I wanted to highlight something odd I stumbled across going through old documents, something I never noticed before, that relates to one of SCO's allegations. In SCO's appeal, you find this statement:
By the end of the day, the stock was down, for sure, but what made it happen? We can only guess. SCO also put out a prepared statement in the morning, almost immediately after Novell's, and then at 11 AM, SCO held a conference call. If the stock went down by the end of the day, who is to say that it wasn't the conference call that caused it? Or SCO's prepared statement, for that matter? Or some combination of all of them? What is SCO's basis for its claim that it was Novell's statement that caused the stock to "plummet"? At any rate, piecing together all the evidence I have collected, I am unable to confirm that the stock plummeted within two hours of Novell's statement, and I see indications that it didn't happen that way. I will show you what I found so you can draw your own conclusions.
Again, here's the IDG article, published, it shows, at 10:12 AM on May 28, 2003, and notice it says the stock was up at that point. It also mentions the 11 AM conference call as something that had not yet begun:
Here's what SCO said in its statement in response to Novell, according to the IDG article:
However, I noticed any number of items discussed during the call that might make some investors decide to step back, particularly some vague, squishy answers to questions. How about this Q and A, from Herbert Jackson of Renaissance Ventures, who asked Darl McBride if the SCOsource licenses that brought in so much money that quarter, the two from Microsoft and Sun, were one-shot deals or whether there was a hope for a steady income stream from products or from SCOsource:
Now, I don't follow stocks, nor am I a guru in that area. All I can say for sure from this evidence is that the day went like this on May 28, 2003:
I'm not saying there was no dip in the stock that day or that the Novell news wasn't a factor at all.
Here's May 27-30, 2003, where you see the dip:
No. 08-4217
IN THE UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
THE SCO GROUP, INC.,
Plaintiff-Appellant,
v.
NOVELL, INC.,
Defendant-Appellee.
On Appeal from the United States District Court
for the District of Utah
Hon. Dale A. Kimball, Presiding
No. 2:04-CV-00139-DAK
BRIEF FOR APPELLANT, THE SCO GROUP, INC.
ORAL ARGUMENT REQUESTED
David Boies
Robert Silver
Edward Normand
BOIES, SCHILLER & FLEXNER LLP
[address]
[phone]
[fax] |
Brent O. Hatch (5715)
Mark F. James (5295)
HATCH, JAMES & DODGE, PC
[address]
[phone]
[fax] |
Stuart Singer
BOIES, SCHILLER & FLEXNER LLP
[address]
[phone]
[fax] |
Devan V. Padmanabhan
DORSEY & WHITNEY LLP
[address]
[phone]
[fax] |
(1)
CORPORATE DISCLOSURE STATEMENT
Appellant, The SCO Group, Inc. ("SCO"), is not owned by a parent
corporation. No publicly held corporation owns 10% or more of SCO's
stock.
i i (2)
TABLE OF CONTENTS
Page |
CORPORATE DISCLOSURE STATEMENT |
i |
TABLE OF CONTENTS |
ii |
TABLE OF AUTHORITIES |
vi |
JURISDICTIONAL STATEMENT |
1 |
ISSUES ON APPEAL |
2 |
STATEMENT OF THE CASE |
3 |
|
A. |
Nature of the Case |
3 |
|
B. |
Proceedings and Disposition Below |
4 |
STATEMENT OF FACTS |
7 |
I. |
THE APA |
7 |
|
A. |
The UNIX Business |
7 |
|
B. |
The Sale of Novell's UNIX Business. |
8 |
II. |
THE UNIX AND UNIXWARE COPYRIGHTS |
9 |
|
A. |
The Language of the APA |
9 |
|
B. |
Novell's Slander of Title |
11 |
|
C. |
Intent of the Asset Purchase Agreement |
13 |
ii (3)
|
D. |
The Parties. Course of Performance |
15 |
III. |
NOVELL'S WAIVER RIGHTS REGARDING SVRX LICENSES |
17 |
|
A. |
The Licensing of UNIX Products |
18 |
|
B. |
"SVRX Licenses" Under the APA |
19 |
|
C. |
Intent of the Parties Regarding Novell's Waiver
Rights |
20 |
|
D. |
Novell's Unauthorized Amendment of IBM's
Software and Sublicensing Agreements |
21 |
IV. |
NOVELL'S RIGHTS IN SVRX ROYALTIES |
23 |
SUMMARY OF ARGUMENT |
27 |
Legal Standards |
30 |
Argument |
31 |
I. |
THE DISTRICT COURT ERRED IN CONCLUDING,
AS A MATTER OF LAW, THAT THE APA AS AMENDED
DID NOT TRANSFER THE EXISTING UNIX AND
UNIXWARE COPYRIGHTS TO SANTA CRUZ |
31 |
|
A. |
The District Court Erred in Interpreting the APA
and
Amendment No. 2 As Separate and Independent |
31 |
|
B. |
The District Court Erred in Finding an "Implied
License"
From the Text of the APA and Amendment No. 2 |
36 |
|
C. |
The District Court Erred in Its Limited
Consideration of the
Extrinsic Evidence of the Parties. Intent to Sell the UNIX
Copyrights to Santa Cruz Under the Amended APA |
38 |
iii (4)
|
1. |
The Testimony Concerning the Negotiation of the
APA
Demonstrates that Amendment No. 2 Conformed
The APA to the Intent of the Principals Who Had
Negotiated the APA |
40 |
|
2. |
The Parties. Course of Performance |
47 |
|
D. |
The Amended APA and Bill of Sale Exceed
The Requirements of the Copyright Act |
49 |
II. |
THE DISTRICT COURT ERRED IN CONCLUDING, AS A
MATTER OF LAW, THAT IF THE APA DID NOT TRANSFER
THE EXISTING UNIX AND UNIXWARE COPYRIGHTS, THEN
SCO IS NOT ENTITLED TO SPECIFIC PERFORMANCE,
REQUIRING THE TRANSFER OF THOSE COPYRIGHTS NOW |
51 |
III. |
THE DISTRICT COURT ERRED IN CONCLUDING, AS A
MATTER OF LAW, THAT NOVELL HAS THE RIGHT TO
"WAIVE" SCO'S RIGHTS UNDER ALL CONTRACTS
RELATING TO SVRX INCLUDING THE SOFTWARE AND
SUBLICENSING AGREEMENTS |
53 |
|
A. |
The Term "SVRX Licenses" Is Ambiguous |
53 |
|
B. |
The APA Separately Transfers the Software and
Sublicensing Agreements to Santa Cruz Without
Any Reservation of Rights for Novell |
56 |
|
C. |
The District Court's Interpretation of Article
4.16(b) Destroys
The Value of the Assets Santa Cruz Purchased |
57 |
|
D. |
Overwhelming Extrinsic Evidence Confirms that
Novell
Did Not Retain Any Rights Over Software and
Sublicensing Agreements |
59 |
iv (5)
IV. |
THE DISTRICT COURT ERRED IN CONCLUDING THAT
NOVELL DID NOT HAVE TO COMPLY WITH THE IMPLIED
COVENANT OF GOOD FAITH AND FAIR DEALING IN
EXERCISING ITS ARTICLE 4.16(b) RIGHTS |
63 |
V. |
THE DISTRICT COURT ERRED IN CONCLUDING,
AS A MATTER OF LAW, THAT NOVELL IS ENTITLED TO
ROYALTIES FROM POST-APA CONTRACTS RELATED TO
SVRX |
66 |
CONCLUSION |
70 |
v (6)
TABLE OF AUTHORITIES
Page |
Cases |
Anderson v. Liberty Lobby, Inc.,
477 U.S. 242 (1986) |
30 |
April Enters., Inc. v. KTTV,
147 Cal. App. 3d 805 (1983) |
64 |
Arthur Rutenberg Homes, Inc. v. Drew
Homes,
29 F.3d 1529 (11th Cir. 1994) |
51 |
Axcess Broadcast Servs., Inc. v. Donnini
Films,
No. Civ.A. 3:04-CV-2639, 2006 WL 1115430
(N.D. Tex. Apr. 26, 2006 |
36 |
Badie v. Bank of Am.,
67 Cal. App. 4th 779 (1998) |
63 |
Bay Cities Paving & Grading, Inc. v.
Lawyers. Mut. Ins. Co.,
5 Cal. 4th 854 (1993) |
54 |
Boghos v. Certain Underwriters at Lloyd.s of
London,
36 Cal. 4th 495 (2005) |
57 |
Cal. Lettuce Growers v. Union Sugar
Co.,
45 Cal. 2d 474 (1955) |
63 |
Carma Developers (Cal.), Inc. v. Marathon Dev.
Cal., Inc.,
2 Cal. 4th 342 (1992) |
63 |
City of Atascadero v. Merrill Lynch,
68 Cal. App. 4th 445 (1998) |
38 |
vi (7)
Davidson v. Am. Online, Inc.,
337 F.3d 1179 (10th Cir. 2003) |
30 |
Dietrich v. Albertsons Inc.,
No. 94-2103, 1995 WL 355246 (10th Cir. June 14, 1995) |
38 |
Dore v. Arnold Worldwide, Inc.,
39 Cal. 4th 384 (2006) |
38 |
Employers Reinsurance Co. v. Sup. Ct.,
161 Cal. App. 4th 906 (2008) |
39, 63 |
Gillespie v. AST Sportswear, Inc.,
No. 97 Civ. 1911 (PKL), 2001 WL 180147
(S.D.N.Y. Feb. 22, 2001) |
37 |
Halicki Films, LLC v. Sanderson Sales and
Mktg.,
547 F.3d 1213 (9th Cir. 2008) |
39 |
I.A.E., Inc. v. Shaver,
74 F.3d 768 (7th Cir. 1996) |
37 |
Imperial Residential Design, Inc. v. Palms Dev.
Group, Inc.,
70 F.3d 96 (11th Cir. 1995) |
51 |
ITOFCA, Inc. v. Megatrans Logistics,
Inc.,
322 F.3d 928 (7th Cir. 2003) |
32, 50 |
Kavruck v. Blue Cross of Cal.,
108 Cal. App. 4th 773 (2003) |
31 |
Kenbrooke Fabrics, Inc. v. Soho Fashions,
Inc.,
690 F. Supp. 298 (S.D.N.Y. 1988) |
49 |
La Resolana Architects, PA v. Clay Realtors
Angel Fire,
416 F.3d 1195 (10th Cir. 2005) |
47 |
vii (8)
Leo F. Piazza Paving Co. v. Found Constr.,
Inc.,
128 Cal. App. 3d 583 (1981) |
65 |
Locke v. Warner Bros. Inc.,
57 Cal. App. 4th 354 (1997) |
63 |
Morey v. Vannucci,
64 Cal. App. 4th 904 (1998) |
39 |
Nish Noroian Farms v. Agric. Labor Relations
Bd.,
35 Cal. 3d 726 (1984) |
31, 34 |
Perdue v. Crocker Nat.l Bank,
38 Cal. 3d 913 (1985) |
63 |
R. Ready Prods., Inc. v. Cantrell,
85 F. Supp. 2d 672 (S.D. Tex. 2000) |
37 |
Radio Television Espanola S.A. v. New World
Entm.t, Ltd.,
183 F.3d 922 (9th Cir. 1999) |
50 |
Relational Design & Tech., Inc. v.
Brock,
No. 91-2452-EEO, 1993 WL 191323 (D. Kan. May 25, 1993) |
33 |
Seamons v. Snow,
206 F.3d 1021 (10th Cir. 2000) |
30, 41 |
Shugrue v. Cont.l Airlines, Inc.,
977 F. Supp. 280 (S.D.N.Y. 1997) |
32 |
SmithKline Beecham Consumer Healthcare, L.P. v.
Watson Pharms, Inc.,
211 F.3d 21 (2d Cir. 2000) |
37 |
Third Story Music, Inc. v. Waits,
41 Cal. App. 4th 798 (1995) |
65 |
viii (9)
Trident Ctr. v. Conn. Gen. Life Ins.
Co.,
847 F.2d 564 (9th Cir. 1988) |
38 |
United States v. Gonzalez-Garcia,
85 Fed. Appx. 160 (10th Cir. 2004) |
57 |
Universal Sales Corp., Ltd. v. Cal. Press Mfg.
