Oracle Sues End User Alleging Hosting Violation

​By Pam Fulmer

Oracle America, Inc. and Oracle International Corporation (collectively “Oracle”) recently sued health information technology solutions company, Perry Johnson & Associates, Inc. (“PJA”) for copyright infringement in the Northern District of California.  Oracle contends that PJA has infringed Oracle’s copyrights on, among other things, its Enterprise Edition Database (“EED”) and Real Application Cluster (“RAC”) software.   Specifically, Oracle alleges that PJA provided hosting services to third parties without a license from Oracle for Oracle Database.  Oracle also contends that “PJA’s software architecture – including the number of sockets – exceeds the scope of any license that PJA may have".  In addition to damages of over $3.2 million in unpaid licensing and support fees, Oracle is seeking injunctive relief, impounding of unlicensed copies of the software, an accounting, statutory damages, attorneys’ fees and interest.  Oracle also seeks enhanced damages claiming that PJA’s infringement was willful. 
 
The case involves a type of Oracle license known as an embedded software license.  According to Oracle:

​Interestingly enough, Oracle has not sued Arrendale Associates, Inc. (“Arrendale”) but pleads on information and belief that Arrendale has complied with its own license obligations to Oracle.  Otherwise Arrendale might also be a target of Oracle’s lawsuit.  According to the Complaint:

​It appears that Oracle contacted PJA directly to attempt to ascertain how PJA was using the Arrendale software.  It is unclear from the Complaint if these actions were taken pursuant to a formal Oracle audit of Arrendale or of Arrendale’s customer.  Oracle may have asked Arrendale to audit its customer PJA or requested that Arrendale assign its audit rights to Oracle.  Oracle embedded license agreements publicly available online do provide for audits of Oracle customers, and also contain provisions whereby Oracle may request assignment of its customers’ rights to audit the ultimate end-user.  We just don’t know based on the facts as pled in the Complaint.  But it is interesting that Oracle makes no mention of any audit.  Could it be that with the Sunrise Firefighters Motion to Dismiss still pending, Oracle wants to ensure that no public filings raise any issues that could negatively impact the legal positions Oracle is asserting in that litigation with regard to how it audits it customers or end-users?   The Complaint continues without providing details around any audit, almost as if PJA voluntarily provided information to Oracle:

​​Oracle has targeted PJA for the alleged unlicensed hosting.  Tactical Law has noticed an uptick in the number of hosting issues that it is seeing Oracle raise in software audits of Oracle customers, and this trend is something we are watching.
 
Oracle may also be asserting some type of claim relating to PJA’s use of VMware.  According to the Complaint:

​If VMware is involved, PJA may want to aggressively pursue discovery from Oracle regarding Oracle’s stance on VMware in software audits, which often is a key factor leading to Oracle’s initial “shock and awe” number in its audit findings.  It could also be relevant to any unclean hands defense against Oracle.
 
The case had initially been assigned to Magistrate Judge Sallie Kim, but on May 12, 2020 Oracle filed a pleading declining to have the case heard by a Magistrate Judge.  The case was reassigned to Judge Chesney who has now recused herself from the case.  Counsel for PJA recently made an appearance, and the case is in the process of being assigned to a new Article III Judge.  
 
Tactical Law will continue to monitor the litigation and will report back with periodic updates.  The case is Oracle America, Inc. et. al. vs. Perry Johnson & Associates Inc. (Northern District of California Case Number 3:20cv 2984).