Software company holds out, hoping to bleed Google of more money

In U.S. District Court for the Northern District of California last week, Magistrate Judge Paul S. Grewal urged Google Inc. (GOOG) and Oracle Corp. (ORCL) to reach a settlement and licensing compromise in Oracle's lawsuit against Google's mobile Android OS.

Google, according to a Reuters report, had offered Oracle $2.8M USD in damages, a figure which Google acknowledged could grow if it loses the infringement trial (Oracle could make as much as $100M USD, according to recent valuations by expert witnesses).  More importantly Google offered to license Oracle's two asserted patents in the case, at a rate of 0.5 percent of Android's revenue for one patent, and 0.15 percent for a second patent.

Oracle wasn't impressed, so it rejected the offer.  A trial date was just set for April 16 at the San Francisco District Court.  Judge William H. Alsup will preside in the trial phase.

In announcing that the settlement could not be reached and that the parties were headed to trial, Judge Grewal solemnly stated, "[T]he parties have reached an irreconcilable impasse in their settlement discussions with the undersigned... no further conferences shall be convened... [I]n the end, some cases just need to be tried."

He wished both companies' teams of lawyers "good luck" in the final battle.

JavaGoogle has been dealt a bitter cup in the Java case. [Image Source: Oracle]

In the trial Oracle will try to establish that Google knowingly used the open source Apache distribution of Java, despite knowing it was not validly licensed and could be in infringement of Sun Microsystems' intellectual property, which Oracle inherited via its $7B USD Jan. 2010 acquisition of Sun.

Oracle's case is built heavily around emails indicating that Android managers were aware of this issue, but did not move aggressively to address it.  Oracle also displays Java processing source files contained in the Android repository and how they allegedly reuse blocks of Sun's code, without holding a valid license.

Ultimately, Oracle's goal is to find Google is in infringement of its Java patents.  While the damages (up to $100M USD) may not be huge, the licensing fees could be, if Google loses.  It's unclear exactly how much Oracle can extract from Google in terms of licensing fees, given that Microsoft Corp. (MSFT) is already raking in $10-15 USD per device [1][2][3][4].  With most Android devices already having narrow profit margins, and with Google only making a small haul on advertising, it's unclear how much revenue their really is for Oracle to gobble up, despite Android being the world's most used smartphone platform.

In addition, Apple, Inc. (AAPL) is attempting to ban Android handsets altogether in the U.S., which may make licensing fees a moot point.

Google, on the other hand, will try to establish that Sun Microsystems knew about and verbally permitted its unlicensed use of Java.  Google points to Sun Microsystems as having called Android a tool to "spread news and word about Java."

It quotes former Sun chief executive Jonathan Schwartz who praised the launch of the unlicensed Android as an "incredible" day for the Java family -- rather inconsistent language with Oracle's claims that Google flagrantly infringed on Sun's Java IP rights.  (Oracle tried to delete the blog in which the former CEO wrote this, but was foiled by webpage archiving.)

We will keep you updated as the trial progresses ahead.

Sources: ZDNet, Reuters

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