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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> IBM United Kingdom Ltd v LzLabs GmbH & Ors [2025] EWHC 998 (TCC) (24 April 2025) URL: https://www.bailii.org/ew/cases/EWHC/TCC/2025/998.html Cite as: [2025] EWHC 998 (TCC) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Rolls Building London, EC4A 1NL |
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B e f o r e :
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IBM UNITED KINGDOM LIMITED | Claimant |
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- and - |
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(1) LZLABS GmbH (a company incorporated in Switzerland) (2) WINSOPIA LIMITED (3) LZLABS LIMITED (4) MARK JONATHAN CRESSWELL (5) THILO ROCKMANN (6) JOHN JAY MOORES |
Defendants |
____________________
Mark Vanhegan KC, Thomas Ogden, Jaani Riordan & George McDonald (instructed by Clifford Chance LLP) for the Defendants
Reading date: 7th April 2025
Hearing dates: 8th, 9th & 10th April 2025
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Crown Copyright ©
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 24 April 2025 at 10.30am
Mrs Justice O'Farrell:
i) The Second Defendant (Winsopia) was in breach of the ICA.
ii) The First Defendant (LzLabs) and the Sixth Defendant (Mr Moores) unlawfully procured breaches of the ICA by Winsopia.
iii) The First, Second and Sixth Defendants were liable for the tort of unlawful means conspiracy.
iv) The claims against the Third Defendant (LzLabs UK), the Fourth Defendant (Mr Cresswell) and the Fifth Defendant (Mr Rockmann) failed.
v) IBM validly terminated the ICA and associated agreements pursuant to the terms of the ICA or at common law.
vi) The claims were not contractually time-barred or statute-barred for limitation.
i) the ambit and terms of any injunctive relief against the First, Second and/or Sixth Defendants;
ii) disposal and directions in respect of the quantum trial;
iii) whether any declaratory relief should be granted;
iv) costs, including whether there should be any stay of payments;
v) the Defendants' application for permission to appeal;
vi) whether there should be a stay in respect of any of the injunctive relief granted.
i) the twenty-eighth witness statement of Kate Scott dated 1 April 2025;
ii) Ms Scott's twenty-ninth statement dated 3 April 2025;
iii) the fifth witness statement of Thilo Rockmann dated 1 April 2025;
iv) Mr Rockmann's sixth statement dated 7 April 2025;
v) the fifth witness statement of Jan Jaeger dated 1 April 2025;
vi) Mr Jaeger's sixth witness statement dated 7 April 2025;
vii) the first witness statement of Markus Liebenberg dated 1 April 2025;
viii) the fifth witness statement of John Moores dated 1 April 2025;
ix) Mr Moores' sixth statement dated 7 April 2025;
x) the first witness statement of Bryant Burke dated 1 April 2025;
xi) Mr Burke's second statement dated 7 April 2025;
xii) the first witness statement of Stefan Hartweg dated 2 April 2025;
xiii) the first witness statement of Elizabeth Wilkerson dated 1 April 2025.
Injunctive relief
i) the terms of the order for delivery up and destruction in respect of the mainframe and the ICA Programs licensed to the Second Defendant under the ICA;
ii) whether the Court should grant any injunctive relief, prohibiting the First, Second and/or Sixth Defendants from marketing or selling the SDM and requiring them to terminate all existing contracts for the sale of, licensing of, or any services relating to, the SDM;
iii) whether the Court should grant any injunctive relief, prohibiting the First, Second and/or Sixth Defendants from using or relying on any information derived from breach of the ICA;
iv) whether the Court should order notification requirements in respect of other licences for IBM mainframe software.
i) ICA Programs
""ICA Program" shall mean any program in the Agreed List of ICA Programs licensed to the Second Defendant annexed to this Order, including, for the avoidance of doubt, any constituent part thereof."
"Each of the First and Sixth Defendants shall be prohibited from procuring directly or indirectly any further use by the Second Defendant of any ICA Program."
