Jury Slaps Oracle With $3B in Damages in HPE Itanium Case

By Chris Preimesberger  |  Posted 2016-06-30 Print this article Print

HPE said Oracle violated a contract between the companies when it decided to stop creating new versions of its database for Itanium-powered servers.

It hasn't exactly been a stellar legal month for Oracle Corp.

On May 26, after six years of litigation, a San Francisco federal jury handed the world's largest database company a major defeat in its Java copyright lawsuit against Google, which used the open-source programming language in its development of the Android operating system for smartphones.

Had it won, Oracle was planning to seek $9.3 billion in restitution. The company did say it planned to appeal for a second time.

Four weeks later, on June 30, another jury an hour south in Silicon Valley slapped Oracle with another defeat, giving a courtroom victory to Hewlett Packard Enterprise Co. This time Oracle was found guilty for actions that contributed to the decline of a once-profitable line of high-end servers.

Court Approves $3 Billion in Damages

Thus, the San Jose, California, court said Oracle should pay HPE a whopping $3 billion in damages—nearly the entire amount the venerable computer maker sought in the lawsuit.

The jury agreed with HPE's contention that Oracle violated a contract between the companies when it decided in 2011 to stop creating new versions of its database and other software for systems running Intel Corp.'s Itanium processor, which HPE (then simply HP) used in many of its products.

Itanium used a different architectural concept and turned out to be less successful than many of Intel's other enterprise microchips, such as Xeon.

The case stems from a decision by Oracle executives that they would no longer develop software for Intel's Itanium chips, which power all of HP's high-end servers. Oracle officials said they had learned from Intel engineers that the giant chip maker was planning to end development of Itanium in favor of its more popular Xeon processors.

HP, Intel Rebuked Oracle

The decision drew a sharp rebuke from executives for both Intel and HP, who argued there were no plans to end development. HP officials accused Oracle of trying to force the 140,000 or so users who run Oracle software—particularly database applications—on HP's high-end Integrity and other servers to migrate to Oracle's SPARC/Solaris systems.

They also said Oracle's decision violated an agreement between the companies that each would continue supporting the other's products that were used by these joint customers. Oracle officials said the documents referred to by HP—a settlement of a lawsuit stemming from Oracle's hiring in 2010 of ex-HP CEO Mark Hurd—did not amount to an airtight agreement.

HP in 2011 sued, and Oracle countersued, claiming HP was not being honest with Oracle or its customers about the fate of Itanium and noting HP was paying Intel millions of dollars to continue developing it. HP is by far the largest user of Itanium chips.

In August 2012, Judge James P. Kleinberg of the Santa Clara County Superior Court ruled in favor of HP, and ordered Oracle not only to continue support for HP's Itanium-based platforms, but also to do so without charging HP. Oracle appealed, hoping to get the order overturned.

Four years later, the jury has decided how much Oracle owes HP, which had been seeking as much as $4 billion.

Revenues for HP Servers Dropped Off

Revenues in HP's Business Critical Systems unit—which includes the Itanium-based high-end servers—had seen a sharp decline from 2010 to 2012. HP officials attributed much of that to Oracle's Itanium announcement, which was forcing joint customers to decide whether to stay with HP hardware or Oracle software.

"Oracle's decision to stop future software development on the Itanium server platform in March of 2011 was a clear breach of contract that caused serious damage to HP and our customers," said John Schultz, HP Enterprise's executive vice president, general counsel and corporate secretary.

Oracle denied wrongdoing. Chairman, co-founder and CTO Larry Ellison testified that the company took action because he believed Intel had decided to stop supporting Itanium, which Intel denied.

Oracle resumed developing software for Itanium after an earlier ruling in the case, but it has vowed to appeal the jury decision. The company issued a statement to the press late on June 30.

"Five years ago, Oracle made a software development announcement which accurately reflected the future of the Itanium microprocessor," Dorian Daley, Oracle executive vice president and general counsel, said in the statement.

"Two trials have now demonstrated clearly that the Itanium chip was nearing end of life, HP knew it, and was actively hiding that fact from its customers. Oracle never believed it had a contract to continue to port our software to Itanium indefinitely and we do not believe so today; nevertheless, Oracle has been providing all its latest software for the Itanium systems since the original ruling while HP and Intel stopped developing systems years ago. Further, it is very clear that any contractual obligations were reciprocal and HP breached its own obligations. Now that both trials have concluded, we intend to appeal both today's ruling and the prior ruling from Judge Kleinberg."

eWEEK Senior Editor Jeff Burt contributed to this story.

Chris Preimesberger

Chris Preimesberger is Editor of Features and Analysis at eWEEK. Twitter: @editingwhiz


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