LZLabs Gmbh & Ors v IBM UK Limited [2025] EWCA Civ 842

[2025] EWCA Civ 842Case No CA-2025-001157
IN THE COURT OF APPEAL (CIVIL DIVISION)
[2025] EWHC 532 (TCC)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Mrs Justice O'Farrell
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Judgment Date: 4 July 2025
Before
LORD JUSTICE COULSONLORD JUSTICE MALES
Between
(1) LZLabs GmbhAppellant(2) Winsopia LimitedAppellant(3) John Jay MooresAppellantIBM UK LimitedRespondent
Roger Stewart KC, Mark Vanhegan KC, Thomas Ogden, Jaani Riordan, George McDonald & Joshua Marshall (instructed by Clifford Chance LLP) for AppellantsNicholas Saunders KC, Matthew Lavy KC, Fred Hobson KC, James Weale, Laura Wright, Henry Edwards, Alex Taylor and Jacob Haddad (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for RespondentHearing Hearing date: 20 June 2025
Reasons for Order Refusing the Appellants’ Application for Permission to AppealThis judgment was handed down remotely at 4 July 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.LORD JUSTICE COULSON:1.Introduction
[1]These judgments set out the reasons for our order dated 4 July 2025 refusing the appellants’ application for permission to appeal. Although they have been given a neutral citation number, that is purely for administrative convenience. They do not cite copious authorities or always give citations for those that are referred to. They assume the detailed knowledge of the papers and the issues which only the parties will have: they are not designed to be free-standing.[2]Following a trial which lasted 33 days (after 5 pre-reading days), on 10 March 2025, O’Farrell J handed down her main judgment in this case ([2025] EWHC 532 (TCC)). Over the course of 1,122 paragraphs and 253 pages, the judge found in favour of IBM and against LZLabs, Winsopia, and Mr Moores (collectively “the appellants”). The allegations were centred on Winsopia’s breaches of the ICA between Winsopia and IBM and the unlawful procurement of those breaches/unlawful means conspiracy on the part of LZLabs and Mr Moores.[3]Following a further three day hearing in April 2025, O’Farrell J handed down a consequentials judgment ([2025] EWHC 998 (TCC)). Amongst other things, she granted injunctive relief and an order for the delivery up and destruction of the ICA Programs that were the subject of the trial, by 16 July 2025. That date has meant that this application for permission to appeal has been dealt with as a matter of urgency. 2 The Judge’s Main Judgment[4]The main judgment in this case is the product of an enormous amount of industry and skill on the part of the judge. It is, on any view, an impressive piece of work.[5]The essence of what the judge found was this. Two of the appellants, LZ Labs and its owner, Mr Moores, wanted to build their own mainframe (the SDM). Their intention from the outset was to access elements of the IBM Programs in order to achieve this aim (or certainly to achieve it more speedily). Through Winsopia, a company owned by LZ Labs, they contracted with IBM UK on a standard form (“the ICA”) which allowed their use of IBM programs on an IBM mainframe. The judge found that, contrary to the ICA, the appellants took the IBM Programs apart (disassembly/reverse engineering etc) and used elements of those Programs to build the SDM. The purpose of the SDM was to allow IBM mainframe customers to run their existing customer applications, written for a mainframe, without mainframe hardware or software.[6]Section 1 of the main judgment sets out the introduction. Section 2 sets out the background to the dispute and demonstrates, putting it neutrally, that some of the appellants had in the past been involved in similar conduct to that which was now alleged in these proceedings. It also identifies at [59] that they foresaw from the start the possibility of this litigation. The judge demonstrated that the codes of conduct to be followed by Winsopia and LZLabs – primarily concerned with a Clean Room arrangement to try and avoid prospective breaches of the ICA between IBM and Winsopia - were continually cut down and weakened by Mr Moores, precisely because anything approaching a genuinely independent development was proving more troublesome than Mr Moores was prepared to accept. This section also contains an analysis of the terms of the ICA between [64]-[75].[7]Section 3 sets out the history of the proceedings and the issues. Section 4 deals with the construction of the ICA because that was at the heart of the dispute between the parties. The paragraphs concerned with the ICA itself run from [147]-[212]. The judge concluded at [213] that the restrictions on the use of the ICA Programs were express and clear. However, they had to be read subject to the Software Directive, embodied in English law by the CDPA 1988.[8]She addressed the Software Directive between [214]-[271]. She accepted the appellants’ primary argument that the ICA had to be construed against the factual matrix of the Software Directive so as to avoid conflict. The Software Directive can, in certain limited circumstances, override the terms of a contract such as the ICA. The judge summarised the principles to be drawn from the authorities on the Software Directive at [258]-[270]. Her conclusions on the ICA were at [271].[9]Section 5 of the judgment is concerned with the alleged breaches of the ICA. This is the heart of the judgment and runs from [273]-[844]. Numerous Items were found to be in breach, although some allegations of breach were rejected. Section 6 is concerned with the allegation that (amongst others) LZLabs and Mr Moores unlawfully procured the breaches of the ICA. Between [845]-[936] the judge explains why she upheld those allegations against LZLabs and Mr Moores and why it failed against three other defendants, LZ Labs Ltd (the UK company), and two directors, Mr Rockmann and Mr Cresswell.[10]Section 7 of the judgment is concerned with the allegations of unlawful means conspiracy. At [937]-[960] the judge found that LZLabs, Winsopia and Mr Moores were liable for the tort of unlawful mean conspiracy whilst the claims against the three other defendants failed. Section 8 is concerned with IBM’s request for an audit, Winsopia’s failure to agree to that (despite the terms of the ICA), and the subsequent termination of the ICA ([961]-[987]). The judge concluded that IBM validly terminated the ICA and Winsopia’s licence for the ICA Programs.[11]Section 9 deals with the various issues as to limitation between [988]-[1120]. The judge concluded that IBM’s claims were not contractually time barred or statute barred for limitation. There is then a summary of her conclusions at [1121].[3]The Consequentials Judgment[12]As noted above, following three further days of argument the judge dealt with a variety of contested further issues in her consequentials judgment. At [6]-[29] she addressed the claim for injunctive relief and granted various injunctions for delivery up/prohibition. At [33]-[35] she granted IBM a declaration in respect of their right to terminate the ICA but declined to grant the other declarations sought by IBM. She dealt with costs between [36]-[71] and ordered the applicants to pay all the costs of the proceedings. This included the costs of the claims against LZLabs Limited, Mr Rockmann and Mr Cresswell.[13]As to the basis of costs, she concluded that it would not be appropriate to grant indemnity costs. She noted at [54] that:
“This was hard-fought, technically complex litigation, in which numerous points were taken on both sides, both sides were critical of the other’s disclosure and every point was argued to the bitter end.”
She ordered a payment on account of costs to IBM of £20 million.[14]Finally, she refused the applicants’ application for permission to appeal. At that point there were 49 grounds with 165 paragraphs of alleged errors, and the application was supported by the skeleton running to 41 pages. The judge gave detailed reasons as to why she refused permission to appeal. She described the lengthy draft grounds of appeal as “an attempt to re-litigate each and every substantive issue in the case by re-opening every adverse finding, in circumstances where the court applied established principles of law to the facts of the case as determined on the factual and expert evidence following the 33 day trial.” That seems to me an entirely accurate description.[4]The Proposed Appeal[15]The proposed appeal appears now to have expanded. Although it seeks to rely on 35 (not 49) identified grounds of appeal, many of those contain multiple different sub-grounds. Simply by way of example, Ground 5 contains 6 separate complaints and Ground 14 contains 5 separate complaints. That process is repeated throughout the document. I have counted well over 150 separate complaints within the 35 grounds. At the hearing on 20 June 2025, Mr Stewart KC for the appellants argued that that was misleading because the grounds operated in a cascade, so that, he said, many of the grounds fell away depending on decisions further up the line. But on analysis that submission was inaccurate; the number of grounds rendered otiose by earlier grounds was small. Moreover, the cascade argument pre-supposed that the appellants were granted PTA on all the earlier grounds. If they were not, then each of the grounds (and sub-grounds) had to be worked through one by one, 150 times.[16]This ‘kitchen sink’ approach is supported by a skeleton argument which, at 80 pages, is now twice the length that it was before the judge, and more than three times as long as the permitted limit of 25 pages. In essence, as the judge noted, no part of the case at trial is immune from the application for permission to appeal: even though it is said that the appellants do not seek to overturn the judge’s findings of fact, the grounds of appeal are littered with complaints that the judge’s findings of fact were “unsupportable” or “wrong”. On its face, the proposed appeal is therefore a re-run of the first instance trial, albeit with at least one potentially important change of emphasis (dealt with further below).[17]Surprisingly, given the sheer volume of documentation, and the fact that the appellants seek to have the appeal expedited, neither side had given an estimate of how long this appeal hearing might actually take, were PTA to be granted (and leaving aside the copious amount of pre-reading and judgment preparation time that would be required). In answer to questions from the court at the hearing on 20 June, Mr Stewart said 5 days. Mr Saunders KC, for IBM, said 8-10 days. Neither estimate was the subject of any sort of breakdown. My Lord, Lord Justice Males and I thought that, for reasons which will become apparent below, both these estimates were too optimistic. This is after all, an appeal that seeks to overturn every adverse finding made after a 33 day trial. We thought as much as 15 days was a more realistic estimate for the ‘island-hopping’ that would be involved. Even on that estimate, and taking my 150 total for grounds and sub-grounds, that would mean getting through 10 grounds and sub-grounds of appeal every day of the appeal hearing. Assuming a 5 hour court day, that would mean 30 minutes per ground or sub-ground, allowing 15 minutes for each side. That is a very tall order.[18]As noted above, there is one major shift in the focus of the appellant’s case. At first instance, the parties – not unreasonably – focused on the ICA and whether or not the appellants’ conduct constituted a breach of the ICA. That was what IBM’s case was all about. As part of a consideration of the numerous breaches alleged, it was accepted that the Software Directive was relevant (as explained above) but it was not the primary basis of the appellants’ defence. That was perhaps unsurprising, given that this was not a copyright infringement claim. However, Grounds 1-6 of the proposed appeal are all concerned, not with the ICA, but with the Software Directive, and even some of the grounds which are ostensibly concerned with breaches of the ICA (such as Ground 8) expressly seek to rely on the Software Directive to allege that the judge went wrong. This new emphasis has not always enhanced the clarity and coherence of this application for PTA.[4]The Proper Approach to PTA in this Case[19]The starting point must be to identify the proper approach to PTA in this sort of case. There are a number of particular points to be made, none of which were addressed in the appellants’ skeleton argument.[20]First, appeals on the judge’s fact finding will not generally be entertained by this court save in limited and well-defined circumstances As The Supreme Court said in Perry v Raleys Solicitors [2019] UKSC 5, [2019] 2 WLR 636 at [52] those may be summarised “as requiring a conclusion either that there was no evidence to support a challenged finding of fact, or that the trial judge’s finding was one that no reasonable judge could have reached.” . As Lewison LJ put it in Fage UK Limited & Another v Chobani UK Limited & Another [2014] EWCA Civ 5, “the trial is not a dress rehearsal. It is the first and last night of the show. Duplication of the trial judge’s role on appeal is a disproportionate use of the limited resources of an appellate court, and will seldom lead to a different outcome in an individual case. In making his decision a trial judge will have regard to the whole of the sea of evidence presented to him, whereas an appellant court will only be island hopping.” I consider that each of those warnings must apply a fortiori where the first instance trial took 33 days and where so many of the individual complaints supporting the application for PTA are criticisms of the judge’s extensive fact-finding.[21]Secondly, to the extent that the appellants argued that some of their criticisms arise out of the judge’s evaluation of the facts, rather than her fact-finding per se, I do not believe that that helps them very much. That is again because the threshold for challenge is high. At [76] of the judgment in Re Sprintroom Limited [2019] EWCA Civ 932; [2019] B.C.C. 1031, this court said: “76. So, on a challenge to an evaluative decision of a first instance judge, the appeal court does not carry out a balancing task afresh but must ask whether the decision of the judge was wrong by reason of some identifiable flaw in the judge’s treatment of the question to be decided, ‘such as a gap in logic, a lack of consistency, or a failure to take account of some material factor, which undermines the cogency of the conclusion’”.[22]Thirdly, one of the reasons for the length of time of this trial was the amount of expert evidence. The judge made copious references to that expert evidence in her judgment. In Thompson v Christie Manson & Woods Limited & others [2005] EWCA Civ 555, May LJ warned that, since the evaluation of expert evidence was likely to be bound up with a wider evaluation of matters of fact, an appellate court will be very slow to intervene in findings based on expert evidence. So he said that, whilst individual points may be amenable to appellate evaluation, “no appellate court should cherry pick a few such points so as to disagree with a composite first instance decision which, in the nature of a jigsaw, depended on the interlocking of a very large number of individual pieces, each the subject of expert evidence that the appellate court has not heard.” Again, the ‘jigsaw’ analogy applies directly here.[23]Fourthly, this is an appeal from the Technology and Construction Court. There have been a number of authorities concerned with the practical difficulties of appealing against decisions of such a specialist tribunal. I gathered them together in Wheeldon Brothers Waste Limited v Millennium Insurance Company Limited [2018] EWCA Civ 2403 at [12]-[16]. I then summarised the applicable principles at [17] as follows:
“17. In those circumstances, I consider that the applicable principles can be summarised as follows: i) The CPR provides a single test for applications for permission to appeal which covers the entirety of the High Court, including the TCC (Virgin Management). ii) Any application for permission to appeal on matters of fact or evaluations of expert evidence must surmount the high hurdle identified in Fage, Henderson, Thomson and Grizzly Business. iii) In addition, because a judgment in the TCC is likely to involve i) detailed findings of fact in an area of specialist expertise (Virgin Management and Skanska) and/or ii) lengthy and interlocking assessments of both factual and expert evidence (Skanska and Thomson) and/or iii) factual minutiae which is difficult or impossible sensibly to reconsider on appeal (Skanska), the Court of Appeal will be reluctant to unpick such a judgment (Thomson), with the inevitable result that obtaining permission to appeal on such matters in a TCC case may be harder than in other, non-specialist types of case (Virgin Management, Skanska and Yorkshire Water).”
[24]Fifthly, it is rare that an appeal court will be faced with – let alone grant – such a ‘kitchen sink’ application for PTA as this one, where every adverse finding is in issue. The applicants have had every opportunity to slim down their application, or to focus on the fundamental points of principle which they assert arise in this case. They have politely but firmly declined to take that course. Thus it is for the court to consider this application as a whole, in circumstances where many of the individual grounds are, bluntly, hopeless.[25]I consider these five separate but overlapping points inevitably combine to demonstrate the height of the hurdle that the applicants need to surmount in this case in order to obtain PTA. They all point very firmly away from granting PTA. I refer to these five points collectively below as “the particularly high permission hurdle in this case.”[5]Some Other Compelling Reason[26]The appellants suggest that, even if the court concluded that the individual grounds had no real prospect of success, permission to appeal should still be granted because there is some other compelling reason for the matter to be heard by the Court of Appeal. The suggestion is that the points in issue in this case are of wider general significance. When asked about this at the hearing on 20 June, Mr Stewart took his stance on the copyright issue: that through the ICA, IBM were obtaining the benefit of contractual terms that protected matters which, as he put it, “were not copyrightable”. He also had a subsidiary point about the importance of the mens rea element of unlawful procurement/unlawful means conspiracy.[27]I reject those contentions. This was a case about a contract between IBM and Winsopia, which contained certain express prohibitions. What mattered was whether what Winsopia actually did comprised a breach of those express prohibitions: if so, they were doing precisely what they had promised not to do. There was then a separate issue as to whether they could argue that the term of which they were in breach fell to be disregarded as a result of the Software Directive. There is no wider point of public significance or general interest. This is a case that turned exclusively on its own facts. Mr Saunders pointed out that this was only the UK version of the IBM licence; and that no-one else had raised similar issues or expressed a wish to intervene.[28]As to the mens rea point, that has been dealt with authoritatively by Lord Leggatt in Lifestyle Equities, which principles the judge applied. There is no need or requirement for any further guidance.[29]I am satisfied that there is no other compelling reason to allow this application for PTA. It must stand or fall on its own merits.[6]Grounds 1-6: Copyright Arguments

