IBM Drops Patent Counterclaims

Mr. Slant writes "According to this article on Groklaw, IBM is dropping their patent counter-claims. Why? It's not because they think they'd lose, but rather because SCO wants to waste more time litigating. There's still some question over whether SCO will be able to pay the rest of their legal bills, given how much cash they're losing each quarter." From the article: "Here's a simple rule of litigation. You never, ever offer to drop anything you think you'll need for victory or to make yourself whole. Litigation is always a cost-benefit analysis. You have to have the prospect of a sizable enough win to pay your lawyer, or you will find it hard to get one, or, like Boies Schiller, the lawyer will want its money up front. IBM did the math, and SCO isn't looking like deep pockets any more, is it, now that Boies Schiller has drained them of pretty much all they had? So, IBM's practical analysis apparently was that it's worth more to get the thing over with on time than to go after counterclaims against a defendant with no money in its pocket to pay damages or royalties, even when IBM won. Plus, there is some strategy here too. Sometimes in chess, you'll let a pawn be sacrificed to set up a checkmate."

So SCO gets no punishment whatsoever.

[philovivero]

The state of litigation in the United States is so bad. I've been very closely involved with another lawsuit where the plaintiff was very SCO-like. In the end, he suffered no real harm in his litigious behaviour. The defendents lost tens of thousands of dollars... to the lawyers.

The judge, even when presented with overwhelming evidence that the case was frivolous, let it go ahead.

From this vantage-point, it looks like the lawyers and judges have set up a system where such litigation is encouraged, and the only winners are... you guessed it, the lawyers and judges.

Go Go Big Blue

[fragmentate]

I'm glad they decided to pull back. It shows how savvy they really are.

But who can remember when IBM was the monstrosity of the market? When they were the litigious ones? The stiff-suited giant wasn't always this open to reason. I think what sets them apart is they wised up, where others believe they will always be the status-quo.

IBM used to think that... Now they know you have to constantly raise the bar. This action shows they know how to.

Is it really that simple?

[zappepcs]

Is it really that simple, just wise plotting on the part of IBM? Something tells me that this isn't really over yet... If winning the lawsuit isn't the point, perhaps tenderizing SCO to the point of being ready to sell out is?

I think if IBM owned any remaining IP from SCO it would make an interesting situation.

Given IBM's recent 'play nice with Linux' attitude, that would be very interesting indeed. I don't think that the wounds that IBM got from fighting with Microsoft have ever really healed. With the world of computing changing so much so fast, how would it look if Google/Sun and IBM/Linux were to end up dominating the next 15 years?

Just a thought, or three

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Be the bigger man.

[xmorg]

IBM is showing a little character here. We as the Linux community, dont want to stoop to their level. Just let them stew in their own bills, and die quietly.

The more you sue the more press they get. We want SCO to die like scrooge... alone, and unloved.

I can't believe SCO's stock price...

[wintermute42]

I was very surprised to see SCO shares selling for slightly more than $4 US. As others have noted, SCO is doomed. The Linux community hates them, it is difficult to imagine that they will gain any new customers and they have no intellectual property that is worth much.

What is odd is that SCO stock is very thinly traded. Under 2K shares changed hands today. With such thin trading, it is tempting to speculate that most of the stock is help by lawyers and SCO executives. They should trade a few shares among themselves to keep the stock price up, keeping what is, in effect, a shell company, looking like it was real.

Otherwise we must assume that that the Efficient Market Hypothesis has ever more holes in it that previously believed. How, after all, could "the market" value SCO at much more than zero.

10Q results due in three weeks

[symbolset]

Last quarter SCO had just about one quarter's worth of cash and equivalents left. It will be interesting to see if and how they scavenged enough money to keep going.

It's time for Darl the Optimist to tell us about the plans for SCOForum again I guess.

Their http://money.cnn.com/quote/sec/sec.html?symb=SCOX [cnn.com] previous 10Q makes for amusing reading:

We expect that our UNIX business will generate sufficient cash in the year ending October 31, 2005 to cover its own costs as well as the internal costs for our SCOsource initiatives and we believe we will have sufficient cash resources to fund our operations through October 31, 2005.

In the event that cash required to fund operations and strategic initiatives exceeds our current cash resources and cash generated from operating activities, we will be required to reduce costs and raise additional capital. We may not be able to reduce costs in a manner that does not impair our ability to maintain our UNIX business and pursue our SCOsource initiatives. We also may not be able to raise capital for any number of reasons including those listed under the section "Risk Factors" below. If additional equity financing is available, it may not be available to us on attractive terms and may be dilutive to our existing stockholders. In addition, if our stock price declines, we may not be able to access the public equity markets on acceptable terms, if at all. Our ability to effect acquisitions for stock would also be impaired.

[...]

Our ability to cut costs to offset revenue declines in our UNIX business is limited because of contractual commitments to maintain and support our existing UNIX customers. This decline in our UNIX business may be accelerated if industry partners withdraw their support as a result of our SCOsource initiatives. Our SCOsource initiatives may cause industry partners, developers and hardware and software vendors to choose not to support or certify to our UNIX operating system products. This would lead to an accelerated decline in our UNIX products and services revenue. If our UNIX products and services revenue is less than expected, our liquidity will be adversely impacted.

It reads like Halloween is going to be a critical day for SCOX. Everybody's migrating off of their products that can = no sales revenue. Nobody's sending in their $699 for Linux = no SCOsource revenue. Baystar debacle = no equity financing (Hey, Baystar, why are you still holding so many shares?). On the cost side you've still got "fulfillment of contractual obligations" and overhead even if your Sophists are working for a cut of your pie in the sky.

Report also says they still had 50 on R&D payroll as of 7/31/05. Are there no other jobs available guys?

I think "liquidity will be adversely impacted" is accountantese for "Padlock the doors. Don't bother turning out the lights--the electric company already did."