IP Law Daily, COPYRIGHT—9th Cir.: Oracle and Rimini head back to the trial court yet another time, (Aug 25, 2023)

By Matthew Hersh, J.D.

Oracle preserves most of its $630,000 contempt judgment, but Rimini comes away with victories as well.

Two companies that have been engaged in a more than decade-long battle over the alleged copying and distribution of enterprise solutions software will have to go back to the trial court yet again to obtain a final resolution of their dispute, the U.S. Court of Appeals for the Ninth Circuit has held. The court of appeals, now wading into the contempt phase of a case that has already reached the Supreme Court once, affirmed the trial court’s order on four of the contempt counts, reversed on a fifth count, and vacated on two others (Oracle USA, Inc. v. Rimini Street, Inc., August 24, 2023, Bumatay, P.).

The civil contempt dispute is “the fallout from the protracted copyright infringement litigation between Oracle USA, Inc. and Rimini Street, Inc.—now in its thirteenth year,” the court of appeals described. Oracle owns and develops copyrighted software that enables large organization to perform various business functions, such as human resources, payroll, taxes, shipping, and customer relations. But Oracle’s software products require ongoing updates and technical support—and Oracle does not corner that market. Instead, Oracle’s customers can choose to have their Oracle products maintained by a third-party vendor instead, such as Rimini.

In 2010, Oracle sued Rimini for copyright infringement of four of its software products, claiming that Rimini had exceeded the bounds of its customers’ licenses with Oracle while doing its technical support. After a jury awarded $35.6 million in damages to Oracle in 2015, the district court entered a permanent injunction against Rimini, enjoining the company from infringing Oracle’s copyrights in the four products. Three years later, in 2018, the Ninth Circuit affirmed the judgment but remanded for the district court to reconsider the scope of the injunction. The district court entered a revised injunction later, which the court of appeals largely affirmed. (Along the way, the case also made law on a separate issue, namely whether a prevailing party like Oracle could recover litigation expenses—specifically fees for expert witnesses, e-discovery, and jury consulting—under the Copyright Act’s fee-shifting statute. In Rimini St., Inc. v. Oracle USA, Inc., 139 S. Ct. 873 (2019), the Supreme Court said no.).

The brings the story to 2019—and to the beginning of contempt proceedings. Oracle contended that Rimini was continuing to exceed the bounds of its customers’ licenses in providing technical support for Oracle products. After 18 months of discovery and a seven-day bench trial, the trial court found Rimini in contempt of the order on five counts and ordered it to pay Oracle $630,000 in sanctions. Rimini appealed, leading to this opinion.

Local hosting. The court of appeals issued a split decision on the contempt order. The first question was whether Rimini violated the injunction by hosting files from Oracle’s PeopleSoft program—a suite of tools for managing human resources, customer relationships, and financial and supply chains—on its own system. The conduct that led to the injunction in the first place was that Rimini had a regular practice of copying PeopleSoft files onto its systems as part of the standard support process for its clients. Here, however, Oracle had only turned up three instances in which Rimini possessed copyrighted PeopleSoft files on its local systems—and in two of those cases, the Rimini client sent the copyrighted files unsolicited. Was that enough to sustain the contempt order? The court of appeals found that it was. Rimini employees “did not immediately quarantine or report the files to Rimini’s security or compliance departments,” the court noted—and in two cases even forwarded the copyrighted material to other employees. That violated “the plain language of the permanent injunction,” the court reasoned.

The court reached its conclusion, in large part, by drawing on a distinction between patent and copyright law. In a prominent patent case, TiVo Inc. v. EchoStar Corp., 646 F.3d 869 (Fed. Cir. 2011), the Federal Circuit held that a district court must determine whether a company’s “new devices [were] more than colorably different from the original [infringing] ones” before deciding whether a company engaged in new infringing activity in a contempt proceeding. Rimini argued that the same doctrine should apply here because the alleged misconduct, while perhaps technically noncompliant, was “different from the local hosting that compelled the permanent injunction.” The court of appeals rejected the argument. The Federal Circuit adopted the TiVo test for the design of products, the court noted, which are “subject to the policy that legitimate design-around efforts should always be encouraged as a path to spur further innovation.” Here, by contrast, the court noted, “it’s Rimini’s conduct that is subject to the district court’s permanent injunction.” Such an injunction is proper, the court noted, if it restrains “acts which are of the same type or class as unlawful acts which the court has found to have been committed”—which was precisely the case here.

Cross-use. The court also affirmed the contempt finding on the question of so-called “cross-use”—that is, the use of a product developed for one customer in the servicing of a product owned by a different customer. In this case, four different clients of Rimini asked the company to fix bugs in their PeopleSoft tax solution software. Rimini turned to the development environment of a fifth client—the City of Eugene, Oregon—to work out the solution. The court of appeals found that this was, again, a straightforward violation of the injunction. “The permanent injunction prohibits the ‘cross use’ of the PeopleSoft program,” the court noted—and Rimini had done just that.

Rimini pointed again to the difference between its pre-injunction and post-injunction conduct, but to no avail. To be sure, the court noted, the conduct at issue in the underlying case was different from the conduct at issue in the contempt proceeding—the original case involved Rimini’s use of a generic development environment hosted in its computer systems to support multiple clients, while here the issue was simply the use of one client’s environment to support another client’s. But the court’s earlier opinion had already “broadly criticized any work that Rimini performs under color of a license held by a customer for other existing customers”—so it made “no difference whether the development environment was generic and locally hosted as in Rimini I or client-specific and remotely accessed as here.” As the Supreme Court has instructed, the court of appeals noted, “a party cannot escape civil contempt because the plan . . . which they adopted was not specifically enjoined.”

Other aspects. But while the court of appeals sided with the district court on some issues, it took a different view on others. One case involved a client who asked Rimini to diagnose a problem with one of its Oracle files. The client had a license to use or copy the file, but could only authorize its venders to “use”—not copy—the file. The client sent it to Rimini to diagnose, but as part of a “zip” package—meaning that Rimini could not open it without making a copy. Did that violate the injunction? The trial court found that it did, but the court of appeals reversed. Every use of an Oracle computer program requires making a copy of the program, the court noted, because it results in “the creation of ephemeral copies of Oracle software in the computer’s RAM.” Thus, the court observed, “the distinction between using the software and copying the software makes little sense.” There was no reason to reach a different conclusion because of the unusual nature of the copying here, the court observed.

The court also remanded on the question of how to define de minimis copying—an issue on which, perhaps notably, Rimini had won below. As part of client support for one client’s update, Rimini created a technical specification document that contained small snippets of Oracle source code—no more than a handful of letters, numbers, and symbols—as markers for where its technicians should do their repair work. The district court declined to find Rimini in contempt because, it concluded, Rimini “could have had a good faith and reasonable belief that copying such a small amount of source code was permitted.” But the district court then went further and found that Rimini could not engage in such copying in the future. That was error, the court of appeals found. “It is hard to see the necessity in preventing Rimini from using non-functional snippets of source code solely as markers to identify where Rimini employees should work,” the court noted. “Prohibiting de minimis copying like this,” the court observed, “would be like asking lawyers to conduct legal research without using pincites.” This portion of the order would therefore be vacated.

The Case is No. 22-15188.

Attorneys: Paul D. Clement (Clement & Murphy, PLLC) for Oracle USA, Inc. West Allen (Howard & Howard Attorneys PLLC) for Rimini Street, Inc.

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

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