Oracle Corporation et al v. SAP AG et al

Filing 976

Memorandum in Opposition re 974 MOTION Exclude Evidence Defendants' Motion to Exclude Evidence Related Solely to Contributory Infringement filed byOracle International Corporation, Oracle USA Inc., Siebel Systems, Inc.. (Howard, Geoffrey) (Filed on 11/5/2010)

Oracle Corporation et al v. SAP AG et al

Doc. 976

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BINGHAM McCUTCHEN LLP DONN P. PICKETT (SBN 72257) GEOFFREY M. HOWARD (SBN 157468) HOLLY A. HOUSE (SBN 136045) ZACHARY J. ALINDER (SBN 209009) BREE HANN (SBN 215695) Three Embarcadero Center San Francisco, CA 94111-4067 Telephone: [phone] Facsimile: [phone] [e-mail] [e-mail] [e-mail] [e-mail] [e-mail] BOIES, SCHILLER & FLEXNER LLP DAVID BOIES (Admitted Pro Hac Vice) 333 Main Street Armonk, NY 10504 Telephone: [phone] Facsimile: [phone] [e-mail] STEVEN C. HOLTZMAN (SBN 144177) FRED NORTON (SBN 224725) 1999 Harrison St., Suite 900 Oakland, CA 94612 Telephone: [phone] Facsimile: [phone] [e-mail] [e-mail] DORIAN DALEY (SBN 129049) JENNIFER GLOSS (SBN 154227) 500 Oracle Parkway, M/S 5op7 Redwood City, CA 94070 Telephone: [phone] Facsimile: [phone] [e-mail] [e-mail] Attorneys for Plaintiffs Oracle USA, Inc., et al. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION ORACLE USA, INC., et al., No. 07-CV-01658 PJH (EDL) v. Plaintiffs, ORACLE'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTS' MOTION TO EXCLUDE EVIDENCE RELATED SOLELY TO CONTRIBUTORY INFRINGEMENT

SAP AG, et al., Defendants.

CASE NO. 07-CV-01658 PJH (EDL)

ORACLE'S MEMORANDUM IN OPPOSITION TO DEFENDANTS' MOTION TO EXCLUDE EVIDENCE RELATED SOLELY TO CONTRIBUTORY INFRINGEMENT
Dockets.Justia.com

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I.

INTRODUCTION Defendants' Motion to Exclude Evidence Related Solely to Contributory

Infringement ("SAP Mot.") rests on three incorrect premises. First, Defendants contend that Oracle is offering evidence "solely" related to contributory infringement. To the contrary, other than a very limited amount of context evidence, Oracle has removed all such evidence from its case (a significant volume, consisting of hours of live and deposition testimony and at least dozens of documents that will now not see the light of day). Those reductions will allow a slight further reduction in time ­ the second in the space of a week, after the Parties stipulated and the Court ordered that each side would have 36 hours to present its case. Second, Defendants contend that evidence of taking a risk of infringement liability does not relate to the value the infringer places on the infringed work. To the contrary, the Georgia-Pacific factors include this very category of evidence and other cases hold it relevant to the calculation of a fair market value license. That only makes sense. If a defendant takes the risk of knowing infringement, that tends to prove, indeed heighten, the value of the intellectual property. Some of that evidence also ­ but not solely ­ relates to contributory liability. Third, evidence in support of the Georgia-Pacific factors that also, but not solely, relates to contributory liability could not impose any prejudice because Defendants have admitted that liability. Excluding such obviously relevant fair market value evidence, which can impose no prejudice, would prevent Oracle from meeting its burden on its chosen damages theory. II. ARGUMENT On two occasions, this Court recognized that the fair market value of use / hypothetical license approach is a proper measure of Oracle's actual damages. See MSJ Order (Dkt. No. 628) at 3. There is no set formula for determining the value of the hypothetical license: the jury is permitted to consider a wide spectrum of evidence in doing so. See, e.g., Wall Data Inc. v. L.A. Cnty. Sheriff's Dep't, 447 F.3d 769, 786-87 (9th Cir. 2006) (upholding CASE NO. 07-CV-01658 PJH (EDL) 1
ORACLE'S MEMORANDUM IN OPPOSITION TO DEFENDANTS' MOTION TO EXCLUDE EVIDENCE RELATED SOLELY TO CONTRIBUTORY INFRINGEMENT

