For those who don't like their documents divided up into pages when displayed on the Internet, here is the Australian complaint as one undivided document, with footnotes grouped at the end. Thank you, John.
Mr Graeme Samuel
Australian Competition and Consumer Commission
[address, phone, fax]
Open Source Victoria Complaint in relation to conduct of SCO Unix
By a press release dated 20 January 2004 (copy attached) the SCO Group Inc
(SCO) (www.sco.com or
www.thescogroup.com1) announced the availability
of a licence which "permits the use of SCO's intellectual property, in binary
form only, as contained in Linux distributions" (the SCOSource Initiative).
SCO's press release raises a number of issues of concern for Open Source
Victoria (OSV), to the effect that consumers may be mislead by the actions of
SCO or may have been mislead in the past. OSV asks the ACCC to
investigate these concerns.
OSV is concerned that SCO may be doing or may have done one of the
following in trade or commerce:
making a false or misleading representation concerning the need for
any goods or services in connexion with the supply or possible supply
of goods or services by representing that people who have already
acquired a licence for Linux from SCO are required to acquire an
or, as an alternative to (a)
made a false or misleading representation concerning the existence,
exclusion or effect of any condition, warranty, guarantee, right or
remedy in that when SCO granted licences over Linux in the past it
wrongly stated the scope of rights granted under the licence (in
particular that binary execution was permitted).
OSV understands that SCO is currently involved in a dispute over whether or
not it has any copyright entitlements in respect of parts of the code in Linux.
OSV considers that, as this complaint does not involve any representation as to
SCO's copyright holdings, then even assuming these claims are taken at their
highest, they do not have any substantive effect on this complaint.
Linux is an operating system licensed under specific licensing conditions
(known as "the GPL") which are aimed at promoting competition for ancillary
goods and services. Linux represents an emerging market, and one which
unhindered, would grow very rapidly.
This complaint relates to the Linux Kernel only
The heart of Linux is the Linux kernel. This complaint relates only to the
conduct of SCO in relation to the various versions of Linux kernel from
version 2.2. The current version of the Linux kernel is version 2.6.
About the Linux Market and the GPL
According to SCO:2
"The Linux market is not characterized by some of the traditional barriers to
entry that are found in most other markets, due to the open source nature of
the Linux kernel"
OSV attributes Linux's rapid growth to the pro competitive licensing terms on
which it is made available, namely the GNU General Public Licence, also
known as the GPL. The GPL requires the disclosure of the source code of the
Linux operating system. SCO describes this by saying that "anyone can freely
download Linux and many Linux applications and modify and re-distribute
them with few restrictions"3. The end result is a highly pro-competitive
market in which competitive differentiation takes place primarily in services
rather than in monopoly control over a key component.
OSV is concerned by the nature of the representations recently made by SCO,
in that the message to the market is that there will be additional, and
substantive, barriers to competition (ie that SCO may act as a gatekeeper by
refusing to grant a licence) in the market both for Linux and for ancillary
goods and services related to Linux. This removes the key competitive
advantage that Linux vendors have to offer – that their customers are acquiring
from a free market rather than one which is subject to control by a specific
vendor (as is the case for other operating systems).
The research group IDC in July 2002 predicted that on servers Linux would
have a 35% share of the installed base share by 2006 (at a cumulative annual
growth rate of 21%), with a 7% share of the installed base for desktop systems
by the same time (CAGR 44%).
As the Linux product has received significant media attention only recently,
and is a product which is licensed on a substantially different basis to similar
products fulfilling the same function, potential acquirers of the product are
especially vulnerable to misleading or deceptive conduct. OSV considers that
the emergent nature of the market also means that any adverse impact SCO's
actions have will be substantially compounded over time.
