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May 5, 2021

API Software Licensing After Google v. Oracle

In its decision on April 5, 2021, the United States Supreme Court held that Google’s copying of 11,500 lines of Oracle’s Java application programming interface (API) was fair use. This is not a green light for all to use third party APIs without a license. Acknowledging that Oracle’s API embodied creativity, the Supreme Court emphasized that its decision applied to the specific kind of API software at issue (declaring code) in view of the particular context of this case. Therefore, before copying a third party’s API without a license, software developers and manufacturers should continue the prudent practice of obtaining a license or receiving the go-ahead from legal counsel based on a formal copyright analysis.

This decision ends a decade of litigation. After the parties failed to agree on license terms, Google copied almost all of the source code (specifically, declaring code) of 37 packages of the Java API programming library. Oracle sued Google for copyright infringement and, after the jury found infringement, the District Court for the Northern District of California held the declaring code was not protectable by copyright. The United States Court of Appeals for the Federal Circuit reversed the district court’s copyrightability decision and reinstated the jury’s infringement verdict. On remand in the district court, a jury found in Google’s favor on its fair use defense. The parties appealed a second time, and the federal circuit found that Google’s copying was not fair use. Although Google asked the Supreme Court to review the determinations on both copyrightability and fair use, the Supreme Court declined to address copyrightability and, instead, found that Google’s copying of the API packages was fair use.

In its holding, the Supreme Court found all four of the fair use factors in Google’s favor as follows:

  • Nature of the Copyrighted Work: Describing the declaring code as that which labels and organizes particular tasks, the Supreme Court found the declaring code to be more functional than expressive. The Supreme Court concluded the declaring code was inherently bound together with uncopyrightable ideas, and thus, this factor pointed in the direction of fair use.
  • Purpose and Character of Use: In regard to this factor, the Supreme Court found that Google used only the portion of Oracle’s code necessary to transform the software from use primarily in desktops and laptops to a new medium—smartphones. In analyzing this factor, the Supreme Court placed weight on the advantages of the copying, such as furthering the development of computer programs, creative progress, enabling innovation, and reimplementing the code in new systems, such as the Android platform for smartphones. On this basis, the Supreme Court found this factor weighed in favor of fair use.
  • Amount and Substantiality of the Portion Use: In analyzing this factor, in relation to the copyrighted work as a whole, the Supreme Court relied on the fact that the declaring code, copied by Google, was only 0.4 percent of the entire code of the Sun Java API programming library. The Supreme Court also considered that the amount of the copied code was tied to a transformative purpose—repurposing the code from desktops and laptops to smartphones. Consequently, the Supreme Court found this factor weighed in favor of fair use.
  • Market Effects: Finally, the Supreme Court found that Google’s use had little effect on the potential market for or value of the copied code. For this factor, the Supreme Court analyzed a variety of questions, explaining, however, that these questions are not always relevant for a fair use determination, not even in the world of computer programs. For the particular circumstance involving Google’s reimplementation, the Supreme Court inquired into the following:
    • The nature of the ability to compete in the copying party’s market space, concluding that Oracle never successfully entered the smartphone market, that Java and Android are used on different devices, and that Android does not substitute for Java
    • The sources of the loss in revenue, concluding that Oracle’s revenue arose from programmers’ investment to learn how to operate Java programs as opposed to an investment to create the Java API
    • The risk of creativity-related harms to the public, concluding that Google’s copying would enable new code to enter the market. On this basis, the Supreme Court found that the market effects factor weighed in favor of Google.

 
Although this decision leaves in place the federal circuit’s prior holding that the API’s declaring code and structure sequence and organization are copyrightable, this decision provides a basis for a fair use defense to use a third party’s API in a limited context. Notably, the fair use defense, described by the Supreme Court as a “context-based check,” is not necessarily applicable to all types of API software nor to declaring code in all types of contexts. Rather, the defense would be most applicable to API users in circumstances that closely resemble the facts of this case. Bear in mind that each of the fair use factors the Supreme Court found to favor Google could point away from fair use under a different set of facts involving API software.
 
This decision could be troublesome to software manufacturers that make API software (e.g., programming libraries) in circumstances similar to this case. These manufacturers should reconsider how to distribute and commercialize their software. Depending on a manufacturer’s business model and market, the following approaches could help the manufacturer protects its API software:

  • Brand and market the declaring code as a distinct software solution; in doing so, a court might be less likely to conclude this declaring code is only a small part of something much bigger—the manufacturer’s entire API software platform.
  • Increase reliance on trade secret protection and only disclose the API source code under written confidentiality terms.
  • Aggressively seek patent protection for the functionality of the API software, keeping patent applications pending, through the continuation practice, to enable the manufacturer to tailor the coverage to address design-around and invalidity tactics of copiers.

These approaches could decrease the likelihood of a fair use determination or give grounds for trade secret misappropriation, breach of contract, or patent infringement.

If you have any questions regarding the content of this alert, please contact Renato Smith, partner, at rsmith@barclaydamon.com; Genevieve Halpenny, associate, at ghalpenny@barclaydamon.com; or another member of the firm’s Branding, Trademarks & Copyrights Practice Area.

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