oracle v. oregon - copyright sovereign immunity opinion

8/10/2019 Oracle v. Oregon - Copyright Sovereign Immunity Opinion

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

ORACLE AMERICA, INC., aDelaware Corporation,

Plaintiff,

v.

THE OREGON HEALTH INSURANCE

EXCHANGE CORPORATION, dba

COVER OREGON, an Oregon

Limited Liability

Corporation; THE STATE OFOREGON, BY AND THROUGH THE

OREGON HEALTH AUTHORITY AND

THE OREGON DEPARTMENT OF

HEALTH SERVICES; and DOES

1-25, INCLUSIVE,

Defendants.

3:14-CV-01279-BR

OPINION AND ORDER

BRENNA K. LEGAARD

JEFFERY S. EDENSchwabe, Wi l l i amson & Wyat t , P. C.1211 S. W. Fi f t h Avenue, Sui t e 1900Por t l and, OR 97204( 503) 222- 9981

KAREN JOHNSON-MCKEWAN

1 - OPI NI ON AND ORDER


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ROBERT S. SHWARTS

ERIN M. CONNELLOr r i ck, Her r i ngt on & Sut cl i f f e LLPThe Or r i ck Bui l di ng405 Howar d St r eetSan Fr anci sco, CA 94105( 415) 773- 5700

DORIAN E. DALEY

DEBORAH K. MILLER

PEGGY E. BRUGGMANOr acl e Cor por at i onLegal Depart ment500 Redwood Shor es, CA 94065( 650) 506- 9534

At t or neys f or Pl ai nt i f f

DAVID B. MARKOWITZ

PETER H. GLADE

LISA A. KANER

DALLAS S. DELUCA

HARRY B. WILSONMarkowi t z Herbol d PCSui t e 3000 Pacwest Cent er1211 S. W. Fi f t h AvenuePor t l and, OR 97204- 3730( 503) 295- 3085

At t orneys f or Def endant s

BROWN, Judge.

Thi s mat t er comes bef or e t he Cour t on t he St at e of Or egon' s

Mot i on ( #39) t o Di smi ss; t he J oi nt Mot i on ( #41) t o Di smi ss or , i n

t he Al t er nat i ve, t o St ay of t he St ate and Cover Or egon; and Cover

Or egon' s Mot i on ( #44) t o Di smi ss. For t he r easons t hat f ol l ow,

t he Cour t GRANTS t he St at e' s Mot i on t o Di smi ss; DENIES Cover

Or egon' s Mot i on t o Di smi ss; and GRANTS in part and DENIES in part

t he J oi nt Mot i on t o Di smi ss or , i n t he Al t er nat i ve, t o St ay of



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t he St at e and Cover Or egon. The Cour t al so GRANTS Or acl e

Amer i ca, I nc. , l eave t o f i l e a Second Amended Compl ai nt no l ater

t han J anuar y 27, 2015.

BACKGROUND

The f ol l owi ng f act s ar e t aken f r om t he Amended Cor r ect ed

Compl ai nt and t he mat er i al s f i l ed i n connect i on wi t h t he Mot i ons

t o Di smi ss.

I n 2007- 2008 t he Or egon Depar t ment of Human Ser vi ces ( DHS)

began a pr oj ect t o moder ni ze i t s t echnol ogy syst ems ( t he

Moder ni zat i on Pr oj ect ) . To i dent i f y pot ent i al t echnol ogy vendor s

t o i mpl ement t he Moder ni zat i on Proj ect , DHS i ssued a Request f or

I dent i f i cat i on ( RFI ) i n J anuar y 2009.

I n Febr uary 2009 Or acl e submi t t ed a r esponse t o t he RFI .

At some poi nt i n 2009 t he Or egon Legi sl atur e created the

Or egon Heal t h Aut hor i t y ( OHA) as a di vi si on of DHS.

On March 23, 2010, Congr ess enacted t he Pat i ent Protect i on

and Af f ordabl e Care Act ( ACA) , Publ i c Law No. 111148, 124 St at .

119 ( 2010) , and t her eby est abl i shed l egal f oundat i ons f or st at es

ei t her t o cr eat e heal t h- i nsur ance exchanges ( HI X) or t o use an

HI X devel oped by t he f ederal gover nment .

I n Oct ober 2010 t he Uni t ed St at es Depar t ment of Heal t h and

Human Servi ces ( HHS) announced i t woul d of f er Ear l y I nnovat or

gr ant s t o st at es t o desi gn and t o i mpl ement t he i nf or mat i on



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t echnol ogy i nf r ast r uct ur e needed t o oper at e t he HI X r equi r ed by

t he ACA. The St at e of Or egon determi ned an Ear l y I nnovat or Gr ant

woul d pr ovi de i t wi t h t he oppor t uni t y t o combi ne the

Moder ni zat i on Pr oj ect wi t h a pr oj ect t o cr eat e an HI X f or t he

St at e.

I n Februar y 2011 HHS awarded t he Stat e an Ear l y I nnovat or

Gr ant t o i mpl ement an HI X. The Stat e t hen began seeki ng a

company t o pr ovi de bot h t he Moderni zat i on Proj ect and an HI X.

Throughout 2010 and 2011 OHA empl oyees at t ended numer ous

pr esent at i ons and demonst r at i ons by Or acl e r el at ed t o i t s abi l i t y

t o pr ovi de t he Moder ni zat i on Pr oj ect and t he HI X. The St at e,

t hr ough DHS/ OHA, subsequent l y deci ded t o use Or acl e t o compl ete

t he Moder ni zat i on Pr oj ect and the HI X ( t he Or acl e Sol ut i on) .

Al t hough t he St at e di d not cont r act wi t h Or acl e di r ect l y, i t

cont r act ed wi t h Myt hi cs, I nc. , a cor por at i on t hat wor ks wi t h

Or acl e t o di st r i but e and t o sel l Or acl e pr oduct s and t o pr ovi de

consul t i ng on t he i mpl ement at i on and i nt egr at i on of Or acl e s

pr oduct s.

On J une 30, 2011, t he St at e ent ered i nt o an agr eement wi t h

Myt hi cs and execut ed t he Myt hi cs Li cense and Ser vi ces Agreement

( MLSA) . Al t hough Or acl e di d not si gn t he MLSA, Or acl e was named

as a t hi r d- par t y benef i ci ar y of t he MLSA.

