In a case which may have a far-reaching impact on how companies deal with other’s firms Intellectual Property, a U.S. District Court in Ohio has imposed heavy penalty and sent the top management including co-owner and CEO of IT support company to jail for two-year for Oracle’s IP theft.
According to court document, TERiX, a US-based IT support company was operating as an Oracle and Solaris support shop without purchasing and maintaining a license from Sun/Oracle. It was found that they have downloaded patches and firmware updates for Solaris from a customer support site, and then started charging it to different companies to install and maintain the patches, costing Oracle $10 million in lost licensing revenue.
Bernd D. Appleby, 66, of San Jose, Calif., was sentenced to 24 months in prison and two years of supervised release and ordered to pay a $100,000 fine. Appleby was one of four TERiX executives who pleaded guilty in August 2017 to one count of conspiracy to commit wire fraud.
In addition, 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.
According to court documents, the four conspired to set up three fake companies using aliases – which they supported using bogus email addresses and addresses, pre-paid telephones and pre-paid credit cards – to enter into service support contracts with Sun and Oracle for a single server.
The support contracts 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.
“As the head of TERiX’s executive management team and 70 percent co-owner of the company, Appleby was responsible for all aspects of the business,” U.S. Attorney Glassman said. “He designed the conspiracy and its evolution over almost 10 years, and understood and directed all aspects of the criminal activity. As the scheme was uncovered, he instructed other company employees to devise ways to avoid detection.”
Oracle used the Appleby sentencing to convey that it takes violations of its intellectual property rights very seriously.
“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,” says Oracle spokesperson Deborah Hellinger.
“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.”