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SCO'S AMENDED ANSWER TO IBM'S AMENDED COUNTERCLAIMS
Saturday, February 07 2004 @ 01:26 AM EST

Here is SCO'S Amended Answer to IBM's Amended Counterclaims.
The original is at http://sco.tuxrocks.com/Docs/IBM/Doc-100-B.pdf .

(Don't confuse this with their proposed Second Amended Complaint,
which we'll do next, and which is the document with the added
copyright infringement claim, which claim is already up as text.
That is available at http://sco.tuxrocks.com/Docs/IBM/Doc-100-A.pdf )


This document is SCO's way of trying to fix an oops. If you read
IBM's Motion to Strike, you'll see what this is all about: SCO failed
to provide some info, and IBM caught them and responded with a
Motion to Strike. Now, SCO is providing that information and hoping
it's going to fly. They would like us to believe that IBM deliberately
tried to hide prior art on four different patents. Four. IBM. What are
the odds on that? Slim? None? Laughable? And SCO will have to
prove all four to escape IBM's patent steam roller. Like they don't have
another thousand or so to throw in SCO's roadway if necessary.

See the Eighteenth Affirmative Defense and compare it
with the original Answer. Both the original Answer and IBM's
Motion to Strike are in the Legal Docs collection. I'll explain more
after we get all the documents up as text. It's more than 300 pages.

SCO filed these as paper documents, and since they are revisions of
documents already in digital format, it means they had to take one
extra step to file that way, namely printing it out on paper. Why,
you might almost get the idea that they aren't proud of their work.
Either that or they think it's funny to make Groklaw scan in 300
pages. Thank you, Frank Sorenson, for scanning in 300 pages all
by yourself.

Another change between this document and the original is SCO
dropped fraud in the Fifteenth Affirmative Defense and added numbers
116 and 256 to the Sixteenth Affirmative Defense.


************************************************************************
Stephen N. Zack
Mark J. Heise
BOIES, SCHILLER & FLEXNER L.L.P.
[address, phone, fax]

Attorneys for Plaintiff The SCO Group, Inc.


IN THE UNITED STATES DISTRICT COURT DISTRICT OF UTAH
________________________________________________
THE SCO GROUP, INC.,
a Delaware corporation,

Plaintiff,

vs.

INTERNATIONAL BUSINESS MACHINES CORPORATION,
a New York corporation,

Defendant.
________________________________________________

SCO'S AMENDED ANSWER TO IBM'S AMENDED COUNTERCLAIMS

Case No. 03-C V-0294

Hon: Dale A. Kimball
Magistrate Judge Brooke C. Wells
________________________________________________

Plaintiff and counterclaim-defendant The SCO Group, Inc. ("SCO"), by and
through counsel, answers the amended counterclaims of defendant
and counterclaim-plaintiff International Business Machines Corporation
("IBM") and further admits, denies and alleges as follows:



ANSWER

1. Admits that the UNIX operating system was originally developed by Bell
Laboratories, then a development arm of AT&T Corp., but denies the
remaining allegations Paragraph 1.

2. Admits that it respects the intellectual property rights of others, but denies
the remaining allegations of Paragraph 2.

3. Admits the allegations of Paragraph 3.

4. Admits the Court has jurisdiction over the claims, but denies that IBM
has any valid claims and denies the remaining allegations of Paragraph
4 not specifically admitted herein.

5. Admits the allegations of Paragraph 5.

6. Admits the allegations of Paragraph 6.

7. Admits the allegations of Paragraph 7.

8. Admits that the earliest UNIX operating system was built by software
engineers at Bell Laboratories, the research division of AT&T, but denies
the remaining allegations of Paragraph 8 not specifically admitted herein.

9. Admits the allegations of Paragraph 9.

10. Admits that AT&T sold UNIX assets, through its subsidiary USL, to
Novell in 1993, admits that Novell sold UNIX assets to The Santa Cruz
Operation, Inc., now known as Tarantella, Inc. ('Tarantella') in 1995, admits
that Tarantella is not affiliated with SCO, but denies that Novell sold only
part of its UNIX assets and further denies the remaining allegations
contained in Paragraph 10 not specifically admitted herein.

11. Denies the allegations of Paragraph 11.

12. Admits that in 1985 IBM acquired certain UNIX rights pursuant to license
with AT&T, and admits that IBM and AT&T entered agreements as referenced
in Paragraph 12, but denies that IBM's UNIX-related rights are characterized
as 'broad,' denies that IBM has any remaining rights under the referenced
agreements and denies the remaining allegations of Paragraph 12 not specifically
admitted herein.

13. Admits that IBM developed a version of UNIX pursuant to license originally
with AT&T and admits that IBM's version of UNIX is called AIX but denies that
IBM properly exercised its rights and is without information sufficient to admit
or deny the remaining allegations of Paragraph 13 and therefore denies the same.

14. Admits that Sequent, like IBM, acquired certain UNIX rights pursuant to its
own license agreements with AT&T, all of which IBM failed to attach to the its
counterclaim, and admits that IBM acquired the stock of Sequent and denies
the remaining allegations of Paragraph 14 not specifically admitted herein.

15. Admits that Amendment X was entered into in 1996 by and among IBM,
Original SCO and Novell, but denies the remaining allegations in Paragraph 15.

