Oracle America, Inc. v. Google Inc., No. 3:2010cv03561 - Document 1832 (N.D. Cal. 2016)

Court Description: MEMORANDUM OPINION RE GOOGLES MOTION IN LIMINE NO. 4 CONCERNING DR. ADAM JAFFE by Hon. William Alsup denying 1561 Motion in Limine.(whalc1, COURT STAFF) (Filed on 5/5/2016)
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Oracle America, Inc. v. Google Inc. Doc. 1832 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 ORACLE AMERICA, INC., 11 For the Northern District of California United States District Court 10 12 13 14 Plaintiff, v. GOOGLE INC., Defendant. / 15 16 17 No. C 10-03561 WHA MEMORANDUM OPINION RE GOOGLE’S MOTION IN LIMINE NO. 4 CONCERNING DR. ADAM JAFFE INTRODUCTION In this copyright infringement action, the final pretrial order largely DENIED defendant 18 Google Inc.’s motion to exclude the testimony of plaintiff Oracle America, Inc.’s fair use 19 expert. The only portion of Jaffe’s testimony excluded is testimony that relied on evidence 20 related to Android Auto, Android Wear, Android TV, and Brillo, addressed in detail in a 21 separate memorandum (Dkt. No. 1781). This memorandum explains the reasoning behind the 22 denial of Google’s motion as to the remaining testimony. 23 24 STATEMENT This action concerns defendant Google Inc.’s use of the declaring code and structure, 25 sequence, and organization of 37 API packages from Java 2 Standard Edition Version 1.4 and 26 Version 5.0 in its operating system for mobile devices, Android. Google’s use has already been 27 found to infringe plaintiff Oracle America, Inc.’s copyrights in Java SE 1.4 and 5.0, subject 28 only to Google’s defense of fair use. 1 Oracle offers Dr. Adam Jaffe, an economist, as an expert on topics related to Google’s 2 fair use defense. In his report, Jaffe conducted a two-part analysis of the market effect of 3 Google’s alleged infringement. Specifically, he considered: (1) the harm to Oracle’s actual and 4 potential markets for Java in various device categories (including harm to the Java developer 5 community) and (2) the harm that would occur if copying like Google’s became widespread. 6 Jaffe did not evaluate the effect of Android on the market for Java 2 SE 1.5 or 5.0 in their 7 primary market, namely, desktop computers. Jaffe also did not compare the current valuation of 8 the copyrighted work as a whole to its valuation absent Google’s alleged infringement. Rather, 9 Jaffe’s theory of market harm rested on the sum of the harms that Oracle allegedly suffered in various markets in which it has licensed or may potentially license derivatives of the 11 For the Northern District of California United States District Court 10 copyrighted works. 12 Jaffe analyzed the effect that Android had on Oracle’s efforts to license alleged 13 derivatives in each of over a dozen markets: “mobile phones; tablets; e-readers; wearables; 14 automotive; Internet of Things; VOIP phones; Blu-Ray; televisions and set-top boxes; gaming; 15 GPS systems; vending machines; printers; household appliances; cameras; payment terminals 16 and point of sale systems” (Jaffe Rpt. ¶ 328). Jaffe described these markets as “product markets 17 for which Java would have been an appropriate application platform solution” (id. ¶ 320). Jaffe 18 then reviewed Oracle’s opportunities for licensing derivatives of the copyrighted works in each 19 market and attributed specific missed opportunities to competition with Android. 20 Jaffe’s primary focus was on the effect of Android on Oracle’s efforts to license the 21 copyrighted works or derivatives thereof in the market for mobile phones. He first discussed 22 Java Micro Edition, an alleged derivative of the copyrighted works. Java ME included ten of 23 the 166 API packages in the copyrighted work and a low-footprint Java Virtual Machine to 24 enable Java developers to write applications for devices with limited computing resources. 25 Jaffe also considered Oracle’s licenses for Java in smartphones made by RIM (Blackberry) and 26 Nokia (Symbian), although he did not specify the scope of the licenses or how the licensees 27 actually used Java in their products. He then assessed the scope of the harm to the market for 28 Java based on the loss in market share suffered by each of Oracle’s licensees, Oracle’s resulting 2 1 revenue loss and missed licensing opportunities, and forecasts of harm in the market for low- 2 cost “feature phones” based on Google’s intent to enter that market (id. ¶¶ 330–337, 340–47). 3 Jaffe’s evaluation of Oracle’s losses in other product markets followed the same pattern. 4 He discussed early efforts by Oracle (or its predecessor, Sun Microsystems, Inc.) to develop 5 each market and its subsequent failed licensing opportunities, which he generally attributed to 6 competition with Android or an implementation thereof. 