This is a rewrite of the original article which is available Here.
Automation Access has sold and supported SCO Xenix and SCO Unix continuously since 1987. While we have always considered the SCO products substandard and overpriced, software publishers for small and medium business refused to support any other Unix, so we continue to support clients running SCO Open Server Unix 4.2 and 5.0 to this day.
SCO Group's recent behavior has made it impossible for us to continue supporting the company. We will, however, support existing and new clients in their use of SCO products indefinitely. Clients should be aware their current SCO Unix applications should continue to function as-is until 2038 (the Unix "Y2K"). Clients on a growth path should plan migration to Linux.
SCO Group's top executives have embarked on an irrational adventure I can only describe as suicidal, and highly damaging not only to SCO Group, but to all businesses that publish Unix and Linux software and users of Unix and Linux. The only winner is Microsoft (and Microsoft seems to be financing their madness). I don't really expect SCO to still be in business three years from now (their own 10-K filing questions their viability A5),
This is very unfortunate for the company's many fine and talented employees, of whom I have met a number in person. They are currently hard at work trying to bring SCO products up to date and fill out their feature set, a task management should have had them doing years ago. I fear their efforts will be betrayed by the ill concieved IP litigation and stock manipulation adventures of SCO Group's top executives.
In contrast to SCO Unix we found Caldera/SCO Linux a superior product,
but we no longer buy it and it's "temporarily" discontinued anyway. We base
current systems on SuSE
Linux, a German company with a strong California presence. SuSE had
already absorbed the Caldera Linux developers for the
United Linux effort, and
the last version of Caldera Linux Server was actually SuSE's United Linux
A Drowning Company Grasps at Straws
The Santa Cruz Operation (SCO) evaluated its Unix products and saw no future. They dumped the products and their extensive support organization to Linux publisher Caldera. Caldera's intent was to bring the "enterprise strength" features of Unix into Linux, merging the two operating systems.
Many questioned what was in SCO's Unix that Linux didn't already have, or wouldn't have in 6 months, but this was the least of Caldera's problems. Caldera had angered the Linux community through bad public relations and failed to market their excellent Linux effectively. The fading Unix products were bringing in most of the cash, and that enabled the SCO crew to take over and push the Linux crew out.
The Canopy Group, the investment organization that controlled Caldera, brought in a new CEO, Darl McBride, an executive with a reputation for using litigation as his tool of first choice. The company was renamed SCO Group and the Linux products were shoved to the back burner.
This, of course, solved nothing. Comparing SCO's Unix to Linux is like comparing a model A Ford to a BMW Z4. Unix revenue was declining steadily with no hope of modernizing the product, and Linux revenue was stagnant. SCO Group was clearly in trouble.
Darl McBride decided not to depend on trying to fix SCO Group's systemic problems, and instead embarked on a path of lawsuits and extortion such as is rarely seen outside the Church of Scientology.
SCO Group engaged the services of high profile lawyer David Boies "for certain Intellectual Property matters". Boies, since his stunning victory over Microsoft in the antitrust case, has become the favorite lawyer for lost causes (the Al Gore campaign, and Napster for instance). This immediately raised suspicions and further prejudiced many people against the company.
The relationship between Boies' lawfirm and SCO Group is a bit strange. Boies' firm has very little experience in matters of intellectual property and is reputed to have taken the case on contingency, which makes no sense at all. SCO Group has sued IBM, the largest holder of patents and copyrights in the known universe. IBM has a highly experienced and well funded intellectual properties legal team with an established reputation for not losing.
Given the speculative nature of this lawsuit and that IBM will certainly fight effectively, it seems the height of folly for an inexperienced lawfirm to take this case on contingency. They could be bankrupt long before the case is concluded. What I take this to mean is that Boies has a clear understanding that he's not going to trial with this case. Failing a contingency agreement, SCO Group likely won't have enough money to go to trial against IBM.
Update 10-DEC-03 [ SCO's claims that the case was taken "on contingency" by Boies have proved to be highly and deliberately misleading (C20). According to SCO Group's 8K filing. Boies' firm has been paid at a "discounted hourly rate" from the first, out of a deposit pool that guaranteed he'd be paid, and with obscenely lucrative bonuses paid for certain "contingency" events.
Some analysts, particularly The Yankee Group's naive and trusting Laura DiDio and a number of stock market analysts, based a great deal of SCO Group's credibility on Boies taking the case on contingency. In actuality, his contracts call for being paid huge sums of money no matter what happens to SCO Group and few commitments to do anything specific. Time to reevaluate, folks.]
Another interesting observation is that SCO Group speaks about their legal actions not through lawyers but by wild and unsubstantiated claims from their executives and public relations department. They've changed course every time they make a statement and consecutive statements are often in conflict. All this could easily prejudice the case and is further evidence that SCO Group doesn't expect to reach trial.
Update 10-DEC-03 [ It is becoming increasingly apparent that lawyer Kevin McBride, Darl McBride's brother, is the key lawyer in this whole nonsense. His rambling and disorganized performance before the judge during the 5-DEC-03 hearing on disclosure (won decisevly by IBM) exemplifies the SCO Group style (C19).
Further evidence has emerged from that greatest of all destroyers of privacy and revealer of secrets, a Microsoft Word document posted on the Internet (C18). Microsoft Word documents often contain hidden data that skilled analysts and negotiators know how to view. This document contained all the absurd misinterpretations of copyrigh law, the U.S. Constitution and the GPL (General Public License) we have found typical of SCO pronouncements. Inspection showed it was originally written by Kevin McBride.]
Boies may be nothing more than a "famous name" engaged to frighten SCO Group's intended victims and not expected to do much actual work, or he could be getting paid under the table (there are rumors of special SCO Group stock issues), or by some source other than SCO to make as much trouble for Linux as possible. Only two credible suspects come to mind, Microsoft and Sun Microsystems, both seriously threatened by Linux. Even so, going to trial seems improbable.
SCO Group has also engaged a local legal firm which includes the son of U.S. Senator from Utah Orrin Hatch. Suspicions that this firm was selected to curry political favor remain unproven.
