Oracle Awarded $1.3 Billion for SAP Copyright Infringement

By Gene Quinn
November 23, 2010

Earlier today, at 2:32 pm Pacific Time, a jury in the United States Federal District Court for the Northern District of California handed down the largest copyright damages verdict in United States history, ordering SAP AG to pay Oracle USA, Inc. the sum of $1.3 billion.  After polling, the jury was excused at 2:33 pm and the Court adjourned at 2:35 pm, but this case is certainly long from over.  There will likely be innumerable post trial motions and the inevitable bluster about an appeal, which is all but guaranteed.  But for today, renowned trial attorney David Bois and his capable team can savor an enormous victory in this monumental case.

The case related to TomorrowNow’s extensive and unlawful downloading, copying and use of Oracle’s copyrighted software and related support materials. SAP acquired TomorrowNow in 2005, and according to evidence presented at trial SAP knew full well about the ongoing copyright infringement at the time of purchase.

In pre-trial pleadings Oracle boldly claimed that they would prove that “Defendants made a library of thousands of copies of Oracle’s copyrighted software and millions of copies of Oracle’s downloadable software support materials in violation of U.S. Copyright law…”  Oracle also proclaimed that they would demonstrate that the copyright infringement was willful, knowing and intentional, done with the intent to “inflict pain” on Oracle, was admitted by a member of SAP’s Executive Board.  The SAG plot seems to have been to use Oracle’s copyrighted software and support materials for the purpose of entering into “extraordinary deals” with customers and then eventually migrate them over to SAP enterprise software.

The verdict returned by the jury was on a special verdict form, which asked the jury to access damages for copyright infringement.  SAP did not contest liability, and stipulated to direct copyright infringement, as well as contributory infringement and vicarious infringement.

The first question asked the jury to enter a dollar amount that Oracle is entitled to from the Defendants to compensate them for its actual damages under its copyright claim.  The jury was told they could either provide a fair market value license amount or the lost profits of Oracle.  The jury choose to award Oracle a fair market value license of $1.3 billion.  Since the jury did not elect to compensate Oracle for its lost profits it did not need to reach the second question on the jury form, which asked about the Defendants profits attributable to the copyright infringement.

The jury instructions the Court read to the jury included this instruction relating the the calculation of damages:

If you decide that the best measure of Oracle’s actual damages is a fair market value license, you should consider all of the information known to and all of the expectations of the parties on the dates of the hypothetical negotiations, which are the dates on which infringement began.  You must determine what would have been the result of this negotiation in order to establish the fair market value.  The fair market value is an objective measure of Oracle’s damages that is meant to approximate the fair market value of a license for all of the copyrights Defendants infringed, calculated at the time the infringement commenced…

The value of a hypothetical license is not necessarily the amount the Defendants in this case would have agreed to pay, or that Oracle would have actually agreed to accept.

You may consider evidence and facts that happened after the date of the hypothetical negotiation only to the extent that it provides insight into the expectations of the parties at the time the infringement first began, or insight into the amount a willing buyer would have been reasonably required to pay a willing seller at the time of the infringement.

You may not limit or increase the fair market value of the rights infringed based on the actual profits Defendant made.

Oracle argued in pre-trial pleadings that it was seeking actual damages in the amount of $2.15 billion as the fair market value of the licenses for the infringed products.  SAP argued that the appropriate damages owed to Oracle was less than $40 million.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

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Discuss this

There are currently 1 Comment comments.

  1. Tom Kulik November 24, 2010 2:00 pm

    Gene: Oracle has been using this case to throw egg on the face of HP’s CEO Leo Apotheker (formerly CEO of SAP AG) and from my perspective, decided to admit liability and focus on damages so as not to drag out testimony from him and other SAP executives on the TomorrowNow acquisition and their knowledge of the nature and extent of the infringing activity. What I find interesting from this award is that the battle of the damages experts for SAP and Oracle originally testified to fair market value license amounts of approx. $41M and $1.7B, respectively, and the jury came up with $1.3B. Notwithstanding the incredible disparity between these amounts and the focus on damages, IMHO the jury seemed to heavily factor in TomorrowNow’s actions and gave weight to SAP testimony that SAP was going to use TomorrowNow to lure away Oracle customers in evaluating fair market value. Granted, SAP/TomorrowNow’s actions are not exactly the prototype for the proper handling of third-party support services, but this award is going to impart a chilling effect on third-party software support providers…especially those considering Oracle products!