Introduction

[30]Grounds 1-6 all seek to rely, in one way or another, on the Software Directive and make a raft of points in respect of claims for copyright infringement. IBM contend that this is seeking to turn the case on its head, because this was a claim not for copyright infringement but breach of contract. Some of the other difficulties with these grounds are that they are regularly untethered to paragraphs of the judgment and, on analysis, appear to be attempts to unpick the judge’s findings of fact.[31]I note that at [74(i)] of her consequentials judgment,

the judge said about the early version of these grounds:

“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.”
[32]I agree with the judge’s reasons for refusing PTA. I have concluded that Grounds 1-3 are particularly egregious examples of many of the difficulties I have already identified. Grounds 4-6 are perhaps more in line with the case at first instance, because the appellants seek to rely on Articles 5 and 6 of the Software Directive in a similar way to that which they advanced to the judge, although they fail to address the detailed reasons how and why the judge rejected these submissions. I consider that in addition, Grounds 1-6 do not begin to get over the particularly high permission hurdle in this case.

Ground 1: Erroneous Approach to the Idea-Expression Dichotomy

[33]This complaint is set out at [1]-[8] of the appellants’ grounds of appeal and [25]-[41] of their skeleton argument. It contains a number of general criticisms of the judgment although there are very few references to the text of the judgment itself. The most focussed submission concerns [258] of the judgment, where the judge said that copyright protection for computer programs “extends to expression of the program but not to ideas and principles underlying functionality of the program”. It is said that this is “an incomplete oversimplification”. The appellants then give various examples of where the judge found examples of “protected expression” in circumstances where the information in question was not a literal copy of any of the source or object code of any IBM computer program.[34]The ‘literal copy’ point appears to be one of the key elements of this complaint. The appellants say the judge assumed that any such expression was that of IBM rather than the customer who had authored it or made the arrangements necessary for its generation by the compiler. It is said that the judge did not find that any specific code of any specific IBM program had been reproduced in the results of Winsopia’s analysis for Items 3-4, 6-15, 17-30 or 49. As Mr Stewart put it at the hearing, “anything that fell short of reproduction cannot amount to expression” and was, by implication, not a breach.[35]It is also said at [40] of the skeleton that, if the judge had applied the correct legal test, she would have found either that the ICA on its proper construction did not purport to prohibit the acts performed by Winsopia in relation to those Items or alternatively that, to the extent that the clauses of the ICA did purport to do so, they were void pursuant to s.296A CDPA. This was not apparently an argument advanced below. It is a very general submission, with no analysis and no reference to the individual parts of the judgment apparently being criticised.[36]In response, IBM rely on clauses 4.1.2 and 4.1.3(a) of the ICA, the latter of which stated that Winsopia would not “reverse assemble, reverse compile, otherwise translate or reverse engineer the ICA Program unless expressly permitted by applicable law without the possibility of contractual waiver”. They say that that is what the judge found that Winsopia had done: picking apart the ICA programs to access the elements they wanted from them. IBM say that it was a breach of contract to reverse assemble/compile/otherwise translate/reverse engineer in order to gain unauthorised insight into the internal implementation of their programs, irrespective of whether there was any reproduction of IBM’s code. They reiterate that this issue was purely a matter of contractual interpretation and that copyright law was irrelevant. They say that the ICA did not need to be glossed as requiring “literal reproduction of the text of any IBM computer program” for there to be a breach.[37]Further, IBM say that the appellants have failed to explain how the judge’s supposed error in relation to the idea/expression dichotomy offers a defence to IBM’s specific claims in contract (or in procuring a breach of contract or an unlawful means conspiracy).[38]In his short reply at the hearing on 20 June, Mr Stewart recognised the significance of Ground 1. He said that Article 5(3) of the Software Directive allowed Winsopia to observe/study/test. He said that was (i.e. was the same as) reverse assemble/reverse compile/otherwise translate/reverse engineer. In this way, the picking apart of the IBM programs which the judge found was entirely lawful.[39]In my view, ground 1 has no real prospect of success. That is primarily for the reasons advanced by IBM. In particular:(i) The judge’s summary of the law at [258] was correct.(ii) The judge fully acknowledged that copyright does not extend to the ideas and principles underlying copyright work: see [240(iii)]. Her analysis of design choices at [417]-[420] was also correct.(iii) The judge’s approach to the Software Directive/CDPA was correct, namely that she had to first work out whether there were breaches of the ICA and then whether the Software Directive/CDPA afforded the appellants any sort of defence.(iv) The appellants’ case now amounts to rewriting the terms of the ICA. That is entirely illegitimate. (iv) In particular, the judge was right to find that it was a breach of the ICA to engage in reverse engineering etc, regardless of whether there was any literal reproduction of IBM’s code. Literal reproduction is a red herring. The suggestion otherwise merely muddles the breach claim (which was before the court) and a claim for copyright infringement (which was not).(v) There is nothing to indicate any error of principle in the judge’s approach.(vi) Ground 1 is an unjustified attack on the judge’s findings of fact as to what the appellants actually did, and/or her careful evaluation of how those acts and omissions could be categorised in the round.[40]For the avoidance of doubt, it is plain to me that observe/test/study is entirely different to reverse assemble/reverse compile/otherwise translate/reverse engineer. The judge’s findings of fact demonstrated that, by picking the ICA Programs apart, the appellants had not done the former, but had done the latter. As noted already, the appellants cannot open up those findings of fact/evaluation.

