Seeking speedy resolution to TomorrowNow case, SAP offers to pay up

Seeking to limit the length and scope of a trial, SAP said today that it would pay Oracle for TomorrowNow’s wrongdoing.

Claiming that it never made any money from TomorrowNow or gained any Oracle customers from its acquisition of the

third party support vendor, SAP today agreed to pay Oracle for copyright infringement and illegal downloading engaged in by its now defunct subsidiary.

The admission was a move to limit the length and scope of litigation by Oracle, its chief competitor in enterprise software.  Oracle sued TommorrowNow and SAP in 2007 accusing it of "theft on a massive scale."  It said SAP had illegally accessed proprietary Oracle intellectual property, and has claimed as much as $1 billion in damages.

While SAP said today in a statement that it would not contest TomorrowNow's liability for copyright infringement and illegal downloading, it vowed to contest Oracle's damages claims. SAP wrote in a statement, "it will continue to present arguments and evidence demonstrating that Oracle’s damages claims in this matter are vastly overstated. "

Instead of the “billions” Oracle alleges, the true damages in the case  are in the “measure of tens of millions, at most,” according to court documents filed today in the U.S. District Court, Northern California. SAP paid $10 million for TomorrowNow, documents state, never gained any Oracle customers from it, and TomorrowNow suffered losses of $90 million during its tenure as an SAP company.

 “Years of litigation have made a few things clear: although TomorrowNow did make mistakes in its operations, Plaintiffs’ damage claims are vastly exaggerated, and Plaintiffs have no interest in resolving this case,” court documents state. “Someone will have to take a major step, or this case will never end.”

While SAP maintains that its subsidiary may have committed improprieties, SAP itself did not, claiming it only bought TomorrowNow to “provide a choice to customers frightened by Oracle’s acquisition of PeopleSoft and J.D. Edwards.” It’s calling on Oracle to dismiss claims to that effect.

Oracle alleges that SAP executives were told about TomorrowNow's illegal operation and ignored warnings that Oracle could sue them because SAP wanted to win market share. Oracle also alleges that SAP wanted to expand TomorrowNow to support Hyperion, Retek and the Oracle E-Business Suite. 

“TomorrowNow served only a tiny fraction of Plaintiffs’ customers -- customers who were already going to drop Plaintiffs’ support and whom Oracle’s own executives dismissed as 'unprofitable laggards,'” the documents state. “TomorrowNow never made a profit, and, despite some initial optimism, no customers chose to purchase SAP software because of TomorrowNow.”

On the contrary, during its time as an SAP subsidiary, TomorrowNow suffered losses of $90 million, documents state. That’s because of the 358 customers TomorrowNow had, most had no interest in replacing their applications, and entered into third-party support contracts only to keep applications in maintenance mode.

SAP also proposes to limit the length of the trial -- which is scheduled for six weeks -- to two weeks. Another pre-trial conference between the parties is scheduled for September, and the two parties could also settle the case any time between now and then.

“SAP is committed to compensating Oracle for the harm the limited operations of TomorrowNow actually caused,” SAP CFO Werner Brandt said in a written statement. “Oracle’s unreasonable damages claims are an unproductive distraction as we work to find a fair resolution in this case.”

SAP already acknowledged that there were “inappropriate downloads” on behalf of TomorrowNow when Oracle filed the lawsuit. When SAP shut down the third-party support provider TomorrowNow in July of 2008, many suspected that the lawsuit would come to a quick resolution. Instead, Oracle filed additional complaints broadening its claims against SAP and TomorrowNow. Oracle has also filed a lawsuit against third-party support provider Rimini Street.

SAP also calls out Oracle in the filing for a “manifest desire to snuff out the third party support competition,” when Oracle’s business model perpetuates demand for it. The market for third party support has steadily grown and now includes both established players and a multitude of emerging companies, the documents state, and customers that don’t want upgrades have difficulty justifying payment of the fees.

“Plaintiffs bristle at the notion that customers may wish to lower their support fees and forego the right to future software upgrades,” the documents state. “A senior Oracle executive wrote: Let the bastards dream of reducing their maintenance fees. I just finished telling Toyota that we’re not going to reduce their bill. Not only that, but they need to buy more software from us!”

An Oracle spokeswoman did not immediately return a call or an email seeking comment.

SAP’s own troubles with justifying its maintenance and support fees to customers have played out quite publicly. SAP is still trying to prove to customers that its Enterprise Support offering -- which will cost the same as Oracle’s [22% of net licensing fees] by 2016 -- is worth the money, and has engaged in several initiatives to that effect.

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