11212 1 IN THE IOWA DISTRICT COURT FOR POLK COUNTY ----------------------------------------------- 2 JOE COMES; RILEY PAINT, ) 3 INC., an Iowa Corporation;) SKEFFINGTON'S FORMAL ) 4 WEAR OF IOWA, INC., an ) NO. CL82311 Iowa Corporation; and ) 5 PATRICIA ANNE LARSEN; ) ) TRANSCRIPT OF 6 Plaintiffs, ) PROCEEDINGS ) VOLUME XLI 7 vs. ) ) 8 MICROSOFT CORPORATION, ) a Washington Corporation ,) 9 ) Defendant. ) 10 ----------------------------------------------- 11 The above-entitled matter came on for 12 trial before the Honorable Scott D. Rosenberg 13 and a jury commencing at 8:29 a.m., January 31, 14 2007, in Room 302 of the Polk County 15 Courthouse, Des Moines, Iowa. 16 17 18 19 20 HUNEY-VAUGHN COURT REPORTERS, LTD. 21 Suite 307, 604 Locust Street 22 Des Moines, Iowa 50309 23 (515)288-4910 24 25 11213 1 A P P E A R A N C E S 2 Plaintiffs by: ROXANNE BARTON CONLIN 3 Attorney at Law Roxanne Conlin & Associates, PC 4 Suite 600 319 Seventh Street 5 Des Moines, IA 50309 (515) 283-1111 6 RICHARD M. HAGSTROM 7 Attorney at Law Zelle, Hofmann, Voelbel, 8 Mason & Gette, LLP 500 Washington Avenue South 9 Suite 4000 Minneapolis, MN 55415 10 (612) 339-2020 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 11214 1 Defendant by: DAVID B. TULCHIN 2 STEVEN L. HOLLEY SHARON L. NELLES 3 JEFFREY C. CHAPMAN Attorneys at Law 4 Sullivan & Cromwell, LLP 125 Broad Street 5 New York, NY 10004-2498 (212) 558-3749 6 KIT A. PIERSON 7 Attorney at Law Heller Ehrman, LLP 8 333 Bush Street San Francisco, CA 94104 9 (415) 772-6000 10 BRENT B. GREEN Attorney at Law 11 Duncan, Green, Brown & Langeness, PC 12 Suite 380 400 Locust Street 13 Des Moines, IA 50309 (515) 288-6440 14 STEVEN J. AESCHBACHER 15 Attorney at Law Microsoft Corporation 16 One Microsoft Way Redmond, WA 98052 17 (425) 882-8080 18 19 20 21 22 23 24 25 11215 1 (The following record was made out of 2 the presence of the jury at 8:29 a.m.) 3 MS. CONLIN: This is 2226, Your Honor, 4 which you've asked about a couple of times and 5 which I'm finally ready to talk about. 6 It is an exhibit offered in connection 7 with the testimony of Mr. Bradford. And here 8 is the status of the exhibit. 9 Defendants objected in total that the 10 exhibit was hearsay and the Special Master said 11 that it was, and we appealed to you and you 12 said it was not. 13 So our appeal was granted and the 14 document in total is not hearsay. 15 The paragraph that begins Mark has a 16 good friend at SCC, that second paragraph, that 17 was offered for the truth, Your Honor. The 18 Special Master overruled the Defendant's 19 objection and there was no appeal. 20 The first paragraph that begins, 21 reported to me in the very first sentence, from 22 that to the end of the paragraph the Special 23 Master ruled was embedded hearsay. So it could 24 only be offered for a nonhearsay purpose. 25 And we offer it under McElroy versus 11216 1 State to explain subsequent conduct, which is 2 listed right in the exhibit. It helps us a 3 lot. It says what they did subsequently and 4 what they intended to do thereafter. 5 So, Your Honor, we offer the entire 6 exhibit. We offer for the truth the -- all 7 after the first paragraph. And we offer the 8 first paragraph beginning reported to me for 9 the nonhearsay purpose of explaining subsequent 10 conduct under McElroy versus State. 11 MR. TULCHIN: Your Honor, if I may. 12 Thank you. 13 Good morning. Ms. Conlin is correct 14 that this document, with the exception of the 15 first paragraph, can come in. 16 As to the first paragraph, as she says 17 beginning with the words reported to me on the 18 first line, all of that was ruled to be 19 embedded hearsay, and I don't know what the 20 nonhearsay purpose could be. 21 This document was shown to 22 Mr. Bradford. It's my recollection that when 23 he saw it, he said he didn't remember any of 24 the events here. And Ms. Conlin, during her 25 examination then, quickly moved on to another 11217 1 subject. 2 So the first paragraph could not now 3 be offered to explain some subsequent conduct 4 about which Mr. Bradford testified. He knew 5 nothing about this when it was shown to him. 6 I don't understand what subsequent 7 conduct the first paragraph is supposedly being 8 used to explain as it pertains to the rest of 9 the document either. And I don't think that 10 this is anything other than embedded hearsay 11 being offered for its truth. 12 If it does come in, this first 13 paragraph, then we're back to the point where I 14 think the jury, at least at some point if it's 15 going to be shown this document or get it 16 during its deliberations, needs an instruction 17 that this is not for the truth. But I don't 18 understand how it could be anything but for a 19 hearsay purpose. 20 THE COURT: The Court -- are you 21 saying I affirmed the Special Master or I 22 reversed -- 23 MS. CONLIN: You reversed the Special 24 Master, Your Honor. 25 THE COURT: As to everything except 11218 1 the first paragraph? 2 MS. CONLIN: Yes. We did not appeal 3 the first paragraph. 4 THE COURT: All right. 5 MS. CONLIN: So that's the one that's 6 at issue. 7 And if I may address the question of 8 whether or not the first paragraph is offered 9 for nonhearsay use under McElroy. 10 What we think, Your Honor, is that the 11 first paragraph is explained -- the subsequent 12 conduct is in the second paragraph. 13 The Court has seen other documents 14 almost exactly like this and permitted them to 15 be offered for the nonhearsay purpose 16 explaining subsequent conduct when the document 17 itself contains the subsequent conduct. We 18 believe that that falls squarely within the 19 Supreme Court's decision and that it is 20 perfectly permissible. 21 We, of course, Your Honor, as you 22 know, do not object to any giving of an 23 instruction in connection with explaining to 24 the jury the -- when there is a nonhearsay use 25 for the document. 11219 1 THE COURT: Anything else on this one? 2 MR. TULCHIN: Only, Your Honor, that 3 if this fits within McElroy, then, I guess 4 McElroy has been expanded to the point where 5 it's hard to see that any embedded hearsay 6 would be excluded, and I don't think that's 7 what McElroy stands for. 8 THE COURT: Anything further? 9 MS. CONLIN: No, Your Honor. 10 THE COURT: Plaintiffs' Exhibit 2266 11 is admitted except for the first paragraph that 12 shall be redacted. 13 Are the other exhibits acceptable that 14 I held and didn't make a ruling on yet, 15 Mr. Holley or Mr. Tulchin? 16 MR. HOLLEY: The only one that -- I 17 looked into the question yesterday, Your Honor, 18 of foundation objections, and Ms. Conlin is 19 correct that in the Special Master process she 20 and Mr. Tuggy agreed that the parties would not 21 assert foundation objections unless they had a 22 good-faith basis to believe that the document 23 was, in fact, authored by the person who 24 purportedly authored. 25 It wasn't our understanding that that 11220 1 stipulation extended to things that didn't go 2 through the Special Master process and came up 3 at trial, but I don't intend to argue about the 4 document that we were talking about yesterday 5 any further. 6 THE COURT: What about those other 7 Plaintiffs' exhibits during Bradford, can I 8 rule on those now? 9 MR. HOLLEY: I'd have to defer to 10 Mr. Tulchin on that, Your Honor. 11 MR. TULCHIN: Your Honor, there was 12 one more, and I think we resolved it, but I 13 didn't bring those materials with me, I'm sorry 14 to say. 15 THE COURT: Oh, okay. 16 MR. TULCHIN: And I can't quite recall 17 -- there was one other exhibit as to which 18 there was a question. I wish I could remember 19 what it was. 20 THE COURT: Let's take care of that 21 after lunch recess. Is that all right? 22 MR. TULCHIN: Sure. 23 THE COURT: Can someone bring you 24 that? 25 MR. TULCHIN: Yes. I'll make sure we 11221 1 get that. 2 THE COURT: Very well. You can get 3 the jury. 4 (The following record was made in the 5 presence of the jury at 8:39 a.m.) 6 THE COURT: Everyone else may be 7 seated. 8 Sir, would you take the stand, please. 9 You're still under oath, sir. 10 THE WITNESS: Yes. 11 THEO LIEVEN, 12 recalled as a witness, having been previously 13 duly sworn, testified as follows: 14 THE COURT: Mr. Holley. 15 CROSS-EXAMINATION (CONT'D) 16 BY MR. HOLLEY: 17 Q. Good morning, Mr. Lieven, how are you? 18 A. Thank you very much. 19 Q. You testified yesterday that Windows 20 for Workgroups was an important product because 21 it was the first version of Windows to include 22 networking capability; correct? 23 A. I think it had some. I don't know 24 whether it was like the later versions was the 25 Windows XP, but it was supposed that it could 11222 1 do that. 2 Q. And that was functionality that VOBIS 3 regarded as valuable to its customers, correct, 4 the -- 5 A. Of course, yes. 6 Q. And that is also true of the CD-ROM 7 support that Microsoft included in Windows 3.0, 8 correct, that was valuable to VOBIS's 9 customers? 10 A. What was that? To write CD-ROMs or -- 11 Q. Or the ability to play CD-ROMs or 12 install software from CD-ROMs. That ability 13 when added to Windows was something that was 14 valuable to VOBIS's customers? 15 A. That's first time with Windows 3.11? 16 Q. No, I said 3.0, but do you think it 17 was 3.11? 18 A. No, no. It was 3.0. It started with 19 that, yes. 20 Q. And my question to you, sir, is that 21 inclusion of support for CD-ROMs and Windows 22 was valuable to VOBIS's customers? 23 A. I don't know whether Microsoft's 24 including was valuable, but it is valuable for 25 customer that he has those functions, yes, of 11223 1 course. 2 I don't know -- hasn't there been 3 other software packages that could do the same 4 to install something on the CD-ROM? I think 5 mainly the CD-ROM drive manufacturers had 6 software with it and that you could install 7 something or that you could play something from 8 normal CDs. That was not exclusively 9 Microsoft, but, of course, it's valuable, 10 whether Microsoft does it or somebody else. 11 Q. And you said yesterday that the 12 emergence of CD-ROM drives spurred an entire 13 revolution in multimedia content; correct? 14 A. Yes, it started 1991, I think slowly, 15 but it has -- I think from 1995 on all 16 computers has -- have had the CD-ROMs, CD-ROM 17 drives. 18 Q. And the ability of PCs to play music 19 and video made them more appealing to people 20 thinking about buying a VOBIS High Screen PC; 21 correct? 22 A. Yes. Not for me. I don't play music 23 or something like that with it, but some people 24 like it, yes. 25 Q. Now, you testified yesterday that 11224 1 Microsoft added support for universal serial 2 bus devices to Windows 95; correct? 3 A. It had to, yes. Otherwise it wouldn't 4 work with the printers. 5 The USB technology has not been 6 developed by Microsoft. It has been by a group 7 of companies to support that, but, of course, 8 Microsoft had to follow that rules of USB. 9 Q. And the inclusion of USB support in 10 Windows 95 that allowed people to plug printers 11 and scanners into their PCs was good for 12 VOBIS's customers; correct? 13 A. Yes, of course. 14 Q. Now I'd like to turn back, if we 15 could, to the chronology of VOBIS's licensing 16 of MS-DOS and DR-DOS, which is sort of where we 17 were yesterday when we stopped at 3 o'clock. 18 The price that VOBIS paid for DR-DOS 5 19 in the February 1991 contract was $9; correct? 20 A. Right. 21 Q. And that was a price that you got that 22 was half of what you had been paying before; 23 correct? You had been paying I think 18 -- 24 A. 18 was at the beginning. Then I think 25 it was 15, 13. It went down with all the 11225 1 payments. Maybe we have a look at the exhibit 2 again, but it went down. It was not from 18 to 3 9. There were steps in between. 4 Q. So as a result of your negotiations 5 with Digital Research, over time the price fell 6 from $18 to $9? 7 A. Right. 8 Q. Now, at the time that you signed the 9 February 1991 contract with Digital Research, 10 they were aware, were they not, that Microsoft 11 had offered you a $9 price for MS-DOS? 12 A. Have they been aware of that? I don't 13 think so. 14 Q. Well, didn't you tell them that, sir? 15 Didn't you show them a Microsoft quote for $9 16 for MS-DOS -- 17 A. I don't think so. I know that story 18 that they have said I have seen. Who did that 19 say, Mr. Giesbrecht or something? But if he 20 says he has seen, he didn't say I have shown 21 him. And I don't run around the world and show 22 papers with prices. 23 Q. I'd like to show you -- 24 MR. HOLLEY: May I approach the 25 witness, Your Honor? 11226 1 THE COURT: You may. 2 Q. -- Defendant's Exhibit 6806. You've 3 seen this document, haven't you? 4 A. Now somebody told me about, but I have 5 -- I don't know, have I seen that? Maybe 6 Mr. Giesbrecht bring that I recall. 7 Q. You know Mr. Giesbrecht; correct? 8 A. I met him not so early with -- had 9 another representative, but I should have met 10 him, yes. He was the general manager of 11 Digital Research in Germany. 12 Q. This is a memo from Mr. Giesbrecht 13 February 1, 1991, to Mr. Dixon, the head of 14 DRI, talking about VOBIS pricing; correct? 15 A. He says MS Windows and Works bundled 16 U.S. 15 not included and MS-DOS 5.0 $9. That 17 is he says, yes. 18 MR. HOLLEY: Your Honor, I move for 19 the admission of Defendant's Exhibit 6806. 20 MS. CONLIN: No objection. 21 THE COURT: It's admitted. 22 Q. Now, here Mr. Giesbrecht is saying to 23 Mr. Dixon, today we saw a quote from Microsoft 24 which included the following, and then the 25 second item is MS-DOS 5 U.S. dollars 9. 11227 1 Is it your testimony that you did not 2 tell Digital Research that Microsoft had 3 offered a $9 price for MS-DOS 5? 4 A. I wonder why he says I saw. Today I 5 saw a quote. What does that mean? Did he see 6 a letter or did he see my writing or something 7 like that? 8 Sometimes it's -- it may be -- it may 9 happen that you tell your second source what 10 prices you have from your first, but you never 11 say the correct price, you know. That is not 12 very usual. But I don't know why he knows that 13 from that he says I saw a quote. What quote 14 should that be? 15 Q. Well, this is a traditional tactic in 16 negotiation, isn't it? 17 You have Vendor Number 1 and Vendor 18 Number 2 and you play them off against one 19 another by suggesting or telling them quite 20 directly that the other guy is giving you a 21 lower price? 22 A. That could happen -- that is what -- 23 when you have two stores, you go to one and you 24 say you are much too expensive, the other one 25 is cheaper. That may happen, yes. 11228 1 Q. Well, and you've done that, haven't 2 you, sir? 3 A. I have done that sometimes in my life, 4 but I am wondering what does that mean? I saw 5 a quote, what does that mean? I gave -- I 6 don't give anybody a quote or something like 7 that. 8 Q. Okay. But you don't deny that you 9 told DRI in February of '91 in order to get a 10 low price for DR-DOS that Microsoft was 11 offering you a very aggressive price for 12 MS-DOS? 13 A. They knew it, yes, so I really can't 14 recall how. Maybe that somebody else told them 15 maybe -- I don't say I don't tell prices to 16 different sources. Sometimes it's technical. 17 You know, you do that for negotiation. 18 Q. And the $9 price that you got out of 19 Digital Research was quite beneficial to VOBIS, 20 wasn't it? 21 A. Of course. 22 Q. All right. Now, yesterday Ms. Conlin 23 showed you Defendant's Exhibit 371, which was 24 the September 12, 1990 contract for both Works 25 and MS-DOS 4.01. 11229 1 Do you remember that contract? 2 A. Yes, I think so. 3 Q. And I believe it was your testimony 4 that even though you had the right to ship 5 MS-DOS 4.01, you never did? 6 A. No, we never did. 7 Q. But that didn't stop you, did it, from 8 taking advantage of the right to ship Works 9 with your -- 10 A. There we were much more interested in. 11 Q. Okay. And I don't -- we talked a lot 12 or you talked a lot yesterday about Works. I 13 just want to make it clear what Works is. 14 Works is an application suite; correct? 15 A. Yes. 16 Q. And it's sort of -- I think you may 17 have referred to it as a baby version of 18 Microsoft Office? 19 A. Yes, it was a home user version. I 20 don't think that it has been used very much in 21 offices. I used it, but it was a small 22 version, yes. 23 Q. So it had a basic word processor and a 24 basic spreadsheet application? 25 A. Yes. 11230 1 Q. And you regarded Works as a very good 2 product for VOBIS; correct? 3 A. Yes, for our customers, for our kinds 4 of customers it was the right product. 5 Q. And you also regarded the price that 6 Microsoft gave you for Works to be quite 7 attractive; correct? 8 A. Reasonable, yes. 9 Q. In fact, you said yesterday that 10 having Works for High Screen computers was like 11 the ability to offer a new car with 100 gallons 12 of gasoline? 13 A. 50. 14 Q. We're down to 50. 15 A. With the Office suite it's 100 16 gallons. But it's a good offer for customers. 17 Q. Okay. And you regarded it at this 18 period of time in 1990, September of 1990, 19 Works was a lot more important to VOBIS than 20 Windows was? 21 A. At that time, yes, in 1991. Windows 22 just started to be important. 23 Q. Now, in 1991, it's correct to say, 24 isn't it, that most customers in Germany, your 25 customers in Germany were still running DOS 11231 1 applications as opposed to Windows 2 applications? 