SCO Stock Plunges After Ruling
By Brice Wallace Deseret Morning News
LINDON — SCO Group Inc. stock nose-dived Monday following a Friday court ruling that could cripple the company’s separate case against International Business Machines Corp.
U.S. District Judge Dale Kimball on Friday ruled that Novell Inc. — and not SCO — owns the copyrights covering the Unix computer operating system. The ruling is a setback for Lindon-based SCO in its lawsuits against Novell and IBM over the use of Unix in the Linux computer operating system.
SCO is seeking billions of dollars in royalty payments from hundreds of companies and is also in litigation with Red Hat Inc., a maker of Linux software. SCO’s case against Novell had been set for trial next month.
SCO bought certain rights to the Unix operating system, which Linux was modeled on, from Novell in 1995 for $145 million, including the right to license Unix to others. SCO sued for slander of title after Novell publicly disputed ownership of the Unix copyrights and said that SCO didn’t have the right to demand royalties from IBM.
“The bill of sale is clear: all copyrights were excluded from the transfer,” Kimball wrote in his 102-page ruling. “Novell is the owner of the Unix and UnixWare copyrights.”
In the aftermath of the ruling, SCO stock fell nearly 72 percent Monday, falling $1.12 to close at 44 cents. During the past year it had been as high as $3.11 but not lower than 77 cents.
Attempts to contact SCO for comment on Monday were unsuccessful, but the company had released a prepared statement in which it said it was “obviously disappointed” with Kimball’s ruling.
“However, the court clearly determined that SCO owns the copyrights to the technology developed or derived by SCO after Novell transferred the assets to SCO in 1995,” the statement said. “This includes the new development in all subsequent versions of UnixWare up through the most current release of UnixWare and substantial portions of SCO UnixWare Gemini 64.”
SCO also said that it owns the “exclusive, worldwide license to the UnixWare trademark,” that some other ownership claims “were not challenged and remain intact” and that other issues remain to be litigated.
“Although the district judge ruled in Novell’s favor on important issues, the case has not yet been fully vetted by the legal system and we will continue to explore our options with respect to how we move forward from here,” SCO statement said.
But a constant SCO critic, the Web site groklaw.com, continued taking its shots at SCO. It said the SCO statement contained “loopy bravado” and that it listed “all the things they didn’t lose.”
Another post at groklaw.com said “SCO is toast.”
The ruling “vindicates the position Novell has taken since the inception of the dispute with SCO,” Joe LaSala, a Novell senior vice president, said in a statement Friday. “It settles the issue of who owns the copyrights of Unix in Novell’s favor.”
The ruling means SCO probably can’t successfully sue IBM or Linux users for copyright violations and that would make the use of so- called “open-source” operating systems more attractive. Linux, the free operating system that challenges Microsoft Corp.’s Windows, is used by IBM, based in Armonk, N.Y., the world’s largest computer- services provider.
SCO sued IBM in 2003 on copyright infringement and breach of contract, saying IBM violated an agreement for a joint project with SCO. SCO said that it owns the copyrights to the Unix code and that IBM inserted Unix code into Linux. IBM has repeatedly denied the claim. SCO was seeking as much as $5 billion in damages, IBM said in court papers.
IBM licensed the Unix code from AT&T Corp. about 20 years ago to develop its AIX system. SCO said the license is part of what a predecessor company bought from Novell.
Red Hat also has filed suit against SCO in Delaware, seeking a judgment that its programs don’t violate the Unix copyrights. That suit is on hold pending the outcome of the Utah case. Kimball put SCO’s case against IBM on hold while the Novell case proceeds.
Novell stock rose 18 cents, or 2.8 percent, Monday to close at $6.60. During the past year, the price has ranged from $5.70 to $8.26. IBM stock rose 7 cents to close at $112.71. During the past year, the price has ranged from $75.20 to $118.82.
Contributing: Bloomberg News
E-mail: bwallace@desnews.com
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