Oracle Corp.’s defeat in a two-year-old lawsuit against Google Inc. will make it harder for the software company to harness demand for mobile devices and benefit from its $7.4 billion Sun Microsystems purchase.
A federal judge ruled on May 31 that Google didn’t violate Oracle’s copyrights on programming interfaces related to the Java computer language, which came as part of the 2010 Sun acquisition.
That means Google doesn’t have to pay Oracle to use elements of Java in its Android operating system, the software used in more than 300 million mobile devices. And since Apple Inc. doesn’t use Java in its iPhones, Oracle misses out on a chance to make money from the world’s two biggest providers of smartphone software just as Sun’s hardware business shrinks.
“One of the crown jewels of the Sun acquisition was Java,” said Brent Thill, an analyst at UBS AG in San Francisco, who has a buy rating on Oracle. “They had grand aspirations of being able to take the ubiquitous platform of Java and monetize it at a potentially higher rate. There are some questions now about what their ability to monetize this is.”
Google and Oracle have jousted since August 2010 to resolve Oracle’s allegation that Google ripped off software code and programming tools to build Android.
When Oracle announced the Sun deal in 2009, Chief Executive Officer Larry Ellison called Java “the single most important software asset we have ever acquired,” and he has been working to increase the $220 million in licensing fees Sun made from Java in 2008.
“This question of, ’Why hasn’t anyone been able to make money from Java?’ is kind of a cliche in our industry,” said Andy van Dam, a computer science professor at Brown University in Providence, Rhode Island, who teaches a course on Java and has written a textbook on it. “It’s never been a bonanza for anyone.”
The Java programming language, created at Sun in the mid- ’90s, is free for anyone to use. Java lets developers write programs that work across a variety of operating systems and computers by translating their code into instructions various machines can understand. Part of the reason Oracle sued was to prevent Google and other companies from coming up with software that runs functions like Java without taking an official license.
When software developers write programs in Java, Oracle has a greater chance of selling its other products, such as computer servers or middleware, used to knit together various applications.
For instance, if corporate technology departments creating business software choose Microsoft Corp.’s .Net technology, they might gravitate toward Microsoft’s operating system, middleware and database software, and servers running Intel Corp. chips, which compete with Oracle’s products.
“Java was essentially a calling card for Sun salesmen,” said John Rymer, an analyst at Forrester Research Inc.
That’s especially important as sales of Sun hardware decline.
Oracle’s hardware sales may drop 11 percent to $6.3 billion this year and slide for a fourth consecutive period in the fourth quarter, which ended in May, Walter Pritchard, an analyst at Citigroup Inc., wrote in a report. Oracle’s database, middleware and business applications revenue may climb 9 percent this year to $26.2 billion and account for 70 percent of the company’s sales.
Oracle’s share of worldwide server revenue declined 7.4 percent in the first quarter to 5.9 percent of a $12.4 billion market, according to market researcher Gartner Inc.
At issue in the court proceedings, which began on April 14, was Google’s use of instructions called application programming interfaces, which help developers create a wide range of programs -- from operating systems to smartphone applications.
Google says it legally used the APIs -- a central building block of computer programs -- to come up with its own compatible version of Java for Android without taking a license to use it.
In 2007, Google released Android using open-source technologies, including the Linux operating system and Apache Harmony, open-source software that replicates Java’s functions. Mountain View, California-based Google gives Android away to smartphone and tablet makers, then makes money through resulting mobile app sales and users’ searches. Android devices now have 51 percent of the U.S. smartphone market, according to market researcher ComScore Inc.
“Google didn’t want a platform Sun controlled,” said Al Hilwa, an analyst at market researcher IDC. “They wanted to bulldoze through things and move much faster.”
Oracle executives, who initially sought $1 billion in damages from Google for infringing copyrights, have said in court proceedings that Google copied Java’s functions without signing a contract to use it. That risks creating multiple, incompatible versions of the language, in turn hampering other developers’ ability to use it effectively.
“Just because something is open source doesn’t mean you can do whatever you want with it,” Ellison said on the witness stand April 17.
To be sure, Oracle gained much more than Java when buying Sun, including the Solaris operating system and Sparc chips. The business is “enormously profitable” and the deal has “already paid for itself” given Sun’s cash, Ellison said at a technology-industry conference May 30.
“Java is only one component of the Sun acquisition,” said UBS’s Thill. “They have had favorable legal battles in the past -- they can’t win ’em all. I don’t think this disrupts the overall story.”
Still, the court ruling may set back Oracle’s growth prospects. U.S. District Judge William Alsup ruled on May 31 in San Francisco that elements of Oracle’s APIs are free for anyone to use and Google didn’t infringe any of Oracle’s copyrights. Alsup said earlier in the trial that even though the jury decided there was infringement, Google wasn’t liable for damages because the jury deadlocked on the question of whether the company’s copying constituted “fair use.”
Oracle plans to appeal, Deborah Hellinger, a company spokeswoman, said in an e-mail after the decision.
As Oracle seeks to make more money from Java than Sun ever did, its best chance now may be on an appeal.
“If Larry Ellison knows anything, it’s how to make money,” said Scott Kveton, CEO of Urban Airship, a Portland, Oregon, maker of software that developers can use in mobile apps. The fight against Google was “Oracle saying, ‘We want a piece of the action.’”