Both parties in Oracle's patent infringement claim against Google may have to change their estimates, according to the order issued by a U.S. District Court judge Friday.
The "starting point" for Oracle's damages claim for alleged infringement of Oracle's Java patents should be $100 million rather than US$6.1 billion, U.S. District Court Judge William Alsup said Friday in a sternly written order. Oracle must lower its multibillion-dollar claim, court papers show.
At the same time, Google was wrong to assert that its advertising revenue is not related to the value of Android and should therefore not be a part of Oracle's damages, the judge wrote. He also warned Google, "there is a substantial possibility that a permanent injunction will be granted" if it is found guilty of infringement.
These are the latest developments in a case that has been heating up as the two sides approach a potential October 31 trial date. Google has asked the judge to delay the trial pending the outcome of a reexamination of Oracle's patents. Alsup said Friday he's not yet willing to give up on the October start.
Oracle sued Google last August, saying its Android OS violates seven Java-related patents, as well as Java copyrights, that Oracle acquired when it bought Sun Microsystems. Google has denied any infringement and complained that Oracle's damages estimate is far too high.
On Friday, the judge seemed to largely agree with Google.
Damages Estimate 'Overreached'
Oracle's damages expert "served a report that overreached in multiple ways -- each and every overreach compounding damages ever higher into the billions -- evidently with the goal of seeing how much it could get away with, a 'free bite,' as it were," the judge wrote.
The expert, Boston University professor Iain Cockburn, can revise his estimate and resubmit it, but the judge warned Oracle that it won't get another chance after that.
"Please be forewarned: the next bite will be for keeps. If the next and final report fails to measure up in any substantial and unseverable way ... then it may be excluded altogether without leave to try yet again," the judge said.
Oracle declined to comment on the judge's order. Google did not immediately respond to a request for comment.
Cockburn's report asserted that in a "hypothetical license negotiation" -- a common way of calculating damages in a patent case -- Google would have agreed to pay Oracle $2.6 billion to license its Java patents, including an up-front payment and annual royalties. Google has asserted that Cockburn's estimate ranged even higher, to as much as $6.1 billion.
License Rejection Irrelevant
Alsup rejected Google's argument that the royalty payments should be no more than $100 million simply because Google received and rejected an offer from Sun to license Java at that price in 2006. In rejecting the offer, Google may simply have been gambling that it could win in court rather than "pay a fair price," the judge said.
But the $100 million figure should be the starting point for calculating a hypothetical license, Alsup wrote. It should then be adjusted upward and downward in line with factors he outlined in his order.
Oracle's patent claims "certainly do not cover all of Java or all of Android," the judge wrote, in explaining why he rejected Cockburn's estimate. Cockburn did not tie his calculations to any of the specific patents at issue, nor did he consider that the claims relate only to specific parts of Android.
"It seems highly unlikely that Android derives its entire value from a small set of infringing features, given its breadth," the judge wrote. "The next report must apportion the total value between the specific infringing features versus the rest of Android."
He backed Oracle in some important areas. Cockburn was entitled to argue that Sun would have sought higher royalty payments because it feared Android would fragment Java, the judge said.
And it's significant that Alsup said Google's ad revenues are linked to the value of Java. Google had argued strongly that the two were unrelated.
"Of course, they do have something to do with the overall value," the judge wrote. "There is evidence, for example, that users with Android phones 'search twice as much' as users with other types of phones, increasing the advertising revenue derived from Google's search service."