SCO could get an injunction that would prevent Utah neighbor Novell from shipping Linux, but it won't try to derail the planned Novell-SUSE merger--at least not legally, an SCO spokesman confirmed.
"SCO is not planning to file an injunction to block the Novell-SUSE merger at this time," SCO said in a printed statement this week, denying previously published reports that it would try to prevent the merger.
This week, Lindon, Utah-based SCO filed a statement with the Securities and Exchange Commission (SEC) claiming that a non-compete clause in Novell's 1995 sale of Unix System V to The Santa Cruz Operation (SCO) prohibits Novell from shipping a direct competitor to Unix.
"When the Novell-SUSE deal is complete, we will take measures to enforce the non-compete agreement with Novell," a SCO spokesman wrote to CRN. "I don't know that it will turn into a lawsuit. That depends upon how they respond, and if they put a competitive product in the marketplace."
SCO President and CEO Darl McBride claimed last week that Linux is a direct competitor--and "knock-off"--of Unix, and therefore Novell cannot ship a Linux OS. The SCO spokesman said the company has yet to decide on its course of action, but McBride sounded the warning bell on Tuesday. "There's nothing [for us] to respond to yet, but when the transaction is complete, they will be violating the non-compete," McBride said. "And if they do what they say they will do--go out and compete [with SCO]--then yes, we will take the appropriate measures to enforce that non-compete."
Provo, Utah-based Novell issued a statement this week blasting SCO's latest claim as baseless and said it has no plans to alter its $210 million purchase of SUSE, based in Nuremberg, Germany, or its plans to distribute SUSE Linux.
"Mr. McBride's characterization of the agreements between Novell and SCO is inaccurate. There is no non-compete provision in those contracts, and the pending acquisition of SUSE Linux does not violate any agreement between Novell and SCO," according to the Novell statement. "Novell has received no formal communication from SCO on this particular issue. Novell understands its rights under the contracts very well, and will respond in due course should SCO choose to formally pursue this issue."
One observer speculated that the SEC filing might represent an effort to force Novell to put a warning label on its Linux products and warn investors about potential liabilities, similar to the one Red Hat has adopted. The SEC requires companies to disclose all potential liabilities in a merger transaction.
Attorneys say, however, it will be difficult for SCO to get an injunction against Novell because SCO would have to prove that Novell's SUSE Linux contains the Unix System V code Novell sold to SCO in 1995. And that issue, which is the basis of SCO's multibillion-dollar lawsuit against IBM, remains to be proven in a court of law.
In its March filing against IBM, SCO alleges that IBM improperly donated Unix System V code to the Linux kernel, on which all Linux products are based--including SUSE Linux.
"In some sense, Linux is a knock-off of Unix and intended to be compatible with software designed to run on Unix," said Tom Carey, an attorney with Bromberg & Sunstein , a law firm in Boston. "But SCO has to prove that Novell is using the code it sold to SCO in that competitive [SUSE Linux] product."
SCO and Novell backers pointed to various excerpts from the SEC filing to support their respective viewpoints. SCO claims the language of the contract is clear:
"The seller [Novell] agrees that it shall use the licensed technology only for internal purposes without restriction or for resale in bundled or integrated products sold by Seller [Novell] which are not directly competitive with the core products of buyer and in which the licensed technology does not constitute a primary portion of the value of the total bundled or integrated product," according to a portion of the purchase agreement, which was signed by Novell and the Santa Cruz Operation in 1995.
According to SCO, this provision means that Novell can't compete against Unix, but Linux does compete with Unix.
Others maintain that Novell does not compete directly because Linux is not inclusive of Unix System V code and is not a direct competitor to Unix.
Additional observers point to other provisions they say make the non-compete null and void and will give Novell lawyers plenty of wiggle room. These provisions include specific language that allows Novell to distribute modified code. One provision, for example, reads:
"Such Licensed Technology and modifications may be sublicensed and/or distributed by Novell solely as part of a bundled or integrated offering and such offering shall not be directly competitive with core application server offerings of SCO," according to a portion of the SEC filing this week, which offers proof that Novell is safe, one source contend.
Observers also question if a "change in control" provision in the documentation could be used by Novell lawyers. While that provision reportedly expired two years after the sale took effect, the fact that ownership of the original buyer--the Santa Cruz Operation--has changed hands twice since 1995 could favor Novell legally, sources claim.
"The non-compete agreement seems to only apply to Novell distributing the licensed [Unix] technology, not Linux," said one source . "It is also unclear if the non-compete would have gone with the assets from Santa Cruz to Caldera to what is now called SCO."
Once friendly neighbors, Novell and SCO have been at odds since Novell's 2001 merger with Cambridge Technology Partners, which shifted the company's power base from Utah to Massachusetts.
Tension heightened considerably in April, when Novell announced a major shift to Linux and then claimed to retain the underlying copyrights and patents to Unix technology, which SCO debunked in part.
One Novell partner said the ongoing Linux litigation is tough to keep up with, but he predicts that SCO's legal maneuvering against IBM and others will ultimately result in changes to Linux.
"It's rare that a small company like SCO tries to bully larger companies like Novell and IBM," said Scott Urbatsch, an engineer with Polar Systems, Portland, Ore. "It seems SCO's case is not very solid, but recent developments seem to add a tiny bit of validity to their case. The end result will be fewer SCO clients and a changed Linux kernel."