IP Law Daily Injunction, fee award to Oracle over software support provider’s copying not erroneous
Monday, August 19, 2019

Injunction, fee award to Oracle over software support provider’s copying not erroneous

By Thomas Long, J.D.

The injunction was not moot, as Rimini failed to prove that its misconduct would not recur, or impermissibly vague, but the district court was instructed to remove "local hosting" and "access" restrictions that were overbroad.

A federal district court in not err in granting computer software developer and manufacturer Oracle a permanent injunction barring software support services provider Rimini Street, Inc., from reproducing Oracle’s copyrighted software, preparing derivative works from it, or distributing it, except to support specific licensees’ internal data processing operations, the U.S. Court of Appeals for the Ninth Circuit has held in an opinion designated "not for publication." The injunction was not rendered moot by Rimini’s purported cessation of the infringing conduct; nor was it impermissibly vague. However, it was overbroad in terms of the conduct it restricted, so the appellate court directed the district court to modify the injunction. In addition, the appellate court affirmed the district court’s award of over $28.5 million in attorney fees incurred in its successful pursuit of copyright infringement claims against Rimini (Oracle USA Inc. v. Rimini Street Inc., August 16, 2019, per curiam).

Oracle USA, Inc. and related entities (collectively, "Oracle") owned or held exclusive licenses for certain PeopleSoft, J.D. Edwards, and Siebel-branded enterprise software products. Oracle did not sell the software outright to end users; instead, it licensed the use of the software to customers through software licensing agreements. Oracle also provided customer support services to customers through separate contracts. Rimini provided similar software support services to customers licensing Oracle’s enterprise software programs. It competed directly with Oracle to provide these services.

Oracle filed suit against Rimini, alleging that Rimini copied several of Oracle’s copyright-protected programs onto its own systems in order to provide support services to customers. Oracle alleged causes of action for, among other things, copyright infringement. The copyright infringement claim arose from Rimini’s copying of Oracle software in the course of providing support services to four customers: the City of Flint, Michigan; the school district of Pittsburgh, Pennsylvania; Giant Cement Holding, Inc.; and Novell, Inc. Each customer was a licensee of at least one of Oracle’s copyright-protected enterprise software programs, but purchased contracted for support services from Rimini.

After a trial, a jury returned a verdict finding that Rimini infringed 93 of Oracle’s software products. The jury also found that Rimini and its principal violated the California and Nevada computer access statutes. The jury awarded Oracle $35.6 million for Rimini’s copyright infringement and approximately $14.4 million for the state-law violations. Oracle sought and obtained a permanent injunction and an award of attorney fees. Rimini appealed to the Ninth Circuit, which affirmed the district court’s and jury’s findings related to Oracle’s claim of copyright infringement against Rimini for all 93 copyright registrations at issue, as well as the jury’s $35.6 million judgment against Rimini for its infringement and the court’s award of approximately $22.5 million in prejudgment interest against Rimini. However, the Ninth Circuit reversed the jury’s verdict against defendants Rimini and Ravin on Oracle’s state law claims and the jury’s $14.4 million associated judgment on those claims. The Ninth Circuit vacated the district court’s issuance of a permanent injunction and the award of attorney fees and remanded for the limited purpose of determining whether the court would again issue a permanent injunction and an award of attorney fees based solely on Rimini’s copyright infringement.

In August 2018, the district court granted Oracle a permanent injunction, as well as an award of over $28.5 million in attorney fees. Rimini appealed again, arguing that the district court erred in entering the injunction, that the injunction was moot, and that the injunction was overbroad and impermissibly vague. Rimini also contended that the district court’s fee award violated the Ninth Circuit’s prior mandate and that the district court abused its discretion in apportioning the award.

Mootness. The injunction was not moot, the appellate court said. According to Rimini, the injunction was moot because Rimini had ceased unauthorized copying of Oracle’s software. However, voluntary cessation of the challenged conduct does not render a case moot unless "it can be said with assurance that there is no reasonable expectation ... that the alleged violation will recur and interim relief or events have completely and irrevocably eradicated the effects of the alleged violation," the court explained. Rimini failed to meet its heavy burden of persuading the court that Rimini’s misconduct could not reasonably be expected to resume.

Discretion in granting injunction. The district court did not abuse its discretion in granting the injunction, the Ninth Circuit held. The district court appropriately weighed the eBay factors, including permissibly finding that Rimini’s infringing conduct had a "causal connection" to the irreparable harm suffered by Oracle. Evidence supported the findings that the parties were direct competitors, that Rimini was able to gain increasing market share by offering lower prices for its service than Oracle offered, and that these lower prices were possible because Rimini’s infringing conduct saved the company time and money.

The appellate court noted that, as part of its weighing of the eBay factors, the district court stated that Rimini had "conscious disregard" for Oracle’s software copyrights. Rimini argued that this contradicted the jury’s finding that Rimini was an "innocent" infringer. Assuming, without deciding, that the district court violated the Seventh Amendment’s Reexamination Clause, the error was harmless, in the appellate court’s view, as Rimini’s mental state was not necessary to the weighing of the factors.

Overbroadness. The court agreed with Rimini that the injunction was overbroad in two respects. First, restricting "local hosting" for the J.D. Edwards and Siebel licenses was error. The injunction enjoined "local hosting" as to PeopleSoft, J.D. Edwards, and Siebel, the court noted. But only the PeopleSoft license limited the licensee to using the licensed Software "at its facilities" (emphasis added by the court), which was the basis for the local-hosting requirement. The J.D. Edwards and Siebel licenses did not contain such a limitation. The Ninth Circuit directed the district court to vacate the portions of the injunction restricting local hosting for the J.D. Edwards and Siebel licenses.

Second, the injunction’s prohibition on "accessing" source code was overbroad, the appellate court said., explaining that "accessing" a copyrighted work is not an infringing activity under the Copyright Act. Even if the prohibition on access was meant to prevent copying, it was unnecessary, as copying was separately prohibited by the injunction. The appellate court instructed the district court to strike the words "or access" from two paragraphs of the injunction. In all other respects, the injunction was not overbroad, the appellate court held.

Vagueness. The injunction was not impermissibly vague. The injunction clearly indicated that Rimini shall not reproduce, prepare derivative works from, or distribute software except "to support the specific licensee’s own internal data processing operations."

Attorney fees. The Ninth Circuit also affirmed the attorney fee award. First, the prior appellate panel’s mandate did not require apportionment. The panel had reversed and remanded the fee award for "reconsideration in light of Oracle’s more limited success at litigation," and the district court clearly reconsidered the amount of the award and re-applied the attorney fees factors. Second, the district court did not abuse its discretion by not apportioning the fee award. As the prevailing party, Oracle could recover only fees incurred in litigating its copyright claims or "related claims." The district court permissibly concluded that the claims involved a common core of facts and were based on related legal theories. Accordingly, it was within the district court’s discretion to determine that apportionment was not required beyond a 20 percent reduction it had made to the award.

This case is No. 18-16554.

Attorneys: Kathleen Roberta Hartnett (Boies Schiller Flexner LLP) for Oracle USA, Inc. West Allen (Howard & Howard) and Jeremy Max Christiansen (Gibson, Dunn & Crutcher LLP) for Rimini Street, Inc.

Companies: Oracle USA, Inc.; Rimini Street, Inc.

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