Oracle Versus Rimini Slogs On In Second Decade
April 5, 2021 Alex Woodie
The lawsuit that keeps on giving, Oracle Versus Rimini Street, is generating news again, as the two companies continue to duke it out in federal court. But the battle spilled out into the streets with a pair of dueling press releases issued April 1 that had us wondering if it was all a joke. It wasn’t.
The last time we visited Oracle Versus Rimini Street was two years ago, when the Supreme Court ruled 9-0 in favor of Rimini on the issue of costs. After a jury decided that Rimini was violating Oracle’s copyright in its third-party software support business in 2014, the court issued a permanent injunction against Rimini and ordered it to pay more than $100 million in damages to Oracle.
The Las Vegas-based company appealed the damages, and another legal debate ensued over what the phrase “full costs” meant in the judgement. Oracle took it to mean things like expert witness fees, e-discovery expenses, and jury consultant fees, and so forth, whereas Rimini did not. In the majority opinion for the court, Justice Bret Kavanaugh explained that “full costs” means just that – costs, but not other expenses. “A ‘full season ticket plan’ means tickets, not hot dogs,” Kavanaugh reasoned. “So too, the term ‘full costs’ means costs, not other expenses.”
Rimini successfully whittled down its damages. But the lawsuit, which Oracle originally filed way back in 2010 – not to mention the countersuit against Oracle that Rimini filed the same year – was not over. Not by a long shot.
In April 2019, the court granted Oracle’s request to reopen discovery to determine whether Rimini Street was abiding by the permanent injunction issued by the court that ordered Rimini not to violate Oracle’s copyright for JD Edwards, PeopleSoft, and Siebel application software and Oracle database software.
On March 31, Federal Judge Larry R Hicks, presiding in the United States District Court in Nevada, issued findings on a range of topics. The short story is that it appears the two sides are headed towards another trial to determine whether Rimini’s new enterprise software support and maintenance techniques are violating the copyright and the permanent injunction, which was first issued in 2014 and renewed in 2018. The long story is a little more nuanced than that.
After losing the jury trial in 2014, Rimini announced that it was changing its business practices and implementing something called “Process 2.0.” Rimini said this new process, along with its Automation Framework (AFW) tools, would allow it to continue its third-party support practice without violating the permanent injunction that was issued against it.
However, Oracle was skeptical, and in court it alleged that Rimini was, in fact, continuing to violate its copyrights. In September 2020, after an “extensive, lengthy, and contentious discovery and motion practice” that involved no fewer than 43,000 pages of supporting documents, according to Judge Hicks’ March 31 ruling, the court found that Rimini had, indeed, violated some of Oracle’s copyrights with Process 2.0, specifically pertaining to PeopleSoft updates for two customers: the City of Eugene and Campbell Soup. Subsequent lawyering and judging will determine whether Process 2.0 for Siebel, JD Edwards, and Oracle database violated the injunction or not.
That set off another round of competing claims, some of which were settled with Judge Hicks’ March 31, 2021 findings. In it, the judge denied several of Rimini’s motion, including to separate Oracle’s primary 2010 lawsuit (Oracle I) from Rimini’s 2014 countersuit (dubbed Rimini II), in which it sought a declaratory judgment (in effect, a stamp of approval from the court that its new Process 2.0 was legit). The court also nixed Rimini’s request for a jury trial with Oracle I (although a jury trial is still on track with the Rimini II lawsuit).
“There is no separate and delineated line between Oracle I and Rimini II based solely on Process 1.0 and 2.0,” Judge Hicks wrote. He also denied Rimini’s request to exclude the testimony of Oracle’s expert witness, Barbara Frederiksen-Cross, who wrote a report that documents how Rimini’s Process 2.0 and AFW tools were violating the permanent injunction.
Since the court has yet to issue a final ruling on whether Process 2.0 is legal or not (outside of the two PeopleSoft customers), the court said that it can’t hold Rimini in contempt because of them. “It is inappropriate to make a determination as to the validity of these services for the first time in contempt proceedings, and therefore, the Court denies Oracle’s motion as it relates to the Dev Instructions and AFW Tools software outright,” it stated.
‘Better and Faster’
An issue before the court was whether Rimini’s “prototype/retrofit support process,” which is a component of its Process 2.0, violated the ban on unlawful cross-use. Oracle argues that it does, and cited evidence. When it first started rolling out an update, it took Rimini engineers nine days of development to prepare a PeopleSoft update for 10 clients. But the rate at which Rimini rolled out the update sped up by a factor of five in subsequent engagements, since quality assurance (QA) analysis didn’t need to be done, according Oracle, which said that was evidence of illegal cross-use and sharing among clients.
