VIRT1253BU

Running Oracle on VMware? t i o n

i s tr ibu
Heard About Mars vs. Oracle? or d
t ion
bli c a
Learn About Oracle Audits t for pu
: N o
from the Experts & Attorneys t e n t
C on
0 1 7
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Mw o
V

#VMworld #VIRT1253BU
 Running Oracle on VMware?
Heard About Mars vs. Oracle?
t i o n
i s tr ibu
or d
Learn About bl i c Oracle
a t i on Audits
r p u
from tthe
:N o t fExperts
o & Attorneys
n t e n
1 7 Co
d2 0
w o rl
VM

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Session Overview
1. Introductions
t i o n
2. Why Virtualize Oracle? t r i b u
r d is
3. The Oracle Agreement o n o
c a t i
u bl i
4. The Oracle Audit f or p
N o t
5. Mars v. Oracle tent :
C on
6. Beyond 2Mars
0 17 v. Oracle: The Oracle Audit Playbook
o rld
7. VMw
Preparing for & Responding to the Inevitable
Oracle Audit

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 t i o n
i s tr ibu
or d
blic a tIntroductions
i on
r p u
o t fo
nt: N
o n te
1 7 C
d2 0
w o rl
VM

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Your Presenters

t i o n
i s tr ibu
or d
t ion
bli c a
r p u
ofo
t
Nathan Biggs t
Arthur
n N
: Beeman Joel Muchmore
ont e
CEO
1 7 C Partner Partner
2 0
House ofdBrick Arent Fox
w o rl Arent Fox
VM

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 About House of Brick
 Founded in 1998
t i o n
 Oracle, Microsoft, VMware, and Cloud
i s tr ibu
or d
 Focus on Business Critical Applications ion
c a t
 House of Brick Services p u bli
fo r
N o t
 Oracle and MS license
e n t :
review and optimization
C o nt
 Application17 re-platforming and data migration
d 2 0
o rl
V Mw
 Virtualization of business critical applications
 HA, DR, and private cloud architectures

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 About Arent Fox
 The Fox: Arent Fox was founded in 1942 and now includes more than 400
lawyers in LA, NY, SF, and DC. on u ti
i b
intrthe areas of
s
 Arent Fox IP: Arent Fox is recognized among the top firms
r d i
patents, trademarks, copyrights, and other areas o n
of o
intellectual property.
c a t i
u bl i
 VMware: Arent Fox has represented rmultiple
o p clients in contentious and
high-stakes licensing disputesN o t f Oracle. Every such dispute begins
against
e n t :
o t customers’ use of VMware.
with Oracle targetingntheir
C
0 1 7

l d 2
Mars v. Oracle: Arent Fox represented Mars in Mars v. Oracle, the only
r complaint addressing Oracle’s licensing-based attack on its
w o
publicly-filed
VM
customers’ use of virtualization.

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 t i o n
i s tr ibu
or d
Why Virtualize
bl i c a t i on Oracle?
r p u
o t fo
nt: N
o n te
1 7 C
d2 0
w o rl
VM

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Why Virtualize Oracle?

t i o n
i s tr ibu
or d
t ion
bli c a
r p u
o t fo
nt: N
o n te
1 7 C
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© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 t i o n
i s tr ibu
or d
The Oracle
blic a t i onAgreement
r p u
o t fo
nt: N
onte
Distinguish between:
C
• Applicable 1 7
0 Licensing Terms
rl d 2
w o
• VNon-Contractual
M Policy Statements

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Licensing is Processor-Based

t i o n
i s tr ibu
“Processor: shall be or d
t n
io
defined as all  Installed = past
bl i c a tense, but currently
processors where p
applicable.
r u
o t fo
the Oracle : NRunning = present tense.
e n t
programs are ont
1 7
installed 2and/or
C  There’s nothing prospective in the
d 0 contract.
orl
wrunning.”
VM
OLSA_V121510_US_OPN.doc http://www.nu-solutions.com/downloads/us-olsa-037355.pdf

