Oracle Corporation et al v. SAP AG et al
Filing
1142
MOTION in Limine Defendants' Motions in Limine filed by SAP AG, SAP America Inc, Tomorrownow Inc. Motion Hearing set for 5/24/2012 02:30 PM in Courtroom 3, 3rd Floor, Oakland before Hon. Phyllis J. Hamilton. Responses due by 5/10/2012. Replies due by 5/17/2012. (Attachments: # 1 Proposed Order)(Froyd, Jane) (Filed on 4/26/2012)
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Robert A. Mittelstaedt (SBN 060359)
Jason McDonell (SBN 115084)
Elaine Wallace (SBN 197882)
JONES DAY
555 California Street, 26th Floor
San Francisco, CA 94104
Telephone:
(415) 626-3939
Facsimile:
(415) 875-5700
ramittelstaedt@jonesday.com
jmcdonell@jonesday.com
ewallace@jonesday.com
Tharan Gregory Lanier (SBN 138784)
Jane L. Froyd (SBN 220776)
JONES DAY
1755 Embarcadero Road
Palo Alto, CA 94303
Telephone:
(650) 739-3939
Facsimile:
(650) 739-3900
tglanier@jonesday.com
jfroyd@jonesday.com
Scott W. Cowan (Admitted Pro Hac Vice)
Joshua L. Fuchs (Admitted Pro Hac Vice)
JONES DAY
717 Texas, Suite 3300
Houston, TX 77002
Telephone:
(832) 239-3939
Facsimile:
(832) 239-3600
swcowan@jonesday.com
jlfuchs@jonesday.com
Attorneys for Defendants
SAP AG, SAP AMERICA, INC., and
TOMORROWNOW, INC.
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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OAKLAND DIVISION
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ORACLE USA, INC., et al.,
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Plaintiffs,
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v.
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SAP AG, et al.,
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Case No. 07-CV-1658 PJH (EDL)
DEFENDANTS’ MOTIONS IN LIMINE
Date:
Time:
Place:
Judge:
May 24, 2012
2:30 p.m.
3rd Floor, Courtroom 3
Hon. Phyllis J. Hamilton
Defendants.
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
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TABLE OF CONTENTS
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Page
I.
MOTION IN LIMINE NO. 1 TO EXCLUDE EVIDENCE AND ARGUMENT
REGARDING NEW LOST PROFITS AND INFRINGER’S PROFITS CLAIMS .......... 1
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A.
Material Facts .......................................................................................................... 2
B.
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Rules 26 and 37 and This Court’s Scheduling Orders Require Excluding
Oracle’s Untimely Damages Claims, Including the New Meyer Report ................ 5
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1.
Legal Standards ........................................................................................... 5
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2.
All of Oracle’s New Disclosures Are Untimely ......................................... 6
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3.
Oracle’s Belated Disclosures Are Neither Substantially Justified
Nor Harmless .............................................................................................. 7
4.
Oracle May Not Circumvent Rule 26’s Disclosure Requirements by
Mischaracterizing Its New Damages Claims as “Supplements.”................ 8
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C.
Judicial Estoppel Requires Precluding New Damages Claims ............................... 9
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D.
The Court Should Preclude Oracle from Reversing Its Approach to
Deductible Expenses in an Attempt to Inflate the Infringer’s Profits Claim ........ 11
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1.
Oracle May Not Reverse Its Approach on Deducting Expenses .............. 11
2.
Willful Infringers Are Not Barred from Deducting All Expenses ............ 12
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E.
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The Court Should Preclude Oracle from Reneging on the Agreed Scope of
Discovery—and Damages—to Inflate the Infringer’s Profits Claim.................... 15
II.
MOTION IN LIMINE NO. 2 TO EXCLUDE EVIDENCE PREVIOUSLY
OFFERED SOLELY TO SUPPORT EXCLUDED DAMAGES THEORIES ................ 16
III.
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MOTION IN LIMINE NO. 3 TO EXCLUDE EVIDENCE AND ARGUMENT
REGARDING TOMORROWNOW’S CRIMINAL CONVICTION............................... 18
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A.
Material Facts ........................................................................................................ 18
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B.
Argument .............................................................................................................. 18
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IV.
MOTION IN LIMINE NO. 4 TO PROHIBIT ORACLE FROM REFERRING TO
“THEFT” OR “STEALING” OF SOFTWARE ............................................................... 21
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
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TABLE OF AUTHORITIES
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Page(s)
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CASES
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Beller v. United States,
221 F.R.D. 689 (D.N.M. 2003) ................................................................................................. 9
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Butler v. Pettigrew,
409 F.2d 1205 (7th Cir. 1969)................................................................................................. 15
Compaq Comp. Corp. v. Ergonome, Inc.,
387 F.3d 403 (5th Cir. 2004)................................................................................................... 19
DAG Enters., Inc. v. Exxon Mobil Corp.,
226 F.R.D. 95 (D.D.C. 2005) .................................................................................................... 9
Engquist v. Oregon Dep’t of Agriculture,
478 F.3d 985 (9th Cir. 2007)................................................................................................... 19
Feist Publ’ns, Inc. v. Rural Tel. Serv. Co.,
499 U.S. 340 (1991) ................................................................................................................ 21
Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc.,
772 F.2d 505 (9th Cir. 1985).............................................................................................. 12-14
Freeman v. Allstate Life Ins. Co.,
253 F.3d 533 (9th Cir. 2001)................................................................................................... 15
Hamil Am., Inc. v. GFI,
193 F.3d 92 (2d Cir. 1999), cert. denied, 528 U.S. 1160 (2000) ............................................ 13
Hamilton v. State Farm Fire & Cas. Co.,
270 F.3d 778 (9th Cir. 2001)................................................................................................... 10
Kamar Int’l, Inc. v. Russ Berrie & Co.,
752 F.2d 1326 (9th Cir. 1984)............................................................................................ 12-14
Lindner v. Meadow Gold Dairies, Inc.,
249 F.R.D. 625 (D. Haw. 2008) ................................................................................................ 9
Luke v. Family Care & Urgent Med. Clinics,
323 Fed. App’x 496 (9th Cir. 2009)...................................................................................... 6, 9
New Hampshire v. Maine,
532 U.S. 742 (2001) ................................................................................................................ 10
Saxon v. Blann,
968 F.2d 676 (8th Cir. 1992)................................................................................................... 13
Sheldon v. Metro-Goldwyn-Mayer Corp.,
106 F.2d 45 (2d Cir. 1939), aff’d, 309 U.S. 390 (1940) ......................................................... 13
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
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TABLE OF AUTHORITIES
(continued)
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Page(s)
Uniloc USA, Inc. v. Microsoft Corp.,
632 F.3d 1292 (Fed. Cir. 2011) ............................................................................................... 17
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United Nat’l Ins. Co. v. Spectrum Worldwide, Inc.,
555 F.3d 772 (9th Cir. 2009)................................................................................................... 10
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United States v. 14.3 Acres of Land,
No. 07cv886-AJB (NLS), 2011 WL 2414348 (S.D. Cal. June 10, 2011) ................................ 8
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United States v. Bush,
58 F.3d 482 (9th Cir. 1995)..................................................................................................... 19
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United States v. Cabrera,
222 F.3d 590 (9th Cir. 2000)................................................................................................... 21
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United States v. Curtain,
489 F.3d 935 (9th Cir. 2007)................................................................................................... 19
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United States v. Gilbert,
57 F.3d 709 (9th Cir. 1995)..................................................................................................... 20
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United States v. Gonzalez-Flores,
418 F.3d 1093 (9th Cir. 2005)................................................................................................. 19
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United States v. Osazuwa,
564 F.3d 1169 (9th Cir. 2009)................................................................................................. 20
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United States v. Skillman,
922 F.2d 1370 (9th Cir. 1990)................................................................................................. 19
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United States v. Smith,
196 F.3d 1034 (9th Cir. 1999)................................................................................................. 19
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Walden v. Georgia Pacific Corp.,
126 F.3d 506 (3d Cir. 1997) .................................................................................................... 20
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Yeti by Molly, Ltd. v. Deckers Outdoor Corp.,
259 F.3d 1101 (9th Cir. 2001)................................................................................................... 6
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ZZ Top v. Chrysler Corp.,
70 F. Supp. 2d 1167 (W.D. Wash. 1999) ........................................................................... 12-14
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STATUTES
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17 U.S.C. § 504 ....................................................................................................................... 12, 14
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OTHER AUTHORITIES
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Fed. R. Civ. P. 26 .................................................................................................................... 6, 8, 9
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Fed. R. Civ. P. 37 .............................................................................................................. 5, 6, 8, 15
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
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TABLE OF AUTHORITIES
(continued)
Page(s)
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Fed. R. Evid. 402 .............................................................................................................. 14, 18, 19
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Fed. R. Evid. 403 ................................................................................................................... passim
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Fed. R. Evid. 609 .......................................................................................................................... 20
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Fed. R. Evid. 802 .......................................................................................................................... 18
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Fed. R. Evid. 803 .......................................................................................................................... 18
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
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Defendants move in limine to exclude evidence and argument related to Oracle’s new and
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untimely damages claims in excess of and materially different from those Oracle disclosed during
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the discovery period, presented at the first trial, and on which Defendants and this Court have
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relied throughout this case. Defendants also ask this Court to exclude evidence and argument
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solely related to damages theories no longer in the case, related to the TomorrowNow criminal
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conviction, or that characterize acts of civil copyright infringement as “theft” or “stealing.”
