When a jury awarded Oracle $1.3B last November in its copyright infringement case against SAP (TomorrowNow), many industry observers focused on the verdict’s impact on the ongoing competition between these two enterprise software giants. The forthcoming appeals process, which is sure to be drawn out, means the full impact will not be felt for quite some time.
Very few observers or analysts noted the impact on the third-party support/maintenance market, which is likely to be much more profound. In fact, pending the outcome of another related and important case, Oracle vs. Rimini Street, this critical market may undergo significant changes in the near term.
It is important to remember that the TomorrowNow decision stemmed largely from SAP’s admission that TomorrowNow had violated Oracle’s copyrights. SAP bought TomorrowNow with the hope it would be able to convert Oracle application users to SAP users since TomorrowNow provided support for Oracle applications and could ensure a safe passage. Unfortunately for SAP, TomorrowNow’s ability to provide third-party maintenance may have stemmed from its violation of Oracle’s copyrights. Does this mean that no third-party maintenance provider can provide support without violating the copyrights of Oracle or other software vendors? Third-party maintenance provider Rimini Street has unequivocally stated that they have not and will never violate any software vendor’s copyrights in providing third-party support.
Of course, Oracle, hot off its victory against SAP in the TomorrowNow suit, doesn’t see things the same way. In fact, Oracle filed a lawsuit against Rimini Street alleging “massive theft of Oracle’s software and related support materials through an illegal business model.” Sound familiar? The only difference with the SAP lawsuit – and it’s a big difference – is that Rimini Street and its CEO Seth Ravin are not admitting that they have violated Oracle’s copyrights.
In fact, Rimini Street is not only directly challenging the allegations made by Oracle, but also accusing Oracle of defamation and illegal anticompetitive actions. Again, Rimini Street is basing its defense on the premise that it has not and will not violate any of Oracle’s intellectual property rights (nor those of SAP for which they also provide support). It is also insisting on the contractual rights of customers to self-maintain licensed software.
This second pillar of the defense is similar to vehicle owners asserting their right to maintain their cars at local auto body shops, rather than at the dealerships where they purchased their cars. Oracle may reluctantly agree with this second part of Rimini Street’s defense, as they have never proclaimed that TomorrowNow had no right to offer the type of third-party support offered by Rimini Street, though Oracle had many opportunities to make such a claim. Oracle’s issue was simply with how TomorrowNow offered support.
Therefore, it is likely that the Rimini Street case will ultimately have a greater impact on the third-party support market than the TomorrowNow decision. So what does this mean to organizations currently evaluating their software support and maintenance options? Here’s our take on the potential outcomes:
If Rimini Street Wins: If the decision falls in favor of Rimini Street, then customers will have greater ability to decide who maintains their licensed software and greater freedom to seek lower maintenance costs (which can be 50% lower with third-party providers). Such a decision would make it very hard, if not impossible, for Oracle or any other software vendor to restrict their customers from using a third-party support model. And organizations currently evaluating their options could have more confidence engaging third-party support providers. For example, they would no longer need to fear that a detrimental court decision would bankrupt their service provider or that software vendors will continually pressure third-party support firms. These concerns have kept a lot of organizations from adopting third-party support, even when it made better sense for their organization.
A Rimini Street win would confirm third-party support as a viable, long- term option for organizations of all sizes. This more competitive environment could in turn pressure software vendors to improve the quality and value proposition of their current maintenance offerings. They may also have to rethink their maintenance fees. Without improvements, lucrative maintenance revenue streams for stable products and releases may begin to dry up – an event no software vendor would welcome or can afford.
If Oracle Wins: We suspect Rimini Street would have to retool its business model or shut down, and the entire third-party support model would be vulnerable to major litigation. It is not too hard to imagine what life would be like for organizations that would need to go back to their software vendors to renew lapsed support, especially in those cases where several years have passed. To say it would be painful is putting it mildly. It is certain that software vendors would recoup lost support fees. In fact, it is standard practice in most software license agreements for the software vendors to be entitled to back maintenance fees and potentially a penalty. In addition, we would also expect the software providers to be opportunistic with certain organizations by extracting additional license fees through upgrades, which would ultimately increase the maintenance base moving forward.
The district court’s ruling this past October is not encouraging for Rimini Street given it granted Oracle’s motion to dismiss two of Rimini Street’s three counterclaims (copyright misuse and unfair competition).
We will be keeping a close eye on the Oracle v. Rimini Street litigation as the outcome could undoubtedly change the playing field for all third-party support providers and those organizations looking to break away from the maintenance shackles of their software vendors.