[TUHS] the SCO/Novell contract

[Kenneth Stailey]

http://news.com.com/2100-1016_3-1013229.html

Contract illuminates Novell, SCO spat

By Stephen Shankland
Staff Writer, CNET News.com
June 4, 2003, 3:01 PM PT

A 1995 contract sheds light on the conflicting Unix ownership claims by Novell
and SCO Group, with SCO receiving broad rights to the operating system but
Novell retaining copyrights and patents.

According to a copy of the contract obtained by CNET News.com, Novell sold "all
rights and ownership of Unix and UnixWare" to the SCO Group's predecessor, the
Santa Cruz Operation. However, the asset purchase agreement, filed with the
Securities and Exchange Commission, specifically excludes "all copyrights" and
"all patents" from the purchase.

"This agreement is kind of murky...You end up with a lot of questions, to put
it mildly," said Mark Radcliffe, an intellectual property attorney with law
firm Gray Cary. 

 While the contract squarely leaves the copyright with Novell, a section that
gives to SCO "all claims...against any parties relating to any right, property
or asset included in the (Unix) business" could be interpreted to give SCO the
right to enforce the copyright, Radcliffe said. "The question is, even though
(Novell) didn't assign the intellectual property (to SCO), did (Novell) assign
the rights to enforce the patents and copyrights?"

The Unix ownership issue is central to a debate about whether companies can be
taken to court for using Linux. On May 14, SCO claimed in letters sent to 1,500
of the world's largest companies that using Linux could open them to legal
liability because Unix source code has been copied into Linux.

That copying, if proven and illegal, could violate Unix copyrights and the
independent spirit of the open-source movement that creates Linux, but the
contract indicates SCO won't have a simple time relying on Unix copyrights in
such a case.

A week after SCO's letter, Novell said it never sold SCO the Unix copyrights
and patents and that SCO's actions could bring legal action on itself. "We
believe it unlikely that SCO can demonstrate that it has any ownership interest
whatsoever in those copyrights," Novell Chief Executive Jack Messman said in a
letter to SCO.

The Unix ownership debate grew from SCO's $1 billion lawsuit against IBM,
alleging Big Blue breached its contract with SCO and misappropriated SCO's
trade secrets by moving Unix intellectual property into Linux. IBM denies the
claims.

SCO didn't immediately respond to questions about how the contract supports its
claims to rights of copyright enforcement, but company Chief Executive Darl
McBride last week said the contract had "conflicting statements." 

 "It doesn't make sense. How would you transfer the product but not have the
copyright attached? That would be like transferring a book but only getting the
cover," McBride said.

Novell continues to disagree with SCO. "It's pretty clear that patents and
copyrights were excluded and not included in the business as it's described (in
the contract), so we don't believe SCO would have copyright and patent
enforcement rights," Hal Thayer, vice president of communications for Novell,
said Wednesday.

Novell is basing future operating system products on Linux, and open-source
advocates say they are reassured by Messman's words that the company won't
press its own copyright claims. "Novell is an ardent supporter of Linux and the
open-source development community," Messman has said.

"It's difficult to imagine any scenario in which we'd bring Unix copyright
infringement action against Linux users. We certainly don't have any plans to
do any such thing...and we wouldn't have undertaken this whole call to SCO to
prove their claims if that was the road we wanted to pursue," Thayer said.

The 1995 contract appears to give Novell the edge in the copyright debate, said
John Ferrell, an intellectual property attorney with Carr and Ferrell, who
reviewed the contract.

"This would support Novell's contention that SCO does not own the copyrights
and does not have the right to litigate" a copyright infringement case, Ferrell
said. However, he said, the contract does indicate SCO could pursue a case that
a Unix licensee breached its contract.

But the contract is odd, Ferrell said. "It's very unusual to have the transfer
of a software program and not have the rights of copyright transferred as
well," he said.

SCO vehemently argues that it has copyright enforcement rights, but in any
case, it doesn't need the Unix copyright to go after Linux users.

"I think it's perfectly clear we have the rights to enforce copyright claims,"
McBride said in an interview after Novell challenged SCO's Linux actions. But
more likely than a copyright case, would be one based on breach of contract, he
said.

"The letter went to 1,500 large companies around the world, the majority of
which all have (Unix) System V licenses with us...We do have sublicense
rights," McBride said. "They sign up for the fact that they will not
misappropriate the code." The sublicenses come through Unix purchases made with
direct Unix licensees such as Silicon Graphics, Hewlett-Packard and IBM, he
said.

But the absence of copyright and patent claims in SCO's lawsuit against IBM is
telling, Gray Cary's Radcliffe said. Copyright and patent claims can make a
strong case.

"If they had the rights to enforce the copyrights, how come that didn't show up
in the IBM suit?" Radcliffe asked. "It's very weird they would bring a lawsuit
on trade secret (misappropriation) and unfair competition and not put in
copyrights and patents. Those are the strongest rights. Particularly with IBM,
you don't go out and say, 'I'm not going to take the elephant-hunting rifle
with me, I'm just going to take my .22-caliber.'"

SCO has said it has the option to include copyright claims later. But while
it's said Unix code was copied into Linux, it hasn't yet said who it believes
is responsible. SCO says it will show proof of the copying later this month to
some neutral parties.

SCO's suit mentions concepts and methods, but not copyrights: "It is not
possible for Linux to rapidly reach Unix performance standards for complete
enterprise functionality without the misappropriation of Unix code, methods or
concepts to achieve such performance and coordination by a larger developer
such as IBM."

Radcliffe said copying methods and concepts are much weaker evidence than
copying code. "If they did enough due diligence to figure out there were
concepts there, how the heck did they miss that there was actual code copying?"
he asked.


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