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I.
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MOTION IN LIMINE NO. 1 TO EXCLUDE EVIDENCE AND ARGUMENT
REGARDING NEW LOST PROFITS AND INFRINGER’S PROFITS CLAIMS
This Court’s orders limit the issues for the new trial to Oracle’s remaining lost profits and
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infringer’s profits claims. From the time of its damages expert Paul Meyer’s deposition in May
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2010, through the first trial and the Court’s post-trial rulings (including the Court’s remittitur
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calculation), Oracle consistently has maintained that its lost and infringer’s profits claims for
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copyright damages total a combined maximum of $408.7 million. Now, Oracle wants to change
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that claim and the methodology used to calculate it. In the past ten days, including the night
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before the pretrial filings deadline, Oracle:
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Filed three motions seeking to revive damages claims that this Court struck;1
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Served a new expert report from Meyer, which increases his infringer’s profits
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calculation by adopting a new and previously undisclosed projection methodology and
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a new approach to deductible expenses;
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Provided yet another, even larger infringer’s profits claim based on a legal argument
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about the effect of willful infringement on infringer’s profits claims (which argument
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is also wrong as a matter of law); and
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Reneged on its own agreement to limit discovery and revenue calculations for
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infringer’s profits to the “List of 86” customers on which both experts based their
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damages calculations.
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As a result, at the time of this filing, no one but Oracle knows what damages claim will be
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Defendants will separately oppose Oracle’s three motions for reconsideration or
“clarification” by May 1, 2012, as ordered by the Court. ECF No. 1126 (4/18/12 Order). This
motion in limine focuses on Oracle’s changes to its profits claims.
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
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presented at trial. This cannot stand. Oracle’s eleventh-hour attempt to reinvent and expand its
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damages claim runs afoul of the Federal Rules, this Court’s own orders, and equity.
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The Court allowed Oracle a new trial, not a free pass from all disclosure obligations and
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the binding effect of Oracle’s previous positions. These new claims should be struck—they are
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untimely, not substantially justified, and not harmless. And equity prohibits Oracle from unfairly
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advancing such inconsistent positions at Defendants’ expense. Oracle should be held to the
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claims that this Court permitted Oracle to retry, i.e., the lost and infringer’s profits claims that
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Oracle offered, albeit so unenthusiastically, at the November 2010 trial.
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A.
Material Facts.
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Oracle’s Infringer’s Profits Claim During Discovery: Up to $288 Million. Fact
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discovery closed on December 4, 2009. ECF No. 325 (6/11/09 Order) at 2. On March 30, 2010,
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Oracle served its Fourth Supplemental and Amended Initial Disclosures, which purported to meet
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Oracle’s obligation to disclose its damages calculations by referring to expert Meyer’s report for
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“a detailed quantification of the damages it will seek at trial, including the methodologies and
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extensive evidentiary record and other support for the stated amounts.” Declaration of Tharan
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Gregory Lanier (“Lanier Decl.”) ¶ 11, Ex. 11 at 49. Oracle also stated that its lost and infringer’s
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profits analyses for the infringement claims would be provided in the report. Id. ¶ 7, Ex. 7 at 52.
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At his May 2010 deposition, Meyer testified that he calculated relevant lost profits at $36
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million or $120.7 million. Id. ¶¶ 1, 4, 6, Ex. 1 (5/12/10 Meyer Tr.) at 64:8-12, 73:5-10, 73:16-
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74:12; Ex. 4 (Meyer Depo. Ex. 2017); 6 (Meyer Depo. Ex. 2024). He explained that $36 million
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represented Oracle’s lost profits through October 31, 2008 (when TomorrowNow permanently
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ceased operations), while $120.7 million represented Oracle’s lost profits projected through 2015.
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Id. ¶¶ 1, 6, Ex. 1 (5/12/10 Meyer Tr.) at 73:16-74:12; Ex. 6 (Meyer Depo. Ex. 2024). Meyer also
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testified that he calculated infringer’s profits at $288 million, explaining that he computed $577
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million in SAP revenues allegedly attributable to infringement through 2008 (based on SAP’s
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2002-2008 gross receipts for a “List of 86” customers) to which he applied the same 50 percent
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profit margin that Defendants’ expert Stephen Clarke used. Id. ¶¶ 1-7, Ex. 1 (5/12/10 Meyer Tr.)
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at 105:14-20, 100:6-12, 149:8-14, 150:13-16; Ex. 2 (5/13/10 Meyer Tr.) at 344:4-345:24; Ex. 3
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
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(5/14/10 Meyer Tr.) at 688:5-13, 793:12-794:5; Ex. 4 (Meyer Depo. Ex. 2017) (showing Meyer’s
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infringer’s profits calculations as of May 2010); Ex. 5 (Meyer Depo. Ex. 2020) at n.10 (stating
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calculation applied “[a]verage profit margin from Mr. Clarke’s Appendix M-9”); Ex. 7 (2/23/10
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Meyer Report) ¶ 445. His infringer’s profits claim did not include projected profits beyond 2008.
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The “List of 86” customers for which Meyer calculated infringer’s profits was developed
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jointly by the parties as part of an extensive, Court-monitored process to identify SAP customers
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who might be relevant to the litigation—i.e., “those customers who purchased TomorrowNow
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service and SAP products/support simultaneously or were existing TomorrowNow customers at
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the time they purchased new SAP software or service.” Id. ¶¶ 8-9, Ex. 8 (6/25/09 Email from J.
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McDonell to H. House); Ex. 9 (6/26/09 Email from A. Donnelly to J. McDonell) (Oracle agreeing
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to processes for identifying customers for list and confirming that Oracle would not seek SAP
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customer discovery beyond listed customers). Oracle agreed to this defined group of SAP
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customers for the purposes of discovery and damages calculations, both in the above-cited
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communications with Defendants and through Meyer’s adoption of the list.
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Oracle’s Infringer’s Profits Claim at Final Disclosures: Up to $288 Million. Expert
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discovery closed on June 18, 2010. ECF No. 586 (12/22/09 Order) at 2. Final pretrial disclosures
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were due August 5, 2010. ECF No. 325 (6/11/09 Order) at 1. Oracle’s final pretrial disclosures
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repeated the same lost and infringer’s profits claims Meyer articulated at deposition; specifically,
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Oracle stated that it would seek “SAP’s infringer’s profits, which Oracle’s damages expert has
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estimated as being up to $288 million.” ECF No. 745 (Joint Pretrial Conf. Statement) at 9.
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Oracle’s Infringer’s Profits Claim at Trial: Up to $288 Million. At the November 2010
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trial, Meyer affirmed the lost and infringer’s profits computations he offered at deposition.