Co.,
20 Cal. 2d 751 (1942) |
39 |
Wolf v. Walt Disney Pictures and
Television,
162 Cal. App. 4th 1107 (2008) |
39 |
Statutes and Rules |
17 U.S.C. § 204 |
49 |
17 U.S.C. § 204(a) |
50 |
28 U.S.C. § 1291 |
1 |
28 U.S.C. § 1331 |
1 |
28 U.S.C. § 1338(a) |
1 |
Cal. Civ. Code § 1647 |
39 |
Other Authorities |
Nimmer on Copyrights § 10.03[2]
(2006) |
49 |
Nimmer on Copyrights § 10.03[3]
(2006) |
51 |
ix (10)
JURISDICTIONAL STATEMENT
This is an appeal from a Final Judgment entered on November 20,
2008. SCO filed timely its notice of appeal on November 25, 2008.
The Final Judgment incorporated two earlier orders: a Memorandum
Opinion and Order entered August 10, 2007, granting summary
judgment for the defendant, Novell, Inc. ("Novell"), on certain of
SCO's claims and Novell's counterclaims; and Findings of Fact,
Conclusions of Law, and Order entered July 16, 2008. Jurisdiction
was founded under 28 U.S.C. §§ 1331 and 1338(a).
Appellate jurisdiction lies in this Court under 28 U.S.C. §
1291.
(11)
ISSUES ON APPEAL
(1) SCO's predecessor-in-interest, The Santa Cruz
Operation, Inc. ("Santa Cruz"), purchased the UNIX operating system
business from Novell under an Asset Purchase Agreement ("APA"). Did
the district court err in concluding, as a matter of law, that
Santa Cruz did not obtain the copyrights to the UNIX and UnixWare
source code under the APA, but only an implied license?
(2) Did the district court err in concluding, as a matter
of law, that if the APA did not itself transfer the copyrights,
then SCO is not entitled to specific performance, requiring the
transfer of the copyrights now?
(3) Did the district court err in concluding, as a matter
of law, that Novell has the right under the APA to force SCO to
waive legal claims against IBM for its breach of Software and
Sublicensing Agreements that Novell had sold to Santa Cruz under
the APA?
(4) Did the district court err in concluding that if
Novell has the right under the APA to waive SCO's rights against
IBM, then Novell did not have to comply with the implied covenant
of good faith and fair dealing in exercising that right?
(5) Did the district court err in concluding, as a matter
of law, that Novell retained an interest in royalties from SCO's
2003 agreement with Sun Microsystems ("Sun") and other post-APA
contracts related to SVRX technology?
2 (12)
STATEMENT OF THE CASE
A. Nature of the Case.
SCO owns the UNIX source code and licensing business, including
the current versions of UNIX known as UnixWare.
(00264;00266;00374;10415-10522;
07422-07447;05626;13870-71;1594-95;15974;16539.) UNIX is a computer
operating system originally developed by AT&T in the 1960s.
(00123.) Over decades, AT&T built a business around the
operating system by licensing its source code to many of the
world's leading institutions, including government agencies,
universities, and all major computer manufacturers.
(Id.)
In 1993, Novell purchased the UNIX business from AT&T for
$300 million. (06100.) In 1995, Santa Cruz purchased the UNIX
business from Novell under the APA, for consideration to date of
approximately $250 million. (00265;06101; 04637.) In 2001, SCO
purchased the UNIX business from Santa Cruz. (1041510522;
07422-07447.)
This case arises from Novell's public claims in 2003 that it had
retained the UNIX copyrights when it sold the UNIX business to
Santa Cruz, and Novell's actions seeking to prevent SCO from
pursuing legal claims against IBM for breaching contractual
agreements acquired as part of the business. (00076-78.)
3 (13)
In 2002, SCO had concluded that IBM and others were violating
their Software and Sublicensing Agreements by publicly disclosing
UNIX source code and related information for use in the development
of a competing operating system known as Linux. (09406-07.) By that
time, Novell had become "an ardent supporter of Linux" and IBM had
committed vast resources to transforming Linux from an "open
source" program developed by volunteers into a competitive,
enterprise-grade alternative to UNIX. (05874;00071.)
In March 2003, SCO brought copyright and contract claims against
IBM in a case pending before the district court. (09407.) Novell
then publicly claimed that it had retained ownership of the UNIX
copyrights and purported to waive SCO's contract claims against
IBM, leading SCO to initiate this litigation. (05875;01920.) Soon
thereafter, IBM paid Novell $50 million to acquire SuSE, a leading
Linux distributor. (16682;04695;04397;04400.)
B. Proceedings and Disposition Below.
In 2004 and 2005, the district court denied Novell's first
attempts to dismiss SCO's claim for slander of title to the UNIX
copyrights. The court reasoned that there were "ambiguities in the
APA as amended" that precluded the court from ruling as a matter of
law that Novell had retained the copyrights under the APA.
(16713;16722;16707.) When ruling on summary judgment in August
2007,
4 (14)
however, the court reversed course and reasoned that the
contract language unambiguously did not transfer the copyrights,
but rather had granted Santa Cruz only an "implied license" to use
the copyrights. (12044;12036-37.)
The district court also granted (at 12082) Novell's motion for
summary judgment with respect to its counterclaim seeking a
declaration that it could force SCO to waive, or waive on SCO's
behalf, SCO's asserted rights and claims against IBM.
Notwithstanding the presence of what the court characterized as
"some ambiguity" in the APA's attempt to define the licenses over
which Novell had retained any rights and the need for a "minor
inferential step" in reaching its conclusion (12060), the court
held (at 12068) that "there was no amount of extrinsic evidence
that would change the result," because it viewed the APA as not
reasonably susceptible to SCO's position. The court also ruled (at
12070) that Novell had no obligation to exercise its waiver rights
in accord with the implied covenant of good faith and fair
dealing.
Finally, the district court granted (at 12082-83) Novell's
motion for summary judgment seeking revenues from post-APA
contracts SCO had executed in 2003, notwithstanding the ambiguity
the court had noted in the APA concerning which licenses gave rise
to Novell's rights to collect revenues from SCO and overwhelming
extrinsic evidence that such licenses did not include post-APA
5 (15)
agreements. Based on this ruling, the court found SCO liable for
conversion and breach of fiduciary duty for not remitting such
amounts from revenues it had received under its 2003 agreement with
Sun (the "Sun Agreement"). After conducting a bench trial to
determine the amount owed to Novell, the court awarded Novell
$2,547,817, plus prejudgment interest.1
6 (16)
STATEMENT OF FACTS
I. THE APA.
A. The UNIX Business.
After UNIX was originally developed by AT&T in the 1960s and
became an operating system of choice for business
(00123;03957-04378), AT&T and the subsequent owners of UNIX,
including Novell and SCO, continually developed and released
updated versions of the operating system derived from and including
the source code from prior versions.
(03957-04378;02398¶27;02411¶31.)
Starting in the early 1980s, AT&T built a business on
licensing the source code to releases of the then-current version
of UNIX known as UNIX System V to all the major computer
manufacturers, also known as Original Equipment Manufacturers.
(03957-04378.) Source code is the human-readable form of a computer
program, in contrast to binary code, which runs on computers and
cannot be read by people. (12256-57.) Manufacturers such as IBM,
Sun, and Hewlett-Packard used the System V source code to develop
their own UNIX-derived "flavors" best suited for use on their
respective computers. (1532729;
15196;02393¶14;04015;04098;04005.) A licensee paid one-time
fees for the rights to use the source code of a particular release
to create and distribute its flavor, and continuing royalties for
each binary copy of the flavor sold to end
7 (17)
users. (02393¶13;15328-29;02406¶16;14299.) While
licensees could distribute their flavors to end-users in binary
form, the Software and Sublicensing Agreements required licensees
to keep the UNIX source code confidential. (See, e.g.,
01472;01475;13142.) IBM was such a licensee and developed its own
flavor of UNIX, which it named AIX. (01577;01618.)
B. The Sale of Novell's UNIX Business.
In 1995, then Novell President and CEO Robert Frankenberg
directed Senior Vice President Duff Thompson "to sell the complete
UNIX business" so that Novell could cut costs and increase
shareholder values. (08610¶4.) In the summer of 1995, Novell
started negotiations with Santa Cruz, a software company that was
itself a UNIX licensee. (08610-11¶5.) Novell sought to sell
everything it owned related to UNIX, but after initial
negotiations, the parties realized that Santa Cruz could not afford
to pay the full price in cash or stock. (08611-12¶¶6-7.)
Accordingly, as a financing device, the parties agreed that Novell
would retain an interest in 95% of "SVRX Royalties," defined as the
per-copy fees that existing licensees paid to Novell for
distributions of certain pre-UnixWare versions of UNIX System V
designated in the APA as "SVRX" for "System V Release __."
(00265-66;00287;00315-16;00360-63.) In addition, Novell received a
conditional
8 (18)
interest of up to $84 million in UnixWare sales through 2002
(00265-66;00321¶c) — an interest that expired without
ever vesting (04638¶15).
On September 19, 1995, Santa Cruz agreed to purchase the UNIX
business, and Novell and Santa Cruz executed the APA. (00257-353.)
The parties amended the agreement on the Closing Date of the
transaction, December 6, 1995 (Amendment No. 1), and on October 16,
1996 (Amendment No. 2). (0035572; 00374-76.)
II. THE UNIX AND UNIXWARE COPYRIGHTS.
A. The Language of the APA.
The APA identifies "all of Seller's right, title, and interest
in and to the assets" listed in the Assets Schedule, and not listed
in the Excluded Assets Schedule, as assets transferred in the
transaction. (00264.) Item I of the Assets Schedule summarizes the
transferred "assets and properties of Seller" as "All rights and
ownership of UNIX, UnixWare and Auxiliary Products, including
but not limited to" the assets and properties listed in the
Schedule, "without limitation." (00313;00361) (emphasis added).)
The schedule then lists all source code and binary code versions of
UNIX, both old and new with no distinction drawn between SVRX and
UnixWare, including all prior and existing versions of UNIX.
9 (19)
(00313.) Item V.A of the Excluded Assets Schedule, as amended by
Amendment No. 2, identifies:
All copyrights and trademarks, except for the
copyrights and trademarks owned by Novell as of the date of the
Agreement required for SCO to exercise its rights with respect to
the acquisition of UNIX and UnixWare technologies.
(00374 (emphasis added).)
Prior to Amendment No. 2, Item V.A excluded: "All copyrights and
trademarks, except for the trademarks UNIX and UnixWare." (00318.)
But Amendment No. 2 expressly excised that language from the APA by
stating that "Subsection A [of Item V] shall be revised to read"
the language set forth in the Amendment. (00374.)
In a section entitled "License Back of Assets," the APA also
provided for a Technology License Agreement (the "TLA") under which
Santa Cruz granted Novell a restricted license to the "Licensed
Technology" in connection with SCO's concurrent purchase of the
UNIX business under the APA. (00268;03690.) The APA and TLA define
the Licensed Technology as "all of the technology included in the
Assets" and "all derivatives" of that technology. (00268;03690.)
The "technology included in the Assets" includes all UNIX and
UnixWare source code, products, versions, and copies.
(00313;00361.)
10 (20)
B. Novell's Slander of Title.
On May 28, 2003, the day on which SCO announced its quarterly
earnings and a few weeks after SCO had sued IBM over violations of
its Software and Sublicensing Agreements, Novell publicly claimed
that it — not SCO — owned the UNIX copyrights, an
assertion that Novell had not made in any context since signing the
APA more than seven years earlier. (05875;10026;04695;05896.) In an
open letter published on its website, Novell CEO Jack Messman
described Novell as "an ardent supporter of Linux" and asserted
that "SCO is not the owner of the UNIX copyrights." (05874-75.)
Nine days later, after SCO had faxed a copy of Amendment No. 2
to Mr. Messman, Novell immediately issued a press release,
admitting:
Amendment #2 to the 1995 SCO-Novell Asset Purchase
Agreement was sent to Novell last night by SCO. To Novell's
knowledge, this amendment is not present in Novell's files. The
amendment appears to support SCO's claims that ownership of certain
copyrights for UNIX did transfer to SCO in 1996.
(05889 (emphasis added).) Novell has admitted that it had made its
initial announcement without considering the APA as amended by
Amendment No. 2 and without consulting the people who had
negotiated the APA or its amendments. (05895-96.) Novell
subsequently sought to retract the retraction, and stated that
11 (21)
Amendment No. 2 "raises as many questions about copyright
transfers as it answers." (07895.)
Within two hours of Novell's public claim that it owns the UNIX
copyrights, SCO's stock plummeted, even though SCO had announced
record revenues that day. (13137-38¶¶6-9.) In discovery,
SCO learned that the timing of Novell's announcement was not
"entirely coincidental," as Mr. Messman had claimed.
(13800;10025-26;10029.) Novell Vice Chairman Chris Stone had
informed Maureen O'Gara, a journalist who has covered the computer
industry since 1972, that Novell intentionally was making the
announcement on the day of SCO's earnings report to "confound SCO's
stock position" and "upset the stock price." (10025-26;10029.)
According to her testimony, Mr. Stone leaked this information "with
laughter" and "chortling." (10029.)
Novell's claim that Amendment No. 2 was "not present in Novell's
files" also proved to be false. Mr. Messman later admitted that a
signed copy of Amendment No. 2 had been present in Novell's files
all along, and that Novell had published its initial ownership
claims knowing that it had, at least, an unsigned copy of the
Amendment. (09379.)
