`
`PUBLISH
`
`UNITED STATES COURT OF APPEALS
`
`FOR THE TENTH CIRCUIT
`_________________________________
`
`FILED
`United States Court of Appeals
`Tenth Circuit
`
`January 2, 2018
`
`Elisabeth A. Shumaker
`Clerk of Court
`
`Plaintiff Counterclaim Defendant -
`Appellant,
`
`
`
`
`
`
`
`No. 16-4040
`(D.C. No. 2:03-CV-00294-DN)
`(D. Utah)
`
`THE SCO GROUP, INC., a Delaware
`corporation,
`
`
`
`
`v.
`
`INTERNATIONAL BUSINESS
`MACHINES CORPORATION,
`
`
`
`
`Defendant Counterclaimant -
`Appellee.
`
`_________________________________
`
`ORDER
`_________________________________
`
`Before KELLY, EBEL, and BACHARACH, Circuit Judges.
`_________________________________
`
`This matter is before the court on appellee International Business
`
`Machines Corporation’s Petition for Panel Rehearing and Request for
`
`Rehearing En Banc. We also have a response from the appellant.
`
`Upon consideration, that part of the petition seeking panel rehearing is granted in
`
`part and only to the limited extent of the changes made to the attached revised Opinion.
`
`The request for panel rehearing is otherwise denied. The clerk is directed to file the
`
`amended decision attached to this order effective today’s date.
`
`
`
`
`
`

`

`
`
`The Petition and the response were also circulated to all the judges of the court
`
`who are in regular active service and who are not recused. See Fed. R. App. P. 35(a). As
`
`no judge on the original panel or the en banc court requested that a poll be called the
`
`request for en banc rehearing is denied.
`
`Entered for the Court
`
`
`ELISABETH A. SHUMAKER, Clerk
`
`
`
`2
`
`

`

`
`
`PUBLISH
`
`UNITED STATES COURT OF APPEALS
`
`FOR THE TENTH CIRCUIT
`_________________________________
`
`FILED
`United States Court of Appeals
`Tenth Circuit
`
`January 2, 2018
`
`Elisabeth A. Shumaker
`Clerk of Court
`
`Plaintiff Counterclaim Defendant -
`Appellant,
`
`
`
`
`
`
`No. 16-4040
`
`THE SCO GROUP, INC.,
`
`
`
`
`v.
`
`INTERNATIONAL BUSINESS
`MACHINES CORPORATION,
`
`
`
`
`Defendant Counterclaimant -
`Appellee.
`
`_________________________________
`
`Appeal from the United States District Court
`for the District of Utah
`(D.C. No. 2:03-CV-00294-DN)
`_________________________________
`
`Edward Normand, Boies, Schiller & Flexner LLP, Armonk, New York (Jason C.
`Cyrulnik, Boies, Schiller & Flexner LLP, Armonk, New York, Stuart H. Singer, Boies,
`Schiller, & Flexner LLP, Fort Lauderdale, Florida, Brent O. Hatch and Mark F. James,
`Hatch, James & Dodge P.C., Salt Lake City, Utah, with him on the briefs), for Plaintiff
`Counterclaim Defendant-Appellant.
`
`David Marriott, Cravath, Swaine & Moore LLP, New York, New York (Evan R. Chesler,
`Cravath, Swaine & Moore LLP, New York, New York, Amy F. Sorenson and Amber M.
`Mettler, Snell & Wilmer L.L.P., Salt Lake City, Utah, with him on the briefs), for
`Defendant Counterclaimant-Appellee.
`_________________________________
`
`Before KELLY, EBEL, and BACHARACH, Circuit Judges.
`_________________________________
`
`EBEL, Circuit Judge.
`
`_________________________________
`
`
`
`
`
`

