|By Maureen O'Gara||
|December 23, 2003 12:00 AM EST||
SCO also started sending another letter to what it calls "select" Fortune 1000 Linux users last Friday telling them that Linux violates the US Copyright Act, including the widely loathed Digital Millennium Copyright Act (DMCA) that the music business has been using to try to fight wholesale piracy, and cites 65 Unix header files in Linux that allegedly infringe SCO IP.
According to SCO, Linux-using end users have been hiding behind SCO's $3 billion suit against IBM, which won't come to trial for another 16 months, waiting to see how that plays out before opening their checkbooks. Now SCO is making it crystal clear, if it wasn't before, that the two issues are separate. It's brought IBM up on contract violations, while it contends it's got end users on copyright violations.
The so-called DMCA letter is the first time SCO has presented any evidence of its copyright case, even to the dozen or so companies it has reportedly been trying to negotiate Linux licenses with for the last few months, according to SCO spokesman Blake Stowell. SCO claims its copyright notices were removed from the files when Linux pinched them and that's what gets Linux in Dutch with the DMCA.
SCO says that either the allegedly DMCA-infringing Fortune 1000s can pay SCO the royalties of $699 per CPU SCO is currently demanding for the privilege of running Linux, or pull the illegal header files out on Linux and cripple almost all the applications Linux can currently run, or go to court.
Under the DMCA, violations are accessed at $30,000 per instance for accidental infringement and $150,000 per instance for willful infringement, SCO CEO Darl McBride said this morning in a conference call. He said he assumes willful infringement at this point.
SCO has yet to double its per-CPU royalties as it has said it would so if end users move quickly on the one-time fees they'd potentially be getting them on the cheap.
Meanwhile, putting the screws to its own SVR5 source code licensees, which include universities and non-profits as well as for-profit companies of all stripes, SCO is demanding that they certify in writing by the end of January that they are not running Linux binaries compiled from any Unix ABI-carrying version of Linux - which is basically everything - and that their employees and contractors haven't thrown Unix code over the wall to Linux or put it out under the GPL.
If the SVR5 licensees don't oblige, McBride said their licenses would be forfeit.
The DMCA letter claims that certain copyrighted Unix ABIs showed up verbatim in Linux and were distributed illegally under the Linux General Public License (GPL). SCO acknowledges that some Unix APIs were made freely available over the years through Posix and other open standards, but that the Unix ABIs have always been copyright-restricted.
SCO also claims that Linux and the 65 header files can't hide - like Linux supporters like to do - behind the shadowy settlement that AT&T and University of California at Berkeley came to after AT&T sued the school and its spin-off Berkeley Systems Development Inc (BSDi) way back when. According to SCO general counsel Ryan Tibbitts who signed the DMCA letter, the settlement left the ABIs protected IP.
Tibbitts also claims that neither SCO nor any "predecessor in interest" in Unix ever sanctioned the distribution of Unix ABIs under the GPL, the cornerstone of Linux and open source. "As a result," he says, "any distribution of Linux by a software vendor or a redistribution of Linux by an end user that contains any of the identified Unix code violates SCO's rights under the DMCA insofar as the distributor knows of these violations."
Thirty-four days ago SCO's fancy lawyer David Boies, victor of the Microsoft antitrust suit, threatened to sue one or more Linux users for trifling with SCO IP in 90 days. The company has another 56 days to make good on its threat. Although it has previously changed its stance on other threats - like sending out invoices to Linux users - there are now hints it will act as soon as the holidays are over. It remains to be seen whether it goes for the jugular and sues high-profile Linux darling Google, whose entire infrastructure of thousands of machines is run by Linux.
