On August 5th, Red Hat
finally told The SCO Group and the
world that they weren't going to take SCO's anti-Linux FUD anymore
in a law suit filed in Delaware federal court against SCO. Reading
from a prepared statement, Mark Webbink, Red Hat's general counsel
said, "We filed this complaint to stop SCO from making
unsubstantiated and untrue public statements attacking Red Hat
Linux and the integrity of the open-source software development
process." SCO isn't taking this lying down.
SCO vehemently denies that they're spreading FUD. Instead, CEO
and president Darl McBride claims that "We have been educating end
users on the risks of running an operating system that is an
unauthorized derivative of Unix." McBride adds that "We have been
showing a portion of this code (which SCO claims has been stolen
from Unix System V and placed in Linux) since early June." He does
not mention, however, that these code samples are only available
after signing a non-disclosure agreement (NDA).
That may be SCO's take on it, but Red Hat's second compliant in
their suit comes right out and says, "SCO's (IP) claims are not
true, and are solely designed to create an atmosphere of fear,
uncertainty and doubt about Linux."
Red Hat is taking SCO to court on seven counts. The heart of the
suit though, Red Hat CEO Matthew Szulik said at LinuxWorld was: "We
have asked the courts to declare that no violations of intellectual
property and trade secrets have occurred. We've been patient, we've
listened. But when our customers and the whole open-source
community are threatened with innuendo and rumor, it's time to
SCO's first response to Red Hat came in an August 4th
note to investors that tries to show, via a letter on July 31st
from Bob Bench, SCO CFO, to Webbink, which was never actually sent,
that SCO had been trying for a peaceful resolution with Linux
distributors. "We had expected the possibility of a global
resolution of SCO's intellectual property claims against all
Linux-related companies that would have likely included Red Hat.
This effort has apparently stalled, through no fault of SCO." At
today SCO's press conference, McBride added that such talks had
been going on with several Linux companies, but these had come to
nothing and that no current discussions are now on-going.
In a letter sent on August 4th to Matthew Szulik, after Red Hat
sued SCO, McBride wrote that he was surprised by Red Hat's legal
action, "I am also disappointed that you have chosen litigation
rather than good faith discussions with SCO about the problems
inherent in Linux." And, "Of course, we will prepare our legal
response as required by your complaint. Be advised that our
response will likely include counterclaims for copyright
infringement and conspiracy."
McBride ends his note with, "I must say that your decision to
file legal action does not seem conductive to the long-term
survivability of Linux."
SCO seemed surprised by this move, but it's hard to see how they
could be. SCO had been telling Red Hat's, and other Linux vendors,
customers for months that they were running Linux illegally. And,
further, SCO had
directly threatened business Linux end-users with legal action
on July 21st.
As Dan Kusnetzky, IDC vice
president for system software research, says, "I was expecting
someone to make this move. By SCO going to the media rather than a
court, it was only a matter of time that someone would take the
move of trying to legally force SCO to show the Linux community
what they've been complaining about." He adds, "After Eben Moglen's
SCO) appeared, it was only a matter of time before someone took
SCO to court."
During the press conference, McBride also said, "Red Hat claims
that SCO is at fault for Red Hat's loss of business. We believe
it's not our fault. We believe Red Hat is losing business because
Red Hat has a faulty business model and that the business model's
real problem is that it based around distributing Linux under the
General Public License (GPL)."
Thomas C. Carey, a partner at of the Boston IP and business law
firm Bromberg & Sunstein
and chairman of the firm's Business Practice Group, thinks Red Hat
has a very good case. "Assuming for the moment that SCO is off-base
in its allegations, this complaint is enough to rock SCO to its
foundations." Still, "A lot will depend upon the vigor with which
the matter is pursued. My presumption is that the suit is serious
and will be pursued with full force."
But Carey warns, "SCO is in some danger even if its allegations
are correct, simply because SCO has put everyone in an impossible
position. What can they (a Linux distributor or end-user) do if
they don't know which code is infringing? If, to that unfairness,
you add a conclusion that SCO has its facts wrong, then SCO's
liability to Red Hat and others could be very substantial. And if
SCO knows (or should know) that its facts are wrong, then you can
kiss the company good-bye."
Last, but far from least, Carey thinks that there's "a potential
securities fraud action is buried within the pleadings. Red Hat
speaks of Canopy Group (SCO's primary owner) having raked in
millions in cash since the start of this affair. Red Hat notes that
its own stock price has declined 20% in a month. This is the stuff
of securities lawsuits. Red Hat could amend its claims to include a
securities law claim, or another law firm could bring a class
action lawsuit against SCO on behalf of selling Red Hat
shareholders who have been harmed by the low price they get.
Finally, it is conceivable that the SEC or the Justice Department
could take an interest in this, viewing it as market
Be that as it may, it's still full speed ahead for SCO. SCO also
announced today the availability of the SCO Intellectual Property
License for Linux. Contrary to earlier comments from SCO, SCO is
not requiring business Linux 2.4 and 2.5 users to buy UnixWare or a
license to use UnixWare. Instead, this run-time license permits the
use of SCO's intellectual property (IP), in binary form only, as
contained in Linux distributions. SCO also claims that because the
SCO license authorizes run-time use only, customers will also
comply with the Linux's GPL.
This seems to disagree with Eben Moglen, professor of law at
Columbia University and counsel to the Free Software Foundation, position who
states: "Those who have received Linux under one license are not
required to take another license simply because SCO wishes the
license it has already been using had different terms." In short,
"I don't see how SCO can get around the fact that they gave people
The new license's cost is also likely to stop many customers
from buying SCO's arguments unless a company is especially worried
about SCO's legal claims. SCO introductory IP license price for a
single CPU system will be $699 through October 15th 2003, after
which it will climb to $1,399.
By comparison, the list price of Microsoft's Server 2003 is
$1,299 for a single processor system with ten users. SCO's pricing
for multiple CPU systems, single CPU add-ons, desktop systems and
embedded systems, according to Chris Sontag, senior vice president
and general manager of SCO Source, will be along these same lines.
The SCO IP License for Linux is a one time license with no need for
It's also not clear why SCO is also asking for license payment
for single processor, desktop and embedded systems. You see, SCO
has been claiming that its IP rights have been violated in the
areas of advanced enterprise level capabilities such as Symmetric
Multi-Processing (SMP), Remote Copy Update (RCU) and Non-Uniform
Memory Access (NUMA) not in basic end-user Linux code or
Regardless, McBride finished his press conference with saying
that Red Hat and others have been playing "shell game going on with
Linux legal liability." Further, trying to take the moral high
ground, McBride said that "the real issue is whether intellectual
property rights have any value in the age of the Internet" and that
Linux companies are making 'don't ask, don't tell' software. And,
finally, that while SCO doesn't want to after end-users, in the
end, if they have to, "we will go after end-users."
The SCO vs. the Linux world cold war has just gotten several
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