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SCO Falls Downstairs, Hitting its Head on Every Step - Updated: SCOsource is Born
Saturday, May 17 2003 @ 06:30 PM EDT

As you likely have heard, SCO has hit IBM with a lawsuit, alleging misappropriation of trade secrets, unfair competition, breach of contract and tortious interference with SCO's business. [Update: The Complaint [PDF], as originally filed in Utah state court; text.]

Why anyone cares, outside of IBM, is because SCO has now sent letters to commercial users of Linux, warning them that they may be liable for IP infringement, and it looks like it intends to go after RedHat and SUSE as well as IBM. Some have said that if SCO is successful in its litigation, "it could undermine one of the basic tenets of the open software movement, of which Linux has been the most successful example. Linux is a Unix derivative..."

Pardon my curled lip.

Regarding SCO's claims, first, Linux , the kernel, is not a "Unix derivative". It was written from scratch. Second, the Free Software Foundation's software is also all written from scratch, and they have a policy of replacing any contested code, as Gartner's has pointed out . Inexplicably, SCO has posted this Gartner's report on their web site, evidently not realizing that it points out the simple solution to any IP claims they may have against Linux, or GNU/Linux.

[Update: SCO has removed it. You can still find it at Gartner's, and also here and on Wayback. It's titled, "SCO's Lawsuit Sends a Warning to Linux IS Shops" by George Weiss, and it's mentioned in SCO's May 14, 2003 press release announcing their suspension of any further Linux distribution.]

Gartner says if you're worried about your code due diligence would include just checking with the Free Software Foundation.

Here is what Richard Stallman said about the SCO claims in a very interesting series of articles on MozillaQuest Magazine, where he offers a simple fix -- just show the code SCO thinks is copied, and it'll be taken out and replaced:

"If any AT&T-copyrighted code was copied into GNU, this occurred despite our continued efforts to prevent such copying. Our intention was to write code from scratch, and we have surely done so 99% of the time or more. If SCO can find code that was copied and is not fair use, they merely have to show it to us. We will take out the AT&T code and replace it."
And here is what he said regarding FSF policy for programmers regarding Unix source code:
"We made deliberate efforts to prevent copying of any Unix source code into the GNU system. We have had written recommendations for GNU developers since the 80s, telling them not to even look at Unix source code while writing GNU programs. I don't know whether the developers of Linux, the kernel, have stated such policies, but at least the GNU part of GNU/Linux should be safe."

Folks, GNU stands for "GNU's not Unix". For that matter, IBM has policies too. While I can't speak to the contract dispute between them and SCO, because all the facts regarding their dealings are not on the table yet, some of IBM's Linux kernel developers were interviewed on Slashdot, and they were specifically asked if they got to see the AIX source code, the code SCO claims was copied. Their answer makes it clear that IBM took steps to prevent it. Here's how they answered:

"First of all, before any of us were allowed to contribute to Linux, we were required to take an 'Open Source Developers' class. This class give us the guidelines we need to participate effectively in the open source community -- both IBM guidelines and lessons learned about open source from others in IBM. We are definitely not allowed to cut and paste proprietary code into any open source projects (or vice versa!)"

What is so weird about the SCO position is it has avoided specifying exactly what code they claim is allegedly copied. They say they'll show it at trial, which is obviously a long way off. Meanwhile, they are causing a lot of PR damage.

The Only Thing We Have to Fear Is...

Hmm... you don't suppose? ...

How weirdly coincidental: Recently Microsoft Chief Executive Steve Ballmer said Linux "customers will never really know who stands behind this product."

Why, that's exactly what SCO is saying in its complaint. It is known that SCO is having money troubles. Could it be... ?? Here's Linus Torvalds' reaction:

"I don't personally think they have any IP rights on Linux, and I agree, it looks more like a suit over the contract rather than over Linux itself. I don't think they are going to win it (very very weak arguments, since at least from a technical perspective I don't think the IBM involvement has been that significant, and SCO was losing out _long_ before IBM started pushing Linux). However, my personal (maybe overly cynical) suspicion is that even _they_ don't think they'll win the suit, and it may be nothing more than a way to force IBM back into license discussions over UNIX itself.

"So I think that 100-day license revocation thing may actually be the most important part of the whole suit, and that the rest might be just the excuse. If I was SCO and looking at IBM, I'd have long since noticed that IBM has been talking about Linux taking over more and more of their current AIX usage, to potentially eventually replace it altogether.