About SCO Linux/ Caldera
OSV understands that:
SCO Unix (SCO) previously traded under the name of Caldera
International (Caldera) (after 7 May 2001)4;
for several years prior to April 2003 in trade or commerce SCO
distributed various versions of the Linux operating system under names
including "SCO Linux" and "Caldera OpenLinux" (the "SCO
each of version 2.2 and version 2.4 of the Linux kernel have been
included in at least one of the SCO Versions6
SCO purported to grant licences to the Linux kernel forming part of the
SCO Versions under the terms of the GPL7 over an extended period of
time (see paragraph (b) above);
The terms of SCO's end user licence agreements over the SCO
Versions permit any licensee, subject to some minor qualifications, to8:
- "copy and distribute verbatim copies of the Program's source
code as you receive it, in any medium,…"
- "modify your copy or copies of the Program or any portion of it"
- "copy and distribute the Program (or a work based on it, …) in
object code or executable form" and
- run the program
SCO now represents that licensees require an additional licence from
SCO to use the licensed software in circumstances already permitted by
SCO's previous licences (a "right to use" "in binary form"9 – in other
words, to run the program)10.
OSV also understands that:
SCO claims that when it licensed software under the GPL it didn't
really mean to;11
SCO was aware of the nature of the GPL and the risk of code
(including SCO code) being included in the SCO Versions illicitly;12
SCO was distributing versions of the Linux kernel under the terms of
the GPL as recently as early December 200313
OSV is concerned that SCO is representing that recipients of a SCO Version
are required to acquire an additional licence from SCO. If this is the case, then
either the result of the initial licence grant by SCO was that recipients of the
SCO Versions received the rights SCO said that they would receive (ie the
rights to use and distribute the relevant kernel in accordance with the terms of
the GPL) or they didn't.
If the former is true, then when SCO initially licensed the SCO versions it
made a false or misleading representation as to the effect of rights.
If the latter is true, then a further licence from SCO is unnecessary and SCO's
statement that recipients need a further licence is a false or misleading
representation as to the effect of rights.
OSV notes that the terms of the licence are specifically directed to consumers
who, in addition to using the SCO Versions themselves, are also
contemplating on supplying them to others. It is not an uncommon practice
for acquirers of a Linux kernel to then on supply that kernel to others as part of
a service offering. If SCO repudiates the licences it has granted over the SCO
Versions, both the initial takers, and anyone to whom they have on supplied
the kernel will be affected. Such conduct has the potential to be very
damaging both to consumers and to businesses who may wish to on supply the
kernel of the SCO Versions.
Whether or not SCO realised what it was doing when it granted licences over
the kernel on the terms of the GPL should not be relevant. SCO purported to
grant a licence over the SCO Versions and should not be able to rely on its
own conduct to diminish those licence grants.
In the view of OSV, if SCO has previously offered to licence specific versions
(2.2 and 2.4) of the Linux kernel on the terms of the GPL then:
SCO should be required to be held to those licence terms in respect of
existing licensees. Those licences should be declared to be valid and
where a consumer acquired a copy of the relevant Linux kernels from
SCO prior to the commencement of SCO's SCOSource intitiative, then
that consumer should be entitled to the grant of a licence by SCO on
terms which are of the same effect as the GPL;
any marketing conducted by SCO in relation to its SCOSource
initiative should explicitly state that existing licensees of OpenLinux
and SCOLinux products are not required to acquire any additional
licences and that such existing licences are valid and enforceable
according to their terms;
SCO should correct its existing advertisements and advertise those
consideration should be given to the appropriateness of the imposition
of pecuniary penalties.
On behalf of the
Open Source Victoria Industry Cluster
- References in this document are given to www.thescogroup.com. At the start of February SCO
removed the domain name www.sco.com from the dns and operated their web site from
www.thescogroup.com. We understand that this is temporary. A number of references are made to
SCO's filings with US regulatory authorities (such as forms 10-K etc). Copies of these forms are
available from the SEC filings section of the investor relations area on SCO's website -
- SCO (then Caldera International) Form 10-K (ie Annual Report) for year end 31 October 2002 (dated 29 January 2003) at
- SCO Unix (then Caldera International) Form 10-K (ie Annual Report) for year end 31 October 2002 (dated 29 January 2003) at
- "On May 7 , Caldera Systems completes the acquisition of SCO's Server Software and Professional Services
Divisions, becoming Caldera International (Caldera) and providing the world's largest Linux/UNIX channel."
