Six years later, SCO-Novell lawsuit finally going to trial

Legal issues might pale to drama outside courtroom.

By Tom Harvey
The Salt Lake Tribune

March 4, 2010

At long last, it's time for the main event in the long-running legal battle between The SCO Group and Novell over who owns the copyrights of the Unix software than runs many businesses computer systems.

Six years after SCO sued Novell, a trial is set to begin Monday in U.S. District Court for Utah. It will determine who owns the Unix copyrights. But the trial, expected to last three weeks, may be just the prelude to an even bigger legal battle.

If the jury sides with SCO, then the Lindon company can pursue its lawsuit against IBM. The computer giant is accused of using Unix as the basis to make important changes in the Linux operating system. These are actions that SCO said made Linux a viable competitor and led to a steady decline in its revenues.

And if SCO wins against IBM, it also would have won the right to assert that anyone who used that version of Linux must pay a licensing fee. These are monies that SCO said could be more than a billion dollars when it first sued IBM back in March of 2003.

Still, all of this legal intrigue is taking place in a radically altered environment than when the tiny SCO took on IBM seven years ago.

An adverse ruling in the Novell case, later overturned by an appeals court, sent SCO into bankruptcy court in 2007. It remains in court under control of a trustee, who fired CEO Darl McBride under whose leadership the company had filed the two lawsuits. SCO several times has been on the edge of dissolution as its tries to reorganize itself. The trustee now is proposing selling off its small mobile software business -- to McBride.

But three days ago, Novell's future also took a twist. A hedge fund, Elliott Associates, offered to buy the Waltham, Mass.-based company -- it had been founded in Utah -- for $2 billion in cash. Some analysts believe that the Elliott offer could spark a bidding war that could create a long period of uncertainty over who will own the company that employs about 1,000 people in Provo.

Given the intrigues and uncertainties surrounding both companies, the staid atmosphere of the federal courtroom where their respective teams of lawyers are squaring off might seem a little mundane. Indeed, at the heart of the case is the ambiguous language of a contract filled with legalese and technical terms in which Novell sold Unix, or portions of it, to the Santa Cruz Operation of California in 1995.

SCO, then calling itself Caldera International, acquired Unix several years later from Santa Cruz, and changed its name to The SCO Group.

After SCO sued IBM, Novell claimed it, and not SCO, owned the Unix copyrights and that SCO's claims against IBM were improper. SCO viewed the Novell claims as an attempt to derail its challenge to Linux, now a major part of Novell's business.

SCO's attack on Linux greatly angered the open-source community that has built Linux. Open-source advocates believe such software should be publicly available for free, including to companies such as Novell that can build products around it that can be sold to others.

Novell's case is aided by the poor drafting and ambiguous language of the asset-purchase agreement between it and the Santa Clara Operation.

"The APA expressly excludes all copyrights, including the UNIX copyrights, from the transferred assets," Novell said in its trial brief to federal Judge Ted Stewart.

SCO plans to call as witnesses executives and negotiators from both sides of the Novell-Santa Clara contract.

"All of the business negotiators on both sides of the transaction, including Novell's senior executives and chief negotiator, agree both that SCO acquired the copyrights," the Lindon company argues in its trial brief.

Momentum in the case has swung to SCO. The 10th Circuit Court of Appeals overturned a ruling by federal Judge Dale Kimball, who had previously presided over the lawsuit and who had ruled that Novell indeed owned much of the copyrighted computer code.

In flurry of pretrial motions, Novell had asked Stewart to limit what some witnesses could testify about. But Stewart ruled largely on SCO's side.

Now the jury will have the final say.

Novell and The SCO Group declined comment on the trial.

Copyright 2010