Oracle Corporation et al v. SAP AG et al

Filing 1125

Declaration of Kyle Zipes in Support of 1124 MOTION for Leave to File Motion for Reconsideration Regarding Up-Sell and Cross-Sell Projections filed byOracle International Corporation. (Attachments: # 1 Exhibit A)(Related document(s) 1124 ) (Howard, Geoffrey) (Filed on 4/17/2012)

EXHIBIT A

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA

BEFORE THE HONORABLE PHYLLIS J. HAMILTON, JUDGE
ORACLE CORPORATION, ET AL.

)
)
PLAINTIFFS,
)
)
VS.
)
)
SAP AG, ET AL.,
)
)
DEFENDANTS.
)
____________________________)

JURY TRIAL
NO. C 07-01658 PJH
VOLUME 5
PAGES 754 - 946
OAKLAND, CALIFORNIA
MONDAY, NOVEMBER 8, 2010

TRANSCRIPT OF PROCEEDINGS

APPEARANCES:
FOR PLAINTIFFS:
BY:

BY:

BINGHAM MUCCUTCHEN LLP
THREE EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111-4607
ZACHARY J. ALINDER,
HOLLY A. HOUSE,
GEOFFREY M. HOWARD,
DONN P. PICKETT, ATTORNEYS AT LAW
BOIES, SCHILLER & FLEXNER LLP
1999 HARRISON STREET, SUITE 900
OAKLAND, CALIFORNIA 94612
DAVID BOIES,
STEVEN C. HOLTZMAN, ATTORNEYS AT LAW

(APPEARANCES CONTINUED NEXT PAGE)

REPORTED BY:

RAYNEE H. MERCADO, CSR NO. 8258
DIANE E. SKILLMAN, CSR NO. 4909
RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

Page 815
1

EASY FOR BOTH OF YOU. THERE'S SOMETHING THAT YOU NEED TO

2

SHOWS AS CLEAR AS CAN BE THAT WHAT THEY'RE INCLUDING IN

2

ADDRESS.

3

COMPUTING THAT NUMBER IS LOST INCREMENTAL REVENUE -- UPSELL LOST

3

FIRST OF ALL, NO DISTINCTION WAS MADE BETWEEN THE

4

INCREMENTAL REVENUE -- WELL, THE NEXT ONE, IF I COULD SEE IT, IS

4

ACTUAL LOST PROFITS BASED UPON THE -- THE POST-JANUARY 2005

5

THE SAME FOR CROSS-SELL. THOSE NUMBERS ARE FOUNDATIONS ON WHICH 5

PERIOD AND THE PROJECTIONS WHICH WERE BASED UPON PREVIOUS SALES

6

THEY BUILD THE $2.1 BILLION CLAIM.

6

ACTIVITY ON ORACLE'S PART. THERE WAS NO DISTINCTION MADE AT

1

THIS IS THE BACKUP SUPPORT FOR THE LARGER NUMBER THAT

Page 817

7

THE PROBLEM THAT WE'RE ADDRESSING HERE IS TWO-FOLD.

7

EITHER IN JUDGE LAPORTE'S ORDER IN THE -- AT THE TIME OF THE

8

ONE, YOU KNOW, THEY DRAW THIS DISTINCTION BETWEEN A LOST

8

PRETRIAL CONFERENCE WHEN THE WHOLE SECOND ISSUE WITH REGARD TO

9

OPPORTUNITY TO UPSELL AND CROSS-SELL AND A LOST EXPECTED

9

UPSELL AND RESALE APPEARED.

10
11

OPPORTUNITY TO UPSELL AND CROSS-SELL.

10

YOUR HONOR, THAT'S A DISTINCTION WITHOUT A

THERE'S NO DISTINCTION. THE FIRST THIS EVEN OCCURRED

11

TO ME WAS ON FRIDAY WHEN THE EXHIBIT WAS SHOWN -- SHOWING SAP'S

12

DIFFERENCE. LOST PROFITS ARE PROFITS THAT WERE NEVER MADE, SO

12

PROJECTIONS. I IMMEDIATELY THOUGHT, HMM, I WONDER WHAT THAT

13

WHETHER YOU CALL IT A LOST OPPORTUNITY OR A LOST EXPECTED

13

MEANS IN TERMS OF ARGUMENT AS TO ORACLE'S PROJECTIONS. IT NEVER

14

OPPORTUNITY, IT'S THE SAME THING. AND IT PLAYS OUT IN THE

14

OCCURRED TO ME THAT THERE WAS A DISTINCTION TO BE MADE.

15

EVIDENCE OF THIS CASE THE SAME WAY, BECAUSE YOU'LL SEE WHAT WE

15

JUDGE LAPORTE'S ORDER DOESN'T ADDRESS IT. NO ORDER

16

HAVE HERE. AND IT'S, FRANKLY --

16

THAT I'VE ISSUED ADDRESSES THIS. AS FAR AS I'M CONCERNED, THIS

17

FRANKLY, DIFFICULT FOR ME TO STAY OUT OF THE WAY.

17

IS ENTIRELY NEW ISSUE. IT IS NOT BARRED BY THE PRIOR DISCOVERY

18

MAY I USE YOUR MICROPHONE, MR. PICKETT?

18

ORDER. IT COULDN'T CONCEIVABLY BE BARRED WHEN I DIDN'T EVEN

19

MR. PICKETT: SURE. IT'S NOT A OPRAH MIKE, BUT --

19

KNOW IT WAS AN ISSUE AT THE TIME THAT I ADOPTED THE SANCTIONS

20

MR. McDONELL: YOUR HONOR, WE HAVE TO GO BACK TO

20

ORDER.

