Oracle Corporation et al v. SAP AG et al

Filing 883

Reply in Support re 767 MOTION No. 3: to Exclude Testimony of Defendants' Expert David Garmus filed by Oracle International Corporation, Oracle USA Inc., Siebel Systems, Inc.. (Alinder, Zachary) (Filed on 9/16/2010) Modified on 9/17/2010 (vlk, COURT STAFF).

Oracle Corporation et al v. SAP AG et al

Doc. 883

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BINGHAM McCUTCHEN LLP DONN P. PICKETT (SBN 72257) GEOFFREY M. HOWARD (SBN 157468) HOLLY A. HOUSE (SBN 136045) ZACHARY J. ALINDER (SBN 209009) BREE HANN (SBN 215695) Three Embarcadero Center San Francisco, CA 94111-4067 Telephone: [phone] Facsimile: [phone] [e-mail] [e-mail] [e-mail] [e-mail] [e-mail] BOIES, SCHILLER & FLEXNER LLP DAVID BOIES (Admitted Pro Hac Vice) 333 Main Street Armonk, NY 10504 Telephone: [phone] Facsimile: [phone] [e-mail] STEVEN C. HOLTZMAN (SBN 144177) FRED NORTON (SBN 224725) 1999 Harrison St., Suite 900 Oakland, CA 94612 Telephone: [phone] Facsimile: [phone] [e-mail] [e-mail] DORIAN DALEY (SBN 129049) JENNIFER GLOSS (SBN 154227) 500 Oracle Parkway, M/S 5op7 Redwood City, CA 94070 Telephone: [phone] Facsimile: [phone] [e-mail] [e-mail] Attorneys for Plaintiffs Oracle USA, Inc., et al. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION ORACLE USA, INC., et al., v. Plaintiffs, No. 07-CV-01658 PJH (EDL) REPLY MEMORANDUM IN SUPPORT OF MOTION NO. 3: TO EXCLUDE TESTIMONY OF DEFENDANTS' EXPERT DAVID GARMUS Date: Time: Place: Judge: September 30, 2010 2:30 p.m. Courtroom 3 Hon. Phyllis J. Hamilton
No. 07-CV-01658 PJH (EDL)

SAP AG, et al., Defendants.

REPLY MEMO. RE MOT. TO EXCLUDE TESTIMONY OF DEFENDANTS' EXPERT DAVID GARMUS
Dockets.Justia.com

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TABLE OF CONTENTS Page INTRODUCTION ............................................................................................................. 1 ARGUMENT ..................................................................................................................... 2 A. Garmus' Opinions Might Be Moot, But Pinto's Are Not ...................................... 2 B. Garmus' Opinions And Testimony Regarding The Scope Of Oracle Software Used By SAP TN ­ And Clarke's Reliance On Them ­ Must Be Excluded................................................................................................................. 3 1. Garmus' Testimony Is Contrary To The Trial Stipulation......................... 4 2. Garmus Has No Expertise At All On The Scope Of Oracle Software Used By SAP TN........................................................................ 4 a. Garmus' Review Of Counsel-Selected Spreadsheets Does Not Satisfy The Daubert Reliability Test....................................... 5 b. The "Facts" Garmus Relies On Are Wrong................................... 6 3. Garmus' Opinions Are Also Contrary To Copyright Law......................... 7 4. Testimony Contrary To The Facts And Law Are Not Admissible, And Do Not Just "Go To The Weight"...................................................... 7 5. Garmus' Improper Opinions Also Cannot be Used By SAP's Damages Expert, Stephen Clarke............................................................... 9 C. Garmus' New Function Point Counts Should Be Excluded As An Irrelevant "Academic Exercise" Or An Undisclosed Affirmative Opinion......... 10 1. Garmus' Function Point Counts Are Not Relevant And Would Not Assist The Trier of Fact............................................................................ 10 2. Garmus' Function Point Counts Are Also Improper Affirmative Opinions ................................................................................................... 11 D. Garmus' Claimed Opinions On Behalf of IFPUG And Its Membership Should be Excluded ............................................................................................. 12 E. Garmus' Improper Legal Conclusions Should be Excluded................................ 13 CONCLUSION ................................................................................................................ 15

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TABLE OF AUTHORITIES Page

Andrews v. E.I. Du Pont De Nemours and Co., 447 F.3d 510 (7th Cir. 2006).................................................................................................... 6 Bazemore v. Friday, 478 U.S. 385 (1986) ................................................................................................................. 8 Brace v. U.S., 72 Fed. Cl. 337 (Fed. Cl. 2006) ............................................................................................... 5 Clicks Billiards, Inc. v. Sixshooters, Inc., 251 F.3d 1252 (9th Cir. 2001)................................................................................................ 13 Crow Tribe of Indians v. Racicot, 87 F.3d 1039 (9th Cir. 1996).................................................................................................. 14 Crowley v. Chait, 322 F. Supp. 2d 530 (D.N.J. 2004) .......................................................................................... 6 Daubert v. Merrell Dow Pharmaceuticals, Inc., 43 F.3d 1311 (9th Cir. 1995)........................................................................................... passim EEOC v. Morgan Stanley & Co., 324 F. Supp. 2d 451 (S.D.N.Y. 2004)...................................................................................... 8 Guidroz-Brault v. Mo. Pac. R. Co., 254 F.3d 825 ............................................................................................................................ 8 Hangarter v. Provident Life and Accident Ins. Co., 373 F.3d 998 (9th Cir. 2004).................................................................................................. 14 Hebert v. Lisle Corp., 99 F.3d 1109 (Fed. Cir. 1996)................................................................................................ 14 Hemmings v. Tidy-Man's Inc., 285 F.3d 1174 (9th Cir. 2002).................................................................................................. 8 IBM Corp. v. Fasco Industries, Inc., No. C-93-20326, 1995 WL 115421 (N.D. Cal. Mar. 15, 1995)....................................... 11, 13 In re Ready-Mix Concrete Antitrust Litig., 261 F.R.D. 154 (S.D. Ill. 2009).............................................................................................. 11 Jones v. Otis Elevator Co., 861 F.2d 655 (11th Cir. 1988).................................................................................................. 8 ii
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TABLE OF AUTHORITIES (continued)

