Opinion ID: 172572
Heading Depth: 2
Heading Rank: 3

Heading: Is Summary Judgment Appropriate on the Ownership of the Copyrights?

Text: We come finally to the question of whether the district court was correct to enter summary judgment on the issue of whether Novell or SCO owns the UNIX and UnixWare copyrights under the APA as revised by Amendment No. 2. In contract actions, the interpretation of a written agreement is a question of fact. See Gomez v. American Elec. Power Service Corp., 726 F.2d 649, 651 (10th Cir. 1984). When a contract is ambiguous, and parties present conflicting evidence regarding their intent at the time of the agreement, a genuine issue of material fact exists which cannot be determined summarily by the court. Id. Of course, the party opposing summary judgment must do more than simply show that there is some metaphysical doubt as to the material facts. Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). But so long as sufficient evidence could lead a rational trier of fact to resolve the dispute in favor of either party, granting either party's dueling motions for summary judgment would be inappropriate. See Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). This case, involving a complicated, multi-million dollar business transaction involving ambiguous language about which the parties offer dramatically different explanations, is particularly ill-suited to summary judgment. We recognize that Novell has powerful arguments to support its version of the transaction, and that, as the district court suggested, there may be reasons to discount the credibility, relevance, or persuasiveness of the extrinsic evidence that SCO presents. Moreover, we appreciate the difficulties that follow when the resolution of ambiguous language in a ten-year-old contract is left to trial. At trial in a case like this, the intention of the parties often must be divined from self-serving testimony offered by partisan witnesses whose recollection is hazy from passage of time and colored by their conflicting interests. Trident Center v. Connecticut General Life Ins. Co., 847 F.2d 564, 569 (9th Cir.1988). Even though the parties may have shared a common understanding of a transaction at the time of the deal, now that circumstances have changed and new financial incentives have arisen, one side may wish it had a different agreement. Nimmer on Copyright, § 10.08. Nevertheless, when conflicting evidence is presented such that the ambiguities in a contract could legitimately be resolved in favor of either party, it is for the ultimate finder of fact  not the court on summary judgment  to interpret the contract. As we now explain, Novell's arguments do not convince us that the admissible evidence concerning the ambiguous contract language concerning contract ownership is so one-sided as to warrant summary judgment. Novell contends that SCO has failed to establish a disputed issue of material fact as to copyright ownership for several reasons. It first claims that SCO has failed to present any evidence to support that the APA, as revised by Amendment No. 2, clarified the agreement to indicate that SCO received ownership of some or all UNIX and UnixWare copyrights as a result of the transaction. In the alternative, it argues that SCO has failed to present any evidence to suggest that ownership of UNIX and UnixWare copyrights was required for Santa Cruz to exercise its rights under the APA. In support of its initial argument, Novell argues that it has introduced undisputed evidence that (1) Santa Cruz admitted that the initial APA excluded copyrights from the asset sale and that (2) Novell expressly rejected Santa Cruz's proposal to use Amendment No. 2 to transfer copyrights to Santa Cruz. See Aple. Br. 39-42. As to the first point, Santa Cruz's admission that the initial APA excluded copyrights is not inconsistent with SCO's position that this exclusion was a mistake and failed to reflect the parties' intent. Novell itself admits that the negotiations that led to the language of Amendment No. 2 concerning copyrights began when Santa Cruz's attorney contacted Novell, informing them that the Original APA explicitly excluded copyrights to UNIX and UnixWare as assets being sold by Novell to Santa Cruz and that it shouldn't have. App'x 6063. As to the second point, Novell directs us to various pieces of evidence supporting its claim that Amendment No. 2 was not intended to affirm that ownership of copyrights had transferred to Santa Cruz, but only to affirm that Santa Cruz had a license under the Original APA to use Novell's UNIX and UnixWare copyrighted works in its business. App'x 6064. Novell primarily relies on evidence of the negotiations over Amendment No. 2. Santa Cruz initially proposed a draft of Amendment No. 2 that would have revised the Intellectual Property section of the Excluded Assets Schedule to read: All copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of this Amendment No. 2, which pertain to the UNIX and UnixWare technologies and which SCO has acquired hereunder. However, in no event shall Novell be liable to SCO for any claim brought by any third party pertaining to said copyrights and trademarks. App'x 6670. Novell rejected this language, and the final language of Amendment No. 2 instead reformed the Excluded Assets Schedule to read: All copyrights and trademarks, except for the copyrights 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 Unix-Ware technologies. However, in no event shall Novell be liable to SCO for any claim brought by any third party pertaining to said copyrights and trademarks. App'x 374. The revised language contains two relevant changes. Instead of excepting from the Excluded Assets Schedule the copyrights ... which pertain to UNIX and UnixWare technologies the final language refers to the copyrights ... required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies. In addition, instead of referring to the copyrights ... owned by Novell as of the date of this Amendment No. 2 ... and which SCO has acquired hereunder, the final language refers to the copyrights ... owned by Novell as of the date of the Agreement. Novell contends that because it did not accept Santa Cruz's initial proposal, there is no basis for construing Amendment No. 2 as SCO would  an affirmation of the transfer of all UNIX and UnixWare copyrights. See Apple Computer v. Microsoft Corp., 35 F.3d 1435, 1440-41 (no basis for construing agreement in line with draft proposal rejected by one of the parties). It insists that the language reflects its explanation of Amendment No. 2 as a mere affirmation of Santa Cruz's implied license to use the copyrights. SCO, in contrast, claims that the final language of Amendment No. 2 only represented a different way of saying what its initial draft proposed  a clarification that the parties' had intended for ownership of the UNIX copyrights to transfer. Aplt. Br. 44-45. As an initial matter, we are skeptical of Novell's interpretation of the Amendment. Whatever the Amendment means, it refers to the ownership of copyrights, not to licenses. A rational trier of fact could surely find that Amendment No. 2 clarified the APA so as to indicate that at least some copyrights transferred to SCO. It is true that the final language of Amendment No. 2, by referring to required copyrights rather than copyrights that pertain to UNIX, is narrower than that initially proposed by Santa Cruz. But is it plausible to think that Santa Cruz would have found the final language equally sufficient for its purposes, given its insistence that all the UNIX copyrights were required for it to exercise its rights under the deal. See, e.g., Testimony of Steve Sabbath, Santa Cruz Attorney, App'x 10722 (all of the [UNIX and UnixWare] copyrights were required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies.) Alternatively, the final language of Amendment No. 2 may have represented a compromise whereby Novell agreed to confirm that Santa Cruz obtained ownership only of those copyrights necessary for Santa Cruz to run its business. Our conclusion that a rational trier of fact could find that Amendment No. 2 clarified the APA to affirm that the parties intended to transfer certain UNIX and UnixWare copyrights to Novell is bolstered by SCO's extrinsic evidence of the transaction. SCO presents testimony from a variety of witnesses involved in the business negotiations on both sides of the deal, which generally supports its version of the transaction. See, e.g., Aplt. Br. 13-15. It is true, as Novell points out, that many of these witnesses were involved in the business negotiations, as opposed to the actual drafting of the contract. But because we cannot exclude the possibility that Amendment No. 2 was designed to restore the language of the transaction to the parties' actual intent during the business negotiations over the deal, such testimony is not irrelevant. Cf. California Pac. Title Co., Sacramento Division v. Moore, 229 Cal.App.2d 114, 40 Cal.Rptr. 61, 63 (Cal.Dist.Ct.App.1964) (A conflict in the evidence does not preclude a court from finding that the two parties had a common intent which was incorrectly reduced to writing.). Moreover, SCO's extrinsic evidence extends not only to the business negotiations preceding the contract, but also to the parties' understanding of the contractual language itself. For instance, Novell points out that the Board resolution approving the transaction on its side of the deal stated that Novell will retain all of its patents, copyrights and trademarks. App'x 5192. But SCO notes that Mr. Frankenberg, then Novell's CEO, testified that he understood the Board resolution's reference to Novell's retention of copyrights to refer to Netware copyrights, as opposed to the core UNIX intellectual property. Aplt. R. Br. 14. Finally, SCO presents evidence of the parties' course of performance following the transaction. Under California law, course of performance evidence may be used to interpret an ambiguous contractual provision. Cal.Code Civ. Proc. § 1856. See also Universal Sales Corp. v. Cal. Press Mfg. Co., 20 Cal.2d 751, 128 P.2d 665, 672 (Cal.1942) ([P]ractical construction placed by the parties