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Judge Dismisses Oracle ‘Gray Market’ Claims

OAKLAND, Calif. (CN) - Oracle can amend claims that technical-support customers impermissibly provided software patches and updates to third parties, a federal judge ruled.

Clients that buy a technical-support agreement can log on to Oracle's secure support website to download software patches and other updates. But the software maker forbids customers from sharing access credentials.

In a July complaint, Oracle accused DLT Federal Business Systems Corp., Service Key LLC and Angela Vines of violating this rule in a "gray market conspiracy."

The customers allegedly took "vast quantities of software patches and updates for Oracle's Sun Solaris Operating System and other technical support files used on Oracle's Sun computers."

They then lied to the U.S. Navy, the Federal Drug Administration and other parties about having the authority to provide Oracle technology, according to the complaint.

On Monday, U.S. District Judge Saundra Brown Armstrong tossed allegations that the defendants violated the Computer Fraud and Abuse Act (CFAA) and induced breach of contract.

"This conduct - using legitimate access credentials to access websites and then distributing information obtained from such access to third parties who have no right to receive such information - is precisely the type of conduct that Nosal held was beyond the scope of the CFAA," Armstrong wrote, citing the April 2012 decision U.S. v. Nosal.

In that opinion authored by 9th Circuit Chief Judge Alex Kozinski, the en banc court held that CFAA intends to punish hacking, not misappropriation of trade secrets.

To find otherwise would "criminalize any unauthorized use of information obtained from a computer" and "make criminals of large groups of people who would have little reason to suspect they are committing a federal crime," Kozinski wrote.

Oracle can still amend its claims for an accounting as well as its fraudulent conduct claims under the CFAA, Armstrong said.

She directed the software maker to "allege with specificity each incident of fraudulent conduct," and to work on the vague assertions of inducing breach of contract.

"The pleadings fail to identify the particular third parties that DLT purportedly induced to breach Oracle's agreements," the ruling states. "Rather, Oracle only avers that defendants induced 'other Oracle customers and third parties' to breach Oracle's Terms of Use agreements. ... Oracle also has not identified the specific provisions of those agreements that were allegedly breached."

Oracle cannot amend its unjust enrichment claim, however, since "there is no cause of action in California for unjust enrichment," Armstrong wrote.

Its claims of fraudulent inducement and unfair competition fared better.

The judge slammed DLT for its "extraordinary assertion that a claim under the CFAA or the Lanham Act may be transmuted into one under the Copyright Act simply because there may be some factual overlap in their claims."

DLT had argued that Oracle's "copyright issues" are so "central to every allegation in its over-pled complaint" that, for all intents and purposes, "all of its claims should be preempted."

Armstrong ordered the parties to meet and confer before a January case-management conference.

Oracle is represented by Geoffrey Howard of Bingham McCutchen in San Francisco. Valerie Margo Wagner of GCA Law Partners in Mountain View is listed as lead attorney for Service Key LLC.

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