BMC Software Receives Historic $1.6 Billion in Damages in Lawsuit Against IBM

HOUSTON, June 2, 2022 /PRNewswire/ — Bracewell LLP won a historic victory on behalf of BMC Software, Inc. in its lawsuit against IBM for fraudulent inducement and then breach of a software license agreement.

On May 30, 2022following a two-week trial, U.S. District Judge Gray H. Miller for the southern district of Texas found that IBM had committed fraud and breached its contract with BMC. Judge Miller awarded BMC for $1.6 billion in damages, including $717 million in actual damages, $168 million in the interest and $717 million in punitive damages.

The overwhelming decision reflects Judge Miller’s assessment that IBM fraudulently induces BMC to sign the 2015 license agreement “without any intention of acting under it” in order to “exercise the rights [to use BMC’s propriety software] without paying them, obtaining other contractual benefits and ultimately acquiring one of BMC’s major customers.”

Because BMC and IBM are mainframe software competitors, the license agreement granted IBM limited rights to access and use BMC software when acting as an IT contractor for BMC software customers. Importantly, this agreement expressly prohibited IBM from replacing BMC software with IBM software at certain customers, including AT&T, one of BMC’s largest mainframe customers, unless IBM had first bought BMC licenses.

Evidence at trial showed that in order to avoid paying BMC the required license fee, IBM decided to ignore IBM’s contractual obligations and undertake a complete replacement of BMC’s software products at AT&T as part of of a secret project, expecting that if challenged, he could settle for “dimes on the dollar.”

Judge Miller wrote: “IBM never intended (and never did) to pay for the right to move. dollars it was entitled to receive under the contract in exchange for the rights exercised by IBM. »

Judge Miller found that IBM’s conduct was “both fraudulent and malicious” and “bad faith”. In explaining his award of punitive damages, Judge Miller noted that “IBM’s conduct vis-à-vis BMC offends the sense of justice and propriety that the public expects from American corporations”.

Patrick Tagtow, Sr. BMC’s Vice President and General Counsel said of Bracewell: “The Bracewell team brought consistent professionalism, depth of skill and excellent performance to this five-year litigation against a much larger and more endowed adversary. significant resources. Together with BMC’s legal team, through integrity, focus and accuracy, they ensured that the facts stood out and the truth prevailed. Our decision to partner with Bracewell on this important matter has directly led to this fantastic result.

Sean Gorman led the Bracewell team, with Christopher L. Dodson. Other members of the test team included Andrew W. Zeve, Jeff Oldham, Timothy R. Geiger, Jeremy Dunbar, Kyle A.Mason, Drew C. Molin, Matthew J. Reasoner, Walter A.Simons and Cole A. Thoms.

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