Ground 2: Confusion between Licensed Computer Program and its Output

[41]The complaint is set out at [9]-[12] of the appellants’ grounds of appeal, and in the skeleton argument at [42]-[52]. It is said to follow “as a result of Ground 1”. It identifies three “fundamental problems of logic” in the judge’s assumption that elements appearing in the object code of a compiled customer application, which had been generated by an IBM compiler or translator, necessarily formed part of the protectable expression of the code of that IBM compiler or translator. The only paragraphs of the judgment to which reference is made at [43] of the grounds, which are simply said to be examples of where the judge treated the output of the compiler as part of the compiler, simply because that output consisted of code. Again it is said that this approach was far too simplistic.[42]The appellants submit that the right analysis is that when a licensee pays to use a commercial compiler or another similar tool, they obtain the right to use that compiler to produce object versions of any source code that the licensee may author. The appellants argue that the licensor has thereby given up any right to object to further use of the code emitted by the compiler at the customer’s instruction “which solely reflects the intellectual creation of the author of the source code of the customer application.” It said that this applies to most of the Items of breach: see [51] of the skeleton argument.[43]IBM maintain that, since this is said to follow from Ground 1, and Ground 1 must fail, then so too should Ground 2. Their principal substantive response is that the judge made detailed findings about the Programs and how and why they were picked apart by the appellants in breach of the ICA, so that this ground is essentially an attack on the judge’s findings of fact.[44]In my view, Ground 2 has no real prospect of success. I agree with IBM’s response and consider the contrary to be unarguable. In particular:(i) Ground 2 follows inexorably from Ground 1 which I have already said has no real prospect of success. The same is therefore true of Ground 2.(ii) Although an error of principle is asserted, there is no reference to any paragraph of the judgment in which this error is alleged to have been made. On the contrary, the judge’s conclusions about the use of code were straightforward and plainly open to her.(iii) The judge carefully set out her findings of fact, based on the evidence (including expert evidence), as to the nature of the Programs in issue and how and why what the appellants did was a breach of the ICA. This ground appears to be an attempt to undo those findings of fact, and by reference to a principle which is not coherently identified.

Ground 3: No Copyright Protection for Interfaces

[45]The appellants’ case is set out in the grounds at [13]-[15] and in the skeleton argument from [53]-[59]. The appellants submit that in general terms interfaces were inherently unprotectable ideas. Various authorities are cited in support of that submission. It is said that this is a further dimension of Ground 1 (see [54]). It raises the Article 5(3) defence – a reference again to the right to use a copy of a computer program “to observe, study or test the functioning of the program” – so as to say that what the appellants did, in order to determine the ideas and principles which underlie any element of the program, was to perform “acts of loading, displaying, running, transmitting or storing the program” which they were entitled to do under Article 5(3).[46]In this way, the appellants submit that therefore the Article 5(3) defence should have succeeded in relation to many of the Items which were found to be breaches.[47]IBM note that the judge found that the ideas and principles underlying any element of a computer program, including its interface, were not protectable through copyright: [258] and [269]. They say that that was entirely correct. But they say that, in the present case, the appellants are seeking to argue that the object code implementing an interface was also ‘not protectable’. That is a very different thing and there was no support for that contention. In particular, the respondent notes that the appellants’ assertion that the object code implementing an interface is “dictated by technical function” and “distinguishable from the underlying idea” are entirely new assertions which were not the subject of any evidence at trial. It is said it is too late for these points to be run now.[48]I consider that ground 3 has no real prospect of success. I agree with IBM’s response and consider the contrary to be unarguable. In particular:(i) The judge’s findings at [258] and [269] were correct in law.(ii) The real issue is the argument now being run that object code implementing an interface was not protectable. That is a new assertion and there was no evidence to support it (because it was not an issue at the trial).(iii) The judge made careful findings about the interfaces in this particular case – guided by both the factual and the expert evidence - and explained how and why they constituted a breach of the ICA. There is no real prospect of the appellants successfully arguing to the contrary.(iv) Ground 3 is essentially another attempt to say that what the judge found as a fact to be reverse assembly/reverse compilation/otherwise translation/reverse engineering, was somehow something more innocuous and permissible. It is therefore another re-run of Ground 1. It fails for the same reasons.

Ground 4: Erroneously Narrow Interpretation of Article 5(3)

[49]This argument is set out in the grounds of appeal at [16]-[21] and the appellants’ skeleton from [60] to [69]. The argument is that the judge adopted an erroneously narrow interpretation of Article 5(3) (set out above, containing the authorisation to observe/study/test the functioning of the program). The judge is criticised for concluding that this exception to the protection afforded by the Software Directive was to be construed narrowly, as set out at [240] and [259]. The argument is that the judge should have found that each of the Items which she said constituted a breach of the ICA fell within this permitted exception.[50]IBM say that the judge was right in law to construe copyright exceptions narrowly, and relies on InfoPaq (as the judge did) for that proposition. Moreover, they say that this ground disguises the main point that the appellants argued below, namely that Article 5(3) permitted disassembly/decompilation/translation of source or object code, an argument that the judge roundly rejected. Accordingly, IBM say that the appellants are now attempting to argue that this exception applied even where, on the facts as found by the judge, it was only possible to study how the program produced outputs etc by disassembling/decompiling the object code of the program and studying its expression and not just its functioning.[51]I have concluded that Ground 4 has no real prospect of success. I agree with IBM’s response and consider the contrary to be unarguable. In particular:(i) The judge was right in law. Exceptions of copyright protection are to be construed restrictively (see InfoPaq). That is only an expression of the general law that exceptions are to be construed narrowly.(ii) The judge made careful findings of fact as to what the appellants actually did. She also assessed the relevant expert evidence. She found that the appellants disassembled/decompiled/reverse engineered. Contrary to the appellants’ argument below, that was in direct breach of clause 4.1.3(a) of the ICA. It is not arguable that Article 5(3) of the Software Directive, which makes no mention of disassembly/compilation etc, permitted what the appellants actually did.(iii) Again, for the same reasons that Ground 1 fails, so too must Ground 4. It is simply wrong to say that observe/test/study is the same as reverse assemble/reverse compile/otherwise translate/reverse engineer.(iv) I agree with the submissions made by Mr Saunders at the hearing on 20 June to the effect that, on the basis of the judge’s findings of fact, the conduct of the appellants was quite extreme, and involved invasive actions on the IBM mainframe. It is unarguable that this was somehow permitted by the Software Directive notwithstanding the clear terms of the ICA.

Ground 5: Erroneous approach to test of necessity in Article 6(1)

[52]This argument is set out in the appellants’ grounds at [22]-[26] and in the skeleton argument at [70]-[81]. Article 6(1) provides that “the authorisation of the right holder shall not be required where reproduction of the code and translation of its form…are indispensable to obtain the information necessary to achieve the interoperability of an independently created computer program with other programs…”.[53]The complaint is that the judge applied an unduly high standard of necessity and presupposed that “indispensable” referred to the goal of interoperability, rather than the acts of reproduction and translation that were permitted by Article 6(1). The complaint is most clearly articulated at [72] of the grounds: that, because the judge reasoned that Winsopia and LZLabs had an alternative migration path, they could avoid the need to migrate the customers application’s object code in the first place, and instead work out a new object code program compiled from the customer’s source code. In this way, the judge reasoned, none of the information was necessary to achieve interoperability, and relied on that reasoning to defeat reliance on Article 6(1) in relation to all of the Items in respect of which it was raised. It is said that that approach was circular and involved asking the wrong question.[54]IBM maintains that the judge was right as a matter of law, but that in any event it is not explained how some different standard(s) would have made a difference to any of the judge’s relevant findings. Indeed, the judge concluded that the appellants did not in fact engage Article 6 at all, because these operations were not performed for the required purposes of obtaining interoperability information. IBM say that the judge applied the test of indispensability in any event in evaluating the acts employed by the appellants to obtain the information and applied the test of necessity (not indispensability) when seeing whether the information obtained through such acts was necessary to achieve interoperability (see for example [400]). This was, they say, all entirely orthodox.[55]In my view, Ground 5 has no real prospect of success. I agree with IBM’s response and consider the contrary to be unarguable. In particular:(i) There was no error of law. The judge applied the right test.(ii) In any event, the point was otiose because of the judge’s findings of fact, which meant that what the appellants did did not engage with Article 6 in the first place.(iii) If (ii) is wrong then, in any event, this appears to be an impermissible attack on the judge’s findings of fact as to what the appellants actually did. Ground 6: Erroneous Removal of Error Correction Right in Article 5(1) Despite Absence of any Prohibition Upon Error Correction[56]This is set out in the appellants’ grounds at [27]-[30] and in the skeleton argument from [82]-[92] and concerns Article 5(1), another example of the protection afforded by the Software Directive, this time in respect of error correction. It is said that the judge took an unduly narrow approach to the right to correct errors and failed to have regard to Top System. If she had properly understood the scope of Article 5(1) she would have held that Winsopia’s acts in Item 1 fell within the scope of error correction because they were not specifically prohibited by any clause in the ICA.[57]In response, IBM say that the complaint ignores the judge’s factual findings in relation to Item 1 that the disassembly was done, not to correct any error, but to improve the performance of the SDM (see [289] of the judgment). That renders Ground 6 moot.[58]I have concluded that Ground 6 has no real prospect of success. I agree with IBM’s response and consider the contrary to be unarguable. In particular:(i) Each of the six reasons for refusing PTA in respect of Ground 1 apply again.(ii) Ground 6 wholly ignores the judge’s detailed findings of fact as to why the disassembly was carried out.(iii) If I may permit myself a comment, this ground demonstrates the lengths to which the appellants appear to be prepared to go on this application for PTA more generally because: a) Item 1 is the only Item (out of over 50) caught by this complaint; b) The complaint is incontestably not a point of principle but an impermissible attack on the judge’s factual findings; c) The appeal on Item 1 fails in any event for the reasons set out under Ground 14.[7]Grounds 7-13: Arguments As To The Construction Of The ICA

General

[59]The judge’s view of these grounds (making allowance for the slight changes in numbering) was set out in [74(ii)] of her consequentials judgment as follows:
“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.”
[60]I agree with the judge’s reasons for refusing PTA. The appellants challenge the judge’s construction of almost every clause in the ICA of which they were found to be in breach. The basis for the challenge appears to be that the appellants’ arguments at first instance, which were rejected by the judge for a mixture of reasons of law and fact, should have been accepted. There is no analysis of the judge’s reasoning as to why those arguments were rejected. This unsophisticated approach is not a proper basis for an appeal. At no point in relation to Grounds 7-13 is any clear error of law identified by the appellants. Furthermore, these grounds fail to clear the particularly high permission hurdle in this case.

