New developments in SCO vs. the world
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Analyst: Rachel Chalmers
Sector: Enterprise software
Report date: Wed, 27 Aug 2003
the451 Group
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SCO's quixotic lawsuit against IBM and its threats against all Linux users continue to baffle and amaze onlookers. Recent developments include IBM's countersuit, SCO's introduction of a license to protect Linux users against litigation, and SCO's presentation of what it claimed was evidence of copyright infringement in Linux. The presentation leaked out into the Linux community, where it was pulled to pieces. SCO immediately shifted its ground.
Impact assessment
The message:
Free software luminaries Linus Torvalds and Bruce Perens have scoffed at SCO's alleged demonstrations of copyright infringement. SCO retorts that the best is yet to come.
Competitive landscape:
SCO's real competition in this market is IBM's legal team and the collective memory of the free software community.
The451 assessment:
SCO still hasn't presented any remotely convincing evidence to support its case. It says it is saving that for court. In the meantime, license revenues are buoying the bottom line – but executives are dumping their stock. It's hard to avoid the conclusion that this lawsuit is frivolous, and ultimately doomed.
Context SCO filed suit against IBM in March, claiming misappropriation of trade secrets, tortious interference, unfair competition and breach of contract. In particular, SCO claims IBM leaked licensed Unix code into Linux.
The historical background is fiendishly complicated. All original Unix licenses were held by AT&T, which sold them to Novell. Novell sold them in turn to the original Santa Cruz Operation, which sold them to Caldera, then a Linux company. Caldera changed its name to SCO, announced that it had found Unix System V code in Linux and sued IBM. IBM finally countersued in August, but not before SCO offered Linux users a $699 license to avoid being sued themselves.
Technology You have to love a company whose key presentation to its own user and reseller conference, SCO Forum 2003 in Las Vegas, is given by a senior VP (Chris Sontag, general manager of SCOsource, the intellectual property enforcement unit) alongside a representative of the company's legal firm (Mark Heise, a partner with Boies, Schiller & Flexner). In the presentation, SCO's argument is very simple. The company says it owns all Unix System V code, and that it has identified Unix System V copyright infringement in Linux. It presents several examples.
The presentation swiftly made its way into the public domain, where members of the free software and open source communities, including Linus Torvalds, primary author of Linux, immediately began to pick it apart. The best summary of their findings was compiled by Bruce Perens, author of the Open Source Definition.
He identifies one alleged infringement as the Berkeley Packet Filter (BPF), originally created at Lawrence Berkeley Laboratory and first deployed under the BSD license. The Linux version of the tool is a clean-room re-implementation by Jay Schulist, using none of the original source code. According to Perens, SCO has no legal claim to either piece of code.
A second example shows memory allocation functions in Unix System V and Linux. These are based on an algorithm published in Donald Knuth's epic book The Art of Computer Programming, published in 1968. The implementation shown in the slides is the work of the original Unix authors, Dennis Ritchie and Ken Thompson, in 1973. Caldera itself released this code as open source in 2002.
A third example presents SCO's claim to own JFS, IBM's Journaling File System. This was originally developed for OS/2 and later ported to Linux. It shares no code with the JFS implementation in Unix System V. A fourth example involves Read Copy Update (RCU), developed by Sequent for Dynix and later acquired with Sequent by IBM. A fifth involved SGI's XFS, the Extent FileSystem. RCU and XFS were separated from any code owned by SCO and ported to Linux.
Strategy As the open source community found counterevidence for one after another of SCO's claims, the company appeared to shift its ground. SCO's Sontag said in interviews that these were not the best examples of SCO's evidence, merely the easiest to understand. Better evidence, he suggested, is being held over for the trial.
Then last week, external counsel Heise began questioning the legality of the General Public License under which Linux is distributed. He pointed out that the GPL permits licensees to make unlimited copies, where copyright law permits only a single copy to be made.
Perversely, Eben Moglen, general counsel of the Free Software Foundation and coauthor of the GPL, was pleased by this attack on the key free software license. He pointed out special exemptions in the US Copyright Act for making multiple copies and even derivatives of computer programs with no license at all. By resorting to this nonsensical argument against the GPL, Moglen said, SCO had demonstrated that it has no case whatsoever.
You wouldn't know it to look at SCO's finances, though. Revenues are up, thanks to SCOsource's license sales. Shares are trading at a 52-week high. That's particularly nice for the senior executives who have spent July and August dumping tens of thousands of shares.
SWOT analysis
Strengths:
SCO has finally produced evidence to support its somewhat bizarre claims.
Weaknesses:
This evidence appears to prove nothing, except that Linux was written by people deeply familiar with the history of Unix. This is not a surprise, and not a violation of SCO's copyrights.
Opportunities:
It's possible that SCO will be able to enforce $699 licenses against all users of Linux – soon to rise to $1,399. It's even possible the company has better evidence than it has presented so far, and that the courts will assign it effective ownership of the operating system. It's pretty unlikely, though.
Threats:
It seems probable that SCO's claims will fail in court. The company's lawyers and executives who sold their stock in time will walk away with tens or hundreds of thousands of dollars. SCO employees, Linux users gullible enough to pay for SCO licenses and the software industry as a whole will be the losers. |
