Oracle Update – Litigation, TikTok, JEDI, and more

Date

LicenseFortressThe ITAM Review, and the law firm of Beeman & Muchmore teamed up to produce Podcast Episode 95: Oracle Update – Litigation, TikTok, JEDI, and more. The host of the podcast was AJ Witt from The ITAM Review. 

 

The Podcast discussed current topics in Oracle licensing in the context of the landmark Mars vs Oracle case. Joel & Art were lead litigators for Mars in that case and have plenty to share about Oracle’s trading and litigation strategies. LicenseFortress works with Beeman & Muchmore to provide legal services as part of their guaranteed Oracle License Compliance solution.

To access the Podcast https://www.itassetmanagement.net/2020/10/05/podcast-episode-95-oracle-litigation-tiktok-jedi-and-more/

Announcer:

Welcome to the ITAM Review podcast. News, reviews, and resources for ITAM, SAM, and Software licensing professionals.

AJ Witt:

So, hello everyone. Welcome to this podcast from the ITAM Review. I’m here today with some folks from LicenseFortress and Beeman & Muchmore. Let’s get into some introductions. We’re going to be talking about Oracle, all things Oracle today, how they do business, what that means for you? And we are even going to get into the crazy world that is TikTok and Walmart and geopolitics and how Oracle get involved in all of that. So something to look forward to at the end of this, but let’s get into introductions. Welcome, Michael.

Michael Corey:

Yeah. How you doing? Thank you for having me today. So just quick introduction, I’ve been working at Oracle since Version 3 or over 36 years. I’m the original Oracle press author, past president of international Oracle users groups, and Oracle ACE today. And so have made my living around Oracle.

AJ Witt:

Thanks, Mike. And Dean? Hi, Dean.

Dean Bolton:

Hello, AJ. Hello everyone. My name is Dean Bolton, co-founder and chief architect at LicenseFortress. I’ve been working with Oracle for about 20 years now, started on Version 8I, Oracle Certified Professional, Oracle Certified Master, VMware, V Expert, Oracle ACE Associate. So a lot of technical expertise on the Oracle side of things right alongside Mike.

AJ Witt:

Great, thanks. We also have Art Beeman from Beeman & Muchmore. Hi, Art.

Art Beeman:

Hello and great to be here. Thank you for the invite. I am one of the founding partners for Beeman & Muchmore. I am a trial lawyer for now nearly 40 years and have represented various technology companies in the myriad of disputes, including software, both in this patent space and copyright space. And most recently, along with Joel Muchmore in the founding of our firm earlier this year, we are dedicated to software licensing disputes, in particular in the ERP space, and are enjoying a splendid partnership with LicenseFortress and getting certain products to market to protect licensees. We’re going to be talking about Mars v Oracle. And along with Joel, I was one of the lead lawyers on that case. Great to be here. Thank you.

AJ Witt:

Thanks Art. And hi, Joel, as well. Hi.

Joel Muchmore:

Hi, thanks again for having both Art and I and everybody else here. I have been a commercial litigator for about 20 years, spent much of that time in the intellectual property space as well. About five years ago is when Art and I litigated the Mars v Oracle matter and opened up a world to software licensing litigation and with Oracle as well. And along with Art, as he said, we founded Beeman & Muchmore and dedicate most of that time to software licensing. And you don’t do legal issues in software licensing without having Oracle at the forefront of a lot of it.

AJ Witt:

Absolutely. Great. It’s really great to have you along, Art and Joel in particular, and Dean and Mike too, as well. But we have written about the Mars case. It is somewhat legendary in the world of IT asset management. I think you’ll agree. It comes up all the time, whenever you talk about Oracle and just actually litigation in general between customers and partners. And this is what we’re going to be getting onto today, actually, specifically around Oracle. So thank you for sharing your expertise. It’s great to actually talk to people who are involved in that today. And the thing we end up talking about Oracle quite a lot is that they are litigious. They like to take their customers to court or at least threaten to take their customers to court. And this seems to me in the way of modern technology relationships between customers and software sellers, to be unusual. We see partnerships, we see Microsoft talking about partnering, we see AWS being a trusted partner for people’s hardware and software, for example. What is it about Oracle that leads to this, do we think?

Art Beeman:

Well, it’s a great question and I don’t think it necessarily can be answered in capsule form. But that said, certainly you can start with the persona of the founder, Larry Ellison, who from almost the start gained a reputation of being quite assertive, quite aggressive in the market, and not afraid to use the courts for purposes of gaining market share. And you could see it certainly in Northern California, the more notorious Oracle litigation matters. For instance, Oracle went after SAP, not so long ago in a copyright dispute where Larry Ellison, uncharacteristic of many CEOs, was gleeful about testifying, couldn’t wait to testify, loves to tell the story. Did as much and they got the largest copyright verdict at the time, the largest copyright verdict ever against SAP in excess of a billion dollars. That is the kind of thing that will establish a reputation, no doubt.