`

`
`
`
`
`This case arises out of a business deal gone wrong. The Santa Cruz Operation,
`
`Inc. (Santa Cruz) entered into a business arrangement with International Business
`
`Machines Corp. (IBM) to develop a new operating system that would run on a more
`
`advanced processor manufactured by Intel Corporation (Intel). The parties signed an
`
`agreement memorializing this collaborative effort and called it Project Monterey.
`
`Another technology company, The SCO Group, Inc. (SCO), then acquired Santa Cruz’s
`
`intellectual property assets and now brings this lawsuit for IBM’s alleged misconduct
`
`during and immediately after Project Monterey.
`
`
`
`Project Monterey involved mutual contributions by IBM and Santa Cruz of
`
`proprietary materials, including computer code for their respective operating systems.
`
`SCO believes that IBM merely pretended to go along with the arrangement in order to
`
`gain access to Santa Cruz’s coveted source code. SCO, the successor-in-interest to Santa
`
`Cruz’s intellectual property assets, accused IBM of stealing and improperly using this
`
`source code to strengthen its own operating system, thereby committing the tort of unfair
`
`competition by means of misappropriation. The district court awarded summary
`
`judgment to IBM on this claim based on the independent tort doctrine, which bars a
`
`separate tort action where there is no violation of a duty independent of a party’s
`
`contractual obligations.
`
`SCO also accused IBM of disclosing Santa Cruz’s proprietary materials to the
`
`computer programming community for inclusion in an open-source operating system
`
`called Linux. When SCO acquired Santa Cruz’s assets involved in Project Monterey and
`
`then sought licensing agreements from various technology companies, IBM allegedly
`
`
`
`2
`
`

`

`
`
`instructed SCO’s business affiliates and investors to cut ties with SCO. These alleged
`
`efforts to disrupt SCO’s business relationships, together with the purportedly improper
`
`Linux disclosures, prompted SCO also to file suit against IBM for tortious interference of
`
`contract and business relations. In a separate order, finding insufficient evidence of
`
`actionable interference by IBM, the district court granted summary judgment in favor of
`
`IBM on these tortious interference claims.
`
`Finally, after the deadline for amended pleadings in this case, SCO sought leave to
`
`add a new claim for copyright infringement based on the allegedly stolen source code
`
`from Project Monterey. SCO claimed it had only discovered the essential facts to support
`
`this claim in IBM’s most recent discovery disclosures. The district court rejected SCO’s
`
`proposed amendment for failure to show good cause.
`
`SCO now appeals all three decisions by the district court: (1) the summary
`
`judgment order on the misappropriation claim; (2) the separate summary judgment order
`
`on the tortious interference claims, and (3) the denial of leave to amend the complaint.
`
`We REVERSE and REMAND the district court’s summary judgment order on the
`
`misappropriation claim, and AFFIRM as to the remaining issues.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`3
`
`

`

`
`
`I. BACKGROUND
`
`A. UNIX Operating System and Intel Processors
`
`UNIX is a computer software operating system that is widely used in the business
`
`or “enterprise” computing environment.1 In the late 1960s, AT&T Technologies
`
`developed UNIX and began licensing it for widespread enterprise use, and those
`
`licensees in turn developed and distributed their own variations of the UNIX platform.
`
`One of those distributors, Santa Cruz, created a UNIX variation which eventually
`
`dominated the market for UNIX-based operating systems running on Intel processors.
`
`During the 1980s, most other companies were running their UNIX variations on
`
`more expensive non-Intel architectures. Santa Cruz, however, recognized early on that
`
`transistors were getting smaller over time, so Intel’s cheaper processors were becoming
`
`faster and thus more capable of handling the demands of high-power enterprise
`
`computing. Santa Cruz predicted that Intel’s less-expensive processors would soon be
`
`able to run the UNIX operating system more effectively than earlier iterations of the
`
`hardware. By 1998, Intel processors had become as capable as the more expensive
`
`alternatives, and Santa Cruz had ultimately become the worldwide market leader for
`
`UNIX-on-Intel with 80 percent share of the market.
`
`In contrast to Santa Cruz, IBM had almost no presence in the UNIX-on-Intel
`
`market. Instead, IBM distributed its own UNIX derivative called AIX, which was
`
`designed to operate on IBM’s own proprietary Power processors. The product was thus
`
`1 An operating system serves as the link between the computer hardware and the
`various software programs or applications that run on the computer.
`
`
`
`
`4
`
`

