Oracle America, Inc. v. Google Inc.

Filing 657

ORDER REQUESTING FURTHER BRIEFING re #642 Order,. Signed by Judge Alsup on December 27, 2011. (whalc1S, COURT STAFF) (Filed on 12/27/2011)

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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Plaintiff,

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No. C 10-03561 WHA

ORACLE AMERICA, INC.,

REQUEST FOR FURTHER
BRIEFING

v.
GOOGLE INC.,
Defendant.
/

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By NOON ON JANUARY 5, 2012, both sides are invited to address the following in

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simultaneous memoranda each not to exceed ten pages (no declarations) with five-page

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simultaneous replies due at noon the following Monday (again, please, no declarations).

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The July order stated that the Court was strongly of the view that the hypothetical

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negotiation should begin with the $100 million offer and make adjustments, but expressly stated

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that this was not the only possible format and other formats were not absolutely ruled out (Dkt.

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No. 230 at 14–15). This request concerns an alternate format, but it also involves legal issues in

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the matter already under consideration. In framing its ruling, the Court would prefer to be

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consistent with proper answers to the following.

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In analyzing the parties’ submissions on reasonable royalty issues, the judge would like to

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have the benefit of counsel’s guidance on the extent to which the following approach would be

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proper under appellate law. Significantly, this approach would not place the burden on Oracle to

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allocate among the items in the $100 million offer by Sun in 2006. Here are the steps in the

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possible line of reasoning:

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1.

Through its econometric and conjoint statistical analyses, Oracle claims to be able to

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spread the 2011 value of Android across various features. This methodology, standing alone, has

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not been challenged by Google. These analyses allow Oracle to opine on a value for a particular

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feature (such as processing time) in the 2008–2011 marketplace and, in turn, opine on the value of
that feature to Android (meaning to Google) in 2008–2011. This, of course, is a stand-alone

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For the Northern District of California

United States District Court

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value independent of the 2006 offer.

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2.

The 2008–2011 value is today an arguable indicator of the value Google would have

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placed on that feature in 2006. True, it is not a precise value because it derives from data as yet

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unknown in 2006, but it might be a rough indicator of how vital that feature was expected to turn

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out so long as the marketplace events, as they eventually unfolded, were reasonably predictable in

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2006. For example, if in 2011 we now know that feature X has proven to be extremely important

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to consumers, then the argument would be that the parties in 2006 could reasonably have

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expected that feature to turn out approximately this way. This expectation then, in turn, would

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have informed their 2006 negotiation. Again, so far, this line of reasoning has nothing to do with

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the $100 million offer.

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3.

The value of a feature must be apportioned among all of the know-how inputs that

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enabled it. That a license to a particular patent claim in suit is now needed to practice a feature

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does not justify attributing the entire value of the feature to that patent claim, for other know-how

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may also be required to practice the feature, such as licenses from other competitors and Google’s

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own independent know-how contribution to developing that feature. Again, the fact that a license

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to practice an Oracle patent claim is essential to the feature does not justify appropriating the full

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market value of the feature to that claim. This is a question of apportionment but it differs from

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the issue of apportionment of the 2006 package.
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Thus, in the 2006 hypothetical negotiation, both sides would be informed, the

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argument would go, as to the expected importance of a feature but would also be informed as to

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the relative contribution of the claimed invention in comparison to all other know-how needed to

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enable the particular feature. Only the expected percentage contribution of the claimed invention

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to the overall expected value would be on the negotiating table.

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5.

Finally, under this line of analysis, the relevance of the $100 million offer in 2006

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would be defensive, meaning Google would be entitled to rebut by showing that Sun would not

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have extracted the vast sums now suggested by Dr. Cockburn because Sun was willing to license,

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not just the claimed inventions, but the entire package for $100 million. If Google wishes to
argue further that only a small percentage of the $100 million should be attributed to the claimed

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inventions, then it would be Google’s burden to allocate the $100 million between the claimed

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inventions versus the rest of the 2006 package, subject to adjustments for fragmentation and

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so on.

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Under this line of reasoning, to repeat, there would be no need for Oracle, in order to meet

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its initial burden, to allocate the $100 million among the thousands of items in the 2006 package

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(or even to address the 2006 offer). Oracle would, on the other hand, have to allocate the value of

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a feature as between the claimed invention and all other know-how contributing to that feature.

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This order does not bless this format of analysis (please do not call it “the Court’s

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proposal”), but invites comment on it generally and particularly with respect to: (a) Under

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appellate law, to what extent are hypothetical negotiators in 2006 allowed to peek into the future

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to see how events unfolded through 2011? (b) Is it correct that the burden would be on Oracle to

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apportion the value of a feature as between the claimed invention versus all other know-how

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contributions to that feature? (c) Is it correct that although Google might raise the $100 million

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offer by way of defense, Oracle would have no duty in its case in chief, if it used the above

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approach to allocate the $100 million as between the claimed invention versus the many other

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thousands of items in the 2006 package?

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The above line of reasoning, the Court realizes, is different from the suggested approach
in the July 2011 order, which suggested approach was to start with the $100 million offer and
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make adjustments. Harping on that point will be unhelpful. What will be helpful is to illuminate

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the above questions. Although the Court continues to believe that using the 2006 real-world $100

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million offer as a starting point and making adjustments is the most persuasive and practical

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approach, it may not be the only viable approach.

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IT IS SO ORDERED.

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Dated: December 27, 2011.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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For the Northern District of California

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