Oracle America, Inc. v. Google Inc.

Filing 1095

AFFIDAVIT Declaration of Christopher C. Carnaval Regarding Google's Production of Android Financial Data in This Litigation by Google Inc.. (Attachments: #1 Exhibit A, #2 Exhibit B, #3 Exhibit C, #4 Exhibit D)(Van Nest, Robert) (Filed on 5/7/2012)

Volume 15
Pages 2680 - 2738
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
BEFORE THE HONORABLE WILLIAM H. ALSUP
ORACLE AMERICA, INC.,

)
)
Plaintiff,
)
)
VS.
)
)
GOOGLE, INC.,
)
)
Defendant.
)
___________________________________)

No. C 10-3561 WHA

San Francisco, California
May 3, 2012

TRANSCRIPT OF PROCEEDINGS
APPEARANCES:
For Plaintiff:
BY:

BY:

MORRISON & FOERSTER
755 Page Mill Road
Palo Alto, California 94304
MICHAEL A. JACOBS, ESQUIRE
KENNETH A. KUWAYTI, ESQUIRE
MARC DAVID PETERS, ESQUIRE
DANIEL P. MUINO, ESQUIRE
BOIES, SCHILLER & FLEXNER
333 Main Street
Armonk, New York 10504
DAVID BOIES, ESQUIRE
ALANNA RUTHERFORD, ESQUIRE

(Appearances continued on next page)

Reported By: Katherine Powell Sullivan, RPR, CRR, CSR #5812

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

APPEARANCES (CONTINUED):
For Plaintiff:
BY:

BY:
For Defendant:
BY:

BOIES, SCHILLER & FLEXNER
1999 Harrison Street, Suite 900
Oakland, California 94612
WILLIAM FRED NORTON, ESQUIRE
STEVEN C. HOLTZMAN, ESQUIRE
ORACLE AMERICA, INC.
500 Oracle Parkway
Redwood Shores, California 94065
ANDREW C. TEMKIN, CORPORATE COUNSEL
DORIAN DALEY, GENERAL COUNSEL
KEKER & VAN NEST
633 Battery Street
San Francisco, California 94111-1809
ROBERT ADDY VAN NEST, ESQUIRE
CHRISTA MARTINE ANDERSON, ESQUIRE
DANIEL PURCELL, ESQUIRE
MICHAEL S. KWUN, ESQUIRE

BY:

BY:
Also Present:

KING & SPALDING LLP
1185 Avenue of the Americas
New York, New York 10036-4003
BRUCE W. BABER, ESQUIRE
GOOGLE, INC.
1600 Amphitheatre Parkway
Mountain View, California 94043
RENNY HWANG, LITIGATION COUNSEL
SAFRA CATZ, President and CFO
Oracle Corporate Representative
CATHERINE LACAVERA
Google Corporate Representative

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

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PROCEEDINGS

1

MR. VAN NEST:

2

THE COURT:

Sure.

Here's what I'm going to do.

3

to say, "answer."

4

you think I'm okay.

5

I'm going

Why don't you take a look at this, to see if

it and see if I wrote it down correctly.

What is today?

6

MR. JACOBS:

8

MR. VAN NEST:

9

THE COURT:

Look at

(Pause)

7

May 3rd, 11:10.

10

Yes, Your Honor.
That's fine, Your Honor.

Do I have your permission now to send

that into the jury room?

11

MR. JACOBS:

12

MR. VAN NEST:

13

THE COURT:

14

Now we can turn to the other event.

15
16
17
18

Yes, Your Honor.
Yes.

Great.

Dawn will do that now.
I've lost my

train of thought; didn't I?
Oh, yes, we want to go over your motion to exclude,
so who's going to argue that and bring me up to speed on this?
MR. PURCELL:

Well, it's their motion, Your Honor.

19

don't know if you wanted them to start.

20

I

some background on it.

21

I'm happy to provide

There's one, actually, important development that

22

just happened in the past couple of days.

If you recall, this

23

motion started off as a motion to strike based on the fact that

24

we didn't have the foundational interviewee on our witness

25

list, Aditya Agarwal, so Your Honor gave us leave to substitute
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

PROCEEDINGS

1

2690

Mr. Rubin.

2

They have now subpoenaed Mr. Argarwal to testify at

3

trial.

4

like that problem should be solved, and we should be able to

5

put Mr. Agarwal on the stand, put Mr. Rubin on the stand, lay

6

the foundation to the documents through them, and then proceed

7

from there.

8

those as they make them.

9

If they have any objections, we can deal with

That's how I would suggest to proceed.
THE COURT:

10
11

We have accepted service of the subpoena, so it seems

Well, that would be great if it's that

simple.

12

Mr. Norton, does that solve the problem?

13

MR. NORTON:

14

THE COURT:

15

MR. NORTON:

16
17

It does not.
Okay.
The problem is not whether Aditya

Agarwal testifies at trial, and it never was.
The problem is that Mr. Argarwal testified, as the

18

30(b)(6) representative of Google, that he didn't know how the

19

P&L was generated; he didn't know how Android costs were

20

allocated.

21

He didn't know anything about that P&L.

That was the basis for our motion to strike, was that

22

Dr. Kearl assumed that Dr. Cox had correctly allocated costs

23

for Android under 504(b).

