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Wednesday, September 17, 2003

Reminder About New Site

This is a friendly reminder that Groklaw has moved here. Please feel free to read on the blog, if you prefer, but if you wish to comment, I'm more likely to see what you write on the new site. The vast majority of our readership has made the move there, so they'll miss your comments too. Thanks.

comment [] 11:25:42 PM    

Here you are, thanks to a friend of Groklaw who went to Delaware for us. This is the legal document where they tell the judge why they think their motion should succeed:


RED HAT, INC. Plaintiff, V. Civil Action No. 03-772-SLR THE SCO GROUP, INC. Defendant. DEFENDANT THE SCO GROUP, INC.'S OPENING BRIEF IN SUPPORT OF ITS MOTION TO DISMISS Jeffrey Moyer (#3309) Steven J. Fineman (#4025) Richards, Layton & Finger, P.A. One Rodney Square P.O. Box 551 Wilmington, DE 19899 (xxx) xxx-xxxx Attorneys for Defendant The SCO Group, Inc.

OF COUNSEL: Stephen N. Zack Mark J. Heise Boies, Schiller & Flexner LLP Bank of America Tower 100 Southeast 2nd Street, Suite 2800 Miami, Florida 33131 (xxx) xxx-xxxx

Dated: September 15, 2003 RLF1-2648814-1 TABLE OF CONTENTS

NOTE: Omitted in this copy for the net

RLF I -2648814-1


Aetna Life Ins. Co. v. Haworth, 300 U.S. 227 (1937) 7

Avery Dennison Corp. v. Acco Brands, Inc., 2000 U.S. Dist. LEXIS 3938 (C.D. Cal. February 22, 2000) 21, 22, 25

BASF Corp. v. PPG Industries, 1991 WL 354884 (D N.J. February 11, 1991) 12

B.P. Chemicals, Ltd. v. Union Carbide Corp., 4 F.-3d. 975 (5th Cir. 1993) 8

Board of Trustees v. Fox, 492 U.S. 469 (1989) 17

Bolger v. Youngs Drug Products Corp, 463 U.S. 60 (1983) 18.23

Bonterra America v. Bestmann, 907 F.Supp. 4 (D.D.C. 1995) 12. 13

CAE Screenplates Inc. v. Beloit Corp., 957 F.Supp. 784 (E.D. Va. 1997) 8, 9, 13

Central Hudson Gas & Electric Corp. v. Public Service Comm'n., 447 U.S. 557 (1980) 18

City of Cincinnati v. Discovery Network, Inc 18 507 U.S. 410 (1993)

City of Pittsburgh v. West Penn Power Co., 147 F.3d 256 (3d Cir. 1998) 6

Diagnostic Unit Inmate Council v. Films Inc., 88 F.M. 651 (8th Cir. 1996) 8, 8,9

Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173 (3d Cir. 2000) 6

Emerson v. Thiel College, 296 F.3d 184 (3d Cir. 2002) 5

Gordon and Breach Science Publishers, S.A. v. American Institute of Physics, 859 F.Supp. 1521 (S.D.N.Y. 1994) 17, 18, 23

Interdynamics, Inc. v. Firma Wolf, 698 F.2d 157 (3d Cir. 1983) :8

International Harvester v. Deere & Co., 623 F.2d 1207 (7th Cir. 1980) 8, 14

International Med. Prosthetics Research Assoc. v. Gore Entrp. Holdings, 787 F.2d. 572 (Fed. Cir. 1986) 8

Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974) 14

Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270 (1941) 7

Mikohn Gaming Corp. v. Acres Gaming, Inc., 165 F.3d 891 (Fed. Cir. 1988) 20, 21, 22

Phillips Plastics Corp. v. Kaisha, 57 F.3d 1051 (Fed. Cir. 1995) 14

Public Affair Assoc. v. Rickover, 369 U.S. 111 (1962) 8,14

Riley v. National Fed'n of the Blind, 487 U.S. 781 (1988) 123,24 Shearin v. Baldwin, 1988 Del. Super. LEXIS 243 (July 5, 1988) 25

