SCO has now filed its appeal brief with the 10th Circuit Court of Appeals. This is the second time SCO has appealed a loss in the US District Court in Utah to this appeals court.
This time, SCO asks the appeals court to rule that the lower court erred in finding that SCO does not require the UNIX and UnixWare copyrights. Considering that is what SCO's CEO at the time told the SEC, they are, in short, as cheeky as ever. Their argument is that they didn't need it for the technology business, but they need them to litigate. Also, SCO asks it to consider if the court erred in ruling that Novell can waive IBM's alleged breaches of the license agreement. SCO also takes issue with the judge at the second SCO v. Novell trial, the Hon. Ted Stewart, allowing the jury to hear about the 2004 BusinessWeek article calling SCO the "Most Hated Company" in the technology industry. Also it takes issue with the judge's evidentiary rulings. For example, SCO doesn't like it that the judge allowed the jury to hear about the earlier decisions in Novell's favor. What is the relief that SCO is requesting this time? SCO respectfully requests, for the foregoing reasons, that the Court reverse the district court’s denial of SCO’s motion for judgment as a matter of law on SCO’s claim for slander of title, or, in the alternative, grant a new trial; and that the Court reverse the district court’s findings of fact and conclusions of law as set forth herein. A new trial. Of course. There can never be too many trials for SCO, as it would like to actually win one and would prefer to keep trying until it does so. Apparently money is no object to a company that is in bankruptcy, has paid none of its creditors, and is now trying to sell off essentially all its assets but the litigation on which it long ago set all its hopes and dreams. And you can't say it's impossible to get an empathetic hearing from this court of appeals. It bent over backwards for SCO last time, granting it this 2nd trial that SCO then lost. So who knows? My grandchildren may someday be writing about the next SCO v. Novell retrial, as this crazed monomania seems to have no closing chapter.
Here it is, but I must warn you, it's 195-pages long, because of attachments, the orders on appeal, the brief itself being 71 pages:
09/09/2010 - Open Document - [9796063] Appellant/Petitioner's brief filed by SCO Group. Original and 7 copies. Served on 09/09/2010 by email, ECF/NDA. Oral argument requested? Yes.
As you can see, they want the opportunity to have oral argument. We have one volunteer to attend, if the request is granted. But I hope others can arrange to go as well. It's always important to have backup, because there are always last-minute issues and unforeseen circumstances that can arise.
Here are the four issues on appeal that SCO brings to the court of appeals, in SCO's words:
1. Did the district court err in finding that SCO does not require any of the UNIX and UnixWare copyrights in connection with the UNIX and UnixWare technology and software business it acquired from Novell, and in thus denying SCO’s Rule 50(b) motion for judgment as a matter of law?
2. Did the district court abuse its discretion in denying SCO’s alternative motion for a new trial on copyright ownership, and err in denying SCO’s alternative claim for specific performance?
3. Did the district court err in finding that under the Asset Purchase
Agreement at issue Novell was entitled to waive SCO’s claims with respect to IBM’s alleged breaches of license agreements that SCO acquired?
4. Did the district court abuse its discretion by (i) changing course from its rulings in the first two weeks of trial, in which it found that such evidence was extremely prejudicial to SCO, and allowing Novell to inform the jury of judicial decisions in Novell’s favor that this Court had reversed; (ii) allowing Novell to confuse the jury by relying upon “exclusion of copyright” language that had been replaced by an amendment to the Asset Purchase Agreement; and (iii) admitting double-hearsay of SCO’s purported reputation as the “Most Hated Company” in the technology industry?
Here's Judge Stewart's ruling against SCO on its Rule 50(b) motion which claimed "the jury simply got it wrong" and so the judge should overrule them, also regarding the matters of Novell being able to waive breaches and SCO not needing the copyrights.
Here's the day, day 9 of the trial when the jury heard about the earlier rulings, as objected to by SCO in issue 4. It was in connection with the testimony of Dr. Christine Botosan, one of SCO's experts. You'll find the arguments about it beginning on page 1392, line 12.
Here's the day when the "most hated company" article first came up and the parties' lawyers debated whether the jury could be allowed to hear it.
Here's the day when the issue of the jury learning about the earlier court rulings came up, as you can see beginning on page 1192, line 2, and going through page 1198, line 22.
That's the same day when Novell entered into evidence SCO's SEC filing which stated that SCO didn't need the UNIX and UnixWare copyrights to run its technology business.
The issue of whether the jury was confused by relying upon "exclusion of copyright" language came up repeatedly. Here's the first time that I recall SCO's lawyer Stuart Singer raising the issue, on page 129, beginning on line 19. But there were other instances, I seem to recall. So here's the calendar of the transcripts of each day of trial, and you can find examples yourself:
Here's the section from SCO's brief regarding its evidentiary issues: A. Evidentiary Rulings. On remand from this Court, in March 2010, the district court held a three-week jury trial on SCO’s claim for slander of title, in which was embedded the issue of copyright ownership.2 There are three evidentiary rulings from that trial that are raised in this appeal.
First, over SCO’s objections (A2548-49), the district court permitted Novell to tell the jury about the prior, reversed decisions the district court had issued in Novell’s favor. (A2548-50.) Novell had repeatedly sought to have the decisions introduced, beginning with its motions in limine (A400-19) and continuing throughout the first half of trial (A1117-21;A1471-75;A1638-72;A1734-41). The court denied all of those requests on the grounds that informing the jury of the decision would be unduly confusing and prejudicial. (A1112-16;A1334- 38;A1476-79;A2363:775-76.) In so doing, the court acknowledged that the prejudicial effect to SCO of such evidence was “extremely high.” (A2628:1794.)
In the second week of trial, however, the court decided to permit Novell to quote from the prior decisions in cross-examining Dr. Christine Botosan, SCO’s damages expert, on the theory that the decisions pertained to the “but for” world of Dr. Botosan’s damages model. (A2549:1494-95.) Novell’s counsel proceeded to read from the district court’s June 2004 and August 2007 decisions, with respect to Novell’s motion to dismiss and motion for summary judgment, respectively. Novell first read from the June 2004 decision, including the language stating that Amendment No. 2 “is not retroactive to the date of the APA” and that “although Amendment Number 2 states that its effective date is the date of the amendment, the language of Amendment Number 2 does not state that a transfer of the copyrights is to occur as of the date of the amendment.” (A2549:1494-95.)
After the district court gave a further instruction in a futile attempt to cure the prejudice to SCO (A2550:1498), Novell continued with its cross-examination of Dr. Botosan and asked further questions about the August 2007 “grant to Novell [of] judgment as a matter of law that Novell did not under the Asset Purchase Agreement, including Amendment Number 1 and Amendment Number 2, transfer ownership of the UNIX copyrights to Santa Cruz Operation or its successor The SCO Group.” (A2553-2555:1511-18; see also A2555-2556:1521-22.) Dr. Botosan explained at length the irrelevance of those decisions to the but-for world on grounds that Novell never sought to contradict. (A2550;A2555.)
Second, over SCO’s objections (see e.g., A2192-3), the district court permitted Novell to focus extensively on the old, removed exclusion of copyright language. (See, e.g., A2236-38;A2866-67.) Given the potential for the jury to be misled into relying on language that no longer existed, SCO moved in limine to restrict Novell’s use of the prior language in accordance with this Court’s decision. (A2192-93.) This motion was denied. (A1092-94;A2186;A2192-93.) While permitting Novell to question witnesses extensively about the removed language, the district court also precluded SCO even from asking several witnesses including SCO’s initial witnesses, Robert Frankenberg, Novell’s CEO at the time of the APA transaction, and Duff Thompson, Novell’s business development executive charged by the CEO to sell the UNIX business to SCO whether they knew that the original copyright language in the APA had been amended. (See, e.g., A2186;A2227;A2249-59.) The court’s rationale was that such witnesses were not involved in negotiating Amendment No. 2. (See, e.g., A2193.)
In light of these rulings, Novell came out of the gate seeking to convey the impression that the original copyright language of the APA was the only relevant language. (See, e.g., A2173-78;A2236-38;A2860-63;A2866-67;A2871.) Novell refused to use the admitted exhibit comprising the APA and the amendments thereto, insisting instead on using an exhibit that was just the text of the original APA. (See, e.g., A2216;A2234;A2236-37.) SCO’s objections to that were overruled. (See, e.g., A2237:298.) Novell even pointed to the original copyright language in conjunction with the integration clause of the APA – as if the jury could consider only the original language. (A2202-03.) When the district court warned counsel for Novell that if he further pursued his questions about the integration clause, then SCO would be permitted to revisit the issue of the application of Amendment No. 2, Novell’s counsel candidly stated: “Well, I don’t want the answer that badly, Your Honor.” (A2736.)
Third, over SCO’s objection, the district court allowed Novell to present the jury with a slide featuring the title to a Business Week article from 2004 describing SCO as the “Most Hated Company in Tech.” (A5091;A2815-16.) This was permitted on the basis that it was relevant for Novell’s expert, Terry Musika, to refute the testimony of Dr. Botosan that in a “but for” world in which Novell had not falsely claimed to own the UNIX and UnixWare copyrights, SCO would have made substantially greater revenues and profits. (A2510-61;A2829-36.)
Here's the Frankenberg testimony referenced, as well as the quotation about not wanting the answer that badly, which was a joke, not a "candid" admission, a joke that resulted in laughter in the courtroom, as you can see in our reporter's account of the day. Here's the day Duff Thompson testified.
What else might you want to review? Oh, the motions in limine are here. The jury verdict is here. The first SCO appeal is here. And the BusinessWeek article from 2004 on SCO being the most hated company in tech is worth reviewing, in that it predicted that SCO's lawsuit against IBM was "a long shot that may yield nothing but bile" and that "this dispute may amount to little more than theater". Amen to that.
I'll work on a text version, so we can analyze this more in detail. But this will get you started.
Update: Here's a quick and dirty text of just the brief. I'll improve the formatting and do the attachments in due time, but I don't want you to have to wait for the brief itself:
******************************************
No. 10-4122
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. Ted Stewart, Presiding
No. 2:04-CV-00139-TS
____________________________________
BRIEF FOR APPELLANT, THE SCO GROUP, INC.
ORAL ARGUMENT REQUESTED
____________________________________
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
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. On
September 14, 2007, SCO filed a petition for reorganization under Chapter 11 of
the Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware. On August 25, 2009, that Bankruptcy Court appointed former United
States District Judge Edward N. Cahn as Chapter 11 Trustee for SCO.
