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Court rules against Oracle in $1.3 billion appeal

Oracle Corp. of Redwood Shores lost a bid to a federal appeals court Friday for reinstatement of a $1.3 billion jury award levied against its largest competitor, SAP AG of Germany, for copyright infringement.

A panel of the 9th U.S. Circuit Court of Appeals in San Francisco said the award, granted to Oracle by a federal jury in Oakland in 2010, was based on “undue speculation.”

The court gave Oracle a choice of accepting a lesser award of $356.7 million or undertaking a new trial in the court of U.S. District Judge Phyllis Hamilton in Oakland. Oracle is the world’s second largest business software company and SAP is the largest, according to the two companies.

The trial was held on a 2007 lawsuit in which Oracle alleged that an SAP subsidiary, TomorrowNow, illegally copied Oracle software in order to provide cut-rate support to Oracle customers. SAP acquired Texas-based TomorrowNow for $10 million in 2005 and shut it down in 2008.

In the civil case, SAP eventually admitted liability for copyright infringement and thus the trial in 2010 concerned only the amount of damages to be awarded to Oracle.

In a separate criminal case, TomorrowNow pleaded guilty in Hamilton’s court in Oakland in 2011 to federal criminal charges of copyright infringement and unauthorized access to Oracle’s computer servers, and was fined $20 million.

After the jury rendered the $1.3 billion verdict in the civil trial, Hamilton said the amount was unjustified and said Oracle could either accept $272 million or have a new trial.

In today’s decision, a three-judge panel of the appeals court agreed that the $1.3 billion was too high because it was based on undue speculation about what SAP would have had to pay Oracle for legally licensing the software.

But it said that on the basis of the trial evidence, the minimum award should be recalculated as $356.7 million, representing a combination of $236 million in profits gained by TomorrowNow and $120.7 million lost by Oracle. Both sides in the case claimed a measure of victory.

Oracle General Counsel Dorian Daley said the ruling in effect permits the company to recover compensation of nearly half a billion dollars, including the damage award and an estimated $120 million in attorneys’ fees, for SAP’s allegedly “brazen conduct.”

Daley said in a statement:

“We are thrilled about this landmark recovery and extremely gratified that our efforts to protect innovation and our shareholder’s interests are duly rewarded.”

SAP spokesman Andy Kendzie said:

“SAP is very pleased with the court’s ruling today. We consider it very favorable to our position. … We hope it brings this case one step closer to resolution.”

Last modified August 29, 2014 11:58 pm

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