Wayne R. Gray, a Florida man who sought to register (and use) the trademark iNUX in connection with a computer operating system, has suffered a defeat in his lawsuit against the companies behind the UNIX trademarks. U.S. District Court Judge Virginia Hernandez Covington of the U.S. District Court for the Middle District of Florida decided that the company which sought to prevent Grey’s application for the mark iNUX from being registered by the U.S. Patent and Trademark Office (“PTO”) was indeed the valid owner of the UNIX trademarks and therefore the Defendants did not commit any of the alleged fraudulent actions related to the ownership of the UNIX trademarks alleged in Gray’s complaint. See Gray v. Novell, Inc. et al, Case No. 06-cv-1950, 2009 U.S. Dist. LEXIS 13185 (M.D. Fla. Feb. 20, 2009).
The UNIX trademarks were originally registered by AT&T in 1986 (Registration Numbers 1,392,203 and 1,390,593, for computer programs and computers, respectively). In May 1990, AT&T assigned the UNIX marks to Unix Systems Laboratories, Inc., which was later purchased by software company Novell, Inc. in April 1994.
In October 1993, Novell signed a non-binding “term sheet” agreement with several companies (Hewlett Packard, IBM, Sun Microsystems) which set forth a framework for a future definitive agreement among the parties. Under that term sheet, the companies agreed that Novell would license the UNIX brand through X/Open Company Limited (“X/Open”), a United Kingdom Company, to companies whose products conformed to certain quality-control standard. At the end of three years, Novell agreed to transfer ownership of the UNIX brand to X/Open.
In May 1994, Novell and X/Open, in order to effectuate part of the “term sheet” agreement, executed a Trademark Relicensing Agreement in which Novell granted X/Open an exclusive, perpetual, irrevocable license to use, and to sub-license to third parties, the UNIX marks as well as agreed to assign the UNIX marks to X/Open at the end of three years (or any earlier or later time upon agreement by the parties).
The problems began in September 1995 when Novell and The Santa Cruz Operation (the predecessor-in-interest of Defendant The SCO Group, Inc. (“SCO”)) entered into an Asset Purchase Agreement (the “APA”) pursuant to which certain of Novell’s assets would be transferred to SCO. The APA schedule listed as a transferred asset "Trademarks UNIX and UnixWare as and to the extent held by [Novell] (excluding any compensation [Novell] receives with respect of the license granted to X/Open regarding the UNIX trademark)." Another section of the APA as well as minutes of Novell’s Board of Directors meeting discussing the APA both reference “the trademarks UNIX and UnixWare" as trademarks that would be transferred.
In September 1996, Novell, X/Open, and SCO entered into a Confirmation Agreement acknowledging that the APA conveyed the UNIX marks to SCO subject to the rights and obligations established in the May 1994 Relicensing Agreement. In that same agreement, the parties also agreed that to have X/Open draft an assignment for Novell to execute in order to document the transfer of title of the UNIX marks to X/Open, that Novell would be deemed the legal owner of the UNIX marks for purposes of such assignment, and that such assignment would not be a breach of the APA between Novell and SCO.
A second amendment to the APA was executed on October 16, 1996 (one month after the Confirmation Agreement), which provided that as of that date, “Excluded Assets” as the term was used in the APA was revised to exclude “All copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the [1995] Agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies." (without any specification for what trademarks were necessary nor any reference to the Confirmation Agreement or to Novell as the owner of the UNIX marks).
Two years later, Novell executed a Deed of Assignment dated November 13, 1998, which purportedly assigned all of its right, title, and interest in the UNIX marks along with the associated goodwill to X/Open. This assignment was recorded with the PTO in June 1999.
In October 1993, Novell signed a non-binding “term sheet” agreement with several companies (Hewlett Packard, IBM, Sun Microsystems) which set forth a framework for a future definitive agreement among the parties. Under that term sheet, the companies agreed that Novell would license the UNIX brand through X/Open Company Limited (“X/Open”), a United Kingdom Company, to companies whose products conformed to certain quality-control standard. At the end of three years, Novell agreed to transfer ownership of the UNIX brand to X/Open.
In May 1994, Novell and X/Open, in order to effectuate part of the “term sheet” agreement, executed a Trademark Relicensing Agreement in which Novell granted X/Open an exclusive, perpetual, irrevocable license to use, and to sub-license to third parties, the UNIX marks as well as agreed to assign the UNIX marks to X/Open at the end of three years (or any earlier or later time upon agreement by the parties).