21

FIRST PRINCIPLES, AND WHAT IS THE SUBSTANCE OF THE HARM WE'RE

21

22

TALKING ABOUT HERE? WHAT WE DID NOT GET WAS HISTORICAL UPSELL

22

SANCTION ORDER, WHETHER OR NOT THE EVIDENCE SHOULD COME IN. AND

23

AND CROSS-SELL INFORMATION ABOUT WHAT THESE COMPANIES,

23

THE ONLY QUESTION HERE IS WHETHER OR NOT IT WAS PRODUCED IN

24

PEOPLESOFT AND SIEBEL HAD ACTUALLY ACCOMPLISHED OVER TIME GOING 24

DISCOVERY. AND TO THE EXTENT THAT IT WASN'T PRODUCED IN

25

ALL THE WAY BACK TO THE PERIOD SEVERAL YEARS BEFORE THOSE

DISCOVERY, THE DIFFICULTY FOR SAP AT THIS POINT IS THAT YOU

25

SO THE QUESTION IS WHETHER OR NOT IRRESPECTIVE OF THE

Page 816
1
2

ACQUISITIONS.
INSTEAD, WHAT WE DO HAVE ARE JUST THESE ISOLATED

Page 818
1

DIDN'T RAISE THE MOTION. YOU ALL RAISED MOTIONS ON ALL MANNER

2

OF EVIDENTIARY ISSUES. I CANNOT IMAGINE THAT THIS IS NOT
SOMETHING THAT YOU WERE AWARE OF.

3

UNSUPPORTED PROJECTIONS, WHICH, AS COUNSEL HAS NOW TOLD YOU,

3

4

ARE -- ARE THE FOUNDATION OF THEIR CLAIM OF THIS $11 BILLION

4

5

VALUE.

5

6

THE COURT: LET ME MAKE SURE I UNDERSTAND. THESE

6

MR. McDONELL: YOUR HONOR, THIS -- THIS WAS OUR
MOTION IN LIMINE NO. 2 COUPLED -THE COURT: NO. NO. NO. THERE WAS NO DISTINCTION

7

PROJECTIONS NOW ARE BASED UPON PRE-JANUARY 2005 SALES FIGURES.

7

MADE WHATSOEVER IN THAT MOTION WITH REGARD TO PROJECTED SALES.

8

MR. McDONELL: WE DON'T KNOW WHAT THEY'RE BASED ON.

8

THE HYPO- --

9

THEY'RE SIMPLY PROJECTIONS WHICH ARE PRESUMABLY --

9

WHEN I RULED THAT THE LOST REVENUE FROM UPSELL AND

10

THE COURT: WELL, EXCUSE ME. THERE ARE DATES ON AT

10

CROSS-SELL COULD NOT BE USED TO SUPPORT A HYPOTHETICAL LICENSE,

11

LEAST THE ONE THAT COUNSEL GAVE ME, AND IT'S SEPTEMBER OF '03;

11

THAT WAS BASED UPON POST-JANUARY 2005 SALES. THERE WAS NO

12

IS THAT CORRECT?

12

DISTINCTION MADE WITH RESPECT TO WHAT SALES WERE BEING RELIED

MR. McDONELL: YES. SO --

13

UPON BY THE EXPERT AND TO THE EXTENT THAT THIS INFORMATION WAS

14

THE COURT: AND SEPTEMBER OF '04. IT'S THROUGH

14

IN MR. MEYER'S REPORT FROM A YEAR AND A HALF AGO, I DON'T

15

DECEMBER OF '04. THE -- IT SEEMS TO ME THAT THE ONES THAT

15

REMEMBER THAT. YOU ALL DID NOT BRING IT TO MY ATTENTION, AND I

16

POST-DATE ARE SOMEWHAT PROBLEMATIC, BUT THOSE THAT PREDATE

16

CERTAINLY HAD NO INTENTION OF RULING ON THAT SPECIFICALLY.

17

AREN'T REALLY THE SAME THING WE WERE TALKING ABOUT.

17

18

MR. McDONELL: THEY'RE EQUALLY, IF NOT MORE,

18

13

SO THE QUESTION IS, DO YOU HAVE A BASIS NOW FOR
KEEPING IT OUT BECAUSE THE FORMER RULING DOES NOT KEEP IT OUT?
MR. McDONELL: AND WE DO, YOUR HONOR. AND IT'S --

19

IMPORTANT BECAUSE THESE ARE PROJECTIONS, YOUR HONOR. A

20

PROJECTION IS JUST A NUMBER A PERSON WRITES DOWN ON A PAGE. AND 20

THE COMMUNICATION MAY BE IMPERFECT ON THIS, BUT THE SUBSTANCE OF

21

WHETHER THEY BASE THAT PROJECTION IN A WAY THAT CLOSELY HEWS 21

THE PROBLEM AND THE PREJUDICE REMAINS THE SAME. AND THE BASIS

22

WITH SOME HISTORICAL EVIDENCE THAT MAKES THE PROJECTION

22

IS AS FOLLOWS:

23

RELIABLE, DEPENDABLE, IMPORTANT, OR NOT, IS THE CRUX OF WHAT

23

24

WE'RE GETTING AT HERE.

24

ACTUAL LICENSE SALES BY THE PLAINTIFFS, EITHER FOR PEOPLESOFT OR

25

SIEBEL, OR FOR ANY OTHER PARTY. EVIDENCE OF ACTUAL LICENSE --

25

THE COURT: OKAY. LOOK, I THINK THAT I CAN MAKE THIS

19

JUDGE LAPORTE FOUND THAT WE WERE DENIED DISCOVERY OF

17 (Pages 815 to 818)
Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR

Page 819

Page 821

1

THE COURT: AFTER THE INFRINGEMENT BEGAN.

1

ON IT. THAT'S -- THAT'S WHY IT'S NOT AN ISSUE. THAT'S WHY

2

MR. McDONELL: NO, YOUR HONOR. AT ANY TIME. WE

2

THERE'S NO PREJUDICE, UNLIKE IN THE OTHER SITUATION.

