AT&T was doing its own UNIX development work to meet its internal needs

As the CSRG was merrily improving AT&T's product, AT&T was doing its own UNIX development work to meet its internal needs. As AT&T developers implemented features, they also evaluated patches that came from the CSRG. When they liked a chunk of BSD code, they incorporated it wholesale into AT&T UNIX, then turned around and relicensed the result back to the universities, who used it as the basis for their next round of work.

This somewhat incestuous relationship kept going for many years, until the grand AT&T breakup. Suddenly, the telecommunications giant was no longer forbidden to dabble in commercial computing. Thanks to years of development, and that generation of computer scientists who knew it, UNIX abruptly looked like a solidly marketable product. Berkeley's release of the BSD code met with great displeasure from AT&T and instigated one of the most famous computer-related lawsuits of all time.

After some legal wrangling, the case was settled out of court. The Berkeley lawyers proved that most of the code in dispute originated in BSD, not in original AT&T UNIX. Only a half-dozen files were original AT&T property, while the rest of the operating system belonged to the CSRG and its contributors. As if that wasn't bad enough, AT&T had even removed the original Berkeley copyright statement from the files it had appropriated from the CSRG! AT&T went away and sulked for a while, finally releasing System V UNIX. The CSRG removed disputed files and released BSD 4.4-Lite2, a complete collection of CSRG code utterly unencumbered by any AT&T copyrights.

BSD 4.4-Lite2, also known just as "Lite 2," is the grandfather of all modern BSD software. This code was not usable out of the box, and it required some tweaks and additions to function. Various groups of programmers, such as BSDi, the NetBSD Project, and the FreeBSD Project, took it on themselves to make this code usable and to maintain it. Each project was independently managed.