16. Denies the allegations of Paragraph 16 and alleges that Linux is, in actuality,
an unauthorized version of UNIX that is structured, assembled and designed to
be technologically indistinguishable from UNIX, and practically is distinguishable
only in that Linux is a 'free' version of UNIX designed to destroy proprietary
operating system software.

17. Admits that Linus Torvalds assembled the original Linux kernel but is
without information sufficient to admit or deny the remaining allegations of
Paragraph 17 not specifically admitted herein, and therefore denies the same.

18. Is without information sufficient to admit or deny the allegations of Paragraph
18, and therefore denies the same.

19. Admits that many developers have contributed software code to the Linux
kernel, admits that IBM has contributed software code to the Linux kernel, admits
that the first iteration of Version 2.4 of the Linux kernel released in 2001, but
is without information sufficient to admit or deny the remaining allegations of
Paragraph 19 not specifically admitted herein, and therefore denies the same.

20. Admits that Red Hat has distributed one or more versions of Linux, which
may include one or more versions of the Linux kernel, and admits that other
distributors may have done so as well, including SCO, but denies the remaining
allegations of Paragraph 20 not specifically admitted herein.

21. Admits the allegations of Paragraph 21, but alleges that Linux software contains
other additional characteristics not identified in Paragraph 21, and further alleges
that Paragraph 21 does not provide a complete definition of Linux.

22. Admits that software license agreements typically reflect legal limitations
restricting the use and reproduction of works, admits that Linux is available for
free download, admits that the license presently governing Linux (the General
Public License) generally is oriented to keep source code publicly available, but
denies the remaining allegations of Paragraph 22 not specifically admitted herein.

23. Admits the allegations of Paragraph 23 but denies enforceability or
applicability of the GPL.

24. Is without information sufficient to admit or deny the allegations of Paragraph
24, and therefore denies the same.

25. Admits that the GPL purports to guarantee the right to freely share and
change free software, but denies that the GPL applies to any program whose
authors commit to using it, denies enforceability or applicability of the GPL,
and is without information sufficient to admit or deny the remaining allegations
of Paragraph 25 not specifically admitted herein, and therefore denies the same.

26. Admits that the GPL allows a licensee to distribute copies of free software,
receive source code and change and use the software in new free programs but
is without information sufficient to admit or deny the remaining allegations of
Paragraph 26 not specifically admitted herein and therefore denies the same.

27. Admits that Linux is licensed under the GPL and admits that Linux contains
some notices placed by some copyright holders, but denies enforceability or
applicability of the GPL and denies the remaining allegations of Paragraph 27
not specifically admitted herein.

28. Denies the allegations of Paragraph 28.

29. Admits that it was originally founded as Caldera, Inc., admits that in 1998
Caldera, Inc. sold certain of its assets to Caldera Systems, Inc., but denies the
remaining allegations in Paragraph 29 not specifically admitted herein.

30. Admits that it has distributed certain versions of the Linux operating system
but denies the remaining allegations of Paragraph 30.

31. Admits that it previously developed and marketed software based on certain
versions of the Linux operating system, and admits that it has provided certain
Linux-related services, but denies the remaining allegations of Paragraph 31.

32. Admits that it previously distributed or re-distributed SCO Linux server, SCO
OpenLinux Server, SCO OpenLinux Workstation and SCO Volution Manager, and
admits that SCO has suspended its Linux distribution, but denies the remaining
allegations contained in Paragraph 32.

33. Denies the allegations of Paragraph 33.

34. Admits that it previously distributed certain versions of Linux, admits that
it previously provided Linux-related educational programs, admits that it joined
UnitedLinux, but denies the remaining allegations of Paragraph 34 not specifically
admitted herein.

35. Admits the allegations of Paragraph 35.

36. Admits that it previously supported in some ways the open-source community
prior to discovery of violation of its intellectual property rights by IBM and others,
but denies the existence of any 'scheme,' and denies the allegations of Paragraph
36 not specifically admitted herein.

37. Admits that some of its products were previously made available for
licensing under the GPL, but denies the remaining allegations of Paragraph
37 not specifically admitted herein.

38. Denies the allegations of Paragraph 38.

39. Admits that it previously engaged in certain Linux-related activities, but
denies the remaining allegations of Paragraph 39 not specifically admitted herein.

40. Admits that it has contributed to certain open-source development
projects, but denies the remaining allegations of Paragraph 40 not specifically
admitted herein.

41. Denies the allegations of Paragraph 41.

42. Admits the allegations of Paragraph 42, but alleges that SCO was unaware
of IBM's Linux-related investment prior to its formal announcements thereof,
and further alleges that IBM secretly and improperly failed to disclose to SCO
such Linux-related investments and its intentions with respect to Linux before
and during Project Monterey.

43. Admits the allegations of Paragraph 43.

44. Admits that IBM has contributed source code to Linux projects under the
GPL, but denies that such contributions were proper or legal, and denies the
remaining allegations of Paragraph 44 not specifically admitted herein.

