Technology company SCO Group proposes sale of assets

Published January 9, 2009 4:17 pm

Litigation » Bankruptcy reorganization would allow it to continue Linux lawsuits
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The embattled SCO Group Inc. is proposing to auction off its core products and use proceeds to continue its controversial lawsuits over the alleged violations of its copyrights in Linux open-source software.

The Lindon company has filed a new reorganization plan with the federal court in Delaware where it sought bankruptcy protection from creditors after an adverse ruling in the Linux litigation.

If approved by a bankruptcy judge, the plan could mean SCO's server software and mobile products lines are owned by other parties while SCO itself remained largely to pursue the lawsuits under the leadership of CEO Darl McBride.

"One goal of this approach is to separate the legal defense of its intellectual property from its core product business," McBride said in a letter to customers, partners and shareholders.

Jeff Hunsaker, president and COO of The SCO Group, said the litigation had been distracting to the company's efforts to market its products.

"We believe there's value in these assets and in order for the business to move forward it's imperative we separate it from our legal claims and we allow our products business to move forward," he said Friday.

SCO's path to bankruptcy began in 2003 when the company sued IBM claiming it was owed hundreds of millions of dollars because the high-tech giant had used SCO's Unix server software code as the basis for an important addition to the Linux software system that allowed Linux sellers to compete for business with Unix.

The lawsuit provoked the wrath of the Linux community of developers who vehemently deny SCO's allegations and take pride in their work in creating the computer system whose core codes are open to the public and available for use in developing products that compete with Unix, Windows and other software that operate computers.

The SCO Group also sued Novell Inc., saying it was trying to interfere with its ownership of Unix. In 2007, U.S. District Judge Dale Kimball ruled against SCO, a decision that meant it potentially owed Novell $37 million, and shortly after that SCO filed for bankruptcy protection.

But in July of last year, Kimball ruled after a four-day trial that SCO owed Novell only $2.5 million. SCO has now filed a notice of appeal in the case and McBride believes the company will get the Novell case sent back to district court for trial.

SCO first proposed a reorganization plan that included an investment of up to $100 million from a private-equity fund, Stephen Norris Capital Partner. That was never implemented and after the outcome of the Novell trial, SCO officials said they didn't need that much investment and might even be able to make it on their own.

But Hunsaker said several groups are now interested in buying SCO's product lines.

"We've seen interest from a number of investment groups that believe in these assets, believe in the value of this business, believe in the installed base of customers throughout the world," he said.

SCO's plan shows it could sell off its entire product line in one package or sell them separately. If buyers do not emerge, it will continue to market the products.

IBM and Novell declined to comment on the plan. Both have an opportunity to make objections in court.

tharvey@sltrib.com" Target="_BLANK">tharvey@sltrib.com

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