Update: SCO warns commercial Linux users of potential 'legal liability'

The SCO Group's not-so-veiled legal threats made yesterday about going after commercial Linux users and vendors to protect its Unix intellectual property is being greeted with little fear, much uncertainty and some real doubts that SCO even has a case.

"It was only a matter of time before some of these things were tested in court," said analyst Tony Iams at D.H. Brown Associates Inc. in Port Chester, N.Y. "It is interesting that [the legal fight] happens to be from one of the Linux suppliers itself. This is clearly a challenge, but it had to happen."

Linux is open-source software built under the General Public License (GPL). The GPL requires that any modifications to the source code base be shared with the rest of the community, meaning the potential for disagreements has always been present.

A key reason for SCO's legal challenge now could be the economic impact Linux is having on the company, Iams said. An upcoming D.H. Brown research study comparing various Linux distributions with SCO's UnixWare operating system shows that Linux is "better than or equal to UnixWare in their functional capabilities," Iams said.

"This is a very real issue for SCO as they go forward," he said. "This is going to have an impact on their business."

Bruce Perens, a Berkeley, Calif.-based leader in the free software and open-source communities, said SCO's action is an attempt to "spread fear" among Linux users and vendors. But he said he believes it will ultimately fail, because SCO itself had been contributing code under the GPL with its own Linux products.

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"Obviously, if they own that software, they had a chance to see what they were distributing" through the GPL when they released their own Linux versions, Perens said. "They have abandoned any future royalties they can make out of it ... for anything that was in Caldera or SCO Linux that was covered under the GPL."
Daniel Ravicher, an attorney specializing in open-source law at Patterson Belknep LLP in New York, said SCO's legal fight could unravel even if some of its source code eventually made its way into Linux.
"The worst-case scenario is that some people have to have a pizza party and do some recoding" to replace any allegedly offending code with new material that wouldn't violate SCO's intellectual property.
Also, he said, SCO may have waited too long to make its claims, since Linux has been under development and in use for more than a decade and has been allowed to proceed without these claims being made.
"In the most likely scenario, they have no case with substantial merit," Ravicher said.
Yesterday, SCO unveiled the latest step in its recent legal fight to protect its Unix intellectual property, some of which it says has made its way illegally into Linux. SCO warned all commercial Linux users that they could be using its code illegally and recommended that commercial users seek legal advice to help them decide what to do about their use of Linux.
Also yesterday, SCO said it's immediately halting the sales and distribution of its own Linux products, including its UnitedLinux offering, SCO Linux Server 4.0, Powered by UnitedLinux, because of the company's ongoing legal claims that Linux is an "unauthorized derivative of Unix."
For SCO, which says it has owned the rights to the Unix operating system since 1995, this is the third major Linux industry punch the company has thrown this year.
In March, SCO stunned the Linux world when it sued IBM for $1 billion, alleging that the company misappropriated trade secrets related to SCO's Unix products to benefit IBM's Linux strategy (see story). That lawsuit came just two months after SCO announced that it was creating a new SCOsource division that would be charged with strictly enforcing its Unix position as the "majority owner of Unix intellectual property" (see story).
In an e-mail interview, Linus Torvalds, who created Linux in 1991 as a personal project, said he would "personally love to hear what it is they consider infringing, since I'd like to go back and see where it got adopted."
Torvalds said that because of the open nature of the Linux development process, it is possible to track the origin of any section of the Linux kernel. "We've got all the history available somewhere, and it should be pretty easy to show when something was added and what the lineage was," he wrote.
Joe Eckert, a spokesman for competing Linux vendor SuSE AG in Nuremberg, Germany, said in a statement that "SCO's actions are again indeed curious. We are not aware, nor has SCO made any attempt to make us aware, of any specific unauthorized code in any SuSE Linux product."
SuSE has "diligent processes for ensuring that appropriate licensing arrangements (open-source or otherwise) are in place for all code used in our products," he said. SuSE has asked SCO for clarification of its public statements, but the requests have been declined, he said. SuSE will continue its participation in the UnitedLinux effort despite SCO's actions.
A statement from U.S. Linux market leader Red Hat Inc. in Raleigh, N.C., said the company has "put a lot of time and effort into making sure we're not in violation of valid trademarks and intellectual property. We have yet to see any code identified that's in question."
A spokesman for IBM had no comment on SCO's latest action.
Darl McBride, CEO of SCO, said yesterday in an interview with Computerworld that the company's actions are being taken to warn Linux customers and vendor partners that SCO is continuing to fight to protect its Unix intellectual property.
"This is very significant," he said. "These are our crown jewels we're talking about."
Letters have been posted on SCO's Web site to Linux customers and to SCO partners and vendors explaining why the company is taking this new position.
"We've warned them that there's a problem here," McBride said.
The company is advising customers to get their own legal interpretations on how their use of Linux might be affected by SCO's recent legal fight and to make decisions based on their own situations, he said.
For Linux vendors, "the decision to continue to ship [Linux] would be at their own peril," McBride said. SCO is "putting everyone on notice that this is tainted and that users are potentially carrying the risk."
SCO will help its customers through the situation with a hotline and other assistance, he said.
McBride said the company isn't targeting individual Linux users but is going after commercial Linux users who are benefiting from Unix code without paying for its use.
"You will not see us calling on some hacker in a garage," he said. "We're ready to go the distance. We are prepared to take as long as it takes ... to get these IP [intellectual property] rights with Linux resolved."
McBride said he doesn't want to see the end of Linux, but instead wants to see SCO get its just rewards for Unix code that SCO alleges has been taken and used improperly in the Linux operating system.
"The world is not about stealing people's code, laundering it and saying everything's OK," McBride said. "In the end, what you could see come out of this is legal Linux. You will see Linux getting stronger IP roots [that] it will be able to sustain for a long period of time, instead of getting knocked down the first time somebody comes along and blows a little IP wind on it."
SCO said it will continue to support existing SCO Linux and Caldera OpenLinux customers and hold them harmless from any SCO intellectual property issues regarding SCO Linux and Caldera OpenLinux products.
While the legal battles continue, SCO said it will pursue a stronger focus on its Unix products and on its recently announced SCOx Web services offerings.
Al Gillen, an analyst at market research firm IDC in Framingham, Mass., said SCO's action today "was always possible" after the company took action against IBM in March.
"They're basically rattling their sabers," Gillen said. "I think this effectively ends their position as a member of the Linux community. I don't think the community will accept The SCO Group as a participant in the community anymore in any way, shape or form at this point. It's a one-way trip."
SCO's move to halt its sales of its Linux products isn't a huge sacrifice for the company, he said, because those sales are under $1 million per year, far less than rival Linux vendors such as Red Hat Inc.
Instead, today's announcement could signal a change in the company's direction, he said. "It could be that they're going to become an IP licensing company with no products," Gillen said. "This sounds like the road they're on."
George Weiss, an analyst at Gartner Inc. in Stamford, Conn., said SCO's move "could potentially have some sort of dampening effect" in the Linux marketplace, but he noted that he hasn't seen any such reaction since the company's lawsuit against IBM.
Weiss said he has asked SCO to show him some examples of SCO Unix code in Linux, but the company hasn't done so because of its legal fights. "We really only have SCO's word for it, which they're attempting to make very compelling," he said.
Robert McMillan of IDG News Service contributed to this story.

Copyright © 2003 IDG Communications, Inc.

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