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UNOFFICIAL TRANSCRIPT

In the United States District Court, District of Nevada

The SCO Group, Inc., v. AutoZone, Inc., Case CV-S-04-0237

Before the Honorable Robert C. Jones
September 9, 2004

Motion Hearing


10:07:51

The Court: Good morning. Welcome. Thank you.  This is United
States District Court.  You're here on SCO vs. AutoZone.
Your appearances, please.

Mr. Stone: David Stone from Boies, Schiller, and Flexner for
plaintiff SCO, your Honor.

Mr. Stewart: David Stewart with Alston, Bird for AutoZone.

Mr. Pisanelli: James Pisanelli, Schreck Brignone, for
AutoZone.

The Court: Thank you.

Mr. Tibbitts: Ryan Tibbits.  I'm General Counsel for the SCO
Group.

The Court: Okay. Alright, we did have a Emergency Motion.
I'll let you address that, please, if you would.

10:08:28

Mr. Stewart: Thank you, your Honor.  We appreciate you
hearing us so quickly on this motion.  We stated in detail
in our moving papers the basis for our motion, so let's say
for brevity I won't repeat all those --

The Court:  I hope not.

Mr. Stewart: -- what I'd like to do is just, address a
couple of the high points of the motion, and then there is
one additional issue I'd like to address, that is raised by
the statement that SCO recently served on AutoZone, that
wasn't addressed in our motion but that I do believe is
relevant in terms of the court's consideration of this
motion.

The court will recall that on July 12, the court heard
argument on AutoZone's motion to stay this case in favor of
the pending Red Hat, Novell and IBM cases.  In defense of
that motion, SCO said that AutoZOne had engaged in unique
infringements of the UNIX code when AutoZone migrated from
UNIX to Linux; that those issues are not at issue in the
other three cases, and that SCO is suffering irreperable
harm.  

As a result of [??withupwith??] those arguments, the court,
through an order dated August 6, provided the parties with
the opportunity to conduct expedited discovery in advance of
the filing of a motion for preliminary injunction, but in
clarifying what this discovery was to go to, at the July 12
hearing we understood the court to make clear to SCO that it
should not be going down the road of expedited discovery if
it doesn't have a good-faith basis for a motion and if it
doesn't intend to file that motion, and specifically --

The Court: Yeah, but I -- you know -- I've stayed the
action, except to preserve their right to get an injunction
unless they're -- you know...  The claim is irreperable
harm.  That's the claim.

Mr. Stewart:  Right.

The Court: And they've given you at least enough of a basis,
in the statement, why shouldn't I let them, especially since
it's limited by time, just let them finish that up and put
on the request if they're going to ask for one?

Mr. Stewart: Well, your Honor, a couple of reasons for that.
Although SCO, in its statement, has purported to identify a
basis on which they'd move for preliminary injunction, when
you really take a look at what they've said in their
statement, they haven't.  It's the same amorphous, vague
allegations that they set forth in their complaint.

For example, they allege that they have reason to believe
that AutoZone infringed standard shared libraries when it
migrated from UNIX to Linux.  my understanding is that there
are between a couple of dozen to a hundred or more shared
libraries in UNIX.  SCOhas yet to identify even a single
library that it believes that AutoZone has infringed in the
migration.

The Court:  Shouldn't it be able to look at the code, to see
which ones do or don't?

Mr. Stewart: Well, your Honor, our understanding of the
pleading requirements in the federal rules is they've got to
have a good-faith basis to believe that that infringement
occurred, before they can even assert a claim.  They have
yet to identify any cogent reason why it is that AutoZone
could not have written around those libraries.  In
AutoZone's... AutoZone has publicly stated that it wrote
around all those libraries: it didn't need them.  There is
no allegation by SCO at all about why that's not plausible.

So what we've got is a hunch, a feeling.  Frankly, it
appears to me that what's really going on is that SCO just
doesn't believe that AutoZone's IT department is technically
sophisticated enough to be able to write around this code.
So they've got a hunch, that maybe something there is
infringing, but it's my understanding, your Honor, of the
federal pleading requirements, that's not enough --

The Court: I don't know

Mr. Stewart: -- to plead a claim, let alone move for
preliminary injunction or preserve -- or to persue a motion
for preliminary injunction, or pursue expedited discovery.
so at this point, we're more than thirty days into the
ninety day expedited discovery process.  We don't have an
identification yet of a single line of code that's been
infringed, a single section of any manual that's been
infringed, or even a cogent theory about why it is that that
could have been infringed.  So what SCO wants to do is root
around in expedited discovery, figure out if it has a claim,
and then bring a motion that it flat out states that as of
today, it does not know whether a motion for preliminary
injunction is warranted.

