SCOs Linux Case: Is Winning Everything?

By Peter Galli  |  Posted 2003-11-21 Print this article Print

Legal experts observed that SCO's latest move to sue a Linux user is more about setting an example. It hopes that a settlement or even lengthy litigation will scare other users into paying license fees.

As the SCO Group prepares to battle at least one Linux user in court, legal experts said that the companys strategy is less about the legal merits of its claims and more about compelling additional Linux users into paying its license fees. Earlier this week, the SCO Group said it planned within 90 days to sue a Linux user over copyright infringement related to its Unix System V code that it alleges is included in Linux. The move marked an expansion of the Lindon, Utah-based companys legal wrangle over Linux, which began with its high profile lawsuit against IBM.
"They knocked on one door and didnt get any money, and now theyre moving to the next door," said Phil Albert, a partner at intellectual property law firm Townsend and Townsend and Crew LLP, in San Francisco. "Part of their strategy may be that it doesnt really matter if they have any copyright claim."
Proving a copyright claim is difficult, and SCO will need to overcome major hurdles to do so, legal experts said. But the fear of litigation alone may force a defendant company into a settlement, which would set an example that could push other Linux-using companies to pay SCO the license fees it has been seeking from end users, they say. Albert expects that SCO will bring a fairly small claim, maybe similar to its current discounted Linux run-time licensing offer of $699, with the assumption that most companies would rather settle than face the cost of litigation that would far exceed such a claim. A non-technology company with a heavy reliance on Linux for its Web presence is a likely target, he said. Other legal experts, though, anticipate that SCO will file a large claim that includes punitive damages. Anupam Chander, a law professor at the University of California at Davis School of Law and a visiting professor at the Cornell Law School, said the claim will likely be between $50 million and even $250 million and be against a high-profile enterprise. "Once you sue a company for a quarter billion dollars you have an impact against everyone else," Chander said. "It doesnt depend then on the merits of the claim but the risk of sitting out there and waiting to be sued." SCO President and CEO Darl McBride, in earlier interviews, has maintained that the company has a legitimate claim and is simply defending its intellectual property. SCO was months away from running out of money when he came on board in 2001. Today, McBride said the company has $60 million in cash. Chander, who initially didnt expect that SCO would sue an end user, said the companys strategy likely changed after Red Hat in August filed a lawsuit against SCO seeking a pre-emptive ruling that the code in its Linux distribution does not violate SCOs copyright. To read more about Red Hats legal counteroffensive against SCO, click here. Chander expects that a judge is likely to side with Red Hat, so in the meantime SCO needs a legal strategy that supports its business model of gaining significant revenues from Linux users who fear litigation, he said. "SCO realized the gig will be up in two or three years from when theres a ruling on the Red Hat case," Chander said. "So what do they do? They hit the cash register as much as possible between now and then." Legal Experts Look at the DMCA and Novell Angles to SCOs Strategy.

Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


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