i
TABLE OF CONTENTS
CORPORATE DISCLOSURE STATEMENT ......................................................... i
TABLE OF AUTHORITIES .....................................................................................v
JURISDICTIONAL STATEMENT ..........................................................................1
ISSUES ON APPEAL ...............................................................................................1
STATEMENT OF THE CASE..................................................................................2
STATEMENT OF FACTS ........................................................................................3
I. DEVELOPMENT AND SALE OF UNIX......................................................3
A. The Sale of Assets Pursuant to the Amended APA. .............................5
B. Novell's "Waiver Rights" Under the Amended APA...........................8
II. THE TRIAL ON REMAND............................................................................9
A. Evidentiary Rulings...............................................................................9
B. The District Court's Rule 50(b) Decision. ..........................................13
C. Denial of SCO's New Trial Motion. ...................................................16
D. Non-Jury Findings on Novell's Waiver Rights...................................18
SUMMARY OF ARGUMENT ...............................................................................20
STANDARD OF REVIEW .....................................................................................23
ARGUMENT ...........................................................................................................24
ii
I. THE DISTRICT COURT ERRED IN DENYING SCO'S MOTION
FOR JUDGMENT UNDER RULE 50(b).....................................................24
A. The Amended APA Transferred Copyrights That SCO
"Required."..........................................................................................26
B. The UNIX and UnixWare Copyrights are "Required" by SCO. ........31
1. The Copyrights Are Required for SCO to Protect the
Source Code Underlying Its Business. .....................................31
2. The Copyrights Are Required for SCO to Exercise
Source-Code Licensing Rights. ................................................35
3. The Copyrights Are Required for SCO to Pursue the
Legal Claims It Acquired Under the APA................................37
II. IN THE ALTERNATIVE, THE DISTRICT COURT ABUSED
ITS DISCRETION IN DENYING SCO'S MOTION FOR A NEW
TRIAL AND ITS ALTERNATIVE CLAIM FOR SPECIFIC
PERFORMANCE..........................................................................................39
III. THE DISTRICT COURT ERRED IN CONCLUDING THAT
NOVELL RETAINED BROAD WAIVER RIGHTS TO DIRECT
SCO TO ABANDON LEGAL CLAIMS AGAINST IBM...........................41
A. Novell's Waiver Rights Did Not Extend to the IBM Software
Development Agreement.....................................................................42
B. Novell's Interpretation Must Be Rejected Because It Would
Give Novell the Ability to Destroy SCO's Benefits Under the
APA. ....................................................................................................46
C. Novell Breached the Implied Covenant of Good Faith and
Fair Dealing in the Amended APA. ....................................................48
iii
1. The District Court's Interpretation of Section 4.16
Makes the Amended APA Contradictory and
Ambiguous, as Well as Illusory. ...............................................49
2. The District Court's Finding that Novell Acted in Its
Economic Self-Interest Does Not Mean It Complied
With the Implied Covenant.......................................................51
IV. THE DISTRICT ABUSED ITS DISCRETION IN MAKING
CRITICAL EVIDENTIARY RULINGS THAT PREJUDICED
SCO................................................................................................................53
A. The District Court Wrongly Informed the Jury of Prior
Judicial Decisions Rendered Against SCO. ........................................53
B. The District Court Improperly Permitted Novell to Rely on
Language in the APA That Was Replaced..........................................56
C. The District Court Erred By Admitting Hearsay That SCO
Was "The Most Hated Company in Tech." ........................................60
CONCLUSION........................................................................................................62
ORAL ARGUMENT STATEMENT ......................................................................62
iv
TABLE OF AUTHORITIES
Cases
Black v. Heib's Enters., Inc.,
805 F.2d 360 (10th Cir. 1986) .......................................................................39
Blackburn v. Charnley,
117 Cal. App. 4th 758 (2004) ........................................................................40
Boghos v. Certain Underwriters at Lloyd's of London,
36 Cal. 4th 495 (2005) ...................................................................................43
Bosetti v. U.S. Life Ins. Co. in City of New York,
175 Cal. App. 4th 1208 (2009) ......................................................................52
Brown v. McGraw-Edison Co.,
736 F.2d 609 (10th Cir. 1984) .......................................................................39
Bryant v. Farmers Ins. Exch.,
432 F.3d 1114 (10th Cir. 2005) .............................................................. 24, 53
Davis v. Blige,
505 F.3d 90 (2d Cir. 2007) ............................................................................31
Dodge v. Cotter Corp.,
328 F.3d 1212 (10th Cir. 2003) .....................................................................60
Haynes Trane Serv. Agency, Inc. v. Am. Std., Inc.,
573 F.3d 947 (10th Cir. 2009) .......................................................................40
Henning v. Union Pac. R.R. Co.,
530 F.3d 1206 (10th Cir. 2008) .....................................................................23
Kavruck v. Blue Cross of Cal.,
108 Cal. App. 4th 773 (2003) ........................................................................25
v
Leo F. Piazza Paving Co. v. Found Constr., Inc.,
128 Cal. App. 3d 583 (1981) .........................................................................46
Lexington Ins. Co. v. Travelers Indem. Co. of Ill.,
No. 00-15407, 2001 WL 1132677 (9th Cir. 2001) ........................................46
Lyons v. Jefferson Bank & Trust,
994 F.2d 716 (10th Cir. 1993) ................................................................ 24, 53
Major v. W. Home Ins. Co.,
169 Cal. App. 4th 1197 (2009) ......................................................................52
Nieto v. Blue Shield of Cal. Life & Health Ins. Co.,
181 Cal. App. 4th 60 (2010) ..........................................................................53
Nish Noroian Farms v. Agric. Labor Relations Bd.,
35 Cal. 3d 726 (1984) ....................................................................................25
Okun v. Morton,
203 Cal. App. 3d 805 (1988) .........................................................................41
Shaw v. AAA Eng'g & Drafting,
213 F.3d 519 (10th Cir. 2000) .......................................................................24
Siemens Med. Solutions USA, Inc. v. Saint-Gobain Ceramics & Plastics,
Inc.,
615 F. Supp. 2d 884 (N.D. Iowa 2009) .........................................................39
Silvers v. Sony Pictures Entmt., Inc.,
402 F.3d 881 (9th Cir. 2005) .................................................................. 31, 38
The SCO Group, Inc. v. Novell, Inc.,
578 F.3d 1201 (10th Cir. 2009) ............................................................. passim
United States v. Gonzalez-Garcia,
85 Fed. Appx. 160 (10th Cir. 2004) ..............................................................43
vi
Wagner v. Live Nat'l Motor Sports, Inc.,
586 F.3d 1237 (10th Cir. 2009) .............................................................. 23, 24
Other Authorities
1 Copyright Law in Business and Practice § 9:1 (2009) .........................................32
1 Copyright Throughout the World § 19:29 (2009) ......................................... 31, 32
17 U.S.C.A. § 101 ....................................................................................................32
28 U.S.C. § 1331 ........................................................................................................1
28 U.S.C. § 1338(a) ...................................................................................................1
3 Patry on Copyright § 7:2 (2010) ...........................................................................31
Copyrights and Copywrongs: The Rise of Intellectual Property and How It
Threatens Creativity, 3 J. High Tech. L. 1 (2003).........................................31
Restatement (Second) of Contracts § 362 (1981) ....................................................41
STATEMENT OF PRIOR RELATED CASES
The SCO Group, Inc. v. Novell, Inc.,
578 F.3d 1201 (10th Cir. 2009)
vii
JURISDICTIONAL STATEMENT
Jurisdiction in the district court was grounded under 28 U.S.C. §§ 1331,
1338(a), 2201(a), and 2202. SCO timely filed its notice of appeal on July 7, 2010.
Jurisdiction in this Court is grounded under 28 U.S.C. § 1291.
ISSUES ON APPEAL
1. Did the district court err in finding that SCO does not require any of
the UNIX and UnixWare copyrights in connection with the UNIX and UnixWare
technology and software business it acquired from Novell, and in thus denying
SCO's Rule 50(b) motion for judgment as a matter of law?
2. Did the district court abuse its discretion in denying SCO's alternative
motion for a new trial on copyright ownership, and err in denying SCO's
alternative claim for specific performance?
3. Did the district court err in finding that under the Asset Purchase
Agreement at issue Novell was entitled to waive SCO's claims with respect to
IBM's alleged breaches of license agreements that SCO acquired?
4. Did the district court abuse its discretion by (i) changing course from
its rulings in the first two weeks of trial, in which it found that such evidence was
extremely prejudicial to SCO, and allowing Novell to inform the jury of judicial
decisions in Novell's favor that this Court had reversed;
(ii) allowing Novell to confuse the jury by relying upon "exclusion of copyright"
language that had been replaced by an amendment to the Asset Purchase
Agreement; and (iii) admitting double-hearsay of SCO's purported reputation as
the "Most Hated Company" in the technology industry?
STATEMENT OF THE CASE
SCO owns the UNIX source code and licensing business, including the
current versions of UNIX known as UnixWare. UNIX is a computer operating
system originally developed by AT&T in the 1960s. This case arises from
Novell's public claims in 2003 and 2004 that it had retained the UNIX copyrights
when it sold the UNIX business and technologies to SCO's predecessor-in-
investment under the APA, and Novell's actions seeking to prevent SCO from
pursuing legal claims against International Business Machines Corp. ("IBM") for
breaching contractual agreements acquired by SCO as part of the UNIX business.
This is an appeal from a jury verdict following a three-week trial, from
Findings of Fact and Conclusions of Law that the district court (Stewart, J.)
subsequently issued, and from the court's Memorandum Decision and Order
denying SCO's renewed motion for judgment as a matter of law or, in the
alternative, for a new trial, and the Final Judgment entered thereon, on remand
2
from this Court's decision in The SCO Group, Inc. v. Novell, Inc., 578 F.3d 1201
(10th Cir. 2009).
STATEMENT OF FACTS
I. DEVELOPMENT AND SALE OF UNIX
SCO is the successor-in-interest to all of the assets that The Santa Cruz
Operation, Inc. (unless otherwise indicated, also "SCO") acquired under an
amended Asset Purchase Agreement ("APA") with Novell in the mid-1990s,
concerning the "UNIX" operating system and its derivatives.
UNIX is a computer operating system developed by AT&T in the late 1960s.
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. Source code is the human-readable form of a
computer program, in contrast to binary code, which runs on computers but cannot
be read by people. Manufacturers, such as IBM, Sun Microsystems,
Hewlett-Packard, and others, used the System V source code to develop their own UNIX-derived "flavors" best suited for use on their respective computers. 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-users. While licensees could distribute their flavors to end-users in
3
binary form, the Software and Sublicensing Agreements licensees executed
required licenses to keep the UNIX source code confidential. IBM was such a
licensee and developed its own flavor of UNIX, which it named AIX. The SCO
Group, Inc. v. Novell, Inc., 578 F.3d 1201, 1204-05 (10th Cir. 2009).
UNIX System Laboratories, the AT&T spin-off that owned the UNIX
business, was sold to Novell in 1993 for over $300 million. Id. at 1205. Only two
years later, however, Novell decided to sell its UNIX business. In the summer of
1995, Novell started negotiations with Santa Cruz, a software company that was
itself a UNIX licensee. 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. Santa Cruz paid Novell in stock, worth
approximately $50 million, plus two revenue streams. (A2187:106-07;A2206:183-
84;A2351:735-36.) First, as a financing device, the parties agreed that although
SCO would acquire legal title to the royalty stream, Novell would retain an interest
in 95% of "SVRX Royalties," defined as the per-copy fees that existing UNIX
licensees paid to the UNIX business owner for distributions of certain pre-
UnixWare versions of UNIX System V designated in the APA as "SVRX" for
"System V Release __." This revenue stream was estimated to be $50 million for
the 1995 year alone. (A2224:248;A2235:292;A2350:730-32.) In addition, Novell
4
received a conditional interest of up to $84 million in UnixWare sales through
2002 (A3168¶c;A2338) an interest that expired without ever vesting.
A. The Sale of Assets Pursuant to the Amended APA.
The transfer of UNIX-related rights occurred as an asset sale, through the
APA; an Amendment No. 1 signed by the parties at the actual closing of the APA
on December 6, 1995; and Amendment No. 2 executed on October 16, 1996.
SCO, 578 F.3d at 1205.
Article 1.1(a) of 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. (A3110.) 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." (A3160; A3207¶k. (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. (A3160-63.) 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
5
[APA] required for SCO to exercise its rights with
respect to the acquisition of UNIX and UnixWare
technologies. However, in no event shall Novell be
liable to SCO for any claim brought by any third party
pertaining to said copyrights and trademarks.
(A3219 (emphasis added).) Prior to Amendment No. 2, Item V.A had excluded:
"All copyrights and trademarks, except for the trademarks UNIX and UnixWare,"
without more. But Amendment No. 2 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. SCO, 578 F.3d at 1210-11;A3219.
There was no license provision to Santa Cruz to use the intellectual property
associated with the assets it had acquired. In a section entitled "License Back of
Assets," however, the APA provided for a Technology License Agreement (the
"TLA") under which SCO granted Novell a restricted license to the "Licensed
Technology" in connection with SCO's concurrent purchase of the UNIX business
under the APA. (A3114§1.6;A3381.) The APA and TLA define the Licensed
Technology as "all of the technology included in the Assets" and "all derivatives"
of that technology. (A3114§1.6;A3381¶I.) It is undisputed that the "technology
included in the Assets" includes all UNIX and UnixWare source code, products,
versions, and copies, and that Novell received a restricted license from Santa Cruz
to use such UNIX and UnixWare source code after the closing of the APA.
6
In its prior decision, this Court held that the language of Amendment No. 2
indisputably replaced, as a matter of law, the old language in the Excluded Assets
Schedule of the APA. SCO, 578 F.3d at 1210-11. The Court further explained
that "any change to the set of Excluded Assets in Schedule 1.1(b) necessarily
implicated those copyrights actually transferred under Schedule 1.1(a). . . .
