Here's the original Red Hat Complaint [PDF], filed back in early August of 2003, as text.
I'll call that the Neolithic Period of SCO'S litigation wars against Linux, and back then, we at Groklaw had to have a volunteer go and pick up the complaint from the US District Court in Wilmington, Delaware in person, because the courts then were not yet digitized, then scan the pages in as PDFs, then another volunteer, IIRC, then had to make all the pages into one PDF, and then for unknown reasons I never did a text version. Exhaustion probably.
Also back then, it was Groklaw's prehistoric period too, and I had no idea Groklaw would end up the public's permanent record of the SCO v. Linux lawsuits. Anyway, we just realized we needed to do it, and thanks to four more volunteers -- both new ones and some from the original group, still here, still helping out -- here is the text version at last. I hope you enjoy it, because a lot of volunteers make up the warp and weft of this text version. It's very timely, because this is the complaint that SCO has asked the bankruptcy court to rule is disallowed and Red Hat has responded vigorously. I expect a real battle on this one, as Red Hat's legal team are some serious dudes, so I have restored the Red Hat Timeline link to our main menu, so you can find it easily as we go forward.
SCO's position in a nutshell is this:
5. SCO Group, Inc. rejects the notion that the Red Hat Claim holds any value. It is SCO Group, Inc.'s position that Red Hat's claims are not valid for several reasons: First, before SCO Group asserted its claims regarding Linux being an unauthorized derivative of UNIX against IBM, IBM had publicly announced, in an effort to promote and advance Linux into the enterprise market, that Linux was valuable because it is "derived from UNIX" and that "UNIX
was a pre-write of Linux". This is the basic point SCO Group, Inc. was making that forms the basis of Red Hat's claims. In other words, before SCO ever made any such statement, one of Red Hat's primary Linux customers and partners (and possibly the largest technology company in the world) had publicly stated the same thing that Red Hat asserts as the basis for its claim against SCO Group, Inc. This evidence shows that SCO Group, Inc.'s statements were truthful and known publicly before SCO Group, Inc. made its claims. Second, Red Hat's CEO publicly stated that SCO Group, Inc.'s allegations about Linux had caused "no slowdown whatsoever in the progress Linux was making." Therefore, Red Hat will not be able to prove that it has been damaged by any alleged statements by SCO Group, Inc.
6. By this Objection, SCO Group, Inc. seeks entry of an order pursuant to section 502(b) of the Bankruptcy Code and Rule 3007 of the Federal Rules of Bankruptcy Procedure disallowing the Red Hat Claim.
7. Further, SCO Group, Inc. asserts that it did not engage in false advertising in violation of the Lanham Act, deceptive trade practices, unfair competition, tortious interference with prospective business opportunities, trade libel or disparagement. Indeed, SCO Group, Inc. asserts that Red Hat is a debtor of SCO Group, Inc. and not the other way around.
See if you agree. Why ask for this relief? Well, I suppose if the claim is disallowed, then Red Hat can't vote against SCO's latest proposed sales plan, and if the litigation goes forward and SCO prevailed, it would then leave SCO free to skip off into its future adventures without the burden of having to actually pay Red Hat damages that Red Hat is seeking for what SCO did. Red Hat says it will pursue this litigation once the bankruptcy automatic stay of all litigation is lifted, but SCO has hinted to the bankruptcy court that it wouldn't mind a bit if the case was transferred to bankruptcy court and decided there instead of in US District Court. SCO has asked that IBM's, Novell's and SUSE's claims also be disallowed. I gather that means SCO would like to avoid any consequences for what it said and did beginning in 2002. If these claims were all disallowed in some alternate universe, then presumably SCO could get the remaining creditors, mainly insiders and partners or legal team to vote yes to the proposed sale, with those most directly harmed by it left with no vote. As you can see, one thing has not changed from Neolithic times. SCO is every bit as lovable and fair-minded as it was back then.
****************************
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
RED HAT, INC.,
Plaintiff,
v.
THE SCO GROUP, INC, (formerly Caldera
International, Inc.),
Defendant.
|
Civil Action No: 03-772
Jury Trial Requested |
COMPLAINT
I. Introduction
1. The plaintiff, Red Hat, Inc. ("Red Hat"), has commenced this
action in response to the unfair, untrue and deceptive campaign now
being waged by the defendant, The SCO Group, Inc. ("SCO"), to harm
the market for Red Hat's highly successful operating system based
on the open source LINUX kernel. As described in detail below,
SCO's tactics have centered on the use of highly publicized, but
vague, general and unsupported claims that portions of the LINUX
kernel and operating system contain intellectual property allegedly
owned by SCO, in hopes that such unfair, untrue and deceptive
statements will cause users and potential users of LINUX to
re-evaluate their plans to deploy LINUX as a primary component of
their Information Technology infrastructure.
2. SCO's claims are not true, and are solely designed to create
an atmosphere of fear, uncertainty and doubt about LINUX. SCO's own
conduct demonstrates this fact. For example, beginning in or about
March 2003, SCO made numerous public statements that LINUX, in some
unspecified way, contains SCO trade secrets, and that LINUX users
might be
(1)
liable to SCO for using those trade secrets if they continue to
use LINUX. Also at that time, SCO filed a lawsuit against IBM
claiming that, among other things, IBM had improperly contributed
UNIX software code trade secrets to LINUX. However, SCO never
publicly identified a single line of the publicly available LINUX
source code that allegedly contains even one SCO trade secret. In
fact, at the same time that SCO was contending that the LINUX
operating system included SCO's trade secrets without
authorization, SCO itself continued to offer its own version of
LINUX, thereby continuing to make publicly available the very
computer source code that SCO was claiming to be "secret."
