SCO Group - WikiHQ

The SCO Group (often referred to SCO and later called The TSG Group) was an American software company in existence from 2002 to 2012. It became known for owning Unix operating system assets that had belonged to the Santa Cruz Operation (the original SCO), including the UnixWare and OpenServer technologies. Under CEO Darl McBride, it pursued a series of high-profile legal battles known as the SCO–Linux controversies.

The SCO Group began in 2002 with a renaming of Caldera International, accompanied by McBride becoming CEO and a major change in business strategy and direction. The SCO brand was re-emphasized, and new releases of UnixWare and OpenServer came out. The company also attempted some initiatives in the e-commerce space with the SCOBiz and SCOx programs. In 2003, the SCO Group claimed that the increasingly popular free Linux operating system contained substantial amounts of Unix code that IBM had improperly put there. The SCOsource division was created to monetize the company's intellectual property by selling Unix license rights to use Linux. The SCO v. IBM lawsuit was filed, asking for billion-dollar damages and setting off one of the top technology battles in the history of the industry. By a year later, four additional lawsuits had been filed involving the company.

Reaction to SCO's actions from the free and open-source software community was intensely negative, and the general IT industry was not enamored of the actions either. SCO soon became, as Businessweek headlined, "The Most Hated Company in Tech". SCO Group stock rose rapidly during 2003, but then SCOsource revenue became erratic and the stock began a long fall. Despite the industry's attention to the lawsuits, SCO continued to maintain a product focus as well, putting out a major new release of OpenServer that incorporated the UnixWare kernel inside it. SCO also made a major push in the burgeoning smartphones space, launching the Me Inc. platform for mobility services. But despite these actions, the company steadily lost money and shrank in size.

In 2007, SCO suffered a major adverse ruling in the SCO v. Novell case that rejected SCO's claim of ownership of Unix-related copyrights and undermined much of the rest of its legal position. The company filed for Chapter 11 bankruptcy protection soon after and attempted to continue operations. Its mobility and Unix software assets were sold off in 2011, to McBride and UnXis respectively. Renamed to The TSG Group, the company converted to Chapter 7 bankruptcy in 2012. A portion of the SCO v. IBM case continued on until 2021, when a settlement was reached for a tiny fraction of what the SCO Group had initially sued for.

Initial history

Background

thumb|right|The Utah Valley was where Novell, Caldera, and the Canopy Group were all based, each of which would play a part in the story of The SCO Group, also based there.

The Santa Cruz Operation had been an American software company, founded in 1979 in Santa Cruz, California, that found success during the 1980s and 1990s selling Unix-based operating system products for Intel x86-based server systems. SCO built a large community of value-added resellers that eventually became 15,000 strong and many of its sales of its SCO OpenServer product to small and medium-sized businesses went through those resellers. In 1995, SCO bought the System V Release 4 and UnixWare business from Novell (which had two years earlier acquired the AT&T-offshoot Unix System Laboratories) to improve its technology base. But beginning in the late 1990s, SCO faced increasingly severe competitive pressure, on one side from Microsoft's Windows NT and its successors and on the other side from the free and open source Linux. In 2001, the Santa Cruz Operation sold its rights to Unix and its SCO OpenServer and UnixWare products to Caldera International.

Caldera, based in Orem, Utah, was founded in 1994 by several former Novell employees who saw promise in Linux as a technology and failed to convince Novell management to move forward with it. Caldera's early funding came from Ray Noorda, the former CEO of Novell, and the Utah Valley-based Canopy Group investment fund that Noorda started for high-technology firms. The company had been in the business of selling its Caldera OpenLinux product but had never been profitable. It attempted to make a combined business out of Linux and Unix but failed to make headway and had suffered continuing financial difficulties. By June 2002, after it had moved to nearby Lindon,

On June 27, 2002, Caldera International had a change in management, with Darl McBride, formerly an executive with Novell, FranklinCovey, and several start-ups, taking over as CEO from Caldera co-founder Ransom Love.