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Lanier Decl. ¶ 18, Ex. 18 (11/9/10 Trial Tr.) at 1021:16-1022:15, 1053:25-1056:5, 1057:5-9,
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1064:13-1065:16; Ex. 18 (11/12/10 Trial Tr.) at 1307:11-25, 1309:19-1310:06, 1310:18-1311:7
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(Meyer testifying that he “stand[s] by” his deposition testimony that “[i]t is my position that the
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$288 million is a calculation of benefits that SAP received from the alleged infringement”),
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1315:12-15; Ex. 18 (11/18/10 Trial Tr.) at 1821:1-1822:2; cf. id. ¶ 18, Ex. 18 (11/16/10 Trial Tr.)
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at 1632:1-3. Meyer also confirmed that although his infringer’s profits calculation “ranges down”
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
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to $236 million (by excluding profits from customers Amgen, BASF, and Lexmark), $288 million
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“was [his] upper bound” for infringer’s profits. Id. ¶ 18, Ex. 18 (11/12/10 Trial Tr.) at 1315:12-
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15. Based on these figures, Meyer testified that his combined lost profits and infringer’s profits
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calculation “ranges from . . . a low of” approximately $272 million “to a high of” approximately
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$408 million. Id. ¶ 18, Ex. 18 (11/9/10 Trial Tr.) at 1058:1-6.
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Having adopted Meyer’s calculations, throughout the litigation, Oracle also took the
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position that, for its copyright infringement claim, it would seek lost and infringer’s profits of no
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more than $120.7 million and $288 million, respectively. During closing arguments, Oracle’s
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counsel stated that “Mr. Meyer came up with an estimate of $288 million for infringer’s profits”
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and displayed a demonstrative to the jury that quantified Oracle’s lost profits at $120.7 million
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and infringer’s profits at $288 million. Id. ¶¶ 13, 18, Ex. 18 (11/22/10 Trial Tr.) at 2094:9-10,
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2094:12-13; Ex. 13 (Oracle Closing 287). And in response to the jury’s request for “a breakdown
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or chart of how Mr. Meyer and Mr. Clarke calculated” damages, id. ¶ 18, Ex. 18 (11/22/10 Trial
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Tr.) at 2224:6-8, Oracle agreed to submit JTX 6, id. ¶ 18, Ex. 18 (11/23/10 Trial Tr.) at 2258:9-
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2259:11, which again reflected Meyer’s “[p]rimary damages calculations” of $120.7 million in
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lost profits and up to either $236 million or $288 million in infringer’s profits (depending on
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whether Meyer included Amgen, BASF, and Lexmark in his analysis). Id. ¶ 15, Ex. 15 (JTX 6).
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On September 1, 2011, the Court granted Defendants’ motion for judgment as a matter of
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law (“JMOL”) and for a new trial on “actual damages in the form of lost profits/infringer’s profits
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only,” “conditioned on Oracle’s rejection of a remittitur to $272 million.” ECF No. 1081 (9/1/11
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Order) at 20. This calculation assumed Oracle’s $236 million calculation of infringer’s profits.
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Id. Oracle rejected the remittitur on February 6, 2012. ECF No. 1107. On February 28, 2012,
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the Court set the new trial to begin on June 18, 2012, roughly four months after the scheduling
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order and nearly 19 months after first trial concluded. ECF No. 1110 (2/28/12 Order) at 2.
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Oracle’s New Infringer’s Profits Claims: $343 Million or $615 Million or $656 Million.
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Less than a week ago, on April 20, 2012, Oracle served an additional Meyer report that materially
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changes his infringer’s profits calculation. Meyer offers a new infringer’s profits computation
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that adds $107 million based on a purported analysis of ongoing support revenue that SAP earned
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
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from its sales to the “List of 86” customers through 2012, less a 25% expense deduction that he
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claims derives from SAP’s reports. Meyer’s computation of post-2008 sales is founded on a
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never-before-disclosed method for projecting such sales, based on pre-2008 sales. Meyer also
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confirms the reduction of his original claim of $288 million in infringer’s profits to the $236
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million amount referenced in the first trial—the result of his decision to exclude customers
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Amgen, BASF, and Lexmark. Thus, the net change from Meyer’s original infringer’s profits
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claim is an increase of $55 million, from $288 million to $343 million.
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During the parties’ pretrial exchanges this week, Oracle also revealed that it intends to
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pursue another previously undisclosed theory of damages at the new trial. Specifically, Oracle
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now alleges that it will seek $615 million for its infringer’s profits claim, apparently based on a
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new theory advanced in Oracle’s proposed jury instructions that, as alleged willful infringers,
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Defendants may not deduct expenses from gross revenues attributable to the infringement as part
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of an infringer’s profits analysis. Joint Pretrial Conf. Statement (filed concurrently) §§ I.B, III;
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Lanier Decl. ¶¶ 16-17, Ex. 23 (Pls.’ Prop. Jury Instr. Re: “Copyright Damages—Infringer’s
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Profits”); Ex. 17 (Pls.’ Prop. Jury Instr. Re: “Copyright Damages—Willful Infringement”).
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The night before these filings were due, Oracle changed positions again. The evening of
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April 25, Oracle’s counsel disclosed that Oracle intends to add yet another claim, this time for
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infringer’s profits of TomorrowNow (which lost $90 million over its life). This new claim was
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not presented at the first trial or in any of the filings leading up to it, and was not disclosed during
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the parties’ preparation for the new trial before April 25. This is because Oracle abandoned any
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such claim. Two years ago, Meyer testified at deposition that TomorrowNow “does not have any
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profits to disgorge.” Id. ¶ 18, Ex. 18 (5/12/12 Meyer Tr.) at 72:1-4; ¶ 4, Ex. 4 (Meyer Depo. Ex.
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2017). Although Meyer had calculated TomorrowNow’s revenues, neither he nor Oracle ever
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presented them as a damages claim, until last night.
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B.
Rules 26 and 37 and This Court’s Scheduling Orders Require Excluding
Oracle’s Untimely Damages Claims, Including the New Meyer Report.
1.
Legal Standards.
Under the Federal Rules and this Court’s orders, any new damages computation, expert
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
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report, or opinion was required to have been disclosed during the discovery period. Rule 26(a)
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requires a computation of each category of damages claimed and production of the documents on
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which the computation is based. Fed. R. Civ. P. 26(a)(1)(A)(iii). If a party becomes aware that a
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disclosure is incomplete, it must supplement “in a timely manner” or “as ordered by the Court.”
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Fed. R. Civ. P. 26(e)(1). Expert reports, which are due “at the times and in the sequence that the
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court orders,” Fed. R. Civ. P. 26(a)(2)(D), must “contain a complete statement of all opinions the
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witness will express and the basis and reasons for them,” and the “data or other information
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considered by the witness in forming the opinions.” Fed. R. Civ. P. 26(a)(2)(B).
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Rule 37 forbids use of information or opinion not timely disclosed as Rule 26 requires,
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unless the failure to disclose is substantially justified or harmless. Fed. R. Civ. P. 37(c)(1). Rule
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37 sanctions are “self-executing” and “automatic,” designed to “provide a strong inducement for
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disclosure of material.” Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106-07
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(9th Cir. 2001) (quoting Fed. R. Civ. P. 37 advisory committee’s note (1993)) (holding that
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failure to disclose expert report was not harmless where “Plaintiffs received [the] report one
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month before they were to litigate a complex case”); Luke v. Family Care & Urgent Med. Clinics,
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323 Fed. App’x 496, 499-500 (9th Cir. 2009). The non-moving party has the burden to show that
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it meets one of the two exceptions to mandatory sanctions. Yeti by Molly, 259 F.3d at 1107.
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2.
All of Oracle’s New Disclosures Are Untimely.
Every one of Oracle’s latest damages calculations—whether in the form of expert opinion
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or attorney argument—is untimely, by more than two years. The Court set December 4, 2009 as
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the “Deadline to Supplement and/or Correct All Disclosures.” ECF No. 325 (6/11/09 Order) at 2.
