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Oracle America, Inc. v. Terix Computer Company, Inc.

United States District Court, N.D. California, San Jose Division

May 5, 2015

ORACLE AMERICA, INC., et al. Plaintiffs,
v.
TERIX COMPUTER COMPANY, INC., et al., Defendants.

ORDER GRANTING MOTION FOR PARTIAL SUMMARY JUDGMENT (Re: Docket No. 396)

PAUL GREWAL, District Judge.

Plaintiffs Oracle America, Inc. and Oracle International Corporation move for partial summary judgment of Defendants Terix Computer Company, Inc., Maintech Incorporated, Volt Delta Resources, Sevanna Financial, Inc. and West Coast Computer Exchange, Inc.'s express and implied license defenses. Because the court finds no disputed issues of material fact on these defenses, and that Oracle is entitled to judgment as a matter of law, Oracle's motion is GRANTED.

I.

A copyright owner holds the exclusive right "to authorize" each right enumerated in the Copyright Act, [1] including the right to license. Anyone holding a valid license has an affirmative defense to an owner's claim for copyright infringement. A defendant asserting a license defense has the initial burden of identifying any license provision that puts it in the clear. If it does so, the owner may overcome the defense by showing that the defendant's conduct exceeded the scope of the provision in question.[2] "[C]opyright licenses are assumed to prohibit any use not authorized."[3]

In 1992, Sun Microsystems released its first version of Solaris.[4] Solaris is a UNIX-based operating system designed and used to operate server, blade, storage and related hardware.[5] This includes hardware that is critical for legal, regulatory or business reasons, and therefore requires extremely high support levels.[6] It also includes less critical systems for test, development and back-up.[7] Sun regularly made available updates and firmware for Solaris that enhanced performance or simply fixed bugs in the system.[8] Solaris updates and firmware are copyrighted, and their use is controlled by express license.

Different licenses govern the use of different versions of Solaris at issue in this case. Sun's Binary Code License Agreement, an integrated written contract covering Solaris versions 7, 8 and 9, provides the customer a "License to Use" the software as follows:

Sun grants to you a non-exclusive and non-transferable license for the internal use only of the accompanying software and documentation and any error corrections provided by Sun (collectively "Software") for the number of users and the class of computer hardware for which the corresponding fee has been paid.[9] With Solaris 10, released in 2005, Sun changed the license structure to a two-part form: a

Software License Agreement and accompanying Entitlement.[10] The SLA provides:

Subject to the terms of your Entitlement, Sun Grants you a nonexclusive, nontransferable limited license to use Software for its Permitted Use for the license term. * * * The terms and conditions of this Agreement will apply to any Software updates provided to you at Sun's discretion, that replace and/or supplement the original Software, unless such update contains a separate license.[11]

Each customer's Entitlement is "the collective set of applicable documents authorized by Sun evidencing your obligation to pay associated fees (if any) for the license, associated Services, and the authorized scope of use of Software under this Agreement."[12] The firmware at issue is licensed separately pursuant to the SLA and an accompanying firmware Entitlement.[13]

Sun's Common Development and Distribution License[14] enables the "open source community" to download Beta versions of Solaris source code from opensolaris.org and, in accordance with the CDDL's terms, use, modify and distribute it (among other things).[15] The purpose is "to encourage developers to create new applications that run on [Solaris], so that when those applications are commercialized, they will drive additional licensing of" Solaris.[16]

Sun was acquired by Oracle in 2011. Since at least that time, customers who want Solaris updates and firmware must sign an annual contract for technical support services to be performed by Oracle.[17] No customer may purchase updates or firmware without these services.[18] Customers that sign a support agreement-either directly with Oracle or through a reseller authorized by Oracle-receive a Customer Support Identification number linked to the products covered by the agreement.[19] The CSI number allows customers to create login credentials to access Oracle's secure support website.[20] Using these credentials, the customer may download Solaris updates and firmware for the hardware systems that are covered by the support agreement.[21] The customer may not share or use its CSI number for the benefit of others or for the benefit of unsupported Oracle hardware-only customers who pay for and maintain an agreement with Oracle for the hardware at issue may download Solaris updates and firmware and only for their own internal business use on specified computers.[22]

Defendants offer their own support services for Solaris hardware.[23] Each either contracts directly with customers to provide this support or indirectly as a subcontractor to another entity, such as its co-defendant.[24]

Oracle filed this suit against Defendants for copyright infringement, fraud and other torts, [25] and Defendants promptly counterclaimed, alleging antitrust violations, unfair competition and other torts.[26] Defendants also pleaded a variety of affirmative defenses to Oracle's claims, including affirmative defenses of express and implied license. Terix's license defense relies on its customers' license rights.[27] According to Terix, "with the purchase of a Sun server or downloading of the Solaris 7, 8 or 9 operating system, and pursuant to the accompanying BCL, purchasing Customers received perpetual license rights both to their obtained version of Solaris 7, 8 or 9 and to any subsequent Solaris Updates."[28] Terix's claimed "License Rights for Solaris 10" are allegedly based on the "[SLA] and an accompanying Entitlement."[29]

After a series of pleadings and discovery-related skirmishes, Oracle now moves for partial summary judgment on each of Defendants' license defenses.

