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OSIA POSITION PAPER ON SCO VS IBM AND OTHERS PUBLISHED
Wednesday, May 26 2004 @ 12:15 PM EDT

OSIA POSITION PAPER ON SCO VS IBM AND OTHERS PUBLISHED

AUSTRALIA, MAY 26. 2004

OSIA, Australia's Open Source industry body, has prepared a position
paper which outlines our analysis of the current state of the SCO vs IBM
and related court cases. Our aim is to provide a concise overview for
Australian organisations who are either using or considering the
adoption of Linux. We also provide recommendations to these
organisations, in case they are approached by SCO.




In March 2003, Caldera Systems Inc., trading as The SCO Group, filed
suit against IBM in the Salt Lake County District Court, claiming
that IBM engaged in unfair competition with SCO by misusing and
misappropriating SCO's proprietary software and incorporating the same
software into open source software (specifically Linux). SCO also
alleged that IBM induced, encouraged and enabled others to commit the
same acts.

"The SCO suit has attracted considerable interest and media attention,
particularly from open source software advocates, and those considering
the adoption of open source software," stated OSIA spokesperson Con
Zymaris. "Open Source Industry Australia has produced this position
paper to help distill the current status of what is, to casual observers,
a complex case, often made murkier by SCO constantly changing its claims
and allegations."

Within the position paper, we demonstrate that:

1) SCO launched this lawsuit as a cynical share-price pump and dump
exercise.

2) Unless proven, there is no infringing code in Linux.

3) SCO has dropped the key argument in its case against IBM.

4) SCO's claims that companies such as Computer Associates have bought
its Linux Intellectual Property (IP) Licenses are false.

5) Linux does not infringe on any SCO IP with respect to Application
Programming Interfaces (API).

6) Linux does not infringe on any SCO IP with respect to Application
Binary Interfaces (ABI).

7) SCO's case will fail because it cannot prove it owns any Unix
copyrights nor can it prove that any infringing Unix code is in Linux

8) The AutoZone and Daimler-Chrysler defendants were not sued for using
Linux.

9) Microsoft is the only reason that SCO is still in business.

Open Source Industry Australia believes that Australian enterprises and
individuals using Linux should continue to do so, and that SCO's threats
are no barrier to the ongoing adoption of the operating system.

All of SCO's attempts to offer any proof of misappropriated source code,
which would lend some credence to their year-long claims, have been
proven false. SCO have dropped the 'trade secrets' aspect of their
court case against IBM , showing weakness in their previous arguments.
Finally, Novell has produced evidence which indicates that SCO doesn't
even own the intellectual property purportedly inserted into Linux.

OSIA also suggest that any Australian organisation which is approached
by SCO, seeking money for the use of Linux, ask the following questions:

1) For what specific code am I being requested to pay a licence fee?
Please provide the file names and line numbers of the offending code.

2) Can you prove that you own this code?

3) Can you disprove Novell's claim of ownership?

4) Can you prove that you did not make this code available under the
terms of the GNU General Public Licence, which confers upon me the
right to run the code without restriction?

5) Why should I pay you anything before you have won your court case
against IBM?

The full position paper is available online here:

http://www.osia.net.au/content/download/361/1616/file/osia_sco_position_paper.pdf

- - -

About Open Source Industry Australia

OSIA is the industry body for Open Source within Australia. We exist to
further the cause of Free and Open Source software (FOSS) in Australia
and to help our members to improve their business success in this
growing sector of the global Information and Communication Technology
(ICT) market.

http://www.osia.net.au/

Spokesperson/Contact: Con Zymaris
Phone: 03 9621 2377
Fax: 03 9621 2477
Email: conz@cyber.com.au


*********************************************

Open Source Industry Australia

Position Paper on SCO vs IBM and others

For Immediate Release





Media Contact: Con Zymaris
Phone: +61 3 9642 2377
Email: conz@cybersource.com.au

Copyright notice: OSIA grants you the following rights on this document:
1. You are free to re-distribute it as widely as you wish, as long as it remains intact. 2. You are also free to use within your works, small segments of the document under a fair-use clause.

