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SCO, unXis, Microsoft, Canopy, Carlyle, Elliott Associates, and Koch Industries - Updated
Thursday, March 10 2011 @ 12:22 AM EST

On January 5th, it was announced that Koch Industries had sued a Utah web host, Bluehost, seeking names of pranksters who had put out a spoof press release and then posted it on a website made to look like Koch's. Koch is asserting trademark infringement, unfair competition, breach of contract, and cyberpiracy under state and federal law, including a claim using the incredibly popular and oppressively flexible Computer Fraud and Abuse Act. It's the dernier cri in litigation, ya know. The New York Times provides some background on the case, which involved Koch Industries unmasking some anonymous defendants and trying to make them pay for making fun of them. Bluehost totally caved, by the way.

The case caught my eye originally because it was assigned to the Hon. Dale Kimball, the judge who originally presided over both SCO v. IBM and SCO v. Novell in US District Court in Utah. So it piqued my curiosity, and I took a look. And then the weirdest thing happened.

As I read the filings, particularly Public Citizens' Memorandum in Support of Motion to Quash, Issue Protective Order, and Dismiss Complaint [here's the Motion it supports, both PDFs], I was struck by two things: 1) the allegations seemed over the top in the SCO-esque sense and 2) Koch Industries is represented by Parsons Behle, the same law firm that represented Canopy Group in its litigation against Ralph Yarro, ousting him from his position with the company in 2004 and totally in 2005. He remained with SCO Group as chairman of the board, until the company filed for bankruptcy in 2007. But looking at the subpoena [PDF] Yarro's lawyers served on Parsons Behle in that litigation, I saw that the firm had represented Canopy Group from 1998 onward, meaning that for some time, they represented Canopy when Yarro was heading it up.

Woah. Is there a Yarro-Koch connection? A unXis connection? After all, unXis seems to have some connections to energy interests, and that's Koch's field. And always, over the years, in reporting on the SCO saga, who do we find peeking out from behind the curtain? Microsoft.

Here we go again: LinkedIn lists one of the people unXis says will be on their advisory board, Craig Feied, as a current Microsoft employee. That means not only is a Microsoft-organized entity trying to purchase Novell's patents, it has someone willing to advise unXis, an entity also just formed for the current purpose of buying up pretty much all the rest of SCO's assets. Then unXis today told the Salt Lake Tribune they've contacted Novell and asked them to work with unXis instead of appealing the bankruptcy court's ruling allowing unXis to buy the assets:

“What I suggested to them is if they work with us, they have access for [their] tool suites to our server base of over a million servers,” said Bolandz. “That makes business sense.”
Tool suites? Novell? That's more Attachmate, the folks trying to buy Novell. Will the new owners, Attachmate, go along with this travesty of a sale and partner with unXis? Is that what this is all about?

This is starting to creep me out.

SCO at the hearing about the sale and in the Declaration of Richard Bolandz [PDF], the CEO of unXis, identified Feied as "Director of the ER One Institutes for Innovation in Medicine". But LinkedIn, Jigsaw, and Facebook list Feied as Chief Health Strategy Officer at Microsoft. If you have an account, which I don't, you can see it, meaning you can't see the information unless you do, but I'd rather die, frankly, than give my info to those people, but someone sent me the url.

Microsoft has long denied being the wind beneath SCO's wings, but what do you think now? Microsoft is currently trying to buy Novell's patents, via a Microsoft-organized entity, and it also now will have someone on the advisory board of the company that bankruptcy court says can buy SCO's UnixWare and OpenServer assets, as well as getting licenses to use copyrighted UNIX materials that belong to Novell -- very much against old-Novell's will. This after a determined course of behavior on SCO's part to damage Linux in the marketplace.

Man. Partnering with Microsoft leads to horror, I've concluded.

So, what did I find about Koch connections?

The Canopy-Yarro-Koch Connection:

When Altiris, a Canopy Group company, went public in 2002, Ralph Yarro, the chairman of the board of SCO Group, was in charge of Canopy. In its SEC filing regarding the IPO, Altiris listed two facts: 1.) that Canopy was the majority shareholder of Altiris; and 2.) that Koch Industries was a customer of Altiris:

The following case studies illustrate how some representative customers are using our products to deploy and manage applications through different phases of the IT lifecycle. These case studies do not constitute endorsements by the respective customers of Altiris or our products and services….

