Update: Oracle-SAP case takes dramatic 11th-hour turn

Oracle's lawsuit against SAP has taken an unexpected turn four days before trial was due to begin, with SAP saying it won't contest charges that it contributed to acts of copyright infringement by its TomorrowNow subsidiary.

Oracle portrayed the move as a confession of guilt, while SAP said it was trying to narrow the scope of a trial that is becoming a "media circus."

The development effectively removes one of SAP's defenses in the trial -- that its executives didn't know TomorrowNow had been stealing Oracle software. It could also reduce the likelihood that SAP executives will have to take the stand, according to one legal observer.

Oracle sued SAP in 2007 alleging that its TomorrowNow subsidiary stole software and support materials from Oracle's website, and that SAP used those materials to help lure away Oracle customers.

In a court filing Thursday, Oracle said it received a letter from SAP's lawyers late Wednesday night informing it that SAP has elected "not to contest the claim for contributory infringement," and that it will ask the court to cut the length of the trial almost in half. A speedy trial could lessen potential negative publicity for SAP.

"SAP management has insisted for three and a half years of litigation that it knew nothing about SAP's own massive theft of Oracle's intellectual property," Oracle said in a statement to reporters. "Today, SAP has finally confessed it knew about the theft all along."

Steve Chang, an attorney and principal shareholder with the IP law firm Banner & Witcoff, put it slightly less dramatically. The filing suggests that SAP no longer thinks it can prove at trial that its executives were unaware of TomorrowNow's illegal conduct, he said.

SAP has already admitted that TomorrowNow stole software and support materials from Oracle's website and has since closed the division. But SAP has maintained its executives knew nothing about the activity. Oracle had said it would present evidence to show that's not the case.

SAP can still argue at trial, as it had planned to, that Oracle did not incur significant losses because of TomorrowNow's activities, said Chang, whose law firm is not a participant in the case. "It doesn't mean an automatic win on the damages issue," he said.

But it means SAP may be conceding some culpability in addition to TomorrowNow's, and the trial will likely see a greater emphasis on SAP's profits -- instead of just TomorrowNow's profits -- as Oracle seeks to prove the extent of its damages, Chang said.

Oracle is seeking damages of about US$2 billion, while SAP says the damages should be no more than tens of millions.

Later Thursday, SAP released the text of a letter to the judge in which it confirmed accepting liability for contributory infringement. It said it was doing so because "that sole remaining liability issue is threatening to overwhelm the case and turn the upcoming trial into a media circus, focussed not on the issues actually in dispute but on the obsession of Oracle and its founder, Larry Ellison, with Hewlett-Packard and whoever may be its CEO."

HP's new CEO, Leo Apotheker, is a former SAP executive and Oracle hopes to call him to the witness stand at next week's trial. It has sent statements to the press saying Apotheker "knew all about the stealing" and suggesting HP should change its tagline from HP Invent to "HP Steal."

Oracle's filing portrays the eleventh-hour move as an underhanded tactic that will require Oracle to "completely reconstitute" its presentation in court. Oracle therefore asked the court to delay the start of trial from Monday to Thursday, Nov. 4. SAP wants the trial to begin Monday as planned.

Oracle argues it should still have the right to present evidence of SAP's knowledge of the TomorrowNow activity.

"In order to have a fair trial, Oracle must be able to demonstrate facts such as the extent of the infringement and SAP's role in, knowledge of, and business plans regarding that infringement," Oracle's lawyers wrote.

"These facts inherently relate to the fact and amount of damages appropriate in this case," they said. "In short, because of the nature of the damages proof, essentially all of the evidence that was important for liability is also relevant for damages."

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