Friday, July 22, 2011

Oracle gets to depose Google CEO Larry Page for two hours on willful patent infringement, value of Android

Late on Thursday by local time, magistrate judge issued an order according to which "Oracle may depose [Google co-founder and CEO] Mr. Page for a maximum of two hours, excluding breaks, solely on topics relevant to the willfulness of Defendant's alleged patent infringement, and the value of Android to Defendant". When I reported on Oracle's related request, I already said that Oracly had a "pretty good chance" because the judge is very interested in the question of willful infringement and has strong suspicions in that regard.

Willful infringement is hugely relevant because it leads to triple damages under U.S. patent law. Even prior to a potential tripling, Oracle's damages claims are staggering and still increasing: the previously claimed amount of 2.6 billion dollars (according to Oracle) -- or range between 1.4 and 6.1 billion according to Google's portrayal of what Oracle wants -- is not even the total bill. As I reported yesterday, Oracle now wants to ask for additional money based on a network effects theory, claiming that Android has positive effects on Google's leadership in search even in connection with its non-mobile business. I am familiar from a business, policy and antitrust angle with network effects, and I think Oracle has a point in principle, though the question is exactly what the additional damages amount should be. At any rate, with so much money at stake, Magistrate Judge Donna Ryu apparently felt that it wasn't unduly burdensome to ask Mr. Page to take the witness stand.

The order on Oracle's request for depositions came about five hours after a court hearing at which the judge indicated in no uncertain terms what he thinks of the parties' positions at this stage of the game (more on that one further below), and about eight hours after a separate telephone conference in which the court discussed with Oracle's and Google's lawyers these requests for deposition.

The rationale for granting Oracle's request to take a deposition of Mr. Page is stated in a footnote:

"Oracle claims that Mr. Page participated in Google's negotiations with Sun for a Java license. Even though Google asserts that Mr. Page was not personally at the bargaining table, Google admits that Mr. Page received briefings on the negotiations. Given the importance of Android to Google's business, it is highly likely that Mr. Page participated in decision-making regarding the licensing negotiations. Therefore, Plaintiff also has satisfied the court that Mr. Page likely 'has unique first-hand, non-repetitive knowledge of facts at issue in the case' and that Plaintiff 'has exhausted other less intrusive discovery methods' to obtain the information it seeks in its proposed deposition." [then cites case law on so-called "apex" depositions]

Oracle was furthermore allowed to depose two software developers: Bob Lee, described in the order as "a former Google employee who was a Senior Software Engineer with a high level of responsibility regarding core library development for Android", and Tim Lindholm, "an engineer, and a former Sun employee who has worked for Google since approximately 2004" who Oracle claims was "also engaged in high level discussions in 2010 on the question of whether Google had viable non-infringing alternatives". Only one of the four requests for depositions was denied: Oracle won't get to depose Dipchand Nishar, a former Google employee whose role seemed "unclear" to the judge. "Oracle has not established that Mr. Nishar has relevant, non-duplicative, non-cumulative knowledge that justifies an additional deposition", the judge concluded.

Fact discovery in this process is currently set to end in a week from today: on Friday, July 29, 2011. The order does not extend this deadline. It remains to be seen whether an extension will be granted. If not, these three additional depositions will have to be scheduled on very short notice. Also, this could result in a packed courtroom because of all the reporters and other people interested in hearing Mr. Page's deposition.

Reports on yesterday's court hearing on damages

As I said before, the depositions issue was discussed in a separate telephone conference, but since it's all about damages-related questions, it's actually intertwined with the primary topic of the hearing, which was Google's motion to dismiss Oracle's damages report.

My feeling based on the reports I read is that the judge won't throw out the report as a whole, but I think it's fairly likely that he'll ask Oracle to amend it. Oracle may very well be required to distinguish between the commercial value of Android as a whole and the Dalvik virtual machine as a key part (undoubtedly a very important one since a couple hundred thousand applications -- and counting -- run on it). But Google's claim that its Android-related mobile advertising revenue shouldn't be included in the royalty base was also dismissed by the judge. In fact, when I reported on that Google position for the first time, I said that "[o]n this item, I agree 100% with Oracle and 0% with Google", though "I agree and disagree with both parties on different matters." And the judge made it clear yesterday that he views this the same way.

Several reporters attended the hearing, and I read their different reports. They all have different angles and tidbits to offer. Here are the reports I've seen so far (in the order in which they were listed by Google News):

  • ZDNet's Rachel King: Google will owe millions, maybe billions, to Oracle no matter what:

    Oracle's legal team also put forth their opinion that Google’s argument seems to be that the damages should be zero in this case.

    Fortunately for Oracle, Judge William H. Alsup agreed with Oracle on this point, saying that such a claim would be ridiculous, and that Google is definitely going to pay up "probably in the millions, maybe in the billions" at some point.

  • Reuters' Dan Levine: U.S. judge criticizes Google and Oracle at hearing

    "You're both asking for the moon and you should be more reasonable."

    "Zero is ridiculous [...] They're totally wrong on that" (on Google's exclusion of ad revenue from damages)

    "This [court] is not a wholly owned subsidiary of Oracle Corp."

  • Bloomberg's Karen Gullo: Google Rejected Sun $100M Java-Android Deal

    "Robert Van Nest, Google’s attorney, said yesterday at a hearing in federal court in San Francisco that the proposed $100 million three-year “all-in” deal in 2006 was for a technology partnership to jointly build Android, rather than for just a patent license."

    "[Judge] Alsup said it appeared that Google 'has a product out there that is in direct violation of these patents'."

  • IDG's James Niccolai: Google: Sun Offered to License Java for $100 Million (this is clearly the most comprehensive account of the hearing)

    "[Steven Holtzman, an attorney for Oracle] read part of [an internal Google] email in court: 'What we've actually been asked to do by Larry and Sergey is to investigate what technology alternatives exist to Java for Android and Chrome,' the Google executive wrote, referring to founders Larry Page and Sergey Brin. 'We've been over a hundred of these and think they all suck. We conclude that we need to negotiate a license for Java.'"

    ""That's a pretty good document for you," Alsup said [to Oracle's lawyer]. "That ought to be big for you at trial."

    Then to Google's attorney: "'You're going to be on the losing end of this document with Andy Rubin on the stand. You think about that,' Alsup continued. 'And I want to say this: Wilful infringement is final. There are profound implications of a permanent injunction. I'm not saying there is wilful infringement, but that is a serious factor when you're considering an injunction.'"

  • The Mercury News' Brandon Bailey: Google execs discussed Java license before Oracle filed suit

    "Van Nest told the judge Thursday that former Sun CEO Jonathan Schwartz gave a sworn statement this week that he did not object to Android when it was released and that he still views it as a 'positive development' for the Java ecosystem." [I'd like to mention that Schwartz bears a grudge against Oracle CEO Larry Ellison, who made it pretty clear after the acquisition that Schwartz had mismanaged Sun, which allowed Oracle to buy the company at a cheap price, and that Sun had great engineers but "even they" couldnt' succeed because they got "astonishingly bad" direction]

    "But Oracle attorney Michael Jacobs told the judge that if the case goes to trial, his side will present evidence that Google 'didn't just program in Java. They adopted the entire architecture.'"

I just quoted a few parts from each report. If you're very interested in this case, read them all. They're all unique and useful.

It's pretty clear now that Google is going to have a hard time to convince the judge and the jury of there being no infringement (and especially no willful one). Google can hope that maybe the judge is willing to stay the case in whole or in part pending reexaminations. But they really are under pressure to settle now, and I believe Oracle is increasingly likely to develop new strategies and work according to new timelines should a stay be granted.

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