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Xinuos finishes picking up SCO’s mantle by suing Red Hat and IBM


The new lawsuit from Xinuos echoes the still-ongoing SCO vs IBM lawsuit in some key aspects, while adding new and heavy-duty anti-trust allegations alongside.
Enlarge / The new lawsuit from Xinuos echoes the still-ongoing SCO vs IBM lawsuit in some key aspects, while adding new and heavy-duty anti-trust allegations alongside.

Yesterday, UnixWare/OpenServer vendor Xinuos filed a lawsuit in the US Virgin Islands, alleging theft of intellectual property and monopolistic market collusion against joint defendants IBM and Red Hat.

If this sounds like a familiar, well-worn tale, it should. Xinuos is the company which purchased the remnants of the SCO Group in 2011. The SCO Group, in turn, is a company most famous not for its actual products but for its litigation against IBM and Linux. That litigation began in 2003—partially funded by a very different Microsoft, only five years after the leak of the Halloween documents in which Microsoft acknowledged the “long-term viability” of open source software and discussed strategies to choke it out of the market.

The substance of the original lawsuit is SCO’s claim that IBM pulled proprietary code out of SCO Unix and inserted it into the Linux kernel. The subsequent 18 years have not been kind to SCO, which first filed for bankruptcy in 2007, then eventually sold off its intellectual property (but not its litigation rights) to Xinuos, then named UnXis, in 2011.

Here’s a quick timeline:

  • March 2003—SCO Group claims ownership of AT&T Unix, that Linux is an unauthorized derivative of AT&T Unix, and that IBM violated contractual obligations by distributing Linux
  • May 2003—Novell publicly states that SCO does not own the AT&T Unix intellectual property in question, Novell does
  • January 2004—Novell publicly indemnifies all Linux users from lawsuits over AT&T Unix intellectual property. SCO responds by suing Novell
  • July 2005—Novell countersues SCO, seeking damages in excess of SCO’s net worth
  • August 2007—US federal Judge Kimball rules that Novell is the owner of the UNIX and UnixWare copyrights
  • August 2009—US 10th Circuit Court of Appeals partially reverses Kimball’s judgment, allowing SCO to continue pursuing ownership of Unix copyrights
  • June 2010—Jury returns a unanimous verdict affirming Novell’s ownership of Unix copyrights
  • July 2010—SCO appeals SCO v. Novell again
  • August 2011—Appeals court upholds the decision for Novell

The astute reader will note that, although SCO v. Novell is ruled on, appealed, affirmed, appealed once more, and finally affirmed in 2011, SCO v. IBM is still ongoing in 2011, when Xinuos (then UnXis) purchases SCO’s intellectual property. That zombie lawsuit is—beggaring all belief—still running today… and now, an extremely similar lawsuit joins it from Xinuos, whom you’ll remember owns the remainder of the SCO Group.

The new lawsuit alleges that IBM incorporated unspecified code from the company’s UnixWare and OpenServer code into IBM’s own AIX operating system. It also alleges that IBM and Red Hat conspired—at some point; the lawsuit does not provide a timeline—directly to divide the entire Unix-like operating system market up into large business opportunities for IBM and smaller opportunities for Red Hat, locking Xinuos out into the cold:

First, IBM stole Xinuos’ intellectual property and used that stolen property to build and sell a product to compete with Xinuos itself. Second, stolen property in IBM’s hand, IBM and Red Hat illegally agreed to divide the relevant market and use their growing market powers to victimize consumers, innovative competitors, and innovation itself. Third, after IBM and Red Hat launched their conspiracy, IBM then acquired Red Hat to solidify and make permanent their scheme.

Xinuos expands upon the harm it believes it has felt in the full lawsuit:

As a result of these activities, Xinuos has been excluded from key opportunities in the market. For example, despite Xinuos offering a FreeBSD-based operating system with substantial commercial value for enterprise users, Xinuos was unable to garner as much financial support or customer interest in OpenServer 10 as it could and should have due to the market conditions. Indeed, the market is so distorted that Xinuos has determined that over 70% fewer of its customers are in a position to license its new operating system than would be available in a functioning market. The foreclosing effect on Xinuos is felt by all competitors as well.

Even more startlingly, it claims that IBM is expressly out to destroy FreeBSD as a whole:

IBM’s strategy with Red Hat has been expressly to destroy FreeBSD, upon which Xinuos’ most recent innovations have been based.

And goes on to demand not merely damages, but the reversal of IBM’s acquisition of Red Hat entirely:

The merger should be declared unlawful in violation of at least Section 7 of the Clayton Act, and IBM and Red Hat should be ordered to divest of each other and void all associated agreements between them.

The “Factual Background” section finishes with this bold declaration, on page 44 of Xinuos’ 57-page complaint:

The outcome has made it impossible for Xinuos to compete on fair terms, and has foreclosed consumers from access to Xinuos’ high-quality products. The outcome is also a deeply dysfunctional market. High-value products have no means for penetration. Nascent rivals have no opportunity for growth. Prices are shooting upwards. Enough is enough. IBM and Red Hat have abused their control over the Unix/Linux operating system market for far too long, and intervention is the only way to fix what they have broken.

It’s worth noting that there is absolutely no mention of SUSE Linux Enterprise Server or Ubuntu—either of which might leap to the mind of a reasonable onlooker thinking of “rivals” to Red Hat Enterprise Linux—anywhere in the complaint, and no explanation is given for the market growth those distributions have experienced.



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