Oracle Corporation et al v. SAP AG et al

Filing 800

Declaration of Elaine Wallace in Support of 798 MOTION Defendants' Notice of Motion and Motion to Exclude Expert Testimony of Paul K. Meyer 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, # 15 Exhibit 15, # 16 Exhibit 16, # 17 Exhibit 17, # 18 Exhibit 18, # 19 Exhibit 19, # 20 Exhibit 20, # 21 Exhibit 21, # 22 Exhibit 22, # 23 Exhibit 23, # 24 Exhibit 24, # 25 Exhibit 25, # 26 Exhibit 26, # 27 Exhibit 27, # 28 Exhibit 28, # 29 Exhibit 29, # 30 Exhibit 30)(Related document(s) 798 ) (Froyd, Jane) (Filed on 8/19/2010)

Oracle Corporation et al v. SAP AG et al

Doc. 800 Att. 4

EXHIBIT 4

Dockets.Justia.com

PAUL K. MEYER May 14, 2010 HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY
Page 648
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION ORACLE CORPORATION, a Delaware corporation, ORACLE USA, INC., a Colorado corporation, and ORACLE INTERNATIONAL CORPORATION, a California corporation, ) ) ) ) ) ) ) ) Plaintiffs, ) ) vs. ) No. 07-CV-1658 (PJH) ) SAP AG, a German ) corporation, SAP AMERICA, ) INC., a Delaware ) corporation, TOMORROWNOW, ) INC., a Texas corporation, ) and DOES 1-50, inclusive, ) ) Defendants. ) ________________________________)

VIDEOTAPED DEPOSITION OF PAUL K. MEYER _________________________________ VOLUME 3; PAGES 648 - 937 FRIDAY, MAY 14, 2010

HIGHLY

CONFIDENTIAL - ATTORNEYS' EYES ONLY

REPORTED BY:

HOLLY THUMAN, CSR No. 6834, RMR, CRR (1-427378)

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Q.

In your opinion, is the fact that a

customer has been identified as a Safe Passage customer by someone at SAP sufficient by itself to meet the plaintiffs' burden of proving that the profits from the customer are attributable to infringement? MS. HOUSE: THE WITNESS: Objection. Vague, overbroad.

It would be my opinion, as I And if you go back

mentioned this morning already.

to all the cites in my report about the Safe Passage program and back to paragraph 40 through 70

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of the report, and then you look at the business records of SAP, I'm relying upon those records that reflect how the company was managing its business contemporaneously outside this litigation. And to

the extent that it was reported to management, here's how we're doing, here's the customers that are a part of Safe Passage, I'm relying upon contemporaneously prepared business record to make these determinations. And so from my perspective, that's certainly the appropriate analysis to do on behalf of the plaintiff.

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MR. McDONELL:

Q.

Do you think that the

fact that a customer purchased SAP product for reasons unrelated to TomorrowNow is irrelevant to the causation analysis? A. Are you asking this with inside of Safe

Passage, the program Safe Passage. Q. Yes. MS. HOUSE: And I'm going to object.

Vague and calls for a legal conclusion. THE WITNESS: So in your hypothetical,

if -- are they called a Safe Passage customer?

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MR. McDONELL: A.

Q.

Yes.

And you're saying they are part of that

program, but it's unrelated, whatever that means, to TomorrowNow? Q. A. Yes. It would be my position on something like

that in in this case, you would have to be able to show on a detailed basis that for some reason, that customer was not impacted by the TomorrowNow involvement. So from my perspective, if the customer is classified as Safe Passage, and we know how that program was marketed and set up, from my perspective, that customer should be in the analysis of infringer's profits.

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MR. McDONELL:

Q.

Have you made an effort

in your work in this case to look at evidence relating to customers' actual purchases of SAP

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software and support and try to determine the -all of the information you could about the reasons the customers made those purchase decisions? MS. HOUSE: vague. THE WITNESS: please? (Record read as follows: Question: Have you made an effort in Could you read that back, Objection. Compound, and

your work in this case to look at evidence relating to customers' actual purchases of SAP software and support and try to determine the -- all of the information you could about the reasons the customers made those purchase decisions?) THE WITNESS: I worked from the premise of

the Safe Passage program, I worked through that and the motivations as described in my report at length in paragraphs 40 through 70. And from that

perspective, I've done the analysis, I've identified the customers, I have identified the revenue, and then I've -- from my perspective, I've been open to looking at the adjustments proposed by the defendant, and I've considered those. that's what I've done. And

But I've worked from the

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premise that the program that was marketed and solicited was part of the accused acts in this case.

