Oracle Corporation et al v. SAP AG et al

Filing 1144

TRIAL BRIEF by Oracle International Corporation. (Howard, Geoffrey) (Filed on 4/26/2012)

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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

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NORTHERN DISTRICT OF CALIFORNIA
OAKLAND DIVISION

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ORACLE USA, INC., et al.,
Plaintiffs,

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SAP AG, et al.,

PLAINTIFF’S TRIAL BRIEF

v.

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Case No. 07-CV-01658 PJH (EDL)

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Defendants.

Date:
Time:
Place:
Judge:

June 18, 2012
8:30 a.m.
3rd Floor, Courtroom 3
Hon. Phyllis J. Hamilton

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Case No. 07-CV-01658 PJH (EDL)

PLAINTIFF’S TRIAL BRIEF

TABLE OF CONTENTS

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Page

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I.
II.

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III.
IV.
V.

SUMMARY OF CASE...................................................................................................... 1
PLAINTIFF’S DAMAGES ............................................................................................... 2
A.
Infringers’ Profits ................................................................................................... 3
1.
Oracle Has Identified The Gross Revenue Associated With The
Infringement............................................................................................... 3
2.
Deductions For Defendants’ Expenses Are Not Permitted........................ 6
3.
The Court’s Previous Judgment Cannot Cap Oracle’s Recovery .............. 7
B.
Lost Profits ............................................................................................................. 8
C.
Hypothetical License............................................................................................ 10
DEFENDANTS’ AFFIRMATIVE DEFENSES ............................................................. 12
TIME OF TRIAL ............................................................................................................. 12
CONCLUSION ................................................................................................................ 13

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TABLE OF AUTHORITIES

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Page(s)

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CASES

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Data Gen. Corp. v. Grumman Sys. Support Corp.,
36 F.3d 1147 (1st Cir. 1994) ..................................................................................................... 8

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6
7
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10
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12
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Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc.,
772 F.2d 505 (9th Cir. 1985)............................................................................................... 7, 11
Georgia-Pacific Corp. v. United States Plywood Corp.,
318 F. Supp. 1116 (S.D.N.Y. 1970)........................................................................................ 11
Harper & Row Publishers, Inc. v. The Nation Enters.,
471 U.S. 539 (1985) .................................................................................................................. 8
Interactive Pictures Corp. v. Infinite Pictures, Inc.,
274 F.3d 1371 (Fed. Cir. 2001)............................................................................................... 11
Jarvis v K2, Inc.,
486 F.3d 526 (9th Cir. 2007)................................................................................................... 11
On Davis v. The Gap Inc.,
246 F.3d 152 (2d Cir. 2001).................................................................................................... 11

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Polar Bear Prods., Inc. v. Timex Corp.,
384 F.3d 700 (9th Cir. 2004)........................................................................................... 3, 8, 11
Stevens Linen Assocs., Inc. v. Mastercraft Corp.,
656 F.2d 11 (2d Cir. 1981)........................................................................................................ 8
Sunset Lamp Corp. v. Alsy Corp.,
749 F. Supp. 520 (S.D.N.Y. 1990)............................................................................................ 9

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STATUTES
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17 U.S.C. § 504(b) .................................................................................................................. 2, 3, 8
17 U.S.C. § 506(a)(1)(A) ................................................................................................................ 1

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18 U.S.C. § 1030(a)(4).................................................................................................................... 1

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18 U.S.C. § 2319(b)(1).................................................................................................................... 1

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I.

SUMMARY OF CASE
As the Court knows, on October 29, 2010, SAP AG and its wholly owned subsidiary,

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SAP America, admitted that they “knew or had reason to know of the infringing activity of

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TomorrowNow” and “intentionally and materially contributed to TomorrowNow’s infringing

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activity.” These admissions, and the associated ones from SAP subsidiary TomorrowNow

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(“TN”), became Orders of the Court, exhibits at trial, and were included in the juror notebooks.1

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Almost a year after trial, on September 14, 2011, SAP America Chief Operating Officer

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Mark White pled guilty on behalf of TN to multiple criminal charges.2 These included criminal

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copyright infringement in violation of 17 U.S.C. § 506(a)(1)(A) and 18 U.S.C. § 2319(b)(1) and

