Novell to SCO - Pay Up

gosherm writes with word that, now that the dust is beginning to settle on the long-running SCO case, Novell wants to get paid. Now. They're requesting that the customary stay on SCO's finances (as a result of their bankruptcy) be lifted so that Novell can begin recouping some of its losses from the protracted legal battle. "'We need to adjudicate if this is money owed to Novell or if it is Novell's property,' said Bruce Lowry, spokesman for Novell. That could determine how quickly Novell can recover those funds. And time is of the essence since there's a possibility SCO 'may run low or even completely out of cash during the process of trying to reorganize,' Novell said in court documents filed Thursday. Novell is also trying to protect royalties SCO collects from Unix and Unixware software licensees and remits annually to the software developer. SCO is required to continue to remit between $500,000 and $800,000 annually to Novell -- the next payment is due Nov. 14. SCO remitted $696,413 to Novell between the third quarter of 2006 and the second quarter of this year."

The title is misleading

[Anonymous Coward]

SCO collects fees for Novell. There is no disagreement about that. What Novell is asking for is that those fees be paid through to Novell. This has nothing to do with the major claim, tens of millions, about the Microsoft and Sun licenses. This is just about the routine license fees that continue to roll in.

AllParadox described it best. He likened SCO to a store clerk. The money the clerk collects belongs to the store owner. The clerk has no claim to it at all. If the clerk goes bankrupt, the trustee can't claim that it is part of the bankruptcy estate.

The reason that SCO jumped (or tried to jump, it hasn't been granted yet.) into chapter 11 was that the Utah court was about to apportion the amount of money it had to pay Novell for the Microsoft and Sun licenses. Because of that, Novell has warned that it is going to file something claiming that SCO acted in bad faith. My WAG is that the bankruptcy judge will allow the Utah case to go forward so as to determine the amount of money SCO owes Novell. Since SCO has little chance of being a successful business, I am also guessing that they will be put in chapter 7. In other words, they won't be re-organizing, they will be liquidating.

Novell to become the new SCO?

[moosesocks]

Am I the only one a bit concerned about Novel taking on the self-assumed role of being the new "corporate stewards" of Linux? Especially since the slashdot community seems to accept them and IBM in that role...

Comical Ali lives?

[Epsillon]

if you look inside that appeals process and you take a microscope and look at the record of Kimball's summary judgment rulings that have gone to appeals, he gets overturned the vast majority of the time. It's nearly two-thirds of the time.

Um, Darl, this isn't the sort of thing you say about someone holding the contents of your codpiece in his hands. He's already ruled that your company, of which you are CEO, with responsibility for the company's actions, has committed conversion and you may just have annoyed him a touch with that quote. I really do hope the Honourable Dale A. Kimball sees what you said. The result could be rather interesting.

Not to mention the ratio of appealed to non-appealed cases might have some bearing on the soundness of his judgments. Sometimes it helps to know just how many of these summary judgments have people "banged to rights" before we start looking at the appeal successes.

But best of British to you, old son. You really are quite, quite funny. Erm, is that a tank in the background?

Re:Negative value reorganization of moderation?

[Johnny Mnemonic]

I've already expressed my meta-moderation opinion about the anonymous and elitist moderation system: It sucks.

Do you really read at -1, then? I've tried. I tried the first couple of times that I moderated, to make sure I wasn't missing any hidden gems. And basically it made the comments unreadable. If you do this too, I don't wonder that you leave on a regular basis.

On the contrary, I find the moderation system to be rather genius. It made a system of open posting readable. I too well remember the days of having each of my favorite Usenet groups made unreadable through spam, and I was glad to find a system that prevented that.

They can say anything they want

[John Jamieson]

Novell can ask for anything they want, what the judge says is what counts.

SCO CANNOT win in the long term, but boy are they good at playing the legal system. If this Bankrupcy judge remains as nieve as he appears... the money will be gone by the time he wakes up. We will see.

How SCO's law firm (BSF) avoids being on the hook for millions, and how the SCO executive tries to stay out of jail will be as interesting as this whole saga... Groklaw has many years of material left just with SCO alone.

So, does this mean Novell owns them? No.

