Oracle Corp. v. Sap AG

• Decision Date: 29 August 2014
• Docket Number: No. 12–16944.,12–16944.
• Citation: 765 F.3d 1081
• Parties: ORACLE CORPORATION, a Delaware corporation; Oracle International Corporation; Oracle Systems Corporation; Oracle USA Inc.; Oracle EMEA Limited; J.D. Edwards Europe Limited; Siebel Systems, Inc., Plaintiffs–Appellants, v. SAP AG, a German corporation; SAP America Inc.; TomorrowNow Inc., a Texas corporation, Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

765 F.3d 1081

ORACLE CORPORATION, a Delaware corporation; Oracle International Corporation; Oracle Systems Corporation; Oracle USA Inc.; Oracle EMEA Limited; J.D. Edwards Europe Limited; Siebel Systems, Inc., Plaintiffs–Appellants,

v.SAP AG, a German corporation; SAP America Inc.; TomorrowNow Inc., a Texas corporation, Defendants–Appellees.

No. 12–16944.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted May 13, 2014.

Filed Aug. 29, 2014.

Kathleen M. Sullivan, (argued) and William Balden Adams, Quinn Emanuel Urquhart & Sullivan LLP, New York, NY; Dorian Estelle Daley and Jennifer Gloss, Oracle Corporation, Redwood City, CA; Steven Christopher Holtzman and Fred Norton, Boies Schiller & Flexner LLP, Oakland, CA; Geoffrey Mathew Howard, Bingham McCutchen LLP, San Francisco, CA, for Plaintiffs–Appellants.

Tharan Gregory Lanier, (argued), Jane L. Froyd, and Jacqueline K.S. Lee, Jones Day, Palo Alto, CA; Gregory Andrew Castanias, Tara Stuckey Morrissey, Jones Day, Washington, D.C., for Defendants–Appellees.

Appeal from the United States District Court for the Northern District of California, Phyllis J. Hamilton, District Judge, Presiding. D.C. No. 4:07–cv–01658–PJH.

Before: SUSAN P. GRABER, WILLIAM A. FLETCHER, and RICHARD A. PAEZ, Circuit Judges.

OPINION

W. FLETCHER, Circuit Judge:

Oracle Corporation and SAP AG are competitors in the enterprise software market. In 2007, Oracle et al. (collectively, “Oracle”) brought suit against SAP et al. (collectively, “SAP”) alleging that TomorrowNow, an enterprise software company recently acquired by SAP, was engaging in systematic and pervasive illegal downloading of Oracle's software. SAP eventually stipulated to liability, and the parties went to trial solely on damages.

The jury awarded Oracle $1.3 billion as the fair market value of a hypothetical license from Oracle encompassing SAP's infringement of Oracle's copyrights. SAP moved for judgment as a matter of law (“JMOL”) on two grounds: (1) that Oracle failed to show that it actually would have granted a license; and (2) that Oracle failed to provide enough evidence to permit the jury to establish an objective, non-speculative hypothetical-license price. The district court granted JMOL, making clear in a later order that it agreed with only the second of the two grounds.

The district court ordered a new trial, conditioned on Oracle's rejection of a $272 million remittitur measured by the copyright holder's lost profits plus infringer's profits, rather than by hypothetical-license damages. Oracle rejected the remittitur. The district court ruled that, if a second trial were conducted, Oracle would not be able to argue for, or present evidence of, hypothetical-license damages. Oracle and SAP stipulated to a $306 million judgment.

Oracle appeals from several rulings by the district court: (1) a grant of JMOL to SAP; (2) a grant of SAP's motion for a new trial conditioned on Oracle's rejection of a remittitur; (3) a ruling that Oracle could not pursue hypothetical-license damages at a second trial; (4) a ruling selecting $272 million as the remittitur amount; and (5) four rulings on issues relevant to a second trial.

We affirm the first three rulings. We vacate the fourth ruling and remand to the district court. We conclude that the district court erred in setting the remittitur at $272 million. That amount was below “the maximum amount sustainable by the proof,” D & S Redi–Mix v. Sierra Redi–Mix & Contracting Co., 692 F.2d 1245, 1249 (9th Cir.1982). We therefore vacate and remand with instructions to condition any new trial on Oracle's rejection of a $356.7 million remittitur. We affirm one of the four rulings relating to the second trial; we do not reach the questions presented by the other three rulings.

I. Background

Oracle and SAP are self-described “fierce” competitors in the enterprise software industry. In 2005, when Oracle acquired PeopleSoft, another enterprise software company, for $11 billion. PeopleSoft had itself recently acquired J.D. Edwards, another enterprise software company. In acquiring PeopleSoft, Oracle hoped to gain PeopleSoft's nearly 10,000 customers. In reaction to Oracle's acquisition, SAP initiated a marketing program called Safe Harbor and later, in a modified form, Safe Passage. For convenience, we will refer to this program as Safe Passage.