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Q.

Mr. Meyer, would you please take a look at

the declaration of Daniel A. Clark which has been marked as Exhibit 2042? A. I'm reading it right now. (Examining document.) Okay

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Q.

Mr. Meyer, have you had a chance to read

Exhibit 2042, which is a Declaration of Daniel A. Clark? A. Q. Yes, I have. Okay. And do you see there that Mr. Clark

describes himself as the Senior Vice President of NewPage Corporation? A. Q. That's correct. And with reference to your Exhibit -- or

to Exhibit 2020, which is your schedule, on page 2 thereof, am I correct that you've included NewPage Corporation revenues in the amount of 4.2 million dollars in your infringer's profits calculation? A. Q. Yes, on page 2 of 42.2.DU. Now, referring to Exhibit 2042, the

declaration of Mr. Clark, do you see in paragraph 3 where he wrote: In late 2007, NewPage completed its acquisition of the issued and outstanding common stock of Stora Enso North America from Stora Enso OYJ. Prior to the acquisition,

NewPage had used SAP applications as its primary business software. Following the

acquisition, in the interest of standardization, NewPage converted SENA to

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SAP applications in replacement of the JDE applications previously used by SENA. Do you see that? A. Q. Yes, I see that. And do you consider that information

relevant to your infringer's profits analysis? A. Well, once again, this was information

I've not seen before, and there may have been something I would have considered if I had received it back before my report was filed. And once again, I would want to know what the responsibilities of Mr. Clark are, and do they include the authorization and the approval of making these decisions. It's not clear.

But certainly I would read this and consider it. Q. Okay. Then referring you to paragraph

No. 4 of Mr. Clark's declaration, he says: Our decision to replace SENA's JD Edwards applications with SAP applications was not influenced in any way by the fact that SENA had used TomorrowNow support for its JD Edwards applications. Do you see that? A. I do see that.

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Q.

Okay.

Do you consider that information

relevant to your infringer's profits analysis? A. It becomes difficult, because the

relationship with NewPage and the company it acquired goes back over time, before the acquisition, some of my data. So once again, it's hard to separate it. And the fact that TomorrowNow has been providing service to Stora Enso North America, now known as NewPage, it's a complicated situation. Q. But my question is, do you consider the

information in paragraph 4 of Mr. Clark's declaration to be relevant to an infringer's profits analysis? A. It's information, and then the question

becomes, it's complicated, because you have revenue, and my analysis goes back to 2006, well before late 2007, and now I have an undated declaration that's one page that looks not very official to me, and it shows up at my deposition? I've been working on doing my study for a long period of time, spent a lot of effort trying to do things correctly and appropriately, and so it's hard just to rely on something like this just sort of the way you're presenting it.

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I would take information like this and follow up and see if I could corroborate some of this, but it doesn't seem to give me an indication that this is very well founded. I'd like to see

more information from his files about the decision-making and the process, particularly in light of the revenue that's incurred prior to the acquisition. Q. Do you agree, Mr. Meyer, that if the

statements Mr. Clark makes in his declaration are true, that that should cause you to eliminate revenue from NewPage Stora Enso from your infringer's profits calculation? MS. HOUSE: THE WITNESS: Asked and answered. I would view it differently.

From my perspective, if Mr. Clark were to come into trial and testify at trial that the sole reason that they made the switch was to move to an application that was offered by SAP, and it wasn't based on service, it wasn't based on the TomorrowNow relationship, it wasn't based on price -- because remember, you know, we don't know the involvement of the Stora Enso individuals that were the ones that were contracting with TomorrowNow, and they may have come into this

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merger and acquisition situation and said, hey, we've been working with these folks for a couple of years, they're great, and then that may have changed the impressions of Mr. Clark, even though he was already under the motivation to try to standardize more things, we'd need know more about that. MR. McDONELL: Q. In your answer, you're

referring to Mr. Daniel Clark, who gave this declaration. A. Q. Correct?

