Source: https://caselaw.findlaw.com/us-10th-circuit/1884893.html
Timestamp: 2020-08-15 14:56:53
Document Index: 614820253

Matched Legal Cases: ['§ 2', '§ 22', '§ 22', '§ 22', '§ 301', '§ 301', '§ 106', '§ 248', '§ 22']

THE SCO GROUP INC v. INTERNATIONAL BUSINESS MACHINES CORPORATION | FindLaw
THE SCO GROUP INC v. INTERNATIONAL BUSINESS MACHINES CORPORATION
THE SCO GROUP, INC., a Delaware corporation, Plaintiff Counterclaim Defendant - Appellant, v. INTERNATIONAL BUSINESS MACHINES CORPORATION, Defendant Counterclaimant - Appellee.
A. UNIX Operating System and Intel Processors
B. Project Monterey and the Joint Development Agreement
Before IBM and SCO began working together, most processors (including Intel's chips) operated only at a 32-bit capacity, but in 1994, Intel announced its intention to develop a higher-capacity 64-bit chip called Itanium. Anticipating Intel's forthcoming Itanium architecture, Santa Cruz and IBM jointly endeavored to build a new UNIX-based operating system that would run on the faster processor. In October 1998, Santa Cruz and IBM entered into a Joint Development Agreement (JDA) that would govern the mechanics of their collaboration, including licenses, royalties, and project management responsibilities. This endeavor became known as Project Monterey.
As part of the JDA, each party granted the other a limited license to its own respective technologies for the purpose of developing the IA-64 Product. After signing the JDA, the parties entered into a Project Supplement that provided: “The Licensed Materials ․ are to be used solely for development of the IA-64 Product.” Aplt. App. 884 (emphasis added). According to SCO, this provision imposed a default rule that IBM could not use SCO's contributed materials in its own AIX for Power. That Supplement, however, also included a caveat: “Notwithstanding [that limitation], any such Licensed Material included in the IA-64 Product Release 1 shall be licensed pursuant to the terms and conditions set forth in the [JDA].” Aplt. App. 884 (emphasis added). In other words, any SCO materials that ultimately found their way into the “IA-64 Product Release 1” would be licensed to IBM pursuant to the JDA, which in turn granted IBM a “worldwide, non-exclusive, royalty free” right of use, Aplt. App. 3085, JDA § 2(d)(2). Under these provisions, IBM would have known that if it wanted to use SCO's materials in AIX for Power, there must be a “IA-64 Product Release 1” containing those materials.
C. IBM Transitions Focus from Project Monterey to the Linux Operating System
D. IBM's Alleged Misappropriation of Santa Cruz's Code
E. Santa Cruz Transfers Assets to Caldera International
F. IBM's Alleged Direct Interference With SCO's Business Relationships
[I]f [SCO] did not drop [its] library licensing program and [its] investigation of Linux and withdraw [its] press release ․ , that IBM was going [to] cut off all business from [SCO] and they were going to encourage partners and customers from doing any business with SCO as well.
G. Procedural Background
Alongside its suit against IBM, SCO also filed suit against another company called Novell, which had publicly claimed that it, rather than SCO, owned the UNIX copyrights. Novell entered into an asset purchase agreement with Santa Cruz in 1995 wherein Novell transferred a license to the UNIX technology to Santa Cruz. Santa Cruz believed that it had received through this asset transfer the UNIX copyrights, and thus the right to license all derivations and variations of the UNIX system. That belief, however, ended up being wrong. In 2011, this Court affirmed a jury verdict that found Santa Cruz did not, in fact, receive the UNIX copyrights in that deal, rather it merely received a license to use, develop, and distribute the UNIX technology. See SCO Group, Inc. v. Novell, Inc., 439 F. App'x 688 (10th Cir. 2011) (outlining this background).
