In a long-awaited federal ruling issued late Wednesday, the bankrupt SCO Group was ordered to pay Novell $2.6 million in royalty payments on Unix licenses collected from Sun Microsystems.

Novell could not be reached Wednesday for comment on the ruling.

At issue is whether SCO has the right to obtain license fees from Linux users of Unix software code through its SCOsource program launched in 2003 -- an effort that angered many in the Linux community who see it as SCO's attempts to misappropriate the contributions of the open-source movement.

On that issue, the verdict is split.

In a 43-page ruling issued today, U.S. District Judge Dale Kimball found SCO "breached its fiduciary duties" to Novell by failing to notify and account for the revenues SCO received from Sun for the rights to opensource its own version of Unix products called OpenSolaris, which is based on Novell's SVRX code, or the earlier versions of Unix.

In Wednesday's ruling, Kimball says SCO violated Novell's SVRX copyrights in that matter because SCO's intellectual property, which is defined as SCO Unix-based code or UnixWare, "cannot include SVRX."

"Sun obtained the rights to opensource Solaris, and SCO received the revenue for granting such rights even though such rights remained with Novell," Kimball wrote in Wednesday's ruling.

"Sun has already received the benefits of the agreement and developed and marketed a product based on those benefits. There was also evidence at trial that OpenSolaris directly competed with Novell's interest. The court, therefore, cannot merely void the contract," he wrote.

In an e-mailed statement Wednesday, 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 more than $20 million dollars it was seeking," SCO said in the statement. "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."

OpenServer accounts for two-thirds of SCO's Unix revenues and has thousands of customers including small- to mid-sized businesses and large companies such as McDonald's.

Novell, in a four-day federal trial in late April, argued that SVRX code is found in the license agreements SCO struck with Sun, Microsoft and the other Linux users. That, Novell asserts, constitutes a breach of a 1995 sale of the UnixWare business to SCO's predecessor, The Santa Cruz Operation. SCO acquired UnixWare from Santa Cruz in 2001.

But, in the case of Microsoft and the 22 Linux customers, Kimball found that SCO did not owe Novell any royalties for revenues it received from them.

That's because he found SCO has the authority to enter into new SVRX license agreements with Microsoft and those Linux customers if those agreements were "incidentally" licensed with the latest versions of Unix or UnixWare, which belongs to SCO. UnixWare refers to a combination of Unix System V code and some components of Novell's NetWare code.

To date, SCO received $16.7 million from Microsoft and $1.2 million from the other Linux customers, which Kimball ruled SCO gets to keep.

But he also cautioned in Wednesday's ruling that "there was no definitive evidence" on whether a buyer of a SCO source license was completely protected."

SCO, in Wednesday's statement, described the ruling as an "important step forward in the capitalization and reorganization plan for SCO that will allow [it] to emerge from its Chapter 11 bankruptcy."

Ryan Tibbitts, general counsel for SCO, could not immediately be reached for comment on how this ruling will affect a 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 and 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.

The company is reviewing Kimball's ruling with its attorneys and will be assessing its next steps. "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," SCO said in the statement.

For the past five years, SCO waged a legal battle against IBM, Novell and other advocates of the freely distributed Linux operating system, claiming that it owned the copyrights to Unix. SCO also claimed IBM violated the confidentiality of its copyrights when it took code from Unix and put it into Linux.

SCO was dealt a massive legal setback after 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 outcome of the trial, 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.