SCO has taken the unusual step of publishing correspondence between it and Linux distributor Red Hat, following the latter's launch of a countersuit yesterday.

Red Hat started legal proceedings on Monday to stop SCO "making unsubstantiated and untrue public statements" about its code being used in Linux distributions.

SCO has hit back at Red Hat's moves and claimed that Red Hat's actions will not help the long-term future of Linux.

In a letter to Red Hat chairman and chief executive Matthew Szulik, SCO's president and chief executive Darl McBride (pictured) said: "I am disappointed that you have chosen litigation rather than good faith discussions with SCO about the problems inherent in Linux.

"Of course, we will prepare our legal response as required by your complaint. Be advised that our response will likely include counterclaims for copyright infringement and conspiracy.

"I must say that your decision to file legal action does not seem conducive to the long-term survivability of Linux."

SCO has published two letters. One is the response from McBride to Szulik, and the second a letter drafted at an earlier date but not previously sent.

The full letters are reprinted below:

August 4, 2003

Matthew J. Szulik
CEO
RED HAT, INC.
1801 Varsity Drive
Raleigh, NC 27606

Dear Matthew,

Attached is the letter I discussed with you during our July 31, 2003 telephone conversation. Instead of actually sending the letter, I thought it was best to telephone you and speak in person to see if we could resolve the issues between our companies short of litigation. We left the conversation with a preliminary agreement to meet and continue our discussions further.

To my surprise, I just discovered that your company filed legal action against The SCO Group earlier today. You, of course, mentioned nothing of this during our telephone conversation. I am disappointed that you were not more forthcoming about your intentions. I am also disappointed that you have chosen litigation rather than good-faith discussions with SCO about the problems inherent in Linux.

Of course, we will prepare our legal response as required by your complaint. Be advised that our response will likely include counterclaims for copyright infringement and conspiracy.

I must say that your decision to file legal action does not seem conducive to the long-term survivability of Linux.

Yours truly

Darl C. McBride
President & CEO

July 31, 2003

Mark Webbink, Esq.
Sr. Vice President and General Counsel
RED HAT, INC.
1801 Varsity Drive
Raleigh, NC 27606

VIA FACSIMILE

Dear Mr Webbink,

This letter is in response to yours of July 18, 2003 to Darl McBride, president and CEO of The SCO Group, Inc.

Before responding to your request, it is important to place your letter in context. Your letter follows on the heels of Red Hat's S-3 filing of July 7, 2003, in which your company revised its risk disclosure statement.

In addition, SCO is currently engaged in litigation with International Business Machines Corporation [IBM] regarding its role in the development of the Linux operating system. At the time of your letter, we had expected the possibility of a global resolution of SCO's intellectual property claims against all Linux-related companies that would have likely included Red Hat. This effort has apparently stalled, through no fault of SCO.

Based on the posture of our litigation and your revised risk disclosures, it is unclear to us the purpose of your July 18, 2003 letter. If you desire to enter good faith discussions to address SCO's intellectual property claims against Linux, either on behalf of a wider consortium of Linux companies or solely on behalf of Red Hat, we are willing to meet with you for that purpose.

In any such meeting, we will provide example after example of infringement of our intellectual property found in Linux. Of course, any such demonstration must be pursuant to an acceptable confidentiality agreement and must be intended to further good-faith discussions about resolving the differences between us.

If you seek information for the purpose of informal discovery intended to benefit IBM in the pending litigation, or for the purpose of devising your own litigation plans against SCO related to Linux, we must respectfully decline your request. Therefore, please clarify in writing the purpose for your request. Thank you.

Sincerely,

Robert Bench
Chief Financial Officer
The SCO Group, Inc.

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