New Media and Technology Law Blog : Technology Lawyers & Attorneys : Proskauer Rose Law Firm : Trademarks, Patents & Copyright

Last week, the district court in SCO, Inc. v. Novell (D. Utah), the current act in the long-running drama of the SCO litigations aimed at the Linux operating system, refused to grant SCO's motion to set aside the jury verdict rendered last March. The jury concluded that Novell owned the copyrights in the UNIX code that SCO claims is infringed by the Linux operating system.  Once again, open source advocates were  celebrating, and with good reason. The ownership of the UNIX code goes to the heart of all of the claims that SCO has raised in the other litigations, and if thet verdict stands, those litigations are effectively over. Although SCO's long-standing fee agreement with its attorneys apparently includes another trip to the U.S. Court of Appeals, it will be up to the Bankruptcy Trustee and the Bankruptcy Court in Delaware to decide whether that trip is actually made. We will learn their decision in due time.
 
Meanwhile, there are many answers to the question of what can be learned from the SCO litigations, but one of them has nothing to do with the future of open source software, or the potential futility of high-stakes, bet-the-company litigation tactics. For attorneys who are engaged in the daily exercise of drafting and negotiating complex technology licensing deals, one lesson is this: When there is a communications or knowledge gap between the lawyers that give final shape to a business deal  and the executives that will live with the deal over time, the result may be a fundamental and detrimental misunderstanding of just what the deal accomplished.

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The jury in The SCO Group v. Novell, Inc. litigation over ownership of the copyrights in UNIX source code has ruled in favor of Novell, the company announced on its blog this afternoon. Novell had previously prevailed on the issue of copyright ownership in a ruling by Judge Dale Kimball on Novell's motion for summary judgment, but as we blogged in August 2009, the U.S. Court of Appeals for the Tenth Circuit reversed that ruling, holding that the issue of copyright ownership was, under the circumstances presented, an issue for the jury. The jury in the federal district court in Utah spoke in Novell's favor following a three-week jury trial before Judge Ted Stewart (following Judge Kimball's recusal and subsequent retirement).

Presumably, the next act in this long-running drama (the litigation commenced in 2005) will focus on SCO's litigation against IBM, which was stayed when SCO filed a (still pending) bankruptcy proceeding. The ownership of the copyrights that are the subject of this jury verdict underlie SCO's claims in that litigation that IBM infringed SCO's copyrights by contributing certain of the UNIX source code to the open source Linux operating system project. And on that basis, SCO has claimed that the Linux operating system itself infringes SCO's copyrights, and has sought licensing fees from users of the Linux OS.

Whether SCO will be financially able to continue following this verdict remains to be seen.

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The back story to the dispute between The SCO Group and Novell, Inc., over the ownership of copyrights to UNIX source code is lengthy indeed. But we'll spare you the details and just say that the ownership of the copyrights is a critical issue because it is that very source code that underlies SCO's claims that the open source Linux Operating System infringes on its intellectual property rights, thereby obligating just about everybody who uses the Linux OS to pay royalties to SCO. So needless to say, the open source community is very interested in the outcome of the current trial in The SCO Group v. Novell, Inc., which commenced in U.S. District Court in Utah on Monday.

To briefly recap, the issue of code ownership is being resolved in a slander of title lawsuit brought by SCO against Novell, which formerly owned (and claims to still own) the copyrights in the disputed code. When SCO claimed ownership of the UNIX code in its lawsuit against IBM, Novell made public statements disputing SCO's ownership, thus the claim by SCO that Novell slandered its title to the code. District Court Judge Dale Kimball ruled in favor of Novell on the ownership issue, granting summary judgment dismissing SCO's claims. But last August, the U.S. Court of Appeals for the Tenth Circuit ruled that there were disputed issues of material fact that precluded the grant of summary judgment, and remanded back to the District Court. Judge Kimball recused himself and the trial is now being held before District Court Judge Ted Stewart.

Meanwhile, the main event, the SCO lawsuit against IBM, is being held in abeyance pending resolution of the code ownership issue. If SCO prevails against Novel on the issue of ownership of the code, then the litigation against IBM should be the next event. The allegations in that lawsuit are, in brief summary, that IBM misappropriated SCO's UNIX code and contributed it to the Linux operating system.

We cannot do justice to all of the ins and outs of the SCO v. Novell litigation, nor to the several related lawsuits, in a short blog post. But we can point you to the mother of all Web sites on the subject, www.Groklaw.net, that has been following these litigations in the greatest of detail since at least 2003. Be forewarned that the operator of the site has strong opinions on the issues, but whether you agree with those opinions or not, the site is an invaluable source of relevant documents and up to date information on the conduct of the trial.

The trial is scheduled to take three weeks.

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A dispute between a proprietary software company and the Java Model Railroad Interface (JMRI) open source project has ended with a settlement, the JRMI project announced on February 17. The dispute yielded a ruling in the United States Court of Appeals for the Federal Circuit (Jacobsen v. Katzer) that warmly endorsed the open source approach to software development. We blogged about that ruling when it was issued in August 2008, referring to it as "a highly significant opinion that will greatly bolster the efforts of the open source community to control the use of open source software according to the terms set out in open source licenses."

