Q: Should Oracle/Java Licensees Be Concerned?
A: Yes. All 8.2 million of them (and their Employers) Should be Very Concerned.
Just over two weeks ago, the United States Supreme Court heard oral arguments in Google v. Oracle, a long-roiling feud between two Silicon Valley software titans surrounding Google’s use of Oracle’s Java software on its popular Android device. No matter how you view this bitterly contentious matter, a lot is at stake not just for those who rely on Java but for software manufacturers and end-users of every stripe.
We will leave it to other commentators to weigh in on the impact that an Oracle win in the Supreme Court could have on the creation and distribution of software (though, suffice to say, many think it would be terrifyingly profound). Instead, we will set our analytic sights on a single and much narrower issue that has been mostly overlooked: What does an anticipated ruling in Google v. Oracle mean to the licensor of Oracle’s Java software?
As discussed below, we posit that Oracle is doggedly pursuing a win for reasons beyond the almost nine billion dollars in damages that it hopes to extract from Google. Rather, Oracle is waiting for favorable resolution in order to finally and fully place Java licensees in its formidable auditing sights. As such, if any of your company’s employees use Java – which, if you are tech or tech-adjacent, some almost certainly do – your company’s vulnerability to Oracle audits is likely to increase over the next few years.
In 2018, We Identified Certain Misconceptions in Oracle’s Java Software Licensing (and Predicted a Wave of Audits Focused on Java).
In September of 2018, we published an article in Bloomberg Law entitled “INSIGHT: Understanding Your Oracle/Java License–Not Everything is as it Seems” that identified certain misconceptions in the licensing of Oracle’s Java software. In sum, we identified the common misconception that Java is open source and free when, in fact, it is not (and has not been for a number of years). An authorized reprint of that article can be found here.
In that article, we also noted that many industry analysts predicted a forthcoming deluge of Oracle audits targeting Java, even noting that “according to some reports, Oracle has not only begun targeting Java licensees, it has hired a team of near two dozen employees that are specifically charged with enforcing Java licensing terms.”
We were far from the only ones with this prediction. As only one example of many, in a forecast addressing certain forthcoming 2019 Java licensing changes, Metrixdata360 surmised that, while they had not seen any Oracle Java audits, “given Oracle’s history with auditing it’s only a matter of time before they move to monetize Java.”
Peculiarly, the Dreaded Oracle Java Software Audits Never Quite Materialized.
For the most part, the anticipated flood of Java audits didn’t materialize. Beginning in mid-2018 and through to the present, we have counseled a limited number of clients with whom Oracle made a few inquires regarding Java deployment (and we have provided defense counseling with regard to a few audits that merely touched on Java). But the much-feared spike in Java audits largely proved to be unwarranted. So far, that is.
Again, our professional experience appears to reflect larger trendlines. On September 1, 2020, Upperedge reported that while “multiple Oracle customers have been contacted by an Oracle Java account representative with calls that appear to be directed at IT managers inquiring about their Java licenses”, it is quite possibly nothing more than Oracle grasping for information while attempting to increase sales of licenses to those who may not even require or desire Java updates. Calling the inquiries nothing more that “fishing expeditions”, the article continued:
Remember that you have the option of telling Oracle that you are not interested in receiving Java updates. This should be the end of the inquiry. If Oracle is intending to conduct a full audit, then you will receive formal written notice from Oracle’s LMS group. As of the date of this writing, we have not heard of a situation where Oracle has followed up with a formal audit. It just appears to be a scare tactic to get customers to share information in the hopes of creating a sales opportunity. So don’t be fooled! This appears to be nothing more than a fishing expedition.
A September 9, 2020, article by Craig Guarente further supports our experience and speculation that, as of yet, Oracle customers are not seeing an increase in Java audits:
Obviously, Oracle is trying to generate more money. So, the first thing we can tell you is we have not seen Oracle audit customers over Java. Amazingly, we still haven’t seen any LMS audit letters or any SIA audit letters come from Oracle to customers. Maybe they’re out there, and we just haven’t seen them yet.
Now, let’s not get too comfortable with that position though because Oracle could change that on a moment’s notice.
What we have seen is Oracle sales and Oracle partners going out extensively to customers to try to get them – let’s call it “educated on Java”, or “worried about Java licensing and support”. The goal here from all of them is that you go buy a Java subscription.
