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SCO Sues DaimlerChrysler & AutoZone

SCO Sues DaimlerChrysler & AutoZone

After weeks of threats and repeated delays, the SCO Group has finally sued two Fortune 500 end-user companies, DaimlerChrysler and AutoZone.

SCO is suing the carmaker, which is already one of its Unix licensees, for not certifying, as SCO says it's required to do under its agreement, that it is not running Linux binaries anywhere in its establishment or, if it is, that it has built a Chinese wall between its Unix and Linux developers, or any of the six other similarly-minded oaths SCO is now demanding its users take.

It's not that DaimlerChrysler refused SCO terms, it just ignored them, missing SCO's 30-day deadline. So SCO is suing it in state court in Michigan.

SCO is suing AutoZone, the premier auto parts chain and former SCO user, worth about $5.5 billion in annual sales, for violating SCO's contested "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 the suit SCO defines this widgetry as including SVR5 static shared libraries; dynamic shared libraries and inter-process communication mechanisms including semaphores, message queues and shared memory; enhanced reliable signal processing; the SVR5 file system switch interface; virtual file system capabilities; process scheduling classes including real-time support; asynchronous I/O; file system quotas; support for lightweight processes (kernel threads); user-level threads; and loadable kernel modules.

A Utah company incorporated in Delaware, SCO is suing AutoZone, a Memphis company in Nevada, where AutoZone is incorporated. SCO wants the Nevada federal courts to slap AutoZone with an injunction order to stop using SCO's proprietary code. It also wants actual, statutory and enhanced damages as well as costs.

In its conference call, SCO said it didn't want to delve too deeply into its legal machinations for fear of offending the magistrate currently presiding over its $5 billion suit against IBM who has already warned SCO and IBM about trying the case in the press, but SCO did describe the AutoZone charges as a "general set of claims" that could be brought against anyone who's running Linux.

That said, however, AutoZone, which used to run its business on SCO's OpenServer Unix, came up in the deposition interrogatories delineating its case that SCO answered for IBM.

There SCO claimed that IBM rustled the AutoZone account away from SCO in 2Q01 and that after that AutoZone wouldn't pay SCO the annual fee to maintain SCO products.

According to the story SCO tells, AutoZone's migration to Linux used the shared libraries that had been stripped out of OpenServer by IBM, which IBM was allegedly paid handsomely for, and embedded in AutoZone's Linux implementation so it could continue to run its legacy OpenServer apps.

SCO's evidence for this charge is its belief that "the precision and efficiency with which the migration to Linux occurred... suggests the use of shared libraries to run legacy applications on Linux."

SCO also thinks that AutoZone is still running the OpenServer shared libraries to run legacy apps on Linux.

Separately, it appears AutoZone used Red Hat over Caldera Linux on the terminals in its string of retail stores starting in 1999 when SCO was Caldera and still a Linux house. AutoZone declined to talk about its infrastructure at all, said it hadn't seen the suit and took a shot and noted that SCO had "sent letters to hundreds of companies making allegations."

However, Jim Greer, who was a senior technical advisor at AutoZone, told Groklaw that the notion that SCO's shared libraries were a necessary part of the company's Linux port was "false" and that "no SCO libraries were involved in the porting activity."

He said he should know because he initiated AutoZone's transition to Linux, directed the port of their legacy software base to Linux, personally ported all of AutoZone's internal software libraries to Linux and personally developed the rules by which other AutoZone developers should make changes to their code to support both Linux and OpenServer, which he described as "trivial given that our code did not generally rely on SCO specific features and that the more technologically sophisticated portions of our code tended to reside in our libraries."

Greer, who says he used to be on SCO's customer advisory board, also denies SCO contention that IBM induced AutoZone to move to Linux. He said it was "SCO's activities that 'greased the skids' and allowed the business case for using Linux to be made more easily."

Greer added that when "SCO was eventually made aware of AutoZone's transition to Linux. They responded by offering to assist AutoZone in the porting activity. By the time of their offer, AutoZone had already completed the initial porting activity and had already installed a Linux-based version of their store system in several stores."

Anyway, both SCO and AutoZone reported their quarterly results today. AutoZone did a lot better by far. SCO limped in with net losses of $2.3 million, or 16 cents a share, on revenues of $11.4 million, down roughly $2 million year-over-year, and the news that its IP licensing scheme had only brought in a scant $20,000 in the January quarter.

All the rest of the money came from the company's flagging Unix business.

Operating losses came to $5.2 million. Operating losses from its fabled SCOsource licensing program came to $3.4 million, a number that includes the company's legal bills.

In truth, SCO had previously indicated that SCOsource wasn't going to contribute much. It's promising to expand the program in the coming quarters in defense of its IP assets with license negotiations and end-user lawsuits. It expects SCOsource and a revived Unix business to "yield positive long-term results."

SCO is expecting to do between $10 million and $14 million in the current quarter and says that SCOsource results "remain difficult to predict in the short-term due to the nature of these licensing transactions and the variability of the timing of revenue recognition."

