What SCO Wants, SCO Gets - (Linux Assault)

Forbes ^ | 06.18.03, 12:00 PM ET | Daniel Lyons,

[Ernest_at_the_Beach]

NEW YORK - Linux vendors are under attack. In March, IBM was sued for $1 billion by The SCO Group, of Lindon, Utah, which claims IBM has put SCO's Unix code into Linux, the open-source software program. SCO also has sent letters to 1,500 large companies warning them that if they are using Linux, they may face legal problems. Though IBM is the only company named in SCO's lawsuit, other Linux vendors, like Red Hat and SuSE Linux, could suffer collateral damage.

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So how are the Linux companies fighting back? IBM (nyse: IBM - news - people ) put out a statement saying it will fight SCO's (nasdaq: SCOX - news - people ) claim and has issued bulletins to its sales force, providing talking points to use with customers. Red Hat (nasdaq: RHAT - news - people ) is posting pro-Linux commentary and analyst reports on its Web site. SuSE Linux, a German company, claims customers aren't scared by the SCO lawsuit. "Everyone has seen through this," a SuSE spokesman says.

In other words, like many religious folk, the Linux-loving crunchies in the open-source movement are a) convinced of their own righteousness, and b) sure the whole world, including judges, will agree.

They should wake up. SCO may not be very good at making a profit by selling software. (Last year the company lost $24.9 million on sales of $64.2 million.) But it is very good at getting what it wants from other companies. And it has a tight circle of friends.

In 1996, SCO's predecessor company, Caldera, bought the rights to a decrepit version of the DOS operating system and used it to sue Microsoft (nasdaq: MSFT - news - people ), eventually shaking a settlement out of the Redmond, Wash., software giant. In 1997, Darl McBride, now SCO's chief executive, sued his then employer, IKON Office Solutions (nyse: IKN - news - people ), and won a settlement that he says was worth multiple millions. (IKON acknowledges the settlement but disputes the amount.)

McBride joined Caldera as chief executive in June 2002. Two months later he changed the company's name to The SCO Group, based on the name of an ailing Unix product that Caldera had purchased in 2001 from its creator, The Santa Cruz Operation, of Santa Cruz, Calif. The Santa Cruz Operation now calls itself Tarantella (nasdaq: TTLDC - news - people ).

As with the 1996 DOS lawsuit against Microsoft, in the current lawsuit over Unix and Linux this company aims to take a nearly dead chunk of old code, bought for a song, and parlay it into a windfall. Not only is the strategy the same--so are some of the players.

SCO is basically owned and run by The Canopy Group, a Utah firm with investments in dozens of companies. Canopy's chief executive, Ralph J. Yarro III, is chairman of SCO's board of directors and engineered the suit against Microsoft in 1996. Darcy Mott, Canopy's chief financial officer, is another SCO director, along with Thomas Raimondi, chief executive of a Canopy company called MTI Technology (nasdaq: MTIC - news - people ). In this cozy company, SCO even leases its office space from Canopy--a fact disclosed in Securities and Exchange Commission filings, along with the fact that SCO's chief financial officer, Robert Bench, has a side job as a partner in a Utah consulting firm that last year billed SCO for $71,200.

Canopy companies sometimes share more than a common parent. They form joint ventures and buy and sell one another's stock. Last November SCO formed a joint venture called Volution with Center 7, a Canopy company. In 2000, Caldera sold off part of its business to EBIZ Enterprises (otc: EBIZQ - news - people ), a Texas company in which Canopy holds a controlling interest and whose board boasts three Canopy execs, including Mott, according to SEC filings. Previously, Caldera bought shares in two other Canopy companies, Troll Tech and Lineo, and later wrote off the Troll Tech investment but sold the Lineo shares at a profit, according to SEC filings. In 1999, Caldera sold its own shares to MTI, then bought those shares back last year, according to SEC filings.

What's the point of all this horse trading? McBride says he has no idea, since those deals happened before he joined Caldera. "I wasn't involved in those transactions," he says.

Yarro says the investments were made based on each company's belief in doing what's best for itself. "There's no hidden agenda," he says.