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unauthorized access to a protected computer in violation of 18 U.S.C. § 1030(a)(4).3 White

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admitted that TN “knowingly accessed Oracle’s computer servers . . . without authorization, or in

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excess of authorized access, that it did so with the intent to defraud, and that by such conduct, it

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furthered the intended fraud and obtained things of value, which included Oracle software and

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related documentation.”4 TN pled guilty that it “willfully infringed” Oracle’s copyrights “for the

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purpose of commercial advantage and private financial gain.”5 By virtue of their liability

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stipulations, SAP AG and its wholly-owned subsidiary, SAP America, both admit they

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“intentionally and materially contributed” to that willful infringement.6 As established at the

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first trial, this knowledge and contribution came from the very highest levels of SAP AG – its

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Executive Board of Directors. For this trial, SAP has refused to bring as witnesses any of its

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non-U.S. directors, leaving only co-CEO Bill McDermott as a Board-level witness.

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1

See generally Dkt. Nos. 910-912, 965-966 (JTX0001 to JTX0005).
2
See also Plea Agreement, USA v. TomorrowNow, Inc., No. 4:11-cr-642 (N.D. Cal. Sept. 14,
2011), Dkt. No. 13, pp. 2-5.
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As the Court will recall, SAP agreed in the course of the liability stipulations regarding TN’s
conduct that Oracle “may present evidence at trial related to the stipulated claims as background
or context for the stipulated claims, and/or as relevant to damages or other claims and defenses
not stipulated to or dismissed by the Parties. ” Dkt. No. 965 (JTX0004).
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TomorrowNow, Inc., Dkt. No. 13, at 4.
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Id. at 5.
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Dkt. No. 965 (JTX0004); Trial Tr. at 1448:12-21.

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The only thing left to do in this trial is determine the damages that Oracle is entitled to

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recover. Oracle maintains that it has a right to pursue actual damages measured by the fair

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market value of the rights infringed, and has separately moved the Court to clarify Oracle’s right

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to present evidence of the hypothetical license that establishes that value.7 If the Court precludes

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Oracle from pursuing that measure of damages, Oracle will pursue (under objection) actual

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damages based on lost sales and support revenue, as well as infringers’ profits. See 17 U.S.C.

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§ 504(b). In that case, Oracle will show it is entitled to recover at least $656 million of

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infringers’ profits, and that it suffered at least $120.7 million in lost profits as a result of

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defendants’ infringement.

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These figures exceed the $272 million dollar award of lost profits and infringers’ profits

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the Court approved in its post-trial orders, for three reasons.8 First, Oracle presented limited

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evidence on these theories in the first trial because Oracle chose to focus on the hypothetical

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license measure. In this trial, Oracle will present an updated analysis and additional evidence to

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support the infringers’ profits and lost profits amounts. Second, Oracle’s infringers’ profits

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number in the first trial measured profits through 2008 only. Oracle’s damages expert has now

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updated those numbers for the passage of time, and will present additional evidence of

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infringers’ profits generated after 2008. Third, defendants’ admissions of willful infringement

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now prevent them from deducting expenses from the gross revenue associated with infringement,

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resulting in a substantially higher measure of infringers’ profits.

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II.

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PLAINTIFF’S DAMAGES
The Parties have briefed the Court at length regarding the availability of, and sufficient

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evidentiary support for, the fair market value (FMV) measure of actual damages. Oracle will

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only briefly summarize that discussion below, but refers the Court primarily to its previously

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Dkt. No. 1120 (Oracle’s Motion for Clarification, filed on April 17, 2012).
Dkt. No. 1081 (Order Granting Defendants’ Motion for JMOL, and Motion For New Trial;
Order Denying Plaintiffs’ Motion For New Trial; Order Partially Vacating Judgment, dated
September 1, 2011).
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filed Motion for Clarification.9 Oracle focuses here on the infringers’ profits and lost profits

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measures of damages.

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A.

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Oracle is entitled to infringers’ profits in addition to actual damages, so long as its

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recovery is not duplicative. See 17 U.S.C. § 504(b). To establish infringers’ profits, “the

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copyright owner is required to present proof only of the infringers’ gross revenue” and the

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“infringer is required to prove his or her deductible expenses and the elements of profit

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attributable to factors other than the copyrighted work.” Id.; see Polar Bear Prods., Inc. v. Timex

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Corp., 384 F.3d 700, 711 n. 8 (9th Cir. 2004); Ninth Circuit Manual of Model Jury Instructions,

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Infringers’ Profits

Instructions 17.24, 17.27.