According to Yankee Group analyst Laura DiDio, who has seen validity in SCO's position and has been subpoenaed by IBM in the SCO case, "The onus is now squarely upon SCO's customers and the 'select Fortune 1000 Linux end users' to determine whether or not there is any illegal code in their products which violates the terms of their SCO agreements. This is no trivial task. And undoubtedly many customers will be upset by what they perceive as further evidence of SCO's heavy-handedness or villainy! At this point, in the absence of a court judgment, the non-SCO customers are under no legal obligation to comply. However, if SCO does prevail in the courts at a later date, the Fortune 1000 Linux end users who received these letters and ignored them, may very well have to pay SCO back licensing fees plus penalties. If SCO loses the case, then nothing will happen. The Fortune 1000 Linux end users will each have to assess their specific risk factors and determine whether or not to respond. SCO's customers are a different matter and they will have to respond. Overall, this is a case of SCO attempting to show the industry that it believes it has a strong, supportable position and is willing to press the issue - no matter how unpopular its position and actions are."
SCO leaked the story of its two letters to the New York Times this morning and then posted the results of its fourth fiscal quarter ended October 31, which had been delayed two weeks, it said, while an outside expert figured out how to account for the $47.7 million equity investment the company cleared in October.
The company lost $1.6 million, or 12 cents a share, on $24.3 million in the quarter, up 57% year-over-year, including $10.3 million in license revenues that it got from Microsoft and Sun Microsystems - and noticeably not from anybody else.
SCO would have earned $7.4 million, or 44 cents a share, if it didn't have to pay its lawyers $9 million of the October investment as part of their convoluted compensation deal, which gives them 20% of practically every dollar SCO sees. SCO said legal costs have run it $16 million so far, roughly $2.5 million-$3 million a quarter, a number it expects to jump by another million or two a quarter going forward.
It is unclear whether SCO's projection of its legal bills includes a potential legal tussle with Novell, which is buying SUSE and getting help for it from IBM. See, Novell has apparently just registered copyrights covering a swat of SVR4 dot releases with the Copyright Office and presumably the only reason it's got for doing that is a showdown over who owns what with SCO in court.
Back in May, Novell flatly claimed SCO didn't own Unix copyrights and had to recant when SCO turned up with the famous Amendment 2 to the purchase agreement between Novell and the old Santa Cruz Operation from which the SCO Group got its interests.
According to a terse statement Novell issued today, it "believes it owns the copyrights in Unix and has applied for and received copyright registrations pertaining to Unix consistent with the position… Contrary to SCO's public statements… SCO has been aware that Novell continues to assert ownership of the Unix copyrights."
Anyway, despite the way the quarter turned out, SCO still managed its first profitable year ever, earning $5.3 million on $79.3 million, up from $64.2 million last year, the difference attributable to its hated licenses.
SCO, which now has $64.2 million in bank, enough, it says, to see it through its legal battles, is projecting no licensing revenues to speak of this quarter, hoping things will change - now that it's sent its letters out - in fiscal Q2 and thereafter when it thinks IP licenses and vendor licenses will start kicking in. It estimates it'll do $10 million-$15 million this quarter, flat with a year ago.
SCO said it had only delegated two people so far - one a marketing type, the other a legal type - to exploit its IP hopes - which, given the 2.5 million Linux servers supposedly out there, is like trying to empty the ocean with a teaspoon. So, to heighten its chances, it said it would be putting more "resources" on the case, which Stowell indicated would mean the company finally cuts its sales force in on the scheme.
SCO's stock, which has been a veritable gold mine for those who got in at a dollar, closed today at $17.73, off $1.07 having gotten as high as $19.31. It's been at a high of $22.29 in the last few months and the Street is expecting it to see $25.50 in the next 52 weeks.To see SCO's letter, with its list of "offending code," see www.linuxworld.com/story/38303.htm
|walterbyrd 01/07/04 09:26:29 AM EST|
>>Anyway, despite the way the quarter turned out, SCO still managed its first profitable year ever, earning $5.3 million on $79.3 million, up from $64.2 million last year, the difference attributable to its hated licenses. <<
No. Nobody bought those licenses. The "profits" were from a one time fud money by msft and sunw.
