A judge in the U.S. District Court for the District of Utah Central District found that Novell is the owner of the Unix and UnixWare copyrights, dismissing SCO's charges of slander and breach of contract.

The judge also ruled that SCO owes Novell for SCO's licensing revenue from Sun and Microsoft. SCO is obligated to pass through to Novell a portion of those licenses, the judge said.

In the ruling, the judge said SCO must pay Novell, but the amount will be determined in a trial, said Pamela Jones, founder and editor of Groklaw, a Web site that follows open-source software legal issues.

In another major blow to SCO, the judge said that because Novell is the owner of the Unix copyrights, it can direct SCO to revoke its copyright-infringement claims against IBM and Sequant. Novell has done so already, but SCO has not honored that direction. "SCO can't sue IBM for copyright infringement on copyrights it doesn't own," Jones said.

The ruling is good news for organizations that use open-source software products, said Jim Zemlin, executive director of the Linux Foundation. "From the perspective of someone who is adopting open-source solutions to run in the enterprise, it proves to them that the industry is going to defend the platform, and that when organizations attack it from a legal perspective, that the industry collectively will defend it," he said.

The decision is "abysmal" news for SCO, according to Zemlin. "Their future is looking bleak," he said. SCO did not reply to requests for comment.

In a statement, Novell said the ruling cut out the core of SCO's case and in the process eliminated SCO's threat to the Linux community.

Still outstanding are several counterclaims. For example, Novell's slander of title counterclaim against SCO is still ongoing and will go to trial, Jones said.

The case is so complex that the judge asked the parties to file a document with what they think is outstanding in the IBM case, Jones said. Those documents must be filed by Aug. 31.

The battle began in 2003 when SCO filed a suit against IBM claiming that it had violated SCO's rights by contributing Unix code to Linux. The following year, SCO sued Novell, saying that Novell falsely claimed it owned rights to Unix.

SCO may still appeal Friday's decision.

This story was updated on Aug. 14, 2007.