Oracle Corporation et al v. SAP AG et al

Filing 1151

Declaration of Tharan Gregory Lanier in Support of 1150 Opposition/Response to Motion,, 1149 Opposition/Response to Motion, Declaration of Tharan Gregory Lanier in Support of Defendants' Oppositions to Oracle's Motions for Leave to File Motions for Reconsideration Regarding (1) Saved Development Costs and (2) Up-Sell and Cross-Sell Projections, and Motion for Clarification filed bySAP AG, SAP America Inc, Tomorrownow Inc. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13, # 14 Exhibit 14)(Related document(s) 1150 , 1149 ) (Froyd, Jane) (Filed on 5/1/2012)

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EXHIBIT 2 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 (510) 451-7530 Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 808 TEXT REMOVED - NOT RELEVANT TO MOTION 4 MR. McDONELL: THERE IS ONE NEW DEVELOPMENT, YOUR 5 HONOR, WHICH IS OVER THE WEEKEND, THE PLAINTIFFS PRODUCED 6 DEMONSTRATIVE SLIDES FOR THEIR DAMAGES EXPERT ALONG WITH CERTAIN 7 BACKUP MATERIALS FOR THEM. 8 PRESENTED ALTERNATIVE APPROACHES TO MEASUREMENT OF THE 9 HYPOTHETICAL LICENSE VALUE OF DAMAGES, ONE THAT INCLUDES UPSELL AND WHAT PLAINTIFFS HAVE DONE NOW IS 10 AND CROSS-SELL COMPUTATIONS THAT PRODUCES ONE NUMBER, AND AN 11 ALTERNATIVE SET OF SLIDES THAT EXCLUDES THE UPSELL AND 12 CROSS-SELL AND PRODUCES A -- A DIFFERENT AND LOWER NUMBER. 13 WE THINK THIS JUST CONFIRMS WHAT WE'VE BEEN SAYING 14 ALL ALONG, THAT THESE CROSS-SELL AND UPSELL SALE OPPORTUNITIES 15 HAVE BEEN INCLUDED IN THEIR FAIR MARKET VALUE LICENSE APPROACH 16 ALL ALONG, IN CONTRAVENTION OF YOUR ORDER THAT THEY SHALL NOT 17 USE THIS EVIDENCE IN SUPPORT OF ANYTHING, INCLUDING THE FAIR 18 MARKET VALUE MEASURE OF DAMAGES. 19 MR. PICKETT: 20 THE COURT: 21 MR. PICKETT: WE DON'T. OKAY. GO AHEAD. HERE -- HERE IS -- HERE IS WHY I SAY 22 THAT. 23 ARE NOT SEEKING ANY CHANGE IN ANY PRIOR ORDER. 24 WITH ALL OF YOUR ORDERS REGARDING THE EVIDENCE OF LOST PROFITS 25 ON SOFTWARE SALES, ALSO KNOWN AS LOST CROSS-SELL/UPSELL SALES, AND LET ME BE CLEARER THAN I WAS FRIDAY AFTERNOON. WE WE ARE COMPLYING Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 809 1 BOTH FOR THE LOST PROFIT MEASURES AND FOR THE FAIR MARKET VALUE 2 OF USE MEASURE. 3 HOWEVER -- AND THAT RULING, AS YOUR HONOR KNOWS, IS 4 BASED ON A FINDING THAT ORACLE -- WE DISAGREE WITH IT -- BUT 5 THAT ORACLE FAILED TO PRODUCE TIMELY THAT EVIDENCE. 6 HOWEVER, WE ARE INTENDING TO RELY ON THE BOARD MODEL 7 THAT MR. ELLISON JUST TESTIFIED ABOUT AS MR. LANIER WAS ASKING 8 QUESTIONS ON CROSS. 9 WITHIN PLAINTIFFS' EXHIBIT 615, AND I HAVE TWO PAGES -- OR THREE SPECIFICALLY, IT'S DATA THAT'S CONTAINED 10 PAGES, RATHER, FROM THAT. 11 TERRIBLY LEGIBLE, BUT I THINK IT WILL GIVE YOU A SENSE OF WHAT 12 I'M TALKING ABOUT. 13 IT'S DATA. FRANKLY, IT'S NOT (EXHIBIT PUBLISHED TO JURY.) 14 MR. PICKETT: 15 YEAH, YOU CAN PUT THAT UP IF YOU WISH. 16 17 AND I HAVE A COPY FOR COUNSEL. (EXHIBIT PUBLISHED TO JURY.) MR. PICKETT: WHAT THIS IS, IS THIS IS GOING TO BE -- 18 THIS IS, IN A SENSE, AN OFFER OF PROOF. BUT THIS IS A DOCUMENT 19 THAT MS. CATZ WILL BE TESTIFYING ABOUT. IT'S A DOCUMENT THAT 20 WAS PRODUCED TIMELY. 21 MR. ELLISON, MR. PHILLIPS, MS. CATZ. 22 WITH RESPECT TO TIMELINESS AND WHAT IT SHOWS. 23 IT WAS PRODUCED BEFORE THE DEPOSITIONS OF FULLY PRODUCED, NO ISSUE IT SHOWS THE DATA THAT WAS PRESENTED IN THAT BOARD 24 MODEL TO SUPPORT THE PEOPLESOFT ACQUISITION. 