Nov. 1 (Bloomberg) -- Oracle Corp., in a trial that began today against SAP AG, wants at least $2.3 billion in damages for what its German rival acknowledges were a now-defunct unit’s “inappropriate” downloads of Oracle materials.
The trial in federal court in Oakland, California, may feature testimony by former SAP Chief Executive Officer Leo Apotheker and Oracle CEO Larry Ellison. Apotheker, who Oracle says oversaw the TomorrowNow unit’s conduct, began his new job today as CEO of another Oracle rival, Hewlett-Packard Co.
SAP, the world’s biggest maker of business-management software, says its executives were unaware of the downloading at its TomorrowNow software maintenance unit, which was closed in 2008. Oracle’s damage estimates are “grossly exaggerated” and the lawsuit is aimed at harassing competitors, SAP’s lawyers said in court filings.
“The whole goal here is humiliation,” said Joshua Greenbaum, a software industry analyst at Enterprise Applications Consulting. In saying it might call Apotheker as a witness, Oracle “has now extended that to Hewlett-Packard,” Greenbaum said.
TomorrowNow, acquired by SAP in 2005 for $10 million, offered lower-cost software maintenance and support to customers using products by companies that Redwood City, California-based Oracle had bought, including PeopleSoft Inc. and JD Edwards & Co.
Oracle’s attorneys said in court filings that TomorrowNow illegally copied software code needed to support customers without buying licenses to access it. TomorrowNow made thousands of duplicates of copyrighted software obtained by illegally accessing electronic materials from Oracle’s customer-support websites, the lawyers said.
Apotheker went to Hewlett-Packard after Mark Hurd resigned as CEO amid a scandal over a personal relationship with a company contractor. Ellison, 66, hired Hurd, saying in a letter to the New York Times that Hewlett-Packard’s board had made “the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago.”
Apotheker, 57, didn’t become SAP’s sole chief executive until after TomorrowNow was shut down, said Bill Wohl, a spokesman for the Walldorf, Germany-based company.
“What we have seen is a heck of a PR sideshow,” Wohl said in a phone interview. “It’s an attempt by Larry to raise the visibility of their battle with HP.”
‘Inflict Some Pain’
Apotheker, an SAP director when the company bought TomorrowNow in 2005, told SAP executive Bill McDermott two months after the acquisition to “inflict some pain” on Oracle by closing deals at the unit “at extraordinary conditions,” according to an Aug. 5 court document that doesn’t explain what Apotheker meant.
“There’s no smoking gun here,” Wohl said. “These are two sales executives talking.”
Oracle is seeking damages for lost business, copyright infringement, disgorgement of SAP’s profits and payment for costs SAP avoided by not having to develop its own software.
“This case is just about how much we should give Oracle,” Robert Mittelstaedt, SAP’s attorney, told a potential juror today in Oakland during jury selection. “Should we pay Oracle whatever they are asking?”
The potential juror replied, “No.”
Mittelstaedt said SAP wanted to ensure that jurors wouldn’t favor Oracle because it’s a local company or disfavor TomorrowNow, which was based in Texas, home to the team the San Francisco Giants now face in the World Series.
TomorrowNow had 358 customers, 86 of which also purchased products or services from SAP after the acquisition, according to SAP. Those customers switched to SAP for reasons other than the support they received from TomorrowNow, so most of Oracle’s damage claims are unfounded, SAP has said. It said TomorrowNow, which was based in Bryan, Texas, lost $900 million as an SAP unit.
Customers that did leave Oracle hoping to lower their maintenance fees had good reason, SAP attorneys said in court papers. They cited a statement written by a senior Oracle executive about a customer’s maintenance fees, which can be 20 percent of the cost of licensing software.
“Let the bastards dream of reducing their maintenance fees,” the Oracle executive wrote, according to an Aug. 5 SAP filing citing a deposition. “I just finished telling Toyota that we’re not going to reduce their bill. Not only that, but they need to buy more software from us!”
SAP said in the filing, “That attitude contributes to customers leaving plaintiffs’ support.”
Oracle is the second-biggest maker of software for managing business tasks such as payroll and accounting. Company spokeswoman Deborah Hellinger declined to comment. Steve Curtis, a Toyota Motor Corp. spokesman, had no immediate comment.
SAP has agreed that TomorrowNow is liable for Oracle’s claims and has accepted financial responsibility for damages, which it argues are at most tens of millions of dollars, according to court records.
Jury selection began today, said Wohl. Each potential juror is being questioned for about 20 minutes by attorneys from both sides, he said. Oracle’s attorneys are scheduled to make opening statements tomorrow. The trial could last as long as four weeks.
The case is Oracle Corp. v. SAP AG, 07-01658, U.S. District Court, Northern District of California (Oakland).
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