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Further, the Court-ordered “Deadline to Serve Expert Reports” was November 16, 2009. Id. At
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the very latest, Oracle should have disclosed Meyer’s full opinions by the date of his May 2010
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deposition.2 Nothing in the Court’s subsequent orders, including the Court’s latest scheduling
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2
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Although the Court’s December 22, 2009 Order set March 29, 2010 as the deadline to
submit rebuttal reports, see ECF No. 586, the parties understood that Meyer would provide his
rebuttal opinions to Clarke’s report at Meyer’s deposition. See, e.g., Lanier Decl. ¶¶ 10, 18, Ex.
10 (1/19/10 Email from H. House to J. McDonell); Ex. 18 (5/14/10 Meyer Tr.) at 675:16-9
(describing Exhibit 2020 as “a subsequent analysis I’ve done since receiving the rebuttal report of
Mr. Clarke, and . . . it is my current opinion about infringer’s profits”).
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
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order, relieves Oracle from the effect of these deadlines. ECF No. 1110 (2/28/12 Order). Indeed,
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Defendants have been preparing their pretrial filings, including their witness list, exhibit list, and
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discovery designations in reliance on the disclosures Oracle made during the discovery period.
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At no time before the first trial did Meyer revise his report to provide lost and infringer’s
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profits figures different from the $408.7 million combined claim he offered at deposition; nor did
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Oracle supplement its disclosures to offer alternative computations of these claims. Any attempt
7
now by Oracle or Meyer to offer new lost and infringer’s profits claims, including to increase the
8
amount claimed beyond $408.7 million, is untimely. Oracle is bound by its disclosures, and the
9
new trial should be limited to only those lost and infringer’s profits claims that Oracle timely and
10
11
12
13
properly disclosed before the first trial.
3.
Oracle’s Belated Disclosures Are Neither Substantially Justified Nor
Harmless.
Oracle cannot justify offering never-before-disclosed infringer’s profits calculations on
14
the eve of the new trial, long after discovery has closed. Oracle had ample opportunity to obtain
15
discovery and offer lost profits and infringer’s profits calculations within the time limits set by the
16
rules and the Court’s orders, and it did. At Meyer’s deposition and the first trial, Oracle chose to
17
disclose and present lost profits and infringer’s profits claims totaling $408.7 million. Oracle
18
purposely compared its claim for billions in hypothetical license damages to its claim for $408.7
19
million in lost and infringer’s profits damages to persuade the jury that awarding hypothetical
20
license damages was the only way to adequately compensate Oracle for infringement. Lanier
21
Decl. ¶ 18, Ex. 18 (11/9/10 Trial Tr.) at 1017:21-1020:22 (Meyer explaining why awarding
22
license damages allegedly is superior to awarding lost profits and noting, “[a]s I mentioned, one,
23
there’s no way that the lost profits and the . . . infringer’s profits, measures the full market value
24
of the copyrighted works”), 1021:12-1022:24 (Meyer testifying that $408.7 million in lost and
25
infringer’s profits does not “fully compensate Oracle in this case” and that “[t]he only way to do
26
it is the fair market value of the license approach at the 1.5 billion”).
27
28
Now that the case is limited to lost and infringer’s profits, Oracle has obvious tactical
reasons for seeking to increase the amount of its remaining claims. But having fully embraced
-7-
DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
one approach to these claims in the first trial, Oracle “cannot now be heard to argue that [it]
2
should be insulated from the consequences of [its own] choice.” United States v. 14.3 Acres of
3
Land, No. 07cv886-AJB (NLS), 2011 WL 2414348, at *5 (S.D. Cal. June 10, 2011) (granting
4
motion to exclude untimely disclosed alternate theory of damages in new expert report).
5
Oracle cannot show that its untimely disclosure of new infringer’s profits calculations and
6
associated expert opinion is harmless. These new opinions and damages calculations are based
7
on data obtained during the discovery period, and Oracle or Meyer could have timely made these
8
changes according to the rules and this Court’s schedule for expert disclosures. They did not.
9
The only conceivable purpose for Oracle’s delay in providing Meyer’s “supplemental” report and
10
other calculations is to blindside Defendants by adding millions of dollars to Oracle’s damages
11
claim on the cusp of the new trial, prejudice Defendants’ trial preparation, and contravene the
12
Court’s orders. If Oracle is allowed to offer its new, untimely claims and expert opinion, it will
13
have achieved its desired result.
14
Oracle tried unsuccessfully to change its damages claims mid-stream in this case before.
15
ECF No. 482 (9/17/09 Order) at 26 (holding that Oracle’s failure to disclose damages theories
16
was not harmless, since “Defendants’ expert would not be able to conduct the required analysis
17
within the time limits set by Judge Hamilton” and as “expanding the damages case significantly
18
as Plaintiffs belatedly attempt to do would severely prejudice the Court’s ability to manage this
19
case to resolution in anything approaching a just, speedy, and inexpensive manner”). Just as
20
before, because Oracle cannot carry its burden to show that offering new damages claims is
21
substantially justified or harmless, Rule 37 prevents Oracle from offering such damages
22
computations, expert opinions, and related arguments at the new trial.
23
24
4.
Oracle May Not Circumvent Rule 26’s Disclosure Requirements by
Mischaracterizing Its New Damages Claims as “Supplements.”
25
Oracle may not present entirely these new opinions and damages calculations in the guise
26
of a “supplement” under Rule 26(e)(2). Although Rule 26(e)(2) requires that parties supplement
27
their expert opinions by “the time the party’s pretrial disclosures under Rule 26(a)(3) are due,” it
28
does not authorize or condone the belated disclosure of entirely new opinions. Fed. R. Civ. P.
-8-
DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
26(e)(2); Luke, 323 Fed. App’x at 499-500 (affirming exclusion of so-called “supplemental”
2
expert opinion offered after disclosure deadlines that “presented a new theory as to a key element
3
of Plaintiffs’ medical negligence claim”); Lindner v. Meadow Gold Dairies, Inc., 249 F.R.D. 625,
4
639 (D. Haw. 2008) (“Although Fed. R. Civ. P. 26(e) requires a party to ‘supplement or correct’
5
disclosure upon information later acquired, that provision does not give license to sandbag one’s
6
opponent with claims and issues which should have been included in the expert witness’ report.”)
7
(citation omitted). Rather, permitting parties to submit new expert opinions under the label of a
8
“supplement” “would surely circumvent the full disclosure requirement implicit in Rule 26” and
9
“interfere with the Court’s ability to set case management deadlines . . . .” Lindner, 249 F.R.D. at
10
639 (quoting Beller v. United States, 221 F.R.D. 689, 695 (D.N.M. 2003)); DAG Enters., Inc. v.
11
Exxon Mobil Corp., 226 F.R.D. 95, 110 (D.D.C. 2005) (“Plaintiffs’ obligation to supplement their
12
expert reports does not give them the right to ignore the Court’s deadlines, reopen discovery, find
13
‘new facts,’ generate new expert reports, and then claim different damages.”).
14
The opinions that Meyer offers in his latest report are not mere “supplements,” but rather
15
qualitative changes to his opinion that should have been disclosed under the Court’s schedule for
16
expert disclosures. Before the April 20, 2012 Report, both Oracle and Meyer consistently limited
17
their infringer’s profits calculations to the 2002-2008 timeframe, just as the parties had agreed
18
during discovery was proper. ECF No. 219 (11/18/08 Joint Disc. Conf. Statement) at 3 & Ex. A
19
(reflecting parties’ agreement to limit damages discovery through 2008); Lanier Decl. ¶ 7, Ex. 7
20
(2/23/10 Meyer Report) ¶ 445. But now, Meyer proposes to materially change his approach by
21
computing damages beyond 2008 using an entirely new, previously undisclosed methodology for
22
projecting post-2008 revenues using pre-2008 data—a methodology he could and should have
23
disclosed prior to the November 2010 trial. Meyer also newly opines that the profit margin
24
applicable to post-2008 revenues is 25%, not the 50% he previously asserted was appropriate.
25
These are new opinions. Oracle cannot avoid the consequences of belatedly disclosing
26
them by simply calling them “supplemental.”
