Rimini Street ordered to pay Oracle $50 million

Rimini Street ordered to pay Oracle $50 million

Jury orders Rimini Street to pay Oracle $50 million but is this the end of the long running copyright infringement saga?

Published on 16th October 2015

Earlier today, the jury in the much awaited Oracle v Rimini Street trial ordered Rimini Street to pay $50 million in damages to Oracle, including a personal assessment of damages of $14 million to be paid by Seth Ravin, CEO Rimini Street.

The case started out with Oracle claiming $245 million and Rimini Street hoping the jury would settle nearer $9-10 million. The background to the case has been well rehearsed (see sidebar) but regardless of outcome, the key point is that both sides agree that Oracle licensees can take up third party maintenance as an option to Oracle maintenance.

In a statement, Oracle spokesperson Deborah Hellinger said:

This decision against Rimini Street and Seth Ravin reinforces long established rules of fairness and honesty in business and the principles protecting investments in innovation. Oracle is committed to delivering outstanding support services for our products to enable our customers’ success and we look forward to the next stage of our legal proceedings with Rimini Street.

For its part, Seth Ravin said:

We were pleased to finally get our day in court. As Oracle and Rimini Street agree, there is no dispute that third party support for enterprise software is permitted for Oracle licensees to purchase and for Rimini Street to offer. This case was about a good-faith license dispute regarding processes no longer in use. The global Rimini Street team remains focused on providing excellent service to our clients, innovating the enterprise support industry and expanding our worldwide service capabilities.

Neither side was prepared to go beyond the canned statements but coincidentally, Rimini Street provided preliminary Q3 FY2015 results information. From the blurbs:

In the same statement, Rimini Street pointed up the ways in which it believes it is better serving customers:

What happened?

This case remains complicated by issues on both sides.

The amount of the award is significant. In a previous case, Oracle won eye watering damages against SAP as the owner of TomorrowNow, another third party maintenance company that Seth Ravin founded. It ran foul of copyright infringement on a massive scale. Those damages were later scaled back significantly on appeal.

The current case is different. In the TomorrowNow case, SAP accepted that it was in the wrong but fought on the quantum of damages. In this case, the judge effectively hobbled Rimini Street’s case before it reached this stage. The judge made a specific ruling on what constitutes copyright infringement in this case that most analysts, including myself, believe is wrong because it does not reflect the reality of what happens in the real world.

Rimini Street was precluded from making any argument against the ruling in court because at the time of this hearing, that was (and remains) the law.

For its part, Oracle was precluded from making any reference to Ravin’s involvement with TomorrowNow or, for that matter, referencing the earlier case at all. If that evidence had been brought to bear, the case would have become very messy because while Ravin was involved with the establishment of TomorrowNow, he was never directly implicated in any wrong doing.

Much of Oracle’s case in this hearing was about establishing the wrong doing of the company through the actions of the CEO, painting Rimini Street as bad guys.

Rimini Street for its part, believed that despite the earlier ruling, it had not acted maliciously and so argued what might be better understood as ‘innocent error.’ The jury didn’t buy that but equally, didn’t buy Oracle’s claims for the quantum of damages.

My long take

Oracle hints at next steps but neither side is talking appeal — just yet.

Oracle can sit back, collect a check and move on in the knowledge it has spanked a competitor.

Rimini Street for its part must assess the expense of taking this matter to appeal and the risks that go with that decision. Regardless of what any of us so-called experts might think, there is no way to know how a further hearing on the ruling will go, whenever that might be.

Legal proceedings are expensive and time consuming. While it is always nice to think that you can fight points of principle, Rimini Street wants to be the top dog in third party maintenance at a time when incumbents like Oracle and SAP are vulnerable to attack on that front. Moving forward with purpose is hard to achieve when management has important and costly legal matters to heft.

I have always been a fan of the third party maintenance model and especially for those customers that are in steady state for their core applications and for whom upgrades have little or no value, but which still require essential break-fix or regulatory support. It doesn’t make sense to pay (say) 22% when a third party can offer the same or better at fractional pricing. Far better to release those costs for other innovations.

The question now for both investors and customers is simple — should Rimini Street put up, shut up and move on or go back to the courts in maybe another three to five years’ time?

None of that matters. The case for third party maintenance is settled and Rimini Street has proven conclusively through its reported earnings that it can serve customers well and grow at a good clip. In that sense, customers are on the winning side. But in the end, it will be stakeholders who decide the next move.

More important, having established the principle that third party maintenance is a legitimate business, customer must now look to the wording of their contracts to ensure that original software vendors do not include words and phrases that make an exit to a third party prohibitively expensive.

I have, for example, recently been consulted in a case where, after several years of using a third party, the client finds itself faced with a demand to pay what amounts to back maintenance for years when it was not supplied by the software vendor. You don’t have to guess our immediate answer but it is illustrative of the many pitfalls by which buyers can find themselves unwittingly trapped.


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