Recent Oracle vs Rimini Street Ruling Is About Customer Software License Rights Not Third Party Maintenance
On February 13th, 2014, the United States District Court , District of Nevada Judge Larry Hicks issued a partial summary judgment in the Oracle vs Rimini Street Case. Here’s the executive summary to key questions about the ruling*:
Is Third Party Maintenance still valid for Oracle products or anyone else? Yes.
Can a customer give a copy to a third party? Yes
Do you have to read every contract detail before a third party maintenance provider can host the software? Yes. If there are site restrictions and if you want to host it in a vendor’s own data center. Make sure you have the right to a site change or site license change.
Can copies of software from customers that are loaded onto the server that are similar to what another customer’s rights be used be reloaded. Yes, the software license goes to intellectual property not to the media. Third party maintenance vendors can use the same instance in setting up their clients and this will drive down the cost.
Does this ruling impact other businesses? Yes. If you have no site specific rights, you can’t have a third party outsource or host. This could have major legal ramifications for Oracle and other vendor’s existing hosting and outsourcing businesses.
Four Customer Cases End In A Draw For Oracle and Rimini Street Based On Contract Law Technicalities
The ruling includes cases from four customers each with unique contract language:
- City of Flint – US District Court rules In Oracle’s favor. “Based on the court’s ruling s above, none of Rimini’s asserted license provisions (Sections 1.2(b), 1.2( c), or 14.2) expressly authorize Rimini ’s copying of Oracle’ s copy righted PeopleSoft branded software a s a matter of law. Therefore, the court finds that Oracle is entitled to summary judgment on Rimini’s express license affirmative defense as it relates to the City of Flint, and the court shall grant Oracle ’s motion accordingly“.
Point of View (POV): The City of Flint’s PeopleSoft contracts were pre-Internet and did not allow for third parties to copy licenses onto other servers on their behalf. In fact, the licenses only allowed for the City of Flint to provide “access to and use of the Software” to a third party. The ruling makes sense and is based on how the license contract is written.
- Pittsburgh Public Schools – US District Court rules In Oracle’s favor. “Based on the rulings above, the court finds that none of Rimini’s asserted license provisions (Sections 1.1, 1.2, or 10.2) expressly authorize Rimini’s copying of Oracle’s copy righted PeopleSoft branded software as a matter of law. Therefore, the court finds that Oracle is entitled to summary judgment on Rimini’s express license affirmative defense as it relates to the Pittsburgh Public Schools, and the court shall grant Oracle’s motion accordingly”.
(POV): Despite Oracle granting the Pittsburgh Public Schools “a nonexclusive, nontransferable license to make and run copies of the Software, “the right to access and use the Software is a separate right from the right to copy or reproduce software”. The ruling makes sense as with City of Flint based on the language in the original PeopleSoft contract.
- Giant Cement – US District Court Denies Oracle’s request for summary judgment. Based on this record, the court finds that there are disputed issues of material fact as to whether Rimini’s use of the development environment associated with Giant Cement was for archival purposes or whether Rimini accessed the software’s source code. Accordingly, the court shall deny Oracle’s motion for summary judgment on Rimini’s express license affirmative defense as it relates to Giant Cement”.
(POV): Rimini Street did show how the JD Edwards development environments were used only for archival purposes and not for software development and testing. According to the JD Edwards licensing agreement, the court ruling to deny request makes sense as the usage was in compliance with the licensing language .
- Novell – US District Court Denies Oracle’s request for summary judgment. “First, the court finds that the plain language of Section 2.1(iv) authorizes Novell to make archival, emergency backup, or disaster-recovery testing copies. Further, the court finds that the plain language of Section 2.1(viii) permits Novell to allow Rimini, or another third-party, to install the software for archival, emergency back-up, or disaster recovery purposes. Therefore the court finds that Novell’s license allows for archival and/or back-up copies of the software on a third-party system. Accordingly, the court shall deny Oracle’s motion for summary judgment on Rimini’s express license affirmative defense as it relates to Novell.”.
