Red Hat Takes Aim at Infringement Claims
Complaint launched against SCO claims, Red Hat pledges $1MM to create fund to protect Linux
SAN FRANCISCO—August 4, 2003—Red Hat, Inc. (Nasdaq:RHAT) today made two significant announcements to protect Red Hat Linux customers and the worldwide Linux industry. First, Red Hat announced that it filed a formal complaint against The SCO Group, Inc. (Nasdaq: SCOX, "SCO"). The purpose of this complaint is to demonstrate that Red Hat's technologies do not infringe any intellectual property of SCO and to hold SCO accountable for its unfair and deceptive actions.
"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," said Mark Webbink, General Counsel at Red Hat. "Red Hat is confident that its current and future customers will continue to realize the significant value that our Red Hat Linux platform provides without interruption."
To further protect the integrity of Open Source software and the Open Source community, Red Hat has established the Open Source Now Fund. The purpose of the fund will be to cover legal expenses associated with infringement claims brought against companies developing software under the GPL license and non-profit organizations supporting the efforts of companies developing software under a GPL license. Red Hat has pledged one million dollars to be provided as funding in this initiative. For more information please e-mail opensourcenow@redhat.com.
"The collaborative process of Open Source software development which created the Linux operating system has been unjustly questioned and threatened," said Matthew Szulik, Chairman and CEO of Red Hat. "In its role as industry leader, Red Hat has a responsibility to ensure the legal rights of users are protected."
About Red Hat, Inc.
Red Hat is the world's premier open source and Linux provider. Red Hat is headquartered in Raleigh, N.C. and has offices worldwide. Its European headquarters is based in Surrey, UK, with offices throughout Europe. Please visit Red Hat on the Web at www.redhat.com.Forward-Looking Statements
Forward-looking statements in this press release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements in this press release that are not strictly historical statements, including, without limitation, management's plans and objectives for future operations, and management's assessment of market factors, constitute forward-looking statements which involve risks and uncertainties. These risks and uncertainties include, without limitation, reliance upon strategic relationships, management of growth, the possibility of undetected software errors, the risks of economic downturns generally, and in Red Hat's industry specifically, the risks associated with competition and competitive pricing pressures, the viability of the Internet, and other risks detailed in Red Hat's filings with the Securities and Exchange Commission, copies of which may be accessed through the SEC's Web site at http://www.sec.gov.LINUX is a trademark of Linus Torvalds. RED HAT is a registered trademark of Red Hat, Inc. All other names and trademarks are the property of their respective owners.
LINDON, Utah, Aug. 4 /PRNewswire-FirstCall/ -- The following statement is
being issued by The SCO Group, Inc. (Nasdaq: SCOX):
(Logo: http://www.newscom.com/cgi-bin/prnh/19990421/SCOLOGO )
SCO has consistently stated that our UNIX System V source code and
derivative UNIX code have been misappropriated into Linux 2.4 and 2.5
kernels. We have been showing a portion of this code since early June.
SCO has not been trying to spread fear, uncertainty and doubt to end
users. We have been educating end users on the risks of running an
operating system that is an unauthorized derivative of UNIX. Linux
includes source code that is a verbatim copy of UNIX and carries with it
no warranty or indemnification. SCO's claims are true and we look
forward to proving them in court.
Recent correspondence from SCO to Red Hat further explains SCO's
position.
The first letter is from Bob Bench, CFO of The SCO Group, Inc., to Mark
Webbink, Sr. Vice President and General Counsel of Red Hat, Inc., that
SCO intended to send to Red Hat. After a conversation between Matthew
Szulik and Darl McBride, Red Hat determined that SCO did not need to send
this letter.
The second letter is one that was sent to Matthew Szulik today from Darl
McBride after Red Hat's lawsuit was filed.
July 31, 2003
Mark Webbink, Esq.
Sr. Vice President and General Counsel
RED HAT, INC.
1801 Varsity Drive
Raleigh, NC 27606
VIA FACSIMILE: (919) 754-3700
Dear Mr. Webbink:
This letter is in response to yours of July 18, 2003 to Darl McBride,
President and CEO of The SCO Group, Inc. ("SCO").
Before responding to your request, it is important to place your letter
in context. Your letter follows on the heels of Red Hat's S-3 filing of
July 7, 2003, in which your company revised its risk disclosure
statement.[1] In addition, SCO is currently engaged in litigation with
International Business Machines Corporation ("IBM") regarding its role in
the development of the Linux operating system. At the time of your
letter, 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.
Based on the posture of our litigation and your revised risk disclosures,
it is unclear to us the purpose of your July 18, 2003 letter. If you
desire to enter good faith discussions to address SCO's intellectual
property claims against Linux, either on behalf of a wider consortium of
Linux companies or solely on behalf of Red Hat, we are willing to meet
with you for that purpose. In any such meeting, we will provide example
after example of infringement of our intellectual property found in
Linux. Of course, any such demonstration must be pursuant to an
acceptable confidentiality agreement and must be intended to further good
faith discussions about resolving the differences between us.
If you seek information for the purpose of informal discovery intended to
benefit IBM in the pending litigation, or for the purpose of devising
your own litigation plans against SCO related to Linux, we must
respectfully decline your request. Therefore, please clarify in writing
the purpose for your request. Thank you.
Sincerely,
Robert Bench
Chief Financial Officer
The SCO Group, Inc.
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[1] Red Hat states in the revised disclosure that it is "vulnerable to
claims that [its] products infringe third-party intellectual property
rights particularly because [its] products are comprised of distinct
software components many of which are developed by independent
parties." The revised risk disclosure continues: "[M]uch of the code
in [Red Hat's] products is developed by independent parties over whom
we exercise no supervision or control ... [and Red Hat's] lack of
access to unpublished software patent applications, copyright
registrations which fail to adequately disclose source code, and
numerous issued software patents that are of dubious validity ...
Claims of infringement could require us to seek to obtain licenses
from third parties in order to continue offering our products, to
reengineer our products, or to discontinue the sale of our products
in the event reengineering could not be accomplished on a timely
basis."
August 4, 2003
Matthew J. Szulik
CEO
RED HAT, INC.
1801 Varsity Drive
Raleigh, NC 27606
Dear Matthew,
Attached is the letter I discussed with you during our July 31, 2003
telephone conversation. Instead of actually sending the letter, I
thought it was best to telephone you and speak in person to see if we
could resolve the issues between our companies short of litigation. We
left the conversation with a preliminary agreement to meet and continue
our discussions further.
To my surprise, I just discovered that your company filed legal action
against The SCO Group earlier today. You, of course, mentioned nothing
of this during our telephone conversation. I am disappointed that you
were not more forthcoming about your intentions. I am also disappointed
that you have chosen litigation rather than good faith discussions with
SCO about the problems inherent in Linux.
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.
I must say that your decision to file legal action does not seem
conducive to the long-term survivability of Linux.
Yours truly
Darl C. McBride
President & CEO
SOURCE SCO Group, Inc.