District Court Rules Novell Owns UNIX Copyrights
August 10, 2007. 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