SCO Terminates IBM’s AIX License

SCO Group Monday followed through on its challenge to IBM, announcing that it has terminated Big Blue’s right to use or distribute any product based on Unix System V source code, including the AIX operating system, due to an alleged contract violation.

“The Software and Sublicensing Agreements and related agreements that SCO has with IBM includes clear provisions that deal with the protection of source code, derivative works and methods,” said Mark J. Heise, Boies Schiller, & Flexner, LLP. “Through contributing AIX source code to Linux and using Unix methods to accelerate and improve Linux as a free operating system, with the resulting destruction of Unix, IBM has clearly demonstrated its misuse of Unix source code and has violated the terms of its contract with SCO. SCO has the right to terminate IBM’s right to use and distribute AIX. Today AIX is an unauthorized derivative of the UNIX System V operating system source code and its users are, as of this date, using AIX without a valid basis to do so.”

SCO also said it is filing an amendment to its $1 billion lawsuit against IBM, calling for a permanent injunction which would require Big Blue to “cease and desist all use and distribution of AIX and to destroy or return all copies of Unix System V source code.” The amendment adds a request for additional damages to the suit based on IBM’s “multi-billion dollar AIX-related business.”

“The damages that we’re requesting of the court are equal to all of the AIX-related business that IBM would realize following Friday the 13th of June,” SCO spokesman Blake Stowell said. Stowell said that SCO is basing its request on industry figures which show IBM’s AIX business “anywhere from as low as $30 billion to as high as $50 billion.”

“IBM has chosen to continue the actions that violate our source code and distribution agreements,” said Darl McBride, president and CEO of SCO. “Over the last several months, SCO has taken all of the steps outlined in the Unix licensing agreements to protect its rights. Today SCO is requesting that the court enforce its rights with a permanent injunction. IBM no longer has the authority to sell or distribute AIX and customers no longer have the right to use AIX software.”

IBM spokeswoman Trink Guarino fired back, “SCO continues to make claims, and as we have said all along, our license is irrevocable, perpetual and cannot be terminated.”

SCO said it sent a letter to IBM Chairman and CEO Sam Palmisano on March 6, warning him that IBM had allegedly breached its contract with SCO by contributing portions of its Unix-based AIX code to the open source movement, and by introducing concepts from Project Monterey, a joint effort by SCO and IBM to develop a 64-bit Unix-based operating system for Intel-based processing platforms, into Linux. IBM scrapped Project Monterey in May 2001.

With the letter sent, SCO initiated a 100-day clock, after which it said it has the right to revoke IBM’s Unix license, which IBM entered into with then Unix source code owner AT&T in February 1985. That clock ran out at midnight Friday.

In the letter sent to Palmisano, SCO spelled out the steps that it required IBM to make to allow it to keep its Unix license and keep selling the AIX operating system.

“SCO is also demanding that IBM cease these anti-competitive practices based on specific requirements sent in a notification letter to IBM,” SCO said in a statement on March 7, the day it filed a $1 billion lawsuit against IBM for “misappropriation of trade secrets, tortious interference, unfair competition and breach of contract.”

“They need to correct the actions they’ve been taking with regard to our Unix source code and that’s ultimately what we want,” SCO’s Stowell said Thursday with regard to SCO’s resolution terms.

However, while SCO has terminated IBM’s license, the company said AIX customers are safe for the moment.

“While revoking of that license would make [IBM’s] customers’ licenses obsolete, at this point in time we’ve elected not to take that approach with customers,” Stowell said. “That’s not to say we won’t at some point. But we see the customer as an innocent bystander right now.”

He added, “What we would encourage AIX customers to do right now is make IBM assure them that they’ll do everything they can to try and bring this to full resolution. I think that IBM needs to indemnify their customers and right now I don’t see how they can do that.”

In a research note based on a meeting with Bill Zeitler, IBM senior vice president and group executive of the Systems Group, Deutsche Bank Securities analyst George Elling said Zeitler defended IBM’s case against SCO by noting Big Blue’s 700 existing or pending patents related to AIX.

“Regarding Linux and open source software, Mr. Zeitler made it clear that he believes vendor strategies to lock customers in to a proprietary environment will fail,” Elling wrote in his note. “He believes customers are now looking for choice in their operating environments and that they are very careful not to get locked in to any one vendor.”

That may have been a subtle jab at SCO, which, though it has only accused IBM of misappropriation of trade secrets, has made no bones about its stance that “Linux is an unauthorized derivative of Unix and that legal liability for the use of Linux may extend to commercial users.”

It sent a letter to that effect to some 1,350 that use Linux, warning them, “similar to analogous efforts underway in the music industry, we are prepared to take all actions necessary to stop the ongoing violation of our intellectual property or other rights.”

Legal and open source experts have suggested that SCO may have some trouble pressing its claims on that front, especially in light of its own sales of Linux. The company also faced a challenge from Novell, which acquired Unix from AT&T in 1993 and later sold it to SCO in 1995. Novell claimed it had retained the Unix copyrights and patents when it sold Unix to SCO. That made SCO’s ability to press claims about copyright infringement questionable.

However, Novell later backed away from that stance after SCO uncovered an amendment to the 1995 SCO-Novell Asset Purchase Agreement.

“To Novell’s knowledge, this amendment is not present in Novell’s files,” Novell said in a statement. “The amendment appears to support SCO’s claim that ownership of certain copyrights for Unix did transfer to SCO in 1996. The amendment does not address ownership of patents, however, which clearly remain with Novell.”

Still, Novell reiterated its request that SCO either prove its allegations that Linux improperly includes Unix code, or retract the statement.

“Absent such action, it will be apparent to all that SCO’s true intent is to sow fear, uncertainty, and doubt about Linux in order to extort payments from Linux distributors and users,” Jack L. Messman, chairman, president and CEO of Novell, wrote to SCO President and CEO Darl McBride in an open letter on May 28.

SCO has begun showing code to certain select experts and analysts under non-disclosure agreements. Stowell said it is showing different instances to everyone, and in at least one instance has shown 80 lines of code.