AT&T was making and selling Unix and the University of California Berkley was making and giving away their own patches for Unix. A group of ex-Berkley students took the patches and formed a complete system and began selling it, trouble didn't start until they began advertising with a slogan of "It's Unix!".
A lawsuit resulted, which dragged in the University of California due to it's releasing the code in the first place. The case went on for a long time, slowing the development of the BSD projects that had begun as completely open source operating systems.
It was LSU versus UoCB and BSDi.
During the case it was found that a large portion of the code in Unix was actually BSD code stripped of it's license, thus breaking the terms of the license and placing LSU in an uncomfortable position. A settlement was made in which the whole of the results were kept from the public for several years, but for the most part freed the BSD code and any who use it from any legal action.