knowledge & insights

Sunrise Firefighters and Google: Oracle’s Troubled 2021 Continues into the Courthouse

2021 isn’t shaping up to be Oracle’s year, is it?

First, the much-touted (and much-maligned) Oracle/TikTok deal faltered as Larry Ellison’s friend and confidant in Washington—former President Trump—slunk out of office crying foul, and a new administration entered. The new administration appears to have little appetite to carry on with the former administration’s bizarre act of what many saw as blatant thievery and the worst of crony capitalism, and Oracle’s bid to have TikTok handed over on a platter appears to have hit a dead end.

Second, on February 18, 2021, Mara Hvistendahl, a Pulitzer Prize-nominated journalist writing for The Intercept, published a scathing expose of Oracle entitled “How Oracle Sells Repression in China” with the blistering tagline: “In its bid for TikTok, Oracle was supposed to prevent data from being passed to Chinese police. Instead, it’s been marketing its own software for their surveillance work.” In the article, Ms. Hvistendahl gathered slide decks from Oracle’s own website that appear to demonstrate that “Oracle representatives have marketed the company’s data analytics for use by police and security industry contractors across China” with some documents implying that “provincial departments used the software in their operations.”

Never one to take a thoughtful piece of investigative journalism sitting down, Ken Glueck – Oracle’s man in Washington (whom we have written about before) – issued a nearly 2,000 word screed attacking Ms. Hvistendahl and The Intercept. Among other peculiar aspects of Mr. Glueck’s rant, he purports to not understand the article (“Whatever this story is, and frankly I’m still not sure even after several dozen reads…”), insults Ms. Hvistendahl for utilizing too many hyperlinks (“One can imagine the author studding the article with blue hypertext to bolster the credibility of her thesis, or maybe it was just to improve the article’s search score.”) and concludes by unwinding all his previous denials and admitting that the story could very well be true (“Or, yes, something could have slipped through the cracks.”).

International intrigue is far out of our wheelhouse, and we have no direct knowledge regarding any of the key allegations in Ms. Hvistendahl’s article. However, we commend the efforts of her and her publisher in telling this important story while absorbing Mr. Glueck’s peculiar concoction of populist insults.

The legal world, however, is our wheelhouse, and Oracle has suffered two major blows in a very short time period.

Oracle Legal Setback No. 1: City of Sunrise Firefighters’ Pension Fund v. Oracle Corporation, et al. (“The Oracle Securities Litigation”)

The Oracle Securities Litigation is a class action matter predicated on the auditing and licensing tactics we have witnessed for years. The operative complaint contained copious whistleblower allegations that detailed Oracle’s practice of selling unwanted cloud credits to licensees who were shell-shocked by allegedly bogus auditing claims. We have been closely monitoring this matter for our Oracle licensee clients and, after attending (via Zoom) the September 24, 2020, hearing on Oracle’s motion to dismiss, we were not optimistic that Judge Freeman would give the plaintiffs the opportunity to develop their case. As we previously wrote, the optics felt wrong when Judge Freeman came out swinging and expressed unfettered skepticism, and the matter seemed doomed to test its luck at the appellate level.  (Specifically, we stated that we “anticipate an Oracle win on its motion to dismiss.”)

We have never been so happy to have been so wrong.

On March 22, 2021, Judge Freeman issued a 54-page opinion granting in part and denying in part Oracle’s Motion to Dismiss. And, to be clear, the order is a minefield of dismissed theories and fallen allegations. In her own words:

As a result of this motion, the Court is only allowing a narrow omissions theory limited to Defendants’ stated reasons for cloud revenue growth and explanations for the subsequent slowing of that growth in light of alleged contrary factual circumstances known to them at the time.

However, as narrow as it might be, it is more than enough. Judge Freeman continued:

Whether this is enough to support Plaintiff’s claims will be determined on a more developed record.

A “more developed record”? In other words, discovery is about to start. Plaintiffs will be given the opportunity to gather information to prove their allegations. By way of a refresher, following are some of the allegations that Plaintiffs will now have a chance to dig into:

  • Oracle’s alleged “improper and extortionate tactics to coerce customers to buy short-term cloud subscriptions they did not want and would not renew,” including their alleged “Audit, Bargain, Close” or “ABC” sales tactics (Compl. at ¶¶ 82, 83);
  • Oracle audits are driven by the sales division ((Compl. at ¶ 89)
  • Oracle intentionally targeted licensees that had declined to purchase cloud products (Compl. at ¶ 92);
  • Oracle’s Installation Practices Virtually Guaranteed Audit Findings of Under-licensing (Compl. at ¶ 88); and
  • Awareness and approval of these tactics went straight to the top, with explicit sign off on a case-by-case basis by Oracle’s then co-CEOs, Defendants Mark Hurd and Safra Catz. (Compl. at ¶¶ 90, 110-111.)

To the best of our knowledge, no public litigation – including Mars v. Oracle (in which we were counsel of record for Mars) — has ever had the opportunity to launch discovery into Oracle’s unpopular licensing tactics.

And we can’t wait.

Oracle Legal Setback No. 2: Google v. Oracle.

In October of last year, in the wake of the inauspicious and deeply troubling Supreme Court arguments in the Google v. Oracle matter, we published a blog post regarding the importance of the case to Java licensees. We noted the many commentators who perceived that the judges appeared in favor of handing the matter to Oracle and, while giving a nod to the “notoriously unpredictable Supreme Court justices,” we also noted that “Google won twice at the District Court level only to be summarily overturned in Washington D.C. at the Federal Circuit level” and that “one would be hard-pressed to be optimistic about the trend lines.” 

We have also written about how members of the Oracle-friendly Trump Administration were brazenly putting their thumb on the scale in favor of campaign donor Oracle and, apparently, felt no hesitation in filing an amicus brief in favor of Oracle on the same day that Larry Ellison hosted a high-dollar fundraiser for President Donald Trump at his Hawai’ian Rancho Mirage. (Who could forget that news of this event prompted about 300 Oracle employees to stage a protest the next day?)

Paralleling Oracle’s recent court record, Beeman & Muchmore is proud to be 0 for 2 in our predictions.

On April 5, 2021, a 6-2 majority of the United States Supreme Court granted Google’s appeal and held that Google’s use of the Java APIs was within the bounds of fair use. Specifically, Justice Bryer, who drafted the majority opinion, found that Google’s use of the APIs had met all four factors and that Google used “only what was needed to allow users to put their accrued talents to work in a new and transformative program.”

Google’s overwhelming victory is nothing but good news for the Java user. There is little doubt that many will sleep easier for the time being.

Still, the future for the Java licensee is uncertain. Last October, we speculated that Oracle had refrained from launching a much-anticipated wave of Java audits pending the resolution of Google v. Oracle. “There can be little doubt”, we surmised, “that fostering a bad public reputation for recklessly leveraging its Java copyright against hapless licensees (many of whom still thought it was open-source) could be used to sway any court against taking over measures to strengthen Oracle’s copyright in Java.” But, now that the slug fest is over, will Oracle cease fretting over public perception of its handling of Java licensees and launch the wave of Java audits that has long been anticipated? The next several months will be very revealing for the perplexed Java licensee.

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We will certainly have more to say on both of these matters, so stay tuned for our further opinions. However, perhaps just for today, the ever-fearful Oracle licensee can count a few blessings and look forward to the future with less apprehension.

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