April 30 (Reuters) - A federal appeals court on Tuesday

overturned a judgment requiring IBM ( IBM ) to pay rival BMC

Software $1.6 billion, after a judge found IBM ( IBM ) improperly

replaced BMC's mainframe software at AT&T ( T ) with its own.

The 5th U.S. Circuit Court of Appeals in New Orleans said a

lower court judge's determination concerning liability was in

error.

BMC is a Houston-based company that develops and licenses

proprietary mainframe software products.