Oracle Corporation et al v. SAP AG et al

Filing 1081

ORDER by Judge Hamilton granting 1044 Motion for Judgment as a Matter of Law; granting 1044 Motion for New Trial; denying 1046 Motion for New Trial (pjhlc1, COURT STAFF) (Filed on 9/1/2011)

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1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 7 8 ORACLE USA, INC., et al., Plaintiffs, 9 v. 11 For the Northern District of California United States District Court 10 SAP AG, et al., 12 Defendants. _______________________________/ No. C 07-1658 PJH ORDER GRANTING DEFENDANTS’ MOTION FOR JMOL, AND MOTION FOR NEW TRIAL; ORDER DENYING PLAINTIFFS’ MOTION FOR NEW TRIAL; ORDER PARTIALLY VACATING JUDGMENT 13 14 Before the court is the renewed motion of defendants SAP, AG, SAP America, Inc., 15 and TomorrowNow, Inc. (“SAP”) for judgment as a matter of law, pursuant to Federal Rule 16 of Civil Procedure 50(b), and motion for a new trial, pursuant to Federal Rule of Civil 17 Procedure 59. Plaintiffs Oracle USA, Inc., Oracle International Corporation, and Siebel 18 Systems, Inc. (“Oracle”) oppose the motion, and also move for a new trial. Also before the 19 court is Oracle’s “conditional motion” for a new trial. Having read the parties’ papers and 20 carefully considered their arguments, including the arguments made at the July 13, 2011 21 hearing, the court GRANTS SAP’s motion for judgment as a matter of law; GRANTS SAP’s 22 motion for a new trial, conditional upon Oracle’s acceptance of a remittitur; and DENIES 23 Oracle’s “conditional motion” for a new trial. 24 As set forth in some detail in the court’s previous orders in this case, Oracle filed suit 25 against SAP in March 2007, alleging copyright infringement, violations of the Computer 26 Fraud and Abuse Act, and various state-law claims. After more than three and a half years 27 of heated litigation, the case was tried to a jury in November 2010. Prior to the trial, SAP 28 conceded liability as to all claims that had not previously been dismissed. Thus, the only 1 issue for decision by the jury was the amount of the damages. On November 23, 2011, the 2 jury returned a verdict, awarding Oracle $1.3 billion in “hypothetical license” damages. SAP seeks judgment as a matter of law that Oracle is not entitled to actual damages 3 4 for copyright infringement in the form of a hypothetical license, for two reasons – because 5 Oracle did not establish that, but for infringement, it would have licensed the asserted 6 copyrighted works for the use at issue, and because Oracle did not present evidence 7 sufficient to value such a license, with the result that the jury’s award was unduly 8 speculative. In the alternative, SAP seeks a remittitur, from $1.3 billion to no more than $408.7 9 million, or, a new trial as to the amount of damages. SAP asserts that the jury award is 11 For the Northern District of California United States District Court 10 grossly excessive, and also against the weight of the evidence, as it was based on the 12 speculative evidence Oracle offered in support of its hypothetical license theory, rather than 13 on evidence of SAP’s actual use of the copyrighted works and the objectively verifiable 14 number of customers (and amount of business) lost as a result. DISCUSSION 15 16 17 A. Legal Standards Judgment as a matter of law is appropriate when “a party has been fully heard on an 18 issue during a jury trial and the court finds that a reasonable jury would not have a legally 19 sufficient evidentiary basis to find for the party on that issue . . . .” Fed. R. Civ. P. 50(a)(1); 20 see also Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 149 (2000). 21 A party must make a motion for judgment as a matter of law under Rule 50(a) before 22 a case is submitted to the jury. If the judge denies or defers ruling on the motion, and if the 23 jury then returns a verdict against the moving party, the party may renew its motion under 24 Rule 50(b). In ruling on the renewed motion, the court may either “allow judgment on the 25 verdict, if the jury returned a verdict,” or “order a new trial,” or “direct the entry of judgment 26 as a matter of law.” Fed. R. Civ. P. 50(b). 27 The standard for judgment as a matter of law “mirrors” that for granting summary 28 judgment. Reeves, 530 U.S. at 150. The court “should review all of the evidence in the 2 1 record,“ but “may not make credibility determinations or weigh the evidence.” Id. see also 2 Josephs v. Pac. Bell, 443 F.3d 1050, 1062 (9th Cir. 2006). The court should give credence 3 to the evidence favoring the non-moving party, as well as that evidence supporting the 4 moving party that is uncontradicted and unimpeached, to the extent that it comes from 5 disinterested witnesses. Reeves, 530 U.S. at 151 (quotation and citation omitted). 6 The test applied is whether the evidence permits only one reasonable conclusion, 7 and that conclusion is contrary to the jury's verdict. Josephs, 443 F.3d at 1062. The 8 verdict must be upheld if the evidence is adequate to support the jury’s conclusion, even if 9 it is also possible to draw a contrary conclusion from the same evidence. Johnson v. Paradise Valley Unified Sch. Dist., 251 F.3d 1222, 1227 (9th Cir. 2001). However, 11 For the Northern District of California United States District Court 10 judgment as a matter of law “is appropriate when the jury could have relied only on 12 speculation to reach its verdict.” Lakeside-Scott v. Multnomah County, 556 F.3d 797, 803 13 (9th Cir. 2009). 14 The district court has discretion to order a new trial rather than grant judgment as a 15 matter of law if it believes that the defect in the nonmoving party’s proof might be remedied 16 on a second trial, or if needed evidence was ruled out at trial by some error of the court. 17 See 9B Wright & Miller, Federal Practice and Procedure, Civil 3d § 2538 (2008). The 18 language in the rule permits the court to exercise discretion to choose between the two 19 alternatives. Cone v. West Virginia Pulp & Paper Co., 330 U.S. 212, 215 (1947). 