HP Wins Itanium Lawsuit, Oracle Ordered To Continue Support

There will be smiling faces at Hewlett-Packard after it scored an important victory over Oracle,  when a California judge ruled that Larry Ellison’s company must continue supporting Intel’s Itanium platform as long as HP continues to sell Itanium-based systems.

In his ruling, Judge James P. Kleinberg of the Santa Clara County Superior Court agreed with HP executives who had argued that Oracle was contractually bound to continue support Itanium as part of a larger settlement between the two in the 2010 legal over Oracle’s hiring of former HP CEO Mark Hurd. He ordered Oracle to not only continue support HP’s Itanium-based platforms, but also to do so without charge to HP.

Damage Claim

The case now moves into the penalty phase before a jury, where HP reportedly is seeking as much as $4 billion (£2.6bn) in damages. HP executives have placed much of the blame for plummeting sales of their high-end Integrity and NonStop systems on Oracle’s decision last year to end development of its software for the Itanium platform.

The Itanium dispute represents the second significant court loss for Oracle in three months, following a jury decision in May that Google had not infringed on Oracle’s Java patents.

HP officials applauded Kleinberg’s ruling, saying in a statement that the ruling “is a tremendous win for HP and its customers. The Superior Court of the State of California, Santa Clara County, has confirmed the existence of a contract between HP and Oracle that requires Oracle to port its software products to HP’s Itanium-based servers. We expect Oracle to comply with its contractual obligation as ordered by the Court.”

Oracle Appeal

Oracle officials said in a statement that they will appeal the ruling, arguing that the decision to no longer port its software to the Itanium platform was made because they believe Intel is intent on ending development of Itanium, and that by HP had misled Oracle and the companies’ 140,000 or so joint customers. They also argued that the language in the settlement over Hurd did not constitute a contractual agreement.

“We know that Oracle did not give up its fundamental right to make platform engineering decisions in the 27 words HP cites from the settlement of an unrelated employment agreement,” Oracle officials said. “HP’s argument turns the concept of Silicon Valley ‘partnerships’ upside down.”

The court case was the latest step in a disintegrating relationship between two companies that at one time were close partners. That began to unravel in 2010, when Oracle bought Sun Microsystems. In the deal, Oracle also inherited Sun’s SPARC/Solaris hardware business, which competed directly with HP’s Itanium-based Integrity systems.

The hiring of Hurd further strained the relationship, as did HP’s decision later to replace him with Leo Apotheker, the former CEO of Oracle software rival SAP.

Contractual Obligations

Through all the twists and turns, HP officials said they continued to get reassurances from Oracle that despite the issues, the software company intended to continue to conduct business as usual with HP.

Executives with HP said that a paragraph in the Hurd settlement solidified that commitment. The paragraph said that the two companies “reaffirm their commitment to their long-standing 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.”

HP officials argued that Oracle’s decision six months later to end Itanium support in its software violated that agreement. During the 12-day trial, Oracle officials said paragraph was more of a “public hug” and that it was more about ensuring that Hurd stayed out of decisions regarding HP rather than obligating the software company to continuing to support Itanium.

The judge dismissed Oracle’s entire argument, saying that based on the history between the two companies, it was reasonable for HP to expect that Oracle would continue supporting all of HP’s platforms in its software.

“Here the evidence establishes that Oracle should continue to offer its product suite on Itanium through the life of the platforms,” Kleinberg wrote in his decision. “Oracle continued porting to HP’s PA-RISC and Alpha server platforms – the predecessors to Itanium – well beyond the time that HP stopped selling those servers. Oracle in fact has never stopped all software development for a hardware platform before the manufacturer stopped selling the servers.”

He said that the “Itanium decision was both inconsistent with the parties’ course of dealing and unprecedented in Oracle’s history.”

Jury Decision

It was Kleinberg’s duty to determine whether a contract between HP and Oracle existed. Now a jury will decide what penalties Oracle will have to pay. During the trial, HP executives that as much as 80 to 90 percent of customers using their Itanium-based systems ran Oracle software on them, a significant number that would greatly damage their business if those customers were forced to go to a competing platform.

HP officials had argued that Oracle’s Itanium decision was aimed at trying to force customers to the software company’s SPARC/Solaris systems, though many analyst argued that the key winner would be IBM and its Power platform.

Oracle officials said that Intel engineers had told them that they soon were going to end Itanium development in favour of their x86-based Xeon processors, a contention that was disputed by both HP and Intel executives. Oracle said HP officials knew of those plans, and misled Oracle and its customers by not admitting it.

Documents unveiled by Oracle showed that HP – by far the largest user of Itanium chips – paid Intel almost $500 million (£321m) over several years to continue developing Itanium. However, some analysts have argued that such arrangements are not unusual in the industry.

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