Microsoft denies BayStar connection

Microsoft has denied allegations that it offered to guarantee an investment made in The SCO Group, a software company embroiled in a long-standing intellectual property dispute with IBM.

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"Microsoft has no financial relationship with BayStar and never agreed to guarantee any of BayStar's $50 million investment in SCO," a Microsoft spokesperson said in a statement on Monday.

BayStar Capital, an investment firm, led a $50 million investment in SCO in 2003 at a time when SCO was ramping up its legal attacks against IBM and other Linux users.

Last week, IBM filed court documents that include declarations from a BayStar executive who said Microsoft promised to guarantee BayStar's investment in SCO. Larry Goldfarb, the executive, goes on to say that once BayStar made the investment, Microsoft stopped returning the company's phone calls and the Microsoft executive who made the promise was likely fired.

Microsoft is using some of those statements to back up its position. "The BayStar declaration confirms that no guarantee was ever provided," the Microsoft spokesperson said.

Microsoft has been under the microscope for any indication that it may have helped support SCO's lawsuit against IBM as a way to stem the growth of Linux, which presents a competitive threat to Microsoft's business.

In its statement, Microsoft reiterated that it did make a licensing deal with SCO to support interoperability between Microsoft Utilities and Unix-based applications. At the time, in 2003, speculation arose that Microsoft made the deal to help support SCO's legal activities, a motive Microsoft denied. Other companies, including Sun Microsystems, also formed licensing agreements with SCO, possibly to avoid litigation.

The dispute began in 2003 when SCO filed a lawsuit against IBM charging it with offering open source software based on source code that SCO claimed to own. SCO then threatened to sue businesses that use Linux for patent infringement.

Earlier this year, a court dismissed almost 200 of SCO's claims, saying the company didn't provide enough details of the alleged patent infringements.