Last Updated on July 24, 2025 by Dave Farquhar
On August 2, 2000, a second-tier Linux vendor acquired a struggling Unix vendor. The merger received some press, but if you weren’t really following Linux at the time, it would have been easy enough to miss. But the merger of Caldera and SCO 24 years ago today created a litigation monster.
Caldera: Famous for making Linux much friendlier
At one time, Caldera had been a promising Linux vendor. They started off by taking a German distribution called Power Linux, adding some of their own code to it, called it Caldera OpenLinux, and arguably created the first Linux distribution that had a truly easy and user friendly installation process.
My first experience installing Linux
My first experience with Linux was walking over to my campus bookstore and buying a Slackware Linux CD, then taking it home and trying to install it. The installation was all text based, which didn’t bother me. Most installers at that point were extremely text heavy. Even the ones that ran in graphics mode still presented you with at least the occasional wall of text.
I wasn’t completely sure which components I needed and which ones I didn’t, but I was able to make an educated guess. The major problem was if I wanted a graphical user interface. Even if I installed the X Window system, Xfree86, Slackware didn’t do anything to configure it. I spent most of a weekend messing around with a plain text configuration file trying to get the graphical interface working. The furthest I got was a gray screen with a black x in the middle of it.
How Caldera made Linux much easier
So when someone gave me a Caldera CD a couple of years later, it was a revelation. The installer was graphical, it gave me no trouble at all on either of the systems I had tried Slackware on, and it resulted in a system with a functioning graphical user interface. It wasn’t as nice as the Silicon Graphics workstations in the computer lab in the physics building on campus, but it was a lot less expensive.
I changed Linux distributions a lot once I started feeling comfortable with Linux, and by 2000, I had certainly moved on from Caldera. Arguably they still had the best installer at that point, but most of the other distributions had improved to the point where I could install a system that met my needs, and I could probably get something a bit more streamlined if I used a different distribution.
But if you had asked me in 2000 if I had a favorable or unfavorable opinion of Caldera, I would have said favorable. They weren’t my favorite anymore, but my first experience building a usable Linux system was with them, and that was worth something to me.
The litigious side of Caldera
There was another reason I liked Caldera, and that’s because I liked underdogs and didn’t like Microsoft. Right around the time I first tried Caldera Linux, on July 23, 1996, Caldera purchased the rights to DR DOS from Novell for $400,000. Caldera and Novell had a connection. Novell’s founder and CEO emeritus was a man named Ray Noorda. Noorda created a venture capital group he called the Canopy Group using his personal fortune. Caldera was one of many companies the Canopy Group invested in.
The very next day, Caldera did what Digital Research was always afraid to do. They sued Microsoft. At the time, there were plenty of rumors that the whole thing was Ray Noorda’s idea, part of a plan to bring down Microsoft before he died.
By the time things had settled, all of the intellectual property related to DR DOS was in a subsidiary called Caldera Thin Clients. Caldera the Linux vendor never made any comment. The lawsuit, as you might guess, failed to bring Microsoft down. Instead, the two companies settled for a reported $155 million, in Caldera’s favor. The settlement money was distributed to its shareholders. That included the Canopy Group. Rumors persisted that secret payments increased the value of the settlement beyond the announced $155 million. Microsoft revealed in 2009 it paid Caldera $280 million.
Aftermath of the Caldera lawsuit with Microsoft
Maybe the lawsuit was just a money grab. But some lasting good things also came from it. Caldera released the source code for DR DOS, but not under a license that permitted much reuse. You won’t find any code from it in FreeDOS, because its license was completely incompatible with the GPL.
But Caldera released the source code for CP/M and GEM under more permissible licenses. So several interesting parts of Digital Research’s legacy did end up being released as open source for study and use as a result of that acquisition.
The Santa Cruz Operation
The Santa Cruz Operation, or SCO, sold a commercial version of Unix that ran on x86 CPUs. It started out as a Microsoft subcontractor, helping Microsoft out with its Unix, which it called Xenix. When Microsoft decided to get out of the Unix business, they sold the product back to SCO, who marketed it under their own brand name and continued development. And for a while, they were a sizable player in the Unix market, because they had a mature product that ran on ordinary PC hardware. If you needed a Unix workstation or server, it was a good choice.
In 1995, SCO purchased Novell’s System V Release 4 and UnixWare business.
But as you might imagine, as Linux matured, SCO was the first Unix vendor to feel the pain. One of the reasons you bought proprietary hardware from companies like Sun Microsystems and Silicon Graphics was because their systems were overbuilt and over engineered in almost every possible way. Both the hardware and the software were built to deliver five nines of uptime. Few x86 vendors had experience building such high-end systems at the time.
The market for SCO Unix was people looking to run Unix on cheaper hardware. And if they were looking to save money on hardware, you better believe they were open to the idea of saving money on the software as well. That left them vulnerable to Linux and FreeBSD.
