Trial Set To Determine What SCO Owes Novell

BobB-nw writes with word that this April will be the trial date for SCO's financial reckoning. Novell will discover via the courts how much (if anything) SCO is going to be compelled to pay in compensation for the lengthy trial over Unix code rights. The NetworkWorld piece also offers an overview of the case. "In September, The Wall Street Journal described the ruling against SCO as 'a boon to the open source software movement.' But experts say Unix is filled with technology that carries copyrights tied to many different companies and that it would be a nightmare to open source the Unix code collectively. Instead, Novell would have to pick and choose pieces to open-source, a process that could begin once the trial has ended."

Comments

And???..

[Anonymous Coward]

SCO is going to pay Novell How?..

Re:And???..

[techpawn]

Well, the courts have this neat way of getting blood from stones... Just ask anyone who has been through a divorce...

Re:And???..

[multisync]

SCO is going to pay Novell How?..

Maybe Microsoft could purchase some more licenses

Make the law firm pay Novell.

[R2.0]

No, really. The Boies law firm representing SCO is being compensated by effectively taking part ownership in SCO. Having done that, should they not be liable for SCO's debts?

My contention for a while has been that, in taking compensation from SCO in terms of stock and shares, Boies has abdicated it's duty as an officer of the court. In a contingency compensation arrangement, the law firm gets paid when they win the case. But in this situation, they only get paid if SCO stock stays high, so their litigation goals are different than just winning.

I think they should be made to experience the full consequences of their agreement.

Re:Make the law firm pay Novell.

[Ngarrang]

In a 'corporation', though, the company is an entity unto itself. The stock holders are not liable for legal damages assessed, right? The personal assets of the employees, chiefs and boards would also safe, unless they were gained through illegal means.

Re:Make the law firm pay Novell.

[R2.0]

True, but the law firm is a *partnership*, where the partners ARE liable - witness the Anderson/Enron debacle.

I'll admit that I'm not sure what the actual arrangement of Boies's ownership is, but would not that be grounds for discovery?

Re:Make the law firm pay Novell.

[qbwiz]

The law firm is a partnership, but SCO is not: SCO is probably a limited liability corporation, which would limit any investors' liability.

Re:Make the law firm pay Novell.

[claytonjr]

It depends on what state the company is incorporated in. Some states have better laws that limit personally liability (read: Nevada).

Re:Make the law firm pay Novell.

[Anonymous Coward]

The stock holders are not liable for legal damages assessed, right? Depends on the circumstances. With bankrupt companies, the trustee has a lot of leeway to recover funds that were paid inappropriately. I believe the phrase is "knew or should have known".

BS&F *knew or should have known* that their legal position was untenable. They also *knew or should have known* what the contracts said. The bottom line is that they got paid with money that they *knew or should have known* belonged to Novell.

Re:Make the law firm pay Novell.

[Anonymous Coward]

Also, there are such things as Limited Liability Partnerships in many jurisdictions. Even IF Novell's lawyers could pierce the corporate veil to the owners (assuming Boies had enough stock to be considered an owner) - which is a big if and extraordinarily unlikely - the Boies partners might be shielded from liability.

Most likely, Novell may become a creditor in bankruptcy. It wouldn't surprise me if part of the settlement ends up being a junior security interest in major assets and a first-in-line security interest in lien-free assets.

Re:Make the law firm pay Novell.

[RobertLTux]

point of interest Boies has redone that agreement to drop the stock part out. The Big Money in this is targetting various payments that TSCOG has done to various folks (including Darl and the rest of the CxO group)

Judge Gross does have the power to require a ROLLBACK of some of this money.

Oh and Novell would not be A Creditor since the funds have been ruled to be "converted" (humans would say STOLEN)
so Taxes and Novell get paid first then the creditors list rolls down.

Re:Make the law firm pay Novell.

[CodeBuster]

Having done that, should they not be liable for SCO's debts? Not unless the law firm made a separate personal guarantee (i.e. contract) to stand behind those debts and why would they have given that to SCOs creditors? There are no more responsible for the debts of the corporation than any of the other owners. That is the whole point of corporation, to prevent direct exposure to liability of the owners whether they be other corporations, private individuals, or shareholders (public traded company). Novel can suck whatever assets remain out of the dried husk of SCO until it crumbles into dust, but once the assets of the corporation are completely exhausted, the corporate headquarters sold, and the office furniture has been auctioned off the company files the dissolution paperwork (or their law firm does it) and the company ceases to exist as entity.

