SAN FRANCISCO Germany's SAP AG has agreed to pay $120 million to Oracle Corp in return for a promise by the U.S. company not to seek punitive damages in its suit against SAP for software theft, according to sources familiar with the agreement.
The legal drama in the case, which has captivated Silicon Valley, further heightened when Hewlett-Packard Co refused a subpoena for Leo Apotheker, its new chief executive and a former CEO of SAP, to testify in the case.
The sources spoke on condition of anonymity because the judge in the case has ordered both sides to keep the matter quiet.
SAP, which reported profit just shy of $1 billion in its most recent quarter, has admitted fault in the three and one-half year case, accepted liability and shut down its TomorrowNow subsidiary, which improperly downloaded millions of files from Oracle's customer service website.
The two companies are still fighting over the compensatory damages that SAP will have to pay, anywhere from tens of millions to billions of dollars. The trial began this week.
Compensatory damages are awarded for specific losses, while punitive damages punish a defendant for wrongdoing.
The agreement needs final approval by U.S. District Judge Phyllis Hamilton in Oakland, California, according to the sources.
Dechert partner Chris Scott Graham said $120 million is a big amount for legal fees, but he noted that a junior lawyer at a big firm working full time can bill $1 million a year.
"It's an unfortunate truth about really big cases. They tend to add up really fast," said Graham, who is not involved in the case.
By taking punitive damages off the table, SAP could further narrow the range of evidence presented to the jury, Graham said. Regardless, Oracle might have been able to seek attorneys' fees at the close of trial because SAP already admitted liability in the case, he said.
"Might as well make an offer up front and try to reduce the claims," he said.
WHERE IN THE WORLD IS LEO APOTHEKER?
Meanwhile, Oracle said that HP refused to accept a subpoena requiring Apotheker to testify in the high-stakes trial.
"Mr. Apotheker started work for HP on Monday, but it now appears that the HP board of directors has decided to keep him away from HP's headquarters and outside the court's jurisdiction," said Oracle spokeswoman Deborah Hellinger.
She said that Oracle would continue to attempt to serve Apotheker.
If he visits HP's headquarters in Palo Alto, California, that would be close enough to the federal courthouse in Oakland for Oracle to summon him to appear in court.
Hewlett-Packard spokeswoman Mylene Mangalindan said in a statement that Oracle did not become interested in getting Apotheker to testify live in court until after he was named CEO of HP on September 30. He was previously deposed in October 2008.
"Given Leo's limited knowledge and role in the matter, Oracle's last-minute effort to require him to appear live at trial is no more than an effort to harass him and interfere with his duties and responsibilities as HP's CEO," she said.
Oracle said it planned to call two witnesses on Thursday -- former Oracle President Charles Phillips and SAP executive John Zepecki.