12 (22)
C. Intent of the Asset Purchase Agreement.
Amendment No. 2, as noted above, specified that copyrights
"required for [SCO] to exercise its rights with respect to the
acquisition of UNIX and UnixWare technologies" are not excluded
from the Assets Schedule — the assets transferred to Santa
Cruz. (00374.)
Santa Cruz General Counsel Steven Sabbath, who negotiated and
signed Amendment No. 2, testified that it was never his
understanding "during the negotiations leading up to the APA or
thereafter that copyrights in the UNIX business were being excluded
from the asset transfer" and that Santa Cruz therefore understood
the revision of the Excluded Assets Schedule "to be a
clarification" of the APA. (10719;10764-65.)
Novell's senior executives at the time of the asset purchase
held similar views. Robert Frankenberg, President and CEO of
Novell at the time of the APA, testified that it was his
"initial intent," his "intent at the time when the APA was signed,"
and his "intent when that transaction closed" that "Novell would
transfer the copyrights to UNIX and UnixWare technology to Santa
Cruz" and that "that intent never changed." (08563.) Ed Chatlos,
who served as Novell's lead negotiator for the asset
purchase and who participated in "detailed discussions"
13 (23)
with Santa Cruz lead negotiator Jim Wilt, testified to the same
intent to sell the copyrights to Santa Cruz as part of the
transaction. (08661-63¶¶ 9-11;08674-75.)
The following ten witnesses on both sides of the deal uniformly
testified that the transaction was intended to transfer the UNIX
and UnixWare copyrights to Santa Cruz:
NOVELL SIDE |
SANTA CRUZ SIDE |
Robert Frankenberg, President and
CEO |
Alok Mohan, President and CEO |
Ed Chatlos, Senior Director for UNIX
Strategic Partnerships and Business
Development and Lead Negotiator of
the APA |
Jim Wilt, Vice President and Lead
Negotiator of the APA |
Duff Thompson, Senior Vice President |
Doug Michels, Founder and Vice
President |
Burt Levine, In-House Counsel |
Steven Sabbath, General Counsel |
Ty Mattingly, Vice President for
Strategic Relations |
Kimberlee Madsen, Assistant
Negotiator |
14 (24)
(08563;08661-63¶¶9-11;08674-75;05646;05663-65;05631-32;05616;05715;05712;
08914-15;10719;10764-65;07827-28¶¶9-11;03938¶16;05727-29.)
In addition, Messrs. Frankenberg, Chatlos, Thompson, Mattingly,
Wilt, Michels, and Sabbath, and Ms. Madsen testified that the
license back of the UNIX source code to Novell under the TLA would
have been unnecessary had the parties intended to exclude the
copyrights and that they therefore understood the TLA to reflect
the shared understanding that Santa Cruz was purchasing the
copyrights under the APA.
(08546;08555;08663¶12;08612¶8;08605;08924¶16;08904;10726;
03937¶12.) In discovery, even Novell admitted that "it would
be reasonable for someone to read the technology license agreement
as inconsistent with a reading of the APA that the UNIX copyrights
were retained by Novell." (09313.)
D. The Parties' Course of Performance.
Contemporaneous with the APA and its amendments, Novell:
-
Transferred its UNIX copyright registrations to Santa Cruz,
which transferred them to SCO in 2001. (See, e.g.,
05731-44.) SCO has possession of the registrations.
(Id.)
-
Modified the copyright notices on the UnixWare source code
existing at the time of the APA to reflect the change in ownership
of the copyrights from Novell to Santa Cruz. (10303-13.)
15 (25)
-
Reported to the APA transition team that "the following changes
have been made" to existing UnixWare code at the request of Santa
Cruz: "SCO copyrights added to documentation and software."
(10320.)
-
Admitted that "All of the technology and intellectual assets" in
existing UNIX source code "will be transitioned to SCO sometime
after December 1, 1995." (13362;13368-69.)
-
Announced in a joint press release that "SCO will acquire
Novell's UnixWare business and UNIX intellectual property."
(05626.)
-
Admitted that Santa Cruz had purchased the UNIX business "lock,
stock and barrel." (10330.)
There is no evidence that Novell exercised or enforced any UNIX
or UnixWare copyrights after the APA, or that Novell told or
represented to anyone that it owned those copyrights between
September 19, 1995, and May 28, 2003.
Contemporaneous with the APA and its amendments, Santa Cruz:
-
Shipped countless UnixWare products with a Santa Cruz copyright
notice on the product discs, without objection from Novell.
(See, e.g., 09036¶3;09038;09040.)
-
Announced in its 1995 Annual Report that it had acquired
"certain assets related to the UNIX business including the core
intellectual property
16 (26)
from Novell." (13870.) Wilson Sonsini, the law firm that
represented Novell in the APA, was Santa Cruz's counsel in
connection with the 1995 Annual Report. (07463-64;13905.)
-
Stated through its investment banker that, under the APA, Santa
Cruz "will obtain the IP" for UNIX, UnixWare, and all UNIX-related
products. (10274 (emphasis added).)
-
Recited in a 1998 agreement with Microsoft that "SCO has
acquired AT&T's ownership of the copyright in the UNIX System V
operating system." (12196.)
-
As UNIX copyright holder, brought a complaint against Microsoft
before the European Commission in 1997, representing that it had
"acquired ownership of the copyright to UNIX," and referring to
itself as "the copyright owner of UNIX."
(09114§4.9;09112§3.4;09119§8.1.)
III. NOVELL'S WAIVER RIGHTS REGARDING SVRX LICENSES.
Article 4.16(b) of the APA grants Novell rights to "amend,
supplement, modify or waive any rights" under certain licenses
called "SVRX Licenses" in the APA. (00287.) The issues concerning
the identity of the "SVRX Licenses" over which Novell had retained
rights became meaningful when Novell purported in 2003 to waive
SCO's claims against IBM under its Software and Sublicensing
17 (27)
Agreements. (01937;01950;01965.) Those Agreements provided IBM
access to the valuable UNIX source code but required IBM to keep
that source code and derivatives thereof strictly confidential in
order to maintain the value of the UNIX technology and licensing
business. (See 01472;01475;13142.)
Believing that IBM had violated those restrictions by releasing
UNIX technology to the Linux operating system, SCO filed suit
against IBM in March 2003. (09407.) Novell then claimed that the
"SVRX Licenses" over which it had retained rights under the APA
included the Software and Sublicensing Agreements that SCO alleged
IBM had violated, and Novell proceeded to direct SCO to waive its
rights to pursue those claims against IBM. (01920;01960.) When SCO
contested Novell's position that it had retained authority over
those agreements, Novell purported to act on SCO's behalf in
waiving IBM's violations. (01937;01950;01965.)
A. The Licensing of UNIX Products.
A UNIX licensee executed a Software Agreement that gave the
licensee the right to develop a UNIX derivative product, and a
Sublicensing Agreement that gave it the right to compile its
derivative product in binary format, for distribution.
(04624-26¶¶10-14;04609-11¶¶13-17.) Those
Agreements required licensees to keep the UNIX source code and
derivatives thereof confidential. (See, e.g.,
18 (28)
01472;01475;13142.) If a licensee wished to sell a
UNIX-derivative product, it entered into a Product Schedule
License, which permitted the licensee to do so in exchange for its
remitting to the UNIX business owner a residual share in the
proceeds of such sales — royalty rights. (See, e.g.,
14298-99;01577.)
As a means of financing Santa Cruz's purchase of the UNIX
licensing business from Novell, Santa Cruz had agreed to allow
Novell to continue to receive the residual royalties paid
under Product Schedule Licenses for SVRX releases.
(08611-12¶¶6-7;00265-66;00287;00315-16;00360-63;04624-26¶¶1014;
04609-11¶¶13-17.) To resolve the obvious problem that
resulted from the parties' agreement to leave Novell with such
royalty rights while the licenses that governed payment of those
royalties were being sold to Santa Cruz in the asset purchase,
Santa Cruz agreed in Section 4.16(b) to give Novell certain rights
over those licenses that governed such payments — the Product
Schedule Licenses. (00287;02472-73¶¶6-7;08537.)
B. "SVRX Licenses" Under the APA.
Article 4.16 identifies the "SVRX Licenses" by pointing to a
list in Item VI of the Assets Schedule:
Following the Closing, Buyer shall administer the
collection of all royalties, fees and other amounts due under the
SVRX Licenses (as listed in detail
19 (29)
under Item VI of Schedule 1.1(a) hereof and
referred to herein as "SVRX Royalties).
(00287 (emphasis added).) In turn, the introductory sentence of
Item VI also refers to a forthcoming list of SVRX Licenses:
All contracts relating to the SVRX Licenses and
Auxiliary Product Licenses (collectively "SVRX Licenses") listed
below:
(00315;00363 (emphasis added).) The ensuing list in Item VI,
however, is a list of products, not a list of licenses.
(00315-16;00366-69.)
The Software and Sublicensing Agreements, such as those executed
by IBM, are separately listed as assets sold to Santa Cruz without
any reservation of rights for Novell, under Item III of the Assets
Schedule:
All of Seller's rights pertaining to UNIX and UnixWare
under any software development contracts, licenses and any other
contracts to which Seller is a party or by which it is bound and
which pertain to the Business . . . including without limitation .
. . Software and Sublicensing Agreements.
(00314-15.)
C. Intent of the Parties Regarding Novell's Waiver
Rights.
Messrs. Frankenberg, Chatlos, Thompson, Mattingly, Mohan, Wilt,
Michels, and Sabbath, and Ms. Madsen all testified that the intent
of Article 4.16(b) was to
20 (30)
provide Novell rights over those licenses that gave rise to the
royalties for sales of SVRX products in which Novell had retained
an interest — and not to provide Novell with the right to
control Santa Cruz's actions under other agreements, such as the
Software and Sublicensing Agreements with IBM at issue. (0854041;
05653¶13;03553-54¶7;08592;
03929-30¶4;03677-78¶10;03561¶9;0385859
¶¶4-5;03937¶13.) William Broderick and John
Maciaszek, executives in Novell's UNIX licensing group,
specifically testified that Novell used the term SVRX Licenses to
refer to Product Schedule Licenses that licensed SVRX products.
(04624-26¶¶10-14;04609-11¶¶13-17.)
D. Novell's Unauthorized Amendment of IBM's
Software and Sublicensing Agreements.
Novell and Santa Cruz previously resolved the same dispute over
whether Novell's 4.16(b) rights extend to IBM's Software and
Sublicensing Agreements. On April 26, 1996, less than four months
after the APA closed, Novell and IBM entered into an "Amendment" of
IBM's Software and Sublicensing Agreements (the "Unauthorized
Amendment") — without telling Santa Cruz about the amendment.
(10400-03.) Novell, "on behalf of itself and The Santa Cruz
Operation," purported to grant IBM a buyout and rights to
distribute UNIX source code. (10400-01.)
21 (31)
When Santa Cruz learned of the Unauthorized Amendment, it
immediately objected, and Santa Cruz CEO Mr. Mohan asserted to
Novell that "our agreements provide SCO with ownership and
exclusive rights to license the UNIX source code." (03890.) Santa
Cruz further wrote: "As to source code, Novell must recognize that
it has no interest whatsoever and must not engage in any buyout or
grant of expanded rights." (13546.)
Novell's CEO, Mr. Frankenberg, did not challenge Mr. Mohan.s
assertions, and indeed, over the ensuing six months of
negotiations, Novell did not once invoke its Article 4.16(b)
rights, as it did in 2003. (03887;03879-901;13538-49.) Instead,
Novell and Santa Cruz resolved the issue by executing Amendment No.
2 to the APA and two related agreements, pursuant to which
Novell:
-
Paid Santa Cruz $1.5 million for a release of its claims against
Novell for Novell's execution of the Unauthorized Amendment, which
had attempted to expand Novell's Article 4.16(b) rights by granting
IBM the right to distribute source code. (03915.)
-
Agreed that it "may not prevent SCO from exercising its rights
with respect to SVRX source code in accordance with" the APA.
(03695.)
-
Agreed that it could not unilaterally grant buyouts even of its
interest in SVRX Royalties. (Id.)
22 (32)
Mr. Sabbath testified that Amendment No. 2 "clarifies the fact
that Santa Cruz Operation owned the source code, all UNIX source
code, including SVRX; that Novell could not give any future SVRX
source code licenses to anybody, and that Novell couldn't prevent
us . . . from taking whatever actions we wanted with regard to that
source code." (10725;10730.) Ms. Madsen testified that Amendment
No. 2 was intended to "confirm that Novell had received no rights
with respect to UNIX source code under the APA." (07829¶16.)
