July 3, 2007 9:34 AM PDT

SAP admits 'inappropriate downloads' from Oracle

SAP has acknowledged in a court filing that its TomorrowNow subsidiary engaged in "inappropriate downloads" of Oracle's proprietary fixes and support documents.

SAP, a German-based enterprise software applications giant, also noted in its filing late Monday that the U.S. Justice Department has requested documents from the company and Texas-based TomorrowNow. SAP said it is cooperating.

The company made the filing in response to a lawsuit that rival Oracle filed in March. In the suit, Oracle alleged that third-party support company TomorrowNow engaged in more than 10,000 illicit downloads, in which it accessed more information than it was entitled to receive when acting on behalf of its customers who were using Oracle applications. Oracle said that, in some cases, TomorrowNow downloaded materials unrelated to the type of software that a particular TomorrowNow customer was running and, in other cases, presented Oracle support materials as its own.

SAP's court filing
(Click here for PDF)
Read the company's formal response to rival Oracle's lawsuit.

SAP issued an apology and said it has taken action to resolve the issue.

"Even a single inappropriate download is unacceptable from my perspective. We regret very much that this occurred," Henning Kagermann, SAP's chief executive, said in a statement. "When I learned what happened, I promptly took action to strengthen operational oversight at TomorrowNow while assuring that we maintain excellent service for TomorrowNow's customers going forward."

SAP appointed SAP America Chief Operating Officer Mark White as TomorrowNow's executive chairman to manage the company's operations and compliance programs. Andrew Nelson, TomorrowNow's chief executive, will report to White.

"We have no evidence that Andrew was aware of these inappropriate downloads," Kagermann said in an analyst and press conference call Tuesday morning. The internal investigation is continuing.

"I told my people to do as much as possible," Kagermann said. "It's important to get entire clarity (of the situation)." SAP said that existing and new policies will be enforced at TomorrowNow, and that it will renew training for employees.

The company also noted that SAP and SAP America did not have access to Oracle's intellectual property via TomorrowNow, because its subsidiary operates on a separate system and the information is not shared.

"We don't think a jury is likely to think much of the argument that the activity was confined to a subsidiary--and that as a result SAP should be less culpable," Pat Walravens, an analyst with JMP Securities, said in a research note. "SAP argues that this conduct is not the same as 'corporate theft'--again, we think a jury might think the TomorrowNow conduct seems very much like corporate theft."

Walravens noted that the SAP-TomorrowNow debacle will be a "net positive" for Oracle, which generates $10 billion a year in support and maintenance fees.

Questions of confidence
Where TomorrowNow goes from here
Opinions are mixed on whether the SAP and its subsidiary will be able to restore customers' trust in the companies.

One analyst noted that while SAP has a reputation of being a credible company, it will have to work hard to reassure customers.

"It's up to SAP to make sure that customers feel that doing business with them is not a mistake," said Peter Kuper, a Morgan Stanley analyst. "If they can't assure them, there could be a backlash, but this is not a catastrophic event that they can't recover from."

Oracle, in response, said its lawsuit provided the means to explore the extent of the issue.

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

Oracle and SAP are fierce competitors in the applications market, as well as in the lucrative support and maintenance arena.

SAP acquired TomorrowNow in 2005, shortly after Oracle acquired PeopleSoft and J.D. Edwards. TomorrowNow provides third-party maintenance and support to PeopleSoft and J.D. Edwards customers.

SAP and TomorrowNow launched a major marketing campaign to woo away Oracle customers, soon after its rival completed its major acquisition.

Honeywell and Merck, for example, signed up for TomorrowNow's services. But, according to SAP's court filing, TomorrowNow used customers' Oracle licenses and passwords to download materials unrelated to the licenses they held, unbeknownst to those customers.

SAP also admitted in its court filing that portions of TomorrowNow's PeopleSoft Daylight Saving Time offering is "substantially similar and in some instances identical" to Oracle's DST offering.

"Defendants further aver that while (TomorrowNow) TN referred to Oracle's 'DST Solution' during the course of researching and preparing TN's PeopleSoft Daylight Savings Time solution, TN also conducted its own independent research," according to the filing.

The PeopleSoft Daylight Saving Time solution features written materials on how to address daylight saving time when using PeopleSoft applications. TomorrowNow plans to discontinue the use of the materials where it is found to be similar or identical to Oracle's DST.