24

correctly allocated costs.

25

that assumption was that he believed that Mr. Argarwal said so.

Dr. Cox assumed that the P&L
Dr. Cox's only basis for making

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

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PROCEEDINGS

1

And Mr. Argarwal testified he didn't have the faintest idea how

2

those numbers were generated.

3

THE COURT:

4

second.

5

So you know-- okay.

Interrupt you for a

Show me the numbers we're arguing over.
I would have thought that we had -- this is a public

6

company.

We would be dealing with audited financials, and that

7

there would be no issue here.

8

MR. PURCELL:

9

THE COURT:

So why --

We are, Your Honor.

No, Mr. Purcell --

10

MR. PURCELL:

11

THE COURT:

12

MR. PURCELL:

13

MR. NORTON:

Fair enough.

It's his motion.

Stop interrupting him.

Fair enough.
I can hand up Exhibit 1069, which was

14

the document produced by Google before Mr. Rubin's deposition

15

and is the P&L for Android.

16

THE COURT:

17

MR. NORTON:

18

Is that this one?
You have an easier-to-read copy than I

do.

19

THE COURT:

20

MR. NORTON:

What kind of document is this?
It is a document that was -- Mr. Rubin

21

testified he received from the Google lawyers.

22

testified that it appeared to be similar to the types of

23

documents he received --

24
25

THE COURT:

And he

Is it ginned up just for this case, or a

real document used in the ordinary course of business?
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

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PROCEEDINGS

1

MR. NORTON:

This document, I'll have to defer to

2

Google on that.

3

testified about, other than Mr. Rubin, who said that he

4

received this document from the lawyers.

5

This is not a document that anyone has

Dr. Cox cited a P&L statement in his report, and he,

6

too, cited a document that he said he received from Google

7

lawyers.

8
9
10

Google, in its discovery response, did direct us to
other P&L statements, but not the ones that Dr. Cox relied upon
and not the one that Mr. Rubin produced for his deposition.

11

So this document, so far as we can tell, so far as

12

the testimony so far establishes, is not a document that is

13

maintained in the ordinary course of business.

14

no one has ever testified to that.

15

THE COURT:

16

significance of the document.

17
18

All right.

It may be, but

Help me understand the

How does this fit into the issues in the case on
damages?
MR. NORTON:

19

Sure.

So we're solely focused on the

20

question of infringer's profits right here.

21

infringer's profits, we need only show their revenues for

22

Android.

23

expenses that are attributable to the copyright infringement.

24

Now, this issue right now is solely focused on what

25

And for

And then they are required to prove their deductible

are the deductible expenses.

And under Ninth Circuit law, the

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

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PROCEEDINGS

1

only expenses they are entitled to deduct are those expenses

2

that actually contributed to the sales of the infringing work.

3

That's Frank Music.

4

motion and the prior motion.

5

dispute about that.

6

We cited that in our papers both on this
I don't think there is any actual

So this argument is not about whether or not Exhibit

7

1079 is admissible; although, it very well may not be.

8

argument is about whether or not Dr. Cox, and by extension

9

Dr. Kearl, has any basis to conclude that the numbers that

10

appear in Exhibit 1079 reflect expenses that actually

11

The

contributed to the sales of the infringing work.

12

The problem is that Mr. Rubin has testified now -- we

13

have good reason to think it's not.

14

has been able to explain --

15
16

THE COURT:

MR. NORTON:

18

THE COURT:

20

I don't even understand the document,

though.

17

19

So, one, no Google witness

Sure.
Help me understand the basics, how the

Google side says that it shows those expenses.
MR. NORTON:

Sure.

So on the first page -- and I

21

think that, really, Dr. Cox only uses the first page -- we have

22

the revenues, and we have them by period.

23

This includes a forecast when we get all the way to

24

the right side.

But Your Honor will see -- mine is very small,

25

but there are 2010 actual revenues by quarter.
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

There's 2011.

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PROCEEDINGS

1
2

THE COURT:
here.

I don't see that -- oh I see it over

2010 actual by quarter revenues.

3

MR. NORTON:

4

THE COURT:

5

MR. NORTON:

6

THE COURT:

7

MR. NORTON:

Okay.
So just stick with that part.
Sure.
Where are the deducts?
So then we have -- beneath that you'll

8

see that there's a series of indented revenue figures:

9

(AFMS)," "Ads (AFMA)," and so on.

10

"TAC:Dist/Organic."

11

"Ads

And then you'll see,

And, at that point, I understand we are

deducting costs.

12

THE COURT:

13

MR. NORTON:

14

At his deposition on the 27th, Mr. Rubin described it
as total acquisition cost.

17
18

THE COURT:

MR. NORTON:

20

THE COURT:

22

Just stick with one column, quarter 1.

It says "Revenue, 97.66."

19

21

I've seen it referred to both as "total

acquisition cost" and "traffic acquisition cost."

15
16

What is "TAC"?

Is that 97 million?

Yes.
And then those subparts underneath

there -MR. NORTON:

Then there will be deductions for sales,

23

marketing.

You'll see under the bolded "Gross Margin":

24

"sales, Marketing, Co-Marketing, PM, Engineering."

