Oracle Corporation et al v. SAP AG et al

Filing 1120

MOTION for Clarification filed by Oracle International Corporation. Motion Hearing set for 5/23/2012 09:00 AM in Courtroom 3, 3rd Floor, Oakland before Hon. Phyllis J. Hamilton. Responses due by 5/1/2012. Replies due by 5/8/2012. (Attachments: # 1 Proposed Order Granting Oracle's Motion for Clarification)(Howard, Geoffrey) (Filed on 4/17/2012)

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BINGHAM MCCUTCHEN LLP
DONN P. PICKETT (SBN 72257)
GEOFFREY M. HOWARD (SBN 157468)
BREE HANN (SBN 215695)
Three Embarcadero Center
San Francisco, CA 94111-4067
Telephone: [phone]
Facsimile: 415.393.2286
[e-mail]
[e-mail]
[e-mail]
BOIES, SCHILLER & FLEXNER LLP
DAVID BOIES (Admitted Pro Hac Vice)
333 Main Street
Armonk, NY 10504
Telephone:
[phone]
Facsimile:
[phone]
[e-mail]
STEVEN C. HOLTZMAN (SBN 144177)
FRED NORTON (SBN 224725)
1999 Harrison St., Suite 900
Oakland, CA 94612
Telephone:
[phone]
Facsimile:
[phone]
[e-mail]
[e-mail]
DORIAN DALEY (SBN 129049)
JENNIFER GLOSS (SBN 154227)
500 Oracle Parkway, M/S 5op7
Redwood City, CA 94070
Telephone: [phone]
Facsimile: 650.506.7144
[e-mail]
[e-mail]
Attorneys for Plaintiff Oracle International Corp.

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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OAKLAND DIVISION

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ORACLE USA, INC., et al.,

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Plaintiffs,
v.

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SAP AG, et al.,
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Defendants.
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No. 07-CV-01658 PJH (EDL)
ORACLE’S MOTION FOR
CLARIFICATION
Date: May 23, 2012
Time: 9:00 a.m.
Place: 3rd Floor, Courtroom 3
Hon. Phyllis J. Hamilton

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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

TABLE OF CONTENTS

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Page

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I.
II.

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III.

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IV.

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V.

INTRODUCTION ............................................................................................................. 1
BACKGROUND AND PROCEDURAL HISTORY........................................................ 2
A.
Pre-Trial Rulings Describing the Evidentiary Standard for the
Hypothetical License Measure of Damages........................................................... 2
B.
Oracle’s Evidence at the November 2010 Trial and the Court’s Rulings on
that Evidence.......................................................................................................... 3
C.
September 1, 2011 Order Granting SAP’s Motion for Judgment as a
Matter of Law/New Trial ....................................................................................... 4
D.
September 16, 2011 Order Denying Certification ................................................. 4
THE COURT SHOULD CLARIFY THAT ORACLE MAY PRESENT
EVIDENCE ON HYPOTHETICAL LICENSE AT THE SECOND TRIAL ................... 5
A.
Legal Standards for Clarification Motions............................................................. 5
B.
All Parties Agree That Calculating the Value of a Hypothetical License for
the Infringed Copyrights Is Possible ...................................................................... 6
C.
Oracle Should Be Allowed to Present Evidence in Support of the
Hypothetical License Remedy ............................................................................... 6
D.
Oracle Will Reintroduce Evidence at the New Trial Supporting an
Objective Measure of Fair Value ........................................................................... 7
THE COURT HAS DISCRETION TO PERMIT ORACLE TO PRESENT
ADDITIONAL EVIDENCE AT THE NEW TRIAL...................................................... 10
A.
Fairness Dictates That the Court Exercise Its Discretion to Allow Oracle
to Present New Evidence ..................................................................................... 10
B.
Oracle Has Additional Objective Hypothetical License Evidence Based on
the Current Discovery Record.............................................................................. 11
CONCLUSION ................................................................................................................ 14

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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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TABLE OF AUTHORITIES

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Page(s)

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CASES

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Bordallo v. Reyes,
763 F.2d 1098 (9th Cir. 1985)..................................................................................................5

