Facing wholesale rejection of its demands for payment for Unix licenses from corporate Linux users, the SCO Group announced it would not invoice enterprises using the operating system.
Earlier this year, SCO filed a multibillion-dollar suit against IBM, claiming intellectual property violations. SCO said Big Blue lifted code from System V Unix, which SCO owns, and contributed it to the Linux kernel. The Lindon, Utah, vendor also threatened Linux users in the Fortune 500 with invoices for Unix licenses and legal action if those enterprises failed to pay.
Several recent polls from Forrester Research Inc. and Credit Suisse Boston, however, indicate that most enterprise chief information officers and IT managers are proceeding with Linux implementations and are ignoring SCO's threats.
"They clearly looked at the cost of pursuing these invoices and saw that the cost was not worth the gain," said Forrester principal analyst Ted Schadler. "It's clear SCO is reaching for IP validation. They do own [Unix] IP. The question is, do they have the ability to exert control over Linux? The broad consensus is they can't. The court of public opinion has made its decision."
Had SCO invoiced Linux users, it could have faced hundreds of companies refusing to pay and ended up pursuing lawsuits against each of them; trying to collect those license fees would have resulted in monumental legal fees.
SCO was seeking $699 licenses for single-processor Linux servers, $1,149 for dual-processor servers, $2,499 for four-way servers and $4,999 for eight-way machines. SCO was also seeking $199 for desktop implementations and $32 for embedded devices.
Chris Sontag, senior vice president and general manager of SCOsource, the division within SCO responsible for managing and protecting intellectual property, told SearchEnterpriseLinux.com earlier this month that SCO had not yet had to invoice commercial users, and that it was satisfied with the compensation it had been getting from end users.
"SCO has really been left with no other choice but to request that commercial customers of Linux compensate SCO for our intellectual property with a license fee," Sontag said. "The hardware vendors don't take responsibility for infringements in Linux because, technically, they aren't distributors. The distributors pass the hot potato to business end users by shielding themselves with the GPL by saying, 'This product has no warranty and no indemnification.' So now if Linux has problems, including misappropriated intellectual property going into Linux, the end users are left holding this hot potato."
SCO spokesperson Blake Stowell said this morning that a couple of Fortune 500 companies had purchased licenses without being invoiced and that several other smaller businesses had as well.
"If we continue to have the progress we are having now, I don't envision us ever having to send invoices," Stowell said. "I'm not surprised [some companies have stepped forward and bought licenses]. We're satisfied with the pace of the program and satisfied with the number of Linux users who have taken out licenses."
Stowell said more details may be made available at SCO's next earnings call, which is scheduled for Dec. 5.
Schadler said CIOs and enterprise decision makers have not been swayed by SCO's threats. A Credit Suisse Boston survey publicized this week said that 84% of CIOs polled had not re-evaluated their Linux plans because of SCO. Meanwhile, 73% said they had Linux plans in place.
"SCO clearly decided they were in the right -- and they very well may be; that's for the courts to decide," Schadler said in regard to SCO's motivations. "They looked at their business, their stock position, their investors, their exit strategy and decided they could make more money this way. The fact is, they're not scaring anybody. We feel like this is starting to run out of gas. IT managers and CIOs have not been confused."
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