SCO: We're After IBM, not Linux Developers

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