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California v. Infineon Techns. AG,
C 06-4333 PJH, 2007 WL 3034372 (N.D. Cal. Oct. 16, 2007) ...............................................5
F.B.T. Productions, LLC v. Aftermath Records,
No. CV 07-3314 PSG, 2011 WL 5174766 (C.D. Cal. Oct. 31, 2011).............................10, 11
Finjan, Inc. v. Secure Computing Corp.,
626 F.3d 1197 (Fed. Cir. 2010)..........................................................................................8, 14
Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc.,
772 F.2d 505 (9th Cir. 1985)....................................................................................................8
Georgia-Pacific Corp. v. United States Plywood Corp.,
318 F. Supp. 1116 (S.D.N.Y. 1970).................................................................................3, 8, 9
Hanson v. Alpine Valley Ski Area, Inc.,
718 F.2d 1075 (Fed. Cir. 1983)................................................................................................8
Inline Connection Corp. v. AOL Time Warner, Inc.,
470 F. Supp. 2d 424 (D. Del. 2007) .........................................................................................9
Interactive Pictures Corp. v. Infinite Pictures, Inc.,
274 F.3d 1371 (Fed. Cir. 2001)....................................................................................8, 13, 14
Jarvis v. K2 Inc.,
486 F.3d 526 (9th Cir. 2007)....................................................................................................7

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Johns Hopkins Univ. v. Cellpro, Ink.,
152 F.3d 1342 (Fed. Cir. 1998)................................................................................................6
Mackie v. Rieser,
296 F.3d 909 (9th Cir. 2002)....................................................................................................7
Pincus v. Pabst Brewing Co.,
752 F. Supp. 871 (E.D. Wis. 1990)........................................................................................11

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Putnam v. Henkel Consumer Adhesives, Incs.,
No. 1:05-CV-2011-BBM, 2007 WL 4794115 (N.D. Ga. Oct. 29, 2007) ................................9
S. Union Co. v. Irvin,
563 F.3d 788 (9th Cir. 2008)..................................................................................................11
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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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TABLE OF AUTHORITIES

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Page(s)
Snellman v. Ricoh Co.,
862 F.2d 283 (Fed. Cir. 1988)......................................................................................8, 13, 14
Stewart v. Abend,
495 U.S. 207 (1990) .................................................................................................................8
Total Containment, Inc. v. Dayco Prods., Inc.,
177 F. Supp. 2d 332 (E.D. Pa. 2001) ...........................................................................6, 10, 11
TWM Mfg. Co., Inc. v. Dura Corp.,
789 F.2d 895 (Fed. Cir. 1986)............................................................................................8, 14
LOCAL RULES
Civil L.R. 7-9(b).............................................................................................................................2

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iii
ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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NOTICE OF MOTION AND MOTION

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PLEASE TAKE NOTICE THAT on May 23, 2012, at 9:00 a.m., in the United

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States District Court, Northern District of California, Oakland Division, located at 1301 Clay

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Street, Oakland, California, Courtroom 3, 3rd Floor, before the Hon. Phyllis J. Hamilton,

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Plaintiff Oracle International Corp. (“Oracle”) will move for permission to present evidence

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relevant to hypothetical license damages at the second trial. This motion is based on this notice

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of motion and motion, the accompanying memorandum of points and authorities, the

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accompanying declaration of Nitin Jindal, and such other matters as may be presented to the

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Court at the time of the hearing.

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RELIEF SOUGHT

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Clarification that Oracle may present evidence and argument in support of a

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hypothetical license measure of damages, including evidence not previously offered, objectively

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showing the fair market value of the copyrighted material.

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MEMORANDUM OF POINTS AND AUTHORITIES
I.

INTRODUCTION
In the post-trial motions following the first trial, the Court reaffirmed that

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hypothetical license damages are available as a matter of law, and that proof of actual licensing

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is not required to support that damages measure, but held that Oracle’s evidence in the first trial

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was insufficient. Oracle now seeks the Court’s clarification that, at the second trial, it may

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submit evidence of hypothetical license damages to meet the standard the Court has now

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articulated, including evidence not presented previously. Any other result would be erroneous,

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unfair, and a potential waste of judicial resources. The standard articulated by the post-trial

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orders differs from the one Oracle had relied on in the first trial based on the Court’s pre-trial

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rulings and the jury instructions. Thus, Oracle should be allowed the opportunity to meet the

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post-trial standard for hypothetical license damages, along with the other measures of damages

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available on retrial. If Oracle is not, a third trial would be required if the Ninth Circuit were to

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hold the post-trial standard legally correct but Oracle had not been given a chance to satisfy it.

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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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Since the Court has ordered a new trial and clarified the standard for hypothetical

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license damages, it should further clarify that Oracle may submit evidence relevant to all of its

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legally valid damages measures.1

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II.

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BACKGROUND AND PROCEDURAL HISTORY
A.

