SCO offers penguin a carrot

SCO claims it has won key Unix copyrights and is offering Linux users a deal that would allow them to pay licensing fees to avoid litigation for infringement of SCO's intellectual property rights.

The company, which is at the heart of a controversial lawsuit over Linux code, said it plans to offer licences that will support run-time, binary use of Linux to all companies that use Linux kernel versions 2.4 and later.

SCO chief executive Darl McBride said in a conference call: "We have a solution that gets you clean, gets you square with the use of Linux without having to go to the courtroom." SCO sparked a major controversy in the Linux world in March, when it sued IBM for $1bn, saying the company had incorporated SCO's Unix code into Linux. The company alleged, among other things, trade-secret theft and breach of contract. SCO then updated its demands in June, saying IBM owed it $3bn. In the meantime, it sent out letters to about 1,500 Linux customers, warning them that their use of Linux could infringe on SCO's intellectual property.

The claim of copyrights on the Unix code in question may raise the stakes in the dispute. Some attorneys say a copyright claim, which was not included in the earlier allegations against IBM, could be easier for the company to prove. SCO said prices for licensing its Unix System V source code would be announced in coming weeks. Pricing will be based on the cost of UnixWare 7.13, the company's current Unix product. SCO, at least initially, isn't directly targeting home users of Linux, McBride said.

The move bypasses companies such as Red Hat that develop, distribute and advocate Linux and goes straight to users who might be inclined to just pay up rather than to get ensnared in an ideological and legal battle. Mark Radcliffe, an intellectual property attorney with Gray Cary, said: "It's a very smart strategy, if it works. If the price is low enough, better to buy a certainty than get tangled in a murky war." But the move hinges on several complicated issues, some of them at the heart of SCO's suit against IBM. Specifically, SCO must be able to persuade courts or Linux users that IBM and other Unix licensees weren't permitted to transfer to Linux the programming code they'd created themselves for use in Unix.

And proving Unix copyrights isn't a simple matter. Radcliffe said: "Unix is now a patchwork of stuff that's in the public domain and stuff that isn't in the public domain." If successful, SCO's move essentially would impose a tax on Linux, an operating system that has spread quickly across the computing industry in part because its open-source nature has sparked a broad, lively, unfettered development process.

But Illuminata analyst Gordon Haff said a tax would undermine that movement. "I'm not sure I really see the option where SCO in the long term succeeds in collecting a tax on every copy of Linux sold, because that really destroys what Linux is. It seems to me that either someone ends up buying SCO, or SCO basically succeeds in destroying Linux."

SCO previously had not been able to base any actions on Unix copyrights, because the US copyright office had them registered to Novell, an earlier owner of Unix intellectual property. McBride said a contract unearthed from a filing cabinet showed that SCO had some of the copyrights, and now SCO has registered copyrights for Unix System V and Unixware.

Chris Sontag, senior vice president and general manager of the company's SCOsource intellectual property division, said in a statement: "Since the year 2001, commercial Linux customers have been purchasing and receiving software that includes misappropriated Unix software owned by SCO."

SCO intends to provide them with choices to help them run Linux in a legal and fully paid-for way, he said.

The move further erodes SCO's aspirations to be a technology company instead of just a licensor of intellectual property. Although most of SCO's 330 employees are still working on developing new technology, the "huge uplift" in revenue is now on the intellectual property side. McBride said: "Clearly, the upside of this side of the business would be greater than the (products) side."

Investors welcomed SCO's move, sending its stock up $1.37, or 11 per cent, to close at $13.32 on Monday.

Stephen Shankland and Lisa M Bowman write for CNET News.com