Oracle Corporation et al v. SAP AG et al

Filing 877

Declaration of Tharan Gregory Lanier in Support of 876 Reply in Support filed by SAP 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)(Related document(s) 876 ) (Froyd, Jane) (Filed on 9/16/2010) Modified on 9/17/2010 (vlk, COURT STAFF).

Oracle Corporation et al v. SAP AG et al

Doc. 877 Att. 1

EXHIBIT 1

Dockets.Justia.com

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. ) ____________________________)

NO. C 07-01658 PJH (EDL)

PAGES 1 - 56 OAKLAND, CALIFORNIA WEDNESDAY, MAY 5, 2010

TRANSCRIPT OF PROCEEDINGS APPEARANCES: FOR PLAINTIFFS: BY: BINGHAM MUCCUTCHEN LLP THREE EMBARCADERO CENTER SAN FRANCISCO, CALIFORNIA 94111-4607 ZACHARY J. ALINDER, AMY K. DONNELLY, HOLLY A. HOUSE, GEOFFREY M. HOWARD, DONN P. PICKETT, JOHN POLITO, CHAD RUSSELL, ATTORNEYS AT LAW JONES DAY SILICON VALLEY OFFICE 1755 EMBARCADERO ROAD PALO ALTO, CALIFORNIA 94303 JANE L. FROYD, THARAN GREGORY LANIER, ELAIN WALLACE, ATTORNEYS AT LAW

FOR DEFENDANTS:

BY:

REPORTED BY:

RAYNEE H. MERCADO, CSR NO. 8258

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

39 1 2 3 4
TEXT REMOVED - NOT RELEVANT TO MOTION

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE OTHER ISSUE THAT WAS ADDRESSED AT THAT MOTION WAS WHETHER THEY WERE ENTITLED TO USE SAVED ACQUISITION COSTS AS A WAY TO VALUE THE SO-CALLED FAIR MARKET LICENSE. RULING DID NOT ADDRESS THAT. THE COURT: MR. LANIER: I DIDN'T REACH THAT ISSUE AT ALL. THAT'S CORRECT, YOUR HONOR. SO THAT'S THE COURT'S

WHY WE BROUGHT IT UP AGAIN THIS TIME, BECAUSE WE THINK IT SHOULD BE STRUCK. AND IT'S WORTH NOTING THAT WHAT MR. MEYER DOES IN

HIS REPORT -- MR. MEYER'S THE EXPERT -- THERE'S SOME MENTION OF, AND IN OUR PAPERS SUBSTANTIALLY, 'CAUSE OUR MOTION FOCUSED ON DAMAGES -- MR. MEYER ACTUALLY COMES UP WITH FOUR DIFFERENT WAYS TO VALUE THE FAIR MARKET VALUE LICENSE. NOW, WE HAVE LOTS OF PROBLEMS WITH ALL OF THEM. WE'LL BE TALKING TO THE COURT AT THE PRETRIAL ABOUT DAUBERT RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

40 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ISSUES AND ALL OF THAT. BUT PUTTING ALL THAT ASIDE, ONE OF

THOSE FOUR WAYS IS SAVED ACQUISITION COSTS. THE QUESTION PRESENTED ON OUR MOTION IS NOT WHETHER HE DID A GOOD JOB USING SAVED ACQUISITION COSTS OR WHETHER THERE'S A PROBLEM WITH HIS OPINION. OF THE REMEDY. IT'S THE LEGAL AVAILABILITY

THE ONLY AUTHORITY FOR THE AVAILABILITY OF SAVED

ACQUISITION COSTS AS A COPYRIGHT REMEDY, WHETHER YOU CALL IT FAIR MARKET VALUE OR NOT, IS THIS DELTAK CASE FROM THE SEVENTH CIRCUIT. BEFORE. AND HERE, I'LL BE VERY BRIEF, 'CAUSE WE'VE ARGUED THIS THE COURT JUST DIDN'T HAVE TO REACH IT. IT'S ADDRESSED

IN OUR PAPERS. THAT DELTAK CASE IS NOT THE LAW OF THE NINTH CIRCUIT. IT HAS NEVER BEEN ADOPTED IN THE NINTH CIRCUIT, AND AS PATRY THE COMMENTATOR THAT WE BOTH CITED TO SAYS, DELTAK IS AN ABERRATION AND SHOULD REMAIN ONE. SO SAVED ACQUISITION COSTS SHOULD NOT BE