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Pre-Trial Rulings Describing the Evidentiary Standard for the Hypothetical
License Measure of Damages
In its January 28, 2010 ruling denying SAP’s summary judgment motion, the

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Court held that “Oracle is not required to prove that it would have successfully negotiated a
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license with SAP, nor is it precluded from seeking license damages simply because it has never
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before licensed what SAP infringed.” Dkt. 628 at 4 (emphasis supplied). The Court also held
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that “Oracle should be permitted to present evidence regarding the fair market value of the
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copyrights that SAP allegedly infringed, including expert testimony based on established
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valuation methodology.” Id. at 5 (emphasis supplied). Later that year, the Court reaffirmed the
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January 28 Order: “The test of market value is ‘what a willing buyer would have been
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reasonably required to pay to a willing seller for plaintiffs’ work.’” Dkt. 762 (quoting Frank
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Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 512 (9th Cir. 1985)).2

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If the Court rejects this requested clarification and holds that its post-trial orders were intended
to preclude Oracle from presenting a hypothetical license theory of damages at the new trial,
then, in the alternative, Oracle requests leave to file a motion for reconsideration of such posttrial rulings. See Dkt. 1081 at 20 (Oracle’s evidence insufficient under the post-trial standard;
“Should Oracle reject the remittitur, the court will order a new trial as to actual damages in the
form of lost profits/infringer’s profits only.”); Dkt. 1103 at 4 (“Should Oracle opt to reject the
remittitur and to proceed with a new trial on lost profits/infringer’s profits, any subsequent
appeal will present the Ninth Circuit with two verdicts to consider – one on hypothetical
damages, and one on lost profits/infringer’s profits.”); see also Dkt. 1088 at 2 (“the court held
that evidence provided by Oracle was not sufficient to support an award of hypothetical license
damages” under the clarified post-trial standard). Reconsideration is proper where the moving
party shows a “manifest failure by the Court to consider material facts or dispositive legal
arguments which were presented to the Court before such interlocutory order.” Civil L.R. 79(b). The facts and arguments before the Court on the post-trial motions showed that Oracle’s
trial evidence met the standard for sufficiency that had been established before and at trial, and
Oracle’s evidence cannot be precluded on retrial for failing to meet a different standard that had
not yet been stated.
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Soon after, the Court denied SAP’s motion to exclude Oracle’s expert Meyer’s testimony on
hypothetical license damages that was based on the same evidence Oracle had cited in its
Opposition to SAP’s first summary judgment motion – the contemporaneous expectations of the
parties as to the value of the infringed intellectual property. Dkt. 930; Dkt. 914 at 3 (Final
Pretrial Order).
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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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Consistent with those prior rulings, the Court instructed the jury that the

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“reduction in the fair market value of the copyrighted work is the amount a willing buyer would

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have been reasonably required to pay a willing seller at the time of the infringement” and that

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“amount also could be represented by the lost license fees that Oracle would have received for

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Defendants’ unauthorized use of Oracle’s works.” Dkt. 1005 at 7. The instructions did not tell

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the jury to focus on or prioritize any particular sort of evidence (such as benchmark licenses),

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instead explaining that “you should consider all the information known to and all the

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expectations of the parties on the dates of the hypothetical negotiations.” Id. at 9 (emphasis

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supplied). The jury was further instructed that the “value of a hypothetical license is not

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necessarily the amount the Defendants in this case would have agreed to pay, or that Oracle

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would have actually agreed to accept.” Id. at 9.

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B.

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Oracle’s Evidence at the November 2010 Trial and the Court’s Rulings on
that Evidence
In accord with those rulings and instructions, Oracle shaped its evidence to focus

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on “established valuation methodology,” and to address the contemporaneous “information
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known to and all the expectations of the parties.”3 Oracle submitted extensive “objective

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evidence” of the fair market value of the rights infringed, and its expert, Meyer, relied on this
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contemporaneous evidence as part of his determination of the license value using the Georgia18
Pacific framework. Meyer also relied on this contemporaneous evidence as inputs to his
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“income method” financial valuation, an established valuation methodology for any asset,
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including intellectual property licenses.
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At the close of Oracle’s case, SAP moved for judgment as a matter of law,
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arguing again that the hypothetical license remedy was unavailable because Oracle had not
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shown that the parties would have actually agreed to license the infringed copyrights.
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Declaration of Nitin Jindal In Support of Motion for Clarification (“Jindal Decl.”), ¶ 2, Ex. A
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Oracle also shaped its evidentiary presentation based on the limitation of the time allotted.
Oracle did not use its full allotted time only because SAP withdrew most of its witnesses,
mooting the cross-examination and rebuttal time Oracle had reserved after its case-in-chief.
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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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(Trial Tr.) at 2008:21-2010:24. The Court denied the motion, “consistent with [its] prior ruling.”

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Id. at 2011:1-2.

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C.

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September 1, 2011 Order Granting SAP’s Motion for Judgment as a Matter
of Law/New Trial
Post trial, SAP renewed its motions. In granting SAP’s motion in its

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September 1, 2011 order (“September 1 Order”), the Court held:
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At trial, Oracle presented no evidence, and did not argue, that it
was entitled to a hypothetical license fee because it lost an
opportunity to license the works to third parties for the same use as
was made by TN. Indeed, Oracle admitted that it had never given
any entity a license to copy Oracle’s application software and
support materials in order to create their own fixes, patches, or
updates for customers. Thus, Oracle could not reasonably claim
that SAP’s infringement diminished the licensing value of the
infringed works.

