IBM sued LzLabs GmbH in March 2022, accusing it of ripping off IBM’s mainframe system software and using the information it obtained to poach customers. The tech giant alleged LzLabs infringed five patents, stole trade secrets, and engaged in false advertising.
LzLabs and co-defendant Texas Wormhole LLC filed their disqualification motion on Jan. 17, saying Albright must relinquish the case because of past work he did as a lawyer in private practice.
Specifically, Albright represented Neon Enterprise Software LLC, which was sued by IBM for IP theft more than a decade ago. Neon executives John Moores and Thilo Rockmann went on to found and run LzLabs, according to the complaint, and the two men “picked up where they left off, with LzLabs as the ‘new Neon.’”
In a hearing on the disqualification motion Thursday, Albright said his past work for Neon would’ve been obvious to LzLabs’ attorneys from the start, given that one of those lawyers, Chris Reynolds, also represented Neon with him.
He questioned why they waited until after he’d rejected their motions to dismiss, a motion seeking a protective order, and a motion to strike before asking him to recuse.
Had LzLabs won on the motion, its lawyers “would be singing ‘Kumbaya,’” but having lost, they wanted a new judge,” Albright said. “I cannot tell you how troubled I am by this, regardless of what I do with this motion.”
Brandon Allen, a partner at Reynolds Frizzell LLP, said the timing was dictated by Albright’s decision to reject LzLabs’ motion to strike, but in the sense that that decision changed the nature of the case. That earlier motion had sought to exclude from the record “Neon-related statements” made by IBM in its pleadings.
Only after its rejection, Allen argued, was it clear that Albright’s past representation of Neon created an issue under a federal disqualification statute. Allen said LzLabs was taking a “pragmatic approach” by waiting to see if there was a disqualification issue or not.
IBM’s lawyer, Justin Wilcox of Desmarais LLP, said the delay was “completely inexcusable.”
When filing their motions and making arguments at an earlier hearing, Wilcox said, LzLabs made “no mention of any potential problem with your honor ruling in this case or having any kind of potential recusal issue.”
“The first time defendants ever raised the issue of recusal was after your honor denied four of their motions and did not adopt their claim construction positions,” Wilcox said.
Albright appeared receptive to that line of argument, but didn’t decide the motion at the hearing.
Still, when Reynolds critiqued IBM for not explaining how Albright’s recusal could prejudice them, the judge piped in with the answer.
“Of course it does,” Albright said, noting that if he transfers the case to another judge in the Western District, the current late-2023 trial date could be pushed out by as much as five years.
RyanIPLaw PC; Groombridge, Wu, Baughman & Stone LLP; and Slayden Grubert Beard PLLC also represent LzLabs and Texas Wormhole.
IBM is also represented by Quinn Emanuel Urquhart & Sullivan LLP and The Dacus Firm PC.
The case is Int’l Bus. Machs. Corp. v. LzLabs GmbH, W.D. Tex., 6:22-cv-299, hearing on motion to disqualify 1/26/23.
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