The dead shall rise: Appeals victory sends SCO/Linux trial back to square one

For the last two years, there really hasn't been much of an SCO Group left, although the company remains in business. The biggest question facing the continued existence of that company in recent days has been whether to file for Chapter 7 bankruptcy (it filed for Chapter 11 in October 2007), after which its remaining assets could be sold off.

But while many think the company is on its last breath, a possible reprieve has come in the form of a reversal of what many felt was the only truly scoring blow in its interminable Linux copyright deathmatch against Novell, the company that sold its Unix and Unixware properties to SCO's predecessor Santa Cruz Operation in 1995. SCO accused Novell of sullying the value of the Unix intellectual property it was sold, by becoming a vendor of Linux. Two years ago, the judge in the case -- who, by that time, may have wished he'd taken up a safer, quieter job managing an ammunition testing facility -- ruled that Novell could do anything it wanted because it never ceded control of its Unix copyrights.

Not so fast, said an appeals court yesterday. A panel of judges with the Tenth Circuit Court of Appeals has ruled that Judge Dale Kimball was premature in granting "summary judgment" (a term that had nothing to do with length or depth) in Novell's favor, saying that the facts in this case were so esoteric and obscure that there's no way either side deserved a summary judgment of any kind.

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"In contract actions, the interpretation of a written agreement is a question of fact. When a contract is ambiguous, and parties present conflicting evidence regarding their intent at the time of the agreement, a genuine issue of material fact exists which cannot be determined summarily by the court," wrote Judge Michael McConnell yesterday on behalf of the panel (PDF available here, hosted by Groklaw). "Of course, the party opposing summary judgment 'must do more than simply show that there is some metaphysical doubt as to the material facts,'" he continued, citing 1986 case law. "But so long as sufficient evidence could lead a rational trier of fact to resolve the dispute in favor of either party, granting either party's dueling motions for summary judgment would be inappropriate."

In what would have been the most beautiful element in this ugly escapade, Judge Kimball thought he had found the key to unlocking this case. Specifically, the sale of copyrights and IP from Novell to Santa Cruz lacked a bill of sale. The Federal Copyright Act, Kimball cited, explicitly states, "A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent."

No such instrument existed, and neither side disputed that. Thus, Kimball found, copyright had not been transferred.

But paperwork did change hands, the Appeals Court noted -- in fact, quite a lot of it, the nature of which remains under dispute. Specifically, an Assets Purchase Agreement (APA) showed what SCO was purchasing; and because it didn't have enough to purchase everything from Novell at the last minute, the APA excluded certain Unix copyrights from the sale, which would let Novell retain at least partial claim to proceeds from Unix's sale. Just because the APA didn't have the big, bold header "Bill of Sale" didn't mean, the Appeals Court found, that it wasn't a bill of sale under current copyright law.

"Of course, under the language of the original agreement, copyrights were expressly excluded from the assets transferred," Judge McConnell wrote. "But here, where a written agreement to the contract excised certain copyrights from that exclusion, we think the Copyright Act's writing requirement is satisfied. We also do not see why the absence of a Bill of Sale is fatal to an alleged transfer under the Copyright Act. Section 204 [of the Act] makes clear that the writing requirement can be satisfied not only by 'an instrument of conveyance' but also by 'a note or memorandum of the transfer.'... Amendment No. 2 [of the APA] was a writing signed by both parties evincing a clear intent to revise or clarify the formal schedule of copyrights transferred by Novell to Santa Cruz. The Copyright Act did not require more."

So the legal time machine gets fired up all over again. In a statement to the Associated Press yesterday, SCO CEO Darl McBride called the continuance of this trial "a case of survival, of protecting what we own."

But to invoke a Clintonian observation, that depends on your definition of "we." Since SCO's restructuring, much of the authority for maintaining an expensive jury trial has been deemed outside the responsibility of SCO's public management, including McBride. As Groklaw's Pamela Jones pointed out yesterday, SCO had been hoping for the Appeals Court to fully overturn Judge Kimball's entire decision, including a separate part where Novell was granted money from a licensing deal with Sun Microsystems. That part was not overturned, so while the SCO trial is alive and well, SCO missed out on a critical blood transfusion.

"So, it's back to Utah! Unless Novell tries to appeal higher, of course, or asks for a full en banc rehearing," Jones wrote. "And it's up to the Chapter 11 trustee, once appointed, to decide what he thinks would be the next step, including Chapter 7. SCO's world has changed since it filed this appeal."

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