June 10, 2004

Shoot Out at the SCO Corral

The Washington Post's Jonathan Krim writes about the bizarre story of the Santa Cruz Operation and Linux: a modern version of the holdup, one might say:

washingtonpost.com: Showdown With The Linux Gang: How can a tiny, struggling software company based here at the foot of the Wasatch Mountains afford to pursue a legal donnybrook with some of the biggest names in corporate America? SCO Group Inc. is suing companies such as International Business Machines Corp., Novell Inc., DaimlerChrysler and AutoZone Inc. -- and threatening government agencies and more than 1,500 other firms -- over their use of software called Linux. Many big companies and organizations have embraced Linux in recent years because of its chief virtue: It's free. Developed and maintained by a loose confederation of engineers, Linux is available to anyone and can be modified by users, challenging the traditional model of software controlled and licensed to others by a single entity such as Microsoft Corp.

SCO claims that pieces of code from another operating system that it owns found its way into Linux, and the company is demanding a licensing fee of $700 for every computer server running the software. In the process, SCO has become one of the most hated companies in the country, and it has sparked a vitriolic war over the future of software.... "There are some vested interests, Microsoft among them, to whom the whole concept of Internet collaboration is a threat," said Eric S. Raymond, a technology book author who was one of the first to take up the fight against SCO more than a year ago. Working largely on their own time, Linux devotees apply their collaborative model for creating software, known as open source, to attack SCO and its case. Dozens of online detectives comb corporate documents, analyze legal filings and publish everything they can find about the company, its finances, management and connections to Microsoft.

One Web site focused exclusively on the case, known as Groklaw, was started by a paralegal named Pamela Jones and now has roughly 5,000 contributors. Though it is ardently pro-Linux, the site has grown into such an exhaustive archive of software history and law that attorneys on both sides use it as a resource. "Our international membership means SCO can't do anything anywhere on the planet without someone seeing it and telling on them," Jones said in an e-mail interview. The strongest evidence pointing to possible Microsoft encouragement in the SCO campaign is this: Early last year, Microsoft agreed it would pay SCO an eyebrow-raising sum, as much as $16 million, to license its technology, according to filings with the Securities and Exchange Commission. Later, Microsoft executives brought SCO to the attention of a venture fund, BayStar Capital, which ended up putting together investments in SCO totaling $50 million.... The cash infusions allowed SCO to hire one of the nation's most prominent and expensive litigators, David Boies, to press its claims.... Boies's firm received a $10 million cut of the $50 million investment SCO received, as well as 400,000 shares of SCO stock, which could soar in value if the company prevails....

McBride calls these arguments tantamount to a death sentence for a multibillion-dollar software industry that has helped propel the United States to economic and technological leadership in the digital era. In March, he sent a letter to every member of Congress warning that Linux threatens the country's economic well-being and even its national security. "Each Open Source installation displaces or pre-empts a sale of proprietary, licensable and copyright-protected software," he said in his letter. "This means fewer jobs, less software revenue and reduced incentives for software companies to innovate." If open-source advocates want to give away their wares, McBride said, they can do so. But he insists they cannot take code from SCO-owned Unix, put it into Linux and distribute it for free....

SCO officials acknowledge that the firm, formerly known as Caldera, was likely going out of business before pursuing its Linux licensing program. The company purchased rights to Unix code from Novell and sells it to some companies, but McBride said that business cannot compete with Linux's free distribution model. For its part, Microsoft has been on the offensive against Linux for years, often labeling it one of the company's greatest competitive threats. Calling it "viral" and a "cancer," officials have lobbied the Pentagon, other agencies and foreign governments not to use it, while stepping up efforts to win business customers by being more flexible in Windows licensing negotiations....

It was then that one of the online gumshoes scored his biggest coup: Raymond was leaked a memo from an SCO consultant suggesting that Microsoft was behind those investments, and more. "Microsoft will have brought in $86 million for us including BayStar," wrote Michael Anderer to SCO Vice President Christopher Sontag in an e-mail dated Oct. 12. "Microsoft also indicated there was a lot more money out there and they would clearly rather use BayStar 'like' entities to help us get significantly more money if we want to grow further or do acquisitions." Responding to the clamor, SCO said the e-mail was authentic, but that Anderer had gotten many details wrong, including Microsoft's involvement. Like Microsoft, McBride said there is no connection between the two beyond the licensing deal....

BayStar, meanwhile, said it was introduced to SCO by Microsoft officials. "I would not have known about the existence of SCO, but for the introduction by Microsoft," BayStar President Lawrence Goldfarb said in an interview....

