IBM Suing Start-Up Over IP Infringement: Is History Repeating Itself?

Recently, IBM announced that it is suing start-up company Winsopia for acting as a front by LzLabs to obtain intellectual property on its mainframes and software. What challenges do ageing systems present, why is IBM fighting these two companies, and are we seeing history repeat itself just like the reverse engineering of the IBM BIOS?

What challenges do ageing systems present?

The speed at which technology develops is truly mind-boggling; smartphones only really came out in full force a decade ago, floppy disks were mainstream 20 years ago, and hard drive spaces have gone from megabytes to terabytes in 30 years. Mainstream computers developed for office applications in the early 2000s pale compared to those produced today, and even the abilities of the most basic microprocessors would run circles around those made a decade ago. 

And yet, there are systems well over 30 years old still being used today and are commonly found in applications such as financial institutions, military equipment, and government infrastructure. The reason for using old hardware usually comes from the difficulty of replacing critical infrastructure with something equally reliable. 

For example, a mainframe being used by a financial institution could be processing millions of transactions every second and has likely to have been doing this for well over a decade. This level of reliability is rarely guaranteed in newer technology due to its young age, which is why mission-critical applications use old hardware; it's tried and tested. In fact, this dependence on older hardware has created a lucrative industry that collects and refurbishes old hardware no longer manufactured, such as floppy disk drives, old processors, and motherboards. 

The same applies to military equipment. While many would assume that the latest fighter jets use state-of-the-art technology, the truth is that their hardware is typically based on systems well over 20 years old. The most essential feature in any military application is reliability, making it hard to integrate new technologies (except for advanced weaponry and experimental defensive systems).

IBM suing Winsopia over IP infringement with LzLabs

In March, IBM announced that it was launching a lawsuit against Switzerland start-up LzLabs over IP infringement of its software-defined mainframes. Now, IBM has announced that it is also turning its attention to a small UK start-up, Winsopia, for acting as a front for LzLabs.

To understand why IBM is suing, we first need to understand the background behind this case. Mainframe systems are slowly becoming obsolete (being replaced by datacenters), but their use in key financial institutions makes them a critical piece of hardware that is not so easily replaced, and this sees IBM generating revenue from manufacturing mainframes as well as their leasing and associated software.

But as IBM are one of the few suppliers of such equipment (likely to be the only supplier), this gives IBM an effective monopoly over IBM mainframe systems. Recognising that some customers may want to use alternative platforms to develop and test new software, LzLabs was formed that focuses on software-defined mainframes. Simply put, they create virtual mainframes that can work on standard off-the-shelf systems, including servers and data centres. 

In retaliation to their services, IBM accused LzLabs of reverse engineering their equipment and software and violating their intellectual property rights. Specifically, because LzLabs have a software system that can translate IBM mainframe instructions to x86, they must infringe at least two patents. 

However, after an investigation of those working at LzLabs, IBM has now turned its attention to a small British start-up, Winsopia. According to IBM, Winsopia is a shell company whose sole purpose is to act as a front for LzLabs and gain access to IBM equipment and software. Once formed, it approached IBM as a customer asking to lease a mainframe and software and then used this access to reverse engineer IBM products to help create software-defined mainframes offered by LzLabs. 

These suspicions are primarily fuelled by the fact that both LzLabs and Winsopia both shared two identical directors. Despite these individuals being named in the lawsuits, a judge in the case stated that it is the companies who are facing legal action and not the individuals (one of the major benefits of a limited company). 

Is history repeating itself just like the IBM BIOS?

This case is extremely similar to those back in the 1980s, whereby numerous computer companies worldwide wanted to create IBM-compatible clones, and IBM did everything in its power to prevent the sale of such machines. Interestingly, an IBM PC in itself has little originality; the CPU is off-the-shelf, the motherboard just connects key system components together, and no custom silicon is found anywhere. However, the magic behind an IBM PC was the BIOS that provided software with an API to interface with hardware.

As operating systems back in the day depended on the BIOS functionality,  a computer company that could legally create an IBM BIOS clone could sell their machines alongside IBM computers. But trying to reverse engineer the IBM BIOS is challenging as anyone who observed the code held in the BIOS ROM would immediately be disqualified from writing a new BIOS. As such, BIOS clones had to be made in legal clean rooms whereby those inside the clean room are never exposed to the BIOS source code; all they can have access to is the list of API functions from a user's perspective. 

This situation between IBM and LzLab is very similar for several reasons. Firstly, LzLabs is trying to create its own version of an IBM mainframe that can run in the cloud and remove the need for a physical IBM machine or virtual machine. To do this legally, LzLabs must not have access to software resources provided by IBM, nor can it break into an IBM mainframe and attempt to reverse engineer the equipment.

Secondly, IBM is accusing LzLabs of having used a shell company to obtain access to key materials. While companies back in the 1980s would claim to have never looked at the IBM source code, it is highly likely that they did. LzLabs could argue that their software was written independently of IBM IP and that any similarities are a coincidence, but this could be hard to prove if IP was indeed breached to implement key features such as IBM mainframe to x86 translation.

Thirdly, LzLabs being able to create an IBM-compatible mainframe presents similar opportunities found back in the 1980s. Offering a discount IBM mainframe that can run on datacenters presents numerous advantages to customers, especially those looking to move away from an IBM mainframe. It also allows designers to move entirely away from physical hardware and onto a data centre, allowing the same software to continue operating while still maintaining the same relatability as before.

It is hard to see where this lawsuit will go, but it is exciting nonetheless. Did LzLabs really set up a shell company to steal IBM IP? Is IBM worried about competition from LzLabs?