Oracle Corporation et al v. SAP AG et al

Filing 649

MOTION for Partial Summary Judgment filed by Oracle International Corporation, Oracle USA Inc.. Motion Hearing set for 5/5/2010 09:00 AM in Courtroom 3, 3rd Floor, Oakland. (Attachments: # 1 Proposed Order Proposed Order)(Howard, Geoffrey) (Filed on 3/3/2010)

Oracle Corporation et al v. SAP AG et al

Doc. 649

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page1 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

BINGHAM McCUTCHEN LLP DONN P. PICKETT (SBN 72257) GEOFFREY M. HOWARD (SBN 157468) HOLLY A. HOUSE (SBN 136045) ZACHARY J. ALINDER (SBN 209009) BREE HANN (SBN 215695) Three Embarcadero Center San Francisco, CA 94111-4067 Telephone: [phone] Facsimile: [phone] [e-mail] [e-mail] [e-mail] [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: [phone] [e-mail] [e-mail] Attorneys for Plaintiffs Oracle USA, Inc., Oracle International Corporation, Oracle EMEA Limited, and Siebel Systems, Inc. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION ORACLE USA, INC., et al., v. Plaintiffs, CASE NO. 07-CV-01658 PJH (EDL) ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT REDACTED VERSION Date: Time: Place: Judge: May 5, 2010 9:00 am 3rd Floor, Courtroom 3 Hon. Phyllis J. Hamilton

SAP AG, et al., Defendants.

ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT
Dockets.Justia.com

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page2 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 V. III. IV. I. II.

TABLE OF CONTENTS Page PRELIMINARY STATEMENT........................................................................................ 1 SAP TN DIRECTLY INFRINGED OIC'S HRMS AND DATABASE COPYRIGHTS................................................................................................................... 4 A. OIC Owns The Relevant Copyrights ..................................................................... 4 B. SAP TN Copied Protected Expression................................................................... 5 1. SAP TN Engaged In Actual Copying ........................................................ 5 a. HRMS 7.0 - TX 4-792-577 ............................................................ 5 b. HRMS 7.5 - TX 4-792-575 ............................................................ 7 c. HRMS 8 SP1 - TX 5-501-312........................................................ 8 d. Database Software - 8.1.6 (TX 5-222-106), 9.2 (TX 5-673282), and 10.2 (TX 6-942-003) ...................................................... 8 2. SAP TN Copied Vast Amounts Of Protectable Expression .................... 10 C. SAP TN Has No License (or Other Defense) For Its Copying or Use ................ 11 SAP AG AND SAP AMERICA ARE LIABLE FOR VICARIOUS AND CONTRIBUTORY INFRINGEMENT ........................................................................... 13 SAP TN VIOLATED THE COMPUTER FRAUD AND ABUSE ACT ........................ 17 A. SAP TN Violated CFAA Section 18 U.S.C. 1030 (a)(2)(C) ............................... 18 1. Oracle's Systems Are "Protected Computers"......................................... 18 2. SAP TN's Access And Downloading Was Intentional............................ 18 a. SAP TN Intentionally Scraped Oracle's Systems........................ 19 b. SAP TN Also Admitted To Downloading Numerous Files Using Expired Credentials ........................................................... 20 3. SAP TN's Access And Downloading Was Not Authorized Or Exceeded Authorization ........................................................................... 20 a. The Applicable Terms Of Use ..................................................... 21 b. SAP TN Violated The Terms Of Use .......................................... 21 4. SAP TN Obtained Oracle Support Materials And Caused More Than $5,000 Loss ..................................................................................... 22 B. SAP TN Violated 18 U.S.C. § 1030 (a)(5)(A)(i) ................................................. 23 C. SAP TN Violated 18 U.S.C. §§ 1030 (a)(5)(A)(ii)-(iii)....................................... 23 D. SAP Is Liable For SAP TN's Computer Fraud.................................................... 24 CONCLUSION ................................................................................................................ 25

i
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page3 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CASES

TABLE OF AUTHORITIES Page(s) A&M Records, Inc. v. Napster, Inc., 114 F. Supp. 2d 896 (N.D. Cal. 2000) .............................................................................. 16, 17 A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001)..................................................................................... 14, 15, 17 ABKCO Music, Inc. v. Harrisongs Music, LTD., 944 F.2d 971 (2d Cir. 1991)...................................................................................................... 5 Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435 (9th Cir. 1994)................................................................................................... 10 Bourne v. Walt Disney Co., 68 F.3d 621 (2d Cir. 1995)...................................................................................................... 11 Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508 (1972) ................................................................................................................ 11 Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994) ................................................................................................................ 11 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) .................................................................................................................. 4 Co-Opportunities, Inc. v. Nat'l Broad. Co., Inc., 510 F. Supp. 43 (N.D. Cal. 1981) ............................................................................................. 5 Colum. Pictures Indus., Inc. v. Landa, 974 F. Supp. 1 (D. D.C. 1997) ................................................................................................ 10 Computer Assoc. Int'l, Inc. v. Altai, Inc., 982 F.2d 693 (2d Cir. 1992).................................................................................................... 10 Creative Computing v. Getloaded.com LLC, 386 F.3d 930 (9th Cir. 2004)............................................................................................. 22, 23 Dong Ah Tire & Rubber Co. v. Glasforms, Inc., No. 06-3359, 2009 U.S. Dist. LEXIS 30610 (N.D. Cal. April 9, 2009) ........................... 24, 25 Dun & Bradstreet Software Servs., Inc. v. Grace Consulting, Inc., 307 F.3d 197 (3d Cir. 2002).................................................................................................... 10 eBay Inc. v. Digital Point Solutions, Inc., 608 F. Supp. 2d 1156 (N.D. Cal. 2009) .................................................................................. 21 ii
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page4 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Feist Publ'ns., Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340 (1991) ................................................................................................................ 11 Frank Music Corp. v. MGM, Inc., 886 F.2d 1545 (9th Cir. 1989)........................................................................................... 14, 17 Hanger Prosthethics & Orthotics, Inc. v. Capstone Orthopedic, Inc., 556 F. Supp. 2d 1122 (E.D. Cal. 2008)................................................................................... 23 Harris v. Emus Records Corp., 734 F.2d 1329 (9th Cir. 1984)................................................................................................. 12 Johnson Controls, Inc. v. Phoenix Control Sys., Inc., 886 F.2d 1173 (9th Cir. 1989)................................................................................................. 11 LGS Architects, Inc. v. Concordia Homes, 434 F.3d 1150 (9th Cir. 2006)................................................................................................. 12 LVRC Holdings LLC v. Brekka, 581 F.3d 1127 (9th Cir. 2009)..................................................................................... 18, 20, 21 MAI Sys. Corp. v. Peak Computer Corp., 991 F.2d 511 (9th Cir. 1993)................................................................................................... 10 MGM Studios, Inc. v. Grokster, 545 U.S. 913 (2005) ................................................................................................................ 14 Michaels v. Internet Entm't Group, Inc., 5 F. Supp. 2d 823 (C.D. Cal. 1998)................................................................................... 11, 12 Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007)........................................................................................... 13, 14 Perfect 10, Inc. v. Google, Inc., 416 F. Supp. 2d 828 (C.D. Cal. 2006) .................................................................................... 17 RCA/Ariola Int'l, Inc. v. Thomas & Grayston Co., 845 F.2d 773 (8th Cir. 1988)................................................................................................... 17 S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081 (9th Cir. 1989)................................................................................................. 12 Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007) .................................................................................................................. 24 Shurgard Storage Ctrs., Inc. v. Safeguard Self Storage, Inc., 119 F. Supp. 2d 1121 (W.D. Wash. 2000).............................................................................. 24 Stenograph L.L.C. v. Bossard Assocs., Inc., 144 F.3d 96 (D.C. Cir. 1998) .................................................................................................. 10 iii
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page5 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