7 Google moves to exclude Jaffe’s testimony regarding the alleged market harm. The 8 parties fully briefed this motion in limine, and the Court held five hearings totaling more than 9 twenty hours of oral argument on several motions in limine, including this one. ANALYSIS 11 For the Northern District of California United States District Court 10 District courts are charged as the gatekeepers who evaluate the admissibility of expert 12 opinion testimony. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999). Rule 702 of the 13 Federal Rules of Evidence permits a court to admit expert testimony that is (1) based upon 14 sufficient facts or data, (2) the product of reliable principles and methods, and (3) delivered by a 15 witness who has applied the principles and methods reliably to the facts of the case. The 16 admissibility of expert testimony turns on “whether expert testimony proffered in the case is 17 sufficiently tied to the facts of the case that it will aid the jury in resolving a factual dispute.” 18 Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 591 (1993). The proponent of expert 19 testimony has the burden of demonstrating its admissibility. Lust v. Merrell Dow Pharms., Inc., 20 89 F.3d 594, 598 (9th Cir. 1996). 21 Here, Google seeks to exclude Jaffe’s testimony on the issue of the harm to the market 22 for the copyrighted works, which relates to the fourth fair use factor. 17 U.S.C. 107(4). 23 Specifically, Google contends that Jaffe defines the “market” too broadly, and that he fails to 24 trace any alleged harm specifically to the infringement. 25 1. 26 Google contends that Jaffe improperly considered the effect of Android on Oracle’s 27 MARKET DEFINITION. potential market for and value of the Java platform, without narrowing his focus on the market 28 3 1 for the particular asserted copyrighted works. Google also argues that Jaffe improperly 2 considered markets that Oracle was unlikely to develop. 3 A. Harm to the Java Platform. 4 In Harper & Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 568 (1985), the 5 Supreme Court clearly stated that consideration of the fourth fair use factor “must take account 6 not only of harm to the original but also of harm to the market for derivative works.” 7 Both sides agree that harm to the market for derivative works may be considered under 8 the fourth fair use factor, but Google contends that Jaffe improperly considered the market for 9 the “Java platform” as opposed to the particular works at issue. Jaffe made clear, however, that 11 For the Northern District of California United States District Court 10 his discussion of the Java platform addressed Java SE 1.4 and 5.0, and derivatives thereof. Google only copied the declaring code and SSO from 37 Java API packages, but Jaffe 12 considered licensing efforts without regard to which API packages from Java SE 1.4 or 5.0 13 drove demand. The jury may nevertheless find that Google’s unlicensed use superseded 14 Oracle’s efforts to license the entire copyrighted work, as well as subsets and derivatives of it, 15 even to the extent those subsets and derivatives included API packages that Google did not 16 copy. Thus, Jaffe’s discussion of the Java platform does not warrant exclusion of his testimony. 17 18 19 20 B. Potential Markets. Google also contends that Jaffe considered product markets in which Oracle’s potential entrance is too speculative. The Court of Appeals for the Second Circuit has recognized that there is a “danger of 21 circularity” in defining the market under the fourth factor to include the loss of potential 22 licensing revenue. See Ringgold v. Black Entertainment TV, Inc., 126 F.3d 70, 81 (2d Cir. 23 1997). That is, an accused infringer can always be considered a “potential licensee,” inasmuch 24 as the accused infringer might have sought a license for its use of the copyrighted material. The 25 accused infringer’s failure to obtain a license, therefore, will support a finding that the copyright 26 owner lost potential licensing revenue in the market for the very kind of work accused of 27 infringement, which would weigh against fair use under the fourth factor. But fair use asks 28 whether the accused infringer needed a license for its use in the first place. Thus, consideration 4 1 of harm to the potential market to license works like accused infringer’s begs the question of 2 fair use. To avoid defining the market under the fourth factor so broadly as to swallow the rule 3 of fair use, the Second Circuit held that “only traditional, reasonable, or likely to be developed 4 markets” may be considered under the fourth fair use factor. Id. at 81. 5 Our court of appeals has not expressly addressed the so-called “danger of circularity,” 6 but it adopted the rule that the fourth factor considers only “traditional, reasonable, or likely to 7 be developed markets” for the copyrighted works. Seltzer v. Green Day, Inc., 725 F.3d 1170, 8 1179 (9th Cir. 2013) (citing Ringgold, 126 F.3d at 81). 