Yarro won't apologize for the IBM lawsuit. "I'm not a guy who goes away quietly in the night. I fight," he says. "If you take something from me, if you break a promise, I'm going to come after you."

And he doesn't give up. In 2001, Canopy and Center 7 sued software giant Computer Associates (nyse: CA - news - people ) in a squabble over a business partnership that turned sour. Two years later the litigation continues.

The IBM lawsuit could bring a windfall to Canopy, which owns 46% of SCO. Another beneficiary could be John Wall, chief executive of Vista.com, a Redmond, Wash., company that last August struck a licensing arrangement with SCO. Wall got 800,000 shares of SCO stock in the deal and still holds 600,000, making him SCO's biggest individual shareholder after Canopy. Those shares, which were worth about $1 each when Wall made the deal, now trade above $10.

One team that won't benefit is the folks at Tarantella, the company that sold its Unix code to Caldera in May 2001. After the deal, Tarantella still held 3.6 million shares of Caldera. But last year Caldera bought back all of them, paying 95 cents apiece for most. All told, Tarantella was paid a mere $36 million for its Unix code--the same code that Yarro and McBride now hope could generate $1 billion from IBM.

These guys in Utah are no dummies. The crunchies in the Linux community should be paying more attention.

[Golden Eagle]

Nick - you can get off your high horse, especially considering you are defending what appears to be a pack of thieves.

'License' is not a difficult term to understand. Most everyone has a 'driver's license'. It gives you certain permissions, but actually has more provisions than rights.

I would find it almost impossible to believe that ATT (and subsequent lineage) ever granted a license to the Unix source code that allowed the licensee to take the source code and re-release it under a different name, and under a different license that claimed it was free to further copy.

To use your sensationalism, that is the most ridiculous thing I have ever heard anyone purporting to be an expert on the issue claim.

[Nick Danger]

"One could argue that developers could write exact or very similar code, but the developers' comments in the code are basically your DNA, or fingerprints, for a particular piece of source code," said Laura DiDio

That depends on where they came from. Are these comments in the POSIX spec? Were they in BSD 4.2? Laura doesn't know. SCO doesn't know. Those who do say that SCO might be claiming ownership of something that isn't theirs at all, which would be fraud, and in this case, attempted extortion. It's going to be a fun case.

I'm sure you're aware that you are selectively quoting the people who said what you wanted said, and that there are other quotes out there by people who also saw the SCO code and who say they found nothing to indicate infringement. So at a minimum, you are trying to throw snow in our eyes. Please stop.

[Golden Eagle]

"I'm sure...there are other quotes out there by people who also saw the SCO code and who say they found nothing to indicate infringement."

You are? Got a single link to a respected publication?

[dark_lord]

As long as SCO can prove that their developers produced the code for SCO Unix, and can prove that IBM then inherited the code into AIX, and can prove that IBM developers then placed that code into Linux -- then they have a case, not so? (Note that if IBM has a Unix license that permits them to own, modify, and release the Unix code for general use then SCO has little to say about it. License issues will also come out in court.) But in fact there are other possible reasons for duplication in the code.

1st -- for small code segments (single line) it happens that for simple statements there are often only a few ways to do something. Different developers will then do the same thing. And since many developers working on Unix cut their teeth on the K&R book, they will use identical coding styles, variable naming approaches, etc.

2nd -- the POSIX standard specifies API calls, the parameters and the return values. This will apply limitations on different developers coding to the same standard. Big suprise (not!) if they use identical variable names and coding constructs in such cases.

3rd - SCO needs to prove that their developers did not lift code from IBM! For example, as has been previously posted, IBM acquired assets from Sequent. Sequent was a multiprocessing pioneer and had a Unix variant. IBM may well have incorporated such code into AIX. Did some SCO developers several years ago "lift" the code from AIX and drop it into SCO Unix, where such code then ended up in Linux via IBM (completely legitimately)? Be sure any issues like this will be examined in court.

4th -- SCO had access to a Linux variant and was modifying and releasing that variant. It is possible that a SCO developer took SCO Unix code and placed it into their Linux variant. Once done, the GPL would apply. If an IBM developer then took that Linux code (inserted by a SCO developer) and modified it and released it back into Linux, the GPL still applies and SCO has no case.

