Don't pay SCO for IBM code, say lawyers

Lawyers have urged companies to fight any attempt by SCO to charge them for Linux-based products bought from IBM.

Lawyers have urged companies to fight any attempt by SCO to charge them for Linux-based products bought from IBM.

SCO, which is involved in a legal dispute with IBM over the alleged unauthorised use of its Unix software code in Linux products sold by IBM, has threatened to invoice those customers who bought the products.

SCO said it will invoice customers £440 for each computer that uses the disputed code. This amount is set to be doubled next month, as SCO attempts to scare IBM customers into submission.

However, lawyers contacted by Computer Weekly said SCO’s position is weak, and even if SCO wins its case against IBM, customers will have a strong case for demanding that IBM deals with the invoices.

Dai Davis, head of IT law at Nabarro Nathanson, said, “Normally, IBM customers will have a software licence that will protect them, either the licence embedded in the software or a paper-based one.

“My advice for companies is to immediately look at their licence and contact IBM as soon as possible. The licence should say that IBM has a right to sell the software and that they will be protected by IBM if there is a dispute with a third party.

“Even if their licence does not spell this out, UK firms have the ‘applied right of quiet possession’, which means they can demand that IBM protects them from the sort of action threatened by SCO.”

Davis said 95% of software licences clearly offer indemnity to users against third-party legal action. But, he said, even if this is not spelt out, the applied right of quiet possession provides grounds for companies not paying SCO and demanding that IBM sorts the problem out.

David Barron, a partner at law firm Wragge & Co, agreed that SCO would find it difficult to pursue IBM’s customers.

“Some companies may consider paying a relatively small amount to avoid getting involved in a legal case. SCO is relying on creating a domino effect in the industry by using the first few who pay to encourage others to do the same,” he said.

“Companies can take a variety of positions once they have received invoices, but the ones who totally ignore them will probably be in the strongest position.

“Those that acknowledge them and try to negotiate over them will probably find that SCO will concentrate on them first. It is unlikely that SCO will have the legal capacity to pursue every company that refuses to accept any liability and ignores the invoice.”

Barron said companies could consider paying, but only on the grounds that the money would be refunded if SCO loses the case against IBM, and that the money be held in a neutral account until the outcome of the IBM case. SCO has so far refused such demands, and Barron said SCO would be “stretched” in legally dealing with companies individually.

Barron advised companies to demand to know from SCO who has settled with the company and under what terms before entering into any agreement.

A SCO spokesman in the US said the company was consulting with its lawyers about the legal position in each country before issuing the invoices.

SCO is also involved in a similar case with Silicon Graphics, but the spokesman said the two parties were working to reach agreement without going to law.

No one at IBM was available for comment on legal and financial support to its users as Computer Weekly went to press.

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