SCO claims copyright infringement and up to $5 billion from IBM

In March last year the SCO Group filed a lawsuit against IBM, alleging that the Linux manufacturer had breached SCO's rights in the UNIX operating system. This was based on a licence agreement entered into in 1985 between IBM and the then owner of the UNIX system, AT&T. IBM wanted to use the software in order to produce its own AIX operating system.

It is alleged that the agreements required IBM to hold the UNIX software code in confidence, and prohibited unauthorised distribution or transfer.

In 1992, AT&T sold UNIX to Novell. Then, in 1995, the Santa Cruz Operation purchased rights in UNIX from Novell, including source code, source documentation, software development contracts, licenses and other intellectual property. The Santa Cruz Operation sold on these rights to Caldera International, which subsequently changed its name to The SCO Group (SCO).

In March 2003 SCO accused IBM of letting parts of UNIX 'slip' into Linux – in breach of SCO's rights in the software. SCO sued for $1 billion, citing misappropriation of trade secrets, tortious interference, unfair competition and breach of contract.

In June, SCO amended the suit, asking for a permanent injunction that would force IBM to cease and desist all use and distribution of AIX, and to destroy or return all copies of the so-called UNIX System V source code.

SCO also upped its claim to at least $3 billion, comprising $2 billion for alleged breaches of contract and $1 billion for unfair competition, in addition to unspecified damages for misappropriation of trade secrets and punitive damages.

Since then, SCO has registered copyrights in critical UNIX source code (in the US, unlike the UK, there is a system of copyright registration), and in July 2003 it announced that it would begin contacting companies about their use of Linux and offer them the chance to purchase a UnixWare license – or risk facing an infringement suit.

SCO's most recent amendments to the suit, filed on Friday, radically alter the action: the claim that IBM misappropriated trade secrets (formerly one of the main aspects of the suit) has been ditched, and replaced by infringement of copyright claims. The damages claimed have increased again, and may reach $5 billion, according to reports.

CNET News.com reports IBM as saying:

"SCO's proposed copyright claim is merely a follow-on from its prior position that it had a right to terminate IBM's Unix license, with which we strongly disagree. IBM continues to believe [SCO's] claims are without merit...and will continue to pursue its own counterclaims."

The court is expected to rule within a week on whether or not the amendments can proceed.

The case represents the biggest clash between open source and proprietary software groups since open source software began to be recognised as a credible business alternative to proprietary products.

Over the course of the past year IBM has counter-sued SCO, Linux distributor Red Hat has launched its own suit against SCO, and Novell and SCO are in dispute over who actually owns the intellectual property rights in the UNIX system.