Novell: SCO insolvency 'imminent' and 'inevitable'

Novell: SCO insolvency 'imminent' and 'inevitable'

Summary: In a court filing, Novell has claimed that SCO owes it millions of pounds in revenue from Unix licence sales

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Novell has claimed that SCO, the US firm conducting various legal campaigns over the Linux operating system, is about to go bankrupt.

In a court filing, reported this week by legal website Groklaw, Novell claimed that SCO should pay it almost all of the Unix licensing revenue it has received from Sun and Microsoft. This revenue amounts to almost $26m (£13m), and was earned by SCO when it sold Unix licences to Sun and Microsoft in 2003.

This revenue helped SCO to fight its claims that IBM violated SCO's intellectual property by including proprietary code from Unix — on which SCO claims copyright — into Linux.

Novell, though, argues that it is owed that revenue. In 1995 it transferred Unix and UnixWare to Santa Cruz Operations (now SCO) under a deal called the Asset Purchase Agreement (APA). The deal also stated that SCO would hand over 95 percent of all revenue it received from SVRX [Unix System V Release any] licence agreements.

Back in October 2006, Novell filed its claim that SCO must hand over this Unix licensing revenue. SCO has so far refused, claiming that the deals with Sun and Microsoft don't relate to the SVRX agreement. SCO also claimed that such a move would cause it financial harm at a time when it is still fighting the case against IBM.

But in its latest court filing, Novell insists that SCO's financial situation makes it even more important that the $26m, minus SCO's 5 percent administration fee, is handed over.

"Contrary to SCO's assertion that a preliminary injunction should be denied because it may accelerate SCO's bankruptcy, SCO's imminent bankruptcy is a compelling reason to grant Novell's motion. When SCO goes into bankruptcy, it will not be because of Novell's motion, but because of its own financial missteps," claimed Novell in its court filing, titled 'Novell's reply to SCO's opposition to Novell's motion for partial summary judgement or preliminary injunction', which can be seen on Groklaw.

"For SCO, bankruptcy is inevitable; it characterises its assets as merely those 'remaining' and does not rebut Novell's arguments that its bankruptcy is imminent. Once this bankruptcy occurs, Novell will lose all ability to collect its judgement," Novell added.

SCO, though, has denied that it is on the verge of financial disaster. A company spokesman told Internetnews.com that: "This is unquestionably Novell FUD [fear, uncertainty and doubt] and irresponsible of them to make such comments."

SCO is due to release its next financial results on 17 January. Previous financial statements have shown that its income from Unix licence sales has been falling, with its Linux indemnification programme — which protects companies from being sued for using Linux — failing to attract any significant interest.

Late last year, SCO's share price fell after a judge ruled that most of its case against IBM should be thrown out.

Topic: Networking

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