Art Beeman:

But what Joel and I found in the Mars v Oracle matter, and something to underscore here, is that we do have a certain confidentiality obligations. So we intend, of course, to honor those confidentiality obligations, and our commentary today will be restricted to the public record. But Joel, that matter as it turns out, we sued Oracle on behalf of Mars. And why don’t you share some of the thinking that went into our, if you will, launching the war instead of waiting for the war to come to us?

AJ Witt:

Yeah, absolutely. Yeah, that’ll be interesting. I think probably a question for Mike and Dean really, but it seems odd to me, Oracle pretty much invented relational databases in terms of commercializing them. It’s a great product, it’s a leading product. It almost feels like why do they need to be so litigious if they’ve got a great product?

Michael Corey:

That’s such a great comment. So let me take a line out of the Godfather, “It’s just business.” I always liked them, it’s just business. Every business decides business strategies. So when you look at Oracle, and I think it is a reflection of its founder, as Art said, and being aggressive, but when you look at Oracle, they’re suffering from organic growth. They can only acquire so much to keep growing. Larry wants to be number one, no matter what it takes. And because of the laws being on their side, it’s easy to go audit people to generate cash. And if you have a reputation of being super aggressive, everybody’s just going to back down and say, “You’re right, just pay the bill.” And so to me, this is just business. It’s not personal it’s business. And so people have to get in their head, the audit’s not about compliance, it’s about generating revenue. It’s a sales arm. They may not call it a sales arm, but looks like a duck, quacks like a duck. As a compensation model, rewarding revenue, it is a duck. It’s about revenue. It’s business.

AJ Witt:

Yeah. Okay. That’s great. And because it’s business and because it’s about contracts, I guess your decision making comes actually… When you are buying Oracle up front, it isn’t that the product’s great because the product is great, you know that for a fact, is it more a question of whether you want to do business with them because it’s business you want to do business on their terms? Is that what you should be paying attention to?

Art Beeman:

Go ahead, Dean, please.

Dean Bolton:

I was going to say, I think so, but what we’ve seen, AJ, is that the hard part is from some of the confusion that’s out there around what those actual terms are. And I think this is applicable to any scenario. If you went into a car dealership and asked to buy a car and they wouldn’t tell you what the price is, it would be very difficult to continue doing business that way. And unfortunately, due to some of the business strategies and confusion out there, that’s what happens in some of these software license engagements, and specifically around Oracle. What we try to do, and I think Mike and I have been doing this for a long time on the technical side is, we try to help customers understand the value of the product. And then with our partnership, with Beeman & Muchmore, put ways in place to control the actual cost and then let them make the decision because then it’s fair.

Dean Bolton:

If you go in and you say, “Okay, I have this new project, it’s going to cost me half a million dollars for the software licensing or half million pounds, half million euros, whatever it is, I can make a decision on whether I want to spend that money with that vendor.” And that’s really the whole point that we try to emphasize with customers and the approach we’ve taken for our product and going to market.

AJ Witt:

Yeah. Okay, that’s cool. But coming back to it though, it is upfront looking at those terms and conditions because they are naturally vague, fundamentally vague in terms of what does all that mean? Incredibly complicated. How do you make sense of that going into that? Do you need to have a legal team alongside much more than just a stand procurement process with Oracle? Do you think you need to approach it differently than you would do to another software vendor?

Michael Corey:

See, I don’t think it’s that simple at all because first of all, you may have bought a product and then Oracle acquired the company. So you may be in this relationship whether you want it or not. So really, ultimately I think it’s a different situation. They make great products so if you can take the risk out of the audit through good business practices, well what’s good business practice? Having a SAM tool. We would argue you should have LicenseFortress because it’s specific to Oracle, but at a minimum you should have a good SAM tool, and you should know you’re effective license position continuously because if you’re making compliance issues and you wait six months or year or three years or two when the audit happens to discover them, it’s going to be a very costly mistake. So with good business practices, you can avoid a lot of this downside and then you should have a good business partner that understands licensing.

Michael Corey:

Too often you say to your DBAs, your system admins, “Oh, you are licensed experts now.” Well, do they realize that Oracle changes policies that your business might be relying on? When they hear ULA, they hear unlimited. They think, “Oh my God, it’s like a bowl of M&Ms or chips. I can have all I want.” They didn’t hear, “Oh, by the way, our ULA is limited to these three products and it’s on the Northeast continent only.” So to me, it’s really about not expecting your technical team to be licensed experts, having licensed experts, having legal counsel that deals with Oracle on a regular basis, not expecting your in-house council to be specific around this, and more importantly, having good business practices so that you’re aware of what you’re consuming so there are no surprises at the end.

