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What SCOsource was for, Part II
Thursday, February 14 2008 @ 07:21 AM EST

In the first part of this article on what SCOsource was for, I showed you the January 2003 version of the SCO press release announcing the new division to be called SCOsource, which said the first offering from SCOsource was a license for unbundled use of SCO OpenServer and UnixWare shared libraries.

However, there was an earlier press release a little more than a month earlier, also purporting to announce the new division to be called SCOsource but listing a different offering as the purported first offering from SCOsource. The December 11, 2002 press release is listed among the exhibits attached to the Hatch Declaration. It's not the first time we've seen it, though. We first saw it in the SCO v. Novell litigation in December, when Novell attached it as an exhibit in support of its Motion for Summary Judgment on its Fourth Claim for Relief. It's Exhibit 2 [PDF].

The December 2002 press release said that the first offering from SCOsource would be a two-part license, first for the unbundled shared libraries, with a quote from Darl McBride stating clearly that both OpenServer and UnixWare were "based on UNIX System V technology". And second, it said the license was to "protect" Linux "from UNIX IP issues that are associated with" it, and to fight against those using FUD to discourage the uptake of Linux. The license was to enable the use SCO's patents, copyrights, and "core technology" in Linux, to ensure the licensee that the "SCO UNIX source code in Linux is authentic and safe from IP patent issues." I know. Weird.

Although the wording of the two announcements was quite different, and the "first offering" each announced was not identical, both called the license a "SCO System V for Linux" license.

Of course, SCO had no UNIX patents, and the Utah court later ruled it had not received the UNIX or UnixWare copyrights from Novell in the 1995 deal either, so the offerings were based on a very shaky foundation. SCO didn't know what it owned, I gather, or what it was licensing. They probably should have just called it the "SCO Give Us Some Money" license, but you know marketing.

Let's take a look at these two announcements, though, because our interest is to try to figure out exactly what it was that Sun Microsystems and Microsoft paid for, as well as later licensees like EV1. Microsoft publicly announced in May of 2003 that it was licensing "SCO's Unix patents and the source code". Talk about a lack of due diligence. They paid for a license for patents that simply didn't exist. But the main point is that what it told us it was licensing was source code, not shared libraries. There was, as we'll see in a later section of this article, Part III, a still later license offered from SCOsource as well. It's the one we read about in the headlines back then and the one most people think of when they hear the word SCOsource. But before we get to it, we'll look at the two prior versions.

In the table below, the December press release is on the left and the January version is on the right, with unique wording in the December version in red and in blue in the later January press release:

December 2002 Version

January 2003 Version

SCO Establishes SCOsource to License UNIX Intellectual Property AND PROTECT LINUXSCO Establishes SCOsource to License UNIX Intellectual Property
SCO, the majority owner of UNIX intellectual property, creates licensing programs to assure UNIX IP protection for Linux environments, introduces SCO System V for Linux and retains David Boies to investigate and advise SCO on IP issuesSCO, the Majority Owner of UNIX Intellectual Property, Creates New Licensing Programs to Expand Access to Its UNIX Technology, Beginning With SCO System V for Linux
LINDON, Utah -- Dec. 11, 2002 -- NEW YORK, LinuxWorld 2003 (Booth # 865), Jan. 22 /PRNewswire-FirstCall/ --
The SCO Group (Nasdaq: SCOX), a leading provider of Linux and UNIX business software solutions, today announced that it has created a new business division to manage the licensing of its UNIX intellectual property and protect Linux from UNIX IP issues that are associated with the popular open source operating system. The new division, called SCOsource, will manage the substantial UNIX intellectual property assets owned by SCO, and will operate an array of licensing programs.The SCO(R) Group (SCO) (Nasdaq: SCOX), a leading provider of Linux and UNIX business software solutions, today announced that it has created a new business division to manage the licensing of its UNIX intellectual property. The new division, called SCOsource, will manage the substantial UNIX intellectual property assets owned by SCO, and will operate an array of licensing programs.
Key components of today's announcement include:Key components of today's announcement include:
The creation of SCOsource, a division of SCO that will expand the licensing of the company's core intellectual property, including the core UNIX source code.The creation of SCOsource, a division of SCO that will expand the licensing of the company's core intellectual property, including the core UNIX source code.
The first offering from SCOsource will be SCO System V for Linux -- an end-user licensed product for use on Linux systems. SCO System V for Linux has two key components that protect and expand the use of Linux as a business server platform. First, SCO System V for Linux provides unbundled licensing of SCO's UNIX System shared libraries for use with UNIX applications running on Linux. Second, users of SCO IP Pack licensed systems are protected from future claims based on unlicensed use of SCO UNIX intellectual property in Linux.The first offering from SCOsource will be SCO System V for Linux -- an end-user licensed product for use on Linux systems. SCO System V for Linux provides unbundled licensing of SCO's UNIX System shared libraries for use with UNIX applications, enabling them to run on Linux.
The appointment of David Boies and the law firm of Boies, Schiller and Flexner to help research and advise SCO on the company's intellectual property.The appointment of David Boies and the law firm of Boies, Schiller and Flexner to help research and advise SCO on the company's intellectual property.
SCOsource --SCOsource
SCO's patents, copyrights and core technology date back to 1969 when Bell Laboratories created the original UNIX source code. SCOsource will manage the licensing of this software technology to customers and vendors. SCO's patents, copyrights and core technology date back to 1969 when Bell Laboratories created the original UNIX source code. SCOsource will manage the licensing of this software technology to customers and vendors.
"SCO is the developer and owner of SCO UnixWare and SCO OpenServer, both based on UNIX System V technology," said Darl McBride, president and CEO, The SCO Group. "SCO owns much of the core UNIX intellectual property, and has full rights to license this technology and enforce the associated patents and copyrights. SCO is frequently approached by software and hardware vendors and customers who want to gain access to key pieces of UNIX technology. SCOsource has established a formal licensing program which will make these technologies available to our partners and customers." "SCO is the developer and owner of SCO UnixWare and SCO OpenServer, both based on UNIX System V technology," said Darl McBride, president and CEO, The SCO Group. "SCO owns much of the core UNIX intellectual property, and has full rights to license this technology and enforce the associated patents and copyrights. SCO is frequently approached by software and hardware vendors and customers who want to gain access to key pieces of UNIX technology. SCOsource will expand our licensing activities, offering partners and customers new ways to take advantage of these technologies."
SCO System V for Linux SCO System V for Linux
Customers frequently cite intellectual property concerns as a barrier to their adoption and use of Linux. To alleviate this uncertainty, SCO today is announcing a program that protects customers from any claims to SCO UNIX source code as it pertains to Linux. Customers who purchase a one-time SCO System V for Linux license will be protected and can be assured that the SCO UNIX source code in Linux is authentic and safe from IP patent issues. The SCO System V for Linux license will provide access to SCO's UNIX System Shared Libraries for use with Linux. Customers frequently use SCO's shared libraries to allow UNIX applications to run on Linux. In the past, SCO's UnixWare and OpenServer license agreements did not allow these UNIX libraries to be used outside of SCO's operating systems. With this announcement, customers can now license these libraries from SCO for use with Linux without having to license the entire SCO operating system. This will enable customers to now run thousands of UNIX applications on Linux.