SuccessFactors, Inc. v. Softscape, Inc., 544 F. Supp. 2d 975 (N.D. Cal. 2008) .................................................................................... 22 Triad Sys. Corp. v. Se. Express Co., 64 F.3d 1330 (9th Cir. 1995)........................................................................................... 4, 5, 10 United States v. Drew, 259 F.R.D. 449 (C.D. Cal. 2009) ............................................................................................ 18 United States v. U.S. Gypsum Co., 438 U.S. 422 (1978) ................................................................................................................ 23 STATUTES 17 U.S.C. § 101 et seq..................................................................................................................... 1 17 U.S.C. § 410 ........................................................................................................................... 4, 5 17 U.S.C. § 501 ........................................................................................................................... 2, 5 18 U.S.C. § 1030 .................................................................................................................... passim California Penal Code § 502(c)(7) ............................................................................................ 1, 23 OTHER AUTHORITIES Fed. R. Civ. P. 56(c)........................................................................................................................ 4 Fed R. Civ. P. 30(b)(6)............................................................................................................ 3, 5, 8 Melville B. Nimmer et al., Nimmer on Copyright (2009).......................................................... 11,5 S. Rep. No. 99­432 (1986) ........................................................................................................... 23

iv
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page6 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I.

NOTICE OF MOTION AND MOTION PLEASE TAKE NOTICE THAT on May 5, 2010 at 9:00 a.m., in the United States District Court, Northern District of California, Oakland Division, located at 1301 Clay Street, Oakland, California, Courtroom 3, 3rd Floor, before the Hon. Phyllis J. Hamilton, Plaintiffs Oracle International Corp. ("OIC") and Oracle USA, Inc. ("OUSA") (collectively "Oracle" or "Plaintiffs") will bring a motion for partial summary judgment against Defendants SAP AG, SAP America, Inc. (together, "SAP"), and TomorrowNow, Inc. ("SAP TN," and together with SAP, "Defendants"), pursuant to Federal Rule of Civil Procedure 56 and Civil Local Rules 7-2, 7-4, 7-5 and 56-1.1 This motion is based upon this Notice of Motion and Motion, the accompanying Memorandum of Points and Authorities, Declarations, and all attached evidence. REQUESTED RELIEF Plaintiffs respectfully request that the Court grant partial summary judgment that: (1) SAP TN violated the Copyright Act, 17 U.S.C. § 101 et seq., as described below; (2) SAP is vicariously and contributorily liable for that copyright infringement; (3) SAP TN violated the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030(a)(2)(C) and (a)(5), and California Penal Code § 502(c)(7) as described below; and (4) SAP is liable for the CFAA and § 502(c)(7) violations under agency principles.2 MEMORANDUM OF POINTS AND AUTHORITIES PRELIMINARY STATEMENT This case is unique in several respects. First, it involves SAP TN's undisputed, direct copying of entire copyrighted software programs ­ indeed that was the basis of SAP TN's business. Second, the volume of copying is staggering, consisting of thousands of copies of Oracle software and millions of related support downloads. A trial encompassing the full scope Oracle's recent acquisition of Sun Microsystems, Inc. has resulted in certain limited changes to Oracle's corporate structure, including that Oracle America, Inc. has assumed all of plaintiff Oracle USA, Inc.'s rights and obligations. Oracle has confirmed by declaration to Defendants that the acquisition has not resulted in any other change to Oracle's corporate structure that would be relevant to this case and has requested that Defendants stipulate to the substitution of Oracle America, Inc. for Oracle USA, Inc. as plaintiff. Alinder Decl., ¶ 81, Ex 114. 2 Oracle also seeks summary adjudication of SAP's second, third, and fourth affirmative defenses with respect to the issues in this motion. Id. ¶ 72, Ex 106 at p. 24 (¶¶ 2, 3, 4).
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT
1

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page7 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

of this wrongdoing would take months, and a motion that marshaled all the evidence proving it would consume thousands of pages. Neither is necessary. This motion presents illustrative evidence sufficient for the Court to rule, as a matter of law, that SAP TN is liable under 17 U.S.C. § 501(a) for infringing six of Oracle's copyrighted works, that it has no license or other defense to this infringement, and that it violated the CFAA. Oracle also moves for an adjudication that SAP is indirectly liable for SAP TN's infringement and CFAA violations. The direct copyright part of this motion is limited to showing that SAP TN committed copyright infringement when it made multiple copies of two Oracle products: (1) three versions of Oracle's PeopleSoft-branded Human Resources Management Systems application ("HRMS"), used to run businesses' payrolls and to automate various other complex processes; and (2) three versions of Oracle's Relational Database Management System ("Database") software, which stores and organizes business data used by HRMS and other business application software. No license authorized any of this copying. Although this motion addresses a tiny fraction of the more than 3,000 illegal HRMS copies that SAP TN made, the Court's ruling will have a farreaching effect on trial management because the testimony and documents supporting these examples are similar to the evidence supporting many other instances of infringement relating to Oracle's other copyrights in the case. As a result, the Court and the parties will have a template to use in streamlining liability and damages, and trial will be far more focused and efficient. The evidence of direct copying comes from SAP TN's detailed business records and admissions based on them. SAP TN referred to its internal copies of HRMS as "environments." It typically acquired them by first making unauthorized copies of install CDs obtained from customers. To track its internal copies, SAP TN created a database called "Baktrak," which it produced to Oracle as a series of spreadsheets. SAP TN used Baktrak to track the date, location, name, and other information about "backup" copies of HRMS environments, and to trace when SAP TN "restored" (i.e., copied) them for further use. Baktrak includes "source" and "target" fields, recording which "source" environments SAP TN copied and renamed as new "target" environments. The illustrative portions of Baktrak cited here detail hundreds of times over several years when SAP TN copied HRMS environments created from one customer's install 2
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page8 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

CDs to use for other customers. Some of these environments were "generic," meaning the name of the environment did not refer to any specific customer, either the one whose install CD SAP TN originally copied or the customer(s) for whom SAP TN used the environment. Other times, SAP TN did label and use an environment for a specific customer, but copied a different customer's software to create that environment. Using Baktrak, SAP TN's Rule 30(b)(6) witnesses gave clear, damning testimony that establishes beyond any dispute that SAP TN made illegal copies and used them ­ generic or not ­ to support multiple customers, even after this litigation began. Other corporate designees provided similar admissions that SAP TN downloaded and copied multiple versions of the Database software, and used those copies for a litany of things for which SAP TN had no license. Because SAP TN can point to no license that permitted or excused its copies, Oracle also moves for partial summary judgment of these defenses to Oracle's copyright claim (and as to Defendants' copyright misuse defense). The CFAA portion of this motion establishes SAP TN's liability through employee admissions of massive, unauthorized downloading from Oracle's systems. These witnesses "crashed" Oracle's website while developing SAP TN's automated downloading tool, Titan, to systematically scrape Oracle's systems. They also admit that they downloaded for customers without valid support contracts with Oracle. Both violate Oracle's website Terms of Use. When they questioned the legality of that activity, supervisors told them to continue because downloading Oracle's support materials as fast as possible was critical to SAP TN's business. The third, and perhaps most remarkable, aspect of this case is that SAP TN's parent companies condoned SAP TN's illegal copying ­ even at the SAP AG Executive Board of Directors ("Board") level ­ because they expected great financial benefit from it. The Board's January 2005 "business case" for the proposed SAP TN acquisition incorporated this warning:

