10692 1 IN THE IOWA DISTRICT COURT FOR POLK COUNTY 2 ---------------------------------------------- 3 JOE COMES; RILEY PAINT, ) an Iowa Corporation; ) 4 SKEFFINGTON'S FORMAL ) WEAR OF IOWA, INC., an ) NO. CL82311 5 Iowa Corporation; ) PATRICIA ANNE LARSEN; ) 6 and MIDWEST COMPUTER ) REGISTER CORP., an ) 7 Iowa Corporation, ) ) TRANSCRIPT OF 8 Plaintiffs, ) PROCEEDINGS ) 9 vs. ) ) VOLUME XXXIX 10 MICROSOFT CORPORATION, ) ) 11 Defendant. ) 12 ----------------------------------------------- 13 The above-entitled matter came on for 14 trial before the Honorable Scott D. Rosenberg, 15 commencing at 8:30 a.m., January 29, 2007, in 16 Room 302 of the Polk County Courthouse, 17 Des Moines, Iowa. 18 19 20 21 22 23 JANIS A. LAVORATO 24 Certified Shorthand Reporter Room 405B-Polk County Courthouse 25 Des Moines, Iowa 50309 10693 1 APPEARANCES 2 FOR THE PLAINTIFFS: 3 MICHAEL R. CASHMAN Attorney at Law 4 Zelle, Hofmann, Zoelbel, Mason & 5 Gette, LLP 500 Washington Avenue South 6 Suite 4000 Minneapolis, MN 55415 7 KENT WILLIAMS 8 Attorney at Law Williams Law Firm 9 1632 Homestead Trail Long Lake, MN 55356 10 11 FOR THE DEFENDANT: 12 JOSEPH E. NEUHAUS SHARON L. NELLIS 13 Attorneys at Law Sullivan & Cromwell, LLP 14 New York, NY 10004-2498 15 ROBERT A. ROSENFELD Attorneys at Law 16 Heller Ehrman, LLP 333 Bush Street 17 San Francisco, CA 94104 18 DAVID SMUTNY Attorney at Law 19 Heller Ehrman 1717 Rhode Island Ave. NW 20 Washington, D.C. 21 KIRK BAINBRIDGE Attorney at Law 22 Duncan, Green, Brown & Langeness, PC 23 Suite 380 400 Locust Street 24 Des Moines, IA 50309 25 10694 1 PROCEEDINGS 2 (The following record commenced on 3 January 29, 2007, at 8:30 a.m.) 4 THE COURT: All right. Let's see. 5 Can we start with the October '97, is that 6 right? 7 MR. CASHMAN: Was it the Court's 8 desire that we're going to go line by line? 9 THE COURT: Well, for now I want to go 10 line by line for the old ones and -- 11 MS. BRADLEY: Your Honor, if I may 12 make a suggestion? Microsoft would be glad to 13 walk through all of these line by line now if 14 you would prefer it. But if you would rather, 15 we could, perhaps, argue just the one we took 16 up on Friday -- or Thursday, rather. And after 17 the Court issues its rulings on one transcript, 18 the parties could meet and confer with hopes of 19 dramatically narrowing the issues, the 20 remaining collateral estoppel issues that we 21 would have to bring before you, if that seems 22 like a manageable way to take this up? 23 MR. CASHMAN: Well, Your Honor, again, 24 the plaintiffs' view is that there is not a 25 single collateral estoppel objection that has 10695 1 any merit for the reasons we explained before, 2 and so plaintiffs feel that all of these should 3 be overruled. 4 We're prepared to go through them if 5 that's the Court's wish. But all of these 6 designations go to other issues, and none of 7 them are for solely bolstering a claim which 8 plaintiffs are not going to be pursuing anyway. 9 THE COURT: Okay. 10 MR. CASHMAN: If Microsoft's desire is 11 that they're concerned about making a record, I 12 think the fact that they make the objections 13 that they have on the chart is sufficient for 14 them to have made their record. 15 I think the Court can overrule all of 16 those objections for the reasons we stated 17 during our argument, and Microsoft has its 18 record with the findings that they cite in the 19 chart. 20 THE COURT: It's up to you how you 21 want to do it. 22 MS. BRADLEY: Well, Your Honor, we 23 would ask we be given the opportunity to go at 24 least one transcript line by line. And if the 25 Court is inclined to sustain any collateral- 10696 1 estoppel objections, we should move forward 2 accordingly. 3 THE COURT: Okay. Try to be quick. 4 MR. CASHMAN: To the plaintiffs, at 5 least, if we are going to go through this on a 6 line by line and try to break this down into 7 some more manageable chunks. And what we've 8 done, Your Honor, is we've broken these into 9 groups based on collateral estoppel objections 10 that Microsoft has asserted. And I have here 11 for the Court a book that I think will make 12 this -- I hope makes it easier. And let me 13 explain what we've done, Your Honor. 14 The findings of fact that Microsoft 15 asserts for collateral estoppel objections as 16 it relates to their -- the testimony to which 17 they're objecting falls into 14 groups. And I 18 put in a book there tabs 1 through 14 where 19 I've recited the specific findings of fact for 20 Your Honor that have been alleged. 21 And also, Your Honor, summarized -- 22 boiled those findings of fact down to their 23 essence for you at the top so that we can 24 easily see what each finding is really about. 25 And then I've attached the specific 10697 1 lines of testimony to each of these groups to 2 which Microsoft is objecting. And on the first 3 page under each tab where I say "group," for 4 example, "Kempin group" once your rulings start 5 lines 1, 2 and 16, I've numbered the rulings 6 chart line so that you can reference those 7 easily to see where those are. 8 And again, the way that these are 9 grouped, generally speaking, is by the findings 10 of fact that Microsoft has asserted for the 11 collateral estoppel objection. 12 As it relates to group 1, Your Honor, 13 we touched on this before. I think it's 14 telling in the first instance that Microsoft 15 cites so many findings, which tells you that 16 really this is not underlying evidence for any 17 of those specific findings. 18 I reminded or advised the Court on 19 Friday that the DOJ CID deposition was not even 20 the underlying evidence for the testimony. 21 And, in fact, in the DOJ case, Mr. Kempin 22 provided written direct testimony. I have that 23 here. I'm not going to burden the Court with 24 reading through it. But it goes to show that 25 the testimony, this deposition testimony, is 10698 1 not the underlying evidence that Judge Jackson 2 used to issue these findings of fact. He had 3 different testimony before him when he issued 4 these findings of fact. 5 The group 1 testimony, Your Honor, 6 basically, here Mr. Kempin is telling the 7 Department of Justice that Internet Explorer 8 is part of Windows and OEMs are contractually 9 obligated to preinstall it. And he goes on to 10 provide other testimony about that. For 11 example, he says at 25, line 1 to 12, that if 12 the OEM Micron had asked to remove it, 13 Mr. Kempin would have referred Micron to the 14 contract and refused. 15 And he goes on to state in the last 16 designation here that restrictions on the boot 17 sequence are in the Windows 95 contracts and 18 are strict rules. 19 As I explained on Friday, this 20 testimony is not subject to any collateral 21 estoppel objections. And I'm going to start 22 factually and then go back to a couple of legal 23 principles. 24 But, first of all, factually, Count II 25 of plaintiffs' petition alleges that Microsoft 10699 1 entered into contracts, combinations or 2 conspiracies in restraint of trade. And these 3 designations, Your Honor, all three of these 4 designations, are relevant to whether 5 Microsoft's contracts unreasonably restrained 6 trade. They go to that issue. And these 7 designations are highly probative because 8 Mr. Kempin concedes that the way Microsoft 9 writes the license agreements for Windows 95 10 gives OEMs no choice and that the contracts are 11 subject to both strict rules. So all of that 12 testimony then goes to the unreasonable 13 restraint-of-trade claim. 14 Furthermore, I didn't -- at the very 15 beginning of the deposition, if the Court were 16 to refer back to the very beginning of the 17 deposition, Mr. Kempin and the examining lawyer 18 discussed the civil investigator demand. 19 You'll see that the Department of Justice is 20 investigating certain alleged conduct. 21 And what you have here, basically, 22 throughout this deposition then, is testimony 23 by Mr. Kempin which is later determined by the 24 Department of Justice to be incorrect or 25 misleading or untrue. And, in fact, by virtue 10700 1 of the findings of fact you have, the Court, 2 Judge Jackson, the findings themselves show 3 that the testimony of Mr. Kempin was deemed 4 not correct or not true because, obviously, 5 Mr. Kempin is defending what Microsoft did with 6 these contracts. 7 And so this testimony all goes to the 8 willful or flagrant issue because here you have 9 Microsoft engaged in prelitigation efforts to 10 mislead the Department of Justice. 11 And then, lastly -- and this is not an 12 exhaustive list -- but, again, this is relevant 13 to the credibility of the witness when you have 14 here a senior vice president who is defending 15 actions, which, as I've mentioned, are found to 16 be anticompetitive. 17 Now, I just want to go back to the law 18 for just a minute. Plaintiffs cannot be 19 collaterally estopped from presenting this 20 evidence when they're not presenting it to redo 21 the issue litigated in the government case. 22 And as we've discussed before, the plaintiffs 23 were not parties to the Department of Justice 24 action, which would be a fundamental 25 prerequisite for application of any collateral 10701 1 estoppel against plaintiffs. And since we were 2 not parties to that action, we cannot be 3 estopped. So factually and legally, this is 4 just a microcosm on group one here, but neither 5 one, facts or law, allow the collateral 6 estoppel objections that Microsoft has alleged. 7 So they should be overruled. 8 And that would take care of group 1. 9 All of the objections which Microsoft has 10 asserted, 158 through 161, 164 and 175 and 176, 11 those collateral estoppel objections have no 12 merit and should be overruled. 13 THE COURT: Thank you, sir. It's a 14 very good notebook. Thank you. Ms. Bradley. 15 MS. BRADLEY: Your Honor, we've 16 addressed the first citation that plaintiffs 17 discussed yesterday, but I would like to go 18 back and speak about a few of the points 19 plaintiffs raised today with respect to that 20 designation, the other two described. 21 Plaintiffs -- first, I know of no 22 ruling by this Court that in order for evidence 23 to be collaterally estopped, it had to be the 24 exact evidence that was considered by Judge 25 Jackson in creating the findings of fact. Once 10702 1 the fact was established, then, as Microsoft 2 reads all of this Court's orders on collateral 3 estoppel, that fact is established and neither 4 plaintiffs nor Microsoft may put into evidence 5 other evidence either supporting or refuting 6 that finding. 7 Plaintiffs first justification for 8 attempting to enter this duplicative evidence 9 is Count II of plaintiffs' complaint that 10 Microsoft entered contracts, combination or 11 conspiracies. And plaintiffs argue that 12 Mr. Kempin's testimony in these three citations 13 show that Microsoft entered into unreasonable 14 restraint of trade because OEMs had no choice 15 as plaintiffs' claim to enter into such 16 contracts if they wanted Windows. 17 This is a fact that is already 18 established in the findings of fact. If we 19 turn again to Finding 158, sort of in the 20 middle of that finding, Judge Jackson finds: 21 After all Microsoft made the 22 restriction a nonnegotiable term in its Windows 23 95 license, and OEMs felt they had no 24 commercially viable alternative to 25 preinstalling Windows 95 on their PCs. 10703 1 The testimony doesn't need to and 2 cannot come in for that same purpose. If 3 plaintiffs claim that the findings show an 4 unreasonable restrain of trade, then that is 5 already established for this period of time and 6 for this market. 7 Mr. Kempin's testimony doesn't touch 8 on anything outside of the period of time and 9 the market which is collaterally estopped by 10 these findings. And there's just no 11 justification for this duplicative evidence to 12 come in on that fact that has been established. 13 Plaintiffs also argue that the DOJ 14 determined that Kempin's testimony was untrue. 15 And it's unclear to me what they mean by that 16 because reading -- particularly if the Court 17 turns to the first designation on the list -- 18 Kempin's testimony about the contracts at 19 issue, he prescribes precisely the terms of the 20 contracts that are described in Finding 158. 21 And it's not clear to me what about 22 Mr. Kempin's testimony plaintiffs would claim 23 to be untrue. 24 Whether Mr. Kempin thought the 25 contracts were appropriate or inappropriate is 10704 1 really irrelevant to the matter at hand, which 2 is whether Microsoft engaged in this conduct 3 and that was later determined by a court down 4 the road that certain actions were determined 5 to be lawful and certain to be unlawful. 6 That's really beside the point and, honestly, I 7 can't make heads or tails of plaintiffs' 8 argument that Kempin's testimony was untrue. 9 In fact, the plaintiffs wish to offer 10 this testimony for its truth. The plaintiffs 11 wish to enter into evidence Microsoft's 12 activities and the contracts that Microsoft 13 entered into that Kempin testified about here. 14 And for plaintiffs to claim that is somehow 15 untrue seems to defeat the purpose on that 16 designation as far as I can tell. 17 Plaintiffs also talk about designation 18 3, I think. 19 THE COURT: 2 and 16. 20 MS. BRADLEY: Designation 16 actually 21 goes to a different subject. It isn't so 22 closely tied to Finding of Fact 158. But if I 23 may just familiarize myself with plaintiffs' 24 binder for a moment so I can locate this 25 designation. 10705 1 This testimony touches more on the 2 Windows boot sequence, which upon further 3 reflection really goes to Finding of Fact 203, 4 if we could turn to that. 5 MR. CASHMAN: I'm going to object, 6 Your Honor. Microsoft hasn't asserted 203 as a 7 collateral estoppel objection to this 8 testimony. 9 MS. BRADLEY: I would just say that as 10 Your Honor can tell, this is a laborious 11 process and one that is, we will agree, not a 12 precise one. And Microsoft has attempted to 13 cite a range of findings to which various 14 testimony goes. But when push comes to shove 15 on some of these, it becomes clear. And 16 Microsoft did this, simply made its assertions 17 of certain findings of fact of which testimony 18 related, really as a service to plaintiffs. 19 Microsoft is attempting to meet its 20 burden to show a linkage to certain findings of 21 fact. And, in fact, many of these citations 22 go to many, many findings. And so we would 23 request, Your Honor, that the Court consider 24 Finding 203 in examining the testimony at 25 plaintiffs' designation 16, that is page 113, 10706 1 lines 5 through 15. 2 And if we turn to that designation, it 3 speaks about the Windows experience and whether 4 Microsoft prohibited OEMs with Windows 95 from 5 altering the sequence in which Windows boots up 6 and the initial Window screen that the end user 7 sees. 8 This is precisely the activity that is 9 described in Finding 203 towards the bottom 10 third of that finding, Judge Jackson writes: 11 Microsoft threatened to terminate the 12 Windows license of any OEM that removed 13 Microsoft's chosen icons and program entries 14 from the Windows desktop or the start menu. It 15 threatened similar punishment for OEMs who 16 added programs that promoted third party 17 software to the Windows boot sequences. 18 Finding 203 talks about Microsoft's 19 restriction on the Windows boot sequence as 20 does the designation at page 113 of the Kempin 21 DOJ CID testimony. It goes to nothing else, 22 and it's collaterally estopped. 23 MR. CASHMAN: Your Honor, this 24 argument just highlights how absurd Microsoft's 25 position is because as I explained on Friday, 10707 1 at a bare minimum, at a bare minimum, this 2 testimony would be admissible in relation to 3 showing -- to proving plaintiffs' claim on the 4 operating systems market for the periods that 5 are not covered by the government case. So at 6 a bare minimum, this testimony, even if it was 7 verbatim from what Judge Jackson saw and relied 8 on, even if it was the exact same issue, 9 plaintiffs would be entitled to rely on it for 10 the purpose of establishing liability in the 11 operating systems markets for periods of time 12 not covered by the government case. Everything 13 Ms. Bradley just said underscores that bare 14 minimum conclusion. 15 All that this -- all that the 16 government findings preclude under the Court's 17 order is bolstering, solely to bolster the 18 findings of fact as it relates to the 19 government claim. And that's not what is going 20 on here. 21 Plaintiffs have multiple other issues. 22 I've explained a few. And the most simple and 23 obvious one which precludes the collateral 24 estoppel objection is operating system market 25 outside of the period of time at issue in the 10708 1 government case. And it's for that very reason 2 that the cases which Microsoft, as the court 3 may recall, cited in support of collateral 4 estoppel, the Setter case and the In Re Air 5 Crash Disaster case, why those cases support 6 plaintiffs. The Court may recall that in those 7 two cases the Court declined to apply 8 collateral estoppel on those two cases. And 9 they said it was because plaintiffs would be 10 entitled to put on that evidence anyhow in the 11 subsequent case. 12 And so in the particular facts of 13 those two cases, there wasn't going to be any 14 judicial efficiency. But you take that a step 15 further in the 3M case that we previously cited 16 to the Court. That case shows that in a 17 complex antitrust case like this, there are 18 judicial efficiencies to be gained by having 19 collateral estoppel, which is what we've got, 20 and that the plaintiffs are entitled to use 21 that evidence to prove other issues in the 22 case. 23 So Microsoft is -- this is a deceptive 24 effort by Microsoft to preclude plaintiffs from 25 putting on evidence which goes to many other 10709 1 issues in the case and has nothing to do with 2 the issues in the government case. So these 3 objections should be rejected, Your Honor. 4 THE COURT: Anything else on this set? 5 MS. BRADLEY: Your Honor, I'll just 6 alert us all to the fact that the testimony at 7 page 113 which plaintiffs claim somehow goes to 8 Microsoft's activities in the operating systems 9 market outside of the time period covered by 10 the DOJ case is false. Mr. Kempin testifies in 11 1997 smack in the middle of the time period 12 covered by the DOJ case. He testifies in the 13 present tense, and plaintiffs can point to 14 nothing that would indicate he testifies about 15 Internet Explorer 4 centrally at issue in the 16 DOJ case. And it's that fact that is estopped 17 by Finding 203 and nothing else. 18 THE COURT: Okay. Can we move to the 19 next set? 20 MR. CASHMAN: The next group 2, Your 21 Honor, is the collateral estoppel objections 22 found at lines 3, 4 and 5 on the rulings page. 23 Again, all the arguments that I've 24 made before would apply with equal force to 25 this group, Your Honor. 10710 1 Here in these designations Kempin is 2 saying that IE is distributed through a variety 3 of means, including one that can be downloaded 4 from the Internet. And the functionality of 5 the version downloaded from the Internet is the 6 same as that of versions preinstalled by an 7 OEM. And Mr. Kempin also testifies in these 8 designations that the price of Windows 95 is 9 attributable to IE, so you pay -- this is a 10 quote from the last group of designations: So 11 you pay for Internet Explorer as well. And 12 Kempin goes on to discuss the increase of price 13 when Microsoft went from Windows 3 to Windows 14 95 with IE included. 15 Now, first of all, there is discussion 16 in this testimony about big price increases. 17 And any evidence regarding prices is highly 18 relevant in a case in this one which is an 19 overcharge when there are overcharge issues. 20 So that's one reason. 21 Another reason, again, is the willful 22 and flagrant conduct because this evidence 23 demonstrates that Mr. Kempin is aware of the 24 lack of a technical justification for tying 25 those two together. 10711 1 So we've got willful and flagrant 2 conduct. And, again, we've got the basic issue 3 that this would apply to operating system 4 liability outside of the period of time at 5 issue in the government case. This testimony 6 simply is not offered to bolster and could not 7 be offered to bolster findings of fact as they 8 relate to operating systems during the period 9 of time at issue in the DOJ matter. 10 These objections should be overruled, 11 Your Honor, for all the reasons we've 12 previously stated. 13 MS. BRADLEY: And for all the reasons 14 we've previously stated, Microsoft submits that 15 they should be sustained. Mr. Kempin's 16 testimony about price increases during the 17 time -- for the operating systems during the 18 time period estopped by the findings of fact is 19 collaterally estopped. 20 Plaintiffs can make no argument that 21 that testimony goes to anything else besides 22 the facts already stated in the findings. 23 The same for the lack of technical 24 justification for tying. The findings of fact 25 found that. Whether Mr. Kempin agrees or not 10712 1 is beside the point. 2 And, frankly, Your Honor, I don't see 3 anything in here about Mr. Kempin testifying 4 either way about the technical justification 5 for tying Internet Explorer to Windows 95. I'm 6 willing to stand corrected on that if there is 7 something in here. 8 And again, for plaintiffs to 9 continually come back to the statement that 10 this somehow goes to activities that are -- 11 activities in the operating system market 12 outside of the time collaterally estopped by 13 the government case is simply wrong. 14 Mr. Kempin testified in 1997 in the 15 present tense, and for a period shortly before 16 that about Microsoft's activities with respect 17 to Windows 95. That's smack in the center of 18 the government case, and it's collaterally 19 estopped. 20 The final citation that plaintiffs 21 include in this group, and that's the citation 22 at page 30. Microsoft submits that the 23 testimony goes not only to the findings of fact 24 listed but also to Finding 62. And if we could 25 just turn to that. 10713 1 MR. CASHMAN: Again, Your Honor, 2 plaintiffs object because the only objection 3 Microsoft asserted here were 242 and 243 to 4 this group. 5 THE COURT: Noted. 6 MS. BRADLEY: And here is questioning 7 about whether the price of Windows 95 changed 8 and how Microsoft made a determination about 9 pricing, that is, what was Microsoft's pricing 10 behavior? At Finding 62 Judge Jackson makes a 11 finding about Microsoft's pricing behavior and 12 what it considered in doing so and the fact 13 that, as was found in the government case, 14 Microsoft raised the price that it charged OEMs 15 for Windows 95. And that fact is estopped, and 16 plaintiffs haven't suggested a single, viable 17 alternative purpose for this testimony. 18 MR. CASHMAN: Your Honor, during 19 opening statement the Court may recall that 20 Mr. Tulchin repeatedly told the jury that this 21 case was about an overcharge involving whether 22 Microsoft's prices were fair and whether 23 Microsoft products were a good value. He said 24 that over and over if the Court will recall. 25 Plaintiffs don't agree with that 10714 1 characterization of what an overcharge case is. 2 But in the discussion Mr. Tulchin repeatedly 3 said there was no separate charge for Internet 4 Explorer and that was important in an 5 overcharge case. 6 Here Mr. Kempin is saying in this 7 testimony, this group of testimony, that, in 8 fact, the price of Internet Explorer was 9 reflected in the price of Windows. 10 Plaintiffs think that is an accurate 11 fact, and that Microsoft, obviously, has to 12 recoup that cost somewhere. So again, that's 13 pricing testimony, and plaintiffs are entitled 14 to introduce that evidence. And they're also 15 entitled to introduce that evidence to rebut 16 the -- and show the falsity of the claims made 17 by Microsoft through Mr. Tulchin in his 18 opening. 19 So, again, we have myriad reasons why 20 this is not subject to collateral -- these 21 collateral estoppel objections. And a couple 22 of really interesting points, because 23 Ms. Bradley is trying to overly narrow what is 24 at issue here. Now she keeps saying that this 25 testimony is present tense testimony in order 10715 1 to try to get around the fact that this 2 evidence at a bare minimum would go to 3 operating system liability outside the period 4 of time at issue in the government case. 5 So her response is to try to say the 6 testimony is being provided right smack in 1997 7 in the middle of the government case. If that 8 is Microsoft's position, that's an admission, 9 Your Honor, of what we talked about on Friday, 10 that any evidence from Caldera could not be 11 collaterally estopped, that any evidence from 12 the JCCP cases could not be collaterally 13 estopped, that any evidence outside that period 14 of time simply could not be collaterally 15 estopped. 16 In any case, that characterization is 17 just plain wrong because, obviously, somebody's 18 testimony can apply to a broad period of time 19 that is not just about when they're testifying. 20 And, in fact, again, if the Court refers to the 21 first couple of pages of the CID testimony 22 where the subject matter of the investigative 23 demand is described, it's clear that the 24 evidence goes back quite aways. 25 So Ms. Bradley's efforts to get around 10716 1 the fact that this is -- just goes to a myriad 2 of other purposes just doesn't hold water. 3 Again, Your Honor, what you really 4 have here is that Microsoft is making 5 cumulative objections. That is all this is. 6 They're trying to disguise a cumulative 7 objection under the rubric of collateral 8 estoppel, and it's not cumulative. 9 Plaintiffs are just beginning to put 10 on their case. And all of this evidence is 11 relevant to go through some of the highlights 12 again. The unreasonable restraint of trade, 13 consumer harm, causation, willful or flagrant 14 conduct, just a variety of issues, and in no 15 sense is this being offered solely to bolster 16 findings on the claim that was at issue in the 17 government case. 18 So these objections have no merit. 19 They should be overruled. 20 THE COURT: Ms. Bradley. 21 MS. BRADLEY: Plaintiffs continue to 22 real off this list of their proposed universe 23 of alternate purposes for what they claim is 24 every single designation to which Microsoft has 25 objected to on collateral estoppel grounds. 10717 1 With all due respect, that just 2 doesn't get them to where they need to be. At 3 minimum, plaintiffs' burden should be to tie an 4 actual alternate purpose to some actual 5 testimony. 6 And it seems to me that throughout 7 this whole argument this morning, plaintiffs 8 have ignored the testimony on the page and have 9 spoken in broad platitude about the conceivable 10 alternate purposes for Mr. Kempin's and 11 presumably any testimony generally what 12 plaintiffs talked about with respect to 13 testimony outside of the estopped period. 14 If we look at the testimony, we find 15 that Mr. Kempin is testifying specifically 16 about that within the time periods that have 17 been collaterally estopped. 18 Plaintiffs claim that this somehow 19 cuts against Microsoft's assertion of 20 collateral estoppel arguments when the 21 testimony was made outside of the time period. 22 Microsoft would just ask: Would plaintiffs 23 claim that if a witness were asked -- and this 24 is actually the case in some other testimony 25 not at issue in this case today -- if a witness 10718 1 were asked whether Finding of Fact 62 was 2 correct but that were asked in 2005 and not 3 during the class period, would that not be 4 collaterally estopped because not considered by 5 Judge Jackson in making his finding or not 6 contemporaneous with the collateral estopped 7 time period? 8 It's difficult to imagine where such 9 an argument would end. When we look to the 10 Caldera testimony and a small amount of JCCP 11 testimony to which Microsoft objected on 12 collateral estoppel grounds, what we will see 13 is that in those cases the questioning attorney 14 was harkening back to the time period and the 15 market that is collaterally estopped and asking 16 about activities that are confined within that 17 time period and that market. And though 18 whether testimony is given contemporaneously or 19 thereafter is really not relevant to that 20 issue. 21 MR. CASHMAN: Your Honor, I think the 22 fact that Microsoft's desperate grasp at straws 23 is demonstrated by the fact that they don't 24 cite to either one of the findings that they 25 allege these objections to the group testimony, 10719 1 group 2 testimony, which were Findings 242 and 2 243. 3 Now they've manufactured a new 4 objection to Finding of Fact 62, and they don't 5 even rely at all on the two findings that they 6 objected to this testimony before it. 7 But, even importantly and more 8 fundamentally, Ms. Bradley conceded during her 9 argument that the alternative uses that I 10 described were conceivable. And that right 11 there, Your Honor, is enough to establish that 12 this testimony is admissible. 13 Microsoft cannot preclude the 14 admission of testimony when it goes to any 15 other issue, and that's what this testimony 16 does. It goes not only to another issue, 17 another conceivable issue, as Ms. Bradley has 18 conceded, but it goes to multiple other issues. 19 And it has nothing to do with the conclusions 20 in the government case, operating system 21 liability for the period at issue there. 22 So the objections, again, are wholly 23 without merit and should be rejected. 24 THE COURT: Anything else? 25 MS. BRADLEY: No, Your Honor. 10720 1 THE COURT: Move to 3 then. 2 MR. CASHMAN: Group 3 is lines 6, 7, 3 and 8 on the rulings chart, and those are 4 findings of fact that Microsoft cites 216, 217 5 and 218. These objections should be overruled. 6 Here Mr. Kempin testifies about OEMs 7 having presupport costs associated with loading 8 more than one browser. He talks about the fact 9 that Microsoft actively attempts to dissuade 10 OEMs from loading another browser. And he also 11 testifies that if IE was the only browser 12 preinstalled, it gets the consumer first and 13 increases the chance that a consumer will stay 14 with Internet Explorer. That's the substance 15 of his testimony. 16 Now, immediately after discussing how 17 Internet Explorer and Windows have been 18 contractually and technically bound together, 19 Mr. Kempin concedes that OEMs are unlikely to 20 preinstall another browser due to the increased 21 support costs. 22 So what you have is a concession by 23 Mr. Kempin that Microsoft's conduct had an 24 impact on consumers and it would have an impact 25 on competitors and that Mr. Kempin, i.e. 10721 1 Microsoft, was aware of that. 2 This evidence is admissible not only 3 for all the other reasons that I've discussed, 4 but here this one goes clearly to causation and 5 consumer harm, that the conduct had an impact. 6 And it also clearly goes to willful and 7 flagrant conduct because as in much of this 8 testimony Mr. Kempin is aware of the impact 9 that its conduct is having. 10 So you've got multiple issues again, 11 which clearly require that the collateral 12 estoppel objections be overruled. It shows 13 they have no merit because the testimony is not 14 being provided solely to bolster any government 15 action claim, the operating system liability 16 for the period at issue in the government 17 actions. They should be overruled, Your Honor. 