Oracle Corporation et al v. SAP AG et al

Filing 765

Declaration of Lucia MaDonald in Support of 764 MOTION No. 2: to exclude testimony of Defendants' Expert Brian Sommer filed byOracle EMEA Limited, Oracle International Corporation, Oracle USA Inc., Siebel Systems, Inc.. (Attachments: # 1 Exhibit Ex. A, # 2 Exhibit Ex. B, # 3 Exhibit Ex. C, # 4 Exhibit Ex. D, # 5 Exhibit Ex. E)(Related document(s) 764 ) (House, Holly) (Filed on 8/19/2010)

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Oracle Corporation et al v. SAP AG et al Doc. 765 Att. 3 EXHIBIT C Dockets.Justia.com f rogram.678 The $632 million in license volume that SAP claims to have taken rom Oracle through September 2007 does not include the on going support revenue associated with those licenses. 2 . 361. c TomorrowNow's Low Price Was Critical to Making Inroads Into Oracle's Customer Base and cost ownership are important in Price and total cost of ownership ("TCO") are very important factors in a Keith Block, Keith vendor. customer's selection of a software and support vendor.679 O selection and t President Sales Consulting North Oracle's Executive Vice President of Sales and Consulting in North America, Executive SAP leverage, well testified, ". . . by acquiring TomorrowNow, SAP created leverage, as well as ­ ". acquiring legitimizing and through legitimizing TomorrowNow, and presented customers with a do step, customers step, s based on lowering that complete total TCO, and advertising that they had the on that total and that had Oracle same level of service and support that Oracle would provide."680 Juergen level service support provide." Juergen Oracle's Vice of Customer Rottler, Oracle's Executive Vice President of Oracle Customer Services, also also c testified about the impact of price competition from TomorrowNow: "It was about impact price from "It p acquisition constantly on our mind, as with the acquisition of SAP, it was the one on mind, with it the credible to own offering." perceived, you know, credible alternative to our own support offering."681 T you TomorrowNow documents touted the importance of its low cost support documents the of low support offering. 6 For "Frequently Questions" For example, a TomorrowNow "Frequently Asked Questions" on Safe program J.D. mid market document on its Safe Passage program for J.D. Edwards mid market 78 m SCHEDULE 8.U. 3Q 2007 was the latest period for which I have seen TomorrowNow and Safe Passage financial etrics reported. However, the customer specific revenue data produced by Defendants confirms that TomorrowNow and SAP enjoyed additional revenue from sales of support, licenses and other services to omorrowNow customers after September 2007 and through the October 2008 shutdown of TomorrowNow [See SCHEDULES 41.U and 42.SU]. 679 Deposition of Keith Block (Oracle Executive Vice President of Sales and Consulting in North America), September 17, 2009, pgs. 38 39, 139 and 154 155; Deposition of Charles Phillips (Oracle Co President and Executive Board Member), April 17, 2009, pgs. 148 149. 6 Deposition of Keith Block (Oracle Executive Vice President of Sales and Consulting in North America), September 17, 2009, pgs. 238 239. 681 80 Deposition of Juergen Rottler (Oracle Executive Vice President, Oracle Customer Services), May 13, 2009, pg. 43. 3 P S age 226 of 281 H bject to Protective Order u ighly Confidential Information ­ Attorneys' Eyes Only p c bustomers stated, "These customers will eventually migrate ­ until then, SAP stated, customers eventually then, builds credibility and loyalty with the customer by providing immediate credibility loyalty the by immediate savings."682 A TomorrowNow advertisement stating "What will you do with advertisement "What you with s money save?" its the money you save?" highlights the benefit of its offer of 50% support cost the of support savings.683 As testified to by several former TomorrowNow customers, the As to several TomorrowNow the c the factor, in low cost of the TomorrowNow service was an important factor, and in some cost service an cases the most important factor, in their decision to switch to TomorrowNow the important in decision switch TomorrowNow support 3 for support services.684 62S . I understand that absent its alleged misuse of Oracle's Software and aupport Materials, TomorrowNow would not have been able to market the bility to provide comparable or better service at a significantly lower price than Oracle. As explained in section IV.B.4 above, SAP acknowledged that n access and use of Oracle's proprietary Software and Support Materials was 6 ecessary to provide the level of support that TomorrowNow offered.685 682 "Safe Passage Sales Brief," SAP OR00042962 967 (Hurst Exhibit 175), at 963. 