A US District Court Judge has overturned the highest ever award for copyright infringement in US history. The $1.3 billion jury award in favour of Oracle against its competitor SAP was described by Judge Phyllis Hamilton as “grossly excessive” and as having no basis in law.

The long-running legal battle between the two software giants began in 2007, when Oracle sued SAP for copyright infringement. It alleged that a subsidiary of SAP, TomorrowNow, had illegally accessed, downloaded and used Oracle’s proprietary software code. Prior to the trial in November 2010, SAP accepted all liability, and so the only issue to be tried was the appropriate measure of damages.

The $1.3 billion jury award was based on a “hypothetical licence fee” that SAP would have paid to Oracle had it lawfully licensed its software. The judge however rejected this measure of damages, as the evidence showed that Oracle “had never given any entity a licence to copy [its] application software…thus [it] could not reasonably claim that SAP’s infringement diminished the licensing value of the infringed works.” Oracle’s own evidence at trial confirmed that it would never have granted such a licence to a competitor to allow it use its software; any such licence would have been “unique” and “unprecedented.” Any claim for damages based on a lost licence fee would have to be supported by evidence of similar licensing practices in the past, which Oracle could not show. As such, damages could not be based on the value of a hypothetical licence that would never have been granted.

The judge was therefore satisfied that the award grossly exceeded the actual harm to Oracle. Rather than providing evidence of lost customers, and the associated loss of profits, Oracle instead presented evidence of the “purported value of its intellectual property as a whole” elicited in “self-serving testimony” from its executives. This could not be used to calculate damages. The law requires that any award must be based on objectively verifiable evidence, ie the loss of profit that Oracle suffered as a result of SAP’s copyright infringement, which the judge calculated as $272 million. If Oracle reject this amount, a new trial will be ordered.

The US Department of Justice has separately filed charges against TomorrowNow – which has been shutdown by SAP – for criminal copyright infringement and unlawful access to Oracle’s computers. SAP have pleaded guilty to all charges, and have negotiated a plea bargain with the Department of Justice, which is subject to an up-coming court review.