`

`
`
`suitably known as AIX for Power. Recognizing that Santa Cruz had positioned itself as
`
`the market leader for UNIX-based systems on the increasingly desirable Intel
`
`architecture, IBM began considering the benefits of collaborating with Santa Cruz.
`
`Further, IBM knew that Santa Cruz’s operating system was based on a more advanced
`
`version of the UNIX operating system: UnixWare System V Release 4 (SVr4). IBM’s
`
`own AIX platform was based on an earlier and less advanced code, so the opportunity to
`
`work with SCO and gain access to the SVr4 code may have been appealing. Santa Cruz,
`
`for its part, also appreciated the advantages of working with IBM, which was a larger
`
`company with more resources, retail relationships, and marketing outlets. So the stage
`
`was set for a mutually beneficial cooperative venture.
`
`
`
`
`
`B. Project Monterey and the Joint Development Agreement
`
`Before IBM and SCO began working together, most processors (including Intel’s
`
`chips) operated only at a 32-bit capacity, but in 1994, Intel announced its intention to
`
`develop a higher-capacity 64-bit chip called Itanium. Anticipating Intel’s forthcoming
`
`Itanium architecture, Santa Cruz and IBM jointly endeavored to build a new UNIX-based
`
`operating system that would run on the faster processor. In October 1998, Santa Cruz
`
`and IBM entered into a Joint Development Agreement (JDA) that would govern the
`
`mechanics of their collaboration, including licenses, royalties, and project management
`
`responsibilities. This endeavor became known as Project Monterey.
`
`As part of the JDA, each party granted the other a limited license to its own
`
`respective technologies for the purpose of developing the IA-64 Product.
`
`
`
`5
`
`

`

`
`
`After signing the JDA, the parties entered into a Project Supplement that provided: “The
`
`Licensed Materials . . . are to be used solely for development of the IA-64 Product.”
`
`Aplt. App. 884 (emphasis added). According to SCO, this provision imposed a default
`
`rule that IBM could not use SCO’s contributed materials in its own AIX for Power. That
`
`Supplement, however, also included a caveat: “Notwithstanding [that limitation], any
`
`such Licensed Material included in the IA-64 Product Release 1 shall be licensed
`
`pursuant to the terms and conditions set forth in the [JDA].” Aplt. App. 884 (emphasis
`
`added). In other words, any SCO materials that ultimately found their way into the “IA-
`
`64 Product Release 1” would be licensed to IBM pursuant to the JDA, which in turn
`
`granted IBM a “worldwide, non-exclusive, royalty free” right of use, Aplt. App. 3085,
`
`JDA § 2(d)(2). Under these provisions, IBM would have known that if it wanted to use
`
`SCO’s materials in AIX for Power, there must be a “IA-64 Product Release 1” containing
`
`those materials.
`
`SCO further points out that a product release is only regarded as the “IA-64
`
`Product Release 1” if the product is made generally available. This requirement is based
`
`on Amendment 5 to the JDA, which provided that if IBM wanted to distribute a “Pre-
`
`Release IA-64 Product” for testing purposes, that pre-release sublicense would terminate
`
`at least by the date of “general availability of the IA-64 Product Release 1.” Aplt. App.
`
`5157. Otherwise stated, any distribution of the Monterey system before the product
`
`became generally available was regarded merely as a “Pre-Release IA-64 Product,” not
`
`the actual “IA-64 Product Release 1” itself. Thus, to the extent that IBM wanted a
`
`“worldwide, non-exclusive, royalty free” license to the coveted SVr4 code, it needed to
`
`
`
`6
`
`

