Patents are increasingly important when it comes to the booming smartphone and tablet market. That's because mobile competitors continue to launch lawsuits at one another in attempts to block the sale of rival devices. The latest dispute between Google (Nasdaq: GOOG ) and Oracle (Nasdaq: ORCL ) is no exception. However, the squabble could end up influencing future legal rules that govern how application-programming interfaces, or APIs, are protected.
Cracking the case
The tech heavyweights are scrapping over Oracle's allegations that Google violated copyrights relating to its Java technology. On Monday, a federal judge decided the search giant was guilty of using Java APIs in building its Android platform. There are more than 300 million mobile devices worldwide today that run on Google's Android software. While this may seem like a win for Oracle, it shouldn't celebrate yet, as a critical question in the case was left unanswered.
The jury was unable to settle whether Google's use of the APIs was allowed through what is known as "fair use." A lawyer for Google called for a mistrial as a result of the jury's indecision on this key issue. According to The Wall Street Journal, Oracle will be awarded statutory damages that could amount to less than $100,000. That's a far cry from the $1 billion Oracle is seeking in the litigation.
However, the real weight of the case rests on whether Oracle's Java APIs are protected from fair use. If Oracle's copyrights prevail, it could mean tougher barriers to entry for companies operating in cloud computing. Amazon.com's (Nasdaq: AMZN ) Web Services are an example of a body of APIs that together form a computing platform in the cloud. Amazon Web Services is unique in its pay-as-you go feature, which makes it more affordable for smaller companies that still want to build a global infrastructure at scale.
To avoid potential infringement of intellectual property, IT provider Eucalyptus Systems cut a deal with Amazon earlier this year. According to CNET's Steven Shankland, under the agreement, Eucalyptus allows customers to build internal systems that are compatible with Amazon Web Services APIs. However, partnerships such as this could be tougher to come by if the Oracle-Google case deems APIs copyrightable -- as some companies may find the threat of legal action too risky.
Oracle's partial victory in the patent battle is not a guarantee that the final outcome will fall in its favor. But it is worth keeping an eye on, because the wide-ranging effects of the case could limit competition and ultimately change the way tech companies do business.
While lawsuits like this pose threats to corporate livelihoods on a daily basis in the tech sector, there is one world-changing event that comes around once every four years that our analysts at the Fool have been keeping their eyes on. In this free report, we've outlined a group of companies poised to skyrocket after the 2012 presidential election, and I invite you to get your copy today.
You can easily keep up with all the news surrounding your top stocks by adding them to My Watchlist -- The Motley Fool's free tool that lets you track and monitor your favorite companies. Get started now.