If any company were to worry about threats to intellectual property, it would be IBM, which holds more patents than any other firm in the world. But the company has staked a portion of its business on Linux, selling services and add-ons to other companies and institutions.... In its lawsuit against SCO, Red Hat -- the country's largest Linux distributor -- has asked a judge to declare Linux free of infringed code. Meanwhile, organizations such as the National Retail Foundation have issued statements that, based on their research, SCO's clams are groundless. As for SCO, it has had a rocky past few weeks. Its stock, which soared when it began its lawsuit campaign, has since dropped dramatically....

From my perspective, it seems very clear that SCO's lawsuits are without substantive, moral, or intellectual merit--however, you can never tell what judges and juries will do.

Perhaps the best way to think of what is really going on is this:

  1. A bunch of people led by Linux Torvalds are building Linux, largely because it is fun to do so and they gain programmer status by contributing to it.
  2. A bunch of people--overlapping--want to see the end of the Microsoft near-monopoly over operating systems because they or their friends have been treated badly by Microsoft, and see Linux as a tool in that fight.
  3. A bunch of companies--led by IBM--want to see software prices fall so that they can make more money selling hardware and integration services, and see Linux as a tool in that fight, much as the Huns drove the Goths before them into the Roman Empire to soften it up.
  4. Microsoft wants to keep Linux from being a large-scale threat to its Windows business by any means necessary--and funding SCO is one.

Fortunes are at stake. The future evolution of software is at stake. And also at stake is the size of the tolls most of the rest of us will pay to Microsoft and Intel for access to the technologies of the information age. And the legal system is not set up to reach a rational decision.

Posted by DeLong at June 10, 2004 11:26 AM | TrackBack | | Other weblogs commenting on this post

A few of points here that weren't raised in Brad's text or the quoted article:

a) SCO has yet to publish or state publicly just what code is infringing. They claim that information is a trade secret. So, Linux developers are faced with the claim that they stole code somewhere, without any specific files and lines so they can verify this for themselves.

b) Linus and the other kernel hackers have publicly stated that any verifiable copyright violation will be removed and rewritten immediately upon receiving notification.

c) There was a major sell off of SCO stock by SCO executives and insiders while it was riding high. This led many to speculate that SCO was embarking on a 'pump and dump' scheme as part of the gain in their legal maneuvering.

d) During the course of the lawsuit SCO's CEO Darl McBride has continued to provide statements to the press (sometimes outright ridiculous and/or flat out wrong ones) in contradiction to what one would assume most legal advisors would recommend: shut up until after the trial is over.

e) The current 'SCO Group' has nothing to do with the old 'Santa Cruz Organization', the company which actually wrote SCO UNIX (and XENIX). Caldera renamed themselves "The SCO Group" after the purchased certain IP rights to the old SCO from Novell, who had purchased those directly from the old 'Santa Cruz Organization' prior to that. The old SCO is now known as Tarrantella and sells web development software.


Posted by: J. Maynard Gelinas on June 10, 2004 11:47 AM


News today suggests that SCO is flaming out:

Posted by: Roland on June 10, 2004 12:25 PM


Prediction, for what it's worth (not much): Darl McBride will see jail time for securities fraud within a year, once his investors finally figure out that they've been had.

Then again, I once worked for a company that didn't immediately fire and file a criminal complaint against a sales guy who was diverting equipment sales to his own bank account, because he was moving a lot of product, they needed his numbers, and figured they'd "work it out" after the next board meeting. So one never knows the limits of stupidity that people can talk themselves into. I don't think they ever got their money back--they parted out the business a few months later, and nobody ever admitted to the board how stupid they'd been. (Hint to VC's: hire an auditor while you're shutting down/parting out a failed company, not just during the "exciting times," just in case someone needs indicting.)

Posted by: me2i81 on June 10, 2004 12:42 PM


Thanks, Maynard, about clearing up the old-SCO and new-SCO relationship; that was the first thing I wondered about.

Reviving the name sure makes this whole gambit look even fishier. So does the line about "incentives to innovate;" right out of the Micro$oft PR phrasebook, that one is. I remember Ballmer and Gates using it all the time around the anti-trust suits.

Looks like an attempt to sully, smear, and, especially, cast a legal shadow over Linux in order to discourage adoption. Preparing for even frivolous suits is pretty expensive.

And maybe there's a parallel strategy to pick up some form of Unix to market under the M$ shield. Doubtless it will be bug-ridden-- nothing new there-- and they might be counting on the bugginess to drive more people away from Unix. And if people accept it, why, there'd be no harm in actually developing it, would there?