25 CERTAIN ASSUMPTIONS, NOT BASED, BY THE WAY, ON ANY INTERNAL DATA AND THERE ARE Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 810 1 BECAUSE IT WAS A HOSTILE TAKE-OVER, YOUR HONOR WILL RECALL. 2 THERE'S NO INSIDE INFORMATION. 3 INFORMATION. 4 SO IT'S JUST PUBLICLY AVAILABLE BUT IT IS THE BEST -- AND OUR EXPERT WILL SAY VERY, 5 VERY GOOD EVIDENCE OF WHAT WAS IN THE MINDS OF ORACLE IN LATE 6 2004 WITH RESPECT TO THE PEOPLESOFT ACQUISITION AND, THEREFORE, 7 WHAT WOULD HAVE BEEN IN THE MIND A FEW WEEKS LATER WHEN THERE 8 WAS A -- IN THE HYPOTHETICAL A NEGOTIATION IN JANUARY 2005 ABOUT 9 THIS PROPERTY. 10 NOW, THIS DOCUMENT IS NOT OBJECTED TO BY PLAINTIFFS 11 (SIC), EXCEPT FOR ONE LIMITED USE. 12 DOCUMENT. 13 THE COURT: 14 MR. PICKETT: 15 THE COURT: 16 MR. PICKETT: 17 NOT OBJECTED TO BY SAP. THEY AGREE THAT THE BY DEFENDANTS. WHAT DID I SAY? "OBJECTED TO BY PLAINTIFFS." IT'S TOO OFTEN I'M ON THE OTHER SIDE. THEY ACKNOWLEDGE THAT IT'S A 18 BUSINESS RECORD. 19 RESPECT TO THE MAINTENANCE REVENUES ARE -- ARE LEGITIMATE, CAN 20 BE USED BY OUR EXPERT, CAN BE USED BY THEIR EXPERT FOR THAT 21 MATTER. 22 THEY ACKNOWLEDGE THAT THE ASSUMPTIONS WITH THAT'S ALL IN. WHAT THEY DO OBJECT TO ARE FOUR LINES OF THIS THAT 23 HAVE TO DO WITH THE ADDITIONAL SALES OF APPLICATIONS -- OF 24 APPLICATION SOFTWELL (SIC) -- THE UPSELL IN THE VERNACULAR OF 25 THE CASE THAT ARE IN THIS DOCUMENT AND THAT ARE -- THE ONLY Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 811 1 THING USED BY OUR EXPERT BECAUSE WE'RE TALKING ABOUT 2 EXPECTATIONS. 3 THE ACTUAL SALES -- THE THING THAT STARTED THIS WHOLE 4 THING, THAT WASN'T PRODUCED ARE NOT RELEVANT. 5 HANSON CASE AND OTHERS. 6 BASED ON A HINDSIGHT EVALUATION OF WHAT HAPPENED. 7 BASED ON WHAT'S IN THE MIND OF THE PARTIES AT THE TIME OF 8 NEGOTIATION. 9 AND THAT'S THE THE -- THE NEGOTIATION'S NOT TO BE IT'S TO BE AND TO BE SORT OF CRYSTAL CLEAR ABOUT IT, YOUR HONOR, 10 THIS TYPE OF DATA WAS PRECISELY THE DATA THAT WE PUT IN TO THE 11 DECLARATION OF PAUL MEYER OUR DAMAGE EXPERT BACK WHEN THE 12 FIRST -- THE FIRST PARTIAL SUMMARY JUDGMENT MOTION WAS PRESENTED 13 TO YOUR HONOR. 14 AND HE SAID I'VE GOT -- YOU KNOW, THERE'S A PROJECTION. AND A PROJECTION IS 15 DIFFERENT THAN ACTUAL SALES AFTER THE FACT. 16 YOU KNOW, RELY ON PROJECTIONS. 17 CHALLENGING THIS WHOLE HYPOTHETICAL LICENSE NEGOTIATION 18 APPROACH, YOU'LL RECALL. 19 NEGOTIATION IS A VALUE OF USE. 20 DAMAGES, AND YOU REITERATED THAT IN AN ORDER, AUGUST 17, AS WELL 21 AND ACTUALLY OVERRULED THEIR OBJECTIONS TO THIS VERY EVIDENCE. AND I'M GOING TO, AND YOUR HONOR -- AND THEY WERE YOUR HONOR SAID NO, THE HYPOTHETICAL IT'S A LEGITIMATE MEASURE OF 22 YOU OVERRULED AN OBJECTION LAST YEAR IN YOUR 23 JANUARY 28TH, 2010 RULING ON THIS WITH RESPECT TO THESE 24 PROJECTIONS. 25 LEGITIMATELY, GET INTO IT. THIS IS WHY YOU CAN, I THINK ABSOLUTELY Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 812 1 AND -- ONE LAST POINT -- IF THERE ARE ANY DOUBT ABOUT 2 THIS, DEFENDANTS HAVE REPEATEDLY OPENED THE DOOR TO THIS VERY 3 ISSUE OF WHAT WOULD BE IN THE MINDS OF ORACLE WITH RESPECT TO 4 UPSELL, NOT THE ACTUAL SALES AFTER THE FACT. 5 MIND WHEN THEY COME TO THE NEGOTIATION TABLE. 