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SCO Group, Inc. v. International Business Machines Corp.

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This article is about the 2003 to 2021 litigation between The SCO Group and IBM over UNIX code, Project Monterey and Linux. For open-source licence obligations generally, see Open-source software licensing.

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The SCO Group, Inc. v. International Business Machines Corp. was a lawsuit that SCO filed against IBM on 6 March 2003. It was litigated in the United States District Court for the District of Utah as No. 2:03-cv-00294 and ran for more than eighteen years.[1][4] SCO claimed rights in UNIX System V code. It alleged that IBM had breached UNIX licence and joint development agreements, infringed copyrights, and competed unfairly, including by contributing code to Linux. IBM denied the claims and counterclaimed.[1][2]

The case changed course after separate litigation with Novell established that SCO did not own the UNIX copyrights, and after SCO entered bankruptcy in 2007.[1] In 2017 the Tenth Circuit revived one SCO claim and affirmed judgment for IBM on the others.[1] In 2021 the Chapter 7 trustee settled with IBM for $14,250,000, with court approval, and the Utah case was dismissed with prejudice.[2]

Background

UNIX was developed by AT&T, which licensed it widely. As the Tenth Circuit recounted, Novell bought the UNIX assets and intellectual property rights from AT&T in 1993 and sold its UNIX business to The Santa Cruz Operation (Santa Cruz) in 1995. SCO, then called Caldera International, later acquired Santa Cruz’s UNIX assets. The court noted that in the 1995 transaction Santa Cruz “did not receive the full panoply of intellectual property rights”, and received only a licence to use, develop and distribute Novell’s copyrighted UNIX technologies.[1]

In October 1998 Santa Cruz and IBM entered a Joint Development Agreement (JDA) to build a UNIX-based operating system for Intel’s forthcoming 64-bit Itanium processor. The project was known as Project Monterey. Each party gave the other a limited licence to its technology for developing the “IA-64 Product”. A project supplement provided that licensed materials “are to be used solely for development of the IA-64 Product”. Materials included in a generally available “IA-64 Product Release 1” would, however, be licensed on the JDA’s broader terms.[1] Itanium was delayed and market interest in the IA-64 product declined. According to the court, IBM shifted its focus to Linux and, “as early as February 2000”, began disclosing some Santa Cruz UNIX technologies acquired through Project Monterey to the Linux community. IBM terminated the JDA on 19 June 2001, after Santa Cruz’s assets passed to SCO.[1]

In January 2003 SCO announced SCOsource, a programme to license its UNIX technologies to Linux users. The Tenth Circuit summarised evidence that an IBM executive objected and told SCO that IBM would cut off business and encourage partners not to deal with SCO. IBM responded with sworn declarations from executives of the companies involved, stating that IBM had not approached them.[1]

The dispute

SCO’s original complaint of 6 March 2003 pleaded nine claims. As the Tenth Circuit listed them, these were breaches of UNIX software and sublicensing agreements between AT&T and IBM and between AT&T and Sequent (later acquired by IBM); copyright infringement “based on SCO’s later-disproven belief that it owned the UNIX copyrights”; unfair competition, including misappropriation; and several claims of tortious interference.[1] The bankruptcy record describes SCO’s allegations that IBM had improperly disclosed SCO’s proprietary UNIX source code and methods to Linux, used them in its AIX operating system, and engaged in unfair competition.[2] These were SCO’s allegations. IBM denied them.

IBM filed counterclaims in August 2003, including breach of contract and unfair competition claims and a claim for a declaration that IBM did not infringe SCO’s copyrights.[1][2] In October 2004 SCO sought leave to add a copyright claim based on IBM’s alleged misuse of the SVr4 code from Project Monterey. The district court refused because the deadline for amending pleadings had passed.[1]

The Novell ownership ruling and bankruptcy

SCO also sued Novell, which had publicly said that it, not SCO, owned the UNIX copyrights. The Tenth Circuit later noted that in 2011 it had affirmed a jury verdict finding that Santa Cruz did not receive the UNIX copyrights from Novell, only a licence.[1] SCO filed Chapter 11 petitions in the District of Delaware on 14 September 2007, and the IBM case was administratively closed. A Chapter 11 trustee was appointed in 2009. In 2011 the bankruptcy court approved a sale of SCO’s software business assets to UnXis, Inc. (later Xinuos), with the estates keeping the litigation claims against IBM. The cases were converted to Chapter 7 in August 2012.[1][2]

Decision or outcome

District court and Tenth Circuit

After the stay was lifted, the Utah court reopened the case in 2013. Because the Novell litigation had established that SCO did not own the UNIX copyrights, SCO voluntarily dismissed many of its claims. What remained were unfair competition by misappropriation and tortious interference. The district court granted IBM summary judgment on these on 5 and 8 February 2016.[1]

On 30 October 2017 the Tenth Circuit (Kelly, Ebel and Bacharach, JJ., opinion by Judge Ebel) decided as follows:[1]

  • Misappropriation: reversed and remanded. The district court had applied the independent tort doctrine and “focused too narrowly” on whether IBM’s use of the code breached the JDA. The Tenth Circuit said the question was “whether IBM violated some separate and independent non-contractual duty in using that code”. Under New York law, any common-law or statutory duty would suffice.
  • Tortious interference: affirmed. The court agreed that a jury could find IBM attempted to interfere with SCO’s relationship with Hewlett-Packard. It held, however, that the evidence did not show “improper means” as Utah law requires, since “merely persuading another company to withdraw its business from a competitor is not, without more, an improper means”. Judge Bacharach dissented on this point and would have remanded the improper-means question.
  • Leave to amend: affirmed. The refusal to allow the late copyright claim was within the district court’s discretion.