Whatever the Amendment means, it refers to the ownership of copyrights, not to
licenses." Id. at 1213-14, 1216 (emphasis added). The Court remanded for trial to
determine whether the APA, as amended, transferred to SCO the UNIX and
UnixWare copyrights either because those copyrights were "required" within the
meaning of Amendment No. 2, or because Amendment No. 2 effectuated the intent
of the parties to transfer the copyrights. Id. at 1217-19.
This Court found that ambiguity in the amended APA as to the transfer of
copyrights compelled the consideration of extrinsic evidence of the parties' intent
and noted that under California law the parties' course of performance is the "best
evidence" of the parties' contractual intent. Id. at 1217. Reversing the district
court, this Court also held that the amended APA was sufficient, without a separate
bill of sale, to satisfy Section 204(a) of the Copyright Act. Id. at 1213-14.1 The
7
Court also pointed to the importance of copyright ownership for SCO to protect the
assets it had acquired under the amended APA. Id. at 1218 n.4.
B. Novell's "Waiver Rights" Under the Amended APA.
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. 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 Agreements.
Those Agreements provided IBM access to the valuable UNIX source code but
required IBM to keep that source code strictly confidential in order to maintain the
value of the UNIX technology and licensing business.
Believing that IBM had violated those restrictions by releasing UNIX
technology to the competing Linux operating system, SCO filed suit against IBM
in March 2003. At IBM's request (A2665;A2668), 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 (A3461-63;A3480-81;A3620-21;A3623-24). When SCO contested Novell's
position that it had retained authority over those agreements (see, e.g., A4382-86),
8
Novell purported to act on SCO's "behalf" in waiving IBM's violations
(A3461-63;A3480-81;A3620-21;A3623-24).
In its prior decision, this Court reversed the district court's (Kimball, J.)
summary judgment ruling that under Section 4.16 of the amended APA Novell
possesses broad "waiver" rights over licenses that SCO owns. The Court found
that the contract was ambiguous as to the scope of these rights, requiring the
consideration of extrinsic evidence at trial. SCO, 578 F.3d at 1219-24. The Court
also remanded SCO's alternative claim that even if Novell had the right to waive
SCO's contract claims, Novell's exercise of its rights under Section 4.16 to waive
SCO's claims against IBM violated the duty of good faith and fair dealing, and
therefore is of no force and effect. Id. at 1224-25.
II. THE TRIAL ON REMAND
A. Evidentiary Rulings.
On remand from this Court, in March 2010, the district court held a three-
week jury trial on SCO's claim for slander of title, in which was embedded the
issue of copyright ownership.2 There are three evidentiary rulings from that trial
that are raised in this appeal.
9
First, over SCO's objections (A2548-49), the district court permitted Novell
to tell the jury about the prior, reversed decisions the district court had issued in
Novell's favor. (A2548-50.) Novell had repeatedly sought to have the decisions
introduced, beginning with its motions in limine (A400-19) and continuing
throughout the first half of trial (A1117-21;A1471-75;A1638-72;A1734-41). The
court denied all of those requests on the grounds that informing the jury of the
decision would be unduly confusing and prejudicial.
(A1112-16;A1334-38;A1476-79;A2363:775-76.) In so doing, the court acknowledged that the
prejudicial effect to SCO of such evidence was "extremely high." (A2628:1794.)
In the second week of trial, however, the court decided to permit Novell to
quote from the prior decisions in cross-examining Dr. Christine Botosan, SCO's
damages expert, on the theory that the decisions pertained to the "but for" world of
Dr. Botosan's damages model. (A2549:1494-95.) Novell's counsel proceeded to
read from the district court's June 2004 and August 2007 decisions, with respect to
Novell's motion to dismiss and motion for summary judgment, respectively.
Novell first read from the June 2004 decision, including the language stating that
Amendment No. 2 "is not retroactive to the date of the APA" and that "although
Amendment Number 2 states that its effective date is the date of the amendment,
10
the language of Amendment Number 2 does not state that a transfer of the
copyrights is to occur as of the date of the amendment." (A2549:1494-95.)
After the district court gave a further instruction in a futile attempt to cure
the prejudice to SCO (A2550:1498), Novell continued with its cross-examination
of Dr. Botosan and asked further questions about the August 2007 "grant to Novell
[of] judgment as a matter of law that Novell did not under the Asset Purchase
Agreement, including Amendment Number 1 and Amendment Number 2, transfer
ownership of the UNIX copyrights to Santa Cruz Operation or its successor The
SCO Group." (A2553-2555:1511-18; see also A2555-2556:1521-22.) Dr.
Botosan explained at length the irrelevance of those decisions to the but-for world
on grounds that Novell never sought to contradict. (A2550;A2555.)
Second, over SCO's objections (see e.g., A2192-3), the district court
permitted Novell to focus extensively on the old, removed exclusion of copyright
language. (See, e.g., A2236-38;A2866-67.) Given the potential for the jury to be
misled into relying on language that no longer existed, SCO moved in limine to
restrict Novell's use of the prior language in accordance with this Court's decision.
(A2192-93.) This motion was denied. (A1092-94;A2186;A2192-93.) While
permitting Novell to question witnesses extensively about the removed language,
the district court also precluded SCO even from asking several witnesses
11
including SCO's initial witnesses, Robert Frankenberg, Novell's CEO at the time
of the APA transaction, and Duff Thompson, Novell's business development
executive charged by the CEO to sell the UNIX business to SCO whether they
knew that the original copyright language in the APA had been amended. (See,
e.g., A2186;A2227;A2249-59.) The court's rationale was that such witnesses were
not involved in negotiating Amendment No. 2. (See, e.g., A2193.)
In light of these rulings, Novell came out of the gate seeking to convey the
impression that the original copyright language of the APA was the only relevant
language. (See, e.g., A2173-78;A2236-38;A2860-63;A2866-67;A2871.) Novell
refused to use the admitted exhibit comprising the APA and the amendments
thereto, insisting instead on using an exhibit that was just the text of the original
APA. (See, e.g., A2216;A2234;A2236-37.) SCO's objections to that were
overruled. (See, e.g., A2237:298.) Novell even pointed to the original copyright
language in conjunction with the integration clause of the APA as if the jury
could consider only the original language. (A2202-03.) When the district court
warned counsel for Novell that if he further pursued his questions about the
integration clause, then SCO would be permitted to revisit the issue of the
application of Amendment No. 2, Novell's counsel candidly stated: "Well, I don't
want the answer that badly, Your Honor." (A2736.)
12
Third, over SCO's objection, the district court allowed Novell to present the
jury with a slide featuring the title to a Business Week article from 2004 describing
SCO as the "Most Hated Company in Tech." (A5091; A2815-16.) This was
permitted on the basis that it was relevant for Novell's expert, Terry Musika, to
refute the testimony of Dr. Botosan that in a "but for" world in which Novell had
not falsely claimed to own the UNIX and UnixWare copyrights, SCO would have
made substantially greater revenues and profits. (A2510-61; A2829-36.)
B. The District Court's Rule 50(b) Decision.
SCO moved at the close of evidence for judgment pursuant to Rule 50(a)
and renewed its motion under Rule 50(b) on the grounds that the evidence showed
that the UNIX and UnixWare copyrights were required for SCO "to exercise its
rights in the UNIX and UnixWare technologies" acquired under the APA, the
standard set forth in the APA as amended by Amendment No. 2. The district court
denied the initial motion as moot, misunderstanding it to be directed to Novell's
counterclaim, which the court had dismissed at the close of the evidence pursuant
to an ore tenus motion. (A1899-1910; A2591-95; A2602; A3006.)
The jury answered one question on the slander of title claim. In response to
the first question on the verdict form: "Did the amended Asset Purchase
13
Agreement transfer the UNIX and UnixWare copyrights from Novell to SCO?"
The jury answered: "No." (A1914.)
The district court subsequently denied SCO's renewed Rule 50(b) motion on
the grounds that the jury adopted Novell's view that "Santa Cruz only acquired the
UnixWare business" and that "Novell retained significant rights in the UNIX
business," including the copyrights. (A3008.) The court's view was that
"Amendment No. 2 was meant to address use rights, not ownership" (A3010),
relying on testimony of Novell's principal negotiator of Amendment No. 2, Alison
Amadia, that "Amendment no. 2 was meant to affirm that SCO had the right to
use, manufacture, and make modifications to the UNIX technology" in other
words, a license. (Id.)
The district court did not cite or even comment on Ms. Amadia's admission
that "if there are copyrights that are required for SCO to exercise its rights, like the
UNIX and UnixWare trademarks, they were transferred." (A2728:2177 (emphasis
added); see also A2728-2729:2176-78;A2724:2160.) Similarly, the district court
ignored her admission with respect to Amendment No. 2 that "it's reasonable to
interpret this language as saying that among the copyrights included in the transfer
are those that SCO needs to exercise its rights with respect to the acquisition of
UNIX and UnixWare technologies." (A2724:2160-61.)
14
The district court dismissed the testimony of SCO's negotiator of
Amendment No. 2, in-house counsel Steven Sabbath, who testified that SCO
"bought the UNIX business from Novell, all copyrights pertaining to that business
came with the product. Amendment Number 2 was meant to confirm that."
(A2397:911.) The court did so because Mr. Sabbath had signed a conflicting
declaration concerning Amendment No. 2, notwithstanding Ms. Amadia's
testimony that Mr. Sabbath told her that the copyrights had been excluded as a
result of a "typographical error in the original APA" that required correction.
(A2730:2184-85.) Ms. Amadia further testified that she understood that Mr.
Sabbath's understanding was that "the purpose of the Amendment was to clarify
that the UNIX and UnixWare copyrights had transferred." (A2726-29:2169-79.)
The district court also cited testimony from SCO witnesses Darl McBride
and Ryan Tibbitts for the proposition that SCO could run its UnixWare product
business without the copyrights (A3010-11), although their testimony carefully and
consistently pointed out that protecting the underlying technology from
infringement in contrast to simply licensing a software product required the
copyrights. (A2421:997(McBride); A2640-41:1844-46(Tibbitts); A2642:1850-
51(Tibbitts).)
15
C. Denial of SCO's New Trial Motion.
SCO moved in the alternative for a new trial under Rule 59 on the grounds
that the jury's verdict on copyright ownership was clearly against the manifest
weight of the evidence. SCO argued that a new trial was justified not only because
the copyrights were "required" under Amendment No. 2, but also because of the
overwhelming evidence that both SCO and Novell had intended that copyrights be
transferred as part of the UNIX and UnixWare business.
At trial SCO presented testimony from ten witnesses that such a transfer was
intended. These included not only all of the witnesses from the Santa Cruz side of
the transaction, but also five Novell executives, including then-CEO Robert
Frankenburg; Novell's lead negotiator of the APA, Ed Chatlos; and in-house
Novell lawyer Burton Levine, who went so far as to testify that it would have been
"unethical" to sell the ownership rights to a software business and seek to withhold
the copyrights. (A2183-84(Frankenberg); 2204(Frankenberg); A22192(Thompson);
2251(Chatlos); 2253(Chatlos); 2336(Mattingly); 2294-95(Levine); 2280(Mohan);
2287(Michels); 2290-91(Michels); 2275-76(Wilt); 2395-96
(Sabbath); 2364-65(Madsen). In denying SCO's motion, the district court acknowledged this
testimony but discounted it because some of the witnesses dealt with high-level
negotiations, while others had a financial interest in SCO in the form of stock or
16
stock options from having worked or served at the company. The court found
more credible the testimony of Novell's witnesses who claimed Novell intended to
withhold the copyrights because of concerns with SCO's financial condition and to
protect the royalty-stream in which it had a continuing interest.
