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March 4, 2003

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SCO's Blake Stowell, MozillaQuest Magazine's Mike Angelo, plus Allen Brown, Richard Gooch, and Richard Stallman Discuss SCO Intellectual Property Issues

SCO-Caldera & the GNU/Linux Community:

Part 2, Under the Iceberg's Tip

Nearly One-Half of SCO-Caldera Income from IP Licensing and Enforcement

Are Linux or C++ on SCO-Caldera's IP Hit List?

By Mike Angelo -- 4 March 2003 (C)

Editor's Note: this story is too darn long -- but it needs to be. It discusses some very serious and complex issues. We considered splitting it into a series of three parts to be published on three consecutive days. However, we felt that so piecemealing this article could lead some readers to jump to unsupported conclusions before they would have an opportunity to read the full story. We hope that you will take the time to read this story in its entirety -- particularly if you might post opinions about the SCO IP issues to forums, newsgroups, or mailing lists. If you do not read the entire story, you should in the very least read pages 1 and 2 and the entire Summary and Conclusions on page 5.

Article Index

Note: Until 2001, the Santa Cruz Operation (SCO), a UNIX company, and Caldera International (CALD), a Linux company, were two different companies. In 2001, Caldera acquired SCO. Then in 2002 Caldera changed its business name to the SCO Group. However, the corporate name remains Caldera International.

Many people still think of the SCO Group's Linux operations as Caldera. In order to make sure that readers would know and realize throughout the article that what is now the SCO Group is also the company once called Caldera, the SCO Group is often referred to as SCO-Caldera in this article.

Intellectual property Note

In this article we use the somewhat vague term intellectual property, in part because that term is the one SCO chooses to use in its SCOsource documents. Free software advocate Richard Stallman believes that the term intellectual property is inappropriate. To see why he believes the term intellectual property is inappropriate, please see his essay Some Confusing or Loaded Words and Phrases that are Worth Avoiding. A link is in the Resources section at the end of this article on page 5.

However, the focus of this article is on the SCO property whether it be in the nature of copyright, patent, or trademark. In order to avoid the off-focus issue of the appropriateness of the term intellectual property here, we operationally define the term intellectual property to include property whether it be in the nature of copyrightable property such as software source code, or a copyright, patent, or trademark.

Richard Stallman also is concerned about the somewhat loose use of the terms GNU/Linux and Linux. To see why Richard Stallman is concerned about the use of the terms GNU/Linux and Linux, please see his essay Linux and the GNU Project. A link is in the Resources section at the end of this article on page 5.)

SCO (NASDAQ: SCOX), the company formerly known as Caldera (NASDAQ: CALD), now owns a good chunk of what at one time was the intellectual property (IP) of AT&T's UNIX Systems Laboratory (USL). On 22 January 2003, SCO-Caldera announced the formation of SCOsource, a SCO-Caldera endeavor to enforce its intellectual property rights and to license its intellectual property.

In our 5 February 2003 article, SCO-Caldera & the GNU/Linux Community: The SCOsource IP Matter, we noted: The worst-case scenario for the Linux community could be that everyone running Linux would have to pay licensing fees to Caldera. There also has been some concern that SCO-Caldera is planning to charge license fees for GNU, GPL, open source, free or otherwise public domain software.

The main focus of our 5 February article was some SCO-Caldera libraries that allow SCO UnixWare and SCO OpenServer applications to run on Intel x86 Linux platforms. We also noted then that the SCO-Caldera UnixWare/Linux libraries are only the tip of an IP iceberg and that many questions remained unanswered.

Today, we look at some of the issues that were hidden under the tip of the SCOsource announcement, what they are, and how they might impact on the Linux, GNU/Linux, free software, and open source software communities. Generally, but not always, in today's article Linux refers to the Linux kernel and GNU/Linux refers to the GNU/Linux operating system, which includes the Linux kernel and all the GNU software packaged with the Linux kernel to make a complete operating system.

SCO-Caldera's IP Claims in a Nutshell

The gist of our discussions with SCO spokesperson Blake Stowell, SCO's Director of Marketing Communications, and various SCO-Caldera documents is that (a) SCO-Caldera has a portfolio of intellectual property that SCO-Caldera now licenses; (b) In order to increase revenues, SCO-Caldera will open additional IP to licensing in the future; and (c) that SCO intends to enforce its intellectual property rights.

Moreover, Blake Stowell states SCO-Caldera owns the UNIX and C++ intellectual property -- and the Linux code is a subset of and a derivative of the UNIX code, which SCO now owns.

If the Linux code is a subset derived from what now is SCO's UNIX code, that could mean that Linux and GNU/Linux use SCO-Caldera intellectual property. Does Linux include SCO IP? Unfortunately, SCO spokesperson Blake Stowell will not answer that question directly with a yes or no. But reading between the lines, it sure does appear that the SCO people believe that Linux does include SCO IP. More about that further on in this article.

