The SCO case gets weirder [LWN.net]

We were planning to keep SCO off the front page this week. Really. But no such luck.

This week's fun centers around a press release issued by Novell. But first some background: SCO, recall, has been trumpeting its ownership rights in the Unix source and patents for some time. The main "SCOsource" page states:

SCO is the owner of the UNIX Operating System Intellectual Property that dates all the way back 1969, when the UNIX System was created at Bell Laboratories. Through a series of mergers and acquisitions, SCO has acquired ownership of the patents, copyrights and core technology associated with the UNIX System.

The patent claim was effectively debunked by Don Marti back in March, but the ownership claim has gotten an easier ride. Until now. Novell, the company which obtained Unix from ATT, has issued a press release taking issue with SCO's claims. In particular, Novell is asserting that it still owns the copyrights on the Unix code base:

Importantly, and contrary to SCO's assertions, SCO is not the owner of the UNIX copyrights. Not only would a quick check of U.S. Copyright Office records reveal this fact, but a review of the asset transfer agreement between Novell and SCO confirms it. To Novell's knowledge, the 1995 agreement governing SCO's purchase of UNIX from Novell does not convey to SCO the associated copyrights. We believe it unlikely that SCO can demonstrate that it has any ownership interest whatsoever in those copyrights. Apparently, you [SCO] share this view, since over the last few months you have repeatedly asked Novell to transfer the copyrights to SCO, requests that Novell has rejected.

Novell's claim notwithstanding, SCO has been quoted reiterating its claim to the Unix copyright (and threatening to sue Linus Torvalds for patent infringement as well). But SCO's annual report, as filed with the U.S. Securities and Exchange Commission, includes an interesting disclosure:

The Company has an arrangement with Novell, Inc. ("Novell") in which it acts as an administrative agent in the collection of royalties for customers who deploy SVRx technology. Under the agency agreement, the Company collects all customer payments and remits 95 percent of the collected funds to Novell and retains 5 percent as an administrative fee.

SCO, it would seem, is not the copyright owner; it is simply the paperwork shuffler, working for a 5% cut. That is not quite the picture that the company has been trying to present.

Whether this turn of events weakens SCO's case against IBM remains to be seen. SCO rushed out a response stating that it doesn't matter:

SCO's lawsuit against IBM does not involve patents or copyrights. SCO's complaint specifically alleges breach of contract, and SCO intends to protect and enforce all of the contracts that the company has with more than 6,000 licensees.

In fact, the original complaint does talk mostly about trade secrets and breach of contract. It does also, however, assert (once again) ownership of Unix and claim that IBM's actions have caused a reduction in the value of its Unix assets. Novell's claim challenges SCO's standing in the case; it may also be used by IBM's lawyers to question SCO's truthfulness and good faith in general.

Regardless of how the IBM suit goes, however, it now seems clearer than ever that the 1500 or so recipients of SCO's "Letter to Linux customers" can simply file that letter next to their AOL disks. SCO's case is not about patents or copyrights; the company has no standing to go after random Linux users. This letter was pure FUD and possibly libelous.

Novell does not stop with its copyright assertion. The company's press release challenges SCO to produce its evidence, and hints at legal moves to come:

SCO's actions are disrupting business relations that might otherwise form at a critical time among partners around Linux technologies, and are depriving these partners of important economic opportunities. We hope you understand the potential significant legal liability SCO faces for the possible harm it is causing to countless customers, developers, and other Linux community members.

It is also interesting to note that LinuxTag's lawyers have given notice to SCO Group GmbH that SCO must cease its "unfair competitive practices" as embodied in its attacks against Linux. If SCO can't produce some convincing evidence for its claims soon, it may well find itself dealing with lawsuits from the other side of the courtroom.

to post comments

The SCO case gets weirder

Posted May 29, 2003 1:47 UTC (Thu) by freeio (guest, #9622) [Link] (1 responses)

As "Deep Throat" (of Watergate fame) is reputed to have said, "Follow the money." What we are seeing is the end game of a failing business model (selling software licenses for utterly unremarkable software) and the replacement with another (attempted extortion through the court system). But the key reasons for the behavior may well lie in the attempt to manipulate stock prices (SCOX has had quite a price run-up based on their new business model) or as an exit strategy for certain major investors (i.e. if there is little of value, start a big lawsuit and hope that someone will buy the company on the chance that the lawsuit will be won).

