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Google Prevails (mostly) on the Motions Against Dr. Kearl ~ pj
Wednesday, April 11 2012 @ 07:12 AM EDT

This is a refreshing moment. A judge has finally told Oracle's lawyers that the relief they were asking for in a motion signed by a Boies Schiller lawyer would be unfair, excessive, and prejudicial to Google.

I've been wondering when a judge would notice, and I am so satisfied to know that someone finally has. You and I have been noticing that for some time, and we surely saw that same style in the SCO wars, where SCO was represented by the same law firm -- remember SCO trying to accuse IBM of "hacking" its website, which can be a *felony* under the Computer Fraud and Abuse Act, for downloading Linux from SCO's web site? -- so it is so reassuring to see a judge call them on going overboard.

By the way, the Ninth Circuit just ruled that the CFAA doesn't cover violations of use restrictions: "We construe criminal statutes narrowly so that Congress will not unintentionally turn ordinary citizens into criminals." So there, SCO. You can read more about the decision on Legal Pad. This might end up an issue before the US Supreme Court, thanks to this decision, because the circuits don't agree in more or less identical fact patterns. But for sure SCO was perfectly willing to try to portray IBM as some kind of common criminal. "Hacking", no less. I expect Oracle to try to paint Google that way too, with excessive gobs of paint thrown at them, but in both cases, it really turns my stomach to watch. And I'm sorry you have to watch, because one of the purposes of Groklaw has always been to help you understand the legal process and how to work through issues effectively that way. And I know this isn't helping you to respect the law.

But this judge helps, don't you think? Here's what it is about. Both sides in Oracle v. Google had filed motions to strike parts of what the neutral third party expert, Dr. James Kearl, had filed in his report. And Google has prevailed overall. Let me show you.

Jump To Comments

First, the docket:

04/10/2012 - 889 - Letter from Michael A. Jacobs re 857 ORDER Regarding Telephone Call. FILED UNDER SEAL. (wsn, COURT STAFF) (Filed on 4/10/2012) (Entered: 04/10/2012)

04/10/2012 - 890 - STIPULATION AND ORDER REGARDING TRIAL PROCEDURES by Hon. William Alsup granting 884 Stipulation.(whalc1, COURT STAFF) (Filed on 4/10/2012) (Entered: 04/10/2012)

04/10/2012 - 891 - ORDER REGARDING DAUBERT MOTIONS AGAINST DR. JAMES KEARL by Hon. William Alsup granting in part and denying in part 845 Motion to Strike 850 MOTION to Strike.(whalc1, COURT STAFF) (Filed on 4/10/2012) (Entered: 04/10/2012)

I find it frustrating, as in the SCO v. IBM case, when a party asks for the sun, moon and stars, when it at most deserves one star, and then files motions to make sure the other side gets nothing but an unfair playing field. To then watch the judge act like it's normal or even acceptable makes it even worse. Here, the judge shows, and says out loud, so to speak, so it's part of the record, that he sees Oracle overplaying its hand, and I suspect we'll see more of that if they don't take a hint. Knowing Boies Schiller, I doubt they'll take a hint.

Anyway, Google won on the following:

1. Dr. James Kearl, the court's neutral expert, had written that the value to Oracle of the infringed material should be the entire Java mobile edition intellectual property portfolio as of 2006, when the parties met for negotiations. The judge says that his reasoning was "that if Google was interested in writing its own operating system but decided that it needed to be written in Java and based on Java mobile-like technology, then Google would have gotten a license to Sun’s entire mobile portfolio as 'insurance against litigation if it happened that Google' later infringed unintentionally."

However that leaves out of the picture that this judge earlier had already ruled that any damages, should they need to be calculated, must be “tailored to the amount and type of infringement that actually occurred” and that “the reasonable royalty must compensate for the infringing features, but not for non-infringing ones”.

Google didn't have to license the entire portfolio for this project, the judge notes, and it doesn't infringe the entire portfolio, and besides, Oracle would be "overcompensated" if it could sue folks over and over for a different alleged copyright being infringed and get paid each time for the entire bundle.