A. Misappropriation1. Applicable Law
New York courts recognize “two theories of common-law unfair competition: palming off and misappropriation.” ITC Ltd. v. Punchgini, Inc., 880 N.E.2d 852, 858 (N.Y. 2007). The gravamen of SCO's claim is misappropriation, which “concerns the taking and use of the plaintiff's property to compete against the plaintiff's own use of the same property.” Sidney Frank Importing Co., Inc. v. Beam Inc., 998 F. Supp. 2d 193, 208-9 (S.D.N.Y. 2014) (internal quotation marks omitted) (interpreting New York law); accord Punchgini, 880 N.E.2d at 859. “To state a claim for the misappropriation theory of unfair competition, a plaintiff must allege that the defendant: (1) misappropriated the plaintiff's labors, skills, expenditures, or goodwill; and (2) displayed some element of bad faith in doing so.” Sidney Frank Importing, 998 F. Supp. 2d at 209 (internal quotation marks, citations omitted). “In this context, bad faith can be established by a showing of fraud, deception, or an abuse of a fiduciary or confidential relationship.” Schroeder v. Pinterest Inc., 17 N.Y.S.3d 678, 693 (N.Y. App. Div. 2015) (internal citations omitted).
2. Independent Tort Doctrine
The district court granted IBM's motion for summary judgment after concluding that the “independent tort doctrine” precluded the misappropriation claim. The independent tort doctrine provides that “a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated.” Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 516 N.E.2d 190, 193 (N.Y. 1987). This separate duty must “spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract.” Id. at 194.
When the plaintiff is “essentially seeking enforcement of the bargain,” rather than a societal policy or law that gives rise to a duty of care, “the action should proceed under a contract theory.” Sommer v. Fed. Signal Corp., 593 N.E.2d 1365, 1369 (N.Y. 1992); see also Abacus Fed. Savings Bank v. ADT Sec. Servs., Inc., 967 N.E.2d 666 (N.Y. 2012) (finding no separate liability in tort when the gravamen of the claim was the defendant's failure to make good on its promise to offer functional security services that would prevent a bank burglary). However, when the defendant has a duty “separate and apart from its contract obligations,” then an action in tort will lie. N.Y. Univ. v. Continental Ins. Co., 662 N.E.2d 763, 768 (N.Y. 1995) (finding no separate liability in tort when the breach of an insurance policy also violated New York statutory insurance law because “the provisions of the Insurance Law are properly viewed as measures regulating the insurer's performance of its contractual obligations, ․ not as a legislative imposition of a separate duty of reasonable care”).
Apple Records, Inc. v. Capitol Records, Inc., 529 N.Y.S.2d 279, 281-82 (N.Y. App. Div. 1988) (emphasis added) (internal citations omitted). With this in mind, we turn to the misappropriation claim here. The district court held that the independent tort doctrine barred SCO's claim, but in doing so the district court focused too narrowly on IBM's allegedly wrongful conduct, observing that the same conduct would constitute both an unfair-competition claim and a breach of the JDA. But that analysis misses the point. What matters is not whether IBM's “use of the code” violated the contract, but rather whether IBM violated some separate and independent non-contractual duty in using that code.
To be sure, the district court devoted some attention to this question, but it restricted its inquiry to whether there existed a fiduciary relationship between the parties, i.e., a joint venture or partnership, giving rise to a heightened duty of care. The JDA clearly provides that “[t]his Agreement shall not be construed to establish any form of partnership, agency, franchise or joint venture of any kind between SCO and IBM, . . [nor] to provide for any sharing of profits or losses between the parties.” Aplt. App. 3113, JDA § 22.5. So the district court correctly concluded that the parties were dealing with each other at arms' length and had no fiduciary or heightened duty toward one another.
But New York does not appear to require a heightened duty incident to a partnership or fiduciary relationship as a predicate to an unfair competition claim—any common-law or statutory duty will suffice. As the Apple Records court explained, the relevant duties for purposes of the Independent Tort Doctrine are not “exclusive to relationships of trust and confidence, but may also arise from special extraneous circumstances and from the ‘legal duty which is due from every man to his fellow, to respect his rights of property and refrain from invading them by force or fraud.’ ” 529 N.Y.S.2d at 282 (emphasis added) (quoting Rich v. N.Y. Central & Hudson River R.R. Co., 87 N.Y. 382, 397 (1882)). For example, in Sidney Frank Importing Co., Inc. v. Beam Inc., 998 F. Supp. 2d at 210, a federal court applying New York law permitted a whiskey distributor to bring a misappropriation claim against its supplier even though the supply contract addressed the wrongful conduct, and there was no specially recognized relationship between those two entities other than the fact that they did business together. In another case, Cargill, Inc. v. Sears Petroleum & Transport Corp., 388 F. Supp. 2d 37, 65 (S.D.N.Y. 2005) (interpreting New York law), a misappropriation claim survived alongside a breach-of-contract claim when the breached agreement specifically governed the use of confidentially shared information between the parties, and the parties had not formalized any joint venture between themselves.
