Novell's claims muddy Linux waters, Dec 26, 2003

Novell Inc. has quietly registered for the copyrights on many versions of the Unix computer operating system that the SCO Group already says it owns, further muddying the water surrounding a dispute that has embroiled the Linux open source world for almost a year.

SCO, which has sued in an effort to capture hundreds of millions of dollars in licensing fees and damages from IBM and other companies, said it owned the rights to the Unix operating system through a transfer from Novell dating back to 1995.

Novell spokesman Bruce Lowry declined to comment beyond what the company posted on its Web page, which was a statement about registering Unix in its name and what it said were correspondences between the two companies in which Novell disputes SCO's claim to owning the copyrights.

The battle is the latest for SCO since it purchased Unix from Novell in 1995. SCO has sued IBM Corp. over the Unix-derivative Linux operating system, and SCO also is seeking licensing payments from Linux users and has threatened legal action against them.

The SCO Group's lawsuit against IBM and and new warnings of legal action by SCO against other companies over its claim that copyrighted code slipped into select versions of the Linux kernel are not slowing deployments of the open source operating system, an upcoming study has found.

Controversial Unix software company SCO Group reported a loss for its fourth quarter on Monday based largely on hefty legal fees the company has accrued waging its intellectual property war against Linux.

The Lindon, Utah-based company said it had a fourth-quarter net loss of $1.6 million, or 12 cents per share, compared with a loss of $2.7 million, or 26 cents per share, in the year-ago quarter. SCO said it would have reported earnings of $7.4 million, or 44 cents per share, for the quarter before making a $9 million payout to lawyers representing the company in its Linux battles.

Novell has registered for the copyrights on UNIX System V 2, 3.0, 3.1, 3.2, 3.2/386, 4.0, 4.1, 4.1ES, 4.1ES/386, 4.2, and 4.2MP with the U.S. Copyright Office.

Now both the SCO Group and Novell have registered for UNIX System V copyrights for the same code, although it appears that Novell has a few that SCO does not.

It's dawned on Computer Associates International that IBM pays it royalties for the SMP technology in AIX, IBM's version of Unix, because of the work done long ago by Unix icon Locus Computing Corporation.

CA says it owns the Locus IP by virtue of its huge US$3.5 billion cash purchase of Platinum technology Inc in 2000. See, Platinum had bought Locus in a stock swap in, oh, 1995.

[The NY Times requires free registration]
The SCO Group plans to announce Monday that it is escalating its campaign to collect license fees from corporations using the Linux operating system, with warning letters to the companies. Supporters of Linux, including IBM and other companies, say that SCO's interpretation of its claim over Linux is exaggerated.

In the real world, Brenda Banks is a 54-year-old grandmother in Greer, S.C., a former warehouse supervisor who teaches rubber-stamping arts and crafts classes. But online she transforms into "br3n," a passionate user of Linux software who cruises Web sites posting smash-mouth messages about SCO Group. So far Banks has posted more than 1,500 messages on SCO's Yahoo! message board alone--including five on Thanksgiving.

"I feel very strongly about it," says Banks, who runs Linux on a six-year-old Acer home computer. "They want to come and stab Linux. It's just not right."

The code at the heart of SCO's legal action against IBM will be revealed only in a closed court

When the SCO Group finally lays its cards on the table in its upcoming lawsuit against IBM, the open-source community won't be given the opportunity to see them.

The Royal Bank of Canada (RBC) has changed the terms of its investment in the SCO Group, providing a further hint that the tide may have turned against SCO in its $3bn lawsuit against IBM.

According to a new SCO filing with the US Securities and Exchange Commission, the RBC now has the power to veto any action by SCO to give its lawyers a 20 per cent cut of any potential settlement awarded to the company.

Since reports of the distributed denial of service attack a few days ago against SCO started surfacing, a number of people have questioned whether or not the attack went down as SCO stated. Groklaw has a piece up which casts serious doubt on whether SCO was truly attacked at all. SCO claimed that their web servers came under a SYN flood attack and were thus unavailable for its duration.

"SYN flood attack? Oh. My. Gawd. That's so 1999!"

Yes, and there has been a patch for Linux to thwart such attacks for some time now. So SCO is not terribly conscious about security, or something else is going on.

