IBM United Kingdom Ltd v Lzlabs GmbH (a company incorporated in Switzerland)
| Jurisdiction | England & Wales |
| Judge | Mrs Justice O'Farrell |
| Judgment Date | 28 February 2024 |
| Neutral Citation | [2024] EWHC 423 (TCC) |
| Court | King's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2021-000363 |
[2024] EWHC 423 (TCC)
Mrs Justice O'Farrell DBE
Case No: HT-2021-000363
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Royal Courts of Justice
Rolls Building
London, EC4A 1NL
Nicholas Caddick KC & James Weale (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Claimant
Roger Stewart KC & George McDonald (instructed by Clifford Chance LLP) for the Defendants
Hearing date: 16 th February 2024
APPROVED JUDGMENT
This judgment was handed down by the court remotely by circulation to the parties' representatives by email and released to The National Archives. The date and time for hand-down is deemed to be 28 February 2024 at 10.30am
The matter before the court is the claimant's application dated 13 February 2024, seeking directions and/or guidance from the court in respect of the designation and management of confidential documents for the purposes of the trial listed to start on 29 April 2024.
Background
This claim arises out of the development by the first defendant (“LzLabs”) of software, known as the ‘Software Defined Mainframe’ (“the SDM”), which is said to enable its customers to take applications developed for IBM mainframe systems and run them in their object level form on x86-based computer architectures without the need for source code changes or recompilation.
On 9 August 2013 the claimant licensed ICA programs to the second defendant (“Winsopia”) pursuant to an IBM customer agreement (“the ICA”) and subsequent agreements. On 24 February 2021 the claimant purported to terminate the licence agreements for contractual breach; alternatively at common law.
On 21 September 2021, the claimant issued these proceedings, in which it seeks a declaration and injunctive relief, an account of profits and/or damages.
The claimant's case is that the defendants breached, conspired with each other to breach, or procured the breach of, the ICA, using Winsopia's access to the IBM mainframe software to develop the SDM to run software systems without an IBM mainframe or the IBM mainframe software stack by reverse assembling, reverse compiling or reverse engineering the software.
The defendants dispute the claims and counterclaim injunctive declaratory relief, damages for breach of the ICA and specific performance of the same.
The defendants' case is that the SDM was developed by LzLabs through its own research and development. No IBM material was used, other than in compliance with the terms of the ICA and through acts of observation, study and testing, or to achieve interoperability of an independently created computer programme with other programmes, within the defendants' statutory rights.
The defendants also rely on defences of contractual and statutory limitation. The claimant's response is that limitation does not provide a defence in the circumstances of this case, where among other matters the relevant causes of action raise issues of dishonest conduct and/or deliberate concealment.
It is apparent from the pleadings that preparation for, and presentation of the parties' respective cases at, trial will include:
i) interrogation of the source code of both IBM and LzLabs, and deconstruction of the software development process for the SDM, to ascertain whether it involved reverse assembling, reverse compiling or reverse engineering of IBM software;
ii) analysis of contemporaneous technical and non-technical communications within and between the defendants to determine whether development of the SDM was in breach of the ICA or permitted by virtue of the Copyright, Design and Patents Act 1988; and
iii) analysis of contemporaneous communications within and between the claimant, IBM Corp and customers to determine when the claimant knew, or ought to have known, of relevant matters said to give rise to an actionable claim.
Confidentiality Order
Given the commercial sensitivity of many of the documents, the parties agreed that a confidentiality ring would be required to facilitate disclosure in these proceedings. Following negotiation and agreement by the parties to the terms on which a confidentiality ring would be established and operated, an order dated 21 December 2022 was made by Waksman J (“the Confidentiality Order”).
The Confidentiality Order (as amended) contains the following provisions:
“1.1.2 ‘Confidential Customer Information’ means:
(a) any information contained or identified in any document:
(i) which relates and/or refers to Source Code Information of a customer, potential customer, business partner, or third party; or
(ii) which is otherwise proprietary or confidential to, and/or protected by confidentiality arrangements in place with customer, potential customer, business partner, or other third party.
