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Microsoft and SCO
Here are the two press releases from Microsoft and SCO. Gives you a good
indication how facts gets distorted by the Microsoft machine.
Microsoft Releases SCO From Obligation to Include, and Pay Royalties on,
Outdated UNIX Code
November 24, 1997 9:02 AM EST
Action Results from Antitrust Probe and Objection by European Commission
SANTA CRUZ, Calif., Nov. 24 /PRNewswire/ -- Microsoft (Nasdaq: MSFT) has
released SCO (Nasdaq: SCOC) from a contractual obligation to continue
including outdated Microsoft code in future UNIX Systems and paying
royalties on that code. Microsoft acted after the European Commission
agreed with SCO that Microsoft had infringed European competition laws.
SCO's UNIX System software competes with Microsoft's Windows NT in the
rapidly expanding market for server operating systems. SCO believes that
removing Microsoft's outdated code will result in lower development costs
with a positive impact on customers.
"SCO has borne a dual burden," said Doug Michels, SCO's executive vice
president and chief technical officer. "SCO has been paying substantial
royalties to Microsoft. Moreover, we were contractually obligated to ensure
that the code remained fully functional within a constantly evolving
software environment. The engineering costs of providing such quality
assurance are significant, impacting our time to market and reducing the
resources we can apply to product innovation.
"Now that we are legally able to remove the outdated Microsoft code from
both our SCO OpenServer and SCO UnixWare products we will do so as soon as
possible," Michels continued. "We are excited about the positive impact the
lifting of this burden will have on SCO."
History of the Microsoft-SCO Agreement
The conflict arose from a 1987 agreement that Microsoft entered into with
AT&T, the original owner of the UNIX System technology. The technology was
subsequently acquired in 1993 by Novell, who sold it to SCO in 1995.
Microsoft and AT&T entered into the original agreement to ensure that AT&Ts
UNIX system for the Intel 286 and 386 microprocessors included Microsoft
code to run applications originally developed for Microsoft's XENIX
operating system, a commercial version of the UNIX operating systems
developed for the Intel hardware platform in the early 1980s.
On September 20, 1996, SCO sent a letter to Microsoft requesting
nullification of the provisions of the agreement that violate the European
Union's competition law. The provisions demanded perpetual inclusion of and
payment for outdated Microsoft code in future UNIX Systems developed by
SCO. In that letter, SCO stated that "the inclusion of (Microsoft's)
components or features would be no longer appropriate or commercially
desirable. The steps required to incorporate such features and components
would impose unnecessary cost, lower reliability, add complexity and extend
the development time for any UNIX operating system for modern Intel
processors. Overall, the effect would be to reduce SCO's ability to compete
in the marketplace with the resulting product."
Microsoft declined SCO's request. On January 31, 1997, SCO filed a
complaint with the European Commission, which is chartered to enforce the
laws of the European Union regarding competition. On May 23, the Commission
issued its Statement of Objections, in which the Commission agreed with SCO
that enforcement of the Microsoft/SCO agreement "in perpetuity" constituted
an infringement of the European competition law in that it "impedes
technical progress, and in particular hampers [SCO's] ability to compete
with Microsoft's own products, particularly Windows NT."
"We applaud the European Commission for responding so swiftly to our
complaint," said Steve Sabbath, SCO's vice president, law and corporate
affairs. "We submitted our complaint to the Commission in January, and they
issued their Statement of Objections to Microsoft in May. The Commission
clearly understood the impact that Microsoft's position had on SCO's
ability to freely compete in the marketplace, and acted accordingly. We
appreciate their prompt attention to the needs of an open marketplace.
"As a worldwide organization, SCO sought the assistance of both the
European Commission and the antitrust division of the U.S. Department of
Justice," Sabbath continued. "They worked closely with each other reviewing
the situation, and in this case the European Commission took the lead in
"Of course," Sabbath added, "Microsoft's lifting of these technical and
financial obligations applies not only in Europe, but in all our global
markets, benefiting SCO customers worldwide."
SCO is a leading provider of system software for business-critical Network
Computing on the Intel hardware platform, offering the world's most popular
UNIX server operating systems, regardless of platform, and the world's
first application broker for Network Computing -- Tarantella. SCO sells and
support its products through a worldwide network of distributors,
resellers, systems integrators, and OEMs. For more information, see SCO's
WWW home page at www.sco.com.
SCO, The Santa Cruz Operation, the SCO logo, UnixWare, SCO OpenServer, and
Tarantella are trademarks or registered trademarks of The Santa Cruz
Operation, Inc. in the USA and other countries. UNIX is a registered
trademark of The Open Group in the US and other countries. All other brand
or product names are or may be trademarks of, and are used to identify
products or services of, their respective owners. SOURCE SCO
© PR Newswire. All rights reserved.
Microsoft Applauds European Commission Decision to Close Santa Cruz
November 24, 1997 6:00 AM EST
Decision Upholds Microsoft's Right to Receive Royalties if SCO Utilizes
REDMOND, Wash., Nov. 24 /PRNewswire/ -- Microsoft Corporation today
applauded the decision of the European Commission to close the file and
take no further action on a dispute between Microsoft and Santa Cruz
Operation (SCO) involving a 1987 contract. The Commission's decision
follows progress by Microsoft and SCO to resolve a number of commercial
issues related to the contract, and upholds Microsoft's right to receive
royalty payments from SCO if software code developed by Microsoft is used
in SCO's UNIX products.