Ground 7: The Meaning of “ICA Program”

[61]This is dealt with in the appellants’ Grounds of Appeal at [31]-[36] and in the skeleton argument at [93]-[119]. The allegation is that the judge was wrong to interpret “ICA Program” as including all the Items identified at [31] of the grounds; the code fragments identified at [32]; and the macros and copybooks at [33]. It is then said that, if the judge had correctly interpreted “ICA Program” as not including output from running a licenced program, compiled programs and IBM programs subject to different licencing regimes, almost all of the Items that the judge found to comprise breaches of the ICA would not have been so found.[62]It is separately asserted that, if the judge had interpreted “ICA Program” as one of the 15 named IBM programs licenced by IBM UK to Winsopia, none of those items would have been a breach of the ICA. There is a yet further allegation at [36] of the grounds that, even if the ICA Program included its component parts, the judge should have construed this as subject “to a minimum threshold of substantiality”.[63]IBM reject this ground of appeal. They point to the definition of “Program” which refers to “the original and all whole or partial copies”. They rely on the judge’s careful analysis of the different constituent elements of an application compiled and link–edited to be run on one or more of the z/OS runtimes at [176]-[193] of the judgment. That included a close analysis of Licence Program Specifications at [185]-[193]. IBM submit that the appellants have simply not engaged with that analysis or identify how it is wrong.[64]IBM also submit that the appellants’ arguments proceed from the false premise that a compiled and bound customer load module should be treated as a single and undifferentiated object, the entirety of which was created at the behest of the application developer. They say that that was not what the evidence showed or what the court found.[65]At the hearing on 20 June, I asked Mr Stewart where the “substantiality” provision came from, given that it cannot be found in either the Software Directive or, more pertinently, in the ICA. He said it was a question of context. That was not developed further. To the extent that this was some sort of implied term, the basis for it was never set out.[66]I consider that Ground 7 has no real prospect of success. I agree with IBM’s response and consider the contrary is unarguable. In particular:(i) The appellants have ignored the contractual definition of ICA Program which included whole or partial copies. That definition is not qualified by any reference to “substantiality” and any implied term to that effect would be contrary to the express term. That is in one sense a complete answer to this ground.(ii) I consider that IBM are right to say that the judge carefully considered what fell within the definition of ICA Program by reference to the evidence. The paragraphs of the judgement at [176]-[193] constitute a careful analysis of the different constituent elements of an application, and IBM are right to say that the appellants make no attempt to engage with that analysis.(iii) In particular, as the judge rightly held at [181], the process of compilation and link-editing does not transform a customer application into an ICA Program, but the process adds or inserts into the customer application components that form part of the ICA Programs, and use of such ICA Program components are subject to the ICA.(iv) This is therefore another example of the appellants seeking to overturn the judge’s analysis of the evidence. Customer load modules may consist of components created by the application developer, but may also consist of others which are ICA Programs (here, for example, the IBM CSECTs, IBM macros and copybooks etc). The issue for the judge was whether the component in question was, on analysis, a component of an ICA Program. If it was, then the appellants were in breach of clause 4.1.3. That was the evaluative exercise that the judge undertook, and I consider her findings are now unassailable. Ground 8: The Meaning of “Reverse Assemble, Reverse Compile, Otherwise Translate, or Reverse Engineer the ICA Program” in Clause 4.1.3(a)[67]Clause 4.1.3(a) has been set out above. The appellants agreed not to reverse assemble, reverse compile otherwise translate or reverse engineer the ICA Program. The judge found that numerous of the Items comprised a breach of that obligation.[68]The relevant paragraphs of the grounds of appeal are [37]-[42] and the skeleton argument at [120] – [127]. Again there is a complaint that the judge did not accept the appellants’ arguments below. It is said that the judge “should have applied ordinary principles of contractual construction”; should not have had regard to the expert evidence; and misapprehended that evidence in any event. In consequence it is said that she was wrong to find that the appellants were in repeated breach of clause 4.1.3(a).[69]There is a separate point at [41] of the grounds in respect of Item 5, where it is said that reverse assembly had to require more than merely a mental act by an experienced human programmer. In addition, there is a reference made to the Software Directive and sections 50BA and 50B(2) of the CDPA and the prohibition or restriction of the right to observe, study and test.[70]IBM say that not only did the judge construe the ICA in accordance with ordinary contract principles but any alleged breach of those principles has not been identified. The judge rightly had regard to expert evidence as to the meaning of “reverse engineer” etc and that was an entirely proper use of expert evidence, even though it was of limited assistance: see [210]. IBM say that the judge rightly took into account the Software Directive at [213]. As to the Item 5 point and the mental acts, they point out that this is based on evidence of fact from Mr Lynch and was properly set out in the judgment at [394]-[397].[71]I consider that this ground has no real prospect of success. I again agree with IBM’s response. In particular:(i) The assertions of failure by the judge are just that: assertions without any grounding in law or principle.(ii) Expert evidence was plainly admissible as to the meaning of the terms in clause in 4.1.3(a). Both sides called expert evidence to explain these and other similar terms, and it is far too late for the appellants now to complain about that. To be fair to him, at the hearing Mr Stewart fairly accepted that the expert evidence argument “was not one of our best points”.(iii) I have already addressed the Software Directive/CDPA arguments and concluded that there was nothing in those arguments.(iv) The specific criticism of the judge’s findings on Item 5 was a clear attack on her fact-finding at [395]-[397] and was therefore wholly impermissible.

Ground 9: The Meaning of “Transfer” of the ICA Program in Clause 4.1.3(b)

[72]Clause 4.1.3(b) comprises a prohibition on transferring the ICA Program outside Winsopia’s enterprise.[73]The complaint is at [43]-[45] of the grounds of appeal and [128]-[133] of the skeleton. It is said that the judge was wrong to interpret “transfer” as extending to the distribution by Winsopia to a third party of any copy of any component part of an ICA Program, irrespective of how small or insubstantial that component was. Instead it is said that transfer should have meant the ICA Program itself, alternatively a named component or part. It is said that various Items would not have been found to be in breach of 4.1.3(b) if the judge had interpreted the clause correctly.[74]IBM’s first point is that this is a rerun of the “small or insubstantial part” point that has already been raised – and which I have already rejected – at Ground 7. Further they say that it could not have affected the outcome because, for the Items identified, clause 4.1.3(b) was far from being the only provision to have been breached.[75]I consider that Ground 9 has no real prospect of success. I agree with IBM’s response. In particular:(i) The appellants repeatedly seek to raise the argument that, in some way, “small insubstantial parts” of the ICA Program were not caught. That is plainly wrong, because the definition of the ICA Program expressly included parts thereof, without qualification.(ii) That makes this therefore a re-run of Ground 7 which I have already refused.(iii) In any event, the point goes nowhere because there were numerous other clauses of which the Items in question comprised a breach.

Ground 10: The Meaning of “Authorised Use” and “Use” under clauses 4.1.1 and 4.1.2(b)

[76]On analysis these are two separate complaints here. Paragraphs [46]-[47] of the grounds complain about the interpretation of the word “use” in clause 4.1.1(a). Paragraphs [48]-[49] comprise a separate complaint about “authorised use” in clause 4.1.1(b). The relevant parts of the skeleton argument are at [134] – [139].[77]The first complaint is that the judge was wrong to say that “use” included mere receipt of a computer programme or receipt of information derived from analysis which did not itself contain any protectable expression for a computer programme. A series of Items were identified which, it is said, should not have been found to be breaches as a result.[78]The second complaint is that the judge failed to have regard to clause 4.1.1(c) when construing clause 4.1.1(b) as conferring a limited authorised use of the ICA Programs and therefore approached the question of what was “authorised use” on too narrow a basis.[79]In response to the first point, IBM say that there is no explanation of what alternative construction should have been adopted and why that alternative construction would not have given rise to a breach. They note that the Items in question were all breaches of numerous clauses, not just 4.1.1. As to the second point, they repeat the absence of any alternative construction which would have permitted a separate company to have access to ICA Programs which were licenced only to Winsopia. They also make the point that the issue is moot because of the court’s anterior findings about the nature and scope of ICA Programs.[80]I consider that this ground has no real prospect of success. I agree with IBM’s response. In particular:(i) The judge’s construction of both of these provisions was plainly open to her. I suspect I would have reached precisely the same view.(ii) There is no cogent explanation for what the judge should have found instead and why her construction was not open to her.(iii) This is one of many grounds and sub-grounds in which it is asserted that the judge’s interpretation of a particular provision of the ICA was “too narrow”. In the absence of any explanation of why it was too narrow and what different interpretation should have been provided (and what difference that would have made), one might be forgiven for thinking that what the appellants really mean is that the judge should have interpreted the provision in a wide enough way to allow the appellants to use the ICA Programs in precisely the way they wanted.

