CDXPO : SCO CEO: Novell-SuSE breaks SCO contract

Novell Inc.’s US$210 million planned acquisition of SuSE Linux AG will put it in violation of a non-compete agreement the networking vendor has with The SCO Group Inc., and could possibly lead to legal action, SCO CEO Darl McBride said Monday in an interview.

The non-compete agreement is part of a broader agreement signed between Novell and The Santa Cruz Operation Inc. when Novell sold the rights to its Unix System V software in 1995, McBride said.

The SCO Group (formerly Caldera Systems Inc.) inherited the non-compete agreement, along with the Unix rights, when it acquired Santa Cruz Operation’s Unix business in 2000, McBride said.

The non-compete agreement prohibits Novell from directly competing with SCO’s Unix-on-Intel business, McBride said. “When (The Santa Cruz Operation) sold us the property, included in the property was a non-compete,” he said. “Last time I checked, Linux was intended to compete with our core products.”

The non-compete agreement was only one of several legal avenues that SCO is considering, should the SuSE acquisition be competed. according to McBride. SCO also believes that Novell does not have the right to distribute Linux, which SCO alleges to contain intellectual property that has been derived and copied directly from its Unix System V code, he said.

Novell greatly enhanced its legal risks “by getting into this Linux game,” McBride said.

The vendor announced plans to acquire SuSE two weeks ago. At the same time, it disclosed that IBM Corp. plans to make a US$50 million investment in Novell. [Please see Novell to buy SuSE for US$210 million in cash.]

SCO has been embroiled in a high profile legal dispute with IBM over IBM’s contributions to Linux, in which it alleges that Big Blue inappropriately contributed code to the Linux kernel in violation of IBM’s System V license. The Lindon, Utah, company has threatened to sue Linux users and distributors and has, in turn, been excoriated by the open source community, which claims that SCO has yet to prove any of its allegations.

Even before SuSE entered the picture, Novell and SCO had argued over the Unix System V sale. Last spring, Novell asserted that it had retained Unix copyright and patents as part of the 1995 Asset Purchase Agreement, but it backed off these claims when SCO produced a 1996 amendment letter that appeared to support SCO’s claims.

SCO is now waiting for the SuSE acquisition to be completed before it engages in any legal action, McBride said. “Once the deal is done, the non-compete can be invoked at that point.”

A Novell spokesperson declined to comment on this story.