27
C.
28
“Judicial estoppel is an equitable doctrine that precludes a party from gaining an
Judicial Estoppel Requires Precluding New Damages Claims.
-9-
DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
advantage by asserting one position, and then later seeking an advantage by taking a clearly
2
inconsistent position.” Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir.
3
2001) (citations omitted); see also New Hampshire v. Maine, 532 U.S. 742, 749 (2001). By
4
precluding a party from taking inconsistent positions, estoppel “protect[s] against a litigant
5
playing fast and loose with the courts.” Hamilton, 270 F.3d at 782. Courts consider three factors
6
to determine whether estoppel bars a party from taking a new position. First, the party’s position
7
must be “clearly inconsistent with its earlier position.” New Hampshire, 532 U.S. at 750 (citation
8
omitted). Second, the party must have “persuad[ed] a court to accept [the] earlier position,” such
9
that accepting the new position would create “the perception that either the first or the second
10
court was misled.” Id. Third, courts consider whether the party “would derive an unfair
11
advantage or impose an unfair detriment on the opposing party if not estopped.” Id. at 757; see
12
also United Nat’l Ins. Co. v. Spectrum Worldwide, Inc., 555 F.3d 772, 779 (9th Cir. 2009).
13
Judicial estoppel forecloses Oracle’s improper attempts to now change the core elements
14
of its damages claim, whether through the new Meyer report or otherwise. First, Oracle’s latest
15
positions as to the scope of and methodology underlying its infringer’s profits claim are “clearly
16
inconsistent” with those it affirmatively and consistently presented during the discovery period
17
and at the first trial. Nowhere is this inconsistency more stark than with respect to Oracle’s new
18
stance on deductible expenses. Until very recently, Oracle and its expert repeatedly advocated an
19
infringer’s profits claim that deducts expenses from gross revenues according to a 50 percent
20
profit margin. Now, however, Oracle reverses course entirely by arguing for the first time that
21
Defendants, as alleged willful infringers, may not deduct their expenses at all, or, alternatively,
22
that any deduction should be limited to a 25 percent profit margin.
23
Second, this Court “accepted” Oracle’s previous positions regarding its damages claims
24
when the Court issued its September 1, 2011 Order granting a new trial and gave Oracle the
25
option of accepting a remittitur of $272 million. Hamilton, 270 F.3d at 783 (finding that court
26
“accepted” party’s prior assertion, having relied on those assertions to discharge party’s debts).
27
By allowing a remittitur of $272 million, the Court accepted Meyer’s lost and infringer’s profits
28
calculations, which were based on Oracle’s adoption of a 50 percent profit margin deduction and
- 10 -
DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
damages timeframe of 2002-2008, and declined to adopt the lower damages figure offered by
2
Defendants’ expert. Although Oracle ultimately rejected the remittitur, the Court was fully
3
prepared to enter final judgment based on Meyer’s calculations.
4
Third, whether described as “an unfair advantage” to Oracle or an “unfair detriment” to
5
Defendants, permitting Oracle to present its new damages claims at the new trial would result in
6
just the kind of inequity that judicial estoppel is designed to prevent. Oracle would reap an unfair
7
advantage (to Defendants’ detriment) by being allowed to present methodologies and legal
8
theories that Defendants never had an opportunity to test through discovery or to challenge
9
through summary judgment. And allowing Oracle’s new claims to proceed at this late date would
10
severely prejudice Defendants’ trial preparation, which to date has been based on the only
11
damages claims Oracle timely disclosed. Equity requires that the Court preclude Oracle from
12
offering any new lost and infringer’s profits claims inconsistent with those it disclosed in
13
compliance with the rules and this Court’s orders and repeatedly presented at the first trial.
14
15
16
17
D.
The Court Should Preclude Oracle from Reversing Its Approach to
Deductible Expenses in an Attempt to Inflate the Infringer’s Profits Claim.
1.
Oracle May Not Reverse Its Approach on Deducting Expenses.
Oracle now has made clear that it seeks to double its infringer’s profits claim by retracting
18
Meyer’s previous deduction of expenses according to a 50 percent profit margin and by arguing
19
that, as alleged willful infringers, Defendants cannot deduct expenses from gross revenues in
20
calculating infringer’s profits. Specifically, Oracle proposes revising a previous jury instruction
21
to inform the jury that “[i]f you find that Defendants’ infringement was willful, then Defendants’
22
profits are equal to all of Defendants’ gross revenue that is associated with the stipulated
23
infringement, and no deduction for Defendants’ expenses is permitted.” Lanier Decl. ¶¶ 16-17,
24
Ex. 16 (Pls.’ Prop. Jury Instr. Re: “Copyright Damages—Infringer’s Profits”); Ex. 17 (Pls.’ Prop.
25
Jury Instr. Re: “Copyright Damages—Willful Infringement”). Although Oracle argued
26
throughout the case that Defendants engaged in willful infringement, see, e.g., ECF No. 182 (3rd
27
Amend. Complaint) ¶ 121, it has never posited that Defendants cannot—as alleged willful
28
infringers—deduct expenses in calculating infringer’s profits. ECF No. 747 (Joint Prop. Jury
- 11 -
DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
Instr.) at 80 (for infringer’s profits instruction, not offering language regarding ability of willful
2
infringers to deduct expenses). Instead, Oracle and its expert elected to repeatedly offer an
3
infringer’s profits calculation that deducts expenses from gross revenues according to the 50
4
percent margin computed by Clarke. Section III.C, supra.
5
As explained above, the Federal Rules, the Court’s orders, and equity prevent Oracle from
6
taking this new position. But even were it not too late for Oracle to change its position, Oracle is
7
wrong on the law, and this new approach should be excluded on that basis as well.
8
9
2.
Willful Infringers Are Not Barred from Deducting All Expenses.
There is no statutory basis for denying an accused willful infringer the opportunity to
10
deduct expenses from revenues attributable to infringement in computing infringer’s profits. The
11
Copyright Act allows a copyright owner to recover only the infringer’s “profits,” not its gross
12
revenues. 17 U.S.C. § 504(b) (stating that “[t]he copyright owner is entitled to recover . . . any
13
profits of the infringer that are attributable to the infringement” and that “[i]n establishing the
14
infringer’s profits, the copyright owner is required to present proof only of the infringer’s gross
15
revenue, and the infringer is required to prove his or her deductible expenses . . . ”). Nothing in
16
the Act states that “profits of the infringer that are attributable to the infringement” is defined
17
differently if the infringement is willful. Id.
18
Oracle presumably will rely on dicta in Ninth Circuit cases implying the possibility that a
19
willful infringer might not be permitted to deduct certain overhead expenses from its revenues in
20
an infringer’s profits analysis. See Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d
21
505, 515 (9th Cir. 1985); Kamar Int’l, Inc. v. Russ Berrie & Co., 752 F.2d 1326, 1331 (9th Cir.
22
1984). But those cases do not hold that such deductions are disallowed, and the only published
23
decision in this Circuit to have squarely addressed the issue held that a willful infringer is not
24
prohibited from deducting its expenses to calculate infringer’s profits. See ZZ Top v. Chrysler
25
Corp., 70 F. Supp. 2d 1167, 1168 (W.D. Wash. 1999).
26
In Kamar, the Ninth Circuit considered the plaintiff’s argument that the defendant, an
27
alleged willful infringer, should not be allowed to deduct “overhead” expenses in calculating
28
infringer’s profits. 752 F.2d at 1331. The plaintiff relied on language from a Second Circuit
- 12 -
DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
case, Sheldon v. Metro-Goldwyn-Mayer Corp., 106 F.2d 45, 51 (2d Cir. 1939), aff’d, 309 U.S.
2
390 (1940), to the effect that a “plagiarist may not charge for his labor.” Id. at 51. Having
3
determined that the defendant was not a willful infringer, however, it was unnecessary for the
4
Ninth Circuit to decide whether willful infringers are precluded from deducting overhead
5
expenses from gross revenues attributable to infringement. Nevertheless, the Ninth Circuit
6
expressed disagreement with the plaintiff’s interpretation of Sheldon, finding that the Second
7
Circuit’s decision “does . . . not disallow all overhead” expenses.3 Kamar, 752 F.2d at 1331.