AJ Witt:

Yeah, I completely agree. Having been a sys admin, not for Oracle, yes, you were quite often expected, I was expected to be a licensing expert. That wasn’t what got me out of bed in the morning. Back then I was interested in the technical side of things. What can this solution do for our employees? And also, you don’t really want to be having a techy guy making decisions that could potentially cost you millions of dollars. It was a nerve wrecking and stressful time.

AJ Witt:

Sitting down trying to work out how to deploy IBM software in a way that was compliant with the license and minimize cost. That’s how I got my start in IT asset management because I ended up learning so much about IBM licensing by running this environment. Going back to this idea about terms being vague, one of the things that I’ve often wanted this, why does… Because for example, Mars v Oracle didn’t get to a judgment as you guys know because you were there. Why do we not get to the point where we’ve defined these terms accurately via court case?

Joel Muchmore:

Well, I think there’s basically two different answers to that. And the first is that the terms are constantly shifting. You call them vague, but they’re also vague and voluminous. You have your master agreement, you have ordering documents, the ordering documents pull in terms and conditions, the terms and conditions pull in other. If you were to actually pull everything that controls, it would be a binder several inches thick of overlapping and conflicting information. And that doesn’t even count the policies that Oracle puts up that are not binding, but they are binding if they are specifically incorporated into a contract, which some of Oracle’s contracts do. And back to Michael’s point on the ULA, some ULA specifically incorporate some of those. So even what the universe is, is not just indeterminate, it is ever expanding, I guess like our own universe. But then to go back to Mars versus Oracle, that dealt with, if you look at the public papers, a quarter century old at that time licensing agreement, master agreement. There was several binders worth of nesting ordering documents that came up to those.

Joel Muchmore:

And yet all of it still turned on a single word that was this whole installed versus running. Again, if you look at the VMware aspect of it, that is all over the complaint that Mars filed. And if you look at the public record, you will note that despite what we all know about Oracle being litigious, how quick they are to go into the courtroom that matter dissipated, it went away before there were any actual filings or any material judgments by the judge. There were some confidentiality and protective orders issued, but nothing material. And then overlay that on both our experience, and as well as Dean and Michael’s experience, that it has never come back up again. Nobody has taken anything to court against Oracle or Oracle against them, and we would postulate it’s because they don’t want a judgment. They don’t want these individual terms of which there’s just a small handful actually adjudicated by a court because if they were, then it would ripple throughout the legal sphere and people would know where the pressure points are, how they can stand up, and there would be authority there to work from.

Art Beeman:

And let’s pick up on that because… and I agree with everything that Joel just shared with us. We talked about Oracle being litigious, but I don’t think that’s being fair to Oracle. Oracle is truly litigious. They don’t just run off to court and sue away like a patent troll, hoping to shake out some money for the cost of defense. They know a good case when they see it. And they took, by way of example, the case I referred to earlier, they took SAP to a jury verdict and then had it upheld on appeal. The point being that they knew they had a good case. And if they believe they have a good case, they’ll run it to ground. In the instance of Mars v Oracle and so many of the issues that our licensee customer clients are dealing with, Oracle’s smart. They sit back and they think, “Well, we have the reputation of being litigious. We can certainly take advantage of that because that way our adversaries will know that we won’t hesitate to go there.

Art Beeman:

But to Joel’s point, they are circumspect about putting some of these terms and phrases into play because the risk is too great. If all of a sudden installed and or running is construed against them, their very licensing program is at risk. They would have to revamp their strategies. Their leverage point would dissipate. So their view is that, “Hey, look, if we can’t go and we don’t like our odds of winning, then we won’t go right now.” So they’re very shrewd. They know what they’re doing. And typically you have siloed licensee customers bewildered, to the points made by Mike, Dean, and Joel, about the volume and abstractions of these documents and what they mean. And it’s like, if you will, if someone put a stack of documents in front of you before you were about to have major surgery and they said, “Well, now look over all the terms here and know this, your life’s on the line here and now take a good look to see if we want to do this.”

Art Beeman:

You have an overwhelming inclination to just sign the doggone thing. You just want to move on and you want in this instance to get your ERP installed because you know it’s a good product and you’ve got a business to run. So I think that can lead to certain sloppiness if you will, on the part of a licensee customer, if they’re not careful about getting the appropriate technical advice, legal advice, and the context that they’re going to need to deal with Oracle on a level playing field.

AJ Witt:

Yeah. Sorry, go.

