Noting that some 700,000 Android devices are activated every day — each one built around Oracle’s copyrighted Java APIs — the company figures “each day’s worth of activations likely generates approximately $10 million in annual mobile advertising revenue for Google.”

So $3.65 billion — which is over $1 billion more than the $2.5 billion Google claimed Android was generating in ad revenues last October.

Why the discrepancy? That’s tough to say, as Oracle doesn’t explain the calculation used to arrive at that figure or the numbers it plugged into it, aside from the 700,000 Android activations per day metric that was provided by Android boss Andy Rubin last December. Over at FOSS Patents, Florian Mueller speculates that Oracle’s number is based on the assumption of annual advertising revenues of $14 per Android user, though again no rationale for it is offered.

In any event, $3.65 billion is a far cry from the up to $6.1 billion in damages Oracle has claimed Google could owe it for the alleged violations, though that first sum doesn’t reflect Android’s full value. Said Oracle, “This revenue does not even include all the other value Android generates for Google, ranging from Android Market revenue, to other Android-related services, to ensuring that Google will not be locked out of the mobile business, to lucrative relationships with manufacturers of myriad devices on which Android can and does run, to the inordinately valuable access Android provides to customers for its new social network service, Google+.”

UPDATE: Looks like that $2.5 billion run rate I mentioned earlier is not exclusive to Android. Rather, it includes all mobile revenues. So the discrepancy between Oracle’s number and revenue generated by Android is even larger than originally though.

The reason? A scary vulnerability in Java that was detected over the summer, and which Oracle has subsequently fixed, is being exploited by people who create the malware and crimeware that causes so many headaches for home users and corporate IT departments.

The risk is especially acute at large companies with big fleets of desktops and notebooks to manage. If you’re a home user, the patch is easy to install. But most employees don’t have administrative privileges on their work desktops or notebooks, so someone from the IT department has to come and install the patch for them.

That’s a big, time-consuming process, says HD Moore, chief security officer at Rapid7, a Cambridge, Mass-based company that specializes in helping companies stay ahead of new computer security vulnerabilities. He’s also the chief architect of Metasploit, which Rapid7 owns.

One of the reasons this particular vulnerability is so bad is that even after it was detected and fixed, it wasn’t fully understood how dangerous it is, Moore says. Crimeware creators somehow figured it out ahead of most security researchers, and started adding code to Web sites designed to take advantage of it. And that’s especially dangerous at this time of the year, when people are shopping online both at home and the office. “It’s kind of like a perfect storm,” Moore told me yesterday. Add to that the fact that many companies have IT staff taking vacation during the holiday season, and the timing couldn’t be worse.

Enterprise is historically bad at patching Java vulnerabilities anyway, because it doesn’t have the same automatic update tools that Windows or Adobe Flash does. “The tools for patching Java aren’t that great,” Moore told me. “A Java update just isn’t treated with the same fervor as a Windows update.”

So how bad is this one? The National Vulnerability Database rates it a 10 out of 10 on the severity scale, and also rates it as “low” on the access complexity scale — meaning it’s really easy for the bad guys to carry out an attack using it.

Security blogger Brian Krebs discovered the vulnerability being “weaponized,” that is, built into the software that computer criminals buy on the black market. For instance, those who have bought something called the Blackhole Exploit Kit, a $4,000 software toolkit used to target Windows machines, are getting automatic updates that include tools to take advantage of the Java vulnerability.

What to do until you can get all your machines updated with the latest version of Java? Simple, really: Disable it and block it at the firewall, until all the machines on the network that need the update have it, Moore says.

Rapid7, incidentally, is a security company on the rise. Just last month it raised a $50 million series C round of funding, led by Technology Crossover Ventures and joined by previous investors Bain Capital Ventures; Tim McAdam, a TCV partner, joined Rapid7′s board.

News of the meeting comes after Reuters reported that, after exploring options for the unit, HP has been leaning toward a sale.

HP had shut down its webOS hardware business on Aug. 18, after sales of the much-ballyhooed TouchPad tablet failed to gain traction at major retailers.

The Reuters story listed several potential buyers, representing more or less the wishful thinking of HP’s advisers at Bank of America: Amazon, Research In Motion, IBM, Oracle and Intel.

I can knock two off that list: Oracle and IBM. I’ve checked with sources at both companies today, and they slapped down the idea of buying webOS from HP. Neither company would have anything useful do with it, other than milk webOS for patent royalties.

Intel might have made a sliver of sense, until it walked away from its own Meego mobile OS in September and instead threw in its lot with Samsung on an Android variant called Tizen.

That leaves Research In Motion, which has problems so numerous that an acquisition seems unlikely; and Amazon, whose flagship tablet, coming later this month, runs a version of Android.

According to reports, the companies’ CEOs, Larrys Ellison and Page, are still at an impasse over how to settle Oracle’s patent-infringement lawsuit against Google over the use of Java in its Android operating system.

The latest sticking point: A recommendation from Oracle’s damages expert arguing the company is owed more than $2 billion for copyright infringement and $201.8 million more for patent infringement.

That’s significantly less than the $6.1 billion Oracle claimed Google owes it in court papers, but it’s still far too heady a figure for the search giant.

Reuters reports that in a Tuesday letter to the judge presiding over the case, Google attorney Robert Van Nest urged the court to reject that recommendation, slagging it as deficient. According to Van Nest, its failure to explain just how the figure was calculated and the forecast for how much revenue Oracle might have earned by partnering with Google on Android are grounds enough for ignoring it.

Meanwhile, talks between the dueling Larrys drag on, with an October trial date looming if they fail to reach a settlement.

According to court filings, U.S. Magistrate Judge Paul Grewal has ordered the two CEOs into a second day of mediation after nothing came of the first.

