One of the key discovery issues that has still been open in the Oracle v. Google case has been Oracle's access to Google's non-mobile data and financial projections for advertising revenue. Of course, a key component of Oracle's damages claim is that Google benefits, in terms of advertising revenue, from the use of the Android operating system in mobile devices. The magistrate has now resolved the issue.
Following a hearing on the subject on August 19, the magistrate issued an order [PDF] in which she dramatically narrowed the scope of what Google will have to produce, but Google will clearly have to produce some relevant information. The magistrate found that Oracle's request was far too detailed to be reasonable, so the magistrate is ordering Google to produce reports that one would expect Google to have produced in the normal course of business.
So Oracle gets at least high-level data on Google's non-mobile advertising revenue, but Google is spared having to dig up information at an excruciating level of detail. The issue of the relationship between Android and Google's non-mobile advertising revenue remains alive with respect to the determination of damages.
08/22/2011 - 348 - STIPULATION and Proposed Order to Extend Due Dates for Expert Rebuttal and Reply Reports on Patent-Related Issues by Google Inc.. (Kamber, Matthias) (Filed on 8/22/2011) (Entered: 08/22/2011)
08/22/2011 - 350 - Transcript of Proceedings held on 8-19-11, before Judge William Alsup. Court Reporter/Transcriber Katherine Wyatt, Telephone number 925-212-5224. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerks Office public terminal or may be purchased through the Court Reporter/Transcriber until the deadline for the Release of Transcript Restriction.After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. Release of Transcript Restriction set for 11/21/2011. (kpw, COURT STAFF) (Filed on 8/22/2011) (Entered: 08/22/2011)
08/23/2011 - 351 - RESPONSE TO ORDER TO SHOW CAUSE by Google Inc. Declaration of Eugene M. Paige In Response To August 16, 2011 306 Order To Show Cause. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7)(Paige, Eugene) (Filed on 8/23/2011) Modified on 8/24/2011 (wsn, COURT STAFF). (Entered: 08/23/2011)
08/23/2011 - 352 ORDER re 295 Document E-Filed Under Seal filed by Oracle America, Inc. Signed by Magistrate Judge Donna M. Ryu on 8/23/2011. (dmrlc2, COURT STAFF) (Filed on 8/23/2011) (Entered: 08/23/2011)
UNITED STATES DISTRICT COURT
ORACLE AMERICA, INC.,
NORTHERN DISTRICT OF CALIFORNIA
No. C-10-03561-WHA (DMR)
ORDER RE JOINT DISCOVERY
LETTER OF AUGUST 10, 2011
[DOCKET NO. 295]
Before the court is the parties’ joint discovery letter dated August 10, 2011 (“Letter”)
concerning Plaintiff Oracle America, Inc.’s request for Defendant Google, Inc.’s non-mobile data
and financial projections in its effort to calculate possible damages that may arise from Google’s
alleged patent and copyright infringment. [Docket No. 295.] This court conducted a hearing on
August 19, 2011. This order summarizes the rulings made by the court during the hearing.
Damages in Patent Cases
When determining damages in patent cases, courts often turn to “the reasonable royalty”
method, which calculates what the plaintiff “would have received through arms-length bargaining.”
Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009) (citations omitted). The
law recognizes multiple approaches for calculating a reasonable royalty. The analytical method
“focuses on the infringer’s projections of profit for the infringing product.” Id. (citation and
quotation marks omitted) (describing analytical method as calculating damages based on infringer’s
own internal profit projections for infringing item at time infringement began and then apportioning
projected profits between patent owner and infringer).
A more common method for determining a reasonable royalty, the “hypothetical negotiation”
approach, “attempts to ascertain the royalty upon which the parties would have agreed had they
successfully negotiated an agreement just before infringement began.” Id. at 1325 (citations
omitted). This method “tries, as best as possible, to recreate the ex ante licensing negotiation
scenario and to describe the resulting agreement. In other words, if infringement had not occurred,
willing parties would have executed a license agreement specifying a certain royalty payment
scheme.” Id. Despite the retrospective nature of this approach, evidence of usage after infringement
can, under proper circumstances, “provide information that the parties would frequently have
estimated during negotiations.” Id. at 1334 (citation omitted).
In his July 22, 2011 Daubert order, Judge Alsup stated that “[t]he relationship between
Android and Google’s advertising revenues would have been known to the parties at the time of [a]
hypothetical negotiation. Plaintiff may base its damages model on then-expected advertising
revenue so long as apportionment is done.” [Docket No. 230.] This court takes Judge Alsup’s
ruling as the basis from which the court should permit Plaintiff to obtain discovery relating to
Defendant’s non-mobile operations.