Back to a SCO name

Change under McBride happened quickly. On August 26, 2002, he announced at the company's annual Forum conference relocated from Santa Cruz to Las Vegas that Caldera International was changing its name to The SCO Group. He did this via a multimedia display in which an image of Caldera was shattered and replaced by The SCO Group's logo, which was a slightly more stylized version of the old Santa Cruz Operation logo. The attendees at the conference, most of whom were veteran SCO partners and resellers, responded to the announcement with enthusiastic applause.

The change back to a SCO-based name reflected recognition of the reality that almost all of the company's revenue was coming from Unix, not Linux, products.

thumb|left| A high-level strategy meeting being held among executives, product managers, and engineering personnel of The SCO Group, in the company's Lindon, Utah offices in December 2002

McBride emphasized that the OpenServer product was still selling: "What is it with the OpenServer phenomenon? We can't kill it. One customer last month bought $4 million in OpenServer licenses. The customers want to give us money for it. Why don't we just sell it?"

In particular, the longstanding UnixWare name which Caldera had changed to Open UNIX was restored, but the other Caldera Volution products were split off under the names Volution Technologies, Center 7, and finally Vintela.

Software releases and e-commerce initiatives SCOBiz and SCOx

thumb|right|As part of the SCOBiz joint initiative, executives from The SCO Group and Vista.com inspect the latter's data center operations in Bellingham in January 2003.

In addition to reviving SCO's longtime operating system products, the SCO Group also announced a new venture, SCOBiz. McBride stated that the program would give partners a chance at "living the American dream". The SCO product was targeted towards the small-to-medium business market, whereas the SuSE product was aimed at the enterprise segment and Conectiva and Turbolinux were intended mostly for the South American and Asian markets. In terms of service and support, SCO pledged to field a set of escalation engineers that would only be handling SCO Linux issues. In particular, the SCO Group stated that due to superior multiprocessor performance and reliability, Linux applications could run better on UnixWare via LKP than they could on native Linux itself, One review, that found UnixWare 7.1.3 lacking in a number of other respects, called LKP "the most impressive of UnixWare's capabilities".

The SCOx software framework was announced in April 2003; its aim was to enable the SCO developer and reseller community to be able to connect web services and web-based presentation layers to the over 4,000 different applications that ran small and midsize businesses and branch offices. The web services aspect of SCOx included bundled SOAP/XML support for the Java, C, C++, PHP, and Perl languages.

But by then, these software releases and e-commerce initiatives had become overshadowed by legal actions.

In the courts

A focus on intellectual property

As soon as McBride became the head of Caldera International, he became interested in what intellectual property the company possessed. Novell had subsequently sold its Unix business to the Santa Cruz Operation, which had then sold it to Caldera. So in 2002, McBride said he had thought: "In theory, there should be some value to that property – somewhere between a million and a billion [dollars], right? I just wanted to know what real, tangible intellectual property value the company held." Shortly before the name change to SCO, Caldera went through its existing license agreements, found some that were not being collected upon, and came to arrangements with those licensees representing some $600,000 in annual revenue. Senior vice president Chris Sontag was put in charge of it. The O'Gara report, unconfirmed as it was, caused some amount of consternation in the Linux community.

On January 22, 2003, creation of the SCOsource division of the company, to manage the licensing of the company's Unix-related intellectual property, was officially announced, as was the hiring of Boies to investigate and oversee legal protection of that property. As the Wall Street Journal reported, Linux users had generally assumed that Linux was created independently of Unix proprietary code, and Linux advocates were immediately concerned that SCO was going to ask large companies using Linux to pay SCO licensing fees to avoid a lawsuit. The first announced license program within SCOsource was called SCO System V for Linux, which was a set of shared libraries intended to allow SCO Unix programs to be run legally on Linux without a user needing to license all of SCO OpenServer or UnixWare as had theretofore been necessary.

The company continued to lose money, on revenues of $13.5 million in the first fiscal quarter of 2003, but McBride was enthusiastic about the prospects for the new SCOsource division, telling investors on a February 26 earnings call that he expected it to bring in $10 million alone in the second fiscal quarter.

