March 3, 2004

SCO Group suing DaimlerChrysler, AutoZone for IP violations

Author: Chris Preimesberger

The SCO Group, Inc. apparently has decided to go after the automotive industry first in its quest to weed out "violators" of its Unix System V intellectual property. The Lindon, Utah-based company said Wednesday that it filed suits against both DaimlerChrysler Corp. and AutoZone, Inc., for using Linux systems that it contends have components of System V included in their design.

All the violations against both companies are about the "structural" aspects of the Linux systems being used, not in shared libraries or specific components, SCO Group CEO Darl McBride said during a press conference to announce the company's quarterly business results. "I can't go into that kind of detail here, but it's all included in the filing," McBride said.

AutoZone spokesman Ray Pohlman said that "we have not seen the lawsuit and have no comment at this time. We understand that hundreds of companies are also in this same situation." A spokeswoman for Stuttgart, Germany-based DaimlerChrysler said Wednesday that the multinational conglomerate also had no comment on the lawsuit. DaimlerChrysler, formerly the Chrysler Motor Corp., has its U.S. headquarters in Auburn Hills, Mich.

SCO contends in the DaimlerChrysler suit, filed in Oakland County, Mich. Circuit Court, that DaimlerChrysler has violated its software agreement with SCO Group's predecessor, the Santa Cruz Group, by refusing to pay licensing fees on the contract and for not filing a "certificate of compliance" regarding the disputed code. SCO is asking for unspecified damages and an injunction against DaimlerChrysler from using the Linux system in question or to file the compliance certificate and begin paying fees immediately. "We don't have the requirements to show that Chrysler has kept those licenses up to date," McBride said.

SCO's lawsuit against AutoZone, an auto parts retailer based in Memphis, Tenn., but incorporated in Nevada, alleges that "AutoZone violated SCO's Unix copyrights by running versions of the Linux operating system that contain code, structure, sequence and/or organization from SCO's proprietary UNIX System V code" in violation of SCO's copyrights. AutoZone has about 3,000 stores in North America.

The lawsuit, filed in U.S. District Court in Las Vegas, requests an injunction against AutoZone's further use or copying of any part of SCO's copyrighted materials and also requests damages -- again unspecified.

"People have to understand what's going on here and understand our rights," McBride said. "SCO has thousands of valuable contracts out there that are not being honored. It's like the music industry has experienced; when Napster was big a few years ago, 40 million people were downloading songs. Then the record industry association saw what was going on and warned people not to do it ... and some litigation followed. Now the RIAA has seen a decrease of more than half the downloading. I expect we'll see some similar transfer."

McBride said the crux of the problem is that "these companies who have chosen to ignore SCO's position have had access to our source code and imported it (into their systems) as they have contributed back to Linux. They need to confirm this with us in one way or another."

Asked whether he thought that lawsuits of this type would scare off litigation-wary potential customers for its Unix products and services, McBride said, "Well, we haven't seen a very promising market (for Unix products) anyway, because of the erosion in it due to IP violations like these. That's why we have to pursue these court actions. We've notified hundreds of companies about this, and we're serious about pursuing our IP interests."

McBride added that SCO Group has sold "only a handful" of Unix licenses in the last year. In answer to a question to be more specific, he said that meant "less than 50."

McBride said the first two lawsuits were filed against U.S. companies because "the cornerstone of our legal team is based here. This is clearly not just a U.S.-only situation; there are licensing and copyright violators in Europe and Asia. We will be pursuing our legal rights here first, however."

Although SCO Group has been as busy litigating as it has been providing software and services during the last year year, McBride said that "we're not particularly thrilled to be filing these lawsuits, but it's part of the educational process that we're committed to. We will work through these actions to come to some positive resolution as we move forward."


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