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1.

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Oracle Has Identified The Gross Revenue Associated
With The Infringement

To establish infringers’ profits, Oracle must identify “the gross revenue associated with
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the infringement.” Polar Bear, 384 F.3d at 711 n. 8; see also Ninth Circuit Manual of Model
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Jury Instructions, Instruction 17.24 (“The defendant’s gross revenue is all of the defendant’s
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receipts . . .[associated with the infringement]. The plaintiff has the burden of proving the
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defendant’s gross revenue by a preponderance of the evidence.”). That requires “a causal nexus
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between the infringement and the gross revenue.” Polar Bear, 384 F.3d at 711. A sufficient
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nexus is established where there is “some evidence . . . [that] the infringement at least partially
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caused the [revenue]” or where the “revenue stream . . . bear[s] a legally significant relationship
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to the infringement.” Id. (recognizing sufficient nexus where infringing photographs were used
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to promote sales of non-infringing watches).
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Here, all revenues related to TN, including Safe Passage sales, other SAP sales, and TN
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sales, tie to defendants’ infringement. Defendants long ago conceded that TN was corrupt to its
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core. The SAP AG Executive Board’s business case, which the Board used to approve the TN
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acquisition, called out the illegality of the TN model that relied on local copies of Oracle
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Dkt. No. 1120 (Oracle’s Motion for Clarification, filed on April 17, 2012).

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software.10 Oracle’s expert, Kevin Mandia, identified software copies – thousands in total – and

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SAP admitted that each of them infringed Oracle’s copyrights. Internal TN documents make

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clear that TN’s entire business relied on these copies. “Technically, TNow is currently green (it

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has local and remote copies that it uses), with a ratio of 99% Yellow (local) and 1% Blue

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(remote).”11 SAP knew this was true, as it has now confessed. In a “risk management”

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document, SAP admitted that TN’s entire business model relied at least upon a “marginal legal

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area” and, accordingly, could not be evaluated for legal liability on a customer-by-customer

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basis.12

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Due to the capabilities and cost savings TN could offer based on these illegal practices,

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SAP saw great opportunity to make TN the “centerpiece” of its Safe Passage marketing program,

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designed to follow SAP’s “1-2-3” plan: commit customers to maintenance with TN, cross-sell

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them into SAP applications, and up-sell them into other products.13 It also knew that, without

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TN, it would lose “maintenance and license revenue as well as customers.”14 SAP did not target

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just a subset of Oracle customers, it went after all of Oracle’s new PeopleSoft and J.D. Edwards

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(and, later, Siebel) customers. It logically started with those with whom SAP had pre-existing

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relationships, knowing that those customers would pick up the phone and listen to the too-good-

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to-be-true TN maintenance offer. Indeed, SAP in some cases secured these deals by offering TN

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services for free. The Safe Passage program “justif[ied] the cost of the [TN] acquisition,” and its

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role as a loss leader.15

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With the illegal TN model as the “key part,” “major cornerstone,” and a “strong[]
weapon,”16 SAP used Safe Passage to take Oracle customers, deprive Oracle of the associated

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PTX 19.
PTX 196 (TN-OR02942461-80 at 79).
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PTX 35.
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PTX 6.
PTX 256 (SAP-OR00136760-68 at 66).
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PTX 43, p. 1.
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Hurst Dep. at 78:8-20; Ziemen Dep. at 302:9-17; 326:18-23; 485:3-14; 504:8-14; 505:6-10;
(Footnote Continued on Next Page.)
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revenue, and generate hundreds of millions of dollars in SAP license sales. SAP established its

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Safe Passage program for “all Oracle customers running PSFT/JDE software.”17 SAP bragged

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that “TomorrowNow features prominently in everything we’re doing.”18 In 2006, SAP reported

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the success of Safe Passage, confirming that the “[p]ipeline [was] steadily increasing in all

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regions.”19 SAP expanded the program to include Siebel software promptly after Oracle

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acquired Siebel Systems, Inc. in 2006. In early 2007, just prior to the filing of Oracle’s lawsuit,

