In 2005, “The Terminator," also known as Arnold Schwarzenegger and later “The Governator,” uttered the famous catchphrase “I’ll be back.” Twenty years later, reflecting on the slogan “I’ll be back,” it could easily be applied to the current legal battle and decades-long saga between Rimini Street and Oracle. Yet it should not be surprising that this battle continues. More importantly, as this battle rages on, your right to use third-party support alternatives from any vendor is under fire.
The casual observer and the astute student of the daily clashes within the “The Six Cities of Silicon Valley,” a term we coined several years ago, might be stunned by both the longevity and the enmity of this particular drawn-out conflict. All battles between massive monolithic 20th-century tech companies are conceived through the jealously of guarding perceptibly proprietary technical intelligence while wrapped in a thin veneer of self-righteous, pretentious legal nuances and trivialities.
The decade-and-a-half war between Oracle and Rimini Street is a tale that would outlast even a Dick Wolf series in the depiction of contemporary vitriol and exaggerated drama but also the ever-increasing cheap scripting and direction. All that being obvious, there are lessons for the tech industry to learn, especially for the non-billion-dollar companies.
My co-author and I have more than 60 years of experience dealing with Oracle. We agree that Oracle makes historically significant and superb software. We would also agree that Oracle is like a dog with a bone when it comes to competition.
Oracle is successful because, no matter the obstacle, Oracle competes to win. Oracle wins more battles than it loses. Today, 498 of the Fortune 500 use Oracle software.
Most purchases of Oracle software required a 1-year purchase of Oracle technical support at 22% of the original software price. This technical support revenue stream is one of the most profitable parts of Oracle’s business. The most valuable aspect of this is that support revenue perpetually recurs annually. Oracle recently announced that it reserves the right to increase technical support by up to 8% annually. This means the technical support stream becomes more lucrative without limit.
COST SAVINGS OF THIRD-PARTY SUPPORT
Rimini Street is the largest global provider of end-to-end enterprise support. Rimini’s entire business model offers companies an alternative to vendor-provided support. The cost savings are substantial for customers willing to take this alternative path. Oracle customers who switch to Rimini Street or Spinnaker Support can save up to 50% on their current support bill.
The cost savings could reach 70% or higher when you factor in that the customer is no longer doing major upgrades.
ONE-WAY DOOR
If a customer cancels support from Oracle and later decides to return to Oracle, they must pay the support cost for each missed year. Therefore, taking this alternative path is a decision that must not be taken lightly. From an Oracle perspective, customers not running the most up-to-date versions and patches are more at risk of permanently leaving the Oracle family of software. Eliminating this lucrative support revenue stream can be financially devastating to any software company, so it is obvious why Oracle has continued to pursue Rimini Street for more than a decade.
GOLIATH CONTINUES TO BATTLE DAVID
Given that Oracle collects $50Bn annually compared to Rimini Street, which generates approximately $500M annually, Goliath versus David is a fair portrayal. While establishing its business, Rimini crossed proverbial legal lines and bears significant corporate responsibility for those mistakes. This, however, is a common story. Microsoft’s founder sold IBM MS-DOS when it technically did not own the product. Uber has had several allegations raised against its aggressive practices. It’s not fair to say Rimini Street has been without fault. The courts have agreed with Oracle on several occasions.
In one case, it was decided Rimini Street had infringed various Oracle copyrights. It was finally a settled issue (No. 17-1625, 2019) only after it reached the U.S. Supreme Court.
DO YOU HAVE A RIGHT TO USE THIRD-PARTY SUPPORT?
In Massachusetts, voters have approved the “right-to-repair” bill, which is now law and requires automakers to open up the error codes so customers can use the repair facilities of their choice to perform diagnostic tests. Yet, at every turn, the law is roadblocked by the automakers. Similarly, as Oracle tries to protect the lucrative software support revenue stream, given the high stakes, Oracle lawyers concentrate on shutting off the option of using third-party support. Rimini Street must protect its business model or face extinction. However, in the process, Rimini has inadvertently protected everyone else’s right to use third-party support.
To quote Joel Muchmore of Beeman and Muchmore, “The good news is that the court’s rulings thus far have made it very clear that licensees have a right to utilize third-party support. This is excellent news for everyone. It also made it clear there is a right way and a wrong way companies can provide third-party support options.”
PATCHES AND UPGRADES
The courts have clarified that software can only be obtained from the vendor that produced the product. Customers who want to access patches and software upgrades must download any software available and necessary for future use before separating from the vendor. Even if the customer was entitled to the patches and upgrades when they were an active support customer of the vendor, the third-party support organization cannot provide them.
REUSE OF KNOWLEDGE ON TRIAL
This is the point that the saga takes the strangest turn down a potentially dark path. During a recent court battle, Oracle put the “reuse of knowledge” on trial. Oracle’s legal team took the position that if Rimini developed a fix for one customer and then reused that work product for another client, it was “prototyping” and violating the license agreement. Work product could be as basic as knowledge gained from one client being applied at another.
Quoting Joel Muchmore, “If Oracle were to obtain a court order or injunction prohibiting the cross-application ‘knowledge and experience’ from one client to another when providing thirdparty consulting services, the world of intellectual capital would be stood on its head.” Thankfully, the judge did strike this down, but that does not prevent Oracle from modifying the argument.
Consider the implications of any software giant being able to claim that all knowledge that can be ultimately traced back to its original source is forever the property of the original owner of that intellectual property. It is paramount for the future competitive health of the software industry that the U.S. federal courts demonstrate the same common sense previously demonstrated and throttle Oracle’s vast overreach.
As Goliath continues to battle David, the industry must pay attention to avoid getting caught in the familiar crossfire. Oracle will do everything possible to ensure that “all” third-party support organizations do not infringe upon its intellectual property rights. The courts have clarified that you have a right to use third-party support as long as it’s done within acceptable contractual bounds. In the process of this battle, we all must avoid the notso-friendly fire.
If Oracle does win one of its far-reaching claims on the reuse of knowledge, Mr. Sullivan and Mr. Corey better pretend to know much less than we know about database theory and operations.
Stay tuned, everyone.