Court Opinion

ID: 2722734
Source: CourtListenerOpinion
Date Created: 2014-09-02 18:00:31.547726+00
Date Added: 2024-06-11T10:02:56.374255
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

ORACLE CORPORATION, a Delaware             No. 12-16944
corporation; ORACLE
INTERNATIONAL CORPORATION;                   D.C. No.
ORACLE SYSTEMS CORPORATION;               4:07-cv-01658-
ORACLE USA INC.; ORACLE EMEA                   PJH
LIMITED; J.D. EDWARDS EUROPE
LIMITED; SIEBEL SYSTEMS, INC.,
               Plaintiffs-Appellants,        OPINION

                 v.

SAP AG, a German corporation;
SAP AMERICA INC.;
TOMORROWNOW INC., a Texas
corporation,
             Defendants-Appellees.

      Appeal from the United States District Court
         for the Northern District of California
      Phyllis J. Hamilton, District Judge, Presiding

                Argued and Submitted
       May 13, 2014—San Francisco, California

                 Filed August 29, 2014

     Before: Susan P. Graber, William A. Fletcher,
         and Richard A. Paez, Circuit Judges.

             Opinion by Judge W. Fletcher
2                  ORACLE CORP. V. SAP AG

                           SUMMARY*

                          Copyright Law

    The panel affirmed in part and vacated in part the district
court’s judgment after a jury trial on damages for
infringement of enterprise software copyrights owned by
Oracle Corp. and other plaintiffs.

    The jury awarded Oracle $1.3 billion as the fair market
value of a hypothetical license from Oracle encompassing the
defendants’ infringement of Oracle’s copyrights. The district
court granted judgment as a matter of law on the ground that
Oracle failed to provide enough evidence to permit the jury
to establish an objective, non-speculative hypothetical-license
price. The district court ordered a new trial, conditioned on
Oracle’s rejection of a $272 million remittitur measured by
the copyright holder’s lost profits plus infringer’s profits,
rather than by hypothetical-license damages. Oracle rejected
the remittitur. The district court ruled that, if a second trial
were conducted, Oracle would not be able to argue for, or
present evidence of, hypothetical-license damages. Oracle
and the defendants stipulated to a $306 million judgment.

    Affirming the district court’s grant of JMOL, the panel
held that in order to recover hypothetical-license damages,
Oracle did not have to show that it actually would have
granted a license to defendants. The panel also held that the
hypothetical-license damage award was based on undue
speculation. The panel affirmed the district court’s grant of

  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                 ORACLE CORP. V. SAP AG                        3

defendants’ motion for new trial conditioned on Oracle’s
rejection of a remittitur, as well as the district court’s ruling
that Oracle could not pursue hypothetical-license damages at
a second trial.

     The panel vacated the district court’s ruling selecting
$272 million as the remittitur amount because that amount
was below the maximum amount sustainable by the proof.
The panel remanded with instructions to condition any new
trial on Oracle’s rejection of a $356.7 million remittitur.

    The panel affirmed the district court’s denial of Oracle’s
motion to exclude testimony by defendants’ damages expert
during a second trial. The panel declined to reach additional
issues concerning a second trial.

                         COUNSEL

Kathleen M. Sullivan (argued) and William Balden Adams,
Quinn Emanuel Urquhart & Sullivan LLP, New York, New
York; Dorian Estelle Daley and Jennifer Gloss, Oracle
Corporation, Redwood City, California; Steven Christopher
Holtzman and Fred Norton, Boies Schiller & Flexner LLP,
Oakland, California; Geoffrey Mathew Howard, Bingham
McCutchen LLP, San Francisco, California, for Plaintiffs-
Appellants.

Tharan Gregory Lanier (argued) and Jacqueline K.S. Lee,
Jones Day, Palo Alto, California; Gregory Andrew Castanias,
Tara Stuckey Morrissey, Jones Day, Washington, D.C.
4                ORACLE CORP. V. SAP AG

                          OPINION

W. FLETCHER, Circuit Judge:

    Oracle Corporation and SAP AG are competitors in the
enterprise software market.         In 2007, Oracle et al.
(collectively, “Oracle”) brought suit against SAP et al.
(collectively, “SAP”) alleging that TomorrowNow, an
enterprise software company recently acquired by SAP, was
engaging in systematic and pervasive illegal downloading of
Oracle’s software. SAP eventually stipulated to liability, and
the parties went to trial solely on damages.

    The jury awarded Oracle $1.3 billion as the fair market
value of a hypothetical license from Oracle encompassing
SAP’s infringement of Oracle’s copyrights. SAP moved for
judgment as a matter of law (“JMOL”) on two grounds:
(1) that Oracle failed to show that it actually would have
granted a license; and (2) that Oracle failed to provide enough
evidence to permit the jury to establish an objective, non-
speculative hypothetical-license price. The district court
granted JMOL, making clear in a later order that it agreed
with only the second of the two grounds.

