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TMCNet:  Oracle, SAP attorneys' closing arguments: $1.7B in damages or $40M?

[December 09, 2010]

Oracle, SAP attorneys' closing arguments: $1.7B in damages or $40M?

Dec 09, 2010 (San Jose Mercury News - McClatchy-Tribune News Service via COMTEX) -- SJ-Oracle-SAP-attorneys-closing-arguments-1.7B-in-damages-or-40M-1122 NYSE:HPQ, NASDAQ:ORCL, NYSE:SAP Oracle, SAP attorneys' closing arguments: $1.7B in damages or $40M? Howard Mintz San Jose Mercury News, Calif.
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With Silicon Valley riveted on the outcome, an Oakland federal court jury now must settle a difference of opinion between software giants Oracle and SAP of more than $1.6 billion.

Lawyers for the two feuding companies presented their closing arguments to the jury Monday, concluding a three-week trial in Oracle's lawsuit alleging that SAP and a subsidiary devised a scheme five years ago to steal copyrighted software from Oracle as it was dramatically expanding its position in the industry.

And the trial was just as notable for a witness who did not appear. Oracle tried but failed to get newly appointed HP CEO Leo Apotheker to testify in the case, because he was a top executive at SAP during the time the illegal downloading occurred, although it was never established what he knew of the activity.

SAP's responsibility is not in doubt, as the company has admitted its share of liability for the copyright infringement. But there is a colossal gulf between what Oracle and SAP believe should be the punishment.

David Boies, Oracle's lawyer, pegged the number Monday at nearly $1.7 billion, although he also suggested the jury could justify damages as high as $3 billion. SAP's attorney continued to insist that the damage to Oracle from the infringement was minimal, saying the award should be anywhere from $28 million to $40 million.

Boies went first, saying SAP's estimate wasn't "even in the ballpark." "This lawsuit goes to the very heart of the software industry," he said. "The defendants have admitted that their infringement was massive and prolonged." But Robert Mittlestaedt, SAP's lawyer, accused Oracle of "overreaching," looking for a "windfall, bonanza, a jackpot" that it doesn't deserve.

"They have been asking for more than they are entitled to and they are trying to trick you into doing that," he told the eight-member jury, which retreated into deliberations toward the end of the day.

The trial centered on the role of SAP subsidiary TomorrowNow, which carried out an extensive illegal download of Oracle software around the time of Oracle's blockbuster acquisitions of PeopleSoft and Siebel Systems. SAP later shut down TomorrowNow after Oracle sued over the copyright violations.

Oracle maintains that SAP orchestrated the infringement, viewing TomorrowNow as an antidote to Oracle's growth. Boies pointed to internal e-mails describing the need to go after Oracle, including one from Apotheker, the invisible star witness who never appeared in the trial.

Oracle subpoenaed Apotheker, recently named Hewlett-Packard's CEO, heightening the tension between Oracle and HP. But Apotheker eluded being served to testify, and did not make himself visible in California until he took part in Monday's conference call to discuss HP's earnings from company headquarters in Palo Alto.

In his closing argument, Boies told the jury that SAP would have had to pay billions to get hold of the same technology through a legitimate licensing agreement.

"It's clear there were billions of dollars at stake here for SAP," he said.

SAP's Mittlestaedt repeated the company's apology for what he called "an unfortunate incident," but also urged the jury to "end this dispute in a reasonable way." Former SAP CEO Bill McDermott acknowledged in his testimony last week that it is "very clear that it was a mistake," referring to the acquisition of TomorrowNow. But he and other SAP witnesses downplayed the suggestion that SAP plotted to woo Oracle customers through a deliberate strategy of using TomorrowNow's copyright infringement.

Ultimately, the jury will have to sort through a complex set of competing ways to value the copyrighted software that was pirated from Oracle. Oracle argued that jurors should consider the fair market value of the software, or the price Oracle would have charged a major competitor such as SAP to license the software.

SAP suggested a narrower view, saying SAP should only pay for actual lost revenue from customers who defected from Oracle to SAP.

Mercury News Staff Writer Brandon Bailey contributed to this story.

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