In that context your Honor, we'd submit that they haven't
shown that they're suffering the kind of irreperable harm
that justifies staying this case when seminal issues,
effect, and law at issue in this case are also being decided
in the three other cases.

And that gets to the additional point that I wanted to make
this morning.  On page 3 of SCO's statement, it identifies
the copyright registrations that cover the copyrights that
it's alleging that AutoZone infringed in the migration.
Now, those registration certificates are important, because,
as the court knows, this court doesn't have subject matter
jurisdiction to entertain a copyright claim unless those
copyrights have been registered with the copyright office.

Those registration certificates are also significant,
because the threshold element that SCO must establish on its
copyright infringement claims is that it owns the copyrights
that it's seeking to enforce against AutoZone.  All four of
the copyright registrations --

The Court: Why are you arguing this issue now?

Mr. Stewart: Well -- I apologize, your Honor -- where I'm
heading with this is that a seminal issue on this motion is
directly at play in the Novell case, in a motion that's
going to be heard very shortly.  I'll hustle through this
point.  

All four of these copyright registration certificates relate
to UNIX System V.  It's undisputed in this case and in all
the other cases that SCO does not own the copyrights in any
UNIX System V materials unless Novell assigned the
copyrights to SCO.  Novell says: it didn't.

Because of public statements by Novell to that extent, SCO
filed the Novell lawsuit.  So --

The Court: Right.  What did it assign?  This is all
background, and it really doesn't belong on our record here
this morning, but just for interest, what did it assign?
Forward, or prior, or nothing?

Mr. Stewart: My understanding is that it assigned the right
to revenue streams down the road, and the right, perhaps, to
make enhancements.  Now, SCO can address those issues better
than I can --

The Court: Gee, I hope not, because it's not an issue before
us.

Mr. Stewart: -- but, well the issue is this, your Honor:
they can't get a preliminary injunction unless they can
show, that they own the code.

The Court: That's not true.  Look, you know -- the point is,
I've stated I'm going to defer to the Utah court, for
heavens' sakes.  I'm going to defer on that.  The only
question is whether there's irreperable injury to be
suffered by them in such deferral.  That's the only question
that -- they have a heavy burden, obviously, but they have to meet
it.

Mr. Stewart: Well, I may have misunderstanded where we're heading --

10:15:30

The Court: Okay, I'm going to deny the motion.  I'm sorry.  I was
going to ask you if you need to, but I'm not getting answers to the
questions, and the obvious -- the obvious conclusion to me after
reading the pleadings is, I -- I gave them this right for the very
purpose, and as a, in essence almost a due process constitutional
predicate to granting a stay of the action here, that they do have at
least the opportunity to pursue injunctive relief for irreparable
injury that would incur while the stay is in existence.  

That's why I did it, and obviously, as a predicate to that, they have
to have some right of discovery.  They've got to have the ability to
ask you, "what is your code?", so that they can tell me whether there
is any irreperable injury that's going to occur.  So, as far as I can
see it, based on their statement, they've given you enough, at least
-- minimal -- what I required, or had in contemplation, when I made
the ruling.

So, I think I have to deny your request.  It's not a big suffering
that you're going through, especially where I've granted your motion
to stay.  You just have to submit yourself to that darned little
period of the discovery, so that they can frame it -- if they're able
to, it's their burden -- for the court on preliminary injunction
request.  So I think that's the basis that I would have to deny you
your request.

Mr. Stewart: Your Honor, the point about the copyrights, if I could
just finish that quickly, because I want to make sure I understand
where we're heading with the motion that you envision.  And my
understanding is that, to show irreperable harm, they've got to show
-- they've got to state at least a reasonable basis for a claim for
copyright infringement --

The Court: I'm not going to give you the standard at this juncture.  I
haven't -- don't even have them having filed the motion yet.

Mr. Stewart: Well, your Honor, it would involve the merits of the
copyright claim.

The Court: Right.

Mr. Stewart: which necessarily means that they have to show that they
own the copyrights --

The Court: If you get a ruling out of the Utah -- as far as I'm
willing to go out on a limb is to say if you get a ruling from the
Utah court in the meantime: "they don't own any copyrights", then, of
course, they've got an additional burden on such a motion then, and I
think they realize that.

But if all you're going to tell me is, you know, they've got to
establish it first here in this court, where I've already granted the
stay so that we can defer to the ruling of the Utah court, that
doesn't make any sense.

Mr. Stewart: If I could give you one more statement and then [?? I've
gone my self shared up ??].