Koch Industries

According to Forbes, Koch Industries Inc. is the second largest privately held company in the United States. Koch companies have IT operations that include over 8,000 individual workstations, approximately 800 of which are laptops, spread across twenty sites and multiple business units worldwide. Koch required an inventory management solution to extend existing inventory tracking and reporting capabilities that is capable of easily integrating with Microsoft SMS 2.0. The solution needed to provide detailed inventory information and satisfy its IT solution pricing, maintenance and upkeep requirements. In August of 2000, Koch Industries chose the Altiris Inventory Solution module over competing products based on price, ease of integration with SMS, low maintenance and upkeep requirements, and detail of inventory data. The Altiris Inventory Solution suite integrated natively with Microsoft SMS and enables Koch companies to perform comprehensive hardware and software inventory for WAN, LAN and mobile clients across various Windows environments. The Altiris suite also provides Koch companies with significant Web reporting capabilities, ranging from comprehensive listings of hardware assets to complete lists of installed software, for presentation in pre-packaged or customized user-designed reports.

That's our first connection, Canopy, Yarro and Koch Industries. At a minimum, Yarro knows them and has done business with them, back when he was at Canopy. That might explain the fact that Koch Industries and Canopy use the same law firm, Parsons, Behle & Latimer.

This book, Contributions to the American Economy [PDF] lists both Ray Noorda and the Koch Brothers as successful Dutch Americans. I don't know if that means they knew each other too, but I'd assume so, since Noorda was Canopy then too. Both Canopy Group and Koch Industries donated to the Romney for President campaign in 2008, by the way.

This listing of lobbyists lobbying Homeland Security, listed by the Sunlight Foundation, lists the areas where Koch Industries is active in that context:

9E5ED4F8-FE89-44BA-9052-F19204B5673B,REGISTRATION,Siff & Associates PLLC,Koch Industries Public Sector,2010-11-03 15:01:31, Financial Institutions/Investments/Securities|Energy/Nuclear|Law Enforcement/Crime/Criminal Justice|Homeland Security|Chemicals/Chemical Industry, "Issues related to federal energy and environmental policy; homeland security and critical infrastructure protection; criminal justice, legal, and judicial processes reform."
The ADTI-Microsoft-Koch Connection:

There is, according to this Deltoid article from 2004, a connection between ADTI and Koch Industries, as well. ADTI, which back then was funded by Microsoft and also by Koch, among others, also supported SCO's theory of Linux's beginnings, if you recall, that it was plagiarized Minix code.

Isn't this getting eerie?

There seems to be a Carlyle-Elliott-Koch connection too. Koch Industries and Carlyle Group share another lawyer, John Holland, a partner at Latham & Watkins.

If you really want to be creeped out, a representative of Paul Singer, head of Elliott Associates, the company that first tried to buy Novell outright and then accepted an investment role in Attachmate, the company that is buying Novell attended a meeting of the super-rich hosted by Koch Industries last October, according to this article. Small world, or what? And Stephen Cohen of Elliott Associates and David Koch both donated to Marco Rubio's successful Florida campaign. Top 100 Donations/Contributions in the 2000 Election Cycle to the National Republican Senatorial Committee include David Koch and Paul Singer of Elliott Associates. Birds of a feather.

All of this is reminding me that when SCO first started to trash talk Linux in 2002-3, a guy who had worked with then CEO Darl McBride wrote an article stating that in his view, McBride was motivated primarily by extreme right-wing political views. I discounted it at the time, and because Groklaw isn't political by choice I didn't even write much about that, wishing to avoid it, but now, I must admit, I'm starting to wonder.

Is it possible that, like ADTI, the money folks behind SCO misunderstand Linux and the GPL and think there is something unAmerican about it? ADTI's Ken Brown, if you recall, suggested in 2004 that Linux was plagiarized from Minix (which Andrew Tanenbaum himself debunked) and that Open Source should be banned in commerce and be state-sponsored for universities to use. ADTI issued its last press release in 2007.

Remember when Microsoft's Steve Ballmer called Linux Communism? Ken Brown did too. Here's part of what he alleged, as reported on TechWorld:

The conflicts with IP law are self-evident, Brown argues. "After a brief glance at much open source software development, it becomes readily apparent that a number of open source practices directly conflict with best practices associated with protecting intellectual property," he writes. "Both intentionally and unintentionally, users, developers, and distributors are in conflict with traditional, staid intellectual property law." Among the potential conflicts are "licensing, attribution, anonymity, derivative works, and indemnification", according to Brown.
The International Intellectual Property Alliance still says stuff like that, by the way, saying as recently as last year that countries be placed on a special trade watchlist if they recommend the use of open source software.