(POV): The Novell specific Siebel contract language allows Novell to have any third party to make the back-up copies it needs. The court ruling makes sense.
The Bottom Line: Third Party Maintenance Is Alive and Well
Rimini Street currently has 120 total contracts out of 700 clients in the data center. In conversations with Rimini Street CEO Seth Ravin mentioned that, “Rimini Street has been in the process of moving its customers out of their data center operations since 2012 “. The action to move away from a data center operation makes sense as half the 120 total contracts may have similar language while the other half have contracts with no site restrictions. In addition, Constellation has spoken to recent customers who are managed via remote access for JD Edwards, Oracle EBS, PeopleSoft, SAP, and Siebel. These clients have had little issues and have taken advantage of the benefits of third party maintenance.
Recommendations: Customers Should Ensure Their Rights Span The Software Ownership Lifecycle
While the initial reaction would cause users and vendors to think this ruling is a draw, the devil is most certainly in the details. The underlying issues stem from how customers negotiated their original JD Edwards, PeopleSoft, and Siebel contract rights. These contracts had poorly defined site license rights. Constellation recommends that every software license include clearly worded third party maintenance and outsourcing rights. In fact, a poorly negotiated contract can have cascading ramifications across the software ownership lifecycle:
- Renewal or replacement
Constellation has put together an Enterprise Software Licensee Bill of Rights and An Enterprise Cloud Bill of Rights and checklist that clients can use to protect themselves. This is pertinent especially for cloud contracts which now resemble long term BPO deals and because the majority of enterprise software is now consumed via SaaS or cloud deployments. Despite a perception of simplicity in software acquisition, many cloud contracts require all the rigor and due diligence of contracts for on-premises licensed software.
Client–vendor relationships in the cloud are seemingly perpetual. When converting from an on-premises arrangement, it is imperative that these agreements provide a chance for a new slate. Thus, chief information officers (CIOs), chief marketing officers (CMOs), line-of-business (LOB) executives, procurement managers and other organizational leaders should ensure that the mistakes they made with on- premises licensed software aren’t blindly carried over. The Enterprise Cloud Buyer’s Bill of Rights provides a tool for clients and vendors to change the tenor of contract negotiations from user subservience to an equal and collaborative long-term partnership
* R “Ray” Wang; Insider Associates, LLC; and Constellation Research, Inc.; provide software contract negotiations support and advice. We are not legal professionals or procurement professionals. Please check with your legal and procurement teams for the specific advice pertinent to your organization.
Let Us Help You.
Need help with your software contract or working out the rationale for used software or third party maintenance? Put the power of experience with over 1500 software contract negotiations to work. Contact us throughout the vendor selection or negotiation process. We can help with a quick contract review or even the complete vendor selection. We provide fix-fee and gain sharing arrangements.
Related Constellation Research
Related Resources And Links
- Tuesday’s Tip: Putting the Kibosh On ERP Vendor Sales Reps Who Troll For Indirect Access
- Polls and Surveys: Negotiating Software Contracts With Oracle or SAP Part 1.