The Court: Okay.

Mr. Stewart: If the court in Utah rules that Novell did not assign the
copyrights: there is no case.  This case is over.

The Court: Sounds likely, though I'm not so ruling, yet, because I
don't have anything in front of me, but that sounds -- sounds to me
like you're right on.

Mr. Stewart: And there is a motion to dismiss pending in the Novell
case right now.  It's not scheduled for argument, but it will decide
whether, whether Novell wins on the pleadings, and if it does --

The Court: I was going to ask you, out of interest, the status --
you're not yet at the point where you're required to file your written
status report I assume, but I was just curious, and you've partially
answered the question: the Utah court has before it the issue of the
ownership and then also a separate motion to dismiss.

Mr. Stewart: It does, your Honor.

The Court: Uh-huh.  And what about the court, is it New Jersey or
Delaware?

Mr. Stewart: The Delaware case, the Red Hat case, is still stayed.
The IBM case is teed up for arguments on the fifteenth on motions for
summary judgment that IBM has filed, and -- I have to confess, I don't
know everything that's going to be heard at that argument on the 15th,
but there are additional issues that SCO would --

The Court: Okay, I was just curious as to the background.

Are there other Linux users that are being sued around the country, or
are there other potential federal lawsuits, or actual existing federal
lawsuits?

Mr. Stewart: SCO filed a lawsuit against DaimlerChrysler, another
end-user.  It has a different basis --

The Court: So it's an ongoing course of litigation that was -- all the more
reason to defer to the first court that had the issue squarely before
it.

Okay, did you want to add or make further comment?

10:19:21

Mr. Stone: Judge, you know, I hesitate since, whereas you've already
denied the motion, but I'm going to plunge into uncharted waters.  Can
I stand up for a second?

The Court: Sure, please.

Mr. Stone: Judge, we have all along, and since said in our papers,
we're trying to reduce the burden to the parties and AutoZone, by
focusing on these issues, and I have suggestion which may do that, may
address some of their concerns.  I think it would certainly help us
expedite this matter.

They have offered us an individual, his name is Greer, who apparently
was the mastermind behind this migration for them.  I don't think he
works for them any more, but he's agreed to appear for a deposition.
If we -- and we've already set the date, for the twenty-fourth
actually, subject to this, obviously, argument.  What I suggest we
should do, and I guess what I ask the court, in essence, to order, but
this is my suggestion, is that we be permitted to take that
deposition, take seven hours.  My clients have told me that we should
be able to know, with much more certainty, whether there's a concern
there or not.

If at the end of that deposition they convince us that they've, as he
says, "written around" our code, didn't use our methods and concepts,
or structures and whatever, then we will so advise the court that we
won't -- preliminary injunction.  The case would still exist because
we're still suing them on the issue of the Linux issue.

If, on the other hand, we confirm some of these issues that we've
talked about, we advise them.  And then the reciprocal discovery could
go forward at that point, on those issues, with those issues being
more focused.  So, I guess what I'm suggesting, they've served us with
a lot of discovery that basically, until we take that deposition, we
can't really answer with specificity anyway, we can answer what we
know.  That would address their burden -- our burden, frankly -- and
give everybody a --

The Court: Well, a corollary of this, of course, is that you have,
during this short period, you have to submit yourself fully, too.  And
if you're suggesting "Hold off, please", uh ...

Mr. Stone: I'm suggesting we go -- I mean, we were going to serve, you
know, request for admissions, interrogatories, document requests.  We
haven't served them.  I wanted to see what happened today.

The Court: Yah.

Mr. Stone: But, I guess my suggestion is since we're talking about the
twenty-fourth, which is only a couple weeks from now, if we hold off
on that, and just have those dates run from after we take that
deposition, that would [?? help to have ?? 10:21:52] everybody focus
on this one issue, and then if there is an issue, and then if there is
an issue, then we can all take the reciprocal discovery that's
necessary.

The Court: that's a very complicated question and you need to address
it to the other side first.

Mr. Stone: That's fine.

The Court: See if there's any disputes.  All I'm doing today is just
denying the emergency motion.

Mr. Stone: Right.  Thank you, your Honor.  I'm just trying to address
their concern.

The Court: No, I appreciate that.  Okay.  Thank you very much.  Can I
have a simple order, please?

Mr. Stone: Your Honor, I'll submit the order.

The Court: Okay, thank you.

Mr. Stewart: Thank you, your honor.

The Court: Thank you very much for your time.

Mr. Stone: Thank you for your time, your Honor.

Ms. Price: All rise.


10:22:21


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