United States Court of Appeal for the Ninth Circuit Refuses to Revive $1.3 Billion Judgment in Oracle v SAP

On August 29, 2014, the United States Court of Appeals for the Ninth Circuit (Court of Appeals) released its decision in Oracle Corporation v SAP AG. In this decision, the Court of Appeals affirmed in part the District Court’s decision to replace a $1.3-billion jury assessment of damages with a remittitur of $272-million and the option of a new trial if Oracle rejected the remittitur. However, the Court of Appeals varied the amount of the remittitur from $272 million to $356.7 million, finding that the District Court erroneously adopted a $36 million lost profits figure instead of a $120.7 million figure. Oracle must now decide between accepting a $356.7 million award or having a retrial on the issue of damages, where they would be precluded from arguing for a hypothetical licence-based theory of damages. This dispute arose when Oracle alleged that TomorrowNow, a company that had recently been acquired by SAP, was infringing Oracle’s copyright by systematically and illegally downloading Oracle software. TomorrowNow and SAP admitted liability with regard to copyright infringement, but pursued an action to assess damages. At trial, the jury awarded a record-breaking $1.3-billion in damages based on a hypothetical licence. Judge Hamilton of the District Court found this amount to be “grossly excessive” and “contrary to the weight of the evidence,” and therefore replaced the $1.3-billion award with a remittitur of $272-million. Oracle appealed, hoping to revive the $1.3-billion assessment of damages. However, the Court of Appeals held that the evidence failed to provide the range of reasonable market values for the hypothetical licence and therefore required the jury to use an “undue” amount of speculation in their assessment of damages. Therefore, the Court refused to revive the $1.3-billion award. The Court of Appeals in this decision held that a plaintiff in a copyright infringement action is not required to show that they would have actually granted a licence to the infringer in order to obtain damages on a hypothetical licence based theory of damages. However, the Court stated that it would be difficult in the absence of such evidence for a plaintiff to establish the quantum of hypothetical licence damages. For news reports on this decision, see below: Reuters Bloomberg Summary by: Michael House