Posted by: Altoid on June 10, 2004 12:49 PM


More fud.
(fear, uncertainty and doubt)
Fud has been a Micro Bloat tactic since they had two dimes to rub together.

An interesting side bar is the nature of patents for software. Unix originally came from Bell Labs in the sixties.
The original SCO Unix may have been patentable. But that was some years ago -- more than 17 I believe which is still the duration of a patent (?). So how does a successor company patent something old enough to be in the public domain?
Which brings us to MS patenting the double click? WTF was the patent office thinking?

-- ml

Posted by: Dum Luks on June 10, 2004 01:43 PM


For what it's worth, when Gene Amdahl coined the term "FUD", it was in reference to IBM.

Posted by: Jake McGuire on June 10, 2004 02:00 PM


Speaking as someone who has followed this from its beginnings... It started as a contract case. Among the things that SCO had purchased was what was originally AT&T's end of a contract with IBM that said that IBM must treat the Unix SysV code it had licensed from AT&T and any "derivative works" as trade secrets. Specifically, it could not reveal the code or the methods used in the code to other parties without AT&T's (now SCO's) approval. SCO advanced the legal theory that IBM's current AIX product was a "derivative work".

Assorted other claims have been added and dropped over time, but the basic case still appears to be the IBM/AT&T contract. SCO's assertion that they can't say which parts of AIX are a violation of the contract terms is a result of their not knowing the development history of the current code. Under their theory, ANY code that has been revealed to the Linux folk represents a violation until IBM demonstrates that it was developed outside of the AIX product, by people who had not seen the AIX code, etc.

A number of things have turned up since the initial suit was filed (such as an addendum to the contract that seems to give IBM permission to do whatever they want with code that they add to the original SysV Unix) that seem to leave SCO without a legal leg to stand on. It is probably in IBM's interests to have the case come to trial, though, so that they can get a verdict that establishes that neither SCO nor anyone else down the line has claims due to this contract.

Posted by: Michael Cain on June 10, 2004 02:01 PM


That's a decent summary. However, as I understand it, IBM's contract is not the one that matters, but Sequent's. AT&T wrote famously rapacious contracts for Unix back in the day, but IBM was too big and smart to sign one. Sequent was not. IBM bought Sequent and inherited, so SCO's theory, not only Sequent's Unix work but also Sequent's obligation under the "derivative works" clause. Per SCO, then, it therefore owns only original Sequent work on Dynix, including the NUMA and RCU code that IBM contributed to the Linux kernel.

It is distantly possible that a judge or jury will decide all of the following: one, SCO is the proper owner of AT&T's erstwhile Unix rights; two, Sequent's contract indeed meant that AT&T would control Sequent's original Unix work in subsequent form; three, IBM inherited Sequent's obligations; and four, therefore IBM was not allowed to contribute it to Linux.

As I understand the case, there is substantial evidence to believe that none of the three necessary conditions is met. However, it is a contract dispute. Should SCO prevail, the Linux community will rewrite any contributed code from scratch, and the game will be over.

My main desktop, doubling as a hobby server, runs Debian GNU/Linux, and I'm not worried.

Posted by: wcw on June 10, 2004 03:04 PM


Wouldn't SCO (and Microsoft) interest be to scare people away from Linux, regardless of the legal issues?

As I see it, they are trying to convince weak-minded IT people that adopting Linux will get them into legal trouble. The same way the RIAA practically claimed that downloading MP3s off the Internet would result IN THE FBI BREAKING FOWN THE DOOR AND DRAGGING YOU OFF TO GITMO WITH ALL THE OTHER INTELLECTUAL-PROPERTY STEALING EVIL DOERS.

Except of course, the RIAA actually had a legitimate case (sortof).

Man, Microsoft is fucking evil Brad. If you get tapped for any government jobs in the future (and honestly, I think you have more than earned a top-level position in a Kerry treasury department), you ought to convince Big John to sign an executive order getting Microsoft off of all government computers, or at least requiring all government computers to run an open-source operating system.

Posted by: Jim D on June 10, 2004 03:30 PM


Brad's proposition 1 is not true at all. It is mostly a bunch of engineers paid for by IBM, HP, Red Hat, Intel,... that are truly developing Linux. This now includes Torvald himself. I wish the enterprise well, but the work should be seen correctly - another bunch of big company programmers with a slow-changing OS aimed at the desktop.