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Entire Agreement Clause

t i o n
i s twhich is r ibu
“You agree that this agreement and the information r d
n o
incorporated into this agreement by writtentreference
c a io (including
reference to information contained inpa u li or referenced policy),
bURL
together with the applicable ordering t f or document, are the complete
: N o
agreement for the programs t e n t and/or services ordered by you, and
that this agreement C onsupersedes all prior or contemporaneous
0 1 7
agreements
r l d 2 or representations, written or oral, regarding such
Mw o programs and/or services.”
V
OLSA_V121510_US_OPN.doc http://www.nu-solutions.com/downloads/us-olsa-037355.pdf

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Contractual vs. Non-Contractual
Oracle Document Contractual?

t i o n
Technical Support Policies ✔ r i
Yesb u
d is t
r
Core Processor Factor Table
a t ion ✔
o Yes

ubli c
Ordering Documents
rp ✔ Yes
t f o
: N o ✖
ent
Software Investment Guide No
C o nt
Licensing Data Recovery
0 1 7 Guide ✖ No
rl d 2
w
Technology
M oHosting ✖ No
V
Partitioning Policy ✖ No

Cloud Computing Environment Policy ✖ No

© 2017 House of Brick Technologies, LLC and Arent Fox LLP
 t i o n
i s tr ibu
or d
The
bl i c a tOracle
i on Audit
r p u
o t fo
nt: N
o n te
1 7 C
d2 0
w o rl
VM

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 What is an Oracle Audit (OLSA O.5)
 Oracle has the right in your master agreement (SLSA, OLSA, or
OMA) to perform an audit of your usage of their technology n
u t i o
b
 45 Day written notice
r distri
o
 You agree to cooperate and provide assistance and access at your own cost
on
c a t i
ubli
 Oracle typically agrees that the audit “shall not unreasonably interfere with
your normal business operations”
f o rp
 You agree to pay within 30 days N o
oft written notification any fees applicable to
e n t : exceed what you have paid for
your use of the programs
C o nt that
 If not, Oracle 1
0 7
“may”
rl d 2 technical support,
 End
M w o your
V Terminate your licenses, or
 Terminate the whole agreement

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 i o n
The Oracle d is t r i Audit:
b u t
o r
Typical bl i c aAudit
t i o n Triggers
p u
t f or
: N o
n t
C o nte
0 1 7
Bottom
rldline…
2 VMware
Mw o
V

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 The Oracle Parking Garage

t i o n
i s tr ibu
or d
t ion
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nt: N
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© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Oracle Audit Triggers
There is no set list of triggers…only anecdotal evidence of certain
activities that seem to have preceded audits with our customers: n
u t i o
 Oracle discovers that you have  Rejection of andOracle i s trib proposal for
migrated their programs into a additional n o r
product purchases,
a i o
t Oracle cloud
VMware virtualized environment
u l i c
especially
bRejection of Oracle’s bid
 The customer is hosting proprietary or p

applications without the hosting right o t f submission in an RFP process
from Oracle e n t:N
on t  Certifying off of an Unlimited

1 7 C
Considerable organizational growth or License Agreement
d
M&A that lhas 0
2become public or
w
shared
r
owith Oracle reps directly  Communicating usage of features
V M to Oracle reps or through support
 Requesting access to Oracle’s LMS requests that you do not have
audit scripts licensed

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 When Oracle Seems to Avoid Audits
Situations where Oracle seems to avoid auditing customers:
t i o n
 The customer has SULS fees  The customer is on an t r i b u
Unlimited
that are above market rates for License Agreement r d is (especially
o n o
their products a large
c a t i
encompassing one)
u bli
 The customer makes t for pThe customer is using Oracle
: N o
considerable new purchases
e n t cloud and/or Oracle hardware
ont basis
from Oracle on anCannual for significant workloads
0 1 7
o rl d2
Avoiding an audit is not necessarily a good thing. It typically means that you are
VMw
paying more than you should for software and support, and Oracle is leaving you
alone.

