SCO: We're After IBM, not Linux Developers

SCO does business on both sides of the proprietary/open-source fence. With its lawsuit against IBM, it shows which side it's really on.

The SCO Group has filed suit against IBM in the State Court of Utah. They're asking for (at least) $1 billion. Here's how their press release puts it:

LINDON, Utah-March 7, 2003-The SCO ®Group (SCO) (Nasdaq: SCOX), the owner of the UNIX operating system, announced today that it has filed legal action against IBM (NYSE:IBM) in the State Court of Utah, for misappropriation of trade secrets, tortious interference, unfair competition and breach of contract. The complaint alleges that IBM made concentrated efforts to improperly destroy the economic value of UNIX, particularly UNIX on Intel, to benefit IBM's new Linux services business.

...

As a result of IBM's unfair competition and the marketplace injury sustained by SCO, SCO is requesting damages in an amount to be proven at trial, but no less than $1 billion, together with additional damages through and after the time of trial.

An eWeek story begins "The SCO Group, which holds all the intellectual property rights to the Unix operating system..." However, as Richard Stallman and others carefully point out,

"intellectual property" (is) a term that also includes patents, trademarks, and other more obscure areas of law. These laws have so little in common, and differ so much, that it is ill-advised to generalize about them. It is best to talk specifically about "copyright," or about "patents", or about "trademarks."

The term "patents" does not appear in the press release, and only makes two appearances, in a quote from an IBM executive, in the complaint. There is a good reason for this: SCO doesn't hold any patents, according to a search on the US Patent and Trademark Office's CASSIS2 system that Linux Journal editor in chief Don Marti did earlier this week.

In fact the complaint takes pains to isolate the case not only to trade secrets, but to the proprietary side of SCO's own business, which also includes an open source side -- a legacy of the company's Caldera past. Item 3 in the complaint puts it this way (emphasis mine):

UNIX and SCO/UNIX compete with other proprietary programs and with "open source" software, which is software dedicated to the public. There are advantages of proprietary programs to end-users (including their proprietary functions in which their developers have invested large amounts of time and money). There are also advantages to open source programs to end-users (including that they do not have to pay for the program itself) and to software vendors (whom market the additional products and services that end-users who use open source programs ordinarily require).  This case is not about the debate about the relative merits of proprietary versus open source software.  Nor is this case about IBM's right to develop and promote open source software if it decides to do so in furtherance of its independent business objectives, so long as it does so without SCO's proprietary information.  This case is, and is only, about the right of SCO not to have its proprietary software misappropriated and misused in violation of its written agreements and well-settled law.

To make more sense out of the case, I talked with Chris Sontag, Senior VP & general manager of SCO's SCOsource Division. When I asked him what this meant for SCO's relationship with the Linux community, he replied,

I have to say that this is not an issue regarding the Linux community. This is an issue between SCO and IBM. We don't have issues with people open sourceing or GPLing software that is independently derived and where there is no question of ownership. The isue we have is specifically with IBM, and specifically regarding contracts we have with IBM regarding their licensing of our intellectual property. I believe the issue and concern with the Linux community should be with IBM.

We are happy to see Linux succeed on its own merits utilizing the efforts of the community derived completely independently; and we have also made contributions to the Linux community of certain IP that we had that we thought was appropriate to be provided to the open source community.

However... we feel it is very appropriate for a business to defend its intellectual property. And that's a completely separate matter.

Yes, we have straddled the fence, as far as being in the Linux community and the UNIX community, and we'll leave it at that.

On one of the many lists where the lawsuit is being discussed, one IBM Linux developer wondered out loud if SCO has a case:

Giving the code to the Linux community? Yeah right, those AIX engineers don't even give the Linux engineers the time of day, let alone even let them so much as sneak a peak at the AIX code. SCO doesn't stand a chance of proving what never happens.

