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Oracle Gets a Spanking & a 3rd Try to Come Up With a Usable Expert Damages Report ~ pj
Thursday, January 19 2012 @ 09:40 PM EST

The parties in Oracle v. Google have been busy debating whether or not Oracle should be allowed to submit yet a third expert damages report, after the judge found the first two were ridiculously wrong. He didn't accept the way Oracle came up with such huge damages numbers, the very ones that made headlines when the case was new.

Now the judge has issued an order [PDF], an unusual one by his own admission, a conditional order that allows Oracle a kind of limited third try by its expert, Dr. Ian Cockburn, "so long as his methodology conforms to the prior rulings herein". There will be depositions, too, with possible further Daubert motions possible afterwards from both sides. This will all be on Oracle's dime:

Oracle has already had two full and fair opportunities and has overreached on both.
Oracle has behaved unreasonably and should bear the burden of the consequences.
So, a third try, subject to the judge's conditions, if Oracle wishes to accept them. Either this judge has the patience of a saint, or he discerns that Oracle's case is falling apart and without a damages report it has zero chance.

Do you remember in the beginning, when this case was new, and a self-described "expert" in the media was pushing the idea that Oracle would win billions and billions in damages? I snorted, if you recall, and now we see it playing out. This judge isn't buying those stratospheric Oracle numbers.

Jump To Comments

In fact, the entire Oracle case is looking mighty peaked, considering how it all began, when almost the entire earth was telling us that this was a slam dunk for Oracle. I told you then, and I meant it, that anyone suing Google has a severely steep climb up a very tall mountain. Google hires the best lawyers and they fight like bulldogs. Polite bulldogs. But they don't just roll over, and Google's track record is very, very impressive.

Oracle may well get something from this awful experience, but it isn't likely to be the billions their lawyers got starry-eyed thinking about in the beginning. In fact, I can't help but wonder if they regret ever starting this Java fight. It costs a lot to go to war like this, and you really shouldn't do it if the rewards aren't going to be more than the costs. And the funny part is, this judge has been more than kind to Oracle. Even asking if he should approve a third try is amazing. You just don't see that, not after a judge has warned a party that their second try is their last chance, as this judge did. So he's bending over backwards for Oracle, and they still look like they have very bad cards in their hand.

Don't let anyone mislead you. No one knows at the start who will win in litigation. Those who pretend to can only hope no one recalls what they wrote. Do you remember when SCO filed against IBM and we had to endure ridiculous headlines about SCO asking for billions in damages? Just because a plaintiff makes such claims, it doesn't make them true or even plausible.

The judge declined to adopt the suggestion by Oracle that the patent case and the copyright case be separated, with the copyright case going first right away. The judge's plate is very full, and while it's possible if all goes smoothly, that the trial can happen in mid-April, that's not certain. It's his view that the damages issue needs to be settled before any trial can happen.

Oracle's proposal that it be allowed to withdraw the patent infringement claims without prejudice is also rejected. If Oracle wishes to drop any damages claims, it must be with prejudice. To do otherwise would manifest a tremendous waste of court resources and would be prejudicial to Google. If Oracle wants to start over, it should have to be with other patents, but they have had their shot with this set.

Oracle also should not be allowed to restart the patent infringement litigation with a new judge and different claims from these same patents (seeing as how it looks like the USPTO will knock out most of the claims presently asserted). In addition, even if Oracle asks to withdraw the patent infringement action, note that Google is not obligated to withdraw its counterclaims of invalidity.

Oracle scolded [PDF] the judge lightly, in its filing, for being too strict with them on the damages point and said they stood by their man's numbers, numbers the judge already told them were impossibly wrong. So who knows what they'll do on the third try. When you read Oracle's filing, you will likely note, as I did, that Oracle again avoids addressing the issue at hand, namely what was wrong in its eyes with Google's filing, and instead continues to go back to its same old arguments about why the Cockburn report is fine as is. Oracle reinforces the impression from their earlier filing that any third attempt is not going to follow the court's instructions but be yet another rehash of the same rejected arguments.

Google, by contrast, focused [PDF] in like a laser on what was wrong with Oracle's last filing, that they failed to address the issue, they raised issues the judge did not ask about, and they demonstrate their lack of technical understanding by now focusing on the Java programming *language*. Really, really inept, and Google is calling their hand. Google pointed out in its Response to the Court's January 9, 2012 Order on Google Motion in Limine No.3 [Dkt. 685], which you can find here, that Oracle, once again, was not only trying to re-use methodologies that the judge has already ruled are not going to happen, they added to their sins by now assessing damages in copyrights based on APIs in the Java *language*, of all desperate moves, which Oracle has already admitted to the court is in the public domain.

I know. Boies Schiller. At it again. Sometimes it works. That's why they do it, I guess. But here, it isn't working with this judge.