I think they should be made to experience the full consequences of their agreement. People have been trying to pierce the veil of the corporation for generations now, but the courts have consistently upheld the separation of liability from the owners of the corporation and established many precedents. The modern world as we know it is based upon these abstractions and they will not be unwound short of crumpling the whole thing up and starting over which could be, well to put it nicely, messy like strawberry jam.

I thought we figured this out

[techpawn]

When SCO was pulled from the market, Novell gets their old furniture cuz there's nothing else to really take...
I guess source code is just as good.

Re:I thought we figured this out

[mikael]

Back in the mid-80's, there was a guy in my home town who started his own high-street company selling home computer products. Unfortunately, he didn't understand the concept of market saturation, so whatever sold well one month, he would buy twice as much the next month. After the sales figures came in, the company was immediately liquidated. Everything was still there - half stacked shelves with the stuff still in delivery boxes. Even the managers notepad had half written accounting notes with a large negative number at the very end underscored in red ink. Everything in the store was given a liquidation sale price - from the street front sign to the executive chair/desk and pen in the managers office.

Perhaps we will see the SCO obelisk auctioned off in Ebay or donated to the Computer History Museum.

I'll let my lawyer, Johnny, speak for me...

[monkeyboythom]

I want my two dollars!

I hated SCO first

[MosesJones]

One thing that annoys me in these posts is all these Johnny Come Lately people who have just started to hate SCO as a result of their actions against Linux. I've been actively hating SCO ever since I had to use their piece of crap OS in 1993 on a 286 PC. All the bugger had to do was keep the modem connection open so we could send email but would it stay up? Would it buggery. It was falling over all the time and in the end we had to go 3 months without email to the outside world, a contributory factor in the company going bust.

So you think you have come to loathe SCO over these last few years? Let me tell you that real hatred takes 15 years to mature :)

Re:I hated SCO first

[Mr. Underbridge]

One thing that annoys me in these posts is all these Johnny Come Lately people who have just started to hate SCO as a result of their actions against Linux. I've been actively hating SCO ever since I had to use their piece of crap OS in 1993 on a 286 PC.

Then as you surely know, they aren't really the same SCO as that one.

Re:I hated SCO first

[ashridah]

That would mean you probably hate Tarantella. Hate to tell you, but they still exist.

Shake your fist in impotent rage!

Re:I hated SCO first

[mu51c10rd]

I admit I was a Caldera employee back when they purchased SCO and left Tarantella alone. The first thing that happened was most of the Utah-based employees were replaced by employees from CA. The company that was once Caldera was gutted after the acquisition and replaced by SCO. I left shortly thereafter and my department was laid off 6 months after I left, and was replaced by SCO's equivalent. It is unfortunate to see my former employer slammed all over the news, but the reality is that those who worked hard on Caldera's Linux distribution were removed after the buyout. The SCO Group has nothing to do with the old Caldera, other than retaining the geographic location.

Quick question

[MC Negro]

Okay, could someone (more knowledgeable than I) explain how this whole trademark vs. IP thing works? From what I understand, it sounds like Novell owns the underlying IP of Unix, but I also thought The Open Group was in charge of the "UNIX" trademark/certification. So speaking purely hypothetically, say Novell were to get back into the Unix market, would they have to have certification by the Open Group to call it "UNIX"?

I guess my question is bit more far-reaching - what is the relationship between the IP holder v. the trademark holder in these circumstances, and are there any other examples where someone owns the IP of something, but doesn't necessarily own the trademark?

Re:Quick question

[RichMan]

There are many types of IP.

Trademark - to brand a product in a particular category
Copyright - particular text experssion
Patent - invention

Novell used to own the UNIX trademark. They passed it to the OpenGroup when the sold the UNIX business to Santa Cruz Operating Systems. OpenGroup certifies systems as meeting the UNIX standard.

SCO has 2 versions of UNIX, I believe one is UNIX95(tm) compliant, the other UNIX98(tm) compliant.
IBM AIX UNIX is UNIX2003(tm) compliant.

http://en.wikipedia.org/wiki/Single_UNIX_Specification

http://en.wikipedia.org/wiki/Intellectual_Property

Re:Quick question

[Simon Brooke]

There are many types of IP.