9 Each of Jaffe’s market analyses included a discussion of some real world effort by Oracle or Sun to develop that market. Although some examples were short-lived or ill-fated, a 11 For the Northern District of California United States District Court 10 reasonable jury could nevertheless find each market “traditional, reasonable, or likely to be 12 developed . . . .” Ibid. Thus, Jaffe’s consideration of those markets is not properly excluded at 13 the threshold. 14 Google also notes that Jaffe made no attempt “to construct a specific scenario or 15 description of what the market would have looked like in the absence of the infringing 16 behavior” (Jaffe Dep. at 107). That failure goes to the weight of Jaffe’s opinion, and Google 17 may raise that issue on cross-examination. 18 The jury will be instructed to consider the harm to the broader potential market for 19 products that feature independent elements in addition to the copyrighted material only insofar 20 as those product markets shed light on the licensing or market value of the copyrighted work 21 (and derivatives thereof). Oracle must be permitted to present the full story of its lost 22 opportunities, and Jaffe’s conclusions regarding Oracle’s various failures and lost opportunities 23 for licensing the copyrighted works and derivatives thereof in the wake of Android’s release 24 will be helpful to the jury, even if Google disputes whether those opportunities could have been 25 realized absent infringement. 26 2. ATTRIBUTION TO THE INFRINGEMENT. 27 Jaffe did not trace any example of market harm specifically to the alleged infringement. 28 Rather, he only considered market harm due to Android’s entry into each market he considered. 5 1 Google contends that Jaffe’s failure to trace his market harm opinions to its specific use of the 2 declaring code and SSO of 37 APIs is insufficient to establish market harm under the fourth fair 3 use factor. Specifically, it notes that the fourth fair use factor considers “the effect of the use 4 upon the potential market for or value of the copyrighted work.” 17 U.S.C. 107(4) (emphasis 5 added). Thus, Google argues, Jaffe may not offer testimony regarding harm attributable to 6 Android in general. 7 Google is correct that the fourth factor focuses on the effect of the infringement on the 8 market for the copyrighted work, but it is incorrect that Jaffe’s conclusions must be excluded on 9 that basis. In Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510, 1523 (9th Cir. 1992), as 11 For the Northern District of California United States District Court 10 amended (Jan. 6, 1993), our court of appeals considered a video game developer’s copying of 12 another’s game in order to reverse engineer the game to access functional elements necessary to 13 create an entirely new game. There, our court of appeals first considered the market effect of 14 the work as a whole, and then attributed any harm to the market for the original to the 15 competitive effect of the transformative elements of the work. 16 Similarly, in Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 592–94 (1994), the 17 Supreme Court directed the lower court to consider on remand whether the accused work 18 specifically affected the market for rap derivatives of “Oh, Pretty Woman.” It further noted, 19 “[o]f course, the only harm to derivatives that need concern us, as discussed above, is the harm 20 of market substitution. The fact that a parody may impair the market for derivative uses by the 21 very effectiveness of its critical commentary is no more relevant under copyright than the like 22 threat to the original market.” Id. at 593. 23 Campbell and Sega demonstrate that the only market harm to consider in the fair use 24 analysis is that which is attributable to the harm of market substitution, and not the 25 transformative elements of the work; however, Google’s motion to limit Jaffe’s testimony 26 because he failed to trace the proffered harm to the infringement begs the question of the extent 27 to which Google’s use was transformative. It will be helpful for the jury to have the full story 28 of the alleged market harm and to evaluate the extent of that harm in light of its findings on the 6 1 remaining fair use factors. As the Supreme Court noted in Campbell, 510 U.S. at 590 n.21, 2 “[m]arket harm is a matter of degree, and the importance of this factor will vary, not only with 3 the amount of harm, but also with the relative strength of the showing on the other factors.” 4 Thus, Google’s arguments that Jaffe’s proffered market harm is due either to exogenous 5 market changes or due to Google’s alleged transformative incorporation of the 37 APIs into a 6 smartphone platform should be directed to the jury. 7 8 CONCLUSION Google’s motion to exclude Jaffe’s testimony regarding market harm is largely DENIED. Android TV, and Brillo, for reasons stated in the memorandum opinion addressing those 11 For the Northern District of California Jaffe’s testimony is excluded only to the extent it relies on Android Auto, Android Wear, 10 United States District Court 9 products. 12 13 Dated: May 5, 2016. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7