The MLSA di d not provi de f or t he act ual pur chase of Or acl e

pr oduct s and servi ces, but i nst ead pr ovi ded a cont r act ual



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f r amework t o gover n the pur chase of Or acl e pr oduct s and ser vi ces.

Act ual purchases were made t hrough a ser i es of purchase orders

submi t t ed pur suant t o t he MLSA.

I n J une 2011 t he Or egon Legi sl at ur e passed l egi sl at i on

cr eat i ng t he Or egon Heal t h I nsur ance Exchange Corporat i on ( Cover

Or egon) 1 as a publ i c cor por at i on and an i ndependent uni t of t he

St ate. Or egon Revi sed St atut e 741. 002( 1) ( a) pr ovi des Cover

Or egon shal l " [ a] dmi ni st er a heal t h i nsur ance exchange i n

accor dance wi t h f eder al l aw t o make qual i f i ed heal t h pl ans

avai l abl e t o i ndi vi dual s and gr oups t hr oughout t hi s st at e. "

Al so on J une 30, 2011, DHS/ OHA execut ed a St at ement of Wor k

t hat pr ovi ded Myt hi cs and Or acl e woul d "ass i st " DHS and OHA wi t h

t he i nst al l at i on, i mpl ement at i on, conf i gur at i on, and

cust omi zat i on of t he Or acl e Pol i cy Aut omat i on 10. 2 component s t o

suppor t benef i t el i gi bi l i t y pr ocessi ng and f ul l det er mi nat i on f or

var i ous st ate pr ogr ams and t he HI X.

I n August 2011 DHS and OHA execut ed a pur chase order wi t h

Or acl e f or t he pur chase of l i censes f or t he Or acl e Sol ut i on, t he

har dwar e on whi ch t o run t he sof t war e, and consul t i ng servi ces t o

begi n pl anni ng and i mpl ement i ng t he Or acl e Sol ut i on.

Bet ween J une 30, 2011, and J ul y 11, 2013, t he St at e and

Myt hi cs execut ed 20 pur chase or ders under t he MLSA f or t he

1 On Oct ober 1, 2012, t he Or egon Heal t h I nsurance ExchangeCor por at i on adopt ed t he name Cover Or egon.



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pur chase of Or acl e har dwar e, sof t war e, and ser vi ces.

I n November 2011 DHS and OHA ent ered i nt o t he Or acl e Li cense

Ser vi ce Agreement ( OHA OLSA) wi t h Or acl e. Li ke t he MLSA, t he OHA

OLSA di d not pr ovi de f or t he act ual pur chase of Or acl e pr oduct s

and servi ces but i nst ead pr ovi ded a cont r actual f r amework

gover ni ng t he pur chase of Or acl e pr oduct s and ser vi ces. Act ual

pur chases were made t hr ough a ser i es of pur chase or ders submi t t ed

pur suant t o t he OHA OLSA.

Bet ween November 30, 2011, and May 29, 2014, DHS and OHA

execut ed 23 purchase or der s under t he OHA OLSA.

I n December 2012 OHA began t o t r ansi t i on t he HI X- I T Pr oj ect

t o Cover Or egon.

As not ed, Cover Or egon was not a par t y t o t he MLSA or t he

Or acl e- OHA Agreement s. On Mar ch 14, 2013, t her ef ore, Cover

Or egon execut ed an Or acl e Li cense and Ser vi ces Agreement ( Cover

Or egon OLSA) wi t h Or acl e. Li ke t he MLSA and t he OHA OLSA, t he

Cover Or egon OLSA di d not pr ovi de f or t he pur chase of Or acl e

pr oduct s and servi ces but i nst ead pr ovi ded a cont r act ual

f r amework gover ni ng the pur chase of Or acl e pr oduct s and ser vi ces.

Speci f i cal l y, pur chases wer e made t hr ough a ser i es of Or acl e

order i ng document s and Cover Or egon pur chase or der s submi t t ed

pur suant t o t he Cover Or egon OLSA.

I n or der f or Or egoni ans t o obt ai n i nsur ance f or 2014 as

r equi r ed by the ACA, Cover Or egon est abl i shed t he goal of



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l aunchi ng t he HI X by Oct ober 1, 2013. The HI X, however , was not

r eady t o l aunch at t hat t i me. Thr oughout 2013 and i nt o 2014

Or acl e and Cover Or egon wor ked t o make t he Or egon HI X useabl e and

ef f ect i ve.

On August 8, 2014, Or acl e f i l ed a Compl ai nt i n t hi s Cour t

agai nst Cover Or egon, 3: 14- CV- 1279- BR ( t he Feder al Act i on) ,

asser t i ng cl ai ms f or br each of cont r act and quantum meruit i n

whi ch Or acl e al l eged Cover Or egon has not pai d f or al l of t he

ser vi ces t hat Or acl e r ender ed, cont i nue[ s] t o use Or acl e s wor k

pr oduct [ , ] and . . . has t r ansf er r ed some or al l of t hat wor k

pr oduct t o ot her s i n vi ol at i on of t he par t i es wr i t t en

agr eement s. I n t he Feder al Act i on Or acl e based t he Cour t s

j ur i sdi ct i on on di ver si t y.

On August 22, 2014, Or egon At t orney General El l en Rosenbl um,

t he St ate of Or egon, and Cover Or egon f i l ed an act i on i n Mar i on

Count y Ci r cui t Cour t ( t he St at e Act i on) agai nst Or acl e, Myt hi cs,

and si x Or acl e empl oyees2 al l egi ng cl ai ms f or f r aud; br each of

cont r act ; br each of t he Or egon Fal se Cl ai ms Act ( OFCA) , Or egon

Revi sed St atut e 180. 750, et seq.; and vi ol at i ons of Or egon

Racket eer I nf l uenced and Corr upt Or gani zat i ons Act ( ORI CO) ,

Or egon Revi sed St at ut e 166. 715, et seq.

Al so on August 22, 2014, Cover Or egon f i l ed i n the Feder al

2 The Or acl e empl oyees ar e St ephen Bar t ol o, Thomas Budnar ,Kevi n Cur r y, Saf r a Cat z, Br i an Ki m, and Ravi Pur i .



