March 07, 2003, 8:52 AM — Unix developer The SCO Group has filed a lawsuit against IBM Corp. charging it with misappropriation of trade secrets, unfair competition and other illegal actions related to IBM's Linux business. The suit seeks at least US$1 billion in damages.
IBM obtained its Unix license in 1985 from AT&T Corp., which developed the operating system, SCO said in a statement. In 1995 SCO purchased the rights and ownership of Unix and thus became the "successor in interest" to the Unix licenses doled out by AT&T to IBM, Hewlett-Packard Co. and others, SCO said.
In its suit filed Thursday in the State Court of Utah, SCO alleges that IBM tried to destroy the economic value of Unix, particularly Unix on Intel Corp.-based servers, in order to benefit its Linux services business. It charges IBM with misappropriation of trade secrets, tortious interference, unfair competition and breach of contract, said SCO, in Lindon, Utah.
IBM said in a statement Friday that although it had not had time yet to sufficiently study the complaint, "based on a quick read the compliant is full of bare allegations with no supporting facts."
The company added that it has been "openly supporting Linux and open standards for several years and neither SCO nor any of its predecessors ever expressed these concerns to us."
All commercial Unix flavors in use today are based on the Unix System V Technology, whose software code and licensing rights are owned by SCO, SCO said in its complaint.
SCO also said it sent a letter to IBM demanding that it cease its allegedly anti-competitive practices. If IBM doesn't meet its demands within 100 days of receiving the letter, SCO said it has a right to revoke IBM's license for the AIX Unix operating system.
However, IBM said Friday that SCO never approached it to raise this complaint and did not inform the company in advance that it was filing a lawsuit.
SCO claims in its suit to have been injured in the marketplace by IBM's actions and has asked the court for damages of at least $1 billion, with the amount to be proven at a trial.
SCO announced in January that it had hired the law firm of Boies, Schiller and Flexner to investigate possible violations of its intellectual property. Partner David Boies is famous in the IT world for the work he did as special trial counsel for the U.S. Department of Justice in its antitrust suit against Microsoft Corp. The hiring of such a high-profile firm led to speculation that SCO was gearing up for litigation, and prompted concerns among Linux advocates.
"This case is not about the debate about the relative merits of the proprietary versus open- source software models. This case is also not about IBM's right to develop and promote open-source software, so long as they do that without SCO's proprietary information," said Darl McBride, SCO's president and chief executive officer, during a conference call late Friday morning.
"This case is about SCO's right to not have its proprietary software misappropriated and misused," he added.
IBM broke the terms of its Unix contract with SCO "by engaging in practices to use this Unix source code to benefit their Linux business and to destroy Unix," McBride said.
IBM is taking SCO's proprietary code and without permission putting it into the open source community. "That's where we have a major-league problem," he said.
But when asked whether SCO has direct, concrete evidence of AIX code being donated to the open source community and showing up on open source projects, McBride deflected the question. "The details of this case will be played out by the attorneys in a legal setting, so I'm not at liberty to go into the evidences we have at this point in time," he said.
McBride stated several times during the call that SCO's action is solely aimed at IBM, and not at the Linux community, to which it belongs as a maker of Linux-based software.
He said SCO approached IBM with its concerns back in December but that the companies have been unable to resolve their differences amicably, which in turn led to this lawsuit.
SCO has posted a copy of its complaint at http://www.sco.com/scosource.
Chris Sontag, senior vice president and general manager of the company's SCOsource intellectual property division, declined to say whether SCO is planning to sue anyone else in the near future.
"Our focus right now is on IBM," he said Friday morning before the conference call. "We have a very strong case and we're very confidently moving forward. We're fully committed to taking this all the way."
That SCO chose IBM to launch its legal offensive has upsides and downsides, said Brian Kelly, a Fenwick & West LLP partner in Washington, D.C., who specializes in IT intellectual property.