Speaking of misleading "experts", do you remember the predictions of an injunction? As Google points out, Oracle waited years to bring this lawsuit, didn't seek a preliminary injunction because of any "overwhelming damage", and has an expert who has admitted that monetary damages should be sufficient to make Oracle whole, should the case go that way. No one should hold their breath for an injunction in favor of Oracle.

Here are the filings:

700 - Filed & Entered: 01/19/2012
RESPONSE to re [697] Response ORACLE AMERICA, INC.S REPLY TO GOOGLES RESPONSE TO THE COURTS JANUARY 9, 2012 ORDER ON GOOGLE MOTION IN LIMINE NO. 3 [DKT. 685] by Oracle America, Inc.. (Holtzman, Steven) (Filed on 1/19/2012)

701 - Filed & Entered: 01/19/2012
Response re [698] Response ( Non Motion ) GOOGLE'S REPLY TO ORACLE'S RESPONSE TO THE COURT'S JANUARY 9, 2012 ORDER ON GOOGLE MOTION IN LIMINE NO. 3 by Google Inc.. (Van Nest, Robert) (Filed on 1/19/2012)

01/20/2012 - 702 - ORDER CONDITIONALLY ALLOWING DR. COCKBURN A THIRD DAMAGES REPORT re 700 Response ( Non Motion ) filed by Oracle America, Inc., 701 Response filed by Google Inc., 698 Response ( Non Motion ) filed by Oracle America, Inc., 697 Response filed by Google Inc.. Signed by Judge Alsup on January 20, 2012. (whalc1, COURT STAFF) (Filed on 1/20/2012) (Entered: 01/20/2012)

Here are the three documents, as text. First, the judge's conditional order. Then Oracle's, with this link to its filing, in which it presented its case; then Google's hilariously cool response:

****************************************

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

____________________

ORACLE AMERICA, INC.,

Plaintiff,

v.

GOOGLE INC.,

Defendant.

_________________

No. C 10-03561 WHA

ORDER CONDITIONALLY
ALLOWING DR. COCKBURN A
THIRD DAMAGES REPORT

The piecemeal approach suggested by Oracle as a trial alternative will not be adopted. The docket simply does not permit that luxury. Counsel are unfortunate in having drawn a judge assigned to the massive MS-13 gang prosecution, which has resulted in four lengthy trials, including one underway now, without any relief from the remainder of his normal caseload. This has led to a backlog of trial-ready cases waiting their turn. Between today and June 30, the Court has 28 cases already set for trial, including two patent cases (other than this one) and five other criminal cases, not counting trials set thereafter. In the instant case, the damages methodology must be sorted out before the case will even be trial-ready. Until then, there is no point in setting a firm trial date. If matters go smoothly herein and if other trial settings fall away, the instant case could still possibly be tried starting mid-April and all counsel and witnesses should reserve

for that possibility, failing which it will likely occur sometime during the last four months of the year. This order, however, gives no assurances as to when the case can be tried. If Oracle wishes to voluntarily dismiss any damages claim, it will have to do so with prejudice; otherwise, a dismissal is nothing more than an invitation to piecemeal litigation.

On the following conditions, as to the items previously stricken, Dr. Ian Cockburn may have a third try to calculate damages so long as his methodology conforms to the prior rulings herein. For the items stricken in the recent order (Dkt. No. 685), he may try any methodology he wishes consistent with the prior rulings but whatever method he selects will, of course, be subject to further Daubert challenge. Here are the conditions:

1. His full revised report, together with all supporting material, must be served no later than NOON ON FEBRUARY 3, 2012. He may revise only those items stricken by the recent order and the studies referred to in paragraph 4 below (Dkt. No. 685).

2. Within seven calendar days after service of the revised report, Dr. Cockburn may be deposed by Google’s counsel for seven hours.

3. Within seven calendar days of the deposition (or the end of the seven-day deposition period if no deposition is taken), the revised damages reports for Google shall be served. Only revisions directly responsive to new material by Dr. Cockburn will be allowed. To streamline matters, no deposition shall be taken of Google’s experts, Oracle may not serve a further reply report, and Oracle will not be allowed to present Dr. Cockburn as a rebuttal witness on the new material. Both sides may, of course, cross-examine the opposing experts and the Rule 706 Expert at trial.

4. By noon on the same deadline, Google must file any Daubert motion to the revisions by Dr. Cockburn including to the “econometric” and “conjoint” studies not previously addressed, to be heard on a shortened track as follows: Oracle’s opposition shall be filed seven calendar days after the motion is served and the reply shall be filed four calendar days thereafter. Filings are due at noon. The Court will announce a hearing date (if one is needed). Since Google will be

2

allowed to challenge the “econometric” and “conjoint” studies, Dr. Cockburn may strengthen and revise those aspects in his revised report as well as the items already stricken, to be done on the same schedule above, namely no later than February 3 at noon.

