Judge Throws Out $1.3B Award Against SAP in Oracle Copyright Case

By Chris Preimesberger  |  Posted 2011-09-01

Judge Throws Out $1.3B Award Against SAP in Oracle Copyright Case

An eight-person jury, supervised by Oakland-based federal Judge Phyllis Hamilton in November 2010, had its wishes overturned Sept. 1 when, upon appeal, Hamilton threw out the jury's $1.3 billion punishment determination against German software maker SAP for admitted copyright infringement against longtime rival Oracle.

Oracle would have banked the largest U.S. copyright infringement award on record if the $1.3 billion judgment had stood. The jury on Nov. 23, 2010, had concluded that amount was fair restitution in a 3-year-old copyright infringement lawsuit.

Ironically, the same judge also ruled in December 2010 that SAP also would have to pay an extra $16.5 million -- above and beyond the $1.3 billion -- to Oracle in prejudgment interest on the penalty. That award also was overturned.

Oracle, in its lawsuit filed in 2007, charged that SAP-through a now-defunct U.S.-based affiliate division called TomorrowNow-illegally downloaded more than 8 million instances of its customer-support software and hundreds of thousands of pages of supporting documentation from one of Oracle's Websites, then used those tools to lure some 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 SAP. The German company argued that since TomorrowNow only lured a few hundred customers, it should have to pay only $40 million to cover those accounts.

The jury, in awarding Oracle massively more than $40 million after a three-week trial, illustrated how much they were willing to punish a corporation for intellectual-property theft. But Hamilton called the penalty "grossly excessive" and said the size of the penalty was "contrary to the weight of the evidence."

Award Now Could be $272 Million

Oracle can now choose whether to accept a lower award of $272 million or file for a new trial before a different jury. The $272 million amount emanated from an earlier estimate from an Oracle expert on what profit Oracle lost and SAP gained.

SAP took corporate responsibility for its affiliate's actions in a court document filed Oct. 28, 2010, and officially apologized on Nov. 16.  The $1.3 billion judgment was announced a week later. SAP subsequently filed an appeal, with Hamilton's resulting decision coming a full nine months later.

"We are very gratified with the court's decision," SAP told the press through Global Communications Director James Dever. "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. We are hopeful that this ruling will move the case toward an appropriate 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 [intellectual property] 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 for court costs to Oracle and argued that another $40 million in restitution would constitute a fair amount. Oracle originally claimed in court documents that its lost assets were valued at $2.15 billion, although CEO Larry Ellison testified that $4 billion was closer to the actual amount.

To confuse the issue even more, an Oracle damages expert, Paul Meyer, testified on Nov. 9 that SAP should pay Oracle $1.66 billion 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 unauthorized access to a customer-support Oracle Website 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 persuade them to switch to SAP.

In the original litigation, Oracle claimed that more than 8 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, which is what TomorrowNow illegally downloaded, amounts to about half of Oracle's annual revenue.

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