From the NY Times:
===============================================================

Legal Dispute Unnerves Linux Users

June 9, 2003
By STEVE LOHR


For the true believers in free software, Bill Gates, the
chairman of Microsoft, has long been the figurative devil.
Yet suddenly, Mr. Gates has a rival for their animosity.
The unlikely challenger is Darl C. McBride, the 43-year-old
chief executive of the SCO Group, a little company in
Lindon, Utah.

Mr. McBride is engaged in an escalating legal fight with
I.B.M., and its ripples are prompting concern in much of
the computer industry and among the industry's corporate
customers. The worries center on whether SCO can hobble the
advance of a fast-emerging force in computing, the GNU
Linux operating system.

This high-technology soap opera is complex, but here is a
simplified version of events so far: SCO, which bought the
licensing rights to the Unix operating system and its
source code in 1995, sued I.B.M. in March, contending that
it breached its contract with SCO by shoveling Unix code
into Linux, an operating system that is closely related to
Unix. Linux is the leading example of open-source software
development, where the code is distributed free and is then
improved and debugged by a loose-knit network of far-flung
programmers. I.B.M. has been the foremost champion of Linux
among big companies.

A legal spat between two companies is a parochial matter,
but SCO broadened its campaign last month. It sent warning
letters to 1,500 large corporations that said, "We believe
that Linux is, in material part, an unauthorized derivative
of Unix." Later, the letter stated: "We believe that Linux
infringes on our Unix intellectual property and other
rights. We intend to aggressively protect and enforce these
rights."

The move by SCO raised the stakes and sent many companies
calling for their lawyers. Last week, there were further
developments. Mr. McBride and his lawyers met on Monday
with I.B.M. executives and their counsel in White Plains.
Copies of the contract for SCO's purchase of the Unix
business from Novell in 1995 began circulating, and a few
days later so did a 1996 amendment to the original
contract. Together, they present a somewhat murky picture
of the breadth of SCO's rights, according to lawyers who
have seen the papers. And an important deadline in the
confrontation between SCO and I.B.M. looms on Friday. SCO
has said it will revoke the license for AIX, the I.B.M.
version of Unix, unless a settlement is reached.

As the SCO story moves ahead, the most important question
is: do Linux customers have a real cause for concern? The
best answer, according to lawyers who have looked at the
documents made public to date, is that as a legal matter it
may be debatable, but as a practical matter almost
certainly not.

First, the SCO suit against I.B.M. is essentially a
contract dispute. That is, the accusation is that I.B.M.
breached its contract with SCO by taking code covered by
the Unix contract and putting it into Linux. The end users
of Linux - like the 1,500 industrial, financial and other
corporations that received the warning letters from SCO -
typically do not have contracts with SCO.

But there is a complicating wrinkle. Contracts spell out
acceptable behavior between companies that have formal
business relationships. Yet intellectual property rights
extend to strangers, corporate or individual, as well.
Though this is not part of the I.B.M. suit, SCO asserts
that it has the intellectual property rights - trademark,
copyright and patents - on Unix. Its intellectual property
claim was the basis for its warning letters to corporate
users.

The documents that came out last week rendered a mixed
verdict on SCO's intellectual property rights. The 1995
contract with Novell appears to exclude them, whereas the
1996 amendment says SCO does have the trademark and
copyrights to Unix, though it does not mention patents.

Legal experts say that if SCO thought it had strong
intellectual property claims, it would probably have
included those assertions in the I.B.M. suit. But they add
that the 1996 amendment may give SCO the basis for some
intellectual property claims.

"It doesn't cover patents, but it muddies the water," said
Jeffrey D. Neuburger, a technology lawyer at the firm of
Brown Raysman Millstein Felder & Steiner. "But you have to
see those 1,500 letters to companies mainly as a great way
to put pressure on the real target, I.B.M."

SCO is coy on what it might do about the end users of
Linux. Mr. McBride speaks in threatening tones of companies
running their operations on software tainted with "stolen
property." And SCO is engaged in a pitched battle with the
many supporters of Linux. "They call us an extortion
racket, and we call them thieves," Mr. McBride said. Yet
pressed a bit about how he really wants this confrontation
to play out, he said, "We're fine as long as there is some
justice."

For I.B.M., the options now are fight, settle or perhaps
buy out SCO. SCO's total market value is about $111
million, nearly eight times that in February, before SCO
sued I.B.M.

In recent weeks, two technology companies have signed new
deals with SCO. One has not been identified; Microsoft is
the other. Microsoft says the deal was intended to make
sure its products could interoperate with Unix systems
without intellectual property violations, though the
company's critics regard it as a cynical ploy to support
SCO's anti-Linux campaign.

Regardless of the outcome of the SCO-I.B.M. dispute, the
case does point to the potentially thorny issue of how to
handle the meeting of the two worlds of software:
traditional proprietary software, guarded by strict
intellectual property laws of copyright and patent; and the
fast-growing realm of open-source software like Linux,
which has thrived by freely sharing code and shunning the
constraints of intellectual property.

"It's a real problem for the future," said George Weiss, an
analyst at Gartner. "The open-source community has been
pretty cavalier about this. You've got to respect
intellectual property."

No company has more at stake in managing this issue than
I.B.M., which holds the world's largest portfolio of
patents. I.B.M. has not commented on the SCO case, other
than to deny the accusations. But Ken King, director of
technical strategy at I.B.M.'s software group, said that
with care, which I.B.M. insists it has exercised, working
with open-source software is not a problem.

"Software patents basically provide incentives to encourage
innovation," Mr. King said. "Open-source approach also
encourages innovation, but in a more informal way."

http://www.nytimes.com/2003/06/09/technology/09NECO.html?ex=1056163111&ei=1&en=426361226ea0aa51


Copyright 2003 The New York Times Company


--
Tom Brandt
Northtech Systems, Inc.
130 S. 1st Street, Suite 220
Ann Arbor, MI 48104-1343
http://www.northtech.com/

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