SCO Faces Tougher IP Battle Against Novell And IBM In Aftermath Of Recent Court Decisions

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SCO will face a tougher IP battle against Novell and IBM in the aftermath of court rulings late last week, but the war is not over, observers say.

SCO cheered procedural and scheduling wins, notably the court's refusal to dismiss its falsity case against Novell and an okay to delay the start of the IBM trial until November, 2005. But many IP attorneys and Linux backers interpreted the court's rulings late last week as big legal setbacks for SCO.

First, the United States District Court for the District of Utah refused SCO's motion to separate IBM's counterclaims against it. That decision vastly increases the cost and burden SCO will face in proving its contractual violation claims against the computer giant, observers say.

More significantly, the judge ruled that Novell provided "persuasive" arguments as to whether copyrights of Unix were transferred to SCO in the mid 1990s. And the court threw out SCO's existing slander of title claim against Novell and gave the company 30 days to re-file.

Some IP attorneys say the judge's acknowledgement of the dispute over copyright ownership -- and the possibility of a summary judgment against SCO -- were detrimental to SCO. They also contend a negative ruling would derail SCO's case against IBM.

"Judge Kimball's decision is a serious loss for SCO. Not only in its slander of title case against Novell, but in SCO's case against IBM," said Michael R. Graham, intellectual property attorney and partner with Chicago based law firm Marshall, Gerstein and Borun LLP.

"The threshold issue in both cases is whether SCO owns copyright in the UNIX software code," Graham told CRN in an email late on Friday. "Although the court denied Novell's motion to dismiss, it allows that the issue might be appropriate for either trial or summary judgment. This case [against Novell] is important in terms of SCO's future and its case against IBM."

Other observers agree the rulings puts more pressure on SCO to prove its claims against Novell and IBM but they maintain that the rulings should not be read as a death knell for SCO.

"The decision is not favorable to SCO. SCO opposed [federal jurisdiction] and Novell wanted it. But in reality, I don't think enough has come out for us to opine that either side has a clear win in either court on either issue," said Philip Albert, a partner at Townsend and Townsend and Crew, San Francisco. "The decision not to bificurate the IBM counterclaims hurts SCO because now they have to defend the counterclaims, which means more expense and effort. With bifurcation, IBM's counterclaims don't go away. It doesn't mean SCO can't prevail. "

Another IP attorney said that the rulings makes the process harder for SCO but agreed that the core issues have yet to be tried.

"The motion for summary judgment might bear fruit for someone but I won't say who because its going to boil down to what the documents say," said Thomas Carey, an intellectual property attorney and partner at Bromberg and Sunstein, Boston. "The judge clearly finds the documentation before him to be confusing and possibly inadequate. But more documentation may well emerge as the process unfolds, and the judge has not made a decision yet. Does SCO wish that it had a clearer and more specific assignment? Yes. Is its claim to the copyright a lost cause? By no means."

SCO said it will refile its claim against Novell within the 30-day window.

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