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Dkt. 1081 at 10 (emphasis supplied). The Court further held:

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Thus, to establish its entitlement to recover hypothetical license
damages, Oracle was required to show that, but for infringement,
the parties would have agreed to license the use of the
copyrighted works at issue. However, Oracle offered no evidence
of the type on which plaintiffs ordinarily rely to prove that they
would have entered into such a license, such as past licensing
history or a plaintiff’s previous licensing practices.

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Id. at 10-11 (emphasis supplied). The September 1 Order thus seemed to hold that, despite the

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January 28 Order’s formulation, Oracle could not recover under the hypothetical license measure

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of damages absent evidence of a willingness to license or lost licensing opportunities.

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Further, the September 1 Order appeared to add a new and additional requirement
to recover a hypothetical license measure of damages:

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An objective, non-speculative license price is established through
objective evidence of benchmark transactions, such as licenses
previously negotiated for comparable use of the infringed work,
and benchmark licenses for comparable uses of comparable works
. . . . Absent evidence of benchmarks, Oracle cannot recover a
lost license fee award, because any such award would be based
on a subjective, not an objective, analysis of fair market value.

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Dkt. 1081 at 11 (emphasis supplied).
D.

September 16, 2011 Order Denying Certification

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In its September 16, 2011 order denying Oracle’s motion for certification for

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interlocutory appeal (the “September 16 Order”), the Court made clear that the September 1
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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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Order had not held “as a matter of law . . . that copyright damages [under the hypothetical license

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theory] are available only if the copyright owner provides evidence of actual licenses it entered

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into or would have entered into for the infringed works, and/or actual ‘benchmark’ licenses.”

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Dkt. 1088 at 2. Specifying that, “under Ninth Circuit case law,” “providing evidence of licenses

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previously negotiated for comparable use of the infringed work, and benchmark licenses for

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comparable uses of comparable works” was merely “one way to establish an objective, non-

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speculative license price,” the Court clarified that the September 1 Order had held merely that

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the “evidence provided by Oracle was not sufficient to support an award of hypothetical license

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damages because it failed to provide objective evidence of what a willing buyer would have paid,

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and because it failed to provide evidence sufficient to allow the jury to assess fair market value

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without undue speculation.” Id. (emphasis supplied). Thus the September 16 Order appeared to

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invite the introduction of hypothetical license damages evidence in the new trial, so long as it

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was objective and non-speculative.

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III.

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THE COURT SHOULD CLARIFY THAT ORACLE MAY PRESENT EVIDENCE
ON HYPOTHETICAL LICENSE AT THE SECOND TRIAL
For the reasons stated below, Oracle respectfully requests the Court clarify that

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Oracle may present evidence relating to the hypothetical license measure of damages at the new
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trial.
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A.

Legal Standards for Clarification Motions
In the Ninth Circuit, a motion for clarification “invite[s] interpretation, which trial

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courts are often asked to supply, for the guidance of the parties.” Bordallo v. Reyes, 763 F.2d
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1098, 1102 (9th Cir. 1985). This Court has granted a motion for clarification where an “order
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could potentially create confusion as to the actual claims being dismissed” and where an order
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“did not directly address” an important issue. California v. Infineon Techns. AG, C 06-4333
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PJH, 2007 WL 3034372, *1, *2 (N.D. Cal. Oct. 16, 2007). Oracle seeks similar clarification
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with this motion: given the Court’s most recent post-trial order clarifying that hypothetical
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license damages are available if sufficient objective evidence supports them, may Oracle present
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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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such evidence on re-trial to meet the standard of sufficiency set forth in the Court’s post-trial

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orders?

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B.

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All Parties Agree that Calculating the Value of a Hypothetical License for the
Infringed Copyrights Is Possible
There is no dispute between the parties that it is possible to calculate some

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objective value for a hypothetical license for the Oracle copyrights that SAP has admitted
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infringing. At the first trial, SAP conceded both that such a license could be valued, and that it
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would be worth tens of millions of dollars. Jindal Decl., ¶ 2, Ex. A (Trial Tr.) at 1538:24-1539:4
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(“[A]nother way to [calculate damages in this case] is to look at this reasonable royalty
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calculation. And you heard at length from Mr. Meyer on this issue. I’m going to deal with it
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too. We come to completely different numbers, as you can see. But this is an alternative [to lost
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and infringer’s profits].”); see also id. at 1633:5-8 (SAP’s expert conceded, “you could look at
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the reasonable royalty . . . it’s $40.6 million.”).
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C.