Yesterday’s talks were not open to the public, so it’s not clear how much, if any, progress was made toward reaching a resolution. But sources familiar with the matter say the two companies remain at an impasse, with Ellison insisting Oracle is owed billions of dollars in damages for Google’s alleged infringement and Page dimissing that figure as excessive.

In the past, Google has said that if it owes Oracle anything, it’s no more than $100 million. And that doesn’t square with Oracle’s view that it’s entitled to royalties on Android device sales.

And so a second round of talks have been scheduled for tomorrow — the same day that Google Executive Chairman Eric Schmidt appears before a Senate antitrust subcommittee hearing to testify about the company’s dominance of Internet search.

A trial has been tentatively scheduled for October if the two CEOs again fail to reach a settlement.

James Gosling, the former Sun Microsystems engineer who went to Google after Sun was acquired by Oracle, has joined Liquid Robotics as chief software architect, he said Tuesday. The Sunnyvale, Calif., company–profiled in the Wall Street Journal earlier this year–makes “wave gliders” that ride ocean currents and collect and transmit data such as water temperature, wave heights, whale songs and chemical levels.

Read the rest of this post on the original site »

The first bit, as noted by FossPatent’s Florian Mueller, is a passage from an October 2005 email written by Andy Rubin, Google’s senior VP of mobile, concerning Sun, which held the patents at issue here before being acquired by Oracle.

“If Sun doesn’t want to work with us, we have two options: 1) Abandon our work and adopt MSFT CLR VM and C# language – or – 2) Do Java anyway and defend our decision, perhaps making enemies along the way.”

There are alternate readings, I’m sure. Rubin here could have been referring to the Java programming language, which is open and free (in which case his prediction about making enemies is surprisingly prescient). But the most obvious is that Google knew it needed a Java license, but chose not to negotiate one. As William Alsup, the district court judge presiding over the case, observed in a court order, “Google may have simply been brazen, preferring to roll the dice on possible litigation rather than to pay a fair price.”

The others, read aloud by Alsup during a hearing in San Francisco last week, are equally — if not more — damning. The first, a 2005 message from Rubin to Larry Page in which Rubin says his team is “making Java central to Android” and proposes that the company “take a license.” The second, this email from Google engineer Tim Lindholm (who was previously a senior Java engineer at Sun) to Rubin in August of 2010:

“What we’ve actually been asked to do (by Larry and Sergey) is to investigate what technical alternatives exist to Java for Android and Chrome. We’ve been over a bunch of these, and think they all suck. We conclude that we need to negotiate a license for Java under the terms we need.”

As Alsup told Oracle’s attorneys moments after reading it in open court, “That’s a pretty good document for you. That ought to be … big for you at the trial.”

Indeed — particularly if Rubin has to explain it on the stand.

“You know what they used to say about Joe Alioto,” Alsup said, referring to the successful antitrust attorney. “In a big case like this, he only needed two documents: He needed a document like this, the one I just read, and the Magna Carta. And he won every case. And you are going to be on the losing end of this document with Andy Rubin on the stand. … If willful infringement is found, there are profound implications for a permanent injunction. So you better think about that.”

[Image credit: Flickr/Hella TJ]

“You’re both asking for the moon and you should be more reasonable,” Judge William Alsup told lawyers for both companies, according to a Reuters report.

Alsup told Oracle that the damages it expects to collect are too high, while Google’s argument that it owes Oracle nothing is “ridiculous.” Oracle has said its damages calculations range from $1.4 billion to as high as $6 billion. It recently told the court it is seeking $2.6 billion.

Alsup also talked about how internal Google emails appeared to show its executives knew it was using Java in Android. “I’m not saying there was willful infringement, but how are you going to answer this?” Alsup asked attorneys for Google during the hearing, according to the Mercury News.

The tone of exasperation with both sides seems to indicate that Alsup wants the two companies to start settlement talks. Oracle sued last year, accusing Google of infringing on Java patents which Oracle now owns as a result of its acquisition of Sun Microsystems.

Alsup also granted Oracle’s request to grill Google CEO Larry Page and several other current and former Google employees in a pretrial deposition. (See the judge’s order below.) Oracle had sought the order last week, arguing that Page, as Google’s president, had been directly involved with its 2005 acquisition of Android and had participated in Java licensing discussions with Oracle CEO Larry Ellison last year. Google had opposed the request.

The judge also granted Oracle’s request to depose two other current and former Googlers, including Bob Lee, who’s now CTO at Square, but he denied the request to depose Dipchand “Deep” Nishar, a senior vice president at LinkedIn. (Update: I revised this paragraph to correct Nishar’s name. I also initially said the judge had granted Oracle’s request to depose Nishar when in fact he denied it. Sorry about that.)

Java Docket 229

In a nine-page letter to the court, which you can read below, Oracle explained that Page, then a Google president, made the decision to acquire Android in 2005, and that later he participated in the licensing talks that occurred between Sun Microsystems and Google concerning Android’s use of Java. He also participated in further communications with Oracle CEO Larry Ellison after that company acquired Sun last year.

Oracle is also seeking to take a deposition of three other people in the case:

Dipchand “Deep” Nishar: The Wall Street Journal described Nishar as an “unsung Google hero” in 2008 when he left to join LinkedIn as its vice president of product. Oracle cites his LinkedIn profile as saying he “started and managed Google’s mobile initiatives worldwide” from 2005 to 2007. Oracle says that Nishar was involved with the Java negotiations between Sun and Google, and wrote several of the documents that Oracle says are going to prove relevant in the case.

Bob Lee: Currently the CTO at Square, Jack Dorsey’s mobile payment start-up, Lee was before that a software engineer at Google whom Oracle portrays in the letter as having “led the core library development for Android.” Oracle says his testimony “would be relevant both with respect to certain aspects of Oracle’s liability and damages theories,” and that documents Lee wrote, which Oracle expects to produce as evidence, demonstrate an “intimate knowledge of Sun’s licensing practices, which is relevant to Oracle’s claims of willful infringement.”