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Act i on a Mot i on t o Di smi ss f or Fai l ur e t o St at e a Cl ai m and

Fai l ur e t o J oi n Necessar y and I ndi spensabl e Par t y. Speci f i cal l y,

Cover Or egon assert ed t hi s Cour t must di smi ss t he Feder al Act i on

because Or acl e f ai l ed t o sue the St ate of Or egon, a necessary and

i ndi spensabl e par t y.

On Sept ember 8, 2014, Or acl e f i l ed an Amended Compl ai nt 3 i n

t he Feder al Act i on agai nst Cover Or egon and t he St ate i n whi ch

Or acl e assert ed cl ai ms f or copyr i ght i nf r i ngement ( agai nst Cover

Or egon and t he St ate) , br each of cont r act ( agai nst Cover Or egon) ,

br each of t he i mpl i ed covenant of good f ai t h and f ai r deal i ng

( agai nst Cover Or egon) , and quantum meruit ( agai nst Cover Or egon

and t he St at e) .

On Sept ember 18, 2014, t hi s Cour t deni ed Cover Or egon s

Mot i on t o Di smi ss ( #15) i n the Feder al Act i on as moot and

di r ect ed Cover Or egon and/ or t he St at e to f i l e any mot i ons

agai nst t he Amended Cor r ect ed Compl ai nt no l at er t han Oct ober 2,

2014.

On Sept ember 25, 2014, Or acl e and Saf r a Cat z r emoved t he

St at e Act i on to t hi s Cour t ( 3: 14- CV- 1532- BR) .

I n t he Feder al Act i on on Oct ober 2, 2014, t he St at e f i l ed a

Mot i on t o Di smi ss; Cover Or egon f i l ed a Mot i on t o Di smi ss; and

t he St at e and Cover Or egon f i l ed a J oi nt Mot i on t o Di smi ss or , i n

3 On Sept ember 17, 2014, Or acl e f i l ed an Amended Cor r ect edFi r st Amended Compl ai nt ( #33) t o cor r ect t he part i es names.



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t he Al t er nat i ve, t o St ay.

On Oct ober 16, 2014, Pl ai nt i f f s f i l ed a Mot i on t o Remand t he

St at e Act i on.

On November 21, 2014, t he Cour t , among ot her t hi ngs, heard

oral argument on t he Mot i on t o Remand. At oral ar gument t he

Cour t granted t he Mot i on t o Remand. On November 25, 2014, t he

Cour t i ssued an Opi ni on and Or der f ormal l y gr ant i ng t he Mot i on t o

Remand and r emandi ng t he Stat e Act i on t o Mar i on County Ci r cui t

Cour t .

On December 2, 2014, Or acl e once agai n removed t he St at e

Act i on t o f eder al cour t ( 6: 14- CV- 1926- BR) , and on December 8,

2014, Or acl e f i l ed Mot i ons t o Consol i dat e i n t he St at e and

Feder al Act i ons.

On December 10, 2014, t he Cour t ent ered Or der s i n t he Stat e

and Feder al Act i ons i n whi ch i t concl uded i t was premat ur e f or

t he Cour t t o deci de the Mot i ons t o Consol i dat e due to t he var i ous

out st andi ng Mot i ons t o Di smi ss pendi ng i n t he Feder al Act i on.

On December 19, 2014, t he Cour t heard or al argument i n t he

Feder al Act i on on t he St at e s Mot i on t o Di smi ss; t he J oi nt Mot i on

t o Di smi ss or , i n t he Al t er nat i ve, t o St ay of t he St at e and Cover

Or egon; and Cover Or egon' s Mot i on t o Di smi ss. At oral argument

t he Cour t gr ant ed t he St ate' s Mot i on t o Di smi ss, deni ed Cover

Or egon' s Mot i on t o Di smi ss, and t ook t he J oi nt Mot i on t o Di smi ss

under advi sement .



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STATE OF OREGONS MOTION (#39) TO DISMISS

As t he Cour t noted at oral argument , t he Cour t concl udes at

t he t i me t hat Congr ess enacted t he Copyr i ght Remedy Cl ar i f i cat i on

Act ( CRCA) , Pub. L. 101- 553, 104 St at . 2749 ( 1990) , Congr ess di d

not have aut hor i t y under Ar t i cl e I of t he Uni t ed St at es

Const i t ut i on t o abr ogat e the st at es sover ei gn i mmuni t y t o

copyr i ght cl ai ms. See Seminole Tribe of Florida v. Florida, 517

U. S. 44, 72 ( 1996) ( "The El event h Amendment r est r i ct s t he j udi ci al

power under Ar t i cl e I I I , and Ar t i cl e I cannot be used t o

ci r cumvent t he const i t ut i onal l i mi t at i ons pl aced upon f eder al

j ur i sdi ct i on. Pet i t i oner ' s sui t agai nst t he St at e of Fl or i da

must be di smi ssed f or a l ack of j ur i sdi ct i on. ") .

I n addi t i on, as t he Cour t al so concl uded at or al ar gument ,

when Congr ess enacted t he CRCA, i t di d not val i dl y abr ogate the

st at es sover ei gn i mmuni t y t o copyr i ght act i ons pur suant t o

Sect i on 5 of t he Four t eent h Amendment t o t he Uni t ed St at es

Const i t ut i on. See Chavez v. Arte Publico Press, 204 F. 3d 601,

604 ( 5t h Ci r . 2000) . See also Issaenko v. Univ. of Minn.,

No. 133605 ( J RT/ SER) , 2014 WL 4954646, at *11 ( D. Mi nn.

Sept . 30, 2014) , and t he cases ci t ed i n Issaenko.

Fi nal l y, as t he Cour t concl uded at or al ar gument , t he St at e

di d not wai ve i t s sover ei gn i mmuni t y i n t he Feder al Act i on when

i t br ought t he St at e Act i on i n st at e cour t al l egi ng st at e- l aw

cl ai ms. The Cour t not es Or acl e r el i es on Competitive



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Technologies v. Fujitsu Limited, 286 F. Supp. 2d 1118, 1129 ( N. D.

Cal . 2003) , f or t he pr oposi t i on t hat when "a st at e i nvokes t he

j ur i sdi ct i on of t he f eder al cour t s, i t wai ves sover ei gn i mmuni t y

not onl y as t o t he st at e' s cl ai ms, but al so as t o count er cl ai ms

t hat ar i se out of t he same t r ansact i on or occur r ence, t hat i s,

compul sor y count er cl ai ms. " Her e, however , i t was Or acl e t hat

f i l ed t hi s Feder al Act i on, and t he St at e di d not i nvoke t he

j ur i sdi ct i on of t hi s Cour t i n t he Federal Act i on.

