Saturday, April 9, 2016

New Oracle filing might result in damages theory north of $10 billion in Google copyright case

Last month there was quite some talk on the Internet about Oracle seeking $9.3 billion in damages from Google in the famous Android-Java copyright case that will go to trial again in a month, with the bulk of that amount ($8.8 billion) being a claim for disgorgement of infringer's profits. Since the related documents are all heavily redacted, I'm far from sure that the disgorgement and reasonably royalty figures can be added up: those are more likely alternative theories. Either way, we're talking about roundabout $9 billion that Oracle wants. At those altitudes, a few hundred million dollars more or less don't matter.

Google naturally rejects Oracle's claim, but it has a problem: the court-appointed damages expert, Dr. Kearl, has come up with a very wide range that also includes Oracle's number as a plausible scenario. That's why Google brought a motion--without previously seeking permission from the court--to exclude Dr. Kearl's testimony from the trial. Judge Alsup, who usually appears to be very strict on case management matters, merely gave Google a slap on the wrist and allowed Google to break a couple of rules at the same time (limit of number of motions in limine, page limit) with that additional motion. In exchange, he also allowed Oracle to bring an additional motion in limine.

Oracle has just filed its response to Google's motion. It's not an opposition brief in all respects: Oracle had already opposed Dr. Kearl's renewed involvement with the case and would still like to see his testimony excluded. Oracle is being very consistent up to that point.

But what if Judge Alsup, whose decisions I've struggled to understand on more than one occasion (most recently, I was very surprised about how he dealt with Google's unauthorized motion) and the most important one of which (copyrightability) resulted in a disaster for him, still wants Dr. Kearl to testify? In that case, Oracle at least wants to prevent the "cherry-picking" it accuses Google of. Apparently, Dr. Kearl came up with three numbers, and Google would like to limit that testimony to a number that would amount to Oracle getting nothing.

In its opposition to such cherry-picking, Oracle first argues that a disgorgement analysis should not consider non-infringing alternatives ("NIAs"). Oracle may be right on the law, but as a matter of policy, I disagree with Oracle on this one. Anyway, here's the most interesting passage from Oracle's latest filing:

"Prof. Kearl's Oracle Number is consistent with Oracle's $8.8 billion, and is in fact much larger than Oracle's $8.8 billion if the Court excludes his improper use of NIAs. Presumably Rule 706 experts do not often offer a number larger than the Plaintiff intends to offer."

It would be unusual indeed, and it would be the result of the court agreeing with Oracle's legal position that non-infringing alternatives cannot be used to reduce a disgorgement figure.

I don't know what Oracle's lawyers believe to be the number resulting from Dr. Kearl's analysis if adjusted by means of removing NIAs, but I guess they wouldn't say "much larger" (emphasis in original) if we were talking about a 5% or 10% difference. A 5% or 10% difference would be "significantly" larger. Therefore, it is fairly possible that the proposed adjustment to Dr. Kearl's numbers would result in a claim well in excess of $10 billion.

Besides that information I wanted to share something else from Oracle's filing. Oracle refers to a 1985 Ninth Circuit decision, Frank Music Corp. v. MGM, Inc.. In that one, a disgorgement of profits from unauthorized performance of scene from a musical at the (old) MGM Grand was based on multiple revenue streams including increased hotel and casino revenues. While it turned out later that the MGM Grand was still doing well without continued infringement, evidence had been provided that the MGM Grand used shows such as the infringing one to bolster its hotel and gaming revenues. The Ninth Circuit wrote:

"Just because one element could be omitted and the show goes on does not prove that the element was not important in the first instance and did not contribute to establishing the show's initial popularity."

This has some important bearing on Oracle v. Google, where Google argues that it no longer needed the 37 Java API packages or that it could already have removed them in 2010. Oracle argues that "the causal connection here is far stronger, because the revenues Oracle seeks to recover were realized on the infringing work (Android), while the gaming and hotel revenues in Frank were earned separately from the infringing work (the show)."

Here's Oracle's filing:

16-04-08 Oracle Response to Google Motion to Strike Kearl Testimony by Florian Mueller

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