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November 24, 2010 8:00 AM

Oracle Wins Record-Setting $1.3B Verdict in Software Copyright Case

Posted by David Bario

From The Am Law Litigation Daily

It took an Oakland, Calif., federal district court jury less than a day of deliberations to award $1.3 billion to Oracle after the software company's copyright damages trial against German rival SAP ended Monday. A trial team led by Boies, Schiller & Flexner's David Boies and Geoffrey Howard of Bingham McCutchen persuaded the eight-person jury to adopt Oracle's model of assessing damages for SAP's admitted copying of Oracle software through its subsidiary, TomorrowNow. The award may be shy of the $1.65 to $3 billion Boies pushed for in Oracle's closing argument, but it dwarfs the $40 million calculation SAP's lead lawyer, Robert Mittelstaedt of Jones Day, urged the jury to adopt on Monday.

"We're feeling ecstatic, obviously," said Bingham's Howard, who delivered Oracle's opening statement on November 1. "The jury delivered a very strong message that intellectual property laws, which are the underpinning for the software industry, have to be respected."

The award is the biggest jury verdict of the year, and the biggest ever for copyright infringement, according to Bloomberg.

The jury foreman told the San Jose Mercury News after the verdict that some jury members wanted to award as much as $3 billion. The lowest award the jury discussed, he said, was $500 million. "It was the principle of the whole thing," another juror said. "If you take something, you've got to pay."

SAP said in a statement, "We are, of course, disappointed by this verdict and will pursue all available options, including posttrial motions and appeal if necessary."

As we've reported, SAP stipulated to contributory infringement on the eve of trial, leaving the lawyers to slug it out over the damages SAP owes Oracle, based on either the fair market value of the license that SAP should have acquired from Oracle, or on Oracle's lost profits.

In his summation Monday, Boies argued that SAP should pay a lump-sum royalty based on its valuation of the Oracle intellectual property when it acquired TomorrowNow in January 2005. "They used [the Oracle IP] to attack Oracle, they used it to disrupt Oracle, and they used it to take dollars away from Oracle," Boies told the jury. "And it was massive. There was a massive, massive use." (Here's a transcript of closing arguments from both sides.)

Based on SAP's expectations of the value of the Oracle software TomorrowNow pirated, SAP would have paid $1.65 billion for a license, Boies argued. In his rebuttal summation, he named an even higher figure, saying expert testimony pegged the fair market value of a license "somewhere between $1.65 billion and $3 billion."

"SAP's board and top executives expected that the infringement would be worth billions of dollars," Boies argued. "SAP believed believed it could hide behind TomorrowNow as a liability shield and let TomorrowNow take the fall when it was caught."

In his closing argument, SAP lawyer Robert Mittelstaed said Oracle's billon-dollar damages claims were akin to a film studio demanding the value of worldwide movie rights from a bootlegger who only managed to sell one pirated copy. He urged the jury to award damages based on the number of customers Oracle actually lost to SAP as a result of TomorrowNow's infringement, or to calculate the value of Oracle's license as if the companies had entered into a royalty agreement based on actual sales. Mittelstaedt argued that damages should match Oracle's lost profits on the infringed IP, which he said expert testimony showed was about $40 million.

"I think the evidence and the way Oracle has presented its case and the damages it's asking for show they have been overreaching," Mittelstaedt told the jury. "They are asking for far more than they are entitled to, and they are trying to trick you in doing that."

The verdict form jurors filled out Tuesday asked them to decide an award based on either a fair market value license or on lost profits. The challenge for Oracle's lawyers was to make sure the jury chose the former, and once it did, to make sure jurors believed that SAP thought Oracle's IP was worth well north of $1 billion.

Boies and Howard may have gotten $350 million less than they asked for, but we'd say they succeeded with flying colors.

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