3

ASKED FOR DISCOVERY OF -- ALL FINANCIAL INFORMATION RELATING TO

3

NOW, THERE IS SOME CLAIM HERE THAT -- WHICH IS A NEW

4

THESE ISSUES, AND WE DIDN'T GET IT. WE WERE CONSISTENTLY DENIED

4

CLAIM -- SOME PRIOR DATA WAS NOT PRODUCED. BUT TWO POINTS ON

5

AND ONLY ALLOWED REVENUES CONCERNING DELIVERY OF SUPPORT

5

THAT. FIRST THESE PROJECTIONS ARE THE BEST EVIDENCE OF WHAT'S

6

SERVICES. NO SOFTWARE LICENSE SALES HISTORICAL DATA WAS

6

IN THEIR MIND. AND THEY HAD THOSE.

7

PRODUCED. THAT'S A SETTLED ISSUE. JUDGE LAPORTE FOUND THAT.

7

8

THE BOOK IS CLOSED.

8

WAS NO OTHER INFORMATION OTHER THAN 10K'S AND PUBLICLY AVAILABLE

9

INFORMATION. AND WHEN WE PUT -- WHEN WE PRESENT THIS, WE WILL

9

THE PROBLEM WITH THAT AND WHAT WE'RE TALKING ABOUT

SECOND, AS I SAID, IT WAS A HOSTILE TAKE-OVER. THERE

10

HERE AND NOW IS WHY ARE WE PREJUDICED AS A RESULT OF THAT? AND

10

LAY THAT FOUNDATION TO SHOW THAT IT'S PUBLICLY AVAILABLE

11

IT'S VERY STRAIGHTFORWARD, AND LET ME BE -- TRY -- TRY TO BE

11

INFORMATION. BUT IT IS THE PROJECTION.

12

VERY CLEAR.

12

13

THEY NOW WANT US TO ACCEPT THESE PROJECTIONS AT FACE

YOU KNOW, LET'S JUST STEP BACK FOR A MOMENT. THE

13

BIG -- WE ALL KNOW THAT THIS IS A MAINTENANCE BUT THEN THE IDEA

14

VALUE. FACE VALUE. WE NOW HAVE NO CHOICE, THEY WILL SAY, BUT

14

IS YOU GET THE APPLICATION SOFTWARE. AND THEN ONCE YOU GET THAT

15

TO ACCEPT THESE PROJECTIONS UPON WHICH THEY FOUND THEIR -- THEIR

15

SOFTWARE, YOU GET MAINTENANCE FOR YOURS. THAT'S THE WAY THE

16

BILLION-DOLLAR CLAIM.

16

BUSINESS RUNS FOR BOTH SAP AND ORACLE.

17

AND, AGAIN, I GO BACK TO A PROJECTION, WITHOUT MORE,

17

AND WE KNOW THAT WHEN A PARTY WOULD BE NEGOTIATING

18

IS JUST SOMEBODY WRITING DOWN ON A PIECE OF PAPER WHAT THEY

18

THIS, SAP (SIC) HAD A CERTAIN THING IN MIND. THEY THOUGHT THE

19

MIGHT WANT TO SELL. AND WHAT WE DIDN'T GET WAS THE HISTORICAL

19

COMBINATION OF MAINTENANCE AND UPSELL WOULD, IN THE FIRST THREE

20

ACTUAL UPSELL AND CROSS-SELL EXPERIENCE BEFORE THE DATE OF THESE

20

YEARS, COME UP TO ALMOST $900 MILLION. WHAT WOULD BE ON THE SAP

21

PROJECTIONS. HAD WE HAD THAT EVIDENCE, WE COULD HAVE CRITICALLY

21

SIDE?

22

ASSESSED THESE PROJECTIONS AND --

22

23

THE COURT: NOW, ARE YOU SAYING, THEN, THAT THE

23

WELL, IT'S THIS DATA RIGHT HERE, WHICH, AGAIN, HAS
BEEN PRODUCED LONG AGO, FULLY DISCLOSED, FULL OPPORTUNITY TO

24

PROJECTIONS THAT ARE INCLUDED POST-ACQUISITION OF TOMORROWNOW BY24

TAKE DISCOVERY AND. AND IF THEY DISAGREE, AND THEY DO, THEY CAN

25

SAP, THAT'S POST-JANUARY 2005, ARE BASED UPON THE PRE-2005

SAY TO MR. ELLISON, WELL, YOU KNOW, YOU THOUGHT THAT IT'S 20 TO

25

Page 820

Page 822

1

SALES, AND YOU'RE SAYING THAT YOU DIDN'T RECEIVE THE UNDERLYING

1

30 PERCENT OF THE CUSTOMERS OR 30 PERCENT OF THE CUSTOMERS. AND

2

INFORMATION THAT SUPPORTS THE CONCLUSIONS CONTAINED IN THESE

2

THEY CAN CROSS-EXAMINE THAT. AND THE JURY CAN DECIDE. THAT'S

3

COLUMNS?

3

THE FAIR THING TO DO IN THIS CASE.

4

MR. McDONELL: WE DIDN'T LEAVE (SIC) THE -- WE DIDN'T

4

5

GET THE UNDERLYING SUPPORT FOR THE PRE-INFRINGEMENT PERIOD OR

5

6

THE POST-INFRINGEMENT PERIOD.

6

IT'S -- IT'S THE WAY THE SECOND MEASURE OF DAMAGES,
FAIR MARKET VALUE OF USE, IS DETERMINED.
THE COURT: OKAY. ALL RIGHT. LAST WORD.
MR. McDONELL: YES, YOUR HONOR. THAT WAS JUST A

7

THE COURT: OKAY.

7

8

MR. McDONELL: WE HAD NEITHER.

8

CIRCULAR POINT. HE'S SAYING -- BECAUSE THEY HAVE PROJECTIONS WE

9

THE COURT: OKAY. MR. --

9

DIDN'T NEED AND DON'T NEED DISCOVERY ABOUT THE PROJECTIONS.

