In-Depth

Behind SCO's Spat with IBM

Does it open a door for Microsoft?

• By Stephen Swoyer
• 03/20/2003

It's been all of two weeks since the SCO Group socked it to IBM Corp. in the form of a $1 billion lawsuit that charged Big Blue with, among other things, attempting to destroy the economic value of Unix.

Since that time, relations between SCO and IBM haven't gotten any better. Most recently, both sides bickered over their interpretations of a seemingly contradictory provision in "Amendment X," a 1996 amendment to the Unix contract that IBM first endorsed when AT&T owned the rights to the operating system, way back in 1985.

A Big Blue representative, for example, cited language in Amendment X which indicates that IBM has the “irrevocable…perpetual right to exercise all of its rights” to the Unix source "at no additional royalty fee."

Hogwash, countered a SCO spokesperson, who cited language in the same section of the agreement that appears to put IBM’s claims in question: "Notwithstanding the above, the irrevocable nature of the above rights will in no way be construed to limit … SCO’s rights to enjoin or otherwise prohibit IBM from violating any and all of … SCO’s rights."

As far as Illuminata analyst Gordon Haff is concerned, bickering of this kind is beside the point: "[SCO’s] lawsuit is a last-ditch, please-buy-us-please effort. I just don’t believe that there’s anything to [its allegations]. [SCO doesn’t] seriously want to enforce these claims. They want IBM or somebody else to buy them."

Why would IBM (or any other vendor) be interested in purchasing SCO? Rob Enderle, a senior analyst with Forrester Research subsidiary Giga Information Group, thinks that he knows the answer. "The core intellectual property is owned by SCO, and … they’re going to go back in and re-explore the license. If [IBM] improperly made any of SCO’s property available to the open source community, then that could be a test case for the underlying foundation of Linux."

On paper, this could be the opportunity that Microsoft Corp. has been waiting for. The software giant has had an adversarial relationship with Linux since the upstart operating system first began to threaten its Windows franchise, and has been stymied in all of its attempts thus far to develop an effective marketing strategy against Linux and open source software (OSS). If SCO’s charges have any teeth, Enderle suggests, Microsoft could purchase the company and wield its IP rights as a cudgel with which to attack Linux, among other OSS initiatives.

Illuminata’s Haff thinks it’s highly unlikely that Microsoft would risk a buy-out of SCO simply on the chance that there’s merit to the Unix vendor’s claims, however. "For Microsoft to be aggressive from a legal perspective against Unix at this point, given the issues that already exist around with the DoJ, given that Steve Ballmer was up on the stage on Friday [March 7th] saying 'We want to put this whole DoJ thing behind us,' I don’t see that happening."

Microsoft has had something of a complicated history with SCO: It contracted with the Unix vendor to do most of the programming legwork on Xenix, a Unix flavor it developed in the early 80’s, and which ran on VAX systems from the erstwhile Digital Equipment Corp., as well as x86-powered IBM PCs. At one point, Microsoft even held an equity stake in SCO that is believed to have exceeded 10 percent. Ironically, SCO sued Microsoft in 1998, claiming that it was forced under the terms of an AT&T contract to pay royalty fees to Microsoft for Xenix-era obsolete code that was included with its Unix operating system. SCO prevailed in this litigation.

Failing a buy-out, analysts anticipate that SCO itself will go the route of other vendors who have become little more than intellectual property (IP) houses, such as one-time workstation specialist Intergraph Corp.

SCO formed its IP licensing division, SCOSource, a couple of months ago. Since then it has worked to convince customers who use its shared Unix libraries to pay a fee of $149 per processor. Jonathan Eunice, a principal analyst and IT advisor with Illuminata, offers a harsh assessment of SCO’s move: "Not a legitimate beef about IP misuse, but an end-of-life move for SCO. It is a last-ditch effort to salvage whatever value remains in the SCO franchise and asset base—value that SCO's managers have decided they cannot get by winning in the marketplace."