What a racket that would be. Some things are just obvious even to us non-experts. What? Oracle's lawyers didn't think of that overcompensation angle? Or did it hope the judge wouldn't?

Anyway, the judge noticed this unfairness. I'm really starting to like this judge a lot. It took him a while to get up to speed on the technical arguments, but he's getting there now. The judge strikes those paragraphs, 101 and 102, from the report, so the jury won't be hearing about that. Paragraph 103 is stricken as to any suggestion that Google was trying for a license to the entire portfolio, and paragraph 104 is stricken "to the extent that it relies on the above-stricken material".

There is another paragraph Google sought to strike, paragraph 100, but here the language is conditional (“if Sun and Google understood that the subset of Sun’s Java ME IP portfolio most relevant to their negotiations was composed of the now in suit patents and copyright, the 2006 value of the Java ME IP portfolio is the value of the in suit IP”), so the judge denies but without prejudice, meaning Google can bring it up again and do a better job of convincing him. And for sure, even as it stands, Google will be able to honestly tell the jury that it wasn't the understanding it had in 2006.

2. Oracle sought to preclude both Dr. Kearl and Google's expert Dr. Alan Cox from providing any testimony about Google's Android expenses, and subtracting that from any copyright disgorgement amounts. In other words, as I understand it, they wanted it to appear to the jury that the entire profit of Android was due to their copyrighted materials being infringed and so Google should hand over all its profits from the alleged infringement, as if Google's contributions to Android don't count at all toward its success. 37 APIs and 9 lines of code and 4 comments. Are they kidding? That's why people buy an Android? Most people don't even know what an API is. For anybody new here, Google earlier, in a trial brief last October, explained:

First, Oracle does not claim that Google's code infringes any Oracle copyright, because Google used entirely different code, much of it newly written by Google and its partners. Instead, Oracle claims that Android's inclusion of code libraries implementing the APIs from 37 Java language API packages (including the method signatures for everyday functions like abs() to calculate an absolute value and sqrt() to calculate a square root) infringes its copyrights.

Oracle cannot be right. The API packages and their organization are functional elements of the Java language that are essential for interoperability. Oracle has conceded that the Java programming language can be freely used by anyone. For years, Sun promoted the use of that language and its APIs by developers who write Java-language code. It is impossible, practically speaking, to use the Java language without the API packages. Even Oracle's expert admits that some of the API packages are "functionally necessary" to use the language. The API packages and their organization define the parts of speech—-such as verbs and nouns—and rules of grammar that enable Java-language speakers to understand one another. Without Android libraries implementing the API packages, an applications developer writing Java-language code for Android today would have no way to ensure she could safely use existing code using the APIs, and instead would have to learn a new vocabulary different from the standard widely-used Java language vocabulary.

No court ever has accepted the copyrightability of APIs. Oracle tries to justify its novel argument for API copyrightability by arguing that the creation, selection, and organization of APIs is a "creative" process. But the Copyright Act protects only original and creative expression, not effort or ideas (even if those efforts and ideas are creative). Programming interfaces are thus not protectable, as the Ninth Circuit repeatedly has held.

We just learned when the court had the parties file unredacted versions of recent supplemental copyright liability trial briefs, very much regarding APIs, that at former Sun CEO Jonathan Schwartz's deposition in this case, he was asked if people could use the APIs freely, and he said Yes:
II. Apache never agreed to a field-of-use restriction, and Sun never objected to the use
by Apache and others of the Hava language APIs.

Jonathan Schwartz, Sun's CEO from 2006 to 2010, testified that, absent a desire by Apache to call its Apache Harmony product “Java,” Apache was free to offer its implementation of the Java language APIs for free, and others were free to use those implementations:

Q. Were you generally familiar with how the Apache Harmony product worked?

A. Yes.

. . .

Q. And based on your understanding, as long as users did not call their products Java, they were free to use the source code that Apache Harmony made available?

