The last month has seen a blur of activity in Oracle’s corporate theft lawsuit against SAP, which goes to trial in a California district court on Monday morning. SAP has conceded some misdeeds, Oracle has made a meal of it in the press, and HP has somehow been dragged into the kerfuffle. Here’s what you need to know to understand what’s going on with Oracle, SAP, HP and that now defunct company called TomorrowNow.
What’s this trial all about then?
It’s about a company SAP bought five years ago called TomorrowNow. It provided third-party maintenance and support services to PeopleSoft and JD Edwards customers.
Third-party maintenance and support. Apps vendors like Oracle and SAP charge about 20 percent of their software license fees each year for services. That includes essentials like security patches and bug fixes, but also big upgrades to newer applications. Some customers don’t want the new applications, they’d rather stick with the software they have. So they go to a third-party provider that charges less than the big vendors and just takes care of the essentials.
Gotcha, so what did SAP do again?
It bought TomorrowNow just after Oracle finished its acquisitions of PeopleSoft and JD Edwards. Maintenance fees are a huge chunk of a software company’s profits, so providing low-cost services to Oracle customers could have been a good way for SAP to get at its main rival. It also hoped to switch some of those Oracle customers over to SAP applications instead.
How did that work out for it?
Terribly. TomorrowNow lost $US90 million while it was part of SAP. Worse, it looks like that TomorrowNow was probably cheating like mad. Instead of going to Oracle’s support site and downloading only the patches and bug fixes its customers were entitled to, it downloaded all the Oracle software it could get its hands on. Oracle says TomorrowNow had a whole bank of servers skimming its computers automatically for Oracle software.
So what did Oracle do?
It did what any red-blooded American company would do and sued the pants off SAP. It eventually filed 10 claims including copyright infringement, breach of contract, unlawful computer access and unfair competition. It also says it found out that TomorrowNow was stealing whole Oracle applications as well as just bug fixes and support materials.
What does it want from SAP?
Moolah, lots of it. Oracle says it’s entitled to around $2 billion in damages. A big chunk of that is for profits it says it would have made if SAP hadn’t used the TomorrowNow services to win away its customers.
What does SAP say?
It says that’s ridiculous. It argues that any PeopleSoft and JD Edwards customers who ditched Oracle around that time did so because they were worried about their vendor being acquired by Oracle, not because of TomorrowNow. It’s willing to pay Oracle some money but only tens of millions of dollars.
Is that what next week’s trial is about then?
Not so fast. A couple of months ago Oracle and SAP agreed to narrow the scope of the case. SAP said it would accept that TomorrowNow infringed Oracle’s copyrights if Oracle in return would forget the other nine charges and focus on damages instead.
That was jolly civilized.
Don’t be silly, they hate each other. But Oracle only has so much time at trial to convince a jury of its case. It’s better off focussing on a big charge that it thinks will give it a good pay off. Plus, SAP had already admitted that TomorrowNow made some “inappropriate downloads,” so it suited SAP as well to focus the case and basically argue about damages.
So does that mean SAP knew about all this illegal activity?
Not necessarily. SAP originally said its executives knew nothing about the illegal downloads and that it was all TomorrowNow. But Oracle said it has evidence SAP’s executives were aware of the illegal behavior. It wants to get SAP executives on the witness stand next week to ask a lot of awkward questions about it.
So is that what the trial is about — whether SAP knew about the illegal downloads?
Not so fast. On Thursday SAP made a surprise move and said it would no longer argue that its executives didn’t know what TomorrowNow was up to. If it doesn’t contest that issue of “contributory infringement,” the trial will basically be just about the damages.
Why on earth did it do that?
That’s hard to say. It could have been holding out for a settlement and realized it wasn’t going to get one. Or it could be it didn’t want its executives on the stand being asked lots of awkward questions by Oracle’s lawyers. They’re not a very pleasant bunch.
Well, what does SAP say? And by the way, what does HP have to do with all this?
Funny you should ask. SAP’s line is that Oracle is turning this whole trial onto a media circus, so it made the concession in order to focus the trial and get it over with quickly. Oracle has been having a field day with this case in the press, and part of it has been aimed at HP and its new CEO, Leo Apotheker. He used to be the top executive at SAP so he’s among the executives Oracle’s lawyers want to grill on the stand.