SCO Files Lawsuit Against Linux User AutoZone

SCO made good on its threat and filed a copyright infringement suit against AutoZone, a Memphis-based auto parts chain.

According to the lawsuit filed Tuesday in the U.S. District Court in Nevada, SCO alleges that AutoZone violated SCO's UNIX copyrights by running versions of Linux that "contain code, structure, sequence and/or organization from SCO's proprietary UNIX System V code in violation of SCO's copyrights," according to a statement issued Wednesday morning.

SCO is seeking injunctive relief to stop AutoZone's use or copying of Linux and will seek an unspecified amount of damages. AutoZone, which Red Hat named as a customer in 2000, could not be reached for comment early Wednesday morning.

A SCO spokesman said AutoZone is a Red Hat customer. However, a Red Hat spokeswoman said AutoZone is no longer a current, paying Red Hat customer. SCO also said it plans to announce later today a breach of licensing agreement case against an unnamed Fortune 1000 customer that licenses Unix System V from SCO.

Observers and IP attorneys expect the case will have little material impact on the Linux industry but could pump up more licensing revenues for SCO.

Wednesday, SCO is expected to report a wider loss of $2.25 million or 16 cents per share, compared to a loss of $724,000 or six cents per share during the same quarter a year ago.

While SCO has already filed significant litigation against Linux vendors IBM and Novell, this is the first time an end user company has been named as a defendant.

Thomas Carey, an IP attorney and partner in Bromberg & Sunstein, Boston, predicts the court will grant a stay on any injunction sought by SCO until the Unix company's primary case against IBM is decided.

Linus Torvalds, the developer of the Linux kernel, said the latest case -- like the one leveled at IBM -- has no merit and he questioned the timing of the filing. "They know they have no copyright ownership in Linux," Torvalds said, noting that SCO's earnings call is scheduled for Wednesday. AutoZone is set to announce first quarter earnings on Wednesday as well.

Channel partners do not expect their Linux business to come to a crashing halt but they will try to ease customer fears by citing indemnification policies offered by Hewlet-Packard, Novell and Sun, and the Open Source Development Labs fund, which have been set up to pay for customers' litigation costs.

Red Hat doesn't offer financial indemnification but offers an IP Warranty to subscribers that guarantees Red Hat will rewrite any code that places the customer in legal jeopardy. Red Hat was not available for comment early Wednesday.

"Solution providers will wait for customers to cite legal risks as barriers in pursuing a Linux strategy. A successful suit against a Linux customer may indeed send a chill through some customers, but it won't others," said Mark Fresolone, director of business development at Melillo Consulting, Somerset, N.J.

"As we saw with the Microsoft antitrust suit, even a successful legal challenge to a broadly adopted technology tends to have muted repercussions. With companies providing indemnity coverage with their packaging, many firms will run with it in spite of SCO's moves," he said.

Many open source advocates and Linux ISVs maintain that SCO has no copyright claim to Linux and urged customers to ignore SCO's efforts to wrangle legal damages out of IBM and force licensing fees out of customers.

"The entire Linux ecosystem, including OSDL and its 35-plus member organizations, will stand firm against any legal actions against Linux end-users made by the SCO Group. This is why OSDL announced our defense fund in January," said Stuart Cohen, CEO of OSDL. "SCO's decision to move forward with their end-user lawsuit is unfortunate, but due to the questionable merits of the case, we see no reason why this case will have an impact on the growth of Linux in the enterprise."

One Linux customer claimed the lawsuit won't hinder adoption unless a jury says otherwise. Nothing short of an actual guilty verdict will slow Linux," said Mark Lehrer, a programmer and consultant in Salt Lake City, Utah, home of The SCO Group.

Still, IP attorney Carey expects the fear, doubt and uncertainty of litigation may entice some CIOs to sign SCO source licenses. SCO has only signed a "handful" of such licenses with customers since launching its licensing program last August.

"This is likely to make large corporate Linux users consider more carefully the possible attraction of signing a licensing agreement with SCO," said Carey, an IP attorney and partner in Bromberg & Sunstein, Boston. "If a financial officer takes a hard look at it, they might decide that taking a license from SCO is cheaper than fending off a lawsuit."

He acknowledged that such a move could nullify customer savings by choosing open source over Windows and Unix but signing a license on a few servers could ease their headaches.

"There are some Linux promoters who assembled pot of money to help defend customers if a case is brought but that will only go so far," Carey claimed.

SCO has threatened to take legal action against customers since launching its first case against IBM last March and twice sent warning letters to Fortune 1000 customers, including one cease-and-desist letter dated Dec. 18 that charged select companies with illegally using more than 65 SCO-owned Application Binary Interfaces (ABIs) without permission.

Several vendors including HP stepped up to the plate to offer their own customers indemnification from legal costs of a case. IBM and Red Hat have not matched that offer.

"HP stands firmly behind its indemnification offer and will vigorously defend its customers against SCO-related lawsuits," HP said in a statement released on Tuesday. "All HP customers who

have purchased HP Linux-based products and services according to the terms HP outlined will have legal protection without any limits.

One leader in the open source movement claimed fear of litigation is not a big issue in the minds of CIOs looking to deploy Linux.

"Fear of legal exposure through open-source licensing never even makes the radar as a problem," said Eric S. Raymond, an early leader of the open source movement and president of Open Source Initiative, who cited IT manager surveys completed by Gartner, Forrester Research and D.H. Brown. "All the concern is about interoperability, TCO [Total Cost Of Ownership] and retraining costs. All of SCO's huffing and puffing has amounted to a big fat zero in actual results, and I see no reason to believe that will change."

Linux ISVs, consultants and customers are standing firm in the wake of the end user lawsuit.

""To date, no decision has been made on SCO's claims by any court of law and it's clear that in spite of SCOs lawsuit, Linux adoption by our customers has continued unabated," said Peter Eck, vice president of

marketing for BakBone Software, a member of the Open source Development Labs and a Linux ISV that makes storage solutions. "We don't see how this latest legal maneuver will change that."

One Linux solution provider scoffed at the case filed on Tuesday.

"Let's put it this way. I was at Software 2004 [Monday] when [SCO CEO Darl]McBride spoke. Three quarters of the audience left the room [when he announced SCO was launching the customer lawsuit]," said Chris Maresca, senior partner at the Olliance Group, a Linux consultancy in Palo Alto, Calif. "So, no, I don't think that SCO will have any impact. If anything, open Source and Linux adoption are actually accelerating.