A. Yes.

Schwartz Dep. at 49:11-50:10; see also id at 47:17-23 (“It’s a free world. . . . If they called it Java, we would be involved. If they didn’t call it Java, then they could call it a Linux phone, they could call it a free phone or an open phone, that’s up to them.”). However, "In order to call your product Java, and in order to feature to the marketplace that you were a Java phone or a Java device and to get that brand, you needed to pass that the -- the TCKs, the Testing [sic] Compatibility Kits." Id. at 46:17-21.

Yet here comes the next owner, Oracle, suing Google for doing what Schwartz said was OK to do. More, that a group of things that can't be copyrighted become copyrightable, if you collect a lot of them. Huh? Oracle likes to talk about novels, comparing the law for novels to software and trying to make it mesh, but software isn't a novel, and there are rules about functionality in software that don't come up with novels. In short, this is an attempt to make the law of copyright even more broad than it already is, to cover something new no one expected it to cover, and suing someone who didn't know it was objectionable to anyone. How's that for litigation by ambush?

It's just not fair to try to change the rules midstream, then suing retroactively for millions over something no one had notice was a problem. I asked Richard Stallman what he thinks of it. He said, "I agree that nobody should be allowed to have a copyright on an API. I think Oracle should lose this case, and I am willing to be quoted." And I agree not only with the statement but with the emotion behind it.

I just had to correct that paragraph. I had written SCO instead of Oracle, by mistake. The brain knows what it knows. And what it knows is that SCO did the same thing, in essence, sued folks over elements which no one in the software world would dream SCO would sue over, given the company's prior behavior and statements and common custom, and then acted indignant in a little play-acting for the cameras. It was also an attempt to spread copyright to cover new elements, and SCO also talked about novels.

It's hard enough to write any code any more without stepping on somebody's patents. And now they want to make copyright even more onerous than it already is. The only winners would be large companies with tons of money in such a world. There would never be another Linux, because students don't have millions to take a license for someone's entire IP portfolio or even a part of one. Google has millions, but Linus surely didn't when he started. So the folks now running the software show would get a total lock on the market, and new and innovative players would be priced out of even being able to get started.

Maybe that's the goal, to price Linux and FOSS out of the market. If so, they should be ashamed, and the lawyers should be ashamed to help them do it, in my view. I hope they didn't understand the tech of it sufficiently to see the impact that winning would have.

Anyway, the lawyers for Oracle came up with an issue about witnesses and who they can rely on and who has to be a witness according to the rules and how Dr. Cox has to do an independent audit and blah blah. But the real purpose was just to win by not allowing Google to deduct its expenses. So here's what the judge wrote: that Dr. Cox doesn't have to do an independent audit and others Dr. Cox talked to can testify on the topic, with the proviso that if Google fails to lay a proper foundation at trial regarding the figures they assert, then Oracle can raise the objection again. But what are the odds that Google will let that happen?

Oracle objected to the fact that Dr. Cox spoke to a certain Google employee, Mr. Adyita Agarwal, a senior financial analyst at Google, about the figures before writing his report, and the guy isn't on Google's witness list. Oracle said that the punishment for failure to list him should be that no one else should be allowed to lay the foundation of the expenses valuation, that there was no other competent witness on that topic.

I mean, *really*?! Sun, moon, and stars time.

Or as the judge puts it, "This punishment is too harsh for failure to list a witness." He cites the rule, Rule 37(c), which calls for sanctions, "unless the failure was substantially justified or is harmless." Of course, Oracle's lawyers glossed over that part and just wanted the sanctions. But the judge tells them plainly that they're going overboard:

Oracle’s motion, which seeks to prevent any testimony based on the P&L statements, would be highly prejudicial to Google because then the jury would not have any information regarding deductible expenses for Android. These expenses were approximately $700 million. Our court of appeals has specifically cautioned against such an unjust outcome....

Here, it is clear that Android’s gross revenue through 2011 was not entirely profit attributable to the allegedly infringed material. There were undoubtedly expenses that went into the development and marketing of Android. It would be unjust to hide these expenses from the jury. Moreover, any prejudice to Oracle of allowing another witness to lay the foundation for the P&L statements is minimized because Oracle was on notice that other witnesses on Google’s witness list, such as Android project head Andy Rubin, would potentially testify about the costs that went into Android...