8
9
As in Kamar, the Ninth Circuit in Frank Music also did not hold that willful infringers
may not deduct expenses in an infringer’s profits calculation. 772 F.2d at 515. Instead, in
10
affirming the district court’s finding that the infringement was not willful, the Ninth Circuit never
11
reached the issue of whether a willful infringer should be denied certain deductions. See id.
12
Although the Frank Music court noted in dicta that overhead expenses “may be deducted from
13
gross revenues to arrive at profits, at least where the infringement was not willful, conscious, or
14
deliberate,” this passing reference was not a holding of the case. Id. (citing Kamar, 752 F.2d at
15
1331). Further, the court’s reliance on Kamar in support of this comment was misplaced in any
16
event, as Kamar did not hold that a willful infringer cannot deduct expenses.
17
Although at least one court outside this Circuit has erroneously interpreted Frank Music as
18
holding that willful infringers may not deduct overhead expenses, see Saxon v. Blann, 968 F.2d
19
676, 681 (8th Cir. 1992), the only court in the Ninth Circuit ever to squarely address whether a
20
willful infringer is precluded from deducting certain expenses held that a willful infringer can
21
deduct overhead in calculating profits. ZZ Top, 70 F. Supp. at 1168. There, the district court
22
correctly observed that there is no statutory basis for denying a deduction of overhead costs as
23
punishment to a willful infringer, since: (1) Section 504(b) of the Copyright Act allows plaintiffs
24
3
25
26
27
28
An independent reading of Sheldon confirms that it did not hold that willful infringers
are automatically precluded from deducting expenses in an infringer’s profits analysis. See 106
F.2d at 51, 54 (commenting that “plagiarist may not charge for his labor” in apportionment
analysis, not deductible expenses analysis, and separately holding that defendant who had
willfully infringed could deduct overhead expenses as long as they “assisted in the production of
the infringement product”); cf. Hamil Am., Inc. v. GFI, 193 F.3d 92, 107 (2d Cir. 1999), cert.
denied, 528 U.S. 1160 (2000) (Second Circuit confirming, post-Sheldon, that accused infringers,
whether willful or not, may deduct expenses).
- 13 -
DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
to recover only profits, not gross revenues; (2) not permitting the defendant to deduct overhead
2
expenses effectively would serve as an “affirmative punishment” of defendants; and (3) Congress
3
specifically addressed punishment of willful infringers under Section 504(c) of the Act, dealing
4
with statutory damages. Id. at 1168 (citing 17 U.S.C. §§ 504(b)-(c)). The court also noted that
5
Frank Music and Kamar only left open the possibility that deducting overhead expenses may be
6
precluded if the infringement is intentional, but did not hold and did “not mandate or even
7
endorse such a preclusion.” Id. at 1169. Based on this reasoning, the court concluded that willful
8
infringers may deduct overhead expenses from infringer’s profits under Section 504(b). See id.
9
No Ninth Circuit case holds that willfulness precludes deducting expenses. To permit
10
Oracle and its expert to advance a previously undisclosed infringer’s profits claim that no longer
11
deducts expenses based on a 50 percent profit margin would double Meyer’s infringer’s profits
12
calculation. This effectively would impose double damages as punishment for the alleged willful
13
infringement—an effect that contravenes the plain language of Section 504(b). Because nothing
14
in the Copyright Act suggests that willfulness has any bearing on a copyright claim for which
15
statutory damages are not being sought, the Court should reject any argument or jury instruction
16
offered by Oracle regarding willful infringement as irrelevant, misleading, and unfairly
17
prejudicial. Fed. R. Evid. 402; Fed. R. Evid. 403.
18
Holding Oracle to the expense deductions that Defendants will prove at trial not only is
19
required by law, but also is fair. Defendants’ expert Clarke carefully approached calculating
20
deductible expenses to ensure that he is deducting expenses related to the accused revenue.
21
Specifically, Clarke performed a regression analysis to establish to a statistical certainty that the
22
expenses he deducts are all related to the accused infringing revenues. In so doing, he completely
23
eliminates any concerns that permitting a defendant to deduct overhead expenses could produce a
24
windfall to the defendant, effectively permitting ill-gotten revenues to offset overhead expenses
25
that the defendant would have incurred even without the infringing revenues. See, e.g., Frank
26
Music, 772 F.2d at 515-16 (holding that defendant may deduct expenses that “actually contributed
27
to the production” of the infringing work). Clarke’s approach does not implicate that concern, as
28
it measures only “variable” expenses incurred in producing the accused revenues.
- 14 -
DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
E.
The Court Should Preclude Oracle from Reneging on the Agreed Scope of
Discovery—and Damages—to Inflate the Infringer’s Profits Claim.
2
3
Oracle also has suggested, in the new Meyer report and draft pretrial filings, that at the
4
new trial, it may seek infringer’s profits based on revenues for customers beyond the “List of 86.”
5
See Joint Pretrial Conf. Statement, filed concurrently, at “Disputed Facts” (proposing disputed
6
fact as to SAP’s sales to “other TN customers” beyond List of 86). This effort should be rejected.
7
The parties agreed that “customers who purchased TomorrowNow service and SAP
8
products/support simultaneously or were existing TomorrowNow customers at the time they
9
purchased new SAP software or service” comprise the universe of potentially relevant SAP
10
customers; these customers constitute the “List of 86.” Lanier Decl. ¶¶ 8-9, Ex. 8 (6/25/09 Email
11
from J. McDonell to H. House); Ex. 9 (6/26/09 Email from A. Donnelly to J. McDonell)
12
(agreeing to processes for identifying customers for list and confirming that Oracle would not
13
seek SAP customer discovery beyond listed customers). The parties conducted discovery based
14
on this agreement, and both experts relied on the List of 86 to calculate infringer’s profits, which
15
calculations they presented at the first trial. TomorrowNow has been out of business since
16
October 2008, and discovery has been closed for two years. Oracle long ago waived its right to
17
challenge the completeness of the List of 86 or to change its claims based on additional customers
18
on which there has been no discovery.
19
A party waives its right to challenge the sufficiency of a discovery response when it fails
20
to seek relief from the court in a timely matter. Freeman v. Allstate Life Ins. Co., 253 F.3d 533,
21
537 (9th Cir. 2001) (affirming decision to admit evidence not produced in discovery when
22
plaintiff failed to prosecute issue as required by local rules); Butler v. Pettigrew, 409 F.2d 1205,
23
1207 (7th Cir. 1969) (holding that plaintiffs waived right to challenge discovery responses’
24
sufficiency by failing to file Rule 37 motion before trial). Given its knowledge of, involvement
25
with, and acquiescence in the procedures used to develop the List of 86, including adopting the
26
list to calculate its properly-disclosed infringer’s profits claims, Oracle’s failure to timely move to
27
compel discovery in connection with the List of 86 bars Oracle from now challenging its
28
sufficiency. Lanier Decl. ¶¶ 5, 18, Ex. 25 (5/12/10 Meyer Tr.) at 100:6-12, 149:8-14, 150:13-16;
- 15 -
DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
Ex. 18 (5/14/10 Meyer Tr.) at 662:1-664:2, 676:6-23; Ex. 5 (Meyer Depo. Ex. 2020) at n.10
2
(reflecting Meyer’s infringer’s profits calculations for “List of 86 Customers”); Ex. 18 (11/9/10
3
Trial Tr.) at 1021:16-1022:15, 1065:22-25; Ex. 18 (11/12/10 Trial Tr.) at 1307:11-25.
