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Novell tries again for an SCO KO

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Novell is once again trying to finish off The SCO Group’s court cases by proving that Novell is the company that actually owns Unix’s intellectual property rights. What makes this latest attempt different, is we finally see an explanation of how SCO ended up owning Unix without owning its copyrights.

This is core to any and all of SCO’s multiple cases regarding Linux. Without a legal claim to Unix IP (intellectual property), SCO’s cases against Novell, IBM, and Red Hat can’t even enter the ring to begin the fight.

Novell has been pushing this very point since early 2004. Then, Novell first asserted that in the original APA (Asset Purchase Agreement) and Amendment No.2 to the APA, it had never sold Unix’s IP to SCO. Since then, the legal arguments have never stopped on this very point.

By and large, though, SCO hasn’t been able to score any points in this critical round. Minutes from a 1995 Novell’s board of directors meeting clearly state, for example, that Novell was to retain its Unix copyrights when it sold the operating system to Santa Cruz Operation. Santa Cruz Operation would eventually become today’s SCO.

Novell has also claimed that in late 2002, SCO’s CEO Darl McBride had tried to get Novell to amend the APA to give SCO Unix’s copyrights. Thus, this proved, according to Novell’s lawyers’ logic, that SCO already knew that it didn’t own Unix’s IP.

SCO’s counter-arguments can be boiled down to: “Why would we buy an operating system without its copyright?” It’s a good question.

Now, thanks to Novell’s latest efforts to win a summary judgment against SCO — that is, Novell is asking the court to rule in its favor without a trial because the evidence is so completely clear that Novell is in the right — we finally know why SCO did not get Unix’s IP.

The Reader’s Digest condensed version? Novell never wanted to sell them in the first place.

In Novell’s supporting document, the company includes statements and some original legal documentation from the Novell attorneys who wrote the APA and the Amendment, Tor Braham and Allison Amadia, respectively.

In Braham’s statement to the U.S. District Court in Utah, he explained that when Novell sold Unix to the Santa Cruz Operation it “was not a straight up asset purchase. The contract took on a more complex form due to various issues that arose in the course of negotiations. For example, Santa Cruz did not have the cash to buy both the UNIX assets that Novell had purchased from USL in 1993 plus Novell’s UnixWare business. SCO’s financial health also raised serious concerns about Santa Cruz’s viability as a company.”

Because of this, “Novell was unwilling to transfer intellectual property rights in UNIX and UnixWare, including patents and copyrights.” The reason for that is that if SCO went under, Novell would still own the valuable Unix IP. “Novell’s copyright ownership, in particular, would permit Novell to continue to have rights to this revenue, should Santa Cruz go bankrupt; the rights to the revenue would follow the copyrights to Novell. Novell’s ownership of the copyrights also would aid in Novell’s negotiation of buyouts of SVRX Licenses and in Novell’s interest in the development of UNIX on 64-bit Intel processors, for example, by Hewlett Packard,” said Braham.

This isn’t just a matter of Braham’s recollection of a deal now more than 10 years gone in the past. His statement includes numerous copies of the original drafts, making it clear that keeping the copyrights had always been Novell’s intentions. Because Santa Cruz was short on cash to make the deal, Santa Cruz eventually agreed to this.

Then, in 1996, according to Allison Amadia, in her declaration to the court, Steve Sabbath, an in-house lawyer at Santa Cruz, had asked “Novell to amend the Original APA to explicitly give Santa Cruz rights to copyrights in UNIX and UnixWare.”

Amadia said that while Novell was willing to affirm that Santa Cruz had a license under the Original APA to use Novell’s UNIX and UnixWare copyrighted works in its business, Novell was not going to transfer ownership of any copyrights to Santa Cruz through Amendment No. 2.”

So it was that the key paragraph in the Amendment reads: “All copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the Agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies.”

Novell’s senior VP and general counsel, Joseph A. LaSala Jr. argues today that SCO only got the “copyrights … required for [Santa Cruz Operation] to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies.” And, since SCO didn’t ask for any specific required copyrights, it never got them.

In her statement, Amadia agreed. “Amendment No. 2 was not intended to alter the Original APA’s copyright ownership exclusion. Amendment No. 2 was not intended to transfer ownership of any UNIX or UnixWare copyrights owned by Novell. As I mentioned above, Amendment No. 2 affirmed that Santa Cruz had a license under the Original APA to use Novell’s UNIX and UnixWare copyrighted works in its business.”

Therefore, SCO’s contention “that Amendment No. 2 acted to transfer ownership of the UNIX and UnixWare copyrights to Santa Cruz, that contention is inaccurate. That was not the intent during the negotiations of Amendment No. 2,” Amadia added.

Amadia continued, “There was no Bill of Sale or other similar legal document executed in connection with Amendment No. 2 that transferred ownership of any UNIX or UnixWare copyrights from Novell to Santa Cruz. The reason is simple: Amendment No. 2 was not intended to transfer ownership of any copyrights to Santa Cruz.”

So, while, yes, Santa Cruz sought to gain Unix’s IP, but “I rejected his proposal and ultimately we agreed on the language that became Paragraph A of Amendment No. 2,” concluded Amadia.

To sum up, Novell former attorneys argue that while Santa Cruz did want to obtain Unix’s IP, Santa Cruz didn’t have the funds to buy them in 1995 and they were unable to negotiate for them in 1996. So again, Novell seeks to have the court deliver a knockout blow to SCO’s ownership of Unix’s IP — and with it, the rest of its protracted legal actions against Linux and Linux-related companies.

A version of this story first appeared in Linux-Watch.

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