Looking for a merger partner
SCO went looking for a merger partner, and it took a while for them to find a willing partner in Caldera. Caldera had a successful IPO in March 2000, and acquired SCO in August 2000. The Caldera-SCO merger closed in May 2001.
At first, the combined company behaved like you might expect a Linux company to behave. In August 2002, Caldera released some of the Unix source code under a BSD-like license. It wasn’t the first time Unix source code was released under an open source license.
But slowly, a reverse merger kicked in. Caldera struggled to find profitability, and co-founder and CEO Ransom Love was forced out, replaced with Darl McBride.
There is a much better chance that you have heard of SCO than Caldera, and that’s probably not because you have something written by SCO running on an old PC in your basement. That’s because Darl McBride quickly changed the company’s direction.
The litigious monster
One of the first things Darl McBride did was change the company’s name from Caldera to SCO. Not long after the name change, SCO started behaving differently. In December 2000, IBM famously announced it would invest a billion dollars in Linux development. From then on, IBM became one of the larger contributors to the Linux kernel.
SCO sues IBM
On March 6, 2003, SCO sued IBM for $1 billion, alleging IBM had placed Unix source code in the Linux source code without permission to do so. SCO later increased the alleged damages to $3 billion and then $5 billion.
None of the infringing code SCO said it found in the Linux kernel had anything at all to do with Caldera releasing early Unix source code under a BSD-like license seven months before. None at all.
Actually it did, and it wasn’t even IBM who put it there. The supposedly infringing code SCO showed publicly turned out to be from Silicon Graphics (SGI), not IBM.
In October 2003, SGI disclosed it had contributed about a million lines of code to Linux, about 200 of which came from Unix source code. Furthermore, SGI found the majority of the lines were already in the public domain, and therefore didn’t infringe on any of SCO’s rights.
On May 28, 2003, Novell wrote a letter to SCO saying that the 1995 purchase did not include all of the copyrights, and that for months prior to the suit, SCO had been asking Novell to transfer the copyrights, which it had not done. So any of SGI’s contributions infringed copyright, they infringed Novell’s rights, not SCO’s.
SCO’s lawsuit with Chrysler
On March 3, 2004, SCO also sued Daimler Chrysler, of all people. Yes, the car people. Car companies need computers to help in the process of designing and manufacturing cars. Chrysler ran Unix System V on a Cray supercomputer, having acquired the license to do so in 1988. SCO demanded Chrysler answer certain questions about its use of Linux, and Chrysler didn’t answer. SCO’s letter was sent to the wrong address, so it’s possible Chrysler never even received it. The case was dismissed January 31, 2005.
Didn’t Ford or General Motors have Linux? No doubt they did. I think they chose Chrysler because they were a company with name recognition that wouldn’t want to be tied up in litigation, and would therefore be willing to settle out of court and yield SCO a quick profit. My theory is that if it had worked, SCO would have sued other companies to make examples of them, and use the list to demand royalties from anyone who was using Linux.
That plan didn’t work out, because Chrysler fought back. I could smell the rat all the way from Missouri, and so could anyone else I knew who knew the significance of a computer having a root account.
The motivations behind SCO’s litigation
I have two theories on their motivation with IBM. One possibility was they wanted a sizable settlement, and then they could either distribute that to shareholders, use it to fund other litigation, or maybe a combination of the two. I think the second possibility is they wanted IBM to simply acquire them to make the problem go away. It’s also possible they thought they could win and get several billion dollars in damages. The public statements from Darl McBride, their new CEO installed in June 2002, suggested he thought he did have a chance of winning.
The hype around the case juiced SCO’s stock price to $22 per share after trading for as little as 66 cents per share, according to McBride’s LinkedIn page. McBride now claims he didn’t know about the litigation when he joined SCO.
The lawsuit didn’t end well. As far as I know, it didn’t end at all. IBM did to SCO what Gary Kildall feared IBM would do to Digital Research if they sued. They just tied them up in court forever. As far as I know, they didn’t even ask for a dismissal. They just let SCO bleed, and let Darl McBride become the most hated man in technology. SCO fired McBride in October 2009.
The case seems to be forever stuck in the almost resolved state. I wrote about it in 2012, and supposedly in 2018 it inched a bit closer. Today, the case is old enough to drink, SCO is barely in business, and IBM continues investing in Linux and letting SCO bleed.
David Farquhar is a computer security professional, entrepreneur, and author. He has written professionally about computers since 1991, so he was writing about retro computers when they were still new. He has been working in IT professionally since 1994 and has specialized in vulnerability management since 2013. He holds Security+ and CISSP certifications. Today he blogs five times a week, mostly about retro computers and retro gaming covering the time period from 1975 to 2000.