"Certain companies in the IT industry would like to see Linux fail and have been spreading fear, uncertainty and doubt about Linux and intellectual property," said Chris Sontag, senior vice president for SCO's operating systems division. "Linux came from UNIX and SCO is the core holder of patents, copyrights and source code for UNIX. We are a Linux vendor and want to see Linux succeed in the market, and as a result, we are implementing a program to protect Linux customers from UNIX IP claims." "The most substantial intellectual property in UNIX comes from SCO," said Chris Sontag, Senior Vice President for Operating Systems and SCOsource, The SCO Group. "While Linux is an Open Source product, it shares philosophy, architecture and APIs with UNIX. Starting today, SCO's libraries will be available to third-party application developers, OS vendors, hardware providers, services vendors, and end-users. SCO will help customers legitimately combine Linux and UNIX technology to run thousands of UNIX applications. SCOsource plans to create other new licensing programs to make our rich inventory of UNIX System technology available to the market."
-- SCO will offer SCO System V for Linux for $149 per CPU. Volume licensing discounts will also be available to enterprise customers and OEMs. SCO is offering customers of SCO Linux Server 4.0 a license to SCO System V for Linux as a free value-add to their use of SCO Linux. Future updates to SCO Linux Server will include a license to SCO System V for Linux.
Licensing of UNIX System Shared Libraries --
In addition to IP protection, the SCO System V for Linux license will provide access to SCO's UNIX System Shared Libraries for use with Linux. Customers frequently use SCO's shared libraries to allow UNIX applications to run on Linux. In the past, SCO's UnixWare and OpenServer license agreements did not allow these UNIX libraries to be used outside of SCO's operating systems. With this announcement, customers can now legitimately license these libraries from SCO for use with Linux without having to license the entire SCO operating system. This will enable customers to now run thousands of UNIX applications on Linux.--
"The most substantial intellectual property in UNIX comes from SCO," said Sontag. "While Linux is an Open Source product, it shares philosophy, architecture and APIs with UNIX. Starting today, SCO's libraries will be available to third-party application developers, OS vendors, hardware providers, services vendors, and end-users. SCO will help customers legitimately combine Linux and UNIX technology to run thousands of UNIX applications. SCOsource plans to create other new licensing programs to make our rich inventory of UNIX System technology available to the market."--
Appointment of Boies, Schiller and FlexnerAppointment of Boies, Schiller and Flexner
As part of SCO's plans to protect its intellectual property, the company has retained David Boies of the law firm Boies, Schiller and Flexner for research and protection of SCO's patents, copyrights and other intellectual property.As part of SCO's plans to protect its intellectual property, the company has retained David Boies of the law firm Boies, Schiller and Flexner for research and protection of SCO's patents, copyrights and other intellectual property.
99-Day Amnesty Period and Pricing--
Beginning today, for customers currently making use of SCO's UNIX System Shared Libraries outside of SCO's operating systems or those who wish to gain SCO UNIX IP protection for Linux, SCO is establishing a 99-day amnesty period for customers to gain a SCO System V for Linux software license. During this 99-day period, SCO System V for Linux is available at a discounted price of $99 per CPU. Following the amnesty period, SCO will offer SCO System V for Linux for $149 per CPU. Volume licensing discounts will also be available to enterprise customers and OEMs.--
Beginning in January, SCO is offering customers of SCO Linux Server 4.0 a license to SCO System V for Linux as a free value-add to their use of SCO Linux. Future updates to SCO Linux Server will include a license to SCO System V for Linux.--
Parties interested in purchasing the SCO IP Pack license should e-mail SCO at [redacted] or call [redacted] in the U.S. or contact their local SCO office found at http://www.sco.com/worldwide . For more information about SCOsource, visit http://www.sco.com/scosource or e-mail SCO at [redacted].Parties interested in purchasing the SCO System V for Linux license should e-mail SCO at [redacted] or call [redacted] in the U.S. or contact their local SCO office found at http://www.sco.com/worldwide . For more information about SCOsource, visit http://www.sco.com/scosource or e-mail SCO at [redacted].
About SCO About SCO
The SCO Group (Nasdaq: SCOX), formerly called Caldera International, provides "Powerful Choices" for businesses through its UNIX, Linux and Volution product lines and services. Based in Lindon, UT, SCO has representation in 82 countries and 16,000+ resellers worldwide. SCO Global Services provides reliable localized support and services to partners and customers. For more information on SCO solutions and services, visit http://www.sco.com . The SCO Group (Nasdaq: SCOX), formerly called Caldera International, helps companies grow their business through its UNIX, Linux and Windows solutions and services. Based in Lindon, UT, SCO has representation in 82 countries and 16,000+ resellers worldwide. SCO Global Services provides reliable localized support and services to partners and customers. For more information on SCO solutions and services, visit http://www.sco.com .
SCO, SCOsource and the associated SCO logo are trademarks or registered trademarks of Caldera International, Inc. in the U.S. and other countries. UNIX and UnixWare, used under an exclusive license, are registered trademarks of The Open Group in the United States and other countries. Linux is a registered trademark of Linus Torvalds. All other brand or product names are or may be trademarks of, and are used to identify products or services of, their respective owners.SCO, SCOsource, OpenServer, UnixWare and the associated SCO logo are trademarks or registered trademarks of Caldera International, Inc. in the U.S. and other countries. UNIX and UnixWare, used under an exclusive license, are registered trademarks of The Open Group in the United States and other countries. Linux is a registered trademark of Linus Torvalds. All other brand or product names are or may be trademarks of, and are used to identify products or services of, their respective owners.

