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Court overturns key computer software decision

Published August 24, 2009 5:47 pm

SCO Group » Lindon firm to renew battles with IBM, Novell
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The SCO Group vowed to renew legal battles against computer giant IBM and Novell after a federal appeals court ruled Monday in its favor on key issues related to the ownership of software programs that run the computers of companies around the world.

CEO Darl McBride hailed the 10th Circuit Court of Appeals decision as putting back on track its 6-year-old legal battle with IBM. SCO claims its Unix operating system was used illegally by its huge adversary to make a crucial improvement that turned the Linux system into a competitor.

The ruling may mean The SCO Group will renew its effort to collect licensing fees from thousands of companies that run the Linux system, said McBride. He also said the ruling again calls into question IBM's ability to continue marketing its Aix server program, which is derived from Unix.

"Today is not the end of the war but it certainly is a key battle that we've won," said McBride. "Now it's time to move on to the next series of battles with our victory in hand."

IBM representatives did not respond to an e-mail and a telephone call seeking comment.

The 10th Circuit Court of Appeals ruling overturned an August 2007 decision by U.S. District Judge Dale Kimball, who had ruled that Novell, and not SCO, owned the Unix copyright. SCO had sued Novell in 2004 after Novell said its ownership of Unix invalidated SCO's $1 billion lawsuit filed the previous year against IBM.

Kimball's ruling caused SCO a month later to file for protection from creditors in federal bankruptcy court in Delaware.

But a three-judge panel of the appeals court said that Kimball was premature in dismissing SCO's claims before they could go to trial. The decision written by Judge Michael McConnell sends the case back to Utah for a trial.

Novell, in a statement, pointed out that much of what happens as the case proceeds remains in the hands of a bankruptcy trustee.

"Precisely what will happen next 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," Novell said.

SCO claimed IBM had used Unix as a basis for making improvements to the Linux operating system, the basic software code of which is "open source," or freely available to the public. Companies such as IBM and Novell take the basic code and use it to create products and services that can be sold to other companies, often more cheaply than for-profit systems such as Unix and Microsoft's Windows.

SCO claims that it saw a precipitous decline in sales of its Unix system after IBM modified Linux using Unix code. But the lawsuit made SCO a pariah among the open source community, a network of developers that donate time and experience to creating and modifying software that is offered for free.

McBride said the ruling strengthens SCO's position in bankruptcy court by increasing the company's value. SCO has asked the bankrupcy court to allow it to sell off its Unix business but retain the rights to pursue its lawsuits and continue its mobile phone-applications business.

The 10th Circuit panel upheld a portion of Kimball's ruling that had resulted in the awarding of $2.5 million from SCO to Novell.

Kimball recused himself Monday from the IBM and Novell cases. Judge Ted Stewart was assigned the Novell case, while Judge Tena Campell will preside over the IBM lawsuit.

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