SCO Group's first legal action was to announce enforcement of licensing for a code library that allows software written for SCO Unix to be run on Linux systems without recoding or recompiling. SCO Group claimed certain (unnamed) entities were distributing and/or using this code without license.
This action was certainly within the bounds of acceptable business practice UNLESS Linux code under the GPL (General Public License) was incorporated into the library, which is likely to be the case. If GPL licensed code is included in a work, the work either cannot be distributed at all (in-house use is fine), or the entire work must be distributed under the GPL license and no other license terms may be added, so SCO Group's actions may have already been in violation of copyright law.
We are not sure if any licenses were actually sold, because SCO Group
quickly lost interest in this product, choosing to initiate a series of
actions that, at face value, seem bizarre, irrational and extremely high
risk. Bizarre and high risk they are, but whether they are totally
irrational must be judged in view of SCO Group as a doomed company.
SCO Group filed suit against IBM for $1 Billion (later raised to $3 Billion) on unsubstantiated charges of having transferred SCO intellectual property to the Linux community in violation of IBM's license for AIX Unix, through which IBM had access to SCO's source code. SCO claims attempts to negotiate with IBM were fruitless. IBM says they were never approached at all on the matter.
This action makes sense only as an attempt to annoy IBM into buying out SCO Group. Darl McBride even stated in an early interview that a buy-out would be entirely acceptable (A26). If that's the case, SCO Group miscalculated badly - instead of opening its wallet, IBM started warming its legal rock crushing machine.
The SCO Group lawsuit against IBM and their threatened lawsuits against Linux users and distributors stand on very shaky ground on a number of counts:
Other factors mitigate against SCO Groups success as well. If there's one thing IBM understands thoroughly, its intellectual property - they own more of it than most entire countries and derive substantial income from licensing it. Other things IBM understands are money and lawyers and how to use them. They have a large supply of both.
Another serious factor is the unified response of the Linux community which has been doing a huge amount of research that seriously weakens SCO Group's claims. This research and evidence is being made available both to the public and to IBM's legal team, and the community is likely to provide expert witnesses of very deep experience.
SCO Group threatened that if IBM didn't provide them with an acceptable response (read: buy-out proposal) by 13 June 2003, SCO Group would void the license to use their intellectual property in IBM's AIX Unix. IBM's only response was, "Our license is perpetual and irrevocable" (A16).
Still without a buy-out offer, SCO Group was forced to proclaim IBM's AIX license revoked. They demanded IBM and all current users of AIX Unix destroy all copies immediately (A44, A40), a patently absurd demand which would bring many large corporations to a halt.
IBM's response was terse (A41), saying they would continue shipping AIX and reiterating that "Our license is permanent and irrevocable".
SCO Group jumped up and down and said they'll now sue everyone, starting with a major hardware vendor to be named later (A39), the 1500 corporations they sent threatening letters to, sue IBM for more things, and maybe sue Linux distributors like Red Hat and SuSE too. They said they would make up settlements for each one in advance and they can just sign and pay or go to court.
SCO Group amended its claims against IBM from $1 billion to $3 billion, plus additional claims and punitive damages (A42). SCO Group, even with its stock price already highly inflated by speculators, was only worth $135 million. This, and the wild claims SCO executives made in public (A43) reinforces the suspicion they just want to cause so much trouble IBM buys them out.
SCO Group has made no move to stop IBM from shipping AIX (or Linux). That would require taking the matter before a judge, requesting an injunction, demonstrating irrevocable harm if shipments continue, and convincing the judge they are likely to prevail in court. Given the highly questionable nature of the charges, their refusal to provide any verifiable facts to support those charges, and the fact that AIX shipments do not affect their income, success would be highly unlikely,
IBM has, of course, taken appropriate measures. They immediately had the case transferred from Utah state court to federal court and asked for routine extensions in their response time. The case is now expected to go to trial in about 2 years. IBM could easily stretch the trial out for 2 or more years. SCO Group will be really lucky to live half that long.
After some weeks of quiet contemplation, IBM issued a countersuit (B7). Among the charges were claims that each of SCO Group's four shipping Unix products is in violation of an IBM patent. The careful selection of just one for each product indicates to me this is just an opening shot. It's nearly impossible to do much of anything with computers without violating a half dozen or so IBM patents.
Even more devastating was IBM's expansion of the countersuit on 26-Sep-03
(B5) charging SCO Group with infringements of IBM
copyrights by continuing to distribute Linux under the GPL license after
being in violation of that license. This resulted in a sharp drop in
SCO Group's stock valuation.
When SCO Group filed their suit against IBM, they said their dispute was only with IBM and not with the Linux community or publishers and distributors of Linux (of which they still were one). They also stated that the disputed code existed in kernels 2.4 and 2.5 only, and previous versions of Linux were unaffected.
Linux users, however, were not unaffected, and SCO Group sent threatening letters to 1500 major corporations, many of them IBM customers, telling them they were running an "unauthorized derivative of Unix" for which they would have to pay SCO Group a license fee or face costly litigation (A51).
In August, SCO Group set the license fee at $1390 per copy, making Linux more expensive than Windows Server (B13). By mid September, SCO Group announced that two companies, one a major corporation, had purchased licenses. My guess is the big one is almost certainly Microsoft, purchasing licenses for its new Linux test lab, and the other is likely another member of the Canopy group, the investment firm that controls SCO Group.
Given that no other companies have volunteered to purchase the license, SCO Group announced they are preparing invoices to be sent out to thousands of companies known to use Linux. None have been sent yet, and legal experts believe sending them will leave SCO Group wide open to lawsuits charging racketeering and fraud. SCO Group's claims not only haven't been proven in court, they have yet to submit any verifiable evidence to support those claims.
That a number of people are itching to get their hands on an SCO Group invoice to launch fraud and racketeering lawsuits may explain why SCO Group continues, month after month, to come up with excuses why they have delayed invoicing (C5). They've become so terrified of this prospect they say they won't accept a license payment except "from a Fortune 1000 company" (C10) - and none of those are interested,
Many doubt that SCO could legally charge license fees to users even if IBM was found guilty of contract violation. The users aren't in violation of the contract nor in violation of copyright. Only distributors of Linux could be charged.
