A federal appeals court on Tuesday reversed a judgment that had ordered IBM to pay $1.6 billion to rival BMC Software. The decision came after a lower court found IBM guilty of improperly substituting BMC’s mainframe software at AT&T with its own.
The 5th U.S. Circuit Court of Appeals, situated in New Orleans, determined that the lower court judge had erred in assigning liability. U.S. Circuit Judge Edith Jones, writing on behalf of a three-judge panel, stated that AT&T, a major client of BMC, had transitioned to IBM software “independently,” concluding that BMC had lost to IBM through legitimate means.
A spokesperson for BMC declined to offer a comment on the ruling. Conversely, an IBM spokesperson issued a statement expressing gratitude for the court’s decision, asserting that the company had acted in good faith throughout the engagement, Reuters news report said.
Representatives for AT&T, while not directly involved in the legal dispute, refrained from immediate comment upon request.
BMC, headquartered in Houston, specializes in developing and licensing proprietary mainframe software products. As per an agreement, IBM has the authority to maintain and operate mainframes running BMC software under a “non-displacement” provision, which restricts IBM from transitioning BMC clients’ software to its own, as outlined in the ruling.
AT&T had engaged IBM to oversee its mainframe operations. BMC’s lawsuit, filed in a Houston federal court, accused IBM of breaching their contract when AT&T opted for IBM’s software over BMC’s.
Tuesday’s ruling effectively overturned the 2022 decision by U.S. District Judge Gray Miller, who had previously ordered IBM to compensate BMC with $1.6 billion in damages for contractual violations. Gray Miller had alleged that IBM had entered into a clandestine agreement to replace BMC’s software at AT&T while negotiating the contract in 2015.