Similarly, in this case, while IBM and SCO may not have had a formal partnership or joint venture as a matter of law, they surely enjoyed a business relationship in which each reposed a degree of trust and confidence in the other. Regardless, as a matter of “social policy,” see Apple Records, Inc., 529 N.Y.S.2d at 281-82, each had a common-law duty—as all persons and entities do—not to engage in fraudulent or deceptive practices, see Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 178 (2011) (recognizing the New York common law tort of fraudulent misrepresentation). While the alleged fraud or deceit may emerge from the business relationship structured and defined by the parties' contract, the duty each owes the other not to engage in fraud or deceit exists separate and apart from the JDA.
At the summary judgment stage, it is IBM's burden to show “that there is no genuine dispute as to any material fact[,]” and we are required to draw “all reasonable inferences in the light most favorable to” SCO. See Ellis v. J.R.'s Country Stores, Inc., 779 F.3d 1184, 1191–92 (10th Cir. 2015) (internal citations and quotations omitted). In light of IBM's burden, we believe a reasonable jury could find here that regardless of whether IBM performed to the letter of the JDA, IBM nonetheless “misappropriated [SCO's] labor, skills, expenditures or good will” through “fraud [or] deception,” see Schroeder, 17 N.Y.S.3d at 693; see also Graubard Mollen Dannett & Horowitz v. Moskovitz, 86 N,Y.2d 112, 112 (1995) (holding that fraud claim could survive summary judgment because “a false statement of intention is sufficient to support an action for fraud, even where that statement relates to an agreement between the parties”). Accordingly, the district court's order cannot be affirmed on this ground.
3. Standing as Assignee of Santa Cruz's Claim
This argument falls flat for two reasons. First, under New York law, a non-assignment provision that merely prohibits assignment—and does not expressly declare that such assignments are void or invalid—merely entitles the aggrieved party to damages. See Sullivan v. Int'l Fidelity Ins. Co., 465 N.Y.S.2d 235, 237-38 (N.Y. App. Div. 1983) (citing cases). Without such a clear and express statement of invalidity of assignments included in the contract, the assignment survives and the assignee can enforce the transferred rights against the third party. Id. In this case, the JDA merely prohibits assignment without consent—it does not state that nonconsensual assignments are void.
Second, and more importantly, the non-assignment provision here specifically forbids the transference of rights “under this Agreement.” Aplt. App. 3114, JDA § 22.12. We have already held that SCO's lawsuit is not to vindicate rights under the JDA itself, but is instead to vindicate a tort arising from a duty separate and apart from that contract. Accordingly, even if this non-assignment provision operated to invalidate nonconsensual contractual assignments, the assignment of rights at issue here is outside the scope of that provision. SCO therefore has standing to bring its misappropriation claim against IBM as an assignee of Santa Cruz's rights.14
IBM next contends that SCO's misappropriation claim is untimely under the contractual limitations period. The JDA provided: “Any legal or other action related to a breach of this Agreement must be commenced no later than two (2) years from the date of the breach ․” Aplt. App. 3113, JDA § 22.3 (emphasis added). At the outset, SCO objects to the application of this provision to its tort claim which, as earlier discussed, is separate from the contract. We may assume, without deciding, that the contractual language applies not only to breach-of-contract claims, but also to “[a]ny legal or other action related to a breach” of the JDA. Id. (emphasis added). Even as a separate tort action, there is no question that SCO's misappropriation claim is “related to” a breach of the JDA because the JDA expressly deals with the use of SCO's licensed materials. We thus apply the two-year limitations period to SCO's misappropriation claim, which SCO initially filed on March 6, 2003.
Nevertheless, SCO complied with the contractual limitations period because it filed suit less than two years after its claim accrued. Under New York law, “[a] tort claim accrues as soon as the claim becomes enforceable, i.e., when all elements of the tort can be truthfully alleged in a complaint[.]” IDT Corp. v. Morgan Stanley Dean Witter & Co., 907 N.E.2d 268, 273 (N.Y. 2009) (internal quotation marks, citation omitted). Recall that the elements of a misappropriation claim are that the defendant “(1) misappropriated the plaintiff's labors, skills, expenditures, or good will[,] and (2) displayed some element of bad faith in doing so.” Sidney Frank Importing, 998 F. Supp. 2d at 209.