Bob Young of Red Hat:

Many smarter people than me have demolished your arguments around the idea that anyone has knowingly stolen any property from you. Yet you continue to refuse to tell anyone what it is that you claim has been stolen. So your arguments against others ring very hollow. It is like my claiming you broke into the trunk of my car and stole something from me. But then I refuse to tell anyone, the police or anyone else, what was stolen, or even allow anyone to look in the trunk of my car. Your strategy would be laughable if it were not costing everyone involved huge amounts and of time and effort to correct your errors and respond to your lawyers.

Jon 'maddog' Hall of Linux International:

In times past when creating computer programs meant access to a machine that costs six million dollars, fitted to a large air-conditioned room that used kilowatts of power, more investment of money was required due to requirements for funding. Today really good software can be produced as a byproduct of solving a particular problem on already existing computer systems, and the owner has no real need to keep the software proprietary. Indeed, some people find that it is cheaper to use the GPL model and hope that others help them develop and improve the code than it is to go the traditional model and have to continue to develop the code themselves.

While Linux users have retracted accusations that SCO made up its claims to have been victim of a distributed denial-of-service attacks, doubts about SCO's claims linger.

In the face of third party evidence that the attacks did happen, Linux users retracted accusations that SCO was lying. But Linux and security experts stood by their statements that SCO's description of the attacks make no sense, and that competent network administrators can easily protect themselves against the type of attack SCO says happened to it.

Even as SCO Group's primary Web site tumbled to the cyber-canvas for a second day on Thursday, critics scorned the Utah software company's claims the crash was the work of hackers.

SCO, which has enraged the so-called "open source" community with its claims to the freely distributed Linux operating system, on Wednesday claimed a massive, "cyber-terrorist" inspired Denial of Service (DoS) attack had knocked its http://www.sco.com site off-line.

DoS attacks vary in style and scope, but generally involve overwhelming the target with requests for data. SCO officials claim at least three other such attacks against their corporate site since March, when the Lindon software company sued IBM for alleged misappropriation of SCO-owned Unix code in the latest versions of Linux.

Bob Young: I'd been going out of my way not to say anything, because McBride was really going after Red Hat. If this latest Open letter had actually been about Red Hat... I would not have said anything because I do not want to confuse (Red Hat CEO) Matthew Szulik's messaging.

But this letter was actually an attack on alternative forms of copyright, and that's what worried me. If McBride and all the fellow travelers -- the Recording Industry Association of America, and the various publishing industry associations -- if they are successful convincing our legislators that anything but the official copyright legislation that has been passed through the U.S. Congress is somehow un-American and should be legislated against, that would do serious damage to the authors who are trying to bring their works to market through Lulu. As far as I'm concerned, McBride's latest open letter was an attack on the authors who I'm trying to empower.

Security experts said that previous attacks in May and August should have been adequate warning for the company to have taken steps to protect its connection to the Internet.

"There are definitely things out there that they can buy, or services that solve this problem," said David Moore, assistant director and researcher at the Cooperative Association for Internet Data Analysis (CAIDA) and an expert on denial-of-service attacks. "It is just a question of how important your Web site is to you and how much you are willing to spend."

SCO has reported that they are experiencing an attack on their servers. Groklaw has been flooded with information that indicates their story doesn't add up.

The consensus of what I am hearing is: That it is probably not an attack. That their description of the "attack" makes no sense. And that if what they are saying were true, SCO would be admitting to gross negligence.

SCO Group Inc., the small software maker suing IBM over the use of software code used for the Linux operating system, said on Wednesday its home page was brought down by a hacker attack in the morning.

The Royal Bank of Canada is changing the terms of its investment in SCO Group, which claims copyright ownership over parts of the Linux operating system.

RBC, which along with investors at U.S-based BayStar Capital Partners pumped $50-million (U.S.) into the company in October, wants to distance itself from any sale of SCO that would result in a 20-per-cent contingency payment to the company's lawyers.

The agreement between the software maker and its lawyers for the high contingency fees has raised many eyebrows in the banking and high-tech industries.

New regulations have made it harder for small-cap companies to get noticed, but this is certainly not the case for The SCO Group. Whether you like him or not, CEO Darl McBride is a master of PR. In March, he sued IBM for $3 billion, hiring "take-no-prisoners" law firm Boies Schiller & Flexner, and raising a cool $50 million to pay for the battle.