And Novell Sales Director Larry Bouffard, who had conceived the
Unauthorized Amendment, understood Amendment No. 2 "to preclude
Novell from undertaking the precise type of unilateral conduct with
respect to the UNIX license agreements that [he] had undertaken
with respect to the IBM-Novell buyout." (03871¶33.)
IV. NOVELL'S RIGHTS IN SVRX ROYALTIES.
In 1994, Sun paid Novell $83 million for a buyout of Sun's
royalty-payment obligations under its pre-APA license to SVRX.
(00889-911.) In 2003, SCO entered into a UnixWare agreement with
Sun that also granted rights to old SVRX technology included in
UnixWare. (00874-87.) The district court concluded (at 12082-83)
that those rights constituted an "SVRX License" and ordered SCO (at
12131) to pay $2,547,817 as "SVRX Royalties" due to Novell under
that license.
23 (33)
Article 1.2(b) of the APA sets forth Novell's retained interest
in UnixWare sales and SVRX Royalties:
Except as otherwise provided in paragraph (e) of this
Section 1.2, Buyer agrees to collect and pass through to Seller one
hundred percent (100%) of the SVRX Royalties as defined and
described in Section 4.16 hereof . . . . Seller and Buyer further
acknowledge and agree that Seller is retaining all right to the
SVRX Royalties notwithstanding the transfer of SVRX Licenses to
Buyer pursuant hereto, and that Buyer only has a legal title and
not an equitable interest in such royalties . . . . For the
purposes of administering the collection of SVRX Royalties, the
parties acknowledge that the royalties shall continue to be
recognized as royalties by Seller on an ongoing basis and the
parties shall take such commercially reasonable steps as may be
necessary to effectuate the foregoing for financial accounting and
tax purposes. In addition, Buyer agrees to make payment to Seller
of additional royalties retained by Seller in respect of the
transfer of UnixWare and on account of Buyer's future sale of
UnixWare products.
(00265.)
Article 4.16(a) in turn describes the SVRX Royalties in which
Novell retained an interest as "all royalties, fees and other
amounts due under the SVRX Licenses" listed in the Assets Schedule.
(00287.) The meaning of "SVRX Royalties" thus depends on the
meaning of "SVRX Licenses". The district court concluded (at 12075)
as a matter of law that even post-APA contracts relating to SVRX,
such as the Sun Agreement in part, are "SVRX Licenses" under the
APA.
24 (34)
Ten witnesses on both sides of the transaction testified that
"SVRX Licenses" refers to licenses that existed at the time of the
APA. (08537-38;
08518;02472¶7;08760;08588;02431¶4;02438¶4;08888-89;10729;02483¶12.)
In a press release announcing the closing of the APA transaction,
Novell described the twin interests it was retaining as
follows:
The agreement also calls for Novell to receive a
revenue stream from SCO based on revenue performance of the
purchased UnixWare product line. This revenue stream is not to
exceed $84 million net present value, and will end by the year
2002. In addition, Novell will continue to receive revenue from
existing licenses for older versions of UNIX System source
code.
(07853 (emphasis added).) Novell made this same admission verbatim
in its 1995 and 1996 Annual Reports and its 1996 Quarterly Reports.
(02182;02232;02302;02320;02341.)
The parties already resolved the dispute over the scope of
Novell's rights to SVRX Royalties in 1996, as part of the dispute
over Novell's attempt to grant IBM an unauthorized buyout. At that
time, Mr. Mohan told Mr. Frankenberg that the APA "provided for
Novell to receive the residual royalties from the in-place SVRX
license stream." (02488 (emphasis added).) In the six months of
negotiations that followed, Novell did not once challenge that
assertion. (03887;03879-901;13538-49.)
25 (35)
Novell's former UNIX contract manager, Jean Acheson, testified
that — until SCO filed this lawsuit in 2004 — Novell
never requested revenues from certain post-APA SVRX agreements and
did not audit such agreements or revenues in its 1998 audit of
Santa Cruz. (04635-36¶¶2-9.)
26 (36)
SUMMARY OF ARGUMENT
The district court's ruling that, as a matter of law, the UNIX
and UnixWare copyrights were not transferred with the sale of the
UNIX and UnixWare business should be reversed for at least three
independent reasons.
First, the district court interpreted the APA without
considering Amendment No. 2, the very Amendment that expressly
clarified the issue of copyright transfer and ownership by
replacing the exclusion of "all copyrights". It is fundamental
error to rely on language of a contract that has been expressly
replaced. It was also error to conclude that Amendment No. 2 did
not independently suffice to transfer the copyrights. Clearly, the
Amendment must be read together with the provisions of the APA that
transferred "[a]ll rights and ownership" in UNIX and UnixWare.
Second, the district court's finding that SCO had
obtained only an "implied license" to the copyrights simply cannot
be squared with the relevant provisions of the APA that deal with
the sale of assets. If Amendment No. 2 was intended only to affirm
an "implied license," the Amendment would have said that and would
not have changed the language regarding copyrights in the Schedules
of Assets being sold. Amendment No. 2 also would have been
entirely unnecessary if the APA had already conferred an implied
license.
27 (37)
Third, although it had previously found the APA to be
ambiguous on the subject of copyright transfers, the district court
disregarded the probative extrinsic evidence of numerous witnesses
and documents drawn from both sides of the transaction and the
subsequent course of performance. The court then improperly drew
inferences in favor of Novell in resolving what both it and Novell
had previously recognized to be ambiguities.
The district court also erred in concluding as a matter of law
that Novell retained the absolute right to waive SCO's claims
against IBM for breaching the UNIX Software and Sublicensing
Agreements. The court acknowledged that there was "ambiguity" in
the relevant language and that it needed to take what it called a
"minor inferential step" to adopt Novell's position. In taking this
"step," the court rejected competent extrinsic evidence defeating
Novell's interpretation. The court further decided that the implied
covenant of good faith and fair dealing does not apply to Novell's
actions under Article 4.16(b), cementing an interpretation of the
APA that gives Novell the unfettered right, for whatever reasons
Novell chooses, to take away from SCO all of the rights under the
licenses and agreements Novell had transferred. Under the court's
interpretation, Novell retained the unlimited right to destroy the
economic value of the business it had sold and for which it has
received more than $250 million of consideration.
28 (38)
Finally, the district court erred in concluding as a matter of
law that, notwithstanding the ambiguity in the APA and overwhelming
extrinsic evidence to the contrary, the "SVRX Licenses" under which
Novell retained "SVRX Royalties" included all contracts relating to
SVRX, including post-APA contracts such as the 2003 Sun
Agreement.
29 (39)
LEGAL STANDARDS
At the summary judgment stage the judge's function is not
himself to weigh the evidence and determine the truth of the matter
but to determine whether there is a genuine issue for trial."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
"The evidence of the non-movant is to be believed, and all
justifiable inferences are to be drawn in his favor." Id. at
255. "It is axiomatic that a judge may not evaluate the credibility
of witnesses in deciding a motion for summary judgment." Seamons
v. Snow, 206 F.3d 1021, 1026 (10th Cir. 2000). The Court
reviews the district court's grant of summary judgment de
novo. Davidson v. Am. Online, Inc., 337 F.3d 1179, 1182
(10th Cir. 2003).
30 (40)
ARGUMENT
I. THE DISTRICT COURT ERRED IN CONCLUDING, AS A MATTER OF
LAW, THAT THE APA AS AMENDED DID NOT TRANSFER THE EXISTING UNIX AND
UNIXWARE COPYRIGHTS TO SANTA CRUZ.
A. The District Court Erred in Interpreting the APA and
Amendment No. 2 As Separate and Independent.
"A written instrument must be construed as a whole, and multiple
writings must be considered together when part of the same
contract." Nish Noroian Farms v. Agric. Labor Relations Bd.,
35 Cal. 3d 726, 735 (1984). "A contract may not be interpreted in a
manner which would render one of its terms meaningless." Kavruck
v. Blue Cross of Cal., 108 Cal. App. 4th 773, 783 (2003). Under
California law, which governs the APA, the district court clearly
erred in interpreting the APA without Amendment No. 2, and then
Amendment No. 2 standing alone, instead of reading the APA as
amended as a single coherent document.
The APA as amended calls for the inclusion, not exclusion, of
the UNIX and UnixWare copyrights from the asset sale. The APA
transfers "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."
(00264.) Item I of Schedule 1.1(a), the Assets Schedule,
includes:
31 (41)
All rights and ownership of UNIX and UnixWare,
including but not limited to all versions of UNIX and UnixWare. . .
including source code . . . such assets to include without
limitation . . ."
(00313 (emphasis added).) The schedule then lists all source code
and binary products, including all releases of UNIX System V and
UnixWare, and all prior versions. (
Id.) The Bill of Sale, in
turn, transfers "all of the Assets" to Santa Cruz. (05602.)
The specific, catch-all phrase "All rights and ownership of UNIX
and UnixWare" (00313) clearly includes the copyrights of UNIX and
UnixWare — the core intellectual property on which the UNIX
licensing business depends. A transfer of "all right, title and
interest to computer programs and software can only mean the
transfer of the copyrights as well as the actual computer
program or disks."2 Shugrue v. Cont.l Airlines, Inc.,
977 F. Supp. 280, 286 (S.D.N.Y. 1997) (emphasis added); see
also ITOFCA, Inc. v. Megatrans Logistics, Inc., 322 F.3d
928, 931 (7th Cir. 2003) (transfer of "all assets" to a business
includes copyrights);
32 (42)
Relational Design & Tech., Inc. v. Brock, No.
91-2452-EEO, 1993 WL 191323, at *6 (D. Kan. May 25, 1993) (transfer
of "all rights" in a program includes copyrights). In addition, the
"without limitation" language makes clear that the list of Items in
the Assets Schedule is non-exhaustive. (00313;00361.)
Schedule 1.1(b) as amended, the Excluded Assets Schedule,
excludes from the transaction several listed assets. It carves out
only those copyrights that Santa Cruz did not need to
exercise its rights with respect to the UNIX and UnixWare business
it was acquiring: "All copyrights and trademarks, except for the
copyrights and trademarks owned by Novell as of the date of the
Agreement required for SCO to exercise its rights with respect to
the acquisition of UNIX and UnixWare technologies." (00374.)
It is undisputed that Santa Cruz acquired the rights to (1)
develop "a line of software products known as Unix and UnixWare,"
(2) sell "binary and source code licenses to various versions of
Unix and UnixWare," (3) provide support to Unix and UnixWare
products, and (4) bring "claims arising after the Closing Date
against any parties relating to any right, property or asset
included in the Business." (00264;00314.) SCO presented
uncontroverted evidence that Santa Cruz could not exercise those
rights without also owning the copyrights to UNIX and UnixWare.
(10722;10762;08676;08905-06;08606;09017;09816.)
33 (43)
Amendment No. 2 expressly revises the Excluded Assets Schedule
of the APA. (00374.) "A written instrument must be construed as a
whole, and multiple writings must be considered together when part
of the same contract." Nish, 35 Cal. 3d at 735. Once
Amendment No. 2 removed the carve-out of UNIX and UnixWare
copyrights, those copyrights were within the purview of the Assets
Schedule and were transferred by the Bill of Sale. Novell's
argument, accepted by the district court (at 12040-41), that the
amendment was not intended to apply "retroactively" to the
transfers effectuated upon the closing of the APA is illogical. As
an amendment to the schedules of assets sold in the transaction,
Amendment No. 2 only makes sense as a clarifying amendment to that
transaction. Moreover, Amendment No. 2 makes express reference to
"the copyrights and trademarks owned by Novell as of the date of
the Agreement." (00374 (emphasis added).) The very language of
the Amendment thus reaches back to the transaction that occurred as
a result of the APA.
At minimum, there was ambiguity created by Amendment No. 2, as
Novell has publicly and repeatedly admitted: "The amendment
appears to support SCO's claims that ownership of certain
copyrights for UNIX did transfer to SCO in 1996." (05889.) Novell
acknowledged "that a reader of this language, you know — you
know, might be able to conclude that SCO's claim of ownership did
transfer,
34 (44)
that SCO's claim of ownership was supported by this
language." (10598 (emphasis added).) Indeed, the district court
itself recognized "the ambiguities of the APA as amended" with
respect to the transfer of copyrights in denying Novell's motions
to dismiss. (16713;16707.) Yet the court subsequently concluded
that the language in Amendment No. 2 was unambiguous as a matter
of law in Novell's favor.
The district court's conclusion is also undermined by the
Technology Licensing Agreement, through which Santa Cruz licensed
back to Novell the "Licensed Technology," which is defined to
include all UNIX and UnixWare "source code," "versions,"
"products," and "copies." (00268;00361;03690;00313.) The
license-back provided Novell with only a limited license,
restricting Novell from using the Licensed Technology in
competition with Santa Cruz. (00268;03690.) Such restrictions are
inconsistent with Novell's claim that it did not intend to transfer
its ownership of the UNIX and UnixWare copyrights in the first
place, which obviously would have permitted Novell to use the
Licensed Technology freely and without any license-back from Santa
Cruz. Indeed, Novell admitted in discovery that "it would be
reasonable for someone to read the technology license agreement as
inconsistent with a reading of the APA that the UNIX copyrights
were retained by Novell." (09313.)
