Oracle USA, Inc. v. Rimini St., Inc.

81 F.4th 843

ORACLE USA, INC.; Oracle America, Inc.; Oracle International Corporation, Plaintiffs-Appellees, v. RIMINI STREET, INC., Defendant-Appellant.

No. 22-15188

United States Court of Appeals, Ninth Circuit

Argued and Submitted February 6, 2023 San Francisco, California

Filed August 24, 2023

Appeal from the United States District Court for the District of Nevada, Larry R. Hicks, District Judge, Presiding, D.C. No. 2:10-cv-00106-LRH-VCF

Mark A. Perry (argued), Weil Gotshal & Manges LLP, Washington, D.C.; Jeremy M. Christiansen, Gibson Dunn & Crutcher LLP, Washington, D.C.; Samuel G. Liversidge, Ilissa S. Samplin, and Casey J. McCracken, Gibson Dunn & Crutcher

LLP, Los Angeles, California; Blaine H. Evanson, Gibson Dunn & Crutcher LLP, Irvine, California; Joseph A. Gorman, Gibson Dunn & Crutcher LLP, San Francisco, California; West Allen, Howard & Howard, Las Vegas, Nevada; Eric D. Vandevelde; United States Attorney's Office, Los Angeles, California; for Defendant-Appellant.

Raechel K. Kummer (argued) and David B. Salmons, Morgan Lewis & Bockius LLP, Washington, D.C.; Benjamin P. Smith and Sharon R. Smith, Morgan Lewis & Bockius LLP, San Francisco, California; Dorian E. Daley, Peggy Bruggman, and James C. Maroulis, Oracle Corporation, Redwood City, California; Paul D. Clement, Erin E. Murphy, and Matthew Rowen, Clement & Murphy PLLC, Alexandria, Virginia; Karen L. Dunn and William A. Isaacson, Paul Weiss Rifkind Wharton & Garrison LLP, Washington, D.C.; Richard J. Pocker, Boies Schiller & Flexner LLP, Las Vegas, Nevada; Beko O. Reblitz-Richardson, Boies Schiller & Flexner LLP, San Francisco, California; for Plaintiffs-Appellees.

Before: Jay S. Bybee and Patrick J. Bumatay, Circuit Judges, and Richard D. Bennett,^* Senior District Judge.

OPINION

BUMATAY, Circuit Judge:

This civil contempt dispute is fallout from the protracted copyright infringement litigation between Oracle USA, Inc. and Rimini Street, Inc.—now in its thirteenth year. In the underlying case, the district court entered a permanent injunction that enjoined Rimini from various infringing practices. Years later, the district court identified ten potential violations of the permanent injunction ("Issues 1-10"), and ultimately held Rimini in contempt on five. Rimini was ordered to pay $630,000 in statutory sanctions, plus attorneys' fees. On appeal, Rimini argues that the contempt order should be reversed and that the sanctions should be vacated.

We affirm the district court's finding of contempt on Issues 1-4, reverse on Issue 8, and vacate the district court's order on Issues 7 and 9 to the extent it reads the permanent injunction to enjoin de minimis copying. We vacate and remand the sanctions award to Oracle for recalculation.

I.

Oracle owns and develops copyrighted software for large organizations. Oracle's enterprise software products help organizations perform various business functions, such as human resources, payroll, taxes, shipping, and customer relations. Businesses and organizations purchase licenses to use specific programs and the products can be customized to accommodate their needs. At issue here are four of Oracle's software programs: PeopleSoft, Siebel, J.D. Edwards, and Oracle Database.

Oracle's enterprise software products require ongoing updates and technical support. For example, an update may reflect changes to regulations or the tax code. So along with a licensing fee, Oracle's licensees may pay an additional fee for software upgrades and support. They may also outsource support services to third parties, like Rimini.

Rimini is Oracle's largest competitor for its software support services. Rimini supports and maintains Oracle-licensed software products for thousands of clients. Rimini's clients include many Fortune 500 companies, universities, governments, and hospitals. Co-defendant Seth Ravin serves as the CEO of Rimini.

A. Process 1.0 and Rimini I

In 2010, Oracle sued Rimini for copyright infringement of its PeopleSoft, J.D. Edwards, Siebel, and Oracle Database software. Oracle alleged that Rimini's support process for its clients, known as Process 1.0, violated Oracle's copyrights by "local hosting" and "cross using" Oracle's products. "Local hosting" refers to Rimini creating "generic" Oracle software development environments on Rimini's local computer systems to develop and test software updates and fixes for clients' Oracle products. Once perfected, Rimini would then deliver the updates and fixes to a client's "live" environment, run on the client's systems. "Cross use" refers to Rimini creating a development environment under the license of one client to support other clients.

