SCO vs. Novell: Come see me in five years
Posted on August 13, 2007
If you care about open source software (OSS) market trends and investment issues related to OSS for the IT industry’s largest companies, the OSS blogosphere is telling you that you should be excited about a Utah Federal District Court ruling on August 10. The judge ruled against SCO (SCOX) and in favor of Novell (NOVL) on a number of claims in a five-year-old court case over who owns 35-year-old UNIX copyrights related to a 12-year-old asset sale. But IBM, Microsoft and any company that runs Linux is also involved.
Remember, this ruling came down in Utah, where Novell was formed (although it is now based on Cambridge, Massachusetts), where SCO is located (although it was formed in Santa Cruz, California) and where the court still distributes forms in WordPerfect. Also remember today’s SCO is not the 1995 SCO, and today’s Novell is not the 1995 Novell (but that would take too long to explain). These factoids could all become relevant in any appeal process.
My first thought in reading Friday’s court opinion is that if I am ever charged with murder I will try to retain the lawyers that Novell used in 1995 in its dealings with SCO when Novell was selling SCO its UNIX business. SCO says it thought it “bought the business” with all the normal-people, non-lawyer implications of those words. According to the judge, it looks like the only thing Novell sold to SCO in 1995 was some rights to trademarks Novell had already basically given to X/Open and the right to keep developing something descended from AT&T UNIX System V.
The change from Novell selling SCO what SCO thought it had bought to Novell selling SCO a few useless trademarks all happened as the pens were being pulled out of the vest pocket protectors over a few days in mid September 1995. Were SCO’s lawyers and executives in 1995 this bad, or is there more we are not hearing? Every debatable dispute in the ruling is decided in Novell’s favor by the judge. He never answers the mystery: What was the purpose of the amendment in 1996 to the Novell-SCO agreement in respect to copyrights if not to straighten out the copyright issue caused by the X/Open-related wording in the original. Even Novell at one point in June 2003 seemed to agree that that amendment meant SCO owned the UNIX copyrights according to the judge. And on the top of page 72 of the 102-page ruling, it even looks like the judge invited SCO to start the whole thing over again on different grounds.
So I don’t get all the blogosphere excitement? According to the OSS blogosphere, a new day has dawned, Linux is liberated, Microsoft is toast, and so forth (the usual litany). But this is going to be appealed for years. And I didn’t see anything that decided whether IBM or anyone else put any UNIX IP in Linux.
If the ruling survives the inevitable appeals, the blogosphere believes (and Novell has said) that Novell will do the right thing and indemnify IBM and the OSS community from further action. But why should Novell? If IBM and the OSS community did what SCO says it did vis-a-vis Unix IP, Novell shareholders should demand the same compensation SCO’s shareholders did.
As for Microsoft, all parties agreed that this had nothing to do with patents.
So come see me in five years and tell me how it all turns out. It is very likely that this is not the last word.
–Dennis Byron
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To bad you over looked one statement Novell made about SCO buying the business…….. they COULD NOT AFFORD IT. That is why Novell only sold them the rights to make their own OS.
As for your comment - “And I didn’t see anything that decided whether IBM or anyone else put any UNIX IP in Linux.”, you are missing a very important point. In this whole wide world SCO has been the only one claiming that UNIX IP has been illegaly dumped in Linux, mind you only SCO with nothing to support this allegation. And to top that they have now lost standing to sue ! So where does that leave this precious allegation ?
SCO purchased the rights to sell Novell’s UnixWare product and to develop new software based on the UnixWare code base. SCO legally and contractually pocketed the money from these transactions and was obligated to remit a percentage of sales proceeds to Novell. That the copyrights did not transfer to SCO is to be expected in this sort of deal. SCO also got a non-compete pact from Novell.
What you missed, Dennis, is that there was no document which specifically said, “Novell hereby on such and such date transfers the copyrights on the following items to Santa Cruz Organization:
Item A
Item B
Item C
etc.. ad infinitum”
Without a writing that clarifies exactly what copyrights were transferred by the 1996 amendment to the APA, nothing transferred. All there is in that writing is some vague language that doesn’t meet the legal requirements of a copyright transfer.
Yes, I’m celebrating, big time. SCO was a pain in the arse to the entire community, and it’s nice to see SCO get their just rewards. Hopefully this will be instructive to any other company that would try spreading anti-Linux FUD to this scale ever again.
Just a quick point — you said “And I didn’t see anything that decided whether IBM or anyone else put any UNIX IP in Linux.” Well, we didn’t see any evidence any UNIX IP was put in Linux. What little was dredged up turned out to be BSD code that was in the public domain. So how about pondering this — maybe there is no UNIX IP in Linux? Conceivable?
Sorry Dennis, but as a former employee of an AT&T subsidiary who worked with Unix back in the DEC days, I saw the holes in SCOs case from the very beginning. This ruling is based mainly on the contract of sale and transfer documents. They are, in fact, very clear on what SCO Santa Cruz was to receive and what they were not to receive. Amendment 2 in 1996 was intended ONLY to clarify the already clear language of the APA itself, NOT to modify the terms of sale. It stated that they would receive those IP items necessary for them to develop and sell Unix software. It is NOT necessary to own the copyrights in order to do that. It is only necessary to be fully licensed to use that copyrighted material and that was what Amendment 2 was intended to clarify. Additionally, SCO Santa Cruz never over the years complained about copyright issues because THEY knew what belonged to them and what didn’t. AND in fact the copyrights in question have been, in fact, registered in NOVELL’s name to this day. They were NEVER transfered. ONLY after Caldera purchased SCO, did they “discover” that they, in fact, did not possess ownership to those copyrights which they “thought/assumed” they had purchased. Hopefully they DO appeal, because this judge was extremely careful and this case will stand appeal easily. In the end, I think there will be significant liability on the part of SCO’s legal team for this whole debacle. They have lost one significant ruling after another and now this. Their case is going nowhere. SCO is dead. And beyond this issue, SCO faces an even more challenging legal minefield. The history of Unix is so convoluted that much of Unix IP has been hopelessly compromised by the way it has been administered. Many of the original copyrights are really unenforceable for various reasons. And now Novell themselves is publishing Linux, which, under the rules of the GPL license, means that EVERYTHING they have published they have perpetually abandoned IP claims to. This means that any company who might purchase Novell would be walking into a new legal minefield and would end up in the same debacle as Caldera has with their SCO purchase. LOL
George Mitchell
The judge ruled as a matter of law. There is very specific wording that EVERY lawyer knows that is needed to transfer copyrights. Nobody pulled anything here. There is no transfer document, the copyright didn’t transfer. It is very doubtful that an appeals judge will find a way to overturn.