Accor di ngl y, t he onl y ot her basi s on whi ch Or acl e r el i es t o

ur ge t he Cour t t o f i nd t he St at e wai ved i t s sover ei gn i mmuni t y i n

t hi s Feder al Act i on i s t he venue pr ovi si on f ound i n t he OHA OLSA.

As t he Cour t not ed at oral argument , however , Or acl e has not

est abl i shed on t hi s r ecor d t hat i t s cl ai m agai nst t he St at e f or

copyr i ght i nf r i ngement as al l eged f al l s wi t hi n t he scope of t he

OHA OLSA cont r act ual pr ovi si on. I n par t i cul ar , t he Cour t not es

t he sol e ref erence t o the OHA OLSA i n Or acl e s Amended Cor r ect ed

Compl ai nt i s a par ent het i cal i n 31 r egar di ng cl ai ms ar i si ng

f r om t he Cover Or egon OLSA, whi ch st at es: "The same l anguage

appears i n a November 30, 2011 OLSA t hat Or acl e ent ered i nto wi t h

DHS and OHA bef ore Cover Or egon t ook over r esponsi bi l i t y f or t he

HI X pr oj ect , a cont r act t hat Or egon' s Depar t ment of J ust i ce al so

r evi ewed and appr oved. " Mor eover , al l of t he al l egat i ons i n t he

copyr i ght cl ai m ( 44- 49 of t he Amended Corr ect ed Compl ai nt )

r ef er t o vi ol at i ons of t he Cover Or egon OLSA and do not r ef er ence



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t he OHA OLSA.

The Cour t , t heref or e, concl udes Or acl e has not est abl i shed

t he St at e wai ved sover ei gn i mmuni t y f r om t he copyr i ght cl ai ms i n

t hi s act i on vi a t he venue pr ovi si on i n t he OHA OLSA.

Accor di ngl y, as st at ed on t he recor d at t he December 19, 2014,

hear i ng, t he Cour t gr ant s t he St at e s Mot i on t o Di smi ss. The

Cour t concl udes, however , t hat t he r ecor d does not necessar i l y

est abl i sh Or acl e woul d be unabl e t o cur e any such def ect upon

amendment . I n t he exer ci se of i t s di scr et i on pur suant t o Feder al

Rul e of Ci vi l Pr ocedur e 15, t he Cour t gr ant s Or acl e l eave t o f i l e

a Second Amended Compl ai nt t o t he ext ent t hat i t can al l ege f act s

t o est abl i sh t hat t he St at e wai ved sover ei gn i mmuni t y f or t he

copyr i ght cl ai m i n t hi s Feder al Act i on pur suant t o t he venue

cl ause i n t he OHA OLSA.

COVER OREGONS MOTION (#44) TO DISMISS

Cover Or egon asser t s i n i t s Mot i on t o Di smi ss t hat i f t he

Cour t di smi sses t he St at e f r om t he Feder al Act i on, t he Cour t

shoul d al so di smi ss t he Feder al Act i on agai nst Cover Or egon

pur suant t o Feder al Rul es of Ci vi l Pr ocedur e 12( b) ( 7) and 19

because t he St at e i s an i ndi spensabl e par t y.

As t he Cour t not ed at oral argument , however , t he Cour t

concl udes i t i s pr emat ur e at t hi s ear l y st age t o f i nd

concl usi vel y t hat t her e i s not any way Cover Or egon coul d f ai r l y



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l i t i gat e t he i ssues i n t hi s mat t er i n t he event t he Cour t

ul t i mat el y di smi sses t he St at e f r om t hi s l i t i gat i on.

Accordi ngl y, t he Cour t deni es Cover Or egon s Mot i on t o Di smi ss as

pr emat ur e wi t h l eave t o renew at a l at er t i me on a f ul l y-

devel oped r ecord t hat makes cl ear Cover Or egon cannot adequat el y

l i t i gat e i t s own i nt er est s or r epr esent t he St at e' s i nt er est s or

t hat t he St at e wi l l be pr ej udi ced by t he Cour t ' s r ul i ngs i n t hi s

mat t er .

THE JOINT MOTION (#41) TO DISMISS

OR, IN THE ALTERNATIVE, TO STAY OF

THE STATE OF OREGON AND COVER OREGON

The St at e and Cover Or egon asser t i n t hei r J oi nt Mot i on t hat

t he Cour t shoul d di smi ss Or acl e s copyr i ght cl ai m because

( 1) Cover Or egon pai d f or t he servi ces i t or der ed, and,

t her ef or e, i t has a l i cense t o use and t o di st r i but e t he Cover

Or egon OLSA copyr i ght assets and/ or ( 2) t he copyr i ght -

i nf r i ngement cl ai m actual l y l i es i n cont r act r at her t han i n

copyr i ght . The St ate and Cover Or egon al so asser t t he Cour t

shoul d di smi ss Or acl e s cl ai ms f or quantum meruit because ( 1) a

quasi - cont r act cannot be i mpl i ed agai nst Cover Or egon and/ or

( 2) Or acl e has not sat i sf i ed t he f eder al pl eadi ng st andar ds.

I. Standards

To survi ve a mot i on t o di smi ss, a compl ai nt mustcont ai n suf f i ci ent f act ual mat t er , accept ed as



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t rue, t o st at e a cl ai m t o rel i ef t hat i spl ausi bl e on i t s f ace. [ Bell Atlantic v.Twombly, 550 U. S. 554, ] 570, 127 S. Ct . 1955. Acl ai m has f aci al pl ausi bi l i t y when t he pl ai nt i f f pl eads f act ual cont ent t hat al l ows t he cour t t odr aw t he reasonabl e i nf er ence t hat t he def endant

i s l i abl e f or t he mi sconduct al l eged. Id. at 556.. . . The pl ausi bi l i t y st andar d i s not aki n t o apr obabi l i t y requi r ement , but i t asks f or mor et han a sheer possi bi l i t y that a def endant hasact ed unl awf ul l y. Ibid. Where a compl ai nt pl eadsf act s t hat ar e mer el y consi st ent wi t h adef endant ' s l i abi l i t y, i t st ops shor t of t he l i nebet ween possi bi l i t y and pl ausi bi l i t y of ent i t l ement t o r el i ef . Id. at 557, 127 S. Ct .1955 ( br acket s omi t t ed) .

