Oracle Shares Fall Despite Narrow Victory Over Google In Patent Suit

Shares of Oracle (Nasdaq: ORCL), the world's biggest database developer, fell most of Tuesday despite the company's apparent victory over Google (Nasdaq: GOOG), the No. 1 search engine, in a vicious patent lawsuit.

Google shares fell, too, perhaps reflecting Tuesday's general market drop but also on fears that its plans to marshall its Android OS to battle the iOS patented by Apple (Nasdaq: AAPL), the world's most valuable technology company, could be in jeopardy.

By midday, Oracle shares had fallen 33 cents to $27.58, valuing the Redwood Shores, Calif., company at $137 billion, while Google's dropped $6.01 to $601.46, valuing the Mountain View, Calif., company at $196.2 billion. By the close, Oracle rose a penny to $27.93 while Google shares surged $5.24 to close at $612.79.

To be sure: both share drops were only about 1 percent. And both companies are technology behemoths with plenty of cash for lawsuits. In their latest reporting periods, the two giants reported a combined $79.04 billion in cash and investments!

The patent dispute before U.S. District Court Judge William Alsupp in San Francisco stems from Oracle's purchase of Sun Microsystems in 2010, which brought with it the Java programming language that Sun had developed to battle Microsoft (Nasdaq: MSFT), the world's biggest software company, and made open source, so that anyone could use it for free.

Google, seeking to develop Android to battle Apple, devised it on Java; Oracle said that it had taken the software without a license. A jury found that Google developers had copied a few application programming interfaces (API) using only nine lines of software code.

Meanwhile, the jury declined to accept Google's defense that because Java had originally been open source that it had a fair use defense to take it.

With the split decision, Judge Alsupp will now start taking testimony about damages. He previously threw out Oracle's claims it deserved to be paid at least $1 billion.

Last year, Alsupp ordered Oracle CEO Larry Ellison and Google CEO Larry Page to settle their dispute before a federal magistrate. When that effort failed, he relucantly ordered the trial to start last month.

The jury finding comes as Google is on the verge of finally closing its $12.5 billion acquisition of Motorola Mobility Holdings (NYSE: MMI) and promoting Android as a platform to leading smartphone makers, especially Samsung Electronics (Seoul: 005930) and other Asian makers.

As well, Amazon.com Inc. (Nasdaq: AMZN), the No. 1 e-retailer, has had a huge initial success selling Kindle Fires with an Android OS.

Android-based phones are now about 60 percent of all smartphone sales, report market research experts including IDC and NPD Group, which means the potential for a slowdown or at least a bump is clear.

At the same time, with the split decision and the known position of the judge that a deal should be made, the likelihood of a settlement increases.

Investors next need to watch for the damages phase of the trial, to see what the jury awards and then how the judge responds. Prospects are that the award will be small, which could end the case, or that Oracle will settle for small payments.