Page

Kilgore v. Carson Pirie Holdings, Inc., 205 Fed. Appx. 367 (6th Cir. 2006) ....................................................................................... 12 Lyman v. St. Jude Med. S.C., Inc., 580 F. Supp. 2d 719 (E.D. Wis. 2008)................................................................................. 6, 8 McNamara v. Kmart Corp., No. 09-2216, 2010 WL 1936268 (3d Cir. May 14, 2010) ................................................. 9, 10 Micro Chem., Inc. v. Lextron, Inc., 317 F.3d 1387 (Fed. Cir. 2003).............................................................................................. 10 Microfinancial, Inc. v. Premier Holidays Int'l, Inc., 385 F.3d 72 (1st Cir. 2004) ...................................................................................................... 8 Nationwide Transport Finance v. Cass Information Systems, Inc., 523 F.3d 1051 (9th Cir. 2008).................................................................................................. 7 Nebraska Plastics, Inc. v. Holland Colors Americas, Inc., 408 F.3d 410 (8th Cir. 2005).................................................................................................... 8 Playtex Products, Inc. v. Georgia-Pacific Corp., 390 F.3d 158 (2d Cir. 2004)..................................................................................................... 6 QR Spex, Inc. v. Motorola, Inc., No. 03-6284, 2004 WL 5642907 (C.D. Cal. Oct 28, 2004)............................................. 4, 6, 8 Regents of Univ. of California v. Monsanto Co., No. 04-0634, 2006 WL 5359055 (N.D. Cal. Feb. 7, 2006) ............................................... 8, 15 Sommerfield v. City of Chicago, 254 F.R.D. 317 (N.D. Ill. 2008) ............................................................................................... 6 U.S. v. Grey Bear, 883 F.2d 1382 (8th Cir. 1989).......................................................................................... 12, 13 Wall Data, Inc. v. Los Angeles County Sheriff's Dept., 447 F.3d 769 (9th Cir. 2006).................................................................................................... 7

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I.

INTRODUCTION Hoping to avoid the substance of Oracle's Daubert challenge to their expert, David

Garmus, SAP now claims that Garmus is moot. They make this assertion based on the erroneous claim that the Oracle expert he seeks to rebut, Paul Pinto, is also moot due to the Court's summary judgment ruling. In fact, certain of Pinto's opinions are unrelated to the summary judgment ruling and still relate to Oracle's damages. Garmus is only moot if Defendants choose to withdraw him, which they should do since their counsel directed him to rely upon facts contradicted by SAP TN's stipulation to "all liability on all claims." Dkt. 866 (Stipulation and Order). Even if SAP does not withdraw Garmus, Garmus cannot testify contrary to the facts or the law. He does both. His testimony must also be relevant and helpful. It is not. Specifically, Garmus testifies to four opinions that fall well short of the Daubert standard. Garmus' "use" opinion is not admissible. Garmus' main opinion is that Pinto should have excluded from his analysis Oracle software that was "not utilized by TN in the course of TN's business." Based solely on a carefully selected group of spreadsheets created by defense counsel, Garmus constructs a five-page listing of Oracle software that he opines TomorrowNow never "used," and which SAP's damages expert, Stephen Clarke, then relies on and extends to reduce SAP's proposed fair market value hypothetical license. This opinion must be excluded, because Garmus cannot testify: · Contrary to a Stipulation and Order of the Court. The opinion contradicts the Trial Stipulation that SAP TN infringed all of the copyrighted software in suit. · Without sufficient factual basis or as a mouthpiece for counsel. Garmus admittedly does so here. · Contrary to undisputed facts. Garmus concedes he ignored key facts completely, because considering them was "beyond the scope of what [he] was assigned to do." · Contrary to the law. Garmus excludes Oracle software and support materials that SAP TN admittedly copied claiming (wrongly) that SAP TN did not use them to service customers, a safe harbor that he invented and that appears nowhere in the Copyright Act. 1
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Garmus' new Function Point analysis is not admissible. Garmus' second opinion is an admitted "academic exercise," which Garmus designed so it could not be compared apples-toapples with anything that Pinto did. Garmus tried to determine the size of two software modules that Pinto never studied as part of his own opinion. In doing so, Garmus engaged in a different function point analysis of a different set of data that, by definition, could not relate to any "pertinent inquiry" as Daubert requires. Even if relevant, this new, non-responsive analysis comes long after the deadline for affirmative opinions. Garmus' hearsay endorsements are not admissible. Third, Garmus offers hearsay endorsements of his opinions by a trade group, its "membership" and anonymous bulletin board posters. Garmus cannot bootstrap his way to reliability or circumvent the rules of hearsay by "testifying that other experts [if they can be called that], not present in the courtroom, corroborate his views." Garmus' legal conclusions on damages are not admissible. Fourth, Garmus offers the bare conclusion that certain damages remedies are legally "not appropriate" for this case. Since he is neither a damages expert, economist, or lawyer, his "opinion" about the appropriate remedy for copyright infringement has no place in the case, even if he got it right (which he does not). None of SAP's arguments turn any of these four opinions into admissible expert testimony. Expert testimony (if not moot) must be relevant and reliable. Garmus' four opinions fall far short on both accounts. II. ARGUMENT Oracle's Daubert motion as to SAP's expert, David Garmus, established that his opinions are contrary to the facts and the law. When the Court entered the Parties' Trial Stipulation in which Defendants admitted full liability as to all claims, Garmus' opinions also became contrary to a binding Stipulation and Order of the Court. Even if those opinions were not precluded by the Trial Stipulation and Order, they fail the Daubert test for reliability and relevance. A. Garmus' Opinions Might Be Moot, But Pinto's Are Not