Ashcroft v. Iqbal, 556 U. S. 662, 679 ( 2009) . See also Bell

Atlantic, 550 U. S. at 555- 56. The cour t must accept as t r ue t he

al l egat i ons i n t he compl ai nt and const r ue t hem i n f avor of t he

pl ai nt i f f . Din v. Kerry, 718 F. 3d 856, 859 ( 9t h Ci r . 2013) .

" I n rul i ng on a 12( b) ( 6) mot i on, a cour t may gener al l y

consi der onl y al l egat i ons cont ai ned i n t he pl eadi ngs, exhi bi t s

at t ached t o t he compl ai nt , and mat t er s pr oper l y subj ect t o

j udi ci al not i ce. " Akhtar v. Mesa, 698 F. 3d 1202, 1212 (9t h Ci r .

2012) ( ci t at i on omi t t ed) . A cour t , however , "may consi der a

wr i t i ng r ef er enced i n a compl ai nt but not expl i ci t l y i ncor por at ed

t her ei n i f t he compl ai nt r el i es on t he document and i t s

aut hent i ci t y i s unquest i oned. " Swartz v. KPMG LLP, 476 F. 3d 756,

763 ( 9t h

Ci r . 2007) ( ci t at i on omi t t ed) .

II. Copyright Claim

As noted, t he St ate and Cover Or egon assert t he Cour t shoul d

di smi ss Or acl e s copyr i ght cl ai m because ( 1) Cover Or egon pai d



15/29

f or t he ser vi ces i t or der ed, and, t her ef or e, i t has a l i cense t o

use and t o di st r i but e t he Cover Or egon OLSA copyr i ght assets

and/ or ( 2) t he copyr i ght - i nf r i ngement cl ai m actual l y l i es i n

cont r act r at her t han i n copyr i ght .

A. Payment for Services

I n i t s cl ai m f or copyr i ght i nf r i ngement Or acl e al l eges

i n per t i nent par t :

44. Or acl e owns al l r i ght t i t l e and i nt er est i nt he copyr i ght s t o t he Cover Or egon OLSA Copyr i ghtAsset s sof t war e code, as wel l as al l cl ai ms f ori nf r i ngement t her eof .

45. An expr ess condi t i on pr ecedent t o any l i censet o Cover Or egon was t hat i t was r equi r ed t o payf or al l servi ces render ed under t he OLSA. Thatexpr ess condi t i on pr ecedent has not been sat i sf i edbecause Cover Or egon has not pai d f or al l of t heservi ces r ender ed under t he OLSA. Accordi ngl y,Cover Or egon has no l i cense at al l f or t he CoverOr egon OLSA Copyr i ght Asset s code and i s notaut hor i zed t o r epr oduce, pr epar e der i vat i ve wor ksof , di st r i but e, or publ i cl y di spl ay those wor ks,

or t o aut hor i ze ot her s t o do so.

46. By cont i nui ng t o operat e t he Cover Or egonwebsi t e, Cover Or egon i s vi ol at i ng Or acl e' sexcl usi ve r i ght s t o r epr oduce and publ i cl y di spl ayt he wor k.

47. By t r ansf er r i ng sour ce code to the cont r ol ofOHA and DHS f or f ur t her devel opment , Cover Or egonhas unl awf ul l y di st r i but ed t he Cover Or egon OLSACopyr i ght Asset s wor k, and has unl awf ul l yaut hor i zed ot her s t o pr epar e der i vat i ve wor ks

based on t he Cover Or egon OLSA Copyr i ght Asset swor k.

48. By accept i ng t he t r ansf er of sour ce code f r omCover Or egon and exerci si ng domi ni on and cont r olover a pr oj ect t o augment t hat code, OHA and DHShave vi ol at ed Or acl e' s excl usi ve r i ght s t o



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r epr oduce and t o pr epare der i vat i ve works of CoverOr egon OLSA Copyr i ght Asset s.

49. Or acl e has been act ual l y and i r r epar abl yharmed by t he act i ons of Cover Or egon i n usi ng,r epr oduci ng, di st r i but i ng and pr epar i ng der i vat i ve

wor ks of t he code wi t hout aut hor i zat i on.Def endant s have benef i t t ed [ sic] f r om code f orwhi ch they have not pai d.

Am. Cor r ect ed Compl . at 44- 49.

Cover Or egon asser t s Or acl e s cl ai m f or copyr i ght

i nf r i ngement f ai l s because Cover Or egon has a l i cense f or t he

Cover Or egon OLSA Copyr i ght Asset s. Speci f i cal l y, Cover Or egon

asser t s cour t s have hel d [ gener al l y, a copyr i ght owner who

gr ant s a nonexcl usi ve l i cense to use hi s copyr i ght ed mat er i al

wai ves hi s r i ght t o sue t he l i censee f or copyr i ght i nf r i ngement

and can sue onl y f or br each of cont r act . Sun Microsystems, Inc.

v. Microsoft Corp., 188 F. 3d 1115, 1121 (9t h Ci r . 1999) ( quot i ng

Graham v. James, 144 F. 3d 229, 236 ( 2d Ci r . 1998) ) . See also

John G. Dandelion, Inc. v. Winchester-Conant Prop., Inc., 322

F. 3d 26, 40 ( 1st Ci r . 2003) ( Uses of t he copyr i ght ed work t hat

st ay wi t hi n t he scope of a nonexcl usi ve l i cense ar e i mmuni zed

f r om i nf r i ngement sui t s. ) . Cover Or egon not es Or acl e al l eges i n

i t s Amended Corr ect ed Compl ai nt t hat an expr ess condi t i on

pr ecedent t o any l i cense t o Cover Or egon was t hat i t was r equi r ed

t o pay f or al l servi ces rendered under t he OLSA. Am. Corr ect ed

Compl . 45. The condi t i on pr ecedent t hat Or acl e r el i es on

appears i n the Cover Or egon OLSA and pr ovi des:



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Upon payment f or ser vi ces, you have t henon- excl usi ve, nonassi gnabl e, r oyal t y f r ee,per pet ual , l i mi t ed r i ght t o use f or your i nt er nalbusi ness oper at i ons anyt hi ng devel oped by Or acl eand del i ver ed t o you under t hi s agreement ;however , cer t ai n del i ver abl es may be subj ect t o

addi t i onal l i cense t er ms pr ovi ded i n t he or der i ngdocument .

