SCO versus IBM, Round Three

SCO sees the downside and IBM clamors for more time

In a regulatory filing with the Securities and Exchange Commission (SEC) in late March, the SCO Group warned of the potential fall-out from its $1 billion lawsuit against IBM Corp.

In early March, SCO filed suit against IBM for allegedly sharing its proprietary technology with the open source software (OSS) community. In its filing, SCO charged that that IBM had deliberately misappropriated SCO’s proprietary Unix source code to accelerate the development of Linux. The company charged Big Blue with attempting to “improperly destroy the economic value of UNIX.”

SCO’s filing was submitted to allow two of its major shareholders to sell their holdings in the troubled company. In it, SCO acknowledges that "Unintended consequences of our lawsuit against IBM may adversely affect our business” and warned that the likelihood of increased legal fees in particular could negatively impact its bottom line. Moreover, SCO disclosed that revenues it earns as a result of joint ventures with IBM and its partners could dry up as well.

IBM enjoys an enviable reputation among many of its customers, and in its filing, SCO acknowledges for the first time that this could hurt its bottom line as well: “We anticipate that IBM may seek to influence participants in the markets in which we sell our products to reduce or eliminate the amount of our products and services that they purchase.”

More alarming, SCO conceded that the lawsuit—and its potential implications with respect to Linux and OSS—could hurt it. "There is also a risk that the lawsuit against IBM will be negatively viewed by participants in our marketplace, and in such event, we may lose support from such participants.”

Some industry watchers—such as Rob Enderle, a senior analyst with Forrester Research subsidiary Giga Information Group—have indicated that SCO’s litigation could “test” the GNU General Public License (GPL), the licensing model on which OSS is based. Even if SCO’s claims are ultimately baseless, Enderle noted in an interview last month, the potential for fear, uncertainty, and doubt among prospective customers could hamper Linux adoption. “The overall Linux model has never been tested in court, and it looks like SCO is on the aggressive path to do so.”

IBM Files for Extension

Big Blue is defended by the firm of Cravath, Swaine & Moore, which could make for an even more intriguing match-up, as SCO’s principal attorney—David Boies, of the firm Boies, Schiller & Flexner—worked for Cravath, Swaine & Moore for most of his career. Boies also defended IBM in its notorious—and interminable—antitrust wrangling with the Justice Department through the early 1980’s.

In a filing last week, IBM sought to have the case moved out of a Utah state court and into a federal court. SCO is headquartered in Lindon, Utah.

This week, Big Blue requested a 30-day extension to allow it to file its response to SCO’s lawsuit.

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About the Author

Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.