I'm looking at the declaration. Because there's another Mr. Clarke here,

I'm trying to make sure we keep the record clear. You're not referring to Stephen Clarke in that last answer? A. I'm sorry, Daniel Clark with the undated

declaration. Q. 2010. there. page. A. And I think it's actually dated May 4, It's a little funny in the word processing You'll see a date at the bottom of the Correct? I -- if you're going to represent to me

that's what it is, then I'll accept that. Q. That's my understanding of it. Mr. Meyer, if -- is it your position that

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even if you accept the declaration of Daniel Clark as being entirely true, that it's your determination to continue to include in your claim of infringer's profits 4.2 million dollars of revenue from NewPage Corporation? MS. HOUSE: testimony. THE WITNESS: As I sit here today, I would I think you have to Objection. Misstates his

need to analyze this further.

recognize -- the is for the court -- that this was provided to me 5 minutes ago. before, ever. I have not seen it

I've done a very detailed study, a So I'd want to take this

very comprehensive study.

back, do some research, some analysis, and I would deserve to report back to the court on my position at this at some later point in time if the court asks. MR. McDONELL: Q. Okay. But as you sit

here today, you're not going to remove the 4.2 million dollars of revenue from NewPage Stora Enso from your infringer's profits calculation? A. I most certainly will not, having just And it's a single piece

seen this 5 minutes ago.

of paper that doesn't purport to give me the information I need at this point in time. I would

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want to do some more research and follow-up, as I mentioned a moment ago.

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Q.

Okay.

And again, to the best your

knowledge, that was an established pricing model in January of 2005 for that Oracle product? A. Well, my understanding is that

Mr. Allison, who was in charge of basically -- I think he's in global product services -- but you would basically configure the license for the customer's needs. But the configuration that he

provided to me when I talked to him about this situation was this would be the configuration from

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his perspective that would be subject to the license, based on -- because we're in a unique situation here, as he sized up how Oracle would do something that -- in this license that they don't do normally, he would configure it this way. And so he said this is the license arrangement that he felt would meet the terms of what TomorrowNow and SAP would need.

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A.

It's the other way around.

What we're

doing here is determining something that's different than what Oracle would allow customers to do. They have their enterprise license for the

database, it's very standard, it has significant restrictive terms of use. And what you can do with

it, my understanding is, that's not available, in this situation. This is -- we are configuring a

license for something that Oracle doesn't normally do. That's the exercise we're involved in.

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4 5 6 7 8 9 10 11 12 13 14 15 16

Q.

In that same time frame, are you aware of

a different pricing formula comparable to the one that you're suggesting in this case that was actually used by Oracle with customers? MS. HOUSE: THE WITNESS: to me. Objection. Vague.

That doesn't make any sense So

You say a different pricing comparable.

what I'm using is what Mr. Allison told me would be the proper metric for this circumstance, which is unique. support. The basic Enterprise Edition license and And we can go to my support work papers

for 527 and pull it out and look at it, and I'd be glad to do that for you. That's what I used.

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Q.

And would you agree with me that the

Standard database product would be powerful enough to run TomorrowNow's operations? MS. HOUSE: THE WITNESS: Calls for speculation. I cannot address the I have been informed

particular capacity issues.

by Mr. Allison that one would have to price that under the Enterprise edition license, in these circumstances.

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MR. McDONELL:

Q.

Did you read the expert

report of Defendants' expert Mr. Gray on this subject? A. that. Not at this point in time, I have not done

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MR. McDONELL:

Q.

Okay.

So -- and what

is the basis for your conclusion that for all of those customers of TomorrowNow, there would have to be a separate database license to create the

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environments and to create the other changes and modifications and updates for that particular customer? MS. HOUSE: THE WITNESS: best response. Asked and answered. I believe I've given you my

There's two parts to it, and I There's a technical There's a business

think you understand this. part -- there's three parts.

part, which is Oracle's input into how they would structure the license; and there's a legal part. And from my perspective, I'm taking the input from Oracle, who has said, this is how we would structure this license if the terms of use, if the grant's going to be what we now understand it has to be because of the infringing activities. MR. McDONELL: Q. So Mr. Allison told you Right?

what the license should be. A.