Now it would appear that the game may be up, as the truth is coming out. If what we have read is true, then it would appear that SCO does not own the trademark, copyrights, or patents, and has duboius claims as to trade secrets since their product (in which the secrets were embodied) is not particularly advanced. Honestly, SCO virtually had to know all of this before the suit was started, and that there were real risks in persuing this. Beyond that, pulling on Super Man's cape (suing IBM - what were they thinking?) will undoubtedly have some real repercussions. IBM has more patents than almost any other company, and given a month or two I suspect that IBM could find dozens which SCO might be said to be violating - especially since IBM has the SCO source code to plow through. So just what were they thinking?

In light of the newly falling SCOX stock price, it would be well to investigate what inside trading has occured during the last several months, and could be happening right now. It may well be that this is the exit - a financial windfall for a few investors. If the company fails, so what? We got ours! Well, that might be true until the SEC investigations start, which is the next likely step. Artifically manipulting stock prices has recently resulted in monumental fines, and hard time in the big house for the formerly wealthy perps.

So sit back and watch the show. This is financial gambling of the first magnitude.

The SCO case gets weirder

Posted May 29, 2003 8:48 UTC (Thu) by james (guest, #1325) [Link]

IBM has more patents than almost any other company, and given a month or two I suspect that IBM could find dozens which SCO might be said to be violating - especially since IBM has the SCO source code to plow through.

Unfortunately for that theory, when IBM and SCO signed up to develop Monterey, they would almost certainly have signed a patent cross-licensing deal.

"To Novell's knowledge..."?

Posted May 29, 2003 2:50 UTC (Thu) by roelofs (guest, #2599) [Link] (3 responses)

As much as I'm heartened and amused by the latest turn of events, I find it a little troubling that Novell's CEO doesn't seem to know for certain whether his company's agreement with SCO includes the copyrights or not. If the wording of the agreement is clear on the matter, say so; if it's ambiguous, well...good luck. (And if you haven't actually reviewed the agreement with your lawyers, you definitely have no business making press releases about it.)

The fact that Novell has refused to transfer the copyrights isn't necessarily material; if a court were to find that they were, in fact, covered under the terms of the agreement, then Novell could find itself on the receiving end of a hefty breach-of-contract lawsuit.

But maybe that's just me. (Only a few things are just me...)

Greg Roelofs

They have to say that.

Posted May 29, 2003 5:03 UTC (Thu) by flewellyn (subscriber, #5047) [Link]

It's legalese for "we checked our paperwork and this is what we found", I think. It's been awhile since I did any heavy study of law (IANAL, but I did take law classes in college, for what little that's worth). My best guess here is that Novell is basically saying "We have these documents here which say that we still have the copyrights and patent rights, so unless you've got some proof otherwise, this is the best of our knowledge." Or something. Again, I'm not a lawyer, just an amateur legal scholar of sorts.

"To Novell's knowledge..."?

Posted May 29, 2003 15:03 UTC (Thu) by smoogen (subscriber, #97) [Link]

It is standard legaleeze to say that 'unless someone pulls a rabbit out our ear, we have gone through everything and double checked it to our lawyers satisfaction.' It is very hard to find a rabbit up someone's ear, but quantum mechanically it is possible for one to possibly appear in one.

"To Novell's knowledge..."?

Posted May 30, 2003 14:44 UTC (Fri) by Baylink (guest, #755) [Link]

> (Only a few things are just me...)

<giggle>

Did Microsoft get what they paid for?