3. SCO apparently recognized that the supposed "secrets" that
SCO itself was making publicly available through its own LINUX
distribution do not qualify as trade secrets. Accordingly, SCO
recently has changed the focus of its campaign against LINUX. SCO,
which has itself developed and sold a version of LINUX for years,
now claims to have suddenly discovered that LINUX contains computer
software code that was copied from another, competing operating
system that SCO claims to own — UNIX. Again, although the
LINUX source code is publicly available, SCO repeatedly has refused
to identify publicly even one line of SCO source code that was
copied.
4. SCO's tactics are as obvious as they are unlawful. SCO makes
grand public claims about the potential liability of anyone using
LINUX because of alleged violations of SCO's purported intellectual
property, but then refuses to support those claims with the detail
that would exist if SCO's claims were true.
5. The reasons for SCO's unfair, untrue and deceptive campaign
against LINUX are equally obvious. SCO is an unprofitable company
that purports to have acquired certain rights to the UNIX operating
system. In fact, SCO and its predecessor-in-interest to the UNIX
code,
(2)
Santa Cruz Operation, Inc., have reported an annual operating
profit only once in the nearly ten years since 1994. As SCO's own
public filings with the U.S. Securities Exchange Commission state,
its "revenue from the sale of Unix based products has declined
since [SCO] acquired" rights to UNIX. By contrast, SCO has admitted
that those "who embraced Unix years ago are adopting Linux today."
According to SCO, LINUX "can be used to power many of the current
and future internet and software needs of businesses, academics and
technical institutions around the world" because of its
"comprehensive internet functionality, flexibility, customizability
and stability, interoperability with multiple systems and networks,
low acquisition and maintenance costs, and compliance with
technical and communication standards."
6. In sum, SCO's campaign is designed both to slow the growth of
LINUX, and to reverse its failing fortunes by convincing LINUX
users that they need to pay SCO a license fee to use the lower-cost
LINUX operating system. As SCO's own representatives have
proclaimed, if SCO is successful at this effort, it can add
"billions" of dollars in undeserved revenues to its declining
bottom line. Additionally, SCO's campaign is designed to further
what, upon information and belief, has been referred to as the
"LINUX Lottery" — the ability to reap personal profit by
carefully timed purchases and sales of SCO stock.
7. SCO has specifically targeted Red Hat with its campaign by
repeatedly meeting with financial analysts who cover Red Hat's
stock and by, among other things, inviting certain of Red Hat's
institutional investors to a briefing held on or about July 22,
2003. During the July 22 briefing, SCO presented information that
it knew or should have known to be false and/or misleading about
any possible infringement of SCO's UNIX code by Red Hat's LINUX
distribution.
(3)
8. SCO's actions, including the climate of uncertainty fostered
by SCO about LINUX, have been carried out with the obvious goal of
adversely affecting Red Hat's business, Red Hat is, as recognized
by SCO, one of the premier distributors of LINUX.
9. In an effort to have SCO disclose the basis — if any
— for its vague public claims about LlNUX, Red Hat wrote to
SCO on July 18, 2003, In its letter, Red Hat noted that "[f]or
months now, officers of [SCO] have made public statements claiming
that some portion of Red Hat® LINUX contains code that
infringes intellectual property rights of SCO," and have sent
letters to Red Hat business partners, customers and potential
customers suggesting that they cease using LINUX. Red Hat noted
that SCO had "failed to provide any details" in support of its
allegations so that Red Hat could refute them, and that SCO's
statements were therefore "designed to disrupt and otherwise
interfere with Red Hat's relations with its customers."
10. Red Hat, in its letter, requested that SCO "fully explain
the bases, if any, for its public allegations concerning Red Hat
Linux," including identifying allegedly infringing source code, the
SCO source code that is the basis for its claims, the author and
date of authorship of the SCO code, the specific rights claimed to
have been violated, and the manner in which SCO claims that Red Hat
has violated those rights. Red Hat requested that SCO provide a
complete response by July 31, 2003. A copy of this letter is
attached as Exhibit A.
11. SCO did not respond to Red Hat's letter, except to make a
telephone call seeking to have Red Hat pay for an unneeded UNIX
license. Neither in that telephone call nor in any other written or
oral communication to Red Hat, has SCO identified any basis
whatsoever for its public claims of infringement.
12. SCO's lack of response to Red Hat is consistent with SCO's
conduct in the litigation SCO has filed against IBM directed to
LINUX — posting pleadings on the Internet long
(4)
before serving them, and taking a lackadaisical attitude toward
pursuing its claims. All of their actions are inconsistent with
actions that would be expected of a company that actually believes
its intellectual property is being used by others without
permission.
13. In light of SCO's consistent refusal to identify any
specific source code in the public LINUX kernel or operating system
that SCO is currently claiming infringes its intellectual property
rights, Red Hat brings this action. As more fully explained below,
Red Hat seeks a declaratory judgment that Red Hat® LINUX does
not infringe any copyright owned by SCO, and does not utilize any
trade secret owned by SCO. Red Hat further seeks damages, trebled,
as well as injunctive relief, attorneys' fees and costs, for harm
caused by SCO's unfair competition and false advertising in
violation of Section 43(a) of the Lanham Act, 15 U.S.C.
