Oracle Concurrent Device Licenses Can Be a Valuable Tool to Combat Alleged Licensing Deficiencies
House of Brick Technologies has recently published a very interesting blog post about how Oracle often approaches concurrent device licenses during audits. If your company has an older license agreement from the 1990s, you may very well have such licenses included in your entitlement. Oracle appears to dislike these licenses because the Concurrent Device metric is more flexible than Named User Plus (NUP). But there is another consideration. When using the Concurrent Device metric, unlike in NUP licensing, processors are not counted. These licenses essentially allow any number of users or devices to share a single license provided that only one user or device at a time uses the license. Thus, they can be very beneficial from a licensing standpoint as the focus is not on counting processors, with all the complexities that may entail.
Although Oracle often assures its customers in connection with initiating audits that it will work to optimize a customer’s Oracle license entitlement, Oracle licensees should take such assurances with a very large grain of salt. We are aware of instances where Oracle recommended certain actions such as canceling licenses, and later the cancellations came back to bite the customer during the audit.
Licensees also need to be alert as Oracle often points to various non-binding policy documents when auditing customers and attempting to assert that customers are bound by these policy documents. One such area involves virtualization and VMware where Oracle asserts a licensee is bound by its non-contractual Hard Partitioning Policy, which we saw in the Mars case. With regard to concurrent licenses, House of Brick reports in its blog post that it is aware of instances where “Oracle License Management Services (LMS) and the Oracle sales team” attempted to “place these per-processor restrictions on clients with valid contracts that contain no per-processor minimums for Concurrent Device licenses”.
Licensees should not be misled by Oracle’s assertions. Oracle license agreements are fully integrated contracts, which can only be modified by a writing signed by both parties. Oracle by unilaterally posting “policy” documents that are not part of or referenced by the license agreement, and that are not signed by both parties, cannot make them magically part of the contract. Under California Civil Code Section 1636, "a contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting;" see also DVD Copy Control Ass'n, Inc. v. Kaleidescape, Inc. (2009) 176 Cal. App. 4th 697, 712 (“interpretation of the License Agreement is guided by the principle that it “must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.”). California Civil Code Section 1638 provides that "the language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity." See also People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2003) 107 Cal. App. 4th 516, 525. Oracle license agreements containing the Concurrent Device license metric are clear and unambiguous, and they are not tied to per-processor minimums or other restrictions.
So, what if you are an Oracle licensee who relied on Oracle’s representations and canceled your Concurrent Device licenses or accepted Oracle’s assertions about per processor minimums and lost money or were otherwise damaged? You may very well have options. Oracle license agreements typically have a California choice of law provision. California has a very strong law to protect consumers and other businesses known as Business & Professions Code Section 17200, which prohibits unfair, unlawful or fraudulent business practices. California courts have interpreted what constitutes a business practice broadly. A business “practice” is doing something habitually, more than once, or repeatedly. It includes a succession of similar acts, habit, and industry custom. California courts have found that even “sporadic” statements made by a defendant’s lower level employees regarding contractual language can be a “practice”. People v. Dollar Rent-A-Car Sys., Inc. (1989) 211 Cal. App. 3d 119, 129. Clearly if Oracle’s stance on Concurrent Device licenses is part of a larger License Management Services (“LMS”) playbook, which we think it may be, then a court could find that false or misleading statements made by Oracle LMS or Oracle Sales to Oracle customers concerning Concurrent Device licensing requiring processor minimums may be actionable under the statute. Although damages are not recoverable under Section 17200, restitution is available giving licensees a path to recover monies spent in overpayment on licenses or alleged areas of non-compliance.
Another reason why Oracle may so strongly dislike Concurrent Device licenses is Oracle would rather focus on processors and VMware in claiming large dollar amounts of alleged non-compliance. For certain customers with older licenses, if Oracle LMS had properly applied the Concurrent Device licenses, the alleged VMware processor deficiency claim could either evaporate or be significantly reduced causing Oracle to lose the benefit of this potentially multi-million dollar lever in the audit resolution discussions. We have discussed in other blog posts why Oracle's non-contractual Hard Partitioning Policy is not binding, and we routinely push back hard on Oracle's non-contractual VMware assertions.
Licensees with Concurrent Device licenses are advised to read their contracts carefully and do not fall for it if Oracle cites a “policy” document that is not part of the contract, and demands that you comply with it. If you find yourself the subject of an Oracle audit or believe that Oracle may have made false statements to you during an audit, consider hiring experienced outside counsel familiar with California law to help guide you through the process or advise you of your legal rights.
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By Tactical Law Attorneys and From Time to Time Their Guests