20 This discretion to order a new trial under Rule 50(b) exists only if the moving party 21 would be entitled to judgment as a matter of law. If that motion must be denied, the court 22 has no power to order a new trial in favor of the moving party, except under the conditions 23 specified in Rule 59(d), unless a motion for a new trial under Rule 59 has been joined in the 24 alternative with the renewed motion under Rule 50(b). See Wright & Miller, § 2538. 25 Whether to grant a new trial is a matter of the trial court's discretion. City Solutions, 26 Inc. v. Clear Channel Communications, 365 F.3d 835, 843 (9th Cir. 2004). Courts apply a 27 lower standard of proof to motions for new trial than they do to motions for judgment as a 28 matter of law. The court may grant a motion for a new trial even if the verdict is supported 3 1 by substantial evidence, if it concludes that the verdict is contrary to the clear weight of the 2 evidence, is based on evidence which is false, or would result in a miscarriage of justice. 3 Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814, 819 (9th Cir. 2001); 4 see also Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007). The court may 5 weigh the evidence and may evaluate the credibility of the witnesses, and is not required to 6 view the evidence from the perspective most favorable to the prevailing party. United 7 States v. Kellington, 217 F.3d 1084, 1095 (9th Cir. 2000). 8 9 However, where a movant claims that a verdict is against the clear weight of the evidence, doubts about the correctness of the verdict are not sufficient grounds for a new trial. Landes Constr. Co., Inc. v. Royal Bank of Canada, 833 F.2d 1365, 1372 (9th Cir. 11 For the Northern District of California United States District Court 10 1987). “Courts are not free to reweigh the evidence and set aside the jury verdict merely 12 because the jury could have drawn different inferences or conclusions or because judges 13 feel that other results are more reasonable.” Tennant v. Peoria & Pekin Union Ry. Co., 321 14 U.S. 29, 35 (1944). The trial court, after having given full respect to the jury's findings, 15 must have a definite and firm conviction that the jury has made a mistake. Landes Constr. 16 Co., 833 F.2d at 1371-72 (citations omitted). 17 Where the court concludes that a new trial is appropriate due to excessive damages, 18 it may exercise its discretion to grant a new trial either without qualification, or conditioned 19 on the winner's refusal to accept a reduction in damages, known as remittitur. See 20 Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 433 (1996); Fenner v. Dependable 21 Trucking Co., Inc., 716 F.2d 598, 603 (9th Cir. 1983). 22 Put another way, once a trial court determines that damages are excessive, it has 23 only two alternatives – either order a new trial, or deny the new trial, conditioned on the 24 prevailing party accepting a remittitur. Fenner, 716 F.2d at 602-03. The standard for 25 remittitur is the same as that for a motion for new trial based on excessive damages. 26 Gasperini, 518 U.S. at 433. The proper amount of a remittitur is the maximum amount of 27 damages that can be sustained by the evidence in the record. D & S Redi-Mix v. Sierra 28 Redi-Mix & Contracting Co., 692 F.2d 1245, 1249 (9th Cir. 1982). 4 1 B. SAP’s Motions 2 1. 3 SAP argues that it is entitled to judgment as a matter of law that Oracle is not 4 entitled to actual damages for copyright infringement in the form of a hypothetical license, 5 because Oracle did not establish that, but for infringement, it would have licensed the 6 asserted copyrighted works for the use at issue, and because Oracle did not present 7 evidence sufficient to value such a license, with the result that the award was based on 8 undue speculation. 9 Judgment as a matter of law The Copyright Act allows recovery of either statutory damages, or “actual damages suffered by [the copyright owner] as a result of the infringement” plus “any profits of the 11 For the Northern District of California United States District Court 10 infringer that are attributable to the infringement and are not taken into account in 12 computing the actual damages.” 17 U.S.C. § 504(a), (b). Actual damages are awarded to 13 compensate for demonstrable harm caused by infringement. Polar Bear Prods., Inc. v. 14 Timex Corp., 384 F.3d 700, 708 (9th Cir. 2004). When proof of actual damages or 15 infringer's profits is insufficient, a copyright owner may elect to receive statutory damages, 16 subject to having met other statutory requirements. See 17 U.S.C. §§ 412(2), 504(c). 17 Because actual damages must be suffered “as a result of the infringement,” and 18 recoverable profits must “be attributable to the infringement,” id. § 504(b), the plaintiff bears 19 the burden of proving the causal connection between the infringement and the monetary 20 remedy sought. See, e.g., Polar Bear, 384 F.3d at 708; Mackie v. Rieser, 296 F.3d 909, 21 914-15 (9th Cir. 2002). This requirement “is akin to tort principles of causation and 22 damages.” Polar Bear, 384 F.3d at 708. In addition, while courts allow both direct and 23 indirect evidence to establish loss, they will reject a proffered measure of damages if it is 24 too speculative. Mackie, 296 F.3d at 915-16; see also Jarvis v. K2 Inc., 486 F.3d 526, 534 25 (9th Cir. 2007). 26 Actual damages are generally determined by the loss in the fair market value of the 27 copyright, “measured by the profits lost due to the infringement or the value of the use of 28 the copyrighted work to the infringer.” Polar Bear, 384 F.3d at 708; see also Abend v. 5 1 MCA, Inc., 863 F.2d 1465, 1479 (9th Cir. 1988). Under this approach, the plaintiff must 2 show that the fair market value of its work has been diminished because the infringement 3 has adversely affected its ability to exercise the exclusive rights granted in § 106 of the 4 Copyright Act. Abend, 863 F.2d at 1479-80. This market value approach requires “an 5 objective, not a subjective analysis.” Jarvis, 486 F.3d at 534 (citations and quotations 6 omitted); Mackie, 296 F.3d at 917. 