6 WHAT'S IN THEIR THEY DID IT IN THEIR OPENING STATEMENT IN TWO MAJOR 7 WAYS. 8 ABOUT IT. 9 WEIGHS ALL THE INDICATIONS OF VALUE AND COMES OUT WITH A VALUE 10 FIRST, THEY PUT FORWARD OUR -- WE HAVE A -- BE VERY CLEAR IF THE UPSELL IS IN THE MIND OF ORACLE, OUR EXPERT FOR THE PEOPLESOFT LICENSE OF AT LEAST $2 BILLION. 11 IF THE UPSELL IS TAKEN OUT, AND IT'S ONLY 12 MAINTENANCE, THEN THE VALUE OF THE LICENSE IS DECREASED. 13 DECREASES ALL THE WAY DOWN TO 1.5 -- AT LEAST 1.5 BILLION. 14 KNOWING THAT THE $2 BILLION FIGURE -- OUR $2 BILLION FIGURE WAS 15 BASED ON THIS -- THE PROJECTION IN -- IN THE DOCUMENT 615, 16 KNOWING THAT IT INCLUDED UPSELL, THE -- THE DEFENDANTS TELL THE 17 JURY THAT ORACLE'S GOING TO ASK FOR $2 BILLION, QUOTE, BECAUSE 18 THEY SUPPOSEDLY THOUGHT A REALLY LARGE PERCENTAGE OF THEIR 19 PEOPLESOFT CUSTOMERS WERE GOING TO GO TO TOMORROWNOW AND THEN TO 20 SAP. 21 PAGE 412, LINE 13 TO 17 OF THE TRANSCRIPT. 22 AND THEN TO SAP. THAT'S THE CROSS-SELL. AND SO THAT ALONE SHOULD BE ENOUGH. IT SO THAT'S AT BUT IT GOT 23 WORSE. 24 REFERENCE TO MR. HENLEY, ORACLE'S CHAIRMAN, ABOUT WHICH THEY 25 SAID THE EVIDENCE WAS GOING TO BE ABOUT SWITCHING FROM BECAUSE EVEN LATER IN THE OPENING STATEMENT, THERE WAS A Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 813 1 PEOPLESOFT TO SAP AND THE -- AND THE HIGH EXPECTATIONS -- THIS 2 IS A QUOTE -- HIGH EXPECTATIONS THAT TOMORROWNOW IS GOING TO 3 TAKE AWAY A LOT OF VALUABLE BUSINESS, MEANING THE SWITCH -- IT'S 4 CALLED UPSWITCH OR UPSELL -- FROM PEOPLESOFT TO -- TO SAP. 5 AND THEN EVEN TODAY -- EVEN TODAY, WE GET IT AGAIN. 6 WE HAVE EXHIBIT 4089 FROM MR. HENLEY TO MS. CATZ. 7 QUESTION WAS, WHAT WAS THE CHAIRMAN'S THINKING AT THE TIME. 8 THEY GET THE ISSUE. 9 ORACLE'S MIND WHEN IT COMES TO THE NEGOTIATION TABLE. AND THE THEY UNDERSTAND THAT IT'S ABOUT WHAT'S IN AND THE 10 QUESTION WAS, WHAT WAS MR. HENLEY'S THINKING AT THE TIME WITH 11 RESPECT TO, QUOTE, A SWITCH FROM PEOPLESOFT TO SAP. 12 THAT'S OUT OF THE MOUTHS OF SAP'S LAWYERS, REPEATED 13 QUESTIONS ABOUT HOW MANY CUSTOMERS SAP COULD GET, NOT 14 TOMORROWNOW. 15 AND THEN FINALLY, REFERENCE TO THE BOARD MODEL ITSELF 16 IN WHICH MR. ELLISON TESTIFIED THAT WE PREPARED TO THE BOARD A 17 MODEL TO JUSTIFY OUR $11 BILLION. 18 EXPECTATIONS ABOUT THE PEOPLESOFT ACQUISITION. 19 EXPECTATIONS ARE WHAT IS IN THE MIND OF SAP -- OF ORACLE WHEN IT 20 COMES TO THAT NEGOTIATING TABLE. 21 DO WITH AFTER-THE-FACT SALES THAT YOUR HONOR AND MAGISTRATE 22 JUDGE LAPORTE FOUND DIDN'T COME IN. 23 WE HAVE TO -- WE HAVE CERTAIN THOSE VERY SAME AND, AGAIN, IT HAS NOTHING TO IT'S JUST WHAT'S IN THEIR MIND LATE 2004, 24 JANUARY 2005. 25 DATA. THAT'S ALL WE'RE RELYING ON, THIS SINGLE SET OF Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 814 1 MR. McDONELL: YOUR HONOR, COUPLE OF THINGS. FIRST 2 OF ALL IN TERMS OF THE MENTION OF THESE VARIOUS THINGS COUNSEL 3 JUST TALKED ABOUT, THOSE WERE GENERIC; NONE OF THEM WERE IN THE 4 CONTEXT OF THIS PRECISE ISSUE, UPSELL AND CROSS-SELL. 5 REALLY DID NOT PRESENT THAT ISSUE IN ANY WAY, SHAPE, OR FORM. 6 THEY THERE CERTAINLY IS EXPECTATION EVIDENCE ON BOTH SIDES 7 THAT IS APPROPRIATE IN THIS CASE. 8 NOW IS ENFORCING THE CONSEQUENCE OF THE SANCTIONS ORDER THAT 9 RESULTED IN YOUR ORDER ADOPTING IT AND RESULTED IN THE ORDERS ON 10 11 WHAT WE'RE TALKING ABOUT HERE MOTIONS IN LIMINE. AND, AGAIN, IT IS CLEAR NOW THAT -- THAT UPSELL AND 12 CROSS-SELL IS IN THESE NUMBERS. 