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August 17 Summary Judgment Order, Dkt. 762, ("MSJ Order"). Dkt. 829 (Def's. Opp. to Oracle's Mot. No. 3 to Exclude Expert Test. of David Garmus) ("Opp.") at 3:22-28. SAP is half right. Garmus' opinions may well be moot, because, among other reasons, his opinions are contrary to SAP's liability admissions. However, the MSJ Order does not, as SAP contends, exclude Pinto's opinions. It merely affects the use of certain of Pinto's opinions in Oracle's damages case. As a result of the MSJ Order, Oracle will not seek the saved cost of software development as damages for any claim, and therefore, to the extent Garmus' opinions seek to rebut such an award, those opinions are moot. However, it does not follow that the rest of Pinto's opinions are no longer relevant. Several of them were not even related to, much less addressed by, the MSJ Order. See Dkt. 843 (Oracle's Opp. to Mot. to Exclude Pinto) at 2:6-23 & 9:12-11:9. B. Garmus' Opinions And Testimony Regarding The Scope Of Oracle Software Used By SAP TN ­ And Clarke's Reliance On Them ­ Must Be Excluded1

Garmus purports to identify Oracle software applications Pinto should have excluded from his analysis, because they "were in fact not being used by TN." Dkt. 768 (Alinder Decl.) Ex. A (Garmus Report) at 10-14. Not only was Garmus' listing of these software applications inexpert, uninformed and contrary to the undisputed evidence, it also contradicts SAP's express stipulation that SAP TN infringed each of Oracle's copyrights in suit. Dkt. 866 (Stipulation and Order). His testimony is unreliable and inadmissible. SAP defends these opinions by claiming (a) they rebut the "scope" of what Pinto analyzed and valued, (b) Garmus reviewed sufficient materials to support his opinions, and (c) the undisputed facts about the software that SAP TN copied is somehow irrelevant. Opp. at 9:7-18:2. SAP further claims that Garmus' failure to consider undisputed facts and testimony that prove his opinions wrong goes to weight, not admissibility. Id. at 16:9-17:2. None of these arguments remotely succeeds.

SAP addressed Oracle's Daubert arguments out of order from Oracle's motion. See generally Opp. Oracle addresses these arguments in their original order. 3
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1.

Garmus' Testimony Is Contrary To The Trial Stipulation

On September 9, all of the Defendants stipulated to SAP TN's complete liability for all claims including "liability on Oracle's claims for copyright infringement...." Dkt. 866 (Stip. and Order). Garmus' purported exclusions of software ­ contrary to the facts ­ therefore contradict the stipulation that Defendants made just a week ago. They cannot concede that SAP TN is liable for infringing all the Oracle software in suit, and then put on expert testimony claiming (wrongly) that SAP TN did not actually use that same software. Garmus' testimony must therefore be excluded, because it would violate the Trial Stipulation and Order. An expert cannot testify contrary to the stipulated facts. See QR Spex, Inc. v. Motorola, Inc., 2004 WL 5642907, at *9 (C.D. Cal.). 2. Garmus Has No Expertise at All On The Scope Of Oracle Software Used By SAP TN

