Tag Archives: Oracle

Itanium chip

Oracle’s Lawyers Aggressively Cross-Examine Hewlett Packard’s Damages Expert

Just days after losing a copyright infringement lawsuit against Google, computer technology giant Oracle was back in court. This time it is defending a lawsuit by Hewlett Packard Enterprise (HPE), a spinoff of the former Hewlett-Packard (HP) that inherited HP’s server business. Hewlett Packard Enterprise is trying to convince a jury that Oracle is responsible for the declining fortunes of HPE’s pricey line of computer servers based on the Itanium chip.

HPE claims that Oracle wrongfully failed to create new versions of its database software that would support machines running Itanium. According to HPE, Oracle wanted to drive business from HPE to Sun Microsystems, an HPE competitor that Oracle purchased in 2010.

A key dispute in the lawsuit concerns the reason for Itanium’s declining popularity and the amount of money that HPE lost because Oracle failed to support the chip. The expert upon whom HPE relies endured a grueling cross-examination as Oracle attempted to persuade the jury that Itanium was doomed regardless of Oracle’s actions.

The Lawsuit

HP and Intel developed Itanium in 1994 to run a high-end line of HP servers. While HP made some inroads with its Itanium servers, many businesses preferred servers that used Intel’s less expensive x86 chips. Many server customers continued to buy HP machines, but they purchased the less profitable x86 machines rather than those that were running Itanium.

Sales of Itanium-based systems declined sharply after 2011. HPE blames that decline on Oracle. It argues that Oracle undermined Itanium when it announced in 2011 that it would no longer create new versions of its popular software products that would run on Itanium. According to HP, Oracle instructed its sales force to encourage customers to switch to servers manufactured by Sun Microsystems, which Oracle had recently acquired. Oracle claimed that that it was simply following the lead of other software companies that considered Itanium to be nearing the end of its market life.

HP sued Oracle, claiming that the settlement of an earlier lawsuit between the two companies required Oracle to continue supporting Itanium. In 2012, a judge agreed. The judge ordered Oracle to continue supporting Itanium in its new software as long as HP continued to sell machines with Itanium chips.

Oracle appealed, but it has obeyed the judge’s order while the appeal is pending. It contends that HP and HPE were not harmed, or that any harm was minor, because its current software will run on Itanium machines. HPE contends that the harm was done at the moment Oracle announced it would not support Itanium, causing customers to abandon servers with Itanium chips. HPE contends it cannot win those customers back. It wants to persuade the jury that Oracle’s breach of the settlement agreement resulted in a loss of $3 billion in sales of Itanium-based servers.

Expert Testimony

To prove the $3 billion loss, HPE is relying on the expert testimony of economist Jonathan Orszag. Among his other credentials, Orszag served on President Clinton’s National Economic Council.

Orszag based his loss analysis on a comparison of HP/HPE’s revenue from sales of Itanium-based products before and after Oracle announced that it would no longer support Itanium. Orszag noted that revenues began to fall as soon as Oracle made the announcement, and then began to snowball. Although Oracle began to support the product again 17 months later, Orszag testified that Oracle’s announcement created uncertainty that caused customers to turn to other platforms.

Orszag anticipates that losses will continue until 2020, the year in which HPE and Intel project the end of Itanium’s market life. Oracle contends that Itanium is already dead and that HPE has been hiding that reality from its customers and from the market in general.

An aggressive cross-examination of Orszag included an attempt to tarnish his credentials. Oracle’s lawyers accused Orszag of relying on his brother’s help to win a “relatively junior” White House post and of padding his resume with lists of the awards he’s won. The judge eventually agreed that the personal attacks were becoming irrelevant.

Oracle’s lawyers then attempted to poke holes in Orszag’s analysis. They pointed to other factors that could have caused a decline in Itanium sales, including Intel’s development of the competing E7 chip.

Oracle is expected to counter with the testimony of its own expert witness, economist Ramsey Shehadeh. In a preview of that testimony, Shehadeh argued that many other factors contribute to the declining sales of HP and HPE servers, including a decline in HP’s reputation before the company separated its home computer business from its server and business support divisions. Shehadeh also noted the industry’s belief that Itanium was nearing the end of its useful life, sparking defections to more stable product lines.

Oracle and HP/HPE have a long history of suing each other. How the jury will resolve this lawsuit will depend in part on its assessment of the competing views offered by the parties’ expert witnesses.

(Photo Credit: “Intel Itanium” by Konstantin Lanzet is licensed under CC BY-SA 3.0.)

Google's Android Logo

Google and Oracle Each Try to Limit the Other’s Experts

Oracle, the nation’s second largest software developer, sued Google in 2010, claiming that Google violated the patents and copyrights that protect its Java programming language. Oracle alleged that Google used Java application programming interfaces (APIs) to develop its popular Android operating system. An API allows one program to communicate with another. Oracle claimed that Google “replicated the structure, sequence, and organization of the overall code” of 37 API packages.

