SCO Scorns Red Hat’s Lawsuit

SCO Group Tuesday poured scorn on a formal complaint filed against it this week by Red Hat , and said its response to the suit will “likely include counterclaims for copyright infringement and conspiracy.”

President and CEO Darl McBride called the effort a “legal shell game” saying Red Hat is the one with the faulty business model and accusing the company of stealing code of UNIX System V.

“IBM and Red Hat have painted a Linux liability target on their backs. We have no choice but to fight it. It wasn’t the place we wanted to go but yesterday was a push in that direction,” McBride said likening the situation to a “Don’t Ask, Don’t Tell” policy between vendors. “Red Hat’s Lawsuit confirms what we have been saying all along — Linux developers are either unwilling or unable to screen the code in the Linux kernel to remove infringing code before customers buy and use it.”

Filed in a Delaware court, Red Hat’s seven-count complaint asks the court to show its technologies do not infringe any intellectual property of SCO and asks for a permanent injunction against SCO for false advertising statements against Red Hat.

Red Hat CEO Matt Szulik said his company was directly mentioned in a recent SCO conference
call to investors that Red Hat says created an “atmosphere of fear, doubt
and uncertainty about Linux.”

SuSE vice president of Development Markus Rex said the German Linux distributor was evaluating Red Hat’s position and plans on a summit with the company this week.

Moving quickly to put its own spin on the situation, SCO spokesman Blake
Stowell told late Monday, “SCO has consistently stated that our
UNIX System V source code and derivative UNIX code have been misappropriated into Linux. 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.”

By mid-day Tuesday, McBride said his company was looking at all of its options on how to respond to Red Hat’s claims including filing motions to dismiss. McBride said it’s a safe bet that the Delaware case will be in courts well into 2005, about the same timeframe as the company’s suit with IBM.

“At issue here is more than just CEO and Red Hat,” McBride said. “What is at issue is whether intellectual property rights will have any value in the age of the Internet where intellectual property rights can be simply taken without regard to ownership.”

As an alternative to litigation, SCO Tuesday also provided an update on the status of its new intellectual property licensing program for Linux, under which it seeks to sell Linux users on a run-time license that would protect them against lawsuits.

The company said it will be offering an introductory license price of $699 for a single CPU system through October 15th, 2003. Pricing for multiple CPU systems, single CPU add-ons, desktop systems and embedded systems will also be available.

The one-time run-time license permits the use of SCO’s intellectual property, in binary form only, as contained in Linux distributions.

Beginning this week, SCO said it will start meeting with commercial Linux customers to present the details of this right to use SCO intellectual property binary licensing program.

“We have identified numerous files of unlicensed UNIX System V code and UNIX System V derivative code in the Linux 2.4 and 2.5 kernels,” said Chris Sontag, senior vice president and general manager of SCOsource, the intellectual property licensing division of SCO.

But a survey the Summer 2003 Linux Development Survey, published by Evans
Data Corp. Monday, suggests that SCO has yet to convince organizations that
they need the license.

The survey found that few Linux developers are troubled by SCO’s assault on

“The SCO threat seems to have generated far more heat than light,” Nicholas
Petreley, Evans Data’s Linux analyst, said in his analysis of the survey. “Fully 88 percent of developers responding say that the SCO vs. IBM intellectual property lawsuit against Linux will have absolutely no effect on their plans, probably no effect, or they have no opinion on the matter. Only 6 percent are certain the SCO lawsuit will affect their plans, and another 6 percent think the lawsuit will probably affect their plans. Obviously, the SCO strategy of keeping its evidence against IBM secret (or made available only through second-hand sources who are under non-disclosure agreements as to what they can report) has limited impact of its litigation threats.”

Specifically, 45.5 percent of respondents said the suit would “absolutely
not” have an effect on their plans, 20 percent said “probably not,” and
16.1 percent said “no opinion.”

Evans Data sent invitations to participate in the survey to developers from the EDC International Panel of Developers, and to various opt-in lists. EDC surveyed 435 developers online.

CEO Wars

In an open letter to Szulik Monday afternoon, SCO President and CEO Darl
McBride referred to a telephone conversation he had held with his Red Hat counterpart in which he said they had discussed resolving “the issues between our companies short of litigation.” McBride said they left the conversation with a preliminary agreement to meet and discuss their positions further.

“To my surprise, I just discovered that your company filed legal action
against the SCO Group earlier today,” McBride wrote in his letter to
Szulik. “You, of course, mentioned nothing of this during our 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.”

McBride added, “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.”

He finished the letter with the warning, “I must say that your decision to
file legal action does not seem conducive to the long-term survivability of

As part of its offensive strategy Red Hat also said it has pledged $1 million to establish a new Open Source Now Fund. The goal is 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.

Szulik said Red Hat would seek support from other commercial partners but did not guarantee indemnity nor did he detail the application criteria for non-profits.

McBride called the fund “misguided” noting that SCO never intended to enforce its copyright on end users, just vendors.

“We would suggest they increase the size of the fund dramatically,” McBride said. “With over 2.5 million servers running infringing Linux 2.4, the price of indemnification is measured in the billions of dollars.”

Days of Future Past

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 multi-billi
on lawsuit
alleging breach of contract and the sharing of trade

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.

Two weeks ago, SCO escalated matters when 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.

Already, legal observers are debating
whether SCO Group can support its legal claims.

Forrester analyst Stacey Quandt told the biggest
question is how the legal posturing actually helps Red Hat.

“Red Hat wants to protect its install base and customer adoption of Red Hat
Linux, but they are not the target of the initial SCO claim,” she said.
“Customers are being asked what is their tolerance for risk for deploying
Linux. Based on what they are saying, Red Hat’s action kind of muddles it
in a way, but it doesn’t look like it will change the original lawsuit.”

News Around the Web