ForgeRock, a San Francisco startup led by a bunch of former Sun Microsystems execs, announced today that it has secured a $15 million Series B round of venture capital funding. Accel Partners, which led its $7 million Series A last year, also participated. Warren Weiss, a general partner at Foundation, will join the board of advisers.

I say “another player” because identity and access management is sort of a hot area these days. For one thing, companies are adding all sorts of cloud services to the mix of their IT operations, so there’s a significant need to make managing all the account credentials easier.

The one that comes most readily to mind is Okta, led by Todd McKinnon, a former Salesforce.com executive. It, too, has been raising a lot of money. And even Salesforce.com is making noise about getting into the identity game.

ForgeRock’s approach is based on open source software to provide a single sign-in across pretty much any kind of cloud environment, including public, private and hybrid. It also works with lots of software-as-a-service applications and mobile apps.

So far it has about 200 customers, including Thomson Reuters, Vodafone, McKesson and AOL.

The team is led by Mike Ellis, a former SAP exec who has also spent time at Oracle and Apple. CTO Lasse Andresen was also CTO for Sun’s European divisions. Jamie Nelson, VP of Engineer, was Sun’s director of engineering.

Several of the senior execs hail from Sun and worked on its identity products, including Sun Director EE and OpenSSO. After Oracle closed its acquisition of Sun in 2010, Sun’s identity products took a back seat to existing Oracle products. Several members of the ForgeRock team bolted Oracle to start their own identity outfit based on open source approaches.

As it turns out, Oracle is ending support for certain Sun identity products, so ForgeRock is going after their customers, specifically marketing a “Sun Replacement” — essentially an upgrade from Open SSO to its own OpenIDM. So now their old employer is a competitor.

The software giant’s chief executive on Tuesday unveiled a set of midrange and high-end server systems, powered by a faster version of the Sparc microprocessor line invented by Sun. Oracle said the new systems are much speedier in running an array of applications, including Oracle databases and Java software, and are up to ten times faster than the similarly priced Oracle system it replaces.

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While the shares fell in after-hours trading, as markets opened in New York investors sent the share soaring by 68 cents, or more than 2 percent, to $32.94. Profits on a per-share basis were 53 cents, in line with what analysts had expected, while revenue, at $8.2 billion, was off the consensus by about $200 million. What gives? It’s subtle, and it all comes down to two big bets Oracle has made that are close to — but not yet — paying off: Hardware and cloud computing.

First, there’s the hardware business, the remnant of the former Sun Microsystems that Oracle acquired in 2010. Oracle has been rebuilding those product lines into what it calls its “engineered systems” line, hardware sold under the brand name Exa: There’s Exadata, Exalogic and Exalytics. (Oracle president Mark Hurd described them in detail in an interview with AllThingsD in June.) It also sells other lines of hardware, the T and M lines that are leftover Sun products. Here, revenue was $779 million for the quarter.

On a constant currency basis, hardware sales are down by more than 20 percent. As analyst Karl Keirstead of BMO Capital Markets put it, Oracle missed the estimates for hardware sales “by a mile,” and he doesn’t expect it to begin growing until the fourth quarter of the 2013 fiscal year. (Yesterday’s report was for Q1 of fiscal 2013.) In fact, Oracle said that it expects hardware sales next quarter to show year-on-year declines in the range of 8 percent to 18 percent on a constant currency basis.

And yet the shares are rising this morning. For one thing, declining hardware sales are all part of the long-term plan. CEO Larry Ellison has spoken many times of letting lower-margin portions of the hardware business fade away while growing sales of hardware that has a higher margin. That’s what the Exa line is all about. Why sell a bucket of peaches for a $2 profit when you can make peach pie and make a $20 profit? Oracle’s only problem is that its peach pie — that would be the new hardware business — is still getting traction, while the older business selling T-Series and M-Series servers is still hanging around. There was progress: Operating margins rose to 44 percent, up from 42 percent a year ago. Oracle’s goal is to get those margins back to 48 percent, which is where they were before the Sun acquisition.

Analyst Brad Reback of Stifel Nicolaus says the trend may turn in Oracle’s favor by next summer or fall. “We think traction for Oracle’s engineered systems continues to accelerate … However, we believe the ‘bleed off’ of its commodity business and cannibalization of its [higher-priced] M-series is masking strength in these other businesses. We believe by 4Q this trend could reverse and expect growth in its hardware business in FY14.”

Combined with headwinds brought on the by the strength of the U.S. dollar versus several foreign currencies, especially the euro, the miss in hardware essentially dragged down the rest of the business. It certainly could have been worse.

Meanwhile, Oracle made a lot of noise about its burgeoning business of offering applications in the cloud, or on a “software-as-a-service” basis. Remember that Oracle has been spending big on cloud acquisitions in the last year or so, nabbing the HR software firm Taleo and the customer support company RightNow, among others. Keirstead reckons that those deals added 11 percent to Oracle’s top line on a constant currency basis.

The new embrace of the cloud constitutes a pivot toward a second fundamental transition. Oracle has long been one of the leaders in the old-school “on-premise” type of software that runs internally on a company’s hardware. Cloud software runs in remote data centers and is generally sold on a subscription basis, where the customer pays for what they use.

Of the $1.6 billion in new software-license and cloud-subscription revenue, return derived from cloud software amounted to $222 million. Its biggest success in the cloud appears to be in the HCM (Human Capital Management) space, which would include the Taleo acquisition. It said less about its Customer Relationship Management suite, which Keirstead thinks suggests that Oracle is getting serious pressure on that front from Salesforce.com.

Whatever the case, CEO Larry Ellison said that more cloud announcements are coming at Oracle’s annual OpenWorld conference in San Francisco next month. “Oracle has clearly signaled that it is pivoting to the cloud more assertively, which may reassure investors worried that it was late in doing so,” Keirstead wrote in a note to clients this morning. For now, the Street likes the cloud.

So anyway, today was the deadline for the companies to drop their filings, and, well, here they are. Short answer: Oracle reiterated what it said before, that it had retained the patent law blogger Florian Mueller, he of Foss Patents, as a paid consultant in the case, though this wasn’t exactly news since Mueller and Oracle had both already disclosed the relationship. It also mentioned an Oracle corporate blogger who wrote about the case while it was going on.

Google for its part appears to have shrugged. “Neither Google nor its counsel has paid an author, journalist, commentator or blogger to report or comment on any issues in this case. And neither Google nor its counsel has been involved in any quid pro quo in exchange for coverage of or articles about the issues in this case.”

That statement more or less sums up Google’s position, though it goes on to say that it doesn’t quite understand what the judge is asking for.

The end of Oracle’s filing provides a clue. It names Ed Black, president and CEO of the Computer and Communications Industry Association, of which Google has long been a paid member, and Jonathan Band, author of the book “Interfaces on Trial 2.0,” which Google referenced in some of its presentations in court.

Says Oracle: “Google maintains a network of direct and indirect ‘influencers’ to advance Google’s intellectual property agenda. This network is extensive, including attorneys, lobbyists, trade associations, academics, and bloggers, and its focus extends beyond pure intellectual property issues to competition/antitrust issues. … Oracle believes that Google brought this extensive network of influencers to help shape public perceptions concerning the positions it was advocating throughout this trial.”

Update: I’ve just heard from Daniel O’Connor, the Senior Director of Public Policy & Government Affairs at the CCIA, and he reminds me that the organization has long had a staked-out position on the copyrightability of APIs — which was a key issue in the trial — since the days when Oracle and Sun Microsystems were members of the organization and Google was not.

Another update: And now I’ve received a statement from Band:

I am a registered lobbyist for NetCoalition and the Computer & Communications Industry Association, trade associations whose members include Google. Oracle until recently also was a member of CCIA. I do not represent Google.

