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Will SCO's Suit Chill the Penguin?

Will SCO's Suit Chill the Penguin?

Despite the intricacy of the SCO vs. IBM tangle, it has been suggested that the foundation of SCO's case could unravel if a judge were to take the General Public License (GPL) into account.

By Elizabeth Millard & Staff Writer
06/11/03 7:00 AM PT

On March 7th of this year, SCO Group filed suit against IBM, claiming that Big Blue had used proprietary Unix code obtained from SCO in creating its version of Linux, and threatening to revoke IBM's Unix license on June 13th if the company had not complied with licensing terms and paid US$1 billion to SCO by that time. (So far, with the deadline fast approaching, IBM has not made any payments to SCO but has hired a legal team.) SCO followed up that bombshell by sending about 1,500 letters to corporate users of Linux, informing them that their use of the open source operating system exposed them to potential legal liability.

Although the IBM case has yet to go to court, SCO's seemingly anti-Linux moves have alarmed open-source advocates and set off a firestorm of controversy in the high-tech community. Novell has stepped into the fray, arguing that it, not SCO, owns the Unix copyright and several patents related to the technology -- but SCO has produced documentation that calls those claims into question. In an interesting display of timing, Microsoft has stepped up to the plate and ponied up money to license SCO's Unix intellectual property. Meanwhile, SCO has agreed to disclose the portions of source code in question -- but only to those who first sign a nondisclosure agreement.

However, some open-source advocates have argued that the General Public License (GPL) may make SCO's suit a moot point, and other analysts believe the company may not benefit from the suit even if it is found to have a viable complaint.

Overall, this snowballing situation is turning into "a high-tech game of Risk, with different combinations of players moving to form political alliances," Yankee Group senior analyst Laura DiDio told the E-Commerce Times.

What are the ramifications of this case for businesses that either are using Linux or are considering doing so? Will SCO's suit chill the Linux juggernaut, or is it a non-starter?

Case History

The Unix code in question has quite a lineage. To procure the Unix source code, IBM initially signed a licensing agreement with AT&T. In that contract, IBM agreed to a usual intellectual property provision -- to hold the code in confidence and not spread it around willy-nilly. The contract included a clause stating that if Big Blue violated the agreement, it would have 100 days to comply or have its license revoked.

However, the computing landscape shifted. Several years ago, before SCO was purchased by Caldera, it purchased the ownership and rights to Unix, including the pertinent licenses (*correction). Now, it apparently has determined that proprietary Unix code has leaked into Linux distributions by way of IBM -- and it has set out to collect licensing fees on those unauthorized uses of its code.

Open Source Dystopia

What does this mean for enterprises? Stacey Quandt, an industry analyst for Linux and open source at Giga/Forrester Research, told the E-Commerce Times that she and other Forrester analysts are recommending a wait-and-see approach for now.

She also urged companies to request that system vendors guarantee migration from Linux to another operating system if it turns out that the underlying source code places them in violation of copyrights. After all, if SCO wins its case, the 1,500 Linux users that received letters from SCO will be required to pay licensing fees.

Caution about Linux legal issues likely will be a new mindset for many enterprises. The Yankee Group's DiDio explained that people traditionally have viewed Linux and open source as a sort of utopia, in which source code is free and organizations can customize it to their hearts' content without fear of infringing on old-fashioned bugaboos like copyrights.

"Obviously, this situation has been sobering to a lot of people," she said.

Review and Renegotiate

DiDio added that customers of IBM absolutely must review terms of their individual licensing contracts. She said now is the time for end users to perform due diligence and ensure compliance with such agreements, so they do not make a mistake that could cost them in the future.

However, Quandt noted that although it seems the SCO situation may make more users hesitant to use Linux, she has yet to encounter anyone who is scaling back Linux use as a result of the pending allegations.

License To Sue

Indeed, despite the intricacy of the SCO vs. IBM tangle, it has been suggested that the foundation of SCO's case could unravel if a judge were to take the General Public License (GPL) into account. As it turns out, the company allegedly included GPL'ed code alongside proprietary Unix code in its own Linux software release.

