What happens next

What happens next

Posted Jul 22, 2003 15:34 UTC (Tue) by skybunny (guest, #4478)
Parent article: SCO's new offensive

From the article:

In a nutshell, SCO is formalizing a plan to try to charge companies for the privilege of using Linux or sue them for not doing so. Whether companies will be willing to do so remains to be seen. If they do so, it will basically be on SCO's say-so that they own the rights that they are trying to sell.

This statement is essentially correct. SCO has taken out formal copyrights for System V UNIX code, something that under U.S. Copyright law, they don't actually have to do, since works are implicitly copyright. Note that in this round, we're not talking about breach of contract or patent violation - now we're talking about copyrights - the right for a given person to use code that's already been written. Taking out a copyright for source code essentially amounts to a publicity stunt, because a work that is written is already copyright the moment it's written.

Obviously, investors believe the copyright application that the publicity stunt represents will bear fruit. The stock as of July 22 is at over $13 a share (up more than a dollar from the previous day). What SCO has done is taken out a copyright publically, and then turned around to say 'If you want to license this in a binary, you need to pay us a fee.'

Yes, there is an entire argument about whether SCO is correct legally in doing this. But of course, proprietary software companies do this all the time. This is like Microsoft taking out a copyright for the source code of Windows XP, and then telling customers, 'We expect you to pay for binary copies of Windows made from this source code.' Of course, you can pay up, or you can challenge Microsoft's assertion in court, and you can guess how likely you would be to win that particular lawsuit. In any event, what SCO is attempting to do is no different, even though the details are terribly less clear cut. The details of what they are attempting to claim copyright over (whether it's BSD code or the most proprietary code on earth) is completely irrelevant until a lawsuit over the licencing fees occurs. That will be when SCO's claims are taken to task by someone who does not believe them (for any of these reasons), and refuses to pay them.

SCO's belief at this point is pretty simple. They believe that the System V code they own is used in Linux, Microsoft, and Sun products. Microsoft and Sun have already paid SCO licensing fees to avoid legal hassle from SCO. Linux companies have not.

This is the Linux companies' 'opportunity' to do so. SCO probably does not, as they have said, have much interest in suing end users. What they want to do is approach Linux distributors and add a 'SCO tax' to anything they distribute with the code SCO believes is theirs. The distributors have two choices. They can pay the tax and pass it on to customers, on the presumption that SCO is correct, or they can wait for SCO to sue somebody, anybody, on copyright violation.

Whether SCO will go that far depends completely upon how seriously they take such a copyright violation. Until they bring a lawsuit to court, they are simply relying on copyright law and their interpretation of their copyrights. The number of people that pay them licensing fees amounts to the number of people that agree that SCO has a point and that they should be paid. Any argument to the contrary, like that there are GNU license issues involved, SCO doesn't own the code in the first place, or that the code they're talking about can't be copyright, can only be brought up in a court of law. Until then, anyone who pays SCO money is relying on SCO's word that they own what they say they do. In theory, SCO believes it has copyright law backing it up.

People paying companies money based on what they claim to own happens all the time in the business world. Few dispute that Microsoft owns major swaths of Windows XP. High level discussion, arbitration, and lawsuits are what happen when companies can't agree on such things. Unless SCO decides that licensing fees for Linux aren't important enough to sue over, the question will be when, not if, a random company distributing or running Linux is sued for licencing fees - when they refuse to pay them (or simply don't). We'll then see for ourselves how close to the truth SCO is in the eyes of the U.S. justice system.

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The entire idea of licensing fees for Linux is a fairly safe road for SCO to take. Particularly until a lawsuit occurs, anyone who pays SCO licencing fees is giving them money nearly free and clear of engineering or marketing expenses, which they can use for future legal fees. Also, the more people that buy in, the higher SCO's stock price will go, which will make their company more valuable - and make it easier for them to sell bonds and other loans to potential investors. If SCO ultimately loses a copyright lawsuit, and particularly if their contract dispute claim with IBM also falls through, the company may very likely be bankrupted. Either because of or in spite of a class action lawsuit demanding the return of licensing fees that were found in a court not to be valid, the SCO group may just go chapter 7 or 11 bankrupt (given lawsuits make up the majority of their business outlook at this point), and licensing fees paid now will not be seen again.

I expect to see a copyright lawsuit in very short order. Whether it will be SCO v. [company or distributor], or [company or distributor] v. SCO depends mainly on who decides to strike first.

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