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Rethinking the IBM-SCO Imbroglio

By Paul Murphy
Oct 23, 2003 3:00 PM PT

The most significant threat to open source isn't coming from SCO. It's coming from IBM. SCO isn't trying to shut down Linux. That demand for licensing fees from users was just a legal ploy -- one more step in an intricate legal dance to which IBM is calling the tune.

Rethinking the IBM-SCO Imbroglio

It's well past time for IBM to act like a grown-up and settle this issue.

Whether IBM does this in court or through negotiations doesn't matter; what matters is reducing uncertainty in the open-source community -- and if the execs at Big Blue can't bring themselves to do it, perhaps Sun could step in and do it for them.

The Story So Far

The story as told by SCO is that Caldera decided to look at its 30,000 or so Unix licensees -- inherited through a $100 million deal with Novell in 1995 -- as possible sources of renewal revenue and found, among other companies, IBM and Microsoft. Microsoft promptly renewed its license upon request; IBM refused, and the resulting negotiations quickly stalled.

In response, SCO asked a Utah court on March 6, 2003, to enforce its rights and issued a letter to IBM notifying it that its license to use Unix code and derivatives would be lifted on June 13, 2003 -- thus effectively prohibiting sales of AIX and all other IBM products containing code covered under the original AT&T agreements.

In response, IBM has not admitted there is a problem, stopped selling AIX or asked a court for an order quashing SCO. Instead, the company has embarked on the discovery process and now shows every sign of intending a long legal battle, the first part of which will culminate in a trial now scheduled to start in April 2005.

As a result, both sides have gone down the path of repeated filings and counterfilings. In these exchanges, the Boies law firm representing SCO (apparently on contingency) has, among other things, misrepresented Unix history, while IBM has denied everything -- even that AT&T invented Unix, that Unix is operating-system software and that Unix is widely used in business.

The following is from Paragraph 1 of the June 16, 2003, revised SCO complaint:

"1. Unix is a computer operating system program and related software originally developed by AT&T Bell Laboratories (AT&T). Unix is widely used in the corporate, or enterprise, computing environment."

According to IBM's August 6, 2003, response and counterclaim, IBM "denies the averments of Paragraph 1."

The level of debate in the rest of the Unix community hasn't been much higher, with a lot of people trying to shout down SCO's claims by impugning their motives, misdirecting attention away from the core issue, or drawing improbable conclusions and refuting them in lieu of arguing the facts.

For example, all of the following mistakes have become common fodder in the opinion and interview sections of various news publications:

  • IBM's licenses covering AIX and derivative products are irrevocable and perpetual.

    To the extent that IBM has offered any fact-based defense, it has consisted mainly of the contention that the company did nothing it didn't have the right to do.

    SCO does not deny that IBM has perpetual and irrevocable rights under the contract, but maintains that IBM allowed actions explicitly prohibited under the terms of that contract, thus setting it aside.

  • This is a battle over ancient history.

    Consider this quotation from a senior IBM representative as reported by Caroline Humer in a Washington Post article:

    IBM vice president of systems sales Bob Samson said in a memo to customers that "SCO's scheme is an attempt to profit from its limited rights to a very old Unix operating system by introducing fear, uncertainty and doubt into the marketplace."

    Whether SCO's actions constitute "a scheme" and whether SCO is intentionally using FUD are currently arguable issues. In contrast, the allegation that this is about "a very old Unix" capitalizes on a widespread misunderstanding of the issues and represents FUD-slinging at its finest.

    In reality, the AT&T licenses include automatic update provisions under which new code is added to the code base and then covered by the core license terms. It is true that long-obsolete enhancements made to Unix when it was first ported to C in 1972 and 1973 are covered.

    It's also true that code added by Sun, Motorola and AT&T to deal with memory management on the Power PC architecture in the late 1980s and early 1990s is covered, along with more recent work.

  • This is a copyright issue.

    It is not. This is a purely contractual issue. As it turned out, SCO hadn't quite got its paperwork in order on copyright, but this had nothing to do with the lawsuit that is based entirely on the contract.

