Copyright, Fair Use and Juries

Intellectual Property Update

Copyright, Fair Use and Juries

Oracle owns the copyright to the widely used Java software platform. Google initially sought to license the Java software for smart phones, but ultimately proceeded to develop its own Android platform without a license. To facilitate development of applications for Android, Google copied the “declaring code” in certain Java Application Programming Interfaces (APIs) that allow programmers to build commonly required functions into applications rather than writing the code from scratch. Android copied the declaring code, but not the Java “implementing code” executing the desired functions. Android copied verbatim 11,500 lines of code to recreate 37 APIs (out of 166 APIs in Java containing 2.8 million lines of code). The copied lines of code were “a tiny fraction of 1%” of Java (or Android). Android generated over $42 billion in advertising revenue for Google. Oracle sought $9 billion in damages for copyright infringement.

THE PROCEEDINGS LEADING UP TO THE SUPREME COURT REVIEW
Google LLC v Oracle America, Inc. has been labeled “the copyright case of the decade” — perhaps because it has been litigated since 2010.

First, a jury found copyright infringement by Google. Despite that verdict the District Court determined the disputed software was not copyrightable as a matter of law and entered judgment for Google. 872 F.Supp.2d 974 (N.D. CA 2012). On appeal, the Federal Circuit1 found the literal element (code) and nonliteral element (structure, sequence and organization — SSO) of the disputed API software were copyrightable. So the Federal Circuit reinstated the jury verdict of infringement and remanded for further proceedings. 750 F.3d 1339, 1348, 1354, 1381 (Fed. Cir 2014), cert. denied, 135 S.Ct 2887 (2015).

Then a second jury entered a verdict in favor of Google on the fair use defense to infringement. The District Court agreed and entered Judgment for Google again. On the second appeal, the Federal Circuit found Google’s use of the disputed API software was not fair use. So the Federal Circuit set aside the jury verdict of fair use and remanded for a trial on damages. 886 F.3d 1179 (Fed. Cir. 2018).

A petition to the Supreme Court challenging both appellate decisions is now pending and oral argument was heard on October 7.

EXAMINATION OF THE ISSUES BEFORE THE SUPREME COURT

1.  Whether Copyright Protection Extends to a Software Interface

THE COPYRIGHT ACT. A computer program is treated as a literary work. Since 1980 the Copyright Act has defined a computer program as “a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.”2 For example, “[a]ny person who distributes . . . a copy of a computer program . . . in violation of [17 USC §109(b)( (1)] is an infringer of copyright . . .  .” 17 USC §109(b)(4).

An interface would seem “directly or indirectly necessary . . . to bring about a certain result” on a computer. The definition of computer program does not distinguish between use by an end user and use by a developer to create an application for use by an end user.

Copyright does not protect any “idea” or “system [or] method of operation”. 17 USC §102(b). The problem is defining when “statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result” become a “system [or] method of operation”.

THE SUPREME COURT PRECEDENT. There is no Supreme Court precedent.

The Supreme Court last considered a software copyright case in 1996. Lotus Development Corp. v Borland Int’l Inc., 49 F3d 807 (1st Cir. 1995) held the menu command hierarchy for the Lotus 1-2-3 spreadsheet program was a “method of operation” and outside the scope of copyright protection. That decision was affirmed by an equally divided Supreme Court (Justice Stevens recusing). 516 US 233 (1996). This disposition did not establish Supreme Court precedent. Ironically, Google v Oracle will be heard by 8 Justices due to the death of Justice Ginsburg.

Is the disputed API software copyrightable despite the Lotus v. Borland decision? The District Court held the APIs were not copyrightable (merely unprotected ideas or methods of operation) and entered judgment for Google notwithstanding the jury verdict of infringement.

In ruling against Google, the Federal Circuit disagreed with the District Court on application of both the Lotus method of operation issue and the merger doctrine.

