Oracle USA, Inc. v. SAP AG

District court reduces $1.3 billion jury verdict in a copyright infringement case to $272 million, finding that there was insufficient evidence for the jury to base its award on a “hypothetical copyright license.”

Following a November 2010 trial on copyright infringement damages (defendants had admitted liability), the jury awarded plaintiffs $1.3 billion, based on plaintiffs’ theory that had a license for the use been granted (a hypothetical copyright license) it would have been in this amount. On a post-trial motion by the defendants, the district court vacated the damages award and ordered a new trial (unless the plaintiffs accepted a damage award of $272 million based on the evidence of “actual damages”), finding that plaintiffs failed to present sufficient evidence warranting a $1.3 billion award under a hypothetical license theory. The court found that plaintiffs did not present any evidence that defendants’ infringement deprived them of an opportunity to license their works. The court further found that plaintiffs had never given any entity a license to use the works in question and that plaintiffs failed to submit evidence of comparable licenses for similar products.

Since defendants had conceded liability on plaintiffs’ copyright infringement claims that had not been dismissed as of trial, the jury was only asked to set the amount of actual damages, which the plaintiffs elected to seek in lieu of statutory damages under the Copyright Act. To prove actual damages, the court held, plaintiffs could either show the harm they suffered as a result of defendants’ admitted infringement or show, as a proxy for that harm, what the defendants would have reasonably been expected to pay in order to license plaintiffs’ works.

While most of the evidence that the plaintiffs presented went to this second theory, called the hypothetical license theory, the court found that plaintiffs did not present any evidence that defendants’ infringement deprived them of an opportunity to license their works. In fact, plaintiffs had never given any entity a license to use the works in question. In overturning the jury’s damages award, the court also found that plaintiffs failed to submit evidence of comparable licenses for similar products.

Acknowledging that its decision was not dictated by any Ninth Circuit precedent, the court reasoned that the Ninth Circuit had never upheld a hypothetical license award absent proof of the price of that license. The court also rejected plaintiffs’ suggestion that hypothetical license damages automatically flowed from a finding of infringement, since the hypothetical license was merely a way of determining the damages that a plaintiff actually incurred.

Having invalidated the jury’s damages award, the court granted a new trial, finding that most of plaintiffs’ evidence went to their hypothetical license argument, and that they were entitled to seek actual damages in view of defendants’ admission of liability. Alternatively, the plaintiffs could accept remittitur of the award to $272 million, the maximum amount that the court found sustainable by the proof.