8323 1 IN THE IOWA DISTRICT COURT FOR POLK COUNTY ----------------------------------------------- 2 JOE COMES; RILEY PAINT, ) 3 INC., an Iowa Corporation;) SKEFFINGTON'S FORMAL ) 4 WEAR OF IOWA, INC., an ) NO. CL82311 Iowa Corporation; and ) 5 PATRICIA ANNE LARSEN; ) ) TRANSCRIPT OF 6 Plaintiffs, ) PROCEEDINGS ) VOLUME XXXI 7 vs. ) ) 8 MICROSOFT CORPORATION, ) a Washington Corporation ,) 9 ) Defendant. ) 10 ----------------------------------------------- 11 The above-entitled matter came on for 12 trial before the Honorable Scott D. Rosenberg 13 and a jury commencing at 8 a.m., January 16, 14 2007, in Room 302 of the Polk County 15 Courthouse, Des Moines, Iowa. 16 17 18 19 20 HUNEY-VAUGHN COURT REPORTERS, LTD. 21 Suite 307, 604 Locust Street 22 Des Moines, Iowa 50309 23 (515)288-4910 24 25 8324 1 A P P E A R A N C E S 2 Plaintiffs by: ROXANNE BARTON CONLIN 3 Attorney at Law Roxanne Conlin & Associates, PC 4 Suite 600 319 Seventh Street 5 Des Moines, IA 50309 (515) 283-1111 6 MICHAEL R. CASHMAN 7 MICHAEL E. JACOBS Attorneys at Law 8 Zelle, Hofmann, Voelbel, Mason & Gette, LLP 9 500 Washington Avenue South Suite 4000 10 Minneapolis, MN 55415 (612) 339-2020 11 ROBERT J. GRALEWSKI, JR. 12 Attorney at Law Gergosian & Gralewski 13 550 West C Street Suite 1600 14 San Diego, CA 92101 (619) 230-0104 15 16 17 18 19 20 21 22 23 24 25 8325 1 Defendant by: DAVID B. TULCHIN 2 STEVEN L. HOLLEY SHARON L. NELLES 3 JOSEPH E. NEUHAUS Attorneys at Law 4 Sullivan & Cromwell, LLP 125 Broad Street 5 New York, NY 10004-2498 (212) 558-3749 6 STEPHEN A. TUGGY 7 HEIDI B. BRADLEY Attorneys at Law 8 Heller Ehrman, LLP 333 South Hope Street 9 Suite 3900 Los Angeles, CA 90071-3043 10 (213) 689-0200 11 BRENT B. GREEN Attorney at Law 12 Duncan, Green, Brown & Langeness, PC 13 Suite 380 400 Locust Street 14 Des Moines, IA 50309 (515) 288-6440 15 16 17 18 19 20 21 22 23 24 25 8326 1 (The following record was made out of 2 the presence of the jury at 8 a.m.) 3 THE COURT: Okay. We have a motion 4 this morning? 5 MS. CONLIN: Yes, Your Honor. 6 May it please the Court, because this 7 is a difficult and complex area of the law and 8 involves interplay between the rule regarding 9 experts, Rule 703 and 803.18 concerning learned 10 treatises, I want to be sure our position is 11 clear on the record and that we move to strike 12 pages 7753, line 11, through page 7768, line 13 13, and Defendant's Exhibit 3165. 14 This includes Mr. Holley's reading 15 back of testimony, his accusation that Sun 16 rigged the test, his discussion of the award 17 and compatibility in the article and of Ziff 18 Davis. 19 The Court's original ruling at page 20 7288, line 7, was correct in all respects. 21 In reversing that ruling on page 7524, 22 line 4, the Court pointed to testimony, and the 23 Court said, quote, where he, Mr. Alepin, says 24 the trade press is a source of information 25 about current events and he did rely on it, end 8327 1 quote. 2 The Court also indicated that it was 3 admissible testimony if he relied on it or upon 4 reading it decided not to rely on it. 5 That is at page 7748, lines 6 through 6 8. 7 That is not a proper use of trade 8 press under either 803.18 or 703. 9 Trade press can come before the jury 10 in only two ways because there is no question 11 but what it's hearsay. 12 803.18 says that trade press can be 13 learned treatises, but a proper foundation must 14 be laid for it and it cannot go to the jury. 15 It must be identified as a, quote, 16 reliable authority by the expert or by another 17 expert. Here the article is not authenticated. 18 At page 7281, line 14, Mr. Alepin was 19 asked in forming your opinion, did you rely on 20 trade press. 21 That is the -- virtually, the full 22 foundation for this, did you rely on trade 23 press. 24 It would be like asking a doctor did 25 you rely on medical books or asking an engineer 8328 1 did you rely on engineering books. 2 Did you rely on trade press does not 3 lay a foundation for this or any other 4 testimony. 5 And then he says -- Mr. Alepin -- he 6 relied on some articles in PC Week and PC 7 Magazine. And again, Your Honor, that does not 8 lay foundation for this testimony. 9 Some articles in some magazines does 10 not provide authentication. That's like saying 11 that -- you know, you get a big treatise and 12 there are several different articles by several 13 different authors. You have to authenticate 14 the different articles. 15 Then he is asked if he read and 16 considered this article, but that is not a part 17 of the foundation for authentication of a 18 learned treatise. 19 He believes -- he, Mr. Alepin, said he 20 believed that he was probably aware of it at 21 the time, meaning contemporaneously. And, of 22 course, he wasn't in the process of forming any 23 opinions in this case at the time he read the 24 article back in the mid '90s. 25 He says he may agree that some article 8329 1 in some magazines -- I beg your pardon, Your 2 Honor -- that he says he may agree that some 3 article in some trade press is authoritative 4 does not establish that all articles in each of 5 these magazines are authoritative and that he 6 read it has nothing whatsoever to do with 7 whether the article is authenticated. 8 He may read mysteries, but that does 9 not give them authentication. 10 If you try to lay a proper foundation 11 for learned treatises and you can't, that is 12 the end of it. 13 Then the examining attorney may ask 14 his own expert about that article, but he may 15 not continue to question the person who does 16 not recognize or authenticate that particular 17 piece of learned treatise. 18 The second way by which a piece of 19 trade press may come into the record is under 20 703 if the expert -- if, quote, the expert 21 bases an opinion or inference on it. 22 There was no attempt to establish a 23 proper foundation under 703. Indeed, it was an 24 attempt to confuse the Court and the jury. 25 The proper questions are did you read 8330 1 it and did you rely on it. What was asked here 2 was not even close to that. 3 Starting at page 7281, he was asked, 4 in forming your opinion in this case, did you 5 rely on trade press? And once again he says he 6 did. And that does not establish that he read 7 this article and relied on it in terms of his 8 opinion. 9 He was asked at page 7765, line 14, 10 did you explore the following statement. 11 It's also important, Your Honor, to 12 note that what he says with respect to trade 13 press and how he uses it is to figure out where 14 to go for reliable information. That is at 15 page 7765, line 4. 16 And to get an awareness of what is 17 going on contemporaneously, that is at page 18 7765, line 14. 19 And then at page 7765, line 14, he was 20 asked did you explore the following statement? 21 But Mr. Holley does not get an answer 22 to that question. He goes on for several lines 23 and does not actually ask the did you explore 24 part of the question. 25 That is objected to at page 7767, 8331 1 lines 9 and 10. 2 And that, Your Honor, is it for the 3 foundation for this piece of trade press and 4 for this extensive testimony. 5 It does not come close to 6 authenticating the article under 703 or 803.18. 7 The -- assuming that considering is 8 also not relying on. 9 I looked, Your Honor, in the Microsoft 10 thesaurus on my computer, and it lists three 11 synonyms for consider: To think, to think 12 about, or to bear in mind. 13 For rely, it lists depend on and 14 trust. 15 Those are not -- consider is not the 16 same as relying, and there is no foundation for 17 the admissibility of the testimony or the 18 exhibit. 19 The words Mr. Holley uses also were 20 take into account. Again, insufficient for 21 foundation for the article. 22 That he happened to have read the 23 article years ago or took it into account does 24 not establish foundation to admit the testimony 25 or the exhibit on which it was based. The 8332 1 expert must use it to form the basis of his 2 opinion or inference, and he must rely on it. 3 He didn't rely on it for his opinion, 4 even if he explored it or took it into account 5 or considered it. Even were there foundation, 6 the testimony and the exhibit are not 7 admissible. 8 In City of Dubuque versus Fauncher, 9 F-a-u-n-c-h-e-r, at 590 N.W. 2d 493, at 496, 10 the Supreme Court tells us that underlying 11 facts and data reasonably relied on by the 12 expert in the field which are disclosed to the 13 jury cannot be considered for their truth. 14 Both the testimony and the exhibit 15 were offered for their truth, or at least no 16 distinction was made. 17 In Bruner versus Brown, 480 N.W. 2d 18 233, at page 37, the Court states, the evidence 19 may be considered solely as a basis of the 20 expert's opinion and not as substantive 21 evidence. 22 Considerations of unfair prejudice -- 23 I'm sorry, Your Honor, that ends the cite. 24 Considerations of unfair prejudice and 25 confusion of the issues misleading the jury and 8333 1 must also inform the Court's discretion, and 2 all of those mitigate against the admission of 3 this document and of this testimony. 4 The party conducting the 5 cross-examination should not be allowed to use 6 the questioning as a vehicle for the admission 7 of unreliable and inadmissible evidence to 8 strengthen its own underlying case under the 9 guise of scrutinizing the facts and data which 10 underlie the expert's opinion. 11 There are only two ways to impeach an 12 expert with a learned treatise or a piece of 13 hearsay, and the two ways are: One, explicitly 14 authenticated learned treatise; or two, a 15 treatise relied upon by the expert himself. 16 So in order to use the trade press as 17 impeachment of the expert, one, he or another 18 credentialed expert must identify that article, 19 that specific article and that specific 20 publication as reliable, and/or, two, even if 21 not reliable, if he relied on it himself, it 22 can come in under the learned treatise 23 doctrine. 24 It otherwise may not be admitted and 25 the testimony with respect to it must not be 8334 1 admitted. 2 Looking at the articles, reading them, 3 memorizing them does not authenticate the 4 article nor lead to the admissibility of the 5 testimony. 6 He can find it interesting. He can 7 even find that it is helpful, but it is an 8 out-of-court statement offered for the truth 9 and can therefore not be used to impeach the 10 expert unless and until one of the two methods 11 set out by the rules of evidence is 12 established. 13 They cannot argue their case -- 14 Microsoft cannot argue its case and use 15 miscellaneous evidence to bolster it within 16 their examination. 17 It cannot be used at all with an 18 expert under 703 unless the expert himself or 19 herself had used it as a basis for his opinion. 20 Mr. Alepin did not use the article 21 that Mr. Holley examined him on as a basis for 22 his opinion. 23 Again, Your Honor, they may use it 24 with their own expert and say he should have 25 relied on it, but they cannot continue to 8335 1 question the witness about it. 2 In our conference in chambers on 3 January 9, Your Honor, Mr. Holley said he was 4 not offering this exhibit at all. 5 That is at page 7285, line 17. 6 When it was offered, we did make an 7 appropriate objection. 8 We proposed an instruction at page 9 7750, lines 1 through 7. 10 If the Court adheres to its rulings, 11 we ask that the Court give an instruction that 12 Exhibit 3165 is hearsay and was not admitted to 13 prove the truth of what was stated. 14 In addition, Your Honor, and as a 15 separate grounds for striking both the exhibit 16 and the testimony -- and these issues were also 17 discussed with the Court -- - we say that the 18 Court's ruling on collateral estoppel is 19 undermined by this testimony, and specific 20 conclusions of law that this contravenes our 21 Conclusion of Law 11 and 12, and with respect 22 to the Findings of Fact 394, 396, 401, 402, and 23 404. 24 The Court may recall that the article 25 itself does not prove that Java implementations 8336 1 were compatible. That was the subject of the 2 questioning. They show that the Java 3 implementations of Microsoft were fast. 4 Alepin never testified that Java 5 implementations were slow. He said they were 6 incompatible with the industry standard. That 7 is perfectly in line with the findings of fact 8 on the subject. 9 Judge Jackson says that the Java 10 Virtual Machine was a high-performance JVM and 11 attractive on its technical merits. But that 12 is not what really happened here. 13 In this case, again, we have a straw 14 person and a red herring. 15 What matters, and what Mr. Holley was 16 seeking to do, was to undermine the findings of 17 fact by suggesting to the jury that the Java 18 Virtual Machine won on its merits. That, of 19 course, is not so, according to the findings of 20 fact. 21 The Java Virtual Machine won because 22 of all of Microsoft's anticompetitive acts to 23 which the Court has granted collateral 24 estoppel. 25 Microsoft deceived developers into 8337 1 using their Java in order to pollute it so it 2 would not be cross-platformed, and the write 3 once, run anywhere slogan would not work. 4 When developers used the attractive, 5 apparently fast, according to the trade press 6 unauthenticated, JVM of Microsoft, what they 7 did was destroy the very idea of cross-platform 8 Java. 9 Finally, Your Honor, we ask that the 10 portion of the testimony with respect to prices 11 of Quicken and other things be stricken -- 12 Quicken and Norton Internet Security because it 13 is uncontestable that these products are not in 14 the same market, not reasonable substitutes, 15 not products that compete with one another, and 16 not reasonably interchangeable, and the Court's 17 ruling on the motion in limine explicitly 18 specifically excluded that kind of testimony. 19 Thank you, Your Honor. 20 THE COURT: Thank you. 21 MR. HOLLEY: Your Honor, taking 22 Ms. Conlin's comments in order, as the Court 23 has now clearly held, and this is, I think, the 24 fourth time Plaintiffs are trying to reargue 25 the same point, there was a foundation laid for 8338 1 this testimony. And they opened the door to 2 this. 3 I think it's important to remember how 4 many times Mr. Alepin was allowed to testify to 5 the jury based solely on trade press. Not 6 learned treatises, but articles in magazines 7 about things that he says happened. 8 For example, at page 6592 of the 9 transcript, starting at line 19, Mr. Alepin 10 said, quote, by September of 1995, Netscape had 11 announced its next version of the Navigator and 12 its vision for the Internet, and it was a very 13 compelling vision, at least at the time, as 14 viewed in the trade press. 15 So that's an example of Mr. Alepin 16 saying something based on the trade press, not 17 as some sort of signpost for what he might go 18 investigate, which was what he was coached to 19 say later, but what he said on an untutored 20 basis before this issue arose. 21 Again, Your Honor, at page 6682, the 22 answer was, quote, well, it gets the idea out 23 there is a new product coming and that's the 24 comparisons that people might normally wait to 25 see from the trade press, which computer should 8339 1 I buy, which operating system should I buy. 2 That was his testimony about vaporware 3 based on his reading of trade press. 4 Here's another more glaring example, 5 page 6967. 6 He was looking at his time line, and 7 he said the last new version of Internet 8 Explorer shipped with Windows XP in October of 9 2001. 10 The reviews in the trade press and the 11 technical reviews is that the product did not 12 find much in the way of change or technological 13 improvements over previous versions Internet 14 Explorer 5.5 and 6.0. 15 He never did any tests. He was 16 testifying to the jury based on what he read in 17 the trade press. 18 And, finally, and this is all before 19 he ever had any occasion to modify what he said 20 about his use of the trade press. 21 When I was cross-examining him about 22 whether Mr. Maritz was telling the truth or 23 Mr. McGeady was telling the truth about what 24 occurred at a meeting at Intel in 1995, his 25 answer was based on, quote, contemporaneous 8340 1 press reports and other background stories, and 2 what have you, in the trade press that 3 discussed the subject. 4 So this is a man who on direct 5 examination was encouraged to testify based on 6 what he had read in the trade press. 7 And then in this particular instance, 8 he was asked whether he read PC Magazine and PC 9 Week. He offered that he had been a subscriber 10 since the very first issue. 11 And then I asked him, did you have 12 occasion, sir, to look in the trade press for 13 analyses of the relative performance of 14 different Java runtime environments, which is, 15 in fact, what Defendant's Exhibit 3165 is. 16 And he says, I did in particular given 17 the nature of my work on Java just-in-time 18 compilers at Fujitsu in the mid 1997 time 19 frame. 20 And I asked him the question, so you'd 21 had occasion to do that long before you ever 22 got retained as an expert in this case? 23 And his answer was quite -- yes, quite 24 well before that. 25 So they used trade press in exactly 8341 1 the way they say we're not allowed to, and that 2 -- so having opened the door, they have no 3 standing to now complain. 4 And the proper foundation was laid 5 that he looked at this analysis. 6 Ms. Conlin's effort to, you know, 7 parse words in an incredibly precise way to say 8 that taking into account and considering do not 9 equate to relying upon, I think is just too 10 clever by half. 11 He did look at this article and rely 12 upon it. That was quite clear from his 13 analysis during cross-examination. 14 On the question of collateral 15 estoppel, (a) this is a waived objection. 16 Secondly, it's wrong. 17 411 talks about deceiving Java 18 developers by not putting warnings in the 19 tools, and 412 talks about Microsoft 20 encouraging Intel to stop supporting Java. 21 There is a finding by the D. C. 22 Circuit Court of Appeals that Microsoft's 23 development of its Java Virtual Machine was not 24 anticompetitive. 25 That's the law, and there is nothing 8342 1 in the Court's findings or conclusions, given 2 collateral estoppel effect, that say anything 3 to the contrary. 4 So it is not a violation of the 5 collateral estoppel order to point out not only 6 was Microsoft Java Virtual Machine the fastest, 7 it was also the most compatible. And that's 8 the point that I was making, and there is 9 nothing that is collaterally estopped on that 10 point. 11 The only question is, were Java 12 developers deceived by the failure to put a big 13 warning in the tools that if you use the green 14 tunnels, you're going to be tied to Windows or 15 bound by that, even though we don't agree with 16 it, and was Microsoft wrongful in telling Intel 17 to stop developing Java. 18 This is a related, but not 19 collaterally estopped topic. 20 And in any event, it cannot be that 21 they can put on evidence on direct relating to 22 subjects that are covered by collateral 23 estoppel, make assertions, and then Microsoft 24 has to stand mute in the face of that. 25 If they want to rely on the 8343 1 collaterally estopped findings and conclusions 2 that have been read to the jury and are in the 3 jurors' notebooks, fine, but if they want to 4 bolster those findings, as they sought to do 5 with Mr. Alepin, it cannot be the case that 6 Microsoft is totally unable to respond. That 7 would not be fair, Your Honor. 8 And if the reason that they did the 9 bolstering was to show, in their words, 10 willfulness and intent, we have an equal 11 opportunity, Your Honor, or at least we should, 12 to show a lack of willfulness. 13 There were perfectly good business 14 reasons for what Microsoft did, and if the 15 question -- and obviously we can't dispute 16 because as to Java developer deception and 17 talking to Intel about its support of Java, we 18 can't undermine those findings and conclusions, 19 but we certainly can put on evidence in 20 response to evidence that they put on about why 21 Microsoft did what it did and what the good 22 business reasons were for that outside of 411 23 and 412. 24 Turning finally, Your Honor, to the 25 question of pricing. 8344 1 As the Court found the last time 2 this issue was raised, on direct examination 3 Mr. Alepin talked about prices, and so the 4 testimony elicited in response to his slides 5 about cheaper, better, faster, whatever his 6 slide was -- I can't remember right now -- was 7 perfectly appropriate. 8 The notion that these products have to 9 be in the same market in order to be relevant, 10 I do not understand. That would be a surprise 11 to Professor Mackie-Mason because his -- and 12 Janet Netz, their experts, they use companies 13 that have nothing to do with PC operating 14 systems and business productivity applications 15 in their groups of companies that they compare 16 in computing damages. 17 If Plaintiffs want to stipulate that 18 all of those analyses are invalid because in 19 many of the products that those two professors 20 use in their analysis are outside the markets 21 as defined by the Plaintiffs in their 22 complaint, then, we might consider that, but 23 that's not their position. 24 So there's no basis for arguing that 25 testimony about the relative value of narrow 8345 1 products like Norton Internet Security 2 vis-a-vis Windows XP Home and their relative 3 prices is out of -- is not admissible. It's 4 admissible. 5 I just note for the record the sort of 6 irony of a case talking about an overcharge, 7 and every time the question of price comes up, 8 the Plaintiffs, who you think would be 9 delighted to talk about prices, run screaming 10 the opposite direction. 11 The jury is entitled to consider the 12 value provided by Windows XP relative to other 13 products in the market as to which there is no 14 allegation of market power or any 15 anticompetitive conduct, and the fact that they 16 charge prices which are almost equal to the 17 price of Windows XP. 18 That is something that the jury is 19 fully entitled to consider. 20 So, Your Honor, for that reason, we 21 object to the motion to strike any of this 22 testimony. 23 MS. CONLIN: Briefly, Your Honor. 24 I assume that Mr. Holley's remarks 25 that Mr. Alepin was coached to say things or 8346 1 whatever other words he used are not meant to 2 imply that we acted improperly because we did 3 not do so. He wasn't coached to say anything. 4 He's a long-term industry expert. He knows 5 what the facts are. 6 And again, Your Honor, the fact that 7 Mr. Alepin testified on the basis of trade 8 press about the fact -- both about the time 9 things happened and about notice to the 10 industry, a perfectly proper use of trade press 11 for notice that he -- that's what Mr. Holley 12 read into the record. Indicates that he may 13 have relied on the general trade press for 14 notice with respect to some matters. 15 But that is quite different, quite 16 distinct from relying on a specific article in 17 a specific piece of trade press for a specific 18 purpose. 19 The fact that he looked at it 20 contemporaneously, it makes it -- and not in 21 the process of forming his opinions, makes it 22 even a weaker basis for the admission of the 23 evidence or the testimony based on it. 24 Mr. Holley accuses us of parsing words 25 in a precise way, and that, of course, is 8347 1 exactly what both of these rules require. 2 They do not permit sloppiness. They 3 do not permit the use of words which, while not 4 synonyms, are almost or may seem to be close in 5 terms of the meaning attached to them. 6 That is not the purpose of the rule. 7 The rule provides an exception to the general 8 rule that hearsay is not admissible, and in 9 order to get hearsay into the record, one must 10 follow the rule. 11 It was not followed here. 12 In connection with Mr. Alepin's 13 testimony, he did not rely on the article that 14 makes it inadmissible under 703 and it is not 15 authenticated for purposes of 803.18. 16 With respect to collateral estoppel, 17 Your Honor, we were in the back room arguing 18 about collateral estoppel. We did, in fact, 19 make an objection with respect to it. 20 Microsoft thinks it's unfair that it 21 lost the government case, but that does not 22 permit the introduction of contrary evidence. 23 And Mr. Holley's argument that it 24 permits Microsoft to make again the argument 25 that it made in the government case that 8348 1 everything it did made good business sense, is 2 a business justification, which would mean that 3 in the balancing test, the acts were not 4 anticompetitive. 5 That, of course, is what they're going 6 for and that is what they cannot be permitted 7 to go for. 8 With respect to prices, once again, 9 there is a false analogy. 10 What Mackie-Mason does, he doesn't use 11 the prices of things in other markets. And I 12 don't even think he uses other markets, but I'm 13 not as familiar as others are with Mackie-Mason 14 -- Doctor Mackie-Mason's expert report. 15 But I can say this to Your Honor, the 16 very same arguments were made about this issue 17 in the past. They were not persuasive then, 18 and they should not be persuasive to the Court 19 in connection with this. 20 I do need to add, Your Honor, with 21 respect to the issue of the admissibility of 22 the evidence and the testimony on the article, 23 the Court already ruled that the only issue is 24 what Alepin said about whether he relied on the 25 article. But he never said he did rely on the 8349 1 article. He said only that he relied on trade 2 press in general. Or to extend the analogy on 3 books, I read some books. 4 That does not mean that any book that 5 they put up in front of him can be used to 6 impeach his testimony. 7 When we presented this issue to the 8 Court on Thursday morning, the Court adopted 9 the principal in the Brian case. 10 It's inadmissible hearsay, and it's 11 admissible only if the testifying expert relied 12 on the specific article. 13 That is -- that is the law. That is 14 the rule. Specific reliance is required. 15 So general reading of the trade press, 16 which is all that was proved here, does not 17 open the door. 18 That's all I have, Your Honor. 19 THE COURT: Thank you. 20 Court finds that the motion is denied 21 except that Court finds that the Plaintiff is 22 correct in regard to 3165. That exhibit shall 23 be withdrawn from the jury's consideration and 24 is denied as not admitted, and I will inform 25 the jury of that. 8350 1 Okay. Get the jury. 2 MS. CONLIN: Your Honor, in addition 3 to that, the Court is removing the exhibit -- 4 nothing further, Your Honor. 5 MS. NELLES: Your Honor, before we 6 begin, I asked on a couple of occasions what is 7 it that Plaintiffs are actually going to do 8 today. 9 I think I've now got it narrowed down 10 to two possibilities, but before the jury comes 11 in, could we be told what's about to happen so 12 we can have the right stuff ready? 13 MS. CONLIN: Your Honor, yes, indeed. 14 MS. NELLES: Thank you. 15 MR. CASHMAN: Anthony Speakman 16 deposition will be played, and then following 17 Speakman, we'll have Mark Chestnut. 18 THE COURT: Very well. 19 MS. CONLIN: Your Honor, and there is 20 one other thing. 21 The Court indicated it had an 22 engagement on the 22nd that could be moved. 23 David Bradford, who was general 24 counsel to Novell, is going to be testifying 25 that week, and I now recall that Ms. Murano is 8351 1 going to be gone on Friday. That's the week, 2 the 26th so I really do -- we really do need to 3 be in session on those days. 4 THE COURT: Thank you for telling me 5 that. I appreciate that. 6 THE CLERK: Ms. [Juror Name] informed me 7 this morning that her father-in-law passed away 8 and that the memorial is Thursday afternoon. 9 She wondered if she could stop at noon to go to 10 the memorial. 11 MS. CONLIN: I think that's fine, Your 12 Honor. This is a deposition week. 13 We have arguments on motions 14 scheduled. Microsoft has indicated they'll be 15 scheduled Wednesday and Thursday, but we would 16 like to do them Thursday and Friday because of 17 the necessity of getting testimony in the can, 18 so to speak, for this week of depositions. 19 THE COURT: Okay. We will let 20 Ms. [Juror Name] go to the memorial. 21 MR. CASHMAN: I'm handing up to the 22 Court a copy for the court reporter of the 23 testimony that we'll be playing for 24 Mr. Speakman and a copy for the Court. 25 (The following record was made in the 8352 1 presence of the jury.) 2 THE COURT: Good morning, ladies and 3 gentlemen of the jury. 4 Sorry for the delay. Had a matter of 5 law to take up. 6 An exhibit was admitted last week, 7 number 3165. The Court is reversing its 8 ruling, and I am not allowing its admission. 9 So 3165 will be withdrawn from the packet of 10 exhibits. 11 MS. CONLIN: Your Honor, that's 12 Defendant's. 13 THE COURT: I am sorry. Defendant's 14 Exhibit 3165. Not Plaintiffs, Defendant's 15 exhibit. I beg your pardon. 16 And if you'll stand easy for a minute, 17 we have to make a copy of something, okay? 18 You may proceed. 19 MS. CONLIN: Thank you, Your Honor. 20 May it please the Court. 21 Because Mr. Alepin's testimony was 22 extensive, Mr. Constant, who was scheduled for 23 this week, had to return to England and so -- 24 and he will be rescheduled later. So this week 25 will be testimony by depositions. 8353 1 As indicated, Mr. Hagstrom and I will 2 not be present for this, and I would like to 3 introduce the jury to Michael Cashman, who is 4 here, who is a Zelle partner, and Mr. Mike 5 Jacobs, who is also a partner in the Zelle 6 firm. 7 And, Your Honor, the first deposition 8 that we will present is that of Anthony 9 Speakman, which was taken on April 27, 1998, in 10 the case of Caldera versus Microsoft. 11 Do we want to turn down the lights? 12 THE COURT: Oh, yeah, sorry. Is that 13 okay, Darin? 14 You may proceed. 15 (Whereupon, the following video was 16 played to the jury.) 17 Question: Good morning, Mr. Speakman. 18 Answer: Good morning. 19 Question: Would you please state your 20 full name for the record? 21 Answer: My name is Anthony Vincent 22 Speakman. 23 Question: Mr. Speakman, are you 24 represented today in this deposition by 25 Mr. Susman? 8354 1 Answer: I am, yes. 2 Question: Could you please explain 3 your education after high school? 4 Answer: Sure. I did a degree in 5 economics, politics and sociology at Hull 6 University in the UK, graduating with a first 7 class degree. 8 Question: What year did you graduate? 9 Answer: 1978. 10 Question: Can you describe what 11 multiuser operating systems software is? 12 Answer: Sure. The purpose of 13 multiuser software is to allow multiple number 14 of users to access one central processing unit. 15 These were the early days of microcomputers, 16 and you were able to buy one PC unit and attach 17 a number of dumb screens to it and have several 18 people access the same piece of software. 19 Question: Why did you leave BBN? 20 Answer: I was approached by a 21 headhunter for Digital Research at a time when 22 BBN were restructuring their internal 23 divisions. And I was attracted by the 24 opportunity of a sales management position 25 within Digital Research. 8355 1 Question: You were approached for a 2 sales management position at Digital Research? 3 Answer: Yes. 4 Question: Did you begin work at 5 Digital Research in the end of '89? 6 Answer: Late '89, yeah. 7 Question: How many years did you work 8 at Digital Research? 9 Answer: In total, three. 10 Question: From late '89 to late '92? 11 Answer: Correct, yes. 12 Question: What positions did you hold 13 during that period? 14 Answer: I joined in the OEM 15 department as the OEM sales manager designate, 16 as there was already a couple of people already 17 in positions within the company. And the guy 18 who had been the OEM sales manager left shortly 19 after I joined the company. 20 Question: After Mr. Perkins left, you 21 became the OEM sales manager for the UK? 22 Answer: That's correct, yes. 23 Question: Did your position change at 24 all over -- 25 Answer: No. Sorry. Strictly 8356 1 speaking, it was probably described as Northern 2 Europe, which would be the UK, Scandinavia. 3 There weren't many OEM manufacturers in 4 Scandinavia. 5 Question: Was the Middle East 6 included in Northern Europe? 7 Answer: I think Middle East and 8 Africa was also included in Northern Europe. 9 Again, there weren't very many manufacturers in 10 the Middle East. 11 Question: At the time you left 12 Digital Research, had it merged with Novell? 13 Answer: It had, yes. 14 Question: So at the time you left, 15 you were actually leaving Novell rather than 16 Digital? 17 Answer: I left Novell 12 months after 18 the acquisition, yeah. 19 Question: What was the reason for 20 your departure from Novell? 21 Answer: I was unsure of the future of 22 my position in the OEM sales department. My 23 sales team had been merged under another sales 24 manager, and I felt that my role was possibly a 25 threat. 8357 1 I was offered a role by Dieter 2 Giesbrecht who had moved from Digital Research 3 to Lotus, so somebody I had worked with before 4 at DR, and he offered me a position in Lotus, 5 and I felt that was a more secure position. 6 Question: What did Microsoft 7 allegedly do to intentionally damage DR-DOS for 8 DRI? 9 Answer: It restricted the OEM 10 customers in their licensing agreements such 11 that they made it very difficult to sell 12 against them. 13 Question: Have you ever seen a copy 14 of a Microsoft licensing agreement? 15 Answer: I think I did actually see 16 part of a Microsoft agreement at a client's, 17 but I never had one in my possession and taken 18 it away. 19 Question: Which client was that? 20 Answer: That would have been at Opus. 21 I was probably shown perhaps one or two pages 22 related -- during a specific discussion. 23 Question: Do you recall what parts of 24 the contracts you saw? 25 Answer: Not in detail, no. I know I 8358 1 had a fairly detailed discussion with Adam 2 Harris from Opus at the point where he was very 3 interested in licensing DR-DOS from Digital 4 Research, but was consistently telling me that 5 he had problems with the contract with 6 Microsoft which wouldn't allow him to do what 7 he wanted to do. 8 I think during the course of that 9 discussion he possibly showed me one or two 10 pages, but I can't claim to recall the details 11 of what was on those pages. 12 Question: Do you recall anything that 13 was on those pages? 14 Answer: Not specific words, no. 15 Question: Do you recall anything 16 generally? 17 Answer: Yes, generally that Opus 18 under the circumstances were committed to a 19 contract of a specific time period, which was 20 at least two years, according to my 21 recollection, and also that they had to pay -- 22 Microsoft had to pay a licensing fee for every 23 processor they shipped regardless of whether 24 MS-DOS was on that processor or not. 25 Question: What did you do to prepare 8359 1 for this deposition? 2 Answer: Nothing other than the 3 meeting with Mr. Hill and Mr. Susman in London. 4 Question: And how long was that 5 meeting, approximately how many hours? 6 Answer: It was probably about an hour 7 and a half. 8 Question: During that meeting, did 9 you review any documents? 10 Answer: Yes, I was shown some copies 11 of letters that I had written and internal 12 memos. 13 Question: And these were letters and 14 memos that were shown to you by Mr. Susman and 15 Mr. Hill? 16 Answer: Correct, yes. 17 Question: Did you review any 18 documents of your own in preparation for this 19 deposition? 20 Answer: No, I haven't. 21 Question: Other than Mr. Susman, 22 Mr. Hill, and Mr. Griggs, have you talked with 23 anyone else about this deposition? 24 Answer: When I met Mr. Susman and 25 Mr. Hill in London, John Constant and -- 8360 1 Mr. Susman: Andy. 2 The Witness: Andy Wightman, thanks -- 3 Answer: Were also there. So we had a 4 brief corridor type discussion. 5 Question: Did Mr. Constant and 6 Mr. Wightman participate in the meeting? 7 Answer: They did, yes. 8 Question: Where is Mr. Constant 9 employed now, if you know? 10 Answer: I don't recall. He gave me 11 his business card, but I don't recall the name 12 of the company. So it's obviously not a large 13 company. 14 Question: How about Mr. Wightman, do 15 you recall? 16 Answer: I think he's at Caldera. Is 17 that correct? 18 Question: I don't know. 19 Mr. Susman: I think he is. 20 The Witness: I think he's at Caldera 21 I'm not sure. 22 Question: I believe you said when you 23 first started work for Digital Research, your 24 position was sort of an OEM sales manager 25 designate. 8361 1 Answer: Yes. 2 Question: As a sales manager, were 3 you responsible for sales only to OEMs? 4 Answer: That's correct, yes. 5 Question: Any corporate accounts? 