A look at Red Hat's complaint [LWN.net]

On August 4, Red Hat filed suit against The SCO Group in U.S. District Court in Delaware. For those who are interested, the full text of the complaint is available in PDF format, but be warned: it's 1.3MB, and the result of a poor scanning job. To save our readers time, bandwidth, and eye strain, we've gone through and summarized the important parts of the complaint.

The first 13 paragraphs summarize the nature of the complaint. SCO, it is said, is pressing untrue claims in order to "create an atmosphere of fear, uncertainty, and doubt about Linux." The IBM lawsuit is mentioned, along with the initial trade secret claims. Then, the focus of the case shifted:

SCO apparently recognized that the supposed "secrets" that SCO itself was making publicly available through its own Linux distribution do not qualify as trade secrets. Accordingly, SCO recently has changed the focus of its campaign against Linux. SCO, which has itself developed and sold a version of Linux for years, now claims to have suddenly discovered that Linux contains computer software code that was copied from another, competing operating system that SCO claims to own - Unix.

SCO, it is said, is doing all of this because its business is failing.

In sum, SCO's campaign is designed both to slow the growth of Linux, and to reverse its failing fortunes by convincing Linux users that they need to pay SCO a license fee to use the lower-cost Linux operating system.

The complaint then says (paragraph 7) that SCO has targeted Red Hat in particular, "repeatedly meeting with financial analysts who cover Red Hat's stock and ... among other things, inviting certain of Red Hat's institutional investors to a briefing....'

Red Hat sent SCO a letter on July 18 (included in the complaint) asking that SCO back up its claims. "SCO did not respond to Red Hat's letter, except to make a telephone call seeking to have Red Hat pay for an unneeded Unix license."

The next few paragraphcs (14-17) identify the parties involved and establish that the court has jurisdiction in this case.

Section IV begins with the history of Linux (pp. 18-27), starting with Richard Stallman. Red Hat's business is described (pp. 28-32) in rather glowing terms; SCO's business (pp. 33-36) does not fare so well.

Paragraphs 37 to 69 are the core of the complaint, describing SCO's actions against Linux and Red Hat in particular. Paragraph 43 notes that SCO is still distributing Linux source. Subsequent paragraphs look at the copyright claims and SCO's unwillingness to back them up with evidence:

46. SCO's copyright infringement claim fares no better than its earlier trade secret assertions. Once again, SCO hides behind a smokescreen of secrecy, refusing to identify with specificity the lines of code in Linux that allegedly have been "copied" from Unix.

47. To identify the allegedly copied code, however, would enable those who created that code to demonstrate that it is not the property of SCO, was not copied from Unix, and was developed independently by engineers - including those at Red Hat - who contribute to the open source software.

48. There is nothing "confidential" about SCO's claims of copyright infringement. Inasmuch as the Linux code is publicly and freely available for anyone in the world to see, there is no legitimate reason for SCO to hide behind a veil of secrecy in making its allegations about Linux.

Red Hat's summary of the situation (p. 59) pulls no punches:

SCO's illicit strategy is transparent - make loud public claims about alleged intellectual property rights, provide no detail (since it does not exist) and hope to use the time-honored technique of creating fear, uncertainty, and doubt to slow the growth and use of Linux, damage the business of Linux providers such as Red Hat, coerce unwarranted fees from Linux users by threats of litigations, and, upon information and belief, even create enough nuisance value to be acquired while running up the price of SCO's stock in the short term, thereby creating various financial opportunities to wrongfully enrich the originators of this scheme.

The harm to Red Hat's business is documented in following paragraphs with descriptions of Linux deployments put on hold, Gartner quotes, etc. The recent drop in Red Hat's stock price is also mentioned. Paragraph 69 states that SCO's newly inflated stock price, meanwhile, has been used to transfer millions of dollars to the Canopy Group.

Starting with paragraph 70, Red Hat provides the seven "counts" that make up its complaint. They are:

Red Hat's products do not infringe upon any of SCO's copyrights. A declaratory judgement is requested to state that no such infringement exists (pp 70-73).
Similarly, there is nothing in Linux which violates any SCO trade secret; another declaratory judgement is requested to that effect (pp. 74-77).
Red Hat claims that SCO is engaged in false advertising which is intended to deceive Red Hat's customers and other Linux users (pp 78-86).
Red Hat claims that SCO is making use of deceptive trade practices in violation of Delaware law (pp 87-90).
Red Hat claims that SCO's actions constitute unfair competition (pp 91-94).
Red Hat claims "tortious interference with prospective business opportunities" (pp. 95-100).
The final count claims "trade libel and disparagement" on SCO's parts (pp 101-105).

For each of the last five claims, Red Hat is asking for (1) a permanent injunction forcing SCO to stop, and (2) payment of damages to Red Hat for the harm it has sustained - and lawyers fees, of course.

The complaint has one exhibit - Red Hat's letter to SCO asking for specifics on SCO's claims.

It will be most interesting to see how SCO responds to this suit, and how things proceed in court. If SCO does have evidence to back up its claims, Red Hat's suit could have the effect of forcing that evidence into the light of day rather sooner that might otherwise happen. For SCO, the choice could be between laying out its cards or finding itself subject to declaratory judgements and injunctions in the near future. In the end, of course, we have to wait to see what happens in court.

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How I think this might go

Posted Aug 4, 2003 22:11 UTC (Mon) by BrucePerens (subscriber, #2510) [Link]

So, Red Hat is suing for a judical determination of non-infringement. This has been discussed before among non-profit advocacy groups, including several with the resources to bring a lawsuit. Most did not feel it was worth pursuing - for us. However, we're happy to see Red Hat do it.

SCO's obvious strategy would be to delay this suit as long as possible. Red Hat might be able to fight that, in part, by calling for injunctive relief (in a separate proceeding), since they can probably demonstrate that there is continuing damage to their business. It would be nice if we could get SCO under an injunction that would modify their behavior until the completion of this case. I have no idea how possible that is.

The biggest disappointment waiting for the Open Source community is that neither in this case nor the IBM one will we get to see the evidence. SCO will claim that it is proprietary, trade secret, etc., and will get the judge to place their evidence under a protective order. That's sort of like a non-disclosure agreement, but worse. Then Red Hat and the court will be able to see SCO's presentations, but not you or me. If the cases go to settlement, we may not even see a verdict or much of the proceedings.

I would much rather see the cases go to a verdict, but I doubt SCO would allow that. With a verdict, there is the potential for the free software developers (who have as a class been libeled and damaged) to bring their own class action in a much more economical way than if we had to fight the first case. For damages, I would ask the court to cause SCO to transfer their copyrights to FSF. There's poetic justice in that.

Bruce