8/10. The U.S. District Court (DUtah) issued a Memorandum Decision and Order in SCO v. Novell, a dispute over intellectual property rights in the UNIX operating system software.

The District Court held that "Novell is the owner of the UNIX and UnixWare copyrights". The opinion will likely also have consequences for Linux distributors and users. While SCO and Novell are the parties to this action, IBM will also benefit.

SCO Group, Inc. (which was previously Caldera Systems, Inc.) began this action by filing a complaint against Novell in state court in Utah alleging slander of title. See, story titled "SCO Sues Novell for Slander of Title" in TLJ Daily E-Mail Alert No. 820, January 21, 2004. Novell removed the action to the U.S. District Court. SCO amended its complaint, and Novell counterclaimed.

In 1995, a predecessor of SCO acquired from Novell, under an Asset Purchase Agreement (APA), certain assets from Novell. The two also executed a Technology Licensing Agreement (TLA) granting Novell the right to use technology included in the transferred assets and derivatives. The meaning and consequences of this APA and TLA are at issue in this action.

SCO also filed a separate complaint against IBM, alleging that IBM wrongfully included UNIX code in Linux products. Novell publicly disputed SCO's claims, which resulted in the present action by SCO against Novell.

See also, stories titled "SCO Group Delivers Notice to IBM of Termination of UNIX License Agreement" in TLJ Daily E-Mail Alert No. 718, August 14, 2007; "SCO And Novell Continue Argument Over Rights in UNIX Operating System" in TLJ Daily E-Mail Alert No. 676, June 9, 2003; "Novell Asserts Intellectual Property Rights in UNIX Technology" and "German Software Group Threatens to Sue SCO Over Linux Claims", in TLJ Daily E-Mail Alert No. 670, May 30, 2003; and "Microsoft Licenses Technology at Issue in Caldera v. IBM", in TLJ Daily E-Mail Alert No. 669, May 29, 2003.

In the just announced action, the District Court dismissed SCO's slander of title claim, along with related claims for specific performance, unfair competition, and implied covenant of good faith and fair dealing.

The District Court has not yet resolved Novell's slander of title claim.

The District Court also concluded that "to the extent that SCO has a copyright to enforce, SCO can simultaneously pursue both a copyright infringement claim and a breach of contract claim based on the non-compete restrictions in the license back of the Licensed Technology under APA and the TLA."

The District Court also concluded that "there has not been a change of control that released the non-compete restrictions of the license, and the non-compete restrictions of the license are not void under California law. Accordingly, Novell's motion for summary judgment on SCO's non-compete claim in its Second Claim for breach of contract and Fifth Claim for Relief for unfair competition is granted to the extent that SCO's claims require ownership of the UNIX and UnixWare copyrights, and denied in all other regards."

The District Court also concluded that "the only reasonable interpretation of the term ``SVRX License´´ in the APA is all licenses related to the SVRX products listed in Item VI of Schedule 1.1(a) to the APA. Therefore, Novell is entitled to a declaration of rights under its Fourth Claim for Relief that it was and is entitled, at its sole discretion, to direct SCO to waive its claims against IBM and Sequent, and SCO is obligated to recognize Novell's waiver of SCO's claims against IBM and Sequent. Accordingly, Novell's motion for partial summary judgment on its Fourth Claim for Relief for declaratory judgment is granted, and SCO's cross-motion for summary judgment on Novell's Fourth Claim for Relief is denied."

Finally, the District Court concluded that "the only reasonably interpretation of all SVRX Licenses includes no temporal restriction of SVRX Licenses existing at the time of the APA. The court further concludes that because a portion of SCO's 2003 Sun and Microsoft Agreements indisputably licenses SVRX products listed under Item VI of Schedule 1.1(a) to the APA, even if only incidental to a license for UnixWare, SCO is obligated under the APA to account for and pass through to Novell the appropriate portion relating to the license of SVRX products. Because SCO failed to do so, it breached its fiduciary duty to Novell under the APA and is liable for conversion."

Joe LaSala, SVP and General Counsel of Novell, stated in a release that "In the spring of 2003, Novell set out to ensure that SCO's groundless claims would not interfere with the development of Linux. Today’s court ruling vindicates the position Novell has taken since the inception of the dispute with SCO, and it settles the issue of who owns the copyrights of UNIX in Novell's favor. The court’s ruling has cut out the core of SCO’s case and, as a result, eliminates SCO’s threat to the Linux community based upon allegations of copyright infringement of UNIX. We are extremely pleased with the outcome."

SCO wrote in a statement that it "is obviously disappointed with the ruling".

