Trial Notes: Oracle v. SAP

Former Oracle executive Charles Phillips testified Thursday in the company's court battle with software rival SAP , arguing that SAP owes Oracle billions of dollars for software it accessed illegally.

SAP's position is that it should only have to pay Oracle tens of millions of dollars for its violations.


The backstory in the trial: About five years ago, SAP bought a company, TomorrowNow, that was set up in part to take software support revenue away from Oracle. Part of TomorrowNow's method involved improperly downloading Oracle code and using it to perform support at a fraction of the price Oracle charged. SAP shut down TomorrowNow two years ago.

The big question here is: What's the value of illegally accessed software?

SAP says it's minimal. Fewer than 400 customers has switched to TomorrowNow support by the time SAP shut the business down, SAP says – and the company uses this to suggest the actual damage that Oracle suffered from SAP's activities wasn't significant. Making things more interesting, Oracle is not allowed to directly argue that it lost profits because of TomorrowNow's activities, and should be compensated for the money it would have made.

Oracle can, however, argue that the software SAP poached was worth billions of dollars. Phillips's testimony went a long way toward fleshing out Oracle's reasoning.

Two of the pillars of the argument:

Oracle paid about $11 billion for PeopleSoft and $6 billion for Siebel Systems, and the main strategic goal was to gain enough customers in the applications market to compete with the biggest company in that space, SAP.

By illegally accessing the software it did, SAP was cheating. The legal way to access the software would have been to get a license for it. And Oracle would have charged billions of dollars for that license, up front. Therefore, SAP should have to pay billions of dollars in damages.

The trial continues today with videotaped testimony from SAP board member Gerhard Oswald and marketing executiveTerry Hurst. Live testimony will come from SAP board member Werner Brandt and Richard Allison, who will argue Oracle's case for a high damages award.

The big day in this trial? Monday, when Oracle CEO Larry Ellison and Co-President Safra Catz are both scheduled to take the stand.

(A postscript: So far no sign of former SAP CEO Leo Apotheker, who started work this week as CEO of Hewlett-Packard . Oracle lawyers said they have been trying to subpoena him to appear live at the trial, but he has spent his first days on the job meeting with customers out of the area. The ground rule is that Apotheker has to be within 100 miles of the courthouse in Oakland for Oracle to serve him – so as long as he stays outside the country – or even just outside the Bay Area – Oracle can't make him testify in person.)

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