- News Analysis: New SAP Customers Face Maintenance Hike
- Monday’s Musings: Trends In The Top Software Insider Posts of 2012 (#softwareinsider)
- Tuesday’s Tip: Act Now To Leave The Door Open For SAP Third Party Maintenance Options
- News Analysis: UsedSoft Vs Oracle Ruling Opens Up Monopolistic Practices By Software Vendors
- News Analysis: Spinnaker Expands JD Edwards Support With Versytec Acquisition
- Research Summary: Best Practices – Three Simple Software Maintenance Strategies That Can Save You Millions
- News Analysis: The Implications Of Oracle’s Acquisition Of Taleo
- Tuesday’s Tip: Five Cloud/SaaS Contract Negotiation Tips For 2012
- News Analysis: Microsoft Licensing Update – May/June 2011
- Tuesday’s Tip: Dealing With Pesky Software Licensing Audits
- Monday’s Musings: Putting An End To The Conflict Of Interest Among Some Sourcing Advisors
- Research Summary: Software Insider’s Top 25 Posts For 2010
- Tuesday’s Tip: Dealing With Vendor Offers To Cancel Shelfware And Replace With New Licenses
- Research Report: Constellation’s Research Outlook For 2011
- Event Report: SAP Australian Users Group Summit 2010
- Tuesday’s Tip: Dealing With Vendor Threats For “All Or Nothing” Maintenance Agreements
- News Analysis: Microsoft Licensing Update – May/June 2010
- Tuesday’s Tip: Dealing With Vendor Threats To Charge For Back Maintenance Fees
- Monday’s Musings: Decoupling Support From Maintenance – What Apps Vendors Can Learn From Microsoft Dynamics
- 20090612, Channel Partner, “Used software – SAP suffers defeat”
- 20090612 Channel Partner, “UsedSoft obtains a provisional order against Microsoft”
- 20080602 Federal Judge Approves eBay Auction of Copyrighted Autodesk AutoCAD Design Software”
- 20120318 Research Summary: Best Practices – Three Simple Software Maintenance Strategies That Can Save You Millions
- 20100419 Tuesday’s Tip: Dealing With Pesky Software Licensing Audits
- 20090714 Research Summary: An Enterprise Software Licensee’s Bill of Rights, V2
- 20101214 Tuesday’s Tip: Dealing With Vendor Offers To Cancel Shelfware And Replace With New Licenses
- 20100308 Monday’s Musings: Decoupling Support From Maintenance – What Apps Vendors Can Learn From Microsoft Dynamics
- 20100222 Monday’s Musings: Why Users Should Preserve Their Third Party Maintenance Rights
- 20100104 News Analysis: SAP Revives Two-Tier Maintenance Options
- 20090210 Tuesday’s Tip: Software Licensing and Pricing – Do Not Give Away Your Third Party Maintenance And Access Rights
- 20090709 Tuesday’s Tip: Do Not Bundle Your Support and Maintenance Contracts!
- 20091222 Tuesday’s Tip: 10 Cloud And SaaS Apps Strategies For 2010
- 20091208 Tuesday’s Tip: 2010 Apps Strategies Should Start With Business Value
- 20091102 Best Practices: Lessons Learned In What SMB’s Want From Their ERP Provider
- 20091006 Tuesday’s Tip: Why Free Software Ain’t Really Free
- 20090504 News Analysis: Oracle Waives Fees On Extended Support Offerings
- 20080909 Trends: What Customers Want From Maintenance And Support
- 20080215 Software Licensing and Pricing: Stop the Anti-Competitive Maintenance Fee Madness
- 20090405 Monday’s Musings: Total Account Value, True Cost of Ownership, And Software Vendor Business Models
- 20090324 Tuesday’s Tips: Five Simple Steps To Reduce Your Software Maintenance Costs
- 20090223 Monday’s Musings: Five Programs Some Vendors Have Implemented To Help Clients In An Economic Recession
- 20091012 Research Report: Customer Bill of Rights – Software-as-a Service
- 20090910 Tuesday’s Tip: Note To Self – Start Renegotiating Your Q4 Software Maintenance Contracts Now!
- 20090721 Tuesday’s Tip: 3 Approaches To Return Shelfware
- 20090127 Tuesday’s Tip: Software Licensing and Pricing – Now’s The Time To Remove “Gag Rule” Clauses In Your Software Contracts
Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact Sales .
Although we work closely with many mega software vendors, we want you to trust us. For the full disclosure policy, stay tuned for the full client list on the Constellation Research website.
* Not responsible for any factual errors or omissions. However, happy to correct any errors upon email receipt.
Copyright © 2001 – 2014 R Wang and Insider Associates, LLC All rights reserved.
Contact the Sales team to purchase this report on a a la carte basis or join the Constellation Customer Experience!
(Cross-posted @ A Software Insider's Point of View)