Shell Oil Co. v. Amoco Corp., 970 F.2d 885 (5th Cir. 1992) 8,9

Symbol Technologies, Inc. v. Proxim, Inc. 2003 WL 21840774 (D. Del. July 30, 2003) 19, 20, 22

United States v. Edge Broadcasting Co., 509 U.S. 418 (1993) 17,18

Village of Schaumberg v. Citizens for a Better Environment, 444 U.S. 620 (1980) 23

Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Counsel, 425 U.S. 748 (1976) 17

OTHER AUTHORITIES 15 U.S.C. § 1125 17 17 U.S.C. § 101 19, 19,24 17 U.S.C. § 106 24 17 U.S.C. § 401-412 24 17 U.S.C. § 502 24 17 U.S.C. § 50... 24 Restatement (Second) Torts § 586 25 Restatement (Second) Torts § 587 24,25

NATURE AND STAGE OF PROCEEDINGS Red Hat, Inc. ("Red Hat") filed suit against The SCO Group, Inc. ("SCO") on August 4. 2003. Red Hat seeks a declaratory judgment that Linux software distributed by it does not infringe or violate certain of SCO's intellectual property rights in a software product known as UNIX. Red Hat also seeks damages and injunctive relief against SCO under the Lanham Act and related state law claims, alleging deceptive trade practices, unfair competition, tortious interference with prospective business opportunities and trade libel and disparagement arising out of certain public statements made by SCO.

Pursuant to a stipulation entered by the parties and signed by the Court, SCO's response to Red Hat's Complaint is due on September 15, 2003. This Motion to Dismiss, pursuant to Rules 12(b)(1) and (6) of the Federal Rules of Civil Procedure, is SCO's response to Red Hat's Complaint. In a separate but related case, SCO has sued International Business Machines Corporation ("IBM") in the U.S. District Court, District of Utah (the "SCO v. IBM Case"). In that action, which was filed five months before this case, SCO contends that IBM has breached its UNIX license with SCO by improperly using UNIX software code and methods to enhance the functionality of Linux.


I. Red Hat's claims under Counts I and II of the Complaint seek declaratory relief that a software product distributed by Red Hat known as "Linux" software does not infringe or violate any of SCO's intellectual property rights in UNIX. These claims fail for lack of subject matter jurisdiction under the Declaratory Judgment Act, 28 U.S.C. § 2201, because Red Hat cannot satisfy its burden of establishing an "actual controversy" as required by the Declaratory Judgment Act. Specifically, Red Hat cannot identify any express or implied threats to enforce SCO's intellectual property rights against Red Hat. In fact, SCO has never threatened to sue Red Hat. Based on its wholesale failure to establish "reasonable apprehension" of being sued. Red Hat fails to meet the core jurisdictional requirement for an action under the Declaratory Judgment Act. Red Hat's legal action does nothing more than seek general guidance for the marketplace as to the legal rights SCO has with respect to Linux software. This is an impermissible use of the Declaratory Judgment Act.

2. Additionally, even if Red Hat were able to successfully establish the jurisdictional requirements for declaratory relief, this Court should decline to exercise jurisdiction because there is no practical reason to do so. The infringement and misappropriation issues Red Hat seeks to adjudicate in this case are currently before U.S. District Judge Dale A. Kimball in the SCO v. IBM Case pending in Utah Federal District Court.

3. Red Hat's claims under Counts III through VII seeking tort damages and injunctive relief based upon SCO's so-called "campaign" of filing suit against IBM and publicly discussing that case and other potential legal liabilities are barred by the First Amendment to the U.S. Constitution and by the common law doctrine of litigation immunity. The nature of SCO's statements complained of by Red Hat do not give rise to liability under the Lanham Act or the associated state law claims. Further, any governmental interest served under the Lanham Act is heavily outweighed by fundamental governmental interests in protecting copyright interests, ensuring full and free access to courts, providing litigation immunity, promoting judicial economy and fairness in litigation, and safeguarding freedom of speech and the press. Therefore, Counts III through VII must be dismissed with prejudice.