Problems: IBM failed to make a buy-out offer, and the VARs and integrators SCO depends on to sell their products were deserting to Linux by the boat load (A15). Suddenly "millions of lines of our intellectual property" were found in every version of Linux, including the earlier versions they had declared exempt. They even threatened to sue Linux Torvalds who wrote the first version of the Linux kernel.
As with the IBM filing, SCO Group provided no verifiable evidence, just vague claims of "stuff" which don't hold up to even causal analysis (A8). This is simply not the way IP infringement cases are handled. In the real world, specific examples are presented and demand is made they be licensed or removed. A negotiated settlement generally follows. Instead, SCO issues nebulous, unsupported claims and irrational threats.
SCO Group claimed they'd hired three groups of experts, particularly a group of mathematicians at MIT (Massachusetts Institute of Technology) to find matches between SCO and Linux code. An informal inquiry at the MIT mathematics department turned up no one who knew of anyone doing any work for SCO Group (B3).
Once questions were asked, SCO became rather vague on those "experts", so I think we can safely presume they don't exist. That doesn't make much difference anyway, because any reasonably knowledgeable programmer could write a script that would find plenty of matches between SCO Unix and Linux. The unanswered question is, do any of those matches indicate wrongdoing?
The AT&T code has been whored around just about everywhere for three decades, Parts of it have been published in books and included in open standards. Unix picked up plenty of stuff from others as well. When AT&T sued BSD (Berkeley System Distribution) and the UCB regents on claims similar to SCO Group's claims, it was found that AT&T had itself incorporated a whole lot of BSD code into AT&T Unix without proper attribution. The case became a total fiasco and was settled favorably to BSD, but the BSD code is still in SCO's Unix.
Since much of the foundation code for Unix networking and other important aspects of the operating system was developed for BSD Unix and licensed under the free BSD license, it's not at all surprising that similar code appears both in Linux and SCO Unix, as well as in Microsoft's Windows.
Further, under its previous management as Caldera, SCO Group's objective was to merge Unix and Linux (B4). Pursuing that goal they deliberately contributed large chunks of SCO Unix code to the Linux community,
To muddy the waters yet more, Novell was working on a major Linux project while they owned Unix, so it's possible they too legitimately contributed Unix code to Linux developers.
It's become obvious SCO Group hasn't a clue what the code matches mean, where the code came from, or what code is legitimately similar in SCO Unix and Linux (B2). Remember, they didn't write any of this code, they bought it fourth hand. Realizing that others know far more about Unix code than they do (B25), they have been unwilling to show examples or provide any other verifiable evidence.
SCO offered to show a few lines of code to a select group of analysts under strict supervision and a draconian NDA (non disclosure agreement). Few could accept the terms of the NDA (A30) especially in light of having no way to know the derivation of the code shown (A27). A number of serious legal issues were noted, so council advised many analysts to pass up this opportunity. Several analysts eventually did sign the NDA and view the code, but only one had training appropriate to evaluate what they saw.
SCO Group also showed some of the same examples on screen at their dealer/user convention in August, with much of the code obfuscated by being converted to Greek characters. What they didn't expect was that a person in the audience photographed the screens and turned the pictures over to the Linux community.
Within a couple days Linux experts had converted back from the Greek characters and traced all the code examples to their origins (B25). Only one fragment was considered questionable, and it had already been removed from Linux because it was considered "ugly code". The rest had every right to be included in Linux.
This is why SCO Group fears providing any verifiable evidence of their claims. Their opponents know far more about both Unix and Linux than they do and will quickly demolish their arguments.
If any of the stuff SCO Group has been spouting is ever presented in a court of law, SCO Group is going to look like a cluster of idiots. Under the theory that they are not actually idiots, I would again have to conclude SCO Group has no intention of going to trial. This is purely an extortion play.
Even more harmful to SCO Group's case is the fact the company has itself been developing and distributing Linux for years, which would include the allegedly infringing code. By distributing their own version of Linux under the GPL (General Public License) they relinquish all rights to control the intellectual property contained therein.
SCO Group says "We didn't know", and offers legal precedence in the case of a pregnant cow (the seller thought the cow was barren and sold cheap). It's hard to accept this when SCO Group was a prominent developer of Linux with all the source code in hand and engineers who knew how to interpret it.
In hope of controlling the damage, SCO Group announced they have withdrawn their Linux product from the market "until the intellectual property matters are clarified" - but it was still freely downloadable from their ftp site weeks later and is still being sold to established customers. This has given IBM considerable leverage in their countercharges of violating the GPL.
It's hard to see how SCO Group can get the toothpaste back into the tube at this point. Their only hope is to invalidate the GPL license itself, and they have made claims it is invalid - based on one of the most bizarre readings of copyright law imaginable (B14).
What makes SCO Group's attack against the GPL even more hilarious is the
fact that they themselves are highly dependent on shipping GPL licensed
software with their Unix products, which would be illegal if the GPL is not
valid. An example is Samba, which makes it possible for SCO Unix servers to
service Windows clients.
SCO Group is threatening SGI (Silicon Graphics Inc.), a major manufacturer of high end engineering workstations and graphics processing computers, with charges similar to those against IBM (B8). They claim SGI contributed SCO intellectual property to Linux and threaten to revoke the license for Irix, SGI's version of Unix, if SGI doesn't "remedy all violations".
SGI's response to SCO's charges is that they are without merit. As for the license, SGI sounds just like IBM, "Our license is fully paid and non-terminable. They can't terminate it". SGI has submitted further clarification to the Linux community (B9).
As in the IBM case, you can expect SGI to hold the copyright to any intellectual property contributed to Linux. There just isn't anything SCO Group holds the copyright to that anyone would want. Once again, SCO Group claims control over that which it does not own.
the main item of contention here is XFS (eXtensible File System), which SGI maintains is not "a derivative of Unix" as SCO claims, but independent code their license gives them complete title to and control of.