All 4 of these possibilities point out absolutely legitimate ways where there can be identical code fragements in Linux and SCO Unix, but where SCO has no legal basis for their position. To reiterate, the 4 legitimate possibilities are:

(a) Normal coincidental duplication. Happens for small code fragments when solving identical problems.
(b) Cause by similar approaches to meeting the POSIX standard.
(c) SCO developers guilty of inserting IP into SCO Unix several years back that may have belonged to IBM, when IBM then places the code into Linux the "duplication" appears.
(d) SCO developers place SCO Unix code into Linux themselves, IBM then modifies and enhances that section of Linux, SCO claims IBM guilty of the duplication -- but actually due to SCO itself!

Since I have pointed out 4 possible ways that code duplication could have occurred, any shouting of GUILTY! GUILTY! will have to wait until the court case and the source control libraries are produced from the archives.

[Golden Eagle]

Those are (in some cases remote) possibilities, but based on the fact that SCO recently tripled their claimed damages and requested the judge expedite proceedings and declare an injuction against IBM - who has a legion of patent lawyers - their case is probably a lot more sound than Linux proponents are willing to admit.

And it looks (to me) like it is a strong case, as they are now even giving more background into where some of the infringing code may have originated from, such as "RCU": (http://news.com.com/2100-1016-1017965.html)

Other common indicators of guilt besides direct evidence are opportunity, and motive, both of which IBM clearly has. So far all the momentum is all on SCO's side, their stock has soared 1000% since this all started.

[Liberal Classic]

I think just for fun today at work I'll call our IBM vendor and see if he's still selling AIX and Linux. I bet he is.

[dark_lord]

It doesn't matter what "analysts" say. It doesn't even matter that there are code duplications. What matters is who put the code there, and when it happened. Until that is revealed, all this is just posturing.

[Dominic Harr]

"If everything SCO showed me today is true, then the Linux community should be very concerned," said Bill Claybrook, research director for Linux and open-source software at the Aberdeen Group (Boston).

Um,

Analyst Finds SCO's Claims Tough To Verify

"After examining the programming code that SCO Group claims was copied from Unix (news - web sites) into Linux (news - web sites ), Aberdeen Group analyst Bill Claybrook said he cannot conclude whether or not SCO's legal claims of copyright infringement have merit. "

*Someone* here is spreading their FUD pretty thinly. :-)

And this is from the 'Aberdeen Group' -- aren't they the folks who brought us the famous "Windows TCO cheaper than Linux" study?

If *they* can't make a case . . .

[Dominic Harr]

I would find it almost impossible to believe that ATT (and subsequent lineage) ever granted a license to the Unix source code that allowed the licensee to take the source code and re-release it under a different name, and under a different license that claimed it was free to further copy.

!

I'm guessing you're *not* in the software industry, from that whopper.

[Ernest_at_the_Beach]

I bet so too!

[Dominic Harr]

Analyst Finds SCO's Claims Tough To Verify

Sorry about that, here's the right link.

[Golden Eagle]

I'm guessing you're *not* in the software industry, from that whopper.

Other than your insult, I have no idea what you are talking about. A company cannot rename, redistribute and relicense something they don't actually own in the first place.

I feel like I'm arguing with children over this. Someone gave them free candy, and now they're throwing a hissy fit because they might not have it given to them anymore.

[Golden Eagle]

Concerning the corrected link, from what I read, the analyst you cite openly admits there is duplicate code. Not a star witness for you, by any stretch of the imagination.

[Nick Danger]

Those are (in some cases remote) possibilities

No, they are not remote possibilities. If you knew half as much about this case as you're trying to sound like you do, you would know that SCO does not dispute that the journaling file system, which IBM contributed to linux, originated with IBM and was developed for AIX. SCO is claiming that licensing legerdemain allows them to claim ownership of IBM's original work. They can claim that, but that just proves you can claim anything if you're a lawyer. Journaling file systems have been part of IBM's mainframe operating systems for decades. SCO will have a hell of a time convincing a judge that they own something that IBM was doing before they were born.