"However, the court clearly determined that SCO owns the copyrights to the technology developed or derived by SCO after Novell transferred the assets to SCO in 1995. This includes the new development in all subsequent versions of UnixWare up through the most current release of UnixWare and substantial portions of SCO UnixWare Gemini 64." Also, SCO wrote that it "owns the exclusive, worldwide license to the UnixWare trademark, now owned by The Open Group. SCO's ownership of OpenServer and its Mobile Server platforms were not challenged and remain intact. These SCO platforms continue to drive enterprises large and small and our rapidly developing mobile business is being well received in the marketplace."

"What's more, the court did not dismiss our claims against Novell regarding the non compete provisions of the 1995 Technology License Agreement relating to Novell's distribution of Linux to the extent implicated by the technology developed by SCO after 1995. Those issues remain to be litigated." SCO concluded that "Although the district judge ruled in Novell's favor on important issues, the case has not yet been fully vetted by the legal system and we will continue to explore our options with respect to how we move forward from here."

This case is SCO Group Inc. v. Novell, Inc., U.S. District Court for the District of Utah, Central Division, D.C. No. 2:04CV139DAK, Judge Dale Kimbell presiding.

8/10. The U.S. District Court (DC) issued an opinion [25 pages in PDF] in multidistrict litigation under the Administrative Procedure Act (APA) challenging the Internal Revenue Service's (IRS) mechanism for refunding illegally collected telephone excise taxes. The District Court denied various requests for dismissal brought by the IRS. The District Court will now proceed to address the merits of the case.

The IRS persisted for years in collecting an excise tax on phone services (codified at 26 U.S.C. § 4251) that the relevant definitional section (26 U.S.C. § 4252) did not cover. The IRS continued to collect the illegal tax even as numerous District Courts and Courts of Appeals held that it could not collect the tax.

See, stories titled "IRS Announces It Will Cease Its Illegal Collection of Excise Taxes on Phone Service" in TLJ Daily E-Mail Alert No. 1,379, May 26, 2006. (This story contains hyperlinks to five Court of Appeals opinions, and TLJ stories regarding those opinions.)

The IRS did relent in May of 2006. It subsequently adopted a refund mechanism. See, story titled "IRS Announces Procedures for Refund of Illegally Collected Phone Excise Taxes" in TLJ Daily E-Mail Alert No. 1,444, September 7, 2006.

The present action is a multidistrict consolidation of federal actions challenging the IRS's refund mechanism. Plaintiffs allege that various restrictions in the mechanism limit refunds to less than the amounts illegally collected by the IRS.

The IRS sought dismissal on various procedural grounds. It asserted lack of standing, sovereign immunity (notwithstanding the APA), that its action is committed to agency discretion, and that there is no final agency action.

The District Court wrote that "Because none of these arguments withstands inspection, the court denies the defendant’s motion to dismiss the claim, permitting further review to proceed on the merits."

This case is In Re Long-Distance Telephone Service Federal Excise Tax Refund Litigation, U.S. District Court for the District of Maryland, MDL Docket No. 1798, Master File 07-mc-0014 (RMU), and Member Case 07-cv-0051 (RMU). This opinion relates to Cohen v. United States, originally filed in the U.S. District Court for the Eastern District of Wisconsin.

8/9. The U.S. Court of Appeals (2ndCir) issued its opinion [29 pages in PDF] in Time Warner Cable v. Directv, a Lanham Act case regarding Directv's television and internets ads for its satellite television service.

Directv made and disseminated several goofy ads featuring actors Jessica Simpson (as Daisy Duke) and William Shatner (as Captain Kirk). Both compared high definition television (HDTV) via cable and Directv. Simpson stated that "You're just not gonna get the best picture out of some fancy big screen TV without DIRECTV." Shatner stated that "settling for cable would be illogical".

Time Warner Cable (TWC) filed a complaint in U.S. District Court (EDNY) against Directv alleging false advertising in violation of § 43(a) of the Lanham Act, which is codified at 15 U.S.C. § 1114, et seq. The District Court granted TWC a preliminary injunction. See, opinion reported at 475 F.Supp.2d 299.

Directv brought the present interlocutory appeal. The Court of Appeals ordered minor changes to the preliminary injunction, and remanded to the District Court, but otherwise upheld the preliminary injunction.

The relevant language of the statute, found at 15 U.S.C. § 1125, provides that "Any person who, on or in connection with any goods or services ... uses in commerce ... any ... false or misleading description of fact, or false or misleading representation of fact, which  ... (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act."

The District Court and Court of Appeals found the Directv ads to be literally false, and hence, that no proof of consumer deception is necessary to obtain injunctive relief.

