From the NY Times:
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SCO targets Linux customers
May 15, 2003
Stephen Shankland, Staff Writer, CNET News.com

SCO Group, a financially struggling company that claims its
Unix intellectual property has been illegally incorporated
into Linux, has sent letters to about 1,500 of the world's
largest corporations warning they could be liable for using
Linux.

The move, announced Wednesday, dramatically broadens the
Lindon, Utah-based company's potential legal actions beyond
its initial target, IBM. Big Blue, a SCO licensee, was sued
in March for more than $1 billion on allegations that
include inappropriately using Unix trade secrets to improve
Linux.

"We think it is appropriate that we warn commercial
companies that there are intellectual property issues with
Linux," Chris Sontag, head of the effort to derive more
revenue from SCO's intellectual property, said in an
interview. "We sent it to the Fortune 500 and effectively
the global 2000. It ended up being about 1,500 top
international companies."

"We believe that Linux infringes on our Unix intellectual
property and other rights," the letter said. "We intend to
aggressively protect and enforce these rights. Legal
liability that may arise from the Linux development process
may also rest with the end user."

Industry analysts viewed the move as an escalation of the
company's intellectual property war and an attempt to put
more pressure on companies to acquire SCO.

"SCO has lobbed its dirty bomb into the user community,
saying, 'You'd better clean this up in a big hurry or
there's going to be a lot of damage,'" said Illuminata
analyst Gordon Haff. "I guess suing IBM wasn't enough to
get them acquired, so this is the next stage."

The company warned that it expects to report revenue of $21
million for its most recent quarter, $2 million to $4
million less than earlier projected. But that's enough to
carry it to its first-ever net income, about $4 million,
SCO said.

The revenue from the quarter, which ended April 30,
consists of about $12.8 million from operating system
products and $8.2 million from licensing. The company said
Wednesday that a second major customer has signed a license
under its SCOsource plan, the name for its effort to
collect revenue from its Unix intellectual property. One of
those licensees is willing to be named, but a SCO
representative said it won't be revealed until later.

Gartner analyst George Weiss agreed that SCO's actions
appear designed to make the company an acquisition target,
but in the meantime, the company is raising hackles.

"They're not well loved," Weiss said. "I guess SCO is
really attempting to create a fairly large disruption of
Linux, and will attempt to take the Linux community with
them in the defense of their intellectual property,
regardless of how poorly it goes off in the Linux
community."

Haff of Illuminata concurred. "The only rational
explanation for this is it's a plea for money, essentially,
from IBM and others that can't afford to let Linux be
derailed," he said. "SCO is not the least afraid of being
the bad guys here."

Indeed, SCO was the victim of a computer attack that
crippled its Web site earlier this month. Though it's not
clear who launched the attack, SCO was quick to blame Linux
enthusiasts.

Despite the consternation SCO’s actions are causing,
the company vehemently argues it's behaving in a principled
manner, comparing its fight to the one being waged by the
music industry to defend its copyrights.

But that’s precisely what some Linux advocates dislike
about SCO’s campaign.

"They're raising a banner equal and opposite to the Linux
community," Weiss said. Linux fans, with their
philosophical roots in the Free Software Foundation often
bring a moral tone to their advocacy.

"They've compared themselves in glowing terms to the record
industry in how they're taking actions to look after their
own rights," Haff said. But “not many people these
days hold the recording industry as an exemplar of
corporate behavior."

Also Wednesday, SCO said the legal problems with Linux are
severe enough that it has ceased sales of its own version
of Linux.

But that product has never been very successful. The
software's high-water mark occurred in March 2000, when it
was the centerpiece of an initial public offering that
raised $70 million for SCO, then called Caldera Systems.

SCO, though, eventually acquired the Unix intellectual
property from the Santa Cruz Operation and later scrapped
its own Linux version for one built by rival SuSE through a
consortium called UnitedLinux.

Following the legal actions taken by SCO, its relationship
with SuSE has deteriorated.

"We certainly have suspended our activities with
UnitedLinux," SCO’s Sontag said. SuSE's argument that
its UnitedLinux contract protects it from SCO legal action
is baseless, he added.

"That simply is not the case at all," Sontag said. "Public
statements to that effect (are) the farthest thing from the
truth."

SuSE didn't immediately respond to requests for comment.

Linux once was only peripherally involved in SCO's
Unix-centric lawsuit against IBM, but is now becoming more
important. Two weeks ago, SCO Chief Executive Darl McBride
said programming code from SCO's UnixWare product had been
copied into Linux, sometimes line by line and sometimes
"obfuscated" to disguise its origin.

Sontag declined to reveal details about the copying, but
said SCO will disclose specifics in court and to credible
third parties who sign nondisclosure agreements.

"We've identified a large number of contributions from
various sources which are very disconcerting to us, and
additional areas of code with no attribution to any
contributor or maintainer at all," Sontag said. "This is in
the kernel, and also in extended areas of Linux."

Sontag said IBM employees were among those who copied code.
In reading Big Blue's Web site describing Linux
contributions, one can "find a lot of areas they mention
code contributions they have made from AIX into Linux,"
Sontag said. AIX is IBM's version of Unix.

IBM, which is vigorously defending the SCO lawsuit,
declined to comment on the accusation, but a representative
did iterate the company's position that IBM believes it has
a perpetual and irrevocable right to use Unix. As part of
its legal action, SCO has threatened to revoke IBM's Unix
license starting June 13.

SCO said the apparent copying led to its SCOsource
strategy. "It's way wider than we expected. We thought our
main focus would be with IBM. It still is our predominant
effort," Sontag said.

SCO also argues that customers aren't protected from the
alleged infringement of companies from which they bought
their versions of Linux.

"Legal liability may rest with the end users. It is not
carried by the distributor or by anyone else involved in
selling that Linux distribution into these commercial
accounts. It resides with the end users, which is unheard
of. They need to know they have exposure in this issue,"
Sontag said.

While SCO's fight may seem quixotic to some, it could have
serious repercussions, Haff said.

"One the one hand, you want to laugh and say this is an
interesting sideshow," Haff said. "But if directives were
to start coming down from CEOs of, 'Get that Linux stuff
out of my shop,' it's going to be very disruptive for a lot
of IT shops, very disruptive for a lot of vendors and very
expensive."

http://www.nytimes.com/cnet/CNET_2100-1016_3-1001609.html?ex=1054010366&ei=1&en=0a0dcfd54fee99c9
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Copyright 2003 The New York Times Company

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