The Community's Response to SCO-Caldera's IP Claims, in a Nutshell

We also had an in-depth discussion about SCO-Caldera's intellectual property claims with Richard Gooch, Ph.D., currently doing post-doctoral research on Astronomical Visualization at the University of Calgary (Canada). He also is maintainer of The linux-kernel mailing list FAQ. Simply put, Richard Gooch told MozillaQuest Magazine that SCO-Caldera's claims that the Linux code is a subset of and a derivative of the UNIX code are not correct. More about that further on in this article. There is a link to The linux-kernel mailing list FAQ in the Resources section at the end of this article on page 5.

Allen Brown is President and Chief Executive Officer of The Open Group and Richard Stallman founded the GNU project and is an author of the GNU C Compiler. They also take issue with SCO's claims. More about that further on in this article.

The bottom line is that if SCO-Caldera wants to lay claim to Linux kernel or GNU/Linux operating system source code, the burden falls upon SCO-Caldera to prove that there is code in the Linux kernel or GNU/Linux OS that is identical to code in its UNIX source code. So far, SCO-Caldera has offered no such proof.

As you might already know, there is a public domain C++, GNU C++. It's part of the GNU Compiler Collection (GCC). The operative question here is does GNU C++ contain SCO C++ intellectual property? SCO spokesperson Blake Stowell will not answer that question directly with a yes or no either. We will take a closer look at the C++ IP issues in an upcoming article in our SCO-Caldera & the GNU/Linux Community series.

What's Behind SCO-Caldera's IP Licensing and Enforcement Initiative

According to the Annual Report Pursuant To Section 13 Or 15(d)The Securities  Exchange Act Of 1934 filed by Caldera International, Inc., for the fiscal year ended October 31, 2002 (also known as a Form 10-K statement), less than five-percent of SCO-Caldera's revenues comes from Linux products and services. Some 95-percent of SCO-Caldera's revenues come from UNIX products and services. Effectively, that pretty much makes SCO-Caldera a UNIX company rather than a Linux company.

Also, the Caldera 10-K filing shows that SCO-Caldera experienced a 27-percent drop in revenues from its fiscal year ending 30 October 2001 to its fiscal year ending 30 October 2002. Moreover, it appears that SCO-Caldera needs to protect and to generate revenues through licensing and enforcement of its intellectual properties:

Our success depends in part on our ability to protect our trademarks, trade secrets, and certain proprietary technology. To accomplish this, we rely primarily on a combination of trademark and copyright laws and trade secrets . . . We also enjoy a broad and deep set of intellectual property rights relating to the UNIX operating system. We have recently initiated efforts to garner value from these intellectual property assets and believe it will provide us with additional licensing and partnering revenue opportunities. (Caldera 10-K filing at page 9)

Additionally, it appears that SCO-Caldera seeks to use intellectual property (IP) licensing and enforcement as a tool to protect its UNIX and Linux product revenues. Under the Risk Factors section of its 10-K filing, SCO-Caldera notes:

We have not been profitable. If our revenue continues to decline or we are unable to efficiently further reduce operating expenses, we may not achieve profitability or generate positive cash flow. (Caldera 10-K filing at page 12)

We operate in a highly competitive market and face significant competition from a variety of current and potential sources, including Red Hat and Sun Microsystems. (Caldera 10-K filing at page 12)

Our principal competitors in the Linux market include Red Hat, Sun and SuSe. In addition, due to the open source nature of Linux, anyone can freely download Linux and many Linux applications and modify and re-distribute them with few restrictions. For example, solution providers upon whom we depend for the distribution of our products could instead create their own Linux solutions to provide to their customers. Also, established companies and other institutions could produce competing versions of Linux software. (Caldera 10-K filing at page 12)

If SCO-Caldera can establish a bone-fide intellectual property right in the Linux kernel and/or the GNU/Linux operating system it could block competition and/or obtain revenue from competitor distribution and sale of the Linux kernel, the GNU/Linux operating system, and Linux distributions.

Intellectual property (IP) licensing and enforcement is an acceptable practice and merely business as usual in the world of commercial, proprietary software. However, software IP licensing and enforcement in the Linux, GNU/Linux, free software, and open source software community is an entirely different matter. It can lead to anything from a minor annoyance and ill-will to being taken as a declaration of war on the Linux, GNU/Linux, free software, and open source software community.

SCO-Caldera's UNIX Library IP Issues

In our 5 February 2003 article, SCO-Caldera & the GNU/Linux Community: The SCOsource IP Matter, we concluded:

On the surface it appears that at this time:

(a) the subject SCO libraries are not GNU, GPL, open source, free software, or otherwise public domain software,

(b) the subject SCO-Caldera libraries are not included in any current major Linux Distributions -- other than perhaps SCO-Caldera Linux,

(c) there is no significant impact and effect of the SCO IP licensing and enforcement effort on the Linux community, and

(d) the UNIX applications that require the subject SCO-Caldera libraries are applications designed to run on SCO OpenServer or SCO UnixWare.

However, the SCO shared libraries that allow UnixWare and OpenServer applications to run on Linux could be just the tip of a SCO-Caldera intellectual property licensing and enforcement endeavor iceberg . . . Things easily could change as SCO's intellectual property licensing and enforcement endeavors progress -- or as more information about SCO's intellectual properties comes to light.

  • See Under the Iceberg's Tip: SCO's Expanding IP Licensing and Enforcement Will It Target Linux or C++ ? on Page 2 ----->

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