3 A. Yes, that time I'm sure. 4 Q. And as a result, the notion of having 5 a graphical interface like Windows was 6 something of a gimmick, as you said yesterday; 7 right? 8 A. Not gimmick, but people did not see 9 the advantage that time. They didn't see that 10 because they had all the DOS programs. 11 Everything was in DOS, even the Word, Microsoft 12 Word was for DOS or the Excel. There haven't 13 been so many applications for Windows yet. 14 So what you had to do, you were in 15 your Windows application, but you had to open 16 application fields for DOS, the DOS Windows 17 again and -- not the DOS window, but this 18 square on the screen was running DOS under 19 Windows, and that makes no -- not so much sense 20 at the beginning. Later when there were more 21 applications for Windows, it made more sense to 22 have Windows. 23 Q. And I think you had said yesterday in 24 response to a question from Ms. Conlin that it 25 wasn't until 1992 or '93, after the release of 11232 1 Windows 3.1, that it became important to VOBIS 2 to have Windows? 3 A. Yes. Important in the meaning that 4 you have to offer it. Otherwise, you are out 5 of the market. 6 Q. And the reason that you have to offer 7 it or be out of the market is because that's 8 what customers say they want; right? 9 A. Yes. 10 Q. Now, you testified yesterday about a 11 meeting that you had with Mr. Kempin from 12 Microsoft in Hanover, Germany, in March of 13 1991. 14 Do you recall that? 15 A. Yes. 16 Q. And Mr. Kempin was annoyed or at least 17 expressed annoyance because he thought that he 18 was coming to basically ceremonially sign an 19 agreement that had been negotiated. 20 Do you remember him saying that to 21 you? 22 A. I don't know, but -- so I don't know. 23 Q. Okay. Well, he was annoyed, wasn't 24 he? 25 A. I don't recall that. I have read that 11233 1 now in the reporting that he was annoyed, but I 2 had -- didn't have the feeling -- I don't know. 3 So maybe, maybe not. 4 Q. And you didn't really take seriously 5 the back and forth that you had with Mr. Kempin 6 at that meeting; isn't that right? 7 A. That means -- 8 Q. You said yesterday that you didn't 9 think he was serious, and you didn't take him 10 seriously; right? 11 A. Seriously means that he tells the 12 truth about that? 13 Q. No, that you weren't particularly 14 worried or intimidated by anything that he said 15 at the meeting. 16 A. I don't think so. That meeting -- the 17 only thing was do we sign the contract for this 18 -- I think this was for MS-DOS 5.0 that came 19 out that year in 1991, is that -- 20 Q. Yes. 21 A. It was this contract? 22 Q. Right. 23 A. Yes, but it was a question of time, 24 you know, because DOS 5.0 was announced much 25 earlier and it came out so late, and maybe that 11234 1 was the reason that we didn't sign it there on 2 this Hanover show. Maybe we said let's wait a 3 little bit. Let's wait till later. That's the 4 only reason I can see there. But I don't think 5 that was because that we still had to review 6 the whole contract. 7 Q. Now, you pride yourself on being quite 8 a good negotiator, don't you? 9 A. No. My partner was much better. 10 Q. But you're very good, aren't you? 11 A. Sometimes not. I'm too impatient, you 12 know. 13 Q. Well, you've testified before that you 14 regard yourself as a good negotiator. 15 A. Yes. It's to have looked -- from 16 average, yes, but there are much better 17 negotiators than me. 18 Q. Well, you certainly thought that you 19 were a match for Mr. Kempin, didn't you? 20 A. A match, that means -- 21 Q. A match. You were -- 22 A. Yes, I understand. Yes, that's the 23 right word. 24 Q. Okay. And you were not a person and 25 were not a person at the time that you were the 11235 1 CEO of VOBIS who was easily pushed around by 2 other companies; correct? 3 A. By competitors or by suppliers? 4 Q. By either. 5 A. Sometimes it was tough. It was not so 6 easy. Not all suppliers liked VOBIS. You 7 know, we got very important that time, and all 8 suppliers don't like to have to depend on 9 really big market player. They also like to 10 have other customers. So we always had to 11 convince our suppliers that it makes sense to 12 work together with us. 13 Q. Well, in fact, you got into a big 14 fight with Intel at one point, didn't you, 15 about a banner that you wanted to hang at the 16 Hanover Trade Fair that advertised AMD 17 processors? Do you remember that? 18 A. It could be, but I don't remember. 19 Good idea. 20 Q. All right. So -- you've testified 21 previously that you are not so fast threatened 22 by big companies. 23 Do you remember saying that? 24 A. No, that's true. 25 So it is really -- it would be good 11236 1 idea to show Intel that they are not the only 2 one in the world. That's what I said 3 yesterday. We really liked to have a choice to 4 have the freedom to choose. 5 Q. Now, so we've talked about the DRI 6 contract from 1991. I'd now like to switch 7 gears and talk about the contract that you did 8 sign later in March of 1991, after the Hanover 9 Trade Fair, the CeBIT Fair with Microsoft. 10 That $9 price that you got for MS-DOS 11 was very important to VOBIS; correct? 12 A. It was the condition on which we were 13 ready to sign the contract. 14 Q. It was the condition on which you were 15 ready to sign the contract, and it was also a 16 very good deal in terms of how cheap it was; 17 right? 18 A. Yes, but it would have been cheap as 19 soon as we throw out DR-DOS. Because it was 20 hundred -- it was 200,000 licenses at $9. That 21 means $1.8 million a year. 22 Q. Right. 23 A. But we still have had the holograms 24 from DR-DOS which we have paid yet for, $9. So 25 in total, we have had a price of -- let me 11237 1 check -- at about -- for each machine of $13.50 2 because we never put DR-DOS and Microsoft 3 together in that machine. So either DR-DOS, 4 would we have paid here for $9, plus the 5 200,000, the $9 that we paid for the MS-DOS. 6 So as soon as the customer wants to 7 have also the DR-DOS, the price goes up $9. 8 And a 50/50 relation, that means that the 9 average operating system price for High Screen 10 was $13.50. 11 But that was okay for us because we 12 came from $15, $16, and then -- it was not 9. 13 The number 9 was constructed by Microsoft by 14 dividing the price before 18 by 2 to 9. 15 Because we asked for per copy license $18, 16 100,000, but Mr. Kempin said we have to have 17 this per copy -- per processor license. There 18 is no way around that. So processor license we 19 do, but we can talk about the price. 20 Q. But you testified yesterday and you 21 still believe that the $9 price was not 22 unfavorable to VOBIS? 23 A. No. 24 Q. Because the average was still below 25 what everybody else was paying? 11238 1 A. I don't know that, but $13.50 was 2 reasonable price at that time for operating 3 system -- and we had again a great advantage. 4 We could give customer a choice, and nobody 5 could do that. 6 Q. In fact, you thought that the price 7 that you got from Microsoft was a rock-bottom 8 price? You've used that phrase before, haven't 9 you? 10 A. Yes. That is, $9 is really low. 11 Q. Now, do you think prior to the time 12 that you decided to license MS-DOS 5 there was 13 something wrong with the fact that VOBIS was 14 exclusively using DR-DOS? 15 A. May you ask again because -- 16 Q. Sure, sorry. 17 You testified yesterday that before 18 you decided to start offering this 50/50 19 allocation of DR-DOS and MS-DOS you were 20 exclusively a DR-DOS house. 21 A. Yes. 22 Q. There was nothing wrong with that, was 23 there? That was your choice? 24 A. That was our choice, yes. 25 Q. And you also testified yesterday that 11239 1 having your own retail stores was a big 2 competitive advantage over people like Amstrad 3 and other PC manufacturers that had to persuade 4 people to carry their machines; right? 5 A. Yes, that's what the key point when we 6 were so successful at that time. 7 Q. And part of what you were doing in 8 business was seeking out those sorts of 9 competitive advantages; right? Looking for 10 ways that you could do things that your 11 competitors couldn't do? 12 A. That is what a businessman should do, 13 yes. 14 Q. And if Amstrad came to you and said, 15 hey, you know, this isn't fair, this isn't a 16 level playing field, I want to use your chain 17 of stores, you would have told them to get 18 lost; right? 19 A. You know that this could happen under 20 European law, when you are the monopolist with 21 that. You know that is in telecommunications 22 we have that discussion all day in Germany 23 because there's the old structure of the 24 government phone company, and they still have 25 the infrastructure. They are the only who have 11240 1 the infrastructure, and that is what you sell. 2 If we would be the only one who had 3 that infrastructure to sell PCs, I'm sure under 4 European and German law we could be asked to 5 open our stores for others. I think so. 6 Q. Though you're not an EC competition 7 lawyer; right? 8 A. Pardon? 9 Q. You're not an EC competition lawyer; 10 right? 11 A. Yes, I studied a little bit. I had to 12 in my status for my master of business 13 administration. Especially this European law. 14 Q. Okay. Well, if you could do me a 15 favor, which is when I ask you a question that 16 could be answered yes or no, if you could 17 answer yes or no and then explain if you have 18 to, I think that we could move this process 19 along. 20 Can you do that, do you think, try 21 to -- 22 A. I can say yes or no, yes. 23 Q. Okay, good. Thank you. 24 So let's go back to my question. 25 In the facts as they existed, which 11241 1 was that you had your own retail stores, there 2 were other stores in Germany that sold PCs, if 3 Amstrad came to you and said, we like your 4 distribution network, we want you to let us use 5 it, you would have said no; right? 6 A. No. Maybe I have said yes. Depends 7 on what they pay. If they -- maybe I would 8 said we sell your PCs. Give me good price, you 9 know, we offer to our customers. Why not? 10 Q. It would have to make business sense 11 to you to give up of the competitive advantage 12 you had vis-a-vis other computer manufacturers 13 before you would turn that competitive 14 advantage over; right? 15 A. Of course. 16 Q. Now you also under this March of 1991 17 agreement with Microsoft license the Windows 18 for $15 a copy; correct? 19 A. The Windows is $15, yes. 20 Q. $15. 21 And that was also quite an attractive 22 price, wasn't it? 23 A. I do not know that. I don't know what 24 others have paid. I'm still a little bit 25 surprised that the normal DOS list price was 11242 1 higher than the Windows price. I think it's 2 because Windows was starting. 3 So DOS was 18 at that time and Windows 4 was 15 or something. Maybe also 18. But I'm 5 really surprised that the Windows license was 6 at least not more expensive than the DOS 7 license. 8 Q. But you don't have any view one way or 9 the other about whether Windows price was low 10 or high at $15? 11 A. I don't know that. I can't compare. 12 I don't know what others paid. 13 Q. Well, you testified back in May -- May 14 of 1998, which I appreciate was a long time 15 ago, that it was a very low price. Are you -- 16 A. That's what I said. I'm surprised 17 that they sold that time Windows at a $15 price 18 because the DOS -- the Windows has a better 19 value than the DOS, of course. 20 Nobody would even -- is able to work 21 with DOS today, so -- because Windows is much 22 easier with this graphical user interface. 23 It's a good -- $15 is not too much for 24 that product. 25 Q. Okay. Now, Ms. Conlin asked you some 11243 1 questions about the duration, the length of 2 that March 1991 contract. 3 You actually had no problem with the 4 two-year length of the contract; right? 5 A. Not with $9 and $15. I didn't have 6 any problem. 7 Q. Right. 8 A. Because after we stopped selling the 9 DR-DOS, we didn't have to buy a DR-DOS license 10 anymore, and everything was covered by the 11 MS-DOS license by $9. Do you understand what I 12 mean? 13 Q. No, I do understand. 14 A. Because this average price from $13.50 15 step by step, the less DR-DOS was shipped went 16 down to $9. Until the day when we only bundled 17 MS-DOS 5.0, then the price of DOS was only $9. 18 So my opinion was let's do that 19 contract as long as possible. It's quite 20 favorable. 21 Q. In fact, you said you would have been 22 happy -- at your deposition in '98 you said you 23 would have been happy for this to be applied to 24 your contract; right? 25 A. Five year, I don't know. Five years 11244 1 is a long time. But saying what I said now, I 2 didn't -- I liked it that it was far in the 3 future, and two years or two and a half years 4 in the future, so that we don't have to 5 negotiate with Microsoft any more about that 6 issues. 7 Q. That's a good thing in business. 8 Certainty about component pricing is a good 9 thing; right? 10 A. If the price is good. If the price is 11 high, it's not good. Certainty about high 12 prices -- 13 Q. But it's very nice to lock in a low 14 price for a long time? 15 A. Yes, of course. 16 Q. Now, in this 1991 agreement with 17 Microsoft, there was nothing in there that said 18 that you had to stop shipping or offering 19 DR-DOS; right? 20 A. No. That would be not possible, no. 21 But the structure was -- when I signed that 22 contract, as I told you, $13.50 is not a bad 23 price. But we have had the security if 24 something happens with Digital Research, what 25 always can happen, something can happen with 11245 1 Microsoft, something can happen with Intel, or 2 something can happen with somebody else. 3 Delays or something. 4 We have good contract to stay with 5 MS-DOS in the market with the $9. So there was 6 no clause in there that we have to finish 7 shipping DR-DOS, of course. No, this would 8 have been illegal, I think. 9 Q. Now, the way that you offered this 10 choice in the stores, as I understand it, is 11 that the price for a High Screen computer was 12 however many deutsche marks it was, and then 13 the customer chose MS-DOS or DR-DOS, and it 14 didn't make any difference from their 15 standpoint, the price stayed the same? 16 A. No, the price same. 17 Q. Now, you said I believe yesterday that 18 DR-DOS was popular in the sort of home 19 user/small business segment of the German 20 market; is that right? 21 A. No. We, our High Screen computers 22 have been more popular in that home and small 23 office market. The DR-DOS, there's no 24 difference between the operating system in the 25 home or small business or in the big business 11246 1 market. There is no difference. 2 Q. Do you know what the relative 3 popularity of DR-DOS was in Europe versus Japan 4 and the United States? 5 A. I don't know. 6 Q. Well, do you know of any OEM of any 7 size in Japan or the United States that ever 8 did what you did, which is installed DR-DOS on 9 its PCs? 10 A. There have been some, I think so. 11 Especially when we started that and when we had 12 some success. Others started to do the same, 13 but I don't -- I don't know. 14 Q. Well, Escom -- 15 A. Let's have a look at the reports from 16 Digital Research. We can see there have been 17 some other big players in there, 20,000 or 18 something like that. 19 Q. In the United States or in Japan? 20 A. I don't -- so let's have a look. 21 Q. I agree with you, let's look. 22 A. Has Digital Research ever had a 23 Japanese version? So what you don't have you 24 can sell in Japan. 25 Q. That's going to require me to find 11247 1 that document. 2 Maybe you have it up there. 3 A. Maybe. 4 Q. I'm trying to remember what the number 5 was. I think it's 10030. 6 MR. HOLLEY: Your Honor, just one 7 moment. 8 THE COURT: Sure. 9 A. I have it. 10 Q. We both found ours at the same time. 11 I don't mean to short-circuit this, 12 but I do note that at the top of this document 13 it says sales report Europe. So I'm afraid 14 that we're not going to find anything. So this 15 isn't going to help us. 16 But do you know whether -- can you 17 give me the name of any significant OEM in 18 Japan or the United States that preinstalled 19 DR-DOS on its PCs? 20 A. United States should be in here, but I 21 would have to look for that. Japan, I can't -- 22 I don't know -- do not know that market so -- 23 Q. All right. Let's switch to the topic 24 of something that you talked to Ms. Conlin 25 about, minimum commitments in Microsoft license 11248 1 agreements. 2 It's correct, is it not, that VOBIS 3 never found itself in the situation where at 4 the end of a contract term it had committed to 5 license operating systems that it hadn't 6 actually licensed? 7 A. I think with operating systems, that's 8 right. 9 I think we have one time had a little 10 bit lower sales in Works, but operating systems 11 we all -- sometimes we even renewed the 12 contracts because we have run out of the 13 licenses. Because we have had more than we 14 have had in our minimum commitment. That was 15 because we grew so fast. 16 We always underestimated that at the 17 beginning to try to do that and to see that we 18 get that number, because otherwise, you know, 19 you lose that, the money. You have to 20 negotiate to get a credit in the next season 21 with the next contract. 22 Q. But you -- VOBIS never found itself in 23 that position -- 24 A. No. 25 Q. -- of having to try to roll them over? 11249 1 A. Didn't have that problem. 