Oracle Wins Verdict Against Google's Unfair Use Of Java Code

Oracle Corporation (NYSE:ORCL) filed a lawsuit, almost eight years back, against Google, accusing it of infringing on the company’s patented Java technology. The lawsuit alleged that Google had used Java Application Programming Interfaces (API) illegally to develop the Androidoperating system (OS). Recently, Oracle released a statement which affirmed that it has won the lawsuit per Federal Circuit verdict.

Google was accused of copying 11,500 lines of Java code unfairly into its core Android OS. Per the court, as revealed by Associated Press, Google earned $42 billion till date from advertising revenues via Android, since the first Android-phone was marketed in 2008. When a free-to-use resource generates significant amount, it does raise eyebrows.

Brief History

Initially, both the parties were anticipated to settle claims. However, till 2012, the jury could not reach a consensus whether Google’s usage of APIs fell under the “fair use” clause “which permits copying under limited circumstances.”

Oracle’s damage expert claimed $8.8 billion as compensation for profits made by Google’s parent, Alphabet (NASDAQ:GOOGL) , in addition to $475 million for damages in March 2016. However, Alphabet was relievedafter being acquitted in May 2016 by the U.S. jury.

Still, Oracle remained adamant to its claim and appealed to the Federal Circuit court for a second trial.

What’s in the Offing?

Per Reuters, the case was sent to a U.S. judge for trial. The judge is handed over the task to determine the compensation that Oracle must receive from Alphabet’s unit.

Meanwhile, Google is performing calculations on its own and might challenge the verdict by appealing to the Supreme Court.

What Investors Need to Know

Shares of Oracle returned 2% in the past year, underperforming the S&P 500 index growth of 10.8%.

The computer software giant, Oracle is elated and claims that copyright protection provides programmers with incentives to innovate. It might be successful in gaining royalty for Google’s use of Java.

Oracle is well on its path of a step-by-step cloud transition. The move is benefitting the company, which is reflected in the recent earnings report. We feel that Oracle stock is promising, given the future prospects of clouds.

Management anticipates SaaS gross margin to eventually rise to 80% in the long haul. According to an IDC market report, SaaS will remain a dominant cloud computing category, capturing nearly two-thirds of all public-cloud spendings in 2018.

In the past 7 days, fourth-quarter fiscal 2018 estimates were revised upward, resulting in the Zacks Consensus Estimate rising significantly from 93 cents to 94 cents per share. The figure reflects year-over-year growth of 2.26%.

Oracle is currently a Zacks Rank #2 (Buy) stock and carries a VGM Score of B.

Meanwhile, Google is going to be hurt along with other software developers. In conclusion, Android might become expensive.

Notably, shares of Alphabet returned 18.5% in the past year, outperforming the S&P 500 index growth of 10.8%. It carries a Zacks Rank #3 (Hold) and a VGM Score of B.

Google spokesman, Patrick Lenihan informed, "We are disappointed the court reversed the jury finding that Java is open and free for everyone. This type of ruling will make apps and online services more expensive for users.”

Key Picks

The Ultimate Software Group, Inc. (NASDAQ:ULTI) and DST Systems, Inc. (NYSE:DST) are other top-ranked stocks worth considering in the Computer-Software industry. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term EPS growth for The Ultimate Software Group and DST Systemsare currently pegged at 22.13% and 10.00%, respectively.

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