Update: HP to indemnify its corporate Linux users against SCO

The move to protect customers will take effect Oct. 1

In a bold move aimed at reassuring its enterprise users that Linux is the right choice for their businesses, Hewlett-Packard Co. today is announcing that it will indemnify its Linux customers against any future legal action from The SCO Group Inc.

The company held a news teleconference earlier today to detail the move, which is effective Oct. 1.

Martin Fink, HP's vice president for Linux enterprise servers and storage, said during the teleconference that the company wants to reassure customers that their investments in the open-source operating system on HP hardware are secure for the long haul.

"Today's announcement is about accountability and protecting the customer while the other vendors sit on their haunches," Fink said. "By doing this, HP is showing its leadership and demonstrating its true commitment to Linux."

HP will offer full legal indemnification to customers buying Linux on HP hardware with a standard support package after they sign an addendum to their sales contract, he said. No modifications to the source code can be made under the contract, but desired changes can be discussed with HP on a case-by-case basis.

"We're giving the green light to customers to move forward on their Linux deployments," Fink said. By indemnifying customers, HP will stand in for the customer if SCO files a lawsuit and will defend its customers in court and handle any potential damages or legal ramifications.

Existing customers will also be able to sign up for indemnification, Fink said, as long as they obtained their Linux distribution through HP and have HP hardware and a standard support contract. Other scenarios, such as a customer wanting to use a Linux distribution obtained elsewhere on their HP hardware, can be discussed, he said.

Rather than pursue the issue in court, he said, HP decided that the biggest difference it could make in the ongoing SCO/Linux controversy was to act on behalf of HP customers, he said. "Our conclusion ... was that the most pragmatic and real material difference we could make is rather than ... offering other lawsuits or countersuits ... to indemnify our customers."

Reaction from Lindon, Utah-based SCO was swift: The company portrayed the HP move as a tacit acknowledgment that SCO's recent legal maneuvering is proper.

"HP's actions this morning reaffirm the fact that enterprise end users running Linux are exposed to legal risks," SCO said in a statement. "Rather than deny the existence of substantial structural problems with Linux, as many open source leaders have done, HP is acknowledging that issues exist and is attempting to be responsive to its customers' request for relief. HP's actions are driving the Linux industry towards a licensing program. In other words, Linux is not free.

"We are gratified that, alone among the major Linux vendors, HP has taken a strong stand to protect their customers by indemnifying them against possible legal difficulties stemming from their use of Linux," the SCO statement said. "We believe that this action signals that HP recognizes their Linux users could, in fact, face litigation because of copyright violations and intellectual property problems within Linux. As a company that strongly supports its customers, HP has done something about this."

A spokesman for SCO couldn't be reached early today.

Earlier this month, SCO said it was considering sending invoices to corporate Linux users identified through Internet searches and press interviews, asking those companies to pay $699 per processor for the right to run Linux.

SCO turned the Linux world upside down in March when it filed a lawsuit against IBM that now seeks $3 billion in damages, alleging that IBM illegally contributed SCO's System V Unix code into the Linux open-source project to benefit IBM's business. IBM filed a countersuit against SCO last month, asserting that SCO has actually infringed on IBM's patents and is in violation of the license that governs contributions to Linux.

SCO said last month that it would offer a $699-per-processor fee for the SCO Intellectual Property License for Linux, which would allow corporate users to run Linux on their servers in binary form only without violating SCO's intellectual property rights. Only one unnamed company has so far signed up for the special license, according to SCO.

Dan Kusnetzky, an analyst at IDC in Framingham, Mass., said he expected one of the large IT vendors to indemnify its customers and protect its business interests. "Now that HP has done that, I suspect that IBM will make a similar move," he said.

Kusnetzky disagreed with SCO's analysis that the indemnification is proof of the alleged legal problems with Linux.

"I don't think HP is admitting that problems exist in Linux," he said. "It's admitting that the SCO Group might attack its customers and rather than lose a budding business ... they are taking steps to reassure customers that if The SCO Group does attack them, that they have a big friend, a big partner."

"It's kind of like HP stepping forward and saying, 'If SCO Group is attacking you, they're attacking us,' " Kusnetzky said. "I don't think that HP in any way, shape or form is agreeing to the original premise of The SCO Group's litigation that somehow their intellectual property ended up in Linux."

Copyright © 2003 IDG Communications, Inc.

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