35 (45)
B. The District Court Erred in Finding an "Implied
License"
From the Text of the APA and Amendment No. 2.
Seeking to explain how Santa Cruz could purchase the UNIX
business "lock, stock, and barrel" (10330), in a 50-page Asset
Purchase Agreement, without acquiring its core intellectual
property, the district court stated (at 12036 and 12043) that the
APA must have conferred "an implied license to use the copyrights
as needed to implement the transaction." Forced then to explain the
purpose of Amendment No. 2, the court concluded (at 12042-44) that
it merely "affirmed" the implied license that had already been
granted. Without citation to any authority, or any explanation, the
court even opined that the Amendment "reads like an implied
license." (12043.)
The doctrine of "implied license" has no application
here.3 The
law recognizes implied licenses only in the specific case
where a defendant needs an affirmative defense to a claim of
copyright infringement where "(1) a person (the licensee) requests
the creation of a work, (2) the creator (licensor) makes that
particular work and delivers it to the licensee who requested it,
and (3) the licensor intends that the licensee-requestor copy and
distribute his work." I.A.E., Inc. v.
36 (46)
Shaver, 74 F.3d 768, 776 (7th Cir. 1996). The Second
Circuit has similarly held that implied licenses are found "only"
in those "narrow circumstances." SmithKline Beecham Consumer
Healthcare, L.P. v. Watson Pharms, Inc., 211 F.3d 21, 25 (2d
Cir. 2000) (emphasis added). This case does not include any of
those facts — Santa Cruz was purchasing a software licensing
business, not merely a work that it had commissioned from
Novell.
In order to cram the square peg of an "implied license" into the
round hole of an "asset purchase agreement," the district court
also had to disregard the clear provision giving Santa Cruz the
right to bring claims relating to any right, property, or asset in
the UNIX business. (00314.) An implied license would not permit SCO
to exercise that right, since an "implied license can only be
non-exclusive,"4 and "[h]olders of a non-exclusive license
lack standing to sue." R. Ready Prods., Inc. v. Cantrell, 85
F. Supp. 2d 672, 684 n.11 (S.D. Tex. 2000).
In addition, the district court's independent conclusion (at
12042-44) that Amendment No. 2 "was merely affirming" an implied
license is implausible on its face. No language in Amendment No. 2
refers to any "license," to any rights that Santa Cruz supposedly
already had, or to any license rights that were being "affirmed."
This was an asset purchase agreement, and Amendment No.
2
37 (47)
expressly amended and clarified the schedule of assets being
purchased, not licensed. Why would anyone affirm in writing an
implied license with language that never mentions the alleged
license?5
C. The District Court Erred in Its Limited Consideration of
the
Extrinsic Evidence of the Parties' Intent to Sell the UNIX
Copyrights to Santa Cruz Under the Amended APA.
Under governing California law, the goal of contract
interpretation is to give effect to the mutual intention of the
parties. City of Atascadero, 68 Cal. App. 4th at 473.
California law has "turned its back on the notion that a contract
can ever have a plain meaning discernible by a court without resort
to extrinsic evidence." Trident Ctr. v. Conn. Gen. Life Ins.
Co., 847 F.2d 564, 568 (9th Cir. 1988).
The California Supreme Court has set out a broad standard for
consideration of extrinsic evidence: "Even if a contract appears
unambiguous on its face, a latent ambiguity may be exposed by
extrinsic evidence which reveals more than one possible meaning to
which the language of the contract is yet reasonably susceptible."
Dore v. Arnold Worldwide, Inc., 39 Cal. 4th 384, 391
(2006).
38 (48)
If "there is a conflict in the extrinsic evidence, the factual
conflict is to be resolved by the jury." Wolf v. Walt Disney
Pictures and Television, 162 Cal. App. 4th 1107, 1127 (2008). A
trial court commits reversible error when it considers only some of
the extrinsic evidence. Halicki Films, LLC v. Sanderson Sales
and Mktg., 547 F.3d 1213, 1223 (9th Cir. 2008); Morey v.
Vannucci, 64 Cal. App. 4th 904, 912 (1998).
The trial court should consider evidence of "the circumstances
surrounding the making of the agreement, including the object,
nature and subject matter of the writing, and the preliminary
negotiations between the parties, and thus place itself in the same
situation in which the parties found themselves at the time of
contracting." Universal Sales Corp., Ltd. v. Cal. Press Mfg.
Co., 20 Cal. 2d 751, 761 (1942); Cal. Civ. Code § 1647. In
addition, the parties' course of performance is crucial.
Employers Reinsurance Co. v. Sup. Ct., 161 Cal. App. 4th
906, 922 (2008) (reversing trial court). The California Supreme
Court has emphasized that the "practical construction placed by the
parties upon the instrument is the best evidence of their
intention." Universal Sales, 20 Cal. 2d at 761-62.
Here there is overwhelming evidence in SCO's favor regarding the
negotiation to the APA and how the parties performed thereunder,
which should have caused the district court to deny Novell's motion
for summary judgment.
39 (49)
1. The Testimony Concerning the Negotiation of the APA
Demonstrates that Amendment No. 2 Conformed
The APA to the Intent of the Principals Who Had
Negotiated the APA.
This is the extraordinary situation where SCO presents not only
testimony from Santa Cruz executives supporting its position, but
testimony from numerous Novell executives, including Novell's then
CEO and chief negotiator for the sale of the UNIX business. In
order to conclude that Santa Cruz had not purchased the UNIX and
UnixWare copyrights under the APA as amended, the district court
needed to discredit on summary judgment all ten of those
witnesses, who uniformly testified that the parties intended to
sell the copyrights to Santa Cruz in the asset purchase.
(08563;08661-63¶¶9-11;08674-75;05646;05663-65;0563132;
05616;05715;05712;08914-15; 10719;10764-65;07827-28¶¶911;
03938¶16;05727-29.)
The district court also minimized or even discredited (as at
12007-08 and 12042) the testimony of Mr. Sabbath, who negotiated
and signed Amendment No. 2 and specifically testified that the
intent of the Amendment was to bring the Schedules of the APA into
conformity with the intent of the transaction by making clear that
the Assets Santa Cruz purchased included all "copyrights and
trademarks owned by Novell as of the date of the [APA] required for
SCO to exercise its rights
40 (50)
with respect to the acquisition of UNIX and UnixWare
technologies." (10719;
10721;03938¶14;10764-65;03938¶16.)
Instead of drawing all inferences in SCO's favor by crediting
these witnesses, the district court disregarded the standards on
summary judgment and committed reversible error by straining to
find ways to discredit them. The court marginalized the testimony
and negatively weighed the credibility of:
-
Novell chief negotiator Ed Chatlos (at 12001), on the grounds
that "his wife has been employed by SCO since the time of the APA
in 1995."
-
Novell CEO Robert Frankenberg (at 12000), on the purported
grounds that he supposedly testified "somewhat
self-contradictorily" and that his testimony was supposedly "at
odds" with other evidence.
-
Novell senior executive Duff Thompson (at 12002), who signed
Amendment No. 1 and the TLA, on the purported grounds that he
"checked out" during the drafting of the APA.
The district court not only was wrong about the substance of
these observations, but obviously erred in making them part of its
summary judgment analysis in the first place. See Seamons,
206 F.3d at 1026.
The district court also afforded little or no weight to the
testimony of several witnesses. The court (at 12005) had to
acknowledge Jim Wilt's key role in the
41 (51)
negotiations of the APA, for example, yet completely ignored his
highly relevant testimony in considering the parties. intent, even
though he was Santa Cruz's chief negotiator and was unwavering in
his testimony that the parties intended to transfer the copyrights.
(05706¶7;05715;05712.) The court also disregarded the
testimony of Novell contract manager William Broderick, whose
recollection is important evidence that during the transition
meetings, no one on either side of the transaction ever suggested
that Novell would be retaining any UNIX or UnixWare copyrights and
that the parties in fact discussed "changing the copyright notices
in the source code to Santa Cruz." (05684-85; see also
10303-13;10320.) The court also essentially ignored the testimony
of Santa Cruz senior executive Doug Michels, who testified that
"there is no way we would have ever done a deal to buy a software
business where we didn't get the copyrights." (08914.)
Having disregarded all of this probative testimony, the district
court then credited Novell's witnesses and drew inferences in
Novell's favor. Novell cited declarations from two of its former
attorneys, David Bradford and Tor Braham, who both testified that,
at the eleventh hour and unbeknownst to their principals and
contractual counterparties, they had inserted an exclusion of all
copyrights into the now inoperative version of the Excluded Assets
Schedule and, without any discussion of the term between the
parties, gave Santa Cruz a license to those
42 (52)
copyrights instead.
(06095-97¶¶10-14;06078¶¶11-12;06106¶¶18-19.)
Even if (contrary to law) the court were permitted to weigh this
evidence against the overwhelming conflicting evidence on summary
judgment, Novell's declarants' testimony cannot remotely govern the
interpretation of the revised APA, as they addressed only the
former, defunct version of the agreement.
In contrast to its treatment of SCO's witnesses, moreover, the
district court credited the testimony of Messrs. Bradford (at
12000-01) and Braham (at 12036 and 11998-99) even in the face of
evidence directly undermining their credibility. The court did not
even acknowledge that, prior to executing his declaration in 2007,
Mr. Bradford had repeatedly stated that he had played no
significant role in the negotiation of the APA and did not have any
view as to whether the copyrights had been transferred.
(10660-62¶¶6-11.) Similarly, the district court credited
(at 12036) Mr. Braham's testimony that Novell supposedly sought to
retain the copyrights to strengthen its rights to do
buyouts, but ignored the ensuing protracted dispute between
Novell and Santa Cruz in 1996 regarding Novell's attempt to do a
buyout with IBM, throughout which Novell never raised
— either internally or externally — a claim of
copyright ownership, let alone held it up as a ground for its
rights to do the buyout. (See Statement of Facts, Section
III.D, above.)
43 (53)
The district court also compounded its error by crediting the
declarations of Novell's former CFO, James Tolonen, and its former
attorney, Allison Amadia, Novell's witnesses about their
understanding of the intent of Amendment No. 2.
(12001;12007-08;12042.) They testified that the Amendment merely
"affirmed" an implied license that had already been granted.
(06097¶¶14-16;03311-12¶¶1718; 06065¶14.)
Even if (contrary to law) a court were permitted to weigh such
evidence against the conflicting evidence on summary judgment,
these witnesses say nothing about the plain language of the amended
Assets Schedule. Moreover, as argued above, there was no need for
any amendment if an "implied license" was all that SCO was
entitled to, and if there was a need to affirm an "implied
license," that is what the amendment would have expressly done.
In order to make sense of the purported affirmation of an
implied license, the district court impermissibly drew even further
inferences against SCO and in favor of Novell:
-
The court concluded (at 12007 and 12042) that, because the
language of Amendment No. 2 differs from draft language Mr. Sabbath
sent Novell, Amendment No. 2 must not have achieved the result that
he intended. The obvious inference in SCO's favor, however, is that
the revised language of Amendment No. 2 was a different way of
saying what he
44 (54)
proposed to say in his initial draft, precisely as Mr. Sabbath
testified. Mr. Sabbath's testimony leaves no doubt that he did not
understand or agree that the difference in language between drafts
had the significance that the court inferred in Novell's favor.
(10719;10722;10738;10764-66.)6
-
The court further reasoned (at 12037) that the copyright
exclusion made sense because "Santa Cruz indisputably did not
acquire ownership of Novell's UNIX-related patents." But the
evidence showed that patents that may have implicated UNIX in some
way did not transfer because Novell did not own any such patents.
(10739;08638;08893-94;08978.) The same was clearly not true of the
UNIX and UnixWare copyrights that cover the length and breadth of
the UNIX code — the core technology at the center of the UNIX
business being sold to Santa Cruz.
-
Observing that the Assets Schedule did not use the word
"copyrights," the court mistakenly assumed (at 11986) that the
Schedule should have specifically enumerated all of the
"Intellectual Property" included in the "Assets." It does not. The
specific assets listed on the Assets Schedule do not purport to be
exhaustive; to the contrary, the schedule expressly
45 (55)
states that the transferred assets are "not limited to" the
list, which is "without limitation." (00313.) Novell concedes,
moreover, that the transferred "Assets" included the "trade
secrets" and "know-how" in UNIX and UnixWare, even though Schedule
1.l(a) did not use any of those words. (06003-04.) The
"Intellectual Property" sections of Schedules 1.1(a) and 1.1(b)
simply do not have the neat symmetry that the court (at 11986,
11990-91, 12026 and 12029) attributed to them, and to whatever
extent symmetry existed, if at all,7 in the original APA, it did not exist
in the APA as amended.