|Pani Panagraphie 12/30/03 06:15:33 PM EST|
The SCO CEO Mcbride caused a cluster mess when he was at Pointserve, where he canned the existing business plan, then paid $$$$$ to outside consultants for a bogus business plan that made money off of "internet advertizing" yes pop-ups. (completly new direction for Pointserve, no way to make money either) I talked to him for a hour when I worked at Pointserve, he is All Smoke, Mirrors, and buzz words. He was eventually canned and Pointserve programmers left demoralized. Sorry SCO.
|Marc 12/27/03 05:04:09 AM EST|
This entire matter is simply an example of the type of fallout we can all expect as the Microsoft empire continues to face is "own" slow, but progressive decline. MS isn't going away, per se, but it "is" going to have to share a notible chunk of the market over time.
McBride is one just one of those antagonistic jerks you'd love to slug back in high school. I wonder when Darl and Bill are going to come out of the closet... Capitalism is capitalism, we all understand that, but c'mon, lets get real here.
|Wesley Parish 12/26/03 05:29:38 AM EST|
The absurdity of The SCO Group's case can be seen merely by investigating one file, the (in)famous ctype.h.
Thanks to Caldera releasing the Ancient Unix source under a BSD-like license, we can now trace the history of it, and indeed, compare it with the history of Linux's own ctype.h.
Unix 32V /usr/include/ctype.h
FreeBSD 2.0 /include/ctype.h
static __inline int
/* _ANSI_LIBRARY is defined by lib/libc/gen/isctype.c. */
static __inline _BSD_RUNE_T_
#else /* !_USE_CTYPE_INLINE_ */
which is a call to architecture-specific macros.
At which point, we are left with the distinct probability that what we are witnessing In The SCO Group, is that very, very rare phenomenon, the Tortured Moron. Some lands endure the Tortured Genius, the best-known examples being the Count Leo Tolstoy and one Soren Kierkegard. The SCO Group, sensing a lack in the United States of America, have obviously endeavoured to fill the gap by providing American business with its very own Tortured Moron.
The only question this leaves in my mind, is this: is it right, is it just, for The SCO Group to monopolize its self-torture? I'm sure there are hundreds of frankly p*ssed-off Linux users who would gleefully take part in assisting The SCO Group in torturing its Inner Moron - I just doubt that we'd have the stomach to do it for any length of time, unlike McBride, Boies, Stowell and co.
|David 12/25/03 12:50:18 PM EST|
Here is a thought from somebody who is new to this, mainly because I live in the Microsoft world. But, a number of comments have been that SCO is doing this for no other reason than to increase it's stock value. Hmmmmm. It seems to be working very well, check out a graph of their value over the last year:
|Andreas Kuckartz 12/25/03 04:39:56 AM EST|
Stock manipulation is illegal in other countries too.
For those who can read German, here is a link:
Verdacht auf Kursmanipulation oder Insiderhandel
If you intend to contact the "Bundesanstalt für Finanzdienstleistungsaufsicht" (the German version of the SEC) please let me know.
|CN 12/24/03 03:56:35 AM EST|
May SCO go to hell
|Thomas Frayne 12/23/03 01:41:07 PM EST|
SCO is trying to intimidate its customers into providing SCO with certifications of compliance with their licenses that go far beyond what is required by the licenses. The customers should review their licenses and their compliance before answering SCO's demand late in January, and should just say that they have complied with the license.
If, as seems likely, SCO is clearly losing its cases with IBM and Redhat in January, SCO might be bankrupt. When deciding whether and when to jump ship, SCO's customers will have to compare the risk that SCO will not be there to support them with the risk that SCO can sue them for using Linux. In evaluting these risks, they might consider the following considerations, which are discussed extensively at the www.groklaw.net web site.
