IBM, Compuware Settle Source Code Dispute

UPDATED: IBM and Compuware settled their
three-year legal battle over source code with a $400 million settlement,
officials announced Tuesday.

Compuware filed
a lawsuit
in March 2002, claiming Big Blue had stolen the source code to
its mainframe software applications, File-AID and Abend-AID, and used it to
create IBM’s own brand of mainframe software, File Manager and Fault
Analyzer.

As part of the arrangement reached by the two sides, the two companies struck
a cross-licensing agreement for the patents used in their respective
mainframe software technologies. In addition, IBM will license $140 million
in Compuware software and buy $260 million worth of Compuware services over
the next four years.

In a press conference Tuesday afternoon Peter Karmanos, Jr., Compuware
chairman and CEO, said the settlement was a victory for both companies; the
only losers were the lawyers. He also said the three-year litigation has
helped the company as a whole.

“It has helped us focus, now more than ever before, on delivering value to
our customers and ensuring that our customers can see and understand that
value,” he said.

Other terms of the agreement include the establishment of a joint task force
to “ensure that IBM obtains maximum value from Compuware solutions,” as well as technical collaboration on IBM and Compuware
interoperability for the System/390 mainframe architecture.

Karmanos will head the task force overseeing IBM’s use of Compuware’s
software and services, saying the terms of the settlement stipulate Big Blue
must spend the $140 million for internal IBM use, while the $260 million in
services can be used either internally or sub-contracted through IBM’s
global services unit.

“We want to be able to demonstrate to [IBM] that we can be a very, very
valuable supplier and that they can get measurable value, even from our
services business,” Karmanos said.

Compuware will also remain a member of IBM’s PartnerWorld program, which
gives ISVs access to resources that allow for software
development on IBM’s hardware and software platforms.

“We think the key here is that IBM is free to distribute our mainframe-based software products at the prices we choose to sell them for, which we believe will benefit our customers,” said Tim Breuer, an IBM spokesperson.

The three-year litigation has not been without its hitches. Last year, Compuware called for a sanction
against IBM
and asked the judge presiding over the case to default in Compuware’s favor. The sanction call came after IBM officials produced source code for a pre-version 1 release of File Manager after claiming it could not find it; more damaging than the sudden reappearance of the code was the fact, Compuware lawyers said at the time, that IBM was using the lack of evidence of that version as the basis for its defense.

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