The district court also rejected as unpersuasive SCO's evidence that the
parties' course of performance after the APA showed that both sides believed the
copyrights had been transferred. That evidence included the undisputed facts that
(i) Novell's own engineers replaced the "Novell" copyright notice with a "Santa
Cruz" copyright notice on the source code and the CD for the current version of
UnixWare transferred under the APA
(A2609:1725-28; A2608:1723-36; A3281-88); (ii) Novell left the copyright registrations with SCO (A2319); and (iii) Novell
wrote thousands of letters to key customers and partners shortly after the APA
closed expressly informing them that it had transferred to SCO Novell's "existing
ownership interest in UNIX System-based offerings and related products," which
were identified as all versions and releases of UNIX and UnixWare (A2313:586;
A3528-33).3 Until November 2003, Novell never claimed to own the copyrights.
17
Indeed, a few weeks after the APA was signed, Novell submitted a premerger
notification form under the Hart-Scott-Rodino Act representing that SCO would
acquire "All rights and ownership of UNIX and UnixWare," "All of Novell's
claims," and "All copies of UNIX and UnixWare."
(A3327;A3308;A2791-92:2411-14.) Just months after Amendment No. 2 was signed, through the law
firm that represented SCO in connection with the APA, SCO (Santa Cruz) took the
position in public litigation against Microsoft Corporation in the European Union
that SCO had acquired the UNIX copyrights and was the UNIX copyright holder.
(A2371-2372;A3364§3.4; A3366§4.9.) In resolving that dispute, SCO entered into
a settlement agreement with Microsoft stating: "SCO has acquired AT&T's
ownership of the copyright in the UNIX System V Operating System Program."
(A3439.)
D. Non-Jury Findings on Novell's Waiver Rights.
After the trial, the district court entered its own findings on SCO's
alternative claim for specific performance for transfer of the copyrights and on
Novell's counterclaim that it had the authority under Section 4.16(b) of the APA to
force SCO to waive its claims against IBM for alleged breach of the restrictions on
disclosure of UNIX technology. The court found that Section 4.16's language
18
regarding "SVRX Licenses" applied to any "contract" concerning SVRX and
therefore applied to all software development agreements or licenses. The court
did not address SCO's argument that the "Software Agreement" and "Sublicensing
Agreement" subject to which IBM obtained access to UNIX source code, and
which imposed limitations on IBM's disclosure of such code, are included among
the "Software and Sublicensing Agreements" referenced in Item III.L of Schedule
1.1(a), and is not an "SVRX License" as to which Novell had unrestricted waiver
rights.
The district court also did not expressly discuss witnesses, including former
Novell employees, who testified that in order to make sense, Novell's "waiver"
rights under Section 4.16(b) of the APA extended only to the terms of the Product
Schedule Licenses through which particular UNIX products were licensed. Those
witnesses included Messrs. Broderick (A2331-2332), Frankenberg (A2188),
Chatlos (A2254-56), Thompson (A2223-2224), Wilt (A2276), Mohan (A2282),
Michels (A2288-90), Sabbath (A2396), and Ms. Madsen (A2382;A2392-93). The
court also rejected SCO's argument that such a broad waiver right would permit
Novell to undermine the UNIX and UnixWare business SCO had acquired.
(A2392-93:892-93; A2315:593-94; A2316:599-600.)
19
Finally, the district court did not find persuasive the parties' own conduct
shortly after the APA, when SCO disputed Novell's effort to unilaterally grant
IBM a buyout of its binary royalty obligations and expanded source code rights,
and "began to institute a law suit" against Novell. (A3433-34;A2600-2601:1690-
95.) The court found no significance in the fact that during the months of
negotiations between Novell and SCO over this issue, Novell did not once assert
ownership of the UNIX copyrights or the broad Section 4.16(b) rights it now
claims.
SUMMARY OF ARGUMENT
The district court's denial of SCO's Rule 50(b) motion rests on the fiction
that SCO obtained only some sort of unidentified license to develop and market a
new UnixWare product when it purchased the UNIX and UnixWare business from
Novell in the mid-1990s, and that SCO did not "require" any of the UNIX and
UnixWare copyrights to exercise any of its rights. The term "license" is never
mentioned in the APA with respect to SCO's rights to the UNIX and UnixWare
technology. (The term "license" is mentioned, however, with respect to the
contemporaneous agreement in which SCO licensed back to Novell a restricted
right to use the UNIX and UnixWare technology a license-back that is in itself
irreconcilable with the decision below.) The language excluding copyrights in the
20
original APA was removed and replaced by Amendment No. 2 with language
making clear that copyrights "required" for SCO to conduct the UNIX and
UnixWare business it acquired were indeed part of the transferred assets. As this
Court held: "Whatever the Amendment means, it refers to the ownership of
copyrights, not to licenses." SCO, 578 F.3d at 1213-14, 1216.
Novell presented no meaningful evidence that the copyrights are not
"required." SCO, by contrast, presented extensive evidence that confirmed the
common-sense proposition that the UNIX and UnixWare copyrights are required
to license certain rights to other users, and most importantly, to protect the valuable
technology against infringement a task which possession of an "implied license"
indisputably does not allow. Given the language of the APA, as amended, and the
record evidence, it was legal error for the district court to have denied SCO's Rule
50(b) motion. On those same principal bases, it was error for the court to deny
SCO's alternative motion for a new trial and claim for specific performance.
The district court also erred in its non-jury findings that Novell had the
authority under the APA to waive essentially any and all of SCO's rights
concerning license agreements that SCO unquestionably acquired. Novell's
waiver of SCO's rights to enforce restrictions on the disclosure of UNIX
technology by IBM goes to the heart of SCO's business. Such broad waiver rights,
21
as this Court previously stated, "would enable Novell, at its sole discretion, to
destroy a substantial part of the value of Santa Cruz's acquisition of the UNIX
business." SCO, 578 F.3d at 1221. The district court's construction ignored the
fact that the IBM software development agreements were transferred to SCO under
a different section of the APA, one that is not subject to the waiver rights Novell
had preserved to protect its remaining royalty interest in UNIX licenses.
During the trial, moreover, the district court abused its discretion with
respect to several evidentiary issues in ways that necessitate a new trial.
First, after steadfastly rejecting numerous efforts by Novell to inform the
jury that it previously had secured a summary judgment (which this Court then
reversed), the district court changed course midway through trial and allowed
Novell to inform the jury of the previous ruling in its favor on the ownership of
copyrights. The district court previously had recognized that "Plaintiff would be
prejudiced if the jury was informed that this Court once entered judgment against it
on those very claims that the jury will be asked to decide," and this prejudice was
not removed by an instruction that the district court's summary judgment order had
been reversed.
Second, the district court wrongly denied SCO's motion in limine and
objections related to Novell's efforts to confuse the jury with respect to the
22
"exclusion of copyrights" language that Amendment No. 2 had removed. This
Court made clear that the APA and Amendment No. 2 must be construed
"together" as a unified instrument. SCO, 578 F.3d at 1211. The district court
nevertheless allowed Novell to proceed to confuse the jury by lines of questioning
predicated on the "exclusion of copyright" language that had been removed and
replaced by Amendment No. 2. The prejudice to SCO was magnified by rulings
that restricted SCO's ability to elicit on its own examinations from certain
witnesses that this language had been removed from and does not exist in the
operative contract.
Third, the district court abused its discretion by allowing Novell to introduce
a highly prejudicial, double-hearsay article in Business Week magazine labeling
SCO the "Most Hated Company" in technology.
STANDARD OF REVIEW
The Court reviews de novo the denial of a post-trial motion for judgment as
a matter of law under Rule 50. Wagner v. Live Nat'l Motor Sports, Inc., 586 F.3d
1237, 1243 (10th Cir. 2009). The Court reviews for abuse of discretion the denial
of a motion for a new trial under Rule 59. Henning v. Union Pac. R.R. Co., 530
F.3d 1206, 1216-17 (10th Cir. 2008). The Court reviews the district court's
findings of fact for abuse of discretion and conclusions of law de novo. Lyons v.
23
Jefferson Bank & Trust, 994 F.2d 716, 727 (10th Cir. 1993). The Court reviews
for abuse of discretion the district court's evidentiary rulings. Bryant v. Farmers
Ins. Exch., 432 F.3d 1114, 1122 (10th Cir. 2005).
ARGUMENT
I. THE DISTRICT COURT ERRED IN DENYING SCO'S MOTION
FOR JUDGMENT UNDER RULE 50(B).
A verdict must be set aside where the "evidence points but one way,"
Wagner v. Live Nat'l Motor Sports, Inc., 586 F.3d 1237, 1244 (10th Cir. 2009), or
"so overwhelmingly favors the moving party as to permit no other rational
conclusion," Shaw v. AAA Eng'g & Drafting, 213 F.3d 519, 529 (10th Cir. 2000).
This Court has repeatedly seen fit to reverse the erroneous denials of motions
under Rule 50(b). See, e.g., Burrell v. Armijo, 603 F.3d 825, 832-35 (10th Cir.
2010); Ward v. Siebel Living Trust, 365 Fed. Appx. 984, 986-88 (10th Cir. 2010);
Wagner, 586 F.3d at 1244; Keylon v. City of Albuquerque, 535 F.3d 1210, 1215-
16 (10th Cir. 2008); Milligan-Hitt v. Bd. of Trustees of Sheridan Cnty. Sch. Dist.
No. 2, 523 F.3d 1219, 1230 (10th Cir. 2008); Shaw, 213 F.3d at 529; Vanmeveren
v. Whirlpool Corp., 65 Fed. Appx. 698, 700-01 (10th Cir. 2003); J.I. Case Credit
Corp. v. Crites, 851 F.2d 309, 311-16 (10th Cir. 1988).
The language of the amended APA, as interpreted by this Court, and the trial
testimony concerning that provision, show that copyrights "required" for the
24
exercise of SCO's rights were transferred to SCO. The district court relied on
testimony from several Novell witnesses but notably not its CEO, chief
negotiator on the deal, or in-house counsel working on the deal (not to mention the
unanimous testimony of Santa Cruz witnesses) to support its conclusion that the
exclusion of copyrights in the original APA was intentional. But this testimony
cannot be reconciled with the fact that Amendment No. 2 replaced the original
exclusionary language. If the intent of the transaction was that no copyrights
transfer, there would have been no reason for that part of Amendment No. 2 to
exist, no reason for a change in language to have occurred at all. The proposition
that Amendment No. 2 was meaningless and had no effect on the copyrights being
transferred runs against the principles of contract interpretation and this Court's
prior opinion. "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).
SCO shows below that the amended language of the APA, combined with
the schedule of assets being transferred, could only mean that the copyrights
"required for SCO to exercise its rights with respect to the acquisition of UNIX
25
and UnixWare technologies" were transferred; and that ownership of UNIX and
UnixWare copyrights were "required" to effectuate and enforce SCO's rights.
A. The Amended APA Transferred Copyrights That
SCO "Required."
The only reasonable interpretation of the amended APA is that SCO
acquired all copyrights "required for SCO to exercise its rights with respect to the
acquisition of UNIX and UnixWare technologies."
First, the amended APA provides for transfer of copyrights required for SCO
to exercise its rights with respect to the UNIX and UnixWare technologies it
acquired through the APA. Under settled precedent, the transfer of "all rights and
ownership" in the UNIX and UnixWare source code, if there were no exclusion of
copyrights, transfers the copyrights. SCO, 578 F.3d at 1213. Thus, as this Court
held, "any change to the set of Excluded Assets in Schedule 1.1(b) necessarily
implicated those copyrights actually transferred under Schedule 1.1(a)." Id.
Amendment No. 2, which amends the list of assets excluded from the sale,
replaced the exclusion of all copyrights with an exclusion of all copyrights and
trademarks, except those "required for SCO to exercise its rights with respect to
the acquisition of UNIX and UnixWare technologies." The amended APA thus
provides for a transfer of "all rights and ownership" in UNIX and UnixWare
26
source code and excludes from transfer only those copyrights not required for SCO
to exercise its rights.
It should take compelling extrinsic evidence to avoid that straightforward
interpretation. The district court pointed to testimony from two Novell attorneys,
Tor Braham and David Bradford, regarding their intent in excluding copyrights,
but the language Braham wrote and Bradford supported4 was removed and
replaced by Amendment No. 2 and neither of them was materially involved in
Amendment No. 2. If Braham's and Bradford's testimony had reflected the intent
of the parties to the APA, Amendment No. 2 would not exist.