The deal set up SCO as the agent for Novell wrt existing licenses. SCO collects royalties and passes them to Novell, Novell pays SCO a percentage. Novell controls what SCO does with Novells customers. Not exactly a “buy the business” kind of deal.
SCO gets to use the source of Unix however it likes in creating new products. It is free to sell these new products to its own customers and make money in the business. There is a lot of real value in this and SCO made a lot of money for their effort.
Nobody is going to pull a repeat of this fiasco because there are no real enforceable copyrights in Unix due to there being few in the original code (AT&T originaly used trade secrets, not copyrights to protect Unix) and the AT&T vs. BSD suit effectively removed much of the rest. There is no Unix infringement in Linux that could be discovered in 4 years of discovery looking over all the changes from the beginning of source control in Unix and Linux. There is no source repository in history that has had the review that this case caused. Result: Linux does not contain any Unix code beyond a few lines of drivers.
Bottom line: there is nothing of value to sue over. That’s why it won’t happen again.
This is not news. You know this as well as anybody that looked seriously at SCO’s suits and yet you publish anyway.
I’m not sure if I agree or not with your premise. It’s hard to trust logic that is described with so many errors in the story.
A few corrections and clarifications along with some opinion:
Novell is headquartered in Waltham, MA, not Cambridge.
Novell didn’t sell useless trademarks to SCO, it had already donated them to X/Open. Novell sold marketing rights to SCO that allowed SCO to license SVR5 Unix to licensees for profit and pay part of that profit to Novell as a royalty payment. SCO made money on this arrangement too. Presumably they also saw a need or opportunity to bring SCO OpenServer and Unix proper closer together.
1995 was a different time and the fragmented Unix market in parallel with false starts on a bigger Unix on x86 market would’ve made this worth thinking about.
Novell makes money on Linux support and has a good relationship with IBM. It would be short sighted of Novell to seek one time profit by trying to be the next SCO vs long running profit by being a key Linux distributor with IBM as a friend.
As you say the story is so mixed up it is hard to follow, but I think this is how it goes.
Because Caldera did not have the $400M required to buy all the rights to UNIX, it bought only what it needed to achieve its goals.
This following is what SCO transferred to itself from the Novell sale to Caldera.
The rights to sell and maintain Novell’s UNIX licenses as an agent of Novell.
The right to develop software based on Novell UNIX. Novell retained the right to use Caldera’s developed code.
The right to sell the code SCO developed.
An agreement for Novell not to compete with SCO with a Novell UNIX developed product.
(The history of the current situation stems from these points.
Caldera needed the UNIX code as it tried to develop a unified Linux/UNIX.
This was before the Santa Cruz acquisition/merger. Santa Cruz had bought Xenix, developed from UNIX code for the M68K, from Microsoft, code that Santa Cruz modified to run on Intel.
The new Caldera Santa Crux merger was renamed the SCO group.
Tarantella was part of Caldera Novell UNIX business deal and was sold to SUN during the Santa Cruz Caldera merger, so a substantial part of the Novell sale was not retained by the new SCO.
Some agreements that IBM had made with Caldera, were not transferred/ratified for SCO.
Try as they might, SCO could not get Novell to transfer the copyrights to the UNIX code base for free.)
What substantially remains of the case with Novell is that SCO reckons that SUSE Linux is based on UNIX code, so Novell owes SCO damages for competing with them.
The UnitedLinux arbitration case to be heard in Europe later this year, where the parties which included SCO and SuSe, (but not Novell at the time), agreed to continue the effort to develop a united UNIX/Linux product and promised not to sue each other for use of the code, is central to the compete agreement. The agreement wasn’t in jeopardy until Novell bought SuSe.
Until SCO, Novell, and IBM lawyers agree on what is left of the unresolved issues. we can’t know what will go to trail, but apart from the compete issue I don’t think very much remains apart from IBM and Novell’s counter claims. IANAL
You have obviously not read the APA or followed the case very closely.
Please do so before you say anything.
SCOG is running out of money. If the result of the trial is a large award to Novell, SCOG will be bankrupt. The court ruled that the SUN and M$ fees paid to SCOG were, in part, SVRX licence fees and the trial will determine what part SCOG must remit to Novell. The contract requires 100% of SVRX licence fees to be remitted to Novell who are then to return 5% as commission. If all the fee was for SVRX, the amount due is several times SCOGs cash assets. No one is likely to lend them more money for this business plan. Their chief leverage for previous investments was the claim that they owned the copyright to UNIX SVRX and that was false and they knew it, according to the court.
You forget one thing: litigation takes money in the US. If you don’t have money, people can take your patents and do whatever they want with them. It’s true, we read a bunch of cases to this effect in my engineering-related businesses classes at Cornell. SCO is soon to be out of money for their lawyers so this ruling is likely to be the nail in the coffin.