The following facts are taken from Red Hat's Complaint, documents to which it refers, ocuments that the Complaint incorporates by reference, and other materials on which this Court may properly rely. SCO accepts as true the allegations in Red Hat's Complaint only for the purposes of the present motion. Facts also are presented from the Amended Complaint in the SCO v. IBM Case and from IBM's Answer and Counterclaim to supplement the record in ways consistent with the standard of review on a motion to dismiss.

The Parties

Red Hat and SCO are companies that provide computer software to large and mid-size corporations. Red Hat Complaint, 24, 25, 30, 33.1 SCO owns all right, title and interest in and to computer software known as UNIX System V and UnixWare, together with related copyrights ("UNIX"). 5, 18, 33; see also SCO v. IBM Amended Complaint 1, 2, 60-63.2 SCO licenses UNIX software to its corporate customers for a fee. SCO also licenses UNIX software to other software companies, who then modify UNIX to their own needs and sublicense UNIX to their own corporate customers, also for a fee. 18; SCO 2, 4. IBM is one of the major licensees of UNIX. IBM licenses UNIX from SCO, modifies it to its own needs, and sublicenses UNIX under its own brand known as AIX. SCO 26.

Red Hat is one of many companies that distributes a software program called "Linux." 28. Linux was developed under an "open source development model' '3 that prohibits proprietary ownership or control by anyone. 22, 26, 32. Therefore, Red Hat has no ownership or proprietary interest in Linux. 32.

The SCO v. IBM Litigation

IBM has implemented a program to "exploit its expertise in AIX to bring Linux up to par with UNIX." SCO 97. SCO contends that these efforts are contrary to IBM's obligations under its UNIX licensing agreements. SCO filed suit to vindicate its rights on March 7, 2003. 41. SCO filed an Amended Complaint on July 22, 2003. As an additional step to protect its rights, SCO terminated IBM's UNIX rights under the authority of SCO's UNIX agreements with IBM. SCO 119-121. IBM requested two extensions of time to answer SCO's Amended Complaint, and in its August 6, 2003, Answer it denied SCO's allegations and in turn counterclaimed against SCO for breach of contract, Lanham Act violations, unfair competition, intentional interference with prospective economic relations, unfair and deceptive trade practices, breach of the General Public License ("GPL") under which Linux is licensed, and four patent infringement claims. IBM Answer and Counterclaim in SCO v. IBM's Exhibit B.

The issues in the SCO v. IBM litigation involve many companies in the software and computing industry. Competing principles of open source versus proprietary software have come into focus and have attracted a great deal of attention from news media, industry analysts, and numerous companies. In response to this interest, SCO tried to provide substantial information, while remaining true to its contractual obligations to keep UNIX code confidential. 1, 2, 7. 37, 42, 45, 49-54, 66. To this end, SCO representatives have given interviews and made public statements about the case, and in several of those interviews and statements they have mentioned, or have been asked about, Red Hat and other Linux distributors. On May 12, 2003, SCO took an additional step to educate the Global 1,500 companies through a direct mailing discussing SCO's intellectual property rights. 42; May 12, 2003, Letter.4 This letter refers to the SCO v. IBM Case and names IBM and Linux, but does not mention Red Hat or any other Linux distributor, nor does it propose any commercial transaction. See, May 12, 2003, Letter, Exhibit C. In addition, in order to provide end users with the ability to run Linux without violating any of SCO's intellectual property rights, SCO announced a licensing program in July 2003.

The Red Hat v. SCO Dispute

Red Hat has not been satisfied to await the outcome of the SCO v. IBM Case. 56. Instead, it sent SCO a letter on July 18, 2003, asking SCO to "fully explain the bases, if any, for its public allegations concerning Red Hat Linux." July 18, 2003, Letter. SCO CEO Darl McBride telephoned Red Hat CEO Matthew Szulick on July 31 to discuss Red Hat's letter. According to Red Hat's Complaint, on July 31, 2003, SCO merely offered it an "unneeded Unix license." 11. Then, on August 4, 2003, Red Hat filed its Complaint against SCO in the instant action. Concurrent with filing the Complaint, Red Hat issued a press release announcing its lawsuit against SCO and explaining the reason for the lawsuit.5 Red Hat claimed in the August 4, 2003 press release that "in its role as an industry leader," to fulfill its responsibility to "ensure [that] the legal rights of users are protected," and to defend "the worldwide Linux industry,"6 it had filed the present Complaint against SCO. 13. No reference was made to any threat or apprehension of threat of being sued by SCO


