Monopolizing the Disruptive

The Federal Circuit overturned the district court's finding on Google's motion for judgment as a matter of law that the Java API declarations (the software interfaces) were not copyrightable since they constituted “methods of operations” exempt from copyright. 17 U.S.C. §102(b). Instead, the Federal Circuit held that the API packages were copyrightable and remanded for a jury finding on fair use (a defense to copyright infringement pursuant to 17 U.S.C. §107). Oracle v. Google, 750 F.3d 1339, 1381 (Fed. Cir. 2014).

The case returned to the Northern District of California, where, following a two-week trial, a jury determined that Google's incorporation of the 37 API packages indeed constituted fair use. Oracle again appealed and the Federal Circuit overturned the very jury findings for which it had remanded the dispute in 2014. Oracle v. Google, 886 F.3d 1179 (Fed. Cir. 2018). Specifically, the Federal Circuit reasoned that a jury's findings related to fair use — other than those determining “historical facts — requires de novo appellate review. 886 F.3d at 1191-96. The Federal Circuit found that the four non-exclusive factors suggested Google's use of the API packages was not “fair” pursuant to 17 U.S.C. §107 and remanded for a third jury trial on damages. Id. at 1211. As expected within the industry, Google petitioned for certiorari on Jan. 25, 2019.

What's At Stake?

To understand what is at stake for the tech industry as a result of these decisions, it is necessary to unpack the Federal Circuit's reasoning. With regard to copyrightability (i.e., the first decision on appeal), the Federal Circuit reasoned that although 17 U.S.C. §102(b) expressly states that copyright protection does not extend “to any … method of operation” regardless of form, it must be understood in conjunction with 17 U.S.C. §102(a) such that “certain expressions are subject to greater scrutiny.” 750 F.3d 1339, 1357 (Fed. Cir. 2014). What the Federal Circuit appeared to misconstrue about the APIs, and what the Northern District of California got right, is that the API packages only work because developers use them “as written.” Their very value is in the method of operating the prewritten Java code. See, Oracle v. Google, 872 F. Supp. 2d 974, 998 (N.D. Cal. 2012) (“The method specification is the idea. The method implementation is the expression. No one may monopolize the idea.” (emphasis in original)). The court also failed to understand the very real costs for software developers to “invent” new software interface for every new platform. Software interfaces allow developers the freedom to use their knowledge to create applications across different platforms, including Android. This is precisely the kind of openness on which the tech sector thrives and that developers rightfully have come to expect.

In 2018, the Federal Circuit considered fair use by reviewing four non-exclusive factors: 1) the purpose and character of the use; 2) the nature of the copyrighted work; 3) the amount and substantiality of the portion used; and 4) the effect on the potential market for the copyrighted work. First, it held that the purpose and character of use did not support Google's argument since Google's use was commercial because, although Google makes Android freely available pursuant to an open source license it nonetheless generates significant revenue from Android, and because Google's use of the APIs was not transformative. 886 F.3d 1179, 1196-1204. The Federal Circuit's reasoning belied the fact that it did not understand the transformative context of smartphones as compared to desktop computers; instead, it focused on whether Google's use of the API's in and of themselves was the same as that of Oracle. The Federal Circuit further determined that the functional nature of the copyrighted work fell in favor of Google, id. at 1204-05, but that Google's use of 11,500 lines of code out of nearly three million lines of code was significant, id. at 1205-07, and that Google's use threatened Oracle's potential to enter the smartphone market, id. at 1207-10.

In essence, the Federal Circuit decisions maximize the reach of copyright law in the tech industry and the effects, if left unchallenged, will be significant despite the questionable precedential value of copyright decisions from a court specializing in patent law. First, software companies will become familiar targets of copyright infringement suits and those companies will struggle to defend successfully against such claims. For example, if 37 APIs — approximately 3% of lines of code in Android — are enough to constitute infringement, it suggests that no amount of code is too small for courts to find software-interface infringement. Given the dominance of certain programming language in the industry (such as Java) and the fluidity with which software developers move between projects and companies, the tech industry is vulnerable to a wave of copyright suits. (Indeed, plaintiffs may well begin to incorporate patent claims in order to appeal to the Federal Circuit.) In addition, if a functional work is not transformative when used to develop completely different devices, it is hard to imagine whether a functional work could ever be transformative for the purposes of the fair-use defense. If any past or future aspiration to enter a market, meanwhile, establishes a copyright holder's market interest, then such an interest is possibly limitless. In other words, the Federal Circuit's decisions render the fair use defense hollow as applied to software interfaces.