45. Admits that it completed a public offering, admits that IBM has established
its business around Linux and that IBM has received a significant amount of
revenue and profit related to Linux, admits that SCO has never generated a
profit related to Linux, admits that SCO has not generated profit until recently,
but denies the remaining allegations of Paragraph 45 not specifically admitted
herein and alleges that IBM's Linux-related revenue is from its wrongful conduct
in violation of SCO's legal and contractual rights.

46. Admits that Caldera Systems, Inc. was merged into Caldera International, Inc.,
admits that SCO acquired rights to the UNIX operating system originally developed
by Bell Laboratories, but denies the remaining allegations of Paragraph 46 not
specifically admitted herein.

47. Denies the allegations of Paragraph 47.

48. Denies the allegations of Paragraph 48.

49. Denies the allegations of Paragraph 49.

50. Denies the allegations of Paragraph 50.

51. Denies the allegations of Paragraph 51.

52. Denies the allegations of Paragraph 52.

53. Admits it alleges that IBM has breached contractual obligations to SCO by,
among other things, incorporating and inducing others to incorporate source
code in the Linux kernel in violation of SCO's contractual and intellectual property
rights, and that IBM has competed unfairly, interfered with SCO contract rights
with others and misappropriated and/or misused trade secrets, but denies the
remaining allegations of Paragraph 53 not specifically admitted herein.

54. Denies the allegations of Paragraph 54.

55. Admits having sent letters to 1500 of the world's largest corporations, alleges
that the letters are the best evidence of the contents thereof, denies that said
letters threatened litigation and denies the remaining allegations of Paragraph 55
not specifically admitted herein.

56. Denies the allegations of Paragraph 56.

57. Admits that it has made certain public statements regarding IBM's rights
to use AIX and Dynix, admits that it claims the legal right and authority to
revoke, and has effectively revoked, IBM right to use, license or distribute AIX
and that it has so stated in certain statements, admits that it claims the legal
right to revoke IBM's use, license or distribution of Dynix and has so stated in
certain statements, but denies the remaining allegations of Paragraph 57
not specifically admitted herein.

58. Admits it claims that licensing and sublicensing agreements and
related agreements with IBM give SCO the right to control certain uses
of AIX by IBM, admits it claims that Linux is, in material part, an unauthorized
derivative of UNIX and that SCO has so stated, admits it claims that as of and
after June 16, 2003 IBM's right to further use, license or distribute AIX was
terminated and that SCO has so stated, admits it claims that IBM customers
who license AIX following June 16, 2003 are doing so in violation of SCO's
rights and that SCO has so stated, admits it claims that certain uses of Linux
infringe on SCO's intellectual property rights and that SCO has so stated,
but denies the remaining allegations of Paragraph 58 not specifically admitted
herein.

59. Admits it claims that IBM has contributed certain Dynix code to Linux in
violation of its contractual and legal obligations to SCO and that SCO has so
stated, admits it claims that IBM's violation of SCO's rights are giving rise to
damages as a result of IBM's improper profit from Linux and improper continued
use of AIX, and that SCO has so stated, but denies the remaining allegations of
Paragraph 59 not specifically admitted herein.

60. Admits the existence of the letter of June 9, 2003 but denies any legal or
factual basis for the said letter and denies the remaining allegations of Paragraph
60 not specifically admitted herein.

61. Admits the existence of the letter of June 12, 2003 but denies any right in
Novell to waive or revoke SCO rights and denies any legal or factual basis for
the said letter and denies the remaining allegations of Paragraph 61 not
specifically admitted herein.

62. Denies the allegations of Paragraph 62.

63. Admits it has revoked IBM's right to further use, license or distribute AIX,
pursuant to the express terms of the Software Agreement and related documents,
and that it has so stated, but denies the remaining allegations of Paragraph
63 not specifically admitted herein.

64. Admits that IBM sent letters dated April 2, 2003 and May 5, 2003 but
denies the remaining allegations of Paragraph 64 not specifically admitted herein.

65. Denies the allegations of Paragraph 65.

66. Denies the allegations of Paragraph 66.

67. Admits that IBM is currently without legal or contractual authority to use,
license or distribute AIX or Dynix, based on its breach of agreement with SCO
and SCO's resulting termination of IBM's AIX software agreement and related
agreements and Sequent's Dynix software agreement and related agreements,
and admits that SCO has so stated, but denies the remaining allegations of
Paragraph 67 not specifically admitted herein.

68. Admits that SCO has offered a license to Fortune 1000 and Global 500 Linux
users as a means of permitting lawful use of certain Linux products and that SCO
has so stated, but denies the remaining allegations of Paragraph 68 not specifically
admitted herein.

69. Denies the allegations of Paragraph 69.

70. Denies the allegations of Paragraph 70.

71. Admits that IBM has made contributions of source code to Linux 2.4 and
2.5 kernels under the GPL, but denies the applicability or enforceability of the
GPL and denies the remaining allegations of Paragraph 71 not specifically
admitted herein.

72. Admits that IBM and others have breached SCO's intellectual property rights,
but denies the remaining allegations of Paragraph 72.

73. Denies the allegations of Paragraph 73 and denies the enforceability or
applicability of the GPL.

74. Denies the allegations of Paragraph 74.

75. Admits that SCO licenses and distributes UnixWare, "OpenServer,"
"SCO Manager," and "Reliant HA," but denies infringement and denies
the remaining allegations of Paragraph 75.

