SCO gets a bankruptcy trustee

IN THE DELAWARE US Bankruptcy Court, Judge Kevin Gross yesterday ordered that a Chapter 11 Trustee be appointed to take control of The SCO Group, Inc, et al (SCO).

Thus SCO's management - chairman Ralph Yarro, CEO Darl McBride, and all the rest of its executives - are no longer in control of the company.

So SCO, the snake in the world of operating systems software, has been scotched.

The backstory here involves more than six years of litigation, so to say that it's extensive is an understatement. It would be impossible to present more than the barest overview here, but the whole sad story is covered in excruciating, exquisite detail at Groklaw, the legal and information technology cross-educational website founded by Pamela Jones and primarily dedicated to the long-running saga of SCO's spectacular self-immolation at law.

(Fair disclosure - The INQUIRER and this writer were of some assistance to Groklaw. We published its Letter to SCO in September 2003, because at the time it lacked adequate hosting and bandwidth.)

Litigation
SCO, a psychopathic little company that began as the second-tier Linux vendor Caldera. veered to the dark side almost seven years ago, after buying an x86 Unix distribution business from the Santa Cruz Operation.

Caldera wasn't a very successful Linux distribution and the company saw that its SCO Unix business was slowly declining, partly due to the increasing popularity of Linux.

Rather than embrace the challenge of developing fresh Linux-based technology for its established SCO Unix small- to medium-sized business market, Caldera took a fateful wrong turn by attempting a hostile takeover of Linux instead.

Caldera adopted the name SCO and embarked upon an ill-considered and ultimately disastrous course of kamikazi litigation, first against IBM and then against Novell.

SCO's hopeless crusade was all in a vain attempt to charge licence fees for Linux, based on a greedy, fevered dream of extracting billions of dollars from corporations, governments and individual users throughout the burgeoning open source universe.

Its scheme proceeded by attempting to misappropriate the copyrights to Unix, which actually are owned by Novell, and claiming without any evidence whatsoever that Linux had been created as a derivative work of Unix, in the technical legal sense of the term.

After its lawsuit against IBM had been running for several years, SCO suddenly realised that it couldn't hope to prevail without being able to prove that it owned the copyrights to the Unix source code. Since Novell owned those copyrights, SCO decided to sue Novell to try to get a jury to agree that it was entitled to them, because, well... it wanted them.

SCO's lawsuit against IBM was postponed after it sued Novell, since its claims against IBM rested upon its contention that it owned the copyrights to Unix, a claim that Novell disputed. SCO v. IBM remains stayed by SCO's bankruptcy and now may never go to trial.

Following devastating losses in pretrial motions and on the eve of trial in SCO v. Novell, SCO fled into bankruptcy court, because its chances of prevailing against Novell weren't looking at all good at that point.

Along the way, SCO also managed to sue Autozone and Daimler-Chrysler, but those two lawsuits were relatively insignificant compared with IBM and Novell. The former case is also stayed and the latter lawsuit was dismissed. In addition, Red Hat sued SCO seeking a declaratory judgment, but that case is stayed as well.

With us so far?

Bankruptcy
Faced with the imminent collapse about its ears of its Linux litigation strategy, SCO filed for Chapter 11 bankruptcy protection in September 2007. Its reprieve from facing trial in SCO v. Novell was short-lived, however, as the bankruptcy court lifted the automatic stay and the Novell trial was held in November 2008.

SCO lost. The court ruled that Novell owns the copyrights to Unix that SCO had tried to claim as its own. SCO appealed and its appeal remains pending until at least 31 August .

Holding fast to its vision of the mountainous riches that would accrue to it, should it just manage hang in there and get a favourable appellate court ruling, reverse its loss against Novell, somehow survive a trial in its lawsuit against IBM, and then successfully extort money from everyone in the world who is running Linux, SCO hemmed and hawed and stalled its bankruptcy case for as long as it possibly could, then stalled some more.

Chapter 11 bankruptcy is intended to protect debtors while they develop a viable plan for reorganisation, and there are rules. One of those rules is that the debtor is allowed six months to develop such a reorganisation plan, with at most two six-month extensions permitted. SCO requested and was granted its two extensions, but finally it overran both its time and the court's patience.

SCO's principal creditors, Novell and IBM, as well as the US Trustee's Office, all filed motions asking the bankruptcy court to convert SCO's case from Chapter 11 to Chapter 7, that is, they requested that the judge order SCO's dissolution.

At the hearing on those conversion motions held on 15 June, SCO arrived late with its last desperate Hail Mary play, the breathless claim that it had found a buyer for most of its assets and conversion wouldn't be necessary if it could just be allowed to complete the transaction.

Judge Gross, still mindful of his obligation to manage SCO's Chapter 11 bankruptcy case in the best interests of SCO's estate and all its creditors, exercised his judicial discretion and scheduled another hearing to review the proposed sale on 27 July.

At that hearing, the judge had before him the three motions for conversion to Chapter 7 dissolution, plus SCO's motion for sale of some of its assets. His order handed down yesterday resolved all of those matters at once.

Judge Gross denied all four of the motions before the court and, as mentioned, ordered the Office of the US Trustee to appoint a Chapter 11 Trustee.

The appointment of a Trustee in a bankruptcy case removes control of the Debtor's estate - its business and all of its assets - from the Debtor in Possession, which in this case was SCO's management.

Conclusion
It's still too soon to play "Ding Dong the Witch is Dead", because the ever resourceful SCO and its lawyers might still have another trick or two up their sleeves. However, the ominous patch of darkness that's now fallen over SCO is the shadow of Dorothy's house in the Wizard of Oz, falling out of the sky overhead. µ

L'Inq
Groklaw