March 3, 2004 1:14 PM PST

SCO suits target two big Linux users

The SCO Group is targeting lawsuits at auto parts retailer AutoZone and automaker DaimlerChrysler in its continuing legal battle over the Unix and Linux operating systems.

The software company alleges that AutoZone "violated SCO's Unix 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 in violation of SCO's copyrights," it said in a statement released on Wednesday.

Spokesman Blake Stowell said on Wednesday that SCO also filed suit against DaimlerChrysler in Michigan's Oakland County Circuit Court for alleged violations of the automotive company's Unix software agreement with SCO.

Stuttgart, Germany-based DaimlerChrysler, which has U.S. offices in Auburn Hills, Mich., was not immediately available for comment.

An AutoZone representative said: "We have not seen the lawsuit and therefore cannot comment on it. It is our understanding that SCO sent letters to hundreds of companies making allegations." Memphis, Tenn.-based AutoZone has about 3,000 stores nationwide.


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Suing companies that use Linux makes strategic sense for SCO, said Mark Radcliffe, an intellectual-property attorney not involved in the case.

"They needed to start suing users, because they're the ones that are going to be the least desirous of spending money to defend this. They're going to scream for their distributors to 'Come and save me,'" he said. "It will produce increased pressure to IBM to produce indemnity," a form of legal protection for customers.

SCO Chief Executive Darl McBride compared his company's actions to the Recording Industry Association of America's lawsuits against alleged music sharing. "It wasn't until the RIAA launched a series of lawsuits against end users that the end users became fully educated," he said.

The RIAA suits decreased file swapping, McBride said, adding: "We think that for the most part we're going to see some similar trends here," with companies starting to pay SCO for a license to use its intellectual property.

The AutoZone suit harks back to an earlier phase of SCO's attempt to make money off Linux by selling licenses that permitted the use of supporting software, called Shared Libraries, that came with SCO's Unix products, OpenServer and UnixWare products. Using the software meant that products written for OpenServer and UnixWare could also run on Linux, though doing so would violate SCO's license agreement.

But the AutoZone case involves Linux claims that stretch beyond the Shared Libraries issue, McBride said during a conference call Wednesday. "This was a case that was very general to anybody who would be using the Linux operating system," McBride said, and future suits against Linux users would look very similar.

The AutoZone lawsuit, filed in U.S. District Court in Nevada, requests injunctive relief against AutoZone's further use or copying of any part of SCO's copyrighted materials. It also requests damages as a result of AutoZone's alleged infringement, in an amount to be proven at trial.

SCO said it has filed suit against DaimlerChrysler because the automaker did not respond to SCO's demand in December that Unix licensees certify, among several related actions, that they haven't moved Unix technology to Linux.

DaimlerChrysler is an avid Linux user. In July, John Picklo, manager of mainframes and high-performance computing for the company's Chrysler division, described at the ClusterWorld trade show how his company was using groups of interconnected Linux servers to run crash test simulations to improve car safety, reliability and other factors.

More light on Linux claims
In the AutoZone suit, SCO sets out details of several Linux technologies it believes infringes on its System V Unix copyrights. The list includes many basic parts of operating system functions: System V static shared libraries; System V dynamic shared libraries; System V interprocess communication mechanisms including semaphores, message queues and shared memory; enhanced reliable signal processing; System V file system switch interface; virtual file system capabilities; process scheduling classes, including real-time support; asynchronous input/output; file system quotas; support for Lightweight Processes (kernel threads); user level threads; and loadable kernel modules.

The copyrighted material has been "copied or otherwise improperly used as the basis for creation of derivative work software code," including Linux versions 2.4 and 2.6, according to the suit.

Linux is sold by distributors--such as Red Hat and Novell's SuSE Linux division--in cooperation with all four of the top server sellers (IBM, Hewlett-Packard, Dell and Sun Microsystems).

Novell, Red Hat and HP have begun offering legal protections for customers, and the Open Source Development Labs has established a legal defense fund. OSDL Chief Executive Stuart Cohen said on Wednesday that the organization has extended an offer to AutoZone to apply for the protection funds and that it will extend a similar offer to DaimlerChrysler.

Linux enthusiasts have been clamoring for SCO to release the Linux code it says infringes on their copyrights. But the open-source fans aren't likely to be satisfied with SCO's filing, Radcliffe said. "We still don't know which code," he said.

The sales situation
Separately, SCO announced on Wednesday a wider loss for its fiscal first quarter. It said its net loss, after paying preferred dividends, was $2.25 million, or 16 cents per share, compared with a loss of $724,000, or 6 cents per share, a year earlier.

Revenue for the quarter, which ended Jan. 31, fell to $11.4 million from $13.5 million in the same period a year ago.

One analyst--the only one listed by Thomson First Call, which surveys financial expectations--had predicted that SCO would turn in a loss of 22 cents per share for the quarter. Revenue projections for SCO from a pair of analysts were for $10 million and $14.4 million.

But SCO's efforts to sell licenses haven't made many gains. In the quarter, SCO garnered $20,000 in revenue from its SCOsource effort to license its intellectual property to Linux users, an amount dwarfed by the $3.4 million in SCOsource expenses.

"We expect SCOsource-related revenue will gain traction this quarter and increase in momentum in future quarters," Chief Financial Officer Bob Bench said in a conference call on Wednesday. The company expects its legal expenses to remain about level in future quarters, he said.

Suits all around
Lawsuits have long been expected. McBride announced on Monday plans to file a suit, but he didn't identify the company. SCO threatened in November to sue Linux users, although it missed a self-imposed mid-February deadline to do so.

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Darl McBride, CEO, SCO Group
SCO, which owns a disputed amount of Unix intellectual property, inherited the agreements by which inventor AT&T and its successors licensed the operating system to IBM, Sun, HP, Silicon Graphics, numerous universities and others. SCO has sued IBM for more than $5 billion in damages, alleging that Big Blue violated its Unix contract by moving Unix technology to Linux that it should have kept secret.

IBM denies wrongdoing and has countersued SCO for patent infringement. Meanwhile, Novell, a previous Unix owner, claims that it owns Unix copyrights, forcing SCO to sue to establish ownership. And Linux seller Red Hat has sued SCO to try to establish that Linux doesn't violate SCO copyrights or trade secrets.

SCO argues that companies must pay for a SCO intellectual property license to use Linux and thus avoid legal action--a license that costs $699 for a single-processor server. On Monday, EV1Servers.net became the first company to acknowledge that it signed up for the program.

CNET News.com's Mike Ricciuti contributed to this report.

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