Declaration by Sean Snyder
Declaration by Sean Snyder
In re: Chapter 7
1. I am the CEO of Xinuos, Inc. (“Xinuos”), a role that I have held since 2014.
including its inception and its initial purchase of assets, as well as my knowledge of and
experience in the operating system market, including its history and development, I am
personally familiar with the facts set forth in this Declaration and know them to be true based
upon my own knowledge or information available to me, except where I have otherwise
indicated.
3. I submit this Declaration in support of the Objection of Xinuos, Inc. to the Motion
of Chapter 7 Trustee for Entry of an Order Approving the Settlement and Release Agreement by
and Between the Trustee and International Business Machines Corporation (“IBM”).
4. In the 1970’s, AT&T developed the computer operating system known as UNIX.
UNIX was (and remains) highly valuable to large enterprise customers due to its reliability and
scalability.
5. Many software distribution vendors, including IBM with regards to its AIX
operating system, entered into licensing agreements with AT&T to use UNIX in their own
6. In or around 1993, AT&T sold all right, title, and interest in UNIX to Novell, Inc.
(“Novell”), including all right, title, and interest in any UNIX licensing agreements. Novell
7. On or about September 19, 1995, SCO entered into an asset purchase agreement
with Novell relating to the UNIX business, products and source code that Novell had purchased
from AT&T or which Novell had otherwise developed (the “Novell Agreement”). SCO believed
2
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 3 of 22
that it obtained the copyrights that Novell had purchased from AT&T and which Novell had
otherwise created prior to the date of the September 19, 1995, through the Novell Agreement.
8. SCO was involved in several legal disputes involving the UNIX source code that
9. SCO sued IBM for violating UNIX contracts and infringing UNIX copyrights, all
relating to the pre-1995 code that was originally developed and owned by AT&T and was then
purchased by Novell. SCO also separately alleged that IBM had unfairly competed by deceiving
SCO and taking actions to injure SCO’s ability to leverage the pre-1995 code.
10. SCO sued Novell for slander of title to seek a judicial decree that it owned the
11. And SCO was sued by Red Hat, Inc., and forced into arbitration by SUSE Linux
GmbH, both in relation to the pre-September 19, 1995, copyrights that were at issue in the
Novell Agreement.
12. Ultimately, all four of these disputes hinged on SCO’s ownership of the UNIX
code that was developed before September 19, 1995, and the accompanying copyrights that were
13. In March 2010, a jury returned a verdict that the Novell Agreement only
amounted to a license for SCO to use pre-September 19, 1995 UNIX and it was established that
SCO had the right to create and own the copyrights in its own proprietary source code in UNIX.
See SCO Group v. Novell, Inc., Case No. 2:04-cv-00139 (D. Utah), D.I. 877, 878.
14. The Tenth Circuit Court of Appeals did not affirm this ruling until August 30,
2011, approximately a year and a half later. See SCO Group, Inc. v. Novell, Inc., 439 F. App’x
3
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 4 of 22
15. SCO was extremely successful due to proprietary developments that it made to its
UNIX operating systems – and specifically to the OpenServer product since SCO’s inception and
to the UnixWare products after September 19, 1995. The copyrights in these proprietary source
code developments were not at issue in the operative complaints in the Novell, IBM, Red Hat, or
SUSE actions.
16. For example, after 1995 and in connection with the joint initiative with IBM that
started in 1998 called Project Monterey, SCO developed “cross-architecture” functionality. The
cross-architecture functionality makes it much easier for enterprise users to transition software
from Project Monterey in 2001 before the work was completed. IBM’s deception of SCO and its
withdrawal from Project Monterey are relevant to the unfair competition cause of action that
17. Despite SCO’s commercial success prior to IBM pursuing the activities that SCO
identified in the IBM litigation, on September 14, 2007, SCO filed for Chapter 11 bankruptcy.
18. It appears that there was a thought at the time that if SCO were successful in its
19. Ultimately, however, after the jury verdict in the litigation between Novell and
SCO in March 2010, SCO sold all of its business operating assets and only retained the assets
20. After a bid process, Xinuos was chosen as the buyer of SCO’s business operating
assets. The sale of assets to Xinuos included acquisition of the SCO branding, and the Debtors
4
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 5 of 22
in bankruptcy proceedings are now referred to as TSG Group, Inc. and TSG Operations, Inc.
However, for simplicity’s sake, this declaration and the Objection continue to refer to the
21. The agreements are all between SCO and UnXis, Inc. UnXis, Inc. is the previous
name used by Xinuos. A true and correct copy of the document filed with the Delaware
22. The scope and terms of the asset sale were made explicit in the January 19, 2011
Asset Purchase Agreement by and between The SCO Group, Inc., SCO Operations, Inc., and
Assignment that formally assigned all exclusive rights under the Copyright Act related to the
assets purchased to Xinuos. A true and correct copy of the Intellectual Property Rights
The Parties’ Shared Understanding About the Meaning of the Asset Purchase Agreement
24. The background against which the APA was negotiated is crucial to
understanding its material terms, and to understanding the intent of the parties in crafting these
material terms.