13 VERY QUICKLY OF MY OWN, YOUR HONOR, TO SHOW YOU REALLY THE -- 14 THE PRECISE THING WE'RE TALKING ABOUT HERE. 15 16 AND IF I JUST MAY HAVE A SLIDE (EXHIBIT PUBLISHED TO JURY.) MR. McDONELL: 17 NO, NEXT SLIDE, PLEASE. (EXHIBIT PUBLISHED TO JURY.) 18 MR. McDONELL: 19 IT'S ONE OF THE SUPPORT SHEETS THAT'S LIKE AN EXCEL 20 21 22 NO. SPREADSHEET. (EXHIBIT PUBLISHED TO JURY.) MR. McDONELL: YOUR HONOR, HERE IS THE BACKUP SUPPORT 23 FOR THEIR CURRENT VERSION OF THEIR -- EITHER AS COUNSEL 24 MENTIONED, 2 BILLION OR APPROXIMATELY $1.5 BILLION CLAIM, ONE 25 WITHOUT UPSELL AND CROSS-SELL, ONE THAT INCLUDES IT. Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 815 1 THIS IS THE BACKUP SUPPORT FOR THE LARGER NUMBER THAT 2 SHOWS AS CLEAR AS CAN BE THAT WHAT THEY'RE INCLUDING IN 3 COMPUTING THAT NUMBER IS LOST INCREMENTAL REVENUE -- UPSELL LOST 4 INCREMENTAL REVENUE -- WELL, THE NEXT ONE, IF I COULD SEE IT, IS 5 THE SAME FOR CROSS-SELL. 6 THEY BUILD THE $2.1 BILLION CLAIM. 7 THOSE NUMBERS ARE FOUNDATIONS ON WHICH THE PROBLEM THAT WE'RE ADDRESSING HERE IS TWO-FOLD. 8 ONE, YOU KNOW, THEY DRAW THIS DISTINCTION BETWEEN A LOST 9 OPPORTUNITY TO UPSELL AND CROSS-SELL AND A LOST EXPECTED 10 OPPORTUNITY TO UPSELL AND CROSS-SELL. 11 YOUR HONOR, THAT'S A DISTINCTION WITHOUT A 12 DIFFERENCE. 13 WHETHER YOU CALL IT A LOST OPPORTUNITY OR A LOST EXPECTED 14 OPPORTUNITY, IT'S THE SAME THING. 15 EVIDENCE OF THIS CASE THE SAME WAY, BECAUSE YOU'LL SEE WHAT WE 16 HAVE HERE. LOST PROFITS ARE PROFITS THAT WERE NEVER MADE, SO AND IT PLAYS OUT IN THE AND IT'S, FRANKLY -- 17 FRANKLY, DIFFICULT FOR ME TO STAY OUT OF THE WAY. 18 MAY I USE YOUR MICROPHONE, MR. PICKETT? 19 MR. PICKETT: 20 MR. McDONELL: SURE. IT'S NOT A OPRAH MIKE, BUT -- YOUR HONOR, WE HAVE TO GO BACK TO 21 FIRST PRINCIPLES, AND WHAT IS THE SUBSTANCE OF THE HARM WE'RE 22 TALKING ABOUT HERE? 23 AND CROSS-SELL INFORMATION ABOUT WHAT THESE COMPANIES, 24 PEOPLESOFT AND SIEBEL HAD ACTUALLY ACCOMPLISHED OVER TIME GOING 25 ALL THE WAY BACK TO THE PERIOD SEVERAL YEARS BEFORE THOSE WHAT WE DID NOT GET WAS HISTORICAL UPSELL Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 816 1 ACQUISITIONS. 2 INSTEAD, WHAT WE DO HAVE ARE JUST THESE ISOLATED 3 UNSUPPORTED PROJECTIONS, WHICH, AS COUNSEL HAS NOW TOLD YOU, 4 ARE -- ARE THE FOUNDATION OF THEIR CLAIM OF THIS $11 BILLION 5 VALUE. 6 7 8 9 10 THE COURT: LET ME MAKE SURE I UNDERSTAND. THESE PROJECTIONS NOW ARE BASED UPON PRE-JANUARY 2005 SALES FIGURES. MR. McDONELL: WE DON'T KNOW WHAT THEY'RE BASED ON. THEY'RE SIMPLY PROJECTIONS WHICH ARE PRESUMABLY -THE COURT: WELL, EXCUSE ME. THERE ARE DATES ON AT 11 LEAST THE ONE THAT COUNSEL GAVE ME, AND IT'S SEPTEMBER OF '03; 12 IS THAT CORRECT? 13 MR. McDONELL: 14 THE COURT: YES. SO -- AND SEPTEMBER OF '04. IT'S THROUGH 15 DECEMBER OF '04. 16 POST-DATE ARE SOMEWHAT PROBLEMATIC, BUT THOSE THAT PREDATE 17 AREN'T REALLY THE SAME THING WE WERE TALKING ABOUT. 18 THE -- IT SEEMS TO ME THAT THE ONES THAT MR. McDONELL: THEY'RE EQUALLY, IF NOT MORE, 19 IMPORTANT BECAUSE THESE ARE PROJECTIONS, YOUR HONOR. 20 PROJECTION IS JUST A NUMBER A PERSON WRITES DOWN ON A PAGE. 21 WHETHER THEY BASE THAT PROJECTION IN A WAY THAT CLOSELY HEWS 22 WITH SOME HISTORICAL EVIDENCE THAT MAKES THE PROJECTION 23 RELIABLE, DEPENDABLE, IMPORTANT, OR NOT, IS THE CRUX OF WHAT 24 WE'RE GETTING AT HERE. 25 THE COURT: OKAY. A AND LOOK, I THINK THAT I CAN MAKE THIS Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 817 1 EASY FOR BOTH OF YOU. 2 ADDRESS. 