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INTEL, IBM BACKING NEW FUND TO DEFEND LINUX USERS

Two of the largest backers of Linux, the fast-growing operating system popular with businesses, are contributing to a new fund that will defend Linux users against copyright infringement lawsuits threatened by SCO Group Inc.

An industry group formed to promote Linux -- an operating system that provides an alternative to Unix and to Microsoft's dominant Windows software -- said it has formed a "Linux legal defense fund" and that the No. 1 computer company and No.1 semiconductor company have agreed to help fund it.

IBM Corp, which has adopted Linux as a competitive tool to sell more hardware and services, and Intel Corp, which makes the chips that Linux runs on, are contributing to the fund, although they haven't specified how much.

SCO shares fell more than 9 percent on the announcement.

Open Source Development Labs, or OSDL, a non-profit industry consortium based in Beaverton, Ore., that is working to promote further adoption of Linux, said in a statement that it created the fund, which so far has attracted pledges of $3 million. OSDL said it is aiming for $10 million.

Linux, a variant of the widely used Unix operating system which can be copied and modified freely, emerged a decade ago and is being used to run the Internet, handle financial transactions and even manage the U.S. nuclear arsenal.

"The threats from SCO were becoming louder and more frequent that they are going to sue an end user," Stuart Cohen, chief executive of OSDL, told Reuters. "We don't want the Linux community to have this cloud over their head... or to see the momentum or deployment of Linux slowed down."

Concerns over the legality of Linux were raised last year after SCO, which came to own the rights to Unix, sued IBM for billions of dollars. SCO also warned companies that they must pay to use Linux or face litigation.

IBM, which won't be tapping into the defense fund for its own legal battles, was accused by SCO of embedding parts of SCO's Unix software code in versions of the freely available Linux operating system.

IBM, which has an OSDL board seat, refuted the claims and counter-sued SCO, saying that SCO had infringed on its patents and breached the general public license for Linux.

"By refusing to give the basis of their claims, what they're doing is preventing the Linux community from resolving any potential intellectual property issues," Intel spokesman Chuck Mulloy said.

Intel, also an OSDL member with a board seat, has also been one of the biggest beneficiaries of the Linux, since the software is designed to run primarily on its chips. Intel became the world's largest semiconductor company by selling chips for personal computers running Microsoft Corp's software, and the Linux operating system is proving to be a formidable competitor to Microsoft.

Lawsuit Imminent?

"If they (OSDL) feel strong in their legal defense then they should set up to indemnify end-users," SCO chief executive Darl McBride told Reuters.

McBride said SCO would make good on its threat to sue a "large Linux end user" within a month, adding "I think it's time to face this thing head on."

Other Linux advocates, including Hewlett-Packard Co and Red Hat Inc, have also taken similar measures to protect themselves and their customers against lawsuits.

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