In-Depth

SCO Finds April is a Cruel Month

Two companies move to have their lawsuits stayed or dismissed; venture capitalist firms asks for money back

• By Stephen Swoyer
• 05/04/2004

In fact, SCO suffered just such a setback in early April, when U.S. District Judge Sue Robinson stayed the lawsuit between SCO and Linux specialist Red Hat Inc., on the grounds that the same issues were being argued in SCO’s case against IBM, which is pending in a U.S. District Court in Utah.

Indeed, SCO officials may paradoxically have welcomed a return to predictability. That’s because April has been an exceptionally rough month for SCO, which less than two weeks ago seemed as surprised as the rest of the tech world when venture capitalist BayStar Capital Management LLC sought to recover $20 million that it had poured into SCO, alleging that the embattled Unix vendor had breached several sections of an investment agreement.

So SCO had to have seen it coming. First, on Tuesday, AutoZone moved to have its case stayed until SCO resolves its other pending lawsuits—including the case with Red Hat. In addition, AutoZone, like IBM before it, pointed out that it hasn’t yet been told exactly how it’s violating SCO’s copyrights.

Then, on Thursday, SCO case watcher Groklaw.com reported that in an April 15 filing, DaimlerChrysler had asked presiding judge Rae Lee Chabot to dismiss SCO’s case. One of DaimlerChrysler’s most intriguing claims, notes Groklaw founder and editor Pamela Jones, is that SCO isn’t even a party to the Unix licensing agreement attached to its complaint, and so may lack both the capacity and the standing to sue in the first place.

Like AutoZone and IBM before it, DaimlerChrysler is also at pains to identify just where it has run afoul of a licensing agreement it claims SCO isn’t even a party to. “Plaintiff fails to identify a duty under the License Agreement that [DaimlerChrysler Corp.] breached, and DCC has cured any alleged failure to comply with an actual duty under the License Agreement,” the filing said.

Much of this falls on the heels of a bold move from IBM, which in March filed for a motion of summary judgment in its own case against SCO. Collectively, it all adds up to a really cruel month for SCO, analysts say.

“I think IBM’s request for a summary judgment, that’s really a remarkable thing for a company that’s being sued to request in a case that’s as big as this one, because in the summary judgment, if the judge takes a look at the evidence and decides that the request for a summary judgment was just a grandstanding ploy, things can go very, very bad for the company that’s requesting it,” comments Charles King, a research director with The Sageza Group. “When I saw IBM make that request, it looked to me like they had taken a look at the evidence that SCO was presenting and decided that it was an empty suit that had to be put back on the rack.”

There’s been some speculation that BayStar’s move was in reaction to SCO’s suits against AutoZone and DaimlerChrysler, but King believes that it may amount to a vote of no confidence with respect to the merits of SCO’s case against IBM. “With this BayStar announcement coming just a few weeks later, it looks to me like the ground is crumbling under SCO,” he suggests. “Certainly, so far the case has been more about smoke than fire, at least in what SCO has been trying to spread.”

Elsewhere, in a response to IBM’s Second Amended Counterclaims, SCO has dropped its insistence on a number of contentious claims, notes Groklaw’s Jones. For example, the embattled SCO has infamously argued that the GNU General Public License (GPL) “violates the U.S. Constitution, together with copyright, antitrust and export control laws.” That claim—along with four others that, collectively, Jones labels as “the silliest of the silly”—have since been dropped.

Representatives from AutoZone, DaimlerChrysler, and SCO did not immediately respond to requests for comment.

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