Then last year, Richard Clarke complained that the US was too slow to deal with cybersecurity and said that Microsoft had gone on the warpath to slow down any switch to Linux and Open Source:

Why has the national response to this problem been so slow? Lack of consensus on what to do and fear of the “R-word”—government regulation, Clarke contends. Then there’s Reason Number Five on his list, which basically boils down to “Microsoft.”

“Some people like things the way they are,” Clarke obliquely observes. “Some of those people have bought access.” Microsoft, he notes, is a prominent member of OpenSecrets.org’s “Heavy Hitters” political donor list. Most of the list’s stars are trade associations. “Microsoft is one of only seven companies that make the cut.”

The software giant’s largesse has shifted from Republicans back in the Clinton antitrust days to Obama, he continues, but the agenda is always clear: “Don’t regulate security in the software industry, don’t let the Pentagon stop using our software no matter how many security flaws it has, and don’t say anything about software production overseas or deals with China.”

Could this just be one of those awful dovetails? Back in 2003, the chairman of ADTI, Gregory Fossedal, wrote this:
Smart investors are putting their shorts on the computer software industry, with a special emphasis on the pitiful, helpless giants such as Sun Microsystems, Oracle, and even Microsoft. Awash with cash and wishy-washy bureaucracy that would have scandalized their founders 25 years ago, these are the giants that have the farthest to fall -- and will have the most difficult time dealing not only with emerging market piracy, but the more subtle assault of "open source" software termites operating in the U.S. and Western Europe.

Straightforward piracy is an issue solved for the software industry 25 years ago by a brilliant young executive named Bill Gates, who realized that only by basing software on undisclosed "source code" could the industry ever really thrive. Today, however, the quasi-monopoly enjoyed (in various sectors) by Microsoft, Oracle, and Sun is highly vulnerable to outright theft by such nations as Brazil, China, and Russia -- to name just three....

Open Source is termites. Bill Gates is brilliant. Security comes from obscurity. But of course, there was more from him:
Sun and Oracle have even tried to sidle up to the Linux and open-source movement. In effect, they have invited the termites into their house, hoping that after a little munching a symbiotic relationship can be worked out. "Let them eat Microsoft," is the motto, and, to be sure, there is a special hatred reserved only for Bill Gates among the community of programmers who couldn't get hired, or compete, with the Redmond wunderkind over several generations of products. . . .

The little competitors, indeed, are already fighting amongst themselves, much as some types of insects and carnivorous fish eat themselves. Heck, they're already suing each other. In this too, the software industry takes much hope, much as the recording industry delighted in its ability to crush this music-sharing program, or that overseas piracy operation. Pirates, one can kill -- but piracy, especially once it is welcomed into the intellectual community, just changes its address. And termites, unless completely exterminated, just keep munching.

He went on to advise people to short proprietary software companies and buy SCO stock:
On the buy side, there are dozens of feisty young companies -- Red Hat, Sco Group, and VA Software -- that are already taking advantage of the new global paradigm.
Why not just buy SCO?

By then, SCO had stopped selling Linux, but then again, they had SCOsource, speaking of vermin eating away at other people's stuff.

In 2004, ADTI said Linux was on a collision course with patents. That certainly dovetails with Microsoft's message and behavior. ADTI also said selling GPL'd software was "inane", because you can get it for free.

Sigh. Tell Red Hat. SCO is heading to extinction, after all, but Red Hat is piling its gold in warehouses, so to speak. Methinks ADTI isn't someone whose advice you want to follow with your wallet.

Here's a page that collected more resources for you to check out on ADTI and Microsoft and Koch Industries, if you are interested in digging deeper. Greenpeace released a report [PDF] on Koch Industries' funding of global warming denial. If you were a major polluter, you might think that was a sane strategy, and Koch Industries made the top ten worst corporate polluters in the US in this study by the Political Economy Research Institute last year. As Congressman Henry Waxman pointed out, you can rewrite laws, but you can't rewrite the laws of nature.

You can find more resources in Wikipedia's article on the company. But while both Microsoft and Koch were funding ADTI, Koch's interest was more in tobacco, I gather. ADTI used to try to prove it wasn't harmful and the government should mind its own business.

To be fair, here, for the other side of the coin, are some of the honors and awards Koch Industries has won over the years. And here is Charles Koch in his own words a few days ago in the Wall Street Journal. Here's the Koch page where the company answers its critics, including a statement about the litigation over the parody, and where we find a statement that Fred Koch was a supporter of the John Birch Society, due to his anti-communist views.