What Oracle wants is unjust. There. Someone has said it.

So the judge offers a plan. Google will be allowed to supplement Dr. Cox's report, and Oracle can depose the other folks who are on the Google witness list to testify on this topic who helped Dr. Cox prepare his report. If Oracle isn't satisfied, they can bring up the motion again. Of course, you and I suspect they will be dissatisfied, because that's how they roll.

Do not expect reasonableness from this crew, please. You risk disappointment.

You know how studies have shown that the bigger the lie, the more people will believe it? Well, Oracle could be said to be going for the Big Ask. They ask for an awful lot of money for such a small alleged infringement, even if they can prove it, which I doubt. Your hint is when Oracle decided to sue over APIs. 37 APIs, functional code, and 9 lines of copied code. That is it. Oracle claims that while the names of the APIs might not be copyrightable, if you arrange them with creativity, then they are. But Oracle's argument is... well, I'll just say that every time I think I've understood it, I say to myself, "That can't be it. That's silly."

That doesn't mean Oracle will stick to the 37 APIs. Here's what I think they will go for at trial, from their most recent filing, #882:

Oracle will be arguing at trial that the selection, structure, and organization of thousands of names in the APIs and class libraries are protected by copyright and that Google copied them. ...

Google may well have lifted the API elements and their structure, selection, and arrangement from Oracle's source code, which it demonstrably had access to.

Oracle did not admit that except for "nine lines" there was no source code copying. Quite the opposite, in fact...

Second, Google engineers consulted Oracle's API specifications and source code when working on Android. The jury could well find that the Android source code was copied from Oracle source code....

MR. JACOBS: Because there is some code that literally you can line up word for word in that code, in that source code, the noncomment source code, the compiled source code, you can line up those words with the corresponding words in what we're calling the specification.
At the hearing, Oracle stated that because Google's source code and Oracle's source code contain the same language, "word for word," the source code is, in part, the same. Moreover, the selection, arrangement, and structure of the APIs that Google admitted copying could have been copied from Oracle's source code.
I'm not positive I know what Mr. Jacobs is hinting at. But here is a hint for him: if the "words" don't line up, it's not an implementation of the API.

Words in the code match words in the API specification, therefore Google actually copied from the code, maybe, instead of the specification? Then what? Well, a claim of derivative work, maybe, and then beellions? You think? My point is, whatever they are hinting at, instead of forthrightly declaring openly as one is supposed to do during discovery, the 37 APIs, I suspect, aren't Oracle's whole story, or even the real story. There'd be no point in going forward on the copyright claims for such a small return. It'd cost more to sue than you can get back.

They don't care, obviously, that I think they are acting badly and saying incredibly outrageous things. They hope, perhaps, the jury will know a lot less, and so will swallow it whole. And that's why I was so relieved to see the judge say to them, in effect, you're going too far. Even if the jury were to turn out to be dumb as rocks, which isn't usually the case, this judge for sure is not.

Here's Judge William Alsup's order regarding the Daubert motions against Dr. Kearl, as text:

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

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 REGARDING
DAUBERT MOTIONS
AGAINST DR. JAMES KEARL

______________

INTRODUCTION

In this patent and copyright infringement action involving Java and Android, both parties move to exclude portions of the report and testimony of the Rule 706 expert Dr. James Kearl. For the reasons stated, the motions are GRANTED IN PART and DENIED IN PART.

STATEMENT

The background of this action has been exhaustively set forth in prior orders (Dkt. Nos. 230, 632, 685, 785). Because the damages aspect of this controversy is particularly complex, the parties have advanced extremely divergent views, and the sums in play vast, a Rule 706 expert, Dr. Kearl, was appointed to assist the jury in evaluating the damages issues (Dkt. No. 610). Dr. Kearl issued his report on March 21, 2012. On April 2, both parties moved to exclude portions of the report.

