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SCO flops in DaimlerChrysler Unix lawsuit

Controversial company suffers setback in legal efforts to capitalize on Unix.

The SCO Group, a struggling company with a loud campaign to profit from Unix intellectual property, has largely lost a case it brought against DaimlerChrysler.

In a hearing Wednesday, Judge Rae Lee Chabot of Oakland County Circuit Court in Michigan granted most of DaimlerChrysler's motion to dismiss the case, SCO and DaimlerChrysler representatives said.

The loss doesn't set a precedent, but it does make it harder for SCO to pursue its overall case, said Mark Radcliffe, an intellectual-property attorney at Gray Cary. "The more that SCO is unsuccessful in its claims, the more it decreases their ability to go out and use the threat of litigation to obtain settlements," he said. "It diminishes their credibility."

SCO sued DaimlerChrysler in March, alleging that it hadn't certified its compliance with its SCO contract to use the System V version of the Unix operating system. In April, DaimlerChrysler provided the certification, saying it wasn't using the software at all anymore, then moved to dismiss the suit.

The case "for the most part, probably" is over, SCO spokesman Blake Stowell said.

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"We're satisfied that DaimlerChrysler did finally certify their compliance with the software agreement, but we are still interested in gaining some information on why they didn't certify within the allotted time," Stowell said. The case "is not completely over yet, because the judge still held out the possibility that we could pursue trying to find out information from DaimlerChrysler on why they took so long to certify."

DaimlerChrysler released a statement: "We are pleased with the judge's ruling, and we look forward to finally resolving the one open issue."

SCO had alleged that DaimlerChrysler violated the Unix software agreement by refusing to certify that it was complying with the contract. DaimlerChrysler was required to certify that it was using the Unix software only on specific computer processors, according to the contract.

When SCO sued, DaimlerChrysler hadn't certified that it was in compliance with the agreement, but it had done so by the time it responded in April--saying it had completely stopped using the Unix software years earlier.

The judge's decision marks a significant setback in SCO's efforts to profit from its Unix intellectual property, often at the expense of Linux. Other setbacks include assertions by earlier Unix owner Novell that it still owns Unix copyrights; an almost complete failure in convincing Linux users to buy SCO intellectual-property licenses; a countersuit by IBM accusing SCO of patent infringement; and a partial stay in SCO's case against AutoZone, which argues that Linux infringes Unix copyrights.

"From the outside looking in, it seems like SCO is really getting beat around the head and shoulders at almost every turn," said John Ferrell, an attorney at Carr & Ferrell.

The legal troubles spill over into SCO's attempt to get Linux users to buy SCO intellectual-property licenses, Radcliffe said. "A year ago, everything was up in the air, nothing was certain, and SCO had a reasonable argument: 'Why don't you buy peace now, while it's cheap?' Now, basically, they haven't had any significant wins, they've had some losses, so I think that argument is gone," he said.

The DaimlerChrysler case centered on Unix and only brushed up against Linux, but SCO has considered a strategy to expand from the Unix contract into Linux. "Say they have a license for the Unix source code to be on 10 boxes. If they have 2,000 boxes that have Linux source code on it that is duplicative of our Unix source code, they are breaking the contract they have with us," SCO Chief Executive Darl McBride said in an earlier interview.

That argument likely won't hold water, Radcliffe said. "Linux is clearly not licensed under the contract. The problem is: This is a contract that says, 'You'll tell us where the software products are being used.' It doesn't, by its terms, say, 'Any program that infringes the copyright of our software products,'" he said.

SCO sent letters to 3,000 Unix licensees in December, demanding that they demonstrate compliance with their contracts within 30 days. In a court filing, SCO said it took DaimlerChrysler 110 days.

The remaining issue in the DaimlerChrysler case--that the automaker didn't respond fast enough--likely won't produce any monetary damage award, Radcliffe said.

DaimlerChrysler hadn't certified its compliance within the 30-day period, but when it did certify on April 6, it notified SCO that it hadn't used the System V version of Unix it licensed for seven years.

SCO had sought a long list of certifications from Unix licensees on how they handled the Unix code--for example, evidence that measures were taken to ensure that employees would keep the Unix code secret and assurance that no employees had moved any code to Linux.

DaimlerChrysler responded that its contract required no such elaborate certifications--only that the company is required to provide a list of computer processors using the software. And there was no contractual requirement to respond within 30 days, the company added.

SCO's aggressive legal attacks will make it more difficult for the company to come up with some other business strategy, Ferrell said.

"Over the last two years, SCO has managed to waste an incredible amount of goodwill and reputation over its increasingly specious-seeming litigation," Ferrell said. "It's a real shame, because SCO had a tradition of being a very strong and important company in the Unix industry and the software industry in general."