Lawsuits begin

On March 6, 2003, SCO filed suit against IBM, claiming that the computer giant had misappropriated trade secrets by transferring portions of its Unix-based AIX operating system into Linux, and asked for at least $1 billion in damages. The complaint also alleged breach of contract and tortious interference by IBM against the Santa Cruz Operation for its part in the failed Project Monterey of the late 1990s. Overall, SCO maintained that Linux could not have caught up to "Unix performance standards for complete enterprise functionality" so quickly without coordination by a large company, and that this coordination could have happened through the taking of "methods or concepts" even if not a single line of Unix code appeared within Linux.

Many industry analysts were not impressed by the lawsuit, with one saying: "It's a fairly end-of-life move for the stockholders and managers of that company [...] This is a way of salvaging value out of the SCO franchise they can't get by winning in the marketplace."

At the same time, SCO announced it would stop selling its own SCO Linux product.

A few days later, Microsoft which had long expressed disdain for Linux said that it was acquiring a Unix license from SCO, in order to ensure interoperability with its own products and to ward off any questions about rights. Another major computer company, Sun Microsystems, bought an additional level of Unix licensing from SCO to add to what it had originally obtained a decade earlier.

The server-based licenses were priced at $699 per machine, and if they were to become mandatory for Linux users, would represent a tremendous source of revenue for SCO. In December 2003, SCO sent letters to 1,000 Linux customers that in essence accused them of making illegal use of SCO's intellectual property. On January 20, 2004, the SCO Group filed a slander of title suit against Novell, alleging that Novell had exhibited bad faith in denying SCO's intellectual property rights to Unix and UnixWare and that Novell had made false statements in an effort to persuade companies and organizations not to do business with SCO. The SCO v. Novell court case was underway.

Lawsuits against two Linux end users, The first alleged that Daimler Chrysler had violated the terms of the Unix software agreement it had with SCO, while the second claimed that AutoZone was running versions of Linux that contained unlicensed source code from SCO.

In July 2003, the SCO Group announced it had acquired Vultus Inc. for an unspecified price. Vultus made the WebFace Solution Suite, a web-based application development environment with a set of browser-based user interface elements that provided a richer UI functionality without the need for Java applets or other plug-ins. Indeed, in putting together WebFace, Vultus was a pioneer in AJAX techniques before that term was even coined.

The acquisition of Vultus resulted in a shift of emphasis in the company's web services initiative, with an announcement being made in August 2003 at SCO Forum that SCOx would now be a web services-based Application Substrate, featuring a combination of tools and APIs from Vultus's WebFace suite and from Ericom Software's Host Publisher development framework.

A year later, in September 2004, this idea materialized when the SCOx Web Services Substrate (WSS) was released for UnixWare 7.1.4. However, as McBride later conceded, the SCOx WSS failed to gain an audience,

Views on infringement claims

In the keynote address at its SCO Forum conference in August 2003, held at the MGM Grand Las Vegas, the SCO Group made an expansive defense of its legal actions. Framed by licensed-from-MGM James Bond music and film clips, McBride portrayed SCO as a valiant warrior for the continuance of proprietary software, saying they were in "a huge raging battle around the globe", that the GNU General Public License that Linux was based on was "about destroying value", and saying that like Bond, they would be thrown into many battles but come out the victor in the end.

However, during the company's Forum conference, SCO did publicly show several alleged examples of illegal copying of copyright code in Linux. Until that time, these examples had only been available to people who signed a non-disclosure agreement, which had prohibited them from revealing the information shown to them. SCO claimed the infringements were divided into four separate categories: literal copying, obfuscation, derivative works, and non-literal transfers. The example used by SCO to demonstrate literal copying became known as the atemalloc example. While the name of the original contributor was not revealed by SCO, quick analysis of the code in question pointed to SGI. At this time it was also revealed that the code had already been removed from the Linux kernel, because it duplicated already existing functions.

By early 2004, the small amount of evidence that had been presented publicly was viewed as inconclusive by lawyers and software professionals who were not partisan to either side.

In any case, while Linux customers may not have been happy about the concerns and threats that the SCO Group was raising, it was unclear whether that was slowing their adoption of Linux; some business media reports indicated that it was, If SCO were to win its legal battles, the results could be extremely disruptive to the IT industry, especially if SCO's notion of derivative works was to be construed broadly by the courts. Furthermore, a SCO victory would be devastating to the open source movement, especially if the legal validity of the GPL license were to be called into question.