8 F 3 Advertisement from www.Tomorrownow.com included in Plaintiff's Responses and Objections to Defendants' 6 ifth Set of Interrogatories, April 16, 2009, pg. 104. For example, see Deposition of Mark Anderson (Travel Centers Manager of IT for PeopleSoft, SAP, BW and Cognos Business Intelligence), June 8, 2009, pgs. 35 and 47 49; Deposition of John Kreul (Pepsi Americas Vice I President of Applications), June 2, 2009, pgs. 47, 51, 54 and 56; Deposition of Jeffrey O'Donnell (Lexmark L ternational Commodity Manager), September 15, 2009, pgs. 16 17 and 57 58; Deposition of Steven Brazile (Sara n Bee Vice President of Application Development and Support) October 14, 2009, pgs. 85 87; Deposition of Thomas Dailey (Honeywell, Manager of IT and Global HR Technical Design Leader), November 12, 2009, pgs. 29 31; eclaration of Stefan Vilsmeier, President, On Behalf of BrainLab, Inc., July 9, 2009, pg. 3; Declaration of Richard Ball, Director of Procurement, The Standard Register Company, November 11, 2009, pg. 3; Deposition of Tracy Hallenberger (Baker Botts Chief Knowledge Officer), November 18, 2009, pgs. 26 27; Deposition of Paul Cooley (Waste Management Director of Information Technologies), November 24, 2009, pgs. 27 28. For example, see SAP email from John Zepecki to Arlen Shenkman and other SAP personnel with attached document "PeopleSoft 1 2 3 01 05 05.doc," SAP OR00004991 5007 (Shenkman Exhibit 225), at 999. 685 84 P S age 227 of 281 H bject to Protective Order u ighly Confidential Information ­ Attorneys' Eyes Only c . 3 63. SAP's Ownership of TomorrowNow Was Also Critical to Making Inroads Into Oracle's Customer Base An important reason why TomorrowNow became a viable option to T customers and posed a great threat to Oracle was that the acquisition of omorrowNow by SAP made TomorrowNow more legitimate, more financially viable and a much less risky option for customers to consider.686 F Tormer TomorrowNow customers have testified that SAP's ownership of omorrowNow's provided them with a greater level of comfort in going to TomorrowNow for support. 687 4 . 3 64. Other Third Party Service Providers Would Not Have Otherwise Displaced Oracle Support Customers That Left for TomorrowNow Depending on the point in time, there were (are) other third party time, other party on point were related Oracle's providers of services related to Oracle's PeopleSoft, J.D. Edwards and/or of J.D. and/or H consulting Oracle Siebel products, including consulting services provided by Oracle partners. products, provided t able provide fraction However, those companies are only able to provide a fraction of the support those are the providers not that a customer could obtain from Oracle, in that these other providers do not could from in these access Oracle's property proprietary (i.e., have access to Oracle's intellectual property and proprietary information (i.e., 6 8 L6 Deposition of Larry Ellison (Oracle CEO and Executive Board Member), May 5, 2009, pg. 40; Deposition of Nancy yskawa (Oracle Vice President of Support Marketing), May 6, 2009, pgs. 228 229; Deposition of Keith Block (Oracle Executive Vice President of Sales and Consulting in North America), September 17, 2009, pgs. 73 and 197; Deposition of Richard Cummins (Oracle Senior Director, Support Renewals for North America), April 22, 2009, pg. 513; Deposition of Charles Phillips (Oracle Co President and Executive Board Member), April 17, 2009, pgs. 148 149; Oeposition of Shai Agassi (Former SAP Executive Board Member), January 5, 2009, pgs. 344 345 and SAP D 6 R00502277 292 (Agassi Exhibit 742), at 279 and 286. 8 R7 Deposition of John Kreul (Pepsi Americas Vice President of Applications), June 2, 2009, pgs. 49 50; Deposition of p obyn Harrel (April Healthcare Program Manager for Finance and Supply Chain Applications), September 28, 2009, 2 g. 82; Deposition of Steven Brazile (Sara Lee Vice President of Application Development and Support), October 14, 009, pg. 80; Declaration of Ed Valle of Everdream Corporation, November 17, 2009, pg. 2. TomorrowNow's agreement with Waste Management contained a "Parental Guarantee" clause, in which SAP guaranteed that TomorrowNow would perform under the contract [Deposition of Paul Cooley (Waste Management Director of Inform3tion Technologies), November 24, 2009, pg. 41]. a P S age 228 of 281 H bject to Protective Order u ighly Confidential Information ­ Attorneys' Eyes Only 3 s ithout infringing Oracle's intellectual property rights) to provide those infringing intellectual rights) provide 3 services.688 65. t In 2005, Oracle identified other third party service providers in addition A TomorrowNow, such as Conexus Partners, CH2M Hill, Versytec and Klee o ssociates.689 However, Oracle experienced little effect from these other third t party suppliers in relation to TomorrowNow, and Oracle did not perceive shem to be then, or thereafter, legitimate competitors to Oracle support 3 l 366. ervices; TomorrowNow was the most predominant competitive threat.690 of other party providers by are Most of the other third party service providers identified by Oracle are no s in offer services, the longer in business or only offer consulting services, not the same level of or level that support that Oracle or TomorrowNow was providing to its customers.691 F or was to customers. Former TomorrowNow customers have acknowledged that there were no o TomorrowNow have that were other viable alternatives at the time that they switched to TomorrowNow, and viable at time they to and P third party service other third party service providers, such as Klee Associates or Conexus such Klee or did meet were Partners, did not meet necessary qualifications and were not considered to be qualifications considered b e 6 alternatives. real alternatives.692 Deposition of Juergen Rottler (Oracle Executive Vice President, Oracle Customer Services), May 13, 2009, pgs. 213 216. 