AVAILABLE AS A REMEDY IN THE COPYRIGHT CASE AS WELL. SO THAT'S OUR ARGUMENT IN A NUTSHELL ON THAT LARGEST DAMAGES ISSUE. WE'RE PREPARED TO ADDRESS ANY OF THE OTHER

ISSUES ON OUR MOTION, IF THE COURT HAS QUESTIONS. THE COURT: THE -- THOSE -- THAT WAS THE ONLY

DIFFICULT ISSUE IN MY VIEW ON YOUR MOTION. MR. LANIER: THE COURT: THANK YOU, YOUR HONOR. ALL RIGHT. GOOD MORNING, YOUR HONOR.

MR. PICKETT:

I'M PREPARED TO ADDRESS A SINGLE ISSUE IN OPPOSITION RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

41 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 TO THE MOTION, WHICH IS THIS ISSUE REGARDING THE SAVED ACQUISITION OR SAVED DEVELOPMENT COSTS WITH RESPECT TO THE COPYRIGHT INFRINGEMENT. ALL OTHER ISSUES, HOLLY HOUSE IS

PREPARED TO -- TO SPEAK TO. THE REASON THAT I WANTED TO DO THAT WAS BECAUSE THERE IS A -- KIND OF A GROUND HOG DAY SENSE IN WHICH WE ARGUE THIS -MR. LANIER ARGUED THIS SAME POINT TO YOUR HONOR. QUESTIONS OF HIM. WE ARGUED. YOU ASKED

YOU TOLD ME I DIDN'T NEED TO

ARGUE IT BACK IN OCTOBER.

I -- THERE'S NO QUESTION THAT THE

SAME CASES, THE SAME AUTHORITIES, THE SAME ARGUMENTS ARE ALL BEFORE YOU. MR. MEYER IN THE DECLARATION IN OPPOSITION -- OUR DAMAGES EXPERT IN OPPOSITION TO THEIR MOTION LAST TIME TOLD YOUR HONOR THAT HE WAS GOING TO CONSIDER THE R & D COSTS THAT WERE SAVED ON THE PART OF THE S&P (SIC) AS PART OF THIS HYPOTHETICAL NEGOTIATION, WHAT A WILLING BUYER AND WILLING SELLER WOULD COME TO A PRICE TO. HE WOULD RELY ON OPINION TESTIMONY OF OTHER

EXPERTS REGARDING THOSE R & D COSTS. AND YOUR HONOR, IN RESPONSE TO THEIR MOTION, WHICH VERY MUCH SO HAD TWO ISSUES, YOU DENIED THE MOTION. YOU DIDN'T YOU

SAY I DENY ONE PART OF IT AND I RESERVE JUDGMENT ON OTHER. DENIED IT, AND YOU DID SO IN VERY SWEEPING LANGUAGE.

YOU SAID

ORACLE SHOULD BE PERMITTED TO PRESENT EVIDENCE REGARDING THE FAIR MARKET VALUE OF THE COPYRIGHTS THAT SAP ALLEGEDLY INFRINGED, INCLUDING EXPERT TESTIMONY BASED ON ESTABLISHED RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

42 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 OF IT. FIRST OF ALL, LET ME START WITH A KIND OF RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone] VALUATION METHODOLOGY. AND THE VALUATION METHODOLOGY THAT WE

HAD PRESENTED TO YOU IN THE FORM OF MR. MEYER'S DECLARATION WAS THAT ONE OF THE FACTORS HE WAS GOING TO CONSIDER WAS GOING TO BE THESE SAVED ACQUISITION COSTS. NOW, THERE'S A DISPUTE AS TO WHETHER IN -- IN SO DENYING -- IN SO RULING, THAT DEALT WITH BOTH ISSUES OR NOT. BUT WHAT I'M HERE TO SAY -THE COURT: I CAN CLARIFY. THERE'S -- THERE'S NO DISPUTE -- I MEAN, YOU ALL

IT WAS NOT MY INTENTION TO REACH IT.

ARGUED AT LENGTH THE DELTAK CASE. AN AWFUL LOT OF TIME LOOKING AT.

IT'S AN ISSUE THAT WE SPENT I'M NOT ENTIRELY PERSUADED I'LL MAKE AN ULTIMATE

THAT I SHOULD FOLLOW THE SEVENTH CIRCUIT. DETERMINATION ON THIS GO-ROUND. INTENTIONALLY DID NOT REACH.

