What happens next in SCO vs. Novell

Earlier this week, a Federal Appeals Court ruled that the U.S. District Court had overstepped its grounds in ruling that SCO had never bought Novell's Unix IP (intellectual property) rights. Without those IP rights, SCO didn't have a leg to stand on in all its other anti-Linux lawsuits against IBM, Novell, Red Hat, et. al. So, now SCO can start again right? Ah wrong. It's much more complicated than that. Here's what really going to happen next.

First, SCO doesn't own Unix's IP. The court ruled that Judge Dale Kimball overstepped his authority to make that decision, and that the question of who owns Unix should be decided by a jury. That's not the same thing as deciding who owns Unix's IP; that question is still up in the air.

According to SCO CEO Darl McBride, this decision enables the company to continue its Novell and IBM lawsuits. Not really, as McBride no longer has any control of SCO. The day after the Federal Appeals Court made its decision, the Bankruptcy Court put SCO under the control of a Chapter 11 Trustee, Edward N. Cahn. Cahn, a former judge who has no connection with SCO's management, is now the man in charge, and his priorities have nothing to do with SCO's manic self-destructive drive to spend every dollar it can beg, borrow and steal on anti-Linux lawsuits.

The real question isn't what McBride wants to do; that doesn't matter any more. Novell intends to fight it out... if there's anyone left to fight. As Ian Bruce, Novell's PR director, explained in a Novell blog: "On other issues such as ownership of the UNIX copyrights, on which SCO's claims against Novell, IBM, and Linux users depend, the Court remanded the case for trial. Precisely what will happen next in the lawsuit remains to be seen, especially in light of the pending SCO bankruptcy and the recent court decision to appoint a Chapter 11 Trustee to take over the business affairs of the company."

Would a Chapter 11 Trustee want to continue the fight? Probably not, according to Andrew Updegrove, a well-known technology and open-source attorney and a partner at the law firm Gesmer Updegrove LLP. Updegrove told me, "Ordinarily, in a situation where this amount of money (relative to legal costs) is at stake, pragmatism would lead to a settlement. Until now, of course, this has always been a war of attrition, with each side willing to fight to the bitter end. A bankruptcy trustee, however, has a different duty, which is to maximize the return to creditors. In my view the trustee should take the greater resources and determination of IBM and Novell into account, and see if he can come to a settlement that achieves their business goals, while preserving as many of SCO's dwindling assets as possible for the benefit of those to whom they are owed."

Tom Carey, a partner at Sunstein, a Boston intellectual property law firm, agrees: "So now SCO is in the hands of a trustee who has been around the block, and whose career is not tied to the decision to sue IBM. My guess is that under his leadership SCO will pursue its fight with Novell if need be, but will give up fighting Big Blue because its case against IBM is a loser. SCO may be able to cut is expenses by settling with Novell if it settles with IBM. But then the question is, what does SCO have? Is there a business left to maintain? I rather doubt it, but I have not been following it since it became clear that SCO poses no threat to Linux. And with every passing day of SCO's bankruptcy, that point becomes clearer and clearer."

Though SCO may slowly go under, there remains the question: Who owns Unix?

Carey thinks "the Novell claim to ownership was all that strong. If the contract between Novell and SCO was not a sale of Unix, then what was it? Either the contract was a hash of words that failed to properly articulate the intent of the parties or, more likely, the parties thought that they had papered over their differences by signing an ambiguous, unclear contract. Nonetheless, someone has to own Unix, and the contract, as a whole, appears to be one in which Novell was the seller and SCO was the buyer."

That, however, is a matter that will have to be decided, if SCO's Trustee thinks it's worth pursuing, by a jury trial. In any case, as Carey notes, "The contract between Novell and IBM, as it was modified when IBM made a lump sum payment in order to stop having to pay ongoing royalties, makes it clear that IBM was free to create derivative works without any accounting to Novell."

Even if IBM had made contributions to Linux from Unix — which, after years of trying, SCO was never able to show one bit of proof for — IBM's "contributions to Linux were entirely proper, involving no violation of Novell's or SCO's rights. Unix has long been in a netherworld between proprietary and open source, and this arrangement was another nail in the coffin as far as there being a single owner of Unix," said Carey.

With that being the case, and there being no chance whatsoever of SCO successfully pursuing a Linux lawsuit, I strongly suspect that the Trustee will drop all of SCO's lawsuits and spend his time on rendering down SCO's remains into pennies on dollars. Rationally, there's nothing left to do, and with a reasonable person now in charge of SCO's remains, that's what I expect to happen.

Copyright © 2009 IDG Communications, Inc.

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