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

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,

“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 “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

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

“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.”

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