    The district court ordered a new trial, conditioned on
Oracle’s rejection of a $272 million remittitur measured by
the copyright holder’s lost profits plus infringer’s profits,
rather than by hypothetical-license damages. Oracle rejected
the remittitur. The district court ruled that, if a second trial
were conducted, Oracle would not be able to argue for, or
present evidence of, hypothetical-license damages. Oracle
and SAP stipulated to a $306 million judgment.
                 ORACLE CORP. V. SAP AG                      5

    Oracle appeals from several rulings by the district court:
(1) a grant of JMOL to SAP; (2) a grant of SAP’s motion for
a new trial conditioned on Oracle’s rejection of a remittitur;
(3) a ruling that Oracle could not pursue hypothetical-license
damages at a second trial; (4) a ruling selecting $272 million
as the remittitur amount; and (5) four rulings on issues
relevant to a second trial.

    We affirm the first three rulings. We vacate the fourth
ruling and remand to the district court. We conclude that the
district court erred in setting the remittitur at $272 million.
That amount was below “the maximum amount sustainable
by the proof,” D & S Redi-Mix v. Sierra Redi-Mix &
Contracting Co., 692 F.2d 1245, 1249 (9th Cir. 1982). We
therefore vacate and remand with instructions to condition
any new trial on Oracle’s rejection of a $356.7 million
remittitur. We affirm one of the four rulings relating to the
second trial; we do not reach the questions presented by the
other three rulings.

                       I. Background

    Oracle and SAP are self-described “fierce” competitors in
the enterprise software industry. In 2005, when Oracle
acquired PeopleSoft, another enterprise software company,
for $11 billion. PeopleSoft had itself recently acquired J.D.
Edwards, another enterprise software company. In acquiring
PeopleSoft, Oracle hoped to gain PeopleSoft’s nearly 10,000
customers. In reaction to Oracle’s acquisition, SAP initiated
a marketing program called Safe Harbor and later, in a
modified form, Safe Passage. For convenience, we will refer
to this program as Safe Passage.
6                ORACLE CORP. V. SAP AG

     As a key component of Safe Passage, SAP acquired
TomorrowNow Inc. (“TomorrowNow”) in 2005 for $10
million. Founded by former employees of PeopleSoft,
TomorrowNow provided software maintenance services to
PeopleSoft’s customers, including J.D. Edwards’ customers,
at half the price charged by Oracle. After Oracle acquired
Siebel Systems, another enterprise software company, for $6
billion in 2006, TomorrowNow expanded its maintenance
services to include Siebel software. SAP hoped to leverage
TomorrowNow’s relationship with its maintenance service
customers to persuade some of those customers to switch
over to SAP software.

    In 2006, an Oracle employee noticed thousands of
suspicious downloads of Oracle software. After an
investigation, Oracle concluded that TomorrowNow had
illegally downloaded millions of PeopleSoft, J.D. Edwards,
Siebel, and Oracle database files. TomorrowNow continued
to provide maintenance services to Oracle customers using
these downloads until sometime in 2008.

    Oracle brought suit in federal district court in 2007,
alleging copyright infringement and other federal and state
claims. Shortly before trial, SAP stipulated to liability on
Oracle’s copyright claims, and Oracle dismissed with
prejudice all of its non-copyright claims.

    The district court conducted a thirteen-day jury trial
limited to damages for copyright infringement. The district
judge instructed the jury that it could award either
(1) hypothetical-license damages or (2) plaintiff’s lost profits
and infringer’s profits. Oracle’s expert testified, based on a
hypothesized negotiation that would have taken place before
the infringement began, that the fair market value of a license
                 ORACLE CORP. V. SAP AG                     7

allowing use of the downloaded software for the period of
infringement would have been $1.656 billion. In November
2010, the jury returned a verdict for Oracle for $1.3 billion,
based on what it found was the fair market value of a
hypothetical license granted by Oracle.

    SAP objected to the amount of the damage award and
moved for JMOL. The district court granted JMOL, making
clear in a later order that its sole ground for denying the
motion was that “the evidence Oracle presented was
insufficient to establish an objective non-speculative license
price.”

    SAP also moved for a new trial. The district court
granted the motion conditioned on Oracle’s rejection of a
$272 million remittitur. The district court determined that
$272 million was “the maximum amount . . . sustainable by
the proof.” In granting SAP’s motion, the district court made
clear that in a new trial, if one were conducted, Oracle would
not be allowed to argue for, or present evidence of,
hypothetical-license damages.

    Oracle rejected the $272 million remittitur. In advance of
a second trial, the district court denied a number of Oracle’s
evidentiary motions. In order to expedite an appeal, the
parties stipulated to a $306 million judgment in Oracle’s
favor. Oracle timely appealed.

                  II. Standard of Review

   We review de novo a district court’s grant of JMOL under
Federal Rule of Civil Procedure 50. Mangum v. Action
Collection Serv., Inc., 575 F.3d 935, 938 (9th Cir. 2009).
JMOL “is properly granted only if no reasonable juror could
8                 ORACLE CORP. V. SAP AG

find in the non-moving party’s favor.” Id. at 939 (quoting
Torres v. City of L.A., 548 F.3d 1197, 1205 (9th Cir. 2008)).
The court “‘must view the evidence in the light most
favorable to the nonmoving party . . . and draw all reasonable
inferences in that party’s favor.’” EEOC v. Go Daddy
Software, Inc., 581 F.3d 951, 961 (9th Cir. 2009) (alteration
in original) (quoting Josephs v. Pac. Bell, 443 F.3d 1050,
1062 (9th Cir. 2006)).