18 THE COURT: Ms. Bradley. 19 MS. BRADLEY: Mr. Kempin is asked 20 about whether he had ever heard that OEMs were 21 concerned about end users confusion or 22 increased technical support calls if they 23 installed two separate browser. 24 Findings of Fact 214 to 218 go to that 25 exact issue. And Mr. Kempin's concession of 10722 1 the unlikeliness of installing two browsers 2 because of the threat of these problems 3 arising, that's a fact that is already 4 established. The fact that Mr. Kempin 5 testified to it gets the plaintiffs no closer 6 to any of their proposed alternate purposes. 7 And, in fact, I haven't heard any alternate 8 purpose except that plaintiffs claim that this 9 somehow goes to the impact of Microsoft's 10 conduct. 11 The impact of the conduct itself is a 12 collaterally estopped fact, and that is that 13 OEMs were less likely to preinstall two 14 browsers because of their concern that end 15 users would be confused and that they would 16 result in increased technical support calls and 17 increased costs to the OEMs. 18 Mr. Kempin goes to precisely those 19 facts, and there's no alternate purpose. We 20 ask that the objection be sustained. 21 MR. CASHMAN: Group 4, Your Honor. 22 THE COURT: You have nothing else on 23 3? No. That's fine. 24 MR. CASHMAN: I'm trying to expedite 25 this, Your Honor, because these objections are 10723 1 all without merit. And it would be error, 2 plaintiffs believe, to grant any of them 3 because the evidence is not being presented to 4 prove liability in the operating systems market 5 for the period of time at issue. 6 And again, I think it bears emphasis 7 that even if this was identical evidence, even 8 if Microsoft would prove that this evidence was 9 exactly the evidence that Judge Jackson relied 10 on to issue a finding of fact, which Microsoft 11 has not done, that it would still be admissible 12 for operating system market liability in other 13 time periods. So we've got that as the bare 14 minimum. 15 And we also have other purposes, which 16 I have identified, all of which make it clear 17 both factually and under the law that 18 plaintiffs are entitled to present this 19 evidence, that these collateral estoppel 20 objections are made up out of whole cloth 21 wherein Microsoft is just attempting to confuse 22 the issues and essentially prevent the 23 plaintiffs from using any evidence from the 24 Department of Justice case other than the 25 findings themselves. That's what Microsoft is 10724 1 essentially asking the Court to do, is to 2 prevent plaintiffs from using any evidence from 3 the government case. And that's absurd, Your 4 Honor. 5 And it's also not only contrary to the 6 law and contrary to the specific facts as we go 7 through each designation, but it's also 8 contrary to prior orders of this Court wherein 9 the Court ordered and allowed discovery for the 10 plaintiffs to obtain that evidence from the 11 Department of Justice case. 12 So the position that Microsoft is 13 taking globally and line by line is nonsensical 14 and should be rejected. 15 We're ready to turn to group 4, Your 16 Honor. 17 THE COURT: Who wants to talk about 4 18 first? 19 MR. CASHMAN: Group 4, Your Honor, 20 this group of designations is largely about 21 preinstallation of Internet Explorer 4.0 and 22 whether OEMs had any choice. So, again, this 23 goes to willful or flagrant conduct. I'm not 24 going to repeat all those arguments. Either 25 Microsoft was misleading government 10725 1 investigators or Microsoft decided to 2 subsequently deny OEM options of which it was 3 aware and knew were problematic. But in either 4 case it goes to willful or flagrant conduct. 5 This testimony also goes to contracts, 6 combinations or conspiracies and restrain of 7 trade. And we also have the basics, which I've 8 discussed before. I'm not going to reargue 9 those here. 10 THE COURT: Ms. Bradley. 11 MS. BRADLEY: If we could turn to the 12 testimony at issue beginning at page 74 and the 13 related finding of fact, Finding of Fact 158, 14 we will see that Mr. Kempin is asked here about 15 an interrogatory answer in which Microsoft 16 describes the distribution of Internet Explorer 17 4, which for this short period of time was 18 optional for all OEMs. And at 76, 19 to 21, 19 and will remain optional in most cases even 20 after that date until OEMs begin shipping 21 Windows 98. Finding of Fact 158 describes just 22 that. A sentence near the end of that finding, 23 Judge Jackson finds that apart from a few 24 months in the fall of 1997 -- note that the 25 exact date in which Mr. Kempin is giving his 10726 1 testimony -- when Microsoft provided OEMs with 2 Internet Explorer 4.0 on a separate disk from 3 Windows 95 and permitted them to ship the 4 latter without the former. Microsoft never 5 allowed OEMs to ship Windows 95 without 6 Internet Explorer. 7 It's difficult to imagine what else 8 the testimony would go to except to that exact 9 finding and, indeed, not even the whole 10 finding, that specific portion of the finding 11 in which Jackson found exactly what Mr. Kempin 12 testifies about precisely during the time 13 period that Judge Jackson describes, and that 14 is, that Internet Explorer 4.0 was optional for 15 OEMs to load during the time period. For 16 plaintiffs to argue that this somehow goes to 17 Microsoft's activity in the OEM market outside 18 of the collaterally estopped period is wrong. 19 Willfulness and flagrance, plaintiffs 20 continue to attempt to use those as the magic 21 words to get in facts that are already 22 estopped, and it doesn't get them there. And 23 if that activity, which is collaterally 24 estopped, is found to be an unreasonable 25 restraint of trade, then it's an unreasonable 10727 1 restraint of trade. Mr. Kempin's testimony 2 about it does nothing more to get us there. 3 For all those reasons, Microsoft asks 4 that these lines of testimony be excluded on 5 collateral estoppel grounds. 6 MR. CASHMAN: Your Honor, I'm going to 7 just focus on one contention that Ms. Bradley 8 made because, again, it emphasizes just how 9 wrong Microsoft is, and that is willful or 10 flagrant. She says that just doesn't get 11 plaintiffs there. 12 And that highlights how absurd the 13 position that Microsoft is taking is because if 14 willful and flagrant were the only issue, this 15 evidence would still be admissible. That's 16 what the law says. That's what the Court's 17 December 7, 2007 -- or 2006 order said because 18 it goes to another issue. And we are entitled 19 to put on evidence to prove willful or flagrant 20 conduct, and Microsoft cannot through these 21 phantom collateral estoppel objections prevent 22 plaintiffs from putting on any evidence that 23 goes to willful or flagrant conduct. 24 Microsoft, if they had their way, 25 would limit plaintiffs to just the findings. 10728 1 That is the only thing we could get from the 2 government case. And then they would turn 3 around and say "ha-ha-ha, try to prove willful 4 and flagrant conduct based on the findings 5 alone." And that's clearly erroneous. 6 So the concession that any evidence 7 that might go to willful or flagrant conduct is 8 a concession that the evidence has to be 9 permitted. And, quite frankly, Your Honor, all 10 of the testimony by Mr. Kempin goes to willful 11 or flagrant because the testimony, which he 12 provided, was obviously rejected or frowned 13 upon by Judge Jackson in reaching the findings 14 that he did. 15 So right there, aside from all the 16 other issues we've been talking about, again, 17 just highlights why Microsoft is wrong. The 18 whole testimony from Mr. Kempin goes to willful 19 or flagrant conduct, his attitude about these 20 contracts goes to willful or flagrant conduct. 21 And that's particularly true since you're 22 talking about a senior vice president of the 23 company. So his testimony is highly probative 24 on that issue, in addition to the other issues 25 which we discussed. So the objections should 10729 1 be overruled. 2 THE COURT: Anything else on group 4? 3 MS. BRADLEY: No, Your Honor. 4 THE COURT: Good fight. 5 MR. CASHMAN: Your Honor, I'm not 6 going to reargue group 5. That's line 14 on 7 the rulings chart, and the arguments I made in 8 relation to group 4 would apply with equal 9 force on group 5. 10 THE COURT: Ms. Bradley. 11 MS. BRADLEY: Again, I would take us 12 to the testimony where the question the 13 attorney asks: 14 If the IE 4 was on the table, if an 15 OEM like Dell had come to you and said -- we 16 talked about one situation already -- but if 17 they had come to you and said, look, for some 18 of our customers we would like to be able to 19 ship the machine without IE 3 on it. We would 20 like to take it off. What would your response 21 have been? 22 And Mr. Kempin testifies that IE 3, 23 that Windows 95 could not be installed without 24 Internet Explorer 3. Findings of Fact 158 says 25 that exact same thing, and that is that 10730 1 Microsoft licenses were nonnegotiable with 2 respect to this issue and that OEMs felt that 3 they had no choice but to preinstall IE 4 with 4 Windows 95. That's collaterally estopped. It 5 goes to nothing else. Plaintiffs haven't given 6 any plausible suggestion as to some other 7 fact -- that it's plaintiffs' burden to 8 establish -- that the testimony goes to. And 9 it should be excluded as collaterally estopped. 10 MR. CASHMAN: The only problem with 11 Ms. Bradley's argument is they didn't insert 12 158 as an objection for line 14. They asserted 13 157 and 241 and those don't apply. All they 14 say is -- 157 -- that Microsoft bundled IE with 15 Windows by July to protect its applications 16 barrier to entry to maximize the usage of IE at 17 the expense of Netscape. And 241 concerns the 18 success that Microsoft had in foreclosing 19 Netscape from the OEM channel. 20 Now, again, testimony -- the testimony 21 that Mr. Kempin provides here is probative and 22 admissible on a number of issues. Number one, 23 as we've talked about before, willful and 24 flagrant. We've also got -- this goes to 25 unreasonable restraint of trade. It goes to 10731 1 causation and consumer harm. It goes to 2 credibility. It goes to multiple issues. And 3 Microsoft's objections have no merit on the law 4 or on the facts. 5 Ms. Bradley continues trying to take 6 refuge in the specific -- in the specific 7 snippet of testimony compared to a line that 8 she lifts out of a finding. And that, Your 9 Honor, is of no help to Microsoft because the 10 testimony still goes to other issues in the 11 case. And for that reason would be admissible, 12 even if it was the exact same evidence that 13 Judge Jackson relied on, which as we know 14 Microsoft has failed to establish. So, again, 15 the objection should be overruled. 16 THE COURT: Ms. Bradley, anything else 17 on this one? 18 MS. BRADLEY: Nothing further, Your 19 Honor. 20 THE COURT: Group 6. 21 MR. CASHMAN: Group 6, Your Honor, is 22 lines 18 through 32 on the rulings chart. And 23 here we're shifting gears a little bit because 24 this is no longer the CID deposition. These 25 are from the Caldera deposition, and it's 10732 1 impossible, as I pointed out earlier, that the 2 Caldera designations were the underlying 3 evidence for Judge Jackson's findings. And 4 here, as we know, Caldera was about the DRI 5 situation, and none of the findings of fact are 6 about the DRI. 7 So as we know in Caldera, they are 8 focused on Microsoft's conduct towards DRI and 9 DR-DOS, and that was conduct that occurred 10 prior to the government action because as we 11 know DR-DOS ceased to exist when Windows 95 12 came out. And the government case, of course, 13 was for an entirely different time period, from 14 July 15, 1995 to June 24, 1999. 15 So we've got that. And also the fact 16 that Microsoft has argued, Your Honor, I think 17 Mr. Holley and Mr. Tulchin have made this 18 argument repeatedly that the DRI issues, none 19 of the DRI issues are subject to collateral 20 estoppel. 21 So given those claims, how can 22 Microsoft credibly claim that any of the 23 evidence from the Caldera action is cumulative 24 or bolsters the established facts from the 25 government action. 10733 1 So here to show how ridiculous some of 2 these objections are, Your Honor, Microsoft has 3 objections to a large part of Mr. Kempin's 4 Caldera testimony where he explained his job 5 responsibilities and he testified about per 6 processor licenses. Of course, there's nothing 7 in the findings about per processor licenses, 8 long-term licenses, Microsoft's marketing 9 strategy versus DR-DOS, how the Windows GUI 10 related to DOS and whether DR-DOS put any price 11 pressure on Microsoft's operating system 12 offerings. 13 So, obviously, this testimony from 14 Mr. Kempin has nothing to do with the 15 bolstering of the findings of fact. There's no 16 testimony -- or, I should say, nothing in any 17 of the findings about the per processor 18 licenses. There's nothing in the findings 19 about whether DR-DOS put price pressure on 20 Microsoft's products. That issue, of course, 21 is relevant to causation and consumer harm. 22 And then we've got the issues about 23 whether those actions by Microsoft as testified 24 to by Mr. Kempin relating to per processor 25 licenses, long-term contracts and the bolting 10734 1 of Windows -- the Windows GUI to MS-DOS -- are 2 relevant to whether those actions were 3 anticompetitive violations of the Iowa 4 Competition Law. 5 So, Your Honor, none of the Caldera 6 testimony in group 6 can even under any view of 7 the facts or the law be viewed as subject to a 8 cumulative objection, which is what these 9 collateral estoppel objections really are. 10 They should all be denied. 11 Thank you. 12 THE COURT: Ms. Bradley. 13 MS. BRADLEY: Your Honor, Microsoft 14 would repeat its offer to plaintiffs and the 15 Court to leave off with having just argued all 16 of Microsoft's objections, collateral estoppel 17 objections and the DOJ CID testimony we just 18 discussed until the Court has had an 19 opportunity to make rulings on those 20 designations at which point Microsoft could 21 meet with plaintiffs and attempt to narrow the 22 universe of collateral estoppel objections in 23 hopes that plaintiffs would withdraw testimony 24 for which they have no alternative purpose and 25 Microsoft could narrow its collateral estoppel 10735 1 objections based upon the Court's rulings on 2 the admissibility of testimony in the DOJ CID 3 deposition. We're also happy to move forward 4 with the line-by-line argument if the Court 5 wishes. 6 MR. CASHMAN: Well, Your Honor, unless 7 Microsoft is willing to withdraw these 8 objections that they've made. They have no 9 merit and they've chosen to focus on a few 10 inapposite lines from the DOJ testimony and 11 don't even want to address the examples which 12 underscore over and over again how ridiculous 13 their objections are, which Caldera is a 14 perfect example. There is no basis for those 15 objections in the first instance, and the 16 examples become even more extreme, even in the 17 DOJ case, Your Honor, which if Microsoft 18 doesn't want to discuss any of these on a line 19 by line or group by group, I'm going -- I will 20 point out then some further examples for the 21 Court to underscore while all of these 22 objections should be overruled. 23 So if Microsoft doesn't want to make 24 any further argument, that's fine. But then I 25 would like to just point out a few additional 10736 1 examples why all these objections should be 2 overruled. 3 MS. BRADLEY: Your Honor, as I stated 4 already, Microsoft is happy to argue these line 5 by line and would be happy to go to them for 6 the Court today. But because plaintiffs have 7 right out refused to meet and confer with 8 Microsoft on these objections, we've had to 9 bring a huge volume of objections to the 10 Court's attention for argument today. We would 11 like to not waste your time with this if the 12 Court should rule one way or another in a way 13 that makes it clear to the parties the standard 14 the Court is drawing on these line-by-line 15 objections and the parties could -- I have 16 great hope -- could take those and reduce the 17 number of objections that we bring to you 18 today. Again, we're happy to go through them 19 line by line today if that's what the Court 20 wishes. 21 MR. CASHMAN: Well, Your Honor, I 22 guess in that case I'm going to direct the 23 Court's attention to some obvious examples, and 24 I'm going to direct your attention first to 25 group No. 8, Your Honor. 10737 1 THE COURT: Well, that doesn't answer 2 the question. Do you want to go line by line 3 or not? 4 MR. CASHMAN: I want to underscore why 5 these objections have no merit under any 6 circumstance. And I've said before if 7 Microsoft doesn't wish to respond to what I've 8 said about group 6 and keep going that way, 9 that's fine. But I want to underscore for the 10 Court why some of the objections to some of 11 these other groups of testimony have no merit. 12 So I think that the right thing to do, 13 Your Honor, is I'm going to say just on group 14 7, again, those go to the issues that we 15 discussed before, credibility, willful or 16 flagrant conduct and causation, consumer harm. 17 And then I wish to direct the Court's attention 18 to group 8. 19 In group 8 designations Mr. Kempin 20 discusses how Microsoft sets prices for Windows 21 98 and Windows 95 OEM licenses. In the context 22 of discussing what factors to consider in 23 setting price, Mr. Kempin says that the price 24 of Windows 95 included an extra charge for 25 Internet Explorer and in some testimony that is 10738 1 actually in group 11. 2 Mr. Kempin discusses the increased 3 royalty price that Microsoft charged for IBM 4 for Windows 95. So, again, plaintiffs' 5 position on the testimony that this would 6 relate to virtually all the objections that 7 Microsoft has asserted for the DOJ deposition, 8 these go to pricing. And plaintiffs are 9 entitled to introduce any price evidence where 10 Microsoft has alleged, as it has in this case, 11 that it has not overcharged any consumers. 12 So that's one reason for this 13 testimony and why it's admissible. 14 Furthermore, under a preliminary Instruction 15 No. 13 that the Court gave, plaintiffs have to 16 prove that Microsoft continued to possess 17 monopoly power after June of 1999. 18 This deposition was taken in October 19 of 1998, Your Honor, and the factors that 20 Microsoft considered in this time period in 21 setting prices are relevant to whether 22 Microsoft continued to possess monopoly power 23 some months later starting in June 1999. 24 Again, we've got the issue of what 25 Mr. Tulchin claims and what one of Microsoft's 10739 1 primary contentions is here. He told the jury 2 that because Internet Explorer was included for 3 free, there could be no consumer harm caused by 4 the conduct at issue in the government action. 5 Therefore, plaintiffs are entitled to present 6 evidence to the jury that clarifies the fact 7 that the price of windows was higher due to the 8 fact that Internet Explorer was included. So 9 this evidence is relevant again on causation 10 and harm to Iowa consumers. 11 So those reasons, actually, Your 12 Honor, cover the designations at issue in 13 group 8 and group 9. 14 MS. BRADLEY: Since plaintiffs have, 15 apparently, rejected our suggestion to meet and 16 confer on these, then I'm happy to argue them 17 line by line. 18 At tab 6 we have Microsoft's 19 objections, collateral estoppel objections to 20 certain testimony from Mr. Kempin in his 21 Caldera deposition. 22 Microsoft has limited its collateral 23 estoppel objections to only testimony that 24 refers to the operating systems market during 25 the collaterally estopped time period, that is 10740 1 the time period in the government case, and has 2 tied those designations, a long discussion in 3 the Caldera deposition, to Findings of Fact 54 4 through 58. 5 In Findings 54 through 58, generally, 6 Judge Jackson describes Microsoft's 7 relationships with OEMs and the importance to 8 Microsoft that OEMs preinstall Windows on their 9 systems and the feeling by OEMs that they had 10 no alternative but to preinstall Microsoft 11 operating systems on their systems. 12 The findings of fact at issue, and to 13 which we tied the testimony, also go to 14 Microsoft's pricing behavior and, in fact, do 15 touch on per processor licenses at Findings of 16 Fact 58 in which the finding describes 17 Microsoft's concerns about piracy and the 18 importance to Microsoft in its attempts to 19 drastically limit the number of PCs that sold 20 without an operating system preinstalled. 21 That's exactly the justification that Microsoft 22 gave and that Mr. Kempin gives for Microsoft's 23 offer of per processor licenses. 24 And as such, we believe that the 25 designations that -- to which Microsoft has 10741 1 objected on collateral estoppel grounds in that 2 Mr. Kempin's Caldera testimony should be 3 excluded because that testimony goes to 4 Microsoft's activities during the collaterally 5 estopped time period about the collaterally 6 estopped products, that is, Microsoft's 7 operating system products. And, in fact, the 8 testimony was taken in the middle of the time 9 period which is collaterally estopped. And the 10 fact that other issues in Caldera take place 11 outside the collaterally estopped time period 12 is really irrelevant to that fact. 13 Moving onto Tab 7 and because 14 plaintiffs have already given their argument on 15 Tab 7 to 9, I will walk us through those pretty 16 quickly. 17 I'm still figuring out the binder 18 so -- 19 THE COURT: Take your time. 20 MS. BRADLEY: If I may go back a bit 21 because we're turning to the DOJ CID testimony 22 again and this testimony taken in 1998. 23 Plaintiffs made an argument earlier 24 this morning about the fact that if Microsoft 25 had its way, it would exclude all testimony 10742 1 taken during the DOJ proceedings. And that I 2 would like to point out is not the case. In 3 fact, Microsoft has narrowly tailored its 4 objections, even to the testimony taken in the 5 DOJ. This Court, I believe, has already seen 6 and will continue to see quite a large volume 7 of testimony taken during DOJ depositions, 8 civil investigative demands and, indeed, during 9 the DOJ trial, liability and remedies trials. 10 And Microsoft doesn't object to that where that 11 testimony goes to a fact that hasn't been 12 collaterally estopped. But there are facts in 13 the testimony that do go only to collaterally 14 estopped facts, and that's when Microsoft must 15 object. 16 Starting at 82. Microsoft asserts 17 collateral estoppel objections to this range of 18 testimony because it relates to Findings 203 19 through 221 and that general range of findings. 20 And this, again, is testimony about 21 Microsoft's conditions that it placed on OEMs 22 when they preloaded Windows 98, which was a 23 product at issue in the DOJ trial and is the 24 subject of many collaterally estopped findings. 25 And this has to do -- this testimony has to do 10743 1 with the OEMs configuration of the channel bar 2 and other items that were permitted to appear 3 or not permitted to appear on the desktops of 4 computers manufactured by the OEMs and 5 Microsoft's limitations on the OEMs' ability to 6 change the way the desktop appeared and that 7 has to do -- it bears directly on Findings of 8 Fact 202, 213. 9 And as Your Honor will see and we've 10 already discussed, Finding 203 describes the 11 start menu and the desktop requirements for 12 OEMs and Microsoft's threats to terminate 13 licenses for OEMs that violated those 14 requirements. 15 213 again describes Microsoft's 16 attempts to, quote, force OEMs to accept a 17 series of restrictions on their ability to 18 reconfigure the Windows 95 desktop and boot 19 sequence. It goes on to describe the OEMs' 20 unhappiness in Finding 214 with this state of 21 affairs and so on and so forth. 22 The questioner in this DOJ CID 23 testimony asks about those restrictions and 24 Mr. Kempin describes them, describes them in a 25 way that is remarkably similar to the way that 10744 1 they're described in the findings of fact. It 2 goes to nothing else. It's simply bolstering. 3 It's the same fact that has already been found, 4 and it's already before the jury. Plaintiffs 5 cannot suggest an alternate purpose for this, 6 and they haven't. 7 For those reasons we ask that 8 Microsoft's objections to the Kempin DOJ CID 9 testimony between pages 82 and 97 be sustained. 10 And that, I believe, takes care of the 11 1998 Kempin DOJ CID testimony and permits us to 12 move on to the Kempin DOJ testimony. And I 13 believe that plaintiffs have already addressed 14 portions of this testimony as well. If I may 15 just confirm that. Yes. And this begins at 16 plaintiffs' Tab 8 in the binder they handed up, 17 line 37, and I'll turn to that now. 18 Microsoft has objected to this first 19 line of testimony as relating to Finding of 20 Fact 55, which, again, goes to the fact that 21 OEMs felt they had no choice but to load 22 Windows and speak some about Microsoft's 23 pricing behavior with respect to its operating 24 system software that it offered to OEMs. 25 Here, beginning at page 9, Mr. Kempin 10745 1 testifies about that pricing behavior and 2 specifically about how Microsoft needed the 3 termination of the pricing structure for 4 Windows 95. 5 Finding of Fact 55 describes the fact 6 that Microsoft did not consider the prices of 7 other Intel-compatible PC operating systems 8 when it set its pricing. And the following 9 findings go on to describe more about 10 Microsoft's pricing behavior. 11 THE COURT: You're starting at line 11 12 on page 9? 13 MS. BRADLEY: Line 9 -- or, I'm sorry. 14 Page 9, line 11 -- through page 11. And again, 15 Microsoft would invite the Court to read the 16 testimony, read the findings of fact and make 17 its own determination about whether Microsoft's 18 linkages that it's proposed for these findings 19 are plausible and in the face of plaintiffs' 20 utter lack to suggest any viable alternative 21 purpose for this testimony to sustain 22 Microsoft's objections accordingly. 23 The testimony at lines -- or pages 21 24 through 26 and again 33 through 39 also go to 25 Microsoft's pricing behavior in a way that is 10746 1 already described in the findings of fact, and, 2 specifically, Finding 55. 3 And reading further in the findings of 4 fact, there are also mentions of Microsoft's 5 pricing behaviors on through Finding 58. 6 And I won't read those all to you here 7 again, but we would ask and suggest that upon 8 reading the testimony, there's no question that 9 Mr. Kempin is testifying about exactly those 10 facts that are estopped. And we would ask that 11 our objections be sustained on that ground. 12 MR. CASHMAN: Your Honor, I'll go back 13 to group 8 here since that's where Ms. Bradley 14 left off and it's incredibly misleading because 15 while Ms. Bradley goes on to talk about -- 16 admitted that Mr. Kempin's testimony is about 17 pricing issues, there's no collateral estoppel 18 on pricing issues. You read Finding 55 that 19 they cite for group 8, and it doesn't have 20 anything to do with the kind of pricing issues 21 that are at issue in an overcharge case. 22 So Mr. Kempin's testimony regarding 23 how Microsoft set prices and what it considers 24 in setting prices is relevant to whether those 25 prices were set by competitive forces or by the 10747 1 unilateral exercise of Microsoft's power. How 2 Microsoft set those prices and what prices it 3 set are incredibly relevant in an overcharge 4 case. 5 So plaintiffs are entitled to 6 introduce that pricing evidence. And don't 7 forget, Your Honor, that here Microsoft alleges 8 and has alleged throughout the case that it has 9 not overcharged any consumers. So any evidence 10 that comes through Mr. Kempin or anyone else 11 about prices is extremely relevant, extremely 12 relevant. 13 So we're entitled to present that 14 evidence. As I think I said in opening 15 statement, Mr. Tulchin told the jury that 16 Internet Explorer was included for free and 17 there could be no consumer harm. And he also 18 said that wasn't established in the government 19 action. 20 So not only are plaintiffs required 21 but they're entitled to present evidence to the 22 jury showing that the price of Windows was 23 higher due to the fact that Internet Explorer 24 was included. So that goes right to rebut some 25 basic claims that Microsoft has made in the 10748 1 case. But they go to the bigger issue of 2 causation and consumer harm. 3 When Ms. Bradley -- I guess she just 4 isn't listening when she keeps saying 5 plaintiffs haven't identified any issues, but 6 we've identified multiple issues. And, again, 7 to go back to the very basic, even if 8 Ms. Bradley could show that there was a piece 9 of evidence that Judge Jackson had and that he 10 relied on and, let's say, even quoted it in a 11 finding, would mean that it could be presented 12 by plaintiffs because plaintiffs are entitled 13 to present that evidence if it goes to any one 14 of these other issues in the case. 15 That's the law. And Microsoft has 16 zero cases. They've never shown the Court a 17 case in which a party who is not a participant 18 in the earlier litigation could be collaterally 19 estopped on any fact. All the cases that 20 Microsoft cited to the Court are misleading, 21 have been misleadingly cited because in all of 22 those cases there was mutuality. In the first 23 case the parties were the same as they were in 24 the second case when they tried to raise a new 25 issue. 10749 1 It's fundamental as a matter of due 2 process, and all the cases make this clear, 3 that a party who is not a participant in the 4 earlier litigation cannot be collaterally 5 estopped from presenting evidence. 6 So not only does Microsoft have it 7 wrong on the law, they've got it wrong on the 8 facts. And all of these objections are just 9 inappropriate and should be overruled. 10 I think we can turn to group 10, Your 11 Honor. 12 MS. BRADLEY: If I may. 13 THE COURT: What about group 8 and 9. 14 MR. CASHMAN: Group 8 and 9, I think 15 we can treat those together because they fall 16 into the same category. 17 THE COURT: I'll let Ms. Bradley 18 respond. 19 MS. BRADLEY: If I may respond to 20 plaintiffs' general argument that they should 21 not be bound by collateral estoppel. I will 22 submit that plaintiffs have never cited a case 23 because there is none in which plaintiffs or a 24 party in a following case is granted collateral 25 estoppel on issues and then is permitted to 10750 1 relitigate those same issues, while the party 2 against whom collateral estoppel has been 3 entered has its hands tied in defending itself 4 on those issues. 5 Iowa law is clear and law generally is 6 clear that once a fact is established under 7 collateral estoppel, that fact cannot be 8 relitigated. Plaintiffs' absurd interpretation 9 of offensive nonmutual collateral estoppel has 10 never been adopted by the Court and should not 11 be done here. 12 What plaintiffs attempt to suggest 13 here, and in fact said as much, is that even 14 facts that were considered by Judge Jackson in 15 the DOJ case, even if those facts are quoted in 16 a finding, plaintiffs should still be entitled 17 to march those out again here, the underlying 18 facts, because plaintiffs were not present 19 during the DOJ case. That is wrong on the law, 20 and the Court has already found as much. 21 To turn back to the citations about 22 which we spoke earlier in Mr. Kempin's DOJ 23 testimony, I would just like to point the Court 24 to one illustrative example and that's at page 25 21 of that testimony in which the questioning 10751 1 attorney asks what factors Microsoft considered 2 when attempting to determine what Microsoft 3 would charge for its operating systems. 