Ground 11: Errors Relating to Construction of the Licence Programme Specifications and Sample Program Licences

[81]This complaint is set out at [50]-[54] of the grounds of appeal and [140] – [147] of the skeleton. Again the complaint is that the judge’s approach was too narrow. At [50] of the grounds it is said that she was wrong to construe the language of the Licence Programme Specifications as imposing any limitation upon the class of potential recipients of such redistributed materials. At [51] it is said that she should have held that it granted a wide permission to the person redistributing a bound load module to do so without any enquiry to the identity or licence status of the recipient. It is said that it imposed no restriction on how, where or in what execution environment, recipients may use the redistributed materials. At [52] it is said that the judge made the same errors in relation to the terms of the Sample Program Licences.[82]At [53] and [54] of the grounds, it is said that the judge took a circular and erroneous approach to the proviso that “any reference to an IBM product, program or service should include functionally equivalent product, program and service that does not infringe any IBM intellectual property right”. It is said that the judge should have held that this language meant that references to z/OS or any other IBM product, program or service had to extend to a functionally equivalent product, such as the SDM. The argument is that since it is not suggested that the SDM infringed any IBM intellectual property right, the proviso did not exclude the SDM. The suggestion at [54] is that any restriction and/or clause 4.1.3(b) of the ICA “were void”. It is assumed this is a reference back to the Software Directive again.[83]IBM say that the judge’s interpretation of the permission notice at [190] was correct. They say that the appellants’ case that it imposed no restrictions is unsustainable because, amongst other things, that argument gave no effect to the proviso that all use under the notice must be “in connection with [the customer’s] authorised use of z/OS”, or the requirement that all relevant IBM copyright statements must be retained in any distributed materials, with the result that all recipients must be licensed to use the materials. There was also a separate requirement that the distributed materials must conform to the documented program interfaces with z/OS.[84]IBM note that no relevant error in the judge’s reasoning at [192]-[193] has ever been identified. The judge was correct to note the terms of the proviso. As to the SDM, the judge adopted no assumption as to whether the SDM infringed IBM intellectual property rights. The Software Directive point is rejected on the basis that the acts in issue were not acts of decompilation directed to interoperability, but instead a transfer out of enterprise of often large numbers of IBM CSECTs and other ICA programs.[85]I consider that ground 11 has no real prospect of success. I agree with IBM’s response and consider the contrary to be unarguable. In particular:(i) The judge’s approach to the construction of the Licence Programme Specifications, and the proviso (judgment at [190]-[193]) was not only open to her but seems to me to have been impeccable.(ii) Again the suspicion is that the appellants need to be able to argue that her approach was “too narrow” solely in order to be able to justify what they actually did.(iii) I consider that the appellants’ argument makes no attempt to grapple with the words of the Licence Programme Specifications or the proviso, or the judge’s explanation of each.(iv) The Software Directive is irrelevant for the reason identified by IBM.

Ground 12: The Meaning of the Contractual Time-Bar in Clause 1.11.4

[86]The relevant part of the provision reads as follows:
“Unless otherwise required by applicable law without the possibility of contractual waiver or limitation, (i) neither party will bring a legal action, regardless of from, arising out of or related to this Agreement or any transaction under it more than two years after the cause of action arose; and (ii) after such time limit, any legal action arising out of this Agreement or any transaction under it and all respective rights related to any such action lapse.”
[87]The judge considered various authorities and applied them at [996]-[997]. In addition, at [1000]-[1004] the judge noted that the authorities demonstrated that express words were needed to bar a claim that had been dishonestly or deliberately concealed.[88]The appellants’ complaints are at [55]-[58] of the grounds of appeal and [148]-[157] of the skeleton argument. It is said that the judge was wrong to interpret this clause as not applying to the claims in this case for unlawful procurement and unlawful means conspiracy against the immediate and ultimate owners of the counter party. In addition, the appellants say that the judge was also wrong to interpret the clause as meaning that there had been deliberate concealment until IBM discovered the concealment, in circumstances where the relevant fact – that LZLabs owned Winsopia - was not secret but in the public domain. At [56] it is said that the judge was wrong not to find that limb (ii) of clause 1.11.4 precluded IBM from bringing any secondary liability claims for procurement. [57] suggests that the judge was wrong not to determine (i.e. uphold) the appellants’ case that Winsopia had a sufficient interest to enforce clause 1.11.4 on behalf of LZLabs and Mr Moores.[89]IBM say that the judge’s construction was correct. They say that clause 1.11.4 could only affect the rights of IBM and Winsopia and therefore could not affect the position of third parties (LZLabs and Mr Moores), who were strangers to the ICA. They argue that that was supported by the authorities to which the judge referred. They also suggest that it would be contrary to common sense for a party who had deliberately concealed a wrong to be able to take advantage of clause 1.11.4.[90]I consider that Ground 12 has no real prospect of success. I agree with IBM’s response. In particular:(i) At the hearing on 20 June, Mr Stewart put his case that the clause caught parties who were not parties to the ICA squarely by reference to the words themselves. I consider that, as a matter of construction, Mr Stewart’s interpretation is untenable. In contrast, the judge’s interpretation at [996]-[998] seems to me to be plainly right, and the authorities support her. Furthermore, I agree with Mr Saunders that “lapse” means “bar”, not extinguishing the right altogether.(ii) Furthermore, this issue has to be approached on the basis of the judge’s findings of fact, which upheld the unlawful procurement and unlawful means conspiracy against LZLabs and Mr Moores. In those circumstances, it is both contrary to common sense, and contrary to the authorities, to suggest that Winsopia could rely on clause 1.11.4, let alone rely on the clause on behalf of LZLabs and Mr Moores.(iii) I respectfully agree with [1000]-[1007] of the judgment. The clause does not apply to assist those who have acted dishonestly.(iv) I further address ‘deliberate concealment’ in more detail under Ground 27: for present purposes, it is sufficient to say that there was much more to it than simply the identity of the owner of Winsopia.

Ground 13: Failure to Apply the Contra Proferentem Principle

[91]The argument is at [59] of the grounds of appeal and [158] of the skeleton argument. It is said that, in relation to each of the clauses, “the judge failed to identify the relevant ambiguity and thereby failed to apply the contra proferentem principle”.[92]I consider that this ground of appeal to be hopeless. The contra proferentem argument is incontestably bad. The appellants do not identify the necessary ambiguity in any of the provisions which would allow the principle even to be raised. In my view, in relation to each of these clauses, there was no such ambiguity: they were simple and straightforward provisions which the judge properly construed. There is therefore no basis on which the contra proferentem principle could be applied. Furthermore, in the 21st Century, cases are now no longer decided solely by reference to this outdated rule of construction.[8]Grounds 14-17: Judge’s Specific Findings of Breach

General

[93]At paragraph 74(3) of the consequentials judgment,

the judge dealt with these grounds as follows:

“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.”
It is fair to note that, on the face of it, the number of grounds in relation to the findings of breach have been reduced since the application was made to the judge.[94]I agree with the judge’s reasons for refusing PTA. These grounds regularly seek to invoke some of the earlier grounds of appeal which I have already rejected. Much of the remainder comprise attacks on the judge’s findings of fact. These attacks are based on the assertion that the judge’s findings are “unsupportable”/“irrational”. However, there is no attempt to engage with the judge’s careful analysis of each of these Items by reference to the terms of the ICA, the expert evidence and in particular, the factual evidence. I consider that these grounds fail to clear the particularly high permission hurdle in this case. For all those reasons I consider that these grounds are, on analysis, hopeless.

Ground 14: Errors in Relation to Item 1 (IGZCUST)

The judge’s analysis of Item 1 is at [274]-[310] of the judgment.

[96]These complaints are set out at [60]-[64] of the grounds of appeal and [160]-[167] of the skeleton argument. [60] of the grounds relies on the Ground 7 arguments and [61] relies on the Ground 6 arguments. [62] asserts that the judge was wrong to find that any breach of the ICA by Winsopia in relation to Item 1 had been procured by LZLabs. [63] asserts that the judge made unsupportable and irrational findings in relation to Mr Moores’ evidence. [64] suggests that the judge’s assessment of the changes to the SDM source code was irrational, unsupportable and contrary to the facts and expert evidence.[97]At the hearing on 20 June, I expressed a certain amount of surprise to Mr Stewart that this attack on the findings of fact of an experienced TCC judge was being maintained. He told me in robust terms that it was because the judge had misunderstood the error. Mr Stewart said that it was a loop on the IBM mainframe which kept running. Mr Moores was told about it and instructed it to be fixed.[98]IBM contend that there is no basis for an appeal. They say that this ground is an impermissible attack on the judge’s factual findings. They go on to say that the appellants’ case, that the IGZCUST was disassembled and the disassembled code shared among a wide group of individuals outside Winsopia (without access to its main frame for the purpose of correcting an error on that same main frame) was preposterous, and that judge was right to reject it on the facts.[99]I regard that Ground 14 as hopeless. I agree with IBM’s response. In particular:(i) To the extent that it relies on Grounds 6 and 7, I have already rejected those grounds.(ii) To the extent that they seek to challenge the judge’s findings of fact, it is not open to them to do so given the judge’s clear explanation for why she found as she did.(iii) It is plain from the judge’s analysis at [274]-[310] that Item I was not about a loop, but was instead based on the agreed disassembly of a portion of the IGZCUST which the judge found was an ICA Program. That is the end of the point.(iv) As to the appellants’ attempted defence of their conduct, the disassembly could not have been for the purposes of fixing an error on the mainframe, because the appellants did not retain the necessary code. Instead, as the judge found at [308]-[309], the disassembly was for the purposes of improving the functionality and performance of the SDM.

Ground 15: Failure to Appreciate that LMD (Item 2) Did Not Process Bound CSECTs

[100]The judgment addresses Item 2 at [311]-[345]. The analysis makes extensive reference to the expert and factual evidence.[101]The appellants’ case is set out at [65]-[67] of the grounds of appeal and [168]-[171] of the skeleton argument. [65] of the grounds relies on Ground 7. [66]-[67] criticise the judge’s conclusion on the evidence that it was “highly likely that the LMD processed IBM CSECTs and other code fragments”. It suggests that the judge’s conclusion was “rationally unsupportable, contrary to the fact and expert evidence before her, and wrong”. It is also said that this was inconsistent with a subsequent finding (which is dealt with under Ground 17).[102]IBM say that this is an impermissible attack on the judge’s factual findings and that she was justified in reaching the conclusions that she did across 34 paragraphs and 6 pages of the judgment.[103]Again, in my view, Ground 15 is hopeless. I agree with IBM. In particular:(i) Ground 7 has already failed.(ii) There can be no support for the attack on the judge’s factual findings, particularly given the care and detail with which she approached the issues.(iii) There is no indication of why her careful assessment was even arguably wrong, let alone “rationally unsupportable”.(iv) The inconsistency point is a bad one: the reference to Ground 17 is a reference to Item 39 which the judge found on the facts was not a material breach. The grounds of appeal fail to appreciate that different alleged breaches gave rise to different evidence, and therefore the prospect of different results.

