Next Up, Damages – Federal Circuit Finds Google’s Use of Java Was Not Fair

by McDermott Will & Emery
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In a case that attracted 20 amici briefs, the US Court of Appeals for the Federal Circuit issued a blockbuster decision in the years-long battle between Oracle and Google over Google’s Android platform. The Court concluded that Google’s use of Oracle’s Java application programming interface (API) packages in its Android operating system did not qualify as fair use as a matter of law. Oracle America, Inc. v. Google LLC, Case Nos. 2017-1118; -1202 (Fed. Cir., Mar. 27, 2018) (Alsup, J). In doing so, the Federal Circuit reversed the district court’s denial of Oracle’s motions for judgment as a matter of law (JMOL) and remanded for a trial on damages.

The Federal Circuit’s decision comes after a second jury trial in the dispute. Oracle originally filed suit against Google for patent and copyright infringement with respect to 37 Java API packages, which can be described as pre-written computer source code programs, used in the Google Android operating system for smartphones and tablets. The first trial resulted in a district court judgment for Google, ruling that the API packages were not copyrightable as a matter of law. Oracle appealed, which resulted in the Federal Circuit finding that the Java API packages were entitled to copyright protection given the “declaring code and the structure, sequence, and organization” of the APIs. The Federal Circuit remanded for further proceedings on Google’s copyright infringement defense of fair use.

The second jury trial resulted in a favorable ruling for Google. The jury found fair use of the copyrighted API packages, and the district court denied Oracle’s motions for JMOL and a new trial. Oracle appealed.

The Federal Circuit has exclusive jurisdiction over all appeals in actions involving patent claims, even where an appeal raises only non-patent issues, as in this dispute. Because copyright law is not within the court’s exclusive jurisdiction, however, it applied the law of the Ninth Circuit in the appeal to decide whether Google’s copying of Oracle’s API packages was fair use. Considering that fair use is a mixed question of law and fact, the Federal Circuit presented a lengthy discussion on the applicable standard of review, concluding that the fair use inquiry is a question to be reviewed de novo. The Court then presented a detailed assessment of the four non-exclusive fair use factors set forth in § 107 of the Copyright Act.

The Purpose and Character of the Use

The first fair use factor has two components, which look at whether use of the copied work is commercial in nature rather than for education or public interest purposes, and whether the new work is transformative or simply replaces the original copyrighted work. The Federal Circuit was quick to note that the free and open source nature of Android does not qualify the use of the API packages as “non-commercial.” Instead, the Court looked to whether Google stood to profit from exploitation of the copyrighted material “without paying the customary price,” and found that Google’s commercial use of the API packages weighed against a finding of fair use.

On the transformative use component, which requires the infringing work to “add something new” to the original, giving it new purpose, character, expression, meaning or message, Google argued that the application of the APIs to mobile smartphone platforms—instead of the typical use for desktops and servers—was transformative. The Court disagreed, stating that the format change to smartphones did not qualify as transformative use given the verbatim copying of the APIs for an identical function and purpose. Thus, the “highly commercial and non-transformative nature of the use” led the Court to conclude that the first factor weighed against finding fair use.  

Nature of the Copyrighted Work

This factor turns on whether the work is more informational or creative, and the Federal Circuit concluded that this factor favored Google’s claim of fair use given the “substantial and important” functional considerations of the API packages. Nevertheless, the Court also noted that the Ninth Circuit has determined that this second factor is not particularly significant in the overall fair use balancing exercise.

Amount and Substantiality of the Portion of the Work Used

The Federal Circuit found that, in terms of the fair use analysis, this factor was neutral at best and arguably weighed against a finding of fair use. The Court stated that even if Google copied only a small portion of Java, it was not qualitatively insignificant, since Google largely conceded that the APIs were important to the creation of the Android platform.

Effect on the Potential Market

This factor looks at whether the copying materially affects the marketability of the work that was copied. Citing the 1985 Supreme Court of the United States case Harper & Row Publishers, Inc. v. Nation Enters., the Federal Circuit explained that this factor is the single most important element of fair use (while still requiring an overall balancing of the four factors). Considering both potential and actual market harm, the Court found that the evidence showed that Oracle intended to license Java in smartphones, and that Google’s conduct would adversely affect the potential market for the original APIs and their derivatives. This factor thus weighed “heavily” in favor of Oracle.

Balancing the analysis of all four factors, and noting that factors one and four weighed greatly against a finding of fair use, the Federal Circuit concluded that Google’s use of the 37 API packages was not fair as a matter of law, and remanded for a trial on damages.

Practice Note: The Federal Circuit was careful to note that its holding in this case does not foreclose a fair use defense in any action involving the copying of computer code, but is instead specific to the facts relating to the copying in this case. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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