SCO's Finances, Legal Case Take Hits

geomon writes "This afternoon, SCO will host a conference call where they will present '04 third quarter financial data. The news isn't expected to be comforting to SCO investors as they are coming up a bit short; earnings and dividends will take a substantial hit. The only bright spot for the company is the settlement with BayStar, a deal that will leave most of the cash they received from the investment house in the hands of SCO management, if only for a short time." Reader ak_hepcat writes "Groklaw has posted the text for the latest IBM memorandum in its case against SCO. In a nutshell, IBM accuses SCO of not only wrangling the legal process to keep delaying the eventual resolution of this case, but they go so far as to pull the curtain away and show that this table never had any legs to begin with. I'm no marksman, but I can tell when something is full of holes."

Comments

There's a better Groklaw article.

[Jaywalk]

I think the more important Groklaw story is this one. The part I found telling was:

Pacer indicates that the SCO-Novell hearing on Novell's motion to dismiss is going to be held on September 15 at 2 PM before Judge Kimball . . . That's not only the same day as the SCO v. IBM hearing on IBM's 10th Counterclaim, it's the same time.

Since the same judge is handling both cases, I can't conceive of a situation where he would want to claim the Novell suit should not be dismissed and that the IBM counter-claim should be denied. Continuing the Novell suit would complicate the IBM suit, so trying to handle them both in the same afternoon would be a potload of work. If, on the other hand, he plans to grant the Novell dismissal on the grounds that the copyrights were never transferred, it would allow him to grant IBM's PSJ on the same grounds.

I'm just guessing here, but if I'm right his is very bad for SCO. It would mean that Novell keeps the UNIX copyrights, the IBM case is limited to the Monterey contract and the Red Hat case can proceed with a finding on record that SCO has been blowing smoke about its UNIX IP.

Want to listen ?

[Anonymous Coward]

here you go

ahh the beauty of the Internet
and the stock is currently trading at $3.80, 6mo performance is definatly a sell

Analysis at LamLaw

[bstadil]

Look at LamLaws analysis of this.

The take is that IBM's request for Summary Judgement that no SCO copyrighted code exist in Linux will be granted.

Novel is invited so as to protect their interest in the Copyrighted material. Most likely Novel is the owner of any copyrighted material not SCO (OldSCO rather ie Caldera)since it was nver transfered in writing, as required.

Re:No Legs? Full of Holes?

[Jaywalk]

but am I to understand that SCO still hasn't ponied up any evidence in the way of source code to show where code was copied?

They tried, but it got shredded by IBM's legal team. Basically, they had one of their own employees say that he thought this and that chunk of code was copied, but he bungled his testimony. He should have first removed the "non-copyrightable elements" -- like everything in the public domain or that's part of an open standard. But he cited both public domain and open standard code as if it was all proprietary.

He also got caught out in something in activity that borders on perjury. Consider this quote:

As Dr. Kernighan [IBM's expert] notes, "Mr. Gupta's conclusions of similarity depend on his selecting isolated lines of code from disparate places and putting them together as if contiguous blocks of code were involved (which they are not) and important differences did not exist (which they do)."

I'm not sure that this stuff hits the non-technical eye as hard as it does an old geek like myself, but to me the critcism is damning. If the judge looks at the exhibits and comes to the same conclusion IBM did, SCO is in serious trouble.

results are in and it's not good

[abrotman]

results

Re:I wonder what Gene Amdahl thinks?

[the_maddman]

Why's that ironic? They compete with Microsoft, don't they?
IBM Invented FUD in the 1980's. Gene Amdahl, would of course be the guy behind Amdahl computers, which made hardware compatible with IBM's mainframes, and was one the receiving end of a lot of FUD.
You can't even count FUD as a Microsoft innovation.

Earnings report has been released

[Anonymous Coward]

Maybe they posted it ahead of time knowing someone would post the results in the comments, like this: http://biz.yahoo.com/prnews/040831/latu104_1.html.

Summary: Revenue is $11,025,000 which is way down from 3Q03 revenues of $20,055,000. The SCOsource revenues are $667,000 vs. $7,280,000 in 3Q03. But, the SCOsource revenue was only $11,000 in 2Q04.

Strangely enough, the stock is up 6 cents in after hours trading.

Re:No Legs? Full of Holes?

[On Lawn]

Okay, I'm just going to ask. That is Dr. Kernighan as in "Kernighan and Ritchie"? That is IBM's expert?

To me it is not a very smart investor who bet against IBM in this matter.

Re:Looney Tunes

[Don'tTreadOnMe]

I went back through a month or so of Business Week articles that mentioned Linux: None of them mentioned SCO, and when talking about the bright future for companies doing Linux related work, they never mentioned that these companies might have a problem with intellectual property or stolen code.

That right there says to me that no one in the business world is taking this seriously. So I suspect that it will shrivel up and blow away.

