Oracle v. SAP: Daytime Drama

Part 1 – Trial Preview: A trial nearly four years in the making is finally upon us. Oracle and SAP counsel will put on a dramatic show thanks to star witnesses, a trail of illegal activity, and accusations of misconduct at the highest levels.

Fritz Nelson, Vice President, Editorial Director InformationWeek Business Technology Network

October 29, 2010

5 Min Read

Inflicting Pain

While the trial is about assigning monetary damages -- and Oracle is clearly after what it thinks is its fair share -- the real damage Oracle wants to inflict is public humiliation on its most hated rival.

In recent days, Larry Ellison, perhaps wanting to make the trial begin a little sooner and last a little longer, has also verbally sparred with HP, practically daring the company to let new CEO Apotheker into the country (he lives in Paris) to take the witness stand, and calling HP Chairman and former Oracle President Ray Lane a liar for having said that Apotheker didn't know anything about TomorrowNow's practices. Ellison even said the HP tagline should change from "Invent" to "Steal." Oracle may not go with the "liar liar, pants on fire" tactic in court, but it sure is getting uncomfortable.

The federal judge in this case, Phyllis Hamilton, said in a partial summary judgment there wasn't enough evidence to implicate SAP and its executives for contributory liability. The jury is to decide. But SAP sucked the drama from the story on Oct. 28, owning up to contributory liability. This admission won't change much about the damages Oracle is seeking, but it sure puts the possible payout on the high end.

Meanwhile, the U.S. Department of Justice will be watching closely. It was practically a given that TomorrowNow employees would be investigated, but if SAP continued and even encouraged illegal practices after it learned of them, the DoJ is likely to climb higher up the ladder. If Apotheker answers Ellison's dare, which is likely, the drama will mount; for HP too.

Oracle's trial brief claims that before buying TomorrowNow, SAP had a former PeopleSoft executive under its employ, John Zepecki, look into TomorrowNow's practices, and it alleges that SAP knew that TomorrowNow's use of Oracle software was "outside the contractual use rights." And yet SAP proceeded with the deal.

Oracle says its forensics expert discovered that TomorrowNow had collected more than 9 million Oracle files (software, support material, etc.) using a bot-like program called Titan. This program allegedly logged into Oracle's servers using customer credentials and scraped support material like a famished vacuum cleaner, using a series of processes that maximized the amount of data it could be exposed to. The amount of Oracle server activity, the brief says, was huge, practically bordering on denial of service attack volumes. In fact, according to Oracle, it sometimes crashed Oracle servers.

In one tersely worded passage in its trial brief, Oracle reveals one of several tactics it will take to try to convince a jury what it couldn't with Judge Hamilton:

"SAP defends itself now by claiming that by March 2005 -- it cannot say precisely when -- the SAP board supposedly issued what SAP now calls a 'directive' to SAP TN to remove all infringing copies of Oracle copyrighted works from SAP TN's servers. No actual record of that Directive exists. No board minutes or resolutions contain any such Directive. No memos summarize its terms. No emails confirm its existence. Board members who supposedly issued the Directive -- including board members directly involved in overseeing SAP TN -- have no recollection of it."

After Oracle sued, the brief says, SAP didn't stop its practices for an entire year. SAP waited, its own brief claims, to make sure customers were protected first; then it shut down TomorrowNow. What it was protecting the customers from is unclear.

There will be some talk about statutes of limitation and laches, the implication being that Oracle knew what TomorrowNow was doing, maybe even long before SAP's purchase of the company, and chose to take action only to damage a rival. Oracle says it didn't find out about TomorrowNow's practices until November 2006, but if these Titan bots were so powerful and disruptive, how could that be? SAP is also claiming in its brief that for the first two years of this case, Oracle was fine with limiting the damages to lost support sales.

Surely, Oracle can change its mind, even if only for vindictive purposes.

Ellison is a man hell-bent on competing in court and in the press as hard as he competes for customers. Legions of customers snatch up his company's software, and almost as many legions curse him (mostly under their breath) for charging hefty maintenance fees. He also happens to be filthy rich. Sympathy, in other words, isn't his ally.

Some version of the truth could be.