Second, the district court referred to the testimony of Alison Amadia,
Novell's negotiator of Amendment No. 2. While contending on direct examination
that she did not envision Amendment No. 2 as doing more than confirming a
license to use technology (an untenable position itself), on cross-examination
Amadia admitted that "if there are copyrights that are required for SCO to exercise
its rights, like the UNIX and UnixWare trademarks, they were transferred."
27
(A2728:2177 (emphasis added).) The court made no mention of, much less sought
to account for, this critical (and arguably dispositive) admission in favor of SCO.
In addition, to give Amendment No. 2 an interpretation contrary to its plain
language, the district court also had to ignore the operation of the same language
with respect to trademarks, which the parties unquestionably intended to transfer.
(A2724:2160;A2727-29:2170-78.) Amendment No. 2 placed the trademarks and
copyrights in the same boat they both transferred to SCO where "required for
SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare
technologies." (A2728:2176; A2728-29:2177-78.) Because Amendment No. 2
changed the APA to make no distinction between trademarks and copyrights, and
Novell admitted that the trademarks referenced in Amendment No. 2 were being
transferred, the same language used to describe the copyrights could not
reasonably mean something different.
Indeed, the language of Amendment No. 2 and Ms. Amadia's admission are
consistent with Novell's own position before the lawsuit started, as expressed in its
worldwide press release dated June 6, 2003, which it issued after SCO reminded
Novell of the existence of Amendment No. 2, that ownership of copyrights "did
transfer" to SCO under the amended APA. (A3352 (emphasis added).) While
Novell then changed its position in a letter that Novell General Counsel Joseph
28
LaSala sent to SCO in August, 2003, even he admitted that Amendment No. 2
required Novell to transfer the "copyrights required for SCO to exercise its rights."
(A2208:192.) Only later did Novell "discover" that Amendment No. 2 simply
confirmed a license to use a position, it bears repeating, that this Court has
already rejected. SCO, 578 F.3d at 1213, 16.
The testimony of the only other Novell witness on Amendment No. 2, James
Tolonen, cannot support a contrary result. He expressed the view that Amendment
No. 2 must have only confirmed a license (A2692; A2703), but that view cannot be
squared with the fact that to "confirm" a license, the contract would have said
"SCO has a license." It would have been neither necessary nor appropriate to
revise the schedule of assets excluded from transfer to confirm a license. As this
Court stated: "[A]ny change to the set of Excluded Assets in Schedule 1.1(b)
necessarily implicated those copyrights actually transferred under Schedule
1.1(a)," and that "[w]hatever the Amendment means, it refers to the ownership of
copyrights, not to licenses." SCO, 578 F.3d at 1213-14, 1216 (emphasis added).
There is no reference in the APA to SCO being "licensed" to use
technology. On the contrary, the APA provided for a "license-back" by SCO to
Novell of the technology SCO acquired and derivatives of that technology. The
district court reasoned that "one of the purposes of that agreement was to allow
29
Novell the right to use post-APA SCO-developed code." (A3005:14.) No one
disputes that the TLA licensed to Novell post-APA UNIX derivatives. But the
TLA also licensed back to Novell the pre-APA UNIX technologies that Novell
sold to SCO in the same transaction. Those are technologies for which Novell
would not have needed a license, much less accepted the restricted license as stated
in the TLA, had it owned the copyrights at issue.
The district court also relied on testimony of former Novell executive
Michael DeFazio for the proposition that Novell must have retained the copyrights
to "bulletproof" Novell's royalty stream. The testimony of DeFazio, who was
uninvolved with Amendment No. 2, does not support this conclusion.
- He testified that he did intend under the APA for "Novell to transfer
the intellectual property of the UNIX program to Santa Cruz through
the asset purchase agreement." (A2766:2321.)
- He says he directed his team to "bulletproof" Novell's royalty stream,
but he merely assumed, because the language "just appeared" in the
text of the original APA, that the retention of copyrights implemented
the directive he said he gave. (A2763-64:2308-10,2311-13.)
- He did not have any discussions one way or the other about Novell
retaining any copyrights. (Id.)
The only rational conclusion from the evidence is that Amendment No. 2
transferred those copyrights required for SCO to exercise rights in the UNIX and
30
UnixWare business it acquired. We now turn to the evidence that the UNIX and
UnixWare copyrights were in fact required.
In remanding, this Court pointed to the importance of copyright ownership
for SCO to protect the assets it had acquired under the APA. SCO, 578 F.3d at
1218 n.4. The evidence at trial confirmed that ownership of the copyrights was
required for SCO to protect its technology against third parties that "copied and
attempted to resell the core UNIX assets Santa Cruz received in the deal." Id.
B. The UNIX and UnixWare Copyrights are "Required" by SCO.
1. The Copyrights Are Required for SCO to Protect the
Source Code Underlying Its Business.
If SCO does not own the copyrights, it cannot bring suit to protect the
copyrighted source code. Davis v. Blige, 505 F.3d 90, 98 (2d Cir. 2007); Silvers v.
Sony Pictures Entmt., Inc., 402 F.3d 881, 885 (9th Cir. 2005); 1 Copyright
Throughout the World § 19:29 (2009); Copyrights and Copywrongs: The Rise of
Intellectual Property and How It Threatens Creativity, 3 J. High Tech. L. 1 (2003);
see also 3 Patry on Copyright § 7:2 (2010) (explaining that "copyright is not just a
bundle of rights; it is also the ability to enforce those rights").
Novell's "license" theory of Amendment No. 2 does not give SCO the right
to bring claims to enforce the copyrights. Novell's former General Counsel took
the position, for example, that SCO acquired only an "implied license."
31
(A2675:1975.) Amadia acknowledged that with an implied license, SCO could not
enforce the UNIX and UnixWare copyrights in court. (A2723:2157.) Whether
implied or express, such a non-exclusive licensee did not provide SCO the ability
to go into court to defend its rights by a copyright action. (A1951.)5
UNIX and early UnixWare technology lies at the heart of UnixWare at the
time of the APA and today. UnixWare is just the name of the latest version or
iteration of the SVRX technology. (A363;2610;2623-24;A2766.) The source code
of the versions of UnixWare that SCO acquired in 1995 (and built its business
around licensing in the ensuing years) consists almost entirely of prior "UNIX"
source code (A2610:1732;A2623:1781), and the current version of UnixWare that
SCO sells still consists in significant part of that "UNIX" source code
(A2624:1784). UnixWare was a "version of UNIX [that] was essentially
32
rebranded and some cosmetic and a few minor features added to it to create
UnixWare 2.0. UnixWare 2.0 is almost entirely UNIX System V release 4.2."
(A2610:1732.) Thus, "90, 95 percent" of UnixWare was older UNIX code that
existed prior to the APA. (A2624:1782.) UnixWare is not a separate, stand-alone
version or block of UNIX that can be detached from the UNIX code and run on its
own; it is the latest release of UNIX. (A363.) Neither the early version of
UnixWare nor the latest version of UnixWare would work if the "UNIX" source
code were removed. (A2624:1784.) All of this testimony went unrebutted.6
Given the technological reality of UnixWare's development and ancestry,
without copyright ownership, SCO does not have the right to enforce in court the
copyrights at issue in the UNIX and UnixWare technology, and thus to protect the
core technology in UnixWare. The need for the copyrights to enforce SCO's rights
was supported by unequivocal testimony of witnesses who have been involved in
the various aspects of the UNIX and UnixWare business, including former Novell
and current SCO UNIX Contracts Manager William Broderick (A2333:666;
A2334:667-68); Santa Cruz General Counsel Steven Sabbath (A2398:913-15);
former SCO CEO Darl McBride (A2421:997); former Novell and current SCO
33
UNIX Product Manager & OEM Relations Manager John Maciaszek
(A2599:1686-87); and former Santa Cruz Manager of Law and Corporate Affairs
Kimberlee Madsen (A2364:780; A2369:802-03; A2386:865, 866; A2388:875;
A2390-91:884-85).
SCO's need to bring copyright enforcement actions does not turn on the
existence of the SCOsource program whose demise Novell focused on at trial, and
which the district court cited. As SCO's General Counsel Ryan Tibbitts explained,
if SCO "could not protect" the "core intellectual property" in UnixWare, then "this
venerable UNIX business that has been around for many years that many
customers around the world are using would simply die off, and we have got to
have that intellectual property to protect those crown jewels." (A2641:1845-46.)
SCOsource was simply the name given to the licensing program and division by
which SCO sought to monetize, without the need for litigation, those parties who
were, in SCO's view, infringing on its rights by using UNIX technology. Without
the ability to sue or license such users, particularly of a "free" Linux product,
SCO's UNIX business "would simply die off," as Tibbitts testified. (Id.) Thus,
"the intellectual property in UNIX [was] an important part of the going forward
UnixWare business" that SCO had purchased. (A2321:12-14.) The district court
was simply wrong when it found that SCO did not acquire the rights to pursue
34
SCOsource (A2996-97¶125); even Novell's General Counsel admitted that SCO
obtained the right to protect its business (A2675), and that is what SCO was
attempting to do through SCOsource.
The district court agreed with the proposition that the copyrights are required
to protect SCO's intellectual property. (A2996¶124.) The court then stated the
following: "However, SCO was not the owner of the copyrights and, thus, had no
right to enforce them." (Id.) In this regard, respectfully, the district court's
reasoning was entirely circular. If the copyrights are required for SCO to exercise
its rights in the technologies it acquired, it does own the copyrights under the APA
as amended by Amendment No. 2. The copyrights are, in fact, required for SCO to
protect its source code and business. Without the copyrights, SCO would be
unable effectively to preclude others from using the code and running their own
UNIX-based business based on it. SCO, 578 F.3d at 1218 n.4.
2. The Copyrights Are Required for SCO to
Exercise Source-Code Licensing Rights.
In addition to requiring copyright ownership to protect UNIX and
UnixWare, SCO requires the copyrights to facilitate source code licensing, which
was an indisputable portion of the UNIX and UnixWare business SCO acquired.
Such source code licensing was historically part of the UNIX and UnixWare
business; SCO's business included entering into new source code licenses, as
35
contemplated by the APA; and the copyrights were needed for such licensing to
occur, as there was nothing in the APA which granted a license for such activity.
(A2825:2543-44; A2222:241-42; A2333-34:666-68; A2290:503-04;
A2275:442-43; A2397-98:912-15.) In its Order denying Rule 50(b) relief, the district court did
not deal with this point or the testimony that supports it. (A2971-72 ¶¶65-69.)
The district court instead merely reiterated Novell's position that former
SCO CEO Darl McBride and Tibbitts had acknowledged that, in the court's words,
"SCO could operate its Unix Ware [sic] business without the copyrights." (A2971-
73 ¶¶66-71.) Their testimony does not support that proposition.
McBride referred to only one part of SCO's business its ability to sell
UnixWare binary products directly to customers as is evident from (1) his
comparison of UnixWare to OpenServer and the products of "HP, IBM and all
other UNIX licensees," and (2) the distinction he drew between the UnixWare
business and "the licensing side" of SCO's overall business. (A2479:1225-26.)
That SCO, like UNIX licensees, could continue to sell its UnixWare binary
products without the copyrights did not mean that the copyrights were not required
to exercise critical rights "on the licensing side" that SCO also acquired under the
APA. Indeed, even selling binary products would be more tenuous if infringers
could copy protected UNIX and UnixWare code with impunity.
36
Tibbitts testified about a proposed deal, in connection with SCO's Chapter
11 reorganization proceedings, where SCO would have sold certain aspects of the
UNIX product business, but kept other aspects, including IP licensing rights and
SCO's legal claims based on the unauthorized use of the UNIX and UnixWare
technologies. (A2642:1850-51.) Because the law requires ownership of the UNIX
and UnixWare copyrights to pursue the claims SCO would have kept, the proposed
deal contemplated that the copyrights would remain with SCO until it completed
prosecuting those claims. That proposed transaction was consistent with the
reading of Amendment No. 2 that SCO, as the party who indisputably acquired
those claims under the APA, required ownership of the UNIX and UnixWare
copyrights.
3. The Copyrights Are Required for SCO to Pursue the
Legal Claims It Acquired Under the APA.
