Novell's $210m planned acquisition of SuSE Linux will put it in violation of a non-compete agreement the networking company has with The SCO Group, and could lead to legal action.
The non-compete agreement is part of a broader agreement signed between Novell and The Santa Cruz Operation when Novell sold the rights to its Unix System V software in 1995, said SCO chief executive officer Darl McBride.
The SCO Group (formerly Caldera Systems) inherited the non-compete agreement, along with the Unix rights, when it acquired Santa Cruz Operation's Unix business in 2000.
The non-compete agreement prohibits Novell from competing directly with SCO's Unix-on-Intel business, McBride said.
"When The Santa Cruz Operation sold us the property, included in the property was a non-compete," he added. "Last time I checked, Linux was intended to compete with our core products."
The non-compete agreement was only one of several legal avenues that SCO is considering, should the SuSE acquisition be competed, according to McBride. SCO also believes that Novell does not have the right to distribute Linux which, SCO alleges, contains intellectual property that has been derived and copied directly from its Unix System V code.
Novell greatly enhanced its legal risks "by getting into this Linux game", McBride said.
Novell announced plans to acquire SuSE two weeks ago. At the same time, it disclosed that IBM plans to make a $50m investment in Novell.
SCO has been embroiled in a high-profile legal dispute with IBM over IBM's contributions to Linux, in which it alleges that IBM inappropriately contributed code to the Linux kernel in violation of IBM's System V licence.
The company has threatened to sue Linux users and distributors and has, in turn, been excoriated by the open-source community, which claims that SCO has yet to prove any of its allegations.
Even before SuSE entered the picture, Novell and SCO had argued over the Unix System V sale. Last spring, Novell asserted that it had retained Unix copyright and patents as part of the 1995 Asset Purchase Agreement, but it backed off these claims when SCO produced a 1996 amendment letter which appeared to support SCO's claims.
SCO is now waiting for the SuSE acquisition to be completed before it engages in any legal action. "Once the deal is done, the non-compete can be invoked at that point," McBride said.
A Novell spokesman declined to comment on this story.
Robert McMillan writes for IDG News Service