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May 31, 2016

Oracle, HP legal fight starts in $3bn Itanium chip case

News: HP accuses Oracle for the decline in sales of Itanium-based systems.

By CBR Staff Writer

The legal battle between Silicon Valley giants Oracle and Hewlett-Packard is set to intensify, as the jury is scheduled to hear opening arguments in the five-year old case after HP accused Oracle for the downfall of its Itanium chip-based systems.

HP is seeking $3bn in damages from Oracle in the lawsuit that claims the database major was responsible for a fall in sales of one of its revenue generating products.

The legal battle is set to open for trial in the state court of San Jose, California, the Wall Street Journal reported.

The hearing comes just a week after a court ruled that Google did not violate copyright law in using Oracle’s Java software.

The trial, which is expected to run for four to five weeks, may see Oracle co-chief Executive Safra Catz and Ann Livermore, a director of HP spinoff Hewlett Packard Enterprise called as witnesses, the publication said.

The lawsuit was filed in 2011 in a reaction to an Oracle’s announcement that raised concerns over the prospects of HP’s flagship computers. The clash is linked to other disputes between the two technology majors.

In line with other manufacturers of server systems, HP included chips from Intel in its hardware. However, some of its highly-priced machines used Itanium-based chips.

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Intel and HP developed Itanium in 1994 on the expectations of rolling out a calculating engine as an innovative product to Intel’s widely used x86 family.

While Itanium-based machines gained popularity among those looking for reliability, most of the other server makers’ customers saw x86 chips as more lucrative.

According to an estimates by International Data Corporation (IDC), annual sales of Itanium-powered systems fell sharply to $876m in 2015 from $3.1bn in 2011.

HP claimed Oracle’s acquisition of Sun Microsystems in January 2010 accelerated the decline in sales of Itanium-based products.

Oracle’s purchase resulted in the company becoming a rival to HP, though it remained an important partner for many years, the publication said.

Oracle rejected HP’s allegations and said that the fall in Itanium-based products was led by other factors.

In September 2010, another confrontation rose between the two companies following Oracle’s job offer to a former chief executive of HP Mark Hurd. Oracle hired Hurd as its co-president.

In that case, HP argued that Oracle’s access to trade secrets possessed by Hurd would result in unfair competition. However, the companies settled the issue several weeks later.

In March 2011, Oracle announced that it would cease releasing new versions of its database and other software for Itanium-based systems.

The company said in a news release that private conversations with senior Intel managers revealed that "Itanium was nearing the end of its life." It also said other software firms had discontinued developing new programs for the Itanium chips.

In reply to Oracle’s announcement, Intel and HP said that they would continue with Itanium-based machines.

In June 2011, HP sued Oracle for violating the settlement reached over the Hurd dispute. The lawsuit argued that Oracle obliged to continue supporting Itanium in the settlement.

"Immediately after issuing its announcement, Oracle exhorted its salesforce to strike at HP’s base of Itanium customers to try to switch them to Oracle’s Sun platform," HP alleges.

In August 2012, a judge ruled in favor of HP, saying that the 2010 agreement obligated Oracle to remain committed to developing Itanium versions of its products free of charge as long as HP sold such systems.

After the ruling, Oracle restarted releasing software programs for Itanium. It argues that HP does not deserve the damages it is claiming.

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