5082 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 XIX 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 8:30 a.m., 14 December 15, 2006, in Room 302 of the Polk 15 County 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 5083 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 RICHARD M. HAGSTROM 7 MICHAEL R. CASHMAN 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 KENT WILLIAMS 16 Attorney at Law Williams Law Firm 17 1632 Homestead Trail Long Lake, MN 55356 18 (612) 940-4452 19 20 21 22 23 24 25 5084 1 Defendant by: DAVID B. TULCHIN 2 STEVEN L. HOLLEY SHARON L. NELLES 3 JOSEPH E. NEUHAUS JEFFREY C. CHAPMAN 4 Attorneys at Law Sullivan & Cromwell, LLP 5 125 Broad Street New York, NY 10004-2498 6 (212) 558-3749 7 ROBERT A. ROSENFELD KIT A. PIERSON 8 Attorneys at Law Heller Ehrman, LLP 9 333 Bush Street San Francisco, CA 94104 10 (415) 772-6000 11 STEPHEN A. TUGGY HEIDI B. BRADLEY 12 Attorneys at Law Heller Ehrman, LLP 13 333 South Hope Street Suite 3900 14 Los Angeles, CA 90071-3043 (213) 689-0200 15 BRENT B. GREEN 16 Attorney at Law Duncan, Green, Brown & 17 Langeness, PC Suite 380 18 400 Locust Street Des Moines, IA 50309 19 (515) 288-6440 20 21 22 23 24 25 5085 1 RICHARD J. WALLIS STEVEN J. AESCHBACHER 2 Attorneys at Law Microsoft Corporation 3 One Microsoft Way Redmond, CA 98052 4 (425) 882-8080 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5086 1 (The following record was made out of 2 the presence of the jury at 8:28 a.m.) 3 MR. HOLLEY: Your Honor, while we are 4 waiting for the Jury, I don't want to argue it 5 at all, but can I take this opportunity to hand 6 up to the Court a memorandum that we prepared 7 overnight on the admissibility of evidence 8 concerning the value of Microsoft's products? 9 And we can take this up obviously at 10 some other time. 11 THE COURT: Great. Thank you very 12 much. 13 MS. CONLIN: That was really good, 14 Judge. 15 MR. GREEN: A little sarcasm. 16 THE COURT: I sincerely meant it. 17 MS. CONLIN: It sounded like it. 18 MR. TULCHIN: I thought you did. 19 MR. HAGSTROM: Do you want a gift from 20 us too? 21 THE COURT: Sure. You can bring it in 22 at any time. Other than sleeping this weekend, 23 I have no other plans. 24 MS. CONLIN: Judge, while we are 25 waiting also, we have pending before the Court 5087 1 Plaintiffs' motion to compel production of 2 withheld documents Requests 89 and 93, which we 3 filed on 10-27. 4 It is completely ready to argue and I 5 wonder if we could argue it like Monday after 6 court. 7 MR. HOLLEY: Yes, Your Honor. 8 MR. TULCHIN: Sure. 9 THE COURT: Okay. Great. We'll do it 10 then. 11 No. I appreciate this. And, of 12 course, if you want to, Mr. Hagstrom and 13 Ms. Conlin -- I brought this issue up 14 yesterday, if you want to present something, 15 that's fine. I'd like to look at it. 16 MR. HAGSTROM: You can be assured -- 17 THE COURT: So I wasn't being 18 sarcastic. 19 Did she tell you about this juror that 20 is not feeling well? 21 MS. CONLIN: Yes. 22 MR. TULCHIN: Yes. 23 (The following record was made in the 24 presence of the jury at 8:31 a.m.) 25 THE CLERK: All rise. 5088 1 THE COURT: Everyone else may be 2 seated. Thank you. 3 Good morning, members of the jury. 4 You may proceed. 5 MR. TULCHIN: Shall I proceed, Your 6 Honor? 7 THE COURT: Sure. 8 MR. TULCHIN: Good morning, ladies and 9 gentlemen. 10 We are on the home stretch, at least 11 the home stretch of the Defendant's opening 12 statement, but at least we are making some 13 progress. 14 And I want to tell you that, of 15 course, the Plaintiffs' opening was very 16 lengthy. It's possible that I may not have 17 covered every point or every allegation that 18 the Plaintiffs made in their opening statement. 19 Opening statements are not evidence. 20 If I missed something, and I may have, 21 we will get to it in the evidence. That is, 22 Microsoft will be submitting evidence on every 23 issue in the case. 24 And, of course, you've heard me say 25 this before. It will be quite a while before 5089 1 Microsoft gets to start its evidence. And we 2 ask you to be patient before making any 3 conclusions about any of the issues. 4 And in connection with the evidence, 5 you know already from what you've seen, there 6 will be some aggressive sounding e-mails that 7 you will see authored by people at Microsoft. 8 As both sides have told you, there's 9 nothing in and of itself wrong or illegal or 10 anticompetitive about being aggressive in 11 business. 12 And even e-mails that are rude or 13 impolite establish nothing in and of themselves 14 when it comes to the question of whether 15 conduct was legitimate business conduct, even 16 if aggressive, or anticompetitive conduct in 17 the manner in which Judge Rosenberg has 18 instructed you on the law. 19 You will also hear and see, perhaps 20 beginning today, a deposition of Bill Gates 21 that was taken in 1998 in the case brought by 22 the government. 23 The Plaintiffs, I believe, will play 24 that deposition just as soon as my opening 25 statement has concluded. 5090 1 We understand that the deposition will 2 take more than ten hours to play, or at least 3 something along those lines. 4 And the deposition is quite 5 contentious. The lawyer taking the deposition 6 and asking Mr. Gates questions was indeed 7 himself aggressive. And we think you'll see 8 that that lawyer was intent on getting under 9 Mr. Gates' skin. 10 He succeeded in that. And there are 11 times when Mr. Gates shows his annoyance. 12 In listening to the deposition, 13 Microsoft asks that you focus not on this 14 interaction between lawyer and witness, but on 15 the substance of Mr. Gates' testimony. 16 And, if you do, Microsoft believes 17 you'll see that Mr. Gates' testimony is 18 consistent with what I have told you 19 Microsoft's evidence at the trial will be. 20 And speaking of depositions in 1998, 21 there will be others, perhaps quite a number of 22 other depositions, taken eight years ago or 23 more. 24 And many of those depositions were 25 taken of witnesses who worked at companies that 5091 1 were competitors of Microsoft. 2 In that connection, we think that the 3 Jury should be asking itself is this testimony 4 from a competitor upset, maybe even bitter at 5 being unsuccessful in its competition with 6 Microsoft. Perhaps testimony from a witness 7 complaining about Microsoft in view of the 8 outcome of hard-fought competition. 9 We would ask you as well, when looking 10 at depositions, including those from 1998, or 11 even in some cases earlier, to consider whether 12 the conduct, the alleged conduct that the 13 witness is referring to explains Microsoft's 14 success in the market or whether other factors, 15 such as those that I've told you the evidence 16 will show, are the explanations for Microsoft's 17 high market share in the three markets at issue 18 in this case. 19 And I would ask you as well to be 20 asking yourself during these depositions 21 whether the conduct that the witness is 22 referring to and whether the allegations that 23 you may hear even pertain to the three markets 24 in issue or whether they pertain to other 25 markets in which the two companies competed. 5092 1 And I want to show you now a slide of 2 things that Microsoft asks you to remember. 3 These are points that you've heard from both 4 sides during the trial. 5 This goes back to something that we 6 talked about early this week. 7 The class period in this case, you 8 know the dates, May 18th, 1994, through June 9 30th, 2006. And that is the period in which 10 the Plaintiffs say they are entitled to damages 11 for purchases of the software at issue in this 12 case. 13 Secondly, as you've heard several 14 times, the conduct of Microsoft at issue in the 15 government case was from July 15, 1995, through 16 June 24, 1999. 17 Thirdly, the product markets that the 18 Plaintiffs allege here are first, 19 Intel-compatible PC operating systems; 20 secondly, word processing, word processing 21 software, of course; and, thirdly, spreadsheet 22 software. 23 And the last point on this first slide 24 today is that, as the Court also instructed 25 you, and you've been reminded several times, 5093 1 the conclusions of law and the findings of fact 2 in your notebooks from the government case 3 apply only to the first market, that is the 4 market for Intel-compatible PC operating system 5 software. 6 MR. HAGSTROM: Your Honor, I would 7 object that the last sentence of Instruction 8 Number 4 states that the facts are for all 9 purposes in this case. 10 THE COURT: The instruction speaks for 11 itself. 12 MR. TULCHIN: I'd be happy to go back 13 to that, Your Honor, if you want. 14 Next, what I'd like to remind you of 15 is a little bit of the history of Microsoft. 16 We saw a time line earlier that had 17 almost everything that you're looking at now. 18 What we've added here is the period of the 19 government case, and also this green bar, which 20 is the class period, the same dates that we 21 were talking about just a moment ago. 22 And I'm not going to go back through 23 all of it in any detail, but I do want to 24 remind you that Microsoft will present evidence 25 in this case -- it may not come in the next 5094 1 week or two or in the next month or two, but 2 Microsoft will present evidence in this case 3 about the very beginnings of the company from 4 the time that Bill Gates and Paul Allen 5 developed the basic programming language. 6 You will remember Mr. Gates looked at 7 that magazine article at the end of 1974 about 8 the Altair computer. 9 Mr. Gates and Mr. Allen formalized 10 their partnership in '77. 11 In 1980 Microsoft knocked on Microsoft 12 -- sorry -- IBM knocked on Microsoft's door, 13 and the two companies entered into an agreement 14 for Microsoft to develop software, operating 15 system software for the very first IBM PC. 16 The first IBM PC came to market in 17 1981. 18 And Microsoft's MS-DOS was not only on 19 the IBM machines, but Microsoft succeeded in 20 licensing MS-DOS to a number of other OEMs, 21 companies that made IBM clone PCs. 22 You'll also remember the story of 23 Microsoft developing software that had a 24 graphical user interface. 25 Bill Gates first saw what Apple was 5095 1 doing when Apple showed Mr. Gates their first 2 GUI, and the story goes on and on. 3 You know about the release of Windows 4 3.0. You know what's happened since. We've 5 talked about the quality and prices of 6 Microsoft's products. 7 And in this 30-year, slightly more 8 than 30-year period, I draw your attention to 9 the fact that the conduct in the government 10 case pertained to just that period indicated on 11 that time line. 12 And as we go down the home stretch in 13 my opening statement, I want to remind you of a 14 number of points on which the parties agree. 15 And I think these points are important 16 because there will be lots of things that the 17 Plaintiffs and Microsoft disagree about. 18 That's what the trial is for. 19 But the framework that you can accept 20 or the things on which we do agree. Let's look 21 at the first one. 22 It isn't illegal to be successful. We 23 applaud that. It isn't illegal to grow your 24 company from little to huge. That's the 25 American dream. 5096 1 And in connection with what the 2 Plaintiffs have said, the Court's Instruction 3 Number 7 is right on point. 4 The mere possession of monopoly power, 5 if lawfully acquired and maintained, does not 6 violate the antitrust laws. 7 You heard me say it yesterday. 8 Professor Noll, the Plaintiffs' expert from 9 California, has said that he accepts that 10 Microsoft's high market share in 1986 and 1987 11 was lawfully acquired. 12 Microsoft had a monopoly in operating 13 systems that was lawfully acquired. 14 And you know, of course, that it is 15 the Plaintiffs' burden to prove that they were 16 injured as a result of some anticompetitive 17 conduct. That's Instruction 14, among other 18 places. 19 So let's look next at another point on 20 which the parties agree. A point that is 21 important, we believe, in evaluating whether 22 conduct is anticompetitive or pro-competitive. 23 This comes from way back on December 24 1st, exactly two weeks ago now. 25 The rules say that companies should 5097 1 compete as vigorously as they can, do 2 everything they can to win, make the best, the 3 most innovative, the most creative products, 4 get the best sales force, and try to win on the 5 merits. 6 You know that our evidence will be 7 that Microsoft has done each of those things. 8 And its success is attributable to what the 9 Plaintiffs themselves say a company can and 10 should do, compete as vigorously as you can. 11 Instruction Number 8 from the Court is 12 quite on point with respect to this same 13 agreement. 14 You should distinguish the acquisition 15 or maintenance of monopoly power through 16 anticompetitive acts from the acquisition or 17 maintenance of monopoly power by supplying 18 better products or services, possessing 19 superior business skills, or because of luck, 20 which is not unlawful. 21 When it comes to possessing superior 22 business skills, I just remind you of the 23 importance of Bill Gates' recognition very 24 early on that computing using a character-based 25 interface was not going to last. That the 5098 1 future of computing was in the graphical world. 2 And Mr. Gates made a bet, a big bet -- 3 one might say he bet the company. He bet the 4 future of Microsoft. It was a big bet with a 5 high risk. 6 Many people in the industry thought 7 that those who used computers liked the 8 character-based system and would not want to 9 change. 10 And as you know, many other companies, 11 including important companies, that competed 12 with Microsoft did not believe in the graphical 13 user interface as the future. 14 They made a different bet. Superior 15 business skills. High risk for Microsoft. 16 High risk to make the bet that Mr. Gates made. 17 And as you know, in business, and 18 sometimes elsewhere in life, when you make a 19 bet that has a high risk with it, the reward, 20 if your bet is successful, can be high as well. 21 And then let me point you to 22 Instruction -- also Instruction Number 8. 23 Instruction Number 8 is at pages 10 to 11 of 24 the Court's instructions. 25 This paragraph begins, the portion 5099 1 we've excerpted, it's the whole last paragraph, 2 it's from pages 10 to 11, and we put on the 3 screen the entire paragraph. 4 And it's long, but I think it's very 5 important as you listen to and see and hear the 6 evidence, this paragraph we think is important 7 for you. 8 The difference between anticompetitive 9 conduct and conduct that has a legitimate 10 business purpose can be difficult to determine. 11 This is because all companies have a desire to 12 increase their profits and increase their 13 market share. 14 These goals are an essential part of a 15 competitive marketplace. The antitrust laws do 16 not make these goals, or the achievement of 17 these goals, unlawful as long as a company does 18 not use anticompetitive means to achieve these 19 goals. 20 In determining whether Microsoft's 21 conduct was anticompetitive or whether it was 22 legitimate business conduct, you should 23 determine whether the conduct is consistent 24 with competition on the merits, whether the 25 conduct provides benefits to consumers, and 5100 1 whether the conduct would make business sense 2 apart from any effect it has on excluding or 3 harming competitors. 4 You've heard me talk for two or three 5 days about what we think our evidence will be, 6 and you've heard me tell you that Microsoft's 7 evidence will be that its conduct was 8 legitimate business conduct. 9 Now we will come to the conduct, and 10 you've heard me talk about it, that you must 11 accept was anticompetitive in the government 12 case. 13 But, remember, the Plaintiffs and 14 Microsoft agree, the Plaintiffs and Microsoft 15 agree, that companies should compete as 16 vigorously as they can and do everything they 17 can to win. 18 Next, still on the subject of 19 agreements between the two sides in this case. 20 Here's what Plaintiffs said, again, on 21 December 1st. 22 I want to stop for a moment and make 23 sure that I tell you as clearly as I can that 24 Iowa class members are not here to criticize 25 Microsoft for the popularity of its Windows 5101 1 GUI, the graphical user interface. 2 We think the evidence will be that 3 given the fact that there's no criticism of the 4 popularity of its Windows GUI, and given the 5 other evidence in this case, that you will 6 conclude ultimately that Microsoft's market 7 position results from this fact, plus the high 8 quality and low price of its software. 9 And then next. The Plaintiffs said, 10 if Microsoft had simply sold a good, quality 11 graphical user interface product at a 12 reasonable price, we'd be here applauding -- 13 well, actually, we wouldn't even be here, but 14 we would be applauding Microsoft rather than 15 suing it. 16 We think you will see that the 17 evidence is that an awful lot of people have 18 applauded. They've applauded in their conduct, 19 by their conduct. They've applauded by 20 recognizing the high quality and the good value 21 of Microsoft software. They've applauded by, 22 in the millions, choosing Microsoft software 23 when other choices have always been available 24 to them. 25 And I remind you what Professor Noll, 5102 1 the Plaintiffs' expert have said, there have 2 always been choices in each of these markets. 3 And then Plaintiffs' counsel, still 4 talking about GUIs, said, showing you a 5 picture, here is the first Apple GUI, GUI with 6 the icons. It was revolutionary. Yes, we 7 agree, that's what Mr. Gates perceived. 8 You remember he wrote to Mr. Sculley 9 in 1985 urging that Apple license its 10 technology to other companies so that the 11 Macintosh could become a standard. 12 Apple chose not to do that. Apple's 13 business decision was to keep its technology 14 proprietary, closed to itself, and it never 15 licensed its operating system to any other 16 company. 17 But Mr. Gates saw the GUI. He saw it 18 was revolutionary, and he made the business 19 decisions that we talked about at some length. 20 And, yes -- let's go to the next one. 21 Plaintiffs' counsel also said -- now 22 we are to May '90, July '90. This is -- during 23 this time DR-DOS 5.0 is released, and this is 24 when the real competition begins. 25 And, remember, Plaintiffs in their 5103 1 opening spent a lot of time, a lot of time, 2 talking to you about competition between 3 Microsoft in the operating system business and 4 Digital Research, DRI. 5 And the Plaintiffs had lots of 6 allegations about why one company was 7 successful and one was not. 8 But just when the Plaintiffs say the 9 real competition begins, out comes Windows 3.0. 10 And you'll remember -- and Microsoft 11 was the first to tell you -- Windows 1.0 and 12 2.0 were not very successful. 13 Windows 3.0, after David Weiss came up 14 with this way of using the protected mode 15 interface in '88, Windows 3.0 comes out in May 16 '90, just when the real competition begins. 17 And even Professor Noll for the 18 Plaintiffs says that that product was a 19 revolutionary technological leap. 20 So talk about competition on the 21 merits. There it is. 22 And, then again, with respect to 23 Digital Research, the Plaintiffs said on 24 December 4th, Microsoft also says that DRI 25 recognized that it was history if it wasn't 5104 1 able to develop Cutlass or some other 2 Windows-like product. 3 And you'll see in the DRI documents 4 very strong language to that effect. 5 And indeed I showed you some of that 6 very strong language from a number of internal 7 Digital Research documents. 8 You'll remember it. Documents showing 9 that DRI itself recognized that it was history. 10 It could not continue to compete successfully 11 in the operating system business without a GUI. 12 And DRI did what competitors often do. 13 They tried hard. They tried like heck to come 14 up with a GUI. 15 They had Cutlass and Star Trek and 16 Gem. They worked on projects to try to come up 17 with a graphical interface that would compete 18 with Windows. 19 They saw what was coming. 20 You remember the memo in '91 where the 21 fellow at DRI says if we don't come up with 22 something in four years, four years, we're 23 toast. I'm paraphrasing. He didn't use the 24 word toast. 25 But he was right. He hit it right on 5105 1 the nose. 1995 was when Windows 95 came out. 2 And before we leave this one point, 3 just a quick reminder. 4 We saw three or four documents, they 5 will be in evidence in the trial, from 1991 and 6 into January of '92 showing that Digital 7 Research could not even answer telephone calls 8 from its customers. 9 Customer support calls coming in by 10 the thousands and reports that customers were 11 hanging up or being told we'll call you back in 12 three or four days. 13 And if you want to know about 14 competing on the merits in the marketplace, I 15 think we would all recognize that if you can't 16 answer the phone when a customer has a 17 question, your future is in question. 18 So, let's look at the next one. The 19 Plaintiffs also said, and with this we agree, 20 we are not saying that Microsoft has an 21 obligation to make its products compatible with 22 DR-DOS. 23 Microsoft did not have that 24 obligation. 25 DR-DOS, if there were 5106 1 incompatibilities, had the obligation to fix 2 them and to make a product that worked; that 3 worked with Windows running on top of it or 4 that worked with applications running on top of 5 it. 6 And I showed you over the last couple 7 of days a number of documents, internal 8 documents at Digital Research where the company 9 is acknowledging the technical problems that 10 they're having. 11 And you remember a report from an 12 independent lab that WordPerfect, at the time a 13 very important application, was not compatible 14 with DR-DOS. The two weren't running together. 15 They would break. 16 Let's go to another point at which the 17 parties agree -- on which the parties agree. 18 Intellectual property is just like any 19 other property. 20 Plaintiffs said that on December 7th. 21 We agree. Intellectual property, if it belongs 22 to Microsoft, trade secrets, copyrights, 23 patents, if it's Microsoft's property, 24 Microsoft has no obligation to give it away for 25 nothing to competitors so that a competitor 5107 1 like Lotus -- and you will remember 2 Mr. Mendelsohn asking for Microsoft property, I 3 need it, I want it, please give it to me, the 4 type of things that people do when negotiating 5 in business. 6 Microsoft had no obligation to give 7 Lotus, its competitor in the spreadsheet 8 business, its own technology, its own 9 intellectual property so that Lotus could beat 10 Microsoft over the head with it. 11 And then, of course, on the subject of 12 whether Microsoft had advantages, we will tell 13 you, yes, Microsoft had advantages. 14 Smart people writing great software, 15 working hard, very often well beyond the normal 16 work day. 17 And Microsoft had other advantages. 18 And I must say not the least of them is having 19 Bill Gates as the CEO. 20 But when it comes to the advantages 21 that the Plaintiffs say were somehow improper, 22 you know, Microsoft has an operating system and 23 it's writing applications, spreadsheets and 24 word processing software to run on its own 25 system. 5108 1 Is that an advantage? Well, maybe it 2 is. Is there anything wrong with it? We would 3 say no. 4 The Plaintiffs made allegations about 5 advantages they said were improper; that 6 Microsoft knows all about the operating system 7 and should have shared that information with 8 competitors. 9 But we think the evidence will show 10 you that the reason Microsoft's applications on 11 Windows were so successful is because Microsoft 12 made great software. 13 And what can you take from what 14 happened on the Macintosh? Microsoft had none 15 of those advantages. Microsoft competed, like 16 everyone else, including Apple, when it came to 17 writing applications like word processing 18 software, spreadsheet software, office suites 19 for the Macintosh. 20 Microsoft didn't have the source code 21 for the Mac operating system. Microsoft had no 22 internal secret information from Apple that it 23 shouldn't have had. Microsoft had none of 24 those advantages. 25 And how did Microsoft do on the 5109 1 Macintosh? 2 Well, remember we looked at this. The 3 evidence will be -- here's word processing -- 4 that Microsoft absolutely dominated the 5 competition, with no advantages, none, except 6 the legitimate advantages that I've told you 7 about, great software engineers working hard, 8 great products, good business decisions, all 9 the things that a company should do. 10 It's not illegal to be successful, to 11 grow your company. That's the American dream. 12 And on the Macintosh, over time -- 13 these are just three years, but you can look at 14 any year. 15 On the Macintosh, without these 16 advantages that the Plaintiffs say are improper 17 -- here's Microsoft's market share, almost 70 18 percent, over 70 percent, and by 1998 actually 19 getting close to 90 in word processing. 20 How about spreadsheets? Same thing. 21 It's actually even more dramatic. 22 Apple itself has a division called 23 Claris, C-l-a-r-i-s, and they're writing 24 applications to their own operating system, the 25 Mac OS. 5110 1 How do they do against Microsoft? 2 This is what customers want, the Microsoft 3 spreadsheet. 4 So when you're thinking about 5 causation, how is it that Microsoft became so 6 successful? Is it because of allegations of 7 anticompetitive conduct? Is it because of any 8 of this conduct that the Plaintiffs point to? 9 Is the conduct anticompetitive to begin with, 10 but, even if it is, does it explain Microsoft's 11 success? 12 We ask you to remember what Microsoft 13 did on the Macintosh. 14 And just a summary of what we think 15 the evidence will show. 16 Let's go back for a moment to the 17 operating system market. 18 I talked at some length to you about 19 lots of different evidence when it comes to 20 competition in operating systems. We talked 21 about DRI just a few moments ago. They never 22 developed a GUI that was released commercially. 23 IBM had OS/2. OS/2 was more expensive 24 and not as good. And you will remember when 25 the two companies were working together on OS/2 5111 1 and they had that blind evaluation, Ed 2 Lassettre from IBM, and Darrell Reuben of 3 Microsoft, and they looked at software code 4 that the two companies had written, but they 5 looked at it in a blind test. Neither knew 6 which code was written by which company. 7 And you remember that chart. IBM's 8 was fat and slow. Those are real insults when 9 spoken by a software engineer about source 10 code, fat and slow. 11 And Microsoft's was okay, okay plus, 12 or better. 13 And you remember those two bell 14 curves. And IBM's was all the way on the bad 15 side, and Microsoft's was all the way on the 16 plus side. 17 And, then, how would you explain this 18 other than by the fact that Microsoft's 19 software was better? 20 IBM itself, when it owned OS/2 in the 21 mid-'90s, competing hard against Microsoft, IBM 22 itself put on its PCs mostly the Windows 23 operating system. 24 I showed you this over the last two 25 days in those bar graphs. 5112 1 IBM sold in the mid-'90s millions of 2 PCs every year. And the PC company at 3 Microsoft -- sorry, at IBM -- my apologies. 4 Let me start again. 5 The PC company at IBM could not even 6 be convinced by the company as a whole, which 7 made OS/2, to put OS/2 on a majority of its 8 PCs. 9 Instead, what did they do? If they 10 wanted to sell PCs into the market, they had to 11 put on it the operating system that people 12 preferred. And that's why Windows, mostly 13 Windows even on IBM PCs. 14 And then let me give you a little bit 15 of a summary about the applications market. 16 And in the applications market, we 17 think the evidence will show that Microsoft 18 prevailed for all the same reasons we've talked 19 about. Superior software at low prices. 20 Lotus and WordPerfect missed the boat. 21 They decided they didn't want to write their 22 software to Windows. 23 And you remember we showed you 24 evidence that you'll see at trial from Steve 25 Crummey of Lotus, the worldwide VP of sales, or 5113 1 marketing, I forget which, and Pete Peterson, 2 the executive vice president of WordPerfect, 3 two very senior guys. 4 And you will remember both of them 5 said essentially the same thing. We didn't 6 write to Windows. We bet on other operating 7 systems, like OS/2. 8 Why? Because our companies did not 9 want to help Microsoft. 10 And you will remember Mr. Crummey 11 saying that Jim Manzi, the boss at Lotus, had a 12 case of Gates envy. He envied Bill Gates. 13 And those companies chose to go down 14 the wrong path. 15 So when Windows 3.0, that 16 revolutionary product, hit the market in May 17 '90 and when people in droves started adopting 18 Windows and the PC business is going way up. 19 People want Windows. People want the GUI. 20 These two companies were left behind. 21 And you also know that in the 22 applications market, Microsoft dropped its 23 prices steadily over the years. Even as market 24 share went up, the prices went down. 25 And just to go back one step. In 5114 1 operating systems, the price of Microsoft's 2 operating systems have always been very low. 3 And they stayed about flat throughout the 4 years. 5 But in applications, I showed you, I 6 believe it was yesterday, what the prices were 7 for the leading applications before Microsoft 8 became the market leader. 9 When Lotus was the market leader, 10 their prices for spreadsheets were, I think, 11 close to $300 in the late '80s. 12 And you know what happened when 13 Microsoft became the leader. Prices went down, 14 down, down. 15 And WordPerfect, same thing. Prices 16 in the 200s when WordPerfect was the leader in 17 the word processing market. 18 So prices coming down. 19 And you know that the Microsoft 20 products that have been released to the market 21 over time just get better and better. New 22 functionality added, new features. Things that 23 make these products, Microsoft believes, better 24 for consumers. 25 And I showed you a document or two 5115 1 which explained the lengths to which Microsoft 2 goes to try to make sure that their products 3 will be good for consumers. 4 Remember the kind of testing that's 5 done where someone comes into a lab and there's 6 a one-way mirror, and a Microsoft software 7 engineer watches the person use the software to 8 see whether or not 90 percent or more find it 9 easy to use? 10 And Microsoft is not commercializing 11 anything until it is satisfied that at least 90 12 percent of new users find it easy to use. 13 Exactly the sort of pro-competitive 14 conduct that explains success. Explains high 15 market share. 16 And Microsoft's R and D, of course, we 17 looked at the extent to which Microsoft makes 18 investments in research and development to 19 improve its products. 20 And then one last time during the 21 opening statement, the four graphs that you 22 looked at several times about prices. 23 Just what we've been talking about. 24 In operating systems through the OEM 25 channel where most people get their Windows, 5116 1 consumer version, $50 or less; professional 2 version, around 100. 3 And in applications, those prices -- 4 we contend those prices for operating systems 5 have always been very low. 6 They're great bargains. 7 And then on applications, the dramatic 8 lines showing you all revenues from all 9 licenses and the average price showing 10 decreases. 11 And on the subject of price, I want to 12 play you a very short video clip from a man 13 named John Sculley. You've heard his name 14 before. 15 John Sculley from 1983 to 1993 was the 16 boss, the CEO of Apple Computer. And he's 17 asked a question about operating systems. 18 (Whereupon, the following video was 19 played to the jury.) 20 Question: Would there be any other 21 reasons that it would be difficult for a 22 competing operating system to enter the market, 23 given the large installed base? 24 Answer: If Microsoft would raise 25 their price, maybe a competing operating system 5117 1 would have a chance, but they kept their prices 2 very low. And they could make a lot of money 3 keeping them very low because they had such an 4 important position in the industry. It was a 5 very, very difficult way for anyone to even 6 consider, you know, coming into the PC 7 industry. 8 (Whereupon playing of video 9 concluded.) 10 MR. TULCHIN: So there is a man who 11 was the boss at Apple for ten years saying 12 Microsoft's prices in the operating system 13 field, in the operating system market, were 14 very, very low. 15 One more clip from Mr. Sculley. Here 16 he's talking about operating systems. And then 17 he talks about prices for Microsoft's 18 applications. 19 (Whereupon, the following video was 20 played to the jury.) 21 Answer: And the real power driver of 22 their profitability is built on the premise of 23 keeping prices as low as possible for the 24 Windows operating system in order to create the 25 largest platform of computers on which to sell 5118 1 his applications. 2 And then he's always been an extremely 3 aggressive marketer, from a price standpoint as 4 well as all standpoint, of selling his 5 application suite. 6 Question: It's your understanding 7 that Mr. Gates has been an extremely aggressive 8 marketer of productivity applications? 9 Answer: Yes. 10 Question: And he has been aggressive 11 on the price of those applications? 12 Answer: Absolutely. He's been 13 extremely aggressive, from a pricing 14 standpoint. He's always been that way. 15 Question: Excuse me. Will you 16 clarify what you meant by aggressive? 17 Answer: By aggressive, I mean that 18 Bill has continually kept his prices low for 19 what appears to be several reasons. 20 (Whereupon, playing of video 21 concluded.) 22 MR. TULCHIN: So, then again, there we 23 have again John Sculley. He's talking about 24 prices. 25 Remember, this case is principally 5119 1 about an overcharge. 2 And Mr. Sculley of Apple says the 3 words that we think are not just important, but 4 central to this case. 5 He talks about keeping prices as low 6 as possible for the Windows operating system. 7 That's the first thing he said in that 8 answer, that Bill Gates is keeping his prices 9 as low as possible for the Windows operating 10 system. 11 And then he goes on to say he's always 12 been an extremely aggressive marketer from a 13 price standpoint as well -- as well as all 14 standpoints of his applications suite. 15 And he's asked: He has been 16 aggressive on the price of those applications? 17 Answer: Absolutely. He's been 18 extremely aggressive from a pricing standpoint. 19 And then another lawyer says: Excuse 20 me, will you clarify what you meant by 21 aggressive? 22 And John Sculley, CEO of Apple for ten 23 years, from '83 to '93, answers as follows: 24 Answer: By aggressive, I mean that 25 Bill has continually kept his prices low for 5120 1 what appears to be several reasons. 2 Just what we think the evidence will 3 tell you. Microsoft's prices have been low. 4 Keeping your prices low is not 5 anticompetitive. It's the essence of 6 competition. 7 We really are on the home stretch. I 8 know it's very warm in here today. I'm 9 finishing up in just the next couple of 10 minutes. 11 The Plaintiffs have experts. Two of 12 them, you know, Professor Mackie-Mason and 13 Professor Netz are married to one another. 14 Their work is not independent. One depends on 15 the other for opinions and conclusions. 16 They hypothesize a but-for world, a 17 world that they say would have existed in the 18 absence of the conduct alleged to be unlawful 19 that we think is unreasonable, unrealistic. 