Setback for SAP in Oracle suit

Oracle will be able to pursue damages based on 'hypothetical' software licenses

Oracle has won a battle regarding the way damages can be calculated in its intellectual property lawsuit against SAP, according to a rulingfiled Jan. 28 in US District Court for the Northern District of California.

In March 2007, Oracle sued SAP and its one-time subsidiary, TomorrowNow, which provided lower-cost support for Oracle applications, claiming TomorrowNow workers had illegally downloaded software from its support systems. SAP has said the employees were authorized to download the materials on behalf of TomorrowNow customers, but also acknowledged some "inappropriate downloads" had occurred.

The case is currently scheduled to go to trial in November. Oracle has said its damages could top US$1 billion, a figure partly based on "hypothetical" license fees it would have gained for use of its software.

But in a motion filed last year, SAP argued that Oracle would not be entitled to damages on this basis because the company "never would have been willing to negotiate with its arch-rival ... for the type of copyright license that Oracle has put at issue here," the Jan. 28 ruling by Judge Phyllis Hamilton states.

"Moreover, SAP asserts, even had Oracle been willing to negotiate such a license, testimony from executives on both sides makes it clear that neither side could have agreed on the basis for negotiations or on the price, as they had vastly different views as to the basis of the negotiation, and thus, there never would have been a 'meeting of the minds,'" it adds.

But Hamilton was not swayed by SAP's argument.

Oracle will be allowed "to present evidence regarding the fair market value of the copyrights that SAP allegedly infringed," the ruling states. "The question is not what Oracle would have charged for a license, 'but what is the fair market value.'"

In a statement, SAP expressed disappointment but noted that it "did not award any particular damages amount or provide that Oracle is actually entitled to damages."

The company "will continue to work through the Court process to bring this case to an appropriate resolution," the statement adds.

An Oracle spokeswoman declined to comment.

The sprawling case underscores the high financial stakes around software support revenue, which provides vendors with steady profits even as license sales slow.

Lodging similar allegations to those made against SAP, Oracle is also suing third-party maintenance provider Rimini Street and its CEO, Seth Ravin , who was a TomorrowNow co-founder.

In an interview last week, Ravin denied wrongdoing and said the company planned to mount a vigorous defense.

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