SCO ordered to pay $2.55M to Novell

The SCO Group, which had angered many in the open-source community when it launched a campaign in 2003 to obtain license fees from Linux users of Unix software code, is ordered today to pay to Novell $2.55 million in royalty payments on Unix licenses collected from Sun Microsystems.

In a 43-page ruling issued today, U.S. District Judge Dale Kimball said the Lindon company "breached its fiduciary duties to Novell by failing to notify Novell and account for and remit the revenue it received from Sun as a result of modifying the confidentiality provisions of Sun's SVRX buy-out agreement with Novell."

Novell, in the four-day federal trial in late April, argued that SVRX code, or the earlier versions of Unix, which Kimball ruled on Aug. 10 that Novell owns the copyrights to, are found in the license agreements SCO struck with Sun, Microsoft and the other Linux users.

But SCO argued in the trial that it believed it can enter into new SVRX licenses with Sun, Microsoft and the other Linux customers if those agreements were "incidentally" licensed with the latest versions of Unix, or UnixWare, which SCO says it owns. UnixWare refers to a combination of Unix System V code and some components of Novell's NetWare code.

Nonetheless, Judge Kimball ruled that Novell is "entitled to the revenues paid by Sun under the 2003 Sun agreement attributable to the release of the SVRX confidentiality provision in the 1994 agreement."

But that $2.55 million restitution amount is significantly lower than what Novell had demanded for what it calls "unjust enrichment" by SCO because it made those agreements with Sun, Microsoft and others without getting Novell's approval and allegedly refused to account for them. Novell believed it was entitled to collect $19.9 million.

Novell could not be reached for comment on Kimball's ruling.

In an e-mailed statement today, SCO described the ruling as "an important step in (its) ability to pursue the appeals to try to get all of (its) claims heard by a jury as soon as possible. We are pleased, however, that the court agreed that Novell is not entitled to anywhere near the more than $20 million dollars it was seeking."

"Importantly, the court ruled that Novell has no right to any royalties from UnixWare or OpenServer sales by SCO, which is where the bulk of SCO's revenue is earned," SCO said in the statement. "This is also an important step forward in the capitalization and reorganization plan for SCO that will allow us to emerge from Chapter 11. We continue to disagree with the premise of this trial and believe that Novell is not owed anything, but that they have interfered with SCO's UNIX rights."

The company is reviewing the ruling by Judge Kimball with its attorneys and will be assessing the next steps over the coming days and weeks.

Ryan Tibbitts, general counsel for SCO could not be immediately reached for comment on how this ruling will affect its proposed bailout by Stephen Norris Capital Partners.

Norris and a group of Middle Eastern investors, who initially proposed a $100 million cash infusion to fund SCO's comeback, have since backed off that offer, were watching for the verdict 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.