25. When the APA was negotiated and ultimately signed, the jury verdict and
judgment had been entered in the litigation between Novell and SCO, but SCO had not yet
exhausted its appeal of the issue of whether SCO had acquired the pre-September 19, 1995
copyrights from Novell. Indeed, as noted above, the Tenth Circuit would not resolve that
26. It is my understanding that it was extremely important for SCO to preserve its
5
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 6 of 22
ability to pursue the litigation against Novell, and also the legal disputes with IBM, Red Hat, and
SUSE relating to the pre-September 19, 1995 code and intellectual property obtained from
Novell. SCO had a very large financial stake at issue in these actions.
27. Accordingly, material terms of the asset purchase agreement were drafted in order
to ensure that SCO could continue to pursue these legal disputes. It was Xinuos’ understanding,
intent and position that SCO could continue to pursue its legal disputes regarding pre-September
19, 1995 code and copyrights acquired from Novell. Otherwise, the intent of the parties was to
have Xinuos stand entirely in the shoes of SCO for purposes of running the server operating
28. The intent of the parties is reflected in section 2.1(c) and in Schedule 2.1(c) of the
APA. These provisions, and in particular Schedule 2.1(c), sub-provision (ix), identify the assets
that were excluded from the sale to Xinuos. The intent of drafting these provisions was to ensure
that SCO could continue to pursue its various legal actions regarding the pre-September 19, 1995
code and copyrights, and to otherwise transfer all other business, operating assets and intellectual
property to Xinuos.
29. The parenthetical clause in section 2.1(a)(vi) was drafted with this in mind as
well. This clause states in relevant part that “for the avoidance of doubt” the assets sold to
Xinuos through the APA do not include any assets, particularly the pre-September 19, 1995 code
and copyrights, that SCO needed to pursue its disputes against Novell, IBM, Red Hat, and SUSE.
Indeed, the entire structure of section 2.1(a)(vi) is consistent with the parties’ understanding at
the time of entering the APA that SCO would only retain the assets needed to pursue its litigation
claims.
30. Similarly, the license back to SCO to use the post-1995 copyrighted code solely
6
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 7 of 22
for purposes of litigating the various pending claims was also drafted with this in mind. SCO
needed to have the ability to use this code in case it was relevant to litigating the disputes (for
example, as evidence of SCO’s market success or other general background issues). There was
no other purpose for SCO to use the post-1995 code because the company was not operational.
By contrast, Xinuos needed to use the code for all other purposes, which is why it otherwise
completely owned the post-1995 code. Xinuos did not extend any right to SCO to “license” or
“sublicense” the post-1995 code or copyrights to any other third party. If Xinuos had intended to
extend such rights it would have said so explicitly, but it did not do so.
31. And this is also why section 2.1(a)(i) expressly states that the assets acquired by
Xinuos through the APA include “all copyrights developed after 1995.” This was expressly
included in the agreement because the intent of the parties was for Xinuos to completely take
over the server operating system business. Xinuos was thus granted complete ownership of the
post-1995 copyrights through the APA, including all constituent rights under the Copyright Act,
and including all rights to assert those copyrights. Xinuos did not leave with SCO or extend to
SCO, and SCO did not retain ownership of, any of the exclusive rights under the copyright
relating to the post-1995 code and copyrights, such as the right to reproduce, distribute or make
derivative works of that code. Xinuos did not leave with SCO or extend to SCO, and SCO did
not retain ownership of, any royalty or licensing revenue stream from Xinuos’ use or
32. The complete transfer of the post-1995 copyrights, including all constituent rights
under the Copyright Act, and the accompanying rights to assert claims on those copyrights, was
made express in the APA because the parties did not want risk another legal battle like the one
between Novell and SCO. This was Xinuos’ intent in drafting the agreement as it was drafted.
7
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 8 of 22
The Novell dispute arose because the parties could not agree on what was actually transferred in
that asset purchase agreement. The parties drafted the APA to ensure that no such similar
33. Finally, it must be stressed that a lot was at stake with this asset sale, and with
SCO’s fall into bankruptcy. SCO, as noted above, was very successful throughout most of its
history, and it had server operating system customers around the globe. Many of these
34. If these SCO customers could not receive server operating system support, the
outcome for their ongoing governmental, business, and educational pursuits would be drastically
hampered. The parties understood that this could have consequences that trickle much farther
35. Accordingly, a driving motivating factor in drafting the APA was to make sure
that Xinuos could fully and completely take over SCO’s business so that it could provide support
for SCO’s many former customers. Not only was this understood by the parties to the APA, but
it was reinforced on several occasions during the hearing in front of the Bankruptcy Court to
approve the APA. See e.g., D.I. 1249, 65:13-25. It was Xinuos’ intent and understanding that in
order to carry the business forward, it would need to own all intellectual property and
commercial and legal rights in the business assets that it had acquired, including the right to
control the post-1995 copyrights, as well as the right to vindicate Xinuos’ competitive interests
36. In 2019, Xinuos discovered that some portion of the Post-1995 proprietary UNIX
developments that SCO developed in connection with Project Monterey and that Xinuos
8
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 9 of 22
purchased through the APA were present in IBM’s AIX server operating system products.
