HT-2021-000363 - [2025] EWHC 532 (TCC)

I turn to consider the position of Mr Moores, who is the indirect beneficial owner of LzLabs, Winsopia and LzLabs UK and, along with his affiliated entities, the principal investor in the LzLabs Group. Because he was not an officer or employee in any of those companies, he does not benefit from the defence afforded to Messrs Cresswell and Rockmann under the principle in Said v Butt.

The pleaded case against Mr Moores is that he was ultimately in control of the corporate defendants, who followed his instructions in relation to the development of the SDM. It is alleged that Mr Moores directed and coordinated the development of the SDM, participating in the detail of its development, testing and marketing. In so doing, Mr Moores gave instructions and took steps that knowingly and intentionally induced and/or facilitated breaches of the ICA. The key allegations are:

The starting point is to recognise the power and control that Mr Moores exerted over the LzLabs Group, including Winsopia. He did not have a formal role or title within the LzLabs Group but, as the ultimate owner, he took an acute interest in what was happening with the SDM project, exerted pressure on the management, and obtained regular reports on development progress. This was understandable; he had invested substantial sums of money in LzLabs and wanted to see the results of such funding. From 2011 to 2018, he rented a flat in Zurich so that he could spend time at LzLabs. He estimated that he spent about 10 weeks of the year (across multiple trips) in Switzerland up until around 2018. Although Mr Moores was not a member of the LzLabs Board of Directors, or an officer of the company, he was appointed as a “board observer” of LzLabs. In that capacity, he attended almost all of LzLabs management board meetings, in which he played an active role and received reports on progress. Mr Cresswell, who was brought in to LzLabs and Winsopia by Mr Moores in 2015 to get a minimum viable product completed and delivered to market, reported directly to Mr Moores. He considered that he was ultimately accountable to Mr Moores and stated that, although he would not necessarily follow all directions from Mr Moores, probably he would not have done anything to which Mr Moores strenuously objected.

Mr Moores acknowledged that he could understand what the SDM did conceptually in quite a high level of detail. He visited Winsopia on a number of occasions and took a keen interest in the technical issues which arose, as illustrated by his email exchanges with Mr Cresswell on 1 May 2015 in which he referred to his involvement with the SDM development issues at a granular level.

Mr Moores used his power and control over LzLabs and Winsopia to direct and/or assist in the breaches of the ICA that have been established, primarily by dismantling the protective barriers put in place by the clean room processes. By March 2014 it was clear that he was unhappy with the rate of progress and considered that the Codes of Conduct were hindering development, as set out in his email dated 25 March 2014:

“Some things are failing & failing badly here. In general, the Chinese Wall is proving to be quite unworkable in its present manifestation. To wit:

1). We have not been able to connect the mainframe to our appliance for NJE (Network Job Entry) or for CICS Inter System Coupling. This has been going on for months now and, even worse, will recur from time to time, even after the current problems are resolved.

While there are problems with the availability of consultants in the UK, the fatal flaw in establishing & maintaining connectivity is that this stuff is horribly arcane & fragile. There is no reasonable alternative to person-to-person communications.

In general, the Chinese Wall is proving to be quite unworkable in its present manifestation. To wit:

2). The process of redaction & printing of listings to avoid a claim of copyright infringement is proving to be a complete bar to our discovering how APIs & communication protocols actually work.

This just isn't working. To be clear, it isn't working poorly; rather it isn't working at all.

So, as my long-time attorney from Houston has stated: Things can only be as good as they can be. The status quo is unworkable.

So I suggest a modification to our Code that provides for direct communication between Winsopia & LzLabs for establishing and maintaining communication links. We also need to get unredacted listings, including assembly listings, of customer programs and traces, etc. Both these issues are narrow in scope and can be thoroughly documented, by 3rd parties and by maintaining a copy of transmittals.

I propose that we send several people ASAP to the UK to fix the communication issues, including things that may or may not be working with the LzLabs appliances & hardware. Otherwise we need to shut the biz down and go home.

While this isn't working, it can be fixed. I am deeply frustrated.”

Mr Moores’ level of concern was indicated by his veiled threat to shut down the project if the position did not improve. He suggested modifications to the Codes of Conduct, to permit direct communication between Winsopia and LzLabs, and to get unredacted listings, including assembly listings, of customer programs and traces, to fix what he perceived to be the problem.

His impatience with progress was further reflected in his memorandum of 26 April 2014, in which he referred to the “Goat Rope 2014”, a meeting attended by Winsopia, LzLabs and other software developers to share information about various projects, including the SDM, as disappointing. He was frank in cross-examination that he wanted developers at LzLabs to have direct access to a mainframe.