The book cited in Google’s brief, Interfaces on Trial 2.0, was accepted for publication by MIT Press in the fall of 2009, before Oracle completed its purchase of Sun Microsystems, and approximately a year before Oracle sued Google. As the book clearly indicates, much of it is based on articles I authored or co-authored prior to 2005, while I was a partner at Morrison & Foerster, the firm that now represents Oracle in this litigation. Several of my co-authors were also Morrison & Foerster lawyers.

The book advances the same policy perspective as the first volume, Interfaces on Trial, which was published in 1995, when I was a partner at Morrison & Foerster. In the Acknowledgements section of that volume, we thank Michael Jacobs (the Morrison & Foerster partner who signed the Oracle filing) and several other then-Morrison & Foerster partners for their contribution to our understanding of copyright law. Both books are available for free download at http://www.policybandwidth.com/interfaces-2-0.

It should be noted that the policy perspective we articulated in both books was shared by Sun Microsystems, and, at that time, by Oracle. Sun and Oracle not only were members of the CCIA, but were also members of the American Committee for Interoperable Systems and the European Committee for Interoperable Systems, groups that advocated positions consistent with those taken by Google in this case.

There you have it. We’ll see what presiding Judge William Alsup says about this in the coming days. I’ve embedded the two filings below.

First, Google’s filing.

GOOG-1237-main

And now Oracle’s.

Oracle Response to Aug. 7 Order

Judge William Alsup, who presided over the case in the U.S. District Court for the Northern District of California, wrote in his order that he’s “concerned that the parties and/or counsel herein may have retained or paid print or Internet authors, journalists, commentators or bloggers who have and/or may publish comments on the issues in this case.”

Google and Oracle have 10 days from today to “file a statement herein clear identifying all authors, journalists, commentators or bloggers who have reported or commented on any issues in this case and who have received money (other than normal subscription fees) from the party or its counsel during the pendency of this action.”

The only one known so far is Florian Mueller, who writes a blog called Foss Patents that covered the legal maneuvering in the trial extensively. He disclosed on April 18 (see the relevant section in the last four paragraphs or so) that he had been hired by Oracle as a consultant.

Oracle spokeswoman Deborah Hellinger just sent a comment that seems to put the onus on Google to disclose some relationship that both parties know about:

Oracle has always disclosed all of its financial relationships in this matter, and it is time for Google to do the same. We read this order to also include indirect payments to entities who, in turn, made comments on behalf of Google.

Google has yet to return my email seeking comment. If there’s anything that either party has yet to disclose on the subject I guess we’ll learn that from the filings, which are due no later than next Friday.

Of course this goes without saying, but I’ll say it anyway: While I wrote quite a bit about this case, no one paid me, aside from my AllThingsD salary, to write anything about it or to color the direction of my coverage one way or the other. And if you want any further information on the subject you can refer yourself to the ethics statement that’s linked directly to the right of my grinning mug at the top of this page.

Now that we’ve got that out of the way you can read the full filing, all one page of it, below.

ORDER RE DISCLOSURE OF FINANCIAL RELATIONSHIPS WITH COMMENTATORS ON ISSUES IN THIS CASE

But the questions stemming from the dispute don’t stop with the decision by Judge James Kleinberg ruling that Oracle must abide by the terms of promises it made to HP in 2010 when it settled an unrelated lawsuit concerning Oracle’s hiring of former HP CEO Mark Hurd.

First off for HP is the question of whether the damage to its Business Critical Server business unit, which sells the Integrity line of servers that use the chips, can be reversed. The damage is plain to see in HP’s financial results. For the first six months of the year, sales are off by $275 million, in a business unit that last year saw sales north of $1.1 billion. The uncertainty brought about by the lawsuit has hurt sales, and HP has made it clear it expects them to remain under pressure.

But it’s not lost sales that are hurting HP the most: A half-billion-dollar drop in sales at a company on track do $123 billion this year isn’t much to get excited about. It’s the profits. Legal filings made public over the course of the suit showed that HP derives a healthy portion of its profits from ongoing service and support contracts with companies that buy its Integrity servers. While HP doesn’t routinely break these numbers out in regulatory filings, documents showed that in 2010, HP derived about 15 percent of its profits on an EBIT basis (Earnings Before Interest and Taxes) on business related to Itanium.

Reversing the trend will be hard. For one thing, the legal fight isn’t over. Oracle has promised both to appeal the decision and to continue to press its counter-claims against HP in court, so the uncertainty among HP customers will continue, though as HP’s enterprise chief Dave Donatelli put it to me in an interview in June, the first step toward saving the BCS business is winning the lawsuit.

HP does have a plan to move Itanium customers onto more mainstream servers. It’s called Odyssey, and it involves building a new generation of Business Critical Servers on a more mainstream platform, probably Intel’s Xeon. Over time — and it would take several years — Integrity customers could be persuaded to move in this direction. Exactly how HP preserves the highly profitable service and sales contracts upon which it has relied all these years isn’t entirely clear. One key piece of the strategy would likely involve the creation by HP of a version of its Unix operating system, called HP-UX, that runs on Intel’s mainstream x86 chips.

For Oracle’s part, while its appeal is pending it will have to rejigger its plans and issue an update to its database software for Itanium systems. Existing customers had nothing to worry about in the first place. But it now faces the prospect of paying out a significant damages award to HP. Even if it is as high as $4 billion as many reports have suggested — and it likely won’t be — Oracle’s balance sheet, flush with almost $31 billion in combined cash and short term investments, can take the hit.

But why let it go that far? HP CEO Meg Whitman has referred to the historical relationship that existed between HP and Oracle as “one of the great partnerships in IT history.” And Oracle CEO Larry Ellison has said he likes Whitman.

There have been at least two rounds of settlement talks held before and during the trial. Now that the primary issue of the trial — whether Oracle was bound to stick to an agreement it made in 2010 — has been decided, perhaps there’s ground upon which to build the foundations of a third way out of the dispute.

Oracle’s point that the Itanium chip is nearing the end of its life has more merit than either HP or Intel would care to admit. There may indeed be a few more generations left of Itanium, but nothing can change the fact that the world of enterprise computing is turning its back on Unix and non-x86 chips. The research firm IDC noted in May that the size of the market for non-x86 servers as a percentage of the overall server market has declined to the lowest it has ever seen.

Both HP and Oracle have to respond to this. HP’s response is Odyssey. Oracle, which owns the legacy Sun Microsystems business of SPARC-based servers running Solaris, has its Exadata, Exalogic and Exalytics hardware systems, all of which are based on Intel x86 chips. As the migration away from Unix plays out, customers of both HP’s Integrity line and Oracle’s SPARC systems are going to be forced to choose a way forward.

Depending on the case, both Oracle and HP will be jockeying for this emerging segment of post-Unix customers. One would think they’d want to do so with the maximum amount of customer goodwill. These are specialized customers — shared customers were the basis of the partnership in the first place — who don’t make their computing choices lightly and who tend to stick with one vendor for a long time. For them, the sight of these two tech industry heavyweights fighting so bitterly must be getting tiresome.

Former Yahoo marketing head Elisa Steele, who left that company in December, is joining Skype as its new chief marketing officer. Steele, who worked at Yahoo under former CEO Carol Bartz, will become CMO of the Internet communications company, as well as a corporate VP at Microsoft.

Steele will report directly to Skype President Tony Bates and will oversee Skype’s global brand for the unit, which is owned by the software giant.

Before Yahoo, Steele has previously worked at NetApp and Sun Microsystems, also in marketing roles.