Posted May 29, 2003 7:08 UTC (Thu) by ronaldcole (guest, #1462) [Link] (3 responses)

After all these revelations, exactly what is Microsoft expecting to get for their recent $10-million purchase?

Did Microsoft get what they paid for?

Posted May 29, 2003 9:36 UTC (Thu) by pavel (guest, #7318) [Link]

That's what I'd really love to find out. Because if it turns out that Microsoft simply poured fuel into the FUD fire by arranging a bogus "IP transfer", I wonder if they can't find themselves sued for anti-competetive behaviour ;-)

Gosh, this whole thing is more hilarious with every single day that passes!

Did Microsoft get what they paid for?

Posted May 29, 2003 13:08 UTC (Thu) by gleef (guest, #1004) [Link]

$9.5 million dollars to Novell? ;-)

Did Microsoft get what they paid for?

Posted Jun 5, 2003 17:45 UTC (Thu) by mmarq (guest, #2332) [Link]

NO, NO, NO,... for one thing that everybody can agree Bill M$ is not a foul!...

THEY ONLY PAYED """AFTER""" THEY GOT THE GOODS!!!...

you cannot find a lawsuit filling more full of anger, prejudice, and false subjective claims, against Linux, than the one SCO vs IBM, as you can see here http://www.sco.com/scosource/complaint3.06.03.html
and if you joint the press releases, the obnoxious letter to Linux customers and the treath to sue Linus, then i think that 10 millions was very cheap!!!... they could have asked for 20 that M$ would have payed because they couldnt achieved the same results by legal publicity!!!...

it starts to be clear that all this *deal* was long and carefully crafted and that it was a real bargain to M$.

SCO is getting desperate...

Posted May 29, 2003 10:11 UTC (Thu) by pointwood (guest, #2814) [Link] (4 responses)

Check this article: Novell challenges SCO's Unix claims

Here is a quote from the last part:
McBride added that unless more companies start licensing SCO's property, he may also sue Linus Torvalds, who is credited with inventing the Linux operating system, for patent infringement.

SCO is getting desperate...

Posted May 29, 2003 10:51 UTC (Thu) by rknop (guest, #66) [Link] (3 responses)

They are thugs. Petty, schoolyard thugs. They need to be slapped around ab it and made to sit in detention.

I wonder if we shouldn't just start ignoring them? Unfortunately, the US courts won't. This is just ridiculous, though. "If you guys don't pay up, we're gonna go after *Linus*. Huh! Yeah! Take *that*! So pay up or your Finn boy gets it!" SCO is no longer an entity worthy of any attention whatsoever. Let them scream louder and louder in the corner until they're done with their fit and go away. (All but that thing that the courts are likely to pay attention to their claims, so somebody else has to as well.)

I suppose what with their Linux business having failed on its own lack of merits, there's pretty much nothing the community can do to try to hurt SCO (boycotts, whatever). Also, by now, there's no point in trying to boycott them (or whatnot) to "send a message" to other companies what the Linux community thinks about SCO's behavior, because their behavior has become so extreme and childish that any self-respecting entity (individual or company) would be emabarrased to think that SCO's behavior is anything other than laughable and inexcusable. Maybe we should all pool our resources and sue them for being "too stupid of a company to continue to exist"?

I do feel sorry for any residual Linux or Unix engineers who will be faced with the choice, once SCO goes under, of either having a gap in their resume or the letters "SCO" on their resume. Personally, at this point, I would choose the gap; better that a future employer think that I was laying around like a bum doing nothing that that they think I was associated with SCO.

Unfortunately, in the predatory lobbying/politic/protect intellectual property law circles, having "SCO" on your resume is probably going to be seen as quite a feather. Too bad we can't just pool our resources and sue those circles completely out of existence.

-Rob

SCO is getting desperate...

Posted May 29, 2003 12:43 UTC (Thu) by erat (guest, #21) [Link] (1 responses)

Oh, please...