A complaint will not withstand attack under Federal Rule of Civil Procedure 12(b)(6) unless the material facts, as alleged, in addition to inferences drawn from those allegations, provide a basis for recovery. Emerson v. Thiel College, 296 F.3d 184, 188 (3d Cir. 2002). While all of the allegations in the complaint must be taken as true, the Court "need not accept as true unsupported conclusions and unwarranted inferences." Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173, 183-84 (3d Cir. 2000). As the Third Circuit has observed "[c]ourts have an obligation in matters before them to view the complaint as a whole and to base rulings not upon the presence of mere words but, rather, upon the presence of a factual situation which is or is not justiciable. [Courts are to] draw on the allegations of the complaint, but in a realistic, rather than a slavish, manner." Id., quoting City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 263 n.13 (3d Cir. 1998). Based on the facts Red Hat alleges in its Complaint, dismissing this case on a 12(b) motion is particularly appropriate for the reasons set forth in this Memorandum.

I. THIS COURT LACKS SUBJECT MATTER JURISDICTION UNDER THE DECLARATORY JUDGMENT ACT. In Counts I and II of their Complaint, Red Hat seeks declaratory judgments. In Count I, Red Hat begins by requesting a declaratory judgment that "it does not infringe any SCO copyright." Then, in a sweeping effort to obtain a declaratory judgment on behalf of the entire Linux industry, Red Hat seeks a declaration that "any SCO copyright to cover Linux software is unenforceable." Finally, again on behalf of the entire Linux industry, Red Hat requests the declaration that "SCO is equitably estopped from asserting any SCO copyright with respect to any Linux software."7 These broad claims for declaratory relief far exceed the scope and purpose of the Declaratory Judgment Act. More importantly, Red Hat fails to establish the existence of an "actual controversy" as required by the Declaratory Judgment Act, and therefore this Court lacks subject matter jurisdiction to adjudicate these claims. In Count II, entitled "Declaratory Judgment of No Misappropriation of Trade Secrets," Red Hat seeks similarly sweeping declarations. Specifically, Red Hat seeks a declaration "that it has not misappropriated any SCO trade secret, that any SCO trade secret claimed to cover UNIX software found in Linux is invalid, that the source code for the Linux kernel and operating system are public and cannot constitute a trade secret and that SCO is equitably estopped from asserting any SCO trade secret with respect to any Linux software."' Red Hat, however, has never had any license from SCO providing access to SCO's trade secrets or other confidential information and, to SCO's knowledge, has not stolen or otherwise misappropriated any of SCO's trade secrets or confidential information. Therefore, unlike companies that have contractual obligations to SCO, Red Hat has no legal or factual basis for apprehension of suit by SCO with respect to trade secrets or confidential information it has licensed from SCO, and its claims in Count II can be summarily dismissed.

A. Red Hat Cannot Establish an "Actual Controversy" as Required by 28 U.S.C. $ 2201. The Declaratory Judgment Act limits the use of declaratory judgments to cases of "actual controversy." 28 U.S.C. § 2201; Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-40 (1937). Generally, the presence of an "actual controversy" within the Act depends on "whether the facts alleged, under all circumstances, show that there is a substantial controversy between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941). The plaintiff, as the party seeking to invoke the court's jurisdiction, bears the burden of proving by a preponderance of evidence that an "actual controversy" existed not only at the time of the complaint's filing but also .throughout the pendency of the action.'' CAE Screenplates Inc. v. Beloit Corp., 957 F.Supp. 784, 788 (E.D. Va. 1997); International Med. Prosthetics Research Assoc. v. Gore Entrp. Holdings, 787 F.2d. 572, 575 (Fed. Cir. 1986). When factual questions concerning jurisdiction have been raised, the court need not accept the allegations of the complaint as true, but may look behind the complaint and view the evidence to determine whether a controversy actually exists. International Harvester v. Deere & Co., 623 F.2d 1207, 1210 (7th Cir. 1980). Significantly, even when it is determined that an actual controversy exists, federal courts may decline to exercise that discretionary jurisdiction. Public Affair Assoc. v. Rickover, 369 U.S. 111, 112 (1962) ("The Declaratory Judgment Act was an authorization, not a command. It gave federal courts competence to make a declaration of rights; it did not impose a duty to do so.").

