August 4, 2003 7:45 PM PDT

Red Hat files suit against SCO

SAN FRANCISCO--Red Hat escalated the legal war over Linux on Monday, announcing that it has filed a lawsuit against the SCO Group.

The seven-count suit seeks, among other things, a declaratory judgment that Red Hat has not violated SCO's copyrights or trade secrets, Red Hat CEO Matthew Szulik said at a news conference here.

"We have asked the courts to declare that no violation of intellectual property and trade secrets have occurred," Szulik said. "We've been patient, we've listened. But when our customers and the whole open-source community are threatened with innuendo and rumor, it's time to act."

The action is the most serious attempt so far to seize some of the initiative from SCO, owner of key Unix copyrights, in its legal actions against Linux. But SCO isn't relaxing: Chief Executive Darl McBride warned Szulik in a letter Monday to expect counterclaims.

"We will prepare our legal response as required by your complaint. Be advised that our response will likely include counterclaims for copyright infringement and conspiracy," McBride said in the letter.

In addition, SCO rebuffed the Linux seller's assertions. "SCO's claims are true, and we look forward to proving them in court," the company said in a statement. "SCO has not been trying to spread fear, uncertainty and doubt to end-users. We have been educating end-users on the risks of running an operating system that is an unauthorized derivative of Unix. Linux includes source code that is a verbatim copy of Unix and carries with it no warranty or indemnification."

The open-source community will likely welcome the legal strategy, which Red Hat announced on the first day of the LinuxWorld Conference and Expo that is taking place here. Lindon, Utah-based SCO asserts that some of the underlying code in Linux was unlawfully copied from Unix, the decades-old operating system to which SCO claims some intellectual property rights.

Earlier this year, SCO filed a $3 billion lawsuit against IBM for alleged copying of proprietary Unix intellectual property into Linux. It has also sent letters to about 1,500 Linux customers, warning that they may be infringing on SCO's intellectual property.

In a press release Monday, Red Hat called SCO's actions "unfair and deceptive" and said Red Hat's software does not infringe on any of SCO's intellectual property.


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"We filed this complaint to stop SCO from making unsubstantiated and untrue public statements attacking Red Hat Linux and the integrity of the open-source software development process," Mark Webbink, Red Hat's general counsel, said in a statement. "Red Hat is confident that its current and future customers will continue to realize the significant value that our Red Hat Linux platform provides without interruption."

Red Hat filed the complaint in the U.S. District Court of Delaware.

The suit describes SCO's assertions about Linux as wrong and says the company's moves grew out of financial desperation.

"SCO's claims are not true and are solely designed to create an atmosphere of fear, uncertainty and doubt about Linux," the suit said. "SCO's campaign is designed to both slow the growth of Linux and to reverse its failing fortunes by convincing Linux users they need to pay SCO a license fee to use the lower-cost Linux operating system."

Good for all?
The action stands to benefit Red Hat and others in the open-source community that collectively develop the operating system, said Jeffrey Osterman, an intellectual property attorney with Weil, Gotshal & Manges.

"I think it's a smart move by them," Osterman said. "It probably had a twofold motivation. One, they actually want to get out from under this cloud. Then there is also the sign that they're willing to fund the fight against SCO."

Because of the open-source nature of Linux, if Red Hat prevails, others that distribute Linux will likely be shielded by the decision, he added.

It's not random that Red Hat's suit moves the action away from the Utah court where SCO filed its suit against IBM, Gray Cary attorney Mark Radcliffe said. "One of the reasons they're doing this is they don't want to be dragged into Utah. The home-court advantage is pretty strong," Radcliffe said.

SCO's defense probably will begin with an argument that Red Hat can't seek declaratory judgment because SCO hasn't sued the company. However, Red Hat will likely be able to prevail over that argument, given SCO's description of Red Hat's product and the threatening letters sent to Red Hat customers, Osterman said.

Open-source legal fund
Red Hat also stated that it has set up a fund, the Open Source Now Fund, to defray any legal costs that may be incurred by the Linux community. It is pledging $1 million to the fund, which will help cover the legal costs of open-source developers that work under the GPL (General Public License) and of nonprofit institutions that become involved in SCO actions.

Red Hat hopes others will contribute to the Open Source Now Fund. Szulik said the company will seek funds from SuSE and other computing companies that stand to profit from Linux.

"The collaborative process of open-source software development, which created the Linux operating system, has been unjustly questioned and threatened," Szulik said in a statement. "In its role as industry leader, Red Hat has a responsibility to ensure the legal rights of users are protected."

SuSE spokesman Joe Eckert said the company supports Red Hat's case, but said it's too early to say whether it will contribute to the fund.

Open-source software advocate Bruce Perens praised Red Hat's move. "I'm happy that Red Hat is pursuing it because from a public relations standpoint, it didn't look like were working to defend ourselves as a community," he said.

However, Perens said ultimately the open-source community won't get everything it needs from the legal actions, because he expects the IBM and Red Hat suits to produce settlements rather than court verdicts and because he expects SCO to seek a court protective order to seal SCO's evidence so that programmers can't see the allegedly offending code.

Other claims
Red Hat is also seeking a preliminary injunction to bar SCO from continuing its assertions that Red Hat's Linux violates SCO's intellectual property.

The suit also seeks to require SCO to triple the financial damages caused to Red Hat "for harm caused by SCO's unfair competition and false advertising...unfair and deceptive (trade) practices...as well as for violations of common law, including trade libel, unfair competition and tortious interference with prospective economic advantage."

The suit, however, won't be enough to reassure customers fully, said Forrester analyst Stacey Quandt, because the legal case extends well beyond Red Hat. "It's not adequate to fully address the concerns of customers around the issues of the IBM lawsuit," she said.

SCO's likely copyright infringement counterclaim is to be expected, but the conspiracy charge would be "a pretty peculiar claim," Radcliffe said.

John Allcock, head of the Gray Cary's patent copyright trademark litigation division, added that the conspiracy charge is typically used in antitrust cases.

Although McBride said in his letter that a conspiracy charge against Red Hat is likely, SCO spokesman Blake Stowell said it won't be the priority. "We will focus much more on the copyright claim," he said.

Szulik said Red Hat took its legal action independently of IBM.

"This came as a surprise to us," IBM said Monday in a statement. "We have not had a chance to talk with Red Hat about this yet. So we have no comment at this time."

 

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