25

engineering is consistently the greatest expense claimed.
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

And

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PROCEEDINGS

1

And then, as a result of those deductions, we get a

2

number at the bottom, "Product Contribution," which I

3

understand Google would contend represents the profit or loss

4

for Android for that particular reporting period.

5

THE COURT:

I'm sorry -- okay.

6

MR. NORTON:

Yes, Your Honor.

7

THE COURT:

8

Bear with me here.

At the very top it says 97.66 million

revenue.

9

MR. NORTON:

10

THE COURT:

For Q2010, yes, Your Honor.
Let's just stick with one column.

The

11

next one says, Revenue Ads distant -- d-i-s-t and organic.

12

What does that mean?

13

MR. NORTON:

That's advertising revenue, distribution

14

and organic.

15

distinction is between those two.

16

And I don't know, offhand, right now what the

THE COURT:

All right.

Do those other non-bolded

17

numbers supposedly add up to the one at the top?

18

way it works?

19

MR. NORTON:

20

THE COURT:

21

Is that the

Yes, Your Honor.
It's not like the total is at the bottom.

The total is at the top.

22

MR. NORTON:

23

THE COURT:

24

"Est. TAC 3.74."

25

That's correct.
Okay.

I got that part.

represent?

So now we go to

What does that column, that -- that row

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

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PROCEEDINGS

1
2

MR. NORTON:

I'm trying to find the column.

I'm

sorry, Your Honor.

3

THE COURT:

About this far down (indicating).

4

MR. NORTON:

5

THE COURT:

Yes.

6

MR. MUINO:

Those are additional costs incurred by

All right.

"Est. TAC."

7

Google.

8

respect to Android in that period.

9
10

They are claimed to have been incurred by Google with

THE COURT:

MR. NORTON:

12

THE COURT:

14

Is that where the costs are

to be shown?

11

13

All right.

Yes.
All right.

So that's the first cost

item.
MR. NORTON:

And then they continue to be cost

15

items -- I believe that the gross margin number reflects the

16

adjustments that come above it.

17

deduct sales, marketing, co-marketing --

18
19

THE COURT:

All right.

And then they continued to

So gross margin is the

18 million.

20

MR. NORTON:

21

THE COURT:

Yes, on that column, yes.
18.88.

And that's gross.

And then there

22

is a -- then, yet, more deductions; is that right?

23

out to they are losing money.

24

MR. NORTON:

25

THE COURT:

So it comes

So they claim.
They are losing money.

Well, that would

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

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PROCEEDINGS

1

mean there would be no disgorgement.

2

MR. NORTON:

Well, no, it would not.

But the

3

standard -- this is disputed in the instructions, but the

4

standard is not straight losses, but if the losses were

5

avoided.

6

Avoidable losses are considered profits.
That is, if you would have lost $10 million but as a

7

result of the infringement you only lost $1 million, that's a

8

$9 million differential, and those are actually profits.

9
10

But for present purposes, in that particular quarter,
they do claim a loss.

11

THE COURT:

Okay.

So we have loss quarter 1, loss

12

quarter 2, loss quarter 3, loss quarter 4.

13

big loss for the whole year.

14

That adds up to a

Then we come to -- we come to, I guess, year -- Have

15

we got all the years?

We got a lot of months here for 2011.

16

Looks like each one of these months -- no, here's a profit.

17

June.

Profit July --

18

MR. NORTON:

And in May, Your Honor, yes.

19

THE COURT:

20

So there are big losses but small profits from the

Yes, I see.

21

second half of 2011.

22

format of this document.

23

MR. NORTON:

24

THE COURT:

25

MR. NORTON:

Okay.

Now I understand the general

Right.
And what is your problem with it?
Okay.

So this is a P&L, purportedly,

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

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PROCEEDINGS

1

just for Android.

2

company, surely there's information out there.

3

Your Honor asked, Google is a public

They don't publicly report Android as a distinct

4

business unit.

5

and see, okay, here's the profit and loss for Android.

6

is the document that we have.

7

So it's not like we can go to their SEC filings
So this

Now, the problem is that not -- there has to be some

8

step along the way where there are expenses incurred partly for

9

Android and partly for other business units.

10

Mr. Agarwal, how does Google do that?

11

So we asked

And he did not know.

So we asked -- and that was the basis, in part, for

12

our prior motion, was, Mr. Argarwal couldn't explain how Google

13

actually allocated its expenses to Android.

14

are actually working on Android, and which are the hundreds of

15

other engineers at Google working on other projects, how are

16

these numbers actually generated?

17
18

And Mr. Argarwal cannot answer that question.
Mr. Rubin does not know the answer to that question.
THE COURT:

19
20

23
24
25

Well, let me stop.

Are you questioning

the revenue side of this, or the expense side of this?

21
22

Which engineers

MR. NORTON:

We are questioning the expense side of

this.
THE COURT:

All right.

So the big number on here is

that engineering.
MR. NORTON:

That is the biggest portion of it, yes.

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

2699

PROCEEDINGS

1

So here's the problem is, first, we know from Mr. Rubin, for

2

example -- he testified to this on the 27th -- one of the

3

things that's included in engineering costs is the cost of

4

developing the Gmail app.

5

THE COURT:

6

MR. NORTON:

7

THE COURT:

8

MR. NORTON:

9

Android.

