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Pinkus: A big decision on software and copyright fair use

April 18, 2018
Pinkus Pinkus

By Craig Pinkus

Few of us get through a day without relying on software based on the Java or Android platforms, and every day for a decade the companies behind them have been locked in battle. Oracle and Google are litigating whether 11,500 lines of Java source code copied verbatim by Google can be used by it for free under the “fair use” defense to infringement in the Copyright Act. A Federal Circuit Court of Appeals panel recently rejected Google’s defense in this high-stakes dispute. Oracle America, Inc. v. Google LLC, Nos. 2017-1118, 1202 (Fed. Cir. March 27, 2018).

The fair use defense has been called the most troublesome in copyright law. It recognizes that there is nothing completely new under the sun and all works protectable by copyright are built to some extent on what came before them. Codified in 17 U.S.C. §107, examples of fair use there include criticism, comment, news reporting, scholarship and research.

The Supreme Court called fair use an “equitable rule of reason.” Fair use is not copyright infringement, but Section 107 requires consideration of at least four factors on a case-by-case basis to decide if a use is fair. What is its purpose and character, and is it commercial or nonprofit? What is the nature of the copyrighted work? How much of it is used, and how substantial is it? What does the new work do to the potential market or value of the copyrighted work?

In connection with the equitable nature of fair use, a party claiming it must act in accordance with “principles of good faith and fair dealing.” As in the equitable maxim on unclean hands, someone acting in bad faith should not be able to invoke the defense.

Fair use is often claimed when there is no question that another work has been copied and no other defenses are left. In the first round of Oracle v. Google, Google argued that Oracle’s code did not merit copyright protection at all. The Federal Circuit disagreed and sent the case back to the trial court. Fair use was almost all that was left for Google to argue.

The new opinion was written for the panel by Circuit Judge Kathleen M. O’Malley. At over 50 pages of thoroughly supported legal and factual conclusions, it seems to reflect recognition that it will be taken apart by excellent lawyers arguing for a review by the entire Federal Circuit, and perhaps the Supreme Court.

Judge O’Malley evaluated the “purpose and character” fair use factor by giving close attention to the “transformative” use concept not found in the Copyright Act but stressed by the Supreme Court in its famous copyright decision upholding the right of 2 Live Crew to parody Roy Orbison’s hit song, “Pretty Woman.” Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994). Transformative use is nearly as difficult to determine as fair use itself, and some decisions on it can seem like little more than Justice Potter Stewart’s famous comment about pornography: “I know it when I see it.”

The transformative use discussion points to the complicated background of this case and the fact that not all federal circuits give it the same weight. This decision is by the Federal Circuit because of the patent infringement allegations in the early stages. When they disappeared, the Federal Circuit had to apply Ninth Circuit fair use decisions with which it did not necessarily agree. In the Seventh Circuit, Judge Frank Easterbrook expressed the view that the Second Circuit relied excessively on transformative use instead of the four factors in Section 107. Kienitz v. Sconnie Nation LLC, 766 F.3d 756, 758 (7th Cir. 2014)

One way to distinguish infringement from transformative use is whether the new work is a substitute product to compete with the original. Oracle’s software was a collection of pre-written source code programs for developers in “packages.” There were 166 such packages when Google copied 37 of them.

Google’s main argument for transformative use was that it used the Java packages in a new context — smartphones. But the court found the argument contradicted by the facts in the record. “…. Java’s code was in smartphones before Android entered the market.”

Google also argued that it gave Android code away to developers, so it was not making a commercial use of Java code. Noting that Android generated over $42 billion in revenue from advertising, the court found that Android being free did not make Google’s use of Oracle code noncommercial. If the jury found Google’s use of Oracle’s code to be anything but “overwhelmingly commercial,” there was no substantial evidence to justify it. The court ruled that Google’s commercial use of Java source code weighs against fair use.

Google’s transformative use arguments were also found without merit because Android packages were not a use recognized in the Copyright Act such as criticism, comment or news reporting. The court found “Google copied code verbatim and used it for the same purposes as Oracles’ packages.” Google argued that the great majority of its new Android product was created at Google. The court found the copied Oracle code was qualitatively important and quoted from the first appeal that “no plagiarist can excuse the wrong by showing how much of his work he did not pirate.”

The factor of the nature of the copyrighted work is the least important of the four factors. Here the court found that although the Java packages were sufficient for copyright protection, they serve a functional purpose and this factor favors fair use.

The amount and substantiality of what is used from the original work factor required both the quantitative amount and the qualitative value of the work to be evaluated. A small percentage of a qualitatively significant part can still be unfair. At one point Google argued that it was using Oracle’s code to achieve commercial interoperability. But that was dropped because Google designed Android to be incompatible with Java. And only 170 lines of code were necessary to write in the Java language, but Google copied 11,500 lines which were not needed and qualitatively significant. This factor was “at best neutral and arguably goes against a finding of fair use.”

The final factor of effect on the original copyright owner’s market has been called the most important for fair use analysis. Such harm can be to the existing market as well as to future uses of the copyrighted work. The court found that Android competed directly against Java for mobile devices and that free availability of Android forced Oracle to accept a steep license discount for Amazon. It held that the jury “could not have reasonably concluded there was no market harm to Oracle”.

The panel concluded overall that allowing Google to use the Java packages for free under the fair use defense did not advance the purposes of copyright law. There is “nothing fair about taking a copyright work verbatim and using it for the same purpose and function as the original in a competing platform.” This is not the end of the story.

Craig Pinkus is a partner in the intellectual property group at Bose McKinney & Evans LLP. Opinions expressed are those of the author.

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