Novell's former General Counsel Joseph LaSala admitted both generally that
"the agreements speak to what copyrights SCO requires in order to exercise its
rights under the agreement" and specifically that "SCO has the rights to bring
claims to protect its business." (A2675:1976-77.)
Among the "rights and ownership" in UNIX and UnixWare that SCO
acquired are all of Novell's claims relating to the UNIX and UnixWare source
code. Item II of the Assets Schedule identifies "All of Seller's claims arising after
37
the Closing Date against any parties relating to any right, property or asset
included in the Business" as having transferred. SCO thus acquired all of the
claims, which otherwise Novell would have, relating to the UNIX and UnixWare
source code.7Ownership of the copyrights is required to prosecute such claims. A
copyright owner cannot transfer its copyright claims without also transferring the
copyrights. Silvers v. Sony Pictures Entmt., Inc., 402 F.3d 881, 885 (9th Cir.
2005). Novell presented no evidence at trial to the contrary.
The district court nevertheless concluded that SCO "provided no evidence of
any such claims that it was entitled to pursue." That is plainly incorrect. In
addition to the reference in Item II of Schedule 1.1(a) to "All of Seller's claims
arising after the closing date against any parties relating to any right, property or
asset included in the business" (emphasis added), former Novell senior executive
Duff Thompson testified without contradiction "that the enumerated assets Novell
actually sold to Santa Cruz included legal claims that it would have against parties
that were connected with the business." (A2224:249-50.) In addition, as noted,
the evidence showed claims SCO pursued post-closing against Microsoft
(A2371-72:807-11; A3364-66§§3.4,4.9; A3439), expressly referring to ownership of
38
copyrights. The copyright claims relating to alleged Linux infringement are
another obvious example. (A3526-26.)
The district court's denial of SCO's Rule 50(b) motion that the UNIX and
UnixWare copyrights are "required" and therefore were transferred by operation of
the amended APA was error and should be reversed.
II. IN THE ALTERNATIVE, THE DISTRICT COURT ABUSED
ITS DISCRETION IN DENYING SCO'S MOTION FOR A
NEW TRIAL AND ITS ALTERNATIVE CLAIM FOR
SPECIFIC PERFORMANCE.
At minimum, the district court should have ordered a new trial. With respect
to the grounds for a new trial, "[t]he inquiry focuses on whether the verdict is
clearly, decidedly or overwhelmingly against the weight of the evidence." Black v.
Heib's Enters., Inc., 805 F.2d 360, 363 (10th Cir. 1986). After a long and
complicated trial, a trial judge should be especially vigilant in examining the
verdict. See, e.g., Siemens Med. Solutions USA, Inc. v. Saint-Gobain Ceramics &
Plastics, Inc., 615 F. Supp. 2d 884, 899 (N.D. Iowa 2009). Where the copyrights
were required for SCO's exercise of its rights in the UNIX and UnixWare
technologies acquired, as set forth above, the verdict clearly was against the weight
of the evidence.
Similarly, the court's non-jury findings rejecting SCO's alternative claim
of specific performance were erroneous. Specific performance of a contract is
39
appropriate where "(1) its terms are sufficiently definite; (2) consideration is
adequate; (3) there is substantial similarity of the requested performance to the
contractual terms; (4) there is mutuality of remedies; and (5) plaintiff's legal
remedy is inadequate." Blackburn v. Charnley, 117 Cal. App. 4th 758, 766 (2004).
"An order of specific performance or an injunction will be so drawn as best to
effectuate the purposes for which the contract was made and on such terms as
justice requires." Restatement (Second) of Contracts § 358(1) (1981).
SCO asked the district court to order Novell to execute the documentation
necessary to transfer the UNIX and UnixWare copyrights from Novell to SCO.
The APA itself provided for such a procedure if the documents failed to effectuate
the purposes of the Agreement. (See, e.g., A3115§1.7(c).) The performance that
SCO seeks follows from Amendment No. 2 as interpreted with the APA as a whole
and the overwhelming evidence of the parties' intent. The copyrights, as shown,
are "required."8
40
A court may order specific performance to account for some technical
failure in the documentation of the parties' intent. See, e.g., Schuler v. Graf, 862
N.E.2d 708, 712-15 (Ind. Ct. App. 2007); O'Berry v. Gray, 510 So. 2d 1135, 1137-
38 (Fla. Ct. App. 1987); Eliason v. Watts, 616 P.2d 427, 429-31 (Utah 1980). In
assessing the intent of the parties, "a court will avail itself of all of the usual aids in
determining the scope of the agreement." Restatement (Second) of Contracts §
362 (1981). Such extrinsic evidence includes the parties' course of performance.
See, e.g., Okun v. Morton, 203 Cal. App. 3d 805, 819 (1988). SCO has shown that
the overwhelming evidence demonstrates that the parties intended to transfer the
UNIX and UnixWare copyrights, and that the grounds on which the district court
reached the contrary conclusion are insufficient.
III. THE DISTRICT COURT ERRED IN CONCLUDING THAT
NOVELL RETAINED BROAD WAIVER RIGHTS TO DIRECT
SCO TO ABANDON LEGAL CLAIMS AGAINST IBM.
SCO contended that Novell's alleged waiver rights were limited to actions
needed to protect its interest in its UNIX royalty revenue stream. Alternatively,
SCO maintained that such waivers must be exercised in accordance with the
implied obligation of good faith and fair dealing. Following trial, the district court
found that Novell's waiver rights extended to the IBM software development
41
agreements, and also rejected SCO's alternative position regarding the implied
covenant of good faith and fair dealing.
These findings were erroneous and should be reversed, because the waiver
language of the APA does not apply by its terms to the agreements with IBM, and
because an interpretation that allows one party to the contract to destroy the
benefits received by the other party cannot be sustained. In addition, Novell's
actions clearly violated the implied covenant of good faith and fair dealing.
A. Novell's Waiver Rights Did Not Extend to the
IBM Software Development Agreement
Section 4.16 (b) of the APA provided Novell with the right to direct SCO's
decisions pertaining to "SVRX Licenses." (A3134.) "SVRX Licenses" are
defined in Section 4.16(a) as those Licenses listed under Item VI of Schedule
1.1(a). (Id.) As this Court recognized, and as the district court also recognized
(A2978¶84), Item VI does not in fact list license agreements, but rather lists a
series of products, leaving ambiguous the issue of what constituted the SVRX
Licenses referred to in Section 4.16. (A3162.)
Source code agreements, like the licenses with IBM in question, are
expressly listed in an entirely different Item of the Schedule of transferred assets.
Item III.L provided for the transfer to SCO of all software development contracts,
and it was undisputed at trial that the IBM Agreements were transferred under this
42
provision. (A3161-62; A2224; A2465.) The district court's interpretation of the
meaning of "SVRX License" identifies the same extensive set of agreements twice,
which runs against normal rules of contract interpretation. Boghos v. 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).
The district court read the relevant contractual provisions as applying to
"any SVRX License" (A2982 ¶92), but that begs the question of what constitutes an
SVRX License. In finding support from the language that Item VI of Schedule
1.1(a) refers to "all contracts relating to the SVRX Licenses listed below," the
court ignores that the definition of an SVRX License in Section 4.16 is not all of
Item VI, but only the licenses supposedly listed within Item VI. The language of
Item VI that "All contracts relating to the SVRX Licenses listed below" reflects
that the term "all contracts" is separate from the term "SVRX Licenses," which are
to be listed below. The reference to "all contracts" thus is not part of any
definition of "SVRX License" as such. The SVRX Licenses to which the waiver
rights apply are clearly a subset of "all contracts," SCO, 578 F.3d at 1223-24, and
all contracts are not SVRX Licenses.
The district court also gave no weight to the extensive extrinsic evidence
that Novell's waiver rights did not extend to such agreements. This evidence
43
included direct testimony not only from the SCO (Santa Cruz) executives and
negotiators involved in the transaction, but also Novell executives, including its
former CEO. Those executives included Frankenberg (A2188), Chatlos
(A2254-56), Thompson (A2223-24), Wilt (A2276), Mohan (A2282), Michels (A2288-90),
Broderick (A2331-32), Sabbath (A2396), and Madsen (A2382;A2392-93). These
witnesses cogently testified that the waiver provision was intended to protect
Novell's interest in the royalty stream in SVRX Licenses which it would continue
to receive post-closing, and was no broader than that. The IBM Software
Agreement was not the source of SVRX royalties (A3231-36; A2303-04); the
product supplement schedules for specific binary products provided those royalties
(A3409-10; A2314), and in addition, in 1996 IBM had completely paid-up the
royalties even under those agreements and was no longer paying any SVRX
royalties that were passed through to Novell. (A2668:1948-49.)
The district court discounted this testimony, saying that one SCO witness,
William Broderick, was not involved in the negotiation or drafting of the APA, and
that many other SCO witnesses acknowledged that the language of Section 4.16 of
the APA was not limited to product supplement schedules. (A2980¶89.)
Broderick, however, worked at Novell (and at USL before that) and offered
evidence as to how Novell, and later Santa Cruz, actually interpreted these
44
provisions. (A2303-04; A2310-12.) The other SCO witnesses to which the court
referred testified that whether or not Section 4.16's waiver rights were limited to
product supplement schedules, they did not extend to software development
agreements. (A2188(Frankenberg);A2254-56(Chatlos);A2223-24(Thompson);
A2276 (Wilt);A2282(Mohan); A2288-90(Michels);A2331-32(Broderick);
A2396(Sabbath);A2382;A2392-93(Madsen).) Further, the court said nothing
about Novell's own witnesses who endorsed SCO's position. (A2764.)
Finally, the district court found essentially irrelevant that less than a year
after the APA, the parties had a dispute (also involving IBM) over the scope of
Novell's rights. This 1996 dispute over a licensee's rights to source code was "the
precise issue in controversy today." SCO, 578 F.3d at 1222. Yet in 1996 Novell
never asserted that its "waiver rights" gave it the authority to act unilaterally in
dealing with IBM, and indeed, Novell agreed to language in Amendment No. 2,
which followed from this dispute, that "Novell may not prevent SCO from
exercising its rights with respect to SVRX source code in accordance with the
agreement." As this Court stated: "If Novell already had the right under the APA
itself to force SCO to increase any SVRX licensee's rights to SVRX code, then this
provision would be pointless and ineffectual." Id. at 1223.
45
B. Novell's Interpretation Must Be Rejected Because
It Would Give Novell the Ability to Destroy
SCO's Benefits Under the APA.
Where a contract is susceptible to different interpretations, courts will adopt
one which will give it validity, rather than one which renders it illusory. Lexington
Ins. Co. v. Travelers Indem. Co. of Ill., No. 00-15407, 2001 WL 1132677, at *3
(9th Cir. 2001) (applying California law). The Court cannot endorse an
interpretation that would permit Novell to destroy SCO's UNIX-based business.
See, e.g., Leo F. Piazza Paving Co. v. Found Constr., Inc., 128 Cal. App. 3d 583,
591 (1981).
There can be no reasonable dispute that Novell's proposed definition of
"SVRX Licenses" renders illusory the rights SCO acquired under the APA. Since
the umbrella Software Agreement governs a licensees use of any UNIX version the
licensee has licenses including UnixWare, for example, then Novell would have
the right to amend, modify, or waive SCO's rights with respect to UnixWare, a
business that SCO indisputably acquired. In addition, if (as Novell contends) any
contract relating to any of the SVRX releases identified in Item VI of the Assets
Schedule is an "SVRX License," then Novell could amend, modify, or waive any
of SCO's rights under the TLA, creating the non-sensical result that, pursuant to
46
Section 4.16(b), Novell was free to lift the restrictions on its use of the SVRX code
set forth in the TLA.
It follows under the law that the only question was whether the APA was
susceptible to SCO's interpretation. As shown above, it is. Indeed, with respect to
the plain language, this Court has already found that Novell's interpretation of
Section 4.16 is problematic. Amendment No. 2 states that the "Amendment does
not give Novell the right to increase any SVRX licensee's rights to SVRX source
code." This Court stated: "If Novell already had the right under the APA itself to
force SCO to increase any SVRX licensee's rights to SVRX code, then this
provision would be pointless and ineffectual." SCO, 578 F.3d at 1223. The exact
same reasoning applies with respect to the further statement in Amendment No. 2
that "Novell may not prevent SCO from exercising its rights with respect to SVRX
source code in accordance with the Agreement."