Earlier this month, the company surprised analysts by reporting quarterly results that were better than anyone expected, and with the revelation that Oracle is now the second-largest provider of software-as-a-service after Salesforce.com, it has challenged the conventional wisdom that it was more of an old-school software company.

But that’s not the most interesting thing I noticed in looking over Oracle’s most recent financials. I saw that a lot of operating expenses were lower — $174 million lower, to be exact — in Oracle’s fiscal 2012 versus fiscal 2011. It looked to me like the Mark Hurd playbook is alive and well. It was the first thing that came to mind when I sat down with the Oracle president (and former CEO of both Hewlett-Packard and NCR) at Oracle’s offices in New York for his second on-the-record interview (here’s the first) with AllThingsD. A transcript of our conversation is below:

AllThingsD: Mark, Oracle had a pretty good quarter, when people expected it to be tougher. Software sales are up, hardware is down. But when I went back and looked at the results, I saw something that looked familiar: Shrinking expense lines in things like marketing and general and administrative. I thought that looked a bit like the old Mark Hurd playbook from HP, and NCR before that. Is that part of what’s going on?

Mark Hurd: I think it was a good quarter for us. The quarter behaved well across virtually every metric. Our pipelines were up. Our conversion rates, which is our ability to convert pipeline into orders, was strong. I think, to your point, we managed our expenses. I think, in the context, if you look at the quarter, we added 3,300 people to our sales organization. And those are really the quota-carrying people, plus the technical people who support the sales people. And we did that while keeping our sales and marketing expenses relatively flat year over year. I think anytime you can realign your capital so you can get it into R&D, or into sales, as we have, it tends to show up. We’ve got more opportunities than we can deal with right now, so we had to increase, and it’s a great thing for us.

And that increase is taking place at a time when some people expected you to cut back. Are you trimming in some places and adding in others?

We’re doing exactly what you’d expect us to do. We’re looking at everything in the company, and trying to ensure that we have our investments in the right place. It’s a team sport. We’ve done a lot of work across Oracle to be prudent in some areas with expenses. But at the same time, we’re investing. Our investment in Research and Development is up. As as you’ve seen, our investment in sales and technical people is up. We’re investing into the business because we think we’ve got a great hand and we want to go play it.

Are you investing in Europe, too? Everyone is concerned about their exposure there, given all the sovereign debt problems and the economic troubles there.

We invested during the year across all the geographies. We grew our U.S. sales organization. We grew our European sales organization. We grew in Latin America, and we grew in Asia. And we grew across most pillars of our business. We made material investments in our applications business, and our cloud applications business. We made investments in middleware — we think we have a very strong suite of middleware, and we want to increase our sales force there. We made investments in business intelligence. We think we have a strong offering with Exalytics, and we want to boost our efforts there. And we’ve made investments in engineered systems, and they’re showing up. If you look at the quarter, we booked almost as many systems in Q4 of 2012 as we did in all of 2011. So I think that’s a compliment to both the product and the capacity of the sales force.

Let’s talk about your engineered systems business, because I think that’s the newest piece that people are just beginning to understand. These are the Exadata, Exalogic and Exalytics systems you’ve been talking about. You’ve got the legacy Sun hardware business on one hand, but what’s fundamentally different about the engineered systems versus the traditional systems?

When you look at Sun, it’s a server line that has the SPARC chip and the Solaris operating system, and it has a very long history. So there’s a couple things we’ve done. Exadata is really a little different than a traditional Sun server. It’s a combination of five different technologies. It has a lot of DRAM memory in it. It has a lot of flash memory in it. It’s got incredible compression technology. We can take a database and shrink it and make it one-tenth the size that it was before. We network it with Infiniband, which gives us 10 times better performance inside it. When you shrink the database by a factor of 10, and run the data inside the computer 10 times faster, you’re doing what you did before 100 times faster. A report that used to take 100 minutes to generate now takes one. And, by the way, you can turn that into a cost benefit or a performance benefit. By that I mean, if you’re happy with 100 minutes, you need only one-tenth of the computer. Or you can run 100 reports in the time it used to take you to run one. It also really combines a server, storage and a database. It’s all of those things, and that’s why we call it an engineered system. And just as important as all of that is the fact that we put it together for you, we provision it for you. Our engineers take the Exadata and integrate everything, which normally you’d have your own people do.

And then you have specific flavors of these systems that are designed for specific industries, say retail or finance or health care?

Depending on how far up the stack goes. Think of Exadata up through the database layer. Exalogic goes up through the middleware layer. Exalytics takes the foundation of Oracle’s business intelligence suite. So they’re three different engineered systems that are built around different parts of the Oracle software stack.

So where does that leave the traditional Sun hardware business?

I think when you speak of Sun, you think of the T Series computer line and the M Series computer line. Larry [CEO Larry Ellison] has done a lot of investments in that core line. So in the traditional server line we’ve done new SPARC silicon, the T4, we’ve brought out a new version of the Solaris operating system, all in an effort to drive better performance and total cost of ownership. And we think now, as we push new releases of SPARC, we think we’re going to have the highest-performing silicon in the computer industry. No one argues that Solaris is the most advanced operating system of the Unixes that are available today. Now we’ve also done something new. We’ve introduced a SPARC Supercluster, and that’s all those different pieces in Exadata, built on a SPARC chip and running Solaris. So if you’re an older Sun-SPARC customer and want the benefit you get from Exadata, but you don’t want to switch over to Intel and Linux, which is what Exadata is built on, you can get them and keep SPARC and Solaris. We’re investing into the Sun base.

That brings me to another interesting point. Without diving too deep into the circumstances around the departure of Keith Block, he got caught in court documents saying some things about Sun products; and earlier, there were some statements made by Larry about letting the business around some older commodity products — Sun products, products where the profit margin is lower — shrink. Obviously you’re not going to defend what Block said, but at the same time, you’ve got Larry saying that it’s okay with him if the sales of certain hardware products fall to zero. Putting myself in the shoes of a longtime Sun customer, I wonder if you can unpack those two ends of a spectrum for me?

The best thing to do is tell you what we’re doing. We’re interested in selling intellectual property that differentiates Oracle in helping our customers run their IT better. That’s what we’re focused on. Those things manifest themselves in the T4 chip and Solaris 11 and SPARC Supercluster, and Exadata and Exalogic, and so on. A product that we bring to the customer that merely passes through our distribution channels and passes through our books, we don’t think we add a lot of value to that. We continue to do it mainly, though with less emphasis, because the customer has asked us to do it. Our view is that Oracle adds value where we can bring to bear differentiated intellectual property that gives people a better, more advanced solution that helps them do something cool and exciting.

Let’s talk about the cloud. Larry said Oracle is on track to be the No. 2 software-as-a-service (SaaS) provider after Salesforce.com, after all those acquisitions you’ve made. Oracle has always been kind of a traditional on-premise software player. How do you see the cloud strategy shaping up?

Let me first say this: You have to separate “cloud” from SaaS. First, there’s an incredible amount of Oracle technology running in the cloud: Oracle databases, Oracle middleware, Exadata, Exalogic. … So if you asked us to give us to give you cloud revenue, it would be huge. But that’s separate from SaaS. Just to be clear: We are No. 2 today in SaaS; we have roughly a billion dollars in SaaS revenue. And we’re just getting started. Our stuff is only just now hitting the market. We will have most of our Oracle portfolio running as SaaS on the Oracle cloud by the end of the calendar year. And when you look at our cloud, it’s best on our technology, running our apps. And by the way, that other SaaS company you mentioned — I can’t remember their name — their stuff is built on Oracle. And it was built three decades ago, in the ’90s. Our stuff is fresh, it’s new and modern and built on Fusion middleware.

