It has been a busy week for those of us watching the SCO case. Here's a
summary of all that has been going on...
The fun started with an even more than usually bizarre open letter from Darl McBride
(actually written by his brother Kevin, about whom we will hear more
shortly, and a SCO technical writer) on the evils of the General Public
License. The letter makes for difficult reading, but the core of its
argument is this:
SCO argues that the authority of Congress under the
U.S. Constitution to "promote the Progress of Science and the
useful arts..." inherently includes a profit motive, and that
protection for this profit motive includes a Constitutional
dimension. We believe that the "progress of science" is best
advanced by vigorously protecting the right of authors and
inventors to earn a profit from their work.
By SCO's reasoning, the GPL, being a mechanism by which the owner of a
copyrighted work can allow others to distribute that work without paying a
license fee, interferes with the profit motive SCO has read into the
constitution and, thus, is unconstitutional. Needless to say, this novel
line of constitutional reasoning is finding few defenders outside of SCO.
See, for example, responses by Lawrence
Torvalds (who did some interesting research into copyright law
himself), and on Groklaw.
The real purpose of the open letter appears to have been to distract
attention from some other events, the first of which being the hearing on
IBM's motions to compel discovery on December 5. As most readers will
have seen by now, IBM won a complete victory in that hearing. Both motions
to compel were upheld, while SCO's motion was tabled and all further SCO
discovery has been suspended until SCO has satisfied IBM's questions. SCO
now has 30 days to specify exactly which code it claims IBM has stolen, and
it will not be able to go fishing through AIX for its answers.
The December 5 hearing was also interesting in that David Boies, SCO's
brand-name lawyer, didn't see fit to show up. Instead, SCO was represented
by Kevin McBride, Darl's brother. This was Kevin McBride's first public
appearance in this case, and he appears to have impressed few people -
certainly not the judge presiding over the hearing. He started by sitting
at the defendants' table, and had to be told to move to the other side of
the court. His arguments were generally described as incoherent and
unconvincing; he talked a lot about what a complex case it was. And, of
course, he lost.
For those seeking further information, there are a few postings on Groklaw:
of the hearing (scroll down to the second version, which is more
list of what SCO must now provide to IBM, and a guest
article on where things go from here (mostly downhill).
SCO was supposed to announce its fourth quarter earnings on
December 8, but that announcement has been
delayed until the 22nd. The stated reason is that the company needs
more time to finish accounting for the BayStar investment. Others have
speculated that the quarter will look so bad that the company hopes that,
by delaying the announcement to just before Christmas, it can escape
Some of the truth, perhaps, came out in a three-part SEC filing on
December 9. This filing provides some interesting insights into how
SCO deals with its investors and lawyers. It also, perhaps, gives the real
reason for the earnings delay: SCO was still negotiating with BayStar and
the Royal Bank of Canada (RBC). It would appear that these investors got a
little nervous about SCO's agreement with its lawyers giving those
lawyers 20% of any settlement, investment in, or sale of the company. As a
result, SCO has filed
a statement that it will not take any action which triggers the 20% fee
unless 2/3 of the preferred stockholders (BayStar and RBC) agree. The
investors, in other words, have established a veto power over the lawyers.
The second part of the filing is a
letter from Boies, Schiller & Flexner to SCO describing the
arrangement between the two companies. This letter is dated
February 26, 2003, but is only being released now. The letter states
that Boies et al. will be paid on an hourly rate - not the pure contingency
deal that SCO has claimed in the past. SCO was also required to put up a
$1 million retainer, and to top it up whenever it gets spent down to
Also stated in this letter is:
It is hereby recognized and acknowledged that Kevin McBride, the
brother of SCO's Chief Executive Officer, Darl McBride, is
an attorney at Angelo, Barry & Boldt who will be working on this
matter. By signing below, Darl McBride acknowledges that full
disclosure of Kevin McBride's involvement in the matter and the
terms and conditions of the fee letter has been made to and
approved by the Board of Directors of Client.
In other words, Boies was not entirely comfortable with Kevin McBride's
presence and required assurance that SCO's board of directors understood
what was going on.
The letter also notes that efforts to sell licenses to Microsoft and Sun
were already underway last February.
letter from SCO to Boies confirms recent payments to the law firm:
$2.6 million, plus the 400,000 shares of stock. SCO has until the
beginning of March to deliver the stock (SEC formalities must be cleared
first). The letter notes that Boies et al. will be taking on, in addition
to the IBM suit, defense against the Red Hat suit and IBM's counterclaims.
Boies will also be helping in "pursuing our potential claims against
third parties arising out of the USL/BSDI settlement." Exactly what
that means remains to be seen.
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