Utah state court SCO filed a
slander of title lawsuit against Novell on January 20, 2004. Filed in Utah state court, the lawsuit requested both preliminary and permanent injunctions assigning all of Novell's Unix copyright registrations to SCO and forcing Novell to retract all of their claims to the Unix code.
United States District Court for the District of Utah Novell
removed the lawsuit to the Federal court system on February 6, 2004. This removal was upheld in the court's June 9 ruling. On February 10, 2004, Novell filed a motion to dismiss the case. Novell requested dismissal for failure to state a claim upon which relief could be granted. Novell argued that: • SCO did not show a valid transfer of copyright ownership, because the Asset Purchase Agreement was merely a
promise to assign under specific circumstances (SCO's demonstration that copyrights were "required" to exercise other rights under the contract), and that the Agreement is therefore—by law—not sufficient to transfer the copyrights to SCO; and • SCO did not specify specific special damages required for such a claim. In response, SCO filed several memoranda opposing Novell's motion to dismiss the case. Additionally, SCO filed a motion to remand the case back to State court. Novell countered that, because the case would hinge upon interpretation of federal copyright law, it should be tried in federal court. On May 9, 2004, federal Judge Dale A. Kimball heard both parties' arguments and took both motions under advisement. Judge Kimball denied SCO's motion to remand and partially granted Novell's motion to dismiss on June 9, 2004, on a pleading technicality. The case was dismissed without
prejudice, which allowed SCO to amend their complaint to include properly pleaded special damages.
Novell's countersuit On July 29, 2005, Novell filed a countersuit against SCO claiming slander of title,
breach of contract, failure to remit
royalties, and failure to conduct audit obligations. Novell sought damages in excess of SCO's net worth, and, as SCO was quickly burning through its assets and cash on hand, Novell asked the court to sequester this money from SCO so that it would not be spent before the resolution of the case. Novell also asked the court to
attach SCO's assets pending adjudication of their claims. Novell accused SCO of licensing Unix System V Release 4 to Microsoft and Sun Microsystems without then sending Novell the 95% of the license fees as required by the APA. In the counter-claim, Novell stated that SCO had asked Novell to participate in the SCO's Linux IP infringement licensing plan. When Novell refused, SCO asked Novell to turn the Unix copyrights over to SCO, a request Novell also refused.
SuSE arbitration SCO filed a second amended complaint on February 6, 2006, containing the original slander of title claim as well as several new claims, including unfair competition, copyright infringement (for Novell's distribution of SUSE Linux), and breaching a purported non-compete agreement (again, related to SUSE Linux). On April 10, 2006, Novell's
SuSE division (a European vendor of Linux operating systems) filed a request for
arbitration against SCO with the Secretariat of the
International Chamber of Commerce's International Court of Arbitration in Paris, France. Years earlier, while still known as
Caldera International, SCO had signed contracts with then-independent SuSE, among others, involving the
United Linux product. The United Linux members agreed that each member would have broad licenses to exploit and distribute Linux products that included United Linux technology. These agreements included clauses requiring the members to use an arbitration process to resolve disputes. SuSE's arbitration request was a response to SCO's amended complaint against Novell. The arbitration process has relatively strict timelines, unlike the U.S. courts' procedures. Novell filed a
Motion to Stay Claims Raising Issues Subject to Arbitration in the U.S. courts, saying that four of SCO's five claims had been brought to arbitration, including the claim of copyright infringement, and thus should be stayed until the arbitration tribunal rendered its decision. Novell also filed an ''Answer to SCO's 2nd Amended Complaint and Counterclaims'', claiming a large number of
affirmative defenses, including a claim that SCO committed fraud upon the U.S. copyright office.
