IBM United Kingdom Ltd v LzLabs GmbH & Ors [2025] EWHC 532 (TCC) (10 March 2025)

IBM United Kingdom Ltd v LzLabs GmbH & Ors [2025] EWHC 532 (TCC) (10 March 2025)

Defendants breached the ICA by using Winsopia's access to IBM mainframe software for unlawful reverse engineering in developing the SDM. Clean room procedures and codes of conduct were insufficient to prevent breach. Rights of observation, studying, testing, and interoperability under Directive 2009/24/EC and CDPA did not excuse the contractual restrictions. IBM's audit request was valid, and licence termination was lawful. Defendants also engaged in wrongful procurement of breach. Unlawful means conspiracy not established due to lack of requisite knowledge and intention.

Citation
[2025] EWHC 532 (TCC)
Parties
Claimant: IBM United Kingdom Limited; Defendant: LZLABS GmbH; Defendant: Winsopia Limited; Defendant: LZLABS Limited; Defendant: Mark Jonathan Cresswell; Defendant: Thilo Rockmann; Defendant: John Jay Moores
Jurisdiction
England and Wales
Judgment Date
10 March 2025
Procedural Posture
Commercial Intellectual Property Dispute / Liability Judgment
Outcome
Claim allowed in part; counterclaim dismissed
Legal Topics
Software Copyright, Reverse Engineering, Licence Termination, Audit Rights, Clean Room Procedures, Breach of Contract, Unlawful Means Conspiracy, Wrongful Procurement of Breach, Statutory Limitation
Intellectual Property Contract Technology Law Software Copyright Reverse Engineering Licence Termination Audit Rights Clean Room Procedures +4 more

Case Brief

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Parties

IBM United Kingdom Limited

Claimant

LZLABS GmbH

Defendant

Winsopia Limited

Defendant

LZLABS Limited

Defendant

Mark Jonathan Cresswell

Defendant

Thilo Rockmann

Defendant

John Jay Moores

Defendant

Procedural Posture

Commercial Intellectual Property Dispute / Liability Judgment

Legal Issues

  1. 1 Whether defendants breached or procured breach of the IBM Customer Agreement (ICA) by unlawful reverse engineering of IBM mainframe software
  2. 2 Whether defendants' development of the Software Defined Mainframe (SDM) was protected by rights of observation, studying, testing, and interoperability under Directive 2009/24/EC and the Copyright, Designs and Patents Act 1988
  3. 3 Validity of IBM's audit request and subsequent licence termination

Ratio Decidendi

Defendants breached the ICA by using Winsopia's access to IBM mainframe software for unlawful reverse engineering in developing the SDM. Clean room procedures and codes of conduct were insufficient to prevent breach. Rights of observation, studying, testing, and interoperability under Directive 2009/24/EC and CDPA did not excuse the contractual restrictions. IBM's audit request was valid, and licence termination was lawful. Defendants also engaged in wrongful procurement of breach. Unlawful means conspiracy not established due to lack of requisite knowledge and intention.

Court Disposition

Claim allowed in part; counterclaim dismissed

Orders

  • Declaration that Winsopia's licence was lawfully terminated
  • Injunction restraining Winsopia and other defendants from further use of IBM licensed software and SDM containing IBM software