Tim Lindholm: A former Sun Microsystems employee, Lindholm, Oracle says, created some of the Java technologies at issue in the lawsuit. As Oracle puts it: “He constructed one of the very first Java virtual machines, and came to Google with intimate knowledge of the Java platform architecture.” Lindholm not only built the first Java virtual machine, he cowrote a book on it. “In addition, Mr. Lindholm participated in the negotiations that took place between Sun and Google for a Java license,” Oracle says.

Coming only days after the judge in the case, William Alsup, notified Google that he has some tough questions about some of the underlying facts in the case — there is the awkward fact that Google did initially negotiate both with Sun and Oracle for a Java license and then walked away — this request is Oracle’s way of turning up the heat on Google.

Oracle sued Google last August, saying that Android infringes on Java patents it owns. (Original complaint here.) Oracle recently told the court it thinks Google should cough up $2.6 billion in damages.

Oracle’s letter contains the text of a Google statement opposing the deposition requests, saying the request is late and that deposing Page is a “harassing demand” and irrelevant to the case at hand. “Oracle comes to this Court ‘gnashing [its] teeth’ with an eleventh-hour attempt to cram extra depositions into the last couple weeks of the discovery period,” the statement says.

Google argues that Oracle has already deposed Andy Rubin, Google’s VP of mobile platforms, and Dan Bornstein, whom it describes as the “primary architect” of one of the Java virtual machines at issue in the case. (See Bornstein talk about it in this video from Google I/O in 2008.) These two should meet Oracle’s needs, Google says.

Oracle rebutted that Google has asked to depose Ellison, and that Google had sought to prevent Oracle from deposing former Google CEO and current Chairman Eric Schmidt.

The companies are supposed to have wrapped up the discovery phase ahead of the trial by July 29, but these new requests would seem to push that phase into August and ultimately delay the start of the trial.

oraclevgooglepagedepoletter

The case, which Oracle brought last August, claiming that Google’s Android operating system infringes on Java patents it owns as a result of its acquisition of Sun Microsystems, has been bogged down over what’s called a Daubert motion, which is a pre-trial challenge aimed at excluding the presentation of certain evidence, usually expert testimony, to the jury. As part of the wrangling, in June Oracle said it planned to seek $2.6 billion in damages in the case.

So today, a notice came down from Judge William Alsup concerning some pointed questions that he intends to ask Google. “It appears that early on Google recognized that it would infringe patents protecting at least part of Java,” Alsup writes in the filing, but that Google later abandoned licensing talks because the terms seemed too expensive. He then goes on to ask, “Does Google acknowledge that Android infringes at least some of the claims if valid?” The next hearing on the matter is July 21 and clearly Alsup has some tough questions for Google’s lawyers.

Oracle, which didn’t comment on the filing, has said that Sun had offered Google reasonable licensing terms, but that Google chose to press ahead with Android without a license. Google didn’t respond to a message seeking comment today. But what it looks like to me is that Alsup is trying to get both parties to agree that some infringement took place. If that’s true, then there’s not much left to fight over — aside from the size of the check Google will write. The text of the notice is below.

ORACLE AMERICA, INC.,
Plaintiff,
v.
GOOGLE INC.,
Defendant.
/
No. C 10-03561 WHA
NOTICE REGARDING
ADDITIONAL QUESTIONS
FOR JULY 21 HEARING

In reading the Daubert briefing, it appears possible that early on Google recognized that it would infringe patents protecting at least part of Java, entered into negotiations with Sun to obtain a license for use in Android, then abandoned the negotiations as too expensive, and pushed home with Android without any license at all. How accurate is this scenario? Does Google acknowledge that Android infringes at least some of the claims if valid? If so, how should this affect the damages analysis? How should this affect the questions of willfulness and equitable relief? Counsel should be prepared to address these issues at the hearing.

Dated: July 12, 2011.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

Oracle sued in August saying Android infringes on a bunch of patents related to Java, the programming language that Oracle became the owner of when it acquired Sun Microsystems. The amount comes in a new filing in the case (below, courtesy the Foss Patents Blog which goes into a lot more detail here). Last week word came that Oracle was seeking “billions” but we didn’t know a specified amount.

Oracle has said that Sun had offered Google reasonable licensing terms, but that Google chose to press ahead with Android without a license. For its part, Google has said that Oracle’s estimate of damages is based on incorrect assumptions and is therefore out of whack. Looks like the judge is going to have rule on this one.

Oracle Opposition to Google Daubert Motion

I can tell you that Windows Azure is going to make the telematics systems in the next generation of Toyota cars smarter. And I also know that this unit of Microsoft has been in a state of management flux recently. Amitabh Srivastava, the Microsoft Distinguished Fellow, who in 2006 took over a project then known only as Red Dog that went on to become Azure, left the company in February.

It’s no secret that, like so many other companies, Microsoft has some big plans for cloud services. It recently disclosed that it plans to spend more than $8 billion in research and development funds on its cloud strategy.

On a recent visit to the Microsoft campus in Redmond, I got a chance to sit down with Doug Hauger, Microsoft’s general manager of Windows Azure. And my first question was really really basic.

NewEnterprise: Doug, there’s so much happening in the cloud computing space these days, and most of the time when people think of cloud services they think of Amazon Web Services. And if they mention Windows Azure, they think, well, that’s Microsoft’s answer to Amazon. But you describe Azure as more of a platform-as-a-service. Can you walk me through the differences?

Hauger: Windows Azure started about five years ago. At that point it started because the company, as with all service providers, was facing some challenges on providing large, scalable, manageable services, not just to consumers, but to businesses that could dynamically scale, and that we could innovate on quickly, and bring out new features. Originally it was meant to be a platform we would use internally for services that we would then deliver out to customers. We quickly realized that we should sell it to partners and customers, and allow them to build on it as a platform.