  • SuSE's recent success in getting a German court to order SCO to stop saying it is right proves that SCO is wrong.

    German courts are not bound by American law and do not enforce American ideas about free speech -- commercial or otherwise. Remember, too, that the IBM-SuSE partnership is commercially important in a country whose current government was elected largely on an anti-American platform.

    These rulings do signify something important -- that litigation like this creates significant legal barriers to the adoption of open-source software in the United States -- barriers that do not apply to American economic competitors in Europe and Asia.

    IBM's inability or unwillingness to settle this dispute quickly and quietly creates a classic non-tariff trade barrier against open-source products, thereby protecting Microsoft's U.S. market share at the expense of the national economy.

  • HP's willingness to indemnify its Linux customers shows that its lawyers think there's nothing to the case.

    SCO's complaint isn't against HP or Linux. It's against IBM. What HP is really promising is to point at IBM on the customer's behalf. That may be a great sales gimmick for HP, but it says nothing about the merits of the SCO complaint against IBM.

  • SCO is attacking the entire Linux community.

    It is not. Responses from SuSE and Red Hat to the contrary, the SCO demand for license fees from Linux users was classic legal fiction. Both key SCO executives -- Darl McBride and Chris Sontag -- have said repeatedly that they are trying to work through issues to achieve justice without putting "a hole in the head of the penguin."

    Most people find these license claims outrageous, but think about the drivers behind the demand and you might yet see SCO as a victim of its own lawyers and the way the courts operate.

    Fundamentally, the court eventually will require SCO to show a quantitative, market-based derivation for the value of damages claimed. Demanding license fees is one way of establishing that basis -- and one likely to appeal to lawyers acting on contingency because a few successful sales would suffice to establish an enormous fair-market value.

  • The recent shouting match between Eric S. Raymond and Bruce Perens on the open-source side and Darl McBride on the SCO side has something to do with the issue.

    It doesn't. There's lots of sound and fury here, but no substance. Peel away the outrage, and what Raymond and others are saying is, "Show us the offending code, and we'll replace it."

    Great, but the lawsuit isn't about code used in Linux. It's about how that code got there. Peel away McBride's paean to intellectual property rights, and all he's really saying is, "Don't shoot me, I'm just the messenger."

  • Caldera's Linux efforts invalidate SCO's claims.

    This argument forms the basis of IBM's "sixth counterclaim" in its August 6, 2003, filing as well as its more recent argument that SCO's Caldera distribution violated IBM's copyright on some GPL code.

    Although a definitive answer will have to await a court judgment, this line of reasoning seems to be a red herring. Just as one child cannot excuse his cookie-stealing by pointing out that the little sister ratting him out ate part of the cookie, so too does it seem unlikely that Caldera's use of -- and contributions to -- Linux have anything of substance to do with the issue here.

    IBM's most recent claim that SCO overstepped its rights with respect to IBM-contributed Linux code by attempting to extract license fees for it appears to be a similar piece of misdirection. The fact that attempts to extract license fees on third-party, open-source code provided under the GPL actually violate the GPL really has nothing to do with the fundamental contractual issue between SCO and IBM.

  • This is just about whether or not Linux code contributed by IBM in areas such as Sequent's NUMA scheduler or journaled file system is derived from licensed code and therefore covered under the license (meaning that SCO wins) or is independent of it and therefore not covered (meaning that IBM wins).

    This is clearly not correct because SCO has already shown code predating the Sequent licenses later taken over by IBM. What's interesting about this, however, is that it looks like a trap for SCO's none-too-technical lawyers.

    While it seems unlikely that IBM's U.S. management knew anything about the code transfers SCO alleges -- which I believe took place at IBM's Bvblingen skunkworks in Germany when the Linux-to-390 port was done -- letting SCO's lawyers lose themselves, and eventually their case, in a morass of legal documentation on a fundamentally unrelated issue seems a perfectly reasonable strategy.