4 And Mr. Kempin says that, "Oh, we look 5 at some of them, that is, other vendors once in 6 awhile. But in this particular case we really 7 compared it with Windows 95." And this is 8 asking about Microsoft's consideration for the 9 pricing of Windows 98. That is exactly what is 10 stated in Finding 55, which states that 11 Microsoft did not consider the prices of other 12 Intel-compatible PC operating systems when it 13 set its prices for Windows 98. It goes to 14 nothing else. It should be collaterally 15 estopped as are the other facts that Microsoft 16 has cited in the DOJ testimony and should be 17 excluded. 18 THE COURT: We're going to take a 19 break for myself and my court reporter. 20 (A short recess was taken.) 21 THE COURT: Okay. What's next? Are 22 we still on 8 or go to 9? 23 MS. BRADLEY: I think we're done with 24 8 and 9. I think we've agreed we raise the 25 same issues, so we can move on to 10 or we will 10752 1 be happy to. 2 MR. CASHMAN: I'll say this, Your 3 Honor, and this is for 8 and 9 and really for 4 all of these is what you see here is Microsoft 5 basically -- they acknowledge that all this 6 evidence is relevant, but what they are saying 7 is that this evidence could not help prove any 8 other fact in the case and that's how absurd 9 their position is. They're saying it couldn't 10 help prove any other fact in the case, and that 11 even though plaintiffs have identified multiple 12 other facts, the Court should disregard 13 plaintiffs' other bases for this evidence. 14 So what they're asking the Court to 15 do, not only is their position wrong as a 16 matter of law, but they're basically asking the 17 Court to usurp the role of the jury, which will 18 decide what evidence helps prove -- helps prove 19 what claims, all these other issues that the 20 plaintiffs have been discussing. 21 Microsoft's position, Your Honor, is 22 absurd in the extreme because clearly this 23 evidence goes or would be helpful for the jury 24 in considering all these other issues. And 25 Microsoft simply cannot establish that the only 10753 1 purpose, the only purpose of this evidence 2 would be to prove operating system liability in 3 the time period that was at issue in the 4 government case. 5 So again, it just highlights why all 6 their objections should be overruled. 7 Turning to group 10, Your Honor, I 8 think, again, just highlights how wrong 9 Microsoft is. 10 Group 10, which is from the 1998 11 Department of Justice deposition, Microsoft has 12 asserted collateral estoppel objections for 13 Findings 203, 208, 213, 214 and 215, and these 14 designations have nothing to do with those -- 15 with what Microsoft claims. 16 What we've got here is a lot of 17 testimony by Mr. Kempin about Microsoft's per 18 system licenses and marketing development 19 agreements which have the acronym MDAs with 20 OEMs such as Compaq, Gateway, IBM, Packard 21 Bell, Dell, and Hewlett Packard. 22 Microsoft's per system licenses and 23 MDAs, Your Honor, were not specifically found 24 to be anticompetitive in any of the findings of 25 fact and certainly not the findings of fact 10754 1 which Microsoft cites. 2 So plaintiffs are entitled to present 3 this evidence in support of the allegations 4 that such licensing terms are anticompetitive. 5 And Mr. Kempin's testimony regarding prices for 6 Windows 95 and discriminatory discounts given 7 by OEMs is a pricing issue. And that is 8 relevant, again, to causation and consumer harm 9 at a bare minimum. 10 In a case involving overcharge and 11 pass-through such as this case, the plaintiffs 12 are entitled to present testimony on the 13 subject of price, and that's what this 14 testimony by Mr. Kempin is about. And, again, 15 it goes back to what Mr. Tulchin has been 16 asserting, and Microsoft has been asserting it 17 throughout the case, that no consumers were 18 overcharged. Well, this testimony goes 19 directly to that claim, and it goes directly to 20 the causation and harm to Iowa consumers on 21 overcharging pass-through. 22 The bottom line here, Your Honor, is 23 if the testimony relates to price, it's 24 admissible because there's no findings saying 25 that there was an overcharge. 10755 1 And Microsoft can -- they can cite to 2 every finding on which collateral estoppel 3 effect was given, and it simply does not 4 prevent the presentation of this evidence. 5 So again, plaintiffs submit that all 6 of these objections to group 10 and everything 7 prior should be overruled. 8 Thank you. 9 MS. BRADLEY: Your Honor, this is a 10 pretty large volume of testimony. And I think, 11 to take it pretty much collectively, that goes 12 to Microsoft's relationships and licensing 13 agreements with OEMs, the exact same behavior 14 that is covered by the findings of fact that 15 Microsoft has cited, that is, basically 16 Findings 203 through 215 or thereabouts, and 17 that is that essentially Microsoft requires 18 that OEMs accept a series of restrictions when 19 entering into licenses for Windows 95 and 20 Windows 98. Again, those are the products and 21 the time period which is collaterally estopped. 22 And Microsoft submits that Microsoft's 23 activities with respect to the OEMs and the 24 requirements that it placed on OEMs before they 25 were permitted to preload Windows 95 and 10756 1 Windows 98 are facts that have been 2 collaterally estoppel and that plaintiffs have 3 again failed to cite any viable alternative 4 purpose for those facts and as such the 5 testimony should be excluded. 6 MR. CASHMAN: Your Honor, according to 7 Microsoft's interpretation of that case -- 8 again their main defense is based on pricing, 9 that their prices are fair and that consumers 10 are not overcharged. And yet Microsoft is 11 seeking to preclude the plaintiffs from putting 12 in evidence on that very point. And that's 13 what all of this testimony in group 10 is 14 about, that the prices that Microsoft charged 15 for these marketing development agreements. 16 As the Court may recall, a marketing 17 developing agreement is what Microsoft started 18 to use after the per processor licenses. The 19 plaintiffs contend in this case that the MDAs 20 are anticompetitive just like the per processor 21 licenses are. 22 So any testimony concerning the market 23 development agreements and the anticompetitive 24 effect, the cause that it had in harming Iowa 25 consumers, is admissible. And again, Microsoft 10757 1 cannot establish that the sole purpose, that 2 the sole purpose of this testimony -- that the 3 only thing it could do is to prove the 4 government case. I mean, that is just not 5 true. 6 And plaintiffs believe that the jury 7 should be and is entitled to hear this evidence 8 because it is probative on multiple issues in 9 the case and that Microsoft was incorrect in 10 asking the Court to usurp the jury's role. 11 So we ask that these objections be 12 overruled, Your Honor. 13 MS. BRADLEY: Your Honor, it's 14 Microsoft's position that these findings, to 15 which Microsoft has linked the testimony, show 16 harm to consumers or had some impact on prices, 17 then that fact is established and plaintiffs 18 may not put in the same evidence yet again 19 because they claim that somehow those facts, 20 the facts that are already collaterally 21 estopped go to the plaintiffs' pricing story. 22 And I do want to address one other 23 point that plaintiffs continue -- an argument 24 that plaintiffs continue to make, which is the 25 suggestion that it's somehow Microsoft's burden 10758 1 to show that the sole purpose of this testimony 2 is collaterally estopped. 3 Microsoft has already linked the 4 testimony to the collaterally estopped 5 findings, which it claims go -- which it claims 6 the testimony is offered solely to bolster. 7 It's then plaintiffs' burden to show that the 8 testimony somehow goes to another relevant 9 issue in the case, and it's not solely to 10 bolster. 11 That's been this Court's clear order. 12 And plaintiffs continue to ignore that and 13 request that somehow it's Microsoft's burden to 14 attempt to conceive of any alternative purpose 15 that the plaintiffs may argue or offer for such 16 testimony and then that Microsoft should not be 17 asserting collateral estoppel objections 18 otherwise. 19 We've given plaintiffs every 20 opportunity to offer viable alternative 21 purposes for this testimony and they have, as 22 of yet, refused to do so. And they're coming 23 in here today and last week and parading out 24 their universe of what they claim are their 25 potential alternative purposes for the 10759 1 testimony. 2 It's simply insufficient to meet their 3 burden to tie specific testimony to a viable 4 and alternative purpose. And they haven't done 5 so again here with respect to this testimony by 6 Mr. Kempin in which he describes Microsoft's 7 licensing practices with respect to certain 8 OEMs and those are OEMs that are described -- 9 and those relationship are described in the 10 findings of fact that Microsoft has cited. 11 MR. CASHMAN: Your Honor, I guess it's 12 pretty amazing that Ms. Bradley keeps saying 13 that plaintiffs haven't shown alternative uses. 14 And aside from whose burden it is, it's clear 15 that there are so many alternative uses for 16 this testimony. 17 And, incredibly, I have to write this 18 down because Ms. Bradley said it's Microsoft's 19 position that if there is a finding that says 20 there is some impact on prices, then the 21 evidence should be excluded. 22 And that's just -- that's just plain 23 wrong. I mean, Microsoft says over and over 24 again that there's no findings on overcharge 25 and that there's no overcharge and that's a key 10760 1 issue in the case, pricing. And so if we have 2 any evidence that goes to pricing, again, like 3 willful and flagrant causation, consumer harm, 4 the other issues we've discussed earlier today 5 and last Friday, any evidence that goes to 6 pricing is clearly admissible because there's 7 no finding in the government case of overcharge 8 as Microsoft continually claims. And so that's 9 a key issue in the case and that is just 10 crystal-clear. And Ms. Bradley also has the 11 standard backwards. If there is some impact on 12 prices, that means it's admissible. What 13 Microsoft has to prove is that the evidence 14 could only prove operating system liability in 15 the government case. And none of the evidence 16 at issue here fits into that category. I mean, 17 it's really pretty astounding that Microsoft 18 keeps saying -- believing that they can 19 characterize what purpose plaintiffs are going 20 to use the evidence for. That's just wrong. 21 If the plaintiffs can believe that 22 this evidence goes to show causation and 23 consumer harm, they're entitled to put it on so 24 that we can prove our case. Microsoft is not 25 entitled to present -- or, pardon me, prevent 10761 1 plaintiffs from putting on evidence that is 2 relevant to prove their claims. 3 Their objections should be overruled, 4 Your Honor, in global and on a line-by-line 5 basis just like they were handled with respect 6 to Mr. Gates. These objections have no more 7 merit than they did when they were asserted 8 against Mr. Gates. 9 THE COURT: Anything else on group 10? 10 MS. BRADLEY: No, Your Honor. 11 THE COURT: Group 11. 12 MR. CASHMAN: Group 11, again, 13 Microsoft asserts a single finding as an 14 objection. That's Finding No. 57. And again, 15 the testimony at issue here in this single line 16 of designation is testimony concerning pricing, 17 Microsoft's per system licenses and the MDAs. 18 And as we just discussed, those were 19 not specifically found to be anticompetitive in 20 any finding of fact and certainly not in No. 21 57. So this testimony regarding prices for 22 Windows 95 and the discriminatory discounts 23 that were given to OEMs is a price issue which 24 is relevant to causation and consumer harm and 25 therefore it's relevant in this case on the 10762 1 issues of overcharge and pass-through. 2 MS. BRADLEY: The testimony at 103 to 3 104 is Mr. Kempin's testimony about what 4 factors Microsoft considered when setting its 5 prices for Windows 95 to IBM and Microsoft's 6 attempts to add value by adding features to 7 Windows 95. In Finding of Fact 57, Judge 8 Jackson describes this pressure that Microsoft 9 attempted to put on OEMs in which Microsoft 10 continued to update its operating system 11 software and release new versions of that 12 software so that there would continue to be a 13 market for its products and then as it did so 14 increase the prices of the older version of its 15 products to OEMs. 16 That's exactly the activities that are 17 described in Mr. Kempin's testimony. And 18 again, I would ask the plaintiffs to 19 specifically describe the alternative purpose 20 for which they would offer such testimony. 21 THE COURT: Anything else on 11, sir? 22 MR. CASHMAN: Your Honor, nothing 23 further on No. 11. 24 THE COURT: 12. 25 MR. CASHMAN: Group 12 are lines 67 10763 1 through 68. I believe that we've already 2 covered the arguments that would be applicable 3 to those designation. Again, none of the 4 testimony of Mr. Kempin pertains solely to 5 bolster the government case. And that would 6 also apply, Your Honor, to group 13. 7 I think we could move forward to group 8 14, which is the JCCP case from California. 9 THE COURT: Do you wish to respond to 10 12? 11 MS. BRADLEY: Microsoft would like to 12 respond on groups 12 and 13. 13 THE COURT: Proceed. 14 MS. BRADLEY: Group 12, which I 15 understand to be line 67, and that is 16 Mr. Kimpen's testimony at pages 219 through 17 225. 18 Mr. Kempin discusses services calls 19 that -- Microsoft Internet referral server 20 describes Microsoft's attempts to distribute 21 Internet Explorer through that channel brand. 22 And if we turn to Finding 25, we will 23 see that finding and the findings thereafter 24 refer to and describe this Windows or Internet 25 referral server, precisely the activity before 10764 1 which Mr. Kempin speaks in his testimony. 2 And again, we would ask that 3 plaintiffs -- and as we read through the 4 findings, we see that, in fact, the findings go 5 on at some length about the Internet referral 6 server, as does Mr. Kempin's testimony, and 7 they essentially mirror each other. 8 Mr. Kempin's testimony bolsters the findings of 9 fact and does nothing else. 10 MR. CASHMAN: Well, Ms. Bradley, I 11 don't think has read the testimony closely 12 enough of Mr. Kempin. His testimony in group 13 12, Your Honor, is about whether Microsoft had 14 any deals with an OEM named Compaq. 15 The Court probably recalls Compaq 16 related to Microsoft's Internet referral 17 service. 18 The deal in question involved Compaq 19 agreeing not to promote Netscape in exchange 20 for revenue from the Internet referral service. 21 The findings of fact that Microsoft cites 22 relate to Microsoft's coercion of ISPs. And 23 Compaq is an OEM, not an ISP. So right there 24 it's about apples and oranges. 25 But it also goes to the other issues 10765 1 that we've talked about before, contracts or 2 combinations and then also causation and 3 consumer harm. 4 So again, there isn't a situation that 5 Microsoft has identified, nor is there a 6 situation that they could identify where the 7 evidence would go to another purpose. 8 The jury is entitled to hear this 9 testimony. It would be error to exclude any of 10 it. 11 Thank you. 12 THE COURT: Anything else on this? 13 MS. BRADLEY: I will just note for the 14 record that Finding of Fact 253 is exactly on 15 point with what Mr. Kempin has testified to 16 which is Microsoft's inclusion of the Internet 17 connection Wizard, and as a result, the Windows 18 referral server in its Windows 95 software. 19 And the deal it did with Compaq was 20 specifically addressing the inclusion of this 21 Internet referral server in Microsoft's version 22 of Windows 95. They exactly track one another, 23 and plaintiffs have not presented a viable 24 alternative purpose for the testimony. 25 MR. CASHMAN: Again, it's just evident 10766 1 that Ms. Bradley does not want to accept the 2 alternative purposes that have been identified 3 repeatedly. 4 Group number 13, Your Honor, I intend 5 to expedite this. These designations -- 6 Mr. Kempin testifies about how he participated 7 in discussions with IBM's PC company once a 8 court order two years prior when he gave this 9 testimony. And he states that Ballmer and 10 Gates were not interested in working closely 11 with IBM, and he identities the reason is that 12 IBM supported Sun and Oracle. 13 The findings of fact that Microsoft 14 cites here, which there's a multitude of them, 15 but they relate to Microsoft pressuring IBM to 16 end its support for SmartSuite and OS/2 work. 17 There's nothing about the support for Java, 18 which is what Mr. Kempin was testifying about. 19 So the issues are not even the same. 20 Here again, the additional purpose -- or an 21 obvious purpose for this testimony is the 22 willful and flagrant conduct for the two 23 highest executives at Microsoft. The way that 24 they were conducting themselves for IBM support 25 for competitors is evidence of willful and 10767 1 flagrant conduct. 2 It shows that Microsoft desired to 3 punish the OEMs, which supported middleware. 4 This was a strategy directed at the very top of 5 Microsoft by Mr. Gates and Mr. Ballmer. 6 So again, we've got the clear purpose 7 of willful and flagrant conduct. And I won't 8 go through all the other reasons again, but it 9 supports causation and consumer harm and 10 combinations in restraint of trade. 11 Thank you. 12 THE COURT: Ms. Bradley, anything 13 else? 14 MS. BRADLEY: I will just say that 15 Microsoft believes, and believes that the Court 16 will find upon reading the testimony and the 17 findings of fact which Microsoft has linked the 18 testimony, that both the testimony and the 19 findings of fact go to Microsoft's complex 20 relationship with IBM, specifically, and that 21 plaintiffs have been unable to cite an 22 alternative purpose for that testimony. The 23 testimony and the findings go to the same facts 24 and the same issues and should not be admitted. 25 THE COURT: Shall we move to the last 10768 1 set then? 2 MR. CASHMAN: Group 14, Your Honor, is 3 from the JCP case. It's just one designation 4 that's line 83 on the rulings chart. 5 Here Mr. Kempin discusses per system 6 licensing of MS-DOS and how it allegedly 7 reduced piracies and supports OEMs to 8 preinstall Microsoft's operating system. 9 Plaintiffs allege that Microsoft's per 10 system licensing of MS-DOS was anticompetitive, 11 as the Court knows, and that it harmed DR-DOS 12 and OS/2. So per system licensing and DR-DOS, 13 as we've discussed before, aren't addressed 14 anywhere in the findings of fact. 15 Where the findings of fact do address 16 piracy, it's in reference to whether it creates 17 price pressure on Microsoft, thereby reducing 18 Microsoft's monopoly power. And Finding 58 19 concluded that it did not. 20 So this designation has nothing to do 21 with Finding 58 and does not bolster Finding 58 22 in any way. And that's just addressing it on a 23 micro level, but, obviously, all the arguments 24 I've made in connection with the global issues 25 apply with equal force. I won't repeat them at 10769 1 this time. 2 Thank you. 3 THE COURT: Ms. Bradley. 4 MS. BRADLEY: Mr. Kempin's testimony 5 at page 499 of this JCCP deposition is about 6 Microsoft's piracy rationale for the licensing 7 practices it undertook with respect to Windows 8 95. That's exactly the activities that are 9 addressed in Finding of Fact 55 in which Judge 10 Jackson writes that -- I'm sorry, it's 58, in 11 which Judge Jackson writes that although there 12 is no legal secondary market for Microsoft PC 13 operating systems, there's a thriving illegal 14 one. Software pirates illegally copy software 15 products such as Windows, selling each copy for 16 a fraction of the vendor's usual price. 17 One of the ways Microsoft combats 18 piracy is by advising OEMs that they will be 19 charged a higher price for Windows unless they 20 drastically limit the number of PCs that they 21 sell without an operating system preinstalled. 22 That's exactly the activity about which 23 Mr. Kempin has advised here in which he states 24 Microsoft put pressure on OEMs to adopt per 25 system -- or per processor licenses because of 10770 1 Microsoft's concern about piracy. 2 Microsoft requests that, as with the 3 other collaterally estopped material, that this 4 designation be excluded. 5 MR. CASHMAN: Your Honor, again, 6 Ms. Bradley -- Microsoft unwittingly makes 7 statements that shows why their objections have 8 no merit. Here in this instance she said when 9 she's talking about this designation for 10 Mr. Kempin, she said it relates to Judge 11 Jackson finding. "Relates" being the key 12 concession here, the key omission because 13 that's not the point. 14 If it relates to Judge Jackson's 15 finding, it doesn't result in -- it doesn't 16 provide merit to their cumulative objections. 17 If it relates to Judge Jackson's findings is 18 not the question. It's whether it helps prove 19 any other issue, and it does. 20 As we've gone through all the various 21 issues that this testimony and all the 22 testimony shows that it goes to other issues. 23 It strains credibility for Microsoft to contend 24 with a straight face that evidence testimony 25 taken in 2002 in the California action could 10771 1 somehow have been considered by Judge Jackson 2 is an impossibility. So not only is it 3 factually inapposite, but there's just no way 4 that evidence could constitute underlying 5 evidence for anything Judge Jackson did. 6 So again, like the Caldera case 7 testimony and like the testimony in the DOJ 8 case and in the CID, which plaintiffs have 9 established was not considered by Judge 10 Jackson, Microsoft's objections have to be 11 overruled for that reason alone. 12 I have nothing further to say on group 13 14, Your Honor. 14 THE COURT: Any other arguments on any 15 of these designations regarding collateral 16 estoppel? 17 MS. BRADLEY: Nothing further from 18 Microsoft. 19 MR. CASHMAN: Plaintiffs respectfully 20 submit that Microsoft's objection have no basis 21 in law or in fact, Your Honor, and that they 22 should be overruled in global. 23 Thank you. 24 THE COURT: Thank you. They're 25 submitted. 10772 1 MR. TUGGY: Your Honor, I think today 2 for the evidence team the only other motion we 3 had on the calendar was at the end of the day 4 the Phase VII Appeals. And late last night or 5 perhaps very early this morning we received an 6 e-mail from Mr. Garwleski. He has some traffic 7 problems and based on that we've agreed with 8 him that we can take these up early next week 9 as time permits. I don't know if we would 10 reach them today in any event, but we've agreed 11 with Mr. Garwleski that his unavailability 12 based on his travel problems means that we need 13 not hear that today. 14 THE COURT: Next on my list is the 15 Charles Laurence matter. 16 MR. CASHMAN: That's -- Mr. Williams 17 will handle that for plaintiffs. 18 THE COURT: Mr. Williams. 19 MR. WILLIAMS: Good morning, Your 20 Honor. I'll give defense counsel a chance to 21 get situated here. 22 THE COURT: Okay. Ms. Bradley is 23 taking a back seat now. 24 MS. BRADLEY: I'm glad too. 25 THE COURT: Okay. 10773 1 MR. WILLIAMS: Thank you, Your Honor. 2 This argument can be long or short, depending 3 on which way we go here. I'll give you some 4 brief background. 5 Last September plaintiffs moved in 6 limine to preclude testimony from several of 7 Microsoft's retained experts, one of which was 8 Mr. Charles Laurence. And all those motions 9 were based on foundational grounds. 10 Mr. Laurence is an accountant. 11 THE COURT: Excuse me one minute. 12 Thank you. Sorry. Go ahead. 13 MR. WILLIAMS: Do you want the 14 material in front of you before I continue? 15 THE COURT: She's getting them. 16 Sorry about that, Mr. Williams. 17 MR. WILLIAMS: Not at all. 18 THE COURT: Go ahead. 19 MR. WILLIAMS: Mr. Laurence is an 20 accountant. He was retained by Microsoft to 21 rebut portions of Dr. Netz's damage analysis, 22 and in plaintiffs' view, at least, he has 23 admitted that he is not qualified to do so. 24 Microsoft resisted that motion. We 25 had oral argument on the matter on October 10774 1 17th, and the Court issued a ruling on November 2 9th with respect to all of the expert issues 3 that plaintiffs had raised in their motions in 4 limine. 5 And in that ruling, Your Honor made 6 specific rulings with respect to specific 7 experts that we had challenged, but there was 8 no specific ruling with respect to 9 Mr. Laurence. So on December 4th of last year 10 we moved Your Honor for clarification of your 11 ruling essentially asking whether our motion in 12 limine with respect to Mr. Laurence had been 13 granted, had been denied or whether Your Honor 14 decided to reserve ruling until some later 15 date. 16 Now Microsoft does not appear to 17 challenge the motion that is before Your Honor, 18 that is, the motion simply for clarification of 19 Your Honor's ruling. I think both parties 20 would submit to Your Honor that this is a 21 perfectly and a proper thing for either of the 22 parties to do if they have a question about one 23 of Your Honor's rulings. But what we find 24 objectionable about Microsoft's response is 25 that they then seize upon our motion as an 10775 1 opportunity to reargue the substance of our 2 challenge to Mr. Laurence. 3 So in our reply, we ask Your Honor to 4 strike that portion of Microsoft's brief and to 5 simply rule on our motion for clarification 6 with respect to Mr. Laurence. 7 So if Your Honor is inclined to allow 8 Mr. Laurence to testify and if that ruling by 9 Your Honor is based in whole or in part upon 10 the additional material that Microsoft has 11 submitted in response to our motion for 12 clarification, then I would ask for leave to 13 respond substantively to the issue of whether 14 Mr. Laurence should be allowed to testify. But 15 I don't know if you want to waste the Court's 16 time doing that. 17 All we're really asking for and all 18 our motion is about is asking for you to 19 clarify ruling. Did you mean to allow his 20 testimony, exclude his testimony or wait and 21 see what develops until we get to some point in 22 time closer to the point that Mr. Laurence 23 would be testifying on behalf of Microsoft and 24 then ask for further briefing or further 25 argument or something of that sort or simply 10776 1 make a ruling at that point. We're just asking 2 for clarification, Your Honor. 3 THE COURT: Very well. Response. 4 MR. SMUTNY: Yes, Your Honor. David 5 Smutny from Heller Ehrman on behalf of 6 Microsoft I don't believe I've had the pleasure 7 of arguing before you. I want to thank you for 8 the opportunity. I'm one of the attorneys on 9 behalf of Microsoft who works with some of the 10 experts and, in particular, Charles Laurence, 11 our accounting expert. As Mr. William 12 suggested, I think there are three issues 13 before you. 14 The first is the motion for 15 clarification which Microsoft does not oppose. 16 Microsoft believes, as it did back in October, 17 that plaintiffs' motion regarding Mr. Laurence 18 is without merit, and we see no reason not to 19 have Your Honor rule on that. 20 With respect to the argument they made 21 in their reply to strike Microsoft's response, 22 I'm not sure how much needs to be said on this. 23 What Microsoft did in a very brief 24 three-and-a-half page response was simply to 25 provide the Court with a short paragraph or 10777 1 paragraph and a half summarizing for the Court 2 given that the argument had happened some 3 three-and-a-half months prior and given the 4 fact that the substantive oral argument 5 regarding Mr. Laurence was sandwiched in with 6 all of the other experts that Your Honor was 7 considering. And Microsoft thought it was 8 appropriate to briefly reiterate and remind the 9 Court of our principal positions. 10 The plaintiffs cite to no law in their 11 reply in support of their argument that our 12 response should be stricken. And I note that 13 their reply to our response was nearly twice as 14 long. 15 Your Honor, given that 16 three-and-a-half months have passed and given 17 that there was not a great deal of substantive 18 arguments on Mr. Laurence's motion and to some 19 degree given the arguments that plaintiffs have 20 made relating to Microsoft's motion to exclude 21 Mr. Alepin and those kinds of developments, I 22 think it's our position that it would be useful 23 to reargue or at least remind the Court of the 24 underlying merits of the argument, if Your 25 Honor is willing to hear a brief reargument. 10778 1 MR. WILLIAMS: Your Honor, for the 2 record, plaintiffs object to rearguing the 3 Laurence matter. It was already argued once. 4 It was fully briefed. There was full argument 5 on it. We do not need to open the door to yet 6 another whack at the mole by Microsoft on this 7 issue by simply asking for a clarification that 8 I think both parties wanted. 9 THE COURT: Okay. You may continue, 10 sir. Go ahead. 11 MR. SMUTNY: Thank you, Your Honor. 12 Your Honor, turning to the merits of 13 the underlying motion, as the plaintiffs have 14 told you repeatedly relating to the motion 15 regarding their own experts, they're seeking an 16 extreme remedy. They're seeking to exclude all 17 of the expert testimony of Charles Laurence on 18 the basis of two relatively narrow arguments. 19 And in doing so they're seeking to shield their 20 own expert, Dr. Netz, from the criticisms 21 relating to the errors in accounting and the 22 misuse of financial accounting reports that 23 Dr. Netz has used. 24 It's Microsoft's position that their 25 motion should be denied. Mr. Laurence is fully 10779 1 qualified. His opinions are squarely within 2 the expertise that he has, and these are 3 matters about which the jury could benefit from 4 expert testimony. 5 THE COURT: He's going to testify as 6 to the accounting methodology? 7 MR. SMUTNY: He's going to testify as 8 to errors in accounting that Dr. Netz has made. 9 Dr. Netz is not an accountant. In 10 connection with her profit margin and rate of 11 return damages analyses, which are two of three 12 of her damage analyses, she relies on a 13 comparison between Microsoft's profit specific 14 profit margins and rates of return to the 15 profit margins and rates of return to her 16 benchmark industry average in dozens of 17 companies. And in doing that -- again, Dr. 18 Netz is not an accountant -- she relies on the 19 expertise of her own team of accountants from 20 Hemming Morse, and I note for the record that 21 on the day that Microsoft filed its original 22 opposition to the motion in limine, the 23 plaintiffs also filed a rebuttal report from 24 Paul Regan, an accountant, not a rebuttal 25 report from Dr. Netz, but a rebuttal report 10780 1 from an accountant of their own responding to 2 the accounting based criticisms that 3 Mr. Laurence had leveled against Dr. Netz. 4 So what he does is he does what 5 accountants and auditors do. They look to see 6 whether in calculating the profit margins, 7 Dr. Netz and her team of accountants did it 8 right. And on the other side they looked to 9 see whether they made any errors on the other 10 side of the comparison. 