A federal judge has ruled that Rimini Street infringed copyrights on Oracle’s PeopleSoft ERP (enterprise resource planning) software in the course of providing third-party support to customers, but decided in favor of Rimini on other points.
Judge Larry Hicks found that Rimini Street violated the copyrights when it installed copies of PeopleSoft on its computer systems so it could create software updates for customers, according to his ruling filed Feb. 13 in U.S. District Court for the District of Nevada.
Hicks’ ruling was based on an examination of software license agreements from two Rimini Street customers who use PeopleSoft: The city of Flint, Michigan, and the school district of Pittsburgh.
Meanwhile, the judge ruled in favor of Rimini Street with respect to how it made copies of Oracle’s J.D. Edwards and Siebel software while serving two other customers, Giant Cement and Novell.
Giant Cement’s license for J.D. Edwards does not allow Rimini Street to tap into the source code in order to create updates, Hicks wrote. However, “the court finds that having a copy of the software on Rimini’s systems for archival purposes does not violate this license restriction so long as Rimini does not access the software’s source code,” he added.
Oracle failed to offer any evidence that Rimini had indeed accessed the source code, according to Hicks.
As for Siebel, Hicks concluded that Novell’s license “allows for archival and/or back-up copies of the software on a third-party system.”
But the judge’s ruling also rejected Rimini’s legal argument that actions by Oracle over time had given Rimini an “implied license” and consent to make copies of its software.
Oracle shipped “at least 90 back-up copies of licensed software installation media to Rimini’s facilities for different Oracle customers” between 2007 and 2009, Hicks wrote.
Rimini Street had argued that Oracle knew not only that it was providing support to Oracle customers but also that it was creating the copies for its systems, the ruling states. Since Oracle continued to ship the back-ups, that amounted to consent and there could be no copyright infringement, Rimini argued.
That argument “is not supported by the evidence,” Hicks wrote.
In many cases, the backups “were shipped after Oracle’s customers submitted requests to Oracle describing Rimini’s address as the customers’ ‘secondary offsite backup location,” Hicks wrote.
“Rimini admits that the purpose behind the obfuscated shipping requests was to allow Rimini to create development environments to service Rimini’s customers without Oracle’s knowledge,” he added. Therefore, “no reasonable jury” could conclude that Oracle was giving Rimini authorization to copy the software onto its systems, Hicks wrote.
Oracle sued Rimini in 2010, claiming the company had engaged in “massive theft” of its software via “an illegal business model.”
Rimini Street is one of a handful of companies that say they can provide superior software support for far less money than what customers pay vendors in annual maintenance fees.
While customers that don’t renew vendor maintenance contracts can’t get further product updates, Rimini and its peers cater to companies that have stable systems and little desire to go through major upgrades. Rimini Street’s service provides customers the ongoing tax and regulatory updates they need to keep the software compliant, as well as general technical support.
Rimini Street CEO Seth Ravin co-founded TomorrowNow, a company and one-time SAP subsidiary that provided lower-cost support to Oracle customers. Oracle sued SAP in 2007, alleging that TomorrowNow workers had illegally downloaded materials from its support systems.
SAP ultimately admitted liability for actions by TomorrowNow employees and Oracle won a sizable judgment, but the case is not yet concluded.
Ravin and Rimini Street have duplicated TomorrowNow’s “corrupt business model,” Oracle has alleged.
Software vendors depend heavily on annual maintenance fees, which carry high-profit margins and keep money flowing in even when customers are holding off on new license purchases.
Observers believe the final outcome of the Oracle-Rimini case could set clear ground rules for how companies can perform third-party support services.
Both Oracle and Rimini Street claimed partial victories on Monday following Hicks’ ruling.
“The Court’s ruling is an important vindication of Oracle’s intellectual property rights,” Oracle attorney David Boies said in a statement.
“We were pleased that the Court ruled on some important issues in the case, and made progress in moving the case forward by helping to narrow the issues that need to be decided by a jury,” Rimini Street said in a letter sent to its clients Monday.
The letter noted that Rimini’s revenue has grown six-fold since the start of the litigation with Oracle. Rimini Street also recently made a filing with the U.S. Securities and Exchange Commission for an IPO (initial public offering).
“This case is NOT about the legality of independent enterprise software support,” but rather “the specific proceses Rimini Street used to support a portion of its clients,” the letter adds.
Rimini Street has been making some changes to the way it conducts business, according to the letter.
Between 2006 and 2012, PeopleSoft, JD Edwards and Siebel clients switching from Oracle to Rimini Street’s services were given the choice of either hosting the test and development environments on their own servers or Rimini Street’s.
In 2012 Rimini Street stopped offering the option of Rimini-based hosting for the test environments and in January 2013 began migrating all customers to client-hosted environments, according to the letter.
Rimini will cover any related costs with the migration as well as “pay, in accordance with our contract indemnity provisions, compensation ultimately awarded by the Court to Oracle, if any, for Rimini-Hosted Environments found to be infringing,” the letter adds.