Speaking of acquisitions, are you still in the hunt? You did Taleo and RightNow and Collective Intellect recently in the SaaS space. Are you still looking around?

We’ve said we’ve got a balanced capital allocation strategy. We’ve been big buyers of our stock. We’re increasing our dividend. And we’re continuing to look at deals that make sense. Larry has said that sometimes the best growth in Oracle’s history has been during economic downturns. And it’s because so many properties become available.

Did you kick tires on Quest Software?

I can’t comment on M&A matters.

When I talked to Meg Whitman at HP earlier this month, she talked about her desire to have a better relationship with Oracle, and how HP and Oracle crafted one of the “great partnerships in IT industry history.” It sounded a little like an olive branch to me. You’re unique in that you sat on both ends of that partnership at various times. Do you share her sentiment?

I can’t comment on that.

You’re coming up on two years at Oracle. Tell me a little about the division of labor. You work with Larry and CFO Safra Catz. How does it work?

It’s just like Larry said at D: All Things Digital. [See the full video here.] He does a lot on products, as he said. I run the revenue, and Safra runs most of our operations. And then, to be blunt, the three of us come together on the strategic issues, and we talk about the issues that cross the areas.

The lawsuit between Oracle and Google over the use of Java in Android is in the books, and while Oracle scored some points and prevailed on at least one narrow point of the dispute, as time has run out, the scoreboard is lopsided in Google’s favor.

Initially billed as the “World Series of intellectual property cases,” this trial had lots of bold-faced names on the witness stand, including Oracle CEO Larry Ellison, Google CEO Larry Page, plus Scott McNealy and Jonathan Schwartz, both former CEOs of Sun Microsystems.

After the jury had its say, William Alsup came back with a ruling that Oracle cannot apply copyright protection to Java APIs. This was by far the most controversial and wide-ranging portion of Oracle’s case, one that had software developers around the world kind of worried that it might prevail. It didn’t, but Oracle has promised to appeal Alsup’s ruling.

Below is a copy of Judge William Alsup’s final order in the case, spelling it all out. You’ll notice that in the portion of the case concerning nine lines of code on which Oracle did prove that its copyright was infringed, no money is changing hands. Oracle was technically entitled to some low-six-figure sum of damages for the infringement. But my understanding is that by agreeing to zero damages now, it’s simply speeding up the process that will lead to an appeal. So while it’s over, it’s really not.

Final Order

At least two analyst reports today suggested that Keith Block, the longtime head of sales for North America, is out. This is the same Keith Block seen disparaging Oracle’s lineup of Sun products in an embarrassing instant messaging conversation with another Oracle executive last summer.

The conversation was included in a dump of documents subpoenaed by Hewlett-Packard in connection with the ongoing litigation between those two companies concerning Intel’s Itanium chip. (HP’s dump came after a release of an equally juicy cache of documents by Oracle earlier the same day.)

The exchange between Block and Anje Dodson, Oracle’s VP for Human Resources, was conducted while Block was on a flight to Washington, D.C., on July 28. In it, Block, typing in the clipped language customary to instant messaging, says the following:

“Nobody talks about Sun, even the Sun customers…it’s dead dead dead….Nobody wants to sell Sun…it baaaalllllooooooows….pig with lipstick, at best.”

Earlier in the same exchange, he discusses how he thinks Mark Hurd, the former Hewlett-Packard CEO who’s now co-president at Oracle, should be CEO of Oracle. That probably didn’t score him any points with Larry Ellison.

Oracle hasn’t returned any of my messages seeking comment on this, and given how close it is to reporting its fourth quarter earnings — it reports this Thursday — probably won’t.

And while it certainly doesn’t look good for Oracle’s head of North American sales to be slamming products of the company it acquired in 2010, his comments aren’t entirely off the reservation. As Ellison himself pointed out during his appearance at D: All Things Digital on May 30, the unprofitable portion of Oracle’s hardware business — the older line of Sun servers — are on the decline and being replaced by the Exa- generation of products. As Ellison put it: “Sales are going down in hardware, but the unprofitable part is going away. Our margins are the highest of anyone in the server business. The sales are down 20 percent, but the profits are up.” Hard to argue with that, though clearly Block could have put it a little more diplomatically.

So about those results: What do the analysts expect? The consensus estimate calls for Oracle to earn 78 cents a share on $11.9 billion in sales, which would amount to sales growth of less than 1 percent.

I talked with Brent Thill, analyst at UBS: He expects a tough comparison this quarter, despite the fact that the period ending in May is always seasonally strong for Oracle. “The set-up for the quarter is a little difficult,” he said.

And yes, the hardware business is going to look a little dicey. As Rick Sherlund of Nomura Securities put it in a research note issued to clients today, Oracle’s hardware business will continue to look troubled while the Sun portion continues to shrink and the Exa lines continue to ramp. “The good news is the commodity business is declining rapidly and by the November quarter, we expect the hardware business to turn positive as the rapid growth in high margin Exa-series products ramps to scale and begins to offset the rapid decline in the commodity business,” Sherlund wrote.

Sherlund said Hurd and Ellison were also personally involved with closing two big deals right at the end of the quarter, one worth about $75 million with a major retailer and another of unknown size with a part of the Australian government, and it was unclear whether they closed or not.

Even so, currency effects are going to hurt. What was expected to be a 3 percent headwind on currency effects turned out to be a 5 percent headwind, thanks to the ongoing difficulties with the euro.

One of the more controversial stances that the software giant Oracle had taken as part of its dispute over Java with the search giant Google was that 37 specific application-programming interfaces — software tools that programmers use to work with Java — could be subject to copyright protections. Today, the judge hearing the case ruled that they cannot.

Judge William Alsup ruled only on the issue of the 37 specific APIs, and didn’t tackle the wider issue over whether or not an API actually can be protected under copyright law. Some software developers had worried that it might be an overbroad interpretation that would tie up some widely used techniques under tricky copyright rules.

Oracle, you’ll recall, had sued Google, alleging both copyright and patent infringement over Google’s use of Java in creating the Android mobile operating system. Google had countered that Java is free to use, and that the APIs are more or less required to use Java in the first place. Oracle won a narrow, but hollow victory in the copyright phase of the trial, but lost outright in the patent phase.

Barring an appeal — and more on that, presently — Oracle won’t collect enough damages over the one case of infringement to cover the cost of the trial. A statement made during the trial limited the potential damages Oracle could collect from the one piece of software code infringed to about $150,000.

The key bit of Alsup’s opinion: “So long as the specific code used to implement a method is different, anyone is free under the Copyright Act to write his or her own code to carry out exactly the same function or specification of any methods used in the Java API.”

In a statement, Oracle promised to appeal. It also stuck to its guns that Google must make its implementation of Java within Android compatible with all other versions of Java, something that Google isn’t likely to do.

Here is the full text of Oracle’s response to Alsup’s ruling:

Oracle is committed to the protection of Java as both a valuable development platform and a valuable intellectual property asset. It will vigorously pursue an appeal of this decision in order to maintain that protection and to continue to support the broader Java community of over 9 million developers and countless law abiding enterprises. Google’s implementation of the accused APIs is not a free pass, since a license has always been required for an implementation of the Java Specification. And the court’s reliance on “interoperability” ignores the undisputed fact that Google deliberately eliminated interoperability between Android and all other Java platforms. Google’s implementation intentionally fragmented Java and broke the “write once, run anywhere” promise. This ruling, if permitted to stand, would undermine the protection for innovation and invention in the United States and make it far more difficult to defend intellectual property rights against companies anywhere in the world that simply takes them as their own.

And here’s Google’s comment:

The court’s decision upholds the principle that open and interoperable computer languages form an essential basis for software development. It’s a good day for collaboration and innovation.

