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TSG Tells Bankruptcy Court: Collecting Novell's SVRX $$ Has Stopped ~ by pj
Sunday, July 31 2011 @ 01:37 PM EDT

SCO has just filed a "Notice of Intent to Abandon Property" [PDF], telling the court that it's not worth the trouble to collect the SVRX royalties for Novell any more and SCO Japan has told licensees to stop paying them. Objections are to be filed by August 12.

The argument is that SCO Japan was sold to UnXis, and SCO put all the Novell SVRX money in SCO Japan, and now the Ch. 11 Trustee, Edward Cahn, says he no longer has the staff to do it, and because the amount TSG could get from its administrative fee is so low, he's decided it makes sense to just stop collecting the money. SCO Japan has already informed licensees not to keep paying those royalties, so they didn't wait for the court to rule. It's a done deal, and now they ask for the rubber stamp from the court. Then again, when does the bankruptcy court say no to any SCO plans?

The judge ruled that SCO could sell its business to UnXis without Novell approval, because in his eyes the 1995 APA [PDF] that made SCO collect those funds in the first place isn't executory, so I thought it was dead in the water already. When the judge made that ruling about the APA, Novell, under the new management at Attachmate, didn't bother to appeal, even though it had asked for more time to do so. That made me conclude that the lawyers did what they were supposed to, but someone not a lawyer decided not to go on. So I'm not sure what they can do now, or if they will even bother. Maybe they anticipated this day, decided it wasn't worth the money to take it to the next level. Or maybe there's a plan I can't imagine. SCO didn't get famous for contract interpretation or honoring its obligations, and if it can dance around a courtroom to finesse you out of your money, guess what happens? But Novell didn't play its part when it could have, so why should we care? I confess, I don't.

Here's the filing:

07/29/2011 - 1306 - Notice of Intent to Abandon Property and Setting Time for Objection (Hearing Date: 8/15/11 at 11:00 a.m.; Objection Deadline: 8/12/11 at 4:00 p.m.) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Attachments: # 1 Certificate of Service) (Fatell, Bonnie) (Entered: 07/29/2011)

Here's what it says about collecting the money:
Prior to the Sale, the Debtors, and subsequently the Trustee, operated the Business, which included, in part, collecting certain royalties from SVRX software licensees (“Licensees’) and remitting the royalties to Novell, Inc. (“Novell”) and in return, the Debtors were entitled to payment of an administrative fee from the royalties. Substantially all of the SVRX royalties were paid into the account of a foreign subsidiary, SCO Japan, Ltd. (“SCO Japan”)....

As a result of the sale of the Business, the transfer of the foreign subsidiaries, including SCO Japan Ltd., to the Buyer, and the termination of all of the employees from the Debtors’ estates, the Trustee is no longer in a position to continue to collect the SVRX royalties nor the administrative fee associated with such collection.. The collection of the SVRX royalties results in a de minimis benefit to the estate (approximately $30,000 in gross administrative fees were earned in the first quarter of 2011 and the fully-loaded cost of collecting these royalties might be greater than these fees). Accordingly, the Trustee has concluded that it is in the best interest of the Debtors’ estates to abandon its interest in the administrative fee associated with collection of the SVRX royalties as such amount has inconsequential value, the royalties are burdensome and costly to collect and there is no benefit to the Debtors’ estates.

Instructions have been provided to the Licensees that SCO Japan is no longer collecting SVRX royalties and to the extent any amounts are received, the Buyer, which now owns the SCO Japan bank accounts, has been instructed to return royalty payments to the Licensees.

That makes it sound like SCO Japan collected the money, then paid them to the Trustee, and he had to pay to Novell, although it's not altogether clear. And he'd rather not be bothered. And if you were Edward Cahn, and you thought it likely that the appeal will not go SCO's way, would you want to have to handle this administrative function until the day you died? Probably you'd prefer to clear the deck.

And if there is one thing the bankruptcy court in Delaware is good at, it's clearing the debtor's deck of pesky responsibilities other people in good faith relied on when the debtor earlier promised to fulfill them.

Is the agreement partly invalid and partly valid? And if partly valid, what parts are still valid and on whom? As I pointed out at the time, the judge ruled that Novell had no further obligations under the APA, which I don't believe is factually true, but that is why he said it wasn't executory, despite IP contracts normally being ones you can't toss overboard. Here's a lawyer explaining what an executory contract normally is. But simultaneously, SCO is telling the court of appeals that Novell is obligated to hand over the copyrights because of the wording of the APA plus Amendment 2. So, go figure. It's like a Rubik's cube. Somebody can figure it out. But I never could. You need a cynical mind, and I never mastered that. Nor do I want to. I mean, seriously, do you *want* to learn how to think like SCO? It might stick, and then where would you be?

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