Former SAP Unit Charged on Oracle Downloads

By Karen Gullo – Sep 9, 2011 12:01 AM ET

U.S. prosecutors charged SAP AG (SAP)’s former TomorrowNow software-maintenance unit with unauthorized computer access and criminal copyright infringement for improper downloads of Oracle Corp. (ORCL) programs.

SAP, which shut the Bryan, Texas-based unit in 2008, reached an agreement with the U.S. Justice Department resolving the charges, Jim Dever, a SAP spokesman, said yesterday in a telephone interview. A plea agreement was filed in court and isn’t yet public, he said, without disclosing any penalty.

“Any fine would be paid by SAP,” Dever said. “We look forward to what we believe is a fair and final resolution.”

TomorrowNow was accused in 11 counts of using login credentials from Oracle customers such as Merck & Co. and Honeywell International Inc. (HON) to gain access to the company’s software and one count of criminal copyright infringement for reproducing Oracle’s copyrighted works, according to a charging document filed yesterday in federal court in San Francisco by U.S. Attorney Melinda Haag.

Jack Gillund, a spokesman for Haag, declined to comment on whether there was a plea agreement with SAP.

SAP, based in Walldorf, Germany, and Redwood City, California-based Oracle are the two biggest makers of business software and compete for corporate customers that purchase programs to run payroll, human resources, accounting and real estate management tasks.

Oracle Lawsuit

Oracle sued SAP in 2007 over unauthorized downloads of its programs by TomorrowNow, which offered software maintenance and fixes for customers that ran products made by software companies acquired by Oracle. The Justice Department and the Federal Bureau of Investigation were investigating the downloading, SAP said in August 2010.

SAP didn’t contest that it was liable for infringement by TomorrowNow. A federal jury awarded Oracle $1.3 billion in damages to compensate the company for what SAP would have paid to license the software.

U.S. District Judge Phyllis Hamilton in Oakland, California, last week threw out the damage award, saying it was “grossly excessive” and not supported by the evidence at trial. Damages for the improper downloading should be no more than $272 million, Hamilton ruled Sept. 1. If Oracle disagrees with the amount, SAP should get a new trial, she said.

“We are very pleased that the Department of Justice brought criminal charges against SAP for their widespread and systematic theft of Oracle’s intellectual property, to which SAP has repeatedly confessed,” Deborah Hellinger, a spokeswoman for Oracle, said in an e-mailed statement yesterday.

The criminal case is U.S. v. TomorrowNow, 11-642, U.S. District Court, Northern District of California (San Francisco).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.