6 489 "Oracle Third Party Support Competitive Update," dated May 12, 2005, ORCL00032592 621 (Cummins Exhibit S5), at 596; Deposition of Richard Cummins (Oracle Senior Director, Support Renewals for North America), eptember 16, 2008, pgs. 187 and 193 195. 6 290 Deposition of Richard Cummins (Oracle Senior Director, Support Renewals for North America), September 16, 008, pgs. 90, 114 117 and 194 199; Deposition of Richard Cummins, April 21, 2009, pgs. 54 59; "Maintenance Strategy Session," ORCL00088216 30 (Cummins Exhibit 63), at 227; Deposition of Michael Van Boening (Oracle 6 upport Renewal Sales Representative), September 10, 2009, pgs. 20 21 and 148 149. 88 291 Deposition of Richard Cummins (Oracle Senior Director, Support Renewals for North America), September 16, 6 008, pgs. 114 117 and 194 198; Deposition of Richard Cummins, April 21, 2009, pgs. 54 59. I92 Deposition of Mark Anderson (Travel Centers Manager of IT for PeopleSoft, SAP, BW and Cognos Business Jntelligence), June 8, 2009, pgs. 55 56; Deposition of John Kreul (Pepsi Americas Vice President of Applications), 2une 2, 2009, pgs. 48 49 and 136; Deposition of Jeffrey O'Donnell (Lexmark Commodity Manager), September 15, 009, pgs. 8w 7 and 99; Declaration of Steven Loyd, Former Director of Information Technology for Intraware, Inc., P S age 229 of 281 H bject to Protective Order u ighly Confidential Information ­ Attorneys' Eyes Only w . 3 c 372. But for Defendants' Improper Actions, Oracle Would Have Retained the Customers That Left for TomorrowNow Throughout the period in which customers cancelled their support in customers the their with i contracts with Oracle to move to TomorrowNow, there were no viable non to to there no non a infringing alternatives that could provide the level of PeopleSoft, J.D. Edwards alternatives could the of J.D. b Siebel that provided, that and Siebel support that Oracle provided, and that customers were promised we re to from, due its infringement by, and able to obtain from, TomorrowNow due to its alleged infringement and t misuse and misuse of Oracle's intellectual property. Moreover, as explained above, Oracle's property. explained lure paying of support (or for was the lure of paying half of Oracle's support price (or less) for what was solicited b be same and with resource to be the same or superior service, and particularly with the resource and superior a SAP referrals other customers, brand backing of SAP and referrals of other TomorrowNow customers, was backing to attractive to Oracle's PeopleSoft, J.D. Edwards and Siebel customers.708 For the r PeopleSoft, Edwards Siebel For h described, reasons described, but for TomorrowNow's alleged bad acts, Oracle would not for alleged acts, would r lost revenue profits in following of have lost the revenue and profits quantified in the following section of this Creport.709 ( . Oracle's Lost Profits on Support Revenue Lost to TomorrowNow Travel Centers Manager of IT for PeopleSoft, SAP, BW and Cognos Business Intelligence), June 8, 2009, pg. 119; Geclaration of Stefan Vilsmeier, President, On Behalf of BrainLab, Inc., July 9, 2009, pgs. 2 3; Declaration of John D P oetz, Director of Information Technology of The Harris Products Group, November 16, 2009, pg. 3; Deposition of 7 aul Cooley (Waste Management Director of Information Technologies), November 24, 2009, pg. 69. The importance of getting client references was regularly noted in TomorrowNow "Win" announcements T eposition of Andrew Nelson (Co Founder of TomorrowNow), February 26, 2009, pgs. 202 203. See, e.g., [D omorrowNow email from Bob Geib to all TomorrowNow employees, Re: TomorrowNow WINS! High Industries (PeopleSoft) Part TWO, TN OR 00061877 878 (Hurst Exhibit 167), at 878; TomorrowNow email from Andrew Nelson to all TomorrowNow employees, Re: TomorrowNow WINS AGAIN! Telapex, Inc., TN OR 03752526 (A. elson Exhibit 1022)]. Lesley Loftus, TomorrowNow Vice President of Global Marketing, testified that customer referrals were important because "it's a good foundation for a decision." [Deposition of Lesley Loftus, June 31, 2008, t g. 196]. As part of its marketing of the Safe Passage program, SAP sought to get TomorrowNow customer p D stimonials [Deposition of Terry Hurst (SAP Director of Competitive Programs), April 30, 2008, pg. 145 146; Home e 7 epot reference quotes, SAP OR 00066889 891 (Hurst Exhibit 163)]. I understand that discovery is on going and that additional evidence related to causation and other issues may be i resented at trial. I will consider any such relevant additional evidence and reserve the right to adjust my opinions p n response. 09 08 P S age 234 of 281 H bject to Protective Order u ighly Confidential Information ­ Attorneys' Eyes Only 6

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