In deciding whether to allow a claim for declaratory relief to proceed in patent and copyright cases, federal courts have widely used a two-step analysis in determining whether an "actual controversy" exists. See, e.g., Diagnostic Unit Inmate Council v. Films Inc., 88 F.3d. 651, 653 (8th Cir. 1996); ("In patent and copyright cases, there is an actual controversy if defendant in a declaratory judgment lawsuit has either expressly or impliedly charged defendant with infringement.") B.P. Chemicals, Ltd. v. Union Carbide Corp., 4 F.3d. 975, 978 (5th Cir. 1993); Interdynamics, Inc. v. Firma Wolf, 698 F.2d 157, 166-70 (3d Cir. 1983); International Harvester, supra. First, defendant's conduct must have created a reasonable apprehension on the plaintiffs part that it will face a suit for infringement. This test is an objective one, focusing on whether the defendant's conduct rose to a level sufficient to indicate an intent to enforce its patent or copyright. See Shell Oil Co. v. Amoco Corp., 970 F.2d 885, 888 (5th Cir. 1992); Diagnostic Unit, 88 F.3d at 653. To assess the defendant's conduct, courts look initially for a specific and express charge of infringement and, if none is found, then to the "totality of the circumstances." Shell Oil, 970 F.2d at 888 ("We must look for any express charges of infringement, and if none, then to the totality of the circumstances."). Second, plaintiff must have engaged in allegedly infringing acts or possessed the capability and definite intention to engage immediately in such acts. CAE Screenplates, 957 F.Supp. at 789; Diagnostic Unit, 88 F.3d at 653. This second prong, in essence, prohibits declaratory judgment plaintiffs from seeking advisory opinions on their potential liability for initiating some future activities.

1. Counts I and II must be dismissed because Red Hat cannot establish a "reasonable apprehension" that SCO will sue it for copyright infringement or misappropriation. Stripped of its rhetoric, Red Hat's Complaint fails to establish a "reasonable apprehension" that it will be sued by SCO for copyright infringement or misappropriation. SCO has not threatened Red Hat with a claim for copyright infringement or misappropriation. Further, Red Hat has not identified facts supporting such a threat. The inquiry consequently becomes whether Red Hat's allegations of the "totality of circumstances" provide a "reasonable apprehension" that it will face such a suit. The answer to that question is a resounding "no."

As a preliminary observation, its August 4, 2003 press release (see, footnote 5, supra.) reveals that Red Hat's real motive for filing suit against SCO was to somehow vindicate the entire Linux industry. Further, in paragraph 13 of the Complaint, Red Hat alleges:

In light of SCO's consistent refusal to identify any specific source code in the public LINUX kernel or operating system that SCO is currently claiming infringes its intellectual property rights, Red Hat brings this action.

This allegation reveals that Red Hat's action does nothing more than seek an advisory opinion of this Court regarding SCO's intellectual property rights, something that is clearly prohibited under the Declaratory Judgment Act.

The examples Red Hat uses to claim apprehension of suit belie its assertion. As detailed below, when the entire quotes, not the biased excerpts that have been placed out of context, are carefully examined, the conclusion is undeniable that Red Hat has no reasonable apprehension that it will be sued for copyright infringement or misappropriation.