In April 2014 the Codes of Conduct were revised in accordance with Mr Moores’ wishes, with the approval of Mr Rockmann. This was a significant departure from the principle of separation that formed the basis of the existing Codes of Conduct. Although Mr Moores demurred at the suggestion that he dictated the changes, the only plausible explanation for the timing and content of them is that they were in response to his concerns.

Mr Moores became concerned about progress again at the end of April/beginning of May 2015, when he asked for an update on progress and questioned whether the deadline of 1 June 2015 would be met. By email dated 28 May 2015, in response to delay caused by a DR response requiring legal review, Mr Moores called for further changes:

“Lordy. Yet another clear example why we need Code of Conduct v2.0”.

He clearly expected his call for changes to be implemented because the next day, he stated:

“I hope that the new Code of Conduct is completed Monday because development progress is being substantially impacted. Continuing the current system won't work.

I mentioned to a couple of folks that they should plan on going to the UK to work at Winsopia as early as this coming Friday.”

Mr Moores confirmed that he was referring to LzLabs developers and that he anticipated that a change would be made to the existing version of the Codes of Conduct to permit them direct mainframe access. As anticipated, the revised Codes of Conduct were issued shortly afterwards, on 10 June 2015, pursuant to which LzLabs developers were permitted to have direct access to Winsopia’s mainframe. Immediate advantage was taken of the relaxed procedures, as demonstrated by Mr Moores’ email dated 19 June 2015, in which he referred to a planned visit to Winsopia with Mr Jaeger to discuss the new “Load Module compiler proposal” and suggested that Mr Spencer at Texas Wormhole could participate in the analysis.

In the light of that evidence, I accept IBM’s submission that during 2014 and 2015: (i) Mr Moores concluded that the development of the SDM was impossible without direct access to the Winsopia mainframe and changes to the clean room procedures; (ii) Mr Moores applied pressure to Mr Rockmann and (from May 2015) to Mr Cresswell to make significant changes to the Codes of Conduct; and (iii) Mr Rockmann and Mr Cresswell procured and/or implemented changes to the Codes of Conduct in response to the pressure which Mr Moores had applied.

It is disputed by the defendants that the relaxation of the clean room processes had any direct link with the breaches of the ICA. But it can be seen that it did have such a direct causal effect, when the ICA breaches are examined against the changes directed and approved by Mr Moores.

In conclusion on this issue, I am satisfied that Mr Moores persuaded, encouraged and assisted Winsopia to commit acts that amounted to breaches of contract.

Turning to the question of knowledge, this has to be considered against the background of the Neon litigation. Mr Moores acknowledged that reverse engineering was a complaint made by IBM Corp in the Neon litigation as amounting to breach of the Neon ICA:

“Q. Well, why don't you tell me now, Mr Moores. Are you -- is your -- you were aware that there was disassembly in the Neon litigation?

A. At some point I was.

Q. And you were aware that IBM was making a complaint that was in breach of the ICA?

A. At some point I was.

Q. And that was before Winsopia entered into its ICA, wasn't it?

A. Yes.”

Although Mr Moores stated firmly that he did not read the ICA and did not know the precise terms and conditions of the same, he agreed that the ICA was a standard term agreement used by IBM and that he was aware that the ICA prohibited decompilation. In any event, as set forth in the discussion on knowledge in relation to Mr Rockmann and Mr Cresswell, to the extent that Mr Moores elected to disregard the ICA terms and conditions, which were available to him, that would be sufficient to constitute knowledge of the same.

It was suggested by Mr Moores that he thought that the Software Directive allowed Winsopia to carry out disassembly and decompilation. However, when asked about his understanding of the Software Directive, he was unable to provide any details and no legal advice has been produced which might support his declared understanding.

As set out above in relation to LzLabs, the required intention is satisfied. Mr Moores’ intention was to develop and market the SDM as quickly as possible. That could not be done without access to the Winsopia mainframe and the licensed operating system:

“Q. And you knew that it was impossible to develop the SDM without breaching Winsopia's ICA?

A. It certainly would have been harder without -- first of all, let me back up. You suggest that I -- you're asking do I know that IBM -- or that Lz breached the ICA? I don't know that. And your question suggests that -- makes me assume that I knew a breach had occurred. That's not correct, and I'll be glad to answer a shorter question, but I'm not going to answer one that assumes a breach of the ICA.

Q. Well, you say it certainly would have been harder without. Can you finish your answer?

A. It would have been harder without some access to -- to a mainframe without -- even without heroic efforts. It was -- it was not something that -- that I ever wanted to do, and I always, as I said earlier, thought that the world's longest running, most expensive, most exhaustive Clean Room process ever needed to take place to achieve interoperability with customer programs.”

Although he disputed that access to the mainframe software put Winsopia in breach of the terms of its licence, I have found on the facts of this case that it did so do. Thus, the means to achieving Mr Moores’ aim of developing the SDM was breach of the ICA.