Michael Corey:

Yeah, I was just going to say, the other thing I’d add into that, which I think just strengthens what he said was, customers need to understand the difference between a contractual obligation and Oracle policy. So in a typical Oracle contract, let’s pick on virtualization, the word virtualization’s nowhere in the contract. So you decide where you run your Oracle workloads. I could care less what the Oracle policy says, unless there’s something in the policy that maybe the client can take advantage of, understanding that policies can be taken away just as quickly with the change. And there’s the famous Oracle cloud policy. Larry Ellison made a statement he’d make Oracle cloud cheaper than all other clouds. He created a policy where he created a hyper threading penalty and doubled the price of public clouds. That policy went in effect overnight. And so really it comes back to understanding your contract versus what’s policy and what’s a contractual obligation?

AJ Witt:

Yeah, that’s a prime example. I think that was January 2017 from memory, wasn’t it? Something like that. It came along and it was just, “Oh, okay,” suddenly your costs are doubled. But that in itself suggests to me that when you’re falling this contract up front, and equally of course, you mentioned the situation where the software that you’ve been using has been acquired by Oracle. We’ve seen some examples around MICROS for example, that I’ve mentioned previously around MICROS being a hospitality software primarily, being acquired by Oracle a few years ago, and licensed terms have changed. We see it with other vendors as well with Micro Focus, for example. Micro Focus have acquired a whole bunch of vendors over the years, Novell in particular, including Attachmate and so on. And suddenly you are dealing with a different company and a different culture. And what you thought you were getting out of that relationship has changed.

AJ Witt:

And it feels to me that this is almost thinking about the divorce bill before you get married. This is almost like you need to have a really good prenup here to make sure that you could exit okay. And I think we’re going to get it onto that in a bit more detail around exit strategy for Oracle, because it feels to me that if you… Because let’s face it, people be bet their business on Oracle. Oracle is fundamental, it’s running their business. That’s a difficult decision to make. What does a rip and replace look like for removing Oracle and going to SQL server or something else, for example? What’s the total cost of ownership? And probably a question for Michael and Dean around calculating CCO because I know it’s something that you guys look at, at LicenseFortress.

Dean Bolton:

Yeah. So it’s one of those things where I think people think it’s a very easy thing. I have a database so I’m not really making use of all these different features in the database, it should be very easy to rip and replace, go to something open source, just go to another vendor. That other vendor might have some downstream issues as well. Microsoft is on the top of the list, just like Oracle for audit issues and compliance issues too. But from the technical aspect, that’s usually not the case, AJ. So what we see in general is if you want to replace an environment on an Oracle database, you are looking at a seven figure cost in there, and months of time in there. So it is not just flipping a switch, it’s not just exporting. It is a very big project to do that because of the nature of where these databases are deployed.

Dean Bolton:

A lot of new projects that are stateless and smaller aren’t on Oracle anyway. Oracle gets the business critical applications in there because some of the costs, but also because of the development that’s been behind Oracle. It’s got 40 years of development behind it. It is probably right with SQL server, the two best RDBMSs out there for when you absolutely positively cannot have downtime or lose transactions. So it’s definitely not an easy thing. And that’s just on the database side. When you get into ERP because of all the different touch points that has, integration has, add another zero to that. You’re looking at easily eight figures in there. And for large companies, Global 1000, Fortune 500, it’s probably higher than that. You’re probably nine figures for any of those changes. And those are multi-year efforts. So a lot of it just comes down to that change is easier said than done and has a hefty price tag associated with it.

Michael Corey:

Nevermind the disruption to the business.

Dean Bolton:

Yeah, absolutely.

Michael Corey:

Don’t discount the disruption and the fact that when you put in a new system, it takes months before you gain back that productivity.

AJ Witt:

Yeah. I certainly experienced that. We had an enforced upgrade for Oracle financials and it took 18 months to two years to do. And at the end of it, we got Oracle financials. It wasn’t much different. It was a bit more modern. The interface looked much the same, but that was a global effort for the organization I was working for at the time, coordinated across four continents. Massive amount of effort involved. And all we got at the end of it was more Oracle financials. It would’ve been a bigger effort of course, to rip that out and go to something else. And that immediately leads to being an unequal relationship. You’re in this relationship where you’re relying on them, there’s nothing you can do, and they can really do what they like.

Art Beeman:

And I think that’s such an important point too because inherent to this, and this collects all the points made by Dean and Mike too, about the value of the product, it’s a good product. Well, what’s a corollary to that? It’s a good product and I really want it. The licensee customer really wants it. Well, inherent to that is an imbalance, it’s negotiations 101. If someone really wants something and you’ve got it, you’ve got inherently leverage points because they want your product. If you want to draw an analogy to just about any other product, whether you’re getting a new car or whatever it may be, you’re the buyer, and typically you feel as if you’ve got the leverage because you’ve got the money, and if you don’t buy that car, you can go get a car from someone else. Well, inherent to these transactions is not just the incredible importance of the technology to the business and the cost of business interruption, it’s just that the customer really wants the product.