There are fundamental differences between infrastructure as a service and what we did as platform as a service. It’s different in key ways from, say, what Amazon does with EC2 and S3 or VMWare being implemented in a data center. Our starting point for the design was to see the data center as a unit. That means the networking structure, the load-balancers, the power management, and so on–rather than in infrastructure as a service, you start from an individual server and move up.

If you allocate a service into Windows Azure and say you want it available 100 percent of the time, we will allocate it across multiple upgrade domains and physical power domains in such a way so that if any individual rack goes down or if we’re upgrading the operating system, there’s no interruption in service. That’s just a fundamentally different starting point, with an individual server and moving up. And the way that we do that is we have built out an abstraction layer of APIs that let you write to a set of services, storage services, computer services, networking services, et cetera. As a developer you can write to the service, and give us your application, and it just gets provisioned through what we call a fabric controller, that controls the data center, and also across multiple data centers. That was a design point. That’s how we allow people to write services that can scale and won’t fail and will be available all the time.

The conversation about infrastructure as a service typically starts at cost savings. You go see a customer and they say they want to cut their IT budget and outsource their IT, and so they start there. Platform as a service you start at the cost savings, but very quickly you see 10, 20 or 30 percent cost savings. But the conversation quickly turns to the innovation life cycle that they can get out of the platform. It’s much faster than you can at infrastructure as a service.

The big point that everyone gets about the cloud is that they can use it to save money, but then they quickly start asking what more can they do with the cloud. Are you seeing the same thing?

Yes, exactly. In the enterprise, they’re starting to turn the crank on innovation. I talk to customers who are turning things around in six weeks or a month whereas before they would six months or a year. I actually just talked to a customer the other day, and they said their developers were spending 40 to 50 percent of their time managing services and they couldn’t use that time writing software which was their job. When they moved to a platform as a service, they didn’t have to worry about that anymore. We’re seeing this happening in the enterprise where people are doing this for internal development and on services they’re building for their customers.

One example, Daimler just did their new version of the smart car. They wanted a service so you can check the status of your car when its charging from your smart phone, locate it, et cetera. They turned it around in a couple of weeks on Azure and launched it at the same time as the car launched.

We’re also seeing small players compete at the enterprise level. There’s a small company called Margin Pro and they do mortgage analysis and risk assessment on mortgages. Basically it’s a couple of economists and developers. They wrote the software on Windows Azure, and now they have 70 banks around the world, tens of millions of dollars in revenue, and they are competing with some of the biggest financial services companies in the world because of this back-end infrastructure data center they can use to deliver their results to their customers.

But do you have customers who run standard apps on it too?

Many standard applications have some level of customization, and so we’re seeing a lot of hybrid applications, where customers are extending them into Azure. We have a case with Coca-Cola Enterprises which has a back-end order-processing app that they’ve extended into Azure. And what they wanted to do was get more reach and more agility for the front-end. So they built a secure connection between their data center and Windows Azure and then extended the application out to their partners and customers, essentially people like Domino’s Pizza who order Coca Cola products. We’re seeing a lot of these cases of existing applications being extended like that.

We’re also seeing companies using the high performance computing workload. One example is a company called Greenbutton, which has done a high performance scheduling and billing system on Azure. Another is Pixar, which has an application called RenderMan, which does rendering. Most large animation houses have their own clusters they do this rendering on. Pixar wanted to open up a market for smaller animation houses, little Pixars if you will. They’re working with Greenbutton to embed their technology into RenderMan. They can farm their rendering out to Azure and be billed on a usage basis. That’s a case where you have a large company and a smaller one working together and leveraging the power of the cloud to open up a whole new marketplace where they can be competitive. We call it the democratization of IT.

At what point is the customers’ thinking right now? Are they still at that point where they want to see how much money they can save by moving things that are on-premise to the cloud or are they past that by now?

I would say there’s three buckets of customers. I’ve been in this role for three years and the conversations have evolved in some interesting ways. Three years ago I was telling people they should be adopters and get on board with this platform early. They all said to come back and talk to them in five years. Then about two years ago, the majority of customers were in the first bucket, interested in wanting to save money but they weren’t interested in doing any new innovation. And then there were a few willing to innovate a bit by extending their applications into the cloud. Today I would say many, but not the majority yet, but a lot of them say they get the cloud, they get the cost savings, and now they want to drive the innovation life cycle faster. And there is a growing percentage who are willing to do something completely different and compete in a new way and build a brand new business. It’s been exciting to see that.

What’s been really exciting has been seeing mid-sized companies realizing they can use the cloud to give them an advantage to innovate faster and compete against really big companies. So that is sort of the landscape. Interestingly, I’ve been seeing a lot more adoption among the financial services companies than I had anticipated.

Aren’t they the ones who are supposed to be the most conservative when it comes to IT? I mean, they’re aggressive on performance, but obsessed with security and so skeptical of using the cloud because they don’t want to let their data leave their hands.

Exactly. But think about financial services. They’ve been in cloud computing forever, but it’s just been running on their own proprietary clouds. And so they are very good about understanding their application portfolio, and what can run in a public cloud, what has to stay in a private cloud, and how they can span those clouds. You can basically say you want to do risk assessment on portfolios, you anonymize the data, and you run it on the public cloud, you do all the analytics, you bring it back on-premise and then you deliver it to your customer. Having that kind of mentality in that industry allows them to move very quickly.

Also, manufacturing is moving and adopting the cloud faster than I would have guessed. And interestingly enough, government–not so much federal, because there’s so many certification requirements–but state and local governments are embracing the cloud because of the economic situation, and these are not just governments within the U.S. In Australia and Western Europe, we’re seeing governments adopting and building out applications so they can get services out to their citizens.