Am. Cor r ect ed Compl . , Ex. A C. Or acl e al so al l eges i n i t s

Amended Cor r ect ed Compl ai nt t hat Cover Or egon di d not meet t he

al l eged condi t i on pr ecedent because Cover Or egon has not pai d f or

al l of t he servi ces r ender ed under t he OLSA. Cover Or egon, i n

t ur n, asser t s Or acl e s cl ai m f or copyr i ght i nf r i ngement f ai l s

because Cover Or egon pai d f or t he servi ces i t order ed, and,

t her ef or e, i t had a l i cense t o use and t o di st r i but e t he Cover

Or egon OLSA copyr i ght ed asset s.

Al t hough bot h Cover Or egon and Or acl e go t o

consi der abl e l engt hs t o ar gue and t hen t o rebut t he asser t i on of

payment f or ser vi ces and an exi st i ng l i cense, t hat i s not a

pr oper anal ysi s on a mot i on t o di smi ss. As noted, t he Supr eme

Cour t and the Ni nt h Ci r cui t have made cl ear t hat t o sur vi ve a

mot i on t o di smi ss, a compl ai nt need onl y cont ai n f act ual cont ent

t hat al l ows t he cour t t o dr aw t he reasonabl e i nf er ence t hat t he

def endant i s l i abl e f or t he mi sconduct al l eged. Ashcroft v.

Iqbal, 556 U. S. at 679. For pur poses of t hi s Mot i on, t he Cour t

must accept as t r ue t he al l egat i ons i n t he Amended Corr ect ed

Compl ai nt and const r ue t hem i n f avor of Or acl e. See Din, 718

F. 3d at 859. The Supr eme Cour t and Ni nt h Ci r cui t have hel d



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of t he l i cense l i mi t ed Cover Or egon t o usi ng t he copyr i ght

asset s. Or acl e al so al l eges Cover Or egon di st r i but ed, copi ed,

and aut hor i zed pr epar at i on of der i vat i ve wor ks. The Cour t ,

t her ef or e, concl udes Or acl e has st at ed a cl ai m f or copyr i ght

i nf r i ngement t hat does not , as al l eged, l i e sol el y i n cont r act .

Accor di ngl y, on t hi s r ecor d t he Cour t deni es t he J oi nt

Mot i on of t he St ate and Cover Or egon t o di smi ss Or acl e s

copyr i ght - i nf r i ngement cl ai m on t he gr ound of f ai l ur e t o st at e a

cl ai m.

III. Quantum Meruit

The St at e and Cover Or egon asser t t he Cour t shoul d di smi ss

Oracl e s cl ai m f or quantum meruit because ( 1) a quasi - cont r act

cannot be i mpl i ed agai nst t he St ate or Cover Or egon and/ or

( 2) Or acl e s quantum meruit cl ai m does not sat i sf y f eder al

pl eadi ng st andards. Because t he Cour t agr ees a quasi - cont r act

cannot be i mpl i ed agai nst t he St at e or Cover Or egon i n thi s

mat t er , t he Cour t decl i nes t o addr ess t he second basi s on whi ch

t he St at e and Cover Or egon seek di smi ssal of t he quantum meruit

cl ai m.

A cl ai m f or quantum meruit i s a quasi - cont r act ualcl ai m. Robinowitz v. Pozzi, 127 Or . App. 464, 467( 1994) . The el ement s of t he cl ai m ar e a benef i t

conf er r ed, awar eness by t he r eci pi ent t hat abenef i t has been r ecei ved, and j udi ci alr ecogni t i on t hat , under t he ci r cumst ances, i twoul d be unj ust t o al l ow r et ent i on of t he benef i twi t hout r equi r i ng t he r eci pi ent t o pay f or i t .

Verizon Nw., Inc. v. Main St. Dev., Inc., 693 F. Supp. 2d 1265,



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1275 ( D. Or . 2010) ( quot at i ons and ci t at i ons omi t t ed) .

The St at e and Cover Or egon poi nt out t hat DHS/ OHS as st at e

agenci es and Cover Or egon as a publ i c corporat i on can onl y act

pur suant t o st at ut or y aut hor i t y. See Ochoco Constr., Inc. v.

Dept of Land Conservation & Dev., 295 Or . 422, 426 ( 1983) . See

also Davis v. Nye Ditch Users Imp. Dist. , 247 Or . App. 266, 272

( 2011) ( I mpr ovement di st r i ct s or gani zed as publ i c cor por at i ons are

cr eatur es of st atut e and have "onl y the power s conf er r ed by the

l egi sl at ur e. ") . The st at ut e creat i ng and aut hor i zi ng Cover

Or egon, however , onl y per mi t s Cover Or egon t o f orm or t o ent er

i nt o cont r act s i n a par t i cul ar manner . Speci f i cal l y, Or egon

Revi sed St atut e 741. 250( 2) pr ovi des Cover Or egon s board of

di r ect or s or t he execut i ve di r ect or of t he cor por at i on may

cont r act wi t h any st at e agency or ot her qual i f i ed per son or

ent i t y f or t he per f or mance of such dut i es, f unct i ons and power s

as t he boar d or execut i ve di r ect or consi der s appr opr i at e.

Or egon st atut es do not gi ve Cover Or egon t he aut hor i t y t o ent er

i nt o cont r act s i n an manner other t han t hat not ed i n

741. 250( 2) . Si mi l ar l y, DHS and OHA ar e subj ect t o st at ut es and

r ul es gover ni ng t hei r cont r act i ng aut hor i t y. Nei t her agency i s

per mi t t ed t o "appr ove a cont r act bef ore t he cont r act has been

r evi ewed f or l egal suf f i ci ency and appr oved by the At t or ney

Gener al . " Or . Rev. St at . 279A. 140( 2) ( b) . Sect i on 291. 047( 1)

pr ovi des i nf ormat i on t echnol ogy cont r act s are not bi ndi ng on DHS



22/29

and OHA unt i l t he At t orney Gener al has appr oved t he cont r act s f or

l egal suf f i ci ency. To obt ai n At t or ney Gener al appr oval , t he

cont r act must be " r educed t o wr i t t en f orm" and cont ai n on i t s

f ace "al l t he essent i al el ement s of a l egal l y bi ndi ng cont r act . "

Or . Admi n. R. 137- 045- 0015( 4) ( a) , ( c) .