Posted by: DonN on June 10, 2004 03:38 PM


wcw: "It is distantly possible that a judge or jury will decide all of the following: one, SCO is the proper owner of AT&T's erstwhile Unix rights; two, Sequent's contract indeed meant that AT&T would control Sequent's original Unix work in subsequent form; three, IBM inherited Sequent's obligations; and four, therefore IBM was not allowed to contribute it to Linux."

And the judge (I think this is one of those cases where there isn't a jury, but I may be wrong) has to also decide that IBM was obligated to protect the trade secrets of the derivative works even though AT&T had not adequately protected the Unix SysV secrets themselves (per some results from the Berkeley-AT&T case). As you say, it is distantly possible that the judge will put together such a string of decisions, but it's certainly not the way that I would bet.

Posted by: Michael Cain on June 10, 2004 03:43 PM


Anyone who wants to know all about this case should go to http://www.groklaw.net

Posted by: Alan on June 10, 2004 03:44 PM


BTW, check out the lead article on Groklaw today. Guess how much money SCO made on shaking down Linux users last quarter.

What I can't figure out is David Boise. He's supposed to the premiere hotshot lawyer of all time, but every time he has a high visibility case he not only loses but loses BIG time. Last one was Bush vs. Gore.

Posted by: Alan on June 10, 2004 04:09 PM


I think you're imputing a little too much deliberate planning to the Huns. Almost the only planning of that sort was when the Gepid Huns and the Lombards agreed spheres of influence between them in the early Byzantine period.

Posted by: P.M.Lawrence on June 10, 2004 08:34 PM


Brad's proposition 1 is not true at all.

It is in past tense. Linus started Linux from Minix (one of many unixes) in University and asked for help on usenet. Some years and a lot of volunteer effort later Linux developed into a paying business that employs programers. But any one with sufficient knowledge could and did add to it before the distros became corporations.

-- ml

Posted by: Dum Luks on June 10, 2004 09:50 PM


As an ardent programmer whose Internet software development company Web-product rollout was gang-banged by the Redmond Gang's *free* MSExplorer, (which they *continue* to perpetrate even after Justice said they must cease and desist, after stealing open-source Java and corrupting it into their own proprietary form), I only hope this Federal judge on Linux v. SCO rolls the brief into a tight tube and rams it up MSFT's ass!

Sorry . . . f&*k the Borg!

Posted by: Clarence Thomas on June 10, 2004 10:56 PM


> And also at stake is the size of the tolls most of the rest of us will pay to Microsoft and Intel for access to the technologies of the information age. And the legal system is not set up to reach a rational decision.
Focusing on why the legal system is failing ... some thoughts
1) copyright and competition law - WTO classification of software as literary work means by default it gets 70 years of protection, experience shows that software has much shorter half-life, hence perverse incentives to "legally" hinder competitors flowing into anti-consumer behaviour
2) difficulty of forming consensus as to derivative work in complex software systems ... not always a hierarchy and difficult to negotiate with copyright owners as implicit licenses (industry norms) vary widely
3) operating systems as economic market is closer to a search rather than literary work - skill is in the selection of the sub-components and tradeoffs
4) contract adhesion within software licenses - traditional contract formation analysis very lop-sided leading to difficulty of enforcement, and thus judgement (no bright lines test)
5) legal systems finding it difficult as specialists in IT/IP law overwhelmingly on side of corporations leading to resentment within the development communities as to perceived "injustice" (cf DeCSS)

Posted by: Lawrence Lau on June 10, 2004 11:28 PM


Linix is Minix free, see http://www.cs.vu.nl/~ast/brown/

More FUD

Posted by: Eli Rabett on June 11, 2004 08:28 AM


Whether or not SCO's original claim is true (and I've seen enough commentary from members of the Linux core team that would indicate that, yes, some SCO-proprietary stuff may be in the kernel [and thus it would be only sensible for SCO to not give Linus, et al, a chance to strip it out and thus make it more difficult for Darl, et al, to make a million on the information superhighway]), it sure looks like SCO has decided to use that original claim as a springboard off into paranoiac fantasyland.

It's somewhat more difficult to base a lawsuit on paranoiac fantasies. And I'm sure that IBM will be perfectly happy to keep expensing lawyers until SCO finally runs out of money and expires, leaving nothing left but claims of a fantastic conspiracy linking Linus Torvalds to alien invaders from planet Zog.

But it's really spiffy pro-Linux advertising; after a few years of the SCO alien invasion hypothesis, even the kookiest Linux supporters (Eric Raymond and Richard Stallman spring right to mind) start to seem like staid and sensible Republican voters.