`

`
`
`wait until there was a generally available release of the IA-64 Product which included
`
`that code.2
`
`
`
`
`
`C. IBM Transitions Focus from Project Monterey to the Linux Operating
`System
`
`The success of Project Monterey hinged on the forthcoming availability of Intel’s
`
`64-bit Itanium chip. But Intel was behind schedule in developing and delivering Itanium
`
`to market. Intel announced a target date of 1999, but was substantially delayed, and
`
`continued to have development difficulties throughout 1999 and 2000. These delays
`
`caused a decrease in market interest in the IA-64 Product under construction through
`
`Project Monterey.
`
`The slump in market interest for the IA-64 Product caused IBM to transition its
`
`focus to a competing open-source operating system called Linux.3 At the time, Linux
`
`occupied the lower end of the computing market as it was designed for lower-capacity
`
`desktop computing. But IBM began to strengthen the Linux platform so that Linux could
`
`compete in the enterprise market, which was the focus of Project Monterey’s forthcoming
`
`UNIX-based product.
`
`
`2 IBM does not appear to dispute this interpretation. Moreover, SCO offered
`evidence that IBM shared this understanding during the course of Project Monterey.
`For example, an internal IBM memo indicated that IBM believed withdrawal from
`Project Monterey would mean forfeiting access to Santa Cruz’s SVr4 code. See Aplt.
`App. 9059-60.
`
` 3
`
` Unlike other UNIX-based systems, Linux is distributed without a fee to users, and
`the programming code is publicly available to all who want to access or customize it.
`7
`
`
`
`

`

`
`
`As part of its contributions to Linux, as early as February 2000, IBM began
`
`disclosing some of Santa Cruz’s proprietary UNIX technologies—acquired through
`
`Project Monterey—to the Linux community for the purpose of fortifying Linux as a
`
`commercially viable option for enterprise use. The evidence suggests that “SCO’s
`
`revenues decline[d] precipitously in 2000 through 2002, dropping 74%, immediately after
`
`the first alleged contributions of IBM in February of 2000.” Aplt. App. 7384. SCO’s
`
`sales dropped as customers migrated to Linux, which has been referred to as a “free
`
`UNIX clone.” Aplt. App. 7389. Because of these declining revenues, SCO relies on
`
`IBM’s Linux disclosures as part of the basis for its tortious-interference claim.
`
`IBM’s general support for Linux, however, was no secret. As early as March
`
`1999, IBM publicly announced its support of Linux at a LinuxWorld conference. But
`
`scaling up Linux to compete in the enterprise market posed a potential conflict with
`
`Project Monterey. To assuage concerns, IBM began re-assuring the public and Santa
`
`Cruz that Linux and the IA-64 Product would compete in different markets, so there was
`
`no conflict. For example, in August 1999, IBM officers explained publicly that the
`
`Monterey IA-64 Product would target enterprise-level computing needs while Linux was
`
`designed for the smaller-scale computing market. IBM made similar representations in a
`
`private meeting with Santa Cruz officers in January 2000. But at least one IBM
`
`executive recognized that such a distinction was fragile:
`
`The distinction used to position Monterey versus Linux is that
`Monterey is targetted [sic] for high-end servers, where as
`Linux comes in at the lower to mid range of servers.
`However, this distinction is a fragile one, since IBM is
`
`
`
`8
`
`