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 t i o n
i s tr ibu
or d
Mars
blic a t i on v. Oracle
r p u
o t fo
nt: N
o n te
1 7 C
d2 0
w o rl
VM

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Mars v. Oracle
Mars v. Oracle - The only publically-filed complaint against Oracle
ion
regarding Oracle’s attempts to control a customer’s use of virtualization.
b u t
 After over a year of failed negotiations, and with a license i s t r i
o r d
termination date only days away, Mars filed ia
t o n
complaint for
declaratory relief, and a few days later, bl i c a for preliminary
filed
r p u
injunction.
o t fo
 The matter was immediately n t : N stayed by joint agreement of Mars and
o n t e
Oracle.
1 7 C
d 2 0
 Matter
w o rl was dismissed, with prejudice, less than two months after
VMfiling.
 Note: All facts contained in this section are part of the public record.

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Mars v. Oracle
Operative Agreement. 1993 License and Services Agreement, as
modified by multiple Ordering Documents. ion b u t
 Oracle’s Contractual Audit Right - Granted Oracle i s r i
t limited
o r d
right to audit Mars’ “use” of Oracle programs.
t io n
bli c a
 “Users” - Defined as an “individual
r p u employed by [Mars] who is
authorized to use the Programs, o t fo regardless of whether the
individuals are actively n t : N
using Programs at any given time.”
on t e
 “Processor” 1 C
7Metric - Per Ordering Documents, Processor
d 2 0
count
o rl includes processors on which Oracle products are
w
VM“installed and/or running.”

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Mars v. Oracle
Oracle’s Audit Request - In sum, Oracle demanded that Mars provide
a listing of all clusters and servers included in Mars’ VMware
t i o n
environments. Specifically, Oracle argued that: t r i b u
s r d i
 Installed and/or running - Mars must purchase o n o
licenses for “all
a t i
processors where the Oracle programsbare
u lic installed and/or
running.” f o rp
N o t
 Live migration - “VMware e n t :technology specifically is designed for the
t migration of programs to all processors
onlive
purpose of allowing
1 7 C
across the d 0
2entire environment.”
o rl
 V Mw
Available for use - As such, Oracle programs “are installed on any
processors where the programs are available for use.”

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Mars v. Oracle
Mars’ Response - Mars provided 233,089 pages of documents in response to the audit.
However, Mars refused to produce the requested documentation of its VMware
t i o n
environments. Specifically, Mars argued that:
i s ibu
tr
 Actual “use” is the proper metric - Mars is required to purchase o r d
licenses only for servers
that use Oracle software, not for processors where Oracle t o n
iprograms are merely
bli c a
“available for use.” u
p and clusters are configured so that
rservers
 Live migration is not enabled - Mars’ VMware f o
t As configured, processing in one cluster
: N o
each VMware cluster has a specific
e n t purpose.
cannot be moved to another.
C o nt Neither can dedicated storage be accessed by different
clusters.
0 1 7
 Corroboratedrl d 2 video evidence - Mars provided video evidence that one VMware
by
M
cluster w o
cannot access another.
V
 Mars has complied - By sending screenshots of all VMware clusters that “use” Oracle
software, Mars has complied.

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Mars v. Oracle
Notice of Termination - During the last push of these negotiations, a 30-day
notice of termination was pending. ionb ut
 Per Oracle’s notice: is t r i
o r d
on
t
 “If Mars continues to refuse [to cure the breach],
a i then Oracle will
u
terminate its license agreement withpMars
c
bli on October 26, 2015.
t for
Should Oracle terminate theoagreement, Mars will be prohibited
from all further use of e
the
N
nt:Oracle programs.”
C o nt
 Several times Oracle
0 1 7 agreed to extend the termination date, but only
by a day rl d
or 2 at a time.
two
M w o
 V Fox has observed that threatening termination of the operative
Arent
license agreement is an essential part of Oracle’s licensing strategy.

