SCO, Novell Trade Legal Moves

By Steven Vaughan-Nichols  |  Posted 2004-05-13

SCO, Novell Trade Legal Moves

The SCO Group Inc. and Novell Inc. are continuing their war over who really owns Unixs intellectual property rights. In this weeks duel, Novell has asked for SCOs copyright case to be dismissed, thus awarding Novell Unixs IP, while SCO has sought to have the case moved from federal to state court.

"Lawyers from both sides gave their arguments on why the case should or shouldnt be dismissed," said Blake Stowell, a spokesman for SCO. "The judge [Judge Dale Kimball of the U.S. District Court for the District of Utah in Salt Lake City] stated that he would take these arguments under advisement and give a ruling on Novells motion to dismiss at a later date."

Bruce Lowry, a Novell spokesman, noted that while "Judge Kimball heard oral arguments on both SCOs motion to remand to state court and our motion to dismiss, he gave no indication of when the decisions will come down."

Both sides agree that Novell sold to SCO some rights to Unix in 1995, but the two differ on whether Novell also sold Unixs copyrights to SCO. SCOs $5 billion lawsuit against IBM largely hinges on showing that IBM misused its licensed Unix code by contributing it to Linux.

Glenn Peterson, intellectual property attorney and shareholder with the Sacramento-based law firm McDonough Holland & Allen, summed up the status of the case: "Judge Kimball has before him two motions: one by Novell to dismiss SCOs complaint under copyright law, and the second by SCO to remand the case back to state court where it began. Novell removed the case from state to federal court, relying on federal jurisdiction associated with copyright claims. However, SCO did not sue under the copyright law—it claims this is, in essence, a contract dispute that does not trigger federal jurisdiction just because the contract involves copyrights, among other things.

"Novells motion to dismiss is based on the argument that SCO cannot make the required showing of copyright ownership because the contract does not qualify as an instrument of conveyance," Peterson said. "By analogy, this is a lot like saying there was an agreement to sell a car, but a title document was never delivered so the buyer cant prove ownership on paper.

"The law is fairly clear that the judge must rule on the motion to remand first, because if remand to the state court is appropriate, it is the policy of law to let the state court determine whether dismissal is appropriate," he said. That being the case, Peterson predicted, "the motion to remand will be granted by Judge Kimball. It has long been a policy in common law that the plaintiff is the master of its claims, meaning essentially that the plaintiff can tacitly shape its claims to suit its choice of forum."

Next page: Why SCO wants the cased moved to state court.

Page Two

Why would SCO want this case to be tried in state court rather then federal since both Novell and SCO have strong Utah roots? "SCO may well have decided to sue in state court because it could not satisfy the copyright ownership on paper requirement," Peterson said. "But there are other remedies outside copyright law to deal with situations where a party was supposed to convey copyrights and didnt.

"A party aggrieved by that can sue for breach of promise, or whatever else might be appropriate under the particular circumstances," he said. "SCOs slander of title claim muddies the waters a bit. No doubt, they didnt sue for breach of contract because they were not a party to the asset purchase agreement—SCOs predecessor in interest was the contracting party. But to have your title slandered, you must first have title; i.e., ownership on paper."

And that is something SCO doesnt have, according to Peterson. "SCO tacitly admits that it didnt get the ownership on paper or instrument of conveyance. In its prayer for relief, it specifically asks the court to order that Novell convey ownership to SCO."

This means, according to Peterson, "the heart of the case is clearly about determining contractual rights, and state courts have jurisdiction to determine copyright ownership issues in a contractual context."

Whether SCO can win Unixs copyright in the state court remains to be seen but, Peterson said, "the law generally favors SCO on these two motions," so SCO is likely to get its day in the Utah court.

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