IBM wins trade secrets case at UK High Court

IBM has won a major court victory in the UK High Court in London, successfully taking legal action against US tech entrepreneur John Moores and two of his companies, Swiss-based computer company LzLabs, and UK-based Winsopia, which it had accused of stealing trade secrets.

The UK ruling relates to allegations that LzLabs had bought an IBM mainframe in 2013 via Winsopia and had then reverse engineered it to develop a new product, called a Software-Defined Mainframe (SDM) platform, which would allow customers to run various IBM programs on computers using the Linux operating system. IBM claimed that this was a violation of its license agreement.

In a 253-page written ruling delivered this week, High Court Judge Dame Finola O’Farrell found that the UK subsidiary, Winsopia, had indeed breached its IBM license terms and ruled that "LzLabs and Mr Moores unlawfully procured breaches of the ICA [the IBM customer agreement] by Winsopia." She went on: “LzLabs, Winsopia and Mr Moores are liable for the tort of unlawful means conspiracy.”

She also addressed arguments that IBM’s law suit was filed too late and therefore ‘time barred’:

“The defendants deliberately concealed the connection between Winsopia and LzLabs and/or Winsopia’s breaches of the ICA for the purpose of section 32 of the Limitation Act 1980 and IBM could not with reasonable diligence have discovered the concealment prior to August 2020. IBM could not with reasonable diligence have discovered the concealment regarding the unlawful conspiracy claim prior to June 2023.”

Hence IBM’s claims were not time-barred.

However, she ruled that another LzLabs subsidiary, LzLabs UK, was not in breach of the ICA, and dismissed conspiracy charges against it and its co-chief executives.

It is understood that there will be a determination of costs and damages following this ruling later this year. At the moment, it is not known if the defendants will appeal.