SCO's DMCA notification letter is the first time (except for 2 files that it showed at the SCO Forum and later repudiated) that SCO has publicly specfied specific files that it claims were illegally copied from SCO's System V product. SCO has done everything in its power to issue press releases that spread Fear, Uncertainty, and Doubt (FUD) concerning the IBM case, the Redhat case, and the risk that SCO might sue corporations for using Linux.
At the same time, SCO has done everything in its power to avoid or delay making specific claims in court. So far, in nine months of legal discovery for the IBM case, SCO has not specified one specific line of code that it claims IBM misappropriated. It is now compelled under a court order to produce answers and documents which it should have produced voluntarily in the normal course of legal discovery in the IBM case. In the Redhat case, SCO tried to delay discovery until the IBM case is decided in 2005.
AT&T settled a lawsuit in 1994 after evidence that it had copied files. Novell recently registered copyrights in many of the same files. SCO claims it owns the same files. SCO might not even own the copyrights it is trying to enforce.
Some of the 65 files that SCO now claims were stolen from SCO were independently written and copyrighted in 1991 by Linux Torvalds, the creator of the Linux operating system. The remainder are available under a BSD license from the University of California that is compatible with the General Public License (GPL) and therefore rightly usable by Linux.
SCO's case is so flimsy that it is hard to believe that SCO's purpose is to win a lawsuit. I came to this conclusion in September, and filed a complaint with the SEC asking that SCO's officers, directors, and insiders be investigated for stock market manipulation and insider trading. A copy of my complaint is at http://groups.google.com/groups?q=tomf+sec+complaint&hl=en&lr=&ie=UTF-8&....
By comparison, IBM's case against SCO is simple and direct: SCO violated 4 of IBM's patents, and several of IBM's registered copyrights. As evidence for the copyright claim, IBM pointed out that SCO publicly distributed Linux without permission of thousands owners of copyrights in Linux files, including IBM.
SCO's insiders have been dumping SCOX stock for at least six months. Many large sales have been recorded, and NOT ONE purchase.
I think that SCO's pump and dump stock manipulation scheme is about to come to an end, and that SCOX will soon be selling at close to $1 per share. The stock market manipulation charges from stockholders will just be added to the charges of fraud and unfair trade from SCO's customers and competitors and the copyright and patent infringement charges from IBM and other Linux developers.
|David 12/23/03 12:56:58 PM EST|
My biggest fear is that rational or fair arguments don't always win in court. The law protected slave owners, denied women the right to vote, prohibited the consumption of alcohol, created software business process patents and the DMCA, and allows Disney to own copyrights for 100 years, long after the creator of the work has died.
I just look forward to the day corporations realize they can outsource their legal work to other countries so we can watch lawyers hit the unemployment line with the rest of the middle class Americans.
|Bill Eccles 12/23/03 12:34:49 PM EST|
Enough attention has not been given to the second-to-last sentence in SCO's open letter, namely:
As stated above, SCO's review is ongoing and will involve additional disclosures of code misappropriation. Certain UNIX code, methods and concepts, which we also claim are being used improperly in Linux, will be produced in the pending litigation between SCO and IBM under a confidentiality order.
SCO is very clear in stating that the revelations of this letter are a subset of their claims; clearly we should not be comfortable with the relative paucity and weak nature of the so-called evidence. The letter is weak in defining SCO's basis for its suit and the claims are easily refuted through public documentation. It's a "gimme"--a bright and shiny object for us to focus on.
And therein lies the most interesting, and perhaps sinister, purpose of the letter. The hundreds of voices heard in the public outcry over this litigation have, essentially, written IBM's defense for this batch of code. SCO merely has to sit back and watch IBM's counterarguments unfold before its very eyes thereby placing IBM at a serious disadvantage at trial. After all, IBM will probably not be able to invent new counterarguments against SCO's claims at trial--that IBM must stick to facts limits IBM's maneuvering, whereas SCO is under no such restrictions in the invention of claims. SCO's letter allows it to prepare for trial without revealing the real code in question. And it has even managed to draw out the likely testimony of the foremost expert on the subject, Mr. Torvalds himself. While SCO will probably not stoop to Law & Order-like tactics such as "If you forgot your lunch last week (and we have pictures), then how can you say you remember how you wrote that code, 13 years ago?" (or maybe they will), having his testimony, or at least his gameplan, is to SCO's advantage.
