Software Contract Dispute: IBM Wins an Appeals, Court Reverses a $1.6 Bn Decision Given to BMC

By Consultants Review Team Wednesday, 01 May 2024

A federal appeals court reversed a $1.6 billion decision against the computer giant in a dispute involving a software contract between BMC Software and IBM, and IBM emerged triumphant. The 5th US Circuit Court of Appeals in New Orleans, according to Reuters, issued the reversal, pointing to mistakes in the lower court judge's assessment of responsibility.

Writing on behalf of a three-judge panel, US Circuit Judge Edith Jones emphasized that AT&T, a significant client of BMC, had chosen on its own to go to IBM software. According to Judge Jones, BMC appeared to have "lost out to IBM fair and square".

Through a representative, IBM conveyed its appreciation for the court's ruling. They went on to say that the business has behaved honorably the whole time. BMC, on the other hand, chose not to comment on the most recent development in the legal drama.

The legal controversy has its roots in IBM's management of AT&T's mainframe operations. Houston-based BMC, a provider of exclusive mainframe software, claimed that IBM had broken their agreement when AT&T switched from using BMC's software to IBM's.

The claim that IBM had violated a "non-displacement" clause, which prohibited IBM from substituting its own software for BMC software, was at the heart of BMC's defense. The appeals court's conclusion is a significant divergence from US District Judge Gray Miller's earlier 2022 finding.

After a decision in favor of BMC, Judge Miller ordered IBM to pay $1.6 billion in damages for allegedly breaking their contract. Miller made his conclusion based on the statement that during the 2015 contract negotiations at AT&T, IBM had previously promised to replace BMC's software.

Despite being a significant actor in the dispute since it is a client of both IBM and BMC, AT&T is not actively involved in the legal proceedings. Representatives of the massive telecom company haven't yet commented on the current decision, though.

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