IBM must pay $21 mln lawyers' tab after $1.6 bln loss in trade-secrets case

A man stands near an IBM logo at the Mobile World Congress in Barcelona, Spain, February 25, 2019. REUTERS/Sergio Perez
  • IBM previously found to have broken mainframe-software agreement
  • Agreement entitled BMC to attorneys' fees, costs of litigation

(Reuters) - A Houston federal judge awarded BMC Software Inc over $21 million in attorneys' fees and other litigation costs from International Business Machines Corp on Monday, months after BMC won $1.6 billion from the tech company in a dispute over mainframe software.

U.S. District Judge Gray Miller said BMC was entitled to the award, between the $30.2 million BMC had requested and $13.9 million IBM had proposed, based on the terms of the agreement that IBM breached.

An IBM spokesperson declined to comment.

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BMC attorney Sean Gorman of Bracewell LLP said Tuesday that the "significant" award "underscores our success for BMC against a well-funded, intense and aggressive defendant."

Miller awarded BMC over $1.6 billion in May after finding IBM broke an agreement by inducing BMC customer AT&T Corp to swap out its mainframe software for IBM's competing software.

The companies' contract allowed IBM to service BMC's software on client mainframes for free. IBM said it would not replace BMC clients' software with its own in return.

Miller said that IBM had convinced BMC through fraud to sign a contract that allowed it to "exercise rights without paying for them, secure other contractual benefits, and ultimately acquire one of BMC's core customers."

Miller awarded BMC $717.7 million in unpaid license fees and doubled it based on IBM's misconduct, which he said "offends the sense of justice and propriety that the public expects from American businesses." Miller also awarded BMC $168.2 million in interest.

The agreement entitled BMC to an additional $21.6 million, Miller ruled Monday, citing a contract provision that the losing party in any litigation between the companies would pay the winner's reasonable attorneys' fees and costs.

Miller found the number of hours Bracewell billed was reasonable, as was the rate it charged. He reduced the award from the amount BMC requested based on the time Bracewell spent on BMC's unsuccessful trade-secret claims and other considerations.

The case is BMC Software Inc v. International Business Machines Corp, U.S. District Court for the Southern District of Texas, No. 4:17-cv-02254.

For BMC: Sean Gorman and Christopher Dodson of Bracewell

For IBM: Richard Werder of Quinn Emanuel Urquhart & Sullivan

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Judge says IBM owes $1.6 billion to BMC over software contract

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Blake Brittain reports on intellectual property law, including patents, trademarks, copyrights and trade secrets. Reach him at blake.brittain@thomsonreuters.com