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How to Understand Oracle’s Use of its Partitioning Policy for Virtualization

Oracle’s “Technology” software products (such as its WebLogic and Database programs) are very popular products. Unfortunately, as we have explained numerous times here, Oracle’s license agreements and compliance practices entail numerous pitfalls for unwary users of those products. Being caught in one of those pitfalls can result in substantial, unforeseen expenses following an audit by Oracle’s License Management Services (LMS) division.

Oracle’s Partitioning Policy

One of the biggest sources of exposure during Oracle LMS audits arises from a “policy” document published on Oracle’s website, titled “Oracle Partitioning Policy | Topic: Server/Hardware Partitioning” (the “Partitioning Policy”), which is available at:

http://www.oracle.com/us/corporate/pricing/partitioning-070609.pdf

The Partitioning Policy purports to elaborate upon Oracle’s standard licensing obligations, to require that all physical processor cores on all hosts in certain virtualization environments must be licensed for an Oracle product that is used anywhere within those environments. The document states:

“Unless explicitly stated elsewhere in this document, soft partitioning (including features/ functionality of any technologies listed as examples above) is not permitted as a means to determine or limit the number of software licenses required for any given server or cluster of servers.”

(emphasis added)

Notably included among the list of “soft partitioning” technologies is VMware, which currently is likely the most widely used virtualization technology. Oracle’s LMS teams would have you believe that the language above requires that a cluster of virtualization hosts within a VMware vCenter must be fully licensed for any Oracle Technology products running anywhere within that cluster (even if, for example, affinity rules have been implemented to limit a particular VM to a single host within the cluster).

Many companies that have been audited by Oracle LMS know that aggressive application of the Partitioning Policy can be truly problematic, often resulting in crippling, multi-million dollar audit settlement demands. But what, if anything, gives Oracle the right to surprise its customers in that way? More importantly, what can audited companies do to challenge the use of the policy?

The Partitioning Policy Is Not Part of the Oracle License Agreement

Let’s start with a review of the actual contract terms.

The first point to keep in mind is the fact that companies purchasing Oracle licenses typically do so subject to the terms of Oracle’s Master Agreement (which then is incorporated in one or more Ordering Documents), and the current Master Agreement (“OMA”) nowhere expressly incorporates the Partitioning Policy. While Oracle’s license agreements and Ordering Documents typically do incorporate by reference certain supplemental or ancillary policies (such as Oracle’s technical support policies, which are explicitly referenced), they do not reference the Partitioning Policy. Furthermore, there is nothing in the OMA or most Ordering Documents that would allow Oracle to unilaterally amend the parties’ agreements merely by publishing a policy on its website.

Schedule P of the OMA governs use of Oracle programs, and it includes the following basic license grant:

“Upon Oracle’s acceptance of Your order, You have the non-exclusive, non-assignable, royalty free, perpetual (unless otherwise specified in the order), limited right to use the Programs and receive any Program-related Service Offerings You ordered solely for Your internal business operations and subject to the terms of the Master Agreement, including the definitions and rules set forth in the order and the Program Documentation.”

“Program Documentation” is defined as:

…the Program user manual and Program installation manuals. Program Documentation may be delivered with the Programs. You may access the documentation online at http://oracle.com/documentation.

Browsing to that URL currently will result in being redirected to the Oracle Help Center at: http://docs.oracle.com. It is possible that the Partitioning Policy exists somewhere within the forest of manuals and administrative guides available at that site, but it is not easy to find, if it does. A search for “partitioning” in connection with Database products at that page does not appear to yield the Partitioning Policy within the first few pages of the 10,160 search results.

Beyond that basic license grant, Schedule P includes the following definition that is commonly relevant to usage of Oracle’s Technology programs:

“Processor: shall be defined as all processors where the Oracle Programs are installed and/or running.”

(emphasis added)

“Installed and/or running” is not defined terminology within the OMA. However, it also is not ambiguous language in need of a definition, at least with regard to identifying physical hardware systems where software is deployed. IT professionals generally know what it means to install or run software on a physical hardware system. If Oracle had used ambiguous terminology in the Processor definition or elsewhere within the OMA’s licensing rules – such as, for example: “all systems where the Oracle Programs are deployed” – then we really would need to look to other sources of guidance (such as a Partitioning Policy) to understand the parties’ intent in agreeing to those terms. However, that is not the case here.

Schedule P also provides a number of program-specific rules for calculating the number of Processor licenses required for licensed servers. However, the basic definition above represents the default licensing rule for all use cases, and none of the identified use cases mentions the Partitioning Policy.

Finally, a separate section of Schedule P is titled: “Licensing Rules for Oracle Technology Programs and Oracle Business Intelligence Applications”. That would seem to be a natural place to find important licensing information related to hardware partitioning, but – yet again – the Partitioning Policy is nowhere found or referenced within that section.

What we have, then, is a license agreement incorporating reasonably clear and unambiguous language regarding how to count the number of licenses required for certain products that does not expressly or impliedly incorporate the Partitioning Policy.

Potential Value of the Partitioning Policy

At best, the Partitioning Policy might be interpreted as Oracle’s statement regarding certain virtualization technologies that will not result in further inquiry regarding processors where Oracle Programs are “installed and/or running” – a kind of safe harbor for the Oracle-approved “hard partitioning” technologies. Licensees using “soft partitioning” technologies like VMware reasonably could expect for LMS to investigate whether those programs ever have run on unlicensed hosts within a vCenter (and those licensees would be well advised to periodically gather system logs, screenshots or other documentation demonstrating that the Oracle VMs really have been running where they are supposed to be running).

However, the mere fact that Oracle unilaterally has identified VMware to be a “soft partitioning” technology does not, by itself, give Oracle LMS the right to assume that all processors within a vCenter have been used to install and/or run those programs. Unfortunately, that is the very assumption that Oracle LMS often makes during audits of companies using Oracle programs within VMware environments

Conclusion

Companies facing audits by Oracle LMS need to keep all of the above in mind during the investigation and settlement/resolution phase of the engagement. Requests for detailed information pertaining to virtualization environments where Oracle programs never have been deployed should be resisted. If Oracle proposes audit findings that purport to reflect program usage on systems where those programs never have run, the audited company should object to those findings early and often. Companies should work closely with legal counsel throughout the audit process to ensure both that their rights are protected and that Oracle is not seeking enforce audit findings that are not supported by the terms of the applicable license agreements.

A final note: Business leaders considering (or perhaps re-considering) their companies’ investments in Oracle programs may review the terms of the current OMA by doing the following:

(1) Browse to Oracle’s online storefront, currently at:

https://shop.oracle.com/

(2) Find a Technology product like Database Standard Edition 2, and add a quantity to the shopping cart.

(3) Click on the shopping cart icon and begin the checkout process. This step will require you to create a free Oracle store ID login and password. It also typically will entail entering a credit card number, but we will not actually be completing a transaction as part of this process.

(4) Complete the checkout steps until you reach the “Terms and Conditions” section. At that stage, the system will display a copy of the OMA as well as a link to download a PDF of the agreement. Click that link, save the PDF for later review, and then close the browser window to discontinue the checkout process.