4
Further, to support its new infringer’s profits claim, Oracle may plan to misinform the
5
jury, as it did at the first trial, that the “List of 86” was the work product of Defendants’ counsel
6
and fails to account for all infringer’s profits. Id. ¶ 18, Ex. 18 (11/18/10 Trial Tr.) at 1853:5-8;
7
Ex. 18 (11/22/2010 Trial Tr.) at 2027:19-2028:4 (arguing that “universe of customers that is, we
8
all know, is incomplete”); but see id. ¶ 18, Ex. 18 (11/22/10 Trial Tr.) at 2030:10-11 (Court
9
ordering Oracle’s counsel not to refer to SAP counsel in connection with List of 86). Any
10
suggestion that the List of 86 is the sole work product of Defendant’s counsel or is incomplete
11
should be excluded as misleading and unfairly prejudicial. Fed. R. Evid. 403. Such a misleading
12
suggestion not only lacks probative value, but also would unfairly prejudice Defendants by
13
allowing Oracle’s lawyers to improperly suggest that foundational evidence, upon which both
14
sides have relied throughout discovery, is not only incomplete, but a fabrication of Defendants’
15
counsel. Preventing Oracle from offering irrelevant, misleading, and unfairly prejudicial
16
evidence and argument disparaging the List of 86 is entirely consistent with the Court’s ruling
17
during the first trial that Oracle’s counsel should not refer to SAP’s counsel in connection with
18
the development of the List of 86. Id. ¶ 18, Ex. 18 (11/22/10 Trial Tr.) at 2030:10-11.
19
II.
20
21
MOTION IN LIMINE NO. 2 TO EXCLUDE EVIDENCE PREVIOUSLY
OFFERED SOLELY TO SUPPORT EXCLUDED DAMAGES THEORIES
This Court’s order granting JMOL is clear: The second trial “will be limited to putting on
22
evidence regarding lost profits” and infringer’s profits. ECF No. 1081 (9/1/11 Order) at 10-15,
23
17-20. Evidence and argument as to the value of a hypothetical license (including as computed
24
using acquisition costs, goodwill, and cross-sell and up-sell data) or any other excluded damages
25
theories are now unquestionably irrelevant to damages, and therefore do not provide context or
26
background related to the stipulated claims. This Court should preclude Oracle from introducing
27
any evidence previously offered solely to support the hypothetical license theory or any other
28
excluded theory of damages.
- 16 -
DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
A few examples illustrate the point. At the first trial, Oracle introduced several categories
2
of evidence for the express purpose of supporting its hypothetical license damages theory. These
3
categories of evidence, or “license factors,” included Defendants’ so-called “risk acceptance,”
4
Defendants’ purported “expected financial gains,” and the alleged “risk to Oracle’s investment.”
5
Lanier Decl. ¶¶ 12-14, Ex. 14 (Meyer Demo.) at 4, 16, 38; Ex. 12 (Oracle Opening) at 30.
6
Oracle then introduced evidence attempting to support these factors. To show alleged risk
7
acceptance, Oracle offered evidence purporting to show that Defendants knew the consequences
8
of acquiring TomorrowNow, see, e.g., PTX 0008, willingly accepted the risk of liability, see, e.g.,
9
PTX 0014, and intended to use TomorrowNow as a “liability shield,” see, e.g., PTX 0161. Oracle
10
argued that “risk acceptance” evidence was relevant because it “relate[s] directly to Oracle’s
11
hypothetical license damages” and offered no other purpose for this evidence. ECF No. 976
12
(Pls.’ Opp’n. to Defs.’ Mot. to Exclude Evidence) at 3. Oracle also used the license claim to
13
rationalize introducing Defendants’ alleged projections of potential customers conversions, which
14
Oracle argued was relevant to Defendants’ expected financial gains when negotiating a license.
15
Lanier Decl. ¶ 14, Ex. 14 (Meyer Demo.) at 24 (citing PTX 0012), 28 (citing PTX 0024), 29
16
(citing PTX 0161), 55 (citing PTX 0960), 56 (citing PTX 0958). And Oracle offered evidence of
17
Oracle’s R&D costs, claiming that this was relevant to investments risks Oracle would have
18
considered in negotiating a license price. Id. ¶¶ 12, 18, Ex. 18 (11/2/10 Trial Tr.) at 339:20-
19
340:4; Ex. 12 (Oracle Opening) at 12; Ex. 18 (11/22/10 Trial Tr.) at 2093:13-24. None of this
20
evidence is context or background for the stipulated claims, as evidenced by the fact that Oracle
21
offered it only in support of its hypothetical license claim.
22
Similarly, Oracle’s counsel and witnesses mentioned the $11 billion PeopleSoft purchase
23
price no less than 77 times at the previous trial. See, e.g., Lanier Decl. ¶ 18, Ex. 18 (11/2/10 Trial
24
Tr.) at 341:15, 341:23; Ex. 18 (11/4/10 Trial Tr.) at 522:20-22; Ex. 18 (11/8/10 Trial Tr.) at
25
846:17, 846:18, 846:21; Ex. 18 (11/22/10 Trial Tr.) at 2087:10. Repeating this large but totally
26
irrelevant figure “cannot help but skew the damages horizon for the jury.” Cf. Uniloc USA, Inc.
27
v. Microsoft Corp., 632 F.3d 1292, 1320 (Fed. Cir. 2011). While the acquisition may be relevant,
28
the only purpose of this repetition was to inflate the damages claim.
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
All of this evidence, and any other evidence Oracle offered solely to support calculating a
2
license or other excluded damages claims, now is indisputably irrelevant to damages and should
3
be excluded as such. Fed. R. Evid. 402. The risk of prejudice and misleading the jury by
4
introducing irrelevant precluded claims evidence in the new trial also warrants its exclusion. Fed.
5
R. Evid. 402; Fed. R. Evid. 403. As the Court observed, Oracle used its license theory to present
6
“speculative” evidence and to “urg[e] the jury to disregard evidence of Oracle’s actual customer
7
losses resulting from infringement,” resulting in a $1.3 billion verdict that was “contrary to the
8
weight of the evidence.” ECF No. 1081 (9/1/11 Order) at 17. The new trial is limited to “actual”
9
damages, id., and Oracle must focus its evidence and trial presentation accordingly.
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III.
MOTION IN LIMINE NO. 3 TO EXCLUDE EVIDENCE AND ARGUMENT
REGARDING TOMORROWNOW’S CRIMINAL CONVICTION
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The Court should exclude any and all references, questions, statements, or proffers of
13
evidence regarding TomorrowNow’s criminal conviction, including the conviction itself, the
14
Information, Plea Agreement, Judgment, and related hearing transcripts. Evidence of a criminal
15
conviction that occurred years after the operative facts cannot provide context or background for
16
this case, and is certainly not relevant to damages. Fed. R. Evid. 402. Even if relevant, any
17
probative value is substantially outweighed by unfair prejudice and the likelihood of confusion
18
under Rule 403. Further, any conviction-related documents are inadmissible hearsay under Rules
19
802 and 803 of the Federal Rules of Evidence.
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A.
21
TomorrowNow pled guilty to eleven counts of unauthorized access to a protected
Material Facts.
22
computer with intent to defraud and obtaining something of value and one count of criminal
23
copyright infringement. The Plea Agreement acknowledges that TomorrowNow employees
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downloaded and copied certain Oracle software without authorization or in excess of the
25
customers’ licenses with Oracle. Neither SAP AG nor SAP America, Inc. were charged, pled
26
guilty, or were convicted of any criminal wrongdoing in conjunction with the conviction.
27
B.
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Relevance. TomorrowNow’s actions that formed the basis of the criminal conviction
Argument.
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
include accessing Oracle-protected computers without authorization, obtaining Oracle software
2
outside the scope of relevant licenses, and making unauthorized copies of Oracle software.
3
Calculating lost and infringer’s profits does not require any of these facts. Rather, as the Court
4
noted, determining profits turns on the number of support customers that Oracle actually lost as
5
the result of infringement and the amount SAP profited from TomorrowNow’s infringement.
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ECF No. 1081 (9/1/11 Order) at 18. By its very nature, the conviction concerns only actions by
7
TomorrowNow, not any damages resulting from those actions. Therefore, its criminal conviction
8
does not make any fact of consequence more or less probable, and it is not relevant to the new
9
trial. Fed. R. Evid. 402; United States v. Curtain, 489 F.3d 935, 943 (9th Cir. 2007).
