A bad day for the SCO Group

IBM, by providing those things, was alleged to have misappropriated SCO's property, breached contracts, and generally ruined SCO's day. At the core of these allegations was the claim that IBM had funneled SCO's Unix code into Linux - up to one million lines' worth. IBM fought back strongly, and, over time, it became clear that no large-scale copying of Unix code into Linux had happened - in fact, almost no copying had happened at all.

IBM continues to argue its case, but an interesting thing happened in May, 2003, when Novell issued a press release claiming that it, rather than SCO, was the owner of the Unix copyrights.

According to Novell, all of SCO's attempts to sell "Linux licenses," and the lawsuit too, were built on a false foundation. SCO was suing over copyrights it did not even own. An interesting little detail that came out later on was that Novell, in selling the Unix licensing business to the Santa Cruz Operation ("old SCO"), had retained the right to waive any claims against Unix licensees; Novell proceeded to exercise that right by requiring SCO to drop its claims against IBM.

SCO, of course, responded by suing Novell. Over the years, the suit grew into a complicated mess of claims and counterclaims upon which was built a series of motions for summary judgments. On August 11, the court, under Judge Dale Kimball, ruled on those motions [PDF]. The result was almost certainly the end of the SCO saga.

In short, Judge Kimball ruled on several issues:

• Novell never transferred the copyrights to Unix to the Santa Cruz Operation or anybody else. The reasoning which leads to this conclusion is quite long, involving sifting through a great deal of evidence and testimony. But the end result is straightforward: the SCO Group does not own the Unix copyrights. SCO had been asking for a "slander of title" judgment against Novell and an injunction requiring Novell to effect the actual transfer of copyrights; both of those motions were dismissed as a result of this ruling.

• SCO claimed that Novell had acted outside of "good faith and fair dealing" by acting to waive the claims against IBM. But the relevant law says that, if you sign a contract with another party which explicitly empowers you to perform a specific action, you cannot be acting in bad faith if you do what the contract says you can do. So this claim, too, was dismissed.

• Novell filed its own slander-of-title claims, which SCO had tried to dispose of via a summary judgment motion. That motion was denied, and Novell still has an open case which it can argue at trial.

• SCO argues that some of the language in the original asset purchase agreement constitutes a non-compete agreement on Novell's part. Yet another motion from Novell asked to dismiss SCO's claims that Novell is violating its non-compete agreements by selling Linux. Several approaches were taken, but Judge Kimball ruled against them all, keeping SCO's non-compete claims alive: "The court also concludes that, to the extent that SCO has a copyright to enforce, SCO can simultaneously pursue both a copyright infringement claim and a breach of contract claim based on the non-compete restrictions in the license back of the Licensed Technology under APA and the TLA."

• SCO had tried to argue that Novell was not empowered to waive its claims against IBM (and Sequent, which was purchased by IBM) because the specific licenses at issue were not covered by the agreement. The court disagreed. In short: "...SCO is obligated to recognized Novell's waiver of SCO's claims against IBM and Sequent."

• The (complex) deal with old SCO required that all Unix license revenues be passed back to Novell; Novell would then tip 5% of those revenues back to SCO as an administrative fee. When Sun and Microsoft bought their high-profile licenses, however, SCO kept the cash. So Novell asked for a judgment to the effect that SCO owed money. Novell also expressed the reasonable fear that SCO might just blow its remaining cash before Novell could get its hands on it, so it asked the court to seize the money immediately.

  Here, the court decided that the licenses sold to Sun and Microsoft did indeed come, at least partially, under the agreement and that SCO should have paid Novell. "Because SCO failed to do so, it breached its fiduciary duty to Novell under the APA and is liable for conversion." In U.S. legal talk, "conversion" means something very close to "theft." The court refused to set up a "constructive trust" establishing Novell's rights to SCO's funds, though, because it did not know how much money is owed. It seems that a portion of the licensing fees might relate SCO's own work and thus would not fall under the agreement with Novell. Until that portion is quantified, there is "a question of fact" on how much Novell is entitled to, and summary judgments cannot be made when there are questions of fact.

This judgment changes the entire game. Much of SCO's case against IBM is now gone - before IBM really even got a chance to defend itself. There has been no copying of SCO's "valuable intellectual property" - it would appear that SCO does not have much of that. SCO's claims that IBM had violated its Unix license agreements have always been tenuous, but they may now become moot, since Novell has exercised its now-clear right to waive any claims based on that agreement. SCO might still be able to push forward its claims that IBM treated it badly with regard to the Monterey initiative. That's far removed from the $5 billion jackpot the company had gone for, though - and it is totally irrelevant to the Linux community.

It is worth remembering that there is a large pile of summary judgment motions pending in SCO v. IBM as well - and that they are before the same judge. It makes sense for Judge Kimball to have resolved the copyright ownership issue first. But the IBM motions have been outstanding for many months and are due for action. What happens there will be interesting; Judge Kimball may settle or moot many of them based on the Novell ruling. That would be a welcome result, but it would fail to provide a definitive answer to some interesting questions - like whether the Unix license agreements, prior to being waived by Novell, truly prohibited IBM from contributing work like read-copy-update or the JFS filesystem to Linux. Even so, IBM has some interesting motions - the GPL violation charges, for example - which will still need to be resolved in their own merits.

SCO might just file an appeal as an attempt to stay any judgments which would bring an end to the IBM case. It is hard to see such an appeal as anything more than (yet another) delaying tactic, though. Given that SCO's lawyers have already seen all the revenue they will earn from this case, their enthusiasm for such a course might just be a little bit low.

Meanwhile, Red Hat had filed suit in August, 2003, seeking to clear the title to its own products and to put an end to the SCO campaign. That case was put on hold pending the results of the IBM case. If Red Hat wanted to, it would appear that a case could now be made for moving that suit forward: Red Hat's products clearly are not infringing upon any intellectual property rights that SCO might own. At this point, though, that would be mostly an exercise in tying up loose ends. Few people have worried about the propriety of the Linux code base for some time, and SCO's anti-Linux campaign was effectively stopped some time ago.

It may take a while to see where all the pieces land, but the SCO affair is, for all practical purposes, over. We, the Linux community, were incredibly lucky here, as painful and expensive as this whole series of events was. Given the success of Linux, it was certain that somebody, somewhere, was going to try to make a grab for it. What happened was that we were attacked by an opponent which was so inept, so lacking in any sort of real cause, and so misguided in its choice of targets that we would have been hard-put to lose. In the process, we took a hard look at where our code comes from, found that we have what must be one of the most legitimate code bases around, and tightened up our procedures anyway. The chances of there being another copyright-based attack of any note have dropped to almost zero. SCO has left us stronger than we were before.

As we put the SCO case behind us, there remains one interesting question: now that Novell is unquestionably the owner of the Unix copyrights, what will it do with them? The commercial value of those copyrights must be near zero at this point - Linux and the BSDs have free code which is better. About the only value left is FUD value - and the SCO case has shown that those copyrights are not worth much in that area either. Still, Novell could provide a more than fitting end to this episode, and perhaps begin to rebuild its standing in the free software community, by releasing the Unix code under a free license - probably a permissive license - and closing the proprietary Unix era forevermore.