How tightly are all these folks intertwined? I can't say, because I don't know. These are bread crumbs along a trail. Maybe rich folks just like to hang around together and think a lot alike by sheer coincidence. But, like I say, I found enough that it's creeping me out. I hate to even write about it, knowing I will have to watch comments closely to keep the environment pleasant here, but Groklaw is about digging to find the truth. And these are the artifacts that I dug up.

What it all means, I do not know, yet. I know it would be irresponsible not to tell you what I found. But please keep in mind that Groklaw takes no political positions, and we ask you to keep your comments polite. Thank you.

More on the Litigation: Koch Industries v. John Does 1-25:

There is a hearing on April 28 in Judge Kimball's courtroom on the Motion to Quash Subpoenas, Motion for Protective Order and Motion to Dismiss Koch Industries' complaint:

22 - Filed & Entered: 03/07/2011
Notice of Hearing on Motion
Docket Text: NOTICE OF HEARING ON MOTIONS re: [12] Defendant's MOTION to Quash Subpoenas, MOTION for Protective Order and MOTION to Dismiss Complaint : (Notice generated by Kim Jones) Motion Hearing set for 4/28/2011 at 03:00 PM in Room 220 before Judge Dale A. Kimball. (kmj)
Here's Koch Industries' complaint [PDF]. If you'd like to see the parody press release, it's attached as Exhibit C [PDF].

In Koch Industries' reply [PDF] to the defendants motion, they write:

Speech—including anonymous speech—is protected by the First Amendment. Trademark infringement and misleading impersonations are not. Koch brought this lawsuit to stop Defendants from stealing and misleading, not to stop them from speaking.

Defendants are free to express their views in innumerable ways, and they have numerous ways to do so anonymously. They may, for example, write anonymous letters to the editor, post pseudonymous websites that are not confusingly similar to Koch’s website, or give anonymous interviews with newspapers (which they have done since the filing of this action) to voice their criticism of Koch. The Federalist Papers of the late 18th Century are perhaps our Nation’s most cherished example of anonymous political expression; they were published under the pseudonym “Publius”; only later was it revealed that Alexander Hamilton, James Madison, and John Jay were the authors.

What Hamilton, Madison, and Jay did not do, however, was publish The Federalist Papers under the name “George Clinton” (then-Governor of New York, an outspoken critic of the Constitution), attach Clinton’s photo to the publications, and lead the world to believe that the views were attributable to Clinton. That is what Defendants did in this case. That is not protected by the First Amendment. In fact, it is prohibited by federal law....

Contrary to Defendants’ claims, Defendants’ conduct and identities are not protected by the First Amendment when they steal someone else’s identity, pass themselves off as that person, and perpetrate what they themselves describe as a “hoax.” (Id.) Perpetrating a “hoax” with respect to Koch’s business to further Defendants’ own competing agenda is not protected—it is simply false commercial speech....

Koch also meets the other evidentiary requirements for obtaining the identity of an anonymous Internet speaker, namely: Koch’s subpoenas sought information about Defendants’ identities for the proper purpose of serving the Complaint; the subpoenas are specific and directly related to Koch’s claims; no other adequate means exist for obtaining the information sought in the subpoenas; and Defendants’ identities are necessary to proceed with this litigation. Finally, Defendants had no expectation of privacy as to their identities: they agreed to the webhost’s terms of service that permitted disclosure of information about them. Accordingly, this Court should deny Defendants’ motions....

On January 3, 2011, this Court granted Koch’s request to serve third-party subpoenas on Fast Domain and BlueHost.com so that Koch could discover the Defendants’ identities to serve legal process on them in accordance with federal law. (Order Granting Motion for Accelerated Discovery, ECF No. 7.) In accordance with the Court’s order, Koch served a subpoena duces tecum on January 4, 2011 to BlueHost.com for information related to the identity of the operator(s) of the Infringing Website. (See ECF No. 9.), and on January 5, 2011, Koch served a subpoena duces tecum to Fast Domain for information related to the identity of the registrant(s) of the Infringing Domain Name. (See ECF No. 8.) Fast Domain and BlueHost.com provided documents in response to Koch’s subpoenas on January 6, 2011. (Declaration of Judith Powell, attached as Ex. A (“Powell Decl.”) ¶ 5.)

