Judge OKs Novell Suit Against SCO

A bankruptcy judge will allow software company Novell Inc. to sue rival The SCO Group Inc. for royalties on software that both companies claim to own.

Judge Kevin Gross of the U.S. Bankruptcy Court in Wilmington, Del., said in court documents filed Tuesday that he would allow a trial over the matter, which was halted when SCO filed for bankruptcy earlier this year.

When a company files for bankruptcy, all pending litigation in which it's involved is suspended. A bankruptcy judge may allow a suit to proceed if the outcome is essential to the bankruptcy case or for other reasons.

Lindon, Utah-based SCO purchased all of Novell's Unix software licenses in 1995, and the two companies have been battling over the rights to the server-running software since 2004.

Novell has argued that according to the 1995 purchase agreement, it retained the rights to all Unix copyrights and that SCO has breached the agreement. SCO maintains that it owns the copyrights and has accused Novell of copyright infringement.

The Utah District Court ruled in August that Novell owned the rights to Unix and is entitled to royalties from these licenses.

The District Court scheduled a trial for Sept. 17 to determine the amount Novell is owed and whether SCO had the authority to license the Unix software to two other software companies. But SCO filed for Chapter 11 protection on Sept. 14, narrowly avoiding the trial.

Gross said the trial must proceed because its outcome _ which will determine the amount of Novell's claim against SCO _ is "the very essence of a bankruptcy court's jurisdiction to decide what is property of the estate."

If the amount of Novell's claim isn't determined, Gross said SCO Group "simply cannot file a confirmable plan of reorganization."

SCO had argued that a lawsuit would eat up valuable time it should be devoting to its reorganization, but Gross said both it and Novell had already completed "extensive trial preparation" before SCO filed for bankruptcy.

Attorneys for SCO couldn't be reached by Monday afternoon for comment.

SCO has been planning to sell the rights to the Unix system, including the right to take over the Novell lawsuit.