    “We review a district court’s grant of a new trial for an
abuse of discretion.” Silver Sage Partners, Ltd. v. City of
Desert Hot Springs, 251 F.3d 814, 818 (9th Cir. 2001).
“[T]he same standard of review is appropriate . . . where a
plaintiff rejects the remittitur and a second trial is held . . . .”
Id. at 818–19. We review for abuse of discretion a remittitur
amount set by the district court. D & S Redi-Mix, 692 F.2d at
1249.

                         III. Discussion

                       A. Grant of JMOL

    SAP makes two arguments in support of the district
court’s grant of JMOL. First, SAP argues that, in order to
recover hypothetical-license damages, Oracle had to show
that it actually would have granted a license to
TomorrowNow. Second, SAP argues that the jury’s
hypothetical-license damage award was based on undue
speculation. The district court disagreed with the first
argument but agreed with the second. We agree with the
district court.
                 ORACLE CORP. V. SAP AG                      9

                   1. No Grant of License

    SAP argues that hypothetical-license damages cannot be
awarded because Oracle was unwilling to grant a license to
TomorrowNow for the use of its PeopleSoft, J.D. Edwards,
Siebel, and Oracle database copyrights. As a factual matter,
we agree that Oracle never would have granted such a license
to TomorrowNow. Oracle executives testified generally that
Oracle never licenses its software to competitors, and
specifically that Oracle never would have granted a license to
TomorrowNow.

     However, we disagree with SAP’s legal argument. Under
17 U.S.C. § 504(b), a “copyright owner is entitled to recover
[1] the actual damages suffered by him or her as a result of
the infringement, and [2] any profits of the infringer that are
attributable to the infringement and are not taken into account
in computing the actual damages.” “[A] plaintiff in a
§ 504(b) action must establish [a] causal connection”
“between the infringement and the monetary remedy sought.”
Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 708
(9th Cir. 2004). “‘Actual damages’ are the extent to which
the market value of a copyrighted work has been injured or
destroyed by an infringement.” Frank Music Corp. v. Metro-
Goldwyn-Mayer, Inc., 772 F.2d 505, 512 (9th Cir. 1985).
Although “actual damages” can be awarded in the form of
lost profits, hypothetical-license damages also constitute an
acceptable form of “actual damages” recoverable under
Section 504(b). See Polar Bear Prods., 384 F.3d at 708–09.
To calculate the “market value” of the injury to the plaintiff
based on a hypothetical-license theory, we look to “the
amount a willing buyer would have been reasonably required
to pay a willing seller at the time of the infringement for the
actual use made by [the infringer] of the plaintiff’s work.”
10               ORACLE CORP. V. SAP AG

Wall Data Inc. v. L.A. Cnty. Sheriff’s Dep’t, 447 F.3d 769,
786 (9th Cir. 2006) (internal quotation marks omitted).

     We have never required a plaintiff in a copyright
infringement case to show that it would have licensed the
infringed material. We decline to impose such a requirement
now. A copyright holder has the right to refuse to license its
work and should not be penalized for exercising that right.
See Stewart v. Abend, 495 U.S. 207, 228–29 (1990). If we
were to require a copyright holder to demonstrate that it
would have been willing to grant a license as a condition for
recovering damages based on the fair market value of the
license, the perverse result would be that some of the most
assiduously protective copyright holders would be unable to
recover the fair market value of their wrongfully appropriated
copyrighted property. For example, posit a songwriter who
has consistently refused to license her work for use in
advertising. A fast-food chain nonetheless uses one of her
songs in a nationwide television campaign. If the rule were
as SAP proposes, the songwriter could not recover
hypothetical-license damages for the infringement even if she
could demonstrate that other songwriters charge $200,000 to
license comparable songs for such use. This rule could
operate unfairly, given the difficulty the songwriter might
face in meeting the burden of proof for lost profits and
infringer’s profits. See On Davis v. The Gap, Inc., 246 F.3d
152, 166 (2d Cir. 2001) (“In our view, as between leaving the
victim of the illegal taking with nothing, and charging the
illegal taker with the reasonable cost of what he took, the
latter, at least in some circumstances, is the preferable
solution.”).

   SAP argues that a plaintiff must show that a license would
have been granted because, if the copyright holder would
                 ORACLE CORP. V. SAP AG                    11

never have agreed to license her work, she could not, by
definition, have lost any licensing fees “as a result of the
infringement” within the meaning of 17 U.S.C. § 504(b). We
disagree.

   The Second Circuit has explained:

           If a copier of protected work, instead of
       obtaining permission and paying the fee,
       proceeds without permission and without
       compensating the owner, it seems entirely
       reasonable to conclude that the owner has
       suffered damages to the extent of the
       infringer’s taking without paying what the
       owner was legally entitled to exact a fee for.
       We can see no reason why, as an abstract
       matter, the statutory term “actual damages”
       should not cover the owner’s failure to obtain
       the market value of the fee the owner was
       entitled to charge for such use.

On Davis, 246 F.3d at 165. The court explained further that
“whether the infringer might in fact have negotiated with the
owner or purchased at the owner’s price is irrelevant” to
whether hypothetical-license damages are available. Id. at
171–72.

