Oracle Corporation v. SAP AG
Encyclopedia
Oracle Corp v. SAP AG, 07-01658, is a United States District Court for the Northern District of California
case in which Oracle
sued
SAP
, alleging that SAP had engaged in copyright infringement
by downloading thousands of copyrighted documents and programs from Oracle's Customer Connection website. SAP admitted that its subsidiary TomorrowNow
had infringed Oracle's copyrights and a jury awarded Oracle record-high damages in the amount of $1.3 billion. Judge Phyllis Hamilton later vacated the jury's verdict, which was based on the calculation of a hypothetical license, and granted SAP's motion for a new trial dependent on Oracle rejecting a remittitur
of $272 million.
was a company based in Bryan, Texas, which specialized in offering third-party technical service and support for enterprise software systems, including systems from PeopleSoft
and JD Edwards. TomorrowNow was acquired by SAP AG
in 2005 and became a wholly owned subsidiary of SAP.
PeopleSoft acquired JD Edwards in 2003 and then Oracle Corporation
acquired PeopleSoft in 2005.
On March 22, 2007, Oracle filed a complaint with the United States District Court for the Northern District of California
accusing SAP and TomorrowNow of corporate theft on a "grand scale". According to Oracle, TomorrowNow had downloaded thousands of documents and programs from Oracle's Customer Connection technical support website. Downloads were performed using credentials from Oracle customers whose support contract either already had or were about to expire. In addition, TomorrowNow had downloaded copyrighted support material for which the customers did not hold a license, and thus, were not authorized to access.
Initially, SAP admitted that TomorrowNow had accessed Oracle's software and support documentation using customers' credentials, but claimed they were entitled to do so as TomorrowNow had been contracted by those customers to provide third-party support for their Oracle products. Later, Oracle and SAP agreed to limit the scope of the trial to solely the copyright infringement claim and the damages. SAP offered to admit that TomorrowNow had indeed infringed Oracle's copyrights, leaving the jury court to only determine the amount of damages.
On the issue of damages, the two parties presented calculations that were vastly different. SAP claimed that Oracle had not suffered any losses and SAP/TomorrowNow had gained no financial benefit (rather they had lost $90 million) from the infringement. According to SAP's calculation, the damages were between $28 million and $408.7 million. Oracle based their damages calculation on the hypothetical price it would have cost a customer to purchase all the software and support in order to legally access all the material downloaded by TomorrowNow, totaling $2 billion.
that actual damages should not be based on hypothetical licenses, and for a new trial for the amount of damages. On September 1, 2011, U.S. District Judge Phyllis Hamilton granted the judgment as a matter of law on the hypothetical license damages, and vacated the $1.3 billion award amount. In her ruling Judge Hamilton stated:
SAP's motion for a new trial was granted, conditioned on Oracle rejecting a remittitur
of $272 million, the "maximum amount of lost profits and infringer’s profits sustainable by the proof."
Judge Hamilton further stated:
Oracle was required to prove that the two parties would have agreed on the hypothetical license and license fees, but Oracle had no such evidence. Oracle did not provide facts on previous licensing history or practices. Oracle also failed to provide evidence on benchmark licenses, such as negotiated licenses for comparable works. There was no evidence that Oracle would have licensed to SAP or if the two parties would have ever agreed to any license, so the hypothetical lost license fees could not be the award damages. Hypothetical lost license fees can be used to calculate actual damages, but they do not imply automatic entitlement of damages. Actual proof is required for objective, non-speculative lost license price.
United States District Court for the Northern District of California
The United States District Court for the Northern District of California is the federal United States district court whose jurisdiction comprises following counties of California: Alameda, Contra Costa, Del Norte, Humboldt, Lake, Marin, Mendocino, Monterey, Napa, San Benito, San Francisco, San...
case in which Oracle
Oracle Corporation
Oracle Corporation is an American multinational computer technology corporation that specializes in developing and marketing hardware systems and enterprise software products – particularly database management systems...
sued
Lawsuit
A lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...
SAP
SAP AG
SAP AG is a German software corporation that makes enterprise software to manage business operations and customer relations. Headquartered in Walldorf, Baden-Württemberg, with regional offices around the world, SAP is the market leader in enterprise application software...
, alleging that SAP had engaged in copyright infringement
Copyright infringement
Copyright infringement is the unauthorized or prohibited use of works under copyright, infringing the copyright holder's exclusive rights, such as the right to reproduce or perform the copyrighted work, or to make derivative works.- "Piracy" :...
by downloading thousands of copyrighted documents and programs from Oracle's Customer Connection website. SAP admitted that its subsidiary TomorrowNow
TomorrowNow
TomorrowNow was founded in December 1998 by Andrew Nelson and Seth Ravin, to provide upgrade and technical service to PeopleSoft licensees with large, complex environments...
had infringed Oracle's copyrights and a jury awarded Oracle record-high damages in the amount of $1.3 billion. Judge Phyllis Hamilton later vacated the jury's verdict, which was based on the calculation of a hypothetical license, and granted SAP's motion for a new trial dependent on Oracle rejecting a remittitur
Remittitur
A remittitur is a ruling by a judge lowering the amount of damages granted by a jury in a civil case. Usually, this is because the amount awarded exceeded the amount demanded...
of $272 million.
