SCO Group, which owns the Unix operating system, is suing IBM Corp. for allegedly trying to tank the value of Unix on the open market by illegally embedding strands of the operating system's code into its open-source Linux platform. Though IBM denies the allegations, the billion-dollar lawsuit threatens to derail the open-source movement just as it has begun to catch on in schools.

Because the source code for Linux is shared freely among users, who are allowed to add to or change it at will, the copied lines of Unix code now reside in the very heart of the Linux kernel owned by millions of users and distributed by other companies, SCO contends.

Although the lawsuit names only IBM, intellectual property lawyers say other companies that distribute Linux could be forced to pay hundreds of thousands of dollars in fines and lost profits if the suit is found to have merit.

The suit, filed March 7 in the U.S. District Court of Utah, accuses IBM of misappropriating trade secrets, unfair competition, and breach of contract relating to a 1985 agreement IBM entered into with AT&T—then owners of the Unix source code—to help build IBM's Unix-based AIX operating system.

The agreement allegedly stated that the Unix source code was to be held in strict confidence and prohibited IBM from distributing or transferring the code for use in other projects outside its development of AIX.

But SCO, which acquired the rights to Unix and UnixWare from AT&T in 1995, says IBM failed to live up to its end of the bargain—and, in some cases, has made public admissions of contractual breaches and other legal missteps.

Lindon, Utah-based SCO, which is in the process of changing its name from Caldera International, claims IBM executives committed several breaches of contract, publicly admitting a willingness to disclose proprietary Unix code in the interest of pursuing open-source opportunities for its Linux-based services program.

SCO spokesman Blake Stowell said the formal complaint filed with the court cites several examples of public statements made by IBM executives that prove Big Blue knowingly and willingly violated the terms of the agreement.

In one such document filed with the court, IBM Vice President Robert LeBlanc allegedly addressed Linux as part of IBM's long-term vision by saying, "We're willing to open source any part of AIX that the Linux community considers valuable."

Because proprietary Unix source code was used to create the AIX operating system, "open-sourcing AIX would be a direct breach of [IBM's] contract with us," Stowell said. "Either they didn't care, or they were just unaware of their contractual obligations."

Stowell even went as far as to suggest that the original contract was nothing more than a ruse orchestrated by IBM executives to learn Unix trade secrets and later use this proprietary information in IBM's construction of a competitive 64-bit Linux platform.