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Ms. DiDio is Confused, and More on Why BayStar Is Doing This
Thursday, April 22 2004 @ 11:50 AM EDT

"This is the screwiest thing I've ever seen. SCO has turned into a roller coaster ride, and the outcome is less predictable now than it ever has been."
~ Laura DiDio

Breakthrough, breakthrough! Reality is calling. At last. You think maybe SCO won't be realizing billions and gazillions of dollars from a Linux tax after all?

Bob Mims has more on the BayStar story, where reality is also rearing its ugly VC head. Mims says RBC is still deciding what to do.

SCO declined to comment on Red Hat's Motion for Reconsideration, Mims reports. Red Hat asked the DE court to lift the stay or enjoin SCO from any further lawsuits. After reading Red Hat's wonderful memorandum in support of its motion, can you blame them? Red Hat has painted them into quite a corner, where nothing SCO can say is going to help.

This just isn't SCO's week:

"As for BayStar's now week-old demands, spokesman Bob McGrath would only say that the San Francisco hedge fund company would 'act appropriately, in due time' relating to return of its investment. The past week's developments had industry analysts buzzing. George Weiss of Gartner said: 'No surprises . . . I wrote some time back about the financial challenge SCO would face [from expensive litigation] and this helps confirm it.'"

Sounds like BayStar will sue, if they don't get satisfaction, as they say in the movies about godfathers and such. Venture Capital people generally win. If they want management out, they get management out. No wonder Darl has been looking so haggard. Money talks to folks that care first, last and only about money. Evidently BayStar doesn't want to make *Darl* rich. They would like to get a return on their money for *themselves*. Stephen Shankland got them to put into words just what kind of return they are looking for:

"BayStar asserts SCO's Unix products business doesn't hold long-term value for shareholders, McGrath said. SCO reported $9.7 million in Unix products revenue and $1.6 million in Unix services revenue in its quarter ended Jan. 31.

"'We think there are limited prospects of that business ever generating growing and significant revenue,' McGrath said. 'And we believe it is diverting resources from going where they would have the most value--the intellectual property process.'"

So they want longterm, growing, and significant revenue. Good luck, dudes. From *this* IP? They need to read more Groklaw. No? Try the Motley Fool, then. They give this IP a less than 10% chance to win.

Hardcore VC folks are chilling, aren't they? I was offered, back in the late 90s, a few million to do a web site. Well, who wasn't, back in the business-plan-on-a-napkin 90s? I talked it over with my dad, who was still alive then and was nobody's fool, and he told me something that made me decide to decline the offer. He said, "Nobody offers you $5 million dollars without strings attached." Words to live by. Words to live by. So I looked more carefully at the offer, and I could see that the plan was to make money for themselves by killing my business, after which they would cut and run, richer than they started out, but with me holding a dead dream. It also made me realize the dotcom bubble had to burst, which saved me a world of grief. I've always been grateful to my dad for that. It's also why I haven't let anyone talk me into "monetizing" Groklaw, by the way. It's no wonder so many corporate guys can't grok the GPL. You have to be nice to understand it.

Rupert Goodwins asks the real question, which is, if Darl's reign is over, who toppled him? He says Groklaw did it because every time Darl said anything, Groklaw answered him. The last thing you want when you are building a "house of cards", as he puts it, is public scrutiny:

"Each florid pronouncement from Darl and his henchmen has spawned a new thread in Groklaw and hundreds of nit-picking replies. Each statement provokes a scurry back through the archives for context and rebuttal: each little Darling grain is swiftly turned into a pearl. . . .

"Not so good for Darl, who is currently looking down the barrel of Baystar's corporate Magnum, but the result has been great for the rest of us. We've enjoyed a free first-class education in the esoteric world of intellectual property and corporate shenanigans. This is the planet on which the major IT wars of the 21st century will be fought -- before SCO, few of us knew this, let alone had much chance of getting a map of the place. We've learned once again that the online community can inherit the traditional power of the press to battle the biggest monsters -- again, mapping out the shape of things to come. . . .

"Baystar knows all this too, and doesn't appreciate our schooling at its expense. It's almost certainly too late to fix SCO, but by killing its management and keeping the IP claims on life support, something may be retrieved -- even if it's only face, an invaluable commodity in the venture-capital community. That it would be forced to make this move in public, a sanction that is indistinguishable to SCO from the threat of a massive legal fine and the judicial removal of its officers, marks an exceptional moment in modern capitalism.

"The rules of the game for future players are now ice-clear: anything you say will be taken down and analysed for thousands of hours by people with access to all the resources of the Net. You better be right, or you better keep quiet: justice, free software style. Today is the day the law went open source."

Shucks. I'm really flattered, and while I believe that public scrutiny is indeed a powerful force and that Groklaw's news coverage has been instrumental in shining the light of truth on SCO (it was Groklaw, after all, that first pointed out early in January that SCO failed to list the Novell copyright dispute in its SEC filings as a business risk factor, something SCO corrected a little over a week after our report), I have my own theories as to what may be motivating BayStar. First, it was Eric Raymond who courageously published the Anderer memo. And IBM is forcing S2 into the lawsuit as a result of that bombshell, and that has to be making the money men mighty nervous indeed. Can you imagine what it feels like, once you have gone to the trouble of setting up a PIPE deal, which is perfect for investors who *don't* want to be publicly known, to get a subpoena or to read that S2 has been asked to produce every scrap of paper or email between you and them? I doubt BayStar (or the investors behind them) expected anything like that when they signed on the dotted line, and they may not like it one bit, especially because they know I'm going to put all those exhibits up on Groklaw, given half a chance.

There is one more possible element. Reading this article by Larry Greenemeier makes me wonder if there is finally a recognition that the DMCA-based dreams of money from suing end users is never going to work? BayStar's Goldfarb is a lawyer, I understand. He has mentioned that he bought into the David-Boies-can-pull-this-off-before-a-Utah-jury fantasy. But he bought into the IBM case, not the novel DMCA idea, evidently. Boies is known for his creativity. Maybe Goldfarb isn't so keen on taking such chances, especially after it became clear that this strategy was based on those rickety ABI header file claims or the even more fragile BSDi settlement copyright notices tomfoolery. Now, maybe he just wants Boies and all his helpers to quit with the creativity and get back to the one case he thinks they have a shot at winning or at least getting some money from IBM to go away. The one clear impression I see is, they don't want the FOSS community hating their guts. They didn't expect we would be able to fight back effectively and they want it to stop.

By the way, don't be thrown by Pacer's notation "S2 - Party Added." They haven't been added as a co-plaintiff or co-defendant in the counterclaims stuff. They are listed that way only because they put in their Objections to Subpoena Duces Tecum, and that makes them a movant in the case, so the notation reflects that and only that.

Oh, and one more thing. If BayStar imagines that Groklaw will stop because of a change in SCO management, they haven't grasped our purpose. Groklaw isn't after Darl at all. It's the IP claim BayStar bought into that has to be defeated. If that is what BayStar was imagining, I hope they realize that Groklaw has no interest in who is running what. We care about GNU/Linux and the freedoms of the GPL and that is what we are working so hard for. Continuing to push their tired and discredited IP claims, Darl or no Darl, will result in continued scrutiny and pushback from Groklaw and everyone else in the community. Just so they know.


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