US appeals court denies Oracle request to restore $1.3 billion judgment against SAP

SAP is very pleased with the court's action, a spokesman says

Oracle has failed to persuade a US federal appeals court to restore US$1.3 billion judgment in its copyright-infringement lawsuit against SAP, but will have the options of taking a lesser amount of money or pursuing a new trial.

The jury initially awarded the $1.3 billion to Oracle in 2010, but the judgment was subsequently vacated by U.S. District Court Judge Phyllis Hamilton, who had overseen the case. Hamilton found the jury overreached and said Oracle could accept a lower award of $272 million or seek a new trial.

Oracle at first opted for a new trial, but then reached a settlement wherein SAP would pay out $306 million, with Oracle reserving the right to appeal Hamilton's ruling overturning the $1.3 billion judgment.

While the jury engaged in "undue speculation" when reaching the $1.3 billion verdict, Hamilton erred in setting the damages at only $272 million, justices at the 9th U.S. Circuit Court of Appeals in San Francisco concluded in their ruling, which was released Friday. Oracle is now entitled to either $356.7 million in damages or a new trial, according to the ruling.

The company sued SAP in 2007, alleging that a now-closed subsidiary, TomorrowNow, had made illegal downloads of Oracle's software while providing software support services to Oracle customers. SAP ultimately accepted liability for wrongdoing on the part of TomorrowNow, resulting in a trial on damages that produced the initial $1.3 billion judgment.

"We are very pleased with the court's action today," SAP spokesman Andy Kendzie said Friday. "We feel it very much supports our position."

Oracle spokeswoman Deborah Hellinger declined to comment on the court's decision.

The appeals court also upheld the lower court's ruling that if a new trial is held, Oracle cannot present arguments related to damages for hypothetical license fees. Oracle had argued SAP should pay the fair market value of what it would have cost to license the illegally downloaded software, as well as to develop it.

TomorrowNow offered Oracle customers support at half the cost of vendor maintenance. It catered to customers with stable systems and little desire or need for the continuous software version upgrades provided by vendor support.

Oracle is also suing Rimini Street, a company led by TomorrowNow co-founder Seth Ravin, claiming it duplicated TomorrowNow's "corrupt business model."

While that case has yet to go to trial, Rimini has suffered a number of adverse pre-trial rulings, with a judge twice finding it had violated Oracle's copyrights.

Industry observers expect the final outcome of the Rimini Street case to lay concrete ground rules for how third-party software support can be conducted legally.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

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