Oracle and SAP battle over 'hypothetical licence' damages

Oracle and SAP are at odds over whether the concept of "hypothetical" software licence fees can be factored into damages in the upcoming retrial of Oracle's intellectual-property lawsuit against SAP, and the outcome could sharply affect the scope of any judgment in the case.

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Oracle and SAP are at odds over whether the concept of "hypothetical" software licence fees can be factored into damages in the upcoming retrial of Oracle's intellectual-property lawsuit against SAP, and the outcome could sharply affect the scope of any judgment in the case.

Oracle sued SAP in March 2007 over actions taken by a former subsidiary, TomorrowNow, that provided lower-cost support for Oracle applications.

SAP admitted liability for illegal downloads of Oracle software and support materials performed by TomorrowNow staff, and in November 2010 a jury awarded Oracle $1.3 billion (£804 million) against SAP based on hypothetical licence fees.

However, a judge tossed the award out in September, saying it "grossly exceeded the harm caused to Oracle" and wasn't backed by the evidence Oracle presented. Oracle opted to reject a lower award for $272 million (£168 million) and the court ordered a new trial on damages based on lost profits and infringer's profits, which is scheduled to begin in June.

Missed "cross-sell" and "up-sell" opportunities

Last week, Oracle said it would seek about $777 million (£481 million) in damages for lost profits and infringer's profits in the retrial, but in April also filed motions asking the court to allow hypothetical licence damages as well.

As in the first case, Oracle is arguing that SAP should have had to pay the fair market value of what it would have cost to licence the downloaded software legally, as well as to develop it. Oracle also contends that its sales representatives would have had "cross-sell" and "up-sell" opportunities associated with legal licensing deals, resulting in additional money.

Oracle also faced time constraints when presenting its case during the first trial, and will present better evidence this time around, it said.

"There is no dispute between the parties that it is possible to calculate some objective value for a hypothetical licence for the Oracle copyrights that SAP has admitted infringing," Oracle said in an April 17 filing. "At the first trial, SAP conceded both that such a licence could be valued, and that it would be worth tens of millions of dollars."

Strong opposition from SAP over "hypothetical" claims

But in a filing this week, SAP voiced strong opposition to Oracle's motions.

"On numerous occasions, the Court has made clear that Oracle may not seek damages based on saved development costs or cross-sell/up-sell opportunities - whether as standalone claims or in support of Oracle's now-precluded hypothetical licence claim," it said.

Instead, the new trial should "be limited to determining lost profits and infringer's profits - the issues that could and should have been tried in November 2010, but for Oracle's overreaching," SAP added.

US District Court Judge Phyllis J. Hamilton has yet to rule on Oracle's motions.

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