October 26, 2015

October 26, 2015 | Devan Brua | Director, Global Tax & Regulatory Compliance

I’m a newbie to third-party support.  After nearly 10 years working in corporate international tax for a public accounting firm, I joined Spinnaker Support in January to take over the Global Tax and Regulatory Compliance team.  It wasn’t long after joining the company that I started hearing about the trial between Oracle and our competitor Rimini Street.  The trial, although not about Spinnaker Support in any way, was something that overshadowed our business and created (unnecessary) uncertainty for our customers in the marketplace.  The lawyer in me (Attorney Juris Doctor by education) was fascinated. Ultimately, I was asked to attend the trial to ascertain Oracle’s view of “legal” third-party support and to gather intelligence on Rimini Street and their defense strategy.

So, as the trial date neared, I dove in.  Over the past few months, I’ve been diligently following the now completed trial as it unfolded in Las Vegas, NV.  I spent hours observing the trial in the courtroom and pouring over the public documents filed with the court.  The most interesting aspect of the case to me was Rimini Street’s strategy.  As I explain, please note that this is all my personal opinion, based on my personal observations only.  I have no insight into Oracle or Rimini Street’s take on the case, (or that of their legal teams).

For background, Oracle accused Rimini Street of numerous counts of copyright infringement with respect to PeopleSoft, JD Edwards, and Siebel software systems.  The infringement stems from the allegations that Rimini Street broke the two cardinal rules of third-party support: 1. that Rimini Street created and used software environments on its own servers (local hosting) in order to serve its customers, and 2. that Rimini Street shared software among customers.  After years of denying Oracle’s allegations, by the time trial came the evidence was clear and Rimini Street had no choice but to admit that the actions alleged by Oracle were true.

In the courtroom, I watched as on the stand the CEO and founder of Rimini Street, Seth Ravin, admitted to all of it.  He admitted to hosting local test and development environments for customers on servers owned by Rimini Street.  He admitted to using robots to download massive amounts of copyrighted files off Oracle support websites.  He admitted to creating an update or fix in one customer’s environment, and sharing that update or fix with other customers on the same version.  He admitted to improperly using customer credentials to download material off Oracle support website.  He admitted to cloning existing customer environments for new customers.

Rimini Street raised a number of defenses as to why they believed this conduct was ok.  Chiefly they asserted their belief that Rimini Street believes that customer license agreements with Oracle allow Rimini to “step into the shoes” of the customer and engage in any activity that the customer could legally engage in, regardless of the limitations of the license agreement.  However, what I found most interesting was not Rimini Street’s reliance on the belief that their actions were acceptable, but rather their assertion (and ultimately their primary strategy at trial) that it is irrelevant because Oracle cannot prove damages.

Rimini Street asserts that 1. Regardless of how it was delivered, Rimini Street customers did not receive any items that exceeded the scope of their license agreements, and 2. Oracle customers would have left Oracle regardless, and therefore Oracle suffered no calculable harm.  While arguably true, to me this is akin to taunting.  To singing “nah nah na boo boo” and sticking out their tongue at Oracle.  Rimini Street quickly grew a business by engaging in unethical activities that violated federal copyright law, and expected to get away with it with little more than a slap on the wrist.

Oracle presented volumes of evidence (largely consisting of emails sent by and to Rimini Street employees) showing that Seth Ravin and other key employees knew, or should have known, that their actions were improper.  Emails with statements such as “they (Oracle) are on to us,” “perhaps a better strategy would be to fly under the radar,” “I’m not sure we can do this without a license,” and “This is what keeps me up at night.”  The sheer quantity of evidence presented by Oracle was enough to convince me that Seth Ravin has no rational basis for claiming he believed his actions were ok.[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][1]

The idea that because customers did not receive items exceeding the scope of their license agreements we should look the other way is a ridiculous notion.  Is it okay to sell bootlegged movies to innocent individuals (who wouldn’t have otherwise bought the movie) simply because the creator of the movie suffers no measureable harm?  How is this any different?  Arguing that the creators of the movie are just forcing inefficiency by being stingy does not make your actions acceptable.

Likewise, how is Oracle supposed to prove that over 200 customers would have stayed?  Oracle admits that it loses about 5% of their maintenance customers each year.  It is extremely plausible that these customers would have left regardless of Rimini Street’s actions.  Other maintenance options outside of Rimini Street exist (obviously, I work for one).  However, does that mean it is okay to lure customers away when using unethical business practices?  Simply because there is a chance they would have left anyway?

Intellectual property laws exist for a reason.  Without protections, innovators lose the incentive to innovate.  The technology we all love would not exist.  By protecting the innovators, we protect advancement, we protect growth.  Oracle’s license agreements did not strip customers of the right to use a third-party for maintenance service, as evidenced by the exceptional service Spinnaker Support provides its customers.  Oracle’s license agreements simply dictated that certain rules must be followed.  Rules that make it less efficient to quickly grow a business providing remote support, but protect innovators for the work they do.

With the trial wrapped up, I fail to understand how one can intelligibly argue that it is acceptable to build a business on lies, deceit and illegal and unethical conduct and expect jury to look the other way. To me, common decency dictates that the jury deliver a large verdict in favor of Oracle large enough to teach Seth Ravin, once and for all, that cheating is not acceptable.

After 3.5 days of deliberation, the jury awarded nearly $53 million in damages to Oracle.  Whether this verdict is large enough to send a message to Rimini Street is unclear.  In the subsequent post-trial conference, both sides indicated their intention to appeal.  Additionally, Oracle announced its intention to seek injunctive relief.  These motions, combined with the 2014 lawsuit (challenging Rimini Street’s ongoing use of the copyrighted materials that were the subject of this case) mean the saga will not be over anytime soon.

I continue to follow and watch in fascination.

 

[1] I will admit some bias here.  Largely left out of the trial was evidence regarding TomorrowNow.  Seth Ravin was a founder of TomorrowNow and ultimately responsible for developing the business model used at TomorrowNow.  Although not a part of the court record, the knowledge I have regarding the lawsuit between Oracle and SAP over TomorrowNow certainly clouds my ability to look at Rimini Street impartially.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

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