Oregon Immune from Oracle America's Infringement Claim

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By Anandashankar Mazumdar

Nov. 25 — The transfer of Oregon's failed health care insurance exchange to a state government agency did not waive the state's sovereign immunity from federal copyright claims, the U.S. District Court for the District of Oregon ruled Nov. 18.

The court rejected an argument by Oracle America Inc.— which said it had not been paid for development work on the exchange—that by transferring the remnants of the exchange to a state agency, the State of Oregon had agreed it could be sued in federal court for copyright infringement.

State Insurance Exchange Fails

After Congress passed the Affordable Care Act of 2010, the State of Oregon created the Oregon Health Insurance Exchange Corp., known as “Cover Oregon,” to administer a health insurance exchange under the law.

Cover Oregon entered into an agreement with computer systems and software developer Oracle America Inc., a subsidiary of Oracle Corp. to develop the digital platform for the exchange.

Oracle America sued Cover Oregon in August 2014 for failure to pay for services and royalties. In March, the state legislature passed a bill to dissolve Cover Oregon and transfer it to the state's Department of Consumer and Business Services. The legislation also substituted the state and the department for any litigation to which Cover Oregon was a party.

In June, the department moved for judgment on the pleadings on the grounds that as a state entity it was entitled to sovereign immunity from Oracle America's copyright claim under the 11th Amendment to the U.S. Constitution, which immunizes states against federal lawsuits by citizens of another U.S. state or a foreign state.

Cover Oregon Could Not Waive Immunity It Didn't Have

Cover Oregon was not protected by 11th Amendment immunity when it entered into a licensing agreement with Oracle America, because it wasn't a state agency.

In its agreement with Oracle, Cover Oregon consented to federal court jurisdiction over disputes, but it could not waive the state's immunity, the court said. Furthermore, the legislation that transferred Cover Oregon's remnants to the state agency did not transfer any waiver of immunity, because such waiver would have to be explicit.

However, the State of Oregon was not off the hook for Oracle's copyright claims for a separate licensing agreement that the Department of Human Services' Oregon Health Authority had entered into with Oracle. The court found that in that second contract, the state had explicitly waived its immunity.

The court's ruling was issued by Judge Anna J. Brown.

Oracle America was represented by Schwabe, Williamson & Wyatt, Portland, Ore. The Oregon state government was represented by Markowitz Herbold Glade & Mehlhaf P.C., Portland.

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

To contact the editor responsible for this story: Mike Wilczek in Washington at mwilczek@bna.com

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