SGI is moving all its systems to Linux, but this is a measured process so the company will depend on Irix for some time yet. If they are sued, we can expect them to continue shipping Irix in defiance of SCO Group, just as IBM continues to ship AIX.
As of mid October, SCO Group has stated they have postponed suing SGI
The Counter Attack
Reaction to SCO Group's action against IBM and their claims that Linux was an "unauthorized derivative of Unix" probably took the Utah firm completely by surprise.
The lawsuit against IBM seemed so preposterous it was immediately subjected to deep analysis by experts highly familiar with Unix and its history. Examples are those by open source luminaries Eric Raymond (A6), Bruce Perens (A12) and Karsten Self (A7). Agreement seems unanimous that the filing is vague, inaccurate, self serving, devoid of substantial points and that SCO will not prevail against IBM.
Detailed change logs have been maintained for the entire history of Linux, so any and all additions and modifications to the Linux kernel can be tracked to date and source. Any code SCO Group claims infringing can be quickly isolated and examined by a community of experts.
Outside the Linux kernel the GNU people are very strict that all contributions be original code or originally published under a GPL compatible license, and that copyright be assigned to the Free Software Foundation. In the 20 year history of GPL licensed code, there have been no significant copyright challenges previous to the SCO case.
The Linux community continues to ask SCO Group to "show us the code". Far from being thieves of intellectual property as SCO Group claims, the Linux community is highly respectful of intellectual property rights - they own the rights to Linux. The GPL license itself derives its awesome power directly from copyright law. The community would remove any actually infringing code immediately, but that's exactly what SCO doesn't want, because that would destroy their extortion ploy.
Since SCO Group won't show the code, and licensees can't, a method by which source matches can be found between Linux and Unix System V without revealing the proprietary System V code has been developed (B12). This may be devastating to SCO's FUD (Fear, Uncertainty and Doubt) campaign. From this analysis Linux proponents could show where the code actually came from, and most if not all is expected to be legitimate.
While licensees can't show the Unix code, they can certainly look at it themselves, and anyone can get the Linux code to compare to it. SGI (Silicon Graphics Inc.) does have the Unix code and did an extensive set of comparisons, first for their own contributions and then for the entire Linux kernel. Their conclusion is that the amount of identical code is "trivial", and may not be code SCO controls anyway (B22).
It is possible for other holders of Unix licenses to do similar comparisons, particularly IBM and HP. IBM probably already has in preparation for the lawsuits between itself and SCO, but as experienced litigants, they're keeping quiet.
When IBM filed their countersuit, SCO Group seemed taken off guard. Their response was short, weak, and mainly parroted Microsoft's stance on Linux and intellectual property. In response to IBM's patent claims, they said, "We've been shipping these products for years and IBM's never given us any trouble". Right, nitwit, you never attacked IBM before.
When Red Hat filed their lawsuit, SCO Group expressed "disappointment" and complained, "We spoke with them just the other day and they didn't mention anything about this". SCO Group has finally submitted a response to the court, and asked for dismissal. The significant points of the request are that they've never attacked Red Hat by name, and they have a First Amendment right to say whatever they please (B1).
Red Hat filed a counter to the request for dismissal, of course, but more important, they filed a blockbuster discovery request (C2). SCO Group asked for a delay until after the dismissal request is decided. If the court accepts the discovery request, it will force SCO to divulge all the information they have been trying so hard to keep hidden, including the Linux Kernel Personality code from SCO Unix that is thought to be rife with GPL'd Linux code.
In a little publicized action, IBM filed a request for information from The Canopy Group, SCO Group's parent organization. This action freezes all disposal or destruction of documents and communication pertaining to the SCO case and places Canopy Group on notice they may not be immune to charges by IBM.
Red Hat also included Canopy Group in their discovery request. Expect Canopy Group to be dragged in more and more because it is rumored they loaned money to SCO with the Unix licenses as security. If SCO goes bankrupt, Canopy Group would have first claim on the Unix licenses and would be able to assign them to another Canopy business to start the lawsuits all over again.
When IBM amended its countersuit on Friday 26-Sep-03, sharply expanding its charges that SCO Group is in violation of the GPL license. SCO Group's stock took a sharp plunge and the company had little to say, just reiterating their claim that copyright law invalidates the GPL (B10). Legal analysts are unanimous that SCO's interpretation is completely absurd.
The open source community is delighted that the GPL will finally be tested in court, and it will have the full power and legal expertise of IBM behind it when that happens. Well, maybe not, because I still don't think SCO Group intends to go to trial.
In the highly unlikely case that SCO Group gets the GPL invalidated, they still aren't out of the woods. By their own misguided interpretation of copyright law they would then never have had the right to distribute Linux, but worse, it would be illegal for them to distribute GPL'd products like Samba and gcc upon which their own Unix products now depend.
Beyond IBM's claims the Linux development community has grounds to file copyright charges against SCO Group. As soon as SCO Group violated the terms of the GPL by demanding additional licenses, they were no longer licensed to distribute Linux in any way, yet continued to do so in violation of the copyrights of the developers.
The open source community probably also has grounds for charges against SCO Group's Unix. Evidence has surfaced that SCO employees copied Linux code into their Unix without proper copyright notice or contributing modified code to the open source community as required by the GPL license. This includes word from a person who worked closely with SCO (A34, A35) and a former Caldera insider (A36).
Another phase of the counter attack is on indefinite hold because while SCO Group announces month after month they are about to send invoices to Linux users they never actually send any. So many are waiting for an invoice so they can sue for fraud and racketeering SCO refuses to sell a license to anyone but a "fortune 1000 company" (C10).
But what about those physical attacks on SCO Group by the Linux community? All actual evidence is that they didn't happen and were purely SCO Group PR stunts.
A number of credible reasons have been proposed for SCO's seemingly irrational actions and behavior, and for the actions and behavior of other companies surrounding the issue.
Stock Manipulation Angle
Caldera/SCO Group's stock was issued less than 4 years ago at over $100/share (adjusted for 4 to 1 reverse split to avoid delisting). In Feb 2003 it was hovering just over $1/share with no prospect of going up. Obviously SCO Group's investors, and particularly major shareholder Canopy Group, considered this less than ideal.
