Welcome!

Linux Containers Authors: Liz McMillan, Elizabeth White, Pat Romanski, Yeshim Deniz, Amit Gupta

Related Topics: Linux Containers

Linux Containers: Article

SCO's IP Gamble

Looking at the challenges from a legal point of view

Anyone reading this is likely aware of The SCO Group's claim to intellectual property (IP) rights in the Linux kernel. SCO hired legal guru David Boies (who prosecuted the government's case against Microsoft) and initiated a two-pronged litigation and marketing attack.

To recap: in March 2003 SCO sued IBM for breach of its software agreements with SCO, misappropriation of SCO's trade secrets in Unix, and wrongful dissemination of those trade secrets via IBM's contributions to open source and Linux. In May, SCO wrote to 1,500 of the world's largest companies, asserting that Linux infringes SCO's IP rights and that end users may face legal liability from the use of Linux. In July, SCO registered for copyrights in its Unix-based systems, and in August announced the availability of a $699 per CPU system "license" for Linux end users "to cure the SCO IP infringement issues for Linux operating systems." And SCO has engaged in an aggressive press campaign, repeatedly asserting that Linux software developers violated SCO's Unix IP rights.

It's no secret that SCO is banking heavily on its IP strategy to achieve profitability after years of multiple million-dollar losses. SCO acknowledged that licensing income would be used in part to "continue our intellectual property protection and licensing initiative," i.e., funding its legal battles with IBM and others such as Red Hat, who initiated a lawsuit against SCO in August in an effort to clear the SCO-created cloud from Red Hat Linux. The plan has worked so far, as SCO's Q3-FY2003 results show positive net income (due primarily to $7.3 million in licensing revenue) and its stock price has risen eightfold since March.

While the open source community fumes, SCO's IP strategy is far from new. As an industry matures, it becomes a target for IP holders. The semiconductor industry saw an explosion of patent litigation in the 1980s, as companies jockeyed for market share and used their IP to protect that share and generate revenue. Texas Instruments, for example, reported patent licensing revenue of $521 million in 1993, primarily from its semiconductorrelated patents; this was more income than TI made from selling semiconductor products. IBM itself is no stranger to the IP game, reportedly realizing $1.7 billion in patent royalties in 2001. And well-known organizations such as the Lemelson Foundation and Ronald A. Katz Technology Licensing do not make or sell products at all, but generate billions of dollars in revenue from patent litigation and licensing.

SCO's effort to emulate these companies, however, is a long shot at best. SCO's asserted IP rights are limited to copyright and trade secrets, whereas successful licensors historically rely on patent rights. The differences are significant. One key distinction is that patent infringement is a strictliability claim; a company so charged cannot rely on the fact that it independently designed the infringing technology. In contrast, copyright and trade secret claims are both subject to the defense of independent creation. Another difference is that welldrafted patents may provide very broad protection over a particular invention, for example, by covering all methods of producing a product or achieving a specific result. Source code copyright claims, however, require more than showing that the offending code achieves the same result as the copyrighted code – there must be evidence that the offending code was copied, at least in part, from the copyrighted code.

These differences mean that IBM and Red Hat may defeat SCO's copyright and trade secret claims by showing they independently wrote the Linux code in question. Further, trade secret claims may also be defeated by showing the "secret" was not properly maintained or was subject to discovery through reverseengineering. This latter point is particularly relevant, as SCO openly marketed UnitedLinux 1.0, and therefore arguably disclosed the very trade secrets (presumably, Unix functionality – SCO has been vague on this point) it now seeks to protect.

SCO faces other challenges. In a countersuit, IBM claimed that SCO's distribution of UnitedLinux was subject to the terms of the General Public License (GPL), and that SCO's attempt to collect licensing fees violates those terms. IBM also sued SCO for patent infringement, asserting four patents against a broad array of SCO products.

Without its own patent claims, the deck is stacked against SCO, and if IBM and/or Red Hat succeeds on the merits, SCO's IP claims against others will be toothless. Nonetheless, there are very few certainties in litigation, as IBM and Red Hat well know. If SCO mounts enough of an attack to sustain the cases towards trial, the risks may be too great for IBM and Red Hat to continue, and settlement is possible. If that occurs, the rest of the industry best be prepared to open its checkbook. And while SCO may be the first to attack the open source community, history shows others will follow. As the popularity of Linux grows, the suppliers of Linux operating systems (i.e., those that generate revenue from Linux product sales) inevitably become a more inviting target for IP holders worldwide.

More Stories By Brian Ferguson

Brian E. Ferguson is a partner in the Washington, D.C. office of the international law firm McDermott, Will & Emery. He specializes in intellectual property litigation and counseling.

Comments (4) View Comments

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


Most Recent Comments
Joe 12/26/03 06:25:53 AM EST

This is an excellent article, congratulations.

