SAP AG admitted today that its subsidiary, TomorrowNow, did indeed inappropriately download material from Oracle’s Web site as charged in a lawsuit filed by Oracle in March. However, the company claimed that the walls of separation established during the formation of the subsidiary prevented SAP employees from accessing the materials.

Oracle has charged that SAP not only accessed Oracle’s Web site using information from and posing as current and former customers--and that it used information obtained from current and former Oracle customers--but also downloaded information and used it. Oracle said SAP is guilty of federal copyright infringement, breach of contract and violating both the federal computer fraud and abuse act and the California computer data access and fraud act. It has accused SAP of unfair competition as well as intentional interference with prospective economic advantage.

SAP says its subsidiary had the authority to access the Oracle data, but may have downloaded some material inappropriately. Henning Kagermann, SAP CEO, said in a statement that even a single inappropriate download is unacceptable and that the company regrets that this incident occurred. His company has since instituted changes in its subsidiary’s operations management as well as established a training program to ensure employees are informed of the pitfalls in this area.

David Mitchell, software practice leader at Ovum, said the long-standing rivalry between these companies has taken a “new and exciting turn.” He said that despite the admission by SAP and its amended response to Oracle’s suit, the case will likely continue through the legal processes and may have many months to run. That is comes to court in the first place was somewhat of a surprise.

“Fighting for market share with marketing siege weapons and hand-to-hand combat in the sales trenches is expected, but the intervention of corporate lawyers in this way was not anticipated by anyone,” Mitchell said.

He also said that this case will be less a legal battle than a public one. “Irrespective of the legal conclusion to the case, a significant part of the impact for both Oracle and SAP will be related to how each manages the public relations impact,” Mitchell said. “Although many will see the legal teams as the cavalry in this battle, the troops that really matter are the PR Special Forces contingent. PR is where this battle will be won or lost.”

This does not mean that SAP will not vigorously defend itself. The main thrust of the SAP announcement today is to challenge the Oracle claims,” Mitchell said.

SAP will defend itself along two lines, Mitchell said. The first is the claim that SAP itself had no access to material downloaded by TomorrowNow due to the corporate separation of systems and operations. Secondly, SAP claims TomorrowNow is entitled to access most of the material that was accessed, since it was doing so on behalf of customers who had that right of access, Mitchell said.

SAP has established a public Web site to argue its case (www.tnlawcuit.com).

“SAP's Henning Kagermann is taking a stance very similar to that taken by HP's Mark Hurd when it experienced difficulties concerning inappropriate corporate behaviour,” Mitchell said. “This is a sensible and entirely appropriate PR response, and exhibits a proper recognition of the potential impact on both SAP and Oracle. Oracle is also taking a strong PR perspective, avoiding the temptation to enter into hand-wringing righteous indignation.”