ANALYSIS

An expert witness may provide opinion testimony “if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and

(3) the witness has applied the principles and methods reliably to the facts of the case.” FRE 702. District courts thus “are charged with a ‘gatekeeping role,’ the objective of which is to ensure that expert testimony admitted into evidence is both reliable and relevant.” Sundance, Inc. v. DeMonte Fabricating Ltd., 550 F.3d 1356, 1360 (Fed. Cir. 2008).

1. GOOGLE’S MOTION TO EXCLUDE OPINION THAT THE VALUE
OF THE INTELLECTUAL PROPERTY IN SUIT WOULD HAVE BEEN THE VALUE OF THE ENTIRE
JAVA MOBILE IP PORTFOLIO.

To calculate the reasonable royalty for the intellectual property in suit, Dr. Kearl begins with the 2006 negotiations between the parties. He then considers the relationship between the value of the IP in suit (two patents and API copyrights) and Sun’s entire Java mobile edition intellectual property portfolio in 2006, which would have included licenses to many patents and copyrights in addition to the IP in suit (Kearl Rpt ¶¶ 97–105). Before conducting an apportionment analysis, Dr. Kearl opines that, as a matter of economics, there are good reasons to not apportion and explains why the value of the IP in suit is equal to the value for the entire portfolio (Rpt ¶¶ 104–05):
Setting aside what the law may require, my best economic advice is that there are good economic reasons why value of the in suit IP in this matter is the 2006 value of a hypothetical negotiation for the entire Java ME IP portfolio and the reasonable royalty rate is 20%.
Dr. Kearl offers three explanations for this opinion. First, he opines that if the parties knew in 2006 that the IP in suit would be the most relevant for Android, then the IP in suit would have “driven the negotiations and the aggregate value of the license in the 2006 negotiations is attributable to this subset” (Rpt. ¶ 100). Second, if the parties in 2006 did not know which subset of IP in the portfolio would be the most useful, then Google would have licensed an “option” to use any subset, to be decided at a later date. Dr. Kearl explains as follows (Rpt. ¶ 101):
The reason is that if Google knew that it needed a subset of the Java ME IP portfolio, but didn’t know in 2006 which subset it needed, then the 2005/06 negotiations can be thought determining the value of an option to, at some later date, decide which, if any, subset of the Java ME IP portfolio to use and when to use it. In this case, the 2006 value of the in suit IP is also the 2006 value of the Java ME IP portfolio — essentially the aggregate value of the

2

2006 Java ME IP license is what Sun was willing to accept for an option for Google to use one, two or as many of the patents and copyrights in the Java ME IP portfolio as it wished and, hence, the amount paid for the option to use what turned out to be the in-suit IP.
To illustrate, Dr. Kearl analogizes the 2006 scenario to a person who subscribes to a 100-page magazine knowing that he intends to read only one page. To that subscriber, the value of that single page is the same as the price of the entire magazine. This is true whether the subscriber already knows the specific page he intends to read, or simply knows that once he has the magazine, he will just choose one page to read. Third, Dr. Kearl opines that if Google was interested in writing its own operating system but decided that it needed to be written in Java and based on Java mobile-like technology, then Google would have gotten a license to Sun’s entire mobile portfolio as “insurance against litigation if it happened that Google” later infringed unintentionally (Rpt. ¶ 102).

This Court’s prior order held that the hypothetical license must be “tailored to the amount and type of infringement that actually occurred” and that “the reasonable royalty must compensate for the infringing features, but not for non-infringing ones” (Dkt. No. 230 at 8). In so holding, the order relied on the Federal Circuit decision of ResQNet, which held that “[a]t all times, the damages inquiry must concentrate on compensation for the economic harm caused by infringement of the claimed invention.” ResQNet.com, Inc.. v. Lansa, Inc., 594 F.3d 860, 869 (Fed. Cir. 2010). This remains true.

Dr. Kearl’s second and third explanations for equating the value of the IP in suit to the entire Java ME IP portfolio are inappropriate for the hypothetical negotiation scenario. Significantly, Dr. Kearl fails to take into account that at the end of the hypothetical negotiation, Google gets a license to the IP in suit, nothing more. Google would not have a license to the entire portfolio, an option to choose any subset of Java IP to license at a later date, nor insurance against future litigation. Nor can we presume that Google would have made good use of the licensed IP. If Google was liable for the value of the entire IP portfolio each time a single IP in that portfolio was asserted in an infringement action, then Oracle would be overcompensated.

