PARK RIDGE, Ill. SCO Group revealed the foundation of its legal battle with the Linux community, when it rolled out evidence of large blocks of Linux code that it contends were stolen from Unix. Analysts who saw the samples of the allegedly stolen code said the evidence is damaging and that SCO Group has a formidable legal case.
"If everything SCO showed me today is true, then the Linux community should be very concerned," said Bill Claybrook, research director for Linux and open-source software at the Aberdeen Group (Boston).
If SCO (Lindon, Utah) prevails in its legal efforts, many observers believe the action could, at best, result in hundreds of multimillion-dollar licensing payments from Fortune 1000 companies and, at worst, damage the foundation of open-source software.
The revelations by the SCO Group Wednesday (June 4) followed a turbulent week in which the company exchanged both allegations and counterallegations with Linux supporters and with Novell Inc. (Provo, Utah), which has proclaimed in an open letter that SCO doesn't own the copyrights and patents to Unix, the operating system Novell sold to SCO in 1995.
SCO's revelations also served as a response to the Linux community, which has complained over the past two months that it doubted SCO's contentions of theft because the company had not publicly disclosed evidence to support its claims.
Claybrook and another analyst who had been given an opportunity to see examples of the alleged theft said the blocks of Unix and Linux were strikingly similar. The two blocks of software, they said, contained as many as 80 lines of identical code, along with identical developers' comments.
"One could argue that developers could write exact or very similar code, but the developers' comments in the code are basically your DNA, or fingerprints, for a particular piece of source code," said Laura DiDio, a senior analyst with the Yankee Group (Boston), who viewed the evidence.
"It's very unlikely that code and comments could be identical by pure chance," Claybrook said.
DiDio and Claybrook said they were given side-by-side copies of Unix and Linux code to compare. Neither was paid for the work, and both agreed that the evidence suggests SCO has a strong case in its $1 billion suit against IBM Corp. and in its scrap with the Linux community.
Linux supporters, however, were quick to question the meaning of the evidence. "Can SCO prove that this code came from SCO to Linux, and not from Linux to SCO?" asked Jon "Maddog" Hall, executive director of Linux International (Nashua, N.H.), a Linux advocacy organization. "Or did the code that's in SCO Unix come from a third source? Show me the facts," he said.
SCO's battle with the open-source community grabbed headlines two months ago when it filed a $1 billion lawsuit in the state court of Utah against IBM, alleging misappropriation of trade secrets and unfair competition in the Linux market. In May, on the heels of that suit, SCO sent letters to Fortune 1,000 companies and 500 other businesses advising them to seek legal counsel if they use Linux.
SCO's actions angered Linux supporters, who allegedly deluged the company with angry e-mails, threatened drive-by shootings, and posted SCO's executives' home phone numbers and addresses on Web sites.
On May 28, Novell jumped into the fray, arguing that it never sold the Unix copyrights or patents to SCO when it consummated the Unix sale in 1995. In an open letter to SCO, Novell said, "Apparently you share this view, since over the last few months you have repeatedly asked Novell to transfer the copyrights to SCO, requests Novell has rejected."
In a subsequent news conference on May 30, SCO chief executive officer Darl McBride lashed out at Novell, restating SCO's claim that it owns the Unix operating system patents and implying that Novell has a hidden agenda for insisting otherwise.
"We strongly disagree with Novell's position and view it as a desperate measure to curry favor with the Linux community," McBride said.
Last week's analyst revelations, however, cast the battle in a new light. Until the analysts weighed in, Linux backers had relied on the defense that no one had seen proof of the allegations. Most said they didn't understand why SCO had refused to release the alleged infringements for public scrutiny. Some said they viewed SCO's actions as a means to spread fear, uncertainty and doubt about open-source software.
But analysts categorically disagreed with that viewpoint last week. "SCO is not trying to destroy Linux," said DiDio of the Yankee Group. "That's silly. This is about paying royalties."
SCO contends that by co-opting code from Unix, Linux has severely damaged SCO's intellectual property. According to some estimates, the company collected annual revenue of between $200 million and $250 million on Unix System 5 software before the rise of Linux. After Linux reached the mainstream, those revenue figures dropped to about $60 million a year.
Because it believes Linux incorporates code that's been "stolen" from Unix, it has warned hundreds of companies to stop using Linux or start paying royalties.
"SCO's words were that Linux distributors and others who are using Linux are 'distributing stolen goods,' " said Claybrook of Aberdeen Group.
Some companies, such as Sun Microsystems Inc., already pay hefty royalties to SCO for Unix. Two weeks ago, Microsoft Corp. joined that group when it agreed to pay royalties that were said to be "significantly in excess of $10 million," one source said. Microsoft declined to comment on the details.
Facing a choice
Many observers believe SCO's case is bolstered by the fact that it is represented by high-powered attorney David Boies, who prosecuted the Microsoft antitrust case and represented Al Gore in the 2000 presidential election vote-counting scandal.
Analysts said IBM will be the first company to face a choice in the legal matter. "If IBM wants to cure this problem, they could start by buying all the appropriate licenses and then paying SCO a billion dollars," Claybrook said. "But SCO now says that a billion may not be enough to cover their damages."
Users of Linux also face a decision about whether to ignore SCO's letters or pay for a license. Analysts said companies may face that decision as soon as June 13, the date on which SCO has threatened to terminate its existing Unix contracts with IBM.
Intellectual-property attorneys advise that companies that received a letter from SCO first determine whether IBM is indemnifying them, as users, against legal action.
IBM, for its part, has said it doesn't intend to respond to SCO's threat. "We believe our contact is perpetual and irrevocable," an IBM spokeswoman said. "We've already paid for it, and there is nothing else we need to do."
Whether the legal actions will harm Linux in the long run is still open to question, experts said.
The Linux community, unconvinced by SCO's actions, says it is still waiting for more solid proof that SCO really has a case. Most say that showing the alleged violations to a few analysts who sign nondisclosure agreements isn't enough.
"We still don't see the need for secrecy," said Hall of Linux International.