SCO Weekly News

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:

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 Lessig, Linus 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: transcripts of the hearing (scroll down to the second version, which is more complete), a 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 notice.

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 $250,000.

Also stated in this letter is:

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.

Finally, this 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.