January 06, 2009
Oracle v. SAP Updates--Third Amended Complaint, Motion to Dismiss Ruling, SAP's Latest Answer
By Eric Goldman
There have been some recent developments in the high-stakes and complicated Oracle v. SAP lawsuit.
In October, Oracle filed its third amended complaint whereby it expanded its efforts to show that SAP America and SAP Germany were both responsible for the actions of SAP America’s TomorrowNow subsidiary, which SAP has already admitted engaged in impermissible practices. The third amended complaint is supported by lots of facts that only millions of dollars of discovery can buy. The complaint a long read and still has too much PR hyperbole about how Oracle is so much better than SAP, but I thought the complaint did a good job arguing that the parent companies were more involved with the rogue subsidiary than mere stockholdership. At the same time, Oracle does look like it will have a damper on some of its copyright claims—it acknowledged that it lacks copyright registrations for many of the copied files, and it made some copyright filings as part of the lawsuit that probably will be too late to create eligibility for statutory damages. This probably means that Oracle won’t get to inflate the final damages calculation as much as it would like.
On Dec. 15, the judge ruled on SAP’s partial motion to dismiss. The ruling cleans up the case a bit but doesn’t really affect the substance of the case. Personally, I was a little confused about the ruling on copyright preemption of the breach of contract claim. The court denied the motion to dismiss the contract claim “except as to the extent that the state law claims are based on the alleged copyright infringement – in which case the parties agree they are preempted by the Copyright Act. SAP does not dispute plaintiffs’ assertion that the TAC alleges other actions (fraud, unauthorized use, and harm to private contractual rights and expectations) that form the basis of the state law claims, and which are not preempted by the Copyright Act.” Did the court say that a breach of contract can’t be based on acts that would constitute a copyright infringement? We know that would be wrong.
On Dec. 30, SAP filed its answer to the third amended complaint. Just like it did with its first answer, which it released so that the news would effectively break on the obscure newsday of the July 4 holiday, SAP once again tried to bury its news by releasing it so that the news would break on a holiday (this time, New Years). Oh please! You’re not fooling anyone with your bogus PR shenanigans, SAP.
Not surprisingly, SAP is blaming its TomorrowNow subsidiary for all misconduct--which is convenient, because SAP has already shuttered TomorrowNow, so it has nothing more to lose if it can contain the lawsuit to the subsidiary.
I must say that the overall picture doesn't look good for SAP. I am skeptical that they will emerge unscathed from this lawsuit. However, I’m still not clear what Oracle wants from SAP. It’s in the driver’s seat, so it should be able to dictate terms. What would it take for Oracle to move on? It may be that keeping the case open is hurting SAP in the marketplace, such as by spooking SAP's potential customers, so Oracle may be happy to let the case linger. Otherwise, it seems like Oracle should have enough information to state a price, and I’d like to think SAP would be prepared to write a reasonable check.
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