____________________________________


Background

In March 2003, Caldera Systems Inc., trading as The SCO Group, filed suit against IBM in the Salt Lake County District Court 1, claiming that IBM engaged in unfair competition with SCO by misusing and misappropriating SCO's proprietary software and incorporating the same software into open source software (specifically Linux). SCO also alleged that IBM induced, encouraged and enabled others to commit the same acts.

The SCO suit has attracted considerable interest and media attention, particularly from open source software advocates, and those considering the adoption of open source software. Particularly worrying are SCO's threats to sue users of the Linux operating system unless they acquired a licence from SCO – a situation that SCO states has come to pass with suits against DaimlerChrysler 2 and car parts maker AutoZone Inc., but as we shall see below, this is not the reality. 3

Open Source Industry Australia has produced this position paper to help distil the current status of what is, to casual observers, a complex case, often made murkier by SCO constantly changing its claims and allegations.

Disclaimer

Open Source Industry Australia (OSIA) is not a legal service nor does it proclaim legal expertise. We are producing the following documentation as a statement of position and opinion on the topic in question. The information contained herein represents OSIA's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. OSIA disclaims all warranties as to the accuracy, completeness or adequacy of the information. OSIA shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.

Executive Summary

Key points:
1) SCO launched this lawsuit as a cynical share-price pump and dump exercise
2) SCO has dropped the key argument in its case against IBM.
3) SCO's claims that companies such as Computer Associates have bought its Linux Intellectual Property (IP) Licenses are false.
4) Unless proven, there is no infringing code in Linux
5) Linux does not infringe on any SCO IP with respect to Application Programming Interfaces (API)
6) Linux does not infringe on any SCO IP with respect to Application Binary Interfaces (ABI)
7) SCO's case will fail because it cannot prove it owns any Unix copyrights nor can it prove that any infringing Unix code is in Linux
8) The AutoZone and Daimler-Chrysler defendants were not sued for using Linux 9) Microsoft is the only reason that SCO is still in business.

Open Source Industry Australia believes that Australian enterprises and individuals using Linux should continue to do so, and that SCO's threats are no barrier to the ongoing adoption of the operating system.

All of SCO's attempts to offer any proof of misappropriated source code, which would lend some credence to their year-long claims, have all been proven false 4. SCO have dropped the 'trade secrets' aspect of their court case against IBM 5, showing weakness in their previous arguments. Finally, Novell has produced evidence which indicates that SCO doesn't even own the intellectual property purportedly inserted into Linux. 6

To any Australian organisation which receives any request for licence payment from The SCO Group, we recommend that you do not respond in any way, seek legal advice , taking this document to your lawyer, and also submit the received documentation from SCO as evidence to the Australian Competion & Consumer Commission (ACCC.) Complaints to the ACCC can be registered here: http://www.accc.gov.au/content/index.phtml/itemId/54217/fromItemId/3634

To put this whole situation into a non-technical perspective, we view the claims made by The SCO Group as akin to a complete stranger knocking on your office door one day, demanding rent in arrears for a portion of your office. You have had no dealings with this stranger beforehand, and he offers you no proof whatsoever that he actually owns what he says he owns. He does, however threaten to sue you if you don't pay.

In essence, we see SCO's actions, of demanding money from organisations that they have no business dealings with, for property which has not been proven to be theirs, akin to conduct not condoned by Australia's Trade Practices Act (1974). As such, we commend all current and future Linux users to act accordingly, by lodging complaints with the ACCC and doing nothing to engage SCO .

Key Points

1) SCO launched this lawsuit as a cynical share-price pump and dump exercise

A decade ago, the original Santa-Cruz Operation (SCO) had a viable business selling x86 based UNIX servers. Linux and other free source UNIX implementations, like FreeBSD, essentially did this role better and cheaper. With time, the original SCO was sold to a company which had been in essence, a competitor from that Linux space, Caldera. Unlike successful Linux companies, like Suse and Red Hat however, Caldera wasn't performing well in the growing Linux marketplace. It is at this point, more than likely, that Caldera decided to hitch its fortunes to the business model of lawsuits, hoping to generate enough momentum through legal threats, to raise its stock price in expectation of either a one in a million jackpot win or an acquisition from one of the lawsuit targets.