SCO's misappropriation theory is predicated on the improper inclusion of the SVr4 code in IBM's AIX for Power product.15 That claim accrued when IBM released the AIX for Power operating system containing the SVr4 code on May 4, 2001, which was less than two years before SCO filed its complaint. This release was allegedly undertaken in bad faith because IBM attempted to legitimize its distribution of the SVr4-enhanced AIX product based on a “sham” release of the Monterey operating system made available on a limited basis that very same day. (Aplt. Br. 13.) Thus, May 4, 2001, is the date upon which “all elements of the tort [could] be truthfully alleged in a complaint” against IBM. IDT Corp., 907 N.E.2d at 273 (internal quotation marks omitted).
5. Copyright Preemption
IBM argues that SCO's misappropriation claim is preempted by federal copyright law. Section 301 of the federal Copyright Act provides: “[A]ll legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright ․ and come within the subject matter of copyright ․ are governed exclusively by” federal copyright law. 17 U.S.C. § 301(a). In other words, the Copyright Act “preempts a state common law or statutory claim if: (1) the work is within the scope of the subject matter of copyright ․ ; and (2) the rights granted under state law are equivalent to any exclusive rights within the scope of federal copyright ․” Harold Stores, Inc. v. Dillard Dep't Stores, Inc., 82 F.3d 1533, 1542-43 (10th Cir. 1996) (internal quotation marks, citations omitted). The parties do not dispute that the SVr4 code at issue here is copyrightable subject matter, see Lexmark Int'l, Inc. v. Static Control Components, Inc., 387 F.3d 522, 533 (6th Cir. 2004), so we proceed on that assumption. The real battleground is whether SCO's misappropriation claim is “equivalent” to any of the exclusive rights granted by federal copyright law. 17 U.S.C. § 301(a).
Section 301 “preempts only those state law rights that may be abridged by an act which, in and of itself, would infringe one of the exclusive rights provided by federal copyright law.” Harolds Stores, 82 F.3d at 1543 (quoting Computer Assocs. Int'l v. Altai, Inc. 982 F.2d 693, 716 (2d Cir. 1992)). Those exclusive rights include the rights to reproduce the work, prepare derivative works, distribute copies, and perform or display the work publicly. See 17 U.S.C. § 106; see also Harolds Stores, 82 F.3d at 1543. Accordingly, “if a state cause of action requires an extra element, beyond mere copying, preparation of derivative works, performance, distribution or display, then the state cause of action is qualitatively different from, and not subsumed within, a copyright infringement claim and federal law will not preempt the state action.” Gates Rubber Co. v. Bando Chemical Indus., Ltd., 9 F.3d 823, 847 (10th Cir. 1993) (emphasis added). The dispositive question, then, is whether a misappropriation claim under New York law has an “extra element” beyond the elements of a federal copyright infringement claim. We hold that it does.
Misappropriation claims in New York require the victim to demonstrate that the defendant acted with bad faith. See, e.g., Schroeder, 17 N.Y.S.3d at 693; Abe's Rooms, Inc. v, Space Hunters, Inc., 833 N.Y.S.2d 138, 140 (N.Y. App. Div. 2007); Saratoga Vichy Spring Co., Inc. v. Lehman, 625 F.2d 1037, 1044 (2d Cir. 1980) (observing that the “element of bad faith” is central to the misappropriation theory of unfair competition under New York law); see also 104 N.Y. Jur. 2d Trade Regulation § 248 (Aug. 2017) (“The gravamen, or essence, of unfair competition under New York law is the bad faith misappropriation” of another's property (footnotes omitted)). As we discuss above, in this context “bad faith” is not simply a scienter requirement, which would be insufficient to provide the requisite extra element to avoid preemption by the Copyright Act. See Computer Assocs. Intern., Inc., 982 F.2d at 717 (holding that an action “will not be saved from preemption by elements such as awareness or intent”). Rather bad faith in the context of an independent New York unfair competition claim “typically results from fraud, deception, or an abuse of fiduciary or confidential relationship[,]” Robert L. Haig, Business and Comercial Litigation in Federal Courts, 105:20 (3d Ed. 2011) (citing Telecom Intern. America, Ltd. v. AT&T Corp., 290 F.3d 175, 197 (2d Cir. 2001)), and it forms the basis for a state-law claim whether or not IBM's use of the SVr4 code violated federal copyright law.
