alt Hacker NewsI think that the SCO threat to Linux also came at a time when Linux was pretty immune from such a threat. If it's the early-90s and there's two options in their infancy and one had AT&T (one of the 5 largest companies) threatening it, you'll go with the other. In 1993, you're not using BSD or Linux and making a choice between them. The legal threat weighs heavy there.
When SCO sued IBM, people were already using Linux including one of the biggest and most trusted names in computing (at the time): IBM. Migrating away from something is a hard choice. Likewise, Linux had IBM's army of lawyers defending it (yes, BSD was defended by UC Berkeley, but the school could have easily folded over a project that wasn't part of the school's core mission). SCO also wasn't much of a threat - they were a dying company trying to win a case against the biggest names in the industry.
It's a lot easier to spread FUD against something no one is currently using that has a viable alternative. In 1993, Linux and BSD may have been equal, but AT&T's legal threat carried weight. People choosing one or the other weren't already using one. By 2003, 25% of the internet was powered by Linux. People were already using it and weren't going to be scared away by the claims of a dying corporation while powerful companies were defending Linux.
You say yourself that if something wasn't Linux compatible, it wasn't valuable and so everyone had to be chasing and reimplementing Linux compatibility. But if BSD had been established for a decade and Linux was chasing BSD compatibility in 2003 and then SCO sued BSD, BSD would still have maintained dominance.
When a company claimed ownership matters. Which company claimed ownership matters. "How big" the OS was when the challenge came matters.
Frankly, reset Linux adoption to 0. Have everyone use BSD for 2-4 years. Then reintroduce Linux. You won't end up with Linux dominance. You'll end up with BSD dominance. Linux had a multi-year head start. As you note, once you become the dominant target, everyone else is chasing you. If BSD had a multi-year head start, Linux would have been chasing BSD and the roles would be swapped.
SCO was suing on two grounds. First was the claim that they were the corporate heirs of the AT&T copyrights, and they claimed that Linux infringed on them. Second was from a joint development agreement with IBM - they claimed that code from that had been contributed to Linux by IBM, and that IBM didn't have the right because it was half SCO's code (or rather, Novell's code that SCO inherited).
That second claim could not have happened until IBM was contributing to Linux. That part of the lawsuit could not have happened in 1993. (The first part was similar to the BSD lawsuit.)