In 2012, a jury decided that Google did not infringe on Oracle’s patents. The same jury found that Google infringed Oracle’s copyright on its API code but could not agree whether Google was entitled to the “fair use” of the APIs.

Before the trial moved forward to allow the jury to consider an award of damages, the judge decided that the Java APIs replicated by Google were not subject to copyright protection. The judge therefore dismissed that portion of the lawsuit.

The court of appeals disagreed. It concluded that the structure, sequence, and organization of the API packages was entitled to copyright protection. The court of appeals therefore reversed the district court’s dismissal of the copyright claims and instructed the district court to reinstate the jury’s infringement verdict.

The case is now set for a second trial. The jury will be asked to decide whether Google made “fair use” of the APIs under copyright law and, if not, what damages it should pay as a result of its copyright infringement. Oracle is asking for $8.8 billion in damages. That’s almost twice the profit that Google’s parent company earned last quarter.

Before the trial starts, however, the court will need to decide what testimony the parties’ damages experts will be permitted to give. Each side has moved to exclude proposed testimony that the other side wants to offer.

Oracle’s Economic Expert

Oracle proposes to call Dr. Adam Jaffe to testify about the market harm that resulted from Google’s use of the 37 Java APIs. Google filed a Daubert motion, asking the court to decide whether Jaffe’s proposed testimony is based on a reliable application of valid principles and methods to the facts of the case. Google’s motion urges the court to exclude key portions of Jaffe’s testimony.

The fair use doctrine requires an evaluation of the effect of the use upon the potential market for the copyrighted work. Google argues that the copyrighted works are Java SE 1.4 and Java SE 5.0. According to Google, Jaffe overreached by analyzing the effect of Google’s Android system on Oracle’s potential market for the entire Java platform, rather than limiting his analysis to the potential market for Java SE 1.4 and 5.0. Google also argues that Jaffe considered the effect of Android as a whole on the potential market for Java, when he should have considered the effect of the 37 infringed APIs on the Java market. Since Jaffe did not limit his analysis to the relevant market or to the specific copyrights that were infringed, Google contends that his analysis is unreliable and unhelpful, and should therefore be excluded.

Google’s Technical Expert

Oracle moved to exclude certain proposed testimony of Google’s expert, Dr. Owen Astrachan, regarding fair use. Google argues that it made fair use of the APIs because it changed their expressive content. In other words, it transformed the copyrighted APIs into something new. Astrachan would testify that Google’s use of Oracle’s APIs was transformative because Google wrote its own code to implement the APIs as part of Android. Oracle contends that Astrachan is misapplying the legal standard because incorporating the APIs into Android did not change the APIs and is therefore not transformative.

In addition, the Court of Appeals concluded that Google could have written its own code instead of copying the API packages. According to Oracle, Astrachan would testify that Google had no choice but to copy the API packages because Android could not have used the Java language without doing so. In Google’s view, the court of appeals’ decision forecloses that testimony.

Finally, Oracle argues that Astrachan should not be allowed to express an opinion about potential harm to the market that was caused by the copyright infringement because Astrachan is an expert in computer programming, not in economics. Oracle argues that Astrachan did not apply a reliable economic methodology to arrive at his opinion about market harm. According to Oracle, his opinion amounts to “pure speculation” that must be excluded under Daubert.

Daubert hearing

The objections remain unresolved, but the judge made some interesting remarks at the Daubert hearing. He suggested that the question of market value comes down to “what could [Oracle] have sold the copyrighted work for before and after” the infringement. The judge expressed skepticism that Oracle could have used Java to “hit a home run” in the smartphone market as Google did with Android, since Android’s development consisted of considerably more than the copied Java APIs. The judge seemed to agree with Google that the APIs embedded within Android are a very small part of a very large work.

The judge also questioned whether he should rule that Google’s use of the APIs was transformative instead of leaving that question for the jury to decide. The judge expressed concern that if he ruled that Google’s actions were not transformative as a matter of law, he would be “cutting [Google] off at the knees.”

Although the judge has not yet decided the motions, he did lament his role as “gatekeeper” under Daubert. The judge asked “Do I have to go through and excise every detail of expert testimony on a granular level?” Despite the thousands of court decisions that have applied Daubert, judges still have differing philosophies about when a gatekeeper should prevent a jury from hearing expert testimony and when a judge should let the jury sort through the testimony to decide whether it is reliable. Where the judge in the dispute between Oracle and Google will draw that line will soon be determined.

(Photo Credit: “Android” by Saad Irfan is licensed under CC BY-SA 2.0.)