Oracle Wants Half of Android Revenue. Can Google Afford the Tab?
How much do Oracle (ORCL) and its CEO Larry Ellison want to make? Enough to make Google (GOOG) go crying home to mother, according to paperwork that IP blogger Florian Mueller found in Oracle's copyright and patent infringement suit. If Oracle gets its way -- though that's a big if -- Google could pay as much as half Android's search revenue as a royalty, plus another huge amount for the "'fragmentation' of Java into myriad competing standards."
Oracle has a long standing reputation of playing hardball. Just ask SAP. After Oracle won a $1.3 billion judgment against SAP, it then asked the court for an additional $211.7 million in interest.
Ellison clearly read Dickens and knows how to say, "Please, sir, I want some more," only with more bite than timid Oliver Twist could muster. What his company seeks from Google is truly audacious.
Plaintiffs tend to ask for a lot, knowing that a court could cut the number down. However, in patent disputes, most companies start at single to low double digits when they demand royalties. Not so, Oracle. Although much is redacted in the document that Mueller found, Google's answer to the damages report by Oracle's expert, there are significant clues as to the relative size of the check that Ellison seeks.
Apparently, Oracle's expert -- Iain Cockburn, a professor of management at Boston University -- argued for including all of Google's search ad revenue from Android handsets. (Google argues that this is unreasonable because it doesn't charge for Android, although it was purely Google's idea to give away the software and make money off the ads it could then capture.)
And then Google says that Cockburn argued for a 50 percent royalty rate. Triple damages could be possible if a court found Google to have willfully infringed Oracle patents. It was only early this year that the Court of Appeals for the Federal Circuit rejected a 25 percent royalty rule of thumb.
If Oracle does manage to win big, Google is in deep dog doo. HTC already pays an estimated $5 per Android phone that it sells to Microsoft (MSFT) because of the latter's patents. Other vendors could get whacked to the tune of $7.50 to $12. How much more cost can the price sensitive Android smartphone and tablet markets take if Google has to start charging money for each Android copy to cover a potential Oracle win?
Related:
- Google's Rivals Are Busily Squeezing Android To Death With Patents
- Microsoft Sues Motorola for Google Android Use; Patent Noose Tightens
- Oracle's $1.3 B Award from SAP: Bad News for High Tech
Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.
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