20 It's a world that has never existed in 21 the three markets at issue. 22 And, Professor Mackie-Mason and 23 Professor Netz, who have been paid millions of 24 dollars directly and through their consulting 25 company that they mostly own, offer opinions 5121 1 such as the overcharge for Windows has been 2 $42.49. 3 In other words, you should have gotten 4 Windows for close to nothing. We think that's 5 unreasonable, and the evidence will not support 6 it. 7 And as you heard me say yesterday -- I 8 won't go back through all the economics -- the 9 methodologies used by the Plaintiffs' experts 10 are, we think the evidence will show you, 11 flawed from beginning to end, apples and 12 oranges. 13 Sort of the old saying that if you put 14 in invalid data, you are going to get out 15 invalid conclusions. 16 Okay. We ask you to keep in mind 17 during this trial ultimately three conclusive 18 questions. 19 First, did Microsoft engage in 20 anticompetitive conduct? 21 Now let me pause. You have been 22 instructed, and Microsoft accepts, that the 23 conduct in the government case to which the 24 Court has referred in the conclusions of law 25 supported by the findings of fact, that conduct 5122 1 was anticompetitive. 2 You're accepted to instruct it -- 3 sorry. You are instructed to accept it. 4 I am almost done. I guess I'm getting 5 tired, even though it's early in the morning. 6 You're instructed to accept it. 7 Microsoft has accepted that as well and moved 8 on. 9 But with respect to Question Number 1, 10 of course, there are many, many, many other 11 allegations. Many of them, you know, go back 12 15 years or more, that were not resolved in the 13 government case. Many, many. 14 And as to those, I remind you, as the 15 Court has instructed, as we talked about this 16 morning, competition can be aggressive. The 17 idea is to win all the business. And not all 18 conduct that injures competitors is 19 anticompetitive. 20 Winning the business by good business 21 practices, high-quality products or low prices 22 is the essence of competition. 23 That's the Question Number 1 that sort 24 of summarizes the whole first issue for you. 25 I ask you during this very long 5123 1 presentation by the Plaintiffs, maybe months, 2 during the videotape depositions of people who 3 testified in some cases six, eight, ten years 4 ago, and, obviously, testified about conduct 5 that took place prior to the date of the 6 deposition, I ask you to keep in mind this 7 Question Number 1. 8 Was the conduct anticompetitive in 9 accordance with the instructions that you've 10 had from the Court, and the agreements that the 11 Plaintiffs and the Defendant have, as we've 12 talked about them earlier this morning? 13 Perfectly fine to be aggressive in 14 competition. 15 And Question Number 2. Did any 16 anticompetitive conduct cause injury to any 17 class member in Iowa? 18 Now, again, I want to pause just for a 19 moment on this very, very important -- we think 20 ultimately conclusive -- question of causation. 21 In the government case, Microsoft's 22 anticompetitive conduct was directed 23 principally to two pieces of middleware. Sun's 24 Java software, Java technology, and Netscape's 25 Navigator. 5124 1 And I think the Plaintiffs, and 2 Microsoft have agreed as well, that most of the 3 findings of fact pertain to Navigator and 4 Microsoft's competition that the Court said 5 went over the line against Navigator. 6 Remember Finding of Fact 411 in 7 connection with this competition against 8 middleware, which you have been instructed to 9 accept. 10 And Finding of Fact 411, it's way back 11 towards the very back of your notebook, says 12 there's insufficient evidence to show that had 13 Microsoft not engaged in this conduct, genuine 14 competition in the operating system business 15 would have been ignited. 16 And we think that's important to 17 remember in thinking about causation. 18 And, of course, we've noted here on 19 Question Number 2, not all conduct that injures 20 competitors injures consumers. 21 You've seen that in the Court's 22 instructions. 23 And, then, of course, the Plaintiffs 24 make two different kinds of claims in this 25 case. You've heard about them. 5125 1 First, Plaintiffs must meet their 2 burden of proving to you that any Microsoft 3 conduct caused them injury in the form of 4 higher prices -- that's the overcharge claim -- 5 higher prices than they would have paid in the 6 absence of anticompetitive conduct. 7 And that's so important. Not just 8 some theoretical higher price that maybe 9 Microsoft's price could have been lower. Could 10 Microsoft have still made a profit if its price 11 were a little lower than what it charged? 12 The question is, as the Court has 13 instructed you, on the first claim, the 14 overcharge claim, in order to prevail, to win, 15 the Plaintiffs must prove -- they must meet 16 their burden of proof to show that any 17 Microsoft conduct caused them injury in the 18 form of higher prices than the prices they 19 would have paid in the absence of 20 anticompetitive conduct. 21 And as we discussed a day or two ago, 22 we think the evidence will be that Microsoft's 23 high market shares in all three of these 24 markets are a result of perfectly legitimate 25 pro-competitive business practices. 5126 1 If that's true, then the question for 2 you will be would any of these Plaintiffs have 3 paid higher prices had any unlawful conduct 4 occurred than they would have paid had it not? 5 If Microsoft's market share, if its 6 position in the market is attributable to good 7 business practices, and nothing would be 8 different in the absence of anticompetitive 9 conduct, nothing about its market share. 10 Remember Finding of Fact 411 when it 11 comes to the government case. There's 12 insufficient evidence to show that genuine 13 competition would have been ignited through 14 those middleware products, Navigator and Java. 15 And, then, of course, there's this 16 second kind of claim that the Plaintiffs make. 17 I should pause here. On the first 18 claim, you know, there are three separate 19 markets. And they'll ask you to award damages 20 to them for all three. 21 We think the evidence will be that no 22 damages will be awarded; that you won't even 23 reach the question of damages because when you 24 think about Question 2, there's no way you'll 25 get past it. 5127 1 But the second claim is again, 2 Plaintiffs must beat their burden of proving 3 that caused them injury, anticompetitive 4 conduct by Microsoft, in the form of security 5 vulnerabilities that they would not have 6 sustained in the absence of anticompetitive 7 conduct. 8 Well, we don't need to spend any time 9 on security vulnerabilities. I've talked about 10 it. I think that claim is indicative of the 11 type of claims that the Plaintiffs have made in 12 this case asking you to compensate them for 13 their three minutes in installing patches that 14 they got for free. 15 And the last question in the case we 16 think -- we don't think you'll ever reach it. 17 Even if Plaintiffs could prevail on the first 18 two questions, can they prove damages? 19 And as the Court has instructed you, 20 damages may not be awarded based on speculation 21 or guesswork. 22 I thank you very, very, very much for 23 the attention you've given me since Monday 24 afternoon when I started at 1:15 or 1:30. 25 I thank you very, very, very much 5128 1 because you've all been so attentive and you're 2 all so interested and clearly intent on doing a 3 good job as jurors. 4 Microsoft is confident, I am confident 5 as well, that in the end, all of you will 6 perform superbly as jurors. 7 I thank you again. It will be a long 8 time before summations and I can speak to you 9 in this form again, but I look forward to it. 10 Thanks a lot. 11 THE COURT: Members of the jury, I'm 12 going to order a recess until 10 o'clock. 13 There are a few matters I want to take up. 14 So we will be in recess until 10:00. 15 At that time we will start with the evidence. 16 Remember the admonition previously 17 given. You may leave your notebooks here. 18 (The following record was made out of 19 the presence of the jury at 9:31 a.m.) 20 MS. NELLES: The parties, I 21 understand, Mr. Cashman apparently have been 22 working quite hard on it, and have been trying 23 to resolve many of the issues related to the 24 Gates deposition. I believe that's where we 25 are about to head. 5129 1 However, we did get the Plaintiffs' 2 final designations after midnight last night. 3 Mr. Tuggy is back at the office, I 4 believe, trying to go through them. I believe 5 he has been trying to reach Mr. Cashman, but, 6 obviously, he is here. 7 We do apparently have an issue with 8 some documents that are hearsay, and for which 9 Plaintiffs have absolutely no -- established as 10 far as I'm aware -- nonhearsay purpose. 11 And, apparently, what they are 12 intending to do is show them anyway on the 13 theory that they are not putting them into 14 evidence or, I guess, the alternative position 15 is they won't show the document, but they still 16 want to play the deposition and have the 17 colloquial about the document be played to the 18 Jury. 19 Now, I think that just is improper. 20 Now, I understand the first issue does 21 not come up until maybe two hours in. And if 22 Mr. Cashman wants to speak with Mr. Tuggy about 23 that, that would be -- we could take it up at 24 the lunch hour if it can't be resolved, but if 25 -- and I think that's correct, that we are 5130 1 about two hours before that first issue arises. 2 I think we resolved the issue about 3 the colloquial, the attorney colloquial. 4 Is that correct, Mr. Cashman, that has 5 been taken out? 6 MR. CASHMAN: When you are finished 7 with your comments, I'll address. 8 MS. NELLES: The second issue is 9 Plaintiffs intended to play the colloquial 10 between which is, obviously, not evidence. 11 Portions of it. Not all of it, but portions 12 they want to play. 13 I believe I am getting a report from 14 Mr. Tuggy that they have now removed all of 15 that. 16 But I think we either need to be clear 17 that we have a couple hours before these first 18 issues come up and make an attempt to resolve 19 them informally or we can take them up to the 20 Court. 21 THE COURT: Were these designations 22 that I looked at and neglected to rule on? 23 MR. CASHMAN: Your Honor, that's what 24 I was going to say. 25 This issue has been ruled long ago. 5131 1 You ruled that all the designations were 2 appropriate and all the objections to the 3 testimony were overruled. 4 So as far as the Plaintiffs are 5 concerned, that was resolved long ago. 6 We worked out a couple of minor issues 7 with Mr. Tuggy, but now Plaintiffs are trying 8 to come back -- or pardon me, Microsoft is 9 trying to come back and revisit issues that 10 have already been decided. 11 So the Plaintiffs' view is that this 12 has been resolved. You've ruled on it. There 13 is no issue. 14 MS. NELLES: Obviously, Your Honor, we 15 are spending a little bit too much time 16 together. We can't remember who is who, whom 17 is who. 18 But Mr. Tuggy is here so perhaps he 19 can address it with specific documents. It is 20 not my understanding that Your Honor ruled with 21 respect to documents that are inadmissible, 22 that he can show the documents and play the 23 testimony about the documents. 24 How can that be? That's Evidence 101. 25 MR. CASHMAN: Your Honor, Ms. Nelles 5132 1 has it wrong because the documents that they're 2 talking about are not being displayed. 3 What we're talking about is that 4 Microsoft is now trying to preclude some 5 testimony where you've already ruled that the 6 testimony designations from Gates are proper 7 and appropriate. 8 THE COURT: Why don't you get together 9 with Mr. Tuggy and see what these issues are. 10 It doesn't come up for two hours anyhow. 11 MR. TUGGY: Correct, Your Honor. This 12 won't come up until after lunch. 13 THE COURT: Why don't you guys confer 14 first and then we'll talk about it. 15 MS. NELLES: Thank you, Your Honor. 16 MR. HOLLEY: Your Honor, one last 17 matter. After the hearing that we had on 18 Microsoft's motion for sanctions for the 19 Plaintiffs' failure to produce documents 20 required by the Court's November 28th order, 21 the Court said -- and I'm at page 4505 of the 22 transcript, starting at line 32. 23 I want a status report on this 24 production by Friday. And at that time the 25 Court will decide what further action or 5133 1 sanctions or anything will be done, if at all, 2 at that time. 3 So now you are on notice to get it 4 done and get it done immediately. Anything 5 you've got now, turn it over. 6 Your Honor, as of 8 o'clock this 7 morning -- and I'm happy to be corrected that 8 something's happened in the last hour and a 9 half -- this is the status of the Plaintiffs' 10 production of documents in response to the 11 November 28th order. 12 And as you'll see, Your Honor, very, 13 very little has been done. 14 Microsoft asks, once again, that the 15 Plaintiffs be sanctioned for their ongoing 16 flouting of an order of this Court. 17 THE COURT: Okay. Do the Plaintiffs 18 have their status report for the Court? 19 MR. HAGSTROM: I am prepared to give 20 that, Your Honor. 21 THE COURT: Can you give it? 22 MR. HAGSTROM: We have been working 23 virtually nonstop, several people talking with 24 experts, and, as of currently, we have 25 completed Ronald Alepin, Paul Reagan, Joseph -- 5134 1 Doctor Joseph Stiglitz, and Doctor Rick Warren 2 Boulton. 3 With regard to Mr. Alepin, there was a 4 few extra documents. Mr. Reagan had already 5 produced everything. Mr. Stiglitz had already 6 produced everything. Mr. Rick Warren, Doctor 7 Rick Warren Boulton had already produced 8 everything. 9 We should have completed today Doctor 10 Gowrisankaran and Richard Smith. And, by 11 Monday or Tuesday, we should have Andrew 12 Schulman, Professor Roger Noll, Professor 13 Mackie-Mason, and Doctor Netz. 14 What we're finding, Your Honor, is 15 that as we go back through documents, then 16 we're having to check against Appendix B to 17 reports. Appendix B is listing, you know, 18 depending upon the report, hundreds or 19 thousands of documents. 20 And it's turning out that virtually 21 everything that we're coming up with has 22 already been listed and produced. 23 MR. HOLLEY: Your Honor, briefly. 24 I asked Mr. Reece when he was on the 25 witness stand under oath whether it was his 5135 1 understanding that the Plaintiffs had already 2 identified documents from Applicon, which is 3 the Netz/Mackie-Mason consulting firm that were 4 responsive to the November 28th order. 5 The answer was yes. 6 That is also my understanding of what 7 Mr. Reece has told Mr. Jurata. 8 If those documents are already in the 9 possession of the Plaintiffs, there is no 10 reason why they should not be produced on a 11 rolling basis. We are in trial. They are 12 about to start their case. 13 I don't know when these witnesses will 14 be called. But it's possible, Your Honor, as 15 Mr. Jurata told Mr. Reece, that whatever these 16 documents they are so desperate to avoid giving 17 us, are going to require us to ask the Court's 18 permission to reopen these depositions. 19 This is going to take time, Your 20 Honor. And every day that goes by causes 21 Microsoft more and more prejudice. 22 So, Your Honor, I again ask the Court 23 to do something, to sanction the Plaintiffs for 24 their failure to abide by this order. 25 THE COURT: Anything else? 5136 1 MR. HAGSTROM: And I find it rather 2 interesting, Microsoft just produced some 3 documents to us yesterday despite the fact that 4 they have represented to the Court on numerous 5 occasions in response to our resistances to 6 their motions that they've produced everything. 7 As I indicated, we'll have this 8 process completed by Tuesday. 9 You know, a lot of the stuff, like I 10 said, has already been produced. That's what 11 we're finding. 12 For instance, I got a whole bunch of 13 product review reports from Professor Noll, a 14 whole stack of them. We went through them. 15 They had already been on his Appendix B. 16 So, I mean, that's the process we are 17 going through. I mean, we are checking. 18 I mean, if Microsoft wants us -- I 19 don't think there's any sense in adding 20 additional documents into the record that have 21 already been produced. 22 THE COURT: What time today are you 23 going to have the Gowrisankaran and the Smith? 24 MR. HAGSTROM: By the end of the 25 business day, I'm sure. 5137 1 THE COURT: And what -- out of these 2 people on this list that Defendant has -- and I 3 don't know if it comports with your list -- are 4 you proceeding in a manner where the ones that 5 -- the documents that relate to the witnesses 6 that you are going to call first are being 7 produced as soon as possible? 8 MR. HAGSTROM: Right. Ronald Alepin 9 is likely going to be on mid-next week, and, 10 you know, we focused on him first. 11 THE COURT: Okay. 12 MR. HAGSTROM: Doctor Gowrisankaran, I 13 don't expect -- well, we've completed, but he 14 won't be on, you know, I'm guessing February, 15 something like that. 16 THE COURT: Okay. 17 MR. HAGSTROM: Professor Mackie-Mason, 18 at the earliest, the end of January. 19 David Martin wouldn't be on for a 20 while. 21 Janet Netz, she would have to be after 22 Mackie-Mason. So the earliest she would be 23 would be February. 24 Roger Noll will not be until late 25 January. 5138 1 Paul Reagan is a rebuttal witness, so 2 he's -- you know, whenever we get there. 3 Andrew Schulman will not likely be 4 till, I would say, late January at the 5 earliest. Probably more likely February. 6 Richard Smith is part of the 7 technology issue. We think that's going to be 8 -- or I should say the security 9 vulnerabilities. And that probably won't be 10 till February. 11 Joseph Stiglitz, Doctor Stiglitz is 12 rebuttal. 13 Doctor Warren Boulton is generally 14 related to rebuttal and the security 15 vulnerability. 16 So other than Mr. Alepin, who we plan 17 to put on next week, it's going to be at least 18 four weeks before the next expert. 19 THE COURT: Okay. 20 MR. HAGSTROM: At least four to five 21 calendar weeks. 22 THE COURT: Very good. 23 Has the Defendant looked at the Alepin 24 documents? 25 MR. HOLLEY: I personally have not, 5139 1 Your Honor, but I understand that these 2 documents have been produced to us. And I'm 3 not contradicting that point. 4 I would like to know, if he's going to 5 be here next week, whether there's a 6 representation that the approximately 25 pages 7 that we have received is all that we're going 8 to receive. 9 THE COURT: Is that -- 10 MR. HAGSTROM: It is, Your Honor. 11 THE COURT: That's it? Okay. 12 Defendant will look at those and let 13 me know if they wish to have any further 14 deposition in regard to Mr. Alepin. 15 I'll rule on it at that time. 16 MR. HOLLEY: Your Honor, just one last 17 point, and it's my mistake. 18 We still have never gotten the list of 19 documents that existed at one time that were 20 destroyed. And I want to make clear that the 21 Court ordered the Plaintiffs to do that. 22 I'm not aware of any superseding order 23 that excused them from complying. And given 24 the importance of these documents, we would 25 like the Plaintiffs to comply with the Court's 5140 1 order that if documents were in existence and 2 they were looked at by experts, even if 3 rejected in forming their views, that those 4 documents be put on a list. 5 It's easy to see, Your Honor, that 6 those could be the most important documents for 7 purposes of cross-examination. 8 For example, if Professor Mackie-Mason 9 wrote an e-mail to Professor Noll laying out 10 why he thinks that the head fake theory is 11 correct, and Professor Noll decided that that 12 was ridiculous and threw it away, we need to 13 know that there was such an e-mail and that it 14 got thrown away. 15 That's a hypothetical example, but it 16 shows exactly why these sorts of documents are 17 so important, Your Honor. 18 And, therefore, I believe the Court 19 should instruct the Plaintiffs to produce the 20 list that they were ordered to produce. 21 MR. HAGSTROM: Your Honor, on the 22 e-mail point, we've talked to the experts. 23 They don't have records of those. 24 And with respect to e-mails between 25 Professor Mackie-Mason and Professor Noll, both 5141 1 of them have already testified to that issue. 2 That's where this whole e-mail issue 3 comes up. And both of them have testified if 4 they see like an article of interest by either 5 of them, they might shoot it back and forth. 6 There is no substantive conversation. 7 They don't have a record of those e-mails. 8 They have both testified that those 9 communications have nothing to do with this 10 case. 11 They have been colleagues for many, 12 many, many years, and they correspond with each 13 other. And they both testified that these 14 e-mails have absolutely nothing to do with the 15 case. 16 THE COURT: Are you preparing a list 17 of documents in earnest then? 18 MR. HAGSTROM: Well, so far there are 19 none. 20 I mean, with regard to these e-mails, 21 I mean, both of them have just basically said 22 just what I told you. 23 I mean, those would, obviously, not be 24 responsive to Your Honor's order. I mean, they 25 aren't -- they have nothing to do with the 5142 1 case. 2 So, I mean, they are both professional 3 professors. They are economists. They might 4 see an article of interest either on, you know, 5 economic principles, on, you know, some 6 particular story they might be working on. 7 They send it back and forth. That's it. 8 I mean, there's testimony in Professor 9 Mackie-Mason's deposition to that effect. 10 There's also testimony in Professor 11 Noll's deposition to that effect. 12 I've also double-checked with both of 13 them to confirm was there anything else. They 14 both say no. 15 So I don't know what I can possibly -- 16 what more I can possibly do. 17 THE COURT: What about those e-mails? 18 Have you produced those? 19 MR. HAGSTROM: They don't have them. 20 Because at the time -- I mean, you know, every 21 once in a while if I'm on CNN and I see an 22 interesting article, I might shoot it to 23 somebody. Well, I don't keep a record of that. 24 And, I think, actually when you do it 25 that way, you know, it's the CNN, if anything, 5143 1 that would have a record of it. 2 So, I mean, I just don't know what 3 more we can do on that. 4 THE COURT: Well, if they know what 5 they looked at and destroyed or deleted, that 6 should be produced. 7 MR. HOLLEY: Your Honor, and just for 8 clarity sake, we've just been discussing 9 communications that apparently occurred between 10 Professor Mackie-Mason and Professor Noll, but 11 the Court's order applies to each and every one 12 of the experts on the list that I've provided 13 this morning. 14 And I would like it to be clear that 15 that list should be produced not just for those 16 two gentlemen, but for all of the Plaintiffs' 17 experts. 18 THE COURT: I think they understand 19 that. 20 Anything else on this while I work on 21 something else? 22 MR. HOLLEY: No, Your Honor. 23 THE COURT: Anything else? 24 MR. HAGSTROM: I think the only other 25 thing is that, you know, like the drafts of the 5144 1 reports, Microsoft has said they're not 2 producing so we've not gone back to look for 3 those. 4 That was the agreement of the parties 5 in the original stipulation, so we are not 6 looking for those. 7 So I want to make that clear. 8 THE COURT: Okay. 9 MR. HAGSTROM: And I guess the other 10 question I should raise with the Court, 11 obviously, as we're preparing for trial, we are 12 going to be communicating with these experts, 13 getting them ready to testify. 14 We are assuming that those 15 communications are not part of this order. 16 THE COURT: I don't think they were 17 intended to be. 18 MR. HAGSTROM: Well, I didn't think so 19 either. 20 MR. HOLLEY: They were not, Your 21 Honor. 22 THE COURT: Otherwise -- 23 MR. HAGSTROM: Because, otherwise, we 24 are going to want all of their communications 25 as well. 5145 1 THE COURT: Yes. That's ridiculous. 2 MR. HOLLEY: Your Honor, we have never 3 suggested -- that's a wonderful application of 4 the goose and gander rule. We don't desire 5 those communications and there's never been a 6 dispute, Your Honor, between the parties about 7 drafts. So, obviously, we are not seeking 8 drafts. 9 We haven't produced them. They 10 haven't produced them. That was the deal. And 11 we're happy to abide by that, Your Honor. 12 THE COURT: Okay. 13 MR. HAGSTROM: Okay. So it's clear, I 14 can -- we can exchange documents with our 15 experts to prepare them for trial? 16 THE COURT: Yes. Yes. 17 And, before the end of the day, I want 18 a further update on what's gone on. 19 MR. HAGSTROM: You will probably have 20 to have Roxanne because I'm going to be leaving 21 now. 22 THE COURT: All right. Well, whoever. 23 MR. HAGSTROM: I'm trying to work -- 24 I'm going to be working on this issue, and then 25 I've got to go back to Minneapolis. 5146 1 THE COURT: To the warm weather. 2 Okay. Anything else? 3 MR. HOLLEY: Nothing further, Your 4 Honor, although we, obviously, have to have 5 Mr. Tuggy and Mr. Cashman consult. 6 THE COURT: Yeah. 7 MS. CONLIN: Your Honor, I do have one 8 further small matter, housekeeping matter. 9 The Plaintiffs expect to present their 10 evidence in sort of chapters as I did the 11 opening. And some witnesses will, therefore, 12 appear on more than one occasion. 13 For example, Mr. Alepin's first group 14 of testimony will be on sort of general 15 liability matters, industry matters, and then 16 he will be back in hopefully the proper order 17 on the issues of security. 18 I just wanted to alert the Court to 19 that, and I know that the Defendant -- I 20 believe the Defendants are aware that that is 21 how we expect and intend to proceed. 22 There won't be many witnesses who will 23 be here more than once, but there will be some. 24 MR. TULCHIN: Your Honor, we've 25 already informed the Plaintiffs that we object 5147 1 to that. We don't think it's proper at all. 2 Normally, in a trial -- and I don't 3 see any reason that this would be any 4 different -- you call a witness. And, when you 5 do, you put on all the testimony and evidence 6 of that witness at one time. 7 You don't call a witness and then 8 recall him, or her, and recall him a second or 9 third time. 10 Whenever -- otherwise what you have, 11 Your Honor, is a rolling issue, a rolling 12 problem where you can't ever be sure what the 13 witness has actually ultimately said. 14 And trying to compartmentalize 15 particular witnesses on issues is the 16 responsibility of each lawyer in summation. 17 That's what summation is for. 18 I'm sure Ms. Conlin will take some 19 time in summation to do that. 20 But we have told the Plaintiffs on a 21 number of occasions that we think whether it's 22 a live witness or a witness by deposition, if 23 you call Alepin or Smith or Jones, you must 24 extract from that witness at that time all of 25 his evidence with the possible exception of 5148 1 genuine rebuttal after Microsoft's case is 2 done. 3 MR. HOLLEY: Your Honor, and as the 4 the lawyer who is going to be cross-examining 5 Mr. Alepin, you can see the sort of mischief 6 that can be created by this. 7 If I bring things to his attention 8 during round one of his examination, he has a 9 month to come back and try to rebut every point 10 that has been made. That isn't fair. 11 In every trial I've ever worked on, it 12 is, as Mr. Tulchin says, the job of the lawyer 13 in summation to piece it back together. 14 But the idea that they can take 15 account of our cross-examination and then bring 16 somebody back again and again isn't fair. 17 MS. CONLIN: This is a trial 18 management matter. This was also the way that 19 the witnesses were going to be presented in the 20 Gordon case. 21 Judge Peterson thought it was a great 22 idea. And the idea is to make this as clear as 23 possible. 24 I know of no rule of Iowa law that 25 says what the Defendant purports to believe is 5149 1 the rule. 2 I can't count the number of cases 3 where witnesses have been on more than once. 4 This is -- you know, they have the right to 5 cross-examine within the scope of our direct 6 examination. 7 And there will be a pretty clear 8 dividing line, Your Honor. And we believe that 9 this will make the case much clearer for the 10 Jury. 11 It is a complicated case. Let's not 12 pretend otherwise. It covers a long period of 13 time, covers a number of products, and covers a 14 number of issues. 15 And we have -- when we have an expert 16 who has expertise that cross more than one of 17 those boundaries, there is simply no reason 18 that I'm aware of, ever, that would prevent us 19 from doing this in a way that will be helpful 20 to the Jury, eliminate in so far as possible 21 confusion. 22 And, you know, they have the right to 23 cross-examine thoroughly within the boundaries 24 of our direct examination. I don't understand 25 their objection. 5150 1 MR. TULCHIN: Your Honor, if I may. 2 I'd be interested in seeing these authorities 3 that Ms. Conlin has for the proposition that 4 you can do this. 5 I'm not aware of any rule of Iowa 6 law -- and I think Mr. Green was going to say 7 the same thing -- that permits this piecemeal 8 presentation of a single witness. 9 Again, with the possible exception of 10 rebuttal in cases where rebuttal is genuinely 11 necessary and appropriate, one always puts on a 12 witness at the same time. 13 And if we have any deviation from that 14 rule, I think we all know these boundaries are 15 never quite as clear as Ms. Conlin is arguing 16 that they are. 17 Cross-examination -- I mean, imagine, 18 Your Honor, Mr. Alepin's on the stand and Mr. 19 Holley is cross-examining him. And Ms. Conlin 20 says I object, it's outside the bounds or the 21 scope of direct. 22 But it's squarely within -- whether it 23 is or not, within the scope of direct. It's 24 squarely within an issue that Mr. Alepin 25 directly offers an opinion about in his expert 5151 1 report. 2 Now, if the Court sustained that 3 objection, it's outside the bounds of direct, 4 although it's part of the report, what kind of 5 confusing mishmash will the Jury be left with? 6 And when Mr. Alepin returns a second 7 time, is that opinion that's part of his report 8 also going to be excluded because it's outside 9 the bounds of the second examination? 10 I think you've got to do this at one 11 time, Your Honor. And I don't know of any 12 authority that says that you can divide a 13 person up into several pieces. 14 MS. CONLIN: Well, we don't intend to 15 do that physically, Your Honor, but we do 16 intend -- we do -- I think this is a matter 17 within our right. 18 I don't think there is authority for 19 the proposition that Defendant offers, nor is 20 there particular authority in connection with 21 that that I offer. 22 I think this is merely a matter of 23 trying to present evidence in a way that is as 24 clear as possible to the Jury. 25 And the parade of horribles that 5152 1 Mr. Tulchin suggests, I think, will not come to 2 pass. It will be clear. We will be able to 3 make a boundary. 4 And it's just going to be easier for 5 the Jury to understand. And that's our goal, 6 is to help the Jury to understand. 7 MR. HOLLEY: Your Honor, can I bring 8 this down to brass tacks? 9 There are lines of cross-examination 10 that I intend to pursue with Mr. Alepin, which 11 I obviously do not intend to disclose now, 12 which apply to his qualifications, to his 13 motivation, to his bias. 14 Those lines of cross-examination are 15 equally applicable to everything that the man 16 says. 17 He is their omnibus expert on all 18 sorts of things. And what they are really 19 trying to do is use him to provide some sort of 20 interim summation or road map to their case. 21 If they want to do that, I may have 22 something to say about it at the time, but they 23 can't do that in little blocks. 24 And Ms. Conlin just said two things, 25 which I agree with completely. 5153 1 One is that this matter is in the 2 sound discretion of the Court; and, secondly, 3 that she is not aware of any authority for 4 doing which it is that she proposes to do. 5 The authority we have, Your Honor, is 6 the common practice in courts of this country. 7 People don't do this, and for a very 8 good reason. 9 MS. CONLIN: Your Honor, I'm told that 10 we do have authority for this, and it's in the 11 manual of complex litigation. 12 When this matter was contested in the 13 Gordon case, there was -- I believe that the 14 matter was briefed, and we can provide the 15 Court with additional authority, but I believe 16 that this is a perfectly appropriate way to 17 proceed, as did Judge Peterson. 18 And the idea is -- 19 MR. TULCHIN: Your Honor, I don't mean 20 to interrupt, but if there's a pause. 21 We didn't do this with Judge Peterson. 22 Unless my memory is faulty, we never did it and 23 he never authorized the Plaintiffs to do it. 24 Now, my memory may be imperfect. It 25 was two and a half years ago, but that's 5154 1 certainly my memory. I'd like to check on it. 2 MS. NELLES: Well, I was there. Mr. 3 Tulchin is correct. 4 MR. ROSENFELD: I was there as well. 5 It didn't happen. 6 MS. NELLES: It didn't happen. 7 MR. HAGSTROM: We can provide Judge 8 Peterson's order. 9 THE COURT: When's this going to be an 10 issue? 11 MR. HAGSTROM: It will be an issue 12 next week. 13 THE COURT: When next week? 14 MR. HAGSTROM: By Wednesday. 15 MS. NELLES: Your Honor, it's actually 16 probably an issue sooner because there are 17 several Gates depositions that they have 18 designated and they don't intend to play them 19 all. 20 And our position is they need to play 21 them all or they waive them. 22 MS. CONLIN: Well, Your Honor, they 23 come from different cases. They came from -- 24 they pertain to different subject matter. 25 This is just not -- it would be as 5155 1 though if someone came to court -- if a police 2 officer came to court to testify on one 3 particular car crash, that police officer would 4 have to also provide testimony at that time on 5 every other car crash that he or she was 6 involved in. That cannot be the law. 7 MR. TULCHIN: Your Honor, I think the 8 question of the depositions is really a 9 different question. It's a somewhat different 10 question. 11 I think with Mr. Alepin -- I almost 12 said professor, but he's not. Mr. Alepin, if 13 we could have till Monday so that both sides 14 perhaps will have a chance to look at Judge 15 Peterson's orders and whatever authority there 16 is, maybe we can take it up Monday morning if 17 that's convenient for you. 18 And I know your overburdened court 19 reporter is working like crazy through a 20 recess. 21 MS. CONLIN: Fine with us, Your Honor. 22 THE COURT: So you want to not take 23 evidence today? 24 MS. CONLIN: Oh, no, no, no. 25 MR. TULCHIN: No. 5156 1 MS. CONLIN: We're ready to proceed, 2 Your Honor. 3 THE COURT: Well, I'm hearing that 4 this is going to be piecemeal as far as -- 5 MS. CONLIN: No, Your Honor. 6 THE COURT: -- as far as the Gates 7 deposition. 8 MR. TULCHIN: Mr. Gates' deposition 9 will take something like 12 or 14 hours to 10 play. Just this one deposition from the DOJ 11 case. 12 So it will take up the rest of the 13 day. And, you know, through Monday and 14 Tuesday, I would think, or at least most of 15 Tuesday. 16 So we won't get to Mr. Alepin until at 17 least Wednesday is my guess. 18 THE COURT: No. What I thought I 19 heard her say was she was going to present that 20 piecemeal too. 21 MS. CONLIN: No, no, Your Honor. 22 MR. TULCHIN: No. 23 THE COURT: Okay. 24 MS. CONLIN: What I -- let me try to 25 be a little clearer. 