SAP claims that Garmus' rebuttal opinion on the scope of SAP TN's use of Oracle software is proper, because it rebuts Pinto's valuation of entire Oracle software suites they infringed. Opp. at 9:7-10:19. Even if Garmus' opinion on what software SAP TN did and did not use were not contrary to the trial stipulation, it requires a factual basis, and Garmus has none. He admitted at deposition he has "no idea" what Oracle intellectual property SAP TN actually used. Alinder Decl., Ex. A (Garmus Depo.) at 92:2-4 ("I have no idea what TomorrowNow was using, or I have no -- I didn't talk to anybody from TomorrowNow."). Garmus simply "relied upon Jones Day" to inform him as to what software they thought SAP TN "would have needed to service its customers." Opp. at 11:8-9; see Alinder Decl., Ex. A (Garmus Depo.) at 91:25-93:6 & 284:8286:4. He did not verify the accuracy of any of the data defense counsel provided. See id. at 200:1-17. Passing on the uncorroborated views of counsel, with the added imprimatur of a purported "expert," does not pass any test for admissibility, let alone Daubert. Worse, Garmus admits he ignored the actual evidence of SAP TN's software copying and use, including (1) the thousands of software copies and millions of Oracle support material copies on SAP TN's computer systems, (2) the vast Oracle documentation libraries on SAP TN's computer systems, (3) the concessions SAP made in their answer and since in the pretrial statement about SAP TN's unlawful use of Oracle software, and, (4) the admissions of SAP TN's personnel, 4
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including its CEO, regarding the scope of use of Oracle software. See id. at 281:17-282:5; see also Dkt. 767 (Oracle's Mot. to Exclude Garmus) ("Mot.") at 13-17. Examining actual evidence of copying and use was "beyond the scope of what [Garmus] was assigned to do." Id. SAP attempts to save Garmus by arguing, first, without factual support, that the spreadsheets counsel provided Garmus were "comprehensive," and second, that "the facts underlying his report have not been directly refuted." Opp. at 11:18-14:10. Both assertions are false. a. Garmus' Review Of Counsel-Selected Spreadsheets Does Not Satisfy The Daubert Reliability Test

First, the only support SAP provides for the claim that the spreadsheets counsel provided were "comprehensive" are yet more vague conclusions from counsel. Opp. at 11:21-12:21 (counsel claiming the spreadsheets were "comprehensive lists of all the [software] for which TN contracted to service or recorded in SAS as servicing"); see also Opp. at 13:8-15 (citing vague testimony from Shelley Nelson about the SAS database generally, along with bare cites to three of five spreadsheets Garmus relied on). SAP cites no testimony from any fact witness to support counsel's claims that these spreadsheets are "comprehensive," apparently because counsel were the only people with any knowledge as to their creation. See id. SAP cannot call their own counsel as witnesses to testify as to purported "facts" they selectively culled from their client's SAS database, and SAP cannot use Garmus as an uncritical mouthpiece to do so for them, parroting "facts" that he admits he knows nothing about: Q. A. Q. A. Are you aware of whether those four spreadsheets were derived from TomorrowNow's SAS database? I have no idea how they were derived. So you've never accessed TomorrowNow's SAS database? I never touched anything at TomorrowNow or SAP or Oracle.

Alinder Decl., Ex. A (Garmus Depo.) at 100:7-14; see, e.g., Brace v. U.S., 72 Fed. Cl. 337, 352 (Fed. Cl. 2006) ("Rule 703 was not intended to abolish the hearsay rule and to allow a witness, under the guise of giving expert testimony, to in effect become the mouthpiece of the witnesses on 5 No. 07-CV-01658 PJH (EDL)
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whose statements or opinions the expert purports to base his opinion.") (citations omitted). SAP also fails to distinguish the cases Oracle cites precluding such non-expert mouthpiece testimony ­ Sommerfield v. City of Chicago, 254 F.R.D. 317, 322 (N.D. Ill. 2008) and Crowley v. Chait, 322 F. Supp. 2d 530, 542, 546 (D.N.J. 2004). SAP attempts to differentiate these cases, arguing that the experts there relied on documents or summaries created by counsel in which the attorneys had been "selective" in what was included. Opp. at 13:21-14:1. But that is exactly what occurred here. See Mot. at 10-12. As SAP's own case, Lyman v. St. Jude Med. S.C., Inc., 580 F. Supp. 2d 719, 726 (E.D. Wis. 2008) holds: "Wilson [the expert] should have independently verified the reliability of the data before opining on plaintiffs' future sales, as opposed to accepting it at the word of St. Jude's counsel." Id. at 726-27. Like in Lyman, Garmus did not verify the reliability of any data; instead he simply "relied upon Jones Day." Alinder Decl., Ex. A (Garmus Depo.) at 200:1-17 & 284:8-286:4. b. The "Facts" Garmus Relies On Are Wrong

Second, the "facts" Garmus relies on (as provided by counsel) have been so thoroughly refuted that Defendants have stipulated they are wrong. Dkt. 866 (Stip. and Order). They admit SAP TN infringed the copyrights in all of the Oracle software alleged ­ including all of the software on Garmus' list. See id. Experts cannot rely on facts not supported by the record. Mot. at 6:16-7:4; 18:5-19:1 (citing, e.g., QR Spex, Inc. v. Motorola, Inc., 2004 WL 5642907, at *9 (C.D. Cal.)). SAP attempts to distinguish QR Spex on the ground that in that case, the expert relied on "facts [which] were thereafter directly contradicted." Opp. at 14. The same is true here ­ even if the wealth of evidence available (but ignored by Garmus) at SAP TN regarding the vast array of Oracle software on their systems were not enough, the purported "facts" supporting Garmus' opinions have now been directly contradicted by the undisputed facts and the stipulation of the Parties. See Dkt. 745 (Joint Pretrial Statement) at 24-25, Undisputed Facts ¶¶ 68-91; see also Dkt. 866 (Stip. and Order). QR Spex is on point, and establishes that Garmus' testimony must be excluded due to his reliance on "facts" that have now been proven wrong. See also Andrews v. E.I. Du Pont De Nemours and Co., 447 F.3d 510, 513 (7th Cir. 2006) (expert testimony excluded under Daubert because expert based his calculations on data from the wrong highway ramp); Playtex 6 No. 07-CV-01658 PJH (EDL)
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Products, Inc. v. Georgia-Pacific Corp., 390 F.3d 158, 167-68 (2d Cir. 2004) (in trademark infringement case, disregarding expert testimony where expert analyzed wrong mark), superseded by statute on other grounds. 3. Garmus' Opinions Are Also Contrary To Copyright Law

