IBM, Red Hat face copyright infringement, antitrust lawsuit in alleged ‘conspiracy’

RESEARCH TRIANGLE PARK – IBM and Red Hat are alleged to using wrongfully copied software code in a copyright infringement and antitrust lawsuit filed today by Xinuos, a software company headquartered in the U.S. Virgin Islands that a decade ago acquired a company that had unsuccessfully fought IBM in court.

Alleges 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.”

Xinuos, which launched in 2011, describes the complaint in this way: “[A]t their peak, Xinuos’ operating systems were the most widely-used operating systems in the Unix/Linux server operating system market.”

Interestingly, in 2011, Xinuos acquired another Unix firm, SCO, which sued IBM years ago and ultimately failed in its legal battle.

“The company … had no interest in SCO’s fruitless lawsuits,” ZDnet reported in 2016. “Indeed, Kerri Wallach, Xinuos’ Sales Manager, said, ‘We are not SCO. We are investors who bought the products. We did not buy the ability to pursue litigation against IBM, and we have absolutely no interest in that.'”

According to the complaint, IBM stole intellectual property and used that stolen property to build and sell a product that was a direct competitor.

“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,” the complaint notes.  “[A]fter IBM and Red Hat launched their conspiracy, IBM then acquired Red Hat to solidify and make permanent their scheme.”

Xinuos asserts 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 is seeking monetary damages and injunctive relief.

“IBM has made demonstrably and materially misleading statements in securities filings about its ownership interest in the Code,” reads the statement summarizing the claim.  “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 and potential asset purchasers.”