Contract clause boosts SCO

SCO Group on Thursday discovered a clause in a contract that could bolster its potential legal claims against Linux users.

The company said it has uncovered a 1996 amendment to the contract under which Novell sold many of its Unix assets - which appears to give SCO claim to at least some Unix copyrights.

The amendment seems to reverse a provision in the original 1995 asset transfer agreement under which Novell sold much of the Unix business to SCO's predecessor, the Santa Cruz Operation. That sale specifically excluded copyrights from the transfer. The amendment modifies this exclusion, so that SCO seems to receive at least some Unix copyrights.

"Our interpretation of this is that we have the copyrights for Unix and UnixWare technologies," said SCO spokesman Blake Stowell. The amendment, dated 16 October, 1996, was signed about a year after the original transfer agreement.

Even SCO challenger Novell seems to concur, in part, with SCO's interpretation, though Novell said it doesn't have a copy of the amendment in its files and still takes issue with SCO's actions against Linux users.

The amendment "that came to Novell's attention today appears to bear a valid Novell signature, and the language, though convoluted, seems to support SCO's claim that ownership of some copyrights for Unix did transfer to SCO," Novell said in a statement issued on Thursday. "The amendment does not address ownership of patents, however, which clearly remain with Novell."

The amendment was part of a larger financial transaction between the Santa Cruz Operation and Novell, but Stowell didn't have details of that broader agreement.

Novell also reiterated its demand that SCO substantiate its claims that proprietary Unix code has been copied into Linux, an open-source operating system modelled after Unix, but whose underlying source code is public.

The copying claim, which grew out of SCO's $1bn lawsuit against IBM, spurred SCO to send letters to 1,500 large companies warning that using Linux could expose them to legal liability.

At least one independent observer agreed that the amendment appears to give SCO copyrights.

"They do have the copyrights," said John Ferrell, an intellectual property attorney with Carr and Ferrell, after reviewing the contract amendment.

However, for SCO to bring copyright-based lawsuits against Linux users, SCO would have to show that the copyright transfers have been registered at the US Copyright Office, Ferrell said.

Signing a contract that transfers the copyrights but not registering that transfer "is akin to buying the Hearst Castle and not recording the deed with the county recorder," Ferrell said.

The amendment changes the intellectual property that wasn't sold to the Santa Cruz Operation. It was modified to exclude from transfer "all copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the agreement, required for SCO to exercise its rights with respect to the acquisition of Unix and UnixWare technologies."

A SCO paralegal found the amendment Thursday in a filing cabinet, Stowell said. It's titled "Amendment No. 2"; Amendment No. 1 is "completely immaterial" to the issue of copyrights and trademarks, said Stowell, who said he believes there are no other amendments.

SCO plans to detail the amended filing and its implications in a news conference on Friday.

Stephen Shankland writes for CNET News.com