In response to Oracle's suit, Rimini argued that each of its clients held a valid Oracle license and no client received a benefit it wasn't entitled to. But in Oracle's view, even when clients hold identical licenses, cross use isn't permitted. Generally, Oracle believed its licenses required Rimini to perform work for each client only in the development environment for that client.

In 2014, the district court granted partial summary judgment to Oracle on aspects of the copyright claims. See Oracle USA, Inc. v. Rimini St., Inc., 6 F. Supp. 3d 1086, 1107 (D. Nev. 2014). And in 2015, a jury sided with Oracle on the rest of its copyright infringement claims against Rimini. The jury awarded Oracle $35.6 million in damages on a hypothetical license theory. The jury also found for Oracle on two state-law claims. The district court further assessed costs, attorneys' fees, and prejudgment interest against Rimini. And the district court entered a permanent injunction against Rimini based on the copyright and state-law claims, enjoining the company from infringing Oracle's PeopleSoft, J.D. Edwards, Siebel, and Oracle Database copyrights.

The Ninth Circuit affirmed the judgment on the copyright infringement claims and the costs award. Oracle USA, Inc. v. Rimini St., Inc., 879 F.3d 948, 953 (9th Cir. 2018) ("Rimini I"). We reversed the state-law claims, however, and vacated the injunction for reconsideration under only the copyright claims. Id. at 964. The Supreme Court later reversed on the meaning of "costs." Rimini St., Inc. v. Oracle USA, Inc., — U.S. —, 139 S. Ct. 873, 875-76, 203 L.Ed.2d 180 (2019).

B. The Permanent Injunction

After that appeal, the district court granted Oracle's renewed motion for a permanent injunction in 2018. Rimini appealed the issuance of the permanent injunction. In an unpublished decision, we affirmed the grant of the permanent injunction except as to two aspects of the order, which we held were overbroad. See Oracle USA, Inc. v. Rimini St., Inc., 783 F. App'x 707, 710 (9th Cir. 2019) (unpublished) ("Rimini Injunction Appeal"). We first struck the provision enjoining "local hosting" of the J.D. Edwards and Siebel software programs because those products' licenses did not prohibit it. Id. at 710-11. We also struck the provision enjoining "access" to Oracle's source code because "accessing" copyrighted work is not infringing activity under the Copyright Act. Id. at 711 (citing 17 U.S.C. § 106 (2002)).

Generally, the operative permanent injunction provides that "Rimini Street shall not reproduce, prepare derivative works from, or distribute PeopleSoft, J.D. Edwards, or Siebel software . . . unless solely in connection with work for a specific customer that holds a valid, written license agreement for the particular PeopleSoft, J.D. Edwards, or Siebel software . . . authorizing Rimini Street's specific conduct." Permanent Injunction ¶ 2a.

The permanent injunction has three relevant provisions related to PeopleSoft:

• "Rimini Street shall not reproduce, prepare derivative works from, or use a specific licensee's PeopleSoft software or documentation other than to support the specific licensee's own internal data processing operations[.]" Id. ¶ 4.

• "Rimini Street shall not reproduce, prepare derivative works from, or use PeopleSoft software or documentation on, with, or to any computer systems other than a specific licensee's own computer systems[.]" Id. ¶ 5.

• "Rimini Street shall not reproduce, prepare derivative works from, or use PeopleSoft software or documentation on one licensee's computer systems to support, troubleshoot, or perform development or testing for any other licensee, including specifically, that Rimini Street shall not use a specific licensee's PeopleSoft environment to develop or test software updates or modifications for the benefit of any other licensee[.]" Id. ¶ 6.

As for J.D. Edwards, the permanent injunction states that "Rimini Street shall not copy or access J.D. Edwards software source code to carry out development and testing of software updates[.]" Id. ¶ 8.

As for Oracle Database, the permanent injunction provides that "Rimini Street shall not reproduce, prepare derivative works from, or distribute Oracle Database software." Id. ¶ 15.

C. Process 2.0 and Rimini II

In response to the district court's 2014 summary judgment ruling, Rimini transitioned its client support process to "Process 2.0." The transition involved two major changes: (1) switching from local-hosting to remote-hosting, and (2) switching from cross-used generic development environments to client-specific development environments. Process 2.0 requires Rimini's clients to host development environments on their own systems, which Rimini can access remotely. Moreover, under Process 2.0, Rimini no longer locally hosts any Oracle environment on its own systems. The transition to Process 2.0 was completed before the 2015 trial in Rimini I.

Rimini filed a new suit seeking a declaratory judgment that Process 2.0 was non-infringing on Oracle's copyrights. See Complaint for Declaratory Judgment, Rimini St., Inc. v. Oracle Int'l Corp., No. 2:14-cv-01699 (D. Nev. Oct. 15, 2014) ("Rimini II"). Although Rimini sought to consolidate Rimini II with Rimini I, the district court denied the motion and the litigation proceeded on separate tracks. Rimini II is...