“This IBM Customer Agreement (called the “Agreement”) governs transactions by which the Customer purchases Machines, licenses ICA Programs, obtains Program licences and acquires Services (including, without limitation, customised development and support, business consulting, and maintenance Services) from IBM United Kingdom Limited (“IBM”).”
“4.1 Licence When IBM accepts the Customer’s order, IBM grants the Customer a non-exclusive licence to use the ICA Program only within the Customer’s Enterprise in the United Kingdom. ICA Programs are owned by International Business Machines Corporation, one of its subsidiaries, or a third party and are copyrighted and licensed (not sold). 4.1.1 Authorised Use Under each licence, IBM authorises the Customer to: a. use the ICA Program's machine-readable portion on only the Designated Machine. If the Designated Machine is inoperable, the Customer may use another machine temporarily. If the Designated Machine cannot assemble or compile the ICA Program, the Customer may assemble or compile the ICA Program on another machine. If the Customer changes a Designated Machine previously identified to IBM, the Customer agrees to notify IBM of the change and its effective date; b. use the ICA Program to the extent of authorisations the Customer has obtained;... 4.1.3 Actions The Customer May Not Take The Customer agrees not to: a. reverse assemble, reverse compile, otherwise translate, or reverse engineer the ICA Program unless expressly permitted by applicable law without the possibility of contractual waiver; or b. sublicense, assign, rent, or lease the ICA Program or transfer it outside the Customer’s Enterprise. 4.4 Compliance Verification 4.4.1 IBM’s right to verify the Customer's usage data and other information affecting the calculation of charges also includes the right to verify the Customer’s compliance with other terms of this agreement (including applicable Attachments and Transaction Documents) relating to the Customer’s use of ICA Programs at all sites and for all environments in which the Customer installs or uses ICA Programs for any purpose. IBM may use an independent auditor to assist with such verification, provided IBM has a written confidentiality agreement in place with such auditor. 4.4.2 The Customer agrees to create, retain, and provide to IBM and its auditors written records system tools outputs, and other system information sufficient to provide auditable verification that the Customer's installation and use of ICA Programs complies with the Agreement terms, including IBM’s applicable licensing and pricing terms. IBM will notify the Customer in writing if any such verification indicates that the Customer is not in compliance with Agreement terms. The rights and obligations in this section remain in effect during the period any ICA Programs are licensed to the Customer and for two years thereafter.”
“2. Moores and Rockmann’s first order of business for LzLabs was to figure out how it could gain access to IBM mainframe software. To acquire that access, LzLabs set up a shell entity to license the IBM mainframe software from a subsidiary of IBM (IBM UK). This shell entity is called Winsopia. Winsopia has no business, except to act at the direction of LzLabs. And that direction is to engage in improper reverse engineering of the IBM software to gain IBM’s trade secret and proprietary information. LzLabs then uses this information to develop a product offering that LzLabs claims is a plug-and-play replacement for the very IBM offerings LzLabs deceitfully obtained – IBM’s industry-leading mainframe system software. 3. LzLabs’ alleged plug-and-play replacement for IBM’s mainframe system software is called the Software Defined Mainframe (“SDM”). LzLabs claims its SDM can run customer owned software applications written for IBM mainframes and process the related data without making modifications to the code or data for those applications, thereby, (according to LzLabs), duplicating the functionality of IBM mainframe systems. While IBM has committed decades of engineering effort and billions of dollars of investment to develop its industry-leading mainframe systems, LzLabs claims to have achieved this feat in a fraction of the time and with a fraction of the engineers IBM used. 4. After IBM UK learned of the connection between the shell entity Winsopia and LzLabs (and to ensure compliance with the agreements by which the shell entity licensed the mainframe software), IBM UK exercised its audit rights under its agreements with Winsopia. Winsopia, however, refused to comply with the audit request, even though IBM UK’s audit rights under the agreements are not discretionary and do not require assent. In fact, before it would even entertain the audit request, Winsopia demanded that IBM UK sign a non-disclosure agreement that effectively required IBM to waive its legal rights before Winsopia provided any of the requested information.”