…
1.1.9 ‘Inner Confidentiality Ring Information’ means:
(a) documents (or any part thereof) that have been or are to be disclosed by a Party to these Proceedings and that (i) are designated by the disclosing Party as Inner Confidentiality Ring Information in writing in accordance with paragraph 7 of this Confidentiality Order, or (ii) are designated as Inner Confidentiality Ring Information by the Court; and
(b) documents (or any part thereof) which contain or otherwise disclose Inner Confidentiality Ring Information falling within paragraph 1.1.9(a), above, but excluding a redacted version or copy of such a document which does not contain or otherwise disclose any such content
Inner Confidentiality Ring Information shall include but shall not be limited to:
(c) all copies, extracts and complete or partial summaries of the Inner Confidentiality Ring Information, together with portions of transcripts or any Confidential Proceedings Document and exhibits or annexes that contain or otherwise disclose the Inner Confidentiality Ring Information;
(d) portions of Inner Confidentiality Ring Information filed at Court or served on another Party;
and
(e) any information, findings, data or analysis containing or otherwise disclosing the Inner Confidentiality Ring Information or the substance of the Inner Confidentiality Ring Information,
provided that in all instances set out above: (i) Inner Confidentiality Ring Information is information which by its nature is highly sensitive commercial information that is reasonably necessary and proportionate to designate as Inner Confidentiality Ring Information in accordance with the terms of this Order and (ii) the designating Party has an honest and reasonable belief as to the designation acting in good faith.
…
1.1.12 ‘Outer Confidentiality Ring Information’ means:
(a) documents (or any part thereof) that have been or are to be disclosed by a Party to these Proceedings and that (i) are designated by the disclosing Party as Outer Confidentiality Ring Information in writing in accordance with paragraph 7 of this Confidentiality Order, or (ii) are designated as Outer Confidentiality Ring Information by the Court; and
(b) documents (or any part thereof) which contain or otherwise disclose Outer Confidentiality Ring Information falling within paragraph 1.1.12(a), above, but excluding a redacted version or copy of such a document which does not contain or otherwise disclose any such content.
Outer Confidentiality Ring Information shall include but shall not be limited to:
(c) all copies, extracts and complete or partial summaries of the Outer Confidentiality Ring Information, together with portions of transcripts or any Confidential Proceedings Document and exhibits or annexes that contain or otherwise disclose the Outer Confidentiality Ring Information;
(d) portions of Outer Confidentiality Ring Information filed at Court or served on another Party;
(e) documents which contain special categories of personal data within the meaning of Article 9(1) of Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 (the General Data Protection Regulation); and
(f) any information, findings, data or analysis containing or otherwise disclosing the Outer Confidentiality Ring Information or the substance of the Outer Confidentiality Ring Information.
…
1.1.18 ‘Source Code Information’ means:
(a) any Confidential Information insofar as it consists of computer source code (whether written in a high-level language, low level-language, Assembler or other instructions) and related instructions and associated metadata;
(b) Winsopia Responses; and
(c) Requests sent from the First Defendant to the Second Defendant through the DR System,
unless upon the agreement of the Parties or an application to the Court it is determined that some or all of the information in paragraphs (b) and (c) above should not be treated as Source Code Information.
1.1.19 ‘Winsopia Response’ means any information sent from the Second Defendant to the First Defendant through the ‘Discovery Request system’ (as provided for in the Services Agreement dated 4 December 2013 between the First and Second Defendants (the “DR System”)) and any attachments to a Winsopia Response (including any attachment that was sent separately from the corresponding Winsopia Response due to attachment size constraints in the DR System).”
Source Code Information was disclosed by the parties on purpose built and configured source code computers, to which access was strictly limited in secure rooms at Clifford Chance's offices. Source Code Information, Confidential Customer Information and Inner Confidentiality Ring Information is made available only to the Inner Confidentiality Ring members or, in the case of Source Code Information and Confidential Customer Information, a...
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