So what’s keeping you up at night? What makes you worry?

There’s a few things I think about. While we drive customers to a very fast innovation life cycle, we need to stay ahead of that innovation life cycle ourselves. We’ve done a pretty good job with that. One example, when we first released in beta a few years ago, we had .NET but we didn’t have PHP or Java. We got feedback immediately, almost on the first day, that customers wanted those and right away. And so we turned it around and added those within three months. Our ability to turn the crank pretty quickly is there. And that is something that in the software industry and specifically Microsoft, we have to make sure we make this turn toward service delivery, where we have to innovate quickly so you can deliver services. I think we’re doing a good job, but it’s something top of mind for me.

What are they asking for now? Is there something new the customers want that they don’t have?

They’re asking for continued investment in Java. We have it now, but making it a truly first class citizen, which is what we’re focused on delivering. We also need to keep our ear to the ground around things like application frameworks, extending the modeling capabilities in Visual Studio and things like that. It’s just a matter of thinking about the developer. We need to understand what they want, that’s what we’re here for.

On Monday, Nortel announced that Google had bid $900 million to acquire the bankrupt company’s patent collection.

In a blog post, Google said the current litigious environment justifies the pricey bid.

“The tech world has recently seen an explosion in patent litigation, often involving low-quality software patents, which threatens to stifle innovation,” said Google general counsel Kent Walker. “Some of these lawsuits have been filed by people or companies that have never actually created anything; others are motivated by a desire to block competing products or profit from the success of a rival’s new technology.”

Google has been on the receiving end of a number of patent lawsuits, both directly and indirectly. Oracle, with its Sun acquisition, has sued Google over Android, while Microsoft has sued and threatened to sue Android handset makers, saying that the mobile operating system infringes on Microsoft’s intellectual property. Microsoft has already sued Motorola and Barnes & Noble and reached a licensing deal with Taiwan’s HTC.

Microsoft is looking to make the case that Google’s Android isn’t really free to handset makers and has been arguing both privately and through its legal actions that it believes it deserves royalties for any use of Android.

And it is not just Microsoft seeking to use patents as part of its smartphone battle. Apple has also sued HTC, while Nokia has also been active on the patent assertion front.

Walker argues that what is really needed is significant patent reform but–given the current situation–the company is best off trying to assemble a patent army of its own.

“Google is a relatively young company, and although we have a growing number of patents, many of our competitors have larger portfolios given their longer histories,” Walker said. “So after a lot of thought, we’ve decided to bid for Nortel’s patent portfolio in the company’s bankruptcy auction. Today, Nortel selected our bid as the ‘stalking-horse bid,’ which is the starting point against which others will bid prior to the auction. If successful, we hope this portfolio will not only create a disincentive for others to sue Google, but also help us, our partners and the open source community–which is integrally involved in projects like Android and Chrome–continue to innovate.”

“Through some odd twists in the road over the past year, and a tardis encountered along the way, I find myself starting employment at Google today,” Gosling wrote in a blog post. “I don’t know what I’ll be working on. I expect it’ll be a bit of everything, seasoned with a large dose of grumpy curmudgeon.”

And a dash of litigation as well. Gosling’s hiring at Google comes as the company faces an Oracle lawsuit accusing that it “knowingly, directly and repeatedly infringed Oracle’s Java-related intellectual property.” I imagine having on your payroll the father of the programming language at issue in the suit will come in handy when it goes to trial.

With the deal, Tiny Hippos said it plans to add BlackBerry support to its Ripple development tool. The acquisition follows RIM’s announcement Thursday of a weaker-than-expected earnings forecast as well as plans to add Android support in the upcoming BlackBerry tablet.

It’s connected to Amazon’s existing cloud services, so sending mail from applications already hosted on services like EC2 should be easy. Messages will cost 10 cents per thousand, and customers can send up to 2,000 per day for free when the messages originate from within an application already running on EC2 or Elastic Beanstalk, Amazon’s new service for Java developers.

Amazon named two customers already using the service: Eyejot, a video-messaging service, is using it for sending transactional messages. Another is Neustar, a managed service provider that handles domain-name queries, which is using it to ensure smooth delivery of mail related to signup for services.

Sales were $8.6 billion, helped mostly by new software license sales that grew 21 percent to $2 billion, while updates and product support revenue grew 12 percent to $3.7 billion. The consensus estimate was $8.34 billion. Sales grew 47 percent from the same period a year ago.

Non-GAAP per-share earnings were 51 cents, beating the 46-cent forecast estimate of analysts surveyed by Thomson Financial. Earnings after one-time items were 37 cents, up from 29 cents a year ago.

Gross margins on Sun-branded hardware increased to 53 percent.

Shares are up almost 4 percent in after-hours trading.

There’s a quote from CEO Larry Ellison, reminding us how fast his new products are, and digging once again at the competition:

“Sun’s new SPARC Supercluster computer shattered the world record for database transaction processing performance by running 3 times faster than IBM’s fastest computer, and a stunning 7.5 times faster than HP’s best ever database performance,” said Oracle CEO, Larry Ellison. “Our new generation of Exadata, Exalogic and SPARC Supercluster computers deliver much better performance and much lower cost than the fastest machines from IBM and HP.”

Here’s another quote, from Oracle co-President (and former HP CEO) Mark Hurd, about the Exadata product line:

“Since joining Oracle I’ve met with and visited many customers that have expressed a high level of enthusiasm around our strategy of engineering hardware and software that works together,” said Oracle President, Mark Hurd. “That enthusiasm translates into an Exadata pipeline that has now grown to nearly $2 billion. That number is a good leading indicator that customers are planning to increase their investment in Oracle technology.”