"Each of the First Defendant, Second Defendant and Sixth Defendant shall by 16 July 2025 deliver up to the Claimant, or instruct Azamour (or another independent third-party custodian agreed by the parties or determined by the Court if not agreed) to destroy, all copies of any ICA Program in their possession or control, save that:
(1) Destruction of ICA Programs by the Second Defendant is subject to paragraph 2 above.
(2) Each of the First and Sixth Defendants may provide a copy of any ICA Program in their possession or control to Azamour (or another independent third-party custodian agreed by the parties or determined by the Court if not agreed) for safekeeping, to be held on the same basis as the Archive Copies are held as set out in paragraph 2 above."
"The destruction of copies of ICA Programs by the First Defendant, Second Defendant and Sixth Defendant shall be supervised by an independent forensic IT firm. The instructions and identity of said firm shall be agreed by the parties or appointed by the Court if not agreed and following submissions by the parties. The costs of said firm shall be borne by the relevant Defendants."
"Each of the First Defendant, Second Defendant and Sixth Defendant shall, within 30 days after destruction as set out in paragraphs 4 and 5 above, provide a sworn statement (in the case of the corporate defendants, acting through an appropriate officer or director) confirming compliance with paragraph 4 above and providing a full list of all ICA Programs delivered up or destroyed (as the case may be)."
ii) SDM
"[52] The proposition asserted by Lord Diplock in The Siskina and Bremer Vulkan on the authority of North London Railway was that an injunction may only be granted to protect a legal or equitable right. There can be no objection to this proposition in so far as it signifies the need to identify an interest of the claimant which merits protection and a legal or equitable principle which justifies exercising the power to grant an injunction to protect that interest by ordering the defendant to do or refrain from doing something. In Beddow v Beddow (1878) 9 Ch D 89, 93, Jessel MR expressed this well when he said that, in determining whether it would be right or just to grant an injunction in any case, "what is right or just must be decided, not by the caprice of the judge, but according to sufficient legal reasons or on settled legal principles". As described above, however, within a very short time after The Siskina was decided, it had already become clear that the proposition cannot be maintained if it is taken to mean that an injunction may only be granted to protect a right which can be identified independently of the reasons which justify the grant of an injunction.
…
[57] As an exposition of the court's equitable power to grant injunctions, it would be difficult to improve on the following passage in Spry, Equitable Remedies, 9th ed (2014), at p 333: "
"The powers of courts with equitable jurisdiction to grant injunctions are, subject to any relevant statutory restrictions, unlimited. Injunctions are granted only when to do so accords with equitable principles, but this restriction involves, not a defect of powers, but an adoption of doctrines and practices that change in their application from time to time. Unfortunately there have sometimes been made observations by judges that tend to confuse questions of jurisdiction or of powers with questions of discretions or of practice. The preferable analysis involves a recognition of the great width of equitable powers, an historical appraisal of the categories of injunctions that have been established and an acceptance that pursuant to general equitable principles injunctions may issue in new categories when this course appears appropriate."
This passage (stated in the same terms in an earlier edition of Spry's book) was quoted in Broadmoor Special Hospital Authority v Robinson [2000] QB 775, para 20, by Lord Woolf MR, who described it as succinctly summarising the correct position. It was again quoted and endorsed as a correct statement of the law by Kitchin LJ (with whom Briggs and Jackson LJJ agreed on this point) in Cartier [2017] Bus LR 1, para 47. The Board would likewise endorse it."
"[19] Like any judicial power, the power to grant an injunction must be exercised in accordance with principle and any restrictions established by judicial precedent and rules of court. Accordingly, as Lord Mustill observed in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334, 360-361:
"Although the words of section 37(1) [of the 1981 Act] and its forebears are very wide it is firmly established by a long history of judicial self-denial that they are not to be taken at their face value and that their application is subject to severe constraints."