§§ 1125(a), et seq., unfair and deceptive acts or
practices in violation of the Delaware Deceptive Trade practices
Act, 6 Del. Code § 2532, as well as for violations of common
law, including trade libel, unfair competition, and tortious
interference with prospective economic advantage.
II. The Parties
14. Red Hat is a corporation organized and existing under the
laws of the State of Delaware, with its principle place of business
in Raleigh, North Carolina. Founded in 1993, Red Hat is the leading
provider of the LINUX operating system, and the most recognized
LINUX brand name in the world. Red Hat and its nearly 600 employees
offer a broad range of technologies and services, including annual
subscriptions to Red Hat Enterprise LINUX, consulting, and a global
LINUX training program that operates in more than 60 locations
worldwide. Red Hat's customers include well-known companies within
the financial and information industries.
(5)
15. Upon information and belief, SCO is a corporation organized
and existing under the laws of the State of Delaware, with its
principal place of business in Lindon, Utah. SCO was formerly known
as Caldera International, Inc., but changed its name to The SCO
Group, Inc. on or around May 16, 2003. SCO claims certain rights to
the UNIX System V operating system source code, which was not
developed by SCO engineers, but was purchased from other
companies.
III. Jurisdiction and Venue
16. This Court has original jurisdiction under 15 U.S.C. §
1121 and 28 U.S.C. §§ 1331, 1338, and has supplemental
jurisdiction under 28 U.S.C. § 1367 (a).
17. Venue is proper in this judicial district pursuant to 28
U.S.C. § 1391 (b) and (c).
IV. Background
A. Proprietary and Open Source Operating Systems
18. Over the past few decades, a variety of computer operating
systems have been developed, but most are proprietary systems that
are expensive, plagued with problems, such as bugs in software, or
are not readily adaptable by the user. For example, Microsoft's DOS
and Windows operating systems are proprietary systems that have
dominated the personal computer market, but they are not adaptable
by users. The UNIX operating system, originally developed by
AT&T in the 1960s, is another proprietary system commonly used
in business. The inherent problems in proprietary operating systems
have helped to spawn a movement toward what is known as open source
programming.
19. In open source programming, computer programmers and users
can read, redistribute, and modify software source code, allowing
the software to evolve and improve
(6)
more quickly and efficiently and less expensively. Unlike
proprietary operating systems or other software in which only a few
programmers ever have access to the source code, thousands of
unaffiliated open source programmers collaborate to improve and
adapt the software.
20. Richard Stallman is largely credited with the taking the
first important steps in developing an open source operating
system. In 1985, he published what is known as the "GNU Manifesto."
(GNU is a recursive acronym that stands for "GNU's Not UNIX.")
Stallman's mission was to develop a UNIX-compatible software system
that was free and that would remain free for anyone who wants to
use it.
21. In 1987, Professor Andrew S. Tanenbaum developed MINIX, a
UNIX clone, using the open source philosophy. MINIX, however, never
became more than a teaching tool for aspiring programmers.
22. In 1991, using a book on operating systems published by
Tanenbaum, Finnish college student Linus Torvalds created an
operating system kernel for his own use. Torvald's system used
inexpensive personal computer hardware, but generally provided the
same capabilities as expensive UNIX systems that he used in
college. This kernel became known as LINUX. Torvalds made both the
kernel and its source code available on the Internet for anyone to
use and improve upon. He protected its "open" features with the GNU
General Public License ("GPL"). The GPL allows access to the
software source code, and allows others to use, change and improve
the software source code so long as modified versions of the
software that are distributed to others are licensed on the same
terms as the GPL. In other words, the software remains open, and
not proprietary.
23. As information about LINUX spread and demand for it grew,
the LINUX kernel was combined with various software from Stallman's
GNU project to form the GNU/LINUX
(7)
operating system, more frequently known simply as LINUX. LINUX
quickly developed beyond the version that was originally designed
to operate in Torvald's personal computer. These rapid advances
were enabled by the many programmers throughout the world who were
constantly contributing to and improving LINUX. Within a few years,
companies developed and sold packaged versions of the operating
system, including documentation and support, sufficiently capable
to operate on a wider range of computer hardware.
24. Red Hat, founded in 1993, was one of these companies. Red
Hat® Linux is successful because it is less expensive to
operate and is highly stable, and because Red Hat provides
excellent support and service — the traditional selling
points of expensive and cumbersome proprietary software. Red
Hat® Linux soon gained widespread popularity for its reputation
as a stable, reliable operating system.
25. In recent years, LINUX has become the world's fastest
growing operating system. It continues to be adopted by large
enterprises for mission-critical roles. For example, a 2002 Merrill
Lynch study found that 25% of Chief Information Officers claimed
that LINUX is strategic to their enterprises.
26. Since its inception, the LINUX kernel was and still is
licensed and distributed under the GPL, which insures that the
operating system remains free for copying and further development.
LINUX can be freely copied and modified by anyone who has the
talent and inclination to do so. It can, therefore, be customized
or adapted easily to fit the specific needs of its users.
27. Over the years, the LINUX kernel has developed and been
released in various versions. LINUX 2.4 kernel was first released
for use in January 2001. SCO claims, in its suit
(8)
against IBM and generally, that this version of the LINUX kernel
is the first version that violated its intellectual property
rights.
