SAP Watch

Jun 27 2008   10:37AM GMT

Oracle-SAP lawsuit update: Why Oracle won’t get its $1b

JackDanahy Jack Danahy Profile: JackDanahy

Oracle wants as much as $1 billion from SAP for SAP subsidiary TomorrowNow’s alleged theft of Oracle support documents and other illegally downloaded intellectual property (IP). As the legal clash nears — it’ll be 2010 before you know it — Oracle and SAP’s lawyers are pushing hard to frame the narrative that the courts will hear. Now that Oracle has finally put the question of damages on the table, it will have uphill work claiming $1b. After all, it hasn’t been claimed — yet — that SAP made off with the secret formula to Coca-Cola.

That’s not to say that Oracle has no case, or that its complaints aren’t meritorious, but $1b is a lot of money (although, admittedly, much less than it used to be). Oracle’s lawyers are taking a fascinating approach to make the argument for such large damages. Oracle’s latest joint discovery filing claims that this case is not merely about illegal downloads but about “the rules of fair play” between the two companies. Violating these rules clearly sounds more egregious than making off with some support documents. Furthermore, Oracle wants to draw the tenuous link between a violation of these rules of fair play and the success of SAP’s Fair Passage program, in which customers of PeopleSoft (the enterprise applications company for which Oracle launched a successful hostile takeover bid three years ago) were encouraged to come to SAP instead of waiting to see how they would be treated after Oracle acquired PeopleSoft.

Oracle wants SAP to disclose information on how important TomorrowNow was to the acquisition of (roughly 800) Safe Passage customers. The insinuation is that TomorrowNow was a strong factor in the loss of all of these customers, many of whom were concerned that Oracle would not provide adequate support for, and/or development of, PeopleSoft products after the takeover. Once TomorrowNow drove a wedge between Oracle and its prospective PeopleSoft customers, SAP was more able to convert many of these customers to its own products.

Of course, the trick here will be to demonstrate that TomorrowNow’s illegal downloads, rather than the fear and uncertainty circulating within the PeopleSoft and J.D. Edwards customer bases three years ago, were responsible for the success of Safe Passage. SAP’s lawyers should be able to create reasonable doubt around this connection. Most Safe Passage customers were trying to escape to a stable, supported platform; how many of them were merely choosing between support organizations? TomorrowNow was always a stepping stone; sure, it got SAP into a lot of deals, but there would have been a “safe passage” movement even if SAP hadn’t pushed for one.

Finally, the whole question of fair play is a hypocritical one for Oracle to raise. Was it fair for Oracle to begin a hostile takeover of PeopleSoft hours after PeopleSoft acquired J.D. Edwards? Is it fair for SAP to use its vast size and influence to get into no-bid deals? Balzac famously claimed that behind every great fortune is a crime, and, at its highest levels, the enterprise applications business is just as dirty as any other high-stakes industry. TomorrowNow may indeed have broken the law, and should be punished if this is the case, but $1b is ridiculous and, more importantly, legally unsupportable. Oracle’s fair play argument, and the logical elision by which TomorrowNow is tied to Safe Passage, just won’t cut it.

Demir Barlas, Site Editor

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