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SAP had 403 open Safe Passage opportunities as a result of TN’s role as the “cornerstone” of the

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program.20 Even Oracle’s lawsuit did not stop SAP, as SAP continued to leverage TN to its

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benefit after acknowledging publicly in July 2007 that TN was engaged in illegal activities.21

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In the second trial, Oracle will show that at least $656 million in gross revenue is

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associated with TN, including from SAP related sales and SAP’s Safe Passage program, and

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therefore attributable to defendants’ infringement.22 This includes maintenance, new license, and

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consulting revenue from customers associated with TN’s infringing business model through

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2008, as well as projections of further maintenance revenue through 2012.23

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If anything, this is a conservative estimate. Paul Meyer’s calculations for post-2008

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revenue include only maintenance revenue generated by SAP from TN customers now on SAP

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software, not new license or consulting revenue from those same customers, even though it is

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certain SAP did earn new license and consulting revenue attributable to its infringement. Indeed,

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(Footnote Continued from Previous Page.)
PTX 161, p. 4; PTX 404, p. 28.
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PTX 671.
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PTX 435 (emphasis in original).
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PTX 275 (SAP-OR-TEMP 00853-68 at 59).
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PTX 404, p. 28.
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PTX 44.
See Supplemental Expert Report of Paul K. Meyer, February 23, 2010, Schedule 41.U.;
Second Supplemental Report of Paul K. Meyer, April 20, 2012, Schedule 50.SSU.
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Id.
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the total revenues SAP has earned related to the illegal TN business model, including as the

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centerpiece of Safe Passage, has likely exceeded $1 billion over time.

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The Court will recall that SAP itself forecasted $897 million in financial benefits from

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owning TN from 2005 through 2007 alone. It projected that 3,000 to 5,000 Oracle customers –

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perhaps half of the 10,000 newly acquired PeopleSoft and J.D. Edwards customers – would leave

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Oracle in response to Safe Passage.24 SAP Board Member Shai Agassi believed SAP could do

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even better.25 If realized, defendants’ use of TN would yield SAP billions of dollars, undermine

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Oracle’s $11.1 billion investment in PeopleSoft, and confer countless other strategic benefits.26

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By its own account, SAP came quite close to these projections. At the November 2010

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trial, SAP’s damage expert admitted what Oracle will prove: that SAP earned hundreds of

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millions of dollars from just a subset of the TN customers it took.
When I looked at the customers, I found that the total revenue was
the 703 million, the number right at the top there. That’s 703
million is that total. So this is revenue of SAP after the
TomorrowNow start date [until only December 2008]. So that’s
important. We are only looking at the revenue that they generated
after the TomorrowNow start date.27

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In short, Mr. Meyer and Mr. Clarke nearly agree on the right revenue number. The issue
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is what deductions the law permits and SAP can prove are appropriate.
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2.

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Deductions For Defendants’ Expenses Are Not
Permitted

Since defendants have pled guilty to willful infringement, defendants’ profits are deemed

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equal to all of defendants’ gross revenue that is associated with the stipulated infringement; no

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deduction for defendants’ expenses is permitted. See Ninth Circuit Manual of Model Jury

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PTX 12, p. 10 (SAP-OR00253288); PTX 24. In April 2008, months before SAP finally shut
down TN, “[o]ver 800 customers ha[d] agreed to leave Oracle since Safe Passage program was
introduced in early 2005.” PTX 519 (SAP-OR 00098932-33 at 32). In discovery, SAP provided
data for only a small fraction of these customers.

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Agassi Dep. at 311:12-312:12.
PTX 24; PTX 43 (SAP-OR00141570-81 at 71).
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Clarke Trial Tr. at 1631:4-9.
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Instructions, Instructions 17.27 (“[g]enerally, deductions of defendant’s expenses are denied

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where the defendant’s infringement is willful or deliberate”) (citing Kamar Int’l, Inc. v. Russ

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Berrie & Co., 752 F.2d 1326, 1331-32 (9th Cir.1984)); see also Frank Music Corp. v. Metro-

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Goldwyn-Mayer, Inc., 772 F.2d 505, 515 (9th Cir. 1985) (“A portion of an infringer’s overhead

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properly may be deducted from gross revenues to arrive at profits, at least where the

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infringement was not willful, conscious, or deliberate.”).