    Hypothetical-license damages assume rather than require
the existence of a willing seller and buyer. The very word
“hypothetical” indicates that damages may be awarded in the
absence of an actual license. Oracle was thus not required, as
a categorical prerequisite to recovery of hypothetical-license
damages, to show that it would ever have granted a license.
Consistent with our cases upholding a hypothetical-license
12               ORACLE CORP. V. SAP AG

damages award, and following the Second Circuit’s decision
in On Davis, we hold that a copyright plaintiff’s
unwillingness to grant a license to use its copyrighted work
does not defeat its ability to recover hypothetical-license
damages.

                    2. Undue Speculation

    An award of hypothetical-license damages is appropriate
“provided the amount is not based on ‘undue speculation.’”
Polar Bear Prods., 384 F.3d at 709 (quoting McRoberts
Software, Inc. v. Media 100, Inc., 329 F.3d 557, 566 (7th Cir.
2003)). The touchstone for hypothetical-license damages is
“the range of [the license’s] reasonable market value.” Id.
“The question,” therefore, “is not what the owner would have
charged, but rather what is the fair market value.” Jarvis v.
K2 Inc., 486 F.3d 526, 534 (9th Cir. 2007) (quoting On Davis,
246 F.3d at 166). Thus, we do not ask what the owner would
like to have charged if unconstrained by reality, but what a
willing owner actually would have charged after negotiation
with the buyer. That is, fair market value is based on “‘an
objective, not a subjective, analysis.’” Jarvis, 486 F.3d at
534 (quoting Mackie v. Rieser, 296 F.3d 909, 917 (9th Cir.
2002)).

    Fair market value in a voluntary licensing transaction
between arms-length parties ordinarily lies somewhere
between the two poles of cost to the seller and benefit to the
buyer. That is, the seller will not ordinarily charge less for a
license than its anticipated cost, and the buyer will not
ordinarily pay more for a license than its anticipated benefit.
In the case of a hypothetical license, it is often difficult to
determine what, at the time of the infringement, the seller and
buyer thought would be their respective cost and benefit.
                 ORACLE CORP. V. SAP AG                      13

Further, even if the cost and benefit can be determined with
some degree of certainty, it is often difficult to determine the
range between the two poles of cost and benefit within which
the parties would likely have settled.

    Oracle argues that the jury’s $1.3 billion verdict was
reasonably supported, pointing to evidence of, among other
things, the enormous amount of data surreptitiously
downloaded by TomorrowNow, the amount that Oracle paid
to acquire PeopleSoft and Siebel, and estimates of how much
money Oracle stood to lose and SAP stood to gain from
TomorrowNow’s infringement. The district court concluded
that “the evidence Oracle presented was insufficient to
establish an objective non-speculative license price.” We
agree. Given that the evidence presented at trial failed to
provide “the range of the reasonable market value” for the
hypothetical license in question, we hold that the jury
awarded damages using an “undue” amount of speculation.
See Polar Bear Prods., 384 F.3d at 709.

                      a. Benefit to SAP

    In its opening brief, Oracle points to two types of
evidence showing SAP’s expected benefit. First, Oracle
states that TomorrowNow’s infringement occurred on a
“massive” scale. Oracle explains that TomorrowNow’s
illegal downloads of Oracle software “totaled over five
terabytes of infringing data,” which “would encircle the globe
nine times if printed out on double-sided paper laid end-to-
end.” This is a dramatic image, emphasizing that there was
a great deal of downloaded data. But the quantity of the data,
by itself, tells us very little about its value to SAP.
14               ORACLE CORP. V. SAP AG

    Second, Oracle presented evidence of SAP’s own
projected “benefits from its use of stolen materials.” Oracle
relies heavily on two pieces of evidence as to PeopleSoft:
(1) SAP’s internal financial estimates, relating to the
conversion of PeopleSoft customers to SAP, which projected
nearly $900 million in revenue over three years, and
(2) testimony from an SAP executive that TomorrowNow’s
maintenance and support offerings were an “important” part
of this conversion plan. As to Siebel, Oracle’s expert testified
that SAP’s improper use of Siebel copyrights would have
yielded $97 million to $247 million in “financial gains” to
SAP. As to Oracle database software, Oracle does not
identify specific evidence as to the benefit that SAP stood to
gain from TomorrowNow’s infringement.

    Although these figures are relevant to the question of the
benefit that SAP hoped to derive from TomorrowNow’s
infringing activity, they leave important gaps. As to
PeopleSoft and J.D. Edwards, we know that SAP hoped to
gain $900 million in revenues by siphoning off business from
Oracle. We also know that TomorrowNow’s infringement of
Oracle’s copyrights was “important” to the success of this
effort. But Oracle points to no evidence indicating what
portion of the $900 million in projected revenue SAP hoped
to obtain from TomorrowNow’s infringing activity, as
distinct from the lawful portion of the Safe Passage program.

    Moreover, the $900-million figure was only what SAP
hoped it could achieve over three years. The presentation
slide prepared for SAP’s internal use, upon which Oracle
bases its argument, characterized the calculations underlying
this figure as merely “Assumptions.” An SAP executive who
provided the numbers for the slide testified that he “attempted
to make reasonable assumptions,” but the slide tells us little
                 ORACLE CORP. V. SAP AG                      15

about what probability SAP actually assigned to such
assumptions. Although we look to the expectations of the
parties at the time of the hypothetical negotiation in
determining the hypothetical-license value, see, e.g., Wall
Data, 447 F.3d at 786, it is telling that, in the end,
TomorrowNow had a total of only 358 customers by the time
it closed its doors in 2008, a small fraction of the customers
SAP had hoped to attract.

