Project Monterey returns to haunt IBM and Red Hat

by Joseph K. Clark

A longstanding dispute over Unix copyright infringement has come back to haunt IBM and Red Hat. Xinuos, the current owner of UnixWare and OpenServer, has filed a lawsuit claiming that IBM and Red Hat, using wrongfully copied software code, have engaged in other illegal anti-competitive misconduct to corner the billion-dollar market for Unix and Linux server operating systems.

Sean Snyder, president and CEO of Xinuos, described copyright infringement as having a wider remit than intellectual property theft. “It’s also about market manipulation that has harmed consumers, competitors, the open-source community, and innovation itself,” he said.

Project Monterey returns

In the complaint, filed in the district court of the Virgin Islands division of St Thomas and St John, Xinuos alleged that IBM then took unlawful steps to improve its market position and safeguard its business from the competition.

The complaint stems from a 1998 joint initiative between IBM and Santa Cruz Operation (SCO) to develop a Unix operating system for Intel’s Itanium 64-bit processorSCO filed for bankruptcy in 2007, and its assets were acquired in 2011 by UnXis, which later renamed itself Xinuos.

In the complaint, Xinuos said Project Monterey was designed to result in a completely new operating system product leveraging what was already under development for UnixWare 7.

The plan was to work with IBM to develop an operating system for modern 64-bit hardware architectures that would allow applications created initially for 32-bit architectures to continue to function and to include modern features for complex enterprise applications. According to the court papers, Project Monterey gave IBM confidential access to the operating system code owned by Xinuos.

Xinuos said that IBM specifically asked Xinuos’ predecessor to use this code in AIX, z/OS, and IBM I, and the request was denied. The complaint also details anti-competitive practices before IBM acquires Red Hat.

Xinuos alleged that IBM and Red Hat divided the market for enterprise clients to protect IBM’s high-end server, software, and services business.

In the complaint, Xinuos stated that the pair “promoted each other’s operating system products, and they granted each other special technical access and abilities that were not made generally available and from which Xinuos and others were specifically excluded”.

Xinuos also claimed the merger between IBM and Red Hat has substantially lessened competition in the market and resulted in quality degradation and excessive pricing pressure.

As an example, the complaint states that since the merger, IBM has also dramatically increased prices across the board on more than 5,000 of its on-premise server software products, including the AIX operating system, by removing prior volume discounts on support and service fees “for the millions of existing IBM customers” that had deals.

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