Nevertheless, the principles and practice governing the exercise of the power to grant injunctions need to and do evolve over time as circumstances change. As Lord Scott observed in Fourie v Le Roux at para 30, practice has not stood still and is unrecognisable from the practice which existed before the 1873 Act.
…
[21] It has often been recognised that the width and flexibility of the equitable jurisdiction to issue injunctions are not to be cut down by categorisations based on previous practice. In Castanho v Brown & Root (UK) Ltd [1981] AC 557, for example, Lord Scarman stated at p 573, in a speech with which the other Law Lords agreed, that "the width and flexibility of equity are not to be undermined by categorisation". To similar effect, in South Carolina Insurance Co v Assurantie Maatschappij "De Zeven Provincien" NV [1987] AC 24, Lord Goff of Chieveley, with whom Lord Mackay of Clashfern agreed, stated at p 44:
"I am reluctant to accept the proposition that the power of the court to grant injunctions is restricted to certain exclusive categories. That power is unfettered by statute; and it is impossible for us now to foresee every circumstance in which it may be thought right to make the remedy available."
In Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd (para 19 above), Lord Browne-Wilkinson, with whose speech Lord Keith of Kinkel and Lord Goff agreed, expressed his agreement at p 343 with Lord Goff's observations in the South Carolina case. In Mercedes Benz AG v Leiduck [1996] AC 284, 308, Lord Nicholls of Birkenhead referred to these dicta in the course of his illuminating albeit dissenting judgment, and stated:
"As circumstances in the world change, so must the situations in which the courts may properly exercise their jurisdiction to grant injunctions. The exercise of the jurisdiction must be principled, but the criterion is injustice. Injustice is to be viewed and decided in the light of today's conditions and standards, not those of yester-year."
[22] These dicta are borne out by the recent developments in the law of injunctions which we have briefly described. They illustrate the continuing ability of equity to innovate both in respect of orders designed to protect and enhance the administration of justice, such as freezing injunctions, Anton Piller orders, Norwich Pharmacal orders and Bankers Trust orders, and also, more significantly for present purposes, in respect of orders designed to protect substantive rights, such as internet blocking orders. That is not to undermine the importance of precedent, or to suggest that established categories of injunction are unimportant. But the developments which have taken place over the past half-century demonstrate the continuing flexibility of equitable powers, and are a reminder that injunctions may be issued in new circumstances when the principles underlying the existing law so require."
"[43] There has been a gradual but growing reaction against that reasoning (which Lord Diplock himself recognised was too narrowly stated: British Airways Board v Laker Airways Ltd [1985] AC 58, 81) over the past 40 years, culminating in the recent decision in Broad Idea [2023] AC 389, cited in para 17 above, where the Judicial Committee of the Privy Council rejected such a rigid doctrine and asserted the court's governance of its own practice. It is now well established that the grant of injunctive relief is not always conditional on the existence of a cause of action."
iii) Information derived from ICA breaches
iv) Notification requirements
Disposal and Quantum
Declaratory relief
Costs
(a) the conduct of all the parties; and
(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful.
(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed any relevant pre-action protocol;
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and
(d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim.
i) Claimant's costs
ii) Defendants' costs
iii) Basis of assessment
i) The Defendants deliberately concealed the facts giving rise to this claim over a decade of development of the SDM from around 2013.
ii) The Second Defendant's failure to comply with the Claimant's audit request was improper (a breach of the ICA) and resulted in the scope of disclosure and the factual investigations in the case being unnecessarily onerous and extensive in scale.
iii) The nature and extent of the underlying wrongdoing which brought about the need for these proceedings included (i) breaches which were found to be deliberate and "systematic and widespread": see Judgment [914]; (ii) an unlawful means conspiracy between the Defendants; and (iii) conduct which formed part of a pattern of behaviour on the part of Mr Moores and his companies against IBM.
iv) The Defendants consistently sought to frustrate the disclosure of documents which would reveal their breaches.
v) The Defendants adopted an attritional and scorched earth approach to these proceedings, with the Defendants contesting every conceivable point, however unmeritorious.
