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IP attorney: Bankrupt or not, SCO case is 'boring'

Jack Loftus, News Writer
For many IT managers and open source advocates, the infamous SCO trial resembles one of those hokey daytime dramas. What was once the Linux trial of the ages has today devolved into a contract argument with little bearing on the future of Linux or opens source software.

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In this interview with SearchOpenSource.com, Tom Carey, an attorney with Boston-based Bromberg & Sunstein LLP, waxes nostalgic on the SCO trial -- where it was, what lessons it has taught users of Linux and open source software, and what SCO's rumored bankruptcy could mean for the major players.

First of all, what would an SCO bankruptcy mean for this case?

Tom Carey: I don't think that by itself bankruptcy would change nature of case. I haven't looked at SCO's cash position, but I have seen their balance sheet. SCO's cash has not been terrible to date, but it does seem like [they are] about to run out of cash. Novell might be thinking that if they can successfully assert the rights to all of the money SCO got from Microsoft, then the claim would make the company bankrupt. SCO's liability would exceed its ability to pay.

If there is no Chapter 11 filing, then the trial goes on [and] SCO suffers a slow and painful death rather than a quick one.
Tom Carey
IP attorneyBromberg & Sunstein LLP

If we look at SCO's 10Q [Editor's Note: The 10Q is a comprehensive report of a company's performance filed with the SEC every quarter] file, they have $227,000 long-term liability but it's not clear that they are even substantially in debt. The form does show a debt to Novell of $449,000. This is a number that Novell disagrees with; they claim it is in the millions. SCO's cash and other assets are $21 million. But in light of this information, I don't think Chapter 11 filing is imminent.

Can Novell make statements like this regarding SCO's "imminent bankruptcy?"

Carey: What they've done, as I understand it, is make an assertion in a court filing. That's pretty par for the course. It's a little dramatic, but they're espousing a position in court and have a right to do it. Looking very quickly at the year end 2004 balance sheet of SCO, their long term debt is $1.3 million. Potentially, that is not a lot debt.

What does this mean for the various other players like IBM?

Carey: If there is a bankruptcy, you'd have to assume it is a Chapter 11 filing, under which a company will continue to operate. In that case, I don't think there would be much of a change for these players.

Does the word 'bankrupt' lead casual observers to associate "the end" with SCO and the case?

Carey: Novell is not trying to affect you and me with this filing. Remember, they are trying to affect a judge. They are saying to the judge: look, this company owes us lot of money, they're burning through cash and soon they will go bankrupt. If you don't have them hand over the money quickly, we stand the chance of not getting any money at all.

In the event that SCO files financials this week and it turns out they are barely breathing but OK, then what?

Carey: If there is no Chapter 11 filing, then the trial goes on as is. SCO suffers a slow and painful death rather than a quick one.

Why should people still care about this case?

Carey: The only reason people still care about this case is that some people want to see SCO get their come-uppance. Eventually, IBM will spend them to death. That's because IBM has a case, and SCO has crummy case.

The original SCO filing and what has led up to today is the real lesson for the open source community. Users have to be careful how they document the originals of their open source code. Because of the case I think people have tightened up their coding procedures, and I don't think anybody thinks today that SCO has a snowball's chance in hell of winning. It's just not going to happen. And in a twist, since the SCO lawsuit was brought forward, more people have taken to creating open source software.

If this trial goes away, what are the remaining issues for open source?

Carey: The real difficult question that open source has had to deal as it relates to this trial is how to interact with the proprietary software world. Users have to ask themselves how aggressive they want to be. How viral do you want your open source license to be? Do you want to pursue a scorched earth policy, with nothing but open source on the system, or do you want to have a live and let live attitude?

All in all, I think the world has gotten bored with this story. The whole thing has devolved into a contract squabble of no particular interest to the world. The OSS community has moved on too. The next big legal story I think will be the whole drafting process of GPLv3. The issues that come up around that are probably far more important now than the SCO case ever was.


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