II.

This court has jurisdiction under 28 U.S.C. §§ 1331 and 1338. The parties further consented to magistrate judge jurisdiction under 28 U.S.C. §636(c) and Fed.R.Civ.P. 72(a). Fed.R.Civ.P. 56(a) provides that the "court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."[30] At the summary judgment stage, the court "does not assess credibility or weigh the evidence, but simply determines whether there is a genuine factual issue for trial."[31] Material facts are those that may affect the outcome of the case.[32] A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party.[33]

Defendants raise substantial questions about Oracle's copyright registrations, and in particular, whether portions of certain versions' registrations were previously published. Registration is a prerequisite to a civil action for infringement, [34] and a copyright "registration for a specific version of a computer program does not cover any unclaimable material that may appear in that version. For purposes of registration, unclaimable material includes: Previously published material."[35] At the same time, the owner of both an underlying work (a patch) and a derivative work (a subsequent major release) "can... sue for copying of material that appears in both the derivative work and the underlying work."[36] The court needs to resolve this issue eventually, but not now: even if Oracle's registrations are flawed, Defendants' license defenses still fail as a matter of law.

III.

Defendants' license defense requires that they present terms-express or implied-that excuse each of Oracle's allegations that they copied Oracle code in violation of Oracle's exclusive rights under 17 U.S.C. § 106. None of the licenses Defendants present meets this basic test.

First, while Defendants make much of the particularity of Oracle's infringement claims- or lack thereof-the nature of Oracle's motion makes the issue immaterial. Defendants argue that because Oracle "has refused to confirm its contentions regarding the copyrighted material at issue, " it cannot defeat the license defense.[37] But whatever the remaining imprecision of Oracle's contentions, [38] Defendants identify no connection between identifying each act of infringement alleged and determining whether there is a license that allows the infringing conduct. As Oracle points out, Defendants offer no evidence, or even argument, that their license defense is anything other than all-or-nothing. And in any event, Oracle accepts that to prevail on its motion, it must show that there is no legally tenable interpretation of any license Defendants put forth "that entitles Solaris licensees to any patch for any version of Solaris software and firmware at any time that is at issue in this case."[39]

Second, Defendants have not shown a genuine issue of material fact as to any express license. "[A] license must be construed in accordance with the purposes underlying federal copyright law" with particular emphasis on "the protection of the author's rights."[40] Under California law, the intent of the parties to a written agreement "is to be ascertained from the writing alone, if possible."[41] California law also recognizes that contract interpretation is a question of law for the court that should only be left to a jury if "the interpretation turns upon the credibility of extrinsic evidence."[42] Where there is a dispute as to the meaning of a contract's term, the court must determine whether the term is ambiguous or "reasonably susceptible" to more than one interpretation.[43] Regardless of the answer, the trial judge is the arbiter of both ambiguous and unambiguous language, as long as the evidence required to resolve the ambiguity is uncontroverted.[44]

This question of contract law asks whether the terms of the Binary Code License Agreement and the Software License Agreement and accompanying Entitlement permit Defendants' conduct. And upon examination, it is clear that they do not. The BCL applies to Solaris versions 7, 8 and 9 and provides in relevant part:

Sun grants to you a non-exclusive and non-transferable license for the internal use only of the accompanying software and documentation and any error corrections provided by Sun... for the number of users and the class of computer hardware for which the corresponding fee has been paid.[45]

The SLA imposes similar restrictions on Solaris 10:

Subject to the terms of your Entitlement, Sun Grants you a nonexclusive, nontransferable limited license to use Software for its Permitted Use for the license term. * * * The terms and conditions of this Agreement will apply to any Software updates provided to you at Sun's discretion, that replace and/or supplement the original Software, unless such update contains a separate license.[46]

Each customer's Entitlement is "the collective set of applicable documents authorized by Sun evidencing your obligation to pay associated fees (if any) for the license, associated Services, and the authorized scope of use of Software under this Agreement."[47]

For the period at issue, Oracle offered hardware customers the ability to buy an annual contract for technical support services that gave them access to patches through My Oracle Support. These individuals could create individualized log-in credentials whereby they could download patches for their covered servers. Each download was subject to a click-through license requiring that users comply with MOS Terms of Use:

You agree that access to My Oracle Support, including access to the service request function, will be granted only to your designated Oracle technical support contacts and that the Materials may be used only in support of your authorized use of the Oracle programs and/or hardware for which you hold a current support contract from Oracle.[48]

