SAP: Pay Oracle and Get Out of Dodge

Includes: ORCL, SAP
by: Dennis Byron
What should SAP do now? It should write the check for a billion-three and get out of Dodge. I said shortly after SAP filed its first response in July 2007 that it needed to settle quickly. I understand that Oracle (NYSE:ORCL) wouldn't let SAP do that, so I can't blame SAP for not taking my advice. But prolonging this catastrophe further to save a few hundred million may ruin SAP in the U.S. for decades.
Although I did not read the Oracle expert's testimony or filings, it looks like his and the jury's logic is that SAP should pay the U.S. full price-list line-item charge for each piece of software Oracle offered for sale in 2006/2007 TIMES MAYBE A 1000 MULTIPLIER. The Oracle price list was publicly available online at the time but this is mosty related to PeopleSoft and JDE software, and I don't have anything in my files about their prices from that period right before they were acquired. (The current Oracle price lists are available here now.) The multiplier would likely simply be the number of unauthorized downloads or the number of TommorowNow users, or some such metric.
Is that logical? No one pays full price-list but SAP before, and after it acquired TomorrowNow it supposedly stole everything Oracle had for sale (even things SAP/TomorrowNow didn't need it), so it should pay full price list. There's a good joke about a guy stealing a $2000 watch, pawning it for $200, and then telling the judge when found guilty for the crime that he should only have to pay $200 in restitution. That was SAP's defense.
It would be interesting to understand whether the Oracle expert's calculation was based on SAP paying just the perpetual license fee or whether there is some formula built in for the much higher recurring maintenance fee -- much higher that is over a number of years. I presume SAP argued that it shouldn't have to pay the maintenance fee because that is what TomorrowNow did, but as noted on this blog frequently, maintenance in an enterprise software sense is about content, not fixing things. If TomorrowNow was stealing the tax-table updates and other content-related real value of maintenance, then I really have no problem with the billion-three verdict.
What does this mean for Rimini Street? Its defense against a similar theft-related lawsuit by Oracle is different than SAP's. For starters, Rimini Street is going to argue that it didn't steal anything; SAP didn't even try to make that argument. Rimini is also going to argue that it has authorization from its clients to log in to Oracle's servers on behalf of its clients, the people who paid the perpetual license fee to Oracle, and that everyone has the right to retain a company like Rimini; Oracle is going to argue it doesn't. Oracle is going to use the SAP verdict as ammunition in sales situations against Rimini but Rimini has countersued Oracle. This is going to be interesting.
(SIDENOTE: I have no knowledge of this but perhaps -- like a lot of less publicized law suits -- an insurance company -- an about to be much poorer insurance company -- was running the defense, not SAP. That might explain what looks on the surface like poor SAP courtroom tactics. If I were a juror I would have been insulted by Werner Brandt trying to parse SAP's contributory responsiblity statement into a non-admission of guilt and the SAP expert claiming SAP only owed Oracle $40 million.)
Disclosure: I have no financial interest in companies mentioned although I have done consulting for all of the above.

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