By a MetNews Staff Writer
The Sixth District Court of Appeal yesterday affirmed a $3 billion judgment obtained by the company then known as Hewlett-Packard against Oracle Corporation based on the defendant’s action in announcing in 2010 that it would cease to provide software for use on one of the plaintiff’s server platforms.
Santa Clara Superior Court Peter H. Kirwan determined that Oracle breached a written contract and a jury set the damages for lost past and future profits at $3.014 billion.
The contract was a “reaffirmation agreement.” It was reached after Mark Hurd, then CEO for Hewlett-Packard Company (“HP”), was pressured by HP’s board of directors to resign in August 2010. On Sept. 6, 2010, Oracle hired him as co-president, prompting a suit by HP against Hurd and Oracle premised on the contention that he could not serve in that capacity without revealing HP’s secrets.
HP (now known as “Hewlett Packard Enterprise”) entered into a settlement agreement with Oracle on Sept. 20, providing:
“Reaffirmation of the Oracle-HP Partnership. Oracle and HP reaffirm their commitment to their longstanding strategic relationship and their mutual desire to continue to support their mutual customers. Oracle will continue to offer its product suite on HP platforms, and HP will continue to support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware in a manner consistent with that partnership as it existed prior to Oracle’s hiring of Hurd.”
One of HP’s products was the Itanium server.
On March 22, 2011, Oracle issued a press release announcing:
“Oracle has decided to discontinue all software development on the Intel Itanium microprocessor.”
It noted that “Oracle will continue to provide customers with support for existing versions of Oracle software products that already run on Itanium.”
That announcement led to the litigation resulting in the $3 billion award.
It emerged at trial that the Itanium server was generated more than $2 billion a year as of A senior vice president of HP testified that “in many ways” the server was HP’s “most important business from a customer perspective, because...customers were running such important applications” and HP “had a lot of really big customers who used those products.”
Trial Court Ruling
Kirwin ruled on Aug. 28, 2012, that the reaffirmation agreement “requires Oracle to continue to offer its product suite on HP’s Itanium-based server platforms and does not confer on Oracle the discretion to decide whether to do so or not.”
After he ruled, Oracle resumed adapting software (porting) to the Itanium server, while protesting the ruling.
Trial before the jury then took place.
Oracle insisted on appeal that the reaffirmation agreement merely constituted a mutual commitment to resumption of a voluntary relationship.
Justice Allison M. Danner said in yesterday’s opinion:
“[W]e conclude that the reaffirmation clause requires Oracle to continue to offer its product suite on certain HP server platforms.”
The second sentence—obligating Oracle to “continue to offer its product suite on HP platforms”—“does more than declare an aspiration or intent to continue working together, as Oracle claims,” she wrote, declaring:
“It commits the parties to continue the actions specified (Oracle offering its product suite and HP supporting the products) as they had done before Oracle hired Hurd.”
She went on to say:
“Oracle’s proposed construction of the reaffirmation clause as an obligation-free reaffirmation of an entirely voluntary partnership is contrary to the plain language of the second sentence and renders the provision superfluous….”
Danner added that the phrase “in a manner consistent with that partnership as it existed” cannot reasonably be construed as to transform the words “will continue” into a proviso that the parties have “the discretion not to continue,” adding:
“Simply put, the language of the reaffirmation clause and the agreement as a whole do not support Oracle’s claim to absolute discretion over whether to continue offering its products on HP’s platform.”
Kirwin’s construction, she said, “is inconsistent with both the plain language of the agreement and with the record of the parties’ past course of dealing, which we view as the defining feature of their strategic partnership.”
The case is Hewlett-Packard v. Oracle, 2021 S.O.S. 2561.
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