The judgment, awarded last week against Vandy Micro, follows a one-day trial in which Novell alleged that the Viejo, California, software reseller passed off Novell upgrades as original products.
Novell said the judgment was likely to send a signal to judges and software vendors alike.
"It really is the first case of this type that has actually gone to trial," said Novell's license manager, Nathan Gage. "It sets a very important precedent as far as the enforceability of our software upgrade licenses go."
Sandra Sellers, vice president for intellectual property education and enforcement at the Software Publishers Association, agreed.
"Resellers have often looked at upgrades as a lower-priced next version [of a software product]," she said. "This case sends a message that upgrades are separate from and not equivalent to a full version."
Because licenses for upgraded software cost substantially less than licenses for original products, companies can profit handsomely from the upgrades. Unfortunately, so can resellers. According to Novell, Vandy made "well over $1 million."
The suit is one of 17 that Novell filed in February 1996 against California software resellers who allegedly engaged in fraud. Novell said the number of suits demonstrated that the practice was common in the industry.
An attorney for Vandy disputed the amount of the judgment awarded Novell, but said the company would not appeal the judge's underlying ruling that Vandy didn't follow Novell's rules concerning upgrades.
Of the 17 suits, only Vandy went to trial, Gage said. The others settled with Novell, which recovered only the illegal profits the companies made from the scheme. In the Vandy case, however, the Los Angeles judge awarded Novell damages, along with attorney's fees.