When I asked Sontag if they had proof to back their allegations, he asked that people read the complaint, which cites only IBM marketing claims:

In a number of places in the complaint we reference statements made by IBM executives (regarding) transfer of AIX technology into the Linux community... This is in the face of the fact that they have agreements with SCO in terms of their licensing of UNIX System 5 technology, not to make any of those transfers, even of derivative works. They cannot even show the source code to anyone except those who have a valid license to view that source code, from us. I'll give you an example. Every time IBM wants to show the source code to any of their customers, they have to send their customer to SCO, and we make arrangements for them to obtain a UNIX System 5 license, so they can view the System 5 source code. Once they have that license, then they have the ability to view IBM AIX source code. And we do this several times a month. So there are portions of IBM that very much understand the requirements of the source code license they have with us. There are other portions of IBM that are making announcements about making wholesale movement of AIX source code, derived from our intellectual property... into the Linux community.

SCO is affiliated with Canopy Group, which was founded in 1995 by Ray Noorda, best known as the founder and long-time CEO of Novell. Says Phil Windley the former CIO for the State of Utah,

This isn't too surprising... The Canopy Group believes in intellectual property and they believe in protecting it. They also are not afraid to litigate. This has been a successful strategy for SCO in the past and companies remember success and try to repeat it.

My bottom-line analysis on this is that SCO has a fiduciary duty to take this action regardless of whatever philosophical beliefs management has on open source unless their investors specifically agree to an alternate strategy .

Bruce Perens takes this angle, which also speaks to investor interests:

This case is not meant to proceed in court. It's designed as an exit strategy by Canopy Group from SCO and Caldera. With a present market cap of $22M for SCO, IBM has no incentive to settle. They could buy the company on the open market for less than the cost of any settlement. Microsoft could buy them to use their assets to continue to FUD Linux. Canopy group management wants to play IBM and Microsoft against each other to drive up the price of the company. IBM will be smart enough to poison that particular well by bringing counter-suits, probably ones good enough that MS will not want to buy the trouble. IBM will end up owning the SCO assets, and the Canopy folks will walk away with some ill-earned cash.

To those kinds of accusations, Chris Sontag answers,

SCO is not desperate. Last week we had our first quarter earnings announcement, where we announced that for the first time in the history of the company we're EBITDA positive, and that although our revenues are significantly less than they were a number of years ago -- which is related to this lawsuit, and some of the damages we're seeking -- we are stable, we have still significant revenues, we expect our revenues to increase in the second quarter significantly, we have plenty of cash in the bank, and financially we're on a very sure footing.

It seems a stretch, to me at least, that SCO's fortunes would be so deeply tied to its position in legacy UNIX, which has seen declining fortunes over many years, regardless of whatever IBM has lately decided to pass from that legacy code base to Linux.

Linux' success, and its continued improvement, is widely -- even indisputably -- attributed to its open source nature. By the same token, the market failings of AT&T's legacy UNIX are just as widely attributed to the proprietary struggles that emerged around it. How, I wondered, could SCO look at history and want to take a losing battle to court? Sontag answered,

I would have to respond by saying the Linux community is free to move forward with independently derived development, and I think in many cases that has happened, and it has been fair and reasonable. We're asserting in this lawsuit that some of what IBM has contributed into the Linux community was inappropriate and in breach of the contract that they had with us.

Sontag treats the Linux community as a separate entity, regardless of SCO's past contributions to it. Here it becomes clear that SCO's heart and soul are on one side of the fence it straddles, and that side is not Linux.

Doc Searls is Senior Editor of Linux Journal. His monthly column is Linux for Suits, and his biweekly newsletter is SuitWatch.

email: doc@ssc.com

______________________

Doc Searls is Senior Editor of Linux Journal

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Re: SCO: We're After IBM, not Linux Developers

Anonymous's picture

Well, Boies knows his opponent because he helped defend IBM in U.S. v. IBM. It's hard to believe that he would get involved if there were no chance but if the client is willing to pay, who is he to decline? On the other hand, the suit only refers to IBM press releases and public statements by IBM execs. A lawsuit gives them ample opportunity to look at documents they have no way to get otherwise, so it will be interesting to see what the judge (a Utah state judge) allows in terms of discovery. In a state court they have a lot better chance of getting a lower bond to get a temporary restraining order to force IBM to stop selling AIX, though that is a long shot. Very strange.