6 Answer: No. 7 Question: Which software products 8 were you responsible for? 9 Answer: We were responsible for the 10 operating system products, so DR-DOS, 11 Multi-User DOS, and Concurrent DOS and also 12 FLEXOS, F-L-E-X-O-S. 13 Question: At what point in time did 14 people begin reporting to you? 15 Answer: Almost immediately after -- 16 within the same week Mr. Dunn left, I 17 officially -- I officially became OEM sales 18 manager, in that same week. And then I began 19 to recruit a sales team. 20 Question: Looking at the OEM sales 21 organization at Digital Research globally, was 22 it divided up according to certain geographic 23 regions? 24 Answer: Globally. 25 Question: Outside of Europe, did the 8362 1 sales organization, the OEM sales organization 2 for Digital Research, was it divided up so that 3 there was maybe a European organization, a 4 North American organization, an Asian 5 organization? 6 Answer: As far as I recall, the total 7 -- the sales operation from within, for 8 example, Europe was subdivided into Northern 9 Europe, Central Europe, or whatever the terms 10 would be. Within Northern Europe, which, as I 11 say, was UK, Scandinavia, Middle East, and 12 Africa, it was then subdivided into OEM and 13 distribution sales. 14 Question: You were responsible for 15 the OEM half? 16 Answer: That's right, yes. 17 Question: The distribution sales, is 18 that retail? 19 Answer: That was -- that's right. 20 They were selling through distributors down to 21 retail resellers. 22 Question: Who while you were employed 23 by DRI had primary responsibility for the Vobis 24 account, if you know? 25 Answer: I think that would have been 8363 1 Komol. 2 Question: When you were OEM sales 3 manager at Digital Research in Novell, were you 4 responsible for any specific OEM accounts 5 yourself, or did you just have overall 6 management responsibility? 7 Answer: I had overall management 8 responsibility, yes. 9 Question: Were there any specific 10 accounts for which you were primarily 11 responsible? 12 Answer: I worked very closely on the 13 Opus account. 14 Question: Any other account other 15 than Opus that you worked particularly closely 16 with? 17 Answer: During the total time that I 18 was there, I also worked with ICL and Elonex. 19 Question: Amongst your sales 20 executives, were they responsible for specific 21 OEMs? 22 Answer: They were, yes. 23 Question: Was responsibility divided 24 up geographically or on an OEM basis? 25 Answer: As far as I recall, it was on 8364 1 an account basis. 2 Question: How many people worked at 3 Digital Research's Newbury office while you 4 were there, approximately? 5 Answer: I would guess at about 40 or 6 50. 7 Question: Do you know when DRI began 8 selling DR-DOS at retail? 9 Answer: I believe they were already 10 selling it as a retail product when I joined 11 the company. So it was obviously sometime 12 prior to that. 13 Question: When you started work at 14 Digital Research, what was the current version 15 of DR-DOS? 16 Answer: They had just released 3.41. 17 Mr. Pepperman: It's 558. I believe 18 that's where we left off. It bears the Bates 19 number C 0532060 through 61. And it's a 20 memorandum from Mr. Giesbrecht to Mr. Williams 21 dated December 14, 1989. 22 Answer: I can't recall seeing this 23 document before, no. 24 Question: This document was written 25 in December of 1989. 8365 1 Answer: Uh-huh. 2 Question: That's not long after you 3 started work at Digital Research? 4 Answer: That's correct, yes. 5 Question: Upon starting work there, 6 did you have any views of why Northern Europe's 7 sales organization was performing below 8 expectations? 9 Answer: I think they just -- there 10 were challenges in the business in so much as 11 having the right people doing the right roles, 12 for one. And they put that right in the 13 restructure of the organization. 14 There was no doubt in my mind very 15 soon after I joined the company the biggest 16 single challenge was the competitive nature of 17 the marketplace. 18 Question: It was a very competitive 19 market? 20 Answer: It was very difficult to 21 compete with Microsoft. 22 Question: You mentioned when you 23 started work at Digital Research a view that 24 was held that the version of DR-DOS out in the 25 market then was superior to the competing 8366 1 MS-DOS version. Was that a view held by 2 Digital Research? 3 Answer: Certainly, yes. 4 Question: Skipping, the next sentence 5 reads, with the exception of NCR, there are no 6 large OEMs on our foreseeable prospect list. 7 What is NCR? 8 Answer: What is NCR? 9 Question: Yes. 10 Answer: NCR were a large computer 11 manufacturer, and specialized in the area of 12 point of sale computers, so cash registers and 13 associated technologies. 14 Question: Did NCR have a contract 15 with Digital Research at that time? 16 Answer: I think they were a prospect 17 at that time. 18 Question: Were any OEMs in Northern 19 Europe licensing DR-DOS at the time you started 20 work there? 21 Answer: I don't believe they were. 22 Question: Were they licensing MS-DOS 23 instead? 24 Answer: OEMs in Northern Europe? 25 Question: Yes. 8367 1 Answer: Obviously, almost 2 exclusively, yes. 3 Question: Or were some of the OEMs 4 shipping their machines without an operating 5 system? 6 Answer: I'm not aware that they were. 7 Question: When you were hired in 1989 8 at Digital Research, was there a view held 9 within the company that Digital Research had 10 inadequate selling resources in Northern 11 Europe? 12 Answer: When I joined them, they 13 believed that they could improve their sales 14 skills by recruiting new people and 15 restructuring their organization, yes. 16 Question: The sentence continues on, 17 lots of smaller OEMs shipping 1,000 to 5,000 18 units per year, but can't and won't commit to a 19 volume license agreement. 20 Why wouldn't the smaller companies 21 commit to a volume license agreement? 22 Answer: Primarily because they would 23 already have had agreements with Microsoft 24 which could have committed them to a two- or 25 three-year period. It also would have 8368 1 committed them to pay per processor. 2 So even though many of them were in 3 the process of evaluating DR-DOS and liked the 4 technology, they felt that it would cost them 5 additional money to ship it, because they had 6 to pay Microsoft anyway. 7 Question: Which OEMs are you thinking 8 of when you say that, sir? 9 Answer: I'm thinking of people such 10 as Opus and Viglen. These were probably the 11 larger of the indigenous PC assemblers and OEMs 12 in the UK at the time. 13 Question: Any other OEMs you're 14 thinking of? 15 Answer: As I say, there were some two 16 to 300 companies. There was a wide range of 17 organizations, from very small to very large. 18 At that point, we were beginning to 19 communicate to all of them. 20 Question: After the sentence I just 21 read to you, the next sentence reads, we need 22 to come up with a completely new type of 23 business proposal for these companies. 24 What business proposal did Digital 25 Research come up with? 8369 1 Answer: The idea was that as they 2 were committed to Microsoft and couldn't get 3 out of those agreements and therefore couldn't 4 get involved with larger volume licensing with 5 Digital Research, that we would try and come up 6 with this idea of a package product which was 7 effectively the complete product with the box 8 and the manuals, the whole thing shrink 9 wrapped, which you weren't at that time 10 necessarily always getting with a computer, and 11 enable them to supply that to those customers 12 who specified DR-DOS over MS-DOS. 13 Question: When did Digital Research 14 begin introducing this package product? 15 Answer: That was probably in early 16 '90, early 1990. 17 Question: Which OEMs are you 18 referring to that I think you said had 19 contracts with Microsoft and couldn't get out 20 of the contracts? Which OEMs? 21 Answer: Which OEMs? It was -- I 22 mean, obviously it was the larger organizations 23 such as IBM and Compaq and ICL, who were the 24 major players in the UK at the time. But 25 equally covered all of the sort of what I like 8370 1 to refer to as the second tier; in other words. 2 The largest of the UK indigenous people, and 3 these were Elonex, they were Viglen, they were 4 Opus, it was Amstrad, and dozens of other 5 smaller companies. 6 Question: And it's correct, sir, you 7 said that the only part of a Microsoft 8 licensing agreement that you might have seen 9 during the course of your employment at Digital 10 Research is part of an agreement from Opus? 11 Answer: It was very difficult to 12 actually compete with a license agreement you 13 could never even see a copy of, because even 14 though the customer believed they understood 15 it, I didn't have the opportunity to drill into 16 that contract and see if there was ways I could 17 find around it for them so they could license 18 my product. 19 So the confidentiality that they put 20 in place made it even more difficult. 21 Question: Did Digital Research permit 22 OEMs to show their contracts with Digital 23 Research to competitors? 24 Answer: I don't recall whether we had 25 any confidentiality clause in it preventing it, 8371 1 but I don't think we had any reason we would 2 have wanted to prevent that. 3 Question: Did Digital Research view 4 its agreements with OEMs as being confidential, 5 the terms of those agreements? 6 Answer: I think in so much as, you 7 know, any two organizations with a business 8 relationship will state that the terms of that 9 agreement are confidential, I'm sure Digital 10 Research had that sort of clause in it. 11 But the difference was, I always got 12 the distinct impression dealing with the OEM 13 customers that it wasn't so much that, you 14 know, it was confidential. 15 It was more they were absolutely, you 16 know, terrified of what would happen to their 17 business if they didn't go along exactly with 18 the way Microsoft wanted them to behave. 19 Question: Which OEMs said that they 20 were terrified of the effects Microsoft would 21 have on their business? 22 Answer: Terrified is probably a 23 fairly strong word, but I know that -- 24 Question: Or afraid. 25 Answer: I know that Opus were very 8372 1 much bound by their agreement and found it very 2 difficult to get around it. 3 I know that Viglen as an organization 4 believed their whole success was sort of 5 structured around being seen as a sort of 6 completely standard organization, and that if 7 they did anything to upset Microsoft, their 8 ability to license the products would be 9 affected, and that would affect their position 10 in the marketplace. 11 So I know on that particular instance 12 there was a feeling of fear, if you will, in 13 terms of how they conducted themselves. 14 I had numerous meetings with their 15 technical director, a gentleman by the name of 16 Diran Kazandjian. I know I always got the 17 feeling after those meetings that the guy was 18 actually -- he was just too scared to do 19 anything with us. 20 Question: Any other OEMs other than 21 Viglen and Opus? 22 Answer: I know that Amstrad had a 23 very strong feeling against the contract that 24 they had to sign with Microsoft, that they 25 would have liked to have seen that hold that 8373 1 Microsoft had ahold of them broken, but again, 2 always feared that if they were the ones that 3 took that step, that it would affect their 4 position in the marketplace. 5 Question: Why couldn't Digital 6 Research convince OEMs to license the DR-DOS 7 for its computers instead of MS-DOS so that 8 they wouldn't have any agreement with 9 Microsoft? 10 Answer: Quite simply they were locked 11 into agreements that had bound them to pay for 12 every processor they shipped for the remainder 13 of a two- or three-year period, and therefore 14 it was too costly to license an additional 15 operating system. 16 Question: What about when those 17 agreements expired? 18 Answer: Those agreements would expire 19 at some point in the future, but it made it 20 very difficult to create business in the 21 following three to six months. 22 Question: You said there were 23 approximately 300 OEMs in the UK? 24 Answer: Yes. 25 Question: It would seem to me that 8374 1 agreements would have to be expiring all the 2 time, they would be of varying lengths, and 3 every couple of months a licensing agreement 4 would expire. 5 Couldn't Digital Research then 6 convince the OEMs to license DR-DOS instead of 7 MS-DOS? 8 Answer: Certainly when an agreement 9 came to a point where it would be due to 10 expire, we would try and know of that and be 11 aware of the fact that there was an agreement 12 that was open to renegotiation. And indeed 13 that was the situation that prevailed in the 14 Opus account. 15 Typically what would happen is 16 Microsoft would have locked their customers 17 into not only a per processor license, not only 18 a fixed time period, but there would be minimum 19 volume commitment, and very often OEMs would 20 have overforecast the number of units they 21 would ship. 22 So, for example, if they committed to 23 ship 50,000 for two years, but they only 24 shipped 40,000 because they cannot -- because 25 they haven't performed -- because they haven't 8375 1 grown to the extent they expected to, they 2 would have to pay Microsoft for 10,000 units to 3 have them shipped. Come to the end of the 4 agreement, Microsoft would then use that as a 5 way to ensure that they didn't go anywhere 6 else. 7 So the basic line was, you lose 10,000 8 licenses, that's money that's just dead. 9 However, if you renew the contract, then, you 10 know, we'll let you carry that money. 11 So there was no ability for them to 12 use the license they had paid for unless they 13 committed for another two-year period. 14 Question: To your knowledge, did 15 Microsoft's per processor licensing agreements 16 affirmatively prohibit the OEMs from licensing 17 a competitive operating system also? 18 Answer: Absolutely certainly, yes. 19 Question: Did the license 20 affirmatively prohibit the OEMs from licensing 21 a competing operating system? 22 Answer: Commercially it prohibited 23 them, yes, absolutely. 24 Question: Was that a term of the 25 license agreement, this prohibition? 8376 1 Answer: I couldn't tell you. 2 Question: You discussed minimum 3 commitments and your impression of how those 4 affected the OEMs' decision-making. Is it your 5 understanding, though, that once the licensing 6 agreement had expired, the OEMs were 7 contractually free to license with -- license 8 operating systems from a competing operating 9 system seller? 10 Answer: Technically, there was 11 nothing to prohibit them once that license had 12 expired, but typically they would have unused 13 monies from a Microsoft agreement, and 14 Microsoft would prohibit them from using those 15 licenses despite the fact that they had paid 16 for them. 17 Question: What did Microsoft 18 prohibit? 19 Answer: The use of unused licenses in 20 the fixed period. 21 So if they licensed 50,000 units over 22 two years and only shipped 40,000, the 10,000 23 unused licenses they would have to pay 24 Microsoft for, but they couldn't ship them 25 because it was outside the period. 8377 1 Question: Outside the two years? 2 Their license to use the software had expired? 3 Answer: Their license -- well, it 4 wasn't license to use. It was a license to 5 ship. So effectively, they were buying the 6 product off Microsoft to ship on to customers, 7 yet they were prohibited from shipping it on to 8 customers because there was a time restriction 9 on the agreement. 10 Question: Because the licenses were 11 of a finite duration? 12 Answer: Yes. 13 Question: It was your impression in 14 starting work at Digital Research at the end of 15 1989 that its prior marketing efforts in 16 Northern Europe had been insufficient? 17 Answer: I think its prior marketing 18 activities were typical of a company of its 19 size. It was a small company, and they were 20 doing everything they possibly could with the 21 resources they had. 22 Question: But your proposal was to 23 expand those activities? 24 Answer: My proposal was to sort of 25 refocus them specific to the OEM marketplace, 8378 1 yes. 2 Question: Where were they focused 3 before? 4 Answer: I think they had had a fairly 5 generic -- they advertised in the computer 6 press. I can't say I had too many details of 7 exactly what the marketing activities were 8 prior to my engagement. 9 But I certainly felt that the very 10 good press that the product was receiving from 11 the computer press in the UK was something we 12 should be doing very much more with to put in 13 front of people who made decisions about those 14 products to help them make the decision we 15 wanted them to make. 16 MR. PATRAS: We'll mark as Exhibit 561 17 a document bearing the Bates numbers C 0501331 18 through 344. 19 Question: Mr. Speakman, that's a 20 fairly long document. I'm going to direct you 21 to specific portions of it and ask you a couple 22 of questions. 23 It's entitled OEM software license 24 agreement. And on the left, there is a company 25 Tobar, T-o-b-a-r, UK Limited. 8379 1 Do you know what Tobar is or was? 2 Answer: Yes. 3 Question: What is it? 4 Answer: They were a small 5 organization who were both reseller of PC 6 components and also I believe also assembled 7 their own brand of computer. 8 Question: In the sense that they 9 assembled their own brand of computer, they 10 were an OEM? 11 Answer: Yes. 12 Question: And what is this document, 13 Exhibit 561? 14 Answer: This would appear to be an 15 agreement for them to use the DR-DOS product 16 with equipment that they sold. 17 Question: After the first page, there 18 is a -- it follows several pages which are 19 labeled Digital Research (UK) Limited, OEM 20 software license agreement, terms and 21 conditions. 22 Answer: Uh-huh. 23 Question: Were these terms and 24 conditions -- the next five or so pages, but 25 were they the standard terms and conditions of 8380 1 all OEM software license agreements coming out 2 of the UK? 3 Answer: They certainly appear to be 4 the standard agreement. However, I couldn't 5 say whether any particular text within them has 6 been changed specific to this agreement over 7 any other. 8 Question: Did you work from sort of a 9 standard set of terms and conditions? 10 Answer: Absolutely, yes. 11 Question: Were they varied at all in 12 specific accounts? 13 Answer: We tried to avoid varying the 14 contracts where possible, and the only person 15 -- the only people that were allowed to change 16 the terms were the contracts department, and 17 that had to be approved by I believe Robert 18 Gunn. So I personally was not allowed to 19 change the terms of any agreement without 20 approval. 21 Question: If you look at -- I think 22 it's the next to last page of this document, 23 the Bates number C 0501343, at the top it says 24 DR UK OEM agreement. 25 Looking at this page here, was this an 8381 1 agreement to license DR-DOS per copy, a license 2 for the product on a per copy basis? 3 Answer: This was a license for DR-DOS 4 for a number of copies, but there was no 5 restriction on Tobar, as I recall, for them to 6 be compelled to ship it. 7 Question: But it was a license for a 8 specific number of copies of DR-DOS? 9 Answer: This was indeed, yes. 10 Question: Were any of the other 11 licenses in the OEM on a different basis, not 12 for a specific number of copies, if you 13 understand my question? 14 Answer: I do understand the question. 15 I think this was fairly typical of 16 licensing a set number of copies. 17 One of the benefits that we did 18 provide to OEMs such as Tobar, who signed with 19 us was that -- was there was a payment schedule 20 for when they paid for those licenses. I don't 21 think it restricted them in any way as to when 22 they could use them. 23 Question: Are you aware of any OEM 24 license agreements with OEMs in Northern Europe 25 that were so a basis other than for a specific 8382 1 number of copies? 2 Answer: I believe we probably had 3 royalty reporting with certain customers where 4 we would agree on a price per copy based on a 5 projected number, and they would report on a 6 monthly or quarterly basis and pay us for the 7 copies they had shipped monthly. 8 Question: Did Digital Research 9 attempt with any OEMs to license DR-DOS on a 10 basis other than a specific number of copies? 11 Answer: I'm not sure I follow how 12 else you could do it. 13 Question: Well, for example, you 14 could say you could license them, give them a 15 right to use DR-DOS on their computers for a 16 set period and measured on a basis other than 17 the number of copies. I'm just trying to get a 18 feel if this was your standard way of doing it, 19 or were there any other ways you licensed the 20 product? 21 Answer: No, I think it's fair to say 22 that probably the majority of cases fell into 23 one of the two categories, i.e., either a 24 customer would license a specific number of 25 units and will use them as they ship them and 8383 1 would report to us the number of copies they 2 had sold, or, alternatively, there may be an 3 agreement where they would report on a royalty 4 basis and pay as they use them. 5 Question: This license agreement 6 here, is it for a specific term, can you tell? 7 Answer: I think -- let me see. I 8 guess there's probably somewhere in this 9 document a term that says when the agreement is 10 valid, because I think most legal agreements do 11 have a term in the contract. 12 However, there would not be a 13 restriction upon the customer in terms of when 14 they could use the copies they had purchased, 15 that's paid for them. 16 Question: Did your license agreements 17 have a typical or a standard term? 18 Answer: I'm not sure, to be honest. 19 Is there one mentioned in this document? 20 Question: Well, I mean, this document 21 is really just sort of a sample that I picked 22 sort of as a discussion piece. 23 More generally than this document, did 24 you enter into with OEMs one-year license 25 agreements, two-year license agreements? Was 8384 1 there a standard duration or a range of 2 duration? 3 Answer: I think the only term would 4 be regarding the validity of the actual 5 contract in terms of the relationship between 6 the two companies. 7 One of the things we were very 8 specific on in sales situations in my area of 9 responsibility was actually stressing to the 10 customer that we were a very much more flexible 11 organization to deal with, because that's 12 typically what they were looking for, having 13 been previously tied into agreements with 14 Microsoft. 15 Question: Did this license agreement 16 here require the OEM to make an up-front 17 payment for a certain number of copies of 18 DR-DOS that was licensed? 19 Answer: This license agreement 20 required a schedule of payments which were paid 21 on a monthly basis over a period of five 22 months. 23 So the number of copies in this 24 particular instance was 5,000 units. And 25 typically at that point, Microsoft would be 8385 1 requiring not only per license -- processor 2 licensing, they would also require payment in 3 advance for a year's worth of units. 4 What we were doing with this contract 5 was talking to -- reaching an agreement with 6 the organization on the basis they wanted to 7 ship about 5,000 units per month, and rather 8 than require -- sorry, a thousand units per 9 month. 10 And rather than require them to pay 11 for a full year up front, we asked them to 12 commit to five months' worth but still only pay 13 it on a monthly basis. 14 Question: But the OEM paid in advance 15 for the copies that it expected to use in any 16 given month? 17 Answer: In this particular instance, 18 they were paying monthly. And this was signed 19 on the 1st of November. The payment schedule 20 was monthly. And so they were effectively 21 paying for one month in advance. 22 Question: They were paying for one 23 month in advance? 24 Answer: Yes, that's all. 25 Question: Would most Digital 8386 1 Research's OEM agreements require advance 2 payments like this? 3 Answer: Of a month? 4 Question: A month or a quarter or 5 some other duration. 6 Answer: It was fairly typical to ask 7 a customer to make some level of commitment in 8 terms of the units they were going to ship. 9 And typically, we would be looking for 10 them to pay an amount at the beginning of the 11 contract. 12 The major difference between what we 13 were doing and what Microsoft was doing was we 14 were not requesting them to ship with every 15 machine they sold. 16 We weren't restricting them in terms 17 of the time period they were able to use the 18 licenses they pay for. 19 So it was very much a more flexible 20 business arrangement we had with those 21 customers. 22 Question: This agreement we've been 23 looking at here, the Tobar agreement, this is 24 not a license agreement for a package product, 25 is it, or can you tell? 8387 1 Answer: I'm pretty sure this would be 2 a licensing agreement rather than a package 3 product agreement. 4 Question: And through this licensing 5 agreement, Tobar paid for the right to use 6 5,000 copies of DR-DOS whether or not they 7 actually used them? They pay for the right to 8 ship 5,000 copies of DR-DOS without regard to 9 whether they actually did it? 10 Answer: It paid -- they paid for 11 5,000 units. I personally dealt with Martyn 12 Rolton, who is the owner of the Tobar company, 13 and I was very clearly aware of the volumes of 14 business that Martyn was doing. 15 And I was happy that this 5,000 units 16 represented -- represented a sensible business 17 commitment on his part, but one that he could 18 more than easily meet within, you know, a 19 12-month period. 20 So it was not -- not a matter of 21 paying for something he wouldn't ship. I was 22 working closely with Martyn and knew his 23 business. 24 Question: As a general matter, did 25 Digital Research offer volume discounts to its 8388 1 OEM customers? 2 Answer: We certainly had a pricing 3 scale where the per unit price was reduced 4 greater the number of copies purchased. 5 Question: As a general matter, the 6 greater the number of units that were licensed, 7 the lower the per unit price would be, is 8 that -- 9 Answer: That's correct, yes. 10 Question: And there's nothing wrong 11 with that method of licensing software? 12 Answer: It's fairly acceptable in I 13 think any business, software or any other, that 14 volume discounts apply. 15 What Digital Research was doing was 16 basically rewarding customers for business and 17 for commitment. 18 However, there was no implication at 19 any point that an OEM was being compelled to 20 ship on every system. 21 I know that there were certain 22 situations in the marketplace where customers, 23 if they committed to a large volume, they ended 24 up paying less for the total volume than they 25 would have done for half that number. 8389 1 Now, mathematically, there's always a 2 crossover point in terms of, you know, when you 3 go from 5,000 units to 5,001 units, where there 4 may be a few dollars difference. 5 But if we're referring to the sort of 6 situation where if you double the number of 7 copies you paid less than you would for the 8 original number, which I know is the sort of 9 thing that I think was occurring in the 10 marketplace, Digital Research didn't have any 11 sort of programs like that. 12 Our ambition was to give pricing that 13 was attractive and to build good relationships 14 with the clients. 15 Mr. Pepperman: Let me mark as Exhibit 16 562 a document bearing the Bates numbers 17 C 0028659 through 663. 18 Question: This appears to be a 19 December 12, 1989 memorandum to you from Mike 20 Shelton entitled meeting with Peter Bondar at 21 Nixdorf on December 11th. 22 Mr. Speakman, have you seen this 23 document before? 24 Answer: Yes, I have. 25 Question: What is Nixdorf, the 8390 1 company? 2 Answer: Nixdorf was a German computer 3 manufacturer. Sometime shortly after this 4 period, they were acquired or merged with 5 Siemens and became Siemens Nixdorf. Now 6 they're just Siemens. 7 Question: Can you tell what this 8 memorandum discusses? 9 Answer: Yes. This was Mike feeding 10 back information to me after he had met with 11 Peter at Nixdorf regarding what they discussed 12 in relation to the Nixdorf business, how they 13 acquired DOS for their PCs, and how that may 14 affect our opportunity to do business with 15 them. 16 Question: Was Mr. Shelton passing 17 this on to you as sort of a sales tip that you 18 might want to attempt to market DR-DOS to 19 Nixdorf in the UK? 20 Answer: If I recall correctly, I had 21 probably asked Mike to go and visit with Peter 22 Bondar. 23 Peter is actually a very good personal 24 friend of mine, I've known him for several 25 years, and knew him already at this point. 8391 1 So I think I probably had a telephone 2 conversation with Peter and said, look, rather 3 than me come and try to sell to you as a 4 personal friend, why don't I send along our 5 product person. Peter was a very technical 6 product marketing person himself within 7 Nixdorf. 8 And so I think I asked Mike to go 9 along so they could speak as equals at a 10 technical level, which would be perhaps a 11 greater level of detail than I could personally 12 go into. 13 Question: If you look on the second 14 page of this document, the bottom half of the 15 second page, the next to the last paragraph 16 reads, the operating system strategy is defined 17 individually by each of the regions. 18 Answer: I'm sorry. 19 Question: I'm sorry. The next to the 20 last paragraph on the second page. 21 Answer: Yes. 22 Question: The operating system 23 strategy is defined individually by each of the 24 regions. 25 Answer: Uh-huh. 8392 1 Question: Was it -- looking at that, 2 was it your hope that you would be able to 3 license to DR-DOS to Nixdorf in the UK? 4 Answer: It was certainly our hope, 5 yeah. 6 Question: If you look at the last 7 sentence on that page, there is no contract 8 with Microsoft in the UK. 9 Answer: Uh-huh. 10 Question: To the best of your 11 recollection, did Nixdorf have an agreement 12 with Microsoft in the UK? 13 Answer: Not in the UK. They were 14 headquartered in the Paderbourne in Germany, 15 and to the best of my recollection they would 16 have had an agreement with Microsoft in 17 Germany. So they wouldn't require one in the 18 UK because the PCs were assembled in Germany. 19 The UK operation in Nixdorf was merely a 20 reselling operation. 21 Question: According to this, Nixdorf 22 was not shipping MS-DOS 4.01 in the UK, 23 correct? 24 Answer: According to that, yes. 25 Question: You were attempting to 8393 1 market DR-DOS to Nixdorf? 2 Answer: We were attempting to, yes. 3 Question: In the UK? 4 Answer: Yes. 5 Question: The reference there to OS/2 6 and to SCO XENIX, in your job as licensing 7 DR-DOS to OEM, did you compete against any 8 other operating products other than Microsoft 9 DOS? 10 Answer: No. OS/2 and XENIX and UNIX 11 were in the marketplace, but they were very 12 specific applications, operating systems, 13 rather, used in very sort of specialist and 14 specific sorts of environments. 15 And the general desktop PC 16 environment, it was a DOS environment. That 17 was what the majority applications, the Lotus 18 1-2-3 and so on were actually running on. 19 So on a daily basis, we weren't 20 positioned against them. Indeed, the FLEXOS 21 product, which was the other Digital Research 22 product, did compete with OS/2 and UNIX on a 23 daily basis, because that was a specialist 24 product, a realtime multitasking system that 25 was appropriate for environments such as cash 8394 1 registers. 2 And as I say, there we were competing 3 with UNIX. 4 But on the desktop, the DR-DOS 5 product, it was competing head to head with 6 MS-DOS. 7 Question: These high-end 80386 8 machines referred to there, were you attempting 9 to market DR-DOS to Nixdorf for those machines? 10 Answer: We certainly wanted Nixdorf 11 to look at DR-DOS as one of the operating 12 systems that it could ship with its machines. 13 If I recall, I think the majority of 14 Nixdorf's business tended to be large accounts 15 with large corporate customers. 16 And typically, those corporate 17 customers would dictate what the standard was. 18 So if their standard was UNIX, they 19 would want UNIX for Nixdorf. If it was MS-DOS, 20 they would want MS-DOS. 21 So my attempt with Nixdorf was simply 22 to have DR-DOS available on Nixdorf machines 23 for those customers that specified it. 24 Question: Turning to the next page, 25 the first half of the page, there's a 8395 1 discussion of issues in choosing an operating 2 system. 3 In your experience, what factors did 4 OEMs consider in selecting an operating system? 5 Answer: What factors did who 6 consider? 7 Question: OEMs consider, in deciding 8 which operating system to license. 9 Answer: I think the biggest single 10 factor that an OEM would consider would be what 11 its customers would perceive as the most 12 attractive solution. 13 Question: The customer preference? 14 Answer: Their customer, yes. 15 Basically it was a very competitive market for 16 the PC assemblers. 17 As I say, there were two or 300 of 18 those guys, smaller guys in the UK, and there's 19 obviously a worldwide market of the bigger 20 players as well, and they're all competing for 21 the same sets of customers. 22 So they would be trying to offer the 23 customer a system that was most attractive. 24 Question: What other factors would an 25 OEM consider? 8396 1 Answer: Overall price. 2 Question: Any other factors? 3 Answer: Well, I take it as a given 4 that they would want an operating system that 5 would be stable and perform to the standards 6 that they and their customers would expect. 7 Question: In that sense, 8 compatibility with applications software, would 9 that be an important factor? 10 Answer: Absolutely. 11 Question: How about technical 12 support, would that be an important factor? 13 Answer: It would be a factor to an 14 OEM. In terms of listing, it would come way 15 below functionality. It would come below 16 pricing. It would come below customer 17 expectation because typically these companies 18 were made up of technically very competent 19 people who were assembling PCs themselves and 20 therefore were very familiar with and very 21 happy with the technology, and therefore they 22 required some support. 23 It wasn't a thing -- it's different 24 from an end user support, who when he's stuck, 25 he's stuck, and the machine doesn't work 8397 1 anymore. 2 These were a bunch of guys who were 3 assembling machines, and once they've got the 4 things up and running and they're selling it, 5 they're relatively happy with the way that's 6 going to work. 7 Question: Point number 3 reads: As 8 DR-DOS is developed in the UK, we can offer far 9 superior support and after-sales support than 10 Microsoft could ever hope to do for DOS or 11 OS/2. 12 Answer: Uh-huh. 13 Question: And we can offer far 14 superior support and after-sales support is 15 underlined, and someone has written in 16 handwriting above it, can we really, though? 17 Is that your handwriting? 18 Answer: That's not my handwriting, 19 no. And I'm intrigued. I'm not sure whose 20 handwriting that is. It's a very good 21 question, and I can answer it. 22 Could we provide far superior support? 23 Without doubt. 24 The DR-DOS product was actually 25 engineered in the UK. The development team 8398 1 were there. I have ready access to the likes 2 of Glenn Stephens and John Constant, and they 3 were exceptionally responsive to our OEM 4 customers. At that time Microsoft had an 5 abysmal reputation for customer support in the 6 UK. 7 It was a well-known fact that a 8 customer would sit on the telephone line for 9 over an hour waiting for a response from their 10 customer support. 11 It was in that period that they 12 ultimately restructured all of their support to 13 try and improve it. But at this point, their 14 support both to OEMs and to end user customers 15 was renowned in the marketplace. 16 Question: Do you know why then 17 someone would write a question in handwriting, 18 can we really, though? 19 Answer: I think that was simply a 20 matter of -- and I think you'll see it in other 21 documents of mine, any claim we made to a 22 customer, we want to be absolutely sure we 23 could back it up 100 percent, because we were 24 competing with Microsoft, who would make 25 commitments and promises and not honor them in 8399 1 terms of the way they dealt with their 2 customers. 3 Those customers were very unsatisfied 4 with that business relationship. And we wanted 5 to make sure any commitments we made, we backed 6 it 100 percent, because that was going to be 7 our way of winning. 8 Question: I think you mentioned that 9 Microsoft, did you say, did not live up to its 10 contractual agreements? 11 Answer: I don't think I said that, 12 but I certainly said that they made -- sorry. 13 We wanted to make sure that the 14 business, the commitments we made, the 15 statements we made in our sales process were 16 backed 100 percent. 