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BayStar To Sue SCO

The off-again, on-again relationship between BayStar Capital and the SCO Group took a decided turn to the off-again after the creditor announced it would file a lawsuit against the Unix software company Friday.

In a tersely worded press release, BayStar officials stated they would get a judge to rule on a dispute between the two companies over an unreleased dispute over terms of SCO's stock repurchase plan filed May 31.

Earlier Friday, the public spat started with SCO releasing a statement claiming it considered the repurchase agreement closed, converting 40,000 Series A-1 shares, or equity shares, to a little more than 2.1 million common stock shares. SCO officials also said they had the $13 million in cash that was part of the deal.

BayStar's statement didn't reveal the nature of the dispute, and officials were unavailable for comment at press time, but SCO's press release provides a glimpse. According to SCO, BayStar is holding up the transfer "pending resolution of claims by BayStar that SCO's recent public statements regarding SCOsource licensing opportunities are inconsistent with statements previously made by SCO to representatives of BayStar."

SCOsource licensing is a program to collect the revenues it gains, or tries to gain, from companies licensing its Unix System V copyrighted source code. Currently, the company is in the middle of a $5 billion lawsuit with IBM , maintaining that a significant portion of its Unix code was illegally used to bolster the Linux kernel source code, courtesy of IBM engineers.

While the odds against the company winning a legal battle continue to mount, SCO executives have remained optimistic about their chances and plan to charge Linux users a licensing fee if they win.

Since the lawsuit began last year, only one company has publicly announced it paid for SCOsource licensing for its Linux OS line of servers, EV1servers.net. This time last year, Microsoft and Sun Microsystems paid for Unix licenses from SCO.

According to SCO's Friday release, BayStar wants confidential information surrounding SCOsource licensing plans as the wording seems to indicate BayStar was led to believe there would be more revenue on the quarterly filing.

"SCO takes such questions very seriously and reaffirms the accuracy of its public disclosures concerning its SCOsource business and confirms its belief that such disclosures are not inconsistent with any confidential statements previously made to BayStar," the release reads.

BayStar was one of two agencies last year who invested $50 million in SCO to help the company fund its legal fight against IBM, as well as separate lawsuits against Linux distributor Red Hat and Novell and customers AutoZone and DaimlerChrysler.

Earlier this week, SCO essentially lost its case against DaimlerChrysler Wednesday after a judge threw out all charges except one in a Michigan district court.

In April, BayStar tried to put a curb on some of the more outlandish public statements made by senior SCO executives, going so far as threatening to demand its investment returned for breach of contract.

The Royal Bank of Canada, BayStar's investment partner, dropped out in May, converting 10,000 equity shares (valued at $1,000 apiece) into common shares and selling the remaining 20,000 equity shares to BayStar.

Last month, BayStar officials did a turnabout and said they were happy with SCO activities, and planned to sell back its 40,000 equity shares.