The evening keynote at CDXPO is by Darl McBride. On the way in they handed out a pamphlet from WIPO entitled "Intellectual Property: A Power Tool for Economic Growth." I'm not sure who decided to hand it out, but I think its a little silly.

Darl McBride of SCO speaks at CDXPO.

Darl starts out with a history of SCO. He says "SCO = UNIX." (Note: in the interest of my fingers, I'm going to stop typing "he says" and just type the essence of his speech. If I add commentary of my own, I'll note that.) A year ago, the answer to the question "who owns UNIX?" would have gotten a variety of responses. While there are many branches of UNIX, they all tie into the same tree trunk. AIX, HPUX, and others are licensed products of SCO. There are more than 6000 licensees with access to UNIX source code. Now he world knows that SCO owns those licenses.

When Darl joined SCO, its market cap had gone from a billion dollars to 6 million and had about 6 months of operating funds in the bank. When he looked at the assets, he saw $60 million in revenue, a channel of resellers, and intellectual property. He didn't think the company was getting the most from its IP assets and saw IP infringements from "the upstart Linux."

He was told when he examined this space that going after Linux infringements would bring down the wrath of the Linux community on the company. He didn't see the Linux community as one of his assets. His constituents are his shareholders and customers.

SCO set up a licensing program to put UNIX libraries on Linux. IBM threatened that they would not support SCO on their products if they didn't retract their licensing program. 20% of SCO's operating systems ship on IBM hardware. IBM thought the program would imply licensing issues with Linux. IBM was talking about taking major parts of AIX and moving it into Linux. Since IBM makes a large portion of its revenue from its IP, SCO thought this was unfair.

SCO got to the point where they had one option left: litigation. That set in place a chain of events that led to the last six months. What is not in dispute:

• SCO owns all UNIX System V source code
• SCO owns agreements to all UNIX vendors
• SCO owns all UNIX System V copyrights
• SCO owns all claims for violation of UNIX licenses.
• SCO controls UNIX System V derivative works.

SCO doesn't own the derivative, but they have rights to confidentiality that are the same as for the original work.

The Linux infringements include literal copying, obfuscated copying, derivative works, and non-literal transfers.

Darl takes on what he calls urban myths surrounding SCO.

• I am not a Penguin Slayer or a Suit-Happy Cowboy.
• SCO does not want to destroy open source or Linux. With the appropriate checks and balances, open source has merit.
• End users are not safe in taking a wait and see position. SCO is contacting customers and asking them to take a license of litigate position.
• Linux infringements cannot be fixed by simply removing or changing it.
• The GPL is at risk, but IBM put it on the table, not SCO as part of the litigation.

Some other points:

• There's no free lunch or free Linux. The value proposition of Linux is UNIX for free. Free models such as free music, free Internet, free bandwidth, and free love haven't worked.
• Giving away a UNIX-like OS for free isn't a problem. What is a problem is giving away UNIX or pieces of it when you don't own it.
• Free software removes the incentive for innovation. There will lost jobs and lack of competition. SCO is in a tug-of-war between those who want software to be free and those who support proprietary software. SCO is a bellwether for this giant tug-of-war.
• This country was built on the notion of property ownership and being about to protect one's property. What's left in this company are concepts and ideas. If you take away the ability to protect that, we're reduced out ability to compete as a country (cue the break out the flag, someone).

• GPL will not survive. Open source will survive, but the GPL will have to be reworked in a way that is more pro-business.
• Linux will not be free.
• UNIX on Intel will continue to drive mission critical applications.
• SCO will prevail in its legal battle. SCO is now worth $200 million and has $60 million in the bank. SCO is committed to seeing this through.

Darl McBride of SCO points to the telling clause in the GPL during the press briefing.

SCO would like this to end up with SCO and Linux peacefully coexisting and competing.

I attended the press conference that Darl held right after his talk for "accredited members of the media." I figured I was accredited as much as the next guy since I publish a blog. There are about 40 people in the room. Here's some of the questions and my paraphrase of the answer.

