Oracle v. Rimini Street, 1/8/18, Ninth Circuit
Oracle sells software (e.g., Peoplesoft) that most people don’t know how to use, at least without an expert. Its software is extremely expensive and tailored to specific clients; those clients don’t update customized software without running the upgrade in “development environments,” aka a “sandbox.” In steps Rimini Street, an internationally known third party expert who assists Oracle (and many other types of) customers with software deployment and updates. Under the color of the client’s license to use Oracle software, Rimini would copy the client’s software and help the client with deployments and updates (“direct use”). However, Rimini would also use that copy of the client’s software to set up sandboxes that it would subsequently use to help other customers of Oracle using the same software (“cross-use”). The judge granted partial summary judgment to Oracle, and the jury subsequently found copyright infringement. The total award (including interest and fees) was over $124M. Rimini appealed. Held: Affirmed in part, reversed in part and remanded for further proceedings.
The opinion is 34 pages but is driven by two principles. The first is the legal principle that when “a licensee exceeds the scope of the license granted by the copyright holder, the licensee is liable for infringement.” LGS Architects, Inc. v. Concordia Homes of Nev., 434 F.3d 1150, 1156 (9th Cir. 2006).
That Oracle granted a license to the customer (and its agent/expert) to work with the customer’s licensed copy of the software, does not give the customer’s vendor the right to keep a copy of that software on its system for use with its future customers. In fact, under the license for one of its software programs, the software could only be copied to its customers facilities, but some of the software was copied to Rimini’s facilities off-site and outside the control of Oracle’s customers.
The second principle concerns market competition: Rimini competes with Oracle in the software support services space, which is a billion dollar industry. It probably thinks it can support Oracle’s software better and cheaper than Oracle itself. While Rimini could have performed its support services at the customer’s site, using the customer’s computers and the customer’s copy of the program, it had to be way more convenient to do that work remotely—after all, Rimini claims that it has over 1,500 customers worldwide. Oracle of course has no interest in making things more convenient for a competitor.
Perhaps Oracle’s customers should try to negotiate changes in the terms of use that would make it easier for them to work with third party software support vendors.
Footnote on California’s computer abuse law:
Oracle also sued Rimini for violation of California’s computer abuse law (“CDAFA”). See Cal. Penal Code 502 (also providing private right of action). As relevant to this case, CDAFA prohibits people from knowingly accessing, and without permission taking, copying and making use of data from someone else’s computer. Here, Oracle allowed customers to download files and programs from its website, but later changed its terms of use policy to prohibit customers from using automated tools, including robots and spiders. At first, Rimini stopped using automated processes to perform downloads, but started again, using automated processes to download at least hundreds of thousands of files from Oracle’s website. (It would have been very tedious to do this manually.) The court held that since Oracle granted customers permission to access files through it website, there was no violation of CDAFA, even though Rimini accessed those files using a prohibited method (automated versus manual download). The Ninth Circuit therefore reversed the verdict on the CDAFA-related claims, wiping away about $14M of the damages award.