10
11

MR. McDONELL: AND AS A RESULT COULD NOT CRITICALLY
ASSESS --

10

HE'S SAYING THAT WE SHOULD HAVE NOW DONE OUR DISCOVERY ON THAT

11

ISSUE HERE IN THIS COURTROOM BY EXAMINING ORACLE EXECUTIVES
ABOUT IT. IT'S FAR TOO LATE FOR THAT.

12

THE COURT: -- SHAKING HIS HEAD.

12

13

NOW, OBVIOUSLY, I HAVE NO IDEA WHAT YOU ALL RECEIVED

13

14
15

IN DISCOVERY FROM EACH OTHER.
MR. PICKETT: LET ME BE VERY CLEAR ABOUT THIS. THIS

JUDGE LAPORTE WAS CRYSTAL CLEAR IN HER FOCUS ON THE

14

FACT THAT WE HAD NOT RECEIVED A FAIR OPPORTUNITY TO CHALLENGE IN

15

ANY WAY, SHAPE, OR FORM A CLAIM OF LOST UPSELL AND CROSS-SELL

16

DATA WAS PRODUCED LONG, LONG TIME AGO. IT WAS PRODUCED BEFORE 16

OPPORTUNITIES AS YOU SEE ON THE SLIDE, THAT'S PRECISELY WHAT

17

MR. ELLISON TESTIFIED. IT WAS PRODUCED BEFORE MS. CATZ

17

THEY'RE PRESENTING HERE TODAY.

18

TESTIFIED AT DEPOSITION. IT WAS PRODUCED BEFORE MR. PHILLIPS

18

19

TESTIFIED. THEY COULD HAVE ASKED ANY ONE OF THEM ABOUT THESE

19

HAVE DEVELOPED THEIR EXPERT APPROACHES ON THIS PRECISE ISSUE SO

20

FIGURES, WHAT WAS IN YOUR MIND? THIS IS WHAT YOU -- YOU KNOW,

20

THEY'RE PREPARED TO PUT THEIR EXPERT ON TODAY WITH EITHER

21

YOU PAID FOR PEOPLESOFT BASED ON THESE ASSUMPTIONS. THOSE ARE

21

UPSELL/CROSS-SELL IN OR UPSELL/CROSS-SELL OUT.

22

THE ASSUMPTIONS THE EXPERT IS USING FOR THE -- THE FAIR MARKET

22

23

VALUE OF USE.

23

TO AND ACTING UNDER THE UNDERSTANDING THAT THIS IS OUT FOR ALL

24

PURPOSES, AND WE ASK THAT YOU ENFORCE WHAT WE HAVE UNDERSTOOD TO

24
25

THEY COULD HAVE SOUGHT -- THEY DON'T HAVE TO TAKE

THEM AT FACE VALUE. THEY HAD AN OPPORTUNITY TO TAKE DISCOVERY 25

THIS IS A -- IT'S A CONTAINED ISSUE RIGHT NOW. THEY

IT HAS BEEN CRYSTAL CLEAR THAT WE'VE BEEN OBJECTING

BE YOUR ORDER.

18 (Pages 819 to 822)
Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR

Page 823
THE COURT: AND THE -- THE -- IS MR. PICKETT NOT

Page 825
1

GENERALLY, THESE KINDS OF MATTERS ARE DETERMINED

2

CORRECT THAT YOU HAD THIS PARTICULAR DATA, AND ARE YOU TELLING

2

BEFORE TRIAL. WHEN THE MAGISTRATE JUDGE LAPORTE LOOKED AT

3

ME THAT YOU CHOSE NOT TO TAKE DISCOVERY ON THIS PARTICULAR DATA

3

THESE, SHE MADE A DETERMINATION. I AFFIRMED IT. DIDN'T OCCUR

4

BECAUSE YOU THOUGHT THAT IT WAS BLOCKED BY JUDGE LAPORTE'S

4

TO ME THAT THERE WAS THE DISTINCTION THAT YOU'RE NOW DRAWING.

5

ORDER?

5

1

6
7
8
9

YOU ALL NEED TO GIVE ME SOME ASSISTANCE IN

MR. McDONELL: NO.

6

DETERMINING HOW I'M SUPPOSED TO DECIDE AN ISSUE OF -- DISCOVERY

THE COURT: AND IF THAT'S THE CASE, I DON'T QUITE --

7

ISSUE THAT SHOULD HAVE BEEN RESOLVED BEFORE TRIAL.

I DON'T UNDERSTAND HOW THAT WORKS.

8

MR. McDONELL: HERE'S THE POINT, YOUR HONOR. BY THE

9

MR. PICKETT: LET ME BE CRYSTAL CLEAR ABOUT ONE
THING. THIS DATA WAS PRODUCED PRIOR TO THEIR FILING THE RULE 37

10

TIME IT BECAME KNOWN THAT ORACLE WAS SEEKING DAMAGES BEYOND LOST 10

11

SUPPORT PROFITS, IT WAS FAR, FAR LATE IN THE FACT DISCOVERY

11

12

PERIOD; IN FACT, JUST MONTHS FROM THE CLOSE OF FACT DISCOVERY.

12

MR. PHILLIPS WERE PRIOR TO THEIR MOTION TO MAGISTRATE JUDGE
LAPORTE.

