Federal Circuit Ruling in Oracle v. Google Could Affect Global Software Industry

Google’s use of 37 of Oracle’s Java application programming interface (API) packages in its Android operating system infringed Oracle patents and copyright, the US District Court for the Federal Circuit (CAFC) said on 27 March. The latest decision in the long-running case was not unreasonable but could stifle software innovation, lawyers said.

The case began in 2005 when Oracle sued Google in district court in California alleging copyright and patent infringement. At the first trial, the jury found that Google infringed Oracle’s copyrights in the Java Standard Edition platform but deadlocked on whether Google’s copying amounted to fair use, the CAFC said. After the jury verdict, the court found that the API package were not copyrightable as a matter of law and entered judgment for Google. Oracle appealed and the CAFC reversed, stating that the declaring code and the structure, sequence and organisation (SSO) of the packages are copyrightable. The CAFC ordered the jury verdict reinstated and further proceedings on Google’s fair use defense and, if appropriate, infringement damages.

Google petitioned the US Supreme Court for review on the issue of copyrightability, which was denied. At the second jury trial, Google won on its fair use defense. Oracle sought a new trial and other relief, all of which was denied. It then appealed those denials to the CAFC.

The decision in Oracle America Inc. v. Google LLC is available here: http://cafc.uscourts.gov/opinions-orders (Appeal No. 17-1118).

Balancing Test

The fair use defense is governed by Section 107 of the 1976 Copyright Act, the CAFC noted. It requires a case-by-case assessment of whether a particular use is fair, based on the evaluation of four non-exclusive factors: (1) The purpose and character of the use, such as whether it’s commercial or for non-profit educational purposes. (2) The nature of the copyrighted work. (3) The amount and substantiality of the portion used relative to the copyrighted work as a whole. (4) The effect of the use on the potential market for or value of the copyrighted work. The party seeking to use the defense must prove that the statutory factors favour it.

The CAFC found that “factors one and four weight heavily against a finding of fair use, while factor two weighs in favour of such a finding and factor three is, at best, neutral.” Among other things, Google’s use of Oracle’s API packages was commercial and did not add anything new to the original software (that is, was not transformative), the court said. And even assuming a reasonable jury could have found no current market harm, the evidence clearly showed that Oracle intended to license its software in smartphones, a fact that, standing alone, is sufficient to establish market impact.

Balancing the factors in light of the purposes of copyright, the court concluded that “allowing Google to commercially exploit Oracle’s work will not advance the purposes of copyright in this case.” There’s “nothing fair about taking a copyrighted work verbatim and using it for the same purpose and function as the original in a competing platform.”

The court noted that its decision does not mean that a fair use defense could never work in an action involving the copying of computer code.

Google said it is “disappointed the court reversed the jury finding that Java is open and free for everyone. This type of ruling will make apps and online services more expensive for users. We are considering our options.” Those options could include seeking Supreme Court review or a hearing by the full Federal Circuit Court.

International Applicability

The fact that the CAFC paid lip service to the idea that fair use can apply in cases involving computer code is interesting, Marshall, Gerstein & Borun (Chicago) commercial and intellectual property attorney James Griffith said in an interview. Google used only a small amount of Oracle’s software in Android, and it’s unclear how there could be a similar use that’s transformative, he said. Given that, it’s difficult to see how fair use would apply in these situations, he said.

There are no obvious errors in the way the federal court applied the fair use factors, but the way it did so could limit how companies apply fair use in such situations in the future, said Griffith. This is a significant decision because of the way the software industry works, he said. It could lead to less openness and development and fewer consumer choices if software companies can no longer expect to rely robustly on fair use to ensure compatibility of devices, but instead must negotiate licenses to use the underlying code of systems with which they want compatibility, he said.

The decision, moreover, has global implications, Griffith told Intellectual Property Watch. “Any software that is sold or distributed in the US, even if it is developed or made abroad, is subject to US copyright law.” So any software development that may be sold in the US “must account for developments in US law, including this case.”

“This isn’t a slam-dunk fair use” case, said Thompson Coburn LLP (Washington, DC) intellectual property attorney James Burger, who stressed he was speaking as a law professor on this matter. (Burger is adjunct professor at Georgetown University Law Center). Based on the evidence, he believes that three of the four factors could have been decided either way, but the fourth factor (market impact) favoured Oracle, which was clearly harmed by Google’s use of its code in the Android operating system. The problem is the nature of software, and whether it’s a creative work, said Burger.

The Federal Circuit opinion “underscores the risk and uncertainty of API copyright cases,” Goodwin Proctor said in a 2 April client alert. Because APIs are copyrightable, software companies unable to negotiate a license to use a set of APIs “must be prepared to litigate a trial on fair use to rebut claims for copyright infringement.” Oracle v. Google “will likely encourage software licensors to assert more control over their API packages,” it said.