The problems began in September 1995 when Novell and The Santa Cruz Operation (the predecessor-in-interest of Defendant The SCO Group, Inc. (“SCO”)) entered into an Asset Purchase Agreement (the “APA”) pursuant to which certain of Novell’s assets would be transferred to SCO. The APA schedule listed as a transferred asset "Trademarks UNIX and UnixWare as and to the extent held by [Novell] (excluding any compensation [Novell] receives with respect of the license granted to X/Open regarding the UNIX trademark)." Another section of the APA as well as minutes of Novell’s Board of Directors meeting discussing the APA both reference “the trademarks UNIX and UnixWare" as trademarks that would be transferred.
In September 1996, Novell, X/Open, and SCO entered into a Confirmation Agreement acknowledging that the APA conveyed the UNIX marks to SCO subject to the rights and obligations established in the May 1994 Relicensing Agreement. In that same agreement, the parties also agreed that to have X/Open draft an assignment for Novell to execute in order to document the transfer of title of the UNIX marks to X/Open, that Novell would be deemed the legal owner of the UNIX marks for purposes of such assignment, and that such assignment would not be a breach of the APA between Novell and SCO.
A second amendment to the APA was executed on October 16, 1996 (one month after the Confirmation Agreement), which provided that as of that date, “Excluded Assets” as the term was used in the APA was revised to exclude “All copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the [1995] Agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies." (without any specification for what trademarks were necessary nor any reference to the Confirmation Agreement or to Novell as the owner of the UNIX marks).
Two years later, Novell executed a Deed of Assignment dated November 13, 1998, which purportedly assigned all of its right, title, and interest in the UNIX marks along with the associated goodwill to X/Open. This assignment was recorded with the PTO in June 1999.
Wayne Gray began a computer software business in early 1998 (later incorporated under the name MegaChoice, Inc.). Sometime in late 1998, Gray supposedly began testing out the mark “iNUX” as a product name. In January 1999, Gray registered the domain name http://www.inux.com/ and http://www.inux.net/. On April 29, 1999, Gray applied to register the INUX mark with the PTO (for computer operating system software for use in consumer hardware systems). In August 1999, Gray changed the name of his corporation to iNUX, Inc. Gray claims to have introduced his first iNUX product in late 1999 with limited sales in December 1999 and shipping of products in early 2000.
In February 2001, Gray received a cease and desist letter from X/Open’s counsel regarding Gray’s use of iNUX. A few months later, X/Open filed an opposition against Gray's trademark application. See X/Open Company Ltd. v. Gray, Opposition No. 91122524 (T.T.A.B. Filed April 11, 2001). The parties were unable to negotiate a settled phase out of Gray’s products and a transfer of the inux domain names to X/Open. Meanwhile, Gray began investigating X/Open’s ownership of the UNIX trademarks and, according to Gray, uncovered a fraudulent scheme by X/Open, Novell, and SCO to unlawfully conceal the true owner of the UNIX marks. With copies of the APA showing a transfer of the marks to SCO at the time, Gray filed a counterclaim of fraud in the opposition. The opposition got bogged down in discovery disputes and was eventually suspended pending the outcome of the instant lawsuit.
On October 23, 2006, Gray filed the instant lawsuit asserting eleven causes of action against Novell, X/Open, and SCO, including allegations of racketeering, fraudulent federal trademark registration, unfair competition, common law fraud, and conspiracy to defraud. Gray’s allegations were that Novell and X/Open engaged in an ongoing scheme to conceal Novell’s true ownership of the UNIX marks through the agreed-upon relicensing agreement entered into between Novell and X/Open, thereby allowing the public to believe that X/Open owned the UNIX marks when in fact Novell continued ownership of the UNIX marks. Moreover, SCO joined this scheme by agreeing to conceal SCO’s September 1995 purchase of the UNIX marks, to conceal the group’s “fraudulent acts,” and to continue to publicize X/Open as the owner of the UNIX marks. Gray alleged that the group conspired after the fact to create the Confirmation Agreement and backdate it to September 1996. Gray also alleged that the 1998 Deed of Assignment was a backdated agreement done by the parties with full knowledge that Novell was not the owner of the UNIX marks after 1995 and that the parties perpetrated a fraud on the PTO by recording the assignment – two months after Gray's April 1999 iNUX trademark application was filed
As further support for his position that the trademarks were transferred in 1995, Gray cited to a Utah District Court’s decision in the lawsuit filed by SCO in January 2004 against Novell for breach of the APA for failure to convey the copyrights to the UNIX software. The SCO Group, Inc. v. Novell, Inc., Case No. 04-cv-00139 (D. Utah Aug. 10, 2007) (decision here). The court in that case, after reviewing the APA and the subsequent amendments, bill of sale, business dealings between the parties, and other extrinsic evidence, concluded that the UNIX and UnixWare copyrights had not been included in the assets that were transferred to SCO pursuant to the APA and its two amendments. In deciding the copyright issue, the court noted that the UNIX marks were transferred as part of the APA and Gray argued that the instant court should be bound to the Utah court’s determination of trademark ownership.