3
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page9 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Alinder Decl., ¶¶ 3, 21, Exs 53 at 7; 8 at 15-16, 101-103, 113-115; 26 at 16-17, 49-50; see also id. at ¶ 3, Exs 8 at 536-537 (SAP AG CFO and CEO knew of Oracle software on TN servers around the time when SAP acquired TN); 15 at 18, 334-336. Based on this analysis, the Board says it issued an oral "directive" to SAP TN to remove Oracle software from its computers. But the Board never enforced its directive; the illegal copying continued for years, even though the Board controlled every aspect of SAP TN's business down to the authority to buy "a bottle of water or an eraser." This and other evidence establishes SAP AG's and SAP America's indirect liability for SAP TN's illegal activity. II. SAP TN DIRECTLY INFRINGED OIC'S HRMS AND DATABASE COPYRIGHTS Summary judgment is appropriate when the evidence shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 331 (1986). To prove copyright infringement, Oracle must show (1) ownership of the relevant copyrights, and (2) copying of protected expression. See, e.g., Triad Sys. Corp. v. Se. Express Co., 64 F.3d 1330, 1335 (9th Cir. 1995), overruled on other grounds by Gonzales v. Texaco, Inc., Nos. 07-17123, 07-17124, 2009 U.S. App. LEXIS 18370 (9th Cir. Aug. 17, 2009). A. OIC Owns The Relevant Copyrights

OIC owns the copyrights at issue in this motion: HRMS 7.0 (TX 4-792-577), HRMS 7.5 (TX 4-792-575), HRMS 8, Service Pack 1 ("HRMS 8 SP1") (TX 5-501-312), Database 8.1.6 (TX 5-222-106), Database 9i, Release.2 ("9.2") (TX 5-673-282), and Database 10g, Release.2 ("10.2") (TX 6-942-003). HRMS. PeopleSoft obtained valid registrations for HRMS versions 7.0, 7.5 and 8 SP1 within five years of publication, and before the registrations were transferred to OIC on March 1, 2005, in connection with Oracle's acquisition of PeopleSoft. Alinder Decl., ¶ 57, Exs 86-88. These registrations establish valid copyrights in each of these works. See 17 U.S.C. § 410(c). Much of the HRMS part of this motion addresses infringements that occurred after March 1, 2005. OIC owns these copyrights and claims directly. Alinder Decl., ¶ 73, Ex 107. OIC also 4
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page10 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

owns the claims for HRMS infringements prior to March 1, 2005. Following the Court's dismissal of Oracle Systems Corporation ("OSC"), which left OIC as the only appropriate plaintiff for the pre-March 1, 2005 HRMS claims, OSC (PeopleSoft's successor in interest) and OIC memorialized their intent, as of the March 1, 2005 acquisition, to transfer to OIC all rights to sue for past infringement of the transferred copyrights "to the extent such rights were not previously assigned, transferred, conveyed or delivered to OIC." Id., ¶ 74, Ex 108; Mickelsen Decl., ¶ 4, Ex A. See 17 U.S.C. § 501(b); ABKCO Music, Inc. v. Harrisongs Music, LTD., 944 F.2d 971, 980-81 (2d Cir. 1991) (new copyright owner may sue for past infringement where assignment conveyed right to do so); Co-Opportunities, Inc. v. Nat'l Broad. Co., Inc., 510 F. Supp. 43, 46-48 (N.D. Cal. 1981) (assignment of right to sue on past infringement may be executed after initiation of litigation). Database. Database versions 8.1.6, 9.2 and 10.2 were each registered within five years of publication. Alinder Decl., ¶ 57, Exs 89-91. These registrations establish that OIC owns valid copyrights in each of these works. See 17 U.S.C. § 410(c). Version 8.1.6 was originally registered to OSC (the former Oracle Corporation), then transferred to OIC by written agreement. Id., ¶¶ 3, 51, Exs 16 at 69-71; 80. The facts set forth above establish OIC's ownership of the copyrights and its standing to sue. See 17 U.S.C. § 501(b). B. SAP TN Copied Protected Expression

The second element of infringement is showing the defendant copied from plaintiff's work, and that copying included protected expression. Triad Sys., 64 F.3d at 1335; Melville B. Nimmer et al., Nimmer on Copyright § 13.01[B] (2009). 1. SAP TN Engaged In Actual Copying

This is the rare case of admitted, direct evidence of literal, wholesale copying. a. HRMS 7.0 - TX 4-792-577

Former PeopleSoft employee Catherine Hyde was SAP TN's third employee, "Lead Developer" for HRMS support products delivered to its customers, and a Rule 30(b)(6) witness for "environments" topics. Alinder Decl., ¶ 3, Ex 12 at 6-8. Hyde admitted that SAP TN obtained copies of HRMS 7.02 installation CDs from either Safeway Stores Inc. ("SAF") or 5
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page11 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Washington Gas Light Co. ("WGL"), two of SAP TN's earliest customers. Id., ¶ 3, Exs 14 at 42-43; 12 at 232-233; see also, id. ¶ 3, Ex 21 at 49, 74, 497-98. Using Baktrak as her guide, Hyde admitted that SAP TN installed HRMS 7.02 software from these SAF/WGL install CDs on its own system, and then copied that initial install dozens of times to use for other customers. Id., ¶¶ 3, 35, Exs 14 at 42-47; 65. Hyde admitted that nearly every one of the 89 HRMS 7.02 environment copies listed in Exhibit 1259 (a printout of BakTrak filtered for HRMS 7.02 source environments) originated from the same SAF/WGL CDs. Id., ¶¶ 3, 35, Exs 14 at 42-47; 65.3 SAP TN used these HRMS 7.02 copies for multiple other customers. Id., ¶ 3, Exs 23 at 5-7, 1213, 132-137; 24 at 363-365; 21 at 84-88; 12 at 116-117. For but one example, SAP admitted the SAF/WGL CDs were the source for an environment named H702RHIM, used to support customer Robert Half International.4 Id., ¶¶ 3, 35, Exs 14 at 45-46; 65; 12 at 103. The 89 copies of HRMS 7.02 that Hyde identified from Exhibit 1259 were made from the "backups" SAP TN made of environments originating from SAF/WGL CDs. Id., ¶¶ 3, 35, Exs 14 at 42-47; 65. A backup compressed the environment into a zip file and stored it in a different server location, which SAP TN admits resulted in an additional copy. Id., ¶¶ 3, 10, Exs 5 at 3234, 39-40, 278-279, 280-281, 288; 42. SAP TN then "restored" these backups into active, working environments, making more copies. Id., ¶¶ 3, 11, 29, Exs 14 at 42-47; 5 at 308-310; 43; 13 at 85-89; 61. Baktrak shows that SAP TN made at least 42 of the 89 restore copies of the SAF/WGL HRMS 7.02 software before its acquisition by SAP, and then at least 47 more after the acquisition, all the way through March 4, 2008. Id., ¶ 36, Ex 66. Defendants' installations of HRMS 7.02 and 7.51 include essentially all of the voluminous code in registered works HRMS 7.0 and 7.5, respectively, because Oracle incorporated virtually the entire code base from the earlier registered version of each release into the slightly later version copied by SAP TN. Ackermann Decl., ¶¶ 5-8. The same concept applies to all relevant versions of Database. Fallon Decl., ¶¶ 4-7. To eliminate any doubt, and although such proof is unnecessary due to SAP TN's wholesale copying, Oracle undertook a limited comparison of sample code from several of the SAP TN local environments for each HRMS release that is the subject of this motion, and found between 80 and 100 percent overlap (most were over 95 percent). Ackermann Decl., ¶¶ 15-26, App A-K. 4 SAP TN had naming conventions for its environments, typically assigning one or two letters for the product line ("H" or "HR" for HRMS), a three-number sequence for the version (e.g., "702" refers to version 7.02), and a three-character sequence to indicate either a specific customer ("RHI" refers to Robert Half) or that the environment was generic (e.g., "CSS" referred to "critical support services," a general business model for providing support at SAP TN). Alinder Decl., ¶ 58, Ex 92. 6
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT
3

