SCO's Threat to LINUX Users: How Should You Respond?

The SCO Group, already suing IBM for billions of dollars in a copyright infringement suit, has followed through on its threat to also sue users of the LINUX operating system for infringement of copyrights to the UNIX operating system.

One of the first such suits was filed March 3 against the 1,100-store AutoZone chain. A related suit was filed against DaimlerChrysler, in which SCO alleges a breach of its UNIX license agreement.

SCO claims to own copyrights that are infringed by LINUX. SCO alleges it purchased the copyrights as part of its acquisition of rights to the UNIX operating system.

LINUX is a very popular open source program. It is an operating system that was originally developed to compete with UNIX on servers. It has had considerable success replacing UNIX in server applications and competes effectively against Windows NT and 2003 Server.

Because many of the open source programmers who contributed code to LINUX were familiar with UNIX, SCO contends that these programmers – intentionally or inadvertently – used UNIX code in developing LINUX.

To further complicate the issue, portions of the UNIX operating system have been placed into the public domain over the past 35 years since it was first developed, and they could be lawfully used in LINUX. Those involved in developing LINUX hotly dispute SCO’s allegations, alleging that they independently developed LINUX code or used only the public domain portions. Sorting out these competing claims will be a central element of litigation over copyright infringement by LINUX.

LINUX has rapidly matured and grown into other roles. The desktop version is regarded as a viable competitor to Microsoft’s Windows. Its popularity is rapidly propelling it into other applications, such as operating systems for PDAs and cell phones, and numerous embedded systems.

Carrot And Stick

SCO has embarked on a “carrot and stick,” broad-based licensing program. The threat of litigation is obviously the “stick.” The “carrot” is the offer of licenses to users.

SCO offers paid-up LINUX licenses starting at $699 per server and $199 per desktop. Large volume users might do better with private negotiations. One allegedly seven-figure license was recently announced. Thus, for corporations with thousands of users, the price could be significant.

No corporate counsel wants to be known as the “handwringer” who paid for licenses that are later proved to have been unnecessary. And, for those companies using LINUX in their products, taking a use license does not avoid liability for distributing LINUX.

Corporate counsel have relatively few options. For those who have not yet adopted LINUX, doing nothing may well be the best choice in the short term. The facts underlying the dispute are too much of a jumbled mess to make sorting them out on your own a viable option.

LINUX and UNIX contain too much code with too-complicated a history to permit a practical checkup to see if LINUX indeed contains copied UNIX code. And, because the extent to which SCO even owns rights to the UNIX code is hotly debated, making the comparison would not necessarily provide a clear answer.

However, the next 18 months should begin to clarify whether SCO’s claims are valid. The SCO suit against IBM is scheduled for trial in 2005. IBM has a substantial team and is spending a huge sum to challenge SCO’s claims. SCO is also in litigation with Novell, which alleges that SCO doesn’t own the copyrights in UNIX. Either of these suits could demolish SCO’s claims.

Moreover, even if SCO prevails in court, victory is likely to be ephemeral in the marketplace. Even a valid claim of copyright infringement can be avoided on a going-forward basis by rewriting the offending code. Numerous individual programmers, Red Hat (a leading LINUX distributor) and big corporations, like IBM and Intel, who have formed the Open Source Development Laboratories (OSDL), all have vowed to rewrite any code SCO proves was copied.

For those unwilling to wait for clarity, indemnity provisions might factor into the selection of a LINUX provider. While indemnities are anathema to the open source model that expects users to fix code problems and pass along bug fixes, some LINUX distributors have offered limited indemnities. These indemnification agreements usually have strings attached, such as requirements to purchase hardware or service contracts.

Indemnities notwithstanding, those who opt to start or continue using LINUX without taking a license from SCO should not take lightly the cost and disruption of defending a suit with such complex issues. If SCO follows the model of others who have undertaken broad-based licensing programs, it will initiate suits periodically against seemingly randomly selected defendants so that everyone considering a license has a litigation risk and expense that makes taking the license seem more attractive.

Less Risk?

However, there are several critical differences that make the downside risk and cost of fighting less than for other recent broad-based licensing programs. First, losing would have far less impact. Copyright infringement can be worked around by rewriting code even if there remains monetary liability for past infringement. Or, one can switch to a functionally equivalent product, including UNIX or Windows.

Second, RedHat, a major LINUX distributor, has jumped into the fray with a suit against SCO. Any user sued should get through much of the litigation riding on IBM’s or RedHat’s coattails. And, the benefits of any SCO settlement with these suppliers should flow to users.

Third, the OSDL, with its major corporate backers, has committed to fund the defense of users and has already raised millions towards a goal of $10million.

Fourth, SCO must limit the number of suits to keep its costs under control and avoid creating a critical mass of defendants sharing expenses, making it no more expensive to fight than to settle.

In sum, for those already committed to LINUX, waiting for clarity may well be the best choice, too.

But, even if you do not change your stance on LINUX, consider this sobering thought: LINUX is one of the best-managed open source products.

Other open source products likely present a greater risk of legal or technical problems. And, more of them are probably coming into your company than you realize.

If the only impact on you of SCO’s campaign is that it prompts you to educate your workforce and enforce good-practice policies with respect to open source software (and IP rights of others, in general), the angst may all be worth it.

Ed Walsh is counsel in the Electrical and Computer Technologies Group and Steve Henry is a shareholder at Boston-based Wolf Greenfield, a leading intellectual property law firm. You can contact Walsh at 617.646.8212 or [email protected], or Henry at 617.646.8238 or [email protected].