Ground 16: Errors in Relation to Brad Taylor’s Secondment (Item 49)

[104]Item 49 is dealt with in the judgment from [811]-[825].[105]The relevant grounds of appeal are set at [68]-[72] and expanded upon at [172]-[178] of the skeleton argument. [68] of the grounds is an assertion that the judge was wrong to find that any of the allegations concerned with Mr Taylor’s use of the Winsopia main frame related to ICA Programs. [69] suggests that the judge was wrong to reject the appellants’ case that his use of Winsopia’s main frame during his secondment meant he was within Winsopia’s enterprise. Grounds [70]-[72] seek to reactivate arguments about the Software Directive/CDPA.[106]IBM say that the judge was entitled to come to the factual conclusions that she did, largely because of Mr Taylor’s own evidence. The detailed reasons why the judge found against the appellants on this Item are encapsulated at [824], which emerged from cross-examination. The judge was entitled to rely on it. The Software Directive arguments must fail for the reasons given previously.[107]Again I consider this ground to be hopeless. I agree with IBM’s response and consider the contrary to be unarguable. In particular:(i) Mr Taylor accepted that he was not part of Winsopia’s enterprise because he was not acting as an agent or contractor and was at all times working for LZLabs.(ii) The particulars of the breach at [824] were clear, and plainly based on the evidence. Mr Taylor’s use of Winsopia’s main frame related to the ICA Programs and any suggestion to the contrary is again an impermissible attack on the judge’s findings of fact. This passage in the judgment reflected a full evaluation of all the evidence.(iii) The Software Directive points are irrelevant for the reasons previously given. Ground 17: Inconsistent Approach to Inadvertent Remedial Breaches.[108]The assertion is that, because the judge concluded that Item 39 was not a breach because “[it] was inadvertent and the problem was swiftly resolved”, she should have reached the same conclusion in respect of Items 34, 37, 38, 40, 41, 45 and 46. This is in the grounds at [73] and the skeleton argument at [179][109]I again consider that Ground 17 is hopeless. In particular:(i) First, it is an impermissible attack on the judge’s findings of fact.(ii) Secondly, it wholly fails to acknowledge that each of the alleged breaches were different: they depended on different evidence and the different assessment by the judge. Take Item 34 as an example. That was dealt with by the judge at [694]-[702]. It is plain from the evidence analysed in that section of the judgment that this was not an inadvertent breach. On the contrary, both Mr Bray and Mr Palmer came close to admitting it. The alleged inconsistencies are no such thing: just different conclusions driven by different evidence.[9]Grounds 18-23: Errors Relating to Unlawful Procurement.

General

[110]In her consequentials judgment

the judge dealt with these grounds (again making allowances for the renumbering):

“(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.”
[111]I agree with the judge’s reasons for refusing PTA. One of the most important parts of this case were the allegations against LZ Labs and Mr Moores (and three other defendants), that they procured Winsopia’s breaches of the ICA. In section VI of the judgment, from [845]-[936], the judge rejected that case against the other three defendants but upheld it against LZLabs and Mr Moores. That section (of 90 paragraphs) contains a summary of the law and an assessment of the wrongful procurement case against each defendant by reference to all the relevant factual evidence. Much of that evidence came from the internal documentation of LZLabs and Mr Moores themselves, and in particular the latter’s repeated attempts to water down and weaken the code of conduct, which had originally been designed to avoid the very breaches that occurred.[112]No attack on those clear findings of fact is permissible. So none of these grounds of appeal have any real prospect of success. The judge’s analysis when rejecting these grounds was correct. None of them come close to clearing the particularly high permission hurdle in this case.

Ground 18: No Secondary Liability Without Primary Liability

[113]The appellants’ case is that, if there were no breaches of the ICA, neither LZLabs nor Mr Moores could be liable for procurement. That of course depends on the suggestion that any one of Grounds 1-17 above are arguable. Since they are not, this ground automatically fails.

Ground 19: Incorrect Approach to Knowledge and Intention

[114]The part of the judgment that is highlighted in particular by the appellants was [884]-[886]. These said:
“884. Fourthly, the Software Directive arguments, rejected by this court, would not be sufficient to displace knowledge of the wrongfulness of Winsopia’s activities. As explained by Lord Leggatt in Lifestyle Equities, liability does not depend on whether the defendant knew that the act done by the primary wrongdoer was against the law; all that is required is knowledge of the essential facts which make the act unlawful. In this case, the essential facts are knowledge that the terms of the ICA prohibited the acts of reverse engineering and other misuse of ICA Programs that LzLabs directed Winsopia to carry out. 885. Fifthly, Mr Rockmann is not entitled to rely on any belief that the Software Directive would provide a defence to the ICA breaches because he conceded that he did not have an understanding of the Software Directive. Further, no legal advice pursuant to which he might have acted has been produced in these proceedings. 886. Although that would be sufficient to establish the requisite knowledge attributable to LzLabs, I find that Mr Cresswell also had knowledge of the essential facts which made the acts unlawful. He was CEO of LzLabs between 18 May 2015 and November 2020. Thereafter, his role was Executive Chairman, followed by Non-Executive Chairman. He was also a director at Winsopia between 2 December 2015 and 28 February 2022. As an officer of both LzLabs and Winsopia, he must have known the terms of the ICA, including the prohibitions on reverse engineering and other misuse of the ICA Programs. Indeed, in cross-examination he accepted this: “Q. So, at least at a high level, you appreciated that the ICA prohibited reverse-engineering? A. Yes, I think I mentioned that in my witness statement. Q. And you understood that it prohibited individuals outside of Winsopia being given access to ICA Programs or using them? A. Yes. There was -- absolutely, yes.””
[115]The appellants’ complaint is confined to [75] of the Grounds of Appeal. It is not addressed separately in the skeleton but worked in with all Grounds 18-26 at [180]-[196]. The argument is that the judge wrongly relied on Lifestyle Equities to decouple the alleged knowledge and belief LZLabs and Mr Moores had about the Software Directive from their knowledge or belief about the ICA; wrongly treated the essential facts as simply being an awareness of certain provisions of the ICA; and wrongly disregarded the principle that LZLabs and Mr Moores “could [not] be liable for procuring a breach of contract if they honestly believed the acts being carried out would not result in a breach.”[116]At the hearing on 20 June, Mr Stewart’s principal attack was that the judge was wrong to find the concession at [885].[117]IBM summarise the complaint as being essentially the rejection of the appellants’ case below, which was to the effect that i) they could not be liable in procurement because they believed that the Software Directive meant that Winsopia did not breach the ICA, and ii) it followed that they could not be liable in unlawful procurement.[118]IBM submit that i) was a matter of fact and the judge was entirely correct to conclude, on the evidence, that the relevant individuals had failed to establish that belief in the Software Directive as a matter of fact: see the whole of [880]-[993] of the judgment, not just the parts picked out by the appellants. Further and in any event, their belief in the Software Directive was irrelevant to their liability in procurement. Knowledge of the law is not relevant. The essential facts which LZLabs and Mr Moores knew were: a) the conduct on the part of Winsopia which they were procuring (such as decompilation or reverse assembly); and b) The terms of the ICA.[119]IBM say that whether or not LZLabs or Mr Moores believed that Winsopia was in breach of the ICA in the light of their understanding of the Software Directive was irrelevant. The judge correctly held that at [884].[120]In my view, Ground 19 has no real prospect of success. I agree with IBM’s response and consider that the contrary is unarguable. In particular:(i) The judge applied the correct test in relation to the knowledge and intention elements, as set out in her judgment at [852]-[860]. She cited and applied Lifestyle Equities.(ii) In relation to each of the appellants she made findings of fact as to their acts of procurement; their knowledge of the essential facts; and their intention. Those findings of fact are unimpeachable.(iii) However, it is worth saying that, even drilling down into the transcripts to check (for example) the validity of the concession point shows that, even at a micro level, the appellants’ position is unarguable. The relevant evidence came from Mr Rockmann on day 7 and is recorded in the transcript at page 173, lines 13-18. That was a concession, rightly referred to as such by the judge. Similarly, Mr Moores’ own evidence on day 16, page 173 line 16, was enough to justify the conclusion that the two men did not have the belief that the appellants’ case requires. There was no proper basis for the asserted belief.(iv) Moreover, her findings on this aspect of the case seems to me to have been inevitable, given the extensive evidence against LZLabs and Mr Moores that the whole basis of their operation was to reverse engineer/decompile etc the ICA Programs. Hence the ultimate fate of the Clean Room system, which – thanks to Mr Moores’ repeated interventions - was rendered less and less effective as time went on.

Ground 20: Absence of the Requisite Knowledge and Intention by LZLabs

The judge’s assessment is at [863]-[877] and [880]-[887] of the judgment.

[122]This Ground is set out at [76]-[78] of the grounds and within [180]-[196] of the skeleton. The suggestion is that the judge was wrong to find that Mr Rockmann and Mr Cresswell (the directors of LZLabs) had the requisite knowledge and intention and that she should have found that they did not.[123]IBM note that LZLabs in fact procured Winsopia to commit acts that amounted to breaches of the ICA: see [863]-[877]. They note that that important finding is not challenged by the appellants. Thus, IBM say that this is all about the judge’s finding at [880]-[887] that Winsopia (acting through Rockmann and Cresswell) had sufficient knowledge of the terms of the ICA such that it knew that the essential facts which made the acts which it was procuring unlawful. That was a pure matter of fact and there was plenty of evidence to support the judge’s finding of awareness.[124]I consider that this ground has no real prospect of success. I agree with IBM’s response and consider the contrary to be unarguable. In particular:(i) The judge properly explains at [880]-[887] how and why, through Mr Rockmann and Mr Cresswell and the evidence relating to their knowledge, there was sufficient knowledge attributable to LZLabs. For example, she carefully explained at [886] how it was that Mr Cresswell also had knowledge of the essential facts which made the acts unlawful.(ii) In my view, no element of the judge’s analysis of the facts and the law can be legitimately criticised.

