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SCO renews threats; Novell offers indemnification

Jan 19, 20044 mins
Enterprise ApplicationsLinux

Novell joined HP to become the second major Linux vendor to announce a Linux indemnification program, under which customers running Linux would be protected against copyright infringement claims.

While The SCO Group promises to sue an unnamed corporation using the Linux operating system next month, the industry is rallying to give open source customers peace of mind.

Last week, Novell joined HP to become the second major Linux vendor to announce a Linux indemnification program, under which customers running Linux would be protected against copyright infringement claims. At the same time, the Open Source Development Lab (OSDL), a consortium formed to advance corporate use of Linux, announced plans to create a $10 million Linux legal defense fund to help defray costs stemming from SCO lawsuits. That fund is in addition to a $1 million legal defense fund Red Hat established earlier last year.

Analysts say they haven’t seen SCO’s war on Linux having a significant impact on the market, but applaud vendors for taking steps to make users feel more comfortable.

“It’s pretty clear that as soon as The SCO Group takes some action that a large number of people will become much more concerned,” says Dan Kusnetzky, vice president of system software at IDC. “That’s why we’re seeing this interesting move to either indemnify, which is a proactive thing that says if anybody comes after you we will protect you, and a reactive fund that says if anybody comes after you and we see that it’s related to what we’re doing, we’ve got this fund to pay your legal fees.”

Novell’s Linux indemnification is available to customers running SuSe Linux Enterprise Server 8 who have obtained upgraded protection and a technical support contract from Novell after Jan. 12 when it completed its $210 million acquisition of SuSe. The program offers protection against any third-party claims.

“Enterprises are accustomed to having indemnification on [intellectual property]. It’s a standard thing in almost any software contract,” says Bruce Lowry, a spokesman for Novell. “That hasn’t been generally available for Linux. So we’re making that available for our version of Linux because we believe we can. It’s all about reducing barriers to adoption of Linux in the enterprise.”

Jeffrey Neuburger, an intellectual property attorney at Brown Raysman Millstein Felder & Steiner in New York, says indemnification is good news for customers.

“To the extent that the vendor indemnifies them, they can feel comfortable that pretty much regardless of what happens in the lawsuit, they are going to be whole,” he says.

Neuburger adds that it’s not unusual for indemnification to be an issue in any software contract negotiation, but stops short of saying that other vendors also should step up to the plate.

“I’m not saying they should or shouldn’t [offer indemnification],” he says. “But these vendors [that are offering indemnification] feel comfortable on the core issue of copyright infringement. You never know for sure what’s going to happen in a court. So to the extent there’s any risk, the vendors have probably decided that the business benefit outweighs that risk.”

Meanwhile, companies such as IBM, Intel and MontaVista Software have contributed more than $3 million to OSDL’s legal defense fund.

SCO, which has escalated its battle to protect its intellectual property since early last year when it filed a $3 billion lawsuit against IBM for allegedly incorporating protected Unix code into Linux, scoffed at vendors’ efforts to assuage customers.

The company, which began targeting Linux customers last May, announced last week that the SCO Intellectual Property Licenses it offered last summer to large corporations as a way to protect themselves against liability were now available to all companies worldwide. The licenses cost $699 per server processor and $199 per desktop processor.

“Indemnification programs or legal defense funds won’t change the fact that SCO’s intellectual property is being found in Linux. SCO is willing to enforce our copyright claims down to the end-user level and in the coming days and weeks, we will make this evident in our actions,” says Darl McBride, SCO’s president and CEO.