17 Question: On what did you base your 18 statement that Microsoft did not do that? 19 Answer: That their support that they 20 were providing to the customers was very 21 difficult for the customers to achieve. 22 Question: What is Locland Computers? 23 Answer: Locland were one of the 24 numerous OEMs based in the UK. 25 Question: Was Locland a small OEM? 8400 1 Answer: They were probably in the 2 sort of mid-range of the indigenous UK-based 3 OEMs. 4 Question: Did Digital Research focus 5 its marketing efforts on mid-range OEMs in the 6 UK? 7 Answer: I certainly had a strategy in 8 the UK of trying to win the smaller mid-range 9 customers -- sorry, small mid-range OEMs as 10 customers so that once we could -- because 11 typically they were less tied to agreements 12 than Microsoft were. 13 They were more flexible, they wanted 14 to be more competitive on price. So my 15 approach is to try and win as many of those 16 mid-range customers as possible so that when we 17 went to the larger customers, we could prove 18 that they were being successful in the 19 marketplace with as many people as possible. 20 Question: Did any customers ever 21 complain to you about the compatibility of 22 DR-DOS? 23 Answer: I wouldn't say anybody ever 24 complained about the compatibility. Any piece 25 of software will have technical issues 8401 1 associated with it. 2 And I know that there are obviously 3 issues with DR-DOS in certain very specific 4 pieces of software. 5 I know when we did some field testing 6 for Opus clients, we got some feedbacks of 7 issues they had found. 8 I always felt very happy and always 9 felt I could write a letter such as this with 10 no concern at all because I was aware of the 11 fact that there were technical issues with 12 running software. 13 Whether you were running MS-DOS or 14 DR-DOS, they were probably different technical 15 issues. But neither product was completely 16 free of technical problems. No software ever 17 is. 18 Question: You did receive complaints 19 from OEMs about technical problems in DR-DOS? 20 Answer: We received reports from OEMs 21 about specific issues in terms of the product 22 and the performance. 23 But these, as I say, were the sort of 24 thing that I've experienced throughout my 25 career in the software industry, regardless of 8402 1 whether it was an operating system or an 2 application product. 3 There will always be customers 4 reporting things that the product doesn't do 5 exactly the way they expected it to or exactly 6 the way they wanted it to, and that was true of 7 DR-DOS. 8 Question: Did you ever hear customers 9 express to you concerns about DR-DOS's 10 compatibility? 11 Answer: No. The vast majority, in 12 fact all of the people who evaluated the 13 software, were happy with it as a technically 14 competent operating system product. 15 It is fair to say that out of the 16 field trials that we did with customers, there 17 were issues that came up. But nobody ever 18 claimed to me that it was anything other than a 19 100 percent acceptable operating system in 20 terms of its technology. 21 Question: When you started work at 22 Digital Research, the current version of DR-DOS 23 was 3.41, correct? 24 Answer: Yes, that's correct, yes. 25 Question: While you were at Digital 8403 1 Research, it also shipped DR-DOS 5.0 and DR-DOS 2 6.0; is that correct? 3 Answer: That's correct, yes. 4 Question: Are you aware of any OEMs 5 that shipped over time all versions of DR-DOS, 6 DR-DOS 3.41, 5.0, and 6.0? 7 Answer: I can be fairly certain that 8 Qubie did, Q-u-b-i-e. Gandlake I think were a 9 customer that shipped more than one version. I 10 couldn't guarantee it was all three. 11 There were -- unfortunately, the TCL 12 company I referred to in Scotland actually went 13 out of business and restructured into two other 14 computer companies, which seemed to go on quite 15 a lot at the time. 16 So they shipped at least two versions, 17 but probably didn't ship all three. 18 But typically, any customer that was 19 shipping 3.41 was very happy to receive 5, 20 because they had had a good experience with 21 3.41, and 5 had even more features in it that 22 MS-DOS didn't have. 23 Question: I think you named four 24 specific OEMs. Other than those four, can you 25 name any other OEMs that shipped multiple 8404 1 versions of DR-DOS? 2 Answer: The biggest problem is 3 remembering the names, I'm afraid to say. 4 These were a lot of small companies 5 that we obviously dealt with quite some years 6 ago, and many of them have since gone out of 7 business. 8 But I know that the number 90, which 9 was the original question you asked, was based 10 on the fact that there was one point in the UK 11 when we had almost 30 small OEM customers who 12 were shipping to DR-DOS with some or all of its 13 PCs. 14 Question: What is it, DR-DOS 3.41 or 15 5.0? 16 Answer: It would have been 3.41 and 17 5.0. 18 Question: At the very last paragraph 19 above your signature, it says, if you already 20 have a Microsoft license, don't panic, call us 21 to learn how we can help. 22 Answer: Uh-huh. 23 Question: How could you help? 24 Answer: What we were looking to do 25 was actually -- we were aware of the fact that 8405 1 Microsoft would have the processor licenses 2 probably more than they would have a fixed time 3 period. 4 What we wanted to do was actually give 5 them an opportunity to ship DR-DOS, either to 6 specific customers who required better memory 7 management or who required facilities in DR-DOS 8 that didn't exist in MS-DOS, to make them more 9 competitive. 10 And this is a sales letter. I think 11 the Wave of Change Sweeps Europe title at the 12 top suggests this probably shipped with a 13 positive press review that went out at the 14 time. 15 I would have almost certainly 16 accompanied this sort of letter with some 17 independent report on the product to prove that 18 what I was claiming here was being said in the 19 marketplace. 20 And I think the wave of change was a 21 headline from a newspaper article at the time. 22 So the sales letter was to get them to 23 consider it. And my approach in terms of how 24 we could help was to basically find -- to go 25 and speak with them, find out what their 8406 1 business issues were and see where we could 2 help. 3 Question: Did you approach OEMs that 4 you knew had a license with Microsoft? 5 Answer: Yes, we did. 6 Question: Was it your understanding 7 that those licenses didn't prevent the OEMs 8 also from shipping DR-DOS? 9 Answer: It didn't prevent or did? 10 Question: Did not. 11 Answer: I was aware of the fact that 12 the majority of those licenses would require 13 them to pay per processor, and therefore 14 financially it prevented them from licensing 15 another operating system most of the time. 16 Question: It didn't prevent them 17 contractually though, correct? 18 Answer: I don't know the details. 19 Having never seen a full Microsoft agreement 20 and had the opportunity to read it, I was never 21 able to say 100 percent whether it did or it 22 didn't. 23 Question: As you said before, you 24 might have seen a portion of only one Microsoft 25 agreement? 8407 1 Answer: Yes. 2 Question: This is a January 11, 1991 3 memorandum from Richard Gibbs to Robert Gunn. 4 What was Mr. Gibbs' position? 5 Answer: I think Richard had come in 6 as product marketing, was working under John 7 Bromhead, was responsible for DR-DOS. 8 I can't clearly remember whether Mike 9 Shelton had left the company by this stage, but 10 if he had, Richard would have been his 11 replacement. 12 Question: The first sentence of this 13 memorandum reads, further, to your recent memo 14 of 10 January, I agree with the high priority 15 you attach to ISV endorsement. 16 And this memorandum is talking about 17 ISV endorsements of DR-DOS? 18 Answer: Yes. 19 Question: Why were such ISV 20 endorsements important? 21 Answer: We were attempting to get 22 DR-DOS known and supported in as many parts of 23 the industry as we possibly could. So in 24 addition to having OEMs who were shipping it, 25 OEMs that were happy with it, each looking to 8408 1 have corporate customers who were happy with 2 it, and we were obviously looking to have 3 independent software suppliers such as Lotus, 4 the major players in the market actually stated 5 they supported it, because if you looked on the 6 brochures for software products, you would find 7 there would be a section on the back of the 8 brochure that would state what the technical 9 requirements were to run their software. 10 We were keen to have those companies 11 include DR-DOS alongside the MS-DOS statement; 12 that that was one of the required or one of the 13 environments in which it would operate. 14 Question: Did Digital Research devote 15 resources to convincing software vendors to 16 write application software for DR-DOS? 17 Answer: We didn't need to get them to 18 write application software for DR-DOS, because 19 it was a 100 percent acceptable replacement for 20 MS-DOS. Anything written for MS-DOS should be 21 equally suitable. 22 Question: But operating system 23 vendors typically have to I think the term is 24 evangelize software developers to write 25 software for their operating system; isn't that 8409 1 correct? 2 Answer: No. Only if your operating 3 system is not compatible with the others on the 4 marketplace at that point. 5 Question: At a certain point an 6 operating system vendor has to convince someone 7 to write for its operating system, doesn't it? 8 Answer: No. You only need to 9 convince them to write for it if it's a 10 different technology. 11 Question: Well, Microsoft at some 12 point had to convince software developers to 13 write for MS-DOS, correct? 14 Answer: Yeah, I guess that's correct. 15 When MS-DOS was first launched, the 16 predominant operating system at that point was 17 CP/M. And although there are some similarities 18 in the base code of the two products in terms 19 of the way applications run on them, yes, they 20 would have had to evangelize that. 21 However, as Microsoft's first client 22 for MS-DOS, I believe, or first significant one 23 was IBM, they didn't particularly have to 24 evangelize because the software vendors saw 25 that as the direction the thing was heading 8410 1 anyway. 2 THE COURT: Take a recess at this time 3 for ten minutes. 4 Remember the admonition previously 5 given. You may leave your notebooks here. 6 Thank you. 7 (A recess was taken from 9:49 to 8 10:06 a.m.) 9 THE COURT: Everyone else may be 10 seated. 11 (Whereupon, the following video 12 resumed playing to the jury.) 13 Question: Did Microsoft have to 14 evangelize software developers to write for 15 Windows? 16 Answer: Yes, they did. 17 Question: But that's not a cost that 18 Digital Research incurred for its operating 19 system product, DR-DOS, correct? 20 Answer: The costs that DR incurred 21 were different ones, because what we had to do 22 was convince the marketplace that the product 23 we had was technically superior, that it was 24 100 percent compatible, and that they should 25 use it instead of the operating system that was 8411 1 on the market at the time, which was MS-DOS. 2 So although the evangelizing still had 3 to be done, it was just sort of focused in a 4 slightly different way. 5 Question: Did Digital Research invest 6 money to convince software developers to 7 optimize the performance of their software on 8 DR-DOS? 9 Answer: As I say, I don't think 10 there's any requirement to optimize it for 11 DR-DOS. DR-DOS was already a superior 12 operating system. It had the functionality 13 that MS-DOS didn't operate, which is why it was 14 being successful and why it had been designed 15 in the first place. 16 It's worth recalling that MS-DOS as a 17 product had not developed for some eight years. 18 It sat in the marketplace, and they hadn't had 19 any new releases, any major steps forward. 20 The first step forward for MS-DOS 21 after 3.3 I think was DOS 4, which was 22 universally derided as an absolutely dreadful 23 product. 24 So what Digital Research were doing 25 was actually releasing a product that had a lot 8412 1 more functionality, which offered benefits to 2 the end users and the OEMs alike. 3 Question: The second paragraph of 4 this letter reads, the long-term objective is 5 to obtain either box back recommendations or 6 ISV-sponsored joint bundling, i.e., OEM 7 arrangements. 8 Did DR-DOS ultimately obtain box back 9 recommendations from ISVs? 10 Answer: I think there were some that 11 stated that the environments required to run 12 the product were DOS. I think there may have 13 been one or two who specified DR-DOS. But one 14 of the things we did manage to achieve is to 15 get people to stop referring to MS-DOS 16 specifically and simply refer to DOS. 17 Question: The next page of this 18 document mentions you, and it refers to you in 19 connection with a relationship with Scott 20 Porter, OEM sales manager at Lotus. 21 Answer: Yes. 22 Question: What was your relationship 23 with Mr. Porter? 24 Answer: I met with Mr. Porter to see 25 if we could have him -- sorry. 8413 1 I met with him to look at where he was 2 trying to sell Lotus products on an OEM basis 3 and see if there were ways that we could, in 4 fact, work together. 5 And we were both effectively competing 6 with Microsoft. And as I felt that our ability 7 to succeed was being hampered by certain of the 8 Microsoft contracts and so on, I was looking 9 for strong allies, and Lotus was obviously a 10 good -- potentially such a good ally. 11 Mr. Pepperman: Let me mark as Exhibit 12 570 a document with a Bates number C 0135169 13 through 71. 14 Question: First of all, this is a 15 letter from Mr. Gibbs to a Mike Shelton at 16 Lotus Development. 17 Answer: Uh-huh. 18 Question: Is that the same Mike 19 Shelton who worked at Digital Research? 20 Answer: That's right, yes. 21 Question: Have you seen a copy of 22 this letter before? 23 Answer: I probably did at the time. 24 I haven't done recently. 25 Question: The letter discusses mainly 8414 1 some possible joint sales and marketing 2 activities between Lotus and DRI relating to 3 DR-DOS 5.0 and LotusWorks. What was 4 LotusWorks? 5 Answer: LotusWorks was a Lotus 6 product which was an integrated word processor 7 and spreadsheet product. It was a cut-down 8 version of 1-2-3 plus word processing and 9 stuff. 10 Question: On the second page of this 11 document, number 8 reads, of critical 12 importance in progressing the joint activities 13 is a completed QA for LotusWorks with DR-DOS 14 5.0. 15 Do you know whether DR-DOS 16 successfully completed that QA? 17 Answer: I'm not sure where that QA 18 was being carried out. So I don't know if that 19 was being carried out at Lotus or at DR. So I 20 don't recall. 21 Question: Look down at two paragraphs 22 down. It reads, Mike Shelton agreed to 23 progress this so that an earlier completion 24 date could be achieved. It seems that Mike 25 Shelton now at Lotus was moving this along. 8415 1 Answer: Probably was. 2 Question: Do you know whether Lotus 3 successfully QA'd DR-DOS 5.0 and LotusWorks? 4 Answer: I think it probably did, 5 because the reference here to marketing through 6 Megatech, as far as I recall, there was some 7 activity of selling these products jointly 8 through Megatech. 9 Question: But you don't recall 10 specifically hearing about the results of the 11 QA? 12 Answer: Lotus wouldn't have allowed 13 it to go ahead if the QA had not been 14 successful. 15 Question: On the next page, number 16 12, Mike Shelton agreed to implement box back 17 changes as soon as possible to include 18 reference to DR-DOS 5.0. Was this ultimately 19 done? 20 Answer: I really don't recall. I 21 have very vague memories that DR-DOS, or at 22 least DOS, was referred to on Lotus products. 23 Question: But you don't know for a 24 fact? 25 Answer: I couldn't guarantee which 8416 1 products that was and which versions of those 2 products. 3 Mr. Pepperman: Let's move on to 4 Exhibit 571 which bears the Bates number 5 C 0057506 through 507. 6 Question: I just have a couple of 7 questions about this. 8 First, have you seen this document 9 before? 10 Answer: I would have done at the 11 time, yes. 12 Question: It's a November 22, 1990 13 memorandum from Helen Tizard to a list of 14 people about a PC User article. 15 Who was Helen Tizard? 16 Answer: She was the marketing manager 17 in the UK. 18 Question: This memorandum attaches an 19 article in PC User entitled DR-DOS 5.0 refuses 20 to run on some PS/2s. PS/2s were a model of 21 computer manufactured by IBM? 22 Answer: That's right, yes. 23 Question: The cover memorandum says, 24 we need to follow up her comments, presumably 25 the author of the article, with a letter to the 8417 1 publication explaining that we are aware of 2 this problem and are demonstrating our 3 commitment to solving incompatibilities. 4 You would agree that the problem 5 referred to in the article was an 6 incompatibility? 7 Answer: It would certainly appear 8 that way, yeah. 9 Question: It was an incompatibility 10 between DR-DOS and a model of IBM PC? 11 Answer: Yeah. I think the particular 12 model of the IBM PC, referring to the PS/2, was 13 designed specifically to run with OS/2, hence 14 the naming of the two. 15 And from the couple of paragraphs of 16 the article I've read, it referred to the 17 handling of the memory. 18 One of the benefits that DR-DOS 19 brought that was it handled memory in excess of 20 640K in a much more efficient manner. 21 And it may well be that there were 22 some ways in which this machine was engineered 23 that was expecting different memory structures 24 than were used in OS/2. 25 Question: That feature of DR-DOS made 8418 1 it incompatible with this model of IBM 2 computer? 3 Answer: It obviously caused some 4 issues for this machine, yes. 5 Question: The article doesn't say 6 anything about most DOS having same or similar 7 problems with the IBM PS/2? 8 Answer: It doesn't, no. 9 Question: The first sentence of the 10 last paragraph -- 11 Answer: Actually, sorry. It says 12 here, Microsoft's product manager for systems 13 marketing, Andrew King, said Microsoft works 14 around several incompatible problems by letting 15 hardware vendors tailor the product to 16 particular machines. 17 That suggests that there was in the 18 original design of that machine an 19 incompatibility, and Microsoft and IBM had 20 talked about it, and they had engineered a way 21 around it. 22 They had obviously not given Digital 23 Research the same opportunity. 24 Question: Did Digital Research 25 subsequently work with IBM on this problem? 8419 1 Answer: I guess we probably actually 2 worked around it in terms of the software 3 itself and fixed it, yes. 4 Question: The first sentence of the 5 last paragraph of the cover memorandum reads, 6 the article also raises a further point, which 7 is the commitment of major hardware and 8 software vendors to support DR-DOS 5.0. 9 Were there doubts in the marketplace 10 about major hardware and software vendors' 11 willingness to support DR-DOS 5.0? 12 Answer: It was back to the constant 13 battle trying to win IBM clients. We needed to 14 be seen in the marketplace by IBM and Compaq 15 clients. It was back to the same issue of how 16 to win those customers, given the position in 17 the marketplace at that time. 18 Question: Would you agree that this 19 problem referred to in this article was a major 20 problem for DR-DOS? 21 Answer: No, I wouldn't, because at 22 this point in the history of the product, there 23 were thousands of copies of DR-DOS in use 24 around the world, running very satisfactorily. 25 This was a brand-new machine from IBM, 8420 1 and the paragraph, Microsoft quoting themselves 2 that they allowed customers to work around such 3 an incompatibility suggests that this was 4 specific to this piece of hardware. 5 So, you know, I think that it would be 6 unfair to suggest that this particular issue 7 was a significant incompatibility. 8 Question: It was a significant enough 9 issue that it was written about in PC User? 10 Answer: Sure. And any PC press are 11 obviously always looking for a good story. 12 Question: And there was a significant 13 enough issue that Ms. Tizard sent a copy of the 14 article to what appears to be over ten people? 15 Answer: Well, as marketing manager 16 for the organization, if she hadn't distributed 17 this and looked for a resolution to it, she 18 wouldn't have been worth her salt, would she? 19 Question: And I take it from this if 20 a computer user had bought a brand-new IBM PS/2 21 and then had gone out to the retail channel and 22 bought a copy of DR-DOS 5.0 and tried to run it 23 on the PS/2, it would not have worked? 24 Answer: From what we read here, 25 that's a safe assumption, the interesting point 8421 1 being of course if they had done that, they 2 would have done it specifically to benefit from 3 the additional features of DR-DOS, because I 4 assume this machine was shipping with MS-DOS. 5 Question: Just to follow up on that, 6 Mr. Speakman. 7 If a user had bought a copy of DR-DOS 8 at retail to achieve these benefits that you 9 spoke of, it would not have been able to at the 10 time of this news article, because DR-DOS 11 wouldn't run on the PS/2 computer; is that 12 correct? 13 Answer: From the details of this 14 article, it seems that way, yes. 15 Question: Mr. Speakman, that's a 16 December 5, 1990 memorandum from Mr. Gunn to 17 you on the subject of MMD, which I think refers 18 to Microprocessor and Memory Distribution. 19 Answer: Uh-huh. 20 Question: What was the Microprocessor 21 and Memory Distribution? 22 Answer: This were a specialist 23 company that embedded microprocessors into 24 computer-driven devices, so it was not a PC 25 company. 8422 1 Question: Did they have a license for 2 DR-DOS? 3 Answer: They did, yes. 4 Question: The first paragraph reads, 5 as I believe you are aware, Microprocessor and 6 Memory Distribution in Reading are claiming 7 technical problems resulting from using DR-DOS 8 on their hardware. 9 Do you know what technical problems 10 MMD was claiming it was having? 11 Answer: MMD were using a subset of 12 the product. They weren't using the full 13 product. 14 It was a scaled-down version of the 15 product in a memory device. So it wasn't a 16 completely standard use of the product. 17 Question: The next paragraph 18 questions whether these are genuine technical 19 problems or are they just prevaricating. And I 20 think it asks you to look into this. 21 Answer: Yes. 22 Question: Did you look and see 23 whether there were genuine technical problems? 24 Answer: I did, yes. I met with them, 25 and what Robert was referring to here was the 8423 1 fact that they actually were not paying 2 invoices that were due. And he was concerned 3 that they were just picking on things that -- 4 on apparent technical issues to prevent 5 themselves from having to pay bills. 6 I met with them, and after some time, 7 we did actually resolve all the issues relating 8 to the payments, certainly. 9 And the technical issues were 10 associated with the fact that they had actually 11 just taken a subset of the product. And to the 12 best of my recollection, after some period of 13 time, these issues were resolved. 14 Question: But there were genuine 15 technical problems? 16 Answer: In terms of how they were 17 using that subset of the total operating system 18 on that particular device that they created, 19 they were seeing some problems. 20 Question: So the answer is yes? 21 Answer: The answer is yes, they had 22 some technical issues in the way they were 23 using it. Yes. 24 Question: And they were claiming they 25 couldn't ship the product because of those 8424 1 issues? 2 Answer: So they were claiming. 3 But as Robert points out in this memo, 4 they were actually wanting copies of our 5 brochure to ship with it. And to the best of 6 my recollection, they were actually continuing 7 to ship product. 8 Question: Were these problems 9 addressed or solved? 10 Answer: As I said, to the best of my 11 recollection they were. 12 Mr. Pepperman: Mark as Exhibit 574 a 13 document bearing the Bates stamp PC 033787. 14 Question: It appears to be a letter 15 from a gentleman named Dave Crocker at IMS to 16 you dated May 30th, 1991. What was IMS? 17 Answer: IMS was a software developer 18 and reseller, and they developed a range of 19 software which ran on top of DR Multi-User DOS 20 which is what his DRMDOS actually specifically 21 relates to in this. 22 Question: Did IMS sell DR-DOS as a 23 reseller for DRI? 24 Answer: Not as a reseller. They 25 acted -- they sold it in conjunction with their 8425 1 own software product, but the main product was 2 running on the multiuser product, and 3 occasionally their customers had instances 4 where they wanted a single user version of 5 their application software, so they would 6 supply it with DR-DOS rather than Multi-User 7 DOS. 8 Question: And they had a license to 9 offer DR-DOS together with their product? 10 Answer: Yes. 11 Question: The last paragraph of this 12 document, first sentence reads, already we are 13 considering discontinuing DR-DOS 5.0 from our 14 product range because the cumulative of effect 15 of unrealistic pricing, gray imports and badly 16 thought-our promotional campaigns make it very 17 difficult and unprofitable for us to sell this 18 product. 19 What is the unrealistic pricing 20 Mr. Crocker is referring to there? 21 Answer: He thought it was too cheap. 22 Question: DR-DOS was too cheap? 23 Answer: Yes. 24 Question: Why did that make it 25 unprofitable for him to sell? 8426 1 Answer: Because if it was being sold 2 in the marketplace for tens of dollars rather 3 than hundreds of dollars, or pounds as it would 4 be in the UK, his percentage margin on it, 5 whilst the percentage was the same, the actual 6 amount was very little. 7 He was used to selling the Multi-User 8 DOS product at probably four or 500 pounds per 9 copy, and he wasn't happy with the fact that he 10 could only sell the DR-DOS product for maybe 40 11 or 50 pounds, 60 pounds, whatever the price was 12 at that point in the marketplace. 13 Question: What is the badly 14 thought-out promotional campaigns he's 15 referring to there? 16 Answer: He's referring to the 17 promotion of the Multi-User DOS that he refers 18 to earlier in the same letter where we had 19 allowed again to -- sorry. 20 To get the Multi-User DOS used more 21 widely we had allowed the dealers to have 22 demonstration copies at a low price. 23 He felt that this was a bad marketing 24 policy. We felt it was a good one because it 25 made them -- made it easier for them to get 8427 1 hold of it and try it in their own systems, in 2 their own companies. 3 Question: Did Mr. Crocker ultimately 4 discontinue offering DR-DOS 5.0? 5 Answer: No. In fact, ultimately, 6 IMS, Dave Crocker actually bought the total 7 marketing rights to the Multi-User DOS product 8 after Novell had acquired Digital Research and 9 weren't quite sure -- rather, not weren't sure, 10 but decided to make Multi-User DOS a sideline 11 product. IMS licensed the rights for it 12 throughout the UK, so his commitment to the 13 product line didn't waiver. 14 Question: But again, through that 15 time he continued to license DR-DOS as well? 16 Answer: Yes. 17 Mr. Pepperman: Let me mark as Exhibit 18 575 a document with a Bates number C 0097172. 19 Question: Have you seen this document 20 before? 21 Answer: Again, I would have done at 22 the time. 23 Question: It appears to be a February 24 27, 1992 memorandum from someone named Dag 25 Melheim at Datavarehuset. 8428 1 Answer: Datavarehuset. 2 Question: -- Datavarehuset to you at 3 Digital Research regarding problems with DR-DOS 4 6.0 on Copam computers. 5 What was Datavarehuset? 6 Answer: They were a value-added 7 reseller in Norway who had been importing a 8 range of computers from the Far East called 9 Copam. 10 And at this point, they were also 11 beginning to build their own machines, so they 12 were moving from being a value-added reseller 13 to being an OEM as well. 14 Question: And they were buying 15 Digital -- DR-DOS from a Norwegian distributor? 16 Answer: Yes. Well, I had been to 17 visit them to talk about them licensing the 18 product directly from us. 19 This was probably following some tests 20 they were doing there. They had obviously also 21 spoken to the local distributor. 22 And from what I can remember of this, 23 we resolved the technical problem, and Dag 24 Melheim actually made the recommendation to Tom 25 Schmidt, I think he was called, who owned 8429 1 Datavarehuset, who said they should standardize 2 on DR-DOS. 3 Question: But at this time, 4 Mr. Melheim was writing to you about problems 5 his company was experiencing with DR-DOS 6.0 on 6 Copam computers? 7 Answer: Yes. 8 Question: And Copam was a 9 manufacturer of computers? 10 Answer: Yes, from somewhere in the 11 Far East. 12 Question: Did they also have a 13 license for DR-DOS? 14 Answer: I'm not sure. I don't think 15 so. I think they were coming in without an 16 operating system. I'm not sure about that, to 17 be absolutely honest. But certainly what I was 18 talking to them about, they had been reselling 19 the Copam machines. 20 He was testing it on the Copam, and 21 they were just beginning to build their own 22 range of machines so they would have -- had 23 then gone ahead -- what they were looking at 24 was using DR-DOS on their own range of 25 machines. They were testing it on those and on 8430 1 the Copam simultaneously. 2 Question: Okay. In the last 3 paragraph Mr. Melheim writes, please answer as 4 fast as possible. The customers are 5 complaining. 6 So his customers who were buying Copam 7 machines with DR-DOS 6.0 on it were complaining 8 about this product? 9 Answer: Apparently so, yes. 10 Question: How was this problem 11 resolved? 12 Answer: I don't actually recall, but 13 if it was an issue to do with high memory, 14 DR-DOS 5 and 6 were stronger in that area than 15 MS-DOS was. So I can only assume that we 16 didn't actually resolve the issue. 17 Question: Was high memory the primary 18 benefit in your mind of DR-DOS 5 and 6 over the 19 competing MS-DOS product? 20 Answer: It was certainly one of the 21 major selling points, yes. 22 Question: But it also created some 23 incompatibilities and technical problems; is 24 that correct? 25 Answer: It caused technical issues 8431 1 because what in fact DR-DOS was doing was 2 trying to address more than the basic 640K 3 memory that the whole Intel IBM PC machines 4 were based on. 5 So we were extending the technology of 6 the operating system to take into -- to 7 actually benefit from the advance in the 8 hardware. 9 The problem in the marketplace at that 10 point was the DOS operating system itself was 11 designed for a system to never have more than 12 640K of memory. 13 And the 486 machines were coming out 14 with 4, 8, 16, 32 megs of memory, which we just 15 couldn't use. 16 So the operating system itself was 17 pushing the use of that hardware forward. And, 18 yes, occasionally there were some issues in 19 that. 20 Question: Did Datavarehuset, I'm 21 sorry, did they ultimately license DR-DOS for 22 their own computers? 23 Answer: No, they didn't. 24 Question: Why didn't they? 25 Answer: The technical -- Dag Melheim 8432 1 was the technical man. He recommended it to 2 Tom Schmidt, who was the owner of the company. 3 And around that time, he was -- Tom 4 Schmidt was approached by Microsoft, and I 5 think it was known to Microsoft at that time 6 that they were on the point of offering -- 7 signing with Digital Research. 8 And I think the Microsoft price was 9 vastly reduced, so they made a decision to stay 10 with Microsoft. 11 Question: So they licensed MS-DOS 12 rather than DR-DOS? 13 Answer: They licensed MS-DOS because 14 Microsoft dropped the price suddenly. 15 Question: There's nothing wrong with 16 competitors engaging in that sort of price 17 compensation, is there? 18 Answer: There's nothing wrong with 19 price competition, no. 20 Question: Did you have a good opinion 21 of Mr. Duncan? 22 Answer: I thought he was an engaging 23 character. He was working hard, and he was 24 doing what he was paid to do. 25 The Witness: Of course, yes. Sorry. 8433 1 There was another contact I had with 2 Sandy sometime later, which was I rang him to 3 actually try and license Windows from him, 4 because a number of my existing OEM customers 5 and potential OEM customers were telling me 6 that they had problems getting Windows from 7 Microsoft if they had DR-DOS because Microsoft 8 weren't willing to license Windows on its own. 9 And having come up with this situation 10 on a number of occasions, I rang Sandy Duncan 11 direct to say, look, I don't know if this is 12 legal or not, but I have one way around it, 13 which is we'll buy it off you, so we'll have 14 legitimate copies, because I would rather the 15 customers bought the copies from me that I 16 bought from him than they were encouraged to 17 get involved with piracy or anything else. 18 So I did actually have a discussion 19 with him on that point, but he basically 20 refused to deal with me in terms of selling me 21 Windows product. 22 Question: Did he say to you that 23 Microsoft did not make Windows separately 24 available to its OEM customers? 25 Answer: He was fully aware when I 8434 1 rang him that that was the situation. 2 Question: What do you base that 3 statement on, he was fully aware that that was 4 the situation? What did he say? 5 Answer: He joked about the fact that 6 my customers couldn't get Windows from him. 7 And there is actually a document from 8 one company where Microsoft wrote to the 9 customer that I was dealing with, Diamond 10 Trading, saying they weren't able to supply 11 Windows alone. 12 Question: Did you ever hear any 13 Microsoft employee say that Microsoft would not 14 sell Windows separately to its OEM customers? 15 Answer: I have seen the letter from a 16 Microsoft employee to Diamond Trading stating 17 that they wouldn't. 18 Question: Just answer my question 19 first, and I'll go on to ask you a follow-up 20 question. If I don't, I'm sure your counsel 21 will. 22 Have you ever heard a Microsoft 23 employee say that? 24 Answer: I'm fairly confident in the 25 conversation I had with Sandy Duncan when I 8435 1 rang him to try and license the product that he 2 made a statement along the lines of the fact 3 that he would deny it was ever said, but that 4 yes, they were doing it. 5 Question: Do you recall Mr. Duncan 6 saying that? 7 Answer: Yes. 8 Question: And what did he say again? 9 Answer: To the best of my 10 recollection, he said that he would deny it, he 11 would deny ever saying that, but they wouldn't 12 license Windows to customers who had DR-DOS. 13 Question: You remember that? 14 Answer: I remember calling him to try 15 and buy the product. I know we had a 16 conversation where I tried genuinely to buy the 17 product from him. Because personally I had a 18 reasonably good relationship with him. I'm 19 sure there was some lighthearted conversation 20 during the course of it. 21 And he was aware of the situation. I 22 was aware of the situation, my customers were 23 aware of the situation. And the situation was 24 that Microsoft would not sell Windows on its 25 own to customers who had DR-DOS. 8436 1 Question: Aside from this one 2 conversation you had with Mr. Duncan, which 3 I'll come back to, and the letter to Diamond 4 Trading which you referred to earlier, are you 5 aware of any other statements by Microsoft 6 employees or Microsoft documents saying that 7 Microsoft didn't make Windows available 8 separately to OEMs? 9 Answer: No, I'm not. 10 Question: When was this conversation 11 with Mr. Duncan? 12 Answer: I don't recall the date. 13 Question: Do you recall the year? 14 Answer: It would have been in a 15 similar time scale to that which the date of 16 the Diamond Trading letter was, if you have the 17 date of that letter. 18 Question: I think I have that 19 available. I'm just probing your recollection. 20 And it was a telephone conversation? 21 Answer: Yes, it was. 22 Question: You said earlier that 23 Mr. Duncan said that jokingly. Could you tell 24 whether Mr. Duncan was serious or whether it 25 was a joke? I mean, you said the two of you 8437 1 had a good, lighthearted relationship. What 2 was the tone of his comment? 3 Answer: The tone of his comment was 4 that he was aware of the seriousness of making 5 any statement in that he was aware of the fact 6 that to do so would be illegal, and therefore 7 he was making light of the fact, at the same 8 time recognizing that that was the situation. 9 Question: Having had this 10 conversation with Mr. Duncan, did you send a 11 memorandum to any of your superiors reporting 12 on it? 13 Answer: I know I discussed with 14 Robert Gunn the fact that I had attempted to 15 buy the product. 16 In fact, I think I discussed with 17 Robert before -- in fact, I'm certain I 18 discussed with Robert before I made that call 19 that I was going to do it, because obviously if 20 we were going to buy the product from them, I 21 would have had to ensure that the company would 22 have been prepared to pay for it, and Robert 23 would have been happy for me to make that call. 24 I don't know that it was ever 25 documented. 