In a 37-page response to a lawsuit by Neon Enterprise Software, IBM accuses the software maker of copyright infringement and false advertising for its zPrime product, which is designed to let mainframe customers move more workloads onto cheaper IBM specialty processors. IBM argues that customers using zPrime are violating their contracts and that Neon knowingly gives mainframe users false information about their contracts and about whether zPrime has IBM's approval.
IBM is firing back at a company that
makes software designed to help businesses reduce the licensing costs on their IBM
Is a sharply worded response and counterclaim to the lawsuit
Neon Enterprise Software filed against IBM in December, IBM
officials are claiming the smaller company's zPrime software violates IBM's
copyrights and induces mainframe customers to violate their mainframe
In the 37-page document, filed Jan. 27 in U.S. District Court in Texas,
IBM compares Neon to an unethical cable TV
"This case is about Neon's attempted hijacking of IBM's
intellectual property," reads the IBM
document, filed by attorney Shannon Ratliff and lawyer Paul Yetter.
"Neon's business model expressly depends upon Neon inducing IBM's
customers to violate their agreements with IBM.
In this respect, it is no different than that of a crafty technician who
promises, for a fee, to rig your cable box so you can watch premium TV channels
without paying the cable company. Even if it could be accomplished technically,
it is neither lawful nor ethical."
IBM is asking the court to not only throw
out Neon's Dec. 14 lawsuit, but to find that Neon has violated IBM's
copyright protections, interfered with IBM's
contracts with customers and violated the Lanham Act by making false claims to IBM's
mainframe customers. IBM also is asking that
it be awarded all of Neon's profits as well as damages.
The main point of contention is Neon's zPrime software, introduced in June
2009. zPrime lets IBM mainframe customers
move workloads around in such a way as to enable them to avoid paying licensing
fees to IBM, which Neon officials say can
save those customers millions of dollars a year.
IBM's System z mainframes come with CPs
(central processors). Customers pay for the CPs in the systems up front, then
pay a monthly fee for the workloads that run on those processors. The more
workloads that run on the CPs, the greater the fees.
Over the last decade, IBM officials-in
hopes of capturing some of the newer workloads, such as those in Linux or
Java-began offering specialty processors, dubbed zAAP (System z Application
Assist Processor) and zIIP (System z Integrated Information Processor). These
specialty engines cost substantially less than the CPs, and are not subject to
the same software usage fees for workloads running on them.
However, according to IBM, the workloads
that run on these specialty processors are limited to those that are outlined
in contracts between IBM and the customers,
and moving any more workloads onto these processors violates the contract.
That's where the two sides disagree. Neon officials have said there is
nothing in IBM's contracts limiting the
workloads that can be put on the specialty engines, which they say are nearly
identical to the CPs. In an interview in November, Neon Chairman and CEO
Lacy Edwards said his company had had lawyers review IBM
contracts to make sure that using zPrime would not violate the terms.
IBM argues that by telling IBM
mainframe customers that using zPrime would not violate their contracts-and
that zPrime was developed with IBM's
approval-Neon officials are running up against the Lanham Act. According to IBM,
Neon also is hurting IBM's business, not
only monetarily but by forcing IBM to go
after mainframe customers that are using the zPrime software, thus damaging the
goodwill IBM has built up.
In addition, IBM points out that Neon is
a mainframe customer and says Neon is violating its own license for its System
z10 by running zPrime on it.
"IBM faces many lawful competitors
in the marketplace," IBM said in its
response document. "Neon is not one of them. IBM
has invested billions of dollars over the past decade to create and improve its
System z offerings to make them the most competitive and innovative in the
marketplace. Its substantial investment is entitled to judicial protection from
Neon's attempted piracy."
IBM's mainframe business has grown over
the past decade, in contrast to analysts' assumptions that it would be greatly
hurt by the rise of smaller, x86 systems. During that time, several companies
have offered System z customers products designed to reduce their mainframe
costs. Some, like T3 Technologies and Platform Computing, sought to sell non-IBM
systems that could run mainframe workloads.
Others, like Neon, are offering software solutions to help businesses reduce
their mainframe costs. TmaxSoft, which has offered its OpenFrame software as a
way of helping businesses migrate off the mainframe, is now selling it as a way
of enabling businesses to shift
their applications written in legacy code like COBOL and PL1 to Linux.
Businesses can then move those workloads onto the IFL (Integrated Facility for
Linux) specialty engine, which would save companies on their z/OS licensing
fees, a TmaxSoft official said earlier in January.
IBM has aggressively protected its
mainframe business, leading some competitors and industry groups to accuse it
of abusing its monopoly power in the space. However, a lawsuit filed against IBM
was dismissed in October.
Still, the Department of Justice reportedly is looking
into claims of anti-competitive practices by IBM around its System z