Yes I would say there’s enthusiasm. It was precisely because of the Exadata line that Macquarie Research upgraded Oracle today.

More from the conference call, which starts at 5 pm ET.

4:53 pm: Seven minutes to go before the Oracle earnings conference call starts. Right now it’s all mellow classical guitar.

Call is running a little late.

5:10 pm: And we’re underway with the safe-harbor statement.

Ellison, Hurd and president Safra Catz are on the call.

Americas grew 32 percent in U.S. dollars.

5:15 pm: Balance sheet: $24.8 billion in cash and short-term investments.

Generated $3.7 billion in free cash flow.

5:15 pm: Safra Catz is now speaking. We exceeded the high point of license guidance. Even excluding a payment for legal fees, we beat guidance by 4 cents.

5:16 pm: All geographies reported double-digit growth.

5:16 pm: “We continue to take share from SAP.”

5:17 pm: With Sun, included operating margins were 44 percent, which is better than SAP. [Another dig.]

5:18 pm: Hardware guidance: $1.1 to $1.2 billion in revenues.

Non-GAAP EPS expected to be 48 to 50 cents, and 34 to 36 cents on a GAAP basis.

Here’s Larry:

5:19 pm: Our goal is to be No. 1 in high-end market for servers. Right now our numbers are behind HP and IBM.

5:20 pm: IBM’s and HP’s servers are slow, and software is slow and expensive and have no software value-add. [Another dig at the competitors.]

5:22 pm: Exadata pipeline continus to grow. We expect our new generation of Sun machines will enable us to win significant share, and position us in the No. 2 position behind IBM very soon. And then we’ll fight it out for No. 1.

5:23 pm: Now Mark Hurd is speaking.

5:23 pm: I want to focus on our opportunities to grow significantly.

5:24 pm: Deal volume was spread across companies of all sizes and strength in the public sector as well.

5:24 pm: All of our customers and competitors are reacting to us.

5:25 pm: 150,000 Middleware customers. We ended the quarter with a record hardware backlog.

5:26 pm: Now going to Q&A:

A question from UBS. Are you starting to see a halo impact on adoption of the Oracle suite?

Larry: Close rates are improving. You’ll see great improvement in Exadata sales from Q2 to Q3. Because it’s new, people were running a lot of benchmarks and trying it out first. We’ll sell a lot more Exadata in Q3 than in Q2.

As for the halo effect, when you buy these servers you buy them to run specific software. Engineer them at the same time and make sure they run well together. We have a huge advantage over IBM and HP. The notion of systems, hardware and software that run well together will dominate the high end of the business.

Q: You clearly have a lot of irons in the fire with Fusion apps coming up and Exadata. Focus on Exalogic. Can you share early feedback from customers and compare that to Exadata ramp.

Mark: Exadata experience benefits Exalogic. We’ve matured the use case, we think we know where the targets are. The Exadata experience is a big deal for us.

5:31 pm: A question about Fusion Middleware.

Larry: We’ve been in the middleware business for a long time. With release 11 everything has been rewritten. It’s a much better user experience, you can patch our entire suite with a single file. We think the fact that we have an integrated suite gives us a huge advantage over IBM.

5:33 pm: A question about Europe. It was better than expected. Apps business was really strong. Look at competitors. You’ve been gaining share against SAP. We are seeing a pickup in general environment.

Hurd: I’m not an economist, but we’re doing well in Europe. It was broad-based. It was not singular to a deal or country. It was broad-based to countries where we have been gaining share. It’s been one quarter after another, a pretty steady beat.

Larry: We had a wonderful set of industry specific applications, in telecommunications and banking and retail, and that’s unique vis-a-vis SAP. that has helped us a lot to establish us in a lot of industries. Also Fusion is right around the corner.

5:35 pm: Q: How frequently is an Exadata deployment resulting in the displacement of a competitor’s product?

Hurd: About 70 to 75 percent of the time. About 20 to 25 percent of the time it’s a consolidation.

We’ve sold Exadata now in 50 countries, and 30 to 35 percent of our customers have made a second purchase. You’re starting to see repeat purchases. We’ve learned a lot about this and so as we launch Exalogic we can accelerate our learnings.

5:36 pm: Q: Margin was also great. What can we expect going forward and what were one-time items?

Catz: In general, it’s the business. The only nonrepeatable thing is the $120 million legal settlement, which we will not repeat. Hardware margins and operating margins, this is something we’ve done for many years.

5:38 pm: Q: What is visibility for database licenses?

Larry: A couple quarters ago, someone noticed database licenses were growing nicely. We think Exadata is going to be a nice turbocharge to our database business. Across the board our database business is going to get strong with Exadata.

I just looked at after-hours trading in Oracle shares and they’re up more than 4.5 percent.

Hurd: “The secret to Exadata is bringing the smarts to the data, versus bringing the data to the smarts.”

5:42 pm: Q: What continues to drive the database business? Is it just core database, add-ons?

Larry: We think our technology is getting faster and more reliable at a faster rate than that of our competitors.

5:43 pm Larry: As far as applications, we think there are lots of reasons we continue to gain share every quarter over the last few years over SAP.

It’s the industry-specific applications. We have telecom companies that are running only Oracle software. We have some banks that are making the same kind of commitments up and down the stack. SAP just doesn’t have that.

5:44 pm: Larry: We’ve got this extremely modern Java-based suite called Fusion that is going to strengthen our competitive stance against Salesforce.com and against Workday.

5:46 pm: That seems to be it. The call is concluded.

Bessemer has an impressive list of e-commerce bets: It was an investor in Quidsi, the parent company of Diapers.com and Soap.com, as well as in Yelp. And personally Ferrara is involved in other deals, such as Yodle, which helps local businesses market online, and OMGPOP, a social gaming company. Yesterday, it announced an investment in Shopify, which provides tools to help businesses sell products online quickly.

eMoney: So, you’re background is actually in computer programming? Does that help you evaluate deals?

