Oracle Wins a Big One

This blog focuses mostly on DBA-related topics so focusing this month’s edition on a lawsuit might confuse some of you. But this is no ordinary lawsuit. It was between two of the biggest ISVs in the business: Oracle and SAP. The lawsuit was filed way back in 2007 and it came to trial at the end of 2010. Justice sure moves slowly, doesn’t it?

Oracle alleged that SAP stole “thousands of proprietary, copyrighted software products and other confidential materials that Oracle developed to service its own support customers.” The “theft” was conducted by employees of TomorrowNow, a now-closed subsidiary of SAP.  The basic claim is that SAP repeatedly accessed proprietary information from Oracle’s customer support website and that SAP was not authorized to do so. If you want to read the entire complaint it is available online at: http://www.oracle.com/sapsuit/complaint.pdf.

Just before the case came to trial, but about three years after it was filed, SAP finally admitted contributory liability in a court filing. In other words, SAP changed its story. Earlier SAP had admitted wrongdoing on TomorrowNow’s part, but not its own. Oracle was consistent in claiming that SAP was involved and knew about the infringement.

After SAP’s admission, both Oracle and SAP volleyed back and forth releasing statements to the press, but Oracle smelled blood! As the trial progressed, Oracle’s witnesses tried to paint a picture of substantial losses; the SAP story was just the opposite, claiming that Oracle did not incur significant losses. That jockeying was important because Oracle’s trial brief stated that the “fair market value” of stolen software was $2 billion; of course, SAP’s estimates were substantially lower, in the tens of millions.

The trial got underway in November. Shortly thereafter we heard about an whereby SAP agreed to pay Oracle’s attorney fees ($120 million) by November 9th. In return, Oracle would not seek punitive damages against SAP. The jury in the case was instructed to consider “only those damages available under the Copyright Act.” So the case came down to a simple jury judgment on how much SAP should pay Oracle for copyright infringement.

SAP tried to belittle the issue indicating that 358 PeopleSoft customers became TomorrowNow customers, and that 200 of those would not have left Oracle if it were not for TomorrowNow. SAP pegged the damage for those lost customers at $32 million. And SAP further intimated that 86 of those 358 became SAP customers, but almost all of those would have left Oracle anyway. Oracle volleyed with 270 as the number of lost customers.

At another point Oracle’s attorney exposed an SAP memo from then-executive Shai Agassi that indicated the desire to lower Oracle’s share price by 10 percent. Oracle’s counsel stated that Oracle’s valuation at the time was about $70b so SAP’s quest was to impart $7 billion worth of damage on Oracle. Of course, SAP was not successful in this mission, but it helped to paint them as more a villain.

For more technical readers, the discussion of TomorrowNow’s Titan tool may be more interesting than the legal gymnastics. This automated tool searched through support documents, continuously answered “No” when asked if the document solved the problem. And that would lead to another set of documents. And so on, and so on, allowing the company to downloaded thousands of support documents. Clearly that was not the intended usage of Oracle’s online support system.

The testimony of Oracle’s CEO, Larry Ellison, was interesting. He claimed that TomorrowNow’s actions cost Oracle as much as 15 percent of Siebel customers and 30 percent of Peoplesoft customers. Ellison believed that nearly $4 billion worth of customer relationships were at risk because of TomorrowNow’s infringement. When cross-examined by SAP’s attorney that Oracle internal documents did not back up those claims, Ellison matter of factly stated that he did not tend to write down worst case scenarios.

Oracle President, Safra Catz, had what was probably the best sound bite during the entire trial. Responding to SAP’s defense that it only paid $10 million for TomorrowNow, cCatz said “It’s like I bought a $15 crowbar, then I break into a house and clean it out. What I pay for the crowbar is irrelevant.” It’s funny because it’s true…

It all came down to the jury’s decision, and it was a big one. Not as big as some of the figures that Oracle was bandying about, but vindication for Oracle nonetheless. After three years of legal maneuvering, the trial ended with the jury awarding Oracle $1.3 billion.

So is it finally over? I doubt it. SAP will most likely appeal the verdict (they added four attorneys to their legal team in late December). This could go on for years folks. SAP surely wants to avoid paying a sum of $1.3 billion to its biggest competitor. And Oracle? Oh, they’d take the money, but if they can keep dragging Leo Apotheker (CEO of Hewlett-Packard, and the ex CEO of SAP) into this insanity, why not! Oracle (owners of Sun Microsystems) would like to see HP’s new CEO get sullied.

There is likely more to come in this saga.

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About craig@craigsmullins.com

I'm a strategist, researcher, and consultant with nearly three decades of experience in all facets of database systems development.
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One Response to Oracle Wins a Big One

  1. Pingback: SAP contests alleged theft of Oracle code | Business Computing World

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