Oracle Should Be Allowed to Present Evidence in Support of the
Hypothetical License Remedy
Fairness dictates that Oracle have the opportunity at the new trial to present

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additional evidence to meet the Court’s post-trial articulation of the evidentiary standard for

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hypothetical license damages, and that Oracle should not be precluded from doing so merely

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because it adhered to the broader evidentiary standard for such damages set forth by the Court

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prior to and during the first trial. It would be wasteful to require a third trial if the Court’s post-

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trial standard were held correct but the evidence necessary to meet it excluded from trial. See,

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e.g., Johns Hopkins Univ. v. Cellpro, Ink., 152 F.3d 1342, 1356-57 (Fed. Cir. 1998) (reversing

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district court’s post-trial legal ruling that barred defendant from offering evidence in retrial it had

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chosen not to enter in the first trial, because post-trial ruling had “changed the rules of the

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game;” defendant could not be held to decisions it made in the first trial when the legal backdrop

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was different); cf. Total Containment, Inc. v. Dayco Prods., Inc., 177 F. Supp. 2d 332, 339-340,

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342 (E.D. Pa. 2001) (permitting party to introduce new evidence at retrial to “refine its prior

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presentation and attempt to prove” a damages theory that it had presented at the first trial, but for

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which the trial court had held that it did not meet its burden).
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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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Permitting Oracle to pursue hypothetical license-based damages at retrial is also

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particularly important given the narrow time limits of the first trial, which necessarily forced

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Oracle to limit its evidentiary presentation. It would be fundamentally unfair to limit a party’s

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time to present evidence, criticize the eventual presentation as insufficient under an adjusted

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standard, and then not allow an opportunity to make a second attempt.

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Oracle therefore respectfully asks the Court to permit evidence on hypothetical

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license damages and not prevent Oracle from attempting to meet the standard articulated by the

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September 1 and 16 Orders.

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D.

Oracle Will Reintroduce Evidence at the New Trial Supporting an Objective
Measure of Fair Value
There is no dispute that measuring the hypothetical license measure of damages

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“is an objective, not subjective analysis.” Jarvis v. K2 Inc., 486 F.3d 526, 533-34 (9th Cir.
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2007). “Objective” refers to the market value of the license, as opposed to the copyright holder’s
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subjective valuation or belief. Id.; see also Mackie v. Rieser, 296 F.3d 909, 917 (9th Cir. 2002);
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On Davis, 246 F.3d at 166. As described in Oracle’s Opposition to SAP’s Motion for a New
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Trial, Dkt. 1057, Oracle offered extensive “objective evidence” of the fair market value of the
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rights infringed under a hypothetical license theory, including: (a) the number of
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PeopleSoft/JDE and Siebel customers that SAP expected to switch to SAP software as a result of
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SAP’s infringement, as indicated by contemporaneous SAP business documents prepared with
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the input and guidance of SAP’s most senior executives and used by SAP to develop and guide
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its high-level business strategies; (b) the value to Oracle of each such customer, as indicated by
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Oracle’s contemporaneous arms-length acquisitions of PeopleSoft/JDE and Siebel, as well as
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Oracle’s contemporaneous financial projections used to value those acquisitions; (c) the value to
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SAP of each such customer, as expressed by SAP’s contemporaneous business projections; (d)
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the total revenues that SAP expected to earn from the customers it converted using
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TomorrowNow in the first three years alone; and (e) SAP’s contemporaneous descriptions of the
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significant business advantages it would obtain, and business obstacles it would create for
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Oracle, as a result of using TomorrowNow in the marketplace.
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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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Should the Court permit Oracle to present evidence in support of the hypothetical

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license measure of damages at the new trial, Oracle would submit all of this objective evidence

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to measure the value of SAP’s infringing use, consistent with Ninth Circuit authority and the

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Georgia-Pacific test.4 As a measure of actual damages, the hypothetical license values the use of

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the infringed material: the value of what was taken. See Frank Music, 772 F.2d at 513 n.6. As

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the Court acknowledged in its September 16 Order, a copyright holder may suffer “actual

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damage” by being deprived of this value, even if it has exercised its right not to license the

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copyrighted work to the defendant (or to anyone). See, e.g., Stewart v. Abend, 495 U.S. 207,

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228-29 (1990) (“this Court has held that a copyright owner has the capacity arbitrarily to refuse

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to license one who seeks to exploit the work.”).

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The parties’ contemporaneous projections of defendants’ anticipated gains or

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plaintiffs’ anticipated losses are the ideal kind of objective evidence from which to value a

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license for defendants’ infringing use of plaintiffs’ intellectual property, as several courts have

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found. See, e.g., Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116,

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1130-31 (S.D.N.Y. 1970) (relying on defendant’s profit expectations); Interactive Pictures Corp.