By contrast, federal copyright infringement does not require proof of unfair competition as that term has been defined under New York law. A plaintiff seeking relief for federal copyright infringement must prove only that he “owns a valid copyright” and that the defendant “copied protectable elements of the copyrighted work.” Paycom Payroll, LLC v. Richison, 758 F.3d 1198, 1204 (10th Cir. 2014) (internal quotation marks, citation omitted). Because misappropriation under New York law is an independent claim with a separate element of bad faith business dealings, SCO's claim is not “equivalent” to a federal copyright infringement claim. Accordingly, it is not preempted by the Section 301 of the Copyright Act.16
The parties have apparently agreed that Utah law governs SCO's tortious interference claims.17 Although the JDA requires that the “legal relations between the parties” are governed by New York law, Aplt. App. 3112, JDA § 22.3, IBM's alleged intermeddling does not concern the legal relations between IBM and SCO. Moreover, SCO's headquarters and principal place of business is in Utah, so that is where it suffered the alleged injury. Accordingly, we apply the law from the State of Utah in evaluating SCO's tortious interference claims.
Under Utah law, the elements of tortious interference are: (1) intentional interference with plaintiff's existing or potential business relationships, (2) the interference is accomplished by improper means, and (3) injury suffered by plaintiff. See Eldridge v. Johndrow, 345 P.3d 553, 556 (Utah 2015).18 With these elements in mind, SCO offers two theories of tortious interference. First, SCO alleges that IBM indirectly interfered with SCO's business relationships generally in the UNIX-on-Intel market by improperly disclosing Santa Cruz's proprietary materials to the Linux community, thereby causing SCO's customers to prefer Linux over SCO's fee-based UNIX platform. Second, SCO claims that IBM directly interfered with SCO's business relationships by inducing SCO's affiliates to cut ties with SCO. We address these in turn.
2. Indirect Interference Through Improper Linux Disclosures
3. Direct Interference by Inducing Business Partners to Cut Ties With SCO
The other business relationships are a different story. We agree with the district court that there is not enough evidence in this record to conclude that IBM actually interfered with SCO's relationships with Oracle, Computer Associates, Intel, and Baystar.19 There is simply no admissible direct evidence that IBM ever confronted these companies. To the contrary, executives representing each of these companies stated in a sworn declaration that, to the best of their knowledge, IBM never approached them about cutting ties with SCO and that any change in business dealings with SCO was not the result of IBM's statements or actions. SCO, for its part, counters that circumstantial evidence should trump these self-serving declarations, at least enough to create a triable issue of fact.
Thus, even if we assume that IBM actually followed through with its threat to persuade industry players not to do business with SCO—as it did with Hewlett-Packard—that conduct would not have been “improper” within the meaning of the Utah tort of intentional interference. The district court therefore appropriately granted summary judgment on this claim.20
C. Amendment of Complaint
After the deadline for amended pleadings, SCO attempted to add a claim for copyright infringement against IBM based on its late discovery of IBM's allegedly unauthorized distribution of the SVr4 code in the AIX for Power product.21 The district court denied SCO's request as untimely and likely to expand the litigation. We review a denial of leave to amend a complaint for abuse of discretion. E.g. Wessel v. City of Albuquerque, 299 F.3d 1186, 1197 (10th Cir. 2002). Under that deferential standard, we affirm the district court's order on this issue.
In March and April 2004, IBM produced almost a million pages of documents and dozens of CDs of source code included in AIX. When SCO reviewed these discovery materials, SCO claims that it learned for the first time that AIX contained the SVr4 code which had been copied from Santa Cruz's contributions to Project Monterey. After analyzing this voluminous document production, SCO sought again to amend its complaint on October 14, 2004 to add a claim for copyright infringement based on the unauthorized use of the SVr4 code.22
We turn now to the arguments and the district court's reasoning. In defending its attempt to add a claim after the February 4, 2004 deadline, SCO contended that IBM would not be prejudiced because IBM had already asserted a counterclaim for declaratory judgment on SCO's copyrights. That counterclaim provided: “IBM does not infringe, induce the infringement of, or contribute to the infringement of any SCO copyright through the reproduction, improvement, and distribution of AIX and Dynix, and that some or all of SCO's purported copyrights in UNIX are invalid and unenforceable.”23 Aplt. App. 233.