[DrJimbo]

Not yet. The Sun and Microsoft "license" royalties are worth $25 million on face value and $37 million with interest. But first the trial in Utah must be unstayed so Judge Kimball can decide exactly how much of that money is actually Novell's. Before the bankruptcy, if that was a substantial sum then it would have been game over for SCO. But now with the bankruptcy, after Judge Kimball decides the amount in Utah, the action swings back to Delaware where it will be up to Judge Gross to decide whether to give Novell the constructive trust or not.

Novell has already asked Judge Gross for a constructive trust but he refused (which was very reasonable IMO) saying that there might be other creditors on the same footing as Novell that he has not heard from yet. In other words, if it is discovered that SCO stole money from other people in addition to Novell then the victims of those thefts get to join Novell at the front of the line of creditors.

The first thing that has to happen though is the November 6th hearing in Delaware where Judge Gross gets to decide whether to lift the stay or not.

Re:So, does this mean Novell owns them?

[Ritchie70]

But this isn't about Novell being a creditor; this is about SCO having in their posession $ that belongs to Novell.

Re:out of money

[speaker of the truth]

Lawsuits these days aren't finished until they've had at least one appeal. Its doubtful SCO can hold on for an appeal so no, there won't be any rulings that the spinmeisters can't spin away.

Who Will Get Unix?

[Doc Ruby]

One issue of the SCO/Novell suit is whether SCO owns the Unix System V code (by owning its copyrights), or whether Novell still does instead. Novell didn't seem to be doing any business depending on owning the Unix copyright, so even if this suit is settled (probably by the judge, in a binding decision) specifying that Unix belongs to Novell either because SCO never owned it, or that SCO did own it but must surrendered it to Novell as compensation for damages, Novell will probably own it. But what will they do with it?

Will they sell it "again", this time retaining their rights to use it that will prevent any attempt at the kind of extortion SCO attempted (whether or not it was legitimately based)? Will they keep it and use it themselves, other than to protect their right to include it in Linux? Will they kill it so it doesn't cause any problems in the new market Novell is in (maybe because Microsoft wants it out of the way once and for all)? Or will they perhaps kill just the copyright, and put it all into the public domain, or under GPL - perhaps just including it in a revised Linux kernel?

Will Novell perhaps release a Linux compatible layer made of Unix that interoperates with only the Novell distro, and with Vista?

The SCO/Novell suit could turn out to be just a preliminary battle. The next chapter of Unix's history could turn out to be the really interesting one. Which, with that kind of relativity, could be extremely interesting.

Re:Corporate veil about to get shredded

[HexaByte]

I do. There is the issue of conversion - stealing someone else's money and using it as your own. The way SCO has spent money on bonuses the day before the bankruptcy filing, the hiring of a temp CFO at $150/hr ($105 wages and $45 to the temp agency), along with various other things that have happened in this case does not make them look too good.

I especially like telling Judge Kimball there's no need for a constructive trust because they won't be going bankrupt, then turning around and filling Chapter 11.

Add to that announced plans to burn thru their money with overpriced lawyers, and whatnot, knowing it's someone else's money your spending, and the behavior becomes criminal. That's a good reason to pierce the corporate veil! However, IANAL.

Will someone explain???

[mysticgoat]

Will someone who understands bankruptcies explain to me how SCO's bankruptcy can continue when the financials they submitted are so clearly wrong?

A court on the East Coast has declared that SCO has been holding assets belonging to Novell.

SCO apparently is including those assets in its balance sheet, and only referring to the matter in the way an accountant would treat a minor unknown, like "Estimated Office Inventory Shrinkage, Current Quarter". However the theft involved is not minor; it probably exceeds the sum of SCO's reported profits over the last few years.

How can the Utah bankruptcy court accept the financial statements that SCO has submitted as valid? How can SCO get protected status if its application failed to meet the requirements?

This case strikes me as being like a pawn shop that has declared bankruptcy after being found guilty of fencing stolen property. The bankruptcy cannot go forward until an investigation to determine how much of its current inventory is stolen property is completed.

It seems to me that this is one of those instances where the bankruptcy cannot proceed until the amount of the theft has been determined. I would think that SCO's bankruptcy request should be denied or nullified, and SCO should be told it cannot submit one until it can accurately produce the required financial statements.

Is it any wonder that most of SCO's accounting staff have left? Being associated with the financials SCO provided the bankruptcy court would be a career stopper for an accountant.