Oracle Corporation et al v. SAP AG et al

Filing 1122

MOTION for Leave to File Motion for Reconsideration Regarding Saved Development Costs filed by Oracle International Corporation. (Attachments: # 1 Proposed Order Granting Oracle's Motion for Leave to File Motion for Reconsideration Regarding Saved Development Costs)(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]

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Attorneys for Plaintiff Oracle International Corp.

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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
OAKLAND DIVISION

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ORACLE USA, INC., et al.,

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Plaintiffs,
v.
SAP AG, et al.,
Defendants.

No. 07-CV-01658 PJH (EDL)
ORACLE’S MOTION FOR LEAVE TO
FILE MOTION FOR RECONSIDERATION
REGARDING SAVED DEVELOPMENT
COSTS
Date: May 23, 2012
Time: 9:00 a.m.
Place: 3rd Floor, Courtroom 3
Judge: Hon. Phyllis J. Hamilton

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ORACLE’S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION RE SAVED DEVELOPMENT COSTS
CASE NO. 07-CV-01658 PJH (EDL)

TABLE OF CONTENTS

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Page

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I.
II.
III.

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IV.

INTRODUCTION ............................................................................................................. 1
BACKGROUND ............................................................................................................... 1
THE COURT SHOULD GRANT LEAVE FOR ORACLE TO FILE A MOTION
FOR RECONSIDERATION ............................................................................................. 3
A.
Legal Standard for Leave to File a Motion for Reconsideration ........................... 3
B.
The Court Should Reconsider Its Ruling Excluding Evidence of SAP’s
Saved Development Costs for All Purposes .......................................................... 4
1.
The Court Failed to Consider Pinto’s Actual Opinion............................... 4
2.
The Court Repeated This Error When it Extended its Summary
Judgment Ruling to Exclude Pinto for All Purposes ................................. 4
CONCLUSION .................................................................................................................. 5

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ORACLE’S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION RE SAVED DEVELOPMENT COSTS
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TABLE OF AUTHORITIES

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Page

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FEDERAL CASES

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Deltak, Inc. v. Advanced Sys., Inc.,
767 F.2d 357 (7th Cir. 1985)................................................................................................. 5

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Jones v. Union Pac. R.R. Co.,
968 F.2d 937 (9th Cir. 1992)................................................................................................. 4
Mars, Inc. v. Coin Acceptors, Inc.,
527 F.3d 1359 (Fed. Cir. 2008), modified on other grounds by 557 F.3d 1377 (Fed.
Cir. 2009) .............................................................................................................................. 5
LOCAL RULES
Civil L.R. 7-9 ...................................................................................................................... 1, 3, 4

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ORACLE’S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION RE SAVED DEVELOPMENT COSTS
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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 bring a motion for leave to file a motion for

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reconsideration of the Court’s ruling excluding evidence of saved development costs, pursuant to

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Civil L.R. 7-9. This motion is based upon this Notice of Motion and Motion, the accompanying

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Memorandum of Points and Authorities, and all attached evidence.

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REQUESTED RELIEF

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Oracle hereby requests leave to file a motion for reconsideration of the Court’s

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September 30, 2010 ruling that excluded evidence of SAP’s saved development costs for all

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purposes.

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MEMORANDUM OF POINTS AND AUTHORITIES
I.

INTRODUCTION

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The Court should grant Oracle leave to file a motion seeking reconsideration of

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the Court’s September 30, 2010 ruling precluding Oracle from introducing evidence of SAP’s

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saved development costs in support of the hypothetical license value. The Court’s ruling

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excluding evidence of SAP’s saved development costs for all purposes rested on, and

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compounded the prejudice from, a material misunderstanding of the nature of that evidence

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reflected in the Court’s prior summary judgment order. The exclusion of that evidence from trial

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in support of the fair market value of the hypothetical license was incorrect and manifestly

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unfair.

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II.

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BACKGROUND
On November 16, 2009, Oracle served the expert report of Paul Pinto. Pinto

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computed what SAP would have spent to develop certain of the infringed PeopleSoft, JD

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Edwards, and Siebel software programs independently. See generally Dkt. 775, Ex. 2 (“Pinto

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Report”). Pinto opined, using two industry-standard methodologies, “that [SAP] would have

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incurred costs in the range of $1,134M to $3,477M (depending on the selected staffing model) to
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independently develop each of the most current version of JD Edwards EnterpriseOne, JD

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Edwards World, PeopleSoft, and Siebel applications.” Id. at 2.