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page12 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

b.

HRMS 7.5 - TX 4-792-575

For HRMS 7.51, Hyde admitted that SAP TN copied install CDs from either SAF or WGL to create at least 157 HRMS 7.51 environment copies on SAP TN servers (Baktrak indicates 90 were made before SAP TN's acquisition by SAP and 67 were made afterward, through November 2007). Alinder Decl., ¶¶ 3, 31, 34, Exs 14 at 27-37; 63; 64. Many were "generic environments," not associated with any particular customer but used to support multiple other SAP TN customers. Id., ¶ 3, Exs 5 at 41-42; 23 at 132-137; 21 at 84-88. Many others were used for customers besides SAF or WGL. For instance, SAP TN admits the SAF/WGL CDs were the original source copied for an environment named HR751YR2, which SAP TN copied further to create local environments named for, and used to support, other customers. Id., ¶¶ 3, 12, Exs 12 at 134-136, 138-139; 44; 14 at 34-35. This was "just a matter of efficiency." Id., ¶ 3, Ex 12 at 135-36. Baktrak confirms that Hyde used HR751YR2 as the "source" for new copies she then labeled, for example, as the "ARC" (Alternative Resources Corp.), or "FTI" (Florida Tile Industries) "targets" (id., ¶ 32):

SAP TN also copied SAF/WGL-originated environments and assigned them to at least two other specific customers ­ Providence Hospital (PHS) and Telapex (TEL) (id., ¶¶ 3, 33, Exs 14 at 34-36; 63):

SAP TN also acknowledges it used SAF/WGL CDs to create a "generic" environment named HR751CSS, which it then used simultaneously to support at least four other SAP TN 7
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page13 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

customers: Advanced Auto Parts, Bear Stearns, Heritage Valley Healthcare, and Universal City Studios. Id., ¶¶ 3, 33, Exs 5 at 43-44; 14 at 31-32; 63; 12 at 34-35. John Baugh, SAP TN's "Environments Manager" and a Rule 30(b)(6) witness, testified that SAP TN was still using HR751CSS to support these four customers at the time of his deposition ­ nearly a year after Oracle sued. Id., ¶¶ 3, 44-45, Exs 5 at 32-34, 43-44; 6 at 126-29; 73; 74. c. HRMS 8 SP1 - TX 5-501-312

For many of its HRMS 8 SP1 environments, SAP TN cannot even identify the customer "source" CDs. Hyde admits that SAP TN copied HRMS 8 SP1 install CDs from an unknown customer to create a generic environment named HR81003C and then copied it again and again to create at least 27 other generic HRMS 8 SP1 environments. Id., ¶¶ 3, 12, 59, Exs 12 at 54-56; 44; 93.5 SAP TN admits that it used at least 21 of these generic HRMS 8 SP1 environments to create updates for groups of customers. Id., ¶¶ 3, 12, Exs 44; 12 at 54-58; see also id. ¶ 3, Ex 23 at 125-127, 128-131. SAP TN also used at least two of these generic HRMS 8 SP1 environments to create client-labeled environments for Praxair and Quad Graphics, Inc. Id., ¶ 3, Ex 12 at 140-142. BakTrak confirms that (Id., ¶ 38):

d.

Database Software - 8.1.6 (TX 5-222-106), 9.2 (TX 5-673-282), and 10.2 (TX 6-942-003)

SAP TN also copied ­ first by downloading and then by making copies from that downloaded install media ­ various entire versions of Oracle's database software. Alinder Decl., ¶ 3, Exs 7 at 166-67, 178-80, 181-82, 199-200, 234; 33 at 8-9, 10, 32, 79-80. Baugh admits that, in March 2004, he downloaded install media from Oracle for Oracle database software versions 8.1.7 and 9.2.0.1. Id., ¶¶ 3, 49, Exs 7 at 167-168, 214-216; 78 at 1, 3. He made several copies of each release corresponding to different operating systems. Id., ¶¶ 3, 49, Exs 7 at 178-180, 2145

SAP TN made at least 30 copies of an unknown customer's HRMS 8 SP1 software before its acquisition and then at least 19 more afterward, through January 23, 2006. Id., ¶ 37, Ex 67 (Date-Sorted HRMS 8 SP1 Restores). SAP TN continued to copy and use these environments for at least another year. Id., ¶ 3, Exs 5 at 189-190; 9. 8
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page14 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

216; 78 at 1, 3. He then used a credential from a prior employer to log on to Oracle's support website and download patches that he applied to the installed copies to create instances of later versions. Id., ¶¶ 3, 49, Exs 7 at 169, 180, 214-216; 78 at 1, 3. SAP TN also downloaded version 10.2 install media in October 2005. Id., ¶ 3, Exs 7 at 223-224, 227-228; 33 at 8-9. As summarized by the chart below, which catalogs only the information expressly admitted by Defendants in discovery responses, SAP TN kept multiple copies of the downloaded install media for each of these releases on its servers, and further used that media to install functional copies of each release on multiple servers across SAP TN's systems: Copyrighted Release6 8.1.6 9.2 10.2 Copies of Install Media7 7 4 2 Functional Installs on Servers 4 7 3 Functional Installs on "Virtual Machines" 3 9 ­ Total: Total Copies 14 20 5 39

Alinder Decl. ¶¶ 3, 67-68, Exs 101-02; 33 at 8-9, 74-76; 7 at 167-168. Furthermore, and again referencing only explicit admissions of copying in discovery responses, SAP TN installed multiple copies of Database from a single download in at least 23 instances: Copyrighted Release (and OS) 8.1.6 (Windows) 9.2 (AIX) 9.2 (Windows) 10.2 (Windows) Copies of Install Media 1 1 1 1 Total: Functional Installs 5 2 14 2 23

