SAP-gate – Openly Acknowledged Software Piracy in Muddy Waters

There is sometimes a fine line between competitive intelligence, the legal practice of gathering, analyzing and managing information on competitors and corporate espionage, the illegal practice of spying, intelligence gathering, and outright theft for competitive advantage.   However, in today’s world of ethical relativism, or, rather, the outright lack of ethics, that line is becoming a wide chasm.

This week, a jury awarded Oracle $1.3 billion in damages in its corporate theft lawsuit against SAP.  The basis of the lawsuit is as follows:

1)     SAP bought TomorrowNow, which provided low-cost third party maintenance and support services for companies, including JD Powers and PeopleSoft customers – both acquired by Oracle at the time that SAP bought TomorrowNow.

2)     TomorrowNow, instead of downloading only the patches and bug fixes its customers were entitled to from Oracle’s support site, downloaded Oracle software, including whole applications, that it was unauthorized to have – Oracle claims that TomorrowNow had bank of servers downloading Oracle software.

In the course to the litigation, SAP agreed that SAP TomorrowNow infringed Oracle’s copyrights.  In addition, and surprisingly so, SAP said it would no longer argue that its executives didn’t know what TomorrowNow was doing, if Oracle doesn’t contest that issue of “contributory infringement,” meaning that the trial would basically be just about the damages.  SAP thought that it should only pay $40 million in lost Oracle profits.  The jury thought otherwise. 

One could, and should, take a meaningful lesson from this case on issues of ethics and illegal corporate activities.  However, there is more to the story.  Oracle, recently hired the former CEO of Hewlett Packard, Mark Hurd, who was fired on ethical and sexual harassment charges, as one of its Presidents – Oracle, subsequently, had to settle a lawsuit with HP which claimed that Hurd breached his confidentiality agreement and that his knowledge of competitive strategy against Oracle would be helpful to his new employer and detrimental to HP.  HP replaced Hurd with Leo Apotheker, former top executive at SAP.   No doubt the lawyers at these three firms will be on the lookout for further corporate espionage cases against one another. And so the world turns.