In a case with potentially important financial consequences, Judge Larry Hicks of the U.S. District Court in Las Vegas has found that Rimini Street infringed on some Oracle copyrights but not on others. The distinction was based on the wording of contracts PeopleSoft customers signed when it was still an independent company, and not the wording of contracts J.D. Edwards or Siebel Systems customers signed. In the short run the decision could (and the operative word here is could) have an impact on Rimini Street's upcoming IPO. In the long run the ruling is unlikely to have much effect.

This is in part because the case is not about is the legality of third parties to offer independent enterprise software support. Oracle does not dispute its customer's right to engage third parties to provide support nor Rimini Street's right to offer it. What it does dispute is the way Rimini Street provided that support. The judge upheld Oracle's position in the case of PeopleSoft customers (but not J.D. Edwards or Siebel customers) that Rimini Street violated Oracle's copyright protections by installing software on servers it owned.

Rimini Street acted promptly to conform to the judge's ruling. In a letter to clients CEO Seth Ravin wrote "Rimini Street respects the Court’s decision and will conform its practices in light of the Court’s ruling.”

The company had already completed all JD Edwards and Siebel client migrations from Rimini-Hosted environments, and will work with the PeopleSoft clients to migrate their Rimini-Hosted environments to client-hosted environments as well.

It is also important to note the ruling is a motion for summary judgment. Although the case was first filed in 2010, it has not yet come up for trial. The summary judgment was made based on a plea from Oracle to decide the issue before the trial began.

Since part of the plea was granted and part was rejected the trial will still take place. The summary judgment will also be held inappropriate if the jury decides the case in favor of Rimini Street. Summary judgments are also subject to appeal which is almost certain to happen no matter who wins. Depending on how the appellate court then rules in that case, it is very likely the losing party will also appeal that decision. Then it will be up to the Supreme Court to decide if it wants to hear the case or ask a lower court to try the case again. Such a process could easily last over a decade.

So this judgment is just one skirmish in a legal battle that has already lasted for 4 years and promises to continue on for many more years to come. Legal sources tell the Observer the judge's ruling may be a sign from the court that he wants the parties to settle. This is not very likely to happen for reasons I am not prepared to discuss here. For the same reasons the smart money sees the case as a plus for Rimini Street's IPO which is why it is called the smart money.

The take away for Rimini Street's current clients, and any customers considering third party support, is that they need to evaluate legal risk the same as any other risk. There is a risk next quarters plans will be disrupted by a giant comet hitting the earth. It’s a real risk, but customers don't need to consult with an astronomer to assess it. By the same token the worst people to assess legal risks are often attorneys. What customer need to evaluate is:

  • How long will the case be expected to last?
  • How likely is either party to appeal?
  • How likely is Rimini Street to win?
  • What will happen to the customer if Oracle prevails in the end?

Since the difference in the ruling had to do with "magic language" in PeopleSoft agreement that was not in the J.D. Edwards or Siebel agreement it is reasonable to expect Oracle (and every other software company) to include that very language in future contacts and to amend existing contracts. It will be up to customers to review their contracts carefully and negotiate on any terms that they think might limit their future options.

The reason most attorneys are poor at assessing legal risk is because they are schooled in a concept developed during medieval times called legal precedence. Precedence holds a rule established in a previous legal case is binding on a court when deciding subsequent cases. The idea at the time was laws should have some consistency and not be subject to some spur-of-the-moment decision by a lord or bannum. The problem is events moved much more slowly in 1250 than they do today. Even though it was only a decade ago, no one involved could have anticipated how much innovation would change enterprise software support. The legal documents were drawn up considering the limits of the technology of the time. Yet precedence assumes that the parties did know what they were agreeing to and where is justice in that?

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