12.26.09

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Novell Legal News: SCO and MoFo

Posted in Courtroom, Law, Microsoft, Novell, SCO, SLES/SLED, UNIX at 10:11 am by Dr. Roy Schestowitz

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Summary: This week’s bits of analysis and news about Novell’s time in court, including a win in California

IN THE PREVIOUS TWO posts [1, 2] about the SCO case we showed that SCO has no reasonable case and that it keeps pressuring SUSE nonetheless. Groklaw has recited some old facts in order for SCO’s lawyers to digest them and give up the case.

LamLaw has written some more about SCO’s opposition to SUSE’s motion and Groklaw used Christmas Eve and Christmas Day to catch up:

i. SUSE’s Reply, Cahn’s Objection to Motion to Compel, and MORs, MORs, MORs

Lots of bankruptcy filings, including a reply by SUSE in support of its motion for relief from the automatic stay and Chapter 11 Trustee Edward Cahn has filed an Objection to Al Petrofsky’s motion to compel him to comply with reporting requirements. And Ocean Park Advisors has filed an Amended Exhibit A. But that isn’t the big news. The big news is that SCO has filed its Monthly Operating Reports, or MORs, for July through September, 2009. But interestingly, they are filed with a disclaimer that they are filed “consistent with the format and allocations of liabilities as previously adopted by the Debtors,” because Mr. Cahn and his financial advisors simply have not yet had time to “review all of the historical information previously reported by the Debtors”, so Cahn reserves the right to amend them once he has done a more thorough review.

“Historically,” the disclaimer continues, “the Company may not have distinguished between direct liabilities of debtor and non-debtor companies.” That would be the foreign subsidiaries, I expect, like Japan and Germany. “The Trustee with its financial advisors is conducting a thorough analysis of the intercompany arrangement among the debtors and the non-debtor subsidiaries and reserves the right to modify these MORs upon completion of its review.” It cautions the reader not to rely on the information, as they are filing just to fulfill reporting requirements. I would take it that SCO may have more in the way of assets than is reported here, then. September says $1,287,030. And we will have to wait for the real MORs.

ii. SUSE’s Reply in Support of Motion to Lift Stay, as text

Here, as promised, is the SUSE Reply [PDF] about lifting the bankruptcy stay, more properly titled SUSE’s Reply in Support of its Motion for Relief from the Automatic Stay to Complete International Arbitration. This document is in response to SCO Chapter 11 Trustee Edward Cahn’s Objection to SUSE’s motion, and they do not hold back. Most interestingly, they highlight the GPL and what it means for SCO’s copyright claims.

Groklaw also carried on showing SCO lawyers that their case is dead to begin with. Latest articles on the subject are:

i. Answering SCO Bit by Bit – Binutils in UnixWare and OpenServer Too

I thought you’d find the slides from a talk given at SCOforum 2004 of interest, because they show that SCO also distributed, under the GPL, binutils in UnixWare and OpenServer. The talk was titled, “Open Source Components in SCO OpenServer and SCO UnixWare”, and the credits list Ron Record at SCO engineering, who we’ve written about before on Groklaw in this context. One of the talk’s slides lists the binutils package in OpenServer as OpenServer gnutools package, which means they had to know, I think, where it came from and that it is GPL’d, and there is a list of ftp sites to get the package.

ii. Answering SCO Bit by Bit – Streams and more GPL’d header files in Caldera OpenLinux 2.2

A reader sends us some more screenshots of Caldera, now SCO Group, distributing header files under the GPL. This time, it’s from OpenLinux 2.2-4, dated from 1999.

Amongst other new posts, there is this one about Novell’s latest motion:

Novell is asking the Utah District Court to set aside the earlier judgment by the Hon. Dale Kimball that Novell is not entitled to any of the SCOsource money from Microsoft or from Linux end users like EV1. That decision was based on his earlier ruling in August of 2007 on summary judgment that Novell owned the copyrights, not SCO, and that since SCO couldn’t offer a release of copyright infringement claims, since it didn’t own the copyrights, the licenses must not be SVRX licenses. I never could see the logic in that, but that is what happened. But since the Tenth Circuit set that summary judgment aside on copyright ownership, the judgment that Novell has no claim on the money must also be set aside, Novell argues.

In effect, if SCO were to be declared the owner of the copyrights, then Novell would like its 95 percent of any royalties. Of course, SCO is broke, so why is Novell asking for money, when it’s so unlikely it will ever get any? I can only guess, but I believe they see that SCO is thinking of gearing up the SCOsource business if it can win the copyrights at trial, and Novell is moving to block. If the licenses are determined to be about SVRX, then SCO would be obligated not only to pay almost everything to Novell, but to ask Novell for permission to sue. Think somewhere between slim to none, the odds of Novell granting SCO permission to sue Linux end users.

This is getting very interesting.

In other legal news, Novell managed to reverse a key judgment that would save it a lot of money.

Judges usually don’t look kindly on discovery lapses. But in a decision last week, an appeals court in California was sympathetic toward the software company Novell, which had been sanctioned for belatedly producing discovery. In a trial over a contract dispute, Novell was ordered to pay $19 million in damages, $4.5 million in interest, and more than $10 million in its opponent’s legal fees.

[...]

During the jury trial in 2006, which lasted six months, Novell produced thousands of documents that had been requested by the plaintiffs earlier but that Novell had been unable to locate. Orange County superior court judge David Velasquez didn’t think it was an accident. He labeled Novell “grossly reckless” in not producing the documents earlier and granted a motion by plaintiffs for sanctions. According to Miriam Vogel of Morrison & Foerster, who represented Novell on appeal, the sanctions were tantamount to a directed verdict.

More here: “Novell Gets New Trial After $35 Million Loss”

Software company Novell Inc. was spared a $35 million jury verdict against it when a California appeal court found last week that an Orange County Superior Court judge’s sanctions against the company went too far.

The 4th District Court of Appeal found that Novell didn’t act intentionally when it failed to present certain documents before the six-month-long trial started, and that Orange County Superior Court Judge David Velasquez was heavy-handed.

This is good news for Novell, but the company continues to jeopardise Free software as long as it acts at the behest of Microsoft, which is one of its biggest sources of income. Novell may be required to extinguish SCO, but Novell too needs to be extinguished along with Microsoft.

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