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IBM Ordered To Pay $1.6 Bln To BMC Software In AT&T Case

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International Business Machines Corp. has been ordered to pay $1.6 billion to BMC Software Inc. for fraud and contract violations in connection with mutual client AT&T Inc.

U.S. District Judge Gray Miller made the final ruling in the case, which began five years ago in the US District Court, Southern District of Texas (Houston). The judgement followed a seven-day trial from March 14 to March 24.

For long, both IBM and IT firm BMC had operated under a deal that disallowed IBM from moving mutual clients over to its own software product line.

IBM had serviced AT&T's mainframe computers for years, but the telecom major relied on BMC software since 2007. Later, AT&T conducted an internal initiative to migrate to IBM software from BMC software.

Following this, in 2017, BMC sued IBM accusing it for poaching AT&T's software business when both companies renewed their power-sharing deal.

BMC had asked the court to award $791 million for IBM's breach of their agreement and $104 million for lost profits on the AT&T contract.

Meanwhile, IBM's response was that it was AT&T which declined BMC's products and turned to IBM for its own reasons. IBM claimed it to be fair game under its agreement with BMC.

The judge rejected IBM's claim that it acquired the mainframe software account of AT&T, one of BMC's core customers, in a fare deal. According to the Judge, IBM fraudulently induced BMC to sign the 2015 power-sharing deal barring IBM from poaching mutual clients.

The judge said, "The court has determined that the theory asserted by BMC, and found meritorious by the court, which affords BMC the greatest recovery is its claim against IBM for fraudulent inducement. Accordingly, BMC shall recover direct and punitive damages from IBM on its fraudulent inducement claim, plus prejudgment interest in the amount of 5% and postjudgment interest."

In the ruling, Miller awarded $717.74 million in actual contractual damages, $168.23 million in prejudgment interest and an additional $717.74 million in punitive damages based on fraud by clear and convincing evidence.

BMC is also entitled to recover from IBM post-judgment interest from the date of the entry of judgment until satisfaction or payment at the rate of 2.06% per annum.

The combined amount of actual damages, exemplary damages, and pre-judgment interest on actual damages awarded to BMC in the amounts to about $1.60 billion.

Meanwhile, Miller dismissed several BMC contract and trade secret claims against IBM.

Responding to the judgement, IBM said it had acted in good faith in every respect, and would appeal the verdict.

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