On March 27, 2018, the Federal Circuit held in a precedential copyright decision that Google Inc.’s (“Google”) use of Oracle America, Inc.’s (“Oracle”) Java application programming interface (“API packages”) was not fair use as a matter of law, contrary to a jury’s finding that it was fair use. In so doing, the Federal Circuit reversed a decision denying Oracle’s request for judgment as a matter of law and request for a damages trial. The impact of yesterday’s decision could mean that Google will have to pay many millions of dollars in damages to Oracle. (Oracle was seeking as much as $8.8 billion).

Procedural History & Background

The Java computer programming platform was developed in the 1990s by Sun Microsystems, Inc.—Oracle’s predecessor. The Java platform is computer software that is used to “write and run programs in the Java programming language” and allows computer programmers to “write programs that ‘run on different types of computer hardware without having to rewrite them for each different type.’” Specifically, it allows programmers to “write once, run anywhere.” The Java platform is generally offered for free, but a license fee was offered for use in platforms that compete with Oracle’s or in electronic devices.

In 2005, Google discussed a possible license with Sun Microsystems for mobile devices after it acquired Android, Inc. No agreement as to a license could be reached, and “Google elected to ‘[d]o Java anyway and defend [its] decision, perhaps making enemies along the way.’”

In 2010, Oracle sued Google in the Northern District of California, alleging that Google infringed Oracle’s patents and copyrights in its Android smartphone operating systems by using, without authorization, 37 of Oracle’s Java API packages. In 2012, the jury in the Northern District of California held that there was no patent infringement but that Google infringed Oracle’s copyrights. The jury could not, however, reach a decision as to whether Google’s use of Oracle’s copyrights was fair use. After the jury’s verdict, the Northern District of California held that the API packages were not in fact entitled to copyright protection, and thus, judgment was entered for Google.

Oracle thereafter appealed to the Federal Circuit, which reversed the decision in 2014 finding that Oracle’s API packages were copyrightable. The case was remanded to reinstate the copyright infringement verdict and to further determine the issue of fair use and possible damages. Google then filed a petition for certiorari with the Supreme Court, which was denied in 2015.

In a second trial in 2016, the jury upheld Google’s fair use defense, and the district court entered final judgment for Google and denied Oracle’s request for judgment as a matter of law. After the district court denied Oracle’s renewed motion for judgment as a matter of law and request for a new trial, Oracle appealed to the Federal Circuit. At the Federal Circuit, Google also cross-appealed the final judgment to “preserve its claim” that the API packages are not copyrightable.

The Federal Circuit’s Ruling

Delivering the opinion of the court, Judge O’Malley observed that “[i]t is undisputed that Google copied Oracle’s declaring code and SSO for the 37 API packages verbatim,” and that the issue that needed to be decided was whether such copying was fair use.

Fair use is an affirmative defense to copyright infringement that permits use of another’s copyrighted work “for purposes such as criticism, comment, news reporting, teaching…, scholarship, or research.” It is a case specific determination that considers four nonexclusive factors— (1) “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;” (2) “the nature of the copyrighted work;” (3) “the amount and substantiality of the portion used in relation to the copyrighted work as a whole;” and (4) “the effect of the use upon the potential market for or value of the copyrighted work.” Under the first factor, a court may also consider whether the new work is transformative or simply supplants the original, and whether or not the use is in bad faith.

As an affirmative defense, Google bore the burden of proof. Arguing against fair use, Oracle alleged that each of the four factors weighed against finding that Google’s use was fair use.

The Federal Circuit outlined the history of the fair use inquiry and the jury’s role in considering the four factors. Applying the law of the Ninth Circuit, the Federal Circuit explained that “while inferences from the four-factor analysis and the ultimate question of fair use are ‘legal in nature,’ in the Ninth Circuit, disputed historical facts represent questions for the jury. Where there are no disputed material historical facts, fair use can be decided by the court alone.” In the district court case, however, the jury considered all aspects of Google’s fair use defense. “Thus, the jury was asked not just what the historical facts were, but what the implications of those facts were for the fair use defense.”

Under governing case law, all jury findings as to fair use other than those related to historical fact must “be viewed as advisory only.”

The Federal Circuit then applied the four-factor test. In considering the first factor, the court found that “Google’s [highly] commercial use of the API packages” as well as its non-transformative nature weighs against a finding of fair use. The court found that the second factor favored a finding of fair use because “[a]lthough it is clear that the 37 API packages at issue involved some level of creativity—and no reasonable juror could disagree with that conclusion—reasonable jurors could have concluded that functional considerations were both substantial and important” but also concluded that this fact has “less significance to the overall analysis.” For the third factor, the Federal Circuit explained that it was “undisputed” that Google copied 11,330 more lines of code than was necessary to write in the Java language, and found that this factor at best was neutral and arguably weighed against a finding of fair use. Finally, with respect to the fourth factor, the court found that “[g]iven the record of evidence of actual and potential harm, we conclude that ‘unrestricted and widespread conduct of the sort engaged in by’ Google would result in ‘a substantially adverse impact on the potential market for the original’ and its derivatives.” Thus, this factor “heavily” weighed in Oracle’s favor.

Weighing all of the factors together, the Federal Circuit concluded that:

[A]llowing Google to commercially exploit Oracle’s work will not advance the purpose of copyright in this case. Although Google could have furthered copyright’s goals of promoting creative expression and innovation by developing its own APIs, or by licensing Oracle’s APIs for use in developing a new platform, it chose to copy Oracle’s creative efforts instead. There is nothing fair about taking a copyrighted work verbatim and using it for the same purpose and function as the original in a competing platform.

Google’s use effectively prevented Oracle from participating in the developing smartphone market, which “is inherently unfair.” Because the first and fourth factors weighed heavily against fair use, only the second factor weighed in favor of fair use, and the third fact was neutral, the Federal Circuit held that “Google’s use of the declaring code and SSO of the 37 API packages was not fair as a matter of law.”

The court clarified, however, that it did not conclude that the copying of computer code could never be fair use and instead “h[e]ld that, given the facts relating to the copying at issue here…Google’s copying and use of this particular code was not fair as a matter of law.”

With respect to Google’s cross-appeal asserting that the API packages are not copyrightable, the Federal Circuit relied on its earlier copyrightability decision and found a ruling unnecessary.