Oracle to Accept Lower Damages in SAP Case or Face Re-trial - Analyst Blog


Recently, Oracle Corp. ( ORCL ) lost an appeal to reinstate its claims amounting to $1.3 billion against rival SAP SE ( SAP ) on grounds of patent infringement. This new ruling may reopen a seven-year old dispute between the two companies.

It began in 2007 when Oracle sued SAP alleging that a Texas-based subsidiary of the latter called Tomorrow Now had illegally downloaded millions of copyrighted documents and programs from Oracle's customer connection website.

Consequently, in 2010, a jury awarded Oracle $1.3 billion in damages based on the value of a hypothetical license that SAP would have negotiated for using Oracle's copyrighted software.

However, SAP retaliated by moving to court and claimed that damage claims should not be based on hypothetical licenses but on facts. In 2011, U.S. District Judge Phyllis Hamilton rejected the previous claim and settled the amount at $272 million.

Oracle appealed against this ruling at the 9th Circuit Court of Appeals in order to restore the original $1.3 billion jury verdict. The Court of Appeals in turn concluded that the damage claim calculated by the trial judge was too low and provided Oracle with two options.

Oracle could recover $356 million from SAP in the form of damages for copyright infringement or move to court again for a second trial.

We believe that such lawsuits take a long time to reach settlement and out-of-court settlements are common.

Meanwhile, in another long-drawn legal battle with Hewlett-Packard ( HPQ ) over software for Itanium, the date for the next hearing got delayed for an indefinite period.

We believe that Oracle, being a late entrant to the cloud computing field, will pursue strategic acquisitions to combat intensifying competition from the likes of IBM ( IBM ) and Red Hat Technologies ( RHT ). This, in turn will improve its market share and help the company in registering robust top-line growth going forward.

Moreover, the speedy adoption of engineered systems and cloud suites will drive top-line growth, going ahead. Moreover, Oracle's strategy of providing end-to-end solutions will further attract new customers in the long run.

Currently, Oracle has a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: SAP , ORCL , RHT , HPQ , IBM

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