The SCO Group, Inc. v. Novell, Inc.

In a software licensing dispute, Tenth Circuit holds, among other things, that Section 204(a) of the Copyright Act requires a copyright transfer to be in writing and signed by a party, but does not require that the copyright being transferred be defined with particularity

Defendant Novell licensed some of its Unix-related assets to Santa Cruz in an asset purchase agreement (APA) and two amendments to the APA. SCO, successor in interest to Santa Cruz, claimed that the APA and Amendment No. 2 constituted a transfer of copyrights. Novell claimed it only granted a license to use its copyrights. The district court granted summary judgment for Novell, and the Tenth Circuit affirmed in part and reversed in part.

Section 204(a) of the Copyright Act provides that a transfer of copyright ownership “is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed.”

The APA provided that the buyer was purchasing Novell’s Unix assets, except for those assets listed in the “Excluded Assets” in Schedule 1.1(b). Schedule 1.1(b) stated that all copyrights and trademarks, except for the trademarks UNIX and UnixWare, were excluded from the purchase. Less than a year later, the parties signed an amendment that amended Schedule 1.1(b) by carving out copyrights “required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies” from the excluded assets list.

Novell asserted that the APA and Amendment No. 2 did not satisfy the requirements of §204(a) because the documents did not state with sufficient clarity the copyrights to be transferred. The court rejected this argument, stating that §204(a) “imposes only the requirement that a copyright transfer be in writing and signed by the parties from whom the copyright is transferred; it does not on its face impose any heightened burden of clarity or particularity.”

The court acknowledged that some courts have held that a writing is insufficient to transfer a copyright unless (1) it reasonably identifies the subject matter of the agreement, (2) is sufficient to indicate that the parties have come to an agreement, and (3) states with reasonable certainty the essential terms of the agreement, citing Pamfiloff v. Giant Records, Inc., 794 F. Supp 933, 936 (N.D. Cal. 1992) (citing Restatement (2d) of Contracts § 131 (1981)).

However, the court decided it was “unwilling to read into Section 204 such an onerous restraint on the alienability of copyrights.” The court explained that, where contract language is ambiguous, the transfer is not invalidated; instead, the court should look at extrinsic evidence to construe the true terms of the agreement.

The court also held that a copyright transfer does not need to mention the word “copyright”, that courts have generally found when a party acquires “all rights and ownership” in a set of terms sufficient to satisfy Section 204(a), and that a copyright transfer does not need to be accompanied by a Bill of Sale.

The appeals court also held that the district court erred when it granted summary judgment to Novell on the issue of ownership of the copyrights because “[t]his 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.”