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1/9/2007
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Novell Says In Court Filing That SCO Owes It Millions

In a motion filed in U.S. District Court in Salt Lake City, Novell is seeking nearly $26 million in Unix licensing fees.

Novell delivered a roundhouse punch to SCO in their dispute over who owns the copyright to Unix.

Novell filed court papers Monday saying SCO received nearly $26 million in Unix System V license fees from Microsoft and Sun Microsystems. But, contrary to its 1995 Asset Purchase Agreement with Novell, SCO has failed to pass them on to Novell.

Novell says the agreement states it is entitled to 100% of the fees, according to a motion for partial summary judgment or preliminary injunction filed by Novell lawyers in the U.S. District Court in Salt Lake City.

SCO is "hemorrhaging assets at an unsustainable rate," the motion asserts. If SCO isn't forced to set aside the license fees now, Novell may be irreparably harmed by never being able to recover them, the motion asserts.

It's the latest round in the ongoing fight over Unix copyrights. Novell in effect is asserting that SCO would be out of funds if it weren't for its use of the license fees for its own purposes. Instead of passing them along to Novell, it has used them to file suits against IBM, Novell, and Red Hat in its bid to stay alive, the Novell lawyers assert.

Even if the court doesn't grant Novell a preliminary injunction, it should impose a constructive trust to hold any existing or future Unix V fees because "SCO is on the verge of insolvency."

Instead of trying to resolve the issue of who owns what in Unix copyrights, Novell is focusing instead on requiring SCO to live up to an existing contract. If Novell prevails on some aspect of its motion, SCO's ability to sustain its cases in court is likely to diminish or disappear.

Novell isn't only asserting that the fees are owed but that SCO refused to disclose their existence, despite repeated inquiries from Novell, until the current court action forced it to.

"For SCO, bankruptcy is inevitable ... bankruptcy is imminent. Once this bankruptcy occurs, Novell will lose all ability to collect its judgment," Novell attorneys say in the motion.

They say the motion is timely because SCO refused to reveal its Microsoft and Sun royalty agreements, despite inquiries from Novell starting in 2003. "For almost three years, SCO hid these agreements. It engaged in the "willful and malicious withholding of the relevant agreements while it dissipated the trust funds," the motion says.

SCO spokesman Blake Stowell said Tuesday Novell's assertions "jump to incorrect conclusions." SCO will report its fourth-quarter and 2006 year-end results Jan. 17, he said.

He added Wednesday, ""Novell's assertions are patently false. We consider it irresponsible of Novell's lawyers to include such comments in court filings."

He declined to comment further.

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