SCO never owned UNIX copyrights, owes Novell 95 percent of UNIX royalties

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Federal district judge Dale A. Kimball issued a ruling on Friday declaring that Novell owns the UNIX copyrights. Kimball's ruling means that the end is near for SCO's protracted litigation trainwreck, an epic assortment of lawsuits that have achieved infamy in the tech industry. Judge Kimball finds that Novell never transferred ownership of the UNIX copyrights to SCO during or after a 1995 agreement between the two companies.

Judge Kimball's ruling effectively ends SCO's "slander of title" lawsuit against Novell, which was based on SCO's allegation that Novell had wrongfully claimed ownership of the UNIX copyrights. Since Novell is the rightful owner of the UNIX copyrights, "there is no basis in the evidence before this court for finding that Novell's public claims of ownership were a misappropriation or seizure of SCO's property," said Judge Kimball in his 102-page ruling.

Confirmation of Novell's ownership of the UNIX copyrights will also put an end to SCO's lawsuit against IBM, in which SCO alleges that IBM infringed on UNIX copyrights by incorporating proprietary UNIX code into the open-source Linux operating system. Judge Kimball has determined that, under the terms of Section 4.16(b) of the 1995 Asset Purchase Agreement between the two companies, Novell has the authority to "direct SCO to waive its purported claims for breaches of [UNIX] license agreements with IBM and Sequent."

An expensive mistake

In the original agreement between Novell and SCO, Novell retained ownership of all UNIX copyrights but granted SCO the ability to sell licenses to third parties. As part of this arrangement, SCO agreed to give Novell all of the royalties generated through UNIX licensing minus a five percent administrative fee. Judge Kimball has ruled that SCO owes Novell 95 percent of the royalties generated by the licensing of Novell's UNIX copyrights. The two most prominent SCO licensees are Microsoft and Sun, both of which develop operating systems that compete directly with Linux.

According to Judge Kimball's ruling, Microsoft paid SCO approximately $16 million for license rights and Sun paid approximately $10 million. SCO neglected to turn over the licensing fees to Novell, which "gave SCO its first profitable year in history," Kimball notes. "As a matter of law, the court concludes that SCO breached its fiduciary duties to Novell by failing to account for and remit the appropriate SVRX Royalty payments to Novell for the SVRX portions of the 2003 Sun and Microsoft Agreements," says Kimball. "Because of the decrease in SCO's revenues and assets, Novell fears that it will be unable to collect on its claim for royalties."

With the exception of the wrongfully-retained UNIX royalties from Microsoft and Sun, SCO has consistently lost money since the start of this entire affair. Few options remain open for SCO, and a bankruptcy could be imminent.
 
While I'm not sorry to see SCO lose this case, I do wonder about the future of the OpenOffice project. If they do go bankrupt will they remove the "free" version?
 
Dj_Jestar said:
Hurrah! I don't feel particularly sorry for any SCO shareholder.. they should have known better :p

Although ouch: " 8-Jun-05 4.09 4.12 4.03 4.08"

Who would want to buy them now?
 
I'm sure that the court's judgement was correct, but it is a very sad day for users of SCO OpenServer which is actually a first class product. SCO's response to this ruling reads
The company is obviously disappointed with the ruling issued last Friday. However, the court clearly determined that SCO owns the copyrights to the technology developed or derived by SCO after Novell transferred the assets to SCO in 1995. This includes the new development in all subsequent versions of UnixWare up through the most current release of UnixWare and substantial portions of SCO UnixWare Gemini 64. Also, SCO owns the exclusive, worldwide license to use the UnixWare trademark, now owned by The Open Group. SCO's ownership of OpenServer and its Mobile Server platforms were not challenged and remain intact. These SCO platforms continue to drive enterprises large and small and our rapidly developing mobile business is being well received in the marketplace.

What's more, the court did not dismiss our claims against Novell regarding the non compete provisions of the 1995 Technology License Agreement relating to Novell's distribution of Linux to the extent implicated by the technology developed by SCO after 1995. Those issues remain to be litigated.

Although the district judge ruled in Novell's favor on important issues, the case has not yet been fully vetted by the legal system and we will continue to explore our options with respect to how we move forward from here.
Elsewhere, SCO comment that their
. . . primary business is not to litigate or to solely rely on outcomes in the court . . .
It would seem that SCO believe that they can turn back the clock, hope people will forget about their attempt to sue IBM for $billions, forget how they cosied up to Microsoft and make everyone pay for the right to run Linux and persuade people to pay for a product that has now been superseded by Linux - unlikely to be the case.
On Monday, August 13, SCO stock (NASDAQ: SCOX) fell over 70%, to 44 cents a share.

We all rue the day that Darl McBride and Caldera got involved with SCO.
 
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FirebarUK said:
I heard that SCO were funded by MS for these lawsuits as well or something?
That is (unsurprisingly) true. The most significant assistance being that both Microsoft and SUN paid SCO/Caldera a substantial license fee for use of UNIX code. This had the effect of validating SCO's claim to own the rights to UNIX and putting down a marker for any corporate user of Linux that if Microsoft and SUN weren't prepared to defend their abuse of Intellectual Property, nor should corporate users - much better all round to drop Linux and move to Windows ;)

If you want to look further, there are interesting articles reviewing Microsoft's support of SCO here, here, here and here.


Perhaps the most interesting aspect of this now is that the court has ruled tha Novell owns the IP rights to UNIX. SCO received license payments from Microsoft and Sun, who have therefore implicitly confirmed that someone else (apparently Novell) does own the rights to UNIX. SCO have now been instructed to pay most of these license fees to Novell.

Where it would get interesting is if Novell were to tell Microsoft and Sun that they no longer have the right to use UNIX code :D
 
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