Microsoft and SCO

[Kamran <kamran@picturetalk.com>]

  Here are the two press releases from Microsoft and SCO. Gives you a good
  indication how facts gets distorted by the Microsoft machine.
  
  Kamran...
  
  
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  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  Outdated UNIX Code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  including outdated Microsoft code in future UNIX Systems and paying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  removing Microsoft's outdated code will result in lower development costs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  "Now that we are legally able to remove the outdated Microsoft code from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
  pursuing it."
  
  "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."
  
      About SCO
  
  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.
  
  
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  Microsoft Applauds European Commission Decision to Close Santa Cruz
  Operation Matter
  
  November 24, 1997 6:00 AM EST
  
  Decision Upholds Microsoft's Right to Receive Royalties if SCO Utilizes
  Microsoft's Technology
  
  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
  of UNIX.
  
  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.