Untangling the Tangled Web

20 November 2003

Roger Bickerstaff

What does the SCO/Linux dispute mean for Linux users?

The various lawsuits engulfing the Linux community in the US are endangering Linux's pro-user reputation and could strike at the heart of its "free use" concept, as seemingly the whole of the Linux community becomes entangled in one lawsuit after another.

This Bird & Bird Briefing unravels the various strands of the legal actions and examines the consequences for Linux users, large and small.

The actions to date

SCO started the bandwagon rolling with an action against IBM, filed on 6 March 2003, claiming that IBM had misappropriated some of SCO's UNIX software in IBM's Linux business. SCO also issued letters to some 1,500 Linux users threatening legal action for using the Linux operating system. In June SCO announced an introductory price of $699 for a single processor licence with the licence fee rising to $1,399 in October.

Red Hat, the largest distributor of Linux products in the US, initially joined in the SCO - IBM action by asking in June for clearance from the judge for its own Linux activities. By August, Red Hat had escalated its legal activities by making its own claim against SCO in a Delaware court, accusing SCO-Caldera of "unfair and deceptive" actions.

IBM issued a counter-claim against SCO in late September alleging that SCO infringed IBM's copyrights by copying and distributing IBM's contributions to Linux without IBM's permission and that SCO's rights to Linux terminated when SCO claimed some parts of the open-source software.

In the meantime, HP has offered to indemnify its Linux users in the event that any claims are brought against them by SCO. IBM and the other Linux providers have, so far, not followed this indemnification route.

Most recently, SCO has claimed in court submissions that IBM has no right to terminate SCO’s Linux rights on the basis that only the Free Software Foundation has the right to enforce the General Public Licence (GPL).

What does all this mean for Linux users?

The key issues for Linux users arising from these legal actions are the extent to which they run a risk of being required unexpectedly to pay software licensing fees for the use of Linux and/or being prevented from using the software by SCO obtaining an injunction prohibiting Linux usage. In essence, should Linux users purchase a licence from SCO as SCO are suggesting?

The extent of the reality of these risks depends on the size and nature of the Linux users. Linux has now become such a powerful operating system that Linux users range from private and domestic users through to major multi-national corporations and public authorities.

For the various categories of users the Bird & Bird assessment of the risks are as follows:

· Private and Domestic Users: whilst SCO-Caldera may threaten to bring legal actions against private and domestic Linux users we consider that, in reality, the risks of SCO bringing such actions, particularly against non-US users, is very remote.

· Smaller Corporate Users: for organisations with less than around 500 users the risks of SCO-Caldera taking action against the organisation directly are remote, particularly if the organisations are not based in the US. The costs of SCO bringing a legal action against a non-US organisation and enforcing it if SCO were to be successful would be very considerable.

· Large Corporate Users: there is a greater risk that large corporate users could be in the firing line for an action by SCO. It is possible that SCO may seek to bring "headline" legal actions against a selection of large corporate users, such as banks, government departments and local authorities, in order to put pressure on Linux users in general to take up SCO's licensing arrangements. The recent statements by the Office of E-Envoy and the Office of Government Commerce promoting the use of Linux for central government departments could provoke SCO to bring a test case in the UK. Large corporate users of Linux are advised to seek specific advice on the issue on a case by case.

· OEMs: OEMs such as Dell, HP and IBM that incorporate Linux into their product lines are the primary target for SCO. SCO’s probable objective in commencing its legal action against IBM was to build up a licensing revenue stream not just from IBM but from OEMs in general. The strategy has, to date, backfired and has provoked a generally negative attitude, including IBM's argument that SCO's actions had terminated SCO's rights to the use of IBM's elements of the Linux source code.

· Linux Software Vendors: the Linux software vendors, such as Red Hat and SuSE, are probably SCIO's secondary targets. SCO may seek to achieve a revenue stream from the licensing of software distributed by the Linux software vendors. If SCO-Caldera were to succeed in this objective it would possibly be the "death-knell" for the Linux free distribution model, and this may be another objective of SCO-Caldera in commencing its programme of legal activities.

As this issue develops, we will issue further Briefings. For further information, please contact Roger Bickerstaff on 020 7415 6000.