By Jonathan Stempel and Blake Brittain
(Reuters) -A federal appeals court on Tuesday overturned a judgment requiring IBM to pay rival BMC Software $1.6 billion, after a judge found IBM improperly replaced BMC’s mainframe software at AT&T with its own.
The 5th U.S. Circuit Court of Appeals in New Orleans said a lower court judge’s determination concerning liability was in error. Writing for a three-judge panel, U.S. Circuit Judge Edith Jones said AT&T, one of BMC’s biggest clients, had switched to IBM software “independently” and that BMC had “lost out to IBM fair and square.”
A BMC spokesperson declined to comment. Representatives for IBM and AT&T did not immediately respond to requests for comment.
AT&T was not a party to the case.
Houston-based BMC develops and licenses proprietary mainframe software products. Under an agreement, IBM can maintain and operate mainframes running BMC software with a “non-displacement” provision that limits IBM from switching BMC clients’ software to IBM’s, the ruling said.
AT&T hired IBM to manage its mainframe operations. BMC’s lawsuit in Houston federal court accused IBM of breaching their contract when AT&T abandoned its software for IBM’s.
Tuesday’s ruling overturned U.S. District Judge Gray Miller’s 2022 decision that IBM owed BMC $1.6 billion in damages for breaking their agreement. Miller said IBM had already secretly agreed to replace BMC’s software at AT&T when it negotiated the contract in 2015.
(Reporting by Jonathan Stempel in New York and Blake Brittain in WashingtonEditing by Chris Reese and Richard Chang)
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