Ninth Circuit Ratchets Up Oracle's Copyright Damages Against SAP

Ninth Circuit Ratchets Up Oracle's Copyright Damages Against SAP Judge William Fletcher, U.S. Court of Appeals for the Ninth Circuit

SAN FRANCISCO — Oracle Corp. squeezed an extra $85 million from the Ninth Circuit in its copyright infringement battle with SAP AG, but lost its push to claim damages based on a hypothetical product license.

Oracle’s lawyers wanted to reinstate a $1.3 billion verdict against German competitor SAP. Instead, the U.S. Court of Appeals for the Ninth Circuit offered the company its choice of either $356.7 million in damages or the gamble of a new trial.

That’s a step up from the $272 million remittitur U.S. District Judge Phyllis Hamilton awarded after a 2010 trial. However, the appellate panel affirmed Hamilton’s ruling that Oracle would not be allowed to ask the jury in a second trial to establish a hypothetical license price.

“Oracle was well aware of the legal standard that it was required to meet,” Judge William Fletcher wrote for the unanimous panel, “and we decline to give Oracle a second bite at the apple.”

An Oracle spokeswoman wouldn’t say Friday whether the company will accept the Ninth Circuit’s judgment.

“We are thrilled about this landmark recovery and extremely gratified that our efforts to protect innovation and our shareholder’s interests are duly rewarded,” Dorian Daley, Oracle’s general counsel, said in a statement. “This sends a strong message to those who would prefer to cheat than compete fairly and legally.”

Kathleen Sullivan, a partner in Quinn Emanuel Urquhart & Sullivan’s New York office, argued on behalf of Oracle. T. Gregory Lanier, a partner in Jones Day’s Silicon Valley office, argued on behalf of SAP.

Oracle sued SAP in 2007, accusing a subsidiary of the company, TomorrowNow Inc., of illegally downloading more than five terabytes of Oracle software, enough data to “encircle the globe nine times if printed out on double-sided paper laid end-to-end.”

In 2010, a jury granted Oracle $1.3 billion based on what it found was the fair market value of a hypothetical license for the infringed data. Hamilton intervened, putting the brakes on what was then the largest jury verdict for copyright infringement in U.S. history. She tossed the verdict, ruling it was based on insufficient evidence, and replaced it with a $272 million remittitur.

Oracle did not license—and never would have licensed—its software to a competitor such as SAP, and Hamilton ruled Oracle hadn’t presented enough evidence to allow the jury to establish a hypothetical license price.

The Ninth Circuit affirmed.

“Oracle failed to provide sufficient objective evidence of the market value of the hypothetical license underpinning the jury’s damages award,” Fletcher wrote. Judges Susan Graber and Richard Paez were part of the panel.

If Oracle decides to walk away from the $356.7 million on the table and opts for a new trial, it will receive a judgment of at least $306 million, under an agreement struck between Oracle and SAP in 2012. Oracle has already netted $120 million from SAP in attorney fees and as compensation for dropping state law and punitive damage claims.

The panel was careful to specify that Friday’s ruling is not a generic attack on hypothetical-license damage models. If the court didn’t allow plaintiffs to collect hypothetical-license damages, the judges wrote, companies that refuse to grant licenses to competitors wouldn’t be able to recover the fair value of their wrongfully appropriated property.

“We have never required a plaintiff in a copyright infringement case to show that it would have licensed the infringed material,” Fletcher wrote. “We decline to impose such a requirement now.”

But practically speaking, it may be difficult for a plaintiff to establish hypothetical-license damages, Fletcher wrote, noting Oracle faced an “uphill battle.”

SAP spokesman Andy Kendzie said SAP is “very pleased” with Friday’s ruling.

“We consider it very favorable to our position,” he said, “and we hope that it brings this matter one step closer to resolution.”

Contact the reporter at mkendall@alm.com.

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