Funny you mention this topic. I mailed off an post earlier today on it. For some reason, my posts are taking a long time to get through.
The relevent law is 17 USC 106 and 17 USC 117. http://www4.law.cornell.edu/uscode/17/106.html?DB=uscode http://www4.law.cornell.edu/uscode/17/117.html?DB=uscode
106 says copyright owners have exclusive right to authorize someone to copy, distribute, and modify their works. Conversely, 17 USC 117 says the "owner" of a copy may make a copy or adaptation for use in a machine and it is not an infringement.
Software companies don't like 117 and try to use contracts and a little bit of bluffing to get users to voluntarily give up their 117 first sale right. The law on the contract issues involved is muddled at best. A number of circuit courts have considered a number of different issues with badly fractured outcomes. Other isses having to do with contract formation requirements have been addressed in district courts and state courts with equally fractured outcomes.
However, in the Linux case, there is no such "shrinkwrap contract", so I believe 17 USC 117 is the final word. SCO's position seems very much like asking people who bought a CD to pay for the right to listen to it based on the allegation that the artist copied something (and SCO has never said what).
In fact, the licence Linux uses clearly authorizes copying, modification, and distribution under carefully controlled circumstances, and SCO itself distributed Linux, so their claims seem almost laughable to me. Taking them at their completely unsubstantiated word, Linux is 1% tops theirs and 99% validly licenced open source software. So how exactly did SCO distribute that 99% if they didn't comply with it's licence terms to re-licence the whole under open source terms. Even if IBM ripped them off and created an infringing mix, SCO has a wholely separate duty to each of the legitimate Linux copyright holders (400+ in number) to respect their licence when they distribute the result.
My personal take is that SCO is being intentionally thrown to lions. Red Hat's recent lawsuit against them points out the very fishy nature of their supposed IP claims. I suspect that what is really happening is that Sun and or Microsoft is using SCO to slow down Linux. At the end of this, SCO will probably no longer exist as we know it.
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