Attorney: IBM-Novell worked together to hurt SCO

Legal dispute turns on wording of contract over sale of software.

By Tom Harvey
The Salt Lake Tribune

March 9, 2010

Novell Inc. lied about owning the copyrights for the Unix computer operating system then collaborated with IBM to damage Unix owner The SCO Group, the latter's attorney told a federal court jury Tuesday.

In the first day of testimony in a trial to settle a long-running legal dispute between SCO and Novell, SCO went on the attack by calling as its first witness the former CEO and chairman of Novell. Robert Frankenberg testified that despite Novell's claims of ownership, his intent was to sell the copyrights in a 1995 deal that's at the heart of the conflict.

The SCO Group claims that Novell "slandered" its title to the Unix system and caused it to lose as much as $215 million in revenue at a time when it was in a related dispute with IBM. SCO had accused IBM of improperly using Unix code for improvements that made the Linux operating system a commercial competitor.

SCO's 2003 lawsuit potentially put IBM on the hook for hundreds of millions of dollars. But then Novell late that year claimed that it, and not SCO, owned the copyrights, meaning SCO did not have a basis for its IBM lawsuit nor for demands that businesses using Linux pay licensing fees.

Novell first claimed it owned Unix on the same day that The SCO Group reported record revenues and earnings, said SCO attorney Stuart Singer. A week later it backed off that claim but then later restated it.

"We say it's not coincidental IBM invested $50 million in Novell so it could buy a Linux business," said Singer, referring to SUSE Linux, a German company that Novell agreed to purchase in late 2003.

Novell's claim to copyright ownership rests on a 1995 agreement in which Novell sold Unix to the Santa Cruz Operation of California. Santa Cruz later sold Unix to a Utah company, Caldera, which then changed its name to The SCO Group.

But the original agreement between Novell and Santa Cruz contains a section that says the sale did not include copyrights.

However, Frankenberg, who oversaw the sale to Santa Cruz as CEO from 1994-96, said the copyright part of the agreement was a mistake and that Novell wanted only to protect its Netware and other products but not Unix.

"I should have read it more carefully and we wouldn't be here today," he said.

SCO intends to call other witnesses who negotiated for Novell who it contends will back SCO's and Frankenberg's version of events.

Attorney Singer also pointed out that the problem with the Novell-Santa Cruz agreement was taken care of by an amendment about a year after the deal closed. Out of the presence of the jury, Singer told Judge Ted Stewart that Novell was misleading jurors by insisting that the language of the original agreement was valid, even though it had been superseded by the amendment.

But Novell's attorney, Sterling Brennan, hammered away at whether Frankenberg had relied on competent legal advice on the wording of the contract and whether it actually said that no copyrights were transferred to Santa Cruz.

In his opening statement, Brennan blamed the dispute on SCO and its then-CEO, Darl McBride. He said McBride turned on users of Linux, which once had been a part of SCO products, and began trying to collect payments from them after the company's business plan faltered.

"Mr. McBride decided to do something radically different. He had to turn on former customers," Brennan told a packed courtroom.

Copyright 2010