5157 1 We have designated testimony from the 2 Department of Justice. In fact, we have 3 designated virtually every word in that 4 deposition so that the Defendant cannot say 5 that we've taken it out of context. 6 There are other -- there's a little 7 piece of the Caldera deposition that Mr. Gates 8 -- that was taken of Mr. Gates. There's an FTC 9 deposition. I can't remember. 10 None of those, frankly, Your Honor, 11 have been cleared either. So that's a 12 different problem. 13 But in terms of the Gates' deposition, 14 we are ready to proceed. We should proceed. 15 THE COURT: Okay. I misunderstood. 16 MS. CONLIN: And the Court will make 17 its decision at some time next week. 18 THE COURT: We'll take it up Monday 19 then. 20 MS. CONLIN: All right. Thank you, 21 Your Honor. 22 THE COURT: Give me some briefs or 23 whatever you want on it because I need more 24 paper. 25 MR. TULCHIN: Thank you, Your Honor. 5158 1 THE COURT: She needs ten minutes and 2 I do too. 3 MR. TULCHIN: Yes, of course. 4 (A recess was taken from 10:01 a.m. 5 to 10:16 a.m.) 6 (The following record was made out 7 of the presence of the jury at 10:16 8 a.m.) 9 THE COURT: I prepared an instruction 10 regarding deposition testimony in conversation 11 with counsel for both sides yesterday. 12 We are talking about deposition 13 testimony and the dates when they were given. 14 This was proposed by the plaintiff. 15 I've kind of done a proposed 16 preliminary instruction regarding date. 17 So any comments by Plaintiffs? 18 MS. CONLIN: No, Your Honor. This is 19 satisfactory to us. 20 THE COURT: Ms. Nelles? 21 MS. NELLES: Yes, Your Honor. 22 Microsoft takes exception to the instruction in 23 its current form. 24 I don't have any objection to the 25 language you are instructed not to give any 5159 1 more or less weight to deposition testimony 2 simply because of when the deposition was taken 3 -- was given. 4 However, in its form, what this is 5 going to do, and what Plaintiffs want it to do, 6 is to confuse the Jury into believing that 7 testimony that was given 10, 12, 15 years ago 8 can relate to situations that are in the 9 current period, and the current period class 10 period. 11 And I would suggest we add a sentence 12 which is completely true. 13 THE COURT: Okay. 14 MS. NELLES: And that would obviate 15 any confusion to follow directly after the 16 instruction Plaintiffs ask for and that you 17 propose to give, which would be to add the 18 language I suggested yesterday. 19 Testimony, however, can only be taken 20 to apply to the period prior to the date of the 21 deposition. 22 THE COURT: Testimony, however, can 23 only -- 24 MS. NELLES: Can only be taken to 25 apply to the period prior to the date of the 5160 1 deposition -- or prior to the date the 2 deposition was given. To be parallel to the 3 first sentence. 4 THE COURT: Comments? 5 MS. CONLIN: Yes, Your Honor. Really 6 this is not a dumb jury. 7 They're going to pretty well be able 8 to understand that the testimony won't apply in 9 the future when the testimony is given in 1998. 10 We think it would be appropriate 11 perhaps for the Court to add this case was 12 filed in February of the year 2000. 13 Mr. Tulchin's emphasis on the length 14 of time is somewhat distressing given the fact 15 that a seven-year delay has been mostly 16 attributable to the Defendant, but I would 17 suggest that the Court give exactly what the 18 Court suggests and no more because it is simply 19 unnecessary and may well be offensive to the 20 Jury because they'll think we think they're 21 stupid. 22 MS. NELLES: Your Honor, there's 23 absolutely nothing in the sentence proposed 24 that is in any way condescending to this jury. 25 It's Plaintiffs who are trying to 5161 1 obscure that dates of depositions matter. 2 They want -- if this jury is not -- if 3 this jury understands what is going on, they 4 wouldn't have asked for the first sentence. 5 Now, let's just all be clear. Let's 6 be fair to both sides. Let's give them their 7 instruction about weight and let's give us -- 8 but time also goes to weight. This is 9 incomplete and confusing as given. 10 The second sentence should be added. 11 Ms. Conlin never argued it was wrong. She just 12 argued it was condescending. It's not. 13 Time periods are very relevant in this 14 case. 15 THE COURT: Well, I don't know how to 16 adjust it, so I'm going to delay it right now, 17 think about it some more. 18 Let's get the Jury. 19 (The following record was made in the 20 presence of the jury at 10:22 a.m.) 21 THE CLERK: Okay. 22 All rise. 23 THE COURT: Sorry we took longer. I 24 had to do some things and I apologize. You got 25 an extra break there. 5162 1 THE CLERK: Give me a few minutes to 2 pass out notebooks. 3 THE COURT: Everybody else may be 4 seated. 5 I guess Carrie has got new notebooks 6 for you or something. 7 MS. CONLIN: While she's doing that, 8 Your Honor, perhaps I can do a housekeeping 9 matter. 10 THE COURT: Sure. 11 MS. CONLIN: Plaintiffs offer into 12 evidence 3,760 exhibits to which there has been 13 no objection. These are exhibits that are free 14 of objection. 15 We offer them at this time, Your 16 Honor. We've provided to Court and to counsel 17 the list of those exhibits which we offer at 18 this time, as well as a disk with the images of 19 those exhibits on it. 20 MS. NELLES: First, Your Honor, first 21 of all, I'm not sure this is the proper time to 22 do this. 23 We do have objection to this being 24 done in this form, nor have we had an 25 opportunity to look at what's on this disk to 5163 1 know that it's accurate in any way. 2 Can we discuss it after? 3 THE COURT: Take a look at it and the 4 Court will rule on the admissibility of it. 5 MS. NELLES: Thank you. 6 THE COURT: Very well. Anything else 7 before we -- 8 MS. CONLIN: No, Your Honor. 9 Well, I guess I could go ahead and say 10 that we offer the deposition of Bill Gates 11 taken in the government case on August 27th, 12 1998, beginning on August 27th, 1998, over a 13 period of three days. 14 The quality of the video is not the 15 best. 16 MS. NELLES: Objection, Your Honor. 17 Could we have a sidebar, please? 18 (Off-the-record sidebar discussion was 19 held.) 20 MS. CONLIN: Well, let's approach 21 again, Your Honor. There was one additional 22 matter. 23 THE COURT: Okay. 24 (Off-the-record sidebar discussion was 25 held.). 5164 1 THE COURT: Would you give the date of 2 the deposition again, please? 3 MS. CONLIN: Yes, Your Honor. 4 The date of the deposition is August 5 27th, 1998. 6 THE COURT: Okay. The deposition has 7 in it references by the witness to exhibits. 8 The exhibits were given a different number at 9 the time the deposition was taken. 10 The number you should pay attention to 11 is the number of either the plaintiff or 12 defendant exhibit in this case and not the 13 exhibit, such as government exhibit number. 14 Did I make that clear enough? 15 MS. CONLIN: Yes. Well, Your Honor -- 16 MS. NELLES: Absolutely perfect, Your 17 Honor. 18 MS. CONLIN: The exhibit that counts 19 will be first displayed by Mr. Buckbinder. 20 THE COURT: That will have the exhibit 21 number that you are to pay attention to? 22 MS. CONLIN: Yes, Your Honor, when the 23 exhibit comes up. 24 THE COURT: Okay. Very well. 25 (Whereupon, the following video was 5165 1 played to the jury.) 2 Question: I understand that you are 3 one of the cofounders of Microsoft; is that 4 correct? 5 Answer: Yes. 6 Question: When was the company 7 founded? 8 Answer: 1975. 9 Question: What position have you held 10 with Microsoft since then? 11 Answer: Partner, chairman, CEO. 12 Question: What is your present title? 13 Answer: Chairman and CEO. 14 Question: Sir, are you familiar with 15 the Microsoft press computer dictionary? 16 Answer: No. 17 Question: You've never cracked it 18 open before? 19 Answer: No. 20 Question: Well, I'll introduce you to 21 it. 22 I have here the Microsoft press 23 computer dictionary. It's the third edition 24 dated 1997. It says -- it claims to be the 25 authoritative source of definitions for 5166 1 computer terms, concepts and acronyms from the 2 world's most respected computer software 3 company. 4 I'll give you a softball question. 5 Would you agree that Microsoft is the world's 6 most respected computer software company? 7 Answer: Some people would agree with 8 that. Some people wouldn't. 9 Question: What's your opinion? 10 Answer: I think we are the most -- if 11 you took it on a statistical basis, yes, we'd 12 be the most respected software company. 13 Question: This computer dictionary 14 defines operating system as follows: The 15 software that controls the allocation and usage 16 of hardware resources such as memory, central 17 processing unit, time, disk space and 18 peripheral devices. 19 Is that an accurate definition of an 20 operating system? 21 Answer: Well, the notion of what's in 22 an operating system has changed quite a bit 23 over time. So that definition is not really 24 complete in terms of how people think of 25 operating systems in the last decade or so. 5167 1 Question: So this definition in the 2 1997 dictionary is incomplete, in your 3 estimation? 4 Answer: What I said is that over 5 time, the number of things that are in 6 operating systems has increased. And so if you 7 want to look at operating systems in the last 8 decade, you'd say the definition is incomplete. 9 Question: Is it accurate? 10 Let me read it to you once again. The 11 software that controls the allegation and usage 12 of hardware resources such as memory, central 13 processing unit, time, disk space and 14 peripheral devices. 15 Answer: I said in terms of the 16 operating systems in the last decade, it's an 17 incomplete definition. 18 Question: In what respects is it 19 incomplete? 20 Answer: There are aspects of the 21 operating systems in the last decade that 22 aren't included in that definition. 23 Question: See if you agree with the 24 definition in the Microsoft dictionary of that 25 term. 5168 1 Application is there defined as a 2 program designed to assist in the performance 3 of a specific task, such as word processing, 4 accounting or inventory management. Is that an 5 accurate definition, Mr. Gates? 6 Answer: Could you read it again? 7 Question: Sure. A program designed 8 to assist in the performance of a specific 9 task, such as word processing, accounting or 10 inventory management. 11 Answer: I'd say it's a pretty vague 12 definition. 13 Question: Is it accurate, as far as 14 it goes? 15 Answer: I'd say it's vague, but 16 accurate. 17 Question: Another term I'm sure we're 18 going to be using throughout the course of the 19 deposition is web browser. 20 And let me read you the definition 21 from your company's dictionary and see if you 22 think that's accurate. 23 Web browser is defined by the 24 Microsoft computer dictionary as follows: A 25 client application that enables a user to view 5169 1 HTML documents on the World Wide Web, another 2 network for the user's computer, following the 3 hyperlinks among them and transfer files. 4 Is that accurate? 5 Answer: It's actually describing 6 browsing functionality. 7 Question: Is it an accurate 8 definition of browsing functionality? 9 Answer: It describes part of what you 10 do when you browse. 11 Question: What is your definition of 12 a web browser? 13 Answer: I'd say browsing technology 14 is what lets you navigate through -- typically 15 it means something that lets you do HTML 16 display and navigation. 17 Question: Is that what you mean when 18 you use the term web browser? 19 Answer: Well, software that lets you 20 do web-browsing is sometimes referred to as a 21 web browser. 22 Question: And Microsoft has marketed 23 a web browser under the trade name Internet 24 Explorer; is that correct? 25 Answer: We've used the term Internet 5170 1 Explorer to refer to the Internet technologies 2 in Windows, as well as some stand-alone 3 products we've done. 4 Question: Let me see if you agree 5 with this definition in the 1997 edition of 6 Microsoft's computer dictionary. The 7 definition is of the term Internet Explorer. 8 Internet Explorer is defined as 9 follows: Microsoft's web browser introduced in 10 October, 1995. 11 Is that an accurate definition of 12 Internet Explorer? 13 Answer: I'm not sure why they say 14 October. I don't think that's right. 15 Question: When is your recollection 16 that it was introduced? 17 Answer: Well, we shipped Windows 95, 18 including browsing functionality, in August, 19 1995. 20 Question: Was IE shipped as a 21 stand-alone product in or about October, 1995? 22 Answer: No. 23 Question: Was it ever shipped as a 24 stand-alone product? 25 Answer: Well, it depends on what you 5171 1 are referring to. If you are talking about 2 Unix or the Macintosh, we did create a set of 3 bits that stood by themselves and could be 4 installed on top of those operating systems. 5 Question: When were those versions of 6 IE first marketed? 7 Answer: Certainly not in October, 8 1995. 9 Question: Apart from the timing 10 issue, would you agree that Internet Explorer 11 is defined here correctly as Microsoft's web 12 browser? 13 Answer: Did you actually read what 14 was in there? 15 Question: Yeah, I read the first 16 sentence. I can read you the whole thing if 17 you'd like. 18 Answer: Well, it seems strange. If 19 you're trying to use the dictionary, you might 20 as well read what it says. You could show it 21 to me. 22 Question: I'll read it to you and 23 I'll show it to you. And you tell me if you 24 think there is anything in here that is 25 inaccurate. 5172 1 The full entry of Internet Explorer 2 reads as follows: Microsoft's web browser 3 introduced in October, 1995. Internet Explorer 4 is now available in Windows and Macintosh 5 versions. 6 Later versions provide the ability to 7 incorporate advanced design and animation 8 features in the web pages and recognize Active 9 X controls and Java applets. 10 Take a look at it and tell me if there 11 is anything else in there that you think is 12 inaccurate. 13 Answer: Well, certainly the product 14 we shipped that was before October, 1995 was 15 Windows 95. 16 The browsing functionality we had in 17 it we've updated quite a bit several times. 18 And so defining Internet Explorer to 19 be what we shipped just on one particular date 20 can't be considered accurate. 21 You have to say that many times we've 22 taken the browsing functionality in Windows, 23 which we refer to as Internet Explorer, and 24 we've updated that functionality. 25 So you can't really pin the definition 5173 1 to a particular date. It's really a brand name 2 we use for those technologies. 3 Question: Was this definition 4 accurate in 1997 when Microsoft's computer 5 dictionary was sold to the public? 6 Answer: I already told you that 7 reference to October, 1995 certainly makes the 8 definition inaccurate. 9 Question: Apart from that, is it 10 accurate? 11 Answer: It's not accurate to say that 12 Internet Explorer is defined at a single point 13 in time, that it's one set of bits because it's 14 a brand that we have used for a set of 15 technologies that have evolved over time. 16 And in that sense I would take 17 exception to the way that the book, that I've 18 never seen there, happened to define it. 19 Question: You've described the web 20 browser as a killer application, haven't you? 21 Answer: I'm not sure what you're 22 talking about. You'd have to show me the 23 context. 24 Question: I'd like you to look at 25 Exhibit 1, Mr. Gates, right here in front of 5174 1 you. 2 This is a memorandum that purports to 3 be from you to your executive staff dated May 4 22, 1996. And it attaches, for want of a 5 better word, an essay entitled the Internet PC 6 dated April 10, 1996. Do you recall writing 7 that essay? 8 Answer: It looks like this is an 9 e-mail, not a memorandum. 10 Question: Do you recall writing the 11 essay dated April 10, 1996 entitled the 12 Internet PC? 13 Answer: Well, it looks like an essay 14 I wrote. I don't remember specifically, but it 15 does look like something I wrote. 16 Question: The portion I refer you to 17 is at the bottom of the first page under the 18 heading called the latest killer app. Do you 19 see that? 20 Answer: I see a heading. 21 Question: First paragraph under that 22 heading reads as follows: Our industry is 23 always looking for the next killer application 24 -- for a category of software that, by its 25 utility and intelligent design, becomes 5175 1 indispensable to millions of people. 2 Word processors and spreadsheets were 3 the killer applications for business PCs 4 starting in 1981. 5 And the next sentence reads, The 6 latest confirmed killer app is the web browser. 7 Do you recall writing that, sir? 8 Answer: No. 9 Question: Do you have any reason to 10 believe you didn't write it? 11 Answer: No. 12 Question: Can you explain what you 13 meant here by describing the web browser as a 14 killer app? 15 Answer: I just meant that browsing 16 would be, in our view, a popular thing, not 17 necessarily on the web, but just browsing in 18 general would be a popular activity. 19 Question: Is a killer application an 20 application that drives sales of other products 21 like operating systems and hardware? 22 Answer: No. 23 Question: Do you have a definition in 24 your mind of killer application? 25 Answer: It means a popular 5176 1 application. 2 Question: Let me resort again to the 3 Microsoft computer dictionary, and I'll read 4 you what that says about killer applications. 5 You may disagree with it, and, if so, you can 6 tell me. 7 The Microsoft computer dictionary, 8 1997 edition, defines killer app as follows, 9 and it gives two definitions. And I'll be very 10 complete this time, Mr. Gates. 11 The first definition is an application 12 of such popularity and widespread 13 standardization that fuels sales of the 14 hardware platform or operating system for which 15 it was written. 16 Do you agree with that definition? 17 Answer: Are you saying to me that 18 there is more in there and you're just reading 19 me part of it? 20 Question: I'm going to read you the 21 second definition as well. 22 Answer: So you're asking me about it 23 without reading me the whole thing? 24 Question: No, sir. There's two 25 definitions. You're familiar with 5177 1 dictionaries, I take it? 2 Sometimes they have more than one 3 definition of a term; correct? 4 Answer: Sometimes terms have more 5 than one meaning, so it's appropriate that 6 dictionaries would give the two different 7 meanings. 8 And, generally, before you'd ask 9 somebody if they agreed with the dictionary, 10 you'd actually give them the benefit of reading 11 them what is in the dictionary, not just a part 12 of it. 13 Question: I read you the first 14 definition and asked you if you agreed with 15 that definition. 16 Answer: I don't think it's the only 17 definition. 18 Question: Is that an accurate 19 definition? 20 Answer: I'd like to hear what the 21 other -- 22 Question: I'll read it to you. The 23 second definition is, an application that 24 supplants its competition. 25 Let me go back and read you the first 5178 1 definition again, now that you've heard both of 2 them. 3 The first definition reads as follows: 4 An application of such popularity and 5 widespread standardization that fuels sales of 6 the hardware platform or operating system for 7 which it was written. 8 Answer: I already told you that my 9 definition of killer app is a very popular 10 application. 11 Question: Is this definition 12 accurate? 13 Answer: I told you, when I use the 14 term killer application, in particular when I 15 use it in a piece of e-mail, what I mean by it 16 -- I'm sure that's people -- 17 Question: I understand. You've told 18 me that, but there's another question on the 19 table. 20 Do you have any disagreement with this 21 definition? 22 Answer: I think most people when they 23 use the word killer app are not necessarily 24 tying it to any relationship to hardware. 25 Question: What about a relationship 5179 1 to an operating system? 2 Answer: Usually they're just talking 3 about it being a very popular application. I 4 certainly know of things that have been 5 referred to as killer applications that haven't 6 driven hardware sales or operating system 7 sales. 8 Question: What other applications 9 would you identify as being killer 10 applications? 11 Answer: Applied simulator. 12 Question: Any others? 13 Answer: Well, you always have to take 14 a year and a context for those things. For 15 example, when desktop publishing software 16 became popular in the 1980s, many people 17 referred to it that way. 18 When people are talking about 19 interactive TV, they thought video on demand 20 would be a killer application. 21 And something went wrong because, you 22 know, the whole thing never caught on. But 23 people had been using that term, the idea of 24 letting people watch movies as something that 25 would be extremely popular. 5180 1 Question: In what time frame was the 2 web browser a killer application? 3 Answer: Well, I think web browsers 4 became very popular between, oh, '95 and '97 5 they became very popular. 6 Question: So at that point in time 7 the web browser was, in your definition, a 8 killer application? 9 Answer: They were very popular, yeah. 10 Unidentified person: We need to 11 renumber Exhibit 1 as Exhibit 337. 12 Question: Microsoft currently markets 13 operating systems for personal computers; 14 correct? 15 Answer: Yes. 16 Question: What operating systems for 17 personal computers does Microsoft currently 18 have on the marketplace? 19 Answer: Well, we have MS-DOS. We've 20 got Windows CE that's got a lot of different 21 versions. We've got Windows 3x, Windows 95, 22 Windows 98, Windows NT Version 3, Windows NT 23 Version 4. 24 Question: Are all those operating 25 systems currently being marketed by Microsoft? 5181 1 Answer: Yes. 2 Question: Does Microsoft endeavor to 3 track its market share with respect to 4 operating systems on personal computers? 5 Answer: There's not some unified 6 effort to do that. 7 Question: Is there anybody in 8 Microsoft responsible for trying to determine 9 what Microsoft's market share is with respect 10 to PC operating systems? 11 Answer: No. 12 Question: Have you seen any figures 13 indicating what Microsoft's market share is 14 with respect to operating systems on personal 15 computers? 16 Answer: From time to time people 17 doing marketing analysis may pull together some 18 figures like that. And depending on, you know, 19 what the context is, they will be different 20 numbers. 21 MR. HOUCK: I'd like to mark as 22 Exhibit 338 a fiscal year 1996 midyear review 23 dated January 22, 1996. 24 Question: Is Exhibit 338 the type of 25 document you referred to that contains market 5182 1 share information? 2 Answer: I don't know anything about 3 338. 4 Question: Have you ever seen it 5 before? 6 Answer: No. 7 Question: Do you know what position 8 Joachim Kempin held in January 1996? 9 Answer: Yes. 10 Question: What was his position at 11 that time? 12 Answer: He was in charge of our 13 relationships with hardware manufacturers. 14 Question: Do you have any 15 understanding that one of Mr. Kempin's job 16 responsibilities in that connection in 1996 was 17 to try to determine what Microsoft's market 18 share was with respect to operating systems 19 sold to hardware manufacturers? 20 Answer: No. 21 Question: I'd like you to turn to the 22 page of this document that ends in 022. And 23 the heading reads, x86 OS analysis for fiscal 24 year '96. 25 Answer: Okay. 5183 1 Question: On the page that is titled 2 x86 OS analysis for fiscal year '96 appears a 3 statement, all other competitive licenses, less 4 than 5 percent. 5 Do you have any understanding that in 6 or about early 1996 Microsoft's share of the 7 market with respect to operating systems sold 8 for x86 computers was in the vicinity of 95 9 percent? 10 Answer: No. 11 Question: What is your understanding 12 of what the Microsoft market share was at that 13 time? 14 Answer: I wouldn't know. 15 Question: Do you have any idea, as 16 you sit here today, what Microsoft's market 17 share is with respect to operating systems sold 18 for x86 architecture computers? 19 Answer: Well, piracy alone is greater 20 than 5 percent. But, no, I don't know the 21 number. 22 Question: What other companies 23 besides Microsoft sell operating systems for 24 x86 architecture computers? 25 Answer: There's a great number. 5184 1 Question: Can you identify them? 2 Answer: Santa Cruz. Red Brick. 3 Caldera. IBM in many different products. Sun 4 Microsystems. Microware. Wind River. 5 MR. HOUCK: I'd like to mark as 6 Exhibit 339 a memorandum or e-mail from Anthony 7 Bay to Ben Slivka dated October 25, 1994. 8 Question: Would you take a look at 9 Exhibit 339, Mr. Gates? 10 Exhibit 339 contains a number of 11 e-mails, and I want to ask you a couple 12 questions about one on the first page from 13 Russell Siegelman to yourself and others re: 14 MCI as an access provider dated October 13, 15 1994. 16 Do you recall receiving this e-mail? 17 Answer: No. 18 Question: Do you have any reason to 19 believe you didn't get it? 20 Answer: No. 21 Question: What was Mr. Siegelman's 22 position in October of '94? 23 Answer: He was involved with looking 24 at Marvel. 25 Question: And what was Marvel? 5185 1 Answer: It was a code name for what 2 we would do in terms of Internet sites or 3 online service activity. 4 Question: Do you understand that in 5 this e-mail here Mr. Siegelman is opposing a 6 proposal to give MCI a position on the Windows 7 95 desktop as an Internet service provider? 8 Answer: I don't remember anything 9 about MCI. 10 This talks about how we'll have a 11 Mosaic client in Windows 95. I don't see 12 anything in here about the desktop. 13 Question: It references in this 14 e-mail the Windows box. 15 What do you understand the Windows box 16 to mean? 17 Answer: Well, the Windows box is 18 certainly not the Windows desktop. 19 Question: Is it your understanding 20 that when he uses Windows box here, he means a 21 piece of cardboard? 22 Answer: Well, he is probably talking 23 about the stuff that's inside. He is saying 24 access to the Windows box. He is talking about 25 the bits that are on the -- 5186 1 Question: What do you understand to 2 be the subject of the memorandum here that he 3 is addressing? 4 THE WITNESS: This is the electronic 5 mail. And Russ is suggesting that he disagrees 6 with doing a deal with MCI under these 7 particular terms. 8 Question: In the e-mail, he refers to 9 Windows distribution as a unique and valuable 10 asset, more specifically as our one unique and 11 valuable asset. Do you see that? 12 Answer: I see a sentence that has 13 those words in it. 14 Question: Do you have an 15 understanding as to what he meant? 16 Answer: Well, the Marvel people were 17 having a hard time coming up with a strategy. 18 And, in retrospect, we can look back 19 and say they didn't come up with a good 20 strategy. And they were looking at, you know, 21 what could they do that would be attractive to 22 a lot of users. 23 And sometimes their goals and the 24 goals of the Windows group were different. 25 And, in retrospect, it's clear they weren't 5187 1 able to attract a lot of users. 2 Question: Mr. Gates, I indicated at 3 the outset of the deposition, I do want to move 4 through this deposition as quickly as possible, 5 but I must say I think your answers are 6 nonresponsive and rambling. 7 And if that continues to be the case, 8 I'm just letting you know this is going to take 9 much longer than I would have hoped. 10 So I'll pose my question again because 11 I think your answer was nonresponsive. 12 Do you have any understanding as to 13 what Mr. Siegelman meant here by his reference 14 to Windows distribution being our one unique 15 and valuable asset? 16 Answer: Was that the question I was 17 asked -- 18 Question: Yes, sir. 19 Answer: Can you read me back the 20 previous question? 21 (Requested portion of the record 22 was read.) 23 Answer: Well, maybe there's some 24 understanding -- you said do I understand what 25 he meant. I thought you were asking about his 5188 1 e-mail as a whole. 2 Question: Let me reask it for the 3 third time and see if I can get an answer. 4 Do you have any understanding what 5 Mr. Siegelman meant when he referred to Windows 6 distribution as our one unique and valuable 7 asset? 8 Answer: I think the Marvel group in 9 their search for what they could do to get 10 millions of users at this particular point in 11 time was thinking about making it easy to sign 12 up to the Windows box being something that 13 would be helpful to them and, therefore, an 14 asset for the Marvel group in what they were 15 doing. 16 (Whereupon, playing of video 17 adjourned.) 18 THE COURT: Thank you. We'll stop at 19 this time for our lunch break. 20 Remember the admonition previously 21 given. You may leave your notebooks here. 22 We'll see you at noon. Thank you. 23 All rise. 24 (A recess was taken from 11:01 a.m. 25 to 11:40 a.m. ) 5189 1 MR. CASHMAN: Okay, Your Honor, 2 Michael Cashman for the Plaintiffs. 3 We have an issue concerning objections 4 that Microsoft is now asserting to portions of 5 the testimony that Mr. Gates gave in his DOJ 6 deposition, and we would reach those 7 designations this afternoon. 8 Plaintiffs think that the objections 9 should be dismissed for several reasons. 10 First of all, Plaintiffs believe that 11 the Court's November 28th, 2006 order is clear, 12 and it overruled all objections that Microsoft 13 made to the testimony designations for 14 Mr. Gates. 15 Microsoft is going to contend, I 16 suspect, that there were certain objections. 17 And this one in particular, that they didn't 18 get a chance to argue at that time. 19 Plaintiffs think that contention is 20 without merit because Microsoft had full 21 opportunity to bring it up. If not then, they 22 could have brought it up at any time since 23 November 28th. 24 And instead, we are confronted with 25 these substantial objections at the very last 5190 1 second in a manner that would disrupt our 2 presentation of Mr. Gates. 3 And in this connection, I'd like to 4 quote a little section of the Court's November 5 28th -- or a little bit of the transcript from 6 November 28th when the designations were 7 argued. 8 And as the Court will recall, there 9 was substantial argument on the testimony. And 10 Mr. Tulchin at that time made the statement in 11 response to some question or a comment by me 12 that all the objections to the testimony could 13 be ruled on globally. 14 And Mr. Tulchin states, quote, so, 15 Your Honor, I want to join Mr. Cashman in 16 saying that if the Court wants to hear 17 individual segments of Mr. Gates' deposition, 18 I'll be happy to go through it. Mr. Tuggy can 19 do that. I see no need for that here. 20 That's at page transcript 1937, line 21 10 through 15. 22 Then I also wish to note for the 23 record that at the end of the arguments that we 24 provided on the testimony of Mr. Gates, and 25 that Microsoft provided, the Court inquired 5191 1 whether our argument covered the exhibits as 2 well. 3 And you stated, the Court stated, 4 quote, the reason I was asking was has your 5 argument here covered the exhibits in the 6 Gates' decision or not? 7 And Mr. Tulchin replies, oh, yes, it 8 does, Your Honor. The same principle applies. 9 The Court then said that's what I 10 wanted. All right. 11 And that's at transcript 1950, lines 12 21 through 25, and 1951, lines 1 and 2. 13 So the Plaintiffs believe that 14 Microsoft had full and ample opportunity to 15 bring these objections up at that time. And 16 even if they didn't, they had our designations, 17 they had all of our exhibits, and they could 18 have brought these objections not only to our 19 attention, but, to the Court's attention, long 20 before today. 21 So we believe those objections should 22 all be overruled on that grounds alone. 23 Turning to the substance. I'm going 24 to start with -- if I may approach. 25 THE COURT: Yes. Thank you. 5192 1 MR. CASHMAN: On the top of what I've 2 just handed up to the Court is a copy of two 3 different exhibits. And attached to that are 4 the portions of the transcript to which 5 Microsoft is objecting. 6 These two exhibits, Plaintiffs' 7 Exhibits 5783 and Plaintiffs' Exhibit 5777A are 8 articles from the Financial Times in London. 9 And they're dated both in 1996, 5777A is June 10 10, '96, and 5783 is July 3rd, 1996. 11 These articles are not going to be 12 offered into evidence by the Plaintiffs. And 13 the Plaintiffs are not -- and have never been 14 planning to display these articles during the 15 course of Mr. Gates' deposition. 16 But if the Court -- I'm going to use 17 5777A as an example. 18 I've tabbed for the Court on the third 19 page of that article a quote attributed to 20 Mr. Gates, which is our business model works. 21 Even if all the Internet software is 22 free, says Mr. Gates, we are still selling 23 operating systems. What does Netscape's 24 business model look like if that happens? Not 25 very good. 5193 1 And that's the only part of this 2 article that Mr. Gates is examined about. And 3 he's examined at length about that statement. 4 And really Mr. Gates is very evasive and 5 nonresponsive about this. 6 But Microsoft, because this article is 7 not -- well, is hearsay, the article is hearsay 8 I believe is what they'll contend, that the 9 examination on Mr. Gates by this one particular 10 statement, that the testimony is, therefore, 11 inappropriate. 12 And Plaintiffs disagree and believe 13 all the testimony is proper because it is 14 appropriate to examine a witness about 15 statements that are attributed to that person. 16 And that's all that's happening here. 17 I direct the Court's attention to Iowa 18 Rule 5.613(a), which is prior statements of 19 witnesses which permits the use of this, I 20 believe, this kind of testimony. 21 And, also, this is clearly an 22 admission by Mr. Gates under 5.801(d)(2), and 23 perhaps other provisions of that rule. 24 But certainly the Plaintiffs are 25 entitled to examine and have this testimony 5194 1 concerning this particular statement admitted. 2 And, just for the record, I also have 3 the prior portion of the testimony from 4 Mr. Gates. If I may approach, Your Honor. 5 THE COURT: Yes. 6 MR. CASHMAN: These are sections of 7 earlier portions of the deposition, some of 8 which haven't been designated for use here, but 9 this is earlier examination of Mr. Gates about 10 these articles, his statements in these 11 articles, where Mr. Gates admits that he had 12 this interview and where he made statements to 13 the interviewer, but he disputes the exact 14 content of what he said. 15 And, for the record, what I've handed 16 up to the Court is the portions of the 17 transcript 129 through 140, but I'd like to 18 direct the Court's attention, in particular, to 19 page 133, lines 21 through 23. 20 And, in particular, Mr. Gates says, 21 I'm not denying making the statement. And that 22 is concerning the statement that I pointed out 23 to the Court, which was also the basic 24 equivalent of what's reported in Plaintiffs' 25 Exhibit 5783. 5195 1 So Mr. Gates adopts and admits that he 2 made these statements, made statements to the 3 reporter. 4 The exhibits are merely examination 5 about his statements, whether he made those 6 statements, what did he mean by those 7 statements, what effect did he think his 8 statements would have. And that's all entirely 9 appropriate examination under the rules. 10 So the Plaintiffs believe that all the 11 objections relating to both 5777A and 5783 12 should be overruled on the merits, in addition 13 to the fact we think those objections were 14 previously overruled or waived by Microsoft. 