[linux-elitists] NYT on SCO/Canopy

Eugen Leitl eugen@leitl.org
Mon Oct 13 04:54:53 PDT 2003


Copyright Lawsuit Is Turnabout for SCO

Published: October 13, 2003

AN FRANCISCO, Oct. 12 - The SCO Group, the company that touched off a
computer industry slugfest last spring by suing I.B.M. over its use of Unix
software, may find itself embarrassed by a similar claim against a company
once related to SCO.

Since filing a lawsuit claiming that I.B.M. added parts of the Unix operating
system to the freely distributed Linux software, SCO has threatened other
computer companies, the open source software movement and hundreds of
corporations that rely on Linux, saying they are unfairly using Unix software
that SCO owns.

But in an unpublicized case, one of SCO's former sister companies, Lineo, has
agreed to quietly settle a third party's accusations that it engaged in the
same kind of copyright infringement that is at the heart of SCO's claim
against I.B.M., industry executives who have been briefed on the matter said.

The case spotlights the behind-the-scenes role of Canopy, an investment firm
formed by Ray Noorda, the founder of Novell and a personal computer industry
pioneer. Canopy is SCO's largest shareholder and formerly controlled Lineo.

Mr. Noorda, who has retired, acquired the rights to the Unix operating system
from AT&T in 1992 while he was running Novell. He hoped to use Unix in his
strategy to compete with Microsoft. Later that strategy shifted to backing
the freely distributed Linux operating system, and Mr. Noorda helped finance
a number of Linux software companies, including Caldera Systems, which last
year changed its name to SCO Group. Lineo, was spun out of Caldera in 1999
and sold to Motorola last December.

Lineo was sued last year by MontaVista, a maker of software for specialized
computers used in consumer and industrial applications that is based in
Sunnyvale, Calif. The MontaVista executives said they had been notified that
software their programmers had written and licensed under the GNU General
Public License - the license that governs companies that distribute Linux
software - had appeared, with copyrights removed, in Lineo's software. The
license, which allows for the free distribution of software, still requires
that the copyright notices be retained.

Neither side would comment on the settlement, which was put under a court
seal last month.

SCO, based in Lindon, Utah, has been pursuing its litigation since shortly
after Darl McBride took over as chief executive in June 2001 and decided that
the company's commercial Linux strategy was failing. Under Mr. McBride, SCO
has aggressively pursued what it contends are its intellectual property
rights over the parts of the Unix operating system that it says I.B.M.
transferred to Linux.

IBM and others in the open source movement note that SCO has provided little,
if any, public evidence that its copyright has been violated.

Canopy is now SCO's largest shareholder, with two seats on the company's
board, and has played an important role, analysts say, in shaping SCO's legal

"All roads lead to Canopy," said Laura Didio, a computer industry analyst at
the Yankee Group. "They've been pretty clever in the way they've played

Although it styles itself as a low-profile early stage investment firm,
Canopy has had other significant legal successes. In 2000 the firm won a $250
million antitrust lawsuit against Microsoft over its earlier DOS operating
system. In August another Canopy-owned company, Center 7, won a $40 million
ruling against Computer Associates.

Although neither party would comment on why the Lineo-MontaVista lawsuit had
been sealed, legal experts said that it was probably because it might have a
direct bearing on the dispute between SCO and I.B.M. One possibility involves
a legal defense known as "innocent infringement" in which a copyright
violator infringes unknowingly. If it became public knowledge that Lineo
admitted guilt but settled for a relatively trivial sum by invoking that
argument, it might come back to haunt SCO.

"If there are transcripts and pleadings that have been sealed in which Lineo
makes the innocent infringement argument, that's a defense that I.B.M. and
others could use in their lawsuits," said Jack Russo, an intellectual
property lawyer at Russo and Hale in Palo Alto, Calif. "There is not a lot of
law in this area and my sense is they are worried that this is something that
I.B.M. could run with."

In a telephone interview, Canopy's chief executive acknowledged that Lineo
had infringed on MontaVista's copyrights but blamed the transgression on the
work of Hexamark Technologies, an Indian outsourcing company that worked for

"This story may speak more to the dangers and cautions of working with these
outsourced companies," said Ralph Yarro, chief executive of the Canopy Group.
He added that when the incident took place Canopy was no longer the majority
shareholder of Lineo.

Mr. Yarro, who is also chairman of SCO and led Canopy's lawsuit against
Microsoft, argued that his company is not trying to destroy Linux but was
simply asserting its intellectual property rights.

"The question is: 'How can we fix this issue and move forward?' " he said.
"I'd like to see Linux survive."

He acknowledged that the Lineo suit did in certain ways parallel issues in
the dispute between SCO and I.B.M.

"SCO picked a big fight and it flowed over to the Linux environment and we
found ourselves in an awkward position," he said. "For better or for worse
it's one of the cautions and dangers and flaws for the model. It happened to
Lineo and has happened to several others."

Canopy's stance has angered people who develop open source software who have
argued that the strategic intent is not so much to establish the truth of its
claim but to drive up SCO's stock price. Since filing the lawsuit, SCO's
stock has risen to $16.42 on Friday from $2.88 on March 31.

"These guys are making fraudulent accusations," said Bruce Perens, an open
source software advocate. "They've had time to understand that they're

Mr. Yarro said: "I know I've been painted in a rough light. I hope that our
companies are our legacy and not our lawsuits."

-- Eugen* Leitl <a href="http://leitl.org">leitl</a>
ICBM: 48.07078, 11.61144 http://www.leitl.org
8B29F6BE: 099D 78BA 2FD3 B014 B08A  7779 75B0 2443 8B29 F6BE
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