Tom Carey for the Public's Interest

We discussed the HP indemnification issues with Thomas C. Carey via e-mail. He is a programmer turned lawyer and now is a partner at Bromberg and Sunstein. He chairs the firm's Business Practice Group. His law practice includes licensing and transferring software, technology and other knowledge-based content, and lots more.

MozillaQuest Magazine: Does not HP's Unix license give it the right to distribute SCO-owned Unix code that might be in any Linux-based solution sold by HP?

Tom Carey: I have not seen HP's Unix license, and will assume for purposes of this discussion that it is identical to IBM's UNIX license, including Amendment No. X that was attached to SCO's complaint as Exhibit D.

Tom Carey: The AT&T License Agreement, as amended in Amendment X, does authorize the distribution of source and binary versions of Unix. No per-copy royalty is payable to SCO for such distributions.

MozillaQuest Magazine: So does that not make it pretty easy for HP to extend the HP Linux-based solution indemnification?

Tom Carey: "Easy" is a relative term. There remain a number of open questions and risks. For example, does Linux now contain code that was developed as part of Project Monterrey, after the date of Amendment X? If so, the license terms (if any) applicable to that software are unclear. Quite possibly no existing Unix license covers this problem. Furthermore, the use of a later Unix license to cover a prior distribution of Linux is a band-aid applied to a prior copyright violation that might not undo damage already done.

Tom Carey: There is the further problem of the potential inconsistency between the Unix license terms and the GPL. Will HP have to demand that customers give up rights with respect to their copies of Linux that the GPL grants them? The answer is clearly yes, because HP is requiring the indemnitees to agree not to modify the software, except under restricted conditions. Is there possible liability to the Free Software Foundation? Could the FSF enjoin this indirect modification of the GPL? Perhaps. If it did, would HP still be on the hook for indemnification? Again, it is possible. So HP may find itself in a morass, even if it has a clever strategy for piggybacking its Unix license.

MozillaQuest Magazine: I notice that Martin Fink avoided answering questions about this subject in the Q & A part of the press conference. However, the Unix licenses that the major sub-licensees such as HP, IBM, Sequent, and so forth have appear to be identical as to the legalities -- and only the names of parties, dates, etc., appear to be different. Moreover, these standard-form Unix licenses are now public by virtue of their incorporations as exhibits in the SCO v IBM lawsuit pleadings.

MozillaQuest Magazine: It also appears that these standard, major Unix licenses would give companies such as HP the right to include SCO-owned Unix code and/or derivative code in any Linux-based solutions provided by the major licensee, in this case HP. Is this correct?

Tom Carey: Under tightly controlled conditions, that is possible, yes. I address those controls elsewhere in my comments.

MozillaQuest Magazine: Therefore, do not HP customers buying Linux-based solutions from HP actually, in effect, have a sub-license via the SCO-HP Unix license to use HP Linux-based solutions that might include SCO-owned code and/or derivative code?

Tom Carey: It is possible that HP can create an umbrella for them by licensing UNIX in parallel to licensing Linux. But just distributing a copy of Linux under the GPL does no good, unless there is a separate contract addressing UNIX licensing, and subjecting Linux to far more restrictive terms than the GPL calls for, or permits. Does that get SCO off of the backs of the HP customers? SCO can still sue them, but HP will step in and defend. Then SCO has a deep pocket to go after for every Linux license that HP grants.

Martin Fink at press conference (responding to Dean Takahashi, San Jose Mercury News): "[W]e're essentially telling our customers that they are indemnified, so if they purchase Linux through HP and meet the requirements of the indemnification, which I just went through, then they're covered," (Emphasis added.)

MozillaQuest Magazine: I think this paragraph seems to support the notion that HP is piggybacking its Unix license with SCO into the HP-distributed Linux indemnification offer.

Tom Carey: You are probably onto something there. The HP lawyers have probably analyzed this and decided that (i) they have enough strength on the basis of the argument you suggest to give SCO a really hard time, and (ii) it makes great business sense to tie the indemnification to Linux running on HP hardware. It creates a closed universe of protection that gives HP a competitive edge in the Linux world.

Martin Fink at press conference (responding to Bill Claybrook, Aberdeen Group): "[Y]ou have to come to HP, and we have an addendum agreement for the indemnification, and as long as you're running on HP hardware and you meet their requirements and that you bought your distribution through HP, which customers could have been doing for quite some time now, then you'll be fine. But you have to come to HP,"

(responding to Maureen O'Gara, Client Server News): "The terms of the addendum basically say that as long as you purchased Linux from HP, and that you run on HP hardware and you haven't modified the source code, what we will do is take over defense on your behalf should you get sued by SCO. So if you encounter a lawsuit from SCO, you therefore agree to give that defense away to HP, and HP becomes the one who defends, on your behalf, and assumes the liability as a result of that defense on your behalf as a customer."

"So basically, by having the requirement where customers purchase their Linux through HP and have a support contract with HP, we in order to be able to offer the indemnification, we have to know who those customers are, and that process is what allows us to insert the indemnification addendum for our customers."

MozillaQuest Magazine: It appears from the Unix licenses that were made public as exhibits to the SCO v IBM lawsuit pleadings, that under the "perpetual" licensing, companies such as IBM and HP paid a large one-time fee that allows them to distribute Unix and/or a Unix derivative without paying any further fees to SCO. So, does that mean that SCO is not receiving any revenue from HP sales of Unix software?

Tom Carey: If HP's license reads like IBM's that is right.

Martin Fink at press conference (responding to Robin Miller, NewForge): "You're not giving up any of your rights under the GPL. What we're saying is the vast majority, 99.999% of our customers do not touch the source code. So a condition of indemnification is that they can't modify the source. So think about it as we're indemnifying the binary Linux distribution that they received from us. Now, if the customer chooses to go modify the source, but I want to stress that's a one in 10,000 kind of situation right now that is our experience, then they are losing the indemnification by doing that."

"What we're indemnifying is the binary that we ship."

MozillaQuest Magazine: This certainly seems to me that HP SCO-Linux indemnification is a matter of piggybacking HP's Unix license as a sub-license to its HP Linux customers, correct?

Tom Carey: Yes.

Martin Fink at press conference (responding to Robin Miller, NewForge): "But if you modify the source code you lose indemnification. If you want to make that modification and continue to maintain your indemnification, then you need to contact HP and we'll look at that, and we may very likely still provide the indemnification for that change. But we will only do that once we are contacted, and we'll do it on a case-by-case basis."

MozillaQuest Magazine: This seems to me that HP is doing the case-by-case review in order to make sure the modifications comport with its license to distribute and to modify SCO-owned Unix code, is not that so?

Tom Carey: Yes, that seems to be correct. Amendment X permits only certain types of source code modifications. It expressly forbids modifications designed to port the operating system to a different hardware platform. So HP is probably trying to avoid crossing the lines drawn by Amendment X.

Martin Fink at press conference (responding to Todd Weiss, Computer World): "the most pragmatic and real material difference we could make is rather than for example offer other lawsuits or counter-sue or any of these other options, the best option that we could take was to look at what it would take to indemnify our customers. We did that and said, "That is a risk that is acceptable to HP." So we did that, and so we're providing the indemnification."

MozillaQuest Magazine: It seems there is not much reason to sue for something HP already has a contractual right to do. Instantly, HP's Unix licenses gives HP a contractual right to modify, sub-license, and distribute SCO-owned Unix code. So, in reality the HP SCO-Linux indemnification program is merely a matter of promising HP Linux customers that HP will enforce its Unix license rights should SCO initiate any legal actions against any HP Linux customers, is this not so?

Tom Carey: In a fashion, yes. But it must establish a UNIX license in order to provide coverage that does not subject HP to undue risk. And I would not in any way minimize the fact that HP is really stepping up to the plate here. You may look at the theoretical risk and dismiss it, but litigation, even if you win, is a very expensive and distracting event. HP is willing to go through this in lieu of having its customers do the same. This adds real value to the Linux proposition, even if it corrupts some of the purity of the GPL as it applies to those customers. (Emphasis added.)

Tom Carey: Off point here, but an interesting sidebar: In reading Amendment X more carefully, I noticed a surprising clause, one that I doubt is in the HP contract. The last sentence of section 6 substantially loosens the restrictions on IBM's ability to develop software products that are based upon ideas learned from reviewing the UNIX code and documentation. In its original agreement with AT&T, IBM reserved the right to do so, provided that the employees who worked on the project did not refer to UNIX software products (including the documentation) while doing so. In Amendment X, that proviso was stricken. Thus, IBM was free to have programmers develop Linux contributions while looking at UNIX source code!!! Is it possible that these lax rules led some at IBM to get sloppy, and engage in direct copying? Only time will tell. (Underlining in original. Boldface emphasis added.)

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