What You Should Not Do To Your Competitor

Short answer: the Oracle v. SAP case (a $1.3 billion jury verdict, later reduced to about $356.7 million) is a list of what not to do to a competitor: do not download more of their software than you are licensed for, do not ignore the terms of use on their site, and never assume your downloads are anonymous. The facts were ordinary license-scope facts, which is exactly why any vendor can learn from them.

I read through the Oracle v. SAP case, the 2010 verdict that was the largest software copyright award of its time, and pulled together takeaways for SaaS and software companies on what NOT to do. As a software licensing attorney, these are the patterns I watch for.

Background.

TomorrowNow (“TN”) was a third-party support company SAP bought in 2005. TN claimed to support certain Oracle products for less than half of what Oracle charged, and SAP used the model to lure customers away from Oracle under its “Safe Passage” program. To deliver that support, TN downloaded thousands of files from Oracle’s customer support portal, and that is where it went wrong.

1. Do Not Download More Software Than You Are Licensed For.

Oracle alleged in detail how SAP, through TN, downloaded far more software than it had license rights to. It is basic, but the point matters, so do not be in possession of more of your competitor’s software than you are validly licensed for. Unauthorized copying is the core of a copyright claim under 17 U.S.C. section 501. This is the flip side of getting your own license restrictions right.

2. Do Not Ignore the Terms of Use on Their Support Site.

Before logging into Oracle’s customer support site, TN employees had to agree to Oracle’s Terms of Use. That contract prohibited downloading more software than licensed and using the software for the benefit of third parties. TN ignored it. Accessing a system in excess of authorization can also raise issues under the Computer Fraud and Abuse Act, 18 U.S.C. section 1030, so a site’s terms of use are not boilerplate to wave past.

3. Do Not Assume Your Actions Are Anonymous.

Oracle tracked every TN download and could show that before certain customers moved their support to TN, those accounts downloaded far more software than they were licensed for. That logging made copyright infringement straightforward to prove. Assume everything you do on a competitor’s system is recorded, because it is.

How to Protect Yourself.

The lessons run the other way too. To make it hard for a competitor to take your stuff:

• make your license grant and restrictions crystal clear;
• put real Terms of Use on your support and download sites; and
• log and track customers’ downloads of your software under support.

For the foundation of that first point, see my piece on copyright issues for SaaS software and the four things to remember about copyright law. Do not use someone’s property without permission, especially a competitor’s. This judgment turned on ordinary license-scope and terms-of-use facts that any vendor can get right.

Frequently Asked Questions.

Did SAP really pay $1.3 billion? A jury awarded $1.3 billion in 2010, but the court vacated that figure and the parties ultimately settled the appeal at about $356.7 million. It was still the largest software copyright case of its era.

Was this copyright infringement or breach of contract? Both were in play. The downloads supported a copyright claim, and violating the support site’s Terms of Use was a contract problem on top of it.

What is the single takeaway for my company? Never possess or use more of a competitor’s software than your license allows, and assume their system logs everything.

I hope this helps. The expensive mistakes here were not exotic; they were license scope and terms of use. Trust me on this one.

Resources:

• Restrictions in Software License Agreements.
• Copyright Issues for SaaS Software.
• How the Leegin Case Changed Software Reseller Law.

Disclaimer:

This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, which should be provided only after review of all relevant facts and applicable law.