In a closely watched appeal, a panel of the U.S. Court of Appeals for the Ninth Circuit recently vacated a permanent injunction from the District of Nevada against software provider Rimini. Oracle Int’l Corp. v. Rimini St., Inc., No. 23-16038. Oracle accused Rimini of copyright infringement and false advertising under the Lanham Act, stemming from Rimini’s third-party software that is designed to interoperate with and provide support for Oracle’s software. The court held that interoperability is not enough to create a derivative work without “something more”—an important precedent for software providers on either side of copyright disputes. The panel also addressed other aspects of the district court’s judgment, mostly favoring Rimini but affirming that certain statements were actionable under the Lanham Act.
Oracle and Rimini have been embroiled in a long-running feud over copyright. Oracle provides a range of software and SaaS products including PeopleSoft, a human resources and financial management tool. Rimini competes with Oracle in some respects but also provides third-party support and updates to Oracle’s products. Rimini’s third-party updates include updates to Oracle’s PeopleSoft to address changing laws and regulations. Oracle provides similar updates to PeopleSoft, in addition to security patches.
In one of the parties’ prior legal disputes, a district court found Rimini liable for copyright infringement and permanently enjoined Rimini from certain uses of Oracle’s software on Rimini’s own systems. That judgment, and a subsequent contempt ruling for violating the injunction, were largely upheld on appeal. Oracle USA, Inc. v. Rimini St., Inc., 879 F.3d 948 (9th Cir. 2018); Oracle USA, Inc. v. Rimini St., Inc., 783 F. App’x 707 (9th Cir. 2019).
After these rulings, Rimini changed its business practices and sought declaratory judgment that its new Process 2.0 business model did not infringe Oracle’s copyrights. Oracle counterclaimed for copyright infringement and false advertising under the Lanham Act.
Following a bench trial, Chief Judge Miranda M. Du held that because Rimini’s products “only interact[] and [are] useable with” Oracle’s software, they were derivative works under the Copyright Act (17 U.S.C. § 106(2)), and so the software Rimini created through Process 2.0 still infringed.
The Ninth Circuit vacated this portion of the district court’s ruling by a unanimous panel. The court observed that many works borrow from other works, but the Copyright Act provides specific examples of derivative works for which the copyright holder owns exclusive rights, including translations, movie adaptations, and reproductions. See 17 U.S.C. § 101. The court determined that these examples all involve “substantially incorporating” the creative components of the preexisting work, whether literal (actual copying of elements in the original work) or non-literal (copying the overall concept). Interoperability is therefore not enough for a party’s work to be “based upon” another’s original work.
On the record before the court, it held that Rimini did not infringe. Rimini’s software was useless without Oracle’s software, but it still did not incorporate Oracle’s copyrighted works. The court borrowed from two video game cases to illustrate this point. Creating additional levels and an extended story to Duke Nukem 3D—even without copying any code or art files—infringed the original work by copying the game’s story, characters, and setting. Micro Star v. Formgen Inc., 154 F.3d 1107 (9th Cir. 1998). But Game Genie, a tool that players could use to alter Nintendo games by physically placing it between the game console and cartridge, did not infringe Nintendo’s copyrights, because it did not incorporate any element of copyrighted material. Lewis Galoob Toys, Inc. v. Nintendo of Am., Inc., 964 F.2d 965 (9th Cir. 1992). Like a Game Genie, Rimini’s software was exclusively interoperable with Oracle’s software, but Rimini did not copy or incorporate any element of the latter.
Because the district court’s PeopleSoft copyright infringement rulings stemmed from an erroneous view of derivative works, the court vacated those rulings and remanded
The court also vacated the district court’s ruling striking Rimini’s affirmative defense that 17 U.S.C. § 117(a) entitles Oracle’s customers to create copies of its software for certain purposes. The district court held that Rimini could not assert this defense (standing in place of Oracle’s customers) because the customers licensed the software rather than owning it outright. The court held that the actual “incidents of ownership” are determined through a fact-heavy analysis that goes beyond the mere label of a license, so this defense should not have been stricken based on the pleadings.
Rimini appealed the district court’s false advertising judgment as to 12 statements. The panel affirmed as to one of these statements, claiming that Rimini falsely offered “holistic security” solutions—a term of art in the software security context. But the panel reversed in part, holding that eight statements claiming that Rimini’s updates were more secure than Oracle’s were nonactionable puffery. Because the record lacked evidence of an “objective, quantifiable metric to measure software’s security, risk to vulnerabilities, or security protocols’ effectiveness,” Rimini’s statements were the type of generalized claims of superiority that do not constitute false advertising.
Judges Patrick J. Bumatay and Richard D. Bennett also agreed that three claims about customers’ needs to apply Oracle’s critical patch updates were puffery. Especially given Oracles customer’s sophistication about software security, Rimini’s “fanciful but vague statements” were a close call but not “specific and measurable” enough to be misleading under the Lanham Act.
Judge Jay S. Bybee dissented only as to Rimini’s claims about the need to apply patches. Rimini claimed that Oracle’s patches provided “little or no value” and are “no longer relevant,” which were the kind of absolute, falsifiable statements Judge Bybee would have held to be actionable.
This ruling provides more certainty to providers of interoperable software while signaling to plaintiffs that they need to plead “something more” to show that such software is a derivative work. At the same time, courts will still have to weigh in on how significant the copying (literal or nonliteral) must be to clear this “something more” bar and how apt this question is for resolution on the pleadings. The Lanham Act portion of the opinion also confirms that competitors have some leeway to engage in marketing puffery by making comparative claims that are generalized and vague, rather than objective or measurable. Owners of original works and interoperable software alike should be mindful of the Ninth Circuit’s clarification in this case when they develop their software or litigate copyright claims.