2 Q. Okay. And just again so the court 3 reporter doesn't kill you and me, you need to 4 wait until I -- even if you know what I'm going 5 to say, if you could wait for me to finish 6 asking my question and then talk because it's 7 hard to type two people talking at the same 8 time. 9 A. Okay. I'll try. 10 Q. Thank you, I appreciate that, and I'm 11 sure she does too. 12 The price that VOBIS paid for 13 Microsoft operating systems was to some extent 14 a function of how many you agreed to take; 15 correct? 16 A. I think so. That should be. 17 Q. And the way that these minimum 18 commitments were determined was to multiply the 19 agreed price times the number of copies that 20 you committed to take? That's how that number 21 was constructed; correct? 22 A. Yes, that was the total -- the minimum 23 commitments guided by the quota or something 24 like that, but this quantity times the price 25 per license gives the minimum commitment. 11250 1 Q. Now, you said in the case of Works 2 that you sort of overshot the target at one 3 point and you committed to more copies of Works 4 than you actually used; is that correct? 5 A. Right. 6 Q. And in that instance, Microsoft agreed 7 to roll that over into the next contract? 8 A. I think so, so -- anything else would 9 be -- would have been very unfriendly, you 10 know, but I think we -- we put that credit over 11 to some other contract. 12 Q. Those sorts of accommodations to good 13 customers are routine in business, aren't they? 14 A. Of course. Good customers always get 15 a credit or rebate or -- I don't know what 16 would have happened if we had no more contract 17 with them. I don't think we would have got 18 money back, refunds. I don't know. Because 19 they were not obliged to do that from the 20 contract. 21 Q. But that was not a situation that you 22 ever faced? 23 A. No, at that time not. 24 Q. Now, I believe that you testified 25 yesterday that you weren't familiar with these 11251 1 sorts of provisions, these minimum commitment 2 provisions in any other software vendor license 3 agreements. Did I understand that correctly? 4 A. I don't see any from that size, no. 5 Q. Well, you had one in your contract 6 with Novell, right, for NetWare? 7 A. Maybe, but small quantity, 1,000 or 8 what -- 9 Q. So the numbers were smaller but the 10 concept was the same? 11 A. Maybe. It's possible. 12 Q. Well, why don't we look at that 13 contract. 14 MR. HOLLEY: Your Honor, may I 15 approach the witness? 16 THE COURT: You may. 17 Q. I'd like to show you an agreement that 18 you signed on behalf of Vobis October 1, 1993. 19 It's a Novell license agreement. And feel free 20 to look at as much of it as you'd like. 21 A. Yes. 22 Q. But what I'm interested in appears on 23 page 24. The page numbers are kind of hard to 24 read. Let me see, the whole thing is kind of 25 hard to read. 11252 1 Why don't you just -- maybe it's 2 easiest to take a look at the third page from 3 the end. It has a production number that ends 4 9574. 5 A. Yes, I've got it. 6 Q. And in this contract, there's a 7 reference to a volume commitment for 8 manufacturing products. Do you see that? 9 A. Yes. 10 Q. And then it says, nonrefundable 11 manufacturing products royalty schedule. Does 12 looking at this refresh your recollection that 13 Novell had contracts that required 14 nonrefundable payments on a particular schedule 15 for products that -- 16 A. Yes, of course. That is very often 17 that, you know. That is -- but, you know, this 18 was a box business, a red box purchase. It's a 19 volume commitment for red box purchases. So 20 what we paid we got something for. We got red 21 boxes. We put it in inventory, and we could 22 sell at any time. So this money would never 23 have been lost for us. It's different from 24 your contracts. 25 Q. In -- 11253 1 A. You see it says volume commitment for 2 red box purchases and -- 3 Q. Well, at some point those red boxes 4 aren't worth anything, right, because they 5 become obsolete? 6 A. That is my risk. You know, I've never 7 asked Microsoft to keep me risk free in this 8 business, you know, and when you commit 9 yourself to do something, it's by risk to do 10 that. So nobody asked Microsoft to keep them 11 risk free. 12 But the only thing was if I buy 13 something, I want to use it any time. Even if 14 the value is zero I can sell it for $1, or I 15 can give it for free as a gift to customers for 16 do them a favor. 17 Q. I appreciate that, and as a practical 18 matter, in the operating system business, 19 because you conservatively estimated your 20 requirements, you never paid Microsoft for 21 something you didn't use; right? 22 A. No, this isn't practice. This was 23 what we did, but this question or the 24 theoretical question what you asked me with 25 this contract. But others do the same 11254 1 contract. This is a different contract from 2 that what we did with Microsoft. 3 Q. I just want to be clear that we 4 understand each other as to why. 5 The distinction that you see is that 6 in the Novell contract you were literally 7 getting boxes of software as opposed to a pure 8 intellectual property license from Microsoft; 9 is that what you're saying? 10 A. No, that's not what I say. With the 11 boxes, it's my property. I can do what I want. 12 With your contract, if I have let me 13 say licenses in my inventory. That's what we 14 talk about. I may not use them anymore except 15 you'll give me credit for the next contract. 16 That's the difference. 17 With Novell it says end of contract 18 and you have still inventory, you are not 19 allowed anymore to sell it. We talk about it, 20 and if you are nice and you do a new contract, 21 you get credit, of course. But from the 22 contract you are not allowed, and that's what 23 Microsoft says. That you have a good policy 24 with good customers, of course you should do 25 that. 11255 1 Q. All right. Let's move into this 2 period post March 1991 when you've licensed the 3 250,000 copies of DR-DOS and you also have a 4 contract for DR-DOS 5 and you also have a 5 contract for MS-DOS 5, and you're offering them 6 both in VOBIS stores and the customer gets to 7 choose. 8 And you testified yesterday that your 9 expectation was that they would stay at roughly 10 50/50? 11 A. Right. 12 Q. That isn't what happens, is it? 13 A. At the beginning, yes. 14 Q. But over time what happened, 15 customers, individual customers, making choices 16 started buying more and more and more MS-DOS 17 relative to DR-DOS? 18 A. Relatively. But in quantity, the 19 DR-DOS even went up. 20 So I think at the beginning, we have 21 had per month $10,000, DR-DOS 10,000 MS-DOS. 22 Then after three months later, I think it was 23 13,000, 14,000 so -- the growth of the company. 24 We sold about 20,000 PCs a month, but 25,000. 25 So then we're 50,000 for MS-DOS but still 11256 1 10,000 DR-DOS. 2 Half year later it was, I think, 3 25,000 MS-DOS and I think 11,000 DR-DOS. So 4 the DR-DOS sales was quite stable. 5 The absolute numbers even grow up. 6 Relatively you are right. You could say all 7 the new customers we got from the growth of the 8 company, they bought MS-DOS. But it's not how 9 it worked, but from the numbers. 10 So relatively you are right, but in 11 absolute figures, DR-DOS, some months it really 12 grew. 13 Q. It was the case, though, that over 14 time, steadily until mid 1992, the relative 15 proportion of MS-DOS and DR-DOS got quite out 16 of kilter so that -- 17 A. Yes, U.S. I think 30 percent or 20 18 percent to 80 percent. 19 Q. 20 to 80, right. 20 Okay. And at that point, in mid 1992, 21 you decided that the costs in terms of the sort 22 of associated manuals and backup diskettes of 23 offering DR-DOS was too high relative to the 24 benefit you were getting from having a second 25 product to offer? 11257 1 A. I don't think -- it's not the manual, 2 it's not so much. But it's an issue. But we 3 still had that holograms. We didn't have any 4 extra cost if a customer asks for DR-DOS. We 5 have had these $9 times 250,000 before, so -- 6 but you are right. 7 So it's my decision later to say we 8 don't need DR-DOS necessarily anymore. You are 9 right, that decision was made. You know how it 10 worked with Bill Gates and then the European 11 discussion we said from October on 1992, 12 there's no more DR-DOS. 13 Q. And that's because, as you testified 14 earlier, when 90 percent of the people who are 15 coming in the front door of a VOBIS store know 16 about MS-DOS and are asking for MS-DOS, there's 17 really no point in keeping DR-DOS around; 18 right? 19 A. No. What economics you say 20 transaction costs is too high then. 21 I mean, you know, we are not able to 22 swim against the river of the market because as 23 long as DR-DOS was really known, you know, in 24 the 1989 decision, then it was quite easy to 25 get DR-DOS. You don't have to convince people 11258 1 too much. 2 But then when there was no more DR-DOS 3 in the market except with us, it was difficult 4 to swim against the stream in the river. Why 5 should we do all that? We had to advertise it 6 again. We had to save some space in our 7 brochures for DR-DOS. This made no sense, you 8 are right. 9 Q. And it was the case, was it not, that 10 because people were asking for MS-DOS, it was 11 getting hard to sell DR-DOS because there were 12 always questions about it that you didn't have 13 with MS-DOS? 14 A. Of course people want to know the 15 difference, but if people ask, I think we told 16 them the differences, and I think then they 17 would buy maybe DR-DOS, I think so. 18 There was still some advantages of 19 DR-DOS 5.0 against MS-DOS 5.0, but the question 20 didn't came up anymore. 21 And I think also our store managers, 22 they had other things to do than to think the 23 whole day about the decision of the customer 24 whether it's DR-DOS or MS-DOS, so -- and MS-DOS 25 5.0 worked. So there were no problems with it, 11259 1 so didn't have to think about that, and 2 everybody had MS-DOS, so why not VOBIS. 3 Q. Are you familiar with the phrase, at 4 least it's popular in the United States, that 5 nobody ever got fired for buying IBM? 6 A. I know that, yes. 7 Q. And that was also true in your 8 business in 1992 with regard to operating 9 systems. As you've said before, nobody ever 10 made a mistake by selling Microsoft operating 11 system? 12 A. Well, at the end there has been only 13 one operating system anymore. That was MS-DOS. 14 So you couldn't make a mistake because you 15 didn't have a choice. You can make a mistake 16 when you have a choice, but when you don't have 17 a choice anymore, you can't make a mistake. 18 Q. Okay. But answer the question that I 19 asked you, if you would, please. 20 A. Wasn't that the question? 21 Q. In 1992 you still had a choice, there 22 was still DR-DOS 5 or 6, whatever it was at 23 that point, and you said in May 1998, that in 24 that context one never made a mistake selling a 25 Microsoft operating system. 11260 1 A. No, that's true. That's true. 2 Q. Now, in the conversation that you had 3 with Mr. Gates at Chez Nico in London in the 4 fall of 1992, you were anxious to transform the 5 business of VOBIS from I think what you called 6 it yesterday was a stupid white box? 7 A. The box mover, yes. 8 Q. Mover, right. Okay. 9 A. I like it. So there be a box mover 10 and every box brings you $100, not bad. 11 But in this business people thought 12 you should be a solution provider. That was -- 13 that was -- that time people asked for that. 14 And okay, we said we'd do some solutions and 15 now we make strategic alliance. That is what 16 we discussed with Mr. Gates. 17 Q. And that you thought would be quite 18 beneficial to VOBIS to be associated not only 19 with Microsoft as a company, but with Mr. Gates 20 personally? 21 A. Of course. I don't go to London -- of 22 course to have a nice lunch, and Chez Nico is 23 always nice, but I wouldn't have gone there if 24 there wouldn't be a benefit to talk to 25 Mr. Gates and get some extra marketing like 11261 1 this photography or some exposure to the 2 public. 3 Q. And the willingness of Mr. Gates to 4 promote this Luigi Colani-designed computer 5 that you had was important to you, wasn't it? 6 A. Yes. It was not that company could 7 survive or not survive on that decision of 8 Mr. Gates, but it helped. 9 Q. It gave you an advantage vis-a-vis 10 your competitors to be able to say that you had 11 an alliance with Microsoft? 12 A. Yes. 13 Q. And that was something, that sort of 14 cache that you got from Microsoft that you 15 couldn't get from Novell and DRI; right? 16 A. What product was that? 17 Q. I said cache, but what I meant was -- 18 A. This gift or what? 19 Q. Well, no. I mean, this sort of -- 20 this kind of nice association. You know, this 21 good publicity that you got from being 22 affiliated with Microsoft was not something 23 that you felt you could get from Novell DRI? 24 A. Digital Research didn't have a 25 Mr. Gates, you know. That is -- maybe was 11262 1 Steve Jobs it would have been possible, but at 2 that time I don't think he was so much in 3 business with Apple. But, of course, Mr. Gates 4 is something. It's somebody who you can -- if 5 you can have a photography with him, everybody 6 says oh, he knows Mr. Gates. So of course. 7 Q. Now, you said yesterday, I thought I 8 heard you say yesterday that whereas the price 9 of other components of PCs were dropping in 10 this time frame that we've been talking about, 11 the price of Microsoft operating systems was 12 going up. Did you say that? 13 A. I think from version to version, yes. 14 I think then the 3.1, 3.11 was a little bit 15 more, but there was no tendency to lower the 16 prices for Microsoft's operating systems. 17 Q. But the -- 18 A. I think from -- that Windows 95 even 19 was much more. It was something like $40. But 20 the prices, from the tendency they went up with 21 Microsoft operating systems. 22 Q. But the prices that VOBIS paid from 23 '90, '91 '92, were actually going down? 24 A. I think these were special discounts 25 for VOBIS, of course. 11263 1 The other way we did, the other way 2 around, we told also Mr. Kempin that we have a 3 good price with DR-DOS. So I think that we 4 hadn't paid their prices that low, Microsoft 5 prices, without the alternative of Digital 6 Research. And after this contract ended, the 7 price went up. I think the MS-DOS went up to 8 10, then to 11, and then 14. Step by step the 9 prices went up. 10 Q. So your low introductory prices didn't 11 last forever? 12 A. Unfortunately not. 13 Q. Okay. 14 A. End of '93 I think it was finished. 15 So we had to negotiate again. 16 Q. Okay. Now, you testified yesterday 17 about a period of time following July 1994 when 18 VOBIS got a letter from Microsoft saying if you 19 want to terminate your license, you can. Do 20 you remember talking about that with Ms. 21 Conlin? 22 A. Yes. There was a letter with period 23 of three months, I think, that you could do 24 that. 25 Q. And, in fact, VOBIS informed Microsoft 11264 1 Germany in September of 1994 that it was 2 terminating all of its licenses with Microsoft; 3 correct? 4 A. This I can't recall. I don't think 5 that we canceled the contracts without 6 negotiating a new one. This is like suicide, 7 you know. That we couldn't do because 8 Microsoft, we need the product. The processor 9 license or prepayment or not, but we had to buy 10 Microsoft products, of course. 11 And we have negotiated with Microsoft 12 is what the story with this 400 or whatever, or 13 500,000 licenses at a price of, what is that, 14 23 instead of both products together separately 15 together to 63. 16 Q. Well -- 17 MR. HOLLEY: May I approach the 18 witness, Your Honor? 19 THE COURT: Yes. 20 Q. I'd like to show you, Mr. Lieven, a 21 letter that you wrote to Mr. Bengt Akerlind at 22 Microsoft. It's dated November 2, 1994. 23 This is a letter you recognize, isn't 24 it? 25 A. Yes. 11265 1 Q. Okay. And this is a letter in which 2 you -- first of all, let's remind the jury, 3 Mr. Akerlind was one of the lieutenants to 4 Mr. Kempin in the OEM licensing group at 5 Microsoft; correct? 6 A. Yes. 7 Q. And you say in the third paragraph of 8 this letter, we have terminated the contract 9 G1503364 in September vis-a-vis Mr. Eschenlohr, 10 Microsoft Germany. 11 Mr. Eschenlohr by his letter of 12 September 28, 1994, confirmed the termination 13 of the existing contract by submitting 14 proposals for a new license agreement. 15 So does this refresh your recollection 16 that you did, in fact, terminate your Microsoft 17 license agreement? 18 A. Yes. You had to. This old contracts 19 you had to I think terminate until September 30 20 -- 30 of September, 1994. 21 But as you see here, there have been 22 proposals for new contract. That did not mean 23 that we cut off any relationship to Microsoft. 24 But this contract -- these contracts that have 25 been covered by the consent decree, those 11266 1 contracts we have canceled. We have terminated 2 that. 3 Q. And I'd like to show you -- I want to 4 show you what this contract is that your letter 5 is referring to. 6 MR. HOLLEY: Your Honor, may I 7 approach the witness? 8 THE COURT: You may. 9 Q. I'd like to show you, Mr. Lieven, what 10 have been marked as Defendant's Exhibit 6810 11 through 6814 and ask you whether this is the 12 contract with amendments that was in force at 13 the time that VOBIS exercised its right to 14 terminate under the consent decree? 