7 The Ninth Circuit has endorsed a retroactive license fee as one measure of the loss bargained with the copyright owner to purchase the right to use the work, actual damages 10 are what a willing buyer would have been reasonably required to pay a willing seller for the 11 For the Northern District of California in fair market value of the copyright. “[I]n situations where the infringer could have 9 United States District Court 8 plaintiff's work.” Jarvis, 486 F.3d at 533 (quoting Sid & Marty Krofft Television Prods, Inc. 12 v. McDonald’s Corp., 562 F.2d 1157, 1174 (9th Cir. 1977)); see also Polar Bear, 384 F.3d 13 at 708-09 (confirming “the value of the use of the copyrighted work to the infringer” as 14 among the actual damages available, and upholding jury award of license where plaintiff's 15 expert provided credible evidence in support of awarded amount). 16 The jury was instructed as to both the fair market value license calculation for actual 17 damages, and the lost profits/infringer’s profits calculation for actual damages. On the 18 verdict form, the jury was asked to state “the dollar amount that Oracle is entitled to from 19 Defendants to compensate [it] for its actual damages under the copyright infringement 20 claim, in the form of EITHER a fair market value license for the copyright infringement OR 21 lost profits.” The jury opted for the fair market value license, for which it awarded Oracle 22 $1.3 billion. 23 SAP argues that Oracle’s hypothetical license claim for the PeopleSoft, JDE, and 24 Siebel works is unreasonable and unduly speculative. SAP contends that no court has 25 ever awarded a lost license fee (measured “hypothetically” or otherwise) to a copyright 26 plaintiff who did not actually lose license fees, or has ever awarded a lost license fee 27 absent evidence of benchmark transactions, and contends that the evidence shows that 28 Oracle did not suffer any damage in the form of lost license fees, and that Oracle’s actual 6 1 harm from infringement was minimal, as TomorrowNow (“TN”) had relatively few 2 customers. 3 SAP also asserts that the evidence shows that Oracle does not license the 4 copyrighted works to provide third-party support, and that Oracle presented no objective 5 evidence as to the value of a license, such as benchmark licenses for comparable use of 6 comparable works (because, as an Oracle executive testified, there are no comparable 7 licenses to the hypothetical license at issue here). Both sides’ witnesses confirmed that 8 such licenses would never have existed between SAP and Oracle. SAP argues that 9 because no real-world benchmarks exist to prove objective market value, the jury’s verdict was based on speculative evidence, including evidence of subjective “negotiation 11 For the Northern District of California United States District Court 10 perspectives.” 12 SAP contends that Oracle invented factors to price the hypothetical PeopleSoft/JDE 13 and Siebel licenses at “at least” $1.66 billion. These factors included the amount Oracle 14 executives claimed they would have charged for a license (unsupported by evidence of 15 benchmark licenses or transactions, or prior licensing history of the subject works); the 16 value of the infringed intellectual property as a whole and the costs of acquiring it; the 17 cumulative liability evidence for stipulated claims; the factors cited by Oracle’s damages 18 expert Paul Meyer for determining the result of a “hypothetical negotiation” to use the 19 PeopleSoft, JDE, and Siebel works; and the invitation to speculate as to the value of the 20 hypothetical license, made to the jury by Oracle’s counsel during closing argument. 21 In particular, SAP argues that the wide range of license values generated by Mr. 22 Meyer’s analysis – a range of $881 million to $2.69 billion – forced the jury to speculate, 23 and notes that Mr. Meyer concluded without any reasoned explanation that the value of the 24 PeopleSoft license would be “at least $1.5 billion,” and proposed that the Siebel license 25 would be worth “at least $100 million.” SAP asserts that Oracle’s counsel also encouraged 26 the jury to speculate. Rather than offering objective evidence to assist the jury in 27 determining a fair market value for the license that even Oracle admitted its expert could 28 not quantify, Oracle’s counsel invited the jury in his closing argument to engage in 7 1 guesswork and simply pick a number between $1.66 billion and $3 billion. 2 SAP asserts that Oracle’s database damages claim is similarly unreasonable and 3 unduly speculative, as Oracle presented only one-sided testimony of “what it would have 4 charged” for a license to use Oracle’s database software; and the license calculation was 5 not based on objective evidence (as no similar license exists), but rather on the 6 unsupported speculation of a single Oracle employee, who admitted there was no “real 7 world” transaction in which any customer had agreed to actually license the database 8 software on this basis. 9 SAP contends that Oracle presented no objective evidence (such as benchmark licenses) relevant to the database license price or structure, and that Oracle’s claim that it 11 For the Northern District of California United States District Court 10 would have charged on a “per-customer” basis had no objective foundation and was unduly 12 speculative, as there was no evidence Oracle had ever priced on a “per-customer” basis. 13 SAP also asserts that Oracle presented only subjective testimony of what it claims it would 14 have charged for a database license, rather than presenting objective evidence showing 15 fair market value. 16 In addition, SAP argues, Oracle failed to analyze, much less substantiate, what TN, 17 as a willing buyer, would have agreed to pay. SAP asserts that focusing on only what the 18 willing seller would have agreed to – as Oracle has done here – is problematic, as Oracle’s 19 calculation deviated significantly from the standard pricing structure, did not arise from 20 comparable benchmark licenses, and ultimately resulted in a licensing fee almost 21 equivalent to TN’s revenues for its entire 7-year history. 