The Lotus court defined method of operation as ”the means by which a person operates something”. 49 F.3d at 815.3 “[N]o other circuit has adopted the First Circuit’s ‘method of operation’ analysis.”  750 F.3d at 1366. Relying on cases from the Ninth Circuit, the Federal Circuit Court found the APIs were not a method of operation. See, e.g., Atari Games Corp. v Nintendo of America, Inc., 975 F2d 832, 839 (Fed Cir. 1992)(Copyright protects “the expression of [a] process or method”); Johnson Controls, Inc. v Phoenix Control Systems, Inc., 886 F.2d 1173, 1175 (9th Cir. 1989)(program structure, sequence , organization and user interface may be protected by copyright as the expression of an idea). Expression contained in the software or SSO, even if functional, can be protected when there were originally multiple ways to express the underlying idea. 750 F.3d at 1367.

The merger doctrine applies if the developer had only one choice in how to express the unprotected “idea” of the interface (idea and expression merge). 750 F.3d at 1361. Copyrightability under the merger doctrine is determined “at the time of creation.” Id; see 17 USC 302(a)(copyright subsists from the creation of the work). The Federal Circuit determined the developer of Java could have expressed the interface in other ways when the APIs were created; consequently, the merger doctrine did not apply.4

The Federal Circuit found the District Court focused too much on functionality and interoperability concerns, and concluded these issues are properly considered in the fair use analysis, not copyrightability. 750 F.3d at 1368, 1376-77.

PREDICTED OUTCOME. The Federal Circuit ruling allowed software to enjoy copyright protection even if it  is successful enough to become an industry standard. The Supreme Court should reach the same result and confirm copyright protection can extend to a computer interface where the developer chose among expressive options in creating the interface.

2.  Whether, as the Jury Found, Google’s use of a Software Interface in the Context of Creating a new Computer Program Constitutes Fair Use

THE COPYRIGHT ACT. Fair use is a defense to copyright infringement. 17 USC §107. There are 4 factors to consider in determining if fair use applies: The purpose and character of the use; The nature of the work; The amount used; and The effect on the market. Id.

THE SUPREME COURT PRECENDENT. The Supreme Court has not considered a fair use case since 1994. Campbell v. Acuff-Rose Music, Inc., 510 US 569 (1994). The Campbell case established that the “transformative” character of the use weighs in favor of a fair use determination (permitting a parody of the song “Pretty Woman” entitled ”Hairy Woman”). Fair use requires a case by case determination. Harper & Row Publishers Inc. v Nation Enterprises, 471 U.S. 539, 549 (1985)

Is Google’s use of the APIs fair use? Based on the jury instructions, the jury returned a verdict of fair use in favor of Google.5 The District Court entered judgment in conformity with the verdict.

In ruling against Google, the Federal Circuit found formatting the copied APIs for commercial use on smart phones was not a transformative change and the use by Google (Android was provided for free) interfered with sales of derivative works by Oracle, including licenses from Oracle for use on smart phones and Amazon Kindle devices. Consequently, both the purpose and character of the use factor and the effect on the market factor weighed against fair use. The amount used factor was “at best neutral” and “arguably weighs against” fair use. Only the functional “nature of the work” weighed in favor of fair use. 886 F.3d at 1205.6

Acknowledging some copying of computer code can be fair use (citing Ninth Circuit cases7), the Federal Circuit concluded, ”[t]here is nothing fair about taking a copyrighted work verbatim and using it for the same purpose and function as the original in a competing  platform.” 886 F.3d at 1210.

PREDICTED OUTCOME. Oracle seeks to use its copyright to force developers to learn and use new declaring codes to develop applications on the Android smart phone platform. Google used the Java APIs (reformatting the declarative code and writing new implementing code) to facilitate third party development of applications for Android.

The Supreme Court should determine whether (as the District Court found) Google’s use can be a fair use on the evidence presented at trial. If so, the Supreme Court should reinstate the jury verdict. If not, the Supreme Court should remand for the Federal Circuit to apply the correct standard of review.

3.  The Standard of Review of the Fair Use Verdict

The jury returned a verdict of fair use by Google. The trial court judge determined a reasonable jury could find Google made fair use of the APIs.8 The Federal Circuit applied de novo review on the question of fair use.9 No other appellate court has ever reviewed de novo a jury’s general verdict finding fair use. Brief of Amicus Curiae AIPLA at 25-26. The Federal Circuit concluded there was overwhelming evidence the District Court erred as a matter of law in upholding the jury verdict of fair use. 886 F.3d at 1209.