In paragraph 50, for example, Red Hat identifies a quote from Darl McBride, the Chief Executive Officer of SCO, in which he says simply "[t)here will be a day of reckoning for Red Hat ...when this is done." 50 (emphasis added). On its face, this quote makes clear that any action against Red Hat would take place only when litigation against IBM is completed. Moreover, when this quote is read in the context of the very next sentence, which Red Hat failed to provide, there is no doubt as to SCO's intentions: "But we are focused on the IBM situation." CRN article attached as Exhibit E. With the quote presented in context there can be no legitimate claim by Red Hat of "reasonable apprehension" of suit by SCO. Lest there be any doubt about Red Hat's complete lack of a "reasonable apprehension" of being sued, SCO's Vice President Chris Sontag was asked in an interview to explain Mr. McBride's comment about "a day of reckoning:"

What he meant was that if SCO prevails in their lawsuit with IBM, companies like Red Hat and SuSE may need to revisit their distributions and remove any UNIX system code from their distributions and compensate SCO in some way for the software code that they benefited from by using our UNIX code."

Mozilla Article attached as Exhibit F. Nothing in that statement indicates that SCO is intending to sue Red Hat for infringement or misappropriation. Instead, it makes the rather unremarkable observation that if SCO prevails in its litigation against IBM, there will be ramifications to other companies in the Linux industry.

Red Hat apparently was aware that Mr. McBride's statement had been clarified. Indeed, when Red Hat presented the foregoing quote of Mr. Sontag, it intentionally deleted the reference showing that the comment was an explanation of Mr. McBride's statement about a "day of reckoning." 52. Whatever Red Hat's motivation for its selective editing, it remains clear that nothing in any of these quotes gives rise to a "reasonable apprehension" of suit by SCO.

In its quest for claiming a "reasonable apprehension," Red Hat next incorrectly attributes a quote to Chris Sontag. Specifically, in paragraph 50, Red Hat claims Mr. Sontag said that SCO "may bring subsequent actions against Linux software developers such as Red Hat ...." There are two significant flaws with Red Hat's use of this "quote." First, it is not a statement that Chris Sontag made. According to the article from which the quote came, the quote was the reporter's interpretation of Mr. Sontag's statement.8 More importantly, when the statement and Mr. Sontag's actual statements are read together, it is clear that Mr. Sontag's comments do not give rise to "reasonable apprehension" on the part of Red Hat:

SCO may also amend its complaint to bring additional causes of action against IBM, he added, and bring subsequent actions against Linux software developers such as Red Hat and SuSE.

"The fact that there are other companies infringing our contract ...(means) there could be other complaints," Sontag said.

In particular, Sontag said that a "major" hardware vendor inserted code protected by SCO's UNIX intellectual-property rights into a Linux product.

Article attached as Exhibit G.

The actual quotes attributed to Mr. Sontag indicate that at least one other company (besides IBM) with whom SCO has a license agreement is in violation of that license agreement. Red Hat does not have any such license agreement and it has not alleged that it has any such license agreement with SCO. Under these circumstances, Red Hat is well aware it is not the unidentified "major" hardware vendor. Thus, there is nothing in this article presented by Red Hat to provide Red Hat with a "reasonable apprehension" of being sued for infringement or misappropriation. In paragraphs 56 through 58 of its Complaint, Red Hat points to the pre-suit letter it wrote to SCO. This letter and SCO's response certainly do not provide a "reasonable apprehension" that Red Hat may be sued. In its Complaint, Red Hat outlines the letter it sent to SCO in which Red Hat demanded that SCO identify the infringing code "and noted that SCO had `failed to provide any details' in support of its allegations so that Red Hat could refute them." 56 (emphasis added). While Red Hat identified its desire to refute SCO's allegations, it never mentioned either in its letter or in reaction to SCO's response to its letter any fear that it would be sued. Rather, according to its allegations, Red Hat received "a telephone call seeking to have Red Hat pay for an unneeded UNIX license." 11. Two business days later, Red Hat filed suit. "The unavoidable inference is that plaintiff, recognizing that it did not have a reasonable basis for apprehension of suit, intentionally attempted to goad defendant's counsel into threatening a lawsuit." BASF Corp. v. PPG Industries, 1991 WL 354884 *9 (D N.J. February 11, 1991)9.