By the very terms of these various contracts, it is clear that these licenses authorize use of the specified Solaris software and firmware, as well as patches subsequently provided by Sun or Oracle. And to the extent some of these patches are downloaded through MOS, they are subject to any click-through license and the MOS Terms of Use. Focusing on the term "provide, " Defendants argue that the BCL and SLA allow users to download any software or patches that Sun or Oracle developed. But even Terix CEO Bernd Appleby admitted that developing, or building, a patch is not the same as providing it, and that the BCL does not require Oracle to provide all error corrections it developed.[49] The court sees no ambiguity on the face of the license agreements that might warrant adopting any meaning other than the plain meaning of provide: to supply.[50] And no other language in these agreements suggests an obligation to make available anything developed but not supplied.[51] There is simply no reasonable justification to stretch the plain meaning of the contract's language beyond the four-corners of the agreement.[52]

The SLA is clear that Sun would only provide patches at its discretion. It is true, as Defendants note, that the SLA "does not contain language stating that Sun may choose to exercise [its] discretion [to provide patches] on a customer-by-customer basis."[53] But Sun did not need to describe how it might exercise its discretion in order to retain it. In fact, Oracle freely provides patches to every customer with a support contract, which is consistent with the licenses' terms. Making that discretionary decision as to when and how to supply patches ( i.e., only making most available to paying customers) is exactly what the copyright laws allow Oracle to do.[54]

Given this interpretation, the next question as a matter of law is whether Defendants' conduct was authorized under the BCL and SLA. The answer is plainly no. Where Defendants falter is that the licenses specifically contemplate download privileges "for the number of users and the class of computer hardware for which the corresponding fee has been paid" or for updates "that replace and/or supplement the original Software" for which a customer pays "associated fees." Defendants violated the terms of the relevant licenses by using a customer's credentials to-at the very least-download patches for any number of that customer's machines, whether covered by the license terms or not. This type of use is clearly not contemplated on the face of the license agreements. Even if Defendants could somehow show that their conduct was authorized, their downloading would still be subject to the terms of the click-through licenses which require that materials downloaded from MOS "may be used only in support of your authorized use of the Oracle programs and/or hardware for which you hold a current support contract from Oracle."[55]

While the court does not find any ambiguity in the contract language that might warrant consideration of extrinsic evidence, even Defendants' purportedly damning evidence misses the mark. Defendants offer policies that were posted on the internet to substantiate Oracle's supposed intent to perpetually license their products. Specifically,

[t]he Solaris Operating System has specific named releases, such as Solaris 9'; each release may also have updates. A license to use a certain version of the software, such as Solaris 9, includes the right to use all current and future Solaris 9 updates, but does not include the right to use the later version such as Solaris 10.[56]

But there is no evidence that this explanation of the relationship between Solaris versions overrides the plain language of the contract which contemplates that a customer can access patches and updates related to whatever Solaris version they are running on licensed servers-subject to a support contract. In particular, the BCL and SLA both include integration clauses which prohibit amendment.[57] Because of these integration clauses, the licenses cannot be "explained or supplemented by evidence of consistent additional terms, "[58] let alone inconsistent ones.

As to the CDDL, [59] there is no dispute that the patches at issue were downloaded to be applied to versions of Solaris covered by the BCL and SLA. Defendants have not argued that the relevant customers were running OpenSolaris-the only version of Solaris covered by the CDDL.[60] Instead, Defendants argue that the OpenSolaris source code that Oracle posted online overlaps with source code inherent to Solaris versions 7-10. According to Defendants, this means that the CDDL applies to all versions of Solaris and their associated patches. But as discussed above, this does not change the fact that the BCL and SLA contain integration clauses that preclude any later agreement from altering or superseding their terms. OpenSolaris was available from www.opensolaris.org.[61] All of the patches at issue were downloaded from MOS and applied to Solaris versions 7-10.[62] These are clearly different products that operate under different licensing regimes.[63] Defendants cannot invoke the CDDL to try and retroactively justify their violation of the BCL and SLA.[64]

Third, Defendants' implied license defense fails. "Courts have found implied licenses only in narrow' circumstances where one party created a work at [the other's] request and handed it over, intending that [the other] copy and distribute it."[65] But "[a]s a general matter, implied terms should never be read to vary express terms, " and no implied license may permit what the actual licenses prohibit.[66] Here, there is no evidence that Oracle commissioned Defendants to create any of the software or patches at issue. Even under Defendants' broader standard that "[a]n implied license can be found where the copyright holder engages in conduct from which [the] other [party] may properly infer that the owner consents to [its] use, "[67] the record does not support any such implication.

Defendants argue that Oracle knew that Defendants thought they had a right to download patches but failed to take any affirmative action to stop Defendants-a "silence" that Defendants characterize as consent.[68] But Defendants present no reasonable justification for why or how silence following a clear objection to their conduct could constitute consent.[69] The undisputed fact is that Oracle put its products behind a pay wall and later filed suit to vindicate its rights under the license agreements. There is no remaining question that must be considered by a jury.


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