3 THERE'S SOMETHING THAT YOU NEED TO FIRST OF ALL, NO DISTINCTION WAS MADE BETWEEN THE 4 ACTUAL LOST PROFITS BASED UPON THE -- THE POST-JANUARY 2005 5 PERIOD AND THE PROJECTIONS WHICH WERE BASED UPON PREVIOUS SALES 6 ACTIVITY ON ORACLE'S PART. 7 EITHER IN JUDGE LAPORTE'S ORDER IN THE -- AT THE TIME OF THE 8 PRETRIAL CONFERENCE WHEN THE WHOLE SECOND ISSUE WITH REGARD TO 9 UPSELL AND RESALE APPEARED. 10 THERE WAS NO DISTINCTION MADE AT THERE'S NO DISTINCTION. THE FIRST THIS EVEN OCCURRED 11 TO ME WAS ON FRIDAY WHEN THE EXHIBIT WAS SHOWN -- SHOWING SAP'S 12 PROJECTIONS. 13 MEANS IN TERMS OF ARGUMENT AS TO ORACLE'S PROJECTIONS. 14 OCCURRED TO ME THAT THERE WAS A DISTINCTION TO BE MADE. 15 I IMMEDIATELY THOUGHT, HMM, I WONDER WHAT THAT JUDGE LAPORTE'S ORDER DOESN'T ADDRESS IT. IT NEVER NO ORDER 16 THAT I'VE ISSUED ADDRESSES THIS. 17 IS ENTIRELY NEW ISSUE. 18 ORDER. 19 KNOW IT WAS AN ISSUE AT THE TIME THAT I ADOPTED THE SANCTIONS 20 ORDER. AS FAR AS I'M CONCERNED, THIS IT IS NOT BARRED BY THE PRIOR DISCOVERY IT COULDN'T CONCEIVABLY BE BARRED WHEN I DIDN'T EVEN 21 SO THE QUESTION IS WHETHER OR NOT IRRESPECTIVE OF THE 22 SANCTION ORDER, WHETHER OR NOT THE EVIDENCE SHOULD COME IN. 23 THE ONLY QUESTION HERE IS WHETHER OR NOT IT WAS PRODUCED IN 24 DISCOVERY. 25 DISCOVERY, THE DIFFICULTY FOR SAP AT THIS POINT IS THAT YOU AND AND TO THE EXTENT THAT IT WASN'T PRODUCED IN Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 818 1 DIDN'T RAISE THE MOTION. 2 OF EVIDENTIARY ISSUES. 3 SOMETHING THAT YOU WERE AWARE OF. 4 5 6 YOU ALL RAISED MOTIONS ON ALL MANNER I CANNOT IMAGINE THAT THIS IS NOT MR. McDONELL: YOUR HONOR, THIS -- THIS WAS OUR MOTION IN LIMINE NO. 2 COUPLED -THE COURT: NO. NO. NO. THERE WAS NO DISTINCTION 7 MADE WHATSOEVER IN THAT MOTION WITH REGARD TO PROJECTED SALES. 8 THE HYPO- -- 9 WHEN I RULED THAT THE LOST REVENUE FROM UPSELL AND 10 CROSS-SELL COULD NOT BE USED TO SUPPORT A HYPOTHETICAL LICENSE, 11 THAT WAS BASED UPON POST-JANUARY 2005 SALES. 12 DISTINCTION MADE WITH RESPECT TO WHAT SALES WERE BEING RELIED 13 UPON BY THE EXPERT AND TO THE EXTENT THAT THIS INFORMATION WAS 14 IN MR. MEYER'S REPORT FROM A YEAR AND A HALF AGO, I DON'T 15 REMEMBER THAT. 16 CERTAINLY HAD NO INTENTION OF RULING ON THAT SPECIFICALLY. 17 SO THE QUESTION IS, DO YOU HAVE A BASIS NOW FOR 18 19 THERE WAS NO YOU ALL DID NOT BRING IT TO MY ATTENTION, AND I KEEPING IT OUT BECAUSE THE FORMER RULING DOES NOT KEEP IT OUT? MR. McDONELL: AND WE DO, YOUR HONOR. AND IT'S -- 20 THE COMMUNICATION MAY BE IMPERFECT ON THIS, BUT THE SUBSTANCE OF 21 THE PROBLEM AND THE PREJUDICE REMAINS THE SAME. 22 IS AS FOLLOWS: 23 AND THE BASIS JUDGE LAPORTE FOUND THAT WE WERE DENIED DISCOVERY OF 24 ACTUAL LICENSE SALES BY THE PLAINTIFFS, EITHER FOR PEOPLESOFT OR 25 SIEBEL, OR FOR ANY OTHER PARTY. EVIDENCE OF ACTUAL LICENSE -- Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 819 1 THE COURT: 2 MR. McDONELL: AFTER THE INFRINGEMENT BEGAN. NO, YOUR HONOR. AT ANY TIME. WE 3 ASKED FOR DISCOVERY OF -- ALL FINANCIAL INFORMATION RELATING TO 4 THESE ISSUES, AND WE DIDN'T GET IT. 5 AND ONLY ALLOWED REVENUES CONCERNING DELIVERY OF SUPPORT 6 SERVICES. NO SOFTWARE LICENSE SALES HISTORICAL DATA WAS 7 PRODUCED. THAT'S A SETTLED ISSUE. 8 THE BOOK IS CLOSED. 9 WE WERE CONSISTENTLY DENIED JUDGE LAPORTE FOUND THAT. THE PROBLEM WITH THAT AND WHAT WE'RE TALKING ABOUT 10 HERE AND NOW IS WHY ARE WE PREJUDICED AS A RESULT OF THAT? 11 IT'S VERY STRAIGHTFORWARD, AND LET ME BE -- TRY -- TRY TO BE 12 VERY CLEAR. 