SCO aims at 2nd big user of Linux

Lindon-based SCO Group Inc., which is suing International Business Machines Corp. over copyrights, plans to sue another large user of the Linux computer operating system by early next year, SCO lawyer David Boies said Tuesday.

The company is demanding fees from Linux users and says IBM is unlawfully using SCO-owned portions of the Unix operating system in Linux products. SCO's Unix license clients include Microsoft Corp., which makes the competing Windows program.

The planned lawsuit is intended to make the defendant an example to other Linux users, Boies said on a conference call. He wouldn't disclose the plaintiff in the new case.

"You certainly will be seeing that within the next 90 days," Boies said.

SCO spent $17.7 million on its legal fight in its fourth quarter ended Oct. 31. Boies's firm, Boies, Schiller & Flexner LLP, and other law firms will get $1 million in cash and 400,000 SCO shares, the software company said in a statement. Boies'firm will get most of the fee and share allotment, said Blake Stowell, an SCO spokesman.

Shares of SCO rose 21 cents to close at $13.86 Tuesday on Nasdaq. They have risen almost 10-fold this year. IBM, the world's second-largest software maker after Microsoft, fell 85 cents to $89.95 on the New York Stock Exchange.

SCO's financial arrangement with its law firms isn't uncommon, a legal ethics expert said.

"Silicon Valley law firms have been doing it for years," Geoffrey Hazard, a professor of legal ethics at the University of Pennsylvania, said about companies paying for attorneys with equity. "For young companies needing very good, sophisticated legal advice, sometimes it's the only way they can get it."

The company also plans to give Boies's firm 20 percent of the proceeds of any settlement with IBM, 20 percent of any equity financing and 20 percent of any sale of the company, said Stowell, the company spokesman.

Last week, SCO subpoenaed Linus Torvalds, the inventor of Linux, which IBM and other computer companies back as a cheaper alternative to Microsoft's Windows. SCO is seeking as much as $50 billion in damages from IBM, which is

based in Armonk, N.Y. Some computer managers have delayed plans to use Linux, concerned that they may have to pay royalties to SCO.