SCO Group Slaps IBM With $1B Suit Over Unix

By Peter Galli  |  Posted 2003-03-10 Print this article Print

The SCO Group, which holds the intellectual property rights to Unix, last week filed suit against IBM for at least $1 billion in the State Court of Utah.

The SCO Group, which holds the intellectual property rights to Unix, last week filed suit against IBM for at least $1 billion in the State Court of Utah, alleging that IBM has made efforts to "improperly destroy the economic value of Unix, particularly Unix on Intel [Corp.], to benefit IBMs new Linux services business."

The SCO filing said that IBM entered into its original Unix license agreements with AT&T Corp. in February 1985 to produce the AIX operating system. The agreements required that the Unix code be held in confidence and barred its unauthorized distribution or transfer.

As a result of IBMs unfair competition and the resulting marketplace injury, SCO charges, the company is requesting damages of at least $1 billion, according to the filing.

SCO is demanding that IBM, of Armonk, N.Y., cease what it refers to as anti-competitive practices specified in a notification letter to IBM. If the requirements are not met, SCO has the authority to revoke IBMs AIX license 100 days following the receipt of the letter, officials said.

In 1995, SCO purchased the rights and ownership of Unix and UnixWare software that had been owned by AT&T, including source code, documentation, development contracts, licenses and other intellectual property that pertained to Unix. SCO became the successor in interest to the Unix licenses originally licensed by AT&T Bell Laboratories to all Unix distributors, including Hewlett-Packard Co., IBM, Silicon Graphics Inc., Sun Microsystems Inc. and others.

"SCO is in the enviable position of owning the Unix operating system," said Darl McBride, president and CEO of SCO, in an interview with eWeek. "Its clear from our standpoint that we have an extremely compelling case against IBM. SCO has more than 30,000 contracts with Unix licensees, and upholding these contracts is as important today as the day they were signed."

McBride said SCO, based in Lindon, Utah, owns the source code to Unix and the right to that operating system. IBM has taken AIX and made it available to the Linux community in an unlawful way, said McBride.

SCO, formerly Caldera International Inc., created its SCOsource division to open new licensing opportunities for its intellectual property (see related story, SCO Mines Licensing Revenue).

SCO has employed high-profile attorney David Boies and his law firm to investigate whether Windows, Mac OS X, Linux and versions of BSD infringed on the Unix intellectual property it owned.

"IBM has been happily giving part of the AIX code away to the Linux community, but the problem is that they dont own the AIX code," McBride said. "Its a huge problem for us. We have been talking to IBM in this regard since early December and have reached an impasse. This was thus the only way forward for us."

The Unix contracts held by SCO are "extremely powerful, and one of the remedies under the contract is that we have the ability to revoke their AIX license," McBride said. "We have to give them 100 days notice before we do that. If they dont cure the problems we have, then we will revoke their license."

Sun, whose Solaris system is based on Unix, moved quickly last week to assure its customers that its licenses were in order. John Loiacono, vice president of Suns operating platforms group, said the company has assured its customers and partners that it has licensing rights to Unix for SPARC and x86 systems.

"Sun acquired rights to make and ship derivative products based on the intellectual property in Unix," said Loiacono, in Santa Clara, Calif. "This forms the foundation for the Solaris operating system that ships today."

IBM corporate spokesman Bill Hughes said on Friday that the company had not yet seen the lawsuit and was unable to comment on it. A spokeswoman for Linux distributor Red Hat Inc., in Raleigh, N.C., told eWeek that the company had not been contacted by SCO with regard to any violations of its IP or other rights. A Microsoft Corp. spokesman, in Redmond, Wash., also declined immediate comment.

Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


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