15 A. This is first page, yes -- G1503364 16 that's a contract. 17 Q. And just so we're clear, if you look 18 at the signature page five pages in, that's 19 your signature dated December 17, 1993; 20 correct? 21 A. What I found is my signature on page 22 3788. There has been an amendment, I think, on 23 April 29, '94. But it's my signature, it is. 24 Q. Okay. Now I want to make sure that 25 you and I are on the same page. 11267 1 So the original contract was signed on 2 the fifth page on 17 December, 1993, and then 3 there are -- after that there are four 4 amendments; correct? 5 A. Maybe, yes. 6 Q. So do you recognize all of these 7 documents as the contract in force at the time 8 that VOBIS exercised its right to terminate its 9 Microsoft license agreement? 10 A. What I'm wondering is here is 11 amendment signed by me at 16th of May, 1995 12 with the same Microsoft license numbers 13 G1503364. 14 So what I think that this license 15 number still stayed the same all the time. 16 Also for the later contracts we made after this 17 termination. 18 So it wasn't the termination of the 19 contracts 3364, but of the terms and 20 conditions, which have been offended by the -- 21 which have been forbidden, I will say, by the 22 parties -- the Department of Justice. 23 So we still had this contract, this 24 licenses, but terms and conditions, that what I 25 terminated. Or what I wanted to say to that; 11268 1 that we terminated the old terms and conditions 2 to negotiate with new proposals. Under the 3 same license number new terms and conditions. 4 MR. HOLLEY: Your Honor, I'd now 5 offer -- 6 A. So what I want to make clear -- excuse 7 me -- is that we never wanted to cut off the 8 relationship to Microsoft. This would have 9 been suicide, in 1994 yet. And after with the 10 expectation of Windows 95, that would have 11 killed us. 12 Q. Well, let's address that in one 13 moment. The first thing I'd like to do is -- 14 A. Yeah, but I must get a recollection of 15 what really happened there, you know. It was 16 not a termination of the contract. 17 Q. Okay. Well, we'll -- 18 A. Because here, what I have here is from 19 May 1995, you know. It's -- we made another 20 Amendment Number 4 into the same Microsoft 21 license numbers. So this was not terminated. 22 Q. We'll get to that in just one moment. 23 MR. HOLLEY: Your Honor, I'd now like 24 to move the admission of Defendant's Exhibits 25 6810 through 6814. 11269 1 MS. CONLIN: No objection. 2 THE COURT: They are admitted. 3 Q. Let's go back to Defendant's Exhibit 4 6808. This is your letter to Mr. Akerlind of 5 November 2, 1994. 6 You say in the third paragraph that 7 the letter that was sent to Microsoft Germany 8 was -- and I'm now quoting -- therefore 9 sufficient for us to affect the termination via 10 Microsoft German subsidiary. 11 So at this time in early November 12 1994, it was your belief that you had 13 terminated this license; correct? 14 A. What this letter is about, if you read 15 the other paragraphs, it was to clear that I 16 really had terminated something. You say the 17 contract, but it has not been terminated. But 18 the terms and conditions -- 19 And Mr. Akerlind didn't know that, 20 because you see here, I told Mr. Akerlind that 21 I believed in telling this Mr. Eschenlohr, his 22 representative, this is terminated, whatever is 23 terminated. 24 But terminated means for me that we 25 didn't want to stay anymore with the 11270 1 prepayments and the per processor license. 2 But, of course, I thought from -- from 3 effective December 31, 1994, this practice is 4 terminated for us. 5 Q. Well, do you still have up there 6 Defendant's Exhibit 626 that Ms. Conlin showed 7 you yesterday? It's this IBM confidential 8 memorandum dated December 6, 1994. 9 A. 628? 10 Q. No, sorry, sir, 626. Defendant's 11 Exhibit 626. 12 A. I have it. 13 THE COURT: Was that admitted? 14 MR. HOLLEY: I'm about to ask that it 15 be admitted, Your Honor. 16 THE COURT: Oh, okay. 17 Q. If that's too big a problem, I can 18 probably find it -- 19 A. No, I think I can find it. It's in 20 sequence, I think. I have 638 and then 584 and 21 then I have -- 626. I don't mix that up. 22 Yes, I have it. 626. 23 Q. Terrific. 24 So I'd like to ask you to look at the 25 top of the fourth page, which is the part that 11271 1 Ms. Conlin directed your attention to 2 yesterday. 3 It's headed OEM, and it says -- then 4 the paragraph starts VOBIS Microcomputer AG. 5 Do you see that? 6 A. Yes. 7 Q. And what it says here in the last 8 sentence is, on November 29 the board of 9 directors of VOBIS decided to cancel, quote, 10 all existing contracts for operating systems 11 from Microsoft, closed quote. 12 Does reading that refresh your 13 recollection that, in fact, you didn't just 14 cancel some terms and conditions, you actually 15 canceled the contracts? 16 A. You know, this was the November 29 17 press release. And you know how difficult it 18 is now to discuss what happened there. And to 19 the press, I said we canceled the contracts and 20 now we bundle OS/2. But we didn't cancel the 21 contracts because I have seen that here that 22 under the same contract numbers we made new 23 contracts later. 24 So cancel the contract and cancel term 25 of conditions under a special contract is a 11272 1 different thing. I couldn't explain that to 2 the press, you know. 3 So this is from the press release. I 4 know the press release said we have canceled 5 all contracts from Microsoft and now from 1st 6 of January, 1995 we bundle OS/2 with this. 7 Q. Why did you issue a press release 8 saying something that wasn't true? 9 A. It is true. It is not precise enough, 10 but it doesn't say the untruths. Of course we 11 have canceled that practice with Microsoft. We 12 did. 13 Q. Okay. The next statement is also 14 true, isn't it? It says, however, it is 15 possible this move is a price negotiating ploy 16 with Microsoft. 17 A. That is the writer's opinion, but it's 18 wrong. 19 Q. Isn't that exactly what you did -- 20 A. We -- 21 Q. Excuse me, sir, just let me finish my 22 question. 23 You publicly picked a fight with 24 Microsoft about the termination of these 25 contracts in order to negotiate the best 11273 1 possible price for Windows 95? 2 A. No, we didn't do that. We -- first of 3 all, to show you that we didn't use that as a 4 negotiation strategy, we bundled OS/2 until I 5 think one and a half years, nearly until May 6 1996. That means 16 months, 18 months from 7 this report or memorandum from IBM we bundled 8 OS/2. And that I think shows that it has not 9 been for negotiation with Microsoft. 10 We really were a little bit upset that 11 time with Microsoft, that's true. But was not 12 anymore for negotiation. It was a really 13 fundamental question that we had with 14 Microsoft, and the question was will there be 15 the possibility to get those per copy licenses 16 that we always asked for. 17 It was not a negotiation with pricing 18 or something like that. 19 MR. HOLLEY: Your Honor, I think I may 20 have failed to do so, but I'd move for the 21 admission of Defendant's Exhibit 626. 22 MS. CONLIN: No objection. 23 THE COURT: It's admitted. 24 Q. Now, one of the reasons that you could 25 bundle OS/2 was because IBM was basically 11274 1 giving it away; isn't that right? 2 A. I don't know what we paid for that, 3 but it was not so much. 4 Q. Well, in fact, Microsoft -- excuse 5 me -- IBM provided VOBIS with marketing funds 6 exceeding the royalties that it charged for 7 OS/2? 8 A. Maybe. 9 Q. Well, maybe or did it? 10 A. I don't know. If you have it in your 11 files, it may be. I can't say no. 12 Q. But I'm interested in your testimony 13 and not what's in a file. 14 It is true, is it not -- 15 A. I can't recall that. 16 Q. Okay. 17 A. But -- I can't recall that. 18 Q. All right. Well, let's look at a 19 document that Ms. Conlin showed you yesterday, 20 Plaintiffs' Exhibit 9578. And this is an 21 E-mail from Mr. Akerlind to Mr. Kempin. 22 And if you could tell me when you find 23 that, please. 24 A. 9578? 25 Q. 9578, yes, sir. 11275 1 A. Yes, there it is. I got it. 2 Q. You have it, great. 3 So in the second paragraph here -- 4 MR. HOLLEY: And maybe we could put 5 this up and highlight that. 6 Q. So it says, IBM is getting very 7 aggressive with OS/2. It says, they go in with 8 -- I'm skipping the next sentence. They go in 9 with an aggressive offer on a broad basis. The 10 offer typically includes low royalties (five to 11 $15 for DOS and OS/2 Warp excluding Windows. 12 Windows is offered as an option for around 25 13 to $30). At the same time they offer huge 14 marketing funds that in many cases completely 15 cover for the royalties. 16 In the same time they offer -- excuse 17 me -- in the case the customer shows interest, 18 IBM sweetens the deal to the point that nobody 19 can resist. 20 And this is correct, isn't it, that 21 IBM was so anxious to market OS/2 against 22 Windows 95 that it was using the huge capital 23 of the IBM Corporation to pay people to take 24 OS/2? 25 A. I would like it would have been like 11276 1 that. 2 If they had convinced, let me see, at 3 30 percent of the industry, the world would be 4 different now. At least the only one who have 5 been convinced has been VOBIS, nobody else. 6 Unfortunately. 7 Q. Okay. And the reason why the other 8 people weren't convinced appears in Plaintiffs' 9 Exhibit 2228 that you were shown yesterday; 10 right? 11 If you could find that one for me. 12 A. Triple 8? 13 Q. I'm sorry, 2228. 14 A. Okay, I've got it. 15 Q. Then this is -- this is a document 16 that Ms. Conlin showed you. It's a memo from 17 Mr. Kempin to the 1995 worldwide regional 18 director meeting attendees. It's dated January 19 31 of 1995. And it's -- the page I'm 20 interested in is page 5 and the heading OS/2 21 units sold. Frankly, those are the two 22 paragraphs there. 23 A. Yes. 24 Q. Now, Ms. Conlin didn't show you this 25 first paragraph, but I'd like to talk about it 11277 1 a little bit. 2 It says, OS/2 Warp remains a niche 3 product. All the feedback I have from Germany 4 says this is an ultra hard product to sell and 5 causes end user returns because of 6 incompatibilities, missing drivers, and missing 7 apps and it does not work well on 4 megabytes. 8 Only banks and insurance companies, long-time 9 big blue accounts who have written some mission 10 critical apps to the OS/2 API continue to 11 demand it. The rest is curiosity. 12 And that was correct, wasn't it, other 13 than Deutsche Bank and a couple of other large 14 insurance companies and banks, nobody wanted 15 OS/2? 16 A. Except VOBIS customers. They liked 17 it. 18 Q. Okay. 19 A. We have long time -- even with Windows 20 95 we offered Package 1. Package 1 was OS/2 21 plus Windows 3.1 or 3.11 from you later. Again 22 when we had the contract. 23 Package 2 was Windows 95. 24 Q. Do you use OS/2 today? 25 A. Today not, no. Today, no. But at 11278 1 that time I used it. I liked it a lot. 2 Q. When did you stop? 3 A. When Windows 95 came out. I was a 4 Package 2 user. 5 Q. Now, if you look back at Defendant's 6 Exhibit 6810. That's the contract that we -- 7 A. Yes, okay. 8 Q. Look at Section 14 entitled audits and 9 investigations. That's on page 4. It has the 10 control number 33768. I'm sorry, audits and 11 inspection. 12 You were aware, were you not, 13 Mr. Lieven, that the contract that you signed 14 with Microsoft gave Microsoft the right as is 15 specified in Section 14(b) of this contract to 16 audit the books and records of VOBIS to 17 determine whether or not it was in compliance 18 with the terms of the agreement. 19 A. Yes, of course. 20 Q. Now, in the context of your public 21 spat with Microsoft about terminating the 22 contract and announcing that you were going to 23 go with OS/2, it wasn't particularly remarkable 24 that Microsoft having had the contract ended 25 wanted to know whether it had been paid what it 11279 1 should have been paid; right? 2 A. If they had done that with all their 3 license partners, yes, I would say this could 4 be a reason. But I think they have choosen 5 separate customers where they made that audits. 6 I don't know. I really don't know. 7 Q. You don't know, right, so if -- 8 A. I felt it really as a tit for tat. 9 Q. That's what you -- 10 A. It's my opinion, so I don't know. 11 Q. Fair enough. 12 If I told you that Microsoft routinely 13 audits people who terminate their contracts, 14 you'd have no basis to disagree with that, 15 would you? 16 A. No. 17 Q. Now, you knew from the outset of the 18 Deloitte & Touche audit that you owed some 19 amount of money to Microsoft? 20 A. I did know that, but how much license 21 did we pay -- how many licenses did we buy from 22 Microsoft? 2 million. So what did we pay? 2 23 million times with all this Word and Excel 24 times $40, $18 million. That should be and 25 sometimes in -- some questioning about the 11280 1 quantities with our complicated system of the 2 removable hard disk drives. 3 There was a reason why agreed to pay 4 something. We can't discuss. I don't have the 5 manpower to go through all this fights and to 6 see whether this is exact number or not. So I 7 pay you $3 million and then we forget it. 8 Q. And that's, in fact, what happened, in 9 March of '95, in order to put all this behind 10 you -- 11 A. Right. 12 Q. -- you paid $3 million and said let's 13 forget about this? 14 A. Yes, when we signed the new contract. 15 When we were back in line again. 16 THE COURT: We're going to take a 17 recess right now for ten minutes. 18 Remember the admonition previously 19 given. You may leave your notebooks here. 20 (A recess was taken from 9:49 a.m. 21 to 10:03 a.m.) 22 THE COURT: Everyone else may be 23 seated. 24 Sir, you're still under oath. 25 MR. HOLLEY: I neglected to offer 11281 1 Defendant's Exhibit 6807, which is the Novell 2 agreement with VOBIS dated October 1, 1993. 3 THE COURT: Any objection? 4 MS. CONLIN: No, Your Honor. 5 THE COURT: Admitted. 6 MR. HOLLEY: And also Defendant's 7 Exhibit 6808, which is the letter from 8 Mr. Lieven to Bengt Akerlind at Microsoft dated 9 November 2, 1994. 10 THE COURT: Any objection? 11 MS. CONLIN: No, Your Honor. 12 THE COURT: Admitted. 13 BY MR. HOLLEY: 14 Q. Yesterday you testified about an 15 episode that occurred in the fall of 1994 with 16 a replicator called Buhl. Do you recall that? 17 A. Yes. 18 Q. And it was your testimony that you 19 couldn't say that whatever occurred vis-a-vis 20 Buhl and VOBIS and Microsoft was intentional; 21 right? 22 A. I don't know. Nobody could talk to 23 those people. I don't know whether it was in 24 their office in Redmond. Maybe somebody was 25 ill, was not there, couldn't get the verify. 11282 1 But it's strange, you know, in these quantities 2 not to give a verify. 3 The system of the replicators only 4 could work if there's a precise procedure how 5 it has to be done. As soon as the material is 6 ready to ship that there is, yes or no. But 7 there has to be a no-no. But there hasn't been 8 a go, and without a go from Redmond, Mr. Buhl 9 was not able to ship to us. 10 Q. But I just want to focus on my 11 question. 12 You said yesterday -- and I think 13 these are exactly your words -- I can't say 14 that it was intentional, and that's correct? 15 A. That's correct. 16 Q. Okay. And then you also testified 17 about a situation in which Heinz-Willi Dahmen 18 went to a USB Plugathon in the Bay area; 19 correct? 20 And it was your testimony that the 21 fact that you didn't have a Win 95 -- copy of 22 the Win 95 beta in advance of that Plugathon is 23 not something that you can say was 24 intentionally designed to hurt VOBIS; correct? 25 A. No, that's true. 11283 1 But what I said is what it did to me 2 -- and this was my example with the flickering 3 of the light. That means if it would have been 4 intentionally and I couldn't prove that, 5 there's no evidence for that, but it seems to 6 me that it could be very expensive for us. 7 What I felt is Microsoft can kill you 8 if they want. That was my impression. And 9 this -- you must follow me with that because as 10 a CEO of a company with 3,000 people, to run 11 out of that material, that is a death for the 12 company, and that is what I felt. 13 I really was very sad and very angry. 14 That was the hardest time in my life. Because 15 I played with my company because I thought -- 16 and that's what people told me, I had this 17 small thing with processor license. For me it 18 was very important, you know. 19 Q. Well, this was a very high stake's 20 game in which you were engaged; correct? 21 A. It was. 22 Q. You were toe-to-toe with Microsoft, 23 and there were people on your board of 24 directors who questioned whether you were 25 engaging in the correct strategy? 11284 1 A. Some people like to go the most 2 easiest way. Most easiest way was to follow 3 Microsoft. 4 Q. Now, you testified yesterday that 5 instead of just letting VOBIS send all of this 6 equipment all the way to the Bay area and not 7 be able to do anything with it, Mr. Akerlind 8 actually intervened and made sure that 9 Mr. Dahmen could test your hardware with 10 Windows 95? 11 A. Yes. I think that's what Mr. Dahmen 12 told me; that Mr. Akerlind, if he didn't do 13 that officially, he asked please help them. So 14 at the end I think that's nice. So Mr. 15 Akerlind is a very nice person. So maybe 16 because he is a nice person, he did it. 17 Q. Now, in March of 1995, VOBIS entered 18 into a new license agreement with Microsoft? 