Novell Session at Cloud Expo

A federal jury Tuesday found that Novell owns the Unix copyrights. They never transferred to the Santa Cruz Operation and so they never transferred to its descendent SCO.

A decision in SCO's favor would have opened the door for it to pursue its original multibillion-dollar case against IBM and to levy a tax on every one of the thousands of Linux systems out there. Without the copyrights SCO has no standing to go after IBM.

SCO was also hoping to collect perhaps at much $215 million in lost business from Novell and an uncalculated amount of punitive damages, enough to put itself back on its feet.

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The seven-year experience has drained SCO of resources and it's currently operating under the protection of the bankruptcy court, its management replaced with a trustee. The loss will probably kill it, a fate that will suit its legion of enemies just fine.

Ironically Novell's fate is also hanging in the balance right now depending on whether it is sold and to whom.

A few days before the trial started on March 8, Elliott Associates, a hedge fund, suddenly put a $2 billion takeover offer on the table that Novell subsequently rejected as "inadequate," but basically promised to replace. With no white knight on the horizon, Elliott could succeed, Novell could be broken up, and its pieces could be sold off. It's unclear where its Linux unit could go.

Novell only claimed that it retained the copyrights after SCO sued Novell's buddy IBM in 2003, charging IBM with purloining code from Unix to harden Linux, the open source operating system that has widely replaced Unix.

Novell sold Unix to the Santa Cruz Operation, SCO's predecessor company, in 1995 and it was always assumed the copyrights went with it. The Asset Purchase Agreement (APA), however, that commemorated the deal was ambiguous on that point and to get to this day SCO first had to get a summary judgment saying Novell owned the copyrights overturned and returned to Utah for trial. Its case rested on a subsequent amendment to the APA, whose meaning was also contested.

The trial saw Novell's former business executives beginning with ex-CEO Robert Frankenberg take the stand to testify that the copyrights were meant to pass to SCO. A few former Novell attorneys claimed they had reserved the copyrights without telling anybody. One of Novell's witnesses, one of its former lawyers Allison Amadia, who negotiated the amendment, even admitted under cross-examination that the amendment transferred the copyrights.

The jury of seven men and five women got the case last Friday around noon, deliberating for four-and-a-half hours then breaking for a three-day weekend, reconvening again on today.