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3.

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The Court’s Previous Judgment Cannot Cap Oracle’s
Recovery

In its post-trial rulings, the Court determined that the evidence at the first trial supported a
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judgment of $272 million against SAP.28 That figure cannot cap Oracle’s recovery here for two

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reasons. First, that number included deductions for expenses that are no longer available in light
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of TN’s guilty plea. Second, Oracle introduced limited evidence of infringers’ profits in the first
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trial because it chose to focus its proof on the hypothetical license measure. Specifically, it
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limited its evidence to profits through 2008. Those revenues consisted of maintenance, new
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license, and consulting revenue from customers associated with TN’s infringing business model.
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SAP obviously has continued to earn revenue from some or all of these customers since 2008.
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Although SAP’s “goal [wa]s to move customers to mySAP as rapidly as possible,”29 for

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customers who did not want to purchase SAP licenses right away, SAP used TN to “[n]urture the
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customer into a migration discussion” over time.30 SAP expected that by “the end of the
decade . . . most customers will have migrated to an SAP solution.”31 Oracle is entitled to the

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revenues SAP earned from post-2008 migrations of TN customers to SAP (and the maintenance
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paid by those customer to SAP) as infringers’ profits.
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Dkt. No. 1081 (Order Granting Defendants’ Motion for JMOL, and Motion For New Trial;
Order Denying Plaintiffs’ Motion For New Trial; Order Partially Vacating Judgment, dated
September 1, 2011).
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PTX 34 (TN-OR00003204-05 at 05).
PTX 24, p. 7 (SAP-OR00299501).
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PTX 300 (SAP-OR00042962-67 at 64).
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Despite Oracle’s requests for post-2008 financial information, SAP has refused to

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provide updated revenue numbers. As a result, Oracle was forced to project post-2008

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maintenance revenue based on existing data.32 Having refused to cooperate in providing updated

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revenue numbers, the Court should not allow SAP to challenge or complain about Oracle’s

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updated projections.

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B.

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In addition, Oracle is entitled to recover the actual damages Oracle suffered as result of

Lost Profits

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defendants’ infringement. See 17 U.S.C. § 504(b); Polar Bear, 384 F.3d at 708. One way to

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measure actual damages is by measuring Oracle’s lost profits.33 While it is Oracle’s burden to

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establish its lost profits, it may meet that burden by establishing with “reasonable probability the

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existence of a causal connection between the infringement and a loss of revenue.” Harper &

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Row Publishers, Inc. v. The Nation Enters., 471 U.S. 539, 576 (1985); see also Data Gen. Corp.

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v. Grumman Sys. Support Corp., 36 F.3d 1147, 1170-77 (1st Cir. 1994) (affirming the jury’s

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damages award and finding that the jury was adequately equipped to determine lost profits based

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on their consideration of “diverse factors” including plaintiff and defendant’s relationship as

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competitors, plaintiff’s capability to service vendors, the uniqueness of defendants’ offering, and

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related expert testimony), overruled on other grounds by Reed Elsevier, Inc. v. Muchnick, 130 S.

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Ct. 1237 (2010).

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Once Oracle establishes a causal connection, the burden “shifts to the infringer to show

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that the damage would have occurred had there been no” infringement. Id.; Stevens Linen

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Assocs., Inc. v. Mastercraft Corp., 656 F.2d 11, 15 (2d Cir. 1981) (“once [plaintiff] established

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that it had been damaged, and that its customers purchased both the infringed and the infringing

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products, the burden shifted to the infringer . . . to prove that the customers . . . would not have

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Sales revenues could not be projected, so that the measure of infringers’ profits is inherently
conservative.
33
Dkt. No. 628, p. 3 (Order Denying Defendants’ Motion for Partial Summary Judgment, dated
January 28, 2010).

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acquired from [plaintiff] alone . . . had there been no infringement”); Sunset Lamp Corp. v. Alsy

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Corp., 749 F. Supp. 520, 524-25 (S.D.N.Y. 1990) (plaintiff may recover lost profit damages

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where defendant used infringing product as a “door opener” to take further sales away from

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plaintiff).

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Here, Oracle will demonstrate that it lost $120.7 million in profits as a result of SAP’s

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infringement. While Oracle’s proof of these lost profits will focus mainly on expert testimony,

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SAP admissions confirm the causal link between defendants’ infringement and Oracle’s losses.

