It's Big Blue's Turn to Sue

The legal wrangling over Linux escalated Thursday as IBM(IBM Quote - Cramer on IBM - Stock Picks) countersued SCO Group(SCOX Quote - Cramer on SCOX - Stock Picks), sending the company's shares on a downward spiral by as much as 12.5%.

IBM's countersuit, filed Wednesday, claims SCO breached the general public license for Linux and infringed on no fewer than four IBM patents, according to the complaint. Armonk, N.Y.-based IBM seeks monetary damages and an injunction against SCO to stop the company from violating its patents and misrepresenting its intellectual property rights.

Although countersuing is standard practice, investors fled SCO, pushing shares down $1.43, or 11.9%, to $10.57 in recent trading. IBM shares gained 42 cents, or 0.5%, to sit at $80.17.

The dive of SCO shares Thursday followed a tripling of its stock since the Lindon, Utah-based company sued IBM in March, alleging Big Blue misappropriated SCO's Unix code for its Linux business. SCO was not immediately available for comment on the countersuit.

IBM denied it has engaged in any unlawful or unfair business practices. IBM charged that SCO is misusing its Unix patents to "extract windfall profits for its unjust enrichment" and highlighted what it called the company's "faltering Linux business." "With apparently no other prospects, SCO shifted its business model to litigation," the company wrote in its complaint.

IBM's suit is the second filed this week in the dispute over the open-source Linux software. Earlier this week, Linux software vendor Red Hat(RHAT Quote - Cramer on RHAT - Stock Picks) filed a suit seeking declaratory judgments stating that it hasn't infringed on SCO's intellectual property and also charging SCO with tortuous interference and trade libel. The company also established a $1 million legal defense fund for the open-source community.