IBM Sues Startup for Allegedly Stealing Software Code

IBM Corp. filed a lawsuit on Wednesday in Manhattan federal court against a startup founded by several of its former employees, claiming that the smaller firm stole source code to offer a cheaper competing software product.

The tech giant says that Teraproc Inc., a Canadian company launched in 2014 by three former IBMers, is using “confidential and proprietary source code” for an IBM software program in its own offerings — an act of “illegal opportunism” that is causing the company irreparable harm.

“Unless halted, Teraproc’s illegal actions will serve as an encouragement to other companies to similarly violate the intellectual property rights of true innovators, like IBM, without investing in their own research and development,” IBM wrote.

IBM claims that Teraproc’s founders took code for a program called Spectrum LSF — a so-called workload management platform — when they left. They used the stolen material to create a cheaper product and “directly compete with IBM.

“Teraproc has been able to market its own LSF, called OpenLava, to IBM’s customers, pitching it as a less expensive substitute for IBM’s Spectrum LSF,” the complaint says. “OpenLava is less expensive because Teraproc stole what it had not created, passing off the inventiveness of Spectrum LSF as Teraproc’s own.”

The suit includes claims of federal copyright infringement, federal trade secrets misappropriation under the new Defend Trade Secrets Act, state law trade secrets claims, tortious interference with contract and “aiding and abetting a breach of fiduciary duty.”

The body of the complaint claims that the code in question was taken by former IBM employees William Lu, James Pang and Meng Ding, but the three are not named individually as defendants in the lawsuit.

Representatives for the parties did not immediately return a request for comment on Wednesday.

IBM is represented by Dale M. Cendali and Joshua L. Simmons of Kirkland & Ellis LLP.

Counsel information for Teraproc was not immediately available on Wednesday.

The case is IBM Corp. et al. v. Teraproc Inc., case number 7:16-cv-07989, in the U.S. District Court for the Southern District of New York.

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