     Oracle strenuously argues that SAP “considered its
projections reliable enough to serve as the basis for its
acquisition” of TomorrowNow, but it fails to mention that
SAP acquired TomorrowNow for only $10 million. If SAP
truly anticipated that TomorrowNow would produce a $1.3
billion benefit to SAP, as Oracle contends, a $10 million
acquisition price is strikingly low. This low acquisition price
does not in itself necessarily preclude Oracle’s recovery of a
$1.3 billion verdict. But it casts substantial doubt on Oracle’s
argument that SAP’s stated assumptions on the slide were
realistic, and that SAP officials believed these assumptions
when they negotiated their purchase price for TomorrowNow.
Even discounting the value to SAP of TomorrowNow based
on the possibility of discovery of the illegal downloads and
resulting litigation, $10 million is a great deal less than the
$1.3 billion Oracle says SAP would have paid to Oracle for
a license to do what TomorrowNow was doing.

                      b. Cost to Oracle

    To show its expected cost, Oracle presented evidence of
projected lost revenue resulting from TomorrowNow’s use of
the downloaded software. Oracle’s expert testified that if
SAP had reasonably convinced 1,375 customers to switch to
SAP’s software, as projected, Oracle stood to suffer over $1.3
16               ORACLE CORP. V. SAP AG

billion in “loss[es].” As to Siebel, Oracle argues that SAP’s
infringement of Siebel’s copyrights would have resulted in
$164 million in “negative financial impacts” for Oracle. As
to Oracle database software, Oracle’s expert testified that the
licensing fees for the illicit copies of Oracle database
software would total $55.6 million, based on what an Oracle
executive claimed that Oracle would charge.

    We accord limited weight to Oracle’s expert’s conclusion
that Oracle stood to lose more than $1.3 billion from
TomorrowNow’s infringement of PeopleSoft and J.D.
Edwards copyrights. Oracle’s expert generated this estimate
by assuming that Oracle would lose the 1,375 customers that
SAP hoped would switch from Oracle software to SAP
software, as outlined in SAP’s “Assumptions” presentation
slide. For the reasons discussed above, the “Assumptions”
are not a particularly reliable source of objective evidence.
Further, as we describe below in our discussion of remittitur,
Oracle presented evidence of its actual lost profits, which
were at most $120.7 million—far less than $1.3 billion. Like
the evidence of the low acquisition price of TomorrowNow,
this lost profits number casts substantial doubt on SAP’s
internal “Assumptions.”

     Oracle also presented evidence of the acquisition cost of
PeopleSoft and Siebel. Oracle emphasized that it “had just
paid $11 billion, in an arms-length transaction, to acquire
PeopleSoft and the accompanying intellectual property that
SAP and [TomorrowNow] admittedly stole.” It had also paid
more than half that—$6 billion—to acquire Siebel Systems.
An Oracle executive testified that the $1.656 billion
hypothetical-license damages estimate provided by Oracle’s
trial expert was “conservative” because it was “around 10
percent of what we actually paid for the . . . intellectual
                 ORACLE CORP. V. SAP AG                       17

property.” She further testified that Oracle expected that
PeopleSoft, J.D. Edwards, and Siebel would generate $1.7
billion annually in maintenance revenue alone.

     Oracle failed, however, to present evidence of the
relationship between the value of owning PeopleSoft, J.D.
Edwards and Siebel, on the one hand, and the cost of granting
a license to use its copyrights in a limited way for a limited
period, on the other. See Wall Data, 447 F.3d at 786
(discussing “actual use” of copyrighted works). In short,
while Oracle’s acquisition price of PeopleSoft and Siebel is
evidence of the immense value that Oracle saw in those
companies, it told the jury little of what a hypothetical license
for a specific use of their copyrights for a brief period would
have cost Oracle.

              c. Value of Hypothetical License

    Evidence of SAP’s projected benefits and Oracle’s
projected costs is relevant to the fair market value of a license
for the use of Oracle’s copyrights during the period of
TomorrowNow’s infringement. But given the type of
objective evidence on which our caselaw has relied in
affirming past hypothetical-license damage awards, we hold
that the district court correctly concluded that Oracle failed to
present sufficient non-speculative evidence to support the
jury’s award.

    Our caselaw provides guidance as to a copyright
plaintiff’s burden in proving hypothetical-license damages.
In one case discussed in particular detail by the parties, we
upheld a hypothetical-license award as non-speculative where
Timex Corporation used Polar Bear Productions’ copyrighted
film footage without the latter’s authorization. Polar Bear
18               ORACLE CORP. V. SAP AG

Prods., 384 F.3d at 703, 709. Timex had sponsored the
production of the film footage at issue “[i]n return [for] an
exclusive one-year license to use the film in its promotional
materials.” Id. at 704. Under the parties’ agreement, beyond
the one-year period “Timex had the option of retaining Polar
Bear to produce [an additional ten-minute promotional] video
at a price to be determined by the parties,” but Timex decided
“to produce the tape separately.” Id. Despite Polar Bear’s
warnings that Timex had no right to use images from the
original film, Timex did so anyway. Id. Timex’s
infringement did not stop there: it “used Polar Bear’s
copyrighted images on two other occasions—in a
promotional campaign associated with the soft drink
Mountain Dew and in videos used to train salespeople at a
large national retailer.” Id.

