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Court finds conspiracy to reverse-engineer IBM mainframe software

11/03/25

IBM UK has succeeded in its claims against US technology entrepreneur John Moores and two of his companies for breach of contract, procurement of breach and participating in an unlawful means conspiracy to develop a software product through the reverse-engineering of IBM’s software.

The claim relates to software which is needed to run applications developed for IBM mainframe computers.

A Swiss company, LzLabs, developed a software product called the Software Defined Mainframe (SDM), which claims to be able to run applications for IBM mainframe computers without users needing to buy IBM’s mainframe hardware or software. That company was set up and is majority-owned by John Moores.

A UK company called Winsopia acquired an IBM mainframe computer and entered into a licence agreement with IBM UK to use IBM’s mainframe software. Unbeknown to IBM UK, Winsopia was a subsidiary of LzLabs and used IBM’s mainframe software for the sole purpose of assisting in LzLabs’ development of its competitor product.

In her 253-page judgment handed down yesterday in IBM United Kingdom v LzLabs GmbH and others [2025] EWHC 532 (TCC), following a 10-week trial on liability issues, Mrs Justice O’Farrell has held that:

  • Winsopia acted in breach of its licence agreement with IBM UK, in particular through the reverse-engineering and disassembly of IBM’s mainframe software. The court held that breaches established by IBM could not be described as isolated errors; their nature and extent, and the duration over which they occurred, were indicative of deliberate and systematic disregard of the terms of the ICA. The Court rejected Winsopia’s defence that its acts were permitted by the EU Software Directive on the basis that they amounted to ‘observation, study and testing’ or were necessary to achieve interoperability of customer applications.
  • LzLabs GmbH and Mr Moores are liable for procuring those breaches. Winsopia, LzLabs and Mr Moores participated in an unlawful means conspiracy, aimed at developing the SDM using information unlawfully gleaned from IBM’s mainframe software. The Court rejected the defendants’ reliance on their so-called ‘clean room’ procedures which were ostensibly designed to maintain operational separation between Winsopia and LzLabs.
  • The breaches were deliberately concealed from IBM UK, thus depriving the defendants of any contractual or statutory limitation defence.

A link to the judgment is here.

Nicholas Saunders KC and Fred Hobson KC acted for IBM UK, instructed by Quinn Emanuel Urquhart & Sullivan UK LLP. Craig Morrison KC also acted for IBM UK at an earlier stage in the proceedings.