The matter was remanded by the Federal Circuit to the District Court, and, as we blogged in December, several additional pre-trial rulings again favored the JMRI project, including a ruling on the eligibility of software code that is distributed for free for copyright infringement damages. The settlement was reached with a trial date on the not-too-distant horizon.

With the settlement, the Federal Circuit and District Court rulings will not be subject to direct appeal. Given the rarity of litigation over open source software, it seems unlikely that the reasoning of these two rulings will be questioned judicially in any other open source litigation for some time.

The settlement agreement is here, and the permanent injunction is here.

The explanation of the settlement on the JMRI site indicates that the proprietary software company has agreed, among other things, not to misuse the JMRI software at issue, or to register any domain names incorporating certain terms attributable to the JMRI project, and will make a payment of $100,000. Future disputes will be settled by mediation or arbitration.

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Jacobsen v. Katzer involves a dispute over rights in software code distributed pursuant to the open source Artistic License. Last year the case yielded one of the very few judicial rulings dealing with open source software. As we wrote at the time, the U.S. Court of Appeals for the Federal Circuit rejected the argument that open source licenses are enforceable only in a breach of contract action. In a broadly worded opinion that endorsed the open source approach to licensing, the court held that open source license restrictions are enforceable under U.S. copyright law, thereby making the federal courts, and the potent remedies under the Copyright Act, available to open source licensors.  
 
The case was remanded to the district court for further proceedings, and has now yielded another ruling favorable to the plaintiffs on a number of critical points, including eligibility of software code that is distributed for free for copyright infringement damages.  Jacobsen v. Katzer, No. C 06-01905 (N.D. Cal. Dec. 10, 2009) .

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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)
 

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On May 20, the Free Software Foundation announced the settlement of its copyright litigation with Cisco Systems over the inclusion of open source software in certain Linksys products. The settlement includes undertakings by Cisco with respect to compliance with the requirements of "free software licenses." Here's some of what the FSF had to say about the settlement (the full text of the FSF press release is available here):

Cisco has agreed to appoint a Free Software Director for Linksys, a subsidiary of Cisco, to supervise Linksys' compliance with the requirements of free software licenses such as the GPL (the GNU General Public License). The Free Software Director will report periodically to the FSF regarding Linksys' compliance efforts. Cisco has further agreed to take certain steps to notify previous recipients of Linksys products containing FSF programs of their rights under the GPL and other applicable licenses, to publish a licensing notice on the Linksys website, and to provide additional notices in a separate publication. In addition, Cisco will continue to make the complete and corresponding source code for versions of FSF programs used with current Linksys products freely available on its website. Cisco will also make a monetary contribution to the FSF.

The parties recognize Cisco's ongoing obligations under the GPL and other free software licenses. The FSF will continue to independently monitor Linksys' compliance with these licenses, and work with Linksys to resolve any new issues that may arise.

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 The Free Software Foundation has filed a copyright infringement complaint against Cisco Systems. The complaint alleges that Cisco's Linksys products contain certain works in which the FSF holds the copyright, but Cisco has not complied with the requirements of the licenses pursuant to which the FSF makes the works available.
 
This is the first copyright infringement action ever filed by the FSF, according to the press release announcing the filing of the action. The filing of the lawsuit follows on the ruling by the United States Court of Appeals for the Federal Circuit last August in Jacobsen v. Katzer that open source licenses are enforceable under copyright law.

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CNET's Ina Fried late yesterday posted an interview with Horacio Gutierrez, deputy general counsel and vice president of intellectual property and licensing at Microsoft, in which he declares that the "war between proprietary and open source is a thing of the past." That statement is going to get a lot of press, and a lot of comment, as will other statements in the interview.
 
Gutierrez is touting Microsoft's open source distributions as well as its licensing deals with open source companies, most significantly Novell. This is a theme that Gutierrez has been sounding for a while but not in such a headline-grabbing way, here's a link to the Sept 16 PR interview of him on the Microsoft site. Microsoft has been taking a softer line with respect to open source software, under pressure from antitrust authorities as well as the realities of the marketplace.
 
The statement about everyone being mixed source, that we can relate to, except that it isn't in the future, it's been true for quite a while. Arguably, the "war" between proprietary and open source software was over long before Bill Gates's infamous remark in January 2005 that was interpreted as comparing open source advocates to communists. 

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There are so few judicial opinions dealing with open source licenses that any single one is of great interest, but the pro-open source ruling of the Court of Appeals for the Federal Circuit in Jacobsen v. Katzer, No. 2008-1001 (Fed. Cir. Aug. 13, 2008) easily goes to the top of the charts of this small category. This is a highly significant opinion that will greatly bolster the efforts of the open source community to control the use of open source software according to the terms set out in open source licenses.

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