Ground 21: No Acts of Procurement by Mr Moores

The judge’s assessment of this issue is at [917]-[936].

[126]The appellants say at [79] of the grounds, and principally at [191] of the skeleton, that the judge was wrong to find that Mr Moores persuaded, encouraged or assisted Winsopia in its breaches of the ICA. IBM say that this is a matter of fact and that the central plank of the judge’s reasoning was that Mr Moores used his power and control over LZLabs – as its ultimate owner – to exert pressure on them to dismantle the protective barriers/code of conduct that had been put in place by the Clean Room process.[127]I consider this ground of appeal to be hopeless. I agree with IBM’s response and find the contrary unarguable. In particular:(i) Ground 21 is an attack on a finding of fact. There is no basis for suggesting that the judge was wrong.(ii) Moreover, the judge’s earlier analysis of the history of the relevant events (and in particular the contemporaneous documentation) demonstrated beyond doubt that Mr Moores played a central role in procuring the breaches of contract. Ground 22: Absence of the Requisite Knowledge and Intention by Mr Moores.[128]This is set out in the grounds of appeal at [80]-[81] and the skeleton argument, primarily at [190]. It is a carbon copy of Ground 20 in respect of LZLabs. It fails for the same reasons that Ground 20 fails. In addition, the judge found that Mr Moores knew that the ICA prohibited decompilation, disassembly and translation and that his decision to disregard those terms was (on its own) sufficient to fix him with sufficient knowledge.

Ground 23: No Liabilities as Ultimate Beneficial Owner

[129]This is set out at [82] of the grounds of appeal and [191]-[195] of the skeleton. It is suggested that the judge should have found that Mr Moores, as the indirect beneficial owner of Winsopia, was entitled to rely on the principle in Said v Butt.[130]In response, IBM say that the Said v Butt argument was expressly limited to Mr Cresswell and Mr Rockmann and the appellants never suggested that it applied to Mr Moores as well. It is much too late for that point to be taken because it would have then necessitated a factual inquiry and cross examination at trial.[131]I refuse permission to the appellants to take this point. Mr Stewart rightly accepted that it was a new argument. It seems to me that there would be clear prejudice if the appellants were permitted to take the point now. First, the inevitable factual enquiry about the nature, scope and extent of Mr Moores’ precise interest (which would have been necessitated by such a plea) simply never took place at trial. Secondly, it would have been necessary for Mr Moores to demonstrate that he was acting in good faith (see [851] in respect of Mr Cresswell and Mr Rockmann). That would have also necessitated cross-examination (again see [913] in respect of the directors). In the absence of such evidence, the prejudice to IBM if the point was allowed in now, would be significant and irredeemable.[132]There was no suggestion before the judge that the Said v Butt point even arguably applied to Mr Moores. In any event, since it has never been suggested that Mr Moores was an agent of Winsopia, it seems to me that the Said v Butt point could not run in his case in any event.[133]For these reasons, Ground 23 has no real prospect of success.[10]Grounds 24-26: Unlawful Means Conspiracy

General

[134]At paragraph [74(v)] of her consequentials judgment,

the judge said this:

“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.”
[135]I agree with the judge’s reasons for refusing PTA. Since the judge found that the same two appellants (LZLabs and Mr Moores) were liable for unlawful means conspiracy as were liable for the unlawful procurement, the unlawful means conspiracy part of the case adds nothing. Thus this part of the appeal is academic. It also suffers from the same fundamental flaws as Grounds 18-23, and fails to clear the particularly high permission hurdle in this case.

Ground 24: No Unlawful Means

[136]As made plain by [83] of the grounds of appeal, this ground is parasitic upon success on the previous 23 Grounds. If they fail, so does Ground 24. I have found that they disclose no real prospect of success. That therefore is the end of this ground too.

Ground 25: Absence of the Requisite Knowledge and Intention

[137]This is set out in the grounds of appeal at [84]-[87] and the skeleton (along with the related arguments about unlawful procurement) at [180]-[196]. The essential argument advanced by the appellants is similar to their procurement case, namely that they believed that their conduct was not unlawful because they believed the Software Directive applied and so it followed that they were not liable in unlawful means conspiracy.[138]IBM say that these are matters of fact, in particular the judge’s factual finding that neither LZLabs nor Mr Moores established the belief that the Software Directive applied. They also say that even if that belief could be established that would not be relevant to their liability in unlawful means conspiracy as a matter of law, as explained by the judge at [949]-[952].[139]I consider that Ground 25 has no real prospect of success. I agree with IBM’s response. In particular:(i) First, there is no error of law or principle in the judge’s reasoning: on the contrary, she sets out and then applies the correct principles.(ii) Secondly, the judge made critical findings of fact which mean that these arguments are simply not open to LZLabs and Mr Moores.(iii) In addition, I should say that, in my view, the breach of the ICA amounted to an independent unlawful means: it is not suggested that that required precise knowledge of unlawfulness. On that basis any debate about the procurement is entirely academic. Procurement too does not require the claimant to establish knowledge of unlawfulness, as explained under Ground 19 above.

Ground 26: Wrong to Conclude that any Damage Was Suffered by IBM

[140]It is suggested at [88]-[89] of the grounds of appeal and [196] of the skeleton argument that the judge was wrong to find liability for these torts in circumstances where there was no damage. It is said that the evidence from Mr Wallin as to damage was extremely thin and the best he could do was identify lost management time.[141]IBM’s response is to identify the judge’s findings of fact at [959] that there had been some damage and that its quantum was to be investigated at stage two of the trial. They point to the fact that, in preparation for the second stage of trial, IBM’s particulars of claim identify a claim in the order of £1.6 million. Management time is one, but only one, of the heads of loss.[142]I agree with IBM’s response. The judge concluded as a matter of fact that, on the evidence, there had been damage. In my view, that is sufficient to make Ground 26 unarguable. Further and in any event, the appellants knew that the precise quantification of damage remained for the second part of the trial.[11]Grounds 27-29: Errors in Relation to Limitation and Concealment

General

[143]At paragraph [74(vii)(viii)]

the judge said:

“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.”
Again, making allowances for some change between the draft grounds before the judge and the grounds with which we are concerned, these paragraphs apply to these grounds. Of course, I have dealt with the point about clause 1.11.4 of the ICA above.[144]I agree with the judge’s reasoning for refusing PTA. It seems to me that all the grounds in this group are, in one way or another, an impermissible attack on the judge’s findings of fact. They must all fail for that reason alone. The particularly high permission hurdle in this case is again of direct relevance; I can see no way in which the appellants can get close to surmounting that hurdle.

Ground 27: Wrong to Conclude That There Had Been Deliberate Concealment

[145]At [90] of the grounds of appeal it is said that there can have been no deliberate concealment of the fact that LZLabs owned Winsopia because that was in the public domain. This is developed in the skeleton at [198] – [206]. At [91] of the grounds, it is said that the judge was wrong to find that the breaches were deliberate, in circumstances in which they were unlikely to be discovered for some time. In his oral submissions at the hearing at 20 June, Mr Stewart relied on [96]-[99] of the judgment in Canada Square, to say that one ingredient of deliberate concealment was that there had to be an intention to keep something secret, an initial hiding.[146]IBM accept that they could have discovered that LZLabs owned Winsopia earlier, but only if they had any reason to make those enquiries. They say they had no such reason, so the point does not run. They rely on the judge’s detailed analysis of concealment at [1022]-[1068] to say that this argument is not open to the appellants on appeal. As to the point that the breaches were deliberate because they were unlikely to be discovered for some time, IBM make the straightforward point that the judge was plainly right because, in fact, it took seven years for the breaches to be detected.[147]I consider that Ground 27 has no real prospect of success. I agree with IBM’s response and I consider the contrary to be unarguable. In particular:(i) There is no error of principle. The lengthy passage at [1022]-[1068] of the judgment is a careful analysis of the evidence and cannot give rise to an arguable appeal.(ii) I consider that the appellants are wrong to say that, in effect, this all turned on a fact that IBM could have discovered, so deliberate concealment cannot operate. The judge’s analysis, in the lengthy section of the judgment noted above, contains considerable detail as to all the elements of the deliberate concealment that was going on.(iii) It was not simply a question of who owned Winsopia. For example, at [1042], the judge referred to the email exchanges in which “Winsopia employees were told to pretend they were LzLabs employees when talking to existing or prospective customers so that IBM would not discover Winsopia’s involvement in the SDM.” In my view, such deliberate deception more than justified the judge’s finding of deliberate concealment.

Ground 28: Error in Relation to IBM’s Knowledge

[148]At [92] of the grounds of appeal and [201]-[201] of the skeleton, the appellants say that the judge should have found Mr Anzani’s knowledge should be attributed to IBM. At [93] they say that the judge should not have decided that IBM was unaware of the connection between LZLabs and Winsopia prior to August 2020 and should have instead drawn adverse inferences against IBM and/or found that they had not discharged the burden of proof. At [94] the appellants contend that the judge erred in finding that IBM could not have found out about the concealment of the unlawful means conspiracy prior to June 2023. It is said that the judge’s reasons were inadequate so her finding was unsupportable.[149]In response, IBM say that Mr Anzani was not an employee and not an agent and that it would therefore have been wrong in principle for the judge to find that the knowledge of a parent company should be attributed to the subsidiary. As to the point at [93], IBM say that the judge accepted IBM’s evidence as to when they became aware of the connection, and that the documents supported that evidence (as the judge found). They say there is no basis to redo that factual inquiry. They make the same point in relation to the finding about unlawful means conspiracy prior to June 2023.[150]I consider this Ground 28 has no real prospect of success. I agree with IBM’s response. In particular:(i) Again there was no error of law or principle. There is no basis for reopening the judge’s factual findings.(ii) I note that the skeleton seeks to argue this point by reference to some of the evidence in Mr Anzani’s cross-examination. That makes Ground 28 a classic example of the appellants doing: a) what they said they were not doing (challenging primary findings of fact); and b) what they cannot do on appeal in any event (as per Fage).

