The Worm Turns and Squirms. And Wall Street Almost Gets It.

Tuesday, December 09 2003 @ 06:24 AM EST

Contributed by: PJ

Reaction to Darl's recent Open Letter hasn't been positive. There is almost uniformly negative publicity for them. Even the Salt Lake Tribune ran a mostly negative story. For the first time that I have noticed, a member of the financial media has taken note that SCO's financial dreams may not be so solid. has an article entitled "SCO Group Hit By Double Whammy":

"Shares of SCO Group (SCOX :Nasdaq - commentary -research) , the company challenging the popular Linux movement, fell sharply Monday after the company lost a court motion Friday and postponed its earnings report."

The Motley Fool doesn't seem to give much for SCO's chances either. What took Wall Street so long? Seriously, why has Wall Street been so slow to catch up with the rest of us? It's a puzzlement. I guess dreams of untold wealth die hard.

Of course, in that world's stories, there is always a SCO silver lining:

"The legal setback may prove temporary for SCO, however. SCO spokesman Blake Stowell said the company will have the opportunity to argue again in Jan. 23 that IBM also should produce source code.

"The judge's order compelling SCO to produce its code was 'absolutely not a surprise to us at all,' Stowell said. 'We were sure at some point we would need to be more specific, and this was that point.'"

Even the lovely and tireless Ms. DiDio is starting to wobble in her erstwhile loyalty. She says she found Darl's recent Open Letter difficult to read:

"'My first reaction, when reading [SCO's] letter, is that it was difficult to get past [the] first paragraph,' Yankee Group senior analyst Laura DiDio told the E-Commerce Times. 'I understand that The SCO Group is trying to explain its position, and by so doing it hopes to change the opinion -- of a large portion of the high-tech industry -- that it is "the bad guy." Unfortunately, the die was cast in March 2003 when The SCO Group launched its lawsuit against IBM.

"'SCO's action has ... put it squarely at odds with the open-source and Linux community, which views them as the villain. That is not likely to change,' DiDio added. 'SCO chose to exercise its right to litigate. Nothing The SCO Group says at this point, no matter how well intentioned, will convince its critics that it is a white knight. SCO's best chance of swaying enterprise opinion is to be sensitive to the needs and budgets of the enterprise community and to remember that IBM and Red Hat corporate customers are innocent bystanders in this ongoing vendor war.'"

DiDio isn't the only one. Ted Schadler, principal software analyst at Forrester Research, said this:

"In my opinion, SCO's posturing in the press is nothing more than keeping the fire lit to keep their stock value up. My recommendation? Don't go long in SCOX."

The honorable Bill Claybrook, with Aberdeen Group, who was the first analyst to question SCO's claims about the code, told E-CommerceTimes " . . . that he does not find any of SCO's arguments compelling and said it will be very difficult to prove the origin of the code in Linux that SCO claims is copied." Oddly enough, there was a "Sponsored Link" on that same page, letting me know I can have a "FREE complete copy of Microsoft Windows Services for UNIX (64)". No, thanks. Not even free. See, this is the problem. When they say "free", they mean one thing; when we say it, we mean another. Now if MS really offered free software, free as in free speech, I might take it and I'd pay for it too. That sentence may confuse them.

Linus' reaction to the Open Letter is here:

"I was recently sent a copy of SCO CEO Darl McBride's open letter on copyright law. As usual, McBride portrays the Linux community as the enemy of copyright. As always, he gets fundamental facts wrong.

"[The letter's] argument about copyright law is totally specious and fails any sensible test. [It] claims that the U.S. Congress' authority under the U.S. Constitution to 'promote the Progress of Science and the useful arts' inherently includes a profit motive.

"This is an obvious misrepresentation of facts. It's akin to saying that public universities are fundamentally unconstitutional, since they 'promote the Progress of Science' yet they aren't motivated by profit. . . .

"Maybe someone can explain to Darl that the GPL is designed so that people receive the value of other people's copyrighted works in return for having made their own contributions. That is the fundamental idea of the whole license -- everything else is just legal fluff."

Larry Lessig told E-Commercetimes that "based on the claims he has seen, SCO's case is 'totally frivolous'." Frivolous isn't a word lawyers use lightly. If your case is found to be frivolous by a judge, the lawyers for the frivolous litigant can be sanctioned. Yup. Money. They, at least, are supposed to know better.