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Oracle also served the expert report of Paul Meyer. Meyer relied on Pinto in two

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ways. First, he used Pinto’s analysis to calculate a separate disgorgement, or unjust enrichment,

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damages figure. Second, Meyer relied on Pinto’s numbers as part of his “cost approach” - one of

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three methods Meyer used to determine SAP’s value of use of the infringed materials. Dkt. 925

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(10/04/10 Refiled Jindal Decl. ISO Mot. to Exclude Meyer), ¶ 3, Ex. A (Meyer Report) at ¶ 142-

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3. As Meyer explained in his report, this “cost approach” provided a valuable reasonableness

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check of the other two methods he used to perform the fair market value calculation of actual

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damages. Id.

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Pinto’s analysis, and Meyer’s methods of reliance on it, is not in dispute. In its

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March 3, 2010 Motion for Summary Judgment, SAP agreed that Meyer relied “on Pinto’s

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analysis to ‘calculate’ disgorgement under an unjust enrichment theory . . . as well as to calculate

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actual damages for copyright infringement under a fair market value license theory.” Dkt. 813 at

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17. SAP also conceded that Pinto had estimated “what it would have cost [SAP] to

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independently develop” the software SAP admittedly infringed. Id. SAP argued, however, that

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“‘saved development costs’ are, as a matter of law, an impermissible measure of damages in this

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case.” Id.

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The Court granted SAP’s motion, but it did so based on a fundamental

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misunderstanding of Pinto’s opinion. The Court based its summary judgment ruling, in part, on

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its finding that “plaintiffs’ calculations [are] highly speculative, as they are based on the amounts

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that Oracle allegedly spent to develop and/or acquire the intellectual property at issue, not on

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what it would have cost SAP for research and development.” Dkt. 762 at 23, n.5 (emphasis

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supplied). That was simply incorrect; even SAP conceded Pinto had calculated SAP’s saved

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development costs.

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Based on this misunderstanding of Pinto’s opinion, the Court held that “Plaintiffs

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cannot recover ‘saved development costs’ for alleged unjust enrichment,” and that “in the

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absence of Ninth Circuit authority for awarding research and development costs to plaintiffs as
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actual damages for infringement, this court declines to permit plaintiffs to seek such damages.”

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Id. at 18-23. Accordingly, the Court’s ruling excluded saved development costs as recoverable

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damages. Oracle does not seek reconsideration of whether evidence of SAP’s saved

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development costs can support a separate measure of damages. The Court did not, however,

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hold that Pinto’s saved development cost evidence was irrelevant or impermissible evidence as a

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reasonableness check on Meyer’s measure of the hypothetical license valuation.

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Pre-trial, SAP moved to exclude Pinto entirely. In its opposition to SAP’s

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motion, Oracle pointed out that “[t]he MSJ Order does not preclude Pinto’s opinions . . . [and

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they] are still relevant considerations in determining the fair market value of the hypothetical

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license.”). Dkt. 843 at 14. At the close of the September 30, 2010 pre-trial conference, the Court

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gave each party “one minute . . . to say something” about the parties’ Daubert motions.

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Declaration of Kyle Zipes in Support of Motion for Leave to File Motion for Reconsideration

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(“Zipes Decl.”), ¶ 2, Ex. A (9/30/10 Hrg.) at 121:11-12. SAP argued that the Court’s “ruling on

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summary judgment eliminating saved acquisition costs should render Mr. Pinto . . . moot because

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[his opinion] only address[es] that saved acquisition costs remedy.” Id. at 121:16-19.

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The Court “totally agree[d]” with SAP. Id. at 122:8-10. The Court thus granted

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SAP’s motion and extended its prior ruling, holding “there will be no testimony from an expert

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on saved acquisition costs. That’s out of the case.” Id.; see also Dkt. 914 (09/30/10 Final

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Pretrial Order) at 3:28-29 (“[N]o witness may testify regarding saved acquisition costs.”).

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Accordingly, Oracle did not present any such testimony at trial.

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III.

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THE COURT SHOULD GRANT LEAVE FOR ORACLE TO FILE
A MOTION FOR RECONSIDERATION
A.
Legal Standard for Leave to File a Motion for Reconsideration
Pursuant to Civil Local Rule 7-9, “[b]efore the entry of a judgment adjudicating

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all of the claims and the rights and liabilities of all the parties in a case, any party may make a

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motion before a Judge requesting that the Judge grant the party leave to file a motion for

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reconsideration of any interlocutory order made by that Judge.” Before noticing a motion for

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reconsideration, the party must “obtain[] leave of Court to file the motion” pursuant to Civ. L.R.

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7-9 and 7-9(b). Reconsideration is proper where the moving party shows a “manifest failure by
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the Court to consider material facts or dispositive legal arguments which were presented to the

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Court before such interlocutory order.” Civil L.R. 7-9(b).

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B.