Id. SAP TN admits that it used at least the instances of 8.1.7 and 9.2 to support multiple customers from March 2004 all the way through October 2008. Id., ¶¶ 3, 43, Exs 7 at 172-74, This column groups SAP TN's copies of Oracle Database according to the copyright in Oracle's complaint the copy infringed. See Fallon Decl., ¶¶ 4-6 (describing relationship of one version to the succeeding versions). 7 Versions of Oracle Database are available to download for different operating systems ­ e.g., Windows, AIX, Solaris, etc. Alinder Decl., ¶ 3, Ex 7 at 178-80. This column includes all copies of SAP TN's Database install media by release without regard to operating system ("OS"). For example, as the chart indicates, SAP TN had two copies of install media for Database 10.2 ­ one for AIX, and one for Windows. Id. ¶¶ 67-68, Exs 101-02. 9
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT
6

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page15 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

187-88, 189-90, 199-200, 250-53; 72. 2. SAP TN Copied Vast Amounts Of Protectable Expression

Having admitted to making wholesale copies of Oracle's Software, SAP TN cannot avoid the fact that its copying was unlawful. Numerous courts have found infringement in virtually identical circumstances. See, e.g., Triad Sys., 64 F.3d at 1333 (prima facie case of copyright infringement where defendant was "copying [plaintiff's] entire [computer] programs" in order to provide software service and maintenance to plaintiff's software customers); MAI Sys. Corp. v. Peak Computer Corp., 991 F.2d 511, 517-19 (9th Cir. 1993) (affirming infringement summary judgment where defendant copied plaintiff's software into computer memory to provide competing software maintenance services, and used unlicensed copies at defendant's headquarters); Dun & Bradstreet Software Servs., Inc. v. Grace Consulting, Inc., 307 F.3d 197, 208-09 (3d Cir. 2002) (finding infringement for "copying [plaintiff's] copyrighted [human resources software] source code while fixing bugs, creating tax updates, [and] customizing [plaintiffs' software]" in connection with software maintenance); Colum. Pictures Indus., Inc. v. Landa, 974 F. Supp. 1, 13-14 (D. D.C. 1997) (defendant who duplicated entire motion picture videocassettes copied protected material by definition). As in the cases above, if an infringer makes literal copies of huge swaths of source code, "there is no doubt that protected elements of the software were copied." Triad Sys., 64 F.3d at 1335 (protectable expression plainly copied where accused infringer's "service activities involved copying entire programs"); see Stenograph L.L.C. v. Bossard Assocs., Inc., 144 F.3d 96, 100, 102 (D.C. Cir. 1998) (in case of "wholesale copying" of source code plaintiff need not show which software elements were protectable).8
8

By contrast, this is not a case where a defendant has taken only non-literal elements of a program such as idea, structure or appearance. See, e.g., Computer Assoc. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 702-712 (2d Cir. 1992) (describing the abstraction-filtration-comparison procedure for distinguishing protected from unprotected elements in cases of non-literal copying); Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435 (9th Cir. 1994) (assessing whether visual elements of graphical user interface are protectable). Here, SAP TN's admissions establish it copied vast amounts of literal expression ­ often the entire application itself ­ just as one might photocopy a book or duplicate a DVD movie. In that situation, there is no need to parse the millions of lines of code or apply Altai's filtration analysis. See Altai, 982 F.2d at 70203, 706-12 (specifically distinguishing literal from non-literal copying, and applying the 10
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page16 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

SAP's copying of protected expression is confirmed for two additional reasons. First, Oracle's copyright registrations carry a presumption that the registered works incorporate protected materials. See Johnson Controls, Inc. v. Phoenix Control Sys., Inc., 886 F.2d 1173, 1175 (9th Cir. 1989). Second, the software indisputably contained countless protected elements representing a wide range of programmer choices in which each author was able to manifest broad creativity; that creativity easily satisfies copyright law's relatively permissive originality requirement. Ackermann Decl., ¶¶ 3-4, 9-27, App C-K; Fallon Decl., ¶¶ 3, 8-12; Feist Publ'ns., Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 346 (1991) (copyright requires only a "modicum of creativity"); Melville B. Nimmer et al., Nimmer on Copyright § 2.01[B] (2009). C. SAP TN Has No License (or Other Defense) For Its Copying or Use

SAP TN has not pled any defense, or asserted any facts, that suggest its infringing acts are immunized by the fair use doctrine, or any other provision of the Copyright Act. See, e.g., Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 590 (1994) (fair use is an affirmative defense). It has also failed to assert sufficient factual support for its copyright misuse affirmative defense9 and its license defenses of permitted "use."10 SAP TN cannot excuse its vast copying by claiming its "use" of the illegal copies detailed in the motion was licensed because it had no license to make the copies in the first place. Moreover, its subsequent "use" far exceeded the scope of any license that could have applied. Accordingly, Oracle also moves for partial summary judgment on SAP TN's second and third affirmative defenses relating to licensed use. To establish a license defense, SAP TN must first prove it holds some license. See Bourne v. Walt Disney Co., 68 F.3d 621, 631 (2d Cir. 1995); Michaels v. Internet Entm't Group, Inc., 5 F. Supp. 2d 823, 831, 834 (C.D. Cal. 1998). SAP TN has admitted it cannot determine abstraction-filtration-comparison process only to the latter). 9 SAP TN's fourth affirmative defense of copyright misuse asserts "Plaintiffs' initiation of the instant suit is an attempt to secure an exclusive right to the maintenance of Plaintiffs' software." Alinder Decl. ¶ 72, Ex 106 at p. 24 (¶ 4). When Oracle asked for "all facts which support" that defense, SAP TN did not identify a single fact relating to Oracle's initiation of this litigation, or any other facts sufficient to establish the defense. Id. ¶ 66, Ex 100. This affirmative defense also fails as a matter of law. See, e.g., Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 509-11 (1972) (describing a competitor's right to seek redress from the Courts). 10 Alinder Decl. ¶ 72, Ex 106 at p. 24 (¶¶ 2-3) (claiming "use" was lawful and consented to, but not "copying"). 11
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page17 of 30

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page18 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

181-82, 199-200. The Development License permitted the installation of Oracle database software on "one computer." Alinder Decl., ¶¶ 3, 48, Exs 33 at 16, 51; 77. SAP TN concedes it installed that software on an array of servers and virtual machines. See Section II.B.1.d, above. Also, the Development License only permits one person to use the software. Id., ¶¶ 3, 48, Exs 33 at 16, 51; 77. SAP TN admits that multiple support engineers used it. Id., ¶ 3, Ex 33 at 25. Finally, the Development License only permits use for developing a "single prototype of [an] application" and "not for any other purpose." Id., ¶¶ 3, 48, Exs 33 at 16, 51; 77. SAP TN admittedly did not develop any prototypes of any applications using Oracle database; rather, it used the Database software to provide support to SAP TN customers, compete with Oracle, and to develop and deliver SAP TN-branded products to them. Id., ¶¶ 3, 43, Exs 7 at 172-74, 18788, 189-90, 250-53; 72; 33 at 6, 22-26. These activities also violate the prohibition on "commercial use" in the Development License. Id., ¶ 48, Ex 77. Since SAP TN exceeded the scope of any potentially relevant licenses beyond any plausible dispute, Oracle is entitled to partial summary judgment of SAP's second and third affirmative defenses. Further, since no license authorizes the infringing acts SAP TN admits, Oracle has established that SAP TN is liable as a matter of law for infringing Oracle's copyrights in its HRMS and Database software. III. SAP AG AND SAP AMERICA ARE LIABLE FOR VICARIOUS AND CONTRIBUTORY INFRINGEMENT SAP AG and SAP America are both liable for SAP TN's illegal copying under wellestablished principles of vicarious and contributory liability. A plaintiff establishes contributory liability where it shows the defendant intentionally induced or contributed to the direct infringement. Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1170 (9th Cir. 2007). Since inaction, combined with specific knowledge, constitutes strong evidence of culpable intent, a party is liable for contributory infringement where it knows that specific infringing material is available using its systems and yet, despite that specific information, fails to remove it. Id. at 1172 ("intent may be imputed" from "knowing failure to prevent infringing actions"). A plaintiff establishes vicarious liability where it shows the defendant "exercises the 13
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page19 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