Notwithstanding the liberal treatment courts ordinarily afford these requests, we cannot say that the district court abused its discretion in finding the absence of “good cause” for the proposed amendment. The parties had already modified the scheduling order previously and the litigation was certainly sizable and complex at the time. Moreover, while SCO may have genuinely realized the existence of the SVr4 code late in the game, it is not unreasonable to conclude that SCO could have investigated the matter before it filed its original complaint, or at least alleged the claim based on information and belief.24 Accordingly, we affirm the denial of leave to amend because the district court did not act outside its broad range of discretion.
The district court's order awarding IBM summary judgment on the tortious interference claims is AFFIRMED. The district court's order denying SCO leave to amend its complaint is also AFFIRMED.25
I largely agree with the majority's excellent opinion, but I respectfully disagree on the issue of improper means. The majority concludes that IBM was entitled to summary judgment on the tortious-interference claim based on the absence of evidence that IBM had used improper means. Majority Op. at 34-36. I would instead remand for the district court to consider the issue of improper means in the first instance.
First, issues of material fact exist on whether IBM directly interfered with SCO's business relationships. As the majority acknowledges, direct evidence exists regarding interference with Hewlett-Packard. Majority Op. at 34. For the interference with other business relationships, SCO presented three forms of circumstantial evidence:
1. IBM told SCO that IBM would tell others not to do business with SCO.
2. IBM told Hewlett-Packard that IBM would tell Intel not to do business with SCO.
3. Soon afterward, the identified business partners stopped or reduced business with SCO.
THE SCO GROUP, INC., a Delaware corporation, Plaintiff Counterclaim Defendant - Appellant,
INTERNATIONAL BUSINESS MACHINES CORPORATION, Defendant Counterclaimant - Appellee.
(D.C. No. 2:03-CV-00294-DN)
This matter is before the court on appellee International Business Machines Corporation's Petition for Panel Rehearing and Request for Rehearing En Banc. We also have a response from the appellant.
8. A company called Novell, Inc. (Novell) purchased the UNIX assets and intellectual property rights from AT&T (the original developer) in 1993, and later sold its UNIX business to Santa Cruz in 1995. As described in two earlier decisions of this Court, Santa Cruz did not receive the full panoply of intellectual property rights in that 1995 transaction, but rather received only a license to use, develop, and distribute Novell's copyrighted UNIX technologies. See SCO Group, Inc., v. Novell, Inc., 439 F. App'x 688, 691-93 (10th Cir. 2011) (unpublished); SCO Group, Inc. v. Novell, Inc., 578 F.3d 1201, 1204-06 (10th Cir. 2009).
14. IBM cites one unpublished federal case, TeeVee Toons, Inc. v. Gerhard SchubertGmbH, No. 00 Civ. 5189, 2006 WL 2463537 (S.D.N.Y. Aug. 23, 2006), for the proposition that a non-party to a contract lacks standing to sue on the contract. But TeeVee Toons is materially different from the case before us: it did not involve any assignment or transfer of rights to a third party.
15. SCO's initial theory of misappropriation was based on IBM's alleged disclosure of confidential materials, acquired through Project Monterey, to the Linux community in order to make Linux competitive in the enterprise computing market. However, SCO specifically asserts that it only learned of IBM's improper use of the SVr4 code during discovery in this case, at which point its theory shifted to focus on the improper use of that code, rather than the Linux disclosures.
16. IBM argues that the district court's denial of SCO's attempt to add a copyright infringement claim should be relevant in determining whether the Copyright Act preempts SCO's misappropriation theory. It is not. The district court precluded amendment of SCO's complaint for procedural reasons—SCO had failed to demonstrate good cause for why the copyright claim was not included in the initial complaint. That does not mean that misappropriation under New York law is “equivalent” to a copyright infringement claim for preemption purposes. Nor does SCO's unsuccessful attempt to amend its complaint prevent SCO from using facts learned during the discovery stage as the basis for its existing causes of action, i.e., misappropriation. As explained earlier, that is apparently what SCO did here. After it discovered the presence of the SVr4 code in IBM's AIX for Power product, that discovery became the predominant basis for its existing misappropriation claim, displacing its earlier theory of misappropriation which focused on the confidential materials which IBM allegedly disclosed to the Linux community.
17. The district court relied on Utah authorities, and the parties cite Utah cases throughout their briefs before this Court, as they did in the district court.
