SCO Group, Inc. v. International Business MacHines Corp.
879 F.3d 1062
| 10th Cir. | 2018Background
- SCO (successor to Santa Cruz) and IBM entered a Joint Development Agreement (JDA) for "Project Monterey" to develop an IA-64 UNIX product; each party contributed proprietary code (including Santa Cruz’s SVr4 code).
- JDA granted limited licenses for development and provided that materials included in a generally available "IA-64 Product Release 1" would be licensed to IBM under the JDA (worldwide, non-exclusive, royalty-free).
- Intel’s delays and IBM’s shifting support to Linux led to tensions; IBM allegedly disclosed Santa Cruz materials to Linux and later released an AIX-for-Power product containing SVr4 code the same day it issued a limited PRPQ Monterey release (May 4, 2001).
- SCO alleges IBM misappropriated SVr4 and acted in bad faith (released a "sham" Monterey to justify using the code); SCO also alleges tortious interference by IBM inducing partners/investors to cut ties.
- District court granted summary judgment to IBM on misappropriation (independent tort doctrine) and tortious interference; denied SCO leave to amend to add a copyright claim. On appeal, the Tenth Circuit reversed the misappropriation summary judgment, affirmed the tortious-interference and denial of amendment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SCO’s New York-law misappropriation claim is barred by the independent tort doctrine | SCO: IBM’s fraud/deception (pretending to support Monterey and issuing a sham release) violated a noncontractual duty and supports misappropriation | IBM: Claim simply enforces contractual rights under the JDA and so is barred by the independent tort doctrine | Reversed district court — a triable misappropriation claim exists because fraud/deception can be a noncontractual duty separate from the JDA |
| Whether SCO as assignee (SCO/Caldera) has standing to sue for misappropriation | SCO: assignment of Santa Cruz rights conveyed rights to enforce misappropriation claims | IBM: Nonconsensual assignment violated JDA anti-assignment clause so SCO lacks standing | SCO has standing: JDA’s anti-assignment rule does not render assignments void and the tort claim vindicates non-contractual rights outside "rights under this Agreement" |
| Whether SCO’s misappropriation claim is time-barred by the JDA limitations clause | SCO: claim accrued May 4, 2001 (release of AIX with SVr4 and sham Monterey PRPQ) and suit filed within two years | IBM: accrual earlier (Oct 2000) or contractual limitation bars suit | Held for SCO: claim accrued May 4, 2001 and was timely under contractual two-year period |
| Whether federal copyright law preempts SCO’s state-law misappropriation claim | SCO: New York misappropriation requires an extra element (bad faith: fraud/deception) not present in copyright law | IBM: misappropriation seeks the same relief as copyright and is therefore preempted by 17 U.S.C. § 301 | Not preempted: New York misappropriation requires bad-faith element (fraud/deception), so it is qualitatively different from copyright infringement |
| Whether IBM tortiously interfered with SCO’s business relations (indirect via Linux disclosures; direct via persuading partners/investors) | SCO: IBM’s disclosures to Linux and communications with partners caused customers/partners to leave SCO | IBM: market competition and denials by partners; any persuasion was lawful competition, not improper means | Affirmed for IBM: indirect-market theory fails (Utah law unlikely to extend tort that broadly); direct-interference fails because Utah requires "improper means" and ordinary persuasion is not improper |
| Whether district court abused discretion in denying leave to amend to add a copyright claim | SCO: discovered SVr4 use during discovery and sought to amend; amendment would not unduly prejudice IBM | IBM: amendment late and would expand and delay complex litigation | Affirmed: district court did not abuse discretion — SCO failed to show good cause under Rule 16(b) to amend after scheduling deadline |
Key Cases Cited
- Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382 (1987) (independent tort doctrine: tort liability requires a duty independent of contract)
- ITC Ltd. v. Punchgini, Inc., 9 N.Y.3d 467 (2007) (recognizes misappropriation and palming-off as New York common-law unfair competition theories)
- Sommer v. Fed. Signal Corp., 79 N.Y.2d 540 (1992) (where plaintiff essentially seeks enforcement of a bargain, action should proceed under contract)
- Graubard Mollen Dannett & Horowitz v. Moskovitz, 86 N.Y.2d 112 (1995) (fraudulent misrepresentations, including false statement of intent, can support tort claims separate from contract)
- IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132 (2009) (tort accrual: claim accrues when all elements can be truthfully alleged)
- Harold Stores, Inc. v. Dillard Dep’t Stores, Inc., 82 F.3d 1533 (10th Cir. 1996) (copyright preemption test for state-law rights)
- Computer Associates Int’l v. Altai, Inc., 982 F.2d 693 (2d Cir. 1992) (state-law claim preemption analysis: requires an extra element beyond copyright elements)
- Leigh Furniture & Carpet Co. v. Isom, 657 P.2d 293 (Utah 1982) (Utah tortious-interference principles; driving away customers as archetypical injury)
- Eldridge v. Johndrow, 345 P.3d 553 (Utah 2015) (Utah requires improper means, not merely improper purpose, for tortious-interference claims)