requisite control over the direct infringer and that the defendant derives a direct financial benefit from the direct infringement." Id. at 1173 (citing MGM Studios, Inc. v. Grokster, 545 U.S. 913, 930 (2005)); see A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1022-23 (9th Cir. 2001). "Control" means the right and ability to stop the direct infringement. Perfect 10, 508 F.3d at 1173; see also Frank Music Corp. v. MGM, Inc., 886 F.2d 1545, 1553 (9th Cir. 1989) (parental liability is appropriate where a "substantial and continuing connection" exists between a parent and subsidiary with respect to infringing acts). "Direct financial benefit" means expected future financial benefits from the direct infringement. Napster, 239 F.3d at 1023 (finding direct financial benefit based on expected future benefits from expanded customer base). The undisputed evidence satisfies these elements: Specific Knowledge And Failure To Act. SAP AG and SAP America knew about SAP TN's copying of Oracle's software at the highest levels. Even before acquiring SAP TN, Board members knew from one of its senior managers ­ a former PeopleSoft executive ­ that "[i]t's very likely that TomorrowNow is using the software outside the contractual use rights. . . ." Alinder Decl., ¶¶ 3, 14, 19, 24, Exs 1 at 39-40, 162, 164-66; 35 at 25-27, 43, 53-54, 158-61; 36 at 93-94, 95, 96-97; 46; 51 at 2; 56. A similar warning appeared in the Business Case the Board used to approve the TomorrowNow deal (TN's "offsite production copies" "may be a serious liability"). See Section I, above. At some unknown point, the Board says it issued an oral directive to SAP TN that required SAP TN to remove all copies of Oracle software from SAP TN's computers. Id., ¶¶ 3, 65, Exs 8 at 536-37; 15 at 340-42; 99 at 30. SAP cannot deny knowledge of the continuing infringement. Whether the "directive" was real or not, it is undisputed that the Board never enforced it until long after Oracle sued ­ despite reports to SAP attorneys and executives indicating that SAP TN had not removed Oracle software from its systems. Id. ¶ 3, 30, Exs 34 at 10, 125-26, 346-50; 62 at 2 (directive was not implemented after issued in 2005, or after suit, because continuing support to customers and maintaining SAP's reputation took precedence); 36 at 367-73, 377, 383-386 (periodic discussion of no software removal). Post-acquisition, one of SAP America's own intellectual property inhouse counsel, Chris Faye, was assigned to advise SAP TN about intellectual property. Id., ¶ 3, 14
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page20 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Exs 10 at 19-20, 52-54; 34 at 14. Faye met regularly with SAP TN management to discuss the legality of SAP TN's operations and potential liability to Oracle, and also advised the SAP AG Board on issues regarding SAP TN. Id., ¶ 3, Exs 10 at 26-27, 74-77 (Faye provided legal advice to SAP TN CEO and received updates); 22 at 87-88, 94; 24 at 400; 34 at 17-18. Yet the SAP AG Board did nothing to ensure the removal of the software. Id., ¶ 3, Exs 8 at 342-345 (Oswald in charge of directive); 26 at 244-45 (Oswald did not follow-up on directive). Only post-lawsuit did SAP America COO, Mark White, take over cleaning up SAP TN at SAP AG's direction. Id. ¶ 3 Exs 8 at 461-64; 34 at 6-9, 10-11. SAP AG and SAP America also knew about SAP TN's use of the Database software. SAP AG CFO and Board member, Werner Brandt, conceded it was "obvious" at the time of the acquisition that "TomorrowNow was running its copies of PeopleSoft and JDE software in conjunction with a database of some kind," and SAP AG knew SAP TN had no license, yet SAP AG undertook no investigation. Id., ¶¶ 3, 16, 62, Exs 8 at 536; 29 at 383-86; 48 (SAP TN Disclosures show only two unrelated IP licenses); 96 at 10, 12 (no investigation "into whether or not TomorrowNow had or used Oracle database server software, nor an investigation into the license agreement under which TomorrowNow would have used such database server software."); 22 at 262-65. After the acquisition, SAP TN made repeated "urgent" requests directly to SAP AG "to purchase Oracle database licenses for environments where we develop our customer's deliverables" and as "a critical need to support our customers running PeopleSoft on Oracle." Alinder Decl., ¶¶ 3, 46, Exs 10 at 52-54; 30; 75. After Oracle sued, Baugh told White that SAP TN was using Oracle's Database software only pursuant to a Development License, but White responded that a new Database license "wasn't a major priority." Id. ¶ 3, Exs 7 at 201-205; 33 at 13-15, 78-79. This is more than enough to hold SAP TN's parents liable. Napster, 239 F.3d at 1020-22 (defendant had actual knowledge of specific infringing material, yet failed to block access to it). Control. SAP TN became a wholly-owned subsidiary of SAP AG through SAP America on January 19, 2005. Alinder Decl., ¶¶ 15, 72, Exs 47 at 1; 106 at p. 6, ¶ 44. As of that date, SAP AG had complete control over SAP TN's activities. Id., ¶ 3, Ex 11 at 32, 105, 108-109. SAP AG concedes it changed SAP TN's management and board at will. Id., ¶¶ 3, 17, Ex 1 at 15
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page21 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