19 A. Right. 20 Q. And as we said earlier, part of that 21 sort of new deal was to resolve the disputes 22 about the audit and to enter into -- and you 23 have to give me an audible answer because the 24 shaking of the head won't be on the record. 25 A. Okay. 11285 1 Q. So part of the new agreement in 19 -- 2 March of 1995 was to resolve the dispute about 3 the audit; correct? 4 A. This was part of it, yes. But this 5 was not the main thing so this was -- I think 6 my CFO has discussed this before with people of 7 Deloitte and said when we pay 3 million so we 8 get rid of that problems. 9 But the most important issue was the 10 new contract for me; was the situation have the 11 procedure that we can do a new per system 12 contract and explain to that to remove the hard 13 disk drives, and they agreed that we do that, 14 okay. 15 Q. And the reason that that was important 16 to VOBIS, this deal pursuant to which you could 17 put a sticker or some kind of hologram sticker 18 on the machine, was that it allowed you to 19 reduce the number of models that you had to 20 keep in the store; right? 21 A. Right. We could make out of one box 22 ten different model by putting the specific 23 hard disk drive in. 24 Q. And that was an accommodation that 25 Microsoft made to VOBIS to deal with your -- 11286 1 the specific way in which you did business? 2 A. Yes, because we could do that in our 3 stores. You can't do that if you are a vendor 4 and your production line is maybe, like we say, 5 an island, and you give that like Dell, you 6 know. They give -- Dell is a different thing. 7 No, like Amstrad. They did it in England and 8 then send it over to continental Europe, and 9 then it is distributed to the dealers. 10 They can't do that because how can 11 they handle that? But because all the 12 inventory was ours, we could do it, and we 13 could do it with our own people in the stores. 14 Q. Now, your -- VOBIS's relationship with 15 Microsoft improved quite substantially after 16 March of 1995; correct? 17 A. Yes. I think you read that in my 18 deposition 1998. 19 Q. Right. You said it was like the story 20 of the prodigal son from the Bible? 21 A. Right. 22 Q. Who goes away, and then when he comes 23 back he's more loved than all the other 24 children who stayed home? 25 A. I felt like that. I was invited to a 11287 1 private Microsoft party, the only other 2 non-Microsoft person have been invited to a 3 party in 1995, and everybody -- I think the 4 name who invited me, was responsible was 5 Mr. Kampermann, K-a-m-p-e-r, mann, m-a-n-n. 6 And he invited me personally, and when 7 I came there everybody was very surprised that 8 Mr. Lieven come here who has made this trouble 9 half a year before. It was only half a year 10 after we settled all that. 11 Q. Now, even when you were having this, 12 you know, public spat with Microsoft about 13 licensing OS/2 in the fall of 1994, it was 14 always your intention to license Windows 95 15 when it came out in August of 1995; correct? 16 A. Yes. 17 Q. And that was because it was your 18 perception that Windows 95 was something that 19 consumers were going to want? 20 A. Yes. It was said long time before 21 that Windows 95 will be the first real good 22 Microsoft product. I'm sorry but -- 23 Q. I only represent them. I don't -- 24 A. But the first Microsoft product that 25 could compete, which was the great first GUI, 11288 1 the graphical user interface, that was the 2 Apple Macintosh with the mouse, you know. 3 This was -- long time Microsoft could 4 not compete with that with the Windows 3, 3.1, 5 but Windows 95, and you see the success of 6 Windows 95, that really did something different 7 than the versions before, and everybody knew 8 that. 9 And I knew that if it we are out of 10 Windows 95, we are out of business, and that's 11 why I have been so afraid about all that in 12 fall '94 and beginning of '95. We had to get 13 any solution. 14 So I feel a little bit, I won't say 15 pushed, but we had to find a solution anyway. 16 Q. Now, in New York anyway, people lined 17 up around stores starting at midnight to be 18 there, you know, when the product was out. Did 19 that happen in Germany at your stores too? 20 A. Not that way. This is American way. 21 But in Germany, it is different. So nobody 22 wakes up during night to go to store to buy 23 Windows operating system. 24 I don't know how many people have been 25 personally invited by Microsoft, but today it's 11289 1 the same when there's a new Harry Potter book 2 or something like that. It's organized, you 3 know. But that's marketing. That's marketing. 4 And Microsoft was always very good. There has 5 never been bad marketing. 6 Q. And Windows 95 was an extremely 7 popular product with VOBIS customers; correct? 8 A. Yes. 9 MR. HOLLEY: I have no further 10 questions, Your Honor. 11 THE COURT: Redirect? 12 MS. CONLIN: Yes, Your Honor. 13 REDIRECT EXAMINATION 14 BY MS. CONLIN: 15 Q. I'm not sure, Mr. Lieven, that we've 16 been clear about the question of whether or not 17 the Plaintiffs' class is paying you, and when 18 we -- you and I -- first talked and E-mailed 19 back and forth, did I offer to pay for your 20 time? 21 A. No, I didn't know that witness gets 22 money, so I haven't asked for that. And if you 23 didn't -- hadn't talked about that on Sunday, I 24 never had asked you so for any -- so in Germany 25 we say witness has to come to say and to swear 11290 1 whatever. So no further questions of the 2 witness. 3 Q. All right. Well, the jury understands 4 that I can't make people come, and so do you 5 know that I thought you were retired and not -- 6 A. Yes, yes. 7 Q. -- and not earning any income for your 8 time? That's what I thought. 9 A. Yes. 10 Q. All right. If you had been retired, 11 as I thought you were, then I couldn't replace 12 income on behalf of the Plaintiffs' class 13 because you wouldn't have had any. 14 A. No. 15 Q. So I did not offer you -- 16 A. No. 17 Q. -- any money? 18 A. I didn't ask so. I have been 19 surprised about that. 20 Q. And now I have. 21 A. But as you know, I don't get any 22 wages. Whether I'm here or not, my money is 23 working at the bank so. I don't lose anything 24 to be here, except maybe the flight expenses, 25 but we can talk about that so. 11291 1 Q. And I'm sure we will. 2 A. So I have come here without any 3 refunds. So that's what I want to say with 4 that. 5 Q. All right. 6 I think that clarifies it. 7 In talking with Mr. Holley, he 8 suggested to you that the price you were paying 9 for MS-DOS 5.0 in 1992 and '93 was a 10 rock-bottom price. Remember that? 11 A. If you -- yes, if you count that are 12 200,000 copies per $9, that is really a low 13 price. 14 Q. And when you got that rock-bottom 15 price for MS-DOS 5.0, DRI was a competitor for 16 your business, correct? Remember, this is 17 19 -- 18 A. 1991, until 1992, yes, that we have 19 both the choice of 5.0 DR-DOS or MS-DOS. But 20 what does it mean competitor to us, DR -- 21 MS. CONLIN: I wonder, Darin, if we 22 could put up 10033A. 23 Q. We're going to wait just a moment for 24 the time line because I think that helps us to 25 put the whole thing in perspective. 11292 1 MS. CONLIN: We can use it on that. 2 Can you blow it up a little bit? 3 Q. We've talked about this, but to be 4 sure that this is in perspective, in 1989 you 5 were shipping DR-DOS exclusively; correct? 6 A. Right. 7 Q. And 1990 you were shipping DR-DOS 8 exclusively? 9 A. Also 1990, yes. 10 Q. Okay. And then in the middle of 1991, 11 that is when you had this good contract with 12 Microsoft for $9 for MS-DOS; correct? 13 A. Yes. It was not only the price, it 14 was also the Windows MS-DOS 5.0. If they had 15 offered us the same price for Windows 4.01, we 16 hadn't shipped it. 17 Q. And why would that be? 18 A. Windows 4.01 is like I think 19 Mr. Holley said yesterday, it was written by 20 IBM. I think he meant that's not good for -- 21 has not been so good. But I think there's a 22 reason why it hasn't been so good. 23 That time people, unfortunately, 24 didn't say take so much care about operating 25 system. That was a problem. Their thought was 11293 1 only to boot the computer up and then it works. 2 But this was a mistake. And therefore the 4.01 3 was not really good. And if Microsoft had 4 offered us this $9 for the 4.01, we had to 5 refuse. Even $1 we had to refuse. But the 6 trigger was the 5.0. 7 Q. Okay. And what I'm getting at, 8 though, is the rock-bottom prices, the $9 for 9 MS-DOS 5.0, that came at a time that you were 10 then loading DR-DOS as well; correct? 11 A. Yes. 12 Q. And when you were loading -- when you 13 stopped loading DR-DOS as an alternative, did 14 your prices go up for MS-DOS or down? 15 A. I think in the '94 contract it was $10 16 and then $11, and then there was so many 17 amendments, and then I saw $14. So it went up. 18 Q. You did mention that you thought that 19 the MS-DOS 4.0 was a very -- not a good 20 product? 21 A. The 4.0 didn't work. So they 22 immediately released the 4.01, which was not 23 better, but at least it let the computer boot 24 up so -- 25 Q. That was good. 11294 1 A. Some progress. 2 MS. CONLIN: May I approach the 3 witness, Your Honor? 4 THE COURT: You may. 5 Q. Let me show you a document that is 6 marked Plaintiffs' Exhibit 37 that is already a 7 part of the record, and I will show it to you 8 for the purpose of establishing that you are 9 not the only one who thought that 4.0 was not 10 the greatest operating system in the world. 11 This is Plaintiffs' Exhibit 37. It is 12 from Mr. Gates to a number of Microsoft 13 executives. It's dated October 31, 1988, 14 and -- 15 MS. CONLIN: It's already in. 16 Q. October 38 -- I'm sorry, October 31, 17 1988. 18 And in the middle of the first 19 paragraph, Mr. Gates says, DOS 4 is a mess to 20 discuss -- bugs, too big, strange shell 21 interface, who wrote it? DOS 4 has a terrible 22 reputation. 23 Do you see that? 24 A. Yes. 25 Q. So you were not alone in your view? 11295 1 A. That's interesting to see that. 2 Q. What Mr. Gates says, was that also 3 your experience? 4 A. Yes. 5 Q. DOS 4 is a mess? 6 A. Yes. That was the reason why we 7 didn't take that. So we had Mr. Dahmen. He 8 was a genius. He knew that it was not good. 9 He said, put your fingers away from that 10 because of the bugs and all this strange 11 things. 12 And I listen to my employees, you 13 know. 14 Q. Sure. 15 Mr. Holly asked you questions about 16 volume discounts and per processor licenses. 17 Was the per processor license like the 18 volume discount? 19 A. So Microsoft didn't have, I think, a 20 volume discount like that. They didn't have a 21 price list that said from there to there. And, 22 you know, we are comparing now, now apples and 23 oranges, you know, because maybe that there 24 have been distinctions between volumes in the 25 per processor license, whether you bought 11296 1 500,000, 400,000, 300,000. 2 What makes sense is $1; maybe you get 3 from 400- to 500- this $1, from 300- to 400- 4 maybe $2. Then the smaller the quantities are, 5 the discount is a little bit bigger. 6 But to switch from that per processor 7 license to a really per copy license where 8 really the quantities make sense because there 9 they are very flexible, they were in totally 10 different price range. It doubled. As soon as 11 you were out of the per processor license and 12 you were in the per copy license, the prices 13 doubled. And that makes no sense. Even the 14 same quantity. That makes no sense. I've 15 never -- never understood that. 16 Q. So the discount, the significant 17 discount depended on your willingness to load 18 or pay for every processor that you shipped for 19 every computer that was out the door? 20 A. Yes. 21 Q. That was the -- 22 A. That was -- it never has been written 23 somewhere, but this was the effect of that. 24 Q. He also used an analogy to minimum 25 commitments, I believe the Vienna orchestra. 11297 1 A. No. I think Mr. Holley did that. 2 Q. Yes. 3 A. With the tickets. 4 Q. Yes, he did. 5 A. I had some time to think about that so 6 it's nice. And I like analogies and -- but it 7 was not the same. 8 You said when you buy in advance, what 9 you can do is your seat for one season. You 10 pay what, I don't know, $800 may be good. 11 Lincoln opera is 800. Broadway theater may be 12 less. And you don't go there anymore, you lose 13 that. You lose that money. It's the same as 14 when you make the minimum commitment from 15 Microsoft and you don't use the licenses. But, 16 you know, the tickets -- there are two things. 17 First of all, this is not a very good 18 example because the ticket you can give away. 19 You are allowed to give away a ticket. We have 20 never been allowed to give away unused 21 Microsoft licenses. It would be very good. So 22 that's the first difference. 23 But second difference, I think, to 24 show that what is with the per processor 25 license to make that analogy right with the 11298 1 theater ticket. 2 Imagine -- I don't know whether you're 3 married or whatever, but guess you are married, 4 and you like to go to dinner. After dinner you 5 go to theater, to Broadway. I don't know 6 whether you go to dinner later or before 7 theater or after. But then you say, okay, go 8 to the theater. And from time to time I have 9 dinner with my wife and can we get a ticket for 10 your show. No, that's not the procedure we 11 assign tickets. 12 So when do you go to dinner? Oh, 13 frequently every month. So, okay, we sell you 14 per dinner ticket. You tell us how many 15 dinners will you have a year. Let's say 12. 16 Okay. Then you get a ticket license for a seat 17 in the theater. Maybe $50 per performance, per 18 show. Say $600. It's ridiculous to wait until 19 the end because it's really ridiculous, this 20 analogy. But that's what Microsoft was doing. 21 They said, okay, you go to dinner and 22 you come to theater. You don't count theater 23 events, you count dinner events. Then you 24 might say, okay, that is okay. 25 So am I allowed to go as often to 11299 1 theater then when I pay this minimum 2 commitments theater visits, as often as I like? 3 Then theater says no, that's not possible. If 4 you go more than 12 times, you have me to pay 5 for any visit more, $50 more. 6 And I said, okay, good, that makes 7 sense, but what if for that evening I have had 8 dinner with my wife, I would prefer another 9 theater because better program. Are you 10 stupid? You paid for my theater. Why you go 11 to the other theater? Even the show is better, 12 but you have paid for me. So come to my 13 theater. But even if you don't come, doesn't 14 matter. You have paid your 12 times $50. 15 And you see that, that is the right 16 analogy with that. This is totally ridiculous. 17 Because why? Why there is no theater with a 18 per dinner license on Broadway? Because there 19 are so many theaters. There's competition -- 20 you can do that only under monopoly. 21 And the second thing which makes even 22 this analogy so ridiculous, there's another 23 thing. You do not need to go to theater 24 necessarily when you have been to dinner. But 25 you need an operating system when you have a 11300 1 PC. That makes it really so crucial, this per 2 processor license. I always complained about 3 that. 4 May have -- I tried to find out more 5 analogies in my life to -- I have tried with my 6 letter to Ann Bingaman to show them what it 7 really was because nobody understood it. 8 I hope it clarified a little bit. 9 Although it's really ridiculous, this example 10 with the theater, this per dinner license and 11 Broadway theater. But that's what it is with 12 Microsoft, what it has been. 13 Q. All right. You also had a discussion 14 with Mr. Holley about whether or not your 15 stores could be required to put other people's 16 computers in them. Do you remember that 17 discussion? 18 A. Yes. 19 Q. All right. And you mentioned that 20 under some circumstances you might be required 21 to put somebody else's computers in your store; 22 correct? 23 A. Correct. 24 Q. Please explain that to the jury. 25 A. I don't know the terms, I'm not a 11301 1 lawyer. I have studied a little bit of that, 2 but that means if a company has an 3 infrastructure for its own -- and this 4 infrastructure is a monopoly. That means, for 5 instance, telephone systems are rate systems. 6 We don't have that in U.S., you always have 7 competition in rate systems. But in Germany we 8 have the Deutsche Bank. They have the total 9 rate system. They own it. 10 And when they own it, they can be 11 asked by law to open that to other competitors. 12 And that's what has been done with this 13 deregulation in Europe and in Germany. 14 Now we have some companies that run 15 trains on that system, which is still owned by 16 the -- not government, but by the Deutsche 17 Bahn. 18 We have the telephone system. They 19 have to open it up for other competitors. 20 That's the T Mobile. T Mobile also is the -- T 21 Mobile is the successor, that's right, from the 22 government. The government gave that to T 23 Mobile. And they now have to open that for 24 others for both. From other competitors. 