Software Firm Seeks to Seal Unflattering Docs

     AUSTIN (CN) – A software company that lost its fight against IBM is now seeking to seal the not-so-flattering documents that came out during the court battle.
     Neon Enterprise Software filed suit in federal court against IBM in December 2009.
     At issue was the Neon product zPrime, which, according to the original complaint, allowed IBM mainframe computer users to dodge software licensing fees by processing legacy workloads, or “those workloads that can only be processed on IBM mainframes,” through specialty processors, rather than through the costly central processor.
     Neon said that IBM drove customers away from its product by claiming that zPrime violated the terms of the IBM mainframe agreement and by threatening zPrime users with fees and legal action.
     The 15-year-old software company lashed out at IBM in the complaint, saying: “Faced with the threat now posed by Neon, IBM has used a variety of unlawful means, including misrepresentation, disparagement, threats of retaliation and baseless litigation, and other types of unfair and unlawful competition, in an attempt to crush Neon and thereby protect the revenue generated from IBM’s monopoly in the processing of Legacy Workloads. In sum and substance, having sold products to its customers without limitation on their use, IBM is attempting unlawfully and retroactively to impose such restrictions, all to the billion-dollar-plus detriment of consumers throughout the United States and the world at large.”
     Neon sued for violation of the Lanham Act, business disparagement, tortious interference with prospective contracts, declaratory judgment and punitive damages. The company also sued for unfair competition under California law.
     IBM fought back, filing its answer and counterclaims in January 2010.
     IBM stated the following in the January document: “This case is about Neon’s attempted hijacking of IBM’s intellectual property. 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.”
     IBM hit Neon with six counterclaims, including copyright infringement and violation of the Digital Millenium Copyright Act.
     Neon and IBM reached a settlement in May 2011, and both parties agreed to a permanent injunction against Neon, requiring the software company to kill the zPrime product.
     U.S. Magistrate Judge Andrew Austin now faces deciding whether or not to seal certain documents as requested by Neon, according to a five-page order filed July 20. The documents concern a motion for relief from spoliation filed by IBM.
     In regard to the documents, the judge says “They do not contain attorney-client material or trade secrets, but instead they cast Neon and several of its key employees in a negative light: the documents include discussion of evidence that Neon employees admitted to reverse-assembling IBM’s code, hiding evidence of this reverse-assembly, and lying under oath about whether Neon engaged in reverse-assembly.”
     “The Court is mindful of the public benefits that flow from the settlement of a dispute, and does not intend to suggest by this decision that it does not favor settlements,” the judge wrote. He continues to say, “What the court intends to make clear is that when parties do not settle before unfavorable evidence and embarrassing hearings take place (all of which carry a public cost), but rather make the calculated decision to ‘roll the dice’ with the Court, then the parties must live with the consequences.” The judge gave Neon five days to explain why he should seal the documents, stating “Embarrassment and mootness will not be acceptable justifications.”

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