As you see, Bluehost and Fast Domain did not notify the Does, but just handed their names over. Does replied [PDF] that the speech is wholly noncommercial, which dooms Koch's trademark, unfair competition, and cybersquatting claims. "The only marketplace relevant here is the marketplace of ideas," they write. As for their computer-hacking and breach-of-contract theories, Does warn that Koch's claims "ask this Court to go well beyond the boundaries of existing law, with staggering implications for online speech. Koch does not deny that its theories, if accepted, could expose any speaker to criminal or civil liability simply for quoting or citing the content of a website in a way that the website's owner does not like." The claims they are referring to in the Koch complaint are Count II on page 9, which calls it cyberpiracy to register without "authorization" the domain name koch-inc.com (Koch's is kochind.com). The contract claim begins on page 13, Count VI, accusing them of putting materials on their parody site that came from Koch's real site, and Koch claims the the use of its site is subject to terms and conditions, including the following:
The information and materials on this Web site and all intellectual property rights in or relating to them are the property of the Koch Companies, and any reproduction, publication, broadcast or posting by you for your own benefit is prohibited unless you obtain prior written approval from the Koch Companies.
Wow. No fair use in Koch Industries' world? On that basis, Koch claims contract violation. And among the list of relief Koch asks for is an injunction preventing the Does even from "accessing or using any content of Plaintiff's websites except as permitted by law". They want to recover statutory damages in the amount of $100,000 under 15 U.S.C. Section 117(d) for the "Infringing Domain Name." Oh, they also want Does to have to pay Koch its costs in connection with suing the Does, including attorneys' fees and expenses.

Unbelievable. Well, one thing is for sure. Koch Industries lacks a sense of humor.

The Does ask the court to "reject Koch's sweeping proposal to criminalize political speech on the Internet." From their filing:

The complaint also alleges hacking in violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 (CFAA), and breach of contract based on defendants’ access to the company’s home page in violation of the site’s “Terms of Use.” Id. ¶¶ 35-37, 43-47. Although the complaint suggests that defendants illegally hacked into Koch’s website, it alleges only that the defendants visited the company’s public home page. Id. ¶ 36. Koch apparently considers this access “fraudulent” and “unlawful” because its Terms of Use—buried behind a small link at the bottom of its home page—did not authorize access to the site for the purpose of creating a spoof. See Compl. Exh. B (showing “Terms of Use” link).

The company then filed an ex parte motion for accelerated discovery, requesting authority to subpoena Bluehost.com and the defendants’ domain registrar, FastDomain. See Mem. in Supp. of Mot. for Accelerated Discovery, Dec. 29, 2010 (Doc. 5). In its memorandum supporting that motion, Koch relied on cases granting plaintiffs authority to conduct discovery into the identities of anonymous defendants, but did not inform the Court of the requirements imposed by those cases as a prerequisite to such discovery—including notice to the defendant, an initial evidentiary showing, and a balancing of the parties’ interests. Id. at 6-7. Nor did Koch attempt to satisfy those requirements. Although the motion contended that the defendants caused Koch “substantial harm,” the only actual damages alleged in the complaint, aside from the cost of bringing this action, was the “time and money” allegedly spent responding to an unidentified number of media inquiries. Id. at 2; Compl. ¶ 19. And although Koch asserted that “several online news sources reported on the false press release, including the Economist and the New York Times,” it failed to mention that those sources correctly identified the press release as a spoof. Mem. at 3.

On January 3, 2011, this Court granted Koch’s ex parte motion. (Doc. 7). Koch then subpoenaed Bluehost.com and FastDomain, which apparently responded by immediately turning over identifying information to Koch.

P.S. One final note of small-worldiness. Bluehost is also the same Utah web hosting company for George Hotz, being sued currently by Sony.

Update: In going through some older papers, I found a printed out email I received that may be illustrative. At the time I found it weird, off-base, and just kind of crazy. But in the context of this article, I thought I'd reproduce it for historians, noting that I get a lot of phony email using names that are not who they claim to be. Nevertheless it will show you how some view the GPL and Linux:

From: "William Jeansonne"
Date: January 21, 2005 12:39:25 PM EST
To: PJ@groklaw.com
Subject: You socialists are all the same

I am going to laugh like hell the day Linux is deemed counterfeit software, and prove that socialist minded thieving rat programmers stole UNIX System V code and pasted into Linux. Hopefully, the discovery will come soon, but knowing IBM they will destroy the evidence.

By the way. Do you actually have a law degree? LOL

Will Jeansonne

I am not a socialist, of course. I don't know why this individual thought I was. The rest of the message is delusional as well, obviously, as things eventually played out to inform us.

Update 2: The Hon. Judge Dale Kimball has dismissed the Koch Brothers case and ordered [PDF] that they may not use any information gleaned from subpoenas that previously issued. Will the ISPs that just rolled over catch a clue about the First Amendment now, do you think?


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