Look out! It's FrankenSCO!

This is a real Halloween story: A few weeks ago the Santa Cruz Operation (SCO) looked like a zombie. The company filed for Chapter 11 protection on Sept. 14, one month after a federal district court judge ruled that SCO wasn’t the owner of the Unix operating-system copyrights that the company had used as the basis for litigation and extortion.

The court further concluded that the copyrights are owned by good old Novell (yes, it is still around) and ruled that “SCO is obligated to recognize Novell’s waiver of SCO’s claims against IBM and Sequent” and, even better, now owes Novell $30 million in royalties.

Darl McBride, SCO’s CEO was quoted as saying: “We want to assure our customers and partners that they can continue to rely on SCO products, support and services for their critical business operations.” Hah!

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This is a real Halloween story: A few weeks ago the Santa Cruz Operation (SCO) looked like a zombie. The company filed for Chapter 11 protection on Sept. 14, one month after a federal district court judge ruled that SCO wasn’t the owner of the Unix operating-system copyrights that the company had used as the basis for litigation and extortion.

The court further concluded that the copyrights are owned by good old Novell (yes, it is still around) and ruled that “SCO is obligated to recognize Novell’s waiver of SCO’s claims against IBM and Sequent” and, even better, now owes Novell $30 million in royalties.

Darl McBride, SCO’s CEO was quoted as saying: “We want to assure our customers and partners that they can continue to rely on SCO products, support and services for their critical business operations.” Hah!

Now I won’t attempt to summarize the whole history of what has been a sordid tale of manipulative and unethical behavior on the part of SCO, but I do want to examine the various companies that have kept SCO afloat despite the blindingly obvious.

Back in the middle of 2003, about six months after SCO first announced it was going to investigate infringement of its intellectual property (i.e., Unix), it launched SCOsource. This was a business division created to manage the company’s intellectual property along with a license program for companies using Linux.

In essence the license, priced at $699 per server processor, $199 per desktop system and $32 per embedded system, was the high-tech version of an organized-crime protection racket. In this case the protection was from SCO suing in the future should the courts confirm its claims that Linux included its intellectual property.

There’s no definitive list of which companies ponied up the license fees, but a few are known: EV1Servers (a hosting company, for a reputed $850,000), CA (as part of a $40 million deal), Questar (an energy company, for an unknown amount) and Leggett & Platt (a manufacturing company, also for an unknown amount).

These companies displayed a complete lack of spine in buying “protection.” We can only conclude their management and lawyers were total wusses. What we do know is that their license fees in no small part prolonged the whole farce. Without their money, SCO’s bankroll would have dwindled considerably faster. After all, SCO’s biggest expense was legal services. In the last quarter the company’s legal bill was $9 million.

Two other notable organizations purchased SCOSource licenses: Microsoft and Sun, but not because either was in any way worried about prosecution. You would have to be pretty naïve not to conclude that the two companies saw contributing to SCO’s coffers was simply a way to dampen the market’s enthusiasm for Linux. Of course, since then, Sun has, to understate the case, changed its tune regarding Linux, but that’s another story.

Also keeping SCO “in the game” was BayStar Capital and the Royal Bank of Canada, which together invested $50 million in 2003.