Following the second court-ordered mediation conference between Oracle and Google, which took place on Wednesday, the magistrate judge moderating this settlement effort entered an order that indicates that the court has not yet given up, but an agreement has not been reached so far. This is how Magistrate Judge Grewal described the status and next steps:
Settlement Conference Held. Further Settlement Conference to be scheduled.
Comments: Lead counsel shall contact the courtroom deputy to [Magistrate Judge Grewal] to schedule a call [on Thursday] regarding when further discussions will take place and whether the further attendance of Mr. Ellison and Mr. Page will be required.
Theoretically, the reference to the further participation of the two Larrys could mean two things. It could indicate that a philosophical agreement has been reached and the parties only need to hammer out some more detail, in which case the two Larrys might not be needed anymore. But more likely, the court has realized that there isn't much hope for an agreement and recognizes that it wouldn't be reasonable to ask for too much time on the two CEOs' part.
Similarly, the uncertainty concerning when the next session will take place -- though, at least for now, the order makes it look like another meeting will definitely happen before the end of the month -- could be interpreted in two ways. It could mean that the court just wants to know how much time the parties need to spend to work out details outside of court. More likely, it means that the court doesn't believe there's enough progress to force them to meet every other day. If they talk on Thursday to determine when to reconvene, I guess we'll see one more meeting, or maybe two, next week, and then the court may have to conclude that this case can't be settled, whatever the reason may be.
I have said it a couple of times before: the best thing the court could do to increase the prospects of a settlement is to turn the tentative Halloween trial date into a definitive one prior to further meetings between the parties.
Comparison of list of attendees (Monday and Wednesday meetings)
A comparison of the list of attendees between the Monday and Wednesday meetings shows that Oracle brought back the same top-level executives (Larry Ellison was accompanied by President and CFO Safra Catz and Executive Vice President of Product Development Thomas Kurian) and three in-house lawyers (led by General Counsel Dorian Daley), plus two external lawyers (but not a third one, Marc David Peters, the head of Morrison & Foerster's litigation department), while Google's list of participants was noticeably affected by a Google antitrust hearing on Capitol Hill: on Wednesday, Larry Page's entourage consisted of Andy Rubin and four lawyers, but the company's two top lawyers (Chief Legal Officer David Drummond and General Counsel Kent Walker) apparently had to go to Washington DC.
If Judge Alsup sees the list of attendees, he will probably have an understanding for Google's scheduling conflict on Wednesday, but the presence of multiple high-level executives on Oracle's part showed a commitment on both days that went beyond the call of duty and, especially, the effort made by Google. That said, the case will ultimately have to be decided on its merits regardless of who scores more goodwill points with the court during mediation. But Judge Alsup has some discretion over the schedule of the case, and those decisions may very well be influenced by how he views the prospects of a settlement and to whom he mostly attributes the failure of those talks.
Google takes major risk by not settling now
I previously explained that Google may want to refuse to settle and try to stall at least as long as its proposed acquisition of Motorola Mobility is under regulatory review, but if this case is not settled and goes to trial, the outcome could be quite bad for Google. In a worst-case scenario that is not unrealistic at all, Google may soon find itself in a situation in which Oracle holds a permanent injunction in its hands. In that case, the cost of licensing Java from Oracle could, over the course of several years, easily exceed the offer Google made for Motorola Mobility. In the post I just linked to, I presented a flowchart that shows which sequence of decisions would get Google into so much trouble, and a table that compares the various outcomes and attaches rough estimates of the related costs.
Media reports on reduced damages claims are unfounded
Yesterday, at least three major news agencies -- all of which typically do a great job reporting on this dispute -- said or suggested that Oracle's damages had been reduced from $6 billion to an amount just above $2 billion. However, there's absolutely no evidence -- none at all -- for such a reduction in the court documents, and in fact, Oracle's damages claims might be even higher now than before. By the way, the $6.1 billion figure was doubtful anyway because it only appeared in Google's representations of those claims, and Oracle itself denied it firmly. So any comparison between $6 billion and $2 billion is a comparison of one number that is denied to another one that is incomplete. It would take a lot of good luck for a conclusion to be accurate if the underlying assumptions aren't even correct.
All the confusion about the new damages computation, which Oracle was recently ordered to come up with, is attributable to the way a Google letter to the court (a request for permission to file another Daubert motion in order to throw out Oracle's revised damages claims) describes Oracle's new damages theories. Those actual claims are sealed, so none of us observers of the dispute has access to it. But there are documents in the public record that make reference to those damages computations.
If one interprets Google's letter correctly, especially in light of all that is known about the previous damages calculation, then there's no reliable indication of a lowering of Oracle's claims. It appears that Oracle just modified its methodology. In fact, the judge didn't take a position on whether the amount Oracle claimed originally was too high. He disagreed with various of the underlying assumptions and some of the rationale, and he proposed to start with the $100 million deal Sun purportedly offered to Google at some point, but left open the possibility of what might be added on top.
Google's new letter regarding damages, filed on Tuesday, refers to the following numbers:
"over $800 million in 'unjust enrichment' damages for copyright infringement (in addition to damages for lost profits and a lost license fee)"
"over $1.2 billion for future unjust enrichment damages for 2012 alone"
"Cockburn concludes that 15% of a $100 million Java license would be attributable to the copyrights at issue, but then adjusts his $14.8 million figure upward to $102.6 million."
"Cockburn has dropped his patent damages estimate from $6.1 billion [remember that Oracle disputed that figure all along] to $201.8 million, but the way he reaches the lower number is equally result-oriented."
While it's true that the sum of all those purported components of Oracle's claims ($800 million + $1.2 billion + $102 million + $201 million) is in the $2.3 billion range, the second item is a figure for only one year: 2012. However, Oracle's original damages report estimated damages for a period from the launch of Android until the year 2025. Assuming that Google accurately represented the estimate for 2012 and Oracle wants $1.2 billion just for that year, why would the amount be anything other than very substantial in 2013, 2014, 2015, and so forth? Without knowing what Oracle wants to be paid with respect to those subsequent years, the $2.3 billion sum is absolutely irrelevant, and most likely, off base.
If one tried to reach a conclusion with respect to Oracle's total claims from the few data points provided by Google, chances are that the total figure for all those years will even exceed the (disputed) $6.1 billion figure.
As always, let's not forget that damages are only a "B" outcome for Oracle. The "A" outcome for Oracle is a permanent injunction, which would enable it to extract from Google whatever royalties it can command in a situation in which Android might otherwise go down the tubes. In that scenario, court-ordered damages for past infringement would become only a small part of the overall consideration. Oracle's leverage with a view to the future would be the decisive factor. Still, those damages figures are interesting to watch -- but it's tricky with limited visibility.
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