Isn't it fascinating? I don't know what happened to the amnesty period. And for the record, the trademark to UnixWare is listed by the USPTO as belonging to X/Open currently. But what really stands out to me is that in the earlier December version, SCO was alleging that it owned patents in UNIX, which it never did, and it was purporting to represent that the license it was offering was designed to "protect" Linux from any who might use FUD or litigation to hinder the uptake of Linux. Aside from the hypocrisy, since SCO was the one claiming to have the rights to sue over its so-called UNIX IP, all it needed to do to "protect" Linux was to say it wouldn't sue anybody using it, isn't it strange that SCO would even try to portray the license as a way to encourage the uptake of Linux and to protect it? Of course, SCO was a Linux vendor at the time.

It goes without saying that Microsoft had zero interest in a license to "protect" Linux. Conceivably, it might buy "protection" from litigation. But what they said they wanted was this:

Microsoft general counsel Brad Smith said acquiring the licence from SCO "is representative of Microsoft's ongoing commitment to respecting intellectual property and the IT community's healthy exchange of IP through licensing. This helps to ensure IP compliance across Microsoft solutions and supports our efforts around existing products like services for Unix that further Unix interoperability."

Uh huh. But what was always so strange to me about the Microsoft license was that according to SCO's 10Q for the quarter ending April 30, 2003, it was a license that didn't contemplate payments beyond 2003, but Microsoft had options to expand. Here's how SCO described SCOsource in that 10Q:

We initiated the SCOsource effort to review the status of these licensing and sublicensing agreements and to identify others in the industry that may be currently using our intellectual property without obtaining the necessary licenses. This effort resulted in the execution of two license agreements during the April 30, 2003 quarter. The first of these licenses was with a long-time licensee of the UNIX source code which is a major participant in the UNIX industry and was a “clean-up” license to cover items that were outside the scope of the initial license. The second license was to Microsoft Corporation (“Microsoft”), and covers Microsoft’s UNIX compatibility products, subject to certain specified limitations. These license agreements will be typical of those we expect to enter into with developers, manufacturers, and distributors of operating systems in that they are non-exclusive, perpetual, royalty-free, paid up licenses to utilize the UNIX source code, including the right to sublicense that code.

The amount that we receive from any such licensee will generally depend on the license rights that the licensee previously held and the amount and level of our intellectual property the licensee desires to license. The two licensing agreements signed by us to date resulted in revenue of $8,250,000 during the April 30, 2003 quarter and provide for an aggregate of an additional $5,000,000 to be paid to us over the next three quarters. These contracts do not provide for any payments beyond 2003, except that Microsoft was granted the option to acquire expanded licensing rights, at its election, that would result in additional payments to us if exercised. In connection with the execution of the first license agreement, we granted a warrant to the licensee to purchase up to 210,000 shares of our common stock, for a period of five years, at a price of $1.83 per share. This warrant has been valued, using the Black-Scholes valuation method, at $500,000. Because the warrant was issued for no consideration, $500,000 of the license proceeds have been recorded as warrant outstanding and the license revenue reduced accordingly.