76. Denies the allegations of Paragraph 76.

77. Denies the allegations of Paragraph 77.

78. Repeats and realleges Paragraphs 1-77, above.

79. Admits that IBM continues to be obligated to SCO by confidentiality
requirements and other provisions in the AT&T Agreements and Amendment
X that, by their terms, specifically continue beyond termination, but alleges
that IBM's right to use, license and distribute under the said agreements has
been lawfully and properly terminated, and therefore denies that IBM has any
right under the said agreements and denies the remaining allegations of
Paragraph 79 not specifically admitted herein.

80. Denies the allegations of Paragraph 80.

81. Denies the allegations of Paragraph 81.

82. Denies the allegations of Paragraph 82.

83. Denies the allegations of Paragraph 83.

84. Repeats and realleges Paragraphs 1-83, above.

85. Admits that IBM sells Linux-related services in interstate commerce, but
denies that IBM has or had authority to sell, license or distribute AIX in
interstate commerce from and after June 16, 2003, and denies that IBM has
or had authority to license, sell or distribute Dynix in interstate commerce
from and after September 2, 2003, alleges that IBM's rights in AIX and Dynix
have been lawfully and properly terminated, and denies the remaining the
allegations of Paragraph 85 not specifically admitted herein.

86. Denies the allegations of Paragraph 86.

87. Denies the allegations of Paragraph 87.

88. Denies the allegations of Paragraph 88.

89. Denies the allegations of Paragraph 89.

90. Repeats and realleges Paragraphs 1-89, above.

91. Admits that IBM has expended a substantial investment of time,
effort, and money in development of AIX pursuant to the terms of its
license with SCO and SCO's predecessors in interest, admits that AIX
has become one of the world's leading UNIX operating systems, admits
that IBM's products and services are sold and used throughout the United
States, admits that IBM acquired Sequent and thereby acquired Sequent's
interest in Dynix, subject to the terms and conditions of Sequent's
agreements with SCO and/or its predecessors, but denies the remaining
allegations of Paragraph 91 not specifically admitted herein.

92. Denies the allegations of Paragraph 92.

93. Denies the allegations of Paragraph 93.

94. Denies the allegations of Paragraph 94.

95. Repeats and realleges Paragraphs 1-94, above.

96. Admits the allegations of Paragraph 96.

97. Admits it is generally aware that IBM has or may have certain prospective
business relationships that IBM deems important, but denies the remaining
allegations of Paragraph 97 not specifically admitted herein.

98. Denies the allegations of Paragraph 98.

99. Denies the allegations of Paragraph 99.

100. Denies the allegations of Paragraph 100.

101. Repeats and realleges Paragraphs 1-100, above.

102. Denies the allegations of Paragraph 102.

103. Denies the allegations of Paragraph 103.

104. Denies the allegations of Paragraph 104.

105. Denies the allegations of Paragraph 105.

106. Denies the allegations of Paragraph 106.

107. Repeats and realleges Paragraphs 1-106, above.

108. Admits that IBM has made contributions of source code to Linux under
the GPL, but denies the applicability or enforceability of the GPL and denies
the remaining allegations of Paragraph 108 not specifically admitted herein.

109. Denies the allegations of Paragraph 109.

110. Denies the allegations of Paragraph 110.

111. Denies the allegations of Paragraph 111.

112. Denies the allegations of Paragraph 112.

113. Repeats and realleges Paragraphs 1-112, above.

114. Denies the allegations of Paragraph 114.

115. Denies the allegations of Paragraph 115.

116. Denies the allegations of Paragraph 116.

117. Denies the allegations of Paragraph 117.

118. Denies the allegations of Paragraph 118.

119. Repeats and realleges Paragraphs 1-118, above.

120. Admits that IBM has made contributions of source code to Linux
under the GPL, but denies the applicability or enforceability of the GPL, alleges
that part of said contributions by IBM violate SCO's contract and intellectual
property rights, and denies the remaining allegations of Paragraph 120 not
specifically admitted herein.

121. Is without information sufficient to admit or deny the allegations of
Paragraph 121, and therefore denies the same.

122. Admits that IBM has placed copyright notices on certain of its AIX and
Dynix contributions to UNIX, but denies it has the legal authority to do so,
denies the applicability or enforceability of the GPL, and denies the remaining
allegations of Paragraph 122 not specifically admitted herein.