The Court of Appeals held, among other things, that "an advertisement can be literally false even though it does not explicitly make a false assertion, if the words or images, considered in context, necessarily and unambiguously imply a false message".

The false message in the present case is that Directv HDTV is better than cable HDTV.

This case is Time Warner Cable, Inc. v. Directv Inc., U.S. Court of Appeals for the 2nd Circuit, App. Ct. No. 07-0468-cv, an appeal from the U.S. District Court for the Eastern District of New York, Judge Laura Swain presiding. Judge Straub wrote the opinion of the Court of Appeals, in which Judges Kearse and Pooler joined.

The House will not meet due to the August District Work Period. See, House 2007 calendar. The House will next meet at 2:00 PM on September 4, 2007.

The Senate will not meet due to the August District Work Period. The Senate will next meet at 1:00 PM on September 4. See, Senate 2007 calendar.

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking (NPRM) in its XM Sirius merger review proceeding that seeks comment on whether the language in an earlier order barring the merger constitutes a binding FCC rule, and if so, whether the FCC should waive, modify, or repeal the prohibition if the FCC determines that the proposed merger would serve the public interest. See, notice in the Federal Register, July 12, 2007, Vol. 72, Number 133, at Pages 38055-38056.

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking (NPRM) regarding changes to its rules that govern the 4.9 GHz band and the Wireless Medical Telemetry Service which shares spectrum. This NPRM is FCC 07-85 in WP Docket No. 07-100. The FCC adopted this NPRM on May 9, 2007, and released it on May 14, 2007. See, notice in the Federal Register, June 13, 2007, Vol. 72, No. 113, at Pages 32582-32589.

9:00 AM - 5:00 PM. Day one of a two day meeting of the Department of Energy's (DOE) Advanced Scientific Computing Advisory Committee (ASCAC). See, notice in the Federal Register, July 6, 2007, Vol. 72, No. 129, at Pages 37000-37001. Location: American Geophysical Union (AGU), 2000 Florida Ave., NW.

6:30 - 8:30 PM. The Federal Communications Bar Association's (FCBA) Young Lawyers Committee will host an event titled "Happy Hour". For more information, contact Megan Stull at mstull at willkie dot com, Mia Hayes at mhayes at willkie dot com, or Chris Fedeli at chrisfedeli at dwt dot com. Location: Topaz Bar, Topaz Hotel, 1733 N St., NW.

9:00 - 11:45 AM. Day two of a two day meeting of the Department of Energy's (DOE) Advanced Scientific Computing Advisory Committee (ASCAC). See, notice in the Federal Register, July 6, 2007, Vol. 72, No. 129, at Pages 37000-37001. Location: American Geophysical Union (AGU), 2000 Florida Ave., NW.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to the FCC notice requests comments that refresh the record on issues raised by the FCC's Notice of Proposed Rulemaking (NPRM) regarding interstate special access services provided by price cap local exchange carriers. The FCC released this notice on July 9, 2007. It is FCC 07-12 in WC Docket No. 05-25 and RM-10593. See, notice in the Federal Register, July 25, 2007, Vol. 72, No. 142, at Pages 40814-40816.

Deadline to register for the August 21, 2007, meeting of the Architectural and Transportation Barriers Compliance Board's (ATBCB) Telecommunications and Electronic and Information Technology Advisory Committee (TEITAC) meeting by teleconference regarding "revising and updating accessibility guidelines for telecommunications products and accessibility standards for electronic and information technology". See, notice in the Federal Register, August 3, 2007, Vol. 72, No. 149, at Pages 43211-43212.

2:00 - 3:00 PM. The President's National Security Telecommunications Advisory Committee (NSTAC) will hold a partially closed meeting by teleconference. At 2:00 - 2:25 PM the NSTAC will meet in open session to hear comments on NSTAC's International Task Force (ITF) Report. At 2:25 - 3:00 PM, the NSTAC will meet in closed session to discuss network security and the global communications environment. To request to participate, contact William Fuller at 703-235-5521 or william dot c dot fuller at dhs dot gov by 5:00 PM on Friday, August 10, 2007. See, notice in the Federal Register: July 31, 2007, Vol. 72, No. 146, at Page 41771.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its Second Further Notice of Proposed Rulemaking (2ndFNPRM) [26 pages in PDF] in its proceeding titled "Carriage of Digital Television Broadcast Signals: Amendment to Part 76 of the Commission's Rules". The FCC adopted this item on April 25, 2007, and released it on May 4, 2007. This item is FCC 07-71 in CS Docket No. 98-120. See, notice in the Federal Register, June 6, 2007, Vol. 72, No. 108, at Pages 31244-31250.