"So SCO sees IBM largely going away as a licensee in a few years - and while I certainly don't have any knowledge of how much that means for SCO, I would not be surprised if IBM licenses are quite a noticeable part of SCOs receivables. And what would you do? You want to get IBM back to the discussion table over licensing _before_ IBM starts to consider the UNIX licenses for AIX to be no longer worth it."

Here's Bruce Perens:

"He's saying this stuff exists, but he's not willing to reveal it. Well, maybe we'll hear about this in court, but frankly, maybe we won't, because they'll try to seal it all....It sounds like he's trying to FUD Linux in general.... They should just show us what code they have problems with. We'll take a look at it or we'll just replace it. Keeping us in the dark is just silly."

Red Hat:

"Given that we have extensive legal resources put forth into making sure we respect the valid intellectual property rights of companies, we are not concerned with the statements that have been made...."

Some more reactions and some more stories.

The community has reacted point by point also. The consensus is that, while no one but the parties can yet know the true facts as to the contract dispute between IBM and SCO, as far as the Linux kernel is concerned, there probably isn't anything to fear but fear itself.

And that, in a phrase, may be exactly what this is all about. Good Olde Fud takes another turn around the block.

David Boies has agreed to represent SCO. I am trying to remind myself that our legal system is predicated on lawyers sometimes representing people they don't personally admire, and the system really does depend on someone being willing to take on unpopular clients. I know Boies doesn't use email, or at least he didn't the last time I checked. So maybe he doesn't quite get the tech ... ah, hang it all, there's no way around it: I feel bad he's chosen to represent them, especially after I posted an Ode singing his praises, and I hope he loses.

UPDATES

Update 2010: Because SCO, in Chapter 11 bankruptcy, sold its domain name, www.caldera.com, materials that they had blocked by a robots.txt file are no longer blocked. So you can now see what the web site looked like in 2003, and back to 1996, actually, and onward. Here's the Gartner report referenced, which SCO published, with a link on its homepage (as of June 2003) titled "Warning to Linux Shops".

Update: Here is the press release announcing SCOsource:

SCO Establishes SCOsource to License UNIX Intellectual Property

LINDON, UT USA 09/16/2002

SCO, 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

NEW YORK, LinuxWorld 2003, Jan. 22 /PRNewswire-FirstCall/ --

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:

-- 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 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.

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 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

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.

"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.

Appointment 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.

Parties interested in purchasing the SCO System V for Linux license should e-mail SCO at sales@sco.com or call 1-888-465-4689 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 scosource@sco.com.

About SCO

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, 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.

And here's SCO's May 14, 2003 press release announcing that it would no longer distribute Linux (you can see it announced on its homepage also, thanks to Internet Archive):

SCO Suspends Distribution of Linux Pending Intellectual Property Clarification; Announces Greater Focus on UNIX and SCOx Strategy

SCO Suspends Sales of Linux, Alerts Customers That Linux Is an Unauthorized Derivative of UNIX and That Legal Liability May Extend to Commercial Users SCO Reaffirms Commitment to SCOx, SCO's Growth Strategy Through Web Services

LINDON, Utah, May 14, 2003 -- The SCO® Group (SCO)(Nasdaq: SCOX), the owner of the UNIX operating system, today warned that Linux is an unauthorized derivative of UNIX and that legal liability for the use of Linux may extend to commercial users. SCO issued this alert based on its findings of illegal inclusions of SCO UNIX intellectual property in Linux. The company also indicated that until the attendant risks with Linux are better understood and properly resolved, the company will suspend all of its future sales of the Linux operating system.

"SCO is taking this important step because there are intellectual property issues with Linux," said Chris Sontag, senior vice president and general manager of SCOsource, The SCO Group. "When SCO's own UNIX software code is being illegally copied into Linux, we believe we have an obligation to educate commercial users of the potential liability that could rest with them for using such software to run their business. We feel so strongly about this issue that we are suspending sales and distribution of SCO Linux until these issues are resolved."

SCO will continue to support existing SCO Linux and Caldera OpenLinux customers and hold them harmless from any SCO intellectual property issues regarding SCO Linux and Caldera OpenLinux products.

Going forward, SCO will have a stronger focus on UNIX and the company's growth strategy around Web services, SCOx. The company introduced SCOx in April as the company's Web services framework and plans to introduce new Web services applications from third party developers in August at SCO Forum, the company's annual conference.

"SCO remains committed to servicing our customers and as such, we intend to continue our growth strategy around SCOx -- the Web services framework for small-to-medium businesses and branch offices," said Darl McBride, president and CEO, The SCO Group.

