The news that the SCO Group has filed for Chapter 7 bankruptcy strikes a sweet note in the history of the Linux operating system, but reminds us of the unfortunate precedent they set for Linux.
In the U.S., Chapter 7 bankruptcy represents total liquidation of assets, as opposed to Chapter 11, which is what SCO had been under. In Chapter 11, it's about re-organizing what you have so you can come back later. But with zero revenue, mounting debt, and the "absence of a reasonable likelihood of rehabilitation," SCO (now known as the slightly recursive The TSG Group) filed their papers for Chapter 7 on Monday.
Groklaw, of course, has the full legal breakdown of what the new filing means, as well as just a bit of self-congratulations. Well, can't begrudge them that.
Looking back, it was one hell of a gamble by SCO. As a strategy, it was admittedly not a bad idea (in a soulless corporate sort of way): claim copyright infringement of their Unix code within Linux and start setting up licensing agreements with anyone and everyone running Linux on their servers.
And talk about gutsy: their first legal target out of the gate was none other than IBM, sued by SCO for violating trade agreements, then later copyright violation.
While that was going on, SCO decided to go into the litigation business, setting up a licensing division called SCOsource to "[introduce] the SCO Intellectual Property License Program to make binary run time licenses for SCO's intellectual property available to end users. The license gives end users the right to use SCO intellectual property contained in Linux, in binary format only. End users who purchase this license will be covered for their use of SCO's intellectual property in binary format in Linux distributions on the licensed system. The license applies to all commercial users of Linux."
In other words, if you use Linux, pay SCO.
This is about where things may have started getting out of control for SCO. By putting so much emphasis on and resources into SCOsource, they left themselves wide open for disaster if something went wrong.
For a while, it seemed to work. Some companies actually purchased licenses from SCOsource. Sun Microsystems and Microsoft were two of the more prominent licensees, probably an attempt to show solidarity with SCO and make Linux look weaker. But then things started to falter, when a lot of companies started asking SCOsource to specify their claims of copyright infringement.
Faced with a skeptical customer base, SCO did what any good business would do to get new customers: sue them for money.
AutoZone and DaimlerChrysler were first in line for litigation. Red Hat jumped in with a preemptive strike of its own, and it looked like this was going to be a legal farrago until 2003, when Novell chimed in with news that while Novell had licensed Unix copyrights to SCO, it never gave them full ownership.
Seven years later, a unanimous jury decision invalidated SCO's claim to the Unix copyrights, fueling the implosion even further. Chapter 11 had already been filed in 2007, after Federal Magistrate Dale Kimball initially ruled that SCO had no claim on Unix copyrights. That decision was appealed, which eventually led to the 2010 jury decision, but SCO was clearly mortally wounded.
While SCO is now out of the picture, the tactic of licensing Linux customers based on vague copyright and patent infringement claims still goes on. Microsoft is a big believer in this system, making sure they tout each cross licensing agreement to whomever will listen. And Microsoft may have learned an important lesson from SCO: instead of going full-bore for the biggest targets all at once, Microsoft is taking its time, quietly working deals behind the scenes so as to not attract the attention of someone who might have a better patent portfolio than them. (Psst, like IBM.)
By working the edges of the Linux and Android user ecosystem, Microsoft is avoiding the problem that ultimately destroyed SCO: taking on too many high-profile targets and attracting the attention of other companies that had a vested interest in seeing Linux succeed, companies with the wherewithal and the intellectual property to back up their interests.
Microsoft has been a little bolder in the mobile sector, but they have to be: it's a smaller environment of phone makers to go after. Plus, it gives an idea of just how weak Google's patent portfolio might be if they can't counter with some licensing moves of their own.
The lesson from SCO is, ultimately, a lesson in hubris. They tried too much with too little. But just scan the headlines for legal battles across all the technology sector, and you will see that their legacy of litigation as revenue lives on.
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