vi) As against Mr Moores, the Court is invited to have regard to his (double) deletion of emails within his Gmail account, which (although not addressed in the Judgment) was addressed in the Claimant's written closing at section F2 and is in the Claimant's submission relevant to the question of costs.
iv) Payment on account of costs
i) The information provided by the Claimant is inadequate and deprives the Defendants of a proper opportunity to scrutinise the costs; in particular, there is no breakdown of the costs in phases and scant description of the work carried out.
ii) There has been no deduction of the costs relating to the unsuccessful claims against the Third, Fourth and Fifth Defendants, which are estimated by Ms Scott to be £6.1 million, based on the costs incurred by the Defendants.
iii) There is a high degree of uncertainty as to what may be recovered on detailed assessment; the Defendants would wish to challenge items such as solicitors' hourly rates, the size of the legal teams and deployment, experts' fees and counsel's fees.
i) the Court will only allow costs which have been reasonably incurred and are reasonable in amount, resolving any doubt in favour of the paying party: CPR 44.3(1)&(2); and
ii) the Court will only allow costs which are proportionate to the matters in issue: CPR 44.3(2).
"[23] What is a reasonable amount will depend on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and thus an element of uncertainty, the extent of which may differ widely from case to case as to what will be allowed on detailed assessment. Any sum will have to be an estimate. A reasonable sum would often be one that was an estimate of the likely level of recovery subject, as the costs claimants accept, to an appropriate margin to allow for error in the estimation. This can be done by taking the lowest figure in a likely range or making a deduction from a single estimated figure or perhaps from the lowest figure in the range if the range itself is not very broad.
[24] In determining whether to order any payment and its amount, account needs to be taken of all relevant factors including the likelihood (if it can be assessed) of the claimants being awarded the costs that they seek or a lesser and if so what proportion of them; the difficulty, if any, that may be faced in recovering those costs; the likelihood of a successful appeal; the means of the parties; the imminence of any assessment; any relevant delay and whether the paying party will have any difficulty in recovery in the case of any overpayment."
v) Stay and/or staged payments
Application for permission to appeal
i) the court considers that the appeal would have a real prospect of success; or
ii) there is some other compelling reason for the appeal to be heard.
i) Grounds 1 to 7 in Section (A) raise alleged errors in the Court's understanding or application of the Software Directive but fail to identify specific errors of law or principle in the Judgment, which sets out the relevant legislation, case law and principles at paragraphs [214] to [270]. The reference to the recent Sony v Datel judgment of the CJEU does not assist because it is not binding, was not relied on by the parties, and does not directly address the issues before the Court.
ii) Grounds 8 to 15 in Section (B) seek to challenge points of construction of the ICA but do not identify any error in the Court's approach or analysis. The material terms of the ICA are at paragraphs [64] to [75] and the analysis is at paragraphs [147] to [272] of the Judgment.
iii) Grounds 16 to 35 in Sections (C), (D), (E), (F) and (G) are an attempt to challenge findings of fact on the technical breaches made by the Court having assessed the credibility and reliability of the witnesses who gave evidence against the contemporaneous documents deployed during the trial and the expert evidence. The technical breaches are considered and determined at paragraphs [273] to [844] of the Judgment.
iv) Grounds 36 to 38 in Section (H) are a further attempt to challenge findings of fact as to knowledge and intention of the Defendants, based on the Court's assessment of the credibility and reliability of the witnesses who gave evidence at trial. The case on unlawful procurement of breach is considered and determined at paragraphs [845] to [936] of the Judgment.
v) Grounds 39 to 41 in Section (I) are a further attempt to challenge findings of fact as to the combination, knowledge and intention of the Defendants, based on the Court's assessment of the credibility and reliability of the witnesses who gave evidence at trial. The case on unlawful means conspiracy is considered and determined at paragraphs [937] to [960] of the Judgment.
