SAP: Unit Made 'Inappropriate Downloads'

Software company SAP AG acknowledged Tuesday that one of its units made "inappropriate downloads" of Oracle Corp. computer code for fixes and support documents, responding to a lawsuit filed by its rival.

SAP said it never had access to Oracle's intellectual property, even as SAP Chief Executive Henning Kagermann vowed to keep "all options open" to settle the case.

The legal battle underscores an increasingly cutthroat battle between the two competitors.

Oracle has accused SAP of "corporate theft on a grand scale" -- claiming that SAP obtained secret product information so it could reel in new customers. The lawsuit was filed on March 22 in San Francisco federal court.

In its formal response, SAP "acknowledged that some inappropriate downloads of fixes and support documents occurred at TomorrowNow" -- a Texas-based customer support unit authorized to download materials from Oracle's Web site. But it maintained that the data remained within that unit's system and SAP did not have access to Oracle's intellectual property.

"Even a single inappropriate download is unacceptable from my perspective," Kagermann said. "We regret very much that this occurred."

SAP and TomorrowNow have been asked by the U.S. Justice Department to provide documents related to claims made by Oracle in its lawsuit, the company said. Oracle lawyer Geoff Howard said his company would be cooperating with the U.S. investigation.

SAP did not disclose any other details about the Justice Department's request.

"SAP CEO Henning Kagermann has now admitted to the repeated and illegal downloading of Oracle's intellectual property," Howard said in an e-mailed statement. Oracle, he said, "filed suit to discover the magnitude of the illegal downloads and fully understand how SAP used Oracle's intellectual property in its business."

Still, Kagermann said SAP believes that Oracle "wasn't significantly harmed."

SAP bought TomorrowNow in early 2005, around the same time Oracle completed its $11.1 billion PeopleSoft acquisition. TomorrowNow, which operates as SAP TN, was formed by several former PeopleSoft engineers promising to provide less expensive software support.

SAP said TomorrowNow was authorized to download materials from Oracle's Web site on behalf of TomorrowNow customers.

In its lawsuit, Oracle claimed that TomorrowNow infiltrated Oracle's systems by using the log-in information of defecting customers and then concealed its true identity by using phony phone numbers and fake e-mail addresses such as test(at), the lawsuit alleged.

Shares in Walldorf-based SAP fell more than 1.6 percent to 37.44 euros ($50.87) in Frankfurt, as analysts said any financial impact was likely to come from a public duel over the allegations.

Despite Kagermann's conciliatory stance, neither SAP or Oracle are expected to back down from their public clashes.

"Of course, SAP has also provided a detailed and paragraph-by-paragraph legal response to each of the Oracle points," said David Mitchell, an analyst at London-based Ovum. "It has taken the interesting step of doing so entirely publicly, even going as far as to create an information Web site to provide full details concerning the case."

SAP has long been the market leader in business applications software, which helps companies, schools and government agencies manage payrolls, vendors and various administrative tasks.

Although it still makes more of its money from database software, Oracle has emerged as a more formidable threat in the business applications market by buying many of the industry's other players. California-based Oracle has spent more than $25 billion since its shopping spree began in early 2005 with its acquisition of PeopleSoft Inc.

"There has long been rivalry between SAP and Oracle," said Mitchell. "However, when Oracle accused SAP of corporate theft the rivalry took a new and exciting turn, with the prospect of the two companies resolving the dispute outside of court being quite remote."

Oracle and SAP have long engaged in public exchanges of one-upmanship as they fight for new customers and try to pull service contracts from their each other's existing customer base.

Honeywell International Inc., Merck & Co. Inc., OCE Technologies BV, SPX Corp. and Metro Machine Corp. are among the Oracle customers who recently defected to SAP for product support, according to Oracle's lawsuit.

Oracle alleges that SAP trampled on its intellectual property rights by lifting computer code and claiming it as its own.

In an amended complaint filed in June in San Francisco federal court, Oracle alleged that SAP broke into its computers in January to heist a software update addressing this year's change to an earlier start for Daylight Savings Time.

TomorrowNow subsequently posted an identical solution, Oracle alleged. SAP's recommended repairs even contained a few minor errors that Oracle later fixed, according to the complaint.

Kagermann said he "promptly took action to strengthen operational oversight at TomorrowNow."

That includes assigning SAP America Chief Operating Officer Mark White to review TomorrowNow's operations.

Kagermann said the company had no evidence that TomorrowNow CEO Andrew Nelson was aware of the inappropriate downloading.


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