Studying Oracle's $1.3 Billion Infringment Verdict over SAP

This week a federal jury in Oakland, California awarded Oracle $1.3 billion in damages from SAP as a result of SAP's infringing the intellectual property of Oracle. The trial was limited to the question of damages. SAP already had admitted that personnel at a now closed Tomorrow Now subsidiary had intentionally gained access to, copied and resold software related to running the data centers of large corporations. SAP also obtained other propriety information and trade secrets, such as manuals and technical support guidance.

The case is stunning in many respects. It is a clear example of blatant copryright infringement and apparently patent infringement. It appears that numerous and senior mananagers at SAP were aware of the subterfuge. And, it demonstrates just how damaging a breach of corporate integrity can be in terms of money, publicity and prestige.

Perhaps, the most interesting aspect is how vulnerable a copyright infringer is if discovered. SAP argued that Oracle's damages should be in the $25 to $40 million range based upon the relatively few customers and amount of income that SAP gained from the effort. Oracles claimed that it would have charged SAP fees amount to as much as $2 billion if it had licensed the software and related materials to SAP. The jury appeared to give much of the benefit of the doubt to Oracle and settled on $1.3 billion, 35 to 40 times what SAP argued.

This reminds me of a case I handled where an advertising and marketing firm made a lengthy infomercial for an appliance that played on national outlets in heavy rotation. The infomercial allegedly included a short bit of background music for which a license had not been obtained. Most likely, the licensor would have charged a very nominal fee if the matter had been negotiated in advance, perhaps less than $50 ro $100. Howevever, after the fact, the licensor was free to demand a fee many, many times that, coupled with potential risks of litigation expenses and treble damages, even though any unlicensed use probably had been an oversight. Accordingly, the client concluded it was worth settling the case promptly for a reasonable amount, but one that was still greatly higher than if a license had been purchased upfront.

The principle in the infomercial case is the same as the one in the SAP trial, the exponentially different sums involved notwithstanding. Be very careful about misappropriating software, music, video or other content that has commerical value. Even if the misuse was inadvertent, if detected, you can now be held hostage for license fees far above an arms length level.

The Chicago intellectual property attorneys of Jeremy A. Gibson & Associates, PC frequently advise companies and employees on legal matters involving software and copyright protection, including trade secret and infringement issues. Our Illinois business and corporate attorneys are available throughout the region to meet at offices in Chicago, Deerfield, Rosemont, Schaumburg and Oak Brook and elsewhere. Please phone or email us to schedule your business law consultation.