"From the Prada Laptop Files"

It probably took a few minutes for the cackles of glee at Oracle/BMW Racing to become glum-faced groans once the full impact of the Arbitration Panel's recent decision sank in. The biggest shock for Oracle - seemingly uninvolved in the OneWorld ambush but a major behind-the-scenes player - was the same dilemma confronted by Adolf Hitler: How to successfully manage a two-front war. "What's the genesis of such clinical depression?" you ask. Here's a story from the "Prada Laptop Files."

There are a variety of strategies used by start-up challenges to become competitive in short order. There was the Bill Koch approach of gobbling-up and thereby eliminating his opponents through "merger." There's also the Machivellian strategy of hiring personnel for already filled positions in order to deny their services to the opposition. A more economical and opportunistic approach is the "turn-key" plan in which a newcomer acquires the assets of a another syndicate (generally at bargain discount) and simply changes the name - that's what Prada effectively did in 1997 when it acquired the America3 operation..

Sharing his predecessors' compulsion for 'instant gratification', in 2000 Larry Ellison set to the task of acquiring what was needed to repeat Bill Koch's achievement of winning the America's Cup as a rookie. Ellison had an advantage that didn't exist before AC-28: the availability of dozens of surplus ACC boats, mountains of equipment and tons of design information for literally pennies on the dollar. Why waste the $100 million+ and years spent by Koch and others to design new boats when previously tested and proven AC yacht designs were available on silver platters?

It must have seemed like a wonderful approach until Ellison's advisors disclosed the sad news that the Protocol Governing the Thirty-First America's Cup restricted competitors from acquiring "design information" developed for another team. Not to be denied, a simple enough change in plans was made - an Ellison subsidiary, Team Sayanara, Inc., would front for Oracle and acquire assets from other teams on its behalf. It must have seemed like a perfectly elegant evasion, and Ellison's highly paid San Francisco lawyers no doubt felt that for once they had earned their fees in suggesting this advice.

Armed with this evasion strategy, Ellison hired San Diego legal beagle Bill Dysart, to go on a shopping trip to Alabama ostensibly on behalf of Team Sayanara, Inc. He soon came back with the two ACC boats built for Aloha Racing's 1999 campaign purchased from bankruptcy for a reported $2 million. While Aloha's 2001 US tax return and Bankruptcy Court filings specify what was paid by Ellison (at least through the Bankruptcy Court) the description of what was purchased by Team Sayanara, Inc. is left intentionally vague and ambiguous, presumably to cloak Sayanara's acquisition of more than just the two boats, assets such as the massive collection of design information such as lines plans, laminate schedules, ratings certificates and test tank models purchased and owned by the Foundation.

Given his run-ins with the authorities, one assumes that the good Dr. Andrews did not overlook anything of value in preparing the Bankruptcy Court asset schedules or in disposing assets without Court approval - only a fool would believe that the "package" purchased by Sayanara only consisted of a pair of oversized aquariums. If that were in fact the case, why in the world was Ian "Fresh" Burns, Aloha's principal designer, hired by Oracle when Bruce Farr was already on retainer and never collaborates with anyone. Then again, Ellison might have seen some speed in the Aloha pigs that eluded the rest of the world.

Its important to have a context for judging the propriety of a team's acquisition of another team's assets, particularly those falling into the category of "design information." Until recently it was generally accepted that acquisition of another team's design information would violate the "separate designers" restriction of the Protocol but this was practically interpreted as additionally requiring proof of a team's actual usage of the information before a winning case could be made to the Arbitration Panel. This presented a fairly substantial burden since competitors are prohibited from reconnoitering their opponents and in the absence of a snitch or fortuitous disclosure, the proof available is probably circumstantial at best. The Panel's recent decision and penalization of OneWorld Challenge radically altered that conventional wisdom and in the process, compelled reassessment of information not previously thought to constitute a Rules violation.

The Arbitrators recently ruled that it is a profoundly serious breach of the Protocol for a team's agent (in that case former TNZ designer Ian Mitchell) to personally possess design information developed for another syndicate. Forget the employing syndicate's non-usage of the information - that's irrelevant. Forget a team's lack of awareness of its agent's private possession or rights of privacy - knowledge is irrelevant. Forget that the agent had a legitimate right to possess or own the design material - that's no excuse. Based on the Panel's ruling, all that need be shown to justify the competitive equivalent of the death penalty, is an agent's private possession of design information created for someone else.

If the story stopped here I would have my ass kicked for wasting everyone's time with unproven conjecture. "Where's the proof?" you ask. "There must be a written contract showing what Ellison bought" you observe. "Unless this is just more of Deep Throat's 'shit-stirring', show us something tangible" you demand. Okay.

In 2000 the San Francisco Challenge (aka AmericaOne) agreed to the sale all of its assets to Team Sayanara, Inc, the Ellison alter ego and now Oracle/BMW Racing. Because the seller was a non-profit California organization, the sale required the approval of the California Attorney General which necessitated that the proposed Purchase Agreement be filed with the State, all terms fully disclosed and al relevant documentation be made available for public review. San Francisco Challenge and Team Sayanara, Inc. complied with these requirements by filing "Purchase Agreement" dated June 15, 2000 with the Office of the California Attorney General. Any change in terms after the original Purchase Agreement was filed, required mandatory and supplemental filings with the Attorney General but this did not occur. In due course the Attorney General approved the Purchase Agreement as submitted and Team Sayanara paid for and became the new owner (on behalf of Oracle) of AmericaOne's assets.

Since this is a public record (although few outside the Oracle camp were aware of its existence), we were successful in obtaining a copy of the Purchase Agreement, which we have decided to share with our loyal readers. While admittedly not the clearest reading copy (requests for a more legible version have gone ignored), it is sufficiently clear and specific in its identification of the assets Ellison purchased from AmericaOne. Besides what was previously disclosed by Oracle's PR hacks, the June 15, 20002 Purchase Agreement discloses that Team Sayanara, Inc. purchased and acquired a massive amount of design materials developed by AmericaOne and including :

Construction drawings and plans for AmericaOne's IACC boats (US-49 and US-61), geometry for the fins, rudders and bulbs, all tangible personal property belonging to AmericaOne and a license for AmericaOne's America's Cup intellectual property rights.

Unless I am mistaken, the materials purchased by Ellison are the type of "design information" the Protocol strictly prohibits a competitor from acquiring or possessing - if Ian Mitchell's dusty lap top and zip disc deserved a four point penalty one can only imagine how severe the sentence would be for a violation of this magnitude. Moreover, how will the Arbitrators react when they discover they have been manipulated and mislead by Oracle in its earlier application for permission to obtain design materials for the boats they had purchased (ostensibly for safety reasons) when, it is now clear, they already possessed those materials for the AmericaOne boats and likely had them for the Aloha fishtanks? One can safely predict that the Arbitrators' shock and extreme disappointment will be reflected in the penalty they impose.

Larry Ellison and his posse were probably just starting to feel comfortable when the Arbitrators suddenly changed the rules - now Oracle has to do what OneWorld recently managed to pull-off: fighting simultaneous battles on the land and water. And while they are figuring out how to accomplish that exceedingly difficult task, they should also be wondering what other tidbits the Italians were planning to use if they had been successful in beating OneWorld -- keep your eyes open for the next discovery from the "Prada Laptop Files."

12/20/2002