IT WAS SOMETHING THAT I

AND TO THE EXTENT THAT ANY OF MY

LANGUAGE HAS CAUSED YOU ANY CONFUSION, I'LL CLARIFY THAT IN THE -- IN THE ORDER THAT'S ISSUED ON THIS MOTION. MR. PICKETT: EVEN IN THAT CASE, I WOULD SUBMIT THAT

THE LOCAL RULE 7-9 WAS NOT FOLLOWED BECAUSE -THE COURT: IT DIDN'T NEED TO BE FOLLOWED. ALL RIGHT.

MR. PICKETT: THE COURT: RECONSIDERATION. MR. PICKETT:

I DON'T VIEW THIS AS A MOTION FOR

OKAY.

LET ME TURN, THEN, TO THE MERITS

43 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 COMMON-SENSE POINT, AND IT COMES FROM YOUR HONOR'S JANUARY 28TH ORDER OF THIS YEAR. YOU CITED THE POLAR BEAR CASE -- IN A

DIFFERENT CONTEXT, BUT YOU CITED IT FOR THE PROPOSITION THAT THERE ARE TWO SIDES OF THE DAMAGES COIN IN PATENT -- COPYRIGHT INFRINGEMENT CASES. ONE LOOKED AT IT FROM THE ASPECT OF THE

COPYRIGHT HOLDER'S LOSS, AND THE OTHER SIDE OF THE COIN WAS TO LOOK AT IT FROM THE INFRINGER'S GAIN. AND, OF COURSE, THE SAVINGS OF RESEARCH AND DEVELOPMENT COSTS THAT ONE EXPERIENCES BY SIMPLY STEALING COPYRIGHTED MATERIAL IS A INFRINGER'S GAIN. AND CLEARLY FITS

WITHIN THE DICHOTOMY THAT THE NINTH CIRCUIT SETS OUT IN POLAR BEAR, ALBEIT IN A DIFFERENT CONTEXT, BUT, CLEARLY HERE, IF YOU'RE THE VICTIM OF THEFT OF YOUR PROTECTED INTELLECTUAL PROPERTY, YOU CAN LOOK AT DAMAGES -- AND THIS IS -- WE HAD A LONG SESSION ON THIS BACK IN OCTOBER -- YOU ARE -- ARE ENTITLED AS THE VICTIM TO LOOK AT BOTH SIDES OF THAT DAMAGE COIN. YOU

CAN LOOK AT YOUR LOSS, BUT YOU CAN ALSO LOOK AT THEIR GAIN, THE -- THE VIOLATORS' GAIN. AND HERE, ONE OF THE GAINS IS THIS SAVED R & D COSTS. I DON'T HAVE TO GO OUT AND HIRE ENGINEERS. ALL THAT WORK. I DON'T HAVE TO DO AND THAT'S

I CAN JUST, YOU KNOW, TAKE IT.

RELEVANT TO THIS ISSUE OF DAMAGES. IT'S RELEVANT IN ANOTHER WAY ALSO BECAUSE, AS YOUR HONOR SET OUT IN THE JANUARY 28TH RULING, VERY CLEARLY, AS TO THIS -- THIS -- WE HAVE A COUPLE OF CHOICES OF MEASURES OF RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

44 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 DAMAGES. ONE IS LOST PROFITS. THE OTHER, THOUGH, IS THIS FAIR

MARKET VALUE, THE HYPOTHETICAL LICENSE. AND AS PART OF THAT, WHAT A WILLING BUYER AND WILLING SELLER WOULD COME TO IN TERMS OF NEGOTIATED PRICE, WOULD BE, WELL, IF I'M GOING TO AVOID A BIG EXPENSE BY NOT HIRING ENGINEERS AND SO ON, THAT'S DIRECTLY RELEVANT. THAT'S JUST

RIGHT ON POINT TO WHAT THAT NEGOTIATIONS IS GOING TO BE. AND SO WHEN THE JURY HEARS FROM THE VARIOUS EXPERTS, WELL, WHAT WOULD THAT PRICE BE -- AND WE'LL HAVE SOME EXPERTS SAY, HERE'S THE FACTORS THAT WILL BE CONSIDERED THIS WAY. AND

THEY WILL HAVE EXPERTS COME AND SAY THOSE WOULD BE FACTORS THAT WILL BE CONSIDERED THE OTHER WAY. THAT'S CLEARLY RIGHT UP THE

