Oracle has asked an appeals court to reinstate a US$1.3 billion jury award against SAP for what an Oracle lawyer on Tuesday called "the most massive and brazen copyright infringement in history."
A District Court judge overturned Oracle's award two years ago, calling it "grossly excessive," and instead granted it damages of $272 million. Oracle appealed, and on Tuesday lawyers for each side presented their cases to a three-judge panel at the Ninth Circuit Court of Appeals in San Francisco.
The case concerns a long-closed SAP subsidiary called TomorrowNow, which Oracle caught downloading masses of software and support materials -- around 5 terabytes -- from an Oracle-PeopleSoft website. SAP didn't contest the infringement, and the trial was to determine how much it should pay.
The jury based its award partly on how much SAP would have paid Oracle if the companies had sat down to negotiate a license. Such "hypothetical license" calculations are a common way to decide damages in infringement cases.
What makes the case novel is that Oracle has never licensed its support materials to another company, let alone a rival like SAP. As the German software vendor said in its appeals brief: "There was no licensing opportunity to lose, so no license fee (however measured) could properly be awarded as actual damages in this case."
That's one of the main questions the appeals court will have to answer: whether Oracle is entitled to collect an imagined license fee from SAP even though Oracle would never have agreed to license its software.
It must also decide if such a fee could ever be fairly calculated, given that there are no previous Oracle deals to compare it with. If not, SAP says Oracle should be able to collect only its lost profits, plus any profit SAP gained from the theft.
The panel of appeals court judges picked holes in both side's arguments Tuesday.
If Oracle has never licensed its support materials, the panel wanted to know, how could a jury objectively calculate their value?
Kathleen Sullivan, an attorney for Oracle, said the value can be seen in how much revenue SAP expected to generate from its purchase of TomorrowNow. A presentation to SAP's board, shown to the jury at trial, pegged that figure at close to $900 million.
That wasn't enough for Judge Susan Graber. "All that demonstrates is what they could have earned from it, which is different from the price of a license," she said.
Sullivan tried again, telling the judge TomorrowNow was a key part of SAP's "PeopleSoft attack strategy."
"All of this is fascinating," Graber told her, "but so far none of it has answered my question."
SAP lawyer Greg Lanier was also put in the hot seat. Judge William Fletcher asked him if he thought the law precluded Oracle from collecting a hypothetical license just because it had chosen never to license its software in the past.
Lanier said that was his position.
"I don't believe the case law is saying that," the judge shot back.
But even if it isn't, Lanier protested, there's still the question of how a jury could calculate a price for the license.
That's part of the reason District Court Judge Phyllis Hamilton reduced Oracle's $1.3 billion verdict: She didn't believe Oracle presented enough evidence for the jury to properly calculate it.
Instead, as Lanier contended Tuesday, Oracle threw out several big numbers to the jury, leading it to come up with one of the highest ever copyright infringement awards. At one point in the trial, for instance, CEO Larry Ellison testified that the software and support materials were worth $4 billion.
Judge Fletcher said he was skeptical Oracle would be able to produce any further evidence at a retrial that would be more helpful to a jury. Sullivan said Oracle should be given the opportunity to try.
Sullivan asked the judges to take one of two courses: reinstate the $1.3 billion award, on the grounds that Oracle was entitled to a hypothetical license fee; or send the case back for a new trial, instructing the court that Oracle can argue for a hypothetical license.
The three-judge panel didn't indicate Tuesday when it will rule.
Either way, Oracle should receive at least $306 million from the case, the result of an agreement it struck with SAP after the District Court reduced its verdict. SAP also paid Oracle $120 million in attorneys' fees.
The case could break new ground in determining whether a company that has never licensed its software can be awarded copyright damages for lost licensing fees. Judge Fletcher asked Sullivan if she had any other cases that resemble this one. "We do not, your honor," she told him.
It's not the only case in which Oracle is reshaping copyright law. Last week an appeals court ruled that its Java programming interfaces could be protected by copyright, something many software developers assumed could not be the case.
This story, "Oracle asks for its pound of flesh in unique SAP theft case" was originally published by IDG News Service .