Another of SCO's "claimed properties" is memory management code for non-uniform memory architecures. They claim IBM stole this from them, that it's part of UNIX System V. Except that everybody knows that the so-called NUMA technology was done by Sequent in the mid 1990's. There is no way in Hell it was ever part of AT&T's System V distribution, because it hadn't been invented then. In 1999, IBM bought Sequent, so today IBM is the owner of the NUMA code. SCO is in the ludicrous position of claiming that IBM stole from them what IBM is known to have purchased from Sequent, who is known to be the original author of the code.

Here's an interesting thing I just learned. In Germany, the courts have enjoined SCO from making these claims. The order prohibuts SCO-Caldera from circulating "the idea that the Linux Operating System illegitimately acquired and contains the Intellectual Property of SCO UNIX and/or that the end users of LINUX can be made liable for patent/copyright infringements against SCO's intellectual Properties." The order provides for a fine of up to 250,000 Euros -- or jail time for the CEO -- for each violation.

There is a similar doctrine in U.S. law called Trade Libel. I suspect we will be hearing more about that soon. If you, or anyone you know, is an employee of, oh, say, Microsoft Corporation, you might want to brush up on Trade Libel as a cause of action.

[Dominic Harr]

Other than your insult, I have no idea what you are talking about.

That much is clear.

A company *does* indeed, often, license some out-of-date software to rename, redistribute and re-license to others. It's common in the software industry. Your sentence screamed "I don't know anything about this but have an opinion anyway".

And that 'analyst' (a man from a company *known* to be an MS FUD machine, perhaps the most famous one currently going -- are you familiar with the Windows v. Linux TCO fiasco of theirs?) clearly said, and I quote, "he cannot conclude whether or not SCO's legal claims of copyright infringement have merit."

A seriously pro-MS person couldn't find any conclusive evidence. Period.

Either you're completely uninformed on this topic, or you're deliberately decieving. Either way, it's funny to me!

I'm off to Dallas, to see the Eagles, and won't be checking back in for a while.

Have a nice day.

[hirn_man]

Microsoft has a lot of lawyers too, that didn't stop SCO when SCO sued Microsoft.

[ShadowAce]

There is a thread that explains how to check whether SCO is telling the truth--without ever looknig at the source code, or signing an NDA.

Check it out.

[Golden Eagle]

Nick - I see you not so hidden inferrence I may have some affiliation with Microsoft. Not at all, and if/when they steal software they should be held accountable by law as well.

And that's what this case is about, stealing software, in this case from a business partner. Talk about a dirty trick. Ever heard of Project Monterey? SCO, IBM and Sequent were partners, working together for some time towards what was supposed to be the next big thing in the Unix world. All the big names were already signed up to support it, but then out of the 'blue', and without public explanation, IBM killed the whole deal.

They claimed it was a simple business decision to refocus on Linux instead of Unix, and bolted on long time partner SCO to run off with the new pretty girl. All's fair in love and war you say, but this time, according to some of the evidence we're starting to see, it looks like IBM may have stolen some of the processes they had jointly developed in past or present and then impelemented them in their new darling.

I find it easily believable, and all the evidence we're hearing so far looks that way. IBM is no lilly white virgin - she's been drug through the courts before for unfair practices, and is also currently under investigation by the Securities and Exchange Commision for other recent illegalaties. SCO's history is that of a company that has been wronged by corporate giants, and once again it looks like that is what is happening here.

What's wrong is wrong, and no bribe of 'free software' will ever make me change my mind.

[Golden Eagle]

Harr - maybe in the international 'open source' world you apparently live in that sort of thing happens, but not here in the USA when discussing corporate trade secrets that are still considered a company's treasure. Cheers.

[Nick Danger]

that's what this case is about, stealing software

Here you are again stating as fact something that you cannot know. If you have some comment to make about evidence or legal precedents in this matter, or the technology involved, those comments would be welcome. Further name-calling and assertions of guilt based on what appears to be a predisposition on your part toward emotional ranting are a waste of time. When you have something cogent to say, let us know.