Robert Pogson

One man, closing all the windows.

Daily Archives / Thursday, August 16, 2007

  • Aug 16 / 2007
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SCOG v World: Status Report

Everyone and their dog has written about this, so here goes…

On Friday, August 10, 2007, Judge Dale A. Kimball at last ruled on the pending summary judgment motions that had been filed, briefed, presented in court and awaited ruling. The summary judgment is used to settle issues in the claims and cross-claims where the law is sufficient to make the ruling without a trial. The biggie in the ruling was that Novell did not transfer the copyrights to the SVRX source code that formed the “basis” of “SCOG v World” to SCO, SCOG’s predecessor in interest. SCOG had claimed in court, blurbed on the ‘net, and public forums and even wrote to 1500 large corporations that the code had been massively copied into Linux in breach of their copyright. The evidence accumulated on GROKLAW shows clearly that SCOG knew that they did not have the copyrights. For instance, SCOG asked Novell to transfer the copyrights to SCOG about 2003.

If that wasn’t enough, the court ruled that the licences sold to SUN and M$ were, in part, SVRX licences and SCOG owed Novell some money to be determined at trial. Since the licence fees were tens of millions of dollars this is problematic for SCOG because their liquid assets are only a few million.

After the ruling, SCOG sent a letter to partners promising to keep up the good fight. Here it is from sec.gov:
"EX-99.1 2 v33097exv99w1.htm EXHIBIT 99.1

EXHIBIT 99.1
Dear SCO Customer and Partners,
Undoubtedly you have heard news about the recent adverse court ruling regarding the situation between SCO and Novell. The company is obviously disappointed with the ruling issued last Friday. We feel it important to outline for you the ruling and what impact, if any, this might have on you.

First, 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. We continue to believe that when SCO paid more than $100 million dollars for the UNIX technology to Novell in 1995, we purchased everything. We believe that “All rights and ownership of UNIX and UnixWare, including but not limited to all versions of UNIX and UnixWare and all copies of UNIX and UnixWare (including revisions and updates in process), and all technical, design, development, installation, operation and maintenance information concerning Unix and UnixWare, including source code, source documentation, source listings...” means just what it says, but the court did not agree.

Second, the court ruling on Friday continues to assert that SCO owns all copyrights to the new development in all subsequent versions of UnixWare up through the most current release of UnixWare which includes substantial portions of SCO UnixWare Gemini 64. Also, SCO owns the exclusive, worldwide license to use the UnixWare trademark, which is owned by The Open Group.

Third, 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.

This ruling has no impact on SCO’s ability to continue to develop and support all versions of UnixWare and OpenServer as well as the recently announced OpenServer 6M and UnixWare 7M as well as our new mobility products. It has no impact on your ability to sell, service, support and develop to any of our UNIX operating systems.

Fourth, 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.

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.

Fifth, as many of you have noted by our recent SCO Tec Forum, SCO’s primary business is not to litigate or to solely rely on outcomes in the court, but to rapidly evolve SCO’s technology platforms to meet your needs in the marketplace. For more than three years SCO has continued to upgrade its UNIX operating systems (including releasing perhaps the single most significant upgrade in its history with OpenServer 6) as well as innovate in the areas of the fastest growing sector of IT, mobile computing.

That being said, we do feel a responsibility to you and our shareholders to defend our rights when we believe they have been violated and that is simply what we continue to do within the courts. In the end, our legal team will focus on the necessary actions needed to protect SCO, its customers and shareholders.

SCO’s management, development, service and sales teams will continue to focus on driving the business forward including releasing the upcoming OpenServer MP3 and new mobile technologies and provide you, our customers, with the best technology in the industry.

Sincerely,
Darl McBride
President and CEO
This letter is subject to the safe harbor statement regarding forward-looking statements included in our Current Report on Form 8-K filed with the SEC on August 16, 2007.