    At trial, Polar Bear presented evidence that before Timex
infringed its copyright it had quoted Timex a price of $37,500
for preparing a ten-minute video. Id. at 709. Polar Bear also
presented expert testimony as to the value of a hypothetical-
license fee covering Timex’s infringing activity that was
“predicated” on this price. Id. The jury awarded Polar Bear
$115,000 in lost license fees. Id. at 705 n.3.

    We upheld the hypothetical-license damage award despite
Timex’s arguments that the award was speculative. Id. at
709. We observed that there was little danger that the
$37,500 fee, on which the calculation of the price of the
hypothetical license was based, “was contrived or artificially
inflated” because “[t]he proposed license fee was proffered
before Timex’s infringement.” Id. We explained: “Having
taken the copyrighted material, Timex is in no better position
to haggle over the license fee than an ordinary thief and must
                 ORACLE CORP. V. SAP AG                     19

accept the jury’s valuation unless it exceeds the range of the
reasonable market value.” Id.

    Two years later, we upheld another hypothetical-license
damage award in Wall Data. See 447 F.3d at 786–87. In that
case, “[t]he Los Angeles County Sheriff’s Department
purchased 3,663 licenses to Wall Data’s computer software,
but installed the software onto 6,007 computers.” Id. at 773
(footnote omitted). After concluding that the Department’s
activity constituted copyright infringement, id. at 774, we
affirmed the jury’s hypothetical-license damages award of
somewhere between $53 and $90 per infringed copy as non-
speculative where (1) “the average price Wall Data charged
the vendor that sold software to the Sheriff’s Department was
$189,” (2) “government entities were charged $113 per
copy,” and (3) the Sheriff’s Department had originally paid
$85 per copy. Id. at 786–87. In upholding the award, we
observed that the jury’s award was “within the range
sustainable by the proof.” Id.

    One year after Wall Data, we upheld another
hypothetical-license damage award in a case involving the
unauthorized use of images. See Jarvis, 486 F.3d at 528. The
plaintiff in Jarvis was “a professional photographer who
created several thousand photographic slides . . . for K2, Inc.
(‘K2’), a maker of outdoor sporting goods.” Id. at 527. In
that case, K2 was found to have infringed the photographer’s
copyrights, and we upheld the district court’s damages
calculation where it had “employed reasonable estimates of
the market value of the infringed images.” Id. In so holding,
we outlined the numerous pieces of evidence on which the
district court had relied in determining the final award:
20              ORACLE CORP. V. SAP AG

       The court’s findings show that it examined at
       least six estimates of the fair market value of
       Jarvis’ infringed images: (1) the testimony of
       Jarvis’ expert witness Richard Weisgrau that
       . . . Jarvis’ images were worth $1,500 to
       $5,000 each; (2) the testimony of a senior K2
       executive that he would pay $5–20 for an
       image to be used online and $500–750 for a
       glossy high-definition image for a print
       advertisement or magazine cover; (3) Jarvis’
       compensation of $10,000 for the 2,516 images
       he delivered to K2 under the 2000 Agreement;
       (4) Jarvis’ compensation of $7,200 for the
       1,210 images he delivered to K2 under the
       2001 Agreement; (5) Jarvis’ compensation of
       $3,000 for seven images he delivered to K2 in
       2001; and (6) Jarvis’ settlement offer of
       $15,520 for all images infringed by K2.
       Although these estimates informed the district
       court’s calculations, it ultimately cited Jarvis’
       own damages figures for images used in print
       and then halved the average of these figures to
       determine the damages per online use. The
       court based its halving on its finding that “the
       fair market value of an online use is less than
       the average fair market value of a print use.”
       This methodology produced a damages figure
       of $461 per online use, a figure below
       Weisgrau’s estimate but well within the range
       of the other five estimates.

Id. at 534 (emphasis omitted). In explaining why we upheld
the district court’s award, we wrote:
                 ORACLE CORP. V. SAP AG                    21

       The court’s inquiry was objective, avoiding
       references to what Jarvis thought he should
       have earned or wished he had charged. The
       court also examined the financial perspectives
       of both the willing buyer (in the form of
       evidence about what K2 typically pays for
       images and what it specifically paid Jarvis in
       its prior dealings with him) and the willing
       seller (in the form of Jarvis’ earlier deals with
       K2 and his revenue from image databanks) at
       the hypothetical time of sale. Furthermore, the
       court gave logical reasons why it discounted
       Weisgrau’s testimony; according to the court,
       he “relied almost exclusively on the Getty
       website for his figures and unrealistically used
       a monthly licensing fee as the basis for his
       valuations.” Finally, the figure the court
       adopted was near the center of the range
       supported by the evidence.

Id. at 534–35 (footnotes omitted).