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 o n
Beyond Mars v.disOracle:
tribu
t i
o r
The OracleblAudit
icat
i o n Playbook
r p u
o t fo
nt: N
o n te
1 7 C
d2 0
w o rl
VM

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Have You Felt This Way?

t i o n
i s tr ibu
or d
t ion
bli c a
r p u
o t fo
nt: N
o n te
1 7 C
d2 0
w o rl
VM

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 The Audit Playbook
1. Oracle Issues Audit Report - The report invariably finds an extreme
licensing deficiency, often with a magnitude of 50 to 100 fold. ion b u t
2. The shortfall is largely predicated on licensee’s use of virtualization
i s t r i
software – Publicly available sample from Oracle: n or
d
c a t io
“Oracle programs are installed on any b
u li
processors where the
o
programs are available for use. fThird-partyrp VMware technology
specifically is designed for N
the
t
o purpose of allowing live migration of
e n t :
on
programs to all processorst across the entire environment.”
1 C
7 legitimate compliance shortfall.
At times there
d 2 0is a
rl
odemands that customer resolve the finding within 30 days -
3. Oracle
M w
V demands that the licensee resolve the findings within 30 days in
Oracle
order to remain compliant.

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 The Audit Playbook
4. Follow-up Communication From Oracle Sales - Shortly after the Audit
Report, Oracle Sales calculates the cost of the needed licenses,ion
i b u t
including past unlicensed use and support. t r is
5. r d
Deep Discount/Cloud Credits - Oracle then offersntooresolve the shortfall
at a “deep discount,” often including “cloud c a t io
credits.”
u bli
Note on cloud credits. Arent Fox and f o r p of Brick routinely see Oracle offer
House
N
“discounted” cloud credits in theo tplace of back support. We have heard that,
t: a competitor in cloud services, that sales
tonbe
as part of Oracle’s pushte
C
representatives7are
n
orewarded with the highest percentage commission on
1
0 with regard to any other Oracle product.
cloud sales2than
o rl d
VM w

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 The Audit Playbook
6. Oracle Partitioning Policy - In side communications, sales
representatives often refer to the “Oracle Partitioning Policy.”
t i o n
(This policy is available at
i s tr ibu
or d
http://www.oracle.com/us/corporate/pricing/partitioning-070609.pdf)
t i o n
 Oracle uses this policy to respond to theliLicensee’s
b c a typical argument
that live migration is disabled. Most u
r plicensees ultimately argue that
t f o
whether or not live migration
: N ocould be enabled is irrelevant; it is
specifically not enabled t e t
n as configured. However, Oracle treats the
C o n
disabling of 1 7
live migration as “soft-partitioning,” which cannot delimit
0 of licenses.
rl
the numberd 2
w o
VM

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 The Audit Playbook
7. Elements of Resolution of Dispute
 Declaration of non-migration - Oracle typically demands a t i on
t rib u
i s
certification from the customer with regard to the continued
r d
o
disabling of live migration. ion c a t
l i
 Execution of “Audit Close Letter”
r pub
 Replacement agreements - Oracle o t fo pressures the licensee to execute
n t :
replacement licensetagreements
N and/or ordering documents that
n e
ofunctions: (1) leaving licensees vulnerable to future
C
typically serve two
7
2 01 and (2) making it more difficult for licensees to
licensedshortfalls;
w o
migraterl to a cloud hosting environment (other than Oracle’s).
MV

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Customer Case
 Roughly $1B company
 Use Oracle EBS, DB, t i o n
middleware, etc. i s tr ibu
or d
 Deployed on VMware t ion Oracle
bli c a finding
r p u
 Initial finding from Oracle -
o t fo Oracle
$100’s of millions nt: N Offer
o n te
7 of millions C Actual
 Oracle offer20- 1$10’s
o rld Gap
V
 Actual Mw
compliance gap -
less than $100 thousand