13 AND THEY NOW WANT US TO ACCEPT THESE PROJECTIONS AT FACE 14 VALUE. 15 TO ACCEPT THESE PROJECTIONS UPON WHICH THEY FOUND THEIR -- THEIR 16 BILLION-DOLLAR CLAIM. 17 FACE VALUE. WE NOW HAVE NO CHOICE, THEY WILL SAY, BUT AND, AGAIN, I GO BACK TO A PROJECTION, WITHOUT MORE, 18 IS JUST SOMEBODY WRITING DOWN ON A PIECE OF PAPER WHAT THEY 19 MIGHT WANT TO SELL. 20 ACTUAL UPSELL AND CROSS-SELL EXPERIENCE BEFORE THE DATE OF THESE 21 PROJECTIONS. 22 ASSESSED THESE PROJECTIONS AND -- 23 AND WHAT WE DIDN'T GET WAS THE HISTORICAL HAD WE HAD THAT EVIDENCE, WE COULD HAVE CRITICALLY THE COURT: NOW, ARE YOU SAYING, THEN, THAT THE 24 PROJECTIONS THAT ARE INCLUDED POST-ACQUISITION OF TOMORROWNOW BY 25 SAP, THAT'S POST-JANUARY 2005, ARE BASED UPON THE PRE-2005 Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 820 1 SALES, AND YOU'RE SAYING THAT YOU DIDN'T RECEIVE THE UNDERLYING 2 INFORMATION THAT SUPPORTS THE CONCLUSIONS CONTAINED IN THESE 3 COLUMNS? 4 MR. McDONELL: WE DIDN'T LEAVE (SIC) THE -- WE DIDN'T 5 GET THE UNDERLYING SUPPORT FOR THE PRE-INFRINGEMENT PERIOD OR 6 THE POST-INFRINGEMENT PERIOD. 7 THE COURT: 8 MR. McDONELL: 9 THE COURT: 10 11 OKAY. WE HAD NEITHER. OKAY. MR. McDONELL: MR. -- AND AS A RESULT COULD NOT CRITICALLY ASSESS -- 12 THE COURT: 13 NOW, OBVIOUSLY, I HAVE NO IDEA WHAT YOU ALL RECEIVED 14 -- SHAKING HIS HEAD. IN DISCOVERY FROM EACH OTHER. 15 MR. PICKETT: LET ME BE VERY CLEAR ABOUT THIS. THIS 16 DATA WAS PRODUCED LONG, LONG TIME AGO. 17 MR. ELLISON TESTIFIED. 18 TESTIFIED AT DEPOSITION. 19 TESTIFIED. 20 FIGURES, WHAT WAS IN YOUR MIND? 21 YOU PAID FOR PEOPLESOFT BASED ON THESE ASSUMPTIONS. 22 THE ASSUMPTIONS THE EXPERT IS USING FOR THE -- THE FAIR MARKET 23 VALUE OF USE. 24 25 IT WAS PRODUCED BEFORE IT WAS PRODUCED BEFORE MS. CATZ IT WAS PRODUCED BEFORE MR. PHILLIPS THEY COULD HAVE ASKED ANY ONE OF THEM ABOUT THESE THIS IS WHAT YOU -- YOU KNOW, THOSE ARE THEY COULD HAVE SOUGHT -- THEY DON'T HAVE TO TAKE THEM AT FACE VALUE. THEY HAD AN OPPORTUNITY TO TAKE DISCOVERY Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 821 1 ON IT. 2 THERE'S NO PREJUDICE, UNLIKE IN THE OTHER SITUATION. 3 THAT'S -- THAT'S WHY IT'S NOT AN ISSUE. THAT'S WHY NOW, THERE IS SOME CLAIM HERE THAT -- WHICH IS A NEW 4 CLAIM -- SOME PRIOR DATA WAS NOT PRODUCED. 5 THAT. 6 IN THEIR MIND. 7 BUT TWO POINTS ON FIRST THESE PROJECTIONS ARE THE BEST EVIDENCE OF WHAT'S AND THEY HAD THOSE. SECOND, AS I SAID, IT WAS A HOSTILE TAKE-OVER. THERE 8 WAS NO OTHER INFORMATION OTHER THAN 10K'S AND PUBLICLY AVAILABLE 9 INFORMATION. AND WHEN WE PUT -- WHEN WE PRESENT THIS, WE WILL 10 LAY THAT FOUNDATION TO SHOW THAT IT'S PUBLICLY AVAILABLE 11 INFORMATION. 12 BUT IT IS THE PROJECTION. 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 IS YOU GET THE APPLICATION SOFTWARE. 15 SOFTWARE, YOU GET MAINTENANCE FOR YOURS. 16 BUSINESS RUNS FOR BOTH SAP AND ORACLE. 17 AND THEN ONCE YOU GET THAT THAT'S THE WAY THE AND WE KNOW THAT WHEN A PARTY WOULD BE NEGOTIATING 18 THIS, SAP (SIC) HAD A CERTAIN THING IN MIND. 19 COMBINATION OF MAINTENANCE AND UPSELL WOULD, IN THE FIRST THREE 20 YEARS, COME UP TO ALMOST $900 MILLION. 