As a key component of Safe Passage, SAP acquired TomorrowNow Inc. (“TomorrowNow”) in 2005 for $10 million. Founded by former employees of PeopleSoft, TomorrowNow provided software maintenance services to PeopleSoft's customers, including J.D. Edwards' customers, at half the price charged by Oracle. After Oracle acquired Siebel Systems, another enterprise software company, for $6 billion in 2006, TomorrowNow expanded its maintenance services to include Siebel software. SAP hoped to leverage TomorrowNow's relationship with its maintenance service customers to persuade some of those customers to switch over to SAP software.

In 2006, an Oracle employee noticed thousands of suspicious downloads of Oracle software. After an investigation, Oracle concluded that TomorrowNow had illegally downloaded millions of PeopleSoft, J.D. Edwards, Siebel, and Oracle database files. TomorrowNow continued to provide maintenance services to Oracle customers using these downloads until sometime in 2008.

Oracle brought suit in federal district court in 2007, alleging copyright infringement and other federal and state claims. Shortly before trial, SAP stipulated to liability on Oracle's copyright claims, and Oracle dismissed with prejudice all of its non-copyright claims.

The district court conducted a thirteen-day jury trial limited to damages for copyright infringement. The district judge instructed the jury that it could award either (1) hypothetical-license damages or (2) plaintiff's lost profits and infringer's profits. Oracle's expert testified, based on a hypothesized negotiation that would have taken place before the infringement began, that the fair market value of a license allowing use of the downloaded software for the period of infringement would have been $1.656 billion. In November 2010, the jury returned a verdict for Oracle for $1.3 billion, based on what it found was the fair market value of a hypothetical license granted by Oracle.

SAP objected to the amount of the damage award and moved for JMOL. The district court granted JMOL, making clear in a later order that its sole ground for denying the motion was that “the evidence Oracle presented was insufficient to establish an objective non-speculative license price.”

SAP also moved for a new trial. The district court granted the motion conditioned on Oracle's rejection of a $272 million remittitur. The district court determined that $272 million was “the maximum amount ... sustainable by the proof.” In granting SAP's motion, the district court made clear that in a new trial, if one were conducted, Oracle would not be allowed to argue for, or present evidence of, hypothetical-license damages.

Oracle rejected the $272 million remittitur. In advance of a second trial, the district court denied a number of Oracle's evidentiary motions. In order to expedite an appeal, the parties stipulated to a $306 million judgment in Oracle's favor. Oracle timely appealed.

II. Standard of Review

We review de novo a district court's grant of JMOL under Federal Rule of Civil Procedure 50. Mangum v. Action Collection Serv., Inc., 575 F.3d 935, 938 (9th Cir.2009). JMOL “is properly granted only if no reasonable juror could find in the non-moving party's favor.” Id. at 939 (quoting Torres v. City of L.A., 548 F.3d 1197, 1205 (9th Cir.2008)). The court “ ‘must view the evidence in the light most favorable to the nonmoving party ... and draw all reasonable inferences in that party's favor.’ ” EEOC v. Go Daddy Software, Inc., 581 F.3d 951, 961 (9th Cir.2009) (alteration in original) (quoting Josephs v. Pac. Bell, 443 F.3d 1050, 1062 (9th Cir.2006)).

“We review a district court's grant of a new trial for an abuse of discretion.” Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814, 818 (9th Cir.2001). “[T]he same standard of review is appropriate ... where a plaintiff rejects the remittitur and a second trial is held....” Id. at 818–19. We review for abuse of discretion a remittitur amount set by the district court. D & S Redi–Mix, 692 F.2d at 1249.

III. Discussion

A. Grant of JMOL

SAP makes two arguments in support of the district court's grant of JMOL. First, SAP argues that, in order to recover hypothetical-license damages, Oracle had to show that it actually would have granted a license to TomorrowNow. Second, SAP argues that the jury's hypothetical-license damage award was based on undue speculation. The district court disagreed with the first argument but agreed with the second. We agree with the district court.

1. No Grant of License

SAP argues that hypothetical-license damages cannot be awarded because Oracle was unwilling to grant a license to TomorrowNow for the use of its PeopleSoft, J.D. Edwards, Siebel, and Oracle database copyrights. As a factual matter, we agree that Oracle never would have granted such a license to TomorrowNow. Oracle executives testified generally that Oracle never licenses its software to competitors, and specifically that Oracle never would have granted a license to TomorrowNow.

However, we disagree with SAP's legal argument. Under 17 U.S.C. § 504(b), a “copyright owner is entitled to recover [1] the actual damages suffered by him or her as a result of the infringement, and [2] any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages.” “[A] plaintiff in a § 504(b) action must establish [a] causal connection” “between the infringement and the monetary remedy sought.” Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 708 (9th Cir.2004). “ ‘Actual damages' are the extent to which the...