Art Beeman:

So the only way the playing field gets leveled in my judgment is through the documents and understanding the documents, and going into the documents, and knowing what you’re signing off on, and finding out if you can get better terms. What has blown us away at times in some of these cases that we’ve litigated, and one in particular against Oracle that I can’t go any farther than that, it’s not the Mars case, but a matter that we had, and Joel and I would be sitting back almost every day and look at the contract and look at the arguments from Oracle. And we used to say, “How do they get away with these contracts? Look at what these contracts say.” If we give you this product and it blows up your business, nevermind, you’re not going to be able to collect anything in the way of consequential or incidental damages.

Art Beeman:

Well, some of these things can be negotiated, at least you should try because maybe there’s some leverage to gain there, but parties aren’t doing it. They just want the product. They see all of the voluminous papers and they think, “Well, let’s just get going.” And I think it leads to some bad business behavior, some sloppiness. Joel, I want to toss it to you. Do you agree with that assessment as to what we’ve seen?

Joel Muchmore:

Well, I think that just as Dean and Mike have talked about how there’s 20, 30, 40 years of them developing a database product, we have seen 20, 30, 40 years of them developing limitations of liability and disclaimers of warranties and termination provisions. You can almost look at their current contract and see how that evolution has gone for the last 10 to 15 years. If this doesn’t play in California, there’ll be another provision below it that says that here’s the new limitation of liability, if that old one gets struck down and it goes to this almost decision tree that takes hours to read through and piece through much less even attempt to litigate. So they have insulated themselves in that manner too, and almost just a grotesque degree, to try to fin through them and hold them liable, which goes back to what you were mentioning, AJ, on the unequal relationship on the termination provision.

Joel Muchmore:

They always build in the right to terminate an agreement based upon a breach. Breach is what they allege is a breach, and that becomes the underpinning of a lot of these licensed negotiations is, cooperate with us or we’re going to flip the switch on you and terminate your agreements and either shut the spigot off at the cloud or terminate your licenses and make you proceed as copyright infringers. And that is the ghost. That is the spectra that oversees every negotiation with Oracle. And a lot of the newcomers you mentioned too, Micro Focus, Attachmate, all of them, as in you need to play ball because we hold all the cards and we will shut you down in 30 days if you don’t play ball with us. And that’s what happened to Mars when they file their litigation.

AJ Witt:

Yeah, it feels like software is the only thing that does this. I don’t know whether you would agree? It’s an unusual way of doing business. It doesn’t happen this way in the physical world. Ford can’t come back and take your car off the drive, can they?

Joel Muchmore:

They need to go through several procedures before they do in order to get the legal right to trespass on your property. And that’s where it inverts. Art had mentioned patent litigation before, which is such a fascinating corollary in that you can carpet bomb a bunch of companies, say, “You infringe upon our patents.” Then you got to go to a court. You got to get a court to agree with you, and then issue an injunction. And then you have that leverage, “Haha, I’ve got you,” like with what happened with Blackberry and a billion dollar settlement so many years ago. But it is inverted here and they don’t need to go to the court. They simply say, “It is our position and we can make this threat.” And then they’re forcing somebody else to go to court and then to stop them from doing what in a patent litigation matter, you would have to get court permission in a court order to do.

Joel Muchmore:

And when we go back to Micro Focus and some of those entities, and this could be a whole nother podcast, they are now operating like trolls, we believe. There is money that is going in to purchase these entities that are now adopting these aggressive licensing tactics. And it’s the same money that was going into patent litigation. I think we have software licensing trolls that are starting to come forward. And a lot of the money that was going into patents are now going into buying software license agreements and then enforcing them in that same draconian carpet bombing fashion that we used to see with patent litigation.

AJ Witt:

Yeah, that’s interesting. We have noticed a few over the last year or so. I’m thinking of GoTo Meeting, for example, now private equity owned. And in a way also Veritas coming in and out and now back out again as a independent company. So that’s an interesting area. I think something to pay attention to and watch down the line. I’m just going to rewind slightly onto talking about the complexity of the agreements and so on. Do you feel that general counsel, even in large firms, just doesn’t have the knowledge or the detailed knowledge of software license terms to be able to do a good job on deciding whether a contract’s good? I can remember sending contracts off for a review before signing them or having them signed, and the review was pretty quick. It was looking at things that they were used to like commercial terms, not so much to do with the specific of software licensing.

