MoneyWatch Tech

SAP Rescues Ellison's Hopes By Being Reckless and Stupid

By Erik Sherman

Updated on: November 9, 2010 / 6:24 PM EST / MoneyWatch

Just yesterday, during his testimony in Oracle's (ORCL) copyright infringement lawsuit against SAP (SAP), Oracle CEO Larry Ellison put a ten figure estimate on how much damage SAP had done by acquiring TomorrowNow, which both sides admit was lifting Oracle program code. Just yesterday, that amount seemed like a flight of fancy. Today, maybe not.

During today's trial session, SAP lawyer Greg Lanier admitted that the company's board was aware of the infringement at the time it acquired TomorrowNow. To put it mildly, this was stunning. That single statement largely kicks the legs out from underneath SAP's defense while putting its action into an entirely different category of offense, with a much larger scale of potential penalty.

Just last month, SAP said that it wouldn't contest the copyright infringement. The reason was to shorten the process to deprive Oracle of "weeks of trial to harass its competitors, whether they are parties to the case or not," as Lanier wrote the presiding judge.

All along, SAP has claimed that the infringement was completely confined to TomorrowNow. And yet, what Lanier just said was that all along, at the highest levels of the company, SAP knew of the copyright infringement. The arguments that new HP (HPQ) CEO Leo Apotheker knew nothing of the action while he was co-CEO of SAP are now out the window. The board knew. It is inconceivable that Apotheker didn't. If you wondered if HP had yet again bungled in choosing a CEO, here's proof.

The remark also casts SAP into a grim light. Rather than a company with a division that went out of control and did something it never should have, SAP deliberately chose to acquire a company that it knew was stealing code from its largest competitor. It speaks to a corrupt and cynical culture.

One other thing it speaks to is significantly higher legal jeopardy. In a case such as this, willful copyright infringement -- and what else do you call acquiring a company that you know to be infringing and then letting it continue? -- can become a criminal matter if a) the infringing party did so for financial gain, and b) put the code on a computer network accessible to members of the public. Will SAP find that it actually committed criminal infringement? Possibly.

Even if SAP did not find itself liable for criminal prosecution, it has essentially said, "Dear judge, please throw the book at us," to say nothing of making potential customers worry that they could get drawn into some legal action down the road and, instead, consider the alternative: Oracle.

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Image: courtesy, Viacom