The bankrupt SCO Group got more time to file a new Chapter 11 reorganization plan as it awaits a pivotal federal ruling on whether it owes licensing fees to Novell over disputed Unix code.

U.S. Bankruptcy Judge Kevin Gross, at a court hearing in Delaware on Tuesday, granted SCO's request to extend the filing deadline of a new restructuring plan for another 120 days to Aug. 11. This will be the second time the Lindon company has asked for an extension.

The deadline was initially extended to May 11 after New York private equity firm Stephen Norris Capital Partners and a group of Middle Eastern investors, who initially proposed a $100 million cash infusion to fund SCO's comeback, backed off that offer and are now watching for the ruling from U.S. District Judge Dale Kimball to determine how to proceed. Instead of lending SCO $95 million to fund its ongoing litigation with Novell, IBM and others, Stephen Norris is now looking to buy SCO's assets outright as part of the new deal.

"The big problem is trying to figure out what our exposure to Novell is. Initially, we were expecting a $40 million judgment, which would have significantly diluted SCO for its shareholders. But at the [April] trial, Novell cut their claims to below $20 million, which indicates a position of weakness, and the court indicated it would rule quickly on the trial. Those are some reasons why we asked for an extension again," said Darl McBride, SCO's chief executive.

"All of these factored into what kind of plan we can formulate and what we need from an investor to get us through this bankruptcy. If we can get clarity on a few issues, such as what, if anything, we owe Novell, it will be easier to fashion a plan that benefits shareholders," he said.

But Novell, in court documents filed earlier this month, called SCO's request for more time to propose a new plan a "contrivance."

"Indeed, [SCO's] sudden reliance on the need for resolution of the District Court litigation has more the look and feel of a scheme to buy time than of the promotion of an opportunity for real progress in the cases," Novell said.

But Gross allowed SCO's filing date to be extended to Aug. 11 and may also grant additional time beyond that deadline pending Kimball's ruling, McBride said.

"If Kimball takes longer to rule on whether we owe royalties to Novell, that could delay the filing of the new plan even more. It may take up to six to eight weeks more from the time the ruling comes out to formulate the plan, structure documents and submit the plan," he said.

Among proposals considered for the new reorganization plan is a possible spinoff or sale of SCO's Unix business, and allowing SCO to focus exclusively on its litigation with IBM and others. SCO claims IBM violated the confidentiality of its copyrights when it took code from Unix and put it into the freely distributed Linux operating system. That litigation is now on hold because of SCO's bankruptcy filing.

"SCO is interested in selling the Unix business so it can continue unhindered by the litigation, that's one of the plans being considered," McBride said. "After reviewing the strength of the Unix customer base and Unix technology, Norris decided to buy the Unix business, and may spin it off into a separate company with a new name and new owners. SCO may become a holding company for ongoing litigation."

SCO was dealt a massive legal setback after Judge Kimball last August found that Novell, not SCO, owns the intellectual property rights to the Unix code. That August ruling, which SCO says it intends to appeal regardless of the ruling, undermined SCO's claims that IBM stole code from Unix and put it into Linux, as well as SCO's attempts to force hundreds of Linux users to pay licensing fees.

Even if Judge Kimball rules that SCO owes royalties to Novell, SCO plans to appeal that ruling along with the August ruling to the U.S. Tenth Circuit Court of Appeals, McBride said.