11 One thing I would like to address at 12 the outside, Your Honor, I think it would be 13 helpful for you to know what is not in dispute 14 in this motion. 15 The first thing that is not in dispute 16 are Mr. Laurence's qualifications and expertise 17 as an accountant. He's a chartered accountant. 18 He was principal of Pricewaterhouse Coopers. 19 He has more than 15 years of accounting 20 expertise in the United States. He's currently 21 the managing director of an accounting firm. 22 He has worked for many years with Microsoft's 23 internal financial accounting data, the very 24 data that Dr. Netz and her team used to 25 calculate Microsoft's internal profit margins 10781 1 and internal rates of return. He's been an 2 expert in previous cases on substantially the 3 same accounting issues, and the plaintiffs have 4 never challenged his expertise in these areas 5 and reasonably cannot. 6 The second thing, Your Honor, that is 7 not in dispute here is that these accounting 8 issues and expertise are very relevant to this 9 case. As I said two of her three damages -- 10 two of Dr. Netz's, the plaintiffs' expert, 11 three damages analyses rely on product specific 12 profit margins. 13 So Windows specific profit margins and 14 Word specific and Office specific and Excel 15 specific profit margins are part of the damages 16 analyses. And the internal financial data of 17 Microsoft don't come sort of tailor made in a 18 package for this. There's a lot of 19 allocations. There are adjustments. All of 20 the very complicated things that accountants do 21 that are deep, deep within Mr. Laurence's 22 expertise. 23 And to the same degree, on the other 24 side of Dr. Netz's benchmark comparison when 25 she looks at the 10 Ks and the other public 10782 1 financial accounting data from her benchmark 2 companies, she makes additional adjustments to 3 that data in order to do her comparisons. 4 Again, Dr. Netz is not an accountant. 5 And what she has done over the course of these 6 many case from California to Minnesota to Iowa 7 is Dr. Netz has looked at what Mr. Laurence has 8 done, and she's made changes. She said, well, 9 Mr. Laurence was right about this and right 10 about this, and she's incorporated some of his 11 analyses. 12 Now, Mr. Laurence says she still 13 hasn't done it right. And she still made 14 accounting errors. And there are still things 15 that call her underlying accounting issues -- 16 that call her damages analyses into question. 17 Now, what is in dispute -- again, the 18 plaintiffs cannot and I don't believe do 19 dispute that these accounting issues that their 20 own expert Mr. Regan and Dr. Netz have as part 21 of their analyses are directly relevant. 22 What is in dispute in this motion is 23 whether Mr. Laurence can say anything about 24 them. Whether he can say she made these 25 accounting errors. Whether he can say on the 10783 1 basis of his analyses of the financial data, 2 there are things that call her damage analyses 3 into question. That's what is at issue here, 4 is an extreme remedy. 5 Now, the plaintiffs have raised two 6 arguments, Your Honor, two arguments to 7 preclude his entire testimony. 8 The first argument is that because in 9 both of his Minnesota deposition and in his 10 Iowa deposition, Mr. Laurence admitted, as he 11 must, that he is not an economist and that he's 12 not qualified to create economic damages models 13 in antitrust cases. 14 They claim that he should not be 15 allowed to testify as to anything at all even 16 to these very relevant accounting issues in 17 which his expertise, I think, is unquestioned. 18 Now, this is wrong, Your Honor, and 19 it's wrong first and foremost because that's 20 not what he does. I tried to explain a little 21 bit for Your Honor what he does. We have 22 attached his expert report to our papers. He 23 is not testifying about how antitrust damages 24 models should be created. He's not doing his 25 own damage analyses for this case. He's not 10784 1 defining antitrust damages "but for" worlds. 2 He's not calculating damages. 3 I should note, Your Honor, that he has 4 served as a damages expert in nonantitrust 5 cases before and that would be part of our 6 qualifications of him. 7 But what he said in his deposition is, 8 no, I'm not an economist and, no, I'm not the 9 guy you would pick if you wanted someone to 10 build an economic damages model. Of course, 11 Your Honor, that is not what he does. 12 What he does is he criticizes aspects 13 of their own damage analyses and the underlying 14 building blocks of Dr. Netz's damages analyses. 15 And he does this grounded in his accounting 16 expertise. 17 Again, he did what accountants 18 typically do. He dug into the financials to 19 determine whether she did certain things right, 20 and he concluded that they didn't. Is this an 21 economic antitrust damages analysis? You know, 22 of course not. It relates to her damage 23 analyses to be sure, but you don't need to be 24 an industrial organization economist in order 25 to make the criticisms, the valid criticisms 10785 1 that the jury is entitled to hear and that 2 Mr. Laurence has made. 3 An analogy, Your Honor, might be if 4 Dr. Netz had used a computer program as part of 5 her damages analyses and we had a computer 6 programming expert who came in and said, "She 7 wrote her code wrong. She wrote her code, and 8 as a result of writing the code wrong, it made 9 the numbers go up." You don't need to be an 10 economist to say that she wrote the code wrong, 11 to criticize the building blocks of her damages 12 analyses. 13 Now, I think it's also instructive, 14 Your Honor, to look at what the plaintiffs did 15 regarding Microsoft's motion in early January 16 regarding limiting the testimony of Mr. Alepin 17 because to some degree that situation is 18 similar. There Microsoft believed, as 19 Mr. Alepin had admitted in his deposition, that 20 he was not an economist. He had no expertise 21 in defining "but for" worlds. He admitted that 22 this was outside of his expertise. And, Your 23 Honor, if I may approach, Your Honor, with the 24 plaintiffs' opposition. 25 And I've tabbed page 16, Your Honor, 10786 1 which lays out both the language that 2 Mr. Alepin used and also their argument 3 essentially as to why, even though he admitted 4 he wasn't an antitrust economist and couldn't 5 define "but for" worlds, he should be allowed 6 to do so anyway. They said, "No, Your Honor, 7 he's not doing that. What he's doing is he's 8 giving the technological perspective on this." 9 And Your Honor, after hearing argument, allowed 10 Mr. Alepin to give a technological perspective 11 for the "but for" world. 12 Mr. Laurence is a full step back from 13 that. He's not doing what Mr. Alepin was 14 trying to do, which was to testify about what 15 he said he couldn't testify about. He does not 16 go that far. He's not trying to create his own 17 accounting damages models. He's not saying 18 what damages should be. 19 Again, he's only pointing out the 20 reasons based in accounting and based in his 21 analysis of the financial accounting data as to 22 why there are flaws from an accounting 23 perspective in her model, taking her model as 24 it is. 25 And again, Your Honor, this is well 10787 1 within Mr. Laurence's unquestioned expertise in 2 accounting. 3 THE COURT: Did he even really use his 4 expertise? 5 MR. SMUTNY: I'm sorry, Your Honor? 6 THE COURT: Didn't he say at one point 7 that his calculations were not supported by any 8 scientific analysis, just his own common sense? 9 MR. SMUTNY: Well, that, Your Honor, 10 is their second argument. And I would like to 11 address that because that argument is based on 12 an extremely misleading statement both of the 13 record in this case and of Mr. Laurence and the 14 Court. I think it's important for Your Honor 15 to understand that. 16 Now, Mr. Laurence's report is attached 17 to Exhibit M to Microsoft's original resistance 18 to the motion in limine. The plaintiffs entire 19 argument is based on a quotation from 20 Mr. Laurence's Minnesota deposition, not the 21 Iowa deposition, his Minnesota deposition. And 22 in his Minnesota expert report, again, not his 23 Iowa report, his Minnesota expert report, 24 Mr. Laurence had a point, a relatively minor 25 point, Your Honor, where he opined that it was 10788 1 improbable that Microsoft would be a below 2 average performer absent the alleged 3 anticompetitive conduct. 4 THE COURT: How would he know that as 5 an accountant? 6 MR. SMUTNY: Your Honor, let me 7 explain, if I could. 8 In Minnesota he had not done any 9 specific analysis to support it. It was based 10 on his years of working with Microsoft, the 11 company and dealing with their financial data 12 and seeing their financial performance on a 13 variety of levels. And as he put it and as 14 they quoted from the Minnesota deposition, he 15 said it was based on his common sense. 16 But, Your Honor, as the plaintiffs 17 know, what he did in Minnesota and what he said 18 in his Minnesota deposition are irrelevant here 19 because his Iowa report is different. In his 20 Iowa report he specifically updated and changed 21 and did new analyses to determine to support 22 that argument, and he did two things. 23 The first thing he did was -- and, 24 again, the argument he's responding to is 25 Dr. Netz saying that absent this 10789 1 anticompetitive conduct. There is no way 2 Microsoft could be an above average performer. 3 They would be at this industry average, and, in 4 fact, as a company they would be below it. 5 And Mr. Laurence said, well, again, 6 taking her damages analyses as a given, he said 7 there is internal Microsoft financial 8 information which is completely inconsistent 9 with that. 10 First, there is their historical 11 performance data where as a company Microsoft 12 even during the period that the plaintiffs 13 allege there was no anticompetitive conduct, 14 Microsoft was a far above average performer. 15 And the second thing he did was, 16 again, looking at these product specific profit 17 margins and product specific financial 18 performance, he said, well, look at these other 19 products, Products like Project and Publisher 20 and all of these other products where there are 21 no allegations of anticompetitive conduct and 22 yet Microsoft is far above this industry 23 average that Dr. Netz says is required. 24 Now, that is not his own economic 25 damages analysis. That is pointing to concrete 10790 1 things that are within his expertise, 2 financial -- analysis of internal financial 3 performance information. That is inconsistent 4 with that. 5 And, Your Honor, we do have an 6 economist, Professor Hubbard, who will be 7 coming in and saying why her methods on large 8 are wrong and shouldn't be trusted. 9 But Mr. Laurence's arguments are much 10 narrower and only go to the areas where I think 11 his accounting expertise is unchallenged. 12 Now the other thing, Your Honor, I 13 think, is that this common-sense point that the 14 plaintiffs point out, even if they were right, 15 which, as I've just shown, they aren't right. 16 They're not right as it relates to Iowa in the 17 Iowa case and his Iowa new analyses. 18 But even if they were, this would not 19 be a basis to exclude his entire report, which 20 is what they're asking you to do. 21 This point, I believe, relates only 22 to -- I think it's only mentioned on three 23 pages of his 28-page report. I think it's 24 pages 14 and 26 and 27 or 26 and 28. 25 Finally, Your Honor, regarding the 10791 1 common sense point, the plaintiffs rely on just 2 a single case, Schlader v. Interstate Power 3 Company. And for the life of me, Your Honor, I 4 can't quite figure out what this case has to do 5 with either common sense or Mr. Laurence's 6 accounting work in this case. 7 That case involved a dairy farmer who 8 was seeking recovery for something called stray 9 voltage liability from a power company. And 10 the trial court in the Schlader case excluded 11 plaintiff's expert witness because he claimed 12 that he could somehow magically sense stray 13 voltage using something he called his magic 14 wand or his wish stick. 15 And not surprisingly, Your Honor, the 16 court concluded that his opinions were bizarre, 17 quote, bizarre, and were wholly inconsistent 18 with the only learned treatise from the 19 Department of Agriculture relating to stray 20 voltage. 21 This case -- again, I can't see what 22 this case has to do with either of their 23 arguments regarding Laurence's common sense or 24 his new analyses as they relate to -- as they 25 relate to the Iowa litigation. 10792 1 So in sum, Your Honor, Microsoft 2 believes, as it did back in October, that there 3 is no basis to exclude even a portion of 4 Mr. Laurence's testimony much less his entire 5 report and his entire opinions. Neither of the 6 plaintiffs' two arguments have any merit. 7 Iowa, as the plaintiffs have reminded 8 you in the past weeks, has a liberal rule on 9 the admissibility of expert opinion. His 10 opinions are grounded in his unchallenged 11 accounting and audit expertise. And plaintiffs 12 are simply trying to shield Dr. Netz from his 13 valid criticisms. Their motion should be 14 denied. 15 Thank you, Your Honor. 16 THE COURT: The problem I have with 17 the Minnesota deposition is if he's saying that 18 his calculations were not supported by his 19 scientific analysis but his own common sense, 20 even though as you say he's done nothing to say 21 that in any report in this case, it must mean 22 that he didn't have any scientific training or 23 basis at that point. And between that time and 24 now he's gained such an advantage or gained 25 such expertise rather than common sense. 10793 1 That's where the issue comes in. Has he done 2 something to increase his education or his 3 abilities? 4 MR. SMUTNY: No, Your Honor. 5 With all respect, I think that is a 6 misreading of both his Minnesota testimony and 7 what the issue was in Minnesota. 8 The Minnesota testimony related to 9 common sense relating only to that one -- that 10 one argument that he was making, that it was 11 improbable that Microsoft would be an above 12 average performer absent this anticompetitive 13 conduct. It wasn't that he didn't have the 14 expertise -- 15 THE COURT: How can an accountant give 16 that opinion? 17 MR. SMUTNY: Well, he based that 18 opinion at the time, as he said, common sense 19 and his long time working with Microsoft's 20 internal financial performance. And what he 21 did, he didn't gain new expertise, but he did 22 do analyses to support. It wasn't that he 23 lacked the expertise to say that. It was that 24 he hadn't done any work to support it. 25 But in Iowa he did do that work and 10794 1 that work is based on his -- on his financial 2 accounting expertise and his expertise in 3 analyzing Microsoft's financial performance for 4 other products, analyzing Microsoft financial 5 performance during other time periods. That is 6 kind of the bread and butter of what 7 accountants and auditors do, Your Honor. And 8 just because he didn't do the work, he didn't 9 do an analysis to support it in Minnesota, 10 didn't mean that he couldn't have. It's just 11 he didn't, and this time he did. It wasn't 12 that he learned anything new. He just did 13 additional work that was always within his 14 expertise, Your Honor. 15 THE COURT: So besides being an expert 16 in accounting, he's also able to give opinions 17 about how particular Microsoft products can 18 perform in the marketplace? 19 MR. SMUTNY: He's certainly capable of 20 offering opinions on how Microsoft's products 21 are performing in the marketplace in terms of 22 their profitability and in terms of their rate 23 of return. That's what accountants and 24 auditors do. They analyze the financial data. 25 They assign -- they determine what expenses 10795 1 should be allocated and what revenue should be 2 allocated, which is exactly what Dr. Netz's 3 team of accountants tried to do for her 4 analyses. And they determined what was the 5 profit margin or what was the rate of return 6 for this profit. He's certainly capable of 7 doing that. That has nothing to do with the 8 "but for" world. It has to do with the real 9 world. 10 He's just saying that there are other 11 examples in the actual world that are 12 inconsistent with her claim. Her claim that if 13 it weren't for its anticompetitive conduct or 14 cheating or some sort of thing, Microsoft could 15 never do better. He says, well, they're doing 16 better in these other areas. They are and have 17 done better. 18 THE COURT: All he can do is look at 19 the hard facts of Microsoft's performance, look 20 at the profit and loss sheets that say here's 21 how they've done in the past, here's how 22 they're doing now, is that correct? 23 MR. SMUTNY: That's correct. 24 THE COURT: Other than that, he cannot 25 go beyond that. 10796 1 MR. SMUTNY: He's not the expert that 2 you would call to say here's how they will do 3 or how they would have done absent 4 anticompetitive conduct and that's not what 5 he's saying. He's saying -- 6 THE COURT: No one is going to ask him 7 that, are they? 8 MR. SMUTNY: I'm sorry? 9 THE COURT: You're not going to ask 10 him that, are you? 11 MR. SMUTNY: No, we're not going to 12 ask him that, Your Honor. We're not going to 13 ask him. What he's responding to, Your Honor, 14 is Dr. Netz's argument that the only way 15 Microsoft could do better than an industry 16 average is by anticompetitive conduct. 17 And he says that is not -- that 18 argument based on whatever model it is, and 19 he's not trying to figure out her model, he's 20 just saying there are financial accounting data 21 that exist today which are inconsistent with 22 that argument and from which the jury could 23 conclude that her damages analyses are not very 24 good. 25 THE COURT: Anything else? 10797 1 MR. SMUTNY: No, Your Honor. 2 THE COURT: Response. 3 MR. WILLIAMS: Thank you, Your Honor. 4 Can I approach? 5 THE COURT: You may. 6 MR. WILLIAMS: Your Honor, I'm handing 7 up an excerpt from Mr. Laurence's expert 8 report. These are some pages from a summary of 9 his opinions. 10 THE COURT: Is this in this case? 11 MR. WILLIAMS: Yes, in this case, Your 12 Honor. This is his Comes report. 13 I want to go first to the issue of 14 what it is that Mr. Laurence, at least, has 15 been represented by Microsoft as testifying 16 about at trial. And if you go to the summary 17 of opinions, it's on page 3 of the other lower 18 part, you see there under No. 1 in the last 19 sentence he says these Internet Explorer and 20 MSDN revenues and costs appear to have been 21 allocated on an inappropriate basis to the 22 challenged Microsoft products which results in 23 overstated contribution margins for those 24 products, overstated damages under her 25 benchmark margin analysis and unreliable 10798 1 results. 2 Now that comment about overstated 3 damages permeates his report. He mentions 4 overstated damages, and you have his report and 5 materials that have been provided, he mentions 6 overstated damages on pages 5, 9, 10. Page 11 7 he says it three times. Page 15, page 22, page 8 26, page 27. 9 So contrary to Mr. Smutny's 10 representations to the Court, this expert 11 witness does not limit himself to simply 12 opining as to whether Dr. Netz and her team use 13 proper accounting methodology in determining 14 rates of return and profit margins. 15 Now, why does that matter? It matters 16 because in this case, in his deposition in this 17 case, he made it quite clear that he does not 18 believe he's qualified to render a damages 19 analysis. 20 If I could approach again, Your Honor. 21 This is an excerpt from his September 13, 2006 22 deposition in the Comes matter and here he was 23 asked: But you were not asked -- at the bottom 24 of page 127 -- but you were not asked to 25 calculate damages in the Iowa case, correct? 10799 1 There was an objection. 2 Answer: That's correct. 3 Question: As I understand it from the 4 prior testimony in Minnesota and what you just 5 talked about in terms of your qualifications, 6 you don't believe that you are qualified to do 7 so, is that correct? 8 Another objection. 9 Answer: I do not hold myself out as 10 an economics expert, and I do not put forward 11 an expert opinion in this case or the prior 12 cases with respect to the economics damage 13 analysis. 14 Question: So you don't believe that 15 you were qualified to do that, correct? 16 There was an objection. 17 Answer: Not with respect to the 18 specifics of the damage analysis as I 19 understand it. 20 Question: Are you qualified to 21 calculate damages in this case at all in any 22 way? 23 Other objection. 24 Answer: In this case not that I'm 25 aware of, no. 10800 1 So the problem that we have here, Your 2 Honor, is that Mr. Laurence does precisely 3 that, which he admits he's not qualified to do. 4 He doesn't, as Mr. Smutny stated, limit himself 5 to simply giving a critique of Dr. Netz's 6 accounting and that of her team. He goes on to 7 talk about the impact it has on damages. As I 8 pointed out, this permeates his report, and it 9 permeates his opinions. 10 Now, with respect to the second point, 11 that has to do with the counterfactual world 12 and his opinions about that. 13 Your Honor is familiar with his 14 testimony from the Gordon case where he 15 admitted that he did not have the requisite 16 expertise to give such opinions. One moment, 17 Your Honor. 18 If you could pick up, again, the 19 expert report and disclosure of Charles 20 Laurence from Comes, the excerpts, and the last 21 page, point 4, is his summary of his response 22 to her counterfactual benchmark analysis. This 23 is her "but for" world analysis, and there 24 under point b, the last sentence, summing it 25 all up he says, In making this illogical 10801 1 assumption, she, Dr. Netz, fails to consider 2 the probability that Microsoft would have 3 earned above average profits on the challenged 4 products in her, quote, counterfactual world, 5 close quote, as indicated by Microsoft's 6 historical reported financial performance and 7 financial performance for other products not at 8 issue in this litigation. So he's taking that 9 additional step, and he's opining as to whether 10 she got it right in her analysis of what would 11 have taken place but for the challenged 12 conduct. 13 And as Microsoft has made very clear 14 in these submissions to Your Honor with respect 15 to Mr. Alepin, they have contended, and I 16 believe the contention holds true here, that 17 you can't just have anyone come in and testify 18 about what would have happened as a matter of 19 economics unless they are trained economists 20 qualified to render that kind of testimony. 21 If I could approach one more time, 22 Your Honor. And here since we are swapping 23 memorandums today, this is an excerpt from 24 Microsoft's memorandum in support of its motion 25 to preclude testimony from Mr. Alepin. I 10802 1 didn't give you the whole thing, but this was 2 the portion of their brief where they cited law 3 and argument to the effect that Mr. Alepin is 4 not qualified to testify about what would have 5 happened in the "but for" world as an economic 6 matter. 7 Our response to that was he's not. 8 Your Honor still, though, issued a 9 cautionary -- if I may, a cautionary 10 instruction that he would not be permitted to 11 do so regardless of whether or not plaintiffs 12 intended to do so. 13 So Microsoft's position was sustained 14 with respect to that motion. And Your Honor 15 told us that Mr. Alepin could only testify 16 about technical matters, but could not get into 17 what would have happened as a matter of 18 economic reality in the "but for" world. 19 As I recall from the record, there 20 were a couple of times when Your Honor agreed 21 with Microsoft that he strayed too far on that 22 line and did give opinions in that regard and 23 Microsoft's objections were sustained. 24 But here, Your Honor, Mr. Laurence 25 makes it absolutely clear that that's exactly 10803 1 what he intends to do. He intends to say that 2 Dr. Netz overstated her damages and that she 3 did not adequately account for what he terms 4 the probability that Microsoft would have 5 earned above average returns in the "but for" 6 world. This is classic damages analysis 7 testimony, and they can characterize it however 8 they want for purposes of the argument today, 9 but they cannot escape that reality because 10 that's what it is. 11 Now, with respect to what Mr. Laurence 12 testified to in Gordon. And again, I apologize 13 for beating a path to Your Honor, but may I 14 approach one more time to give you the 15 pertinent testimony? 16 THE COURT: Yes. Thank you. 17 MR. WILLIAMS: Thank you. I won't 18 read it into the record, Your Honor. I believe 19 you're familiar with it, but this is the 20 portion of the Gordon testimony where 21 Mr. Laurence was asked about the sentence that 22 I just read to you from his Comes report 23 because he had the same sentence in his report 24 in the Gordon case in Minnesota. And this is 25 where he conceded that he did not have any 10804 1 scientific analysis supporting that statement. 2 That it was just based on his own experience 3 with Microsoft, and that it was essentially a 4 lay opinion. 5 Now, Mr. Smutny's comeback on that is 6 that he has done all sorts of work since then 7 that now gives him the foundation to make that 8 statement and to make it stick. 9 However, in the Comes deposition of 10 Mr. Laurence, there was a discussion about the 11 Gordon deposition. And, Your Honor, I 12 apologize because I did not anticipate this 13 argument from Mr. Smutny, but I would like to 14 read to you a passage from the Comes opinion 15 where the impact and effect of the Gordon 16 deposition was discussed between Mr. Smutny and 17 Mr. Lamb. And these are part of your 18 materials, if you get to them. For purposes of 19 following along, it's part of Exhibit A to the 20 materials that we submitted in connection with 21 our reply on our motion. 22 THE COURT: What page? 23 MR. WILLIAMS: It's the excerpts from 24 the Comes deposition. And I'll be picking it 25 up on page 6. 10805 1 THE COURT: Okay. 2 MR. WILLIAMS: On line 7. Mr. Lamb 3 was taking the deposition, and he asked 4 Mr. Laurence: On July of 2003, you gave a 5 deposition on behalf of Microsoft as an expert 6 in the Minnesota case for the joint Minnesota 7 case and Arizona case, I believe. 8 Question: Have you been retained by 9 Microsoft in any other capacity other than in 10 this case, the Iowa consolidated cases. 11 Answer: In this time frame? 12 Question: Ever. 13 Answer: Ever, yes. 14 Question: What were those retentions? 15 Mr. Smutny asks: Do you mean since 16 the July deposition of 2003? 17 Mr. Lamb: No, never. 18 Mr. Smutny: Well, this deposition -- 19 her stipulation between the parties is limited 20 to materials that are new to the Iowa report 21 and that I think by definition in term of its 22 background is since July of 2003. 23 Mr. Lamb: I don't think that was 24 asked in the prior deposition, Mr. Smutny. 25 Mr. Smutny: It doesn't matter whether 10806 1 it was asked or not. If it could have been 2 asked, he was asked about his background in the 3 prior deposition so I will allow you to ask 4 what he has been doing since July of 2003, but 5 I will instruct him not to answer prior to that 6 per the stipulation between the parties. 7 Mr. Lamb: I don't agree that's what 8 the stipulation is. 9 Question: Are you going to follow 10 your counsel's instructions? 11 Answer: Yes. 12 Then further down, page 19. Two more 13 pages past the excerpts. Picking it up at line 14 11. 15 Question: As your counsel has already 16 referred to the stipulation between the parties 17 and in relation to your prior deposition 18 testimony in California and Minnesota so that 19 we don't have difficulty with that, you have 20 obviously had time to review that deposition 21 testimony, correct? 22 Answer: I have. 23 Question: And do you agree that it is 24 accurately stated in relation to the work that 25 you've done and the opinions that you have 10807 1 rendered in those opinions, correct? 2 Answer: To the best of my 3 recollection, it does. 4 Then if you pick it up at page 128, 5 the next page, line 5: 6 As I understand it from the prior 7 testimony in Minnesota and what you have just 8 talked about in term of your qualifications, 9 you don't believe that you're qualified to do 10 so, is that correct? 11 Now they are talking about his 12 qualifications to do damages analysis. 13 Answer: I do not hold myself out as 14 an economics expert, and I do not put forward 15 an expert opinion in this case or the prior 16 cases with respect to the economics damage 17 analysis. 18 Question: So you don't believe that 19 you're qualified to do that, correct? 20 There was an objection. 21 Answer: Not with respect to the 22 specifics of this damage analysis as I 23 understand it. 24 And this is the portion that I had 25 provided to Your Honor before. So the point 10808 1 being that as much as Mr. Smutny wants to run 2 away from what Mr. Laurence testified to in the 3 Minnesota case, he can't because the Minnesota 4 case had been adopted by this witness for 5 purposes of this case. And according to 6 Mr. Smutny, and he took the position in the 7 deposition, we were not allowed to ask 8 questions about anything that had been asked or 9 could have been asked including this sentence, 10 the sentence regarding the so-called 11 probability of what Microsoft's rates of return 12 would have been in the "but for" world. 13 So, Your Honor, we submit to you that 14 having taken that position, they cannot now run 15 away from it and claim, oh, he's done all this 16 extra work that suddenly qualifies him now to 17 render that kind of testimony. 18 There's only two bases then for 19 excluding this testimony. One being he simply 20 isn't qualified to do it because of all of the 21 law and all the argument that Microsoft itself 22 quoted to Your Honor less than a month ago with 23 respect to Mr. Alepin. It takes an economist 24 to render opinions about economic matters in a 25 "but for" world setting, which is precisely 10809 1 what this witness intends to do. 2 Moreover, this witness has already 3 testified that he's not qualified to do it, and 4 they're bound by that testimony because they've 5 taken the position that the Gordon report 6 applies just as fully as it did in Gordon as it 7 does in this case. 8 And we were prohibited from asking 9 questions beyond that unless there was 10 something new, Your Honor. The fact is there 11 is nothing new. There is no expertise, and 12 this witness should not be allowed to take that 13 additional step and give his layperson opinion 14 using his own terms about what would or would 15 not have taken place in the "but for" world. 16 So for that reason, Your Honor, we 17 submit that under the law that we cite in our 18 papers, which is the Riemers case, which says 19 flat out that once a witness admits he doesn't 20 have requisite knowledge on the topic, he 21 shouldn't be allowed to testify about it. 22 That's what we have here. And this witness 23 should not be allowed to testify about the 24 matters that he's been held out as qualified to 25 talk about. 