The what?
The Gmail, the e-mail app for Google.
Yes.
Now, the Gmail app is not just for

The Gmail app is the one they use on all the

10

different phones, whether it's an Android phone or not.

11

appears that, based on his testimony, that a hundred percent of

12

the cost of the Gmail application has been allocated to

13

Android.

14

But it

Now, that may be appropriate in some accounting

15

sense.

16

purposes.

17

actually contributed -- that's the standard -- actually

18

contributed to the sales of the infringing work?

19
20
21

It may or may not.

It doesn't really matter for our

Our purposes here are, are these expenses that

And the development of an application for use on
non-Android phones doesn't fit the bill.

So that's one.

Another problem is that Mr. Rubin testified that

22

there are costs here to investigate options/alternatives to

23

Android as far back as 2008.

24

this is at page 11 of his deposition -- that there were

25

additional costs that they incurred to look at other ways,

So Mr. Rubin testified -- and

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

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PROCEEDINGS

1
2

alternative ways to develop Android.
Well, those, again -- for example, the Court will

3

hear testimony, has already heard testimony, that Google

4

considered not using Java, and explored those alternatives.

5

Well, apparently, they are claiming those cost, as well.

6

those two are not costs that actually contributed to the sales

7

of the infringing work.

8
9
10

But

So then Mr. Rubin also says, in his deposition, that
when he spoke to Dr. Cox -- he says, "When we reviewed the
costs" -- I'm quoting from his deposition:

11

"ANSWER:

When we reviewed the costs, I

12

indicated there were a couple of -- you know,

13

there was a couple of pieces of background

14

information that were important to consider.

15

One was, we didn't start any of the

16

accounting until 2008.

17

costs associated with Android that weren't

18

tracked before 2008.

19

"I also talked to him briefly, that although

20

the spreadsheets in these reports

21

represent -- should certainly represent costs

22

that were part of developing Android, the

23

spreadsheets also could include costs in

24

other areas that weren't Android.

25

were -- we tried our best to -- you know, the

So there's a bunch of

And those

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

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PROCEEDINGS

1

accounting system tries its best to sort

2

those out.

3

chance that other data would be in there."

4

So Mr. Rubin -- who doesn't really know how these

But, you know, there's some odd

5

things are created -- believes that there are other costs that

6

are not Android, that are reflected in Exhibit 1079.

7
8

THE COURT:

Let me ask you this, on just that

engineering item that is the big one, 28 million.

9

MR. NORTON:

Yes, Your Honor -- yes, Your Honor.

10

THE COURT:

Is there a spreadsheet that backs the

11

detail that goes behind that number?

12

MR. NORTON:

Were can I find that?

It's not a document on which Dr. Cox

13

relied.

14

paper (indicating).

15

analysis, is what's here.

16

is.

17
18
19
20

Dr. Cox only uses this front -- this first piece of
This is the entirety of Dr. Cox's
And Dr. Cox doesn't know what this

Dr. Cox, by the way, is not an accountant.

He's an

economist.
THE COURT:

That may be a good enough point, but I

want to understand it better than that.

21

Is there a backup detail sheet for that 28 million?

22

MR. NORTON:

There is some detail, but it would

23

not -- the additional detail, which appears in the additional

24

pages behind Exhibit 1079, does not answer our question.

25

THE COURT:

Well, show me where that -- is there a

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

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PROCEEDINGS

1

place where I can look and see the 28-plus million, and it has

2

some line items that add up to 28 million?

3

MR. NORTON:

I believe the answer to that is in

4

Exhibit 1079 the answer is no, but I want to be certain of

5

that.

6

On the second page of the document they break things

7

down by headcount, but they do not appear to ever break things

8

down by cost.

9
10
11

THE COURT:

All right.

Let's look at the second

page.
It has the months.

It has all of 2010.

12

engineering.

13

sure what to make of those numbers.

14

line item that adds -- that ties to the engineering line on the

15

main page, 2878?

16

These are quite large numbers.

And it has

I'm not quite

But do they -- is there a

2878.

MR. NORTON:

Your Honor, we have not been able to

17

find any such line in the spreadsheet.

18

headcount breakdown.

19

to that --

20

THE COURT:

21

MR. NORTON:

22

There is not a number that relates back

What is the headcount breakdown?
The head count breakdown is page 2 of

Exhibit 1079.

23

THE COURT:

24

MR. NORTON:

25

Again, there is a

engineering.

Right.

I see that.

And so there are subcategories here for

Of course, these are -- the cost for this
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

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PROCEEDINGS

1

particular sheet start more recently, June 11.

2

period that would correspond to the number Your Honor is

3

interested in, first quarter of 2010, you would actually have

4

to sum the three months, January, February and March of 2010,

5

that are in the right most third of the page.

But that would

6

only tell you how many engineers were working.

It wouldn't

7

actually tell you a cost.

8
9

THE COURT:

So "headcount" refers to number of

engineers?
MR. NORTON:

10
11

That is what I understand it to mean and

what I believe Mr. Rubin indicated at his deposition.

12

THE COURT:

13

quite a number of categories.

14

MR. NORTON:

15

THE COURT:

16

MR. NORTON:

17

So to find the

So he says engineering is Dev.

There's

"Dev" means what?

I believe "Dev" is development.
Skip "Other."

Yes.

"PM" means what?

I'm going to need some help here, Your

Honor.