283-284; 8 at 208-12; 26 at 120-21; 29 at 493-494; 49. SAP AG also imposed specific, operational rules on SAP TN relating to Oracle software. Shortly after the alleged oral directive, in March 2005, and again in March 2006, the Board approved and issued "Rules of Engagement" ("Rules") purportedly to "respect [Oracle's] intellectual property rights." Id., ¶¶ 7-8, 65, Exs 39 at 2; 40; 99 at 29. SAP AG installed its own SAP TN "Global Business Owner," who met regularly with the SAP TN CEO, approved all SAP TN purchases, and reported back to SAP AG's head of support, Gerd Oswald, who was on the Board and who other Board members testified had operational oversight for SAP TN. Id., ¶¶ 3, 22-23, Exs 1 at 224; 8 at 309-310, 353; 15 at 88; 36 at 116-119, 134, 136-137, 383-385; 54 at 3; 55. SAP AG also judged SAP TN's performance against specific goals SAP AG set for revenue, customers, geographical expansion, and impact on Oracle. Id., ¶¶ 3, 13, 20, 28, Exs 4 at 71-72; 21 at 357-58; 36 at 264, 275-76, 28286, 329, 330; 45 at 10; 52 at 6; 60 at 4. SAP AG also controlled SAP TN's budget and headcount from acquisition until wind down. Id., ¶¶ 3, 27, Exs 21 at 384-385 (Oswald approved headcount); 36 at 286-87 (board approved headcount); 8 at 282-83 (Brandt responsible for budget); 26 at 204-06; 59 at 1. SAP TN executives groused that SAP AG had to clear the purchase of "a bottle of water or an eraser." Id., ¶ 3, Ex 22 at 120; see also id., ¶ 3, Ex 21 at 137-38, 140-41. SAP's corporate testimony and the testimony of SAP Board members concedes that SAP AG could have secured SAP TN's compliance with the Board's alleged directive. Id., ¶ 3, Exs 11 at 32, 105, 108-09, 166 (SAP AG had the authority and ability to "direct TomorrowNow to operate its business in a particular way" and had the ability to force SAP TN to comply with the Board's alleged "directive"); 1 at 283-84 (same); 8 at 349-51 (Brandt surmised directive would be immediately implemented because "board decisions are [] implemented once they have been made"). After Oracle filed suit, SAP AG replaced Andrew Nelson with White and moved operational oversight of SAP TN to SAP AG's CFO, Brandt. Id., ¶ 3, Exs 34 at 6-9; 8 at 383-84. These executives still failed to remove Oracle software from SAP TN's servers. Id., ¶ 65, Ex 99 (all "customer local environments' on SAP TN computers were not "shut down permanently" until April 30, 2008). This alone is more than enough to establish the requisite control. A&M 16
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page22 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Records, Inc. v. Napster, Inc., 114 F. Supp. 2d 896, 920-21 (N.D. Cal. 2000), aff'd in relevant part, 239 F.3d 1004 (9th Cir. 2001) (right and ability to police direct infringement demonstrates control even if not exercised); Frank Music, 886 F.3d at 1553; RCA/Ariola Int'l, Inc. v. Thomas & Grayston Co., 845 F.2d 773, 781-82 (8th Cir. 1988) (vicarious liability proper where defendant issued instructions pertaining to use of infringing implements and "policed" potential infringement but infringement occurred anyhow). Financial Benefit. SAP AG admitted it anticipated and enjoyed significant financial and strategic benefits from SAP TN's illegal business model. Id., ¶¶ 3, 22, 28, Exs 26 at 266-67, 271-272; 60 at 6, 7 (SAP TN used as an "enabler for future license revenue, to grow maintenance contract volume taken away from Oracle and to generate additional maintenance revenue for SAP"); 4 at 71-72; 3 at 12-13, 83, 223; 36 at 292, 298-302, 304-305; 54 at 2, 8. Again, this is ample evidence. Napster, 239 F.3d at 1023 (expected future benefits from expanded customer base shows direct financial benefit); Perfect 10, Inc. v. Google, Inc., 416 F. Supp. 2d 828, 856-57 (C.D. Cal. 2006) ("future hope to `monetize'" infringement shows sufficient financial benefit), aff'd in relevant part sub nom. Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007). IV. SAP TN VIOLATED THE COMPUTER FRAUD AND ABUSE ACT SAP TN's business model relied on illegally downloading millions of electronic support materials from Oracle's Customer Connection customer support website ("Oracle's systems") onto its own computers. Alinder Decl., ¶ 71-72, 75, Exs 105-06 at ¶ 22 (SAP AG CEO admitting to "inappropriate" downloads); 109 (identifying over 4 million Oracle files on SAP TN's computers). SAP TN used these downloaded Oracle support materials to provide support to customers who previously bought support from Oracle. Id., ¶ 72, Ex 106 at 3 (¶ 19) ("Defendants admit that TN, on behalf of its customers, downloaded and stored a large quantity of Software and Support Materials, and further admit that TN used those materials for customer support."). Oracle discovered SAP TN's unauthorized downloading in late 2006 when it noticed suspicious download requests coming from SAP TN's IP address in Bryan, Texas. Id., ¶ 77, Ex 110. Oracle's discovery coincided with SAP TN's testing of new versions of its software 17
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page23 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

download program ­ Titan ­ purpose-built to "scrape" Oracle's systems quickly and completely. In short, SAP TN employee testimony establishes beyond dispute that SAP TN's downloading from Oracle's systems violated 18 U.S.C. §§ 1030 (a)(2)(C) and (a)(5) of the CFAA.11 A. SAP TN Violated CFAA Section 18 U.S.C. 1030 (a)(2)(C)

To prove a violation of Section 1030(a)(2)(C), Oracle must show (1) that SAP TN accessed a "protected computer," (2) the access was done "intentionally," (3) the access was "without authorization" or "exceed[ing] authoriz[ation]," (4) that SAP TN thereby obtained information, and (5) that as a result, there was loss to Oracle aggregating at least $5,000 in a oneyear period. 18 U.S.C. §§ 1030(a)(2), (g), (a)(5)(B)(i). 1. Oracle's Systems Are "Protected Computers"

A "protected" computer under the CFAA must be "used in interstate or foreign commerce or communication." 18 U.S.C. § 1030(e)(2)(B). Defendants have admitted that Oracle's systems "constitute a `protected computer' within the meaning of 18 U.S.C. § 1030(e)(2)." Alinder Decl., ¶ 70, Ex 104 at 14 (¶ 113). SAP TN's access and downloading requests came across state lines from its Texas headquarters to Oracle's systems located in California and Colorado. Id., ¶¶ 3, 63, Exs 18 at 21, 23-24, 26-27, 31-32; 17 at 155-56; 97 ("The downloads were conducted by TomorrowNow's employees using certain laptop and desktop computers as well as dedicated download servers located at TomorrowNow's data center in Bryan, Texas"); Mickelson Decl., ¶¶ 2-3. 2. SAP TN's Access And Downloading Was Intentional

Under the CFAA, "intentionally" means "a clear intent to enter, without proper authorization," and that "the conduct . . . must have been the person's conscious objective." Id., ¶ 78, Ex 11; United States v. Drew, 259 F.R.D. 449, 459 (C.D. Cal. 2009). The evidence of SAP TN's intent is widespread, but for purposes of this motion Oracle offers two indisputable

