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Attorneys: SCO v. IBM Remains Murky

As Linux devotees gear up for the LinuxWorld Conference & Expo in San Francisco next week, the Open Source Development Lab (OSDL) Thursday moved to put its own spin on the ongoing saga between SCO Group and Linux with a position paper suggesting enterprise Linux users have little need for the protection of a SCO runtime license, based on what is currently known.

But legal observers are divided on that front.

"It is impossible to assess the weight of undisclosed evidence," Eben Moglen, general counsel for the Free Software Foundation (which maintains the GNU General Public License under which Linux is licensed), wrote in the OSDL Position Paper. "Based on the facts currently known, which are the facts SCO itself has chosen to disclose, a number of very severe questions arise concerning SCO's legal claims. As a lawyer with reasonably extensive experience in free software licensing, I see substantial reason to reject SCO's assertions."

Moglen, also a professor of law at Columbia Law School, argued that users don't really need a license to use copyrighted works.

"In general, users of copyrighted works do not need licenses," he wrote. "The Copyright Act conveys to copyright holders certain exclusive rights in their works. So far as software is concerned, the rights exclusively granted to the holder are to copy, to modify or make derivative works, and to distribute. Parties who wish to do any of the things that copyright holders are exclusively entitled to do need permission; if they don't have permission, they're infringing. But the Copyright Act doesn't grant the copyright holder the exclusive right to use the work; that would vitiate the basic idea of copyright. One doesn't need a copyright license to read the newspaper over someone's shoulder or listen to music wafting on the summer breeze even though they haven't paid the copyright holder. Software users are sometimes confused by the prevailing tendency to present software products with contracts under shrink-wrap; in order to use the software one has to accept a contract from the manufacturer. But that's not because copyright law requires such a license."

A faulty Argument?
But Mark Radcliffe, co-chair of the Licensing Division at Gray Cary, a law firm that represents emerging growth and technology companies, said that argument is faulty.

"The analogy he uses to books is fundamentally flawed," Radcliffe told internetnews.com.

The reason, he said, is that software just isn't the same as books.

"Every time you load software into the processor of the computer, you're making a copy," Radcliffe said. "It's kind of a point of dispute, but there are cases about that. You're not looking over someone's should here. Software is unlike a book. The problem with software is that you need to make a copy for it to be useful."

Moglen noted that the Copyright Act addresses that issue.

"But don't users of free software make copies, and need a license for that activity? The Copyright Act contains a special limitation on the exclusive right to copy with respect to software. It does not infringe the copyright holder's exclusive right to copy software for the purpose of executing that software on one machine, or for purposes of maintenance or archiving. Such copying also requires no license. But what if a firm has gotten a single copy of the Linux kernel from some source, and has made many hundreds or thousands of copies for installation on multiple machines? Would it need a license for that purpose? Yes, and it already has one," Moglen wrote, referring at the end to the GNU GPL.

Radcliffe agreed that a special exception to the Copyright Act was included in Section 117, which gives users rights to copy, or even modify, copyrighted software under certain conditions. However, he noted that almost all software licenses stipulate that the licensor retains title to the copy. "This is an important part which has substantially reduced the value of the section," he said.

He also noted that in the more than 20 years since that section has been on the books, it has only been brought up in court a handful of times, which makes any ruling based on that section uncertain at best.

Concerning IBM
In any case, Radcliffe pointed out that the only lawsuit on record to date concerning SCO and Linux is the one SCO has filed against IBM for disclosing trade secrets.

"It's not clear what sort of action they would have against the users," Radcliffe said.

IBM, and other vendors with contractual relationships with SCO that contributed to Linux are another matter, though even that area is murky, Radcliffe said.

"It's very clear that the IBM license to Unix is very complicated," he said, noting that IBM has 400 supplementary agreements to its Unix license.

"There are lots of facts floating around here," he said. "It appears to be an incredibly complex licensing scheme, and it's going to take a while to sort out."

Tom Carey, partner with intellectual property firm Bromberg & Sunstein, agreed.

"IBM negotiated with AT&T [the original holder of the Unix copyrights and patents] a very detailed side letter to their license agreement," Carey told internetnews.com. "That side letter is Exhibit C to the SCO complaint. That side letter negates many of the key license terms that SCO relies upon in its complaint. For example, the basic license agreement says that IBM is authorized to create derivative works, but those derivative works will become the property of AT&T. The side letter says exactly the opposite, that those derivatives will become the property of IBM."

He added, "The format of this is unusual. It appears that AT&T insisted that IBM sign their standard form agreement and that any changes be set forth in a separate document. The side letter clearly takes precedence."