In a separate announcement released today, SCO gave guidance on expected results for its 2nd fiscal quarter. The company expects to report net income of $4.0 million on revenue of $21 million.

In addition, SCO today also posted an analyst report from Gartner to their Web site at www.sco.com/scosource entitled, "SCO Lawsuit Sends a Warning to Linux IS Shops." The executive summary of the report asks whether Linux is safe from encumbrances.

About The SCO Group

The SCO Group (Nasdaq: SCOX) helps millions of customers in more than 82 countries to grow their businesses everyday. Headquartered in Lindon, Utah, SCO has a worldwide network of more than 11,000 resellers and 8,000 developers. SCO Global Services provides reliable localized support and services to all partners and customers. For more information on SCO products and services visit http://www.sco.com .

SCO and the associated SCO logo are trademarks or registered trademarks of Caldera International, Inc. in the U.S. and other countries. UNIX, used under an exclusive license, is a registered trademark 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 their respective owners.

Update: And since the article about SCO sending letters is now only available on Internet Archive, I'll put some of the salient facts from it here as well, just in case it disappears too and to ensure the history is complete:
The SCO Group, which owns key components of the Unix operating system, has sent letters to Linux customers claiming the software is an "unauthorized derivative" of its property.

The letters, which were sent earlier this week to companies around the world, warned that commercial users of Linux may face legal liability for using the operating system without a license from SCO.

The move follows the filing of a $1 billion lawsuit in March against International Business Machines Corp. for allegedly taking bits of Unix code and transferring them to Linux. IBM dismissed the lawsuit as unfounded.

If the latest tactic is successful, it could undermine a tenet of the Linux movement, which has been growing in large part because of the software's very low cost and freedom from the hassles of proprietary software, such as Microsoft Corp. (MSFT)'s Windows.

But even if SCO fails to convince Linux users to pay for licenses, it has raised fear, uncertainty and doubt - or "FUD" - about Linux and whether end users can be held liable if other portions are found to be what amounts to stolen property.

"When SCO's own UNIX software code is being illegally copied into Linux, we believe we have an obligation to educate commercial users of the potential liability that could rest with them for using such software to run their business," Chris Sontag, a SCO senior vice president, said Wednesday.

Lindon, Utah-based SCO acquired control of Unix intellectual property from Novell, which had bought the rights in 1992 from AT&T. AT&T's Bell Laboratories created Unix for minicomputers in the late 1960s and commercialized it in the 1980s.

Linux, a Unix derivative first developed in the early 1990s by Finnish college student Linus Torvalds, has in recent years gained in popularity because of its low cost, reliability and ability to run on inexpensive computer hardware.

In an e-mail interview Wednesday, Torvalds said he has not heard what components of Linux might be infringing.

"I'd dearly love to hear exactly - what - they think is infringing, but they haven't told anybody," he said. "Oh, well. They seem to be more interested in FUD than anything else."

SCO also announced it was pulling its own version of Linux, which may be significant because it was distributed under the same license as other versions. That license allows for the free redistribution of the software.

"I suspect the current letter is because their lawyers finally noticed that as long as they ship Linux, they are themselves bound by the license under which it ships," Torvalds said.

Some observers believe SCO sued IBM in an effort to be bought - a charge SCO denies. SCO's stock price has nearly doubled since it filed the lawsuit, said Bruce Perens, an open-source software advocate and consultant. He said he believes it's a tactic of SCO's investors to recoup their investment.

"They don't care who or what they hurt," he said.

"Everyone is protected except the users," he said. "We're trying to alert users there are these problems. We're trying to do this in a favorable fashion. ... The hot potato is being passed. We're trying to keep them from being burned."

Here's the text of the March 7, 2003 press release about suing IBM:
SCO FILES LAWSUIT AGAINST IBM

SCO FILES BILLION DOLLAR LAWSUIT FOR MISAPPROPRIATION OF TRADE SECRETS,
TORTIOUS INTERFERENCE, UNFAIR COMPETITION AND BREACH OF CONTRACT

LINDON, UTAH--MARCH 7, 2003--The SCO(R) Group (SCO) (Nasdaq: SCOX), the owner of the UNIX operating system, announced today that it has filed legal action against IBM (NYSE:IBM) in the State Court of Utah, for misappropriation of trade secrets, tortious interference, unfair competition and breach of contract. The complaint alleges that IBM made concentrated efforts to improperly destroy the economic value of UNIX, particularly UNIX on Intel, to benefit IBM's new Linux services business.

