San Francisco: Stepping up its legal battle against German rival SAP AG, business software maker Oracle in its latest filing in the federal court accused SAP of knowingly buying and then embracing an illegal operation set up to steal Oracle's products and customers.

The current allegation, which is a follow up of the 2007 fraud case filed in San Francisco federal court, comes on the eve of SAP declaring its second-quarter earnings report.

The 16-month-old lawsuit focuses on TomorrowNow, a software maintenance specialist that SAP bought in 2005 to counter Oracle's $11.1 billion acquisition of PeopleSoft. As the prices of TomorrowNow's offerings were lower than that of Oracle, SAP hoped this advantage would help lure customers away from its rival in business applications software. But Oracle alleges that TomorrowNow relied on a 'corrupt' strategy that included breaking into Oracle's computers to obtain confidential information.

Oracle's allegations contradict some of the public statements of SAP's chief executive, Henning Kagermann, who said the company's hierarchy in Germany and the United States never had access to any 'inappropriate' material obtained by TomorrowNow. In the documents filed Monday, Oracle alleged that SAP executives could enter TomorrowNow's system through an internal Web site. They could also routinely exchange material with the subsidiary through e-mail, the document said.

In June 2005, SAP executives even considered conspiring with TomorrowNow's management to cover up the covert activity as part of a plan called 'Project Blue,' Oracle alleged. The project was eventually scrapped, according to Oracle's legal brief. Oracle's lawyer wrote in Monday's filing, "For years, SAP profited from TomorrowNow's illegal business model, without breathing a word about it to Oracle, SAP AG's existing and prospective customers, or the investing public."

SAP spokesman Saswato Das declined to address Oracle's latest allegations. "Ultimately, it is the court that will determine the facts and remedies in this case and we prefer that this discussion take place in the legal system," Das said.

Signaling its disappointment with TomorrowNow's performance, SAP had last week disclosed plans to close the subsidiary in October.