MOTION WITH MAGISTRATE JUDGE LAPORTE.
THE DEPOSITIONS OF MR. ELLISON, MS. CATZ,

13

THE ISSUE GOT LITIGATED BEFORE JUDGE LAPORTE AND THEN

13

14

LITIGATED BEFORE YOUR HONOR THROUGH THE OBJECTIONS, AND JUDGE

14

15

LAPORTE FOUND THAT THIS WAS OUT OF BOUNDS, PERIOD. AND FOR

15

WERE OR WHETHER THERE WAS SOMETHING MORE THEY NEEDED, OR THERE

16

PURPOSES OF YOUR ADOPTING ORDER, WE UNDERSTOOD THAT YOU TOOK

16

WAS SOMETHING MISSING, WOULDN'T THEY HAVE TOLD JUDGE LAPORTE

17

THAT EVEN ONE STEP TOWARDS FURTHER CLARIFICATION BY SAYING THIS

17

ABOUT IT RATHER THAN TRYING TO SWEEP THIS IN NOW AND SAY THAT

18

IS NOT COMING IN THROUGH THE BACK DOOR EITHER.

18

WELL, PROJECTIONS, YOU KNOW, AREN'T GOOD ENOUGH. PROJECTIONS

19

ARE PRECISELY THE ISSUE.

19

WE UNDERSTOOD THAT LOST UPSELL AND CROSS-SELL

IF THEY HAD SOME QUARREL WITH WHAT THESE PROJECTIONS

20

OPPORTUNITIES WERE OFF THE TABLE. YES, WE HAD SOME PROJECTION

20

21

DOCUMENTS.

21

NEGOTIATION. IT'S NOT BASED ON -- YOU KNOW, AFTER THE FACT.

22

IT'S BASED ON PROJECTIONS IN THE MIND AT THE TIME. THAT'S THIS

22

THE COURT: SO YOU THINK THE DISTINCTION BETWEEN THE

KEEP IN MIND THE CASE LAW ON THIS HYPOTHETICAL

23

ACTUAL SALES, WHICH IS WHAT I WAS CONCENTRATING ON, AS OPPOSED

23

EVIDENCE. THEY'VE HAD IT. THEY'VE HAD AN OPPORTUNITY -- AND

24

TO THE PROJECTED SALES -- YOU THINK THERE'S NO -- YOU HAVE

24

IT'S FAR TOO LATE TO COME IN HERE NOW AND TRY AND CUT THIS OUT,

25

CONSTRUED THE ORDER AS NOT PROVIDING A DISTINCTION BETWEEN THOSE

25

PARTICULARLY WHEN THEY'VE OPENED THE DOOR AGAIN AND AGAIN AND

Page 824
1
2

TWO.

Page 826
1

MR. McDONELL: IT'S MORE THAT -- IT -- IT'S -- THE

AGAIN.

2

MR. McDONELL: YOUR HONOR, LET'S COME BACK TO WHAT'S

3

SUBSTANCE I COME BACK TO IS WE DIDN'T HAVE ACTUAL DATA EITHER

3

BEEN PRECLUDED. JUDGE LAPORTE PRECLUDED THEM FROM PURSUING

4

BEFORE OR AFTER THE DATE OF THE INFRINGEMENT. AND SO WE

4

CLAIMS FOR LOST UPSELL AND CROSS-SELL OPPORTUNITIES.

5

COULDN'T ASSESS THE -- THE CREDIBILITY OF THE PROJECTIONS AT THE

5

OPPORTUNITIES. A PROJECTION OF WHAT THEY THINK THEY'RE GOING TO

6

TIME THEY'RE MADE OR WITH THE BENEFIT OF HINDSIGHT, WHICH THE

6

GET IN CROSS-SELL AND UPSELL IS NOTHING MORE THAN A PROJECTION

7

CASE LAW PERMITS.

7

OF THAT OPPORTUNITY. IT'S AN EMBODIMENT OF THAT OPPORTUNITY.

8
9
10
11

THE COURT: SO YOUR EXPERT DIDN'T LOOK AT THE
PROJECTIONS AND HAS NO OPINION AS TO THE MERIT OF THE
PROJECTIONS?
MR. McDONELL: HE HAS -- HE WILL HAVE OPINIONS. HE

8

JUDGE LAPORTE FOUND THAT WE HAD NOT HAD ADEQUATE

9

DISCOVERY ON THAT ISSUE TO CHALLENGE IT ONE WAY OR THE OTHER.

10

WE STILL HAVE NOT HAD IT. IT IS ABSOLUTELY WITHIN THE COURT'S

11

POWER AND AUTHORITY TO SIMPLY AFFIRM THAT RULING AND ALLOW

12

WILL, HOWEVER, STATE THAT HE HAS BEEN -- AND HE HAS STATED THIS

12

PLAINTIFFS TO PROCEED WITH THEIR ALTERNATIVE THEORY THAT THEIR

13

IN THE DECLARATION HE FILED WITH JUDGE LAPORTE, THAT HE'S BEEN

13

EXPERT'S READY TO PROCEED WITH HERE TODAY.

14

SEVERELY LIMITATED (PHONETIC) -- LIMITED IN HIS ABILITY TO

14

15

CHALLENGE HIM BECAUSE HE DOESN'T HAVE THE UNDERLYING DATA.

15

MADE GOOD ARGUMENTS. IT CLEARLY WASN'T CONTEMPLATED BY THE

16

COURT AT THE TIME OF THE PRETRIAL RULING. BUT I'M PERSUADED BY

17

THE DEFENSE POSITION. I THINK IT'S CLOSE ENOUGH -- I THINK
OPPORTUNITY IS CLOSE ENOUGH.

16
17

AND HE IS -- AS A RESULT, THERE'S A FAIR AMOUNT OF
PRESSURE ON OUR SIDE TO SIMPLY ACCEPT THEM.

THE COURT: RIGHT. RIGHT. WELL, I THINK YOU'VE BOTH

18

THE COURT: OKAY. I DON'T QUITE --

18

19

MR. PICKETT: I NEED TO CORRECT --

19

20

THE COURT: EXCUSE ME. EXCUSE ME.

20

CROSS-SELL, WHICH I HAVE DENIED ALL ALONG, CONTINUES TO BE

21

MR. PICKETT: SORRY.

21

DENIED.

