The SCO Group says it has revoked IBM's right to use and distribute software based on Unix, intensifying a legal dispute over the rights of companies worldwide to the popular Linux operating system.
IBM immediately rejected SCO's attempt to block the world's largest computer company from working with Unix-based software, which is used to run corporate and government computer systems for serving up Web pages, accounting, manufacturing and storing information.
"As we have said all along our licence is irrevocable, perpetual and cannot be terminated," IBM spokesperson Trink Guarino said, reading from a prepared statement.
Chris Sontag, a general manager in charge of SCO's Unix licensing efforts, said that IBM's liability would increase after it failed to respond to an initial deadline in a $1 billion lawsuit that expired on Friday.
"We gave IBM notice that they are in violation of the contract that they had," Sontag told Reuters.
"If they continue to ignore the termination order and with the damages that will rack up every day, we are not in a hurry to settle anymore."
At the heart of the legal wrangling is the widespread proliferation of various versions of Unix over the past 20 years or so.
Unix, originally developed by AT&T for computers that are networked together, and its various versions are used to power much of the Internet, manage corporate payrolls, monitor the US nuclear arsenal and create animated movies.
Lindon, Utah-based SCO came to own the rights to Unix after several complicated changes in ownership.
Meanwhile, IBM had developed a version of Unix called AIX.
SCO said that a significant part of the original Unix source code, or underlying software blueprint, was transferred from Unix to AIX to yet another version of Unix called Linux, which can be modified and copied freely. That makes it hard for SCO to collect licensing fees for Linux, which is becoming increasingly popular among corporations seeking to cut their technology costs.
Settlement or lawsuit?
Lawyers monitoring the case said it would be difficult to predict whether the latest legal steps would lead to a settlement or a full-blown trial.
SCO said that it decided to take action against IBM after Big Blue failed to respond before a Friday deadline to a lawsuit claiming that IBM had illegally used parts of its Unix software in AIX.
SCO said that it was filing for a permanent injunction against IBM that requires it to "cease and desist all use and distribution of AIX" and to return all copies of Unix source code as part of an amended complaint filed in federal court in Utah.
Legal experts said that IBM appeared to have concluded that SCO has no legal basis and could fight the case in court.
"You are not going to allow someone to pull the carpet out of something that makes hundreds of millions of dollars," said Michael Overly, an intellectual property lawyer at Foley & Lardner who has no stake in the case.
SCO has warned in regulatory filings that drawn-out litigation proceedings could hurt its financial performance.
Kevin Kudlac, managing partner of law firm Dewey Ballantine, which also has no direct stake in the case, said that intellectual property lawsuits typically take 18 months to 30 months to be resolved.
Still, SCO has some allies, such as Microsoft, which recently licensed Unix technology from SCO so that its Windows software could work better with Unix-based systems. Microsoft is competing aggressively against Linux-based software for corporate servers.
Shares in SCO, which rallied to a 28-month high ahead of the Friday deadline, slipped in Monday trade to a low of $9.60 before recovering to close down 28c, or 2.52%, at $10.93 on the Nasdaq.
Investors had bid up SCO's shares in the hope that a financial settlement with IBM would help boost SCO's bottom line.
IBM shares closed up $1.75, or 2.11%, at $84.50 on the New York Stock Exchange.
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