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Anti-Linux Litigator SCO Inc. Files for Bankruptcy

Associated Press
Published | Updated

SALT LAKE CITY – The SCO Group Inc., licenser of the Unix operating system, filed for bankruptcy protection Friday, drained by unsuccessfully filing lawsuits claiming its software code was misappropriated by developers of the open-source Linux operating system.

The Lindon, Utah, company said it is seeking protection from creditors under Chapter 11 as it continues to license and improve Unix for corporate servers.

"We want to assure our customers and partners that they can continue to rely on SCO products, support and services for their critical business operations," Darl McBride, president and chief executive, said in a statement Friday.

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McBride has blamed competition from Linux for operating losses and the ongoing slide in company revenues. The company said its operating loss in the quarter ending April 30 was $1.1 million. A year earlier, it lost $3.9 million.

In August, U.S. District Court Dale Kimball ruled that Novell Inc. (NOVL), not SCO, owns the copyrights covering the Unix operating system. SCO licenses the Unix software for corporate servers.

The case could leave SCO with a bigger liability: Kimball said SCO may owe Novell software royalties.

"They were going to owe Novell a ton of money that they probably didn't have," said Rob Enderle, an industry analyst in San Jose, Calif. "They had been taking a major hit from legal fees and were burning through cash at a high rate. I don't think this is a big surprise."

Kimball's ruling was a relief for IBM Corp. (IBM), the target of one lawsuit by SCO claiming Big Blue dumped Unix code in Linux.

Separately, Novell is countersuing SCO for damages in a trial that was to begin next week but is now on hold because of the bankruptcy filing.

Chapter 11 frees a company from lawsuits by creditors while it reorganizes its finances.

McBride didn't immediately return a message relayed Friday through a public-relations firm.

SCO said the petition was filed electronically in U.S. Bankruptcy Court for Delaware. Copies weren't immediately available online.