22

THE COURT: I'M NOT EXACTLY SURE HOW I'M SUPPOSED TO

22

23

RESOLVE IT WITH ONE SIDE SAYING THE DATA HAS BEEN PROVIDED AND 23

24

THE OTHER SIDE SAYING WE DON'T HAVE ACCESS AND HAVEN'T HAD

24

25

ACCESS TO THE UNDERLYING DATA.

25

I'M GOING TO REAFFIRM THE RULING. UPSELL,

MR. McDONELL: THANK YOU, YOUR HONOR.
MR. PICKETT: WILL WE AT LEAST BE ABLE TO MAKE AN
OFFER OF PROOF FOR THE RECORD, YOUR HONOR?
THE COURT: SURE.

19 (Pages 823 to 826)
Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
BEFORE THE HONORABLE PHYLLIS J. HAMILTON, JUDGE
ORACLE CORPORATION, ET AL.

)
)
PLAINTIFFS,
)
)
VS.
)
)
SAP AG, ET AL.,
)
)
DEFENDANTS.
)
____________________________)

JURY TRIAL
NO. C 07-01658 PJH
VOLUME 9
PAGES 1512 - 1695
OAKLAND, CALIFORNIA
TUESDAY, NOVEMBER 16, 2010

TRANSCRIPT OF PROCEEDINGS
APPEARANCES:
FOR PLAINTIFFS:
BY:

BINGHAM MCCUTCHEN LLP
THREE EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111-4607
ZACHARY J. ALINDER,
HOLLY A. HOUSE,
GEOFFREY M. HOWARD,
DONN P. PICKETT, ATTORNEYS AT LAW

BY:

BOIES, SCHILLER & FLEXNER LLP
1999 HARRISON STREET, SUITE 900
OAKLAND, CALIFORNIA 94612
DAVID BOIES,
STEVEN C. HOLTZMAN, ATTORNEYS AT LAW

(APPEARANCES CONTINUED NEXT PAGE)

REPORTED BY:

RAYNEE H. MERCADO, CSR NO. 8258
DIANE E. SKILLMAN, CSR NO. 4909

RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

Page 1677
1
2
3
4

COVERED BY A MOTION IN LIMINE ORDER.

Page 1679
1

DO YOU RECALL THAT?

MR. BOIES: ALL --

2

A. I DO.

THE COURT: WERE YOU GETTING READY TO SAY I WILL

3

Q. NOW, THE VALUATION DATE FOR THAT LICENSE WOULD HAVE BEEN

4

EITHER JANUARY 18TH OR JANUARY 19TH OF 2005; IS THAT CORRECT?

WITHDRAW IT?

5

MR. BOIES: NO.

5

A. YES.

6

THE COURT: WHICH IN LIMINE ORDER?

6

Q. AND WHEN YOU ARE VALUING SOMETHING AS OF A VALUATION DATE,

7

MR. MITTELSTAEDT: ABOUT PRECLUDED EVIDENCE.

7

YOU NEED TO LOOK AT THE STATE OF AFFAIRS THAT EXISTS AT THAT

8

THE COURT: DO YOU REMEMBER WHICH NUMBER IT WAS?

8

TIME, NOT SOME OTHER TIME. FAIR?

9

A. YES.

9

THERE WAS A NUMBER OF THEM.

10

MR. MITTELSTAEDT: NUMBERS ONE AND TWO.

10

Q. SO THAT WHAT YOU WOULD BE LOOKING AT IS WHAT WOULD HAVE

11

MR. BOIES: THIS JUST REQUIRES A "YES" OR "NO"

11

BEEN IN THE MINDS OF SAP AND ORACLE ON JANUARY 18TH OR

12

JANUARY 19TH, CORRECT?

13

A. YES.

14

Q. ON JANUARY 18TH OR 19TH -- JUST SO I DON'T HAVE TO KEEP

15

SAYING IT, IN YOUR OPINION, IS IT THE 18TH OR IS IT THE 19TH?

12
13
14
15

ANSWER AT THIS POINT.
THE COURT: YOU MAY ANSWER THIS QUESTION, BUT YOU
MAY NOT EXPLORE THAT AREA.
THE WITNESS: NO.

16

BY MR. BOIES:

16

A. LET'S CALL IT THE 19TH.

17

Q. WHAT?

17

Q. ON JANUARY 19TH, NEITHER SAP NOR ORACLE HAD A CRYSTAL BALL

18

A. NO.

18

THAT WOULD HAVE TOLD THEM EXACTLY WHAT WAS GOING TO HAPPEN IN

19

Q. OKAY.

19

THE FUTURE, CORRECT?

20

A. NO CRYSTAL BALL.

20

MR. BOIES: LET ME PUT ONE QUESTION AND -- WHICH I

21

DON'T THINK HAS ANYTHING TO DO WITH THE IN LIMINE MOTIONS, YOUR 21

Q. SO ALL THEY COULD GO ON IN NEGOTIATING A LICENSE WAS WHAT

22

HONOR, BUT LET ME JUST PUT IT AND SEE.

22

THEY KNEW AND BELIEVED AT THE TIME, CORRECT?

23

BY MR. BOIES:

23

A. CORRECT.

24

Q. DID YOU INVESTIGATE THE EXTENT TO WHICH ORACLE REDUCED

24

Q. SO IN TERMS OF COMING UP WITH WHAT YOU REFER TO AS THIS

25

PRICES IN ORDER TO KEEP CUSTOMERS?

25

HYPOTHETICAL LICENSE, WHAT YOU ARE GOING TO BE DOING IS TRYING

Page 1678
1
2
3
4

Page 1680

MR. MITTELSTAEDT: SAME OBJECTION.

1

TO FIGURE OUT WHAT WOULD HAVE BEEN THEIR PLANS AND

THE COURT: I THINK THAT'S GETTING PRETTY CLOSE,

2

EXPECTATIONS -- I THINK YOU USED THE WORD "FORECASTS" AT

3

JANUARY 19TH, 2005, CORRECT?