Licensing agreements and Novell's motion for summary judgement On September 22, 2006, Novell sought leave to file amended counterclaims. Through
discovery, Novell had obtained copies of SCO's Unix licensing agreements with Microsoft and Sun. Upon reviewing the agreements, Novell claimed that they breached the APA. The added claims were
conversion and
breach of fiduciary duties. SCO stipulated to Novell's motion, and therefore Judge Kimball granted it. Novell filed a motion on September 29, 2006, asking for
summary judgment, or if that was rejected, then for a preliminary injunction. Novell alleged that SCO, through their agreements with Sun and Microsoft, licensed Novell's property without paying Novell the royalties it was due under the APA. Novell asked the court to force SCO to turn the royalties over to Novell or, in the alternative, be forced to put the money into a collective
trust, where neither party would be able to access it until the issue was decided by the courts. On August 10, 2007, Judge Kimball ruled that "...Novell is the owner of the Unix and UnixWare Copyrights." Novell was awarded summary judgment on a number of its claims, and a number of SCO's claims were denied. SCO was instructed to account for, and pass to Novell, an appropriate portion of its income from the Sun and Microsoft licenses.
SCO's bankruptcy The parties were expected to go to trial on September 17, 2007, in order to determine exactly how much money SCO owed Novell. However, on September 14, the SCO Group filed for bankruptcy under
Chapter 11 of the United States Bankruptcy Code. As SCO was a Delaware corporation, the bankruptcy filing was made with the
United States Bankruptcy Court for the District of Delaware. The filing caused all pending litigation to be
automatically stayed as required by the
United States Code. On November 27, 2007, United States Bankruptcy Judge Kevin Gross lifted the automatic stay so as to allow the Utah court to determine how much money SCO owed Novell, but the bankruptcy court retained jurisdiction over any constructive trust that the Federal court might create.
Trial to determine damages For the purposes of the trial to determine how much money SCO owed Novell, SCO was named the defendant and Novell was named the plaintiff, because SCO had not prevailed on any of its initial claims. The trial commenced April 30, 2008. Novell sought the recovery of $19,979,561 from SCO based on its licenses to Microsoft, Sun, and others. On July 16, 2008, the Utah court awarded The decision, which SCO could appeal, granted Novell the asked-for $2,547,817 award due to the 2003 Sun Agreement's modification of the 1994 confidentiality provisions. These modifications permitted the release of
OpenSolaris. On November 20, 2008, Kimball's final judgment in the case affirmed his August 10, 2007 ruling, granting Novell the award plus interest of $918,122, plus $489 additional interest for every day after August 29, 2008, should SCO fail to pay the award by that date. The ruling also ordered a constructive trust of $625,486.90. Judge Kimball dismissed the case with no possibility to re-file the suit with an amended
complaint, restricting SCO to pursue the case only in
appeals.
Circuit Court appeal On August 24, 2009, the
U.S. Court of Appeals for the Tenth Circuit partially reversed Kimball's August 10, 2007, summary judgement, insofar as Kimball had found that Novell owned the copyright to Unix. The portion dealing with the 2003 Sun agreement was upheld by the appeals court. As a result, SCO could pursue its ownership of the Unix copyrights at trial. However, it remained liable for the $2,547,817 royalty award. Novell filed a petition for a
writ of certiorari on March 4, 2010, seeking intervention by the
Supreme Court of the United States. Novell argued that there is a
circuit split on the correct interpretation of the Copyright Act's
transfer requirements, and that the correct requirements are more strict than the Tenth Circuit's holding in this case. The petition was dismissed by the Supreme Court.
Trial on remand for copyright issues The jury trial on the remanded copyright issues began on March 8, 2010, before Judge Ted Stewart. It was expected to last three weeks. On March 30, the jury returned a unanimous verdict in favor of Novell. The court found that Novell had not committed slander of title, was not now required to transfer the copyrights under the APA, that its copyright waivers issued to IBM were authorized, and that they did not violate the
covenant of good faith. SCO appealed the district court judgment to the
United States Court of Appeals for the Tenth Circuit on July 7, 2010. On August 30, 2011, the Appeals Court affirmed the trial decision. == See also ==