Oracle awarded US$1.3 billion in SAP lawsuit

A jury on Tuesday awarded Oracle Corp. US$1.3 billion in damages in its corporate theft lawsuit against SAP AG.

The award was a blow to the German applications vendor, which had argued it should pay no more than $40 million for the software stolen by its TomorrowNow subsidiary.

Oracle called it “the largest amount ever awarded for software piracy.” Members of its legal team embraced as the verdict was read in the U.S. District Court in Oakland, California, according to a person in the courtroom. Closing arguments had been presented Monday afternoon, so the jury took less than a full day to reach its decision.

It was not the full amount Oracle had asked for, but still considerably more than SAP had argued it should have to pay. Oracle CEO Larry Ellison testified two weeks ago that SAP should be made to pay as much as $4 billion to cover the cost of the stolen software.

In the end, the amount awarded was closer to the sum suggested by Oracle’s damages expert, who put the figure at $1.7 billion. SAP’s damages expert had told the jury that SAP should have to pay about $40 million in damages, to cover Oracle’s lost profits.

“We are, of course, disappointed by this verdict and will pursue all available options, including post-trial motions and appeal if necessary,” SAP said in a statement. 

The verdict follows an 11-day trial that captivated Silicon Valley with the drama of the two biggest business-software-applications vendors battling in court. Top executives including Ellison, Oracle co-President Safra Catz and SAP co-CEO Bill McDermott appeared in the witness box.

The battle appears not to be entirely over, however, and SAP suggested its appeal could take a long time to play out. “This will unfortunately be a prolonged process and we continue to hope that the matter can be resolved appropriately without more years of litigation,” it said.

SAP never denied that TomorrowNow had downloaded software and support materials illegally from an Oracle website, although it did initially deny knowing about it. The trial was to determine how much SAP should pay.

TomorrowNow provided low-cost support services to customers of JD Edwards and PeopleSoft, which Oracle had just acquired when SAP bought TomorrowNow in 2005. Oracle’s lawyers argued that SAP felt threatened by the acquisitions and bought TomorrowNow as a way to undercut Oracle’s maintenance revenue from those applications, and to try to lure customers to SAP’s own software.

The jury was given wide latitude in deciding how much damages to award. It apparently bought Oracle’s argument that SAP should have to cover the cost of a “hypothetical license” — or whatever it would have had to pay Oracle to license the stolen software at fair market value.

SAP had argued that it should have to pay only for the profits that Oracle lost from customers who switched to TomorrowNow’s services. According to SAP, that amounted to only tens of millions of dollars for a handful of customers.

SAP filed a few post-trial motions before the verdict was delivered. One of those asked the judge, in the event of a high jury award, to consider whether the damages are fair and appropriate. It wasn’t immediately clear Tuesday if Judge Phyllis Hamilton planned to consider those motions.

One observer said the verdict is more than a financial setback for SAP. 

“The bigger damage will likely be in the competitive marketplace, where Oracle will be pushing its new generation of Fusion apps and application updates, and SAP has little to offer but a further tarnished reputation,” said analyst Rebecca Wettemann, a vice president with Nucleus Research.

SAP initially denied knowing about the illegal software downloading at TomorrowNow, which started before it bought the company. But shortly before the trial, it said it would not contest “contributory infringement” in the case. That means it acknowledged that its executives knew, or should have known, about the illegal downloads. 

“SAP learned the hard way today that stealing is wrong and even big software companies — especially big software companies — will be punished for it,” Wettemann said.