SCO sues IBM for $1 billion for infringement

The SCO Group last week filed a $1 billion lawsuit against IBM, alleging Big Blue tried to destroy the value of Unix to benefit IBM’s Linux business.

LINDON, UTAH – The SCO Group last week filed a $1 billion lawsuit against IBM, alleging Big Blue tried to destroy the value of Unix to benefit IBM’s Linux business.

SCO’s complaint, filed last Thursday in the State Court of Utah, claims misappropriation of trade secrets, tortious interference, unfair competition and breach of contract on the part of IBM. IBM could not be reached for comment.

“We are alleging that IBM misappropriated the research-and-development resources previously dedicated to AIX to benefit their Linux business,” said Darl McBride, president and CEO at SCO. “This is a direct violation of their Unix contract with SCO.”

IBM entered into a Unix license agreement with AT&T in 1985 to produce its AIX operating system. SCO inherited AT&T’s interest in the IBM agreement in 1995 when it purchased rights to the Unix operating system and UnixWare – including source code, source documentation, software development contracts and licenses – which AT&T originally owned.

SCO is demanding that IBM cease within 100 days what it deems anticompetitive practices, or SCO will revoke its AIX license. SCO seeks at least $1 billion in damages.

Boies, Schiller and Flexner filed SCO’s complaint. David Boies, the lead lawyer in the U.S. Justice Department’s Microsoft antitrust case, is managing partner at the law firm. SCO announced in January that the firm had been retained to research and investigate possible violations of SCO’s intellectual property. That SCO chose IBM as the first target of its legal offensive has upsides and downsides, says Brian Kelly, a Fenwick & West partner in Washington, D.C., who specializes in IT intellectual property.

The upsides are that IBM has deep pockets, so seeking large amounts of money is feasible, and that suing IBM has a high public relations value, Kelly says.

The main downside is that by now IBM has so much money invested in its Linux efforts that it will have little incentive to capitulate and seek a settlement, and probably will be willing to devote a significant amount of money and legal resources to fight the lawsuit, Kelly says. Had SCO chosen to go after a smaller company, its chances of getting the upper hand in a settlement would have been better, he says.

IDG News Service correspondent James Niccolai contributed to this story.