SCO's Linux battle: Game over?

A district court on Friday confirmed that Novell holds Unix and UnixWare copyrights that are at the focus of SCO's ongoing multi-billion dollar lawsuit against IBM. It is a far reaching ruling that enables Novell to force SCO to withdraw its suit against IBM and claim licensing fees collected by the company.

It appears that SCO's legal proceedings against IBM, filed originally back in March of 2003, may be coming to an end. A significant 122-page ruling by district court Judge Dale Kimball that was published last Friday is considered to be a huge blow against SCO: According to Groklaw, the bottom-line message of the ruling is "that SCO is toast."

This specific case between SCO and Novell was about who actually owned the copyright to Unix "System V Release x", commonly referred to as SVRx. While SCO claimed that the company acquired the rights with a certain purchase of Unix assets in 1995 and accordingly filed for Unix copyrights in July 2003, Novell disputed this claim and, after a series of letters being sent back and forth between the companies, filed for Unix copyrights in October of 2003. A "slander of title" suit filed in response by SCO was dismissed in June 2004; the battle however continued with complaints filed by both parties as well as a "slander of title" suit brought forward by Novell in July 2005.

The ruling is a huge setback to SCO's claim it should be paid billions in royalties by International Business Machines. SCO says that International Business Machines took code from Unix for use in Linux, another operating system. Shares of SCO Group plummeted 72.8%, or $1.13, to 43 cents. Practically all of SCO's business is Unix-related.

Novell shares jumped 3.1%, or 20 cents, to $6.62, on Monday. The court victory likely means better business for Novell, which sells Linux software. Brent Williams, an analyst at the Benchmark brokerage, explained that many businesses interested in switching to Linux had been sitting on the sidelines while the SCO suit played out. They worried using Linux could obligate them to pay royalties to SCO or make them lawsuit targets. SCO has sued AutoZone and DaimlerChrysler for using Linux without paying them.

Increased Linux adoption would also benefit Red Hat. The company sells Linux-based operating systems. Shares of Red Hat were down 23 cents, or 1.1%, to $21.75, on Monday.