25 Our electricity plans, this has been a 11302 1 monopoly in Germany until 1990, I think, and 2 then they had to deregulate that. Now we have 3 four or five. But they use the infrastructure 4 still owned by the government or the government 5 company. 6 And that's what I said. If we would 7 have been the only retail store chain in 8 Germany where you could buy computers, we could 9 have been asked by law to open that up to 10 others. Against a fee, of course. That is, 11 you have to pay also for the telephone lines if 12 you are a competitor. 13 Nobody's asking to get a risk-free 14 contact -- contract from monopolies or 15 something like that. But in this case, yes. 16 But this is different from -- so, of course. I 17 would -- I don't know any retail chain that is 18 in process offer monopoly infrastructure to 19 sell a computer. And then I said no, we would 20 not agree to Amstrad to use it. Except we 21 signed an agreement that they give us their 22 computers for good price and we offered it. 23 MR. HOLLEY: Your Honor, I move to 24 strike that answer. 25 Article 82 of the Treaty of Rome does 11303 1 not apply in Polk County, Iowa. 2 A. No, but you asked me about Germany, 3 about my retail store in Germany. 4 MS. CONLIN: We'll let the Judge rule 5 on the question. 6 THE COURT: Sustained. 7 Q. Let's talk about the increase of other 8 computer components. 9 When -- in your testimony and 10 discussion with Mr. Holley, and also with me, 11 you talked about other computer components, 12 like memory and other things, were going down 13 in price and up in quality; correct? 14 A. This was the development and still is 15 the development, a little bit slower now, but 16 since 25 or 30 years in that industry. 17 Q. And in terms of the total cost of the 18 computer, has the cost of Microsoft's operating 19 system become a larger percentage of the total 20 cost or a smaller percentage? 21 A. No, it has become a larger percentage. 22 Q. Any idea of how much a percentage it 23 is? 24 A. I know up till end of '96 when I left, 25 I think then the license for Windows 95 was 11304 1 $45, like that. Is that possible? So much 2 more than $15 or $24. And the prices went 3 down. You know, when we have had the $17 for 4 Windows, or $15, the computer cost I think 5 $1,200, average, and then it went down when AMD 6 had new processors. And they had this 7 competition between AMD and Intel. The average 8 price went down, but I said yesterday $1,000. 9 But this is -- I think a good computer for 10 $1,000. You can start with even 500. 11 But, you know, the license, Windows 12 license cost always the same. It doesn't 13 depend on the price of the computer. It's not 14 a percentage license. You pay your $45. You 15 don't pay 5 percent, which would be good 16 enough. But $45 is much more from $500 than 17 from $1,000. I don't know what now the license 18 is. I think it must be 70, 80. The Vista is 19 even more, I think. I haven't -- I don't have 20 to negotiate anymore so I don't know the 21 figures right now. 22 Q. You also were asked questions about 23 whether or not anyone in Iowa ever bought a 24 High Screen computer from VOBIS. 25 Do you recall that line of 11305 1 questioning? 2 A. How can I know? 3 Q. All right. Well, let's assume that 4 nobody ever did. 5 Based on -- and there is a finding of 6 fact that is collaterally estopped from -- for 7 a period of time in the middle here that says 8 that the world -- that the market for Intel PCs 9 is worldwide. But let me then confine my 10 question to you for a period in '94 and behind. 11 Based on your experiences as an OEM 12 CEO, what is the market for Intel-compatible 13 PCs? 14 MR. HOLLEY: Objection, Your Honor. 15 Misstates the record. The Iowa Competition Law 16 states that the market is the state of Iowa. 17 That's the law. 18 MS. CONLIN: Your Honor, if we're 19 going to talk about this, we can do so off the 20 record, but that is absolutely not correct. 21 MR. HOLLEY: The form of the question 22 was completely improper, and if we need to 23 approach, I'd be happy to do that. 24 THE COURT: Very well. 25 (The following record was made out of 11306 1 the presence of the jury at 10:33 a.m.) 2 MR. HOLLEY: Your Honor, this is a lay 3 witness with absolutely no economic training. 4 He can't testify about market definition. And 5 the Iowa Competition Law says that the market 6 is the State of Iowa. Whatever Judge Jackson 7 found cannot trump what the Iowa legislature 8 enacted. That's just the way it is. 9 And so the question is improper on 10 multiple grounds. It's also unbelievably 11 leading. I didn't have time to make that 12 objection, but he should not be testifying 13 about market definition. 14 THE COURT: What's the question again? 15 MS. CONLIN: Your Honor, based on -- 16 something like -- Based on your experience as 17 an OEM CEO, is the market for PCs worldwide? I 18 asked it in a bit different way if the Court 19 would like. 20 But, Your Honor, we've been here 21 before. The Court has already granted 22 collateral estoppel to Judge Jackson's findings 23 on the issue of what is the market for 24 Intel-compatible PCs and Judge Jackson found 25 and you found that it was worldwide. And my 11307 1 question to him is for the period before 2 because that's when he was around. 3 And I am only responding to what 4 Mr. Holley did, which was try to make the jury 5 believe that if nobody in Iowa bought a High 6 Screen computer, then how this testimony is not 7 material. That's what he did. I have the 8 right to respond to that, as I did, I think. 9 Moving onto another subject. Let me 10 stop, Your Honor. I would like to address the 11 sustaining of Mr. Holley's objection to his 12 answer with respect to why he would be required 13 to under some circumstances let other people 14 use their stores for their computer. 15 MR. HOLLEY: I can't give an opinion 16 about market definition. That's economic. 17 Relative market. He did business in Europe 18 exclusively and didn't sell his stuff in the 19 United States. That is a fact. And asking him 20 to opine about something that plaintiffs have 21 multiple experts coming to testify about is not 22 appropriate. He would be offering expert 23 opinion that he's not qualified to offer. 24 There's nothing improper about eliciting the 25 fact that Vobis was purely a European company. 11308 1 Ms. Conlin may not like the 2 consequence of that fact, but it's a fact. 3 THE COURT: And the question is it's 4 just whether or not he believes -- 5 MS. CONLIN: Yes, as a CEO of the 6 largest computer company in Germany and one of 7 the largest in Europe, he can express his 8 opinion within the facts that he's familiar 9 with. That is all I'm asking. 10 Mr. Holley has misled the jury. I 11 just want the opportunity to ask a question 12 that may help them to understand and remind -- 13 THE COURT: Where are you going beyond 14 this question? 15 MS. CONLIN: I'm done. That's it. 16 THE COURT: So just asking as an OEM 17 whether or not he believes PCs are a worldwide 18 market? 19 MS. CONLIN: Exactly. 20 THE COURT: All right. I'll allow 21 that. 22 MS. CONLIN: Then, Your Honor, may I 23 revisit the issue that the Court sustained an 24 objection as long as we're already back here. 25 My question to him was based entirely 11309 1 on what Mr. Holley asked him. And he provided 2 an answer, perhaps a little longer than I 3 anticipated with a little more detail than I 4 anticipated; but, nonetheless, the question was 5 proper and the answer that he gave was a direct 6 response to Mr. Holley's questions. And 7 Mr. Holley's question was: They can't make 8 you -- they -- you cannot be caused to let 9 other people use your store to sell your 10 computers. Of course, his argument, erroneous 11 as it is, is that Microsoft cannot be required 12 to make its product available on fair and equal 13 terms. That was the intent of the question. 14 The intent of mine was to say not so. 15 There are circumstances under which that can be 16 permitted. I think it is fair redirect. I 17 have the right to respond to what he does, even 18 if I believe that it is not correct. 19 So that's what I was doing, Your 20 Honor. And that he mixed in other things 21 doesn't really make the answer entirely 22 incorrect. 23 And if Mr. Holley has -- or had 24 objections to some specific parts, then I think 25 that that would be appropriate. But, Your 11310 1 Honor, the Treaty of Rome and that it doesn't 2 apply in Iowa, that was an improper objection. 3 And because I wasn't asking questions about the 4 Treaty of Rome, about which I know absolutely 5 nothing. I was asking questions to respond to 6 what Mr. Holley did in his cross-examination 7 and to clarify the record and to clarify for 8 the jury that there are such circumstances. 9 And you know it and I know it and Mr. Holley 10 knows it. 11 MR. HOLLEY: Not in the United States 12 of America. Never. There is no law which says 13 that you can take people's private property and 14 give it to their competitors. That is a crazy 15 European notion, but it isn't the law of this 16 country. And you were suggesting improperly 17 through that question and that answer that that 18 rule of European law, which I regard as 19 socialist, applies in this country and it 20 doesn't. 21 And he went off on some entire, you 22 know, discussion about state-owned monopolies 23 and about how the European government forces 24 people to allow others to use their facilities. 25 That isn't the law of the United States, and 11311 1 it's not fair to suggest that it is. And the 2 jury would be really confused. 3 THE COURT: My problem with it was it 4 went into a legal conclusion which she has no 5 grounds. He has no background. 6 MS. CONLIN: Well, actually, he does, 7 Your Honor, but I won't argue the point any 8 further. 9 THE COURT: Okay. 10 MR. HOLLEY: Thank you. 11 THE COURT: At least there's no 12 foundation. 13 MS. CONLIN: I could lay some. 14 (The following record was made in the 15 presence of the jury at 10:40 a.m.) 16 THE COURT: Please proceed. 17 MS. CONLIN: Do you want to read the 18 question back? 19 (Requested portion of the record 20 was read.) 21 THE COURT: Objection is overruled. 22 You may answer. 23 A. From the purchasing sites, so from 24 sales, because we haven't been a worldwide 25 seller for those PCs, but you can easily see, 11312 1 as soon as it has to do something with OEM, you 2 couldn't do that anymore in the business with 3 the local subsidiaries of Microsoft. It was 4 transferred immediately to the headquarter, to 5 Redmond, to Mr. Kempin that time. 6 So this was -- of course it was 7 globally. All the things -- memory, memory was 8 part of Japanese Toshiba, was -- American it 9 was Micro Devices from Boise, Idaho. Texas 10 Instruments, they have been -- Siemens, 11 Germany. So this was an overall international 12 global market. 13 Q. All right. 14 A. You can see that because nobody in 15 Munich would ever talk to an OEM. It had been 16 immediately transferred to Redmond, to the 17 international headquarter for global OEM 18 business. 19 Q. And Microsoft competed worldwide and 20 DRI competed worldwide? 21 A. Yes. Well, they had their 22 subsidiaries. They haven't been so big that 23 time. But they have had a remarkable sales 24 representatives organization. Yeah, they're 25 worldwide. And not in every country, but there 11313 1 was no limitation that they were local like us. 2 So we were local. We were Europeans. We once 3 thought about to go to Japan, but we withdraw 4 that immediately. 5 Q. I want to talk just for a moment about 6 the comparison ad. Remember you did a 7 comparison ad between MS-DOS and DR-DOS? 8 And did you know when you ran that ad 9 that there was any kind of a prohibition 10 against it? 11 A. It was 1989. Yes, at that time it was 12 still -- there was a law that you are not 13 allowed to make any comparison, even if it is 14 true. To avoid confusion or I don't know why. 15 So the competition law, the German 16 competition law was from 1868. So it was a 17 little bit out, so they have now -- because to 18 get it similar in whole Europe, we have 19 regulations were not so strong at the time, 20 also 1989, to get it more equal, and now you 21 can do that. 22 The only thing you may not do is to, 23 you know, not to tell the truth. But in this 24 comparison, everything was true. 25 Q. Well, did you -- when you put the ad 11314 1 in though, did you know that what you were 2 doing might violate the 1868 German law, do you 3 know? 4 A. This is -- with the comparison, 5 normally says you have your own product. Maybe 6 car manufacturer. You have your Mercedes. You 7 may not compare it in an ad with BMW. In 8 United States you may -- you have done that all 9 the time. 10 I thought because we sell both, we 11 have an obligation to tell the customer what 12 the difference is. And that was not accepted. 13 I don't -- by their law it's not. It wasn't 14 acceptable. It is not a comparison, so 15 absolutely forbidden. 16 I thought because I sell I have to 17 compare because when customer ask me what is 18 different so I have to compare. I have to 19 explain both. But then they said not in an ad. 20 So okay so -- 21 Q. Did you -- what was the outcome of the 22 complaint -- was a complaint made against you 23 by Microsoft? 24 A. Yes. They send a letter, a lawyer 25 send a letter. What then came of it, I don't 11315 1 know. We withdraw that ad. We said we don't 2 do it again. 3 Q. Do you know whether or not you had to 4 pay a fine? 5 A. Not a fine. We don't pay a fine for 6 that in Germany. You pay the lawyer. That may 7 be a fine. 8 Q. Okay. Questions about did DR-DOS and 9 the declining percentage that it was of your 10 total sales. Do you remember those questions 11 from Mr. Holley? 12 A. In the 1991, 1992 period, yes. 13 Q. All right. Do you know the acronym 14 FUD, F-U-D? 15 A. Is that fear, uncertainty, and doubt? 16 Q. Yes. Do you know that acronym? 17 A. I know that, yes. 18 Q. Did you observe any attempt or -- let 19 me see how I can put this. 20 Did you observe fear, uncertainty, and 21 doubt, FUD, by Microsoft against DRI during 22 this time frame? 23 A. FUD, I don't know. Oh, yes, with this 24 Windows 3.0, where this strange or this 25 nonmistake, this -- the mistake -- error 11316 1 message which wasn't an error, yes, that may 2 be. That is something like that. 3 Which again I can't say that this was 4 intentionally to really to say that. But this 5 is this light flickering. Light flickering and 6 FUD is exactly the same. That's the same, you 7 know. 8 Q. All right. Let's talk about whether 9 or not the declining prices -- I beg your 10 pardon and -- 11 MS. CONLIN: May I approach the 12 witness, Your Honor? 13 THE COURT: You may. 14 Q. Mr. Lieven, I'm handing you what has 15 been marked Plaintiffs' Exhibit 232. 16 This is another internal Microsoft 17 document. This is already a part of the record 18 in this case, but I wanted to show you what 19 Microsoft said in this time frame. 20 This is a report you see on the front 21 from Mr. Schindler, and he was your sales rep; 22 correct? 23 A. Yes. 24 Q. And it goes to Mr. Kempin and others. 25 It is the OEM report for March of 1990. 11317 1 MS. CONLIN: Do you have that? Okay. 2 Q. Let's turn to the page that ends in 3 the Bates stamp 6042. You will see VOBIS down 4 there. 5 A. Yes, I have it. 6 Q. And what Mr. Schindler tells 7 Mr. Kempin in March of 1990 is Theo Lieven, GM, 8 is blocking our attempts to initiate 9 negotiations for a DOS contract. Meanwhile, 10 DRI presented their further steps in DR-DOS. 11 We have to find a way for presenting DOS 5 and 12 to talk about contracts, but it looks like we 13 have to compete with DRI's pricing (less than 14 $10 royalty). Do you see that? 15 A. Yes. 16 Q. So in this Microsoft document they 17 identify that in order to get your business 18 they're going to have to compete on price? 19 A. Yes, but I'm a little bit surprised 20 because I thought that DR-DOS says we saw 21 Microsoft offer for $9, and now I see that 22 Microsoft says we know about DR-DOS $9. Maybe 23 that is $9 happen in the air or somewhere. 24 Q. Another thing I want to be sure we're 25 clear on is remember when Mr. Kempin -- I think 11318 1 in terms of one of the negotiations you were 2 having, the March negotiations, he said you 3 didn't have a license for Windows. Do you 4 remember that? 5 A. He wrote that in the report. 6 Q. Correct. 7 A. But I thought that this meant a 8 written license. 9 MR. HOLLEY: Objection, Your Honor. I 10 didn't mention anything about this on cross. 11 THE COURT: Sustained. 12 Q. Did you talk about your holograms, the 13 holograms you had left with Mr. Holley? 14 MS. CONLIN: Mr. Holley is shaking his 15 head. 16 MR. HOLLEY: I guess I'm -- 17 A. We talked about holograms but -- that 18 we have this holograms and we burn them, we can 19 use it any time. But I don't recall that we 20 talked about that, that remaining holograms. 21 Q. I want to step through these issues 22 with respect to the contracts and whether you 23 terminated your contract or terminated the 24 conditions. 25 But in order to do that, I need to put 11319 1 into the record some additional contracts. 2 Maybe Mr. Holley already did it, but I've got 3 them numbered, so -- and mine look different 4 than his. 5 MS. CONLIN: So may I approach the 6 witness, Your Honor? 7 THE COURT: You may. 8 Q. I'm handing you what I have marked 9 Plaintiffs' Exhibit 10048. 