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SCO vs. Novell: The bankruptcy wars
Nov. 08, 2007

Can SCO escape Novell's wrath? Will SCO CEO Darl McBride emerge rejuvenated and ready to continue the Linux legal wars by selling SCO's Unix business? These and many more questions will be answered in the next episode of "As SCO Turns."

In our last chapter, SCO appeared in front of a bankruptcy court on Nov. 6, 2007, in Delaware. When the news that SCO was applying for Chapter 11 bankruptcy first appeared, most assumed that was the end of SCO and its seemingly endless lawsuits against IBM, Novell and other Linux-related companies.

Since then, Novell asked that the stay on its case against SCO be lifted. That case, which dealt with which company really owned Unix's IP (intellectual property), was entering its final days in the U.S. District Court in Utah. Since the court had already decided that Novell still owned Unix's IP, there was no doubt that Novell would easily win its last points and that SCO would quickly collapse.

Despite SCO's continued business woes, the company was granted a new chance for life and continued litigation when York Capital Management, a private equity firm, offered a complex purchase agreement for SCO. While the total amount of the deal comes to $36 million, a closer look reveals SCO would get $10 million in cash and what amounts to a $10 million line of credit to use to continue its legal fights with Novell and IBM.

On Nov. 6, the bankruptcy court took up the matter. The fullest account of the day in court can be found on Groklaw. To sum up, Novell was unable to immediately deliver the knockout blow of being able to proceed with the Utah court case.

The judge, however, did not rule out this possibility or of putting some of SCO's assets into a trust for the amounts it may owe Novell from its Microsoft and Sun deals. The judge also stated that he will rule quickly on Novell's main motion to allow the SCO case in Utah to proceed. He also, however, did not rule out deciding himself on the remaining matters of the Utah case.

The bankruptcy court will take up the remaining matters--IBM and Novell objecting to SCO being sold in order to continue its lawsuits and SCO asking the court to allow its sale of assets to York--on Nov. 16.

So it is that every time it appears that SCO's cases are finally coming to an end the company seems to find a new way to continue its litigation. The bankruptcy court's ruling on whether SCO can be sold will be SCO's next critical test. If the deal with York is allowed, SCO's Unix and Linux litigation seems certain to continue for at least another year. This SCO soap opera is far from over.

—Steven J. Vaughan-Nichols

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