[CS-FSLUG] NI: Novell Files Answer and Counterclaims, and Tells Us the Rest of the SCO Story

[Fred A. Miller]

This is from a good friend of mine, and is a MUST read!! The end of SCO is not 
far off, I suspect!! I also suspect that MickySoft will get a "bloody nose" 
in the end as well, (but no more than that), for their known and unknown as 
of now involvement.

Fred
____________________

http://www.groklaw.net/article.php?story=20050729190708887

 Here's the big news. Novell tells the court that SCO contacted Novell after 
Darl McBride took the helm, and they asked Novell to go in with them in a 
"Linux licensing program". Novell refused to participate, calling it a 
"scheme". It was in that context that SCO asked Novell to give them the Unix 
copyrights. They repeatedly made such requests, asking Novell to amend the 
Novell-Santa Cruz agreement to give SCO the copyrights. Novell repeatedly 
said no.

The next biggest news is Novell is bringing Microsoft and Sun Microsystems 
into the picture. It looks like we will eventually find out what role they 
played, if any. Novell tells us that it began an audit of SCO's activities in 
July of 2003, which it was entitled to do under the contract, but SCO refused 
to turn over requested information regarding Sun Microsystems' and 
Microsoft's licenses or any others under the SCOsource program. Novell says 
that SCO had no authority to enter into new SVRX licenses with Sun, 
Microsoft, or anybody else and they noted that the IP License for Linux SCO 
was offering appeared to be SVRX licenses, because they purported to grant 
rights related to UNIX System V or UnixWare. SCO never turned over anything, 
and that is the foundation of Novell's breach of contract claim, and it leads 
to the breach of obligation to remit royalties claim. SCO never asked Novell 
for permission to enter into any new SVRX licenses, so none of the new 
licenses, Novell asserts, falls within §1.2(e)'s exception to SCO's general 
duty to remit 100% of SVRX royalties to Novell. They are asserting their 
rights to all but 5% of what Sun and Microsoft paid.

They ask the court for specific performance, to compel SCO to comply with its 
audit *and remittance* obligations. Specific performance is legalese when you 
are asking the court to make the other party to a contract do what it said it 
would. They also ask the court to set up a constructive trust for SCO to 
deposit the revenues from Sun, Microsoft, and all revenue from its 
"Intellectual Property Licenses with Linux end users and UNIX vendors," to 
protect Novell from "SCO's wrongful retention of monies owing Novell due to 
SCO's failure to perform its remittance obligations." That should get the SCO 
lawyers to wake up with a start. Do you think SCO is finally sorry it started 
down this road? I'll bet the lawyers are, even if SCO isn't. Novell has just 
handed them a lot of work to do, with uncertainty as to getting paid for it. 
That uncertainty is also why Novell asks the court to order a trust be 
established, because, Novell says, SCO is quickly dissipating its assets.

Discovery, here we come. We'll get to see those Sun, Microsoft and SCOsource 
licenses yet, methinks. If the court sustains these claims, all the SCOsource 
money SCO ever got or ever could get would go to Novell, with a small 
handling fee to them for their trouble. Actually not even that. Novell says 
SCO was unjustly enriched by keeping the revenue but not fulfilling its 
administrative, remittance and audit obligations, so they don't deserve the 
5% either. Novell is aiming its arrows straight at SCO's heart, where it 
lives, namely its pocketbook. Oh, my, oh, my. Not to the moon after all?

Novell lists a number of affirmative defenses and several counterclaims, 
including slander of title. Yay. At last. I was pretty sure that was going to 
show up.

Novell's affirmative defenses are:

        * Privilege
        * Estoppel
        * Unclean Hands
        * Laches
        * Comparative Fault
        * Failure to Mitigate
        * No Causation
        * Claims barred in whole or in part by the First Amendment to the US 
Constitution.