5. Within seven calendar days of receipt of the revisions to Google’s expert reports, Oracle may file its own Daubert motions challenging Google’s revision, said motion to be heard on a shortened track similar to the above but later in time. If Oracle waives any such challenge, then it should so advise promptly.

6. All of the above reports, motions, and responses shall be served on the Rule 706 Expert James Kearl. He shall promptly proceed with his analysis and drafting of his own report (without awaiting the outcome of the above Daubert proceedings) but shall not release any report or opinion until ordered to do so. If his report becomes authorized, Dr. Kearl may then be deposed on the timeline previously contemplated and either or both sides may bring prompt motions to challenge his analysis. Note well that Dr. Kearl will have no need to comment on damages issues excluded by order from Oracle’s damages case (and will not be authorized to do so), so neither side should gamble on the prospect of somehow being able to fall back on the analysis of the Rule 706 Expert.

7. All fees and expenses reasonably incurred by Dr. Kearl in responding to the revisions by Dr. Cockburn shall ultimately be borne by Oracle, as follows: Dr. Kearl shall track his time in such a way as to make this segregation possible. Dr. Kearl shall continue to divide his billings as before and Google shall continue to pay its share to him, but Google may demand and recover prompt reimbursement from Oracle for the portion identified by Dr. Kearl as attributable to Dr. Cockburn’s third report.

8. All attorney’s fees, expert fees, and other expenses reasonably incurred by Google as a result of allowing a third damages study by Oracle, including all expense and time discussed above, shall be reimbursed by Oracle. Google shall track such

3

items separately and invoice them to Oracle within 14 calendar days of the close of a calendar month and Oracle shall pay them within another 14 calendar days. These reimbursement amounts shall not be recoverable costs that Oracle may recover back in the event it prevails in this action.

9. The extent of which Dr. Cockburn may be impeached at trial by his track record of rejected methodologies will be decided between Phase Two and Phase Three. At this late hour, Oracle may not substitute a different damages expert or add a different damages expert. Except as above authorized, Dr. Cockburn may not make further revisions.

10. If the foregoing conditions are acceptable to Oracle, then Oracle shall so state promptly and the above plan shall be effective. If the foregoing conditions are unacceptable to Oracle, then Dr. Cockburn and Oracle shall be granted no further opportunity to revise the damages report and the case shall proceed to trial without the stricken material and Oracle will suffer whatever prejudice flows from the corresponding lack of proof. By NOON ON JANUARY 24, 2012, Oracle shall file an unequivocal and unconditional statement advising whether it will take advantage of this third opportunity provided by this order or whether it declines to do so. Please do not negotiate over the conditions or insinuate assumptions into the statement; please file either a clear “yes” or a clear “no.”

* * *

Oracle should be required to make the reimbursements described above as a condition of a third try because it would be unfair to impose on Google the fees and expenses necessary to respond to the third effort. Oracle has already had two full and fair opportunities and has overreached on both. Oracle has behaved unreasonably and should bear the burden of the consequences. Apart from reasonableness or not, allowing a third try of this magnitude is rare in federal litigation and the party responsible for the need for a third try should bear the full burden

4

thereof. A district court is not required to allow a third try at all, therefore, it is certainly allowed to impose fee and cost reimbursement as a condition of allowing a third opportunity.

Although in the past the Court has suggested possible starting points and inquired about possible methodologies (without requiring them), this order emphasizes that Dr. Cockburn may try any methodology he wishes to replace the stricken items so long as the methodology is true to the rulings previously made herein, subject to challenge by Google. No prior suggestion or question by the Court should be taken as a blessing of any particular approach, including any of the approaches referenced by Oracle in its recent filings.

IT IS SO ORDERED.

Dated: January 20, 2012.

[signature]
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

5

Oracle's:

****************************************
****************************************

MORRISON & FOERSTER LLP
MICHAEL A. JACOBS (Bar No. 111664)
[email]
MARC DAVID PETERS (Bar No. 211725)
[email]
DANIEL P. MUINO (Bar No. 209624)
[email]
[address, phone, fax]

BOIES, SCHILLER & FLEXNER LLP
DAVID BOIES (Admitted Pro Hac Vice)
[email]
[address, phone, fax]

STEVEN C. HOLTZMAN (Bar No. 144177)
[email]
[address, phone, fax]
ALANNA RUTHERFORD
[address, phone, fax]

ORACLE CORPORATION
DORIAN DALEY (Bar No. 129049)
[email]
DEBORAH K. MILLER (Bar No. 95527)
[email]
MATTHEW M. SARBORARIA (Bar No. 211600)
[email]
[address, phone, fax]

Attorneys for Plaintiff
ORACLE AMERICA, INC.

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION

ORACLE AMERICA, INC.

Plaintiff,

v.

> GOOGLE, INC.

Defendant.

