Novell: SCO on its last legs, bankruptcy imminent

The SCO Group, the Unix vendor that gained notoriety for claiming IBM illegally incorporated its proprietary Unix code into Linux, is hanging by a thread and financial bankruptcy is "inevitable," according to court documents filed by Novell in U.S. District court in Utah this week.

In the filing, which was posted on the Groklaw Web site Tuesday, Novell argues that SCO owes it the majority of revenues gained from Unix licensing deals it made with Microsoft and Sun in 2003. The revenues amount to nearly $26 million.

Novell's claim stems from a 1995 deal it crafted when it transferred Unix and UnixWare to The Santa Cruz Operation, which sold its software and services business to Caldera, which later became SCO. Under the deal, known as the asset purchase agreement [APA], SCO is responsible for forwarding the revenue it receives from SVRX [Unix System V] license agreements to Novell, with Novell sending back 5% to SCO as an administrative fee.

Novell filed its initial demand for the revenues last September as part of a response to a lawsuit SCO initiated in 2004, claiming that Novell had misrepresented its ownership of Unix. Unix ownership is at the heart of the original lawsuit SCO filed against IBM in 2003.

SCO has refused to turn over any money to Novell, claiming that the revenues from Microsoft and Sun don't fall under the APA. In addition, SCO claims that turning over the money would amount to an unjust financial burden at a time when it is spending dollars fighting its legal case against IBM.