IBM's countersuit against SCO: an analysis


by Greg Lehey
Last updated: $Date: 2003/08/11 08:01:55 $

Note: The opinions expressed here are my own and have no relationship with the opinions or official viewpoints of any organization with which I am associated

On 9 March 2003, Caldera, trading as SCO, sued IBM for giving away trade secrets. I commented on this complaint some time ago.

In early August 2003, IBM countersued. This page comments on a copy of that document posted on the web. It contains a number of errors which suggests it is a scan of the original.

Comparing the documents, the most obvious problem is that the paragraph numbers don't match. It's possible that there are more than one complaint, or that the original SCO complaint has been renumbered for display on the web. This makes it very difficult to interpret statements in the IBM document like

5. Denies the averments of paragraph 5.

Paragraph 5 of the SCO complaint reads:
Parties, Jurisdiction and Venue

5. Plaintiff SCO is a Delaware corporation with its principal place of business in Utah County, State of Utah.

It would appear to be paragraph 12 of the document to which IBM refers:
PARTIES, JURISDICTION AND VENUE

12. Admits the averments of paragraph 12.

I think I can guess the meaning of most of it, but there's a danger that IBM is really referring to a completely different document.

55. States that it is without information sufficient to form a belief as to the truth of the averments of paragraph 55, except admits that IBM and The Santa Cruz Operation, Inc. (a California corporation now known as Tarantella, Inc., which is not affiliated with SCO), entered into an agreement to develop a UNIX operating system for a 64-bit processing platform that was being developed by Intel and that the project was known as Project Monterey.
Heh. SCO and Tarantella both issued from the restructuring of SCO a few years back. It's nice to see that IBM has identified the partnership as being with another company. If that stands up in court (of which I'm not yet convinced), it would kill SCO's main complaint.

In summary, IBM denies every single charge, either because it is not true, or because SCO has no right to make such a claim.

The counterclaims are more interesting:

1. These counterclaims arise from SCO's efforts wrongly to assert proprietary rights over important, widely-used technology and to impede the use of that technology by the open-source community. SCO has misused, and is misusing, its purported rights to the UNIX operating system developed originally by Bell Laboratories, then a research and development arm of AT&T Corp., to threaten destruction of the competing operating systems known as AIX and Linux, and to extract windfall profits for its unjust enrichment.
This is the main issue, of course, and IBM has stated it well.

Paragraphs 8 to 11 are a good description of how IBM, Novell and SCO developed in the last 20 years. I can't see anything incorrect in it. They mention an “irrevocable, fully paid-up, perpetual right to exercise all of its rights” under the AT&T Agreements, submitted in copy as part of the document. This makes SCO look silly for even trying.

Paragraphs 9 to 16 deal with Linux and the GPL. Probably the most interesting part is:

16. SCO accepted the terms of the GPL by modifying and distributing Linux products. By distributing Linux products under the GPL, SCO agreed, among other things, not to assert—indeed, it is prohibited from asserting —certain proprietary rights (such as the right to collect license fees) over any source code distributed under the terms of the GPL. SCO also agreed not to restrict further distribution of any source code distributed by SCO under the terms of the GPL.
That's a nice one: as I understand it, they're pointing out that, by contributing to Linux, they can no longer charge royalties for it.

Paragraphs 20 and 21 point out that SCO was never profitable as a software company:

With apparently no other prospects. SCO shifted its business model to litigation.

Paragraphs 22 to 24 describe (accurately in my opinion) how SCO built up a plan to extract license fees based on fear, uncertainty and doubt. Paragraphs 25 to 35 go into more detail about how SCO has misrepresented IBM, and while interesting, they're probably not the most important thing for most people.

Paragraphs 36 to 38 address the fact that SCO has refused to reveal the basis of their claims. The only conclusions they draw is that this is intended to artificially inflate their stock.

Paragraphs 39 to 41 go into SCO's disparagement of Linux without bringing any new insights.

Paragraphs 42 to 44 assert SCO's violation of IBM's IP, citing four patents (attached as exhibits). It doesn't go into any details, beyond the claim:

by making, using, selling and/or offering to sell a variety of products, including: "UnixWare", a UNIX operating system for Intel and AMD processor-based computer systems; “Open Server”, an operating system platform; “SCO Manager”, a web-based remote systems management solution for management of Linux and SCO UNIX systems; and “Reliant HA”, “clustering” software that permits interconnection of multiple servers to achieve redundancy.
This is the weakest part of the document so far. I would have expected to see more specific information on what was violated and how. They do go into more detail below, however.

Paragraphs 43 and 44 sum up the effects of SCO's behaviour, noting particular artificially inflated stock prices and damage to IBM and the open source community.

First counterclaim

The first counterclaim accuses SCO of breach of contract, based on their alleged deliberate public misinterpretation of their license conditions.

Second to fifth counterclaims

The second, third, fourth and fifth counterclaims deal with various aspects of inappropriate business conduct: misrepresentation, unfair competition, intentional interference with prospective economic relations, and unfair and deceptive trade practices. It asks the court to set damages.

Sixth counterclaim

The sixth counterclaim accuses SCO of breach of the GNU General Public License (GPL). Specifically:
76. SCO has taken source code made available by IBM under the GPL, included that code in SCO's Linux products, and distributed significant portions of those products under the GPL. By so doing, SCO accepted the terms of the GPL (pursuant to GPL ? 5), both with respect to source code made available by IBM under the GPL and with respect to SCO's own Linux distributions.

77. The GPL prohibits SCO from asserting certain proprietary rights (such as the right to collect license fees) over, or attempting to restrict further distribution of any source code distributed by SCO under the temis of the GPL. Based on the misconduct described herein, SCO's rights to distribute the copyrighted works of others included in Linux under the GPL have been terminated pursuant to § 4 of the GPL.

78. SCO has breached the GPL by, among other things, (1) claiming ownership rights over Linux code, including IBM contributions; (2) seeking to collect and collecting license fees with respect to Linux code, including IBM contributions; (3) copying, modifying, sublicensing or distributing Linux, including IBM contributions, on terms other than those set out in the GPL and after its rights under the GPL terminated; and (4) seeking to impose additional restrictions on the recipients of Linux code, including IBM contributions, distributed by SCO.

79. As a result of SCO's breaches of the GPL, countless developers and users of Linux, including IBM, have suffered and will continue to suffer damages and other irreparable injury. IBM is entitled to an award of damages in an amount to be determined at trial and to an injunction prohibiting SCO from its continuing and threatened breaches of the GPL.

It's interesting to note that the last paragraph states that IBM and the Linux community have suffered as a result. IBM further states that IBM is entitled to damages. It doesn't say anything about the community. It would be interesting to consider whether a class action suit would be appropriate.

Seventh to tenth counterclaims

The next four counterclaims relate to patent infringement. They're more specific than the previous mention of this topic, but they relate to products which were probably not built by this incarnation of SCO, such as OpenServer, so it's probable that SCO inherited the code which infringed on the patents. Looking at the description, they're probably also patents which have been infringed in a big way by number of vendors. For example, I can't see how Microsoft or Apple computer can get by without a “Method of Navigating Among Program Menus Using a Graphical Menu Tree” (eighth counterclaim). On the face of it, this is a less friendly side of IBM, and while I suspect they may just be keeping a dossier on people who infringe on their patents so that they can have something to fight back with in times like these, it looks a little ugly.


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