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(originally published at IP-WARS 2007-05-28)
For many years the IT industry presumed that Santa Cruz
Operation was the sole and rightful owner of the original
UnixTM . Unix, of course was
developed originally at AT&T and spun off into their
USL division, which was later sold to Novell. In
1995 there was the sale of Unix assets to Santa Cruz
Operation. It was widely assumed that all
enforceable copyrights followed that sale. We now
know that is apparently not so.
Now even with that assumption, things in the unix world
were not cut and dried. Prior to the sale to
Novell there was a nasty schism between Berkeley and
USL. AT&T had for many years been forbidden
by consent decree from entering the computer business, so
when Unix came out of their own labs - many sharing
facilities with various universities - they had little
reason to object to its wider distribution among academic
institutions. And many of those academies also had
business relations with various computer companies who
also bought various rights to Unix from AT&T.
These incestuous relations were much the norm for the time
in the computer world and the sharing of information
followed much the same traditions of academia, share
freely and build upon each others' work. That is
exactly what happened. Many academics as well as
businesses had access to the Unix code and would fix bugs,
add features and new tools which were shared ... and
AT&T incorporated many of them into the versions of
Unix that they licensed and distributed.
One of the centers for academic development of Unix was
the University of California at Berkeley. As early
as
1978 a group at Berkeley had been distributing its
own version of Unix known as Berkeley Software
Distribution. With the, perhaps strained,
blessing of the University a group of researchers had
formed BSDI and was selling that distribution.
In 1990 USL realized that Unix was a valuable commercial
property and attempted to end free distribution outside
their control. USL v BSDI ended with a settlement
which resulted in BSDI being allowed to continue to
distribute its version of Unix (after replacing some
files). The full terms of the settlement were not
publicly known until 2004 when it was published on
Groklaw but it was widely known and understood that
most Unix copyrights were considered impaired subsequent
to the
finding of Judge Debevoise.
So there have long been AT&T free versions of
unix-like operating systems available, aside from the
"official" Unix. But it was widely thought that
the "baton" of such copyright as remained for Unix
righteously passed from USL to Novell thence to Santa
Cruz, then presumably to Caldera International in 2001
which renamed itself in 2002 to "The SCO Group".
Linux of course, begun in 1991 and still presided over
by Linus Torvalds, has grown to ascendancy as foremost
of the "free" unix-like systems, seriously challenging
both AT&T derived Unix and Microsoft operating
systems in the server market, holding a share of
embedded systems, and now poised as a potential threat
even on the hitherto Microsoft and Apple owned desktop
markets. That phenomenal growth has attracted
attention and created business opportunities. IBM
in particular now does billions of dollars of business
annually supporting Linux in various ways. It has
also caused envy.
In late 2002 The SCO Group (SCOX as per its NASDAQ symbol)
through its officers and agents began
asserting that Linux impinged upon its rights to Unix.
In March of 2003 they filed suit against IBM
claiming various malfeasance under contract and Unix
rights related to IBM's Linux activities.
Now the SCO v. IBM lawsuit is vast and complicated - in
large part because SCOX has been very unspecific about its
various claims - but a large number of watchers of this
suit are doubtful that SCOX could prevail even if they are
found to own the residual Unix copyrights. In a
ruling on the October 2004 hearing, presiding Judge Dale A.
Kimball he found it "astonishing" that SCOX failed to
demonstrate any specific copying from Unix to Linux.
Even today, with discovery in this case complete, the
courts have allowed allegations involving only 326 lines of
code in Linux proper (the kernel or core of the operating
system) to remain at issue. And many of those lines
come not from Unix code, but from IBM's own work.
But without ownership of Unix code copyrights, SCOX's case
comes tumbling down, another decaying monument to avarice
and hubris.
Shortly after the IBM case was filed, Novell who was now
actively interested in Linux announced that its reading of
the
APA, particularly schedule 1.1(b) Excluded Assets, that
neither SCOX nor its predecessor Santa Cruz, actually owned
the Unix copyrights. There was some confusion (even
on Novell's part, evidently) following the discovery of
APA Amendment 2 by SCOX, but many observers are still
convinced that SCOX does not have a valid claim to the Unix
copyrights.
SCOX then sued Novell for "slander of title", claiming that
they did own the copyrights and that Novell's contrary
statements were tortuous interference with their business.
This may have been something of a rather strategic
blunder. Indeed Judge Kimball, has already
said in a
prior ruling (p 10) "there is substantial doubt" about
whether the APA even with Amendment 2 constituted a
copyright transfer. Given the explicit requirements
for a copyright transfer, this is judicial restraint
telling SCOX "you'd better come up with more than this!".
Unfortunately for SCOX they have not come up with better.
They have entered numerous declarations and
depositions by numerous people saying "they should have",
"they must have", "I thought so". But none which
say "they did".
Without a bill of sale listing copyrights to specific
works as an item in the sale, SCOX is left pleading that
the intent of the APA and Amendment 2 was to transfer
those rights despite the Judge's previously expressed
misgivings. But no matter what others say
about the contract, SCOX is faced with the fact that the
APA is an "integrated contract". Its own words are
the highest authority for what it means. The judge
is only allowed to consider evidence outside the words
of the contract where there is ambiguity in the meaning
of the contract itself.
