Ellison: Oracle has $4 Billion Case against SAP

Associated Press

Oracle Corp. CEO Larry Ellison turned up the pressure in an industrial espionage trial Monday by testifying that archenemy SAP AG should have paid $4 billion for licenses to Oracle software.

SAP and Oracle, two of the world's biggest business-software makers, are fighting over how much SAP should pay to atone for the shady tactics of a now-shuttered software support subsidiary called TomorrowNow.

SAP has already admitted to bad behavior. It acknowledged that TomorrowNow stole customer support documents from Oracle password-protected websites and used them to steal business from Oracle by offering similar services at a cheaper price.

Oracle has said that it is owed billions for the value of the intellectual property that was taken from it. Ellison's $4 billion estimate concerned the amount of money SAP would have paid for the appropriate licenses to Oracle's software, under certain conditions.

SAP claims TomorrowNow wasn't that effective at stealing customers, and it should only have to pay $40 million for Oracle accounts it did manage to lure away.

The trial, in its second week in federal court, offers a rare look at the corners big companies might be tempted to cut in the battle for new business.

It is also as much a public relations bonanza for Oracle as it is an attempt to recover damages, since Oracle gets to pillory two rivals at once: SAP and Hewlett-Packard Co.

The conflict with SAP has grown as Oracle has moved beyond its core business of selling database software and into SAP's stronghold of applications that help companies manage payroll, human resources and other tasks.

The beef with HP stems from Oracle's decision to start selling computer servers, an HP mainstay. Also, Ellison has taken HP to task for hiring Leo Apotheker, SAP's former CEO, as HP's new CEO. Apotheker is replacing Ellison's friend and tennis buddy Mark Hurd, who was ousted as HP's CEO over expense-report lapses. Ellison has since hired Hurd to serve as an Oracle co-president.

Apotheker may not wind up testifying live about his role in the TomorrowNow espionage.

Oracle has tried to force him to appear in court but says HP has refused the subpoena. Apotheker has proven so elusive that Oracle has hired investigators to try and track him down and serve him with the subpoena if he appears within 100 miles of the federal courthouse in Oakland, which includes HP's headquarters in Palo Alto.

If Apotheker stays out of range, Oracle can't force him to testify.

HP accuses Oracle of harassing its new executive and says Oracle had ample time to question Apotheker during an earlier sworn deposition. If Apotheker doesn't appear, Oracle could play the videotaped testimony.

Ellison's testimony injected some celebrity drama into the trial. Although he is known for trash-talking against rivals, his courtroom appearance was devoid of theatrics, and he didn't give any public comments afterward.

Ellison testified that he was deeply worried that his company would bleed customers because of what seemed like SAP's masterstroke of an acquisition of TomorrowNow in 2005. Ellison called the TomorrowNow deal a "brilliant idea" that posed a "grave risk" to Oracle because of its ability to let SAP steal business, even without the theft of Oracle's documents.

The extent of those fears, and how they squared with the amount of business SAP actually poached, consumed most of his hourlong testimony.

Lawyers from Oracle and SAP questioned Ellison on his initial fears that Oracle could lose as much as 30 percent of the customer contracts it got as part of its $10.3 billion acquisition of PeopleSoft in 2005.

That deal sparked SAP's interest in TomorrowNow, since TomorrowNow supported PeopleSoft software.

SAP insists that it owes far less than Oracle is demanding because TomorrowNow stole far fewer customers than Oracle thought it would. SAP's lawyers have repeatedly cited SAP's claim that TomorrowNow stole only 358 Oracle customers, out of the thousands that came to Oracle through the acquisition.

Trial Opens Over Damages in Oracle Copyright Case With SAP

NY Times

 

The dispute between the software giants Oracle and SAP, in one of the most closely watched court cases in Silicon Valley history, is not over whether SAP engaged in a copyright infringement scheme, but over how much damage was done to Oracle.

