ARTICLE
10 November 2011

Case Update: Oracle v SAP- Damages For Copyright Infringement

M
Matheson

Contributor

Established in 1825 in Dublin, Ireland and with offices in Cork, London, New York, Palo Alto and San Francisco, more than 700 people work across Matheson’s six offices, including 96 partners and tax principals and over 470 legal and tax professionals. Matheson services the legal needs of internationally focused companies and financial institutions doing business in and from Ireland. Our clients include over half of the world’s 50 largest banks, 6 of the world’s 10 largest asset managers, 7 of the top 10 global technology brands and we have advised the majority of the Fortune 100.
A US District Court Judge has overturned the highest ever award for copyright infringement in US history.
Ireland Intellectual Property

This article previously appeared in Technology and Commercial Contracts Newsletter, November 2011.

A US District Court Judge has overturned the highest ever award for copyright infringement in US history. The $1.3 billion jury award in favour of Oracle against its competitor SAP was described by Judge Phyllis Hamilton as "grossly excessive" and as having no basis in law.

The long-running legal battle between the two software giants began in 2007, when Oracle sued SAP for copyright infringement. It alleged that a subsidiary of SAP, TomorrowNow, had illegally accessed, downloaded and used Oracle's proprietary software code. Prior to the trial in November 2010, SAP accepted all liability, and so the only issue to be tried was the appropriate measure of damages.

The $1.3 billion jury award was based on a "hypothetical licence fee" that SAP would have paid to Oracle had it lawfully licensed its software. The judge however rejected this measure of damages, as the evidence showed that Oracle "had never given any entity a licence to copy [its] application software...thus [it] could not reasonably claim that SAP's infringement diminished the licensing value of the infringed works." Oracle's own evidence at trial confirmed that it would never have granted such a licence to a competitor to allow it use its software; any such licence would have been "unique" and "unprecedented." Any claim for damages based on a lost licence fee would have to be supported by evidence of similar licensing practices in the past, which Oracle could not show. As such, damages could not be based on the value of a hypothetical licence that would never have been granted.

The judge was therefore satisfied that the award grossly exceeded the actual harm to Oracle. Rather than providing evidence of lost customers, and the associated loss of profits, Oracle instead presented evidence of the "purported value of its intellectual property as a whole" elicited in "self-serving testimony" from its executives. This could not be used to calculate damages. The law requires that any award must be based on objectively verifiable evidence, ie the loss of profit that Oracle suffered as a result of SAP's copyright infringement, which the judge calculated as $272 million. If Oracle reject this amount, a new trial will be ordered.

The US Department of Justice has separately filed charges against TomorrowNow – which has been shutdown by SAP – for criminal copyright infringement and unlawful access to Oracle's computers. SAP have pleaded guilty to all charges, and have negotiated a plea bargain with the Department of Justice, which is subject to an up-coming court review.

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