SAP’s big break of a $1.28bn reduction in its fine for intellectual property infringement has Oracle bristling
On the face of it, $20 million (£13m) does not sound like a relatively light penalty for losing a major international copyright infringement case, but rest assured, German software maker SAP was glad to agree to that figure. It could have been much, much worse.
On 1 September, a federal court judge in California threw out a jury’s punishing $1.3 billion (£824.5m) fine against SAP and its former US-based affiliate, TomorrowNow, for admitted copyright infringement against long-time rival Oracle.
Two weeks later, SAP announced that it has reached agreement with the US attorney’s office in San Francisco to resolve the case for that relatively modest $20 million.
Billion Dollar Reduction
Oracle would have banked the largest US intellectual property infringement award on record if the original judgment had stood. On 23 November, 2010, the jury had concluded that $1.3 billion was fair restitution in the four-year-old copyright-infringement lawsuit brought by Oracle.
As part of the agreement, SAP – representing the long-defunct TomorrowNow – pleaded guilty to 11 counts of violations of the US Computer Fraud & Abuse Act and one count of criminal copyright infringement, and will pay the fine of $20 million to the enterprise database software and hardware maker.
SAP, in a statement to the press, said: “The business operations of TomorrowNow, Inc. were discontinued in 2008. No other SAP entity, including SAP AG or SAP America, will face charges arising out of the office’s investigation. The plea agreement was approved by the US District Court today. We believe that the resolution of this investigation is fair. We are pleased to have come to an appropriate conclusion of this process.”
Oracle, as one might imagine, was not pleased.
“Oracle has spent the last four years uncovering SAP’s massive copyright theft, and SAP finally pleaded guilty in federal court to criminal charges for its illegal scheme,” was all Oracle would tell eWEEK on the record about the decision. The company has requested permission to appeal the reduction in the fine.
Oracle, in its lawsuit filed in 2007, charged that SAP – through TomorrowNow – illegally downloaded more than eight 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.
SAP took corporate responsibility for its affiliate’s actions in a court document filed on 28 October, 2010, and officially apologised on 16 November. The $1.3 billion judgement reached by jury consensus was announced a week later. SAP subsequently filed an appeal, with Judge Phyllis Hamilton’s resulting decision throwing out the fine coming a full nine months later.
Two years after it was acquired by SAP in 2005, TomorrowNow was caught stealing Oracle’s intellectual property by gaining unauthorised 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 eight 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, at that time headed by Leo Apotheker, now CEO at HP.
Enterprise support software, which is what TomorrowNow illegally downloaded, amounts to about half of Oracle’s annual revenue.