SAP ordered to pay largest fine on record for software piracy

A federal jury in California has ruled that software giant, SAP, has to pay $1.3 billion in damages for illegally downloading customer support documents and software belonging to its rival, Oracle. The scheme apparently involved setting up fake customer accounts to access instruction manuals and software information.

The case began in 2007, when Oracle filed a suit against TomorrowNow (TN) alleging the it had made thousands of illegal downloads over a three year period. Oracle claimed that SAP, which acquired TN in 2004, did so in full knowledge of the ongoing piracy. SAP admitted liability, however contested Oracle’s claim that the damages amounted to $1.65 billion. The recent decision turned on the question of how to evaluate the worth of the intellectual property TN illegally downloaded.

Under US copyright law, money can be recovered for statutory damages or for actual damages caused by the infringement, along with any additional profit amassed by the infringer through its wrongdoing. Actual damages can be assessed by considering the “fair market value” of the plaintiff’s work. This approach requires a jury to assess “what a willing buyer would have been reasonably required to pay to a willing seller for the plaintiffs’ work,” Frank Music Corp v Metro-Goldwyn-Mayer Inc (1985). An alternative method to prove actual damages is to indirectly prove the plaintiff’s lost profits.

Using the loss of profit method, SAP argued that Oracle had lost 358 customers as a result of the piracy, and evaluated actual damages at around $40 million. Unsurprisingly, Oracle opted for the “fair market value” option, reaching a figure over 40 times larger. After an 11 day trial, the jury panel decided on an award representing the fair market value of the licence that SAP should have agreed with Oracle.

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by Katey Dixon