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Some Oracle Software Licenses Do Not Allow Copying by Third-Party Servicer

Wednesday, February 19, 2014

By Anandashankar Mazumdar

Feb. 18 --The terms of some software licenses governing Oracle enterprise software did not grant a third-party software services provider either explicit or implicit licenses to make copies in order to serve Oracle licensees, the U.S. District Court for the District of Nevada ruled Feb. 13 (Oracle USA, Inc. v. Rimini St., Inc., 2014 BL 39467, D. Nev., No. 2:10-cv-00106-LRH-PAL, 2/13/14).

Granting partial summary judgment on some of the defendant's defenses, the court however allowed the third-party service provider to seek application of the terms of the software license between Oracle and its licensees, even though the service provider was not a party to the license. With respect to some of the terms, the court found that the contract did not grant explicit or implicit rights to the third party to make copies.

The ruling--being a mixed ruling at the summary judgment stage and applying to specific contract terms--does not necessarily have widespread implications in its interpretation of the licensing terms.

However, the fact that the defendant was able to seek the protection of the contract in the first place seems to be a victory for software licensees who want to outsource software services to a third-party competitor and do not necessarily want to be limited to the services of the original software developer.

Rimini Street Services Oracle Licensees

Computer hardware and software maker Oracle Corp. of Redwood City, Calif., was founded in 1977 as Software Development Laboratories by Lawrence J. Ellison. Today, it is the world's second-largest software company and a leader in the field of enterprise software--software related to the internal operations of an organization, such as sales and personnel management--which it licenses to business entities under numerous brand names, including PeopleSoft, J.D. Edwards and Siebel. Oracle also offers support services for users of its products.

Rimini Street Inc. of Las Vegas was founded in 2005 by Seth A. Ravin and it competes with Oracle in the software support market and serves numerous clients who are licensees of Oracle software.

For example, Oracle, periodically issues software updates for its products. However, because of the critical role that the software plays in the operations of its licensees, the updates cannot be incorporated without first being tested and verified in an isolated computer environment to ensure that it operates correctly. Both Oracle and Rimini Street offer such services to Oracle licensees.

Oracle alleged that in offering such services, Rimini Street was making unauthorized copies of several Oracle computer programs. In 2010, Oracle USA Inc., Oracle America Inc. and Oracle International Corp. sued Rimini Street, alleging copyright infringement.

Rimini Street asserted several defenses, arguing that Oracle had expressly and implicitly conveyed a license for such copying. Oracle moved for summary judgment on these defenses.

Four Separate Licensing Contracts Examined

In addressing these arguments, Judge Larry R. Hicks examined licensing agreements between Oracle and four licensees that were using Rimini Street's services: the municipal government of the City of Flint, Mich., Pittsburgh Public Schools, Giant Cement Co. of Harleyville, S.C. and Novell Inc. of Provo, Utah.

The court first rejected Oracle's argument that Rimini Street could not claim to have an explicit or implicit license to make copies of the software deriving from the licensing agreements between Oracle and its licensees.

According to Oracle, its license authorized copies made only from the media--whether on discs or through the Internet--that Oracle had conveyed to its licensees in conjunction with their initial transactions. Rimini Street could not say for sure what the source of its copies were when servicing any specific client. They might have come from direct downloads from the Oracle website or from copies coming from other sources. The court rejected Oracle's argument, concluding that the right to install and use software conveyed by the licenses was separate from the specific installation media conveyed with the transactions:

Oracle's initial argument is based on the flawed assumption that the rights to use and install the licensed software are restricted and tied solely to the specific software installation media delivered by Oracle, and is in direct contention with the express language of the City of Flint's license as well as federal copyright law. In the City of Flint's license, Oracle granted the City Flint “a perpetual, non-exclusive, non-transferable license to use the licensed Software.” …

“Software” is defined as “any or any portion of the then commercially available global version(s) of the binary computer software programs.” … Nowhere does the licensing agreement require the City of Flint to install the licensed software from the specific installation media provided by Oracle. Rather, the license grants the City of Flint the right to install and use “version(s)” of the licensed software. This is separate from, and in contrast to, a right to install and use only the provided software installation media.

 

Citing Harris v. Emus Records Corp., 734 F.2d 1329, 222 U.S.P.Q. 466 (9th Cir. 1984), the court said that federal copyright protection also applies only to the licensed software, not to specific software installation media that might hold such software at any particular time.

Two Contracts Found to Favor Oracle

Turning to the specific contractual provisions, the court found that with respect to the Flint license, Rimini Street did not have explicit rights to make copies, because only the city government was authorized to make such copies. Similarly, the court found that the Pittsburgh Public Schools license also did not grant explicit authorization to Rimini Street.

The court thus granted summary judgment in favor of Oracle on the explicit authorization defense in these two instances.

However, with respect to the Giant Cement license, the court found outstanding questions of material fact that prevented summary judgment. Specifically, it was unresolved whether Rimini Street had made copies for archival purposes or whether it had accessed the source code of the software.

Finally, turning to the Novell license, the court found that Novell was permitted to direct a third party such as Rimini Street “to install the software for archival, emergency back-up, or disaster recovery purposes.”

Rimini Street also argued that Oracle had granted implicit authorization for it to make copies because “for years Oracle shipped back-up copies of its customer's software installation media to Rimini's facilities.”

However, the court found that the licensees had not told Oracle that this shipping destination was actually meant for Rimini Street's support services, but only that the address had been a “secondary offsite backup location.” Furthermore, the court found that there was evidence that Rimini Street and the licensees had intentionally withheld this information from Oracle so that it would not know that the backup copies were being received by Rimini Street.

The court concluded that there was no evidence in the record that Oracle had known that Rimini Street was using these shipments nor that Oracle had otherwise encouraged Rimini to make copies of it. The court thus granted summary judgment in favor of Oracle on Rimini Street's implied license or consent of use defense.

Oracle was represented by Dorian E. Daley of Oracle Corp., Redwood City, Calif. Rimini Street was represented by Leslie A.S. Godfrey of Greenberg Traurig LLP, North Las Vegas.


Text is available at http://www.bloomberglaw.com/public/document/Oracle_USA_Inc_et_al_v_Rimini_Street_Inc_et_al_Docket_No_210cv001.

 

To contact the reporter on this story: Anandashankar Mazumdar in Washington at amazumdar@bna.com

To contact the editor responsible for this story: Naresh Sritharan at nsritharan@bna.com

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