-
Contrary to the court's finding (at 12010-11, 12038-39, and
12046), SCO witnesses expressly denied having asked Novell to
transfer the UNIX or UnixWare copyrights during conversations in
late 2002 or early 2003. Quite the contrary, they testified that
Novell had in fact "agreed" that SCO owned the copyrights and that
Novell would undertake to find documents related to the APA.
(04698-700¶¶7-16;09778;09751;
46 (56)
10316¶3.) In Novell's own internal documents memorializing
those communications and at deposition, Novell admitted that SCO
had sought only "documents that helped give the history of SCO's
rights to UNIX" to clarify what SCO considered to be a "clerical
error" in the unamended APA. (07529;11488.)
2. The Parties' Course of Performance.
Overwhelming extrinsic evidence of Novell's and Santa Cruz's
course of performance demonstrates both parties' mutual
understanding that Santa Cruz had purchased the UNIX and UnixWare
copyrights.
For one, SCO, as Santa Cruz's successor, has possession of the
UNIX copyright registrations that Novell had in its possession
prior to the APA. (See, e.g., 05731-44.) The registrations
are prima facie evidence of the ownership and validity of the
copyrights. La Resolana Architects, PA v. Clay Realtors Angel
Fire, 416 F.3d 1195, 1202-03 (10th Cir. 2005). The district
court observed (at 11996), without pursuing the point, that Novell
transferred the UNIX copyright registrations to Santa Cruz. But the
court then failed to draw the reasonable and required inference
that Novell transferred the registrations to Santa Cruz because it
had purchased the copyrights.
47 (57)
In addition, contemporaneous with the APA and its amendments,
Novell:
-
Changed the copyrights notices on existing UNIX and UnixWare
source code and documentation to reflect the change in ownership of
the copyrights from Novell to Santa Cruz. (10303-13;10320.)
-
Reported to the APA transition team that "the following changes
have been made" to existing UnixWare code at the request of Santa
Cruz: "SCO copyrights added to documentation and software."
(10320.)
-
Admitted that "All of the technology and intellectual assets" in
existing UNIX source code "will be transitioned to SCO sometime
after December 1, 1995." (13362;13368-69.)
-
Announced in a joint press release that "SCO will acquire
Novell's UnixWare business and UNIX intellectual property."
(05626.)
-
Notified its customers that Novell had transferred "its existing
ownership interest in UNIX System-based offerings and related
products" to Santa Cruz and referred to Santa Cruz "the owner" of
the UNIX software. (See, e.g.,
10645;10652;10657;10710;03838;03843;03845.) These UNIX assets were
identified as "All Releases of UNIX System V and prior Releases of
the UNIX System." (03847.)
48 (58)
D. The Amended APA and Bill of Sale Exceed
The Requirements of the Copyright Act.
The Copyright Act requires a signed written instrument of
conveyance or a note or record of the transfer. 17 U.S.C. §
204. The district court ruled (at 58-59) that Amendment No. 2 does
not constitute an instrument of transfer because it does not
include a provision that purports to transfer copyrights, does not
expressly amend the schedule of assets that transferred at the
closing, and does not specify which copyrights were conveyed. The
court arrived at this erroneous conclusion by attempting to
construe Amendment No. 2 independently of the APA it amended. The
APA, as amended by Amendment No. 2, and the Bill of Sale, easily
satisfy the Copyright Act's requirements.
Those requirements are intended to effectuate, not frustrate,
the intent of the parties. "As with all matters of contract law,
the essence of the inquiry here is to effectuate the intent of the
parties. Accordingly, even though a written instrument may lack the
terms "transfer" and "copyright," it still may suffice to evidence
their mutual intent to transfer the copyright interest." Nimmer
on Copyrights § 10.03[2] (2006) (collecting cases);
Kenbrooke Fabrics, Inc. v. Soho Fashions, Inc., 690 F. Supp.
298, 301 (S.D.N.Y. 1988) (invoice and short letter transferring
ownership of products without mention of copyrights suffice). No
particular language or "magic
49 (59)
words" are required. Radio Television Espanola S.A. v. New
World Entm't, Ltd., 183 F.3d 922, 927 (9th Cir. 1999). Even the
word "copyright" is not required. See, e.g., ITOFCA, Inc.
v. Megatrans Logistics, Inc., 322 F.3d 928, 931 (7th Cir. 2003)
(transfer of "all assets" to a business suffices).
The amended APA unambiguously provided for the transfer to Santa
Cruz of all of Novell's "right, title, and interest" and "all
rights and ownership of UNIX and UnixWare." (00264;00313.) The Bill
of Sale unambiguously effectuated that transfer and complied with
the Copyright Act. (05602.) Amendment No. 2, by clarifying the
Excluded Assets Schedule, allowed for the transfer of copyrights
along with "[a]ll rights and ownership" of UNIX and UnixWare
transferred through the Assets Schedule. No further revision of
that schedule was required, as the language was sweeping and
expressly labeled "without limitation." (00313.) Nor, as argued
above, is there any real question — and certainly none
resolvable against SCO as a matter of law — that the UNIX and
UnixWare copyrights were necessary to Santa Cruz's conduct of the
business and thus were not excluded from the sale.
(10722;10762;08676;08905-06;08606;09017;09816.)
In addition, "the requirements of 17 U.S.C. § 204(a) can be
satisfied by an oral assignment later ratified or confirmed by a
written memorandum of the transfer." Arthur Rutenberg Homes,
Inc. v. Drew Homes, 29 F.3d 1529, 1532
50 (60)
(11th Cir. 1994); accord Imperial Residential Design,
Inc. v. Palms Dev. Group, Inc., 70 F.3d 96, 99 (11th Cir.
1995); Nimmer, supra, § 10.03[3]. Here, Amendment No. 2
confirms not just an oral agreement, but the written agreement in
the APA to transfer all rights and ownership of UNIX and UnixWare.
Neither the district court nor Novell could cite a single case that
even suggests that a full-blown asset purchase agreement, such as
the one here, does not suffice as a transfer instrument under the
Copyright Act.
The amended APA and the Bill of Sale thus plainly provided for
and effectuated the transfer of the UNIX and UnixWare copyrights
consistent with the Copyright Act.
II. THE DISTRICT COURT ERRED IN CONCLUDING, AS A MATTER OF
LAW, THAT IF THE APA DID NOT TRANSFER THE EXISTING UNIX AND
UNIXWARE COPYRIGHTS, THEN SCO IS NOT ENTITLED TO SPECIFIC
PERFORMANCE, REQUIRING THE TRANSFER OF THOSE COPYRIGHTS
NOW.
In dismissing SCO's alternative claim for specific performance
of an agreement to convey copyrights, the district court cursorily
ruled (at 12044) that "neither the original APA nor Amendment No. 2
entitle SCO to obtain ownership of the UNIX and UnixWare
copyrights." The court's decision thus follows from its error in
interpreting the original APA and Amendment No. 2 as separate,
standalone documents. If the APA, as amended, somehow failed to
transfer the
51 (61)
UNIX and UnixWare copyrights, SCO clearly would be entitled to
compel the transfer of copyrights "required for SCO to exercise its
rights with respect to the acquisition of UNIX and UnixWare
technologies." (00374.)
If, as the district court concluded (at 12042-43), SCO only
received an implied license to the copyrights, SCO would not be
able to exercise the rights it indisputably acquired under Items II
and III of the Assets Schedule to bring claims under the UNIX and
UnixWare Software and Sublicensing Agreements. (00314.) SCO needed
ownership of the copyrights to bring such claims, as Novell itself
acknowledged by asserting ownership of the copyrights precisely to
foreclose SCO's claims against IBM. (09212-14.) SCO presented
competent evidence that (1) SCO's capacity to bring claims to
enforce the UNIX and UnixWare copyrights is an integral and
necessary component of operating the UNIX and UnixWare licensing
businesses, (2) SCO's copyright claims against IBM were premised on
UNIX and UnixWare copyrights existing as of the execution of the
APA, and (3) such copyrights covered all of the technology in UNIX
and the majority of the technology in UnixWare.
(10722;10762;08905-06;09017;0981516;
08834;08676;13045-13128;12981-13043;15540-41;15447-50;02398¶27;
52 (62)
02411¶31.) Such evidence was more than sufficient to
preclude summary judgment on SCO's claim for specific
performance.8
III. THE DISTRICT COURT ERRED IN CONCLUDING, AS A MATTER OF
LAW, THAT NOVELL HAS THE RIGHT TO "WAIVE" SCO'S RIGHTS UNDER ALL
CONTRACTS RELATING TO SVRX INCLUDING THE SOFTWARE AND SUBLICENSING
AGREEMENTS.
A. The Term "SVRX Licenses" Is Ambiguous.
Article 4.16(b) of the APA grants Novell rights over only those
licenses that are supposedly "listed in detail" in Item VI of the
Assets Schedule and called "SVRX Licenses" in the APA. (00287.) The
scope of Novell's rights to force SCO to waive its contractual
rights against IBM thus turns on the meaning of the term "SVRX
Licenses". In concluding (at 12062-63 and 12070) that the term
unambiguously includes "all contracts relating to SVRX," including
Software and Sublicensing Agreements, the district court erred for
several related textual reasons.
First, the term "SVRX Licenses" is obviously ambiguous, as
it is not defined, except in a circular reference to itself.
Article 4.16(a) identifies the
53 (63)
"SVRX Licenses" by pointing to a supposed list in Item VI of the
Assets Schedule. (00287.) The introductory sentence of Item VI also
refers to a forthcoming list of SVRX Licenses — "All
contracts relating to the SVRX Licenses and Auxiliary Product
Licenses (collectively 'SVRX Licenses') listed below" — but
the definition runs into a dead-end, as no list of licenses
follows, only a list of products. (0031516; 00366-69.) The "SVRX
Licenses" are thus defined as a list of "SVRX Licenses" that is
supposed to appear in Item VI, but that does not appear anywhere in
the APA. The absence of any definition supports a finding of
ambiguity.
Bay Cities Paving & Grading, Inc. v. Lawyers.
Mut. Ins. Co., 5 Cal. 4th 854, 867 (1993). Since the APA does
not identify the licenses under which Novell retained waiver and
royalty rights, the district court should have looked outside the
four corners of the Agreement — under even the traditional
standard for use of extrinsic evidence and certainly under the
broader standard adopted by the California Supreme Court and that
governs interpretation of the APA. (Part I, above.)
The district court (at 12060) in fact acknowledged that
there "appears to be some ambiguity in the APA's attempt to define
SVRX Licenses," but decided to resolve the ambiguity on summary
judgment anyway. The court's acknowledgment of any ambiguity
underscored the need both to consider the potential meaning of
"SVRX Licenses" within the context of the APA as a whole
54 (64)
and to consider the extrinsic evidence of the meaning of the
term, both of which the court failed reasonably to do.
Recognizing the ambiguity, the district court turned that
ambiguity against SCO and took an "inferential step" (at 12060) in
favor of Novell. The court reasoned (at 12065) that the parties
could have used clearer language to define "SVRX Licenses" to mean
only those licenses in which Novell was retaining a financial
interest, as SCO proposed. Of course, the parties also could have
used clearer language if they intended "SVRX Licenses" to include
the Software and Sublicensing Agreements — they could have
properly defined the term, or defined the term with references to
actual "licenses."
Second, by adopting Novell's reading, the district court
erred by confusing the introductory sentence of Item VI with the
list that appears under that sentence. Like all other Items in the
Asset Schedule, Item VI identified assets being transferred to
Santa Cruz under the APA. In that context, Item VI identifies "all
contracts relating to the SVRX Licenses" listed below it as assets
that Santa Cruz was purchasing. (00315-16;00363.) Instead of
independently listing the "SVRX Licenses" over which Novell was
retaining royalty and waiver rights, Article 4.16 cross-referenced
a portion of Item VI — the list. (00287 (describing the SVRX
Licenses as being "listed in detail under Item VI of Schedule
1.1(a)").) By its own
55 (65)
terms, the clear language of Article 4.16(b) applies only to the
SVRX Licenses "listed below" the introductory sentence of Item VI
— not to "all contracts relating to" the list. That broader
category of all contracts relating to the list — in contrast
to the list itself — defines the assets that were
being transferred to Santa Cruz.
The district court thus confused Item VI, which identifies the
assets Santa Cruz was purchasing, with the portion of Item VI that
Article 4.16 cross-references as licenses over which Novell was
retaining waiver rights.
B. The APA Separately Transfers the Software and
Sublicensing Agreements to Santa Cruz Without
Any Reservation of Rights for Novell.