15 THE COURT: How many of these are 16 there you are going to go through today? 17 MR. TUGGY: There are three articles 18 that have very similar quotes, and it's all the 19 same issue. 20 THE COURT: And then there's other 21 stuff you want to go over also? 22 MR. TUGGY: No. 23 THE COURT: Just three articles? 24 MR. TUGGY: Right. And then it is the 25 testimony related to those three. 5196 1 And what I suggested to Plaintiffs -- 2 because this is not the way this meet and 3 confer process was supposed to work to have 4 this occur in this way. 5 THE COURT: I'm just trying to get an 6 idea how long it's going to be. 7 MR. TUGGY: Right. My suggestion is 8 that they could -- well, I think it's going to 9 take 15 to 20 minutes to do this. 10 But it's a single issue. And it seems 11 to me technologically feasible in this unusual 12 circumstance to take this block of testimony 13 and move it to the morning because there's no 14 flow. And then we could complete the argument 15 this afternoon without creating inconvenience 16 for the Jury. 17 THE COURT: I thought this was going 18 to be this afternoon, isn't it? 19 MS. CONLIN: Yes, Your Honor. And if 20 I may make this statement. 21 One of the reasons that we adopted 22 this process was so this exact thing would not 23 come up. This is not fair to us. It's not 24 fair to our technicians. And we want this 25 deposition presented to the Jury in exactly the 5197 1 way that it was presented -- that the 2 questioning happened. And one of the reasons 3 is because this testimony sort of sets the 4 relationship between the witness and the 5 attorney. 6 And it's extremely important that it 7 be in the context. And we really do object 8 quite strenuously to the fact that we are here 9 in court with this deposition which we have -- 10 which we designated five or six weeks ago, I 11 think. 12 It's just not -- we just can't be 13 asked to do this with the kind of regularity 14 that is occurring. 15 MR. TUGGY: Your Honor, if I may speak 16 to that. 17 MR. CASHMAN: And I just wanted to 18 note, Your Honor, that Mr. Tuggy says this 19 relates to three exhibits. 20 There's one more exhibit, which I 21 haven't handed up yet which is -- I can and I 22 will hand it up just for the record, Exhibit 23 6156 and the related testimony. 24 But the objections by the Microsoft 25 folks are extremely overbroad. What we have 5198 1 here would be is if you made a notation on the 2 side of one of these documents and then 3 somebody later examined you about your notation 4 in the marginalia of one of these documents. 5 That's basically what the examination 6 is of Mr. Gates looking solely at statements 7 that are attributed to him. 8 And notwithstanding that, Microsoft 9 goes way overboard and have objected at the 10 last minute to over -- I think it's 30 pages of 11 critically important testimony. 12 Now, they could have raised these 13 issues long ago. They've known about the order 14 since the 28th of November. They've had our 15 exhibits. They've had our designations. And 16 we didn't hear about this until the first time 17 last night. 18 So, for all these reasons, we think 19 that these objections should be rejected. 20 MR. TUGGY: Your Honor, may I respond? 21 May I approach the bench? An e-mail 22 and some documents. 23 Your Honor, the e-mail I've handed up, 24 I was hoping we wouldn't get into argument 25 about process for getting here as late as we 5199 1 have. 2 Immediately after your order, which is 3 in the document -- set of documents I handed up 4 to you as Exhibit B. It's your order dated 5 November 28th, 2006, where you find that the 6 Plaintiffs' designations of the deposition 7 testimony of Bill Gates are proper and that the 8 objections urged by the Defendant are hereby 9 denied. 10 I immediately attempted to engage the 11 Plaintiffs in meet and confer on issues that I 12 thought were not addressed by this order 13 because they had not been presented to you. 14 I also have in the order as Exhibit A 15 what they did present to you, which does not 16 include the objections that we're discussing 17 today. 18 And in that e-mail of November -- that 19 e-mail of December 2, I -- the Plaintiffs -- 20 it's part of a long series of e-mails where the 21 Plaintiffs stonewalled me on meeting and 22 conferring regarding the Gates' testimony. 23 And I informed them in that e-mail in 24 the section that I highlighted that if their 25 conduct results in difficulty in playing this 5200 1 deposition, it's through no fault of my own. 2 I attempted over and over again to do 3 this meet and confer on these issues. And then 4 finally, last night at 6 o'clock, Mr. Cashman 5 agreed to meet with me. 6 We resolved virtually all the issues. 7 We had many exhibit issues and I tried my best 8 to get them all resolved. 9 This single legal issue is the one as 10 to which we could not get agreement last night. 11 And when we were giving our opening, 12 they rushed in late at night with objections. 13 But this is not what's occurring here. 14 We first made this objection back in April 15 2006. And I've been trying to meet and confer, 16 and now we're at a point where they want to 17 play this testimony this afternoon, but we have 18 objections that have not been ruled upon that I 19 think are good objections. And the objection 20 is really quite simple. 21 The declarant in these articles is the 22 reporter. The reporter is saying that 23 Mr. Gates made certain statements. Mr. Gates 24 in his deposition disclaims having made those 25 statements. He either does not recall having 5201 1 made them or doesn't think that he made them. 2 THE COURT: Okay. Before we get into 3 that, how many total -- excluding the three 4 that you want to talk about today, how many 5 total objections do we have here the Court 6 needs to look at before we can continue to play 7 the Gates' deposition? 8 MR. CASHMAN: Your Honor, we could -- 9 we could go up until about line 152, which is 10 probably going to take us an hour or an hour 11 and a half, and then we'd run into this where 12 their first objections are. 13 THE COURT: My question was how many 14 objections do you have total? 15 MR. CASHMAN: They object to numerous 16 lines. 17 THE COURT: You said three, but 18 there's more; right? 19 MR. CASHMAN: Your Honor, I'm going to 20 hand up to the Court -- 21 THE COURT: I just want to get an idea 22 how many there are. 23 MR. CASHMAN: There are a lot. And 24 that's why I wanted to show you Mr. Tuggy's 25 chart. 5202 1 MR. TUGGY: Your Honor, if I may 2 speak. There are three exhibits and what we 3 are objecting to is the testimony on those 4 documents. 5 THE COURT: Okay. How lengthy is 6 that? 7 MR. TUGGY: There's probably around 20 8 to 30 pages of testimony on the documents. 9 THE COURT: And is there any other 10 objections that you have other than these 11 objections? 12 MR. TUGGY: Not to be resolved in 13 connection with Plaintiffs -- for example -- 14 the answer is no. 15 THE COURT: There's no more -- there's 16 no more objections the Defendant has to 17 anything else in the Gates' deposition other 18 than what you've just told me? 19 MR. TUGGY: Correct. 20 THE COURT: So if I resolve these 30 21 pages today, I will have no more objections on 22 the rest of the Gates' deposition, right? 23 MR. TUGGY: None to be resolved 24 because they've all been made. 25 THE COURT: No, no. You didn't hear 5203 1 what I said. 2 MR. TUGGY: Correct. 3 MR. CASHMAN: Your Honor, if I may 4 just respond, because Mr. Tuggy made some 5 comments about the meet and confer, which 6 require response, at least for the record. 7 And that is that -- and I'm handing up 8 the e-mail stream, which is pertinent on this 9 point. 10 The reason why Microsoft didn't raise 11 these before is because in spite of your order 12 of November 28th, Microsoft took the position 13 that your collateral estoppel objections had 14 not been -- were not dispositive of the -- your 15 collateral estoppel rulings were not 16 dispositive on the Gates' testimony. 17 And so it's simply incorrect for 18 Mr. Tuggy to say that they were stonewalled. 19 I told Mr. Tuggy if you identify 20 specific issues that aren't collateral estoppel 21 issues, I'll be happy to talk with you about 22 them. 23 And Mr. Tuggy insisted, Microsoft 24 insisted that all the collateral estoppel 25 objections were still in play. 5204 1 And it was only yesterday when 2 Mr. Tuggy finally said to me, okay, I will not 3 assert any objections to the testimony and we 4 can talk about specific issues on some 5 documents. 6 And on that basis, we talked about 7 exhibits, and then we get a reflux on that deal 8 as it related to the testimony. 9 So, again, our view is that all of the 10 testimony objections were decided. Microsoft 11 could have raised them long ago. 12 Instead, they stood by their 13 collateral estoppel objections in spite of your 14 order, and just last night for the first time 15 asserted these new testimony objections. 16 And we think they should be overruled 17 both for that reason and on the merits. 18 THE COURT: Anything else on that 19 before we get some idea of how long it's going 20 to take to go through these? 21 I heard you said 15 minutes. Is that 22 realistic? 23 MS. CONLIN: I wonder if maybe, you 24 know, we could go to the first break and then 25 do it. Would that be a good way to proceed? 5205 1 THE COURT: It's going to come up 2 when? In about an hour? 3 MR. CASHMAN: Probably an hour to an 4 hour and a half. 5 MR. TUGGY: Perhaps, Your Honor, if we 6 did the first couple pages in the next five 7 minutes presenting to you the legal issue and 8 you were to rule, then between now and the 9 first break, based on your guidance and 10 rulings, we would be able to meet and confer 11 and resolve the balance. 12 MR. CASHMAN: I don't think that's a 13 practical way to proceed because the more 14 important exhibits are 5777A and 5783, and 15 those come up later. 16 Those take up -- of all the 17 designations, they take up the bulk of the 18 designations. 19 And what I think Microsoft should do 20 is go back and narrow its objections to 21 something that's reasonable if the Court's not 22 inclined to otherwise reject these objections 23 out of -- 24 THE COURT: I just want to know if 25 there's something the Jury can watch for an 5206 1 hour and get back to these. 2 MS. CONLIN: Yeah, there is, Your 3 Honor. 4 THE COURT: What I'll do is let them 5 watch something for an hour and then dismiss 6 them early and get these done. 7 MR. CASHMAN: That would be fine with 8 us. 9 THE COURT: Mr. Tuggy? 10 MR. TUGGY: That would be fine, Your 11 Honor. 12 THE COURT: Okay. Let's do that. 13 Have your technician stop it at the 14 appropriate -- before we get to the disputed 15 testimony. 16 MS. CONLIN: I will, Your Honor. I 17 think that we would stop -- let me see. Page 18 151, line 16. 19 THE COURT: Does that sound right, 20 Mr. Tuggy? 21 MR. TUGGY: Yes. 22 THE COURT: That's right. Okay. 23 All right, we'll do that. 24 You can get the Jury. 25 MS. CONLIN: Your Honor, are we going 5207 1 to kind of tell them what we are doing because 2 they get a little grumpy if they don't get 3 their break on time. 4 THE COURT: Is it about an hour? 5 MS. CONLIN: It could be a little more 6 than an hour. An hour and 15 minutes. 7 THE COURT: Okay. I'll tell them it's 8 about an hour and 15 minutes. 9 MS. CONLIN: And then if they get to 10 go home, they'll be happy 11 THE COURT: I'll tell them. 12 (The following record was made in the 13 presence of the jury at 12:07 p.m.) 14 THE CLERK: All rise. 15 THE COURT: Everyone else may be 16 seated. 17 Ladies and gentlemen of the jury, we 18 are going to, oh, go approximately an hour and 19 15 minutes with this videotape. 20 At that time I will dismiss you for 21 the day, so you can get an early start on your 22 weekend if that's okay. 23 [Juror Name]: We'll make the 24 sacrifice. 25 MR. TULCHIN: But we're making it up 5208 1 tomorrow, is that it? 2 THE COURT: No. Sunday would probably 3 be better. 4 All right, you may continue. 5 (Whereupon, the following video was 6 played to the jury.) 7 Question: Do you understand that 8 Mr. Siegelman in his reference had in mind the 9 large market share that Microsoft has with 10 respect to operating systems? 11 Answer: I don't see anything about 12 that in here. 13 Question: That's not your 14 understanding? 15 Answer: Remember, Russ isn't involved 16 with the Windows business. He is involved with 17 the Marvel business. 18 Question: Let me put the question 19 again without reference to this document. 20 Mr. Gates, do you believe that Windows 21 distribution is a unique asset that Microsoft 22 has? 23 Answer: What do you mean when you say 24 Windows distribution there? 25 Question: Do you have an 5209 1 understanding what Mr. Siegelman meant by the 2 phrase Windows distribution in his e-mail that 3 he wrote to you? 4 Answer: He means -- I think he 5 means -- I don't know for sure. I think he 6 means including an icon on the desktop for 7 access to Marvel. 8 Question: And by the desktop, you 9 mean the Windows desktop? 10 Answer: In this case, yes. 11 Question: He goes on in the e-mail to 12 say as follows: The only real advantage we 13 have in this game is Windows distribution. Why 14 sell it so cheaply when we think -- is will be 15 a big market and can give us leverage in so 16 many ways in the Iway business. 17 Do you have any understanding what he 18 meant by the phrase Iway business here? 19 Answer: No. I've never -- I don't 20 remember ever seeing that term before. 21 Question: What distribution channels 22 has Microsoft employed to distribute Internet 23 Explorer? 24 Answer: Well, the primary 25 distribution channel is the Internet where 5210 1 people very easily download whatever version of 2 Windows Internet technology they're interested 3 in. 4 We've also distributed it through 5 retailers, the Windows 95 update product and, 6 you know, wherever Windows goes out, which 7 includes retail, OEM. 8 And then people do Internet signups 9 have also done some distribution. There's a 10 lot of different marketing programs where we'll 11 have like a conference and we'll make available 12 Internet Explorer to people that attend the 13 conferences. 14 I think we've also included it with 15 Microsoft Office in some cases. 16 Question: Has Microsoft done research 17 to determine which distribution channels are 18 most effective in delivering browsers that are 19 actually used by people? 20 Answer: I think somebody did a survey 21 to ask people where they get their browser at 22 some point. 23 Question: Do you have any 24 recollection who did that survey? 25 Answer: No. 5211 1 Question: Do you recall what the 2 results were? 3 Answer: I know the Internet has 4 always been the primary distribution channel 5 for browsers. 6 Question: You're talking about 7 specifically Internet Explorer? 8 Answer: No. 9 MR. HOUCK: I'd like to mark as 10 Exhibit 340 a memorandum -- or, rather, an 11 e-mail -- from Kumar Mehta to Brad Chase and 12 Yusuf Mehdi dated March 27, 1997. 13 Question: Is this an example of the 14 type of memorandum you've seen in which 15 Microsoft has endeavored to determine which 16 distribution channels are most effective in 17 distributing web browsers? 18 Answer: No. 19 Question: What position in the 20 company did Mr. Mehta have in March of 1997? 21 Answer: I don't know. 22 Question: Do you know if one of his 23 responsibilities was market research? 24 Answer: No. I mean, I'm not copied 25 on this. I mean, just looking at it -- and I 5212 1 certainly have no recollection of seeing this. 2 It also seems to contradict some other things 3 that I have seen. 4 Question: The e-mail reads as 5 follows: Bob Foulon is gathering data for a 6 John Roberts meeting with Bill Gates tomorrow. 7 Apparently, they are going to discuss 8 whether IE and Memphis should be bundled 9 together. 10 Do you recall such a meeting with 11 Mr. Foulon and Mr. Roberts? 12 Answer: No. 13 Question: Do you recall Mr. Foulon or 14 Mr. Roberts sharing with you market research 15 data with respect to how people get their 16 browsers? 17 Answer: I don't know Bob F-o-u. 18 Question: Do you understand that is a 19 reference to Bob Foulon? 20 Answer: I don't know Bob Foulon. I 21 don't know anyone who's name is Bob F-o-u 22 anything. 23 Question: Do you know John Roberts? 24 Answer: Yes. 25 Question: What position does he have 5213 1 with Microsoft? 2 Answer: He at this time -- is that 3 what you're interested in? 4 Question: Yes. 5 Answer: At this time I think he works 6 for Brad Chase. 7 Question: Did you have a meeting that 8 you recall with Mr. Roberts and/or Mr. Chase in 9 or about March of 1997 where you talked about 10 the results of market research to determine how 11 people obtained Internet Explorer? 12 Answer: I don't remember. 13 Question: The e-mail I quoted 14 attaches another e-mail dated March 27, 1997, 15 which says in the first two paragraphs, which 16 I'll read, Bob, here is some information on how 17 people get and use IE that might help you guys. 18 My feeling, based on all the IE 19 research we have done, is that it is a mistake 20 to release Memphis without bundling IE with it. 21 IE users are more likely than other 22 browser users to get it with their computers. 23 Overall, 20 percent of people who use 24 IE at home obtained it with their computer; and 25 24 percent of those using IE at work got it 5214 1 with their computer. 2 Effectively, we would be taking away 3 the distribution channel of almost a quarter of 4 all IE users. 5 Do you have any understanding as to 6 the accuracy of the numbers he cites here with 7 respect to the number of people using IE who 8 obtained it with their computer? 9 Answer: I have no idea what we're 10 talking about in terms of what kinds of users 11 he surveyed or looked at. 12 So, no, I have no opinion on it 13 whatsoever. I mean, who knows. 14 Question: Do you have any reason to 15 believe the information he reports here is 16 inaccurate? 17 Answer: I don't have enough of a 18 context to even state an opinion. It doesn't 19 even say what kind of users or anything. 20 Question: Can you identify any 21 specific documents you've seen that indicate 22 how IE users obtained IE? 23 Answer: No. 24 Question: Have you seen any documents 25 like that at Microsoft prepared by Microsoft 5215 1 employees? 2 Answer: I believe I have, yes. 3 Question: Do you know who prepared 4 them? 5 Answer: No. 6 Question: Was Netscape the first 7 company to market a web browser that gained 8 widespread consumer usage? 9 Answer: I think Mosaic was the first 10 browser. I don't know what your criteria -- 11 what you're implying in terms of widespread. 12 Mosaic was the first popular browser 13 and that predates the existence of Netscape for 14 their browser. 15 Question: Did Netscape's browser 16 supplant the Mosaic browser as the most popular 17 one? 18 Answer: There's a point in time when 19 Netscape's browser became more popular in terms 20 of usage share than Mosaic. 21 Question: Do you recall when that 22 was? 23 Answer: I'm sorry? 24 Question: Do you recall when that 25 was? 5216 1 Answer: No. I don't think anybody 2 knows exactly when that was. 3 MR. HOUCK: Excuse me. I'd like to 4 mark as Exhibit 341 a series of e-mails, the 5 first one being from Pat Ferrel, F-e-r-r-e-l, 6 to Bill Gates and others dated April 6, 1995. 7 Question: I hand you Exhibit 341, 8 Mr. Gates. And this is a series of e-mails. 9 And the one I want to ask you about is 10 the one on the second page from Mr. Siegelman 11 to yourself and others dated April 6, 1995. 12 Take a minute to take a look at it. 13 Have you finished reviewing the 14 e-mail? 15 Answer: I looked at it. 16 Question: The e-mail starts off as 17 follows: Pat Ferrel and I have been thinking 18 about this problem a lot and watching Netscape 19 very closely. 20 I too am very worried. 21 What position did Mr. Ferrel hold at 22 Microsoft in or about April of 1995? 23 Answer: He wasn't involved with 24 Windows. He was involved with Marvel. 25 Question: Is he still a Microsoft 5217 1 employee? 2 Answer: I don't think so. I'm not 3 sure. 4 Question: Do you recall personally 5 being worried about Netscape in or about April 6 of 1995? 7 Answer: No. 8 Question: Do you recall discussing 9 Netscape with Mr. Siegelman in this time 10 period? 11 Answer: I'm sure Russ and I discussed 12 the effect of the Internet in general on online 13 service strategies like the work he was doing 14 that became MSN, but not Netscape in 15 particular, no. 16 Question: The next sentence of the 17 e-mail says, I agree with most of your problem 18 statement, but I think you underestimate the 19 publisher/ISV threat. 20 Netscape is already opening up API 21 hooks in their viewer and many ISVs are hopping 22 aboard. 23 Do you know what his reference is to 24 your problem statement? 25 Answer: No. 5218 1 Question: Do you understand what he 2 means here when he talks about opening up API 3 hooks and many ISVs hopping aboard? 4 Answer: I don't know what he meant. 5 I can guess if you want. 6 Question: Do you have any 7 understanding as you sit here what he meant by 8 the language used in this e-mail? 9 Answer: I don't know what he meant. 10 I'd have to ask him what he meant. 11 Question: I'm asking for your 12 understanding. Do you have one or not? 13 Answer: Understanding of what? Of 14 what he meant? 15 Question: Yes. 16 Answer: No. Of what those words 17 might mean, I can guess. 18 Question: I don't want you to guess. 19 I'm asking if you have any present 20 understanding of what these words mean. 21 Answer: I've told you I don't know 22 who he means by you. I don't know what he 23 means by problem statement. 24 So I'm a little unclear about what he 25 means in this paragraph. 5219 1 Question: By ISV, do you understand 2 him to be referring to independent software 3 vendors? 4 Answer: That acronym refers to 5 independent software vendor. 6 Question: And what does the acronym 7 API refer to? 8 Answer: Application programming 9 interface. 10 Question: Do you recall yourself 11 having a concern in or about April, 1995 about 12 the possibility that Netscape was going to open 13 up API hooks in the Netscape web browser? 14 Answer: I can't pin any recollection 15 to that particular time period, no. 16 Question: Did you at some point come 17 to the conclusion that the prospect that 18 Netscape might open up API hooks in their 19 browser was a threat to Microsoft? 20 Answer: I think in late '95 21 Andreessen was talking about how he was going 22 to put us out of business, suggesting that 23 their browser was a platform. And, in fact, 24 they did have APIs in their browser. 25 Question: Do you recall having any 5220 1 concern yourself before late 1995 with respect 2 to the threat posed by Netscape opening up API 3 hooks in their browser? 4 Answer: No. 5 Question: Do you recall that other 6 folks at Microsoft had such concerns before 7 late 1995? 8 Answer: It's hard to recall other 9 people's concerns. No, I don't recall other 10 people's concerns. 11 MR. HOUCK: I'd like to mark as 12 Exhibit 342 a series of e-mails, first one 13 being from Nathan Mhryvold to Mr. Gates dated 14 April 24, 1995. 15 Question: Before you take a look at 16 that document, do you recall that there was a 17 general discussion at Microsoft at the top 18 executive level in or about April, 1995, with 19 respect to the threat to Microsoft posed by 20 Netscape? 21 Answer: No. 22 Question: What position did 23 Mr. Mhryvold hold with Microsoft in April of 24 1995? 25 Answer: He was Russ Siegelman's boss, 5221 1 so he wasn't involved in the Windows business. 2 He was involved in our online service 3 activities. 4 Question: Was he one of your top 5 executives? 6 Answer: He was an executive. I'm not 7 sure what you mean by top executive. He didn't 8 manage any of the large products that we offer. 9 Question: Was he sort of Microsoft's 10 resident strategic thinker? 11 Answer: No. 12 Question: Did you value his advice? 13 Answer: Not over the advice of people 14 who are more directly involved in their 15 businesses. 16 Question: If you would, would you 17 take a look at Exhibit 342, and in particular 18 the e-mail on the second page, which is from 19 Mr. Mhryvold to yourself and others regarding 20 Internet strategy dated April 18, 1995. 21 The first paragraph reads, there has 22 been a flurry of e-mail about Netscape and our 23 general Internet development strategy. This 24 e-mail is my contribution to this topic. 25 Does this refresh your recollection 5222 1 there was a general discussion at the upper 2 levels of Microsoft in or about April, 1995 3 with respect to Netscape and how to respond 4 competitively to Netscape? 5 Answer: Well, I think that's a 6 mischaracterization. It appears there was some 7 mail about the effect of Netscape and their 8 activities on our online service strategy. 9 Question: What do you understand 10 about Mr. Myhrvold's reference here to general 11 Internet development strategy? 12 Answer: This memo is about our 13 strategy with the Blackbird front end and how 14 it should relate to Internet protocols. 15 And it's a very long, nine-page thing 16 about Blackbird, and his various opinions about 17 Blackbird. The interesting thing is Blackbird 18 basically was cancelled. 19 Question: Is it your testimony and 20 your understanding that this memorandum is 21 limited to a discussion about Blackbird? 22 THE WITNESS: You keep using the word 23 memorandum to refer to electronic mail. I 24 don't think of electronic mail as a memorandum. 25 So this e-mail, which I haven't read, 5223 1 the part I've glanced at, all the action items, 2 all the things he is saying we should do all 3 relate strictly to Blackbird and the online 4 services activities. 5 Question: On the next page, first 6 full paragraph, Mr. Mhryvold states, the world 7 of the Internet is rapidly becoming Windows 8 centric because Windows will be the most 9 popular client operating system by a wide 10 margin. 11 Did you understand he was referring 12 here to market share enjoyed by Windows? 13 Answer: I've said I don't remember 14 the memo specifically, so it's hard for me to 15 say I remember something he was referring to. 16 Question: Is it your present 17 understanding that by the reference here to 18 Windows being the most popular client operating 19 system by a wide margin, Mr. Mhryvold was 20 referring to the market share enjoyed by 21 Windows in or about April, 1995? 22 Answer: He may have been. 23 Question: Isn't it a fact that you 24 executives at Microsoft back in April of '95 25 were concerned that Netscape's web browser 5224 1 posed a threat to Microsoft's Windows platform? 2 Answer: Well -- 3 Question: You can answer it yes or 4 no, sir. 5 Answer: I don't know when people 6 began to think of Netscape as a competitor to 7 Windows. I don't think it was that early, but 8 it might have been. I know that by late '95 9 when people thought about the various 10 competitors to Windows, they did think of 11 Netscape. 12 Question: What's the earliest date 13 you could put on the concern expressed to you 14 by Microsoft executives that Netscape posed a 15 threat to the Windows platform? 16 THE WITNESS: I said that in late '95 17 I'm pretty sure people thought of them as a 18 competitor. I couldn't name a date earlier 19 than that. 20 I know that online service people were 21 thinking about Netscape and the Internet at 22 earlier dates. 23 Question: Let me ask you a few 24 questions about page 898 of this document, 25 several pages later on. 5225 1 I'll read you the portion of it I want 2 to ask you some questions about so you have 3 that in mind. 4 The front end which supports these 5 services is basically the union of the MSN 6 front end with Blackbird and O'Hare. 7 At some point this is very smoothly 8 integrated, but at first they are separate 9 pieces of code stuck together at the end user 10 level. 11 The front end should be given away as 12 widely as possible, including put into Windows. 13 I agree with Paul Maritz's comment 14 that we should distribute the front end very 15 broadly by having it Windows, at least at some 16 point down the line. 17 Distributed free on the Internet. 18 Distributed free with MSN. 19 Do you recall any general discussion 20 of this subject with Mr. Mhryvold and 21 Mr. Maritz back in April of '95? 22 Answer: I know there was a plan to 23 have Blackbird include all the HTML support and 24 so it would be a superset in that sense. 25 Question: Is the reference to O'Hare 5226 1 a reference to Internet Explorer? 2 Answer: Probably. 3 Question: Do you know a gentleman by 4 the name of Ben Slivka? 5 Answer: Yes. 6 Question: What were his 7 responsibilities, if any, at Microsoft back in 8 early 1995? 9 Answer: I'm not sure. 10 MR. HOUCK: I'd like to mark as 11 Government Exhibit 343 a series of e-mails, the 12 first one being from Alec Saunders to various 13 people at Microsoft dated January 31, 1995, the 14 subject being Frosting and O'Hare. 15 Question: To expedite your review of 16 this document, Mr. Gates, I'll tell you my 17 questions are going to be limited to the e-mail 18 on the last page of the document. 19 This is an e-mail from Ben Slivka to 20 Tim Harris and others at Microsoft dated 21 February 13, 1995 and does not show you as a 22 recipient. 23 Answer: Which one? 24 Question: The top one. 25 The first sentence of the e-mail from 5227 1 Mr. Slivka states, O'Hare is a code name for 2 our Internet client, and we plan to ship it in 3 the Win 95 frosting package which sim-ships 4 with Win 95. 5 Do you understand his reference here 6 to O'Hare and the Internet client to be a 7 reference to what became known as Internet 8 Explorer? 9 Answer: I think Internet Explorer 10 1.0, that was in part of the Windows 95. 11 Question: Do you recall a plan back 12 in early 1995 to ship a product known as 13 Frosting? 14 Answer: I don't recall the plan. I 15 know we worked on what we called Frosting. 16 Question: What is your understanding 17 of what Frosting was? 18 Answer: It became the Windows plus 19 pack. It didn't sim-ship I don't think. 20 Question: Was it your understanding 21 that at some point in time it was Microsoft's 22 intention to include Internet Explorer in the 23 Frosting package as opposed to Windows 95? 24 Answer: Well, for the primary Windows 25 95 distribution channel, we included Internet 5228 1 Explorer 1.0 with Windows. So when you say 2 Windows 95, it was part of Windows 95. 3 Then there is the Windows 95 upgrade 4 that was sold at retail, which that had a box 5 labeled Windows 95 upgrade and a box labeled 6 Windows 95 plus pack. 7 Question: Do you recall that in or 8 about February, 1995, it was Microsoft's 9 intention to include Internet Explorer in the 10 Frosting package and not in Windows 95? 11 THE WITNESS: No. I think you 12 misunderstood what I said. Windows 95, the 13 full product, included IE. Windows 95, the 14 upgrade product, did not. 15 But Windows 95, the full product, 16 whether sold through the OEM or whatever, that 17 included the capabilities. It was just the 18 upgrade that did not. 19 Question: I understood your answer. 20 Let me ask the question again because 21 I don't think you understood the question. 22 The question was: Is it your 23 understanding that as of February, 1995, it was 24 not Microsoft's intention to include Internet 25 Explorer in the full product known as Windows 5229 1 95? 2 Answer: The product that didn't 3 include Internet Explorer is called the Windows 4 95 upgrade. Windows 95, the full product, did 5 include Internet Explorer. 6 Question: I understand that when it 7 was marketed, it included Internet Explorer. 8 The question is: Is it your 9 recollection that back in February of 1995, it 10 was Microsoft's intention not to include 11 Internet Explorer in Windows 95, but to market 12 it instead as part of the package known as 13 Frosting? 14 Can you answer the question, sir? 15 Answer: I'm confused about what 16 you're asking me because you have to 17 differentiate the retail channel, which is the 18 Windows 95 upgrade and the plus pack from 19 Windows 95, the whole product. 20 Windows 95, the whole product, we 21 wanted to include a lot of features. We don't 22 know for sure which features are going to get 23 done in time until, really, the product is 24 done. 25 So certainly our intention to do it 5230 1 and working hard on doing it, that plan had 2 existed for a long time. 3 We weren't certain for any future on 4 Windows 95 exactly what we would decide to get 5 in or not get in. 6 We did, in fact, get the Internet 7 Explorer 1.0 into the Windows 95 full product. 8 Question: Do you recall that in or 9 about February 1995, it was Microsoft's 10 intention to ship O'Hare as part of Frosting? 11 Answer: The thing that was code named 12 O'Hare ended up in the Windows 95 full product 13 as one place it came. And another place was in 14 the plus pack. 15 Question: Let me ask it one more 16 time. 17 Was it Microsoft's plan as of 18 February, 1995, to ship Internet Explorer 19 solely in the Frosting package and not in the 20 initial full Windows 95 package that was to be 21 marketed? 22 Answer: No. Our plan was to get it 23 into the Windows 95 full package if possible. 24 Question: Do you recall that in or 25 about February, 1995, it was felt at Microsoft 5231 1 that it was not possible to include O'Hare in 2 the Windows 95 package? 3 Answer: We had a plan to include it 4 if at all possible. 5 In the world of software development 6 there's always skeptics. 7 So you can name any features of 8 Windows 95 and you can find somebody who would 9 have been skeptical about whether it would get 10 done or not in time for the shipment of the 11 product. 12 Certainly, the people involved in 13 doing the development were working hard and, in 14 fact, they succeeded in achieving our plan, 15 which was as best we could to include it in the 16 product. And we did. 17 Question: Who was responsible back in 18 1995 for determining what went into Windows and 19 what didn't? 20 Answer: That's a decision that I 21 would have the final say on. 22 Question: Who were your senior 23 executives responsible for assisting in that 24 decision? 25 Answer: Maritz. 5232 1 MR. HOUCK: I'd like to mark as 2 Government Exhibit 344 a series of e-mails, 3 first one being from Paul Maritz dated April 4 12, 1995. 5 Question: Exhibit 344, Mr. Gates, is 6 a series of e-mails and the initial questions 7 will be about the very last one, which is an 8 e-mail from you to Craig Mundie dated April 10, 9 1995. 10 What were Mr. Mundie's 11 responsibilities back in April of 1995? 12 Answer: He was doing the broadband 13 online service work, which was sometimes 14 referred to as interactive TV. 15 Question: In the first paragraph you 16 say, given that we are looking at the Internet 17 destroying our position as a setter of 18 standards in APIs, do you see things we should 19 be doing to use ACT assets to avoid this? 20 What was your reference to ACT assets? 21 Answer: ACT, A-C-T. That's Craig 22 Mundie's group. 23 Question: Your e-mail goes on to 24 state, I admit I find it hard to focus lots of 25 resources on trials and things when the 5233 1 Internet is taking away our power every day. 2 In what sense did you mean the Internet was 3 taking away Microsoft's power every day? 4 Answer: I meant that -- this is 5 copied to people involved in the online service 6 activity, Nathan, Rick and Russ, and not to the 7 Windows people at all. 8 It looks like at 3 a.m. that morning I 9 was thinking about the fact that our ambitions 10 for online service in the narrow band field, we 11 needed to think of some of the broadband work 12 that Craig was doing to come in and be helpful 13 to that, particularly given that the Internet 14 was changing the framework. 