Reports surfaced recently that SAP shelled out US$120 million to Oracle agreeing not to seek punitive damages in the latter’s lawsuit against the company.
However, SAP spokesperson Saswato Das ducked questions on this topic.
“I cannot comment on this because this has been sealed by the court,”he told CRM Buyer.
Oracle did not respond to requests for comment by press time.
Thumbnail Snapshot of the Week
Here’s a quick rundown of the week in court:
Reports have emerged that SAP coughed up $120 million to Oracle in whatmight be a bid to reduce the range of evidence Oracle presents to thejury. The two sides are still fighting over how much SAP would have topay in damages, however.
Then former Oracle Copresident Charles Phillips gave his testimony onThursday. Phillips said the database giant would have charged SAP$3 billion to $4 billion for the right to use software fromPeopleSoft, which Oracle bought five years ago.
Former SAP executive Shai Agassi said the company knew from the start that itmight get sued by Oracle because of TomorrowNow, according to courtdepositions filed by SAP.
Looking at the Issues
Why would SAP agree to a $120 million payout to Oracle to avoid punitive damages, if this indeeddid happen?
“Perhaps it had a weak case,” Rick Sturm, founder and CEO ofEnterprise Management Associates (EMA) pointed out. “Or SAP justwanted to get this behind it and reduce the cost of the litigation andavoid potential damage to its reputation.”
Oracle might agree — if its case wasn’t strong enough, Sturm suggested.
SAP spokesperson Das declined comment.
That PeopleSoft software was illegally copied by SAP’s TomorrowNowsubsidiary to provide third-party maintenance to PeopleSoft users.SAP has already admitted wrongdoing, accepted liability forTomorrowNow’s actions and offered to pay restitution but was turneddown by Oracle, which believes it is owed significantly more than SAP has offered.
Were those copies of PeopleSoft software TomorrowNow made really worththe billions Oracle’s Phillips claimed?
“SAP is committed to compensating Oracle for the harm the limitedoperations of TomorrowNow actually caused,” SAP’s Das stated. “Thatcompensation must be reasonable, and it must be tethered to reality andthe law. The jury in this case is really here to determine damages.That’s the main focus of this case,” he added.
“I think Oracle’s inflating that figure dramatically,” EMA’s Sturmsaid. “It’s just a negotiation tactic.”
Alarms and Excursions
Perhaps the statement by ex-SAPer Agassi that the company knew it mightget sued by Oracle if it bought TomorrowNow might have hurt SAP’s casethe most.
However, it could be argued that the SAP board was merely conductingdue diligence and looking at the cost-benefit ratio. If a move by acompany will make it more money than the projected liabilities fromthat move, the cost-benefit ratio is favorable to the company.
“Companies are supposed to do their due diligence before doing anacquisition,” EMA’s Sturm said. “SAP should have done due diligence.Perhaps it should not have bought TomorrowNow,” he added.
“Our position all along has been that we did not know about theseactivities until the lawsuit was filed, after which we investigated,admitted that inappropriate downloads had taken place, tookresponsibility for those actions while taking steps to resolve thebehaviors, replaced TomorrowNow management, and ultimately wound downthe business,” SAP’s Das said. He pointed out that his company tookthese actions three years ago.