Gartner Recommends Holding Onto The SCO Money

benploni writes "George Weiss of Gartner has published a paper with some interesting recommendations regarding SCO. They include 1) Keep a low profile and do not divulge details on Linux deployments. 2) Until a judgment in a case would unequivocally warrant it, Linux users should not pay SCO the license fees it has asked for to settle its allegations of infringement of intellectual property rights. 3) Do not permit SCO to audit your premises without legal authorization. 4) For customers of SCO Open Server and UnixWare, an unfavorable judgment could cause SCO to cease operations or sell itself. That could harm future support and maintenance. Just in case, prepare a plan for migrating to another platform within two years. There's more, but are the analysts finally catching on?"

Comments

Register.co.uk says:

[KamuSan]

We reveal major UNIX(TM) IP violations

Caldera released UNIX source code back in 2002.
http://www.theregister.co.uk/content/4/3410 2.html

Re:Register.co.uk says:

[KamuSan]

Corroberation from O'Reilly: http://linux.oreillynet.com/pub/a/linux/2002/02/28 /caldera.html Why Caldera Released Unix: A Brief History [..] Things do tend to come full circle. It was Caldera that, on January 23 of this year, disencumbered the entire source code of Unix, up to and including the Seventh Edition (1979) and its VAX port "32V" from which BSD had started the development that led to 4.0BSD. (32V is basically V7, minus some bits that were written in the PDP-11 assembly language, and the remainder was adapted to work on the VAX.) This seems to mean that BSD Unix is, at last, fully disencumbered, even the few parts that couldn't be used in the various BSD systems over the years due to residual AT&T copyrights. Interestingly, Caldera released it under the original BSD copyright. [...]

Article Text

[Anonymous Coward]

Event

On 18 November 2003, SCO announced that it would pay $1 million and issue shares worth $7.95 million to Boies, Schiller & Flexner. This law firm represents SCO in its lawsuits against companies using Linux in alleged violation of SCO's intellectual property rights

First Take

Mounting financial pressures have forced SCO to find alternatives to pay Boies, Schiller & Flexner. SCO not only faces the litigation against IBM (scheduled for April 2005) but must also defend counterclaims by Red Hat and IBM. Moreover, after threatening 1,500 Linux users for infringing its intellectual property rights, SCO has declared that within 90 days (or by about February 2004) it will start litigation against one or more Fortune 500 companies with large Linux installations.

SCO has declared in filings with the U.S. Securities and Exchange Commission that its competitive position could decline if the company can't obtain additional financing. The latest share issue will dilute shareholders' investments about 3.5 percent. It comes on top of a previously announced arrangement giving Boies, Schiller & Flexner a 20-percent share in SCO if the company were sold. SCO also received an investment of $50 million from BayStar Capital in return for 17.5 percent of outstanding shares. We believe that these moves compromise SCO's mission as a software company. Increasingly, the legal and financial aspects of the intellectual property infringement cases will absorb the company's attention, and a law firm will be in an increasingly powerful position to set the overall agenda for its compensation. Therefore, SCO will likely pursue claims against Linux users quickly. Its degree of success will determine the vendor's financial health.

Recommendations:

• Keep a low profile and do not divulge details on Linux deployments.
• Until a judgment in a case would unequivocally warrant it, Linux users should not pay SCO the license fees it has asked for to settle its allegations of infringement of intellectual property rights.
• Do not permit SCO to audit your premises without legal authorization.
• Your legal counsel should monitor developments and understand the infringement claims.
• Pressure high-profile Linux vendors to contractually guarantee against infringement claims by covering court costs. Evaluate Hewlett-Packard's willingness to indemnify Linux customers.
• Fence off the innocuous Linux deployments (such as network-edge solutions) from the performance-intensive ones. Where feasible, delay deployment of high-performance systems until the end of 1Q04 to see what SCO will do.
• If high-performance Linux systems are in production, develop plans that would enable a quick changeover in case SCO wins a favorable judgment and requires the Linux kernel code to be substantially changed. Unix systems are the best alternatives.
• For customers of SCO Open Server and UnixWare, an unfavorable judgment could cause SCO to cease operations or sell itself. That could harm future support and maintenance. Just in case, prepare a plan for migrating to another platform within two years.

Analytical Source: George Weiss, Gartner Research

Recommended Reading and Related Research

• "HP and Linux Users Will Benefit From Legal Indemnity Offer" -- The offer to pay the legal expenses of Linux customers sued by SCO for infringing its intellectual-property rights sets Hewlett-Packard apart from other major vendors. By George Weiss
• "IBM, Red Hat Lawsuits Will Put Financial Pressure on SCO" -- Enterprises with large future Linux commitments should avoid paying SCO's server license fees because they appear arbitrarily high, represent a concession to SCO's claims and will expose the customers to ever-larger license fees. By George Weiss

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Re:BSD was in SCO UNIX?

[GOD_ALMIGHTY]

Surely then his amazing legal understanding must be extended to his own company, in which case SCO could be a veritable GOLDMINE for the BSD Developers.

The BSD license allows this. This is also the reason many OSS developers prefer the LGPL or GPL to BSD and Artistic licenses. The BSD is a free-market radical/libertarian's wet dream, but the GPL and LGPL constitute a steal all you want but give back approach.

The various BSD teams are fully aware of what people can do with their code and only care if someone else claims copyright over code they wrote. If SCO used BSD code, the OSS community gets nothing, if they had used GPL'd code, the copyright owner (possibly the FSF) could demand everything opened or the code removed plus damages. Under the LGPL, there are more possiblities, depending on how the code was used.

