IBM alleges that LzLabs illegally reverse-engineered its mainframe software to help develop its Software Defined Mainframe (SDM).
Switzerland's LzLabs says IBM is challenging principles enshrined in law under the Software Directive of 1991 and that it is using "speculative and unparticularized" claims to thwart a competitor.
The Stack is at court.
May 16, 2024: Day #11: IBM probes test of ethics walls used to build LzLabs’ mainframe software
Claimant queries resilience of rival’s separation of duties in developing its alternative technology to IBM Big Iron
In the latest twist to the trial concerning legal development of alternatives to IBM’s mainframe workload business, the IT giant cast doubt on its smaller rival LzLabs’ processes for keeping developers with conflicting duties apart.
The separation process is often known as “Chinese wall/s” although many prefer the term “ethics wall/s” today.* The process has long been a staple topic of debate in software development, for example, in the 1990s when it was widely pondered whether Microsoft application devs had a leg up through knowledge of the same company’s Windows operating system.
On day 11 of the trial, that notion was aired again when Christian Wehrli took the stand. Wehrli is a former LzLabs and, indeed, IBM employee but today works for neither concern. He gave evidence about the clean room process in which LzLabs says it developed its Software Defined Mainframe (SDM). SDM is a product that lets customers run mainframe workloads without access to an IBM mainframe, thereby threatening IBM’s income from its long-running but still hugely important business area.
For IBM, Nicholas Saunders KC once again began by taking aim at a defence witness’s credibility, saying Wehrli wasn’t an appropriate person to comment on processes at LzLabs’ Winsopia UK subsidiary as he had not been employed by Winsopia and hadn’t overseen its clean room operations on a regular basis.
Saunders tried to break down the claim by LzLabs that Winsopia and LzLabs maintained separate physical locations. Wehrli said that LzLabs could use a VPN, which allowed its employees to access the server from anywhere and confirmed that no Winsopia employee had access to this. LzLabs AND Winsopia also operated different discovery systems, he added.
At one juncture in 2015, LzLabs UK and Winsopia shared an office but were separated by a (physical) wall, Werhli said under further questioning.
This led Saunders to suggest:
“This idea that the offices operated entirely separately was not reality … [Staff] were mixing quite fluently … getting coffee and chatting away to each other.”
This was rebuffed by Wehrli:
“As far as I’m aware, everyone was taking this very seriously and we knew there was a certain risk involved with proximity between the parties, which was discussed … with legal counsel but we decided it was a risk that could be [managed] and everyone was extensively briefed as to what they could do and what they couldn’t. I am not aware of anyone who did not take this seriously and every time I visited the premises, they all knew what they could and couldn’t do.”
It was put to Wehrli that he had written an email saying, “We don’t want to reveal the Winsopia name and terminate the licence for [the mainframe].”. Saunders said that Wehrli did not want to reveal, and in fact purposely concealed, the Winsopia and LzLabs connection because he knew that Winsopia had breached the terms of its mainframe licensing agreement. The idea that LzLabs concealed links between it and its subsidiary has been a recurring theme of the trial so far.
Wehrli said he did not want to “advertise” the connection between the two companies, even though it was public knowledge and he thought that IBM might have already known about it. However, he was concerned about IBM becoming aggressive and possibly terminating the license with Winsopia if it felt threatened by the SDM product. Wehrli added that he didn’t want to confuse customers.
“My fear was generally that they would strike a competitive product, taking the licence away,” Wehrli said. “I’m not a lawyer. I don’t know all the possibilities, but I was genuinely concerned.”
Saunders suggested that Wehrli was aware of a potential breach of the ICA mainframe usage licence. Wehrli denied this.
This has been a trial studded with many tetchy exchanges and Saunders appeared to be in a particularly feisty mood, suggesting that Wehrli was providing “stock answers” that were irrelevant to many questions he was asked. The claimant’s lawyer asked numerous times if someone had told him to “give these speeches”. Wehrli was adamant that nobody had coached him and everything he was saying was his own words.
The next witness, LzLabs senior software developer David Bond, was quizzed about what the claimant’s lawyers considered a gap between his witness statements saying the scrubbing process at Winsopia was highly effective and emails he had sent suggesting improvements. Bond said there were differences in quality of the scrubbing process depending on development language and that he had made suggestions for enhancing processes.
The case continues.