10810 1 A couple of other points, Your Honor, 2 and I just want to say this for the record, 3 nothing more than that. 4 There was the issue that Mr. Smutny 5 raised about whether we are challenging his 6 qualifications as an accountant and not for 7 purposes of this motion. I don't want it to be 8 thought that we're waiving our right to do so 9 if he were to testify later at trial. 10 And, finally, with respect to the fact 11 that we have designated or identified an expert 12 in rebuttal to this witness, that was simply 13 the prudent thing to do, Your Honor. But we 14 believe that neither person really should 15 testify in this case and, obviously, if our 16 motion in limine is granted, we would withdraw 17 our accountant as a rebuttal witness to 18 Mr. Laurence. 19 THE COURT: Mr. Smutny, has 20 Mr. Laurence done other things in this case 21 outside of his report? 22 MR. SMUTNY: Let me see if I can 23 respond, Your Honor, if I understand your 24 question. I assume you're asking in response 25 to Mr. Williams's point about adopting the 10811 1 Minnesota deposition and the Minnesota report. 2 And the answer is, of course, Your Honor, 3 Mr. Laurence has done something different 4 relating to this point for Iowa than he did for 5 Minnesota. 6 THE COURT: That was disclosed to 7 plaintiffs? 8 MR. SMUTNY: Of course it was 9 disclosed to him. And despite the lengthy 10 recitation and description of me supposedly not 11 letting Mr. Lamb ask questions about this, he 12 was -- again, I'll direct you to pages 26 to 13 28, which is where the new -- this is 26 to 28 14 of exhibit M of our -- actually, I'm not sure 15 which one it was, but it's the Laurence Iowa 16 expert report. I know it's attached to the 17 papers. Forgive me, Your Honor. But pages 26 18 to 28 are new, and that is the new supporting 19 analysis that follows up on the statement 20 about the probability that Mr. Williams handed 21 up to you. 22 And the answer is: Plaintiffs were 23 not stopped from asking any questions on this, 24 and Mr. Williams didn't allege that they were 25 stopped from asking questions on these new 10812 1 analyses. He said they were stopped from 2 asking questions on the single line, which is 3 obviously a different thing. 4 And, Your Honor, I would also note 5 that Microsoft took plaintiffs' depositions -- 6 or depositions of their experts first. And the 7 ground rules for what we were not going to be 8 allowed to go into were laid very firmly, as 9 Your Honor knows, from prior arguments by 10 plaintiffs' counsel. And they were not -- they 11 were not stopped from asking about any of these 12 new analyses at all. 13 And, of course, Your Honor they can't 14 say these new analyses don't exist. They're 15 right there. And they can't say these new 16 analyses aren't firmly within his expertise as 17 an accountant in looking at Microsoft's 18 financial performance. 19 Let me, Your Honor, see if I can 20 respond to some of the arguments that 21 Mr. Williams made. 22 First of all, he said the real 23 problem, and I don't remember the exact words, 24 but he said essentially the real problem isn't 25 that Mr. Laurence goes through and points out 10813 1 all of these errors that she made which, I 2 guess, he concedes is well within his expertise 3 here. And they're not really challenging, 4 which is, of course, the bulk of Mr. Laurence's 5 expert report. What he doesn't like is 6 Mr. Laurence concluding from those errors that 7 the damages are either too high or too low. 8 But, Your Honor, that has to be 9 ridiculous. Mr. Laurence can look at the 10 accounting errors, and he can see in which 11 direction they're biased. It's Mr. Laurence's 12 opinion that they are biased always to making 13 Microsoft's margins to appear higher. 14 From there, Your Honor, it's simple 15 math. If Microsoft's margins are higher in 16 comparison to the benchmark margins, then 17 damages go up. You don't need to be an 18 Industrial organizational economist to do that 19 kind of math. He is merely doing what experts 20 should be entitled to do, which is make 21 reasonable conclusions from his analysis. 22 Again, Your Honor, he is not, despite 23 what Mr. Williams argued, he's not doing his 24 own damages analysis. And by saying and by 25 opining that because of her errors, the damages 10814 1 are higher than they should be rather than 2 lower, this is the direction in which those 3 errors go, that is not intruding on the 4 providence of an industrial organization 5 economist. He's perfectly capable and has the 6 expertise of doing that. 7 Now -- 8 THE COURT: Doesn't he adopt his prior 9 deposition by saying it's logic? 10 MR. SMUTNY: He adopts his prior 11 deposition in the way that, are you aware of 12 anything in your prior deposition that wasn't 13 true? You know, it was true then. It is still 14 true about his Minnesota report. 15 Now, his Iowa report, I mean, they 16 didn't ask him, well, did you do anything new, 17 is there anything new in the Iowa report? That 18 was what the deposition was for. If they 19 didn't want to ask about it, they didn't have 20 to ask about it, but he can't be limited simply 21 because he was asked a broad general question 22 about whether he knows of anything that was 23 said in his Minnesota deposition that wasn't 24 true. It was true then. It was true based 25 upon the work he did. And again, Your Honor, I 10815 1 want to be very clear about this. 2 Mr. Williams tried to imply that 3 Mr. Laurence lacked expertise in Minnesota to 4 do what he's doing now, and that is not the 5 case. He had the expertise then. He just 6 didn't do any work. He did a bunch of work, 7 and this wasn't part of it. 8 And for Iowa, we fixed that because it 9 was work that he could have done that he 10 concluded, you know, supported his opinions, 11 and that's what he did. 12 And again, it is based on an analysis 13 of how Microsoft has performed financially in 14 areas where there are no allegations of 15 anticompetitive conduct. And that is where he 16 bases his opinion that when she says Microsoft 17 couldn't perform better than that, he says, 18 well, what about this? What about the fact 19 that Microsoft is way better than average 20 performer for these other products, and he's 21 got a whole list of them there on page 26 and 22 27. He's got a whole list of products where 23 Microsoft -- you know, if there are no 24 allegations of anticompetitive conduct, then 25 Microsoft does better than Netz says they ought 10816 1 to be able to do. That is inconsistent with 2 her claims. That is not Laurence doing his own 3 damages analysis. That's him looking at the 4 financial data and the financial accounting 5 records and pointing out flaws that she has 6 made, and he can tell in which direction those 7 flaws go. 8 THE COURT: It seems as though page 4 9 of his report on that sentence that 10 Mr. Williams is talking about, he actually 11 analyses the, quote, counterfactual rule, end 12 quote of Netz. How can he do an analysis like 13 that? You said he's only go to be talking 14 about hard accounting facts. 15 MR. SMUTNY: Your Honor, I can tell 16 you what he will testify to and perhaps this 17 was not worded very precisely. But the point 18 here is not -- I am going to do my own 19 counterfactual world. What he's saying is she 20 makes a claim and it's inconsistent with what 21 is happening today. It is her claim that 22 Microsoft, absent the anticompetitive conduct, 23 which is a "but for" or "counterfactual" world 24 is they could not perform better than -- better 25 than the average software company in the 10817 1 industry. 2 And Mr. Laurence says, well, I know of 3 things. I'm an accountant. I have expertise 4 in analyzing the financial performance of 5 companies, and I have done that for Microsoft. 6 And I can tell you that I am aware of 7 information that is inconsistent with Netz's 8 claim. 9 And so when she says it's improbable 10 or impossible for that to happen, she's not 11 taking this information into account. That is 12 what he's going to offer an opinion on. 13 THE COURT: What information? 14 MR. SMUTNY: The information is 15 Microsoft's historical financial performance 16 where Microsoft, even at the time period before 17 plaintiffs' allegations of anticompetitive 18 conduct started, their financial performance 19 was well above the industry average. 20 THE COURT: Is this part of general 21 accounting principles? 22 MR. SMUTNY: Certainly the analysis of 23 how a company is doing financially is part of 24 general accounting principles and what an 25 accountant and auditor does. 10818 1 THE COURT: An accountant can predict 2 a future for a company? 3 MR. SMUTNY: He's not predicting the 4 future for the company. He's saying that her 5 prediction for the future doesn't take into 6 account this "real world" accounting 7 experience. And one of them is the historical 8 data, and one of them is Microsoft's 9 performance on these other not at issue 10 products like Project and Publisher. There's a 11 whole list of them. They all beat the average 12 that Netz says can't be beaten without 13 anticompetitive conduct. That is "real world" 14 analysis of the kind that falls within an 15 accountant's and auditor's expertise. He's not 16 saying what the future would be like. He's 17 saying this information is inconsistent with 18 what she says it's going to be like. 19 THE COURT: So he's going to be using 20 his accounting techniques and methodology, 21 right? 22 MR. SMUTNY: That's correct. 23 THE COURT: And he's not going to 24 depend on logic versus expertise in terms of 25 accounting logic. Is that what you're saying? 10819 1 MR. SMUTNY: I think experts can never 2 really divorce themselves from the line on some 3 degree on logic, but his opinions are grounded 4 in his expertise and on reasonable conclusions 5 based on that expertise and not on him trying 6 to be an economist, Your Honor. 7 MR. WILLIAMS: Well, again, he's 8 trying to be an economist, and it's sort of 9 like six of one, half a dozen of the other. Is 10 it predicting that you can say that something 11 would not have happened the way she says it 12 would? I think so. Is that simply drawing a 13 logical conclusion from data? It may well be, 14 but I can tell you that I don't think I would 15 be qualified to do it with all the accounting 16 knowledge in the world because there's so many 17 other variables that one has to take into 18 account. But that's precisely what he does. 19 I would like to direct Your Honor's 20 attention to page 27 and 28, which I believe 21 Mr. Smutny say is the new material. This is 22 Mr. Laurence's expert report, which we included 23 as part of our submission. It's the Exhibit M 24 reference. 25 And if you look there, it picks up on 10820 1 Microsoft's historical financial performance. 2 It goes on to 28. This is the new material. 3 It doesn't say anything, anything 4 other than what was already in the summary of 5 opinions essentially. It says he repeats the 6 illogical assumption phrase there in the 7 sentence following the first sentence. She 8 fails to consider the probability that 9 Microsoft would have earned above average 10 profits. It talks about flaws in her logic. 11 And, yes, he refers to historical data 12 from 1982 to 1988, but the problem is he tries 13 to link that up with a criticism of her 14 analysis as to what would have happened in the 15 "but for" world for later years. He simply 16 isn't qualified to do it, and the problem is he 17 tries to draw through and make it out to be a 18 criticism that she's overstating damages. And 19 that, Your Honor, is a damages analysis, and 20 they can gussy it up however they like, but 21 that's what it is. 22 And that's why we object to this 23 testimony. The law makes it clear. It's not 24 permitted. The witness's own statements make 25 it clear that it's not permitted. Microsoft's 10821 1 higher positions to this Court make it clear 2 that it's not permitted. It is sort of a 3 triple whammy and, therefore, once again, we 4 ask that his testimony be excluded. 5 MR. SMUTNY: Briefly, Your Honor. 6 First of all, the new material starts 7 on page 26 with the financial performance of 8 other products where Mr. Laurence looks at the 9 information from the internal financials and 10 PLs about how Microsoft has done on all these 11 other products. His historic financial 12 performance pieces on 27 and 28. 13 Mr. Williams has failed to also note 14 Exhibit 11 to Mr. Laurence's report, which is 15 the analysis that he does in comparing 16 Microsoft's company wide performance against 17 company wide performance of other leading 18 software companies, which shows that Microsoft 19 did a lot better. 20 And again, as it relates to the 21 overstatement of damages, it's just a matter of 22 in which direction this criticism goes. You 23 know, if Microsoft's margin -- if she's saying 24 Microsoft's margin is higher than -- if she's 25 putting Microsoft at issue product margin 10822 1 higher than she ought to, that makes damages go 2 up. If it were any other direction, it would 3 make damages go down. That is simple math and 4 is something that Mr. Laurence can certainly 5 address. 6 And, you know, again, they don't like 7 these new analyses. They don't like these new 8 things because they point out financial 9 information which is very much at odds with 10 Dr. Netz's conclusions. And what they're 11 trying to do is they're trying to say in order 12 to say anything about damages, you have to be 13 an economist, which is clearly -- that cannot 14 be the case and that is not what plaintiffs -- 15 the cases that plaintiffs rely on say. 16 Looking at the Riemers case, which 17 Mr. Williams mentioned, that was a case, which 18 as far as I can tell, doesn't even involve an 19 expert witness. It involves a fact witness who 20 was asked to estimate the value of a car, and 21 he said, I have no idea. I can't estimate it. 22 And then what he tried to do after saying that 23 was go back and do exactly what he said he 24 couldn't do. The Williams v. Wadsworth case is 25 essentially the same. There a doctor admitted 10823 1 during his testimony that he didn't know the 2 purpose today of what a lymph angiogram was 3 because he hadn't done one in 20 years and who 4 knows what they're used for. Then he tried to 5 go back and say exactly that. 6 Now that is not what Mr. Laurence 7 does. Mr. Laurence has said in Minnesota and 8 said in Iowa and would say if he were standing 9 here in front of you today I am not the expert 10 who would create an antitrust damages model and 11 calculate damages in an antitrust case. It 12 involves linking illegal conduct with the 13 amount of harm, and those kinds of things, many 14 of which we think Dr. Netz didn't do either, 15 and Professor Hubbard is dealing with. 16 But the accounting problem with what 17 she did and her misuse of her financial 18 information is right in Mr. Laurence's strike 19 zone. And him saying, yes, I'm not an 20 antitrust damages expert, doesn't disqualify 21 him from doing what he does, which is point out 22 errors that she's made in the underlying -- 23 some of the underlying building blocks. Not 24 the model themselves, but the underlying 25 building blocks and then say which direction do 10824 1 these errors go. 2 THE COURT: Anything else? 3 MR. WILLIAMS: Your Honor, Mr. Smutny 4 says we don't like these analyses. It's not 5 really a matter of liking them or disliking 6 them. They simply aren't probative of 7 anything, and the purpose for which they're 8 trying to use them with this witness lacks 9 foundation. So I guess if that means we don't 10 like them, we don't like them for that reason. 11 Your Honor, Mr. Smutny faulted 12 plaintiffs for not citing any cases in support 13 of their position. I'll cite Microsoft, Your 14 Honor. This is from their deposition of 15 Mr. Alepin. Here is what they said: 16 This is, of course, an antitrust case. 17 In fact, the theoretical existence and 18 structure of "but for" markets for PC operating 19 systems and Office productivity application 20 software is as plaintiffs' expert, Professor 21 Mackie-Mason has said, quote, the economic 22 basis, close quote, for plaintiffs' monopoly 23 overcharge claims in this case. Not 24 surprisingly, the construction of these 25 hypothetical "but for" markets depends on the 10825 1 applications of economic principles such as 2 supply and demand, utility costs and sump 3 costs. Even for professional economists, 4 creating these "but for" worlds is difficult, 5 and the resulting conclusion must be rigorously 6 tested. 7 And what we have, Your Honor, is an 8 accountant trying to make exactly those 9 conclusions which by his own omission in 10 another case lacks scientific rigor. And all 11 the historical fact checking on Microsoft's 12 operating margins don't change that fact. He's 13 not qualified to do what needs to be done to 14 make it probative, which is, okay, that is how 15 they did historically, but what would have 16 happened in the "but for" world. That's what 17 he can't talk about. That is what he's not 18 qualified to talk about. So without that, this 19 lacks any probative value whatsoever because 20 that analysis hasn't been done. 21 So, Your Honor, what they need, what 22 they should have had is an economist to draw 23 the link that they're now desperately -- 24 realizing their mistake -- trying to get an 25 accountant to do. And he simply isn't 10826 1 qualified to do it in Iowa, Your Honor. 2 MR. SMUTNY: Your Honor, just briefly, 3 the idea that these analyses -- the idea that 4 the fact that Microsoft, in markets not at 5 issue in this case and where there is no 6 anticompetitive conduct alleged, so far out 7 performs the benchmark that Dr. Netz has chosen 8 as the world in which -- how Microsoft could 9 behave -- could do in the at issue products is 10 astounding that they would argue that this is 11 not probative. 12 As for Mr. Alepin, Your Honor, the 13 arguments that we made there -- Your Honor 14 knows what you ruled. You allowed Mr. Alepin 15 to testify as to the technological perspective 16 of a "but for" world. We argued at the time, 17 Your Honor, that there wasn't really a 18 difference between the economic "but for" world 19 and the technological "but for" world. But 20 Your Honor allowed him to testify as to the 21 technological "but for" world. 22 And again, Mr. Laurence is not doing 23 that. Mr. Laurence is just saying that there 24 are things about the internal financial 25 information and historical performance and the 10827 1 existing performance on other products which 2 are inconsistent with her conclusions on what 3 the world would have looked like. That is not 4 the same as trying to play an economist, Your 5 Honor. It is not. He's not tried to say this 6 is what would have happened. You know, we have 7 an economist who will do that. His name is 8 Glen Hubbard, but that is not what Mr. Laurence 9 is trying to do. And plaintiffs' attempts to 10 pigeon hole him into that are just 11 inappropriate, Your Honor. 12 MR. WILLIAMS: We didn't pigeon hole 13 him. He pigeon holed himself. What we have 14 here is Microsoft brought a knife to a gun 15 fight. They got an accountant that they intend 16 to have testify about economists in the "but 17 for" world, but it simply isn't appropriate. 18 THE COURT: Anything else on this 19 issue? 20 MR. WILLIAMS: Not from the 21 plaintiffs, Your Honor. 22 MR. SMUTNY: No, Your Honor. Thank 23 you. 24 THE COURT: See you at -- we will take 25 an hour-and-a-half off -- 1:30. 10828 1 2 THE COURT: I think the next one is 3 the plaintiffs' motion to preclude Microsoft 4 from introducing exhibits. 5 MR. CASHMAN: Good afternoon, Your 6 Honor. 7 THE COURT: Good afternoon. 8 MR. CASHMAN: Yes. We are here to 9 address plaintiffs' motion to preclude 10 Microsoft from proffering its 2,846 defendant 11 exhibits during plaintiffs' case-in-chief. 12 Plaintiffs object to this motion under 13 Iowa Rule 1.919 which provides that after the 14 brief statement of claims, defense and 15 evidence, i.e., the opening statements, the 16 party with the burden produces its evidence and 17 that is to be followed by the adverse party. 18 Plaintiffs filed this motion because 19 it would be improper to admit the defendant's 20 exhibits during plaintiffs' case-in-chief under 21 that rule. 22 And the reason, first of all, Your 23 Honor, is because it would result in unfair and 24 substantial prejudice to plaintiffs. The key 25 here, Your Honor, is if these defendants' 10829 1 exhibits are entertained, and if some of them 2 are admitted at this point, then, obviously, 3 Microsoft will use those exhibits against 4 plaintiffs. 5 And, in particular, when the 6 plaintiffs finish their case-in-chief, 7 Microsoft would have at its disposal the 8 ability to cite these exhibits in support of a 9 motion for directed verdict or other -- a 10 motion to dismiss plaintiffs' claims. 11 And clearly, that is improper. And 12 that's just exactly what Rule 1.919 is intended 13 to preclude. 14 It's fundamental, Your Honor, that the 15 plaintiffs are entitled to put on their case 16 without Microsoft's interference or without 17 Microsoft putting on its evidence during 18 plaintiffs' case so that at the time the 19 plaintiffs conclude their case, they're in the 20 best position possible to withstand any motion 21 for directed verdict that Microsoft may wish to 22 submit. 23 The case law on Rule 1.919 is 24 relatively sparse because the issue seems to be 25 so clear. 10830 1 The plaintiffs have cited for the 2 Court two cases, the first of those is Shoberg 3 v. Rock, 298 N.W.2d 834, in which the Supreme 4 Court held that a defendant may not put its 5 evidence on during cross-examination. And, 6 obviously, that is a real straightforward 7 concept, and it applies with even greater force 8 here where Microsoft is seeking to proffer over 9 2000 defendant exhibits during plaintiffs' 10 case-in-chief. 11 Plaintiffs have also cited another 12 case, which is straight on point, and that's 13 called Burk v. Reese, 121 N.W. 1016. That's an 14 Iowa Supreme Court case from 1909. And in 15 particular, the passage which the plaintiffs 16 think is apropos from the Burk case, quote, the 17 party having the burden on an issue is entitled 18 to have an opportunity to make his case as best 19 he can by his own witnesses. And then the 20 Court continued in the Burk case: This right 21 is seriously abridged when the other party is 22 allowed to interpose its defense prematurely. 23 And continuing on, addressing the 24 issue of the extent to which the Court has 25 discretion on such an issue in the Burk case, 10831 1 that the discretion accorded to the Court, 2 quote, has never been held broad enough to 3 permit the opposing party to go beyond the 4 appropriate limits of cross-examination and 5 introduce new matters pertaining only to his 6 defense, close quote. 7 Again, the plaintiffs believe that 8 this speaks directly to this issue and 9 highlights why it is that Microsoft should not 10 be allowd to put on its exhibits during 11 plaintiffs' case-in-chief. It would be error 12 because Microsoft is not under Rule 1.919 13 allowed to put on evidence that it can use 14 against plaintiffs in the way that it would be 15 able to do here. 16 Microsoft, Your Honor, has cited no 17 valid basis for seeking the premature admission 18 of these exhibits. It's really only cited two 19 bases for its proffer. 20 First of all, Microsoft suggests that 21 it will save time. I think Microsoft has 22 really failed to explain how there will be any 23 timesavings from its exhibits being entertained 24 during plaintiffs' case-in-chief. But more 25 importantly, Rule 1.919 does not provide 10832 1 timesavings of the way that Microsoft is 2 alleging as a valid basis for permitting what 3 Microsoft seeks to do. 4 In this respect, Your Honor, it's 5 important, I think, to point out that in its 6 papers Microsoft acknowledges that these 2800 7 exhibits may never be used. They certainly do 8 not claim that many of them or maybe even any 9 of them will be used on cross-examination. 10 Microsoft seems to take the position 11 that it needs to get some of these exhibits 12 admitted to smooth the process on 13 cross-examination. They've alleged that the 14 plaintiffs shouldn't be able to make objections 15 in the ordinary course when Microsoft produces 16 a defendant exhibit during the 17 cross-examination and that this somehow 18 justifies the mass proffer of these 2800 19 exhibits. 20 That doesn't hold water, Your Honor, 21 because, first of all, the exhibits that 22 Microsoft wants to use in cross-examination are 23 subject to objection in the ordinary course. 24 So there's no reason why the ordinary course 25 shouldn't apply. 10833 1 But furthermore, if Microsoft was 2 truly concerned about avoiding objections in 3 front of the jury, all they have to do is bring 4 the exhibits that they wish to use in 5 cross-examination to our attention. And if 6 there is an objection, we could entertain those 7 before the court, before or after any trial 8 day. But it certainly doesn't justify the mass 9 proffer of 2846 exhibits. 10 The other argument that Microsoft 11 advances is what they call parity. Again, 12 parity is not a valid basis under Rule 1.919 13 particularly in light of the authorities that 14 we've just mentioned, in particular, the Burk 15 case. The parity argument makes no sense, Your 16 Honor, because Rule 1.919 allows Microsoft a 17 full opportunity to present its exhibits during 18 its case. And that's exactly the order that is 19 contemplated by 919, and it gives both sides 20 equal footing. But Rule 919 does not permit 21 Microsoft to put its case in while plaintiffs 22 are putting in their case-in-chief. 23 So Microsoft cites a couple of cases 24 that are inapposite, Your Honor. They cited a 25 case called Crouch v. National Livestock. And 10834 1 that's inapposite because -- the issue in that 2 case was whether a party should be allowed to 3 ask questions of its own expert based on facts 4 that were going to be put in at a subsequent 5 time. And the Court in that case allowed it. 6 That's wholly different than the situation that 7 we're discussing here. 8 The other case they cite is a matter 9 called Huey v. Huey, and there the issue was 10 whether the plaintiff should be allowed to 11 introduce additional evidence after having 12 initially rested. 13 So neither one of those cases cited by 14 Microsoft are even remotely similar to the 15 circumstance that we have before us today 16 wherein Microsoft without any need, without any 17 justification, is seeking to proffer over 2800 18 exhibits during our case-in-chief. 19 And as I've explained, that should not 20 be permitted because it's not allowed by Rule 21 1.919 and the applicable authorities. And 22 importantly, most importantly, the prejudice 23 that would result to plaintiffs of having to 24 face this mass of defendant's exhibits when it 25 comes time at the conclusion of our case where 10835 1 Microsoft inevitably will file a motion to 2 dismiss on one or more claims. That is exactly 3 what Rule 1.919 is supposed to prevent. And 4 the plaintiffs request that on that basis the 5 Court table or deny Microsoft's proffer until 6 its case arises at which time Microsoft could 7 make another proffer at that time. 8 The second part of our motion, Your 9 Honor, is related to the fact that Ms. Nellis, 10 in spite of having been on the e-mail 11 correspondence that I had with Mr. Tuggy 12 indicating that we -- that plaintiffs were 13 intending to object in due course to these 14 defendant's exhibits, in due course meaning 15 when Microsoft's case-in-chief was being 16 presented. Nonetheless, in spite of that 17 knowledge, Ms. Nellis in front of the jury said 18 that there were no objections when she knew 19 very well that was not the case. 20 So we think a corrective instruction 21 should be given to the jury on that point 22 explaining that her comments should be 23 disregarded because they were incorrect. And I 24 have specific language that we can propose to 25 the Court when we get to that point. 10836 1 Thank you, Your Honor. 2 THE COURT: Thank you, Mr. Cashman. 3 Ms. Nellis. 4 MS. NELLIS: Thank you, Your Honor. 5 The Court will recall that on 6 December 15th after the completion of the 7 Gates deposition, plaintiffs moved to admit 8 3,768 exhibits en masse. And plaintiffs told 9 the Court and told the jury at that time that 10 there were no objections to those exhibits. 11 And Microsoft objected to this mass admission 12 noting that there was a standing order of the 13 Court that certain objections, specifically 14 relevance and prejudice objections, a couple 15 others, were reserved for trial. 16 And it was Microsoft's understanding 17 at that time that Microsoft would be entitled 18 to raise such objections. Documents were 19 introduced with witnesses with specific 20 reference to the scope of the witness's 21 testimony. I understand that's not how this 22 ultimately played out, but that was our 23 understanding at the time. 24 I have had the privilege, I suppose is 25 the right word, to have been involved in 10837 1 several trials where there was a massive amount 2 of documentary evidence. This remains, 3 however, the largest. 4 But in Minnesota, for example, what we 5 did is something we called a preadmit process 6 where both sides had evidence to which there 7 were no outstanding objections, preadmitted so 8 that they could be used without going through 9 foundation exercise as they came in through 10 each witness where they were then admitted on 11 the record with the understanding that at the 12 close of either side's case, for example, with 13 the close of plaintiffs' case on direct, they 14 would be able to move into admission whatever 15 remaining exhibits weren't used with the 16 witness. And Microsoft would have that same 17 opportunity at the close of its case-in-chief. 18 Now, when I objected at that time, 19 plaintiffs argued that Microsoft -- really 20 me -- had made a terrible misrepresentation to 21 the Court and to the jury when I raised the 22 standing order. I guess a note just for the 23 Court, the jury wasn't present. But when I 24 raised the issue of the standing order and that 25 all objections whether reserved for trial or 10838 1 not and said that all of these objections, 2 whether reserved at trial or not, were to have 3 been inserted during the Special Master 4 process. And at that time plaintiffs stood up 5 and said that that is exactly what they 6 themselves had done with respect to Microsoft's 7 exhibits. They had put forward their relevance 8 and prejudice objection to the extent they had 9 any. 10 We had a few days of argument, which 11 we tend to do sometimes here, and the Court 12 ultimately ordered Microsoft on December 21 to 13 review all of plaintiffs' exhibits and assert 14 any reserve, relevance and prejudice objections 15 by January 10. 16 So Microsoft was given 20 days to 17 assert those objections to the 3,760 plus 18 exhibits, 13 of those were while we were on 19 break. But we did exactly what the Court asked 20 us to do, exactly what the Court ordered us to 21 do. As soon as we were all back, which was 22 essentially around January 3rd, we just printed 23 up copies of all of these exhibits, we divided 24 them up among ourselves, we sat around a big 25 conference table and we tried to make 10839 1 thoughtful objections. 2 And as ordered, we provided these to 3 the plaintiffs. We did so on a rolling basis 4 beginning on January 6th and ending on January 5 10th. And ultimately we objected to 574 of the 6 3,760 exhibits. 