“[N]o fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.” U.S. Constitution, Seventh Amendment. A suit for damages for copyright infringement was tried to a jury at common law. Feltner v Columbia Pictures Television, Inc., 523 U.S. 340, 348-52 (1998).10 In accord with the common law, entry of judgement contrary to a jury verdict requires a determination ”a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.” Fed. R. Civ. P. 50 (a)(1).This “reasonable jury” standard is a more deferential standard than de novo review.

Google argues fair use is a fact bound determination properly made by a jury. “Fair use is a mixed question of law and fact.” Harper & Row Publishers Inc. v Nation Enterprises, 471 U.S. 539, 560 (1985). In Hana Financial , Inc. v Hana Bank, 574 U.S. 418, 419-20 (2015), the Supreme Court noted “a ’mixed question of law and fact’ has typically been resolved by juries.” Hana Financial upheld a jury determination of trademark tacking. Id., at 423-24. If resolved by a jury verdict, review must be under the deferential “reasonable jury” standard.

Oracle argues application of the fair use doctrine depends primarily on the broad legal standard set forth in the fair use statute making de novo review appropriate.

[T]he standard of review depends on “whether answering  [that mixed question] entails primarily legal or factual work.”

U.S. Bank Nat’l Ass’n v Village at Lakeridge, LLC, 138 S. Ct. 960, 967 (2018)(review of a bankruptcy court judge’s determination whether a creditor is a non-statutory insider). In Markman v. Westview Instruments, Inc., 517 U.S. 370, 377 (1996), the Supreme Court required a determination of the jury’s role based on the “particular issue”. Markman held patent claim construction is not a jury issue and is better suited for determination by the court. Id., at 388. De novo review then applies.

PREDICTED OUTCOME. The fair use factors under 17 USC §107 are primarily factual determinations. When tried to a jury, the fair use verdict should be subject to the deferential “reasonable jury” standard of Fed. R. Civ. P. 50(a). The Federal Circuit did not apply an appropriately deferential standard of review to the jury verdict. The Supreme Court should either reinstate the jury verdict on fair use or remand for application of the proper standard of review (and potentially a third jury trial on damages).

 


 

[1] A patent infringement claim was originally asserted in this case. So the Federal Circuit had exclusive jurisdiction, even though there were no patent issues raised on appeal. The Federal Circuit was required to apply the copyright law of the Ninth Circuit, where the case was tried. 886 F.3d at 1179, 1190 (Fed. Cir. 2018).
[2]17 USC §101. See Id., §117(a) (limitation on a copyright owner’s exclusive rights in computer programs); 17 USC §109(b)(4) (referring to “the owner of the copyright in a computer program”).
[3] This definition of method of operation is precariously close to the definition of computer program (“a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.”).
[4] The Federal Circuit noted the merger doctrine might apply to 3 of the 37 APIs, but Google did not preserve the issue on appeal. 750 F.3d at 1362.
[5] Oracle did not appeal the form of the jury instructions.
[6] The interoperability concerns were dropped by Google. 886 F.3d at 1206 n11. Indeed, Android is not interoperable with Java, id., and the Java license was apparently refused because it would have required interoperability. 750 F.3d at 1350.
[7] Sega Enterprises v Accolade, Inc., 977 F.2d 1510, 1527-28 (9th Cir. 1992); Sony Computer Entertainment, Inc. v Connectix Corp., 203 F.3d 596, 608 (9th Cir. 2000).
[8] The District Court denied Oracle’s motion for judgment as a matter of law. Fed. R. Civ. P. 50.
[9] Oracle asserts the Federal Circuit was correct, even under the Rule 50 reasonable jury standard, because a finding of fair use was error as a matter of law. The Federal Circuit, however, gave no deference to the inferences the jury could draw from the facts. 886 F.3d at 1196.
[10] Oracle contends it was inappropriate for the jury to decide fair use because fair use is “equitable in nature” and was not an issue in common law damages cases. But Oracle consented to a jury trial on fair use.