Wednesday, July 20, 2011

Google blinks in Oracle patent case, indicates willingness to pay

Oracle and Google just filed their joint reply to the judge's request for input on "the extent to which" that lawsuit should be stayed.

As I expected, the common and agreed-upon part of their response is confined to undisputable facts: a summary of the five first Office actions that have been issued so far as a result of Google's requests that the USPTO reexamine all seven patents-in-suit. But (unsurprisingly) they disagree completely on what impact those preliminary rejections should have. Oracle wants the trial to begin on October 31 as scheduled; Google wants a complete stay or, failing that, pressure on Oracle to narrow its assertions now.

Before I start my more detailed analysis of that update on the ongoing reexaminations, let me quote and comment on the two most interesting tidbits from the filing:

  • The biggest news is that Google, which has so far dismissed Oracle's assertions as if they had no merit whatsoever, has for the first time indicated in public (i.e., in a public court filing) its willingness to settle this case with Oracle. In a fundamental departure from the positions it previously articulated in its public filings and its public statements, Google clearly blinks. Here's the sentence I mean -- it makes references to Google's proposal to require Oracle to narrow the case for the sake of efficiency (unless it's stayed, which Google would prefer):

    "Such a narrowed case will also eliminate the need for those efforts specifically directed at the claims rejected through reexamination, including motion practice, expert reports, and other trial preparation, as well as make it more likely that the parties could reach an informal resolution of the matter."

    The last part about "informal resolution of the matter" can be interpreted in only one way: Google is prepared to settle with Oracle and make one or more payments in that event, but apparently the parties' positions are too far apart at this stage because Oracle is too confident of its ability to command a high royalty rate (presumably a high per-unit royalty).

    In principle, it's constructive if a party indicates a willingness to settle. But there's a fundamental difference between negotiating in private and letting the court (as well as the public) know -- more than three months before the scheduled trial (!) -- that one isn't so sure of one's defenses anymore. This stands in clear contradiction to Google's past positions and declarations, and it looks increasingly like an admission all by itself. Discovery is almost complete, and it probably didn't go too well for Google.

    Theoretically, an "informal resolution" could be a lot of things. But no one would seriously think that (after all of what's happened) Oracle would let Google off the hook for free. According to its own representation, Oracle wants a $2.6 billion damages award (which might even be tripled due to willful infringement). Google even claims Oracle's demands constitute a range of up to $6.1 billion. When you start from that kind of amount, you can't settle for a small amount of money.

  • A less important but also interesting position taken by Oracle is that this case needs to resolved swiftly because the delay caused by a stay would harm Oracle's business, arguing in part with Google's alleged poaching of Oracle employees:

    "The prejudicial impact of such a delay would be particularly acute as Android continues to gain market share at a dramatic pace, growing at over 500,000 activations per day (see!/Arubin (last visited July 19, 2011)), and as knowledgeable Oracle employees continue to be lost to turnover (many being hired away by Google)."

    It was previously known that some former Java developers -- most notably the father of Java, James Gosling -- signed up with Google. Oracle tries to leverage that fact in order to get a trial before the end of the year. Also, the ongoing war for talent in Silicon Valley is a fact. But this reference could additionally indicate that there's even more friction between those two companies than just this patent and copyright infringement lawsuit.

Status of reexaminations

Today's filing doesn't contain any news concerning the ongoing reexaminations per se. In a footnote, Google expresses its belief that first Office actions for the remaining two patents are coming soon:

"In the two reexaminations without initial office actions, office actions are anticipated shortly."

Independent observers believe that at least one of those Office actions could indeed be issued very soon, but even the other one is likely to be issued this summer. However, there's no guarantee.

Today's filing does disclose some new information related to the asserted patent claims: the shortlist of the 50 patent claims that Oracle had to present on or before July 1 (so the court has seen this a while ago, but the shortlist wasn't disclosed in a public filing before today). Initially Oracle asserted 132 claims of the seven patents-in-suit. The judge wants them to narrow that list, and an interim step was Oracle's narrowing to an intermediate list of 50 claims. Out of that shortlist Oracle will then have to choose the claims to be asserted in a trial. Oracle wants to take 21 patent claims to trial; the judge tentatively proposed a number of three (which Google also mentions in today's filing), but Oracle kept insisting on 21 even after Google offered a compromise of 10 to 14 claims.

Based on the shortlist of 50 claims, I now get a clearer picture of how the first Office actions that have been issued concerning five of the asserte patents relate to Oracle's actually selected claims:

For three of the patents it was already clear to me that none of the asserted claims was considered valid according to the relevant first Office actions. That's because even all of the asserted claims that were part of the long list of 132 claims had been rejected on a preliminary basis. But for two of the patents, the situation wasn't "black or white". One of them -- U.S. Patent No. 6,061,520 -- emerged pretty strong while the other (U.S. Patent No. 6,192,476) was called into question rather strongly by the examiner. Based on the shortlist of 50 asserted claims, the '476 patent is actually the fourth one of which all actually asserted claims have been rejected on a preliminary basis (some claims that were not rejected were on the long list of 132 claims, but no longer on the shortlist of 50). And while some claims of the '520 patent have been rejected on a preliminary basis, those didn't seem too important to me initially and they don't appear on Oracle's shortlist of the 50 claims asserted at this stage.

Here's the table Oracle and Google presented to the court (click to enlarge):

Google's all-or-nothing position on possible stay

I interpreted the judge's most recent notice on a possible stay as an indication of being willing to stay the case at least in part. I'm not surprised that Oracle is against any stay. But I thought Google's second proposal would be a partial stay. I thought Google would propose (as a second-best alternative) a stay of any claims concerning the four patents that suffered so badly based on those preliminary results. Instead, Google's second choice is that the court pressure Oracle to narrow its claims now and to a much greater extent than Oracle is willing to.

One possible explanation for Google's all-or-nothing take on a stay is that it may be quite afraid of even the remaining patents. In particular, the '520 patent (all shortlisted claims of which were found valid based on the related first Office action) might worry them. Also, the copyright infringement claims couldn't be stayed because those aren't subject to reexamination.

But it's also possible that Google thought the judge might order a partial stay anyway, whether or not they ask for one in their own pleading.

There will be a (short) court hearing tomorrow, and maybe some interesting information will become available thereafter.

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