FAIRWAY OF WHAT SOMEONE TRYING TO LICENSE THIS SOFTWARE WOULD CONSIDER, BOTH, MIND YOU, FROM THE BUYER'S STANDPOINT, I WOULD SAVE THOSE COSTS, AND ALSO FROM THE SELLER'S STANDPOINT, I KNOW THAT THERE WILL BE A LOT OF AVOIDED COSTS HERE TO DEVELOP, THAT IF I LICENSE THIS, THAT'S GOING TO BE SOMETHING THAT I'M GOING TO INSIST ON A CERTAIN AMOUNT OF COMPENSATION FOR. AND YOU DON'T HAVE TO LOOK ANY FATHER THAN THE SID & MARTY KROFFT CASE IN THE NINTH CIRCUIT TO SEE THAT THAT ALSO FOLLOWS ESTABLISHED NINTH CIRCUIT LAW, BECAUSE -THE COURT: WHAT --- IN THAT CASE --

MR. PICKETT: THE COURT:

WHAT CASE -THAT'S THE SID & AND MARTY KROFFT

MR. PICKETT:

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

45 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 TELEVISION PRODUCTIONS AGAINST MCDONALD'S CASE. 1157 AT 1174. THE COURT: DOES THAT PREDATE DELTAK? THAT DOES PREDATE, BUT THAT'S -- THAT'S THIS IS THE FOUNDATIONAL -- THIS IT'S 562 F.2D.

MR. PICKETT:

HOW WE GET TO THE DELTAK RULE. IS HOW YOU GET THERE.

THEY -- THE NINTH CIRCUIT SAID IN THAT

CASE -- AND IT WAS THE FIRST TO CLEARLY IDENTIFY IT -- IT SAID THAT THE FAIR MARKET LICENSE APPROACH, THE APPROACH THAT YOUR HONOR HAS AUTHORIZED US TO PROCEED WITH IN YOUR JANUARY ORDER, ALLOWS THE JURY TO CONSIDER, QUOTE, THE VALUE, IF ANY, TO DEFENDANTS OF THE USE OF PLAINTIFFS' WORKS. SO IT -- IT EMBRACES THE NOTION THAT THE VALUE OF USE BY THE DEFENDANT IS A RELEVANT FACTOR. AND OF COURSE, VALUE OF

USE WOULD BE, WELL, I'M GOING TO SAVE, YOU KNOW, HUNDREDS AND HUNDREDS OF MILLIONS, IF NOT MORE, IN NOT DEVELOPING ALL THIS SOFTWARE. SIMILARLY, THE NINTH CIRCUIT MODEL JURY INSTRUCTION DOESN'T LIMIT ANY CONSIDERATION OF THE BENEFITS THAT DEFENDANTS WOULD ENJOY FROM USING THE MATERIALS -- THE COPYRIGHTED MATERIALS. THERE'S NO LIMITATION IN IT. IT SIMPLY SAYS, YOU

PUT UP THE EVIDENCE, AND THERE'S A -- THERE'S A DECISION THAT'S TO BE MADE WHAT A WILLING BUYER, WILLING SELLER WOULD -- WOULD REASONABLY REQUIRE TO PAY AT THE TIME OF INFRINGEMENT. AND THAT

IS, AS I EARLIER TOLD, I THINK VERY CLEARLY, VERY LOGICALLY HOW MUCH COSTS YOU'D AVOID WOULD BE A RELEVANT PART OF THAT RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

46 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 DISCUSSION, SOMETHING THE JURY SHOULD BE ALLOWED TO CONSIDER. THEN DELTAK IS A CASE IN WHICH THEY EXPRESSLY SAY, RIGHT, VALUE OF USE, CITING THE KROFFT CASE, CITING THE SID & MARTY KROFFT CASE, DELTAK RELIES ON NINTH CIRCUIT LAW AND SAYS, YEAH, OF COURSE, YOU CAN CONSIDER -- AS PART OF THE VALUE OF USE BY THE INFRINGER, YOU CAN CONSIDER AN AMOUNT EQUAL TO THE ACQUISITION COSTS SAVED BY THE INFRINGEMENT INSTEAD OF BY BUYING IT OR LICENSING IT. THAT -- THAT -- THAT'S THE LOGICAL EXTENSION THEY GOT FROM THE NINTH CIRCUIT LAW. NOW, THERE IS ONE CASES -- ONE CASE, THE BUSINESS TRENDS CASE THAT FOUR YEARS LATER IN THE SECOND CIRCUIT SAID, NO WE'RE GOING TO DISAGREE WITH THE SEVENTH CIRCUIT ON THAT. BUT