“11. The Court has jurisdiction over this action under 28 U.S.C. §§ 1331, 1338, and 1367. 12. Personal jurisdiction is proper against LzLabs because it has engaged in substantial activities in the United States in connection with the development, marketing, and offers for sale of its SDM. LzLabs engages in widespread marketing efforts of its SDM in the United States.3 LzLabs also advertises several major partnerships providing access to its SDM through the cloud.4 Moreover, LzLabs has made direct offers for sale and engaged in numerous discussions concerning the operation of the SDM with at least one IBM mainframe customer in the United States. 13. LzLabs has engaged in development work for its SDM in the United States, including within Texas. Defendant Texas Wormhole is LzLabs’ Austin, Texas-based development arm, engaging in development of the SDM in this District. Texas Wormhole acts under the direction (and for the exclusive benefit) of LzLabs. By way of example, Texas Wormhole employees Steve Towns, Gary Trinklein, Tom Harper, and Tommy Sprinkle reside, according to their respective LinkedIn profiles, in Texas, and all have roles relating to software development, such as software engineer, developer, or architect. Tom Harper is expressly named in the Neon injunction. These individuals’ work for LzLabs includes development of the LzLabs SDM including the reverse assembling, reverse compiling, translating, or reverse engineering of IBM software to develop the SDM. 14. Venue is proper in this District under 28 U.S.C. § 1391 and 1400. For example, Texas Wormhole has a regular and established place of business in this District and engages in development and use of the SDM in this District, actions that infringe the patents asserted in this action. LzLabs has directed Texas Wormhole’s misappropriation in this District. Furthermore, because LzLabs is a foreign corporation subject to personal jurisdiction in the United States, venue is proper in any United States District Court for the causes of action asserted here.”
“69. LzLabs offers its SDM for sale to customers within the United States. It does this through general offers and offers for demonstrations on its website. It also offers its SDM for cloud implementation through the Microsoft Azure platform. 70. In a recent press release, LzLabs formally announced expansion into North America to take advantage of the well-established mainframe customer base in North America. The majority of the mainframe customer base in North America is within the United States. 71. In or around February 2021, IBM became aware that LzLabs was communicating with an IBM customer headquartered in Tennessee. Specifically, IBM became aware that LzLabs had scheduled meetings to occur with that customer in Tennessee the week of February 22, 2021, to explore migrating certain of that customer’s applications from an IBM mainframe to LzLabs’ SDM. The IBM customer invited IBM to this meeting. When the meeting was to begin and it became apparent to LzLabs that IBM was attending, LzLabs canceled the meeting. 72. In connection with those efforts, LzLabs offered to sell its SDM to the IBM customer within the United States and has made a test installation of the SDM in the United States for that IBM customer.”
“78. LzLabs’ and Texas Wormhole’s conduct constitutes a willful and malicious misappropriation of IBM’s trade secrets in the United States. Such trade secrets include the structure, function, and operation of IBM’s COBOL & PL/I Runtime Service Routines, Middleware Service Routines, and Operating System Services (“Misappropriated Trade Secrets”). 79. The Misappropriated Trade Secrets have independent economic value because they are not generally known to, and not readily ascertainable through proper means by, other persons who can obtain economic value from their disclosure or use. For example, the Misappropriated Trade Secrets are not readily ascertainable absent the reverse assembling, reverse compiling, translating, or reverse engineering of the Licensed IBM Software, which IBM distributes with contractual restrictions on such activities. 80. IBM has maintained the secret, confidential information of the Misappropriated Trade Secrets and has taken reasonable measures to keep the information secret, including through employment agreements that require IBM employees to retain such information confidentially and forbid disclosure of such information to anyone outside of IBM. In addition, IBM places contractual restrictions on activities such as reverse assembling, reverse compiling, translating, and reverse engineering of the Licensed IBM Software. Further, IBM source code embodying the Misappropriated Trade Secrets is stored in source code management repositories. Such source code management repositories are accessible only from within the IBM intranet by an authenticated user. They are monitored for unusual network traffic to maintain their security. User access to these source code management repositories is authorized and revalidated on a quarterly basis. IBM employees are also required to take annual cybersecurity education courses. 81. In creating, using, marketing, and selling its SDM, LzLabs and Texas Wormhole misappropriated the Misappropriated Trade Secrets. The SDM incorporates the Misappropriated Trade Secrets, which were derived using improper means. LzLabs and Texas Wormhole had no rights in the Licensed IBM Software, and therefore the reverse engineering, reverse assembling, reverse compiling and/or translating they (or those on their behalf) performed was unauthorized and improper. Although LzLabs set up a shell entity to license the IBM software from IBM UK, LzLabs and Texas Wormhole further knew that any reverse engineering, reverse assembling, reverse compiling and/or translating performed by the shell entity was barred by its agreements with IBM UK. 82. LzLabs has been marketing and offering to sell the fruit of its misappropriation, the SDM, which incorporates or whose development relies on the Misappropriated Trade Secrets. These efforts have taken place within the United States. 83. Texas Wormhole has been using the fruit of its misappropriation, the SDM, which incorporates or whose development relies on, the Misappropriated Trade Secrets. This use has occurred in the United States. 84. LzLabs’ and Texas Wormhole’s misappropriation of IBM’s Misappropriated Trade Secrets was willful. 85. IBM has been damaged as a result of LzLabs’ and Texas Wormhole’s conduct, and seeks damages in accordance with proof at trial, but in any event sufficient to: (1) compensate it for its actual losses, including lost profits resulting from LzLabs’ and Texas Wormhole’s misappropriation, and (2) recover the amounts that LzLabs and Texas Wormhole unjustly received as a result of its misappropriation of the Misappropriated Trade Secrets. In lieu of the above, IBM is entitled to a reasonable royalty for LzLabs’ and Texas Wormhole’s misappropriation. 86. In addition, because LzLabs’ and Texas Wormhole’s misappropriation was willful and malicious, IBM is entitled to recover exemplary damages in an amount equal to twice the damages otherwise recoverable, and to recover its attorneys’ fees and costs of suit. 87. If Defendants are not enjoined Defendants will continue to misappropriate and use IBM’s trade secrets for their own benefit and to IBM’s detriment.”
