IBM prevails as appeals court reverses $1.6 bn judgment to BMC in software contract dispute

IBM has emerged victorious as a federal appeals court overturned a $1.6 billion judgment against the tech giant in a dispute with BMC Software over a software contract.

According to Reuters, the 5th US Circuit Court of Appeals in New Orleans delivered the reversal, citing errors in the lower court judge's determination regarding liability.

US Circuit Judge Edith Jones, writing for a three-judge panel, highlighted that AT&T, one of BMC's major clients, had independently opted to switch to IBM software.

Judge Jones said that BMC had seemingly "lost out to IBM fair and square".

IBM, represented by a spokesperson, expressed gratitude for the court's decision.

They further stated that the company had acted in good faith throughout the engagement.

Conversely, BMC declined to comment on the latest development in the legal saga.

The origins of the legal dispute stem from IBM's involvement in managing mainframe operations for AT&T.

BMC, a Houston-based developer of proprietary mainframe software, accused IBM of violating their contract when AT&T transitioned from BMC's software to IBM's.

Central to BMC's argument was the contention that IBM had breached a "non-displacement" provision, which restricted IBM from replacing BMC software with its own.

The ruling handed down by the appeals court marks a major departure from the earlier decision by US District Judge Gray Miller in 2022.

Judge Miller had ruled in favour of BMC, ordering IBM to pay $1.6 billion in damages for allegedly violating their agreement.

Miller's decision was based on the declaration that IBM had already committed to replacing BMC's software at AT&T during the negotiation of the contract in 2015.

AT&T, a key player in the dispute due to its role as a client of both IBM and BMC, has not been directly implicated in the legal proceedings.

However, representatives of the telecommunications giant have yet to issue any comment regarding the recent ruling.

(With inputs from Reuters)