B. Red Hat's Business
28. Red Hat is the most well-known and trusted provider of LINUX
software. In a June 2002 survey by CNET — in which more than
2,200 Information Technology (" IT" ) professionals were asked
which software companies generally would be most relevant to their
business in the next five years — Red Hat ranked second.
29. Red Hat® Linux's success has enabled Red Hat to assemble
the world's most talented group of open source engineers. They
assemble the LINUX kernel with other user space open source
software, compile it, and test it for performance and reliability.
Then they add new features, and test them for compatibility —
all while sharing the software with customers, partners, software
vendors, and members of the open source community in a structured
feedback cycle.
30. Red Hat Enterprise Linux is the standard for LINUX used by a
business enterprise, and features enhanced enterprise performance
and an extended release cycle. Red Hat also offers a range of
management services, training, global support, consulting and
custom engineering. Red Hat has entered into partner arrangements
with industry leaders such as Intel, Dell, Hewlett-Packard, IBM and
Oracle.
31. Red Hat's focus on open source software has been a financial
success. Even during the last year — a challenging one for
technology companies — Red Hat's gross profit rose
approximately 18%.
32. Red Hat's open source products have been developed and made
available for licensing under the GPL and similar open source
licenses. These licenses permit anyone to copy, modify and
distribute the software, subject only to the restriction that any
resulting or derivative
(9)
work that is made available to the public be licensed under the
same terms. Therefore, although Red Hat owns the copyright to the
LINUX software code that it develops, anyone who complies with the
GPL can freely copy or modify it, or create derivative works based
on Red Hat-authored software code.
C. SCO's Failing Business
33. SCO is a provider of computer operating systems and business
applications for small businesses. SCO sells both proprietary UNIX
and open source LINUX operating systems.
34. SCO has not been financially successful. In its 2002 Annual
Report, SCO stated that "[s]ales of Unix-based products and
services have historically been declining" and that SCO OpenServer
and SCO UnixWare products "will represent a decreasing percentage
of total revenue."
35. SCO noted that "[i]f our revenue continues to decline or we
are unable to efficiently further reduce operating expenses, we may
not achieve profitability or generate positive cash flow.... If we
are unable to achieve positive cash flow from operations, we will
not be able to implement our business plan without additional
funding, which may not be available to us."
36. SCO's business, including that of its predecessor Santa Cruz
Operation, Inc., was already in sharp decline at the time the LINUX
2.4 kernel was first released for use in January 2001. Their
revenues had fallen by more than a third from 1999 to 2000,
producing an operating loss for the year ended September 30, 2000
of more than $50 million.
D. SCO's Wrongful Actions
37. It is in the context of the success of LINUX, the decline of
UNIX, and the financial pressure generated by a declining business
that SCO has recently embarked upon its campaign against LINUX.
(10)
38. In particular, SCO has developed a licensing program that is
based on unfounded claims of violations of its purported
intellectual property rights by LINUX users and developers. Despite
making claims to royalties that SCO proclaims could total in the
"billions" of dollars and that have caused industry analysts to
issue cautionary reports about the deployment and use of LINUX
technology, SCO repeatedly has refused to articulate publicly any
specific basis for its claims that would allow the industry
meaningfully to evaluate those claims. SCO also has refused to
provide such information in response to a direct written request by
Red Hat sent on July 18, 2003.
39. On information and belief, SCO has intentionally and
wrongfully done so to create a cloud of uncertainty over LINUX and,
thus, to further its own economic interests.
40. In particular, SCO has claimed both that certain portions of
the LINUX operating system represent SCO "trade secrets" and that
portions were copied from earlier versions of UNIX, the rights to
which SCO says it later acquired from others.
41. In the first step of its campaign, SCO filed suit against
IBM on March 7, 2003, claiming approximately $1 billion in damages,
alleging in part that "trade secrets" disclosed by SCO to IBM were
wrongly contributed by IBM to the LINUX operating system. Despite
the fact that the LINUX source code is publicly available for
anyone, SCO has struggled for more than four months to identify
publicly even one line of LINUX source code that SCO claims to be a
misappropriated "trade secret."
42. Subsequently, in May 2003, SCO sent approximately 1,500
letters to actual or potential users of LINUX, claiming that those
companies could be liable to SCO for using LINUX. The letters
stated that SCO "believe[s] that Linux infringes on [its] Unix
intellectual property and other rights." Further, the letter stated
that SCO "intend[s] to aggressively protect
(11)
and enforce these rights" and that "[l]egal liability that may
arise from the LINUX development process may also rest with the end
user." Again, SCO's letter contained no information specifically
identifying any aspect of the publicly available LINUX source code
that would support SCO's vague claims.
43. SCO itself, however, has been publicly distributing the
LINUX operating system, including the LINUX source code, for at
least five years. Recognizing the inconsistency between its claim
of "trade secret" misappropriation and its public disclosures of
the same allegedly secret information, in May 2003 SCO publicly
stated that it would no longer distribute LINUX. However, that
statement too is false. SCO continues to offer LINUX source code
for public downloading today — more than four months after
SCO sued IBM for disclosing UNIX "trade secrets" that SCO continues
to disclose itself. For example, through a partnership with three
other companies, SCO currently offers UnitedLinux Version 1.0.
