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New Media and Technology Law Blog

The Beat Goes On: In SCO v. Novell, Tenth Circuit Remands UNIX Copyright Ownership Issue for Trial

Posted in Copyright, Open Source

The Tenth Circuit has ruled in the closely watched SCO v. Novell appeal, and while it upheld a judgment in favor of Novell for royalties due from The SCO Group, the appeals court remanded for a trial on the issue of ownership of the copyrights in the UNIX code that is at the heart of SCO’s copyright litigation against IBM over its contribution of code to the Linux operating system.

The SCO v. Novell case is one of a complicated series of litigations that commenced in 2003 when SCO claimed that copyrights in the UNIX code that it acquired as a result of a transaction with Novell in 1995 were infringed by IBM and users of the Linux OS. When Novell publicly stated that SCO did not acquire the copyrights in as a result of the 1995 transaction, SCO sued Novell for slander of title. The issue of ownership of the code was the subject of the 2007 ruling by the U.S. District Court in Nevada from which SCO appealed.

In a lengthy opinion, the Tenth Circuit reviewed the evidence and arguments presented on the motion for summary judgment and concluded that the issue of should not have been resolved summarily. The court recognized Novell’s "powerful arguments" in support of its interpretation of the transaction, and allowed that there might be cause "to discount the credibility, relevance, or persuasiveness" of SCO’s extrinsic evidence in support of its view of the transaction. Nevertheless, the court said, "when conflicting evidence is presented such that the ambiguities in a contract could legitimately be resolved in favor of either party, it is for the ultimate finder of fact—not the court on summary judgment—to interpret the contract."

Judge Dale Kimbell, who presided over both the SCO v. Novell litigation and the underlying SCO v. IBM litigation in the District of Nevada since 2003 has already filed a notice of recusal, and both  matters have been reassigned.

Meanwhile, it remains to be seen whether SCO will survive to press forward with the Novell and other litigations, including the underlying copyright infringement case against IBM, which had been stayed pending the outcome of SCO v. Novell and by SCO bankruptcy filing. SCO filed a Chapter 11 petition in the District of Delaware shortly after the district court’s ruling in SCO v. Novell in 2007. The bankruptcy proceeding ground on as the appeal to the Tenth Circuit was pending, with SCO having yet to file a reorganization plan. On August 5, the bankruptcy court ordered the appointment of a Chapter 11 trustee to take over management of SCO. As recognized in SCO’s 8K filing following the order, "the Chapter 11 Trustee will have, upon appointment, authority over the Debtors’ assets and affairs and the future course of the Debtors’ litigation against Novell, IBM, et al."

SCO also appealed from the district court ruling awarding Novell $2.5 million plus in royalties, but on that issue the Tenth Circuit affirmed, so the favorable ruling on copyright ownership brings no monetary relief for SCO’s remaining financial resources.

The SCO Group, Inc. v. Novell, Inc., No. 08-4217 (10th Cir. Aug. 24, 2009)