SCO lawyers promised settlement payday

Lawyers representing SCO Group in the software maker's ongoing intellectual-property litigation could stand to benefit significantly if the company settles its pending lawsuits or is sold.

In a recent filing with the Securities and Exchange Commission, SCO reported that it is finalizing

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an agreement that would pay the law firm involved in its intellectual-property suits 20 percent of any money gained via settlements. The company's lawyers would receive the same percentage of any funds received through equity financings or a sale of the company while it has litigation pending. The agreement, first detailed in The Wall Street Journal on Thursday, also stipulates that additional payments could be made to the law firm of $1 million and 400,000 shares of SCO's common stock.

Although SCO did not name its law firm in the SEC filing, its lead firm is New York's Boies Schiller & Flexner, with David Boies, best known for his role in the Microsoft federal antitrust case. Neither SCO nor the law firm could be reached for comment on the agreement.

SCO said in May that Boies' firm was paid on a contingency basis--in which attorneys are compensated with a fraction of the money won in a suit--but didn't detail the arrangement.

SCO has become the center of a large-scale controversy after suing IBM for unauthorized use of the Unix source code in Linux-based software. SCO owns some key intellectual-property rights for Unix. The SCO Group's lawsuit against IBM also targets the General Public License--the legal foundation for Linux, numerous other open-source programming projects and even for software that SCO itself still ships. However, IBM has countersued, and Linux seller Red Hat has also sued SCO in an attempt to lay the matter to rest.

Despite the ongoing debate, SCO has been able to generate interest from investors. In mid-October the company announced a $50 million investment by BayStar. At that time, SCO said it would use the funding primarily to boost its software-development efforts and to help pay legal and licensing program costs.