10 MS. CONLIN: May I hand the Court also 11 a copy? 12 Q. Mr. Lieven, that is a contract -- 13 that's a Microsoft sheet that attached to a 14 Microsoft OEM license agreement dated January 15 1, 1994. Do you see there on the second page? 16 A. Signed by me? 17 Q. Yes. 18 A. I see my signature on page 1703 from 19 17 of December, 1993. 20 Q. Correct. That is your signature? 21 A. Yes. 22 MS. CONLIN: Your Honor, we would 23 offer Plaintiffs' Exhibit 10048. 24 MR. HOLLEY: Your Honor, if you could 25 just bear with me for one moment, I'm trying to 11320 1 compare it. 2 It appears to be, with the exception 3 of the cover sheet, the same as Defendant's 4 Exhibit 6810, but I just would note that there 5 are certain handwritten notations on the 6 exhibit that Ms. Conlin proposes to introduce 7 that aren't on the other contract, but I have 8 no objection to introducing this other version. 9 THE COURT: It's admitted. 10 MS. CONLIN: Thank you, Your Honor. 11 Q. This January 1 -- what date did you 12 sign it, Mr. Lieven? 13 A. I think 17th of December. Yes, 14 December 17th, '93. 15 MS. CONLIN: Could you change the 16 page, please, Darin, on the time line? 17 Okay. 18 Q. So this January 1, I have added to the 19 time line VOBIS enters per processor license 20 with Microsoft. 21 So this January 1 contract is a per 22 processor contract? 23 A. Yes. It was after this very favorable 24 contract with the $9 ended. 25 Q. And your price, if you will look at 11321 1 the page ending 705, your price for the 2 operating system goes to $11; correct? 3 A. Yes, yes. 4 MS. CONLIN: Do you see that? At the 5 top, Darin. Right at the very top. 6 Q. So now it's $11 for MS-DOS operating 7 system; right? 8 A. Right. 9 Q. And the price for Windows -- for 10 Workgroups is $17; correct? 11 A. Yes, that's it. 12 Q. In the end of '94, first of '95 time 13 period, you entered into a contract for OS/2 14 Warp; correct? 15 A. Right. 16 Q. And did you intend at the time you 17 entered into the contract for OS/2 Warp to 18 continue to use Microsoft products? 19 A. Yes, of course. 20 Q. All right. And Microsoft learned of 21 your contract with IBM for OS/2 Warp? 22 A. I think so. 23 Q. All right. 24 A. Yes. You couldn't hide that. When 25 VOBIS did something, everybody knew one day 11322 1 later. Even there was no press release. 2 Q. Well, we looked at a document even 3 that indicated that it was announced at COMDEX. 4 Do you recall that? 5 A. At the time of COMDEX. 6 Q. Yes. 7 A. We haven't been at that COMDEX. One 8 year later we have been there, but COMDEX is 9 October, I think. Is that COMDEX fall in Las 10 Vegas that time? 11 Q. Fall. 12 A. Maybe. 13 Q. Well, I think it said November. But 14 what you're saying is that it was the same 15 time, though you yourself were not present at 16 COMDEX? 17 A. Yes. 18 Q. All right. Let's look at a document 19 that I have marked 10039. 20 MS. CONLIN: May I approach the 21 witness, Your Honor? 22 THE COURT: Yes. 23 Q. Mr. Lieven, this is an E-mail from 24 Mr. Kempin and it is dated November 20, 1994. 25 Mr. Kempin sends this E-mail to 11323 1 Mr. Gates, Mr. Akerlind, Mr. Silverberg, 2 Mr. Wedell, Mr. Maritz, and Steve Ballmer. 3 I know that you've not seen it before, 4 but it addresses some of the topics that we are 5 discussing. 6 MS. CONLIN: And I would offer 7 Plaintiffs' Exhibit 10039. 8 I offer the embedded hearsay at the 9 bottom, but not for the truth of the matter 10 asserted, but rather for the purpose of 11 establishing subsequent conduct under McElroy 12 versus State. 13 MR. HOLLEY: I object to the admission 14 of the hearsay, Your Honor, and I also object 15 to the use of this internal Microsoft document 16 with a witness who's never seen it. 17 THE COURT: It's admitted. 18 Q. Mr. Lieven, looking at the very top, 19 there's the date of November 20th. And this 20 would be after the announcement, correct, that 21 you, VOBIS, are going to be using the IBM OS/2 22 Warp; correct? 23 A. Right. Yes. I think we just were 24 starting to ship it. I think the first -- the 25 time was last week. 11324 1 Q. Well -- 2 A. Do we have it there? 3 Q. From our earlier -- 4 A. Yes, 25. November 25 we started it. 5 Q. So this is before that, but after 6 COMDEX? 7 A. Yes. 8 Q. It says at the top, after talking to 9 Escom and VOBIS over the last six to eight 10 weeks constantly, it looks like that IBM has 11 hooked them with marketing money and other 12 favors to bundle Warp on most of their PCs. 13 I believe that you've addressed this 14 question, but your rationale for bundling OS/2 15 Warp, was it because of the marketing money or 16 were there other reasons why you wanted to put 17 OS/2 Warp on computers available to your 18 customers? 19 A. You never do anything for marketing 20 money if you don't need the product. That 21 makes no sense. 22 This transaction cost is to -- 23 marketing money, you have to do something. You 24 have to advertise, you have to promote. You 25 don't get the marketing money for free, except 11325 1 for the holograms, which is the definition of 2 the marketing money. But if you get marketing 3 money you have to do something for that, and we 4 said if we have to -- you know, this -- 5 Microsoft was very strong that time yet. It 6 was a really big hot air balloon, you know. 7 This is -- the only thing you could see at the 8 sky was operating systems. 9 And we said, if we take now IBM, this 10 small balloon -- IBM, it was small in operating 11 systems that time. If you want us to promote 12 that, we need some money. 13 We can't change all the supply chain, 14 prepare the CD-ROM drives, install it on the 15 hard disk drives without getting some money. 16 But it was not that they said you get money and 17 then you do it, this was -- but it helped, of 18 course. 19 THE COURT: We're going to take our 20 recess at this time. It is after 11. And 21 we'll be in recess until 12 noon. 22 Remember the admonition previously 23 given. 24 See you at noon. 25 (A recess was taken from 11 a.m. to 11326 1 12:08 p.m.) 2 (At this time, a sealed-by-the-Court 3 record was made by Janis Lavorato.) 4 (The following record was made out of 5 the presence of the jury at 12:12 p.m.) 6 MR. TULCHIN: Your Honor, we were 7 going to talk about an exhibit. I don't know 8 if because of the hour you want to wait to do 9 this at 3. 10 THE COURT: Thank you for reminding 11 me. 12 MR. TULCHIN: There were a couple 13 little scheduling things. 3 o'clock works -- 14 or at break, whatever. 15 THE COURT: Thanks for reminding me. 16 You've got a better memory than me. 17 (The following record was made in the 18 presence of the jury at 12:17 p.m.) 19 THE COURT: Everyone else may be 20 seated. 21 Sir, you're still under oath. 22 Sorry I interrupted you, Ms. Conlin. 23 MS. CONLIN: That's all right, Your 24 Honor. 25 THE COURT: You may proceed. 11327 1 REDIRECT EXAMINATION (CONT'D) 2 BY MS. CONLIN: 3 Q. Instead of returning to that document, 4 which we will in a minute, I want to look at a 5 different document, and that is Plaintiffs' 6 Exhibit 5279. 7 MS. CONLIN: May I approach the 8 witness, Your Honor? 9 THE COURT: Yes. 10 MS. CONLIN: This document is already 11 a part of the record, and the document is a 12 Microsoft document from worldwide OEM sales. 13 Darin, if you would put up the first 14 page just to give us context for our 15 discussion. 16 Q. And then, Mr. Lieven, if you would 17 turn to page 5 of the document. And again, 18 this is Microsoft's comments on VOBIS on page 19 5. 20 A. It's the page number 5 or the fifth -- 21 Q. Actual page number 5. Not the Bates 22 page, but -- do you see it? Do you see VOBIS 23 there? 24 A. No, I don't. 25 Q. Then let's look at the Bates number. 11328 1 That ends with 758. 2 A. 758. Well, that is -- now I got it. 3 Q. Okay, good. 4 This is also again -- again for 5 context, this is the April status report 6 European OEM division, Jeff Lum. 7 And in April he says, we are focusing 8 on getting these guys -- meaning, I'm sure, 9 VOBIS -- to ship DOS 5.0 ASAP. If we can do 10 this quickly, this will have a huge influence 11 on other DRI OEMs that look to VOBIS and think 12 it is okay and competitive to ship DR-DOS. 13 Now, explain to the jury why other 14 OEMs would look to VOBIS in terms of whether or 15 not to ship DR-DOS. 16 A. Because we have been that time in 17 1991 -- how does one say -- the leading sheep, 18 the market leader, and everybody look what we 19 are doing. We have communicated with our 20 advertising every month. And everybody had to 21 look at it to see what's new, what are they 22 doing, what products are in, what have to be -- 23 has to be -- maybe software was very important. 24 And they say when VOBIS is doing it so 25 successful, why don't we follow a little bit. 11329 1 Q. All right. 2 A. So we were the market leader yet at 3 that time. 4 Q. Let's look now again at Defendant's 5 Exhibit 6808. 6 MS. CONLIN: And I'm going to approach 7 the witness. May I, Your Honor? 8 THE COURT: Yes. 9 Q. This is a document that you discussed 10 with Mr. Holley, and the -- it's dated November 11 2nd. 12 MS. CONLIN: Could you put that up, 13 Darin? 6808, Defendant's. 14 Q. You discussed this with Mr. Holley. 15 The letter itself is dated November 2nd. 16 A. Yes. 17 Q. And you sent this to Mr. Akerlind? 18 A. To his fax number, yes. 19 Q. And at that time he was not in Europe, 20 he was in Redmond? 21 A. I think so. Otherwise I wouldn't send 22 him that to Redmond. I think that I knew that 23 he is there. 24 Q. And what you say is, we have 25 terminated the contract G1503384 in September 11330 1 vis-a-vis Mr. Eschenlohr, Microsoft Germany. 2 Now, when you said you terminated the 3 contract, tell the jury what you meant and why 4 you sent this letter. 5 A. We have been informed by Microsoft 6 after the consent decree that they -- what I 7 recall, they gave us three months to decide 8 whether we stayed with our contract, the per 9 processor license, or whether we want to cancel 10 that or to terminate or whatever. 11 And I was a little bit afraid that we 12 got too late with that because I think this 13 three months started was July 1st, of August, 14 and it ended 13th of September. I thought 15 that. 16 And then I told Mr. Eschenlohr we 17 don't agree to work together under those terms 18 and conditions from this contract. We take 19 your offer to terminate whatever the contract, 20 not -- of course, we wanted to buy Microsoft 21 products, but to terminate the terms and 22 continues that had been there before the per 23 processor license. 24 And this letter was to clarify that we 25 really did that, because there was a 11331 1 misunderstanding that Mr. Akerlind thought we 2 didn't have done that in that three months 3 period of time. That was the only reason I 4 wrote that to him. 5 Q. All right. And let me show you 6 Plaintiffs' Exhibit 1048. 7 THE COURT: 10048? 8 MS. CONLIN: Yes, Your Honor. I left 9 out a 0. So it would be 10048. 10 THE COURT: Okay. 11 MS. CONLIN: May I approach the 12 witness, Your Honor? 13 THE COURT: You may. It's already 14 been admitted. 15 MS. CONLIN: Did I say may I approach? 16 THE COURT: You did, and you may. 17 MS. CONLIN: Thank you. 18 Q. This contract has the number on it and 19 tells us on the second page right at the top 20 the number. Is that the contract that you were 21 referring to? 22 A. That's the number from the very 23 beginning, isn't it, from 1990 -- from 1989 or 24 1990 contract, yes. 25 Q. And in this document, you say -- in 11332 1 Defendant's Exhibit 6808 you say, we have 2 terminated the contract G1503384 so that's -- 3 A. 64 or 84? 4 Q. 336 -- oh, you said -- I'm sorry, I'm 5 probably misreading it. 6 A. The copy is not so good. But it's 7 this number, 3364, yes. 8 Q. So let's look at this contract, which 9 is dated January 1, 1994. And if you would 10 turn to the -- is this a per processor license? 11 A. Yes, of course, this -- that time they 12 still worked only with per processor licenses. 13 Q. All right. And if you'll turn to the 14 page ending Bates stamp 706, you will also see 15 there are minimum commitments in this contract. 16 A. Yes. 17 Q. And the minimum commitments are per 18 period $14,700,000 for each of the two years. 19 A. That's it. 20 Q. And what did you understand you had 21 the right to do under the consent decree? 22 A. That these -- that there is not any 23 more the minimum commitment, but that now we 24 can do this what we always wanted to do since 25 the first time that we contacted Microsoft, 11333 1 that we commit ourselves for copies, right. 2 But that we pay copies. And that we thought 3 that be good too. 4 First of all, we knew that there are 5 no anymore -- not any more minimum commitments. 6 That we knew. This was the point that was good 7 with this consent decree. 8 But the terms of per processor -- we 9 explained that yesterday -- I still felt that 10 this was still the same procedure. Whether 11 it's per processor that is vertically and 12 counted per processor, it's 286, 386, 486, 13 Pentium, or whether you do it by system, System 14 1, 2, 3, 4, 5, it's the same. 15 Q. Okay. When you wrote this letter on 16 November 2nd, however, was it your 17 understanding from Microsoft and from your own 18 reading that Microsoft had agreed not to use 19 per processor agreements anymore? 20 A. I thought. 21 Q. All right. Let me show you the 22 document then that we were discussing, which is 23 10039. Do you still have that? 24 MS. CONLIN: May I approach, Your 25 Honor? 11334 1 THE COURT: You may. 2 Q. This we were talking about, and I 3 think we would start actually at the bottom 4 with Mr. Gates' E-mail. And that is dated 5 November 18, 1994. And it is from Mr. Gates to 6 Mr. Kempin, Mr. Silverberg, Mr. Maritz, and 7 Mr. Ballmer, and it talks about OS/2 bundling 8 in Germany. 9 And Mr. Gates forwards to Mr. Kempin 10 what appears to be something that he found 11 perhaps in the press, or otherwise, but it has 12 little quotes around it. That's why I think 13 that. 14 It says, IBM also announced it has 15 signed agreements with three German PC 16 manufacturers, Escom, VOBIS, and Comm Tech to 17 preload Warp on their PC systems. 18 A German business publication, Focus, 19 says anticipated sales of these units will give 20 Warp more than 40 percent of the operating 21 system market, making it the best selling 22 operating system in the country. 23 Actually, maybe that comes from an IBM 24 press release. 25 But, in any event, Mr. Kempin responds 11335 1 to Mr. Gates and the others and says, after 2 talking to Escom over the last six to eight 3 weeks constantly, it looks like the IBM -- that 4 IBM has hooked them with marketing money and 5 other favors to bundle Warp on most of their 6 PCs. 7 And then skipping down to the middle 8 of the next paragraph, it says, in the case of 9 VOBIS, Lieven says I want to license Windows 10 from you because IBM is more expensive than 11 you. 12 Now, could you license Windows from 13 IBM? 14 A. I could, but not immediately because 15 the Windows of IBM had some problems with I 16 think API, or they had to fix something, and 17 they finally did it. It was a great job they 18 did. I think Kempin thought it last 12 months 19 or something like that. But then they did a 20 good job at IBM, and I think in February they 21 were ready with that. 22 And so after our contract ended with 23 Microsoft -- we should end at the 8th of March 24 in 1995 -- we were very happy to have this 25 eternity from IBM. 11336 1 But in the normal procedure, I had 2 always preferred to buy Windows from Microsoft 3 because why put that around there indirectly 4 with IBM because it's a Microsoft product. Why 5 not license directly from the manufacturer? 6 Q. Okay. And then if you'll skip a 7 couple of lines, you will see a sentence that 8 begins with our current thinking, and what it 9 says is, our -- by Mr. Kempin to Mr. Gates. 10 Our current thinking is that we cannot 11 bend over and let them get away with this. We 12 need to fight back massively. 13 Do you see that? 14 A. Yes. 15 Q. All right. And then is it a few days 16 later that you are notified by Microsoft that 17 your company is going to be subjected to a 18 total audit? 19 MR. HOLLEY: Object to the 20 characterization in the question, Your Honor. 21 THE COURT: Rephrase. 22 MS. CONLIN: Thank you, Your Honor. 23 Q. Are you notified at some point by 24 Microsoft that your company is going to be 25 subject to an audit? 11337 1 A. It was one day before I released that 2 press release. 3 Q. All right. 4 A. That I know exactly because I know it 5 as it is yesterday, because I practice with my 6 piano teacher for a piano concert in next year. 7 And then we went out for lunch. We walked a 8 little bit to the restaurant, and then I got a 9 phone call on my mobile phone, and my CFO, my 10 chief financial officer, Mr. Weck, W-e-c-k, he 11 informed me that there will be an audit by IBM. 12 Q. By IBM or by Microsoft? 13 A. By Microsoft. Sorry, by Microsoft. 14 Q. And was that to be a partial audit or 15 a total audit? 16 A. I don't know, but I think it's -- if 17 they come, they will make a total audit, of 18 course. 19 Q. You mentioned the press release, and I 20 want to hand you what we have marked as 21 Plaintiffs' Exhibit 10044. 22 MS. CONLIN: May I approach, Your 23 Honor? 24 THE COURT: You may. 25 Q. Mr. Lieven, is this the press release, 11338 1 an English translation of the press release 2 that you have mentioned? 