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Oracle Seeks Its Ton of SAP Flesh in Court

By Richard Adhikari
Nov 2, 2010 5:00 AM PT

Oracle faced off with SAP in an Oakland, Calif., court on Monday in a hearing to determine the amount of damages the former is owed over its claim that SAP stole its software.

Oracle Seeks Its Ton of SAP Flesh in Court

Oracle reportedly wants US$2.3 billion dollars, while SAP is seeking to pare down the sum to within the range of tens of millions of dollars.

The hearing is expected to continue until the end of the month, following which a jury will deliberate on the evidence.

Oracle filed the lawsuit in March of 2007 after allegedly discovering that SAP subsidiary TomorrowNow, which provided third-party support for Oracle applications including software from JD Edwards and PeopleSoft, had been illegally accessing its support tools.

Roughly eight months later, SAP admitted TomorrowNow was in the wrong, closed down that subsidiary and offered compensation, but Oracle pressed on with its lawsuit.

Oracle is now seeking to have Leo Apotheker, who was appointed co-CEO of SAP after the TomorrowNow suit was filed, summoned as a witness. Apotheker, who left SAP under a cloud, is now CEO of HP.

All the Legal Furies Seize You

Monday reportedly saw jury selection; opening arguments in the damages hearing for the SAP-Oracle lawsuit will be made tomorrow.

SAP has repeatedly attempted to settle the suit, which it said is draining its coffers, but Oracle has refused.

In a bid to shorten the length of the trial, SAP has reportedly told the court that it won't be contesting Oracle's claims that it was aware of TomorrowNow's copyright infringement, although it had strongly contested these charges previously.

However, SAP did not admit any liability. Does this mean Oracle may have a smoking gun? Or is SAP just trying to speed up the hearing?

"By accepting responsibility for TomorrowNow's actions, SAP took a decisive move to focus the issues in the case," SAP spokesperson Saswato Das told CRM Buyer.

"We acknowledged three years ago that TomorrowNow made mistakes, and we took direct action to address Oracle's concerns, including shutting down the company two years ago. SAP is committed to compensating Oracle for the harm the limited operations of TomorrowNow actually caused. That compensation must be reasonable, and it must be tethered to reality and the law," he added.

"SAP's trying to contain the costs of the lawsuit by focusing on the judgment amount," Rob Enderle, principal analyst at the Enderle Group, said. "That is where it can make its strongest argument, rather than on the intellectual property issue, which it can't defend successfully against."

Shoulda, Coulda, but Not a Cheater

SAP maintains it wasn't involved in TomorrowNow's service operations and didn't engage in any of the copyright breaches or downloading alleged in Oracle's complaint, and on that point Oracle agrees, said Das.

Oracle told the court that liability for contributory copyright infringement doesn't require that SAP actually knew about the infringement, Das said. The court agreed and said such infringement could be proved by simply showing that SAP should have known of the infringement, and that the company failed to stop it.

"We do not contest that SAP could have and should have known about the mistakes of TomorrowNow," Das said. "This move was designed to further simplify this case, focus it more narrowly on the damages, and eliminate the need for testimony on this issue since it has no impact on damages," he added.

This has shortened the overall trial, Das remarked.

Oracle did not respond to requests for comment by press time.

The Redwood City Squeeze

TomorrowNow was a small company worth a few tens of millions of dollars, and Oracle may have difficulty convincing the court that it could have done $2.3 billion worth of harm. Further, SAP acknowledged wrongdoing on TomorrowNow's part, closed down that company and offered Oracle compensation. It has repeatedly tried to settle the dispute without success.

Was Oracle that badly hurt, or does it hate SAP that much? Both companies go head to head in the CRM and ERP spaces, although Oracle currently appears to be winning.

Oracle's real problem is the revenue it's lost, and is continuing to lose, to third-party companies like TomorrowNow that offer support and maintenance for JD Edwards, PeopleSoft and other applications from Oracle.

Oracle charges clients 22 percent of the cost of their software per year for support and maintenance. Customer dissatisfaction with this cost has given rise to a healthy third-party support and maintenance industry. Oracle considers that industry to be stealing from its coffers.

"Oracle planted the field with sales and wants every dollar that springs up," Enderle, principal analyst at the Enderle Group, told CRM Buyer. "It doesn't like third parties harvesting its crop."

The lawsuit is "a warning that Oracle wants this industry to go away and that it's likely to be very aggressive at going after members of the industry," Enderle suggested.

In January, Oracle filed suit against Rimini Street, another third-party support provider for Oracle software, alleging copyright misuse, defamation, disparagement, trade libel and unfair competition. Rimini Street supported Oracle's Siebel, PeopleSoft and JD Edwards software packages, and it saw year-over-year growth of more than 270 percent in 2009.

Rimini Street counter-sued in March, alleging Oracle had been harassing it for five years.

Rimini Street did not respond to requests for comment by press time.


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