18

I believe that one is product management.

I think

19

that Mr. Rubin's testimony on this was that he was familiar

20

with the categories but not necessarily all the acronyms.

21

THE COURT:

22

of these categories is "Dev."

23

MR. NORTON:

24

THE COURT:

25

Well, the -- far and away the biggest one

"Dev" is the most substantial one.
All right.

May I let you sit down for a

moment.
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

PROCEEDINGS

1
2

MR. NORTON:

2704

If I could make one last point, Your

Honor.

3

THE COURT:

4

MR. NORTON:

All right.

What is that?

The other problem with relying on this

5

particular document, or any other similar such document, is

6

that when we asked Google point blank what their revenues were

7

by way of an interrogatory, what they answered was -- and this

8

is Google's Third Supplemental Response to Plaintiff's

9

Interrogatory No. 17.

10

And Google specifically said -- this is

on page 7 and 8:

11

"Google states that any financial data

12

relating to mobile platforms from prior to

13

January 2009 that it may have maintained are

14

inaccurate and unreliable."

15

So they want us to take on faith -- because no one

16

has been able to actually explain how this document was

17

created -- that this document is entirely accurate;

18

notwithstanding a lot of testimony that suggests that it isn't,

19

and notwithstanding the fact that they themselves concede that

20

their financial documentation up until January 2009 is

21

inaccurate and unreliable.

22

So neither we nor Dr. Cox nor Dr. Kearl has any basis

23

to be able to say that there's any line on Exhibit 1079 that

24

you could say is a cost that was actually incurred by Android

25

and actually contributed to the sales of the infringing work.
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

PROCEEDINGS

1
2

THE COURT:
made?

2705

In what context was that interrogatory

What was the question?

3

MR. NORTON:

The question was:

4

"Please state the total amount of your actual

5

and (as applicable) projected unit sales,

6

revenues, gross profits, and operating

7

profits, separately for each month

8

January 2005 through December 2011, relating

9

to or derived from each of (i) Android

10

application developers' registration fees,

11

(ii) Android application transaction fees

12

(regardless of whether application downloads

13

or transactions were conducted using Android

14

Market), (iii) Android Market application

15

downloads or other transactions, (iv) in-app

16

billing on Android devices, (v) advertising

17

on or through Android devices, (vi) any other

18

product or service sold, licensed,

19

downloaded, or otherwise offered in

20

connection with Android, (vii) advertising on

21

or through each mobile platform other than

22

Android, and (viii) any other product or

23

service sold, licensed, downloaded, or

24

otherwise offered in connection with any

25

mobile platform other than Android."
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

2706

PROCEEDINGS

1

And then there's a request that documents on which

2

the answer is based be produced.

And they gave an answer,

3

which provides some information.

But what is most relevant

4

here is their statement that their financial data up until

5

prior 2009 -- prior to 2009, is inaccurate and unreliable, and

6

yet they want us to rely upon a document that no one can

7

actually explain.

8
9
10

THE COURT:

Well, but that statement about being

unreliable prior to 2009, the dates that you've got for me here
are all after that.

11

MR. NORTON:

Well, the dates -- that's actually true

12

and interesting.

The dates on this document are all after

13

that.

14

for fiscal year 2009 include costs incurred in the prior

15

period.

But it's not clear to us whether the numbers that appear

But --

16

THE COURT:

17

MR. NORTON:

When did Google go public?
Google has been public since -- they'll

18

know better than I, but well before this.

19

think.

20

Around 2000, 2001, I

But they do have on this sheet numbers for fiscal

21

year 2008.

22

document says fiscal year 2008, the very year on which they say

23

they don't have accurate or reliable numbers.

24
25

This document, the very first column of the

But it's not just a question of whether they have
accurate numbers for the period prior to 2009.
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

The question

2707

PROCEEDINGS

1

is, in conjunction with all of the other evidence, how are

2

we -- how is Dr. Cox -- and this is a motion directed at

3

Dr. Cox and Dr. Kearl, really, not this particular document

4

exclusively -- but how can Dr. Cox offer an opinion that

5

Google's expenses that actually contributed to the sales of the

6

infringing work, what those are?

7

THE COURT:

8

MR. PURCELL:

9

Honor.

All right.

Let me hear from Mr. Purcell.

So a couple of basic things, Your

This document was not ginned up for the litigation.

10

If I could step back, Mr. Argarwal is the accountant

11

for Android, who actually takes the inputs that are reported to

12

him and creates these spreadsheets.

13

And then Mr. Rubin, of course, is the business head

14

who reviews these every quarter, every time they are released

15

to him, and uses them as a basis for running the business.

16

Both of them testified that these documents are

17

created in the ordinary course of Google's business.

18

reviewed regularly.

19
20

23
24
25

They are checked.

Mr. Rubin said the financials are audited and they're
relied on for purposes of product planning.

21
22

They are

THE COURT:

Mr. Rubin said these spreadsheets are

audited?
I do understand auditing, Mr. Purcell, so you're not
going to slip something by me.
MR. PURCELL:

These are clearly not audited.

Well, he said Google financials are

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

PROCEEDINGS

1

audited.

2

2708

He did not say the spreadsheets are audited.

That's

right.

3

THE COURT:

4

MR. PURCELL:

5

these were audited.