Even if the spreadsheets counsel provided had been verified by Garmus and truly "comprehensive," the resulting testimony that Garmus seeks to provide would still be inadmissible and contrary to copyright law. According to SAP, Garmus did not need to have any knowledge of the software copies that SAP TN actually made and used ­ that evidence is "irrelevant" in their view. Opp. at 14:16-16:6. Not so. Garmus' testimony seeks to rebut copyright damages. It is elementary that "use" for purposes of copyright law includes all of the copies that SAP TN actually made of Oracle software, not just those copies that SAP TN would have most needed to service some of its customers (according to its counsel). See, e.g., Wall Data, Inc. v. Los Angeles County Sheriff's Dept., 447 F.3d 769, 775 n.3, 786-87 (9th Cir. 2006) (upholding damages award based on 3,962 infringing software copies where the evidence showed that some of these copies of the "software would remain installed, but unused" in the defendant's workstations); see also 17 U.S.C. § 106. SAP doesn't get a free pass on copying, merely because in the hypothetical constructed by counsel and delivered to Garmus, it claims it really didn't need those copies for its operations. See id. SAP took the software it took and made the copies it made. The fact that it may have taken more than it needed is not a defense. Allowing SAP to exclude software copies from the copyright value of use, as SAP seeks to do through Clarke's reliance on Garmus, deprives the victim of infringement a complete remedy. See id; see also, Nationwide Transport Finance v. Cass Information Systems, Inc., 523 F.3d 1051, 1055-64 (9th Cir. 2008) (affirming preclusion of expert testimony that was based on "erroneous or inapplicable legal theories" in part because it "may confuse or mislead the jury"). 4. Testimony Contrary To The Facts And Law Are Not Admissible, And Do Not Just "Go To The Weight"

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what SAP TN used, and an expert cannot just take counsel's word for it. See Lyman v. St. Jude Medical S.C., Inc., 580 F. Supp. 2d 719, 726 (E.D. Wis. 2008). An expert also cannot testify contrary to the law. See Regents of Univ. of California v. Monsanto Co., 2006 WL 5359055, at *1 (N.D. Cal.); see also Sec. II.B.3. above. Finally, an expert cannot testify in disregard of, and contrary to, the facts. See, e.g., Guidroz-Brault v. Mo. Pac. R. Co., 254 F.3d 825, 830-31. Garmus' opinions are "fundamentally unsupported" by "the relevant facts of the case" and "should not be admitted." Nebraska Plastics, Inc. v. Holland Colors Americas, Inc., 408 F.3d 410, 416 (8th Cir. 2005); QR Spex, Inc. v. Motorola, 2004 WL 5642907, *9-10 (C.D. Cal.) (opinion "founded upon nothing more than [expert's] own conjecture and speculation, simply fails to meet the test for reliability set forth in Rule 702"). Each of these defects is fatal, requiring exclusion of his proposed testimony. The string cite of cases that SAP cites ­ e.g. Hemmings v. Tidy-Man's Inc., 285 F.3d 1174 (9th Cir. 2002) and Bazemore v. Friday, 478 U.S. 385 (1986) ­ are at best inapposite, and in many respects support Oracle. Opp. at 16:14-17:2. These cases do not concern a situation where an expert seeks to testify in direct conflict with undisputed facts. See id. Further, even SAP's cases recognize that an "[expert's] analysis may be so incomplete as to be inadmissible as irrelevant." Hemmings, 285 F.3d at 1188 (quoting Bazemore).2 Here, Garmus' opinions are contrary to the undisputed facts, and he concedes that he is ignorant of the facts of what SAP TN actually used ­ he ignored that evidence because it was beyond what he was assigned to do. See Dkt. 866 (Stip. and Order); see also Dkt. 745 (Joint Pretrial Statement) at 24-25, Undisputed Facts ¶¶ 68-91; see also Alinder Decl., Ex. A (Garmus Depo.) at 281:17-282:5. The defects in Garmus' testimony are

2

The remainder of SAP's string cite of cases are similarly inapposite. See Jones v. Otis Elevator Co., 861 F.2d 655, 662-663 (11th Cir. 1988) ("relevant testimony from a qualified expert is admissible only if the expert knows of facts which enable him to express a reasonably accurate conclusion as opposed to conjecture or speculation."); Microfinancial, Inc. v. Premier Holidays Int'l, Inc., 385 F.3d 72, 81 (1st Cir. 2004) (not clear error to admit expert testimony where expert relied on some but not all available information, with no discussion of the admissibility of expert opinion based upon admittedly wrong information); EEOC v. Morgan Stanley & Co., 324 F. Supp. 2d 451, 458-60 (S.D.N.Y. 2004) (holding that allegations of incomplete expert analysis go to weight, but not discussing effect of admittedly wrong expert opinion). 8
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not a matter of credibility or competing facts; they render his opinions unreliable, unhelpful and inadmissible. 5. Garmus' Improper Opinions Also Cannot be Used By SAP's Damages Expert, Stephen Clarke