Courts confronted with far more compelling examples of purported "reasonable apprehension" have rejected such claims. In Bonterra America v. Bestmann, 907 F.Supp. 4, 7 (D.D.C. 1995), for example, the "totality of circumstances" was (1) an offer from the defendant patent holder of a non-exclusive license; (2) statements allegedly made to plaintiffs customer and/or marketing representative that certain of plaintiffs products violated defendant's patent; and (3) a letter to the same person from defendant's attorney in which the attorney declined to answer legal questions about defendant's patent and directed the person to seek his own counsel regarding such questions. Id. The court further noted the absence of allegations that may have supported jurisdiction:

No allegations have been made by [plaintiff] that [defendant] has contacted [plaintiff] and informed it that its products are in violation of the patent. No allegations have been made that [defendant] has conveyed to [plaintiff] either expressly or implicitly that it intends to sue to enforce its patent, and no allegations have been made that [defendant] has ever before sued another entity for infringement.

Id. Red Hat's Complaint suffers from the same infirmities found by the court in Bonterra America to preclude subject matter jurisdiction. There are no allegations that SCO has contacted Red Hat and informed it that its product violates SCO's copyrights. Nor has SCO done so. There are no allegations that SCO has conveyed to Red Hat either expressly or implicitly that it intends to sue Red Hat to enforce its copyrights. Nor has SCO done so. There are no allegations that SCO has sued any other entity for infringement. - Nor has SCO done so. Under these circumstances, the declaratory judgment claims fail for lack of subject matter jurisdiction. See also CAE Screenplates, 957 F.Supp. at 790 (series of letters between patentee's counsel and putative infringer's counsel concerning putative infringer's demands for license, fears of putative infringer's customers about patent, and patentee's history of patent litigation did not give putative infringer objective, reasonable apprehension of infringement suit, as required for subject matter jurisdiction and declaratory judgment action for a non-infringement, unenforceability and invalidity of patent); Phillips Plastics Corp. v. Kaisha, 57 F.3d 1051, 1053 (Fed. Cir. 1995) ("The offer of a patent license does not create an actual controversy").

Red Hat's allegations directed solely to its claim for a declaratory judgment for "no misappropriation of trade secrets" also do not provide proof of an "actual controversy." Red Hat certainly has not alleged it has been threatened with such an action. Similarly, the "totality of circumstances" do not imply such a threatened action. As to any threats by SCO, real or perceived, they are found in paragraph 51 of its Complaint. There, Red Hat claims SCO has asserted Red Hat wrongfully misappropriated portions of SCO's proprietary UNIX software. However, the purported factual support for this proposition incorporated in Plaintiffs allegations eviscerates this pronouncement. Specifically, Red Hat notes that Darl McBride stated that "IBM took chunks [of code] out of [Project] Monterey, and gave it away. You can find it in Red Hat ...Linux." 51 (emphasis added). As this quote makes clear, any claim for misappropriation asserted by SCO would not be made against Red Hat, but instead would be made against IBM, as SCO has done in the litigation pending in federal court in Utah.

In addition to this lack of a threat, there is a simple factual hurdle that precludes any "reasonable apprehension" of suit against Red Hat. Red Hat, unlike IBM, has never signed a license agreement giving it access to SCO's confidential trade secrets in System V source code. A fundamental principle of trade secret law is that "[t]he protection accorded the trade secret holder is against the disclosure or unauthorized use of the trade secret by those to whom the secret has been confided under the express or implied restriction of nondisclosure or nonuse." Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 475 (1974) (emphasis added). In the absence of access to the confidential UNIX System V source code or the improper taking of that source code Red Hat cannot legally be in a position of "reasonable apprehension" that it may be sued for misappropriation of trade secrets.

B. Even if the Court Determines Subject Matter Jurisdiction Exists, the Court Should Exercise its Discretion and Decline to Consider the Case.

