http://ir.sco.com/releasedetail.cfm?ReleaseID=264124

We had been waiting since noting NASDAQ had halted trading shortly after 1p.m.

Update [2007-9-14 16:15:15 by JCausey]:The news has begun trickling out, though I have not yet found anything that is an article other than a reprint of SCO's press release. In any case, it is always nice to see the headlines on the Yahoo! summary page for SCOX looking like this:

Thanks for reading,

For more than three years the SCO v. IBM lawsuit has been part of the backdrop of all Linux discussion.  Initially, following SCO's filing in 2003 there was some genuine concern, at least among the less technically inclined, that there may have actually been some code from proprietary sources that had found its way into the GPL'd Linux codebase.

The technical community gave SCO's claims little credence from the first and were quite annoyed by the many very public claims voiced by representatives for SCO.  Those pronouncements and the antagonism of the Linux aficionados has raised the various lawsuits above prosaic tedium and kept both the fear, uncertainty, and doubt (FUD) and the hostility towards SCO higher than would otherwise be expected.

As time wore on, however, SCO's failure to identify any particular code in Linux which infringed upon any UNIX (tm) code, and the imbroglio will Novell which seems to indicate that they do not even own the code which they assert some Linux may infringe upon as allayed most of those fears even among the less technical business community.   One of the key factors in that has been IBM's cross motion request for a Summary Judgment on it's Counter Claim 10 in that lawsuit, a request that the court find that IBM has not (and by implication, no one else either) infringed upon SCO copyrights.  

CC10 as it is known by shorthand among the rapt followers of the SCO drama, dragging on through the years like an afternoon soap opera,  was first heard by Judge Dale Kimball in October 2004.   At the time he ruled against it on procedural grounds and without prejudice, meaning that it could be raised again later.  But his commentary was devastating, stating that he was "astonished" that SCO had provided no competent evidence in support of its public statements or in defense against IBM's motion.

But, however slowly, the wheels of justice do grind on.  The discovery phase of SCO v. IBM is now complete, and as per the court's schedule the time to raise Summary Judgment issues is now.  And IBM has indeed raised them ... such that it is very possible that all of SCO's claims against IBM could wind up dismissed piecemeal in those motions.  

Yesterday, IBM's redacted memo in support of CC10 hit Pacer.  (reproduced as http://www.zensden.net/misc/IBM-838-1.pdf and http://www.zensden.net/misc/IBM-838-2.pdf).   This is 102 pages detailing five independent but overlapping, direct and powerfully detailed reasons why SCO's claims of Linux infringement against its code are nonsense.

The first reason is that SCO has not shown any unauthorized copying of any code owned by SCO.  This goes to the heart of SCO's public comments regarding IBM, the allegation that IBM copied UNIX material into Linux.   Despite their hand waving about "methods and concepts" SCO has not demonstrated
any copying of actual code.

IBM argument for this first reason, aside from SCO's failure to produce any credible evidence,  is where points out that SCO appears not to be owner of the copyrights for UNIX anyway.  They also point out that even though there are 326 lines alleged to be similar, that SCO does NOT specify exactly what rights they claim to have and what specific acts IBM committed which constitutes copyright infringement.

The second reason is that IBM was given license to any and all code found in Linux from multiple and overlapping licenses ... including SCO itself.  The memo goes into exacting detail concerning the specific materials in Linux identified by SCO and demonstrates past tedium that there are public free licenses from various standards bodies - to many of which either of both of Caldera or Santa Cruz were members - to the code produced.  

They also point out that Caldera was in the Linux business for nearly a decade prior to the suit and willfully distributed and contributed to Linux in that time ... including some of the material they now accuse IBM of misuse.   IBM goes into detail in demonstrating that officers and employees of Caldera knew in detail the workings of Linux and the constituents of the code even while they were distributing it under and attached to the GPL.  Therefore IBM argues even if there were UNIX code improperly in Linux SCO itself (under it's prior name of Caldera) licensed any rights it had by its long time distribution under GPL.

The third reason is related, is the legal notion of promissory estoppal.  SCO and it's predecessor's - whichever inheritance SCO claims today (SCO's very name is an attempt to claim the heritage of Santa Cruz Operation, part of which Caldera bought before renaming itself, but at times SCO appears to be trying to make others forget that it was once renowned as Linux vendor, "Caldera International") - took numerous and positive steps to encourage others to use Linux and endorsed its free use under the GPL.  Under the legal notion of estoppal they cannot "change their mind" to the material detriment of those who invested in Linux based upon those statements.  Once again IBM cites numerous examples of both Caldera's and Santa Cruz's promises, not just in regard to Linux but regarding the standards committee's for the code in question to which they were members.

The fourth reason IBM puts forward is very similar to the first but the argument strikes harder.  SCO has shown no similarity to any particular body of code to which it may have proprietary rights and Linux.   We are not privy to the redacted filings in discovery, but the remaining claims evidently identify only 326 lines of Linux code which are allegedly similar to UNIX code. There are broad hints that IBM regards these particular lines as being functional and required by their purpose and thus not subject to copyright.

IBM's characterization of this code reads "(230) The particular lines SCO has identified as allegedly copied are a scattered and fragmentary collection of define statements, data structures and function prototypes, not qualitatively different in form or character or content or their individual importance from the many thousands of lines of other interface code. (ex 215 P37) Nor is their any apparent pattern, regularity, consistency, or cohesiveness to the accused code; it is scattered throughout the files, sometimes only a line or two in a file."