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 o n
Preparing for & Responding d is t r i to
b u the
t i
o r
Inevitable bl i c a tOracle Audit
i o n
p u
t f or
: N o
t e n t
Be prepared on be resolute.
and
C
0 1 7
rl d 2
Mw o
V

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Preparing for an Audit
 Involve legal counsel early.
t i o n
 Understand your contractual rights and obligations.
i s tr Know ibu
o d
ris not.
what is in the binding agreement and what
tio n
bl i c a
 Be vigilant - Ensure architectural pu
or integrity and monitor
o t f
regularly to ensure VMs n : N
t running Oracle stay on licensed
on t e
hosts. 7 C 1
2 0
w rld
o annual internal audit and assessments of
 Routinize
V M
compliance.

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Responding to an Audit
 Don’t panic - You typically have 45 days to respond.
 Don’t over communicate - Only provide information youbu t
areion
contractually obligated to provide. i s t ri
o r d
 Keep a written record - Conducting audit a t i on
communications in
u bl i c
writing is important. p
t f or
 Scrutinize “findings” - There : N o almost always false positives and
are
t e n t
mistakes in the report.
C on
0 1
 Don’t be intimidated
7 - Oracle’s initial finding is always
rl d 2
w o
outrageously –and intentionally – excessive.
VM
 Know your position and stand your ground.

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 House of Brick Services
 Ad Hoc License Services  Managed License Support Service
 Pre-audit assessment  Annual internal audit ion
i b u t
 Audit defense  Weekly automated i s t r
 Negotiation support o d
r monitoring
compliance
t io n
 Cost reduction strategy bli c a
r 
p uExpert analysis of results
o t fo  Monthly status meeting
 Ad Hoc Architecture Services : N
t e n t
 Reference architecture
C on and best  Unlimited support for Oracle
practices 0 1 7 audit
d 2
rl right sizing
M w o
 Hardware  Unlimited support for
V
 Performance analysis and tuning negotiations with Oracle
 Migration and re-platform services

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 Arent Fox Services
Arthur S. Beeman
Arthur (Art) leads Arent Fox’s Complex Litigation and Intellectual Property t i o n
practices in Northern California. Art's cases have involved cutting-edge t r i b u legal
r d is
issues in patent, trademark, and copyright law. An accomplished
o n o trial lawyer,
a
Art has successfully represented his clients over thecyearsi
t in numerous "bet-the-
l i
company" disputes. pub r
o t fo
Joel T. Muchmore n t : N
ont e
Joel is a partner in ArentCFox’s Complex Litigation and Intellectual Property
groups. Joel has 2 0 17
substantial experience with appellate issues, as a trial attorney
o
and in litigating
d
rl patent infringement, licensing disputes, trademark, trade secret,
w
VM unfair competition, and other complex commercial disputes.
copyright,

© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 t i o n
i s tr ibu
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Questions
blic a t i on & Answers
r p u
o t fo
nt: N
o n te
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© 2017 House of Brick Technologies, LLC and Arent Fox LLP

 t i o n
i s tr ibu
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o t fo
nt: N
o n te
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 t i o n
i s tr ibu
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 Copyright

t i o n
Copyright 2017 House of Brick Technologies LLC, and Arent Fox LLP. This
i s tr ibu
work is the intellectual property of House of Brick Technologies and
or d
Arent Fox. Oracle documents referenced are copyright Oracle
t ion
Corporation. Quotes from Oracle documents are per U.S. copyright law
bli c a
r p u
fair use doctrine. You are encouraged to validate your contractual
o t fo
obligations and privileges with your own legal counsel. Permission is
nt: N
granted for this material to be shared within your organization, provided
o n te
1 7 C
that this copyright statement appears on the reproduced materials and
0
notice is given that the copying is by permission of the copyright owner.
d2
o rl
To otherwise disseminate or to republish requires written permission from
w
VM
the copyright owner.

© 2017 House of Brick Technologies, LLC and Arent Fox LLP