SCO v. IBM: Case Closed?

‘Lawsuit is doomed,’ attorney says

By Jennifer deJong

March 15, 2007 —

It’s been a long four years of lawsuits, countersuits, motions for dismissal and judges’ refusals to grant them, but the case of SCO v. IBM isn’t over yet. Or is it?

“SCO has no future,” said Tom Carey, an intellectual property attorney for Boston-based law firm Bromberg & Sunstein. “The lawsuit is doomed.”

Industry analyst Rob Enderle echoed those sentiments, saying he believes the company has no future beyond the outcome of the lawsuit.

The SCO Group sued IBM in March 2003 for US$1 billion, alleging that IBM took code from SCO’s version of Unix, and, without authorization from SCO, contributed it to open source operating system Linux. The essential complaint that SCO has against IBM—that IBM misappropriated code in violation of its contract with SCO—is “a complete loser,” said Carey. “The IBM contract expressly permits IBM to develop competing products using the very personnel who have had a look at the Unix source code.”

Compounding SCO’s legal troubles is its weakening financial position. The company has an accumulated deficit of $250 million, noted Carey. Share prices have ranged from a 52-week low of 85 cents and a 52-week high of $5.23, and were trading at about $1 in late February.

If SCO loses the case, the most it can hope for is a four-man office to collect license fees on legacy Unix installations, Carey said. “There will be no more R&D and no new products.”

SD Times offered SCO the opportunity to respond to Carey’s comments by e-mail, but SCO did not reply. Nor did the company respond to a request for a phone interview.

‘INTENSE ANTAGONISM’
In an effort to stem its financial losses, SCO launched new mobile product offerings last summer, including HipCheck, an application that lets IT managers monitor network problems from a cell phone.

In-Stat principal analyst Bill Hughes said that SCO’s new mobile product offerings launched last summer are worth looking at, and that he does not believe the company’s legal troubles will have a negative impact on potential buyers. He also described as unwarranted the ill will SCO has generated within the industry, noting the company has been the recipient of “intense antagonism.”

“Frankly,” Hughes said, “there has been lots of emotion about the lawsuit, and not much rational discussion about it.” Even if the mobile initiatives fail, and SCO goes out of business, the lawsuit would continue, he said.

SCO v. IBM cannot go to trial until a related case, SCO v. Novell, is decided. SCO sued Novell in January 2004, alleging that Novell had falsely claimed that it controls the Unix operating system. The dispute dates back to a 1995 licensing deal between the two companies. SCO claims the deal gave SCO control over Unix copyrights. Novell says it retains the copyrights to Unix, and, as a result, there is no merit to SCO’s claims against IBM.

SCO v. Novell is expected to go to trial in September. Bromberg & Sunstein’s Carey said Novell’s claim that it owns Unix seems unlikely to prevail.

The details of both cases have been chronicled at length by Pamela Jones on her www.groklaw.net blog. Groklaw includes thousands of articles and documents related to the SCO lawsuits and has a strong anti-SCO bent.

In the latest twist in the ongoing saga, SCO is taking aim at Jones, seeking to take a deposition from her, according to a Feb. 13 report from Forbes.com titled “SCO vs. Blogger.” According to the report, SCO officials want to depose Jones because they believe her Groklaw blog is acting as a front for IBM.

Enderle said he doesn’t believe IBM is behind Groklaw. But who Jones is and how Groklaw is funded are legitimate questions. “There is a significant voluntary effort behind the site, and it is not apparent where the money comes from,” Enderle said.

Her identity has remained a mystery since she launched the site in May 2003, noted Enderle. Jones did not respond to a request for an interview with SD Times.

In the long run, who she is won’t matter, Enderle said, because he, too, believes SCO has no future. The question of whether its mobile offerings will gain traction is moot, because customers don’t want to do business with a company tied to the lawsuits.

“Is SCO dead?” he asked. “No, they are not dead yet.”

SCO BACK IN TIME
March 2003: The SCO Group files suit in the 3rd District Court of Utah against IBM for "misappropriation of trade secrets, unfair competition, breach of contract and tortuous interference with its business,” seeking US$1 billion in damages. SCO claimed IBM stole code from Unix, to which SCO claims to hold copyrights, and put it into the Linux operating system. IBM spokesman Mike Fay said SCO's filing is "full of allegations with no supporting facts” and declined to comment further. Members of the open source community are quick to voice their disapproval. Typical of many comments was that of open source movement co-founder Eric S. Raymond, who in a March 6, 2003, report in http://www.newsforge.com, called SCO’s actions "deeply stupid,” and also said: “Make no mistake: this is a strike at the heart of our community.”

May 2003: SCO CEO Darl McBride reports the first net income "in the company's history: For the second quarter of fiscal 2003 ended April 30, SCO earned $4.5 million on revenue of just over $21 million.

June 2003: SCO raises the amount it is seeking in damages from IBM to $3 billion. Eben Moglen, counsel for the Free Software Foundation (FSF), releases position paper on the SCO suit. Given that SCO released code to the Linux kernel under the GNU General Public License (GPL), its case is fundamentally flawed, he argued. “SCO itself has continuously published, as part of its regular business, the material which it claims includes its trade secrets. There is simply no legal basis on which SCO can claim trade secret liability in others for material it widely and commercially published itself under a license that specifically permitted unrestricted copying and distribution."

August 2003: IBM announces that it has filed suit against SCO. In addition to claiming SCO has interfered with its business, IBM claims that SCO software violates four IBM patents. SCO reacts by releasing a statement calling IBM's Linux business "flawed.” Linux distributor Red Hat files suit against SCO in the U.S. District Court of Delaware, accusing SCO of unfair competition, false advertising, unfair and deceptive practices and interference with its business. Linux distributor SUSE announces its support of Red Hat and urges SCO to "stop the fear, uncertainty and doubt." A report in the Wall Street Journal points out that SCO execs have sold more than $1.2 million worth of stock since the company announced it was suing IBM.