Art Beeman:

Well, if I may, and this is in many ways responding and giving you at least one of the reasons that we formed Beeman & Muchmore. After Mars v Oracle and the spate of communications, emails, phone calls, we received from aggrieved licensees who finally saw a public filing regarding these practices and they sought our assistance in counseling, we realized that you can’t do this without a total immersion in the contracts, not just the documents in front of you, but the history of the agreement, documents that may not even be part of the agreement, but can bear on the construction of the current agreement. The immersive approach is the only approach. And we have found in many instances that in order to provide the appropriate counseling, given how granular the issues may be and how inextricably linked they are to the technology, you just simply can’t do it in the context of the general counsel.

Art Beeman:

That would be like, all due respect, going to a general practitioner doctor when you have a very specific heart ailment or a problem with another organ where in their general practice they just don’t focus that much on that sort of malady. So Beeman & Muchmore was very much formed as a response to that phenomena, where we realized that the way to do this for customers and customer licensees, and then ultimately our clients, is to just be immersed in it, to have the context, to be able to tell a client, “We’ve seen this before, and not just once before, multiple times before. And let us tell you how it plays out.” And the reason that’s so important here is because Oracle, by way of example, is not doing this in a pell-mell fashion. Their licensing program and how they approach these audits is the stuff of policy strategy, and then executing on tactics. That needs to be met with the appropriate response.

Art Beeman:

In other words, to borrow from the Untouchables, you don’t take a knife to a gun fight. So if you’re going to take a gun to the gun fight, you have to know the documents, you have to know what they’re trying to do in the way of governing this transaction as well as they do. So that’s a very long winded response to your question, but we emphatically believe that just a cursory, “Hey, here’s another contract, we buy widgets one day and we buy software the next,” it’s all just the same, that’s not how it works.

AJ Witt:

Yeah, I would agree. I know when I was doing the job, it is what are we signing? Then maybe 12 clauses to a contract, but of course you don’t know what’s underpinning that. And also you don’t know the history, of course. I think it’s the problem of information, which is always the case with legal arguments. Of course, as you say, with Mars it was a 25 year old initial agreement. Those things probably, maybe legal don’t even have access to that because it would’ve been purchased by technology. It’s on a piece of paper in a filing cabinet somewhere. It’s certainly not held electronically because we’re going back to things that were signed in perhaps in the late 80s.

AJ Witt:

I think that’s a key point. That’s probably an area that we should probably look at the ITAM Review in a bit more detail, is actually what else is out there in terms of legal support for doing these transactions? It’s part and parcel of the role, particularly as we improve our seniority, I suppose, and go up. It’s probably a question of talking to your legal counsel and saying, “Well, I think you probably need to talk to somebody else about this to really get to the bottom of what this license screening actually means.”

Art Beeman:

Yes.

AJ Witt:

We talked a lot about history. There’s always news with Oracle. I wanted to touch on a few things that are current, just to close out today. First up, something we at the ITAM Review have helped out with is the ongoing stock fraud case from Sunshine Firefighters. So Sunshine Firefighters alleged that Oracle have overstated their cloud revenue and they were using audits to drive cloud revenue. I was wondering what’s the latest update on that? I know Joel, you had something to share around that.

Joel Muchmore:

Well, the latest update is even more emergent than I had thought. There was a motion dismissed filed by Oracle back in October or was filed previous October but the hearing was back when we were actually attending hearings in October. And I went to that hearing just to get the ambiance, to get the vibe there. And it was an inauspicious beginning when the judge thanked Oracle’s representatives for coming to the courtroom. And if you back up a little bit, they’d been accused of fraud and the judge is there with her job to do justice, and thank them for coming to their hearing, where they were being accused of fraud. Marching the way through that hearing, I don’t know what to say other than the judge simply just said, “Eh, I don’t buy it. That didn’t sound right to me. That seems like no one would really do that. You’re taking these statements out of context.”

Joel Muchmore:

And the judge essentially dismissed the complaint with the option to refile, but basically said, “I don’t see a path for you to clear this motion to dismiss stage if you’re not actually getting testimony from licensees in the class period.” And of course the licensees are bound to not talk through confidentiality and non-disclosure agreements. So there’s a tight little paradox there. They refiled, a whole rash of papers has gone back and forth. And this Wednesday is going to be the next hearing on the revised motion to dismiss against the revised complaint that we have not seen anything in the way of a proposed order. But the one, again, inauspicious sign is that the attorneys for Sunrise Firefighters tried to get more pages just saying, “This is a massive, massive issue. Can we have 10 more pages to brief it?”

Joel Muchmore:

And Oracle agreed. So there was a stipulation for more pages and the judge looked at it and said, “Nah, you can’t have any more pages. You’ve said enough so far.” Now, that doesn’t mean anything, but it’s not a great sign that she’s willing to dig into the details to the extent we think they need to be dug into. And those details are extraordinary. If you ever thought that it was just a few errand figures, the whistleblower allegations map out a long standing pattern and practice of even more integrated than we ever would’ve estimated as to how far up and how far down this plan goes.