SAP's damages expert, Clarke, relies on Garmus' (really, Jones Day's) erroneous and unreliable software exclusion to reduce Oracle's damages. See Dkt. 781 (Oracle's Mot. to Exclude Clarke) at 11:6-16; n.11. SAP cannot launder Garmus' inadmissible opinions through Clarke. See, e.g., McNamara v. Kmart Corp., 2010 WL 1936268, at *4 (3d Cir.) ("Because McKenzie [the first expert] was not permitted to testify about these expenses, Johnson's testimony [the second expert], which was dependent on McKenzie's, was also properly excluded."). SAP first tries to limit Clarke's exposure, by downplaying how much he relies on Garmus, arguing that "Clarke's reliance on Garmus is limited to providing a high level critique of Meyer's cost approach." Opp. at 17:19-20. But Clarke's report and testimony are clear ­ he relies directly and solely on Garmus' flawed opinions to tell him what TN "used" in criticizing Meyer's value of use damages number, and in reducing his own. Alinder Decl., Ex. B (Clarke Report) at ¶ 3.7.3. (stating in the section titled "Value of Use" that "[B]ased on information provided by Mr. David Garmus, it was not necessary for TomorrowNow to have access to the entirety of Oracle's software .... Based on Mr. Garmus' report, Mr. Meyer's Value of Use should incorporate an adjustment to allow for the lack of access to those portions of Oracle's software that TomorrowNow did not actually support."). Clarke then reinforces that his reliance on Garmus extends to all measures of damages, not just the cost approach as SAP claims in their opposition: Furthermore, as Mr. Garmus reports, (later) the Subject IP TomorrowNow used did not include the entire suite of software at issue. To the extent the Subject IP was only a subset of the software at issue, Mr. Meyer should have reduced his Value of Use for all approach measures (i.e., market, income and cost) accordingly. Id. at ¶ 6.2 (emphasis supplied); cf. Opp. at 17:19-20. Clarke's reliance on Garmus is broad, and

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those opinions are no more admissible from Clarke than they are from Garmus. See McNamara, 2010 WL 1936268, at *4.3 SAP next tries to explain away Clarke's reliance as merely a battle over interpretation of facts. Opp. at 17:23-18:2. But Garmus concedes he has no factual basis, so there can be no battle. Alinder Decl., Ex. A (Garmus Depo.) at 92:2-4 ("I have no idea what TomorrowNow was using...."). The case that SAP relies on, Micro Chem., Inc. v. Lextron, Inc., 317 F.3d 1387 (Fed. Cir. 2003) helps make this point. That case holds that competing experts may properly rely on competing sets of facts. See id. at 1392. The "facts" that Garmus and Clarke rely on are not "competing;" they are not facts. They are merely hypothetical facts, constructed by litigation counsel and provided to an expert in the hope that if they are repeated enough, they will be believed. Compare Dkt. 768 (Alinder Decl.) Ex. A (Garmus Report) at 10-14, with Dkt. 866 (Stip. and Order). Micro Chem. does not stand for the proposition that a court should admit expert testimony based on assumed "facts" that are contrary to the real ones ­ no case does. C. Garmus' New Function Point Counts Should Be Excluded As An Irrelevant "Academic Exercise" Or An Undisclosed Affirmative Opinion

Garmus' function point count "exercise" is either irrelevant or an untimely and improper affirmative opinion. It should be excluded either way. SAP responds that Garmus' attempt to introduce new function point counts in rebuttal are proper, because they (a) demonstrate the correct process for function point analysis, and (b) are not affirmative opinions, as they rebut evidence on the "same subject matter." Opp. at 18:3-21:18. Both arguments fail. 1. Garmus' Function Point Counts Are Not Relevant And Would Not Assist The Trier Of Fact

SAP first attempts to show relevance by asserting that Garmus' counts of admittedly Nor can SAP rely on their other rebuttal expert, Donald Reifer, for this support. Contrary to Garmus and Clarke, Reifer in his only prior testimony agreed with Oracle's Pinto that for a "value of use" damages analysis, the proper measure was to count all of the code that was copied, not just the code that the defendants purportedly "used." Alinder Decl., Ex. C (Reifer Evolution Depo.) at 42:3-25 (testifying that even if the defendants had only used two of the 9,962 lines of code included in his valuation, Reifer would not change his valuation analysis, because you have to "value the entire product."). 10
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irrelevant software modules "provide an example to the Court and the jury of what steps would have been included in a proper [function point analysis], in comparison to Pinto's faulty approach." Opp. at 18:16-18. But, by SAP's own design, Garmus' conclusions cannot be compared with anything Pinto did. That is because Garmus expressly decided not to count any of the applications relevant to the Pinto Report. Alinder Decl., Ex. A (Garmus Depo.) at 39:8-10. Because Garmus concedes that he did not count anything relevant, he testified that these counts were purely "academic exercises." Id. at 37:12-18. He further admitted that his exercises did not address the costs of software development at all, or any other factor relevant to the Georgia Pacific analysis, as required under the Daubert standard. Id. at 55:13-22; Daubert v. Merrell Dow Pharmaceuticals, Inc.,, 43 F.3d 1311, 1320 (9th Cir. 1995) ("Rule 702's `helpfulness' standard requires a valid scientific connection to the pertinent inquiry as a precondition to admissibility."). His opinions are therefore irrelevant and inadmissible twice over. 2. Garmus' Function Point Counts Are Also Improper Affirmative Opinions