The Court Should Reconsider Its Ruling Excluding Evidence of
SAP’s Saved Development Costs for All Purposes
Oracle respectfully submits that, for the new trial, the Court should grant leave for

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Oracle to file a motion for the Court to reconsider its prior decision to preclude Oracle’s expert

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witnesses from testifying “regarding saved acquisition costs.” Oracle submits that evidence of

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SAP’s saved development costs – the opinion Pinto gave and Meyer relied on – is relevant and

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admissible for the limited purpose of providing the jury with a reasonableness check on Meyer’s

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measure of the hypothetical license valuation. In its prior ruling, the Court manifestly failed to

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consider a material fact before the Court prior to its ruling, namely the fundamental nature of

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Pinto’s opinion that the Court excluded.

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1.

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The Court’s summary judgment order was based on the misapprehension that

The Court Failed to Consider Pinto’s Actual Opinion

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Pinto measured Oracle’s development costs. Dkt. 762 at 23, n.5. Even SAP agreed that Pinto

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“purports to estimate ‘what it would have cost [SAP] to independently develop the underlying

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software applications.’” Dkt. 813 (03/03/10 Defs’ MSJ) at 17:12-14 (emphasis supplied).

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Therefore, the Court’s conclusion that “plaintiffs have provided no evidence of what SAP would

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have spent” was factually incorrect, as it relied on the mistaken premise that Pinto assessed

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Oracle’s development costs, not SAP’s. Dkt. 762 at 23, n.5.

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2.

The Court Repeated this Error When It Extended Its
Summary Judgment Ruling to Exclude Pinto for All Purposes

Pre-trial, the Court “totally agree[d]” with SAP’s argument that the summary

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judgment ruling had rendered Pinto’s testimony “moot,” and ruled it “out of the case” entirely.

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Part II, above. The Court’s September 30, 2010 ruling thus extended and compounded the error

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underlying the summary judgment ruling by failing again to consider Pinto’s actual opinion.

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See, e.g., Jones v. Union Pac. R.R. Co., 968 F.2d 937, 941-42 (9th Cir. 1992).

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After the summary judgment ruling, Oracle still intended to submit evidence of
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SAP’s saved development costs as objective evidence relevant to the hypothetical license

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remedy. Specifically, Meyer intended to rely on Pinto’s opinion of SAP’s saved development

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costs as a “reasonableness check on the valuations derived from [Meyer’s] other approaches” but

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not as a separate damages measure. Dkt. 925 (10/04/10 Refiled Jindal Decl. ISO Opp. to Mot. to

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Exclude Meyer), ¶ 3, Ex. A (Meyer Report) at ¶ 143. The law supports this approach: in

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deciding how much it would be willing to pay for a license, the buying party in a hypothetical

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license negotiation would consider the cost of alternatives to buy or develop the licensed

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product. See, e.g., Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359, 1372-73 (Fed. Cir. 2008),

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modified on other grounds by 557 F.3d 1377 (Fed. Cir. 2009); Deltak, Inc. v. Advanced Sys.,

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Inc., 767 F.2d 357, 360-62 & n.3 (7th Cir. 1985); see also Dkt. 679 (03/31/10 House Decl. ISO

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MSJ Opp.), ¶ 32, Ex. 6 (Gordon V. Smith & Russell L. Parr, Intellectual Property, Valuation,

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Exploitation, and Infringement Damages (2005 ed.)) at 526 (among the questions “at the heart of

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technology transfers” is: “How long would it take to invent around this technology?”).

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Accordingly, Pinto’s opinion of what SAP would have had to pay to develop the infringed

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software was relevant, and Meyer was entitled to rely on it.

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The Court’s order excluding that testimony severely prejudiced Oracle. The order

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not only deprived Oracle of one source of objective evidence supporting hypothetical license

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damages, it also prejudiced Oracle by preventing it from countering SAP’s repeated attacks on

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Meyer’s opinion for lacking exactly such a “reality check.” See Zipes Decl., ¶ 3, Ex. B (Trial

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Tr.) at 2167:11-15 (“Don’t trust somebody who doesn’t believe in reality checks.”); id. at

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2135:10-11 (Meyer failed to “use reality to provide insight into what [Oracle and SAP] really

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would have been thinking at the time” of a hypothetical negotiation.); id. at 2138:7-8 (“[Meyer]

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is way, way too high. If only he had done a reality check.”).

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IV.

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CONCLUSION
Because the Court precluded Meyer’s reliance on Pinto based on a fundamental

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misunderstanding of Pinto’s testimony, the Court should allow Oracle to file a motion to

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reconsider whether SAP’s saved development costs are “out of the case” for the limited purpose

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of supporting Meyer’s cost approach.
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CASE NO. 07-CV-01658 PJH (EDL)

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DATED: April 17, 2011

Bingham McCutchen LLP

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By:

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

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