ST. THOMAS, U.S. Virgin Islands, March 31, 2021 /PRNewswire/ -- Xinuos, Inc., a software company headquartered in the U.S. Virgin Islands that provides commercial customers with server operating systems, today filed a copyright infringement and antitrust lawsuit against International Business Machines Corp. ("IBM") and Red Hat, Inc. ("Red Hat") in the United States District Court of the Virgin Islands, St. Thomas and St. John Division. Xinuos alleges that IBM and Red Hat, using wrongfully copied software code, have engaged in additional, illegal anti-competitive misconduct to corner the billion-dollar market for Unix and Linux server operating systems.
"While this case is about Xinuos and the theft of our intellectual property," said Sean Snyder, President and CEO of Xinuos. "It is also about market manipulation that has harmed consumers, competitors, the open-source community, and innovation itself."
According to the complaint, at their peak, Xinuos' operating systems were the most widely-used operating systems in the Unix/Linux server operating system market. Xinuos' UnixWare 7 and OpenServer 5 and 6 server operating systems were popular because they were stable, reliable, and easy to manage. Xinuos alleges that in or around this time, IBM's server operating systems were declining in popularity and new entrants to the market, such as Red Hat, were gaining market share and threatening IBM's server operating system business, its underlying business selling server hardware, as well as related software and services.
Xinuos' complaint alleges that IBM then took unlawful steps to improve its market position and safeguard its business from competition:
"First, IBM stole Xinuos' intellectual property and used that stolen property to build and sell a product to compete with Xinuos itself. Second, stolen property in IBM's hand, IBM and Red Hat illegally agreed to divide the relevant market and use their growing market powers to victimize consumers, innovative competitors, and innovation itself. Third, after IBM and Red Hat launched their conspiracy, IBM then acquired Red Hat to solidify and make permanent their scheme."
The complaint further alleges that IBM has been misleading its investors about its rights to use Xinuos' code for more than a decade:
"IBM has made demonstrably and materially misleading statements in securities filings about its ownership interest in the Code. In every annual report filed with the SEC since 2008, IBM has represented that a third-party owns all of the UNIX and UnixWare copyrights, and that this third-party has waived any infringement claim against IBM. These self-serving representations are demonstrably false and misleading to investors and potential asset purchasers."
The complaint also details IBM's and Red Hat's alleged conspiracy, summarizing it as follows:
"Thereafter, IBM and Red Hat…divided the market for enterprise clients to protect IBM's precious high-end server, software, and services business, they 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. These bad acts continue to this day."
Xinuos alleges that the IBM and Red Hat conspiracy has harmed the open-source community and specifically Xinuos' OpenServer 10 product, which is based on FreeBSD, an open-source UNIX-based operating system and alternative to Red Hat's Linux-based open-source operating system, RHEL. "By dominating the Unix/Linux server operating system market, competing open-source operating systems, like our FreeBSD-based OpenServer 10, have been pushed out of the market," said Snyder. "This prevents developers and consumers from receiving the benefits that these products have to offer."
Xinuos asserts claims under the copyright infringement provisions of 17 U.S. Code §101, the Sherman Antitrust Act, the Clayton Antitrust Act, the Virgin Islands Antimonopoly Law, and Virgin Islands Unfair Competition and Unjust Enrichment common law. Xinuos has asked for both monetary damages and injunctive relief.
About Xinuos, Inc.
Xinuos provides commercial customers with operating systems that are reliable, dependable, and secure for mission-critical applications that demand rock-solid performance. The Xinuos general-purpose operating systems are on pace with hardware and software industry advances and are designed to power any size business that requires stability, reliability, and scalability. Learn more at www.xinuos.com.