SCO confirms Microsoft has licensed its Unix technology

The deal ensures it is complying with SCO's Unix intellectual property

In a deal that brings together companies that Linux backers consider bogeymen, The SCO Group Inc. announced today that it has signed a licensing agreement with Microsoft Corp. over SCO's Unix operating system.

Through the deal, SCO has licensed Unix technology, including source code and patents, to Microsoft, said Chris Sontag, senior vice president and general manager of the company's SCOsource, a division in charge of managing and protecting SCO's Unix intellectual property.

The deal ensures that Microsoft is in compliance with SCO's Unix intellectual property and will help Microsoft improve the Unix compatibility of its products, specifically Microsoft Windows Services for Unix, Sontag said.

News of the agreement first appeared earlier today on The Wall Street Journal's Web site (see story).

Windows Services for Unix, now in Version 3.0, consists of different components that bridge the gap between Windows- and Unix-based systems running in the same network, according to information on Microsoft's Web site. The product's services include file sharing, remote access and administration, password synchronization, common directory management, a common set of utilities and a shell, according to Microsoft's Web site.

Microsoft didn't immediately return calls seeking comment on the deal. But in an e-mail statement, Brad Smith, the company's general counsel and senior vice president, said the agreement "is representative of Microsoft's ongoing commitment to respecting intellectual property [IP] and the IT community's healthy exchange of IP through licensing. This helps to ensure IP compliance across Microsoft solutions and supports our efforts around existing products like Services for UNIX that further UNIX interoperability."

The deal isn't a reward from Microsoft for SCO's recent legal challenges to the Linux operating system, Sontag said. Microsoft has been very vocal about the threat that Linux poses to its business.

"That is simply not the case," he said. "This is a standard, straight-up Unix licensing agreement, like many we've done in the past" with other companies, he said.

The deal appears to be a normal Microsoft attempt to make sure it's properly honoring SCO's intellectual property rights, said Dan Kusnetzky, an analyst at market research firm IDC. Those advancing a conspiracy theory to explain the timing of the deal will have a hard time proving it, he said. "I'm not sure there's a way to support a quid pro quo notion. It is certainly an interesting theory, but it's one that would be almost impossible to prove or disprove," he said.

Asked to comment on the news of the licensing deal at a news conference today, Oracle Chairman and CEO Larry Ellison seemed to have no compunction about drawing a link between the agreement and SCO's litigation. "Bill [Gates] is innovating. Microsoft has always had incredible innovation. You've had advanced bundling, and what you see now is extreme litigation. They have a lot of experience with extreme litigation, actually," he said.

Microsoft once licensed Unix source code from AT&T Corp., Unix's creator, but that license ran out after Microsoft abandoned the Unix-related project that had prompted the licensing, Sontag said.

A SCO spokesman said that the licensing deal will allow Microsoft to continue a program, announced earlier this year, of providing deeper Unix services. The spokesman also addressed the question of whether Microsoft is or ever has been a minority investor in SCO. Although Microsoft is not a minority investor in SCO, it was involved with the company years ago, when it was still known as the Santa Cruz Operation and before its acquisition by the former Caldera International Inc.

Microsoft and the former SCO did joint development work on an old operating system called Xenix, but the minority stake in that effort has long since ended, the spokesman said.

The licensing agreement announced today is one of two SCO signed in its second fiscal quarter, ended in April, worth a combined total of more than $10 million, Sontag said. He declined to be more specific on how much the Microsoft deal was worth.

SCO and Microsoft both have grievances against Linux. SCO, which owns Unix, claims that Unix code has been illegally copied into Linux. Meanwhile, Microsoft sees Linux as a rising threat to its desktop and server operating systems.

The kernel of the Linux operating system is developed by a team of volunteers led by Linux creator Linus Torvalds. The Linux kernel is available to anyone who wants it, at no charge. Moreover, it's distributed under a license that gives users access to the Linux source code and permission to modify, copy, share and redistribute it. Linux is the best-known example of open-source software.

By contrast, most commercial software vendors, such as Microsoft, rarely, if ever, disclose the source code of their programs and normally forbid users from freely modifying, copying or distributing them, an approach sometimes called "proprietary."

The SCO/Microsoft announcement comes a little more than two months after SCO filed suit against IBM and days after SCO said it will suspend its Linux business (see story).

SCO has become increasingly reviled in Linux circles during the past two months because of its allegations that Unix code has been copied illegally into the Linux operating system's kernel, allegedly violating SCO's intellectual property rights.

SCO's actions over this matter so far include a formal lawsuit against IBM and stern warnings against Linux users and vendors, such as Red Hat Inc. and SuSE Linux AG, that they also might be in violation of SCO's intellectual property. IBM has denied the allegations, while Red Hat and SuSE have brushed off SCO's warnings, saying they are baseless.

Todd R. Weiss contributed to this report.

Copyright © 2003 IDG Communications, Inc.

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