"The Company [Caldera International] was originally incorporated as Caldera Systems, Inc. ("Caldera Systems"), a Utah
corporation, on August 21, 1998, and reincorporated as a Delaware corporation on March 6, 2000. In March 2000, Caldera
Systems completed an initial public offering of its common stock." SCO (then Caldera International) Form 10-K (ie Annual
Report) for year end 31 October 2002 (dated 29 January 2003) at page 40
- "Caldera Systems developed and marketed software and provided services related to the development, deployment and
management of Linux-based specialized servers and internet devices. Caldera Systems sold and distributed its software and
related products indirectly through distributors and solutions providers, which included value-added resellers ("VARs"),
original equipment manufacturers ("OEMs"), vertical solution providers ("VSPs") and systems integrators, as well as directly
to end-user customers. These sales occurred throughout the United States and in certain international locations."
SCO (then Caldera International) Form 10-K (ie Annual Report) for year end 31 October 2002 (dated 29 January 2003) at page 40.
Similar statements can be found in SCO's 10-K filing for the year ended 31 October 2000 at page 53.
- " OpenLinux 2.3 is based on the 2.2.10 kernel and includes an improved LIZARD (LInux wiZARD) install with faster autoprobing.",
"[SCO Linux 4 is] Based on 2.4.19 kernel version" Slide 14, Powell R, (System Engineer, SCO Unix) SCO Group Technical
Overview 24 April 2003 available from:
- " Linux packages as selected, arranged and coordinated by Caldera Systems for inclusion in this OpenLinux distribution. GPL
Software is not owned by Caldera Systems. GPL Software is distributed by Caldera Systems to Licensee for use by Licensee. GPL
Software is distributed under the terms of the GNU General Public License, Version 2, June 1991, a copy of which accompanies
this OpenLinux Agreement. The GNU General Public License governs the GPL Software and the copying, distribution and
modification of the GPL Software. GPL Software source code is included in the GPL Software distributed to Licensee consistent
with the requirements of the GNU Public License." OpenLinux Version 2.2 End User License Agreement available from
"Hasn't SCO already indicated that it's okay for its code to be distributed by distributing this code itself that is now in
question? Haven't they essentially GPL'd their code?" question 5 of
See also: SCO's response to this question and Eblen Moglen's response to their response at section 3 of
- Attachment: "Copy of GNU General Public License" to SCO's document entitled " OpenLinux Version 2.2 End User License
Agreement" available from
- "End user customers who purchase a SCO IP license are granted the right to use SCO intellectual property in binary form as
contained in Linux binary installations on end user systems" http://www.thescogroup.com/scosource/linuxqanda.html
- " 24. If I am running SCO Linux or Caldera OpenLinux do I need to obtain a SCO IP License for Linux? Yes." Item 24 at
- SCO's explanation is far from clear: "During the period that SCO distributed Linux, SCO was unaware of the copyright
violations. Copyrights cannot be given up by unintentional or illegal inclusion in a GPL product. The owner of the copyrights
must transfer the copyrights in writing, which SCO has never done." – Response to question 5 of
- "In addition, due to the open source nature of Linux, anyone can freely download Linux and many Linux applications and
modify and re-distribute them with few restrictions. For example, solution providers upon whom we depend for the
distribution of our products could instead create their own Linux solutions to provide to their customers." SCO (then Caldera
International) Form 10-K (ie Annual Report) for year end 31 October 2002 (dated 29 January 2003) at page 12
"We believe that Linux has not yet been widely adopted by businesses due to a number of factors, including: the fragmentation of
Linux offerings; concerns about intellectual property protection for software designed to work with the Linux kernel" ibid at page 4
- "However, as of Monday, December 8, 2003, SCO Group was still distributing the Linux kernel under the terms of the GNU
GPL via their FTP server. (ftp.sco.com OpenLinux%203.1.1%20linux-2.4.13-21S%20src.rpm  (FTP))" [OSV
assumes this link refers to version 2.4.13 of the Linux kernel]