Of course, mega-message PR has a downside: It demands a steady flow of mega messages. Last week, McBride declared in an open letter, "There is a group of software developers in the United States, and other parts of the world, that do not believe in the approach to copyright protection mandated by Congress ... The future of the global economy hangs in the balance."

IBM won a tactical victory Friday in a legal battle with SCO Group when a judge ordered SCO to show within 30 days the Linux software to which it believes it has rights and to point out where it believes IBM is infringing.

A federal court judge is expected to hear arguments Friday in SCO Group's contract dispute over whether IBM allegedly breached a contract with the company by contributing unauthorized portions of Unix-based AIX code to the open source movement.

SCO claims that, as a result, Linux is an unauthorized derivative of its UNIX intellectual property.

On Friday in SCO's home state of Utah, U.S. District Court Judge Brooke Wells is expected to hear from lawyers representing SCO and IBM, each with motions to compel the other side to provide more information for discovery.

Webmaster's note: Those interested in seeing the original SCO "open letter", you can find it here

As if on the stand, McBride stated his case in no uncertain terms. "The GPL, under which Linux is distributed, violates the United States Constitution and the U.S. copyright and patent laws," he said in the letter.

In its Supplemental Responses to IBM's Second Interrogatories and Second Requests for Documents, SCO gave this answer:

"Insofar as this interrogatory seeks information as to whether plaintiff has ever distributed the code in question or otherwise made it available to the public, SCO has never authorized, approved or knowingly released any part of the subject code that contains or may contain its confidential and proprietary information and/or trade secrets for inclusion in any Linux kernel or as part of any Linux distribution."

Cross your heart and hope to die, SCO? Or cross your fingers behind your back? Let's see what the evidence shows.

SCO has specifically mentioned the following four as being code at issue in this case: JFS, NUMA, RCU, and SMP, and while it is conceivable that the "subject code" they are talking about in this response to IBM's interrogatory is referring to some other code, it seems reasonable to look at the code they have mentioned publicly. Actually, it's more than reasonable. It's our only choice, until they tell us exactly what code they are complaining about with specificity. Is it true that they never "authorized, approved or knowingly released" any of this code for inclusion in any Linux kernel or as part of any Linux distribution?

The war of words between the SCO Group and the open-source community continued last week with the publication of a paper by a Columbia University Law School professor, who described SCO's position as "desperate."

Step right up and take a look. Here is the letter that IBM received from SCO as one of "the notoriouos gang of 1500". Who knew that being a successful company would turn out to be so unpleasant? It's Exhibit I attached to IBM's Amended Counterclaims. Thanks to Palle Raabjerg for transcribing it for us now as text and to our intrepid volunteer who got hold of the paper exhibit from the court. Here is the original of the letter to IBM, so you can compare.

You will notice some grammar errors, but they are SCO's, not Palle's. You will also notice that what Darl wrote differs considerably from what OSDL yesterday showed the actual Linux kernel development process to be like. "Numerous unrelated and unknown software developers" indeed. What hogwash.

The Open Source Development Labs (OSDL), a Linux consortium funded by most of the computing industry's major companies, has launched the open-source industry's latest counterattack to the SCO Group's attack on Linux: an education campaign designed to raise awareness of how the Linux kernel is developed.

This is a good day for a stroll down memory lane.

SCO is accusing IBM of helping Linux to scale by donating "their" code to Linux inappropriately. But they forget that OldSCO wanted Linux to scale in precisely the areas IBM is alleged to have helped it to do so. Not only that, they told the world they were helping it to do so.

Despite online reports, SCO on Wednesday denied that Google will be its next target for legal action due to its Linux use.

The SCO Group Inc. earlier this month announced that it would file at least one lawsuit against a large corporate Linux user within the next 90 days as part of its effort to expand its legal war with Linux and its business supporters. This week, according to a LinuxWorld report, Lindon, Utah-based SCO picked its target: Google, the world's largest search engine company.

There's a traditional definition of a shyster: a lawyer who, when the law is against him, pounds on the facts; when the facts are against him, pounds on the law; and when both the facts and the law are against him, pounds on the table. The SCO Group's continuing attempts to increase its market value at the expense of free software developers, distributors and users through outlandish legal theories and unsubstantiated factual claims show that the old saying hasn't lost its relevance.