44. Such inconsistencies with SCO's ill-conceived theory of
trade secret misappropriation have prompted SCO to expand its
claims and pursue additional legal theories. Now, according to SCO,
it is not SCO trade secrets that LINUX users are using, but SCO
copyrighted code that has been improperly copied.
45. Specifically, though SCO sued IBM in March 2003 on several
legal theories, including misappropriation of trade secrets, SCO
began publicly altering its legal theory at least by April 2003. In
conjunction with an interview of Chris Sontag, SCO's Vice President
and General Manager, one reporter noted that "[a]s you read through
today's discussion, please notice how Chris Sontag's statements
appear to be laying the groundwork for copyright infringement
claims against Red Hat." As of late, the main focus of SCO's
campaign is now claims of copyright infringement. SCO explicitly so
stated during a recent conference call. SCO
(12)
now publicly distances itself from its earlier broad statements
regarding trade secret misappropriation, characterizing its dispute
with IBM as a private "contract issue."
46. SCO's copyright infringement claim fares no better than its
earlier trade secret assertions. Once again, SCO hides behind a
smokescreen of secrecy, refusing to identify with specificity the
lines of code in LINUX that allegedly have been "copied" from
UNIX.
47. To identify the allegedly copied code, however, would enable
those who created that code to demonstrate that it is not the
property of SCO, was not copied from UNIX, and was developed
independently by engineers — including those at Red Hat
— who contribute to the open source software.
48. There is nothing "confidential" about SCO's claims of
copyright infringement. Inasmuch as the LINUX code is publicly and
freely available for anyone in the world to see, there is no
legitimate reason for SCO to hide behind a veil of secrecy in
making its allegations about LINUX.
V. SCO's Assertion About Red
Hat
49. Though SCO is engaged in a lawsuit with IBM, SCO's real
target is LINUX, and therefore the developers and providers who
improve and distribute it, support it, and help make it a success.
Thus, SCO explicitly has claimed that Red Hat, in some unspecified
way, has acted wrongfully with regard to SCO's alleged intellectual
property rights, and has threatened to take legal action against
Red Hat. Notably — once again — SCO makes general and
highly publicized claims in the media against Red Hat, but cannot
support these claims with specific facts.
50. For example, Darl McBride, Chief Executive Officer of SCO,
has stated that "[t]here will be a day of reckoning for Red Hat ...
when this is done." Similarly, in an interview with CNET News.com,
Chris Sontag, Vice President and General Manager of SCO, said that
SCO "may bring subsequent actions against Linux software developers
such as Red Hat...."
(13)
51. SCO also has falsely and explicitly claimed that Red Hat
wrongfully misappropriates portions of SCO's proprietary UNIX
software code for use in Red Hat's LINUX products. For example,
Darl McBride stated that "IBM took chunks [of code] out of
[Project] Monterey, and gave it away. You can find it in Red Hat
... Linux."
52. Similarly, Chris Sontag also stated that "if SCO prevails in
their lawsuit with IBM, companies like Red Hat ... may need to
revisit their distributions and remove any Unix system code from
their distributions and compensate SCO in some way for the software
code that they benefited from by using our Unix code."
53. SCO has been unable to articulate its claims in sufficient
detail to give them even a modicum of credibility. For example,
when asked what was copied from UNIX, Chris Sontag generally
replied, "[w]e're not talking about the Linux kernel that Linus and
others have helped develop. We're talking about what's on the
periphery of the Linux kernel." However, when pushed for more
detail about where the allegedly stolen code is, Sontag replied, "I
really can't go any further from what I've commented on."
54. Tellingly, SCO has not been consistent in even its vague
allegations of wrongdoing. For example, contrary to the statement
set forth in the preceding paragraph, SCO's subsequent statements
indicated that the offending software is associated with the LINUX
kernel. Recently, when asked whether "there is offending code in
the Linux kernel," Darl McBride of SCO answered "Yeah. That one is
a no-brainer."
55. In the face of SCO's refusal — or inability — to
identify any real factual basis for its varying assertions, others
in the computer industry have attempted to investigate them. For
example, the Open Source Initiative has published a position paper
concluding that the public evidence does not support a claim for
misappropriation, because not one of the five key
(14)
technologies present in LINUX can be traced through IBM from the
UNIX software code to which SCO claims to have obtained legal
rights.
56. In an attempt to resolve this issue and remove the
uncertainty that SCO has intentionally cast on LINUX and open
source software in general, Red Hat sent a letter to SCO on July
18, 2003, requesting that SCO specifically identify the bases for
its vague claims. In its letter, Red Hat noted that "[f]or months
now, officers of [SCO] have made public statements claiming that
some portion of Red Hat® Linux contains code that infringes
intellectual property rights of SCO" and noted that SCO had "failed
to provide any details" in support of its allegations so that Red
Hat could refute them.
57. Red Hat, in its letter, requested that, no later than July
31, 2003, SCO "fully explain the bases, if any, for its public
allegations concerning Red Hat Linux."
58. As of the filing of this complaint, SCO has not identified
any such factual basis.
59. SCO's illicit strategy is transparent — make loud
public claims about alleged intellectual property rights, provide
no detail (since it does not exist), and hope to use the
time-honored technique of creating fear, uncertainty and doubt to
slow the growth and use of LINUX, damage the business of LINUX
providers such as Red Hat, coerce unwarranted fees from LINUX users
by threats of litigation, and, upon information and belief, even
create enough nuisance value to be acquired while running up the
price of SCO's stock in the short term, thereby creating various
financial opportunities to wrongfully enrich the originators of
this scheme.