But the court seemed unsure of this reasoning. “It is common sense that Rimini’s engineers would get better and faster at conducting a task with more experience,” Judge Hicks wrote. “It would be inapposite to find that simply because Rimini’s developers are able to develop updates faster, with less testing, after they have built the update for another client, Rimini is violating the permanent injunction against cross-use.”
The court also seemed unsure of another Oracle accusation that Rimini was violating the permanent injunction by distributing updates to JD Edwards and PeopleSoft customers. “…[T]to say that Rimini is permitted to create derivative works within the scope of the license but that it can’t distribute the derivative work to its client would be an absurd result,” Judge Hicks wrote.
The nature of “source code” is also in dispute, specifically when it comes to JD Edwards World. According to the court, Oracle maintains that all forms of source code, including “open code” that customers can customize for tax and regulatory reasons, as well as “closed code” that is not public, both are protected by the copyright and therefore cannot be copied. Rimini maintains that “open code” by definition can be copied without violating the copyright. This is an open question, and will be taken up by an evidentiary hearing this September.
The evidentiary hearing will look into the “test plan” system used by Rimini to test client updates for PeopleSoft and JD Edwards. Oracle says that, because Rimini uses it with multiple clients, then it constitutes illegal sharing.
Oracle’s database is also featuring in the techno-legal drama. The court previous ruled that Rimini was prohibited from making copies of the Oracle database in the course of supporting its clients, some of whom use the Oracle database in conjunction with their ERP systems (JD Edwards World, obviously, only runs on Db2 for i, but EnterpriseOne and PeopleSoft applications can run atop Oracle’s eponymous database.)
The court, however, took exception to the previous ruling. “Rimini is permitted to make copies of these software programs when doing so is within the scope of the software license,” Judge Hicks writes. “If copies of Oracle Database are necessarily made when Rimini is providing support services for these other Enterprise Software programs, and those copies are expressly permitted under their respective licenses, the Oracle Database copies cannot be prohibited by the permanent injunction.”
Rimini had a mixed day in the courtroom, and the same can be said of Oracle. For instance, Oracle asked the court to impose so-called Rule 11 sanctions against Rimini, which enables a district court to sanction lawyers or parties “who submit pleadings for an improper purpose or that contain frivolous arguments or arguments that have no evidentiary support,” according to the site Upcounsel.
Oracle says Rimini’s legal moves were designed to drag out the case by effectively re-ligating reasonableness of the sanctions, which were ordered by the District Court and upheld by the Ninth Circuit. Oracle also asked the court to explain why the court was not holding Rimini in contempt for violating the permanent injunction.
Judge Hicks denied both of those requests. He also issued this warning. “The Court is concerned with both parties’ conduct,” he wrote. “Both sides appear to have behaved improperly, but the Court finds that sanctions are not appropriate under Rule 11, section 1927, or the Court’s inherent authority.”
Judge Hicks wrote that he has been impressed by the way the parties worked together over the past 11 years, but that he’s worried where things are headed now. “The Court is greatly concerned that these two motions indicate a breakdown in amicable proceedings and strongly cautions the parties against reaching a point that zealous advocacy overshadows professional conduct,” he wrote.
No Laughing Matter
While both Rimini and Oracle lost motions, both sides declared victory in a pair of press release issued April 1, the day after Judge Hicks issued his findings.
“Court Rules in Rimini Street’s Favor on Key Matters, Denies Oracle Motions and Cites ‘Common Sense’ and ‘Absurd Result’ in Denying Oracle Claims,” read Rimini’s press release. Rimini touted the fact that the court had not found its Process 2.0 or the AFW tools were a violation of the injunction, although it admits that “those issues will be heard and decided by a jury.”
A seemingly frustrated Oracle fired back with its own press release, which sported the headline Rimini Street Distorts Court Ruling, Says Up is Down.
“Rimini Street today took its deceptive business practices described in Oracle’s litigation against Rimini Street to new heights, proclaiming that its unequivocal loss in US District Court was actually somehow a victory,” the company wrote.
” [B]y Rimini Street’s reasoning, losing is winning, up is down, and ignorance is strength,” the software giant continued. “Its statement is indeed another attempt at bamboozling its customers into believing its services are a viable, ethical business model.”
By the looks of it, this legal battle is far from over.