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SCO Wants Suit It Filed Against Novell in Federal Court Moved to State Court

SCO Wants Suit It Filed Against Novell in Federal Court Moved to State Court
By Maureen O'Gara
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March 12, 2004 12:00 AM EST
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 18,497
In what is sure to be characterized as a cynical delaying tactic by its many critics, the SCO Group wants the slander suit it filed against Novell in the Third District Court in Salt Lake City in mid-January moved to state court.

SCO lawyers told the court that by law it has to decide the issue of jurisdiction before Novell's motion to dismiss can be decided and if the federal court sends the case to the Utah state court then the state court gets to decide Novell's motion to throw the suit out.

If it fails to get the charges quashed, Novell at least wants to keep the case in the federal system, but in papers filed with the federal court last Friday, SCO said that although SCO itself "may prefer to have its claims heard in federal court," the slander-in-title suit is really a Utah common law tort action that just involves the interpretation of a contract.

Despite Novell's assertions to the contrary, the suit has nothing to do with the application of the Copyright Act, which would make it a federal matter, even if copyrights are at issue, SCO said. In other words the federal courts don't have subject matter jurisdiction.

SCO has charged Novell - in concert with IBM and because of Novell's new last-chance Linux strategy - with trying to run off SCO's business by falsely claiming to own the Unix copyrights and bad mouthing SCO's ownership rights.

SCO's filing includes a response to Novell's motion to dismiss, which SCO claims hangs on a frayed string alleging that the old 50-page 1995 asset purchase agreement between Novell and the Santa Cruz Operation, SCO's predecessor in title, doesn't repeat the requisite legal incantation needed to transfer copyrights under Section 204(a) of the Copyright Act.

SCO says the Ninth Circuit has ruled that "If the copyright holder agrees to transfer ownership to another party, that party must get the copyright holder to sign a piece of paper saying so. It doesn't have to be the Magna Carta; a one-line pro forma statement will do." SCO also quotes another case the Ninth Circuit decided saying, "No magic words must be included in a document to satisfy" and another by the Seventh Circuit, which said the word copyright doesn't even have to be used. Intention suffices.

SCO's lawyers quote the judge the 1996 Amendment 2 to the Novell-Santa Cruz asset purchase as saying that SCO owns all "copyrights and trademarks owned by Novell as of the date of the [1995 asset purchase agreement] required for SCO to exercise its rights with respect to the acquisition of Unix and UnixWare technologies." The agreement, they say, also itemizes 106 separate copyright registrations.

Novell's motion to dismiss, for its part, argues that Unix and UnixWare had many versions and Amendment 2 doesn't specify which copyrights to which versions passed to SCO. SCO basically retorts that "all rights and ownership" means "all rights and ownership."

"Novell's claim that SCO has all rights and ownership of Unix and UnixWare including all source code," SCO says, "but somehow not all of the copyrights required to exercise those rights contradicts both the plain language of the asset purchase agreement as amended and the intent of the parties as expressed in the agreement." SCO couldn't exercise its "exclusive ownership" without the copyrights, it claims.

SCO needs to shoot down Novell's motion to dismiss because if it doesn't, it means the court denies that SCO owns the disputed copyrights. SCO enemy Free Software Foundation attorney Eben Moglen has said that if SCO doesn't emerge from the Novell suit with its exclusive rights recognized, it's screwed.

Published March 12, 2004 – Reads 18,497
Copyright © 2004 SYS-CON Media, Inc. — All Rights Reserved.
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More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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Most Recent Comments
Chuck 03/16/04 12:22:51 AM EST

Well, SCO is probably right. Both SCO and Novell are Utah corporations or have priciple offices in Utah, so there is no chance of diversity jurisdiction. If there is no federal question, (i.e. validity of the copyright) then the federal court doesn't have subject matter jurisdiction.

Of course, SCO is the plaintiff, they chose the court. Its pretty convienient, if Novell objects to jurisdiction then time is wasted changing to state court. And since SMJ is non-waivable, SCO can always complain about jurisdiction if they loose, or when the going gets tough...

More delaying tactics? Of course.
daniel wallace 03/12/04 04:48:59 PM EST

I suspect the Utah state court docket would allow the suit to be heard long before any federal venue.

I find it curious that SCO has not referred to section 9.3 of the Asset Purchase Agreement.

9.3 Interpretation.
When a reference is made in this Agreement to Schedules or Exhibits, such reference shall be to a Schedule or Exhibit to this Agreement unless otherwise indicated. The words "include", "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The table of contents and headings contained in the Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
CRL 03/12/04 01:54:07 PM EST

"SCO's lawyers quote the judge the 1996 Amendment 2 to the Novell-Santa Cruz asset purchase as saying that SCO owns all "copyrights and trademarks owned by Novell as of the date of the [1995 asset purchase agreement] required for SCO to exercise its rights with respect to the acquisition of Unix and UnixWare technologies." The agreement, they say, also itemizes 106 separate copyright registrations."

The 106 itemized copyright registrations are for manuals, etc. There is one registration that is for software, and I think that is SysIII, not SysV.
David Mohring 03/12/04 01:09:23 PM EST

IMO The real reason the SCO Group don't want this case heard in a federal court is that it is a federal crime to file for copyrights if you do not have clear title to do so and have fraudulent intent.

That Novell has to yet transfered the title to the SCO Group is a matter of fact. The SCO Group itself repeatedly ask Novell to transfer title of the works before SCO Group filed for copyright.

That the SCO Group is using the copyrights in question for fraudulent intent is easy to prove. Both the SCO Group's CEOs statements to the press and the SCO Group's filings to the SEC have made plenty of claims representing the SCO Group's ownership of the copyrights in question as fact. That the SCO Group used these statements to pump up the SCO Group's share prices is of little doubt.