Something for everyone: IBM v LzLabs

Trawling through the court judgments on BAILII this week, IP Draughts discovered a case about software licensing that seems to have something for everyone: reverse engineering, decompilation rights and back-up copies, access to source code, use of white rooms, procuring breach of contract, unlawful means conspiracy, termination for breach, limitation issues, challenge to jurisdiction, claims to privilege, and so much more!

The judgment is only about preliminary matters, including the timetable for preparing for trial and the number of days of court hearing that will be required. But it promises rich pickings when the matter comes to trial. See IBM United Kingdom Ltd v LzLabs GmbH & Ors [2023] EWHC 3015 (TCC) (29 November 2023), reported at  https://www.bailii.org/ew/cases/EWHC/TCC/2023/3015.html

As summarised by the judge (Mrs Justice O’Farrell, whom IP Draughts knew slightly at university when both were studying law):

This claim arises out of the development by the first defendant (“LzLabs”) of software, known as the ‘Software Defined Mainframe’ (“the SDM”), which is said to enable its customers to take applications developed for IBM mainframe computers and run them on x86-based computer architectures without the need for source code changes or recompilation.

On 9 August 2013 the claimant licensed the IBM mainframe software to the second defendant (“Winsopia”) pursuant to an IBM customer agreement (“the ICA”).

The claimant’s case is that the defendants breached, or procured breach of, the ICA, using Winsopia’s access to the IBM mainframe software to develop the SDM to run IBM software systems without an IBM mainframe or the IBM mainframe software stack by reverse assembling, reverse compiling or reverse engineering the software.

By notice dated 24 February 2021 the claimant gave notice purporting to terminate the licence agreements for contractual breach; alternatively at common law.

On 21 September 2021, the claimant issued these proceedings, in which it seeks:

i) a declaration that Winsopia’s licence has been lawfully terminated;

ii) an injunction restraining Winsopia from making any further use of the IBM mainframe software, including from offering any services relying on the SDM that contains or uses any part of the IBM mainframe software (and the other defendants from procuring the same); and

iii) an account of profits and/or damages.

The defendants dispute the claims and counterclaim for injunctive declaratory relief, damages for breach of the ICA and specific performance of the same. The defendants’ case is that the SDM was developed by LzLabs following an extensive research and development process spanning almost 10 years, using strict processes and policies which applied both to LzLabs and the developers whom it engaged, and to Winsopia, to ensure that no IBM material was used other than in compliance with the terms of the ICA. In developing the SDM, LzLabs employed a clean room process and did not use Winsopia’s IBM mainframe.

The judgment reads like a techie version of the 12 Days of Christmas. Instead of a partridge in a pear tree there is mention of:

• 36 days of hearings
• 22 witnesses (one of whom has already made 25 witness statements)
• an expert witness withdrawing
• a later trial date

IP Draughts looks forward to reading the final judgment in this case, probably some time in the Autumn of 2024.