Oracle wants Rimini Street, provider of third-party support for enterprise applications, to reveal the details of its business model in connection with Oracle’s ongoing intellectual-property litigation against rival SAP, according to documents filed last week in U.S. District Court for the District of Nevada.
Oracle filed a lawsuit in March 2007 against SAP and its now-shuttered subsidiary TomorrowNow, which provided lower-cost support for Oracle’s PeopleSoft, JD Edwards and Siebel applications.
Rimini Street, which did not respond to a request for comment, was founded by former TomorrowNow executive Seth Ravin, who left the company after SAP purchased it in 2005. The Las Vegas company, which provides support for both Oracle and SAP applications, has made a regular stream of announcements touting its growth but could find its fortunes dimmed by the cost and distraction of a legal battle with Oracle.
It is one of the more visible players in the small but growing market for third-party support, which caters to customers who have stable legacy systems and no immediate desire to upgrade, and therefore find little value in paying for a full-price vendor maintenance contract. Rimini Street promises customers will save at least 50 percent on their current maintenance bills.
Companies like Oracle are fiercely protective of their maintenance revenue streams, given the extremely high profit margins and promise of continual income even amid slower sales for new software licenses.
In its most recent quarterly statement, Oracle reported US$3.05 billion in revenues for “license updates and product support,” but just $293 million in operating expenses against that total, for a roughly 90 percent profit margin.
While Oracle acknowledges that third-party support is legal, it claims that SAP and TomorrowNow managed to provide discounted support through illegal acts, such as making thousands of unauthorized copies of Oracle’s software, and conducting “routine, massive and indiscriminate downloading” of support-related materials on behalf of customers who weren’t entitled to them, according to the motion to compel filed against Rimini Street on Aug. 21.
SAP has said that TomorrowNow workers were authorized to download materials from Oracle’s site on behalf of TomorrowNow customers, but also that some “inappropriate downloads” had occurred. SAP has also said that Oracle’s software remained in TomorrowNow’s systems and has denied Oracle’s allegations of a wider pattern of wrongdoing.
Meanwhile, after leaving TomorrowNow Ravin has “since touted the similarities between TomorrowNow’s and Rimini’s offering,” according to Oracle’s Aug. 21 filing.
Information about Rimini Street’s business model is relevant because Oracle’s suit attempts to recover lost profits it claims it would have made, had “SAP not lured [customers] away with its 50% discount premised on illegal support offerings,” according to the Aug. 21 motion.
“Rimini has attracted customers, many of them the same ones, using a similar discount,” it adds. “SAP claims that Oracle may not recover lost profits for those customers, on the grounds that Oracle would not have received maintenance payments from them even if TomorrowNow had never existed — i.e., TomorrowNow did not cause the loss, as evidenced by customers’ decision to sign up with Rimini.”
In making the argument, SAP is assuming Rimini’s business model is legal, Oracle added. But “if, as Mr. Ravin has implied, Rimini merely replicates the illegal TomorrowNow model, then Rimini is not a legitimate alternative destination. In that case, Oracle will have the information it needs to rebut SAP’s argument and pursue the profits attributable to those customers in Oracle’s lost profits model.”
Oracle already subpoenaed Rimini Street earlier this year, seeking a variety of data about the company’s business practices. But Rimini objected to the request on a number of grounds, including confidentiality concerns and the possibility Oracle was seeking discovery related to Rimini Street “for a purpose other than the present lawsuit,” according to court documents.
Ravin did sit for a deposition in May, according to Oracle’s motion. During the session, he confirmed that Rimini Street was serving a number of former TomorrowNow customers, but “would not provide a single detail about how those customers are being supported,” it states.
Oracle’s Aug. 21 motion demands that Ravin be ordered to sit for an additional two hours of deposition; “documents sufficient to show Rimini’s business model,” including whether it has ever “relied on copies of customers’ licensed software to provide software support”; information about any automated tools the company has used to download material from Oracle’s support site; and documents tied to Rimini’s preparation of tax updates for customers.
Oracle originally filed suit against SAP in a California U.S. District Court. A judge overseeing discovery issues in the case ruled that “some testimony regarding Rimini Street appears relevant to damages,” according to Oracle’s Aug. 21 motion.
“In doing so, [the judge] rejected the argument Rimini will likely make here, that Oracle merely seeks pre-complaint discovery in order to sue Rimini,” the motion adds. “If Rimini has done nothing wrong, it has nothing to hide. If it has done something wrong, then that information is critical to Oracle’s damages case against SAP, regardless of where else that discovery may lead.”