10
Unfair Prejudice and Confusion. Even if evidence and argument about the conviction
11
were relevant to the new trial, the Court should exclude such evidence as unfairly prejudicial and
12
confusing. Any conceivable probative value the conviction may have is substantially outweighed
13
by the risk that mentioning the conviction could confuse the jury and lead it to issue a verdict on
14
improper bases. Fed. R. Evid. 403; Fed. R. Evid. 403 advisory committee’s note; United States v.
15
Skillman, 922 F.2d 1370, 1374 (9th Cir. 1990) (finding that such evidence “appeals to the jury’s
16
sympathies, arouses its sense of horror, provokes its instinct to punish,” or “may cause a jury to
17
base its decision on something other than the established propositions in the case”) (citing 1 J.
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Weinstein & M. Berger, Weinstein’s Evidence ¶ 403[03] at 403-36-403-39 (1989 ed.)).
19
First, evidence and argument regarding the conviction likely would confuse the jury as to
20
its proper role in the case, i.e., to calculate money damages, not to exact punishment. Fed. R.
21
Evid. 403; see also United States v. Smith, 196 F.3d 1034, 1037-38 (9th Cir. 1999); United States
22
v. Bush, 58 F.3d 482, 488-89 (9th Cir. 1995). A party may not encourage a jury to blindly defer
23
to a prior result or improperly punish. Engquist v. Oregon Dep’t of Agriculture, 478 F.3d 985,
24
1008-10 (9th Cir. 2007) (upholding exclusion of earlier judgment in light of substantial risk jury
25
would defer to earlier result); United States v. Gonzalez-Flores, 418 F.3d 1093, 1098-99 (9th Cir.
26
2005) (finding abuse of discretion in admitting inflammatory testimony not supporting elements
27
of crime and only slightly probative to charged offense, as it could have triggered jury’s desire to
28
punish); Compaq Comp. Corp. v. Ergonome, Inc., 387 F.3d 403, 409 (5th Cir. 2004). No matter
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
how Oracle attempts to use the conviction, if it is admitted, the jury may try to punish Defendants
2
by increasing the damages award. Punishment is neither relevant nor proper in assessing civil
3
copyright damages. Further, by stipulation, Oracle relinquished its right to seek punitive damages
4
and should not be allowed to use the conviction to circumvent that voluntary decision.
5
Second, the conviction likely will confuse the jury as to how it relates to SAP. While
6
SAP AG and SAP America, Inc. agreed to take financial responsibility for TomorrowNow’s
7
actions, neither was indicted, charged, or found guilty of a criminal offense. If Oracle is allowed
8
to introduce and use the conviction in any way against SAP AG and SAP America, Inc., this will
9
improperly encourage the jury to assume that SAP AG and SAP America, Inc. pled guilty to a
10
crime as well; this is untrue and likely would improperly influence the jury’s deliberation.
11
Rule 609 Character Evidence. Rule 609 of the Federal Rules of Evidence does not
12
provide a basis for Oracle to offer evidence of TommorowNow’s conviction.4 Rule 609 provides
13
that a party may impeach a witness’s character for truthfulness with evidence that the witness was
14
convicted of a crime, “if the court can readily determine that establishing the elements of the
15
crime required proving—or the witness admitting—a dishonest act or false statement.” Fed. R.
16
Evid. 609. The plain language of Rule 609 applies only to a witness’s own conviction, and no
17
Ninth Circuit authority supports extending the rule to permit use of a corporate conviction to
18
impeach an individual. And Oracle should be prohibited from calling a TomorrowNow witness
19
for the sole purpose of attempting to expose the jury to the conviction. United States v. Gilbert,
20
57 F.3d 709, 711 (9th Cir. 1995) (holding that party cannot call witness with primary goal of
21
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25
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4
Even if the Court determines Rule 609 permits impeachment of any individual witness
with TomorrowNow’s conviction, it should limit the way in which the conviction may be used,
and require strict adherence to the rule, allowing only the barest of details absent exceptional
circumstances. United States v. Osazuwa, 564 F.3d 1169, 1175 (9th Cir. 2009). Further, if it is
allowed at all, such impeachment evidence should be permitted only if the witness was directly
involved in the criminal activity leading to TomorrowNow’s conviction, as the policy underlying
Rule 609 is to inform the jury about the character of the specific witness the jury is being asked to
believe. Walden v. Georgia Pacific Corp., 126 F.3d 506, 523-24 (3d Cir. 1997) (affirming
exclusion of corporation’s conviction as improper when used to impeach employee witnesses not
directly involved in underlying actions that led to corporation’s conviction). Thus, to the extent
that this Court finds that the conviction is admissible under Rule 609, at most, it could be used
only to impeach former TomorrowNow employees (to the extent they are properly called to
testify for other purposes) that downloaded or copied Oracle software without authorization or in
excess of license grants between 2005 and 2007 (e.g., the subject matter of the criminal plea and
related orders), and a limiting instruction should be issued.
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
impeaching witness or presenting substantive evidence that is otherwise inadmissible).
2
IV.
3
MOTION IN LIMINE NO. 4 TO PROHIBIT ORACLE FROM REFERRING TO
“THEFT” OR “STEALING” OF SOFTWARE
4
During the first trial, the Court instructed Oracle to refrain from using the word “theft” or
5
“stealing” to describe TomorrowNow’s conduct. Lanier Decl. ¶ 18, Ex. 18 (11/1/10 Trial Tr.) at
6
257:1-15; Ex. 18 (11/22/10 Trial Tr.) at 2030:19-2031:12. Despite the Court’s instruction, Oracle
7
did not comply. See, e.g., id. ¶ 18, Ex. 18 (11/8/10 Trial Tr.) at 867:10-15; Ex. 18 (11/22/10 Trial
8
Tr.) at 2185:19-2186:12. Defendants therefore are compelled to ask the Court to prohibit Oracle
9
from referring to TomorrowNow’s actions at the new trial in this civil case as “theft,” “stealing,”
10
11
or any variation of those terms.
TomorrowNow stipulated to liability for civil copyright infringement. The elements of
12
this claim are: (1) ownership of a valid copyright and (2) copying original elements of a
13
copyrighted work. See Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991).
14
Even had Defendants not stipulated to liability, Oracle would not need to prove TomorrowNow
15
committed theft to meet its liability burden. As the Court noted, a theft case is not the same as a
16
copyright infringement case. Lanier Decl. ¶ 18, Ex. 18 (11/1/10 Trial Tr.) at 257:1-5; Ex. 18
17
(11/22/10 Trial Tr.) at 2030:19-2031:11. Colorful analogies aside, copyright infringement is
18
copying, not taking; Oracle still has the software it bought and licenses to its customers.
19
Characterizing the stipulated copyright infringement as theft is not accurate. It is also not
20
relevant to determining the sole remaining issues in this case: the amount of lost and infringer’s
21
profits for civil copyright infringement when liability is stipulated. These issues turn on why
22
customers left Oracle. Inflammatory and inaccurate characterizations of TomorrowNow’s
23
conduct as theft lack any probative value at all to resolving these issues.
24
Even if there were somehow probative value in using the terms “theft,” “stealing,” or their
25
variations, such references still should be excluded, since any probative value is substantially
26
outweighed by the accompanying unfair prejudice. Fed. R. Evid. 403. The Ninth Circuit has held
27
that inflammatory terms should be excluded as unfairly prejudicial when less inflammatory terms
28
are equally relevant. United States v. Cabrera, 222 F.3d 590, 595-96 (9th Cir. 2000). Oracle can
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
1
say “copying” or “infringing.” The only purpose served by saying “stealing” or “theft” is to
2
inflame the jury to punish SAP through a larger damages award. This is the very type of unfair
3
prejudice Rule 403 is intended to prevent.
4
Dated: April 26, 2012
5
By: /s/ Tharan Gregory Lanier
Tharan Gregory Lanier
6
Counsel for Defendants
SAP AG, SAP AMERICA, INC., and
TOMORROWNOW, INC.
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JONES DAY
SVI-107395v1
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DEFENDANTS’ MOTIONS IN LIMINE
Case No. 07-CV-1658 PJH (EDL)
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