Judge Throws Out Oracle’s $1.3bn Award From SAP

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New judgement means Oracle may not bank the largest US IP infringement fine, awarded against SAP

Oracle’s hopes to bank the largest US copyright infringement award on record have been dashed, with federal judge Phyllis Hamilton overturning the $1.3 billion (£800m) judgement.

On November 23, 2010, an eight-person jury supervised by Hamilton, had concluded this sum to be fair restitution in a three-year old copyright infringement lawsuit. But, upon appeal, Hamilton has thrown out the jury’s punishing determination against German software maker SAP for admitted copyright infringement against long-term rival Oracle.

Blame Laid On US Affiliate

In its lawsuit, filed in 2007, the database company charged that a now-defunct US-based affiliate of SAP, called TomorrowNow, illegally downloaded more than eight million instances of Oracle customer-support software and hundreds of thousands of pages of supporting documentation. Oracle further claimed that those tools were then used to lure around 350 customers away from Oracle and over to SAP.

Oracle claimed that the stolen documents enabled SAP to entice customers into buying similar services at lower prices from them. The German company argued that since TommorowNow only lured a few hundred customers, it should have to pay only $40 million (£25m) to cover those accounts.

In awarding Oracle massively more than this $40 million sum, the jury illustrated how much it was willing to punish a corporation for intellectual property (IP) theft. At the appeal hearing, Hamilton called the $1.3 billion penalty “grossly excessive” and said the size of the penalty was “contrary to the weight of the evidence”.

Award Could Now Be Only $272 Million

Oracle can now choose whether to accept a lower award of $272 million (£168m), or file for a new trial before a different jury. This figure was an estimate given by an Oracle expert on what profit the company probably lost and SAP gained.

SAP took corporate responsibility for its affiliate’s actions in a court document filed on October 28, 2010 and officially apologised on November 16. The $1.3 billion judgement was announced a week later and SAP subsequently filed an appeal, with Hamilton’s resulting decision coming nine months later.

“We are very gratified with the court’s decision,” SAP’s spokesman told the press. “We believed the jury’s verdict was wrong and are pleased at the significant reduction in damages. We hope the court’s action will help drive this matter to a final resolution.”

Oracle was not pleased by the news and said it will fight for the full amount it was originally awarded.

“There was voluminous evidence regarding the massive scope of the theft, clear involvement of SAP management in the misconduct, and the tremendous value of the IP stolen,” Oracle said. “We believe the jury got it right, and we intend to pursue the full measure of damages that we believe are owed to Oracle.”

Regrettable Acquisition In 2005

Germany-based SAP, the world’s largest maker and distributor of enterprise application software, certainly is regretting the 2005 acquisition of the now-defunct Texas-based affiliate, TomorrowNow, which performed the misdeeds that led to the lawsuit and jury decision.

SAP already has paid $120 million (£74m) for court costs to Oracle and argued that another $40 million (£25m) in restitution would constitute a fair amount. Oracle originally claimed in court documents that its lost assets were valued at $2.15 billion (£1.33bn), although CEO Larry Ellison testified that $4 billion (£2.5bn) was closer to the actual amount.

To confuse the issue even more, an Oracle damages expert, Paul Meyer, testified on November 9 that SAP should pay Oracle $1.66 billion (£1bn) to settle the case.

Background On The Case

Two years after it was acquired by SAP in 2005, TomorrowNow was caught stealing Oracle’s intellectual property by gaining unauthorised access to a customer-support Oracle Web site and downloading copyrighted instances of support software and thousands of pages of documentation. It then resold the software and documentation to Oracle customers and tried to convince them to switch to SAP.

In the original litigation, Oracle claimed that more than eight million instances of its enterprise support software worth $2.15 billion were stolen, stored on SAP’s servers and used without its permission.

It also charged that SAP/TomorrowNow deployed automated bots that used Oracle’s own software to lure customers with software installations from PeopleSoft, JD Edwards and Siebel Systems (all now owned by Oracle) over to SAP.

Enterprise support software, as illegally downloaded by TomorrowNow, amounts to about half of Oracle’s annual revenue.

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