Posted by: David Parsons on June 11, 2004 09:08 AM


Do you actually know much of the Goth/Hun story?

Posted by: Gordon on June 11, 2004 09:29 AM


I like using open source. I dislike paying for stuff I can get for free. Of course.

On the other hand.

I've spent several years of my life, and a hundred thousand dollars of mine and my parents' money, training to become a professional software engineer, getting a degree from one of the foremost institutions of higher learning in the country.

I am in constant competition, along some axes, with those who give away software for free. In my career thus far I have worked for several small companies that produced commercial software (most were pre-Web); they have gone out of business in large part because the society does not consider software to be a product that they need to pay for.

This is not only insulting to my profession and to the education I've expended a great deal to achieve, but it imperils my ability to earn a living in my chosen profession.

I currently work for a company that has a need for internally-developed, internally-used software. I have a niche, and I don't by any means suffer financially at the moment.

But I am lucky, and a lot of good software engineers I know are struggling far more than I am. It causes me to reflect that perhaps I made a bad choice in my education -- I envision a future where learning to write software will be like knowing how to play basketball or write essays on Shakespeare. The few who are very very good at it will earn a good (or fantastic) living; just about everyone else, including those who spend their college careers developing the skill, will find it to be useless in the real world, because no one will pay for you to write software if no one will buy the product.

If all software is one day free, software engineers become dilettantes -- hobbyists. That is what free software is: software written by hobbyists. This doesn't mean they don't do a phenomenal job -- they do. But if they're writing it for some reason other than to make a living, it's a hobby.

I would not encourage high school kids today to pursue a career in software -- because the work of software engineers is increasingly perceived not to have a market value.

Yes, I'm oversimplifying. Companies will still pay to have software developed /for them first/, or software that does /exactly what they want/. I'm making a good living and I'm not sorry I do it; I love writing software, and I write software outside of work as well as for work, as a hobby.

But I repeat my caution. I think it's becoming a lot less worth the effort to get good at it, if your motivation is to develop a skill that will earn you a good living. If your motivation is that software is fun to write (and it is), then by all means, become an expert software engineer.

Just be prepared to ask if they want fries with that.

Posted by: eyelessgame on June 11, 2004 12:22 PM


Eyeless: Cheer up. Most of the software in the world, measuring by lines of code, is either bespoke, or sold as an accessory to hardware. Amazon's website is an example of the former. MacOS is an example of the latter. These two classes of software will never be free-as-in-beer, and they account for the majority of the market for programmer labor.

Shrink-wrapped software --- by which I mean not software necessarily packaged in a shrink-wrapped box, but software that is sold *as software* and used *as is* --- represents a relatively small segment of the market for programmer labor. Microsoft is an aberration that persists mostly due to their near-monopoly power. If this software segment disappeared, it would be a loss, but that's not going to happen. What will happen is that an increasing fraction of the software universe will be commoditized. That's not a loss for society, and in the long run I doubt that it's really a loss for the programming profession either.

Posted by: Armature on June 12, 2004 12:25 PM


Patents were for 17 years when AT&T was developing its patentable software concepts. However, they may have been granted their patents after the patent term was extended to 20 years in the nineties.
Usually there is a requirement that you must patent something before publically using it in most of the world or within a year of publically using it in America, but because they only made software patentable at all in the eighties there were extensions.
And of course, there are submarine patent issues involved where patent applications were delayed until the other people working on standards were sucked in and couldn't practically back out again.
Or the paranoid theory that IBM was deliberately corrupting the Linux code knowing that it held provable AT%T/SCO trade secrets as part of a plan to destroy Linux.
I know what you mean. There is a book about that phenomenum called 'Winner Take All', out a couple of years ago. I got a degree in programming but never actually practiced. It was evident to me that I would wind up competing with Chinese and Indian labor and I decided it wasn't worth it. I'm in Silicon Valley and you have to be way up the talent curve to be in this business at any reasonable level of compensation.
Switch to sales and configuration. English language skills and American cultural understanding still give you an advantage. We will continue to see Indian and Chinese programmers increase at ten percent a year. You are the textile industry, dude.

Posted by: walter willis on June 12, 2004 03:31 PM


Walter Willis, and Eyeless: I've been a programmer since 1963, doing everything from OS development to machine interface to high-level applications, on everything from an old (even for that time) IBM 700 to the newest micro's. If what you want is a guaranteed paycheck, you're no better off, as Walter says, than in any industry competing with India and China. If you're willing to change and learn and seek out work for yourself, it will always be there.

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