HP Indemnifies Its Linux Customers

In response to attacks on the Linux operating system launched by SCO, which claims its own Unix source code was incorporated into the open-source software, Hewlett-Packard (NYSE: HPQ) is indemnifying its Linux customers against any potential SCO litigation.

The move comes after SCO, which has sued IBM (NYSE: IBM) for US$3 billion over the copyright claims, has criticized the lack of indemnification on Linux from large vendors including Big Blue, Red Hat and others.

HP said it will provide full indemnity to customers running Linux with HP systems and specifically stated its assumption of liability in the case of any lawsuits from SCO. Industry analysts said the move might steer more potential Linux customers to HP and puts pressure on IBM, which has refused to offer indemnification to its Linux users, to follow suit.

"It's quite a savvy move by HP," Yankee Group senior analyst Dana Gardner told TechNewsWorld. "For the community at large and those that like Linux but want as little risk as possible, HP is giving them a pretty good deal."

Validation of Claims

SCO, which followed up its lawsuit against IBM with an offer of Linux licenses, viewed HP's indemnification as a validation of its claims, company spokesperson Blake Stowell told TechNewsWorld.

SCO said it has a Fortune 500 company signed on to its Linux license, an announcement that has infuriated the open-source community. While Stowell likened HP's move to SCO's license offer, he said Linux users are still not off the hook.

"What it means is that HP is willing to indemnify its customers from any lawsuits that come from us," Stowell said. "That certainly doesn't mean that they won't come from us."

Calling SCO's Bluff

Gardner viewed the HP indemnification differently, saying that HP is "calling SCO's bluff" and that HP likely found its risk was low enough to offer the protection.

"I would expect HP has done its homework and views the risk as acceptable," Gardner said. "They must have gone through the code to determine whatever risk is there is acceptable. It really points out that Linux is less risk than what SCO is saying."

Calling HP's move a significant chapter in the SCO saga, which began last spring with the Lindon, Utah-based company's lawsuit against IBM, Gardner said HP has a lot riding on Linux and is likely to differentiate itself through the indemnification.

Standing Behind Software

Aberdeen research director Bill Claybrook, who called the HP indemnification "a great marketing ploy," said the indemnification issue cuts across the entire software industry.

Claybrook said many companies, including IBM, Microsoft (Nasdaq: MSFT), HP and Sun, do not indemnify all of their software, instead typically indemnifying some software for some customers. The analyst said that regardless of whether a company developed software itself or gets it from a third party, the seller still should indemnify its customers.

"I think indemnification should be required for all software," he said. "They're not all going to do it because indemnification costs money, but I think they should stand behind the software they sell -- open source or not."

Pressure Increases

Analysts agreed HP's Linux indemnification puts more pressure on IBM and Red Hat, which have countersued SCO with their own copyright and damages claims, to do the same.

"It will put pressure on them to step up and do something, hopefully," Claybrook said.

Gardner said indemnification might have been easier for HP than for IBM because HP is not involved in litigation with SCO. IBM might injure its legal footing with a similar move. Still, Gardner said, it would make sense for IBM to consider its own Linux indemnification.

Boardroom over Courtroom

Gardner said that while SCO wants the issues deliberated in court, a process that legal experts say could take years, HP is making "a very strong statement" by taking its case to the marketplace.

He referred to IBM's legal predicament, but said the company would be better served following HP's lead and concentrating on the business side of the issues.

"What's more important for them is to build their business and move to indemnification to increase their business," Gardner said.