International Business Machines Corporation (IBM) won a significant lawsuit against LzLabs, a Switzerland-based software firm owned by U.S. tech entrepreneur John Moores, on Monday at London’s High Court.
IBM accused LzLabs, its UK subsidiary Winsopiaof unlawfully acquiring and reverse-engineering IBM’s proprietary mainframe software. Moores, a well-known U.S. entrepreneur and philanthropist, previously owned the San Diego Padres baseball team and founded the IT firm BMC Software in 1980.
According to IBM, Winsopia legally purchased an IBM mainframe computer in 2013 and signed a software license agreement with the company. However, IBM argued that this access was misused to develop LzLabs’ own software solutions by reverse-engineering IBM’s proprietary mainframe software to develop the Software Defined Mainframe (SDM) , a product enabling customers to migrate workloads from IBM systems to cheaper Linux servers.
LzLabs denied copying code, arguing it only studied software interfaces to ensure compatibility, as permitted under the EU Software Directive (1991) . They asserted that their software was built independently over nearly a decade of development, without unlawful use of IBM’s technology. Despite these claims, the UK High Court largely ruled in favor of IBM, stating that Winsopia breached its software license agreement and that both LzLabs and Moores played a role in these violations.
The legal framework for reverse engineering in the UK and EU, governed by the Software Directive and UK copyright law, allows such practices for interoperability under specific conditions. However, the license agreement between IBM and Winsopia explicitly prohibited reverse-engineering, which the court found was breached.
Judge Finola O’Farrell, in her written ruling, found that “LzLabs and Mr. Moores unlawfully procured (those) breaches.” This ruling reinforces IBM’s stance on protecting its multi-billion-dollar investment in mainframe technology. IBM described the court decision as a significant win, with a company spokesperson stating, “The technology at the centre of the lawsuit represents billions of dollars of IBM investment.”
While the court ruled against Winsopia, it did not uphold IBM’s claims against another British subsidiary, LzLabs Limited, or against LzLabs’ current and former CEO. The ruling clarifies that while certain entities within LzLabs were found liable, others were not directly implicated in the alleged intellectual property violations.
The ruling was not a complete sweep for IBM. The dismissal of claims against LzLabs Limited and its executives suggests the court found insufficient evidence of broader corporate wrongdoing beyond Winsopia’s actions. Comentators note that this split decision shows the court’s careful approach to distinguishing direct breaches from peripheral involvement.
LzLabs had positioned its technology as a legitimate innovation, arguing it offered customers flexibility and cost savings by breaking IBM’s dominance in the mainframe market. Critics of IBM’s stance, including some open-source advocates, have suggested that such lawsuits stifle competition.
Mainframes, though less prominent in today’s cloud-centric world, remain a cornerstone of enterprise computing. IBM has controlled roughly 90% of this market for decades, according to IDC data, thanks to its z/OS operating system and associated software ecosystem.
LzLabs’ disputed product, known as the Software Defined Mainframe (SDM), promised to liberate clients from this ecosystem—a prospect that threatened IBM’s revenue model.
Mainframes are large, powerful computers critical for industries like banking, finance, and government, known for their reliability and capacity to handle vast data. IBM has dominated this market, with estimates suggesting it controls around 90% of the market share, generating over $3 billion annually in revenue for its mainframe division
