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The word is out, if it wasn’t already: Do not mess with Oracle when it comes to its intellectual property. You may find yourself behind bars if you do.
The co-owner and CEO of TERiX Computer Co., Inc. was sentenced in U.S. District Court April 5 for his role in fraudulently obtaining more than $10 million worth of intellectual property from the world’s largest database maker.
Bernd D. Appleby, 66, of San Jose, Calif., was sentenced by Senior U.S. District Judge James L. Graham of the Ohio Southern District to 24 months in prison, two years of supervised release and ordered to pay a $100,000 fine.
In June 2015, Oracle obtained a $58 million judgment against Terix for copyright infringement based on Terix’s theft of patches and updates to Oracle’s UNIX-based Solaris operating system.
TERiX Had No Licenses from Oracle
TERiX, with locations in both Sunnyvale, Calif. and Dublin, Ohio, fraudulently used the intellectual property belonging to Sun Microsystems—creator of Solaris—and Oracle, which acquired Sun in 2010, to support its customers nationwide and internationally.
TERiX describes itself as providing “vendor-neutral support for servers, storage and networking hardware and UNIX operating systems in the U.S. and 56 countries.” By enabling data centers and CFOs/CEOs to consolidate hardware support from multiple OEMs to a single point of contact, the company claims it can reduce hardware maintenance costs by 30 percent or more.
The problem was, TERiX was performing support for Sun and Oracle systems without licensing from the company and had set up shell entities (Maintech, Sevanna Financial and West Coast Computer Exchange) in an effort to obtain service contracts and insulate itself.
Appleby was one of four TERiX executives who pleaded guilty in August 2017 to one count of conspiracy to commit wire fraud. The others have also been sentenced and include:
- TERiX co-owner and COO James A. Olding, 52, of Dublin, Ohio, who was sentenced to 12 months and one day in prison, three years of supervised release and a $50,000 fine;
- Director of Sales Lawrence E. Quinn, Jr., 58, of Hilliard, Ohio, who was sentenced to one day in prison, two years of supervised release and a $5,000 fine; and
- Director of Technical Services Jason T. Joyce. 47, of Dublin, Ohio, who was sentenced to 24 months of probation and a $5,000 fine.
Set Up Fake Companies to Obtain Service Contracts
According to court documents, the four men conspired to set up three fake companies using aliases–which they supported using bogus email addresses and addresses, prepaid telephones and prepaid credit cards–to enter into service support contracts with Sun and Oracle for a single server.
The support contracts subsequently gave the four defendants credentials for Sun’s and Oracle’s databases and allowed them to download Sun’s and Oracle’s intellectual property without detection. The intellectual property included firmware patches and updates for various Sun or Oracle hardware products, or operating system patches and updates for various versions of Sun’s and Oracle’s Solaris operating system.
The four used the fraudulently obtained intellectual property to support at least 500 TERiX customers, who did not know about the fraud. A statement of facts filed with the plea agreements cites more than 2,700 separate downloaded pieces of intellectual property between 2010 and 2014.
The primary purpose of the conspiracy was to fraudulently obtain intellectual property worth millions of dollars and then use the intellectual property to support unwitting TERiX customers, and for their own personal benefit.
Oracle’s Take on the Sentencing
Oracle was quick to send comment out on April 6.
“Oracle is pleased that the United States District Court for the Southern District of Ohio accepted the guilty pleas of James Olding and Bernd Appleby, the principals of Terix, for their roles in misappropriating Oracle’s intellectual property and sentenced them both to prison for their criminal acts,” Oracle spokesperson Deborah Hellinger said in a media advisory.
“Oracle takes violations of its intellectual property rights very seriously and, as demonstrated by Oracle’s lawsuits against Terix, Rimini Street and other IP violators, Oracle will not hesitate to go after those who do so. Oracle appreciates the fine work of the law enforcement officials whose efforts led to the criminal penalties assessed against Terix’s principals.”
Oracle is involved in ongoing litigation with both Rimini Street and Google.
Previous work by former eWEEK Senior Editor Darryl K. Taft was used as background in this story.