In March, a panel of the Federal Circuit affirmed a Texas district court ruling requiring EchoStar to remotely disable the DVRs of innocent customers as part of its damages for infringing on TiVo’s DVR patents.  At the time, Elisabeth and JZ predicted that we would see an increasing number of similar cases as companies — and governments — figured out how to take advantage of additional control points that exist in tethered appliances.  Their Delphian suggestion came to pass in the mobile arena recently when Oracle filed suit against Google for patent and copyright infringement.  The lawsuit claims that Google’s Android OS (along with its software development kit and custom virtual machine) infringes Oracle’s IP rights in the Java programming language.

Much of the online discussion has focused on the merits of the suit.  Oracle officially acquired Sun Microsystems early this year.  Sun originally developed Java and, over time, released most of the platform into the open source ecosystem.  Patents that were filed may have been a defense against litigation or even a joke.  And Google has licenses for those patents.  So the question here revolves around whether, by strict or loose interpretation, Google violated its licenses, but the vagueness and generality of Oracle’s complaint [pdf] (and press release) renders most of this analysis speculative pending additional clarification.  (More discussion on the open source backdrop is available here and here, and counterpoint here.)

However, the remedy Oracle wants couldn’t be more clear.  It asks for monetary damages to compensate it for its financial losses and punitive damages because it alleges Google “knowingly,” i.e. intentionally, violated its IP rights.  In addition, Oracle requests “[a]n order permanently enjoining Google, its officers, agents, servants, employees, attorneys and affiliated companies, its assigns and successors in interest, and those persons in active concert or participation with it, from continued acts of infringement of the patents and copyrights at issue in this litigation” and “[a]n order that all copies made or used in violation of Oracle America’s copyrights, and all means by which such copies may be reproduced, be impounded and destroyed or otherwise reasonably disposed of.”  The last one is the kicker: just like TiVo’s demand of EchoStar, Oracle wants the court to tell Google to reach into Android owners’ handsets and rip out the offending material, leaving innocent consumers with a gutted shell — and the remainder of their two-year service contract.

The destruction remedy applies only to the copyright claim.  If the case goes to trial a jury could conceivably find Google liable for patent infringement but not copyright violation.  And even if it did, the district judge has discretion over what relief to grant.  Plus, the appeals process could hack back overbearing damages.

But as long as it is on the table, the availability of such a remedy is a very big stick.  Even if Google believes it should win the suit, betting on that outcome doesn’t make sense if it means risking having to destroy consumers’ phones or fighting a long and uncertain legal battle after the destruction provision is awarded, instead of paying conventional monetary damages.

Google has seen how a similar fight has played out for EchoStar.  EchoStar attempted to comply with the court order by sending DVR boxes an update that replaced the infringing technology with noninfringing parts, leaving intact the DVRs’ functionality.  The Federal Circuit said “no dice,” the remedy was disablement of the DVRs, and that alone would suffice.  EchoStar continues to refuse to disable its customers’ DVRs and has been held in contempt and fined $200 million.

The Federal Circuit has agreed to rehear EchoStar’s case en banc.  And in the interim, the U.S. Patent and Trademark office has invalidated the very patents TiVo claimed EchoStar infringed. (TiVo is appealing the ruling; until its appeal is exhausted, the patents remain in force.)  And the FTC has stepped in to give the circuit court some guidance, filing an amicus brief urging it to consider how specific sanctions will impact innovation across the technology industry.

The availability of destruction as a remedy smothers innovation.  If Oracle can’t strong-arm Google into settling but wins at trial and is awarded the destruction provision (and it survives appeal and Google eventually capitulates instead of balking and riding a series of contempt proceedings into a draconian post-litigation settlement or bankruptcy), (1) consumers would have their phones replaced with bricks and think twice before buying new tech again; (2) Android developers would see their platform and all their apps evaporate; and (3) in the future, companies would likely waste time reinventing the wheel to avoid Google’s court-ordered fate rather than developing new technologies.  There is a storm brewing, brought on by the rise of tethered appliances and the thicket of software patent regulation.

—By Jennifer Halbleib