22 In sum, SAP argues that the evidence demonstrates that the “hypothetical license” 23 fees that Oracle obtained as damages from the jury were not “actual” damages. Rather, 24 SAP asserts, that award represented an unduly speculative, counterfactual, and punitive 25 award that wholly failed to measure Oracle’s actual damages – which, in fact, were in the 26 form of lost profits, not lost license fees. 27 28 Oracle responds that it is undisputed that the Ninth Circuit accepts hypothetical license damages, and that the license should be measured by contemporaneous “objective 8 1 considerations of market value,” rather than after-the-fact events. Oracle asserts that the 2 court has already rejected SAP’s contention that Oracle is ineligible for hypothetical license 3 damages (referring to the January 28, 2010 order denying SAP’s motion for partial 4 summary judgment). 5 Oracle contends that SAP took rights for which Oracle was entitled to charge, and 6 that it is irrelevant whether the parties would actually have reached an agreement or even 7 attempted to negotiate one. Oracle asserts that an infringer who takes for free what the 8 copyright owner has the right to license, automatically and immediately deprives the owner 9 of the license fee it was entitled to receive. Oracle claims that the authorities cited by SAP impose no additional causation burden. 11 For the Northern District of California United States District Court 10 Oracle contends that the evidence it presented proved the fair market value of the 12 hypothetical license, and that the evidence shows that it invested billions in its intellectual 13 property in reliance on its right to control and protect it, as did SAP; and that the purchase 14 price of PeopleSoft and Siebel was commensurate with their expected value to Oracle, and 15 constitutes objective evidence of the fee that it would have charged to license the software. 16 Oracle asserts that the evidence also shows that SAP’s infringement was vast, that 17 TN’s use of Oracle’s copyrighted software was intended as a means to convert customers 18 to SAP applications, and that SAP had plans to convert more than half of the PeopleSoft 19 customers; that SAP’s executive board gave “extensive guidance” on SAP’s plans to use 20 TN to generate billions in revenue and disruption; and that TN used Oracle’s intellectual 21 property as a means of containing Oracle’s growth and reducing Oracle’s ability to invest in 22 research and development. 23 Oracle argues that a prudent copyright owner and a prudent licensee, in the 24 positions of Oracle and SAP, would have considered the level of infringement, the value of 25 the infringed works, and the top-level business decisions behind the infringement when 26 negotiating and deciding on the scope and value of a hypothetical license. Oracle 27 contends that Mr. Meyer’s testimony relied on the undisputed principle that the willing- 28 buyer, willing-seller hypothetical license framework should account for the Georgia-Pacific 9 1 factors.1 Oracle also claims that Mr. Meyer showed how his consideration of this evidence 2 supported his opinion regarding the value of the hypothetical license, how he weighed each 3 party’s “negotiating perspective” and the evidence of their projected financial and other 4 strategic motivations, and how he applied an established valuation methodology to that 5 evidence to determine the fair market value of SAP’s infringing use of Oracle’s software. 6 Oracle argues that the hypothetical Database license valuation was also supported 7 by substantial and undisputed evidence. Oracle contends that the testimony of the Oracle 8 executives was not the only evidence that supported Mr. Meyer’s calculation of the 9 hypothetical license award, and it is not true that the “benchmark” license is the only objective measure of a reasonable license fee. Oracle notes that experts from both sides 11 For the Northern District of California United States District Court 10 used Oracle’s historical Database price lists, as a reasonable benchmark in calculating the 12 Database license value. 13 The court finds that the motion must be GRANTED. At trial, Oracle presented no 14 evidence, and did not argue, that it was entitled to a hypothetical license fee because it lost 15 an opportunity to license the works to third parties for the same use as was made by TN. 16 Indeed, Oracle admitted that it had never given any entity a license to copy Oracle’s 17 application software and support materials in order to create their own fixes, patches, or 18 updates for customers. Thus, Oracle could not reasonably claim that SAP’s infringement 19 diminished the licensing value of the infringed works. 20 Thus, to establish its entitlement to recover hypothetical license damages, Oracle 21 was required to show that, but for infringement, the parties would have agreed to license 22 the use of the copyrighted works at issue. However, Oracle offered no evidence of the type 23 on which plaintiffs ordinarily rely to prove that they would have entered into such a license, 24 25 26 27 28 1 The Federal Circuit has adopted the factors articulated by the court in Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F.Supp. 1116, 1119-10 (S.D.N.Y. 1970), as a method of determining the amount of a hypothetically negotiated royalty for a patent license. See, e.g., Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1311-19 (Fed. Cir. 2011); Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1207-12 (Fed. Cir. 2010). It is less clear whether and to what extent those factors are applicable to the determination of hypothetical license damages in a copyright infringement case. 10 1 such as past licensing history or a plaintiff’s previous licensing practices. See, e.g., Polar 2 Bear, 384 F.3d at 711; On Davis v. The Gap, Inc., 246 F.3d 152, 161-62 (2nd Cir. 2001). 