15 Question: What was Mr. Rick Rashid's 16 position in Microsoft back in April of '95? 17 Answer: He was -- he had actually two 18 jobs at the time. 19 He was involved in research, but 20 mostly he had moved over to help out with the 21 ACT work, which is the interactive TV 22 activities. 23 MR. HOUCK: I'd like to mark as 24 Exhibit 345 a memorandum from Mr. Gates to his 25 executive staff and direct reports entitled the 5234 1 Internet tidal wave. 2 Question: Do you recall authoring 3 this memorandum, Mr. Gates? 4 Answer: Yes. 5 Question: To whom did you send it? 6 Answer: It appears it was sent to 7 executive staff and direct reports. 8 Question: What does executive staff 9 refer to? 10 Answer: It's an electronic mail alias 11 for a group of people. 12 Question: And who did that constitute 13 as of May of 1995? 14 Answer: I'm not sure, but it would 15 have included most of the officers. 16 Question: On the second page of the 17 memorandum, second paragraph, you say, most 18 important is that the Internet has bootstrapped 19 itself as a place to publish content. It has 20 enough users that it is benefiting from the 21 positive feedback loop of the more users it 22 gets, the more content it gets, and the more 23 content it gets, the more users it gets. 24 Can you explain what your reference 25 was to a positive feedback loop? 5235 1 Answer: Well, it's explained right 2 there. It says the more users it gets, the 3 more content it gets. And the more content it 4 gets, the more users it gets. 5 I mean, I don't expect that people 6 know what the term means, so I explain it right 7 in that sentence. 8 Question: Is the positive feedback 9 loop something that, in your estimation, would 10 result in ever increasing popularity of the 11 Internet? 12 Answer: No. 13 Question: Did you anticipate in May 14 of 1995 that Internet would become increasing 15 popular? 16 Answer: It had become more popular, 17 yes. 18 Question: Was one of the reasons you 19 thought it would be more unpopular was that 20 more content would be written for the Internet? 21 Answer: Created to Internet 22 standards, yes. 23 Question: And was it your 24 understanding or expectation that the more 25 content that was written, the more users there 5236 1 would be? 2 Answer: Yes. 3 Question: In the fourth page of your 4 memorandum -- 5 MS. CONLIN: Your Honor, may we 6 approach for a moment? Just stop for a moment 7 there. 8 (Off-the-record sidebar discussion was 9 held.) 10 THE COURT: Members of the jury, 11 because of the quality of the videotape here, 12 Ms. Conlin is going to read from this point for 13 a while the deposition questions and answers 14 because apparently, from what I'm 15 understanding, for a little while it gets kind 16 of garbled like this. 17 So she's going to read from the depo. 18 Okay. 19 MS. CONLIN: Thank you, Your Honor. 20 THE COURT: You may proceed. 21 MS. CONLIN: Beginning on page 79, 22 line 12. 23 THE COURT: Would you adjust your 24 microphone? 25 MS. CONLIN: Yes, I can. I will put 5237 1 it down here. 2 Beginning on page 79, line 12. 3 Question: In the fourth page of your 4 memorandum, in the second photograph above the 5 heading next steps you state, a new competitor 6 born on the Internet is Netscape. Their 7 browser is dominant, with 70 percent usage 8 share, allowing them to determine which network 9 extensions will catch on. 10 Do you recall how you determined that 11 Netscape's usage share was 70 percent at this 12 time? 13 Answer: No. 14 Question: Is your reference to 15 network extensions a reference to APIs? 16 Answer: No. 17 Question: What is it a reference to? 18 Answer: To network extensions. 19 Question: And how do you define that? 20 Answer: Things that let you do richer 21 things across the network. 22 Question: Can you give some examples? 23 Answer: Advanced HTML. HTML tables. 24 HTML file tags. 25 Question: Did you undertake a 5238 1 reorganization of Microsoft back at this time 2 in order to position the company to respond 3 better to the Internet? 4 Answer: Not at the time I wrote this 5 memo. 6 Question: Under the heading next 7 steps you say the challenge/opportunity of the 8 Internet is a key reason behind the recent 9 organization. 10 What were you referring to? 11 Answer: I'm not sure. 12 Question: What did you perceive the 13 challenge/opportunity of the Internet to be at 14 this point in time? 15 Answer: That users were interested in 16 using the Internet and so we needed to make 17 sure that our software was doing a good job of 18 that, and that that was a challenge in the 19 sense that other people could do it and that 20 was competition and an opportunity in the sense 21 that it would grow the importance of our strong 22 software work. 23 Question: On the next page you talk 24 about various critical steps. 25 Were these steps to respond to the 5239 1 challenge/opportunity of the Internet you 2 described in the earlier part of your 3 memorandum? 4 Answer: I'm not sure what you mean by 5 that. 6 Question: You outline several 7 critical steps. 8 Can you explain why you felt they were 9 critical? 10 Answer: For all the reasons I cite in 11 the entire memo. I mean, the whole memo -- 12 there's part of the memo that precedes these 13 steps. I could read the memo up to the point 14 of the critical steps to you if you want. 15 Question: What was your purpose in 16 sending this memorandum to your key executives? 17 Answer: To talk about my view of the 18 Internet tidal wave. 19 Question: Did you also outline your 20 views as to what steps Microsoft needed to take 21 to respond to the Internet tidal wave? 22 Answer: There's a part of the memo 23 that talks about steps. 24 Question: And in that part of the 25 memorandum, are you outlining the steps that 5240 1 needed to be taken in your view to respond to 2 the Internet tidal wave? 3 Answer: I'm suggesting some steps I 4 think we should take. I wouldn't say they are 5 all related to one particular thing, but I make 6 some recommendations here. 7 Question: The second step here 8 relates to something called the client. Is 9 that a reference to Internet Explorer? 10 Answer: No. 11 Question: What is it a reference to? 12 Answer: Client here means Windows. 13 Question: You say, first we need to 14 offer a decent client (O'Hare) that exploits 15 Windows 95 shortcuts. 16 Is not O'Hare a reference to client 17 here? 18 Answer: Client means client operating 19 system. 20 Question: Why did you put O'Hare in 21 parentheses after the word client? 22 Answer: Probably because that's the 23 part of Windows that exploits Windows 95 24 shortcuts. 25 Question: What Windows 95 shortcuts 5241 1 did you have in mind? 2 Answer: Windows 95 shortcuts is a 3 technical term. And the O'Hare part of Windows 4 exploits this feature known as Windows 5 shortcuts. 6 It doesn't mean shortcut as in the 7 common sense use of the term shortcut. It 8 means the technical feature Windows 95 9 shortcuts. 10 MS. CONLIN: Shall we see -- still 11 bad. Okay. Sorry. 12 Question: When you use the term 13 O'Hare in the e-mails that you write, what do 14 you mean? 15 Answer: Well, this -- in this case, I 16 meant the group that was working on that part 17 of Windows 95. 18 Question: And what part is that? 19 Answer: The part that supported HTML. 20 Question: Is that the part that 21 became known as the Internet Explorer? 22 Answer: Yes. Most of the work in 23 Internet Explorer came out of that group. 24 Question: Further down in this 25 paragraph you refer to plus pack. 5242 1 Is that, again, a reference to 2 something also referred to at Microsoft as 3 Frosting? 4 Answer: Yes. Frosting was a name we 5 used for what later became known as plus pack. 6 Question: Do you recall it was in or 7 about that time frame that Microsoft was doing 8 everything it possibly could to include the 9 O'Hare client in the Windows 95 package? 10 Answer: And by that you mean the 11 Windows 95 full product? Yes. 12 Question: Who was responsible at 13 Microsoft for accomplishing that? 14 Answer: I'm not sure you could point 15 to one individual. 16 Question: Was there one individual 17 that had primary responsibility? 18 Answer: Brad Silverberg managed the 19 group that was doing a lot of that work. 20 Question: Did you periodically have 21 something you called think week? 22 Answer: Yes. 23 Question: What is think week? 24 Answer: It's setting aside a week of 25 time where I have no meetings or phone calls 5243 1 and I get a chance to use products and learn 2 about new research work that we're doing and 3 other people are doing. 4 Question: Do you recall one of the 5 subjects you devoted time to in your 1995 think 6 week was the Internet? 7 Answer: I'm sure I did. 8 Question: Do you recall receiving 9 information from your subordinates in 10 connection with your 1995 think week on the 11 subject of the Internet? 12 Answer: Well, before I go off on 13 think week, I get boxes of information, usually 14 three cardboard boxes. 15 And some of that I get a chance to 16 look at and some of it I don't. I don't recall 17 specifically what I was given for that think 18 week. 19 Question: How did the process work 20 for giving you think week materials? Did your 21 senior executives collect items that might be 22 of interest to you and send them to you for 23 your review? 24 Answer: Well, most of my think week 25 time is focused on technology issues. 5244 1 And so there is a variety of people I 2 solicit to provide input. It's not -- many of 3 them are not executives, but people who might 4 have things that I'm interested in learning 5 about. 6 Question: Do you recall that 7 Mr. Siegelman was one of the people whom you 8 asked to collect materials for you for your 9 1995 think week? 10 Answer: I think probably I asked 11 Brian Flemming to gather the material and he 12 would have gone out to other people asking. 13 Question: What position did 14 Mr. Flemming have in -- 15 Answer: He had an assistant position 16 working for me. 17 Question: Was it your expectation 18 that the inclusion of Internet Explorer with 19 Windows would drive up Internet Explorer's 20 market share? 21 MR. HEINER: Objection. Ambiguity. 22 THE WITNESS: I'm not sure what you 23 mean. 24 We do know that when we included 25 Internet Explorer in Windows, it gained 5245 1 basically no market share. 2 MR. HOUCK: I'd like to mark as 3 Exhibit 348 an e-mail from Mr. Allchin to 4 various people dated January 6, 1997. 5 Question: What do you understand the 6 second e-mail to contain, Mr. Gates, on Exhibit 7 348? 8 Answer: Looks like Ben Slivka is 9 making some comments on something. 10 MS. CONLIN: Any better? 11 Question: -- On Exhibit 348? 12 Answer: Looks like Ben Slivka is 13 making some comments on something. 14 Question: Do you understand that this 15 e-mail contains slides that were prepared for a 16 presentation you made or were to make in or 17 about January of 1997? 18 Answer: No, these are not slides that 19 were prepared for me to give. I think these 20 are -- it may have been something that Ben 21 Slivka was looking at doing. I'm not sure. 22 Question: The subject of the second 23 e-mail from Mr. Slivka to Mr. Maritz is 24 overview slides for BillG/NC and Java session 25 with 14 pluses on Monday. 5246 1 Do you know what the reference here is 2 to a session with 14 pluses? 3 Answer: Well, 14 probably refers to 4 the fact that in our jobs in the technical 5 group, level 14 is a fairly high level. 6 And I know we had a meeting where we 7 asked some of those high-level people to come 8 and sit and talk about our strategy and 9 indicate what they thought about the strategy. 10 Question: Do you recall making a 11 presentation yourself at that meeting? 12 Answer: I made a presentation, but 13 not of these slides. 14 Question: What was the subject of 15 your presentation? 16 Answer: I don't recall exactly, but 17 it certainly wasn't these slides. 18 Question: Do you recall a discussion 19 at that session of the NC and Java challenge? 20 Answer: No. 21 Question: Do you have any 22 understanding as to what is meant here by the 23 NC and Java challenge? 24 Answer: I'm sure NC stands for 25 network computer and the competition that came 5247 1 from that direction. And Java I'm sure refers 2 to the competition coming from that direction. 3 Question: Why did you consider Java 4 to be a challenge at this point in time? 5 Answer: Well, the term Java is used 6 in a lot of different ways. There's a part of 7 it with respect to run times that was a direct 8 competitor to Windows. 9 Question: Under key platform 10 challenge, the memo states possible emergence 11 of a set of APIs and underlying system software 12 that lead to lesser or no role for Windows. 13 Do you recall any of the portion of 14 the discussion on this subject at that meeting? 15 Answer: No. 16 Question: The next sentence says, 17 puts our other (server and apps) businesses at 18 a disadvantage. 19 Do you recall any portion of the 20 discussion on this subject at this meeting? 21 Answer: No. 22 Question: Under the heading response 23 summary, various items appear. One is increase 24 IE share followed by integrate with Windows. 25 Do you recall any discussion about 5248 1 this portion of the meeting? 2 Answer: Remember we haven't 3 established that these slides were ever 4 presented at any meeting. So, no, I don't 5 recall that being discussed, but doing it in 6 the context of the slides means nothing to me 7 because I don't -- certainly don't think I 8 presented any slides like this. 9 Question: Do you have any 10 recollection of a discussion at this meeting as 11 to how to increase IE market share? 12 Answer: No. 13 Question: Next page refers to another 14 response as differentiate through Windows 15 integration. 16 Do you recall any aspect of a 17 discussion on this subject? 18 Answer: No. 19 Question: Is it correct that the 20 Netscape browser was one of the principal means 21 through which the Java Virtual Machine was 22 distributed? 23 Answer: I don't know what you mean 24 was distributed. 25 Certainly, the Java Virtual Machine 5249 1 has the ability to be distributed with any 2 application over the Internet, so just like all 3 software on the Internet, distribution is wide 4 open. 5 Question: Did you form any judgment 6 yourself as to whether the Netscape browser was 7 the major distribution vehicle for the Java 8 Virtual Machine? 9 Answer: Well, I don't know what you 10 mean the Java Virtual Machine. Understand that 11 many different companies have Java Virtual 12 Machines. 13 Netscape had one that was different 14 than the one that Sun had, which was different 15 than ours, which was different than HP's, which 16 was different than IBM's, which was different 17 from Novell's, so you'll have to be more 18 specific. 19 But in terms of distributing those 20 things, they're out there on the Internet easy 21 to get. 22 MR. HOUCK: I'll mark as Exhibit 349 23 an e-mail from Paul Maritz to Mr. Gates and 24 others dated July 14, 1997. 25 Question: To save time, I'll tell you 5250 1 I'm going to ask you about the very first 2 e-mail here from Mr. Maritz to Mr. Dunie and 3 yourself and others. 4 And, in particular, where it says if 5 we look further at Java/JFC being our major 6 threat, then Netscape is the major distribution 7 vehicle. 8 Do you see that? 9 Answer: I see it. 10 Question: What does JFC refer to 11 here, if you know? 12 Answer: Well, as I said, it's all 13 about runtime APIs. And JFC was the term for 14 what Netscape was putting out as a set of 15 runtime APIs, which was different than what Sun 16 was putting out, but was their Netscape 1. 17 Question: Do you have any 18 understanding as to what Mr. Maritz meant here 19 when he referred to Netscape as the major 20 distribution vehicle? 21 Answer: Well, Netscape had some 22 unique APIs. And one of the ways they were 23 distributing it was through their software 24 products, including the browser. 25 Question: Did you understand that, in 5251 1 Mr. Maritz's view, Netscape was the principal 2 means by which people were acquiring the Java 3 Virtual Machine? 4 Answer: Well, you actually started 5 these questions asking about Sun's virtual 6 machine and I explained to you that Netscape's 7 is different. So I'm not sure what you're 8 referring to now. 9 Question: When Mr. Maritz said that 10 Netscape was a major distribution vehicle -- 11 MS. CONLIN: Whoops. That's question. 12 Question: When Mr. Maritz said that 13 Netscape was the major distribution vehicle, 14 what did you understand him to be saying the 15 vehicle for? 16 Answer: The Netscape runtime bits. 17 Not Sun's virtual machine. It says JFC there. 18 So, obviously, it's not Sun. 19 MS. CONLIN: Shall we try again? No. 20 Okay. Well, then let me get some 21 water. 22 MR. HOUCK: I'd like to mark as 23 Exhibit 350 an e-mail from Mr. Slivka to 24 various people dated June 12, 1997. 25 Question: The second e-mail on the 5252 1 first page here is from Chris Jones, and it 2 says, here is final copy of the memo we sent to 3 BillG for think week about what we should do to 4 get up to 30 percent browser share. 5 Do you recall reviewing the attachment 6 as part of your 1995 think week? 7 Answer: I didn't review it. 8 Question: What were Mr. Jones' 9 responsibilities in 1995? 10 Answer: Good question. 11 Question: Do you recall? 12 Answer: No. He might have worked for 13 Maritz. 14 Question: In or about June 1995, 15 Mr. Gates, did you become involved in the 16 planning for some meetings with Netscape? 17 Answer: No. 18 Question: I'd like to mark as Exhibit 19 352 -- 351. I'd like to mark as Exhibit 351 an 20 e-mail chain. This appears to have been 21 produced from Mr. Gates' file. 22 The e-mail I want to ask you about 23 first, Mr. Gates, is dated June 1, 1995, and 24 the very top portion indicates that the bottom 25 portion is being sent to you for your 5253 1 information by Paul Maritz, and the bottom 2 portion is an e-mail from Thomas Reardon dated 3 June 1, 1995, on the subject of working with 4 Netscape. 5 Do you recall receiving this 6 memorandum or e-mail? 7 Answer: E-mail, no. 8 Question: I apologize for using my 9 old-fashioned terminology. 10 You don't recall receiving this e-mail 11 particularly? 12 Answer: No. 13 Question: The e-mail states that, Dan 14 and Barb and I met late yesterday to review our 15 recent discussions with Netscape and form our 16 next few action items. Dan is meeting with Jim 17 Barksdale, their CEO, shortly. 18 Do you understand the reference to Dan 19 to be a reference to Dan Rosen? 20 Answer: Probably. 21 Question: And is the reference for 22 Barb a reference to Barbara Fox? 23 Answer: I mean, you could ask Thomas. 24 Probably. 25 Question: Do you have any 5254 1 understanding, sir? 2 Answer: Based on -- I've never spoken 3 to Thomas about this. I don't remember seeing 4 the e-mail. 5 Question: Do you recall speaking to 6 anyone about the meeting referred to here 7 between Dan Rosen and Jim Barksdale? 8 Answer: No. 9 Question: The e-mail goes on to list 10 working goals which are, One, launch STT, our 11 electronic payment protocol. Get STT presence 12 on the Internet. 13 Two, move Netscape out of the Win32 14 Internet client area. 15 Three, avoid cold or hot war with 16 Netscape. Keep them from sabotaging our 17 platform evolution. 18 Do you understand the reference to 19 Win32 Internet client to be a reference to 20 Windows 95? 21 Answer: No. 22 Question: What do you understand it 23 to be a reference to? 24 Answer: Win32. 25 Question: Can you describe what that 5255 1 is? 2 Answer: 32 bit Windows. 3 Question: Is Windows 95 a 32 bit 4 Windows product? 5 Answer: It's one of them. 6 Question: Were there any other 32 bit 7 products in development in June of 1995? 8 Answer: Certainly. 9 Question: Which ones? 10 Answer: Windows NT. 11 Question: Do you know whether 12 Mr. Reardon was referring to Windows NT and 13 Windows 3.0 and Windows 95 or one or the other? 14 Answer: Win32's a term that refers to 15 all of the 32 bit platforms. 16 Question: And as I understand, your 17 testimony is that the 32 bit platforms under 18 development in June of 1995 were Windows NT and 19 Windows 95; is that correct? 20 Answer: No. Windows NT was shipping 21 and there was a new version that was under 22 development. 23 Question: And Windows 95 was in 24 development at this time? 25 Answer: Certainly. 5256 1 Question: In the portion of the 2 e-mail denominated Number 2 which is, move 3 Netscape out of the Win32/Win 95, avoid 4 battling them in the next year, there appears 5 the following statement in the second 6 paragraph, quote, they appear to be moving fast 7 to establish themselves in the value-add app 8 business by leveraging Netscape itself as a 9 platform. 10 Do you recall whether you agreed that 11 that's what Netscape was doing back in June 12 '95? 13 Answer: At this time, I had no sense 14 of what Netscape was doing. 15 Question: Okay. The next e-mail I 16 want to ask you about is on page 231 of the 17 document. And it's an e-mail from Paul Maritz 18 to various people, including yourself, 19 regarding the Netscape meeting, and it's dated 20 June 5, 1995. 21 MS. CONLIN: Any hope? 22 MR. BUCHBINDER: About seven more 23 pages. 24 MS. CONLIN: I beg your pardon? 25 MR. BUCHBINDER: Seven more. 5257 1 Question: The next e-mail I want to 2 ask you about is on page 231 of the document, 3 and it's an e-mail from Paul Maritz to various 4 people including yourself regarding the 5 Netscape meeting, and it's dated June 5, 1995. 6 Here Mr. Maritz reports that he did 7 not get the impression from the meeting that he 8 had that Netscape was ready for a broad, 9 strategic relationship. 10 Do you see that? 11 Answer: Do you think that refers to a 12 meeting he had? I don't think so. 13 Question: Let me refer you to page 14 596, Bates number 596. 15 Answer: Okay. 16 Question: It's e-mailed the same 17 date. And it says, attached is my summary of 18 the meeting that Nathan, Paul and I had with 19 Jim Barksdale of Netscape. 20 Do you understand the reference of 21 Paul to be a reference to Paul Maritz? 22 Answer: Oh, maybe he is talking about 23 a meeting he had. 24 Question: Do you have any 25 recollection of discussing Mr. Maritz's 5258 1 impression of this meeting with Netscape? 2 Answer: I didn't think Paul had met 3 with Netscape. 4 Question: So you have no present 5 recollection of discussing with Mr. Maritz his 6 views based on a meeting he had with 7 Mr. Barksdale in or about the early part of 8 June 1995? 9 Answer: No. 10 Question: Let me refer you next to a 11 Bates number page 585. 12 And this is an e-mail to you and 13 others from Dan Rosen regarding a Netscape 14 meeting, and the date of the e-mail is June 22, 15 1995. It's page 585 Bates number. 16 You got it? 17 Answer: Uh-huh. 18 Question: Do you recall getting this 19 particular e-mail? 20 Answer: No. I recall getting this 21 e-mail from Brad Silverberg on 584 but not this 22 one from Dan (indicating). 23 Question: And you have no reason to 24 believe you didn't get it; is that correct? 25 Answer: That's right. I'm still 5259 1 confused if it actually was enclosed on the 2 other one or not. 3 From the way it's printed out, it may 4 have been. And although my name is there, I 5 don't remember getting that one. 6 I do remember getting this one which 7 it may also be an enclosure to. 8 Question: Do you understand this to 9 be Mr. Rosen's report on the meeting he had on 10 June 21, 1995, with Netscape executives? 11 Answer: It looks like it. The thing 12 I recall is the Reardon -- 13 Question: Right. 14 Answer: What he calls his perspective 15 that Brad sent to me. 16 Question: Right. Did you understand 17 that Mr. Reardon had a somewhat different 18 perspective on the meeting than Mr. Rosen had? 19 Answer: Yes. 20 Question: Who was the senior 21 Microsoft executive at the June 21st meeting? 22 Answer: There were no senior 23 executives at that meeting. 24 Question: Who was the most senior of 25 the people there? 5260 1 Answer: You would have to tell me who 2 was at the meeting. I have no idea who was at 3 the meeting. 4 Question: Did you understand that Dan 5 Rosen was at the meeting? 6 Answer: Apparently from this e-mail, 7 yes. 8 Question: Did you understand that Tom 9 Reardon was at the meeting? 10 Answer: From his e-mail, yes. 11 Question: Did you understand that Jim 12 Allard was at the meeting? 13 Answer: Jim who? 14 Question: Allard. 15 Answer: Jay Allard? 16 Question: Jay Allard, yeah. 17 Answer: I don't know. 18 Question: How about Chris Jones? 19 Answer: I don't know. 20 Does one of these list who was at the 21 meeting? 22 Question: Let me just ask you: Do 23 you have any recollection as you sit here as to 24 who you were told attended the meeting on 25 behalf of Microsoft other than Mr. Reardon? 5261 1 THE WITNESS: I'm not certain what you 2 mean, told. 3 Question: Were you informed, 4 Mr. Gates, who attended the meeting on behalf 5 of Microsoft? 6 Answer: I don't think so. 7 Question: Do you have any 8 understanding, as you sit here today, who 9 attended that meeting on behalf of Microsoft? 10 Answer: Well, the last page of the 11 thing you gave me on 599 might relate to that. 12 But I don't have any prior knowledge 13 about it. 14 Question: The e-mail from Mr. Rosen 15 on the first page says, quote, our goals going 16 into the meeting were (in priority order). 17 One, establish Microsoft ownership of 18 the Internet client platform for Win 95. 19 Two, have Netscape add value to the NT 20 server and back office platform (above our 21 stuff), making it the preferred Internet 22 solution. 23 Three, have Netscape preferentially 24 support Microsoft authoring tools/solutions and 25 support our viewers. 5262 1 Four, send a message to the 2 marketplace that Netscape and Microsoft were 3 cooperating on Internet issues. 4 Do you recall discussing these goals 5 with any of the Microsoft people who attended 6 the meeting in advance of the meeting? 7 Answer: No. 8 Question: The next page of the e-mail 9 says, Chris Jones summed up the purpose nicely. 10 We need to understand if you will 11 adopt our platform and build on top of it or if 12 you are going to compete with us on the 13 platform level. 14 Did you understand that was a 15 principal purpose of Microsoft in attending 16 this meeting with Netscape? 17 Answer: No. It says in the Rosen 18 memo the purpose of the meeting was to scope 19 out specific areas that the relationship 20 between the two companies might take and to set 21 in place a process to either conclude a 22 strategic relationship or go our separate ways. 23 Question: Do you have any present 24 recollection as you sit here as to what the 25 purpose of the Microsoft executives was in 5263 1 attending the meeting? 2 Answer: Well, there were no Microsoft 3 executives in the meeting. 4 Question: You don't consider Mr. 5 Rosen a Microsoft executive? 6 Answer: No. Inside Microsoft -- I 7 don't know about other companies -- but the VPs 8 are called executives and the non-VPs are 9 called nonexecutives. 10 And there were no executives at that 11 meeting. 12 Question: Let me rephrase the 13 question then. 14 Do you have any understanding as you 15 sit here today as to what the purpose was of 16 the Microsoft employees who attended the 17 meeting with Netscape on June 21, 1995? 18 Answer: I can read to you from the 19 stuff you've given me here. 20 Question: I don't want you just to 21 read. I'm asking for your present recollection 22 if you have one. 23 I can read the document myself. 24 Answer: I don't know what you mean my 25 present recollection. 5264 1 Question: As you sit here today, do 2 you have any recollection as to what your 3 understanding was back in June 1995 as to the 4 principal purpose of the Microsoft employees in 5 the meeting with Netscape? 6 Answer: I wasn't involved in setting 7 up the meeting, so I -- I can see what Reardon 8 said here. I can see what Rosen said here. 9 You've read something that purports to be 10 something that Jones said. I mean -- 11 Question: As we discussed before, did 12 you understand that Mr. Reardon and Mr. Rosen 13 had different perspectives on the meeting? 14 Answer: Well, I -- I got some e-mail 15 from Brad Silverberg after the meeting that 16 showed that Reardon seemed to have a more 17 realistic view of what was going on. 18 Question: Did you share his view? 19 Answer: I had no view whatsoever. 20 Question: When you said Reardon had a 21 more realistic view of the meeting, can you 22 explain what you meant? 23 Answer: Well, Reardon's mail says -- 24 MR. BUCHBINDER: Do one more page. 25 MS. CONLIN: One more page. Okay. 5265 1 Let's see. 2 Question: When you said Reardon had a 3 more realistic view of the meeting, can you 4 explain what you meant? 5 Answer: Well, Reardon's mail says, 6 maybe I am being a dick, but there is no deal 7 here. 8 If we are smart and deft and engaged 9 at the right levels, we have a chance to 10 cooperate on a few of these smaller things. 11 So usually the -- if you have two 12 people that go to a meeting and one comes back 13 and says looks great, and the other comes back 14 and says it doesn't look good, my business 15 experience is the person who says that it 16 doesn't look good is probably the one who has 17 the most accurate view of the meeting, 18 particularly when you're dealing with Thomas 19 Reardon and Dan Rosen. 20 Question: So you thought that 21 Reardon's view of how the meeting went was 22 likelier the more accurate one? 23 Answer: In the sense that it didn't 24 look like much would come out of it, yes. 25 Question: Okay. Do you recall, as 5266 1 you sit here today apart from just reading 2 these e-mails, anything that was reported back 3 to you by any of the participants from 4 Microsoft at this June 21st meeting? 5 Answer: Well, I think somewhere about 6 this time somebody said to me that -- asked if 7 it made sense for us to consider investing in 8 Netscape. 9 And I said that that didn't make sense 10 to me, I didn't see that as something that made 11 sense. 12 Question: Do you recall who said that 13 to you? 14 Answer: It would have been probably 15 suggested in a piece of e-mail from Dan, I 16 think. 17 Question: Do you recall when you got 18 that suggestion, whether it was before or after 19 the meeting? 20 Answer: Oh, it would have been after 21 the meeting. 22 Question: Do you recall anything else 23 that anyone told you back in June '95 about the 24 meeting? 25 Answer: No. 5267 1 Question: Did you personally devote 2 time, Mr. Gates, to studying Netscape and 3 trying to determine what their sources of 4 revenue were? 5 Answer: In what time frame are we 6 talking about? 7 Question: Well, do you recall doing 8 that at all? 9 Answer: I personally didn't make any 10 study of it. But I know that in late '95 when 11 we reviewed a bunch of different competitors, 12 one of those was Netscape, and there was some 13 revenue analysis done as part of that. 14 Question: So what I want to ask you 15 about is Exhibit 353. And this is a December 16 1, 1996 e-mail from you to Mr. Nehru. 17 MS. CONLIN: Okay. I've done a page. 18 MR. BUCHBINDER: Yeah. 19 Question: Do you recall asking 20 Mr. Nehru in or about December 1996 -- 21 MS. CONLIN: Let me go on a little bit 22 more, Your Honor, and then perhaps we should 23 stop, or perhaps we should stop now. 24 THE COURT: Okay, let's stop now. 25 Members of the jury, remember the 5268 1 admonition given. 2 You are done for the week. 3 Have you report at 8:30 Monday 4 morning. 5 Remember, again, the admonition and 6 keep your notebooks here. We'll collect them 7 and lock them up as usual. 8 Hope you have a good, safe weekend. 9 Take care. 10 Take a 15-minute recess, please. 11 MR. TULCHIN: Thank you, Your Honor. 12 (A recess was taken from 1:31 p.m. 13 to 1:45 p.m.) 14 (The following record was made out of 15 the presence of the jury at 1:45 p.m.) 16 THE COURT: Okay. 17 Ms. Nelles, you had one issue first 18 about some exhibits? 19 MS. NELLES: Yes, Your Honor. Just 20 briefly. 21 Earlier today Ms. Conlin left on our 22 counsel table, and I imagine hand -- I believe 23 handed up to the Court this disk. It's a Zelle 24 Hoffman disk. 25 It says on it Plaintiffs' December 15, 5269 1 2006 trial exhibits and asked that these be 2 admitted as Plaintiffs' trial exhibits. 3 And I think Your Honor and I were both 4 under the impression, at least initially, that 5 something entitled Plaintiffs' December 15, 6 2006 trial exhibits was probably a set of the 7 exhibits that Plaintiffs intended to introduce 8 into evidence through the testimony of 9 Mr. Gates today. 10 But I did object because I thought I 11 heard -- I don't know -- I guess you can see 12 out of the corner of your eye -- I don't know 13 if you can hear out of the corner of your ear, 14 but I picked up Ms. Conlin saying something 15 about 3,000 exhibits which plainly has nothing 16 to do with the ones that were shown today. 17 And what I think is going on here, and 18 I think we've talked about it before, Your 19 Honor, and I think I would ask if we could make 20 it perfectly clear that that's not going to 21 happen in this trial because apparently we need 22 to do this again. 23 That Plaintiffs are attempting to have 24 you admit a number of exhibits, some 3,000 25 exhibits that they contend are not objected to 5270 1 just without them coming in, without any 2 witness whatsoever. 3 I'd like to refer the Court back to 4 two of its prior orders. The first one is 5 dated July 6, 2005. This is the order 6 appointing the Special Master. 7 And paragraph 2 of the order, Your 8 Honor, states explicitly, objections under Iowa 9 Rule of Evidence 5.401, 5.402, or 5.403 or 10 other objections that can be made only in light 11 of the trial record may be made at trial. 12 What Plaintiffs apparently are trying 13 to do here is deny us of our right of slipping 14 this disk and denies us our right to object as 15 exhibits are being brought in through witnesses 16 on relevance ground, undue prejudice ground, 17 cumulative ground. 18 We have, as you know, some hotly 19 contested collateral estoppel objections still 20 to come and any other objections that we might 21 want to make in light of the trial record. 22 Now, I'm not sure -- I'm not going to 23 put motives or ascribe motives to Plaintiffs 24 when I don't know what they are, but that is 25 one possibility. 5271 1 The second is something we discussed 2 before, Your Honor. I think you may recall, 3 maybe not, so much has happened in this trial, 4 but we did talk, the Court, myself, I was on by 5 phone, Ms. Conlin I believe in person in one of 6 our status conferences about a variety of 7 issues, one of them was the website. 8 And when we discussed the website, I 9 reminded Your Honor of the objection -- or I 10 told Your Honor what our objection was and 11 reminded Your Honor of something that 12 Plaintiffs had tried to do, but were 13 unsuccessful in attempting to do in Minnesota, 14 which was to hand the Court a gold disk, ask 15 that -- what they called a gold disk, ask that 16 all the exhibits be admitted and then put them 17 up under the Court's imprimatur on a website so 18 that they would have -- be available to the 19 press and so that they could use them in their 20 press efforts. 21 And I said I was not going to object 22 to the website. I said it then. I said it 23 again very recently when we were talking about 24 it again so long as we weren't going to have 25 this kind of a situation. 5272 1 And Your Honor actually issued a 2 ruling on this one, on this conference. And 3 Your Honor said the Court was also presented 4 with the issue of the displaying of exhibits on 5 a proposed website during the trial. 6 The Court finds that exhibits may be 7 displayed on a proposed website approved by the 8 Court if they are first admitted into evidence 9 by the Court on the record. There shall be no 10 predisplaying of exhibits on such a website 11 prior to an exhibit being admitted. 