Case No. CV 10-03561 WHA

ORACLE AMERICA, INC.'S REPLY TO
GOOGLE'S RESPONSE TO THE
COURT'S JANUARY 9, 2012 ORDER ON
GOOGLE MOTION IN LIMINE NO. 3
(DKT. 685)

Dept.: Courtroom 8, 19th Floor
Judge: The Honorable William Alsup

Predictably, Google opposes any opportunity for Oracle to submit a third report to establish reasonable royalty damages for patent and copyright. But instead of discussing what a third report would require, Google merely re-hashes its attacks on the second and even the first report from Prof. Cockburn, while making the absurd claim that the cost alone of responding to a narrowly amended Cockburn report would unduly prejudice it. Contrary to Google's claims, a third report only needs to fill in the one element of a reasonable royalty analysis that the Court found lacking apportionment and could do so using the very approach specifically prescribed by the Court and advocated by Google.

Oracle renews the proposal that it made in its own brief: (i) sever the patent and copyright claims, (ii) proceed to trial as soon as possible on copyright while staying the patent claims or dismissing the patent claims without prejudice, and (iii) allow a third damages report to address the narrow remaining issue of apportionment as to any claims that will not be tried by this spring. (Dkt. No. 698.) Oracle's solution would sacrifice the chance for Oracle to use a third report to prove copyright damages in exchange for the prospect of expediting resolution of this case on the merits without unfair prejudice to any party.

I. Setting The Copyright Case For Trial While Allowing A Third Report On Reasonable
Royalty Damages Is Practical, Feasible, And Would Cause No Prejudicial Delay

Oracle does not want any delay. Google cannot seriously complain about Oracle's proposal to sever, as Google has emphatically endorsed separate trial of the copyright and patent claims (Dkt. No. 628) and has repeatedly sought a stay of the patent claims (Dkt. No. 223 at 4; Dkt. No. 480 at 4).

What is most telling about Google's brief is what it is missing.

First, Google does not argue that there would be any substantive prejudice to it from allowing a third report, nor could it. Under any scenario, Google would have a full opportunity to respond to any new elements in the third report before they would be the basis of testimony at trial.

Second, Google does not try to argue that a third report would be futile, nor could it. As described in Oracle's submission (Dkt. No. 698 at 916), Oracle will implement the grouping approach to apportionment suggested in the Court's January 9 Order, could apportion applying the principles of the Federal Circuit's Finjan decision, or could apply the Alternate Approach described in the Court's December 27 Order. Any of these approaches would permit a reasonable royalty calculation consistent

with the Court's orders and suggestions, while requiring very little new analysis or disclosures. Third, Google does not argue that a third report should be denied on account of delay, nor could it. Google's strategy is delay. Even if trial is not delayed while the Federal Circuit considers Google's mandamus petition, and even if the patent claims are not stayed or dismissed without prejudice, Prof. Cockburn could prepare a third report promptly. The only new element would be an apportionment analysis, as all of the other essential elements of Prof. Cockburn's royalty analysis have already been disclosed and withstood Google's Daubert challenges.

Given the feasibility of amending the report and the absence of prejudice to Google, the only basis on which to deny a third report would be to punish Oracle. Goading the Court to punish Oracle is, in fact, the crux of Google's brief. But Daubert and its progeny rest on the Rules of Evidence, not a principle of sanctions. Rules of evidence "should be construed so as to administer every proceeding fairly, eliminate unjustifiable expense and delay, and promote the development of evidence law, to the end of ascertaining the truth and securing a just determination." FED. R. EVID. 102 (emphasis added). Oracle seeks "a just determination," based on evidence ultimately found admissible. Google seeks a windfall, based on precluding evidence of the damages it has caused.

It is equally important that Oracle has done nothing that would warrant punishment. Oracle and Prof. Cockburn applied each step of the damages approach set out in the Court's July 22 Order, including apportionment. In its November 9 Order stating the reasons for appointing a Rule 706 expert, this Court acknowledged the "unusual complexity of the damages aspect of this case." (Dkt. No. 610 at 3.) Prof. Cockburn sought to address that complexity, consistent with Federal Circuit law and sound economic principles. And even in light of the Court's second Daubert Order, Prof. Cockburn succeeded in all essential respects but apportionment a deeply challenging problem that has Federal Circuit law in flux and professional economists, such as Google's damages expert, Dr. Leonard, rejecting the approach Google itself advocates in this case. (Dkt. No. 698 at 78.) Google's experts have no apportionment analysis of their own, no analysis of the value of Sun's technology, no analysis of the performance benefits afforded by the patents, and no analysis of the value of Google's technology. Prof. Cockburn, in contrast, has tried in good faith and consistent with his training as an economist to calculate damages. He should be allowed another try.

II. Google's Arguments Do Not Warrant Denying A Third Report, Particularly Under The
Circumstances That Oracle Has Proposed

Nothing in Google's brief would justify rejecting Oracle's proposal.