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v. Infinite Pictures, Inc., 274 F.3d 1371, 1384-85 (Fed. Cir. 2001) (by relying on defendant’s

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contemporaneous business plan to establish a range of anticipated sales for the infringing

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products, plaintiff appropriately analyzed defendant’s position at the time of the hypothetical

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negotiation); Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1270-72 (Fed. Cir. 2010)

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(affirming jury’s award of damages based on evidence “reflect[ing] [] the profits [defendants]

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might have anticipated” in disregard of evidence of a prior license between plaintiff and a third

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party, due to differences between the plaintiff’s prior licensing scenario and a “hypothetical

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negotiation with [d]efendants”); Snellman v. Ricoh Co., 862 F.2d 283, 289 (Fed. Cir. 1988)

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(affirming jury’s consideration of internal “document projecting [defendant’s] anticipated sale”

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of infringing products in support of hypothetical-license damages); TWM Mfg. Co., Inc. v. Dura

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4

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While Oracle believes that the original trial was carried out in accordance with the law and with
sufficient evidence, it understands that the Court has held otherwise. The evidence Oracle
proposes to present at the new trial will be tailored to the Court’s holding.
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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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Corp., 789 F.2d 895, 900 (Fed. Cir. 1986) (affirming hypothetical-license damages based on

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“pre-infringement internal memorandum” on defendant’s anticipated profits); see also Hanson v.

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Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1081 (Fed. Cir. 1983) (reasonableness of

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negotiations “is to be determined not on the basis of a hindsight evaluation of what actually

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happened, but on the basis of what the parties to the hypothetical license negotiations would have

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considered at the time of the negotiations”).

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Valuing a license based on the parties’ contemporaneous projections is also

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consistent with the “income method,” an established financial valuation methodology that is

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commonly used by experts to value intangible assets, and that Meyer used here. Inline

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Connection Corp. v. AOL Time Warner, Inc., 470 F. Supp. 2d 424, 432 (D. Del. 2007)

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(describing the Income Approach, the Market Approach, and Cost Approach as “commonly used

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by experts to value intangible assets”); Putnam v. Henkel Consumer Adhesives, Incs., No. 1:05-

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CV-2011-BBM, 2007 WL 4794115 at *6-7 (N.D. Ga. Oct. 29, 2007) (“[T]he income approach

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. . . is also commonly used by experts to value intangible assets. . . . Under the income approach,

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the asset is valued by assessing the benefits derived from the use of the asset.”); Dkt. 847 (Jindal

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Decl.), Ex. O (SMITH AND PARR) at 148, 150, 155. Consistent with Ninth Circuit authority

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and Georgia-Pacific, the “income method” measures “the price a virtual buyer would be willing

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to pay for the anticipated returns from the” license based on the “economic benefit that can

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reasonably be expected from the exploitation of the” license. Id. at 150, 185. SAP’s expert even

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stated, “I accept that it is appropriate to value intellectual property using the market, income and

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cost approaches . . . .” Dkt. 925, Ex. G (Expert Report of Stephen K. Clarke) at 24.

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The Court itself held at the first trial that the parties’ contemporaneous projections

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and expectations are relevant objective evidence that can support a hypothetical license measure

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of damages. In discussing the relevance of SAP’s contemporaneous projection that it would earn

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$897 million in just three years from its infringing use of Oracle’s copyrighted software − the

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projection that was based on “extensive guidance” from SAP’s Executive Board − the Court

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stated that:

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9
ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

1

It certainly seems to me to be pertinent to the question of fair
market value. I mean, that’s an objective standard, and I -- this
seems to me to be perfectly relevant to that.

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***

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I do think the exhibit needs to be admitted into evidence.
Jindal Decl., ¶2, Ex. A (Trial Tr.) at 510:11-511:1.
The contemporaneous valuation of an asset, and the action on that valuation by

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executing a transaction, is objective evidence of the value of that asset and what a “willing

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seller” and “willing buyer” would exchange for it. The Court’s ruling regarding the relevance of

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SAP’s projection made sense, because SAP’s Executive Board – by virtue of their position, some

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of the most sophisticated and qualified people to place a value on the use of ERP software –

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projected the value SAP could gain from its infringing use and acted on that valuation by

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purchasing TomorrowNow. Likewise, Oracle valued its ability to use the copyrighted software,

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and then acted on that valuation, when it spent $11.1 billion and $6 billion to purchase

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PeopleSoft and Siebel. There could be no better objective evidence of value than what these

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highly sophisticated parties actually calculated at the time. Evidence of the parties’

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contemporaneous projections or expectations is therefore relevant objective evidence of the

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value of SAP’s infringing use of Oracle’s software, and so Oracle’s new trial evidence

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previously submitted in support of a hypothetical license measure of damages will comply with

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settled law and meet the September 16 Order’s requirements.