3 Apart from this, the evidence Oracle presented was insufficient to establish an 4 objective non-speculative license price. Determining a hypothetical license price requires 5 an “objective, not a subjective” analysis, and “[e]xcessively speculative” claims must be 6 rejected. Jarvis, 486 F.3d at 534; Polar Bear, 384 F.3d at 709; Mackie, 296 F.3d at 917; 7 On Davis, 246 F.3d at 166. An objective, non-speculative license price is established 8 through objective evidence of benchmark transactions, such as licenses previously 9 negotiated for comparable use of the infringed work, and benchmark licenses for comparable uses of comparable works. See Jarvis, 486 F.3d at 533-35; Polar Bear, 384 11 For the Northern District of California United States District Court 10 F.3d at 709. 12 Here, Oracle failed to present evidence of benchmark licenses. Indeed, Oracle 13 executives testified that Oracle has never granted a comparable license that would permit a 14 competitor to use Oracle software to compete for Oracle’s customers, and that such a 15 license would be “unique” and “unprecedented.” Nor were the Oracle executives aware of 16 any analogous situations in which any other company had licensed software to or from a 17 competitor to provide support services. Moreover, damages experts on both sides agreed 18 that no benchmark licenses exist, and the evidence Oracle did present proved that the 19 parties would never have agreed to a license. Absent evidence of benchmarks, Oracle 20 cannot recover a lost license fee award, because any such award would be based on a 21 subjective, not an objective, analysis of fair market value. 22 Objective evidence is necessary to price a hypothetical license because the 23 hypothetical license is simply a construct designed to help calculate actual damages 24 suffered as a result of the infringement (the measure of damages under the copyright 25 statute). The amount of the hypothetical license must be based on the actual use the 26 defendant made of the work, not simply the highest use for which the plaintiff might license. 27 See On Davis, 246 F.3d at 166 n.5; see also Jarvis, 486 F.3d at 535 (distinguishing making 28 the plaintiff whole from punishing the infringer by charging the highest price possible)). 11 Although the Ninth Circuit has never explicitly held that hypothetical damages are 1 2 not available absent actual proof that the plaintiff would have licensed the infringed work to 3 the defendant or a third party for the specific use at issue, and proof that the infringement 4 caused the loss of that opportunity, it is also true, as SAP notes, that the Ninth Circuit has 5 never upheld a hypothetical license award absent such actual proof. See Polar Bear, 384 6 F.3d at 704, 709 (defendant had license, but it had expired); Jarvis, 486 F.3d at 528, 533- 7 34 (plaintiff had licensed photos to defendant in the past); Mackie, 296 F.3d at 913, 917 8 (parties were not competitors and plaintiff had previously given permission for others to use 9 its materials in same way); Cream Records, Inc. v. Jos. Schlitz Brewing Co., 754 F.2d 826, 827-28 (9th Cir. 1985) (unauthorized use of copyrighted song in defendant’s commercial 11 For the Northern District of California United States District Court 10 deterred potential licensees from licensing the song for their own commercials).2 12 Oracle’s suggestion – that upon proof of infringement, copyright plaintiffs are 13 automatically entitled to seek “hypothetical” license damages because they are presumed 14 to have suffered harm in the form of lost license fees – has no support in the law. Lost 15 license fees are simply a method of calculating “actual damages suffered by [the owner] as 16 a result of the infringement.” 17 U.S.C. § 504(b). Thus, a plaintiff must prove that the 17 license fees were actually lost as a result of the infringement. Oracle appears to be, in 18 effect, asking the court to amend § 506(b) by reading in the Patent Act’s requirement that 19 an award of (patent) damages be “in no event less than a reasonable royalty for the use of 20 the invention by the infringer . . . .“ 35 U.S.C. § 284. 21 Moreover, the Ninth Circuit has expressly rejected the argument that damage in the 22 form of lost licensing opportunities may be “presumed” as a “natural and probable result” of 23 infringement. See Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 513-14 24 25 26 27 28 2 Similarly, while the Ninth Circuit has not held that hypothetical license damages are never available in cases where the parties are competitors, the cases in which the court has affirmed a hypothetical license have involved non-competitors. See, e.g., Wall Data, Ltd. v. LA County Sheriff’s Department, 447 F.3d 769 (9th Cir. 2006) (software developer vs. municipal customer); Polar Bear (watch company vs. film production company); Frank Music (music production company vs. hotel); Jarvis (photographer vs. advertiser); and Mackie (artist v. symphony). Nor has the Ninth Circuit ever affirmed a hypothetical license award where no comparable transactions established the likelihood of a license between the parties. 12 1 & n.8 (9th Cir. 1985) (in seeking to recover value of use damages, a copyright owner is still 2 required to prove actual damages, and is not allowed to simply rely on some presumption). 3 Oracle claims that SAP’s position is that direct competitors may never recover actual 4 damages in the form of lost license fees, or that copyright plaintiffs may not recover lost 5 license damages unless they have licensed their copyrighted works. This interpretation is 6 not entirely accurate, as what SAP argues is that the circumstances presented here – the 7 parties directly compete, and Oracle never previously licensed the copyrighted works – 8 provide evidence that no license fees were lost, particularly given the lack of benchmark 9 transactions or other evidence showing the parties would have agreed to a license. The court’s prior ruling denying SAP’s motion for partial summary judgment does not 11 For the Northern District of California United States District Court 10 dispose of the present motion. In the January 28, 2010 order, the court commented as a 12 general matter that “[g]eneral tort principles of causation and damages apply when 13 analyzing compensatory damage awards for copyright infringement,” including actual 14 damages. The court also stated that Oracle “is not required to prove that it would have 15 successfully negotiated a license with SAP, nor is it precluded from seeking license 16 damages simply because it has never before licensed what SAP infringed.” 