As early as January, 2019, ITAM Channel was already emphasizing this point, referring to Oracle’s attempt to “worry” customers into buying Java:
They’re approaching Java differently right now. It’s taken them about ten years to try to monetize Java. Oracle’s being really smart about this, because they’re not auditing customers to get them to buy Java, but they’re worrying customers to get them to buy Java.
Meanwhile, Oracle’s Copyright Dispute (Google v. Oracle) Gains Traction.
Was Oracle’s strategy to “worry” its Java customers — in lieu of auditing them — all part of a concentrated plan from the beginning? Or did Oracle pivot midstream? Absent inside information, all we can do is speculate based on the facts available. And no facts are more important than the parallel development of Oracle’s suit against Google for infringement of Java copyright.
Put simply, coinciding with the mounting fears of Oracle targeting Java deployment, Oracle’s copyright dispute with Google gained (potentially unexpected) traction. On March 27, 2018, the Federal Circuit Court ruled in favor of Oracle on its second appeal. By January 2019, Google filed an appeal with the United States Supreme Court.
If the Oral Argument in Google v. Oracle was Any Indication, the Software Industry Should Anticipate an Oracle Victory.
The U.S. Supreme Court heard oral arguments from both Oracle and Google on October 7, 2020. The oral arguments suggest an Oracle victory. IP Watchdog wrote the following analysis on the same day:
Brian Michalek of Saul Ewing Arnstein & Lehr said that “questioning from Chief Justice Roberts, Justice Thomas, and Justice Gorsuch seemed to suggest that each had a comfort level that the Oracle software code was, in fact, protectable under the copyright laws. In contrast, Justice Sotomayor and Justice Breyer were concerned about what the particular code was.”
However, given the direction of the questioning overall, “it looks like many of the justices were comfortable enough with Oracle’s code being copyright protectable to suggest a possible affirmance,” Michalek said.
During an event on the same day entitled “Courthouse Steps Oral Argument Teleforum: Google v. Oracle”, Steven Tepp, Professorial Lecturer in Law at The George Washington University Law School offered similar predictions of an Oracle victory:
I offer my own observations about the oral argument and invite our panelists to agree, disagree, or make other observations. I heard great skepticism of Google’s copyrightability arguments, and I’m not sure I could identify even a single justice who seemed to find them appealing. There was, to me, surprisingly, little discussion on the merits of fair use; although, they did get to some transformative-use questions later on.
Coming to essentially the same conclusion, The New York Times commentary noted “on balance, Mr. Goldstein, Google’s lawyer, faced more hostile questions than did his adversaries in the case.”
Skepticism does not necessarily mean that the notoriously unpredictable Supreme Court justices have shown the entirety of their hand. Still, considering the fact that Google won twice at the District Court level only to be summarily overturned in Washington D.C. at the Federal Circuit level and are now at the Supreme Court for their last stop, one would be hard-pressed to be optimistic about the trend lines.
What Does this Mean for the Java Licensee?
First, it is our speculation that Oracle refrained from launching a wave of Java audits pending the resolution of Google v. Oracle. There can be little doubt that fostering a bad public reputation for recklessly leveraging its Java copyright against hapless licensees (many of whom still thought it was open-source) could be used to sway any court against taking over measures to strengthen Oracle’s copyright in Java.
But Oracle’s delay in launching Java audits could very easily reflect Oracle keeping its powder dry until the Supreme Court rules, hoping for robust and expanded copyright protection. If Oracle prevails in this very high-profile matter, it can leverage licensee dread and uncertainty fueled by a victory at the highest Court in the land. Particularly, many software developers have embedded Java script into software products that have been sold and shipped. While it is unlikely that many licensees will be on the hook for anything close to the almost $9 billion that Oracle is demanding from Google, that figure can’t help but work its way into a licensee’s calculations when (or if) Oracle roars in seeking a thorough review of Java licensees, especially with regard to Java code embedded in downstream products.
If our speculation is correct and Oracle is holding off, in part, in order to not harm its public reputation while waiting for a Supreme Court ruling, a victory at the Supreme Court isn’t necessary. Even an adverse or mixed ruling would free Oracle to dust off its Java auditing plan and put it into play in 2021.
Oracle has spent well over a decade deciding how best to monetize Java. There can be little doubt that Oracle is plotting right now how to do so. The only question is how and whether the Supreme Court will provide an essential part of Oracle’s emerging plan. As such, savvy in-house counsel will not wait for Oracle to knock on their door with an audit before they begin internal review of their Java deployment.