21 SIDE? 22 THEY THOUGHT THE WHAT WOULD BE ON THE SAP WELL, IT'S THIS DATA RIGHT HERE, WHICH, AGAIN, HAS 23 BEEN PRODUCED LONG AGO, FULLY DISCLOSED, FULL OPPORTUNITY TO 24 TAKE DISCOVERY AND. 25 SAY TO MR. ELLISON, WELL, YOU KNOW, YOU THOUGHT THAT IT'S 20 TO AND IF THEY DISAGREE, AND THEY DO, THEY CAN Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 822 1 30 PERCENT OF THE CUSTOMERS OR 30 PERCENT OF THE CUSTOMERS. 2 THEY CAN CROSS-EXAMINE THAT. 3 THE FAIR THING TO DO IN THIS CASE. 4 5 AND THE JURY CAN DECIDE. AND THAT'S IT'S -- IT'S THE WAY THE SECOND MEASURE OF DAMAGES, FAIR MARKET VALUE OF USE, IS DETERMINED. 6 THE COURT: 7 MR. McDONELL: OKAY. ALL RIGHT. YES, YOUR HONOR. LAST WORD. THAT WAS JUST A 8 CIRCULAR POINT. 9 DIDN'T NEED AND DON'T NEED DISCOVERY ABOUT THE PROJECTIONS. HE'S SAYING -- BECAUSE THEY HAVE PROJECTIONS WE 10 HE'S SAYING THAT WE SHOULD HAVE NOW DONE OUR DISCOVERY ON THAT 11 ISSUE HERE IN THIS COURTROOM BY EXAMINING ORACLE EXECUTIVES 12 ABOUT IT. 13 IT'S FAR TOO LATE FOR THAT. 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 OPPORTUNITIES AS YOU SEE ON THE SLIDE, THAT'S PRECISELY WHAT 17 THEY'RE PRESENTING HERE TODAY. 18 THIS IS A -- IT'S A CONTAINED ISSUE RIGHT NOW. THEY 19 HAVE DEVELOPED THEIR EXPERT APPROACHES ON THIS PRECISE ISSUE SO 20 THEY'RE PREPARED TO PUT THEIR EXPERT ON TODAY WITH EITHER 21 UPSELL/CROSS-SELL IN OR UPSELL/CROSS-SELL OUT. 22 IT HAS BEEN CRYSTAL CLEAR THAT WE'VE BEEN OBJECTING 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 25 BE YOUR ORDER. Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 823 1 THE COURT: AND THE -- THE -- IS MR. PICKETT NOT 2 CORRECT THAT YOU HAD THIS PARTICULAR DATA, AND ARE YOU TELLING 3 ME THAT YOU CHOSE NOT TO TAKE DISCOVERY ON THIS PARTICULAR DATA 4 BECAUSE YOU THOUGHT THAT IT WAS BLOCKED BY JUDGE LAPORTE'S 5 ORDER? 6 MR. McDONELL: 7 THE COURT: 8 NO. AND IF THAT'S THE CASE, I DON'T QUITE -- I DON'T UNDERSTAND HOW THAT WORKS. 9 MR. McDONELL: HERE'S THE POINT, YOUR HONOR. BY THE 10 TIME IT BECAME KNOWN THAT ORACLE WAS SEEKING DAMAGES BEYOND LOST 11 SUPPORT PROFITS, IT WAS FAR, FAR LATE IN THE FACT DISCOVERY 12 PERIOD; IN FACT, JUST MONTHS FROM THE CLOSE OF FACT DISCOVERY. 13 THE ISSUE GOT LITIGATED BEFORE JUDGE LAPORTE AND THEN 14 LITIGATED BEFORE YOUR HONOR THROUGH THE OBJECTIONS, AND JUDGE 15 LAPORTE FOUND THAT THIS WAS OUT OF BOUNDS, PERIOD. 16 PURPOSES OF YOUR ADOPTING ORDER, WE UNDERSTOOD THAT YOU TOOK 17 THAT EVEN ONE STEP TOWARDS FURTHER CLARIFICATION BY SAYING THIS 18 IS NOT COMING IN THROUGH THE BACK DOOR EITHER. 19 AND FOR WE UNDERSTOOD THAT LOST UPSELL AND CROSS-SELL 20 OPPORTUNITIES WERE OFF THE TABLE. 21 DOCUMENTS. 22 THE COURT: YES, WE HAD SOME PROJECTION SO YOU THINK THE DISTINCTION BETWEEN THE 23 ACTUAL SALES, WHICH IS WHAT I WAS CONCENTRATING ON, AS OPPOSED 24 TO THE PROJECTED SALES -- YOU THINK THERE'S NO -- YOU HAVE 25 CONSTRUED THE ORDER AS NOT PROVIDING A DISTINCTION BETWEEN THOSE Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 824 1 2 TWO. MR. McDONELL: IT'S MORE THAT -- IT -- IT'S -- THE 3 SUBSTANCE I COME BACK TO IS WE DIDN'T HAVE ACTUAL DATA EITHER 4 BEFORE OR AFTER THE DATE OF THE INFRINGEMENT. 5 COULDN'T ASSESS THE -- THE CREDIBILITY OF THE PROJECTIONS AT THE 6 TIME THEY'RE MADE OR WITH THE BENEFIT OF HINDSIGHT, WHICH THE 7 CASE LAW PERMITS. 