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I'll Huff and I'll Puff and I'll Huff and I'll Puff Some More -- If That Doesn't Work, Then I'll Hold My Breath
Wednesday, August 13 2003 @ 01:44 PM EDT

SCO has "terminated" Sequent's UNIX System V software contract. This may be setting the stage for some legal action on SCO's part down the road, or just dotting an i (Sequent is already named in the case, but they were added later, in the Amended Complaint, so SCO had to wait the contractually required number of days to "terminate" Sequent after that), or it could be just another puff of FUD smoke, or two of the three. Hopefully, IBM will be able to resist the urge to go off into the woods and slit its wrists.

SCO's press release says it was "terminated" for the following reason:

. . .for improper transfer of Sequent's UNIX source code and development methods into Linux. As a result, IBM no longer has the right to use or license the Sequent UNIX product known as "Dynix/ptx". Customers may not acquire a license in Dynix/ptx from today's date forward.


The press release also enumerates Sequent's sins in greater detail than SCO normally does, and we can probably assume this is the legal theory they will be following:
SCO's System V UNIX contract allowed Sequent to prepare derivative works and modifications of System V software "provided the resulting materials were treated as part of the Original [System V] Software." Restrictions on use of the Original System V Software include the requirement of confidentiality, a prohibition against transfer of ownership, and a restriction against use for the benefit of third parties. Sequent-IBM has nevertheless contributed approximately 148 files of direct Sequent UNIX code to the Linux 2.4 and 2.5 kernels, containing 168,276 lines of code. This Sequent code is critical NUMA and RCU multi-processor code previously lacking in Linux. Sequent-IBM has also contributed significant UNIX-based development methods to Linux in addition to the direct lines of code specified above. Through these Linux contributions, Sequent-IBM failed to treat Dynix as part of the original System V software, and exceeded the scope of permitted use under its UNIX System V contract with SCO.
In Other News of Interest

Here's something interesting, because it shows what the penalties for false and misleading statements can be, something I've gotten emails about. Here is a CEO who faces up to 30 years in a criminal case for issuing false press releases (he separately is facing civil charges):

The former CEO of technology firm eConnect pleaded guilty to overseeing a scheme to artificially inflate the company's stock price by issuing false financial information, federal prosecutors said.

Thomas Hughes, 55, was charged with three counts of securities fraud for distributing false press releases and making misleading statements on the company's Web site, the U.S. Attorney's Office said Monday in a statement. . . .

Hughes was scheduled for sentencing Dec. 1 by U.S. district judge Nora Manella. He faces up to 30 years in prison for the securities fraud charges and an indefinite maximum sentence for the contempt count.

"Manipulation of the markets will not be tolerated," U.S. attorney Debra Yang said in the statement. . . .

Prosecutors say Hughes helped send out press releases claiming eConnect had obtained a $20 million investment in quality asset-backed bonds, started a stock repurchase program, and received a purchase order of nearly $1 million for one its products. In reality, the bonds had little value and no stock buyback program existed, prosecutors said.

So, now you know the worst-case scenario for such behavior. Whether IBM's accusations against SCO in its Amended Complaint will end up being pursued by regulators and also be proven true, I don't know, but even raising the charge is something any company would need to take seriously. I expect they are carefully looking at what they say and do before they speak, and wouldn't that be a refreshing change?

Update: Here's the Declaration of a Sequent guy, Roger C. Swanson, who was Director of Software Engineering at Sequent and negotiated the agreement with AT&T, submitted by IBM in 2004, along with a group of others, including David Frasure, who negotiated the Sequent agreement for AT&T, on the other side, who all testify to what the contract actually intended and was understood to mean, so you can see how off the wall SCO's allegations were.

For historians, in case the press releases disappear again down the rabbit hole, here's SCO's press release in full:

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

The SCO® Group Announces Final Termination of IBM / Sequent's Contract to Use or License Dynix Software

IBM's Disregard of Sequent's Contract With SCO Leads to Final Termination of UNIX License

LINDON, Utah, Aug 13, 2003 -- The SCO® Group (SCO)(Nasdaq: SCOX) delivered final written notice yesterday to Sequent Computer Systems for termination of its UNIX® System V software contract. Sequent is now owned by IBM. The Sequent (IBM) contract was terminated for improper transfer of Sequent's UNIX source code and development methods into Linux. As a result, IBM no longer has the right to use or license the Sequent UNIX product known as "Dynix/ptx." Customers may not acquire a license in Dynix/ptx from today's date forward.

SCO's System V UNIX contract allowed Sequent to prepare derivative works and modifications of System V software "provided the resulting materials were treated as part of the Original [System V] Software." Restrictions on use of the Original System V Software include the requirement of confidentiality, a prohibition against transfer of ownership, and a restriction against use for the benefit of third parties. Sequent-IBM has nevertheless contributed approximately 148 files of direct Sequent UNIX code to the Linux 2.4 and 2.5 kernels, containing 168,276 lines of code. This Sequent code is critical NUMA and RCU multi-processor code previously lacking in Linux. Sequent-IBM has also contributed significant UNIX-based development methods to Linux in addition to the direct lines of code specified above. Through these Linux contributions, Sequent-IBM failed to treat Dynix as part of the original System V software, and exceeded the scope of permitted use under its UNIX System V contract with SCO.

SCO gave Sequent-IBM two months written notice prior to termination, as required by contract. IBM failed to cure its breach of the Sequent-IBM contract, or to offer any solution whatsoever to cure its breach. SCO's termination of the Sequent-IBM UNIX System V license is self-effectuating and does not require court approval. SCO previously terminated IBM's right to use or license IBM's UNIX product known as AIX. From and after June 16, 2003, customers no longer have the legal right to acquire new AIX licenses.


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