LZLabs Gmbh & Ors v IBM UK Limited

An appellate court will rarely grant permission to challenge detailed findings of fact, expert evidence or evaluative conclusions after a lengthy specialist trial. The applicant must identify an absence of evidence, a conclusion no reasonable judge could reach, or an identifiable flaw in the evaluation. A contractual prohibition on reverse engineering may be breached without literal copying of program code. Rights under the Software Directive to observe, study or test a program do not equate to reverse assembly, decompilation, translation or reverse engineering. Liability for procuring a breach depends on knowledge of the essential facts making the act unlawful, not knowledge that it is unlawful. A diffuse application seeking to re-litigate factual findings supplies neither a real prospect of success nor another compelling reason for an appeal.

IBM licensed specified mainframe programs to Winsopia under an International Customer Agreement (ICA). Following a 33-day trial, O’Farrell J found that Winsopia had breached the ICA by disassembling, reverse engineering and using elements of IBM programs in developing a mainframe product. She also found LZLabs and Mr Moores liable for procuring breaches and for unlawful means conspiracy.

In the principal judgment, the judge upheld IBM’s claims, rejected limitation defences, and held that IBM had validly terminated the ICA: [2025] EWHC 532 (TCC). In a consequential judgment, she granted injunctions, delivery-up and destruction relief, made costs orders, and refused permission to appeal: [2025] EWHC 998 (TCC).

The appellants sought permission to advance 35 wide-ranging grounds, principally challenging the judge’s contractual construction, factual findings, application of the Software Directive, liability in tort, limitation, termination, relief and costs.

1. Permission to appeal was refused. Coulson LJ held, with whom Males LJ agreed, that none of the 35 grounds had a real prospect of success and that there was no other compelling reason for an appeal. The application was an impermissible attempt to re-litigate the outcome of a lengthy specialist trial by challenging extensive factual and expert findings.

2. An appeal against primary fact-finding is exceptional. The Court of Appeal does not retry the evidence. An evaluative decision may be disturbed only for an identifiable flaw, such as a gap in logic, inconsistency or failure to take account of a material factor. The hurdle was especially high because the judgment came from the Technology and Construction Court after a 33-day trial involving detailed and interlocking expert evidence.

3. The judge had correctly treated the ICA as containing clear express restrictions. The appellants’ conduct could breach those restrictions by reverse assembly, reverse compilation, translation or reverse engineering even if no IBM source or object code was literally reproduced. The entitlement in Article 5(3) of the Software Directive to observe, study or test a program was distinct from those invasive acts. The copyright arguments did not turn the contractual claim into a copyright-infringement claim.

4. The judge’s approach to the statutory exceptions was unarguable. Copyright exceptions were to be read restrictively. On her findings, the relevant conduct did not engage the interoperability purpose in Article 6(1), and the disassembly relied on as error correction was carried out to improve the SDM rather than to correct an error in the licensed program.

5. The challenges to findings of unlawful procurement and unlawful means conspiracy also failed. The judge had applied the correct principle that the requisite knowledge is knowledge of the essential facts making the primary act unlawful, not knowledge that it is unlawful. Her findings that LZLabs and Mr Moores knew the ICA restrictions, procured the prohibited conduct and lacked the asserted belief in a Software Directive defence were not open to appellate challenge.

6. The Court also rejected the challenges to limitation, audit, termination, relief and costs. By agreement, it amended the derived-information injunction so that it covered information deriving from breaches of the ICA as found by the judge in her judgment.

• Court of Appeal (Civil Division) — refused the appellants’ renewed application for permission to appeal and, by agreement, amended the wording of one injunction: [2025] EWCA Civ 842.
• High Court of Justice, Technology and Construction Court — upheld IBM’s contractual and tort claims and rejected the limitation defences: [2025] EWHC 532 (TCC).
• High Court of Justice, Technology and Construction Court — granted consequential injunctions, delivery-up and destruction relief, made costs orders, and refused permission to appeal: [2025] EWHC 998 (TCC).