IBM originally entered into their UNIX license agreement with AT&T in February 1985 in order to produce the AIX operating system. These agreements require that the UNIX software code be held in confidence, and prohibit unauthorized distribution or transfer.

In 1995, SCO purchased the rights and ownership of UNIX and UnixWare that had been originally owned by AT&T. This included source code, source documentation, software development contracts, licenses and other intellectual property that pertained to UNIX-related business. SCO became the successor in interest to the UNIX software licenses originally licensed by AT&T Bell Laboratories to all UNIX distributors, including HP, IBM, Silicon Graphics, Sun Microsystems, and many others.

As a result of IBM's unfair competition and the marketplace injury sustained by SCO, SCO is requesting damages in an amount to be proven at trial, but no less than $1 billion, together with additional damages through and after the time of trial.

SCO is also demanding that IBM cease these anti-competitive practices based on specific requirements sent in a notification letter to IBM. If these requirements are not met, SCO will have the authority to revoke IBM's AIX license 100 days following the receipt of SCO's letter.

SCO's letter and complaint have been filed by the law firm of Boies, Schiller and Flexner. SCO announced in January that the law firm had been retained to research and investigate possible violations of SCO's intellectual property.

"SCO is in the enviable position of owning the UNIX operating system," said Darl McBride, president and CEO, SCO. "It is clear from our stand point that we have an extremely compelling case against IBM. SCO has more than 30,000 contracts with UNIX licensees and upholding these contracts is as important today as the day they were signed."

A copy of SCO's complaint is on file with the State Court of Utah and can also be found at www.sco.com/scosource.

ABOUT THE SCO GROUP

The SCO Group (NASDAQ: SCOX) helps millions of customers in more than 82 countries to grow their businesses with UNIX business solutions. Headquartered in Lindon, Utah, SCO has a worldwide network of more than 16,000 resellers and 8,000 developers. SCO Global Services provides reliable localized support and services to all partners and customers. For more information on SCO products and services visit http://www.sco.com.

SCO, SCOSOURCE, UNIXWARE and the associated SCO logo are trademarks or registered trademarks of Caldera International, Inc. in the U.S. and other countries. UNIX, used under an exclusive license, is a registered trademark 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.

And here's the August 26, 2002 press release about Caldera changing its name to SCO Group. Here's the May 14, 2003 press release about signing a second SCOsource license with, as we later learned, Microsoft. Here's the May 5th media statement on an alleged DOS attack. And the February 21, 2003 announcement that SCO retained Silverman Heller to help find them investors.

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

For historians, in case it disappears again, here is the Gartner article:

SCO's Lawsuit Sends a Warning to Linux IS Shops

The SCO Group's suit against IBM could be a way to make SCO a more attractive takeover target. Two key questions are whether Linux is safe from encumbrances and how IBM will ensure AIX's future.

16 April 2003

George Weiss
Research Note
Note Number:E-19-7659

The SCO Group's suit against IBM could be a way to make SCO a more attractive takeover target. Two key questions are whether Linux is safe from encumbrances and how IBM will ensure AIX's future.


What You Need to Know

IS departments using Linux or other open-source code should have an internal process, possibly with advice from their legal departments, to perform due diligence (see Note 1) on the nature and origin of open-source code for possible infringement of patents. System administrators must be admonished to submit open-source code to inspection for potential violation of patents. An open-source quality assurance process should determine and approve allowable code for production systems. Such efforts may slow adoption of Linux in high-end production systems of critical applications.

If IBM is found to be in violation according to the complaint, its options will be to settle on a compromise in damages or to buy out SCO. It is unlikely IBM will acquire SCO and add to an already complex portfolio with SCO's aging OSs, especially with Linux as IBM's mainstream direction. However, IBM is committed to protect its users and maintain Unix license rights. Thus, IBM would opt for a settlement (0.8 probability if the suit is upheld).

Regardless of the outcome of the suit, SCO has lost significant goodwill in the Linux community. SCO's lawsuit can be construed as an attempt to raise shareholder value through claims of intellectual-property infringement or to pressure IBM into an acquisition. If the SCO lawsuit is not upheld, the SCO installed base would face a potentially weakened SCO and should then plan for migration from OpenServer and UnixWare within the next five years.

Analysis

On 7 March 2003, the SCO Group, which holds all the intellectual property rights to the Unix operating system (OS), filed suit against IBM for more than $1 billion in the State Court of Utah alleging that IBM made "concentrated efforts to improperly destroy the economic value of Unix, particularly Unix on Intel, to benefit IBM's new Linux services business."