Judge Alsup’s order repeatedly makes clear that any damage analysis must account solely for
the contribution of infringing features. However, because Plaintiff’s request arises during discovery,
the court will not require Plaintiff to tether its discovery requests to specific infringement claims or
make a damage apportionment showing at this time. Nevertheless, the court remains mindful that
the discovery process must adhere to the proportionality requirements of Rule 26 of the Federal
Rules of Civil Procedure. See Fed. R. Civ. P. 26(b)(2)(C) (“[T]he court must limit the frequency or
extent of discovery otherwise allowed by these rules . . . if it determines that: . . . (iii) the burden or
expense of the proposed discovery outweighs its likely benefit . . . .”).
As a result of the court-ordered meet and confer process, the parties narrowed their disputes.
Oracle pared down its requests, and Google offered to produce certain materials as a compromise.
Oracle now asks the court to compel Google to produce the following data:
For each of 5,000 individual keywords, (keywords to be selected by Oracle),
quarterly data for the period 1/1/2004 through 7/31/2011 on the following (limited to
the United States):
(Letter at 2-3.) Defendant opposes these requests as overly burdensome in relation to the relevant
information that they may provide. (Letter at 6.) The court agrees.
- Total search volume (e.g. number of auctions or searches per month per
- Average Cost Per Click (“CPC”)
- Average Click Through Rate (“CTR”)
- Total Search Advertising Revenue
Quarterly aggregate data between and including Q1 2004 and Q1 2011 on the
following (limited to the United States):
- Total search volume (e.g. number of auctions or searches per month per
- Average CPC
- Average CTR
- Total Search Advertising Revenue
The high specificity, complexity and volume of Oracle’s requests, and the significant
burdens that they would place upon Google, outstrip the likely benefit to Plaintiff’s damages
calculation. Oracle seeks the information because its experts “intend to isolate the effect of Android
on Google’s non-mobile revenues through a statistical analysis of search volume, click-through
rates, cost per click, and revenue for keywords before and after the introduction of Android.” (Letter
at 2.) As such, these requests go well beyond the type of information that would have been available
to the parties in a past hypothetical negotiation. See Lucent Techs., Inc., 580 F.3d at 1325.1 Instead,
the court will compel discovery geared toward arming the hypothetical negotiators with information
that they would have had about the likely effect of Android on Google’s advertising revenues. As
noted in Lucent, it is appropriate to include some actual post-infringement data. The court will also
compel a representative body of Google’s non-mobile projections.
The court therefore narrows the scope of Oracle’s requests and ORDERS the following: By
the close of business on August 22, 2011, Google shall search for and provide Oracle with a list of
regularly produced non-mobile revenue projections that would have been prepared for the two
highest levels of Defendant’s management. The list shall be geared toward providing Oracle with
the information it needs to make meaningful decisions about which documents it seeks. At a
minimum, that information shall include (1) who prepared the report, and for whom it was intended;
1 Oracle argues that its discovery demands are justified by its claim for damages for copyright
infringement. However, Oracle has made absolutely no showing that the alleged infringement of certain Java
class libraries is causally connected to Google’s advertising revenues. Oracle’s copyright damage argument
is therefore too speculative to support these discovery requests.
(2) the types of data captured in the report; and (3) the purpose of the report. The parties then shall
meet and confer, and Oracle shall inform Google which documents from the list that it desires no
later than close of business on August 23, 2011. With respect to the relevant timeframe for these
documents, Google shall produce non-mobile annual third quarter revenue projections for 2005
through 2008 and for the first quarter of 2009. If any given projection does not exist, Google shall
produce a projection for the following quarter. Google shall provide Oracle with these documents
by close of business on August 29, 2011.
The court also ORDERS that Google shall prepare and produce actual quarterly data for 1Q
2004 through 1Q 2011 regarding Google’s total number of searches, average CPC for search ads,
average CTR for search ads, and total advertising revenues. Google shall provide this information to
Oracle in waves as soon as data sets are generated, completing all production by September 5,
2011.2 As a final matter, the court notes that it is unclear how difficult or time consuming it
will be for Google to produce the aforementioned materials, or how voluminous the production will
be. This court does not have the authority to grant Oracle permission to supplement its expert
damage report with late-produced or unexpectedly voluminous information that it had to move to
compel from Google. However, the court notes for the record that Oracle made timely discovery
requests and moved promptly to compel responses thereto.
IT IS SO ORDERED.
Dated: August 23, 2011
DONNA M. RYU
United States Magistrate Judge
2 At the discovery hearing, Google certified to the court that using search terms provided by Oracle, it
had searched for documents relating to the impact of Android on any aspect of “network effects,” including
on Google’s advertisement revenues and other non-mobile business. Google certified that all documents
discovered as a result of the new searches have now been produced.