7 And then the Court went ahead and 8 admitted the remainder, the 3,186 exhibits to 9 which Microsoft had asserted no objections, 10 into evidence. 11 Now it was on that same day that the 12 Court made its order regarding Microsoft's 13 obligations with respect to plaintiffs' 14 exhibits that Microsoft asked plaintiffs to 15 please participate in the same process with 16 respect to Microsoft's exhibits. Specifically, 17 Mr. Tuggy sent, I believe, Mr. Cashman a list 18 of approximately 2900 exhibits to which 19 plaintiffs had not asserted any objection 20 during the Special Master process. 21 Now, although the plaintiffs had 22 already stated in court for Your Honor that 23 they had already asserted their relevance and 24 prejudice objections during the Special Master 25 process, we, Microsoft, nonetheless, asked 10840 1 plaintiffs whether they wanted to assert 2 objections to these exhibits in light of the 3 Court's order. We thought that was 4 appropriate. 5 In other words, we offered them the 6 same opportunity to engage in the very same 7 process that Microsoft was undertaking, despite 8 plaintiffs' earlier avowal that they had 9 asserted all of its relevance and prejudice 10 objections. And Mr. Tuggy's correspondence 11 with Mr. Cashman is attached as an exhibit to 12 our resistance. 13 Now, essentially what happened is 14 plaintiffs ignored us. So we asked, again, on 15 December 27 whether plaintiffs want to 16 participate. We received no response. And, 17 again, asked on January 4th for at least the 18 courtesy of a reply. 19 And at this time, Mr. Cashman finally 20 wrote back saying that if Microsoft could 21 assert relevance and prejudice objections, so 22 could plaintiffs. And we don't disagree with 23 that. But that plaintiffs would address 24 Microsoft's exhibits in due course, due course 25 meaning, apparently to us then and plainly to 10841 1 us now, sometime after plaintiffs rest their 2 case-in-chief. 3 In other words, plaintiffs were simply 4 refusing to address our documents leading to a 5 situation where thousands of plaintiffs' 6 exhibits have been admitted for use without 7 objection with witnesses, but that Microsoft's 8 exhibits are left in sort of a limbo. 9 So on the same day, plaintiffs moved 10 their unobjected exhibits into evidence on 11 January 16th. Microsoft did the same and did 12 it exactly the same way plaintiffs had done. 13 Microsoft offered into evidence -- I think at 14 that time there were about 2800 exhibits. We 15 took a few off because we took them off our 16 final exhibit list, but we offered into 17 evidence those 2800 exhibits that we sent to 18 plaintiffs on December 21 that plaintiffs 19 hadn't addressed. 20 Now I was the one who offered those 21 exhibits, Your Honor. And I told the Court and 22 I told the jury exactly what Ms. Conlin told 23 the Court and told the jury on December 15, 24 that the offered exhibits were not subject to 25 any outstanding objections. This was and 10842 1 remains absolutely correct. 2 Despite plaintiffs' attacks on what I 3 did, I did not in any way misrepresent the 4 status of those documents. And I think that 5 the Court is fully aware of that. 6 In fact, plaintiffs objected, and we 7 went back and had a side bar, and plaintiffs 8 argued there just as they do on this motion for 9 reconsideration because that is what this 10 motion is, that plaintiffs should not have to 11 object to the offered exhibits during their 12 case-in-chief. 13 That argument, the same one they raise 14 now, was fully addressed and rejected by Your 15 Honor during the side bar, and the Court gave 16 plaintiffs a full month, until February 15, to 17 review Microsoft's exhibits and assert any 18 reserved objections. 19 As the Court said at that time, the 20 Court was treating everybody the same when it 21 came to the admission of exhibits. 22 Apparently, plaintiffs don't like 23 that. I suppose until today I was not really 24 sure why the arguments that they made seem 25 entirely pretextual to me. However, I will 10843 1 address Mr. Cashman's argument regarding the 2 unfair and substantial prejudice he presumes 3 will fall to plaintiffs if these exhibits are 4 used on a motion for directed verdict because I 5 do think that is something worthy to raise and 6 deserves to be addressed. 7 But in their papers and what they 8 argued at that time was that Microsoft's 9 attempt -- and what they argue now -- is that 10 Microsoft's attempt to introduce these exhibits 11 now was prohibited by the Iowa Rule of Civil 12 Procedure 1.919(a). 13 Rule 1.919(a) provides that after the 14 jury is sworn, first plaintiffs and then the 15 defendants must produce the parties' evidence. 16 This rule does not say that a defendant is 17 precluded from introducing exhibits during 18 plaintiffs' case-in-chief, and plainly that is 19 not the law. Indeed, many of Microsoft's 20 exhibits have already been admitted without any 21 objection through cross-examination of live 22 witnesses and through the video presentation of 23 evidence. 24 The applicable rule here, Your Honor, 25 is Iowa Rule of Evidence 5.611(a). That rule 10844 1 gives this Court a wide range of discretion 2 over the mode and order of the presentation of 3 evidence to a jury. 4 And the relevant factors for a Court 5 to consider in making such a determination 6 include making sure that the integration and 7 presentation are effective for the 8 ascertainment of the truth, avoiding needless 9 consumption of time and protecting witnesses 10 from harassment or undue embarrassment. 11 In fact, under Rule 5.611(a), it is 12 expressly provided that the district court has 13 a wide range of discretion in allowing 14 variations from the usual order of proof. As 15 the Court knows and, of course, as do 16 plaintiffs, evidence is routinely received out 17 of the usual order when doing so will expedite 18 trial. And I think that is clearly the case 19 here. And I would like to address that in a 20 bit more detail in a moment. 21 The second argument that plaintiffs 22 raise in their papers, but not in argument 23 today, is that the Court should reverse its 24 prior decision because and I quote, it disrupts 25 the plaintiffs' work schedule. And I just 10845 1 would like to say that the idea that somehow 2 plaintiffs' counsel is working harder than 3 counsel for Microsoft or is under some greater 4 burden than counsel for Microsoft is one that 5 is not true, one that I believe plaintiffs' 6 counsel certainly knows is not true, and one 7 that I very much hope and expect the Court will 8 not count on this. 9 There are certainly no difference in 10 burden on being the party on direct than the 11 party who sits on defense as plaintiffs will 12 find out when Microsoft has its opportunity to 13 present its case-in-chief. 14 Whatever the reason behind this 15 motion, what we have now is a disparity of 16 procedure and that will certainly continue if 17 the Court does what plaintiffs ask the Court to 18 do and that is what I think we need to find a 19 way to avoid. And I would ask the Court to 20 consider the recent examination of 21 Mr. Bradford. 22 The procedures that we've been 23 following here are that a document is not to be 24 published to a jury until it is admitted. At 25 least that is a procedure we have been 10846 1 following with our live witnesses. 2 Generally with the video presentation, 3 both sides move their evidence at the close of 4 the video presentation because neither side can 5 interrupt. 6 So when it comes to live witnesses, 7 what plaintiffs did, having had thousands upon 8 thousands of their documents already admitted 9 en masse, was simply throw a document up on the 10 screen when they wanted to use it. In fact, 11 many times plaintiffs did this without even 12 providing a copy to Microsoft at the time, even 13 with a minute of advance warning. 14 And the Court may recall the number of 15 times I either ran back to the printer to have 16 our tech person Chris print a copy of the 17 exhibit that was already up on the screen or 18 that one of my colleagues printed and brought 19 the exhibit up to counsel table so we could see 20 what it is, the full copy of what it was that 21 plaintiffs were using. 22 As an aside, I'll note that plaintiffs 23 on occasion throw up a document that had 24 sustained objections. Your Honor may recall 25 Exhibit 2266, which was a document that 10847 1 plaintiffs put on the screen and Ms. Conlin 2 read to the jury and that was full of sustained 3 hearsay objections. And that was done before 4 we even had an opportunity to get the document 5 and object. Perhaps that is an argument or an 6 issue that needs to be raised on another day. 7 But it is obviously quite hard to 8 track these exhibits given the speed at which 9 plaintiffs are putting them up on the screen. 10 But the documents are in evidence. And 11 presumably if they're doing it right and 12 they're not subject to a sustained objection, 13 there is no reason Plaintiffs can't put that 14 document up on the screen and show it to the 15 jury. 16 However, on cross-examination 17 something very, very different is occurring. 18 When it came time to cross Mr. Bradford, for 19 example, each time Microsoft wanted to use a 20 document, it to had to first provide it to the 21 witness and to the plaintiffs. Occasionally we 22 got it up to the Court. 23 I think it's right to get it up to the 24 Court, but Mr. Tulchin and I weren't entirely 25 insane. We laid a bit of foundation, and then 10848 1 the plaintiff made throughout the 2 cross-examination ongoing relevance and 3 prejudice objections. 4 Really, plaintiffs did more than this. 5 Plaintiffs made other objections, including 6 foundation objections that had already been 7 cleared in the Special Master process and in 8 which this Court has said were not to be 9 reraised at trial. 10 Now, I'm not suggesting that we are 11 not up to the task of taking objections as they 12 come. I thought Mr. Tulchin did just fine 13 handling them. But this is my point. 14 Here we are today with a process where 15 plaintiffs can simply put an exhibit up and 16 show it to the jury on the ground that it is 17 already admitted and not give Microsoft any 18 opportunity to object because presumably we 19 already had to go through all of our 20 objections. 21 And perhaps that's right and that's 22 how the Court would like to proceed. It is an 23 admitted document, although I do believe we 24 have seen, particularly through examination of 25 Mr. Bradford, that there is always going to be 10849 1 scope specific objections. Ms. Conlin made 2 many, whether a document is admitted or not. 3 But when it comes to Microsoft, 4 Microsoft can't do that. Microsoft can't do 5 that at all. Microsoft has to go through this 6 very different process. Microsoft must submit 7 each of its documents to the witness and to 8 counsel and, I think appropriately, to the 9 Court and wait for any relevance or prejudice 10 objections to be asserted and ruled on before 11 cross-examination can go forward. 12 And I do not believe for one moment 13 that this disparity of process is being lost on 14 the jury. I do not think it is lost on them at 15 all. 16 I believe as we now stand, the jury 17 sees quite clearly that Microsoft is following 18 one set of procedures and plaintiffs are 19 following a very different set of procedures. 20 And, of course, the jury is right because 21 plaintiffs' exhibits are in evidence. 22 Before they're ever shown to a 23 witness, they're free to use them. Before they 24 even start their examination, they're free to 25 use them in a way Microsoft cannot use its 10850 1 evidence which is not admitted and which 2 plaintiffs say cannot be admitted until 3 Microsoft begins its case. 4 And I do note that Ms. Conlin 5 complained about the length of Mr. Bradford's 6 cross-examination. And I don't think the 7 length of examination should be dispositive 8 necessarily in the Court's consideration. But 9 I do think the evidence process that took place 10 on cross but not on direct contributed to the 11 length of the cross-examination. 12 Now, if the real issue here is putting 13 in evidence, direct evidence while plaintiffs 14 are putting on their case-in-chief, I will 15 stipulate right here, Your Honor, that it is 16 not our purpose to create a record for use on 17 directed verdict. We are not going to do 18 anything with this evidence except use it 19 appropriately on cross-examination or through 20 the video presentation. 21 So what I am really seeking here is 22 the opportunity to be able to use our exhibits 23 the same way plaintiffs are using their 24 exhibits when it comes to cross-examining their 25 live witnesses. And we will move our 10851 1 evidence -- you know, we will use that document 2 with a live witness or that document will be 3 used through the video presentation. And that 4 is obviously appropriate and that is the 5 evidence that has been shown to the jury, 6 proffered to the jury. And I will stipulate 7 that on any motion for directed verdict, we 8 will be confined to the evidence that was used 9 before the jurors. 10 Our goal here is not to have some 11 extra set of exhibits that we can use on our 12 directed verdict motion. Should we have one? 13 I expect we will. 14 What I'm looking for here is, to use 15 Mr. Cashman's word, I guess maybe I started it 16 in the papers, but parity. Parity of how the 17 evidence is being used before the Court. 18 Now, we wouldn't have had this issue, 19 I think, if we had followed the preadmit 20 process that I thought we were going to be 21 using, but that's not the process we're using. 22 So as we stand here today, I do think we need 23 to come up with some kind of procedure so that 24 there is this parity. 25 Now, if the Court decides that 10852 1 Microsoft will not be allowed to have its 2 unobjected exhibits admitted at this time, if 3 the Court says that Microsoft must wait until 4 its case, that's within the Court's discretion. 5 I don't argue otherwise. 6 If the Court prefers that Microsoft 7 goes through the process of offering each of 8 its exhibits one at a time through 9 cross-examination and waiting for objections as 10 they come at that time, Microsoft is capable of 11 doing that. We've done that with Mr. Alepin. 12 We've done that with Mr. Bradford. We're going 13 to have to do that with Mr. Lieven who I 14 understand is going to start tomorrow morning. 15 I just do think it paints a picture to 16 the jury that the parties are subject to 17 different rules. I do not think that's ever 18 the right picture to paint to a jury. 19 I think it's very simple in my mind. 20 The Court has already set an order for the 21 plaintiffs to follow a procedure asserting 22 relevance and prejudice objections outside the 23 presence of the jury. I don't think the Court 24 should change its ruling now. 25 And I think we can all agree here that 10853 1 when it comes to any motion on directed 2 verdict, that Microsoft will be only able to 3 rely on that evidence that was presented to the 4 jury. 5 I guess I need to address the request 6 for a curative instruction. I think it's 7 entirely unwarranted and plainly unfair. 8 Plaintiffs do not explain how a statement that 9 they have no objection to the admission of 10 unidentified exhibits possibly caused them any 11 prejudice which, of course, is what they must 12 do in order to obtain a curative instruction. 13 But if there was any such prejudice or 14 if there were any such harm, then Microsoft 15 must have also suffered the very same harm when 16 on December 15 Ms. Conlin told the Court and 17 the jury that there were no objections to the 18 3,768 exhibits that Microsoft offered -- excuse 19 me, that plaintiffs offered that day. Because, 20 of course, Microsoft then stood in the very 21 same shoes that plaintiffs stand in now. They 22 still have a right to assert their relevance 23 and prejudice objections. 24 But, in fact, really neither party 25 suffered any prejudice because both statements 10854 1 were correct when they were made. Ms. Conlin 2 did not make a false statement nor did I, and 3 both sides have been given the same amount of 4 time to reserve relevance and prejudice 5 objections. 6 The Court said before the jury that 7 such time would be given. A curative 8 instruction is neither necessary nor 9 appropriate. However, if one is to be given, 10 it must be given as to both sides. And I think 11 then we're truly falling into a place of 12 needless confusion to the jury of an issue that 13 is truly a nonissue in that respect. 14 THE COURT: A couple of questions. 15 When you made an objection earlier, didn't I 16 tell both sides to start doing that? 17 MS. NELLIS: Yes, you did, Your Honor. 18 The plaintiffs have titled this motion 19 plaintiffs' expedited motion to preclude 20 Microsoft from prematurely introducing exhibits 21 during plaintiffs' case-in-chief. In fact, at 22 the time Microsoft made its offer of this 23 evidence, we had argument. Plaintiffs objected 24 at the time. We had argument back in court. I 25 believe the transcript pages or most of them 10855 1 are attached to our motion, and Your Honor 2 ruled in our favor that plaintiffs needed to do 3 this. 4 THE COURT: I'm not talking about 5 that. I'm saying didn't I tell the parties to 6 show the other side their exhibits before they 7 put them on the screen? 8 MR. CASHMAN: Yes. Your Honor, the 9 parties have been showing the other side their 10 exhibits. I believe they're going to come back 11 and cover this in a more fullsome way. But I 12 believe what may be causing some confusion is 13 on cross-examination is a slightly different 14 process, at least the way Microsoft has been 15 doing it. They have exhibits which they have 16 not designated at all during the Special Master 17 process. And when they have those exhibits, 18 they put them down on our table and they give 19 one to you. And those are exhibits which have 20 to be objected to in the normal course because 21 Microsoft has taken the position that exhibits 22 which are used in cross-examination don't have 23 to be previously identified until they're shown 24 to counsel at the time they're being used. 25 THE COURT: So the exhibits that 10856 1 you've been shown for purposes of 2 cross-examination you've not seen before? 3 MS. NELLIS: No, Your Honor -- 4 MR. CASHMAN: Yes. That is correct. 5 MS. NELLIS: -- Mr. Cashman is 6 misstating what is going on. 7 MR. CASHMAN: That is correct, Your 8 Honor. And if we went back, I could identify 9 several exhibits, defendant exhibit numbers 10 which Mr. Tulchin used with Mr. Bradford last 11 week where it was a new exhibit, which 12 plaintiffs saw for the first time at the time 13 that it was being used, which is basically in 14 the normal course of a trial where they would 15 say, okay, here is the exhibit. And Ms. Conlin 16 would have to decide what objections to assert 17 to those cross-examination exhibits. 18 THE COURT: Was the procedure that was 19 set up for just exhibits to be used on direct 20 or all exhibits? 21 MR. CASHMAN: The procedure for the 22 Special Master and for the use of exhibits 23 really pertains to direct examination. I think 24 that both sides are of the belief that exhibits 25 for cross-examination do not necessarily have 10857 1 to have been something that was disclosed 2 because things happen during trial and issues 3 come up and therefore an exhibit which wasn't 4 thoroughly vetted through the Special Master 5 process may then become relevant. 6 MS. NELLIS: If I may briefly, Your 7 Honor. 8 THE COURT: Sure. 9 MS. NELLIS: I think Mr. Cashman 10 inflated two pieces of this. 11 With respect to plaintiffs' direct 12 case, the vast majority of the documents that 13 they show to the jury were preadmitted. There 14 were, in fact, some new documents that they 15 disclosed at the end, documents like the time 16 lines, however, because they were already in, 17 they -- what they've been doing is putting the 18 document up on the screen. 19 And after my request they are now 20 mostly giving us a copy of the exhibit but, in 21 fact, it's been very hit or miss. I think 22 that's just procedural and, perhaps, everybody 23 will get a little better. 24 THE COURT: Did I overrule an 25 objection that Microsoft made to that 10858 1 procedure? 2 MR. CASHMAN: Your Honor -- 3 MS. NELLIS: You asked both sides 4 to do it -- Mr. Cashman, if I may please. 5 THE COURT: To do what? 6 MS. NELLIS: You requested that 7 plaintiffs provide Microsoft with a copy of the 8 document they were showing on the screen 9 because we requested that courtesy. And they 10 did. 11 THE COURT: Prior to showing -- 12 MS. NELLIS: But they have not been 13 giving it to us prior to showing it. That is 14 not what's been going on. I do think it will 15 be helpful to both sides if we could at least 16 have that courtesy established as a standing 17 rule and make sure we do get that for a moment 18 or two. 19 Now, on cross-examination, of course, 20 both sides do agree, and I think the Court 21 agrees too, you don't preclear what it is one 22 is going to do on cross-examination. We don't 23 know what exhibits they're going to use either 24 on direct. But certainly on cross-examination 25 you're not confined to that set of exhibits. 10859 1 But most of the exhibits that 2 Mr. Tulchin used had gone -- had been 3 designated, previously designated. Of course, 4 there were some that weren't, but most of them 5 were. 6 But it isn't a matter of when it comes 7 to our side simply saying here is a copy of the 8 exhibit with the exhibit number. Take a 9 breath. Now we're going to put it up on the 10 screen. 11 I'm sure the Court recalls in each 12 instance Mr. Tulchin had to bring a copy to the 13 witness, give a copy to Ms. Conlin, wait while 14 Ms. Conlin decided whether to raise an 15 objection. And Ms. Conlin raised an objection. 16 Of course, we had no objections that we could 17 raise unless they were doing something improper 18 like they did with 2266 because Your Honor 19 already admitted those. 20 So unless she was using -- Ms. Conlin 21 was using new undisclosed documents as she did 22 very much so during the redirect, and we went 23 through an admissions process at the end with 24 those, we just a have a disparity of what the 25 sides are doing here. Their's are in evidence. 10860 1 They can use them as they want. Ours have to 2 go through this process. 3 My lead here, what I'm asking for 4 here, and I think we need to clear up what the 5 objections are in order to go forward, is that 6 our evidence be in the same place for use in 7 the courtroom. If we need to give that 8 evidence a different title than "admitted," but 9 let's say "for use without objection" so that 10 they can, you know, somehow feel comfortable 11 that we aren't going to use this evidence or 12 won't be allowed to use this evidence on a 13 directed verdict, I'm okay with that. Although 14 I think my representation to the Court today 15 and to counsel for plaintiffs should be enough. 16 But that is what we have here. We 17 have a situation where they have thousands and 18 thousands and thousands of exhibits without 19 objection which are admitted and free for use. 20 And we have thousands and thousands -- we only 21 have two thousands and thousands, they have 22 three -- but we have thousands and thousands of 23 exhibits that are also without objection but 24 are not free for use. And I think the jury 25 plainly sees that. 10861 1 THE COURT: Is this something I 2 created, this process? 3 MS. NELLIS: Yes, Your Honor. 4 MR. CASHMAN: If, Your Honor -- 5 MS. NELLIS: I think this is just how 6 this has spun out as a result of the various 7 rulings on admissions of evidence, but it is 8 where we land now. 9 THE COURT: So have I overruled a 10 specific objection you made on the presentation 11 of evidence that has caused this disparity? 12 MS. NELLIS: Well, yes, Your Honor. 13 You overruled my objection that the document 14 should be precleared but then should come in 15 through witnesses with any nonused exhibits 16 being admitted at the end of the process. You 17 ordered that we would have to go through and 18 make our objections before they were used with 19 the witness. And you admitted them, 20 plaintiffs' exhibits, into evidence. 3600, 21 3700 plus exhibits are in evidence, but now we 22 can't have the same thing is what plaintiffs 23 say. 24 THE COURT: I've ruled you can't have 25 the same thing? 10862 1 MS. NELLIS: No. You ruled we can. 2 Plaintiffs are here arguing that you should 3 reverse yourself. 4 THE COURT: I want to get one thing 5 straight. What did I specifically overrule 6 that caused a disparity in the presentation? 7 MS. NELLIS: The rule -- what is 8 causing the disparity in the presentation is 9 that they have thousands and thousands of 10 exhibits that are admitted, thus, free for them 11 to use. Our exhibits are not admitted, so we 12 have to go to through a procedure with each and 13 every one of them before we can show them to 14 the jury. 15 THE COURT: Are these 2000 exhibits 16 that you seek to have admitted, are they for 17 your direct or cross or what are they? 18 MS. NELLIS: They're to be used. We 19 obviously -- we will use the ones we think are 20 properly used on cross on cross, and we want to 21 be able to use them free of the procedural 22 hamstrings that we are currently under. 23 THE COURT: And under the same rules 24 wouldn't the objection to these only be 25 relevancy and prejudice? 10863 1 MS. NELLIS: Exactly. Just the 2 reserve trial objections. That's exactly 3 correct, Your Honor. 4 THE COURT: Okay. 5 MR. CASHMAN: Your Honor, if I may. 6 The way Ms. Nellis presented her 7 argument was quite confusing, so I'm going -- 8 I'm going to try to do a couple of things with 9 the Court's permission. 10 First of all, just to straighten out 11 the record on the process for direct and cross. 12 The parties -- when we have prior testimony 13 designations, Microsoft sees everything that is 14 going to be read or shown as an exhibit. 15 That's all vetted, as the Court knows, and we 16 have arguments before the Court about what can 17 be shown, what can't be shown. So that's all 18 worked out with Microsoft in advance. 19 In the Court's order that we showed to 20 Microsoft, what we are actually going to be 21 playing on a videotape, that's what that order 22 concerned, to make sure that we had the exact 23 same script as far as prior testimony 24 designations. And in that instance the direct 25 and the cross as far as the testimony and as 10864 1 far as the exhibits is thoroughly vetted 2 beforehand, and so that's not an issue. 3 On direct examination, obviously, the 4 exhibits that are used in this instance by 5 Ms. Conlin with Mr. Bradford, for example, were 6 exhibits that had been cleared of objections 7 either through arguments to the Court on 8 Appeals from the Special Master or through meet 9 and confers with Microsoft. And so there's no 10 issue there. 11 On cross-examination what Microsoft 12 was doing is oftentimes had new exhibits and 13 they would present those, and that's when 14 objections might arise in the normal course 15 just as they usually would. So there's been no 16 problem about the process, the way it's worked 17 so far. 18 There have been a couple of glitches 19 where a word gets left out of the videotape, 20 but we've addressed those kind of things with 21 the Court as they come up and both sides have 22 been trying to minimize that situation. 23 Now, let's talk about the real -- the 24 real issue and where Microsoft is really missed 25 the boat. 10865 1 They keep on attempting to say that 2 the plaintiffs' exhibit proffer of exhibits and 3 the plaintiffs' presentation of their case is 4 the same -- that Microsoft should be in the 5 same position right now that the plaintiffs 6 are. 7 Ms. Nellis -- I wrote this down -- 8 that they should stand in the same shoes, she 9 said, plaintiffs and Microsoft. And that's 10 just flat out wrong because that's contrary to 11 the law. 12 The plaintiffs are entitled to put on 13 their case first without Microsoft putting on 14 their case at the same time. That's the law in 15 Iowa. That's the rule, and that's the way that 16 evidence is to proceed. 17 So Ms. Nellis is just flat out wrong 18 in suggesting that Microsoft is entitled to be 19 in the same situation. That's wrong. 20 They're not in the same shoes. 21 Plaintiffs get to put on their case, and 22 Microsoft has to wait until its turn comes. 23 That's the law. Microsoft has to wait its 24 turn, and then they can put on their evidence. 25 So Ms. Nellis starts from a faulty 10866 1 premise. That's just plain wrong and blatantly 2 wrong. She cites Rule 611 in saying that the 3 Court has discretion about how evidence is 4 presented. That's true to a point. 5 What that means is that the scope of 6 cross-examination has to be limited to the 7 direct examination generally, but the Court has 8 discretion in making decisions about whether 9 examination is reasonably within the scope of 10 the direct. That's wholly different than what 11 Microsoft is trying to do here, which is to 12 introduce 2800 and some odd exhibits which are 13 not within in any way within the scope of 14 cross-examination. 15 In fact, Your Honor, the case which I 16 described to the Court and which is cited in 17 our papers, the Burk case, addresses this very 18 point and highlights that there is no 19 discretion to permit Microsoft to put its case 20 on during plaintiffs' case, which is clearly 21 what is happening when you have a proffer of 22 2843 exhibits, none of which Microsoft has 23 identified as being an exhibit that they're 24 going to use for cross-examination. They 25 failed to identify a single one. And, in fact, 10867 1 in their papers, Your Honor, you'll see that 2 Microsoft says several times they may never use 3 any of these exhibits during examination. 4 So it doesn't have anything to do with 5 cross-examination. It has everything to do 6 with Microsoft trying to put its case in during 7 our case. They're not entitled to stand in the 8 same position that plaintiffs are. 9 Ms. Nellis comes back over and over 10 again and clearly this is what she's 11 complaining about is the disparity of 12 procedure. Well, that's the way the world 13 works when you have a trial. The plaintiffs 14 are entitled to put on their evidence. That's 15 the rule. That's the law. And there's nothing 16 that entitles Microsoft to puts its case in 17 wholesale with a proffer of 2843 exhibits any 18 more than they would be entitled to have a 19 witness on the stand and go off on subjects of 20 their choosing on cross-examination. Both 21 would be inappropriate under Rule 919 and under 22 611 and under every applicable case law 23 decision. They're simply not allowed to do it. 24 Ms. Nellis complains about the 25 cross-examination process. Well, here is the 10868 1 answer to that, Your Honor. 2 First of all, some of their defendant 3 exhibits that they've used with Mr. Bradford 4 and which undoubtedly will be the case with 5 other witnesses are new exhibits. So that's 6 something that the Court gets to address as to 7 whether that is within the scope of 8 cross-examination and which is necessarily 9 something that has to be decided when that 10 witness is sitting on the stand. It doesn't 11 mean that Microsoft is entitled to make a 12 proffer of 2843 exhibits which, of course, 13 don't even include any of these unnamed 14 exhibits, new exhibits, which they want to use 15 during cross-examination. 