SAP-Oracle Trial Set For Early 2009

Attorneys representing software giants SAP and Oracle squared off for the first time in court Tuesday during a hearing to establish the ground rules and timeline for a possible trial to determine whether or not SAP stole intellectual property and customers from its chief rival.

Barring a settlement or any subsequent delays related to gathering pre-trial evidence, the trial will begin on February 9, 2009.

U.S. District Judge Martin Jenkins summed up Oracle’s complaint and SAP’s answer as “a tale of two different stories,” with Oracle insisting that downloads made by employees working for its services subsidiary TomorrowNow amounted to corporate espionage and SAP, which acknowledged some “inappropriate” downloads, dismissing the vast majority of Oracle’s allegations.

Judge Jenkins told the companies’ attorneys he plans to “manage this case” and “find a balance to discovery” to ensure the process of gathering evidence from depositions doesn’t drag on for years as the two sides bunker down for battle.

“That’s not going to happen,” he said. “I like to handle my own discovery. This is a significant case for all parties involved. We’re here today to chop through these issues.”

The issues began in January 2005 with Oracle’s takeover of PeopleSoft, which had previously acquired J.D. Edwards. By adding the PeopleSoft-J.D. Edwards coup to its own acquisition of Siebel Systems, Oracle instantly became a real threat to SAP’s stranglehold on the customer relationship management (CRM)  and enterprise resource management (ERP)  software markets and the bounty of services revenue that came with them.

SAP immediately responded by acquiring TomorrowNow, a third-party service and support company based in Bryan, Texas, two weeks later and introduced what it called a “safe passage program” to persuade organizations to migrate to its mySAP ERP software and NetWeaver platform.

Under this program, companies now pay a maintenance fee of 17 percent of the original price of their PeopleSoft and J.D. Edwards software licenses, not only undercutting Oracle’s standard rate of 22 percent but also priming the pump for future SAP applications down the road.

In late 2006, Oracle discovered some TomorrowNow employees were downloading Oracle customer files for the purpose, Oracle says, of taking away some of its lucrative services business. In its complaint, Oracle claims SAP stole intellectual property and violated the Federal Computer Fraud and Abuse Act as well as the California Computer Data Access and Fraud Act.

During the hearing, Oracle’s lead attorney, Christopher Hockett said the company “has detailed records of an enormous amount of copying and downloading from the fall of 2006” but “have had hard time figuring out what happened before the fall of 2006.”

“We want to know not only when they did it but also what they did with the information,” he said while arguing for the opportunity to depose more current and former customers to bolster Oracle’s complaint.

SAP attorney Bob Mittelstaedt said the company “requested mitigation immediately” and is willing to provide a detailed record of all downloads made by TomorrowNow employees.

“Our intent is to resolve this as efficiently as possible,” he said.

For now, Judge Jenkins has given both sides a limit of 20 depositions, 150 document requests, three expert witnesses to evaluate forensic evidence and determine potential damages and an August 8, 2008 deadline to submit its expert disclosure reports. He also said the last date he will hear pre-trial motions will be November 13, 2008.

The two sides will meet again for a status hearing on February 12, 2008 to determine if more time or latitude needs to be extended for gathering evidence or if mediation can resolve the dispute.

If the case does go to trial, both sides expect the trial to last no longer than four weeks.

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