“93. LzLabs’ and Texas Wormhole’s misappropriation occurred at least in part in the state of Texas. All of Texas Wormhole’s operations occur in Texas. In addition, LzLabs’ employees within Texas, including Steve Towns, Gary Trinklein, Tom Harper, and Tommy Sprinkle engaged in misappropriation within the state of Texas through, at least, their use of the SDM within the state.”
“18. The question whether an undisclosed agency relationship was created must depend in principle, as I see it, not on the state of mind of the supposed agent at the time of contracting, but on whether the supposed agent had communicated to the supposed principal an intention to contract on its behalf. The principle is confirmed by further binding House of Lords authority. In Garnac Grain Co Inc v H M F Fauré & Fairclough Ltd[1967] 1 Lloyd’s Rep 495 at page 508 col 2, Lord Pearson (with whose speech the other law lords agreed) stated the principle as follows: “The relationship of principal and agent can only be established by the consent of the principal and the agent. They will be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognise it themselves and even if they have professed to disclaim it . . . But the consent must have been given by each of them, either expressly or by implication from their words and conduct.”
“Where in respect of each claim: “(2B) The claimant may serve the claim form on the defendant outside of the United Kingdom where, for each claim made against the defendant to be served and included in the claim form— (a) the court has power to determine that claim under the 2005 Hague Convention and the defendant is a party to an exclusive choice of court agreement conferring jurisdiction on that court within the meaning of Article 3 of the 2005 Hague Convention; or (b) a contract contains a term to the effect that the court shall have jurisdiction to determine that claim.”
“(1) The power of the court to grant declaratory relief is discretionary. (2) There must, in general, be a real and present dispute between the parties before the court as to the existence or extent of a legal right between them. However, the claimant does not need to have a present cause of action against the defendant. (3) Each party must, in general, be affected by the court's determination of the issues concerning the legal right in question. (4) The fact that the claimant is not a party to the relevant contract in respect of which a declaration is sought is not fatal to an application for a declaration, provided that it is directly affected by the issue; (in this respect the cases have undoubtedly "moved on" from Meadows ). … (7) In all cases, assuming that the other tests are satisfied, the court must ask: is this the most effective way of resolving the issues raised? In answering that question it must consider the other options of resolving this issue.”
“It is sufficient to dispose of the point in this case to indicate that the required connection between claim and contract must inevitably be the more difficult to establish in a case where the intended defendant is not party to the contract upon which reliance is placed than in a case where he is party to it.”
“118A Further, Winsopia is entitled to declarations that (i) IBM is bound by the terms of clause 1.13.2 of the ICA and is required to submit any dispute in relation to the ICA to the exclusive jurisdiction of the English Courts; (ii) by commencing the US Proceedings, IBM is in breach thereof; (iii) IBM UK is in breach of clause 1.13.2 of the ICA in permitting or allowing IBM to include the Allegations in the US Proceedings or failing to stop IBM from so doing. 118B IBM should be restrained from continuing the US Proceedings in relation to the Allegations or initiating proceedings in relation to the Allegation other than before the English Courts. Winsopia seeks a permanent injunction to that effect. Further or alternatively, IBM UK should be ordered to take all such steps as may be within its power to compel IBM to discontinue or to stay the US Proceedings insofar as they advance the Allegations.”