May 15, 2024: Day #10: LzLabs CTO defends development processes under IBM questioning
Mainframe veteran Jan Jaeger backs up coding processes for its competing SDM technology
Jan Jaeger, LzLabs chief technology officer and chief software architect, continued to give evidence on day 10 of the trial in which IBM UK alleges that its mainframe rival LzLabs failed to comply with the former’s usage contract, the ICA, giving the Swiss company the chance to create an alternative to IBM’s long-running host server line. For the claimant, Nicholas Saunders KC attempted continually to punch holes in the credibility of the witness, suggesting his statements were misleading or plain incorrect.
Jaeger, a tall, softly spoken mainframe veteran, was not this time asked to raise his voice for the better understanding of the London courtroom as he had been the previous day. However, he continued to provide deep insights into LzLabs’ processes as he countered suggestions put forward by IBM counsel.
Jaeger agreed that he was not intimate with the ICA per se but said he had always been confident that LzLabs was acting legally based on his understanding of the licensing terms and conditions of specific programs and a knowledge of the EU Software Directive. The Directive broadly supports interoperability between vendors.
For IBM, Saunders also suggested that Jaeger had only partial control over the DR (Discovery Request) system that governed LzLabs’ internal collaborative attempts to understand mainframe interfaces. As on the previous day, Jaeger responded that it was impractical to look at every line of code, adding that he oversaw a team conducting a multi-step process. When Saunders posited that a junior member of staff might not feel confident enough to admit to an error, Jaeger gave a response straight out of the professional developer’s playbook:
“People make errors; that’s not bad,” he said. “What is bad is not correcting the error. That’s how we operate at LzLabs.”
Probed on the quality of LzLabs’ scrubbing processes to remove and replace “stubs” (fragments of code that as pointers), Jaeger conceded that the process was not perfect but suggested that “over-scrubbing” also has issues. “There is no perfect solution,” he said. “We were doing the best we [could] and I think we did a good job.”
At the heart of the case is whether LzLabs and its UK subsidiary Winsopia broke terms of the ICA in their use of an IBM mainframe acquired by Winsopia. Saunders suggested that LzLabs could not have created its SDM product for running mainframe workloads on commodity servers without access to the IBM server hardware. Jaeger demurred but acknowledged that having a mainframe accelerated some areas. Not having to wait for load modules did “speed up the process”, for example, Jaeger said.
The case continues with further witnesses for the defence scheduled for the next days.
May 14, 2024: Day #9: LzLabs CEO completes epic session amid mainframe contract breach claims
Thilo Rockmann finally stood down after two-day testimony
As the IBM-LzLabs trial reached its projected quarter-way point, key witnesses for the defendant continued to bat away suggestions that it had breached IBM’s ICA customer agreement in developing its Software Defined Mainframe (SDM) product. SDM is designed to let mainframe users run workloads in modern environments without the costs or overheads of Big Blue and ‘Big Iron’ hardware. The morning of the trial notably saw the close of a marathon session within the trial as claimant lawyer Nicholas Saunders KC wrapped up questioning of LzLabs CEO Thilo Rockmann that had run for over two days.
In a packed court of about 50 people, continued issues with heat management saw the London courtroom strewn with water bottles and hear the hum of cooling fans. There was heat too in some lines of claimant questioning.
Saunders repeatedly suggested that LzLabs management must have anticipated legal challenges from IBM.
“You didn’t seriously expect that IBM would be unaware of intellectual property infringements?” he asked Rockmann.
Rockmann returned to the theme of the defence which is that customer applications were not impacted by ICA and that LzLabs had only been interested in legally understanding critical interfaces on the mainframe. The comparison the defendant makes for its SDM product is with an international power adapter designed to work across devices and outlets.
Saunders turned to IBM’s ICA auditing provision, stating, “It must have been absolutely obvious you were going to get an audit.” Later he asked, “What did you think IBM was going to do? You just sat there passively wondering?”
Rockmann said that he had not expected a sudden escalation of threats and when he had received a letter from IBM suggesting there had been a “material breach” of the ICA he had been “shocked and angry”. He said: “I never, ever thought a platform vendor would claim rights to a customer application.”
Saunders alleged that Rockmann and LzLabs had tried “to be as obstructive as possible … You chose not to supply a single thing [requested by IBM]”. But Rockmann said there had been a “lack of engagement on material matters” and questions had arisen over confidentiality. LzLabs and its Winsopia subsidiary had always tried to comply with the audit process, he claimed.
