On September 1, 2011, U. S. District Judge Phyllis Hamilton set aside the record-setting $1.3 billion jury verdict in Oracle USA, Inc. v. SAP AG, No. C 07-1658, 2011 U.S. Dist. LEXIS 98816 (N.D. Cal. Sept. 1, 2011). Absent proof that Oracle lost an opportunity to license its software to third parties, and absent objective evidence of benchmark transactions, the court held the “hypothetical license fee” used as the jury’s measure of damages was subjective and speculative. Oracle’s “consolation prize” does not appear shabby by ordinary standards, however. As an alternative to a new trial on actual damages, Oracle can accept a remittitur of $272 million.
Oracle sued SAP in March 2007, alleging infringement of certain Oracle software by the SAP subsidiary, TomorrowNow, and the case was tried before a jury in November 2010. In advance of the trial, SAP admitted liability for the alleged copyright infringement, save for some claims by Oracle that had been dismissed before the trial. The only issue for the jury was therefore the amount of damages. The jury awarded a staggering $1.3 billion to Oracle on the theory that this was the value of the hypothetical license fee that Oracle and SAP would have negotiated if Oracle had granted SAP a license to use the Oracle software in question, even though witnesses for both sides confirmed that such a license would never have existed between Oracle and SAP. This award was the highest ever damages award in a U.S. copyright infringement case.
In 2011, SAP filed a motion for judgment as a matter of law that Oracle was not entitled to damages in the form of a hypothetical license fee because Oracle did not provide sufficient evidence to demonstrate that it would have licensed the software in question to SAP, an Oracle competitor, and because Oracle did not provide objective evidence of a non-speculative value on such a license.
The court granted SAP’s motion and overturned the jury award. Judge Hamilton agreed that Oracle did not provide evidence to support its hypothetical license estimates which were presented to the jury. First, Oracle did not show that it had lost an opportunity to license the software to third parties for the same use as the infringing use by SAP. Second, Oracle failed to present non-speculative evidence to support a hypothetical license to SAP. The court indicated it “expected to see objective evidence showing some licensing activity either by Oracle or by some other company in the related industry — if not from Oracle/SAP’s prior dealings — and objective evidence of what a willing buyer would have reasonably paid, not simply what Oracle would have demanded.”
The court clarified what is required: “An objective, non-speculative [hypothetical] license price is established through objective evidence of benchmark transactions, such as licenses previously negotiated for comparable use of the infringed work, and benchmark licenses for comparable uses of comparable works,” the court ruled. “Absent evidence of benchmarks, Oracle cannot recover a lost license fee award….”
Although SAP’s motion was granted, the court noted that Oracle is still entitled to some measure of damages given that SAP admitted liability for copyright infringement and consequently Oracle is entitled to recover actual damages in for the form of lost profits/infringers profits. Based on the evidence provided by damages experts for both SAP and Oracle, Judge Hamilton calculated that Oracle’s lost profits totaled $272 million, and offered Oracle a choice – take the $272 million or go to trial again to determine lost profits.