Shares in the SCO Group, the company which claimed to own patents on much of the Linux operating system source code, plummeted by 70% after a court ruled last week that its infringement claims against rival Novell were unfounded. Meanwhile, investor confidence drove Novell’s own stock price up by 7%.

SCO Group claimed that its predecessor, Santa Cruz Operations, bought the copyright to the Unix code that eventually became the foundation of Linux from Novell in 1995, and therefore had a right to royalties from the code.

Last week, however, a California court found that that transaction did not involve the sale of copyright of much of the disputed code. The judge ruled that SCO must pay Novell back-dated royalties from its use of the code in question. This will include a significant proportion of a $16 million licensing agreement with Microsoft. That will be financially disastrous for the already-troubled company.

The company is also involved in a lengthy lawsuit against IBM, which it claims infringes other Linux patents. Victory in that trial now seems unlikely, and the future of SCO looks bleak.

Further reading

Information Age Today - SCO denies imminent bankruptcy - January 2007
Information Age feature - Open source grows up