Ferrara: I was a software engineer for many years, using Java and Microsoft languages, and I had the pleasure of authoring an O’Reilly book on Web services [O’Reilly & Associates’ "Programming .NET Web Services"]. I don’t know if it helps me, but it causes me to gravitate toward good technology and product teams.

Your most recent investment is Shopify?

Yes, we just closed last week. I just loved the team and was impressed by the product and the tech DNA that these guys had. It provides a commerce platform that can quickly serve small as well as larger businesses. They have about 10,000 to 11,000 customers as of today–and they’ve watched a lot of small businesses grow into larger enterprises.

My view of this whole small- and medium-sized business space is that they have a lot of the same pain points as large enterprises….Shopify delivers 80 percent of the functionality of larger, more expensive and cumbersome e-commerce software packages at a fraction of the cost. It offers a range of very sophisticated features around inventory management, marketing capabilities, as well as shipping and fulfillment–all of the capabilities you would get in an expensive package. They are democratizing the whole expensive enterprise software functionality.

E-commerce is a mature business that’s been around for a long time. Is there more innovation that’s happening in the space?

I think the market that Shopify is going after is less about taking share from existing players, and more about the next generation of businesses that are getting started today. A lot of those are mainstream local retailers.

Let’s say a trillion-plus has been spent in local retail, and it’s starting to move online, so that’s a big business. It won’t fully move online, but the local retailers need something besides their Main Street shop. Plus, the retailers want to tie in their physical locations, and use phones to manage their store, and take advantage of [Shopify's] technology to manage their business, whether its physical or online.

An Apple store was the first retail experience I had where I could swipe my credit card anywhere in the store–there was no waiting in line at the register.

Why can’t all retail experiences be like that? Shopify is going to do that, by moving everything to the cloud, whether you are going to a physical store, to the Web or on a mobile device. It should be one and the same.

What do you think of the local e-commerce market, especially given Google’s reported $6 billion offer for Groupon?

From what I’ve seen from afar, Groupon seems like a big business. If the rumors are true, it’s interesting to see Google having an interest. I look at them mostly as a self-serve ad company, which is mostly about technology and automation. Groupon has built a big local salesforce–it’s the inverse of Google’s approach.

I think it says a lot about how Google must be thinking about growth opportunities. To get to the local market, you do need the local salesforce. Self-serve works for a portion, but at the end of the day you need a sales channel.

So, you do think Google needs a local salesforce?

I’m guessing, but it strikes me as something that could be very compelling when [Groupon is] combined with [Google's] machinery. You could leverage each other’s data to do better at targeting for serving ads.

What about all the Groupon copycats?

Time will tell. It’s one of the questions I’ve thought about a fair amount. I don’t know. We have not invested, and clearly there’s a lot of smart people who think there are alternatives and a big enough opportunity to support competitors. I wouldn’t be surprised if it’s big enough. There’s a number of players doing quite well. It’s a good time to be No. 2 to 4.

The big question is, how valuable will it be for the end-business over time. There’s not a lot of historical information on that.

What’s the role of mobile in e-commerce going forward?

For a lot of the local businesses, [mobile] fits so perfectly, and it’s got to be a huge part of any local product offering. A lot of the local merchants are mobile, as well. They don’t have large staffs to rely on and are wearing lots of hats. They want to provide service to their customers on the go–the iPhone and Android really enable that. That’s why Shopify made an iPhone version that helps the merchants to do that.

On the consumer side, they’ve also seen an increase in willingness to make purchases on mobile. It’s expected to grow exponentially, and we have some pretty good data on Shopify. Purchases on mobile are starting to grow quickly.

What about virtual goods? You are an investor in OMGPOP, a social gaming company.

They monetize and generate a good portion of revenues from virtual goods….One of our former investments is Playdom and they did a fantastic job. [Yes, they did. In July, the Walt Disney Company acquired Playdom for $763 million.]

We are bullish on digital media and gaming. We are seeing more and more game mechanics being applied to other business models. For instance, companies in financial services or online education are having their products include game mechanics to drive behavior and make the product experience more intuitive.

Still opportunities for start-ups, with giants like Amazon around? What would be your advice?

There’s a tremendous opportunity internationally. I think it would be challenging to go head to head with Amazon in certain categories. You can’t differentiate on price, and you can’t differentiate on customer service because they are impressive. This isn’t my area of expertise, but as a firm, we see that there’s a space for international e-commerce companies. They understand the local market and the nuances of the local market, and can be in an area that has been overlooked. If they can get scale, they have a chance.

Or niche opportunities, like Diapers?:

That’s a team that did a fantastic job. They provided a great level of customer service. Whenever I told people we were investors, strangers or friends would say, “I love it.”

Google today responded to Oracle’s (ORCL) claims that its Android OS infringes copyrights and patents related to Java, which Oracle acquired as part of its purchase of Sun Microsystems earlier this year. This morning, the search sovereign filed an answer to Oracle’s suit, denying all seven of its patent-infringement charges, and asking that the company’s copyright-infringement claim be dismissed because Google (GOOG) feels it is “legally deficient.”

And, interestingly, the answer calls Oracle out as a hypocrite–a company that pushed for a fully open Java platform when the OS was owned by Sun, only to blatantly ignore the open source community’s requests to fully open source it after its acquisition of Sun closed.

“It’s disappointing that after years of supporting open source, Oracle turned around to attack not just Android, but the entire open source Java community with vague software patent claims,” the company said in a statement. “Open platforms like Android are essential to innovation, and we will continue to support the open source community to make the mobile experience better for consumers and developers alike.”