When SCO launched this cynical attack against Linux (via IBM,) it's share price was idling at around US$1.00 7. A mere nine months later, at the height of its media-blitz and just before the industry started to realise that SCO had no case, the share price had reached $18.00. This constitutes a 1,700% growth factor. For a company like SCO to make such a share price gain using a real business model, rather than filing spurious lawsuits, it would have had to have grown revenues and profits by at least an order of magnitude. Instead,we have an ailing company, now almost universally loathed in the ICT industry, with revenues falling around 8% ever quarter 8, and haemorrhaging cash rapidly. Even its gamble to con Linux users into paying for licences which they do not need has failed. To date, the SCOSource Linux Intellectual Property Licence has brought in a mere $20,000. 9

2) SCO has dropped the key argument in its case against IBM


SCO has dropped its original complaint that IBM had inserted SCO trade secrets into the Linux source code. 10 Specifically:

“In response to the Court's Order, SCO abandons any claim that IBM misappropriated its trade secrets, concedes that SCO has no evidence that IBM improperly disclosed UNIX System V code, and acknowledges that SCO's contract case is grounded solely on the proposition that IBM improperly disclosed portions of IBM's own AIX and Dynix products, which SCO claims to be derivatives of UNIX System V"

At this point, SCO's suit against IBM claims only copyright infringement for continuing to distribute AIX (IBM's own proprietary UNIX implementation, not at all related to Linux) after SCO had terminated its licence to the AT&T UNIX code, the termination of which rested upon IBM's alleged code insertion into Linux. The current breach of copyright has nothing to do with Linux, and was the most substantial component of SCO's original complaint. It also very likely means that SCO has terminated IBM's AIX licence without cause, but once again, this doesn't relate to Linux and Open Source at all.

3) SCO's claims that companies such as Computer Associates have bought its Linux Intellectual Property (IP) Licenses are false

SCO has claimed that several companies have purchased SCOSource Linux Intellectual Property Licences, presumably in an attempt to show that other parties accept the legitimacy of their claims. However, the companies identified to date have denied this; for example, Computer Associates claims that it unintentionally acquired the licences as part of a breach of contract settlement with the Canopy Group Inc., a major investor in SCO. 11 Chief architect of CA's Linux Technology Group, Sam Greenblatt, specifically disavows any endorsement of SCO's actions:

“To represent us as having supported the SCO thing is totally wrong . . . We totally disagree with [Darl McBride's, SCO CEO] approach, his tactics and the way he's going about this”. 12

Specifically, CA claims that:

“SCO has twisted a $40 million breach-of-contract settlement that CA paid last summer to the Canopy Group, SCO's biggest stockholder, and Center 7, another Canopy company, and has turned it into a purported Linux license. As a 'small part' of that settlement, [CA's] Barrenechea said, CA got a bunch of UnixWare licenses that it needed to support its UnixWare customers. SCO, he said, had just attached a transparent Linux indemnification to all UnixWare licenses and that is how SCO comes off calling CA a Linux licensee.” 13

Another claimed licencee, Leggett and Platt, can also find no record of their ever having bought a SCOSource licence. 14

The one firm (EV1) which did indeed purchase a SCOSource Linux Intellectual Property Licence, web-hosting company has already regretted it, with their CEO Robert Marsh telling reporters at ComputerWorld:

“Would I do it again? No. I'll go on the record as saying that," Marsh said. "I certainly know a lot more today than I knew a month ago, in a lot of respects." 15

4) Unless proven, there is no infringing code in Linux

SCO has consistently been unable or unwilling to provide details of the Linux code which they claim infringes their copyright – this, despite the fact that SCO must have access to the UNIX source code they purport to own, and everyone has access to the Linux source code, making comparison quite easy. Instead, SCO has demanded access to IBM's Dynix/PTX source code – which IBM supplied – and the AIX source code – which it did not.

In fact, the presiding judge in the SCO vs. IBM case, Judge Brooke Wells, as actioned SCO repeatedly to specify the infringing code., requests which SCO has repeatedly failed to comply with. 16 SCO now have until April 19th, 2004 to show this supposedly infringing code. As was recently reported in the Salt Lake Tribune:

“Meantime, both sides face an April 19 deadline to provide each other with source codes and related correspondence. However, it is SCO's provision of evidence to back its UnixLinux claims that could prove critical. If SCO fails to satisfy the court, the case -tentatively scheduled for April 2005 -- could be thrown out.” 17

5) Linux does not infringe on any SCO IP with respect to Application Programming Interfaces (API)

An Application Programming Interface (API) is the specification that a programmer is provided to access an underlying operating system or system library. It consists of functions, procedures, and methods, defined in a particular programming language (in both UNIX and Linux, this is the C programming language.) An API provides source code compatibility with an underlying class of platform. 18

SCO claims that because the function calls that Linux offers to application programmers are in many cases identical to those which originated in AT&T UNIX, that Linux is an infringing derivative of the AT&T code.

