Software maker SAP AG admitted a subsidiary had carried out inappropriate downloads of documents belonging to archrival Oracle Corp but said on Tuesday SAP itself had not had access to that material.
Responding to Oracle's charges of intellectual property theft, SAP Chief Executive Henning Kagermann said its TomorrowNow unit should not have made some of the downloads but that firewalls had protected the material from SAP's view.
Even a single inappropriate download is unacceptable from my perspective. We regret very much that this occurred, Kagermann said, striking a more conciliatory note in contrast to recent SAP declarations that it would aggressively defend itself in the case.
SAP, the world's biggest maker of business software, said both it and TomorrowNow had been asked to supply certain documents to the U.S. Justice Department and that both intended to cooperate fully with the request.
A SAP spokesman declined to comment further on the Justice Department request, which could lead to criminal proceedings.
SAP shares were down 1.4 percent at 37.44 euros by 1042 GMT, the leading decliner in the German blue-chip DAX index which was 1.2 percent stronger.
JP Morgan software analyst Stefan Kuppen said: Looking at the details they've given, it looks like things went wrong at the subsidiary but it doesn't look like a concerted effort at industrial espionage.
At the moment, it's primarily a PR battle between Oracle and SAP, and from that point of view I think SAP's response makes sense, Kuppen added. But it's always tough to make a call before you get to the actual court hearing.
SAP said it had installed a new executive chairman to help ensure proper practices at TomorrowNow, a specialist in support for Oracle legacy software which SAP bought in 2005 to help it win over Oracle customers.
TomorrowNow has annual sales of 15.7 million euros ($21.4 million) and 157 staff.
Kagermann said SAP, the world's biggest maker of business software, was open to all options including a settlement but expected no big developments before the next hearing scheduled for September at the U.S. District Court in San Francisco.
ORACLE CLAIMS SUCCESS
Oracle, which has spent $20 billion in recent years buying up companies to challenge SAP's leadership in business applications, said it had succeeded in forcing SAP to disclose its activities.
SAP CEO Henning Kagermann has now admitted to the repeated and illegal downloading of Oracle's intellectual property, Oracle lawyer Geoff Howard said in a written statement.
Oracle filed suit to discover the magnitude of the illegal downloads and fully understand how SAP used Oracle's intellectual property in its business, he said, adding that Oracle would also cooperate with the Justice Department probe.
Database specialist Oracle sued SAP in March, alleging corporate theft on a grand scale through the use of customers' online access codes to steal copyrighted software.
SAP said on Tuesday it had found that most of TomorrowNow's downloads had been for the legitimate purpose of helping customers, but a few had been inappropriate.
Kagermann said SAP's so-called Safe Passage program to win customers away from Oracle would continue and that he did not expect the case to have any impact on SAP's U.S. business.
SAP says it has so far won about 740 Oracle customers through the Safe Passage program.
Kagermann declined to comment on any financial provisions SAP might have made for the lawsuit ahead of second-quarter results due for release on July 19.
Propelled by its recent string of acquisitions, Oracle is increasingly competing with SAP's core business of supplying software to automate and streamline processes ranging from human resources management to budgeting at large enterprises.