All too much like James Cameron’s 2009 sci-fi flick Avatar, just when you think the feud between Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Oracle Corporation (NYSE:ORCL) is over, you find out it’s not.* Last week, the iconic database company told the iconic search engine company it was appealing a ruling made against Oracle — in favor of Alphabet — in May of last year.
For better or worse, GOOGL stock owners either didn’t hear, or didn’t care. If it’s the latter, it’s not terribly surprising. The company formerly known as Google is sued on a regular basis, often by parties with weak cases just looking for a payday.
GOOGL shareholders may want to take a closer look this time around though. While successful appeal cases are tough, Oracle’s argument holds slightly more water than the typical long-shot case like the one Vringo levied (and ultimately lost) back in 2014. Moreover, the case itself could have significant repercussions for other outfits in the heat of similar arguments about open source software.
GOOGL: Here We Go Again
Warning: You may need to read through the intricacies of this case twice to fully understand what’s going on, and even then, there’s no guarantee it will make complete sense. Here’s the crux of the argument though … Oracle says Alphabet used a little too much of its Java software — which is free, open-source software — in its Android operating system.
The suit largely hinges on what constitutes “fair use” of open-source and freely-available software.
While Oracle offers Java for any consumer to download and any developer to utilize pieces of, the company contends it was never intended for wide swaths of the code to be cut and pasted and utilized as part of a commercial, revenue-bearing system. The complaint specifically read:
“The undisputed evidence showed that Google verbatim copied the heart of Oracle’s creative work for an entirely commercial purpose without any change to Oracle’s expressive content or message, took far more than necessary to program in the Java language, and, in so doing, harmed the market for Java.”
The strength of Oracle’s copyrights on its application programming interfaces, or APIs, was particularly emphasized by the company in the prior jury trial.
Alphabet’s counterargument is simpler — CEO Larry Page said, “We didn’t pay for the free and open things.”
If all of this rings a bell with GOOGL stock owners, there’s a reason. This argument has been waged in a courtroom a few times, going back as far as 2010. The current stage for this battle of the titans is an appeal of last year’s loss suffered by Oracle. That case’s loss likely saved Alphabet Inc from being forced to pay the $9 billion in damages Oracle was seeking.
Bottom Line for GOOGL Stock, and Others
Owners of GOOGL stock don’t have a great deal to worry about here. The courts sided with the company in the most recent case, and appeals — a reversal of a prior judgment — are very difficult win.
The case, though, will have far-reaching consequences beyond the Alphabet/Oracle tiff. In essence, this contest could largely help affirm just how “open” open source code really is even if its user ends up commercializing it as Alphabet did with Java via Android. Perhaps in a bigger sense though, this trial will once again serve as an indictment on decency (or lack thereof) and common sense (or, again, lack thereof).
While not a legal matter raised during any of the lawsuits’ arguments, all juror’s minds were apt to be asking themselves why Oracle would offer Java in part or in whole for free — even for commercial uses — if it didn’t want it to be used this extensively.
Another relevant but unasked question is why Java’s original developer, Sun Microsystems, supported Android’s use of the platform before Oracle acquired Sun, but Oracle switched gears on the stance after buying Sun Microsystems. And, perhaps if Oracle had been more clear about how its rampant use of it in the Android OS had “harmed the market for Java” when it’s not really otherwise monetized, a judge and jury could have been a little more sympathetic.
As it stands though, the Oracle argument looks to be founded more on regret and frustration and less on merits. The courts so far seem to be picking up on that.
Broadly speaking, it all bodes well for other entities that have somehow commercialized open source software and APIs.
* Avatar, while a stunningly successful film, was a three hour epic, and could have easily ended at two points in the film before the third (and actual) ending.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