X/Open and Novell both filed motions for summary judgment, and Gray file his own motion for summary judgment. The court granted both X/Open’s motion and Novell’s motion and denied Gray’s motion. In the end, the court found that the evidence supported Novell and X/Open's contentions that Novell granted X/Open an exclusive license for the UNIX marks in May 1994, that it intended to transfer ownership of the UNIX marks to X/Open sometime thereafter, that SCO documented its agreement of that transfer in the 1996 Confirmation Agreement, and that the UNIX marks were lawfully transferred to X/Open by operation of the 1998 Deed of Assignment.
With respect to the key language “as and to the extent held by Seller” in the APA that was in dispute between the parties, the court sided with X/Open and Novell that this limiting language meant that the APA was subject to the 1994 licensing agreement which required Novell to assign the UNIX marks to X/Open within a few years (and understanding which was confirmed in the Confirmation Agreement). The court found that the APA as modified or supplemented by the 1996 Confirmation Agreement (an agreement signed by all of the parties to the APA) granted Novell the legal authority to transfer ownership of the UNIX trademark to X/Open in the 1998 Deed of Assignment:
In February 2001, Gray received a cease and desist letter from X/Open’s counsel regarding Gray’s use of iNUX. A few months later, X/Open filed an opposition against Gray's trademark application. See X/Open Company Ltd. v. Gray, Opposition No. 91122524 (T.T.A.B. Filed April 11, 2001). The parties were unable to negotiate a settled phase out of Gray’s products and a transfer of the inux domain names to X/Open. Meanwhile, Gray began investigating X/Open’s ownership of the UNIX trademarks and, according to Gray, uncovered a fraudulent scheme by X/Open, Novell, and SCO to unlawfully conceal the true owner of the UNIX marks. With copies of the APA showing a transfer of the marks to SCO at the time, Gray filed a counterclaim of fraud in the opposition. The opposition got bogged down in discovery disputes and was eventually suspended pending the outcome of the instant lawsuit.
On October 23, 2006, Gray filed the instant lawsuit asserting eleven causes of action against Novell, X/Open, and SCO, including allegations of racketeering, fraudulent federal trademark registration, unfair competition, common law fraud, and conspiracy to defraud. Gray’s allegations were that Novell and X/Open engaged in an ongoing scheme to conceal Novell’s true ownership of the UNIX marks through the agreed-upon relicensing agreement entered into between Novell and X/Open, thereby allowing the public to believe that X/Open owned the UNIX marks when in fact Novell continued ownership of the UNIX marks. Moreover, SCO joined this scheme by agreeing to conceal SCO’s September 1995 purchase of the UNIX marks, to conceal the group’s “fraudulent acts,” and to continue to publicize X/Open as the owner of the UNIX marks. Gray alleged that the group conspired after the fact to create the Confirmation Agreement and backdate it to September 1996. Gray also alleged that the 1998 Deed of Assignment was a backdated agreement done by the parties with full knowledge that Novell was not the owner of the UNIX marks after 1995 and that the parties perpetrated a fraud on the PTO by recording the assignment – two months after Gray's April 1999 iNUX trademark application was filed
As further support for his position that the trademarks were transferred in 1995, Gray cited to a Utah District Court’s decision in the lawsuit filed by SCO in January 2004 against Novell for breach of the APA for failure to convey the copyrights to the UNIX software. The SCO Group, Inc. v. Novell, Inc., Case No. 04-cv-00139 (D. Utah Aug. 10, 2007) (decision here). The court in that case, after reviewing the APA and the subsequent amendments, bill of sale, business dealings between the parties, and other extrinsic evidence, concluded that the UNIX and UnixWare copyrights had not been included in the assets that were transferred to SCO pursuant to the APA and its two amendments. In deciding the copyright issue, the court noted that the UNIX marks were transferred as part of the APA and Gray argued that the instant court should be bound to the Utah court’s determination of trademark ownership.