SAP and Oracle will have a case management hearing September 4 in the U.S. District Court for Northern California.

See more CNET content tagged:
TomorrowNow, SAP AG, Oracle Corp., Henning Kagermann, subsidiary

11 comments

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soft of funny
that these two huge rivals are in legal battle, and no one
comments. Guess not as easy to discuss as an iPhone, and how
apple/microsoft/att/itunes/zune sucks
Posted by shoffmueller (236 comments )
Reply Link Flag
yeah...
we live in a sad pathetic world...
Posted by dondarko (261 comments )
Link Flag
Ok, I'll bite.
Did anyone notice how it took a lawsuit in a U.S. court to get an explanation from SAP? Oracle, a U.S. company, has discussed this for a long while. I thought that the EU had vehicles in place to prevent this sort of behavior. That is what was stated when the EU came about. I'm all for free trade as long as it is fare trade.
Posted by suyts (824 comments )
Link Flag
Further,
I don't give a damn about iphones or zunes. ATT? That depends on wether they are a different company or not..... can't determine at this point. It could be that a bunch of suits are just switching chairs. What's that game?
Posted by suyts (824 comments )
Link Flag
It's not that big of a story
The IP story is a big one, but this is more of a case of theft. They took something they had no right to take.

In the much bigger picture, I don't think the overall intellectual property story is going away anytime soon. If EU companies aren't complying, and the enforcement is difficult, what can any American company expect in either India or China?

So, I have no interest in defending SAP, but I don't think that a recently acquired subsidiary stealing some patches is anything more than a minor blemish.
Posted by BogusName (33 comments )
Link Flag
SAP's problems are not limited to Oracle
SAP's understanding about the full extent of their problems seems very elementary. For full details about their problems with the United Nations go to <a class="jive-link-external" href="http://www.klauskorner.com/2007/07/03/tmg-responses/" target="_newWindow">http://www.klauskorner.com/2007/07/03/tmg-responses/</a>.

These are not the same problems but they do seem to indicate that SAP has a much more serious and systemic problem that is not limited to a few "rogue" engineers or support staff.

As you will read from SAP Vice President of Industry Standards, Michael Bechauf, and other comments posted at klauskorner.com, there are significant problems with SAP conflict of interest and possible monpoly that are being ignored.

It is time for bloggers and other media to expose more of this preditory behavior from SAP with the same agreesiveness as they use to go after Microsoft.
Posted by standardsguru (3 comments )
Reply Link Flag
Open Standards blocked by SAP Patents!
Standardsguru, thanks for the link. I spend the last hour reading
all the related postings as well as visiting the CEFACT (the
standards organization involved) web site. This is truly a
underhanded attack by a vendor to stop the implementation of
an "open-standard" which is also an ISO standard, by filing not
one but at least 10 patents to stifle the implementation by
others, such as the competition, which also includes Oracle.

I agree with your plea that it is time for the technology media to
fully expose this attack on an Open Standard, especially since it
looks like that the CEFACT leadership is doing nothing other
than support SAP in its claim of having done nothing wrong. As
you said if this were Microsoft we would have heard by now
outcries of foul play. Why is the media so silent when it comes to
others?
Posted by xml_geek (1 comment )
Link Flag
OOPS,
This is one EU company that got caught. Why did it have to take a lawsuit in the U.S. to get them to admit it? Because the respect for other countries laws, (something that the EU promised when they came to be) is just lip service.
Posted by suyts (824 comments )
Reply Link Flag
What???
More clueless blathering from the always clueless suyts.

What does a company in Europe and their behavior have to do the EU.
Posted by qwerty75 (1164 comments )
Link Flag
There's a discussion group hosted at the following address on this topic, with Mr Kagermann posting his own comments on the matter

<a class="jive-link-external" href="http://www.meettheboss.com/index.asp?buid=FinChannel040920081sn" target="_newWindow">http://www.meettheboss.com/index.asp?buid=FinChannel040920081sn</a>

There's a simple registration process involved, but no costs and it is exclusively for banking and financial services executives, so no headhunters or solution providers involved in the discussions...
Apparently, you can also communicate with other users by online video-conferencing facilities.

It seems like a very interesting group, i look forward to meeting some of you on there.
Posted by Abu_Talal (2 comments )
Reply Link Flag
 

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