During the course of the review of our intellectual property rights, we became concerned generally about the existence of UNIX source code in the Linux operating system. We have discovered that UNIX source code and unauthorized derivatives of UNIX source code are prevalent in the Linux kernel. In March 2003, we filed a complaint against IBM alleging, in part, that it had breached its license agreement with us by, among other things, inappropriately contributing UNIX source code to the open source community and seeking to use its knowledge and methods with respect to UNIX source code and derivative works and modifications licensed to it to destroy the value of the UNIX operating system in favor of promoting the adoption by businesses of the Linux operating system, of which it has been a major backer. Unless IBM cures the breaches we have identified, we will terminate the license agreement we have with it that permitted the use of our UNIX source code in the development of its AIX operating system. In May, 2003, we sent letters to approximately 1,500 large corporations notifying them that the use of the Linux operating system may be a violation of our intellectual property rights.

The success of our SCOsource licensing initiative, at least initially, will depend to a great extent on the perceived strength of our intellectual property and contractual claims and our willingness to enforce our rights. Many, particularly those in the open source community, dispute the allegations of infringement that we have made.

We learned later that the first licensee was Sun. And if you look at the list of exhibits attached to the Hatch Declaration that SCO just filed, you see four amendments to the Microsoft agreement, titled amendments to "Microsoft Release, License and Option Agreement". I don't know if that means they did expand or not, but I'm guessing yes. But did you notice the part I put in red, stating that what they got was source code and the right to sublicense it? That doesn't sound like UnixWare to me. It sounds like System V Unix. However, one could verify, I would assume, by looking at what they did with the license and what they paid for it.

If Microsoft bought this license for patent protection, I'd say they bought a pig in a poke, since SCO never owned any patents and in the end, they were ruled not to have received the UNIX and UnixWare copyrights from Novell either. Do large corporations spend millions on patents without any due diligence to ascertain if there actually are such patents? Further, do you see any dovetail between the press releases' descriptions of the licenses and what Microsoft told us they were buying? I assume that SCO will argue that "interoperability" meant the shared libraries, but did Microsoft need to run UNIX applications on Linux? That is what the press release said the licenses covered, after all. I can't make a match at all, except for the phantom patents, and that points to the December offering, if either. Of course, it's all about System V, no matter how you slice it. The language in red pretty much points to System V source code and sublicensing rights, no?

What about the rest of the licensees? Did anybody buy either of these original licenses? The first was about "protection" and shared libraries, but the second was only about shared libraries. Anyone buy that one? How about EV1? I think we can also safely conclude, from his testimony of the threats that he was subjected to in order to get him to sign up for SCOsource license, that EV1's CEO Robert Marsh didn't buy either type of license in March of 2004 when he agreed to pay for what he said SCO called a "Linux IP license" after SCO told him that he and/or his customers would be sued for "copyright infringement" if he didn't buy the license. We also know it, because it wasn't sold to him at this price, not even with the discount:

In his February 10, 2004, email, Mr. Langer informed me that the "list pricing" for the SCO license was "$699 per server processor for a one time license fee and $140 per server processor for a 1-year license."

So what EV1 bought can't be this type of license. They had no need, one would assume, for shared libraries to run UNIX applications on Linux. And when you review the exhibits attached to Marsh's Declaration, it's clear it was about licensing SCO's code allegedly in Linux or get sued.

In fact, there was a later license offered under SCOsource. In Part III of this article, we'll look at what EV1 did buy, the Linux license that SCO announced in July and made available in August of 2003.

Update: I found that I had saved some versions of the web page on SCOsource, specifically when it was began talking about and then offering to sell a license for Linux end use, and I thought it useful to put them all here. Here's what the page looked like in summer of 2002:

By summer of 2003, it looked like this:

And later in 2003 (this screenshot was from Wayback, shot in December of 2003), SCO explained SCOsource like this, mentioning that it has registered copyrights:

Since it banned further distribution, I think it's obvious why the community immediately noticed that the SCOsource license conflicted with the GPL, the license on Linux.

There was a FAQ page also, giving the prices, and here's how it looked in December of 2003:

If you were stupid enough to want to buy a license, here's the page that greeted you and your wallet, in May of 2004:


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