123. Denies the allegations of Paragraph 123.

124. Denies the allegations of Paragraph 124.

125. Denies the allegations of Paragraph 125.

126. Denies the allegations of Paragraph 126.

127. Repeats and realleges Paragraphs 1-126, above.

128. Is without information sufficient to admit or deny the allegations of
Paragraph 128, and therefore denies the same.

129. Denies the allegations of Paragraph 129.

130. Denies the allegations of Paragraph 130.

131. Denies the allegations of Paragraph 131.

132. Denies the allegations of Paragraph 132.

133. Repeats and realleges Paragraphs 1-132, above.

134. Is without information sufficient to admit or deny the allegations of
Paragraph 134, and therefore denies the same.

135. Denies the allegations of Paragraph 135.

136. Denies the allegations of Paragraph 136.

137. Denies the allegations of Paragraph 137.

138. Denies the allegations of Paragraph 138.

139. Repeats and realleges Paragraphs 1-138, above.

140. Is without information sufficient to admit or deny the allegations of
Paragraph 140, and therefore denies the same.

141. Denies the allegations of Paragraph 141.

142. Denies the allegations of Paragraph 142.

143. Denies the allegations of Paragraph 143.

144. Denies the allegations of Paragraph 144.

145. Repeats and realleges Paragraphs 1-144, above.

146. Is without information sufficient to admit or deny the allegations of
Paragraph 146, and therefore denies the same.

147. Denies the allegations of Paragraph 147.

148. Denies the allegations of Paragraph 148.

149. Denies the allegations of Paragraph 149.

150. Denies the allegations of Paragraph 150.

151. Repeats and realleges Paragraphs 1-150, above.

152. Denies the allegations of Paragraph 152.

153. Denies the allegations of Paragraph 153.

154. Denies the allegations of Paragraph 154.

155. Denies the allegations of Paragraph 155.

156. Denies the allegations of Paragraph 156.

FIRST AFFIRMATIVE DEFENSE
IBM fails to state a claim upon which relief may be granted.

SECOND AFFIRMATIVE DEFENSE
IBM's claims are barred by the doctrines of waiver, estoppel, acquiescence,
and/or laches.

THIRD AFFIRMATIVE DEFENSE
IBM's contractual right to license, distribute or use AIX or Dynix has been
properly and validly terminated, and any claim based thereon is barred.

FOURTH AFFIRMATIVE DEFENSE
IBM's claims are barred by license.

FIFTH AFFIRMATIVE DEFENSE
IBM's claims are barred by illegality, collusion, conspiracy and/or lack of
clean hands.

SIXTH AFFIRMATIVE DEFENSE
The General Public License ('GPL') is unenforceable, void and/or voidable,
and IBM's claims based thereon, or related thereto, are barred.

SEVENTH AFFIRMATIVE DEFENSE
The GPL is selectively enforced by the Free Software Foundation such
that enforcement of the GPL by IBM or others is waived, estopped or otherwise
barred as a matter of equity.

EIGHTH AFFIRMATIVE DEFENSE
The GPL violates the U.S. Constitution, together with copyright, antitrust and
export control laws, and IBM claims based thereon, or related thereto, are barred.

NINTH AFFIRMATIVE DEFENSE
IBM claims are barred, in whole or in part, by the First Amendment to the U.S.
Constitution, by the doctrine of judicial immunity and by privilege.

TENTH AFFIRMATIVE DEFENSE
IBM lacks standing to assert these claims.

ELEVENTH AFFIRMATIVE DEFENSE
IBM's claims are barred or preempted, in whole or in part, by the
laws of the United States.

TWELFTH AFFIRMATIVE DEFENSE
IBM's own conduct, including that of its agents, contractors and partners,
and/or conduct of third parties constitute superseding or intervening
causes with respect to IBM's claims of damage or injury.

THIRTEENTH AFFIRMATIVE DEFENSE
SCO has acted legally and properly at all relevant times and IBM is therefore
barred from any relief whatsoever.

FOURTEENTH AFFIRMATIVE DEFENSE
IBM's purported copyright registrations are invalid and/or IBM has violated
copyright laws in respect to its claims alleged and the claims based on, or
related to, copyrights are barred.

FIFTEENTH AFFIRMATIVE DEFENSE
IBM is not, or may not be, the owner of the #746, #211, #209 or #785
Patents at issue.


SIXTEENTH AFFIRMATIVE DEFENSE
The patents at issue, and particularly the claims of those patents alleged
to be infringed, are invalid and of no effect for failure to comply with one
or more requirements set forth in Title 35 of the United States Code, including,
but not limited to Sections 101, 102, 103, 112, 116 and/or 256.

SEVENTEENTH AFFIRMATIVE DEFENSE
On information and belief, IBM's claims under the patents at issue are precluded
by the doctrine of prosecution history estoppel based on the admissions and
representations made by IBM in proceedings before the United States Patent
and Trademark Office during the prosecution of the applications of the patents
at issue.

EIGHTEENTH AFFIRMATIVE DEFENSE
On information and belief, U.S. Patent 4,814,746 ("the '746 patent) is
unenforceable by reason of IBM's inequitable conduct, acts or omissions
before the United States Patent and Trademark Office ("PTO"). The '746
patent, in a section entitled "Background of the Invention," cites one article
directed to LZ78 data compression and indicates that it is representative of
the prior art. U.S. Patent No. 4,814,746, column 1, lines 13-27. That
statement is material, false and misleading and was known by IBM to be
material, false and misleading. In fact, the single article cited in the '746
patent is not representative of the prior art. There are numerous other
techniques such as LZ77, described in an article entitled "A Universal Algorithm
for Sequential Data Compression," IEEE Transactions on Information Theory,
Vol. IT-23, No. 3, May 1977, pp. 337-343. Other types of prior art data
compression methods include run length encoding, arithmetic encoding
and Huffman encoding. The falsity of IBM's statement is also reflected by
the fact that in the period from December 9, 1975 to March 1, 1983, IBM
itself obtained the issuance of at least 31 patents directed to data compression.