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damages award where evidence supported a hypothetical number of infringing copies and hypothetical unit price as nonspeculative); Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 709 (9th Cir. 2004) (upholding damages award based on an expert's proffered "reasonable production license fee"); McRoberts Software, Inc. v. Media 100, Inc., 329 F.3d 557, 566-67 (7th Cir. 2003) (upholding damages award that could have been based on a number of hypothetical license consideration). A. Evidence Regarding Substantial Litigation Risk Is Relevant To Oracle's Damages Evidence of the value a defendant itself placed on the infringing activity at the time the defendant undertook it is highly relevant to the fair market value / hypothetical license analysis. See, e.g., McRoberts, 329 F.3d at 567 (reviewing evidence of "the value of . . . [the relevant] software to [the infringer]" in upholding hypothetical license damages); Interactive Pictures Corp. v. Infinite Pictures, Inc., 274 F.3d 1371, 1384-85 (Fed. Cir. 2001) (affirming that infringer's sales projections are proper basis for assessing damages via hypothetical license); Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1131 (S.D.N.Y. 1970) ("The Court finds that GP would have been willing to pay a substantial royalty to USP in order to obtain reasonably anticipated large profits without the risk of infringement liability."), aff'd as modified, 446 F.2d 295 (2d Cir. 1971). Evidence of a defendant's willingness to proceed with infringing activity in the face of substantial legal risks shows the defendant placed such a high value on the rights it infringed ­ enough to risk both the expense of suit and the damages (financial or otherwise) associated with infringement liability. See Gyromat Corp. v. Champion Spark Plug Co., 735 F.2d 549, 552 (Fed. Cir. 1984) ("Champion's decision to risk infringement liability indicates the value it placed on the patented features."); Georgia-Pacific Corp., 318 F. Supp. at 1123 ("Noteworthy is the fact that . . . GP deliberately decided to duplicate [the patentholder's product] notwithstanding the caveat of GP's own counsel that an expensive infringement suit was inevitable."); Pentech Int'l, Inc. v. Hayduchok, 931 F. Supp. 1167, 1175 (S.D.N.Y. 1996) (finding, in applying the Georgia-Pacific factors, that "the fact that Pentech would risk the expense of a law suit implies that the [patented] product is valuable"). CASE NO. 07-CV-01658 PJH (EDL) 2
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Defendants' documents and testimony relate to at least three categories of evidence relevant to hypothetical license damages: (1) SAP's knowledge of infringement and the risk of liability, (2) SAP's willingness to take that risk, and (3) SAP's institution and implementation of a shield against liability. The Court has already ruled that each of these types of evidence are relevant to the fair market value here. See Trial Tr., Nov. 1, 2010, 257:7-9. SAP made a conscious decision to risk infringement liability. Its "calculated infringement . . . is an admission by conduct that" SAP regarded the Oracle software "as occupying a uniquely favorable position in the market." See Georgia-Pacific, 318 F. Supp. at 1123. The defendants in Gyromat, Pentech, and Georgia-Pacific made the same decision. Just as the Courts in those cases considered it relevant to damages, so is it here. SAP's characterization of this evidence as contributory infringement or willful infringement evidence misses the point. Whatever else they may relate to, these three categories of evidence relate directly to Oracle's hypothetical license damages. Cf. SAP Mot. at 1, 2. SAP's top executives believed Oracle's copyrights were so valuable they would risk substantial liability in order to take them for free. It is hard to imagine actions or evidence more relevant to determining the value of the rights SAP infringed. See Georgia-Pacific Corp., 318 F. Supp. at 1123 ("calculated infringement" over counsel's warning that "an expensive infringement suit was inevitable" is an "admission by conduct"). SAP's authorities do not permit the exclusion of evidence relevant to damages ­ here Oracle's most important damages evidence ­ simply because it also relates to a decided issue.1 In each of the authorities SAP cites, a court rejected application of a punitive multiplier to a hypothetical license. In all three of SAP's cases, a copyright rightsholder calculated a value of use for infringement of photographs or graphic art, and then sought to apply a multiplier to the value of use based on unauthorized use, willfulness or failure to credit the rightsholder. See Stehrenberger v. R.J. Reynolds Tobacco Holdings, Inc., 335 F. Supp. 2d 466, 467, 469 (S.D.N.Y. Both SAP Defendants continue to deny any knowing involvement in the infringement, having contended in opening argument that they told Defendant TomorrowNow not to infringe. Trial Tr., Nov. 2, 2010, 395:5-9. 3
CASE NO. 07-CV-01658 PJH (EDL)