First, Google contends that Oracle should be denied a third report because the Court previously warned Oracle that result was a possibility if the second report were struck in "any substantial and unseverable way." The second Daubert Order struck only one part of the second report that was essential to a reasonable royalty calculation: the apportionment of the 2006 license bundle. That aspect of the analysis is not "unseverable." The second Daubert order identifies a means to apportion the 2006 license bundle. That sole adjustment would be sufficient to bring the second report into compliance with the Court's orders and for Prof. Cockburn to testify to a reasonable royalty in this case.

Google also contends that it is "unaware of any case in which an expert has been given a third shot at producing a viable damages report." (Dkt. No. 697 at 3) (emphasis removed). That can only mean that Google did not look for such a case, for they are not hard to find, even when limited to "damages reports." See Texas Digital Sys., Inc. v. Telegenix, Inc., 308 F.3d 1193, 1219 (Fed. Cir. 2002) (affirming district court's decision to allow plaintiff's expert to submit third damages report, after second report was disallowed because expert had used incorrect cost figures); Lifewise Master Funding v. Telebank, 374 F.3d 917, 921 (10th Cir. 2004) (noting that district court allowed plaintiff four opportunities to submit a damages report); Coop. Commc'ns, Inc. v. AT & T, 31 F. Supp. 2d 1317, 1318 (D. Utah 1999) (noting that plaintiff's damage report had "gone through three revisions" over course of over one year and four months; admitting testimony based on third report); Gutierrez v. Wells Fargo & Co., C07-05923 WHA, 2010 WL 1233810 (N.D. Cal. Mar. 26, 2010) (allowing third damages report).1

Second, Google contends that Prof. Cockburn's second report "ignored the explicit direction of the Court . . . with the obvious intent of inflating Oracle's damages recovery." (Dkt. No. 697 at 3.) Even were Prof. Cockburn's motives relevant, Google's accusation that Prof. Cockburn's apportionment analysis was designed to inflate damages is untenable. The second report applies each of the steps that the Court suggested in its July 22 Order. Contrary to Google's assertion, Prof. Cockburn did apportion the value of the claimed intellectual property as a percentage of Sun's $100 million offer, based on contemporaneous evidence, the technical attributes of the patents, and detailed quantitative evidence, and explained why this approach was appropriate in applying the Court's suggested methodology. Prof. Cockburn expressly described in his September report why it would be economically improper to apportion both the value of Android and the value of the asserted claims on top of each other. (Cockburn Report, ¶ 251.) Google has not pointed to anything in the decisional law that suggests what Prof. Cockburn did was improper, and the Court has acknowledged the absence of controlling authority and the complexity of the problem. Moreover, Prof. Cockburn's analysis showed that the infringed intellectual property has already increased Android's revenues by more than $100 million a conclusion that Google did not challenge in a Daubert motion. Yet Prof. Cockburn's apportionment approach steeply discounted that figure, attributing far less than $100 million to the patents and copyrights in the starting point. Further, Google cannot assert that Prof. Cockburn's apportionment analysis overstates damages, because Google's expert has never done an apportionment analysis of any kind. Finally, the Court's own reasons for rejecting Prof. Cockburn's analysis do not support the conclusion that the analysis would overstate damages. The Court concluded that there was no relationship between the incremental value of Android as it exists today and the anticipated incremental value in 2006, and consequently, the current incremental value of Android was not necessarily an upper bound for the value of the 2006 bundle. (Dkt. No. 685 at 8); Dkt. No. 642, at 8 (reasoning that "[t]he value of Android could be more or less"). If the Court is correct, then Prof. Cockburn's apportionment analysis was as likely to understate damages as overstate them.

Google also incorrectly complains that Prof. Cockburn improperly measured the value of "features" enabled by the infringement, without accounting for Google's contributions. Prof. Cockburn valued the incremental performance benefits of the patents, as demonstrated by Android handset

modifications designed to remove only the functionality afforded by the patents. Google unsuccessfully challenged those modifications in a motion in limine, arguing that they removed too much. (Dkt. No. 676 at 23.) And Google's own damages experts have never asserted that the performance enhancements Oracle attributes to the patents could be attributed to anything Google developed.

Third, Google complains that it will have to spend time and money responding to a third report, which it claims would "effectively force yet another re-do of the entire damages expert discovery process from square one." (Dkt. No. 697, at 6). But the only new analysis would be to apportion the patent claims and copyrights compared to the other benefits on the table in the 2006 negotiation. If any further Daubert motion were permitted, its scope should be limited to whether Prof. Cockburn properly applied the facts to the methodology suggested by the Court and advocated by Google.