12 Your Honor may recall when we talked 13 about that, we did talk about it as evidence 14 coming in with witnesses and objections being 15 made along the way as they come. 16 And, in fact, when we saw the proposal 17 for the website we saw, you know, exhibits day 18 one, exhibits day two, exhibits day three. 19 I think we were all under the 20 impression, certainly Defendants were, and I 21 think the Court was as well, that it was 22 entirely clear that we were not going to have 23 this kind of a process; that exhibits may be 24 admitted into evidence on a day-to-day basis 25 through the prior depositions or through live 5273 1 witnesses and objections can be made when the 2 exhibits are proffered and not through some 3 kind of a gold disk. 4 Thank you. 5 THE COURT: So you're objecting to all 6 these exhibits? 7 MS. NELLES: If that's what they are 8 trying to do, yes. I object to the process. I 9 object to the process. 10 THE COURT: Okay. So you want time to 11 look at the exhibits to see? 12 MS. NELLES: No. I want to stand by 13 the process that I think we had already 14 established and the Court has already ruled. 15 These are not the exhibits from 16 today's deposition, Your Honor. This is all of 17 their exhibits. Every single last one of them. 18 MS. CONLIN: No. 19 MS. NELLES: And maybe not. Maybe 20 there's a few that aren't because there are 21 objections standing on them. 22 But these are some 3,000 exhibits. We 23 saw 11, 12 at 8:20 today. 24 If they want to move to admit the 20 25 today or at the end of Mr. Gates' deposition, I 5274 1 probably could preclear all of those with them. 2 There are some embedded hearsay 3 issues, but we are talking about a subset of 4 documents and that's how documents come into 5 evidence in a trial. 6 You don't admit all the evidence you 7 hope to get into evidence without giving us a 8 chance to object to them in context of the 9 witness ahead of time. 10 MS. CONLIN: Your Honor, this is 11 really a terrible misrepresentation. 12 First of all, the exhibits on this 13 disk are 3,760 exhibits. There are no 14 objections to these exhibits. None. Zero. 15 The objections of relevance or 16 prejudicial or cumulative or collateral 17 estoppel were made within the Special Master 18 process. 19 And though the Special Master did not 20 rule on those objections, they had to be made 21 in that process. 22 These 3,760 exhibits have no 23 objections. They are clear. 24 And if I may, Your Honor, quote from 25 what Mr. Tulchin said to the Jury yesterday. 5275 1 He said, quote, we had an evidentiary 2 process. We designated that as our exhibit, 3 and the that he's referring to, Your Honor, was 4 the consent decree. 5 It is my understanding -- and I 6 believe this is correct -- that there was never 7 any objection to that. 8 So under our process that is, you 9 know, in evidence. 10 Now, Mr. Tulchin was wrong about that 11 particular document. I, however, am not wrong 12 about the 3,760 exhibits which are, in fact, 13 preadmitted. 14 There are no objections to these 15 exhibits. None were made at any point in the 16 process. All by this time had to have been 17 made. And they were not. 18 And, therefore, these under our usual 19 procedure, these are already, as Mr. Tulchin 20 said. Quote, so, under our process, that is, 21 you know, in evidence. 22 I'm stunned by the reaction to this. 23 Particularly given that Mr. Tulchin clearly 24 knew exactly what was happening and what was 25 the agreed-upon process. This is not unusual 5276 1 in any way. 2 The Court ruled that once the exhibits 3 were admitted that they could be displayed. 4 Now, as far as I know, Your Honor, I 5 was going to ask the Court about the website, 6 but it isn't up anyway, but I think it is 7 perfectly reasonable for them to take the disk 8 and the list and make sure that we didn't make 9 a mistake and report on Monday whether or not, 10 you know -- certainly, we took great care in 11 providing this disk to the Court, but I 12 anticipated that they would want the 13 opportunity to review it. 14 The idea that evidence only comes in 15 through witnesses or depositions is false. 16 Evidence, documentary evidence comes 17 into the record when offered unless the 18 Defendant makes an objection to it. These are 19 exhibits to which there are no objections. 20 If they were able to get the Court in 21 Minnesota to rule that no exhibits could be 22 displayed on the website until they were talked 23 about by a witness. 24 I thought that a pretty odd ruling. 25 And they made that argument to you, Your Honor, 5277 1 but, as I understand what the Court said in its 2 ruling, it was that evidence -- exhibits once 3 admitted to be displayed, and that there are 4 plenty of exhibits to which no reference will 5 ever be made by witnesses or testimony. 6 They are simply documentary exhibits 7 to which no objection has been raised. They 8 are perfectly admissible. And we ask that the 9 Court admit them subject to the Defendant 10 checking to make sure that we did not make a 11 error and by mistake somehow include on the 12 disk something to which they did, in fact, urge 13 an objection. 14 But these 3,760 exhibits are, as Mr. 15 Tulchin so recently put it, already in 16 evidence. There are no objections and we have 17 offered them. 18 MS. NELLES: Your Honor, Ms. Conlin 19 can't be surprised about this because she knows 20 I've been objecting to what she's trying to do 21 here in this case and another case for almost 22 three years now. 23 Your Honor, Ms. Conlin came in and 24 raised an objection yesterday about the consent 25 decree, consent judgment, and she had every 5278 1 right to do that. 2 Your Court's ruling says, objections 3 under Iowa Rule of Evidence 5.401, 5.402, or 4 5.403 or other objections that can be made only 5 in light of the trial record may be made at 6 trial. 7 She made a relevance objection. That 8 objection wasn't waived. 9 We raise the issue about that she 10 hadn't objected was made in the scope of 11 timeliness. And Your Honor heard her, heard 12 her for I think an hour and a half on this 13 issue. 14 THE COURT: Is that the Special Master 15 ruling? 16 MS. NELLES: This is, yes. 17 Would you like a copy of this, Your 18 Honor? 19 THE COURT: No. I was just asking. 20 MS. NELLES: Yeah, this is the Special 21 Master. This is the order appointing the 22 Special Master. 23 THE COURT: Okay. 24 MS. NELLES: It's July 6, 2005. 25 Now, the idea that in an effort to be 5279 1 cooperative in a process, we preasserted some 2 prejudice objections in the process so that the 3 parties could work and confer and work those 4 out when we knew ahead of time in no way means 5 that we waived our relevance objections to any 6 document that may be on this disk. 7 We have a right to raise a relevance 8 document -- objection, excuse me -- a relevance 9 objection, an undue prejudice objection or any 10 other -- a cumulative objection. 11 How will we know until the evidence 12 comes in? A collateral estoppel objection. 13 We do not waive our rights to those, 14 not any of them. We are entitled to waive 15 those -- raise those in the context of the 16 evidence as it comes in through the Court. 17 She can't do this. 18 THE COURT: So how do you want her to 19 proceed? 20 MS. NELLES: I think if she wants to 21 move in -- well, in fact, Your Honor, we asked 22 to meet with Plaintiffs last night. Mr. Tuggy 23 either e-mailed or spoke to Mr. Cashman and 24 said we've got to figure out a process for 25 this, let's talk about this. 5280 1 And, instead, this is what happened. 2 They never responded. They did this instead. 3 What I suggest is you give us an 4 opportunity to see if we can come up with a 5 procedure, but I guarantee you it's not going 6 to be -- this is not going to be one we agree 7 to. 8 And I think it should come in through 9 witnesses, through testimony, and we need a 10 procedure for additional exhibits. But this 11 can't be it. This cannot be it. This is 12 entirely unfair. We do not waive our relevance 13 objections. 14 MS. CONLIN: Your Honor, I was not a 15 participant in the Special Master process, nor 16 was Ms. Nelles, but it is my understanding -- 17 and Mr. Cashman may speak to this -- but the 18 Special Master specifically requested and 19 required that all objections be made in the 20 Special Master process, though, he was not 21 going to rule on them. 22 And I can -- I am very confident, Your 23 Honor, that objections as to relevance were 24 made in the Special Master process. 25 Objections as to prejudice were made 5281 1 in the Special Master process, as were 2 objections as to cumulativeness. 3 All of those objections were made in 4 the Special Master process, though, he did not 5 rule on them. He requested and required that 6 those objections be preasserted. 7 What we have offered today are those 8 exhibits to which no objections are pending. 9 None. 10 And the idea that we have to have a 11 witness to put in a document is foreign to the 12 practice of law in Iowa. And that is not my 13 understanding of the rule, the process, or how 14 it was to be done. 15 I mean, certainly we did not 16 contemplate any hysterical reaction to putting 17 into evidence the documents to which the 18 Defendant urged no objections. 19 With respect to yesterday, that 20 document, Your Honor, did not go through the 21 Special Master process. We'd only been 22 provided with that document a few days in 23 advance of the time that Mr. Tulchin attempted 24 to use it. 25 And so that document, despite the fact 5282 1 that it gave rise to Mr. Tulchin's remarks 2 which I have read to the Court, which I believe 3 does accurately, in fact, say what the parties 4 understood and agreed, and that is that if 5 there is no objection, the document is in 6 evidence. 7 I only made the offer because that's 8 -- you know, that's the appropriate thing to 9 do. But they can't urge objections now to 10 documents to which they urged no objections 11 within the Special Master process, Your Honor. 12 THE COURT: Did the Special Master 13 indeed require pre- -- 14 MS. NELLES: No, Your Honor. And if I 15 may one more time refer you to your own 16 language. This is your order and we relied on 17 this order. 18 It says, objections under Iowa Rule of 19 Evidence 5.401, 5.402, or a 5.403 or other 20 objections that can be made only in light of 21 the trial record, in light of the trial record, 22 may be made at trial. 23 I cannot believe that I am accused of 24 being hysterical for reacting to a request that 25 this order -- that we can make objections 5283 1 during trial to evidence is going to be wiped 2 out from underneath us when we've already 3 started the evidence. We've relied on this 4 order for a year and a half now, Your Honor. 5 THE COURT: So -- 6 MR. CASHMAN: Your Honor, if I may. 7 THE COURT: So am I to understand -- 8 did the Special Master look at objections 9 regarding relevance? 10 MS. NELLES: No, Your Honor. 11 MR. CASHMAN: No, Your Honor. 12 If I may. If I may. 13 The Special Master did not rule on 14 prejudice, relevance objections, but the 15 parties had a process pursuant to this schedule 16 that was adopted by the Court and by the 17 Special Master wherein the parties, both sides, 18 at the appropriate time in each phase had to 19 make all applicable -- all objections they 20 thought were applicable, including relevance, 21 prejudice, everything, everything. The Special 22 Master -- 23 THE COURT: This was an agreement 24 between the parties? 25 MR. CASHMAN: Pardon me? 5284 1 THE COURT: This was an agreement or 2 part of my order? 3 MR. CASHMAN: It was a part of the 4 scheduling order that was adopted by the Court 5 with the Special Master order. 6 And so while the Special Master did 7 not rule on those objections, the process was 8 that the parties had to know what the 9 objections were pursuant to the schedule for 10 each phase of either exhibits or of testimony. 11 And that can be easily established if 12 the Court wanted to see it both pursuant to the 13 scheduling order and we could show you, if it 14 was really something that was necessary, the 15 objection charts that the parties exchanged 16 which show that we all made every objection 17 that was potentially applicable to any given 18 exhibit. 19 And so you've heard that, I think, in 20 prior argument on other matters. 21 And what Ms. Conlin is talking about 22 here today are exhibits for which Microsoft did 23 not assert either relevance, prejudice, or any 24 of the objections that the Special Master could 25 have ruled on. 5285 1 So these are exhibits for which there 2 are no pending objections. 3 And I just want to also note for the 4 record that it's ironic that Ms. Nelles is 5 saying they should be able to assert these kind 6 of objections at the last minute because, as 7 you may recall, it was Microsoft which took the 8 position over and over again in particular 9 relation to the alleged nonhearsay uses, they 10 alleged over and over and over again that every 11 single objection had to be asserted in that 12 process. 13 So it's -- they are taking a contrary 14 position now and contrary to the order and 15 contrary to what was actually done. 16 MS. CONLIN: And also contrary to what 17 Mr. Tulchin just told us all yesterday, Your 18 Honor, on the record. 19 That was the process that everybody 20 accepted yesterday. It's only changed today. 21 And it is inconsistent clearly with 22 Mr. Tulchin's understanding. If you haven't 23 made an objection, the document is in evidence. 24 And that's what he said. I read it to the 25 Court. 5286 1 So under our process that, as you 2 know, is in evidence. Everybody understood 3 that, Your Honor. 4 MS. NELLES: Your Honor, they're 5 mixing up apples and oranges. They are mixing 6 up things that could be shown at opening 7 statements with the process of -- for having 8 evidence introduced at trial. 9 Both parties asserted objections to 10 the Special Master. There was a schedule for 11 asserting objections. Nothing said every 12 objection had to be asserted. 13 Both parties went in -- well, 14 certainly this party went in with the 15 understanding we were going to assert every 16 single objection we could possibly think of in 17 light of the documents as they stood, but that, 18 as the Court's order said, other objections 19 that can be made only in light of the trial 20 record may be made at trial. It's what it 21 says. 22 THE COURT: Very well. 23 MR. CASHMAN: Well, Your Honor, that 24 would make a mockery of the Special Master 25 process as Microsoft has so often argued 5287 1 because then we went through the whole process 2 and wouldn't know until we are sitting here now 3 what the objections are going to be to all 4 these exhibits. 5 And that's exactly why the parties had 6 to assert these objections because when we went 7 through the meet and confer process, then we 8 talked about all the objections, whether some 9 of them would be withdrawn by any side. 10 And so that was one of the reasons why 11 all the objections had to be asserted. So that 12 everybody would be on advance notice. 13 And what is left for the Court now is 14 to rule on relevancy or prejudicial objections 15 that were made way back when. 16 It's not a matter of we're going to 17 assert -- that any party can assert those now 18 and then ruling. 19 So the assertion of the objections had 20 to happen long ago. 21 THE COURT: How long will it take you 22 to look at all these? 23 MS. NELLES: For what purpose, Your 24 Honor? To know if they are going to be 25 relevant five months from now? 5288 1 THE COURT: They have been offered. 2 MS. NELLES: I can't waive -- I can't 3 say -- I can look at every single one of the 4 exhibits that was put on the screen today, I 5 can look at every single exhibit that's coming 6 in with the Gates' deposition. That's what the 7 Special Master process did. 8 We could clear every single one of 9 those by, you know, the end of the evening. 10 What I can't do is say that there's 11 some exhibit on here numbered 2975 that may be 12 irrelevant based on rulings that happened down 13 the line. 14 And I can't imagine that they're 15 waiving every single -- they're stating here 16 and saying we are not going to make a relevance 17 objection to any evidence that Microsoft puts 18 in. 19 Of course, we have to be free to 20 continue to make relevance objections. Some we 21 knew ahead of time based on what we thought may 22 come in or out based on collateral estoppel. 23 But some of these things just have to 24 happen during the course of a trial. That's 25 the nature of a trial. 5289 1 MR. CASHMAN: Again, Your Honor -- and 2 I know we've put in -- in connection with the 3 Gates' depo, I know we've put this evidence in 4 with the applicable schedule and evidence 5 establishing that all of the objections had to 6 be asserted. 7 So Ms. Nelles' arguments go to a 8 different set of exhibits, not exhibits that 9 have no pending objections. 10 THE COURT: Do you know which 11 witnesses you are going to use these exhibits 12 with? 13 MR. CASHMAN: Pardon me? 14 THE COURT: Do you know which 15 witnesses you are going to use these exhibits 16 with? 17 MS. CONLIN: In many cases, Your 18 Honor, there are no witnesses with which we are 19 going to use these exhibits to which no 20 objection was asserted. 21 And, you know, these are documents 22 from, for the most part, Microsoft. These are 23 the e-mails and the like. The Court has seen 24 many of them. 25 And there is no -- you know, I know 5290 1 I'm being repetitive, but the process that Mr. 2 Tulchin described for the Court yesterday is, 3 in fact, the process adopted by the parties. 4 Relevance objections were made, as 5 were all the other objections that now 6 Defendant comes before the Court and says it 7 can still make. 8 That's not how the parties proceeded. 9 That was not either -- yesterday it was the 10 Defendant's understanding. 11 Certainly, Your Honor, I can offer 12 documents to which no objection has been 13 asserted without having a witness to use those 14 documents with. 15 And, frankly, Your Honor, there are 16 just all kinds of them that are exactly like 17 that. And we certainly are caught off guard by 18 this assertion that there has to be a witness. 19 Even Judge Peterson didn't say that, 20 frankly. He was trying to protect Microsoft 21 from having -- well, I don't want to -- I think 22 his ruling I thought was an odd ruling, and I 23 think this Court has ruled, I think, quite to 24 the contrary. 25 You have said that documents that come 5291 1 into evidence in the ordinary course, which 2 these would come into evidence in the ordinary 3 course, can be posted. 4 But we're also talking about something 5 that doesn't even exist yet. So I know 6 Microsoft doesn't want the public ever to know, 7 ever, what it has done, what it says in its 8 internal documents. 9 I certainly understand why they 10 wouldn't want people to know that. But this is 11 a public trial in a public courtroom. These 12 documents were not objected to in the process. 13 Mr. Tulchin told us yesterday that 14 means they are, quote, in evidence. That was 15 the parties' understanding, and that's what 16 should be done. 17 They've looked at all these. They've 18 looked at all these documents already, Your 19 Honor. I mean, they've already looked at these 20 3,760 documents within the Special Master 21 process. 22 Every single one of these documents 23 has been closely examined by lawyers for 24 Microsoft. And no objection was raised. These 25 are so clearly relevant. 5292 1 I mean, you know, Your Honor, there 2 are all kinds of documents to which they say 3 highly prejudicial. I mean, it's already 4 written down. 5 I don't know if it would be helpful to 6 the Court to see what that looks like, but, 7 gosh, we just had -- I mean, they raised highly 8 prejudicial. None of the documents to which 9 they raised 403 objection is on this disk. 10 MR. CASHMAN: And, Your Honor, if I 11 just may add, your comment about which, you 12 know, witnesses with exhibits. 13 That is the kind of situation where 14 there are objections such as unduly prejudicial 15 or relevance, for example. 16 And those are the kind of issues that 17 the parties are working through -- trying to 18 work through in meet and confer. And, when we 19 can't, we come to you and we say -- and we 20 argue those things out. 21 And the process that we have been 22 discussing is for witness-specific exhibits, 23 moving them in at the end of the deposition or 24 some process like that. 25 But those are for exhibits where the 5293 1 objections were asserted and where there's been 2 a back and forth through the Special Master 3 process for objections. 4 So that's a different category of 5 exhibits. 6 Here we're talking about exhibits that 7 are free and clear. 8 THE COURT: But my order does say that 9 they reserve some stuff as to relevance and 10 other things; right? 11 MR. CASHMAN: The order provided that 12 rulings on relevancy and prejudice and whatnot 13 would be reserved for your decision, which is 14 what we've argued all along when we argued why 15 the Special Master was exceeding his authority 16 on certain -- on certain matters. 17 THE COURT: So they can still raise 18 their relevance objection? 19 MR. CASHMAN: No. 20 MS. CONLIN: No. 21 MR. CASHMAN: That's not how the 22 process was set up. 23 And, again, if -- we can provide the 24 supplemental authority for you on that if you'd 25 like. 5294 1 THE COURT: It seems like both parties 2 have different views of what the process is. 3 Each party should have a right to make the 4 objections that were not presented to the 5 Special Master to have the Court rule on, 6 especially in light of my order which reserves 7 some. 8 So, I guess, what Defendants are going 9 to have to do now that these have been offered 10 is to go through them and see if they have an 11 objection, if at all, at this time to any of 12 the exhibits. 13 And if they do, then they'll tell me 14 on the record and we'll go through it. 15 If they don't, then they will be 16 admitted in front of the jury. 17 And then I don't know how else to do 18 it. 19 MS. NELLES: Your Honor, shortcut 20 this -- 21 THE COURT: I'd rather go exhibit by 22 exhibit and that's how we'll do it. 23 No more discussion. 24 MS. NELLES: Your Honor, to shortcut 25 this perhaps what I'll do now is -- 5295 1 THE COURT: I tell you what, you know, 2 no one seems to have an idea of a process they 3 want to do or can agree to one. So we are 4 going to do it my way. 5 So present your exhibits and they've 6 been offered at this time. 7 You take as much time as you need to 8 look through them and then you be prepared to 9 go through all 3,000 at some point and, exhibit 10 by exhibit, you tell me the objection. I will 11 rule on it if I can. 12 If we can't rule on it because we need 13 a witness to provide some foundation or 14 something, I don't -- I guess we'll have to do 15 it that way. 16 Any other discussion or record on it? 17 MS. NELLES: None for us, Your Honor. 18 THE COURT: Very good. 19 MS. NELLES: Thank you. 20 MS. CONLIN: Your Honor, we have a 21 motion to hand to the Court. 22 It is Plaintiffs' renewed motion to 23 compel Microsoft to produce documents 24 responsive to Plaintiffs' request for 25 production 30, 41, 43, 45, 47, and 48, and 5296 1 Interrogatory Number 15. 2 This, Your Honor, has to do with the 3 conduct of the Defendant past the consent 4 decree. 5 We mentioned this yesterday, Your 6 Honor. What we would request is that the 7 hearing that we ask for on Monday with respect 8 to 89 and 93 be pushed to Tuesday and that the 9 Court hear us on this motion to compel on 10 Monday. 11 Also, Your Honor, what I have for 12 today is an instruction -- we didn't quite 13 finish, you know, with the instruction that you 14 had earlier on the depositions. 15 And then, of course, you have the 16 Gates' video and Anthony Speakman. 17 But I would ask the Court to consider 18 over the weekend imposing a deadline on the 19 Defendant for making objections to the 3,760 20 exhibits to which at this point they have made 21 no objections. 22 THE COURT: Well, I would suggest that 23 the ones -- I guess they're not in any 24 particular order or to any particular witness, 25 are they? 5297 1 MS. CONLIN: They are not, Your Honor. 2 THE COURT: Okay. Well, I think they 3 are entitled for some reasonable time to look 4 through them. I don't want to put a deadline 5 right now, but -- 6 MR. CASHMAN: Your Honor, if I can -- 7 if Plaintiffs can show you that these exhibits 8 were examined by Microsoft and that they chose 9 not to assert the relevance and prejudice 10 objections and if we provide the information to 11 you establishing what we said was the process, 12 perhaps that would make this an easier matter 13 to dispose of. 14 THE COURT: Was there another piece of 15 paper that I signed other than that order that 16 says what the process is? 17 MR. CASHMAN: I believe that there -- 18 I believe that there is a schedule that goes -- 19 that was entered in connection with that 20 appointment order which says parties to do 21 these activities by certain dates. 22 THE COURT: Were you done with this or 23 did you want to talk about this one? 24 MS. CONLIN: No, I don't want to talk 25 about that. I just served that, Your Honor. 5298 1 MS. NELLES: And we'd like a 2 reasonable opportunity to look at it, Your 3 Honor, before responding, please. 4 THE COURT: Okay. All right. Sorry. 5 MS. CONLIN: I wanted to take that up 6 on Monday. Sorry, Your Honor. 7 MS. NELLES: Monday would not be -- we 8 can't take it up on Monday. We need at least a 9 day to look at it, please, Your Honor, and 10 respond. 11 MS. CONLIN: We would ask that it be 12 Monday. And the reason that we ask that it be 13 Monday, because we've already briefed this and 14 we've already discussed it and the Court 15 permitted the Defendant to refer before the 16 Jury to the consent decree. 17 And we were not permitted to do any 18 discovery beyond the consent decree and now we 19 ask that it be done. 20 But, as I said, it's already been 21 discussed and briefed. The thing that has 22 changed is the Defendant has used the consent 23 decree, talked about it to the Jury. 24 THE COURT: Are these new documents or 25 ones they haven't produced? 5299 1 MS. CONLIN: No. No, Your Honor. 2 Those are from requests of production of 3 documents literally years ago when we were 4 denied, denied the opportunity to discover what 5 Defendant's conduct has been in connection with 6 -- past the consent decree. 7 So that's why we think it's 8 appropriate, Your Honor. 9 We need to have this material. Our 10 experts need to look at this material. It's 11 now an issue in the case, and we've been denied 12 discovery on it. So that's what we're hoping 13 to do. 14 THE COURT: All right. 15 How long do you need to look at this? 16 MS. NELLES: Could I just have until 17 Tuesday, Your Honor? Do it on Tuesday. If you 18 want to do it on Monday, I'll be prepared. 19 THE COURT: We have another issue on 20 Monday, don't we? 21 MS. NELLES: I thought we were already 22 booked. 23 THE COURT: No. 24 MS. CONLIN: On Monday -- I just 25 suggested we push this to Tuesday because this 5300 1 is much more urgent to us than the 89/93 stuff. 2 THE COURT: We'll take it up Tuesday 3 morning. 4 MS. NELLES: Thank you, Your Honor. 5 And speaking of urgent and materials that are 6 owed to us, could we get the status report or 7 order Miss Conlin to give this afternoon on the 8 expert materials, the updated report? 9 MR. GRALEWSKI: Your Honor, Bob 10 Gralewski. 11 I was at the office preparing for Tony 12 Speakman while Mr. Hagstrom was working very 13 hard on this. 14 And he asked me when this afternoon 15 the status report should be given? I guessed 16 and said around 3 o'clock, thinking we were 17 going to argue the Gates' stuff and then 18 Speakman and then the status report could be 19 given around 3 o'clock. 20 THE COURT: That's fine. 21 MR. GRALEWSKI: Because I want to call 22 and ask someone to come over and do that. 23 THE COURT: That's fine. 24 MS. NELLES: That's fine. Thank you. 25 MS. CONLIN: And, Your Honor, if we 5301 1 may also on Monday gather the materials that we 2 think support our view with respect to the 3 Court's prior rulings. 4 THE COURT: Yeah. I think that's what 5 I was talking to Mr. Cashman about. Sure. 6 MR. CASHMAN: I was trying to, 7 obviously, alleviate a lot of work for the 8 Court if I can show you that these are as we 9 stated. 10 THE COURT: Bring it in. Bring it in. 11 Absolutely. Absolutely. If that would 12 shortcut that, that would be great. 13 Okay. 14 MS. NELLES: With the Court's 15 permission, I'm going to leave. 16 THE COURT: Okay. Have a good 17 weekend. 18 MS. NELLES: Thank you, Your Honor. 19 You too, and everyone else. 20 MR. CASHMAN: So I guess that leaves 21 the -- 22 THE COURT: We are back on Gates. 23 MS. CONLIN: How about the 24 instructions on the depos, Your Honor? Do you 25 want to take that up another time? 5302 1 THE COURT: I'm going to work on it 2 this weekend and give you one Monday morning as 3 to what I -- my second proposed. 4 MS. NELLES: Thank you, Your Honor. 5 MS. CONLIN: Okay. 6 THE COURT: I'm either going to redo 7 it or do something else. And I intend to give 8 something, though. 9 MS. NELLES: All right. 10 MS. CONLIN: Thank you, Your Honor. 11 THE COURT: Yeah. I've got it on the 12 top of my list with red pen. 13 MS. NELLES: It's not on the top of 14 mine, but I appreciate it's on the top of 15 yours, Your Honor. Thank you. 16 THE COURT: All right. Let me get my 17 notes on this. 18 MR. CASHMAN: Your Honor, I think we 19 should start with the testimony, which I handed 20 up to you earlier today that has the PX 5777A. 21 THE COURT: Okay. I got it. And that 22 goes with which? 23 MR. CASHMAN: There's some testimony 24 and there's a June 10, 1996 Financial Times 25 article. 5303 1 THE COURT: The testimony is attached 2 to it; right? 3 MR. CASHMAN: Yep. 4 And before we look at this more 5 specifically, I want to just emphasize for the 6 Court that what we're looking at here both on 7 5777A and the others, this all occurs at the 8 beginning of the examination by David Boies. 9 And this interchange between Boies and 10 Gates on this exhibit and the other two that we 11 are going to be talking about is contentious, 12 as Mr. Tulchin mentioned in his opening this 13 morning. 14 But it's really important because it 15 provides critical context for the way that 16 Boies questions Mr. Gates subsequent to these 17 exhibits, and it really sets the tone. 18 And the Jury needs to able to hear 19 that testimony. If the Jury is deprived of 20 that important context, they will not 21 understand why Boies is taking the line of 22 questioning that he does with Mr. Gates. 23 So it's crucial for the Jury's 24 understanding of the whole deposition for them 25 to have this information. 5304 1 THE COURT: Well, let me ask first, 2 maybe -- I guess I need to know what was the 3 objection to this portion? 4 MR. TUGGY: The objection to the 5 exhibit is hearsay, which is conceded. 6 THE COURT: I thought you were 7 objecting to the testimony. 8 MR. TUGGY: Yes. And then the 9 testimony, the objection is that it's testimony 10 based on hearsay so it's hearsay itself. 11 THE COURT: Okay. Go ahead, 12 Mr. Cashman. 13 MR. CASHMAN: Okay. So Mr. Tuggy says 14 it's hearsay. 15 He's stated the sole basis for their 16 position this morning that they believe that 17 the statement, which is on 5777A with the blue 18 tag on it that I've provided to the Court where 19 Mr. Gates is quoted as saying our business 20 model works even if all Internet software is 21 free. 22 We are still selling operating 23 systems. What does Netscape's business model 24 look like if that happens? Not very good. 25 And Microsoft's assertion is that the 5305 1 declarant is the reporter. And that just 2 doesn't square -- I mean, the definition 3 provided right in the Iowa Rules, 5.801(b) says 4 the declarant is the person who makes the 5 statement, and clearly Gates is the person 6 making the statement. 7 Furthermore, as I mentioned this 8 morning, I've provided the Court with evidence 9 showing that Mr. Gates admits having this 10 interview with this reporter. 11 He has some quibbles. I mean, I don't 12 even know if that's the right thing to say 13 about whether its quibbles with how he's 14 quoted. It's more nonresponsiveness than 15 anything else. 16 But, certainly, his statements would 17 not be hearsay, rather, they are admissions I 18 think clearly under 5.801(d)(2)(A) and I think 19 (D). 20 So this is no different than -- 21 examining Mr. Gates about his own statement is 22 clearly appropriate. And I think it's also 23 appropriate, as I mentioned this morning under 24 the prior statements of a witness rule, Iowa 25 5.613(a). 5306 1 Now, before I turn to the line-by-line 2 to demonstrate why the objections are not well 3 taken and why it's overly broad, I just think 4 it's important to understand that this is a 5 situation where the Plaintiffs are not going to 6 be moving for the admission of 5777A. And they 7 are not going to be displaying 5777A. 8 So we're just talking about the 9 testimony. And Plaintiffs submit that it's 10 entirely correct and appropriate that testimony 11 comes in when Mr. Gates is testifying about his 12 own quote. 13 So if we turn now to the transcript -- 14 THE COURT: Page 173? 15 MS. CONLIN: Your Honor, if I may just 16 say a few words and then I'd like to be 17 excused. 18 THE COURT: Sure. 19 MS. CONLIN: Because you have turned 20 the air conditioner on again. 21 Here's the context of what he said to 22 the Financial Times and to other papers is very 23 important here. 24 At the time Netscape was the leading 25 browser. Netscape made a charge for its 5307 1 browser. 2 Mr. Gates is publicly threatening 3 Netscape. This comes in the context of the 4 meetings and other things that are going on. 5 But he says with respect to the 6 Microsoft browser that they're going to offer 7 it for free. And he does so in order to 8 directly threaten Netscape. 9 He says in this quote, you know, we've 10 still got the operating system, what does 11 Netscape's business model look like if the one 12 product that they sell we're going to give away 13 for free. 14 This is an important piece of 15 evidence. And, as Mr. Cashman said, it also 16 sets the context for the entire examination. 17 But this is what's happening. He's 18 publicly saying to Netscape, you know, your 19 business model is dead. 20 We're going to give away the Internet 21 Explorer, you know, with our product and we've 22 still got the operating system. That's our 23 business model. But you're dead. 24 So that's why this is an important 25 statement. And there's little question that he 5308 1 made it, Your Honor. He made it several times 2 in several places. 3 THE COURT: Mr. Cashman. Thank you. 4 MR. CASHMAN: If you look at the 5 testimony designations, Your Honor -- 6 THE COURT: I hope you warm up, 7 Ms. Conlin. 8 MS. CONLIN: Wait a minute. 9 MR. GRALEWSKI: I'm not going to let 10 her leave, Judge. 11 MS. CONLIN: Why can't somebody else 12 read? 13 MR. CASHMAN: You need to make a 14 report it sounds like. 15 But at page 173, the objection, as I 16 understand it, by Microsoft starts at 173, 23. 17 THE COURT: Right. 18 MR. CASHMAN: In response to the 19 question right above it. As you can see the 20 Government Exhibit 355 they talked about that, 21 which is Government Exhibit 355 is Exhibit 22 5783, which we'll talk about in a minute, but 23 Exhibit 364 is what is now Plaintiffs' Exhibit 24 5777A. 25 THE COURT: Have a good weekend, 5309 1 Ms. Conlin. 