And if they don't get enough of IBM's plan, they'll just release a few more code snippets to the public. Remember, Judge Wells ordered that the code be revealed to IBM--not to the public at large. Be very, very suspicious.
The letter is, most certainly, produced to bolster SCO stock prices, extract lines of argument, distract the knowledgeable, and spread fear, uncertainty and doubt. And because public outcry does not--and should not--influence a judge and jury's decisions, we must be careful not to jump to early and unfounded conclusions of victory.
|Matthew Dillon 12/23/03 12:34:22 PM EST|
SCO specifically states in their letter that (they believe) the code was derived from the USL settlement. Files from the USL settlement only contain UC Berkeley copyrights on them, not USL, AT&T, or SCO. The idea that SCO has the right to enforce UCB copyrights is silly. SCO could sue UCB, but they certainly could not sue end-users. Additionally, all the code in question is freely available and has been since the USL settlement. The only violation, at worst, is that the copyright attributions are missing from the header files and the obvious solution is to simply add the notices back in, not pay SCO hundreds and thousands of dollars for 'licenses'. Nothing was stolen or used illegally. There is no IP. There are no patents. There is no ownership of information. Nothing. In fact, even the original SysV attribution on the files is in question, especially for files like these which were almost certainly worked on heavily by UCB.
Furthermore, Linus has stated that at least two of the files in question were original works. Considering the fact that they basically just contain constant definitions and those constant definitions are listed almost verbatim in at least 3 standards and probably more, the idea that SCO has any sort of compelling argument for damages just becomes more laughable.
These analysts don't know jack. They've done no real research, have made no attempt to delve into the facts or the history. Basically all they have done is listen to SCO's carp and been duped into believing it.
|Mr. Pink 12/23/03 12:10:06 PM EST|
After all the evidence is in this will turn out to be the biggest stock swindle of all time after Enron. Look for the SEC to begin investigations once Mr. Spitzer wakes them up.
|Jeremy Stanley 12/23/03 12:06:42 PM EST|
Linus Torvalds has responded to SCO's claims.
"'In short,' Mr. Torvalds said, 'for the files where I personally checked the history, I can definitely say that those files were trivially written by me personally, with no copying from any Unix code, ever.
'I can show, and SCO should have been able to see, that the list they show clearly shows original work, not copied.'"
Full story on www.groklaw.net
|David Mohring 12/23/03 11:30:18 AM EST|
The SCO Group cannot expect to win any case based upon application interfaces which its AT&T, USL and Novell predecessors released in open standards specifically for the purpose of interoperability.
signal.h, errorno.h,and ioctl are all parts of many released standards including The Open Group and IEEE POSIX Base Specifications and the Federal Information Processing Standards Publication 151-2.
Note that The SCO Group does not own the copyrights on any of those standards and it does not own clear title to the copyrights on most of the AT&T Unix source code and manual base.
It is a requirement of the ISO, IEEE and ANSI standards body that participants involved in the development of standards must pre-declare and clearly lable and identify any section of a standard in developent that an implementation would be dependent upon a patent for which royalties must be paid.
Both AT&T and Santa Cruz Operation participated in the development of the POSIX / FIPS 151-X standards and they did not identify any such royalty/patent dependent section as required for federal endorsed standards.
In terms of copyright, anyone and any organization who has purchased an ISO standard and any subsequent recipients, are free to release implementations based upon those standards.
Linux kernel developers are free to develop implementations based upon publicly documented interfaces.
|E 12/23/03 11:13:00 AM EST|
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