On September 22, 1988, during prosecution of the continuation patent
application which led to issuance of the '746 patent, IBM filed an Information
Disclosure Statement ("IDS") with the PTO. That IDS discloses European
Patent Office ("EPO") patent publication 129439. The inventor of that
patent publication was Terry Welch. The patent publication was published
on December 27, 1984. Inexplicably, while IBM mentioned the United States
counterpart of the EPO publication, it did not cite that counterpart in the
citation of prior art. Thus, the face of the '746 patent does not contain any
reference to the U.S. counterpart. That counterpart was U.S. Patent No.
4,558,302. That patent contains claims which overlap with the '746 patent.
The Welch U.S. Patent No. 4,558,302 was filed 19 days after the '746 patent
application was filed in the PTO. The closeness of these dates implicates 35
U.S.C. Section 102(g) and raises a serious question as to who was the first
inventor of the claimed subject matter and who is entitled to the patent.
The failure to cite the U.S. counterpart, the fact that IBM waited almost three
years after the U.S. counterpart issued as a patent to even inform the PTO of
the EPO publication, and the additional fact that IBM waited until after the
claims of the '746 patent were allowed to file an IDS, were intended to deter
the Patent Examiner from comparing the claims of the U.S. counterpart to
the allowed claims of the '746 patent. These actions were material to the
examination of the '746 patent.

IBM's IDS states that the U.S. counterpart patent "apparently is an improvement
on the teaching of [another reference] and offers nothing more that would
affect the patentability of the allowed claims in this case. These statements
were material, false and misleading and were known by IBM to be material,
false and misleading. These statements and the fact that IBM cited the EPO
publication and not the U.S. patent counterpart had the effects of not only
mischaracterizing the disclosure of the Welch patent application, but also
of concealing from the PTO the overlap between the claimed subject matter
of the '746 patent and the counterpart U.S. patent.

IBM withheld additional prior art from the PTO. In February, 1981, IBM
published an article entitled "Message Compression Method." The
article was published as an IBM Technical Disclosure Bulletin, Volume
23, No. 9, pages 4197-98. That publication was material to the patentability
of the '746 patent. IBM withheld this prior art with intent to deceive the PTO.

On information and belief, U.S. Patent 5,805,785 ("the '785 patent") is
unenforceable by reason of IBM's inequitable conduct, acts or omissions
before the PTO. The '785 patent, entitled "Method for Monitoring and
Recovery of Subsystems in a Distributed/Clustered System," was filed
on February 27, 1996, listing as joint inventors Daniel Manuel Dias, Richard
Pervin King, and Avraham Leff. Applicants also filed an IDS on this date.
The IDS listed 12 references that are all U.S. patents. No other references,
including technical papers authored by one or more of the joint inventors
were listed. A review of papers authored by the three inventors reveals
several that are material to patentability. In particular, Avraham Leff's Ph.D
dissertation, entitled "A Dynamic and Decentralized Approach to Management
of CPU and Memory," published at Columbia University in 1992, is material
to the patentability of the '785 patent application. the dissertation describes
a system of resource management that does not require a centralized
coordinator. Sites cooperate in transmitting important state information
to each other. Decisions made at one site are then factored by other sites
into subsequent decisions. Because this dissertation was material to the
patentability of the '785 patent application, the dissertation should have
been disclosed to the PTO during prosecution of the '785 patent application.
IBM withheld this reference with the intent to deceive the PTO.

Inventor Daniel M. Dias appears as joint author on three papers that relate
directly to the subject matter claimed in the '785 patent. These three papers
appear to have been published at about the same time as the '785 patent
filing date of February 27, 1996. All three papers list joint authors, none of
whom, other that [sic] Mr. Dias, appears as an inventor on the '785 patent.
"A Scalable and Highly Available Web Server," published in Proceedings of
COMPCON '96, lists as authors, in addition to Mr. Dias, William Kish, Rajat
Mukherjee, and Renu Tewari. "High Availability in Clustered Multimedia
Servers," published in Proceedings - International Conference on Data
Engineering 1996, lists as authors, in addition to Mr. Dias, Renu Tewari,
Rajat Mukherjee, and Harrick Vin. "Design and Performance Tradeoffs in
Clustered Video Servers," published in Proceedings - International Conference
on Multimedia Computing and Systems 1996, lists as authors, in addition to
Mr. Dias, Renu Tewari, Rajat Mukherjee, and Harrick Vin. All three of these
papers describe concepts that can be found in the '785 patent claims, and
thus Messrs. Kish, Mukherjee, Tewari, and Vin should have been listed as
inventors on the '785 patent. IBM's decision not to list Messrs. Kish,
Mukherjee, Tewari, and Vin as inventors of the '785 patent was with
the intent to deceive the PTO.

U.S. Patent 5,129,080 ("the '080 patent"), entitled "Method and System
Increasing the Operational Availability of a System of Computer Programs
Operating in a Distributed System of Computers," filed October 17, 1990,
issued July 7, 1992, and assigned to IBM, is material to patentability of the
'785 patent, and should have been disclosed by IBM to the PTO. In particular,
the '080 patent discloses high availability architectures, cooperative processing
among nodes of a computer network, and fault recovery techniques. The
'080 patent also discloses sharing of state information among the computer
network nodes and global and local management. Because the '080 patent is
material to patentability of the '785 patent application, the '080 patent is material
to patentability of the '785 patent application, the '080 patent should have been
disclosed to the PTO during prosecution of the '785 patent application. IBM
withheld this reference with the intent to deceive the PTO.

