November 2, 2010 / 2:11 AM / 7 years ago

Oracle-SAP testimony nears; HP CEO in spotlight

OAKLAND, California (Reuters) - A Silicon Valley legal drama that has enmeshed three of the world’s most powerful technology companies kicks into high gear on Tuesday as Oracle Corp lays out its case for seeking some $2 billion in damages from rival SAP AG.

Attorneys from Oracle and SAP spent nearly seven hours on Monday selecting jurors and hammering out procedural rules for the five week trial. They are due to present opening arguments on Tuesday.

Larry Ellison, Oracle’s co-founder and CEO, has waited 2-1/2 years to bring SAP to court on accusations that SAP’s TomorrowNow subsidiary stole its software and resold the technology at bargain-basement prices -- which SAP has admitted.

At issue is not whether SAP or now-defunct TomorrowNow is at fault. SAP has admitted to wrongdoing, accepted liability and shut down TomorrowNow. The two sides are fighting over the damages SAP will have to pay, anywhere from tens of millions to billions of dollars.

Also at stake is the credibility of former SAP CEO and now top Hewlett-Packard executive Leo Apotheker. SAP says Apotheker did not know of any wrongdoing initially and moved to shut TomorrowNow after he found out.

Ellison, however, has stated he has evidence Apotheker was complicit in the SAP’s improper downloading of the software.

Oracle has attacked HP for naming Apotheker CEO in September. Ellison charges the German executive -- who spent just seven months as sole SAP CEO before leaving amid public criticism -- played a key role in the case. Europe’s biggest software maker and HP have moved quickly to defend Apotheker.

While the high-tech industry is one where personal rivalries and friendships play a significant role in shaping corporate warfare, it is rare for alliances to shift so quickly and dramatically.

HP, the world’s biggest technology company by revenue, and Oracle, the biggest independent maker of business software, were close partners until three months ago.

They became foes following a series of executive shuffles that began in August.

HP’s CEO, Mark Hurd, a close friend of Ellison left HP after accusations of falsifying expense reports to hide a relationship with a female contractor.

Oracle then hired Hurd as its president. And HP hired Apotheker as its chief executive, which prompted a verbal firestorm from Ellison.

“It has gotten very, very personal. And it’s not going to stop,” Howard Anderson, a lecturer at MIT’s Sloan School of Management said last week.

AND WE‘RE UNDERWAY

The court proceedings got under way in U.S. District Court in Oakland, California on Monday. Oracle’s President Safra Catz, who rarely appears in public, sat quietly in the gallery as the two sides selected eight jurors out of a pool of 27.

SAP has chosen not to contest liability in the case and has admitted to wrongdoing for improperly downloading files from an Oracle customer-service website.

That means the jury case will be limited to determining the scope of damages. SAP has said in a court filing it believes damages should total in the “tens of millions of dollars.”

Oracle has said SAP should pay more than $2 billion in damages and has hired David Boies, one of the top trial attorneys in the United States, to make that case to the jury.

While both sides will spend the next five weeks arguing over money, several analysts said the size of the award may not have a huge impact on either company, since they each generate billions of dollars a year in revenue.

“Let’s not confuse this with real money,” Anderson said.

CRIMINAL PROBE

The U.S. government is conducting a criminal investigation into the matter and will likely be monitoring the trial closely. That could make some executives less keen on testifying in the civil trial, said Eric Goldman, associate professor at Santa Clara University School of Law.

SAP disclosed the criminal probe in July 2007. The government has not disclosed details about the investigation.

Company spokesman Bill Wohl said on Sunday that SAP had been cooperating with Department of Justice investigators. He said he was not sure whether government officials had questioned any SAP executives.

One potential witness of high interest is Apotheker, who began his new job with HP on Monday.

HP has declined to say whether Apotheker will testify. The company has said it believes Oracle is calling him only to harass him and interfere with his new duties.

A spokeswoman for HP declined to say on Monday night whether Apotheker would be working in the Silicon Valley area during the course of the trial. That would put him within the court’s jurisdiction and allow Oracle to call him as a witness.

Oracle has said other potential witnesses include former SAP CEO Henning Kagermann and current SAP co-CEO Bill McDermott.

The case in U.S. District Court, Northern District of California is Oracle USA, Inc., et al. v. SAP AG, et al, 07-1658.

Editing by Derek Caney, Matthew Lewis, Edwin Chan and Carol Bishopric

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