    The evidence presented by Oracle provides a much more
speculative basis for calculating hypothetical-license damages
than the evidence in Polar Bear, Wall Data, and Jarvis.
Although a copyright plaintiff need not demonstrate that it
would have reached a licensing agreement with the infringer
or present evidence of “benchmark” agreements in order to
recover hypothetical-license damages, it may be difficult for
a plaintiff to establish the amount of such damages without
undue speculation in the absence of such evidence. Cf.
Getaped.com, Inc. v. Cangemi, 188 F. Supp. 2d 398, 405–06
(S.D.N.Y. 2002) (recognizing the difficulty of determining a
non-speculative hypothetical-license damages amount when
22               ORACLE CORP. V. SAP AG

the infringer is a direct competitor). Here, because Oracle has
no history of granting similar licenses, and has not presented
evidence of “benchmark” licenses in the industry
approximating the hypothetical license in question here,
Oracle faced an uphill battle.

    Oracle bore the burden of proving the fair market value of
the hypothetical license in question. We agree with the
district court that Oracle failed to provide sufficient objective
evidence of the market value of the hypothetical license
underpinning the jury’s damages award. We therefore affirm
the district court’s grant of JMOL to SAP on that ground.

          B. District Court’s Grant of a New Trial

    A new trial is warranted when “the verdict ‘is against the
great weight of the evidence, or it is quite clear that the jury
has reached a seriously erroneous result.’” SEC v. Todd,
642 F.3d 1207, 1225 (9th Cir. 2011) (quoting EEOC v. Pape
Lift, Inc., 115 F.3d 676, 680 (9th Cir. 1997)). We will reverse
the district court only if it abused its discretion in granting a
new trial. Id. For the same reasons as those laid out in our
discussion of the district court’s grant of JMOL to SAP, we
conclude that the district court did not abuse its discretion in
concluding that “the verdict [was] against the great weight of
the evidence,” id. (internal quotation marks omitted).

  C. District Court’s Damages Limitation for a New Trial

    Oracle contends that, even if the district court did not
abuse its discretion in granting SAP’s motion for a new trial,
the district court erred in limiting the second trial to damages
based on a lost-profits and infringer’s-profits theory, barring
Oracle’s pursuit of hypothetical-license damages. According
                 ORACLE CORP. V. SAP AG                      23

to Oracle, the district court “changed the rules after the close
of proof” and therefore should have provided Oracle with
another opportunity to meet the post-trial standard
pronounced by the district court.

    We disagree. We have previously made clear that
hypothetical-license damages “are ‘what a willing buyer
would have been reasonably required to pay to a willing seller
for plaintiffs’ work.’” Jarvis, 486 F.3d at 533 (quoting Frank
Music Corp., 772 F.2d at 512). Thus, “[e]xcessively
speculative claims of damages are to be rejected.” Id. at 534.
The district court applied this well-established standard in
granting JMOL to SAP. Oracle was well aware of the legal
standard that it was required to meet, and we decline to give
Oracle a second bite at the apple.

                        D. Remittitur

    A remittitur must reflect “the maximum amount
sustainable by the proof.” D & S Redi-Mix, 692 F.2d at 1249.
Here, the district court set the remittitur at $272 million,
which was the lower of two amounts calculated by Oracle’s
expert for lost profits and infringer’s profits. This figure
reflected $36 million in Oracle’s lost profits, and $236
million in SAP’s infringer’s profits. As the district court
noted, however, Oracle’s expert had also testified to a higher
figure: $408.7 million, based on $120.7 million in lost profits
through 2015 rather than 2008, “to reflect the ongoing
impact” of SAP’s infringement on Oracle’s profits, and $288
million in infringer’s profits, which included three customers
that the lower, $236-million estimate did not.

   Oracle argues that the district court erred in setting the
remittitur at $272 million, given that the very expert whose
24               ORACLE CORP. V. SAP AG

testimony the district court had credited also testified to the
higher amount of $408.7 million. Therefore, according to
Oracle, the maximum amount of damages sustainable by the
proof under a lost- and infringer’s-profits theory was $408.7
million instead of $272 million.

     We agree with the district court that, as to infringer’s
profits, $236 million was the maximum amount sustainable
by the proof. As the district court pointed out, Oracle’s
expert “testified that his calculation of infringer’s profits
‘ranges down’ to $236 million because there are three
customers ‘where there’s some issues still that sort of exist
about the role of TomorrowNow in converting those
customers to SAP.’” Because Oracle’s expert was unsure
about these three customers, the district court deemed the
$288-million infringer’s-profits estimate to be “unduly
speculative.” We agree. “[A] plaintiff in a § 504(b) action
must establish [a] causal connection” “between the
infringement and the monetary remedy sought.” Polar Bear
Prods., 384 F.3d at 708. Because of its expert’s equivocation
as to whether the loss of these three customers was
attributable to TomorrowNow’s infringement, Oracle has
failed to establish this requisite causal connection and
therefore cannot recover damages related to those three
customers.

    We disagree, however, with the district court’s adoption
of the $36-million lost-profits figure as the maximum amount
sustainable by the proof and conclude that the district court
should have chosen the $120.7-million lost-profits figure
instead. Oracle’s expert assumed, for both his lower and
higher lost-profits estimates, that some of Oracle’s customers
switched from Oracle to SAP permanently as a result of
TomorrowNow’s infringement. The higher figure included
                 ORACLE CORP. V. SAP AG                      25

Oracle’s lost profits for seven years after TomorrowNow shut
its doors in 2008, whereas the lower figure accounted for
Oracle’s lost profits only through 2008. In other words, the
higher figure reflected the reality that, even after
TomorrowNow ceased operations, Oracle had lost an ongoing
stream of revenue from its former customers who
permanently remained with SAP.