Background
TomorrowNowTomorrowNow
TomorrowNow was founded in December 1998 by Andrew Nelson and Seth Ravin, to provide upgrade and technical service to PeopleSoft licensees with large, complex environments...
was a company based in Bryan, Texas, which specialized in offering third-party technical service and support for enterprise software systems, including systems from PeopleSoft
PeopleSoft
PeopleSoft, Inc. was a company that provided Human Resource Management Systems , Financial Management Solutions , Supply Chain and customer relationship management software, as well as software solutions for manufacturing, enterprise performance management, and student administration to large...
and JD Edwards. TomorrowNow was acquired by SAP AG
SAP AG
SAP AG is a German software corporation that makes enterprise software to manage business operations and customer relations. Headquartered in Walldorf, Baden-Württemberg, with regional offices around the world, SAP is the market leader in enterprise application software...
in 2005 and became a wholly owned subsidiary of SAP.
PeopleSoft acquired JD Edwards in 2003 and then Oracle Corporation
Oracle Corporation
Oracle Corporation is an American multinational computer technology corporation that specializes in developing and marketing hardware systems and enterprise software products – particularly database management systems...
acquired PeopleSoft in 2005.
On March 22, 2007, Oracle filed a complaint with the United States District Court for the Northern District of California
United States District Court for the Northern District of California
The United States District Court for the Northern District of California is the federal United States district court whose jurisdiction comprises following counties of California: Alameda, Contra Costa, Del Norte, Humboldt, Lake, Marin, Mendocino, Monterey, Napa, San Benito, San Francisco, San...
accusing SAP and TomorrowNow of corporate theft on a "grand scale". According to Oracle, TomorrowNow had downloaded thousands of documents and programs from Oracle's Customer Connection technical support website. Downloads were performed using credentials from Oracle customers whose support contract either already had or were about to expire. In addition, TomorrowNow had downloaded copyrighted support material for which the customers did not hold a license, and thus, were not authorized to access.
Initially, SAP admitted that TomorrowNow had accessed Oracle's software and support documentation using customers' credentials, but claimed they were entitled to do so as TomorrowNow had been contracted by those customers to provide third-party support for their Oracle products. Later, Oracle and SAP agreed to limit the scope of the trial to solely the copyright infringement claim and the damages. SAP offered to admit that TomorrowNow had indeed infringed Oracle's copyrights, leaving the jury court to only determine the amount of damages.
On the issue of damages, the two parties presented calculations that were vastly different. SAP claimed that Oracle had not suffered any losses and SAP/TomorrowNow had gained no financial benefit (rather they had lost $90 million) from the infringement. According to SAP's calculation, the damages were between $28 million and $408.7 million. Oracle based their damages calculation on the hypothetical price it would have cost a customer to purchase all the software and support in order to legally access all the material downloaded by TomorrowNow, totaling $2 billion.
Court ruling
On November 23, 2010, the jury awarded Oracle damages in the amount of $1.3 billion. This was the highest amount of damages ever awarded in a copyright infringement case. On July 13, 2011, SAP motioned for seeking judgment as a matter of lawJudgment as a matter of law
Judgment as a matter of law is a motion made by a party, during trial, claiming the opposing party has insufficient evidence to reasonably support its case. JMOL is also known as a directed verdict, which it has replaced in American Federal courts.JMOL is similar to judgment on the pleadings and...
that actual damages should not be based on hypothetical licenses, and for a new trial for the amount of damages. On September 1, 2011, U.S. District Judge Phyllis Hamilton granted the judgment as a matter of law on the hypothetical license damages, and vacated the $1.3 billion award amount. In her ruling Judge Hamilton stated:
SAP's motion for a new trial was granted, conditioned on Oracle rejecting a remittitur
Remittitur
A remittitur is a ruling by a judge lowering the amount of damages granted by a jury in a civil case. Usually, this is because the amount awarded exceeded the amount demanded...
of $272 million, the "maximum amount of lost profits and infringer’s profits sustainable by the proof."
Judge Hamilton further stated:
Hypothetical licenses
In of the Copyright Act, it states that “the copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement”. Since the actual damages must be the result of the infringement, the burden is on the copyright holder to prove the connection between the monetary amount and the infringement.Oracle was required to prove that the two parties would have agreed on the hypothetical license and license fees, but Oracle had no such evidence. Oracle did not provide facts on previous licensing history or practices. Oracle also failed to provide evidence on benchmark licenses, such as negotiated licenses for comparable works. There was no evidence that Oracle would have licensed to SAP or if the two parties would have ever agreed to any license, so the hypothetical lost license fees could not be the award damages. Hypothetical lost license fees can be used to calculate actual damages, but they do not imply automatic entitlement of damages. Actual proof is required for objective, non-speculative lost license price.