Gates Says SCO's Case Against IBM Will Harm Linux’s Commercial Prospects

Microsoft Chairman and Chief Software Architect Bill Gates said the intellectual property battle between SCO and IBM is hurting the business of Linux.

Gates, speaking to financial analysts at the company's Redmond, Wash., headquarters Thursday, said it's unclear if Microsoft is benefiting from customer worries about the liability of deploying Linux when the lawsuit between SCO and IBM hasn't been resolved.

However, Gates said the controversy has exposed a fundamental weakness of Linux--that the General Public License (GPL) makes it difficult for companies to engage in the cross-licensing deals that have become standard in the software industry.

That's a big Achilles heel, Gates said.

Gates predicted that the intellectual property and GPL issues will eventually create enough inertia to hurt Linux's acceptance in commercial settings.

Yet Microsoft is clearly mindful of the threat Linux poses as it grows. Its share of the server operating system market is now more than 30 percent, and Linux ISVs are now targeting the desktop as well.

Microsoft, which does not subscribe to the GPL, licensed Unix System V source code from SCO in May and is using it to develop an enhanced emulation layer for Unix applications.

"One thing about the GPL is that you can't just license IBM Linux, or Red Hat Linux," Gates said. "The way the GPL works, if you license any Linux, you have to license all Linux."

"Here you have a product without R&D controls, and it's not part of a cross-license," he said. "Given the high level of functionality, you'd think it would have patents.

"Companies that are doing R&D have by and large entered into cross-licensing agreements," he said. "Microsoft and IBM did cross-licensing 10 years ago, when we were small. But Linux is not covered by most of these cross-licenses."

"The whole IP thing is begging to get attention because it's not a scenario that existed in the past," Gates noted. "The SCO suit is largely related to trademark and copyright."

Microsoft has not determined whether SCO's claims--that IBM misappropriated Unix Systems V code and donated it to the open-source community--are valid.

However, Gates said intellectual property from SCO and other companies--including Microsoft--has found its way into the code.

"There's no question that in cloning activities, IP from many, many companies, including Microsoft, is being used in open-source software," Gates said. "When people clone things, that often becomes unavoidable."

"Linux is a form of Unix, like FreeBSD was, and the open-source approach is valuable for certain types of development. I don't think that's going away," he said. "But we need to remind people that what they expect out of an operating system isn't standing still. That's why we're doing the investment in R&D."

Microsoft said Thursday it plans to invest $6.8 billion in research and development in fiscal 2004.

CEO Steve Ballmer, also on hand to answer questions at the meeting, said customers and partners are confused about the impact of the IP issues related to Linux.

"The average person on the IT floor knows there are issues because of the SCO-IBM lawsuit, but in terms of understanding the details about risks, there's not a well-developed understanding I see among our customers," Ballmer said.

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