Yet, these interfaces help maintain the incredible productivity of the tech sector, leading to the second negative impact of the Federal Circuit's decisions. The expansion of copyrightability to software interfaces has very real economic consequences for Silicon Valley. Almost immediately upon publication of these decisions, commentators lamented the potential chill on innovation that such reasoning foretold. Google incorporated the 37 software interfaces in part to attract programmers, who could rely on their accumulated knowledge grounded in the freely available Java programming language to generate new and original applications for Android. Were companies like Google forced instead to invent a programming language from scratch for every new platform, the impact on the market would be extreme. Entrepreneurs would understandably invest less freely in technology companies given the increased startup costs. Once funded, those companies would struggle to attract developer talent that would need to re-invent the programming wheel with virtually every new software employer. Ultimately, these challenges would translate into fewer and more expensive products of lesser quality for consumers.

Analysis

The economic impact on the industry could even begin to shift the center of gravity for tech from Silicon Valley to other jurisdictions with a more nuanced appreciation for the rights attendant to software interfaces. The European Court of Justice, for example, has ruled that APIs are not copyrightable, for the very concerns animating much of the blogosphere in response to the Oracle v. Google decisions. SAS Inst. Inc. v World Programming Ltd, (C-406/10) [2012] 3 CMLR 4. In arguing against the extension of copyright protections to software interfaces, Europe's high court stated that “to accept that the functionality of a computer program can be protected by copyright would amount to making it possible to monopolise ideas, to the detriment of technological progress and industrial development.” Id. at ¶40. The Court of Justice further highlighted that the advantage of copyright protection (as opposed to the patent rights considered normally by the Federal Circuit, for example), lay precisely in the flexibility afforded by this less stringent property right. Id. at ¶41 (noting that “the main advantage of protecting computer programs by copyright is that such protection covers only the individual expression of the work and thus leaves other authors the desired latitude to create similar or even identical programs provided that they refrain from copying.”). The further U.S. copyright decisions drift from an accurate understanding of software development, developers may increasingly look to innovate elsewhere.

Indeed, the Federal Circuit decisions threaten to grant software copyright holders rights similar in scope and strength to those of patents, a phenomenon outlined in Google's petition for certiorari. Google LLC v. Oracle Am. Inc., at 20, No. __ (Jan. 25, 2019). The concomitant increase in control by copyright holders would fundamentally alter the creative spirit of the tech industry. The fluidity of the tech sector is part of its ingenuity and contributes to an overall culture built on disruption. Yet, granting patent-like rights in software interfaces will render developers beholden to copyright holders. In Oracle v. Google, programmers embraced Java both because of its utility but also because it was free and open. That very availability cemented Java as a hegemonic programming language. In the hands of a copyright holder such as Oracle, however, unsuspecting programmers may well be punished for their embrace of Java. Oracle could, and in the licensing context has, used the threat of litigation to reinforce its dominance in the industry. See, A. Beeman, J. Muchmore & B. Liu, “The Oracle Audit: Lessons From the Only Licensee Suit,” Law360 (Nov. 15, 2017); A. Beeman, J. Muchmore & B. Liu, “10 Things Every Licensee Should do to Prepare for — and Survive — an Oracle Licensing Audit,” Crowell & Moring Client Alert (Nov. 3, 2017).

Setting aside jurisprudence and economics, this level of control over software would sit uneasily atop an industry built on a shared investment in openness and interoperability. Throughout the litigation, Google highlighted the significance of interoperability as a worthy goal in and of itself and justifying the unlicensed use of the Java APIs. As many commentators have noted, the Federal Circuit gave the argument short shrift. But software development evolved as the result of the cross-pollination of ideas leading to better products and tremendous growth. The Federal Circuit decisions in Oracle v. Google would dismantle the culture surrounding software development and disadvantage programmers and consumers in the process.

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Arthur (Art) Beeman is a partner in the San Francisco office of Crowell & Moring. He focuses on the trial and management of complex intellectual property and commercial litigation and has extensive experience handling matters in the telecommunications, Internet, software, hardware, medical device, and construction machinery industries. Art's cases have involved cutting-edge legal issues in patent, trademark, trade secret, and copyright law. An accomplished trial lawyer, Art has successfully represented his clients over the years in numerous 'bet-the-company” disputes. He can be reached at [email protected].