Cover Or egon al so notes because i t r ecei ved a subst ant i al

f eder al gr ant and was usi ng f unds suppl i ed ent i r el y f r om t he

f ederal gover nment t o devel op t he HI X, Cover Or egon was subj ect

t o f eder al r ul es gover ni ng i t s abi l i t y to cont r act wi t h vendor s,

i ncl udi ng t he requi r ement t hat ever y pur chase or der or ot her

cont r act i ncl udes any cl auses requi r ed by Feder al st at ut es and

execut i ve or der s and t hei r i mpl ement i ng r egul at i ons. 45 C. F. R.

92. 36( a) .

Thus, accor di ng t o t he St at e and Cover Or egon, because

DHS/ OHS and Cover Or egon l acked the st at ut ory aut hor i t y t o ent er

i nt o cont r act s i n any manner other t han t hose speci f i ed under

Or egon st at ut e and i n var i ous f eder al r egul at i ons, t hey cannot be

hel d l i abl e i n quasi - cont r act f or agr eement s t hat al l egedl y ar ose

wi t hout compl yi ng wi t h t he pr ocedur es r equi r ed i n DHS/ OHS and

Cover Or egon s aut hor i zi ng st at ut es and t he f eder al r egul at i ons

gover ni ng f eder al gr ant ees. The St ate and Cover Or egon r el y on

Wegroup PC /Architects & Planners v. State, 131 Or . App. 346

( 1994) , t o support t hei r asser t i on t hat t hey may not be bound by

such quasi - cont r act s. I n Wegroup t he pl ai nt i f f al l eged



23/29

t he St at e f r ust r at ed t he negot i at i on t er m of t hecont r act , whi ch r equi r ed t he St at e t o bar gai n andf or mal i ze i t s r equest f or added wor k. Because[ pl ai nt i f f ] had cont r act ed t o do al l t he desi gnf r om t he begi nni ng t o t he end, t he ar chi t ect scoul d not bl i t hel y r ef use t he St at e' s di r ecti ons.

Ther ef or e, an i mpl i ed- i n- f act promi se ar ose i n t heexi st i ng cont r act t o pay t he r easonabl e val ue oft he ser vi ces request ed and r endered.

Id. at 354. The Or egon Cour t of Appeal s rej ect ed t he pl ai nt i f f ' s

argument as f ol l ows:

The gener al doct r i ne unquest i onabl y i s t hat whenone r ecei ves t he benef i t of anot her ' s wor k orpr oper t y, he i s bound t o pay f or t he same, andt hi s doctr i ne appl i es as wel l t o [ publ i c]cor por at i ons as t o i ndi vi dual s i n cases wher et her e i s no r est r i ct i on i mposed by l aw upon t he[ publ i c] cor por at i on agai nst maki ng i n di r ectt er ms a cont r act l i ke t he one sought t o bei mpl i ed; but wher e t her e exi st l egal r est r i ct i onswhi ch di sabl e a [ publ i c] cor por at i on t o agr ee i nexpr ess t er ms t o pay money, t he l aw wi l l not i mpl yany such agr eement agai nst t he cor porat i on. Twohy Bros. Co. v. Ochoco Irr. Dist. et al., 108Or . 1, 33, 210 P. 873 ( 1923) .

Id. The cour t not ed

[ t ] hat r ul e pl aces r i gor ous bur dens of compl i anceon per sons and ent i t i es i n pl ai nt i f f ' s posi t i onand may, on occasi on, compel seemi ngl y oract ual l y dr aconi an consequences. But t hat i st he st at ut or i l y i mposed pr i ce of doi ng busi nesswi t h a publ i c body. Per sons who ent er i nt o publ i ccont r act s ar e deemed t o know t he l aws gover ni ngsuch cont r act s, and t hey assume the r i sk ofnonpayment i f t hey per f or m wi t hout i nsi st i ng onst r i ct compl i ance wi t h t hose l aws.

Id. at 354- 55 ( ci t at i on omi t t ed) .

Wegroup makes cl ear t hat when l egal r est r i ct i ons exi st t hat

pr ohi bi t a publ i c cor por at i on or st at e agency f r om agr eei ng i n



24/29

expr ess t erms t o pay money, t he l aw wi l l not i mpl y any such

agr eement agai nst t he corporat i on or t he st ate agency. The

aut hor i zi ng st at ut es f or DHS/ OHS and Cover Or egon est abl i sh Cover

Or egon di d not have aut hor i t y to ent er i nt o a cont r act ( quasi or

act ual ) wi t h Or acl e absent appr oval of i t s boar d or execut i ve

di r ect or and OHA and DHS coul d not ent er i nt o a cont r act wi t hout

a l egal suf f i ci ency r evi ew by t he At t or ney Gener al . The Cour t

notes, however , t hat Or acl e does not al l ege i n i t s Amended

Cor r ect ed Compl ai nt t hat Cover Or egon' s boar d of di r ect or s or

execut i ve di r ect or appr oved t he agr eement t hat Or acl e descr i bes

i n 66. I n f act , Or acl e al l eges Cover Or egon r ef used t o execut e

Or der i ng Document s. Am. Cor r ect ed Compl . 54. I n addi t i on,

Or acl e does not al l ege i t pr ovi ded t he ser vi ces descr i bed i n

66 and 67 of t he Amended Cor r ect ed Compl ai nt accompani ed by

t he not i ces r equi r ed under 45 C. F. R. 92. 36( a) . Or acl e al so

does not al l ege i n i t s Amended Corr ect ed Compl ai nt t hat t he

Or egon At t or ney Gener al pr ovi ded a l egal suf f i ci ency r evi ew f or

t he ser vi ces t hat Or acl e al l eges i t pr ovi ded i n 68.

Or acl e, nevert hel ess, not es Cover Or egon i s empowered by

st at ut e t o ent er i nt o cont r act s gener al l y. Or acl e poi nt s out

t hat Or egon Revi sed St atut e 741. 250( 2) pr ovi des t he boar d of

di r ect or s or t he execut i ve di r ect or of t he cor por at i on may

cont r act wi t h any st at e agency or ot her qual i f i ed per son or

ent i t y f or t he per f or mance of such dut i es. Emphasi s added.