A rebuttal expert "must restrict [his] testimony to attacking theories offered by the adversary's experts," something that Garmus admittedly failed to do here. IBM Corp. v. Fasco Industries, Inc., 1995 WL 115421, at *3 (N.D. Cal.); accord In re Ready-Mix Concrete Antitrust Litig., 261 F.R.D. 154, 159 (S.D. Ill. 2009) (rebuttal report must rebut, not offer affirmative opinions). If there is any relevance at all to these new function point counts, they are plainly affirmative opinions, and therefore inadmissible. Mot. at 19:18-22:7. SAP claims the opinions are proper rebuttal, because they are "on the same `subject matter'" as Pinto. Opp. at 19:4-19. Not so. As established above and in the opening brief, Garmus conceded during his deposition that these counts were intentionally designed not to rebut Pinto, but to count different software completely. See Mot. at 20; see sec. II.C.1. above. Further, Garmus' counts stop at the half-way point ­ only deriving a size for the software, not a cost of development. See Mot. at 20:15-20. Thus, Garmus' two hand-count exercises relate to the same "subject matter" as Pinto's software cost analysis only in the sense that both relate to Oracle software. SAP's claim of the same "subject matter" here is like stating that expert analysis on the 11 No. 07-CV-01658 PJH (EDL)
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size of Microsoft Excel is relevant to rebut the cost of developing Microsoft Word. They are apples and oranges. Garmus' non-responsive "academic exercises" would at best mislead the jury. See Alinder Decl., Ex. A (Garmus Depo.) at 37:12-18. D. Garmus' Claimed Opinions on Behalf Of IFPUG And Its Membership Should Be Excluded

Garmus tries to bootstrap his way to reliability by claiming that the International Function Point User's Group ("IFPUG"), its "membership" (as a monolithic group), and eight anonymous web posters "agree" with him and not Pinto. Dkt. 768 (Alinder Decl.) Ex. A (Garmus Report) at 17-21. SAP even briefly agrees that these opinions are improper: "[E]xperts generally are not permitted to testify that some other individual--such as the hypothetical IFPUG member proposed by Plaintiffs--'corroborated' or approved that experts opinions." Opp. at 7:3-6 (citing U.S. v. Grey Bear, 883 F.2d 1382, 1392-93 (8th Cir. 1989)). This is exactly what Garmus attempts to do here. SAP attempts to save these opinions in two ways, first by recasting them as opinions on "industry standards," and second by distinguishing them from Grey Bear on the ground that his statements were made on behalf of an "organization," rather than an "individual." Opp. at 5:167:19. Neither attempt succeeds. First, as to their argument that Garmus merely opines about "industry standards" (Opp. at 5:16-18), Garmus' own words betray them. He opines repeatedly that "IFPUG does not agree" and that the "IFPUG membership does not agree" with Pinto. Dkt. 768 (Alinder Decl.) Ex. A (Garmus Report) at 17-21. He also cuts and pastes directly into his report eight anonymous bulletin board postings from purported IFPUG members he claims corroborate his views on backfiring. See id. None of those are statements of "industry standards," but hearsay statements of anonymous, potentially fictitious individuals or groups that Garmus uses to improperly bolster his own credibility at Pinto's expense. Accordingly, they are unreliable, misleading and inadmissible. As Grey Bear holds, an expert cannot "circumvent the rules of hearsay by testifying that other experts, not present in the courtroom, corroborate his views." U.S. v. Grey Bear, 883 F.2d 1382, 1392-93 (8th Cir. 1989); see also Kilgore v. Carson Pirie Holdings, Inc.,, 2205 Fed. Appx. 367, 371-72 (6th 12 No. 07-CV-01658 PJH (EDL)
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Cir. 2006) (finding internet article an unreliable basis for opinion where expert did not know what research methodology the article was based on and conducted no independent research).4 Second, SAP's attempt to distinguish Grey Bear strains credulity. SAP argues Grey Bear is "irrelevant" here, because Garmus seeks to testify on behalf of an "organization," and not an "individual." Opp. at 6:16-26. Putting aside the fact that Garmus also seeks to testify on behalf of anonymous individuals who posted comments on the IFPUG bulletin board (Dkt. 768 (Alinder Decl.) Ex. A (Garmus Report) at 17-20), SAP does not even attempt to explain why it should make a difference whether an expert seeks to import hearsay of individuals or a group of them. Opp. at 6:20-26. SAP cites no authority for this proposition, nor can they. SAP instead argues that "[i]t entirely defeats the purpose of expert testimony to require legions of experts to `approve' or double-check testifying experts' opinions." Opp. at 7:6-7. But that simply makes Oracle's point. Oracle does not suggest that Garmus needs other experts to "approve" his opinions. Quite the opposite, Garmus may only testify to his own opinions, not those of individuals or groups who are outside of court, have never been deposed, nor even identified. These opinions must be excluded as a result. E. Garmus' Improper Legal Conclusions Should be Excluded