`

`
`
`working as fast as it can to bolster Linux’s ability to compete
`in the mid to high end range of servers.
`
` Aplt. App. 5693 (emphasis added). Construing the evidence in SCO’s favor, it may be
`
`that IBM led Santa Cruz to believe its Linux product would not compete against
`
`enterprise-level developers—but IBM was actually working quickly, and without Santa
`
`Cruz’s knowledge, to scale up Linux to compete in the enterprise space. Meanwhile,
`
`IBM maintained that it was fully committed to Project Monterey. It reaffirmed that
`
`commitment in the January 2000 meeting and, as late as December 2000, IBM stated
`
`publicly that its devotion to the success of the IA-64 Product remained strong.
`
`But a jury could find that IBM’s heart was not in Project Monterey. Throughout
`
`late 1999 and early 2000, IBM executives began recommending “internally that IBM take
`
`more definitive steps to drop Project Monterey and transition even more support to
`
`[Linux].” Aplt. App. 9591, Dist. Ct. Op. at 24. In July 2000, another IBM internal report
`
`recommended a “significant reduction in emphasis” in Project Monterey. Aplt. App.
`
`6202. Further, IBM’s effort to bolster Linux as a potential competitor in the enterprise
`
`space could indicate to a jury that IBM was not fully committed to the success of Project
`
`Monterey, despite its public assurances to the contrary.
`
`
`D. IBM’s Alleged Misappropriation of Santa Cruz’s Code
`
`In October 2000, IBM used some of the SVr4 code in a test version of its own
`
`AIX for Power product, which was intended for certified software developers and “not
`
`intended for general production use.” Aplt. App. 8610. This appears to have been a
`
`preparatory step in anticipation of later releasing an upgraded AIX for Power product for
`
`
`
`9
`
`

`

`
`
`general distribution. But again, IBM would need to make generally available the
`
`Monterey operating system including the SVr4 code before IBM would acquire the
`
`royalty-free license for general distribution of that code in its own products.
`
`With that in mind, IBM announced in April 2001 a forthcoming IA-64 Product,
`
`which included the SVr4 code, and planned to make it available on May 4, 2001. As
`
`scheduled, IBM released a version of the Monterey operating system on May 4, 2001 as a
`
`Programming Request for Price Quote (PRPQ), which is the term used internally at IBM
`
`to describe beta test releases. This release lacked what is known as a compiler, which in
`
`this case refers to a software program that translates programming code into a language
`
`readable by the computer processor. Without a compiler, an operating system cannot be
`
`executed by the processing hardware, but it does not seem that IBM had a confirmed plan
`
`to include a compiler in the product. Moreover, this Monterey release was offered free of
`
`charge and without support, was not on IBM’s price lists, and was not marketed. In light
`
`of these characteristics, a reasonable jury could find that this PRPQ version was not a
`
`generally available release of the product and thus did not entitle IBM to a royalty-free
`
`license to the SVr4 code included therein.4
`
`
`4 One internal e-mail from an IBM executive defending the PRPQ release cuts in the
`other direction, explaining that IBM had “a very positive product to deliver” that was
`“not under-function for this target delivery” and was “stable and worth release.”
`Aplt. App. 5167. But this is a disputed issue of material fact. On summary judgment
`we adopt the version of the facts most favorable to SCO, which suggests that IBM’s
`May 4, 2001 PRPQ of the Monterey product was not equivalent to a generally
`available release.
`
`
`
`
`10
`
`

`

`
`
`Moreover, the evidence suggests that IBM was conscious of the inadequacies of
`
`this May 4, 2001 release of the Monterey product. For example, an IBM project manager
`
`stated in an internal e-mail: “I think the compiler MUST be available in some form or the
`
`whole thing just doesn’t make sense (ie [Santa Cruz] won’t buy it).” Aplt. App. 5194
`
`(italicized emphasis added). And another internal IBM strategy document explained that
`
`there was “no confirmed compiler plan” and that IBM would “[c]ontinue to ship AIX 5L
`
`as a PRPQ” which would be in “[s]tealth mode only.”5 Aplt. App. 5170. That document
`
`also indicated that IBM would “[a]t the appropriate time announce plan not to GA AIX
`
`5L and withdraw the PRPQ” sometime during the “July/August timeframe.”6 Id. What
`
`is more, one piece of evidence suggests that IBM appears to have known that the May 4,
`
`2001 PRPQ version might not have been sufficient to acquire the SVr4 license. In one
`
`internal e-mail, an IBM employee stated: “As you know, we need to GA this PRPQ to
`
`gain rights to [Santa Cruz] code we want for our base AIX product delivery . . . I know
`
`the fine lines we are walking here.” Aplt. App. 5167.
`
`Nevertheless, despite the deficiencies in the May 4, 2001 release of the Monterey
`
`operating system and despite IBM’s apparent knowledge of the problem, that very same
`
`day IBM released for general distribution a version of its own proprietary AIX for Power
`
`product that included the SVr4 code. SCO thus argues that IBM released a “sham”
`
`
`5 The reference to “AIX 5L” appears to be IBM’s shorthand for the product released
`for operation on Intel’s IA-64 processor.
`
` We assume the acronym “GA” to be a reference to “general availability” of the IA-
`64 Product.
`
`
` 6
`
`
`
`11
`
`