Art Beeman:

What is it, Joel, in the complaint, audit, buy and close?

Joel Muchmore:

That’s right. That was their vernacular for LMS being the sales wing audit first and then get them to buy more software and then close it out. That’s been their plan for two decades now.

AJ Witt:

Yeah. We’ve got extensive files on that one and we’ve spoken about it in a couple of articles over the last year or so. I’ll put some links to those in the show notes for everyone listening. And probably by the time you publish this we’ll know even more so there’ll be a follow up to that. A question really from Mike and Dean, this sprung to mind as well, we’ve seen it seems a final judgment on the whole thing around the Jedi department of defense contract. Do you want to make any comments on that one? It looks like they failed to prove the DOD were unfair in their contracting.

Michael Corey:

So you know what’s funny? I try not to follow the Jedi thing because frankly I think it just bothers me that every time a vendor goes after something and they lose, they just take it to court and spin everybody’s cycles. And to be honest, I wasn’t displeased that Microsoft got the business. I thought that was a nice balance to AWS in the scheme of things. So personally, but I really just tried not to follow it.

Dean Bolton:

I guess my take on it is just that it’s very interesting that there are, not the technical side of it, but the political side of it, is that there’s limits to the power there. That whole Jedi contract seemed like it was very much outside of a normal RFP process. A lot of criteria were being used, not in the formal RFP and for a lot of political reasons that got Amazon excluded, and then ended up with Microsoft. But it was interesting to see that Oracle could not manage to get it to go their way despite their political connectedness. But that’s different than I think another topic that we might be touching on next.

AJ Witt:

Yes, absolutely. I think my take from it is actually, obviously I’m not a US citizen, so it doesn’t really directly affect me, but it has to be the case that the department of defense don’t have their technology stack. Two years down the line, three years down the line from going out to tender for this, they don’t have the technology that they were expecting to by now. Being the department of defense, that’s clearly affecting the ability of the country to defend itself. No one seemed to call that out and yell at Microsoft and AWS and so on for potentially endangering people. But yes, next, not least, so Jedi seems probably to be done and dusted and they’ve lost and it’s going to Microsoft and that’s all baked. But hot off the press we have global trade agreements, trade wars, whatever you like to call it, resulting in TikTok being purchased, or at least forming an agreement with Walmart and Oracle. This has to be the strangest set of bedfellows I’ve ever encountered this side of a late 60s Californian kind of commune or something. What’s going on here?

Joel Muchmore:

I’ll take a first crack at that one, but there could have been some news that came down this morning that changes everything. But I like to start all the way back in June 21st when a community of K-pop stars used TikTok in order to a prank Trump so that his Tulsa rally was a disaster. He threw a hissy fit. It was within two months that he’s issuing executive orders about, “Well, it turns out TikTok is a grave American threat issuing personal ultimatums for its sale.” And then in come Oracle, which had been doing multiple deals with the Trump administration, including back when Larry Ellison hosted a Trump fundraiser on February 19th of this year, the same day that the justice department issued something to the Supreme court saying, “Don’t take on the Oracle v Google matter.” So then flash forward from there, Oracle is working with Larry Ellison in order to put out a database to track the use of hydrochloric quinine. Don’t even know what happened to that.

Joel Muchmore:

Next thing we know Oracle’s going to beat out Microsoft for this sale. Next thing we know it’s not a sale, it is going to be a spinoff, a new company of which is still 80% owned by ByteDance. TikTok global then is going to spin off and have 12.5% to Oracle, 7.5% to a Walmart for that control. Larry Ellison and Oracle then get control over a lot of cloud databases and a lot of cloud infrastructure that they didn’t have before, which is a massive, big deal. And I think this is another one of their ways to leapfrog ahead in the cloud war. And finally, we talked about those strange bedfellows, and I know I’m getting a million miles a minute here, but there’s so much here, Oracle and Walmart are two of the three founders of the free and fair markets initiative, which is one of four right wing watchdog organizations that Oracle’s been funding now for the last several years.

Joel Muchmore:

So Oracle and Walmart had been bedfellows for a long time in advancing these right winging causes and pseudo advocacy organizations. It’s hard for me not to think that those two blend together when they both popped up again under the right wing organization of Trump when he was deciding both what to do and who to do it with.

AJ Witt:

Interesting. Yeah, I wasn’t aware of that. That’s something to dig into in a bit more detail, absolutely. For me as a watcher of global history and so on, it’s quite extraordinary that you have it at this level where effectively a government is deciding to affect free speech directly by acquiring a foreign company, by preventing it from trading. There are some parallels to a certain extent around export restrictions around encryption that are obviously were around for a long time and are still there, and obviously of course things like you can’t sell to North Korea and Iraq and so on. But this seems another step because those are all about governments, this is about private company. So it feels of course quite different.

