IP Law Daily Jury’s fair use verdict in favor of Google in Oracle’s Java API lawsuit overturned
Tuesday, March 27, 2018

Jury’s fair use verdict in favor of Google in Oracle’s Java API lawsuit overturned

By Joseph Arshawsky, J.D.

A jury’s finding that Google LLC was entitled to a fair use defense in Oracle America, Inc.’s copyright infringement lawsuit has been overturned by the U.S. Court of Appeals for the Federal Circuit, in a landmark decision, applying Ninth Circuit law. Google’s use of Oracle’s Java API interfaces in its Android operating system, while not in bad faith, was highly commercial and non-transformative. Although the nature of the work was primarily functional, Google used a substantively significant portion of the code, and copied far more lines than was necessary for offering Java compatibility. Most importantly, Google deprived Oracle of a significant potential market in the mobile phone market segment. On balance, the factors did not support a finding of fair use. The court remanded the case for a damages trial only (Oracle America, Inc. v. Google LLC, March 27, 2018, O’Malley, K.).

Oracle filed suit in the Northern District of California alleging that Google’s unauthorized use of 37 packages of Oracle’s Java application programming interface ("API packages") in its Android operating system infringed Oracle’s patents and copyrights. An API package is a collection of classes and each class contains methods and other elements. "Each method performs a specific function, sparing a programmer the need to write Java code from scratch to perform that function." In a first round, the Federal Circuit reinstated the jury’s infringement verdict and ordered this second trial on the fair use defense and damages. At issue in this appeal are 37 API packages from Java SE Version 1.4 and Version 5.0. In the first appeal, the court concluded that the declaring code and the SSO of the 37 Java API packages at issue are entitled to copyright protection. It was undisputed that Google copied verbatim the declaring code of the 37 Java API packages—11,500 lines of Oracle’s copyrighted code. It also copied the SSO of the Java API packages. Google then wrote its own implementing code. The second jury returned a verdict for the defense based on fair use. Oracle lost the post-trial motions and this appeal followed. The Federal Circuit reversed, finding no fair use defense, and remanding for a third trial on damages.

Standards of Review. As this was a review of a jury trial on the fair use issue, a mixed question of law and fact, the court spent considerable effort reviewing the appropriate standards of review to apply. Ultimately, the court arrived at a complex formula, determining to break the inquiry into three segments. "We conclude that whether the court applied the correct legal standard to the fair use inquiry is a question we review de novo, whether the findings relating to any relevant historical facts were correct are questions which we review with deference, and whether the use at issue is ultimately a fair one is something we also review de novo." The jury form did not request that the jury articulate its fact findings in detail, so the court assumed that all fact issues were resolved in favor of the verdict. The parties agreed to resolve some, not all, factual disputes.

The purpose and character of the use. This first factor has two primary components: (1) whether the use is commercial in nature, rather than for educational or public interest purposes; and (2) "whether the new work is transformative or simply supplants the original." "It is undisputed that Google’s use of the declaring code and SSO from 37 Java API packages served commercial purposes." The fact that Android is free of charge did not make Google’s use of the Java API packages non-commercial. To the extent the jury found Google’s use of the API packages to be anything other than overwhelmingly commercial, the court disregarded it. "Accordingly, Google’s commercial use of the API packages weighs against a finding of fair use." "To be transformative, a secondary work must either alter the original with new expression, meaning, or message or serve a new purpose distinct from that of the original work." Google merely replicated the same functionality of a computer in a smartphone environment. That was not sufficiently "transformative" in the doctrinal sense. According to the Federal Circuit, "Google’s use of the API packages is not transformative as a matter of law because: (1) it does not fit within the uses listed in the preamble to § 107; (2) the purpose of the API packages in Android is the same as the purpose of the packages in the Java platform; (3) Google made no alteration to the expressive content or message of the copyrighted material; and (4) smartphones were not a new context." The court rejected Google’s argument that taking only select passages of a copyrighted work is, by itself, transformative. It does not matter how much of the rest of Android is original. Finally, the court accepted that the jury did not find sufficient evidence of bad faith, in light of Google’s good faith explanation as to its intentions, given the open source interface information available. "Ultimately, we find that, even assuming the jury was unpersuaded that Google acted in bad faith, the highly commercial and non-transformative nature of the use strongly support the conclusion that the first factor weighs against a finding of fair use."

Nature of the copyrighted work. The Federal Circuit agreed with the district court that the "jury could reasonably have found that, while the declaring code and SSO were creative enough to qualify for copyright protection, functional considerations predominated in their design." Based on that assumed factual finding, the court concluded that factor two favored a finding of fair use. However, the Ninth Circuit has recognized "that this second factor ‘typically has not been terribly significant in the overall fair use balancing.’"

Amount and substantiality of the portion used. The inquiry is not the percentage of the work, but a flexible one, considering whether the portion copied was "qualitatively significant." "Here, we have found that Google’s use was not transformative and Google has conceded both that it could have written its own APIs and that the purpose of its copying was to make Android attractive to programmers. ‘Necessary’ in the context of the cases upon which Google relies does not simply mean easier." The parties stipulated that only 170 lines of code were necessary to write in the Java language, but Google copied 11,500 lines of code, which weighed against fair use. The court found this third factor to be, at best, neutral, and arguably weighed against a fair use finding.

Effect upon the potential market. "Courts ‘consider not only the extent of market harm caused by the particular actions of the alleged infringer, but also whether unrestricted and widespread conduct of the sort engaged in by the defendant would result in a substantially adverse impact on the potential market for the original.’" This factor was the single most important element, according to the court. The Ninth Circuit states that market harm can be presumed where the use is "commercial and not transformative." The Federal Circuit agreed with Oracle that the evidence of actual and potential harm stemming from Google’s copying was "overwhelming," and the district court erred in concluding otherwise. Java SE had been used in early smartphones prior to Android’s release, and in Kindle. "In other words, the record contained substantial evidence that Android was used as a substitute for Java SE and had a direct market impact. Given this evidence of actual market harm, no reasonable jury could have concluded that there was no market harm to Oracle from Google’s copying." The fourth factor therefore did not support a fair use defense.

On balance, the court weighed the factors and determined that there was no fair use defense in this case. The court was careful to note that its decision was fact specific and it did not mean that APIs could never be safely used in competing software without a license.

The case is Nos. 2017-1118, 2017-1202.

Attorneys: E. Joshua Rosenkranz (Orrick, Herrington & Sutcliffe LLP) for Oracle America, Inc. Daryl Joseffer (King & Spalding LLP) for Google LLC.

Companies: Oracle America, Inc.; Google LLC

MainStory: TopStory Copyright TechnologyInternet FedCirNews

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