On information and belief, U.S. Patent 4,821,211 ("the '211 patent") is
unenforceable by reason of IBM's inequitable conduct, acts or omissions before
the PTO. The '211 patent was filed on November 19, 1987 and issued on April
11, 1989. During prosecution of the '211 patent application, Applicants did
not disclose any prior art references to the PTO through filing an IDS. On
information and belief, Applicants were aware of prior art references that
were material to patentability of the '211 patent, and which, therefore, were
required to be disclosed to the U.S. Patent and Trademark Office.

More specifically, U.S. Patent 4,688,181 to Cottrell et al. ("the '181 patent"),
filed April 30, 1986 and issued August 18, 1987, and assigned to IBM was
material to the patentability of the '211 patent, but was not disclosed to the
PTO. The '181 patent was cited by the patent examiner during prosecution
of the '211 patent. Further, the '181 patent listed a number of prior art
references that were themselves material to patentability of the '211 patent.
These additional prior art references were not themselves material to
patentability of the ''211 patent. These additional prior art references
were not disclosed to the PTO during prosecution of the '211 patent.
One of the prior art references cited during the Cottrell patent application
prosecution is U.S. Patent 4,613,946 to Forman ("the '946 patent"). That
patent was also material to the patentability of the '211 patent. Thus, the
'946 patent, and the other references cited during prosecution of the Cottrell
patent application should have been disclosed to the PTO by IBM. IBM withheld
these material references with the intention to deceive the PTO.

On information and belief, IBM was aware of other references that were material
to the patentability of the '211 patent, and with deceptive intent, IBM did not
disclose these references to the PTO. For example, U.S. Defensive Publication
T980,008 ("the '008 publication"), entitled "Interaactive Design of Character-
Recognition Logics," filed July 19, 1976, published March 6, 1979, and assigned
to IBM, is material to the patentability of the '211 patent, and should have been
disclosed by IBM to the PTO. The '008 publication discloses generating graphic
display of pattern locations and a menu of operations. The '008 publication also
discloses using auxiliary operations in the menu to modify the sequence of input
patterns. Because the '008 publication is material to the patentability of the '211
patent, the '008 publication should have been disclosed to the PTO during
prosecution of the '211 patent. IBM withheld this reference with intent to deceive
the PTO.

Other references of which IBM was aware and that were required to be disclosed to
the PTO include U.S. Patent 4,731,606 to Bantz et al. ("the '606 patent), filed August
2, 1985 and issued March 15, 1988 and U.S. Patent 4,719,571 to Rissanen et al.
("the 571 patent"), filed March 5, 1986 and issued January 12, 1988, both assigned
to IBM. Both the '606 patent and the '571 patent are material to patentability of the
'211 patent, and both should have been disclosed to the PTO during prosecution of
the '211 patent. IBM withheld these references with the intent to deceive the U.S.
Patent and Trademark Office.

On information and belief, U.S. Patent 4,953,209 ("the '209 patent") is unenforceable
by reason of IBM's inequitable conduct, acts or omissions before the PTO. The '209
patent, entitled "Self-verifying Receipt and Acceptance System for Electronically
Delivered Data Objects," was filed on October 31, 1988. The '209 patent, in the
section entitled "Background of the Invention," describes only two prior art
references: U.S. Patent No. 4,757,33 to Allen et al. and U.S. Patent No.
4,757,534 ("the '534 patent") to Stephen M. Matyas el al.

The '534 patent is assigned to IBM. Stephen M. Matyasa, co-inventor of the
'534 patent, is listed as an author of more than 100 IBM publications related to
cryptography or data encryption. Mr. Matyas is also listed as an inventor on more
than 70 issued patents in this field. Mr. Matyas is well known in the field of
cryptography and data encryption at IBM. When the '209 patent application was
filed, IBM knew that some of Mr. Matyas' activities were material to the patentability
of the '209 patent. However, as noted above, only the '534 patent was l isted.
IBM failed to cite other material prior art references associated with Mr. Matyas,
including, for example, U.S. Patent 4,203,166 ("the '166 patent") in which Mr.
Matyas is listed as an inventor. The '166 patent, entitled "Cryptographic File Security
for Multiple Domain Networks," filed December 5, 1977, issued May 13, 1980, and
assigned to IBM, is material to patentability of the '209 patent, and should have been
disclosed by IBM to the PTO.

The '166 patent discloses a file security system for data files created at a first host
system in one domain and recovered at a second host system in another domain
of a multiple domain network. Specifically, the '166 patent discloses, a first host
system that provides a file recovery key for subsequent recovery of a data file at a
second host system. The first host system enciphers (modifies) the first host system
plaintext to obtain first host system ciphertext as a data file. The file recovery key
is used as header information for the data file. When the data file is to be recovered
at the second host system, the file recovery key is provided at the second host system
and the second host system transforms the file recovery key into a form, which is
usable to decipher the data file. The second host system uses the transformed file
recovery key to perform a cryptographic operation to obtain the first host system
ciphertext in clear form (unmodified) at the second host system. Thus, the '166 patent
should have been disclosed to the PTO during prosecution of the '209 patent. IBM
withheld this reference with the intention to deceive the PTO.

