Trial Underway in Oracle Case Against Rimini Street

Robert Galbraith/Reuters

A legal showdown between software giant Oracle Corp. and tiny rival Rimini Street Inc., five years in the making, is underway in a federal courtroom in Las Vegas. The outcome of the case could shape the future of Rimini, which provides software maintenance and support to users of business software created by Oracle and SAP SE .

Oracle won key rulings last year from Judge Larry R. Hicks of the U.S. district court in Nevada, which said that Rimini had violated Oracle copyrights for two products. Now the jury in the trial, over which Judge Hicks presides, will determine if Rimini violated copyrights for two other products and the extent of the damages, if any, for all copyright infringements that Rimini must pay.

Oracle customers negotiate a price for a software license. After that, they make additional annual payments for maintenance and support of the software, which are

to 22 percent of the original purchase price. Rimini Street charges about half of that price for support, but, unlike Oracle, doesn’t provide future updates and upgrades.

Judge Hicks issued two summary judgments last year in Oracle’s favor, ruling in February 2014 that Rimini infringed upon Oracle’s PeopleSoft copyright by improperly copying their clients’ software, and in August 2014 that Rimini infringed upon Oracle’s Database copyright, by making copies without the appropriate license. Now, the jury will set damages for Rimini’s past actions. Oracle is seeking $245.9 million, arguing that it should be compensated for lost profits and customer interference. Rimini says damages, if any, should be based on an alternative measure. The company estimates that damages would be less than $10 million

Judge Hicks previously denied Oracle’s motion for partial summary judgment involving Rimini and Oracle’s JD Edwards and Siebel product lines. The jury will address the issue of liability in the JD Edwards and Siebel issues, and such a finding could lead to the judge issuing an injunction, which would prevent Rimini from further conducting the disputed practices.

The extent of the damages will turn on how Rimini’s violations are interpreted. Oracle argues that Rimini is guilty of blatant cheating. “This is not some sort of broad assault on third party support,” said Karen Dunn, Oracle counsel and a partner in the Washington, D.C. office of Boies, Schiller & Flexner LLP, “This case is about one company that cheated, cheated egregiously and today admitted that in court,” she told CIO Journal in an interview on Friday.

A slide used by Oracle in its opening remarks, Sept. 15, 2015
Oracle

Rimini casts the dispute as a disagreement over licensing rules. “We agree with Oracle that there is no dispute that third-party support for enterprise software is permitted to be offered and permitted for Oracle licensees to purchase. We disagree with Oracle’s characterization that a good-faith dispute over software license terms is ‘cheating,’ ” Rimini General Counsel Daniel B. Winslow said in a statement to CIO Journal. “Once Rimini Street had the benefit of the judicial interpretation of the license terms, we adjusted our support process to conform to the court’s guidance.  We are in court to get resolution of our remaining disputes.”

One industry analyst said the dispute is closely watched.

“I sometimes take two or three calls a day from CIOs and ERP leaders … that are considering canceling a vendor maintenance contract and moving to a third party option. This topic of Rimini-Oracle litigation always comes up,” says Pat Phelan, research vice president for enterprise application strategies at Gartner Inc., an IT research and consulting firm. “I think CIOs are watching it,” she said. “It is my understanding that the right of a third party to provide software services on behalf of a customer is not being questioned.”

Oracle CEO Safra Catz testified that “this suit is about one third party support vendor that violated our copyrights. This is not about the third party vendors who have licenses. This is about Rimini Street.”

The trial began September 14. In opening statements, Oracle counsel William Isaacson, a partner at Boies, Schiller & Flexner, said that Rimini Street engaged in massive unauthorized copying of Oracle software in order to provide support services to former Oracle customers. Mr. Isaacson told the jury that Rimini Street lied to customers about the unauthorized use of Oracle software and that the company interfered with Oracle customer relationships. Mr. Isaacson’s firm is no stranger to high-profile technology cases. David Boies, the firm’s co-founder, initially represented the Department of Justice in its antitrust case against Microsoft Corp.

Rimini may be a small rival, but it has the attention of Oracle. For the fiscal year 2015, ended May 31, Oracle said that software license updates and support accounted for $18.8 billion of its $29.4 billion total software sales. During that period, the profit margin for the support business was 90%.

Las Vegas-based Rimini Street launched in 2005. On July 8, Rimini said sales for the second fiscal quarter of 2015 increased 36% year over year to $27.8 million. As of June 30, it had 1,080 clients, a 28% increase from a year ago.

According to Oracle’s rules, copies of its software can only be used at a customer’s facility. Using automated tools to download large amounts of Oracle software at once was prohibited, too. Oracle says that Rimini Street copied its software into “local Rimini environments,” essentially its own computers, which was against the rules, in order to support customers.

“Rimini Street no longer uses any of the disputed processes or software to deliver any services to clients as of July 2014,” said a Rimini spokesperson in an emailed statement.

Write to rachael.king@wsj.com