Ex-Novell officers back SCO over copyrights

At stake is who controls computer operating system.

By Tom Harvey
The Salt Lake Tribune

March 10, 2010

The top two negotiators for Novell Inc. in its 1995 deal to sell the Unix computer operating system testified Wednesday their former employer believed it sold the copyrights to that software along with the entire Unix business.

Along with Tuesday's testimony from former Novell CEO and Chairman Robert Frankenberg, the Wednesday session bolstered The SCO Group's arguments that it, and not Novell, owns the Unix copyrights.

SCO sued in 2004 after Novell publicly claimed ownership of the Unix copyrights, a move that SCO said stifled its efforts to license the use of its code, costing SCO as much as $215 million.

SCO's first three witnesses before a federal court jury were former Novell officers, including Wednesday's testimony from former Senior Vice President Robert "Duff" Thompson, who directed the negotiations to sell Unix, and Edward Chatlos, who represented Novell in the day-to-day talks.

Novell sold the Unix business to the Santa Cruz Operation of California in 1995. Caldera of Utah bought Unix from Santa Cruz in 2001 and changed its named to The SCO Group.

But Novell did not claim ownership of the copyrights until 2003, after SCO sued IBM, asking for as much as $1 billion because IBM allegedly had used the copyrighted Unix to make the improvements to the competing Linux operating system.

Novell's opening to make that claim is the 1995 sales agreement, part of which could be read to say that the copyrights to Unix were not included in the sale.

But Thompson and Chatlos both said that section was meant to apply to Netware, a Novell networking program, and not to the Unix business.

"I assumed and I intended we were selling the copyrights, as well," said Thompson, who also testified that his orders from Frankenberg were to sell all of Unix, including the copyrights.

One of Novell's arguments is that it retained the copyrights because Santa Cruz could not pay completely in cash for Unix, which it had bought from AT&T; for more than $300 million a few years earlier.

Asked if that were true, Chatlos said "absolutely not. The deal I negotiated with SCO included the copyrights."

Part of the sparring between the legal teams -- led by Boies Schiller & Flexner of Fort Lauderdale, Fla., for The SCO Group ,and Morrison & Foerster of San Francisco for Novell -- is over Amendment No. 2 to the original sales agreement.

The amendment was added in 1996 and appears to be intended to fix the copyright issue in Santa Cruz's favor, and by extension SCO's. Novell has introduced as evidence the original sales agreement without the amendment, while SCO's evidence includes the amendment.

Novell's trial strategy to this point has been to show -- time and again -- the actual wording of the original sales agreement with no mention of Amendment No. 2.

Novell attorney Eric Acker pressed Thompson and Chatlos to admit the original agreement excluded copyrights from the sale, but both insisted that was not the case.