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Are You SCO's Next Target?

SCO Group is taking its Linux fight directly to users. Will your company face a lawsuit?
SCO has been getting its finances in order for a legal fight. Last week, it revealed it would give $1 million in cash and 400,000 shares of common stock, valued at $8 million, to the law firm heading up its legal maneuvers, Boies, Schiller, & Flexner LLP, as compensation for work already done. The firm also stands to get 20% of any award or settlement that may come to SCO. Partner David Boies, who provided outside counsel to IBM for years, is overseeing the legal strategy. Separately, SCO last month secured $50 million in private financing to fund its litigation for the long run.

It's possible, even likely, that other lawsuits will result from SCO's intellectual-property push. McBride warns that Novell will be in violation of a noncompete clause signed in 1995, when the former Santa Cruz Operation purchased Unix assets from Novell, if Novell begins distributing the open-source operating system after its planned acquisition of SuSE Linux AG. "They'll be hearing from us," McBride says. And SCO last week also warned that "industry consortia" and other technology companies are fair game, too.

The result of all this is that SCO has become about as popular in Linux circles as Code Red was with system administrators. But McBride, a self-described cowboy, isn't about to back down. He once had his administrative assistant return the call of someone who challenged McBride to a fight"to get a time and place. "We have developed thick skin," he says.SCO has been on the receiving end of court papers, too. IBM countersued SCO, and a court date has been set for the spring of 2005 in Utah district court. Red Hat filed its own suit "to stop SCO from making unsubstantiated and untrue public statements" in the matter.

SCO's Escalating Battle chart

Both sides have begun to rope in outside parties. IBM recently subpoenaed the Yankee Group and three financial companies as it tries to build a case; SCO subpoenaed Linux creator Linus Torvalds.

With all the suits, countersuits, and threatened suits, some companies are being careful about what they say. A spokesman for Google Inc., which uses 8,000 Linux servers, declined to comment for this article, as did a spokesman for VeriSign Inc., another large Linux shop. "I'm not going anywhere near this fireball," responded the CIO of a financial firm that uses Linux to a request for an interview.

The impulse to seek protection from SCO's claims may be growing. Hewlett-Packard says at least 10 companies, most of them major corporations, have signed up for a plan it introduced Oct. 1 that offers customers indemnity from potential SCO legal action, as long as they get their Linux technology from HP. Neither IBM nor Red Hat offers similar protection (see "HP's Big Bet," Sept. 29, 2003). "We haven't changed our position at all" about offering customers indemnity, an IBM spokeswoman says.

Some experts continue to advise CIOs to wait for a court ruling before signing SCO's Unix-Linux license. Yet, given SCO's aggressive pursuit of, in McBride's words, "justice," it's getting harder for Linux vendors and users to duck the trouble. Many believe SCO's strategy will ultimately unravel in court. But what if SCO prevails? In that case, says lawyer Ferguson, "The industry is going to be faced with having to write a lot of checks to SCO."

--with Charles Babcock and Larry Greenemeier