He told me the -- basically the structure That's really an input from him.

of the license. Q. Correct? A. Yes.

And you accepted what he told you to do.

In these circumstances, when I came

to understand that this is not just what you mentioned a while back, sort of an off-the-shelf use of Oracle's database property.

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Q.

Did you -- and you did not see any other

similarly structured license anywhere in Oracle's past. A. Correct? I didn't do that analysis, because I knew

at this point I was being asked to come up with the value of something that does not occur at Oracle, in its everyday customers. of license. Q. If Mr. Allison would have told you that It's a different type

you could price that exact same license he described to you at 50 percent of that cost, would you have accepted that? A. Based on my understanding of the

situation, since this was so highly focused on the particulars of this case, and because it was focused on a license that is not granted of this nature by Oracle, I would have had to defer to Mr. Allison to provide that input. And if he felt

that was the way it would be structured, I would have accepted that, in terms of the structure of the license. Q. A. And in terms of the pricing. The structure, which leads to the pricing,

that's correct. Q. And by the same token, if Mr. Allison

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would have described to you a structure of a license that was twice as expensive as the one he described to you, you would have accepted that, too. Correct? A. I would defer to him as -- and I have his I believe he's the global It's -- Oracle's Senior Vice

title back here. business leader.

President of Global Practices and Risk Management. Paragraph 250.

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Q.

So let's then just focus on Table 8 at

page 101 of your report. Do you have that in front of you?

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A. Q. 101? A. Q.

I'm on page 101. And you're referring to Table 8 on page

That's correct. Okay. Please tell us how you use the

numbers reflected in Table 8 and then end up with a final conclusion of fair market value of no less than 2 billion dollars. MS. HOUSE: Asked and answered over the

past 2 1/2 days, overbroad, calls for a narrative. THE WITNESS: Once again, I have to refer

you back to my report -MR. McDONELL: just tell me directly? MS. HOUSE: Asked and answered. Q. Because if you can't, Q. Are you not able to

MR. McDONELL: that's fine. MS. HOUSE: answering.

He was in the process of

He has been answering for 2 1/2 days.

More than 2 1/2 days now. THE WITNESS: We spent a long time talking

for 2 1/2 days, many hours, about this process, and now all of a sudden you ask me another question. We've be talking about it for 2 1/2 days. And I

would take you back to my report, back to the

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section on the beginning of the value of use, the overview, probably take you a little deeper back to paragraph 91, to paragraph 153, in which we've talked about in detail the calculations, the inputs, the different analytical techniques, the market approach, the income approach, the cost approach, all the considerations and all the metrics that have come out of that process, and we've talked at length about the transaction between PeopleSoft and Oracle, the timing of that transaction, all the projections and the Board involvement, all the things that SAP was doing to respond to the biggest threat probably that had happened to its company in many years in terms of having a legitimate market competition from a company like Oracle combined with PeopleSoft, all those factors, all those inputs, and that's how I came to no less than 2 billion dollars. MR. McDONELL: with some other number? for example? MS. HOUSE: THE WITNESS: Same objections. Because ultimately, in the And we've Q. Why didn't you come up

Why wasn't it 1.5 billion,

process, you assess all the information.

talked at length about the projections of SAP, all

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the involvement of senior individuals.

Not persons

that run low-level departments, but the top chief technology office in all of SAP, the top Board members, the canvassing of the marketplace, the 4,000 joint customers, all that information and how important it was for SAP to have a response to Oracle's acquisition, all that information is tremendous risk that Oracle was taking on with the license and tremendous benefit that SAP is gaining. And I've been through all of that. And from my perspective, I can turn you to my report, 2 1/2 days of exhaustive testimony, all the detail, all the footnotes. I'm sitting here in the room, and I've got 30 binders of support documents behind me, which just -- the key documents to support all these findings. And it goes right to this question

of no less than 2 billion dollars. MR. McDONELL: billion? MS. HOUSE: THE WITNESS: response on that. MR. McDONELL: Q. Could you reasonably Same objections. I've given you my best Q. Okay. Why not 1.5

calculate your value of use at 3 billion?

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MS. HOUSE: THE WITNESS: from my perspective.