Settlement

The remanded misappropriation claim never went to trial. In 2021 the Chapter 7 trustee moved for approval of a Settlement and Release Agreement with IBM (D.I. 1501).[5] According to an objection filed by Xinuos, section 3.1 of the proposed agreement released IBM from claims including those relating to “any allegations that Linux violates SCO’s Unix or Unixware intellectual property, contract or other rights”. Xinuos, which had bought the SCO business in 2011 and had sued IBM and Red Hat separately in the District of the Virgin Islands, objected that the release should not reach claims it said it owned.[3] IBM filed a joinder and reply supporting the motion.[5]

The bankruptcy court approved the settlement on 14 October 2021 (D.I. 1535). IBM paid the $14,250,000 settlement amount to the estates on or about 3 November 2021. On 5 November 2021 the Utah court entered a stipulated dismissal of all claims with prejudice.[2][4] No court made a final finding that IBM’s Linux contributions infringed any SCO right.

Significance for software licensing and SAM practice

  • Ownership before enforcement. SCO’s copyright-based claims against IBM, and its licensing programme aimed at Linux users, depended on SCO owning the UNIX copyrights. Once the Novell litigation established that it held only a licence, SCO dropped the claims that relied on ownership.[1] Any licence compliance claim rests on the claimant’s chain of title, and an asset purchase agreement may transfer a licence rather than the underlying copyright.
  • Joint development and field-of-use limits. The dispute turned on a JDA clause limiting contributed code to use “solely for development of the IA-64 Product”, with broader rights arising only on general availability of a defined release.[1] Field-of-use restrictions and release-dependent licence grants can decide who may use code in which product.
  • Contract and tort claims can coexist. The Tenth Circuit held that a contractual remedy does not by itself bar a tort claim where a separate, non-contractual duty is alleged.[1] Remedies for exceeding a licence may therefore go beyond breach of contract.
  • Open-source provenance. The allegations concerned the provenance of code contributed to Linux. The case ended without a court finding on them.[2] For the obligations that apply when distributing Linux and other GPL-licensed software, see GNU GPL, LGPL and AGPL obligations and open-source software licensing.

Lessons learned

  • Check the chain of title. SCO’s copyright claims and its licensing programme for Linux users depended on owning the UNIX copyrights, and it dropped those claims once the Novell litigation showed it held only a licence.[1] An asset purchase may transfer a licence rather than the copyright itself.
  • Field-of-use limits matter. The dispute turned on a clause limiting contributed code to use “solely for development of the IA-64 Product”, with broader rights arising only on release of a defined product.[1] Such limits can decide which products may lawfully include the code.
  • Contract and tort claims can coexist. The Tenth Circuit held that a contractual remedy does not by itself bar a tort claim based on a separate, non-contractual duty.[1]
  • Track open-source provenance. The allegations concerned code said to have been contributed to Linux, and the case ended in settlement without a court finding on them.[2] Records of where contributed code came from are the evidence available if such questions arise.

References

  1. The SCO Group, Inc. v. International Business Machines Corp., No. 16-4040 (10th Cir. Oct. 30, 2017) (published opinion)Appeal from D. Utah No. 2:03-CV-00294-DNEffective 2017-10-30. Retrieved 2026-09-30.
  2. In re TSG Group, Inc. (f/k/a The SCO Group, Inc.), Interim Fee Application of Boies Schiller Flexner LLP as Special Counsel (Bankr. D. Del. No. 07-11337, D.I. 1551)Filed 2022-03-25; recites the bankruptcy and settlement chronology with docket references; public PACER copy via CourtListener RECAPEffective 2022-03-25. Retrieved 2026-09-30.
  3. In re TSG Group, Inc., Objection of Xinuos, Inc. to the Motion of the Chapter 7 Trustee for Entry of an Order Approving the Settlement and Release Agreement with IBM (D.I. 1509)Filed 2021-09-09; quotes section 3.1 of the proposed settlement agreementEffective 2021-09-09. Retrieved 2026-09-30.
  4. SCO Grp v. Intl Bus Mach Inc, docket (D. Utah 2:03-cv-00294)PACER-derived docket on CourtListener; terminated 2021-11-05Retrieved 2026-09-30.
  5. In re TSG Group, Inc., docket (Bankr. D. Del. 07-11337)PACER-derived docket on CourtListener: D.I. 1501, 1509, 1511, 1517, 1535Retrieved 2026-09-30.

See also

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