This is a very simple argument to demolish. The API which specifies UNIX was donated by UNIX's owners, Novell to The Open Group 19, In fact, this organisation and not SCO, is also the owner of the UNIX name and trademark (“UNIX® is a registered trademark of The Open Group in the USA and other countries.”)

The Open Group owns and maintains this standard UNIX API, branding it their Single Unix Specification. The Open Group explicitly states that anyone can implement this API without any copyright concerns, and clearly status so on their website:

“Q. Does an operating system have to be derived from AT&T/SCO code to meet the Single UNIX Specification?

A. No. As the owner of the UNIX trademark, The Open Group has separated the UNIX trademark from any actual code stream itself, thus allowing multiple implementations. Since the introduction of the Single UNIX Specification, there has been a single, open, consensus specification that defines the requirements for a conformant UNIX system.”

SCO's claims that the header files which are found within Linux infringe on SCO IP is also an incorrect statement. As Bruce Perens states:

“The header files in question were released for the public to implement without a copyright encumbrance on five separate occasions in all.” 20

These included:

(a)AT&T's release for the ANSI C Language Standard.

(b)AT&T's release for the U.S. Government POSIX standard.

(c)The USL v. BSDI court case of the early 1990's, in which AT&T's Unix System Labs was found not to have a defensible copyright interest in UNIX. Thus, UNIX was in the public domain.

(d)The transfer of the Unix definition to the Open Group.

(e)The release of earlier AT&T UNIX implementations under the BSD license by Caldera (which now calls itself SCO) in 2002.

This information is all on the public record. SCO's attempts at claiming Linux's API infringes on their IP will therefore fail.

6) Linux does not infringe on any SCO IP with respect to Application Binary Interfaces (ABI)

An Application Binary Interface (API) is somewhat equivalent to an API but deals in compiled binary compatibility for a specific CPU computing environment. The original Santa Cruz Operation was a participant in a collaborative effort, which included IBM, SGI, HP and various Linux firms. This collaborative effort resulted in the creation of extensions to the UNIX System V ABI for the IA64 (Itanium) architecture. The document which defines this standard, is available from Intel. 21 In section 1.1 of this document, appears the following statement:

“This document is the result of consensus among operating system vendors intending to provide UNIX and UNIX workalike operating systems on the IA-64 architecture. The vendors participating in this effort include Intel, Sun Microsystems, SCO, IBM, SGI, Cygnus Solutions, VA Linux Systems, HP, and Compaq.”

Therefore, SCO, in concordance with other vendors who had an interest in ensuring conformance and interoperability of their platforms, agreed to make this specification open and public to all. In fact, the Caldera/SCO website still makes the following assertion:

“You should seriously consider the benefits of building your products in conformance with the binary compatibility specification that matches your intended market.” 22

and also this statement:

“The benefit of using an ABI is that the same binary distribution of your product runs on systems from many vendors, rather than having to be ported and compiled separately for each system. You can sell each shrink-wrapped unit into a significantly larger market than would otherwise be the case.”

From a lengthy investigative article on this topic (by Frank Sorenson et al), we present the following selection:

“As we have already seen, according to the Linux A.B.I. homepage, Christoph Hellwig, working for Caldera, developed and wrote the linux-abi patches to allow the Linux kernel to run UnixWare and other foreign binaries. The entries in the ChangeLog show Christoph Hellwig as the principal maintainer of the patches, and the patch releases were announced by him as well (for example, 2.4.14 kernel and 2.4.15 kernel)." 23

So, far from being protective or exclusionary of its portion of the ABI specification/IP, SCO strongly encouraged all vendors and platform providers to make use of it. In fact, they also (through Caldera/SCO employees) knowingly contributed code to Linux (under the LGPL) to make sure this happened. This means that all Linux users can proceed to use this code as they have always done, with impunity.