Errr... that's another way of saying 'there is no such thing as intellectual property'. Lawyers and other weasels who speak of 'intellectual property' are playing a classic quickness of the hand deceiveth the eye trick. Precisely, they're doing two things:

• They're deliberately conflating the limited and short term contingent protections which Western states have found it pragmatic to offer creators or new ideas and products with the unlimited and long term protections which Western states have traditionally offered to property in land;
• They're making a hegemonistic claim about the status of new ideas and expressions.

Whether property in land ought to be given the sorts of protections which Western society gives it is another question entirely. But that's beside the point. New ideas and expressions are not property, do not have the status of property, and do not have nearly the same degree of protection that property has. And it's in everyone's interest - that includes the 'content creators' - that it remains that way. Where would Walt Disney be now if all the classic fairy tales had been someone else's 'intellectual property'?

Admit it ...

[Anonymous Coward]

You might just as well admit now: Nobody will be satisfied before the day comes when Darl is in jail and his wife is doing two dollar blow jobs in the parking outside WalMart to pay the bills ...

Just how much does SCO have?

[Jason Levine]

Their last financial report (July '07, they apparently didn't file one for October '07) said that they had $15.79 million in total assets. This isn't taking into account any other debts. That was down $4 million from the previous quarter. Let's suppose that that drop repeated itself the next two quarters (since we're almost out of the current quarter). That means that SCO would have just under $8 million in total assets. So even if Novell took everything SCO had into possession and all other debtors got nothing, Novell wouldn't come close to recouping the money they were owed from Microsoft's $16.6 million Unix license payment. (To say nothing of Sun's $9.3 million license payment or any other payments.)

Another way to look at how much SCO is worth is to look at their market cap. Back in July, SCOX closed at $1.48 per share. Over 21.25 million shares, that's $31.45 million. Today, they're at $0.09 per share for a market cap of $1,912,500. Novell could easily buy up the remaining pieces of SCOX if they wanted to. Any way you slice it, SCO is toast and won't be able to pay Novell back even a fraction of what they owe them.

Re:Just how much does SCO have?

[KokorHekkus]

I belive you are correct with the exception of using their market capitalisation as a benchmark since SCOX has a "stockholder rights plan" (a.k.a "poison pill") that basically allows the directors to set their price should anyone actually want to take over the whole company. From SCOX last years 10-K (under "Risk Factors):

We have adopted a stockholder rights plan. The power given to the Board of Directors by the stockholder rights plan may make it more difficult for a change of control of our company to occur or for our company to be acquired if the acquisition is opposed by our Board of Directors.

The board of directors are also allowed to play very fast and loose when it comes to issue new preferred stock:

Our Board of Directors currently has the right, with respect to the 5,000,000 shares of our preferred stock, to authorize the issuance of one or more additional series of our preferred stock with such voting, dividend and other rights as our directors determine. The Board of Directors can designate new series of preferred stock without the approval of the holders of our common stock. The rights of holders of our common stock may be adversely affected by the rights of any holders of additional shares of preferred stock that may be issued in the future, including without limitation, further dilution of the equity ownership percentage of our holders of common stock and their voting power if we issue preferred stock with voting rights. Additionally, the issuance of preferred stock could make it more difficult for a third party to acquire a majority of our outstanding voting stock.

(bold is my added emphasis)

The directors can pretty much dilute the value and rights of the common stock in any way they wish. So the value of the common stock does not mirror a take-over cost.

SCOX 10-K: http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0000891020-07-000020&Type=HTML

Re:Just how much does SCO have?

[bhtooefr]

Sounds like stockholder rights management. ;)

it's not compensation for the trial

[lophophore]

The description here is incorrect.

SCO does not owe Novell any compensation for the trial or lawsuit.

They owe them something like 95% of the Unix license fees they collected from Sun and Microsoft, as well as some others.

SOX? Go after execs personally?

[walterbyrd]

I thought that was the idea of Sarbanes-Oxely, execs are not supposed to able to commit crimes and hide behind the company. Exec can be help personally liable.

Besides, scox paying novell is not the point. The point is to legally prove that Linux does not use proprietary UNIX technology, and to thereby stop the msft FUD.

The trial is significant because this trial has to be completed before the real trial can be held.

Re:SOX? Go after execs personally?

