SCO to pay lawyers millions for more legal firepower

Unix developer The SCO Group Tuesday said that it is extending an agreement with its lawyers to defend itself against new copyright issues in a move that will take a multimillion-dollar bite out of its fourth-quarter 2003 financial results to go toward paying legal fees.

Unix developer The SCO Group Tuesday said that it is extending an agreement with its lawyers to defend itself against new copyright issues in a move that will take a multimillion-dollar bite out of its fourth-quarter 2003 financial results to go toward paying legal fees.

The company, which is currently embroiled in a lawsuit with IBM over a Unix license, said it plans to take a charge of $8,956,000 in its fourth quarter ended Oct. 31 to pay Boies, Schiller & Flexner LLP and other law firms representing SCO. One million dollars will be paid in cash while the remaining amount will go toward the issuance of 400,000 shares of common stock, the company said.

Additionally, SCO said that it plans to take another $8,741,000 non-cash charge for the fourth quarter 2003 related to the issue of Series A Convertible Preferred Stock.

Despite the nearly $17.7 million in charges, SCO said it is holding to its previous fourth-quarter guidance of revenue between $22 million and $25 million. The company is due to release its fourth-quarter and fiscal year 2003 results on Dec. 8.

With the additional legal representation, SCO is looking to up the ante in the defense of its intellectual property. The company said Boies, Schiller & Flexner will now be dealing with issues related to copyrighted Unix code incorporated into Linux without authorization of appropriate copyright notices. SCO said that code identified includes Unix System V and copyrighted code covered in the 1994 settlement between Unix Systems Laboratories and Berkeley Software Design. SCO said it bought this code and its associated copyrights from Novell in 1995.

The expanded legal agreement with SCO’s lawyers concerns issues outside of SCO’s current legal brawl with IBM. The Lindon, Utah, company sued Big Blue for $1 billion in March, claiming that IBM had tried to destroy the economic value of Unix to benefit its Linux services business.

SCO and its lawyers are holding a conference call at 11:30 a.m. Eastern time Tuesday to further address their new legal agreement and its effect on the company’s financial results.

In related news, SCO CEO Darl McBride Monday told IDG News Service that the company could possibly take legal action against Novell because its $210 million bid for SuSE Linux AG violates a non-compete agreement.