"We are gratified that the European Commission rejected SCO's request for
further action and approved our request to close the file on this case,"
said Brad Smith, Microsoft's associate general counsel, international.
"We were prepared to address SCO's concerns as long as our intellectual
property royalty rights could be protected at the same time. The unique
nature of the original 1987 contract made it difficult, but we were able to
find a workable solution that resolves SCO's major concerns and still
protects Microsoft's intellectual property rights," Smith said.
SCO's complaint concerned a contract originally negotiated in 1987 between
Microsoft and AT&T for the development of the UNIX operating system. A
principal goal of that contract was to help AT&T reduce fragmentation in
the UNIX marketplace by creating a single merged UNIX product. To
accomplish this goal, under the contract Microsoft developed for AT&T a new
Intel-compatible version of UNIX that improved the program's performance
and added compatibility with Microsoft's popular XENIX(R) operating system,
which was at the time the most popular version of UNIX on any hardware
platform. When completed in 1988, the merged product created by Microsoft
was named "Product of the Year" by UnixWorld Magazine.
To prevent further UNIX fragmentation and at AT&T's behest, the contract
obligated the parties to ensure that any future versions of UNIX they
developed for the Intel platform would be compatible with this new version
As compensation for Microsoft's technology and for its agreement to give up
its leadership position with XENIX, AT&T agreed to pay Microsoft a set
royalty for the future copies of UNIX it shipped. AT&T subsequently
transferred its rights and obligations under the contract to Novell, which
transferred the contract to SCO in 1995.
The code developed by Microsoft under the 1987 contract continues to play
an important role in SCO's OpenServer UNIX product. This includes
improvements Microsoft made in memory management and system performance,
development of a multi-step bootstrap sequence, numerous bug fixes, and the
addition of new functions originally developed for XENIX and still
documented today by SCO for use by current application developers.
SCO complained to the EC that the provisions in the 1987 contract
restricted the manner in which it could develop a future version of UNIX
(code-named "Gemini") for the 64-bit generation of Intel processors. After
reviewing the matter, Microsoft modified the contract to waive SCO's
backward compatibility and development obligations, but insisted on
continued payment of royalties for any UNIX versions that include
Microsoft's technology. Microsoft then requested that the Commission close
the file on the case and take no further action, and the Commission agreed
to do so. SCO therefore withdrew its complaint.
Microsoft's Smith said there were basically three issues in the contract
that needed to be resolved: (1) the backward compatibility requirement, (2)
a development requirement designed to reduce UNIX fragmentation under which
each new version of UNIX would be built on the previous versions, and (3)
royalty payment obligations for Microsoft's intellectual property rights.
"Microsoft was willing to waive the backward compatibility and development
requirements, which were included in the 1987 agreement at AT&T's behest,
but we needed to preserve our intellectual property royalty rights, which
are fundamental to the software industry as a whole," he noted.
"Unfortunately, the old contract was written in a way that made it
difficult to separate the development requirement from the royalty rights,
but we were able to find a solution that gave SCO what it wanted but
protected our intellectual property rights."
Microsoft first learned of SCO's complaint to the European Commission in
late March. In a May 22 submission to European Commission officials,
Microsoft affirmed that it was willing to waive the backward compatibility
requirement in the contract, as long as Microsoft's right to receive
royalty payment for use of its copyrighted technology was preserved. On May
26, before receiving Microsoft's submission, the Commission provided
Microsoft with a Statement of Objections. This is a preliminary step in the
EC process that identifies issues for further deliberation and provides a
company an opportunity to present its position in person at an internal
hearing. Microsoft reiterated its willingness to waive the backward
compatibility requirements in an August 1 filing with the European
Commission. Microsoft also requested that the Commission hold a hearing, so
that Microsoft could document the various ways in which Microsoft's
intellectual property is contained in SCO's present UNIX products.
On November 4, after discussions with SCO were unsuccessful in resolving
the matter, Microsoft informed SCO that it was unilaterally waiving the
compatibility and development requirements of the contract, but retaining
the requirement that SCO pay a royalty to Microsoft when it ships product
that utilizes Microsoft's intellectual property rights. Upon receiving
Microsoft's waiver, the Commission canceled the hearing, which was
scheduled for November 13. Despite Microsoft's action to address SCO's
concerns, SCO continued to ask for further action by the European
Commission. However, the Commission rejected SCO's request and decided to
close the case. SCO therefore withdrew its complaint.
"We're pleased that we were able to resolve these issues to the
satisfaction of everyone involved, and we're particularly pleased that the
EC upheld our right to collect royalties for the use of our technology.
This principle is fundamental to the entire software industry," said Smith.
Founded in 1975, Microsoft (Nasdaq: MSFT) is the worldwide leader in
software for personal computers. The company offers a wide range of
products and services for business and personal use, each designed with the
mission of making it easier and more enjoyable for people to take advantage
of the full power of personal computing every day.
Microsoft and XENIX are either registered trademarks or trademarks of
Microsoft Corporation in the United States and/or other countries. Other
products and company names mentioned herein may be the trademarks of their
respective owners. SOURCE Microsoft Corp.
© PR Newswire. All rights reserved.