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SAP set out to acquire TN as a “strategic weapon” not only to make billions of dollars in

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license sales, but also to deprive Oracle of its highly profitable maintenance revenue. SAP knew

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that if it failed to acquire this weapon it would “[m]iss the unique increased opportunity to take

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away Maintenance revenue from Oracle.”34 SAP knew that “Oracle’s deal assumptions [would

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be] challenged by [the TN] support model – losing support revenue stream forces actions or

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reactions and is a distraction.”35 Depriving Oracle of maintenance profits would also “[d]isrupt

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Oracle’s ability to pay for [its acquisitions] out of cash flow,” “[s]hrink their share of the

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application market,” and “[d]iscredit their efforts to create a next-generation application

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platform.”36 SAP did not believe these losses would occur without TN. SAP consistently

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measured TN’s success by its ability to deprive Oracle of maintenance revenue. TN also

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recognized the impact it was having on Oracle’s performance and believed it would deprive

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Oracle of over $1 billion in maintenance revenues alone.37

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SAP knew TN’s unique (and infringing) role in the market was integral to SAP’s ability

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to harm Oracle. SAP recognized TN as “the only meaningful North American provider of third

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party PeopleSoft maintenance services.”38 TN’s infringement was key to this success, and

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PTX 256, p. 6.
PTX 7.

36

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PTX 24, p. 6 (SAP-OR 00299500).
PTX 970.
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PTX 19, p.2.
37

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infected its entire support model. Certainly, every installed piece of Oracle software TN had on

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its systems when Oracle sued – and there were thousands – defendants have admitted infringed.

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Indeed, SAP and TN have admitted to infringing all of Oracle’s major PeopleSoft, J.D. Edwards,

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Siebel, and Database software and support materials. And it was that same locally installed

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software that TN claimed gave it the dominant position in the third party service market for

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Oracle software, allowing TN to provide the level of support it did at cut-rate prices.39 When it

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came time to operate without the now-admitted infringing local copies, SAP instead decided just

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to shut TN down.40 Absent that infringement and SAP’s support of it, Oracle would have

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retained its customers.41

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SAP and TN’s ability to take customers caused far more harm than the immediate loss in

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yearly support revenue. Oracle will submit evidence that SAP and Oracle value their customer

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relationships as 10-year profit streams because of the high likelihood that customers will renew

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their maintenance contracts. Mr. Meyer measured the loss of these profits for the customers TN

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took from Oracle, and this is the method by which he arrived at his calculation of $120.7 million

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in lost profits. Much of SAP’s response to Oracle’s lost profits analysis purportedly comes

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through its damages expert, Mr. Stephen Clarke. However, as demonstrated in Oracle’s

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accompanying motions in limine, Clarke is not qualified to perform the customer causation

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analysis upon which he relies, or assess the third party market options in the way he does. As a

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result, the Court should exclude his causation testimony.

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C.

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As Oracle has explained, it believes it is entitled to introduce objective evidence of the

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Hypothetical License

FMV of a license to Oracle’s copyrights as evidenced by the parties’ expectations regarding the

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25
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See Supplemental Expert Report of Paul K. Meyer, February 23, 2010, ¶¶ 356, 361-362; see
also PTX 29 (TN-OR01018370-71 at 71, p. 6) (describing that TN’s business model is built on
“major assumption[s]” assumption #1 – that client environments had to stay local to create
“efficiencies” – if that assumption changed then TN would need “major headcount increases”).
40

27

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Apotheker Dep. at 32:19-22.
See Supplemental Expert Report of Paul K. Meyer, February 23, 2010, ¶¶ 356-372.

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value of a license to those copyrights at the time of infringement.42 Oracle should be

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compensated with the FMV of the license that SAP would have had to bargain for if it had asked

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to use Oracle’s copyrighted materials in the way it did.43 Polar Bear, 384 F.3d at 709; Frank

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Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 513 (9th Cir. 1985); see also On

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Davis v. The Gap Inc., 246 F.3d 152, 171-72 (2d Cir. 2001). Courts have found that “an

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objective, not subjective analysis” is an appropriate measure of these damages. Jarvis v K2, Inc.,

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486 F.3d 526, 534 (9th Cir. 2007). The parties’ contemporaneous projections of defendants’

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anticipated gains or plaintiff’s anticipated losses are the ideal kind of objective evidence from

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which to value a license for defendants’ infringing use of plaintiff’s intellectual property. See,

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e.g., Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1130-31

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(S.D.N.Y. 1970) (relying on defendant’s profit expectations)44; Interactive Pictures Corp. v.