Saunders concluded his cross-examination of Rockmann, saying, “All of you were happy to put in place measures that allowed breaches to happen.”
But Rockmann denied this. “We wanted SDM to succeed [but] I wouldn’t say at all costs, at all,” he said. Instead, he said, LzLabs had always acted fairly with the aim of helping customers to modernise their infrastructure. The relationship with Winsopia that IBM alleges was concealed “could have easily been found by anyone [as] public information on the internet”.
“That’s what competition is all about,” he said. “It’s normal [and] very attractive to customers … We were trying to do the right thing. We are human beings and mistakes happen [but there was] no breach or IP infringement. I did act in good faith … I don’t think there was anything misleading in any form.”
The next witness called was a mainframe veteran of over 40 years. Jan Jaeger, CTO and chief software architect, LzLabs, was questioned over how he and other experts were recruited to LzLabs and on technical matters but his early testimony was leavened by a humorous exchange when it was suggested that he had submitted four statements. Jaeger appeared confused before saying, ‘I thought you had said false statements…’” “We’re not getting there yet,” Saunders responded, laughing.
It was put to Jaeger that he must have expected legal action but he explained that although “people were speculating”, the example of another company suggested that sustainable mainframe-sector businesses could exist:
“Micro Focus has been doing it for 30 years and they’re still here,” he noted, referring to a UK-founded software veteran that is now part of OpenText and is best known for helping customers to modernise mainframe workloads.
Saunders and Jaeger jousted over definitions of reverse engineering and code interfaces and when Saunders suggested that compiler listings are for debugging, he was immediately rebuffed with Jaeger pointing out that many banks use them explicitly for audit purposes.
When Saunders turned his attention to compliance with the LzLabs Code of Conduct, Jaeger said that the managed process through which LzLabs communicated about mainframe interfaces with its Winsopia subsidiary was effectively monitored by Clifford Chance lawyer Daniel Hedley in the Discovery Request system.
The case continues with more defence witnesses working for LzLabs scheduled to be called next.
May 13, 2024: Day #8: LzLabs CEO rebuffs IBM suggestions of backdoor agreements and secret liaisons
Continuing his epic stint on the stand, LzLabs’ Thilo Rockmann defended the Swiss company’s mainframe R&D agenda
In the fall-out from another high-profile technology court case that took place in the early 1990s, Intel famously referred to microprocessor rival as “the Milli Vanilli of semiconductors”, a quipping reference to the pop duet who didn’t sing on a hit marketed under their name. IBM UK lawyers haven’t quite gone so far but they have left zero doubt that they believe mainframe computing workload rival LzLabs broke a key contract relating to mainframe usage to develop its rival product.
In another long day in court for Thilo Rockmann, CEO of the Swiss-based company, the court heard repeated allegations by the claimant’s Nicholas Saunders KC that LzLabs had hidden its relationship with Winsopia to swap information that led to the development of LzLab’s Software Defined Mainframe (SDM) product. The allegation is key because Winsopia, a UK-based subsidiary of LzLabs, is the organisation that acquired the mainframe in question and IBM says it broke the core ICA contract relating to usage terms and conditions.
Rockmann was at pains to suggest that a code of conduct was monitored and adhered to throughout SDM development, ensuring strict separation of Winsopia’s QA and LzLabs’s R&D areas of specialisation.
However, Saunders suggested that lines between development, discovery and testing became blurred. Visits to Winsopia’s Farnborough, Hants. offices by LzLabs left the door open to LzLabs staff being aided in efforts to reverse engineer the IBM software environment, Saunders suggested.
Arrangements meant it was possible for LzLabs staff to “slide over and have a cursory look over the shoulder” of Winsopia employees, he said. “There were significant departures from what was arranged…this was no longer a separation”, he added, and “valuable knowledge could be shared over the course of a short discussion”.
Rockmann said there had been no connivance and no collaboration that touched on development of the SDM or impacted the ICA.
While Rockmann denied that there had ever been a plan to obscure the relationship, Saunders pushed on with his well-worn line:
“You were concerned about making sure that IBM were not tipped off about a connection between Winsopia and LzLabs,” he alleged.
Rockmann also defended LzLabs on the point that employees had email addresses for both LzLabs and Winsopia domains. These were to support separations of duties and to provide focus, he said.