Proving a copyright claim is difficult, and SCO will need to overcome major hurdles to do so, legal experts said. But the fear of litigation alone may force a defendant company into a settlement, which would set an example that could push other Linux-using companies to pay SCO the license fees it has been seeking from end users, they say.

With SCO spraying out threats of legal action like a tomcat on diuretics, this latest piece of territorial widdle might seem like an attempt to put the legal frighteners on a competitor rather than a justifiable defence of SCO's core business -- unless SCO's core business now is taking people to court. The company is handing over hunks of shares to its lawyers: this can't be ruled out.

Ransom Love's Linux ideas have come full circle--twice in the space of one month. Love began his Linux career by leaving Novell to help found Linux seller Caldera in 1994. As chief executive officer, he took the company down a path that forsook its Linux business in favor of Unix. But Love left in 2002, before the company renamed itself SCO Group and launched a legal attack on IBM and the open-source operating system.

Nine years after rejecting Love's idea, Novell concluded that it wants to be a Linux company after all, announcing a plan to acquire second-place SuSE Linux for $210 million. And Love himself has returned to the Linux camp, joining the board of directors of Progeny, which sells a customizable operating system product based on the Debian version of Linux.

With its recent pronouncements about suing Linux customers and BSD, SCO's Darl McBride doesn't seem to be scoring very well in the good will department, judging from the reactions of Las Vegas showgoers.

McBride spelled out some of SCO's latest plans at least three times yesterday: in a press teleconference; a speech at Jupitermedia's Computer Digital Expo (CDE) in Las Vegas, and a press briefing just afterward.

Attendees at Comdex and Apache.Con--two other shows going on in Las Vegas this week--responded to the news with a mix of anger, frustration, bemusement, and concern.

The debate over SCO Group's claims on the Unix and Linux operating systems has never been polite. But now, it has grown deadly serious. Literally. Following telephone and e-mail threats to the Lindon software company and Darl McBride, SCO's president and chief executive; senior vice president Chris Sontag, and others, an unspecified number of bodyguards has been assigned to protect SCO's leadership.

The end game in the SCO fiasco is at hand. IBM's dissection of SCO's discovery wish-list is covered in exquisite detail at Groklaw. As yesterday's conference call demonstrated, SCO's lawyers are being forced to make increasingly bizarre arguments to just stay in the game. The company's last substantive filing demanded that the court find the GPL invalid and unconstitutional, and all software released under the GPL in the last three years to be public domain. At this point, it appears the entire SCO case will devolve to the nuts and bolts of contract agreements between IBM and AT&T. If you believe that IBM lawyers are stupid and sloppy, and have been for the last 20 years, then you might believe SCO has a chance. I don't.

The non-compete agreement prohibits Novell from directly competing with SCO's Unix-on-Intel business, McBride said. "When (The Santa Cruz Operation) sold us the property, included in the property was a non-compete," he said. "Last time I checked, Linux was intended to compete with our core products."

Unix developer The SCO Group Inc. said today that it is extending an agreement with its lawyers to defend itself against new copyright issues in a move that will take a multimillion-dollar bite out of its fourth-quarter 2003 financial results to go toward paying legal fees.

The company, which is currently embroiled in a lawsuit with IBM over a Unix license, said it plans to take a charge of $8,956,000 in its fourth quarter, which ended Oct. 31, to pay Boies, Schiller & Flexner LLP and other law firms representing SCO. Of that total, $1 million will be paid in cash, and the remaining amount will go toward the issuance of 400,000 shares of common stock, the company said.

By law, companies must provide apocalyptic forward-looking scenarios in their SEC filings. They need to show they've thought of everything, to fend off potential class action suits just in case the sky really does fall in.

But in a filing yesterday the SCO Group gave a strong hint that while it anticipates riches from IP licenses, its current business is falling apart. Deeply embedded in the risks portion of the filing is this statement:

"We are informed that participants in the Linux industry have attempted to influence participants in the markets in which we sell our products to reduce or eliminate the amount of our products and services that they purchase. They have been somewhat successful in those efforts and similar efforts and success will likely continue. There is also a risk that the assertion of our intellectual property rights will be negatively viewed by participants in our marketplace and we may lose support from such participants. Any of the foregoing could adversely affect our position in the marketplace and our results of operations. "

"Linus (Torvalds) is the only one who seems worth subpoenaing," said Bill Claybrook, a research director with Aberdeen Group Inc. who has also examined SCO's source code. "The rest of them don't have any information that would lead a judge to determine whether code had been copied."