Ground 29: Incorrect Approach to Accrual of the Causes of Action in Tort

The judge’s judgment on this is set out at [1119] as follows:

“1119. There is a dispute between the parties as to the date on which any damage occurred so as to give rise to a cause of action in the tort of unlawful means conspiracy. The competing dates are 2016 (the defendants) and 2021 (IBM). The evidence before the court on the date of damage is sparse, not least because issues of quantum were not included in this trial. I do not consider that it is necessary to resolve this matter because on the facts it does not affect any limitation defence or the key findings on liability. The only claim that might be affected would be IBM’s claim against Winsopia for unlawful means conspiracy, which might be caught by the contractual limitation period of two years, subject to the issue of dishonest or deliberate concealment. However, based on my Judgment dated 29 November 2023, when giving permission to IBM to amend to plead the unlawful conspiracy claim, I am satisfied that, as a result of late disclosure, IBM could not with reasonable diligence have discovered the concealment regarding the unlawful conspiracy claim prior to June 2023, when that claim was formulated.”
[152]In the grounds of appeal at [95] and the skeleton at [207], this unremarkable statement is attacked. It is said that the judge should have determined this issue and should have found that there was either no damage or that the cause of action arose no later than March 2016.[153]I consider that Ground 29 is hopeless. Indeed, I regard it as going beyond the boundaries of a properly considered ground of appeal. The judge had produced an enormous judgment covering a huge range of interleaved issues. She declined to deal with this particular issue because it was academic. To criticise that conclusion perhaps gives some clue as to the true nature and purpose of this ‘kitchen sink’ PTA application. In any event, the damage point is not open to the appellants because it is an attack on the judge’s findings of fact. The argument that the cause of action accrued in March 2016 is untenable in the light of the judge’s explanation of concealment and knowledge.[11]Grounds 30-31 Errors Relating to Audit and Termination.

General

[154]At [74(ix)] of the consequentials judgment,

the judge said:

“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.”
[155]I agree with the judge’s reasons for refusing PTA. At trial, IBM’s case was that Winsopia refused their reasonable request for an audit. Winsopia’s answer was to say that, because there was confidential material involved, some sort of separate agreement was necessary. The judge dealt with all of the arguments in the judgment at [961]-[987]. She concluded that the request for an audit was reasonable and that in the circumstances the termination was lawful. In addition, IBM had a separate claim, based on the breaches of contract found by the judge, which either justified termination under the contract or comprised repudiatory breaches of contract.[156]Accordingly, it follows that, as with most cases concerned with termination/repudiation, the result turned on the judge’s evaluation and findings of fact. Again that means that these grounds of appeal must fail, principally because they are an illegitimate attempt to reopen those findings of fact and because they do not clear the particularly high permission hurdle in this case. Ground 30: Erroneous Conclusion that Audit Request was Valid or Not Complied With.[157]This is dealt with in grounds of appeal document at [96] and the skeleton at [208]-[212]. There are two complaints. The first is that the judge was wrong to find breach because of the ‘confidential information’ point. The second is that IBM won on an unpleaded case because their pleaded reliance was on IBM’s letter of 3 December 2010 and so they should not have been able to rely on their letter of 12 January 2011.[158]In response, IBM say that the judge was entitled to reach the conclusion she did about confidential information, so that this is an attack on the judge’s findings of fact. She found that “much of the material sought was not confidential” so that was a complete answer to the defence in any event. As to the pleading point, they say that the letter of 12 January was pleaded at paragraph 38 of the RRRAPOC and that in any event the letter of January only repeated what was in the letter of 3 December.[159]In my view, Ground 30 has no real prospect of success. I agree with IBM’s response. In particular:(i) The judge’s conclusions on confidential information were entirely a matter of fact and cannot be re-opened.(ii) The pleading point is hopeless. The second letter was pleaded and in any event repeated almost verbatim what was in the first letter. The problem was simply that the first letter came from IBM Corporation, so the second letter had to come from the UK company (because they were the correct contracting party). The second letter was a free standing letter in respect of the audit and made the same request. Ground 31: No Valid Termination of the ICA by IBM.[160]The relevant paragraphs in the Grounds of Appeal are [97]-[99] and the skeleton at [213]-[217]. [97] is parasitic upon success of all of the earlier grounds. [98] asserts that the judge was wrong to say that Winsopia had been given reasonable notice and an opportunity to comply. [99] says that the judge was wrong to find that IBM was entitled to terminate at common law.[161]IBM make the point that [97] must fail because the other grounds on which it relies have also failed. They say that they were entitled to terminate under the contract or by way of repudiatory breach, just as the judge found. That latter claim was not capable of remediation because the ICA Programs had been transferred to a third party. As to the audit request, they rely on the fact that the judge concluded that Winsopia had more than enough time to comply with that request.[162]I consider this ground of appeal has no real prospect of success. I agree with IBM’s response and consider the contrary to be unarguable. In particular:(i) The judge’s analysis shows no error of law or principle. The breaches of the ICA that the judge had found gave rise to an unarguable common law claim for repudiatory breach of contract.(ii) As to the termination under the contract, questions of reasonable notice, time to respond and the like, were all a matter for the judge’s factual evaluation and this court will not interfere with them.[13]Grounds 32-34: Consequential Judgment and Relief

General

[163]The injunction and other relief granted by the judge in her consequentials judgment seem to me to be the inevitable consequence of the appellant’s failure in the main action. The injunctions granted were all a matter of discretion for the judge who spent many weeks hearing and subsequently evaluating the evidence, and then another three days at the consequentials hearing. Her conclusions are not wrong in principle, so this court would not interfere with the exercise of her discretion. The particularly high permission hurdle noted above applies with even more force because this is an attack on a pure exercise of the specialist judge’s discretion. Grounds 32 and 33: Injunction in Relation to SDM (Ground 32) and in Relation to Derived Information (Ground 33)[164]These are dealt with in the appellants grounds of appeal at [100]-[106] and the skeleton at [218]-[228]. Ground 32 appears to rely on a number of grounds which have already been rejected and a number of arguments which I have already concluded were unarguable such as the complaint about no literal copy of any source code or object code having been made.[165]Ground 33 complains that it was wrong to grant an injunction to restrain the use or dissemination of pure information which was not established to be protected by any intellectual property rights.[166]IBM repeat their principal point that it is irrelevant whether any component of an ICA Program was actually copied into the SDM. They maintain that what was relevant was that the appellant’s systematic breaches were used to “develop or improve performance of the SDM” (as the judge found in the consequential judgment at [22]). In consequence the SDM was tainted. Any parts of the SDM that were not tainted would not be subject to the injunction but the appellants provided no proper evidence to demonstrate whether the tainted parts of the SDM could be separated from untainted parts. The appellants’ proposals were described by the judge as “woefully inadequate” and “not credible” at [23]. As to Ground 33, IBM’s point it that the property rights are immaterial and all that mattered was the use of information unlawfully harvested from ICA Programs.[167]Grounds 32 and 33 have no real prospect of success. I agree with IBM’s response and consider the contrary to be unarguable. In particular:(i) In my view the judge was plainly entitled to come to the conclusions she did in the light of the main judgment.(ii) As to the SDM, it had nothing to do with literal copying. It was for the appellants to show that there was any part of the SDM that was untainted by their breaches, and whether separation was even possible. They failed to demonstrate either.(iii) On ground 33, the proprietary rights are irrelevant to the terms of the injunction.[168]However, it emerged during the hearing on 20 June that neither Lord Justice Males nor I were very enthusiastic about the formulation of the injunction in respect of derived information. That is because it referenced information “which derives from breaches of the ICA”. That seems to us to be open to all sorts of argument, given the bitter litigation thus far. We suggested a change to reflect this concern, and IBM in their email of 3 July 2025 agreed to that change. We therefore amend that injunction to refer to information “which derives from breaches of the ICA as found by the judge in her judgment”. Ground 34: Injunction and Delivery up in Relation to LZLabs and Mr Moores.[169]This is set out in the Grounds of Appeal at [107]-[108] and the skeleton argument at [229]. It is said that it was wrong to grant the injunction against LZLabs and Mr Moores, or if it was, it should have been more limited. IBM say that the judge was fully entitled to require delivery up against the background of widespread breaches in order to protect against further misuse. There was no justification for the appellants continuing to hold ICA Programs.[170]In my view, this was plainly a matter that the judge was entitled to consider and rule on when ordering delivery up of the ICA Programs. Any other result would have allowed the appellants to keep the product of their unlawful conduct. Ground 34 is therefore unarguable. Ground 35: The Costs of LZLabs Limited, Mr Creswell and Mr Rockmann.[171]The judge concluded that the appellants were liable for the costs of the proceedings as a whole including the costs incurred by IBM in pursuing the claims against LZLabs Limited (the UK company), Mr Creswell and Mr Rockmann. The appellants complain about that conclusion.[172]There can be nothing in this complaint. Costs are a paradigm example of the exercise of a judge’s discretion. It is common for defendants who have taken every point and lost every point to be ordered to pay the claimant’s successful costs of pursuing all the defendants, including in this case three defendants who, although closely related to the relevant parties and events, were found not to be liable. It is a form of Sanderson[173]In consequence, this ground of appeal is refused. It has no real prospect of success.[14]Conclusions[174]For all these reasons, this application for permission to appeal is refused. Notwithstanding the length of all the documents (including these reasons) the ultimate position is a simple one. There are no free-standing points of principle that the judge got even arguably wrong. Instead, as she herself said, she applied the settled law to the facts as she found them to be. It appears that the appellants were aware from the outset of the risk of IBM pursuing them when they discovered what they were doing. After many years, that risk eventuated before the judge. None of the arguments in the grounds of appeal document, or the long accompanying skeleton can, in my view, put off the consequences of that risk-taking any longer. LORD JUSTICE MALES:[175]I agree that permission to appeal must be refused for the reasons given by Lord Justice Coulson.[176]When I first read the judgment in this case it struck me as a thorough and careful piece of work by a specialist judge with a firm command of the evidence given during a trial which lasted 38 days (including her five reading days) and which must have required extensive further reading out of court. It was therefore surprising to see an appellant’s notice which insisted that the judge got almost everything wrong. The appellants’ 35 grounds of appeal and 80 pages of skeleton argument have confirmed, rather than shaken, my initial view. They illustrate powerfully the truth of the old adage that less is more and its converse, which could usefully be borne in mind by those seeking permission to appeal in this kind of case, that very often more is less.

order

see White Book, para 44.2.28.

Cited in 1 later judgment