Judge to SCO: No Suit for You!

A federal judge has dismissed SCO's copyright lawsuit against DaimlerChrysler; experts say legal strategy is backfiring

July 23, 2004

3 Min Read
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Unix system vendor The SCO Group yesterday effectively lost another round in its controversial fight to enjoin what it claims is misuse of its source code, with a federal judge saying SCO has no valid cause to demand that customer DaimlerChrysler AG conduct a licenses audit.

But the issue here may be even bigger: The DaimlerChrysler suit is a key test of SCO's legal strategy, and its failure to win over the judge in this case might be an early indication that its strategy is backfiring, some experts say. SCO has pursued a broad-based legal strategy of claiming rights to many pieces of code derived from its own brand of Unix, including pieces of Linux.

Officials of SCO said their compliance request was a standard annual procedure to ensure the safety of their intellectual property, which DaimlerChrysler originally licensed from prior Unix code owner AT&T Corp. (NYSE: T) in 1990. But officials at the automaker, commenting on yesterday's summary judgment, said they haven't even used the SCO software in more than seven years.

This may be a common trend among SCO's customers, say analysts, customers, and lawyers watching the case. Meanwhile, SCO's legal costs are mounting, and its stock price plummeted recently into the $4 range, after hitting $20 in January.

NDCF contacted several companies featured prominently on SCO's homepage, including the Seattle Mariners baseball team, which is the first customer listed on the page: "5 Reasons to Choose Unix over Linux." However, like DaimlerChrysler, the ball club (now deeply mired in last place) says it no longer even uses SCO, according to Larry Witherspoon, director of information systems. Similarly, use of SCO has diminished at Pearle Vision, IT worker Judy Johnson says.SCO does advertise a few name-brand companies that agreed to buy new licenses based on running Linux, such as Computer Associates International Inc. (CA) (NYSE: CA), Leggett & Platt Inc., and Questar Corp. But Boston attorney Ed Walsh, of Wold, Greenfield, and Sacks, says, "I don't have a high expectation that they're going to achieve their full objective. That was grossly optimistic. I had expected all along that their case would be whittled away. When they're done whittling would there be anything left that anyone cared about?"

SCO has even been accused of being indirectly funded by Microsoft Corp. (Nasdaq: MSFT). A memo posted on an open-source Website this spring by open-source advocate Eric Raymond indicates that it is at least partially true. SCO officials today reiterated earlier statements that the memo is real, but said that its author was an outside consultant making unfounded claims.

SCO, of Lindon, Utah, may have a stronger case against IBM Corp. (NYSE: IBM), the main company it's accusing of stealing its code, and it also may have better luck against smaller companies that lack the legal defense funds of a DaimlerChrysler or IBM. It's surprising that SCO hasn't sued smaller companies already, Walsh says.

In the big picture, as industry analyst Rich Ptak says, "It pretty much looks like the last desperate throws of a company that's got no real future with the products it's trying to sell. They put themselves in a bigger hole than Novell did. The strategy appears to be, 'If you pay me protection money, I won't come after you.' " Given the respectability of the original company, called Santa Cruz Operation, what's happening now is "an embarrassment," he says. His advice to customers: "I'd be looking for an exit strategy."

Evan Koblentz, Senior Editor, Next-Gen Data Center Forum0

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