2 MS. CONLIN: Thank you, Your Honor. 3 You too. 4 MR. CASHMAN: And you can see here 5 that Mr. Boies quotes the one line that I 6 quoted just a moment ago. 7 And he says, did you say those words 8 to this reporter, Mr. Gates? 9 And that's entirely an appropriate 10 question to ask if Mr. Gates made that 11 statement. 12 That's not calling for hearsay and 13 there's nothing wrong with it. And so, 14 therefore, there's nothing wrong with the 15 answer. 16 You can see from the answer that 17 Mr. Gates is being evasive, which is actually 18 what he does for much of the testimony which 19 follows and actually why there's so much 20 colloquy about this particular exhibit because 21 Mr. Gates is trying to avoid providing an 22 answer. 23 There's nothing wrong with that 24 question or the answer. 25 So you can see as we move on, 5310 1 Mr. Gates is questioning whether -- he says, I 2 gave an interview to Louise Kehoe. Louise 3 Kehoe is Louise Kehoe. 4 The reason he starts making those kind 5 of efforts to wiggle around is because the 6 article 5777A also has another individual on 7 the author line. 8 And so Mr. Gates is trying to get out 9 of admitting that he said what he said by 10 misdirecting the testimony to whether the other 11 author was involved. 12 So then moving on. For example, on 13 lines 8 and 9, Mr. Boies asked if the article 14 refreshes his recollection, and Mr. Gates says 15 I don't remember. 16 That's an entirely appropriate line of 17 questioning. If you put -- if I were to put a 18 document in front of you that you had written 19 on in the marginalia, as I indicated earlier, 20 and asked if you had written that marginalia 21 there, that would be appropriate questioning. 22 Then as you move on towards the bottom 23 of the page, Mr. Boies says did you communicate 24 the substance of those words to the Financial 25 Times? And that's an entirely proper question 5311 1 to ask if the substance was conveyed to the 2 Times. 3 So then we move to the second page, 4 and there's some colloquy there between the 5 lawyers, but moving down again, Mr. Boies tries 6 to get an answer to his question at the bottom 7 of page 175, and here he asked about the 8 difference in the language in 364 versus the 9 difference in the language in the other 10 Financial Times article, which is 5783. 11 So asking the declarant, Mr. Gates, 12 why -- if he can explain why there's a 13 difference is an appropriate question. 14 THE COURT: Difference between which? 15 MR. CASHMAN: Well, if you look -- if 16 you have the -- 17 THE COURT: Does he adopt one -- does 18 he say he adopts one and not the other? 19 MR. CASHMAN: He says that he made 20 statements to Louise Kehoe. 21 THE COURT: Right. But I -- 22 MR. CASHMAN: But there's some fencing 23 over exactly what he said. 24 THE COURT: Okay. 25 MR. CASHMAN: And if you look at 5777A 5312 1 where I have the blue tag and then if you have 2 5783 handy, and turn to the blue tag and the 3 highlighted text there, which they also ask 4 Mr. Gates about, the language is just a little 5 bit different. 6 And that's what they're asking him 7 about right here on 175. 8 So asking Mr. Gates if he can explain 9 the difference is an appropriate question. 10 Moving -- as you move through the 11 subsequent testimony, you can see that the 12 witness continues to be evasive, which is what 13 triggers the additional questioning. 14 So then Mr. Boies asked on 176, line 15 22 to 24 whether Gates believes that there 16 would be any reason for the reporter to make up 17 the quotations. That's an appropriate 18 question. 19 Turning to 177, you can see the 20 question and answers here. And basically 21 Mr. Boies is trying to find out -- in essence, 22 he's trying to find out if he provided this 23 information in sum or substance to the 24 Financial Times reporter. And again and again 25 Mr. Gates is evasive. 5313 1 So there's nothing wrong with the 2 questioning. You can see in particular when 3 you get down to, for example, the answer at 4 Line 19 and 20 where Mr. Gates is trying to 5 quibble with the questioner now -- not even 6 with the content of the quote that he gave to 7 the Financial Times, but now he's quibbling 8 with Mr. Boies, what do you mean by Internet 9 software, for example. 10 And so Mr. Boies says what I mean is 11 what you refer to as Internet software in these 12 various quotations. 13 And that's not an improper question. 14 It doesn't call for a hearsay response. 15 And so as you move through these 16 questions, it's all about what Mr. Gates said 17 or whether he remembers what he said or what 18 substance -- what he said in substance. And so 19 the questions are not improper at all. 20 And you'll see, for example, moving to 21 page 181, Mr. Boies says let me ask you a 22 different question. Do you believe that the 23 publication of this article, and, in 24 particular, the publication of the statement 25 attributed to you, whether accurately 5314 1 attributed to you or not, and then he continues 2 on after the quote, believe that the 3 publication of the statement affected Netscape. 4 So that's an appropriate question to 5 ask Mr. Gates for his belief as to whether his 6 statement affected Netscape. That's not 7 hearsay. 8 And even then you'll see in the 9 subsequent colloquy Mr. Gates cannot provide a 10 straight answer. 11 And I know Ms. Conlin has stated 12 several times to the Court it's the evasiveness 13 and the nonresponsiveness and the deceit and 14 deception by Mr. Gates in this kind of 15 testimony and elsewhere that makes this 16 deposition an important one and why the Jury 17 needs to see this kind of information. 18 Because, amongst other things, it goes 19 to the willful and flagrant conduct claim. 20 So then you move to the next page, 21 182, and Boies asks are you telling me you 22 don't understand the question, sir? I mean, 23 Microsoft is even objecting to those kinds of 24 questions. And there's nothing wrong with 25 asking whether or not the witness understands 5315 1 the question. 2 Then if you move down to line 13 and 3 14. By affected Netscape, I mean adversely 4 affected Netscape. I mean, these are all 5 questions that could be asked independently of 6 showing Mr. Gates the article. And it's just 7 ordinary, straight-ahead testimony. There's 8 nothing hearsay about this. 9 And, again, you can see how Mr. Gates 10 continued to be nonresponsive and evasive. 11 At line 23 and 24 Mr. Boies says, do 12 you think it adversely affected Netscape's 13 business prospects? I mean, he's just asking 14 for Mr. Gates' belief or perception or opinion 15 of how that would affect Netscape in his view. 16 You go to the next page, 183. 17 Question at line 4, now, you putting in the 18 word direct effect -- and I know that you are a 19 very precise person from the statement you've 20 already made today -- so I'm going to ask you 21 what you mean by the use of the word direct 22 there that you put in the answer that wasn't in 23 the question. What do you mean by direct? 24 So there's nothing wrong with that 25 question. That's just pushing a witness who 5316 1 won't answer the questions in a straight-ahead 2 fashion. 3 You move down to line 24. What I'm 4 asking you about, of course, is the effect of 5 what you were saying or what was attributed to 6 you. And I do want to come to the effect that 7 your products had on Netscape as well, but 8 right now I want to talk about the effect of 9 what was attributed to you. 10 There's nothing improper about that 11 question as he continues on because he's simply 12 asking for Mr. Gates' perception about how he 13 thinks that kind of statement would affect 14 Netscape. 15 Then, at line 15, Mr. Boies asked, do 16 you think the effect on Microsoft's business of 17 competitors saying things about Microsoft is 18 comparable to the effect on Netscape's business 19 on Microsoft saying things like this about 20 Netscape? 21 That's not an improper question. Not 22 hearsay. And it doesn't call for a hearsay 23 response. 24 So, again, all this testimony is 25 proper. 5317 1 We move to the next page, on 185. 2 Here at lines 5 through 7 Mr. Boies asked if 3 Mr. Gates has any doubts it was published -- 4 here he admits that he knows it was published. 5 And, again, because Mr. Gates has 6 refused to answer straight-ahead questions 7 about his own belief or opinion, Mr. Gates -- 8 or Mr. Boies is going back into that territory 9 until he can get a straight answer, which 10 Mr. Gates continually refuses to do. 11 It's so evident here reading through 12 the back and forth that this -- there's no 13 hearsay involved here. 14 There is no statement by somebody 15 other than Mr. Gates that's involved. This is 16 all straight-ahead testimony about what 17 Mr. Gates said, what did he mean when he said 18 it, did he say these things, or did he state 19 that to the reporter in substance, and what 20 Mr. Gates thought the effect of his statements 21 might be. That's certainly not inappropriate. 22 I could go on, Your Honor, but I do 23 want to point out for the record that although 24 this testimony is clearly appropriate, 25 Microsoft objects all the way through 192, line 5318 1 6. I think that's where they end there. 2 But there's no basis for the hearsay 3 objection, and that's their only objection, for 4 all the reasons I have stated. 5 I mean, first, Mr. Gates is the 6 declarant. It's an admission. It is, I think, 7 appropriate under 5.613, the prior statement of 8 witnesses. 9 And, most importantly, it's just 10 ordinary questioning about something that 11 somebody has written. It's not in any way, 12 shape, or form hearsay. 13 So I will respond to any comments that 14 Mr. Tuggy has about the testimony related to 15 5777A. 16 MR. TUGGY: I have a question 17 initially about the papers Mr. Cashman has 18 handed up. 19 Are these arrows intended to be what's 20 being played on screen or the scope of the 21 objection? 22 MR. CASHMAN: It could be neither. 23 The black arrows on the right-hand side column 24 were what was designated at one time, but it 25 may not be the end product of what is being 5319 1 played on the screen. 2 MR. TUGGY: So have you provided the 3 Court yet with sections? 4 MR. CASHMAN: Yes. 5 MR. TUGGY: Okay. 6 The testimony at issue involves three 7 articles, and, in particular, the testimony on 8 those articles, Microsoft asserted the hearsay 9 objection to the articles which was conceded by 10 Plaintiffs. 11 The articles attribute certain 12 statements to Mr. Gates. And the first article 13 which forms the subject of the testimony 14 Mr. Cashman has been referring to is a 15 Financial Times article dated June 10, 1996. 16 And you have, I believe, Plaintiffs' 17 Exhibit 5777A, which on the third page has a 18 quote that's attributed to Mr. Gates. 19 And the quote begins, our business 20 model works, even if all Internet software is 21 free. 22 And the article says, says Mr. Gates, 23 we are still selling operating systems. What 24 does Netscape's business model look like if 25 that happens? Not very good. 5320 1 In other words, statements made -- two 2 actually. One by Mr. Cashman and one by 3 Ms. Conlin, which illustrates the danger of 4 permitting this testimony to be shown to the 5 Jury, the hearsay danger. 6 Mr. Cashman said, and I quote, 7 examining Mr. Gates about his own statement is 8 clearly appropriate. 9 Ms. Conlin said, the context of what 10 he said to the reporters is very important. 11 Now, it's also important as we focus 12 on this that we are clear on who the declarant 13 is; that Microsoft claims is the subject of our 14 hearsay objection. 15 According to Rule 5.801(c), hearsay is 16 a statement other than one made by the 17 declarant while testifying at the trial or 18 hearing offered in evidence to prove the truth 19 of the matter asserted. 20 The statement at issue is that 21 Mr. Gates made the statements; that Mr. Gates' 22 words are what's stated in these articles. 23 So the declarant under 5.801(b) is the 24 person who makes the statement. 25 The person making the statement is the 5321 1 reporter. The reporter is saying in these 2 articles this is something Mr. Gates said. 3 The question is, in all of his 4 testimony is the reporter's statement being 5 assumed as true or is it being presented to the 6 Jury so the Jury may infer, as both Ms. Conlin 7 and Mr. Cashman have done, that, in fact, the 8 reporter's statement is true; that these were 9 statements made by Mr. Gates? 10 The hearsay issue is not whether 11 Mr. Gates' statement is being offered for its 12 truth. 13 The hearsay issue is whether the 14 reporter's statement is being offered for its 15 truth. And the reporter's statement is that 16 these are -- this is an accurate quote of what 17 was said by Mr. Gates. 18 So how does the testimony play out on 19 this evidence? And Mr. Cashman selected 20 Plaintiffs' Exhibit 5777A, which I think is a 21 good example. 22 The first thing Mr. Boies does is to 23 describe in detail the article and the quote 24 that is at issue. 25 And in the information provided with 5322 1 5777A, in the materials you have, that begins 2 at page 173, line 3. 3 There Mr. Boies asks, do you have 4 Exhibit 364 in front of you, sir? 5 And to be clear, Exhibit 364 is 6 Plaintiffs' Exhibit 577A. 7 And Mr. Boies says, Exhibit 355 that 8 we were just talking about is a July 3, 1996 9 Financial Times article. 10 Exhibit 364 is a June 10, 1996 11 Financial Times article. 12 There were two articles written for 13 the Financial Times by the same author that are 14 at issue today. 15 The other Financial Times article is 16 Government Exhibit 355. 17 In any event, Mr. Boies proceeds. And 18 I'd like you to look on the fourth page, the 19 first paragraph, and you can read as much of 20 the document as you need to put this into 21 context, but the paragraph I'm interested in at 22 the top of the page -- the paragraph I'm 23 interested is at the top of the page and it 24 says, quote, and then the quote is provided. 25 So when Mr. Boies asks the question, 5323 1 which are perfectly appropriate in a discovery 2 question, but the question is whether they are 3 appropriate for trial. Mr. Boies identifies 4 the article, the date, and the quote and states 5 it on the record. 6 Plaintiffs' suggestion that by not 7 putting the Financial Times article on the 8 screen, they have somehow cured the hearsay 9 problem is incorrect. 10 By quoting the language and 11 identifying the publication, Mr. Boies has done 12 the same thing. The damage is done because the 13 hearsay has been put before the Jury in an 14 improper way. 15 Now, the statement by the reporter 16 that this is, in fact, a quote of Mr. Gates is 17 hearsay. 18 Now, the first thing that Mr. Boies 19 does in the deposition is to ask Mr. Gates 20 whether the words that have been attributed to 21 him were his words, and Mr. Gates does not 22 adopt the statement. 23 As Mr. Cashman said, Mr. Gates and 24 Mr. Boies go round and round on it, but 25 Mr. Gates is quite clear that he does not 5324 1 recall making the statement, and there is no 2 adoption anywhere that, in fact, these are his 3 words. 4 And for this particular exhibit, at 5 page 174, line 10, Mr. Boies says, did you say 6 to a Financial Times reporter in 1996, quote. 7 So, again, he's referring back to the 8 hearsay. Not hearsay because it's a statement 9 by Mr. Gates. It's hearsay because it's a 10 statement attributed to him by a reporter. 11 And Mr. Boies asked, Did you say those 12 words? 13 Answer: I don't remember. 14 Question: To a Financial Times 15 reporter, Mr. Gates? 16 Answer: I said I don't remember. 17 So it's not a situation where a 18 witness has adopted the quote, where the 19 witness has said I don't really remember, but 20 it's likely something I said. 21 It's not a situation where -- I 22 believe that there's some authority for the 23 proposition that if a public figure makes a 24 statement and there are multiple reporters who 25 see the statement and those reporters, in at 5325 1 least three or more publications each report 2 the same statement, you might have foundation 3 sufficient to show that, in fact, the statement 4 was made. This is not that situation. 5 There's no evidence in the record that 6 this is a statement by Mr. Gates and no offer 7 of proof that they have or can make that, in 8 fact, this is a correct quote of a statement by 9 Mr. Gates. 10 What occurs after that line of 11 questioning, it begins with a detailed 12 description of the quote, a question about 13 whether he made the statement, answers by 14 Mr. Gates that he does not adopt these 15 statements as his own. 16 Then he is asked questions about the 17 effect of the statement on the market. 18 And Mr. Cashman pointed one of those 19 out at page 182 with respect to this document. 20 Page 182, lines 4 to 8. 21 The question was: Do you believe that 22 the publication of that statement -- in other 23 words, just the mere publication, it doesn't 24 matter whether you said it, Mr. Gates, but the 25 fact that it was published -- do you believe 5326 1 that that affected Netscape? 2 And the answer was what do you mean by 3 affected Netscape. 4 And then counsel here and the witness 5 went round and round on what that meant. And 6 the examination continued along those lines. 7 Now, if as is the case here, that 8 there's no foundation, the statement was made 9 by Mr. Gates because the only foundation that's 10 been laid is hearsay, then whether that 11 statement affected Netscape is completely 12 irrelevant. 13 The fact that a reporter might have 14 misquoted Gates in a way that affected Netscape 15 is not a relevant fact. 16 The only thing that can make it 17 relevant is if the quote is properly attributed 18 to Mr. Gates. 19 Finally -- 20 THE COURT: Wait a minute. Didn't I 21 let something in for you guys which was a quote 22 from Gates that was being offered to show the 23 affect on the market? 24 MR. TUGGY: Yes, Your Honor. 25 THE COURT: Why doesn't that apply 5327 1 here too? 2 MR. TUGGY: Because there the question 3 was, the issue that's -- what makes that 4 relevant is the effect of Mr. Gates' statement 5 in that other context on the ISV community and 6 whether their reliance on the so-called -- the 7 other statements relating to Plaintiffs' head 8 fake claim. 9 Plaintiffs, as you know, claim that 10 Microsoft made public statements and other 11 statements that caused developers to write for 12 OS/2 while Microsoft was secretly pursuing 13 Windows. 14 To the extent that in the trade press 15 available to the ISV communities publications 16 attribute statements to Microsoft different 17 than what the ISVs were purportedly told, it is 18 relevant to the information that's available to 19 the ISVs when they have to decide one way or 20 the other whether they're going to write for 21 OS/2 or they're going to write for Windows. 22 This situation is different because it 23 is not relevant. There's not a relevant issue 24 in this lawsuit. Whether when reading this 25 article, this publication that somehow that 5328 1 would adversely affect Netscape. 2 In other words, if it were relevant in 3 this case that the mere publication of this 4 article and the quote adversely affected 5 Netscape, then it would be a proper nonhearsay 6 use of the article. 7 And the best example of that is 8 Fanning versus Mapco where statements were made 9 that could affect the value of property and the 10 fact that the statements were in a widely made 11 publication that could affect the value of 12 property, statements regarding anhydrous 13 ammonia were relevant to a fact in that case. 14 THE COURT: Just because it's called 15 the Financial Times, what's the difference? 16 MR. TUGGY: Well, the difference is -- 17 THE COURT: Maybe it's even read more. 18 MR. TUGGY: It may be the case that 19 the Financial Times is read more. And it may 20 be the case that, in fact, the publication of 21 this purported quote adversely affected 22 Netscape. 23 THE COURT: Okay. 24 MR. TUGGY: But that's not relevant. 25 Our argument on the other issues is 5329 1 that the publication of those statements 2 affected purchasers' decisions, affected ISV 3 actions, which is relevant. 4 THE COURT: Well, if they're arguing 5 that it's anticompetitive conduct, then 6 couldn't they say it's relevant because what 7 Mr. Gates says or doesn't say or even what a 8 publication says or attributes to him, whether 9 it's true or not as being attributed to him, 10 couldn't that affect Netscape's -- directly 11 affect Netscape's business precisely because of 12 an act by the publication? 13 MR. TUGGY: It is the case that an act 14 by a publication could affect positively or -- 15 THE COURT: How is this different from 16 the quote in the -- there was a quote in the 17 trade press directly from Gates that you guys 18 wanted in your opening, and I said fine. 19 Here's a quote attributed to Gates in 20 the Financial Times also to show a similar 21 effect or that it did something to somebody and 22 the test being from Fanning and Mapco is that 23 it had -- either gave knowledge to or caused 24 someone to react in a certain way. 25 And by asking Gates himself, I'm just 5330 1 playing devil's advocate, who I guess you could 2 say if you said Sculley has a feel for the 3 pulse of the market, certainly Mr. Gates does, 4 and wouldn't he be qualified to say whether or 5 not such a quote, whether made by him or not, 6 would have an effect or could have an effect on 7 Netscape? 8 MR. TUGGY: He would be -- 9 THE COURT: It seems like it's a 10 really close argument. I don't see the 11 consistency in you arguing one way for the 12 trade press and then arguing one way for this. 13 You know, just because it's a trade 14 press, if I'm a business that does computers, I 15 may not read only trade press. 16 I'm going to read stuff like Financial 17 Times to see how my business is affected too. 18 What's the difference? 19 MR. TUGGY: The difference, Your 20 Honor, is in the nature of the objection, 21 distinguishing between a relevance objection 22 and a hearsay objection. 23 It is the case that Mr. Gates would 24 have the foundation to say whether -- well, he 25 may have the foundation to say whether this 5331 1 quote attributed to him in the Financial Times 2 could adversely affect Netscape. 3 It is a -- if it were relevant, is the 4 proper nonhearsay use of this quote to ask a 5 witness did this adversely affect Netscape. 6 The question is whether it's relevant 7 to an issue in this case. 8 THE COURT: All right. Tell me how 9 the trade press that I allowed you to talk 10 about in opening is relevant to an issue in the 11 case and what is the issue? 12 MR. TUGGY: All right. 13 With respect to the trade press -- 14 THE COURT: Specifically, the one that 15 had a quote from Mr. Gates. 16 MR. TUGGY: Right. The quote from 17 Mr. Gates, the first part of the quote was 18 we're doing a lot of work on Windows and anyone 19 who's not doing what we're doing is crazy. 20 This was a quote that was attributed 21 to him by the trade press and published. 22 THE COURT: Okay. 23 MR. TUGGY: Okay. So the objection 24 that was asserted was hearsay. And Microsoft's 25 response was we're offering it for a nonhearsay 5332 1 use, and the relevance of the nonhearsay use is 2 that the impact of a statement like that on 3 ISVs, whose state of mind is at issue, the 4 state of mind of ISVs is at issue because 5 Plaintiffs say they were deceived. 6 This was information available to ISVs 7 and so relevant to their state of mind. How 8 did they react to this? What did they do? Was 9 their reliance plausible? 10 This is all information relevant to 11 the case because the Plaintiffs have put at 12 issue their state of mind. 13 But in this situation no one's put at 14 issue the state of mind of investors in 15 Netscape. It's not -- 16 THE COURT: What about Netscape 17 itself, fear that they are going to be attacked 18 or the subject of anticompetitive conduct by 19 Microsoft? That's a state of mind. 20 MR. TUGGY: It is. 21 THE COURT: Fear. 22 MR. TUGGY: Fear is a state of mind. 23 And the issue is if Mr. -- if we 24 assume it's true that Mr. Gates made this 25 statement. 5333 1 THE COURT: Let's assume it's not even 2 true. Doesn't even have to be true. 3 MR. TUGGY: If it's not true, what's 4 absent is anticompetitive conduct. 5 If he didn't make a statement and he 6 was misquoted and as a result of the misquote 7 harm came to Netscape or fear came to Netscape, 8 how is it that there was any anticompetitive 9 conduct on the part of Microsoft that linked to 10 Netscape's fear or harm? 11 THE COURT: Okay. Okay. I follow 12 you. 13 MR. TUGGY: There is testimony in this 14 group that we haven't objected to that gets to 15 these issues. 16 And I wanted to point that out to show 17 that it's not -- that it's Microsoft's position 18 that this whole line of questioning is 19 improper. It's just improper to the extent 20 that it relies on hearsay for its truth. 21 That's what is being done for the most 22 part of this, but there is a nonhearsay purpose 23 on the Netscape effect which we've just 24 discussed. 25 THE COURT: So what lines do you want 5334 1 out? 2 MR. TUGGY: Do you have -- I have a 3 transcript with all the lines bracketed that we 4 want out. 5 THE COURT: Oh, you do? 6 MR. TUGGY: Yeah. That's what I was 7 asking Mr. Cashman, whether you have been 8 provided that. 9 THE COURT: I got this. Oh, you were 10 talking about something else. 11 MR. TUGGY: May I approach? 12 THE COURT: Did you give it to me? I 13 guess I don't have it. 14 MR. CASHMAN: What I have -- and let's 15 read this in the record because I want to make 16 sure. 17 What I have is you want 172, 23 to 18 177, 15. 19 THE COURT: Is it in this document 20 with the 2A, B tab? 21 MR. TUGGY: No. It's in the -- I can 22 hand this up to you. I have the script for the 23 video with brackets around what Mr. Cashman is 24 reading. 25 THE COURT: Okay. 5335 1 MR. CASHMAN: Do you have a copy for 2 me? 3 MR. TUGGY: I will see if I can find 4 one. 5 THE COURT: Do you want Carrie to make 6 a copy? Is she here? 7 Why don't we -- if you don't have one, 8 we'll make one. 9 MR. TUGGY: I think I have -- I only 10 have -- 11 THE COURT: Let's just make one. 12 MR. TUGGY: This copy. Perhaps it's 13 best to make it. 14 THE COURT: Let me find Carrie and 15 make a copy. 16 Will it go through with the tabs, I 17 wonder? 18 MR. TUGGY: We can take those off. It 19 just identifies where the things are. 20 (A recess was taken from 3:04 p.m. 21 to 3:16 p.m.) 22 THE COURT: All right. I've got it 23 now. 24 What page do you want to start with? 25 MR. TUGGY: Your Honor, I believe that 5336 1 there are four groupings of testimony at issue. 2 The first one is at page 152, line 20. 3 MR. CASHMAN: Those aren't for 5777A. 4 And I'd like to respond to these 5 arguments before we go through line by line and 6 before we go back to other categories. 7 The section that you objected for 8 5777A doesn't begin until 172, 23, and I'd like 9 to respond to these arguments first before we 10 go either on to another exhibit or line by 11 line. 12 THE COURT: I just want him to point 13 out -- he told me, I thought -- the record will 14 reflect this -- that the lines that you got all 15 these markings, 172 on, he objected to all of 16 them; right? 17 MR. TUGGY: Correct. 18 THE COURT: I just want to know which 19 ones, that's all. So it will be easier for me 20 because you've got them all marked, every page. 21 MR. CASHMAN: What he's -- those are 22 the designations. And what I was telling you 23 -- well, Mr. Tuggy has told me 172, 23. 24 THE COURT: That's what I need to 25 know, 172, 23. 5337 1 MR. CASHMAN: To 177, 15. 2 THE COURT: To 177, 15? 3 MR. CASHMAN: Right. 4 THE COURT: Okay. 5 MR. CASHMAN: 181, 3. 6 THE COURT: To? 7 MR. CASHMAN: To 192, 6. 8 THE COURT: Okay. 9 MR. CASHMAN: 193, 4 to 196, 23. And 10 then 203, 20 to 206, 8, and that is in relation 11 to 5777A. 12 THE COURT: Okay. That's what I 13 needed to know. 14 Is that correct? 15 MR. TUGGY: I would like to make sure 16 that it's clear because it may be confusing 17 later. 18 That when Mr. Boies was doing this 19 examination, he was switching these articles. 20 And so while what he's giving you is 21 correct for that exhibit, there's other ones 22 for other exhibits that cross over. 23 And if you take the examination as a 24 whole on these three exhibits, it's kind of 25 cleaner and I can give you four designations 5338 1 that are the blocks. 2 MR. CASHMAN: Well, and I disagree 3 with that. That's part of the problem here. 4 But I want to respond to some of these 5 arguments before we look at this. 6 THE COURT: Okay. 7 MR. CASHMAN: First of all, Mr. Tuggy 8 says this is hearsay. 9 And just to look at the basic rule 10 proves that Mr. Tuggy is wrong. 11 Declarant is defined under 5.801(b) as 12 a person who makes a statement. That's 13 Mr. Gates here. He made the statement. That's 14 why there are quotation marks there. 15 The reporter records statements. So 16 that's just flat-out wrong to say that the 17 reporter is the declarant. 18 So all of Mr. Tuggy's arguments fail 19 on that ground. 20 Second of all, Mr. Tuggy alleged that 21 Mr. Gates did not adopt the fact that he had 22 this -- that he made that statement. That is 23 incorrect also. 24 This morning I provided the Court with 25 the section of the testimony from page 129 to 5339 1 page 140. And if the Court has that 2 available -- 3 THE COURT: I have it. 4 MR. CASHMAN: You can see on page 130 5 at line 16 is where these articles first start 6 coming up. 7 And this is during the examination of 8 Mr. Houck, who did the examination before 9 Mr. Boies. 10 But in the subsequent testimony, 11 Mr. Gates clearly admits to having this 12 interview with Louise Kehoe of the Financial 13 Times. 14 THE COURT: Where is this testimony 15 from? 16 MR. CASHMAN: This is from the Gates 17 -- this testimony I gave, that I handed up? 18 THE COURT: I'm talking about right 19 now. 129 -- the one you are talking about. 20 MR. CASHMAN: That's from the Gates' 21 deposition. 22 THE COURT: The same one? 23 MR. CASHMAN: Yeah, the same -- it's 24 earlier testimony. 25 THE COURT: Okay. I'm sorry. 5340 1 MR. TUGGY: The reason why no 2 objection was asserted to it is because they 3 are not playing it. It's not part of the 4 record, Your Honor. 5 MR. CASHMAN: That's what I stated 6 this morning. It isn't part of the 7 designation. 8 But it answers the question that 9 Mr. Tuggy incorrectly alleged. And I want to 10 direct the Court, in particular, to page 133, 11 line 18. 12 The question is: Sir, do you deny 13 making the statement attributed to you here? 14 Answer: I'm not denying making the 15 statement, but I'm pointing out that I didn't 16 just make a statement. I was in an interview 17 with a reporter, and it would be valuable to 18 understand her questions. And I do recall the 19 general nature of these questions. 20 And so if your interest is 21 understanding the quote, understanding the 22 context is, I think, quite valuable. 23 So he adopts the quote there, and even 24 in spite of his evasiveness and equivocation, 25 it's clear from this testimony that Mr. Gates 5341 1 -- he's trying to dodge what he said, but he 2 essentially admits that he did make the 3 statement. 4 If you look over on page 135, line 5. 5 Question: When you give quotations 6 like this to financial analysts and reporters, 7 you understood, did you not, that statements 8 like this could have a negative impact on 9 Netscape's stock price? 10 Answer: At line 9. I participated in 11 an interview with Louise Kehoe, and I explained 12 why her basic proposition that we were going to 13 go out of business soon wasn't necessarily the 14 case. 15 And so the focus of the interview was 16 certainly on Microsoft and our future or lack 17 of future. She's not a financial analyst. 18 She's a reporter. 19 So, again, he doesn't -- he doesn't 20 deny making these statements. As you can see 21 from all this back and forth, he's trying to 22 wiggle out of what he said by arguing that the 23 context needs to be understood. 24 So I submit that there can be no 25 reasonable debate that Mr. Gates made the 5342 1 statement that's alleged -- that's attributed 2 to him. 3 And all you're seeing in all of this 4 testimony is Mr. Gates' evasion of what he 5 said. 6 So Mr. Tuggy is incorrect in that 7 respect. 8 Now, Mr. Tuggy also made a bunch of 9 argument about -- I guess the point was that if 10 this was hearsay, it didn't have -- it wouldn't 11 have a nonhearsay purpose, which is false, of 12 course, because this isn't hearsay. 13 But the questions clearly are about 14 nonhearsay matters such as do you deny making 15 the statements. 16 They also ask if -- for his view, his 17 personal view, on whether such statements would 18 have an effect on Netscape. And that clearly 19 is appropriate. 20 If you want to call it just regular 21 old nonhearsay or even if you were to take it 22 as hearsay for a nonhearsay purpose, that's the 23 kind of thing that would be a legitimate 24 nonhearsay use, when you're asking for 25 Mr. Gates' personal view on such matters. 5343 1 And the Court was quite right that 2 this is a lot more of the kind of thing that 3 would be a nonhearsay use than the trade press 4 that Microsoft argued should be admitted. 5 In that case, as the Court will 6 recall, Microsoft was arguing that the 7 marketplace had knowledge just because of 8 something that Mr. Gates was alleged to have 9 said. 10 Here the questioning is about the 11 person who made the statement himself and what 12 effect he thought that statement might have. 13 And so, clearly, that would be 14 appropriate use of that testimony. 15 There was some talk about whether the 16 effect on Netscape, the statement itself being 17 anticompetitive conduct, that's true, but also 18 the flip would be -- the flip side would be 19 true that if the statement was false and 20 Microsoft failed to correct it, that, too, 21 would be anti- -- could be anticompetitive 22 conduct. 23 So simply stated, Mr. Tuggy is wrong 24 on all counts. 25 This testimony is clearly appropriate 5344 1 for 5777A and should all be permitted. It's 2 not hearsay. It's clear that Mr. Gates adopted 3 it. And it is highly relevant. 4 And then I want to also emphasize, 5 since we had this discussion about the Special 6 Master just a moment ago, that this is exactly 7 the kind of objection that they could have and 8 should have asserted before the Special Master. 9 Didn't do it. 10 It's exactly the kind of objection 11 they could have asserted and argued before the 12 Court on November 28th. They didn't do it. 13 It's exactly the kind of objection 14 that they could have raised and argued in the 15 last three weeks. They didn't do it. 16 So the objections are untimely and are 17 waived. And so for all those reasons 18 Plaintiffs believe that the objections should 19 be overruled. 20 THE COURT: Mr. Tuggy? 21 MR. TUGGY: Yes. 22 With respect to the testimony to which 23 Mr. Cashman points regarding whether Mr. Gates 24 adopts these statements, that testimony does 25 not establish adoption. 5345 1 It is in the midst of an examination 2 by Mr. Houck where Mr. Gates is testifying 3 about the fact that he was interviewed, that he 4 made comments in that interview; that it would 5 be valuable to get a transcript of the 6 interview, but that in the context of this 7 deposition he was not going to outright deny 8 making the statement. And, in that context, it 9 is not an adoption of the statement. 