Many consider SCO Group's lawsuit against IBM and its continuous grasping for publicity to be part of a classic "pump and dump" stock scheme, but it's really a lot more interesting than that.
SCO Group's board of directors authorized 45 million new shares at a par value of 1/10th cent per share. With only 13.5 million shares outstanding, issuing even part of this hoard would significantly dilute shareholder value - in a sane world. Investment and corporate finance are not now and have never been sane.
If some of this stock is issued without fanfare, nobody notices, and this nearly worthless 1/10th cent per share stock is suddenly valued at the market rate, which has been as high as $20 dollars. Neat, huh? Some of this stock has already been issued to provide SCO executives with lucrative stock options.
Some of this speculation inflated stock has been used by SCO Group as if it were real money to purchase Vultus, a Web services developer (A50). Strangely enough, Vultus is not only located in the same building as SCO Group, but received its seed capital from The Canopy Group. Some stock may have been issued to atorney David Boies.
Some have said they doubt the stock manipulation factor because SCO executives haven't been bailing out rapidly. Remember though, they must file intent to execute an insider trade with the FTC, which makes large transaction pretty obvious, and they expect to have 2 years to get out before the case comes to trial.
That's not to say SCO Group executives haven't been selling their
speculation inflated stocks (A48). Most telling
though, is the sale of all his stock and resignation from SCO by
Opinder Bawa, Senior Vice President of Engineering and Global Services,
the person within SCO Group who would know the most about what's in the
The Speculator's Angle
The $3 Billion lawsuit against IBM combined with unending press releases from SCO Group threatening to sue everyone else has attracted speculators like flies to [Bleep]. As the Dot.com boom demonstrated, speculators (who prefer to call themselves "investors") require neither logic nor substance if the number to the right of the $ is large enough.
With no patience for details, especially technical details, speculators get their information from popular and investment press journalists who also have no patience for details. Once the ball starts to roll, fantasy builds on itself.
Speculation began with well distributed reports from Renaissance Ventures (B6), which include more erroneous thinking and suspension of disbelief than the war in Iraq. SCO Group stock has also been touted by a well known stock analyst who said he liked it so much he bought some himself (and he profited handsomely from the the run-up he caused).
On 15-Oct-03 the stock took another sharp jump when Deutsche Bank analysts proclaimed it a "Buy" (C6). They followed their recommendation with an explanation that the stock was very high risk, but speculators seldom read that far.
Opinion by technical and legal experts is that Deutsche Bank's analysts were wildly optomistic in their "very high risk" evaluation, but the recommendation may have been based on knowledge of the upcoming investment by (or rather through) Royal Bank of Canada and BayStar Capital.
On 16-Oct-03, the Royal Bank of Canada and investment fund BayStar Capital
placed an "invested" of $50 Million in SCO Group. At first this looked like
total lunacy, but more has been revealed, so we've moved this item down to
The Lawyer's Angle
As you might expect, David Boies' law firm, Boies, Schiller & Flexner, wins big if SCO either wins or sells. If SCO sells out, the lawyers get 20%, which at 5-Nov-03 market cap is about $50 Million (C13, C14). In the unlikely case that SCO wins against IBM, the lawyers get 20% of the take. The $3 Billion would yield $600 Million. If any companies actually pay Linux license fees, the lawyers get 20% of that too.
Further, they get 20% of any equity investment in the company over the period of the lawsuit, so it's probable they're getting $10 Million of that $50 million investment SCO Group has just recieved from mysterious sources that are suspected to be Microsoft.
The size of these numbers combined with lack of IP and technical expertise on the part of Boies, Schiller & Flexner is probably the reason the firm was willing to take such a risky case on contingency. If it starts to tank, they can just claim SCO Group mislead them and bail, Like there's going to be enough of SCO Group left to sue them for malpractice? Meanwhile,
On the other hand, the many ways the lawyers have written in for them to profit without winning demonstrates the weakness of SCO Group's case and the importance of driving up the stock price.
At this time we don't know what the local Utah lawfirm is getting, but
maybe they're just getting paid. Perhaps that's what all that money pouring
in from Microsoft is for. And people wonder why this country has more lawyers
So far little evidence has been presented implicating Microsoft in planning SCO Group's actions, but a delighted Microsoft certainly did jump in with both feet in the early going, That Linux could be vulnerable to intellectual property attacks was the only one of Microsoft's anti-Linux stories to gain any traction, so SCO's actions were a godsend to Microsoft.
Microsoft donated funds to the tune of of around $6 million with about $4 million more coming. They did this through a licensing agreement with SCO Group for use of Unix properties and "to show our deep respect for intellectual property rights" (A10). This is total hogwash because Microsoft has no need whatever for that license.
Aside from a consistent reputation for violating the intellectual property rights of anyone they please, Microsoft can get any Unix code it wants from BSD Unix, and already has. The BSD license, unlike the GPL, permits "privatizing" of code and inclusion in commercial products. Microsoft's whole TCP/IP networking stack was originally based on BSD licensed code.
Microsoft does claims it agreed to license Unix before the IBM suit was filed, making it likely they were well aware of what SCO Group was going to do early on, and IBM itself seems to be of the opinion that Microsoft's fingers are definitely in the pie (A54).
Further, On the same day Microsoft announced licensing Unix from SCO Group, SCO Group announced compatibility with Microsoft Active Directory (A11). This really stretches coincidence way too far - SCO Group would need Microsoft's permission and close cooperation for this even though a third party developer was involved. It's also been revealed that SCO Group is one of only 8 companies that have licensed Microsoft's communications protocols (C9).
At the same time as the IBM suit, SCO shredded all evidence against Microsoft from the successful Caldera antitrust case (A13). For those that don't remember, Caldera (now SCO Group) sued Microsoft for various acts and unfair business practices against DR-DOS. Microsoft bought off the case for somewhere between $350 and $500 million to avoid copious evidence of their misbehavior becoming a matter of public record.
