By Pam Fulmer
Oracle America Inc. and Oracle International Corporation (collectively "Oracle") have filed a new lawsuit in the Northern District of California against their licensee NEC Corporation of America ("NECAM"). According to the Complaint, NECAM was a member of the Oracle Partner Network ("OPN") until Oracle terminated its licenses due to this dispute. Oracle seeks at least $7 million in damages, as well as any profits made by NECAM through its use of the Oracle software and distribution of the Oracle software to NECAM's customers. Oracle has asserted claims for breach of contract as well as copyright infringement and seeks treble damages as Oracle alleges that NECAM's copyright infringement was willful. Oracle also seeks an award of attorneys' fees and costs pursuant to the license agreement.
Oracle contends that NECAM has been a long standing partner of Oracle (15 years) and is therefore extremely familiar with the various contracts signed by Oracle partners, as well as with the approved distribution methods allowed depending on the type of license purchased. According to the Complaint:
"As a long-time OPN member and Oracle licensee, NECAM was (and is) intimately
familiar with the Oracle PartnerNetwork and the different distribution methods Oracle offers to its OPN members – ESL [Embedded Software License], ASFU [Application Specific Full Use License], and Full Use. In the past fifteen years, NECAM has distributed licenses to Oracle software using all three distribution methods – ESL, ASFU, and Full Use – under the agreements set forth above.
Essentially Oracle asserts, among other things, that NECAM was using the Oracle software and allowing its customers to interact with the software, in a way that was not authorized by the applicable license agreement and distribution method, and that NECAM failed to pay all the license and support fees due Oracle.
Oracle issued an audit notice to NECAM in December of 2019 pursuant to the audit clause and delivered its Final Audit Report in October 2020. According to the Complaint, Oracle asked "NECAM to resolve the compliance findings within 30 days" and advised NECAM that it "needed to procure (pay for) additional ASFU and Full Use licenses for its prior distributions." Oracle further advised NECAM that it had previously "failed to report (or had under-reported) certain distributions". Finally Oracle demanded that NECAM provide Oracle with additional information regarding its on-premise development environments to enable Oracle to determine the extent to which they exceeded NECAM’s rights."
Oracle alleges that NECAM failed to respond and pay the licensing and support fees that Oracle contends were owed within 30 days of notification of the amounts owing. As a result on January 19, 2021, Oracle sent a breach notice to NECAM. Oracle contends that NECAM did not cure the breach, and as a result on March 5, 2021 Oracle sent a termination letter, notifying NECAM that Oracle was, by its letter, "terminating NECAM’s membership in the Oracle PartnerNetwork, the 2018 MDA, and all related ASFU distribution addenda and ESL distribution addenda."
According to the Complaint:
"NECAM breached its contracts with Oracle by its acts and omissions, including failing to
pay license and support fees owed to Oracle under the contracts and failing to provide information to Oracle as required by the contracts’ audit provisions. For example, NECAM breached the 2013 MDA, the 2013 ASFU Addendum, the 2018 MDA, and the ASFU Addenda by failing to report and pay license fees (and support fees) owed under the ASFU Addenda for distributions of its Integra-ID 5 application with the Oracle Database and the Database Options and Packs that were not permitted by NECAM’s ESL Addenda. As another example, NECAM breached the 2013 MDA and the 2016 Full Use Addendum by failing to report and pay license fees (and support fees) owed under the Full Use Distribution Addendum for distributions of the Oracle Database (and other Oracle software) to the Ohio State Police that were not permitted by NECAM’s ASFU addendum. And, as another example, NECAM breached its duty under the OPN Agreement and the 2018 MDA to cooperate with Oracle’s audit and provide reasonable assistance and access to information, by failing to provide Oracle with additional information regarding its on-premise development environments to enable Oracle to determine the extent to which they exceeded NECAM’s rights, as Oracle repeatedly requested."
A few observations about this case and other recent audit cases brought by Oracle that readers of our blog may find interesting:
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