Making Sense of the SCO Suits

By Peter Galli  |  Posted 2004-03-05

Making Sense of the SCO Suits

The SCO Group Inc.s latest lawsuits against two Linux users, AutoZone, Inc., and DaimlerChrysler Corp., are very different and bring their own set of legal challenges for the Lindon, Utah, company.

Mark Radcliffe, a Linux expert and licensing attorney at the national technology law firm Gray Cary Ware & Freidenrich in Palo Alto, Calif., says the lawsuit against AutoZone alleges copyright infringement due to the use of Linux.

"The problem is that Novell has disputed that the copyrights were transferred to SCO. Without that copyright, SCO may only bring suit under the licenses that SCO purchased from Novell under the Asset Purchase Agreement [APA]. The ownership issue may prove a powerful defense for AutoZone and will probably prevent the issuance of a preliminary injunction," he said.

The Daimler lawsuit contended that Daimler violated its Unix license by failing to certify its compliance with its terms as required by the license. "SCO demanded that many of its Unix licensees provide a certification under their license in a letter sent late last year.

"However the letter demanded a certification that went significantly beyond what was provided for in the Unix licenses. In addition, Novell has its silver bullet provision under the APA to block SCOs actions under these licenses. This provision permits Novell to amend, supplement, modify or waive provisions of the Unix licenses sold to SCO," Radcliffe said.

Novell also retained the unusual right to require SCO to follow its directions to "amend, supplement, modify or waive" these licenses and, if SCO did not comply, Novell could do so on SCOs behalf, he said, adding that Novell has already exercised this right for IBM and SGI.

Officials at AutoZone and DaimlerChrysler declined to immediately comment on the lawsuits, as did officials at Novell and IBM, citing their ongoing litigation with SCO.

Eben Moglen, a law professor at Columbia University in New York and general counsel for the Free Software Foundation, said there is no clarity about how the various SCO lawsuits will aggregate or in what sequence they will be taken.

"But there are some logical priorities," Moglen said. "There is a claim between IBM and SCO concerning contract essentially independent of the dispute over the code in Linux. Then theres the claim that SCO has brought against AutoZone on the basis of copyrights that it says it has.

"It is at the same time in litigation against Novell, claiming that it owns those copyrights, despite Novells denial that it does. Novell was allegedly the seller of those Unix copyright interests to SCO.

"If SCO loses in the case with Novell on the copyright front, it cannot maintain SCO against AutoZone. So, in theory, the court in SCO against AutoZone should await the conclusion of SCO against Novell," he said.

But the case brought by SCO against DaimlerChrysler revolves around the fact that Daimler is not obeying its contracts with SCO, which also appears to be independent of the SCO versus Novell and SCO versus AutoZone lawsuits, Moglen said.

Next page: An additional complexity.

Additional Complexity

There is also an additional complexity: In its suit against AutoZone SCO is claiming "code structure sequence is what is infringed by Linux if it is copied/modified or distributed by AutoZone," Moglen said. "I should point out that ordinary end users dont distribute software and rarely copy or modify operating system kernel code because they like to have their systems serviced by someone. SCO will have to prove the copying/modification and/or distribution as to AutoZone.

"In addition, AutoZone was a SCO customer, and so it is not clear if they got any versions of Linux from SCO. So SCO will have to prove that it did not license AutoZone itself if AutoZone claimed it got a license from SCO," he said.

In short, all the questions that were raised by SCO against IBM are being raised again in in its suit against AutoZone, except now the claim is purely based on copyright. That means SCO must show that the program infringed and that AutoZones copies were distributed, copied or modified so the infringement was AutoZones work and not someone elses. "Thats an additional layer of difficulty for SCO," Moglen said.

"SCO cannot succeed simply by saying that AutoZone uses an infringing program. SCO has already been asked in the IBM case to show where the unlawful literal copying is, but has so far failed to show this," he said.

If the legal issues were similar, it would be within the discretion of the federal district courts to ship the common issues to multidistrict litigation for resolution, Moglen said.

"However, SCO against Novell is not a federal court litigation and is proceeding in Utah State Court and is not subject to multidistrict consolidation, so there will inevitably be a certain degree of either duplication or delay," he said. "But the court hearing the case against AutoZone could well decide to await the result of the case against Novell.

"At a minimum, the argument for a preliminary injunction against AutoZone stating that SCO was being irreparably harmed and was likely to succeed on the merits in this litigation would be affected by the fact that SCO would not be likely to succeed on the merits if it did not own the copyrights to the Unix code. A judge would likely wait until the case against Novell was resolved before issuing any such preliminary injunction," Moglen said.

Next page: Will litigation drag on?

How Long


While all this litigation, if pursued all the way to resolution in the various courts, could drag on for years, Moglen pointed out that for that to happen "SCO would have to have an infinite amount of time to remain in being. I have to also point out that the parties being sued here by SCO are its present and former customers.

"Ordinarily, a business engaged in suing its own customers is not in it for the long haul. Another interesting question is where SCO gets the money to litigate endlessly, particularly against billion-dollar enterprises like IBM, Novell and AutoZone," he said.

Current and potentially new Linux users do not have anything to fear from these lawsuits and the threat of others, Moglen said, adding that the market has seen players like IBM, Hewlett-Packard Co. and Novell all essentially treat the matter as a nuisance rather than a problem.

"I think that large enterprises are also aware of that. They have assessed the legal risks themselves to some extent, but have also watched the largest firms in the IT industry assess as their proxies the technical and legal claims. They are eyeing it as a possible concern and going forward nonetheless," Moglen said.

If AutoZone or DaimlerChrysler does not settle quickly, then SCOs theory of action has a real problem because you "cannot sell licenses when you are in litigation against firm A to prove that you own what you are trying to license; and you are in litigation against firm B for needing a license and nobody has settled with you and people are saying that if you dont own what you are selling then I dont need to buy it."

"And if your infringement action if I dont buy your license isnt any good, then I shouldnt buy, and so Im going to sit and wait. What judge is going to say I was intentionally infringing when it wasnt clear if the licensor owned what he was trying to license and was in litigation against somebody else who was defending that litigation and saying there was no infringement," Moglen said.

"You now have a little company suing four immense companies in different places on very different claims and supposing that it can take all of this on at once. My advice to potential and/or existing Linux customers who might be worried about being sued by SCO is that the lesson here is that your greatest danger of that is to be a SCO customer," he said.

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