One place SCO Group will find little support from Microsoft is in defending against IBM's charges of violating the GPL license. Microsoft is rabidly against the GPL because it prevents them from stealing Linux code for their own products. On the other hand, SCO Group's claims that it is invalid, if upheld, would weaken copyright protections, and that is counter to Microsoft's interests.
On 16-Oct-03, Microsoft's $10 Million looked like small potatoes when Royal Bank of Canada and BayStar Capital placed an investment of $50 Million with SCO (C4). This investment seems to be total lunacy, until you analyze it in detail.
The method of investment was a PIPE (Private Investment in Public Equity), a vehicle designed to hide where the money came from and relieve the company invested in of revealing pesky details. Two of the top 10 investors in PIPEs are Microsoft and Vulcan Ventures (the investment firm of Microsoft cofounder Paul Allen) (C7),
Microsoft, BayStar and SCO Group all maintain Microsoft had no part in this transaction. Questions about Vulcan Ventures, however, get a "don't know". In business finance, if you've been following the headlines lately, you know there are a thousand ways for the left hand to do the right hand's evil while maintaining "plausable deniability".
Interestingly, Royal Bank of Canada also participated in this PIPE deal, and Deutsche Bank seems also involved. That's the bank who's analyst had recommended SCO Group stock only a few days before, causing a sharp uptick in the stock's value. What did that analyst know?
Investing $50 Million in SCO based on them winning against IBM or based on future business is lunacy. On the other hand, Microsoft investing $50 million to fight its most dangerous enemy makes perfect sense. You be the judge.
In any case, IBM isn't taking any chances, and by 3-Nov-03 had issued
subpoenas to Deutsche Bank, Baystar Capital, the Yankee Group and Renaisance
Research Group to clarify their financial involvement with SCO Group.
Sun Microsystem's Angle
Like Microsoft, Sun Microsystem's business model is directly and severely threatened by Linux, but unlike Microsoft, they are of two minds about it. The evidence is that there are two powerful tribes within Sun locked in a power struggle, the Solaris tribe and the Linux tribe. This causes rather erratic behavior.
Like Microsoft, Sun contributed money through a licensing deal, but unlike Microsoft they actually had an excuse, though a weak one - saving money on developing certain device drivers for certain projects. Sun didn't need license for Unix itself because they'd paid Novell $100 million for ownership equavalence of the Unix code when Novell owned Unix.
SCO Group itself declared that all was right with Sun and they had no intellectual property beef with Sun at all.
Meanwhile, Sun signed an agreement with SuSE to provide Linux for a major
push against Microsoft on the desktop - in complete and total violation of
SCO Group's Linux claims. It's pretty obvious Sun isn't taking SCO Group's
threats at all seriously.
HP's (Hewlett Packard) Angle
HP (formerly Hewlett Packard / Compaq) is playing a very interesting game indeed. The part of HP that was formerly Compaq has long had a close relationship with the Santa Cruz Operation (the real SCO) which they carried forward to the SCO Group. HP strongly promotes its products as the preferred platform for implementing SCO Unix on.
HP was a major sponsor of SCO Group's August user/dealer confab, hosting a major party at the start of the event (they did, however, back out of giving a scheduled keynote speech). HP is also sponsoring SCO Group's October multi-city road show, along with backup software publisher Microlite.
On the other hand, HP sells a lot more servers running Linux, and to protect this business from SCO's Group's attacks, HP has become the first Linux provider to indemnify its customers against lawsuits by SCO Group.
As usual SCO Group's response made no sense. They stated that HP's
providing protection was proof SCO Group's claims against Linux were valid
(reversing their previous line that lack of indemnification proved their
claims were valid). Just about everyone else thinks HP regards it as a
great PR move with just about no risk at all. SCO Group's stock dropped
15% on the news.
Research Firms & The Press
Research Firms seem to form their advice depending on how close a relationship they have with Microsoft. Long term Microsoft promoter Gartner Group, for instance, is warning their clients to stick with Unix and Windows until this SCO Group flap is over - but given Gartner Group's track record for accuracy, few are worried.
Other research firms, like Meta Group, are advising their clients to move ahead with Linux implementation - the rewards are great and the risks are small (A3) and Forester Research says Linux users have little to worry about (A18).
Yankee Group's Laura DiDio is said not to have signed the NDA (Non Disclosure Agreement) because it's against Yankee Group policy, but gave her word she'd adhere to it (B28). She has been almost completely uncritical of everything SCO Group has shown her and claims SCO Group has a "credible case" (A38). She's a Microsoft analyst completely unqualified in matters of program code and I expect she anticipates favors from Microsoft for supporting their position.
Some other analysts also signed the NDA, including Aberdeen Group's Bill Clayton, and one representative of the open source community, Lance Taylor. Most have been far more critical of SCO Group's presentation than DiDio is. They said they were shown a block of code where about 80 lines were very similar but Claybrook expressed serious doubts about what he was shown and with SCO's behavior (A37). Taylor also strongly doubts the ability of SCO's charges to stand up in court (A47)
Writers for the technology press likewise have applied windage depending
on their relationship with Microsoft, but the majority of articles advise
continued implementation of Linux in the corporate environment. A number
of columnists have ridiculed SCO Group strongly.
The Customer Angle
The weakest points in IBM's counter suit and Red Hat's suit is to prove SCO Group's actions have damaged their businesses. Far from sticking with Windows as recommended by Gartner Group or switching to Unix as recommended by SCO Group, both corporate and government IT (Information Technology) departments continue to adopt Linux at an ever accelerating rate.
Even giant Ford Motor Company has recently announced it will be making major usage of Linux on its servers worldwide, and for Ford Europe it may extend far beyond the server. Government agencies worldwide, including the U.S. are rapidly adopting Linux for reasons of security, flexibility, cost, and to free their systems from proprietary data formats.
And SCO Group's customers? The rank and file at SCO Group genuinely want to serve their customers, are working hard and have a well laid out plan for updating and improving their products, as well as coming out with new products including Web services. Ironically, their modernization plans depend a lot on open source products, including products licensed under the GPL.
