Red Hat Guarantee a Boost to Linux Users

By Maria Trombly | Securities Industry News | February 2, 2004

February 2, 2004 - Red Hat's announcement last month that it would guarantee that its Linux distribution was free of copyright problems--and that it would immediately correct any such problems that might arise--should help allay the concerns of its many Wall Street customers, experts say.

Red Hat is the "first name" in Linux when it comes to securities industry deployments, said Sapient CTO Ben Gaucherin. "It certainly makes it easier for us to advise people to use Linux," he said. "Beyond its capabilities and its cost, some of the risk that existed yesterday is not here today."

According to Red Hat spokeswoman Leigh Day, if there is infringing code, "We will fix it, replace it and provide our customers with uninterrupted use of the platform."
Linux is a low-cost alternative to proprietary operating systems like Microsoft Windows and Sun Solaris and is increasingly used on Wall Street to serve Web pages, run computing grids, and perform other, increasingly mission-critical functions.

But Linux is also a target. Microsoft is one of the companies bankrolling a $3 billion lawsuit by the SCO Group against IBM and Novell, two major Linux backers. SCO claims that most current distributions of Linux violate its intellectual property rights. SCO owns the rights to certain distributions of Unix and claims that some source code that it owns was illegally incorporated into Linux.

Previously, Sun, Hewlett-Packard and Novell announced they would indemnify users against any risks associated with these lawsuits, a somewhat stronger degree of assurance than Red Hat's. The next target in SCO's legal sights: Linux users themselves.

Unlike the other vendors, which indemnify all users against all legal risks, Red Hat has set up a $1 million fund to protect developers against potential lawsuits. The fund is not aimed at end-users, however, said Day.

But even given those restrictions, that fund might still be too small.

"Practically speaking, if the number of lawsuits gets really big, the fund will disappear really quickly," said Steve Rubinow, CTO at Archipelago, which is currently planning a new Linux deployment.

Meanwhile, another Linux group has formed a $10 million legal defense fund for users. Open Source Development Labs, a global consortium of leading technology companies, says it has already received contributions from Intel, IBM and other technology companies to its fund.

For Rubinow, the legal cloud hanging over Linux isn't stopping him from moving ahead with his plans. "But it would be nice to see where the whole legal landscape ends up," he said. "I think it will end up in favor of all the Linux users, but I could be surprised."

According to SCO, users should pony up a $699 one-time license fee per server processor and a $199 one-time licensing fee per desktop processor running Linux.

"We have no lawsuits against end-users at this time," said Blake Stowell, CSO's director of corporate communications. "But we've publicly stated that we plan to have some very soon."

Many observers have dismissed SCO's claims, and there are doubts that SCO will prevail against IBM, much less successfully pursue lawsuits against users.

"Even if a judge rules against Linux, it will only take a couple of weeks to fix the problems," said Damon Kovelsky, an analyst at Financial Insights. "Most people who use Linux understand this."

Meanwhile, Street firms have become accidental victims on another front of the Linux-SCO war. A hacker released the MyDoom virus, which bogged down e-mail servers and Internet sites around the world last week. At its peak, the virus almost doubled typical Web site response rates, according to Keynote Systems, which monitors an index that includes the Web sites of Merrill Lynch, Charles Schwab and Fidelity Investments.