June 16, 2003 5:02 PM PDT

SCO claims IBM Unix contract void

SCO Group on Monday said it revoked IBM's license to sell its version of Unix, called AIX, and requested that a judge permanently block IBM's Unix business.

"We have terminated IBM's right to use AIX in their business, development, distribution and sales," said Chris Sontag, head of the SCOsource effort to derive more revenue from the company's Unix intellectual property. And in an amendment to the company's March complaint against IBM, SCO is "seeking a permanent injunction from IBM's continued use of our software in their business."

Also in the amended suit, SCO said that it owns the copyrights to Unix and criticized the practices of Linux founder and leader Linus Torvalds. "A significant flaw of Linux is the inability and/or unwillingness of the Linux process manager, Linus Torvalds, to identify the intellectual-property origins of contributed source code that comes in from those many different software developers" who contribute to Linux, the suit said.

IBM maintains that it has done nothing wrong, that its license to sell Unix products is still valid, and that its customers need not worry that they no longer have a license to use AIX, said spokesman Mike Fay, vice president of communications for IBM's systems group. "Our Unix license is irrevocable, perpetual and fully paid up. It can't be terminated," Fay said.

SCO said that the termination of the AIX license means that all IBM Unix customers also have no license to use the software. "This termination not only applies to new business by IBM, but also existing copies of AIX that are installed at all customer sites. All of it has to be destroyed," Sontag said.

Despite the harsh rhetoric, the fact that SCO is seeking a permanent rather than preliminary injunction means that the issue won't be resolved soon and customers need not worry, said Daniel Harris, an intellectual-property attorney with Clifford Chance. "There isn't going to be any practical impact now," Harris said. "Unless they seek a preliminary injunction, there's no (court) order impacting IBM or IBM's customers."

IBM sold $3.6 billion worth of Unix servers last year. Among AIX's high-profile customers are Lawrence Livermore National Laboratory, for fulfilling its guarantees about the safety and reliability of U.S. nuclear weapons; Colgate-Palmolive, in order to run much of its global accounting and inventory system; and the National Weather Service, for forecasting hurricanes and other weather events.

"We have a recognition of the fact that it's not the end users that have caused this problem, it's IBM's actions that have caused this problem. Our preference would be for corrective action on the part of IBM," SCO's Sontag said. "If we need to, we will enforce all our rights, even with IBM's end users."

In a statement, IBM said it will stand behind its products and customers, but raised an intellectual-property issue that SCO so far has skirted: patents.

"IBM will continue to ship, support and develop AIX, which represents years of IBM innovation, hundreds of millions of dollars of investment and many patents," IBM said.

"I think that's a clear signal," said Gray Cary, an attorney at Mark Radcliffe, who said that a company's first response to an intellectual-property infringement lawsuit is a countersuit based on that company's patents. "I think that's code for 'stand by for the hurricane.' You're going to find a stack of patents about 5-feet high that your product infringes that's going to run up the cost of litigation.'"

A judge likely wouldn't grant SCO a preliminary injunction, said John Ferrell, an intellectual-property attorney at Carr & Ferrell. "If they were to ask for preliminary injunction, I can't imagine that it would be granted because the harm to IBM would be so tremendous relative to the benefit of granting the injunction now, as opposed to waiting to the end of the case," he said.

In addition, SCO would have to post a bond that would pay for the damage to IBM's business if a preliminary injunction were granted and later found to be improper, Ferrell said. "SCO would have to post that in cash."

As a result, SCO's move means that AIX customers might feel a reprieve, Harris said. "If anything, I think the customers may breathe a sigh of relief that there isn't going to be any hearing on a preliminary injunction that might impact them," Harris said. Seeking a permanent injunction as part of a trial "is going to take years."

But David Moyer, an attorney with Wineberg, Simmonds & Narita, said not seeking a preliminary injunction "could signal weakness" on SCO's part. "They had signaled they would do something to stop IBM from going forward with AIX. The fact that they haven't filed a motion yet either signals they don't want to do something that drastic or they don't believe they would win."

Sontag didn't explain SCO's reasons for not seeking a preliminary injunction, other than to say the company is confident of its case and decided against "taking multiple steps."

Because of IBM's unwillingness to bow to SCO's demands, SCO's actions Monday were expected. The companies had engaged in brief but unfruitful discussions, SCO said last week.

The seeds of SCO's dispute were sowed several years ago. Unix and AIX has a long and twisted history. In 1995, Novell sold SCO Unix copyrights and contracts with many large companies, including Hewlett-Packard, IBM and Compaq Computer. Though those licenses lay largely dormant for years, SCO decided that they could be a source of revenue that could bolster the struggling company's fortunes after its failure to make a business of selling Linux.

SCO in March sued IBM for more than $1 billion, alleging that Big Blue had violated its contract with SCO by misappropriating Unix trade secrets it had built into Linux. SCO then found Unix code that it says was copied directly into Linux and has said it will sue others as well.

IBM licensed Unix from AT&T in the 1980s, and SCO--formerly called Caldera Systems and Caldera International--bought that contract in 2001. IBM was permitted to build on that Unix technology, but SCO argues that IBM violated its contract by transferring some of those modifications to Linux.

Specifically, Sontag said IBM moved technology to Linux from AIX and another version of Unix called Dynix that IBM acquired when it bought Sequent.

Specifically, the transferred code includes the Journaled File System (JFS), extensions to make Linux work on a multiprocessor server employing the non-uniform memory access (NUMA) technique, Sontag said. In addition, he said read-copy update (RCU) for relieving some memory bottlenecks on multiprocessor servers, was transferred.

 

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