60, For example, on July 21, 2003, SCO announced that it would
launch a licensing program for LINUX end users, in which end users
would pay a license fee to SCO in order to continue using LINUX. In
the same announcement, SCO stated that "[s]ince the year 2001
(15)
commercial Linux customers have been purchasing and receiving
software that includes misappropriated Unix software owned by
SCO."
61. According to SCO, its licensing program will be "very
targeted" towards the people who are using the product. SCO will
offer a runtime-only license — a license that provides the
end user with only the right to operate or run the software —
targeted to end users of LINUX. Contrary to the principles of open
source programming upon which LINUX is based, SCO's proposed
license would not allow the users to modify the source code.
Further, SCO does not intend to offer a license to distributors of
LINUX, such as Red Hat, that would allow the distributors to then
license the end-users. SCO's licensing program is an attempt to
wrongfully disrupt Red Hat's business and its relationships with
its customers. In fact, while explaining its licensing program at
is recent conference call on July 21, 2003, SCO specifically stated
that it anticipated such a result: "And so I'm guessing that those
end users are going to be looking around to the vendor or vendors
involved in supplying [LINUX software] to them whether it's Red Hat
or IBM and saying, 'What's up, guys? You know what's happening
here?' But, you know, that is going to be their beef with their
particular vendor."
62. Additionally, SCO has stated that it intends to license
LINUX only in conjunction with its own products. At its press
conference, SCO stated that it would "hold its licensees harmless
and will covenant not to sue such licensees for running LINUX in
binary format on any CPU licensed under a valid SCO UnixWare 7.1.3.
license." In other words, SCO does not intend to merely license its
intellectual property rights. It intends to tie that license to the
use of its own UNIX product, Thus, SCO is wrongfully attempting to
both interfere with and disrupt Red Hat's business as well as
employ its alleged intellectual property rights to force current
and prospective LINUX users to purchase SCO's UNIX products —
or at least to license those products.
(16)
63. Overall, SCO's illicit campaign has had a negative impact on
the LINUX industry. For example, several industry analysts have
issued cautions against large-scale deployments of LINUX until
SCO's claims are either resolved or at least better understood.
64. Gartner analyst George Weiss advised in a May note that
"[a]lthough Gartner has reservations on the merits of (SCO's
claims), don't take them lightly." He recommended that users
"[m]inimize Linux in complex, mission-critical systems until the
merits of SCO's claims or any resulting judgments become
clear."
65. Further, even SCO stated during its recent telephone
conference on July 21 that it is aware of customers that were in
the process of implementing LINUX but that are now in a "hold
pattern."
66. SCO also has attempted to buttress its own declining
business and to affect negatively the business of its competitors
by making the same untrue and unsubstantiated statements to stock
analysts. For example, in a July 22, 2003 meeting with investors,
SCO continued to make its unsubstantiated claims of infringement.
Following this meeting, Deutsche Bank issued a report indicating
that open source software may have been created wrongfully by
copying proprietary software. Notably, in the face of SCO's
wrongful comments and the resulting statements from various
industry analysts, Red Hat's stock price has decreased
approximately 20% between June 30, 2003 and July 30, 2003.
67. Industry analysts also have noted that SCO's actions have an
ulterior economic purpose of forcing an acquisition of SCO, which
would be on terms that SCO's poor financial condition would not
otherwise justify. Industry Analyst Gordon Haff of Illuminata
stated that "suing IBM wasn't enough to get them acquired, so this
[sending 1500 letters] is the next stage." Another industry
analyst, George Weiss of Gartner, agreed, stating "SCO is really
attempting to
(17)
create a fairly large disruption of Linux, and will attempt to
take the Linux community with them in the defense of their
intellectual property, regardless of how poorly it goes off in the
Linux community." Concurring, Gordon Haff stated "[t]he only
rational explanation for this is it's a plea for money,
essentially, from IBM and others that can't afford to let Linux be
derailed."
68. In addition to the prospective benefit of forcing its
acquisition at an inflated price, SCO's wrongful campaign has
already enriched its owners. Despite its bleak financial picture,
SCO's stock price has risen to approximately ten times what it was
six months ago before SCO began making its meritless and
unsupported claims. Analogizing SCO's combination of a weakening
business and rising stock price to the irrational stock valuations
of the "dot-com bubble," Frank Haynes of Computerworld noted that
"every time SCO makes a new wilder set of legal threats,
speculators bid up the price of SCO stock — starting in
March, with the IBM law suit, then in May, when the threatening
letters were sent, then again in June, when SCO tried to make IBM
users pull the plug, and again last week [when SCO unveiled its new
copyright theories]."
69. SCO, in conjunction with its holding company, The Canopy
Group (" Canopy"), has already used its wrongfully inflated stock
price to transfer millions of dollars to Canopy. Thus, SCO has no
incentive to resolve its unsupported and apparently baseless legal
threats in the near future. Again according to Frank Haynes, "[i]f
it all sounds like a shell game, well, that's the way Canopy likes
to move its companies around. But in effect, Canopy used SCO's
stock price, boosted by Linux threats, to rake in a couple of
million dollars in cash behind the scenes. And apparently it
worked. Which means we can expect that as long as Canopy can find
ways of cashing in on SCO's threats against Linux users, those
threats will keep coming — no matter how little sense they
make."
