June 12, 2003 5:03 PM PDT

SCO could act Monday in IBM Unix case

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SCO Group's next move in its legal wrestling match with IBM likely will come Monday, possibly in the form of a request that a judge halt Big Blue's Unix product sales.

Friday is the deadline for IBM to meet SCO's demand that it comply with the terms of its license to sell Unix or face revocation of that license. But IBM, which says it hasn't done anything wrong, isn't likely to yield to SCO's demands. "We think we have nothing to do. We haven't violated the contract," said IBM spokeswoman Trink Guarino.

SCO's course of action is clear. "If SCO truly believes what they're saying, once the cure period comes and goes without any action by IBM, they should quite promptly be filing in court a request for preliminary injunction," said Rich Gray, a Silicon Valley intellectual-property attorney. The preliminary injunction would likely seek to block IBM's future sales of its Unix product, AIX.

SCO spokesman Blake Stowell said the company probably will announce its next move Monday. A request for preliminary injunction is "a likely option, but it's one of many we could take," he said.

SCO will probably take the weekend to decide what to do. Barring any settlement by the end of Friday, June 13, "you should expect on (June) 16th, we will be taking appropriate steps to enforce the contract rights we have," SCO Chief Executive Darl McBride said last week.

In March, SCO surprised the computing industry by suing IBM for more than $1 billion, arguing that the company broke its contract with SCO by misappropriating trade secrets that SCO owned by using them to improve Linux. Simultaneously, SCO told IBM that if it didn't come into compliance with the contract within 100 days, it would revoke IBM's contract to sell AIX servers.

The case directly affects a major portion of IBM's business. In 2002, it had $3.6 billion in Unix server sales, according to Gartner. That figure doesn't include revenue from support or software such as Big Blue's Tivoli, DB2 or WebSphere products that often are sold along with those servers.

The two companies have discussed settlement, but those talks haven't been fruitful, Stowell said. "We've had discussions with them prior to today, but those discussions were short," he said.

One action that SCO could take--but won't, at least initially--is to target users of IBM's AIX products.

"We would also have the right to make all the AIX licenses (that IBM's) customers have invalid, but at this point in time, we have chosen not to exercise that option," Stowell said. "We view the customers as innocent bystanders in this, but that doesn't mean we won't invoke that right at some time."

In any case, Guarino said, IBM has been reassuring its customers. "They know they're going to get support from IBM. They have confidence that IBM will ultimately resolve this issue," she said.

Obtaining a preliminary injunction won't be easy for SCO, said Daniel Harris, an intellectual-property attorney with Clifford Chance.

SCO would have to convince a judge that its lawsuit has enough merit to succeed and that continued sales of AIX products would damage SCO in a way that couldn't merely be compensated by paying SCO money, Harris said. "That, I believe, will make it virtually impossible to get a (preliminary) injunction," Harris said.

Gray, though, believes that SCO could fare better. "If the theory they've set out in their complaint can be backed up by proof, I think they have a pretty good shot to making a good showing," he said. But, he cautioned, "A good question is: 'Can they back up the allegations of their claim with proof?'"

One possible argument that IBM could make against a request for preliminary injunction is that taking such action wouldn't fix anything, Gray said. SCO's lawsuit argues that IBM violated Unix trade secrets by moving Unix technology to Linux, thereby damaging SCO, but IBM could argue that stopping IBM's Unix shipments wouldn't change SCO's position.

A classic trade secret example is the recipe for Coca-Cola, Gray said. If a Coca-Cola employee published that recipe on the Internet and the secret got out, it would be too late for an injunction against that employee to matter.

 

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