Envisage Technologies, LLC ("Envisage") has filed a counterclaim against Defendants Oracle America, Inc., and Oracle International Corporation (collectively, "Oracle") requesting declaratory relief of no copyright infringement and asserting a second claim for unjust enrichment due to payments made to Amazon Web Services ("AWS") under the RDS "License Included" model.  Tactical Law has previously blogged on this case brought by Oracle, which Oracle contends involves hosting.

According to the counterclaim, Envisage's legacy product was an on-premises version where Envisage customers hosted and maintained the Acadis software product on their own hardware.  Under this model Envisage customers were responsible for acquiring their own licenses to the Oracle software.  However, in 2019 Envisage opted to change this model in favor of cloud-based software hosted on Envisage's own hardware.  To support the cloud-based hosting of Acadis, Envisage turned to Amazon's Relational Database Service ("Amazon RDS") offered by AWS. 

Envisage alleges that it chose to go with the RDS "License Included" model due to representations made by AWS that the model would work for its Acadis service offering.  Envisage pleads that it "relied in good faith on representations made by AWS regarding the scope of the license to Oracle Database provided under AWS's "License Included" service model for Amazon RDS for Oracle."  Envisage also asserts that in meetings in 2019 and 2020 with representatives of AWS, Envisage explained the technical details of its Acadis offering and further relied on AWS representations that it could cost effectively leverage the RDS "License Included" model for Envisage's intended use of the software.  Envisage also asserts that Oracle authorized AWS to act on Oracle's behalf under the "License Included" model, and presumably either did or should have approved the representations being made by AWS to its customers concerning the permissible uses of the Oracle software.  Envisage seeks a declaration that it is not infringing Oracle's copyrights and that it was authorized to use the Oracle software for hosting when it went with the RDS "License Included" model.  Envisage also asserts a claim for unjust enrichment against Oracle, to the extent that Oracle has already been compensated by AWS for Envisage's use of the software.

But here is the rub.  The AWS Service Terms at Section 10.3.1 provide that the RDS "License Included" customer cannot "use the Oracle Software for rental, timesharing, subscription services, hosting, or outsourcing".  And it appears from the face of the counterclaim that this is exactly what Envisage has done.


It should be noted that the AWS Customer Agreement contains an integration clause at Section 13.2.  Envisage may argue fraud in the inducement to get around the integration clause if it sues AWS.  But any such argument seems weak given how clear the Terms of Use are on no hosting allowed under the RDS "License Included" model, and a court may find Envisage's alleged reliance on AWS's representations unreasonable under the circumstances.  Envisage appears to be previewing this argument in its counterclaim.  Also any alleged fraud could not have been committed by Oracle as Oracle did not make any misrepresentations to Envisage and was not involved directly, although Envisage alleges that Oracle should have known what its agent AWS was representing to AWS customers.  AWS of course is not a defendant in Oracle's lawsuit, although Envisage contends in an affirmative defense that it should be.  Matters are further complicated since the AWS Customer Agreement appears to require that Envisage arbitrate any claims (i.e. fraud in the inducement, indemnification, etc.) against AWS with the American Arbitration Association ("AAA").  Of course, an arbitration is confidential so we can't know for sure now if Envisage has filed for arbitration against AWS.  If it has, it may seek to stay Oracle's court action pending the resolution of the AAA arbitration.

What does this all mean for AWS and Oracle customers?  It means that licensing Oracle through AWS is complicated and should be done very carefully.  Both the technical and legal issues need to be thoroughly vetted before significant investments are made.  Also, Oracle appears to be actively looking for AWS "License Included" customers who may be non-compliant with the AWS Terms of Service, and reaching out to them directly demanding payment.  Clearly that is what Oracle has done in this lawsuit.  Oracle also appears to be demanding information from AWS customers as if it had an audit clause to rely upon.   But AWS "License Included" customers do not have a contract directly with Oracle, which is most likely why many of these customers are resisting Oracle's demands for information.  Instead, their contract is with AWS, and the AWS agreements do not have an audit clause. For its part, Oracle may be relying on the AWS Service Terms that provide "[n]otwithstanding anything to the contrary elsewhere in the Agreement, Oracle is an intended third-party beneficiary of the Agreement, but solely with respect to this Section 10.3.1 of these Service Terms."  However, it should be noted that AWS Service Term 10.4 relating to Microsoft software on AWS, specifically provides that "Microsoft is an intended third-party beneficiary of this Section 10.4, with the right to enforce its provisions."  Why the difference and can this be leveraged by AWS customers when Oracle comes knocking?

In short, Envisage has quite the mess on its hands.  A high-profile lawsuit by Oracle seeking damages of at least $3 million and perhaps an expensive arbitration with AWS either pending or about to be filed.  Meanwhile, Envisage's entire business model may be up in the air and the legal fees doubtless keep racking up.  All of this trauma and expense could have been and should have been avoided upfront with a little planning and investment by Envisage.  Other AWS RDS customers should take note and be careful to avoid falling into the hosting trap.  And for those AWS customers who believe that by using the RDS License Included model, they can avoid dealing with Oracle all together, these recent lawsuits by Oracle prove otherwise.

The case is Oracle America, Inc. et al v. Envisage Technologies, LLC., Case No. 3:21-cv-03540, Northern District of California.  We will continue to monitor the case.  Check back for updates.

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