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IV.

THE COURT HAS DISCRETION TO PERMIT ORACLE TO PRESENT
ADDITIONAL EVIDENCE AT THE NEW TRIAL

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In addition, Oracle stands ready to provide additional objective evidence relating
to the market value of the infringed software. The Court has discretion to allow additional
evidence, and should.

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A.

Fairness Dictates that the Court Exercise Its Discretion to Allow Oracle To
Present New Evidence

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The Court has broad discretion in determining the relevance and admissibility of

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new evidence in a new trial/retrial. See, e.g., F.B.T. Productions, LLC v. Aftermath Records, No.

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CV 07-3314 PSG, 2011 WL 5174766 at *6 (C.D. Cal. Oct. 31, 2011) (noting a new trial
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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

1

proceeds de novo, under the broad discretion of a district court judge to supervise trials). The

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“Court must be guided by considerations of fairness to the parties . . . and avoid undue prejudice

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to either party.” Total Containment, Inc. v. Dayco Prods., Inc., 117 F. Supp. 2d 332, 338 (E.D.

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Pa. 2001).

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Oracle would be severely prejudiced by not being able to submit new and

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additional evidence during the new trial. The Court has ruled that Oracle’s prior evidence was

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insufficient; although Oracle disagrees, if Oracle is allowed to present the hypothetical license

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theory to the jury at the new trial but cannot add to that evidence, then it will be hampered in

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meeting the newly articulated standard for sufficient objective evidence. It would be manifestly

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unfair to deny Oracle the opportunity to cure that alleged defect. See pp. 11-12, above; see also,

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e.g., S. Union Co. v. Irvin, 563 F.3d 788, 793 n.4 (9th Cir. 2008) (granting a party the option of

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relitigating the case rather than accepting a remittitur because of the “possibility that additional

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evidence might be submitted at a new trial”); Pincus v. Pabst Brewing Co., 752 F. Supp. 871,

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875-76 (E.D. Wis. 1990) (finding that it would be “illogical” and make “little sense” for a

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“court’s rulings on the sufficiency of the evidence [to] constrict[] the admission of evidence at a

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new trial”); see also Total Containment, 177 F. Supp. 2d at 339 (allowing additional limited

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discovery and holding that it would be “unfair” to prevent a party from “expanding [at a retrial]

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upon evidence which it previously introduced” but was held to be insufficient).

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By contrast, SAP would suffer no undue prejudice from allowing Oracle to

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proceed with evidence from the existing discovery record not previously presented at trial. The

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parties are familiar with the available evidence. F.B.T., 2011 WL 5174766 at *6. Accordingly,

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Oracle should be given the chance to present additional evidence to meet the September 16

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Order’s adjusted standard of sufficient evidence.

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B.

Oracle Has Additional Objective Hypothetical License Evidence Based on
the Current Discovery Record
Oracle is prepared to provide the following additional evidence at retrial in

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support of a hypothetical license measure of damages. Beyond providing an additional quantum
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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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of evidence, this evidence will help show that the evidence that Oracle will reintroduce, as

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described above, establishes an objective measure of hypothetical license damages.

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Additional evidence of relevant Oracle licenses and willingness to license.

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Oracle will, if permitted, submit additional evidence relating to the Oracle/SAP database reseller

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agreement. This intellectual property license is probative of a hypothetical license between

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Oracle and SAP for the infringed materials. The reseller agreement is between the same parties

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and relates to Oracle’s crown-jewel software – here, Oracle’s Database software. This license

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was referred to in passing at the first trial, but its relevance and bearing on the hypothetical

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license at issue will be expanded, as it shows the parties would in fact be willing to license the

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software at issue, albeit only at the right price.

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While this license is not fully comparable to one the jury would be instructed to

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value, it is directly relevant to the parties’ willingness to license. As such, it addresses the

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Court’s expressed concerns about the gaps in Oracle’s prior evidence.

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Similarly, current and former Oracle executives, including Mr. Ellison, Ms. Catz,

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and Mr. Phillips, will testify, consistent with their prior testimony (and with their declarations

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submitted in support of Oracle’s opposition to SAP’s motion for summary judgment, Dkt. 539 &

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485) but more explicitly on this point, that while they may have been disinclined to license the

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software at issue to their main competitor, they would certainly have done so (as with any

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business transaction) for the right price.5

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Additional evidence of the parties’ expectations at the time of infringement.