4

A. YES.

MR. BOIES.
MR. BOIES: WHY DON'T I -- I AM NOT GOING TO FINISH

5

TODAY ANYWAY. PERHAPS WE CAN TAKE THAT UP AT THE BREAK, YOUR

5

Q. NOW, DID YOU LOOK AT WHAT THE PLANS, PROJECTIONS,

6

HONOR.

6

FORECASTS WERE OF SAP AS TO WHAT THEY THOUGHT WAS GOING TO

7

HAPPEN ON JANUARY 19TH, 2005?
A. YES.
Q. AND WHAT DOCUMENTS DID YOU LOOK AT IN THAT CONNECTION AND

7

THE COURT: OKAY.

8

BY MR. BOIES:

8

9

Q. IN TERMS OF YOUR ANALYSIS OF THE LOST PROFITS TO ORACLE,

9

10

THE LOST PROFITS THAT YOU CALCULATED RELATED TO THE DEPRIVATION 10

RELY ON?

11

OF A MAINTENANCE STREAM THROUGH 2008; IS THAT CORRECT?

11

A. I LOOKED AT THE BUSINESS CASE, WHICH I THINK WAS A

12

A. YES.

12

JANUARY 7TH DOCUMENT. AND THAT WAS THE DOCUMENT THAT HAD THE

13

Q. AND SOME OF THE CUSTOMERS FROM TOMORROWNOW WENT BACK TO 13

14

ORACLE, CORRECT?

14

THE ONLY REASON I AM SLIGHTLY HESITANT ON THAT IS

15

A. YES.

15

YOU ASKED ME IF I RELIED UPON THAT. AND I CONSIDERED IT, BUT I

16

Q. AND SOME DID NOT, CORRECT?

16

AM NOT SURE IT ROSE TO THE LEVEL OF RELIANCE. I DIDN'T BASE

17

A. CORRECT.

17

ANY CALCULATION ON IT, IF YOU LIKE.

18

Q. AND FOR THE CUSTOMERS THAT DID NOT GO BACK TO ORACLE, YOU

18

Q. NOW, IN ORDER TO COME UP WITH A VALUE OF A HYPOTHETICAL

19

DID NOT INCLUDE ANY DAMAGES FOR PERIODS AFTER 2008; IS THAT

19

LICENSE, YOU HAD TO FIGURE OUT WHAT SAP AND ORACLE WOULD HAVE

20

CORRECT?

20

NEGOTIATED ON JANUARY 19TH, 2005, CORRECT?

21

A. THAT'S CORRECT.

21

A. YES.

22

Q. LET ME TURN TO THE LICENSE, FAIR VALUE -- FAIR MARKET

22

Q. AND TO DO THAT YOU WOULD HAVE HAD TO DETERMINE WHAT YOU

23

VALUE LICENSE. THAT IS SOMETHING THAT YOU TESTIFIED WAS

23

BELIEVED WOULD HAVE BEEN IN THEIR MINDS ON THAT DATE, CORRECT?

24

SOMETHING THAT IS NEGOTIATED BEFORE THE INFRINGEMENT BEGINS SO 24

A. YES. IN PART, YES.

25

IT SHOULD NOT HAVE A PUNISHMENT ELEMENT TO IT.

Q. AND IN ORDER TO DO THAT, YOU WOULD HAVE NEEDED TO KNOW

25

FORECAST IN IT.

43 (Pages 1677 to 1680)
Raynee H. Mercado, CSR, RMR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR

Page 1681

Page 1683

1

WHAT THEY FORECASTED OR PROJECTED WAS GOING TO HAPPEN AS A

1

A. YES, I THINK I DID.

2

RESULT OF THEIR USE OF THE COPYRIGHTED MATERIALS, CORRECT?

2

Q. SO YOU TRIED TO FIND EXAMPLES OF LUMP SUM ROYALTY PAYMENTS

3

A. THAT'S PARTLY CORRECT.

3

FOR INTELLECTUAL PROPERTY, CORRECT?

4

A. CORRECT.

4

AS I SAY, IT'S A DOCUMENT I WOULD CONSIDER, BUT IN

5

TERMS OF QUANTIFYING A NUMBER, I THINK THAT WOULD ONLY BE

5

Q. WHAT WAS THE HIGHEST ONE YOU FOUND?

6

RELEVANT IF YOU WERE DOING A LUMP SUM PAID IN ADVANCE.

6

A. I DON'T RECALL.

7

Q. APPROXIMATELY?

7

SO IN MY ANALYSIS, BECAUSE I AM USING WHAT I KNOW AT

8

THAT POINT TO COME UP WITH A ROYALTY RATE AS OPPOSED TO A LUMP

8

A. I COULDN'T TELL YOU.

9

SUM PAYMENT, I CONSIDERED IT AND I DIDN'T RELY ON IT TO DO A

9

Q. JUST A RANGE.

10

CALCULATION.

10

A. I CAN'T TELL YOU. I WOULD TELL YOU IF I REMEMBERED, BUT I

11

Q. LET ME FOLLOW UP ON THAT.

11

DON'T REMEMBER.

12

Q. WAS IT MORE THAN A QUARTER OF A BILLION DOLLARS?

12

YOU DID NOT CALCULATE A LUMP SUM ROYALTY PAYMENT,

13

CORRECT?

13

A. YOU KNOW, I COULDN'T TELL YOU.

14

A. THAT'S CORRECT.

14

Q. MORE THAN HALF A BILLION DOLLARS?

15

Q. YOU DID NOT MAKE ANY EFFORT TO DETERMINE WHAT THE AMOUNT 15

A. I CAN'T TELL YOU MEANS I CAN'T TELL YOU. I COULDN'T TELL

16

OF A LUMP SUM ROYALTY PAYMENT WOULD HAVE BEEN IF THAT IS WHAT 16

YOU.

