sale Transferred Only the Assets
Identified in the
APA and Amendment No. 1, Which Did Not Include Copyrights |
12 |
|
F. |
Amendment No. 2 Revised the "Excluded
Assets" Provision, But
Did Not Transfer Ownership of Copyrights or Specify Which
Copyrights Might Be "Required" for the UNIX Business |
13 |
|
G. |
The Negotiation History of Amendment No. 2
Confirms that It
Was Not Intended to Transfer Ownership of UNIX and UnixWare
Copyrights |
14 |
IV. |
ARGUMENT |
16 |
|
A. |
Novell Is Entitled to Summary Judgment that the APA as
Amended by Amendment No. 1 Excluded UNIX and UnixWare
Copyrights from the Assets Transferred to Santa Cruz by the Bill
of Sale |
16 |
|
|
1. |
The Plain Language of the APA and Amendment No. 1
Excluded "All Copyrights" from the Assets to Be
Transferred by Novell to Santa Cruz. |
17 |
i
|
|
2. |
SCO's Attempt to Rewrite "All
Copyrights" As "NetWare Copyrights Only" Should Be
Rejected as Contrary to the
Plain Language and to the Parol Evidence Rule. |
18 |
|
|
3. |
The Exclusion of "All Copyrights"
from the Transferred
Assets Was Deliberate and Consistent with the Basic
Objectives of the APA. |
23 |
|
|
|
a. |
The scope of the transferred assets was specifically
negotiated. |
24 |
b. |
Novell deliberately excluded copyrights to protect
its continuing interests in UNIX and UnixWare. |
25 |
c. |
Santa Cruz had a license to use the UNIX and
UnixWare copyrights, and hence did not need to
acquire ownership to implement the APA. |
26 |
|
|
4. |
The Other Contractual Provisions Cited by SCO Do Not
Demonstrate that the UNIX and UnixWare Copyrights
Transferred to Santa Cruz |
29 |
|
|
|
a. |
Schedule 1.1(a) does not demonstrate that the
exclusion of "all copyrights" was limited to
"NetWare" copyrights. |
29 |
b. |
The definition of "Business" does not demonstrate
that "all copyrights" means "NetWare copyrights
only. |
30 |
c. |
Section 1.6 and the Technology License
Agreement do not demonstrate that "all
copyrights" means "NetWare copyrights only". |
31 |
|
|
5. |
The Plain Language of the APA and Amendment No. 1
Excluded "All Copyrights" from the Assets to Be
Transferred by Novell to Santa Cruz. |
33 |
|
B. |
Novell Is Entitled to Summary
Judgment that Amendment No. 2
Does Not Constitute a Sufficient Written Instrument to Transfer
UNIX and UnixWare Copyrights to Santa Cruz |
35 |
|
|
1. |
The Copyright Act Requires a Signed Instrument of
Conveyance to Transfer Ownership of Copyrights. |
34 |
|
|
2. |
Amendment No. 2 Did Not Purport to Transfer Copyrights
or to Retroactively Amend the Bill of Sale. |
35 |
ii
|
|
3. |
Amendment No. 2 Did Not Identify Which Copyrights, If
Any, Should be Transferred. |
37 |
|
|
4. |
Santa Cruz Did Not "Require" Ownership of the UNIX
and UnixWare Copyrights for its Business As It Already
Had a License to Use these Copyrights as Needed to
Implement the APA. |
38 |
|
C. |
Novell Is Entitled to Summary
Judgment on SCO's Slander of
Title Claim Because SCO Cannot Demonstrate that Novell's
Assertion of Copyright Ownership Was False. |
38 |
|
D. |
Novell Is Entitled to Summary
Judgment On SCO's Claim for
Specific Performance of Novell's Alleged Obligation to Transfer
the UNIX and UnixWare Copyrights to SCO. |
39 |
V. |
CONCLUSION |
40 |
iii
TABLE OF AUTHORITIES
|
Page(s) |
CASES |
Blumenfeld v. R.H. Macy & Co.,
92 Cal. App. 3d 38 (1979) |
21 |
Community for Creative Non-Violence v. Reid,
490 U.S. 730 (1989) |
35 |
Dore v. Arnold Worldwide, Inc.,
39 Cal. 4th 384 (2006) |
19 |
EPA Real Estate P'ship v. Kang,
12 Cal. App. 4th 171 (1992) |
21, 24 |
Effects Assoc. v. Cohen,
908 F.2d 555 (9th Cir. 1990) |
28. 34 |
First Sec. Bank of Utah v. Banberry Crossing,
780 P.2d 1253 (Utah 1989) |
39 |
Foad Consulting Group, Inc. v. Musil Govan Azzalino,
270 F.3d 821 (9th Cir. 2001) |
19, 27, 28 |
Gerdlund v. Electronic Dispensers Int'l,
190 Cal. App. 3d 263 (1987) |
21, 22 |
Konigsberg Int'l, Inc. v. Rice,
16 F.3d 355 (9th Cir. 1994) |
35, 37 |
National Ins. Underwriters v. Maurice Carter,
17 Cal. 3d 380 (1976) |
30 |
Pamfiloff v. Giant Records, Inc.,
794 F. Supp. 933 (N.D. Cal. 1992) |
35, 37 |
Radio Television Espanola S.A. v. New World Entm't,
Ltd.,
183 F.3d 922 (9th Cir. 1999) |
35 |
Wilder v. Wilder,
138 Cal. App. 2d 152 (1955) |
31 |
iv
|
Page(s) |
STATUTES |
17 U.S.C. |
|
§ 101 |
35 |
|
§ 204 |
2,34,35,37,38 |
|
§ 204(a) |
19,33,34,35 |
Cal. Civ. Proc. Code |
|
|
§ 1859 |
30 |
Cal. Bankr. Code |
|
|
§ 541(d) |
8 |
v
I. STATEMENT OF ISSUES
SCO's First and Third Causes of Action for slander
of title and specific performance,
respectively, are based on SCO's assertion that Novell sold the
UNIX and UnixWare copyrights to
SCO's alleged predecessor, the Santa Cruz Operation ("Santa
Cruz"), as part of the Asset Purchase
Agreement ("APA"). This motion raises two issues related
to this alleged transfer of the UNIX and
UnixWare copyrights.
1. Is Novell entitled to summary judgment that the
APA expressly excluded "all
copyrights" from the assets to be transferred, and hence the
Bill of Sale that implemented the
APA did not transfer the UNIX and UnixWare copyrights to Santa Cruz?
2. Is Novell entitled to summary judgment that
Amendment No. 2 to the APA did
not transfer the UNIX and UnixWare copyrights to Santa Cruz?
This Court visited similar issues in the context of
Novell's motion to dismiss filed prior to
discovery in this action. After discovery, Novell can now
demonstrate that there is no genuine dispute
of fact precluding judgment as a matter of law in Novell's favor
on both issues. Therefore, Novell is
also entitled to summary judgment on SCO's claims for slander of
title and specific performance.
II. INTRODUCTION
The APA, signed by Novell and Santa Cruz on
September 19, 1995, explicitly excluded
"all copyrights" from the assets that Novell transferred
to Santa Cruz. This copyright exclusion
is found in a Schedule 1.1(b) of Excluded Assets. It is further
reinforced by express language in
the contract providing that the Assets purchased "shall not
include those assets ... set forth on
1
Schedule 1.1(b)." SCO has nevertheless claimed that the
APA transferred the UNIX and
UnixWare copyrights to Santa Cruz, which later sold these
copyrights to SCO.1
As a matter of law, the original APA did not transfer
ownership of any copyrights. The
language of the APA is clear and unequivocal: "all
copyrights" are excluded from the assets to
be transferred. SCO's attempt to overcome this exclusion by
citing extrinsic evidence that "all
copyrights" does not mean "all copyrights" is
unavailing. Once again in this dispute, "all"
means all,2 and
parol evidence to the contrary is inadmissible. Moreover, the admissible
extrinsic evidence confirms that the exclusion of all copyrights
from the transferred assets was
deliberate and consistent with the APA's objectives.
The APA as amended by Amendment No. 2 also did not transfer the UNIX and
UnixWare copyrights to Santa Cruz. The Copyright Act, 17 U.S.C.
§ 204, requires a written
2
instrument, signed by the copyright owner, to transfer
copyrights. Amendment No. 2 does not
constitute such a written instrument because it did not transfer
any copyrights or other assets.
Rather, it merely revised the definition of "Excluded
Assets," effective as of the date it was
signed, to create an exception for copyrights "required"
for Santa Cruz to exercise its rights
regarding the UNIX business. In addition, Amendment No. 2 did not
identify which copyrights
were "required," and SCO cannot demonstrate that Santa
Cruz "required" ownership of the
copyrights, because Santa Cruz already had a license to use the
UNIX and UnixWare copyrights
as needed to implement the APA.
Because neither the APA nor Amendment No. 2 transferred
copyright ownership to Santa
Cruz, Novell is entitled to summary judgment on SCO's slander of
title claim on the ground that
SCO cannot establish that Novell made "false" statements.
Because SCO has no right to obtain ownership of the UNIX and
UnixWare copyrights,
Novell is also entitled to summary judgment on SCO's claim for
an order transferring ownership
of these copyrights to SCO.
III. STATEMENT OF UNDISPUTED FACTS
A. The APA Expressly Excluded "All
Copyrights" from the Assets to be
Transferred by Novell to Santa Cruz.
1. Novell and Santa Cruz signed the APA on September 19, 1995.
Through the
APA, Santa Cruz acquired "certain of the assets"
comprising Novell's UNIX and UnixWare
3
business. (Declaration of Kenneth W. Brakebill In Support of
Novell's Motions for Summary
Judgment ("Brakebill Decl."), Ex. 2, Recital B.)3
2. The APA defined the "Assets" to be transferred by
reference to Schedule 1.1(a),
which listed assets included in the transfer; and Schedule 1.1(b), which listed assets excluded
from the transfer. In this regard, Section 1.1(a) of the APA stated:
Seller will sell, convey, transfer, assign, and
deliver to Buyer and
Buyer will purchase and acquire from Seller on the Closing Date
(as defined in Section 1.7), all of Seller's right, title and
interest in
and to the assets and properties of Seller relating to the Business
(collectively the "Assets") identified on
Schedule 1.1(a) hereto.
Notwithstanding the foregoing, the Assets to be so purchased shall
not include those assets (the "Excluded Assets ") set forth on
Schedule 1.1(b).
(ld., Section 1.1(a) (emphasis added).)
3. The first paragraph of the Schedule 1.1(a) list of included
assets referred to "[a]ll
rights and ownership of UNIX and UnixWare, including but not
limited to all versions of UNIX
and UnixWare...." (Brakebill Decl., Ex. 3, Schedule 1. 1
(a), Section 1.) This general reference
was followed by more detailed, itemized lists of specific
categories of assets. The "Intellectual
Property" category stated:
V. Intellectual Property - Trademarks UNIX and UnixWare
as and to the extent held by Seller (excluding any
compensation Seller receives with respect of the license
granted to X/Open regarding the UNIX trademark).
4
(Id., Section V.) Thus, the only "Intellectual
Property" identified in the list of assets to be
transferred were the UNIX and UnixWare trademarks. Neither the
"Intellectual Property"
category, nor any other part of Schedule 1.1(a) identified
copyrights in UNIX and UnixWare (or
in any other product) as an asset to be transferred. (Id.)
4. Similarly, the Schedule 1.1(b) list of "Excluded
Assets" expressly excluded the
following "Intellectual Property" from the sale:
V. Intellectual Property
A. All copyrights and trademarks, except for the
trademarks UNIX and UnixWare.
B. All Patents
(Brakebill Decl., Ex. 4, Schedule 1.1(b), Section V
(emphasis added).) Thus, the
intellectual property listed as included assets under Schedule
1.1(a) was consistent with
the intellectual property excluded by Schedule 1.1(b): only
the UNIX and UnixWare
trademarks were included, and all patents, copyrights, and
trademarks were excluded
except for the UNIX and UnixWare trademarks.
B. Novell Deliberately Excluded Copyrights from the
Transferred Assets
to Protect its Right to Receive SVRX and UnixWare Royalties and its
Continuing Interest in the UNIX Business.
5. Novell's initial goal was to sell its UNIX assets for an
all-cash payment.
However, because Santa Cruz did not have sufficient cash to
purchase all of Novell's UNIX
assets, the deal was structured so that Novell would retain
certain UNIX-related rights and would
receive other forms of consideration. (Brakebill Decl., Ex. 21
(Deposition of Robert
Frankenberg, February 10, 2007 ("Frankenberg Dep.") at
30:19 to 33:19, 61:23 to 64:21);
Declaration of David Bradford, filed herewith ("Bradford
Decl."), ¶ 7, 15, 16; Declaration of Tor
5
Braham, filed herewith ("Braham Decl."), ¶ 7,
9-13, 18; Declaration of Jim Tolonen, filed
herewith ("Tolonen Decl."), ¶ 5-6, 11-12.) In
particular, Novell was entitled to receive 95% of
"all royalties, fees, and other amounts" that were due
under licenses to the Unix System V
software Releases listed in Schedule 1.1(a) (the "SVRX
Licenses"). (Brakebill Decl., Ex. 2,
Sections 1.2(b), 4.16(a); Ex. 3, Section VI.) Novell's right to
receive future SVRX revenues was
an important part of the overall consideration for the APA; Novell
had received $50 million in
SVRX revenues in Fiscal Year 1995 alone. (Bradford Decl., ¶
15, Ex. 2.) In contrast, the Santa
Cruz stock that Novell received under the APA had a value of
approximately $50 million.
(Braham Decl., ¶7.)
6. In addition to the right to receive future SVRX revenues,
Novell also retained the
right to require Santa Cruz to "amend, supplement, modify
or waive any rights under" or "assign
any rights to" the SVRX Licenses as directed by Novell.
(Brakebill Decl., Ex. 2, Section
4.16(b).) One reason for this provision was to ensure that
Novell could negotiate "buy-outs" of
particular SVRX Licenses, in which the licensee made a
substantial payment to obtain a "paid-up" license in which no future royalty payments were due.
(Braham Decl., ¶¶ 6, 12, 13;
Bradford Decl. ¶ 16; Brakebill Decl., Ex. 21, Frankenberg
Depo. at 88:14 to 89:3.) Novell had
already negotiated SVRX buyouts before the APA was signed, and
wanted to be able to continue
to enter buyouts after the APA was signed. (Braham Decl., ¶
13; Brakebill Decl., Ex. 21,
Frankenberg Dep. at 63:1 to 64:21.)
7. Another important consideration for Novell's sale of UNIX
assets was Santa
Cruz's commitment to develop enhanced UnixWare products that
were compatible with Novell's
NetWare product. The APA required Santa Cruz to use
"commercially reasonable efforts" to
develop a "Merged Product" that would combine Novell's
version of the UNIX operating system
6
(UnixWare 2. 1, or "Eiger") with Santa Cruz's flavor
of UNIX ("OpenServer Release 5. 1," or
"Comet"). (Brakebill Decl., Ex. 2, § 4.18.)
Development of this Merged Product was the
detailed subject of a separate "Operating Agreement,"
which was executed by Novell and Santa
Cruz upon the Closing. (Brakebill Decl., Ex. 22 (further
detailing SCO's obligation to develop
the Merged Product).)
8. Novell and Santa Cruz hoped that the Merged Product, which
was designed to run
on Intel 32-bit processors, would provide a commercially
successful alternative to Microsoft
Windows. (Braham Decl., ¶ 8.) This was a very important
consideration for Novell, because
Novell's flagship "NetWare" product needed an
alternative operating system if it was to compete
successfully with Microsoft. Thus, if the Merged Product
successfully penetrated the Intel 32-bit
market, this would likely lead to increased sales of NetWare as
well. (Braham Decl., ¶ 8.)
Moreover, Novell also had a direct financial interest in Santa
Cruz's future sale of UnixWare
products, as the APA entitled Novell to receive revenues on such
sales. (Brakebill Decl., Ex. 2,
§ 1.2(b) and Schedule 1.2(b).)
9. Novell also had a strong interest in the development of a
commercially successful
UNIX operating system that would run on Intel's next generation,
64-bit processors, as this
would further expand the market for Novell's NetWare product.
(Braham Decl., ¶ 13-14;
Bradford Decl., Ex. I at 1; Tolonen Decl., ¶ 12.) Novell
discussed development of a 64-bit
UNIX operating system with several companies, including Santa
Cruz and Hewlett-Packard.
(Bradford Decl., Ex. I at 1, 3.)
10. In sum, although Novell sold certain UNIX-related assets
to Santa Cruz, Novell
retained significant rights and commercial interests in the UNIX
business, including (a) the right
to collect 95% of "all" revenues due under
"all" SVRX Licenses; (b) the right to negotiate
7
buy-outs of the SVRX Licenses; (c) the right to require Santa
Cruz to develop a unified UNIX
operating system for Intel 32-bit processors; (d) the right to
receive revenues on Santa Cruz's
sales of UnixWare products; and (e) an interest in development of
a UNIX operating system for
Intel 64-bit processors by Santa Cruz, Hewlett-Packard, or someone else.
11. Robert Frankenberg, the CEO of Novell, directed his team
to take steps to protect
Novell's UNIX-related rights and interests under the APA.
(Brakebill Decl., Ex. 21 (2/10/2007
Frankenberg Dep. at 63: 10 to 64:21).) Novell had a specific
concern about entrusting the future
of UNIX to Santa Cruz. In particular, Santa Cruz was not the
most financially stable company
and Novell had concerns about Santa Cruz's viability as a
company. (Braham Decl., ¶ 7;
Bradford Decl., ¶ 8; Tolonen Decl., ¶ 12.) After a
series of executive-level discussions during
the summer of 1995, David Bradford, Novell's Senior
Vice-President and General Counsel, was
then entasked with overseeing the negotiation and drafting of
the contract between Novell and
Santa Cruz to protect Novell's interests. (Bradford Decl. ¶
4, Tolonen Decl., ¶ 8.)
12. Pursuant to Mr. Frankenberg's and then Mr. Bradford's
instruction, Novell's legal
team took several steps to protect Novell's UNIX-related
interests. First, Novell inserted a
provision that "Seller is retaining all rights to the SVRX
Royalties notwithstanding the transfer
of the SVRX Licenses to Buyer pursuant hereto, and that Buyer
only has legal title and not an
equitable interest in such royalties within the meaning of
Section 541(d) of the Bankruptcy
Code." (Brakebill Decl., Ex. 2, Section 1.2(b); Braham
Decl. ¶ 10.) Novell added this provision
to decrease the risk that if Santa Cruz went into bankruptcy,
this would interfere with Novell's
receipt of SVRX revenues. (Braham Decl., ¶ 10, Tolonen Decl.
¶ 12.)
13. Second, Novell expressly excluded "all
copyrights" from the assets to be
transferred to Santa Cruz, as reflected in Schedules 1.1(a)
and 1.1(b) to the APA. (Braham
8
Decl., ¶¶ 18-19; Bradford Decl., ¶¶ 11-12;
Tolonen Decl. 111.) This exclusion ensured that if
Santa Cruz went into bankruptcy, the UNIX and UnixWare copyrights
would not be part of the
bankruptcy estate, decreasing the risk that the bankruptcy trustee
would assert an interest in the
future SVRX revenues due to Novell under the APA. (Braham Decl.,
¶ 14; Bradford Decl., 19;
Tolonen Decl. 112; see also Brakebill Decl., Ex. 23, ¶ 45.)
14. Excluding copyrights from the transferred assets also
protected Novell's other
UNIX-related interests. Retaining ownership of the copyrights
strengthened Novell's rights to
negotiate buy-outs of the SVRX Licenses and to receive future
revenues. (Braham Decl., ¶ 14;
Tolonen Decl. ¶ 12.) Retaining ownership of the copyrights
also put Novell in a better position
to ensure successful development of future versions of the UNIX
operating system by Santa
Cruz, Hewlett-Packard, or other companies. (Braham Decl., 114;
Tolonen Decl. 112; see
Bradford Decl., ¶¶ 9, 16.)
C. The Lists of Transferred Assets Were Revised to
Include a Copyright
Exclusion and Then Exchanged By the Parties Before the APA Was
Signed.
15. The correspondence between Novell and Santa Cruz shows
that, before the APA
was signed on September 19, 1995, several significant revisions
were made to the lists of
included and excluded assets.
16. After receiving David Bradford's business direction to retain
Novell's intellectual
property rights in UNIX and UnixWare, Novell's outside legal
team revised an early draft of a
Schedule of Assets that had included patents, copyrights and
trademarks. (Braham Decl. 115.)
Unlike the final version of Schedule 1.1(a), this early draft
of Schedule 1.1(a), which Novell's
outside counsel taxed to Santa Cruz's legal representatives on
September 8, 1995, included "all
9
patents, patent applications, copyrights ... and all other
intellectual property ... that pertain to Unix
or UnixWare." (Braham Decl. ¶ 15, Ex. 6 at NOV 31783.)
17. Novell's outside counsel drafted a new schedule of assets
to be included in the
asset transfer, as well as a schedule of assets to be excluded
from the transfer. (Braham Decl.
¶ 15, Ex. 7; see generally Tolonen Decl. 19 (discussing
Braham role).) The new Schedule 1.1(a)
deleted "copyrights," "patents," and
"all other intellectual property" from the list of assets to be
transferred. It revised Schedule 1.1(a) so that the UNIX and
UnixWare trademarks were the only
"Intellectual Property" included in the transaction. The
new Schedule 1.1(b) made clear that
patents and copyrights were not included as assets; instead they were
specifically excluded. (Id.)
18. During the negotiations, Novell transmitted drafts of
Schedules 1.1(a) and 1.1(b)
to Santa Cruz, including the Schedule 1.1(b) that explicitly
excluded "all patents" and "all
copyrights." (Braham Decl. 117 and Ex. 4 thereto.) On
September 18, 1995, for example,
Novell's outside counsel sent revised Schedules 1.1(a) and 1.1(b) to Santa Cruz's legal
representatives. (Braham Decl. 117 and Ex. 4 thereto.) Novell
proposed to alter the prior
version of Intellectual Property assets to be included in the
transfer -- previously limited to
"Trademarks UNIX and UnixWare as held by Seller" -- to also
include the below, underlined
language:
V. Intellectual property - Trademarks UNIX and UnixWare
as and to the extent held by Seller (excluding any
compensation Seller receives with respect of the license
granted to X/Open regarding the UNIX trademark).
(Id. at NOV 404 10) Novell also proposed several
other changes to the Schedule 1.1(a) list of
included assets and the Schedule 1.1(b) list of excluded
assets. (Id., Schedule 1.1(a), at 1, 2, 4;
Schedule 1.1(b), at 2.)
10
19. The draft of Schedule 1.1(b) that Novell sent to Santa
Cruz on September 18,
1995, expressly excluded from the assets to be transferred
"[a]ll copyrights and trademarks,
except for the trademarks UNIX and UnixWare."
(Id., Schedule 1.1(b).) Santa Cruz accepted
this exclusion. Thus, the final version of the APA, signed on
September 19, 1995, excludes "all
copyrights" from the transferred assets. (Brakebill Decl.,
Ex. 4, Section V.)
20. During the APA negotiations, several representatives of
Novell reviewed and
approved the language in the Excluded Assets provision excluding
copyrights from the asset
transfer: David Bradford, Tor Braham, Aaron Alter and Burt Levine.
(Braham Decl. ¶ 16.)
21. Aaron Alter of the Wilson firm specifically edited the
Intellectual Property
provisions of Schedules 1.1(a) and 1.1(b), confirming that
only certain UNIX and UnixWare
trademarks would be transferred to Santa Cruz and leaving the
copyright exclusion intact.
(Braham Decl. ¶ 16(c), Ex. 8.) Mr. Alter had also marked up
an early term sheet, adding the
handwritten notation, "already excluded," next to a
Section including "Intellectual Property
Copyrights, trademarks .... (Braham Decl., ¶ 16(c), Ex. 9
at NOV 39798.)
22. Burt Levine, a lawyer for AT&T, Unix Systems
Laboratories ("USL") and Novell
who then joined Santa Cruz in early 1996, also reviewed and
edited the Intellectual Property
provisions in Schedules 1.1(a) and 1.1(b) during the APA
negotiation period. He kept UNIX and
UnixWare trademarks as a category of intellectual property to be
included as an asset. He did
not add UNIX or UnixWare copyrights as included assets. He left
intact the copyright exclusion.
(Braham Decl., ¶ 16(d), Ex. 10; Brakebill Decl., Ex. 25,
Levine Dep. at 74:1-75:1, 76:10-77:7.)
Further, Mr. Levine's comments on Schedules 1.1(a) and 1.1(b) -- including the identification of
"all copyrights" as an excluded asset -- were transmitted
to Santa Cruz's legal representatives
11
during the negotiations. (Braham Decl., 117, Ex. 4; Brakebill
Decl., Ex. 25, Levine Dep. at
83:20-85:9, 184:5-19.)
D. Amendment No. 1 Made Further Revisions to the Lists
of Transferred
Assets, But Not to the Copyright Exclusion.
23. After the APA was signed on September 19, 1995, Novell and
Santa Cruz had
discussions about clarifying certain provisions in the APA in
the form of an Amendment No. 1.
(Brakebill Decl., Ex. 17 (Madsen Dep. at 154:7-16.)
24. Novell and Santa Cruz signed Amendment No. 1 on December
6, 1995, which is
the date that the transaction closed. (See Brakebill Decl., Ex.
26, Amendment 1.) Amendment
No. 1 made several clarifying amendments, including specific
revisions to the Schedule 1.1(a)
and Schedule 1.1(b) lists of included and excluded assets.
(Id., § K, L.) Amendment No. 1 did
not, however, change the description of the Intellectual
Property that was included and excluded
from the transferred assets by Section V of Schedules 1.1(a) and
1.1(b). (Id.)
E. The Bill of Sale Transferred Only the Assets
Identified in the APA
and Amendment No. 1, Which Did Not Include Copyrights.
25. The APA did not, itself, transfer any assets. Rather, it
described the assets that
would be transferred in the future when the transaction was
closed. (See Brakebill Decl., Ex. 2,
§ 1.1(a).) Thus, the APA contemplated that at the Closing,
Novell would deliver a "bill of sale"
transferring Novell's title to the "Assets" described in
the APA to Santa Cruz. (Id., § 1.7(b)(iii).)
26. Novell and Santa Cruz executed a "Bill of Sale"
when the transaction was closed
on December 6, 2005, which is the same day that Amendment No. 1
was signed. (See Brakebill
Decl., Ex. 27.) The Bill of Sale stated that Novell "does
hereby transfer, convey, sell, assign and
deliver" to Santa Cruz "all of the Assets."
(Id.) The Bill of Sale further stated that all capitalized
12
terms had the meanings set forth in "the Agreement,"
which was defined as "the Asset Purchase
Agreement by and between The Santa Cruz Operation, Inc. and
Novell, Inc. dated as of
September 19, 1995, as amended by Amendment No. 1 to Asset
Purchase Agreement dated as of
December 6, 1995." (Id.)
27. As noted above, Section 1.1(a) of the APA defined the
"Assets" to be transferred
as the assets that were included in Schedule 1.1(a), and not
excluded by Schedule 1.1(b).
Schedule 1.1(a) did not include any copyrights, and Schedule
1.1(b) excluded "all copyrights."
Thus, the Bill of Sale did not transfer any UNIX or UnixWare
copyrights to Santa Cruz.
F. Amendment No. 2 Revised the "Excluded
Assets" Provision, But Did
Not Transfer Ownership of Copyrights or Specify Which Copyrights
Might Be "Required" for the UNIX Business.
28. On October 16, 1996, Novell and Santa Cruz executed
Amendment No. 2 to the
APA. (See Brakebill Decl., Ex. 28.) Amendment No. 2 revised the
definition of "Excluded
Assets" in Section V.A of Schedule 1.1(b) to read as follows:
All copyrights and trademarks, except for the copyrights and
trademarks owned by Novell as of the date of the Agreement
required for SCO to exercise its rights with respect to the
acquisition of the UNIX and UnixWare technologies.
(Id., Paragraph A.)
29. Amendment No. 2 did not specify which copyrights, if any,
were "required for
SCO to exercise its rights with respect to the acquisition of
the UNIX and UnixWare
technologies." (Id.) Amendment No. 2 also did not
contain any provision transferring
ownership of copyrights or other assets from Novell to Santa Cruz.
(Id.)
30. Amendment No. 2 stated that the APA was amended "[a]s of the 16th day of
October, 1996," or about thirteen months after the APA was
executed on September 19, 1995,
13
and ten months after the transaction closed on December 6,
1995. (Id.) Thus, by its own terms,
Amendment No. 2's revision to Schedule 1.1(b) did not
retroactively amend the APA as of the
date the APA was signed or the transaction closed. Moreover,
Novell did not execute a "Bill of
Sale" or any similar document transferring copyrights from
Novell to Santa Cruz in connection
with Amendment No. 2. (Declaration of Allison Amadia, filed
herewith ("Amadia Decl."),
¶ 17.)
G. The Negotiation History of Amendment No. 2 Confirms
that It Was
Not Intended to Transfer Ownership of UNIX and UnixWare
Copyrights.
31. Amendment No. 2 was negotiated primarily through
communications between
two in-house lawyers, Allison Amadia (then Allison Lisbonne) of
Novell, and Steve Sabbath of
Santa Cruz. (Amadia Decl., ¶¶ 4-5.) During the summer
of 1996, Mr. Sabbath telephoned Ms.
Amadia and raised an issue relating to the UNIX and UnixWare
copyrights. He told Ms. Amadia
that the Original APA explicitly excluded copyrights to UNIX and
UnixWare as assets being
sold by Novell to Santa Cruz and that it should not have. He
wanted Novell to amend the
original APA to explicitly give Santa Cruz rights to copyrights
in UNIX and UnixWare. (Id.,
¶ 6.) Mr. Sabbath was not seeking a clarification that the
APA gave copyright ownership to
Santa Cruz. Rather, he wanted Novell to change the original APA
to give Santa Cruz ownership
of copyrights in UNIX and UnixWare because the original APA did
not so provide. (Id. ¶ 18.)
32. Ms. Amadia was not involved in the negotiation and
drafting of the original APA.
Accordingly, after her conversation with Sabbath, Amadia
undertook to find out the intent of the
original APA concerning copyrights. She confirmed that ownership
of the UNIX and UnixWare
copyrights did not transfer by reviewing the APA and by
contacting Novell's outside counsel,
Tor Braham, who was the principal drafter of the APA.
(Id., ¶ 7.)
14
33. Mr. Sabbath later sent Ms. Amadia a first draft of
Amendment No. 2. (Id., ¶ 8,
Ex. 1 thereto.) Santa Cruz proposed to revise Section V of
Schedule 1.1(b) to read as follows:
All copyrights and trademarks, except for the copyrights and
trademarks owned by Novell as of the date of this Amendment,
which pertain to the UNIX and UnixWare technologies and which
SCO has acquired hereunder...
(Id., Ex. 1, Paragraph A.)
34. Santa Cruz's initial Amendment No. 2 proposal created a
blanket exception for
copyrights and trademarks "owned by Novell as of the date
of this Amendment, which pertain to
the UNIX and UnixWare technologies and which SCO has acquired
hereunder." (Id. (emphasis
added).) Thus, insofar as the UNIX and UnixWare copyrights were
concerned, Santa Cruz's
draft acknowledged that Novell owned them "as of the date
of the amendment," and proposed
that all of them were to be transferred to Santa Cruz. Moreover,
Santa Cruz's reference to
copyrights "which SCO has acquired hereunder,"
indicated that its proposed amendment was
intended to transfer ownership of the UNIX and UnixWare copyrights
to Santa Cruz. (Id.)
35. Novell rejected Santa Cruz's proposed amendment. Ms. Amadia told Mr.
Sabbath that while Novell was willing to affirm that Santa Cruz
had a license under the APA to
use Novell's UNIX and UnixWare copyrighted works in its
business, Novell was not going to
transfer ownership of any copyrights to Santa Cruz through
Amendment No. 2. (Amadia Decl.,
¶ 10.)
36. After further negotiations, Novell and Santa Cruz agreed
to the narrower
exception in the final version of Amendment No. 2. Instead of a
blanket exception for
copyrights that "pertain to the UNIX and UnixWare
technologies," the final version was limited
to copyrights that were "required for SCO to exercise its
rights with respect to the acquisition of
the UNIX and UnixWare technologies." (Amadia Decl.,
¶ 11, Ex. 2, Paragraph A.) In addition,
15
the final version did not include Santa Cruz's proposed
reference to copyrights "which SCO has
acquired hereunder," nor did it include any other reference
to an "acquisition" or transfer of
copyrights. (Id.) Accordingly, Jim Tolonen, the Novell
executive who signed Amendment
No. 2, confirms that it was never Novell's intent to transfer
copyrights by way of Amendment
No. 2 (or the APA), and that he would not have signed Amendment
No. 2 had he believed it
would do so. (Tolonen Decl. ¶ 13-16.)
IV. ARGUMENT
A. Novell Is Entitled to Summary Judgment that the
APA as Amended
by Amendment No. 1 Excluded UNIX and UnixWare Copyrights
from the Assets Transferred to Santa Cruz by the Bill of
Sale.
As noted in the Undisputed Facts above, the Bill of Sale
executed by Novell on
December 6, 1995, transferred ownership to Santa Cruz of
"the Assets," as defined in the APA
and Amendment No. 1. (Undisputed Facts, ¶ 23; Brakebill
Decl., Ex. 27 .)4 Thus,
the scope of
assets transferred by the Bill of Sale must be determined by the
definition of "Assets" set forth in
the APA and Amendment No. 1.
Novell is entitled to summary judgment that the Bill of Sale
did not transfer the UNIX
and UnixWare copyrights to Santa Cruz because:
- The plain language of the APA and Amendment No. 1 excluded
"all copyrights" from
the assets transferred to Santa Cruz;
16
- The parol evidence rule precludes SCO from relying on
extrinsic evidence to rewrite
"all copyrights" as "NetWare copyrights
only," because the plain language is not
reasonably susceptible to SCO's interpretation;
- The exclusion of "all copyrights" was deliberate
and consistent with the basic
objectives of the APA;
- The other contractual provisions cited by SCO do not
demonstrate that "all
copyrights" means "NetWare copyrights only," as
some SCO witnesses have argued;
and
- The "Assets" transferred by the Bill of Sale is
controlled by the APA as amended by
Amendment No. 1; Amendment No. 2 is irrelevant to the Bill of Sale.
1. The Plain Language of the APA and Amendment No. 1
Excluded "All Copyrights" from the Assets to Be Transferred
by Novell to Santa Cruz.
The APA defined the assets to be transferred by Novell to Santa
Cruz by reference to lists
of included and excluded assets. (Undisputed Facts, ¶ 2;
Brakebill Decl., Ex. 2, Section 1.1(a).)
Both schedules require the same conclusion: the transferred
assets did not include the UNIX and
UnixWare copyrights.
The only "Intellectual Property" identified in the
Schedule 1.1(a) list of assets to be
transferred are the UNIX and UnixWare trademarks. (Undisputed
Facts, ¶ 3; Brakebill Decl.,
Ex. 3, Section V.) Schedule 1.1(a) did not identify the UNIX
and UnixWare copyrights as an
asset to be transferred. (Id.) Conversely, the Schedule
1.1(b) list of "Excluded Assets" expressly
excluded from the transferred assets "[all copyrights and
trademarks, except for the trademarks
UNIX and UnixWare." (Undisputed Facts, ¶ 4, Brakebill
Decl., Ex. 4, Section V.)
17
Amendment No. 1 made some revisions to Schedules 1.1(a) and
(b), but did not change
the description of the Intellectual Property included and excluded
from the transfer. (Undisputed
Facts, ¶¶ 23-24, Brakebill Decl. Ex. 26, § K, L.)
Thus, the language of the APA and
Amendment No. 1 is clear: "[a]ll copyrights" were
excluded from the assets to be transferred.
2. SCO's Attempt to Rewrite "All
Copyrights" As "NetWare
Copyrights Only" Should Be Rejected as Contrary to the Plain
Language and to the Parol Evidence Rule.
SCO has asserted that even though the APA excluded "all
copyrights" from the assets to
be transferred, the "intent" of the APA was to
transfer the UNIX and UnixWare copyrights to
Santa Cruz. SCO has relied on declarations and deposition
testimony to support its assertion that
the intent of the APA was to transfer the UNIX and UnixWare
copyrights. (See SCO's Motion
for Partial Summary Judgment On Its First, Second, and Fifth
Causes of Action and For
Summary Judgment on Novell's First Counterclaim, filed April 9,
2007, PACER No. 259
("SCO's Ownership MSJ 4/9/2007, PACER No. 259") at
6-16 .)5 SCO also has relied on
testimony that the Schedule 1.1(b) exclusion of "all
copyrights" should be interpreted as limited
to Novell's NetWare product only, and as not including UNIX and
UnixWare copyrights. (Id. at
28, footnote 3.)
SCO's attempt to rewrite "all copyrights" as meaning
"NetWare copyrights only" should
be rejected because it is contrary to the plain language of the
APA. Under the governing
18
California law,6
oral testimony and other extrinsic evidence are not admissible to support an
interpretation of a contract that is contrary to the plain
language. The critical issue is "whether
the offered evidence is relevant to prove a meaning to which the
language of the instrument is
reasonably susceptible." Dore v. Arnold Worldwide,
Inc., 39 Cal. 4th 384, 391 (2006) (citation
omitted). If the contract is not reasonably susceptible to the
proposed interpretation, extrinsic
evidence is inadmissible and does not create a triable issue of
fact that would defeat summary
judgment. Id. at 388, 391-93 (affirming summary judgment
on wrongful termination claim
because letter agreement that employment was "at will"
and could be terminated "at any time"
could not reasonably be interpreted as allowing termination for
cause only, and hence contrary
extrinsic evidence did not create a triable issue of fact).
The rule against considering extrinsic evidence contrary to
the plain language is
particularly strong for an integrated contract. As the California
Court of Appeal has noted:
The parol evidence rule generally prohibits the introduction of
extrinsic evidence -- oral or written -- to vary or contradict the
terms of an integrated written instrument ... . According to this
substantive rule of law, when the parties intend a written
agreement to be the final and complete expression of their
understanding, that writing becomes the final contract between the
parties, which may not be contradicted by even the most
persuasive evidence of collateral agreements. Such evidence is
legally irrelevant.
19
EPA Real Estate P'ship v. Kang, 12 Cal. App. 4th 171,
175 (1992) (citations omitted). Thus,
when a contract is integrated, "extrinsic evidence is
admissible only to supplement or explain the
terms of the agreement -- and even then, only where such evidence
is consistent with the terms
of the integrated document ...." Id. at 176-77
(citations omitted).
The APA includes an express integration clause, which states
in relevant part:
Entire Agreement. This Agreement, and the Schedules and
Exhibits hereto: (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all
prior agreements and understanding, both written and oral, among
the parties with respect to the subject matter hereof....
(Brakebill Decl., Ex. 2, Section 9.5.) Novell and Santa Cruz
further agreed, in connection with
the Bill of Sale, that the APA is an integrated agreement not to
be altered by any other
understandings:
It is acknowledged and agreed ... that the Agreement is the
exclusive source of the agreement and understanding between
Seller and Buyer respecting the Assets.
(Brakebill Decl., Ex. 27.) On the same day the Bill of Sale
was executed, Santa Cruz's outside
counsel sent an opinion letter to Novell's Board of Directors
stating that:
* * REDACTED * *
(Brakebill Decl., Ex. 24 at NOV 16188.)
As a matter of law, the express exclusion of "all
copyrights" in Schedule 1.1(b) is not
"reasonably susceptible" to SCO's proposed interpretation
of "NetWare copyrights only." The
plain meaning of "all" is all. "All copyrights"
cannot reasonably be interpreted as "NetWare
20
copyrights only." Nor can "all copyrights"
reasonably be interpreted as "all copyrights except
for UNIX and UnixWare copyrights."
Directly on point is the California Court of Appeal's decision
in Blumenfeld v. R.H. Macy
& Co., 92 Cal. App. 3d 38 (1979), which rejected a
similar attempt to interpret "all" as meaning
"less than all." The trial court had relied on extrinsic
evidence to interpret a contract assigning
"all claims against third parties relating to the
[shopping] Center" as limited to claims against
current tenants of the Center and excluding plaintiff's claim
against Macy's, which was never a
tenant, for breach of an agreement to lease key store space.
Id. at 41-44. The Court of Appeal
reversed, holding that the "all-inclusive language of the
agreement is not reasonably susceptible
of the meaning advanced." Id. at 46.
Similarly, in Gerdlund v. Electronic Dispensers
Int'l, 190 Cal. App. 3d 263 (1987), the
California Court of Appeal rejected an attempt to use parol
evidence to interpret "any" in a less
than all-inclusive manner. "Testimony by all parties"
had established that "all had the same
general intent" that the plaintiffs "would not be
terminated as long as they were doing a good
job." Id. at 273. Plaintiffs relied on this
evidence to interpret a contract that allowed termination
of employment "for any reason" as meaning, "for
any good reason." Id. The Court of Appeal
excluded this evidence as "totally inconsistent" with
the plain language:
The term "any reason" is plainly all-inclusive,
encompassing all
reasons "of whatever kind," good, bad, or
indifferent ... . Adding
the modifier "good" has a delimiting effect which changes the
meaning entirely ... . The trial court admitted the evidence on the
ground that "both parties have testified as to what they
interpreted
the contract to mean." Testimony of intention which is contrary to
a contract's express terms, however, does not give meaning to the
contract: rather it seeks to substitute a different meaning. It
follows ... that such evidence must be excluded.
21
Id. Based on its conclusion that the "testimony
of intention" should have been excluded, the
Court of Appeal reversed the jury verdict for the plaintiffs and
directed that judgment be entered
for the defendant. Id. at 267, 278.
Here, too, it is clear that the exclusion of "all
copyrights" was "all-inclusive,"
encompassing copyrights to UNIX, UnixWare, NetWare, and any
other copyrighted work.
Therefore, the parol evidence offered by SCO to show that
"all" means "NetWare only" must be
excluded.
SCO's proposed interpretation is especially far-fetched in
view of the plain language of
the remainder of Section V of Schedule 1.1(b). Section V
excluded from the transferred assets
"[a]ll copyrights and trademarks, except for the trademarks
UNIX and UnixWare." (Brakebill
Decl., Ex. 4, Schedule 1. 1 (b), Section V.A (emphasis added).) Had
the parties intended to make
an exception for the UNIX and UnixWare copyrights, it would have been
simple to draft this
clause as "all copyrights and trademarks, except for the UNIX
and UnixWare trademarks and
copyrights." However, the parties chose not to do so.
Instead, the "UNIX and UnixWare"
exception was limited to trademarks only.
Moreover, if "all copyrights" were interpreted as
"NetWare only," then Section V.A of
Schedule 1.1(b) would effectively read, "NetWare
copyrights and trademarks, except for the
UNIX and UnixWare trademarks." But this interpretation
would make no sense. "NetWare
trademarks" do not include UNIX and UnixWare trademarks. If
"all copyrights and trademarks"
were limited to "NetWare only," the exception for UNIX
and UnixWare trademarks would be
superfluous. Thus, the exception for UNIX and UnixWare
trademarks logically implies that
"all" copyrights and trademarks means
"all" copyrights and trademarks, including UNIX and
UnixWare.
22
The bizarre nature of SCO's proposed interpretation is further
demonstrated by the next
clause of Section V of Schedule 1.1(b), which excludes
"All Patents" from the assets to be
transferred. (Brakebill Decl., Ex. 4, Section V.B.) SCO's own
witnesses have admitted that the
exclusion of "all" patents excludes "all"
patents from the transfer, including patents related to
UNIX and UnixWare.7
SCO thus proposes two conflicting interpretations of "all":
(1) "all
patents" means "all patents, including UNIX and UnixWare
patents"; but (2) "all copyrights"
means "NetWare copyrights only." SCO's attempt to
interpret "all" in two different ways in the
same paragraph of the same contract is an untenable distortion of
the plain language.
3. The Exclusion of "All Copyrights" from
the Transferred
Assets Was Deliberate and Consistent with the Basic
Objectives of the APA.
SCO has argued that there is no evidence that the parties
intended to exclude the UNIX
and UnixWare copyrights from the transferred assets, and that
this exclusion would render the
APA meaningless by preventing Santa Cruz from pursuing its UNIX
business. SCO is wrong on
both points. In fact, the parties specifically negotiated the
scope of the transferred assets, and
Novell deliberately excluded the UNIX and UnixWare copyrights to
protect its UNIX-related
rights. Moreover, Novell's sale of its UNIX and UnixWare
products to Santa Cruz necessarily
conferred a license on Santa Cruz to use the copyrights as needed
to implement the APA.
23
a. The scope of the transferred assets was specifically
negotiated.
SCO has asserted that there is no evidence that the parties
intentionally excluded the
UNIX and UnixWare copyrights from the assets to be transferred
by Novell to Santa Cruz.
However, the best evidence of the parties' intent is the
language of the APA itself. The language
of the APA could not be clearer: "all copyrights" are
excluded.
In any event, SCO's assertions regarding intent conveniently
overlook the very written
communications exchanged between the parties at the time the APA
was being negotiated.
Counsel for Novell and Santa Cruz exchanged specific
communications about the precise scope
of the assets to be transferred.
On September 8, 1995, Novell's counsel sent a first draft of
Schedule 1.1(a) to Santa
Cruz's counsel on September 8, 1995, along with a draft of the
APA. This initial draft included
"all patents, patent applications, copyrights ... and all
other intellectual property ... that pertain to
Unix or UnixWare" in the assets to be transferred to Santa
Cruz.8 (Undisputed Facts,
¶ 16;
Braham Decl., ¶ 15, Ex. 6 thereto.) However, Novell then
revised Schedule 1.1(a) to delete the
reference to patents and copyrights, leaving UNIX and UnixWare
trademarks as the only
"Intellectual Property" identified as assets. (Undisputed
Facts, ¶ 17; Braham Decl., ¶ 15, Ex. 7
thereto.)
24
Further, on September 18, 1995, Novell's counsel sent revised
Schedules 1.1(a) and
1.1(b) to Santa Cruz's counsel. (Undisputed Facts, ¶ 18;
Braham Decl., ¶ 17 and Ex. 4 thereto.)
These drafts made redlined revisions to the included and excluded
assets, including to the
Section V list of included and excluded "Intellectual
Property." However, the revised Schedule
1.1(b) continued to exclude "all copyrights" from the
transferred assets. (Undisputed Facts,
¶¶ 19, 22; Braham Decl., Ex. 4.) The description of
"Intellectual Property" in the final versions
of Schedules 1.1(a) and (b) attached to the APA were identical
to Novell's drafts of September
18, 1995, confirming that Santa Cruz accepted Novell's proposed
revisions. (Compare Braham
Decl., Ex. 4 with Brakebill Decl. Exs. 3, 4.)
In sum, the negotiation history demonstrates that counsel to
Novell and Santa Cruz
specifically considered and revised the lists of included and
excluded assets. Novell provided
advance written notice that Novell had decided to delete
copyrights and patents from the
included assets, and instead proposed to exclude all copyrights
and patents from the transferred
assets. Santa Cruz accepted this exclusion, and SCO -- as the
successor-in-interest to Santa
Cruz -- is in no position to attempt to reverse that concession.
b. Novell deliberately excluded copyrights to protect its
continuing interests in UNIX and UnixWare.
As noted above, Novell's initial goal was to sell its UNIX
assets for an all-cash payment.
(Undisputed Facts, ¶ 5.) However, because Santa Cruz did
not have sufficient cash, the
transaction was structured so that Novell would retain
significant UNIX-related rights. In
particular, Novell retained the right to receive 95% of future
"SVRX" revenues collected by
Santa Cruz under licenses to the UNIX System V operating system.
(Id.) Novell also retained
the right to modify the SVRX Licenses, so that Novell could,
inter alia, negotiate "buy-outs" of
25
the SVRX revenue stream. (Id., ¶ 6.) In addition,
Novell obtained a commitment from Santa
Cruz to develop an enhanced version of UnixWare that was intended
to increase the market for
Novell's "NetWare" product, as well as the right to
receive royalties on Santa Cruz's future sales
of UnixWare products. (Id., ¶¶ 7-8.) Novell
also had a strong interest in the development of a
UNIX operating system that would run on Intel's 64-bit processor,
to further expand the market
for Novell's NetWare product. (Id., ¶ 9.)
Robert Frankenberg, Novell's CEO, directed his team to take
steps to protect Novell's
UNIX-related rights and interests. (Undisputed Facts, ¶
11.) To implement this instruction,
Novell's legal team decided to exclude the UNIX and UnixWare
copyrights from the assets
transferred to Santa Cruz. (Id., ¶¶ 12-13.)
This exclusion ensured that the UNIX and UnixWare
copyrights would not be part of the bankruptcy estate if Santa
Cruz went into bankruptcy, and
thus made it less likely that the bankruptcy trustee would
assert an interest in these copyrights or
in the related revenue streams. (Id., ¶ 14.)
Retaining ownership of the UNIX and UnixWare
copyrights also strengthened Novell's legal basis for receiving
royalties and negotiating buy-outs
of SVRX Licenses, and put Novell in a better position to ensure
development of future versions
of the UNIX operating system. (Id.)
c. Santa Cruz had a license to use the UNIX and
UnixWare copyrights, and hence did not need to
acquire ownership to implement the APA.
SCO has asserted that excluding UNIX and UnixWare copyrights
from the transferred
assets would be inconsistent with the APA's purpose because
Santa Cruz allegedly could not
pursue its UNIX business unless it owned these copyrights.
However, as noted above, this
exclusion was consistent with the goal of protecting the
UNIX-related rights retained by Novell,
which were a critical part of the consideration for Novell's
sale of most of its UNIX assets.
26
Moreover, contrary to SCO's assertion, Santa Cruz did not need
to own the UNIX and
UnixWare copyrights to pursue its UNIX business. It is
well-established that a contract
involving copyrighted works confers an implied license to use the
copyrights as needed to
implement the transaction, even if the contract does not expressly
refer to a license. For
example, in Foad Consulting Group, Inc. v. Musil Govan
Azzalino, 270 F.3d 821 (9th Cir. 2001),
defendant's predecessor paid $175,000 to plaintiff to prepare a
preliminary plot plan and final
engineering drawings for a proposal to build a shopping center.
Id. at 824. When defendant
hired a different firm to complete the project using a modified
version of plaintiff's plan, plaintiff
claimed that defendant had no right to use and modify plaintiff's
copyrighted drawings. Id. at
824-25. The Ninth Circuit rejected this claim, holding that the
contract granted "an implied
license to use the revised plot plan to build the project."
Id. at 828. The Ninth Circuit
emphasized that "[t]he central purpose of the contract"
was the production of engineering
documents for the shopping center. Given this purpose and the
amount of money paid, "it would
have been surprising if the parties had intended for [defendant]
to seek [plaintiff's] permission
before using the plans to build the project. Id.
Here, while copyrights were excluded from the transferred
assets, Santa Cruz did acquire
ownership of other rights in multiple versions of UNIX and
UnixWare. (Brakebill Decl., Ex. 3,
Schedule 1.1(a), Section I (list of "UNIX Source Code
Products," "Binary Product Releases,"
"Products Under Development," and "Other
Technology" included in the sale).) Moreover, a
"central purpose" of the APA was to enable Santa Cruz to
develop and distribute an improved
version of UNIX that combined Novell's "UnixWare" product
with Santa Cruz's "OpenServer."
(Undisputed Facts, 117-8.) Implementing this purpose required
Santa Cruz to copy, modify,
distribute, and sublicense the copyrighted code in Novell's
UnixWare products. Thus, Novell's
27
sale of its UNIX and UnixWare products necessarily conferred a
license on Santa Cruz to use the
related copyrights as needed to carry out the business activities
contemplated by the APA,
including the development of derivative works such as the Merged
Product. See Foad, 270 F.3d
at 828; see also Effects Assoc. v. Cohen, 908 F.2d 555, 558 (9th
Cir. 1990) (plaintiff's delivery of
special effects sequence conferred an implied copyright license to
use the sequence in a movie,
because plaintiff "created a work at defendant's request and
handed it over, intending that
defendant copy and distribute it")
The conclusion that Santa Cruz had a license to the UNIX
copyrights is reinforced by the
fact that Santa Cruz indisputably did not acquire ownership of
Novell's UNIX-related patents.
(See supra, footnote 7.) Santa Cruz needed to use these patents
to be able to distribute and
modify UNIX products. Therefore, Novell's sale of its UNIX
products to Santa Cruz necessarily
conveyed a license to use the patents as needed to implement the
APA. As noted by Burt
Levine, a former paid consultant to SCO and in-house attorney
for AT&T, USL, Novell, and
Santa Cruz, the APA "convey[ed] enough of a patent license
under Novell's patents that would
be necessary for SCO to conduct its business." (Brakebill
Decl., Ex. 25, Levine Dep. at
185:17-23; see id. at 7-24, 148-49.)
Similarly, because Santa Cruz needed to use the UNIX and
UnixWare copyrights to
distribute and modify UNIX products, the APA conferred a license
on Santa Cruz to use the
copyrights as needed to implement the APA. (Braham Decl., §
20.) As Burt Levine testified:
Q. Assuming that the copyrights had been retained by Novell
in the transaction, SCO would have had a license to use
those copyrights in the business, correct?
A. Correct.
28
(Brakebill Decl., Ex. 25, Levine Dep. at 89:7-11; see id. at
88:5-89:2 (Santa Cruz "absolutely,
absolutely" would have had a license to use copyrights in
its business; there would be an
"inherent" license to do "anything necessary to
practice the copyright in the transferred asset").)
Mr. Levine testified further: "My understanding is similarly to
my stand on copyrights that the
grant of the whole business carries with it at least licenses
under the patents needed to carry on
the business to the extent that Novell had them."
(Id. at 87:2-6; see also id. at 185:9-23.)
4. The Other Contractual Provisions Cited by SCO Do Not
Demonstrate that the UNIX and UnixWare Copyrights
Transferred to Santa Cruz.
SCO has asserted that other provisions of the APA demonstrate
that the APA was
intended to transfer ownership of the UNIX and UnixWare
copyrights, despite the Schedule
1.1(b) exclusion of "all copyrights." None of the
provisions cited by SCO support this assertion.
a. Schedule 1.1(a) does not demonstrate that the
exclusion of
"all copyrights" was limited to "NetWare"
copyrights.
SCO contends that UNIX and UnixWare copyrights were included
in the assets to be
transferred to Santa Cruz, because Schedule 1.1(a) refers to
"[a]11 rights and ownership of UNIX
and UnixWare, including but not limited to all versions of UNIX
and UnixWare...." (See, e.g.,
SCO's Ownership MSJ 4/9/2007, PACER No. 259, at 2.) SCO fails to
mention, however, that
Schedule 1.1(a)'s description of the "Intellectual
Property" to be transferred identified only
UNIX and UnixWare trademarks, and did not include any
copyrights. (Undisputed Facts, ¶ 3;
Brakebill Decl., Ex. 3, Section V.)
Moreover, even if Schedule 1.1(a) were deemed to include
"UNIX and UnixWare
copyrights" as an asset to be transferred, this would have
been overridden by Schedule 1.1(b)'s
exclusion of "all copyrights." (Undisputed Facts,
¶ 3; Brakebill Decl., Ex. 3, Section V.) The
29
APA initially defined the "Assets" to be transferred
by reference to Schedule 1.1(a), but then
added a critical qualification: "Notwithstanding the
foregoing, the assets to be so purchased
shall not include those assets (the 'Excluded Assets')
set forth on Schedule 1.1(b)." (Brakebill
Decl., Ex. 2, Section 1.1(a) (emphasis added).) This
"notwithstanding" clause makes clear that
the Schedule 1.1(b) exclusion of "all copyrights"
controls over any contrary language in
Schedule 1.1(a). (Braham Decl., 119.) See National Ins.
Underwriters v. Maurice Carter, 17
Cal. 3d 380, 384-86 (1976) (specific exclusion of insurance
coverage when airplane is operated
by an unqualified pilot prevails over general definition of
"insured" as including "any person
while using or riding in the aircraft")
b. The definition of "Business" does not
demonstrate that
"all copyrights" means "NetWare copyrights
only."
SCO also relies on the APA's general references to the
"Business" to support its
argument that the APA transferred all copyrights. (See, e.g.,
SCO's Ownership MSJ 4/9/2007,
PACER No. 259, at 21.) SCO cites, for example, Recital A of the
APA, which defined the
"Business" as Novell's business in developing UNIX and
UnixWare, selling binary and source
code licenses to these products and to directly related products, and
supporting these products.
(Brakebill Decl., Ex. 2, at 1.) SCO also relies on references in
Recital B and Section 1.3(a)(i) to
the parties' intent to sell "the Business."
These provisions do not support SCO's position because the
specific assets to be
transferred were defined in Section 1.1(a) and Schedules 1.1(a) and (b), and not in Recitals A
and B or Section 1.3. "[W]hen a general and particular
provision are inconsistent, the latter is
paramount to the former." National Ins. Underwriters, 17
Cal. 3d at 86 (quoting Cal. Civ. Proc.
Code § 1859). Schedule 1.1(b)'s specific exclusion of
"all copyrights" from the assets to be
30
transferred prevails over the general definition of
"Business" in other parts of the APA. See id.
(holding that "[t1he specific language of the pilot
exclusion clause overrides the general coverage
provisions of the insuring clause"); Wilder v.
Wilder, 138 Cal. App. 2d 152, 157-58 (1955)
(where settlement agreement stated an intent to settle "all
property rights" but then identified the
specific obligations that were settled, the settlement was limited
to the itemized list).
c. Section 1.6 and the Technology License Agreement do
not demonstrate that "all copyrights" means "NetWare
copyrights only."
SCO contends that the "license back" contemplated by
Section 1.6 of the APA and
implemented by the Technology License Agreement implies that
Novell transferred the UNIX
and UnixWare copyrights to Santa Cruz, because this license
would have been unnecessary if
Novell retained ownership of the UNIX and UnixWare copyrights.
(SCO's Ownership MSJ
4/9/2007, PACER No. 259, at 22.) The Technology License
Agreement stated that Novell
"retains" a license to the "Licensed
Technology," which was defined in the APA as:
(i) all of the technology included in the Assets and
(ii) all derivatives of such technology included in the Assets,
including the "Eiger" product release ....
(Brakebill Decl. Ex. 2, Section 1.6, and Ex. 5, TLA, Section II.A.)
SCO's argument fails because the "Licensed
Technology" included valuable rights that
were distinct from Novell's "UNIX and UnixWare
copyrights." "Technology" is a broad
concept, which encompasses trade secrets and know-how, in
addition to copyrights and patents.
Schedule 1.1(b) excluded copyrights and patents from the
assets transferred to Santa Cruz, but
did not exclude trade secrets or software know-how. Thus, Novell
needed a license to be able to
31
use trade secrets and know-how related to the UNIX and UnixWare
products that Novell sold to
Santa Cruz. (Braham Decl., ¶ 23.)
Further, "Licensed Technology" was defined to
encompass "derivatives" of the
technology included in the Assets. The APA contemplated that
Santa Cruz would create
derivative works, including a "Merged Product" that
was an enhanced version of Novell's
UnixWare product. (Undisputed Facts, ¶¶ 7-8.) Although
Novell retained ownership of the
UnixWare copyrights, Santa Cruz would own the copyrights in any
new code written for the
"Merged Product." Thus, to be able to use any new code in
the "Merged Product" and other
enhanced versions of UnixWare, Novell needed a license to Santa
Cruz's copyrights in
derivative works. (Braham Decl., ¶ 23.)
A further defect in SCO's argument is that the same
"logic" would imply that Novell
transferred ownership of UNIX-related patents because Novell
would not have needed a license
to these patents if it retained ownership. However, it is
undisputed that Novell did not transfer
ownership of the patents to Santa Cruz. (See supra, footnote 7.)
This admission refutes SCO's
argument that the Technology License Agreement implies that
Novell must have transferred
ownership of all UNIX-related technology to Santa Cruz.9
32
5. The Scope of Assets Transferred by the Bill of Sale Is
Controlled by the APA and Amendment No. 1, and Not by
Amendment No. 2.
SCO has argued that the exclusion of "all
copyrights" in Schedule 1.1(b) of the APA
"does not exist for purposes of construing the APA,"
because this exclusion was modified by
Amendment No. 2. (SCO's Ownership MSJ 4/9/2007, PACER No. 259,
at 2.) At the same time,
however, SCO contends that the alleged transfer of the UNIX and
UnixWare copyrights was
"effectuated" by the Bill of Sale executed by Novell on
December 6, 1995. (Id. at 1, 27.) SCO
is forced to rely on the Bill of Sale because the Copyright Act
requires a signed "instrument of
conveyance" to transfer copyright ownership. 17 U.S.C.
§ 204(a). The APA does not constitute
an "instrument of conveyance," because it merely
describes the assets that Novell "will" sell and
transfer in the future, and does not actually transfer such
assets. (Undisputed Facts, ¶ 22.)
SCO's argument suffers from a fatal defect: the Bill of Sale
transferred the "Assets" as
defined by "the Agreement," which the Bill of Sale
defines as the APA and Amendment No. 1.
(Undisputed Facts, ¶ 22.) The Bill of Sale did not transfer
the "Assets" as defined by the APA
and Amendment No. 2. Indeed, the Bill of Sale did not mention
Amendment No. 2. This is not
surprising, since the Bill of Sale was executed on December 6,
1995, or ten months before
Amendment No. 2 was signed on October 16, 1996. When the Bill of
Sale was executed, it
obviously could not and did not transfer the "Assets"
as defined by an amendment that did not
even exist. Moreover, Amendment No. 2 was not retroactive and
did not purport to transfer any
copyrights or other assets. (Undisputed Facts, ¶¶ 29,
30; see infra, Section IV.B.2.)
Thus, contrary to SCO's assertion, Schedule 1.1(b)'s
exclusion of "all copyrights" is
highly relevant -- indeed, dispositive -- in determining whether
the Bill of Sale transferred the
UNIX and UnixWare copyrights. Conversely, Amendment No. 2 is
irrelevant in determining the
33
legal effect of the Bill of Sale. Of course, there is a
separate issue as to whether Amendment
No. 2, standing alone, transferred the UNIX and UnixWare
copyrights. As demonstrated in the
following section, however, Amendment No. 2 did not transfer the
copyrights.
B. Novell Is Entitled to Summary Judgment that
Amendment No. 2 Does
Not Constitute a Sufficient Written Instrument to Transfer UNIX and
UnixWare Copyrights to Santa Cruz.
The APA as amended by Amendment No. 2 did not transfer the
UNIX and UnixWare
copyrights because (1) the Copyright Act requires a signed
"instrument of conveyance" to
transfer copyright ownership; (2) Amendment No. 2 did not
include any provisions transferring
ownership of copyrights, nor did it purport to retroactively
amend the Bill of Sale to transfer
copyrights; (3) Amendment No. 2 did not specifically identify
which copyrights, if any, should
be transferred; and (4) Santa Cruz did not "require"
ownership of the UNIX and UnixWare
copyrights for its business, as Santa Cruz already had a license
to use these copyrights as needed
to implement the APA.
1. The Copyright Act Requires a Signed Instrument of
Conveyance to Transfer Ownership of Copyrights.
The Copyright Act requires a signed written instrument to
transfer ownership of
copyrights. Section 204(a) states: "A transfer of copyright
ownership, other than by operation of
law, is not valid unless an instrument of conveyance, or a note
or memorandum of the transfer, is
in writing and signed by the owner of the rights conveyed or
such owner's duly authorized
agent." 17 U.S.C. § 204(a).
The "instrument of conveyance" required by Section
204 "enhances predictability and
certainty of copyright ownership," which was Congress's
"paramount goal" when it amended the
Copyright Act in 1976. Effects Assoc. v. Cohen, 908
F.2d 555, 557 (9th Cir. 1990) (citing
34
Community for Creative Non-Violence v. Reid, 490 U.S.
730, 749-50 (1989)). Consistent with
this purpose, Section 204 has been strictly applied to bar claims
due to the absence of the
required "instrument of conveyance." Konigsberg Int'l,
Inc. v. Rice, 16 F.3d 355, 357 (9th Cir.
1994) (dismissing claim for breach of exclusive copyright license
due to the absence of a signed
final contract); Radio Television Espanola S.A. v. New World
Enun't, Ltd., 183 F.3d 922, 926
(9th Cir. 1999) (granting summary judgment on claim for breach of
exclusive copyright license
due to the absence of a signed contract).10 Section 204 is a substantive prerequisite to a valid
transfer of copyright ownership, and not merely an evidentiary
rule; a transfer of copyright is
simply "not valid" without the required written
instrument. Konigsberg Int'l, 16 F.3d at 357.
Further, unlike a statute of frauds, Section 204 is not subject to
equitable defenses such as
estoppel, as allowing such defenses would "undermine the goal
of uniformity and predictability
in the field of copyright ownership and transfer."
Pamfiloff v. Giant Records, Inc., 794 F. Supp.
933, 937 (N.D. Cal. 1992).
Amendment No. 2 does not constitute the "instrument of
conveyance" required by
Section 204(a) for three independent reasons, as discussed below.
2. Amendment No. 2 Did Not Purport to Transfer Copyrights or
to Retroactively Amend the Bill of Sale.
The first reason that Amendment No. 2 does not satisfy Section
204(a) is that it did not
include any provision that purported to transfer ownership of
copyrights. Amendment No. 2 did
35
not state that copyrights "are hereby transferred,"
"have been transferred," or even "will be
transferred." Rather, it merely revised the definition of
the "Intellectual Property" category of
"Excluded Assets" under Schedule 1.1(b) by adding an
exception for copyrights "required" for
Santa Cruz to exercise its rights. (Undisputed Facts, 124;
Brakebill Decl., Ex. 28.)
Amendment No. 2's failure to include a provision transferring
copyrights is particularly
significant in view of its negotiation history. Santa Cruz's
first draft of Amendment No. 2
referred to copyrights "which pertain to UNIX and UnixWare
technologies and which SCO has
acquired hereunder." (Undisputed Facts, ¶ ¶
33-34; Amadia Decl., Ex. 1 (emphasis added).)
This was clearly intended to transfer the UNIX and UnixWare
copyrights to Santa Cruz.
However, Novell rejected Santa Cruz's proposed amendment,
explaining that Novell was willing
to confirm that Santa Cruz had a license to use the UNIX and
UnixWare copyrights, but was not
willing to transfer ownership of the copyrights. (Undisputed
Facts, ¶ 35.) As a result, the final
version of Amendment No. 2 did not refer to SCO's
"acquisition" of any copyrights.
(Undisputed Facts, ¶ 36.)
Further, unlike the APA, Amendment No. 2 was not accompanied
by a separate "Bill of
Sale" or similar document that transferred additional
assets. (Undisputed Facts, ¶ 30) Nor did
Amendment No. 2 purport to retroactively change the scope of
assets transferred by the Bill of
Sale that was previously executed in connection with the APA. On
the contrary, Amendment
No. 2 stated that it "amended" the APA "[a]s of
the 16th day of October, 1996," which was
thirteen months after the APA was signed on September 19, 1995,
and ten months after the Bill
of Sale was executed on December 6, 1995. (Id.) Thus, Amendment
No. 2 did not retroactively
cause the Bill of Sale to transfer copyrights that were
expressly excluded from transfer by the
APA and Amendment No. 1.
36
3. Amendment No. 2 Did Not Identify Which Copyrights, If Any,
Should be Transferred.
Another reason why Amendment No. 2 fails to constitute the
required "instrument of
conveyance" is that it did not specify which copyrights, if
any, should be transferred. The written
instrument required by Section 204 should contain sufficient
information "to serve as a guidepost
for the parties to resolve their disputes," thereby
enabling the parties to resolve disputes by
examining "the writing that sets out their respective
rights." Konigsberg Int'l, 16 F.3d at 357.
Consistent with Section 204's goal of "enhanc[ing] the
predictability and certainty of copyright
ownership," the written instrument must "(1)
reasonably identify the subject matter of the
agreement, (2) be sufficient to indicate the parties have come
to an agreement, and (3) state with
reasonable certainty the essential terms of the agreement."
Pamfiloff, 794 F. Supp. at 936-37.
Santa Cruz's first draft of Amendment No. 2 referred to
copyrights "which pertain to
UNIX and UnixWare technologies and which SCO has acquired
hereunder." (Undisputed Facts,
¶ 30; Amadia Decl., Ex. 1 (emphasis added).) However,
because Novell objected to this draft,
the final version referred to copyrights "required for SCO
to exercise its rights with respect to the
acquisition of the UNIX and UnixWare technologies."
(Undisputed Facts, ¶ 33.)
SCO now contends that Santa Cruz "required"
ownership of all of Novell's UNIX and
UnixWare copyrights to exercise its rights regarding the UNIX
assets that Santa Cruz acquired
under the APA. Novell, in contrast, contends that Santa Cruz did
not need to own these
copyrights, because Santa Cruz already had a license to the
copyrights. The questions that
Amendment No. 2 leaves open are legion, including what
particular rights as to which of the
many versions and releases of UNIX and UnixWare were
transferred. Thus, it is clear that there
was no "meeting of the minds" regarding which
copyrights, if any, were required for Santa Cruz
to exercise its rights.
37
4. Santa Cruz Did Not "Require" Ownership
of the UNIX and
UnixWare Copyrights for its Business As It Already Had a
License to Use these Copyrights as Needed to Implement the
APA.
A final reason that Amendment No. 2 does not constitute an
"instrument of conveyance"
under Section 204 is that Santa Cruz did not "require"
ownership of Novell's UNIX and
UnixWare copyrights to exercise its rights under the APA. In
fact, because the APA excluded
"all copyrights" from the transfer, Santa Cruz indisputably
did not own the copyrights during the
ten months between the execution of the Bill of Sale at the closing
on December 6, 1995, and
entry of Amendment No. 2 on October 16, 1996. Nevertheless, Santa
Cruz was able to pursue its
UNIX business during this time period without any problems caused by
its lack of ownership of
the copyrights.
Santa Cruz was able to pursue its UNIX business without owning
the UNIX and
UnixWare copyrights because, as discussed above, the APA
conferred a license on Santa Cruz to
use Novell's copyrights as needed to implement the purposes of
the APA. (See supra, Section
IV.A.3.c.) Because Santa Cruz already had a license, Santa Cruz
did not "require" ownership of
the copyrights. Therefore, even if Amendment No. 2 had stated
that it "hereby transfers" all
copyrights required by Santa Cruz for its UNIX business (which
it did not), Amendment No. 2
would not have transferred any copyrights as no copyrights were
"required."
C. Novell Is Entitled to Summary Judgment on SCO's
Slander of Title
Claim Because SCO Cannot Demonstrate that Novell's Assertion of
Copyright Ownership Was False.
SCO's first claim in its Second Amended Complaint alleges that
Novell has slandered
SCO's title by falsely and maliciously asserting that Novell,
not SCO, owns the copyrights in
UNIX and UnixWare. (Brakebill Decl., Ex. 1, Second Amended
Complaint, filed February 3,
38
2006, PACER No. 96, ("Second Am. Compl., PACER No.
96") at ¶ ¶ 91-92.) To prevail on its
slander of title claim, SCO must establish:
- Novell published a slanderous statement disparaging SCO's title;
- the statement was false;
- the statement was made with malice; and
- the statement caused actual or special damages.
First Sec. Bank of Utah v. Banberry Crossing, 780
P.2d 1253, 1256-67 (Utah 1989).
As demonstrated above, the Bill of Sale did not transfer the
UNIX and UnixWare
copyrights from Novell to Santa Cruz, because the APA excluded
"all copyrights" from the
transferred assets. Amendment No. 2 also did not transfer the
copyrights for multiple reasons.
Therefore, Novell is entitled to summary judgment on SCO's
slander of title claim because SCO
cannot establish that Novell's assertion that it owned the
copyrights was false.