Is this effort too little too late to keep SCO customers from drifting
away? I expect that question's irrelevant because the antics of their top
executives will likely destroy the company before the marketplace has its
say. Even the most conservative customers should be working on a Linux
migration plan "just in case".
It's very difficult to find any legal opinion that gives much credence to either SCO Group's charges or to their chances of prevailing in court - unless you talk to someone from David Boies' office. Everyone else remains highly skeptical of both the validity of the claims and SCO Group's chances in court (A55, A49).
One of the earliest legal opinions was by lawyer Michael Overly of Foley & Lardner in Los Angeles. He states that SCO Group's code show under Non Disclosure "means absolutely, positively nothing" (A31).
Of course Eben Moglen, General Council for the Free Software Foundation and professor of law at Columbia University Law School, has plenty to say about SCO's lawsuit too (B21).
SCO Group's submittals to the court have provided considerable amusement to those who bother to analyze them, such as this shredding of SCO Group's response to Red Hat's response to their request for dismissal of the declaratory judgement case (C8).
Given the weight of legal opinion against them, and the almost total
lack of coherent statements from David Boies' group, I conclude once again
that SCO has no intention of carrying any of this to trial.
The Battle Rages On
Major items added since the rewrite.
25-Oct-03 - IBM has not been happy with SCO Group's level of response to it's discovery requests, so it submitted to the court a Motion to Compel Discovery. SCO Group submitted a Memorandum of Law opposing that motion which is quite adequately commented at GrokLaw (C11).
27-Oct-03 - SCO Group has submitted a response to IBM's Ammended Answer with Conterclaims. It's main point is to claim the GPL (General Public License) under which SCO Group distributes major components of it's SCO Unix is invalid and unenforceable. "The GPL violates the U.S. Constitution, together with copyright, antitrust and export control laws, and IBM's claims based thereon, or related thereto, are barred" (C12).
In the astronomically unlikely case that SCO Group should win this point, SCO Unix distributions in their current configuration would be illegal, exposing them to lawsuits by all the copyright holders of the code they are distributing. This would also apply to their distribution of Caldera Linux, the source code of which is still posted on their site for download as is required for compliance with the GPL.
The absurdity of SCO Group's claims and responses has caused some to
suspect their overall strategy is to cause IBM's lawyers to laugh so hard
they die, allowing SCO Group to win by default.
05-Dec-03 - SCO Group has consistently refused to provide any evidence to IBM of the infractions they claim IBM is guilty of. They have claimed it's IBM's responsibilty to offer the evidence to them. In a court face-off with IBM, the judge put SCO Group straight. giving them 30 days from Wednesday, 11-Dec-03 to put together a mountain of highly complex material in response to IBM's requests for disclosure (C19). I suspect a few Christmas vacation have just been canceled at SCO Group.
In this court appearance, SCO Group was represented by Darl McBride's brother Kevin McBride, a Salt Lake City, Utah lawyer, not by David Boies. Kevin McBride's rambling and innefective presentation goes a long way to pointing out where SCO Group's style and absurd interpretations of law are coming from. See also (C18) for more evidence of Kevin McBride's influence.
A Little History
This section is for people who would like to know more about the background leading up to the fiasco described above. It combines my personal experience with information in published timelines, particularly the one referenced as (A1).
While my outline is extremely brief and just touches on a few high points, it should give you some idea why SCO's property rights are far from clear, even had they made any attempt to state them clearly.
In 1969, Ken Thompson wrote the first version of Unix to run on the PDP-7 minicomputer at AT&T's Bell Labs.
By 1974, AT&T was licensing the Unix source code, especially to Universities, who could get it free of charge. The University of California at Berkeley soon became a major Unix developer.
In August 1980, Microsoft announced it would publish its first operating system, a version of Unix for microcomputers, to be developed mainly by The Santa Cruz Operation (SCO), a Unix porting company formed the previous year. This operating system was to be named Xenix. Xenix was to be constructed from AT&T and Berkeley code.
Just a few months later, after signing an agreement with IBM to provide an operating system called PC-DOS for the IBM PC then in development, Microsoft started to slowly lose interest in Xenix (though it continued to be used internally for software development). By 1983 Xenix was associated predominantly with SCO rather than with Microsoft.
Many versions of Unix for the PC and other microcomputers were released, but Xenix continued to be the best marketed and was ported to a number of platforms, including the Tandy (Radio Shack) PC and to Altos, which became the dominant manufacturer of multiuser computers for small business.
This widespread use of Xenix encouraged software publishers to write for it and to ignore other varieties of Unix for the PC and small business markets. Because Xenix deviated quite significantly from real Unix, this software was not easily ported to other Unix platforms, a situation SCO has always encouraged, even to the extent of subverting standards efforts such as Intel's iABI effort.
SCO went on from year to year showing losses (minimizing taxes), but when the time came for their IPO (Initial Public Offering) the books suddenly showed them quite profitable. This raised more than a few eyebrows at the time.
The IPO was successfully completed in 1993 despite the accounting questions and the resignation of CEO Larry Michels on charges of repeated and habitual sexual assault and harassment of female employees (A2).
Before the IPO, SCO would firmly correct anyone who called them "Sko" that the correct pronunciation was "Ess See Oh". Wall Street was pleased to call them "Sko", so the company adopted that pronunciation.
During this period, Automation Access was gaining experience with real Unix, starting with Microport SVr3.0. We continued to sell Xenix because many software publishers wouldn't support anything else.
PCs became more powerful so the shortcuts used by Xenix became less important. SCO licensed the Unix trademark, and in 1989 released SCO Unix System Vr3.2.x.
Automation Access recommended Esix Unix SVr3.2.x, but also sold SCO Unix r3.2.x because so many software publishers wouldn't support anything else.
I never considered SCO Unix r3.2 to be "real Unix", but rather "Xenix on steroids", and so did AT&T. They threatened to revoke SCO's license if they didn't bring it strictly up to standard. SCO stalled, because they had no intention of doing this. If they conformed, then software written for SCO Unix would also run on other brands of Unix which were better quality and less expensive.
