Last Tuesday (June 3, 2003), the flurry surrounding the $1 billion lawsuit filed by SCO Group against IBM for allegedly stealing SCO's UNIX intellectual property (see "Bowling for Linux") took several bizarre turns as the Linux community fumed over the implications of SCO's actions. What does SCO really want: revenge, damages, or a buyout by Big Blue? Most of the Linux community doesn't care; it just wants SCO to go away.

Buyout Rumors

Rumors had been circulating for several days that SCO might settle its differences with IBM if the computer giant offered to buy the ailing software company. "If there's a way of resolving this that is positive, then we can get back out to business and everybody is good to go, then I'm fine with that," said Darl McBride, President and CEO of SCO Group. "If that's one of the outcomes of this, then so be it."

Blackmail: Buying SCO

But the previous week, Novell Chairman, CEO, and President Jack L. Messman said that when Novell sold UNIX System V to SCO in 1995, the asset purchase agreement did not transfer the copyrights and patents.

In a letter to McBride, Messman wrote, "Importantly, and contrary to SCO's assertions, SCO is not the owner of the UNIX copyrights. Not only would a quick check of U.S. Copyright Office records reveal this fact, but a review of the asset transfer agreement between Novell and SCO confirms it. To Novell's knowledge, the 1995 agreement governing SCO's purchase of UNIX from Novell does not convey to SCO the associated copyrights."

Furthermore, according to Messman, "We believe it unlikely that SCO can demonstrate that it has any ownership interest whatsoever in those copyrights. Apparently, you [SCO] share this view, since over the last few months you have repeatedly asked Novell to transfer the copyrights to SCO, requests that Novell has rejected."

Why SCO Waited to Sue

Meanwhile, the question on everyone's mind has been, Why did SCO wait so long to sue over Linux if the open-source operating system was infringing upon its intellectual property? In a recent interview with Computerworld, CEO McBride said SCO didn't have any options in the late 1990s when Linux started to gain some momentum. "Even if you potentially had a problem, what are you going to do?" McBride asked. "Sue Linus Torvalds? And get what?"

But the answer to that rhetorical question should have been clear to McBride: Suing Torvalds would have stopped the so-called "illegal infringement" and resolved this claim before hundreds of millions of dollars were invested by organizations. Instead, it appears SCO decided to wait. For what? Perhaps for some benighted corporation with deep pockets to embrace the technology. And that's exactly what IBM did.

In the meantime, according to McBride, the financial ride for SCO has been a downhill slide since the Linux operating system first gained corporate notoriety in the late 1990s. The company's revenues have slipped from $200 million in 1999 to just $99 million this year. According to McBride, "It's sort of like somebody stealing your car.... The notion that we're going to sit back and let the Linux steamroller go over us at our expense, at the shareholders' expense, makes zero sense to me."

Yet McBride's delay in enforcing his company's alleged intellectual property rights makes zero sense too! And, if there were concerns back in 1999, why did SCO participate in the OpenLinux Consortium, whose goal was to establish a Linux distribution standard? Once again, either McBride's motivations or his competence to lead his company needs to be questioned.

Linux Community Assaults SCO

However, SCO isn't the only organization with a legal team, and the dispute is rapidly taking on international proportions. On May 28, LinuxTag, a German Linux lobbying association, said it would seek a German court order against SCO this week because of threats made by SCO against the Linux community of users. (SCO's threat was published on May 19, stating that companies that implement the Linux operating system could be liable for licensing fees to SCO for every computer that runs on the software. (See "Bowling for Linux: Episode II.")

It's estimated that Linux now runs on approximately 15% of all computers in the European Union (EU), and the impact of the SCO warning was immediately felt. "SCO is massively unsettling our members," said Michael Kleinhenz, a spokesman for LinuxTag.

LinuxTag told SCO that it needed to provide proof for its claims against Linux by May 30 or face court action in Germany. When SCO refused, the group obtained the injunction, and SCO was forced to shut down its German Web site where the claims against Linux were posted.

SCO Prepares Its Proof

This week, SCO promises to unveil the long-awaited proof that IBM stole UNIX code. It says that it will provide such proof to anyone who signs a nondisclosure agreement, including Linux author Linus Torvalds. However, few members of the Linux development community are volunteering for the job. Why? Because nobody wants to get caught in SCO's legal entrapment.

By simply viewing the disputed code under a nondisclosure agreement, a Linux developer will be put into a legal double-bind: The nondisclosure would enjoin the developer from removing any of the disputed code from their own Linux distributions, while making them a potential legal participant in the proceedings against IBM. Or, conversely, the developer could be later sued by SCO for failing to take action to remove the disputed code once the infringements were made known. That's a severe price to pay for satisfying one's curiosity.

Mountains and Molehills

Several industry analysts believe that SCO merely wants to get licensing from IBM and that the Linux community itself is really not at risk. According to this view, the whole legal dispute boils down to SCO's desire to pressure IBM to start a UNIX licensing revenue stream.

The problem, these analysts contend, is that SCO (formerly Caldera, formerly Santa Cruz Operations, etc.) failed to establish a unique brand name during the 1990s for its UNIX operating system. Instead, its marketing strategy, according to these analysts, was to bundle UNIX with hardware provided by IBM, HP, and others. When these hardware vendors began to turn toward Linux--with its open-source licensing arrangement--SCO lost its market for UNIX, and it was too late to establish brand loyalty. If IBM settles, these analysts reason, the UNIX/Linux debate will go away like a bad dream.

However, SCO's recent actions toward Linux users really seem to belie this view: If SCO's only target is IBM, why is it threatening end-user customers?

From McBride's perspective, the stated motivation of SCO seems clear enough: "I'm not trying to screw up the Linux business," he said. "I'm trying to take care of the shareholders, employees, and people who have been having their rights trampled on."

However, McBride's actions over the last 10 years of running SCO--a time during which this Linux storm was brewing--don't really support his claim. If shareholders and employees are pointing their fingers at anything, it would seem clear that their first target should be the failed executive leadership of the CEO himself.

Consequently, a buyout by IBM may be one more McBride calculation to turn the company's fortunes around. But what, exactly, would IBM really be buying except the opportunity to kick McBride out of his position as CEO and president?

Sounds like a win-win situation to me.

Thomas M. Stockwell is the Editor in Chief of MC Press, LLC. He has written extensively about program development, project management, IT management, and IT consulting and has been a frequent contributor to many midrange periodicals. He has authored numerous white papers for iSeries solutions providers. His most recent consulting assignments have been as a Senior Industry Analyst working with IBM on the iSeries, on the mid-market, and specifically on WebSphere brand positioning. He welcomes your comments about this or other articles and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Thomas M. Stockwell is an independent IT analyst and writer. He is the former Editor in Chief of MC Press Online and Midrange Computing magazine and has over 20 years of experience as a programmer, systems engineer, IT director, industry analyst, author, speaker, consultant, and editor.  

 

Tom works from his home in the Napa Valley in California. He can be reached at ITincendiary.com.

 

 

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