THE KEY THERE IS A ON DAVIS CASE, WHICH CAME LATER AND WHICH YOUR HONOR CITED IN YOUR JANUARY RULING HERE. THE ON DAVIS CASE EXPRESSLY REJECTS THE BUSINESS TRENDS CASE THAT PLAINTIFFS RELY ON. THEIR UNDERLYING ANALYSIS

AND THE -- AND THE BUSINESS TRENDS CASE HAS NO VIABLE MEANING AFTER YOU READ ON DAVIS. WHAT THE PANEL IN THE ON DAVIS CASE

DID WAS ESSENTIALLY REJECT IT. SO NONE OF THE CASES SUPPORT PLAINTIFF, EXCEPT FOR THIS SUPERSEDED CASE. AND AS FAR AS SOME OF THE OTHERS, THERE ARE -- THERE ARE NIMMER -- THESE COMMENTARIES -- NIMMER HIMSELF ACKNOWLEDGES THE RULE, THE "PALTRY (SIC) ON COPYRIGHT" CRITICIZES DELTAK AS RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]
TEXT REMOVED - NOT RELEVANT TO MOTION

AN ABERRATION BUT FOR A VERY, VERY DIFFERENT POINT.

IT'S AN

IMPORTANT DISTINCTION, BECAUSE THEY'RE CITING THIS PALTRY TREATISE AS CRITICISM OF DELTAK AS AN ABERRATION, BUT THE ABERRATION IN THE TREATISE'S VIEWPOINT HAD NOTHING TO DO WITH THE ISSUE ON THIS MOTION, HAD NOTHING TO DO WITH WHETHER YOU CONSIDER AS PART OF THE VALUE OF DEFENDANTS' USING THE COPYRIGHTED MATERIAL, AS TO WHETHER THAT'S A RELEVANT FACTOR IN VALUING IT. BUT IT'S WHETHER THAT KIND OF CONSIDERATION WAS

APPROPRIATE IN CONSIDERING THE PROFITS ISSUE, THE OTHER MEASURE OF DAMAGES, NOT THE FAIR MARKET VALUE HYPOTHETICAL NEGOTIATIONS, THE OTHER ONE. SO IT'S JUST -- IT'S JUST MISLEADING TO TALK

ABOUT DELTAK AS AN ABERRATION IN THAT -- IN THAT CONTEXT. SO IN SHORT, WE THINK THAT VALUE OF USE IS APPROPRIATE UNDER NINTH CIRCUIT LAW. WE THINK VALUE OF USE

INCLUDES A CONSIDERATION OF THE METHODOLOGY THAT OUR EXPERT HAS PUT FORTH. WE THINK IT'S A LEGITIMATE QUESTION FOR THE JURY TO

DECIDE, WHETHER A HYPOTHET- -- IN THAT HYPOTHETICAL NEGOTIATION, AVOIDED COST WOULD BE RELEVANT AND TO WHAT EXTENT THE JURY WOULD -- WOULD WEIGH THAT.

56 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone] _________ ____________ ___________ CERTIFICATE OF REPORTER I, RAYNEE H. MERCADO, OFFICIAL REPORTER FOR THE UNITED STATES COURT, NORTHERN DISTRICT OF CALIFORNIA, HEREBY CERTIFY THAT THE FOREGOING PROCEEDINGS IN C07-01658PJH(EDL), ORACLE CORPORATION, ET AL. V. SAP AG, ET AL., WERE REPORTED BY ME, A CERTIFIED SHORTHAND REPORTER, AND WERE THEREAFTER TRANSCRIBED UNDER MY DIRECTION INTO TYPEWRITING; THAT THE FOREGOING IS A FULL, COMPLETE AND TRUE RECORD OF SAID PROCEEDINGS AS BOUND BY ME AT THE TIME OF FILING. THE VALIDITY OF THE REPORTER'S CERTIFICATION OF SAID TRANSCRIPT MAY BE VOID UPON DISASSEMBLY AND/OR REMOVAL FROM THE COURT FILE.

RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR MONDAY, MAY 10, 2010