"The list that I read seemed nonsensical to me," said IDC analyst Dan Kusnetzky, speaking of SCO's list of subpoena targets. "The SCO Group has been playing this as a media event," he said.

Webmaster's note: Story includes a link to a RealVideo file of the story as it appeared on KTV News, Utah

There's a lawsuit making waves in the computer industry... that could potentially create ripples in all of our lives.

A small Utah-based software company is tangling with computer-giant IBM... raising the ire of many software users... and the outcome could affect business around the world.

Subpoenas are flying in the high-profile lawsuit between the SCO Group and IBM, as both companies try to buttress their legal claims by turning to third parties for information.

SCO said Wednesday that it has filed subpoenas with the U.S. District Court in Utah, targeting six different individuals or organizations. Those include Novell; Linus Torvalds, creator of the Linux kernel; Richard Stallman of the Free Software Foundation; Stewart Cohen, chief executive of the Open Source Development Labs; and John Horsley, general counsel of Transmeta.

The legal battle between SCO Group and IBM is widening, as IBM has sent subpoenas to investors and analysts who have supported SCO.

On Oct. 30, IBM issued subpoenas to Baystar Capital, Deutsche Bank, Renaissance Ventures and Yankee Group, companies that have either invested in SCO or published reports suggesting that SCO's claims against IBM could be legitimate.

A press release is out this morning (and is reprinted at the bottom of this article) that says Ransom Love is joining Progeny's board of directors. Progeny founder -- now Board Chairman and Chief Strategist -- Ian Murdock says they went after Ransom, not the other way around. "We asked him," Ian adds with a small laugh, "but he was more than willing." And why wouldn't he be? Progeny is not only profitable today but has been profitable for the last two years and is reinvesting its profits in the company. It is now up to 25 employees and is looking at further growth in the future.

Organizations running Linux unwilling to pay SCO Group Inc's IP license could find themselves running Unix or Windows, under a planned exit clause from the company.

SCO Group has revealed it plans migration options extending the intellectual property program launched earlier this year.

Long-time Groklaw reader Scott Lazar has written a parody, "The Grinch Who Stole Linux," which he sent to me. I found it delightful, and with his permission, I am sharing it with all of you. Sometimes, it's nice to take a break and just smile. Thanks, Scott.

In a move likely to antagonize the free software community even further, the SCO Group is to resume distributing Linux, but only if you agree to a new "IP license" which implicitly supports SCO's intellectual property claims.

Of course, SCO will show code in question to people willing to sign a nondisclosure agreement. You chose not to sign the agreement. Why not?

Weiss: I don't agree to the method of asking for nondisclosures. I know why they need it, or felt they needed to do it. But I really feel that if there are certain violations that, if they were unintentional, or not really deliberately malicious, or whatever it might be, there should be ways to remedy the situation if the infringer is willing to oblige.

But to call them into court and say, 'We're going to sue you for multiple billions of dollars, and we're not going to tell you what it's all about,' is already a hostile act.

The case could have been settled, probably, if it had not been conducted in that way, but SCO would have probably gotten a lot less money, so that's why it's going to be dragged out. They want more money. They absolutely want the biggest bucks. They went after IBM, with the deepest pockets, not Red Hat. They're playing for the big payoff, which is why they're getting venture capital money.

Yet the most surprising part of IBM's response is the revelation that Novell can waive all alleged violations of the UNIX licenses. For reasons I don't understand, this "silver bullet" defense has not been widely reported in the press. In a very unusual provision, Novell, as part of its sale of the UNIX licenses to SCO, retained the right to require SCO to "amend, supplement, modify or waive any right" under the license agreements (and if SCO did not comply, Novell could exercise those rights itself on SCO's behalf). At IBM's request, Novell employed this right and demanded that SCO waive IBM's purported violations. When SCO did not do so, Novell exercised its right to waive the violations on SCO's behalf. Basically, this defense destroys the core of the SCO case: IBM's violation of its UNIX license with SCO.

Perens, arguing the enforceability of the GPL has withstood past court scrutiny, dismissed SCO's challenge as a bid for time.
"What we have here . . . isn't really a serious legal filing. It's just an attempt to delay the inevitable day that the case gets thrown out of court," Perens said.

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