• What about SCO's pattern of non-enforcement? It depends on the topic we're speaking of. The problem that gets most problematic are trade secrets. Out strongest claims are not on the trade secrets side--they are on the copyright side. There was no significant violations in the Linux code base. The infringements show up after 2001.
• Critics have said SCO previously participated in open source. Did SCO give its own code away? From a legal standpoint, this is not an issue, but its a PR issue.
• Did some of the cash ($60 million) come from Microsoft? Microsoft took out a license. Sun took out a license and the next version of Solaris will have a better range of drivers.
• Do you have claims against BSD or BSD derivative works? In the settlement agreement of 1994, there were about 100 files that were protected. We have found files inside Linux that come from BSD that don't have proper copyright notifications. We haven't done a code review of BSD.
• What would you say to customers who say "we didn't know we were infringing?" The only people we will sue are people who were notified six months ago that there were copyright infringements inside of Linux. Clauses 11 and 12 of the GPL say there is no warranty. The quid pro quo of the GPL is that you get it for free, but the end user takes on the liability. IBM says that since IBM doesn't do distributions, they can't be sued. All we want is justice. The GPL is in violent collision with the DMCA. That's why Linux guys are opposed to the DMCA. Something has got to give.
• What percentage of Linux is infringing? Roughly one million lines of code. 20% of the Linux kernel. BSD is in a clear legal environment. There are dozens of protected BSD files that have made there way into Linux.
• In your presentation you contrasted proprietary and free software. CIOs aren't attracted to free so much as the ability to work with the source code and cooperate with other organization in software that doesn't differentiate their business. Why didn't you mention this model? That may be true. So, should we ask all the database companies to give away their IP to raise the overall functionality of databases. These people are demolishing the value of my company. Just because my stuff isn't differentiating for the customer, doesn't mean its not a valuable asset for SCO.
• Who was notified of infringement? The Fortune 1000 and the Global 500.
• Won't shareholders lose in the end from the bad publiciity? For every person who illegally contributed code to the Linux code base, there are 20 who followed the rules. Its understandable that they'll be angry. Even so, our customers are happy that we're able to continue to deliver services for them.
• Will you do an analysis of BSD source tree and all derivative works. How much time will that take? We know for a fact that there are copyright violations going on in the Linux code base. We have enough sorted out to pursue our course in the next 90 days. The more you pull on this yarn, the more come out. We need to get our arms around the BSD front. We can only focus so much with our limited energies. Right now, we're focusing on Linux. We'll get to BSD next year.
• What do you think of HP's indemnification of Linux users? in HP's case we had a lot of discussions regarding getting them clean. To do that, we had to get to the point where they would come in and pay for the versions of Linux their customers are using. It would have cost them hundreds of millions of dollars. They probably figured they could pay for a lot fo indemnification before they paid out that money. The challenge with HP's situation is that if SCO goes out and starts issuing invoices to their customers, HP has to keep paying. HP will have a tough time turning this around. The alternative is for them to ask their customers to ask SCO to sue them and HP will indemnify them against suit. Other vendors might be more interested in working a deal with SCO upfront since they don't have as deep of pockets.
• Does Microsoft have an direct or indirect claims on your equity? No. Originally they did based on the Xenix purchase from Microsoft, but that went away in 1999.
• What kinds of "checks and balances" were you talking about in your earlier talk? Linus, for as big a cultural leader that he is, put blinders on with respect to IP entanglements. Why didn't GNU grow up to be the big overpowering OS? They never got the kernel right since they were very concerned about IP infringement. With IBM's help the Linux kernel has become viable. OSDL and other efforts are taking the right steps to set up an environment that respect IP.

My thoughts as I listened:

• Some of this seems like an apology or at least an explanation. "Don't hate me," he seems to be saying. "I did what I did for the shareholders."
• I think the continued reference to intellectual property, with the emphasis on property, does a disservice to real property rights. IP is different, constitutionally, from real property.
• I think Darl's overall position is that he's protecting the shareholders and feels that's what he has to do.
• The point that Darl made clearly several times, is that Linux couldn't be viable without UNIX code. Somehow that code solves problems (as does Windows) that other people can't figure out on their own. I'm afraid that a trail won't shed much more light opn this, but it seems to be the heart of the matter. Is there something so special about UNIX code that Linux couldn't have grown up without it, or if, in fact, there is UNIX code in Linux, is it something that is not critical or could be easily replaced.

I have some sympathy for Darl's position. I don't think that Darl could have done his job and ignored what he felt were real infringements. Nevertheless, I hate what its doing to the momentum that has been building behind open source. The answer won't be as simple as SCO just going away as much as we might like that. I guess the best way to look at this is that this issue is real and it needs to be cleared up sooner or later. I firmly hope that the end result is in favor of open source software.