Who Will Win the Google vs. Oracle Legal Battle?

alphabet-googl-logoFrom Zacks: The Alphabet Inc (NASDAQ:GOOGL) vs. Oracle case seems to be winding on forever and current developments don’t even seem too newsy any more. But that doesn’t mean it’s all over, not by a long shot.

The last we heard about it, Google won the case against Oracle on the principle of fair use, a decision Oracle vowed to appeal. That’s because fair use is a kind of defense where the offender admits to the offense (in this case copyright infringement) but explains why the infringement was justified.

Normally, “fair use” can be resorted to when the offender is able to show that a) the infringement benefited many, so was for common good; b) if the copyrighted material was a small part of the end product created, i.e., there was true originality/innovation in the product created that is distinguishable from the copyrighted material; c) if the infringement can cause material harm to the original work, for example by reducing its market value or impacting its ability to generate revenue.

There is no dispute about Android’s usefulness: it has enabled many phone makers with limited means to bring smartphones to market thereby increasing competition and lowering the price of smartphones. This in turn has made smartphones accessible to many more. Further, it has created an ecosystem of developers that can depend on it for their livelihood. Google’s own revenue generation is indirect: it only makes money when customers use its apps that are pre-loaded on the devices.

Second, there is also no dispute about the end product. In fact, the lines of Java code used in Android are important but a tiny fraction of Android. Java use in Android is essentially restricted to the application programming interface (API), a virtual machine-powered application platform on top of the OS that helps to add functionality to devices because it allows third-party apps to run on them. In this case, Google used Java SE (the desktop version) and not Java ME (the mobile version).

Third, whether there is material harm to Oracle is debatable because while Android is a tremendous force today, that’s not the way it started out. Android grew over time and Oracle didn’t buy Sun (which created Java) until Android was already successful. Oracle could theoretically have devoted resources and time to develop on Java, but instead it thought it could get a bite out of Android.

As far as Sun is concerned, its former CEO Jonathan Schwartz has testified in court that “We had the foundational technologies to make it work, but we weren’t able to get it to market in time…It’s very difficult. We had R&D choices we had to make. We couldn’t fund every project.” Further, on being asked whether Sun’s failure to launch a Java-based smartphone had anything to do with Android, he said “No.”

 

 

But that’s not the end of the story.

The Role of APIs

APIs are like gateways or better, sockets in hardware that third parties plug their stuff into. They constitute software code that enable different programs to communicate with each other.

So it’s important that these APIs remain neutral so companies can’t fleece the world at large every time they are used. Media reports indicate that courts have thus far ruled in favor of maintaining this neutrality of APIs. And that’s exactly why the Electronic Frontier Foundation (EFF) has repeatedly filed amicus curiae (friend/impartial advisor to the court) briefs so the courts hold that APIs aren’t copyrightable and to prevent Oracle from monetizing the Java API through its acquisition of Sun.

And in fact, the case revealed that it was Sun’s practice to allow companies to freely use Java APIs. Sun’s strategy in those days was to use this approach to extend Java’s reach as far as possible so more developers would build on it. The idea was that once the ecosystem gathered momentum, it would help Sun sell other products.

So was Google under the impression that it could get away without a license? From the publicly available information it is difficult to determine whether Google thought it needed a license. It’s clear that Sun wanted a commercial relationship with Google that didn’t work out for some reason. According to Schwartz it was “a combination of money and technical dependence.…Google didn’t want to rely, as best as I understand, on anyone else.”

Then again, former Android head Andy Rubin testified in court that Sun didn’t want Google to give away Android for free (this could have been because it’s hard to fix lucrative licensing terms for something free). Alphabet chairman Eric Schmidt said he had been willing to fork out $30-40 million for a five-year license but what exactly that license was for is unclear. It might have been for the code Google used or something more than that (since the Java logo was supposed to appear in various places in that arrangement and the talks may have fallen apart because of Google’s desire to give away the OS for free).

The May 2016 hearing in which the jury ruled in favor of Google’s fair use was therefore good news for the future of software development (and every Android user because we are not using a criminally infringing device).

So Why Are We Bringing This Up Again Today?

Oracle lawyers are now saying that Google withheld key information. One of the defenses Google took in the retrial depended was that it had used the desktop version of Java while Android was used in mobile devices. Oracle says that the recent launch of Google Play on Chrome therefore renders this defense groundless. They therefore think another retrial is justified so the jury can have access to this information.

Google’s response was that during discovery Oracle had asked for and received information about App Runtime for Chrome (ARC), so Oracle could have pursued the matter then. And the update ARC++ was still in the works at the time, so wasn’t mentioned, especially since “it was beyond the scope of the trial”.

The judge told Google “If I had been in your position, I would have disclosed.” But he also questioned Oracle’s asking for a retrial because it didn’t use the information available to influence this jury and was asking for another hearing.  He will rule on the new angle in writing.

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In Conclusion

This case isn’t likely to get resolved any time soon and both companies still have a fair chance to win. Google could simply take a license or Oracle could simply back off. But neither of those two things looks like it’s going to happen.

Here are a few companies you could focus on instead as they have favorable Zacks ranks and are therefore worth a look: NVIDIA Corp (NVDAAnalyst Report) , Paylocity Holdings (PCTYSnapshot Report) and Autobytel Inc (ABTLSnapshot Report).

This article is brought to you courtesy of Zacks Research.

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