ORACLE'S MEMORANDUM IN OPPOSITION TO DEFENDANTS' MOTION TO EXCLUDE EVIDENCE RELATED SOLELY TO CONTRIBUTORY INFRINGEMENT

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2004) (rejecting a 10x multiplier for willful infringement of graphic art); Barrera v. Brooklyn Music, Ltd., 00 Civ. 9331, 2004 U.S. Dist. LEXIS 12450, at *3, *14-*16 (S.D.N.Y. June 30, 2004) (rejecting a 5x multiplier for unauthorized use of photograph), aff'd in relevant part, 346 F. Supp. 2d 400 (S.D.N.Y. 2004); Faulkner v. Nat'l Geographic Soc'y, 576 F.Supp.2d 609, 61418 (S.D.N.Y. 2008) (rejecting a 2x multiplier for a failure to include a byline and a 6x multiplier for unauthorized use of photograph); see also id. (limiting a 2x multiplier for "encourag[ing] users" of a CD-ROM to make additional copies "to the extent it rest[ed] on punitive considerations"). These cases are beside the point: Oracle is seeking actual damages consisting of the "value of what was illegally taken," nothing more. Stehrenberger, 335 F. Supp. 2d at 469. None of the cases cited by SAP considered, much less excluded, actual damages evidence related to the Georgia-Pacific factors used in calculating a hypothetical license, such as that a defendant's top executives recognized a specific risk of substantial infringement liability and made a conscious choice to infringe anyway.2 Cf. Trial Tr., Nov. 4, 2010, 502:3-7 (permitting evidence that Defendants "willingly took the risk of a lawsuit, and . . . the steps they took to protect that.") Defendants' attempt to distinguish Gyromat and Georgia-Pacific fails. While they correctly observe that Gyromat held evidence of a defendant's conscious decision to risk infringement liability was relevant to lost profits, Gyromat's holding that a "decision to risk infringement liability in the case the value [the infringer] placed on the patented features" is equally relevant to hypothetical license based on the Georgia-Pacific factors.3 Compare SAP Mot. at 3 with Gyromat, 735 F.2d at 552 and Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. at 1123 ("Noteworthy is the fact that GP deliberately decided to duplicate [defendant's product] notwithstanding the caveat of GP's own counsel that an expensive infringement suit was inevitable."). As well, SAP itself has put lost profits in issue, providing an independent The fact that the Faulkner Court excluded plaintiff's evidence of willfulness as not relevant to infringement liability is not relevant to the actual damages evidence that SAP's motion seeks to exclude. Compare SAP Mot. at 3 with Faulkner, 576 F. Supp. 2d at 613. 3 The quoted language shows the incorrectness of SAP's assertion that Gyromat discussed "business risk, rather than a party's willingness to risk infringement." Compare SAP Mot. at 3 with Gyromat, 735 F.2d at 552 4
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ORACLE'S MEMORANDUM IN OPPOSITION TO DEFENDANTS' MOTION TO EXCLUDE EVIDENCE RELATED SOLELY TO CONTRIBUTORY INFRINGEMENT

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basis for admission of evidence of willingness to risk infringement liability. Trial Tr., Nov. 2, 2010, 385:10-24. The Court should disregard Defendants' characterizations of Pentech. Defendants suggest the Court should simply ignore Pentech's holding that an infringer's willingness to risk litigation is relevant to the determination of fair market value, asserting that Faulkner, Stehrenberger and Barrera have supplanted the holding of Pentech. See SAP Mot. at 3. Faulkner, Stehrenberger and Barrera do not even speak to the same issue, much less supplant Pentech. (P.4, above.) B. Evidence Of Substantial Litigation Risk Should Not Be Excluded Under Fed. R. Evid. 403 SAP's request to exclude evidence under Fed. R. Evid. 403 repeats the same mistakes. SAP contends evidence of "willfulness" is unfairly prejudicial because it will "taint" the jury "without establishing anything about objective, fair market value" damages. See SAP Mot. at 3. "Relevant evidence is inherently prejudicial" ­ if not, there is no point offering it. See, e.g., United States v. Hankey, 203 F.3d 1160, 1172 (9th Cir. 2000) (internal citation omitted). The evidence is relevant, as described above. The question under Fed. R. Evid. 403 is whether the evidence presents a danger of "unfair" prejudice ­ an "undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one." Hankey, 203 F.3d at 1172 (citing Advisory Committee Notes). Here, there is nothing unfair about presenting the jury with evidence that may also relate to a claim SAP appears to have conceded but that also shows Defendants valued the rights they infringed highly enough to risk both the expense of litigation and the damages associated with infringement liability. III. CONCLUSION Defendants' motion should be denied in its entirety.

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ORACLE'S MEMORANDUM IN OPPOSITION TO DEFENDANTS' MOTION TO EXCLUDE EVIDENCE RELATED SOLELY TO CONTRIBUTORY INFRINGEMENT

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DATED: November 5, 2010

Bingham McCutchen LLP

By:

/s/ Geoffrey M. Howard Geoffrey M. Howard Attorneys for Plaintiffs Oracle USA, Inc., Oracle International Corporation, and Siebel Systems, Inc.

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ORACLE'S MEMORANDUM IN OPPOSITION TO DEFENDANTS' MOTION TO EXCLUDE EVIDENCE RELATED SOLELY TO CONTRIBUTORY INFRINGEMENT