Update: SCO clarifies IBM suit

By Matt Whipp

Posted on 7 Mar 2003 at 17:46

Darl C. McBride, president and CEO, and Chris Sontag, senior vice president and general manager of SCOsource gave a teleconference this afternoon in which they confirmed that their $1bn beef was just with IBM.

'This is not about the Linux community and we're not going after them,' said Sontag. And when questioned about the 30,000 odd other Unix licencees he said: 'It is not about other companies.'

SCO's particular issue with IBM is over how the company is uses its Unix licence. Said Sontag: 'When [IBM] take our proprietary code and put that into the open-source community we have a major league problem.'

The particular code in question is the Unix System V operating system developed by AT&T's Bell Labs, the rights to which SCO claims it owns. SCO alleges that IBM based its open AIX operating system upon this, thus breaking terms of the licence.

Asked whether the company had any direct evidence of this, McBride and Sontag were guarded in their reply. 'We're not at liberty to go into the evidences we have right here,' said Sontag. But as anecdotal proof he offered the fact that 'a $28bn company sent in a request to SCO to see the System V code that AIX came out of.'

Sontag said the suit was the result of earlier attempts to settle SCO's issues with IBM. 'We have been talking to with IBM going back to December and reached an impasse.' In January of this year, SCO formed its SCOsource division, specifically tasked with investigating how to exercise its intellectual property rights. For the current quarter, SCO expects around two fifth's of its upper estimate of $25m revenues to come from this division.

When asked whether SCO might consider becoming an intellectual property company such as Intergraph, Sontag vehemently denied it. 'No, that is not the road we're going down,' he said, pointing out that the company would be leading on SCOX, the next generation of its operating system and adding that seven out of 10 of the world's top retailers, including McDonalds, use SCO systems.

SCO claims intellectual property ownership of Unix libraries that allow programs on SCO's version of Unix to run on Linux systems. The company has filed a suit to a District Court in Utah, alleging 'misappropriation of trade secrets, tortuous interference, unfair competition and breach of contract' on the part of IBM and that IBM had 'made concentrated efforts to improperly destroy the economic value of Unix, particularly Unix on Intel, to benefit IBM's new Linux services business'.

SCO is seeking damages of no less than $1bn, as well as additional damages for market injury and to revoke the Unix licences issued to IBM for AIX within 100 days.

'SCO is in the enviable position of owning the UNIX operating system,' said Darl McBride, president and CEO, SCO. 'It is clear from our stand point 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.'

SCO also forms one corner of the UnitedLinux quartet, but has not said how (or if) its IP rights would affect the venture. It has confirmed that SCO Linux customers are fully licensed.

For the quarter ending last month, SCO showed revenues of $18m. It's guidance for the current quarter foresees as much as $25m, with $10m attributed to SCOsource.