Trial Judge Removes Final Obstacles to Trial in SCO v. Novell Slander of Copyright Title Case

In The SCO Group v. Novell, the trial court issued two orders that send SCO’s claims against Novell for slander of copyright title to trial, along with the general ownership dispute involving the UNIX software copyrights.

Jury trial is set for March 8, 2010 in Utah Federal District Court.

In the first ruling, the court denied Novell’s motion to set aside a judgment that was entered before appeal of a summary judgment decision to the Tenth Circuit, but not made part of the appeal.

In the second ruling, the court held that SCO’s special damages claims for slander of copyright title against Novell may include lost sales, but may not include any decrease in stock value resulting from the alleged slander of title.

If SCO prevails on claims that Novell slandered its copyright title in UNIX (by claiming ownership when it knew that ownership had already passed to SCO), attorney’s fees associated with removing the cloud placed on the title of the copyrights would be recoverable; while fees not associated with removing the cloud placed on the title would not.

Background

In July 2007, Judge Dale A. Kimball ruled on summary judgment that Novell owned copyrights to the UNIX operating system.

UNIX is the enterprise-level computing platform used by most large companies. UNIX is also the platform that Linux tries to emulate—and replace.  For this reason, ownership of the UNIX copyrights is broadly relevant in the enterprise computing marketplace.

On summary judgment, Judge Kimball further ruled on the amount of certain royalty payments that SCO owed Novell under a separate agreement.

SCO APPEALED the copyright ownership issue to the Tenth Circuit, but Novell DID NOT appeal the trial court’s order regarding the royalty payments.

In August 2009, the Tenth Circuit Court of Appeals REVERSED the summary judgment on the copyright ownership issues, finding issues of fact that must be decided by a jury. The case was remanded for trial, currently scheduled for March 8, 2010.

On remand, Judge Kimball recused himself and Judge Ted Stewart is the new trial judge.

The Mandate Ruling

Novell filed its motion to set aside the earlier summary judgment on the royalty issue under a Rule 60(b) motion.  Judge Stewart denied the motion  under the “mandate rule” governing cases after appellate remand.

The mandate rule generally prevents a court from considering an argument that could have been, but was not, made on appeal.

Judge Stewart explained that the argument raised by Novell regarding royalty payments “could have, and should have, been raised on appeal.”

Novell could have easily argued to the Tenth Circuit that, if the decision concerning ownership of the copyrights was reversed, the decision concerning royalties should similarly be reversed. It did not.

Judge Stewart also explained the limited nature of the mandate issued by the Tenth Circuit governing proceeds on appeal. The Tenth Circuit’s mandate is as follows:

[W]e AFFIRM the district court’s judgment with regards to the royalties due Novell under the 2003 Sun-SCO Agreement, but REVERSE the district court’s entry of summary judgment on (1) the ownership of the UNIX and UnixWare copyrights; (2) SCO’s claim seeking specific performance; (3) the scope of Novell’s rights under Section 4.16 of the APA; (4) the application of the covenant of good faith and fair dealing to Novell’s rights under Section 4.16 of the APA. On these issues, we REMAND for trial.

This is not a general mandate. The mandate is very specific. The Tenth Circuit has remanded this matter to the Court for trial on those four specific issues identified in the mandate. Because of the specific nature of the mandate, the Court is not free to explore matters outside of it. Even
if the Court could do so, the Court is not inclined to allow the parties to litigate this case anew.

Jury trial on SCO’s slander of title claim and the general UNIX copyright ownership matter is set to begin in Utah Federal District Court on March 8, 2010.

The Special Damages Ruling

SCO has alleged, among other things, that Novell slandered its UNIX copyright title by improperly claiming ownership to UNIX.

These claims will go to trial along with the general ownership issues.  As noted above, SCO’s special damages for the slander of title claims may include the resulting lost sales, but may not include any resulting diminished stock price.