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Oracle will provide additional evidence of Oracle’s and SAP’s executives’ expectations of the

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value of the infringed copyrights as of the time of infringement.6

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5

While the Court noted that Oracle’s executives testified that such a license would have been
“unique” and “unprecedented,” Dkt. 1081 (September 1 Order granting SAP’s motion for
judgment as a matter of law) at 11, the executives also testified that they would have taken this
unprecedented step, for the right price. See, e.g., Jindal Decl., ¶ 2, Ex. A (Trial Tr.) at 764:9765:10; 765:24-766:14; 802:3-9; 865:16-867:4.
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Oracle did not provide this evidence at the prior trial because it believed its presentation was
sufficient and because of the time constraints imposed by the Court and the need to reserve time
for cross and rebuttal. See, pp. 5-6, above.
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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

1

First, Oracle will provide live or deposition testimony from the involved SAP AG

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Board members, as well as from Mr. Hurst, Mr. Crean, Mr. Faye, Mr. Trainor, Mr. Shenkman,

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Mr. Mackey, and Mr. Word (not all of whom testified at the last trial). Previously, Oracle

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limited its questions to those SAP executives that SAP called. Given the September 16 Order’s

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adjusted standard, with live witnesses Oracle will now more fully explore SAP’s expectations for

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the Safe Passage program and TomorrowNow. For example, to explore SAP’s expectations,

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Oracle will ask SAP executives what they, as a willing licensee, would have been willing to pay

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to license Oracle Database, and explore the evidence showing that SAP personnel generated

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price quotes for just such a Database license for TomorrowNow’s use.

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Second, Oracle will more fully explore the value SAP itself places on copyrighted

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enterprise software and the associated revenue streams, to further support Meyer’s damages

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methodology.

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Third, Oracle will present evidence of its projections related to its expected sales

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of additional software licenses to the PeopleSoft and Siebel customer bases, a key and objective

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set of evidence related to the value of the copyrighted works that other courts permit to evaluate

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fair market value. See, e.g., Interactive Pictures, 274 F.3d at 1385; Snellman, 862 F.2d at 289-

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90. Oracle believes this evidence was incorrectly excluded at the last trial. Accordingly, Oracle

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seeks reconsideration of that ruling in a concurrently filed motion.

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Fourth, Oracle will submit expert and non-expert evidence of SAP’s saved

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development costs. The cost that SAP would have incurred to develop the infringed materials is

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objective evidence that is logically and legally relevant to the parties’ contemporaneous

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bargaining positions in a hypothetical negotiation. Accordingly, Oracle’s damages expert will

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rely on that analysis through the cost approach, an established valuation methodology, as a

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reasonableness check on his calculations. To be clear, Oracle does not intend to seek to recover

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SAP’s saved development costs themselves as an independent measure of damages, but to show

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that the cost to independently develop the software is relevant to the value of that software.

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Because Oracle believes this evidence of saved development costs was incorrectly excluded at

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the last trial, Oracle also seeks reconsideration of that ruling in a concurrently filed motion.
13
ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

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Fifth, Oracle will supplement its executive witness testimony with testimony from

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Mr. Kehring and Mr. Rozwat regarding Oracle’s contemporaneous expectations. These

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individuals will discuss the objectivity and underlying basis for Oracle’s contemporaneous

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projections, Oracle’s support line of business, and Oracle’s research and development efforts,

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respectively. Each of those subjects is a relevant and proper basis for Meyer’s damages

6

calculations.

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Oracle will also place added emphasis on the previously admitted evidence

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relevant to the September 16 Order’s standard of “objective” evidence. For example, Oracle will

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present to the jury more detail surrounding the extensive due diligence and investigations that

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both parties invested in creating their projections of the value of the software at issue. As several

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courts have held, this evidence is “objective” evidence, relevant to the hypothetical negotiation

12

and the fair market value of the infringed works. See, e.g., Interactive Pictures Corp, 274 F.3d

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1371.; Finjan, 626 F.3d at 1270-72; Snellman, 862 F.2d at 289.; TWM Mfg., 789 F.2d at 900.

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While much of this evidence was admitted into the record previously, at retrial, Oracle will

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specifically present and explain this objective evidence to the jury and the Court.

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This list is not exhaustive. If the Court permits Oracle to proceed with the

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hypothetical license measure of damages, Oracle should be permitted to submit all new and

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expanded evidence in support of that remedy that meets the newly articulated requirements of

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this Court’s September 16 Order. If the Court denies Oracle’s request and bases that denial on

20

its post-trial orders, then Oracle requests leave to move for reconsideration of those orders. See

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fn. 1, above.

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V.

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CONCLUSION
For the reasons stated above, the Court should clarify that Oracle is permitted to

present the hypothetical license theory of damages at the new trial.

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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)

1
DATED: April 17, 2012

Bingham McCutchen LLP

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By:

/s/ Geoffrey M. Howard
Geoffrey M. Howard
Attorneys for Plaintiff Oracle International
Corporation

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ORACLE’S MOTION FOR CLARIFICATION
CASE NO. 07-CV-01658 PJH (EDL)