Linuxworld has an article by an attorney who says that SCO's mistake was it has no patents. If you want to clean up, he says, you need patents:

'Without its own patent claims, the deck is stacked against SCO, and if IBM and/or Red Hat succeeds on the merits, SCO's IP claims against others will be toothless. Nonetheless, there are very few certainties in litigation, as IBM and Red Hat well know. If SCO mounts enough of an attack to sustain the cases towards trial, the risks may be too great for IBM and Red Hat to continue, and settlement is possible. If that occurs, the rest of the industry best be prepared to open its checkbook."

It's hard to kill a dream, eh? Still with the buyout fantasy. This is from a lawyer, no less. Risks for Red Hat, sir? I believe you failed to note that it is Red Hat suing SCO, not the other way around. There are no risks to Red Hat. And as for IBM thinking its risks are too great in the court room, well, I think that's out. We've seen they've decided to crush SCO to smithereens instead of buying them. I'm not a lawyer who "specializes in intellectual property litigation and counseling" but I know a legal tidal wave when I see one.

The brainiacs at IDC predict , in the same E-Commercetimes story, that IBM will "extend the same type of indemnification to its customers that HP unveiled earlier this year in the face of stepped up legal action from SCO." I wonder if they have as much fun at IBM reading nonsense about themselves as I do reading it about them? They'll offer that type of indemnification when pigs fly or when they suffer a stroke and forget what it is that makes GNU/Linux special, both of which are conceivable but not likely. Of course, the always very nervous George Weiss continues to fret that companies might tell a reporter they use Linux. They should keep a low profile, in his timid opinion. Of course, I'm sure MS wouldn't mind if nobody found out the whole world is switching to Linux.

Hmm. "The whole world." I need to be careful. I'm starting to talk like Sun Microsystems. I believe they are claiming the whole world for themselves:

"Banking on the China deal's potential of rolling out tens of millions of Linux-based desktops, Sun could become the largest Linux company in the world, McNealy said."

I guess the love affair with Linux is back on again. On, off. It's so hard to keep track of such a fickle lover. Though Sun's sweeping claims may be questionable, there is one thing about their new product. It's irresistibly beautiful:

"McNealy showed off a 3-D Java program called "Looking glass" which will be included in upcoming version of JDS. The program allows users to move around the desktop and view items in 3-D, with documents appearing to float, partially transparent, in the air."

You can read about it here and see a demo here or off this page. Personally, I'll wait for a GNU/Linux equivalent from a company I trust not to encumber software with patents and to still love Linux in the morning, but it's still wonderfully tempting to see 3D. Please get to work on this, guys.

Reaction to the SCO defeat in court Friday is now beginning to show up, and it's all negative too, severely negative. The stock was down nearly 8%, for starters, as you can see on the chart. Linuxworld began its coverage gloomily:

"The SCO Group is about to find out just how prudent it was to claim that 'million lines of code' in Linux are there because IBM illegally put them there in breach of SCO's intellectual property rights . . . . Many pundits are predicting it will be a Happy New Year for Linux."

PCPro interviewed Jason Schultz, staff attorney for the Electric Frontier Foundation, who predicted:

"'If SCO doesn't start turning over some real information to IBM soon, I could see the judge sanctioning SCO for money as a punishment for non-compliance. Such sanctions can be pretty steep.' . . . .

"If SCO is unable to satisfy the terms of the motions, IBM may well ask for the case to be thrown out. . . . However, Schultz said: 'I'm sure the judge will give SCO many, many chances to satisfy IBM's requests before considering dismissal of the case. Dismissal is a very drastic action at this stage.'"

ZDNET reports that SCO's Blake Stowell says Northrop Grumman was not the one Fortune 500 company that signed up for SCO's license to run Linux. Northrop declined to comment when asked. My brain finds it hard to put those two sentences together. Why would Northrup have a problem saying they aren't the company, if they aren't? But if they aren't, why did IBM subpoena them? It's probably way over my pretty little head.

The article mentions SCO's handing IBM source code on paper instead in digital form, and here is Stowell's reaction to IBM complaining about that in court:

"If a company wants code, it's the other party's decision to provide that any way they feel like providing that."