Here's what they ask for in the Wherefore clauses:

        * That SCO take nothing by the Amended Complaint
        * That the Court enter judgment in favor of Novell and against SCO, 
dismissing with prejudice the Amended Complaint and each of its causes of 
action
        * That the Court award Novell its reasonable expenses and costs 
incurred, including without limitation attorneys' fees, in defending against 
the Amended Complaint
        * actual and special damages caused by SCO's slander of Novell's title 
to the UNIX copyrights
        * punitive damages for "SCO's malicious and wilful conduct in 
slandering Novell's title"
        * preliminary and permanent injunctive relief requiring SCO to 
withdraw its improperly registered claims to UNIX copyrights and to withdraw 
all other representations it has made regarding its purported ownership of 
the UNIX copyrights
        * actual and special damages caused by SCO's breach of contract
        * specific performance of future compliance with SCO's audit 
obligations
        * specific performance of future compliance with SCO's royalty 
obligations
        * an order imposing a constructive trust on the revenues remitted to 
SCO under new or amended SVRX Linceses
        * an order attaching SCO's assets pending adjudication of Novell's 
contract claims
        * declaratory relief establishing Novell's rights and SCO's 
obligations under the contract regarding section 4.16(b)
        * preliminary and permanent injunctive relief enforcing Novell's 
rights under the APA, including injunctive relief barring SCO from taking 
actions inconsistent with or in violation of sections 1.2(b), 1.2(f), 4.16(a) 
and 4.16(b)
        * for declaratory relief establishing Novell's rights and SCO's 
obligations under the covenant of good faith and fair dealing in the APA
        * an order of restitution of all monies constituting SCO's unjust 
enrichment
        * for an accounting of the royalties remitted to SCO under the SVRX 
licenses and the monies owing to Novell under the APA
        * for pre-judgment interest on any monetary recovery
        * any other relief the Court thinks is appropriate

They also ask for a declaration that Novell is entitled to direct SCO to waive 
claims against IBM, Sequent, and other SVRX licensees and that SCO is 
obligated to recognize the waiver of SCO's claims against IBM and Sequent. 
They also seek a declaration that SCO was obligated to seek Novell's prior 
approval to enter into new SVRX licenses or amendments to SVRX licenses, 
including SCO's agreements with Sun, Microsoft and other licensees. In the 
alternative, Novell asks for a declaration that SCO had no authority to enter 
into the Sun and Microsoft licenses or any IP licenses with Linux end users 
and UNIX vendors. Then they ask for a declaration that SCO is obligated to 
comply with Novell's audit demands.

Its Counterclaims:

        * breach of contract
        * accounting
        * restitution
        * slander of title

There is more about exactly what the deal was between Novell and Santa Cruz, 
about the amendments (Amendment 2 was merely an amendment to the schedule of 
excluded assets, Novell says, and so doesn't qualify as an instrument of 
copyright conveyance, it doesn't identify copyrights necessary at that time 
for Santa Cruz to "exercise its rihts", and there's no language in it or the 
modified APA suggesting a contemporaneous transfer of any copyright, and 
nowhere is there any date for any purported transfer of copyrights, and by 
repeatedly asking Novell in 2003 to transfer the copyrights to SCO, it 
conceded Novell's rights), and yes, Novell tells the court that The SCO Group 
was not a party to the agreement between Novell and Santa Cruz, and by the 
way, Novell retained all copyrights in that deal. So the later deal between 
Santa Cruz and Caldera is clarified. Santa Cruz couldn't pass along to 
Caldera, now The SCO Group, what it never received. Why didn't they get the 
copyrights? They were short on money. Aren't you glad? If you wish to review 
the contract, don't forget we have them all on our permanent Contracts page.

And now we know Novell is a hero in this saga, and I am going out to buy the 
latest SUSE Linux this exact minute, even though I already have it. I hope 
you do too, even if you don't need it. Imagine if Novell had said yes. They 
accuse SCO of knowingly making public statements of ownership to the media 
and in SEC filings that were false regarding their purported ownership of the 
copyrights, and the document lists some of the worst examples. Yoo hoo, Red 
Hat. I believe you have some Lanham Act claims? I think you're going to enjoy 
this document.

Remember I told you that Novell had hired a litigator, Kenneth Brakebill? He 
is listed on this Answer and Counterclaims. Welcome, Mr. Brakebill. 

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