Aug. 11 (Bloomberg) -- Novell Inc. owns the copyrights covering the Unix computer operating system and not SCO Group Inc., a judge ruled in a lawsuit over royalties from users of the Linux computer operating system.

The ruling by U.S. District Judge Dale Kimball in Salt Lake City yesterday is a setback for SCO in its lawsuits against Novell and International Business Machines Corp. SCO is seeking billions of dollars in royalty payments from hundreds of companies and is also in litigation with Red Hat Inc., a maker of Linux software. SCO's case against Novell had been set for trial next month.

SCO bought certain rights to the Unix operating system, which Linux was modeled on, from Novell in 1995 for $145 million, including the right to license Unix to others. SCO sued for slander of title after Novell publicly disputed ownership of the Unix copyrights and said that SCO didn't have the right to demand royalties from IBM.

``The bill of sale is clear: all copyrights were excluded from the transfer,'' Kimball wrote in his 102-page ruling. ``Novell is the owner of the Unix and UnixWare copyrights.''

The ruling ``vindicates the position Novell has taken since the inception of the dispute with SCO,'' said Joe LaSala, a Novell senior vice president, in a statement today. ``It settles the issue of who owns the copyrights of Unix in Novell's favor.''

IBM Sued

SCO spokesman Blake Stowell didn't return a voice-mail message seeking comment.

The ruling means SCO probably can't successfully sue IBM or Linux users for copyright violations and that would make the use of so-called open-source operating systems more attractive. Linux, the free operating system that challenges Microsoft Corp.'s Windows, is used by Armonk, New York-based IBM, the world's largest computer-services provider.

SCO, based in Lindon, Utah, sued IBM in 2003 for copyright infringement and breach of contract, claiming IBM violated an agreement for a joint project with SCO. SCO claimed that it owns the copyrights to the Unix code and that IBM inserted Unix code into Linux. IBM has repeatedly denied the claim. SCO was seeking as much as $5 billion in damages, IBM said in court papers.

IBM licensed the Unix code from AT&T Corp. about 20 years ago to develop its AIX system. SCO said the license is part of what a predecessor company bought from Novell.

Red Hat

Red Hat also has filed suit against SCO in Delaware, seeking a judgment that its programs don't violate the Unix copyrights. That suit is on hold pending the outcome of the Utah case. Kimball put SCO's case against IBM on hold while the Novell case proceeds.

SCO shares rose 6 cents to $1.56 in Nasdaq Stock Market composite trading yesterday. They have risen 38 percent this year. Shares of Waltham, Massachusetts-based Novell rose 33 cents to $6.42. Shares of IBM rose $1.91 to $112.64 in New York Stock Exchange composite trading.

The story was reported by the Wall Street Journal and Reuters late yesterday.

The case is SCO Group v. Novell Inc., 04cv139, U.S. District Court, District of Utah. The IBM case is SCO Group Inc. v. International Business Machines Corp., 03cv294, U.S. District Court, District of Utah.

To contact the reporter on this story: Jeff St.Onge in Washington, at jstonge@bloomberg.net.

Last Updated: August 11, 2007 19:16 EDT