37. After further investigation of these circumstances, Xinuos further discovered that
competitors IBM and Red Hat were engaging in anticompetitive and unfair business practices,
including joint action to divide the market between them and to exclude competitors, including
Xinuos, from the market, and to illegally impair the ability of Xinuos’ existing and new products
(particularly the recent OpenServer 10 product developed by Xinuos) to compete in the market,
as well as monopolization of the market generally. Many of the practices identified by Xinuos
38. Given the need to protect its intellectual property position, to protect the market
from exclusionary practices that harm consumer welfare, to protect its business and products,
and to protect the very same customers, partners, and operating system ecosystem that animated
the purpose of the APA in the first place, Xinuos was forced to initiate litigation in Federal Court
against IBM and Red Hat. See Xinuos, Inc. v. International Business Machines Corporation, et
al., Case No. 3:21-cv-00031 (D.V.I.), D.I. 1 (Complaint). The Complaint in the Virgin Islands
Litigation alleges that IBM infringed the copyrights that Xinuos owns in the Post-1995 UNIX
and UnixWare developments, and that Red Hat and IBM took joint action to injure the market
and competitors, including Xinuos, and its customers and partners, in violation of the federal
antitrust laws and Virgin Islands anticompetition and unfair practices laws. Id.
39. Xinuos brings these allegations because it has experienced and become aware of
this conduct in the market long after the APA. In recent years, Xinuos has experienced first-
hand the impact of IBM and Red Hat’s anticompetitive conduct and further completed its own
investigations in 2019 to understand the breadth and depth of the illegal activity.
9
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 10 of 22
I affirm under penalty of perjury that the foregoing is true and correct to the best of my
Executed this 9th day of September, 2021, in St. Thomas, Virgin Islands.
Sean Snyder
10
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 11 of 22
EXHIBIT A
{00138624;v1 }
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 12 of 22
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 13 of 22
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 14 of 22
EXHIBIT B
{00138624;v1 }
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 15 of 22
Assignor and Assignee are parties to that certain Asset Purchase Agreement dated as of
January 19, 2011 (the “Purchase Agreement”), pursuant to which Assignor has agreed to assign
such Intellectual Property to Assignee subject to the terms and conditions set forth herein.
Assignor wishes to assign and Assignee wishes to acquire such Intellectual Property. Capitalized
terms used and not defined herein shall have the meanings ascribed to such terms in the Purchase
Agreement.
Each of Assignor and Assignee, in consideration of the mutual promises contained in this
Assignment, and for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, intending to be legally bound hereby, agrees as follows:
4. Governing Law. This Assignment is made under, and shall be construed and
enforced in accordance with, the laws of the State of Delaware.
133091.01600/12077918v.2
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 16 of 22
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 17 of 22
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 18 of 22
[All trademark registrations owned by The SCO Group, Inc. unless otherwise indicated]
1
Foreign trademarks and services marks subject to review and confirmation by foreign counsel.
133091.01600/12077918v.2
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 19 of 22
SCO (Class 9) HONG KONG 11-Sep-91 6689/91 and REGISTERED 19930087 04-Mar-93
6690/91 9AA
133091.01600/12077918v.2
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 20 of 22
SCO and Tree HONG KONG 24-Feb-96 2253/96 REGISTERED 19970508 06-May-97
Design 0
SCO and Tree SOUTH KOREA 16-Feb-96 1996-6058 REGISTERED 380641 01-Nov-97
Design
133091.01600/12077918v.2
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 21 of 22
U. S. Copyright Registrations:
The following copyright registrations, except to the extent incorporating any Excluded Assets:
SCO OpenServer : release 5.0.5 SCO Group, Inc. TX 6-008-305 8/31/2004 Registered
UNIX system V : release 3.0 The SCO Group, TX 5-750-270 7/7/2003 Registered
Inc.
UNIX system V : release 3.1 The SCO Group, TX 5-750-269 7/7/2003 Registered
Inc.
UNIX system V : release 3.2 The SCO Group, TX 5-750-271 7/7/2003 Registered
Inc.
UNIX system V : release 4.0 The SCO Group, TX 5-776-217 7/16/2003 Registered
Inc.
UNIX system V : release 4.1 The SCO Group, TX 5-762-234 7/3/2003 Registered
Inc.
UNIX system V, release 4.1ES The SCO Group, TX 5-705-356 6/30/2003 Registered
Inc.
UNIX system V : release 4.2 The SCO Group, TX 5-762-235 7/3/2003 Registered
Inc.
UNIX System V release 4.2MP The SCO Group, TX 5-972-097 6/29/2004 Registered
Inc.
133091.01600/12077918v.2
Case 07-11337-BLS Doc 1510 Filed 09/09/21 Page 22 of 22
133091.01600/12077918v.2