Saturday, September 24, 2011

Third Oracle-Google settlement talk scheduled for Saturday, October 1 [UPDATE: rescheduled to Friday, September 30]

[Update] On Monday, this was rescheduled to Friday, September 30. [/Update]

Oracle and Google already had two mediation sessions in San Jose in front of Magistrate Judge Paul S. Grewal of the United States District Court for the Northern District of California. So far, no settlement. After the second meeting, held on Wednesday, Magistrate Judge Grewal asked the parties' lawyers to confer by telephone to set a date for the next meeting. He also indicated that the presence of the companies' CEOs may not be required, which could either mean that it's just about details or, more likely, that these talks yield little progress, if any.

The latest indication of the parties' failure to reach an agreement at this stage is that Magistrate Judge Grewal ordered on Friday evening "that a further settlement conference shall be held on October 1, 2011 at 9:00 a.m.", even though he said two weeks earlier that in the event of the first session (held on Monday, September 19) not leading to an agreement, "the parties and their counsel should be prepared for further conferences between September 20 and September 30, 2011". On September 8, I reported that Judge William Alsup, the federal judge presiding over this lawsuit, had written that "[i]n light of the October trial date, mediation sessions should take place this month". The October 1 date is just beyond the original timeline for mediation. The parties will meet on a Saturday morning. For the court schedule, this amounts to the same as a meeting on September 30, and maybe it was easier to ensure the participation of some of the high-level decision-makers on that Saturday morning than on Friday.

The order does not state explicitly whether the two Larrys would be ordered to attend again. This was apparently discussed between the court and the parties over the phone. They may have to, given that the original mediation order required them to participate and that order would still be in force until modified or superseded. But there's another week to go, and the court could still clarify that question in the meantime.

The best thing the court could do in the meantime to raise the prospects of a settlement would be to turn the tentative Halloween trial date into a definitive one. Before this mediation effort began, I voiced my concerns about the absence of a firm trial date, which is closely related to Google's interest in getting the proposed acquisition of Motorola Mobility cleared by regulators before Oracle's lawsuit gets decided.

Judge wants to review Oracle's new damages report amid confusion in the media concerning Oracle's demands

Shortly before Magistrate Judge Grewal ordered the third settlement conference, Judge Alsup asked Google to "submit a copy of [Oracle's] revised [damages] report by NOON ON SEPTEMBER 26, 2011, to help the Court evaluate [Google's] request [for permission to file another Daubert motion to have that new damages calculation dismissed]".

The Google letter to which the judge reacted with that order caused a whole lot of confusion in the media. I still saw new reports coming out yesterday that claimed Oracle had reduced its demands. The first wave of media reports (grossly inaccurately) claimed that Oracle had lowered its claims from $6 billion to about $2 billion. That news spread like wildfire and was wrong for three reasons:

  1. The $6 billion figure showed up in a Google letter in June but Oracle firmly denied it back then, saying that the correct number was $2.6 billion. Unfortunately, most of the people reporting on this case still remember that $6 billion figure since it seemed so spectacular, but it's wrong to rely on how Google represents Oracle's demands instead of how Oracle itself described its demands in a letter to the judge. At the very least, everyone should understand that the $6 billion figure is controversial and dubious.

  2. The other point of comparison, the $2 billion figure, resulted from the simple addition of four numbers that appeared in Google's letter. However, the biggest one of those four components was $1.2 billion (more than half of the sum of those components), and whatever it did or did not mean (I'll address that in the third part), it related to only the year 2012, while the original damages report included damages until the year 2025. Consequently, even if one had taken the numbers in Google's letter at face value without questioning it (I clearly started my conclusions from it with a condition: "Assuming that Google accurately represented the estimate for 2012 and Oracle wants $1.2 billion just for that year [...]"), everyone would have had to recognize that the numbers in the old damages report and the ones in the new one weren't comparable due to vastly different periods of time. In light of that, there was no indication of a major reduction of Oracle's damages claims. They just used a different methodology but still arrived at very high numbers.

  3. In its reply to Google's letter, Oracle firmly denied that the $1.2 billion amount for the year 2012 represented a damages claim. Instead, that was a "gross profits" calculation, and Oracle explained in its letter that Google would have to prove deductions from that number. Realistically, Oracle's damages claim would then be some percentage of that amount, but hardly all of it. Oracle's letter again shows a distinction between past and future damages -- a fundamental distinction that almost all of the reports I saw in recent days failed to make.

Based on serious and accurate analysis, there are no signs at all of Oracle backing down, no matter how many people misinterpret the relevant court filings.

At least there's an increasing number of people who understand that those damages claims are not even the most important aspect of this dispute. Those billion-dollar figures are staggering, but the biggest issues here is whether Oracle will be granted an injunction that enables it to shut down Android unless Google accedes to its demands.

I produced a flowchart, a sort of roadmap to various possible outcomes, ranging from Oracle getting nothing to an amount that could easily exceed what Google offered for Motorola (click to enlarge):

For further explanation of the flowchart, please read what I wrote when I published it a few days ago. I wrote that even before Oracle's clarifying letter was filed. The rough estimates of the various amounts of money are still correct. Even before Oracle's letter I said that past damages would most likely be below $1 billion. And that has nothing to do with Oracle backing down -- it's been like that for months as far as past damages are concerned. Those can be tripled anyway (for willful infringement), another fact that most people don't mention.

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