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Oracle-SAP Trial: Oracle Damage Expert Lands On $1.66 billion

A long day of math leads Oracle's damage expert to a final tally of damages. The tally comes after the judge limits the damage amount. On Friday, Oracle rests its case.

Oracle's damage claims are dwindling just as fast as Oracle executives can talk them up. Judge Phyllis Hamilton ruled late Monday night to exclude evidence from Oracle that would, in theory, outline potential lost profits from selling PeopleSoft and Siebel customers other Oracle products. On Tuesday Oracle's damage expert, Paul Meyer, carefully outlined his estimation of what SAP should pay Oracle: $1.66 billion. While this is still a substantial figure, it is a far cry from the $4 billion Oracle CEO Larry Ellison insisted on Monday.

(For an explanation of the trial, read this preview.)

Naturally, SAP will continue its efforts to further whittle away at this number. SAP's Bill Wohl, in response to Hamilton's ruling said: "The ruling of the Court has an immediate and demonstrable impact on Oracle's damages presentation, reducing the total by $500 million from $2.2 billion . . . This is the second such reduction by the court and we are confident that when the jury hears our case presentation the outcome will reflect the actual damages the limited actions of TommorowNow had upon Oracle."

Hamilton's declaration -- essentially a grant to enforce an earlier ruling -- wasn't a huge surprise, but it did put impose a much lower ceiling on Oracle's expert witness. Although there are some nuances to what's behind the ruling, the basic argument goes like this: SAP planned to sell PeopleSoft (and later Siebel) customers TomorrowNow support services; when those customers switched to TomorrowNow, it could sell them other SAP products, like NetWeaver (this aspect is known as "cross-sell"); ultimately, the goal would be to sell them products that competed with PeopleSoft (this was known as "up-sell" or "up-switch"). SAP projected the potential revenue of each phase of this process, and presented these projections to SAP's board as part of the approval process for acquiring TomorrowNow. SAP's projection for this multi-step process was about $900 million, according to internal SAP documents used as evidence in the trial.

Oracle had the same cross-sell/up-switch opportunity. In other words, it could take the PeopleSoft (and JD Edwards) customers it was acquiring and try to sell them other Oracle products. SAP claims that it asked for these projections for well over a year during the discovery process of the case, prior to trial, but Oracle did not produce them. Oracle has admitted as much. Therefore, the judge wouldn't allow Oracle to present those figures during trial--figures that could have added onto damage estimates.

The prior ruling has remained a source of discussion in court, albeit not in front of the jury. Nary a day goes by without arcane discussions about cross-sell/up-sell, and Oracle's failure to produce the requisite documentation; but before Oracle's damage expert produced his final tally estimates, Judge Hamilton had to re-affirm her earlier ruling.

Meanwhile, Oracle's hired-gun expert Paul Meyer spent all of Tuesday on the witness stand, and he's not finished yet. Initially, Meyer presented several damage scenarios, breaking down his math on PeopleSoft, Siebel and Oracle database licenses that SAP and TomorrowNow infringed upon by downloading millions of files over a protracted period of time. SAP's attorney Rob Mittelstaedt hammered away at the edges of what Meyer presented for the better part of two hours, and he was just getting warmed up.

Even though Meyer's testimony has been the bulk of the trial's focus, it was Mittelstaedt who seemed worse for the wear: he couldn't get Meyer to give a straight answer to pretty much anything he asked. Although Meyer presented a very crisp outline of damages, with Oracle attorney Donn Picket carefully summarizing along the way, at day's end it seemed as if Meyer was spending far too much time parsing phraseology and couching his language during cross-examination; the jury must be wondering whether Meyer's testimony, paid for to the tune of about $4 million according to his own estimates, was worth the time it has been given. At one point after numerous evasions, Mittelstaedt asked plainly: "Can you just say yes?" Another few questions later, Meyer finally did.

Judge Hamilton also discussed another controversial side issue with Oracle and SAP counsel--that SAP board members (Gerd Oswald, Shai Agassi and Werner Brandt) seemed to be disavowing what SAP has already stipulated in this trial; namely, that it is liable for contributory infringement of Oracle's copyrights. SAP attorneys said that the company was not backing away from the liability, but that there was a difference between admitting to the claim and willingly allowing the infringement, which SAP officials claim not to be guilty of. SAP attorneys said they believe that this notion of willingness -- which Oracle is trying to demonstrate -- could influence a decision that drives damage figures higher. Judge Hamilton has not yet decided how to sort out this issue.

The trial takes two days off now: Wednesdays are always off, as Judge Hamilton hears motions; Veterans Day is observed by the court on Thursday.

Fritz Nelson is the editorial director for InformationWeek and the Executive Producer of TechWebTV. Fritz writes about startups and established companies alike, but likes to exploit multiple forms of media into his writing.

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