10 Second, this testimony that Plaintiffs 11 seek to rely on as the foundation for this 12 evidence, for whatever reason, they have chosen 13 not to show to the Jury and not to make a part 14 of the record in this case. And it doesn't 15 serve, therefore, as foundation here. 16 But I think the primary point is 17 there's no adoption that occurs there where 18 then the reporter's -- to cure the foundation 19 problem created by the fact that the reporter's 20 statement is hearsay, to the extent that it was 21 in fact used to prove that that was a statement 22 made by Mr. Gates. 23 As to the last point that Mr. Cashman 24 raised, Microsoft has asserted for a long time 25 an objection to his testimony, his testimony 5346 1 based on an inadmissible document. 2 We have litigated before the Special 3 Master the admissibility of this exhibit. 4 It is not admissible -- 5 THE COURT: Of the Gates' deposition? 6 MR. TUGGY: No, the exhibit. 7 THE COURT: Oh. 8 MR. TUGGY: And so the exhibit has our 9 hearsay objection we asserted in that process. 10 It's conceded it exists. 11 That was the value in the process 12 where this exhibit as the Plaintiffs -- I mean, 13 I wasn't aware this argument was going to come 14 up. 15 And I have communications from them 16 saying that this exact objection cannot be 17 considered by the Special Master, testimony 18 based on an inadmissible document because it 19 cannot be determined until trial whether these 20 documents are going to ultimately be 21 inadmissible. 22 In other words, sometimes documents 23 are offered for nonhearsay purposes. 24 Sometimes, you know, you'll assert an objection 25 and it will be appealed and reversed. 5347 1 All sorts of factors affect whether a 2 document is admissible. And so for both sides 3 when we asserted this general objection to the 4 use of documents in depositions, we reserved 5 the right until this process to litigate 6 whether there is testimony based on an 7 inadmissible document that ought to be taken 8 out for that reason. 9 And that's happened here. There was a 10 witness named Rick Apple, and you took out 11 Plaintiffs' testimony on inadmissible exhibit, 12 Microsoft's testimony on an inadmissible 13 exhibit. 14 Your ruling on Mr. Peterson's 15 deposition where he was shown some trade press 16 was based on that same concept. 17 I mean, this isn't something where 18 we've waived it or we've somehow made a mockery 19 of the Special Master process. 20 That process was valuable and got rid 21 of a lot of objections. And this one is one 22 that we did not clear through that process, 23 either side, and the reason was you can't tell 24 until late in the day, after the Special Master 25 process was done, whether a document is 5348 1 ultimately going to be inadmissible at trial 2 because there's so many issues relating to 3 inadmissibility including relevance, prejudice, 4 collateral estoppel, nonhearsay uses, that it 5 just -- it would be as if you were asking the 6 Special Master for testimony exactly like this 7 to speculate on what the purpose of the 8 testimony in the document was. 9 So I won't belabor that point. 10 We are here now. We've asserted the 11 objection in a timely way. And we're really 12 not getting to the page, line references to 13 walk through them, and I'm willing to do that. 14 MR. CASHMAN: I want to make a couple 15 more comments. 16 THE COURT: Well, when was the hearsay 17 objection made to the deposition? 18 MR. TUGGY: Let's see. 19 THE COURT: I mean, I understand the 20 hearsay objection to the exhibit. When did you 21 make it to the -- your objection now is to the 22 actual statements in the depo? 23 MR. CASHMAN: Your Honor -- 24 MR. TUGGY: May I approach, Your 25 Honor? 5349 1 THE COURT: When was that made? 2 MR. TUGGY: May I show you how we did 3 this, both sides? 4 MR. CASHMAN: I think this is -- 5 MR. TUGGY: I think it was made in 6 April or March of 2006. And I can provide you 7 what I provided to the Plaintiffs. 8 THE COURT: All right. 9 MR. TUGGY: And this is the way both 10 sides approached this issue. 11 With respect to all depositions, the 12 Plaintiffs call this Objection G1, and what the 13 parties did is they would at the beginning of 14 an objection to a chart like this, we would say 15 for all the testimony in this deposition, we 16 object to it if it's based on an inadmissible 17 document. 18 So that's basically the third line 19 down on this chart where it says all, improper 20 use of inadmissible document. 21 THE COURT: So this is something that 22 didn't go before the Special Master then? 23 MR. TUGGY: Correct. And then the 24 next one, all collateral estoppel. We didn't 25 know back in March or April where there was 5350 1 going -- you know, what the scope of collateral 2 estoppel would be. 3 So we just out of an abundance of 4 caution, the parties would make objections like 5 this, even though they weren't going to be 6 resolved by the Special Master. 7 There's other ones. For example, 8 cumulative that weren't going to be resolved by 9 the Special Master. 10 What we would do is we would make 11 objections that came to mind as we were doing 12 this work. There were certain objections that 13 the Special Master needed to resolve. Hearsay, 14 foundation, improper opinion. 15 THE COURT: Were those resolved by the 16 Special Master? 17 MR. TUGGY: What's that? 18 THE COURT: Were those resolved by the 19 Special Master? 20 MR. CASHMAN: Yes. 21 MR. TUGGY: The hearsay, lack of 22 personal -- lack of foundation were all 23 resolved by the Special Master unless we 24 withdrew it in the meet and confer process. 25 All that's left for trial are the trial 5351 1 objections. And this is one of them. 2 THE COURT: All right. Mr. Cashman, 3 go ahead. 4 MR. CASHMAN: Your Honor, let me 5 respond to a few of those points. 6 Number one, the argument that 7 Mr. Tuggy makes about adoption is just 8 misguided because that would be -- there's no 9 requirement to make the testimony admissible 10 that the witness say I adopt this statement. 11 That is frosting on the cake. 12 That would be like I have a 13 handwritten note on this document. If I were 14 to be examining you in a deposition and I say 15 here, is that your handwriting? 16 And if you say, no, that's not my 17 handwriting doesn't mean the question is 18 improper or that your answer saying no is 19 hearsay. 20 So you don't -- to make the 21 questioning proper doesn't mean that you have 22 to say I did that. It's equally appropriate 23 even if you say, no, I didn't. 24 Second of all, Mr. Tuggy says -- he 25 puts adoption in the foundation category. 5352 1 And in that context you'll note that 2 they didn't -- they aren't objecting on 3 foundation grounds here, as to whether he 4 adopted the statement. 5 And if they had objected on foundation 6 grounds, they would have had to assert it 7 before the Special Master. They didn't do it. 8 Or it was overruled. 9 But, lastly, I respectfully submit 10 that Mr. Tuggy is either missing the point or 11 misleading on this issue about improper use of 12 admissible documents because what he's talking 13 about, if you remember the Peterson testimony, 14 is where a hearsay document is put in front of 15 a witness that's got statements by a third 16 party, and in the case of Peterson, that was 17 trade press. 18 Here Mr. Peterson, here's trade press, 19 et cetera, et cetera. And the questions go 20 from there. 21 Here, we're talking about statements 22 by Mr. Gates. That's a different category. 23 They could have made objections to 24 that, and should have made objections to that 25 because they could see that if they thought 5353 1 that statements of Mr. Gates were hearsay, 2 that's something that they could object to and 3 should have, but didn't. 4 But even in the larger context, what I 5 was trying to emphasize before is that these 6 objections are being raised at the twelfth 7 hour, and they've had the ability to make these 8 objections long ago. 9 I mean, they're waived. The 10 objections aren't hearsay. They don't have any 11 merit. They should be rejected. 12 I want to emphasize just how 13 ridiculous some of these objections are. 14 I want to hand up to the Court another 15 part of the testimony that they are objecting 16 to. 17 These are the 200 category objections. 18 And you can see starting, for example, at the 19 bottom of page 203, did you ever contact any of 20 the publications involved with these exhibits 21 to complain that you were misquoted in any way? 22 That's not an inappropriate. They're 23 objecting to that, and that just goes to show 24 you how absurd these objections are. 25 That's not inappropriate questioning 5354 1 to ask whether somebody is calling to correct 2 misstatements. 3 And it goes on. And Mr. Gates can't 4 even answer a simple question like that, did 5 you ever call to get them corrected. Ever. 6 So they've objected to a whole series 7 of questioning just on simple proper grounds 8 like that. 9 All these objections simply have no 10 basis and should be rejected. 11 They were waived. It's not hearsay. 12 We submit they should all be overruled. 13 THE COURT: All right. 14 Well, it's supposed to be 15 minutes. 15 It's gone much longer. 16 Mr. Gralewski, have you heard from 17 Mr. Hagstrom? 18 MR. GRALEWSKI: Yes, I have, Your 19 Honor. 20 Would you like a status report now? 21 THE COURT: Yes. 22 MR. GRALEWSKI: I have provided a copy 23 of this document to the Defendant and I can 24 provide it to Your Honor if I may. 25 THE COURT: Yes. 5355 1 MR. GRALEWSKI: And I will identify 2 for the record what the status is. 3 This is our status report as of 4 approximately 3 p.m. this afternoon. 5 With respect to Plaintiffs' Expert 6 Alepin, that is completed. 7 With respect to Expert Gowrisankaran, 8 that will mostly be done today, with any 9 remainder to be done by Monday, December 18th. 10 Professor Mackie-Mason will be 11 completed no later than Tuesday, December 19th. 12 Doctor Netz will be completed no later 13 than Tuesday, December 19th. 14 Professor Noll will be completed no 15 later than Tuesday, December 19th. 16 Paul Reagan is completed. 17 Andrew Schulman will be completed no 18 later than Tuesday, December 19th. 19 Richard Smith will be done today. 20 Joseph Stiglitz is done. 21 And Frederick Warren Boulton is done. 22 THE COURT: Any estimation -- and I 23 know this is probably an unfair question -- how 24 many pages of material we're talking about? 25 MR. GRALEWSKI: Your Honor, I 5356 1 apologize, but I do not know that. 2 THE COURT: Okay. I just thought I'd 3 ask. 4 Very good. 5 Can you give me an update Monday 6 morning? 7 MR. GRALEWSKI: Absolutely. 8 THE COURT: Thank you. 9 All right. 10 Let's -- 11 MR. GRALEWSKI: Your Honor, may I also 12 tell you that Mr. Tuggy and I had contemplated 13 arguing Tony Speakman this afternoon. And we 14 will do that -- just to ensure Your Honor that 15 we're not intending to do that this afternoon 16 -- on Monday afternoon. 17 MR. TUGGY: But we were successful in 18 reducing the issues down to nine. 19 THE COURT: Good. 20 MR. TUGGY: So we think we will finish 21 it Monday afternoon. 22 MR. GRALEWSKI: Thank you, Your Honor. 23 THE COURT: Excellent. 24 Okay, let's go. Line by line. 25 MR. TUGGY: Your Honor, we can go line 5357 1 by line. Microsoft is also willing to submit 2 the lines to you for you to review and rule, or 3 we can argue through them if that's what the 4 Plaintiffs prefer. 5 THE COURT: Whatever you want to do. 6 I don't care. 7 MR. CASHMAN: I think what the 8 Plaintiffs would like to do is probably put in 9 some argument on this because this testimony is 10 very important. 11 And since Microsoft has put this at 12 the last minute, we'd like to put in some 13 argument on it, some written argument. 14 THE COURT: Let's go line by line 15 then. 16 Is that what you meant? 17 MR. CASHMAN: No. I mean, we'd like 18 to put in some written argument on it. 19 THE COURT: When are you proposing to 20 get it done and be able to play the deposition 21 on Monday? 22 MR. CASHMAN: Well, okay. We -- 23 THE COURT: I mean, that's fine with 24 me. But are you willing to take -- when would 25 you give me the written thing, today? 5358 1 MR. CASHMAN: Well, we'd do it over -- 2 probably overnight. 3 THE COURT: Oh, okay. I see what 4 you're saying. So you can get it to me this 5 weekend and I can work on it? 6 MR. CASHMAN: Yeah. 7 THE COURT: Oh, okay. That's fine. I 8 thought you were talking about Monday. 9 MR. CASHMAN: No, not Monday. 10 THE COURT: Would that be quicker? 11 MR. TUGGY: I think so. 12 And if I could give you the four 13 blocks of the testimony -- so if I could give 14 you the four blocks of testimony which are also 15 bracketed in that script I gave you, then it 16 will be easier to locate. 17 So it's 152, 20. 18 THE COURT: 152? 19 MR. TUGGY: 20. 20 THE COURT: Line 20? 21 MR. TUGGY: Yes. 22 MR. CASHMAN: Can you identify from 23 which exhibit because that's the information I 24 was provided? 25 MR. TUGGY: Why don't we do this first 5359 1 and I can do that as well. 2 Let's just get the groups in. 3 So 152, 20 to 156, 23. 4 163, 4 to 177, 15. 5 THE COURT: 15? 6 MR. TUGGY: 15. 7 181, 3, to 196, 23. 8 THE COURT: Okay. 9 MR. TUGGY: 203, 20, to 206, 8. 10 And then, as Mr. Cashman said, what we 11 did is to break it up into the three exhibits. 12 And I can e-mail that to you copying you if 13 that would -- because it's more. It's just a 14 lot more information. I can do that right when 15 we get back. 16 THE COURT: The exhibits that relate 17 to these? 18 MR. TUGGY: Yes. In other words, I 19 can tell you the exhibit number and then the 20 lines in that grouping that relate to that 21 particular exhibit for the three exhibits. 22 THE COURT: It's the same objection, 23 though, the hearsay? 24 MR. TUGGY: The same. 25 MR. CASHMAN: Well, would you tell me 5360 1 now what your blocks are now? 2 THE COURT: Let's go to the stuff you 3 gave me. 4 I see 152, line 20 starts on page 37 5 of the materials you gave me; is that right? 6 MR. TUGGY: Correct. 7 THE COURT: 163 starts on, I believe, 8 page 40? 9 MR. TUGGY: Page 40, yes. 10 THE COURT: 181 starts on page 47; is 11 that right? 12 MR. TUGGY: Yes, Your Honor. 13 THE COURT: And 203 -- let's see. On 14 page 54? No. Is that right? 15 MR. TUGGY: Page 55. 16 THE COURT: 55, okay. 17 MR. TUGGY: Should be bracketed. 18 Now, you've identified where those 19 tabs were. 20 THE COURT: Yeah, where the tabs were. 21 I just put yellow marks on it. All right. 22 You guys have my e-mail address. 23 MR. TUGGY: Yes. I still have it from 24 last night. 25 THE COURT: Do you have it, 5361 1 Mr. Cashman? 2 MR. CASHMAN: I do, Your Honor. Thank 3 you. 4 THE COURT: All right. That will save 5 time. That will give me something to do this 6 weekend. 7 MR. TUGGY: Thank you, Your Honor. 8 THE COURT: Anything else on this? 9 I'm sorry. I didn't mean to cut 10 anybody off. 11 MR. CASHMAN: No, not right now. 12 THE COURT: All right. So I need 13 this, this. Okay. 14 MR. TUGGY: Thank you. 15 MR. CASHMAN: Thank you, Your Honor. 16 MR. JONES: Thank you, Judge. 17 MR. GRALEWSKI: Thank you, Your Honor. 18 THE COURT: You guys have a good 19 weekend. 20 MR. GRALEWSKI: You too, Your Honor. 21 MR. CASHMAN: Your Honor, you know, I 22 would just like to note for the record, Your 23 Honor, that what Mr. Tuggy handed up about the 24 Gates' deposition, I think, demonstrates the 25 point that we were making earlier about the 5362 1 objection process. 2 You'll note that as it relates to 3 Gates, they asserted collateral estoppel. They 4 asserted cumulative. They asserted cumulative 5 in several places. 6 But those are all examples of the kind 7 of objections that the parties knew could never 8 be decided by the Special Master, but yet were 9 making them at the appropriate time. 10 THE COURT: Okay. 11 MR. CASHMAN: So there's a first piece 12 of information for you on that. 13 MR. TUGGY: Your Honor, I hadn't 14 expected that to be said. 15 So I must respond because Ms. Nelles 16 isn't here. 17 I was involved with this process. 18 The Plaintiffs designated over 300,000 19 lines of testimony and thousands of exhibits. 20 When going through it, it seemed 21 wasteful to us to not think about potential 22 trial objections so when we could determine it 23 at that time, we made the objection and 24 communicated to Plaintiffs. 25 We didn't feel that we were obligated 5363 1 to do it under your order appointing the 2 Special Master. These are objections that 3 could be made later. But at least we could get 4 them there so that they could be dealt with at 5 a future time. And that's what was going on 6 when we were making objections. 7 THE COURT: All right. I understand. 8 I mean, that appears to be what the Special 9 Master order said. 10 And, I guess, you know, it's still the 11 Court's responsibility to see if it's 12 admissible or not. 13 So all I asked Ms. Nelles to do, now 14 that they've offered these things, I guess 15 either you make your objection right now for 16 whatever grounds or you look at them and tell 17 me -- I don't think that's unreasonable to have 18 you look at them. 19 MR. TUGGY: It's going to be me, but 20 it will be -- 21 THE COURT: I don't know any other way 22 to do it. It's just like any other case, in my 23 opinion. If you offer one or 3,000 objections, 24 here we are. 25 So I think, you know -- I understand 5364 1 it takes time. I'm willing to give you the 2 time. That's fine. 3 MR. TUGGY: The risk is when we have 4 to assert objections prematurely, the risk is 5 that they get overasserted. 6 THE COURT: Right. And the other 7 thing you could do if you don't -- you know, 8 you could object because you don't know the 9 contents or no foundation at that point. 10 MR. TUGGY: Well, to be frank, 11 foundation, that kind of objection is one that 12 we tried to litigate before the Special Master, 13 but there are certain things you need 14 foundation for, like, you know, if you are 15 going to use something for a nonhearsay 16 purpose, you have to have foundation that trade 17 press is widely circulated. 18 THE COURT: Right. I understand. 19 MR. TUGGY: So that kind of objection 20 we would have to assert now. 21 THE COURT: I hope I wasn't being 22 unfair in having you look at it. Is that 23 unfair, that process? I mean, I have to make a 24 ruling, so what do I do? 25 MR. TUGGY: The tough part is -- we 5365 1 can look at it, but I think the risk -- because 2 we don't know, for example, what their case is 3 going to be and how relevant this evidence is 4 going to be. 5 The risk is that we are tempted to 6 overobject on relevance and prejudice grounds 7 because we don't want to lose the objection. 8 I'm not quite sure -- the problem is I 9 can review them to make potential objections, 10 but to resolve them would be extremely 11 difficult. 12 THE COURT: On the other side of the 13 coin, is the risk they run. They offer an 14 exhibit without any testimony or anything else 15 to support it, and I look at it just barely 16 with nothing around it in a total vacuum, just 17 the exhibit, they run the risk of me sustaining 18 an objection. 19 MR. TUGGY: Correct. 20 THE COURT: When they offer it that 21 way. 22 MR. TUGGY: Correct. 23 THE COURT: I understand their 24 problem, too, the way their thought process 25 was. 5366 1 What's broken down here, for whatever 2 reason -- I'm not pointing fingers and I don't 3 want to get into that. There's been enough of 4 that already and I don't want to do that. 5 And if the Court's done that, I 6 apologize, but the problem is it appears that 7 there's a total misunderstanding of what the 8 process was and now it's come down to this. 9 Now, if you think there's a better way 10 to look at the 3,000 exhibits, please tell me. 11 I don't know how else to do it. 12 I just have to go through every one, I 13 guess, and so do you. How else should I do it? 14 I'm open for suggestions. 15 MR. TUGGY: I would like to think, if 16 I can find a solution, one possibility is that 17 we deliver -- we can't deliver the objections 18 at the close of their case in chief because 19 then it's probably too late for them. 20 I'm trying to figure out how to make 21 objections like cumulative or relevance or 22 undue prejudice. Collateral estoppel I can 23 make now if I think it's just being used to 24 bolster a finding. 25 So perhaps we make a good faith effort 5367 1 to assert the objections we can assert now and 2 if, you know, there's some circumstance we 3 didn't foresee that wouldn't prejudice us from 4 asserting an objection later, but that doesn't 5 help because they want it admitted now. That's 6 -- I'm just thinking outloud. It's 7 complicated. 8 THE COURT: I don't know. 9 MR. GRALEWSKI: Your Honor, I'd like 10 to think outloud just for a second to respond. 11 THE COURT: Go ahead. I'm not holding 12 anybody to this. I'm just trying to 13 brainstorm. 14 MR. GRALEWSKI: Your Honor's order is 15 Your Honor's order. And I think that's what we 16 will obviously proceed under, but this sort of 17 reminds me of the movie Groundhog Day. I don't 18 know if you've seen it, where Bill Murray wakes 19 up every morning and it's the same day. 20 For the last 10 or 11 months 21 Mr. Cashman and I and Ms. Davis have flown all 22 around the country to meet with Mr. Tuggy and 23 his team. And we would go through lists of 24 documents. 25 And on those lists would be these very 5368 1 objections that they're talking about now. And 2 through the process we've tried to whittle them 3 down. And the relevance and the prejudice 4 objections to all these documents that are on 5 the disk have been made. 6 So the Court has permitted them to 7 look at the documents. And we just hope that 8 we don't see relevance and prejudice objections 9 reasserted that we've met and conferred about 10 for the last 11 months and they've agreed to 11 withdraw. That would seem to be problematic. 12 THE COURT: In my reading of the 13 Special Master order, and granted, the parties 14 brought the order to me, and I signed it. That 15 was probably my fault. 16 You did, and I've been hearing this 17 several times in the hearings we've had. There 18 are certain objections that only the Court can 19 rule on. 20 MR. GRALEWSKI: Absolutely. 21 THE COURT: I assume that the ones 22 that weren't made are the ones -- on these 23 3,000 are the ones that only the Court can 24 rule. 25 MR. TUGGY: Correct. 5369 1 MR. CASHMAN: No. The distinction is 2 that no objections were made or else they were 3 withdrawn either because the parties determined 4 at the time they looked at these that they 5 weren't going to assert a relevancy -- 6 THE COURT: Oh, I see. 7 MR. CASHMAN: -- or prejudice. 8 THE COURT: You are saying -- 9 MR. CASHMAN: So it's helpful, I 10 think, to look at this in two -- by two 11 categories. 12 One category are documents that it 13 could be either side, documents where the 14 parties looked at it and said that document is 15 going to be relevant, it's not prejudicial, we 16 don't have any other objections. So that one 17 is free and clear. 18 And so we put those aside. The ones 19 that we met and conferred about and which are 20 going to be for you to decide on eventually, 21 the relevance and undue prejudice are another 22 category of documents. 23 The exhibits that you have on the disk 24 are ones where the parties have already 25 determined not to assert those objections. So 5370 1 there's nothing for you to rule on. 2 THE COURT: Okay. So let me get this 3 straight and you correct me. 4 What I'm hearing is that the parties 5 looked at these 3,000 exhibits; that at the 6 time you looked at them, you discussed not only 7 objections that the Special Master could rule 8 on, but also any other objections that may come 9 up? 10 MR. CASHMAN: Correct. 11 THE COURT: And at that time it was 12 the Plaintiffs' understanding -- and I'm not 13 putting words in your mouth, and you correct 14 me -- is that you didn't hear from the 15 Defendant that there was any objection of any 16 kind to any of these documents? 17 MR. CASHMAN: That's correct. 18 THE COURT: And you guys discussed 19 these? 20 MR. GRALEWSKI: Or a fine point on 21 that, Your Honor, let's just take -- make up a 22 number. PX 1000. 23 Microsoft may have asserted hearsay, 24 embedded hearsay, foundation, relevance, and 25 prejudice. Okay. 5371 1 And through the process that we 2 engaged in over the last -- a long time, ten 3 months, who knows what, we would have meet and 4 confers, one in Minnesota, one in San Diego, 5 you know, all around the country. 6 And we would say, okay, this time 7 let's focus on the hearsay objections and clear 8 out the hearsay objections. And we would say 9 will you withdraw that hearsay objection, yes 10 or no? And if it was withdrawn, you would, you 11 know -- hearsay would drop away from PX 1000, 12 and then maybe the next day we would discuss 13 all the embedded hearsay objections. 14 And if they would withdraw on PX 1000, 15 then we'd take it away. 16 And we'd go through the process 17 dwindling down until a document was either free 18 and clear of no objections -- no hearsay, no 19 embedded hearsay, no relevance -- all clear, or 20 there would be a category of documents where 21 relevance objections remain and a category of 22 documents where prejudice objections remained. 23 And for that category we'd say, well, 24 we're not presenting those to the Special 25 Master. We are reserving those for the ones -- 5372 1 for the Judge to rule on at trial. 2 But we went through a process where we 3 could minimize objections. And once we were 4 able to clear out all the objections on a 5 certain document, let's say PX 1000, just 6 making it up, those are the kinds of documents 7 that are on that disk where they had made all 8 these objections and either no objections were 9 made or we agreed that they were all cleared 10 out or the Special Master ruled and overruled 11 objections. 12 I -- Mr. Tuggy is shaking his head so 13 why don't I let -- I don't want to misstate, 14 but I think that's what -- I think that's 15 accurate. 16 MR. CASHMAN: The bottom line, that 17 the exhibits that you have on that disk, the 18 parties laid eyes on them and either no 19 objections were asserted or whatever objections 20 there were, were either withdrawn or overruled. 21 And so there are no objections and no 22 relevance objections, no prejudice objections. 23 All that work has been done already on those 24 exhibits. 25 THE COURT: Still, though, had there 5373 1 been a relevance objection, it would have come 2 to me anyway. 3 MR. GRALEWSKI: Right. 4 MR. CASHMAN: What we're really 5 looking at here when we said yes, Microsoft 6 should look them over means to look at their 7 chart to make sure that the exhibits we have 8 listed are consistent with their records which 9 say, yes, all the objections have been cleared 10 out. 11 And I should say that this will work 12 the same way. I mean, there's some exhibits 13 that are Defendant exhibits which fit in the 14 same process. 15 MR. TUGGY: Your Honor, if I might 16 just speak. 17 THE COURT: Sure. 18 MR. TUGGY: In the meet and confer 19 process, what we attempted to do was to 20 determine which of the objections that were 21 going to be presented to the Special Master we 22 could make agreements on to withdraw so they 23 wouldn't have to be presented to the Special 24 Master for ruling. 25 So, as Mr. Gralewski said, we had meet 5374 1 and confers on hearsay, embedded hearsay, 2 improper opinion, and foundation. 3 And as you probably know, those are 4 the issues that have percolated up to you in 5 the appeals. It's those types of objections, 6 not relevance or undue prejudice. 7 We haven't met and conferred on those, 8 except in a separate context, which I'll 9 explain. 10 In other words, I'd be willing to 11 provide the Court a list of all those exhibits 12 for which we withdrew a relevance or undue 13 prejudice objection in a meet and confer. That 14 hasn't happened. 15 The only time that we've been 16 addressing prejudice and relevance objections 17 is during this process of preparing testimony 18 for videotape because we have -- there's 19 objections, relevance, and undue prejudice to 20 exhibits that are going up on tape. 21 So in the process of putting that 22 together, we negotiate relevance and undue 23 prejudice. 24 But in the Special Master process, I 25 was responsible -- and our view was if there's 5375 1 some documents where the undue prejudice just 2 jumps out at you like it has foul language, 3 we'll, you know, just put the objection down so 4 we don't have to rereview all 11,000 5 Plaintiffs' objections to make an undue 6 prejudice objection. We just -- someone is 7 reviewing it. Let's make the record. 8 But we also understood that under your 9 order appointing the Special Master, these were 10 objections that could be made at trial. 11 And so we didn't overobject. We 12 didn't just slap relevance and undue prejudice 13 objections on all 11,000 exhibits. 14 It just -- that would have been 15 unproductive to preserve that objection. 16 THE COURT: Okay. 17 MR. CASHMAN: We can establish that's 18 just not correct, Your Honor. 19 THE COURT: Well, I think it's 20 something that we not get into now. 21 The whole point now is how we handle 22 it. Whether it was made then or now, the Court 23 has to rule on relevance. 24 If there's objections like that, I 25 have to rule on it. 5376 1 MR. TUGGY: I was wondering if it 2 makes sense for us to submit objections at some 3 time -- it seems like the exhibits that are not 4 used with witnesses, the only time that 5 Ms. Conlin can refer to them -- 6 THE COURT: That's another question. 7 Are these going to be with witnesses? 8 MR. GRALEWSKI: Your Honor, I think we 9 are getting to the nub of the issue. And the 10 nub of the issue is how much time is 11 appropriate for Microsoft to have. 12 As I said when I first started 13 responding to this, Your Honor's order is Your 14 Honor's order. They're going to be provided 15 time to look at these documents and decide what 16 objections, prejudice and relevance objections, 17 they want to assert. 18 That's the order, and that's what's 19 going to happen. 20 What I would submit, Your Honor, is 21 that in order to do that -- and I think this is 22 important for you to understand, and I want 23 Mr. Tuggy to correct me if I'm wrong -- for 24 them to do that, they don't have to assemble a 25 team of lawyers and look at each document one 5377 1 by one. 2 I really do believe, Your Honor, that 3 to do that they need to press a button on their 4 computer because these have already been looked 5 at before to see which one they've asserted 6 relevance to and which ones they've asserted 7 prejudice to. 8 With the respect we've tried not to 9 overobject, if Your Honor would like, we will 10 get you the numbers because we can do it too 11 because they've provided the objections to us. 12 We can press a button and determine of 13 those 3,000 -- or of the total number how many 14 relevance objections were lodged and how many 15 prejudice objections were lodged. This process 16 was undertaken. 17 MR. TUGGY: I'd like to speak to the 18 solution. 19 THE COURT: Just before you speak -- 20 I'm sorry to open up a Pandora's box. 21 Go ahead. 22 MR. TUGGY: The solution I was 23 thinking of -- there's a lot of these that 24 won't be used with witnesses. And the only 25 time it seems to me they can be used is in 5378 1 summation. 2 So, to me, it makes sense that we 3 address these as they intend to use them with 4 witnesses or in prior testimony. And then at 5 the end of their case there will a group that 6 she wants admitted into evidence that she's 7 only going to refer to in summation. 8 And it's that group of 3,000 or so 9 that we need to provide the objections for. I 10 can't see why it would be needed before that. 11 MR. CASHMAN: This is really quite 12 distressing because Microsoft wants to change 13 the rules when they think that is to their 14 benefit now. 15 And, I mean, we'll talk with Mr. Tuggy 16 about this, but I think that we can demonstrate 17 compellingly that Microsoft not only could, but 18 was by agreement and by court order was 19 required to assert all their objections and 20 this category of documents didn't get relevance 21 or undue prejudice objections. They should be 22 clean. 23 And there's no reason to have to go 24 through all the gymnastics that Microsoft is 25 trying to force now. 5379 1 The parties agreed that these were all 2 finished. 3 THE COURT: Well, I think I already 4 said earlier -- 5 MR. CASHMAN: And I guess that's a 6 subject that's further discussion with the 7 Court, but clearly we'll have to talk with 8 Microsoft and we'll have to see what we can 9 come up with. 10 THE COURT: I think I said earlier 11 when Ms. Conlin was here she can bring whatever 12 document you think is out there in and I'll 13 look at it. 14 It's going to come down to me having 15 to look at all 3,000. So if we do that, then, 16 you know -- you should be given a reasonable 17 amount of time to look through them. 18 And then I guess I'll have to -- I 19 don't want to delay the trial. So what I think 20 I'll do is in the batches that I get or however 21 you do it, after they make their objections to 22 them, you guys look at them -- or I guess the 23 better thing is, the ones you don't have any 24 objection to will just submit immediately. 25 The ones you do have objections to, 5380 1 either allow argument on it or I'll look at it 2 and decide at night. 3 MR. CASHMAN: Well, I suppose we are 4 going to need to revisit this subject on Monday 5 or maybe -- 6 THE COURT: Okay. 7 MR. TUGGY: And I would just build -- 8 because we have found it profitable in a meet 9 and confer process. 10 In other words, we would assert our 11 objections and then I would be happy to meet 12 and confer with the Plaintiffs and go through 13 our objections on either relevance or 14 collateral estoppel and then whatever we can't 15 resolve. 16 MR. CASHMAN: What I want to make 17 clear for the record is that the Plaintiffs, 18 based on what we supplied to you in the next 19 few days to establish that, in fact, they did 20 make all their objections or were required to 21 make all their objections either pursuant to 22 court order or by agreement. 23 So we can, of course, not have to go 24 through all this. That's why I want to reserve 25 the right to discuss it further with the Court 5381 1 on Monday or Tuesday. 2 THE COURT: Is it possible -- I don't 3 know if you guys can do it or not -- is to find 4 the ones in there that you know are going to be 5 needed rather soon with someone? 6 MR. CASHMAN: Well, we'll have to talk 7 with our team about that. 8 THE COURT: Or is that really finding 9 a needle in a haystack? 10 MR. CASHMAN: I can't answer that 11 question, Your Honor. I don't know the answer 12 right now, Your Honor. 13 THE COURT: All right. I don't want 14 to delay also the Plaintiffs' ability, if it is 15 admissible, to use it. 16 MR. CASHMAN: I understand that and 17 appreciate that. 18 The point I'm trying to make is that 19 Microsoft wants to recreate the wheel. I mean, 20 that's exactly why we had this process. And I 21 believe it's subject to court order so that we 22 didn't have to do this. 23 THE COURT: I'll look at that too. 24 But if that doesn't solve the issue, then we 25 got to figure something else out. 5382 1 MR. GRALEWSKI: Your Honor, I'm not 2 going to meet and confer with Mr. Tuggy about a 3 relevance objection that I met and conferred 4 with him and he withdrew already. I just want 5 to state that for the record. 6 MR. TUGGY: I understand that 7 position. 8 MR. GRALEWSKI: Because that's what's 9 going on here. 10 THE COURT: Anything else in our 11 encounter group here? 12 MR. GRALEWSKI: Thank you, Your Honor. 13 Have a good weekend. 14 MR. CASHMAN: Thank you, Your Honor. 15 THE COURT: Everyone have a good 16 weekend. 17 (Proceedings adjourned at 4:07 18 p.m.) 19 20 21 22 23 24 25 5383 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 15th 19 day of December, 2006. 20 21 22 ______________________________ Certified Shorthand Reporter(s) 23 24 25