`

`
`
`version of the Monterey system in order to legitimize its own general distribution of the
`
`AIX for Power product containing Santa Cruz’s SVr4 code. (Aplt. Br. 2, 13.) This is the
`
`essence of SCO’s misappropriation claim.7
`
`
`
`E. Santa Cruz Transfers Assets to Caldera International
`
`Santa Cruz owned a license to use, develop, and distribute its UNIX-based
`
`technology.8 During the life of Project Monterey, however, Santa Cruz decided to sell its
`
`UNIX business to SCO.9 In mid-June 2000, Santa Cruz sent IBM an official notice of the
`
`
`7 SCO’s initial claim of misappropriation was based not on the allegedly stolen SVr4
`code, but rather on the improper Linux disclosures discussed earlier. SCO says it
`discovered the SVr4 code in the AIX for Power product late in the discovery process
`after filing this lawsuit, which is why the current misappropriation theory differs
`from the original theory. IBM does not appear to dispute, however, that a party can
`change its theory for a particular existing cause of action as new evidence comes to
`light during the discovery process. Moreover, the language of SCO’s operative
`complaint encompasses this revised theory. The cause of action is labeled “unfair
`competition” and it is based, in part, on “[m]isappropriation of source code, methods,
`and confidential information of plaintiff,” as well as “[u]se of deceptive means and
`practices in dealing with plaintiff with respect to its software development efforts[.]”
`Aplt. App. 156.
`8 A company called Novell, Inc. (Novell) purchased the UNIX assets and intellectual
`property rights from AT&T (the original developer) in 1993, and later sold its UNIX
`business to Santa Cruz in 1995. As described in two earlier decisions of this Court, Santa
`Cruz did not receive the full panoply of intellectual property rights in that 1995
`transaction, but rather received only a license to use, develop, and distribute Novell’s
`copyrighted UNIX technologies. See SCO Group, Inc., v. Novell, Inc., 439 F. App’x
`688, 691-93 (10th Cir. 2011) (unpublished); SCO Group, Inc. v. Novell, Inc., 578 F.3d
`1201, 1204-06 (10th Cir. 2009).
`
`9 At the time of this transaction, plaintiff SCO went by the name Caldera
`International. For consistency and convenience, we use the SCO label to describe
`plaintiff even at the time that it acquired Santa Cruz’s intellectual property rights.
`12
`
`
`
`

`

`
`
`forthcoming asset transfer to SCO.10 Hearing no formal objection from IBM, Santa Cruz
`
`followed through with the agreement and, on May 7, 2001, finalized the deal with SCO.
`
`On June 6, 2001, Santa Cruz informed IBM of the consummation of the sale and the
`
`assignment of the rights under the JDA. IBM then responded on June 19, 2001, formally
`
`objecting to the assignment and officially terminating the JDA, thereby putting a formal
`
`end to Project Monterey.
`
`
`
`F. IBM’s Alleged Direct Interference With SCO’s Business Relationships
`
`In late 2002 and early 2003, SCO began investigating the intellectual property
`
`within Linux and discovered that Linux customers were using SCO’s proprietary UNIX
`
`technologies. SCO then devised a licensing strategy whereby Linux users would
`
`purchase from SCO a license to use Linux, as enhanced by SCO’s proprietary
`
`technologies. SCO presented this licensing plan to multiple partners, including Oracle,
`
`Intel, and Computer Associates, all of which responded favorably. IBM, on the other
`
`hand, objected to the proposed strategy.
`
`IBM asked SCO not to issue its press release announcing and initiating the
`
`licensing plan. Nevertheless, in January 2003, SCO announced a new business division,
`
`SCOsource, to manage the licensing of its UNIX technologies for Linux customers. The
`
`
`
`10 The JDA governing Project Monterey required Santa Cruz to give IBM notice if
`Santa Cruz received an offer by another company to purchase substantially all of
`Santa Cruz’s assets. Aplt. App. 3109, JDA § 16.1. This requirement was apparently
`designed to give IBM a reasonable period of time to submit a counteroffer. Id., JDA
`§ 16.2.
`
`
`
`13
`
`