Earlier in the day, Saunders pursued another familiar refrain, suggesting that LzLabs “scrubbing” of software had been inefficient. When customers compiled progams, the IBM load module would automatically introduce IBM fragmentary code “stubs” into the application. IBM’s counsel suggested that LzLabs engineers attempted to replace these stubs with scrubbing in order to avoid transgressing the ICA. Rockmann said that it was customers’ own applications that contained these stubs and so outside LzLabs’ legal domain.
The case continues and indications are that Rockmann will be queried for about half an hour in the following morning session.
May 9, 2024: Day #7: IBM goes on attack, challenging LzLabs’ ‘Chinese walls’ in making its mainframe workload rival
Claimant’s lawyers double-down on Swiss rival’s development processes
Day seven of the IBM UK claim against mainframe workload rival LzLabs saw IBM lawyer Nicholas Saunders KC take his turn to examine witnesses, beginning with an exhaustive questioning of the Swiss company’s CEO, Thilo Rockmann. The line of attack focused on whether LzLabs had acted inappropriately and hitched a “free ride” on IBM technology in developing its Software Defined Mainframe product that can run mainframe workloads on independent hardware and operating system.
In a session lasting all day, Rockmann was quizzed over his relationship with John Moores, who bankrolled the company; his experiences at a previous company, Neon Enterprise Software; and the extent to which the Swiss company adhered to its internal code of conduct. Notably, Saunders focused on whether ‘Chinese walls’ (that is, strict segregation of developer staff acting ethically) had been effectively deployed to maintain compliance with IBM’s ICA customer contract.
The session began with Saunders going back to Rockmann’s time at Neon, a previous Moores-owned company that created zPrime, a way to offload IBM mainframe processes at lower cost. Neon collapsed in 2011 in the wake of another trial with IBM. Later, Moores asked Rockmann to get involved in creating a new project that became LzLabs, appointing him as CEO and chairman.
Pressed on details of the Neon collapse and settlement, Rockmann said he was unaware of details. “I was fired,” he said. “Neon was history for me.”
When Rockmann was later in receipt of letters sent by IBM special projects executive Mark Anzani, Saunders suggested: “You knew very well what was going on. You’d been through all this before.” Rockmann responded: “You’re trying to combine things that are not related ... The contents [of the respective letters] were very different.”
Rockmann went on to say that there had been no widespread expectation of IBM litigation against LzLabs but he stressed there had been no relaxation of a code of conduct established to maintain order in clean-room development. Notably, there had been separation between software development and QA testing for optimal efficiency, he claimed.
Rockmann said LzLabs had not prepared to brief customers on potential IBM allegations and actions but said it would explain product development processes when asked. Despite this, he conceded that some customers had “disappeared” after receiving communications from IBM.
Saunders also pressed Rockmann on its UK subsidiary Winsopia’s acquisition of a mainframe, suggesting that LzLabs had concealed its relationship with the Farnborough, Hants.-based company. He next returned to Rockmann’s relationship with Moores, a serial entrepreneur who co-founded systems management software giant BMC Software. (Moores later also found fame as the former owner of baseball team San Diego Padres, as well as via links with moves into English football.)
Rockmann conceded that Moores “could be demanding” and “frustrated”, manifesting this in emails and calls. “He was the ultimate investor and, understandably, he wanted to see a return on his investment,” Rockmann said. Asked about Moores’ view of IBM, Rockmann said it had become “a bit tainted by proceedings like this”.
Saunders suggested that if LzLabs had bought the mainframe under its own name then IBM, as a “highly litigious company would have learned LzLabs had its own mainframe and would want to know what use was made of it”.
Turning to an exploration of LzLabs executive emails, there was light relief when IBM was referred to in messages as a “dancing dinosaur”. That term was a reference to a book by a former IBM CEO, Rockmann said, presumably meaning Lou Gerstner’s Who Says Elephants Can’t Dance?, a 2002 memoir of the company’s corporate turnaround to become a nimbler player.
Yet another line of questioning concerned LzLabs’ keenness in an email exchange on Winsopia acquiring an IBM mainframe on the basis that IBM would not monitor usage. Rockmann stressed that this was because of cost efficiencies rather than a desire to conceal activities.
“That’s a complete misreading of what this email was saying [which] was that IBM would not be tipped off this was happening,” Saunders suggested. Rockmann said this was untrue and that, as a relatively small company, LzLabs was only keen to pursue best value.
