Bloomberg News

SAP Loses Bid to Overturn $345 Million Patent Verdict Loss (1)

May 01, 2013

SAP Inc., (SAP:US) the world’s biggest maker of business-management software, lost a bid to overturn a $345 million jury verdict won by Versata Software Inc. over ways to customize pricing.

The U.S. Court of Appeals for the Federal Circuit in Washington did say an order limiting SAP’s sales and maintenance of its software was too broad, and ordered the trial judge to modify that part of the case. The decision was posted today on the court’s website.

“Sufficient evidence supports the jury’s verdict of infringement,” Chief Circuit Judge Randall Rader wrote for the three-judge panel, rejecting SAP’s arguments that it didn’t use the invention.

The dispute is over software that can customize pricing based on factors such as the particular customer, product and size of the order. Closely held Versata sold its software, called Pricer, in the late 1990s to customers such as International Business Machines Corp. and Motorola Inc. Walldorf, Germany-based SAP began offering customized pricing as part of its enterprise software in 1998, according to the court’s opinion.

Versata “had tremendous sales success until precisely the point in time that SAP entered the market with the patented product,” said Michael McKool of McKool Smith, which represented Versata. He said the company, which still sells software, was pleased with the ruling.

Damage Calculations

Austin, Texas-based Versata sued SAP in 2007. The first trial in 2009 resulted in a $138.6 million verdict against SAP. The magistrate presiding over the case ordered a new trial because of changed rules on how damages should be calculated.

A different jury in 2011 awarded $260 million to compensate Versata for its lost profits plus $85 million as a reasonable royalty on SAP’s sales. With modifications and interest, the jury award has grown to more than $400 million, McKool said.

Part of SAP’s appeal centered on how damages should be calculated. The company argued that, since SAP didn’t sell Pricer to anyone after 2001, Versata shouldn’t be entitled to compensation for lost profits.

“When SAP entered the market by bundling hierarchical pricing into its enterprise software, the market for Pricer disappeared,” Rader wrote. “Versata need not have actually sold Pricer during the damages period to show demand for the patented functionality, particularly given the economic reality that SAP had eroded the market for Pricer through bundling hierarchical access into its own software.”

Software Maintenance

Magistrate Charles Everingham, who presided over the trial, ordered SAP to stop selling the pricing feature in its enterprise and customer relationship-management software.

Everingham told SAP it must disable the capability from any new placement in the software, wasn’t allowed to accept fees for maintenance of the feature, and couldn’t add new people using the technology to existing licenses. The Federal Circuit said SAP should be able to provide maintenance or additional spots for its customers, so said wording of the order, called an injunction, should be changed.

SAP said its lawyers are reviewing the court’s ruling.

“We are pleased the court found the injunction was overbroad and remanded it to the lower court for modification,” Andy Kendzie, an SAP spokesman, said today. “Until we have had a chance to review this ruling in detail, we will not comment further.”

SAP reported operating profit adjusted for some items of 901 million euros ($1.19 billion) on sales of 3.6 billion euros in the first quarter. The global market for enterprise software will grow 6.4 percent this year and 6.7 percent in 2014 to reach $316 billion, researcher Gartner Inc. said in March.

The case is Versata Software Inc. v. SAP America Inc., 12-1029, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Versata Software Inc. v. SAP America Inc., 07cv153, U.S. District Court, Eastern District of Texas (Marshall).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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