(18)
COUNT I
(For Declaratory Judgment of Noninfringement of Copyrights, 28
U.S.C. § 2201)
70. Red Hat repeats the allegations of the preceding paragraphs
as if set forth here in full.
71. No LINUX version sold, used or distributed by Red Hat, or
used by Red Hat' s customers, infringes any right SCO may have
pursuant to Section 106 of the Copyright Act, 17 U.S.C. §
l06.
72. On information and belief, any alleged SCO copyright
covering LINUX software is unenforceable.
73. An actual controversy exists between SCO and Red Hat as to
the noninfringement and unenforceability of SCO's copyrights. To
afford relief from the uncertainty and controversy raised by this
dispute, Red Hat is entitled to a declaratory judgment pursuant to
28 U.S.C. § 2201 that it does not infringe any SCO copyright,
that any SCO copyright claimed to cover LINUX software is
unenforceable, and that SCO is equitably estopped from asserting
any SCO copyright with respect to any LINUX software.
COUNT II
(For Declaratory Judgment of No Misappropriation of Trade Secrets,
28 U.S.C. § 2201)
74. Red Hat repeats the allegations of the preceding paragraphs
as if set forth here in full.
75. The source code for the LINUX kernel and operating system
are public and cannot constitute a trade secret.
76. The use and sale of LINUX by Red Hat and the use of LINUX by
Red Hat customers do not misappropriate any SCO trade secret.
(19)
77. An actual1 controversy exists between SCO and Red Hat as to
the nonmisappropriation and the validity and the enforceability of
SCO's trade secrets. To afford relief from the uncertainty and
controversy raised by this dispute, Red Hat is entitled to a
declaratory judgment pursuant to 28 U.S.C. § 2201 that it has
not misappropriated any SCO trade secret, that any SCO trade secret
claimed to cover UNIX software found in LINUX is invalid, that the
source code for the LINUX kernel and operating system are public
and cannot constitute a trade secret, and that SCO is equitably
estopped from asserting any SCO trade secret with respect to any
LINUX software.
COUNT III
(False Advertising in Violation of Section 43(a) of the Lanham Act,
15 U.S.C. § 1125(a))
78. Red Hat repeats the allegations of the preceding paragraphs
as if set forth here in full.
79. SCO is selling, advertising and promoting UNIX products and
services, as well as other products and services, in interstate
commerce.
80. By virtue of the conduct described above, SCO has made false
and misleading statements and misrepresentations of fact in
commerce in press releases, interviews, in presentations to
investors, and otherwise.
81. SCO statements as described above, have a tendency to
deceive and have deceived Red Hat's customers, potential users and
other users of LINUX software.
82. SCO's statements are material and affect the decision as to
whether a customer would purchase LINUX software or services.
83. SCO's activities as set forth above constitute a violation
of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a).
(20)
84. On information and belief, SCO has acted willfully,
intentionally and in bad faith.
85. SCO's actions have caused and are causing irreparable harm
to Red Hat, and unless permanently restrained and enjoined by this
Court, such irreparable harm will continue.
86. Red Hat is entitled to actual damages for injuries sustained
as a result of SCO's violations of 15 U.S.C. § 1125(a).
COUNT IV
(Deceptive Trade Practices in Violation of 6 Del. C. §
2532)
87. Red Hat repeats the allegations of the preceding paragraphs
as if set forth here in full.
88. By virtue of the conduct described above, SCO has
represented that its products and services have qualities that they
do not have, has disparaged Red Hat's goods and services by making
false and misleading representations of fact, and has otherwise
engaged in conduct that has caused and is likely to cause confusion
and misunderstanding in violation of the Delaware Deceptive Trade
Practices Act, 6 Del. C. § 2532.
89. SCO's actions have caused and are causing irreparable harm
to Red Hat, and unless permanently restrained and enjoined by this
Court, such irreparable harm will continue.
90. Red Hat is entitled to actual damages, trebled, for injuries
sustained as a result of SCO's violations of the Delaware Deceptive
Trade Practices Act.
COUNT V
(Unfair Competition)
91. Red Hat repeats the allegations of the preceding paragraphs
as if set forth here in full.
92. By virtue of the statements made in commerce set forth
above, SCO has engaged in unfair competition prohibited by the
common law.
(21)
93. SCO's actions have caused and are causing irreparable harm
to Red Hat, and unless permanently restrained and enjoined by this
Court, such irreparable harm will continue.
94. Red Hat is entitled to actual damages for injuries sustained
as a result of SCO's violations of the common law prohibiting
unfair competition.
COUNT VI
(Tortious Interference with Prospective Business
Opportunities)
95. Red Hat repeats the allegations of the preceding paragraphs
as if set forth here in full.
96. Red Hat has relationships and contracts with its customers,
business partners and investors and it is reasonably probable that
those contracts and/or business opportunities will continue.
97. By virtue of its conduct described above, SCO tortiously
interfered with Red Hat's relationships, contracts and business
opportunities with its customers, partners and business
investors.
98. As a direct and proximate result of SCO's actions, Red Hat
has suffered harm and will continue to suffer harm.
99. SCO's actions have caused and are causing irreparable harm
to Red Hat, and unless permanently restrained and enjoined by this
Court, such irreparable harm will continue.
