The CEO of one of Oracle's rivals has been sentenced to 2 years of prison — and Oracle is 'pleased' (ORCL)

Larry Ellison

For the first time, one of Oracle's intellectual property lawsuits has led to a jail sentence for its rival.
Bernd Appleby, the co-owner and CEO of a company called Terix Computer Company, has been sentenced to 24 months in prison and ordered to pay a $100,000 fine as part of a years-long battle with database giant Oracle.
Appleby and other Terix execs pled guilty in August 2017 to one count of conspiracy to commit wire fraud in this case and were sentenced this week.

Bernd Appleby, the co-owner and CEO of a company called Terix Computer Company, has been sentenced to 24 months in prison and ordered to pay a $100,000 fine as part of a years-long battle with database giant Oracle.

Terix is a company that makes its money offering technical support on products from a long list of big tech companies, including IBM, Cisco, HP, Dell and Oracle.

In addition to Appleby, the company's COO, director of sales, and director of technical services are also being fined and sentenced to either jail time or probation.

These are the first executives to ever be sentenced to prison as a result of intellectual property litigation with Oracle.

Appleby and other Terix execs pled guilty in August 2017 to one count of conspiracy to commit wire fraud in this case.

This isn't the only third-party technical support company Oracle has sued, but it the first time the CEO of such a company wound up with jail time.

The only other criminal case of this type with Oracle was when an SAP subsidiary called TomorrowNow pled guilty to criminal charges. TomorrowNow was a third-party support company SAP acquired, and while criminal charges were filed against the company, no one ended up going to jail.

Oracle is particularly litigious when it comes to third-party support companies. Oracle makes most of its money selling its own technical support contracts, although one day, in the future, that may change as it moves more of its customers to its cloud.

In the meantime, companies like Terix allow businesses to skip Oracle's support contracts, buying their support elsewhere.

How do they get the goods?

At issue is how these third-party companies obtain Oracle's software in order to provide the support, patches, and updates to their customers.

According to court documents, these execs set up "three fake companies ... using bogus email addresses and addresses, pre-paid telephones and pre-paid credit cards," the District Attorney's office said in a press release. They used those companies to buy Oracle support contracts and gain access to Oracle's support computer systems, the DA charged.

Then they allegedly downloaded patches and updates from those servers and used those downloaded items to provide patches and support to some 500 of customers of its own, the DA said.

All told, the DA says that Terix took $10 million worth of Oracle's intellectual property.

U.S. Attorney Glassman slammed Terix CEO Appleby in his statement, saying, "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 has been suing Terix for years. In 2015, a judge ruled in favor of Oracle and ordered Terix to pay Oracle a $57 million fine. Oracle also sued Hewlett Packard Enterprise in 2016 for allegedly partnering with Terix, and that suit is still in the courts.

In June, 2016, Oracle sued Terix again, alleging that its top executives transferred assets to a new company called TUSA in order to avoid paying the fine.

Mike Halverson, vice president of sales at Terix, tells Business Insider that today's Terix is not associated with the one ordered to pay the fine, it is merely doing business as (dba), under the same name.

"We are not associated with TERiX Computer Company, Inc. (TCCI), the company referenced in the article [the DA's press release]. That company no longer operates. We are TUSA, Inc., dba Terix, and we purchased portions of the assets in February 2016," he said, adding, that the criminal case "is a personal matter" of the people involved "and not associated with our entity."

It is unclear who the current owner and/or CEO of Terix is. The names of the company's top executives are not listed on the website.

Oracle is 'pleased'

Meanwhile, Oracle is doing a victory dance over this sentencing.

“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,” she said.

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