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IBM Subpoenas SCO Investors, Analysts
Bigfishbowl writes "Forbes has an interesting article about IBM sending subpoenas to large SCO investors in an effort to compel discovery. An IBM spokesman says IBM is frustrated by SCO's reluctance to produce proof of its allegations. '"It is time for SCO to produce something meaningful. They have been dragging their feet and it is not clear there is any incentive for SCO to try this in court," he says.'"
Warning: put drinks and domestic animals safely out of danger first.
Lacking <sarcasm> tags,
Geez, how lazy are you people? Just check the box next to "Caldera."
NEW YORK - The legal battle between SCO Group and IBM is widening, as IBM has sent subpoenas to investors and analysts who have supported SCO.
On Oct. 30, IBM (nyse: IBM - news - people ) issued subpoenas to Baystar Capital, Deutsche Bank (nyse: DB - news - people ), Renaissance Ventures and Yankee Group, companies that have either invested in SCO (nasdaq: SCOX - news - people ) or published reports suggesting that SCO's claims against IBM could be legitimate.
"I view this as an attempt to bully and intimidate analysts--to try to cow them into silence," says Christopher Sontag, executive vice president at SCO, in Lindon, Utah.
In a lawsuit filed in March, SCO claims IBM put derivative code from Unix System V--an operating system for which SCO holds copyrights--into Linux, the free operating system developed collaboratively by programmers around the world.
SCO aims to collect $3 billion in damages from IBM and wants Linux customers to pay licensing fees to SCO.
IBM will not say why it issued the subpoenas. But a company spokesman says IBM is frustrated by SCO's reluctance to produce proof of its allegations. "It is time for SCO to produce something meaningful. They have been dragging their feet and it is not clear there is any incentive for SCO to try this in court," he says.
IBM has filed two motions to compel discovery, the most recent one on Nov. 6.
Sontag says SCO has provided 1 million pages of documents to IBM and that IBM in return has provided only 100,000 pages to SCO. "The foot-dragging is on the part of IBM," he says.
One legal expert says the subpoenas may be IBM's way to get at information that SCO will not provide. "If you're having trouble compelling discovery, you go to outside sources," says Brian Ferguson, an attorney at McDermott, Will & Emery, a Washington, D.C., law firm.
Ferguson, who is on the advisory board of a Linux enthusiast magazine and has published an article declaring SCO's case a long shot, points out that in its counter-claim IBM alleges SCO has unjustly enriched itself through the lawsuit.
Investors and analysts have participated, perhaps unwittingly, in that enrichment, Ferguson says. SCO shares, which traded at less than $1 before the suit was filed, now change hands at nearly $16 per share. Some insiders have sold shares.
"IBM needs to get answers from analysts about why they wrote positive reports and from Baystar about why they invested," Ferguson says.
The subpoenas, issued by Cravath, Swaine & Moore, IBM's law firm, present a broad request for all documents related to SCO and the Canopy Group, a Utah investment company that is SCO's biggest shareholder. One subpoena provided to Forbes requests all material related to communication with SCO or Canopy and any agreements that outsiders may have made with SCO or Canopy.
Baystar, Deutsche Bank and Yankee Group acknowledged receipt of the subpoenas but declined to comment on them. Baystar in October invested $50 million in SCO. Deutsche Bank analyst Brian Skiba in October issued a "buy" recommendation on SCO stock and said the stock could more than double in value. Yankee Group analyst Laura DiDio has advised corporate customers who use Linux that they should take SCO's claims seriously.
"We expected IBM to conduct a fishing expedition at some point," says Herbert Jackson, managing director of Renaissance Ventures, a small investment company in Richmond, Va., that first bought SCO shares 18 months ago, before SCO filed its lawsuit, and it has bought more since the suit was filed. In April of this year Renaissance published a research report stating that the SCO lawsuit was "well founded."
Jackson, who also has invested alongside Canopy in other companies, says he has complied with the IBM subpoena, sending a 15-inch stack of paperwork to IBM's lawyers.
Meanwhile, Linux enthusiast Web sites and blogs are buzzing with the
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How many times now has /. said that finally the SCO case was going to come to an end soon. I count at least 4 or 5.
