A Legal Showdown With Oracle Threatens A Software Company That Just Filed A $US60 Million IPO

Larry Ellison seatedBusiness InsiderOracle CEO Larry Ellison

Last week, an enterprise company called Rimini Street filed for a $US60 million IPO.

This week, it’s doing damage control thanks to an ongoing lawsuit with Oracle in which Oracle alleges that Rimini illegally installed Oracle software.

Rimini Street offers a service that helps businesses troubleshoot and fix problems when software glitches occur. It’s called “support” and it’s like an extended warranty of sorts.

Normally, enterprises buy this kind of service from the software vendor directly. It’s one of the most lucrative things software companies sell.

For instance, “software support margins during fiscal 2013 were 88% and accounted for 74% of our total margins over the same period,” Oracle said in its last annual report.

But instead of buying that support from Oracle, companies can buy it from Rimini at about half the cost, Rimini promises. Rimini Street offers the same for SAP software.

In 2010, Oracle sued Rimini, claiming, among other things, that Rimini didn’t have the right to host Oracle software on behalf of Oracle’s customers. The two have been battling it out in court ever since. The suit involves four specific customers.

In the midst of this, on Wednesday, Rimini filed for its IPO. On Thursday, the court issued a partial ruling and on Monday, and Oracle issued a press release proclaiming victory, “Court Rules That Rimini Street Infringed Oracle Copyrights.”

While it’s true that Oracle won part of the case, the court actually split its decision, finding in favour of Oracle for two customers, in favour of Rimini for the other two, and opting to send other legal questions to a jury trial.

Yet, this partial win still hurts Rimini. It fuels the idea that Oracle can sue it out of business. In fact, in Rimini’s SEC documents, there’s a long discussion of its cantankerous history with Oracle. It warns:

Oracle has a history of litigation against companies offering alternative support programs for Oracle products, and Oracle could pursue additional litigation with us. Such additional litigation could be costly, distract our management team and reduce client interest and sales revenues.

So, after Oracle’s press release, Rimini sent a letter to all of its its customers telling them not to freak out. It sent that memo to Business Insider too. Here is part of it:

This case is NOT about the legality of independent enterprise software support. Oracle agrees that it is legal for third parties to offer independent enterprise software support to Oracle licensees, and Oracle licensees have a legal right to purchase Rimini Street support services instead of Oracle annual support services. Competitive motivations aside, this case is primarily about the specific processes Rimini Street used to support a portion of its clients.

Industry analyst Ray Wang offers a detailed analysis on the court rulings. The upshot is enterprise customers who want to hire Rimini need to sign carefully worded contracts. This litigation is still a dark cloud over Rimini Street’s business, particularly as it looks to go public.

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