IBM Sues Micro Focus For Copyright Infringement and Breach of Contract in Software Development Related Brawl
By Pam Fulmer
Software development agreements between enterprise software publishers can sometimes lead to licensing disputes and related litigation. Two software publishers known for their aggressive software audits against their enterprise software customers have ended up in their own "dust up" relating to IBM Corporation's ("IBM") partner software development program. Recently, IBM sued Micro Focus International plc and Micro Focus (US), Inc. (collectively, “Micro Focus” or “Defendants”) in the Southern District of New York for copyright infringement and breach of contract arising out of an IBM development agreement involving IBM’s PartnerWorld program. IBM accuses Micro Focus of copying IBM’s computer programs without authorization and breaching the parties’ development agreement by using its developer access to undertake such prohibited acts. IBM alleges that Micro Focus created the Micro Focus Enterprise Suite by copying IBM’s copyrighted Works, and that Micro Focus promotes and uses the pirated software for financial gain, and in brazen disregard of IBM’s intellectual property rights and Micro Focus’s contractual obligations to IBM.
According to the Complaint, Micro Focus created software called Micro Focus Enterprise Server and Micro Focus Enterprise Developer by using its developer access to copy IBM’s CICS Transaction Server for z/OS (“CICS® TS”) software. IBM offers a general-purpose application server and transaction processing subsystem called the CICS Transaction Server for z/OS, or “CICS® TS,” for its z/OS® operating system environment. IBM holds the copyrights for CICS® TS (the “Works”). IBM claims that the Works feature uniquely expressed source code, object code, structure, architecture, modules, algorithms, data structures, and control instructions, and are creative computer programs, which were the result of IBM’s engineering discretion and substantial skills, resources, and creative energies. The Complaint alleges that the Works also are of great value to IBM and remain integral to the daily business operations of much of IBM’s mainframe system customer base.
According to IBM, the developers who participate in the IBM PartnerWorld program (“PartnerWorld”) agree to the IBM PartnerWorld Agreement and Value Package Attachment (the “PartnerWorld Agreement”). IBM contends that along with other agreements, the PartnerWorld Agreement sets the terms under which developers are permitted to use IBM’s computer programs. These terms ensure that IBM and its developers are aligned in their goals: to promote innovative solutions for their mutual customers.
IBM’s z/OPD Developer Discount Program (“Developer Discount Program”) similarly provides benefits to third party developers and grants them access to IBM’s valuable mainframe software. Participants in the Developer Discount Program receive access to IBM copyrighted software, including the Works. In exchange, IBM’s developers agree to three different agreements detailing the limited scope of their access and use: (1) IBM’s Client Relationship Agreement (the “CRA”); (2) Attachment for Developer Discount – IBM Z (the “CRA Attachment”); and (3) Addendum to the Attachment for Developer Discount for IBM Z (the “CRA Addendum”). None of these agreements are attached to the Complaint
IBM asserts that through these agreements, participants in the Developer Discount Program agree to comply with the terms of the limited license granted to them, and “not us[e] any of the elements of the Program or related licensed material separately from the Program.” Participants are prohibited from “reverse assembling, reverse compiling, translating, or reverse engineering the Program” and making derivative works based on IBM’s software. Further, IBM’s developers promise to use their exclusive access to IBM software for the mutual benefit of the parties and their customers. IBM claims that Micro Focus violated these agreements by copying elements of IBM’s copyrighted Works to create a derivative work in at least Micro Focus Enterprise Developer and Micro Focus Enterprise Server. IBM argues that there is no way such extensive similarity could arise through attempts to meet similar functional requirements, or as a result of coincidence, and that the striking similarities indicate that Micro Focus reverse engineered at least a portion of the CICS® TS software in contravention of Micro Focus’s various contractual obligations to IBM. As a result, IBM terminated Micro Focus’s involvement in the Developer Discount Program by sending a Notice of Non-Renewal on May 31, 2021, and Micro Focus’s membership ended by August 31, 2022.
IBM is seeking preliminary and permanent injunctive relief, a finding that Micro Focus infringed its copyrights and breached the development related licensing agreements. IBM also seeks an award of damages and an accounting from Micro Focus, as well as the award of attorneys’ fees and costs.
The case is IBM Corporation v. Micro Focus (US), Inc., et. al, venued in the Southern District of New York. Tactical Law will continue to monitor the case. Check back for updates.