Although not at all unexpected, SCO's latest legal strategy -- taking the fight directly to Linux users -- ratchets up the risk level for enterprises that have opted to use this technology. Last week, SCO announced that it would be filing a number of lawsuits against large enterprise-Linux users for copyright infringement within 90 days.
"It could be a few companies -- it could be a half dozen," SCO Group spokesperson Blake Stowell told NewsFactor.
Not that SCO is on solid legal ground. Indeed, more than a fair share of analysts and legal observers say that in the end, SCO's cause will be lost.
But, as Yankee Group analyst Laura DiDio told NewsFactor, "the case will ultimately be decided in court, and like any other court case, SCO's side will be heard and considered."
In the meanwhile, it is clear that enterprise users of this technology are at an increased exposure. At the very least, they can expect to spend more money on legal fees as they evaluate their position.
SCO's Shaky Finances
If it provides any measure of comfort, SCO also is feeling the pinch. (Good news for the many individuals who revile the company's practices. The hostility level is off the charts. In fact, SCO's CEO received death threats at Comdex last week -- no doubt a dubious first in the annuals of the I.T. trade show.)
The SCO Group will pay its lawyers some US$9 million to pursue these lawsuits while also shelling out to defend itself against counterclaims by Red Hat and IBM, according to a research note by Gartner analyst George Weiss. This comes on top of a previously announced arrangement giving its legal representatives, the firm Boies, Schiller & Flexner, a 20 percent share in SCO if it is sold. Finally, SCO received some $50 million from BayStar Capital recently -- a welcome cash infusion -- but in return for 17.5 percent of outstanding shares.
"We believe these moves compromise SCO's mission as a software company," Weiss says in his note. "Increasingly, the legal and financial aspects of intellectual-property infringement cases will absorb the company's attention, and a law firm will be in an increasingly powerful position to set the overall agenda for its compensation."
Translation: You can count on SCO to make good on its threats to sue the users -- and quickly too. "It's degree of success will determine the vendor's financial health," Weiss said. (continued...)
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