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Infinite Pictures, Inc., 274 F.3d 1371, 1385 (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).

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The testimony related to determining a FMV for Oracle’s copyrighted works at the

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November 2010 trial presented objective evidence as to the value of a hypothetical license

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whether determined under a Georgia Pacific Approach (expected profits or profit inputs from

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SAP’s own documents) or the Income Approach within established valuation methodology. For

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example, SAP’s own contemporaneously prepared documents provide objective evidence to

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establish the value of the hypothetical license to Oracle’s copyrights. SAP’s Executive Board

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42

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25
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Dkt. No. 1120 (Oracle’s Motion for Clarification, filed on April 17, 2012).
Dkt. No. 628 at 3-5 (Order Denying Defendants’ Motion for Partial Summary Judgment, dated
January 28, 2010 ).
44
Both parties agree that the Georgia-Pacific framework, which allows reliance on projections
and anticipated profits as objective evidence of valuation, is a sufficiently objective method for
valuing the hypothetical license. Trial Tr. at 1982:1-24 (SAP conceding that “[o]nce you get to
the valuation, Georgia-Pacific is appropriate.”). SAP’s own damages expert placed a value on
the hypothetical license, using the Georgia-Pacific framework, although he arrived at a different
value than did the jury or Mr. Meyer. Clarke Trial Tr. at 1566:19-1573:12.
43

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and senior management projected the value SAP could gain from its infringing use and acted on

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that valuation by purchasing TN. Likewise, Oracle valued its ability to use the copyrighted

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software, 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 the infringement began. Oracle’s

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damages expert, Mr. Meyer, analyzed the information that was available to Oracle and SAP at

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the time those negotiations would have occurred. Mr. Meyer will testify to the FMV of a license

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to use the infringed copyrighted works with the support of that objective evidence.

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In addition, Oracle will present, and Mr. Meyer will rely on, further objective evidence of

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the FMV of a hypothetical license. First, Oracle will present additional evidence of relevant

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Oracle licenses and willingness to license, including an actual license between the same parties

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relating to Oracle’s crown-jewel software and testimony from its executives, both of which

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further establish that the parties would in fact be willing to license the software at issue, at the

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right price. Second, Oracle will present additional evidence of the parties’ expectations at the

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time of infringement, including additional testimony from SAP AG Executive Board members

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and other SAP and Oracle witnesses. If permitted, Oracle will also present evidence of its

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projections related to its expected sales of additional software licenses to the PeopleSoft and

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Siebel customer bases, and of SAP’s saved development costs, both of which categories are

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relevant to FMV and, Oracle contends, were improperly excluded in the first trial.

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III.

Defendants have stipulated to liability and preserve no defenses as to liability.45

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DEFENDANTS’ AFFIRMATIVE DEFENSES

IV.

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TIME OF TRIAL
The time allocated for trial puts severe restrictions on Oracle’s ability to present

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customer-related evidence for infringers’ profits and lost profits. Although Oracle is mindful

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that the Court found Oracle’s evidence sufficient to support $272 million in infringers’ and lost

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45

Dkt. No. 965 (JTX0004).

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profits at the last trial, Oracle also believes the evidence supports a higher number. Given the

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Court’s concerns regarding the sufficiency of evidence in the last trial, Oracle respectfully

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requests, and seeks leave to move for, additional time to present its evidence at this trial.

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V.

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CONCLUSION
Based on the evidence and argument that Oracle will present at trial, Oracle will seek

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judgment against TN and SAP including actual damages (subject to the Court’s ruling on

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Oracle’s Motion for Clarification): hypothetical license based damages in an amount subject to

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the Court’s pre-trial rulings, infringers’ profits of at least $656 million and lost profits of at least

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$120.7 million.

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DATED: April 26, 2012

Bingham McCutchen LLP

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By:

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

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Case No. 07-CV-01658 PJH (EDL)