SCO has got roughly $58 million in the bank.

AutoZone stock dropped $3.87 to $84.53 by mid-day Wednesday and Wall Street said it was because of the suit although its top line came in a tad short. SCO was off $1.66 (12.4%) to $11.76. DaimlerChrysler was off 67 cents to $44.24.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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Most Recent Comments
Edward D. Perry 03/09/04 08:04:01 PM EST

Everybody should cancel all buisness with SCO. Gang togather and and keep this charade up as long as possible, until SCO's layers sue SCO for their fees. Turn around is fair play.

Ken Gallenbeck 03/04/04 01:30:06 PM EST

What surprises me is that AutoZone and/or DaimlerChrysler haven't already asked the court to issue a stay on their own proceeding and restrain SCO from filing additional suits until their claim is proven via the IBM and Novell suits. It would be in the interests of a fairly large "class" of users... which enterprising lawyer will file the Class Action suit against SCO ?? Short of that, SCO could waste a whole lot of people's time. The lawyers are the only winners (again!)...

U. Penski 03/04/04 01:26:10 PM EST

Nice article and feedback so far (is Linuxworld.com becoming a subsidiary of "The Wall Street Journal" or Forbes.com ?)
Having in mind what reached me about the SCO lawsuit I felt a bit guilty last week buying a package of noname candy-bars
which looked and tasted like those from major food companies but only cost half.
But I think that I got the point:
Looking now more for SCO "licensed" Linux distributions (like Sun's "Java Desktop System") than before.

riffraff 03/04/04 10:24:59 AM EST

More public death throes. How sad. And how embarrassing it must be to be an SCO employee.

Fecal Extrusion 03/04/04 10:22:49 AM EST

You know the end is near when nothing less than the blood of
elephants is good enough for the measly mosquito.

You just KNOW SCO is only trying to annoy someone enough to
make someone buy them to shut them down/up.

I hope nobody takes the bait. I want SCO to lose big-time,
and for it to be a worthless entity in the end. Darl should
experience the hell of watching his neurotic actions destroy his company into oblivion, and in the end, he doesn't even
get one red cent.
And hopefully, now that everyone sees his business ethics
are corrupt, no one wants to give him a job.

I hope Darl and Jacko share the same cel.

Ralph Mace 03/04/04 06:07:58 AM EST

How unfortunate that a company, any company, feels it must turn to litigation as a means of survival. In so doing, the company exposes the inept nature of its management. No company can survive on litigation alone; there must be a viable product as well. SCO does not have a viable product, at least not at the licensing fees they attempt to extort from their customers. When the company passes into history, as it surely will, other firms should learn a valuable object lesson from SCO's behavior.

DJ 03/04/04 04:08:51 AM EST

SCO are on the downward slope and have no hope of getting back up despite the Microsoft crutch. It's sad to see a once reputable organisation stoop to such stupid tactics just to prolong it's dance of death. It's a great pity that it should be allowed to interfere with other organisations but raising ridiculous law suits. I long for the burial or SCO and errection of the headstone saying "SCO R.I.P.".

Jacob 03/03/04 09:36:57 PM EST

This is ludicrous. Imagine this scenario: John Dough buys himself a car from Ford, drives it for a few years, and then buys a Honda. Then Ford files a law suit against him because they feel that the transition to the Honda was too smooth, so he must have taken parts of the Ford and put them in the Honda. Mind you, they have no evidence to that effect, but feel it must be true because the vehicles look similar. Yup. That'll go real far.

Dan Clamage 03/03/04 08:46:19 PM EST

>for violating SCO's contested "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."
To which I'd respond, "Prove it" and then file counter-suit for the false allegations.

As far as Auto-Zone's speedy conversion, I think it could be attributed to the skill of the people doing the port, not on reliance of some mythical .so's. Pure conjecture on SCO's part, and inflammatory in nature. Another counter-suit for libel is indicated. Especially on behalf of the folks who did the port.

At some point, the DOJ is gonna see that these lawsuits are frivolous and damaging to the market overall.

SCO can't go on forever losing money. At some point, they'll have to close their doors. That will be a Happy Day.

David 03/03/04 07:02:23 PM EST

It's a shame that lawsuits take so long to be tried. It would be great to put this behind us, and I'd certainly guess that SCO is going to lose based on the merits we've seen so far. But you can see that the lawsuits all have aspects that may turn out worse if they are true, even if they don't really affect Linux directly.

Wei Wang 03/03/04 06:35:35 PM EST

President Bush needs to declare SCO Group an information technology terrorist organization and take some preemptive action against them to make this country more secure.

Thomas Frayne 03/03/04 04:25:27 PM EST

Good article. However, I think you missed one point. SCOG's pro forma loss was much greater than that. SCO's financials states: "The loss from operations for the first quarter of fiscal year 2004 was $5,169,000 compared to a loss of $738,000 for the comparable quarter in the prior year." My arithmetic says that's $.37 per share. Did SCOG compare apples to oranges in the conference call?

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