The Illogical Nature of The 2021 Summary Judgement for Teradata Versus SAP

Executive Summary

• There was a summary judgment in favor of SAP against Teradata.
• This article analyzes this summary judgment.

Introduction

In November of 2021, a summary judgment was given in the case of Teradata versus SAP. Curiously there has been little commentary on this summary judgment.

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What is a Summary Judgement

Before getting into the details of the summary judgment, it is important for those that are not attorneys to review what is a summary judgment, and I found this explanation.

In England and Wales, the court rules for a party without a full trial when “the claim, defence or issue has no real prospect of success and there is no other compelling reason why the case or issue should be disposed of at a trial.”

A party moving (applying) for summary judgment is attempting to avoid the time and expense of a trial when, in the moving party’s view, the outcome is obvious. Typically this is stated as, when all the evidence likely to be put forward is such that no reasonable factfinder could disagree with the moving party, summary judgment is appropriate. – Wikipedia

Case Background

It was difficult to find much information about the summary judgment. However, we found this from the Jones Day law firm’s website.

Jones Day successfully defended SAP, one of the world’s leading producers of software for the management of business processes, against trade secret and antitrust claims in a lawsuit filed in the Northern District of California. Teradata, a database software company, filed suit in 2018, alleging that SAP misappropriated trade secrets during a joint project between the parties, and used those trade secrets to develop HANA – SAP’s revolutionary in-memory database product. Teradata further alleged that SAP was attempting to monopolize the database market, and unlawfully tied HANA together with SAP’s ERP software, known as S/4HANA, in violation of federal antitrust law. Teradata sought significant damages, in addition to injunctive relief. – Jones Day

So that is just the background information on the case. Now we get to the summary judgment.

About the Summary Judgement

Jones Day persuaded the district court to grant summary judgment on both of Teradata’s core claims. The court held, first, that contracts between the parties required Teradata to mark the alleged trade secrets as confidential, which Teradata did not do, and gave SAP ownership rights over modifications to SAP’s products resulting from the project. – Jones Day

That is quite a ridiculous statement. When two companies engage in a partnership, the company with IP does not have natural protection from that IP being copied by the other partner. This means that any partnership involving IP, which there often is, is simply a transfer of IP from one partner to the other.

However, I will also say that I disagreed with the IP portion of the case, or I never saw the evidence of SAP stealing IP from Teradata. I explained my position in the September 2018 article How True is SAP’s Motion to Dismiss Teradata’s Complaint.

This quote is from that article.

Teradata overstates its intellectual property through the original complaint, implying that they have some secret sauce no one else has. The designs that are similar to HANA are all over the place. AWS has Redshift, which is identical in design to HANA. And both Google Cloud and AWS have Redis, which is also similar to HANA (although in a different dimension). Reading Teradata’s complaint is symptomatic of commercial software companies perpetually overstating how unique their software is. However, the claim is axiomatic; declarations of uniqueness and innovation correlate with commercial software sales positively. Teradata’s complaint also exclaims how employees are made to sign NDAs so that Teradata’s technology secrets are not distributed outside of Teradata. But neglects to mention how much Teradata benefits from those same employees add to Teradata’s IP. Apparently, by inference, all of the Teradata IP was created by executives and not employees. And where did Teradata initially develop its database from? That is right, from using database concepts that were in the public domain.

As with pharmaceutical companies which commercialize research that is performed by universities and is funded by taxpayers through the National Institutes of Health, as soon as a software vendor wants to sell software, the public domain very conveniently recedes into the background, the narrative of “their IP” is wheeled out front and center.

However, it is clear that SAP did take some of Teradata’s IP. But SAP has been taking IP from many sources because it knew so little about databases when it first started developing HANA which is something I cover in the article How SAP Admitted in Court Documents to Copying from Open Source MySQL.

You see, SAP would never admit to customers that it copied from open source, but it was essentially forced to as it went through the lawsuit with Teradata.

In addition to MySQL, SAP copied from Oracle as I cover in the article Did SAP Simply Reinvent the Wheel with HANA?

Furthermore, SAP bought a database that is used as the basis for HANA, and hid this from the public as I cover in the article Did Hasso Plattner Students Invent HANA?

SAP Engaged in No Tying Arrangement?

In analyzing the case against SAP, I concluded that the anticompetitive portion of the case was strong. The next section of the quotation addresses the court’s judgment on this part of the case.

The court held, second, that Teradata’s antitrust claims failed because Teradata failed to properly define a tying or tied market, and failed to show that SAP caused actual injury to competition in the markets Teradata did define. – Jones Day

SAP constantly markets its products by tying them to other products. Typically SAP uses the tie to the ERP system. If you look at basically all of SAP’s marketing, they constantly present the idea that one must buy SAP products in unrelated areas of the software to get the benefits of SAP. Furthermore, SAP, like other mega-vendors, sells its software in a bundle. If you reject the overall bundle, which normally includes items that the software buyer does not need, then the discount offered changes. I covered this in the article How SAP Plans to Markup Cloud Service Providers.

How SAP’s Tying Arrangement With HANA Worked and Continues to Work

In the case of HANA, it proposed that its applications would only work as SAP defined and SAP originally designed by using the HANA database. All of this is combined with enormous exaggerations as to how HANA performs versus competing options.

This naturally pushed out Teradata from many accounts. This is impossible to contradict as the SAP marketing material, and the sales communication and SAP consulting company ecosystem communication on this point is straightforward to prove.

SAP Uses AntiCompetitive Tactics As Part of Its Overall Strategy

SAP engages in textbook tying arrangement behavior, not merely against Teradata. I covered another instance of this tying arrangement behavior in the article SAP’s Indirect Access Violates US Tying Arrangements.

It is amazing to see a court state provide a summary judgment for something that is the opposite of what is common knowledge in the SAP space. Although, only those who are free to speak would admit this. For example, none of SAP’s many ecosystem partners would ever admit that SAP competes in this way. And there are only a few entities that publish material that explains how SAP actually functions. One is us, and the other would be Upperedge. Nearly all of the companies in the SAP ecosystem are so reliant on SAP for their revenues that they would never provide such information in public.

A Case That is Still Not Over

In November 2021, the district court granted summary judgment in favor of SAP dismissing almost all of Teradata’s claims. The district court then certified the case for immediate appeal after Teradata agreed to dismiss or stay the remaining claims. – Paul Weiss

Therefore, Teradata can and will most likely appeal.

One problem with this information is that it is provided by the attorneys that represent SAP. The summary judgment provided support for claims by both plaintiffs (SAP and Teradata), however by granting a summary judgment that dismissed two of the most important claims by Teradata, the court was stating that SAP should win the case.

Conclusion

The interest level in the case has dramatically dropped off as there was so little coverage of this summary judgment.

The judgment by the court did not make sense in two ways.

Problematic Item #1

The court placed all of the responsibility on Teradata to define its IP, thus allowing SAP to take what it liked from the partnership. This is a long-term strategy that SAP has used to vacuum IP from other software companies. I covered this strategy back in January of 2010 in the article Time for SAP xApps Program to Die.

However, on the other hand, Teradata greatly exaggerated its IP and how much it has pulled from the public space to create its technology.

Problematic Item #2

The court ruled incorrectly on the second point of tying arrangements and unfair and anti-competitive trade practices. SAP uses inequitable and anti-competitive trade practices as part of its business strategy. And I can easily provide many cases or examples of these anti-competitive practices.

The court issuing this judgment on the issue of anticompetitive behavior is equivalent to saying the moon is made of cheese.