Oracle's bid to wrest another $1 billion in damages from software rival SAP took a hit Friday in a federal appeals court.
The 9th U.S. Circuit Court of Appeals for the most part rejected Oracle's legal arguments for restoring a $1.3 billion jury verdict arising from a 2010 trial against SAP, believed to be the largest such damages award in a copyright infringement case. Under the appeals court ruling, Oracle can roll the dice with another trial, but would still not be entitled to seek such a hefty penalty against the German software giant.
SAP admitted before trial four years ago that a now-defunct subsidiary had violated Oracle's copyright protections, leaving only what SAP should pay in damages for the jury to resolve. After the trial, U.S. District Judge Phyllis Hamilton determined that the $1.3 billion judgment was excessive, primarily because she found much of it was based on what SAP would have had to pay Oracle to license the software.
This created a sticky legal question over whether Oracle should be entitled to "hypothetical" damages for a license that, as it was conceded, Oracle would never grant to its chief rival.
Oracle and SAP then agreed that SAP would pay Oracle $320 million in damages (plus $120 million in legal costs) to avoid a retrial. That settlement allowed Oracle to turn to the appeals courts to argue that the original billion-dollar verdict was legally justified.
In Friday's ruling, the 9th Circuit supported Oracle's argument that in theory it could recover hypothetical damages because the law does not require a company to prove it would have licensed its product to a competitor. But the ruling, written by Judge William Fletcher, agreed with Hamilton that Oracle fell far short of establishing the license would be worth so much money, saying its licensing damages were based on "undue speculation."
The only consolation for Oracle is that the 9th Circuit found the amount it should receive had been calculated too low by the trial judge. As a result, Oracle should recover about $356 million, unless it seeks another trial in the case.
Oracle lawyers said the outcome still allows the company to recover a large amount for SAP's "brazen conduct."
"This sends a strong message to those who would prefer to cheat than compete fairly and legally," said Dorian Daley, Oracle's general counsel.
In the case closely watched in Silicon Valley, SAP acknowledged that employees of its TomorrowNow subsidiary illegally downloaded thousands of copies of Oracle software and used them for TomorrowNow customers without paying for a license. Those accusations led SAP to plead guilty to federal criminal copyright infringement charges in 2011.
The trial included testimony by Oracle CEO Larry Ellison, who told the jury that the software theft was worth $4 billion, and SAP Co-CEO Bill McDermott, who valued the technology at about $40 million.
Howard Mintz covers legal affairs. Contact him at 408-286-0236 or follow him at Twitter.com/hmintz.