Hewlett-Packard Co. v. Oracle Corp. is a California case over Oracle’s March 2011 announcement that it would stop developing software for HP’s Itanium-based servers. In a bifurcated trial, the Santa Clara County Superior Court held that a September 2010 settlement agreement between the companies required Oracle to continue to offer its product suite on HP’s Itanium platforms until HP stopped selling them, and a jury then awarded HP $3.014 billion in damages.[1] The Court of Appeal affirmed the judgment in June 2021, and the Supreme Court of the United States denied Oracle’s petition for review in May 2022.[1][2]
Background
According to the Court of Appeal, HP’s high-end Itanium servers ran HP’s proprietary HP-UX operating system on the Itanium microprocessor, and over 80 percent of HP’s Itanium systems used Oracle’s database software. “Porting” is the process of making software written for one operating system and processor architecture available on another. About 99 percent of Oracle’s porting work to Itanium happened without any contract or payment between the companies, and once Oracle ported a product it typically supported customers on that platform under its lifetime support policy.[1]
Oracle completed its acquisition of Sun Microsystems, an HP competitor in servers, in January 2010. In September 2010 Oracle hired HP’s former chief executive Mark Hurd, and HP sued Hurd the following day. The companies settled that dispute in an agreement executed on 20 September 2010. Its first paragraph, which the parties called the “reaffirmation clause”, read in part: “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.”[1] During the negotiations, HP had proposed adding an express reference to porting to Itanium, and Oracle rejected it.[1]
The dispute
On 22 March 2011 Oracle issued a press release titled “Oracle Stops All Software Development For Intel Itanium Microprocessor”. It stated that Oracle would “continue to provide customers with support for existing versions of Oracle software products that already run on Itanium”, and a second announcement the next day listed the next versions of Oracle software that would not be available on Itanium.[1] HP filed suit on 15 June 2011, alleging that Oracle had breached the settlement agreement.[4]
HP’s position was that the agreement required Oracle to continue to offer and support any Oracle product that was offered on Itanium when the agreement was signed. It claimed breach of contract, breach of the implied covenant of good faith and fair dealing, promissory estoppel and other causes of action.[1] Oracle’s position was that the reaffirmation clause did not create a binding obligation to continue offering its products on Itanium. Oracle also filed a cross-complaint alleging that HP had misled Oracle, customers, investors and the public; the jury rejected Oracle’s Lanham Act claim in 2016.[1]
Decision or outcome
Phase 1 (2012). After a 12-day bench trial in June 2012, the trial court issued a 45-page statement of decision on 28 August 2012. It held that the reaffirmation clause was unambiguous and that the 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”. It construed “product suite” as the Oracle products offered on Itanium when the agreement was signed, including new releases, versions and updates, and held that the obligation applied without charge to HP until HP discontinued the sale of its Itanium servers.[1] In September 2012 Oracle announced that it would comply with the ruling and continue building the latest versions of its software for Itanium, while stating that it intended to appeal.[1]
Delay and phase 2 (2013 to 2016). Oracle’s anti-SLAPP motion was denied as untimely in April 2013, and its appeal from that order stayed the case until the Court of Appeal affirmed the denial in August 2015.[1] The phase 2 jury trial took place in May and June 2016. The jury found that Oracle had breached the contract and the implied covenant and awarded HP $1.699 billion for past lost profits and $1.315 billion for future lost profits, a total of $3.014 billion. The trial court entered judgment for that amount on 20 October 2016 and denied HP’s request for prejudgment interest.[1] In its next quarterly filing Oracle stated that it believed it had meritorious defenses and would challenge the judgment on appeal.[4]
Appeal (2021 and 2022). On 14 June 2021 the Court of Appeal affirmed. It concluded that the reaffirmation clause requires Oracle to continue to offer its product suite on certain HP server platforms, that the breach and implied covenant claims were properly put to the jury, and that the damages award did not penalise Oracle’s right to appeal and was not impermissibly speculative. It also rejected HP’s cross-appeal on prejudgment interest.[1] HP Inc. reported that the California Supreme Court denied review on 29 September 2021 and that on 12 October 2021 Oracle paid approximately $4.65 billion to satisfy the judgment with interest, an amount shared equally between HP Inc. and Hewlett Packard Enterprise.[3] The Supreme Court of the United States denied Oracle’s petition for certiorari on 16 May 2022.[2]
Significance for software licensing and SAM practice
The case is about a platform commitment between a software vendor and a hardware vendor, not about a customer’s licence. It shows that whether new releases of licensed software will be available on a given platform can depend on contracts that customers never see. Oracle’s March 2011 announcement distinguished between support for existing versions already running on Itanium and development of new versions, which would not be offered there.[1] For organisations that hold support contracts, that distinction affects upgrade rights: support may continue while the path to newer releases on the same hardware closes. See Oracle technical support policies for how Oracle describes support levels and release coverage.
The Court of Appeal noted that Oracle’s executive responsible for software development acknowledged that the 2011 decision was the first time Oracle had stopped porting to a server architecture that was still being sold and marketed, and that customers running Oracle software on Itanium would have to choose another hardware platform to receive future releases.[1]
Lessons learned
- General wording can bind. The clause at issue was two sentences long, and Oracle had rejected HP’s attempt to add a specific reference to Itanium porting. The courts still held that “Oracle will continue to offer its product suite on HP platforms” created an obligation Oracle could not end at its discretion.[1] When an agreement promises continued availability, read it as a potential obligation, and when you rely on such a promise, record what it covers.
- Support for existing releases is not the same as new releases. Oracle’s announcement promised continued support for existing versions on Itanium but no new versions.[1] When assessing a platform, check separately whether your agreements and the vendor’s policies cover future releases on it.
- Litigation is slow compared with hardware cycles. HP filed in June 2011, the final appeal ended in May 2022, and payment was made in October 2021.[4][2][3] HP’s damages expert testified that many Itanium customers decided to move to other platforms between March 2011 and September 2012.[1] Customers cannot count on a court ruling arriving in time to settle a platform decision.