18. Before Eldridge v. Johndrow was decided in 2015, Utah courts permitted a plaintiff to prove tortious interference even without improper means, so long as the defendant harbored a predominant improper purpose. See 345 P.3d at 556; see also AndersonDev. Co. v. Tobias, 116, P.3d 323, 331 (Utah 2005) (“[O]nly one alternative, either improper purpose or improper means, need be established; a plaintiff need not prove both.”). Eldridge changed the law by repudiating the improper-purpose alternative and requiring improper means to establish a claim for tortious interference. See 345 P.3d at 565 (“We therefore conclude that the improper-purpose doctrine has not worked well in practice, ․ It should therefore be abandoned.” (internal citation omitted)).
19. SCO did offer some evidence that IBM had attempted to persuade a managing member of Baystar named Lawrence Goldfarb to discontinue Baystar's investment in SCO. SCO's chief executive Darl McBride submitted a declaration stating that Goldfarb told McBride “that IBM had been ‘on him, on him, on him’ to retract his support from SCO.” Aplt. App. 5586. But that evidence would have been inadmissible hearsay, as it was offered out of court to prove the truth of the matter asserted and SCO has not pointed to any hearsay exception on appeal that would have salvaged the statement from exclusion at trial. Nor can the Court think of an applicable exception. Thus, a jury would not have been entitled to consider this statement so it is not proper to include it in our analysis for the purpose of summary judgment.
20. Because we resolve this claim on the improper-means requirement, we do not address the district court's determination that SCO failed to demonstrate adequate causation for its injury on summary judgment.
21. The original complaint contained a claim for copyright infringement, but that appears to be based on SCO's mistaken belief that it owned the copyrights to all the UNIX technologies, so any unauthorized use of a UNIX variation might have been vulnerable to the copyright owner's challenge. This later-added copyright claim is based on SCO's discovery that IBM had improperly used SCO's SVr4 code specifically—a claim that is different from SCO's misappropriation claim because the copyright theory does not depend upon proof of bad faith, while misappropriation does.
22. It also seems that this late-stage discovery is the event that prompted SCO to shift its theory on its existing cause of action for misappropriation. As explained earlier, while the initial misappropriation theory was predicated on IBM's alleged Linux disclosures, SCO's current misappropriation theory is based on the allegedly stolen SVr4 code.
23. “Dynix” is a reference to the UNIX variation developed by Sequent, a company that was subsequently merged into IBM.
24. This is not inconsistent with our earlier determination regarding SCO's compliance with the two-year contractual limitations period. We held that the misappropriation claim, which is based on the allegedly unauthorized use of the SVr4 code acquired through Project Monterey, did not accrue until May 4, 2001 because that is the date on which IBM released a purportedly “sham” version of the IA-64 Product to legitimize its use of the SVr4 code in its own AIX for Power product released that very same day, thereby satisfying the requisite element of bad faith under New York law.
25. On August 31, 2016, Appellant filed an “Unopposed Motion for Permission to File Opening Brief and Appendix Under Seal.” On September 12, 2016, Appellant filed a supplement to that motion entitled “Appellant's Supplement to its Unopposed Motion for Permission to File Opening Brief and Appendix Under Seal,” and on September 16, 2016, Appellant filed a second supplement to that motion entitled “Appellant's Second Supplement to its Unopposed Motion for Permission to File Opening Brief and Appendix Under Seal.”On September 16, 2016, this Court entered an Order ruling on all three motions, largely denying them. However, as our Order makes clear, the matters identified in paragraph 4 in “Appellant's Supplement to its Unopposed Motion for Permission to File Opening Brief and Appendix Under Seal” filed on September 12, 2016, were to remain “provisionally sealed” subject to a further ruling by the merits panel.Those documents are identified as the following appendix volumes: 6, 7, 8, 9, 12, 14, 18,19, 20, 21, 22, 25, 36, 37, 38, 39, 40, 43, 44, 45, 46, 47, 48, 52, 53, 54, 55, 56, 61, 62, 63, 64, and 66.Appellant represents, and Appellee does not oppose, that these materials contain sensitive confidential revenue and profitability information, as well as strategic business and marketing plans.All record material relevant to our opinion has been disclosed in the opinion itself. The Court sees no need to require further public disclosure of these confidential materials.Accordingly, the Court affirms its previous provisional order accepting the materials listed above under seal.This disposes of all open or provisional rulings pertaining to motions to seal in this case.