6

question.

Show me, then, if these were audited -I don't believe that we know whether

I don't believe Oracle asked that

I can't represent that they are.

7

THE COURT:

8

What is the -- the backup to the 28.78 that we have

9

I'm sure they weren't.

been looking -MR. PURCELL:

10
11

for quarter 1, 2010?

12

THE COURT:

13

MR. PURCELL:

The backup for the engineering costs

14

spreadsheet.

15
16
17

Right.
I don't believe it's shown on this

What's shown is headcount.

THE COURT:

Did that number just get pulled out of

thin air?
MR. PURCELL:

No.

That number was calculated by

18

Google in the ordinary course of its business, and incorporated

19

on the spreadsheet.

20

THE COURT:

21

I just don't get this.

22
23

I don't think that's good enough.
You're telling me this

document is used in the ordinary course of business?
MR. PURCELL:

This is an executive summary financial

24

spreadsheet that is used by Andy Rubin every time he gets

25

reports on how Android is doing; every month, every quarter.
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

2709

PROCEEDINGS

1

This is the format in which he gets it, the format in which he

2

reviews it, receives it, and makes decisions based on it.

3

And it doesn't include specific line item breakdowns

4

for each individual line item.

5

sure they could be generated.

6

provided to Dr. Cox.

7

to Oracle.

8
9

Those documents do exist.

I'm

That was not something we

That was not something that we provided

That's something that we could provide, certainly.

I have no doubt that that 28.78-million-dollar number
is accounted for somewhere in a more specific form than this.
THE COURT:

10

But you're saying that a -- that this

11

very document that I'm holding is one that sometime in the

12

past -- I don't mean it was drawn and compiled together from

13

someone -- I mean this very document that somebody gave me this

14

morning, there was a time in the past when Mr. Rubin looked at

15

this for business purposes and it was exactly the same

16

document?

17

MR. PURCELL:

What Mr. Rubin said at his deposition

18

is that this document is in the format that he is given

19

financials on a monthly and a quarterly basis.

20

THE COURT:

That is a much different proposition.

21

MR. PURCELL:

I believe that this was -- I mean, this

22

looks to me, just based on the numbers, that this is the

23

financial statement for August of 2011.

24

month.

25

reviewed by Mr. Rubin.

That's the last actual

And I believe in that context this would have been

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

PROCEEDINGS

1
2

THE COURT:

Have you produced the real documents that

he looked at on an ongoing basis going back to 2008?

3
4

MR. PURCELL:
month.

We could.

We haven't produced them for every

This is --

5

THE COURT:

6

MR. PURCELL:

7

2710

Would they track these numbers?
I believe they would, Your Honor.

I

don't believe the numbers have changed.

8

This should be the document that Andy Rubin received

9

after August 2011.

10

reported on this.

11

the format that he received it.

12

THE COURT:

13

because -- go ahead.

14

That's the last actual month that's
He testified that this is the document in

But "format," you have to forgive me

MR. PURCELL:

I'm informed that we actually have

15

produced every single Android profit and loss statement that we

16

have.

They should have those.

17

THE COURT:

And it's in this format?

18

MR. PURCELL:

19

THE COURT:

20

MR. PURCELL:

I believe so.

Okay.

Mr. Norton, is that true?

Hold on.

If I could, I would like to

21

respond to a couple of the other things that Mr. Norton said

22

that aren't right.

23

Number one, he raises this issue that there's costs

24

in here about non-Android apps, apps that were developed -- the

25

Gmail app he mentioned specifically -- for other platforms.
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

2711

PROCEEDINGS

1

And he thinks we allocated all of those costs for the iPhone

2

Gmail app, and the -- you know, Symbian Gmail app, just to the

3

Android P&L.

4

said.

That's not right.

That's not what Mr. Rubin

5

The question by Ms. Rutherford at the deposition was:

6

"Are the costs of the apps that Google

7

develops that are specific to Android

8

included?"

9

Mr. Rubin said yes.

10
11

example of the application.

And then he said Gmail is a good

And then he also mentioned GMaps.

As Your Honor knows, Google has to design separate

12

versions of the Gmail app for Android versus for iPhone versus

13

for other platforms.

14

languages.

15
16
17

These platforms use different programming

All Mr. Rubin said is that Android-specific apps,
like Gmail on Android, are included in the P&Ls.
The other thing I would like to reference is the

18

interrogatory response that Mr. Norton referenced about data

19

before 2009.

20

If you listen to the categories that he mentioned,

21

the categories he mentioned are all products, services,

22

advertising related to Android.

23

Android didn't launch until October/November of 2008,

24

with these platforms, these projects, these services.

25

wouldn't be any costs, really, for 2008.
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

There

2712

PROCEEDINGS

1

And if you look at the P&L, what's represented on the

2

P&L for 2008 is engineering, predominantly, which makes sense

3

because in 2008 Android was being developed.

4

engineering costs going into actually getting the first release

5

of the software out there, which happened at the very end of

6

the year?

7

THE COURT:

Wait.

There were huge

Let me -- I want to get to the

8

bottom of whether or not the financial statements in the

9

ordinary course of business, that were in this format, were

10

produced to Mr. Norton.

11

Mr. Norton, what is the answer to that?

