SCO Scores, Says Claims Now Worth More
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|CEO Darl McBride|
Two years after losing a summary judgment against Novell over who owns Unix copyrights, a U.S Federal Appeals court judge has changed the score. The appeals judge struck down the 2007 ruling that awarded Unix copyrights to Novell, so now SCO is free to pursue a new trial against Novell as well as one against IBM on alleged copyright infringement.
Not surprisingly, SCO's chief executive, Darl McBride, appeared noticeably upbeat during a conference call with investors today.
With SCO now once again able to litigate on the basis of its Unix copyright ownership, McBride said he's optimistic about the company's future and its ability to remain a going concern.
"My opinion is whatever our claims were worth when we woke up yesterday morning, they are worth more now as a result of the ruling that came down," McBride said.
Not everything went SCO's way this week. The appeals court judge upheld a royalty payment to Novell, which means the company is still on the hook for about $3 million.
Yet the development still marks a dramatic shift in fortunes for SCO, which has been embroiled in a bitter six-year-old dispute with Novell over which company owns certain Unix trademarks.
At the heart of the matter is SCO's assertion that it purchased all rights from Novell in 1995, a claim that Novell disputes. In August 2007, Judge Dale Kimball said in a summary judgment ruling that Novell still owned the Unix and UnixWare copyrights and that SCO would be required to pay royalties to Novell.
Now just over two years later, McBride senses a new opportunity.
"August 10, 2007, was a really bad day, and yesterday was a really good day," he said. "We look forward to taking that momentum now and moving forward. Obviously, this doesn't get us totally out of hot water, but it certainly puts us in a really good position to move forward to accomplish the objective of the company and to maximize the value for our shareholders."
Novell intends to continue to fight the issue.
"We are pleased that the decision affirmed the district court's monetary award of approximately $3M from SCO to Novell," Novell said in a statement. "On other issues such as ownership of the Unix copyrights ... Novell intends to vigorously defend the case and the interests of its Linux customers and the greater open source community."
The original 2007 ruling helped to push SCO into bankruptcy protection, where it still remains. SCO has been trying to get itself out of bankruptcy by selling off assets, though the bankruptcy court has blocked such moves.
The latest step will be a Delaware bankruptcy court's appointment of a bankruptcy trustee for SCO.
McBride noted on the call that he didn't have any visibility into who that trustee might be, but that he hopes the trustee will review SCO's legal claims and put a value on them.
Any boost to SCO's financial position from the appeal ruling would likely be welcome. Jeff Hunsaker, the company's president, said that SCO is concerned about the appeal court's decision to uphold the 2007 judgment on royalties in Novell's favor -- totaling approximately $2.5 million plus interest.
But he added that it could have been worse.
"It is much less than the $40 million that Novell originally claimed was owed to them," Hunsaker said.
SCO had stated in a 2007 SEC filing that the potential of a large payout to Novell had helped to push it into bankruptcy protection.
As to how SCO now expects to be able to pay Novell, Hunsaker said that the company has a plan -- but gave away few details.
"We have a proposed business deal waiting in the wings that can solve the judgment if it can be structured in a way to meet the approval of the bankruptcy court," he said.