16 So you're talking about apples and 17 oranges there. 18 Second of all, Microsoft says it's 19 not. It's not fair that we have to show the 20 exhibit to plaintiffs and to the Court and wait 21 and see if there's an objection and then to 22 have the objection ruled on. Well, that's the 23 way it happens every day in a lot of trials. 24 But, furthermore, if Microsoft doesn't want to 25 have objections during the course of the trial, 10869 1 all they have to do is say: Here is a list of 2 our exhibits that we want to use in 3 cross-examination for Mr. Bradford tomorrow. 4 Mr. Plaintiff, do you object to any of these? 5 We say, yes, we do object to these and 6 here are our objections. And then they can 7 say, okay, let's take those objections to the 8 Court and ask for the Court to revolve those so 9 we don't have to have objections in front of 10 the jury. And that's a perfectly fine 11 procedure for addressing that if Microsoft is 12 truly concerned about having objections in 13 front of the jury. 14 The other thing is, Your Honor, that 15 the procedure which governs a proceeding like 16 this is going to apply to the plaintiffs when 17 Microsoft has its case. When we want to 18 cross-examine their witnesses, if we put a new 19 exhibit that they haven't seen before and put 20 it on their desk and say we're going to use 21 this exhibit right now, they're going to be in 22 the same position where they can object. We 23 have to wait for the Court to rule. And all of 24 that highlights, Your Honor, is that the 25 procedure is already balanced so that both 10870 1 parties have the same procedure. And that's 2 what the rules are intended to do. 3 What Microsoft is asking it to be 4 given an advantage to put their case in while 5 plaintiffs are putting their case on. And 6 there is not a single authority in Iowa which 7 permits that. And, in fact, the only 8 authority, all the authority in Iowa, says it's 9 not permitted and that there is no discretion 10 for Microsoft to engage in that kind of 11 proffer. 12 So plaintiffs request, Your Honor, 13 that Microsoft's proffer of 2843 exhibits, that 14 it be rejected. If Microsoft wants to make the 15 proffer of those exhibits, it should do it in 16 its case-in-chief as per the rules and the law 17 of Iowa. 18 Thank you. 19 MS. NELLIS: Briefly, Your Honor, if I 20 may. 21 THE COURT: Yes. 22 MS. NELLIS: With respect to 23 plaintiffs' authority, the Burk case and the 24 Shoberg case, the issue is whether defendants 25 had on cross-examination improperly exceeded or 10871 1 sought to exceed the scope of direct 2 examination of a witness. 3 In Burk, defense counsel asked several 4 questions of plaintiffs' witnesses that were 5 not proper cross-examination, and the Iowa 6 Supreme Court said that although trial courts 7 have discretion over the order of introducing 8 testimony, that discretion is not broad enough 9 to permit opposing party to go beyond the 10 appropriate limits of cross-examination. 11 Shoberg, it's the same thing. The 12 defense counsel asked several questions during 13 cross-exam that went beyond the scope of 14 direct. Trial court sustained objections to 15 those questions, and the Iowa Supreme Court 16 affirmed, ruling that the defendant was not 17 entitled to examine the plaintiff's witness 18 until the defendant's case-in-chief. 19 The principles articulated in Burk and 20 Shoberg are exactly the ones codified in Iowa 21 Rule of Evidence 5.611: That cross-examination 22 should be limited to the subject matter of the 23 direct examination and matters affecting the 24 credibility of witnesses. 25 Neither Burk or Shoberg have any 10872 1 bearing to this extent because Microsoft does 2 not seek permission to exceed the scope of 3 cross-examination. That is not what's going on 4 here. 5 We're not trying to interpose our 6 defense prematurely. Indeed, none of 7 Microsoft's exhibits will be shown to the jury 8 during plaintiffs' case unless and until 9 they're used during appropriate 10 cross-examination. 11 Now, Mr. Cashman takes exception to 12 the use of my phrase or request that we stand 13 in the same shoes, saying we're not standing in 14 the same shoes because we don't get to come and 15 invade their direct case. What I said was we 16 should stand in the same shoes simply when it 17 comes to procedure. I am not in any way 18 suggesting that plaintiffs are on direct and 19 that we are on cross and that we are confined 20 to the scope of cross-examination at this point 21 in time. 22 What we're talking about here is an 23 issue of administration, not scope of 24 examination. Nobody is trying to go outside 25 the scope of direct. That is not what we're 10873 1 requesting, and as I made perfectly clear, I 2 thought, in my argument, though apparently it 3 was quite confusing to Mr. Cashman, that we 4 would be happy to stipulate to or have said so 5 on the record that we are not seeking to have 6 documents that -- we will not seek or rely on 7 documents that are not used with the jury in 8 any directed verdict motion. 9 I also never said Mr. Cashman has 10 called me on it twice in our papers that 11 Microsoft said it may never use these exhibits 12 in their examination. The reference was to 13 plaintiffs' exhibits and the fact that they 14 have admitted thousands upon thousands of 15 exhibits that they are likely never to use. 16 And we all know why. It was for the purpose of 17 posting it on their website. 18 Simply looking here for some parity of 19 use of documents as they're used before the 20 jury with witnesses, I'm not discussing here, 21 there's nothing to do with the video. 22 If the issue really is, although I 23 don't think it really is, but if the issue 24 really is that they don't want these documents 25 admitted, I'll make a suggestion that, perhaps, 10874 1 what we do is go forward, maintain the February 2 15th date, allow plaintiffs to put in any 3 relevance objections they may have. We can, 4 quote, preadmit Microsoft's documents with an 5 understanding that Microsoft may use 6 nonobjected to preadmitted documents in the 7 same way plaintiffs use their admitted 8 documents in terms of showing them to the jury 9 and then we will be in a position to introduce 10 them formally on the first day of Microsoft's 11 direct examination. I think that would solve 12 everybody's problem. 13 The last thing I just have to address, 14 and I'll do it quite briefly, is Mr. Cashman's 15 suggestion that what we should do here is 16 predisclose to plaintiffs documents we intend 17 to use on cross-examination. 18 First of all, we have no idea what 19 documents we're going to use on 20 cross-examination, but in any real sense until 21 we hear the direct examination because, as Your 22 Honor knows, and as Mr. Cashman has said many 23 times today, we are limited by the scope of 24 that examination. 25 However, if Mr. Cashman is making an 10875 1 offer today that both sides are going to 2 preclear any exhibit they intend to use on 3 cross-examination prior to cross-examination, I 4 reject it because it's improper. But I suggest 5 that, perhaps, if Ms. Conlin were called in to 6 comment on such a procedure that Mr. Cashman 7 would be packing his bags at this time. It is 8 clearly not the way cross-examination can 9 proceed or was ever intended to proceed. 10 But I think we should put aside the 11 substantive argument because I have made, I 12 believe, as clearly as I can, every 13 representation that we will not seek to rely on 14 any admitted or precleared document that is not 15 shown for the jury before the jury for purposes 16 of any motion for directed verdict on the close 17 of plaintiffs' case and get to what is really 18 at the heart here, which is a matter of 19 administration and procedure. 20 And if we can clear these 2800 21 documents with objections, whether we call them 22 admitted or preadmitted or something else, then 23 both sides can go forward before the jury in 24 the same manner. 25 Thank you. 10876 1 MR. CASHMAN: All right, Your Honor, 2 I'll be brief. 3 First of all, Ms. Nellis said 4 Microsoft is not going to use its exhibits 5 unless on cross-examination. The obvious 6 question then is: Why do they need 2843 7 exhibits admitted? They don't. That's the 8 answer. They don't. 9 And if they've got exhibits they want 10 to use on cross-examination, they're subject to 11 the normal procedure. 12 Next, she -- Ms. Nellis kept 13 emphasizing that this is a matter of 14 administration. That's just contrary to the 15 rules and the administrative aspect, if she 16 wants to call it an administrative aspect, the 17 administrative aspect of admission of 18 defendant's exhibits are properly handled 19 during their case-in-chief. That's what the 20 rules require. 21 Again, Ms. Nellis keeps trying to 22 compare the procedure between the plaintiffs' 23 exhibits and the defendant's exhibits, which 24 overlooks the elephant in the living room that 25 the plaintiffs are entitled to get their 10877 1 exhibits admitted during their case-in-chief 2 and to use them in their case-in-chief to 3 support their claims. 4 Next, Ms. Nellis says -- well, Your 5 Honor, I'll just close out by saying the rules 6 should be followed. Microsoft should make its 7 proffer during its case. All the objections 8 and the resolution of those objections are 9 something that should be handled during its 10 case. That's the way the rules work, and 11 there's nothing unfair and, in fact, the 12 contrary is true, that is fair. That's what 13 the people who drafted the rules were doing in 14 drafting the rules, to make sure that the 15 process was fair for both parties. 16 So Microsoft's motion for the 17 admission of these exhibits should be rejected, 18 and they should make the proffer again if they 19 so choose during their case. 20 Thank you. 21 THE COURT: Anything else? 22 MS. NELLIS: Your Honor, you got it 23 exactly right the first time. Plaintiffs 24 should be required to clear out any objections 25 they have, if they want to reassert these 2800 10878 1 exhibits. And then if the Court would prefer 2 that Microsoft then hold those in abeyance to 3 offer until the first day of Microsoft -- the 4 day that Microsoft begins its case, that would 5 be fine but the objections would be cleared out 6 so that we could go forward with the witnesses 7 in the same place. I think that solves 8 everybody's problem. And I think it's a very 9 simple way to do it. Plaintiffs should do 10 this. They should do it by February 15th as 11 the Court has ordered. And if the Court would 12 like us to reserve formal admission until the 13 first day of our case, that's fine, but then we 14 will know what is objected to, what is not 15 objected to with the understanding that we can 16 go forward with those documents as if they have 17 no objections. Problem solved for everybody. 18 Thank you. 19 THE COURT: Anything else? 20 MR. CASHMAN: Nothing further from 21 plaintiffs, Your Honor. 22 THE COURT: We will take a short 23 recess for 10 minutes. Then we will proceed 24 with the other motions. The motion on Schulman 25 is next. 10879 1 MR. ROSENFELD: Yes, Your Honor. 2 Thank you. I will try to be brief and to the 3 point. 4 The issue here is a pretty simple one. 5 Plaintiffs expert, Andrew Schulman, as you 6 know, Your Honor, because you've heard over the 7 last several weeks about all of this discussion 8 about undocumented APIs and all this other 9 technical stuff relating to the code, well 10 that's what Mr. Schulman does. He reads code 11 and offers opinions about it. And he has teed 12 up a supplement expert report that was filed on 13 the 19th of December, 16 pages. It's more in 14 the form of an outline than a detailed expert 15 report. Not stimulating reading for those of 16 us who don't spend our time going through lines 17 of code. 18 THE COURT: December 16th? 19 MR. ROSENFELD: December 19th. 20 Plaintiffs provided a copy of that 21 report with the papers. What they didn't 22 provide a copy of was the supplement of 23 materials, a list of materials that he 24 considered in connection with it. With the 25 Court's permission, I would like to hand that 10880 1 up to you. 2 THE COURT: Sure. 3 Thank you. 4 MR. ROSENFELD: The reason, I think, 5 Your Honor, that it's important that you have 6 this in connection with this motion is because 7 this 32-page document sets out all of the 8 materials that Mr. Schulman purported to review 9 in connection with the filing of his 10 supplemental expert report. 11 Now, he had filed an original earlier 12 expert report on June 2d. These materials 13 relate only to his supplemental report. 14 If I could direct you, the first 13 15 pages of this report make reference to source 16 code. And as you will no doubt recall, some of 17 this source code was produced in response to a 18 motion by plaintiffs and a response from an 19 order from Your Honor and it was produced. It 20 was a rolling period. It was a difficult 21 production. Some of it was late, and we did 22 not object to Mr. Schulman reviewing it and 23 presenting a late report based on his review of 24 those materials. After all, that was only 25 fair. We couldn't expect him to meet a 10881 1 deadline before he had the materials. However, 2 I would point out that of the first 13 pages 3 of source code, not all of the source code 4 falls into that category of materials produced 5 pursuant to the Court order. But perhaps more 6 significantly for these purposes, the 7 subsequent 20 some pages, I believe, since 8 there are 32 all together or 19, don't concern 9 source code at all. Those are other documents 10 and materials that were produced before or 11 available before or publicly available 12 materials that Mr. Schulman also reviewed in 13 connection with his December 19th report. 14 In addition, two CDs were produced to 15 us containing other materials that Mr. Schulman 16 reviewed. They have thousands and thousands 17 and thousands of pages of materials on it that 18 he reviewed in connection with this report. 19 Now, this report and the materials in 20 it is obviously of some importance to 21 plaintiffs, and I say that for two reasons. 22 One, they filed this supplemental 23 report. They undoubtedly did that because they 24 anticipate that Mr. Schulman will testify at 25 trial, and they wanted to make sure that 10882 1 through their disclosures they preserve the 2 ability for him to testify about these 3 subjects, relatively standard practice. That's 4 why they did it. 5 Second, as Your Honor knows, they 6 sought permission from this Court to modify the 7 protective order precisely so that they could 8 provide these materials, that is, 9 Mr. Schulman's reports and related materials to 10 the Department of Justice and to the Iowa 11 Attorney General. 12 When they made that motion to Your 13 Honor, they requested -- make sure I've got the 14 right document in front of me -- they requested 15 that they be able to provide their findings to 16 the Department of Justice and to the Iowa 17 Attorney General. And they also requested and 18 I quote, the right to discuss the basis for 19 those findings with those parties, including 20 any confidential or highly confidential 21 discovery produced in this case. 22 So we have materials, voluminous 23 materials that were reviewed. We have a new 24 supplemental expert report, and we have a 25 report and material that plaintiffs sought to 10883 1 provide to the Department of Justice and to the 2 Iowa Attorney General. But they don't want to 3 give us the opportunity to take the deposition 4 of Mr. Schulman in connection with this 5 supplemental report to determine how it was 6 that the materials he reviewed support the 7 conclusions he had reached or what he did with 8 that 32 pages of materials and those two CDs of 9 materials that he purported to review. They 10 don't want to give us that opportunity. 11 THE COURT: Were these additional 12 materials beyond the first 13 pages, were they 13 provided before? 14 MR. ROSENFELD: Yes. They were 15 available before or they were in the public 16 bidding. 17 THE COURT: No, no. When he gave his 18 first report, were any of these repetitious? 19 MR. ROSENFELD: That's a very good 20 question. This morning I asked the same one. 21 I asked someone to go back and look and 22 determine whether there was overlap between the 23 first set of materials provided to us and those 24 materials. And based on that review, Your 25 Honor, I was informed that there is not 10884 1 overlap. 2 Now, plaintiffs' resistance in this 3 regard -- and we sent him a letter asking and 4 they sent back a letter refusing a deposition 5 in connection with this report. 6 The pretrial schedule here did 7 contemplate rebuttal reports, and when rebuttal 8 reports were issued, the pretrial schedule was 9 quite explicit in saying that there would be a 10 deposition and setting a date by which that 11 deposition had to be undertaken. 12 In addition, several of plaintiffs' 13 experts submitted not rebuttal reports, but 14 supplemental reports, particularly Professor 15 Netz who was plaintiffs' damage expert. 16 She submitted a supplemental report 17 because she had changed her calculations, and 18 we requested a deposition so we could inquire 19 into her new work. And plaintiffs agreed to 20 that deposition, as they should have. And she 21 was deposed the first time for approximately 22 six hours and I think 47 minutes or something 23 close. 24 And the second time in the deposition 25 relating to her supplemental report, she was 10885 1 deposed for five hours and change. 2 So we have the practice here when 3 there's a supplemental report of allowing 4 discovery. And, of course, we have the overall 5 Iowa rules that say the purpose of expert 6 discovery and expert depositions is to make 7 sure that is not a trial by ambush. It's the 8 search for truth, not surprise. That is 9 particularly critical in a case like this where 10 Ms. Conlin has said repeatedly this is a case 11 about experts. 12 The experts are going to talk about 13 the overcharge. They're going to talk about 14 the calculations. And the notion that one of 15 the standard barriers on an issue about 16 security and undocumented APIs, principally the 17 11, about which we've all heard so much, is 18 going to be shielded from explaining his 19 conclusions makes no sense and it's flatly 20 inconsistent with Iowa law. 21 THE COURT: How long was he deposed 22 the first time? 23 MR. ROSENFELD: I think close to seven 24 hours on his initial report. And, of course, 25 at that point we had no idea that there would 10886 1 be a supplemental report. 2 THE COURT: Okay. 3 MR. ROSENFELD: There are good reasons 4 why a supplemental deposition is important 5 here. One is it is not at all clear, and now I 6 will tell you, Your Honor, in all candor, what 7 I'm telling you is based on what people who are 8 far more adept technically have told me than 9 what I know. But if you read through the 10 report, there are a lot of technical issues 11 that are just sketched out. For example, I 12 think I've got this right, the difference 13 between calling on undocumented APIs, that is, 14 calling on undocumented APIs in the operating 15 system as opposed to copying them, which is a 16 distinction that Mr. Schulman makes and it was 17 coyly set out in the letters to the DOJ and the 18 Iowa Attorney General. It's a difficult 19 technical issue. We need to understand what he 20 did in reviewing all this code and how he 21 reached these technical conclusions. This is 22 not something where good cross-examination 23 skills will substitute for technical know-how. 24 In addition, the methodology is not 25 described in great detail. At some points, for 10887 1 example, he discusses using a hash to determine 2 whether the code was copied. 3 When I heard hash, the first thing I 4 thought of was corn beef. That's not, I 5 suspect, what he has in mind here. It has to 6 do with, apparently, some algorithm in which 7 you calculate whether the code is or is not the 8 same. 9 THE COURT: I hope it's nothing 10 illegal. 11 MR. ROSENFELD: That's not what I 12 thought of. Even if it had been, I was not 13 going to mention it. But, anyway, this is 14 relatively complicated stuff. There are a lot 15 of materials that have been reviewed. We need 16 to know what this key witness did. 17 Now, what is the argument that we 18 shouldn't be able to do it. In essence, and I 19 think in total, frankly, plaintiffs have argued 20 that some of the source code that was produced 21 here was produced late, and that's why 22 Mr. Schulman looked at it after the deadline. 23 That's why he submitted a report. That issue 24 was raised before Your Honor at great length, 25 and you ruled and it was produced late, but you 10888 1 denied plaintiffs' motion for sanctions 2 appropriately because you said there was no 3 evidence that it was willful or intentional. 4 It was a tough job, and we worked very hard, 5 but we didn't get it completely done the first 6 or second or third time through. 7 So there was a delayed production, but 8 you denied the sanctions. Properly viewed this 9 motion is an effort to get them again. They're 10 simply saying to Your Honor you denied the 11 sanctions the first time. What we want you to 12 do now is impose a sanction on Microsoft, and 13 that sanction is keep them in the dark. Don't 14 let Microsoft do the kind of discovery it needs 15 to do to figure out what this key witness is 16 going to say. Just let us put him on the 17 stand, say the plaintiffs, and penalize 18 Microsoft by making them have to do their 19 cross-examination blind. 20 Now, that can only be seen for what it 21 is: Request for a sanction that this court 22 previously denied. And it is certainly not 23 appropriate here. 24 Mr. Schulman got the opportunity to 25 review the code. He got the opportunity to 10889 1 file a late report with no objection for loss 2 because we recognize that he needed to review 3 the materials. 4 Now we need an opportunity to examine 5 him. That coupled with the fact that a great 6 deal of his report relates to source code that 7 wasn't produced late and that we've gotten this 8 32 page disclosure of all the materials we 9 relied upon, roughly two-fifths of which is 10 source code and three-fifths of which is not. 11 So in this circumstance a deposition 12 makes imminently good sense, and it's 13 consistent both with fairness to the plaintiffs 14 in letting them file a supplemental report and 15 fairness to Microsoft in letting us do 16 discovery in someone who is going to ply his 17 ware not only in this courtroom but to the 18 Department of Justice and to the Iowa Attorney 19 General as well. 20 Plaintiffs' last argument. They made 21 this argument earlier on in connection with 22 depositions too. You got seven hours to depose 23 him on his first report. That's all the 24 stipulation allowed. If you wanted to depose 25 him on his supplemental report, you should have 10890 1 saved some time. 2 Now that by my mind is worse than 3 wrong, it's just silly. Number one, at the 4 time we took his deposition the first time 5 through, we didn't know he was going to file a 6 supplemental report. None of the parties in 7 this case has reserved time out of their 8 initial deposition on the off chance that there 9 might be a supplemental report. 10 Second, the Court's scheduling order 11 provides when there's another report or a 12 rebuttal report, the clock starts over again 13 and you get your seven hours or whatever it is. 14 And, third, a common law has developed 15 in this case when Dr. Netz filed her 16 supplemental report. Nobody came in here and 17 said you have your seven hours. You don't get 18 anymore. We took her deposition as was 19 appropriate. 20 So I won't summarize it. I haven't 21 talked for that long, I hope. 22 I don't know if that laugh meant I 23 have or I haven't, but I don't think I have. 24 But it seems to me that the case here for a 25 deposition is compelling, and there is no basis 10891 1 for the Court granting what is, in effect, 2 plaintiffs' motion for sanctions by keeping us 3 in the dark about a key witness who is going to 4 testify on these very technical issues for a 5 blind cross-examination, one that is unusually 6 fraught with danger and peril. 7 Thank you, Your Honor. 8 THE COURT: Thank you. 9 Mr. Williams, I assume. 10 MR. WILLIAMS: Thank you, Your Honor. 11 THE COURT: You're going back and 12 forth, right? 13 MR. CASHMAN: That's correct. 14 MR. WILLIAMS: We're trying to mix it 15 up and keep it interesting for you. 16 Let me start with the notion that 17 Microsoft is somehow being kept in the dark 18 about its own source code. 19 I don't want to have to go through the 20 whole litany of what it took for us to get the 21 source code because we all lived through that, 22 and Your Honor heard plenty about it. But the 23 fact of the matter is it took, as Mr. Rosenfeld 24 conceded, numerous attempts. It took numerous 25 trips to Your Honor to get the source code. 10892 1 Frankly, I'm still not sure that we even have 2 it all because there was an exchange of letters 3 in November that raised some questions about 4 that, which I'll speak to in a moment. 5 But throughout this, one must not 6 forget that it is Microsoft's source code that 7 we're talking about. Microsoft built it. 8 Microsoft built the programs that use it. They 9 built the programs that called the APIs that 10 Mr. Schulman said were not improperly 11 documented. So it certainly is not the case 12 that Microsoft is in the dark about the 13 particulars of its own source code and the 14 issues that are raised by Mr. Schulman's 15 report. 16 And this is important because almost 17 two weeks ago we were before Your Honor and the 18 roles were reversed. The plaintiffs were 19 seeking discovery from Microsoft. And Your 20 Honor will recall that what we were seeking was 21 discovery about Microsoft's post-2002 conduct. 22 There was a long back and forth. Mr. Jacobs 23 argued on our behalf, and Mr. Neuhaus argued on 24 Microsoft's behalf. And our issue was that 25 there were numerous outstanding discovery 10893 1 requests for which there had not been a 2 response, certainly nothing substantive had 3 been produced. 4 And Mr. Neuhaus's response relied 5 heavily on the notion that because trial is 6 already commenced, it's simply too distracting, 7 too much work now for the parties to engage in 8 discovery. 9 Your Honor, if I could, I would like 10 to approach with a few excerpts from 11 Mr. Neuhaus's argument. 12 THE COURT: Thank you. 13 MR. WILLIAMS: You can see here he 14 didn't just say it once or twice. He said it 15 at least three times over and over again that 16 it was fundamental. Fundamental fairness was 17 that even if our discovery requests asked for 18 relevant information, that it was simply too 19 late. That we waited too long. And that, 20 therefore, we should not be -- or not be 21 allowed to discovery that we were seeking. 22 And Your Honor's ruling sustained that 23 objection. Your Honor said, no, the request is 24 untimely and, therefore, the motion was denied. 25 Well, Your Honor, I ask you today to 10894 1 adopt the Neuhaus doctrine. The Neuhaus 2 doctrine is discovery ends when the trial 3 begins. And the fact is trial has begun. 4 We're well into trial. We're putting on 5 witnesses. We're doing all of these things, 6 and we should not have to now stop and prepare 7 one of our expert witnesses for a deposition. 8 And we shouldn't have to do that not only 9 because of the obvious symmetry in positions 10 now, but because unlike the motion that we 11 brought regarding post-2002 conduct, this 12 situation really is of Microsoft's making. We 13 should have received the source code that is at 14 issue here, at least much of it, over a year 15 ago. 16 But what happened was it came out in 17 dribs and drabs. First they wanted us to be 18 satisfied with code that they had produced in 19 other cases which they sort of begrudgingly 20 gave us years after it should have been 21 produced. Then we couldn't reach agreement on 22 what else was left to be produced, so we had to 23 come to Your Honor, not once or twice, but even 24 three times. Your Honor set deadlines which 25 Microsoft sort of complied with but then didn't 10895 1 and so on. 2 Mr. Rosenfeld says that denying 3 discovery, denying the deposition of 4 Mr. Schulman at this point would be tantamount 5 to granting our motion for sanctions because of 6 this dilatory conduct by Microsoft. 7 Well, Your Honor, I submit to you that 8 we were not sanctioned, at least I don't think 9 it was Your Honor's intention to sanction us in 10 denying us discovery of Microsoft's post-2002 11 conduct. We simply asked for the discovery. 12 Your Honor heard everybody out and decided no. 13 It's untimely. That's all we're saying here, 14 Your Honor. It's not a sanction we're asking 15 for. 16 The fact is we have given discovery. 17 We gave them a supplemental report, and we gave 18 them the list of materials that Mr. Schulman 19 looked at in drafting that report. But now for 20 us to have to the take the additional step and 21 go through the additional burden of preparing 22 him for a deposition, we submit to you, is 23 unfair, not fair as Mr. Rosenfeld states. 24 Mr. Rosenfeld had reference in his 25 argument to the Department of Justice and the 10896 1 letter that went to the Department of Justice. 2 I have yet to hear why that procedure, which 3 really is now taking place outside of this 4 courtroom, why that procedure has any relevance 5 to Mr. Schulman's opinions or what he's going 6 to be testifying about at trial. Maybe in his 7 remarks after my argument we will hear about 8 that. 9 The fact is on June 2nd Mr. Schulman 10 submitted an expert report. He did identify 11 some APIs that were undocumented based on the 12 information that he had at that time. We had 13 this long-standing dispute about the source 14 code that had not been resolved. Microsoft was 15 aware of it as an issue. Microsoft took his 16 deposition, took over seven hours, didn't 17 reserve any time. I don't want to make an 18 issue about that. Frankly, I agree with 19 Mr. Rosenfeld. It's kind of a silly argument, 20 and I'm willing to make that concession now. 21 But what we feel very strongly about is that 22 there should be no time at all for 23 Mr. Schulman's deposition because it's 24 untimely, consistent with Your Honor's previous 25 rulings. 10897 1 After Microsoft took Mr. Schulman's 2 deposition, we were unable to reach any 3 agreement on the source code issue. Microsoft 4 had produced some source code, and there is a 5 litany of letters in the record on this. A lot 6 of the source code came in fragments. It was 7 riddled with viruses and worms and corrupted 8 disks and all these other issues. Your Honor 9 ordered Microsoft to produce the remaining 10 source code that we were asking for by 11 September 1st. It continued to come out in 12 these dribs and drabs. The September 1 13 deadline came and went and we still didn't have 14 a significant portion of it relating to Windows 15 Media Player. We came back, asked again. 16 Microsoft then said, and I believe it 17 was for the first time, said, well, this source 18 code, it's sort of scattered throughout the 19 Microsoft facility in different departments, so 20 it's real hard to get it all together, which 21 was quite a revelation to us. But that was 22 their reasoning, that was their excuse. Your 23 Honor accepted that, set a new deadline, 24 October 31st. It turns out Microsoft didn't 25 meet that deadline either. There was another 10898 1 exchange of letters. I believe it's in the 2 record regarding that. 3 And this is when we asked for a 4 sanction, which as Mr. Rosenfeld has pointed 5 out, was denied. 