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Novell challenges SCO's Linux claims

The second in the chain of four companies to own rights to the Unix operating system challenges the legal basis of actions that SCO Group is taking against Linux and companies using it.

Novell, the second in the chain of four companies to own rights to the Unix operating system, has challenged the legal basis of actions that SCO Group is taking against Linux and companies using it.

In a letter to SCO released Wednesday, Novell asserted that it retains Unix patents and copyrights SCO says it owns. Novell demanded that SCO reveal where Unix source code has been copied into Linux, and raised its own threat of legal action to compensate for damage that it says has been done to customers, programmers and companies using Linux.

"To Novell's knowledge, the 1995 agreement governing SCO's purchase of Unix from Novell does not convey to SCO the associated copyrights," Novell Chief Executive Jack Messman said in the letter to SCO Chief Executive Darl McBride. He said that SCO evidently realizes this, because "over the last few months you have repeatedly asked Novell to transfer the copyrights to SCO, requests that Novell has rejected."

But SCO Group said that that issue is beside the point, because the company bought full rights to the Unix intellectual property, including its copyrights, patents and the right to enforce those patents, according to Chris Sontag, head of the SCOsource effort to derive more money from the Unix intellectual property.

"We have enforcement rights to any appropriate patents that are still viable and related to Unix," Sontag said in a Tuesday interview. He said that Novell and AT&T, the original creators of Unix, still had some Unix patents, but that SCO has "all the rights and control of all copyrights and contracts."

SCO's claims are the basis of a $1 billion lawsuit against IBM that alleges that Big Blue misappropriated SCO's Unix trade secrets by building Unix intellectual property into Linux and violated its Unix contract with SCO. More recently, SCO has claimed that Unix code has been copied line-by-line into Linux, sometimes obscured to disguise its origin, an accusation that cuts to the core of the open-source philosophy that underlies Linux.

SCO recently sent threatening letters to 1,500 of the world's largest companies, saying use of Linux could make them the target of legal action based on copyrighted Unix source code allegedly copied into Linux.

Novell's move came as SCO reported results for its second quarter of fiscal 2003. SCO reported a net income of $4.5 million for the quarter, the company's first profit, on revenue of $21.4 million. About a third of that revenue came from SCO's licensing programs, the company said.

Patents aren't a part of SCO's suit against IBM, but Sontag said SCO doesn't rule out the possibility of adding patent-based claims to its suit in the future. In any case, the company believes that it has a stronger position with its claim that IBM's actions breached its contract with SCO.

"Copyrights and patents are protection against strangers. Contracts are what you use against parties you have relationships with," Sontag said. "They end up being far stronger than anything you do could do with a patent."

Sontag said SCO, based in Lindon, Utah, plans in June to show specific code copied from Unix into Linux to analysts and others who sign nondisclosure agreements.

But Novell attacked SCO's refusal thus far to disclose what code was allegedly copied. "It is time to substantiate that claim or recant the sweeping and unsupported allegation made in your letter. Absent such action, it will be apparent to all that SCO's true intent is to sow fear, uncertainty and doubt about Linux in order to extort payments from Linux distributors and users," Messman said in the letter.

In addition, Novell raised its own legal threats against SCO.

"SCO's actions are disrupting business relations that might otherwise form at a critical time among partners around Linux technologies and are depriving these partners of important economic opportunities," Messman stated. "We hope you understand the potential significant legal liability SCO faces for the possible harm it is causing to countless customers, developers and other Linux community members. SCO's actions, if carried forward, will lead to the loss of sales and jobs, delayed projects, canceled financing and a balkanized Linux community."

Novell's challenge is the strongest so far to SCO's actions. Provo, Utah-based Novell has a strong interest in Linux's future: It is building a new version of its NetWare operating system around a Linux core.

Open-source advocate Bruce Perens lauded Novell's move. "Today, the company has done us a tremendous service by stomping upon an obnoxious parasite," Perens said in a statement. SCO "has loudly and repeatedly asserted that they were the owner of the Unix intellectual property, all of the way back to AT&T's original development of the system 30 years ago. They've lied to their stockholders, their customers and partners, the 1,500 companies that they threatened, the press and the public."

A complex legacy
Unix, more than 30 years old, has a long and complicated history. Unix was initially developed by AT&T, though many extensions to the operating system were created at the University of California's Berkeley campus.

AT&T sold the operating system rights to Novell, which later sold them to the Santa Cruz Operation. That company renamed itself Tarantella at the same time that it sold the Unix intellectual property to Linux seller Caldera International, which in turn changed its name to SCO Group to reflect the fact that most of its revenue comes from the Unix products it acquired from the Santa Cruz Operation.

Novell and AT&T still have patents related to Unix, Sontag said, but Tarantella doesn't. "Tarantella has no leftover intellectual property from the sale of our Unix business to Caldera. There is no Unix IP ownership at Tarantella anymore," said Tarantella spokeswoman Lynn Schroeder.

Linux, meanwhile, is a derivative of Unix with a completely separate and freely available code base. Linus Torvalds began the Linux project less than 12 years ago, piggybacking on Richard Stallman's GNU (Gnu's Not Unix ) project that began in 1984 to clone Unix but discard its proprietary nature in favor of an open, sharing philosophy.

Linux now has the backing of all the major server makers and many software companies. Analyst firm IDC said about 13 percent of all servers in 2002 shipped with Linux. By 2007, that number is expected to exceed 25 percent, though the fraction of money spent on Linux servers likely will be closer to 15 percent.

SCO's actions have triggered derision from many Linux advocates, and industry analysts have said that SCO appears to be shifting from a company that sells software products to a company that licenses intellectual property.

SCO's actions triggered more intense scrutiny last week when it licensed Unix intellectual property to Microsoft, a Linux foe that has been trying for years to attract Unix customers to its own Windows operating system.

Analysts said Novell's move weakens SCO's case. "Their credibility in the context of their claims is certainly weakened," said Forrester analyst Stacey Quandt.

And Illuminata analyst Jonathan Eunice said Novell's action "substantially undermines SCO's claims of ownership, given that Novell is one of the legal predecessors whose actions and intellectual property SCO's suit rests upon."

In an interview Wednesday, McBride said Novell's actions appear to stem from a contradiction in its 1995 contract with SCO. One part of the contract "said Novell had some rights to copyrights and patents," McBride said, but much more of the contract describes in detail copyrights and patents that will be transferred to SCO.

SCO discussed the contract with the two company CEOs and the attorney involved with the contract, and all four individuals independently agreed that the contract's intent was to give SCO "the entire rights to the Unix business," including copyrights and patents, McBride said.

Novell stood by its position. "To our knowledge, the 1995 agreement governing SCO's purchase of Unix from Novell does not convey to SCO the associated copyrights," company spokesman Bruce Lowry said in a statement.