The US Court of Appeals for the Federal Circuit recently ruled in a dispute between technology giants Google and Oracle that commenced in 2010. As a result, Google may have  to pay up to 8.8 billion dollars, for using elements of Oracle's Java programming code for the development of its smartphone operating system, Android.

The decision has raised more than a few eyebrows, and many software developers fear the ruling risks limiting innovation, development speed and quality in the software industry. In this blog, we will briefly highlight important elements of the case, analyse what consequences this ruling may have on the development of software and compare the legal framework with European Law.

1. What occurred prior to the case

Java SE is a programming language originally developed in the '90s by Sun Microsystems, which was aquired by Oracle in 2010. As a result, Oracle owns all their patents and copyrights including Java. Afterwards, Java could be used for free for general purpose computing. However, Oracle charged customers with special licenses for commercial use of their programs. In this case, Google used certain parts of Java in their development of Android, specifically the declaring code and the structure, sequence and organisation of 37 Java API Packages , without having agreed on a license required to use these API's for commercial ends Oracle claimed Google infringed on their copyright by doing so.

In an earlier decision, the same federal court ruled that APIs are copyrightable. However, the lower court (and many software developers) stated that API's are not protected by copyright as they simply are a method of operation which carry out pre-assigned functions and are separate from the underlying code which makes up the software. The Federal Circuit Court disagreed, stating that the declaring code and the structure, sequence and organisation of an API were elements that "may nevertheless contain expression that is eligible for copyright protection". In this case, the function names and other signals which were copied by Google in the form of 11,500 lines of code were deemed copyrightable.

2. The Federal Court

In the recent case, Google had to justify their infringement of the now-copyright protected parts of the Java APIs. The company attempted this through the 'fair use' defense. Codified in Section 107 of the 1976 Copyright Act, the fair use defense is a limited exception to the absolute right that a copyright owner has in his or her work. Whether fair use can be accepted depends on four factors:

• the purpose and character of your use, focussing on whether the use is commercial and the new work created is transformative.

• the nature of the copyrighted work.

• the amount and substantiality of the portion taken, and

• the effect of the use upon the potential market.

The Court rejected the 'fair use' argument. As Google made more than $42 billion dollars through advertisements, the Court could not agree with Google's reasoning that they were using the code in Android for non-commercial purposes. Android is also not transformative, according to the Court. Google's copying of Oracle's original material – regardless of how small the amount of the material – and moving it from a desktop platform to a smartphone platform cannot be seen as sufficiently transformative. Indeed, Oracle had even attempted to implement Java in smartphones themselves, through their line of SavaJe phones. Lastly, the Court opined that Oracle had suffered considerable loss by being limited in entering many actual and potential markets.

3. Consequences of the case

This decision will have major consequences for the American software industry. As API's are used to enable interoperability between programs, programmers now either have to create software with interfaces created by themselves or they will have to get a license to use elements of other API's. This could lead to start-ups being deterred in writing software as such licenses increase development costs. This contrasts with the idea behind API's, which were developed to stimulate programming as many programs could use the basic functions and tools provided by these type of open source software. Moreover, it seems that Oracle is not stopping at Google. More companies are being targeted by the company for utilizing Java functions. The question now is if more US companies will catch wind of this new possibility to assert their copyright on minor elements of computer programs such as API's.

4. Trouble in European Paradise?

In Europe there is a different view on copyright when it comes to software. In the SAS Institute / World Programming case, the ECJ ruled that copyright on software only protects the source code of software, which is the specific, unique implementation of that function. Functional aspects, such as programming language and formatting of data files, are not protected. this means that Google would not have been in trouble in Europe.

Nor would other European software developers be. As functional aspects of software are not protected by copyright, programmers can continue to utilize functional elements of each other's API's (within reasonable limits). As long as the functions used are not reflected in the source code, EU-Member State courts should tolerate the use of these tools. Although, to be certain, a clear and comprehensive licensing agreement is always advisable