3

Thus, paragraphs 101 and 102 of Dr. Kearl’s report are STRICKEN. Paragraph 103 is stricken to the extent it suggests that the hypothetical negotiation would have been for a license to the entire portfolio. Paragraph 104 is stricken to the extent that it relies on the above-stricken material.

Dr. Kearl’s first explanation, that “if Sun and Google understood that the subset of Sun’s Java ME IP portfolio most relevant to their negotiations was composed of the now in suit patents and copyright, the 2006 value of the Java ME IP portfolio is the value of the in suit IP,” does not run into the problems discussed above because this explanation appropriately presumes that Google would receive only a license for the alleged infringement in the hypothetical negotiation (Rpt. ¶ 100). Google has failed to show that this opinion is inappropriate as a matter of law. However, because Dr. Kearl frames his opinion as a conditional, it is unclear whether he actually opines that the IP in suit was understood in 2006 to be the most relevant to the 2006 negotiations. If so, then the parties have not adequately briefed the appropriateness of this opinion and Google’s objection to paragraph 100 is DENIED WITHOUT PREJUDICE.

2. ORACLE’S MOTION TO EXCLUDE DEDUCTIONS
FOR COPYRIGHT DISGORGEMENT.

In his copyright-disgorgement analysis, Dr. Kearl used figures for Android-related expenses from Google’s expert Dr. Alan Cox’s October 2011 damages report (Kearl Rpt ¶¶ 120–21). Dr. Cox had relied on an “Android Profit-and-Loss Statement” to calculate traffic acquisition costs, operations, and operating expenses, including sales expenses, marketing, product management, and engineering expenses for the Android platform (Cox Rpt Exh. 3b). Dr. Cox did not conduct an independent audit of the P&L statement to determine its reliability. Instead, he relied on interviews of Aditya Agarwal, a senior financial analyst at Google.

Oracle attacks Dr. Cox’s reliance on the P&L statements and seeks to preclude both Dr. Kearl and Dr. Cox from offering any testimony about Google’s Android-related expenses in the copyright-disgorgement analysis. This would result in a difference of approximately $700 million for disgorgement damages (compare Kearl Rpt ¶ 119 with Rpt ¶ 121). Oracle argues the following: First, Dr. Cox did not conduct an independent audit on the Android P&L statements. Second, Dr. Cox testified in his deposition that he only relied on Mr. Agarwal for the

4

foundational fact that all engineering expenses in the Android P&L Statement were appropriately allocated to the Android platform (Dearborn Decl. at 74–76). Third, Mr. Agarwal is not on Google’s witness list and thus cannot offer foundational testimony at trial (Dkt. Nos. 525-2, 840). In its opposition brief, Google counters that there are other witnesses on its witness list who can lay the proper foundation (authentication and explaining the figures contained therein) for the P&L statements.

Our court of appeals has held that

[A] deduction for overhead should be allowed only when the infringer can demonstrate that the overhead expense was of actual assistance in the production, distribution or sale of the infringing product. We do not take this to mean that an infringer must prove his overhead expenses and their relationship to the infringing production in minute detail. Nonetheless, the defendant bears the burden of explaining, at least in general terms, how claimed overhead actually contributed to the production of the infringing work.
Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 516 (9th Cir. 1985) (citations omitted). In Frank, the court held that the defendants did not meet their burden of showing deductible expenses because there was no evidence of what costs were attributable to the infringing movie in MGM’s overall “general and administrative expenses.” Ibid. In a prior order, this Court held that Dr. Cox could offer opinions based on interviews with percipient witnesses so long as the interviewees on which he relied can testify to the foundational facts with firsthand knowledge at trial (Dkt. No. 632 at 3).

