SCO threatened with Chapter 7 destruction

SCO Group's long-standing legal battles over its claimed Unix copyrights may finally end with US bankruptcy court forcing a Chapter 7 cyanide capsule down the company's throat.

On Tuesday, the trustee appointed by the federal bankruptcy court in Delaware asked for permission to dissolve the ailing shell-of-a-software-company and pawn off its assets.

Trustee Roberta DeAngelis told the presiding judge in a filing that that SCO has "no reasonable change of rehabilitation," adding the company has "tried — and failed — to liquidate their business in chapter 11."

In September 2007, SCO filed for Chapter 11 bankruptcy protection, which shields the company from creditors while it reorganizes the biz. Forcing the firm into Chapter 7 would require an appointed independent trustee to sell all of SCO's assets and distribute the proceeds to its creditors.

"We are reviewing the motion with counsel and will have a detailed response for the court in due course," SCO told El Reg in an e-mailed statement. "We plan to oppose the motion and present our own suggested course of action to the court."

The bankruptcy judge now has three options. He can approve Chapter 7, accept a SCO survival plan under Chapter 11 if it somehow scrounges up the money to pay off its debts, or dismiss the bankruptcy protection plea completely. That decision is likely to come during a hearing set for June 12.

SCO's mess began about a decade ago, when Novell sold Unix trademarks and other assets to the firm. SCO assumed that deal included copyrights to Unix code,and the company used this claim to force Sun Microsystems and Microsoft into licensing agreements. It then sued IBM in 2003, claiming the computer giant was using the allegedly copyrighted technology in its Linux kernel.

A year later, SCO filed a slander of action lawsuit against Novell after the company said it still, in fact, owned the disputed Unix copyrights in SCO's case against IBM. After three years of legal battling, a US district judge in Delaware ruled in Novell's favor and ordered SCO to pay nearly $2.5m in royalties to Novell for unjust enrichment.

SCO filed for bankruptcy about one month after the court's initial ruling. The company is hoping to overturn the decision on appeal.

A copy of motion for chapter 7 is available here (PDF) ®