The SCO complaint alleges that IBM deliberately undermined and sought to destroy the market value of Unix in the enterprise market to promote Linux. The complaint claims that IBM was privy to trade secrets, in part from the Monterey project, which was aimed at developing an enterprise version of Unix for Intel. The complaint further claims that IBM abandoned Monterey for Linux and contributed Unix code to the open-source community. SCO claims misappropriation of trade secrets, unfair competition and breach of contract.

IBM has stated that its Unix license is expressly worded as "irrevocable and perpetual." However, SCO believes it has grounds to revoke IBM's AIX license contract because IBM made parts of the System V code in AIX available to the open-source community, and SCO claims that "irrevocable and perpetual" only apply if the conditions on misappropriation are not violated.

In addition, SCO has cautioned Linux users who may knowingly or unknowingly have used SCO's shared libraries in enabling Unix applications to run under Linux. Although Linux distributors such as Red Hat are denying this, Red Hat, like most other independent software vendors, uses indemnification clauses in the end-user license agreement to absolve itself from liability or damages based on the content of the software. SCO has indicated that the libraries are available from SCO for $149, or lower with discounts. The most exposed Unix vendor is IBM. Hewlett-Packard has a different type of agreement, according to SCO, but also includes a misappropriation restriction on the source. Sun Microsystems made a buyout, but with an agreement not to make source code available.

SCO maintains that IBM has offered code from AIX, which included SCO's intellectual property, to the Linux open-source community to build Linux into an enterprise OS, and effectively killed SCO's Unix market for Intel. The Monterey project, in 2000, was an initiative through which IBM, SCO, Intel and original equipment manufacturers were to produce a single-source, high-volume Unix for IA-64. At the time, Linux was still too immature to determine its fate as an enterprise OS, but, according to SCO, with IBM's contributions, Linux has rapidly progressed into an enterprise-capable OS. Nevertheless, SCO could have also benefited from the rise of Linux. SCO's claim against IBM of theft of intellectual property contributed during Monterey for a high-end Unix OS for Intel is arguable. Sequent (later acquired by IBM) was another member of the Monterey Project that had expertise in high-end Unix capability for scalable Intel servers — for example, nonuniform memory access (NUMA) scaling. However, Sequent was a licensee of System V source code.

SCO has yet to provide Gartner with specific details of stolen or misappropriated intellectual property. In Gartner's opinion, SCO's claim that IBM misappropriated trade secrets from AIX will be difficult to prove, because an enterprise OS consists of many components, including high-availability features, diagnostics, security, kernel hardening, scheduling and queue management. Linux began as a project by a university student, using a community-based development model with contributions from programmers worldwide. How important IBM's contributions may be and whether they were based on licensed intellectual property remain subjects for speculation. However, one thing is certain: The community process is fraught with risk to users. How well does the open-source community examine its code and weed out potentially misappropriated intellectual property? Richard Stallman's Free Software Foundation's policy is to replace contested code claimed to be violating patents and intellectual property. Regardless of the actual outcome, the suit is a warning to IS organizations about the potential legal exposures in using open-source code.

Gartner believes that, pending the outcome of the lawsuit, two communities may be at risk: AIX users and Linux users. If the court decides in favor of SCO's complaint, then IBM's AIX license agreement could be suspended. This could place AIX users in future jeopardy regarding upgrades and maintenance. Also, Linux users who may be using shared source libraries with their distributions could be asked to pay for the shared libraries on every server deployed. It is important to note that even enterprise servers using Red Hat or other distributions with no intellectual-property infringement may be exposed due to the possibility that misappropriated code was used for application deployment.

Although it is unlikely that SCO will be able, or necessarily want, to police the market, the lawsuit has wider ramifications for future misappropriation of code. Clearly, there will be more scrutiny on how the open-source community develops and derives code for the future improvements of the Linux OS environment.


Note 1
Due Diligence Options
1.     Name and reputation of source and origin of software code
2.     Names of the contributors and developers
3.     If outside libraries are included, the source of the code, its use and deployment
4.     Checks with the Free Software Foundation on patent infringement claims
5.     Negotiations for indemnification from liabilities, or support from the vendor
6.     References and contacts

Key Issue
How will centralized and distributed servers evolve during the next five years?


Recommended Reading and Related Research
"Red Hat: An Appraisal and Outlook" — Red Hat, the leading Linux distributor, is challenged to leverage market share into higher profitability and revenue growth. By George Weiss
"Linux Makes Inroads in Midrange Server Magic Quadrant" — There are four separate Linux categories in Gartner's latest midrange server Magic Quadrant. By Andrew Butler and George Weiss



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