Today, the Federal Circuit issued an opinion in Oracle America, Inc. v. Google LLC, No. 2017-1118, 2017-1202, granting Oracle’s appeal of the district court’s final judgment against Oracle and denial of Oracle’s motions for judgment as a matter of law (JMOL). The Federal Circuit found that, despite a jury verdict to the contrary, Google’s use of Oracle’s copyrightable Java API packages “was not fair as a matter of law,” Slip Op. at 7, and remanded the case to the district court for a trial on damages (previously alleged at nearly $9 billion).

After the Federal Circuit’s 2015 decision that Oracle’s Java API Packages were copyrightable as a matter of law, Oracle’s dispute with Google was remanded to the district court for trial on whether Google’s copying was a fair use. The jury concluded that Google’s use was fair. Oracle disagreed, filing a motion (and later, a renewed motion) for JMOL, as well as a motion for a new trial, arguing, inter alia, that no reasonable jury could have found fair use based on the evidence presented. The district court considered each of the four statutory fair use factors and denied Oracle’s motions, permitting the jury verdict to stand. Slip Op. at 11-15.

The Federal Circuit first established the appropriate standard of review following Ninth Circuit law, that the court “must assess all inferences to be drawn from the historical facts found by the jury and the ultimate question of fair use de novo.” Slip Op. at 26. Then, after reviewing the evidence of record, the jury’s inferences, and analyzing the fair use factors de novo as required by the Ninth Circuit, the Federal Circuit determined that “Google’s copying and use of this particular code was not fair as a matter of law.” Slip Op. at 54. In particular, the Federal Circuit focused on the first and fourth statutory fair use factors: the purpose and character of the use, and the effect on the potential market for the copyrighted work.

As to the first factor, the Federal Circuit found that Google’s use was “highly commercial and non-transformative,” weighing against a finding of fair use. Slip Op. at 42. The panel dedicated a significant portion of its analysis of this factor to the question of transformativeness: whether the contested use “adds something new, with a further purpose or different character, altering the first with new expression, meaning or message.” Slip Op. at 30.1 The opinion noted that Google had copied a “qualitatively significant” portion of Oracle’s code, undermining its claims of transformativeness, and also that its use of the code in an arguably “new context”--smartphones versus computers--was not transformative in and of itself. Slip Op. at 35-37. (The Federal Circuit further pointed to evidence that, even if smartphones and computers were distinct contexts, Oracle was already in the smartphone market at the relevant time. Slip Op. at 36-37.)

The Federal Circuit’s determination on the first factor apparently drove its analysis of the fourth fair use factor, the effect of the use on the market for the work at issue. The opinion agreed with Oracle that “the evidence of actual and potential harm stemming from Google’s copying was ‘overwhelming[.]’” Slip Op. at 51. Specifically, the Federal Circuit noted evidence of Oracle’s prior entry into the smartphone marketplace, but even setting that aside, concluded that smartphones were a reasonable, likely to be developed market for Oracle’s code. Slip Op. at 52-53. Accordingly, the court found that the fourth statutory fair use factor weighed “heavily” in favor of Oracle. Slip Op. at 53.

In view of its analysis of these two primary factors, and its determinations that the remaining two factors (the nature of the copyrighted work and the amount and substantiality of the portion used) failed to tip the scales back towards Google, the Federal Circuit concluded that Google’s use of Oracle’s copyrighted material was infringing and not fair as a matter of law. Slip Op. at 55. The case will now return to the district court for a trial on damages.