Federal district judge Dale A. Kimball issued a ruling on Friday declaring that Novell owns the UNIX copyrights. Kimball's ruling means that the end is near for SCO's protracted litigation trainwreck, an epic assortment of lawsuits that have achieved infamy in the tech industry. Judge Kimball finds that Novell never transferred ownership of the UNIX copyrights to SCO during or after a 1995 agreement between the two companies.

Judge Kimball's ruling effectively ends SCO's "slander of title" lawsuit against Novell, which was based on SCO's allegation that Novell had wrongfully claimed ownership of the UNIX copyrights. Since Novell is the rightful owner of the UNIX copyrights, "there is no basis in the evidence before this court for finding that Novell's public claims of ownership were a misappropriation or seizure of SCO's property," said Judge Kimball in his 102-page ruling.

Confirmation of Novell's ownership of the UNIX copyrights will also put an end to SCO's lawsuit against IBM, in which SCO alleges that IBM infringed on UNIX copyrights by incorporating proprietary UNIX code into the open-source Linux operating system. Judge Kimball has determined that, under the terms of Section 4.16(b) of the 1995 Asset Purchase Agreement between the two companies, Novell has the authority to "direct SCO to waive its purported claims for breaches of [UNIX] license agreements with IBM and Sequent."

An expensive mistake

In the original agreement between Novell and SCO, Novell retained ownership of all UNIX copyrights but granted SCO the ability to sell licenses to third parties. As part of this arrangement, SCO agreed to give Novell all of the royalties generated through UNIX licensing minus a five percent administrative fee. Judge Kimball has ruled that SCO owes Novell 95 percent of the royalties generated by the licensing of Novell's UNIX copyrights. The two most prominent SCO licensees are Microsoft and Sun, both of which develop operating systems that compete directly with Linux.

According to Judge Kimball's ruling, Microsoft paid SCO approximately $16 million for license rights and Sun paid approximately $10 million. SCO neglected to turn over the licensing fees to Novell, which "gave SCO its first profitable year in history," Kimball notes. "As a matter of law, the court concludes that SCO breached its fiduciary duties to Novell by failing to account for and remit the appropriate SVRX Royalty payments to Novell for the SVRX portions of the 2003 Sun and Microsoft Agreements," says Kimball. "Because of the decrease in SCO's revenues and assets, Novell fears that it will be unable to collect on its claim for royalties."

With the exception of the wrongfully-retained UNIX royalties from Microsoft and Sun, SCO has consistently lost money since the start of this entire affair. Few options remain open for SCO, and a bankruptcy could be imminent.