Court Says Novell Owns Unix, Not SCO

Published: August 23, 2007

by Timothy Prickett Morgan

After what seems like an eternity of waiting, a judge has finally come to some conclusions in the hairball of legal cases that The SCO Group launched against IBM, Red Hat, Novell, and a number of user companies deploying Linux. SCO just lost a key suit against Novell over who actually owns the Unix intellectual property that SCO believes others have infringed upon.

Those cluster of lawsuits stem from a $1 billion suit that SCO launched against IBM in March 2003. SCO's original suit was based on allegations that IBM engaged in unfair competition, misappropriated trade secrets, breach its Unix contracts, and did a laundry list of others things that had an economic effect on SCO. The original Santa Cruz Operation was a long-time vendor of X86-based Unix operating systems, including its own OpenServer and the UnixWare that it acquired from Novell in 1995 as part of a complex deal. Novell, after trying to take on Microsoft's Windows NT with a one-two NetWare-Unix punch, gave it up when it became clear that Windows was going to sweep the X86 server market. So after only two years in the Unix space, in September 1995, the original SCO bought some of the assets and assumed some of the liabilities of the Unix business that Novell bought from AT&T back in 1993. Fast forward to July 2000, when Caldera Systems, a Linux distributor founded with backing from Ray Noorda, one of Novell's founders, bought SCO for $145 million and changed its name to The SCO Group. SCO Group's interpretation of what the original SCO bought back in 1995 is the issue that this lawsuit ruling deals with.

On August 10, while IT Jungle was on holiday, Judge Dale Kimball, U.S. District Court Judge for the District of Utah, made his ruling in the SCO-Novell suit, which you can read here compliments of Groklaw. Novell was asking for summary judgment in the case, and because the SCO suits against IBM and Red Hat are contingent upon the ruling in the SCO-Novell case, Kimball got to rule first. Both IBM and Novell have asked for summary judgments from Kimball. In plain English, summary judgments ask the judge to rule from the bench, claiming that the issues are so clear that matters do not need to be decided by a jury. The motions to dismiss allow a judge to weed out erroneous or superfluous claims and focus the case; it also is a chance for a party to convince a judge that a claim is unfounded and therefore not worthy of going to trial.

In his 102-page ruling, Kimball rammed a stake through the heart of SCO's case. Here it is, on page 99: "For the reasons stated above, the court concludes that Novell is the owner of the Unix and UnixWare copyrights." Kimball also said that under the agreement that the original SCO inked with Novell back in 1995, Novell is entitled to a portion of the Unix royalties that SCO collected from Sun Microsystems and Microsoft--and presumably any SCOsource licensing deal that was not expressly limited to OpenServer. And as if those stakes were not enough, Kimball also said that SCO has to recognize Novell's waiver of its claims against IBM and the Sequent server division the company acquired and had allegedly put Unix intellectual property into the open source Linux operating system by letting out code from Sequent's Dynix/ptx Unix variant.

Joe LaSala, senior vice president and general counsel at Novell, released this statement after the ruling was announced: "In the spring of 2003, Novell set out to ensure that SCO’s groundless claims would not interfere with the development of Linux. Today's court ruling vindicates the position Novell has taken since the inception of the dispute with SCO, and it settles the issue of who owns the copyrights of Unix in Novell's favor. The court's ruling has cut out the core of SCO's case and, as a result, eliminates SCO's threat to the Linux community based upon allegations of copyright infringement of Unix. We are extremely pleased with the outcome."

SCO released its own statement on the ruling, which you can read in full at this link. But here is the crux of it: "Although the district judge ruled in Novell's favor on important issues, the case has not yet been fully vetted by the legal system and we will continue to explore our options with respect to how we move forward from here." SCO pointed out in its statement that Kimball did rule that SCO owned the copyrights to technology developed from the Unix source code it received from the Novell deal and was permitted to tweak. SCO also owns the exclusive trademark to the UnixWare trademark, which is owned by The Open Group, a Unix standards body. It also owns OpenServer and related technology. Moreover, SCO pointed out that Kimball did not dismiss SCO's claims that Novell is violating a non-compete clause in the deal relating to the distribution of Linux, which Novell obviously does now thanks to its acquisition of SUSE.

Among the many questions that this situation raises is the possibility that SCO did indeed think that it was acquiring the copyrights to Unix and that the company feels its original lawyers did not structure the deal that it thought it was signing. It would not be surprising to see SCO go after its former lawyers for inking a deal that led to this embarrassing situation. It also begs the question of exactly what SCO paid for. It appears it paid for the right to collect royalties on new Unix licensing contracts and to build out a new variant of UnixWare, taking bits from UnixWare and plowing them into OpenServer.

It would probably be best for all parties involved to settle these cases ASAP. But the lawyers don't make money that way, so don't count on that happening any time soon.

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