SAP has already admitted that it infringed on Oracle’s copyrights and has conceded liability. At issue in a jury trial that began on Tuesday in Federal District Court is how much money SAP will pay in damages. Oracle has argued for $2 billion, and SAP has countered that tens of millions of dollars would be enough. It has set aside $160 million to cover the cost.

For most people in the technology industry, though, the trial is a forum for Lawrence J. Ellison, Oracle’s outspoken chief executive, to go after Léo Apotheker, SAP’s former chief executive and now chief executive of Hewlett-Packard. H.P. had been a close partner of Oracle’s, but in recent months the companies have become rivals.

In the weeks before the trial, Mr. Ellison publicly castigated Mr. Apotheker for overseeing the infringement. He also criticized H.P. for hiring Mr. Apotheker, who succeeded Mark V. Hurd. Mr. Hurd was hired by Oracle as co-president after he resigned from H.P. over an ethics question.

The opening arguments in the trial, which is expected to last four weeks, highlighted the cutthroat business tactics of competitors in the business software industry.

Jo-Ellen Pozner, a professor of management and organization at University of California, Berkeley, said that Mr. Ellison was using the trial to sully the image of his rivals. She likened his attacks to a negative campaign advertisement, calling them nasty but memorable in the minds of potential customers.

“He’s killing two birds with one stone,” Ms. Pozner said.

Geoffrey Howard, a Bingham McCutchen lawyer representing Oracle, told Judge Phyllis J. Hamilton, an eight-person jury and a packed courtroom that SAP executives had been well aware of the theft carried out against his client, and that, in fact, they had encouraged it. He painted a picture of a company so fearful of Oracle’s growing power that it chose to purloin its software in an effort to steal its customers.

“The scope is vast,” Mr. Howard said. He also quoted from a 2005 e-mail written by Mr. Apotheker that said, “We need to inflict some pain on Oracle.”

SAP’s lawyer, Robert A. Mittelstaedt of Jones Day, was contrite about the copyright infringement, telling the jury that SAP admits “that it did something wrong.” But he minimized its scope by saying that other than some lost profits and lost customers, Oracle suffered little damage.

“They want a windfall,” Mr. Mittelstaedt said. “They want a bonanza that is all out of proportion to the harm.”

The theft stems from SAP’s acquisition in 2005 of TomorrowNow, a company that provided technical support to some of Oracle’s customers. TomorrowNow routinely downloaded copies of Oracle’s software and maintenance manuals onto its computers and distributed some of those copies to clients — all without paying Oracle.

One of the biggest questions about the trial is whether Mr. Apotheker will testify in person. Oracle’s lawyer was vague on the matter, leaving the door open to his appearing in a video deposition.

Mr. Ellison has suggested that Mr. Apotheker, who started work at H.P. on Monday, is trying to dodge an appearance by staying outside the country. H.P. declined to comment on Mr. Apotheker’s whereabouts.

Ray Lane, H.P.’s chairman, defended Mr. Apotheker’s integrity in a statement last week. He emphasized that Mr. Apotheker had known little about the infringement, and he called Mr. Ellison’s criticism merely an effort to harass Mr. Apotheker and “interfere with his duties.”

At the trial, each side produced e-mails and internal documents that shed an unflattering light on the other.

Oracle’s lawyer showed an e-mail in which an SAP executive had warned Shai Agassi, then SAP’s president, of the potential copyright liability of acquiring TomorrowNow. John Ritchie, a TomorrowNow employee, offered another blow in a video deposition by saying that his superior had ignored his concerns about copyright infringement and went so far as to tell him never to write anything down.

SAP’s lawyer countered with e-mails in which Juan Jones, an Oracle employee, had referred to Toyota, an Oracle customer, with an expletive and boasted of refusing it a lower price on software. The lawyer said the contents had showed that Oracle’s poor service led to some customer defections and that SAP should not be held liable for those.

Indeed, Oracle claimed that SAP had been trying to steal thousands of customers it provided support to, pointing to an internal SAP presentation. But SAP responded that despite its rosy projections, the company lured only 358 of Oracle’s 9,000 or 10,000 support business customers, and that many of them would have left anyway.