7) SCO's case will fail because it cannot prove it owns any UNIX copyrights nor can it prove that any infringing Unix code is in Linux

SCO's copyright case seems likely to fail on at least two points:

a) Novell Inc. asserts that when it sold its UNIX System V business to SCO in 1995, the asset purchase agreement did not transfer the copyrights and patents, and has stated, in a letter to SCO President and CEO Darl McBride:

“We believe it unlikely that SCO can demonstrate any ownership interest whatsoever in those copyrights. Apparently, you share this view, since over the last few months you have repeatedly asked Novell to transfer the copyrights to SCO, requests that Novell has denied”.

b) As far as anyone can determine – bearing in mind SCO's inability to definitively identify source code files and line numbers – the lines of code transferred to Linux are not part of the original AT&T System V source code, but instead are extensions to that system which were in fact written by IBM, or by employees of Sequent, a company that IBM acquired in 1994. However, SCO's case is that such additions are a derived work, and that therefore SCO owns rights to all such work. However, in 1985, AT&T specifically clarified its Software Agreements to “assure licensees that AT&T will claim no ownership in the software that they developed – only the portion of the software developed by AT&T” 24, and AT&T's successors in interest – be that SCO or Novell – are bound by the terms of this licence.

8) The AutoZone and Daimler-Chrysler Defendants were not sued for using Linux

In short, both companies were in fact sued for essentially being SCO clients. According to Linux community leader, Bruce Perens :

“SCO's suit against AutoZone is related to AutoZone's alleged use of Unixware compatibility software for Linux previously released for free on the net by Caldera, before they stopped being a Linux business. SCO claims that AutoZone had old applications that ran on Unixware and could not be recompiled. This is unusual, in that most Linux users will not be moving software that they can't recompile. Caldera, now SCO, gave that compatibility software away for years, so they're going to have a very hard time showing that AutoZone didn't have a right to use it. A former AutoZone lead software engineer contradicts that the compatibility libraries were used at all. 25”26

Daimler-Chrysler were not sued for being a Linux user. SCO sued because Daimler-Chrysler was a Unix source-code licencee, but refused to certify that its use of the Unix operating system was in accordance with the terms of the licensing that SCO offered 27

As we have probably demonstrated, it is not in any organisation's best interests to have business dealings with SCO, as SCO seems to sue their clients more than anyone else.

9) Microsoft is the only reason that SCO is still in business

Most Linux industry observers believe that one of the major motive forces behind SCO's ability to undertake this attack on Linux and Linux users is Microsoft.

Microsoft, very early on in the proceedings, decided to licence SCO's UNIX Intellectual Property 28. It is still unclear what Microsoft intends to do with this licenced IP, as the UNIX software technology which SCO has the right to resell, is now essentially a legacy platform, all but defeated in the marketplace by Linux. It is very unlikely that Microsoft itself could use this technology, even in their own Microsoft Services for Unix (SFU) software product. Instead, SFU in fact makes extensive use of GPL-based and BSD-based Free and Open Source software. 29

There has been no suggestion to date that SFU uses any SCO licenced UNIX technology at all. 30,31 Microsoft purportedly paid around $15 million 32 to acquire a licence for this software which it is unlikely to ever use. Furthermore, Microsoft has been selling SFU for years. Why would it decide it needed to pay SCO for a licence only when SCO launched an attack on Linux, post March 2003?

The most likely conclusion we can draw from this activity, is that Microsoft understood that SCO had a need to be propped up financially, and Microsoft's payment was the fastest way to ensure that SCO could cause as much damage (or threat of damage) as possible to Linux''s growing reputation as the standard industry computing platform.

Additionally, some months after this direct cash injection, Microsoft also co-ordinated, in what has become the biggest Watergate-style scandal in recent ICT industry history, for an investment company to arrange an additional US$50 million of funding to SCO. 33 This investment vehicle, called BayStar Capital has additional links to Microsoft. Wired magazine recently reported the following on BayStar capital:

“BayStar Capital is a private equity fund that makes direct investments in privately held and publicly traded companies. One of BayStar's largest investors, according to BayStar (PDF), is Vulcan Capital, the private investment vehicle of Paul Allen. Allen co-founded Microsoft with Bill Gates, and is the second-largest Microsoft shareholder after Gates.” 34

Make of this what you will. What is probably obvious to any informed observer, is that an investment of that magnitude, injected after SCO had started to lose out in the public relations war against the Linux industry, is a very poor investment. In fact, that investment of $50 million is worth less than half that amount now, a mere few months later, making investment into SCO a poor decision. So, if direct financial gain wasn't at the heart of this transaction to inject money into SCO, what was?