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking (NPRM) regarding whether to license Vehicle-Mounted Earth Stations as an application of the Fixed-Satellite Service in the conventional and extended Ku-band frequencies. The FCC adopted this NPRM on May 9, 2007 and released the text on May 15, 2007. This item is FCC 07-86 in IB Docket No. 07-101. See, notice in the Federal Register, July 18, 2007, Vol. 72, No. 137, at Pages 39357-39370.

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking (NPRM) [PDF] regarding E911 location requirements. This item is FCC 07-108 in PS Docket No. 07-114, CC Docket No. 94-102, and WC Docket No. 05-196. The FCC adopted this item on May 31, 2007, and released on it on June 1, 2007. See, notice in the Federal Register, June 20, 2007, Vol. 72, No. 118, at Pages 33948-33955. See also, story titled "FCC Extends E911 Location Tracking Rules to Interconnected VOIP" in TLJ Daily E-Mail Alert No. 1,589, May 31, 2007.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its request for comments regarding what constitutes a "near reservation" area for federal Lifeline and Link-Up support purposes. See, DA 07-1239 in CC Docket No. 96-45, and notice in the Federal Register, July 5, 2007, Vol. 72, No. 128, at Pages 36706-36708.

Effective date of the Federal Communications Commission's (FCC) Second Memorandum Opinion and Order in its proceeding regarding public safety communications in the 800 MHz Band. The FCC adopted this item on May 24, 2007, and released the text on May 30, 2007. It is FCC 07-102 in WT Docket No. 02-55. See also, notice in the Federal Register, July 20, 2007, Vol. 72, No. 139, at Pages 39756-39761.

8/12. Qwest Communications International announced in a release that Edward Mueller has been named Chairman and CEO. He replaces Richard Notebaert, who previously announced his retirement.

8/2. The U.S. District Court (EDVa), Judge Leonie Brinkema presiding, sentenced Timothy W. Hall to serve two years in prison, serve three years of supervised release, and pay a $1,200 fine, following his May 8, 2007 plea of guilty one count of criminal copyright infringement in connection with his sale through his web site of copyrighted videogames.

8/2. A grand jury of the U.S. District Court (SDCal) returned a 313 count criminal indictment that charges 18 people with various federal crimes in connection with their alleged illegal online sale of prescription pharmaceuticals. The Department of Justice (DOJ) stated in a release that the indictment charges "racketeering and conspiracy to commit racketeering; distribution and dispensing of controlled substances and conspiracy to distribute and dispense controlled substances; mail and wire fraud, and conspiracy to commit mail and wire fraud; conspiracy to commit money laundering; and conspiracy to dispense and dispensing of misbranded drugs with the intent to defraud and mislead". The inductment was returned on July 27, 2007, and unsealed on August 2, 2007.

8/1. The Securities and Exchange Commission (SEC) announced in a release that "it has started distribution of the $267 million Fair Fund created as part of settlements with Qwest Communications International Inc. and several of its former executives. The funds will be distributed to approximately 200,000 investors who purchased Qwest's securities between July 27, 1999, and July 28, 2002. The distribution process is expected to be completed within five days."

8/1. The Securities and Exchange Commission (SEC) published a notice in the Federal Register that announces, describes, recites, and sets the effective date (January 1, 2008) for, its amendments to its proxy rules. This notice states that "issuers and other soliciting persons will be required to post their proxy materials on an Internet Web site and provide shareholders with a notice of the Internet availability of the materials". See, Federal Register, August 1, 2007, Vol. 72, No. 147, at Pages 42221-42239. See also, stories titled "SEC Adopts E-Proxy Rule Changes" in TLJ Daily E-Mail Alert No. 1,506, December 15, 2006, and "SEC Seeks Comments on Proposal to Mandate Internet Availability of Proxy Materials" in TLJ Daily E-Mail Alert No. 1,529, January 30, 2007.

8/1. The Department of Justice (DOJ) announced in a release that Xiaodong Sheldon Meng plead guilty in U.S. District Court (NDCal) on August 1, 2007, to one count of violating Economic Espionage Act (EEA), which is codified at 18 U.S.C. §§ 1831-9, and one count of violating the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR), in connection with his export of source code to the People's Republic of China (PRC). The DOJ stated that Meng illegally installed on a PRC Navy web site a software program, and trade secret, named Mantis, that is owned by his former employer, Quantum3D. The program simulate real world motion for military training purposes. The DOJ also stated that Meng illegally exported without a license the source code to another Quantum3D program, named viXsen, a training simulator for military fighter pilots.

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