17 That ruling was based on the court’s analysis of the relevant Ninth Circuit cases, but 18 was not intended as a definitive ruling as to what Oracle was or was not required to show. 19 At that stage of the litigation, having not yet had the benefit of the evidence presented at 20 the trial, the court was unwilling to rule as a matter of law that Oracle could never prove 21 entitlement to hypothetical license damages, which was what SAP appeared to be arguing. 22 In the court’s view, the most salient guidance provided by that order was the instruction that 23 Oracle could claim lost license fees only if it “present[ed] evidence sufficient to allow the 24 jury to assess fair market value without ‘undue speculation.’” 25 SAP’s motion was denied because the court was unable to find as a matter of law 26 that Oracle could not prove it had suffered damages from lost license fees simply because 27 it had never previously licensed the intellectual property, and specifically had not licensed it 28 to SAP. The finding was not that Oracle was entitled to lost license fees, but rather that 13 1 Oracle could proceed to trial to prove that it was. Oracle did not move for summary 2 judgment on this issue, and the court was not privy to discovery but fully anticipated that 3 Oracle would present objective evidence in support of lost license fees. Instead, the 4 evidence showed that Oracle had not only not licensed to anyone (including SAP) in the 5 past, but would not ever license to anyone (including SAP). 6 That is, in allowing the theory to proceed to trial, the court expected to see objective 7 evidence showing some licensing activity either by Oracle or by some other company in the 8 related industry – if not from Oracle/SAP’s prior dealings – and objective evidence of what 9 a willing buyer would have reasonably paid, not simply what Oracle would have demanded. 11 For the Northern District of California United States District Court 10 However, Oracle failed to present such objective, non-speculative evidence. The Copyright Act requires proof of “actual damages suffered by [the owner] as a 12 result of the infringement,” and SAP is correct that no court has awarded a lost license fee 13 in the absence of evidence that the copyright holder actually lost license fees. While SAP’s 14 argument regarding the availability of hypothetical license damages does not differ in 15 substance from the argument it made prior to trial in its motions for summary judgment 16 (which the court denied), the court now has the benefit of having heard all the evidence. 17 Without the fully developed trial record, the court was unable to tell whether there 18 was a past history of licensing or that Oracle would absolutely not have agreed to license 19 the materials to anyone. Now, however, given the lack of history of past licensing of the 20 copyrighted material to anyone (not just to SAP), and the lack of any evidence that Oracle 21 would ever license the material to SAP or to anyone in the future, coupled with the absence 22 of any benchmark evidence upon which to determine the value of a license, the court finds 23 no support for awarding Oracle actual damages in the form of lost license fees. 24 The standard in a motion for judgment as a matter of law is that the motion should 25 be granted only if the evidence permits only one reasonable conclusion, and that 26 conclusion is contrary to the jury’s verdict. The jury was instructed that the damages award 27 “must be based on evidence, not on speculation, guesswork, or conjecture,” although they 28 were also instructed that “[d]etermining the fair market value of the rights infringed may 14 1 involve some uncertainty” and that Oracle was “not required to establish its actual damages 2 with precision.” The court finds that there was insufficient evidence for a reasonable jury to 3 find that Oracle was entitled to a hypothetical license, and judgment shall be entered in 4 SAP’s favor on this issue, pursuant to Rule 50. 5 2. New trial 6 SAP argues that the reasons that justify granting judgment as a matter of law also 7 support granting the motion for a new trial – that the $1.3 billion verdict vastly exceeds any 8 harm to Oracle, and is contrary to the clear weight of evidence. In the alternative, SAP 9 asserts that the court should reduce the amount of the damages to the maximum amount of 11 For the Northern District of California United States District Court 10 lost profits and infringer’s profits sustainable by the proof. SAP contends that the $1.3 billion award resulted from Oracle’s presentation of 12 speculative evidence that was given the imprimatur of expert opinion, irrelevant evidence 13 regarding the purported value of the intellectual property as a whole, and liability evidence, 14 which was prejudicial because liability was not in issue. 15 As in its arguments in support of the motion for judgment as a matter of law, SAP 16 asserts that Oracle’s improper hypothetical license theory was based on speculation, and 17 that rather than focusing on the value of SAP’s actual use of the copyrighted works, Oracle 18 and Mr. Meyer confused the jury with fictitious and speculative “negotiation” factors, which 19 Mr. Meyer claimed were consistent with the Georgia-Pacific factors, but which SAP asserts 20 did not resemble those used in Georgia-Pacific. Instead, SAP argues, Mr. Meyer crafted 21 his own factors to suit the speculative evidence he found in SAP’s documents. 