Spend more time analyzing OSS licenses than the SCO case and you'll have a better idea of when to get excited and when to not care.

Re:Change your TCP/IP fingerprint

[the_mad_poster]

Yup.

Re:Crying in his Jello

[Anonymous Coward]

We DO NOT want SCO to turn out like Rambus. For chrissakes, just take a look
at the chart. The company is doing very very very well after WINNING the lawsuits.

Re:Why wait?

[bahamat]

Why wait? Migrate

Because of the choices.
Linux - bad, pending litigation
SCO UNIX - bad, company may fold
Solaris - expensive
AIX - expensive
HP-UX - expensive
Windows - expensive, bugs, security nightmare
[Free|Open|Net]BSD - free, legally clear due to BSD/USL settlement

Possibly, the best alternative to Linux is *BSD. The problem is that BSD doesn't get nearly as much support from comercial vendors (Oracle, etc.). If this support is necessary for any particular installation the choices are to wait or to use Solaris/HP-UX.

Re:Red Herrings Eat Profits

[platypus]

I rather hope that IBM is doing/has done its own code commonality inspections because it seems highly likely that there is GPLed code in SCO's product (that's the easy way to compatibility you know). If so that would tarnish their case badly, although it's not very likely to be as damning as it was in the BSD case.

Surely IBM has inspected the code! IBM and it's lawyers have acted completely clever in this case until now, do you really think they would forget the obvious?
I would be very surprised if IBM hadn't left a lot of aces in their sleeves. Look, they haven't made a lot of noise until now, but everything action of IBM agaist SCO was _extremely_ well dosed. If IBM really felt threatened, they would have a lot of alternatives. They could have bought SCO, they even could have bought Canopy, they could have threatened SCO and/or Canopy with patent lawsuits against them or companies they have a stake in (might still happen, hehe).
They didn't do anything like that, instead they go into a lawsuit, well prepared, and acting like someone who knows he will win.

Re:That's exactly why many call them anal-ysts

[El]

You are male or female, NOT both.

Bad example. Some people really are born both, although the number is small enough so as to be statistically insignificant. There are a lot fewer categorical variables than you think -- in real life, variances usually occur in a continuous spectrum. Classifiation is a delusion invented by scientists as an expedient; don't be fooled into thinking it accurately mirrors the real world.

Re:Red Herrings Eat Profits

[Charlotte]

Go take a look at the BSD lawsuit papers (various links posted around the net). The judge's opinion where he denied the preliminary injunction against BSDI is really quite remarkable.

I went out to look for the ruling and found a link here.

I especially liked this part, after the ruling on the preliminary injunction (which was denied):

After reviewing the affidavits of Plaintiff's and Defendants, experts, a great deal of incertainty remains as to what trade secrets Net2 might contain. One fact does seem clear: the header files, filenames, and function names used by Defendants are not trade secrets. Defendants could have printed these off of any of the thousands of unrestricted copies of Plaintiff's binary object code. (Kashtan Aff. at 9-11.) Moreover, the nonfunctional elements of the code, such as comments, cannot be trade secrets because these elements are minimal and confer no competitive advantage on Defendants. The copied elements that contain instructions, such as BREAD and CPIO, might perhaps be trade secrets, but Defendants' experts have argued persuasively that these instructions are either in the public domain or otherwise exempt. As Defendants have repeatedly emphasized, much of 32V seems to be publicly available.

If the SCO case does largely depend on actual code reviews then they'll have to make their case... The experts will inevitably track down and inspect every line of code and see if could have come from the public domain, the programmer or IBM.

Then they'll need to show that IBM did in fact contribute that code and that this infringed the license.

In any case the judge in the BSD places great value on the expert opinions in determining that variable names, structure members, etc need to match header file declarations and that header files themselves are a public interface that is not subject to the same rules as the operational code.

How much code was actually copied and from where isn't really clear to the judge: he calls it an arguments over facts, presumably to go on and on until the facts are known fully and only matters of law remain:

Finally, Plaintiff argues that Defendants have copied 32V in writing the instructions and organizing the logical structure of Net2. Defendants counter that even if Plaintiff does retain trade secrets in Unix, Defendants carefully plucked these secrets out of Net2 and BSD/386. This argument is an argument over facts, and Plaintiff and Defendants have joined it with their experts. At the present state of the record, it seems that the side who gets in the last word wins.

He goes on to say this about BSDI's code having a similar structure to the V32 from Unix System Laboratories (USL), and USL's assertion that the structure similarities could be a violation of the license:

A further consideration is that 32V's overall organization may not even be protectable in the first place. Berkeley's license to use 32V protects 32V derivatives only to the extent that they contain certain proprietary information. If Berkeley excises the proprietary information (as it attempted to do with Net2), Berkeley is free to distribute derivatives without restriction.

So it really boils down to:

1) What are the facts? Unless there was deliberate copying and SCO can point at source lines that were copied and can't be explained by IBM as being in the public domain, there is no problem. Especially if IBM made a diligent effort to remove infringing code. This may take a while and IIRC, the actual trial doesn't begin untill these arguments over facts are resolved.

2) What exactly is in IBM's Unix license? Does it have clauses that limit IBM's ability to make their own code public under the GPL? I guess this will cause a lot of bickering but it will probably be easier to reduce this discussion to arguments of law.

3) The part about GPL not being legal will not even make it to trial unless it's substantiated.

That puts us where we were before, but that's the SCO story for ya :).