25/29

Accor di ng t o Or acl e, t her ef or e, t he st at ut e does not r equi r e t he

boar d t o appr ove every cont r act ent ered i nt o by Cover Or egon.

Or acl e not es Or egon Revi sed St atut e 741. 002( 3) pr ovi des Cover

Or egon may pur chase al l servi ces necessary t o car r y out t he

cor por at i on' s dut i es, and 741. 002( 6) per mi t s Cover Or egon t o

"adopt r ul es necessary t o car r y out i t s mi ssi on, dut i es and

f unct i ons. " Accor di ng t o Or acl e, t her ef or e, not hi ng i n t he

st atut e pl aces l i mi t s on how Cover Or egon may car r y out i t s

dut i es.

As noted, however , Or egon cour t s have made cl ear t hat publ i c

corporat i ons and st ate agenci es are cr eatur es of st atut e and may

onl y act as aut hor i zed by t he Or egon Legi sl at ur e. Davis, 247 Or .

App. at 272. Thus, t he absence of expr ess l i mi t s on t he

aut hor i t y of OHS/ DHS and Cover Or egon does not mean t hose

ent i t i es may per f or m any act i ons t hat t hey pl ease. I n f act , t he

r esul t i s t he opposi t e: Absent expr ess aut hor i zat i on, DHS/ OHS

and Cover Or egon may not act . Moreover , as not ed, 741. 250( 2)

onl y per mi t s Cover Or egon s boar d of di r ect or s and execut i ve

di r ect or t o ent er i nt o cont r act s. Because t he aut hor i zi ng

st at ut e does not i dent i f y any other empl oyees or agent s who may

ent er i nt o cont r act s f or Cover Or egon, no ot her empl oyees or

agent s may do so. Even t hough t he pr ovi si on i n 741. 250( 2) uses

t he per mi ssi ve t er m "may, " i t does not expr essl y conf er power t o

ent er i nt o cont r act s i n some manner other t han t hat set out by



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because t he Ci t y of Sal em l acked a "char t er - i mposed l i mi t at i on"

on cont r act f or mat i on. 53 Or . App. at 163.

Her e t he Cour t concl udes Cover Or egon and DHS/ OHS ar e not

aut hor i zed t o ent er i nt o cont r act s i n any manner ot her t han t hose

al l owed by st atut e. Or acl e has not al l eged Cover Or egon and/ or

DHS/ OHS wer e conf er r ed t he benef i t s al l eged by Or acl e i n i t s

Amended Cor r ect ed Compl ai nt pur suant t o a cont r act ( quasi or

act ual ) ent er ed i nt o i n a manner per mi t t ed by the aut hor i zi ng

st at ut es f or Cover Or egon and DHS/ OHS. The Cour t , t heref ore,

concl udes pur suant t o Wegroup t hat DHS/ OHS and Cover Or egon may

not be hel d l i abl e i n quantum meruit f or t he quasi - cont r act ual

benef i t s t hat Or acl e al l eges t hey r ecei ved.

Accor di ngl y, t he Cour t gr ant s t he J oi nt Mot i on of t he St at e

and Cover Or egon t o di smi ss Or acl e s al t er nat i ve Four t h cl ai m f or

quantum meruit. To t he extent Or acl e cont ends i t has a basi s t o

r epl ead t hi s Cl ai m consi st ent wi t h t he Cour t s anal ysi s her ei n,

t he Cour t gr ant s Or acl e l eave t o do so wi t h i t s next f or m of

Compl ai nt .

VI. Doe Defendants

The St at e and Cover Or egon move t o di smi ss t he Doe

Def endant s f r om t he Feder al Act i on, and Or acl e concedes t he Cour t

shoul d di smi ss t he Doe Def endant s.

Accor di ngl y, t he Cour t gr ant s t he J oi nt Mot i on of t he St at e

and Cover Or egon to di smi ss t he Doe Def endants.



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V. Alternative Motion to Stay Pursuant to the Colorado River

Doctrine

I n Colorado River Water Conservation District v. United

States, 424 U. S. 800 (1976) , t he Supr eme Cour t est abl i shed an

abst ent i on r ul e appl i cabl e t o si t uat i ons when par al l el st at e and

f eder al l i t i gat i on ar e pendi ng.

The St at e and Cover Or egon asser t i n t he al t er nat i ve t o

t hei r Mot i on t o Di smi ss t hat i f t he Cour t ( 1) di smi sses Or acl e' s

copyr i ght - i nf r i ngement cl ai m, ( 2) decl i nes t o di smi ss one or mor e

of Or acl e' s other cl ai ms i n t hi s act i on, and ( 3) r emands at l east

some of t he cl ai ms i n t he St ate Act i on t o st at e cour t , t he Cour t

shoul d st ay any cl ai ms r emai ni ng i n f eder al cour t dur i ng t he

pendency of t he st at e- cour t act i on pur suant t o Colorado River.

The Cour t has not yet deci ded whether t o r emand any of t he

cl ai ms i n t he St at e Act i on, and, as not ed, i t has gr ant ed Or acl e

l eave t o amend i t s Amended Cor r ect ed Compl ai nt . Accor di ngl y, t he

Cour t deni es t he J oi nt Mot i on t o St ay pur suant t o t he Colorado

River Doct r i ne as premat ur e at t hi s t i me.

CONCLUSION

For t hese reasons, t he Cour t GRANTS t he St at e of Or egon' s

Mot i on ( #39) t o Di smi ss; DENIES Cover Or egon' s Mot i on ( #44) t o

Di smi ss; and GRANTS in part and DENIES in part t he J oi nt Mot i on

( #41) t o Di smi ss or , i n t he Al t er nat i ve, t o St ay of t he St at e of



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Or egon and Cover Or egon. The Cour t al so GRANTS Or acl e l eave t o

f i l e a Second Amended Compl ai nt no later than January 27, 2015.

I T I S SO ORDERED.

DATED t hi s 13t h day of J anuary, 2015.

/ s/ Anna J . Br own

ANNA J . BROWNUni t ed St at es Di st r i ct J udge


oracle v. oregon - copyright sovereign immunity opinion

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