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Windows & Linux Edition
Volume 2, Number 20 -- May 21, 2003

Microsoft Licenses Unix from SCO Group

by Timothy Prickett Morgan

Everybody is wondering when and where the next shoe is going to drop as the recently litigious SCO Group is prowling around the operating system business looking for companies who have purportedly stolen the Unix intellectual property it owns. Microsoft has enough legal problems--including some with SCO back in the late 1990s--and has decided to license Unix from SCO. This is exactly the course of action that SCO wants all other platform providers to take.

Microsoft did not issue a press release on the licensing of the entire source code of Unix and unspecified patents, but Microsoft's new general counsel, Brad Smith, did make a statement last week before when the deal was announced. "The announcement of this license is representative of Microsoft's ongoing commitment to respecting intellectual property (IP) and the IT community's healthy exchange of IP through licensing," the statement said. "This helps to ensure IP compliance across Microsoft solutions and supports our efforts around existing products like Services for Unix that further Unix interoperability."

Microsoft would say nothing further on the matter, and certainly did not want to answer questions concerning whether or not Microsoft did this licensing deal to protect it from being sued by SCO for violating Unix patents and intellectual property rights that SCO acquired from Novell in 1995. But it is clear that any licensing deal between SCO and Microsoft would have to protect Microsoft from future litigation or Microsoft would not have bothered. Whether or not it was on the short-list of potential targets for being sued by SCO is also unknown. One potential point of legal exposure might be products created by Softway Systems, a company Microsoft acquired in September 1999. Softway developed a Unix runtime environment for Windows called Interix, which is now sold by Microsoft as Windows Services for Unix. With the licensing agreement, the theoretical question about whether or not the Softway products--or indeed any other Microsoft programs--were violating SCO patents or IP rights is moot. Still, more than a few eyebrows in the industry raised upon hearing that Microsoft had done this.

The financial terms of the licensing deal were not disclosed, but as we went to press SCO's market capitalization has risen by about 50 percent since Friday's close to $58 million. There's no question that the lawsuits are making SCO's shareholders happy, even if it is making Linux and Unix vendors and shops jumpy. By inking a deal with SCO, Microsoft can breathe easy and let Linux and Unix shops stay jumpy, too. Microsoft would love anything that makes Linux look less desirable, and staying out of the Unix IP lawsuit and giving SCO some money to keep up its own lawsuits certainly helps in that regard.

SCO's market cap has almost doubled since it established the SCOsource intellectual property licensing unit and launched a $1 billion lawsuit against IBM in early March contending, among other things, that IBM has stolen SCO's intellectual property and put it into Linux or abetted those who did do this. IBM denies these allegations, of course, and says further that SCO cannot revoke its license to Unix, which SCO has threatened to do on June 13, because the license it has to Unix is perpetual and irrevocable.

In a separate announcement, SCO and Microsoft announced that SCO and business partner Center 7, which is based in SCO's hometown of Lindon, Utah, have created an authentication product for Microsoft's Active Directory for Windows that runs on top of Unix. SCO Authentication for Microsoft Active Directory costs $999 on a RISC/Unix box with 25 active users, with additional licenses costing $20 per user. Customers with more than 1,000 users can buy a site license at a discount.

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