Fourth, Google argues that any prejudice to Oracle would be mitigated by the anticipated testimony of Dr. Kearl. To be clear, Oracle welcomes Dr. Kearl's independent analysis as soon as he can provide it. At the same time, Dr. Kearl has made clear that doing a "ground-up brand-new study" would take at least three months more than what he is currently doing. (Oct. 19, 2011 Hearing Tr. at 6 11.) Oracle does not believe that trial on copyright claims and damages should be delayed to permit this additional independent copyright analysis. Moreover, the testimony of a Rule 706 expert is not a substitute for a party expert, especially one who can generate a third report significantly more quickly than three months. Either Google envisions further delaying the proceedings to allow Dr. Kearl to perform a complete analysis while preventing Prof. Cockburn from taking far less time to amend his existing report, or Google envisions a damages phase in which the jury hears no expert testimony (Google's experts having advanced none) on the apportionment issue that the Court has identified as critical to the reasonable royalty calculation. In either case, Oracle is prejudiced and Google benefits.

Dated: January 19, 2012

BOIES, SCHILLER & FLEXNER LLP

By: /s/ Steven C. Holtzman
Steven C. Holtzman

Attorneys for Plaintiff
ORACLE AMERICA, INC.

________________
1 Google's cited cases do not support its argument. In Cornell, Judge Rader concluded during trial that plaintiff was improperly invoking the entire market value rule, contrary to prior orders, and gave plaintiff a chance to correct that error by changing its damages analysis in the middle of trial. Plaintiff refused to do so, and Judge Rader then rejected the testimony in a JMOL order after trial. Cornell Univ. v. Hewlett-Packard Co., 609 F.Supp.2d 279, 282 (N.D.N.Y. May 15, 2009). InRolls Royce, the district court excluded the plaintiff's first report; there is no discussion of any opportunity to amend. Rolls- Royce PLC v. United Techs. Corp., No. 1:10-cv-457 (LMB/JFA) 2011 WL 1740143, at *2 (E.D. Va. May 4, 2011). In Emerald Investments, the plaintiff's expert's first report was so "preposterous," "irresponsible," and biased that district court properly held that the expert would not be allowed to offer another report, a decision that was not appealed. Emerald Investments Ltd. P'ship v. Allmerica Fin. Life Ins. & Annuity Co., 516 F.3d 612, 61718 (7th Cir. 2008).

Now

Google's:

***********************************
************************************
***********************************

 KEKER & VAN NEST LLP
ROBERT A. VAN NEST - #84065
[email]
CHRISTA M. ANDERSON - #184325
[email]
DANIEL PURCELL - #191424
[address, phone, fax]

KING & SPALDING LLP
SCOTT T. WEINGAERTNER (Pro Hac Vice)
[email
ROBERT F. PERRY
[email]
BRUCE W. BABER (Pro Hac Vice)
[address, phone, fax]

KING & SPALDING LLP
DONALD F. ZIMMER, JR. - #112279
[email]
CHERYL A. SABNIS - #224323
[email]
[address, phone, fax]

IAN C. BALLON - #141819
[email]
HEATHER MEEKER - #172148
[email]
GREENBERG TRAURIG, LLP
[address, phone, fax]

Attorneys for Defendant
GOOGLE INC.

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION

ORACLE AMERICA, INC.,

Plaintiff,

v.

GOOGLE INC.,

Defendant.

Case No. 3:10-cv-03561-WHA

GOOGLE'S REPLY TO ORACLE'S
RESPONSE TO THE COURT'S
JANUARY 9, 2012 ORDER ON GOOGLE
MOTION IN LIMINE NO. 3

Dept.: Courtroom 8, 19th Floor
Defendant. Judge: Hon. William Alsup

The Court is now dealing with the issue whether to give Oracle a third chance at serving a viable, legally compliant damages expert report because Oracle has twice served overreaching damages reports that ignored governing law. Even worse, Oracle's second try at a damages report ignored the unambiguous instructions in the Court's July 22 , 2011 Order. The Court ordered Oracle to serve a second report that (1) apportioned the intellectual property at issue in the 2006 negotiations between "the asserted claims" and "the rest of the Java platform," July 22, 2011 Order [Dkt. No. 230] at 5-6 ; and (2) was based on "claim-by-claim analysis." Id. at 7. Oracle's second report did neither of these things. Nowhere in the many briefs filed on this issue has Oracle ever explained why it ignored these clear instructions.

More disturbingly, Oracle's response goes even further--implying that, if the Court gives it a third try, it will yet again ignore the Court's explicit rulings and shoot for the moon using the same, repeatedly rejected analysis. Oracle pays lip service to the Court's rulings, but makes clear it rejects the premises of those decisions, insisting that "its damages claims and analyses are reasonable and correct in light of the evidence, and are consistent with the Supreme Court and Federal Circuit precedents on the issues of apportionment, claim-by-claim analysis, and calculation of future royalties." Oracle Resp. [Dkt. No. 698 ] at 2. It criticizes the Court for "tak[ing] an unduly strict and improperly narrow approach to the analysis of damages in this case." Id. Although it "regrets that the Court has formed [the] view" that Oracle has improperly inflated its damages, it "does not withdraw Prof. Cockburn's previous reports ... because it believes it would be improper to do so under the statutory and decisional law." Id. at 5. These statements confirm that a third report would again ignore the law and the Court's rulings.