8438 1 Question: Did you mention to Mr. Gunn 2 the comment by Mr. Duncan that you were 3 referring to? 4 Answer: I'm sure I would have 5 reported the conversation back to him, yes. 6 Question: Did you report it to any of 7 Digital Research's lawyers, in-house or 8 outside? 9 Answer: No. 10 Question: And you didn't memorialize 11 it in any sort of memorandum to files or anyone 12 else at Digital Research? 13 Answer: Not that I recall. It was 14 something that we were so clearly aware of, it 15 was nothing new. It wasn't as though this was 16 a shock. 17 We were completely aware of the fact 18 that Microsoft was making it difficult for us 19 to sell DOS to customers who wanted Windows. 20 So it wasn't a revolutionary new thing 21 that was so stunning it was worth documenting. 22 It was just yet further -- and of course at the 23 time we were just doing business and weren't 24 recording things for legal reasons. 25 Question: A couple quick questions on 8439 1 this document. 2 This appears to be a letter from you 3 to Mr. Duncan dated July 1990. The first 4 paragraph says, I recently received a request 5 from you for further information about how 6 DR-DOS 5.0 can improve networking performance 7 and provide extra memory for applications and 8 details of our corporate upgrade program. 9 Why was Mr. Duncan requesting this 10 information? 11 Answer: We had done -- ran an advert 12 which had a coupon saying if you wanted further 13 information about our products, please fill it 14 in. And he had filled that coupon in and sent 15 it in, assuming that it would go through some 16 processing house and that we would never see 17 it. 18 Helen Tizard had actually pulled this 19 coupon out and brought it to me and said, I 20 thought you might be interested in seeing that 21 Microsoft wants copies of our brochures. 22 So I wrote this rather lighthearted 23 letter, because I didn't want him to be able to 24 accuse us of not responding to his incoming 25 inquiry, as my way of saying, we know you want 8440 1 the information, but if you want it, you better 2 call me. 3 It was as a direct result of this 4 particular letter that he did ring me, and that 5 led to the lunch where he offered me the job. 6 Question: Did Digital Research 7 ultimately provide Microsoft with the 8 information? 9 Answer: I don't think we withheld the 10 information. 11 Question: Do you know whether Digital 12 Research ultimately provided it? 13 Answer: The information on the 14 products? 15 Question: Yes. 16 Answer: I'm sure when he came in, 17 because he came into our offices to meet me 18 when he went for lunch, and I'm pretty sure he 19 probably took the brochures with him at that 20 point. 21 Question: Was there a lighthearted 22 nature to your relationship with Mr. Duncan? 23 Answer: Given that this was the first 24 communication with him and it was lighthearted 25 in itself, I think it's fair to say it 8441 1 continued in that vein. 2 Question: Let me show you a different 3 exhibit marked Exhibit 579. 4 Have you seen this document before? 5 Answer: I've signed it. 6 Question: It's a letter from you to 7 Mr. Duncan dated March 20, 1992, regarding 8 Windows 3.0 and Windows 3.1. 9 Answer: Yes. 10 Question: And this is the letter that 11 you sent to Mr. Duncan after your telephone 12 conversation? 13 Answer: Yes, it must have been. You 14 asked me whether I did. It was just a 15 telephone conversation. Obviously I backed it 16 up in writing. 17 Question: So you had a telephone 18 conversation and then you sent him this letter 19 which reads, further to our recent telephone 20 conversation, I would be grateful if you could 21 quote me prices for the purchase of Windows 22 3.0, Windows 3.1 for quantities of 250, 500, 23 and 1,000. 24 I look forward to receiving these 25 details at your earliest convenience. 8442 1 Regards, yours sincerely, Tony 2 Speakman. 3 Answer: Yes. 4 Question: This puts the time frame of 5 when your conversation occurred in about March 6 of 1992? 7 Answer: Obviously, yes. 8 Question: You don't say anything in 9 this letter about Mr. Duncan's comment to you 10 where he sort of said without saying that 11 Microsoft didn't make Windows separately 12 available to its OEM customers. You don't 13 mention that comment in this letter? 14 Answer: No. 15 Question: At the time of this 16 conversation, March of 1992, was Novell 17 participating with the Federal Trade Commission 18 in its investigation of Microsoft? 19 Answer: I'm not aware whether they 20 were or not. I guess they probably were. If 21 those were the dates at which that was going 22 on, then I'm sure they were. 23 Question: And I think we'll see some 24 documents later, you were having correspondence 25 with Linnet Harlan, Digital Research's general 8443 1 counsel? 2 Answer: I'm sure I was asked for 3 information by her, yes. 4 Question: I think before Novell, did 5 Digital Research participate with the Federal 6 Trade Commission in its investigation of 7 Microsoft? 8 Answer: I'm sure if that was ongoing, 9 then they did, yes. 10 Question: The FTC's investigation of 11 Microsoft was a fairly well-known public event? 12 Answer: Uh-huh. 13 Question: So -- and you were aware of 14 it, the FTC's investigation? 15 Answer: Yes. 16 Question: So the FTC's investigating 17 Microsoft, your largest competitor, and 18 according to you, a salesperson at your largest 19 competitor essentially admits to doing 20 something unlawful, and you don't report it to 21 any of Digital Research's lawyers? 22 Answer: As I say, I relayed the 23 conversation to Robert Gunn. We didn't have 24 any legal staff in the UK. We had a contracts 25 administrator, but we didn't have any legal 8444 1 staff in the UK. 2 I reported it to my management. It 3 would have been his responsibility to report it 4 to the legal staff if he deemed it suitable. 5 The other thing that's worth making a 6 comment about about this particular letter and 7 the comment in it is the fact that by this 8 stage, I had been selling DR-DOS for Digital 9 Research for over two years. 10 I had been confronting Microsoft's 11 license agreements, their approach in the 12 market, their whole position and their 13 dominance over the customer set. 14 And there were -- this was nothing new 15 to me. And what's more, it had been widely 16 known by the rest of the Digital Research and a 17 lot of other people in the computer community. 18 So this one telephone conversation 19 wasn't going to set the world alight. There 20 was masses of documentary evidence available 21 far better than a note on a telephone 22 conversation I had had. 23 So when you put it into that 24 perspective, it's not that surprising that I 25 didn't put anything into writing here. 8445 1 Mr. Pepperman: Let me mark as Exhibit 2 582 a document, Bates number C 0109078 through 3 081. 4 Question: This is a January 15, 1992 5 memorandum from you to Mr. Gunn entitled OEM 6 pricing. 7 I just have a couple of specific 8 questions about this, and if at any point you 9 want to stop and read this, let me know. 10 The reference to four to five DR-DOS 11 distributors under summary, who were those 12 distributors, if you recall? 13 Answer: I know that Megatech was one 14 of the them, but I don't recall who the others 15 were. 16 Question: Can you think of any names 17 other than Megatech now? 18 Answer: Not right now, no. 19 Question: Under history, further down 20 that page, referring to the OEM business, 21 there's a sentence that reads, up-front 22 payments and a single point of support made 23 this a highly profitable business. 24 The up-front payments there are the 25 ones we talked about earlier, where the OEM 8446 1 would be required to pay a certain amount at 2 the beginning of the contract and periodically 3 thereafter for the right to ship DR-DOS? 4 Answer: That's correct, yes. 5 Question: So the OEM was required to 6 make minimum financial commitment up front to 7 license the product? 8 Answer: In order to secure lower unit 9 prices for the higher volumes, a percentage of 10 that amount was required to be paid up front, 11 yes. 12 Otherwise, every company would say 13 they were going to ship 100,000 units, get the 14 best possible price, and then ship 500. 15 Question: You would agree that to 16 really be able to implement productively 17 discount volume programs, you need to have some 18 sort of financial commitment or otherwise OEMs 19 would do what you said, they would say they're 20 going to ship 100,000 units and maybe only ship 21 five? 22 Answer: Yes. 23 Question: The next page, a couple 24 quick questions. 25 The first sentence right at the top of 8447 1 the page says, the market has changed 2 significantly over the last five years with a 3 proliferation of smaller OEMs, many of whom 4 sell direct to the public through mail order or 5 through their own stores. 6 And down at the top of the next 7 paragraph, it says, whilst our pricing and 8 licensing policies have changed to accommodate 9 these market conditions, and it goes on. 10 And my question is, how did DR-DOS's 11 pricing and licensing policy change in response 12 to this market condition? 13 Answer: We made the products 14 available in smaller quantities. We made them 15 available in shrink wrapped product form. 16 And so the smaller companies who were 17 selling direct and through mail order and 18 through their own stores could buy them in 19 units of 50 or 100 rather than having to commit 20 to thousands. 21 Question: That was a new development 22 because of this proliferation of all these 23 literally hundreds of small garage OEMs? 24 Answer: That's right, yes. 25 Mr. Pepperman: Let me mark as Exhibit 8448 1 583 a one-page memorandum Bates number 2 C 0071649. 3 Question: It appears to be a February 4 12, 1992 memorandum from Mr. Gupta regarding 5 status with a company called Tulip. What was 6 Tulip? 7 Answer: Tulip are a Dutch 8 manufacturer of computers. 9 Question: Was Tulip an OEM that DRI 10 had targeted? 11 Answer: It was, yes. 12 Question: In the second paragraph, 13 the last sentence of that paragraph says, 14 Mr. Van Eck, who I take it is someone at Tulip, 15 believes that Windows interface is going to be 16 standard like DOS interface in near future. 17 What do you understand that statement 18 to mean? 19 Answer: I understand it to mean that 20 that was his belief; that the market was going 21 to standardize on Windows. 22 Question: The next sentence says, 23 positioning of DR-DOS 6.0 as a stand-alone 24 product may not be considered in Tulip's 25 strategical positioning. 8449 1 Answer: Uh-huh. 2 Question: Do you read that statement 3 as reading that Mr. Van Eck was concerned that 4 since the market was going toward Windows, that 5 DR-DOS 6.0 would not be as attractive a 6 product? 7 Answer: I read it to mean that his 8 belief was they would need to supply Windows 9 with their machines, and their DR-DOS without 10 Windows was not an attractive proposition. 11 Question: Did the market's movement 12 towards Windows generally hurt DR-DOS as a 13 product? 14 Answer: No. It didn't hurt it as a 15 product in itself because Windows runs with 16 DR-DOS in the same way it did with MS-DOS. 17 Question: It appears from this memo 18 at least that Mr. Van Eck thought that the 19 market's movement towards Windows was a reason 20 for not licensing DR-DOS. 21 Answer: No. My interpretation would 22 be -- is that his belief was, unless we could 23 supply Windows with DR-DOS, that DR-DOS was not 24 attractive. 25 So it was the availability of Windows 8450 1 that is the issue here, not DR-DOS. 2 Question: Do you have any evidence 3 that Microsoft was refusing to provide Windows 4 separately to Tulip? 5 Answer: I was not involved in Tulip 6 at that point, so I don't know whether that was 7 the case or not. 8 Question: You have no evidence or no 9 knowledge of that? 10 Answer: I certainly have no evidence 11 of it, no. 12 Question: Did you ever hear from 13 Mr. Gupta that that was the case? 14 Answer: I think that Komol Gupta, 15 Jose Vasco and myself were responsible for the 16 OEM business in the three different territories 17 of Europe. On occasion we discussed the 18 situation in our territories. 19 And we were all experiencing the same 20 thing, and that was that in a situation much as 21 this, Tulip would see it as not easily feasible 22 to acquire Windows and to run on top of DR-DOS. 23 Question: And why is that? 24 Answer: Because it would be priced in 25 such a way that it was far more expensive for 8451 1 them to take DR-DOS and Windows -- DR-DOS from 2 Digital Research and Windows from Microsoft 3 than it was to take the two products together 4 from Microsoft. 5 Question: The concern is that 6 Microsoft offered Windows at a higher price 7 separately? 8 Answer: That's right, yes. 9 Question: Did Tulip ultimately 10 license DR-DOS 6.0? 11 Answer: I don't think so. 12 Question: Do you know why? 13 Answer: No, I don't. 14 Question: I think you said though 15 with Tulip -- we'll get into that in more 16 detail. 17 I think you said though with Tulip, 18 the Tulip OEM, that Tulip's concern there was 19 that the price would be higher for Windows if 20 Windows were licensed separately from MS-DOS 21 and not that Microsoft would not provide Tulip 22 with Windows separately. 23 Answer: The issue was that it was 24 going to be dramatically higher. 25 Question: Do you recall how much 8452 1 higher? 2 Answer: No, I don't. 3 Mr. Pepperman: Mark as Exhibit 591 a 4 document with a Bates number C 0821569. 5 Question: This appears to be another 6 memorandum from Mr. Griggs on the subject of 7 IBS Radix dated September 18, 1991. 8 Have you seen this document before? 9 Answer: Yes, I would have done. 10 Question: The second paragraph, first 11 couple sentences read, he, which I think is 12 referring to Steve Robinson at IBS Radix UK, he 13 is the decision maker on technical features and 14 benefits and appreciates the significant 15 advantage of disk compression utility. 16 However, there is still an obstacle as 17 their sales and marketing people regard 18 Microsoft as standard. 19 I learned from other people at IBS 20 Radix UK that an initial decision has been 21 taken to use Microsoft, although to date they 22 have not had detailed discussions with 23 Microsoft. 24 To your knowledge, what does it mean 25 that people regard Microsoft as standard? 8453 1 Answer: That Microsoft were the 2 predominant player and that they would take the 3 easiest course of action and follow the market 4 trend. 5 Question: Was that a broad 6 perception, that Microsoft MS-DOS was the 7 standard operating system? 8 Answer: Considering the percentage of 9 the market share they had, obviously, yes, it 10 was. 11 Question: Was it a perception held 12 among customers and users and other sales and 13 marketing people? 14 Answer: That it was the standard? 15 Question: Uh-huh. 16 Answer: Yes. 17 Question: Was that an obstacle in 18 yours and others' efforts to license DR-DOS to 19 OEMs? 20 Answer: It played a part, but it was 21 the easiest thing to sell against because the 22 product stood up for itself. 23 Question: In your experience, did you 24 encounter at other OEM situations where 25 technical people were interested in DR-DOS but 8454 1 sales and marketing people would rather the OEM 2 license MS-DOS rather than DR-DOS? 3 Answer: That was often the situation, 4 yes. 5 Mr. Pepperman: Let me mark as Exhibit 6 593 a document with a Bates number LW 007452 7 through 56. 8 Question: This appears to be a 9 summary memorandum that Mr. Gunn made following 10 an OEM sales meeting on January 31, 1992, sent 11 to 19 different people, one of whom is 12 yourself. 13 Are the 19 people listed there, 14 starting from Norbert Christ and going down to 15 Mr. Gupta, are they all people who are involved 16 in OEM sales in Europe? 17 Answer: Not directly, no. You have 18 David Bridger who was product marketing, you 19 have Chris Gibbs, who was product marketing, 20 you have John Bromhead who was product 21 marketing, you have Lindsay Williams who was 22 contracts, you have Duncan Baldwin who was 23 European marketing director, you have Norbert 24 Christ who I think was running Central Europe. 25 So only a proportion of them are OEM 8455 1 specific. But obviously the OEM fell within 2 the country manager, they were selling the 3 product, it affected the products. Everybody 4 had an OEM interest. But they were not OEM 5 salespeople. 6 Question: And this would include the 7 people who had OEM management responsibility 8 for Europe? 9 Answer: Yes. 10 Question: To Mr. Vasco and Mr. Gupta? 11 Answer: That's correct, yes. 12 Question: On the second page of this, 13 number F., there's a reference to you. 14 It says, Tony Speakman gave an 15 overview of our activities in the UK concerning 16 Opus Technology PLC. 17 Part of our sales strategy should not 18 be to wait until an MS-DOS license is about to 19 expire before we try to undertake some business 20 with that particular OEM. 21 I'll be more than prepared to consider 22 business opportunities on a case-by-case basis 23 with other OEMs that are part of the way 24 through their MS-DOS licensing period, and if 25 this means aggressive pricing from our point of 8456 1 view, then this should be brought up where 2 opportunities arise and will be discussed. 3 Mr. Gunn is proposing that people 4 aggressively approach OEMs that have license 5 agreements with MS-DOS; is that correct? 6 Answer: He's proposing that we 7 propose -- that we approach OEMs, and that if 8 they are constrained by their license with 9 Microsoft and have to pay for every processor, 10 we would possibly adapt our pricing so that 11 that OEM could afford to ship DR-DOS instead. 12 So, in other words, they would ship 13 the DR-DOS product but Microsoft would get the 14 license fee. 15 Question: And DRI would get a license 16 fee as well? 17 Answer: A minimum one, yes. 18 Question: A reduced one from what it 19 otherwise -- 20 Answer: No, a minimal one. 21 Question: The understanding then is 22 that the Microsoft license agreements did not 23 prohibit OEMs from licensing another operating 24 system, they could? 25 Answer: Well, it effectively 8457 1 prohibited it because they had to pay for it 2 whether they shipped it or not. 3 Question: When a license agreement 4 has terminated, it's over, it's run its course, 5 and let's assume the computer manufacturer had 6 a terrible experience with Microsoft and they 7 said good riddance, our agreement is over, I'm 8 going to put DR-DOS on all my computers and 9 never talk to the Microsoft folks again, did 10 that ever happen? 11 Answer: I think Vobis was an instance 12 of something along those lines, where they were 13 so tired with the relationship they put DR-DOS 14 on the agreement. 15 In situations such as Opus, where they 16 were frustrated and tired at the end of the 17 agreement, yes, they were prepared to look at 18 DR-DOS. 19 THE COURT: Very well. We'll take our 20 lunch recess. 21 Remember the admonition previously 22 given. 23 We'll be in recess until 12 noon. 24 We'll see you then. 25 (A recess was taken from 11 a.m. 8458 1 to 11:59 a.m.) 2 (The following record was made out of 3 the presence of the jury.) 4 MR. CASHMAN: Apparently we're going 5 to have some disagreement here, Your Honor. 6 THE COURT: What's the problem? 7 MR. CASHMAN: Plaintiffs' records show 8 that they intended to have as a designation 9 page 200, line 18 through page 204, line 22 10 read as part of the Speakman designations, and 11 that encompasses a reference to Plaintiffs' 12 Exhibit 5105. 13 That designation is on our final play 14 list that we provided to Microsoft, and for 15 some reason that I personally am not aware of, 16 that designation is not in the clip report that 17 I handed up to the Court and to the court 18 reporter. 19 And when I have checked back with our 20 office, it's been confirmed by the people who 21 prepared Mr. Speakman that indeed that 22 designation was supposed to be played. 23 I've advised Mr. Tulchin and Ms. 24 Nelles that Mr. Tulchin says he's refusing to 25 let Plaintiffs play that designation -- I 8459 1 should say that our technical person has 2 already that four-page designation queued up 3 and ready to play before we would resume with 4 where we left off at lunch, and our proposal 5 would be that we just simply tell the jury that 6 we skipped over a designation. 7 And then there will be a gap where we 8 resume where we left off right before lunch, 9 but apparently Microsoft is objecting. 10 MS. NELLES: Your Honor, our records 11 reflect, and first, in the set of materials I 12 brought this morning that indeed this was -- 13 this material is out by agreement. 14 I have my list and the little notation 15 that it's out, and I think that's confirmed by 16 the fact that it's not in the clip report that 17 I had asked for and Your Honor made a copy for 18 me of this morning. 19 This material does not appear in the 20 materials that Plaintiffs handed up to the 21 Court as what was going to be brought into 22 evidence today, and I simply -- not -- I don't 23 believe the material should come in, and based 24 on the records that I have, that it is out for 25 a reason, and by agreement I can't agree, 8460 1 simply agree, that it should be played. 2 MR. CASHMAN: Your Honor, there was no 3 objection to these designations in the process 4 that leads up to this point. There was no 5 objection by Microsoft, and so it should be in. 6 And Mr. Gralewski who handled Mr. 7 Speakman -- you may recall that Mr. Gralewski 8 argued the Speakman objections before you a 9 week or so ago, and he's just confirmed via 10 E-mail that indeed this was never removed and 11 was supposed to have been read. 12 It's a simple matter to put these in 13 the record. 14 THE COURT: Was it through a process 15 of meet and confer? 16 MS. NELLES: It was, Your Honor. 17 And candidly, I was not involved in 18 the meet-and-confer process, and I'm happy to 19 check back with my people, but everything I 20 have in front of me shows that it's -- it was 21 out according to our records. It certainly was 22 out on their video, and it's out in the 23 materials they provided to the Court. 24 And, you know, as I said, I'm happy to 25 go back and double-check this, but I don't 8461 1 think it's appropriate since our records are 2 different at this time to simply go ahead and 3 play it. 4 MR. CASHMAN: Well, there's two simple 5 ways to show that's incorrect, Your Honor. 6 First of all, when the parties -- in 7 the process leading up to this, after they have 8 their meet and confer, they exchange what we 9 call the final play list, and this identifies 10 all the designations. 11 This is E-mailed to Microsoft, and it 12 clearly includes the designation, and it 13 includes the exhibit reference. 14 Also, we sent Microsoft a copy of the 15 exhibit chart, and that includes the exhibit 16 that's referenced only in this particular piece 17 of testimony. 18 And what has apparently happened here 19 is a simple editing mistake, and certainly 20 there should be no problem where there was no 21 objection by Microsoft to this testimony or 22 this exhibit why we shouldn't be able to go 23 back and simply correct the record and read it 24 and move on. 25 THE COURT: Ms. Nelles, was there an 8462 1 objection to it previously? 2 MS. NELLES: Your Honor, I don't know 3 that there was a specific objection to this 4 testimony. 5 As you are likely more than aware by 6 now, these things tend to be moved in pieces, 7 and lots of times it's resolved through 8 agreement without any formal objection having 9 been logged. 10 And my records, as I sit here, reflect 11 that this material is out by agreement, not 12 through an objection process or coming to the 13 Court. 14 And it may, in fact, be an error and 15 Mr. Cashman may be correct, but that is not 16 what my records reflect. 17 And I think the fact that -- it's not 18 in my records that I brought myself before I 19 was actually given the clip list, the fact that 20 the clip list doesn't have it, and the fact 21 that it was never played by Plaintiffs shows 22 that there was -- there was at least somebody 23 on both sides of the table who thought this 24 material wasn't coming in today. 25 THE COURT: Do you have any records 8463 1 that show that before you reached an agreement 2 that it was objected to at all? 3 MS. NELLES: I don't. I don't have 4 that, Your Honor. 5 But, of course, we -- both sides 6 designate quite a bit of testimony, and some 7 comes in and some comes out, as Mr. Gralewski 8 and Mr. Tuggy sit down over coffee and try to 9 work out as much as they can before we bring it 10 to Your Honor. 11 MR. CASHMAN: I do have the evidence, 12 Your Honor, though. 13 I've got the final play list, which 14 I've identified, and I've also got the exhibits 15 that are referenced in Mr. Speakman's testimony 16 which was sent to Microsoft by E-mail, and this 17 includes exhibit -- Plaintiffs' Exhibit 5105, 18 which is the exhibit which is in the testimony 19 that we're talking about, and it's the only 20 place where that exhibit is referenced. 21 And Exhibit 5105 had no pending 22 objections. It's free and clear. There's no 23 Special Master ruling or Court ruling saying 24 that the exhibit is limited in any way or 25 inadmissible. 8464 1 The testimony and the exhibit are -- 2 should have been included, and the Plaintiffs 3 request that they be allowed to correct that to 4 include -- 5 THE COURT: So your records show that 6 the Special Master didn't have to rule on this? 7 MR. CASHMAN: No, because there's no 8 objection to the exhibit. 9 THE COURT: Ms. Nelles, is there 10 somewhere else you have to check? 11 MS. NELLES: Your Honor, I think I can 12 probably send an E-mail back to our office and 13 get a very quick response, and perhaps we can 14 simply continue, and if it -- probably isn't 15 much difference between playing it now and 16 playing it at the end if we can get it 17 resolved. 18 THE COURT: Is that okay if I let her 19 check? 20 MR. CASHMAN: That's fine, although 21 we'd like to play it -- instead of interrupt or 22 do it at the end, we'd like to play it right 23 away and just state that this was inadvertently 24 skipped before we resume with where we left off 25 at lunch. 8465 1 THE COURT: Does it -- is it relevant 2 to further portions in the testimony? Is that 3 why? 4 MR. CASHMAN: I -- 5 THE COURT: Does it refer to it again? 6 MR. CASHMAN: I would just prefer to 7 get the issue cleaned up sooner rather than 8 later, Your Honor. 9 MS. NELLES: Very much a stand-alone 10 piece, Your Honor. Goes to compensation of DRI 11 employees. 12 THE COURT: Why don't we go ahead and 13 start with the jury. 14 You can E-mail and find out, and the 15 next break, we'll play it then, if it's free 16 and clear. I have no problem playing it, but I 17 want her to check her records. 18 MS. NELLES: Thank you, Your Honor. 19 THE COURT: Okay. 20 (The following record was made in the 21 presence of the jury at 12:09 p.m.) 22 THE COURT: Everyone else may be 23 seated. 24 You may continue, sir. 25 MR. CASHMAN: Plaintiffs continue with 8466 1 the testimony of Anthony Speakman. 2 (Whereupon, the following video 3 resumed playing to the jury.) 4 Question: Did they, when the 5 agreement was over, then take all their 6 operating system to DR-DOS? 7 Answer: No, because it wasn't that 8 simple. The marketplace wasn't that 9 straightforward. 10 Question: Was that because certain of 11 their customers demanded to have MS-DOS on 12 their computers? 13 Answer: It's because certain of their 14 customers expected to have MS-DOS, would have 15 preferred to have MS-DOS, but rather than being 16 able to at the end of that period say, okay, 17 the majority of our machines will go out with 18 DR-DOS and we'll buy MS-DOS as they require it, 19 the agreements through Microsoft wouldn't 20 permit that. 21 Question: This is after the 22 agreements -- I'm assuming after the agreements 23 have terminated? 24 The agreements are over, so the 25 agreement is not a bar. They can pick whatever 8467 1 they want for their operating system. The 2 agreement is done. Why not just say, well, 3 DR-DOS is a technically superior operating 4 system, I'm going to put it on all my machines? 5 Answer: Are we talking about this 6 specific point in F here? 7 Question: We started there. I'm just 8 talking more generally. 9 Answer: This point here was saying 10 that we should approach them during the course 11 of their agreement. 12 Question: Right. 13 Answer: And price it aggressively. 14 Question: After the agreement is 15 over, why not just put DR-DOS on all the 16 computers? 17 Answer: It was -- it's not that 18 simple. 19 The reason it's not that simple is 20 that an OEM would be selling to large 21 corporations as well as small corporations. 22 Large corporations would have standards. And 23 some of those customers would require to 24 maintain the same version of the operating 25 system across all of their hardware. 8468 1 And so the OEM would need to be able 2 to supply both operating systems. And whilst 3 Digital Research was prepared to be flexible in 4 both its pricing and licensing agreements, the 5 OEMs typically didn't find Microsoft to be 6 flexible in that way. 7 Question: In Mr. Gunn's memo, he's 8 referring to, and if this means highly 9 aggressive pricing from our view, then this 10 should be brought up where opportunities arise 11 and will be excused. 12 Was there any disagreement within DRI 13 or Novell at the time about how aggressive the 14 company should be about DR-DOS pricing? 15 Answer: There wasn't a disagreement. 16 I and others believed that in certain instances 17 we would have to provide our products at very 18 low prices to take into consideration the fact 19 that those OEMs were also having to pay 20 Microsoft's fee even though they weren't 21 shipping the product. 22 And when I proposed those sorts of 23 situations to the likes of Robert Gunn, he 24 would be supportive of them, and he would have 25 the authority within the organization to get 8469 1 such pricing approved, if necessary. 2 As a general rule, the company had a 3 pricing structure and liked to stick to it. 4 Question: Turning to the next page of 5 this memorandum, Point Number 7, under country 6 managers, the first paragraph there says, we 7 discussed the issue of competition against 8 Microsoft with regard to their strategy of only 9 selling Windows with MS-DOS 5.0 or selling 10 Windows at a prohibitively high price if MS-DOS 11 5.0 is not required. 12 Firstly, any written evidence of 13 Microsoft's strategy in this respect should be 14 forwarded to Robert Gunn immediately. It may 15 well be that Microsoft's sales strategies are 16 illegal, and therefore the evidence is of the 17 utmost importance. 18 Aside from the Diamond Trading letter 19 that you referred to earlier, are you aware of 20 any other written evidence of this alleged 21 Microsoft strategy that anyone gave Mr. Gunn as 22 a result of this memorandum? 23 Answer: I'm not aware of written 24 evidence, no. 25 Question: So the only written 8470 1 evidence that you're aware of is this Diamond 2 Trading letter? 3 Answer: That's the only one that I've 4 heard, yes. 5 Question: I believe that this fax of 6 January 31, 1992, was before your conversation 7 with Mr. Duncan that we talked about earlier. 8 Here is Mr. Gunn saying that this must 9 be brought to his attention immediately and 10 that such sales strategies are illegal, and you 11 would receive this memorandum from Mr. Gunn. 12 And still you didn't mention your 13 conversation with Mr. Duncan to any of Digital 14 Research or Novell's legal department? 15 Answer: No. This here -- firstly, 16 this asks for written evidence. I didn't have 17 any written evidence at that point. 18 I discussed my intention of talking to 19 Sandy Duncan with Robert Gunn. I reported back 20 to him afterwards, as my immediate superior, 21 that conversation. And it was in Robert's 22 hands to communicate that to the legal 23 department, and he may well have done that. 24 Question: Did you report to Mr. Gunn 25 the specific part of the conversation that you 8471 1 relayed to me earlier where you said that 2 Mr. Duncan confirmed in a sort of -- you can't 3 quote me on this, but confirmed that Microsoft 4 didn't make Windows available separately to its 5 OEMs? 6 Did you report that part of your 7 conversation to Mr. Gunn? 8 Answer: I can't remember every word 9 that's spoken in the conversation with Robert 10 Gunn. 11 But knowing that I have a habit of 12 saying too much rather than too little, it's 13 quite likely that I would have repeated the 14 whole thing. 15 Question: But you don't remember for 16 a fact whether or not you did? 17 Answer: No. 18 Question: Let's go back to my 19 question. 20 What, if anything, did you do after 21 receiving this memorandum to attempt to obtain 22 this written evidence? 23 Answer: As I had already received the 24 written evidence from the Diamond Trading 25 situation, I don't know that I embarked on 8472 1 anything other than the letter that I wrote to 2 Sandy Duncan asking for license pricing for 3 Windows, which was me giving him an opportunity 4 to put in writing his refusal. 5 Question: So after you got the 6 Diamond Trading fax, you didn't attempt to get 7 any other written evidence? 8 Answer: My job was to sell software. 9 Question: Mr. Gunn here is asking 10 people to try to get written evidence. 11 Answer: Yes, he's asking a group of 12 how many people there, and I was the person who 13 had already provided him with any written 14 evidence. 15 Question: So after this memorandum, 16 you didn't find any other written evidence? 17 Answer: Not written, no. 18 Question: Thank you. 19 Who at DRI was primarily responsible 20 for the Amstrad, for Amstrad? 21 Answer: I was. 22 Question: Is Amstrad a large OEM in 23 the UK? 24 Answer: Yes. 25 Question: So you were the one who had 8473 1 sort of the direct contact with Amstrad? 2 Answer: That's right, yes. 3 Question: Was anyone else sort of 4 above you in the corporate structure involved 5 in any sort of a regular basis with Amstrad? 6 Answer: I know that I attended 7 meetings with Robert Gunn at Amstrad. 8 Question: Who was your primary 9 contact at Amstrad? Was it Adam Harris? 10 Answer: No, Adam Harris was at Opus. 11 Question: I'm sorry. I got my names 12 confused. 13 I ought to let you answer the 14 questions. 15 Who was your primary contact at 16 Amstrad? 17 Answer: It was -- Malcolm Miller I 18 think was his name, was the marketing director. 19 I met with the owner of the company, Alan 20 Sugar, on one occasion. And I met a number of 21 other people from the organization at different 22 points. 23 Question: Did you meet a Mr. Hennell, 24 David Hennell? 25 Answer: Yes, I did. 8474 1 Question: How about Peter Roback? 2 Answer: Yes, I had that pleasure. 3 Question: What was Mr. Roback's 4 position? 5 Answer: He was a marketing executive 6 reporting I think to David Hennell, maybe to 7 Malcolm Miller. 8 Question: And what was Mr. Hennell's 9 position? 10 Answer: He was a marketing 11 individual. 12 Amstrad was relatively unstructured in 13 terms of its internal organization. So he was 14 acting as a product marketing person. He was 15 sourcing components for products, negotiating 16 with suppliers. He had a sort of a mixture of 17 roles. 18 Question: When I mentioned Mr. 19 Roback, I believe you said something, yes, I 20 had the pleasure of dealing with Mr. Roback. 21 It sounded a little bit sarcastic. What was 22 the background there? 23 Answer: Nothing specific. He was a 24 fairly abrasive character to deal with. 25 Amstrad were a successful 8475 1 organization. He took that success upon his 2 shoulders and tried to use it as a way to beat 3 suppliers. As not a terribly experienced 4 individual, he often did it in an unsubtle way. 5 Question: I take it DRI attempted to 6 license DR-DOS to Amstrad? 7 Answer: Yes. 8 Question: Did Amstrad ever license 9 DR-DOS? 10 Answer: No, I don't think so. 11 Question: Did anyone from Amstrad 12 ever say why Amstrad did not license DR-DOS? 13 Answer: Yes, it was to do with the 14 fact that they had a long-term license 15 agreement with Microsoft that they found it was 16 economically unviable to get out of. 17 They had previously licensed product 18 from DR. They had licensed Gem, and I believe 19 one of the -- there was a precursor product to 20 DR-DOS, and they had licensed that on, again, a 21 non-Intel machine which was a typing device. 22 Question: Who did this information 23 come from, these reasons? Was that from 24 Mr. Miller? 25 Answer: It came from either Peter 8476 1 Roback or Mr. Miller, yes. 2 Mr. Miller had a very, very strong 3 dislike of their relationship with Microsoft. 4 Question: How about Mr. Roback? 5 Answer: I think he shared that 6 dislike. 7 Question: Was there something about 8 DRI's previous license with Amstrad that made 9 Amstrad less likely to -- 10 Answer: No, I don't think so. I 11 think at the time that they signed the license 12 with Microsoft, the DR-DOS product was not at 13 that point available, and so they had signed 14 with Microsoft. And I think they were tied 15 into something possibly as long as a three-year 16 agreement. 17 Question: You never saw the agreement 18 between Amstrad and -- 19 Answer: No. 20 Question: -- and Microsoft? 21 Answer: No. 22 Mr. Pepperman: We'll mark as Exhibit 23 594 a document, Bates number A 014096 through 24 98. 25 Question: This appears to be a letter 8477 1 from you to Mr. Roback dated February 12, 1991. 2 Answer: Yes. 3 Question: Have you seen this before? 4 Answer: Yes. 5 Question: Do you recall what this 6 letter is about? 7 Answer: Yes. We had discussions 8 about them shipping DR-DOS at a nominal price 9 of one pound or possibly even free on a certain 10 range of machines, and part of that original 11 discussion was to ship it into Germany for 12 specific reasons in that market. 13 Question: The first sentence of the 14 letter refers to your fax of February 7th, 15 which I assume is a fax from Mr. Roback. 16 Do you recall anything about his fax 17 other than the references made in this letter 18 to it? 19 Answer: No. I haven't seen it since 20 the time. 21 Question: You don't happen to still 22 have a copy of it? 23 Answer: I have no documents. But 24 they may exist somewhere. 25 Question: The first two points read, 8478 1 it is unfortunate that you were unwilling to 2 extend this trial to another market. However, 3 if you cannot be persuaded to give this further 4 consideration, we have little option at this 5 stage other than to accept this. 6 Two, we foresee significant benefits 7 being derived in the target market if the PC 8 4000 is shipped with DRD 5.0. However, if you 9 are not able to accommodate this, we again must 10 accept it. 11 What is the trial referred to in the 12 first sentence there? 13 Answer: I had wanted him to -- sorry. 14 We had discussed a trial period where 15 he would ship DR-DOS. And it had been my hope 16 that would be in the UK, which was their 17 predominant marketplace. 18 They had some success in Germany, but 19 it was probably no more than 10, 15 percent of 20 their total business. I wanted the trial to be 21 in the UK, and he basically turned it around 22 that it was going to be in Germany, I think. 23 Question: And was part of this trial 24 you were going to give them copies of DR-DOS 25 4.0 for a nominal amount? 8479 1 Answer: For a pound. 2 Question: Why wouldn't Amstrad do it 3 in the UK? 4 Answer: I don't recall what their 5 reasons were now. 6 Question: They wouldn't agree to ship 7 DR-DOS on their machines in the UK for even a 8 pound? 9 Answer: At this point they were still 10 committed to ship Microsoft product. And I 11 think this was one particular range in UPC. I 12 don't recall the reasons. 13 Question: And they weren't willing to 14 ship DR-DOS on some of these new machines for a 15 trial period as little as a pound additional in 16 the UK? 17 Answer: Apparently so. 18 Question: These first two paragraphs 19 there read as if you were a little bit 20 frustrated with Mr. Roback. 21 Answer: He could be a difficult 22 person to deal with. 23 Question: The number two, where it 24 says, we foresee significant benefits being 25 derived in the target market if the PC 4000 is 8480 1 shipped with DR-DOS 5.0. However, if you are 2 not able to accommodate this, we must again 3 accept it. The PC 4000, was that a new Amstrad 4 computer? 5 Answer: That was a new Amstrad 6 computer, yes. 7 Question: Did Amstrad disagree with 8 you on the benefits of shipping DR-DOS on that 9 new computer in the UK? 10 Answer: No, I don't think they 11 disagreed with the benefits. They just didn't 12 seem to want to take that step for whatever 13 market reasons they had. 14 Question: And you don't know what 15 those market reasons were? 16 Answer: I don't recall them now, no. 17 Question: The paragraph four reads, 18 your desire to ship the product free of charge 19 is based upon a suggestion I made several 20 months ago. 21 At that time it was suggested as a 22 discussion point, and whilst I am always keen 23 to meet any commitments made, I must make the 24 following points. And you go on to make a few 25 points. 8481 1 Had you offered to give DR-DOS to 2 Amstrad for free to ship in the UK? 3 Answer: In a conversation some months 4 before, and I had made a suggestion that we 5 would look at different ways of having the DR 6 product taken to market with Amstrad, and one 7 of those suggestions would have been 8 potentially free of charge shipment whilst that 9 Microsoft agreement -- whilst we were still 10 having to pay Microsoft. 11 Question: It looks like on the next 12 page, after your list of reasons, it says, 13 therefore, we propose that if you are to accept 14 a one pound price that you apply to all copies 15 used -- there are a few other points made 16 there. Was your proposal now that the amount 17 be for one pound? 18 Answer: Yes. 19 Question: And it was your 20 understanding that Amstrad's agreement with 21 Microsoft did not prohibit Amstrad from 22 licensing DR-DOS on Amstrad's machines? 23 Answer: No. Their agreement required 24 them to pay for every unit. 25 Question: But there was no agreement 8482 1 you should only ship to MS-DOS units on your 2 machine, was there? 3 Answer: I didn't see the agreement. 4 Question: But you've never heard 5 anyone suggest that the agreement actually 6 required Amstrad to load MS-DOS on all the 7 machines? 8 Answer: I don't see that as a great 9 material difference if you're paying for it. 10 Whether you ship it or not is not a big deal. 11 Question: It would be a big 12 difference if you saw a product that had other 13 benefits and you could pay for that and put it 14 on your machine, whereas if you were required 15 to put it on, you couldn't even do that? 16 Answer: I think being requested to 17 pay for it is restrictive enough without having 18 to ship it as well. 19 Question: Were you ever able to 20 license DR-DOS to an OEM that had a per 21 processor license with Microsoft? 22 Answer: Yes, we did, with Opus. 23 Question: So that contractual 24 distinction made a difference there, you were 25 able to license DR-DOS to Opus? 8483 1 Answer: We're talking about a 2 theoretical situation where, you know, they 3 were prohibited from shipping it, which isn't 4 the issue here. It's where they were required 5 to pay for it. 6 Question: In offering DR-DOS to 7 Amstrad at a pound per unit, was that below 8 your per unit cost? 9 Answer: Significantly. 10 Question: So DRI would have lost 11 money on this deal? 12 Answer: Probably, yes. 13 Question: I said below your cost, and 14 you said significantly would you have lost 15 money, then it's probably. Why isn't it 16 definitely? 17 Answer: Well, it depends how you 18 calculate the cost. If you calculate the cost 19 of supplying software to an OEM and you take 20 into account the cost of customer support, the 21 cost of sales, the cost of marketing and all 22 the rest of it, you would have definitely lost 23 money. 24 If you only take into account the 25 shippable units to the OEM, which would have 8484 1 probably have been a master copy and the 2 license agreement, then it's a little bit more 3 marginal. 4 Question: Okay. Did Amstrad 5 ultimately license DR-DOS from DRI? 6 Answer: No. 7 Question: Did you ever get the 8 impression in your dealings with Amstrad that 9 Amstrad was using DRI to get a lower royalty 10 rate from Microsoft? 11 Answer: The thought went through my 12 mind, yes. 13 Question: Why do you say that? 14 Answer: Because they were an 15 aggressive organization who would use whatever 16 tools were at their disposal to get the best 17 prices they could from their suppliers. 18 Question: Did you ever get the 19 impression in your dealings with other OEMs 20 that they were using DRI to get a better price 21 from Microsoft? 22 Answer: No. 23 Question: So Amstrad was the only one 24 you got that impression? 25 Answer: Yes. 8485 1 Mr. Pepperman: Mark as Exhibit 595 a 2 document with a Bates number, C 0313632 through 3 33. 4 Question: I'm only going to ask you a 5 question about a small portion of this. 6 Again, feel free to look at it as much 7 as you would like. 8 It's a letter from Mr. Gunn to a 9 Mr. Barry Young at Amstrad. 10 My question really is, just the very 11 last sentence in the first page, it says, in 12 the meantime, of course, Digital Research is 13 continuing to develop DR-DOS, and whilst I 14 won't make any promises about future releases 15 at this time, our intention is to stay ahead of 16 the competition from a technical point of view 17 whilst providing a fully compatible product. 18 I just want to get clear, what is your 19 understanding of what Mr. Gunn meant by a fully 20 compatible product? 21 Answer: Meaning that it would 22 continue to be a reliable operating system for 23 the Intel PCs. 24 Question: I think we saw -- as you 25 use -- I think we saw a document where you said 8486 1 100 percent compatible. This says fully 2 compatible. 3 As that phrase was used at Digital 4 Research, does that mean if a customer bought a 5 computer with DR-DOS on it, that that computer 6 would run all applications written for MS-DOS 7 as well as MS-DOS would run them, without any 8 modifications to DR-DOS? 9 Answer: That was certainly the 10 intention and the goal. But it's worth 11 pointing out that for an operating system to be 12 fully compatible, it means that it should take 13 maximum advantage of the hardware that it is 14 driving. 15 And there was sufficient evidence from 16 the reviews that we had that the Digital 17 Research product drove more benefit from the 18 hardware than the MS-DOS product did. 19 So we never had any concern about 20 making the claim that it was fully compatible. 21 Question: Did you ever encounter any 22 situations in your dealing with OEMs or their 23 customers where it was reported that DR-DOS 24 would not run an application written for MS-DOS 25 without some sort of modifications to DR-DOS? 8487 1 Answer: There were reports of certain 2 functionality within certain products maybe 3 having issues. But I'm very, very confident 4 that the number of reports regarding issues 5 regarding DR-DOS were far fewer than there were 6 of technical issues with MS-DOS in the market 7 at that time with a whole range of 8 applications. 9 Question: What do you base that 10 statement on? 11 Answer: I base that statement on the 12 fact that the MS-DOS product was known to be a 13 highly bug-ridden product, and that MS-DOS 4 14 was an extremely unsuccessful product and very 15 unpopular with the customer base, both end user 16 customers and the OEM customers. 17 The number of both those sets of 18 customers that upgraded to 4 were minimal 19 compared to the numbers that subsequently 20 upgraded to later versions. 21 So to have an operating system that 22 had problems in it, or rather for DR to have 23 some problems in its operating system was 24 hardly a sort of earth shattering event, 25 considering that the supposed market leader in 8488 1 either version which was not compatible -- that 2 was not fully backward compatible with its own 3 previous version, there were more 4 inconsistencies between MS-DOS 3.3 and MS-DOS 4 5 than there were between DR-DOS and MS-DOS. 6 Question: You're talking about MS-DOS 7 4, and you said MS-DOS 4 was not popular with 8 customers. 9 What about MS-DOS 5? 10 Answer: When MS-DOS 5 eventually came 11 out after DR-DOS had been in the market for 12 some time, they had managed to play a game of 13 catch-up and put in nearly all the same 14 features that were already in DR-DOS 5. And at 15 that time we were already well on the way with 16 DR-DOS 6, which had a number of additional 17 benefits. 18 So, in fact, when it comes to what are 19 we talking about with compatibility, Digital 20 Research was driving the hardware better, it 21 was more compatible with the applications than 22 previous versions of MS-DOS such as MS-DOS 4 23 were. 24 So there was no question in my mind 25 when I talked to customers about compatibility 8489 1 that we could quite honestly hand in hand with 2 all sort of moral integrity make those claims. 3 Question: But my question was, was 4 MS-DOS 5.0 popular with customers? 5 Answer: Eventually it was, yes. 6 Again, MS-DOS 5 would probably never have 7 existed if -- 8 Question: You've answered my 9 question. 10 Answer: Good. 11 Question: Let's look at Exhibit 596. 12 This document relates to the Opus account, 13 which I think we've discussed a little bit 14 today. 15 Who was primarily responsible at DRI 16 for Opus? 17 Answer: I was. 18 Question: Did Opus ever license 19 DR-DOS? 20 Answer: They licensed it at a very 21 low unit cost, yes. 22 Question: When did they license it? 23 Answer: I can't remember when the 24 contract was signed. 25 Question: Do you know which version 8490 1 of DR-DOS it was? 2 Answer: I'm pretty sure it would have 3 been DR-DOS 5. 4 Question: And you were involved in 5 the efforts to convince Opus to license DR-DOS? 6 Answer: Yes. 7 Question: This memorandum that we've 8 marked as Exhibit 596, I think you mentioned 9 earlier that some customers of Opus did some 10 testing at DR-DOS at a point before Opus 11 ultimately licensed DR-DOS; is that correct? 12 Answer: That's right. 13 Question: And this memorandum reports 14 on parts of those field tests? 15 Answer: That's right. 16 Question: More specifically, I think 17 this OEM reports on problems that certain 18 customers identified during the field testing? 19 Answer: These are reports of the 20 issues they found in the field testing, yes. 21 Question: The second paragraph reads, 22 Opus had been very positive towards us and 23 DR-DOS and very critical of the service in 24 support of their current supplier. 25 They are surprised and worried by the 8491 1 initial comments they have received from these 2 clients and I am concerned that we prove the 3 claims we make about our responsiveness and 4 quality service. 5 At this time, Opus was expressing some 6 concerns about some of the comments of its 7 customers who were testing DR-DOS? 8 Answer: They had expressed concerns 9 about the content that follows, yes. 10 Question: Okay. And these were 11 technical concerns about DR-DOS? 12 Answer: Uh-huh. 13 Question: So these various customers 14 that are listed here, British Aerospace, South 15 Bank Poly, Liverpool University, Marconi 16 Command and Control, and Stafford Poly, had 17 raised technical issues about DR-DOS? 18 Answer: Yes. 19 Question: Up top there is some 20 handwriting. It appears to be a handwritten 21 note from Ian Dunn to you. At the top of the 22 first page. 23 It says, Tony, while these may seem 24 trivial, they could be made to seem quite 25 important to Opus re compatibility. So we must 8492 1 get these sort of ASAP. Let me know if you 2 have problems. 3 Did Opus view these problems as being 4 serious? 5 Answer: It wasn't viewed as a 6 show-stopper. 7 Question: Well, you would agree that 8 compatibility is an important issue for OEMs? 9 Answer: Of course. 10 Question: And Mr. Dunn was concerned 11 that these problems might give Opus some 12 concerns about DR-DOS's compatibility? 13 Answer: Yes. 14 Mr. Pepperman: Let me mark as Exhibit 15 597 a document with a Bates number, 277153. 16 Question: This appears to be a letter 17 from Mr. Breffit at Opus to you, date of March 18 2nd, 1990. 19 The second paragraph of the letter 20 reads, I have read with interest the contents 21 of your letter, but, unfortunately, we are not 22 in a position to progress any further with 23 DR-DOS until all the technical issues are 24 resolved. 25 What are the technical issues that 8493 1 Mr. Breffit is referring to there? 2 Answer: I assume they would be ones 3 that come out of this field trial. 4 Question: And Mr. Dunn is asking 5 John, is that John Bromhead, please keep the 6 focus on resolving Opus technical issues so we 7 could close this sale? 8 Answer: That would probably be John 9 Constant. 10 Question: John Constant, you're 11 right. 12 I think you had testified earlier that 13 for OEMs probably the most important factor in 14 picking an operating system is the operating 15 system that their customers demand; is that 16 correct? 17 Answer: Uh-huh. 18 Mr. Pepperman: Let me mark as Exhibit 19 598 a document with Bates numbers C 0290231 20 through 236. 21 Question: Have you seen this document 22 before? 23 Answer: Yes. 24 MS. NELLES: Your Honor, may we break 25 until we're able to pull that exhibit up? We 8494 1 seem to be having a technical difficulty. 2 THE COURT: You need some time, Darin? 3 MR. CASHMAN: It will take just a 4 minute, Your Honor. 5 I think we have to reboot, I'm told. 6 THE COURT: That's fine. 7 MS. NELLES: Your Honor, we're capable 8 of putting the documents up from our side of 9 the table if Plaintiffs would like us to. 10 THE COURT: Let's see. 11 MR. CASHMAN: One moment, please. 12 THE COURT: Is that it? 13 MS. NELLES: That's it. 14 Question: Have you seen this document 15 before? 16 Answer: Yes. 17 Question: The first page of it looks 18 to be a little handwritten note from you to 19 Mike Shelton. Is that who the Mike is referred 20 to there? 21 Answer: Yes, it probably would be. 22 Question: It says, internal report 23 from Opus for your interest. And you copied 24 John Bromhead and John Constant. 25 Answer: Uh-huh. 8495 1 Question: Is the document I have 2 attached to it the internal Opus report 3 referred to in the handwritten note? 4 Answer: Yes, I guess it would be. 5 Question: This document that follows 6 on the next page was an internal report 7 prepared by Opus? 8 Answer: Yes. 9 Question: Did they send a copy of it 10 to you? 11 Answer: Yes, I presume this is where 12 this came from, yes. 13 Question: And this is a report with 14 results of a survey they had conducted of their 15 best and most cooperative customers? 16 Answer: Yes. In addition to doing 17 the detail field trials with the four or five 18 customers we talked about a moment ago, they 19 did some telephone research, they put together 20 this questionnaire, and they telephoned a range 21 of customers to get a feeling for what the 22 reaction would be. 23 They were getting very close to making 24 a positive decision regarding shipping DR-DOS, 25 and they wanted to do further field testing as 8496 1 to what the reaction in the marketplace was 2 going to be. 3 Question: The second sentence reads, 4 the sample was carefully selected to represent 5 the best and most cooperative of our customers. 6 So Opus sent it to the people who they 7 thought were their best customers? 8 Answer: Yes. 9 Question: And the next paragraph 10 reads, although the sample was small, the 11 conclusions are not spurious. All respondents 12 showed a strong preference for MS-DOS. 13 So this is saying that all of Opus' 14 best customers showed a strong preference for 15 MS-DOS as the operating system. 16 Answer: That's what this says. 17 Question: It says that of the 18 customers who respond, only one of the 23 used 19 DR-DOS. Correct? 20 Answer: Yes. 21 Question: And that 18 or 87 percent 22 of the sample are not planning to use any other 23 operating system except for MS-DOS in the 24 future, correct? 25 Answer: That's what it says. 8497 1 Question: And that 20 or 87 percent 2 of the sample would prefer Opus to supply 3 MS-DOS, is that what it says? 4 Answer: Yes. Suggesting that this 13 5 percent would be happy with an alternative. 6 Question: Right. But the most 7 important factor for an OEM in selecting an 8 operating system is what their customers 9 demand, and 87 percent of Opus' best customers 10 who responded to this said that they would 11 prefer Opus to license to supply MS-DOS? 12 Answer: Sure. They wouldn't prohibit 13 them -- they shouldn't prohibit them from 14 supplying the other 13 percent from the system 15 they wanted. 16 Question: I mean, the point of this 17 memo -- I mean, when you read this, is not 18 that, oh, we have a great market opportunity 19 for DR-DOS because 13 percent of our customers 20 are receptive to another operating system. 21 The point of the memo is that our 22 customers showed -- is that correct? That was 23 not the purpose? 24 Answer: The purpose of this survey 25 was to find what their customers said. The 8498 1 purpose of this memo was to report back the 2 findings and the views expressed. 3 And to be honest, if one of the things 4 that we could draw from this is that 13 percent 5 would have been happy with DR-DOS or another 6 operating system, that would have been a 7 percentage of the market that Digital Research 8 would have been very happy to gain over the 9 following 12 months. 10 Question: Just let me refer you to 11 the page with the Bates number C 0290234. 12 Answer: Uh-huh. 13 Question: The question 5, which DOS 14 would you prefer to be supplied with by Opus? 15 And 24 customers responded, and only one 16 customer said DR-DOS, correct? 17 Answer: That's correct, yes. 18 From which we can draw the conclusion 19 that Microsoft's position was sufficiently 20 dominant they didn't need to restrict their 21 OEMs. 22 Question: And prior to this point, I 23 guess Opus had had a contract with Microsoft; 24 is that correct? 25 Answer: Yes. 8499 1 Question: And that contract was now 2 expired? 3 Answer: It was about to expire, yes. 4 Question: About to expire. 5 And Microsoft was negotiating with 6 Opus to renew their license? 7 Answer: Uh-huh. 8 Question: And you were negotiating 9 with Opus to take at least part of that 10 business away? 11 Answer: Yes. 12 Question: And Opus had made a 13 commitment with Microsoft for a certain volume, 14 to use a certain volume of software during the 15 term of the license, and had not used that 16 entire volume, and there was sort of leftover 17 money there, right? 18 Answer: That's correct. 19 Question: It's sort of like in some 20 of the agreements we talked about, when I was 21 asking you if someone committed to the license 22 5,000 units and they weren't able to license 23 the five now units, they would have paid for 24 units that were left over, right? 25 Answer: Yes, but the difference was 8500 1 that in this instance, they were only allowed 2 to use it if they signed another agreement 3 committing to pay for every processor that they 4 shipped. 5 Question: But this was a time when 6 they had license to use a certain amount of 7 product for a certain period of time, Opus had 8 from Microsoft, correct? 9 Answer: Yes. 10 Question: The period of time was 11 over, they had not used the full amount that 12 they had expected to use at the beginning of 13 the license agreement, correct? 14 Answer: That's correct, yes. 15 Question: And in a way, they weren't 16 entitled to the full volume discount that they 17 received under the license agreement because 18 they didn't ship the full volume during the 19 term of the license, correct? 20 Answer: That's correct. 21 Question: And what Mr. Microsoft was 22 doing was working with an existing customer who 23 was considering whether to reconsider to sign 24 another licensing agreement and trying to 25 provide a financial incentive to them, give 8501 1 them the ability to take advantage of some 2 money that otherwise was Microsoft's money? 3 Answer: According to Mr. Harris, this 4 flexibility only came to light or only became 5 available once it became clear to Microsoft 6 they were going to sign with Digital Research. 7 Question: Well, at this time, May 8 '90, did Opus end up licensing DR-DOS from DRI? 9 Answer: Not at this point, no. 10 Question: Did they renew their 11 license with Microsoft? 12 Answer: I believe in some form they 13 did, yes. 14 Question: Did there come a point in 15 time later when Opus licensed DR-DOS? 16 Answer: Yes. 17 Question: Why did they license DR-DOS 18 later? 19 Answer: We continued to work with 20 them. We continued to show them the benefits 21 their clients would derive from shipping the 22 product. 23 They continued to be unhappy with 24 their relationship with Microsoft. They 25 continued to be dissatisfied with the quality 8502 1 of the product they were receiving from 2 Microsoft. 3 And therefore the ultimate agreement 4 was that we license DR-DOS at a very low unit 5 cost because we knew they had to enter into 6 another restrictive agreement with Microsoft 7 where they still had to pay for every processor 8 they shipped. 9 Question: So at the time when Opus 10 eventually entered into an agreement with 11 Digital Research, it had a per processor 12 license with Microsoft? 13 Answer: That's my belief. 14 Question: And Opus was still able to 15 license product from Digital Research, correct? 16 Answer: They were able to, but they 17 still had to pay for the Microsoft product. 18 Mr. Pepperman: Let me mark as Exhibit 19 600 a copy of a document with Bates numbers 20 33994 through 96. 21 Question: Is this a copy of part of 22 the license agreement between Digital Research 23 and Opus? 24 Answer: It is, yes. 25 Question: Right. It was around 8503 1 September 5th, September 6th, 1991. 2 Answer: Yes. 3 Question: I do not have, I could not 4 find in our production the attachments to this 5 with the information about the Opus license. 6 Do you recall how many copies of DR-DOS Opus 7 licensed? 8 Answer: I'm afraid I don't know. 9 Question: Do you recall what the 10 royalty was? 11 Answer: I think it was two pounds. 12 Possibly -- well, something in that order. 13 Question: Mr. Speakman, this is a 14 memorandum from you to Mr. Gunn and Ms. 15 Williams dated April 13th, 1992, re Microsoft 16 restrictive licensing. 17 The second paragraph says, any 18 information you may have of OEMs licensing both 19 MS-DOS and DR-DOS would be very helpful. 20 After this, did you learn of any OEMs 21 that licensed both MS-DOS and DR-DOS? 22 Answer: Not that I recall, no. 23 Question: The last paragraph reads, I 24 have asked Adam Harris, Opus' M.D., to get a 25 written confirmation of their policy, and if he 8504 1 receives it, I am sure the FTC will be 2 interested. 3 Did Mr. Harris ever obtain a written 4 confirmation? 5 Answer: No, I don't think he did. 6 Question: And this memorandum would 7 indicate that at the time, April of 1992, you 8 were aware of the FTC investigation? 9 Answer: Yes. 10 Question: Are you familiar with an 11 OEM called Viglen? 12 Answer: Yes. 13 Question: We've talked a little bit 14 about an OEM called Diamond Trading. 15 Answer: Uh-huh. 16 Question: Are you familiar with 17 Diamond Trading? 18 Answer: Yes. 19 Question: How big an OEM is Diamond 20 Trading? 21 Answer: At the time they were a 22 mid-range size organization. I think they had 23 something on the order of five retail stores 24 through which they sold the PCs that they 25 either assembled or brought in and repatched as 8505 1 their own. 2 Question: Did Diamond Trading ever 3 license DR-DOS? 4 Answer: I don't think so. 5 Question: Are you aware of any 6 allegations that Microsoft engaged in any 7 improper conduct with respect to Diamond 8 Trading? 9 Answer: Yes. 10 Question: And what is that conduct, 11 sir? 12 Answer: That they refused to sell 13 them Windows without MS-DOS. 14 Question: What was your basis for 15 that? 16 Answer: A letter that Microsoft wrote 17 to them. 18 Question: Let me mark the letter, 19 that would be easier. 20 Mr. Pepperman: I'll mark it as 21 Exhibit 603. 22 Question: The third page of this 23 document is a letter from Microsoft that you've 24 been referring to, correct? 25 Answer: Yes. 8506 1 Question: Do I correctly have this as 2 the attachment to the preceding memorandum? 3 Answer: Yes. 4 Question: How did it come to be that 5 Digital Research got a copy of this fax? 6 Answer: We were in the Diamond 7 Trading building on the day they received that 8 fax. 9 Question: Were you in the Diamond 10 Trading building? 11 Answer: Yes. 12 Question: At the top, is that your 13 handwriting on top, the top of this -- 14 Answer: Yes, it is. 15 Question: That's a note from you to 16 Robert Gunn? 17 Answer: Yes. 18 Question: What does that say? 19 Answer: This is as expected not very 20 detailed, but does confirm their position. 21 And then it's somebody else's writing, 22 it says, for the attention of Richard Thompson, 23 FAO, for attention of. 24 Question: Thank you. 25 Do you know what happened after 8507 1 Mr. Davis received this fax from Microsoft, do 2 you know whether he had any subsequent 3 conversations with Microsoft on this subject? 4 Answer: I'm not aware of any 5 subsequent conversations he had, no. 6 Question: Do you know whether anyone 7 from Microsoft contacted Mr. Davis and said 8 that the statements in this fax were erroneous? 9 Answer: I have seen a letter in the 10 last couple of months written by Microsoft 11 saying that these statements were correct. 12 Question: Were correct? 13 Answer: Were not correct. 14 Question: Were incorrect, excuse me. 15 Do you know if the Diamond Trading was 16 subsequently able to license Windows 17 separately? 18 Answer: I don't think they were, no. 19 Question: Do you know one way or the 20 other, or do you know that for a fact? 21 Answer: I'm fairly confident they 22 weren't able to license Windows on their own. 23 Question: Did Diamond Trading ever 24 license DR-DOS? 25 Answer: I don't recall. 8508 1 Question: You are familiar with an 2 OEM called Elonex? 3 Answer: Yes. 4 Question: Are you aware of any 5 allegation that Microsoft engaged in any 6 improper conduct with Elonex? 7 Answer: I believe that they had a per 8 processor license with Elonex. 9 Question: Other than the per 10 processor license, can you remember anything 11 else? 12 Answer: No. 13 Question: Mr. Speakman, would you 14 tell the ladies and gentlemen of the jury what 15 your perception was of the technological 16 qualities of DR-DOS during the three years you 17 were trying to sell it in Northern Europe? 18 Answer: My belief was that DR-DOS was 19 a product that was significant steps ahead of 20 the MS-DOS products in terms of its ability to 21 allow the end user to get the maximum benefit 22 from the latest generation of PC hardware that 23 was on the market; that it was better able to 24 handle memory; it was better able to provide 25 facilities the end users wanted such as disk 8509 1 compression and undelete facilities; that it 2 had numerous end user focused benefits from the 3 marketplace would benefit from; and that 4 technologically it was a far superior product. 5 Question: All right. Did you have a 6 perception based upon what customers told you 7 and what you observed as to whether the DR-DOS 8 versions you were attempting to sell had more 9 bugs or less bugs or about the same bugs as the 10 competing Microsoft products? 11 Answer: It changed over a period of 12 time. But it was very clearly documented in 13 the press that when the MS-DOS 4 product was 14 the latest version they had, there were 15 considerably more bugs in MS-DOS than there 16 were in the then marketed copy of DR-DOS. 17 Subsequent versions of 5 and 6, I 18 think it would be fair to say there was nothing 19 that could prove there were more bugs in DR-DOS 20 than there were in MS-DOS. 21 By Mr. Susman: 22 Question: Let me ask the same 23 question insofar as compatibility with 24 applications programs designed to run on 25 MS-DOS. 8510 1 Was it your perception, sir, that the 2 DR-DOS products were less compatibility, 3 similarly compatible, or more compatible than 4 the comparable Microsoft products? 5 Answer: I would say that the 6 applications software specifically, I would say 7 the DR-DOS products were equally compatible 8 with those of MS-DOS. 9 Question: Finally, on the subject of 10 the availability of technical support, did you 11 observe, did you feel that DR-DOS was less able 12 -- what was your perception of their ability to 13 provide technical support to customers in your 14 territory as compared to Microsoft? 15 Answer: In my territory, given that 16 we had the development center based in the UK, 17 we had significant advantage over Microsoft in 18 getting any issues resolved in a relatively 19 short space of time. 20 Question: Given your testimony about 21 the capabilities technologically and qualities 22 of the DR-DOS products, how do you explain to 23 the ladies and gentlemen of the jury why you 24 weren't more successful in selling those 25 products? 8511 1 Answer: My belief is that in the OEM 2 sales environment, we were restricted from the 3 outset by the fact that the OEM customers had 4 long-term license agreements, they were not -- 5 they had to pay for Microsoft's product whether 6 they shipped it or not, and that put us at a 7 significant commercial disadvantage from the 8 outset. 9 Question: Now, one of the documents 10 we looked at was Exhibit 19, the letter from 11 Viglen to Microsoft, which you had not seen 12 until this deposition, correct? 13 Answer: Correct, yes. 14 Question: He begins the letter by 15 saying, I would for the record like to point 16 out the three issues which we are not entirely 17 happy with. 18 The first issue which you have 19 addressed in your letter of the 14th of April, 20 1992 is the long-term three-year nature of the 21 contract. 22 Was that something that you found 23 common or uncommon? 24 Answer: I found that very common in 25 the customers that I dealt with. 8512 1 Question: Did you ever have a 2 contract that was as long as three years? 3 Answer: I don't believe we ever 4 signed an agreement that had a commitment for a 5 three-year period, no. 6 Question: We talked about, you have 7 testified about the effect on a competitor of 8 minimum commitments. And I think you described 9 the situation where Microsoft has, say, a 10 three-year contract, minimum commitments, they 11 get to the end of the term, and they haven't 12 used all of their minimum guarantee up. 13 Now, how does the fact that they 14 haven't used it all up, that they've had 15 minimum commitments, how does that keep you 16 from coming in at the end of the three years 17 and making a sale, if it does? 18 Answer: It wouldn't have prevented us 19 from making a sale if they were allowed to use 20 those units in conjunction with using units 21 from Digital Research. 22 But typically, they were only allowed 23 to use those unused units if they signed 24 another agreement with Microsoft which was 25 equally restrictive as the original one. 8513 1 Question: On that score, look at 2 Exhibit 561, which is the OEM software license 3 agreement between Tobar and DRI. 4 Answer: Yes. 5 Question: Now, as I understand it, in 6 this agreement, Tobar agreed to a minimum 7 volume of 5,000 copies, which they were to pay 8 for essentially a thousand copies per month for 9 five months? 10 Answer: That's right. Yes. 11 Question: Now, let's say you get to 12 the end of the time period, the end of the five 13 months, which I guess would be either April 14 30th or May 31st, I'm not sure. You see the 15 payable period there? 16 Answer: Yes. 17 Question: Let's say the time period 18 expires on May 31st. And let's say this 19 customer, Tobar, has only shipped 2,000, and 20 they have paid already for 3,000, okay? You've 21 got my hypothetical? 22 Answer: Yes. 23 Question: Do they have to sign 24 another contract with DRI to utilize the 3,000 25 that they haven't used? 8514 1 Answer: No. They were entitled to 2 continue shipping them. 3 Question: Is there any time limit 4 whatsoever on when they can use them? 5 Answer: Not that I'm aware of. 6 Question: Could Tobar commencing on 7 May 31st mix and match them with any operating 8 system they cared to? 9 Answer: They were entitled to from 10 the beginning of this agreement. 11 Question: And in your understanding, 12 is that the way the Microsoft license worked? 13 Answer: Not at all. 14 Question: We talked about the per 15 processor licenses, minimum commitments, length 16 of licenses. And you've also talked about the 17 fact that you understood that Microsoft -- 18 okay. Look at 603. Do you have 603 before 19 you? 20 In the cover letter from Mr. Gunn, 21 memo from Mr. Gunn to Mr. Williams and three 22 others dated January 29, 1992, Mr. Gunn says in 23 paragraph three, it is also becoming very clear 24 that Microsoft will not license Windows to 25 their OEMs unless they take MS-DOS 5 as well. 8515 1 Did you agree with that statement? 2 Answer: I did, yes. 3 Question: And was that only based on 4 the letter that Diamond Trading provided you? 5 Answer: No. It was based on my other 6 experiences with the other OEM customers. 7 Question: I pass you Exhibit 604. 8 And the practice I want to ask you about is 9 something you testified to when Mr. Pepperman 10 was asking you questions, and that was 11 Microsoft's tying extensions to the purchase of 12 MS-DOS. Do you remember that? 13 Answer: Uh-huh. 14 Question: Look, if you will, at 15 Exhibit 604. Is the third paragraph of this 16 letter to you from a gentleman at Acorn an 17 example of that practice? 18 Read the third paragraph and tell me 19 -- what do you think he's saying in this third 20 paragraph? 21 Answer: Microsoft have developed 22 extensions to support CD-ROM technology, and 23 license these at $1.50 per unit, provided that 24 we supply the extensions with MS-DOS. 25 My interpretation of that is that that 8516 1 extension would work with other versions of 2 DOS, but they would only be prepared to license 3 it to Acorn, who were an existing DR-DOS 4 customer, if they supplied it with MS-DOS 5 rather than DR-DOS. 6 Question: Have you heard the term, 7 Mr. Speakman, vaporware? 8 Answer: Yes, I have. 9 Question: What does that mean to you, 10 as one who has been selling software for many, 11 many years? 12 Answer: Vaporware is a company 13 announcing to the marketplace either a product 14 or a version of a product or features of a 15 product which they hope to bring to market. 16 It's usually done to confound 17 competition. And typically it was the type of 18 thing that DR-DOS faced every time -- sorry, 19 Digital Research faced every time a new version 20 of DR-DOS was released. 21 So, for example, when DR-DOS 5 was 22 released, Microsoft would almost immediately 23 announce MS-DOS 5 was coming along. 24 Typically the reason this could be 25 described as vaporware is there was no sign of 8517 1 a beta version of it and there was no release 2 date, and it would take nine months, 12 months, 3 or more for such a product to arrive on the 4 market. 5 So in other words, customers who 6 wanted the features in the product that had 7 just been released were put into some question 8 of doubt as to whether that product was going 9 to actually come out imminently or whether they 10 should buy the DR-DOS product. 11 And so it's a fairly well-understood 12 term in the market, and it's one that doesn't 13 carry very much respect with it. 14 There is an interim phase between 15 vaporware and software which is known as 16 slideware, which is where the company goes to 17 the extent that they're prepared to actually 18 put some information about it on slides, but 19 you still can't see it in any real software. 20 Question: Slideware? 21 Answer: Slideware, yes. 22 Question: Did this pose any 23 competitive problems for DRI, in your opinion, 24 against Microsoft? 25 Answer: It did, yes, because the 8518 1 technological advances that Digital Research 2 had put into 3.41, then 5, then 6 were 3 significantly better and made much better use 4 of the hardware available on the market at that 5 time than the equivalent -- than of the current 6 MS-DOS version. 7 And effectively to confound Digital 8 Research's marketing efforts and the 9 acclamation they were receiving in the press, 10 Microsoft would almost imminently announce that 11 they would have the same things in their next 12 version. And it was just a game of catch-up 13 that was going on. 14 Question: Well, did you all do the 15 same thing? 16 Answer: No. Digital Research was 17 actually very cautious about preannouncing its 18 technology. 19 It understood that if it was to be 20 taken seriously in the marketplace, it had to 21 actually deliver on its promises within the 22 time frames. 23 No software can be -- this is -- the 24 science is not so precise that you can give a 25 date and stick to it within 24 hours, but 8519 1 there's a difference between missing a ship 2 date by a matter of weeks and preannouncing 3 something that the development work on is not 4 even started. 5 Question: Look, if you will, at 6 Exhibit 598. 7 Answer: Uh-huh. 8 Question: Mr. Pepperman asked you 9 about this internal survey, a survey that was 10 done by Opus. 11 Answer: Yes. 12 Question: And do you see Question 13 Number 5 on page 2, under observations? I 14 mean, I'm sorry, the first page, Roman numeral 15 II, observations, Question Number 5. 20, or 87 16 percent, of the sample would prefer Opus to 17 supply MS-DOS. What did that mean to you when 18 you saw it? 19 Answer: It wasn't a surprise given 20 Microsoft's position in the marketplace. 21 What it did mean to me, however, was 22 that at that stage, in the relative infancy of 23 the DR-DOS product, already 13 percent of the 24 people were happy to consider DR-DOS or another 25 operating system over MS-DOS. 8520 1 Question: And if you would look at 2 Conclusion Number 1, what did it apparently 3 mean to Opus? 4 Answer: It suggests to them that they 5 could sell DR-DOS in addition to or instead of 6 MS-DOS, and that their feeling was it was 7 really only a matter of educating the market 8 about what the product had to offer. 9 Question: If you will look at the 10 Question Number 4, which of the following 11 operating system enhancements would be of 12 interest to you. Do you see the scores? 13 Answer: Yes. 14 Question: Can you draw any 15 conclusions by looking at that? 16 Answer: Yes. The enhancements that 17 are listed there were all enhancements that 18 were in DR-DOS. 19 And of the six enhancements, there was 20 a -- there's a significant proportion of the 21 respondents saying that they would be very 22 interested in seeing those enhancements in a 23 product, and a significant number also said 24 there would be some interest. 25 There's a very, very low score for the 8521 1 people who said those enhancements are of no 2 interest. 3 Question: And all six of these were 4 what DR-DOS had going for it in April '90, that 5 the comparable MS-DOS product did not have? 6 Answer: That's correct. 7 Question: At the time. 8 Answer: At that time, if you wanted 9 to edit the file, you had a single line editor, 10 which was extremely difficult to use. 11 There wasn't any help on commands 12 within MS-DOS. Loading device drivers and 13 things was exceptionally difficult. 14 All of these features were things that 15 Digital Research enhanced within DR-DOS. 16 Question: And look back at the first 17 page, and can you read to us the conclusion 18 that Opus itself drew from that question, 19 Conclusion Number 2? 20 Answer: It says that if these six 21 features would be so well received, then 22 perhaps Microsoft should be advised to include 23 them in MS-DOS. 24 Question: Mr. Speakman, did Microsoft 25 at some point in time during the three years 8522 1 you were trying to sell DR-DOS develop some 2 kind of program where they sold MS-DOS to 3 distributors who in turn would sell it to the 4 smaller OEMs? 5 Answer: Yes. Initially, Microsoft 6 weren't interested in the sort of smaller 7 low-end developing marketplace, but as Digital 8 Research started to have some success in that 9 area, they established a group of distributors, 10 which they referred to, I think, as DSPs, who 11 were distributors who were entitled to sell 12 Microsoft MS-DOS, and I believe subsequently 13 Windows, to the smaller OEMs. 14 This was in direct response to Digital 15 Research selling to those smaller customers. 16 Question: Did they call them DSPs? 17 Answer: I think that was the term 18 they used. 19 Question: Do you know what that 20 means? 21 Answer: I'm afraid I can't recall. 22 Question: What were the 23 characteristics of those DSPs? 24 Answer: Typically, they were 25 organizations such as Ideal Hardware, who was 8523 1 one of them who were suppliers of memory, hard 2 disk drives, PC cases, all sorts of PC 3 components. 4 So these were people who were already 5 supplying the components to the smaller 6 assemblers and OEMs in the UK marketplace. 7 Question: Now, did that create any 8 competitive problems for you? 9 Answer: It created a competitive 10 problem in so much as those suppliers had a 11 direct access to all of the OEMs, were able to 12 offer pricing which was in association with the 13 hardware they were supplying. 14 It was a competitive situation, and it 15 was just an illustration to me that Microsoft 16 were responding to the success that Digital 17 Research was beginning to have in the lower 18 tier marketplace. 19 Question: You had several 20 conversations, you've described them to us, 21 wtih Mr. Duncan at Microsoft. And on none of 22 those occasions did you write a memo 23 memorializing the conversations, correct? 24 Answer: I'm sorry. Can you repeat 25 that? 8524 1 Question: You had one conversation 2 where Mr. Duncan offered you a job. 3 Answer: Uh-huh. 4 Question: That's not in a memo, 5 right? 6 Answer: No. 7 Question: Why didn't you write a memo 8 on it? 9 Answer: I didn't think it was 10 significant to Digital Research's business at 11 the time. 12 Question: And the other occasion was 13 when you talked to Mr. Duncan about wanting to 14 buy from Microsoft a quantity of Windows that 15 you could provide to customers. 16 Answer: Uh-huh. 17 Question: And you did not write a 18 memo about that conversation either? 19 Answer: No. I had discussions 20 directly with my manager, Robert Gunn, and I 21 put in writing a confirmation to Mr. Duncan of 22 my request to buy copies of Windows. And that 23 was a subtle, and perhaps too subtle, intent on 24 my behalf to have him commit in writing that he 25 wasn't prepared to supply that. 8525 1 And I was hoping from the response to 2 that as the documentary evidence that I wanted. 3 MR. CASHMAN: Your Honor, could we 4 have a sidebar, please? 5 THE COURT: Yes. 6 (The following record was made out of 7 the presence of the jury at 1:31 p.m.) 8 MR. CASHMAN: This concerns the 9 testimony and the exhibit that was 10 inadvertently skipped earlier in the day. 11 I just wanted for the record, 12 Mr. Gralewski, who handled the work for 13 Mr. Speakman spoke with Mr. Tuggy and confirmed 14 that there was no agreement to withdraw this 15 testimony or this exhibit, and we have also 16 checked, just for certainty's sake, there were 17 no objections to the testimony during the 18 Special Master process, nor was there any 19 objection to Plaintiffs' Exhibit 5105. So 20 there were no objections. It wasn't withdrawn. 21 And we would like to have it played, and I 22 understand now there's no objection from 23 Microsoft. 24 THE COURT: Do you want to make an 25 announcement after you finish -- you're almost 8526 1 done; right? 2 MR. CASHMAN: Yeah, we're almost done. 3 I just propose that the Court tell the Jury 4 that a portion of Mr. Speakman's testimony was 5 inadvertently skipped and we are going to read 6 it now, and then at the end of that -- when the 7 skipped testimony -- I say read, Darin will 8 take just a 15-second break and go back to the 9 concluding questions, 10 seconds, just so it's 10 obvious it was -- then we're going back to 11 where we were. 12 THE COURT: Oh, I see. That's fine. 13 MS. NELLES: So long as we are making 14 record, although I'm not certain it was 15 necessary, Your Honor, since we did agree. 16 To be clear, throughout the 17 meet-and-confer process, there's always some 18 give and take, and indeed this is Plaintiffs' 19 testimony, and when we receive information that 20 they are now playing certain snippets, we 21 believe it's not going to be played, and that's 22 why it's very helpful to get as much 23 information ahead of time as possible so we can 24 correct and do these things and not have to do 25 it during the court day. 8527 1 But as I said, mistakes do happen. We 2 have no objection to them correcting this 3 mistake, and we hope we will receive the same 4 courtesy when our time comes. 5 THE COURT: Okay. So I'll make the 6 same announcement now. 7 MR. CASHMAN: That's right. 8 MR. TULCHIN: Just, Your Honor, so I 9 understand, I gather what Mr. Cashman intends 10 to do is to go back and read these three or 11 four pages and then -- is that correct? And 12 then resume the video where we are now? 13 MR. CASHMAN: No. Mr. -- Darin, the 14 technician, is going to play the portion of the 15 video that had the testimony that was skipped. 16 THE COURT: What did you mean by read 17 later? 18 MR. CASHMAN: Well, I meant to say 19 play that portion of the video. 20 THE COURT: Oh, all right. Just play. 21 You are not going to read it twice? 22 MR. CASHMAN: I'm not going to read it 23 myself, no. It's just going to be played as it 24 would have been played had it been played right 25 through. 8528 1 THE COURT: Okay. 2 MR. CASHMAN: And then we will come 3 back to the conclusion of the testimony. 4 MR. TULCHIN: From where we are right 5 now, I take it? 6 MR. CASHMAN: Yeah. 7 THE COURT: Okay. 8 (The following record was made in the 9 presence of the jury at 1:38 p.m.) 10 THE COURT: Ladies and gentlemen, 11 before the depo concludes there was a portion 12 inadvertently missed. It's very small, I 13 understand. 14 So they're going to play that part. 15 It was inadvertently missed. Then they're 16 going to conclude the depo; is that correct? 17 It's almost over. 18 MR. CASHMAN: That's correct. 19 MR. TULCHIN: Thank you, Your Honor. 20 (Whereupon, the following video 21 resumed playing to the jury.) 22 Question: How were people, OEM sales 23 at Digital Research, compensated while you were 24 there? 25 Answer: They was paid a basic salary 8529 1 plus commission. 2 Question: Did it receive stock 3 options also? 4 Answer: The worst -- yes, there were 5 stock options that -- which were typically 6 granted somewhere around the time the 7 individual joined the company. I don't recall 8 if there were any additional options ever 9 granted after that. 10 Question: The second page of Exhibit 11 566 which I've given you discusses the 12 commission plan for p -- European staff, and 13 for you says, earned 2 percent commission 14 against all OEM orders in Northern Europe. 15 So your commission was you received 16 2 percent of the -- as a commission of the 17 royalties that OEMs paid pursuant to their 18 agreements? 19 Answer: Yes. 20 Question: It seems that your 21 commission structure was different from other 22 people in similar positions such as Mr. Vasco 23 or Mr. Christ in that they -- that their 24 commission -- they could earn up to a certain 25 percent of their base salary and it was 8530 1 measured against -- against plan. 2 Answer: Uh-huh. 3 Question: Why was your commission 4 structure different than the others? 5 Answer: I wasn't aware that it was to 6 have addition. I know that my salary and 7 commission targets -- I had an on-target 8 earning amount, and I know that 50 percent of 9 that was salary, so I had a target to achieve, 10 and that target issue -- if I earn 2 percent of 11 that achieved amount, then I would -- I would 12 reach that 100 percent of on-target earnings, 13 potential earnings. 14 And interestingly enough, the fact 15 that I -- 50 percent of what I earned was based 16 on commission was the reason that I turned down 17 the job that Microsoft offered me around that 18 time because they approached me to try and 19 offer me a job. 20 Sandy Duncan rang me up, came and met 21 with me, wanted me to go work for them because 22 I was signing customers and it was becoming an 23 irritation to them, and had I taken the job 24 these stock options at Microsoft would have 25 maybe been worth $2 million by now, but I 8531 1 didn't because I was earning 2 percent 2 commissions. 3 Question: Mr. Duncan contacted you 4 after you had already begun working for Digital 5 Research? 6 A. I had been there for a year and 7 signing some good business, and he rang me up 8 and took me out for lunch and offered me a job. 9 Question: What else can you remember 10 about that meeting with Mr. Duncan? 11 Answer: I remember he just bought his 12 wife a Porsche. 13 He rang me up and he wanted me to go 14 and work for them because I was practically 15 winning a number of accounts. He was impressed 16 by the fact that given the difficult situation 17 we had in terms of competing with them, we were 18 still winning business, and he felt that if he 19 recruited me, I'd be an asset to Microsoft and 20 it would weaken Digital Research's sales 21 activity in his region. 22 Queston: And did the reason why you 23 did not go is because you thought your 24 compensation at Digital Research, the option to 25 earn up to 50 percent in your salary, was a 8532 1 positive thing that kept you at DRI. 2 Answer: He was offering me a salary 3 which was considerably less than the total I 4 was earning at the time, and there was no 5 commission payments at Microsoft at that point, 6 plus I had, obviously, some reservations about 7 joining a competitive company. 8 Question: What were those 9 reservations? 10 Answer: I had spent the previous 11 several months selling against them and didn't 12 particularly like their contractual 13 arrangements. I didn't like the relationship 14 they had with their customers, and so I wasn't 15 totally convinced that it was a place that I 16 would want to work. 17 Question: The primary reason was the 18 commission that Digital Research paid you? 19 Answer: That was at the end of the 20 day I got out of bed and go to work to earn 21 money, and he was offering for me to earn less 22 money, and I had three young children and 23 didn't think that was a -- would be a 24 responsible thing to do 25 Question: Mr. Speakman, let me ask 8533 1 you a final question, sir. 2 Do you have a financial stake anywhere 3 in the world in the outcome of this lawsuit? 4 Answer: None whatsoever. 5 Question: Has anyone suggested to you 6 or promised you or offered you anything for 7 your testimony? 8 Answer: I have been offered nothing 9 at all, no. 10 Mr. Susman: No further questions. 11 By Mr. Pepperman: 12 Question: At this point refer you 13 back to Exhibit 598. It's the internal Opus 14 study. Mr. Susman asked you about the 15 Conclusion Number 1 on the first page of that 16 memo. 17 He asked you that question without 18 actually reading the terms of that conclusion. 19 Could you read Conclusion Number 1 20 into the record, please? 21 Answer: It says, we could sell DR-DOS 22 in addition to MS-DOS but only after a 23 well-planned campaign of prospect preparation 24 and education. 25 Question: So it was Opus' view that 8534 1 to sell DR-DOS in addition to MS-DOS, they 2 would have to engage in this, as they say, 3 well-planned campaign of prospect preparation 4 and education? 5 Answer: That's right. 6 What they were saying was that they 7 could sell it as an alternative to MS-DOS and 8 all that was required was to communicate to the 9 marketplace what the benefits are of -- or 10 were, rather, of DR-DOS. 11 Question: Because at this time, their 12 customers were unaware of what you described as 13 the benefits of DR-DOS? 14 Answer: At that point, the market 15 position of DR-DOS had nothing of the strength 16 of MS-DOS and the marketing monies that Digital 17 Research had available to change that were 18 fractional compared to those of Microsoft. 19 Question: I can't find the exhibit 20 here, but I recall, and I think it was the 21 document that you wrote about pricing, your 22 discussion of there being a proliferation of 23 the small OEMs in the last several year period. 24 Do you recall that? 25 Answer: I do, yes. 8535 1 Question: And during your testimony, 2 and I think in that memo, you also said that 3 Digital Research had changed its pricing and 4 licensing policies in response to that recent 5 proliferation of smaller OEMs; is that correct? 6 Answer: It changes pricing in 7 response to changes in the marketplace. One of 8 those changes was the proliferation of OEMs, 9 yes. 10 Question: Mr. Susman was asking you 11 questions about Microsoft's hiring of 12 distributors to market MS-DOS to smaller OEMs. 13 DSPs -- 14 Answer: DSPs was the term you used. 15 Question: Was it possible that the 16 decision of Microsoft to use those distributors 17 was in response to this phenomenon that you 18 identified, the proliferation of smaller OEMs, 19 and not in direct response to what DRI was 20 doing? 21 Answer: The establishment of the DSPs 22 was sometime later I think than our approach to 23 addressing the small marketplace. 24 I'm sure their market intelligence was 25 at least as good as ours. So it had either 8536 1 taken a long time to do it or it was more in 2 response to Digital Research's efforts. 3 Mr. Pepperman: I have no further 4 questions. 5 Mr. Susman: I don't either. Thank 6 you, sir. 7 (Whereupon, playing of video 8 concluded.) 9 THE COURT: Very well. We'll take a 10 recess for ten minutes. 11 Remember the admonition previously 12 given. Leave your notebooks here. 13 Thank you. 14 (A recess was taken from 1:47 p.m. 15 to 1:59 p.m.) 16 (The following record was made out of 17 the presence of the jury.) 18 MR. CASHMAN: The Court will recall 19 that on Friday, the Plaintiffs moved for the 20 admission of 3,186 Plaintiffs' exhibits that 21 had no objections to them, and the Court said 22 that Microsoft would have until today to check 23 against those exhibits against their list to 24 confirm that indeed there were no typographical 25 errors or such, and so we'd like confirmation 8537 1 from Microsoft that those are free of 2 objections so that they can be admitted here 3 when the jury comes back. 4 MR. TULCHIN: We've checked -- 5 MS. NELLES: It's my day. 6 MR. TULCHIN: It's Ms. Nelles' day. I 7 won't say a word about this. 8 MS. NELLES: Not even about exhibits. 9 MR. CASHMAN: They were just thinking 10 alike. 11 MR. TULCHIN: What if our answers had 12 been different? 13 THE COURT: Have a real problem then. 14 MS. NELLES: When Mr. Cashman makes -- 15 offers them into evidence, we are not going to 16 object. We have looked at the documents, and 17 we believe it's accurate. 18 THE COURT: And by agreement, I'm not 19 reading the numbers. 20 MR. CASHMAN: So I will just -- when 21 the jury comes back, I'll make reference to the 22 proffer on Friday, and then it can be noted on 23 the record that -- 24 THE COURT: And I'll admit them. 25 MS. NELLES: And are you moving 8538 1 specifically any documents? 2 MR. CASHMAN: I'm going to move and 3 list the exhibit numbers for Mr. Speakman when 4 the jury comes back. 5 MS. NELLES: Then, Your Honor, I'd 6 like my turn as well. 7 THE COURT: Are you going to move for 8 the ones on Speakman too? 9 MR. CASHMAN: Yes. 10 THE COURT: Those I'll have to write 11 down. 12 MR. CASHMAN: I have a chart for, Your 13 Honor. 14 THE COURT: Oh, you do? 15 MR. CASHMAN: I'll just offer them up 16 when the jury comes back. 17 MS. NELLES: And, Your Honor, when 18 Mr. Cashman is finished I will offer 19 Microsoft's. 20 THE COURT: Sure. You have some too 21 to offer? 22 MS. NELLES: I have some to offer, 23 Your Honor. 24 MR. CASHMAN: Four exhibits from 25 Microsoft. 8539 1 THE COURT: Everyone else may be 2 seated. 3 (The following record was made in the 4 presence of the jury.) 5 THE COURT: Mr. Cashman? 6 MR. CASHMAN: Your Honor, if I may 7 approach? 8 THE COURT: You may. 9 MR. CASHMAN: I have for the Court a 10 hard copy of the exhibits referenced -- 11 Plaintiffs' exhibits referenced in the 12 testimony of Anthony Speakman and two CDs. 13 Plaintiffs respectfully move for the 14 admission of Plaintiffs' Exhibits 1204A, 1290A, 15 5079, 5080, 5105, 5109, 5139, 5174, 5203, 5207, 16 5214, 5216, 5276, 5285, 5318, 5338, 5436, 5446, 17 5452, 5456, 5460, 5483. 18 Those are all Plaintiffs' exhibits 19 referenced by Mr. Speakman during the course of 20 his testimony, and we respectfully move for 21 their admission. 22 THE COURT: Any objection? 23 MS. NELLES: No objection, Your Honor. 24 THE COURT: They are admitted. 25 Ms. Nelles, you have some exhibits? 8540 1 MS. NELLES: I do. I have four 2 exhibits, Your Honor, that were referenced in 3 the -- in Mr. Speakman's deposition. That 4 would be Defendant's Exhibit 161, Defendant's 5 Exhibit 226, Defendant's Exhibit 6746, and 6 Defendant's Exhibit 6749A. 7 If I may approach. 8 THE COURT: Yes, thank you. 9 MS. NELLES: And offer those for 10 admission at this time. 11 THE COURT: Any objection? 12 MR. CASHMAN: No objection, Your 13 Honor. 14 MS. NELLES: In addition, Your. 15 Honor -- 16 THE COURT: They're admitted. 17 MS. NELLES: Thank you, Your Honor. 18 In addition, Your Honor, Microsoft 19 also has, like Plaintiffs, a set of exhibits to 20 which no objections have been asserted. 21 We don't have quite as many. We have 22 at this time 2,846. 23 I provided a list of these -- or 24 Microsoft provided a list of these exhibits to 25 Plaintiffs on December 21. No objections 8541 1 having been asserted, I would move for their 2 admission at this time. 3 MR. CASHMAN: Objection, Your Honor. 4 May we have a sidebar, please? 5 THE COURT: Okay. 6 (The following record was made out of 7 the presence of the jury at 2:07 p.m.) 8 MR. CASHMAN: Your Honor, after 9 Plaintiffs provided their first proffer of 10 exhibits to which no objection had been 11 offered, Microsoft objected to the process, as 12 you may recall, and there was substantial 13 discussion about that. 14 Microsoft, on the day before the 15 Christmas holiday, provided exhibits, 16 Defendant's exhibits to which they claimed 17 there was no objections. 18 Plaintiffs advised Microsoft, 19 specifically I advised Mr. Tuggy, that we 20 reserved the right to object given the process 21 that Microsoft was insisting on at that time, 22 and that we would provide our objections in due 23 course, but that there was no need to take the 24 matter up with any speed given the fact that 25 Microsoft's case is months away. 8542 1 And Mr. Tuggy did not object or 2 disagree with that proposal. 3 Consequently, this proffer by 4 Microsoft is premature and certainly contrary 5 to the process which Microsoft itself insisted 6 on. 7 So that's it in a nutshell. 8 The Plaintiffs object and do not think 9 that this matter needs to be taken up at this 10 time during Plaintiffs' case. It's merely an 11 attempt to divert Plaintiffs from doing the 12 work that we need to do to put on our case in 13 chief, and I think it's contrary to the very 14 process that Microsoft itself insisted on when 15 they opposed the admission of exhibits that we 16 said had already gone through the Special 17 Master process. 18 So Plaintiffs request that the Court 19 table this motion until some later time, and 20 we'll provide our objections to those exhibits, 21 but certainly there's no rush, no need for it 22 to be done while the Plaintiffs are working 23 hard to put on their case. 24 Thank you. 25 THE COURT: Yes. 8543 1 MS. NELLES: Your Honor, as you know, 2 we did ask for a process because there are 3 reserved objections for trial, and Your Honor 4 did create a process which Microsoft has 5 complied with, and there are -- both sides have 6 a substantial number of exhibits to which 7 neither side has objected, and December 21 we 8 asked them to go through the same process with 9 us as we are going through with them. And 10 there was no agreement to put it off. 11 Mr. Tuggy asked Mr. Cashman on 12 multiple occasions to return comment on his 13 e-mail and his request. Mr. Cashman's response 14 has always been simply we will do this, we do 15 not want to do this now because you do not have 16 the right to put documents in until -- or 17 something along those lines -- until our case. 18 Now, clearly evidence is coming in for 19 both sides, and what we're about to face is a 20 situation where the Plaintiffs are going to 21 have a storehouse of documents that are 22 essentially, I use the phrase, I know you don't 23 necessarily agree with it, but preadmitted. 24 They are clear they can just be used where 25 Microsoft is going to have to go through a 8544 1 document-by-document admission process through 2 the cross-examination. 3 That was fine. We worked very -- 4 that's how we just went through Mr. Alepin's 5 testimony. But the process was the same for 6 both sides, and it seems to me that there's no 7 reason we shouldn't clear up as much of this as 8 we can so that both sides can move forward on 9 equal footing. 10 And I have no objection to Plaintiffs 11 taking the time they need to review these. 12 That time can't be until our case because then 13 -- it just simply can't be. 14 We had a period of weeks. All these 15 were provided to them December 21. None of 16 them have outstanding objections. There's no 17 reason we can't go through the process. I'm 18 willing to go through any process the Court 19 believes is reasonable, but I do think it's 20 time for both sides to move forward in the same 21 direction. 22 We both make our arguments, one side 23 wins, won side loses, but once we have a 24 decision, it's time for both sides to move 25 forward on the same footing. 8545 1 MR. CASHMAN: Well, Your Honor -- 2 MS. NELLES: And certainly there's no 3 rule in Iowa that says we cannot seek to have 4 our documents admitted at this time. In fact, 5 Your Honor explained that rule to me. 6 MR. CASHMAN: Well, Your Honor, I 7 specifically told Mr. Tuggy that we would take 8 these exhibits up in due course and assert any 9 relevance, undue prejudice, or collateral 10 estoppel or other appropriate objection. 11 Given the Court's ruling relative to 12 the Plaintiffs -- the process that Microsoft 13 insisted on relative to Plaintiffs' exhibits, 14 there's no rush, there's no urgency in this. 15 It's simply a matter to divert our resources 16 into looking at their exhibits, and, you know, 17 their case is not coming up for many months, 18 and there's no need for us to be addressing 19 this right now. 20 And that's a wholly different 21 situation than Plaintiffs' exhibits. 22 As we have explained before, many of 23 these Plaintiffs' exhibits are going to be used 24 with witnesses, and that is ripe for decision. 25 The Microsoft objections -- or 8546 1 Microsoft Defendant's exhibits are not ripe. 2 THE COURT: Are these exhibits ones 3 that there's no objection to other than what 4 can be made in trial? 5 MS. NELLES: That's exactly right, 6 Your Honor. 7 THE COURT: Okay. Anything else? 8 MS. NELLES: Very briefly, simply that 9 I think every lawyer in this room, and probably 10 others, is aware that there's no less work to 11 be done on the cross-examining side then direct 12 examining side, and that will be true when we 13 switch sides, which will happen, and there's no 14 effort here to divert any resources. It is 15 simply an effort to get everybody in the same 16 place, which I think will be the best for -- 17 best for the Jury and the parties on a going 18 forward basis. 19 And I'm sorry that it's resisting, but 20 as I said, I'm more than happy to agree to any 21 reasonable process, but when it comes to due 22 course, I think due course is now. 23 Thank you. 24 THE COURT: Anything else? 25 MR. CASHMAN: Nothing further, Your 8547 1 Honor. 2 THE COURT: All right. 3 Well, they have been identified is 4 what you wish to offer? 5 MS. NELLES: Yes. 6 THE COURT: Why don't you take -- 7 let's let the Plaintiffs look them over, and 8 let's say by next week sometime just give me a 9 basis of -- or something based on how far you 10 have gone with them. 11 MR. CASHMAN: Okay, Your Honor. 12 THE COURT: Say next Wednesday, and 13 let me know how far you have gone with them. 14 MS. NELLES: Thank you, Your Honor. 15 And I'll simply hand these up when we 16 go in just to simply complete the process. 17 THE COURT: Don't hand them up now. 18 MS. NELLES: Can I hand them to him? 19 THE COURT: Oh, to him, yeah. 20 MS. NELLES: Just to be sure what we 21 are doing. 22 THE COURT: Just let me know. If you 23 need more time, I'll give it to you. 24 MR. CASHMAN: When we made our proffer 25 initially, it was 3760, and we made our proffer 8548 1 on the 15th of December. 2 THE COURT: How long did I give them? 3 MR. CASHMAN: Then your rule, the 4 ruling, Your Honor, was that Microsoft folks 5 had to tell us their objections on the 10th of 6 January, which I believe that's a substantial 7 amount of time. 8 MS. NELLES: Minus vacation. 9 MR. CASHMAN: Your Honor, I want to 10 make it clear that Plaintiffs are not 11 suggesting necessarily the same process, but 12 just to point out that when we do advise you 13 next week of where we are that we aren't -- 14 Plaintiffs don't believe it will be appropriate 15 that we have to provide our objections in one 16 week's time. 17 MS. NELLES: I do believe the Court 18 said we could have additional time, and 19 Microsoft certainly does not object. 20 THE COURT: How much time did I give 21 you guys? 22 MR. CASHMAN: The 15th until the 20th. 23 MS. NELLES: We started on the 21st 24 and then we went on break. We were back on the 25 4th, and all of our objections were due the 8549 1 10th, and we started rolling them to Plaintiffs 2 I believe on the 6th. 3 But as I said, I am not objecting to 4 giving Plaintiffs a reasonable amount of time 5 or what they need. I simply just want to get 6 this process moving now. 7 MR. CASHMAN: And, Your Honor, let me 8 just add a little bit of further gloss to this 9 because of the prior testimony designation 10 process and how much time it takes to get these 11 testimony designations lined up and ready to 12 go, that is really what Plaintiffs are focused 13 on, and that really underscores Plaintiffs' 14 position that we shouldn't have to be reviewing 15 Microsoft's exhibits for undue prejudice or 16 relevance objections at this point when we have 17 so many of these prior testimony designations 18 that we need to review to keep the process 19 moving. 20 And we will review those, but we don't 21 see the urgency when Microsoft's case is so far 22 off. 23 THE COURT: Oh, all right. Take a 24 review of them, and I'll give you until 25 February 15th to let me know. 8550 1 MR. CASHMAN: Thank you. 2 MS. NELLES: February 15th for all 3 objections, Your Honor. 4 THE COURT: For objections. 5 MS. NELLES: Okay. And I believe you 6 ruled to us as you ruled to them? 7 THE COURT: I don't know. Was that 8 ordered by me? 9 MS. NELLES: Yes, it was. 10 MR. CASHMAN: Well, they provided 11 their objections over four days prior. 12 THE COURT: Do the same thing? Okay. 13 All right. 14 MS. NELLES: Thank you, Your Honor. 15 THE COURT: Treat everybody the same. 16 (The following record was made in the 17 presence of the jury at 2:17 p.m.) 18 THE COURT: Let's see. Yours are not 19 admitted yet. Given the number of them, I'm 20 going to allow the Plaintiffs to look them 21 over. 22 MS. NELLES: Thank you, Your Honor. 23 May I provide these to the Plaintiffs at this 24 time? 25 THE COURT: Yes. 8551 1 MS. NELLES: Thank you. 2 And with the Court's permission, I am 3 going to switch tables with Mr. Green for the 4 next segment of today's movie day. 5 THE COURT: Okay. 6 MR. CASHMAN: Your Honor -- 7 THE COURT: You have another exhibit; 8 right? 9 MR. CASHMAN: Plaintiffs, Your Honor, 10 on Friday made a proffer of 3,186 Plaintiffs' 11 exhibits to which there were no objections, and 12 we kindly ask for a Court ruling. 13 MS. NELLES: No objection, Your Honor. 14 THE COURT: They're admitted. And I'm 15 not going to read all the numbers. 16 MR. CASHMAN: Thank you, Your Honor. 17 Next, the Plaintiffs wish to offer the 18 videotaped testimony of Mark Chestnut -- that's 19 C-h-e-s-t-n-u-t -- taken in the action titled 20 Caldera versus Microsoft on July 22nd, 1998. 21 MR. TULCHIN: Just like the chestnut 22 that falls from a tree. 23 THE COURT: You may go, Darin. 24 MS. NELLES: Thank you, Your Honor. 25 (Whereupon, the following video was 8552 1 played to the jury.) 2 Question: Okay. At your positions at 3 Microsoft from 1987 to 1995, what were the 4 various titles that you held there, and what 5 years did you hold those responsibilities? 6 Answer: I was originally hired into 7 the OEM sales organization as an account 8 manager, and I held that position for a little 9 over a year. And I believe it was January 1989 10 I took a position as product manager for 11 MS-DOS. And I was there for just about a 12 little shy of two years. 13 In November of 1990, I moved back to 14 the OEM sales group as a group manager, and I 15 did that for, oh, gosh, up until the summer of 16 1994. 17 In the summer of '94, I transferred to 18 another organization within Microsoft called 19 advanced technology sales as a group manager. 20 Question: When you were an OEM sales 21 account manager originally at Microsoft, was 22 your account Hewlett-Packard? 23 Answer: Yes. That was my primary 24 account. 25 Question: And you had others besides 8553 1 that? 2 Answer: I had Atari for a time, and 3 I'm trying to think if I had any others. For a 4 time, I had one or two other small accounts, 5 and then I had just HP after a few months, I 6 think. 7 Question: And when you went back in 8 November of '90 to be an OEM sales group 9 manager, you were over the group that included 10 Hewlett-Packard and some others? 11 Answer: True. 12 Question: Were they all domestic 13 or -- 14 Answer: They were all domestic. 15 Question: Let me hand you what has 16 previously been marked as Exhibit 814. 17 We brought a bunch of extra copies 18 that we won't need. 19 First of all, I'll just read that it 20 is from Marianne Allison and from the Waggener 21 group and Kathryn Hinsch at Microsoft 22 Corporation. 23 Are you familiar with the two of them? 24 Answer: Yes. 25 Question: Who were they? 8554 1 Answer: Marianne was outside -- the 2 outside PR person assigned to MS-DOS who I 3 worked with fairly regularly. 4 Kathryn at that time was in-house PR, 5 and was in more of a supporting role. Marianne 6 was more of the lead PR person for MS-DOS. 7 Question: As an account manager -- 8 I'm sorry, as MS-DOS product manager, did you 9 oversee marketing and PR? 10 Answer: I did. 11 Question: And did you also oversee 12 technical development and implementation? 13 Answer: No. Technical development 14 was the province of the development group. 15 Initially that was Tom Lennon and later it was 16 Mike Dryfoos. 17 Basically the division of labor sort 18 of within the Microsoft product group is the 19 development team has a development manager or a 20 development lead. They're responsible for 21 writing the code. 22 Program management is responsible for 23 basically the product schedule and the product 24 specification, product marketing. 25 Product management, which is what I 8555 1 was doing, was responsible for basically PR 2 advertising, distribution channels, pricing 3 promotion, the overall marketing plan. 4 Question: And in your job, you still 5 -- do you have a good technical understanding 6 of the actual code running in DOS and the 7 features and enhancements that are being 8 proposed to be added? 9 Answer: Are you talking now or are 10 you talking then or -- 11 Question: Then, at the time. 12 Answer: I had a reasonable 13 understanding. I was certainly not as 14 technical as people like Tom Lennon or Mike 15 Dryfoos. I was not a programmer, and I was not 16 intricately involved in, you know, getting into 17 the bowels of the code. 18 Question: Is it the norm in the 19 industry to make a big deal out of minor bugs 20 and incompatibilities in products, or are minor 21 bugs and incompatibilities expected in new 22 releases? 23 Answer: I don't know what you mean by 24 a big deal, is it a norm to make a big deal. 25 It's certainly not normal -- 8556 1 Question: A press release -- 2 Answer: It's certainly not normal to 3 issue a press release if you find a bug. 4 Question: Is it normal to draw 5 attention to minor bugs and incompatibilities 6 in new products? 7 Answer: Well, it depends on who 8 you're talking about. The press certainly -- 9 the trade press certainly reports -- you know, 10 and this has been true in this industry for as 11 long as I've been involved in it; they report 12 all those kinds of bugs, even minor ones. 13 The issue that I'm speaking to is 14 someone like an OEM, not someone in the 15 editorial community, finds a bug and fixes it. 16 Do you issue a press release? No, I'm 17 not aware of any other situation where that's 18 ever happened. 19 Question: How should -- how do you 20 think Amstrad should have handled this 21 situation? 22 Answer: They should have fixed the 23 bug and, you know -- I mean, basically -- 24 Question: Should they have contacted 25 Microsoft and said, we found a bug, we should 8557 1 work together -- 2 Answer: Well, again -- 3 Question: -- to fix it? 4 Do you think the -- would you expect 5 when an OEM identifies a bug like this that 6 they would contact Microsoft and say something 7 to the effect that we've found this problem 8 with 4.01 and we want to work on getting a 9 patch for it? 10 Answer: Certainly that would have 11 been the normal way of resolving a situation 12 like that. 13 And it happened -- you know, I mean, 14 basically we attempted to have good 15 relationships with our OEM customers and to 16 work with them in a cooperative manner. 17 And in the case of Amstrad, my belief 18 is that they made a very nominal attempt to 19 work with us and then fixed it on their own and 20 then went public and made a big, you know, deal 21 out of it. 22 Question: Didn't Microsoft in fact 23 after this point of time begin keeping lists of 24 perceived incompatibilities in DR-DOS products 25 and sharing that both with the press and with 8558 1 specific OEMs? 2 Answer: We did look at the product, 3 we did develop lists of incompatibilities. I 4 specifically remember sharing those with the 5 OEM sales organization. 6 As far as sharing that with editorial 7 contacts, I don't specifically recall giving 8 that same information that we gave to OEM sales 9 to editorial contacts. 10 I'm sure that we shared some of the 11 information, the results of our compatibility 12 testing with the press, but I don't recall 13 sharing lists of incompatibilities with the 14 press. 15 Question: But you do recall sharing 16 at least some incompatibilities with the press 17 about DR-DOS products? 18 Answer: I specifically don't recall 19 having a conversation with the press saying, 20 are you aware of these incompatibilities with 21 DR-DOS? But my recollection is that we did 22 share some of that information but, you know, I 23 don't specifically remember handing a list or 24 pointedly having a discussion about, there are 25 the 12 incompatibilities with DR-DOS, Mr. PC 8559 1 Week editor. 2 Question: Actually, these types of 3 conversations with the press that we're talking 4 about, I mean, are these mostly just telephone 5 calls and you're talking with the people and 6 discussing upcoming stories about the products? 7 I mean, are we talking about formal meetings? 8 Answer: Mostly they were telephone 9 calls. We did on a couple of occasions go out 10 on press tours, but not in the early 1989 time 11 frame. 12 Question: Now, these lists that were 13 given to -- that were sent out to the OEM sales 14 group about perceived problems in DR-DOS, was 15 the expectation that individual sales personnel 16 would be communicating that list to specific 17 OEMs, assuming DR-DOS was a threat in the 18 account? 19 Answer: The expectation was that OEM 20 sales representatives would use that 21 information as they saw fit in competitive 22 situations. 23 Question: Were you confident that all 24 of the incompatibilities that were being 25 communicated to your OEM sales force for 8560 1 further communication to OEMs were true and 2 accurate? 3 Answer: Yes. 4 Question: And you wouldn't want to be 5 circulating fabricated information to your OEM 6 sales force and thereby to your OEM customers; 7 is that correct? 8 Answer: Absolutely. 9 Question: What if you had 10 contradictory evidence that suggested 11 compatibility in one context, but 12 incompatibility in other; perhaps it just 13 depended on the particular hardware array that 14 were being used? How would you handle that 15 situation? 16 Answer: I don't recall that being the 17 case, but if that had been the situation, I 18 would have presented the context of the 19 incompatibility and passed that information 20 along to OEM salespeople. 21 Question: What if some testing showed 22 compatibilities with Windows 3.0, for instance, 23 and other testing shows incompatibility with 24 Windows 3.0? Do you have an understanding what 25 message would be communicated to the OEM sales 8561 1 force? 2 Answer: I guess I don't understand 3 the point of the question. That didn't happen. 4 Are you asking me to speak 5 hypothetically what if this happened nine years 6 ago what would I have done? 7 I don't know -- I don't know -- I 8 would have had to understand more completely 9 what were the differences between the two types 10 of testing. 11 If -- you know, I would want to 12 understand why there was a discrepancy. If 13 there was a valid reason for the discrepancy 14 and I could explain that and it was information 15 that would, you know, accurately describe some 16 incompatibility with the problem, then yes, I 17 would pass that along. 18 Question: At this point when it says 19 Mark Chestnut is working with Ray Duncan to do 20 a technical analysis, I take it that's a true 21 statement, that you were doing that? 22 Answer: We were -- I was talking to 23 Ray at that time. I don't think that -- this 24 is April of '89. I don't think Ray did 25 anything for us in that time frame. 8562 1 I specifically remember him doing some 2 work for us about a year later, but, you know, 3 Ray was one of those guys that we talked to a 4 lot. He was a DOS guru. He was an industry 5 expert. He's written books, very 6 well-respected guy. We talked to him a lot. 7 But as I recall, he did not do a 8 technical analysis for us of DR-DOS at that 9 time. 10 Question: Let me hand you what I've 11 marked as Exhibit 900. 12 This is an article published in PC 13 Magazine, September 25, 1990, by Ray Duncan, 14 and the title is DR-DOS 5.0 - An MS-DOS Clone 15 with Charisma. 16 Do you recall this article? 17 Answer: You know, I actually don't 18 recall this article. 19 Question: Okay. Can you -- well, 20 take your time, please, and read the article 21 either at length or skim it so that you're 22 familiar with it. 23 Answer: Okay. 24 Question: And this is written by Ray 25 Duncan, and this is the same gentleman that we 8563 1 were talking about. 2 And I believe that you expressed the 3 opinion that his technical view of these DOS 4 products that were shipping was a 5 well-respected opinion in the industry; 6 correct? 7 Answer: Correct. 8 Question: Okay. And the second 9 paragraph says, DR-DOS 5.0 is an almost perfect 10 superset of MS-DOS 3.3 and 4.0. 11 In the course of a normal day's work 12 you probably wouldn't notice any difference 13 between how you'd interact with MS-DOS or 14 DR-DOS. 15 I found no compatibility problems with 16 a broad selection of applications including 17 several word processors, programming tools, 18 debuggers, TSRs, DOS extender applications, 19 3Com network software, the various Norton 20 utilities, and to my surprise, Windows 3.0. 21 Did I read that correctly? 22 Answer: (Witness nodded.) 23 Question: And to your knowledge, is 24 that an accurate statement of fact? 25 Answer: My recollection is that -- 8564 1 and Ray didn't include this in his article. 2 My recollection is that the major 3 problem that DR-DOS 5.0 had -- I mean, he's 4 correct that they fixed some compatibility 5 issues they had with previous versions with the 6 network redirectors and the CD-ROM extensions 7 and so forth. 8 The thing that they still have 9 problems with was incompatibilities when you 10 ran -- when you loaded DOS HI with several 11 different applications. 12 I know that in about this same time 13 frame, we had done some testing of DR-DOS 5.0 14 and found that there were many compatibility 15 problems when you ran -- when you loaded DOS 16 HI. 17 So again, it depended on the 18 circumstances. If you didn't take advantage of 19 the ability to load DOS HI to run the 20 applications, there weren't -- there didn't 21 appear to be compatibility problems. But our 22 results indicated that there were compatibility 23 problems when you loaded the DR-DOS into high 24 memory, which was, you know, a key feature of 25 the product being able to load it into high 8565 1 memory. 2 MR. GREEN: Your Honor, can we take a 3 sidebar? 4 (The following record was made out of 5 the presence of the jury at 2:35 p.m.) 6 MR. GREEN: I think -- was this 7 Exhibit 5166. 8 MR. CASHMAN: 5166. 9 MR. GREEN: This is a trade press 10 article. I don't see it on the admitted list 11 that I have, and they're displaying it on the 12 board, and in view of the comments made by Ms. 13 Conlin this morning, I just thought I'd raise 14 it, I have got a list of exhibits to the 15 Chestnut deposition which were -- 16 THE COURT: It's not in there? 17 MR. GREEN: It's not on the list I 18 have. I don't have 5166 on that list. It's 19 referred to in the transcript, but they're 20 displaying it on the board, and it's clearly a 21 trade press article which Ms. Conlin was pretty 22 vehement about this morning should not be used. 23 MR. CASHMAN: I'm quite confident, 24 Your Honor, that I had argument before you on 25 5166 with Mr. Chestnut and that it -- as I 8566 1 recall the ruling, that it could be displayed 2 because of Mr. Chestnut's testimony about -- in 3 recalling the discussion he had with Mr. 4 Duncan. 5 That's my recollection. 6 I'm quite sure that the exhibit was 7 discussed in argument that we had on that 8 particular exhibit. 9 I don't recall anything further than 10 that right now, but I know that it was 11 discussed that at least it could be displayed. 12 THE COURT: Do you have my ruling? 13 MR. CASHMAN: I don't have it right 14 with me, Your Honor, I don't think. Maybe I do 15 out at the table, but I don't -- but I don't 16 think so. 17 MR. GREEN: Your Honor, I just -- 18 MR. CASHMAN: And it was, my 19 recollection is because the testimony made it 20 clear that Mr. Chestnut had these discussions 21 with Mr. Duncan, I think he's testifying about 22 that right now. 23 THE COURT: Well, let's get out the 24 ruling. I guess I'll let the Jury go now so I 25 can find it. 8567 1 MR. CASHMAN: Okay. I'll have to call 2 my office. 3 THE COURT: I'll look at my stuff too. 4 MR. CASHMAN: Okay. 5 MR. GREEN: We'll look too, Your 6 Honor. Thank you. 7 MR. CASHMAN: Anyway, we'll get it 8 straightened out by tomorrow. 9 THE COURT: Okay. 10 (The following record was made in the 11 presence of the jury at 2:38 p.m.) 12 THE COURT: Ladies and gentlemen, 13 we're going to take up a matter of law, so in 14 order not to keep you around, I'm going to let 15 you go early today. 16 So remember the admonition previously 17 given. 18 Please be here tomorrow morning at 19 8:30. 20 Leave your notebooks here. 21 And we'll resume at that time. And 22 drive safely and stay warm in this nice 23 weather, and we'll see you tomorrow. 24 (The following record was made out of 25 the presence of the jury at 2:39 p.m.) 8568 1 THE COURT: Okay. 2 MR. CASHMAN: On that particular 3 exhibit, I'm sure that we can work it out over 4 the course of the evening with Microsoft, and 5 if we need to, we can bring it to your 6 attention in the morning before we resume. 7 THE COURT: Okay. I'm going to look 8 for it in my rulings too. 9 If you can find my ruling on it, it 10 would be great. I think I did a chart, didn't 11 I? 12 MR. CASHMAN: You know, I'm not sure. 13 That's why I'm going to check with my office. 14 I do have one other matter that in 15 light of the comment by Juror Number 6 about 16 fast forwarding through the dead spaces. 17 THE COURT: Yes. 18 MR. CASHMAN: The Court may recall 19 that Plaintiffs made a motion to do exactly 20 that on the -- on these depositions -- these 21 prior testimony designations, and Microsoft 22 opposed it. 23 So Plaintiffs at this time renew their 24 motion to edit out those dead spaces, or if 25 Microsoft still resists, then we'd like the 8569 1 jury to be told that Plaintiffs wanted to edit 2 it out and Microsoft has resisted. 3 THE COURT: Okay. Defense? 4 MR. TULCHIN: Your Honor, there was a 5 motion and the Court decided it. 6 I think the issue has been resolved. 7 We certainly object to any idea that the jury 8 should be told that Microsoft is in favor of X 9 or opposed to Y. 10 In specific instances where a juror is 11 looking at a document and the dead space 12 pertains to the time necessary -- I said a 13 juror, I meant a witness. Sorry. 14 THE COURT: Witness. 15 MR. TULCHIN: And the time pertains to 16 a witness looking at a document, it may well be 17 that that dead space should be edited out. 18 The Plaintiffs' motion, if I remember 19 it going back some weeks ago, was much broader 20 than that. 21 It had to do with editing out dead 22 spaces wherever they existed, including the 23 time that a witness took between the end of an 24 answer and the commencement -- sorry, the end 25 of a question and the commencement of his 8570 1 answer. 2 And so in specific instances where 3 there's just dead time looking through a 4 document, perhaps we should confer with the 5 other side and take care of that. I don't have 6 any particular objection to that. 7 But I think the Court's ruling was in 8 general the deposition should be played in the 9 form in which it exists, and with that 10 proposition we agree. 11 THE COURT: Well, if the parties agree 12 to edit out any particular portions, I have no 13 problem, so -- but I'm looking at my prior 14 order, and it did say tape -- to play it as it 15 is presented without edited, which applies to 16 both sides. 17 MR. CASHMAN: The reason why -- 18 THE COURT: Not just one. 19 MR. CASHMAN: -- this is more of an 20 issue probably for the Plaintiffs, Your Honor, 21 is because more of our testimony, of course, is 22 going to be through these prior testimony 23 designations. 24 And I think it's unfair that -- 25 especially since the concerns expressed by the 8571 1 jury that we be required to keep these dead 2 spaces in the prior testimony designations, 3 when, on the other hand, Microsoft has control 4 -- more control over live witnesses and won't 5 have that same issue. 6 So we request that we be permitted to 7 edit out those dead spaces. 8 THE COURT: And they resist; right? 9 MR. TULCHIN: Correct, Your Honor. 10 THE COURT: All right. I'm going to 11 stay with my ruling. 12 Anything else? 13 MR. CASHMAN: That's it for the 14 moment, Your Honor. 15 I think Mr. Gralewski and Mr. Tuggy 16 had something to discuss before we did -- went 17 back to Mr. Dixon, but doesn't look like they 18 will be here until 3 o'clock. 19 THE COURT: All right. I'm going to 20 look for that order. 21 MR. CASHMAN: I'll call my office and 22 see if we can find out more information. 23 THE COURT: Who argued that, 24 Gralewski? 25 MR. CASHMAN: I argued it, I believe. 8572 1 THE COURT: I don't know what I did 2 with it. 3 MR. CASHMAN: That's my recollection 4 anyway, Your Honor. 5 THE COURT: Do you remember what day 6 it was? 7 MR. CASHMAN: That I can't say. 8 THE COURT: Okay. 9 MR. GREEN: Who argued it for us? 10 THE COURT: I think Tuggy argued it 11 for you. 12 MR. CASHMAN: It would have been 13 Mr. Tuggy. 14 THE COURT: Well, we'll look for that 15 order if you want it and see what I said. 16 (A recess was taken from 2:44 p.m. to 17 3:06 p.m.) 18 THE COURT: Mr. Neuhaus? 19 MR. NEUHAUS: Thank you. 20 Your Honor, back in October the 21 Plaintiffs served a motion to compel the 22 production of certain documents on a privilege 23 list that Microsoft had served. 24 That motion had been briefed, and in 25 the course of the briefing, Plaintiffs argued 8573 1 that documents should be submitted to Special 2 Master and a revised privilege log be provided 3 as to other documents. 4 The parties have engaged in 5 negotiation over that and have reached 6 agreement whereby two categories of documents 7 would be submitted to Special Master, subject 8 to Your Honor's approval, of course. And 9 another two categories, we would supplement our 10 existing privilege log. 11 We've briefed the Special Master on 12 this proposal. The Special Master -- and shown 13 him a draft of what I'm about to show Your 14 Honor, and the Special Master is happy with 15 those arrangements and is willing to take on 16 the assignment. 17 So I'm handing to Your Honor a joint 18 letter from the two -- from Mr. Gralewski and 19 me with a proposed order appointing the Special 20 Master, which has in addition an acknowledgment 21 by the Special Master that he would execute as 22 well. 23 THE COURT: Is this -- do you 24 anticipate, both parties, that this is an 25 efficient and speedy process to decide these 8574 1 issues? 2 MR. NEUHAUS: I think we do, Your 3 Honor. 4 THE COURT: In light of the fact that 5 my experience has been it hasn't gone well. 6 MR. GRALEWSKI: Your Honor, certainly 7 that is one of our highest priorities, to see 8 to it that we have this process resolved 9 quickly, given that we're in our case in chief, 10 and if we don't get these documents by the time 11 our case in chief is over, it may be all for 12 naught. 13 We have spoken with the Special 14 Master, and he has assured us that because of 15 other commitments he has, he wants to complete 16 the totality of these rulings by I believe the 17 third week of February, and so that we would 18 anticipate having this process completed by 19 then, save for maybe a week or two after that 20 for any appeals that need to be heard. 21 THE COURT: And then they'll all be 22 appealed and I'm going to review them. 23 MR. GRALEWSKI: I hope not, sincerely. 24 THE COURT: How many are there? 25 MR. GRALEWSKI: I believe there are 8575 1 1,200 entries on the privilege log, but that 2 doesn't mean there are 1,200 documents, because 3 there are, we understand, duplicate entries or 4 duplicate strings. 5 MR. NEUHAUS: Entries where you will 6 have multiple E-mails, each one of which may 7 end up as an entry on a privilege log, all of 8 them are a part of one string. 9 So it's 1,200 entries. It's obviously 10 a substantial number. 11 THE COURT: How are you going to have 12 time to have a hearing on this? Are you guys 13 going to have hearings? 14 MR. GRALEWSKI: We have put in place a 15 process where either party can request a 16 hearing, but at the present time, we're not 17 necessarily -- we haven't necessarily decided 18 to have hearings. We may, depending on what 19 the tentative rulings are and what the final 20 rulings are. 21 THE COURT: May hold hearings, okay. 22 MR. GRALEWSKI: And, of course, Your 23 Honor, we're busy outside of Court during the 24 day while the jury is in session. 25 THE COURT: Why do you want to use 8576 1 this procedure? 2 MR. NEUHAUS: I suppose the best 3 answer is, it's a resolution of a disputed 4 motion that gives in our view Plaintiffs 5 assurance that our claims are good claims and 6 that there's nothing material in the documents 7 that they don't already have in other forms in 8 terms of what they're entitled to have. 9 THE COURT: Why not just present them 10 to me, that's what I'm asking. 11 MR. NEUHAUS: Well, it's 1,200 12 documents, Your Honor. That's -- it's a very 13 large number. 14 I know Your Honor has the sense that a 15 lot of material has ended up on your plate 16 after the Special Master process, but it's my 17 impression that a great deal has been winnowed 18 down through the Special Master process and the 19 meet and confer. 20 I would expect that this would be -- 21 that there would be a great deal of this 22 disposed of in this process. 23 MR. GRALEWSKI: To be clear, and I 24 don't want to speak for Microsoft, Plaintiffs 25 certainly would not be opposed to your looking 8577 1 at them in the first instance. 2 I think that both parties were 3 attempting to save Your Honor a considerable 4 amount of work, believing that you had a lot of 5 other things on your plate. 6 THE COURT: Well, we'll see what 7 happens. If I get 1,200 appeals, I know it's 8 for naught. 9 Okay. I signed the order. 10 MR. NEUHAUS: Thank you, Your Honor. 11 THE COURT: What's next? 12 MR. GRALEWSKI: Your Honor, as we 13 discussed, we're going to shift gears and take 14 up an appeal of a witness named Philip Barrett. 15 If I may approach. 16 THE COURT: You may. 17 MR. GRALEWSKI: I have a joint rulings 18 chart and copies of the at-issue documents, and 19 I believe Ms. Bradley or Mr. Tuggy have the 20 transcripts for you. 21 The reason that we're doing this, Your 22 Honor, is Mr. Cashman has indicated there are 23 over seven or eight hours of testimony of 24 Barrett, relatively few objections, and if we 25 clear these out this afternoon with Your 8578 1 Honor's rulings, we can prepare Barrett this 2 evening and be assured that we won't have any 3 interruptions in the trial schedule for the 4 later part of this week, early part of next. 5 THE COURT: Your chart has something 6 crossed out. That is no longer an issue? 7 MR. GRALWESKI: Yes, the -- 8 THE COURT: Do you have something -- 9 MR. GRALEWSKI: Your Honor, there was 10 a -- this is the result of a continued 11 meet-and-confer effort. 12 Initially the parties -- I should say 13 initially Microsoft wanted to play about a page 14 and a half of affirmative designations from the 15 FTC transcript of Philip Barrett, and we 16 opposed that. 17 As an accommodation, in this witness 18 specific instance, we have decided to permit 19 Microsoft to read their affirmative 20 designations from the FTC transcript. 21 So Your Honor doesn't need to rule on 22 those issues in this instance. 23 THE COURT: From the FTC hearing? 24 MR. GRALEWSKI: No. It's an actual 25 adversary proceeding. 8579 1 Microsoft did not assert a hearsay 2 objection because at the time of Mr. Barrett's 3 deposition he was employed by Microsoft. 4 THE COURT: Okay, got you. 5 MR. GRALEWSKI: So it is -- that is 6 the distinction between, for instance, the 7 Williams FTC matter that you considered and 8 also Dixon. 9 So moving into the substance of the 10 appeal, there are only three documents and 11 related testimony at issue, Your Honor, as you 12 can see from the rulings chart. 13 In each instance, Plaintiffs are 14 proposing nonhearsay purposes for the documents 15 and of the related testimony, and I'll one by 16 one walk Your Honor through what Plaintiffs' 17 nonhearsay purposes are, and if Your Honor is 18 so inclined, the parties would welcome rulings 19 at this point so that we can prepare. 20 If Your Honor wants to take it under 21 advisement, of course that's your prerogative, 22 and we'll receive rulings when you're prepared. 23 THE COURT: Appreciate that. Thank 24 you. 25 MR. GRALEWSKI: The first issue comes 8580 1 up at pages 47 and 48 of the transcript, and 2 the related document is PX 7567, which I've 3 provided to Your Honor. 4 THE COURT: Okay. 5 MR. GRALEWSKI: Basically what's going 6 on in 7567, Your Honor, is that at the very 7 bottom of the first page, the entire second 8 page, and the entire third page, there is a 9 Microsoft employee Percy T., who does a review 10 of DR-DOS 5.0 and compares it to MS-DOS 5.0. 11 This was a review that was asked to be 12 done by Mr. Barrett. 13 THE COURT: Percy T. works for 14 Microsoft? 15 MR. GRALEWSKI: That's correct. Percy 16 T. works for Microsoft. 17 THE COURT: And the bottom here, he's 18 sending an E-mail here to somebody; right? 19 MR. GRALWESKI: That's right. 20 THE COURT: Phil Barrett. 21 MR. GRALEWSKI: What he did was he did 22 a review of DR-DOS. 23 This E-mail contains his findings of 24 that review. And then what he does is he sends 25 his review to Mr. Barrett, and then what Mr. 8581 1 Barrett does in turn -- and this is relevant to 2 our nonhearsay purpose -- Mr. Barrett forwards 3 this review that Percy T. does to a group 4 within Microsoft called DOS WAR, D-O-S W-A-R. 5 That's the E-mail directly above, the E-mail at 6 the bottom. 7 THE COURT: Okay. 8 MR. GRALEWSKI: So there are several 9 nonhearsay purposes for this document, Your 10 Honor. 11 As the rulings chart indicates, there 12 was a hearsay objection to this portion of the 13 document that the Special Master sustained. 14 I believe the reasoning was that Percy 15 T. was a low-level Microsoft employee, and 16 despite the fact that he was proceeding at the 17 direction of Mr. Barrett, he was not acting in 18 the course and scope of his job duties and 19 responsibilities, and this was not therefore 20 business record. 21 Despite the dubiousness of that 22 ruling, the Plaintiffs decided not to appeal 23 that ruling and instead to propose several 24 nonhearsay purposes. 25 The first one of which, Your Honor, is 8582 1 notice to Microsoft that there were people who 2 believed that DR-DOS was superior to MS-DOS. 3 And to deal with the Gacke issue 4 head-on, it does not matter for the purposes of 5 this document and the related testimony if 6 DR-DOS was actually superior. What matters is 7 that there were people who thought that it was 8 better and reported this to Microsoft. 9 And then this subsequently explains 10 the manner in which Microsoft chose to compete 11 against DR-DOS. 12 It explains what Microsoft did after 13 receiving this information. 14 Specifically in the testimony, Your 15 Honor, with respect to the notice issue, and 16 it's plain from the face of the document, what 17 Mr. Barrett does with this information is he 18 turns around and he sends it to a group within 19 Microsoft whose primary purpose was to deal 20 with competition with DRI. That's the DOS WAR 21 group. 22 So that on its face shows that it was 23 for the -- this testimony is for the intended 24 purpose of notice. 25 The second issue, Your Honor, 8583 1 explaining subsequent competitive actions, 2 Mr. Barrett testifies, I believe, at page 48, 3 lines 18 to 20 -- I guess starting a little bit 4 above that, line 14. 5 Question: Did you make any use of 6 that analysis that he -- meaning Percy T. -- 7 provided to you that you recall? 8 Answer: Yeah. Yes, I did. 9 Question: And what was that? 10 Answer: The -- well, probably the 11 primary issue was to send it to the DOS WAR 12 group to jive them into -- goad them into more 13 effort. 14 Question: More effort to? 15 Answer: To beat DR-DOS, sorry. 16 So in summary, Your Honor, the 17 nonhearsay purposes would be notice to 18 Microsoft and explaining their subsequent 19 conduct and why they chose to do things that 20 they did. 21 Thank you, Your Honor. 22 THE COURT: How would you propose that 23 it be -- would you propose there be some 24 instruction then to the jury or what? 25 MR. GRALEWSKI: If Microsoft insisted 8584 1 on that, we would not oppose that. Certainly 2 if Your Honor believed that that was necessary, 3 that would be an appropriate thing to do. 4 And I'm sorry, I would have that same 5 answer for each of the next two as well. 6 THE COURT: Ms. Bradley? 7 MS. BRADLEY: Your Honor, to give a 8 little history on PX 7567, Plaintiffs call the 9 Special Master's rulings sustaining the hearsay 10 objection to this document dubious. 11 Plaintiffs designated almost precisely 12 the same document that included this 13 objectionable Percy T. E-mail in the first 14 phase of the Special Master process as PX 682. 15 There again, the Special Master 16 sustained Microsoft's hearsay objection. 17 At that time Plaintiffs appealed the 18 Special Master's ruling and Your Honor upheld 19 the Special Master's hearsay ruling there. 20 And so this -- the admissibility of 21 this document has been argued again and again. 22 Your Honor has sustained that ruling, and so 23 for the Plaintiffs to come before you now and 24 claim that they chose not to appeal the ruling 25 and that that ruling was somehow dubious is 8585 1 disingenuous. 2 To go on to Plaintiffs' purported 3 nonhearsay purposes for the exhibit, those also 4 seem to be not genuine nonhearsay purposes. 5 First Plaintiffs claim that the E-mail 6 somehow served as notice to Microsoft that some 7 people believed DR-DOS to be superior to 8 MS-DOS, and their second argument that this 9 somehow explains Microsoft's subsequent 10 conduct. 11 The linkage between this E-mail and 12 Microsoft's subsequent conduct is far too 13 tenuous to admit such a document over a 14 three-times-sustained hearsay objection. 15 And that is, seems to me that the 16 Plaintiffs' suggestion is that Microsoft's 17 decision that they wanted to beat DR-DOS is 18 somehow explained by this document. 19 Microsoft's decision to attempt to 20 beat DR-DOS and attempt to compete against 21 DR-DOS in the market is not something that's 22 really in question here, and so as the 23 relevance of this exhibit to somehow show or 24 explain that conduct, Microsoft's competition 25 with DR-DOS in the marketplace is irrelevant. 8586 1 Also, on the notice point, same 2 problem. 3 Microsoft was certainly on notice, and 4 Microsoft would concede that some people in the 5 market may have thought that DR-DOS was a 6 superior product to MS-DOS. 7 The necessity of this exhibit to show 8 that sort of notice to Microsoft has simply not 9 been established here. 10 Your Honor, this is a classic Gacke 11 problem. 12 Plaintiffs haven't been able to 13 overcome that they want this for its truth. 14 The only relevance would be for its truth, and 15 it's inadmissible as such. 16 Also under McElroy -- you'll recall, 17 Your Honor, that McElroy -- in McElroy the 18 Supreme Court of Iowa laid out a number of 19 preconditions for admission of evidence for 20 nonhearsay purposes. 21 And the first one is that the Court 22 requires that the parties' true purpose for 23 offering an exhibit must be a nonhearsay 24 purpose. 25 The simple fact that a party attempts 8587 1 to articulate some conceivable nonhearsay 2 purpose for an exhibit isn't enough to get them 3 over that threshold. 4 Here, we concede Plaintiffs want this 5 in because it's a long missive talking about 6 the superiority of DR-DOS over MS-DOS, and 7 that's not a viable nonhearsay purpose, 8 particularly under McElroy. 9 And again, McElroy also requires that 10 the nonhearsay purpose be relevant. 11 Here, that Plaintiffs claimed 12 nonhearsay purpose, that this somehow explains 13 Microsoft's decision and attempt to compete 14 hard against DR-DOS is not a relevant one and 15 not a viable one, and we would ask that the 16 exhibit and the testimony about the exhibit be 17 excluded for those reasons. 18 THE COURT: Anything else? 19 MR. GRALEWSKI: Yes, Your Honor. 20 With the moving pieces, Your Honor, I 21 was unaware of the portion of the document in 22 another PX that Plaintiffs did appeal, and I 23 apologize for that reason -- or about that. 24 I should have brought that to Your 25 Honor's attention and I didn't. 8588 1 That doesn't change the fact, however, 2 that Plaintiffs here are not seeking to offer 3 this document for its truth, and so we are not 4 violating any decision by this Court. 5 Plaintiffs are free as the trial 6 progresses to offer documents that have been -- 7 or have had objections sustained to them for 8 non -- relevant nonhearsay purposes. 9 Here we have just that example. 10 Plaintiffs are not making up a 11 conceivable argument that maybe this has to do 12 with notice. 13 It's right here in black and white at 14 this point in time of the trial that this 15 particular E-mail that has a sustained hearsay 16 objection to it was sent to higher-ups at 17 Microsoft to alert them of the fact that people 18 perceived DR-DOS to be superior to MS-DOS. 19 There would be no other reason to send 20 this to these higher-ups and executives if it 21 wasn't relevant for them to know this in their 22 decision-making processes. 23 If you look at the top of page 46, 24 Mr. Barrett describes what the DOS WAR group 25 is. 8589 1 He says: 2 Answer: DOS WAR was -- let's see, 3 what's the best way to describe it? 4 Well, there was a war, a war meeting, 5 a war group. We were at war with DR-DOS. 6 And then later on in that answer, he 7 says, and basically DOS WAR was a group of 8 people that was charged with winning the war 9 against DR-DOS. 10 And what we have two pages later, you 11 see, is that this information was provided to 12 that group obviously to react upon. 13 THE COURT: Anything else? 14 MR. GRALEWSKI: No, Your Honor. 15 MS. BRADLEY: Your Honor, I'll just 16 say that notice that someone thought DR-DOS was 17 superior to MS-DOS is not at all relevant. 18 MR. GRALEWSKI: I guess the only 19 counter I have to that, since there's silence, 20 is to offer the question then why else would 21 Mr. Barrett send it to high-up executives at 22 Microsoft if it wasn't relevant. 23 THE COURT: Anything else on 7567 and 24 the testimony at pages 47 and 48? 25 The Court finds that the exhibit may 8590 1 not be offered. However, page 47, line 4 2 through 15 is admissible. Line 20 through 24 3 is admissible. Page 48, lines 13 through 22 is 4 admissible. 5 Next. 6 MR. TUGGY: So we don't have the 7 confusion that occurred today, Microsoft's 8 position is that the document can't be shown to 9 the jury while those lines are being played. 10 THE COURT: Right. That's not 11 admitted. 12 MR. GRALEWSKI: Thank you, Your Honor. 13 The second of third portion of 14 testimony and related documents has to do with 15 testimony at 94, 10, to 95, 7, and also some 16 redirect at 374, 19, to 375, 22. The documents 17 at issue are PX 1075 and PX 4380. 18 The main nonhearsay purpose that 19 Plaintiffs propose here, Your Honor, is 20 context, and let me explain. 21 We have an E-mail exchange in both of 22 these documents. It's the same E-mail, just 23 different strings repeating the same E-mail 24 from David Cole to Brad Silverberg and Phil 25 Barrett. 8591 1 THE COURT: Remind me who David Cole 2 is. 3 MR. GRALEWSKI: He is another senior 4 level executive at Microsoft. 5 THE COURT: Okay. 6 MR. GRALEWSKI: These are all internal 7 Microsoft folks talking. 8 THE COURT: Okay. 9 MR. GRALEWSKI: And Mr. Cole reports 10 to Mr. Silverberg and Mr. Barrett, just got a 11 call from Debra V. who was dealing with the FTC 12 stuff. 13 And this next sentence is the embedded 14 hearsay. 15 The FTC called her this morning and 16 said that DRI called and informed them that 17 Microsoft had moved a couple of DOS guys to the 18 Windows team and that these guys were putting 19 code in Windows that would detect DR-DOS and 20 prevent Windows 3.1 from running on DR-DOS. 21 The rest of the document is clean and 22 free of objection. 23 The reason that this sentence that I 24 just read is necessary for context, Your Honor, 25 is because without that sentence, it's 8592 1 impossible to tell what Mr. Cole is talking 2 about in his next sentence when he refers to 3 the information. 4 I'm sorry, it's in the final 5 paragraph. 6 He says in the final paragraph, the 7 bothersome part is where the hell is DRI 8 getting their information. 9 Essentially, what Microsoft's concern 10 was here is that there was a leak within 11 Microsoft, and somebody within Microsoft was 12 either providing information to DRI or to the 13 FTC about how Microsoft was choosing to use its 14 people power in developing its products. 15 And as I said, without the first 16 paragraph, that particular sentence, the jury 17 will have no idea what Mr. Cole is talking 18 about when he says information, and the 19 document, you know, loses all import. 20 This document and the information that 21 we've talked about is also relevant, Your 22 Honor, to explaining relevant subsequent 23 conduct. 24 What happened, as I've said, is that 25 upon receiving the information that Mr. Cole 8593 1 reported to Mr. Barrett, Mr. Barrett testifies 2 that Microsoft spent a significant amount of 3 time investigating whether or not it was true 4 that there was a leak. 5 He testifies at the top of page 96, 6 Your Honor: 7 Question -- and this is after 8 discussion about this document. 9 Question: Did you or anyone else that 10 you know of at Microsoft make an investigation 11 to determine how Digital Research was getting 12 information about what Microsoft was doing in 13 this regard? 14 THE COURT: What page are you on? 15 MR. GRALEWSKI: I'm sorry, Your Honor. 16 Page 96. At the top 96, line 3, is the 17 question. 18 THE COURT: Oh, okay. Go ahead. 19 MR. GRALEWSKI: So at the top of page 20 96 the question is, you know, did you conduct 21 an investigation after getting this E-mail. 22 And Mr. Barrett answers starting at 23 line 7, yeah, I actually spent not a lot of 24 time, but I spent some time trying to determine 25 who this person might be, if there was indeed a 8594 1 leak within Microsoft. I went so far as to 2 talk to the phone people to see if there was a 3 way to check phone records, et cetera. 4 So this is conduct that Microsoft took 5 after receiving this information, and therefore 6 this particular sentence that I read is 7 relevant to explain why they took that -- why 8 they took those steps. 9 THE COURT: Was the E-mail on 4380 at 10 the bottom of the page from Phil Barrett 11 November 6, '91, at 1700 hours, was that in 12 direct response from the E-mail from David 13 Cole? 14 MR. GRALEWSKI: Are you talking about 15 the one that starts they are getting very 16 accurate information? 17 THE COURT: Yeah. 18 MR. GRALEWSKI: Yeah, that is, and 19 that is, I believe, discussed in the testimony 20 and does not have objection. 21 THE COURT: Do you have something 22 else? 23 MR. GRALEWSKI: Thank you, Your Honor. 24 THE COURT: Ms. Bradley? 25 MS. BRADLEY: Your Honor, Plaintiffs' 8595 1 suggestion about potential nonhearsay purposes 2 and the requirement that this embedded hearsay 3 be admitted somehow for context for the 4 remainder of the E-mail is all very 5 interesting, but the testimony which Plaintiffs 6 seek to admit about this exhibit, or these two 7 exhibits, rather, is directly -- pertains 8 directly to only the embedded hearsay and 9 pertains to the truth of the embedded hearsay. 10 If I may point you to -- 11 THE COURT: Why is it even hearsay? 12 Doesn't Mr. Barrett adopt it? 13 MS. BRADLEY: Your Honor, Mr. Barrett 14 -- 15 THE COURT: He says it's accurate. 16 MS. BRADLEY: I will say, Your Honor, 17 a couple of things about that. 18 First, if you may -- if I may review 19 the document for a moment. 20 THE COURT: Sure, go ahead. 21 MS. BRADLEY: Couple of problems. 22 First of all, it's not accurate. And 23 I think as Your Honor has seen, and as the jury 24 has seen in sitting in the room, there are a 25 couple of huge misstatements in here. In fact, 8596 1 the embedded hearsay makes two statements of 2 fact. 3 First, that Microsoft's guys were 4 putting code in Windows that would detect 5 DR-DOS; and second, that the code would prevent 6 Windows 3.1 from running on DR-DOS. 7 It's incorrect that they were 8 detecting DR-DOS. In fact, as we've heard in 9 the testimony that's played already or that 10 will be played, any code in Windows 3.1 was 11 intended, in fact, to detect MS-DOS, the 12 existence of MS-DOS, and, in fact, the code did 13 not prevent another operating system from 14 running, but instead, displayed a benign 15 nonfatal error message. 16 And so we know from the beginning that 17 the embedded hearsay itself is, in fact, not 18 accurate, which goes to the whole problem with 19 hearsay, which is that the DOS -- the DRI guys 20 who called the FTC, who in turn called 21 Microsoft to make a report were not subject to 22 cross-examination, gave incorrect information. 23 Whether they -- whether that was the 24 information they received or not, it's -- we 25 don't know because we were not able to sit them 8597 1 on the witness chair and ask them. 2 But we know that the information here 3 is wrong. 4 Also, the embedded hearsay objection 5 itself was sustained by the Special Master in 6 one of these exhibits and in the other exhibit 7 was conceded by Plaintiffs. Never submitted to 8 the Special Master for a ruling. 9 And so whether this is hearsay or not 10 is really not at issue before us today. 11 THE COURT: Well, my chart says that 12 Plaintiffs' Exhibit 4380 was not submitted for 13 ruling. Is that wrong? 14 MS. BRADLEY: And, Your Honor, the 15 understanding of the parties and the way the 16 Special Master came to work -- act was that 17 where a party wished to offer an exhibit for 18 its truth, they would submit the objection to 19 the Special Master for ruling. 20 And so as to PX 1075, Plaintiffs did 21 submit the exhibit to Special Master for ruling 22 and ask that he overrule the embedded -- 23 Microsoft's embedded hearsay objection, and 24 that objection was sustained. 25 THE COURT: Did he look at 4380? 8598 1 MS. BRADLEY: When it came to 4380, 2 Plaintiffs did not submit the objection to the 3 Special Master for ruling. 4 What that meant, and what both parties 5 understood that to mean, is that the party was 6 not seeking to offer the exhibit for its truth, 7 and because the Special Master was not asked to 8 rule on nonhearsay purposes, the Special Master 9 didn't -- wasn't asked ever to look at the 10 document. 11 So by Exhibit 4380, Plaintiffs had 12 conceded that this was, in fact, embedded 13 hearsay and so only proposed here, and really 14 only can propose here, to offer it for some 15 nonhearsay purpose. 16 THE COURT: So you didn't submit 4380 17 to the Special Master? 18 MR. GRALEWSKI: That's correct, Your 19 Honor. And if I may -- 20 THE COURT: Okay, go ahead. 21 MR. GRALEWSKI: I want to respond to 22 two points and address -- 23 THE COURT: Were you done, Ms. 24 Bradley? 25 MS. BRADLEY: I wasn't quite done. 8599 1 MR. GRALEWSKI: I apologize. 2 THE COURT: I'm sorry. 3 MS. BRADLEY: I'm sorry. 4 If I may point you to the testimony 5 about the document itself. 6 At page 94, the questioning attorney 7 reads the embedded hearsay, and only the 8 embedded hearsay, into the record and then asks 9 the question, was that accurate information. 10 That is, was the embedded hearsay true. 11 And Mr. Barrett goes on to answer the 12 question saying that it was and it wasn't. 13 But for Plaintiffs to come before you 14 here today and claim that somehow they're not 15 offering the embedded hearsay for its truth but 16 instead for some context for another part of 17 the document that's not even addressed in the 18 testimony just doesn't fit when, in fact, the 19 question about the -- is confined to the 20 embedded hearsay and the question is whether or 21 not it's true. 22 The later testimony about this same 23 document does a similar thing, reads only the 24 embedded hearsay into the record and then asks 25 about the voracity of the embedded hearsay. 8600 1 It's impossible for me to understand, 2 Your Honor, how we could need the embedded 3 hearsay to provide context for another part of 4 the document that's never addressed in the 5 testimony. That's not required for the 6 understanding of any other part of the 7 testimony, and it's just a back-door way of 8 trying to get in embedded hearsay that's been 9 both sustained by the Special Master and then 10 conceded -- later conceded by the Plaintiffs. 11 THE COURT: Go ahead. 12 MR. GRALEWSKI: Your Honor, two 13 points. 14 First point is Ms. Bradley's argument 15 that what's transpiring here is not accurate I 16 think is easily addressed because that argument 17 goes to the weight of the testimony, not its 18 admissibility. 19 Microsoft's arguing here at 3:45 in 20 the afternoon that something's not accurate, 21 can't make it so, it has to be for the jury to 22 determine. 23 Now, the argument that we're 24 attempting to, you know, back door this 25 testimony, I respectfully disagree with. 8601 1 I stated straight up when I began my 2 presentation that the main nonhearsay purpose 3 here is context, and as I explained, and I'll 4 explain further right now, it is absolutely 5 necessary to have this sentence in the first 6 paragraph to understand later clean, 7 objection-free testimony. 8 At page 95, Your Honor, which is just 9 below the first portion of testimony that 10 Microsoft objects to, there is a clean question 11 which is, okay, Mr. Cole ends his E-mail by 12 saying the bothersome part is where the hell is 13 DRI getting their information. 14 Without the paragraph preceding that, 15 the jury will have no idea what is transpiring 16 in this otherwise clean designation. 17 Similarly at the bottom of page 97 -- 18 and Microsoft was free to cross-examine 19 Mr. Barrett at the time, and indeed 20 cross-examined Mr. Barrett for I believe over a 21 day on all of his direct testimony. 22 At the bottom of page 97, Mr. Barrett 23 is asked about the E-mail at the top -- on top 24 of the E-mail in question on 4380, and the 25 question is: In the E-mail, you say, quote, 8602 1 they are getting very accurate information from 2 an internal source. I don't want to witch 3 hunt, but this is out of control, but this is 4 pretty important. I talked to Brad -- meaning 5 Brad Silverberg -- and he is in agreement that 6 we should ferret out the leak. 7 Is this -- are you talking about the 8 leak to Digital Research? 9 Answer: Yes, that's precisely what 10 I'm referring to. 11 At the end you say I have suspicions, 12 et cetera, et cetera. 13 And then from line 9 to 14 he 14 discusses who he believes could have been one 15 source of the leak. 16 Again, without the portion of the 17 document that's at issue, all of this testimony 18 is completely out of context and completely 19 meaningless to the jury. 20 Addressing Your Honor's question to me 21 regarding whether or not Plaintiffs submitted 22 4380 to the Special Master, Plaintiffs did not 23 for the reason that the Special Master had 24 ruled on 1075, and in light of that ruling, the 25 Plaintiffs made a decision to proffer the 8603 1 document for a nonhearsay purpose, and that's 2 what we're doing now. 3 MS. BRADLEY: Your Honor, a couple of 4 things. 5 First, if the Plaintiffs feel that 6 they need some sort of context for the 7 testimony at 95, 8, Microsoft would be willing 8 to withdraw its objection to 94, 10 through 14, 9 at which the questioning attorney introduces 10 the E-mail, a portion of which could come in if 11 the embedded hearsay weren't redacted and then 12 the context would be there for talking about 13 the document itself. 14 Beyond that, the fact that there was a 15 leak to DRI needs no further context about what 16 was the -- you know, the specific details of 17 the leak and what specifically DRI reported to 18 the FTC in the process of building a case 19 against Microsoft. 20 DRI -- the subsequent discussion later 21 in this E-mail and in the following E-mails 22 that we see in PX 4380 stand alone to show that 23 Microsoft was concerned about a leak to DRI. 24 This, the report in the embedded 25 hearsay portion of both documents that reports 8604 1 incorrect information that was reported by DRI 2 to the FTC that the FTC subsequently called 3 Microsoft about is not at all necessary to 4 provide context for the simple fact that 5 Microsoft believed there to be a leak to DRI 6 and was concerned about that. 7 THE COURT: Your position, though, is 8 also that the sentence is not true; correct? 9 MS. BRADLEY: That's -- that is 10 correct. 11 THE COURT: How is it hearsay then? 12 MS. BRADLEY: How is it hearsay? 13 THE COURT: If it's not true. 14 MS. BRADLEY: It's offered for the 15 truth of the matter asserted, Your Honor. 16 THE COURT: You don't even think it's 17 true. How is it offered for the truth of the 18 matter asserted? 19 MS. BRADLEY: If we look at the 20 testimony itself, the questioning attorney asks 21 the witness -- reads the embedded hearsay into 22 the record and asks whether it's true, and so 23 whether or not it's true -- that's really 24 precisely the problem with hearsay, is that 25 there are statements that are made as 8605 1 statements of fact that are untestable because 2 we can't ask the declarant about the truth of 3 them. And so the danger of hearsay is that it 4 could be false and the jury wouldn't know about 5 it. 6 MR. GRALEWSKI: Your Honor, just 7 briefly. A couple points. 8 The gracious offer to have lines 10 9 through 14 on 94 doesn't provide the context 10 that's necessary. 11 The context that is necessary isn't 12 for the document itself, but for the 13 information that's described in the document. 14 So really what is necessary for the 15 context is what is from line 15 to 22 on 16 page 94. 17 With respect to the truthfulness of 18 the statement, Mr. Barrett at line 1 of page 95 19 indeed says it's not entirely accurate. 20 If the Court were so inclined and was 21 concerned about for-truth issues, I suppose one 22 thing that could be done is from 94, 22, 23 starting with was that accurate, through 95, 24 line 1, finishing with not entirely accurate, 25 could be struck, and then you would still have 8606 1 line 15 through 22 to provide the context for 2 the testimony at page 95, 96, 97, and 98. 3 The last argument Ms. Bradley makes 4 that I want to address is that I think that the 5 suggestion was that the jury will understand 6 what leak we're talking about here. 7 And I would submit that while the jury 8 may understand from subsequent testimony that 9 there was a leak or a purported leak within 10 Microsoft to DRI, without this portion of the 11 testimony, there's no way to understand what 12 the leak was. 13 So the jury will be left to speculate 14 -- and we're actually going to do a disservice 15 to them by carving this testimony out because 16 they'll be left to speculate well, was this a 17 leak about information provided to the FTC? 18 No, they'll have no way of knowing that. 19 Was this a leak about the Christmas 20 beta? Was this a leak about where the 21 Christmas party was going to be? 22 They'll have no way of determining 23 what that leak was. 24 And so getting back to where I 25 started, we're not offering this for its truth, 8607 1 we're offering to explain and to provide 2 context for the subsequent clean testimony that 3 follows it. 4 THE COURT: Ms. Bradley, on page 95, 5 line 1, beginning with there and ending on line 6 7, do you agree that's not hearsay? 7 MS. BRADLEY: That alone isn't 8 hearsay, Your Honor, but it's hard to imagine 9 how it would come in with no pending question, 10 and the question itself is just pure hearsay. 11 That statement doesn't appear to be 12 hearsay. 13 THE COURT: So now your objection is 14 it would be unresponsive if the Court allowed 15 that? 16 MS. BRADLEY: If the Court could find 17 a way to make it work, Microsoft wouldn't be -- 18 wouldn't object to that testimony alone, but -- 19 THE COURT: Why does it have to be an 20 answer to a question? 21 MS. BRADLEY: That's been the parties' 22 practice going along, is that if we can't find 23 a -- an appropriate question for it, then 24 testimony itself shouldn't come in. 25 THE COURT: What's Phil Barrett's 8608 1 position? 2 MS. BRADLEY: Phil Barrett was a 3 Microsoft executive. 4 THE COURT: So it's an admission in 5 and of itself. 6 MS. BRADLEY: The statements that he 7 makes that you pointed to at page 95 are not 8 objectionable to Microsoft. 9 MR. TUGGY: Just to -- 10 THE COURT: So that statement could go 11 in the record without any question at all. 12 It's an admission. 13 MR. TUGGY: He was not employed by 14 Microsoft at the time of the deposition. He 15 was employed by our competitor. 16 THE COURT: He's talking about when he 17 was employed there, come on. How else would he 18 get the knowledge? 19 MS. BRADLEY: Your Honor, the general 20 practice of the parties has been that without 21 an appropriate pending question, and this was 22 something that we saw several times with Linnet 23 Harlan, was that if the question is based on 24 inadmissible hearsay, then the answer standing 25 alone is not responsive to anything. 8609 1 THE COURT: So if a defendant in a 2 murder case confessed with no pending question, 3 it's not admissible? There has to be a 4 question? 5 MS. BRADLEY: Your Honor, there is -- 6 THE COURT: What if there's a 7 deposition of a guy and all of a sudden he says 8 I killed somebody? It's not admissible then 9 under your theory? No question. 10 MS. BRADLEY: That's a tougher one. 11 THE COURT: He's under oath here, 12 isn't he? 13 MS. BRADLEY: Yes, Your Honor, he is 14 under oath. 15 It seems to us, and the parties have 16 tried to make a practice of not -- 17 THE COURT: Is this some rule besides 18 -- is this a rule that's stated in the law 19 somewhere that all answers must only be to a 20 question, or are you just saying this is an 21 agreement between you guys? 22 MR. TUGGY: Well, for example, when we 23 were arguing evidence for the openings, there 24 was one question that was asked that was 25 basically to the effect whether in your 8610 1 capacity as a reseller, a particular finding of 2 fact was correct, and then there was an answer 3 given that didn't refer to findings of fact, it 4 just said, you know, based upon my role as a 5 reseller after the findings of fact were 6 entered, here's the answer. 7 But that was all excluded because of 8 an infirmity in the question. 9 So we haven't really faced since then 10 this issue whether answers can be taken away 11 from the question and then offered without the 12 question's context. 13 THE COURT: But my question is, from 14 strictly a legal point of view, are you saying 15 that this is the law or this is just the way 16 the parties have been acting? No answer can be 17 put into a record unless it's done subject to a 18 question? Is that -- is that the law? 19 MS. BRADLEY: The issue hadn't really 20 presented itself until we were before you here 21 today and you suggested that as a potential 22 resolution, and so to be honest, we haven't -- 23 THE COURT: Mr. Tuggy? 24 MR. TUGGY: The only way this can come 25 in is under the prior testimony exception. 8611 1 I want to make sure clear that it 2 can't be an admission because he didn't make 3 the testimony in the scope and course of his 4 employment. In fact, he made it while he was 5 working for a company that was suing Microsoft. 6 THE COURT: He wasn't employed at the 7 time this happened? 8 MR. TUGGY: At the time of the 9 deposition he was employed by RealNetworks. So 10 his statement at the time of his deposition -- 11 he's hostile -- is certainly not an admission 12 of Microsoft. 13 So the question is under the prior 14 testimony exception, can testimony be admitted 15 outside of the question-and-answer context, and 16 I have to confess that I have not researched 17 that. 18 It doesn't make sense to me that it 19 would -- for example, affidavits and 20 declarations have never been admitted under the 21 prior testimony exception where a person can 22 just make statements under -- 23 THE COURT: But that's different. You 24 don't have the right of cross-examination. 25 MR. TUGGY: I'd agree with that. 8612 1 THE COURT: Here you do. Interesting 2 issue. 3 Anything else on this one? 4 MR. GRALEWSKI: I would just say, Your 5 Honor, that on this last point, we have in 6 several other witnesses taken portions of 7 questions and answers out and not faced this 8 one-way interpretation of our practice. 9 I would submit that to the extent Your 10 Honor is inclined to take those portions out 11 that I had suggested, what's left, starting at 12 the there were on 95, 1 and 2, is directly 13 responsive to the question that begins at line 14 15 on page 94. 15 So it's not a statement in isolation, 16 if you will. It's Mr. Barrett responding to a 17 portion of the question that starts at line 15. 18 THE COURT: Anything else? 19 MR. GRALEWSKI: No, Your Honor. 20 MS. BRADLEY: No, Your Honor. 21 THE COURT: Appeal is denied. 1075, 22 4380 denied. Testimony is denied. 23 Next. 24 MR. GRALEWSKI: Last one, Your Honor, 25 is PX 479 and testimony about it at 117, 24, to 8613 1 118, 22, and 119, 14, through 121, 06. 2 THE COURT: Okay. 3 MR. GRALEWSKI: If Your Honor has 4 Plaintiffs' Exhibit 479. 5 THE COURT: I've got it. 6 MR. GRALEWSKI: There is an E-mail 7 right in the center of the first page, again 8 from David Cole to -- 9 THE COURT: Phil Barrett. 10 MR. GRALEWSKI: It's I believe the 11 E-mail at issue, Your Honor. 12 THE COURT: You're right. I'm sorry. 13 Look at the one above it. Yeah, I apologize. 14 MR. GRALEWSKI: From David Cole to 15 Brad Silverberg, Phil Barrett, and Richard 16 Abel, I believe, and the subject is DRI and 17 VXD. 18 I think that it's important to point 19 out what happened at the Special Master process 20 here. 21 The special -- the objection was 22 improper opinion. 23 It's a short E-mail, so let's look at 24 what's going on here. 25 Mr. Cole says, denying DRI the VXD 8614 1 smells of an antitrust lawsuit. You are not 2 supposed to use your control of one market, in 3 this case Windows, to influence another market, 4 in this case DOS, or something like that. 5 The Special Master ruled that the 6 improper opinion objection was sustained as to 7 Mr. Cole's lay opinion, but made no ruling 8 regarding any use for any other purpose. 9 The purpose that -- and so Plaintiffs 10 here are not appealing the Special Master's 11 ruling on the improper opinion. 12 The Plaintiffs are proffering this 13 testimony for a non -- for a not-for-truth 14 purpose, and that not-for-truth purpose, Your 15 Honor, is to show that Microsoft was concerned 16 and aware that its actions had potential 17 antitrust implications. 18 And given this awareness, the document 19 goes to the issue of Microsoft's willfulness as 20 it proceeded in ways in which it competed 21 against DRI. 22 This testimony will not be offered to 23 take away the authority of the jury to decide 24 whether or not Microsoft violated any antitrust 25 laws. 8615 1 And, in fact, Mr. Cole in his E-mail 2 equivocates on that point and doesn't come to 3 any firm conclusions in that regard, 4 Thank you, Your Honor. 5 THE COURT: Ms. Bradley? 6 MS. BRADLEY: Your Honor, again the 7 fact that Plaintiffs claim to be offering this 8 legal opinion for some purpose other than its 9 truth doesn't cure the fact that this is rank 10 legal opinion that's getting shown to the jury. 11 In fact, the reasons, the policy 12 reasons for excluding legal opinion have very 13 little to do with whether the legal opinion 14 being offered is true or not. 15 As you'll recall, we've spoken about 16 this a number of times before, and the concern 17 with legal opinion is that it usurps the 18 Court's role as the law giver and the jury's 19 role as the party that decides -- that applies 20 the law -- the facts to the -- the law to the 21 facts and determines whether there's liability. 22 Here, David Cole, who is not a lawyer, 23 says um, denying DRI the VXD smells of an 24 antitrust lawsuit. You are not supposed to use 25 your control in one market, in this case 8616 1 Windows, to influence another market, in this 2 case DOS, urr, something like that. 3 THE COURT: What about just the first 4 sentence? 5 MS. BRADLEY: Denying DRI of the VXD 6 smells of an antitrust lawsuit? 7 THE COURT: Yes. 8 MS. BRADLEY: The trouble is, Your 9 Honor, that expressing concern about whether 10 this is an antitrust violation is not within 11 David Cole's purview, and in fact, David Cole 12 is wrong on the law. 13 In fact, quite wrong on the law. 14 If I may, I'd like to hand up an 15 opinion by Judge Jackson in United States 16 versus Microsoft, and I've tabbed the portion 17 that's relevant to us here. 18 And if you'll turn to it, I've also 19 highlighted the page after the tab. 20 This was an opinion by Judge Jackson 21 on a motion for summary judgment by Microsoft 22 in the state's case against Microsoft. 23 And Microsoft moved for summary 24 judgment on the state's monopoly leveraging 25 theory, which is essentially what David Cole is 8617 1 talking about here, and the Court found that -- 2 it granted Microsoft's motion for summary 3 judgment and found that a firm violates Section 4 2 only when it actually monopolizes or 5 dangerously threatens to do so. 6 I will say that after Judge Jackson 7 handed down this opinion on monopoly 8 leveraging, the states dropped their claim that 9 Microsoft -- their monopoly leveraging claim 10 with respect to Microsoft Office, which is 11 something -- and here David Cole expresses 12 concerns that that very -- that very activity 13 that Judge Jackson had found to be lawful, 14 Microsoft using its monopoly in one market just 15 to gain an advantage in another market without 16 a dangerous probability of obtaining a monopoly 17 in that other market is not illegal and is, in 18 fact, lawful. 19 So David Cole's opinion here is 20 particularly -- causes particular concern 21 because it's a wrong statement of the law, and 22 to put -- to put that before the jury for any 23 purpose, a for-truth purpose or a not-for-truth 24 purpose, it's just far too dangerous, and it's 25 really unduly prejudicial if not an improper 8618 1 opinion. 2 THE COURT: What about the first 3 sentence? 4 MS. BRADLEY: The first sentence alone 5 that Microsoft's actions might violate the 6 antitrust laws -- 7 THE COURT: No, it doesn't say that. 8 MS. BRADLEY: Smells of an antitrust 9 lawsuit. 10 THE COURT: Lawsuit, that's different 11 from violation. 12 MS. BRADLEY: Well -- 13 THE COURT: If I was to tell you that 14 if I throw a rock at my neighbor's window I 15 could get sued, it doesn't take a lawyer to 16 tell me that, does it? 17 MS. BRADLEY: It doesn't, but that's 18 also because that's plainly illegal, and the 19 conduct that Mr. Cole is speaking about here 20 is, in fact, not illegal. 21 And so to suggest as much, to suggest 22 that this would open Microsoft up to a lawsuit 23 for these actions is -- 24 THE COURT: Well, lawsuit doesn't mean 25 you're going to win or lose. 8619 1 MS. BRADLEY: The suggestion before 2 the jury -- and the jury would have to take 3 away from that the implication that there may 4 be some merit to a lawsuit like that, and that 5 -- that just -- that's legal opinion and it's 6 wrong. 7 THE COURT: Let's take the illegal 8 part out. Let's say my lawn mower hits a rock 9 and it throws a rock through the neighbor's 10 window, and I say to someone, boy, I might get 11 sued. 12 MS. BRADLEY: Well, Your Honor, that 13 seems like a closer call to me. 14 Your opinion as an esteemed Judge in 15 the Iowa state courts -- 16 THE COURT: What's Cole's position? 17 MS. BRADLEY: David Cole is not a 18 lawyer. 19 THE COURT: What's his job? 20 MS. BRADLEY: He's an executive at 21 Microsoft. 22 THE COURT: What's he in charge of? 23 What's his background? Has he been involved in 24 lawsuits? Has he had to testify in antitrust 25 cases? Has he been deposed? Has he talked to 8620 1 his lawyers about antitrust cases? 2 MS. BRADLEY: Your Honor, David Cole, 3 it seems clear from the following E-mails that 4 he does engage in discussion with legal at 5 Microsoft on various issues, and this may be 6 one of them. 7 But at least as to this issue, he 8 hasn't yet spoken to the lawyers, or it doesn't 9 appear that he has, because Brad Silverberg 10 asks the next day, has someone asked legal yet? 11 Please get an opinion from Bill N., Bill 12 Neukom. He is handling other DRI-related 13 issues. 14 So, you know, whether he's asked a 15 lawyer or not about this, if he did, he got the 16 wrong answer. 17 THE COURT: So I can fully expect that 18 I'm not going to have this problem with any of 19 your witnesses, am I? 20 MS. BRADLEY: Improper legal opinion 21 problem? 22 THE COURT: None of your witnesses are 23 going to offer improper opinion, are they? 24 MS. BRADLEY: We don't plan to. 25 THE COURT: So if I sustain all these, 8621 1 if I hold this up here and bring it and show it 2 to you the next time you come in, you're not 3 going to even argue it, are you? 4 MS. BRADLEY: Your Honor, we really do 5 hope to take to heart all of your rulings and 6 work these issues out with Plaintiffs going 7 forward. 8 THE COURT: Sure. 9 MS. BRADLEY: You don't believe us? 10 THE COURT: Well, Ms. Bradley, my 11 experience has been that I've ruled on the same 12 objections from both sides over and over and 13 over again. That's been my experience. 14 MS. BRADLEY: Your Honor, I will tell 15 you that we've tried our darndest to minimize 16 the issues that we bring before you, and we'll 17 continue. 18 THE COURT: I'm not blaming you. I'm 19 just saying both sides. I rule on the same 20 thing every day it seems like. 21 MS. BRADLEY: It does seem like deja 22 vu on this sometimes. 23 THE COURT: Anything else on this? 24 MR. GRALEWSKI: Yes, Your Honor. 25 It can't be the law and it can't be 8622 1 the way this trial proceeds for a Microsoft 2 executive to opine or speculate or suggest, 3 hey, we might be violating the law. 4 What if there's a situation where 5 Mr. Cole says something like this: We're not 6 supposed to do X. 7 Whether you legally are entitled to do 8 do it or not is irrelevant. 9 And Mr. Silverberg says, damn the 10 torpedoes, we're doing it anyway. I don't care 11 what the lawyers say. 12 Does that get excluded? We would 13 submit that that clearly falls on the side of 14 the line of Microsoft's willfulness in acting 15 against its competitors. 16 This situation is similar. You have a 17 situation of Mr. Cole suggesting that you're 18 not supposed to do something. 19 Now, whether that is a -- an accurate 20 statement of the law or not, it doesn't matter. 21 It explains Microsoft's willfulness as they 22 proceed to act in this manner, and that's why 23 we're offering the testimony; not to -- not for 24 the jury to -- not to tell the jury whether or 25 not you're supposed to leverage or not. 8623 1 We're offering the testimony to show 2 that Microsoft was aware of these issues and 3 elected to proceed in the manner that they did. 4 THE COURT: Okay. Anything else? 5 MS. BRADLEY: Your Honor, Plaintiffs' 6 hypothetical is one thing, but here 7 Mr. Silverberg doesn't say damn the torpedoes. 8 Mr. Silverberg says, gee, let's ask the lawyers 9 if that's legal or not. 10 We don't know the rest of this because 11 it's privileged, but one could expect that the 12 lawyers got back to them and said in fact this 13 is not illegal, and Judge Jackson said as much. 14 That doesn't go to willfulness. 15 MR. GRALEWSKI: So if I may, Your 16 Honor, believing something -- getting advice 17 from a lawyer that something is not illegal and 18 electing to proceed to do it anyway, walking a 19 fine line still goes to the issue of 20 willfulness. It's relevant testimony in that 21 issue and it should be admitted for those 22 reasons. 23 THE COURT: Anything else? 24 MR. GRALEWSKI: No, Your Honor. 25 MS. BRADLEY: Nothing further. 8624 1 THE COURT: Ms. Bradley. 2 MS. BRADLEY: No, Your Honor. 3 THE COURT: And I wasn't picking on 4 you, Ms. Bradley. 5 MS. BRADLEY: Felt like it. 6 THE COURT: I apologize. I just get 7 frustrated sometimes. 8 MS. BRADLEY: I'm used to it. 9 THE COURT: If I picked on you, I'm 10 sorry. 11 Special Master's ruling is sustained. 12 Anything else? 13 MR. GRALEWSKI: No, Your Honor, not on 14 Mr. Barrett. Thank you. 15 THE COURT: What do we proceed on 16 next? 17 MR. CASHMAN: Your Honor, just 18 briefly. 19 I'm still looking for any argument on 20 that Exhibit 5166, but since Mr. Tuggy is more 21 knowledgeable about these issues, I would just 22 bring this to the Court's attention now. 23 What I've given you on the -- are 24 three pieces of correspondence between the 25 parties, and the first of what I've given you 8625 1 is a December 20, 2006 E-mail from Dan 2 Silverman. He's counsel for Microsoft. 3 You may recall Mr. Silverman having 4 been in before the Court on a couple of 5 occasions. 6 And significantly the chart that he 7 forwarded to Ms. Davis, turning to the second 8 page, 5166, exhibit will not be admitted but 9 Plaintiffs may display the portions of this 10 exhibit -- this exhibit referenced in the 11 testimony. 12 So that was the genesis of 5166 being 13 displayed. It was explicitly agreed upon by 14 Microsoft. Mr. Silverman in particular. 15 The subsequent correspondence that I 16 enclosed for the Court's reference, a December 17 21 E-mail then from Ms. Davis to Mr. Silverman 18 in which she attaches the plaintiff exhibit 19 report and confirms that Plaintiffs will seek 20 to admit all the exhibits except for PX 5166, 21 and you'll also see attached to that is the -- 22 what the parties called their final 23 designations, the play list, and you can see on 24 page 1 and then several times throughout that 25 play list that was provided to Microsoft that 8626 1 displaying 5166 was disclosed to Microsoft. 2 And then again the last exhibit, which 3 is from Ms. Davis to Mr. Silverman dated 4 January 3, 2007, with the Chestnut final, 5 again, the final designations which were 6 conveyed to Microsoft indicate that Plaintiffs 7 intended to, as agreed by Microsoft, display 8 5166, but we're not going to seek its 9 admission. 10 So I will -- Plaintiffs will continue 11 to see if we can find any discussion on the 12 record with the Court about 5166, but I think 13 it's clear that Microsoft explicitly agreed to 14 having it displayed. 15 THE COURT: What page is that comment 16 in the Chestnut -- 17 MR. CASHMAN: Pardon me? 18 THE COURT: At what page of the 19 Chestnut deposition does 5166 come into play, 20 do you know? 21 MR. CASHMAN: I think that is -- 22 THE COURT: Pretty close to the 23 beginning, isn't it? 24 MR. CASHMAN: It's early, and then I 25 think it comes up again late, Your Honor. 8627 1 That's why I'm -- 2 THE COURT: 43, 03, does that sound 3 right? 4 MR. CASHMAN: It comes up first at the 5 -- if you look at the -- the first place it 6 comes up is 43, 02. 7 THE COURT: Got it. 8 MR. CASHMAN: And then it's displayed 9 during the next designation 45, 06, to 45, 10. 10 THE COURT: It's Exhibit 900 in here, 11 right? 12 MR. CASHMAN: Exhibit -- I don't have 13 that information readily handy, but I think 14 that's correct. 15 THE COURT: Article published in PC 16 Magazine September 25, 1990, by Ray Duncan? 17 Do you have the exhibit? 18 MR. CASHMAN: I may have the exhibit 19 here, yes, Your Honor. 20 THE COURT: That would confirm it. 21 MR. CASHMAN: I may not have it 22 because we weren't planning to have it 23 admitted. 24 THE COURT: Do you have it, Ms. 25 Bradley, or, Mr. Tuggy? 8628 1 MR. TUGGY: We don't have the exhibit. 2 MR. CASHMAN: No, I don't have a hard 3 copy of that one because I have only the ones 4 that we were going to have -- 5 THE COURT: Can you bring it tomorrow? 6 MR. CASHMAN: I will, Your Honor. 7 MR. TUGGY: This evening I'll be in 8 conversation with Mr. Silverman to determine 9 whether anything occurred after January 3. 10 If he has agreed to this, sobeit. It 11 would be contrary to our general practice, but 12 that doesn't mean it didn't occur. So we'll 13 let you know. 14 THE COURT: All right. Very well. 15 Due to the lateness of the hour, we'll 16 stop now. 17 MR. CASHMAN: Thank you, Your Honor. 18 (Proceedings adjourned at 4:20 p.m.) 19 20 21 22 23 24 25 8629 1 CERTIFICATE TO TRANSCRIPT 2 The undersigned, Official Court 3 Reporters in and for the Fifth Judicial 4 District of Iowa, which embraces the County of 5 Polk, hereby certifies: 6 That she acted as such reporter in the 7 above-entitled cause in the District Court of 8 Iowa, for Polk County, before the Judge stated 9 in the title page attached to this transcript, 10 and took down in shorthand the proceedings had 11 at said time and place. 12 That the foregoing pages of typed 13 written matter is a full, true and complete 14 transcript of said shorthand notes so taken by 15 her in said cause, and that said transcript 16 contains all of the proceedings had at the 17 times therein shown. 18 Dated at Des Moines, Iowa, this 16th 19 day of January, 2007. 20 21 22 ______________________________ Certified Shorthand Reporter(s) 23 24 25