SCO has suspended all sales of its distribution of Linux and warned rivals and users alike that they face legal action if they are found to be using its code in their software.

The company has claimed that it owns intellectual property contained within all commercial distributions of Linux, including the kernel itself. It is so confident of its claims that it has stopped sales "until attendant risks with Linux are better understood".

On Monday it sent letters to 1,500 international Linux users warning them they may be liable for using SCO's code. President and chief executive Darl McBride, warned that "legal liability may arise....[which] may also rest with the end user".

In an exclusive interview with vnunet.com, Chris Sontag, senior vice president and general manager of SCOsource, fired a warning shot at the Linux community, stating that all distributions of the operating system shared "equal liability" with IBM if SCO's code was being misused.

SCO is already locked in a $1bn lawsuit with IBM, which it launched in March, claiming that IBM misappropriated and misused its Unix code. It claims IBM has contributed Unix code - owned by SCO - to Linux, including the Linux kernel, where SCO has "concerns and issues", said Sontag.

"The same issue applies in terms of inappropriate intellectual property in Linux being distributed by any commercial distribution," he said.

Fellow UnitedLinux company SuSE had claimed not to be liable. But Sontag said he had reviewed his company's agreements with the firm, and added: "They are dead wrong on that issue."

Joseph Eckert, SuSE Linux vice president of corporate communications, said SuSE was "re-evaluating" its relationship with SCO, adding: "I'm not a lawyer but what I've said I stand by. How can they sue us for a product we have jointly developed?"

Sontag's claims leave the future of UnitedLinux in doubt, with industry watchers questioning how the group can ever work together again.

Red Hat, not part of UnitedLinux, dismissed SCO's actions, and maintained that the code released to the Linux community was under the GNU General Public License (GPL).

Mark de Visser, vice president of marketing for Red Hat, commented: "We're not happy about this. We don't think they have a case but would rather see it resolved. SCO released the code under GPL and has relinquished all rights to it."

Analysts believe SCO's actions may slow down the momentum of Linux.Dan Kusnetsky, vice president of systems software research at analyst IDC, said it gave the impression of a desperate act by a dying company. But if SCO attacks all Linux distributions, he added, it would damage the software's reputation among users.

"Microsoft will declare victory and say 'we told you so'. Companies were starting to see Linux show up as a mainstream choice and this would put a chill on that. It won't stop [installations] but it will lengthen the decision cycle."

Get the latest news, views and technology updates in a weekly round up of the Penguin's unstoppable march by signing up to vnunet.com's FREE Linux newsletter here.