I didn’t get a copy of the ruling, but ZDNet did, so I’m taking the liberty of embedding its copy here:

Oracle v. Google: Order Regarding Copyrightability of APIs

Asa Mathat / AllThingsD.com

In the history of Silicon Valley, there are few characters more colorful than Larry Ellison. The CEO and founder of the enterprise software giant Oracle rarely needs an introduction, and in certain circles he is often referred to by his first name alone — with no doubt as to whom you’re referring. He’s also known for racing sailboats and flying planes. Today, he’s onstage for an interview with Kara Swisher at D: All Things Digital.

Ellison is also known for his enemies, both in the marketplace and in the courtroom. Oracle is a dominant force in the enterprise software business, and competes strenuously against other giants like SAP, but it has also hauled its executives into the courtroom over the theft of software.

Newer enemies are Hewlett-Packard, once a significant partner; and Google, against which Oracle recently lost a lawsuit alleging patent infringement. Expect lots of questions about the lawsuits. There’s also the matter of Oracle’s new enterprise hardware business. Oracle, traditionally a software company, bought Sun Microsystems and thus has a new — or some would say old — hardware business. No doubt he’ll have a lot to say about whether or not that’s been a good purchase. The jury is still out.

Finally, Ellison is also known for his friends, and one in particular: Apple founder and CEO Steve Jobs. After the interview, Ellison will participate on a panel we are doing as a tribute to his close friend.

4:27 pm: Kara: This is the interview I’m most excited about. Let’s start with the America’s Cup.

Larry: It’s the oldest trophy in international sports. Dates to 1851.

Back in the 1850s, when you moved products around, it was by sailing ship. The Queen of England organized it. Schooner America from the U.S. challenged the Brits. They raced around the Isle of Wight. Americans won the first one. Since that time, six American teams have won the cup. It’s the most difficult trophy to win. I tried three times, and won once. I’m defending in San Francisco next year.

There are lots of teams to beat, but we’ll be competitive. It’s extreme sailing — this is not the kind of boat you’d use to take your kids to sail. Even the small boats go 40 miles per hour. They are designed to be unstable so they go fast.

It can be dangerous. Every time I’m on one of these boats, there’s some kind of injury.

Kara: You’ve been CEO of Oracle since 1977. You’re probably the longest-running tech CEO in Silicon Valley. Let’s talk about the sweep. Where do you think Silicon Valley is now? Do you still think innovation is mature?

Larry: I think the Internet was the last big change. The Internet is maturing. They don’t call it the Internet anymore. They call it cloud computing.

Larry: When the Internet first started, the primary device connected to it was the personal computer. Every network has enormously complex components that are hidden from consumers. The PC network was very different. The PC was very complex, and was attached to a complex network.

Now we’ve migrated that complexity off the desktop and moved it to Internet servers. That has been recast as cloud computing.

Kara: Why did you resist the name “cloud computing”?

Larry: I objected to people saying, “Oh my God, we just invented cloud computing.”

Kara: You just don’t like the words “cloud computing.”

Larry: I like the words. It’s a charismatic brand. And people do need to simplify their existing data centers and deliver services in simpler ways.

Kara: How do you look at innovation in Silicon Valley?

Larry: The big thing was the Internet. Right now, our daily lives are on the Internet or the social network. For a very long time, we’ve known how much you earn, what clothes you recently bought, because we had your credit records. That was the single most important database in the world. It tracked every consumer and everything they were doing. Now we can track not only what you’re buying, but what you’re saying about them. We know who your friends are, and what you’re saying to your friends.

We suddenly have consumers instrumented, because they are willing to share their information. Consumers just tell us everything about themselves. Every time you make a comment or tweet, all of this stuff, we have all this detail of people’s lives online, which allows us to market things and sell things and service the consumers in a more insightful way.

Kara: Thoughts on Facebook?

Larry: I am on Facebook, but I don’t use it much. I was obsessed with it for three months. Making friends. Meeting people I would otherwise never meet. Finding out what they had for breakfast.

Kara: What did you say to Mark Zuckerberg when you met him?

Larry: I told him I thought Facebook was a world-changing technology. Google is a very important company. Facebook is arguably an even more important company. How they monetize all of it remains to be seen.

(Ellison mentions the Salesforce deal we reported on yesterday to buy Buddy Media.)

Kara: Did you also look at Buddy Media?

Larry: We did. But we looked at other companies as well. And we bought the one we wanted.

4:45 pm: Larry: If you don’t keep your technology current, you’re going to lose your customers to a competitor. For every Facebook, there’s also a Splunk or other companies doing interesting things.

Kara: Are there areas that are more hyped than others?

Larry: I thought cloud computing was overly hyped and very promising at the same time.

Larry: People said the PC would replace the mainframe. But IBM still does mainframes. PCs are more important than mainframes. I would argue that smartphones are more important than PCs. For the first time, the consumer end of IT is bigger than the enterprise side. Consumer information processing is the biggest part of our business.

Kara: So are you a consumer company?

Larry: We’re not a consumer company, but we sell to the consumer companies. Apple is a big customer. And all the phone companies — we are by far the most popular provider of automation systems all over the world. Our big competitor there is IBM, and we’re growing much faster than they are. IBM used to be No. 1 in database; now we’re No. 1. They used to be No. 1 in middleware, and we’re now No. 1 in middleware. They’re No. 1 in high-end servers; soon we’re going to be No. 1 in high-end servers.

Kara: What do you do all day?

Larry: I still run engineering at Oracle. Mark Hurd runs the sales and consulting, and Safra Catz runs accounting and legal. What I do every day is look at product plans.

4:50 pm: Larry: Long before we bought Sun, we decided to build this database machine. We thought data centers were unnecessarily complex. People were buying storage from EMC, and networks from Cisco, and all these other separate parts together. I said let’s do all of it. We’ll sell one building block you can plug into your data center. We’re trying to do for the data center what Apple did for the consumer.

4:52 pm: Larry: Sun has already paid for itself. Sales are going down in hardware, but the unprofitable part is going away. Our margins are the highest of anyone in the server business. The sales are down 20 percent, but the profits are up.

Larry: If you look at the iPhone, 90 percent of the complexity is the software. And the chips. We design the chips in the Sun servers, the SPARC chip. The complexity is in the software.

Larry: We’re announcing the general availability of the Oracle Cloud. Platform as a Service. Database Service, Java Service and a bunch of applications. All on top of other acquisitions, like Taleo for talent management.

Larry: A complex ERP and HR suite in the cloud. All running on Oracle hardware, and running in their own virtual machine.

When you’re a multi-tenant customer, you get the new upgrade when the vendor tells you. When you run your own VM, you have more control. (Take that, Benioff!)

Kara: Talk about your patent situation, the recent cases with Google, HP and SAP?

Larry: They’re all being litigated. Google is really a copyright case.

Kara: Will you appeal?

Larry: We won on infringement. (Sorta.) When litigation is over, I’ll talk about it.

On the HP case: HP sued us when we hired Mark Hurd. Then they sued us when we said we wouldn’t port new versions of our software to Itanium. That is the next version of our database, which comes out next year. HP says we have a contractual obligation to port to Itanium. We don’t think that is true.

Kara: Do you imagine a better relationship with HP?

Larry: Now that Meg Whitman is CEO. I like Meg.

He doesn’t like the former CEO, Léo Apotheker, formerly of SAP.

Larry: SAP admitted to stealing Oracle software. Who was CEO of SAP when that happened? Leo.

Kara: Léo.

Larry: I’m not going to call him Léo. Leo. You’re going to fire Mark Hurd and hire Leo?

