The Pregnant Cow Case

Wednesday, July 23 2003 @ 09:42 AM EDT

Contributed by: PJ



It is a fact that a lot of people do not understand the GPL. Even some attorneys don't, because they've never used it or litigated over it. I think we've seen SCO make mistakes because of not understanding it themselves. So when I saw some attorneys quoted as saying that an 1880's pregnant cow case might allow SCO to say they never meant to release under the GPL and thus could take it back, I didn't think it could be correct.

I have now had a chance to ask Dan Ravicher, Esq., about the pregnant cow case. He doesn't think it is relevant, for one important reason, as well as some subsidiary ones, namely, the simple fact that the cow case was about a contract. and the GPL isn't a contract. The GPL is a license, not a contract, and that's why it just doesn't seem to apply. I had sent him a link to the case and a discussion of it that didn't sound right to me, and asked if he'd comment. Here's what he wrote:

"I'd have to say that I don't think either the pregnant cow case or the discussion of unilateral vs. bilateral contracts is germane to the SCO-Linux situation. First, contract law varies by state, so the cow case may only apply (if it's even relevant and still valid) in the state from which it came. Other states may very well not have such law. Second, the GPL is not a contract, either unilaterally or bilaterally."

[Emphasis added.]

That last is the point. The GPL is a license, not a contract. As for the rest, I did some research and what I found confirms what he wrote. For example, this article says that nationwide, courts are not united in how to handle mistake cases, so the pregnant cow isn't like one of the 10 Commandments, written in stone, and courts vary in how they decide such cases:

"Unsurprisingly, courts are left puzzled about when to void for mistake. One casebook says, 'The case law in this area is confused beyond reconciliation. Courts cannot agree on what is "mutual" and what is "unilateral" and in many jurisdictions cases can be found in which relief is granted in both situations, however they are defined.'"

That article also points out that it is "relatively rare" for courts to allow avoidance of a contract anyway.

But what if Caldera/SCO had been in a contract, under which they released the code and later discovered code they didn't know was in there? I found some material that appears to indicate that even if the GPL were a contract, and even if Caldera had released materials under the GPL without awareness that certain code was in the release, the pregnant cow case wouldn't necessarily save them.

First, here is the case, Sherwood v. Walker, 66 Mich. 568,  33 N.W. 919. As he correctly points out, it's a Michigan case, not a US Supreme Court decision, so it applies specifically to Michigan. It is a famous case, however, often taught in contract law, because it addresses the issue of when a mutual mistake allows a party to get out of the contract. It was a replevin action, which is an "action to recover an item of personal property."

The facts of the case, explained here, were these:

"Seller Walker owned breeding cows, worth between $750.00 and $1,000.00 and barren cows, worth about $80.00. Buyer Sherwood inspected an apparently barren cow, Rose 2nd of Aberlone, and decided to buy her. A price was agreed on 5.5 cents per pound but before the exchange of money and cow, Walker found Rose was pregnant and refused to part with her. The court said that if both parties thought the cow was barren (a question for the jury), the contract was voidable on grounds of mutual mistake."

Note that the contract was voidable in part because it had not yet been executed. The cow hadn't been delivered yet. That was what the lawsuit was about. Did the seller have to deliver the cow under the old terms, now that it was clear the cow was worth a lot more? But had both sides acted in harmony with the contract for years, the seller could hardly ask a court to release it from a bargain the buyer had acted in harmony with and upheld its side of the contract: "When offeree has rendered substantial performance offeror can't revoke."

Further, if both parties in Sherwood had been taking a risk on whether the cow might be fertile, the contract would not have been voidable. When will relief be granted for mutual mistake? Here is one explanation:

"A mistake of fact, shared by both parties, which goes to the basis of the bargain, entitles either party to rescind the contract. (See, Sherwood v. Walker 33 N.W. 919 (Mich. 1887).) If both parties are mistaken and neither is at fault or both are equally to blame, mistake may prevent the formation of a contract. Unilateral mistake does not render a contract voidable except where the mistake is due to the fault of the other party or the other party knows or has reason to know there is a mistake. (Rest.2d § 153)."

Here are some notes for a contract class:

"When BOTH parties make a material mistake, it is voidable if:
"Enforcement makes K [contract] burdensome on one party
"During K, the fact in question was not in doubt
"NOTE Re:Chen.the court will not say it, but if a contract is executed, they will not change the positions of the parties, rather, they will find another reason not to overturn contract. . . .A basic mistake on subject matter voids a contract."


For there to be a contract, there has to be a meeting of the minds:

"So if there is a misunderstanding as to a material term and neither party knows or has reason to know of the misunderstanding, there is no contract. Rest. 2d Rest. 2d, §20(1). . . . Where one party either knows of the misunderstanding or objectively should know of the misunderstanding, the contract is interpreted against them. . . . Business transactions. It will be presumed in business settings that the parties intend to be bound ? for example, even if one party made an offer in jest and the other party seriously and reasonably accepted the offer, the contract will be binding."

The mutual mistake in the pregnant cow case was that both sides thought the cow was barren. Recission would not have been allowed if both parties had been taking the risk of whether the cow was pregnant or not.  What about SCO? What is the mutual mistake here? If you could apply mutual mistake reasoning to SCO, in a contract setting, which this one isn't, you'd have to argue that neither side knew that the allegedly infringing code was in there or neither knew the code was infringing. If SCO argues that, what happens to their other legal claims?