Tell it to the judge, Mr. Stowell. Oh. You did. And it fell flat. MacObserver scored Friday "IBM:1, SCO:0" but it ended its piece with an odd final sentence:

"We should make it clear that we believe very strongly that a company should protect its intellectual property when there is need, but we also believe that there are reasonable way to do this. SCO chose to alienate the industry by making unproven claims, and then attempting to extort fees without proving it has the right to do so. The initial effect has so far been to add some confusion to the Linux and UNIX community, something that Microsoft enjoys seeing. That might change sooner than many of us had hoped."

Now that I read it, the first sentence and the entire tone is a bit odd. Is that saying what it seems to be saying, that they were hoping for a more prolonged confusion to the Linux and UNIX community? I must have read it wrong. That makes no sense.

Surfing about to find all these articles gave me a chance to notice comments and feedback on several other web sites. There is no question that Groklaw's comments are head and shoulders above anything I saw elsewhere. We don't get arguments over politics, like the thread I saw on about whether Joe McCarthy was a patriot or a swine, for example. And we don't get anything like this comment, also on

""Free Lunch" ? (11:49am EST Mon Dec 08 2003)

"I wrote an 'Open Source' program too hoping to make a living. Unfortunatley, now I'm broke, my car was reposessed and my landlord threw me out. Now I'm homeless and can't care for my wife and kids. -by OpenSourceSucks"

Tip to astroturfers: you need to learn the culture and the lingo better than that to blend in as a solitary writer of an open source program. Hint: look up what "open source" means. Next, research what motivates folks to work on open source projects. Duh.

One thoughtful guy did comment on Darl's letter, which said that profit is the engine that ensures the progress of science, by saying that although he was an "outsider to the open-source community" he "could see the progress of science demonstrated in linux."

Then suddenly, on MacObserver, I stumbled across a comment about Groklaw, which said in part:

"Yeah, very good information source. Just remember that Groklaw was dumbfounded like the rest of the EFF-oriented community, that Lessig lost the Eldrich case. They certainly have strong, well reasoned opinions, but that doesn't mean their opposition doesn't, and it doesn't mean they will prevail in court. It also doesn't mean that code wasn't taken, nor does it mean that SCO's distribution of it under the GPL was a willful GPL'ing of their proprietary code."

Groklaw wasn't dumbfounded by the Eldred case for the simple reason that it didn't exist when that case was decided. The case was decided in January of 2003. Groklaw began in May of 2003. Groklaw also isn't connected in any way with EFF.

Well, I thought, I guess Groklaw has hit the big time now. Next, you will be in the checkout line at the supermarket and see a headline in a tabloid that I am having Darl's alien baby. P.S. That's not true either.

I saved the best for last. The Inquirer's Egan Orion has a reaction to the Open Letter from FSF's Eben Moglen:

"As an amateur scholar of constitutional law, Mr. McBride is longer than he is deep."

If brains and a good sense of humor mean anything, I'd say our side has it in the bag. Without a doubt, we are having more fun.

Here's a reaction to the Open Letter that is exclusive to Groklaw from Richard Stallman:

"The SCO statement is designed to confuse three separate questions:

* Are today's copyright laws just or unjust? (They are unjust, and morally bankrupt, when used to stop people from sharing.)

* Will Congress and the Supreme Court support today's copyright laws? (Congress probably will, in the short term. . . However, proprietary software distribution is mainly a matter of contract law rather than copyright.)

* Does SCO have a valid claim against Linux, the kernel of the GNU+Linux operating system, under copyright law? (Not as far as we can tell.)"

He also finds fault with this statement in Darl's letter: "'In the past 20 years, the Free Software Foundation and others in the Open Source software movement..." and corrects Darl:

"That statement is false because it describes the FSF as part of the open source movement, whose views we disagree with.

"We are part of the free software movement, which built our community with its idealism. The open source movement was started much later as a reaction against our ideals. We disagree with that movement on basic philosophical values--what's important, what's the whole point?

"Our practical activities have an overlap with those of the open source movement, so we can and do work with their supporters on practical projects. But we don't support that movement and never did. See for the details, if you haven't already read it."

Darl, like the astroturfer, forgot one of the most important rules of warfare: know your enemy.