I used to work at SCO. I don't say "SCO Group" on my resume because the name "SCO Group" has not been approved by shareholders yet (the name is still officially "Caldera International"). Regardless, even if the name is officially changed to SCO Group I wouldn't knock those years of experience off of my resume just because of philosophical issues with SCO's upper management, nor would I change "Caldera International" to "SCO Group" just to put a "feather" in my IP cap (do you honestly think potential employers will look at a resume and say "Hey, you used to work for SCO! They sue over IP issues! You're hired!!"? I don't think so).

And consider this: many of SCO's employees started working at SCO when they graduated from college 15+ years ago. What do you propose people do when 100% of their work experience since college was at SCO? Pretend they just graduated?

You have a right to decide what goes on your resume, and I'm not the kind of person who tells folks what they should or should not do, so whatever. I will say, though, that witholding information from a resume is the same as witholding vital maintenance information for your car (like the re-setting of an odometer) when you go to sell it. It's a lie, and if I were a potential employer I wouldn't hire anyone who I caught lying on a resume.

Just my 2 shares of VA Software stock...

SCO is getting desperate...

Posted May 29, 2003 15:07 UTC (Thu) by smoogen (subscriber, #97) [Link]

Correction to the above post, SCO group was approved by the shareholders on May 20.

http://biz.yahoo.com/prnews/030520/latu029_1.html

Correction to the both posts, it is quite clear that looking over the list of the board and the various CxO officers.. that none of the original management of the original SCO or Caldera are calling the shots there anymore. Basically the name of both companies are being used in vain by a bunch of thugs.

SCO is getting desperate...

Posted Jun 5, 2003 18:03 UTC (Thu) by mmarq (guest, #2332) [Link]

Dont hurt SCO,... let them die in peace...
Instead hurt M$...

It only takes linus to merge a patch for a supermout that really auto mounts and umounts sanely removable media, and other local or network volumes, and claim with that that * LINUX IS GOING HEAVELY AFTER THE DESKTOP * to start a fire in the rigth direction...

The opensource community can and should also play same propaganda, because *going heavly after the desktop*, in vue of it's subjectiveness, is not deception... and a really good supermount is really missed in the desktop!

I love it!

Posted May 29, 2003 11:47 UTC (Thu) by fergal (guest, #602) [Link] (1 responses)

If SCO is just relicensing UNIX for a 5% cut and MS just gave them $10m does that mean that they really just gave Novell $9.5m? That would be just too good.

Nope.

Posted Jun 5, 2003 7:34 UTC (Thu) by dark (guest, #8483) [Link]

The revenue agreement was only until 2002, so it ended just before SCO started litigating. I doubt that's coincidence.

Tidbit of information about German law

Posted May 29, 2003 14:00 UTC (Thu) by jschrod (subscriber, #1646) [Link] (1 responses)

Concerning LinuxTag's cease and desist letter: The interesting point is that there are laws in Germany against "unfair competitive practices". That means that SCO Germany must react, otherwise it get's very easy to force them legally to a reaction. And that isn't associated with the same financial risk as in the US, since SCO must pay the lawyer's bills of LinuxTag if they didn't react in time. (German law has the concept that a case looser has to pay the legal expenses of the winner.) The only risk is that they must show that SCO Germany has been involved in Linux user bullying as well, not only SCO US.

FWIW: IANAL, but a CEO and have to cope with such stuff, to keep my company out of "unfair competitive practices" :-)

Tidbit of information about German law

Posted May 31, 2003 0:48 UTC (Sat) by giraffedata (guest, #1954) [Link]

Many US states also have laws against "unfair competitive practices." They're usually pretty specific, though, about the kinds of practices that are covered. Selling below cost is one I remember. I don't know anything about Germany's law; maybe it's broader.

Perhaps this explains their refusal to say what the IP is...

