MoneyWatch Tech

Oracle's $1.3 B Award from SAP: Bad News for High Tech

By Erik Sherman

Updated on: November 24, 2010 / 10:34 AM EST / MoneyWatch

After years of litigation over alleged patent and copyright infringement, Oracle (ORCL) finally got its pound of flesh from SAP with a pretty price tag: $1.3 billion. That's an astronomical figure, especially given that SAP estimated Oracle's actual damages to be $28 million to $41 million.

Although a number of media outlets call this the largest award ever for copyright infringement, Oracle originally brought action on ten different grounds. SAP had already admitted that a company it had once acquired, TomorrowNow, had stolen code from Oracle and tried to use it to woo the company's business. The number of customers lost? About 350. The payment will be an average of more than $3.7 million each. It's an unusual case in a number of ways, but it should make not only tech companies, but any corporation with an IT department, pay attention. Oracle is a litigious and contentious opponent if it thinks that someone has infringed its rights. And given that it gained ownership of Java when it bought Sun Microsystems that net could scoop up many.

What set SAP apart from others is that it admitted that its board knew of the infringement when it acquired TomorrowNow. That degree of clear recklessness at the highest level of a corporation is unusual, and stunning.

However, where do you draw the line at recklessness? Google (GOOG) is learning, as it defends itself in the suit Oracle brought for alleged patent and copyright infringement over Android's implementation of Java. Did Google top management know? We're unlikely to hear such an admission. And yet, at the very least, Google proved its management practices inadequate in its recording of private data on Wi-Fi networks.

Now think of the thousands of companies, whether high tech vendors or corporations that do their own in-house development, that use Java. As a reader pointed out in a comment on a post I wrote about Google, inspecting and using source code of others has likely become common place:

As a generation of programmers becomes comfortable (even reliant) on direct inspection of others protected intellectual property at the source code level; a generation of lawyers will evolve to sue ... well.. everyone.

Oracle has shown that it is happy to go after those who infringe its IP. What happens if it becomes clear that others, including customers, have done so? Will it take action? I suspect so. Look at how aggressive Oracle can be already with a customer like Toyota.

But don't leave Oracle in the role of sole avenger. How many companies have inspected and used material from software written by competitors? How many management teams would welcome a chance to drop a hammer on someone? And how easily can a company hide its activities if its Web-based work is also available for inspection?

That alone should be enough to have engineering managers run to the office of their corporate counsel and ask how to set up procedures to avoid potential problems. Of course, as that is unlikely to happen, think of this as another corporate lawyer full employment act.

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Image: Flickr user russelljsmith, CC 2.0.