The district court failed even to address the foregoing law or most of the
foregoing evidence. The court pointed instead to the singular rationale that Novell
sought "to protect and maintain control" over the "SVRX royalty stream" and that
"[i]t only makes sense for Novell to retain control over all components of the
SVRX licensing agreements in order to protect this significant asset." (A2981-
82¶91.) As this Court recognized, however, while "it is reasonable to think that the
47
parties would have covenanted in such a manner as to protect Novell's substantial
pecuniary interest in the revenue stream that . . . financed the acquisition," "[i]t is
less easy to accept that SCO would have consented to giving Novell the unilateral
power to unravel its exclusive and undisputed ownership rights in the underlying
source code of UNIX." SCO, 578 F.3d at 1224. The IBM Software Agreement
was not a source of a royalty revenue stream to Novell. (A3231-36;A2303-04.)
The product supplement schedules provided that revenue (A3409-10;A2314), and
with respect to IBM, even that revenue stream was already bought out or "paid in
full" by IBM many years earlier. (A2668:1948-49.) While Novell may have
wanted to advance its relationship with IBM in 2003, or even its support of the
open-source Linux community, there is no plausible rationale that Novell required
(or secured) an unlimited waiver right that went beyond its right to protect its
interest in legacy SVRX royalties.
C. Novell Breached the Implied Covenant of Good Faith and
Fair Dealing in the Amended APA.
If Novell did have expansive waiver rights under Section 4.16(b), those
rights should be constrained by the implied covenant of good faith and fair dealing.
The district court concluded that application of the implied covenant was not
required to constrain Novell's discretion or to avoid making the agreement's
benefit illusory, circumstances that this Court had referred to as where the implied
48
obligation may apply even to a contractual provision that seemingly provided one
party unrestricted discretion. These findings were erroneous.
1. The District Court's Interpretation of Section 4.16
Makes the Amended APA Contradictory and
Ambiguous, as Well as Illusory.
The district court acknowledged SCO's argument that Novell's
interpretation would allow Novell to destroy "the UNIX-based business that
Novell transferred," but then reasoned that the "faulty premise" of SCO's
argument was "that Novell transferred the UNIX business to SCO." (A3002-
03¶144 (emphasis added).) This line of reasoning reflects a fiction. (See
A3122§1.3(a)(i).)
The plain language of the APA transferred the UNIX source code, and all
versions and copies of UNIX not just UnixWare to SCO. Novell's retention of
royalties does not negate that transfer. (A3160-62.) Amendment No. 2 clearly
states that SCO acquired the UNIX and UnixWare technology, and the district
court acknowledged this fact. (A2997¶126.) In addition, the SVRX source code
that the "UNIX business" comprises, and whose use and distribution the SVRX
Licenses govern, is a fundamental and crucial component of UnixWare. The
"commercially valuable technology from the prior versions is included in
UnixWare, and UnixWare would not operate without its System V components.
49
(A2624:1784.) The current version of UnixWare supports the newest
industry-standard hardware." (A363-64.) UnixWare is simply another name for the latest
release of SVRX. (A363.) The first release of "UnixWare" was interchangeably
referred to as an "SVRX" release. (A363.) How SVRX source code is used by
third parties directly and critically affects the UnixWare business "UNIX-based"
business.
Under the district court's interpretation of Section 4.16, as in April
Enterprises v. KTTV, 147 Cal. App. 3d 805 (1983), there are contractual
provisions that contradict one another, if Novell had unlimited waiver rights under
Section 4.16. On the one hand, SCO has acquired and supposedly is free to
operate a UnixWare business and protect the technology therein. On the other
hand, by the court's lights, Novell has retained the right to permit the free and
unfettered use, by whomever Novell chooses, of the very technology on which the
UnixWare business is based. Given that contradiction, application of the implied
covenant is appropriate.
As shown, moreover, under its interpretation of Section 4.16 and "SVRX
Licenses," Novell retained the authority to impact even the UnixWare business that
the district court conceded that SCO had bought, and retained the authority to
50
eliminate the restrictions in the license-back that Novell obtained in the TLA.
Such authority renders the amended APA illusory.
2. The District Court's Finding that Novell Acted in Its
Economic Self-Interest Does Not Mean It Complied
With the Implied Covenant.
The district court "finds that Novell's actions were motivated to protect its
own interests and those of the open source community and were not taken because
of influence by IBM or any ill-will toward SCO." (A3003-04 ¶146.) That
conclusion is legally meaningless and factually erroneous. It is legally irrelevant
because the implied covenant is not met simply when a party acts in its own
economic interest; as shown below, it must act to further the objectives of the
contract it entered. Moreover, Novell's explanation that it was seeking to avoid
having to return royalties to IBM does not withstand scrutiny.
In 1996 IBM secured a buy-out of the royalties it had been paying under its
Product Schedule Licenses underlying AIX. (A2668:1948-49.) On the one hand,
if SCO were not to prevail on its contract claims against IBM, there would be no
arguable effect on IBM's prior buyout. (A2668-69:1950-51.) On the other hand,
if SCO were to prevail, there would be a finding or verdict that IBM has acted in
breach of its Software and Sublicensing Agreements and that SCO had the right to
terminate those Agreements, and thus IBM would have no basis to demand a
51
refund. (Cf. A2668-69:1950-51.) Novell cannot identify any legal basis where
IBM, if in breach of the license, could nevertheless demand that Novell return to
IBM the money IBM had paid for its buy-out. When confronted with this line of
analysis on cross examination, Mr. LaSala responded "I don't know" and
ultimately admitted that IBM "would not have come and asked us for the $10
million." (A2668:1950.)9
Similarly, Novell's waiver decision cannot be justified on the basis
of Novell (or IBM) business interests in the success of the Linux operating system
arising years later. "The fundamental purpose of the implied covenant of good
faith and fair dealing is that neither party will do anything which will injure the
right of the other to receive the benefits of the agreement." Major v. W. Home Ins.
Co., 169 Cal. App. 4th 1197, 1209 (2009) (citations and quotations omitted);
Bosetti v. U.S. Life Ins. Co. in City of New York, 175 Cal. App. 4th 1208, 1235
(2009) (same). Accordingly, the covenant "imposes upon each party the obligation
to do everything that the contract presupposes they will do to accomplish its
purpose," Bosetti, 175 Cal. App. 4th at 1235, and a party breaches the covenant if
it engages "in a conscious and deliberate act, which unfairly frustrates the agreed
52
common purposes and disappoints the reasonable expectations of the other party
thereby depriving the party of the benefits of the agreement." Nieto v. Blue Shield
of Cal. Life & Health Ins. Co., 181 Cal. App. 4th 60, 86 (2010) (citations and
quotations omitted). That would be a meaningless restriction if a party's own
economic self-interest were sufficient justification for its action.
IV. THE DISTRICT ABUSED ITS DISCRETION IN MAKING
CRITICAL EVIDENTIARY RULINGS THAT PREJUDICED SCO.
The reversal of a district court's evidentiary decision is warranted where the
Court "has a definite and firm conviction that the lower court made a clear error of
judgment or exceeded the bounds of permissible choice in the circumstances."
Bryant v. Farmers Ins. Exch., 432 F.3d 1114, 1122 (10th Cir. 2005). "A district
court would necessarily abuse its discretion if it based its ruling on an erroneous
view of the law or on a clearly erroneous assessment of the evidence." Lyons v.
Jefferson Bank & Trust, 994 F.2d 716, 727 (10th Cir. 1993) (quotations omitted).
A. The District Court Wrongly Informed the Jury of
Prior Judicial Decisions Rendered Against SCO.
After steadfastly rejecting numerous efforts by Novell to inform the jury that
it previously had secured a summary judgment (which this Court then reversed) on
the ownership of copyrights, the district court changed midway through trial and
allowed Novell to inform the jury of the previous rulings.
53
It was extremely prejudicial to SCO for the jury to find out that the district
court had previously dismissed SCO's claim for slander of title as a matter of law,
and that the court had dismissed other of SCO's claims as well. Indeed, the basis
on which the district court repeatedly refused to have the jury learn of the decision
in the first half of trial was that the information would cause SCO undue prejudice.
The court had concluded, correctly, that "Plaintiff would be prejudiced if the jury
was informed that this Court once entered judgment against it on those very claims
that the jury will be asked to decide." (A1094.2.) Inexplicably, the district court
allowed this information to be used in cross-examination of SCO's damages
expert, while noting that "as a general rule," it was both "unnecessary" and "highly
prejudicial." (A2541:1465.)
The admission of such information not only was highly prejudicial but was
erroneous. The reversed decisions of a court would, of course, be irrelevant and
not made known to the jury charged with deciding those issues. The district court
here permitted the jury to be told of the prior decisions on the grounds that they
were relevant to Dr. Botosan's "conclusions about damages." (A2550:1498.)
They were not. Dr. Botosan, as noted, based her analysis of the damages that SCO
had suffered by calculating the revenues and profits that SCO would have made in
the "but for" world that world in which Novell had never claimed to own the
54
copyrights.10In that world, of course, the court's decision concerning SCO's claim
for slander of title against Novell would not have existed because the slander of
title itself would not have occurred. Dr. Botosan expressly told Novell's counsel
before he disclosed the ruling that in her "but-for world ... none of those
[rulings] would matter." (A2548:1492.) SCO again objected to the introduction of
the reversed rulings, but the objection was overruled. (A2548.)
Novell's counsel then proceeded to read to the witness from prior district
court rulings. He told her that "it is undisputed that the APA did not transfer any
copyrights" (A2549:1494); that "there is no dispute that all copyrights were
excluded on Schedule 1.1(b)" (referring to the replaced language of the original
APA); that "Amendment Number 2 merely amends the schedule of excluded assets
and does not constitute a transfer of copyrights on its own", and that the
amendment "is not retroactive to the date of the APA." Having succeeded in
putting before the jury these prejudicial statements, all of which were effectively
reversed by this Court's prior decision, Novell's counsel again elicited from the
witness what she had said before that these decisions did not matter to her
55
analysis because "nobody would be able to read this document because it wouldn't
exist." (A2550:1499; see also A2555:1519.)
It is hard to imagine a more contrived basis upon which to secure the
introduction of more highly prejudicial information before the jury. The jury was
told flatly wrong statements about the ultimate issues they are to decide all
clothed with the imprimatur of a district judge's decision; in fact, the jury was not
even told it was a different district judge who had issued the decisions.
The instruction the jury received did not begin to cure the prejudice. The
instruction simply said that the district court's prior decision had been "reversed,"
by a unanimous decision of the Tenth Circuit, and "those issues were to be decided
by a jury." (A2549:1495.) The court's instruction did not state the basis for the
reversal nor informed the jury that this Court had rejected the very statements that
Novell's counsel had quoted.
The district court abused its discretion by permitting Novell to introduce
passages from a reversed judicial decision on the very issue of copyright
ownership to be decided, and this error requires a new trial.
B. The District Court Improperly Permitted Novell to Rely on
Language in the APA That Was Replaced.
SCO apprehended from the start that the jury could be confused if it were
presented with the old, replaced language concerning the exclusion of all
56
copyrights without it being made clear that this language no longer existed in the
APA and could be given no legal effect. SCO sought a motion in limine to this
effect. The district court wrongly denied SCO's motion in limine, and wrongly
denied subsequent objections related to Novell's seeking to confuse the jury with
respect to the "exclusion of copyrights" language that had been removed from the
APA by Amendment No. 2.
Under this Court's remand opinion, it was not a "permissible choice" for the
district court to permit Novell to treat the original language of the APA in
isolation. SCO, 578 F.3d at 1210-11. In its prior Order, this Court made clear that
the APA and Amendment No. 2 must be construed together as a single instrument.
Id. at 1211. Yet the district court allowed Novell to confuse the jury by lines of
questioning predicated on the "exclusion of copyright" language that had been
removed and replaced by Amendment No. 2. The prejudice to SCO was magnified
by rulings that restricted SCO's ability to elicit on its own examinations from
certain witnesses that this language had been replaced.
