End of the line for SCO?

[unixronin]

Computerworld's Frank Hayes summarizes the latest events in the SCO lawsuit:

You might not know it from some of the coverage, but The SCO Group now appears to be facing annihilation in its lawsuits against IBM, Novell, Red Hat and Linux users AutoZone and DaimlerChrysler.

That's since last Friday, when Novell finally had to file its response to a lawsuit SCO originally filed waaaay back in January 2004.  (Groklaw has copies of both SCO's amended suit against Novell and Novell's countersuit, along with a timeline of what's held things up, for those who want so see the legalese.)

If "annihilation" seems like too strong a word, understand this: If Novell gets the preliminary injunction it's asking for, SCO will no longer have any money.  None.  SCO would be out of business -- something IBM, Red Hat, AutoZone and DaimlerChrysler could never have made happen.

How could that be?  It's because of how SCO ended up with Novell's Unix business.  In 1995, Novell sold certain Unix assets to a Unix vendor called The Santa Cruz Operation.  Santa Cruz Operation wanted to buy everything Unix-related that Novell had, but didn't have the cash.  So under the deal the two companies cut, Santa Cruz would collect royalties from Unix licensees and forward them to Novell, which would send back a 5% of the money to Santa Cruz as an administration fee.

In 2000, Santa Cruz Operation sold its Unix business to the company that would become known as SCO Group.  That didn't change the deal with Novell: 95% of Unix royalties still had to end up in Novell's hands.

In fiscal 2003, SCO Group reported $25.8 million in new Unix license fees from Sun and Microsoft, according to its financial statements.  Novell says 95% of that should be paid to Novell.  That would come to $24.5 million that SCO owes Novell.

But SCO currently has only about $11 million.  So Novell is asking for SCO's assets to be attached and its cash put in a trust fund until the legal issues are resolved, in order to protect the money Novell says it's owed.  If the judge in this case (who's also the judge in SCO v IBM), grants those preliminaries, SCO will have no money at all to continue in business -- much less to sue IBM, Novell or Linux users.

And that's just the preliminary injunction.  If SCO survives that, SCO still has to explain why it hasn't abided by the terms of the contract it inherited when it bought the Unix assets from Santa Cruz Operation.  And unless SCO can find a remarkably well-hidden loophole that absolves it of the 95% cut that Novell is due, SCO will still owe a lot more money than it's got.

And remember, that's SCO's best-case scenario.  There are still disputes about whether SCO improperly made and cancelled Unix licenses and who owns the Unix copyrights.  SCO would have to win every point just to stay alive in its suits against IBM and the others.

SCO's worst-case scenario: SCO drops dead -- and very soon.