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Former SCO Group wants bankruptcy converted to liquidation

Published August 10, 2012 10:05 pm

Software •Company would still continue litigation against IBM.
This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The bankruptcy trustee for the company formerly known as The SCO Group is now seeking to convert the case from reorganization to a liquidation, but still wants to pursue its high-profile lawsuit against IBM.

The bankruptcy trustee for The TSG Group, formerly named The SCO Group, has asked a Delaware bankruptcy court to convert the case from Chapter 11 to Chapter 7.

Chapter 7 generally means liquidation of any assets and the end of the company. But trustee Edward Cahn said while the firm remains in bankruptcy court, he still wishes to pursue legal claims filed in 2003 that IBM used access to the code of SCO's Unix operating system to strengthen its competing operating system, Linux.

In 2011, Cahn sold off the Unix computer operating system and related services to a company called UnXis and now he says the IBM lawsuit is now the company's only asset. TSG Group is insolvent with $3.7 million in debt incurred since the bankruptcy filing in 2007 and has only $143,352 of cash on hand, according to the motion to convert the bankruptcy case.

As in other similar bankruptcies, "there is no reasonable chance of 'rehabilitation' in these cases as the debtors' estates have already sold substantially all of their assets and have no continuing business operations," the motion said.

Chapter 7 would allow the trustee to eliminate administrative expenses while awaiting the outcome of the IBM case, which now is the company's "only reasonable opportunity" to pay outstanding expenses, the motion said.

Cahn also seeks to continue as the trustee if the case is converted, to oversee the litigation and any administrative matters.

The IBM case was closed pending the outcome of a related lawsuit SCO filed against Novell Inc. In that case, a jury decided in 2010 that Novell, and not SCO, owned the copyrights to Unix that existed before Novell sold the system in 1995.

A motion is currently pending in U.S. District Court in Salt Lake City to open the IBM case.

SCO contends that IBM engaged in unfair competition when it allegedly misappropriated and misused Unix code, which SCO contends was the basis for a key change that allowed the Linux operating system to become a commercial competitor to Unix.

Linux's basic codes are open source, meaning anyone can use them for free, but businesses such as IBM and Novell have built commercial products around Linux and competed with SCO's Unix and other systems.