    By choosing the $36-million lost-profits amount for the
remittitur, the district court necessarily accepted that some of
Oracle’s customers switched to SAP due to TomorrowNow’s
infringement. Moreover, as Oracle’s expert explained, in the
enterprise software market, loss of a customer is typically
permanent. Therefore, once the district court accepted the
fact that TomorrowNow’s infringement led some customers
to switch to SAP, common sense suggests that Oracle would
suffer from the loss of those customers beyond the date that
TomorrowNow ceased operating. As to the amount of harm
Oracle suffered, Oracle presented evidence at trial that it
would be “conservative” to assume that its typical
relationship with a customer lasts ten years. This supports
Oracle’s expert’s use of 2015 as an end date for the higher
lost-profits figure—ten years after SAP acquired
TomorrowNow.

    By failing to select a remittitur that reflected the
maximum amount sustainable by the proof, the district court
abused its discretion in selecting the $36-million lost-profits
figure rather than the $120.7-million one. We therefore
vacate and remand to the district court for it to offer Oracle
the choice between a $356.7-million remittitur—combining
the highest lost-profits and infringer’s-profits estimates
sustainable by the proof—and proceeding to a second trial.
26               ORACLE CORP. V. SAP AG

            E. Orders Relevant to a Second Trial

   Oracle appeals four rulings relevant to a second trial, if
one were to occur. We address them in turn.

          1. Expert Testimony of Stephen Clarke

    Oracle appeals the district court’s denial of its motion to
exclude testimony by SAP’s damages expert Stephen Clarke
during the first trial, and seeks an order excluding his
testimony during a second trial. See Daubert v. Merrell Dow
Pharm., Inc., 509 U.S. 579 (1993). We review for abuse of
discretion, United States v. Morales, 108 F.3d 1031, 1035
(9th Cir. 1997) (en banc), and affirm the district court. Oracle
contends that “Clarke’s only training and experience is in
accounting,” such that he is unqualified to comment on
consumer behavior. Oracle misstates Clarke’s qualifications.
He has a degree in Management Sciences, has taught
university-level economics, and has extensive experience as
an intellectual property damages expert. Oracle further
contends that Clarke’s “testimony [during the first trial] was
unreliable and outside his expertise” because he relied on
Internet research in his market study. Oracle fails to explain
why the Internet is an inappropriate resource for conducting
market research. Moreover, Oracle had ample opportunity to
cross-examine Clarke about his underlying sources and
discredit them. The district court did not abuse its discretion
in allowing Clarke to testify in the first trial, and Oracle has
advanced no reason to exclude his testimony in a second trial.

                      2. Jury Instruction

   Oracle contends that the district court erred in rejecting its
proposed instruction that would have told the jury that Oracle
                 ORACLE CORP. V. SAP AG                      27

could recover both hypothetical-license damages and
infringer’s profits. It asks us to hold on appeal that such an
instruction should be given in a second trial. We need not
decide this question because, as we have held above,
hypothetical-license damages may not be sought in a second
trial.

            3. Research and Development Costs

    Oracle contends that the district court erred in ruling that
a calculation of hypothetical-license damages could not take
into account the expenditures for research and development
costs that SAP would have incurred if it had tried to develop
non-infringing software. It asks us to hold on appeal that
such hypothetical expenditures should be taken into account
in calculating hypothetical-license damages in an second trial.
For the same reason we do not reach the question about
Oracle’s proposed jury instruction, we do not reach this
question.

                    4. Motion in Limine

     Oracle contends that the district court erred in denying
Oracle’s motion in limine, filed in anticipation of the second
trial, seeking to preclude SAP from introducing evidence of
its overhead expenses in order to deduct them from any
calculation of infringer’s profits. Oracle recognizes that
17 U.S.C. § 504(b) permits an infringer to introduce evidence
of “deductible expenses” to offset the calculation of
infringer’s profits under that statute. According to Oracle,
however, our caselaw precludes willful infringers from
deducting overhead costs. Oracle relies heavily on dicta in
Frank Music Corp., 772 F.2d at 515 (“A portion of an
infringer’s overhead properly may be deducted from gross
28               ORACLE CORP. V. SAP AG

revenues to arrive at profits, at least where the infringement
was not willful, conscious, or deliberate.”). Because the
second trial has not yet occurred, and evidence presented at
trial may be relevant to any ultimate ruling by the district
court, we decline to reach this question. We note that the
district court is free to reconsider its decision in advance of,
or during, a second trial if one should occur.

                         Conclusion

     We affirm the district court’s grant of judgment as a
matter of law to SAP, as well as the district court’s grant of
SAP’s motion requesting a new trial conditioned on Oracle’s
rejection of a remittitur, on the ground that the jury reached
its $1.3 billion verdict based on undue speculation. We also
affirm the district court’s ruling barring Oracle from
presenting hypothetical-license damages at any new trial, and
affirm the district court’s ruling allowing SAP’s expert
Clarke to testify. We conclude, however, that the district
court erroneously set the remittitur at $272 million. We
therefore vacate and remand with instructions for the district
court to offer Oracle the choice between a $356.7 million
remittitur and a new trial. Each side shall bear its own costs
on appeal.

  AFFIRMED in part, VACATED in part, and
REMANDED.