[techpawn]

I thought that was the idea of Sarbanes-Oxely

From my SOX experience it was just to create undue bureaucracy in IT department's of publicly traded companies and some other accounting nonsense to make sure the bean counters are actually counting beans that really exist and not saying the kidney beans are jelly beans. SOX wasn't to hold anyone reasonable in a corp when things went bad, it was a knee-jerk law in response to Enron. Like the PATRIOT ACT was to 9/11

I agree with Lewis Black on this one. You don't want another Enron, here's your law: If you can't explain, in one sentence, what it is that your company... DOES... it's illegal!

Not trolling, just having flashbacks! SOX makes me rock back and forth in a corner in the fetal position...

Re:SOX? Go after execs personally?

[Chris Burke]

Besides, scox paying novell is not the point. The point is to legally prove that Linux does not use proprietary UNIX technology, and to thereby stop the msft FUD.

Exactly! That's why I was rather confused by this quote from the summary.

"In September, The Wall Street Journal described the ruling against SCO as 'a boon to the open source software movement.' But experts say Unix is filled with technology that carries copyrights tied to many different companies and that it would be a nightmare to open source the Unix code collectively."

Uh, who cares? We don't want their shitty Unix source! We want it to be known far and wide that Linux doesn't contain any of that shitty code! That's the "boon" to open source -- preventing proprietary vendors from being able to say "OooooOOOooh possible IP violaaaaations oooOOOOooh unkown liability ooowaaaah!" in an eerie voice to scare people off from open source! And this, a relatively high profile attempt to turn the vague scary threat of copyright violation into legal fact that fell flat on its face, should help do that.

not SCO's money in the first place

[Nick Barnes]

This isn't money which "SCO owes Novell". This is Novell's money which SCO has retained (in breach of contract). The distinction seems trivial but should be important. In theory, it should give Novell priority over all other creditors (including the lawyers, accountants, and landlords with whom SCO has been merrily spending money since entering Chapter 11). The word "disgorgement" looms large in the future of this case. A pair of loose analogies should make the distinction clear: if I rob a bank, and then use the stolen money to hire expensive lawyers in a futile attempt to escape justice, the bank is entitled to recover that money from the lawyers. But if instead I borrow money from a bank and then spend it all on expensive lawyers on my way out of business, the bank is out of luck. The current situation is more like the former analogy than the latter. In selling Sys V licenses to Microsoft and Sun, TSCOG was acting as Novell's agent: the money was Novell's all along.

Not according to scox or msft

[walterbyrd]

Msft is sponsoring scox, and acacia to claim that proprietary technology was illegally put into linux. Of course, these are just more msft FUD PR stunt. But, sponsering companies like acacia and scox to abuse the US legal system, and file bogus lawsuits has a chilling effect on those who might want to use, or contribute to, linux. Msft is, very successfully IMO, putting a legal cloud over linux.

That would not end it

[walterbyrd]

It is not as simple as that. The trials would go on, even if scox files chapter 7, and even if scox is no longer in business.

Hey Darl!

[spun]

Don't forget to pay your $6,990,000 Novell court fees, you cock smoking teabagger.

Summary misleading

[UnknowingFool]

But experts say Unix is filled with technology that carries copyrights tied to many different companies and that it would be a nightmare to open source the Unix code collectively. Instead, Novell would have to pick and choose pieces to open-source, a process that could begin once the trial has ended.

First of all, the journalist is confusing Unix as a family with the UNIX IP that Novell owns. As a family, Unix is confusing because it contains contributions from many companies and organizations like components like RCU (IBM), filesystems (JFS, XFS, ZFS, etc), libraries (BSD, GNU,etc) and the like. Novell, however, knows exactly what it owns in terms of copyrights.

The main issue that needs to worked out is what amount Novell owed from the Microsoft and Sun licenses. When Novell sold SCO the Unix business (and not the IP), SCO agreed to pay Novell 100% of any UNIX licenses which Novell would remit 5% back to SCO for their trouble. SCO argued that the licenses to Microsoft and Sun were not UNIX licenses at all. The judge didn't buy their argument for although SCO may have called it differently, certainly the licenses they sold contained UNIX IP and thus Novell was entitled to a share. The reason why the judge did not summarily order SCO to pay Novell the full amount was there is a question of how much of the technology was Novell's UNIX and how much was SCO's IP (i.e. UnixWare, OpenServer). That question is being addressed by the court now. I highly doubt that SCO sold much of their IP to the likes of Sun whose Unix offering is much more advanced or Microsoft who isn't even in the Unix business.