IBM in the dock over antitrust violations and copyright infringement charges

IBM in the dock over antitrust violations and copyright infringement charges

Xinuos Inc. has alleged in the lawsuit that IBM stole its intellectual property and used the stolen property to build and sell a product that was a direct competitor.

Xinuos Inc., a software company headquartered in the U.S. Virgin Islands, has filed a copyright infringement and antitrust lawsuit against International Business Machines Corp. (IBM) and its subsidiary Red Hat, accusing it of using wrongfully copied software code.

Xinuos has alleged in the lawsuit filed in the US District Court of the Virgin Islands, St. Thomas and St. John Division that IBM stole intellectual property and used that stolen property to build and sell a product that was a direct competitor.

Xinuos has asserted its claims under the copyright infringement provisions of 17 U.S. Code §101, the Sherman Antitrust Act, the Clayton Antitrust Act, the Virgin Islands Antimonopoly Law, and Virgin Islands Unfair Competition and Unjust Enrichment common law.

The company has sought monetary damages and injunctive relief.

Interestingly, Xinuos had acquired another Unix firm, SCO, which had unsuccessfully sued IBM years ago, though Xinuos has clarified that its present lawsuit has nothing to do with the legal battle that SCO had fought against IBM in the past.

Xinuos has alleged that IBM and Red Hat engaged in additional, illegal anti-competitive misconduct to corner the billion-dollar market for Unix and Linux server operating systems.

"IBM has made demonstrably and materially misleading statements in securities filings about its ownership interest in the Code," Xinuos said in the suit, adding that In every annual report filed with the SEC since 2008, IBM has represented that a third-party owns all of the UNIX and UnixWare copyrights, and that this third-party has waived any infringement claim against IBM. "These self-serving representations are demonstrably false and misleading to investors," Xinuos has stated.

"While this case is about Xinuos and the theft of our intellectual property," said Sean Snyder, President and CEO of Xinuos. "It is also about market manipulation that has harmed consumers, competitors, the open-source community, and innovation itself."

Xinuos has stated in the complaint that at its peak, its operating systems were the most widely-used operating systems in the Unix/Linux server operating system market. Xinuos' UnixWare 7 and OpenServer 5 and 6 server operating systems were popular because they were stable, reliable, and easy to manage.

Xinuos has further said that in or around this time, IBM's server operating systems were declining in popularity and new entrants to the market, such as Red Hat, were gaining market share and threatening IBM's server operating system business.

Xinuos' complaint alleges that IBM then took unlawful steps to improve its market position and safeguard its business from competition by stealing Xinuos' intellectual property and using the stolen property to build and sell a product to compete with Xinuos itself.

It has further stated that with the stolen property in 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. IBM subsequently acquired Red Hat to consolidate and make permanent their scheme.

Xinuos has alleged in the lawsuit that the IBM and Red Hat conspiracy has harmed the open-source community and specifically Xinuos' OpenServer 10 product, which is based on FreeBSD, an open-source UNIX-based operating system and alternative to Red Hat's Linux-based open-source operating system, RHEL.

"By dominating the Unix/Linux server operating system market, competing for open-source operating systems, like our FreeBSD-based OpenServer 10, have been pushed out of the market," said Snyder, adding that this has prevented developers and consumers from receiving the benefits that these products offer.