October 2003: In a filing in U.S. District Court in Utah, SCO asks for a dismissal of IBM's August 2003 countersuit. The company further argues that the GPL violates U.S. copyright, antitrust and export control laws as well as the U.S. Constitution. FSF attorney Moglen calls SCO's legal arguments "rubbish."

December 2003: A Utah federal court orders SCO to show IBM within 30 days exactly what code it alleges was stolen from SCO’s version of Unix and placed in Linux.

January 2004: SCO announces it is suing Novell for “Slander of Title.” SCO alleges that Novell's claims that it owns Unix copyrights is a bad faith effort to harm SCO’s business.

February 2004: Novell asks the U.S. District Court in Utah to dismiss SCO's Slander of Title suit. Novell argues that SCO can neither prove it owns the specific copyrights to Unix nor show that SCO has suffered damages or lost money due to Novell's assertions. Novell, which has recently refocused its business on Linux, sends a letter to SCO arguing its position that the 1995 SCO purchase of Unix from Novell excluded the right to control works based on Unix.

March 2004: SCO reports first-quarter results with losses of more than $2 million, three times more than it lost in the same quarter a year earlier. SCO spokesman Blake Stowell and CEO McBride make accusations that IBM is behind Pamela Jones’ blog http://www.groklaw.net. In a March 5 blog entry, Jones said: “Groklaw is independent of any outside influence. It's a noncommercial site. Groklaw is me and a world full of volunteers who believe in what we are doing. The truth is there isn't enough money in the world to get me to do Groklaw. It's a labor of love.”

April 2004: SCO investor Baystar Capital announces it is not happy with the way in which SCO management is pursuing the company's intellectual property litigation. Baystar threatens to pull out its investment, estimated at US$50 million. SCO has removed its claims that the GPL is unconstitutional in the most recent district court filing.

May 2004: IBM's lawyers file a motion in U.S. District Court in Salt Lake City asking that SCO's copyright claims be dismissed, alleging that SCO has produced no evidence to support the copyright infringement claims.

August 2004: SCO reports a third-quarter loss of $7.4 million and announces a cap on legal fees, which have reached $31 million.

September 2004: IBM asks U.S. District Judge Dale Kimball for a ruling that IBM code contributed to Linux does not infringe SCO's copyrights. Such a ruling would effectively dismiss the case.

December 2004: SCO reports fourth-quarter results, posting losses of $6.5 million; announces it has cut its workforce in the past year by almost a third.

February 2005: Kimball refuses to grant IBM's motion for dismissal of SCO’s copyright claims against it. But he also says that he finds it "astonishing that SCO has not offered any competent evidence to create a disputed fact regarding whether IBM has infringed SCO's alleged copyrights through IBM's Linux activities."

June 2005: SCO reports losses of nearly $2 million for the second quarter of fiscal 2005, compared with a loss of nearly $15 million for the same quarter in fiscal 2004.

July 2005: Novell files a countersuit against SCO for breach of contract. Novell alleges that it did not transfer the copyrights to the Unix asset purchase that took place in 1995. Second, it claims that under the 1995 agreement, Novell is entitled to 95 percent of any revenue acquired from Unix System V license sales.

September 2005: SCO reports a net loss of $2.4 million for the third quarter.

October 2005: Citing its desire to speed up a resolution on the case with SCO, IBM drops its counterclaims of patent infringement. IBM also points out that even if it wins the case, the monetary award from SCO would be limited, given SCO's financial situation. SCO reveals in court what it alleges are 217 instances where IBM has violated its Unix contract.

June 2006: Judge Brooke Wells throws out two-thirds of SCO's claims of infringement against IBM. SCO reports a first-quarter loss of almost $2 million.

September 2006: IBM files several motions asking for SCO's case to be dismissed as well as summary judgment for IBM’s counterclaims. SCO announces that its third-quarter revenue has dropped more than 20 percent compared with the same quarter of 2005.

January 2007: SCO posts a loss of $3.7 million for the fourth quarter of 2006. Despite these losses, CEO McBride dismisses Novell's claims that SCO is headed for bankruptcy, though he admits the company's financial situation is "not a real pretty picture."

February 2007: SCO tries unsuccessfully to subpoena Groklaw blogger Pamela Jones in order to take a deposition from her. —Jennifer deJong

Source: http://www.linux.org/news/sco/timeline.html

Share this link: http://www.sdtimes.com/link/30321

SCO’s Darl McBride shown the door CEO and president Darl McBride, the driving force in SCO’s lawsuits, has been fired by the company's Chapter 11 trustee

SCO vs. Novell decision overturned A review of the Unix asset purchasing agreement led a U.S. Court of Appeals panel to send the matter to another trial

SCO finds buyer, potential rescue from liquidation The embattled Unix company has signed an agreement to sell its mobile and Unix business to a group of investors called unXis.

Add comment

Name*
Email*
Country

Comment
Preview

News on Monday
more>>
SharePoint Tech Report
more>>

Download Current Issue
ISSUE 3/15/2010 PDF

Need Back Issues?
DOWNLOAD HERE

Receive the print Edition?

Google Code turns 5
Google Code Turns 5, and adds a Paxos Algorithm to make the system more stable and reliable.
03/17/2010 11:16 AM EST

Test your Visual Studio 2010 know-how
Microsoft is offering free beta certification exams for Visual Studio 2010.
03/17/2010 11:08 AM EST

Microsoft lifts the hood on IE9
Microsoft is previewing IE9.
03/16/2010 01:10 PM EST