upon the instrument is the best evidence of their intention). SCO points to a variety of steps taken by the parties following the signing of the APA and Amendment No. 2 that it claims supports its interpretation of the contract. These include Novell's modification of copyright notices on certain UnixWare source code, see App'x 10303-13, certain statements related to the transfer of intellectual property within transition documents following the deal, see, e.g., App'x 13362, and the publication of a press release in 1995 stating that SCO will acquire Novell's UnixWare business and UNIX intellectual property. [3] App'x 5626. Of course, such documents are not dispositive of the companies' intent at the time of the transaction. But they illustrate the difficulties with granting summary judgment here. Novell finally argues that SCO has failed to show what UNIX copyrights are required for Santa Cruz to exercise its rights under the APA. The parties each argue for plausible, but diametrically opposed, interpretations of the word required. SCO argues that the bulk of the UNIX and UnixWare copyrights are required in order for it to exercise its rights. For instance, the APA transferred to Santa Cruz all of [Novell's] claims arising after the Closing Date against any parties relating to any right, property or asset included in the Business. App'x 313. SCO argues that it could not defend any of its intellectual property against software piracy or other business harm without ownership of the copyrights. Indeed, a key reason why this litigation is so important to SCO is that it has claimed that other companies, including IBM, are infringing on the proprietary technology that it supposedly received through its transaction with Novell. Novell, in contrast, asserts that the class of required copyrights constitutes a null set. See Aple. Br. 40, 41 n.8 (arguing that Amendment No. 2 was not intended to transfer any copyright ownership, but merely to affirm its license to use certain copyrights). The district court agreed, noting amongst other things that Santa Cruz had been able to pursue its UNIX business from December 6, 1995 until October 16, 1996 [the date of Amendment No. 2] without any problems due to its [alleged] lack of ownership of the copyrights. Dist. Ct. Op. 61. But the fact that SCO did not need to assert ownership of the UNIX copyrights publicly following the closing of the transaction does not indicate that the UNIX copyrights are unnecessary to SCO's full exercise of its rights under the agreement. Indeed, it would seem that neither party asserted public ownership of the copyrights until the events leading to the instant litigation, almost a decade after the closing of the transaction. See, e.g., Aple. Br. 32 (noting that Novell and SCO did not file their competing copyright registrations until after this dispute arose in 2003). We need not determine at the summary judgment stage which copyrights were required. If the evidence presented on a dispositive issue is subject to conflicting, reasonable interpretations, summary judgment is improper. Archuleta v. Wal-Mart Stores, Inc., 543 F.3d 1226, 1234 (10th Cir.2008). Although the district court found that there is ... significant evidence that Santa Cruz did not `require' the UNIX and UnixWare copyrights, we think SCO has presented sufficient evidence to create a triable fact as to whether at least some UNIX copyrights were required for it to exercise its rights under the agreement. Although the district court acknowledged that SCO has submitted testimony from witnesses stating generally that the copyrights were necessary to running a software business, it found that none of those witnesses give specific examples of how a lack of copyright ownership impeded Santa Cruz's ability to exercise its rights under the APA. Dist. Ct. Op. 61. But the documents detailing the actions of the transition team at least create ambiguity over whether the transfer of copyrights was required to support SCO's rights under the APA. See, e.g., App'x 13362 (All of the technology and intellectual assets covered by the work outlined in this document will be transitioned to SCO after December 1, 1995). And we think it a commonsense proposition that intellectual property at least may be required to protect the underlying assets in SCO software business should, for instance, a UNIX licensee have attempted to resell technology licensed from SCO. [4] Because we conclude summary judgment is inappropriate on the question of which party owns the UNIX and UnixWare copyrights, we must likewise reverse the district court's determination that Novell is entitled to summary judgment [on SCO's claim] seeking an order directing Novell to specifically perform its alleged obligations under the APA by executing all documents needed to transfer ownership of the UNIX and UnixWare copyrights to SCO. Dist. Ct. Op. 62. We take no position on which party ultimately owns the UNIX copyrights or which copyrights were required for Santa Cruz to exercise its rights under the agreement. Such matters are for the finder of fact on remand.