IBM also failed to cite U.S. Patent 4,238,854 ("the '854 patent") in which Mr. Matyas is
again listed as an inventor. The '854 patent, entitled "Cryptographic File Security for
Single Domain Networks," filed December 5, 1977, issued December 9, 1980, and
assigned to IBM, is material to patentability of the '209 patent, and should have
been disclosed by IBM to the PTO. The '854 patent was filed concurrently with
the '166 patent described above.

The '854 patent discloses that an operational key enciphered under the file key
of the designated storage media, as header information, together with the host
data enciphered under the operational key is written on the storage media as an
enciphered data file. When the data file is recovered, the host data security device
transforms the enciphered operational key header information under control of a
host master key into a form which permits the operational key to be used for
deciphering the enciphered data file to obtain the file data in clear form. Thus,
the '854 patent is material to the patentability to the claims of the '209 patent.
Because the '854 patent is material to the patentability of the '209 patent, the
'854 patent should have been disclosed to the PTO during prosecution of the
'2090 patent. IBM withheld this reference with the intention to deceive the PTO.

Matyas is also one of the authors of an article entitled "Cryptographic Key
Authentication in Communication System" published by IBM in March, 1978.
The article was published as an IBM Technical Disclosure Bulletin, March 1978,
pages 3990-92. This publication discloses that message communication
protection is obtained by enciphering a clear data message X at a host under
control of a working key KS to yield a ciphered data message Y. At the receiving
terminal, the enciphered data message Y is deciphered under control of the working
key KS to yield the clear data message X.

Another article in which Matyas is an author is entitled "Terminal Control of Encipher
and Decipher Data Operations" published by IBM in August, 1981. The article was
published as an IBM Technical Disclosure Bulletin, August, 1981, pages 1334-1339.
The publication discloses that in communication security applications where data is
to be transmitted in a cryptographic session, between a host unit and a remote
terminal controller unit, a data encrypting session key (KS) is required to be
established in a form suitable for use at each unit. Data may then be enciphered
under KS at one unit and transmitted to the other unit where it is deciphered under KS.

Thus, the above publications, published as IBM Technical Disclosure Bulletins,
are material to the patentability to [sic] the claims of the '209 patent. Because these
publications are material to the patentability of the '209 patent, these articles should
have been disclosed to the PTO during prosecution of the '209 patent. IBM withheld
these references with the intention to deceive the PTO.

The foregoing actions constitute inequitable conduct and render the claims of the '746,
'785, '211 and '209 patents unenforceable. Discover in this proceeding is ongoing, and
additional acts of inequitable conduct will be added to this defense at the appropriate time.

NINETEENTH AFFIRMATIVE DEFENSE
SCO has not infringed, literally or under the doctrine of equivalents, any valid claim
of the #746, #211, #209 and #785 Patents.


TWENTIETH AFFIRMATIVE DEFENSE
On information and belief, IBM failed to mark patent articles covered by the #746,
#211, #209 and/or #785 Patents at issue in the counterclaims. Any claim for
damages is therefore limited by 35 U.S.C. Section 287.


TWENTY FIRST AFFIRMATIVE DEFENSE
On information and belief, IBM failed to provide SCO with actual notice of
IBM's allegations of infringement of the patents at issue, and therefore IBM cannot
recover any damages for SCO's actions before the filing of IBM's counterclaims.


TWENTY SECOND AFFIRMATIVE DEFENSE
IBM has not and cannot plead and meet the requirements for an award of
enhanced damages or attorneys' fees.


TWENTY THIRD AFFIRMATIVE DEFENSE
SCO has an express or implied license to practice some or all of the claims
embodied in the patents at issue.


TWENTY FOURTH AFFIRMATIVE DEFENSE
Upon information and belief, IBM lacks standing to assert that SCO
infringed some or all of the patents at issue.


TWENTY FIFTH AFFIRMATIVE DEFENSE
SCO states that IBM's request for treble damages and attorneys fees is
barred because SCO acted in good faith, and this is not an exceptional case
within the meaning of the Patent Code.

TWENTY SIXTH AFFIRMATIVE DEFENSE
IBM has failed to join one or more parties needed for just adjudication of
the counterclaims, including but not limited to the Free Software Foundation
and contributors to the Linux 2.4 and 2.5 kernels.

WHEREFORE, having fully answered IBM amended counterclaims, SCO prays for
dismissal with prejudice of all claims, or in the alternative judgment in its favor
thereunder, together with attorneys' fees and costs, and together with all other
legal and equitable relief deemed just and proper by this Court.

JURY DEMAND

SCO demands trial by jury on all issues raised in IBM's amended counterclaims
that are so triable.


DATED this ____th day of February, 2004


Respectfully submitted,

HATCH, JAMES & DODGE, P.C.
Brent O. Hatch
Mark F. James

BOIES, SCHILLER & FLEXNER, L.L.P.
Stephen N. Zack
Mark J. Heise

By: _________________________________
Counsel for Plaintiff/Counterclaim Defendant


  




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