In addition, Carey said, the side letter spells out the conditions under which IBM could keep ownership of derivative works. Carey explained that the letter permits IBM to have its employees use ideas they learned from seeing the Unix code and incorporate those ideas into other products, under certain conditions: the programmers could not refer to Unix code or manuals while doing their coding.

"That provision allowed, I believe, IBM to essentially reverse engineer Unix, provided that it did so in a kind of a 'clean room' method, and incorporate those reverse engineered modules into its products," Carey said. "It seems hard to imagine that if IBM followed those procedures that someone who bought a product from IBM or acquired software indirectly from IBM could be found guilty of infringing SCO's copyrights in the Unix operating system."

Meanwhile, Radcliffe also pointed out that the term 'derivative works' has a very precise meaning in copyright law.

"[SCO] talks about these things as derivative works," he said. "We need to be careful to separate out derivative works in a copyright statute and the way they may have been used in the agreement."

Specifically, Radcliffe said that according to copyright law, a derivative work is "a work where if you excised any of the copyrights in that work, you would infringe another work."

In other words, a specific instance of code would have to contain actual Unix code to constitute a derivative work under copyright law, Radcliffe said.

Meanwhile, Carey noted that SCO President and CEO Darl McBride seemed to have misspoken when he said last week that Linux is unique in that it is an operating system which is offered without any warranty of copyright non-infringement (which implied that users were taking a big risk by signing onto Linux).

Carey said he took a look at the Unix license between AT&T and IBM -- the very agreement that forms the basis of SCO's complaint. "It contains a nearly identical disclaimer of any warranty of non-infringement," he said.

While conceding that he has not seen the current license that SCO offers, he said, "It would be interesting to see if it also contained a disclaimer to any warranty. If they're following the AT&T model that they are the successor to, it would contain just such a disclaimer."

He also noted that SCO likely needs to include terms in its new runtime license to the effect that the licensee acknowledges that there is a possibility that it may not need the runtime license in the first place. Otherwise, he said, "If that isn't the case, then I think that SCO will have committed the business equivalent of extortion, assuming they lose their case against IBM. And they will have some exposure for having collected substantial licensing fees and having given nothing in return."

Stuart Cohen, CEO of OSDL -- a non-profit organization dedicated to furthering Linux for the enterprise -- said Linux users he has spoken with have not slowed their Linux implementation plans based on SCO's claim that Linux is an unauthorized derivative of Unix. OSDL recently hired Linux creator and development kernel maintainer Linus Torvalds, and also hired Andrew Morton, maintainer of the stable Linux kernel.

"It is the consensus among the end users with whom we've discussed SCO's claims that they are not slowing their Linux implementation plans," Cohen said. "As suggested by Moglen, absent clear, open and publicly available evidence that using Linux violates rights that SCO has not already conferred on users by freely distributing Linux over the course of several years, users see no need to purchase a license from SCO at present."

SCO (formerly Caldera), a founding member of the UnitedLinux group and until recently a Linux distributor, upset the Linux party in March when it turned its legal guns on IBM with a $1 billion (now raised to $3 billion) lawsuit alleging breach of contract and the sharing of trade secrets.

On March 6, the company sent a letter to IBM Chairman and CEO Sam Palmisano, warning him that IBM had allegedly breached its contract with SCO by contributing portions of its Unix-based AIX code to the open source movement, and by introducing concepts from Project Monterey, a joint effort by SCO and IBM to develop a 64-bit Unix-based operating system for Intel-based processing platforms, into Linux. IBM scrapped Project Monterey in May 2001.

SCO claims the AIX code IBM contributed is a derivative work of SCO's Unix System V and UnixWare intellectual property, making Linux an "unauthorized derivative" of Unix, according to SCO. The firm has also claimed that the code, and possibly code from other Unix vendors which have contracts with SCO, was foundational in allowing Linux to make the leap to Symmetrical Multi-Processing (SMP) capabilities, which are essential to making Linux an enterprise-grade operating system.

At first, SCO seemed content to wage its contract war with IBM, although it did send a letter to some 1,350 companies that use Linux, warning them, "similar to analogous efforts underway in the music industry, we are prepared to take all actions necessary to stop the ongoing violation of our intellectual property or other rights." In other words, SCO alleges that running Linux is essentially the same as running pirated software.

Last week, SCO declared that it had received U.S. copyright registrations for its Unix System V and UnixWare source code, a precursor to pursuing legal action over copyrights.

"A case like this could easily go on for three or four years," Carey said. "If it goes all the way to the end, there's going to be a huge amount of discovery and analysis concerning who wrote what and when."