The Assets Schedule lists several separately numbered "items"
being sold to Santa Cruz. (00313-16.) In Item III.L of the Assets
Schedule, Novell sold to Santa Cruz "All of Seller's rights" in a
list of assets, including the "Software and Sublicensing
Agreements" with IBM at issue, without any reservation of rights.
(00314-15.) The "SVRX Licenses" in Item VI, by contrast, are assets
over which Novell retained rights under Article 4.16. The district
court's conclusion that the "SVRX Licenses" in Item VI include the
Software and Sublicensing Agreements expressly sold under a
separate Item would mean that the APA transferred the Software and
Sublicensing Agreements twice. (12063;12070;12082.) It is error to
read an agreement in a way that renders a term or provision
redundant. Boghos v.
56 (66)
Certain Underwriters at Lloyd's of London, 36 Cal. 4th
495, 503 (2005); accord United States v.
Gonzalez-Garcia, 85 Fed. Appx. 160, 164 (10th Cir. 2004). Since
the Software and Sublicensing Agreements are already transferred by
name in Item III.L of the Assets Schedule, the term "SVRX Licenses"
in Item VI cannot properly be read to include the Software and
Sublicensing Agreements with IBM.
C. The District Court's Interpretation of Article 4.16(b)
Destroys
The Value of the Assets Santa Cruz Purchased.
As a means of financing Santa Cruz's purchase of the UNIX
licensing business from Novell, Santa Cruz had agreed to allow
Novell to continue receiving the residual royalty payments under
the Product Schedule Licenses. (0861112
¶¶6-7;00265-66;00287;00315-16;00360-63;04624-26¶¶10-14;04609-11¶¶1317.)
To protect that limited right, Novell retained certain rights over
the licenses that governed such payments — the Product
Schedule Licenses. (00287;0247273 ¶¶6-7;08537.)
The district court, however, broadened the list of SVRX Licenses
over which Novell had maintained 4.16(b) rights to also include the
Software and Sublicensing Agreements, such as those with IBM. Those
agreements protected the UNIX licensing business by providing its
owner protections against disclosure of the UNIX source code upon
which the value of the licensing business was
57 (67)
predicated. (See, e.g., 01472;01475;13142.) By including
even agreements that do not impose any royalty obligations (such as
the Software and Sublicensing Agreements) in the "SVRX Licenses"
over which Novell retained rights, the court thus destroyed the
value of the assets that Santa Cruz purchased under the APA.
Under the district court's interpretation, Novell can grant IBM,
and any other UNIX licensees of Novell's choosing, the right to
distribute, export, or even open source the valuable UNIX source
code, without any protection or compensation for SCO. Since UNIX
products are derived progressively from prior releases, moreover,
UnixWare contains all the commercially valuable features of
predecessor SVRX source code.
(15540-41;15447-50;02398¶27;02411¶31.) Under the court's
interpretation of Article 4.16, Novell thus could empower IBM and
others to destroy the value of UnixWare, which even Novell concedes
was sold to Santa Cruz without limitation.
The district court's interpretation also obviously destroys the
value of the independent asset that Santa Cruz indisputably
purchased from Novell — "claims arising after the Closing
Date against any parties, relating to any right, property or asset
included in the Business." (00314.) Under the court's
interpretation, Novell could waive any such claims to suit its
purposes, as Novell in fact purported to do when it came to IBM's
defense in 2003.
58 (68)
(01920;01937;01950;01960;01965.) Novell thus could empower IBM
and other licensees to breach UNIX agreements and leave SCO without
recourse, even though Santa Cruz had purchased all rights under
those agreements.
The district court's interpretation raises other absurd results.
Since the technology licensed back to Novell under the TLA includes
SVRX products (00268;00361;03690;00313), under the court's reading,
the TLA is an SVRX License. As such, Novell could have waived Santa
Cruz's rights under the agreement, abolishing the non-compete and
other protections that Santa Cruz had negotiated and secured from
Novell. (00268;03690.) In addition, since Santa Cruz was itself an
SVRX licensee whose business was the development and sale of a UNIX
flavor known as OpenServer (00357;05626-27), Novell could have
revoked Santa Cruz's rights under its own Software and Sublicensing
Agreements, destroying the business Santa Cruz had built
prior to the APA.
D. Overwhelming Extrinsic Evidence Confirms that Novell
Did Not Retain Any Rights Over Software and
Sublicensing Agreements.
Nine witnesses on both sides of the transaction, including
Messrs. Frankenberg and Mohan, testified that the parties did not
intend for Novell to have the rights over the Software and
Sublicensing Agreements, or over subsequent claims based on those
Agreements, that the district court afforded Novell; these
59 (69)
same witnesses testified that the APA was intended to limit
Novell's 4.16(b) rights to its interest in SVRX Royalties.
(08540-41;05653¶13;03553-54¶7;08592;
03929-30¶4;03677-78¶10;03561¶9;03858-59¶¶4-5;03937¶13.)
In addition, John Maciaszek, Bill Broderick, and Jean Acheson, who
have managed UNIX licensing and revenues since prior to the APA,
testified that they implemented the APA with their Novell
counterparts in accordance with that intent without controversy.
(02394-96¶¶15-21;02407-09¶¶19-24;02418-19¶¶5-6.)
In 1996, Novell and Santa Cruz already resolved the same dispute
over whether Novell's 4.16 rights extended to IBM's Software and
Sublicensing Agreements. Only months after the APA closed, Novell's
worldwide sales director purported to amend IBM's Software and
Sublicensing Agreements to grant IBM a royalty buyout and rights to
sublicense UNIX source code. (03871¶¶31-32;1040003.) When
Santa Cruz objected that it had "ownership and exclusive rights to
license the UNIX source code" and that "[a]s to source code, Novell
must recognize that it has no interest whatsoever," Novell did not
even mention the rights it now purports to have, even though those
rights would have resolved the entire dispute.
(03879-99;13908-36;04883-93;13511-21;13546.) Instead, after more
than six months of negotiations, Novell agreed in Amendment No. 2
that it "may not prevent SCO from exercising its rights with
respect to SVRX source
60 (70)
code in accordance with" the APA. (03695.) Novell also paid
Santa Cruz $1.5 million for a release of its claims against Novell
for Novell's unauthorized attempt to expand its Article 4.16(b)
rights, capitulating to Santa Cruz's claim that it had acquired
"ownership and exclusive rights to license the UNIX source code."
(03915;03890.)
Extrinsic evidence confirms that Amendment No. 2 clarified that
Santa Cruz owned and could take whatever actions it wanted with
regard to the UNIX source code. (10725;10730.) Novell's subsequent
course of performance further confirms that the parties intended
Novell's 4.16(b) rights to be limited to its royalty interest and
not to the agreements that governed the UNIX licensing business.
(01432;10645;10652;10657;10710;03838;03843;03845;02384-86;02970;02972;
02974.) If Novell believed during any of this time that it had
retained unfettered rights over the Software and Sublicensing
Agreements that governed the UNIX licensing business, it would not
have announced the unqualified transfer of its rights under those
agreements or sought authorization from Santa Cruz to
conduct UNIX licensing.
The district court declined (at 12068) to consider the foregoing
evidence on the grounds that "it does not uniformly support SCO's
interpretation" and "would, at most, create only a question of fact
for the jury" — which, of course are grounds
61 (71)
for denying a motion for summary judgment, not granting
it. Where the court addressed the extrinsic evidence (at 12068-69),
it improperly drew inferences from evidence against SCO.
First, the district court appears to have been confused
about the split of revenues from Amendment No. X — the 1996
Agreement with IBM that replaced the Unauthorized Amendment that
Novell had purported to execute without telling Santa Cruz. The
court observed (at 12069) that "SCO does not dispute that it
treated all of the SVRX revenue from Amendment No. X as subject to
the 95/5 split that the APA applied exclusively to SVRX Licenses."
The court was factually mistaken. The undisputed evidence is that,
of the $10.125 million that IBM paid in 1996, Santa Cruz retained
$1.5 million for the rights to sublicense source code granted in
the amendment, in addition to the 5% it was entitled to
under the split. (04380;04384;03915.)
Second, the district court improperly weighed the
evidence. Pointing to certain instances of Santa Cruz's conduct in
1996, the court maintained (at 12069) that "[t]his evidence
regarding the parties' conduct is close in time to the execution of
the APA and, therefore, more persuasive as to the meaning of the
agreement" and that the witness testimony "is less reliable given
the passage of years and witnesses' mistaken beliefs." The court
did not apply the same standard for
62 (72)
credibility to Novell's witnesses and behavior. Regardless, the
court's attribution of different weight to documentary evidence and
witness testimony was error. Employers Reinsurance, 161 Cal.
App. 4th at 922.
IV. THE DISTRICT COURT ERRED IN CONCLUDING THAT NOVELL DID
NOT HAVE TO COMPLY WITH THE IMPLIED COVENANT OF GOOD FAITH AND FAIR
DEALING IN EXERCISING ITS ARTICLE 4.16(b) RIGHTS.
In the alternative, if Novell had the right to force SCO to
abstain from enforcing its rights, Novell was required to exercise
such vast authority in conformity with the implied covenant of good
faith and fair dealing. "Every contract imposes upon each party a
duty of good faith and fair dealing in its performance and its
enforcement." Carma Developers (Cal.), Inc. v. Marathon Dev.
Cal., Inc., 2 Cal. 4th 342, 371 (1992). The district court
erroneously held that Novell had no such obligation.
"The covenant of good faith finds particular application in
situations where one party is invested with a discretionary power
affecting the rights of another."
Id. at 372.
9 Provisions
granting a party "discretion" (even "sole discretion") differ from
express contractual rights.
See, e.g.,
Locke v. Warner
Bros. Inc., 57 Cal. App. 4th 354, 367 (1997). The "discretion"
afforded Novell under Article 4.16(b)
63 (73)
is "a discretionary power affecting the rights of another" and
thus must be exercised in accordance with the implied covenant of
good faith and fair dealing.
"In the case of a contradictory and ambiguous contract,"
moreover, "the implied covenant may be applied to aid in
construction." April Enters., Inc. v. KTTV, 147 Cal. App. 3d
805, 816 (1983). In KTTV, the contract at issue contained an
express provision allowing one party to erase tapes of a television
show produced by the other after broadcast, but another provision
gave the producer the right to sell those same shows in
syndication. The court reasoned: "Taken literally, the contract
would allow respondents to erase a video tape either at the same
time appellant was negotiating a syndication agreement, or after
such an agreement had been reached. Obviously it would be senseless
for appellant to negotiate syndication if it could not be assured
availability of the tapes." Id. at 816. The court concluded:
"These conflicting terms of the 1965 contract can be reconciled by
construing the erasure clause to be limited by the implied covenant
of fair dealing." Id. at 817.
Taken literally (in light of the district court's ruling on the
scope of SVRX Licenses), the APA would allow Novell to destroy the
business Santa Cruz had purchased, and solely with the goal of
impeding Santa Cruz's rights and hurting it financially —
which the evidence shows is exactly what Novell did in this
case.
64 (74)
Such an interpretation is disfavored. See, e.g., Leo
F. Piazza Paving Co. v. Found Constr., Inc., 128 Cal. App. 3d
583, 591 (1981). Indeed, courts must imply a covenant of
good faith, even if at odds with an express grant of discretionary
power, where "reading the provision literally would, contrary to
the parties clear intention, result in an unenforceable,
illusory agreement." Third Story Music, Inc. v. Waits, 41
Cal. App. 4th 798, 808 (1995) (emphasis added).
Under the district court's interpretation, the 4.16(b) waiver
provisions should not be interpreted so broadly as to mean Santa
Cruz paid what has amounted to approximately $250 million for
rights that Novell could abrogate at its whim by, among other
things, allowing licensees to violate contract and intellectual
property rights. Whether Novell was motivated to exercise its
purported waiver rights due to IBM's $50 million payment or for
some other reason, it is clear that the action damaged SCO,
interfered with its rights to manage the UNIX business that it had
purchased under the APA, and thus cannot be accepted, beyond
factual dispute, as a good-faith exercise of discretion.
65 (75)
V. THE DISTRICT COURT ERRED IN CONCLUDING, AS A MATTER OF
LAW, THAT NOVELL IS ENTITLED TO ROYALTIES FROM POST-APA CONTRACTS
RELATED TO SVRX.
The APA defines "SVRX Royalties" as certain payments due under
"SVRX Licenses." (00287.) The district court concluded as a matter
of law (at 12082-83) that even post-APA contracts relating to SVRX,
such as the Sun Agreement, are "SVRX Licenses" under the APA. The
language of the APA makes clear, however, that the term "SVRX
Licenses" refers to then-existing assets.
First, the SVRX Licenses are expressly "listed" in the
Assets Schedule among the "assets and properties of Seller," that
is, the assets and properties that Novell actually owned and could
sell at the time. (00264;00313.)