And what about the issue of Caldera/SCO's duty to investigate what it was releasing? Was the company able to investigate if the code it was releasing contained the allegedly infringing code? To look carefully at the terms of the GPL so as to understand them? Well, folks, that's what open source means. Anybody can look at the code. No one else was in a position to know if their proprietary code was there, because it was closed source code that only they could identify as theirs. If they didn't bother to investigate, despite having full opportunity to do so, would a a court reward their lack of due diligence? Obviously we can't say for sure, since courts themselves are so divided. But what do you think?

If you are interested, there is a tutorial on mutual mistake here. And you can read more here and here and here.

The attorneys originally quoted seemed to be thinking about SCO's relationship with its own customers under contract with them, judging from what they said. And while, as one of them honestly pointed out, it's impossible for anyone to say for sure how a judge or jury might rule in a mutual mistake case, even if this were such a case, the simple fact is that Caldera released code to the public at large, not just to its own customers, and they did it under the terms of the GPL, which isn't a contract. Anyone could download it off its site, and it came with the GPL attached. So where is the contract they can now ask a court to void? If there is one certain thing, it's that you can't distribute GPL code under any other terms than the GPL and you can't hit reverse and take it back later.


Tell Me This is "Just a Coincidence"



Microsoft has a new license, as of March 1. They will indemnify their users against IP lawsuits, such as the SCO mess:

"In older contracts, Microsoft agreed to pay all legal fees for volume license customers who got sued because of Microsoft, but only up to the value of the software they bought.

"Under the new provision, which took effect March 1, Microsoft removed the liability cap in intellectual property suits and altered other parts of the agreements that potentially expand its liability.

"The company also expanded its product warranties for licensing customers from 90 days to a year and expanded the minimum notice given to customers regarding software audits from 15 days to 30 days."


You'll never guess who thinks this is a wonderful idea. Yes, it's the lovely and tireless Ms. DiDio:

"'The former clause allocated too much risk to third parties,' said Laura DiDio, an analyst at the Yankee Group. 'Intellectual property issues relating to Microsoft software are entirely in the control of Microsoft.'

"In real world terms, the changes won't likely dent Microsoft's legal budget. The indemnity provision rarely comes into play, said Morris Kremen, associate general counsel for licensing at Microsoft. Customers, though, hated the old one."


The new license says that if there is a lawsuit, MS promises to buy a license, such as the one SCO is now offering. So...let me get this straight. In March, they changed their licensing terms to include terms that would fit the SCO fact pattern to a tee, in May they signed a licensing agreement publicly with SCO, unlike Sun who at least had enough angst to ask to keep it secret, and today there is a news story just two days after the SCO licensing scheme is announced, that MS wants to be your friend in need. And with such a strong endorsement from an "independent" analyst, what more would you want to go with MS instead of Linux?

Excuuuse me, but what jumps off the page is that "the indemnity provision rarely comes into play", meaning this is a big FUD issue, for starters, and MS wasn't indemnifying anybody in any real way either, until the SCO attack was planned:

"A phantom menace

"Microsoft, however, was defending against a phantom menace. Kremen could recall only one case where a plaintiff brought a copyright infringement action against Microsoft's customers rather than the multi-billion dollar company. (In that case, IBM and Microsoft actually picked up the defense anyway and obtained a verdict in favor of their customers).

"Neither Kremen nor Mark Bolender, senior attorney at Microsoft, could recall any cases where customer sued a Microsoft customer for software security breaches or personal injury relating to a Microsoft product.

"Even if a suit were brought, the old indemnity provisions, which are similar to contractual provisions issued by other software companies, would likely have been adequate to protect licensees.

"'It is hard to imagine a royalty claim that is higher than the cost of the software,' Kremen said."


Especially if you've paid through the nose for Microsoft's products. Just a coincidence?

Sorry, Microsoft. Friendships are built on trust. Even business relationships are built on a measure of it . This announcement inspires less trust, not more, because of the coincidental timing, and, frankly, Ms. DiDio being trotted out again.

The fundamental problem MS faces isn't Linux. Their problem is their business depends on customers being tech-stupid and FUD-inexperienced. That only can work for so long. At one time, nobody knew anything about computers, so they relied on MS products to ease them into it and hold their hands. That just isn't the case any more, except for my mom. Her generation is the last one that believes such FUD and will put up with poor quality and poor service and proprietary ways, because they imagine the BSOD they are staring at happened because they did something wrong as they typed and they imagine proprietary software is normal, like air.

When she reads about the new license, she'll think it's great, until we talk it over. When I read about the new license, I just snort. And that is MS's real problem. They lost our trust. We grew up. And we know how to use computers. We know now that it's valuable to be able to look at code yourself. Some of us went into business, and we are the new office managers and other types that decide what software to buy. MS treated us like we were criminally-inclined. And that told us who they are. And their licenses for XP onward were so mean-spirited, so weighted against the customer, that we got disgusted. GNU/Linux gave us a choice, and we took it. How do you reverse that? I can't think of any way, can you? No one goes back to a bad relationship of their own free will. Especially because in the interim, we fell in love with the new software.

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