8 9 10 11 THE COURT: AND SO WE 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 12 WILL, HOWEVER, STATE THAT HE HAS BEEN -- AND HE HAS STATED THIS 13 IN THE DECLARATION HE FILED WITH JUDGE LAPORTE, THAT HE'S BEEN 14 SEVERELY LIMITATED (PHONETIC) -- LIMITED IN HIS ABILITY TO 15 CHALLENGE HIM BECAUSE HE DOESN'T HAVE THE UNDERLYING DATA. 16 17 AND HE IS -- AS A RESULT, THERE'S A FAIR AMOUNT OF PRESSURE ON OUR SIDE TO SIMPLY ACCEPT THEM. 18 THE COURT: 19 MR. PICKETT: 20 THE COURT: 21 MR. PICKETT: 22 THE COURT: OKAY. I DON'T QUITE -- I NEED TO CORRECT -EXCUSE ME. EXCUSE ME. SORRY. I'M NOT EXACTLY SURE HOW I'M SUPPOSED TO 23 RESOLVE IT WITH ONE SIDE SAYING THE DATA HAS BEEN PROVIDED AND 24 THE OTHER SIDE SAYING WE DON'T HAVE ACCESS AND HAVEN'T HAD 25 ACCESS TO THE UNDERLYING DATA. Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 825 1 GENERALLY, THESE KINDS OF MATTERS ARE DETERMINED 2 BEFORE TRIAL. 3 THESE, SHE MADE A DETERMINATION. 4 TO ME THAT THERE WAS THE DISTINCTION THAT YOU'RE NOW DRAWING. 5 WHEN THE MAGISTRATE JUDGE LAPORTE LOOKED AT I AFFIRMED IT. DIDN'T OCCUR YOU ALL NEED TO GIVE ME SOME ASSISTANCE IN 6 DETERMINING HOW I'M SUPPOSED TO DECIDE AN ISSUE OF -- DISCOVERY 7 ISSUE THAT SHOULD HAVE BEEN RESOLVED BEFORE TRIAL. 8 9 10 MR. PICKETT: THING. LET ME BE CRYSTAL CLEAR ABOUT ONE THIS DATA WAS PRODUCED PRIOR TO THEIR FILING THE RULE 37 MOTION WITH MAGISTRATE JUDGE LAPORTE. 11 THE DEPOSITIONS OF MR. ELLISON, MS. CATZ, 12 MR. PHILLIPS WERE PRIOR TO THEIR MOTION TO MAGISTRATE JUDGE 13 LAPORTE. 14 IF THEY HAD SOME QUARREL WITH WHAT THESE PROJECTIONS 15 WERE OR WHETHER THERE WAS SOMETHING MORE THEY NEEDED, OR THERE 16 WAS SOMETHING MISSING, WOULDN'T THEY HAVE TOLD JUDGE LAPORTE 17 ABOUT IT RATHER THAN TRYING TO SWEEP THIS IN NOW AND SAY THAT 18 WELL, PROJECTIONS, YOU KNOW, AREN'T GOOD ENOUGH. 19 ARE PRECISELY THE ISSUE. 20 PROJECTIONS KEEP IN MIND THE CASE LAW ON THIS HYPOTHETICAL 21 NEGOTIATION. 22 IT'S BASED ON PROJECTIONS IN THE MIND AT THE TIME. 23 EVIDENCE. 24 IT'S FAR TOO LATE TO COME IN HERE NOW AND TRY AND CUT THIS OUT, 25 PARTICULARLY WHEN THEY'VE OPENED THE DOOR AGAIN AND AGAIN AND IT'S NOT BASED ON -- YOU KNOW, AFTER THE FACT. THEY'VE HAD IT. THAT'S THIS THEY'VE HAD AN OPPORTUNITY -- AND Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630 Page 826 1 AGAIN. 2 MR. McDONELL: YOUR HONOR, LET'S COME BACK TO WHAT'S 3 BEEN PRECLUDED. 4 CLAIMS FOR LOST UPSELL AND CROSS-SELL OPPORTUNITIES. 5 OPPORTUNITIES. 6 GET IN CROSS-SELL AND UPSELL IS NOTHING MORE THAN A PROJECTION 7 OF THAT OPPORTUNITY. 8 9 JUDGE LAPORTE PRECLUDED THEM FROM PURSUING A PROJECTION OF WHAT THEY THINK THEY'RE GOING TO IT'S AN EMBODIMENT OF THAT OPPORTUNITY. JUDGE LAPORTE FOUND THAT WE HAD NOT HAD ADEQUATE DISCOVERY ON THAT ISSUE TO CHALLENGE IT ONE WAY OR THE OTHER. 10 WE STILL HAVE NOT HAD IT. 11 POWER AND AUTHORITY TO SIMPLY AFFIRM THAT RULING AND ALLOW 12 PLAINTIFFS TO PROCEED WITH THEIR ALTERNATIVE THEORY THAT THEIR 13 EXPERT'S READY TO PROCEED WITH HERE TODAY. 14 THE COURT: IT IS ABSOLUTELY WITHIN THE COURT'S RIGHT. RIGHT. WELL, I THINK YOU'VE BOTH 15 MADE GOOD ARGUMENTS. 16 COURT AT THE TIME OF THE PRETRIAL RULING. 17 THE DEFENSE POSITION. 18 OPPORTUNITY IS CLOSE ENOUGH. 19 IT CLEARLY WASN'T CONTEMPLATED BY THE BUT I'M PERSUADED BY I THINK IT'S CLOSE ENOUGH -- I THINK I'M GOING TO REAFFIRM THE RULING. UPSELL, 20 CROSS-SELL, WHICH I HAVE DENIED ALL ALONG, CONTINUES TO BE 21 DENIED. TEXT REMOVED - NOT RELEVANT TO MOTION Raynee H. Mercado, CSR, CRR, FCRR & Diane E. Skillman, CSR, RPR, FCRR 5aa486af-96d5-4092-b078-2f276d575630

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