Yes. THAT Dr. Kernighan. (n/t)

[MenTaLguY]

Lameness filter go away, come again another day.

Re:No Legs? Full of Holes?

[mikelmoore]

And considering that he was the expert in the case that established the abstraction, filtration and comparison that this court will use to determine copyright infringement, he testimony is a nuke to SCO's 'case'.

Re:You're Kidding, Right?

[UnknowingFool]

In it's motion, IBM is pointing out all the inconsistencies in SCO's story. In one case, they argued this and said this, but in this case, they are saying the opposite. By pointing this out, they are forcing SCO into one corner or the other since most judges don't like these tricks. At the same time, they're painting SCO is a bad light.

While there is a lot of chest thumping in many motions, IBM presents some convincing legal arguments. For example the Gupta Declaration. To use an expert witness, you have to establish an expert's credentials. SCO did not do that. Also it must be presented in a timely fashion. SCO did not produce Gupta's Declaration until after IBM asked for Summary Judgement. It's a matter of procedure. Not following procedure alone is sometimes enough to get it thrown out.

Even if it that could be overcome, IBM points out that Gupta did not use the abstraction-comparison-filtration test that the Tenth Circuit has adopted in software copyright cases. This is sort of saying that to get a DNA match in a case, you didn't use one of the standard DNA testing methods but invented your own. That again is enough for it be thrown out.

Barring all that, IBM attacks the Gupta Declaration point by point with a properly certified expert. IBM didn't need to do this last step, but they're being very thorough. On a few examples, IBM points that certain pieces of code that Gupta says are similar are not remotely similiar even to someone who knows nothing about programming.

Some favorite lines

[UnknowingFool]

Most of the memo is legalese but here are a few of my favorite lines:

SCO's opposition to IBM's summary judgment motion is nothing more than a smokescreen to cover the shortcomings of its claims and yet another attempt by SCO to delay (perhaps forever) the resolution of this litigation.
...
Indeed, SCO appears to have lost track of the representations it has made to avoid review of its assertions of copyright infringement in the several courts in which it is litigating.
...
SCO attempts in effect to portray IBM's Tenth Counterclaim -- which seeks a declaration that IBM's Linux activities do not infringe SCO's alleged copyrights -- as a surprise to SCO. SCO, however, has been claiming publicly for more than a year that anyone's -- which obviously includes IBM's -- use of Linux infringes SCO's alleged copyrights.
...
As reviewed here, SCO appears willing to adopt, in court and in the media, whatever position is most expedient under the circumstances, without regard either to consistency or the truth. SCO has spun, and continues to spin, a tangled web of inconsistencies to avoid resolution of the claims it has made against IBM's and others' use of the Linux kernel. SCO's opposition to IBM's motion is just more of the same gamesmanship -- intended solely to procure further delay so that SCO might profit from the fear, uncertainty and doubt that it has fostered regarding Linux.

While this just a motion, IBM seems confident and is calling it like it sees it. Most of /. would agree.

Re:No Legs? Full of Holes?

[pjrc]

If they show code now, they will be demonstrating that they haven't complied with the court's orders.

If you read the (very long) IBM memo, SCO tried this (Sandeep Gupta deposition), and IBM said that and much, much more. Here's basically what IBM said:

• SCO's memo was not in format required by law
• Gupta's evidence was not filed when required (2 court orders) and now it can't be introduced
• Evidence is not from Gupta's personal knowledge
• Gupta is not an expert witness
• Gupta did not follow required legal required procedure for comparing code
• Similarities are only unprotected expression, not copyrightable.
• Some code claimed to be similar is not at all alike, even to a untrained viewer (apparantly exhibits attached).
• Gupta quoted tiny bits out of context and rearranged them to deceptively make linux and sysv look similar, when the sections quoted aren't similar at all.
• Some of the compared code is in the public domain
• Much is "scenes a faire" (dictated by compatibility standards and thus not protected by copyright)
• Some code Gupta compared is not even part of linux kernel
• Gupta only testifies to 300 lines of code, which is not a substantial part of the millions of lines in linux or unix sysv.

If even some of these are true, this last-minute "evidence" doesn't seem like it'll do SCO any good. Then again, we'll know for sure in a couple weeks.

Re:No Legs? Full of Holes?

[UnknowingFool]

Let's see:
In one corner, SCO has Sontag and Gupta, two of their employees. One of them is unknown in his credentials.

In the other corner, IBM has Dr. Brian Kernighan (Princeton) who with Dennis Ritchie wrote the first C programming book. Kernighan has also written seminal books in many other programming guides and languages.

IBM also has Dr. Randall Davis (MIT) whose expert testimony was used in not one but two of the benchmarks that are cited as case law in all software copyright infringement cases (CAI v. Altai and Gates Rubber v. Bando).

I wouldn't say it looks bad for SCO but I would bet a blind money could hammer away at a typewriter and finish writing Hamlet before I would bet SCO would win.