Something I would add is that if SCO is to follow copyright laws, it should have tried to mitigate damages by those it claims are infringing its copyrights (which are not their copyrights since Novell is contesting this). SCO has denied Linux developers their right to see where they are purportedly infringing on SCO's "intellectual property".

Another point is the confusion that SCO spokespeople are generating by a whole lot of misleading arguments such as:

- Claim of ownership of UNIX when SCO doesn’t even own the UNIX trademark (the Open Group owns this trademark).
- Claiming to be the same company that bought the UNIX licensing business from Novell, while they are not. The current SCO bought assets (including UNIX licensing business and SCO trademark) from original SCO (Santa Cruz Operations) a couple of years ago, and then changed its name from “Caldera” to “The SCO Group” when started with its litigation against IBM.
- A whole lot more of misleading and false statements…

Best

Rudisaurus 12/01/03 06:18:54 AM EST

"Nonetheless, there are very few certainties in litigation, as IBM and Red Hat well know. If SCO mounts enough of an attack to sustain the cases towards trial, the risks may be too great for IBM and Red Hat to continue, and settlement is possible. If that occurs, the rest of the industry best be prepared to open its checkbook."

Are you seriously attempting to suggest that IBM and Red Hat cannot afford for this matter to reach the trial stage, Brian? That is patent nonsense, as you (should) well know. It has been clearly established over the past 8 months or so (ref. groklaw.net) that the one party which cannot afford for this matter to actually reach the courts themselves is SCO, and that the party which continues to sow fear, uncertainty, and doubt about Linux and the GPL far and wide while failing to provide any trace of relevance or shred of credible evidence of copyright infringement or contract breach is that same group of litigious miscreants.

What a pity they didn't choose to devote the amounts of energy and resources they've squandered on this sordid matter to actually improving their so-called IP instead.

Fuzzy 11/30/03 09:49:44 PM EST

Why would IBM or RedHat or that matter any company relying on Linux as it's core business strategy settle ?

As I understand it (and from what I see) IBM had not only spent a LOT of money on marketing and developing Linux but have shifted their whole business strategy on it.

RedHat is a purely Linux business. That's all they do... why would they settle ?

Also, RedHat, from what I understand, have not countersued SCO regarding copyright or patent infringment but rather that SCO is damaging potential business by using scare tactics without providing proof (ie. Attempting to charge $699 for a linux licence without proving that there has been infringment). Their case is to simply have SCO either prove that there has been infringment and show what it is (without an NDA) or to shut-up.

Chuck Talk 10/16/03 08:49:34 PM EDT

I still would never open my checkbook to SCO Group. I would simply throw them out. Anything they do means their ultimate demise as a company, because I would simply move toward HURD or BSD and tell them to go and self-procreate.

That is all that anyone needs to know.