100. Red Hat is entitled to actual damages for harm sustained as
a result of SCO's tortuous interference with Red Hat's prospective
business opportunities.
(22)
COUNT VII
(Trade Libel And Disparagement)
101. Red Hat repeats the preceding allegations of the Complaint
as if set forth here in full.
102, By virtue of the statements outlined above, SCO has
published or caused to be published oral and written false and/or
disparaging statements regarding Red Hat's products, services and
business practices.
103. As a direct and proximate result of SCO's actions, Red Hat
has suffered harm and will continue to suffer harm.
104. SCO's actions have caused and are causing irreparable harm
to Red Hat, and unless permanently restrained and enjoined by this
Court, such irreparable harm will continue.
105. Red Hat is entitled to actual damages for harm sustained as
a result of SCO's trade libel and disparagement.
REQUEST FOR RELIEF
WHEREFORE, Red Hat respectfully requests:
A. A permanent injunction restraining SCO and its officers,
directors, partners, agents, servants, employees and attorneys, and
those persons in active concert or participation with SCO from
representing by any means whatsoever, directly or indirectly, or
doing any other acts or things calculated or likely to cause
confusion, mistake or to deceive purchasers, business partners
and/or investors into believing that Red Hat's LINUX products
and/or the LINUX products used by Red Hat's customers and partners
violates any of SCO's intellectual property or trade secret
rights;
(23)
B. Under Count I, a Declaratory Judgment pursuant to 28 U.S.C,
§§ 2201 et seq. that Red Hat's and its customers' actions
in providing, creating, maintaining, debugging, developing,
copying, selling, transferring, installing, operating, or otherwise
using any of Red Hat's LINUX products and services do not violate
any SCO rights under Section 106 of the Copyright Act, 17 U.S.C.
§§ 101 et seq., and a Declaratory Judgment that any SCO
copyright claimed to be infringed by Red Hat or its customers in
conjunction with any of Red Hat's products is unenforceable;
C. Under Count II, a Declaratory Judgment pursuant to 28 U.S.C.
§§ 2201 et seq. that Red Hat's and its customers' actions
in providing, creating, maintaining, debugging, developing,
copying, selling, transferring, installing, operating, or otherwise
using any of Red Hat's products and services do not constitute a
misappropriation of any SCO trade secret, a Declaratory Judgment
that the LINUX kernel and operating system are public and therefore
cannot constitute a trade secret; and a Declaratory Judgment that
any SCO trade secret claimed to be misappropriated by Red Hat or
its customers in conjunction with any of Red Hat's products is
unenforceable;
D. Under Counts III-VII, an award of actual damages to Red Hat
by reason of SCO's actions in an amount to be established at
trial;
E. An order and judgment that Red Hat's actual damages be
trebled pursuant to the Delaware Deceptive Trade Practices Act;
J. An award of Red Hat's attorneys' fees and costs incurred in
connection with this matter pursuant to the Delaware Deceptive
Trade Practices Act; and
K. Such further relief as the Court may deem just and
proper.
(24)
Red Hat requests a trial by jury on all issues so triable.
RED HAT, INC.
By its attorneys
(signature)
Josy W. Ingersoll (#1088)
Adam W. Poff (#3990)
YOUNG CONAWAY STARGATT & TAYLOR, LLP
[address]
[phone]
OF COUNSEL:
William F. Lee
Mark G. Matuschak
Michelle D. Miller
Donald R. Steinberg
HALE AND DORR LLP
[address]
[phone]
Dated: August 4, 2003
(25)
[Red Hat letterhead]
July 18, 2003
VIA CERTIFIED MAIL
RETURN RECEIPT
Mr. Darl C. McBride
President and CEO
The SCO Group, Inc.
[address]
Dear Mr. McBride:
As you are aware, Red Hat, Inc, ("Red Hat") distributes a "Red
Hat"-branded Linux® operating system ("Red Hat Linux"). For
months now, officers of The SCO Group, Inc. ("SCO") have made
public statements claiming that some portion of Red Hat® Linux
contains code that infringes intellectual property rights of SCO.
In conjunction with these public statements, SCO has sent letters
to certain of Red Hat's business partners, customers and potential
customers ("third-parties") suggesting that these third-parties
should cease using Linux because it is an "unauthorized derivative"
of SCO's System V UNIX®.
We have no basis to believe that Red Hat has copied any SCO
software, used any SCO trade secrets, or otherwise violated any SCO
intellectual property rights. SCO notably has failed to provide any
details in support of its allegation that would permit Red Hat to
refute them, and, as such, SCO's public statements can only be
designed to disrupt and otherwise interfere with Red Hat's
relations with its customers.
Red Hat requests that SCO fully explain the bases, if any, for
its public allegations concerning Red Hat Linux. At the very least,
Red Hat requests that SCO specifically identify any source code in
any Red Hat distribution to which SCO claims intellectual property
rights, the specific SCO source code that is the basis for such
intellectual property rights, the author and date of authorship of
the SCO code, the specific rights that SCO claims have been
violated, and the manner in which SCO claims that Red Hat has
violated those rights.
Please provide a complete response to this letter no later than
July 31, 2003. In the absence of a complete response from SCO by
that date, we will be left to conclude there is no basis for the
referenced statements.
Sincerely,
(signature)
Mark H. Webbink
Sr. Vice President and General Counsel
Red Hat, Inc.
cc: Donald Steinberg, Esq., Hale and Dorr LLP
(26)
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