Of Copyright Transfers, Slander of Title, and SCO [LWN.net]

February 4, 2004

By Pamela Jones, Editor of Groklaw

A lot of people are curious about SCO's lawsuit against Novell for "slander of title." First, most people have never heard of such a claim before and don't know what it is. Second, since the dispute surrounds a question of transfer of copyrights, how exactly are copyrights validly transfered and did there occur such a transfer between Novell and SCO? And third, why sue for slander of title instead of bringing a breach of contract claim or both together?

Taking those questions in order, first, what is "slander of title"? Normally a claim you find in real estate matters, it's defined as "false, unjustified statements regarding another person's title to property". There are elements you must prove to win:

A cause of action for slander of title occurs when there is a false and malicious statement made to disparage a person's title to real estate. The elements of slander of title are: (1) falsity of the statement made; and (2) malice.

If you own a house, and I know I don't but I claim to be the owner anyway, you can sue me for slander of title, because I have cast a cloud over your ownership claim in that house. There is such a thing as libel not only to your personal reputation but also to the reputation of property. You can read a bit more on that here if you are interested.

But if it's instead a good-faith conflict, in which each side thinks it really does own the house, well, that's a different kettle of fish. It still needs to get worked out in the courts, but it isn't slander of title, because it's not malicious to assert what you believe are your legal rights. Otherwise there could never be a contract dispute.

Malice is also a necessary element in a slander claim. The malicious claim must be intentional and without reasonable cause:

To recover in an action for slander of title, a party must allege and prove: (i) the utterings and publishing of disparaging words; (ii) that they were false; (iii) that they were malicious; (iv) that special damages were sustained thereby; (v) that the plaintiff possessed an estate or interest in the property disparaged; and (vi) the loss of a specific sale. Malice as a basis for recovery of actual damages in a slander of title case means merely that the acts must have been deliberate conduct without reasonable cause....

As compared to other 'injurious falsehood' causes of action, slander of title or property differs in that there is no presumption of damages. The plaintiff must show that he or she sustains special damage proximately, naturally and reasonably resulting from the alleged slander.... The plaintiff must prove the loss of a specific sale, i.e., that a pending sale was defeated by the slander.

That has a bearing, obviously, on SCO's case against Novell. And it's why some are questioning their choice to use that claim. If you read Novell's letters, do you get the impression that they feel they actually do own the copyrights? Note particularly the letters dated May 28, June 6 and 26, August 4, and October 9 to follow the copyright argument. If Novell honestly believes that it owns the copyrights, there is no slander of title. The necessary element of malice would be missing. It's not slander if the party has a valid claim. Novell claims it did not transfer the copyrights to SCO. This raises the possibility that Novell could win on that basis alone.

Can SCO succeed is establishing its claims to copyright on Unix code? Some have expressed doubt. And even if SCO were to succeed in establishing that Novell has no copyrights, there is a deeper question, namely: what can and what can't you copyright when it comes to software?

Who owns the copyrights here anyway? To delve into it deeply, you would need to read the contracts involved, and after you do, I'm guessing you still won't be 100% sure, though you may well find yourself leaning toward Novell. SCO highlights, in particular, Amendment 2 to the Asset Purchase Agreement, but Novell points out that there were other documents, including Amendment 1, the Schedules, and a Technology License Agreement, although the latter does not pertain to the copyright issue. Novell isn't saying SCO has no rights. Novell is saying it retained certain rights, that SCO needed to assert a need for copyrights and that it never did that, that there were, in other words, conditions that SCO has not satisfied. Because they did not satisfy the conditions, the copyrights never transfered.

Why didn't SCO sue for breach of contract, then, if their position is correct and copyrights were supposed to transfer and Amendment 2 is the contract that was to make that happen? No one I have talked to can figure that out. At least one attorney I asked about this thinks that failure to assert a breach of contract claim will prove fatal to SCO's chances of prevailing in the slander of title claim. While SCO alleges that the copyrights were to have transferred under the Asset Purchase Agreement, clearly it didn't happen, or there would be no dispute heading to court. So why not sue for breach of contract and ask the judge to enforce the contract?

SCO has been claiming that its rights to Unix were absolute, but all the while it turns out it was in hot and heavy correspondence with Novell, so its rights were contested all along. That fact alone, the fact that Novell firmly asserted what it claims to be its rights, indicates that SCO may have great difficulty persuading a judge that malice was involved. If you have read the contract documents, you already know it is far from obvious that Novell has no legitimate claim.

SCO registered for copyrights, but so did Novell. SCO would need to show that Novell transfered those rights to SCO. And it had to have been in writing, because copyright law requires copyright transfers to be in writing and "signed by the owner of the rights conveyed or such owner's duly authorized agent." For example, a friend of mine, who just registered a copyright in some music he wrote, got a letter from the US Copyright Office that included this sentence:

Copyright belongs initially to the author. It may be transferred to another person or organization by a written agreement or by operation of law. For registration purposes, the copyright claimant is either (1) the author or (2) the person or organization that has obtained ownership of all rights under the copyright.

Here, that would mean Novell, who would have to transfer by writing to SCO. There is no official US Copyright Office form for a copyright transfer, so normally they are effectuated by contract. Here are some examples of copyright transfer forms some have used, to give you an idea, here and here and here (PDF format) and here (also PDF).

So is the Asset Purchase Agreement plus amendments and schedules a contract? Yes. Is a contract enough to transfer a copyright? Yes. Is it clear on its face that this contract did mean to effectuate such a transfer? That is not clear to many readers, and obviously Novell doesn't think so. And intriguingly, if SCO ultimately fails to establish copyright ownership, after publicly asserting Linux is infringing its copyrights for nearly a year, and particularly if it sues end users for copyright infringement, and it turns out their claim to copyright had no reasonable basis and they knew it, is SCO opening itself up to a possible claim of slander to title itself?

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