OracleCoverOregon_Lloyd.JPG

Oracle programmers at work on Cover Oregon last fall.

(Michael Lloyd/The Oregonian)

In the legal fracas over the Cover Oregon health exchange, software giant Oracle America is seeking help from an unlikely source to bolster its case against the state: The U.S. Copyright Office.

On Sept. 8, the firm applied for federal copyright protection for the latest version of software products it sold to Oregon as part of the insurance exchange system. Within hours, the giant technology firm filed an amended complaint in federal court accusing Oregon of copyright infringement.

The new allegation shows that the legal dispute between Oracle and Oregon won't be a courteous affair, but a back-alley brawl.

"This is such a mess," said David Friedman, a Willamette University law professor, when told of the new charge. "It's like a war."

In the latest filings, Oracle and Oregon are each trying to pull the case into the court they consider more favorable.

The state wants to face Oracle in Marion County Circuit Court, arguing the case mainly concerns violations of state law.

Oracle wants to keep the dispute in federal court, and hopes its new allegation about copyright law -- a federal statute -- will bolster that claim.

"Federal courts are vested with exclusive jurisdiction in copyright cases," Oracle lawyers argued in their amended complaint.

Oracle's push to keep the case in federal court is not surprising. Out-of-state companies often prefer federal court, especially when they are suing the state, several lawyers said.

"The general rule is an out-of-state litigant prefers federal court to state court because they feel they'll be treated more fairly in federal court than state court," said Owen Dukelow, a lawyer at the Portland intellectual property firm Kolisch Hartwell.

Federal juries are selected from a wider region, as opposed to a Marion County jury that might be stocked with state workers. Not only that, but federal judges are appointed indefinitely -- not elected for fixed terms as state judges are -- and may therefore be less affected by public opinion, lawyers say.

Oracle filed its federal case Aug. 8, at a time when Oregon's lawsuit against Oracle was already a given, though it hadn't been filed yet.

The Oracle suit demanded $23 million from Oregon for what the company says are unpaid bills. It says that because Oregon did not pay the firm for all the work it performed trying to repair the non-functioning exchange, the state must stop using the Oracle software.

Although much of the exchange did not work as planned, Oracle is correct that the state continues to use some of the software products the state purchased. Also, Oregon has hired Deloitte Consulting to try to salvage a portion of Oracle's exchange work to enroll Oregon Health Plan members.

Federal law recognizes that software developers hold copyright protection until they transfer those rights to their customer in a contract. Oracle contends its contract did not transfer those rights to Oregon.

On Aug. 22, Oregon filed its lawsuit, spanning 126 pages. It accused Oracle of racketeering, fraud and false claims, saying the firm deceived Oregon about the quality of its software and programming.

Oregon on the same day filed a motion to dismiss Oracle's federal claim, accusing Oracle of "forum shopping" and trying to "increase the state's litigation costs by simultaneously litigating in two courts."

That's why Oracle filed its amended complaint, beefing up its attempt to remain in federal court with the copyright infringement claim.

Oracle's effort to file in federal court before Oregon filed its own case may well have been an attempt to take advantage of a legal principle called "first to file," that essentially allows the entity filing the first lawsuit to choose the venue.

There are exceptions to that rule, however, so the outcome of Oregon's tug-of-war with Oracle is hard to predict, several lawyers said. Whether the case ultimately lands in federal or state court is "difficult to answer," Dukelow said.

-- Nick Budnick