Clouds Still Swirl Around SCO

Its litigation assault on Linux remains shrouded in mystery. What's clear is that the open-source movement isn't slowing down

When tiny SCO Group (SCOX ) first claimed ownership to parts of the open-source Linux operating system in January, 2003, the software community reacted with a collective shrug. When SCO filed a Linux-related suit against IBM (IBM ) one year ago this month -- with alleged damages now at $5 billion, the industry perked its ears. Three weeks ago, when SCO launched a suit against two big corporate users of Linux, plenty of people took notice. Then they went right on buying Linux software.

So more than a year into its litigious drive, SCO is still waiting for a big reaction. With the litigation threat, it has managed to get a handful of companies to buy SCO licenses, and its stock, while drifting down lately, is up from the sub-$1 gutter (see BW 2/2/04, "The Most Hated Company In Tech"). But the rest of the software community putters on, as though the ugly SCO episode never existed. Still, the entire industry has questions about the SCO hullabaloo, such as:

Will the threat of SCO litigation slow down Linux adoption?

Not likely. The lawsuits have been in the air for a year now, yet sales of Linux-based servers continue to pick up steam. In the fourth quarter of 2003, they grew 51% over the same quarter last year, according to Gartner. In comparison, sales of Windows servers were up 15.9%, and Unix servers dropped 4%. In the last two years, Linux' share of the server market has grown from 2.7% to 7%. With big computer makers like IBM, Hewlett-Packard (HPQ ), Dell (DELL ), and now even Sun Microsystems (SUNW ) selling Linux boxes, there's little reason to think Linux will lose its momentum.

Next up is the desktop. Linux is growing in popularity as a desktop operating system in developing countries like China and India, and with big companies like HP and Sun throwing their weight behind Linux PCs, it's only a matter of time before the open-source OS gets a toehold in the American desktop market.

Does anyone know for sure what SCO does and does not own?

Only SCO executives and their lawyers. So far, SCO has made public a snippet of computer code contained in Linux that it believes it owns. A handful of industry analysts who have been allowed to see SCO's evidence say some similarities exist between the SCO code and parts of Linux. But Linux project leader Linus Torvalds says SCO is mistaken. He says he wrote that code as a young programmer nearly a decade ago, and his beginner's mistakes prove that's the case (see BW, 2/2/04, "Linus Torvalds: SCO Is "Just Too Wrong").

As for the rest of the nearly 100,000 lines of privately owned code SCO says has found its way into Linux, the evidence is unclear. Linux experts are stumped. SCO's superstar lawyer, David Boies, maintains all will be revealed in due time as SCO and IBM haggle through a yearlong discovery process, leading up to their trial next year.

Does SCO even own what it says it owns?

Like everything else in this nasty dispute, the basic notion of what SCO does and does not own is in question. SCO says it owns the original Unix technology developed at Bell Labs in the late 1960s, having bought it from Novell, a fellow Utah software maker. Novell, however, says it sold only the old Unix business to SCO and held on to the ownership of underlying intellectual property. SCO has filed suit against Novell, claiming it's interfering with SCO's business. If SCO can't win that suit, it'll be awfully hard to pursue any other cases.

Is Microsoft (MSFT ) pulling strings behind the scenes?

While Internet message boards have been filled with Microsoft-related rumors, the giant so far has only been proven to be dancing on the edge of the SCO feud. Microsoft spokespeople adamantly reject the notion that a direct financial relationship exists between Microsoft and SCO. But Microsoft has spent at least $13 million on two SCO licenses, according to sources close to SCO. Microsoft says it needed those licenses.

Last year, Gates & Co. also played matchmaker between SCO and BayStar Capital, a San Francisco-based hedge fund that invested $50 million in SCO, according to BayStar's founder. That money has made it easier for SCO to pay for its varied lawsuits (see BW Online, 3/11/04, "SCO's Suit: A Match Made in Redmond?").

No doubt, Microsoft execs would love to see Linux go away. It's the biggest threat to their Windows empire since Netscape took Web browsers mainstream. Four years ago, Microsoft created a Web site to address what it called "Linux myths." In 2002, it hired two tech research companies to compare Linux performance and cost to those of Windows. Both studies found in favor of Windows, though it appears few tech buyers have paid heed to that research.

It seems Microsoft is still trying to figure out what to do about Linux, and fanning the flames around SCO's claims are as good a strategy as it has found so far.

Will intellectual-property questions mean open-source doesn't get beyond the operating system?

Not likely. Other open-source projects have an easier time proving the origins of their work. AMR Research estimates that MySQL, the open-source database, will go mainstream within three years. Apache, the open-source Web server, is already the most widely used Web server in the world. And open-source versions of application servers as well as a host of other software niches are starting to gain acceptance.

It seems the only limitation on open-source is the number of developers interested in a project and the number of customers willing to take a chance that cheaper software can be just as good as the expensive stuff they've been using for years.

By Jim Kerstetter in Silicon Valley

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