Same objections. It could have been higher, I was at a point where that's

the appropriate amount, and I'm very comfortable there, and it's an opinion that's supportable and makes very strong economic sense in these circumstances. MR. McDONELL: Q. Can you explain to me

as you sit here today why the number is 2 billion dollars and not some other number in the ranges that you've depicted on Table 8? MS. HOUSE: THE WITNESS: Asked and answered. I've already answered that.

And behind all these numbers on Table 8 I've gone through all these details. I've looked at all the

financial metrics of the value of a maintenance contract on an annual basis to SAP and Oracle. value of cross-selling, the value of upselling. All the calculations that Oracle did when it paid 11 billion dollars for PeopleSoft and was acquiring these 10,000 customers under service contracts that were protected by the intellectual property that's been infringed in this case by SAP. I've gone through all that information, have spent hundreds of hours doing calculations and The

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discounted cash flows, looking at market information, looking at other details about valuation. And it's all in the report, and it's

all in the work pages, and it's all in SAP's own projections and plans and it's all there. There's -- it's not -- it's all been talked about. MR. McDONELL: A. Q. Anything else to add?

I -- the last 2 1/2 days of testimony, all

the work papers in this room, all the footnote references, all the calculations, the hundreds of calculations. Q. Would your answer be the same for your

hypothetical license number under Georgia Pacific if I asked you why you came up with no less than 2 billion dollars as opposed to some other number? MS. HOUSE: THE WITNESS: question. MR. McDONELL: Q. Okay. You looked at a Same objections. I don't follow that

number of different numbers and factors when you developed your Georgia Pacific calculation. Correct? A. Q. That's correct. All right. If I asked you -- and with

reference to the exhibit that's before you,

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Exhibit 2044, we've endeavored to try to put some of them on paper. A. Correct?

I don't recognize this as being an

appropriate summary of a report that is hundreds of pages, it's I believe upwards of -Q. A. Mr. Meyer, I --- it's almost -MS. HOUSE: THE WITNESS: Let him finish. I'm going to give you the 281 pages, with I

number of pages of this report.

believe there's 853 footnotes, and that doesn't -and then there's the fact that -- there's more footnotes than that. There's 857 footnotes. And

then there's attachments or schedules, and one schedule alone is 1,500 pages. schedules. And I have over 50

I have all kinds of data that goes into And we've been talking

supporting my findings.

about that for a very long time. MR. McDONELL: Q. Is there some specific

calculation that you came up -- you used to come up with your no less than 2 billion dollars, or is it just your judgment? MS. HOUSE: THE WITNESS: Asked and answered. I'm going back to all my

testimony I've given in the last 2 1/2 days

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that's -- and all the work papers in the report. And even on Table 8, you'll see the information. And behind each of these numbers are

exhaustive calculations, calculations that go on for pages with all kinds of detailed calculations. And we looked at the Project Spice documents that were put together contemporaneously by Oracle when they made the acquisition with all their values, how they saw the importance of the maintenance contracts -- let me finish; you asked the question -- went through all that information, all the information that went into Mr. Ellison and Ms. Catz and Mr. Phillips and the Board deciding to buy PeopleSoft, and the very next day, this is the program that's been -- let me finish -- that's been launched by SAP. Tremendous impact on Oracle's We have lots of

premium in this acquisition. discussion about that.

All that information has been brought together, and this is my opinion. MR. McDONELL: Q. Okay. So what is -- is

there a methodology that I can see that would make it clear to me why under your Georgia Pacific analysis you get the number of no less than 2 billion dollars as opposed to, say, 1.5 billion or

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2.5 billion? MS. HOUSE: THE WITNESS: Asked and answered, overbroad. From my perspective -- and

obviously you haven't been paying much attention to my testimony and you haven't read my report and looked at my schedules, because I've actually used contemporaneous documents from Oracle back in January 2005, and from SAP, and I've taken all their numbers and all their metrics. The value of

cross-sell, the value of upsell the value of an annual maintenance contract, the 10-year value of a maintenance contract. calculations. And even on the schedule, Table 8, you see the range of values. And so it's all right here. I've done all those

So I've given you my best testimony, my complete answers, my untethered attention, and I have a report here with all this backup.

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