IBM has won a lawsuit in the UK against Swiss company LzLabs, which was accused of misappropriating trade secrets related to Big Blue’s mainframe technology. The UK High Court ruled that LzLabs’ UK subsidiary Winsopia had breached the terms of its software licence agreement with IBM.
Winsopia bought an IBM mainframe computer and signed a licence agreement for IBM mainframe software in 2013. The case revolved around allegations that Winsopia used the access to reverse-engineer IBM’s mainframe software. Besides Winsopia, the defendants in the case included another LzLabs subsidiary, LzLabs UK, and their ultimate owner US tech entrepreneur and philanthropist John Moores, who founded IT company BMC Software in 1980.
In the written ruling, Justice Finola O’Farrell stated that Winsopia’s actions constituted a breach of the licensing agreement and that LzLabs and John Moores had unlawfully procured such breaches. IBM welcomed the ruling.
“[We are] delighted that the Court has upheld our claims against Winsopia, LzLabs GmbH and John Moores,” a company spokesperson told Tech Monitor. “The Court found that these parties had conspired to breach Winsopia’s licence agreement in a deliberate, systematic and intentionally hidden effort to unlawfully reverse engineer critical IBM mainframe technology. This technology represents billions of dollars of IBM investment.”
IBM’s response to the ruling
At the heart of the dispute was LzLabs’ Software Defined Mainframe (SDM), launched in 2016. IBM contended that LzLabs developed SDM by reverse-engineering IBM’s software. LzLabs claims SDM can empower customers to migrate their business applications originally designed to run on IBM mainframe computers to x86-based computer architectures operating on Linux, all without requiring changes to the source code or recompilation.
In December 2020/ January 2021, IBM requested an audit of Winsopia’s compliance with the terms of their IBM Customer Agreement (ICA). Winsopia refused, arguing that IBM’s request exceeded the scope of the contractual audit rights and made unreasonable demands within an unreasonable compliance timeframe.
Subsequently, the case came to court last year. Despite LzLabs and Moores’ defence that they had independently developed their software after nearly a decade of work and had not unlawfully used IBM’s licensed software, the judgment ultimately favoured IBM.
IBM expressed satisfaction with the court’s decision. “IBM is delighted that the Court has upheld our claims against Winsopia, LzLabs and John Moores,” the company said in a statement. “The Court found that these parties had conspired to breach Winsopia’s licence agreement in a deliberate, systematic and intentionally hidden effort to unlawfully reverse engineer critical IBM mainframe technology. This technology represents billions of dollars of IBM investment.”
LzLabs did not respond to Reuters’ queries on the court’s decision. However, IBM’s case against another British subsidiary LzLabs Limited, and LzLabs’ current and former CEO was rejected.
In 2022, IBM sued Micro Focus for similar allegations of illegal copying and reverse engineering of its software. That lawsuit was settled in July 2024 after Rocket Software acquired the Micro Focus products involved in the dispute.
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