$124M Terms of Use Violation in Latest Clone War

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On Monday, a federal appeals court in San Francisco ruled mostly for Oracle in its battle against cloning of its software by Rimini Street Inc. in violation or Oracle’s terms of use. The lawsuit was first filed in 2010 after Rimini began hosting Oracle software on Rimini’s own servers, as well as “cloning” that software to make it available to multiple customers. The terms of use for software products at issue allowed for some copying of Oracle’s software. Specifically:

J.D. Edwards terms: “Customer shall not, or cause anyone else to . . . (iii) copy the Documentation or Software except to the extent necessary for Customer’s archival needs and to support the Users.”

Siebel terms: “Customer” may “reproduce, exactly as provided by [Oracle], a reasonable number of copies of the Programs and the Ancillary Programs solely for archive or emergency back-up purposes or disaster recovery and related testing.”

That’s why Rimini’s defense was that the terms of use allow it to copy Oracle’s database software systems to adjust them to the needs of a given user. But Oracle argued Rimini was copying Oracle’s software and selling it as its own, which was in excess of what the terms of service had allowed, in violation of copyright law.

So, in October 2015, a court ruled that Rimini’s actions violated several state computer crime statutes. The jury awarded damages to Oracle in the sum of $50,027,000 which, when prejudgment interest, attorneys’ fees and costs were added, resulted in a total monetary judgment of $124,291,396.82.

However, yesterday, a Ninth Circuit panel found that a lower court went too far in calling Rimini’s practice a violation of California and Nevada’s criminal computer fraud laws. But the Ninth Circuit still agreed that Rimini violated Oracle’s terms of use by cloning its software. As a result, $14.4 million awarded to Oracle as a result of the violation of the state computer crime claims will be subtracted from $50 million damages award. The Ninth Circuit remanded the decision of attorney fees to federal court.

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