Second, Article 1.2(b) provides that "Seller is retaining
all rights to the SVRX Royalties notwithstanding the
transfer of SVRX Licenses to Buyer pursuant hereto, and that Buyer
only has legal title" in such royalties. (00265 (emphasis
added).) This language suggests that that the royalties and
licenses are existing assets — one a revenue stream being
kept by Novell, the other the revenue-generating licenses being
transferred to Santa Cruz. The use of the present tense "has"
indicates existing royalties; Santa Cruz could not have had "title"
in non-existing assets.
66 (76)
Third, Article 1.2(b) provides that "[f]or purposes of
administering the collection of SVRX Royalties, the parties
acknowledge that the royalties shall continue to be recognized as
royalties by Seller on an ongoing basis," clearly indicating
that the SVRX Royalties were an existing revenue stream.
(Id. (emphasis added).) In contrast, Article 1.2(b) provides
for conditional UnixWare payments "on account of Buyer's future
sale of UnixWare products." (Id. (emphasis added).) The
contrast shows that the drafters knew how to provide for royalties
from future licenses.
Fourth, the reading of "SVRX Licenses" limited to
existing licenses fits the financial structure of the deal. The APA
contemplated that Santa Cruz would not typically enter into new
SVRX Licenses. (00287.) Instead, to protect Novell's interest in
SVRX Royalties, existing OEM licensees needed to "convert" to the
current version of UnixWare. (00321.) Each licensee thus
represented a single source of royalties for Novell, under either
its conditional interest in UnixWare sales or its existing interest
in SVRX Royalties, but not both. (See 08537-38.)
Fifth, Novell is not entitled to any revenues from the
Sun agreement specifically for the additional reason that Sun had
already paid Novell $83 million in 1994 for a buyout of Sun's
royalty-payment obligations. (00889-911.) Accordingly, Novell was
not entitled to any SVRX Royalties even under Sun's
67 (77)
pre-APA license to SVRX. Ten witnesses on both sides of the
transaction testified that, consistent with the language of the
APA, Novell's rights in SVRX Royalties were limited to the royalty
stream being paid by licensees under existing licenses.
(08537-38;08518;02472¶7;08760;08588;02431¶4;02438¶4;0888889;
10729;02483¶12; see also 02488.)
The district court reasoned (at 12074-75) that the term SVRX
Licenses must include post-APA licenses because Amendment No. 1
provides that Santa Cruz would retain several "categories of SVRX
Royalties," including "fees attributable to new SVRX licenses." But
that language creates an ambiguity in the APA, as it conflicts with
other language in the APA that unambiguously identifies SVRX
Licenses and royalties as existing assets. (See,
e.g., 00265;00315.) Amendment No. 1 thus incongruously removes
from the scope of "SVRX Royalties" assets that are not included in
the scope of the term in the first place. This inherent conflict
within the APA thus creates an ambiguity as to whether fees from
"new SVRX licenses" are SVRX Royalties.
Ten witnesses on both sides of the transaction testified that
the term "SVRX Licenses" was intended to refer to then-existing
licenses. (08537-38;08518;
02472¶7;08760;08588;02431¶4;02438¶4;08888-89;10729;02483¶12.)
As noted above, upon the closing of the APA, Novell described the
SVRX Royalties as
68 (78)
"revenue from
existing licenses for older version of UNIX"
in a press release and in multiple SEC filings in 1995 and 1996.
(02182;02232;02302;02320;02341.)
Moreover, the parties already resolved the dispute over the
scope of Novell's rights to SVRX Royalties in 1996, as part of the
settlement of Novell's attempt to grant IBM an unauthorized buyout.
At that time, Mr. Mohan told Mr. Frankenberg that the APA "provided
for Novell to receive the residual royalties from the in- place
SVRX license stream." (02488 (emphasis added).) In the ensuing
months of negotiations, Novell did not once challenge that
assertion. (03887;03879901; 13538-49.) Indeed, Novell's former UNIX
contract manager, Jean Acheson, testified that — until SCO
filed this lawsuit in 2004 — Novell never requested revenues
from certain post-APA SVRX agreements and did not even audit such
agreements or revenues in its 1998 audit of Santa Cruz.
(04635-36¶¶2-9.)
69 (79)
CONCLUSION
For the foregoing reasons, SCO respectfully requests that the
Court reverse the district court's summary judgment rulings that
(1) Santa Cruz did not acquire the UNIX and UnixWare copyrights
under the APA; (2) in the alternative, SCO is not entitled to
specific performance, requiring the transfer of those copyrights
now; (3) Novell has the right under the APA to force SCO to waive
claims against IBM for its breach of UNIX Software and Sublicensing
Agreements; (4) Novell is not required to comply with the covenant
of good faith and fair dealing in exercising its 4.16(b) rights
under the APA; and (5) Novell is entitled to royalties from post-
APA licenses related to SVRX, including the Sun Agreement, and that
the Court remand the case for further proceedings consistent with
its decision.10
70 (80)
Respectfully submitted on this 4th day of March, 2009.
/s/ Edward Normand
David Boies
Robert Silver
Edward Normand
BOIES, SCHILLER & FLEXNER LLP
[address]
[phone]
[fax]
[email addresses] |
Brent O. Hatch (5715)
Mark F. James (5295)
HATCH, JAMES & DODGE, PC
[address]
[phone]
[fax]
[email addresses] |
Stuart Singer
BOIES, SCHILLER & FLEXNER LLP
[address]
[phone]
[fax]
[email address] |
Devan V. Padmanabhan
DORSEY & WHITNEY LLP
[address]
[phone]
[fax]
[email address] |
Attorneys for Plaintiff-Appellant, The SCO Group,
Inc.
71 (81)
CERTIFICATE OF COMPLIANCE WITH
FEDERAL RULE OF APPELLATE PROCEDURE 32(a)
Certificate of Compliance with Type-Volume
Limitation, Typeface Requirements
and Type Style Requirements
1. This brief complies with the type-volume limitation of Fed.
R. App. P. 32(a)(7)(B) because this brief contains 13,948 words,
excluding the parts of the brief exempted by Fed. R. App. P.
32(a)(7)(B)(iii).
2. This brief complies with the typeface requirement of Fed. R.
App. P. 32(a)(5), and the type style requirements of Fed. R. App.
P. 32(a)(6) because this brief has been prepared in a
proportionally spaced typeface using Microsoft Word 2002 in
14-point Times New Roman.
Dated: March 4, 2009
/s/ Edward Normand
Edward Normand
Boies, Schiller & Flexner LLP
[address]
[phone]
[fax]
[email address]
(82)
CERTIFICATE OF SERVICE
I, Edward Normand, hereby certify that on this 4th day of March,
2009, a true and correct copy of the foregoing BRIEF OF
APPELLANT, THE SCO GROUP, INC. was filed with the court and
served by hand delivery in accordance with Fed. R. App. P. Rule
25(c)(1)(A), in accordance with the exception enumerated in Fed. R.
App. P. Rule 26(c), to the following recipient:
David E. Melaugh
MORRISON & FOERSTER
[address]
Counsel for Defendant-Appellee Novell, Inc.
A true and correct copy of the above mentioned BRIEF OF
APPELLANT, THE SCO GROUP, INC. was also served via electronic
mail to the following recipients:
Thomas R. Karrenberg
Heather M. Sneddon
ANDERSON & KARRENBERG
[address]
(83)
Michael A. Jacobs
George C. Harris
David E. Melaugh
MORRISON & FOERSTER
[address]
Counsel for Defendant-Appellee Novell, Inc.
/s/ Edward Normand
Edward Normand
Boies, Schiller & Flexner LLP
[address]
[phone]
[fax]
[email address]
(84)
CERTIFICATE OF SERVICE
I, Edward Normand, hereby certify that on this 3rd day of March,
2009, a true and correct copy of APPELLANT'S APPENDIX was
served via Federal Express Priority Overnight service for delivery
on the morning of March 4, 2009, to the following recipients:
Thomas R. Karrenberg
Heather M. Sneddon
ANDERSON & KARRENBERG
[address]
Michael A. Jacobs
George C. Harris
David E. Melaugh
MORRISON & FOERSTER
[address]
Counsel for Defendant-Appellee Novell, Inc.
/s/ Edward Normand
Edward Normand
Boies, Schiller & Flexner LLP
[address]
[phone]
[fax]
[email address]
(85)
CERTIFICATE OF SERVICE
I, Alexander Marr, hereby certify that on this 4th day of March,
2009, I served via hand delivery, a true and correct copy of the
foregoing BRIEF OF APPELLANT, THE SCO GROUP, INC. in
accordance with Fed. R. App. P. Rule 25(c)(1)(A), in accordance
with the exception enumerated in Fed. R. App. P. Rule 26(c), to the
following recipient:
David E. Melaugh
MORRISON & FOERSTER
[address]
Counsel for Defendant-Appellee Novell, Inc.
/s/ Alexander Marr
Alexander Marr
Boies, Schiller & Flexner LLP
[address]
[phone]
[fax]
[email address]
(86)
CERTIFICATE OF DIGITAL
SUBMISSION
The undersigned certifies with respect to this filing that no
privacy redactions were necessary. This BRIEF FOR APPELLANT, THE
SCO GROUP, INC. submitted in digital form is an exact copy of
the written document filed with the Clerk. The digital submission
has been scanned for viruses with the most recent version of a
commercial virus scanning program (using Symantec Antivirus which
is updated weekly) and, according to the program, is free of
viruses.
Dated: March 4, 2009
/s/ Edward Normand
Edward Normand
Boies, Schiller & Flexner LLP
[address]
[phone]
[fax]
[email address]
(87)
|
The Court also made other findings in its August 2007 and July
2008 orders not discussed in text as they are not the subject of
this appeal. |
|
Witnesses in the software business testified that purchasing a
software business is synonymous with purchasing the copyrights.
(08914;0894041; 10722;08638.) Mr. Michels, who had worked in the
software business for twenty years, testified: "[T]he only way that
I know of, and anyone on my team knew of to buy a software business
is to buy the copyrights . . . . Every single person on my team
understood that. The lawyers understood. The business development
people understood it. The people at Novell understood it." (08914.)
Mr. Michels likened this proposition to "breathing oxygen."
(Id.) |
|
As a threshold matter, the finding of an implied license
presents a "classic question of fact." Axcess Broadcast Servs.,
Inc. v. Donnini Films, No. Civ.A. 3:04-CV-2639, 2006 WL
1115430, at *5 (N.D. Tex. Apr. 26, 2006) (unpublished). |
|
Gillespie v. AST Sportswear, Inc., No. 97 Civ. 1911
(PKL), 2001 WL 180147, at *7 (S.D.N.Y. Feb. 22, 2001)
(unpublished). |
|
In addition, the Amendment cannot properly be read as an
"affirmation" without improperly gutting Paragraph A of Amendment
No. 2 of any independent meaning or significance. See
City of Atascadero v. Merrill Lynch, 68 Cal. App. 4th 445,
473 (1998); Dietrich v. Albertsons Inc., No. 94-2103, 1995
WL 355246, at *5 (10th Cir. June 14, 1995) (unpublished). |
|
The district court also imposed a double-standard: If Ms.
Amadia's and Mr. Tolonen's understandings of what Amendment No. 2
accomplished are relevant, as noted above, then Mr. Sabbath's
understanding must similarly be relevant, thus creating a fact
issue for the jury. |
|
The unamended APA itself reflects an ambiguity. Because the
core ownership rights to an operating system are its copyrights,
the transfer of "All rights and ownership" of UNIX and UnixWare
plainly includes the UNIX and UnixWare copyrights. In
juxtaposition, the Assets and Excluded Assets Schedules cannot
reasonably be read to include and exclude those copyrights at the
same time. At minimum, the exclusion of "All copyrights" makes
hollow the simultaneous transfer of "All rights and ownership of
UNIX and UnixWare." |
|
SCO is also entitled to the transfer of copyrights under three
other provisions of the APA, which expressly require Novell to
perform "all actions" required to effectuate the intent of the deal
(00268§1.7;00285§4.9;00286§4.12), which was to
transfer the copyrights. (See Statement of Facts, Section
II.C, above.) |
|
Accord Perdue v. Crocker Nat'l Bank, 38 Cal. 3d
913, 923 (1985); see, e.g., Cal. Lettuce Growers v. Union
Sugar Co., 45 Cal. 2d 474, 484 (1955); Badie v. Bank of
Am., 67 Cal. App. 4th 779, 795-96 (1998). |
|
Based on the guidance of the Clerk's Office, in addition to the
expedited briefing schedule that this Court has set, SCO
respectfully requests that oral argument be scheduled in this
matter for either the May 2009 panel or a special panel to convene
in June 2009. SCO is willing to file its reply brief earlier than
otherwise required in order to facilitate that scheduling. |