In fact, in its latest brief Oracle appears to backtrack to an overbroad concept of damages based on Google's use of the public-domain Java programming language, contending that:

The copyrighted APIs are essential, Google concedes, once a decision has been made to use the Java programming language. Prof. Cockburn's September report extensively documents the evidence from 2005 and 2006 that shows that Google believed that the Java programming language provided unique benefits to a smartphone platform, in terms of an established developer community, familiarity, and the demands of wireless operators, such that Java was the only language that Google seriously considered and the language that Google decided was superior to all others.

Oracle Resp. [Dkt. No. 698] at 12 (emphases added). This case is not about the value of the Java language. Oracle has conceded repeatedly in open court that anyone is free to use the language. (Indeed, Oracle's response concedes that the APIs on which its copyright claim is based are an essential part of the language and accordingly should be freely usable by anyone.) This is the same tack taken by Oracle in its original May 2011 damages report, in which it purported to calculate damages based on the value of "Java," rather than the asserted inventions. The Court emphatically rejected that effort.See July 22, 2011 Order [Dkt. No. 230] at 5.

With respect to the Court's instruction that Oracle undertake a claim-by-claim analysis of damages, Oracle does not even pretend it would follow the Court's direction in a third report. Instead, it insists that "[i]t would be inappropriate to apportion among the claims, because the value of every claim is identical and duplicative, not cumulative or overlapping." Oracle Resp. at 16 . This is the same argument that Oracle has already made repeatedly, see Oracle Opp. to Google MIL No. 3 [Dkt. No. 494-1] at 16-17 ; Oracle Supp. Br. [Dkt. No. 572] at 15-17 , and this Court rejected. See Jan. 9, 2012 Order [Dkt. No. 685] at 9-10. If this is so, one is left to wonder why Oracle is still asserting separate patent claims. In any event, given Oracle's fundamental refusal to accept the Court's repeated prior rulings, a third report would be an exercise in futility.

A. Courts do not routinely grant experts third chances to offer viable damages reports.

Oracle cites two cases in which courts have given experts leave to submit revised reports, see In re Ephedra Products Liab. Litig., 04 M.D. 1598, 2007 WL 4643885 (S.D.N.Y. Apr. 3, 2007); Kroger v. Legalbill.com LLC, CIV A 04-2189 ESH, 2007 WL 4730719 (D.D.C. Feb. 5, 2007), but neither of those cases involved leave to serve a third expert report after two previous failures, or where the expert had previously ignored express instructions from the court. Indeed, in one of the two cases, the court allowed a revised report without striking the expert's previous report at all. In re Ephedra, 2007 WL 4643885, at *1. Those cases are inapposite.

Oracle also cites this Court's decision to allow a third expert report in one case, Gutierrez v. Wells Fargo & Co., C07-05923 WHA, 2010 WL 1233810 (N.D. Cal. Mar. 26, 2010), but that case is nothing like this one factually. There, the Court initially rejected class plaintiffs' damages report because it failed to calculate damages "on a member-by-member basis." Id. at

* 2. The Court substantially upheld the second report, but struck minor aspects of that report for reasons having nothing to do with the exclusion of the first report. Id. at * 12. The Court gave plaintiffs the chance to fix the limited flaws with the second report, but they had not done what Oracle did here: ignoring the Court's identification of errors and express instructions in the order striking its first report, and willfully repeating those same errors in the second report. Moreover, Dr. Cockburn's stricken apportionment analysis was not a minor component of his report; it was the starting point and fundamental basis of his entire patent and copyright royalty analysis.

B. None of Oracle's three proposed methods for Dr. Cockburn are acceptable.

Oracle suggests three "new" methods that Dr. Cockburn could employ, but all three have already been rejected by this Court in its prior rulings.

First, Oracle's "Method " purports to be a grudging agreement, "with concerns," to use the framework in the Court's January 9, 2012 Order. Oracle Resp. [Dkt. 698] at 10. But Oracle offers only the briefest explanation of how Dr. Cockburn would identify and value the components of Sun's $100 million demand--and, at deposition, Dr. Cockburn admitted having no idea what those components even were. Further, even Oracle's sketchy explanation reveals that it is still planning to conflate the lesser value of the asserted inventions (which Dr. Cockburn is obligated to value) with the greater value of "features and technical specifications of Android," id., just as it did in its rejected second report. Google and Sun were not negotiating over Android's "features." They were negotiating for a partnership that would have given Google the right to inventions that could be used, along with Google's IP and hard work, to enable features.

