Jury Says SAP Owes Oracle $1.3 Billion Over TomorrowNow Theft

November 29, 2010 Timothy Prickett Morgan

German software giant SAP acquired the defunct TomorrowNow software unit to try to steal away some business from application rival Oracle, and by doing so it may have inadvertently helped fuel a new wave of acquisitions by the database, application, and increasingly serious systems vendor. That’s because the jury deciding the TomorrowNow lawsuit has said that SAP should pay Oracle $1.3 billion in damages.

When the trial started four weeks ago, there was some talk that Oracle and SAP were possibly going to settle the issue, but that didn’t happen. You can’t pay for the kind of adverse publicity that the TomorrowNow lawsuit has brought SAP and now Oracle rival Hewlett-Packard since SAP’s former chief executive officer, Leo Apotheker, was tapped to run HP after Mark Hurd was fired because of an alleged sex and expense scandal and jumped to become president of Oracle.

Oracle filed a lawsuit against SAP and TomorrowNow in March 2007 after SAP bought TomorrowNow, a provider of third-party maintenance for PeopleSoft, Siebel, and JDE Software suites. Oracle said that TomorrowNow stole its intellectual property to support its 358 customers, alleging $2 billion in damages. The lawsuit, filed in U.S. District Court for the Northern District of California in San Francisco, started on November 1, Apotheker’s first day on the job at HP, and he was globetrotting to meet HP customers, partners, and employees, but also to duck a subpoena compelling him to testify at the trial.

SAP’s lawyers argued during the case that the damages to Oracle were between $28 million and $41 million, according to reports in the Wall Street Journal and Bloomberg, while Oracle’s math showed the damages to be somewhere between $288 million and $3 billion. The jury basically split the difference; its thinking about how this number is justified has not been revealed, but that is a lot of cash.

It is perhaps not a coincidence that SAP announced that it had re-upped a five-year, €1.5 billion ($2 billion) revolving credit facility with Royal Bank of Scotland and Société Générale on November 18. SAP ended its third quarter with €2.83 billion ($3.79 billion), and can afford to pay the damages, but will probably appeal the ruling because it is cheaper to spend a lot of money on lawyers than to cut that $1.3 billion check to Larry Ellison.

SAP’s statement in the wake of the jury ruling didn’t make it clear it would appeal.

“We are, of course, disappointed by this verdict and will consider all available options,” the SAP statement reads. “This will unfortunately be a prolonged process and we continue to hope that the matter can be resolved appropriately without more years of litigation. The mark of a leading company is the way it handles its mistakes. As stated in court, we regret the actions of TomorrowNow, we have accepted liability, and have been willing to fairly compensate Oracle. Throughout this matter, our customers, employees and partners have stood by us and, for that, we are grateful. Our focus now is looking forward, helping our customers be best-run businesses, and extending our legacy of industry leadership well into the future. We thank the jury for its diligent service through this lengthy trial and the court for its supervision of this complex case.”

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