SCO Sues AutoZone, Readies Suit Against DaimlerChrysler

SCO alleges AutoZone violated SCO copyright by running Linux containing Unix code. SCO is seeking an injunction blocking AutoZone from continuing with the alleged violation, and unspecified damages. SCO says it will charge DaimlerChrysler with violating its Unix software agreement with SCO.
The SCO Group Inc., pushing ahead with its threats to sue Linux users, on Wednesday said it has sued auto parts chain AutoZone Inc., and is close to doing the same against auto giant DaimlerChrysler Corp.

SCO, which claims ownership of code contained in the open source operating system, filed on Tuesday a copyright infringement suit against Memphis, Tenn.-based, AutoZone in a federal court in Nevada.

The suit alleges the defendant violated SCO's copyrights by running versions of the Linux operating system that contain "code, structure, sequence and/or organization from SCO's proprietary Unix System V code," a SCO statement said.

Linux is a cousin of the Unix operating system, and SCO claims its Unix copyrighted code was inserted in Linux by IBM. SCO has filed a $5 billion suit against the high-tech giant, which denies the allegations.

SCO is asking the U.S. District Court for an injunction preventing AutoZone from continuing with the violation, and is seeking damages "in an amount to proven at trial."

In the DaimlerChrysler case, SCO said it planned to file a lawsuit on Wednesday, alleging that the carmaker has violated its Unix software agreement with SCO. It was not immediately clear how the violation involved Linux.

The suit, which is expected to be filed in Oakland County Circuit Court in Michigan, will ask the court to prevent Chrysler from further violations of the software agreement, order the company to fix the effects of past violations, and to award damages in an amount determined at trial.

DamilerChrysler was not immediately available for comment, and a AutoZone spokesman, responding to an e-mail, declined comment, saying: "We have not seen the lawsuit."

Last year, SCO sent letters to 1,500 companies, warning them that their use of Linux violated the company's copyright on a significant portion of code within the operating system. The Lindon, Utah-based software maker has hired high-powered law firm Boies, Schiller & Flexner LLP to handle the case.

SCO has refused to say how many companies have agreed to buy its Linux license, but Darl McBride, president and chief executive, said in a Wednesday teleconference to report company earnings that the number was "less than 50."

To date, SCO's pursuit of Linux users hasn't brought much financial gain. The company reported revenues of $11.4 million for the first fiscal quarter ended Jan. 31, with only $20,000 coming from its SCOsource initiatives. SCOsource is the business unit that handles licensing. For the same period a year ago, revenues were $13.5 million.

The company's net loss increased for the quarter to $2.3 million, or 16 cents a share, from $724,000, or 6 cents a share, a year ago.

Nevertheless, McBride said the company had enough cash to defend its intellectual property rights, and he believed the legal actions would eventually generate revenue.

"What we're focused on is not something that's going to be measured in 10s of millions (of dollars), but something that has another zero or two behind it," McBride said. "Even though the actual numbers were down for the quarter, we're very encouraged about the progress we're making in the legal front, we're encouraged about the foundation we have on the balance sheet side, and we're encouraged that we now have end users that are starting to step up in a substantial way."

Research, however, has told a different story. In surveys of corporate users of Linux, International Data Corp. has found most of them choosing to wait for court decisions before deciding whether to buy a SCO license. In general, companies haven not changed their overall strategy for using open-source software, the analyst firm has said.

Indeed, unit shipments of servers running Linux increased 52.5 percent in the fourth quarter of 2003, compared to the same period the prior year; and revenue from the operating system jumped 63.1 percent to $960 million, according to IDC.

To ease customer fears, some companies selling products that use Linux have issued indemnification policies stating they would pay for Linux customers' litigation costs. Those companies include Hewlett-Packard Co., Novell Inc. and Sun Microsystems Inc.

In addition, the Open Source Developments Labs, has established a fund to cover legal costs.

McBride, however, predicted SCO's legal actions would eventually move companies toward buying a SCO license, which starts at $699 per server processor.

"We do believe that this is an education process," McBride said. "As we work through these issues with end users on the Unix and the Linux side, we will come to some positive resolution, as we move forward."

In the meantime, SCO's claims have led to a legal tangle, which started last March with SCO's suit against IBM, claiming the latter company violated its Unix license by inserting some of SCO' copyrighted code into Linux.

SCO's Linux claims are also the basis for its suit against Provo, Utah-based Novell Inc., which sold the Unix System 5 code to SCO in 1995, when SCO went by the name of Caldera. Novell has claimed SCO doesn't have the right to demand licensing fees.

Red Hat Inc., the top Linux seller, also has challenged SCO's claims in its own suit against the software maker.

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