    Intense Emotionalism

    One of the most interesting aspects of the case is the intense emotionalism in IBM's denunciation of SCO in its August 6th counterclaim. Here's part of section "E" called "SCO's Scheme":

    22. SCO devised a scheme to profit from the Unix rights that it acquired from Original SCO, though Unix was in no way developed by SCO. Although most, if not all, of the Unix technology that SCO purports to own is generally known, available without restriction to the general public or readily ascertainable by proper means, SCO undertook to create fear, uncertainty and doubt in the marketplace in regard to SCO's rights in and to that technology.

    23. Recognizing that there is little value in its Unix rights, SCO did not limit its scheme to that technology, rather, SCO devised and executed a plan to create the false perception that SCO holds rights to Unix that permit it to control not only all Unix technology, but also Linux -- including those aspects generated through the independent hard work and creativity of thousands of other developers and long distributed by SCO itself under the GPL.

    In general, people who point fingers at others point three back at themselves. Here, certainly, the stunning hypocrisy of the accusation that SCO wants to profit from Unix although "Unix was in no way developed by SCO," the definitive attribution of unknowable motivations, and the general viciousness of tone do not reflect well on IBM.

    IBM: Take Two Tylenol

    So, what can or should IBM do? It should take two Tylenol and call McBride in the morning.

    Remember Johnson & Johnson? During the early 1980s, a few bottles of Tylenol on retail shelves in Chicago were contaminated with cyanide, and seven people died. Johnson & Johnson executives reacted by taking personal responsibility and acting immediately and openly to contain risks, first by pulling product from the shelves and then by fixing the underlying packaging problem.

    This effort cost Johnson & Johnson several hundred million dollars, but the results included a fairly quick sales recovery, a sales boost on other products, and hundreds of laudatory case studies citing the company for setting the standard in successful crisis management.

    The right answer for open source is to get this matter settled. If you believe that no IBM personnel exceeded the scope of the contract, call your friendly local IBM representative and ask that the matter be settled by forcing SCO into court as quickly as possible.

    If you believe that SCO is probably right, then urge that same IBM contact to face facts and put the matter to rest.

    Either way, the right answer is to quit stalling and deal with it.

    Is Sun the Solution?

    Sun's Unix source licenses probably let Sun do whatever it wants with the source. If so, the company will be tempted to use the source code for its own competitive advantage by releasing its own Linux on its own hardware, charging a minor fee to the end user and offering strong legal guarantees on indemnification.

    Unfortunately, this would create a two-tier Linux world and would lead to problems in getting major applications certified on both platforms. If, instead, the company released Sun Linux to the open-source community under the GPL, its action would allow all of the Linux distribution developers to restart from a clean base, eliminating the ambiguities created by the SCO lawsuit without affecting the merits of SCO's case against IBM.

    It seems likely that Sun has the legal right to do this, and it certainly has the moral right, because most of the code IBM -- as differentiated from Sequent and SGI -- is accused of leaking deals with functions affecting such areas as Power PC multiprocessing memory management. Those sections of code were first written by, or with the help of, people from Sun, NCR and Motorola.

    An action like this would have three very significant kinds of effects:

  • It would free the Linux community from most of the FUD currently being generated; remove Microsoft's opportunity to use this FUD against Linux; and lift much of the threat to open source coming from lawyers seeking new billing opportunities.

  • It would bring more competition to Linux by making it extremely difficult, if not impossible, for Red Hat to control the North American Linux market while significantly weakening SuSE's competitive position in the U.S. and world markets.

  • It would make it easy for everyone involved to see that this is fundamentally a simple contract dispute between SCO and IBM; allow AIX users to assess their exposure fairly; and allow the rest of us to get on with business.

    All of those sound good to me. How about you, Mr. McNealy?

    Paul Murphy, a LinuxInsider columnist, wrote and published The Unix Guide to Defenestration. Murphy is a 20-year veteran of the IT consulting industry, specializing in Unix and Unix-related management issues.

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