22 SAP also asserts that the amount awarded by the jury far exceeds Oracle’s actual 23 harm. SAP contends that the actual harm to Oracle cannot be measured by evidence of 24 SAP’s goals and aspirations regarding TN, but rather by, for example, the number of 25 customers or amount of business that TN attracted away from Oracle. SAP argues that the 26 $1.3 billion award purportedly represents what a prudent willing buyer and seller would 27 have agreed was a reasonable fee to use the copyrighted works as part of a marketing plan 28 to persuade Oracle customers to migrate to SAP, but asserts that Oracle failed to present 15 1 evidence establishing SAP’s valuation of TN’s impact, and that the evidence that was 2 presented showed, overwhelmingly, that Oracle itself did not expect customers to migrate 3 to SAP because of TN. 4 SAP asserts that even had Oracle suffered harm in the form of lost license fees, the 5 jury’s award greatly surpassed any rational quantification of fees for a non-exclusive, 6 non-transferable, license of limited purpose and duration to use the copyrightable elements 7 of the software, as the award improperly included the value of non-protectable elements of 8 the infringed works, the price to acquire whole companies, and the cost to develop 9 unrelated products. Thus, SAP argues, the award was speculative and excessive and 11 For the Northern District of California United States District Court 10 should be set aside. In addition, SAP contends that the award was influenced by Oracle’s presentation of 12 irrelevant and prejudicial liability evidence – particularly the evidence regarding liability – 13 and by Oracle’s repeated usage of words like “theft” and “stealing” to describe SAP’s 14 actions. SAP argues that Oracle conflated issues of liability and concepts of punishment 15 with the need to calculate damages under copyright law, which does not permit punitive 16 damages. SAP contends that the prejudice was exacerbated because SAP’s witnesses 17 were not permitted to testify about steps SAP took to mitigate the risk of infringement, and 18 Oracle subsequently argued to the jury that it should draw a negative inference from the 19 lack of mitigating evidence. 20 In response, Oracle argues, that substantial evidence supported the hypothetical 21 license award, and that the award is based on TN’s “pervasive use” of Oracle’s software, 22 which Oracle claims justified the amount of the award. Oracle contends that the liability 23 evidence it presented at trial was highly relevant as “background or context” and caused no 24 undue prejudice. Oracle also asserts that Mr. Meyer’s analysis was properly grounded in 25 Georgia-Pacific, and that the jury’s award does not exceed the amount of actual harm, 26 because the harm to Oracle cannot be measured by lost profits. Oracle contends that SAP 27 infringed a vast scope of work, with the intention of harming Oracle and of containing 28 Oracle’s future growth. 16 1 With regard to the remittitur, Oracle contends that SAP is simply asking the court to 2 substitute its (SAP’s) view of the evidence and proper damages amount for the jury’s, by 3 reducing the award to the “maximum lost profits and infringer’s profits supported by the 4 evidence.” Oracle claims that the jury rejected that measure of damages when it decided 5 that a fair market value license measured Oracle’s damages better than lost profits. Oracle 6 claims that the jury simply required SAP to pay for the value of what it took. According to 7 Oracle, this is not “shocking to the conscience,” but rather is “justice.” 8 The court finds that the $1.3 billion verdict is contrary to the weight of the evidence. 9 Rather than providing evidence of SAP’s actual use of the copyrighted works, and 11 the purported value of the intellectual property as a whole, elicited self-serving testimony For the Northern District of California United States District Court 10 objectively verifiable number of customers lost as a result, Oracle presented evidence of 12 from its executives regarding the price they claim they would have demanded in an 13 admittedly fictional negotiation, and proffered the speculative opinion of its damages expert, 14 which was based on little more than guesses about the parties’ expectations. At the same 15 time, Oracle urged the jury to disregard evidence of Oracle’s actual customer losses 16 resulting from infringement. Thus, the verdict grossly exceeded the actual harm to Oracle 17 in the form of lost customers, which was quantified by Oracle’s expert at $408.7 million, and 18 alternatively at $272 million, and by SAP’s expert at $28 million. 19 Having already determined that SAP is entitled to judgment as a matter of law that 20 Oracle is not entitled to actual damages for copyright infringement in the form of a 21 hypothetical license, the court finds that the motion for a new trial must be GRANTED, 22 conditional upon Oracle’s rejection of a remittitur to $272 million, the maximum amount of 23 lost profits and infringer’s profits sustainable by the proof. 24 Prior to the trial, the court ruled that Oracle could not recover lost profits/infringer’s 25 profits and hypothetical license damages, and Oracle chose to limit its presentation largely 26 to hypothetical license damages. Mr. Meyer did testify as to lost profits/infringer’s profits, 27 but only on cross-examination. The jury was not asked to make a finding on both lost 28 profits/infringer’s profits and hypothetical license damages, and opted for an award of 17 1 hypothetical license damages. 2 However, entitlement to hypothetical license damages is simply one theory of 3 damages, and the finding that Oracle is not entitled to recover damages for a hypothetical 4 license does not entirely resolve the parties’ dispute. Although a motion for a new trial is 5 generally made as an alternative to a motion for judgment as a matter of law, given the 6 unusual procedural posture of this case, the court finds that both are warranted here. 7 The court may grant a new trial if it finds that the verdict would result in a miscarriage 8 of justice. Silver Sage Partners, 251 F.3d at 819. Although the court herein grants 9 judgment in SAP’s favor on the issue of hypothetical license damages, Oracle is still 11 entitlement to an award of hypothetical license damages, Oracle must be allowed to For the Northern District of California United States District Court 10 entitled to damages, given SAP’s admission of liability. Thus, having failed to establish 12 recover actual damages in the form of lost profits/infringer’s profits. A contrary result would 13 be unjust and would constitute a miscarriage of justice. 