`

`
`
`next day, IBM executive Karen Smith told SCO’s CEO Darl McBride that she expected
`
`SCO’s approach to “kill Linux.” Aplt. App. 4095. She further threatened:
`
`[I]f [SCO] did not drop [its] library licensing program and
`[its]
`investigation of Linux and withdraw [its] press
`release . . . , that IBM was going [to] cut off all business from
`[SCO] and they were going to encourage partners and
`customers from doing any business with SCO as well.
`
`
`Id. at 4095. SCO did not back down. That afternoon, Smith met with Hewlett-Packard
`
`executive Richard Becker. According to Becker’s deposition,
`
`[Smith] indicated to [him] that IBM was going to withdraw
`all their business activities from SCO, and that in the interest
`of the best outcome for [IBM’s and Hewlett-Packard’s] joint
`Linux initiatives that she was going to suggest that HP, and
`[he] was representing HP, and following [him], Intel should
`do the same.
`
`
`Aplt. App. 2352.
`
`SCO believes that, in addition to Hewlett-Packard, IBM directly communicated
`
`with other SCO business affiliates and investors in an effort to persuade those entities to
`
`refrain from doing business with SCO. Those entities included Oracle, Computer
`
`Associates, Intel, and Baystar. SCO presented evidence that, after SCO began
`
`implementing its licensing strategy, these entities began withdrawing or reducing their
`
`business dealings with SCO. IBM responded, however, with sworn declarations by
`
`executives representing each entity indicating that, to the best of their knowledge, IBM
`
`never approached them about cutting ties with SCO and that any change in business
`
`dealings with SCO was not the result of IBM’s statements or actions. Nevertheless, SCO
`
`
`
`14
`
`

`

`
`
`asserts that IBM directly interfered with SCO’s business relationships by inducing SCO’s
`
`key investors and affiliates to cease doing business with SCO.
`
`
`
`G. Procedural Background
`
`We are now almost fifteen years into this litigation. SCO filed the initial
`
`Complaint on March 6, 2003, which included nine claims against IBM.11 After twice
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`amending its Complaint, SCO sought leave to amend a third time in October 2004, after
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`the deadline for amended pleadings, for the purpose of adding a tenth cause of action for
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`copyright infringement based on IBM’s alleged misuse of the SVr4 code. The district
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`court denied that motion, finding insufficient cause to permit the untimely addition of the
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`claim. The case then proceeded but was administratively closed in 2007 after SCO filed
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`for bankruptcy.
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`Alongside its suit against IBM, SCO also filed suit against another company called
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`Novell, which had publicly claimed that it, rather than SCO, owned the UNIX copyrights.
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`Novell entered into an asset purchase agreement with Santa Cruz in 1995 wherein Novell
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`transferred a license to the UNIX technology to Santa Cruz. Santa Cruz believed that it
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`had received through this asset transfer the UNIX copyrights, and thus the right to license
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`11 Counts 1 through 4 alleged breaches of the original software and sublicensing
`agreements between IBM and AT&T (the original UNIX developer), and between
`Sequent Computer Systems, Inc. (which was later acquired by IBM) and AT&T.
`Count 5 alleged copyright infringement based on SCO’s later-disproven belief that it
`owned the UNIX copyrights. Count 6 alleged unfair competition by means of, in
`part, misappropriation. Count 7 alleged tortious interference of SCO’s contracts with
`Linux users and licensees. Count 8 alleged tortious interference of SCO’s asset
`purchase agreement with Novell executed in 1995. Count 9 alleged tortious
`interference of SCO’s specific business relationships.
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`all derivations and variations of the UNIX system. That belief, however, ended up being
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`wrong. In 2011, this Court affirmed a jury verdict that found Santa Cruz did not, in fact,
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`receive the UNIX copyrights in that deal, rather it merely received a license to use,
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`develop, and distribute the UNIX technology. See SCO Group, Inc. v. Novell, Inc., 439
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`F. App’x 688 (10th Cir. 2011) (outlining this background).
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`When the bankruptcy stay was lifted in this case, the district court here re-opened
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`the case in 2013. Because the Novell litigation had established that SCO did not own the
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`copyrights to the UNIX technologies, SCO voluntarily dismissed many of its claims
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`against IBM that were predicated upon that faulty assumption. All that remained of
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`SCO’s case against IBM were allegations that IBM (1) committed unfair competition by
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`means of misappropriation, and (2) tortiously interfered with SCO’s business
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`relationships.12 On February 5, 2016, the district court awarded summary judgment to
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`IBM on the misappropriation claim. In a separate order, on February 8, 2016, the district
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`court also awarded IBM summary judgment on the tortious interference claims.
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`SCO brings three issues to this Court for appeal: (1) the district court’s summary
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`judgment order on the misappropriation claim; (2) the district court’s separate summary
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`judgment order on the tortious interference claims; and (3) the district court’s denial of
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`leave for SCO to add a claim for copyright infringement after the deadline for amended
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`pleadings. We address these issues in turn.
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`12 Count 6 encompassed the misappropriation claim; Counts 7 and 9 represented the
`remaining claims for tortious interference.
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`A. Misappropriation
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`1. Applicable Law
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`II. DISCUSSION
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`The parties could not agree on which State’s law governs SCO’s misappropriation
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`claim. Instead they have stipulated that either the laws of Utah or New York should
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`control, believing there are no material differences in the relevant legal principles. The
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`district court similarly relied on both Utah and New York law to ground its analysis of
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`this claim. We cannot, however, analyze this claim without first deciding which State’s
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`law should govern.
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`The JDA provides: “This Agreement shall be governed by, and the legal relations
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`between the parties hereto shall be determined in accordance with, the substantive laws of
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`the State of New York.” Aplt. App. 3112, JDA § 22.3. Whether SCO’s claim ultimately
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`sounds in contract or tort, this provision mandates that “the legal relations between the
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`parties” be adjudicated pursuant to New York law. Id. That phrase is sufficiently broad
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`to encompass a claim by one party of unfair competition based on misappropriation.13
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`Thus, we rely on New York substantive law to resolve the propriety of summary
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`judgment on SCO’s misappropriation claim.
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`New York courts recognize “two theories of common-law unfair competition:
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`palming off and misappropriation.” ITC Ltd. v. Punchgini, Inc., 880 N.E.2d 852, 858
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`13 Moreover, the parties’ consensus that the laws of New York and Utah are
`materially the same on this issue further confirms that our application of New York
`law should be acceptable to the parties.
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`(N.Y. 2007). The gravamen of SCO’s claim is misappropriation, which “concerns
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`the taking and use of the plaintiff’s property to compete against the plaintiff’s own
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`use of the same property.” Sidney Frank Importing Co., Inc. v. Beam Inc., 998 F.
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`Supp. 2d 193, 208-9 (S.D.N.Y. 2014) (internal quotation marks omitted) (interpreting
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`New York law); accord Punchgini, 880 N.E.2d at 859. “To state a claim for the
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`misappropriation theory of unfair competition, a plaintiff must allege that the
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`defendant: (1) misappropriated the plaintiff’s labors, skills, expenditures, or
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`goodwill; and (2) displayed some element of bad faith in doing so.” Sidney Frank
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`Importing, 998 F. Supp. 2d at 2