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SCO - Linux' Worst Nightmare Is Back

Armed with the court's decision it's merely a matter of time before SCO starts seeking payments

Linux users might have to start reaching for their checkbooks again because SCO, Linux’ worst nightmare, is back.

The Utah court that decided a year ago that Novell, not SCO, owned Unix (SVRx) – although SCO was under the impression it had bought the operating system from Novell in 1995 – has now decided that SCO owns all right and title, free and clear, to UnixWare, which is merely a later model of Unix SVR4.

Novell, it said, has no interest in UnixWare; its ownership is limited to the old, outdated SVRx widgetry; and SCO has every right to license SVRx IP as a roll-up, incidental to UnixWare.

The court also said Novell couldn’t run interference for Linux and stop SCO from seeking royalty payments for alleged UnixWare and OpenServer infringement by Linux users under its infamous SCOsource licensing program.

Armed with that decision, it’s merely a matter of time before SCO starts seeking those payments.

It could start immediately or it could wait until it appeals the August 2007 summary judgment that said Novell owns the Unix copyrights – a legally flawed decision that is widely assumed will never withstand an appeals court’s scrutiny.

The only folks that are currently safe from SCO’s demands are Microsoft and OpenSolaris users and the 22 individuals and companies like CA and Kellogg that bought SCOsource licenses.

When this fracas started, Novell was seeking to put SCO out of business by claiming that SCO owed it something like $38 million that SCO didn’t have from the 2003 IP licenses it signed with Microsoft and Sun Microsystems and from the other royalties it collected from the truncated SCOsource program.

SCO was facing the prospect of Novell persuading the Utah court to slap a constructive trust on SCO and let Novell seize all its assets. That’s why SCO sought the protection of the bankruptcy court in Delaware even though it wasn’t bankrupt.

Now that specter has been removed and SCO’s written-off fortunes resuscitated.

In a 43-page decision handed down late Wednesday the Utah court found that SCO only owed Novell $2.5 million.

That’s a sum SCO could write Novell a check for now – if it wasn’t going to appeal Wednesday’s decision too.

It’s also a sum small enough to persuade SCO’s new Arab friends to go ahead and write that check for $100 million that they’ve been promising to invest in the company, money that will be used to press both SCO’s appeal and its suit against IBM and Linux.

If SCO wins its prospective appeal and makes progress in the IBM suit – (IBM may finally have met a budget that exceeds even its unlimited resources) – well, heaven help the Linux user.

Sun can also thank its lucky stars the court ruled the way it did because Novell had every intention of pressing any advantage it got in Utah to take out OpenSolaris, since it competes with Novell’s SUSE Linux and Linux in general.

As it stands, the court decided that SCO had the right to execute the UnixWare licenses with Sun, Microsoft and the SCOsource licensees, a fact Novell contested.

It decided that “Novell is not entitled to any of the revenue SCO received under the 2003 Microsoft Agreement,” which brought SCO $16,680,000, or to any of $1,156,110 it derived from the SCOsource program.

It did however find that SCO exceeded its rights in negotiating its $9,143,451 deal with Sun in 2003.

Seems Sun wanted to open source Solaris and went to SCO, then the recognized owner of Unix, to get the confidentiality provisions governing its 1994 Unix buy-out agreement in Novell lifted so it could open source Solaris.

The court found that under the 1995 Asset Purchase Agreement between Novell and the Santa Cruz Operation, SCO’s predecessor company, SCO should have brought Novell in on that part of the deal and it didn’t.

It said “SCO renegotiated a contract and expanded Sun’s rights to [SVRx] technology still owned by Novell. And, SCO improperly received the money for granting such right even though those rights remained with Novell.”

SCO in that part of the deal was guilty of breach of fiduciary duty, conversion and unjust enrichment.

The court however refused to void the contract saying it “could not return the parties to the same position they were in prior to the 2003 Agreement. Sun has already received the benefits of the agreement and developed and marketed a product based on those benefits. There was also evidence at trial that OpenSolaris directly competed with Novell’s interest. The court, therefore, cannot merely void the contract.”

But it could recompense Novell for the rights given to Sun to the tune of $2,547,817, a figure the judge derived after subtracting $1.5 million from the total value of the $9.1 million contract and declaring that $1.5 million strictly a release related to SCO IP and then arbitrarily carving off a third of the $7,643,451 left that was related to a UnixWare license, associated UnixWare and OpenServer drivers and the confidentiality release and awarding it to Novell.

He told Novell to come back in 15 days with a brief describing “what, if any, pre-judgment interest” Novell figured it was owed.

SCO released a statement expressing a certain amount of pleasure in the decision but said, “We continue to disagree with the premise of this trial and believe that Novell is not owed anything, but that they have interfered with SCO’s Unix rights.”

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara