Oracle Claims SAP Stole Trade Secrets

Suit says third-party support unit downloaded software, documents

Oracle Corp. last week charged applications archrival SAP AG with the electronic theft of “thousands of proprietary, copyrighted software products and other confidential materials” used by Oracle’s support organization.

A 44-page lawsuit, filed last Thursday in federal court in San Francisco, alleges that SAP copied the software programs and support materials onto its own servers as part of a plan to compile “an illegal library” of Oracle code and instructional documents.

The lawsuit contends that the illegal downloads originated from an IP address in Bryan, Texas, the location of SAP subsidiary TomorrowNow Inc. The unit provides software maintenance and support services for PeopleSoft, Siebel and J.D. Edwards applications — all owned by Oracle.

On Friday, SAP issued a statement in which it declined to comment about Oracle’s accusations but said it “will aggressively defend against the claims made in the lawsuit.”

Oracle said in the lawsuit that it first spotted the illegal activity last November and that SAP made the downloads on behalf of at least 27 customers.

Two of those customers, Metro Machine Corp. in Norfolk, Va., and Honeywell International Inc. in Morristown, N.J., declined to comment.

Richard Gates, CIO at San Diego-based Ace Parking Management Inc., a TomorrowNow client not named in the suit, said he plans to stick with the service provider.

“It’s a great service. I’m happy to pay the maintenance fee each year,” Gates said. “[The suit is] not a source of worry. After the dust settles, we’ll decide what to do. Something like this could drag on for years.”

John Matelski, chief security officer and deputy CIO for the city of Orlando, which runs J.D. Edwards ERP software, said the lawsuit could force TomorrowNow users to switch service vendors.

“The question then becomes, What will be the additional cost of migrating over to another vendor, or what will Oracle charge?” said Matelski, a past president of the Quest International Users Group, which represents J.D. Edwards and PeopleSoft users.

Oracle said it filed the suit to “stop SAP’s illegal intrusions and theft, to prevent SAP from using the materials it has illegally acquired to compete with Oracle and to recover damages and attorneys’ fees.”

The lawsuit didn’t indicate a specific sum Oracle might be seeking, and a company spokeswoman declined to comment on the suit.

Oracle contended that the allegedly stolen materials “enable SAP to offer cut-rate support services to customers who use Oracle software, and to attempt to lure them to SAP’s applications platform and away from Oracle’s.”

It also claimed that SAP’s alleged activities were spawned by Oracle’s January 2005 acquisition of PeopleSoft Inc.

“Rather than improve its own products and offerings, SAP AG instead considered how to undermine Oracle,” the suit states. “One way was to hit at Oracle’s customer base — and potentially increase its own — by acquiring and bankrolling a company that claimed the ability to compete with Oracle support and maintenance services on Oracle’s own software products.”

Charles King, an analyst at Pund-IT Inc. in Hayward, Calif., called the lawsuit “a curious state of affairs.”

“Oracle has been trying very hard to remake itself as a company that looks more like SAP than the classic Oracle,” he said. “It recognized that being a database specialist was not a way to sustain growth.” That has resulted in a series of acquisitions that have turned Oracle into SAP’s chief application rival, King added.

“One always has to be careful to separate the acts of individuals from corporate acts.” noted Mervyn Adrian, an analyst at Forrester Research Inc. “It’s hard for me to believe that a company would build such a program to do such a thing. It seems less than credible.”

Adrian added that the lawsuit “may turn out to be a tempest in a teapot. I frankly doubt that [SAP is] driving its strategy based on pirated information on what their competition is doing. I don’t think what they find in a Dumpster at Oracle changes their strategy on any basis.”

The lawsuit cites 11 claims, including allegations that SAP violated the Federal Computer Fraud and Abuse Act and the California Computer Data Access and Fraud Act. It also charges that SAP, which bought TomorrowNow in January 2005, engaged in unfair competition, intentional and negligent interference with prospective economic advantage, and civil conspiracy.

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