SCO Sues AutoZone For Copyright Infringement

The SCO Group on Tuesday filed a copyright infringement lawsuit against AutoZone, a Memphis, Tenn.-based auto parts chain.

In the suit, filed in the U.S. District Court in Nevada, SCO alleges that AutoZone ran versions of Linux that "contain code, structure, sequence and/or organization from SCO's proprietary Unix System V code in violation of SCO's copyrights," according to a company statement issued Wednesday morning.

SCO seeks injunctive relief to stop AutoZone's use or copying of Linux and as well as an unspecified amount of damages. AutoZone couldn't be reached for comment early Wednesday morning.

Red Hat named AutoZone as a customer in 2000, and a SCO spokesman said AutoZone is a Red Hat customer. However, a Red Hat spokeswoman said AutoZone is no longer a current, paying Red Hat customer.

Although SCO already has engaged in significant litigation against Linux vendors IBM and Novell, this is the first time that SCO has sued an end-user company. SCO also said that, later on Wednesday, it plans to announce a breach-of-licensing agreement suit against an unnamed Fortune 1000 customer that licenses SCO's Unix System V.Industry observers and intellectual property attorneys said they expect the AutoZone suit to have little material impact on the Linux industry, but the case could pump up more licensing revenue for SCO.

On Wednesday, SCO is expected to report a loss of $2.25 million, or 16 cents per share, compared with a loss of $724,000, or 6 cents per share, during the same quarter a year ago.

Thomas Carey, an intellectual property attorney and partner in Boston law firm Bromberg & Sunstein, predicts that in the AutoZone case, the court will grant a stay on any injunction sought by SCO until the Unix company's primary case against IBM is decided.

Linus Torvalds, the developer of the Linux kernel, said the AutoZone case--like the one leveled at IBM--has no merit. He also questioned the timing of the filing.

"They know they have no copyright ownership in Linux," Torvalds said, noting that SCO's earnings call is scheduled for Wednesday. AutoZone also is set to announce first-quarter earnings on Wednesday.Channel partners said they don't expect the latest SCO suit to bring their Linux business to a crashing halt. Yet they said they will try to ease customer fears by citing indemnification policies offered by Hewlett-Packard, Novell and Sun Micosystems and the Open Source Development Labs (OSDL) fund, all which have been set up to pay for Linux customers' litigation costs.

"HP stands firmly behind its indemnification offer and will vigorously defend its customers against SCO-related lawsuits," HP said in a statement released Tuesday. "All HP customers who have purchased HP Linux-based products and services according to the terms HP outlined will have legal protection without any limits."

Red Hat doesn't offer financial indemnification but provides an intellectual property warranty to subscribers that guarantees the company will rewrite any code that places the customer in legal jeopardy.

"Solution providers will wait for customers to cite legal risks as barriers in pursuing a Linux strategy. A successful suit against a Linux customer may indeed send a chill through some customers, but it won't [do so to] others," said Mark Fresolone, director of business development at Melillo Consulting, a Somerset, N.J.-based solution provider.

"As we saw with the Microsoft antitrust suit, even a successful legal challenge to a broadly adopted technology tends to have muted repercussions," Fresolone said. "With companies providing indemnity coverage with their packaging, many firms will run with it, in spite of SCO's moves."Many open-source advocates and Linux ISVs say SCO has no copyright claim to Linux and urge customers to ignore SCO's efforts to wring legal damages out of IBM and extract licensing fees from customers.

"The entire Linux ecosystem, including OSDL and its 35-plus member organizations, will stand firm against any legal actions against Linux end users made by The SCO Group. This is why OSDL announced our defense fund in January," said Stuart Cohen, CEO of OSDL. "SCO's decision to move forward with their end-user lawsuit is unfortunate. But due to the questionable merits of the case, we see no reason why this case will have an impact on the growth of Linux in the enterprise."

One Linux customer claimed the AutoZone lawsuit won't hinder adoption unless a jury says otherwise. "Nothing short of an actual guilty verdict will slow Linux," said Mark Lehrer, a programmer and consultant in Salt Lake City, home of SCO.

Still, attorney Carey said the fear, uncertainty and doubt of litigation may entice some CIOs to sign SCO source licenses. SCO has only signed a handful of such licenses with customers since launching its licensing program last August, he said.

"This is likely to make large corporate Linux users consider more carefully the possible attraction of signing a licensing agreement with SCO," said Carey. "If financial officers take a hard look at it, they might decide that taking a license from SCO is cheaper than fending off a lawsuit."He added that such a move could nullify customer savings in choosing open source over Windows and Unix, while signing a license on a few servers could ease their headaches.

"There are some Linux promoters who assembled a pot of money to help defend customers if a case is brought, but that will only go so far," Carey said.

SCO has threatened to take legal action against customers since launching its first case against IBM last March. SCO has twice sent warning letters to Fortune 1000 customers, including one cease-and-desist letter dated Dec. 18 that charged select companies with illegally using more than 65 SCO-owned Application Binary Interfaces (ABIs) without permission.

One leader in the open-source movement said fear of litigation isn't a big issue in the minds of CIOs looking to deploy Linux.

"Fear of legal exposure through open-source licensing never even makes the radar as a problem," said Eric Raymond, an early leader of the open-source movement and president of Open Source Initiative, who cited IT manager surveys by Gartner, Forrester Research and D.H. Brown. "All the concern is about interoperability, TCO [total cost of ownership] and retraining costs. All of SCO's huffing and puffing has amounted to a big fat zero in actual results, and I see no reason to believe that will change."Linux ISVs, consultants and customers are standing firm in the wake of the end-user lawsuit.

"To date, no decision has been made on SCO's claims by any court of law, and it's clear that in spite of SCO's lawsuit, Linux adoption by our customers has continued unabated," said Peter Eck, vice president of marketing at BakBone Software, a member of the OSDL and a Linux ISV that develops storage solutions. "We don't see how this latest legal maneuver will change that."

Chris Maresca, senior partner at the Olliance Group, a Linux consultancy in Palo Alto, Calif., scoffed at the AutoZone case. He said he was at Software 2004 on Monday, where SCO CEO Darl McBride, a guest speaker, announced that SCO was launching a lawsuit against a customer. Most of the audience then left the room, Maresca said.

"So I don't think that SCO will have any impact," Maresca said. "If anything, open source and Linux adoption are actually accelerating."