Recommendations

Open Source Industry Australia advises any company approached by SCO demanding payment of licence fees for Linux systems, to first consult their legal advisors, taking this position paper along, and to also take the matter up with the ACCC as indicated earlier.

We note that based on our research, various well informed governments around the world have decided to not respond to SCO at all.

If your legal advisors do decide to respond, ensure that they seek the following answers from SCO :

1) For what specific code am I being requested to pay a licence fee? Please provide the file names and line numbers of the offending code.

2) Can you prove that you own this code?

3) Can you disprove Novell's claim of ownership?

4) Can you prove that you did not make this code available under the terms of the GNU General Public Licence, which confers upon me the right to run the code without restriction?

5) Why should I pay you anything before you have won your court case against IBM?




__________________
1 Caldera Systems, Inc. v International Business Machines Corporation. See http://www.sco.com/scosource/complaint3.06.03.html
2 The SCO Group, Inc v DaimlerChrysler Corporation. See http://www.sco.com/iplawsuit/DCComplaint.pdf
3 The SCO Group, Inc v AutoZone, Inc. See http://www.sco.com/iplawsuit/AZComplaint.pdf
4 http://www.perens.com/SCO/SCOSlideShow.html
5 http://www.groklaw.net/article.php?story=20040209231214944
6 http://www.novell.com/news/press/archive/2003/05/pr03033.html and http://lwn.net/Articles/67050/
7 http://finance.yahoo.com/q/bc?s=SCOX&t=2y&l=on&z=m&q=l&c=
8 http://biz.yahoo.com/ibd/040402/tech_1.html
9 http://biz.yahoo.com/ibd/040402/tech_1.html
10http://www.groklaw.net/article.php?story=20040206175445975
11Computerworld Australia, 5/3/2004. See http://www.computerworld.com.au/index.php?id=1162635813&fp=16&fpid=0
12IDG News Service and Tech-World, 5/3/2004. See http://www.techworld.com/news/index.cfm?fuseaction=displaynews&NewsID=1151
13http://www.groklaw.net/article.php?story=20040304231541412&query=computer+associates
14http://www.techworld.com/news/index.cfm?fuseaction=displaynews&NewsID=1151
15http://www.computerworld.com/governmenttopics/government/legalissues/story/0,10801,91671,00.html
16http://news.com.com/2100-7344_3-5114689.html and http://www.groklaw.net/article.php?story=20040303182840400#c90191
17http://www.sltrib.com/2004/Apr/04062004/business/154471.asp
18http://www.linuxworld.com/story/39051.htm
19http://www.opengroup.org/
20http://www.linuxworld.com/story/44020.htm
21ftp://download.intel.com/design/Itanium/Downloads/24537003.pdf
22http://ou800doc.caldera.com/DIFFS/_ABI_Conformance.html
23http://www.groklaw.net/article.php?story=20040130235310123
24“AT&T $echo”, August 1985, AT&T Software Sales and Licensing, Greensboro. p.5 See http://www.novell.com/licensing/indemnity/pdf/08_1985_echo.pdf
25http://yro.slashdot.org/comments.pl?sid=99137&cid=8452800
26http://east.perens.com/SCO/March2004.html
27http://www.midrangeserver.com/tlb/tlb030904-story03.html
28http://insight.zdnet.co.uk/software/linuxunix/0,39020472,2134917,00.htm
29http://www.oreillynet.com/cs/user/view/cs_msg/31358
30http://www.pcworld.com/news/article/0,aid,53943,00.asp
31http://www.deadly.org/article.php3?sid=20030927090008
32http://www.technewsworld.com/perl/story/31252.html
33http://www.eweek.com/article2/0,4149,1547662,00.asp?kc=EWRSS03119TX1K0000594
34http://www.wired.com/news/business/0,1367,62544,00.html?tw=wn_tophead_

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