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IBM Litigation

SCO's lawsuit against IBM alleges that IBM exceeded the scope of its 1985 license with AT&T by providing UNIX code for incorporation into Linux. However, SCO has inconsistently pled its complaint against IBM. Initially, SCO asserted that IBM breached the contract, misappropriated trade secrets, and infringed SCO's copyrights and patents. SCO also claimed that IBM engaged in unfair trade practices because IBM undertook these efforts to increase the sales of its new Linux services business and to destroy UNIX's value by boosting the free alternative Linux. SCO later hedged on its copyright infringement claim, suggesting that it was only pursuing a breach-of-contract action.

Most recently, however, SCO reasserted that IBM infringed its copyrights. SCO filed a second amendment to its complaint, once again claiming copyright infringement. In that amendment, SCO dropped the trade secret misappropriation claim-a logical move, given that SCO distributed Linux and posted some UNIX code, in 2002, to its own web site. The court allowed the amendment because IBM didn't object.

SCO now claims that the 1985 AT&T/IBM license agreement gives SCO ownership over any derivative work made to the UNIX code. If SCO owns the derivative works made by IBM, then IBM breached its contract and infringed SCO's copyright. SCO has revoked the license and is now demanding damages of $5 billion. SCO further claims that IBM has breached the contracts with Sequent (now owned by IBM). IBM also entered into an October 1996 agreement, a royalty buyout known as Amendment X, that places further restrictions on IBM's use of the software. SCO claims that IBM has breached those provisions, too.

IBM has denied virtually all of SCO's claims. IBM has raised the following affirmative defenses: lack of standing, statute of limitations, economic-loss and independent-duty doctrines, laches, delay, unclean hands, waiver, estoppel, federal law preemption, and improper venue. In IBM's first counterclaim, it alleged that SCO breached the same contracts and engaged in unfair competition and patent and copyright infringement. In its most recent amended counterclaim, IBM dropped one of its claims of patent infringement by SCO.

On March 24, 2004, SCO filed a motion to "bifurcate" the patent claims into a separate case from the other legal claims, effectively splitting the lawsuit into two independent matters. In response, IBM sought a declaratory judgment ruling that "IBM does not infringe, induce the infringement of, or contribute to the infringement of any SCO copyright through its Linux activities, including its use, reproduction, and improvement of Linux, and that some or all of SCO's purported copyrights in Unix are invalid and unenforceable."

On June 10, 2004, Judge Dale Kimball of U.S. District Court in Utah denied SCO's motion to bifurcate the trial. At the same time, Judge Kimball pushed the five-week trial, scheduled for April 2005, back to November 2005.

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