17

THE PARTIES HAD AGREED TO, CORRECT?

17

Q. YOU DID THIS IN THE COURSE OF YOUR WORK ON THIS CASE,

18

A. THAT'S CORRECT.

18

CORRECT?

19

Q. NOW, YOU ARE AWARE OF LICENSE NEGOTIATIONS FOR SOFTWARE

19

A. I DID IT LOOKING TO SEE IF THERE WERE COMPARABLE

20

THAT RESULT IN LUMP SUM ROYALTY PAYMENTS, CORRECT?

20

TRANSACTIONS, NOT FOR JUST ANY OLD TRANSACTION. AND YOUR

21

A. YES.

21

QUESTION SEEMS TO BE BROADER THAN THE COMPARABLE TRANSACTION.

22

Q. AND YOU ARE AWARE OF LICENSE AGREEMENTS THAT INVOLVE A

22

Q. ALL RIGHT.

23

VERY SUBSTANTIAL AMOUNT OF MONEY THAT RELATE TO LUMP SUM

23

24

ROYALTY PAYMENTS, CORRECT?

24

COMPARABLE TRANSACTION, WHAT ARE THE CRITERIA THAT YOU USE TO

25

A. WELL, I DON'T REALLY KNOW WHAT YOU MEAN BY "VERY

25

DETERMINE WHETHER A ROYALTY PAYMENT IS OR IS NOT COMPARABLE TO

LET ME REFINE THAT. WHEN YOU TALK ABOUT A

Page 1682

Page 1684

1

SUBSTANTIAL", BUT I --

1

THIS CASE?

2

Q. LET ME PUT A NUMBER ON IT.

2

A. WHAT I WAS LOOKING FOR WAS TRANSACTIONS, MOSTLY BY THE TWO

3

A. LET ME FINISH MY QUESTION (SIC).

3

PARTIES TO THIS CASE, TO SEE IF THEY HAD SOMETHING IN THEIR

4

Q. OKAY.

4

BACKGROUND THAT MIGHT BE HELPFUL AND INSTRUCTIVE.

5

A. I AM NOT -- I CAN'T THINK OF A PARTICULAR LUMP SUM PAID IN

5

6

ADVANCE ROYALTY THAT I WOULD DESCRIBE AS VERY SUBSTANTIAL.

6

LICENSES FOR SIGNIFICANT SOFTWARE SYSTEMS THAT WOULD -- WHERE

7

Q. OKAY.

7

THERE WOULD BE A LUMP SUM PAYMENT FOR THAT ACQUISITION. NOT OF

8

AN OWNERSHIP, BUT ONLY OF A LICENSE.

9

Q. I AM ONLY TALKING ABOUT LICENSES.

8
9

WOULD YOU DESCRIBE SOMETHING IN EXCESS OF A BILLION
DOLLARS AS VERY SUBSTANTIAL?

AND THEN I WAS LOOKING TO SEE IF I COULD FIND

10

A. YES, I THINK THAT WILL BE PRETTY SUBSTANTIAL.

10

A. I UNDERSTAND.

11

Q. SO, IS IT YOUR TESTIMONY THAT YOU'RE NOT AWARE OF ANY LUMP

11

Q. I AM LEAVING OWNERSHIP ASIDE.

12

SUM ROYALTY PAYMENTS FOR INTELLECTUAL PROPERTY OF MORE THAN A 12

A. I AM LETTING YOU KNOW WHAT I LOOKED FOR.

13

BILLION DOLLARS?

13

Q. AND YOU DIDN'T JUST LIMIT YOUR INVESTIGATION TO

14

A. NOT THAT I CAN THINK OF THAT WILL BE A TALL COMPARABLE

14

TRANSACTIONS BETWEEN SAP AND ORACLE, DID YOU?

15

WITH THIS CASE.

15

A. YOU KNOW, FAIRLY SOON INTO THIS PIECE OF WORK I GAVE UP ON

16

Q. SINCE I AM NOT EXACTLY SURE OF WHAT YOU MEAN BY

16

IT BECAUSE I CAME TO THE CONCLUSION THAT A LUMP SUM WOULDN'T

17

"COMPARABLE WITH THIS CASE," LET ME ASK A MORE GENERAL

17

WORK IN THE CIRCUMSTANCES AND I WASN'T GETTING ANY RESULTS FROM

18

QUESTION.

18

LOOKING FOR THIS TYPE OF THING. SO, I GAVE UP, IF YOU LIKE.

19

ARE YOU AWARE OF ANY LUMP SUM ROYALTY PAYMENTS FOR

19

I DIDN'T, MAYBE DIDN'T COMPLETE AN ENTIRE ANALYTICAL

20

INTELLECTUAL PROPERTY IN EXCESS OF A BILLION DOLLARS, WHETHER

20

APPROACH WHICH IS WHAT I WOULD BE DOING IF SOMEONE SAID, "I

21

YOU WOULD CONSIDER THEM COMPARABLE OR NOT?

21

WANT YOU TO GO AND FIND A COMPARABLE LUMP SUM ROYALTY." SO

22

A. NOTHING SHORT OF A TRANSACTION WHERE OWNERSHIP WAS

22

ONCE I DETERMINED THAT A LUMP SUM WASN'T APPROPRIATE, I DIDN'T

23

TRANSFERRING. I CAN'T THINK OF ANY LICENSE AGREEMENT OF A

23

NEED TO LOOK ANY FURTHER.

24

BILLION DOLLARS OR MORE IN A LUMP SUM.

24

Q. ARE YOU SAYING THAT YOU DIDN'T REALLY COMPLETE THE WORK

25

Q. DID YOU INVESTIGATE THAT?

25

THAT YOU WOULD NEED TO DO TO DETERMINE WHETHER OR NOT THERE

44 (Pages 1681 to 1684)
Raynee H. Mercado, CSR, RMR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR