Tuesday, February 21, 2012

Once again, confusion and misinformation about Oracle's damages claims against Google abound

Over the last eight months, there has repeatedly been speculation about the amount of Oracle's damages claims against Google.

Unfortunately, some of the numbers that were presented as reliable facts were not even speculation but simply the result of fundamental misconceptions. The latest round of reports on what some believe is a huge reduction of Oracle's claims once again reflects that most of the people who talk about these issues don't even make a good-faith attempt to understand them.

There has probably been some reduction, but it's most likely much less than some people thought.

The challenge here has always been (and still is) that only a very few people who are directly involved with that litigation have actually seen the different damages reports (by now there are three of them) submitted by Oracle's expert, Professor Iain Cockburn. And those who have seen are not allowed to speak out, without exceptions. All those of us who are free to talk about this have access to only a limited subset of the information. We can glean data points from publicly-accessible filings in which the parties make reference to those reports. But then we must also be realistic and acknowledge what we don't know.

By now, everyone has had the opportunity to learn that such data points can be very incomplete, and potentially misleading if taken out of context. I contradicted almost everyone else reporting on this case when I said that the second Cockburn report didn't necessarily arrive at a substantially lower damages figure than the first -- and last month I was proven right (the number had even gone up from $2.6 billion to $2.7 billion). But there are people out there on the Internet who simply don't want to learn. Their approach comes down to this: why even try to think if you can talk anyway?

If you read in recent days that Oracle allegedly "sharply reduced the amount of damages" it seeks, let me tell you that such bold claims are, once again, not based on facts or accurate analysis. They quote from a letter Google sent to the court on Friday, February 17. That letter doesn't claim or pretend to summarize the entire third Cockburn report. It just focuses on certain legal questions.

No one can rule out that Oracle reduced its damages amount. But the thing is that Google's February 17 letter falls far short of anything that would prove it. Adding up the numbers cited in that letter paints an incomplete picture, and comparing a subset of the claims to the total of what was demanded in the past is a moronic apples-to-oranges comparison.

In a September 22, 2011 letter, Oracle outlined three key elements of its damages claims (referring to its second report):

  1. Patent Damages

  2. Copyright Actual Damages

    (calculated alternatively with a License Method and a Lost Profits Method)

  3. Copyright Infringer's Profits

The Google letter of February 17, 2012 that gets some people so very excited says that the third Cockburn report arrives at "final patent-damages figures of $17 million to $57.1 million under the group and value approach and at least $43.7 million under the independent significance approach." Google's letter also refers to "alternative total damages figures for both patent and copyright infringement [...] between $52.4 million and $169 million under the group and value approach [...] and [...] at least $129.2 million under the independent significance approach."

Any numbers that are preceded by the words "at least" can't be interpreted as specific demands, and therefore can't be compared to specific numbers or to the higher ends of ranges. Those are lower ends of ranges, with the higher ends not being specified at all.

In the September 22, 2011 letter, Oracle referred to patent damages between $176 milllion and $202 million, and copyright actual damages of either $102.6 million or $136.2 million (two alternative calculations). The latest figures for those particular elements of the damages claim appear somewhat lower -- but not necessarily much lower -- than the corresponding numbers back in September. We're talking about "a couple hundred million dollars" either way.

I have no idea what Oracle's third damages report demands on the basis of other theories than those. But unlike some others, I acknowledge that there are things we don't know and can't know. Those claims can have components that are not mentioned in each letter. For example, Oracle's demand for a disgorgement of infringer's profits (provided that copyright infringement is proven) may have been dropped but it may also still be in Oracle's report. The fact that Google's February 17, 2012 letter doesn't mention it certainly doesn't prove that Oracle has given up on that one.

When Oracle was allowed to produce a third damages report, Judge Alsup primarily insisted on apportionment: he wanted Oracle to break down the commercial value of each of the asserted intellectual property rights all the way down to the level of a single patent claim. Apportionment isn't necessarily a reduction. It can indirectly have that effect in the end (if some claims aren't deemed valid or infringed), but you can apportion something without reducing its total value.

I saw Google's letter back on Friday, but in my opinion, there was far too much uncertainty here to speculate about what Oracle's damages claims are at this stage. Again, some reduction is likely, and it would make sense for Oracle given its set of priorities. Last month, Oracle proposed to take the copyright part of the case to trial without a third damages report being put in place at that stage. Those damages claims are important enough that Oracle spent money on the creation of a third damages report, but they aren't nearly as important to Oracle as a swift resolution of the question of whether it's entitled to an injunction against Android.

Lastly, let me mention that Oracle withdrew the sole remaining claim of the '476 patent. Oracle is still asserting claims from five out of the original seven patents. A certain degree of streamlining ahead of trial is nothing unusual in such multi-patent cases. We may even see some more of this before this case goes to trial. But as I mentioned before, Oracle's set of priorities is clear, and last month's proposal to take the copyright part to trial very soon but potentially stay the patent infringement claims for an extended period of time shows what Oracle is now focusing on. In light of that, its withdrawal of another patent comes as little surprise (if any at all).

This case has its challenges for Oracle, but it hasn't fallen apart. Furthermore, it's possible that Oracle still has many other Java-related patents that it can assert in a subsequent lawsuit, but if it did so at this stage, there could be a huge delay of the resolution of the ongoing litigation. I once heard that Sun claimed to hold about 2,000 patents related to Java. Even if that number was an overstatement, we're certainly talking about hundreds of patents in this area, and it remains to be seen if the seven patents that Oracle picked in August 2010 are really the only ones it believes Android infringes.


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