Posted May 29, 2003 19:51 UTC (Thu) by iabervon (subscriber, #722) [Link]

It is possible that the reason that SCO hasn't been saying what code in Linux offends them is not because they want to save it for their day in court or because they want to prevent people from removing it, but because they are not permitted by law to reveal the information. If they don't own it, and are only licensed to license it (and, presumably, not under their choice of terms, either), it might be considered to be a violation of Novell's copyright for SCO to release to the public the UNIX code which they believe to be duplicated in Linux, and likewise a possible violation (under precedent from the 2600 DeCSS case) to refer to the Linux code they believe to be a copy of it.

Presumably, they were hoping to own the IP involved outright before suing anyone over it, if they ever decided to actually sue someone. They probably missed Novell's announcement a month ago that their going to support Linux and won't look kindly on a third party threatening Novell's customers with Novell's property (imagine Dell sending threatening letters to non-Dell Windows users...).

Note that it seems like the IBM case has nothing to do with Novell's IP, but to allege that IBM pulled the scam of starting a joint project, getting some of SCO's (new) ideas, and then ditching the project to go implement the ideas on their own, in Linux. This is something that's been done many times in the past (allegedly, at least). The whole UNIX IP thing is an unrelated ploy to get people to continue to use UNIX, which generated license revenue for SCO.

SCO's exact claims, as far as I can tell

Posted May 30, 2003 2:17 UTC (Fri) by gdt (subscriber, #6284) [Link]

SCO seem to be making two claims:

IBM misappropiated code from the the SCO/IBM joint venture "Project Monterey" into AIX. In particular the 64-bit PowerPC code.
There is code from UNIX in the Linux kernel source.

Some SCO statements claim this is from UnixWare 7. That is, intellectual property developed by SCO and not claimed by Novell.

Other SCO statements claim this is from System V or earlier code. Novell says the I.P in System V is theirs. SCO say in return that the right to make contracts for access to the I.P gives them rights to sue for breaches of that contract.

UNIX code earlier than System V was released under a BSD-style license contract by Caldera [the company this is now SCO], so it's unclear to me why SCO is making statements about pre-System V UNIX.

Please keep the two claims distinct in your mind.

If SCO do not hold the UNIX trademark, relevant patents, or the copyright to the code and as long as SCO and Torvalds have no UNIX licensing contract, I'm not sure how SCO intend to sue Linus.

As a final thought, the reassuring remarks from SuSE and Lindows about having contractural arrangements with SCO are less reassuring when you realise that, as contract law is the only lever SCO has, having no contract with SCO might be a better position.

The SCO case gets weirder

Posted May 30, 2003 3:48 UTC (Fri) by marduk (guest, #3831) [Link] (1 responses)

Okay, SCO doesn't own the Trademark; they don't own the patents, and they don't own the copyright. The only thing they might have is a breach of contract with IBM. But this has nothing to do with Linux or even Unix for that matter. With this knowledge I think a good move for IBM would be to acquire Novell. With that they get:

* Ownership of Unix source and patents
* Ownership of Novell's eDirectory technology
* Potential to break the Novell/SCO agreement where SCO get's 5% of Unix licensing
* Potential to prohibit SCO from using Unix source and patents

Wouldn't that be nice...

Does SCO own Unix or not?

Posted May 31, 2003 0:52 UTC (Sat) by giraffedata (guest, #1954) [Link]

From the little I've seen, I'd bet on there being more truth to SCO's claims to own Unix patents and copyrights than to Novell's claims that SCO doesn't.

Ownership is not a precise thing, and I think we're just arguing about legal technicalities here. Like maybe Novell is the holder of record of the copyright but contractually assigned to SCO all the ability to profit from it.

The SCO case gets weirder

Posted May 30, 2003 16:55 UTC (Fri) by jmayer (guest, #595) [Link]

A very nice post (German): At http://www.pro-linux.de/news/2003/5581.html it looks like another company has beaten LinuxTag to actually getting an injunction(?) agains SCO. It may cost SCO up to 250k€ in case they repeat their accusation in (the German) public.