Re: SCO: We're After IBM, not Linux Developers

Anonymous's picture

Fundamentally as I see it, what's under attack is not the soundness, but the integrity of the development process. I wonder if this process was formalized, under a body akin to the Apache Software Foundation (www.apache.org/foundation), if problems such as this one could have materialized this easily. The procedures as overseen by such bodies are usually much more respected than otherwise.

Nor IBM, Nor Linux

Anonymous's picture

SCO is after M$ney, nothing else.

IBM has been a fair, honorable partner in OSD (Open Source Development).

Looking Ahead

Anonymous's picture

Be it what come may, the value proposition of Linux will always be openness, reliability, performance, a tall order indeed for anything MS might have to offer...

Re: SCO: We're After IBM, not Linux Developers

Anonymous's picture

>SCO is affiliated with Canopy Group, which was founded in 1995 by Ray Noorda, best known as the founder and long-time CEO of Novell.

Another company heavily involved in Open Source and affiliated with the Canopy Group is Trolltech (http://www.trolltech.com).

Re: SCO: We're After IBM, not Linux Developers

Anonymous's picture

I guess that the biggest question that I have is:

Why the hell is SCO still in business? They've never been competitive in the unix world even before the advent of Linux. In short, this company has no reason to exist.

I hope that they lose their asses.

Re: SCO: We're After IBM, not Linux Developers

Anonymous's picture

Are you sure its Unix-on-Intel trailblazer, The Santa Cruz Operation, behind this lawsuit?

Reference:

http://www.sco.com/company/profile.html

SCO (Caldera) vs IBM

Anonymous's picture

I am telling you, since this issue hit, its like someone pulled the floor from under me. I am still watching my step somewhat! I have done some surfing, and I can tell you there is a lot been written concerning this, and I am sure not all too good.

The longer this issue is prolonged, the deeper into the gutter we all will be pulled into! If there is a way for this issue to be solved, amicably, fairly, then I appeal to all concerned please, lets do it.

For everyone who has ever dreamed of desktop Unix, and see the options evaporate (SCO OpenDesktop, ATT Destiny, etc), well to see my Linux powered desktop, that's my billion dollars!

Re: SCO (Caldera) vs IBM

Anonymous's picture

Why are you waiting? Do it now! My major use of Linux is on the desktop, and has been for the past 2 years. Until last year I missed desired applications. This last 12 months, though, the missing pieces have arrived. (True, Open Office also works on MSWindows, but that's no excuse to stick with them.)

Now I will need to conceed that the Linux applications aren't yet quite as polished as the MS applications. But they exist. And they don't tie you to impossible EULAs.

Re: SCO (Caldera) vs IBM

Anonymous's picture

I have used some of the Open Source software and found them to be quite adequate in some areas. However, while not meant as a criticism, I do find the lack of commercial support on the Linux desktop somewhat troubling. Look at the other desktop Unix, Mac OS-X, for instance, no problem here -- http://guide.apple.com/ussoftware.lasso.

Re: SCO: We're After IBM, not Linux Developers

Anonymous's picture

The title irritates me the most. IBM has proved itself as a "good citizen" with respect to Apache and seems to be doing the same with Linux. Thus, IBM is a Linux developer. I have to side with IBM in this battle.

Re: SCO: We're after IBM, not Linux Developers

Anonymous's picture

How long before IBM 'absorbs' SCO?

First Linux SMP project supported by...

dmarti's picture

Caldera.

That link is from the Linux Weekly News comments on this issue. Many vendors, including Caldera, contributed server and "enterprise" hardware, or access to same, to Linux development projects before IBM.

SCO UNIX vs. UNIX Open Group

Anonymous's picture

I'm confused.

SCO is the organization that licenses the UNIX source code.

The UNIX Open Group is the organization responsible for UNIX standards, UNIX trademark and branding.

http://www.unix.org/

Can anyone clarify this for me?

Re: SCO UNIX vs. UNIX Open Group

Anonymous's picture

UNIX(R) is a specification (www.unix.org/what_is_unix.html). OTOH, SCO's UnixWare is an OS that adheres to this specification (www.opengroup.org/public/prods/xu.htm). And SCO owns the source to UnixWare, of course.