Garmus is admittedly not an expert in "damages," "copyright," or "avoided costs," and thus has no basis for his opinion that "determining the cost for independently developing the four underlying application suites is not appropriate." See Mot. at 23:18-24:4. See also Alinder Decl., Ex. A (Garmus Depo.) at 60:4-12 & 213:19-214:24 & Dkt. 768 (Alinder Decl.) Ex. A (Garmus Report) at 1, 26. Even if he were somehow qualified to render any damages opinion (though he's

In arguing otherwise, SAP cites IBM Corp. v. Fasco Indus., Inc., 1995 WL 115421, at *3 (N.D. Cal.). This case supports Oracle, as it holds the expert must "restrict [his] testimony to attacking the theories offered by the adversary's experts" and may not "put forth [his] own theories." Id.; Mot. at 20-22. Further, another case cited by SAP, Clicks Billiards, does not stand for cited proposition ­ that this issue goes to the weight of Garmus' testimony, not to determining its admissibility. See Clicks Billiards, Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1262-63 (9th Cir. 2001). It did not even involve a Daubert challenge, but instead holds "it is not the role of a district court at the summary judgment stage" to determine whether a jury would agree with an expert's conclusions. Id. It is inapposite. 13
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not), his "opinion" about the appropriate remedy for copyright infringement is simply a legal conclusion, and an incorrect one at that. See Hebert v. Lisle Corp., 99 F.3d 1109, 1117 (Fed. Cir. 1996) ("We encourage exercise of the trial court's gatekeeper authority when parties proffer, through purported experts, not only unproven science, [citation to Daubert omitted], but markedly incorrect law. Incorrect statements of law are no more admissible through `experts' than are falsifiable scientific theories."). SAP claims that Garmus does not opine "about the meaning of any legal term or standard," but "merely offers his opinion as to whether any reasonable estimator would have estimated the cost for entire software suites given the facts at hand." Opp. at 23:8-10. Though SAP's own expert, Reifer, would take issue with that proposition (see n. 3 above), Garmus did not so limit his opinions, and thus runs afoul of the Daubert standard.5 Garmus argues it is "not appropriate" to measure damages by estimating what it would have cost SAP TN to develop the products it infringed. Dkt. 768 (Alinder Decl.) Ex. A (Garmus Report) at 1, 26. This is a legal conclusion, and SAP's cited case proves the point. The expert in Hangarter opined that the defendant insurer's "letter terminating [plaintiff's] benefits was misleading, deceptive, and fell below industry standards as it incorrectly advised [plaintiff] about her rights under [her disability] policy." Hangarter v. Provident Life and Accident Ins. Co., 373 F.3d 998, 1010, 1016 (9th Cir. 2004). This factual determination allowed the jury to make the ultimate finding that the plaintiff's benefits were terminated in bad faith. See id. However, the Court further ruled that the expert would not have been allowed to opine on the ultimate legal issue of bad faith, as "instructing the jury as to the applicable law is the distinct and exclusive province of the court." Id. at 1016 (citations omitted). This is precisely what Garmus seeks to do here. His report contains his opinions on the "appropriate" measure of damages in this case, though he is admittedly unqualified to give such opinions and though this is a question of law.

SAP also falsely claims Oracle somehow cites a misleading fragment of Garmus' report. Opp. at 21:26-22:6. In fact, the larger fragment quoted by SAP only further demonstrates that Garmus seeks to testify on the appropriate measure of damages, something he is not qualified to do. 14
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SAP's attempts to distinguish Oracle's cases ­ Crow Tribe of Indians v. Racicot, 87 F.3d 1039, 1045 (9th Cir. 1996) and Regents of Univ. of California v. Monsanto Co., 2006 WL 5359055, at *1 (N.D. Cal.) ­ also fail. Opp. at 22-23. SAP claims these cases do not apply "because they all discuss experts testifying about the meanings of legal terms or the applicability of legal standards." Id at 22:23-24. And indeed, Oracle cited them for this proposition, because that is what Garmus does. He opines about a measure of copyright damages and claims that it is not appropriate in this case. Dkt. 768 (Alinder Decl.) Ex. A (Garmus Report) at 1, 26. Whether a damages measure is appropriate is a legal conclusion, not the proper subject of opinion testimony (especially from an admitted non-expert in damages like Garmus). See Alinder Decl., Ex. A (Garmus Depo) at 60:10-12 ("Q. Do you hold yourself out as being expert in damages? A. No."). The Court should exclude it as well. III. CONCLUSION The Court should grant Oracle's motion to exclude Garmus' four inadmissible opinions and related testimony, including from SAP's other experts, like Clarke, who rely on them.

DATED: September 16, 2010

Bingham McCutchen LLP By: /s/ Zachary J. Alinder Zachary J. Alinder Attorneys for Plaintiffs Oracle USA, Inc., et al.

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