Google’s prayer for relief makes that disappointment quite clear. In it, the company asks not only for a judgment dismissing Oracle’s complaint against it with prejudice, but also for a judgment in favor of Google on all of its counterclaims; a declaration that Google has not infringed, contributed to the infringement of, or induced others to infringe, either directly or indirectly, any valid and enforceable claims of the Patents-in-Suit; a declaration that the Patents-in-Suit are invalid; a declaration that Oracle’s claims are barred by the doctrines of laches, equitable estoppel, and/or waiver; a declaration that the Oracle’s claims are barred by the doctrine of unclean hands; a declaration that this case is exceptional and an award to Google of its reasonable costs and expenses of litigation, including attorneys’ fees and expert witness fees; and such other and further relief as this Court may deem just and proper.

Here are three of the more pointed graphs from the answer, followed by a copy of the document in its entirety.

7. Sun came under significant criticism from members of the open source community, including Oracle Corp., for its refusal to fully open source Java. For example, in August of 2006, the Apache Software Foundation (“ASF”), a not-for-profit corporation that provides organizational, legal, and financial support for open source software projects, attempted to obtain a TCK from Sun to verify Apache Harmony’s compatibility with Java. Although Sun eventually offered to open source the TCK for Java SE, Sun included field of use (“FOU”) restrictions that limited the circumstances under which Apache Harmony users could use the software that the ASF created, such as preventing the TCK from being executed on mobile devices. In April of 2007, the ASF wrote an open letter to Sun asking for either a TCK license without FOU restrictions, or an explanation as to why Sun was “protect[ing] portions of Sun’s commercial Java business at the expense of ASF’s open software” and violating “Sun’s public promise that any Sun-led specification [such as Java] would be fully implementable and distributable as open source/free software.” However, Sun continued to refuse the ASF’s requests.

8. Oracle Corp., as a member of the Executive Committee (“EC”) of the Java Community Process (“JCP”), the organization tasked with managing Java standards, voiced the same concerns regarding Sun’s refusal to fully open source the Java platform. Later that year, in December of 2007, during a JCP EC meeting, Oracle Corp. proposed that the JCP should provide “a new, simplified IPR [intellectual property rights] Policy that permits the broadest number of implementations.” At that same meeting, BEA Systems – which at the time was in negotiations that resulted in Oracle Corp. purchasing BEA – proposed a resolution that TCK licenses would be “offered without field of use restrictions . . . enabling the TCK to be used by organizations including Apache.” Oracle Corp. voted in favor of the resolution.

9. Just over a year later, in February of 2009, Oracle Corp. reiterated its position on the open-source community’s expectation of a fully open Java platform when it supported a motion that “TCK licenses must not be used to discriminate against or restrict compatible implementations of Java specifications by including field of use restrictions on the tested implementations or otherwise. Licenses containing such limitations do not meet the requirements of the JSPA, the agreement under which the JCP operates, and violate the expectations of the Java community that JCP specs can be openly implemented.”

UPDATE: Oracle has issued this statement on Google’s answer.

“In developing Android, Google chose to use Java code without obtaining a license. Additionally, it modified the technology so it is not compliant with Java’s central design principle to ‘write once and run anywhere.’ Google’s infringement and fragmentation of Java code not only damages Oracle, it clearly harms consumers, developers and device manufacturers.”

UPDATE: Engadget’s Nilay Patel has a good analysis of Google’s strategy, here — as well as some potential holes in it.

2010.10.04 – Google Answer and Counterclaims _filed_ –

Terms of the deal weren’t disclosed, but given Motally’s size–eight people–and the size of its 2009 first-round funding–$1 million–it’s likely the company came fairly cheaply.

One last point worth noting: Motally’s application tracker currently supports Apple’s (AAPL) iOS, RIM’s (RIMM) BlackBerry OS and Google (GOOG) Android, but not a single Nokia (NOK) platform. First order of business for Nokia when the acquisition closes, then: Adapting Motally for Symbian, MeeGo, Qt, and Java.

“There are no guiltless parties with white hats in this little drama. This skirmish isn’t much about patents or principles or programming languages. The suit is far more about ego, money and power.”

– Java creator James Gosling on Oracle’s patent infringement lawsuit against Google

For those who love to get legal, here is Oracle’s complaint against Google, as well as the full statement, in its fight over intellectual property.

This afternoon, the database software giant said it was suing Google (GOOG), alleging patent and copyright infringement of Java-related intellectual property in the development of Android mobile operating system software.

Java is a software programming language and platform created by Sun Microsystems, which Oracle (ORCL) bought this year.

A Google PR person said the Silicon Valley search giant hadn’t been served, so it declined comment on the complaint until it had a chance to review it.

The complaint was filed in the United States District Court for the Northern District of California.

Enjoy (if you’re not Google. that is!):

FINAL Complaint

Google Complaint

Oracle CEO Larry Ellison–fresh from slapping around Hewlett-Packard (HPQ) for ousting CEO Mark Hurd–is aiming his company’s legal guns at another powerhouse.

This afternoon, the database software giant said it was suing Google, alleging patent and copyright infringement of intellectual property related to Java in the development of Android mobile operating system software.

Java is a software programming language and platform created by Sun Microsystems, which Oracle (ORCL) bought this year.

“Sun is now Oracle America and continues to hold all of Sun’s interest, rights, and title to the patents and copyrights at issue in this litigation,” said Oracle in its complaint, filed in the U.S. District Court for the Northern District of California.

Ironically, before he headed the Silicon Valley search giant, Google (GOOG) CEO Eric Schmidt was a key exec at Sun back in the day, guiding the development of Java and actually leading its efforts.

In a short press release, Oracle alleged Google “knowingly, directly and repeatedly infringed Oracle’s Java-related intellectual property.”

A Google PR person said the company hadn’t been served, so it declined comment on the complaint until it had a chance to review it.

You can read that complaint here, as well as the actual Oracle statement.