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SCO Group Sues IBM, May Pursue Other Action in Dispute Over Linux

By Steve Lohr

The New York Times -- For the true believers in free software, Bill Gates, the chairman of Microsoft, has long been the figurative devil. Yet suddenly, Gates has a rival for their animosity. The unlikely challenger is Darl C. McBride, the 43-year-old chief executive of the SCO Group, a little company in Lindon, Utah.

McBride is engaged in an escalating legal fight with IBM, and its ripples are prompting concern in much of the computer industry and among the industry’s corporate customers. The worries center on whether SCO can hobble the advance of a fast-emerging force in computing, the GNU Linux operating system.

This high-technology soap opera is complex, but here is a simplified version of events so far: SCO, which bought the licensing rights to the Unix operating system and its source code in 1995, sued IBM in March, contending that it breached its contract with SCO by shoveling Unix code into Linux, an operating system that is closely related to Unix. Linux is the leading example of open-source software development in which the code is distributed free, and is then improved and debugged by a loose-knit network of far-flung programmers. IBM has been the foremost champion of Linux among big companies.

A legal spat between two companies is a parochial matter, but SCO broadened its campaign last month. It sent warning letters to 1,500 large corporations that said, “We believe that Linux is, in material part, an unauthorized derivative of Unix.” Later, the letter stated: “We believe that Linux infringes on our Unix intellectual property and other rights. We intend to aggressively protect and enforce these rights.”

The move by SCO raised the stakes and sent many companies calling for their lawyers. Last week, there were further developments. McBride and his lawyers met on Monday with IBM executives and their counsel in White Plains, N.Y. Copies of the contract for SCO’s purchase of the Unix business from Novell in 1995 began circulating, and a few days later so did a 1996 amendment to the original contract. Together, they present a somewhat murky picture of the breadth of SCO’s rights, according to lawyers who have seen the papers. And an important deadline in the confrontation between SCO and IBM looms on Friday. SCO has said it will revoke the license for AIX, the IBM version of Unix, unless a settlement is reached.

As the SCO story moves ahead, the most important question is: Do Linux customers have a real cause for concern? The best answer, according to lawyers who have looked at the documents made public to date, is that as a legal matter it may be debatable, but as a practical matter almost certainly not.

First, the SCO suit against IBM is essentially a contract dispute. That is, the accusation is that IBM breached its contract with SCO by taking code covered by the Unix contract and putting it into Linux. The end users of Linux like the 1,500 industrial, financial and other corporations that received the warning letters from SCO -- typically do not have contracts with SCO.

But there is a complicating wrinkle. Contracts spell out acceptable behavior between companies that have formal business relationships. Yet intellectual property rights extend to strangers, corporate or individual, as well. Though this is not part of the IBM suit, SCO asserts that it has the intellectual property rights -- trademark, copyright and patents -- on Unix.