Now the two surviving members of the band and Cobain's widow, Courtney Love, admit in court records that it does exist.
But fans may never get to hear it.
A King County Superior Court judge has granted Love an injunction against the song's release as part of a 45-track Nirvana box set commemorating the 10th anniversary of the band's groundbreaking "Nevermind" album. Love and the surviving members of the band are facing off in court over control of a studio recording of the song, the box set and, ultimately, the legacy of the group itself.
A trial to resolve the issue is scheduled for Dec. 31, 2002.
All sides agree the song could be a major addition to the band's legacy.
"It's a spectacular piece of music," said O. Yale Lewis, Love's attorney. "Probably one of the most important pieces of music to be released in years."
It also could be lucrative. The attorney for bassist Krist Novoselic and drummer Dave Grohl called the box set a "tremendously valuable asset." James Barber, Love's manager, contends in court documents that an album that includes "You Know You're Right" could sell up to 15 million copies worldwide, more than "Nevermind." Without the song, he said sales may be one-fifth that number.
Court documents show that the relationship between Love and Cobain's former bandmates has broken down. Three years after Cobain's suicide at his Seattle home, the trio formed a partnership called Nirvana L.L.C., which owns and controls all the band's assets, including unreleased Nirvana songs, images and demo tapes. Now they're battling in court over control of Cobain's work, especially the unreleased "You Know You're Right."
But while the documents discuss royalty percentages, contracts and who owns Cobain's name, the case is about much more.
"The fight is over control of Nirvana," said Warren Rheaume, attorney for Grohl and Novoselic.
Both sides say they want to honor the artistic legacy of a band many critics rank among the best ever and of Cobain, its driving force.
Rheaume said Grohl and Novoselic feel it should be done through releasing the band's best songs for fans to hear; Love's lawyer said she simply wants to be involved in decisions about the band and that she was left out of the making of the box set. A disputed 1996 agreement with Geffen Records (now Universal) calls for the box set's masters to be delivered to the record company by Saturday.
Love is now trying to dissolve the corporation and get control of most of Nirvana's assets. She says she was "emotionally overwrought and distraught" when she signed the agreement, which splits proceeds from the assets equally among the three, court documents say. Grohl and Novoselic's reply questions how overwrought Love was more than three years after the suicide.
Documents filed for Love downplay Novoselic's and Grohl's contributions to the band, saying, "Nirvana could never be a partnership because it was the living manifestation of the creative vision, personal will and life force of a single unique individual."
Love also accuses Novoselic of threatening to destroy master recordings of unreleased Nirvana songs. He says his words were distorted. She says Grohl won't speak to her. His lawyer says Grohl "communicates with Ms. Love as the need arises."
But the two sides are at least still talking.
Until things are resolved, fans will be searching out bootlegs of the few live Nirvana performances of "You Know You're Right." Now, the song exists as a grainy 45-second clip, buried on a fan-club Web site.
But with the fight over who controls it playing out in the courts, maybe Cobain, who was never comfortable with his fame or fortune, would have seen the song differently.
As he sings in "You Know You're Right": "I just don't think it's worth it."
Seattle Times staff reporter Melanie McFarland contributed to this report.