Art Beeman:

And I think it goes back to what we were saying earlier regarding the litigious quality of Oracle. And then I amplified that by saying not just litigious, but shrewdly so. When Trump was elected back in 2016, you have in Northern California for the uninitiated, it’s very liberal part of America, including the valley. So Trump’s elected and the liberal masses here, including the business leaders, were inside out upset, what’s going to happen? Social media lit up over and all that other good stuff. And while that’s going on, Larry Ellison and his CEO are part of the transition team for Trump. I don’t know anything about Larry Ellison’s politics, but he sure as heck didn’t have any problem dealing with the new president because he’s a pretty practical guy, “Well, we’re going to probably have Trump for the next four years and maybe something good can come from it for Oracle.”

Art Beeman:

And as we know now with TikTok, yep, looks like something good is going to come from it for Oracle. And Oracle is going to be expanding in the cloud space in a manner that prior to this partnership, I think would’ve been impossible. So once again, and looping back to our protagonist here in this discussion, that being Oracle, they’re very good at what they do, very good, whether it’s making software, litigating, or playing politics, they are a force to be reckoned with. And you level the playing field by not being outraged at what they’re doing and showing that you have a higher sense of morality or ethics, that’s just irrelevant. You deal with them on the basis that they come to the bargaining table. And I frankly, notwithstanding whatever your politics may be, once again, a very shrewd move by Oracle. They have good relations with this administration in a form and a fashion that certain technology companies here in the valley, such as Google, do not.

AJ Witt:

Yeah, it takes me back to the turn of the 20th century, where there are concerns around the big cartels and trusts around Rockefeller and Carnegie and so on, and the steps that were taken to reform those. And I wonder if we’re heading that way with big tech as well, because all the technology companies that are well known have to a certain extent, a political position. Apple come across as being very libertarian, very liberal, I should say, all about privacy, all about encryption and so on. Facebook, something else entirely. We’ve already been through a Facebook cycle of elections and so on with Cambridge Analytica. All these big tech companies, it’s not just about the technology anymore, that they have an impact on world politics and indeed potentially world history.

AJ Witt:

And that was the case very much as well, way back, late 1800s, early 1900s with the oil companies and steel and rail and so on, and action was taken then. So I wonder whether that’s what we’re going to see in the 2020s, some kind of trust legislation around big tech. We certainly see it in Europe. European commission has for a number of years taken on, certainly Microsoft for example, if you think back to the browser wars from however long ago that was, around internet Explorer being bundled in windows. So watch this space I think. I think there’s more to come on this and a lot of it will depend on what happens in November in the US.

Michael Corey:

So I think it’s overdue. I do think that we need to look at doing some breakups. The problem is with all the money in American politics and the super funds, they’re backing both sides. Oracle politics is really easy. Larry’s politics are easy, making money. So I suspect he backed both sides, didn’t matter who really won, and now is leveraging the heck out of it, which is very shrewd. But with all the money in our politics, I’m sad to say I’m not hopeful, but I really do wish some breakups would happen. And I think the country would be better off for it. Google in four pieces would be probably more successful, but right now they’re using their size, Amazon’s a perfect example, using its size to its advantage and is dominating.

Michael Corey:

And Walmart is so terrified of Amazon that they think TikTok’s going to be their savior, because somehow that’s going to give them legitimacy on online shopping. Please give it a break. With all the money of Walmart, I don’t get why they don’t just create Walmart Prime and go toe to toe with them and take some losses till they built up the business like Amazon did.

AJ Witt:

Yeah. And online retail is a loss making business effectively. It’s very tight margins, but that’s Walmart’s game. So they should have been able to do that. They obviously missed the boat. We have a world leading technology in that space, over in the UK, in Ocado actually, who I forget the American supermarket chain that they support as well. But we’ve been around for 10, 15 years on that level of integration, particularly for groceries. Amazon are a utility in the same way as AT&T were, to me. So we split up AT&T in what was that? The 80s wasn’t it? We had all the baby bells. So, that seems logical to me. How would you split up AWS? Would you split off storage from compute, from database, something like that?

AJ Witt:

I guess it’s watch this space. Who knew that software would end up being a political issue, and clearly it is. I’m conscious of time. Thank you everyone. I think we’ve gone a long way with this podcast actually. We started off with just some basic stuff about Oracle contracts and we’ve ended up talking about the 1900s and Carnegie and so on. So thank you everyone. Thank you for your time. It was really enjoyable. We must do one of these again somewhere because let’s face it we’re not going to be short of news about Oracle for the foreseeable future. So watch this space. Thank you. And we’ll all speak soon.

Michael Corey:

Thank you.

Art Beeman:

Great being here. Bye bye now.