To this end, SCOX has referenced numerous related
contracts and documents by which they try to imply that
everyone thought Santa Cruz had the copyrights and that
Santa Cruz needed them to conduct its business, and that
Novell had no valid reason not to transfer the copyright.
A business contract is a working functional document.
Every clause is presumed to be there for a specific
legal or business purpose. Conceivably, if SCOX can raise
enough doubt about there not being business reasons to not
have transferred the copyrights in the initial APA and
that Amendment 2 existed for the purpose of curing that
oversight in the face of evident need by Santa Cruz, then
Judge Kimball might be moved to consider evidence beyond
the amended contract. Then SCOX might have a chance
to set its depositions and interpretations against those
of Novell.
But last month Novell filed the
declaration of Tor Braham. This is devastating
to any hopes SCOX may have had to raise enough doubt in
Kimball's mind about the business reasons for the
copyright exclusion to consider it ambiguous.
Braham gives those reasons in clear simple terms.
Braham was the attorney at the Wilson, Sonsini,
Goodrich & Rosati law firm whom Novell charged with
drafting the agreement with Santa Cruz. He kept
meticulous notes of his marked up drafts and
correspondence with his opposite numbers at Brobeck,
Phleger & Harrison representing Santa Cruz and
included many of them in his declaration.
Novell wanted to get out of the Unix licensing business
to concentrate on developing Netware and related
products, so it was willing to entertain Santa Cruz's
proposal to allow Santa Cruz to continue developing
UnixWare based on Unix. But there were problems
with such a deal. According to Braham "For
example, Santa Cruz did not have the cash to buy
both the UNIX assets that Novell had purchased from USL
in 1993 plus the UnixWare business. SCO's
financial health also raised serious concerns about
Santa Cruz's viability as a company." (para 7).
The solution to this was that Novell would continue to
receive the royalty revenue stream from Unix licensees,
but Santa Cruz would act as agent and receive a 5%
administrative fee. "Novell was receiving an
annual SVRX revenue stream of approximately $50
million. 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." (para 14).
Nor did Amendment 2 to the APA change that. In
the
declaration of Allison Amadia, the lawyer at
Anderson & Karrenberg who negotiated Amendment 2
on behalf of Novell, says, "I told Mr. Sabbath
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". (para 10). And later: "Should, after
Amendment No. 2, Santa Cruz believe its
license to use Novell's copyrighted works was
insufficient and that it needed ownership of any
particular Unix or UnixWare copyright rights because
ownership of such copyrights was "required" to run
its business, I believe Santa Cruz would have to
have made such a request to Novell." (para 15).
So there it is in black and white from the lawyers
who wrote the contract and Amendment 2.. A
clear business reason why Novell did
not assign the copyrights in the Santa Cruz deal.
A judge may not consider extrinsic evidence
to a contract when the intent of the contract is
clear, but there is no reason for him not to
consider that the best extrinsic evidence - from
the lawyer who wrote it - says that it means and
is intended to mean what it says.
The best response SCO has yet mustered is the
declaration of G. Gervaise Davis III who
asserts that it would be normal for copyrights to
follow the business in such cases. In a
simple buyout that would undoubtedly be true, but
the Novell/Santa Cruz deal was not a simple buyout.
He avers that Novell's rights to use Unix
technology would be protected in bankruptcy by the
later executed Technology Licensing Agreement (TLA)
between Santa Cruz and Novell. But
thunderously loud by its absence is any commentary
on how Novell would have protected its business
interest in the Unix licensing revenue stream in
that event.
That business reason, retaining revenue rights in
the face of SCO bankruptcy, is particularly poignant
- and more than a little presciently ironic - in
that Novell has represented to the court that SCOX
is in clear jeopardy of bankruptcy at the present
time and asserts that SCOX owes it more than
$25 million in SVRX licensing revenues from SCOX's
Microsoft and Sun deals.
It is indeed strange that SCOX undertook this
adventure without ownership of the copyrights.
Even if there were code in Linux which was
improperly derived from Unix, any revenue SCOX
received from it would have had to pass through to
Novell. Stranger still that SCOX would launch
lawsuits and make public statements about ownership
of those copyrights which would open them to
serious, perhaps personal, legal liabilities.
There is little doubt at this time that SCOX knew
before launching its suit against IBM that it did not
own the copyrights. When Caldera, prior to
changing its name to "The SCO Group, bought the Unix
assets from Santa Cruz, Wilson Sonsini for
Santa Cruz represented to Caldera: "except that
Assignor may not be able to establish a chain of
title from Novell, Inc but shall diligently endeavor
to do so as soon as possible." (Novell's
Memorandum in Support of Novell's Opposition ...
). SCOX president Darl McBride called Novell
asking for the copyrights several times as early as
February 2003, and SCOX chairman Ralph Yarro
in May of that year called Novell to ask for
changes to the original APA.
So the documents show that Santa Cruz never received
copyrights (impaired from USL v BSDI anyway) from
Novell for simple and sound business reasons
explained by their attorneys of the time.
Caldera, aka SCOX could not then have bought them
from Santa Cruz as they didn't own them.
And SCOX knew before launching its campaign against
Linux and IBM that they didn't own them.
We know now why Santa Cruz did not receive the
copyrights.
(UNIX is a trademark of The Open Group)
Copyright 2007 by Terrence W. Zellers (aka
ColonelZen). This article may be
reproduced under the
Creative Common Attribution ShareAlike 2.5 License.
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