According to GPL licensing terms, if any GPL'ed code is included in a software release, the entire release must actively be made available under the GPL; otherwise, the GPL'ed code must be removed (*correction).

Some have argued that if SCO distributed proprietary Unix code in a Linux release that also included GPL'ed code, the Unix code is no longer proprietary. SCO has countered by pointing out a nuance of the GPL language.

"The GPL issue is something we've just recently been looking at," SCO spokesperson Blake Stowell told the E-Commerce Times. "It's been said that maybe we've contributed Unix source code to Linux, because SCO was formerly a distributor of Linux."

Did SCO Know?

However, Stowell said, when the company discovered that its source code had been incorporated into Red Hat Linux, it stopped distributing its own version of Linux and ended any further Linux development. This move, he noted, showed that SCO was acting according to a GPL clause that could shore up its case.

"After the preamble, it says the code has to be contributed knowingly in order to be considered part of the GPL license," he explained.

Like the difference between "dead" and "almost dead," everything hangs on one word. Stowell maintains that because SCO never knowingly contributed proprietary Unix code to Linux, and ceased distributing GPL'ed code when it discovered the error, the company is off the hook.

Second Guesses

Analysts are not as sure as Stowell that the case is airtight. Dana Gardner, senior analyst at the Yankee Group, questioned the company's need to sue right now, in the midst of a bad business cycle.

"The timing is interesting," he told the E-Commerce Times. "Why now? Linux has been available and growing for a number of years. The similarities between Linux and Unix in terms of their technical features and functions are well known and go back a number of years. So, why SCO would do this now, and go after the big kid on the block, is strange."

Also contributing to the oddity of the suit are subsequent developments in the matter. First, the company sent those 1,500 letters to commercial users of Linux. Then, just days later, Microsoft announced it had paid to license SCO's Unix intellectual property, setting off a wave of speculation that the software giant might have been supporting SCO's efforts behind the scenes.

"In a way, Microsoft is legitimizing SCO's claim," Gardner said. "They're sort of saying that more licensing should take place for Unix. That Microsoft should do this now is also pretty interesting timing."

Long-Term Effects

Even if the case looks strong for SCO and it can sidestep the GPL quagmire, some analysts wonder if the company would not be better off dropping the suit anyway. In its quest to make sure IBM is living up to its contract, and in its implied threat to go after corporate Linux users, SCO may be doing itself more harm than good in the long run.

Gartner research director George Weiss told the E-Commerce Times that the company risks alienating the strong and vocal Linux community.

"The cloud that hangs over the Linux community has to be lifted," he said. "I don't think this back-and-forth innuendo and accusation can continue without forcing a pall over the community.

"It's going to cost SCO a tremendous price in terms of goodwill," Weiss added. "I don't even know if it's worth the minimal profits they could see from the suit, if you consider how important it is to have the faith of the community. "

He noted that any new products SCO might release in the future could be affected, since purchase of such items generally requires good feelings about the company that makes them. "As long as this cloud hangs over SCO," he said, "it will dampen any enthusiasm to do business with them, regardless of the outcome of the suit."

*Editor's Correction Note: In the original version of this article, we incorrectly stated, "A few years ago, when SCO was called Caldera, it purchased the ownership and rights to Unix from AT&T, including the pertinent licenses." In fact, the original SCO company purchased the Unix ownership and rights from Novell before being acquired by Caldera (which then adopted the SCO name for the combined company). Previously, Novell had bought Unix Systems Laboratories (USL) from AT&T, gaining the Unix rights for itself. Also, we initially reported, "According to GPL licensing terms, if any GPL'ed code is included in a release, the entire release immediately becomes covered under the GPL." In fact, if GPL'ed code is included in a release, the distributor has two options: to actively make the rest of the code in the release available under the GPL, or to cease distribution of the GPL'ed portion of code.


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