Oracle, managed services provider to settle suit over third-party support

Oracle and managed services provider ServiceKey have come to a proposed settlement of an intellectual-property lawsuit Oracle filed against the company last year.

Oracle sued ServiceKey in February 2012, alleging that it and another company, Federal Business Systems Corporation, were part of a “gray market” conspiracy that unlawfully used Oracle’s software code and log-in credentials with the goal of selling “support on Oracle hardware to customers with no active support contract with Oracle.”

ServiceKey had been paying Oracle for technical support on a small number of computers it owned, but then used its log-in credentials to provide hardware support to third parties, Oracle alleged.

But now Oracle and ServiceKey are poised to settle the suit in a deal that would see ServiceKey pay no monetary damages but face a number of conditions and restrictions, according to a court filing Thursday in U.S. District Court for the Northern District of California.

For one, ServiceKey officials must search their systems for Oracle software and support materials and “destroy” anything they find.

Oracle must also be allowed to “perform an annual audit of [ServiceKey’s] work relating to Oracle/Sun hardware for the next five (5) years,” the proposed settlement adds. “They shall maintain complete and detailed records regarding their performance of any and all support services on Oracle/Sun hardware in their customer support record system, shall retain all emails sent to or from their IT Help Desk personnel.”

ServiceKey would also be barred from logging into “any password-protected portion of any Oracle website or any Oracle FTP site, whether on their own behalf or as an agent or a contractor for any third party,” as well as giving or receiving “any Oracle/Sun software and/or support materials,” it adds.

But Oracle will receive no damages for its claim of unjust enrichment, and each side will pay their own court costs and attorneys’ fees, according to the filing.

A judge has yet to issue an order on the proposed joint settlement, but one is expected “shortly,” ServiceKey said in a statement. An Oracle spokeswoman declined comment on Friday.

“The proposed settlement represents significant progress toward an understanding between Oracle and ServiceKey, with respect to ServiceKey’s appropriate role in the hardware service support market for Sun/Oracle systems,” ServiceKey CEO Angela Vines said in a statement.

Since Oracle got into the hardware business with its purchase of Sun Microsystems, it has seen hardware revenue fall while insisting it is focused on higher-margin “engineered systems” rather than commodity servers.

Oracle has also sought to derive more revenue from hardware support, moving in 2010 to what amounts to an all-or-nothing policy.

“When acquiring technical support, all hardware systems must be supported (e.g., Oracle Premier Support for Systems or Oracle Premier Support for Operating Systems) or all hardware systems must be unsupported,” Oracle’s official policy states. It is believed that under Sun, some customers were able to use patches on unsupported machines while the company essentially looked the other way.

Oracle’s case against FBSC is still ongoing.

The allegations against ServiceKey and FBSC bear some resemblance to those made by Oracle against former SAP subsidiary TomorrowNow, which provided lower-cost support for Oracle applications.

Oracle won a sizable judgment against SAP, which admitted liability for illegal support-site downloads conducted by TomorrowNow, but that case has yet to be fully resolved.

Oracle has also sued third-party support provider Rimini Street, claiming it duplicated TomorrowNow’s business model. Rimini Street maintains its innocence and has countersued Oracle, saying it acts within the boundaries of its customers’ software license agreements.

Support services provide lucrative profit margins for Oracle and other vendors, who are loath to see any part of that money slip away.

But third-party providers say they provide a legal choice for customers in the marketplace, much like the option of going to an independent garage for auto repairs rather than the dealership where the vehicle was purchased.