Third Party Affirmative Defenses to Software Copyright Infringement

A license, either express or implied, may be an affirmative defense to software copyright infringement.  However, a recent case, brought by Oracle against a vendor who had provided services to Oracle's customer, illustrates the limits of these defenses.  Oracle USA, Inc. v. Rimini Street, Inc., No. 2:10-CV-00106-LRH-PAL (D. Nev. Feb 13, 2014).  Perhaps more importantly, this case illustrates practices – generally governed by fairly standard provisions in a software license – concerning which both the software licensee and its third-party vendors should take care.

Following a motion by Oracle, the court granted summary judgment denying a number of the affirmative defenses raised by the defendant, albeit reserving judgment on a few.  The defendant, Rimini, conceded that it had copied Oracle's software.  However, with respect to four different Oracle customers, Rimini argued that it had express and implied licenses to use the software.  (Rimini also raised an affirmative defense of “consent,” which the court explained was the same as an implied license.)

Express License Defenses

Turning to the first Oracle customer at issue, the City of Flint, the court first rejected Oracle's argument that Rimini could not “assert the City of Flint's software licensing agreement as a defense” at all “because Rimini cannot prove that the City of Flint's software installation media . . . was used to build [Rimini's] development environments.”  This threshold argument by Oracle was “premised on the flawed assumption that the rights to use and install the licensed software are restricted and tied solely to the specific software installation media delivered by Oracle.”  In fact, under federal copyright law, the grant of a license to use software is distinct from “a right to install and use only the provided software installation media.”  Certain provisions of the license agreement did distinguish between the software and the installation media, further bolstering the conclusion that Oracle licensed a right to use a version of the software, and not just specific installation media.

Next, turning to the heart of the matter, the court considered three provisions of the City of Flint's license with Oracle that Rimini contended gave it license to use Oracle's software.  The first provision did not help Rimini, because although the provision allowed software to be copied, the provision allowed copying only for archival and backup purposes.  In contrast, Rimini had established “development environments [that] were used to develop and test software updates for the City of Flint and other Rimini customers with similar software licenses.”  This use went beyond the license granted to the customer, which was “solely for [the City of Flint’s] internal data processing operations at its facilities in the [United States].”

A second provision in the City of Flint's license allowed the customer to “modify or merge the Software with other software.”  The court found that “the right to modify the software pursuant to” this provision “does not authorize Rimini to make copies of the software.”  Modifying and copying software are legally distinct.  Granting “the right to modify the software does not automatically grant a right to reproduce that software.”  Further, the provision at issue “conspicuously” did not use “the word 'copy.'”  Moreover, even if the “modification” provision permitted copying, copies of the software would still have been restricted to the City of Flint's facilities.

A third provision in the City of Flint's license set forth restrictions relating to third-party access and use to Oracle's software on behalf of the City of Flint.  The language of this provision did not say anything about copying, and a right to access and use “is separate from a right to reproduce or copy the software.”  Further, Rimini “proffered no admissible evidence that it has agreed to certain non-disclosure obligations as required by” the provision in question.

The court undertook a similar analysis with respect to a license held by the Pittsburgh Public Schools. That license expressly provided “that only the Pittsburgh Public Schools may make copies of the software.”  The license also prohibited third parties designated by the Pittsburgh Public Schools from installing Oracle's software on a computer, accessing its source code, or copying the software.

However, a license held by Giant Cement permitted Rimini to have a copy of the software on it systems “for archival purposes . . . so long as Rimini does not access the software's source code.”  Oracle proffered no “evidence that Rimini accessed the software's source code while providing archival support to Giant Cement.”  Rimini did proffer evidence to the contrary.  The court found a genuine issue of material fact concerning whether “the development environment associated with Giant Cement is used solely for archival purposes as authorized by” the license agreement.

Likewise, the court found that Novell's license had provisions that could be read together “to allow Rimini to make a reasonable number of copies of the licensed Siebel software on Rimini's system for archival and back-up purposes.”  The court therefor denied “Oracle's motion for summary judgment on Rimini's express license affirmative defense as it relates to Novell.”

Implied License Defenses

Rimini argued that it had an implied license to Oracle's software because, allegedly, “for years Oracle shipped back-up copies of its customer's software installation media to Rimini's facilities with full knowledge” that the software was “being shipped to Rimini's facilities” and also “that Rimini was using the installation media to create copies of the software on its own systems to provide support services to Oracle's customers.”  The court found that Rimini's support for this defense, consisting only of the facts that Oracle shipped software to Rimini, and that its executives had been tracking Rimini's business activities, was insufficient.

In fact, the court had evidence that back-up copies were shipped to Rimini only “after Oracle's customers submitted requests to Oracle describing Rimini's address as the customers' 'secondary off-site backup location.'”  Further, "Rimini admitted that the purpose behind the obfuscated shipping requests was to allow Rimini to create development environments to service Rimini's customers without Oracle's knowledge.”  Moreover, there was “no evidence that Oracle knew of Rimini’s use of the shipped installation media to create copies of the software on Rimini’s systems.”

In sum, no reasonable jury could find that Oracle authorized Rimini to copy its software onto Rimini's systems merely from “Oracle's shipments of the installation media to a location described as a “secondary off-site backup location."”  The court therefore granted Oracle's motion for summary judgment concerning Rimini's implied license and consent affirmative defenses.