Second, Oracle's "Method " is an even worse iteration of the same bad idea--proposing to allow Dr. Cockburn to calculate the value of certain Android features to Google, then ascribe some or all of the value of those features to the asserted inventions, without any further analysis. Again, this compares apples and oranges. The claimed inventions are not equivalent to Android's processing speed, which is the complex result of myriad pieces of intellectual property, including hardware, Google's source code, and other components of the Dalvik virtual machine which are not alleged to infringe, as well as other licensed or open-source technology, including the Linux kernel. Oracle suggests that Dr. Cockburn's "analysis" would amount to a

subjective judgment about what represents the "substantial fraction" of the Android feature that is enabled by the claimed inventions.

This approach is not grounded in economics. It ignores the Court's mandate that "a fair apportionment of the $100 million as between the technology in suit and the remainder of the technology then offered must be made." Jan. 9, 2012 Order [Dkt. No. 685] at (emphases added). And, contrary to Oracle's argument, Finjan, Inc. v. Secure Computing Corp., 626 F. 3d 1197 (Fed. Cir. 2010), offers no support for a damages analysis that conflates the value of features of an accused product with the value of an invention. There, the defendant challenged a royalty award by arguing about the sufficiency of evidence under several of the Georgia-Pacific factors. The language Oracle cites is from the court's brief discussion of Georgia-Pacific factor 13, where it ruled that the expert's opinion that the patented inventions were "fundamentally important to the product" was probative under factor 13. Id. at 1211. But that was just one of non-exclusive factors bearing on a royalty calculation, one input in a more sophisticated analysis. Neither the Finjan court, nor any other Google is aware of, has ever suggested, much less held, that a plaintiff could arbitrarily assign part or all of the value of a given product feature to an invention based on purported "importance."

Third, Oracle's "Method 3" is exactly the same approach Oracle proposed in its January 5, 2012 response to the Court's December 27, 2011 Order. [Dkt. No. 682] The Court did not adopt the proposed approach discussed in the December 27, 2011 Order, and rejected the logic of Method 3 in its January 9, 2012 Order. The Court was right to reject it. Just as Google has previously explained in its Response to the Court's December 27, 2011 Request [Dkt No. 681], "Method 3" improperly substitutes the 2011 value of Android and its features for the value negotiators hypothetically would have placed on the claimed inventions in 2006 . Federal Circuit case law requires that a patent royalty be determined based on the parties' "sales expectations at the time when infringement begins ... as opposed to an after-the-fact counting of actual sales." Interactive Pictures Corp. v. Infinite Pictures, Inc., 274 F. 3d 1371, (Fed. Cir. 2001). The facts of this case show that in 2006 it was uncertain whether Android would be successful at all. But even more distressingly, despite repeated statements from the Court, see, e.g., Dec. 27, 2011

Request [Dkt. No. 657] at 2 ("The value of a feature must be apportioned among all of the know- how inputs that enabled it."), Oracle continues to insist that Google's work in allegedly turning the inventions at issue into Android features was worth nothing. Oracle Resp. [Dkt. 698] at 15. First Oracle claims it has already isolated Oracle's contribution by measuring the "incremental benefit" of the claimed inventions to Android, even though it has never accounted for Google's work in allegedly implementing those inventions. Oracle criticizes Google's experts for failing to value Google's contribution to the relevant features, but that valuation was Oracle's burden. Finally, without explaining how, Oracle asserts that, "to the extent" Google contributed anything, "Prof. Cockburn would account for the value" of Google's work. Id. The Court has heard this song before. It is clear that Oracle plans to yet again ignore the law and this Court's orders.

C. Response to Oracle's unsolicited trial plan comments.

Finally, with respect to Oracle's extensive discussion of potential alternative trial plans, those same issues were briefed by the parties and decided by the Court just last week, and the Court did not ask the parties for further comment on those issues. But Oracle's belated claims of irreparable harm are fictional. Oracle waited nearly three years after Android's public announcement in 2007 and nearly two years after the release of the first Android phone in 2008 even to file suit. In the nearly 18 months since filing suit, it has never sought a preliminary injunction. Even its own damages expert has expressed the opinion that any future harm to Oracle could be compensated with money damages, and the Court established a protocol in its January 9, 2012 Order for such a calculation. Jan. 9, 2012 Order [Dkt. No. 685] at 11. Second, to the extent Oracle justifies its various trial plans on the grounds that they would permit Dr. Cockburn to draft a third report, there is no justification for permitting a third report, as set forth above. In any event, Oracle concedes it is perfectly capable of presenting a damages case even without a further report from Dr. Cockburn. Oracle Resp. [Dkt. 698] at 4-5. Dated: January 19, 2012

KEKER & VAN NEST LLP

By: s/ Robert A. Van Nest
ROBERT A. VAN NEST
Attorneys for Defendant
GOOGLE INC.


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