Larry: When HP said “whoops” nine months later, I almost tweeted “Told ya!”

Kara: So you get along better with Meg?

Larry: I wish Meg nothing but the best. I wish her nothing but the best. Those of us who grew up in the Valley think of Hewlett and Packard as role models, and we’d like to be half as good as they were. Then they brought in Leo. Then when we subpeonaed him, he went on the lam!

5:00 pm: Larry: They sent him to Bolivia to talk to customers. And then they sent him to Mongolia to talk to customers, just beyond the reach of the federal subpoena. They should have left him in Mongolia, because when he got to California, it got bad.

5:01 pm: Kara: What do you think HP should do?

Larry: You want me to give HP advice? I think Meg was a big improvement. But I’m focused on running Oracle. I like her, and I hope she does well — for the benefit of HP’s customers and employees.

Kara: What keeps you going?

Larry: Red Bull. Kidding. Life’s a journey. We’re all curious about each other and about ourselves. It’s a journey about discovering limits. I’m fascinated by what can be done with technology. To constantly test limits. Learning as we compete to solve customer problems. The whole thing is just fascinating. I don’t know what I would do if I retired. When I go sailing, I look around to see if anyone wants to race. I just like competing.

Kara: What’s one thing people don’t know about you?

Larry: That I play classical guitar.

Kara: Is the public’s image of you accurate?

Larry: Frequently, I’ll be in a meeting with someone and the person says “Oh my God, you’re nothing like what I thought you’d be.” Of course, it’s a low bar. I didn’t just bite the head off a small animal before the meeting.

5:04 pm: Now time for Q&A. Question about what is the next mountain for Oracle to climb. Is the consumer cloud holding something for you?

Larry: We are not competing with IBM in services. As services becomes more important for IBM, products are the tail and service is the dog. We think we can beat IBM in servers. That is the next thing for us. Exadata, Exalytics, Exalogic. Our other big competitor is SAP. The interesting thing about them is that while we’re rewriting all our big applications, SAP hasn’t even begun to rewrite their applications.

Larry: SAP’s franchise in ERP (enterprise resource planning) is in danger. They announced they will have nothing new until 2020. They are buying Ariba, and they bought SuccessFactors. SAP’s business is ERP and they have nothing new in the cloud for at least eight years and I’d argue nothing for 10 to 12 years.

Question about Workday, a company run by PeopleSoft founder Aneel Bhusri, who is in the audience.

Larry: It’s going to be very interesting to monitor Workday. We monitor Workday, and we beat Workday all the time. Workday doesn’t use a database. They use Flash as a user interface, so they can’t run on iPhones or iPads. Whenever we’re in a head-to-head with Workday, we almost always win, and that’s before we’re fully launched. (He’s really hating on Workday. Interesting.) Salesforce uses a really good database. They use Oracle. And great middleware. They use Oracle.

Question about America’s Cup. What is it about this event for guys like you? And what do I have to do to get to sail with you?

Larry: I had a boat called Sayonara. I drove it to five consecutive championships. So it was the logical next step. I have been a competitive sailor for a very long time. I decided to find out how good this Russell Coutts guy is. Answer is, he’s really good.

5:12 pm: Question from Esther Dyson about Larry’s philanthropic efforts.

Larry: We have a foundation, the Ellison Medical Foundation, that is focused on diseases related to aging. For obvious reasons. (Jokingly referring to himself.) We do primary and applied research. I’ve spent about $1 billion supporting that. Oracle has a very large health-sciences practice.

5:13 pm: Larry: We recently started a company where we are simulating quantum mechanics in small molecules, where we are doing drug design. Basically building chemical simulators so we can test drugs.

It’s something that has fascinated me my entire life. Biological systems are very complex, and every year we understand them better.

5:15 pm Question: Any advice for Obama?

Larry: My advice to Obama is that we have to have a more balanced immigration policy. (Applause.) Immigration is a good thing. We need to embrace people with skills not readily available in the U.S. We need to embrace scientists and mathematicians and doctors trained in the U.S to stay in the U.S., rather than sending them back to China or Indonesia and have them buy houses there and start their companies over there. It is simply madness that after we grant someone a degree from Stanford that next they get a note from the government to get out.

5:18 pm: Kara: We have to end it there, because we’re going to the panel on Steve Jobs. That’s it for now.

Full D10 Conference Coverage

Bloomberg News is reporting that the jury has been dimissed, and that there will be no third phase of the trial, which was to have focused on damages in the event that Oracle prevailed.

The win for Google in the patent phase comes on top of a narrow but hollow victory for Oracle, in which the enterprise software giant won a part of its argument, but failed to make it stick in a way that would make any difference to either company.

Asked to decide whether Google had infringed upon Oracle’s copyrights to certain parts of the Java programming language, the jury — the same jury that came out in Google’s favor today — agreed that it had. Then asked to decide on four specific examples of that infringement, jurors could agree on only one that cracked the threshold of being sufficiently egregious to warrant any damages. And in that case, the damages amount to no more than $200,000, probably less than it cost to litigate in the first place.

Google shares rose slightly by $2.09 to $602.89 or less than 1 percent. Oracle shares fell slightly by 6 cents to $26.30.

Oracle put out this statement:

Oracle presented overwhelming evidence at trial that Google knew it would fragment and damage Java. We plan to continue to defend and uphold Java’s core write once run anywhere principle and ensure it is protected for the nine million Java developers and the community that depend on Java compatibility.

Meanwhile, here’s Google’s statement, which reads like a victory lap:

Today’s jury verdict that Android does not infringe Oracle’s patents was a victory not just for Google but the entire Android ecosystem.

Asked to decide whether Google had infringed upon Oracle’s copyrights to certain parts of the Java programming language, the jury agreed that it had. But then, when asked to decide on four specific examples of that infringement, jurors could agree on only one: The rangeCheck method in TimSort.java and ComparableTimSort.java. Don’t ask me to explain exactly what it is, but it is being described widely as “nine lines of code.” And, unfortunately for Oracle, the damages it can collect are limited to somewhere in the neighborhood of $150,000 to $200,000, or less than pocket change for either company, not the $1 billion or more Oracle had said it wanted.

Jurors were also unable to decide if the portions of Java code that it copied could be protected by the long-established doctrine of Fair Use, under which certain infringements can be excused. Google lawyers pounced on this, and said they would move for a mistrial.

The conclusion is that Oracle proved at least part of its argument, but failed to prove the dramatic injury it said it had suffered. It also proved that Google knew that it needed a license to Java in order to use the portions of Java that it did use. The complication there was the fact that one flavor of Java is compatible with other flavors of Java: It still operates under the old “write once, run anywhere” principle that Sun Microsystems envisioned when it created Java. Oracle still wants Google to take out a commercial license that would require Google to maintain Java compatibility with other platforms.

Still undecided — and this is the big issue that has the eyes of the software industry watching this case closely — is whether Oracle can prevail on the issue of protecting software APIs using a copyright in the first place. Jurors were instructed to proceed under the assumption that this was a matter of settled law, when in fact it is not. Judge William Alsup will decide on this issue later, and it is unclear exactly how the jury verdict in the first phase of this case will affect his decision.

Had Oracle won a more ringing endorsement from the jury, that portion of the argument might seem to be stronger. It’s an important point that Google argued against, saying APIs shouldn’t be subject to copyright protection, because they’re more like tools and techniques that programmers use to build software. You can copyright a given program because it’s unique, but you can’t copyright the language it’s written in. The possibly strained analogy I came up with before is this: You can copyright a musical composition like Miles Davis’s “So What,” but you can’t copyright the form of music known as jazz.