Next, Saunders pursued LzLabs’ “code of conduct”. Rockmann said this began as a “belt and braces” approach designed to avoid inadvertent copyright infringements and ensure clean development processes with clear separation of roles. There was again a flurry of laughter in court when Saunders pressed Rockmann on potential meetings between LzLabs and Winsopia in shared office areas such as lavatories. Rockmann suggested that a server in a hole dug 330m in the ground would be probably safer but, more seriously, argued that LzLabs had gone to reasonable lengths to monitor compliance with its behavioural code, acting when it saw potential breaches.
“A breach of the code of conduct does not equate to a breach of the ICA,” he added, referring to IBM’s customer agreement. Asked persistently about LzLabs monitoring procedures, Rockmann responded, “I have no idea how you believe I can track every employee running around.”
Rockmann was also asked about an email from Moores, suggesting that “some things are failing, and failing badly” and that aspects of the “Chinese walls” policy has become “quite unworkable”.
“We can book a trip to Farnborough for the celebration of the destruction of the Chinese walls,” Moores had written.
“That didn’t happen,” Rockmann deadpanned.
The case continues.
May 8, 2024: Day #6: IBM ethics questioned as trial turns to motivations in case against LzLabs
LzLabs lawyers question IBM’s intent when a special projects team investigated its Swiss rival
The latest instalment in the high-stakes trial examining whether a smaller rival broke contractual terms when it set out to develop an alternative source to run IBM mainframe workloads saw a marathon cross-examination of Big Blue special projects executive, Mark Anzani. Day six of the trial was dominated by cut and thrust between Anzani and LzLabs defence lawyer Roger Stewart KC, who carried on his work from yesterday by questioning Anzani for almost the whole of the day. Witness record-keeping habits, timings and suggestions that IBM was effectively trying to block an emerging competitor all came under scrutiny.
On Tuesday, Stewart probed “cloak and dagger” behaviour by Anzani and he began Wednesday’s proceedings on the same tack. Stewart suggested that Anzani’s habit of not maintaining notes or formal records suggested he did not conduct himself “in an honest way”, leaving “no record upon which to base your knowledge”.
The absence of note-taking was “because of your experience of litigation … it can get you caught out with uncomfortable truths”, Stewart said.
As for timings, Stewart suggested that IBM and Anzani should have been familiar with LzLabs and its executive team at an early stage, as well as the fact that LzLabs is the parent of UK subsidiary, Winsopia. Winsopia’s acquisition of an IBM mainframe and subsequent examination of software code is central to the case.
However, Anzani said that matters only started to become serious when telecoms firm Swisscom went public as an LzLabs customer in 2019. While Swisscom undoubtedly was a lighthouse win and proof-point for the technology, LzLabs customers today include commercial vehicle maker MAN Truck & Bus, Canadian connectivity provider Rogers and Italian bank BPER Banca. Part of LzLabs’ defence is that IBM acted against it because it feared more such migrations to weaken its long-running mainframe cash cow.
“The purpose of bringing this litigation was because clients were voting with their feet and IBM needed to stop LzLabs achieving business,” Stewart said. “Your litigation strategy has been to exert maximum pressure on LzLabs, Winsopia and [associated] individuals.”
Anzani said that the action was prompted by IBM’s own legal counsel and aligned with a long history of the company protecting its rights. But Stewart alleged that IBM’s actions were contrary to its own ethics code, employing “hordes of lawyers” to pursue a case counter to fair competition and innovation. LzLabs has said it spent over 300 million Swiss francs (about US$330m) developing its Software Defined Mainframe product that lets IBM mainframe users run workloads more affordably and flexibly.
On a warm day in London, one unfortunate, notable environmental aspect, consistent throughout the trial, continued. Enormous fans were in place to cool the well-attended court but the resulting noise made some remarks difficult to hear.
The case continues.
May 7, 2024: Day #5: LzLabs rebuffs IBM claim it concealed Winsopia link and pushes its own ‘cloak and dagger’ claim
Details emerge of IBM counter-offensive versus mainframe software rival
Lawyers for LzLabs were kept busy in London’s Technology & Construction Court as a stream of witnesses were called to give evidence on day five of the IBM suit against mainframe rival, LzLabs.
Much of that testimony concerned the relationship between Switzerland-headquartered LzLabs and its UK subsidiary Winsopia; IBM contends that the former attempted to conceal its relationship with the latter as part of its efforts to build a rival to IBM’s lucrative mainframe computing business.
