Thursday, 9 June 2011

Oracle v. Google: 50% royalty rate?

In Oracle America, Inc. v. Google Inc. (C 10-3561 WHA), the defendant has recently filed a writ requesting leave to file a Daubert or other motion directed at the damages report of Oracle’s expert Iain Cockburn.

Apparently, Oracle’s expert is not only fixing an unprecedented royalty rate, but also (i) fails to tie his royalty rate to the value of the patented technology actually at issue in the case (ii) argues that royalties would be owed even after expiration of Oracle’s patents and, believe it or not, (iii) would be including a portion of Google’s advertisement pie!

May Google be facing a sort of punitive damages in this case?

Arguments used by Google:
"First, Cockburn has no basis for including all of Google’s revenue from Android phones into the base of his royalty calculation. The accused product here is the Android software platform, which Google does not sell (and Google does not receive any payment, fee, royalty, or other remuneration for its contributions to Android). Cockburn seems to be arguing that Google’s advertising revenue from, e.g., mobile searches on Android devices should be included in the royalty base as a convoyed sale, though he never articulates or supports this justification and ignores the applicable principles under Uniloc and other cases. In fact, the value of the Android software and of Google’s ads are entirely separate: the software allows for phones to function, whether or not the user is viewing ads; and Google’s ads are viewable on any software and are not uniquely enabled by Android. Cockburn’s analysis effectively seeks disgorgement of Google’s profits even though “[t]he determination of a reasonable royalty . . . is based not on the infringer’s profit, but on the royalty to which a willing licensor and a willing licensee would have agreed at the time the infringement began.” ...

Second, Cockburn includes Oracle’s “lost profits and opportunities” in his purported royalty base. This is an obvious ploy to avoid the more demanding test for recovery of lost profits that Oracle cannot meet… Most audaciously, Cockburn tries to import into his royalty base the alleged harm Sun and Oracle would have suffered from so-called “fragmentation” of Java into myriad competing standards, opining that Oracle’s damages from the Android software includes theoretical downstream harm to a wholly different Oracle product. This is not a cognizable patent damages theory, and is unsupported by any precedent or analytical reasoning.

Third, after improperly inflating the base of his royalty calculation, Cockburn proceeds to apply an unprecedented fifty percent royalty rate to that base through use of improper short-cuts. In contravention of long-settled precedent, he fails to tie his royalty rate to the value of the patented technology actually at issue in this case. ... He treats the patents and copyrights at issue as a single, indivisible unit, casually dismissing critical differences in the patents (such as the technologies they embody and expiration dates over a decade apart) by deeming them all “essential” to Java, without pointing to any facts that could justify that conclusion. Instead of satisfying the Lucent standard, he adopts a presumption that is contrary to Lucent, stating that there is “no clear economic basis” for apportioning the total value of Android into value attributable to the patents and copyrights in suit and any additional value added by Google. Under the case law, however, damages must be tied to “the claimed invention’s footprint in the market place.” …

Cockburn similarly inflates his royalty rate by calculating Oracle’s loss based on the alleged value of Java as a whole, even though the patented features are only a small part of Java….

Fourth, Cockburn cavalierly asserts that infringement of a Single claim of a single patent would result in the same … award as infringement of all of the asserted claims. The ‘720 patent, for example, it expires nearly eight years after every other patent-in-suit. But according to Cockburn, even if Google does not infringe the ‘720 patent, the damages should still run throughout its life, which extends to 2025…”

1 comment:

Anonymous said...

Bottom line - Google breached java license on the copyright. That is reality. if the FFS did not push to hard to get the CAFC 2008-1001 case ruling on copyright, this would be a non-issue. The FSF in essence put the nail in the coffin on Google.

Cases like this, result when the FSF tries to create judicial laws, rather than using the legal system
1. Google has an ugly copyright problem (past damages until they fix it - not sure they can fix it)
2. Google has an ugly patent problem, future damages,

Either way you look at it, Google is going o write a big check. My gut has place this between 15B – 30B

It is ironic. FSF judicial activism actions caused this mess on