14 Both SAP’s damages expert Richard Clarke and Oracle’s damages expert Mr. Meyer 15 offered opinions on Oracle’s actual lost support profits and SAP’s infringer’s profits resulting 16 from TN’s use of the copyrighted works. Mr. Clarke calculated lost profits of $19.3 million 17 and infringer’s profits of $8.7 million – a total of $28 million. Mr. Meyer calculated $120.7 in 18 lost profits and $288 million in infringer’s profits – a total of $408.7 million; and under an 19 alternative scenario, calculated $36 million in lost profits, and $236 million in infringer’s 20 profits – a total of $272 million. 21 SAP argues that a remittitur to the lowest of these figures – the $28 million 22 calculated by Mr. Clarke – would be appropriate, but also suggests that a remittitur to the 23 lower figure calculated by Mr. Meyer – $272 million – is supported by the evidence. SAP 24 contends, however, that in no case should the amount of the remittitur exceed the higher 25 amount calculated by Mr. Meyer – $408.7 million. 26 The court questions whether the $408.7 million figure is supported by the evidence. 27 Mr. Meyer testified that his $120.7 million lost profits calculation represented Oracle’s lost 28 profits through 2015, “to reflect the ongoing impact” of the infringement, and that this 18 1 calculation differed from Mr. Clarke’s analysis in that Mr. Clarke calculated lost profits and 2 infringer’s profits through the wind-down of TN’s operations in October 2008. In his 3 alternative scenario, Mr. Meyer also calculated lost profits through the wind-down of TN’s 4 operations in October 2008. This calculation produced the $36 million in lost profits that 5 constituted part of the $272 million damages figure. 6 Mr. Meyer testified that his calculation of infringer’s profits “ranges down” to $236 7 million because there are three customers “where there’s some issues still that sort of exist 8 about the role of TomorrowNow in converting those customers to SAP.” He testified that 9 Mr. Clarke excluded more customers from his calculation of lost profits and infringer’s 11 purchased from SAP even absent TN’s infringing activities. For the Northern District of California United States District Court 10 profits based on the conclusion that these customers would have left Oracle or would have 12 The court finds that Mr. Meyer’s $408.7 million calculation is not supported by proof. 13 It is undisputed that SAP ceased TN’s operations (and any infringement of Oracle’s 14 copyrighted works) in late 2008. Oracle provided no evidence to support an additional 15 $84.7 million for “ongoing impact” for seven years following TN’s demise. In addition, Mr. 16 Meyer’s justification for the larger calculation of infringer’s profits is unduly speculative. 17 On the other hand, SAP’s much lower calculation is not supportable, as it was largely 18 based on evidence that the court had ruled was inadmissible. 19 Accordingly, the court finds that the “maximum amount sustainable by the proof,” 20 see D & S Redi-Mix, 692 F.2d at 1249, is $272 million. Accordingly, Oracle may accept a 21 remittitur to $272 million, or the court will order a new trial as to the amount of actual 22 damages in the form of lost profits/infringer’s profits. 23 C. Oracle’s Motion 24 Oracle filed a “conditional motion” for a new trial pursuant to Rule 59, in which it 25 asserts that it “does not seek a new trial,” but also argues that in the event the court orders 26 a new trial, the court should also permit Oracle to put on evidence as to various damages27 related issues. SAP contends that the motion should be denied because it is a disguised 28 (and premature) motion in limine, seeking reconsideration and reversal of certain 19 1 evidentiary and instructional rulings made prior to (or during) the trial that is the subject of 2 SAP’s present motions. SAP argues that Rule 59 does not permit such relief, and that 3 even if it did, there is no reason for the court to reverse its prior rulings. 4 The motion is DENIED. The court is unaware of any authority supporting a Rule 59 5 motion for a new trial by a party that has prevailed in a trial. If Oracle rejects the remittitur 6 and opts for a new trial, the parties will be limited to putting on evidence regarding lost 7 profits. At this stage, further discussion of the particulars of a new trial is premature. 8 9 CONCLUSION In accordance with the foregoing, the court GRANTS judgment as a matter of law as 11 hypothetical license damages totaling $1.3 billion was contrary to the weight of the For the Northern District of California United States District Court 10 to the award of hypothetical license damages. The court finds further that the award of 12 evidence, and was grossly excessive. Given SAP’s concession of liability, and request for 13 a remittitur, the court GRANTS the motion for a new trial as to actual damages, conditioned 14 on Oracle’s rejection of a remittitur to $272 million. Should Oracle reject the remittitur, the 15 court will order a new trial as to actual damages in the form of lost profits/infringer’s profits 16 only. The court DENIES Oracle’s “conditional motion” for a new trial. 17 Oracle shall submit a statement accepting or rejecting the remittitur no later than 18 September 30, 2011 (or the parties shall submit a stipulated request for additional time, if 19 necessary). Having found that the award of damages for copyright infringement is 20 unjustified, that portion of the February 3, 2011 judgment awarding $1.3 billion for 21 hypothetical license damages is VACATED. 22 23 IT IS SO ORDERED. 24 Dated: September 1, 2011 ______________________________ PHYLLIS J. HAMILTON United States District Judge 25 26 27 28 20

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