Chaos will always win out over order because chaos is more organized
For the stock.
Best example is Sony, who has wound up suing itself a couple of times. I don't remember the exact article, but it detailed the problems facing the company since its technology arm was often at odds with its entertainment/content distribution arm. Time Warner, I bet, has run into the same problems with AOL under their belts.
Even in "smaller" companies this kind of stuff happens. My company works with car dealerships and manufacturers like Ford, GM, etc. We sell a lot of products and services to the Big Car Companies, but in one strange twist, once we wound up joining a class-action lawsuit with our direct competitors suing our customers over a certain program (basically the case is that the car companies aren't sharing the required information so their dealers won't be able to switch from their own systems -- I believe it was settled out of court). But even so, it never really affected relationships with the car companies or anyone else. It's this odd bit of business life that sometimes you can sue your best friend and help your most bitter enemy, but relationships with those people don't change as a result of the actions.
Forget String Theory and Quantum Mechanics; the business world is really where the bizarre happens.
Matt
What's worse is that a large part of the 'million' pages that SCO produced were scanned printouts of UNIX source code. Rather than burning a source code CD or DVD and mailing it to IBM, they went to enormous efforts to furnish the data in the least useful format possible. They did this even though they acknowledged that IBM would need to perform computer analysis of the code itself.
Oh, and though they had time to send the million pages to IBM, they didn't have the chance to include the code that they have been showing for months to financial analysts, columnists, and anyone who will sign an NDA. It must have slipped their minds.
Try looking under "shark":
It's not a criminal trial you dumb fuck
Uh, poena means punishment, not penis.
From the article: "Meanwhile, Linux enthusiast Web sites and blogs are buzzing with theories. One is that SCO knows its case is groundless and has been using the lawsuit to perpetrate a massive "pump and dump" securities fraud, and now IBM is talking to Baystar and Renaissance to find out what they were told. (SCO says the "pump and dump" theories are nonsense and that Sontag, along with Darl McBride, CEO, have not sold a single share. Some executives have sold shares but only small amounts and mostly "to cover tax consequences on restricted stock," Sontag says.)"
But records at http://finance.yahoo.com/q/it?s=SCOX show that all 25 insider transactions for the past 6 months have been sales of stock --- get this, not a single buy!
"He who throws mud, loses ground." - proverb
I think you're talking about barratry. It's come up several times in slashdot discussions about the case.
The only reason we have the rights we have is that people just like us died to gain those rights. -- Cheerio Boy
What is the Lanham Act anyway? I find two references to it at law.cornell.edu but the links don't point to the actual part of US law that they affect.
I'm English and even *I* know what the Lanham Act is. (Or think I do, anyway.)
The Lanham Act is a law that stops businesses unreasonably making allegations that interfere with a competitor's trade. I believe that it forms the basis of part of IBM's countersuit, and also of RedHat's action against SCO.
*Googles to be sure*
OK. It seems that while it's primarily about trademarks, I'm still right. You can find the whole thing here.
Under the federal rules, attorneys for a party can issue a subpoena in the name of the federal district court where the target of the subpoena resides.
So you would bow at the alter of IBM hoping that IBM agrees with your interpretation of the GPL? IBM could present a defense that leads the court to interpret the GPL in a manner far different than you would like.
Huh? IBM trying to get the GPL interpreted differently than is commonly understood? What planet are you on?
Go read the IBM countersuit and related filings over at Groklaw. IBM is claiming that SCO is not abiding by the terms of the distribution license for the linux kernel as set forth in the GPL, therefore SCO is infringing on IBM's copyright. Pretty much textbook as to how the FSF would like to see the GPL defended.
Happy Fun Ball is for external use only.
According to MSN MoneyCentral's StockScouter :
The SCO Group, Inc., a small-cap growth company in the technology sector, is expected to significantly underperform the market over the next six months with very high risk.
With a rating of 1/10...
IBM filed coutersuits over most everything they could a long time ago. They have quite a few counterclaims, including patent infringement, read to go against SCO should something good happen, e.g. a judge issuing summary judgement or dismissing SCO's claims with prejudice...