There is more than just $9B on the line in the Oracle vs Google lawsuit

Monday May 23, 2016 , 5 min Read

Oracle and Google have been embroiled in a six year-long legal battle over Java that was used in Google's Android operating system. Later today (Monday), the jury will hear the closing arguments in the latest trial of this $9-billion lawsuit that has the whole tech industry on the edge of their seat, for many reasons. Analysts state that even if Oracle succeeds, a $9-billion lawasuit won't affect Alphabet Inc's bottom line much, but it could have a tremendous impact on the whole tech industry and affect software innovation.

The back story

The Google vs Oracle saga began shortly after Oracle acquired Sun Microsystems in 2009. Oracle tried to sue Google for using application program interfaces (APIs), a set of instructions that allow one type of software talk to another, tied to Java without permission. Google won at an initial trial in 2012 when a jury found that the company didn’t infringe Oracle’s patents, and a judge concluded that the APIs didn’t qualify for copyright protection.

But in 2014, an appeals court found that Oracle’s APIs were indeed covered by copyright. Google retorted that the use of APIs comes under the 'fair use' policy. According to Stanford, fair use can be defined as,

Now, at this second trial, Oracle claims Google's Android violated its copyright on parts of the Java programming language, while Google says it should be able to use Java without paying a fee under the fair-use provision of copyright law.

A damages expert hired by Oracle estimated that Google has taken in $29 billion in gross advertising and search revenue from Android devices since their inception, according to court documents. An additional $11.6 billion was earned in sales of apps and Android phones, reports Reuters. Google feels that Oracle has vastly overstated Java's role in the success of Android.

Oracle's stance

Oracle alleges that Google has largely benefited from utilising Java on Android, which now ships on 80 percent of smartphones sold. So, on those grounds, Oracle is seeking approximately $9 billion in damages and is also seeking an injunction against Google's future use of Java in Android, which would give Oracle more leverage to negotiate an ongoing royalty.

However, as this injunction would have to be issued by a judge and not a jury, legal experts believe that the latter (royalty) is a remote possibility.

Oracle also alleges that Google impacted their revenue to plummet. Oracle's Co-chief executive Safra Catz told jurors last week that Google's decision to distribute Android for free to phone manufacturers like Samsung undercut traditional licencing revenue those manufacturers paid for Java.

Google's stance

Oracle attorney Peter Bicks sharply questioned Larry Page about the importance of Android to Google's business, pointing to documents noting billions of dollars in revenue. Page, who testified for about a half hour, according to Reuters, said,

"Yes, I already testified I think Android is significant to Google."

Bicks also questioned Page if Google paid Oracle for the use of Java, which was developed by Sun Microsystems in the early 1990s and acquired by Oracle in 2010. Page responded,

"I think when Sun established Java it was established as an open source thing,....No we didn't pay for the free and open things. I think we acted very responsibly and carefully around the intellectual property issues."

Under questioning from Google attorney Robert Van Nest, Page said Google's use of Java was consistent with widespread industry practice.

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The financial and technological implications

While an estimated $9 billion or more is at the stake, the bigger issue is the fallout in case Google loses its 'fair use' claim. The general public sentiment around this case is very interesting too. Many tend to side with Google because of the far-reaching implications on software innovation in the event Google loses. Others are amused and confused about the nature of the legal battle on the whole-

Oracle vs Google is so weird. They're arguing how their businesses depend on the power of the steam train in an era of jet engines.
— Ryan C. Gordon (@icculus) May 18, 2016

Developers have long treated APIs as a standard set of instructions outside the realm of copyright. It is common for startups to utilise open source software as the basis of commercial products they sell. Even tech giants like Microsoft, which spent a long time opposing open source, have come around to embrace it.

Fortune reports that "if the jury finds Google’s activities were not fair use, it could be 'open season' on other software companies, big and small, that rely on unlicenced APIs....

Now, if Google loses, they could have to seek a license or basically reinvent the wheel every time they want one computer program to interact with another. As prominent computer scientists told the appeals court, allowing companies to assert copyright over APIs could have a profound and negative effect on software innovation."

Another horrific implication, according to Business Insider, is that if Google with its vast resources couldn't mount a successful defense, it's unlikely anyone else would have better luck fighting similar legal lawsuits in the future.

Both Google and Oracle have strong presence in India, which has a thriving developer community. So India, like the rest of the world, will be keenly tracking the developments to see how this legal battle plays out and the impact it will have on the tech and startup industry on the whole.