Paragraph 235 reads simply:  "None of the System V Code is protectable by copyright."  By which they presumably mean the lines identified by the SCO specific allegations.   It seems that ALL the identified code is part of header files.  But the header files are the API interface to the operating system.   But the API for UNIX has long been part of several international standards.  And API compatibility is regarded as functional rather than expressive in copyright.  IBM elaborates at length on these standards and shows how Linux came to implement code similar to UNIX code simply to be in compliance with those standards.

Subsequently IBM points out that the particular code in question in UNIX was part of the code in the BSD settlement more than a decade ago and was released by BSD under a license even more permissive than the GPL.

Finally IBM argues that even IF SCO owned the copyrights and IF there were infringement of copyright protectable elements owned by SCO in Linux and IF SCO as either and both of Caldera and Santa Cruz had not both encouraged others to use Linux under the GPL when either or both knew or should have known of any infringing code,  THEN SCO would still be unable to assert an infringement claim over Linux due to copyright misuse.   That is SCO attempted to claim and control far more of Linux than is actually there.   This is a legal nicety evidently, but the penalty enforced by federal courts for overreaching copyright claims is forfeiture in the instance.  

Having split the atom and now looking for quarks, IBM offers five independent reasons demonstrating SCO misuse: that SCO does not own all of the copyrights it purported, that SCO claimed broader rights to Linux than such copyrights would allow, that SCO attempted to use its (purported) copyrights to control material copyrighted by others (IBM in particular), that SCO asserted copyright over material not protectable under copyright law, and that SCO attempted to enforce copyright over IBM in ways not allowed by copyright law.

Given the "millions of lines" claims of SCO president Darl McBride and other SCO officers throughout 2003, this claim of overreaching is pure gold.

I am not a lawyer but this document is intimidating in its directness and clarity.   This is very readable to the lay person and the arguments are buttressed with overwhelming detail.   Like the memo in support of CC8 this will be very hard for SCO to defend against.   Those of us who have been awaiting some measure of justice for the multitude of calumnies SCO has perpetrated against Linux are breathless in anticipation of a ruling.  

According to one site though, this formula is accurate 72% of the time at predicting bankruptcy within 2 years.

Anyway, I thought it would be interesting to try it out on SCOX. So here is the data I gathered from their last annual financials:

• EBIT: -10,453,000
• Total Assets: 28,948,000
• Net Sales: 17,691,000 (unclear to me whether you would pull this before or after COGS is factored in, so I used gross margin)
• Market Value of Equity: 69,336,000 (I had to guess that this is the same thing as market cap)
• Total Liabilities: 16,953,000
• Current Assets: 24,924,000
• Current Liabilities: 16,255,000
• Retained Earnings: 11,337,000 (I am guessing this is the same as stockholder's equity, but I imagine there are other components of stockholder's equity besides Retained Earnings)

That seems to be pretty consisent with my previous calculations related to SCOX - they are in poor shape, but bankruptcy is not a given.

Of course, one of the big questions for those following SCO's assault on Linux is whether they will be able to stay in business long enough to get into the courtroom (assuming the case is not resolved before then). There has been much speculation in the past that various parties were either interested in helping to finance SCO in their litigation strategy or thought it was a good wager. However, as PIPE deals soured and information came to light that may help connect the dots, it appeared those various sources may have distanced themselves. I believe this left SCO in the position of needing a new strategy. I think their solution was to take the steps necessary to reorganize their business and operations so it could sustain them long enough to get to trial. As others have noted, SCO has recently taken to portraying themselves as an actual software company.

Those who follow the SCO saga closely are already familiar with the name Bert Young. That's because Bert Young was named the CFO for SCO back in April 2004 amidst turmoil involving the Baystar investment in SCO which went sour. Bert Young was also the CFO for MarchFirst, a company that went bankrupt in 2001. It was later discovered a massive fraud was occurring at MarchFirst leading to a wide assortment of lawsuits. Many surmised some financial shenanigans would result with Young involved at SCO. With the company starting to run low on cash, it looks like some more of the old MarchFirst crew is being called back into action.

I'm a cynic and a pessimist.  The end will come in the way which proves most exasperating for us.   We are mostly the moral equivalent of housewives glued to the TV each day for an hour of our favorite soap opera.  Ok we're mostly techies glued to the internet and are a bit more dynamic and interactive than those hypnotically enraptured to a flickering box ... but not by much (and the cynical philosopher wonders, in all seriousness, if the difference matters at all anyway).

The bottom line is that we watch SCOX for entertainment.  They have been a hugely wonderful and satisfactorily stupid supervillian - evil and intent upon malice but never quite capable enough to present a real threat - and allowing us to see IBM, despite its past sins still legendary for it's technical competance, as an adequate superhero.   And it has allowed almost all of us to play our little heroic bit parts in our heads.   I don't think I've ever seen or heard of a case of real life providing this much melodrama this deeply for so many for so long.

This law is what will determine what portions of the hundreds of pages of depositions and declarations about the contracts the court will pay any attention to. You really can't make any sense of what's going on in this area without some understanding of this "fascinating" topic.