First, Oracle’s challenge that Dr. Cox is required to conduct an independent audit of the Android P&L statements is denied without prejudice. If the proper foundation is laid at trial that the P&L statements were “routinely updated every quarter by Google in the ordinary course of business” and the figures therein accurately “encompass Android financial data” (Opp. at 2), then Dr. Cox can reasonably rely on those figures for calculating Android expenses. He does not need to conduct an independent audit of the P&L statements. Oracle may re-raise this issue if Google’s witnesses fail to lay the necessary foundation for Dr. Cox’s testimony at trial.

5

Second, Oracle’s assertion that because Mr. Agarwal will not be a witness at trial, no one else can lay the proper foundation for the P&L statements is rejected. This punishment is too harsh for failure to list a witness. The issue is whether the foundational facts must be laid by the same individual(s) cited in Dr. Cox’s report. Rule 37(c) guides our analysis:
If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless. In addition to or instead of this sanction, the court, on motion and after giving an opportunity to be heard:
(A) may order payment of the reasonable expenses, including attorney's fees, caused by the failure;

(B) may inform the jury of the party’s failure; and

(C) may impose other appropriate sanctions, including any of the orders listed in Rule 14 37(b)(2)(A)(i)-(vi).

Oracle’s motion, which seeks to prevent any testimony based on the P&L statements, would be highly prejudicial to Google because then the jury would not have any information regarding deductible expenses for Android. These expenses were approximately $700 million. Our court of appeals has specifically cautioned against such an unjust outcome:
Although the statute imposes upon the infringer the burden of showing “the elements of profit attributable to factors other than the copyrighted work,” 17 U.S.C. 504(b), nonetheless where it is clear, as it is in this case, that not all of the profits are attributable to the infringing material, the copyright owner is not entitled to recover all of those profits merely because the infringer fails to establish with certainty the portion attributable to the non-infringing elements. “In cases such as this where an infringer’s profits are not entirely due to the infringement, and the evidence suggests some division which may rationally be used as a springboard it is the duty of the court to make some apportionment

.... .

But we are resolved to avoid the one certainly unjust course of giving the plaintiffs everything,

6

because the defendants cannot with certainty compute their own share. In cases where plaintiffs fail to prove their damages exactly, we often make the best estimate we can, even though it is really no more than a guess, and under the guise of resolving all doubts against the defendants we will not deny the one fact that stands undoubted.
Cream Records, Inc. v. Jos. Schlitz Brewing Co., 754 F.2d 826, 828–29 (9th Cir. 1985) (citations omitted). Here, it is clear that Android’s gross revenue through 2011 was not entirely profit attributable to the allegedly infringed material. There were undoubtedly expenses that went into the development and marketing of Android. It would be unjust to hide these expenses from the jury. Moreover, any prejudice to Oracle of allowing another witness to lay the foundation for the P&L statements is minimized because Oracle was on notice that other witnesses on Google’s witness list, such as Android project head Andy Rubin, would potentially testify about the costs that went into Android (see Dkt. No. 525-3).

The following compromise will be implemented. Oracle’s motion is DENIED WITHOUT PREJUDICE. Dr. Cox will submit a supplement report revising only the foundational interviewee(s) for the P&L statements by APRIL 16. The new interviewee(s) must already be on Google’s witness list and their disclosed testimonial topic must be related to Android expenses. Oracle may depose each new foundational interviewee(s) for three hours, to be taken by APRIL 30. Google must produce at the deposition any materials used by the deponent in supplying information to Dr. Cox. No other materials need be produced. The questioning shall be limited to the subject of the interviews and the information provided to the expert and its accuracy. Oracle may re-raise its motion if the new foundational interviewee(s) proves inadequate to lay the proper foundation at trial.

7

CONCLUSION

For the reasons stated above, paragraphs 101 and 102 of Dr. Kearl’s report are STRICKEN. Paragraph 103 is stricken to the extent it suggests that the hypothetical negotiation would have been for a license to the entire portfolio. Paragraph 104 is stricken to the extent that it relies on the above-stricken material.

IT IS SO ORDERED.

Dated: April 10, 2012.

[signature]
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

8


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