6 Now, despite the fact that Microsoft 7 has been leaving its source code apparently 8 laying around at Microsoft so it has to be 9 gathered up and compiled and sent to us, 10 Microsoft did insist upon onerous restrictions 11 in analyzing that source code. Your Honor will 12 recall that you issued a lengthy order on that. 13 We complied with that order. 14 Mr. Schulman has been required to fly 15 to Minneapolis and go to the Zelle offices and 16 look at the source code there where it's kept 17 under lock and key. I dare say the procedures 18 we have are probably more secure than those at 19 Microsoft because at least we can say it's all 20 in one place. But he's come out and looked at 21 the source code. But the problem is as that 22 source code has been sent to us in bits and 23 pieces, Mr. Schulman might on occasion run a 24 test and then we get more source code so he has 25 to rerun the tests. So this is really 10899 1 resulting in a lengthy serialized, complicated 2 process for him that would have been mitigated 3 had Microsoft simply complied as it should, as 4 Your Honor held back in 2005, and given us the 5 source code that we were asking for. But be 6 that as it may, he did get enough together, did 7 run enough tests that he felt that he had 8 enough to issue a supplement report, that was 9 the December 19th report. 10 I understand from Mr. Rosenfeld that 11 they're not objecting to the tardiness of that 12 report because it really wasn't tardy and that 13 it was necessitated by the tardiness of 14 Microsoft. 15 Mr. Rosenfeld does seem to take issue 16 with the length of the materials -- or the 17 length of the list of materials that 18 Mr. Schulman cited that he considered in 19 connection with the supplemental report. 20 Your Honor, I have not examined that 21 list in any detail, but what I can say is, as 22 Your Honor will also recall, that in December 23 we were embroiled in Microsoft's motions or 24 motions to sanction plaintiffs for not being 25 sufficiently forthcoming about the documents 10900 1 that had been looked at by experts. And so I 2 believe that at least a partial explanation for 3 the length of that list of documents is that 4 these are documents that Mr. Schulman looked at 5 in drafting his supplemental report. 6 But, Your Honor, I would like to go 7 through the report itself and explain to you as 8 best I can why it is -- looking at the 9 substance of the report itself, why it is that 10 it really does not warrant, either 11 substantively or equitably, does not warrant a 12 subsequent deposition of Mr. Schulman. 13 The bulk of it, 75 percent of it, at 14 least, is derived almost exclusively from the 15 source code that we received from Microsoft. 16 And that it simply took Mr. Schulman time to 17 analyze. 18 The remaining portions of it are 19 contextual materials, contextual analyses where 20 he compares where Microsoft is saying no to 21 what Microsoft said at some other point in 22 time. Nothing repetitious about it. He's 23 simply explaining the significance of what he's 24 seeing in the source code. 25 The remainder is material -- it's not 10901 1 really material. It's the results of tests 2 that he ran with respect to a couple of matters 3 that corroborate earlier opinions that he's 4 already given a report on and then 5 cross-examined on in deposition. 6 Your Honor, I don't know if you have 7 the report in front of you. 8 THE COURT: I don't. 9 MR. WILLIAMS: The first 10 items -- 10 he has 13 points he makes overall. And 11 Mr. Rosenfeld seemed to cast aspirations on the 12 report and said it wasn't sufficiently 13 detailed. I take strong exception to that. If 14 you go through the report, you can see it's 15 extremely detailed. In fact, I think it's one 16 of the more detailed reports that has been 17 submitted in this case. 18 But the first point talks about the 19 source code for Windows XP and Microsoft 20 Office, providing additional bases for his 21 opinion No. 21 in his June 2nd report, which 22 was that Microsoft Office uses and copies 23 undocumented direct UI APIs. And he goes 24 through in great detail and explains why that 25 is and what it was in the source code that 10902 1 supports that earlier opinion. 2 Similarly, point No. 2. He states the 3 source code for Windows XP and Microsoft Office 4 provides additional bases for opinion No. 20 in 5 his earlier report, which was that Microsoft 6 Office and other Microsoft applications used 7 undocumented Windows line services, APIs. 8 No. 3, the source code for Windows XP, 9 Internet Explorer 7 Beta 3 provide additional 10 bases for opinion No. 36 in his earlier report. 11 No. 4, source code for XP and Internet 12 Explorer provide additional bases for opinion 13 No. 35. 14 No. 5 is the source code for XP and 15 Internet Explorer provide additional bases for 16 opinion No. 34 in his previous report. 17 And then we get to No. 6. And No. 6 18 is one of the more interesting ones for 19 purposes of today because this is one of the 20 points in the supplemental report where 21 Microsoft said, aha, this is not derived almost 22 exclusively from source code. Let me explain 23 what No. 6 is about. 24 No. 6 is entitled Microsoft's 25 application and middleware users of 10903 1 undocumented Windows APIs are not, quote, 2 trusted components. Here is what this is going 3 to. One of Microsoft's defenses, if you will, 4 to not documenting certain APIs is that other 5 Microsoft components and applications that rely 6 on those APIs are what they call trusted 7 components. So, therefore, no documentation is 8 needed. 9 Mr. Schulman says, Okay, if that's 10 true, then why is it that all this code, 11 including Windows Media Player, for example, 12 which we didn't get until very late because it 13 was some other place in the company that they 14 apparently couldn't find, why is it that all 15 these other pieces of code and all these other 16 components and applications that use the code 17 were not readily available and, in fact, had to 18 be found at the company. And he submits that 19 this is inconsistent. That it's inconsistent 20 with the notion that you would have a component 21 or application that you can't get your hands on 22 that is not kept under lock and key that is not 23 kept secure as a trusted component. 24 So he's taking what Microsoft's 25 justification has been for not readily 10904 1 producing and timely producing the source code 2 and the other material that we've asked for. 3 He takes their explanations for that. He 4 juxtaposes it against one of their defenses in 5 this case to not properly documenting APIs. 6 And he says he can't reconcile the two. 7 And then he goes further into the 8 historical record in this case, and he finds 9 more evidence of this, more evidence of the 10 fact that you have applications people doing 11 things and using APIs, not talking to the 12 operating systems people, and that that whole 13 record contradicts the notion that these 14 components and these other pieces of it are 15 trusted components. That's what No. 6 is 16 about. He's actually using this dispute that 17 we've been having and Microsoft's excuses for 18 not producing the source code, and he's 19 applying it to one of their defenses in the 20 case and saying you can't reconcile the two. 21 That's the points there. 22 Now, why does Microsoft want a 23 deposition about that? Microsoft, obviously, 24 knows what the truth is, and Microsoft is going 25 to have a full opportunity to cross-examine him 10905 1 on this opinion at trial. In fact, Microsoft 2 is going to have a wholesome opportunity to 3 cross-examine on all his opinions at trial. 4 There's no reason for there to be a separate 5 deposition on this particular point when what 6 it really is, is it's pointing out a 7 contradiction of what Microsoft is saying. 8 That's all. It's not the kind of thing that 9 Microsoft is in the dark about. 10 No. 7 is another source code. Clearly 11 a source code point which Mr. Schulman says 12 supports opinion No. 28 in his original report. 13 Point 8 is a source code point that 14 supports opinion 38 in his earlier report. 15 No. 9 simply goes to the fact that 16 he's just begun examining the protocol 17 documentation that he talks about under that 18 point and points out that he didn't find a 19 certain documentation. 20 Then we get to No. 10. One more has 21 to do with the OS/2-related warning message 22 that he found on an 6.0 source code CD. He 23 simply points out that he found a warning 24 message in this combined DOS Windows install 25 from 1991 to 1992. Again, nothing that is 10906 1 really controversial about the fact of that. 2 The implications of it may be, but not the fact 3 of it itself. 4 So then we get to the last three 5 points, 11, 12 and 13, and these in their 6 moving papers Microsoft says here we have more 7 points made by Mr. Schulman that don't derive 8 specifically from source code. And I want to 9 talk about those for a moment. 10 Number 11, Dell recovery CD contains 11 MS-DOS 7.1 from Windows 98 SE. And point 12 No. 13 which has to do with tests using 13 ToolHelp and Dependency Walker which supports 14 Mr. Schulman's earlier opinion that Windows is 15 componentizable, meaning doesn't have to be 16 bundled. It can be issued or released or used 17 as components. 18 These two points, 11 and 13, relate to 19 tests that Mr. Schulman ran that simply 20 corroborate what he's already testified about 21 in deposition and in his earlier report, which 22 were those two underlying opinions. 23 They are not new material in the sense 24 that they're not giving rise to new opinions 25 that he has. These were the same opinions that 10907 1 he had. It's just additional factual support 2 in the form of the test that he ran that 3 supports those. Again, something readily 4 examinable on cross-examination. 5 The only other point then in this 6 supplemental report is point No. 12, and this 7 is a simple observation that he makes. 8 Remember, I pointed out that in his initial 9 report, his June 2nd report, Mr. Schulman did 10 identify some undocumented APIs. 11 Point 12 in his supplemental report, 12 he notes that since then, since he talked about 13 that in his June 2nd report, Microsoft has 14 documented them. That's what point 12 is. 15 Several undocumented APIs cited in my earlier 16 report have recently been documented. 17 Again, nothing that Microsoft needs a 18 deposition for. If they want to ask him about 19 it, they can do it on cross-examination at 20 trial. Frankly, I don't think they will, but 21 that's up to them. 22 All right. So where does that leave 23 us. Mr. Rosenfeld points out that Professor 24 Netz, Dr. Netz issued a supplemental report, 25 had her deposition taken. We agreed to that. 10908 1 He's absolutely right, but that's completely 2 different than what we have here where the 3 reason for this supplemental report was because 4 we didn't get the discovery we were entitled to 5 get in a timely fashion, which they admitted 6 to. That was the reason for the supplemental 7 report. 8 Second distinction between this 9 instance and the next instance is the Neuhaus 10 doctrine. Discovery ends when the trial 11 begins, and when Professor Netz was deposed 12 under supplemental report, trial had not yet 13 begun. 14 And I submit to you, Your Honor, that 15 we're the plaintiffs. We're in the midst of 16 putting our case on. It's different than 17 defending. It's putting your case on. We have 18 witnesses we're trying to prepare. We're 19 trying to get designated testimony clear. 20 We're dealing with demonstratives, everything 21 that goes into putting your case on. It's 22 truly in a case like this a Herculean effort. 23 And so for us to have to -- in order to 24 accommodate Microsoft, for us to now pull 25 resources, including what we all agree is a key 10909 1 witness, and pull him away from his trial 2 testimony preparation and get him ready for 3 another deposition, Your Honor, I submit to you 4 is unfair. It's unwarranted given the nature 5 of the supplemental report and the context in 6 which that report was provided. 7 I have nothing further on this, Your 8 Honor. 9 THE COURT: Response. 10 MR. ROSENFELD: I have a number of 11 points, Your Honor, but I want to focus first 12 on the argument about the so-called Neuhaus 13 doctrine because, frankly, I'm a little 14 perplexed that plaintiffs would be making this 15 argument. 16 Number one, the report at issue, Your 17 Honor, was filed during trial, though it's a 18 little different than other discovery 19 situations. But perhaps more important than 20 that, plaintiffs seem to have a notion that if 21 we need to do discovery during trial to 22 accommodate them, it's okay. But if we have to 23 do discovery during trial to accommodate 24 Microsoft, it's not. And I want to be very 25 specific about that. 10910 1 Plaintiffs designated Professor Joseph 2 Stiglitz as an expert. They filed a report on 3 the 29th of September. Under the rule his 4 deposition was to be taken by the end of 5 October. So we tried to schedule that 6 deposition. And plaintiffs said, sorry, 7 Professor Stiglitz is a busy man. He's going 8 to be on a book tour. We said, okay. We will 9 give you a couple of weeks grace on this so we 10 can do it before trial starts. Sorry, say the 11 plaintiffs. Professor Stiglitz is a busy man. 12 He's going to be out of the country on his book 13 tour. The soonest he can be available is 14 January 15th. 15 And we objected to this and came 16 before Your Honor and said, You know what? 17 It's not fair. This fellow, Nobel Prize 18 winner, somebody by plaintiffs -- Mr. Reece 19 went on at great length about how important he 20 was. We ought to be able to depose him before 21 trial starts. We shouldn't have to do it in 22 the middle of trial. 23 Now, at that point doing discovery 24 during trial didn't seem to bother the 25 plaintiffs at all. And the Court said take the 10911 1 deposition on the 15th of January. 2 So while everybody else had a 3 three-day weekend, we were in New York with 4 Professor Stiglitz taking his deposition during 5 trial. And you'll see a motion about that 6 deposition, but that's not the point here 7 today. 8 So taking discovery during trial seems 9 to be okay when it's necessary to accommodate 10 plaintiffs' expert, but if Microsoft wants to 11 take discovery during trial when it had no 12 alternative given that the report was not made 13 available until the middle of trial, all of a 14 sudden that's not acceptable, that 15 inconveniences the plaintiffs. 16 Now, with all respect, Your Honor, I 17 think the response to that is the much touted 18 goose-and-gander rule. I mean, when they 19 wanted an accommodation, they got it. And now 20 they come in here and have the chutzpah to 21 suggest that that rule shouldn't work both 22 ways. 23 I was going to compliment Mr. Williams 24 on his hair cut, but in light of that argument 25 I've got to take it back. I've just got to 10912 1 take it back. 2 So on that argument I really do think 3 that the out come here is crystal-clear. 4 Now, let's get into the substance. 5 And here I'm not saying it borders modestly on 6 the amusing. Maybe Mr. William is far more 7 technically adept than I am. But the notion 8 that, one, we could sit here and decide between 9 us what of this detailed technical analysis of 10 computer code Microsoft can figure out on its 11 own and what it needs a deposition for makes no 12 sense. 13 In this area above all others, we 14 ought to get the chance before he gets on the 15 stand to figure out what he's saying. It's not 16 our source code that would be the object of 17 that deposition. It's his conclusions about 18 our source code that we want to probe. And no 19 reading of our source code will tell us 20 Mr. Schulman's conclusions. Nor does the fact 21 that he ostensively doesn't reach any new 22 opinions make one wit of difference. 23 We all know that in cross-examining 24 experts what is central is the basis for their 25 opinions. They start out in a very perfunctory 10913 1 fashion setting out their opinions and then the 2 rest of the endless days of direct and 3 cross-examination is to figure out how they 4 reached it, how good the evidentiary basis is. 5 What Mr. Schulman did in all those 6 various paragraphs to which Mr. Williams made 7 reference is an attempt to set out how he used 8 some of the new and some of the not so new 9 information to support his conclusions. 10 Well, that is precisely what we're 11 entitled to determine on cross-examination -- 12 excuse me, in a deposition. We're not going to 13 do a discovery cross-examination on the details 14 of computer code in front of the jury. They 15 will be bored out of their minds and so, 16 frankly, will we. It makes no sense. 17 This is the classic case for having a 18 deposition. Mr. William goes on at great 19 length about some of the new analysis that is 20 involved here in those various paragraphs he 21 identified, but that's precisely the point. It 22 is new analysis, and we are entitled to inquire 23 into it. 24 Now, I want to make one other point. 25 Not all source code is equal in this context. 10914 1 And what I mean by that is you'll recall 2 Mr. Williams marched you through that report, 3 and he talked about Office source code and he 4 talked about IE 7 source code. But in our 5 brief, we set out and we also provided you the 6 documentary evidence that while some of the 7 Windows source code had been properly requested 8 and there were problems producing it, the 9 parties did seem to agree that as to the Office 10 source code and the IE 7 source code, there had 11 been a miscommunication and, in fact, the 12 production of that code wasn't really called 13 for, wasn't really called for until after 14 professor -- or, excuse, me Mr. Schulman's 15 initial report. 16 So while there was a lot of discussion 17 from Mr. Williams about Office and IE, even as 18 to that source code, the case for a deposition 19 here is compelling. 20 At the end of the day, we're not 21 sitting here to go through the substance. And 22 for us to argue back and forth about whether on 23 these technical issues there's a need for more 24 discovery or not because, frankly, that is what 25 the deposition is designed to tell us, what did 10915 1 you do with this detailed stuff? So that the 2 folks who understand it can deal with it. 3 This is the classic case for 4 discovery, and it is, as Ms. Nellis reminds me, 5 expert discovery. Whatever Mr. Neuhaus was 6 involved with dealing with fact discovery, 7 which has involved 25 million pages of 8 documents, hundreds and hundreds and hundreds 9 of people searching, this is expert discovery. 10 This is a key expert. This is a new report. 11 These are endless materials. It's ripe for a 12 deposition. 13 And the fact that Mr. Schulman in his 14 latest disclosure of documents and information 15 included more information because he complied 16 with the Court's order to identify everything 17 he looked at, that also provides an added 18 reason why we should have this discovery to 19 figure out what all those other documents 20 related to and bore on. 21 There was one other point. Last point 22 and then I'll wrap up. Last point. 23 Department of Justice and Iowa 24 Attorney General. It is Mr. Schulman's 25 analysis here in his earlier report and in his 10916 1 December report that is being provided to the 2 attorney general and to the Department of 3 Justice if they so request. 4 Moreover, when they approached Your 5 Honor for permission to do this, they said they 6 may also want to discuss that with those 7 individuals. It seems a bit strange that they 8 don't think Microsoft in this trial, where this 9 evidence is going to be dealt with, has the 10 right to, if you will, discuss it with 11 Mr. Schulman, and to get into the bases for the 12 conclusions that he is going to discuss or have 13 been submitted to the government agency. 14 It seems to us that, once again, 15 fairness cries out here for letting us have 16 that examination. And Mr. William is right. 17 We don't object to this late report, although 18 we, of course, as we said in the brief, reserve 19 the right. If there are conclusions in there 20 that are not related to new material, that 21 should have been provided earlier, then we will 22 have to decide whether there's a basis for 23 challenging those conclusions. 24 Bottom line, the timing argument 25 provides no basis for denying a deposition 10917 1 here. What is fair for the goose is fair for 2 the gander. We deposed Professor Stiglitz in 3 the middle of trial because he wasn't available 4 because of the press of his other business. 5 Mr. Schulman has testified that 75 6 percent of his business is related to this 7 litigation or similar litigation. This is his 8 business. He should be made available for 9 deposition so that Microsoft is prepared 10 appropriately and fully to respond to his 11 opinions and cross-examine him at trial. 12 Thank you, Your Honor. 13 THE COURT: How long do you anticipate 14 your proposed deposition to take? 15 MR. ROSENFELD: It's difficult for me 16 to say, but I would say in the neighborhood of 17 conceivably five hours or six. Maybe less, 18 maybe more, depending on what we learn 19 obviously. 20 THE COURT: Anything else? 21 MR. ROSENFELD: No. Thank you, Your 22 Honor. 23 MR. WILLIAMS: Your Honor, could I 24 response to a couple of points that 25 Mr. Rosenfeld made? 10918 1 THE COURT: You may. 2 MR. WILLIAMS: I won't get into the 3 comment about my hair cut. 4 MR. ROSENFELD: We can probably come 5 up with a truce on that. 6 MR. WILLIAMS: I did get my hair cut 7 for the argument today, so I am a little 8 offended by that, but be that as it may. 9 I think we've gone now from the 10 Neuhaus doctrine to the goose-gander doctrine, 11 which I really think should be attributed to 12 Mr. Tuggy to now what I'm going to call the 13 chutzpah doctrine of Mr. Rosenfeld because what 14 Mr. Rosenfeld is telling the Court is 15 essentially this. 16 We, Microsoft, get to depose 17 plaintiffs' expert during plaintiffs' 18 case-in-chief after we stonewalled plaintiffs 19 on the very data we want to depose their expert 20 about. That's the chutzpah doctrine. 21 Let me address a couple of the points 22 that Mr. Rosenfeld cited in support of this 23 doctrine. Now the first is that there is a 24 distinction between the motion to compel we 25 brought two weeks ago and this motion that 10919 1 they're bringing to compel a deposition because 2 in this case the issue didn't ripen until trial 3 had already begun. Well, that was precisely 4 what happened with respect to the 2002 conduct. 5 The issue didn't ripen, Your Honor, 6 until Mr. Tulchin during his open said, I want 7 to tell the jury about the 2002 final judgment, 8 and there was a long debate about that. We 9 opposed that, and Your Honor decided to allow 10 him to discuss the provisions of that agreement 11 and that was what prompted us then to bring a 12 motion seeking to compel discovery of what 13 they've done since then because Your Honor said 14 you can talk about -- both sides can talk about 15 what Microsoft has done since 2002. You just 16 can't talk about whether Microsoft has actually 17 complied or not complied. 18 Fair enough. So we wanted discovery 19 on what they've done. Your Honor said, nope, 20 too late, it's untimely. But the issue didn't 21 come up until December. In fact, I don't know 22 if it was before the 19th or after but it was 23 right around in there, no more than a week off. 24 So it's a distinction that doesn't really 25 exist. 10920 1 The second thing that Mr. Rosenfeld 2 mentioned is Mr. Stiglitz. Yes, the parties 3 went round and round about Mr. Stiglitz. 4 Two points about that. First, it was 5 just a scheduling issue. We never said they 6 couldn't get Mr. Stiglitz's deposition. We 7 just had to get the thing scheduled. That's 8 what it boiled down to. 9 The second point about Mr. Stiglitz is 10 he's a rebuttal witness. Mr. Stiglitz wouldn't 11 be testifying until -- at this rate until 12 September. It wasn't an issue we felt had to 13 be addressed right now. Your Honor said, no, 14 let's get his deposition taken. It got taken. 15 End of story. It's not the same thing. There 16 was nobody at fault either way. It was just a 17 snit over scheduling. 18 With respect to Mr. Rosenfeld's 19 comment, well we need a deposition to know what 20 is relevant and what isn't and what needs to be 21 gotten into on cross-examination and what 22 doesn't. 23 Again, Your Honor these are the sort 24 of things that we submit to you can be dealt 25 with in cross-examination at trial unlike our 10921 1 motion which was denied where we're never going 2 to know what discovery they have. They're 3 going to get a whole shot at Mr. Schulman, and 4 that eliminates any need for this supplemental 5 deposition that they're asking for, which we 6 now hear may exceed five or six hours. 7 And, Your Honor, they say, well, what 8 is the big deal? It's one day. Well, that's 9 like saying producing all of the documents and 10 information and data about your post-2002 11 conduct will take one day. Sure, you can do 12 the act of producing it in one day. You give 13 us a bunch of CDs. That's one day. It's what 14 goes into that one day that takes up all that 15 time. 16 And we submit it's the same here. 17 Preparing Mr. Schulman for this discovery 18 deposition, which is what Mr. Rosenfeld has 19 indicated or stated explicitly they want to 20 take. It's going to take a lot of time, and 21 it's going to distract him and us from 22 preparing him for his trial testimony, which is 23 a very different thing. 24 With respect to his point about the 25 Office source code and the Internet Explorer 10922 1 source code not really being asked for until 2 this summer. That simply isn't the case. 3 One of the exhibits that we included, 4 and I honestly don't know which one it was or 5 even which party submitted it to you, but it's 6 from plaintiffs' emergency motion for an order 7 to show cause regarding Microsoft's failure to 8 comply with this Court's discovery orders 9 relating to Microsoft's obligations to provide 10 source code to plaintiffs. We would like to 11 think of shorter titles for these things. This 12 was filed on October 6th, apparently after 13 Microsoft blew the September 1 deadline. In 14 here, in this document, we go through all of 15 the various requests that called for the source 16 code. And there's a reference to a 17 December 2, 2005, fifth set of requests for 18 production of documents to Microsoft. And it 19 states here in this pleading that Document 20 Request No. 113 sought from Microsoft, quote, 21 source code for DOS OS/2, Windows, Excel, Word 22 and Office released to you, the public or any 23 vendor, any software developer or any other 24 person from 1990 to 2005. Then it says 25 Microsoft refused to provide the requested 10923 1 source code. 2 Now say what you will about that 3 request. Maybe it's overbroad, but it 4 certainly includes Microsoft Office and it was 5 requested in December of 2005, long before this 6 last summer. 7 Mr. Rosenfeld says that he doesn't 8 want to debate the necessity of the discovery 9 that they're requesting. And I submit to you, 10 Your Honor, that the reason for that is that he 11 knows that they don't need a discovery 12 deposition on this. That it's about source 13 code that they own, they control. He says, 14 well, it's about Schulman's conclusions about 15 the source code. They can ask him at trial on 16 cross-examination. 17 Finally with respect to the Department 18 of Justice, I asked for it, but unfortunately 19 still have not heard any relevant connection 20 between what is happening with the Department 21 of Justice and what is happening now in this 22 courtroom or what Mr. Schulman will be 23 testifying about. 24 Mr. Rosenfeld said, well, if you're 25 going to the DOJ, we have a right to know what 10924 1 you're going to tell them. Well, first of all, 2 I'm not really sure that's true. But, 3 secondly, if that's what they think, they can 4 go to the DOJ and they can ask. And they can 5 ask for access to Mr. Schulman. But I wonder 6 at this point -- because they're absolutely 7 right that we do intend to, if asked, make 8 Mr. Schulman available to the Department of 9 Justice and the Iowa Attorney General -- 10 whether it's even appropriate for them to ask 11 him what he's going to tell the Department of 12 Justice because essentially now he's a witness 13 or he would be if they asked him to explain 14 what it is he thinks Microsoft has not done 15 correctly with respect to the consent decree. 16 So for all of these reasons, Your 17 Honor, again, we submit that Microsoft should 18 not be allowed to take this deposition. The 19 request is untimely. The untimeliness was 20 caused by their own delay, and it would be 21 unfair for us now in the next few weeks to try 22 to make time and prepare this witness for a 23 deposition. 24 THE COURT: You know when you asked 25 for the discovery when they said about 2002 10925 1 decree, it's my understanding your class period 2 goes to 2006, right? 3 MR. WILLIAMS: Yes, Your Honor. 4 THE COURT: I would assume during your 5 general discovery you were trying to find out 6 up to and including 2006, weren't you? 7 MR. WILLIAMS: We were, Your Honor. 8 THE COURT: You had a continuing duty 9 to disclose those too. 10 MR. WILLIAMS: You made that clear in 11 your order, Your Honor. I wait for what it is 12 they want produced, but I haven't seen anything 13 yet. 14 THE COURT: If something that hasn't 15 been produced yet, you better produce it. 16 MR. WILLIAMS: I agree with you, Your 17 Honor, and we will have to wait and see on 18 that. 19 THE COURT: I don't want any surprises 20 from witnesses on either side. If you've got 21 something more you're going to do with regard 22 to that, you better tell me. 23 MR. WILLIAMS: I believe we requested 24 that supplementation, Your Honor, but not that 25 I think it's necessary in light of your order. 10926 1 THE COURT: Okay. 2 MR. WILLIAMS: You did put your 3 supplementation requirement in your order. 4 THE COURT: Anything else on this one? 5 All right. I'll do a ruling on it. 6 Any more motions today? 7 MR. CASHMAN: I think we have one more 8 on McGeady, is that right? 9 MS. NELLIS: That's not for today. 10 THE COURT: It wasn't set for today. 11 You needed time to reply. 12 THE COURT: And Phase VII we're doing 13 tomorrow because someone is out of town. 14 MS. NELLIS: Apparently Mr. Grawleski 15 is not available. But I won't make a motion to 16 preclude Minnesota attorneys from using the 17 word chutzpah in court until they can pronounce 18 it. 19 MR. ROSENFELD: I wasn't going to say 20 a word. 21 MS. NELLIS: I had to. Sorry, Your 22 Honor. 23 THE COURT: Off the record then. 24 (Record closed at 3:35 p.m.) 25 1 CERTIFICATE TO TRANSCRIPT 2 The undersigned, Janis A. Lavorato, one 3 of the Official Court Reporters in and for the 4 Fifth Judicial District of Iowa, which embraces 5 the County of 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 30th 19 day of January, 2007. 20 21 _______________________________ JANIS A. LAVORATO 22 Certified Shorthand Reporter 23 24 25