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The notice came to light in an SEC filing submitted on Monday by the company that revealed SCO now sees it as the next target following its ongoing litigation with IBM.

It reads: 'We recently received a notice from SCO Group stating its intention to terminate our fully paid license to certain UNIX-related code, under which we distribute our IRIX operating system, on the basis that we have breached the terms of such license.

'We believe that the SCO Group's allegations are without merit and that our fully paid license is nonterminable. Nonetheless, there can be no assurance that this dispute with SCO Group will not escalate into litigation, which could have a material adverse effect on SGI, or that SCO Group's intellectual property claims will not impair the market

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acceptance of the Linux operating system.'

The sobriety of the statement should be taken in the context it was set: as part of the company's risk assessment statement.

Nonetheless, SCO's CEO Darl McBride had made clear SGI was in his sights, and with very specific allegations, in the open letter he published earlier this month.

He wrote: 'A Linux developer on the payroll of Silicon Graphics stripped copyright attributions from copyrighted System V code that was licensed to Silicon Graphics under strict conditions of use, and then contributed that source code into Linux as though it was clean code owned and controlled by SGI. This is a clear violation of SGI's contract and copyright obligations to SCO.'

SCO told us today that the company had sent a letter to SGI outlining its concerns on 13 August and gave the company two months to remedy 'all violations of the AT&T/SGI agreements'. SCO alleges that SGI's XFS journalling filesystem which it contributed to the open source movement contains Unix System V code.

SCO says that if the situation is not remedied, then SGI is 'required to immediately discontinue use of the software product and destroy or return all such copies to SCO.'

SGI declined to comment.

See also:

SCO invites open source people to 'monetize' Linux