AT&T Unix System Vr4.0 "unified Unix" was released in 1989, and included a Xenix compatibility module using code licensed from Microsoft. It also incorporated major features of Berkeley Unix and Sun Unix. PC Software publishers continued to support only SCO, even though their code would now run on real Unix.
SCO solved their license problem by promising AT&T they'd conform to standard with the release of Unix SVr4.0 - then just never upgraded to revision 4.0. They claimed their customers just didn't need it.
This left a marketing problem - everyone else was offering Unix SVr4.x. They solved this by launching a highly deceptive advertising campaign proclaiming "Version 4 Is Here!". It was actually r18.104.22.168, they just dropped the 3.2 as redundant and started calling their revisions by the third stanza, which they do to this day. Personally, I considered this maneuver to border on fraud.
Automation Access recommended Esix Unix SVr4.0.x, but also sold SCO Unix r3.2.4.x because so many software publishers wouldn't support anything else.
SCO later issued Unix v3.2.5.x with a screwy file layout and called it "Open Server". The real system files were buried 8 layers deep in a /opt directory structure, with links to them in the normal Unix places. Otherwise it was plain old SCO Unix, so why bother with the confusing mess?
In 1991, Linux Torvalds started development of Linux, based not on Unix, but on a Unix look-alike named Minix.
In 1992, Berkeley Software Design Inc. (BSDI) was formed to publish a commercial version of the University of California's Berkeley Unix. They were sued by AT&T's Unix Systems Lab. Due to technicalities, USL had to refile to include the University of California. The University of California sued USL over Berkeley features included in System V Unix and things got messy from there. The suit finally reached a negotiated settlement after the Novell purchase with replacement of three files out of 18,000 and addition of a few copyright notices.
In 1993, AT&T decided it wanted out of the Unix licensing business and sold the rights to Unix to Novell. Novell was briefly in empire building mode, but was crippled by a monopoly mindset left over from their former dominance of departmental and small business networking. They renamed Unix UnixWare (to match NetWare) and allowed it to decline rapidly.
Novell's ownership caused considerable protest, so they gave the Unix trademark to the Open Group, which still has the right to say what is Unix and what is not. Sun Microsystems was particularly vocal, so Novell sold them a perpetual license for $82 Million.
In 1995, Novell, all its products in decline, bailed out and sold UnixWare to SCO, along with all the licensing rights it had purchased from AT&T. Well, no, apparently not. Apparently Novell just agreed to allow SCO to form a business around Unix licensing, while Novell still owns the patents and copyrights and receives royalties from SCO - oh, but wait, maybe the copyrights were transferred, but not the patents.
SCO Sued Microsoft to allow them to remove the Xenix code AT&T had put in UnixWare so they could stop paying royalties to Microsoft. SCO won.
SCO was now stuck with developing two product lines, "real Unix" and the relatively primitive SCO Unix (Open Server). They began efforts to wind down Open Server and migrate everyone to UnixWare, but once again, the software publishers refused to budge and declined to port their products to UnixWare.
Linux was now becoming a mature product, certainly rivaling SCO Open Server and barking at the heels of UnixWare. Linux included a compatibility module that allowed it to run most SCO Open Server software.
Automation Access recommended Caldera Linux, but continued to sell SCO Unix because that's what software vendors would support - but now there was a difference. The software vendors were sensing something important was going on and it was something they couldn't stop. They started becoming less and less hostile to running their software on Linux, in fact many started to openly support that usage.
SCO recognized the threat and sent a memo ridiculing Linux to their dealers, developers and customers - a memo they withdrew with apologies a few days later. Some time later I participated in an SCO conference call and Web interactive presentation for SCO dealers to explain the company's Linux strategy. It became immediately and painfully obvious they hadn't one clue in the universe what to do.
To add surrealism to the aimless and wandering talk, most of their dealers couldn't participate in the interactive part of the presentation because it required you to run a Windows PC with Internet Explorer and Microsoft Office. Now is that stupidity or what?
In those days SCO ran a road show of quarterly briefings for dealers, VARs and software developers. I attended a number of them and noticed Linux questions coming up more and more frequently. One woman said her company had ported their software to the latest version of SCO Unix, but couldn't get it to work right, apparently due to bugs in SCO Unix. She said SCO's expensive tech support provided no answers, so they tried running the product on Linux. She reported she got excellent tech support and the product was running flawlessly within hours. She told the SCO reps her company was no longer developing new software for the SCO platform.
Totally unable to formulate a strategy to counter Linux or live with it, SCO sold the entire Unix part of their business to Linux distributor Caldera (founded 1994) and renamed themselves Tarantella, after their one remaining product.
Caldera had originally been a Red Hat distributor, but started its own Linux for business distribution because it could not convince Red Hat of the need for quality and consistency.
Caldera CEO Ransom Love had a talent, a very strong talent. Unfortunately that talent was in phrasing every announcement in a way that maximized outrage among Linux enthusiasts, in marked contrast to Robert Young of Red Hat's ability to say the same things phrased for enthusiastic acceptance by that same group. Unfortunately for Caldera, the enthusiasts were still extremely important in introducing Linux to business.
Upon acquiring SCO, Caldera explained they would be releasing SCO's Unix intellectual properties for use in Linux, gradually, as they cleared it of possible licensing problems. The Linux enthusiasts were absolutely outraged that Caldera didn't turn all SCO Unix properties over to Linux immediately. Caldera did, however, start trickling stuff out.
With Caldera Linux sales slow, the SCO Unix group brought in most of the money and was able to take control and push the Caldera Linux people out of the company. The company newsletters started de-emphasizing the Linux products until they were barely mentioned at all.
With the SCO group firmly in control, Canopy Group pushed Ransom Love out and installed a new CEO, Darl McBride, who has a weak technical background and a reputation for litigation as as a first resort. The SCO group renamed Caldera to "SCO Group". Major problem: the SCO people still had no idea whatever what to do about Linux, and their Unix products were losing market to Linux rapidly.
This timeline will be coming to an end soon.
- Andrew Grygus
- Automation Access
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