D. Novell Is Entitled to Summary Judgment On SCO's Claim for
Specific Performance of Novell's Alleged Obligation to Transfer the
UNIX and UnixWare Copyrights to SCO.
SCO's third claim in its Second Amended Complaint alleges
that the "purpose and
effect" of the APA was to transfer title to the UNIX and
UnixWare copyrights to SCO's
predecessor, Santa Cruz, and that the APA required Novell to
take all actions necessary to
effectuate this purpose. (Brakebill Decl., Ex. 1, Second Am.
Compl., PACER No. 96, at
¶ ¶ 103-04.) SCO claims that it is entitled to an
order directing Novell to specifically perform its
39
obligations under the APA by executing all documents needed to
transfer ownership of the
copyrights to SCO.11
(Id., ¶ ¶ 107-08.)
As demonstrated above, neither the original APA nor Amendment
No. 2 entitled Santa
Cruz to obtain ownership of the UNIX and UnixWare copyrights.
Therefore, Novell is entitled
to summary judgment on SCO's claim for specific performance
because SCO cannot establish
that Santa Cruz had the right to obtain title to the copyrights.
V. CONCLUSION
The APA explicitly excluded "all copyrights" from
the assets to be transferred by Novell
to Santa Cruz. SCO's attempt to rewrite "all
copyrights" as "some copyrights" fails because it is
contrary to the plain language and to the parol evidence rule.
SCO's reliance on Amendment
No. 2 is also misplaced, because Amendment No. 2 did not
transfer ownership of any copyrights,
and Santa Cruz already had a license and hence did not
"require" ownership of the UNIX and
UnixWare copyrights.
For all of these reasons, Novell requests the Court to enter
summary judgment that
neither the APA nor Amendment No. 2 transferred ownership of the
copyrights to Santa Cruz,
and that SCO's slander of title and specific performance claims
fail as a matter of law.
40
DATED: April 20,2007
ANDERSON & KARRENBERG
By: /s/ Heather M. Sneddon
Thomas R. Karrenberg
John P. Mullen
Heather M. Sneddon
-and-
MORRISON & FOERSTER LLP
Michael A. Jacobs (pro hac vice)
Kenneth W. Brakebill (pro hac vice)
Grant L. Kim (pro hac vice)
Attorneys for Defendant and
Counterclaim-Plaintiff Novell, Inc.
41
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 20th day of April, 2007, I
caused a true and correct
copy of the foregoing MEMORANDUM IN SUPPORT OF NOVELL'S MOTION FOR
SUMMARY JUDGMENT ON SCO'S FIRST CLAIM FOR SLANDER OF TITLE AND
THIRD CLAIM FOR SPECIFIC PERFORMANCE [REDACTED pursuant to the August
2, 2006 Stipulated Protective Order] to be served to
the following:
Via CM/ECF:
Brent O. Hatch
Mark F. James
HATCH JAMES & DODGE, P.C.
[Address]
Stuart H. Singer
William T. Dzurilla
Sashi Bach Boruchow
BOIES, SCHILLER & FLEXNER LLP
[Address]
David Boies
Edward J. Normand
BOIES, SCHILLER & FLEXNER LLP
[Address]
Devan V. Padmanabhan
John J. Brogan
DORSEY & WHITNEY, LLP
[Address]
Via U.S. Mail, postage prepaid:
Stephen Neal Zack
BOIES, SCHILLER & FLEXNER LLP
[Address]
/s/ Heather M. Sneddon
42
1 SCO's position in
this litigation has shifted on copyright ownership. Initially, SCO
focused its ownership claim on Amendment No. 2 to the APA, a
contract that was executed more
than one year after the APA was signed. (See, e.g., Pl.'s Memo. in
Opp. to Def.'s Motion to
Dismiss, filed March 4, 2004, PACER No. 13, at 7, 8 (repeatedly
referring only to the "Asset
Purchase Agreement, as amended" by Amendment No. 2 as having
transferred the copyrights).)
Subsequently, SCO argued that the original APA transferred
copyrights to SCO even before
Amendment No. 2 was executed. (See, e.g., Pl.'s Mem. in Opp. to
Def.'s Motion to Dismiss
SCO's Amended Complaint, filed Oct. 1, 2004, PACER No. 52, at 7-9
(arguing that the APA,
standing on its own, acted to transfer the UNIX copyrights from
Novell to Santa Cruz).)
2 SCO's position that
"all copyrights" means less than "all copyrights"
mirrors its
interpretation of other provisions in the APA. For example, SCO
claims that the APA limits
Novell's broad authority under Section 4.16(b) to just certain
SVRX Licenses, even though the
APA expressly extends that authority to "any" and
"all" SVRX Licenses. (Mem. in Support of
Novell's Mot. for Partial Summary Judgment on its Fourth Claim for
Relief, PACER No. 155, at
22-29; Novell's Reply to SCO's Opposition to Novell's Motion for
Partial Summary Judgment
on its Fourth Claim for Relief, PACER No. 237, at 4-7.) In
addition, SCO claims that Novell's
entitlement to SVRX Royalties extends only to some royalties from
a narrow subset of licenses,
even though SVRX Royalties is defined in the APA to include
"all royalties, fees and other
amounts" from "all SVRX Licenses." (Novell's Reply
to SCO's Opp. to Novell's Mot. for
Partial Summary Judgment or Preliminary Injunction, PACER No. 205,
at 4-7, 9-13.)
3 Novell submits the
Brakebill Declaration, and the exhibits cited therein, in support of
this motion, as well as three other concurrently-filed summary
judgment motions: (1) Novell's
Motion for Partial Summary Judgment on SCO's Non-Compete Claim in
Its Second Claim for
Breach of Contract and Fifth Claim for Unfair Competition; (2)
Novell's Motion for Partial
Summary Judgment on the Copyright Ownership Portions of SCO's
Second Claim for Breach of
Contract and Fifth Claim for Unfair Competition; and (3) Novell's
Motion for Summary
Judgment on SCO's First Claim for Slander of Title Based on
Failure to Establish Special
Damages.
4 Undisputed Facts set
forth above are cited by the relevant paragraph number of the Undisputed
Facts section.
5 On April 9, 2007,
SCO filed a summary judgment motion raising similar issues
concerning copyright ownership. Although in this motion Novell
responds to many of the
arguments in SCO's motion, Novell will address some additional
issues in its opposition to
SCO's motion.
6 The APA provides for
application of California law. (Brakebill Decl., Ex. 2, Section
9.8.) Thus, interpretation of the APA is governed by California
law, except that federal law
controls to the extent that California law conflicts with federal
copyright law or policy. Foad
Consulting Group, Inc. v. Musil Govan Azzalino, 270 F.3d 821,
827-28 (9th Cir. 200 1). Here,
California law requires exclusion of SCO's cited parol evidence
and affirmation of the plain
language of the APA. Thus, California law is consistent with the
strong federal policy,
embodied in 17 U.S.C. § 204(a), requiring a written
instrument to transfer copyrights.
7 For example, Duff
Thompson, a current member of SCO's Board and head of its
litigation committee, admitted in the declaration submitted by SCO
that patents were expressly
excluded from the assets transferred to Santa Cruz. (Declaration
of R. Duff Thompson, filed
November 9, 2006, ¶ 9 (attached as Exhibit 10 to Declaration
of Edward Normand In Support of
SCO's Ownership MSJ 4/9/2007, PACER No. 260)). Similarly, Burt
Levine, a former paid SCO
litigation consultant who was represented by SCO's counsel at his
deposition, testified that
Novell's UNIX patents were not transferred to Santa Cruz.
(Brakebill Decl., Ex. 25, Deposition
of Burt Levine, March 23, 2007 ("Levine Dep.") at 146:22
to 149:9, 185:9-23.)
8 As noted above,
extrinsic evidence is inadmissible to contradict the plain language of
an integrated contract, but is admissible "to supplement or
explain the terms of the agreement,"
where "such evidence is consistent with the terms of the
integrated document." EPA Real Estate
P'ship, 12 Cal. App. 4th at 176-77 (emphasis in original;
citations omitted). Because the APA
explicitly excludes "all copyrights" from the transfer,
the Court need not consider extrinsic
evidence to decide the meaning of the APA. However, the extrinsic
evidence cited in support of
this motion is consistent with the plain language of the APA, and
hence may be properly
considered if the Court wishes to do so. In contrast, the
extrinsic evidence cited by SCO is not
admissible because the APA is not "reasonably
susceptible" to SCO's proposed interpretation.
9 SCO previously made
a similar "argument-by-implication" that Novell's representation
in Section 2.10 of the APA that Novell owns or has rights to the
UNIX-related copyrights and
patents identified in the attached schedules implies that Novell
must have transferred ownership.
SCO appears to have abandoned this argument, as it does not appear
in SCO's Ownership MSJ
4/9/2007, PACER No. 259. In any event, these schedules support the
opposite conclusion. Had
the parties intended to transfer the UNIX copyrights, they easily
could have done so by referring
to the UNIX copyright list. However, not only did Schedule 1.1(a) fail to refer to this list,
Schedule 1.1(b) expressly excluded "all
copyrights" from the transfer. Moreover, as noted
above, the APA conferred a license on Santa Cruz to Novell's UNIX
copyrights and patents.
Novell's representation in Section 2.10 that it owned or had
rights to the UNIX copyrights and
patents served the purpose of ensuring that Novell had the right
to grant this license.
10 Both of these
cases involved exclusive licenses, but were governed by Section 204(a)
because the Copyright Act defines "transfer of
ownership" as an "assignment, mortgage,
exclusive license, or any other conveyance, alienation, or
hypothecation of any of the exclusive
rights comprised in a copyright ... but not including a
nonexclusive license." 17 U.S.C. § 101.
Thus, a signed writing is required for either a transfer of
copyright ownership or an exclusive
license, but not for a nonexclusive license.
11 SCO has also
requested that this court require Novell to transfer to SCO "the UNIX
and UnixWare business, without subjecting any portion of that
business, other than the SVRX
binary royalty stream, to Sections 4.16, 1.2(b), and 1.2(f)."
(Id., ¶ 108.) This appears to be an
unjustified attempt to place a binary limitation on Novell's
authority and rights under Sections
1.2(b), 1.2(b) and 4.16 of the APA. This attempt fails for the
reasons set forth in Novell's
pending Motion for Partial Summary Judgment on its Fourth Claim
for Relief (PACER No. 155)
and pending Motion for Partial Summary Judgment or Preliminary
Injunction (PACER No. 148).
Therefore, Novell is entitled to summary judgment on the
"Section 4.16" portion of SCO's Third
Claim for specific performance.
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