IBM and Neon Enterprises Settlement

In late May 2011, IBM and Neon Enterprise Software LLC reached a settlement widely regarded as very favorable to Compass Lexecon’s client, IBM. At the heart of the dispute was a software product, zPrime, offered by Neon that allowed IBM’s mainframe customers to run certain workloads without incurring software charges in contravention of IBM’s agreements with its customers. As a result of the settlement, the court issued a permanent injunction against Neon, ordering Neon to withdraw its zPrime software from the market, to cancel all existing licenses for zPrime (effectively recalling the product), to ensure that its customers do in fact cease using zPrime, and to transfer to IBM any additional licensing revenue that Neon may continue to receive from its zPrime customers. The injunction also ordered Neon to publicly announce on its website and by press release the immediate withdrawal of zPrime from the market. A team from Compass Lexecon’s Oakland office including Professor Rich Gilbert, Jim Ratliff, Kun Huang, Blake Phillips, Rebecca Schindel, Brianne Limber, and Alison Davis worked on this matter. We worked with Teena-Ann Sankoorikal of Cravath, Swaine & Moore LLP and Eric Stock of Hogan Lovells LLP among others.