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SAP hopeful Oracle will talk settlement

SAP and Oracle failed to reach a lawsuit settlement in their first mediation session, but SAP hopes Oracle wants to talk more out of court.

SAP said it's still hoping to settle a copyright infringement lawsuit filed by Oracle, despite the recent failed attempt at mediation between the two software giants.

The two companies met May 29 in U.S. District Court in San Francisco as part of a court-ordered attempt to settle Oracle's claims that TomorrowNow Inc. illegally downloaded support materials to sell them at half price to Oracle customers. SAP bought TomorrowNow, a provider of third-party support for Oracle applications, in July 2005.

SAP spokeswoman Lindsey Held said that, at the very least, there will be a settlement conference between Oracle and SAP in October, as scheduled by the court.

"This is not the end of the mediation process. This is the first step," said Held, executive director of media relations at SAP. "We firmly believe it makes sense for both parties to seek resolution. We firmly believe that it makes sense to continue discussions."

Oracle, which filed the lawsuit against SAP in March 2007, declined to comment on the failed mediation attempt.

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Oracle says in its lawsuit that SAP knew what TomorrowNow was doing

It would have been highly unusual for SAP and Oracle to reach an agreement in their first mediation session, according to Hillard M. Sterling, an attorney who specializes in information technology litigation with Chicago-based Freeborn & Peters LLP.

Sterling said that the parties are simply feeling each other out in the initial session. They're not even in the same room. They make separate pitches to the mediator, and the mediator tries to convince them that they each face risk.

"Mediation rarely, if ever, succeeds with the initial session," Sterling said. "Most likely, the parties made some progress in identifying where they disagree. Now, the critical factor will be whether they find commonality in those areas of disagreement over the next one or several mediation sessions."

It might be wise to hold off on further mediation until October, Sterling said. The trial isn't scheduled to start until February 2010, according to court documents.

"Passage of time may help the parties come to a closer ground, as each party spends exorbitant legal fees and suffers the burdens of the discovery process," Sterling said. "If the mediator schedules these sessions too closely, he loses that leverage."

In addition to alleging that TomorrowNow -- which provides support for Siebel, JD Edwards and PeopleSoft applications -- illegally downloaded materials from Oracle's customer support website, Oracle also said that it plans to bring further accusations in an amended complaint, which hasn't yet been filed.

Oracle plans to accuse TomorrowNow of stealing Oracle's underlying software applications, not just its support materials, according to court documents. It says TomorrowNow warehoused these applications as "generic software environments" and used them to service other customers, train employees and create SAP-branded fixes.

According to court documents, Oracle will also claim that SAP executives knew TomorrowNow's business model was illegal when they acquired the company, but -- for business purposes -- SAP failed to do anything about it.

SAP has denied the claims but said that Bryan, Texas-based TomorrowNow may have downloaded some inappropriate items. SAP maintains that it never saw those items because they remained in TomorrowNow's system and claims that the majority of TomorrowNow's downloads were legal.

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