12

MR. NORTON:

13

So what we got, Google identified P&L statements in

The answer is, they were not.

14

its interrogatory response, and -- in the interrogatory

15

response I just read to the Court.

16

And I didn't bring everything.

But I can show it to

17

counsel.

These are examples of the documents that are cited

18

specifically in the interrogatory response.

19

You might want to show this to --

20

MR. PURCELL:

These are also -- documents in that

21

format are also attached to this, which is another one of the

22

documents Mr. Rubin testified about at his deposition, and that

23

we produced to Oracle recently, as supporting Mr. Rubin's

24

discussion with Dr. Cox.

25

THE COURT:

Well, I -- I would like to know whether

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

PROCEEDINGS

2713

1

or not the very documents that Mr. Rubin would have looked at

2

at the end of each quarter, for 2010, 2011, earlier, the ones

3

done in the ordinary course of business without any massaging

4

at all, the historical actual thing that he held in his hand,

5

was that produced?

6
7

MR. NORTON:
not.

We are confident that they were

Let me explain why I am so confidence.

8
9

No.

THE COURT:

This is an opinion you are about to give

me?

10

MR. NORTON:

11

THE COURT:

I don't think so.
You don't actually know, you're just

12

giving me an opinion.

13

confident means it's an opinion.

14

MR. NORTON:

15

We don't have spreadsheets that look like 1079, that

16

first page.

17

You're confident -- anyone who is

I'm going to explain the evidence.

Those were not produced to us.

Secondly, Mr. Rubin testified at his deposition on

18

the 27th.

He was shown Exhibit 1079, the document that Your

19

Honor has.

And Ms. Rutherford asked:

20

"All right.

You have before you Exhibit

21

1079.

22

spreadsheet you've been discussing, that you

23

reviewed with Dr. Cox.

24

"ANSWER:

25

There's many pages here, and I think there's

Would you just verify that that's the

This is -- well, let's see.

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

2714

PROCEEDINGS

1

actually different spreadsheets here.

So

2

let's review it for a second.

3

"QUESTION:

4

"ANSWER:

5

mean, it seems to be kind of some of the same

6

data, but it's not in the exact form,

7

probably just because of the way it was

8

printed.

9

names of tabs for one of these reports, and

Okay.

It's an eye chart.

This is -- I

For example, my spreadsheet had the

10

this doesn't have it.

11

"QUESTION:

12

on a computer; is that correct?"

13

Objection to form.

14

"ANSWER:

15

spreadsheet that was projected on the screen

16

from a computer because the numbers are

17

really small.

18

if this is just one spreadsheet or more than

19

one spreadsheet.

20

this is the identical document that I

21

reviewed.

22

The point of that --

23

THE COURT:

24

It would be okay -- it would be perfectly okay if

25

You are looking at a spreadsheet

I looked at a version of this

And I'm trying to figure out

I don't -- I don't know if

I guess that's my conclusion."

All right.

That's a good point.

these numbers were drawn from the same columns on some other
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

2715

PROCEEDINGS

1

document that was produced in the ordinary course of business,

2

and this just happens to be a summary sheet, so long as we

3

could go back to the original documents.

4

big number, we could go behind it and find out what it was

5

based on.

6

And if there was a

That's what we ought to be asking here is, where are

7

the original documents that he held in his hand, so that you

8

could sit down at a desk, put on your green eyeshade like Bob

9

Cratchit, and then go to work seeing if you could reverse

10

engineer this thing to see if the numbers add up, or whether

11

it's been ginned up for litigation.

12

It wouldn't be the first time something had been

13

ginned up for litigation.

14

to get to the bottom of.

15

28 million, you ought to be entitled to see the detail behind

16

that.

17
18

MR. NORTON:

21

And then if -- a big number like

I don't think there is any dispute here

that we did not get that level of detail.
THE COURT:

Well, then, maybe you should get the

MR. NORTON:

19
20

So that's what we ought to be trying

So -- but even with, you know, the

detail.

22

challenge -- although, the document would need to be

23

authenticated at trial.

24

on the document.

25

Our motion is not focused exclusively

Right.

THE COURT:

Well, if there was -- if I'm satisfied

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

2716

PROCEEDINGS

1

that this -- these numbers are in the ballpark of reasonable,

2

then I would let him testify to it, and put the burden on you

3

to show that it was bogus.

4

doesn't -- somebody just gave him a document.

5

can't -- can't vouch for it.

6

MR. NORTON:

7

THE COURT:

8

But I am concerned that he
And Mr. Rubin

We absolutely share -Somebody has got to be able to vouch for

this document and where the numbers came from.

9

MR. NORTON:

Well, that's exactly right.

And we did

10

take the deposition of a 30(b)(6) witness on Android finances.

11

That was Mr. Argarwal.

12

And our original motion on this issue was not that

13

Mr. Argarwal was not a trial witness.

14

had testified, as the 30(b)(6) witness that, he did not know

15

how these numbers were generated.

16

It was that Mr. Argarwal

So now what they want to do is put up Mr. Rubin, who

17

also doesn't know.

And then, failing that, they want to

18

produce some more documents to us that might justify these

19

numbers.

20

and, at the end of the day, they have a burden to produce the

21

evidence that will allow them to prove their allocable costs.

But we've been through several iterations of this,

22

THE COURT:

Yes, that's their burden.