Oracle argued at trial that copyright law offers the only proper protection for original expression in software, mainly because software advances are incremental, building upon previous advances and innovations. Laws governing trade secrets and patents don’t get the job done. Oracle lawyers contended that copyright law, while still imperfect, protects innovations and advances at a more granular level, but mainly against copying.

Also still ahead is the patent phase of the trial, where Oracle will assert that Google violated Java patents in building Android. After that, there will be a third phase, where the two parties will wrangle over damages. So far, it seems — unless Oracle prevails in the patent portion — that there won’t be much to wrangle over.

At least for now, it appears that Google has escaped the worst of Oracle’s accusations. That was the conclusion of shareholders of both companies. Google shares rose by more than 2 percent on the news of the verdict yesterday, closing at $607.55 a share. Oracle shares fell by more than 1 percent to close at $27.92 a share. The case isn’t over, and Google hasn’t exactly come out of it looking virtuous. But if the point of defending against a lawsuit is to escape paying huge monetary damages, Google won the day.

Embedded below is the filled-out jury questionnaire:

Verdict

As the AP has it, the jury has decided against Google on Oracle’s copyright claim, but has reached an impasse on some key questions. There’s obviously more to this story as it develops. I’ll be updating as soon as I know more.

Update: The jury sided in part with Oracle, ruling that the Android mobile operating system infringes on some Java copyrights. However, it was deadlocked over the question of whether that use constituted “fair use,” and was therefore protected. This impasse appears to be the basis for a mistrial motion that Google lawyers say they intend to file.

Oracle has not prevailed on every point and, in fact, it’s looking like a messy victory. The jury found code in two files to be infringing, and that some elements of Android application programming interfaces or APIs were similar to Oracle’s Java APIs.

Attorneys for Google told Judge William Alsup that they intend to file a motion for a mistrial because of the impasse over the “fair use” question. Alsup told both sides to be prepared to argue that motion, which will come later.

A few other things are coming up: Judge Alsup still has to rule on whether APIs can be copyrighted as a matter of law. Jurors were instructed to deliberate, assuming that they could be copyrighted.

There is a clear finding that Google has infringed on nine lines of code. This came in Question 3A, concerning something called RangeCheck in Java. They decided that Google hadn’t infringed on two other blocks of code. With the jury out of the room, Judge Alsup said that there is “zero finding of copyright liability” on anything other than the nine lines.

That’s good for Google, because Oracle’s own expert at trial said they’re not worth much. An Oracle attorney suggested that the company should receive a share of Google’s profits on top of regular damages. Judge Alsup rejected that as “bordering on the ridiculous.”

From Google:

“We appreciate the jury’s efforts, and know that fair use and infringement are two sides of the same coin. The core issue is whether the APIs here are copyrightable, and that’s for the court to decide. We expect to prevail on this issue and Oracle’s other claims.”

And here’s Oracle’s statement:

“Oracle, the nine million Java developers, and the entire Java community thank the jury for their verdict in this phase of the case. The overwhelming evidence demonstrated that Google knew it needed a license and that its unauthorized fork of Java in Android shattered Java’s central write once run anywhere principle. Every major commercial enterprise — except Google — has a license for Java and maintains compatibility to run across all computing platforms.”

For reference, I’ve embedded the questionnaire that the jurors were required to fill out:

Jury Questions

Judge William Alsup is starting to talk about opening arguments for phase two of the trial, which will focus on patents. A third phase, assuming Oracle prevails, will focus on determining damages.

There was a false alarm late Friday when CNET and Bloomberg News reported that a partial verdict had been reached, when in fact it hadn’t. This happened after it became relatively clear that jurors were stuck and unable to agree on all four questions they have been tasked with answering.

Jurors have been asked to decide if Google’s use of 37 sections of Java source code — which Oracle owns, having acquired Sun Microsystems in 2010 — constitutes copyright infringement; or if, as Google argues, the copied sections are so insignificant as to amount to “no big deal.”

Oracle sued Google in 2010, after closing the Sun deal. Google stands accused of using some parts of Java to create Android without having first obtained the relevant licenses — first from Sun, then from Oracle — that, among other things, required compatibility with other flavors of Java.

Jurors have reached no conclusion in the case and Judge William Alsup has sent them home for the weekend with instructions to try again on Monday.

The jury had indicated Thursday in a note to Alsup that it was stuck on some point. Alsup warned lawyers for both sides that they might have to prepare for a deadlocked jury. Obviously, the situation here is fluid. I’ll have more in this post as it comes in.

There are four questions the jurors are tasked to answer, and they’re said to be unanimously agreed on three of them, but unable to reach consensus on the fourth, though its unclear which are which.

For what its worth, below is the form with the four questions the jurors have to answer.

Jury Questions

The Associated Press reported that a note to Judge William Alsup asked what would happen if jurors were unable to come to a conclusion, and indicated that some jurors are not budging from their positions.

Alsup called jurors into the courtroom for a talk, then sent them home so they could “start fresh” today. Bloomberg Businessweek reported that Alsup told lawyers that it’s possible the jury is deadlocked. If that’s what happens, Alsup said, the parties would move immediately into the second phase of the trial, which covers patents.

Jurors have been asked to decide if Google’s use of 37 sections of Oracle-owned Java source code constitutes a copyright infringement, or if, as Google has argued, the copied sections are so insignificant as to amount to “no big deal.”

Oracle sued Google in 2010, after acquiring Sun Microsystems and becoming the owner of the Java programming language. Google stands accused of using some parts of Java to create Android without having first obtained the relevant licenses — first from Sun, then from Oracle — that, among other things, required compatibility with other flavors of Java.

The jury has been deliberating since lawyers for Google and Oracle wound up their arguments on Monday.

(Image courtesy of Icanhascheezburger)

The jury has had the case since Monday, and as yet there’s no indication of when its deliberations will be complete.

The basic questions jurors are wrestling with concern whether and how it is or isn’t okay for a company to copy portions of software code that would otherwise require a commercial license. Also looming large over the proceedings is whether or not a programming language can by itself by protected by copyright. Oracle lawyers argued at trial that it can, but this is by no means a legal slam dunk.

Google lawyers, for their part, argued that the copying was insignificant, or “no big deal whatsoever.”

Oracle sued Google in 2010, after acquiring Sun Microsystems and becoming the owner of the Java programming language. Google stands accused of using some parts of Java to create Android without having first obtained the relevant licenses, first from Sun, then from Oracle, a license that among other things required compatibility with other flavors of Java.

Once the jury comes back, which could be as soon as today (but we thought that earlier this week), the trial will shift to a second phase over patents. After that, assuming Oracle prevails in one or both of the first two phases, a third phase will determine the amount of damages, if any. The full trial is expected to last two months.

Lots of people are waiting on the outcome of this first phase, however. To all of them, I dedicate Tom Petty’s “The Waiting.”

In his appearance, McNealy said that, as he remembers it, Google was asked to take out a commercial license on Java. “There is a Java specification license document available,” he said, that didn’t contain any financial requirements, but it did require compatibility.

McNealy had been called as a witness by Oracle, and on the stand he said that it was Sun’s practice to let other companies use Java, but only with a commercial license, and that its primary requirement was that the licensee ensure that Java remain compatible.

While numerous other phones from the likes of Nokia, Research In Motion and Motorola were compatible with Java applications, those on Android weren’t. Compatibility is one of the main points over which Oracle has been arguing with Google. Oracle contends that not only did Google violate its patents and copyrights, but it then went on to build its own incompatible version of Java, fracturing one of the oldest premises of Java’s existence: Write once, run anywhere.

McNealy is also running a poll on Twitpolls, asking people to vote for which side they agree with. (Google is ahead as of this morning.)