It is clear that Red Hat has not established (and cannot establish) a reasonable apprehension of suit by SCO for infringement or misappropriation. Nonetheless, even if Red Hat could satisfy the prerequisites, this Court has the discretion to decline to exercise its jurisdiction. Rickover, supra; International Harvester, 623 F.2d at 1217. The previously filed SCO v. IBM Case addresses most, if not all, of the issues of copyright infringement and misappropriation. If these issues are decided against SCO in that case, then Red Hat's lawsuit becomes unnecessary. Certainly, Red Hat's "need for declaratory relief does not outweigh the interests in judicial expediency and in avoiding unnecessary federal court decisions." International Harvester, 623 F.2d at 1218. This Court, therefore, should decline jurisdiction, if it exists, in this case and dismiss Counts I and II of the case.


Red Hat's claims for relief under the Lanham Act and related state law claims, as set forth in Counts III through VII of the Complaint, contain only legal conclusions in the body of each count, without reference to specific averments of fact. Therefore, it is necessary to glean factual support for each of these claims from the Background Facts contained in paragraphs 1 through 69 of the Complaint. A complicating factor is that many of the "Background Facts" are argument and ad hominem attacks, rather than avennents of factual conduct.

Nevertheless, the Background Facts generally condense into five public statements made by SCO that relate to Red Hat's claims: (1) Linux software versions 2.4 and 2.5 con
comment [] 11:16:59 PM    

"SCO Has Had an Amazing Year" - Indeed

The SCO Group, like Old Faithful, has burst forth with yet another press release. They plan on taking the SCO Show on the road to a city near some of you. They would like to share with you "the latest SCO technology advancements and business solutions". It's free, in case you were not feeling enthusiastic enough to pay.

Wait a sec. Share with us their business solutions? Wasn't Darl just asking for us to come up one of those for him? Judging from a cursory reading of his 10Q, I'd say he could use one within about 12 months:

"During recent quarters, we have experienced a decline in our product and services revenue primarily attributed to the worldwide economic slowdown, lower information technology spending and increased competition in the operating system market. However, we have implemented cost reduction measures to decrease personnel and excess facilities costs and have significantly reduced our overall operating expenses. These measures, combined with revenue of $15,530,000 from our SCOsource licensing initiative, have resulted in the first two profitable quarters in our history."

Maybe they heard from their RIAA friends that musicians make the bulk of their money on tour, so they thought they'd imitate that part of RIAA's repetoire, as they diligently do their imitation of their legal strategy.

And as for technical solutions, I wonder what they have to offer? Some really old code and not a lot of employees to make it better, and a collective cold shoulder, as in dry ice, from the entire world of open source/free software programmers. NASA, we have a problem.

They've had an amazing year, says their Senior VP marketroid, and I think here, at least, we have found common ground. But here's their spin:

"We've enjoyed record earnings during the past two quarters, been one of the top performing stocks on the NASDAQ, been a pioneer in intellectual property protection and announced major technological advancements in both our UNIX and SCOx product initiatives. Because we've made these landmark accomplishments in a struggling economy, the future continues to look extremely bright for SCO and its partners. We're excited to showcase the company and our technologies at this year's worldwide City-to-City Tour."

I guess comedians do go on tour too, so, hey, why not? Knock yourselves out. Please.

Nah, just horsing around. Of course, their buddy Microsoft is bailing them out, because they really need that license from SCO very badly to run their business:

"The amount that we receive from any such licensee will generally depend on the license rights that the licensee previously held and the amount and level of our intellectual property the licensee desires to license. The two licensing agreements signed by us to date resulted in revenue of $8,250,000 during the April 30, 2003 quarter and $7,280,000 during the July 31, 2003 quarter. The license agreement with Sun provides for an additional $2,500,000 to be paid to us by November 2003. On July 31, 2003, Microsoft exercised an option to acquire expanded licensing rights. Upon delivery, we expect to recognize additional revenue related to this option."

So at least at the end of July, Microsoft apparently deemed value in the license and has ponied up some more dough. I am shocked, shocked. Actually, I am, but I'm not surprised. What is of greatest interest to me is that if Microsoft had waited just a little week or so, this detail could have been kept a secret until the next quarterly filing. Evidently, they don't care if we know about their affiliation with the SCO Show. So be it.

comment [] 6:16:51 AM    

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