SCO Seeks to Block Novell-SUSE Deal

SCO is planning to block Novell's acquisition of SUSE Linux on the grounds that it has a non-compete agreement with Novell dating back to its purchase of Unix.

The SCO Group has announced it plans to take legal action to block Novell Inc.s proposed purchase of SUSE Linux AG. The company claims that it has inherited a non-compete agreement, which was part of a broader agreement signed between Novell and one of SCOs ancestors, The Santa Cruz Operation Inc., when Novell sold Unixs intellectual property rights.

In addition, Lindon, Utah-based SCO announced that it will broaden its code copyright fight beyond IBM. In a press release, SCO stated that it is now including "copyrighted code included in the 1994 settlement between Unix Systems Laboratories, Inc. and Berkeley Software Design, Inc. in the expanded scope protection of and defense against unauthorized use and exploitation of SCOs intellectual property. SCO acquired this code and associated copyrights in 1995 from Novell."

This means that SCO is opening the gates to possibly take action against the open-source organizations behind such BSD-based operating systems as FreeBSD, NetBSD and OpenBSD. In addition, since Apple Computer Inc.s Mac OS X is based on BSD Unix, Apple too could be targeted.

Novell denies SCOs claims. According to Kevan Barney, Novells Linux senior manager of public relations, "There is no non-compete provision in those contracts, and the pending acquisition of SUSE Linux does not violate any agreement between Novell and SCO." In any case, he said, "Novell has received no formal communication from SCO and ... Novell will respond in due course should SCO choose to formally pursue this issue."

SCO has also announced that it has agreed to pay Boies, Schiller & Flexner LLP and other law firms representing the company $1 million in cash and will issue 400,000 shares of its common stock. "As a result of the issuance of this consideration, SCO anticipates recording a charge to earnings of approximately $8,956,000 in its fourth quarter that ended October 31, 2003. This $8,956,000 charge to earnings is comprised of non-cash expense of $7,956,000 related to the issuance of the 400,000 shares of common stock and $1,000,000 in cash expense," the company announced.

Looking at this newest turn of events, Dan Kusnetzky, vice president of system software research for analyst company International Data Corp., said, "These are more litigation bills that The SCO Group will have to pay for. Maybe they can find some more investors."

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