Index: admin/launcher/src/main/java/com/sun/enterprise/admin/launcher/GFLauncher.java
===================================================================
--- admin/launcher/src/main/java/com/sun/enterprise/admin/launcher/GFLauncher.java	(revision 43670)
+++ admin/launcher/src/main/java/com/sun/enterprise/admin/launcher/GFLauncher.java	(working copy)
@@ -51,6 +51,7 @@
 import com.sun.enterprise.universal.process.ProcessStreamDrainer;
 import com.sun.enterprise.universal.xml.MiniXmlParserException;
 import com.sun.enterprise.util.OS;
+import com.sun.enterprise.util.io.FileUtils;
 import com.sun.enterprise.util.net.NetUtils;
 import com.sun.enterprise.universal.glassfish.ASenvPropertyReader;
 import com.sun.enterprise.universal.xml.MiniXmlParser;
@@ -156,6 +157,7 @@
         info.setAdminAddresses(parser.getAdminAddresses());
         javaConfig = new JavaConfig(parser.getJavaConfig());
         setupProfilerAndJvmOptions(parser);
+        setupUpgradeSecurity();
         setupMonitoring(parser);
         sysPropsFromXml = parser.getSystemProperties();
         asenvProps.put(INSTANCE_ROOT_PROPERTY, getInfo().getInstanceRootDir().getPath());
@@ -666,6 +668,29 @@
         jvmOptions = new JvmOptions(rawJvmOptions);
     }
 
+    private void setupUpgradeSecurity() throws GFLauncherException {
+        // If this is an upgrade and the security manager is on,
+        // copy the current server.policy file to the domain
+        // before the upgrade.
+        if (info.isUpgrade() &&
+            jvmOptions.sysProps.containsKey("java.security.manager")) {
+
+            GFLauncherLogger.info(strings.get("copy_server_policy"));
+
+            File source = new File(new File(new File(info.installDir, "lib"),
+                "templates"), "server.policy");
+            File target = new File(info.getConfigDir(), "server.policy");
+
+            try {
+                FileUtils.copyFile(source, target);
+            } catch (IOException ioe) {
+                // just in case. if source is missing for some reason,
+                // an illegal arg exception will be thrown.
+                throw new GFLauncherException("copy_server_policy_error");
+            }
+        }
+    }
+
     private void setupMonitoring(MiniXmlParser parser) throws GFLauncherException {
         // As usual we have to be very careful.
 
Index: admin/launcher/src/main/java/com/sun/enterprise/admin/launcher/LocalStrings.properties
===================================================================
--- admin/launcher/src/main/java/com/sun/enterprise/admin/launcher/LocalStrings.properties	(revision 43670)
+++ admin/launcher/src/main/java/com/sun/enterprise/admin/launcher/LocalStrings.properties	(working copy)
@@ -80,4 +80,7 @@
 #'ssh' message from Sathyan Catari see IT 13862  October 19, 2010
 ssh=Attempting to start {0}.... Please look at the server log for more details.....
 
-
+# issue 11665
+copy_server_policy=Will copy glassfish/lib/templates/server.policy file to domain before upgrading.
+copy_server_policy_error=Could not copy server.policy to domain. You may need to turn off the \
+   security manager before upgrading.