On June 21, 2018, Teradata filed a civil lawsuit against SAP claiming that SAP stole its trade secrets and was using monopolistic practices to squeeze Teradata out of the enterprise data warehousing market. On August 31, 2018, SAP responded with a data-based (pun intended) motion to dismiss, which essentially says we didn’t do it and even if we did, it is too late to file suit. SAP’s motion to dismiss is peppered with 74 references to previous cases and points to 10 additional statutes and rules. SAP requested that all claims be dismissed and that Teradata take its troubles elsewhere.
In Teradata’s lawsuit against SAP, Teradata charged that SAP had acquired trade secrets from Teradata while working on a joint venture with SAP to build a better bridge between the two company’s software platforms. Teradata claims that SAP used the information obtained during that joint venture to develop its S/4HANA ERP product.
We learned in SAP’s motion to dismiss that only one company had expressed any significant interest in pursuing the level of automation that SAP and Teradata were working on. Perhaps this explains why the joint venture was terminated.
Teradata also claimed that by SAP introducing S/4HANA (SAP’s integrated ERP and database platform), SAP is leaving companies with no choice but to migrate to it due to the high cost of switching ERPs. S4/HANA, Teradata claims, effectively block them out of competing for clients’ future data warehousing capabilities due to the S4HANA product already having similar capabilities.
The Teradata suit requested an injunction on SAP to stop using Teradata’s intellectual property and recover any software from customers that used it. It also requested damages in the form of lost profits.
Summary of SAP’s Responses to Each of Teradata’s Charges
With Regards to Pilfering Teradata’s Intellectual Property:
Claim 1: Stealing Trade Secrets
SAP says it didn’t do it. SAP then goes on to provide arguments that even if they did, there are a number of reasons that Teradata’s claim should be dismissed including the point that Teradata had an obligation under the terms of the non-disclosure agreements to notify SAP of what was to be deemed trade secrets or confidential. SAP points out that Teradata’s charge did not provide sufficient specificity to identify exactly what SAP is accused to have stolen and that Teradata cannot retroactively go back and claim trade secrets now at this late date. Finally, SAP stipulates that it is too late to file charges due to the statute of limitations having expired.
Claim 2: Copyright Infringement
Teradata claims that SAP reverse-engineered Teradata’s code in violation of copyright laws. SAP responded that Teradata’s copyright violation claims are flawed in that even if SAP did reverse engineer the code, it was done expressly for the purposes allowed by Teradata. It also states that the statute of limitations has also run out on this case.
With Regards to SAP’s Anti-Trust Violations:
Claim 3: Unlawful Tying
Teradata puts forward in its suit that SAP has tied its products together in such a way to do damage to Teradata. Tying is defined as the practices of selling two separate products as one, forcing the buyer to purchase something they don’t want if only one of the products is desired.
SAP essentially makes three points in response:
- S4/HANA is one product and cannot be separated
- SAP’s customers do have a choice to stay with their current ECC platform or to select another ERP system
- SAP has no market power in Teradata’s defined space
Claim 4: Monopolistic Practices
Teradata claims that through its practices, SAP is attempting to monopolize the data warehouse market. SAP’s response is that the data warehouse is not a market that SAP has any control over, and further, that the antitrust laws are there to prohibit limiting competition. The laws are not intended to disallow product innovation and competition.
Ruling on SAP’s motion to dismiss is expected to come in late October. UpperEdge anticipates that we will see Teradata file an amended complaint or a specific response to SAP’s motion.
UpperEdge considers this lawsuit to be a positive for SAP’s current and future customer base. The suit supports our views that customer choice promotes industry innovation. We recommend to all SAP current and potential customers to reinforce with SAP that client choice is important, and that SAP needs to compete on the merits of their product and not on tactics designed to freeze other competitors out.