"

This letter is a sad commentary on the human condition. Having spent many millions of dollars on litigation, knowing they had no basis for a case, and attacking Novell for pointing out the lack of copyright, politely and privately, SCOG is still in denial. The reason the court ruled that the copyrights were not transferred is that is what the contract says. The quotation given above is only a small part of the contract and omits a list of assets to be omitted including copyrights. The business that was transferred was being a licensing agent for Novell and developing and distributing more UNIX code. On top of that, in discovery, it turns out that “millions of lines of code” that were similar in UNIX SVRX and Linux were only a few files that define the POSIX open standard for a UNIX operating system. There are tens of millions of lines of code in Linux and most of it was written from scratch or legally contributed from similar projects. That was all discovered in SCO v IBM where SCOG insisted on and received truckloads of IBM’s code in AIX. SCOG had the UNIX SVRX code and the Linux code and could find no copying and they still went to court hoping to find something that IBM had written for AIX that got into Linux (which IBM could legally have done with their own code).

“This ruling has no impact on SCO’s ability to continue”

is a lie if Novell is awarded many millions of dollars that SCOG spent on the SCOG v World suits rather than passing on to Novell as their contract with Novell required.

” SCO’s primary business is not to litigate or to solely rely on outcomes in the court, but to rapidly evolve SCO’s technology platforms to meet your needs in the marketplace.”

is a lie as SCOG has spent many millions suing:

  • Daimler-Chrysler, whom they accused of avoiding an audit even though they do not even use SCOG’s stuff any longer, Dismissed without prejudice.
  • Autozone, whom they sued for using Linux, claiming that violated SCOG’s copyrights that we know now did not exist. Stayed, pending progress in SCO v IBM and RedHat v SCO.
  • IBM, claiming IBM copied SCOG’s code into Linux, changing the claims to violating contracts, and operating without a licence after SCOG revoked it and Novell orderd them to leave IBM alone.
  • Novell, for interefering with SCOG by demanding SCOG leave IBM alone and claiming the copyrights had not been transferred from Novell. SCOG was supposed to be acting as Novell’s agent and the contract explicitly enabled Novell to protect its revenue from the existing licences and not to make any new SVRX licences without Novell’s permission. The recent ruling shoots most of SCOG’s case down. Going to trial in September/October unless settled. This letter suggests SCOG is not going to settle.

and RedHat sued SCOG for interfering with business. That case is dallying. Business is fine for RedHat these days, unlike SCOG. RedHat can still argue that their business grew more slowly because of SCOG’s interference.

” actions needed to protect SCO, its customers and shareholders. ”

That’s a laugh. How is SCOG protecting customers and shareholders by killing the business? They had a good Linux distribution and killed it about the time they starting to sue users of Linux for violating SCOG’s imaginary rights. It is possible viable parts of SCOG could survive bankruptcy, but it is very risky. Customers will bail if they haven’t already to avoid a shaky supplier and where will that leave the shareholders? SCOX is trading below 40 cents. Some of those shareholders bought at $4 or more. Going on with the trial when they only have a weak claim left is a complete waste of time and more money. Ending it sooner would protect customers and shareholders by avoiding uncertainty. What the trial does do is delay justice for the folks who instigated this madness. The other cases depending on the outcome of the SCOG v Novell case are best dropped/settled, too. Novell has the authority to order SCOG to respect Autozone and Daimler-Chrysler, too.

No, this was never about protecting SCOG’s rights. It was an attempt to profit from the success of Linux by threatening the LInux community and taxing it. All the licence fees collected for using Linux were proceeds of fraud or extortion and SCOG could be sued for their return, which is as likely as Hell freezing. No good will come from this action except that the careers of some very poor businessmen will have been extended a few years while there was any doubt about the cases. They ran a company that only made money one year out of many, 2003, when SUN and M$ gave them millions, they extorted fees from EV1 and others and M$ sent SCOG a PIPE fairy with $50 million. That has been SCOG’s main occupation for years, now, but it will all soon end. They could have caught the Linux wave, but chickened out, only to play chicken with corporate giants.