Who is right in the Oracle vs. Google lawsuit? reply w/ #oracle #google #neither #both http://t.co/aWdhzPbO

May 1, 2012 1:44 pm via GetTwitPollsReplyRetweetFavorite

@scottmcnealy

Scott McNealy

And he promotes a similar poll on his own new venture’s site, Wayin.com, where, as of this morning, the vote is favoring Oracle.

Meanwhile, the jury is still out, and the world is still waiting for a verdict. It could come today.

Anyhow, here’s the video of McNealy’s six-minute TV interview:

The jury in the Oracle-Google trial will begin its second day of deliberations today, following a round of closing arguments by lawyers for both sides.

From Oracle’s perspective, the basic question jurors will have to answer, as its lawyer Michael Jacobs put it, is whether it’s okay for one company to use another company’s intellectual property without permission. (See Jacobs’ slide deck, embedded below.)

Google attorney Robert Van Nest argued that the amount of Oracle IP that it used was so small as to be “no big deal whatsoever.”

Oracle sued Google in 2010, after Oracle acquired Sun Microsystems and thus became the owner of its Java programming language. Google is accused of using some parts of Java to create Android without having first obtained the relevant licenses, first from Sun, then from Oracle.

Monday’s closing arguments constituted the end of the first phase of the trial, which has also turned into a closely watched battle of the proper use of copyrights over software.

Once the jury comes back, which could be as soon as today, the trial will shift to a second phase concerning patents, after which a third phase will determine the amount of damages, if any. The full trial is expected to last two months.

Judge William Alsup, in his final instructions to the jury, reiterated the parameters of the case, telling panelists that copyright protection covers the “expression of ideas,” but not methods of operation. He said the copyrights Oracle has exerted cover the “structure, sequence and organization” of software code.

Google has argued that APIs shouldn’t be subject to copyright protection because they’re more akin to tools and techniques that programmers use to build software.

Oracle has argued that copyright protections should apply because they’re more granular and targeted than trade-secret law or patents.

day11-closing-1609612

(Image courtesy of icanhascheezburger.com)

Of the two, Jonathan Schwartz, Sun’s last CEO, spent the most time on the witness stand. Called by lawyers for Google, he bolstered Google’s argument that it was free to use parts of Java as it assembled its Android mobile operating system.

Scott McNealy, called by Oracle, said it was Sun’s practice to let other companies use Java, but only with a commercial license, the primary requirement of which was that the licensee ensure that Java remain compatible.

While numerous other phones from the likes of Nokia, Research In Motion and Motorola were compatible with Java applications, those on Android weren’t. Compatibility is one of the main points over which Oracle has been arguing with Google. Oracle contends that not only did Google violate its patents and copyrights, but it then went on to build its own incompatible version of Java, fracturing one of the oldest premises of Java’s existence: Write once, run anywhere.

Schwartz said he had hoped that Google would take out a commercial license, but in the end, he said, according to a report on CNet News, Sun opted “to grit our teeth” and support it as part of the Java community. He said that he opted not to sue Google over the issue.

Oracle also presented as evidence an email from Schwartz, describing Google as having taken Java “without attribution or contribution,” and then went on: “This is why I love scroogle,” referring to a now-defunct Web-search service that served up Google-like search results anonymously. See it below.

Andy Rubin, Google’s senior vice president of mobile, was shown during his testimony at a trial in San Francisco a series of emails he wrote about six years ago advising others at Google that the company should buy the right to use Sun Microsystems’ Java technology in Android.

Read the rest of this post on the original site »

Oracle CEO Larry Ellison will take the witness stand today in his company’s lawsuit against the search giant Google. In what has been described as the World Series of intellectual property lawsuits, Ellison will be examined by Oracle lawyers in the case, in which Oracle has accused Google of infringing both patents and copyrights on Java while it was working to create the Android mobile operating system.

Ellison’s testimony will come after Oracle lawyers make their opening arguments. You can get a pretty good idea of what they’re going to say from this 91-page PDF posted overnight to the Oracle Web site.

Oracle sued Google in 2010, alleging that the Android mobile operating system violated seven different Java patents. Five of those patents have since been tossed out since they were reexamined, leaving two. That reduces the potential amount of damages Oracle might be entitled to should it prevail. Google offered Oracle a share of Android revenue and $2.8 million in damages in the event that it prevails; Oracle declined. Oracle has also accused Google of infringing copyrights on Java APIs.

Google has denied the infringement claims, and is expected to argue that Java APIs can’t be protected by copyright because they’re more akin to programming languages. Software developers everywhere are paying close attention to this part of the trial.

The parties are the software giant Oracle and the Internet concern Google. At issue is Java, the software platform Oracle became owner of when it acquired Sun Microsystems in 2010. And the witness list will be interesting: Both Google CEO Larry Page and Oracle CEO Larry Ellison are expected to take the witness stand during the trial; as will former Sun CEO Jonathan Schwartz and Andy Rubin, the Google senior vice president who runs its Android and mobile operations.

The allegations are fairly simple, but the case could have some significant impact if Oracle prevails in some of its arguments. Oracle sued Google in the summer of 2010, alleging that the Android mobile operating system violated seven different Java patents.

Five of those patents have since been tossed out since they were reexamined, leaving two. That reduces the potential amount of damages that Oracle might be entitled to, should it prevail. Google even went so far as to offer to cut Oracle in on Android and $2.8 million in damages, in the event that it prevails. Oracle declined.

The other issue, and the one that has the potential for more lasting impact, is over copyright. Oracle will argue in court that Google violated copyrights on Java. Specifically, Oracle alleges that when Google was creating Android, it copied a lot of material — more than 37 Java application programming interfaces (APIs), and 11 lines of Java source code — and that these are subject to copyright protection like other intellectual property.

This is a new and controversial legal argument that has software developers watching the trial closely. Google has argued that APIs shouldn’t be subject to copyright protection, because they’re more akin to tools and techniques that programmers use to build software. I may be simplifying it a little too much here, but one way of thinking might be to ask if it’s possible to copyright the technique and instructions for hammering a nail or fitting a door.

Google has argued that APIs and programming languages aren’t entitled to copyright protection, for exactly that reason: You can copyright a given program because it’s unique, but you can’t copyright the language it’s written in. Perhaps I’m straining my skills at analogy here, but the way I understand Google’s argument, as put forth in an April 12 brief, is that you can copyright “So What?” but you can’t copyright “jazz.”

As Google puts it in that brief, which is the first two of two legal filings I’ve embedded below:

“That is a classic attempt to improperly assert copyright over an idea rather than expression.” And earlier in the brief, it argues: “Without a computer programming language, the set of statements or instructions cannot be understood by the computer. As such, a computer language is inherently a utilitarian, nonprotectable means by which computers operate. … The protectable material is the computer program (the set of statements or instructions); the unprotectable material is the method or system (the language). So understood, original computer programs may be protected, but the medium for expression in which they are created is not.”

For its part, Oracle outlined its position on the issue in a trial brief filed on April 5, which is the second of the two documents embedded below. Here’s a meaty paragraph summing it up:

“Allowing copyright protection for computer interfaces makes sense because original expressions in software are innovations of an incremental sort that Congress meant to encourage. Trade secrecy law cannot achieve this goal because interfaces can be reverse-engineered. Patent law, because of its novelty and non-obviousness requirements and examination process, protects those substantial innovations, claimed as broadly and generically as possible, and in return gives strong protection against even those who independently develop the same technology. Copyright law protects innovations at a much finer level of detail (where original expression can be found) than patents ever could, but only offers protection against the copyist.”

Obviously, it’s going to be an interesting trial, provided the parties don’t find some way to settle before it’s all over. They tried settlement talks once. It didn’t work.

Google Brief

Oracle Brief