“i) An application for an anti-suit injunction “always requires caution because by definition it involves interference with the process or potential process of a foreign court”... Particular caution is required in single forum cases, where the foreign proceedings which it is sought to prevent could not be brought in England... ii) The claimant in a case involving an exclusive jurisdiction clause... must ordinarily demonstrate “a high degree of probability” that there is a clause governing the dispute in question... iii) … it is only where “the English court can point with confidence to a contractual promise not to litigate elsewhere that it can be justified in interfering with a party’s right to bring its claim in such other place as might accept jurisdiction” … it is one thing to enforce a clear agreement not to sue or one which on an interlocutory basis can be seen to be highly likely to be established, it is another to restrain a party from litigating in a foreign country where the position is less clear than that. iv) If the “high probability” test can be satisfied, then the court will ordinarily exercise its discretion to restrain the pursuit of proceedings brought in breach of the exclusive jurisdiction clause unless the defendant can show “strong reasons” to refuse the relief... the principle in the Angelic Grace does not appear to come into play absent a high probability that there is a contractual promise... v) Where a matter is justiciable in an English and a foreign court “the party seeking an anti-suit injunction must generally show that proceeding before the foreign court is or would be vexatious or oppressive”... vi) … An application for injunctive relief is brought... to enforce the contractual entitlement and, absent confidence in its validity, it is difficult to see how the court can be justified in interfering with the right to bring a claim in another jurisdiction. As Clarke LJ observed... it would be inappropriate to grant an interlocutory injunction to restrain foreign proceedings at a time when it is “no more than arguable” that they were brought in breach of contract, because it could be said that such proceedings were vexatious or oppressive. vii) This appears to me to be particularly so where there are many factors connecting this case to [the foreign jurisdiction] and where there is no provision in the contract requiring proceedings to be brought in any particular jurisdiction... As Toulson LJ pointed out... “the principle of comity requires the court to recognise that, in deciding questions of weight to be attached to different factors, different judges operating under different legal systems with different legal policies may legitimately arrive at different answers, without occasioning a breach of customary international law or manifest injustice, and that in such circumstances it is not for an English court to arrogate to itself the decision how a foreign court should determine the matter. The stronger the connection of the foreign court with the parties and the subject matter of the dispute, the stronger the argument against intervention.”
“1. Under English law the court may restrain a defendant over whom it has personal jurisdiction from instituting or continuing proceedings in a foreign court when it is necessary in the interests of justice to do. 2. It is too narrow to say that such an injunction may be granted only on grounds of vexation or oppression, but, where a matter is justiciable in an English and a foreign court, the party seeking an anti-suit injunction must generally show that proceeding before the foreign court is or would be vexatious or oppressive. 3. The courts have refrained from attempting a comprehensive definition of vexation or oppression, but in order to establish that proceeding in a foreign court is or would be vexatious or oppressive on grounds of forum non conveniens, it is generally necessary to show that (a) England is clearly the more appropriate forum ("the natural forum"), and (b) justice requires that the claimant in the foreign court should be restrained from proceeding there. 4. If the English court considers England to be the natural forum and can see no legitimate personal or juridical advantage in the claimant in the foreign proceedings being allowed to pursue them, it does not automatically follow that an anti-suit injunction should be granted. For that would be to overlook the important restraining influence of considerations of comity. 5. An anti-suit injunction always requires caution because by definition it involves interference with the process or potential process of a foreign court. An injunction to enforce an exclusive jurisdiction clause governed by English law is not regarded as a breach of comity, because it merely requires a party to honour his contract. In other cases, the principle of comity requires the court to recognise that, in deciding questions of weight to be attached to different factors, different judges operating under different legal systems with different legal polices may legitimately arrive at different answers, without occasioning a breach of customary international law or manifest injustice, and that in such circumstances it is not for an English court to arrogate to itself the decision how a foreign court should determine the matter. The stronger the connection of the foreign court with the parties and the subject matter of the dispute, the stronger the argument against intervention. 6. The prosecution of parallel proceedings in different jurisdictions is undesirable but not necessarily vexatious or oppressive. …8. The decision whether or not to grant an anti-suit injunction involves an exercise of discretion and the principles governing it contain an element of flexibility.”
“1. Forthwith, require IBM to comply with the exclusive jurisdiction clause at clause 1.13.2 of the IBM Customer Agreement (referred to in paragraph 4(a), above) by discontinuing or staying the US Proceedings insofar as they advance the Allegations; and 2. Thereafter, take all steps as may be within its power to compel IBM to discontinue or stay the US Proceedings insofar as they advance the Allegations.”