23

MR. NORTON:

And we don't have that.

24
25

And their

expert can't offer an opinion in the absence of that evidence.
THE COURT:

Dawn, can I have some water, please.

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

2717

PROCEEDINGS

1

What would you like to say, Mr. Purcell?

2

MR. PURCELL:

3

I can't represent to you that I'm a hundred percent

Very briefly, Your Honor.

4

sure.

And maybe that means that isn't good enough, but I

5

believe that we produced to them our entire Android financial

6

site, basically all of the data on that, which includes

7

quarterly reports in greater detail than what they have, going

8

back to 2009.

9

So that's one point.

The other point is, I think their last motion was

10

based entirely on Mr. Argarwal not being on the witness list.

11

To the extent they felt his 30(b)(6) testimony was inadequate,

12

they never moved to compel on that.

13

And, in fact, Mr. Argarwal did testify at his

14

deposition that although he hadn't personally vetted every

15

single input to his analysis, that he was the one who prepared

16

these charts; he did so regularly; and he vouched for his

17

accuracy.

18

And he certainly vouched for the fact that they

19

weren't concocted for the litigation.

20

the fact that this how Google does business, litigation or no

21

litigation.

22

THE COURT:

23

MR. PURCELL:

He certainly vouched for

Who prepared this spreadsheet?
That spreadsheet, I believe, is an

24

output from Google's financial system, that I believe was

25

created -- I think Mr. Argarwal did produce it in preparation
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

2718

PROCEEDINGS

1

to give to Dr. Cox in about August of 2011.

2

recent financial data that was available then.

3

expert report was due on October 3rd.

4

recent monthly --

5

THE COURT:

It was the most
Dr. Cox's

And it was the most

Do you have any workpapers that would

6

help us reconstruct how he -- the original source for some of

7

these numbers?

8
9
10

MR. PURCELL:

I'm sure he does.

I'm sure that that

information is all in Google's accounting system and could be
generated fairly quickly.

11

THE COURT:

Look.

I am going to tell you what should

12

be done here.

And I'm going to skip over the niceties of what

13

this exact motion is all about.

14

We're talking about huge numbers here.

15

is -- if the jury finds liability, $600 million can turn on

16

whether or not these numbers are any good, this spreadsheet is

17

any good.

18

this thing.

19

If there

And no one seems to know much about the pedigree of

So here's what should be done:

Mr. Purcell, it is

20

your burden to produce, again, in hard copy form, the actual

21

documents that Mr. -- that were given to Mr. Rubin.

22

things that are constructed for the expert, but the actual

23

documents that were given on a quarterly basis for 2010 and

24

2011.

25

produce the backup of how the big number, which is the

Just those two years would be good enough.

Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

Not these

And to

2719

PROCEEDINGS

1

engineering number, just that one number, how that was

2

calculated, and the source for that information.

3

MR. PURCELL:

4

THE COURT:

5

We'll do it.

And then Mr. -- is it Agarwal, is his

name?

6

MR. PURCELL:

7

THE COURT:

8

MR. PURCELL:

9

THE COURT:

Yes, Your Honor.

He should be deposed again.
We'll do that, too.

This should be done promptly.

Let's say

10

you produce the documents by Monday, and he gets deposed by the

11

end of next week.

12

MR. PURCELL:

13

THE COURT:

14

MR. PURCELL:

15

THE COURT:

16

But my general view of it is that if the

17

$28.78 million is actually the way it was accounted for, for

18

Android only, and allocated to Android, and there was some kind

19

of reasonable method for allocation, that was the way it was

20

done in the actual course of business, fine, then that can go

21

before the jury and Mr. Norton can -- can argue over whether or

22

not the allocation method was proper or not.

23

We can do that.

Then if there's anything to fight over -I suspect there might be.

-- we can fight over it again later.

But, right now, it's unclear to me that anyone can

24

vouch for any of these numbers, as to how they got put

25

together.

So this is the -- that's what we ought to do.
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]

2720

PROCEEDINGS

1

MR. PURCELL:

Thank you, Your Honor.

2

THE COURT:

Thank you.

3

All right.

Any other items to take up right now?

4

MR. VAN NEST:

I don't believe so, Your Honor.

We

5

understand, all of us, that the patent phase will begin Monday

6

morning.

7

last night.

8
9

That's what we understood from Your Honor's order

THE COURT:

That really is the way it has to be,

because if they are deliberating tomorrow, then they will be

10

deliberating and we won't be able to start.

11

a verdict today, then we'll all take Friday off and start on

12

Monday.

13
14
15

And if they reach

So I think, basically, I've in effect said we will
start on Monday unless they are still deliberating.
MR. VAN NEST:

That's what we all understood, and

16

that's what we're planning for.

17

THE COURT:

18

MR. JACOBS:

Thanks, Your Honor.

19

THE COURT:

Well, please stand by.

20

Dawn, are they going to be here until 4:00 today?

21

THE CLERK:

Correct.

22

THE COURT:

Remember the note said they would be here

23
24
25

Thank you.

Anything more?
Nothing from us.

until 4:00 today.
As soon as we know anything, any more notes, we'll
let you know right away.
Katherine Powell Sullivan, CSR, RPR,CRR
Official Reporter - U.S. District Court
[phone]