@ThingsExpo Stories
DXWorldEXPO LLC, the producer of the world's most influential technology conferences and trade shows has announced the 22nd International CloudEXPO | DXWorldEXPO "Early Bird Registration" is now open. Register for Full Conference "Gold Pass" ▸ Here (Expo Hall ▸ Here)
The Jevons Paradox suggests that when technological advances increase efficiency of a resource, it results in an overall increase in consumption. Writing on the increased use of coal as a result of technological improvements, 19th-century economist William Stanley Jevons found that these improvements led to the development of new ways to utilize coal. In his session at 19th Cloud Expo, Mark Thiele, Chief Strategy Officer for Apcera, compared the Jevons Paradox to modern-day enterprise IT, examin...
Major trends and emerging technologies – from virtual reality and IoT, to Big Data and algorithms – are helping organizations innovate in the digital era. However, to create real business value, IT must think beyond the ‘what’ of digital transformation to the ‘how’ to harness emerging trends, innovation and disruption. Architecture is the key that underpins and ties all these efforts together. In the digital age, it’s important to invest in architecture, extend the enterprise footprint to the cl...
DXWorldEXPO LLC announced today that All in Mobile, a mobile app development company from Poland, will exhibit at the 22nd International CloudEXPO | DXWorldEXPO. All In Mobile is a mobile app development company from Poland. Since 2014, they maintain passion for developing mobile applications for enterprises and startups worldwide.
DXWorldEXPO LLC announced today that ICC-USA, a computer systems integrator and server manufacturing company focused on developing products and product appliances, will exhibit at the 22nd International CloudEXPO | DXWorldEXPO. DXWordEXPO New York 2018, colocated with CloudEXPO New York 2018 will be held November 11-13, 2018, in New York City. ICC is a computer systems integrator and server manufacturing company focused on developing products and product appliances to meet a wide range of ...
In an era of historic innovation fueled by unprecedented access to data and technology, the low cost and risk of entering new markets has leveled the playing field for business. Today, any ambitious innovator can easily introduce a new application or product that can reinvent business models and transform the client experience. In their Day 2 Keynote at 19th Cloud Expo, Mercer Rowe, IBM Vice President of Strategic Alliances, and Raejeanne Skillern, Intel Vice President of Data Center Group and ...
"We are a well-established player in the application life cycle management market and we also have a very strong version control product," stated Flint Brenton, CEO of CollabNet,, in this SYS-CON.tv interview at 18th Cloud Expo at the Javits Center in New York City, NY.
In his session at @ThingsExpo, Arvind Radhakrishnen discussed how IoT offers new business models in banking and financial services organizations with the capability to revolutionize products, payments, channels, business processes and asset management built on strong architectural foundation. The following topics were covered: How IoT stands to impact various business parameters including customer experience, cost and risk management within BFS organizations.
Here are the Top 20 Twitter Influencers of the month as determined by the Kcore algorithm, in a range of current topics of interest from #IoT to #DeepLearning. To run a real-time search of a given term in our website and see the current top influencers, click on the topic name. Among the top 20 IoT influencers, ThingsEXPO ranked #14 and CloudEXPO ranked #17.
While the focus and objectives of IoT initiatives are many and diverse, they all share a few common attributes, and one of those is the network. Commonly, that network includes the Internet, over which there isn't any real control for performance and availability. Or is there? The current state of the art for Big Data analytics, as applied to network telemetry, offers new opportunities for improving and assuring operational integrity. In his session at @ThingsExpo, Jim Frey, Vice President of S...
With the introduction of IoT and Smart Living in every aspect of our lives, one question has become relevant: What are the security implications? To answer this, first we have to look and explore the security models of the technologies that IoT is founded upon. In his session at @ThingsExpo, Nevi Kaja, a Research Engineer at Ford Motor Company, discussed some of the security challenges of the IoT infrastructure and related how these aspects impact Smart Living. The material was delivered interac...
Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life settlement products to hedge funds and investment banks. After, he co-founded a revenue cycle management company where he learned about Bitcoin and eventually Ethereal. Andrew's role at ConsenSys Enterprise is a mul...
Amazon started as an online bookseller 20 years ago. Since then, it has evolved into a technology juggernaut that has disrupted multiple markets and industries and touches many aspects of our lives. It is a relentless technology and business model innovator driving disruption throughout numerous ecosystems. Amazon’s AWS revenues alone are approaching $16B a year making it one of the largest IT companies in the world. With dominant offerings in Cloud, IoT, eCommerce, Big Data, AI, Digital Assista...
In his session at Cloud Expo, Alan Winters, U.S. Head of Business Development at MobiDev, presented a success story of an entrepreneur who has both suffered through and benefited from offshore development across multiple businesses: The smart choice, or how to select the right offshore development partner Warning signs, or how to minimize chances of making the wrong choice Collaboration, or how to establish the most effective work processes Budget control, or how to maximize project result...
The Founder of NostaLab and a member of the Google Health Advisory Board, John is a unique combination of strategic thinker, marketer and entrepreneur. His career was built on the "science of advertising" combining strategy, creativity and marketing for industry-leading results. Combined with his ability to communicate complicated scientific concepts in a way that consumers and scientists alike can appreciate, John is a sought-after speaker for conferences on the forefront of healthcare science,...
In his keynote at 19th Cloud Expo, Sheng Liang, co-founder and CEO of Rancher Labs, discussed the technological advances and new business opportunities created by the rapid adoption of containers. With the success of Amazon Web Services (AWS) and various open source technologies used to build private clouds, cloud computing has become an essential component of IT strategy. However, users continue to face challenges in implementing clouds, as older technologies evolve and newer ones like Docker c...
When shopping for a new data processing platform for IoT solutions, many development teams want to be able to test-drive options before making a choice. Yet when evaluating an IoT solution, it’s simply not feasible to do so at scale with physical devices. Building a sensor simulator is the next best choice; however, generating a realistic simulation at very high TPS with ease of configurability is a formidable challenge. When dealing with multiple application or transport protocols, you would be...
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, discussed the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
Personalization has long been the holy grail of marketing. Simply stated, communicate the most relevant offer to the right person and you will increase sales. To achieve this, you must understand the individual. Consequently, digital marketers developed many ways to gather and leverage customer information to deliver targeted experiences. In his session at @ThingsExpo, Lou Casal, Founder and Principal Consultant at Practicala, discussed how the Internet of Things (IoT) has accelerated our abilit...
Detecting internal user threats in the Big Data eco-system is challenging and cumbersome. Many organizations monitor internal usage of the Big Data eco-system using a set of alerts. This is not a scalable process given the increase in the number of alerts with the accelerating growth in data volume and user base. Organizations are increasingly leveraging machine learning to monitor only those data elements that are sensitive and critical, autonomously establish monitoring policies, and to detect...