A next thing, even though you might hear the word Unix (lower case), it is but a generic term, as the term UNIX (upper case) is the trademark that is protected by the Open Group, and what defines a standard-based system or what is generally know as a UNIX system. BTW, even Linux is shooting for this standard (www.kernel.org).

Re: SCO UNIX vs. UNIX Open Group

dmarti's picture

Nothing to clarify -- you have it right. SCO owns the copyright, the Open Group owns the trademark. SCO does have the trademark "Unixware" and they and other companies have trademarks with "Unix" in them, but the Open Group has the trademark for just plain "Unix".

Is UNIX proprietary?

Anonymous's picture

I always thought that the goal of UNIX vendors was to cooperate on standards and compete on implementations. Of course the implementations would be proprietary, but that's where the value is derived. This value is at the heart of the capitalist economy that powers America!

-----

www.UNIX.org

Linux Developers: We're after SCO, not IBM

Anonymous's picture

...it will certainly cut both ways.

Re: SCO: We're after IBM, not Linux Developers

Anonymous's picture

" There are other portions of IBM that are making announcements about making wholesale movement of AIX source code, derived from our intellectual property... into the Linux community."

Well then show us this pirated code. What, you can't? Oh, because there isn't any. It's pirated ideas.

It's a desperate strategy by an obsolete, failing company.

Re: SCO: We're after IBM, not Linux Developers

Anonymous's picture

why would they show you at this time? they would have nothing to gain by laying their cards on the table at the start of the game. duh!

The old [SCO] Unix business model, profitable but stagnant

NZheretic's picture

Iv'e said it once before but it bares repeating
Saturday, August 31, 2002As someone old enough to remember the decline the Unix share of the market in the 80s and it's shift into the dusty corners of server rooms in the 90s, I have to wonder whether the SCO crew are at all forward looking or just lost in nostalgia driven halcyon dreams of past business models which resulted in their sale to Caldera in the first place.

SCO in the past did excel at what they did best, charging lots of money to provide businesses and professionals highly stable, low maintenance, but sadly not very flexable, enterprise infrastructure. However this highly profitable, per customer business model led SCO and most of the other smaller Unix vendors to entirely abandon the business desktop market, at which I can still remember vividly their sneers of "Thats not a REAL computer", which left them to fight over an ever decreasing market of small businesses, now hooked on Microsoft's most recent drug of choice.

Without co-operation, the Unix compatibility dream now rested with installing the third party, at that time somewhat buggy, GNU GCC toolkit and libraries. The Unix market retreated onto specialized hardware which found it self ever more pushed to the back of the computer rooms, the data centers and the technical graphics market. That alone might sound profitable, but in reality has a very low turnover in equipment, software and services. That is, until Linux and BSD came along.

It is no wonder that I shuddered when I listened to Opinder Bawa, the new Senoir VP of technology at SCO, being interviewed on The Linux Show, extol the virtues of the small professional customized "Doctors Office" market. For once they capture a small but profitable section of the market, it would be too easy, using tactics of the past, falling into the same old trap. To distinguish themselfs from other vendors in the market, instead of providing a better service, they return to the non-standard proprietary tactics, platforms, applications and protocols that greatly contributed to the failure of the Unix market in the first place. That way lies madness.

David Mohring

Re: The old [SCO] Unix business model, profitable but stagnant

Anonymous's picture

Regardless of your "analysis", the AIX server business of IBM pulled in 3.6 billion dollars last year. And what about Sun been a 10+ billion dollars company. Sounds like real money to me!

It's the smaller size of the enterprises SCO target

NZheretic's picture

SCO targeted smaller businesses and professionals, not larger organizations. Most of that market was lost to NT on the server and windows on the desktop, replacing the dumb-character-based wyse and co terminals. SCO never really got into the desktop market.

Re: SCO: We're after IBM, not Linux Developers

Anonymous's picture

This is one of the more breathtakingly stupid moves I have ever seen.

Quick. Purchase stock in whatever airline that has a direct flight from Armonk to Salt Lake City. One that offers top notch business or first class service.

Derek

Re: SCO: We're after IBM, not Linux Developers

dmarti's picture

They got David Boies as their lawyer, so look out. Napster will be full of protest songs, and wait until President Gore finds out about this!

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