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Analysis: SCO Takes on Linux

The SCO Group (SCO) last week shifted gears in what it describes as an effort to assert its intellectual property (IP) rights, which SCO claims have been illegally incorporated into the open source Linux operating system.

For the first time, the embattled company specifically warned 1500 global companies that they could be held liable for running Linux. SCO also suspended sales of Caldera OpenLinux, its own Linux distribution, although it has said that it will honor its Linux-related contractual obligations.

SCO targeted IBM Corp. in early March with a $1 billion lawsuit, charging Big Blue with the misappropriation of its proprietary Unix source code. SCO claims that IBM illegally shared its proprietary Unix code with the open source community in a deliberate attempt to destroy the economic value of Unix.

Although SCO claims that IBM fostered the development of Linux largely to the detriment of Unix, especially on Intel processors, company representatives have repeatedly sought to allay the concerns of open source advocates. Said SCO CEO Darl McBride in March: “This case is not about the Linux community or us going after them. This is not about the open-source community or about UnitedLinux, of whom [sic] we are members and partners.”

Until now, that is. SCO last week sent ominous letters to approximately 1,500 global companies -- including major members of the Fortune 500. Organizations which received the letter were informed that SCO intended to “aggressively protect and enforce its [Unix intellectual property] rights.” In addition, SCO’s missive warned companies that “Legal liability that may arise from the Linux development process may also rest with the end user."

According to Chris Sontag, Senior VP and GM of SCO’s SCOSource IP-licensing initiative, SCO issued the warning because of IP violations that it identified during its audits of Linux source code. “We felt that we had to provide a warning to commercial users of Linux that there was a problem, … to let them know that there is an intellectual property issue with Linux, that we’ve identified issues, and that the legal liability may rest with the end user.”

Sontag says that SCO has identified specific instances in which its proprietary Unix IP has been improperly implemented in the Linux source code. In some cases, Sontag claims, code has been lifted from SCO’s Unix source on a line-by-line basis; in still others, he maintains, code has been “obfuscated” to dissemble its origins. Sontag declined to disclose examples of pilfered code, however, and said that SCO will make its case in court.

Moreover, claim Sontag and SCO, liability isn’t limited only to Linux vendors: Companies that have implemented the open source operating environment can also be sued. “Don’t just take our word for it,” Sontag asserts. “Seek the opinion of legal counsel, get your own counsel to take a look at the Linux licenses you have and see where the liability resides.”

Does this mean that SCO is gearing up to pursue claims against companies that use Linux? Sontag didn’t rule it out: “Right now, our focus is on IBM; we have an outstanding lawsuit with them. That does not mean we will not pursue other violations of our intellectual property rights, however.”

SCO inaugurated SCOSource as part of an effort to collect extra revenue from its ownership of Unix intellectual property. Through SCOSource, Sontag says that his company would be willing to work with companies that have deployed Linux and are concerned about their potential liability. “We would be happy to have that dialogue with them, they are welcomed and encouraged to talk to us.” He says that SCO is even willing to share its evidence under non-disclosure agreements with concerned organizations.

At the same time, Sontag ruled out similar discussions with major Linux vendors. “We don’t have a solution in place yet. We’re still in the process of just identifying the full scope of the problem.”

For its part, Linux vendor Red Hat Inc. posted an open letter from CEO and President Matthew Szulik on its Web site. Szulik encouraged customers with questions about SCO’s claims to send e-mails to a special address, legal@redhat.com.

Gordon Haff, a senior analyst with consultancy Illuminata, thinks it’s unlikely that SCO is going to start chasing after users of Linux in the Fortune 500 any time soon. “To the best of my knowledge, SCO has since indicated that they don’t intend to start suing end users, so what was the intent here? It was effectively a cease and desist letter, certainly a warning.”

In Haff’s account, SCO would almost certainly alienate its existing customer base should it pursue direct litigation against companies that have deployed Linux. “I think it would be unrealistic for SCO to start going after their big end users, particularly among the Global 1500. Also, I don’t think SCO is necessarily kind of on this campaign to kill Linux, wipe it off the planet. I don’t think they’re stupid enough to think they have that kind of clout in the market.”

Regardless of SCO’s motives, Haff concedes, some slight damage -- in terms of fear, uncertainty and doubt (FUD) -- has probably been done. “I’m sure there are some concerns in some end user companies about intellectual property issues … and there were probably some CIOs who’ve had some meetings with CEOs that they would prefer not to have had.”

The best thing for Linux, Haff says, would be a quick resolution to the FUD that SCO has kicked up around not only the GNU General Public License (GPL), but other open source licensing schemes, as well. “This really would apply to most if not all of the open source licenses, and it could become a problem if it lingers. If this lingers on, it does raise issues when Linux is being considered against other alternatives, it has to be seen as somewhat of a liability for Linux.”

From the moment it first announced its lawsuit, critics have charged SCO with a kind of IP blackmail vis-à-vis Big Blue: Acquire us, and we’ll make it all go away; fight us, and we’ll test the legitimacy of the GPL and kick up FUD around open source software (OSS) in general. In this respect, Haff sees SCO’s latest gambit as an escalation in the embattled vendor’s tactics: “This was essentially ratcheting up the pressure from its litigation with IBM.”

SCO, for its part, insists that it’s taking a principled stand for IP rights. “SCO has no issue with the concept of open source or free software,” Sontag asserted. “We do have a big issue, however, when anyone’s intellectual property is inappropriately copied and used without permission and without appropriate licensing.”

SCO is not alone in staking out this position. This week, Microsoft Corp. announced that it had licensed the rights to SCO’s Unix source code.

SCO’s Sontag said that Microsoft opted to license SCO’s Unix System V source code and libraries, largely for use with its Windows Services for Unix interoperability package. Microsoft has marketed Windows Services for Unix since April of 2000.

In a prepared statement, Brad Smith, general counsel and senior Microsoft VP, stressed his company’s commitment to IP licensing rights. “The announcement of this license is representative of Microsoft's ongoing commitment to respecting intellectual property and the IT community's healthy exchange of IP through licensing," said Brad Smith, Microsoft general counsel and senior vice president, in a prepared statement. "This helps to ensure IP compliance across Microsoft solutions and supports our efforts around existing products like Services for Unix that further Unix interoperability.”

Microsoft’s position is to be expected, of course. The software giant has struggled unsuccessfully to stem the Linux tide for several years now.

On Monday, Sun Microsystems Inc. CEO Scott McNealy came down firmly in support of software copyrights during an event partially given over to promoting his company’s new server blades -- which are designed to run both Solaris and Red Hat’s version of Linux, no less. “We think Open Source is a wonderful and good thing, but we also believe in copyright and believe in the rule of law, and this is going to get tested in the courts.”

OSS advocates often accuse Microsoft of exploiting FUD to stifle enthusiasm for Linux and other OSS software solutions. On Monday, however, McNealy engaged in some first-class FUD-slinging of his own: “You have no IP issues [with Solaris],” he claimed. “We’ve got a free and clear SCO license, all up, all in, there’s no issues there. Your audit committee won’t get a letter because you’re using Solaris. That feels good.”

SCO has infamously threatened to revoke Big Blue’s AIX license by June 13th. Under a worst-case scenario, the embattled vendor could make good on its promise and get a court-ordered injunction to prevent IBM from shipping AIX.

Almost no one expects that this will happen, however. Illuminata’s Haff puts it best: “No, that will not happen. There is not a chance that will happen. There is a lot of shared code out there, and there are too many questions about who had what first and where did it come from.”

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