SCO Group, which owns the Unix operating system, is suing IBM Corp. for reportedly trying to tank the value of Unix on the open market by allegedly allowing strands of its operating system code to be illegally embedded into the 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 SCO 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 opportunities for its Linux-based services.

SCO spokesman Blake Stowell said the company’s complaint cites several examples of public statements made by IBM executives that prove Big Blue knowingly 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.

IBM says these claims are unfounded.

“While IBM has endeavored to support the open-source community and to further the development of Linux, IBM has not engaged in any wrongdoing,” the company said in a formal response to the allegations. “Contrary to [SCO’s] unsupported assertions, IBM has not misappropriated any trade secrets; it has not engaged in unfair competition; it has not interfered with [SCO’s] contracts; and it has not breached contractual obligations to [SCO].”

Beyond that, the company revealed little about its defensive strategy, except to say, “IBM has the irrevocable, fully paid-up, and perpetual right to use the ‘proprietary software’ that it is alleged to have misappropriated or misused.”

IBM also lashed out at SCO, branding the lawsuit as a self-righteous attempt to stifle development in the open-source market.

“By its lawsuit, [SCO] seeks to hold up the open-source community—and development of Linux in particular—by improperly seeking to assert proprietary rights over important, widely used technology and impeding the use of that technology by the open-source community,” IBM said.

SCO—which also distributes a version of Linux but derives a large percentage of its revenue from its Unix-based systems—candidly admitted that the rise of Linux in recent years has contributed to waning profits and huge financial losses for the company.

According to Stowell, SCO has watched its profits fall since the mid- 90s—when the company was raking in more than $200 million a year in Unix-related sales—to just around $60 million today.

Whether or not SCO is able to prove IBM unlawfully copied its Unix source code into Linux remains to be seen. Still, the lawsuit raises the question of whether other companies that market their own brand of Linux might be vulnerable to similar charges of intellectual property theft in the future.

The fallout from the ensuing legal battle could have serious implications for the open-source community, which proponents say is based almost entirely on the underlying principle of trust.

“This situation, more than any other, points out how important it is to us as a society, as a community, and as decision makers in public agencies to promote the use of free software,” said Paul Nelson, founder of K-12 Linux Terminal Server Package, a Linux distribution for schools. “In a digital age where information is our currency, the software that makes it happen needs to be owned by all of us rather than one company that can hold us hostage in the courts.”

A technology coordinator at Riverdale High School in Portland, Ore., Nelson said the implementation of Linux already has saved his school enormous amounts of time and money.

SCO officials have declined requests to disclose exactly which lines of Unix code allegedly were copied into Linux, citing proprietary interests in maintaining trade secrets. Some members of the open-source movement say SCO’s refusal makes it impossible to assess the validity of the company’s claims.

See these related links:

SCO’s IBM lawsuit page

K-12 Linux Terminal Server Package