Farnborough, Hants.-based Winsopia is at the heart of the contract case as it acquired the mainframe. IBM says defendants went on to break terms of its licensing agreement amid research and development into providing an alternative way to run mainframe workloads.
Defence lawyer Roger Stewart KC began by questioning the relevance of the day’s first witness, Ian Lyon, a Big Blue sales veteran with over 30 years’ experience at the company.
Stewart suggested that Lyon had only minimal involvement with Winsopia, was largely focused on hardware, was not focused on customer licence compliance monitoring, and had never checked the customer database that held details of Winsopia’s legal structure.
Lyon agreed that, although he recalled being involved in a Winsopia hardware purchase, his “involvement in this one transaction was very minimal”. Stewart also noted that IBM had used a customer number for Winsopia with the corporate VAT number for LzLabs.
Next up was Paul Knight, a former IBM account manager until 2018. Stewart suggested that, as the customer account manager for Winsopia, Knight had visited Winsopia and must have seen employees wearing LzLabs logos. Knight denied this and also said he could not recall a 2013 email sent in his name offering Winsopia possible financing.
Stewart pursued a line of questioning around IBM familiarity with Winsopia, saying Knight must have accessed the relevant customer records database. However, Knight said that database was “absolutely hopeless” and had access rights controls attached. Pressed as to what Knight could and couldn’t see specifically, the witness responded, “I don’t know. I couldn’t see it.”
Emma Wright, IBM head of legal for UKI and Company Secretary, was called next. When asked who had sanctioned the current litigation action, echoes of the previous week’s evidence given by IBM’s Steven Wallin rang clear. Wright attempted to refuse to answer this question, citing privilege. As with Wallin, Stewart took an aggressive position, raising his voice to say, “You’re a solicitor giving evidence under oath [and] refusing to answer a question is contempt of court”.
At this, Wright relented, conceding that it was a senior figure within the company. She added that she did not know who had authorised the audit of Winsopia but conceded that Mark Anzani, a leader in IBM’s efforts to track LzLabs activities, had written relevant letters.
Matters took a literary turn as Anzani himself took the stand. Stewart, in a characteristically urbane comment, noted that Anzani had previously described his method of doing business as “cloak and dagger” with few notes or records retained.
Stewart noted that the term derives from Chaucer: “With a knife hidden under a cloak. That’s you, isn’t it? You keep your knife hidden under your cloak of secrecy.”
Anzani said he was referring to keeping information “close to his chest” but conceded that not keeping formal records meant mistakes could be made.
Anzani said he had first heard of LzLabs in March 2016 and had almost immediately commenced an investigation into the company. That showed that US technology entrepreneur John Moores owned the company and led to the discovery of the link between LzLabs and Winsopia.
The IBM investigation of LzLabs went under the name of Project Eiger and Anzani claimed that he viewed it “as an investigation to understand the technical capability of the ‘software mainframe’.
“Some of that information became used on how to respond to client inquiries. I kept that away from the technical team working on the project.”
Stewart suggested that Anzani was also concerned with deterring customers from migrating from IBM to LzLabs and had gone “on attack, on occasion”. “On occasion,” Anzani responded.
The trial continues.
May 2, 2024: Day #4: LzLabs lawyers turn up heat as first IBM witness gives evidence
Mainframe legal case sees doubts cast on Big Blue actions and motivations in suit against Swiss rival
On a day when the toasty setting of the Technology & Construction Court in London necessitated giant aircon units being drafted in between sessions, it was an IBM witness’s turn to feel the heat.
In a long examination of IBM executive Steven Wallin, defence lawyer Roger Stewart KC suggested that Wallin had neither the seniority nor the knowledge to sign and send a warning letter to LzLabs’ UK subsidiary, Winsopia. That letter asked Winsopia to take rapid remedial action to comply with IBM’s ICA customer agreement covering appropriate usage of its software.
Under questioning, Wallin said he had no software auditing experience or in-depth knowledge of Project Eiger, pitched by LzLabs as IBM’s attempt to dissuade users from migrating mainframe workloads to its rival, until late in 2020. Wallin also had said he had only a “very high-level understanding” of terms of the ICA agreement.
Stewart said IBM had spent “an enormous amount of time since 2016” on Project Eiger but Wallin insisted he was unable to quantify the amount of time committed by the IT giant. Rather, he had been under the impression that IBM was merely investigating LzLabs’ activities, reviewing intellectual property, and attempting to understand the SDM product the Swiss company had created to allow customers to migrate critical workloads away from IBM.