11

The CFAA allows a party to maintain a civil action for violation of its sections "if the conduct" caused "loss to [Oracle] during any 1-year period . . . aggregating at least $5,000 in value." 18 U.S.C. §§ 1030(g) & (a)(5)(B)(i) (2006). Oracle cites the CFAA applicable prior to September 26, 2008, as those amendments were not retroactive. Alinder Decl., ¶ 79, Ex 112; LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1131 n.3 (9th Cir. 2009). 18
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page24 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

examples.12 a. SAP TN Intentionally Scraped Oracle's Systems

In late June 2006, SAP TN hired an expert programmer ­ John Ritchie ­ to help develop Titan. Alinder Decl., ¶ 3, Ex 27 at 10, 11-13, 55. Ritchie testified that on the instructions of his supervisors he developed and tested Titan using login credentials from a former Oracle employee and with unidentified credentials from SAP TN's Project Management Office (which had responsibility for the project under the supervision of Greg Nelson, the Chief Information Officer and brother of SAP TN's founder and President, Andrew Nelson). Id. at 72-75. Indeed, SAP TN tested Titan using a login credential for Rockwell Automation for months, knowing that Rockwell's maintenance end date had passed much earlier and that not even Rockwell itself had a license to download with the expired password. Id., ¶¶ 3, 47, Exs 27 at 145-147; 76. Using those unauthorized user ids and passwords to gain access, Titan transmitted commands and requests to Oracle's systems seeking to download all of the support materials available on them ­ more than 15 different support files at a time for as long as it took to complete. Id., ¶ 3, Ex 27 at 49-51, 76, 90-91. Ritchie ultimately limited Titan to 15 download "threads" at a time, because when he increased the downloading, he "crashed" the Oracle system. Id. at 49-51. To confirm his conclusions about the impact of this extraordinary volume of downloading, Ritchie tested the responsiveness of Oracle's website when Titan was in use and found that Titan slowed the availability of the website. Id. at 52-53, 169-70. Ritchie, a 15-year software programming veteran, deemed this impact so significant that he testified Titan "was equivalent to a ­ what we call a denial-of-service attack, you know, where you basically pound on a server so hard that nobody can get through to it." Id. at 33-34, 49-51, 55-57, 62. He reported these impacts on Oracle's systems to his superiors, but was instructed to continue. Id. at 14-26, 28-34, 57-61. Ritchie also reported, to no avail, concerns regarding the legality of Titan's access and downloading based upon his review of Oracle's Terms of Use. Id. at 14-24, 26, 32-33, 173.
12

Though Oracle focuses below on just two examples of SAP TN's illegal downloading, SAP TN had terabytes of downloaded Oracle support materials on its systems. It virtually ignored licensing limitations, and admits that it has no way to prove whether any of the downloads were actually licensed when it took them from Oracle. Alinder Decl., ¶¶ 3, 61, Exs 95; 24 at 570-71. 19
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page25 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Ritchie was not alone ­ another employee, Owen O'Neil, who had specific familiarity with Oracle's system, its Terms of Use, and PeopleSoft customer licenses from his tenure at PeopleSoft, raised similar concerns about the legality of Titan and the consequent violations of the Terms of Use during this same time period. Id., ¶ 3, Ex 25 at 68-73. Titan testing and development nonetheless continued. Id., ¶ 3, Exs 25 at 72-73; 27 at 57-58 (in response to Ritchie's concerns about Titan, Ritchie's manager told him: "`Well, we need to do it, and if anything happens, I'll cover your back,' or actually, I think his actual words were, `Yes, I'll be in jail next to you.'"). Ritchie estimated that, during late 2006 and through April 2007, when he was testing Titan, he accessed and copied approximately one million Oracle support materials from Oracle onto SAP TN's computer systems, then deleted them. Id., ¶ 3, Ex 27 at 75-79. SAP TN put Titan into production, downloading Oracle's support materials for SAP TN's own commercial use. Alinder Decl., ¶¶ 3, 72, Exs 22 at 47; 106 at p. 3, 11-12 (¶¶ 19, 93, 99). b. SAP TN Also Admitted To Downloading Numerous Files Using Expired Credentials

SAP TN purportedly had one "golden rule" for downloading ­ not to download for a customer after its maintenance end date ("MED") with Oracle had passed, because the customer (and surely SAP TN) was not authorized to access Oracle's system after that date. Id., ¶¶ 3, Exs 31 at 21; 20 at 40; 21 at 95-96. SAP TN admitted that it failed to follow even this one rule on multiple occasions. Cf. Id., ¶ 71, 72, Exs 105-06 at p. 35, 37-38 (¶¶ 107, 113); id., ¶ 3, Exs 24 at 574, 576-85 (customer Koontz-Wagner); 31 at 141-43 (customers MKS, Praxair); 28 at 86-88 (customer Ajinomoto). Indeed, in one email copied to the SAP TN CEO, SAP TN's VP of PeopleSoft Support instructed employees to download for one customer even though she knew it was almost three weeks after that customer's MED. Id., ¶ 3, 40 Exs 24 at 583-84; 69. 3. SAP TN's Access And Downloading Was Not Authorized Or Exceeded Authorization

In the Ninth Circuit, "a person who `intentionally accesses a computer without authorization,' [under] §§ 1030(a)(2) . . . accesses a computer without any permission at all, while a person who `exceeds authorized access,' [] has permission to access the computer, but accesses information on the computer that the person is not entitled to access." LVRC Holdings, 20
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page26 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

581 F.3d at 1133 (citation omitted); see also 18 U.S.C. § 1030(e)(6). Further, "access and use beyond those set forth in a user agreement constitute unauthorized use under the CFAA." eBay Inc. v. Digital Point Solutions, Inc., 608 F. Supp. 2d 1156, 1164 (N.D. Cal. 2009). SAP TN's access and downloading were knowing violations of Oracle's Terms of Use, and therefore, unauthorized. a. The Applicable Terms Of Use

When logging onto Oracle's system with a username and password, a user was confronted with Terms of Use, which the user was required to accept by clicking before proceeding. Alinder Decl., ¶ 3, Ex 2 at 160-61, 163-64. Without dispute, the Terms of Use prohibit Defendants' Titan testing and post-MED downloading, e.g.,: "You agree that . . . the Materials may be used solely in support of your authorized use of the Oracle Programs for which you hold a supported license from Oracle" and not for any other "purpose."13 Id., ¶¶ 3, 52-53, 56, Exs 2 at 164-65, 169, 171-72; 81-82; 85. The materials are not to be used to provide services for third parties and may not be "shared with or accessed by third parties." Id. Users also were required to agree to Oracle's Download Agreement, again by clicking, before downloading files from Oracle's system. Id., ¶¶ 3, 41, 54-55, Exs 2 at 190-93; 31 at 10809, 114-15; 70 at 4 (instruction document requiring accepting terms); 83-84. The Download Agreement prohibits downloading except pursuant to, and in compliance with, a valid Oracle license agreement, and further states that "any reproduction or redistribution of the Software not in accordance with the License Agreement is expressly prohibited." Id. b. SAP TN Violated The Terms Of Use

Pursuant to these terms, SAP TN had no right to access or download from Oracle's system the comprehensive scrapes via Titan or to use credentials of customers that SAP TN knew no longer had a valid Oracle support agreement. Indeed, SAP TN concedes "only active ­ or customers that had active support . . . agreements would be entitled to download material."
13

Alinder Decl., ¶ 52, Ex 81. These quotations are from the version of the Customer Connection Terms of Use covering the bulk of Defendants' conduct ­ i.e., September 20, 2005 to February 19, 2007. Id., ¶ 3, Ex 2 at 163-65. Both prior and later versions of the Customer Connection Terms of Use contain similar language. Id., ¶¶ 3, 53, 56, Exs 2 at 169, 171-172; 81-82. 21
ORACLE'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Case4:07-cv-01658-PJH Document649

Filed03/03/10 Page27 of 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Id., ¶ 3, Exs 20 at 40; 21 at 95-96. Defendants admitted that they reviewed these Terms of Use prior to using Oracle's system. Id., ¶ 42, 60, Exs 71; 94. Even so, S