Starting with its opening statement, having secured the denial of SCO's
motion in limine, Novell conveyed the misimpression that the original copyright
language of the APA was the only relevant language. (See, e.g., A2173-82:56-60,62,65-73,75-67; A2236-38:296-301; A2860-63:2678-91; A2866-67:2703-
57
04; A2871:2722.) Holding a bound copy of only the original APA, Novell's
counsel contended that having shown the jury only the original language, he had
shown them the "black and white letter of the agreement" (A2178:73); he
repeatedly referred to Amendment No. 1 without acknowledging Amendment No.
2 (A2175-77:62, 65, 68-69); he contended that Amendment No. 1 made "no change
to exclusion of copyrights," (A2178:75-76). Although Novell's counsel ultimately
did acknowledge Amendment No. 2, he did not say that it replaced the language in
the APA, arguing rather that the amendment itself did not transfer copyright
ownership (A2179:78-79) a straw man that this Court had previously knocked
down. SCO, 578 F.3d at 1213. Novell even pointed to the original copyright
language in conjunction with the integration clause of the APA as if the jury
could consider only the original language. (A2202-03:168-70.) Novell also
declined to use the admitted exhibit comprising the APA and the amendments
thereto, insisting instead on using an exhibit that was just the text of the original
APA. (See, e.g., A2216:217.)
There can be no reasonable dispute about Novell's intentions: During
colloquy on the line of questioning concerning the integration clause, when the
district court warned counsel for Novell that if he continued to pursue his questions
about the integration clause, then SCO would be permitted to revisit the issue of
58
Amendment No. 2, Novell's counsel candidly, and transparently, stated: "Well, I
don't want the answer that badly, Your Honor." (A2202-03:168-70.) The district
court magnified the error by then precluding SCO from asking questions of two
critical witnesses, Frankenberg and Thompson, to correct the misimpression
Novell had created. (A2186; A2192; A2215-16; A2238.) The court did so on the
basis that these witnesses, not having been involved in the negotiation or drafting
of Amendment No. 2, lacked personal knowledge so as to testify concerning the
Amendment. But that should not have precluded the witnesses from testifying that
the old language had subsequently been replaced a fact on which they could
testify even if they were not involved in negotiating or drafting Amendment No. 2
and understandably could not testify to what was intended by the language
selected. As an example, in cross-examining SCO's first witness, former Novell
CEO Robert Frankenberg, Novell asked him to consider the old, replaced language
"as you sit here today and look at the agreement." (A2192:130.) When SCO
objected and asked if it could ask Frankenberg about the amendment to the original
language, the court ruled that SCO could not, because he was not at the company at
the time of Amendment No. 2. (A2193:132-33.)
These were not harmless errors. The "erroneous admission of evidence is
harmless only if other competent evidence is sufficiently strong to permit the
59
conclusion that the improper evidence had no effect on the decision." Dodge v.
Cotter Corp., 328 F.3d 1212, 1229 (10th Cir. 2003) (quotations, citation and
brackets omitted). In the crucial first part of the trial, in the first several days of
evidence, Novell created the misimpression that the language excluding copyrights
was still operative. The Court's ruling created the impression that in all
subsequent references to Amendment No. 2, SCO was scrambling to somehow
make Amendment No. 2 relevant to the transaction in the face of the original
exclusionary language when, in fact, that language no longer existed and was not
the language that the jury would be called upon to interpret.
C. The District Court Erred By Admitting Hearsay That SCO Was
"The Most Hated Company in Tech."
Over SCO's objections, Novell's expert witness was allowed to show the
jury a slide of a Business Week magazine article describing SCO as the "Most
Hated Company in Tech." (A2815-16.) This article was hearsay. In addition, in
describing SCO's reputation, the article was purporting to describe what even
further third parties the participants in the industry said and thought about
SCO. The article's title thus contained a second level of hearsay.
An expert witness is allowed to consider certain forms of hearsay (if reliable
and of a type generally used by members of the profession), but that does not
constitute a license to publish the hearsay before the jury. Estate of Parsons v. The
60
Palestinian Authority, Civil Action No. 07-1847 (JR), 2010 WL 2169617, at *3
(D.D.C. May 28, 2010); Malletier v. Dooney & Bourke, Inc., 525 F. Supp. 2d 558,
666 (S.D.N.Y. 2007); 30 C. Wright, et al., Fed. Prac. & Proc. Evid. § 6337 (2010).
In other words, the ability of Novell's expert to rely on the Business Week article
is not the issue; the problem is his serving as a conduit through which that hearsay
is presented to the jury. To the extent Mr. Musika, Novell's expert, was seeking to
criticize Dr. Botosan for not considering certain "real world" articles regarding
SCO's reputation in connection with the effect of Novell's slander, it was
unnecessary and in any event, improper to present the jury with the highly
prejudicial hearsay article.11See, e.g., Malletier, 525 F. Supp. 2d at 666 (An expert
is "precluded from disclosing the hearsay to the jury unless its probative value in
illustrating the basis of the expert's opinion substantially outweighs the prejudicial
effect of having the jury hear about the otherwise inadmissible hearsay.")
61
CONCLUSION
SCO respectfully requests, for the foregoing reasons, that the Court reverse
the district court's denial of SCO's motion for judgment as a matter of law on
SCO's claim for slander of title, or, in the alternative, grant a new trial; and that the
Court reverse the district court's findings of fact and conclusions of law as set forth
herein.
ORAL ARGUMENT STATEMENT
SCO respectfully requests oral argument on the grounds that, given the size
of the underlying record and the number and complexity of the issues involved in
this appeal, such argument would help to frame the principal issues and arguments
for the Panel after the appeal has been fully briefed.
Respectfully submitted on this 9th day of September, 2010.
/s/ Edward Normand
Edward Normand
BOIES, SCHILLER & FLEXNER LLP
[address, phone, fax, email]
Brent O. Hatch (5715)
Mark F. James (5295)
HATCH, JAMES & DODGE, PC [address, phone, fax, email]
62
Stuart Singer
BOIES, SCHILLER & FLEXNER LLP
[address, phone, fax, email]
Devan V. Padmanabhan
DORSEY & WHITNEY LLP
[address, phone, fax, email]
Attorneys for Plaintiff-Appellant, The SCO Group, Inc.
63
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 13,822 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: September 9, 2010
/s/ Edward Normand
Edward Normand
Boies, Schiller & Flexner LLP
64
CERTIFICATE OF SERVICE
I, Edward Normand, hereby certify that on this 9th day of September, 2010,
a true and correct copy of the foregoing BRIEF OF APPELLANT, THE SCO
GROUP, INC., was filed with the court and served via ECF and Federal Express
to the following recipients:
Sterling A. Brennan
David R. Wright
Kirk R. Harris
Cara J. Baldwin
WORKMAN | NYDEGGER
[address]
Michael A. Jacobs
Eric M. Acker
Grant L. Kim
MORRISON & FOERSTER
[address]
Thomas R. Karrenberg
Heather M. Sneddon
ANDERSON & KARRENBERG
[address]
Counsel for Defendant-Appellee Novell, Inc.
/s/ Edward Normand
Edward Normand
Boies, Schiller & Flexner LLP
65
CERTIFICATE OF SERVICE
I, Edward Normand, hereby certify that on this 9th day of September, 2010,
a true and correct copy of APPELLANT'S APPENDIX was served Federal
Express to the following recipients:
Sterling A. Brennan
David R. Wright
Kirk R. Harris
Cara J. Baldwin
WORKMAN | NYDEGGER
[address]
Michael A. Jacobs
Eric M. Acker
Grant L. Kim
MORRISON & FOERSTER
[address]
Thomas R. Karrenberg
Heather M. Sneddon
ANDERSON & KARRENBERG
[address]
Counsel for Defendant-Appellee Novell, Inc.
/s/ Edward Normand
Edward Normand
Boies, Schiller & Flexner LLP
66
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: September 9, 2010
/s/ Edward Normand
Edward Normand
Boies, Schiller & Flexner LLP
67
1 Novell filed a petition for a writ of certiorari to the U.S. Supreme Court from
this ruling. In August 2010, after prevailing at trial, Novell dismissed the petition.
2
Novell's counterclaim for slander of title was also tried but dismissed as a
matter of law following the close of the evidence. (A3055-56.)
3
The official press release that SCO issued on September 20, 1995, quoted
Novell CEO Robert Frankenberg and stated: "According to the terms of the
agreement, SCO will acquire Novell's UnixWare business and UNIX intellectual
property." (A3507-09;A2188:110-11.) Mr. Frankenberg testified that, in
approving that press release for Novell, he understood the term "intellectual
property" to include the copyrights. (A2188:112.)
4
In addition, this "support" was highly equivocal. Bradford admitted that he
did not have a recollection of what had occurred independent of his review of
selected documents he was provided in meeting with Novell's counsel.
(A2797-2800:2434-35,2438,2441,2444,2446-47.) Bradford further acknowledged that his
review of documents did not include Amendment No. 2. (A2804:2461.) The
evidence showed that he authored a memo to the Novell Board at the time of the
transaction that pointedly did not report on the exclusion of any UNIX or
UnixWare copyrights. (A2800-01.)
5
Under the Copyright Act, if SCO had obtained an "exclusive license," then it
necessarily had acquired ownership of the copyrights. (A3086-87.) See 17
U.S.C.A. § 101. At trial, Novell affirmed its view that SCO does not have any
"exclusive license." (A3082-85.) Only an exclusive licensee possesses all of the
exclusive rights of copyright ownership, including the right to sue for
infringement. 1 Copyright Throughout the World § 19:29 (2009); 1 Copyright
Law in Business and Practice § 9:1 (2009); 2 Patry on Copyright § 5:1118 (2010).
"[A]n implied license can only be non-exclusive." Robinson v. Buy-Rite Costume
Jewelry, Inc., No. 03 Civ. 3619(DC), 2004 WL 1878781, at *4 (S.D.N.Y. Aug. 24,
2004); accord Gillespie v. AST Sportswear, Inc., No. 97 Civ. 1911 (PKL), 2001
WL 180147, at *7 (S.D.N.Y. Feb. 22, 2001); SHL Imaging,Inc. v. Artisan House,
Inc., 117 F. Supp. 2d 301, 316 (S.D.N.Y. 2000); 2 Patry, supra, § 5:1118;
Copyright Litigation Handbook § 13:12 (2d ed. 2009).
6
There was no issue at trial as to which specific UNIX or UnixWare
copyrights were required; the parties and the witnesses addressed them as a whole
as identified on the asset schedule attached to the amended APA.
7
The fact that SCO formed a new division in 2003 to protect its UNIX
technology and intellectual property, and called it SCOsource, does not mean it did
not acquire the right to pursue the SCOsource initiative as the court found.
8
The district court erred in concluding that the verdict resolved SCO's claim.
The Seventh Amendment so operates only where the verdict necessarily "resolves
a factual issue." Haynes Trane Serv. Agency, Inc. v. Am. Std., Inc., 573 F.3d 947,
959 (10th Cir. 2009). The principal question on this claim is whether the jury has
already decided that there are no "required" copyrights. The verdict does not
necessarily answer that question.
9
These same points apply with respect to Novell's purported waiver of SCO's
rights to enforce restrictions in the license agreement with Sequent Computer
Systems, which IBM had acquired in the late 1990s, as IBM also was not paying
any royalties under the Sequent Schedules.
10
Both Dr. Botosan and Novell's expert, Mr. Musika, agreed that a "but-for
world" analysis is commonly used and is acceptable for this type of analysis.
(A2483:1239-40(Botosan);A2524:1399(Botosan); A2809:2479-80(Musika); A2819:2519(Musika).)
11
In addition, the article did not tend to make it more likely that Dr. Botosan
had failed to account adequately for perceptions of SCO in the market. The
article, which was published after SCO filed its lawsuit against Novell and which
specifically referenced the "competing claims" of copyright ownership that SCO
had made and quoted commentary regarding the substance of SCO's arguments
against those claims may not have published at all in the "but-for world" of Dr.
Botosan's damages analysis.
|