Amount still far short of Novell's demands

The convoluted case of SCO v. Novell dealt a heady blow to the SCO Group Wednesday, with United States District Judge Dale Kimball ordering the company to pay $2.5 million to Novell for improperly claiming, and collecting royalties for, the Unix operating system.

SCO originally filed the lawsuit in 2004, accusing Novell of claiming ownership over Unix SVRx code that SCO acquired after a complicated chain of sales between the two companies. SCO says it owns all rights to the SVRx code – a claim that Novell disputes.

Kimball’s ruling (PDF) was ultimately a reversal. After finding that the contested software was indeed owned by Novell, he proceeded to slap SCO with a variety of charges including unjust enrichment, conversion, and breach of fiduciary duty.

The IP rights in question originally came from Unix System Laboratories, formed as a division of AT&T. AT&T, however, sold all of USL’s assets to Novell in 1993, and then Novell sold the both the USL assets and additional work to Santa Cruz Operation in 1995. The Santa Cruz Operation marketed and sold a PC-based Unix until 2000, after which it sold its rights to Caldera Systems – who later changed its name to the SCO Group.

The sale between Novell and Santa Cruz Operation was far from straightforward, however, and the transfer was conducted through a vaguely-worded “Asset Purchase Agreement” (APA) that amounted, ultimately, to only a partial transfer of ownership. Novell claims the agreement did not include copyrights to the Unix SVRx source code. Judge Kimball’s interpretation of the APA sided with Novell in 2007.

In its SCOScource licensing program, SCO used its supposed ownership of UNIX to assert control over the Linux operating system, which it claims uses source code originally written for UNIX. The company then proceeded to attack a variety of companies that use Linux in their infrastructure, including IBM, DaimlerChrysler, and AutoZone. Much of the details regarding copyrighted code are still under seal in SCO v. IBM.

Groklaw called the reversal of fortunes “ironic,” noting that the case “started with SCO accusing Novell of slander of title, and asking for millions in damages.”

“Instead it has to pay Novell millions,” it added.

Many have described Novell’s victory as lukewarm; noting that the damages prescribed may not be enough to truly stop SCO in its tracks, despite the company’s already questionable financial situation – which includes Chapter 11 filings in September 2007.

Kimball’s ruling allows both parties to appeal the decision, and could prolong the already drawn-out case even further.

"When an individual makes a copy of a song for himself, I suppose we can say he stole a song." -- Sony BMG attorney Jennifer Pariser
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