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Verdict in Novell/SCO Case a Mixed Bag

The ruling in the SCO/Novell legal clash over Unix copyrights is likely to leave observers divided over the results. The decision from U.S. District Judge Dale Kimball awarded $2.55 million to Novell, a nominal victory, but a far cry from the millions the company had sought. As a result, the ruling, which could be appealed […]

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SMK

Sean Michael Kerner

Jul 19, 2008

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Novell and SCO in court

The ruling in the SCO/Novell legal clash over Unix copyrights is likely to leave observers divided over the results.

The decision from U.S. District Judge Dale Kimball awarded $2.55 million to Novell, a nominal victory, but a far cry from the millions the company had sought.

As a result, the ruling, which could be appealed by Novell, means that SCO could continue to survive as a going concern — and that its delayed case against IBM is likely to go ahead as well.

“We are pleased … that the court agreed that Novell is not entitled to anywhere near the more than $20 million dollars it was seeking,” SCO said in a statement published on its Web site. “Importantly, the court ruled that Novell has no right to any royalties from UnixWare or OpenServer sales by SCO, which is where the bulk of SCO’s revenue is earned.”

Representatives from Novell and SCO did not return requests for comment by press time.

The two companies have been embroiled in a bitter, three-year-old dispute over which owns certain Unix trademarks.

SCO said it purchased all rights from Novell in 1995, but Novell disputed the claim.

The current deliberations started in May and followed an August summary judgment ruling from Kimball in which the court ruled against SCO, finding that Novell was the owner of the disputed Unix and UnixWare copyrights. That ruling led to SCO’s filing for Chapter 11 bankruptcy protection.

The new decision, however, found that SCO’s main Unix products, UnixWare and OpenServer, are not related to the Novell Unix copyright sale.

As a result, SCO owes Novell only for royalty fees that SCO charged other vendors, including Sun and Microsoft, for the SVRX version of Linux, which Novell sold SCO in 1995.

“The court … did not determine the value of the SVRX Licenses contained in the 2003 Sun or Microsoft agreements on summary judgment,” Kimball said in his ruling. “Rather, the court determined that there were issues of fact with respect to the SVRX Royalties to be paid to Novell under the Sun and Microsoft Agreements. The court set for trial the issue of apportionment of value in the Sun and Microsoft Agreements between the SVRX components and the other components of the agreements.”

August’s summary judgment also did not address the SCOsource licenses that SCO was trying to sell to Linux end users. SCO has alleged that Linux infringes on its Unix source code, and since began working to encourage Linux users to buy licenses.

“Darl McBride, SCO’s CEO, testified that during his conversations with Greg Jones at Novell [that] he pointed out that SCO’s efforts to enforce the intellectual property in Linux would indirectly help the sale of the various UNIX flavors that compete with Linux in the market place,” Kimball said in his ruling. “And that such a boost would potentially increase the declining SVRX Royalty stream that SCO remitted to Novell from contracts that licensed out the older products.”

While the ruling slaps SCO with a multimillion-dollar bill, it may not have a major impact on the firm, despite its shaky finances.

Although SCO is currently operating under bankruptcy protection from its creditors, it does have a significant lifeline: In February, the company got a $100 million credit line from Stephen Norris Capital Partners (SNCP).