Quizzed about the Winsopia letter, Wallin denied that he had been working closely with Mark Anzani, an IBM executive who LzLabs suggests had led Eiger since April 2016. Eiger, LzLabs claims, was set up because LzLabs’s SDM had created a serious threat to its mainframe revenues stream. That stream is worth more than $3bn per quarter, according to a report cited by LzLabs.
“You knew full well Mr. Anzani had been conducting a campaign to keep customers away from LzLabs,” Stewart suggested.
And, in a testy examination, he accused Wallin of “refusing to answer the question” as the latter frequently cited meetings held under “privilege”.
Judge Mrs Justice O’Farrell intervened to remind Wallin he had to answer the questions. Stewart asked, “Has someone told you to hide behind privilege when asked difficult questions?”
Later, he accused Wallin of “gabble” and asked why he was taking such long pauses before answering.
Stewart said that IBM had conducted a “sustained campaign to stop customers going to LzLabs” and suggested that Wallin had been a “stooge” for Anzani. Wallin denied working closely with Anzani, stating: “Anzani was a senior member of the leadership team. I was aware of him and interacted with him on a limited number of occasions.”
IBM, Stewart said, had pursued a policy of FUD, which he spelled out as “fear, upset and distress” to dissuade customers from adopting LzLabs technology. [More commonly, FUD is spelled out as “fear, uncertainty and doubt”. The phrase was popularised in technology circles by Gene Amdahl, whose company Amdahl marketed a mainframe competitor, to describe IBM sales tactics.]
Stewart said IBM had also communicated to customers, warning of reduced security, performance and possible IP infringements. This was “plain FUD”, he said, and a threat that warned customers not to get on the “wrong side of IBM and its lawyers”.
Stewart said that IBM wanted to protect a revenue stream with extremely high margins of 80-90 per cent. Wallin responded by saying there have always been alternatives and healthy competition, as exemplified by the modern rise of cloud hyper-scalers.
The case, scheduled to run for nine weeks, continues.
May 1, 2024: Day #3: LzLabs has its day in court and leans on EC Software Directive for support
Lawyers for IBM UK and its Swiss rival LzLabs debate customer agreement as arguments brew over contractual Ts and Cs
Lawyers for IBM UK and its much smaller mainframe computing rival LzLabs went deep into contractual terms and conditions on day three of their trial in London as the pair vied over rights pertaining to the IBM Customer Agreement (ICA) contract.
The case differs from many technology sector disputes in that it centres on whether LzLabs strayed from terms of the licensing contract. LzLabs lawyers argued over wording, for example suggesting that components such as macros or stubs (relatively tiny software elements) should not be treated as IBM programs.
Users can observe, study and test code so long as those actions don’t infringe copyright, the defence argued, but there was no limitation on the extent of observing, studying and testing. So, in principle, the contract effectively allows the user to observe every internal working part of any IBM program, they claimed.
The defence contends that Lzlabs/Winsopia was allowed to examine code at a microscopic level, so long as it was not reproducing the “expression” of the code. “Expression” of the code is what is protected by copyright and not “ideas, practices, procedures”, it added.
Defences lawyers went on to argue that IBM’s case seemed to be that as soon as a customer includes a macro in the source code of its own application, it is restricted in its usage. “That’s commercial nonsense,” it said, contrary to the language of ICA, and would destroy the competitive ecosystem surrounding mainframe computing.
The claimants argue that Winsopia was systematically “looking under the bonnet”, using tools to exceed the parameters of observing, testing and studying because they dipped into the “internals” of IBM programs.
The overarching defence is that code sent from Winsopia to LzLabs were not part of the ICA terms and so not a breach of contract under terms of the EC Software Directive. LzLabs also argued that it only pursued interoperability and, turning to allegations of disassembly of IBM code, it noted that the original four allegations had been reduced to three and said that this illustrates that suggestions of “systematic disassembly” are not supported by evidence.
The case continues with expert witnesses for the prosecution due to take the stand.
April 30, 2024: Day #2: IBM, LzLabs lawyers fight fire with fire
On the second day of the closely watched trial, prosecution and defence exchanged barbs, claims and counter claims over what IBM knew and what LzLabs did
A fire alarm delayed proceedings at the Rolls Buildings in London on Tuesday amid more heated confrontations as IBM UK continued its claims against LzLabs for breach of its mainframe customer usage contract.
IBM lawyers said LzLabs-owned subsidiary Winsopia used a software tool as a “Swiss Army Knife” in order not to test how IBM mainframe applications work but rather to reverse-engineer code and thus support the development of LzLabs’ SDM (Software-Defined Mainframe) product. SDM lets customers run applications written for IBM’s host hardware on standard, affordable servers or in the cloud.
IBM also suggested that Winsopia’s “scrubbing” technique (that is, its cleansing of IBM code, data and attempts to remove errors) was flawed and inadequate. This process resulted in IBM materials being transferred to LzLabs and hence finding their way into the SDM product. Winsopia/LzLabs’ actions were “lousy and did a terrible job at removing IBM materials”, the prosecution alleged.
Also, building on claims yesterday that IBM did not know of the existence of Winsopia until 2020, prosecutors said LzLabs had deliberately concealed” the connection from IBM UK until 25 August of that year.
Lawyers for LzLabs responded, saying that argument stretched credulity as IBM had commissioned a taskforce to analyse the LzLabs threat as far back as 2016 and the connection between Winsopia and LzLabs was a matter of public documentation. An IBM representative had also asked for annual accounts for Winsopia and LzLabs as far back as 2017, it said.
“You have to assume that IBM were really stupid because you were trying to keep them from something they could find out really easily,” defence lawyers said.
The defence also said that the SDM program is composed of some 3.5 million lines of source code, all of which has been made available to the claimants. Not a single line was copied from IBM source, it insisted. Instead, it was more interested in providing customers with a choice of running mainframe software on a modern system.
It added that what it had created was analogous to a UK power socket where its SDM acts as an international adapter to access the energy source. It had used a highly experienced team of over 60 developers and had commenced work even before it had signed the ICA agreement with IBM, it claimed.
In a rare poetic moment, LzLabs’ lawyers quoted Thomas More, the lawyer, politician and satirical author of ‘Utopia’, who was executed as a traitor after falling out of favour with King Henry VIII. The defence doubtless believes that a victory would be Utopia for competition in the technology sector…
The case continues.
April 29, 2024: Day #1. Big Blue starts London trial with allegations of mainframe code misuse
Such was the state of the packed courtroom in the Rolls Building, London that the judge’s first spoken words were a request for further seating. The attendance levels reflected interest in, and the importance of, a crucial case between IBM UK and Switzerland-headquartered LzLabs with major potential implications for technology development and enterprise IT competition.
After initial housekeeping discussions mostly concerned with timeliness of document submissions and requests for review, IBM UK prosecution lawyers went straight to their claim that LzLabs breached laws when its UK subsidiary Winsopia reverse-engineered mainframe code. That in turn, it said, enabled LzLabs to create its Software Defined Mainframe (SDM) product line that allows customers to run mainframe programs on commodity servers and in the cloud.
That ability unlocks scope for enormous cost savings and provides customers with an off-ramp from Big Iron systems and onto modern hardware.
At its heart, the case brings together two polar views. IBM is painting the situation as “unlawful exploitation of technology” whereas LzLabs says that it has remained compliant with relevant laws including the EU Software Directive and UK law. It wants to foster a view that any judgement against it would be a blow to innovation and competition.
The first day of the trial saw IBM lawyers recount how Winsopia acquired a mainframe from a reseller and allege that the organisation went on to illegally break terms of the IBM Customer Agreement (ICA). “Winsopia repeatedly and extensively reverse-engineered mainframe software and provided the fruits [of its labour] to LzLabs,” lawyers said.
The prosecution noted that several LzLabs figures also worked at Neon Enterprise Software, including serial entrepreneur John Moores, a defendant in the case. Neon and IBM also saw a legal clash in a case that ended in 2011 with Neon withdrawing its products from the market.
In opening remarks, IBM lawyers cited a statement released by a PR agency representing LZ Labs. They said IBM didn’t accept the depiction of it as “a monopoly charging exorbitant pricing” and adding that this theme was anyway not part of the trial. Instead, this was “simply noise by the defendant” and the case was “not Big Blue trying to pursue a competitor”.
In a notable statement, IBM also said it had only become aware of the existence of Winsopia in 2020, despite the unit having been set up several years previously.
The case underlines the remarkable longevity of mainframe technology that has its roots in the middle of the 20th century. All these years later, enterprise executives say mainframe modernisation remains a key concern with seven in 10 saying mainframes are central to their business technology strategies. According to whom? IBM itself in this 2023 report…
