Court reinstates SCO’s misappropriation claim against IBM in long-running lawsuit

For almost a decade and a half, SCO and IBM have been fighting over their collaboration gone wrong concerning the development of a new version of UNIX for Intel processors. The case has garnered much attention, including from the open source community. You can read the backstory here on the Wikipedia page for the dispute. The case has been on appeal to the Tenth Circuit, which released its opinion on October 30. The decision was a mixed ruling – the court affirmed summary judgment in favor of IBM on most of the issues, but ruled in favor of SCO on one important claim – misappropriation.

SCO sued IBM for the tort of misappropriation (a form of unfair competition) arising from IBM’s alleged use in its own product of source code that SCO had contributed to the joint efforts to develop the new UNIX version. The district court granted IBM’s motion for summary judgment on the misappropriation claim, holding that such a claim was barred under New York law’s “independent tort doctrine”. SCO sought review with the Tenth Circuit Court of Appeals. The court reversed and remanded the case on the misappropriation claim.

This doctrine provides that a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated. This separate duty must spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract.

In this case, the court held that while IBM and SCO may not have had a formal partnership or joint venture as a matter of law, they surely enjoyed a business relationship in which each reposed a degree of trust and confidence in the other. In such a situation, there exists a duty not to take a business collaborator’s property in bad faith and without its consent in order to compete against that owner’s use of the same property.

SCO v. IBM, — F.3d —, 2017 WL 4872572 (10th Cir., October 30, 2017)

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.