X/Open and Novell both filed motions for summary judgment, and Gray file his own motion for summary judgment. The court granted both X/Open’s motion and Novell’s motion and denied Gray’s motion. In the end, the court found that the evidence supported Novell and X/Open's contentions that Novell granted X/Open an exclusive license for the UNIX marks in May 1994, that it intended to transfer ownership of the UNIX marks to X/Open sometime thereafter, that SCO documented its agreement of that transfer in the 1996 Confirmation Agreement, and that the UNIX marks were lawfully transferred to X/Open by operation of the 1998 Deed of Assignment.
With respect to the key language “as and to the extent held by Seller” in the APA that was in dispute between the parties, the court sided with X/Open and Novell that this limiting language meant that the APA was subject to the 1994 licensing agreement which required Novell to assign the UNIX marks to X/Open within a few years (and understanding which was confirmed in the Confirmation Agreement). The court found that the APA as modified or supplemented by the 1996 Confirmation Agreement (an agreement signed by all of the parties to the APA) granted Novell the legal authority to transfer ownership of the UNIX trademark to X/Open in the 1998 Deed of Assignment:
Thus, upon execution of the Confirmation Agreement, the terms of the 1995 APA relating to the UNIX trademarks were superseded to the extent that title to the UNIX marks remained with Novell for the purpose of assigning those marks to X/Open. Regardless of whether the language of the subsequent agreement is thought to merely clarify, or completely alter, the prior agreement, the result is the same. Consequently, based on the clear and unambiguous language of the 1996 Confirmation Agreement, the Court concludes that the subsequent 1998 Deed of Assignment validly passed ownership of the UNIX trademark to X/Open as of November 13, 1998.
Regarding Gray’s arguments about the validity and authenticity of both the Confirmation Agreement and the Deed of Assignment, the court stated that Gray offered “absolutely no evidence to support his allegation that Defendants fraudulently created these documents after the fact and back-dated them in an effort to validate the 1999 recording of assignment with the PTO. Mere suspicions and unsupported theories are not enough to create a triable issue of fact.”
As for the Utah district court's "holding" in SCO v. Novell, the court rejected Gray’s argument that the Utah’s court’s decision should be binding as proof that Novell had no title to pass to X/Open in 1998 – primarily because the issue addressed by the Utah court was transfer to SCO of the copyrights, and not the trademarks. Any statement by the Utah court on the transfer of trademarks “was not necessary to the decision in that case and therefore is non-binding dicta.” Moreover, the court added that the Utah court’s decision about a transfer of the trademarks in 1995 was not necessarily inconsistent with the current court’s findings since “some limited rights in the UNIX marks” did pass to SCO as part of the APA – however, given the execution of the Confirmation Agreement by the parties, the court need not consider to what extent the rights in the UNIX marks transferred to SCO under the APA.
The court found Novell’s 1998 assignment of the UNIX marks to X/Open lawful and valid, and thus the recording of such assignment with the PTO in June 1999 also valid. This determination pretty much undercut all of Gray’s fraud based claims. The court also added that Gray was unable to show standing for his claims of unfair competition nor any injury to support his racketeering claims.
With that, the court granted summary judgment in favor of the Defendants and against Gray on all eleven counts of Gray's complaint.
As for the Utah district court's "holding" in SCO v. Novell, the court rejected Gray’s argument that the Utah’s court’s decision should be binding as proof that Novell had no title to pass to X/Open in 1998 – primarily because the issue addressed by the Utah court was transfer to SCO of the copyrights, and not the trademarks. Any statement by the Utah court on the transfer of trademarks “was not necessary to the decision in that case and therefore is non-binding dicta.” Moreover, the court added that the Utah court’s decision about a transfer of the trademarks in 1995 was not necessarily inconsistent with the current court’s findings since “some limited rights in the UNIX marks” did pass to SCO as part of the APA – however, given the execution of the Confirmation Agreement by the parties, the court need not consider to what extent the rights in the UNIX marks transferred to SCO under the APA.
The court found Novell’s 1998 assignment of the UNIX marks to X/Open lawful and valid, and thus the recording of such assignment with the PTO in June 1999 also valid. This determination pretty much undercut all of Gray’s fraud based claims. The court also added that Gray was unable to show standing for his claims of unfair competition nor any injury to support his racketeering claims.
With that, the court granted summary judgment in favor of the Defendants and against Gray on all eleven counts of Gray's complaint.
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