vi) Grounds 42 in Section (J) and 46 in Section (K) seek to challenge the Court's finding that there was damage for the purpose of unlawful means conspiracy at paragraphs [959] and [1119] of the Judgment but fail to identify any error of principle or law.
vii) Ground 43 in Section (K) seeks to challenge the Court's construction of clause 1.11.4 of the ICA but the arguments made were considered in the Judgment and rejected at paragraphs [991] to [1007]. The Defendants have not identified any authority in which a court at first instance, or on appeal, reached a different conclusion on a similar issue of construction.
viii) Grounds 44 and 45 in Section (K) seek to challenge the Court's findings of fact on deliberate concealment and knowledge, considered at paragraphs [1013] to [1118] of the Judgment, but do not identify any error in the legal principles set out and fail to engage with the detailed evidence set out in that part of the Judgment in support of the findings.
ix) Grounds 47 to 49 in Section (L) seek to challenge the Court's findings of fact on the audit and termination issues considered at paragraphs [961] to [987] of the Judgment but do not identify any error of principle or law.
Stay
"It is not in dispute that where a plaintiff has at first instance established a right to a perpetual injunction, the court has a discretion to stay the operation of that injunction pending an appeal by the defendant against the judgment. On what principles ought such a discretion to be exercised? The object, where it can be fairly achieved, must surely be so to arrange matters that, when the appeal comes to be heard, the appellate court may be able to do justice between the parties, whatever the outcome of the appeal may be. Where an injunction is an appropriate form of remedy for a successful plaintiff, the plaintiff, if he succeeds at first instance in establishing his right to relief, is entitled to that remedy upon the basis of the trial judge's findings of fact and his application of the law. This is, however, subject to the defendant's right of appeal. If the defendant in good faith proposes to appeal, challenging either the trial judge's findings or his law, and has a genuine chance of success on his appeal, the plaintiff's entitlement to his remedy cannot be regarded as certain until the appeal has been disposed of. In some cases the putting of an injunction into effect pending appeal may very severely damage the defendant in such a way that he will have no remedy against the plaintiff if he, the defendant, succeeds on his appeal. On the other hand, the postponement of putting an injunction into effect pending appeal may severely damage the plaintiff. In such a case a plaintiff may be able to recover some remedy against the defendant in the appellate court in respect of his damage in the event of the appeal failing, but the amount of this damage may be difficult to assess and the remedy available in the appellate court may not amount to a complete indemnity. It may be possible to do justice by staying the injunction pending the appeal, the plaintiff's position being suitably safeguarded. On the other hand it may, in some circumstances, be fair to allow the injunction to operate on condition that the plaintiff gives an undertaking in damages or otherwise protects the defendant's rights, should he succeed on his appeal. In some cases it may be impossible to devise any method of ensuring perfect justice in any event, but the court may nevertheless be able to devise an interlocutory remedy pending the decision of the appeal which will achieve the highest available measure of fairness. The appropriate course must depend upon the particular facts of each case."
"(i) The court must be satisfied that the appeal has a real prospect of success.
(ii) If the court is satisfied that there is a real prospect of success on appeal, it will not usually be useful to attempt to form a view as to how much stronger the prospects of appeal are, or to attempt to give weight to that view in assessing the balance of convenience.
(iii) It does not follow automatically from the fact that an interim injunction has or would have been granted pre-trial that an injunction pending appeal should be granted. The court must assess all the relevant circumstances following judgment, including the period of time before any appeal is likely to be heard and the balance of hardship to each party if an injunction is refused or granted.
(iv) The grant of an injunction is not limited to the case where its refusal would render an appeal nugatory. Such a case merely represents the extreme end of a spectrum of possible factual situations in which the injustice to one side is balanced against the injustice to the other.
(v) As in the case of the stay of a permanent injunction which would otherwise be granted to a successful claimant, the court should endeavour to arrange matters so that the Court of Appeal is best able to do justice between the parties once the appeal has been heard."
Order