3 A. It's not the press release. It's a 4 translation from the German original. 5 Q. And is this press release a report of 6 action that VOBIS took? 7 A. Right, yes. 8 Q. And did you create this press release 9 on or before November 29th, 1994? 10 A. It was November 29th. Exactly the day 11 after I got that information with this audit. 12 Q. And did you send this press release 13 out as a part of the regular business activity 14 of VOBIS? 15 A. This was -- my press relation was my 16 activity. I never would have let that out of 17 my fingers, you know. As a CEO, you should 18 take care of the press yourself. Otherwise you 19 will read some strange things one day in the 20 magazine so -- or in the newspapers about 21 yourself, so this was my task. This was my 22 original task, to keep contact with the press. 23 Q. And was it also a part of VOBIS's 24 regular activity to keep contact with the 25 press? 11339 1 A. Of course. Such a big company has 2 daily contacts to the press. 3 Q. All right. And was it your personal 4 responsibility to send out press releases when 5 something of importance occurred with VOBIS? 6 A. I wrote that press release and I had a 7 press release -- a press manager, and I gave 8 her and she spread around. She had contact 9 with fax and phones and -- but I wrote those 10 words here. 11 Q. All right. And did you keep this 12 press release yourself as a part of the 13 business records of VOBIS? 14 A. Of course. 15 MS. CONLIN: Your Honor, we would 16 offer Plaintiffs' Exhibit 10044 as a business 17 record under the exception to the hearsay rule. 18 MR. HOLLEY: Your Honor, could I just 19 inquire who translated this from German into 20 English because it's very strange? 21 THE COURT: Sure. You may voir dire 22 the witness. 23 VOIR DIRE EXAMINATION 24 BY MR. HOLLEY: 25 Q. Mr. Lieven, did you do the translation 11340 1 from German into English of this -- 2 A. No, I did not. 3 Q. Do you know who did? 4 A. I think my press manager. She was 5 half English so I told her please translate 6 that. So we didn't have professional 7 translation service for that. 8 Q. And you're quite fluent in English. 9 You've read this press release in English, and 10 you think it fairly represents the same 11 substance as it had in German? 12 A. There are some words in there I don't 13 know because I'm not so good at English, but I 14 think mainly, yes, it represents that. 15 So maybe we go through that. I take 16 -- do we have a German version of that -- I 17 don't know -- the original? Because this is 18 translation so it's -- some things there, is it 19 strange to you or something maybe substantially 20 wrong or -- 21 Q. Well, I don't want to testify, but as 22 a native English speaker, there are many things 23 in here that don't make a lot of sense to me, 24 and I just want to make sure that you believe 25 that this English translation is an accurate 11341 1 description of what -- an accurate rendition in 2 English of what you wrote in German. 3 A. How can I say? I haven't made the 4 translation, and I'm not able to put the German 5 word -- German press release correctly in an 6 English translation. 7 I believe that it is nearly correct. 8 MR. HOLLEY: Your Honor, on that 9 basis, I have to object to the admission of 10 this document. 11 THE COURT: Sustained. 12 REDIRECT EXAMINATION (CONT'D) 13 BY MS. CONLIN: 14 Q. Let's go for a moment to the issue of 15 translation because that's our problem. 16 Can you say that this -- let me back 17 up a minute. 18 When this translation was done, it was 19 done by someone at VOBIS; correct? 20 A. The translation, yes. 21 Q. And was there an English version of 22 the press release that was actually put out, or 23 was it put out only in German? 24 A. I think it was only put out in German, 25 but we made that -- because after the German 11342 1 newspapers, the famous newspapers, and also the 2 Focus what was the name here, was a very famous 3 weekly magazine, wrote that, we got many 4 contacts also to the United States, and it went 5 through the computer press, of course. 6 Q. And did you as a result of those 7 contacts from English press ask someone on your 8 staff to translate this from German to English? 9 A. Yeah. This is for those people so 10 they know what's about. But normally when they 11 have questions they ask -- if there is 12 something unclear or something. So there were 13 many contacts also with American newspapers 14 that time. 15 Q. Right, and though the -- some of the 16 syntax may be a bit foreign and clumsy to 17 native English speakers, does it in your view 18 accurately say what the German version said? 19 A. For me it sounds okay. 20 MS. CONLIN: Okay. Your Honor, we 21 would offer again Plaintiffs' Exhibit 10044. 22 MR. HOLLEY: Well, Your Honor, I think 23 the witness testified on voir dire that without 24 the German text, he's not able to say whether 25 this is an accurate translation. And I don't 11343 1 think his impressionistic view years after the 2 fact is a sufficient basis to permit this 3 document to be admitted into evidence. 4 THE COURT: Objection is sustained. 5 MS. CONLIN: All right. 6 Q. Did you -- now I'm talking about only 7 this English translation. 8 Is this what VOBIS passed out to 9 English-speaking journalists so that they would 10 know what VOBIS was announcing? 11 A. I really don't know. 12 Q. All right. So if I can get the German 13 translation, then you could read it to the 14 jury? I meant -- I beg your pardon. 15 If I get this for you in German, then 16 you could read it to the jury? 17 A. I could translate it myself and I 18 think then everything is clear so -- if I have 19 the German version, I could explain it in my 20 own words what's in there. 21 MS. CONLIN: Your Honor, I wonder if I 22 could have a few minutes to see if I can get 23 the German version? I think it will not take 24 very long, but this would be a help I think to 25 the jury to know what it says and for Mr. 11344 1 Lieven to translate. 2 THE COURT: Very well. We'll take a 3 ten-minute recess. 4 Remember the admonition previously 5 given. We'll see you in ten minutes. 6 (A recess was taken from 12:38 p.m. 7 to 12:47 p.m.) 8 (The following record was made out of 9 the presence of the jury at 12:47 p.m.) 10 THE COURT: Do you want to make some 11 record? 12 MR. HOLLEY: Yes, Your Honor. Even if 13 Mr. Lieven were able to translate this on the 14 fly from German into English, it is not a 15 document which should be admissible in 16 evidence. 17 It is a posturing press release which 18 draws various legal conclusions that the 19 witness is not qualified to make. For 20 example -- and the syntax is bizarre, but the 21 second sentence says, according to the 22 corporation the reason is restricting 23 competition bonds, which Microsoft hitherto of 24 its licensees claimed. After lasting for 25 months inquiries of the American Attorney 11345 1 General and the European Cartel Bureaus 2 Microsoft had to covenant in the summer of this 3 year to adjust with immediate effect several 4 illegal practices. And then it goes on. 5 So in the next paragraph, Your Honor, 6 there is a quotation attributed to Mr. Lieven 7 which says, quote, after the years of 8 aberration under quasi-monopolist structures 9 the 16-bit operating systems by Microsoft 10 remain static on low proficiency and high price 11 level. 12 And then it goes on to say, but only 13 the initiative of the American Attorney General 14 and the European Cartel Bureaus breaks options 15 to us to finally change to this operating 16 system. 17 This is not a business record. It is 18 a press release that was issued, as IBM noted, 19 as part of a negotiation ploy. 20 It makes allegation of the illegal 21 behavior and refers repeatedly in terms which 22 are not accurate to actions taken by the U.S. 23 Department of Justice and the Director of 24 General for Competition in the European Union. 25 And for those reasons, Your Honor, quite apart 11346 1 from the translation issue, the document should 2 not be admitted into evidence. 3 THE COURT: Anything else on this? 4 MS. CONLIN: Your Honor, yes. 5 I believe the document that we have 6 laid a business record foundation for this 7 document and it is admissible on that basis. 8 There is, however, an alternate theory for its 9 admissibility, and that would be to explain 10 subsequent conduct under McElroy. 11 Almost immediately after this press 12 release was issued in Germany, Microsoft 13 notified Buhl, B-u-h-l, the authorized 14 replicator, that it could not ship to VOBIS 15 50,000 manuals and other materials. 16 That, Your Honor, occurs December 2nd, 17 1994. 18 We believe the document in its 19 entirety is necessary for the jury to explain 20 that Microsoft's conduct just a matter of a few 21 days thereafter and we believe that the jury 22 should have all of it. 23 If the Court believes that it is not 24 admissible as a business record, then -- and 25 wishes to instruct the jury on the purpose for 11347 1 which they may consider the document, of course 2 you know, Your Honor, that the Plaintiffs do 3 not have an objection to that. 4 MR. HOLLEY: Your Honor, briefly. 5 It is entirely unnecessary for the 6 jury to see the text or hear the text of this 7 press release in order to make the point that 8 Ms. Conlin wishes to make. 9 It is the date of the press release 10 that matters. And I stand by my arguments that 11 it's not admissible under any exception to the 12 hearsay rule. 13 Also, its prejudicial effect far, far 14 outweighs any probative value it might have. 15 As I said, the only interesting issue 16 is the date, not this rant against Microsoft as 17 a monopolist. 18 MS. CONLIN: On the contrary. What 19 Mr. Holley calls a rant may indeed have been 20 the impetus for Microsoft's almost -- well, 21 Microsoft's quite remarkable response. 22 THE COURT: Anything else? 23 MR. HOLLEY: No, Your Honor. 24 THE COURT: Well, I tend to agree with 25 the Defendant. I think it's hearsay. It's 11348 1 denied. 2 Anything else. 3 MS. CONLIN: Yes, Your Honor. If we 4 may. 5 We'll make an offer of proof in 6 writing. We'll ask Mr. Lieven to make the 7 translation, and we'll provide it to the Court 8 in writing by way of offer of proof. 9 I have marked the German version of 10 the press release 10044A. 11 THE COURT: Very well. 12 MS. CONLIN: Thank you, Your Honor. 13 MR. HOLLEY: Just a housekeeping 14 detail, but just so we can do our own 15 translation, it would be -- 16 MS. CONLIN: I didn't give it to you? 17 MR. HOLLEY: No. 18 MS. CONLIN: Oh, I apologize. I meant 19 to. 20 THE COURT: You want her to make a 21 copy, Carrie? 22 MS. CONLIN: I've got plenty of 23 copies, Your Honor. And I'm happy, thrilled to 24 pieces -- 25 MR. HOLLEY: Thank you very much. 11349 1 THE COURT: Are you going to translate 2 it yourself, Mr. Holley? 3 MR. HOLLEY: I won't be doing it, but 4 someone fluent in German might. 5 THE COURT: Okay. 6 (The following record was made in the 7 presence of the jury at 12:55 p.m.) 8 THE COURT: Everyone else may be 9 seated. 10 Sir, you're still under oath. 11 BY MS. CONLIN: 12 Q. Mr. Lieven, what did you notify the 13 press VOBIS was going to do on November 29th, 14 1994? 15 A. We told the press that we were from 16 January 1st on bundle every High Screen PC with 17 IBM's OS/2 and then we stopped to bundle it 18 with DOS and Windows. 19 Q. And why did you do that? 20 A. You know, we have decided it before, 21 but we never gave it to the press. 22 And what we wanted to do is to show 23 the press that the consent decree had an impact 24 on the business; that there was a result, a 25 good result. 11350 1 I think I wrote because after all this 2 years of this practices -- I said -- Mr. 3 Holley, that's true, illegal practices. This 4 only is a press release, this was not a 5 statement of a lawyer, so -- 6 But we said after these practices, now 7 we are free to bundle what we may bundle. That 8 we don't have any more bindings on processors 9 or whatever, and that we are free to choose an 10 operating system, and I said, this operating 11 system is really better. 30 bit -- 32-bit 12 operating system, the OS/2, and it's better. 13 And now finally. And we weren't very happy 14 about that. We could choose that operating 15 system. 16 We have decided that before. You 17 know, when we had decided that in September, 18 October with IBM. 19 And we started, we have just -- we had 20 just started on November 24 to ship it with 21 OS/2. So the press release is after that. 22 But after this experience from this 23 28th of November when they announced their 24 audit, I said, okay, if it's like that, and 25 Joachim Kempin -- I have read that before -- 11351 1 talks about a battle. But if it's a battle, 2 then now we are next. And then we say the 3 press what we mean -- what we think about it so 4 everybody knows there has been a change with 5 the consent decree. And the first good result 6 is what we can do at VOBIS with OS/2. 7 Q. And when you issued the press release 8 to the German press and also -- did 9 English-speaking newspapers ask for that 10 information as well? 11 A. I think had many interviews with 12 financial press, yes, and computer magazines. 13 It was a busy week. 14 Q. Okay. 15 A. Because nobody had dared before 16 publicly to say that. And so this was 17 interesting for the press. 18 Q. And did you still, however, on 19 November 27th expect and intend to be able to 20 distribute Windows 95 when it was available? 21 A. I said in my press release that we are 22 in negotiations in the meantime with Microsoft 23 to find a solution with Windows and DOS, of 24 course. 25 I didn't say we stop all relationship 11352 1 to Microsoft. No, we said we have a different 2 situation. Now we can choose what operating 3 system. Economically we can choose what 4 operating system we put on the machine. 5 MS. CONLIN: Darin, could we have the 6 time line, please? The second page. 7 Q. Here is Exhibit 10045. 8 MS. CONLIN: May I approach the 9 witness, Your Honor? 10 THE COURT: You may. 11 Q. Mr. Lieven, is this a letter dated 12 December 5, 1994? 13 A. It is. 14 Q. Are you the author of the letter? 15 A. Yes. 16 Q. Did you send the letter to Microsoft? 17 A. Yeah, to one of their fax numbers. 18 Q. All right. To whom did you address 19 the letter? 20 A. To Mr. Grant Duers. Grant is 21 G-r-a-n-t D-u-e-r-s. 22 That's the person who is still with 23 Microsoft. In a different position, I think. 24 Q. Do you know there's a second 25 addressee, Mr. John Lauchin, L-a-u -- 11353 1 A. Yes. I think he was his secretary. I 2 don't know who he was then. 3 Q. All right. And is this a report of an 4 action that VOBIS took, this writing of this 5 letter? 6 A. That is what -- what? I didn't 7 understand your question so -- I'm sorry. 8 Q. The letter that you sent to Microsoft, 9 to two people at Microsoft, did you keep this 10 as a part of the business records of VOBIS? 11 A. Of course. 12 Q. And was it your regular practice to 13 communicate with Microsoft and other suppliers? 14 A. Frequently. 15 Q. And you yourself wrote this letter? 16 A. Yes. 17 MS. CONLIN: Your Honor, we would 18 offer Plaintiffs' Exhibit 10045 as a business 19 record. 20 MR. HOLLEY: Your Honor, this is a 21 document that's never been produced in 22 discovery in this case and I think we need to 23 approach and discuss it. 24 THE COURT: Very well. 25 (The following record was made out of 11354 1 the presence of the jury at 1:01 p.m.) 2 MS. CONLIN: Your Honor, before 3 Mr. Holley addresses the Court, I move to 4 strike his comments. This has never been 5 produced in discovery. 6 There's not any discovery that asks 7 for the production of this. And for Mr. Holley 8 to suggest in any way that my failure to 9 produce it to him violates any rule is really 10 not correct. 11 MR. HOLLEY: There's an understanding 12 that documents used on direct examination are 13 not dropped on the other side as they're about 14 to go up on the screen. So my point is very 15 well taken. 16 MS. CONLIN: This is not direct. This 17 is redirect, Mr. Holley. 18 MR. HOLLEY: Excuse me. There's 19 nothing I did on cross that had anything to do 20 with Buhl Data that would cause you to put this 21 document up on the screen. And if you've been 22 lying in wait waiting to do that, you should 23 have provided a copy of this document to the 24 defense. But let's put that question aside. 25 This "PS" at the bottom. First of 11355 1 all, this document is, again, complete 2 posturing by this witness. It's making all 3 sorts of allegations against Microsoft. It's 4 done, apparently, in anticipation of litigation 5 because he says in the PS: Let me give you my 6 personal opinion. The sharp reactions in the 7 world-press after Vobis press releases may have 8 caused Microsoft's try to damage Vobis' 9 Christmas business. But please take into 10 consideration that this seems to be a 11 tit-for-tat response. This is unlawful because 12 of the contract and competition law. 13 Additionally, we assume that the pressure on 14 third parties like Buhl Data is unlawful 15 because of contract, competition and maybe even 16 criminal law. Buhl will go bankrupt. If he 17 follows you, we will hold him responsible. If 18 he does not follow you, he will lose 19 Microsoft's business. 20 Now, this is precisely the sort of 21 document that is not a business record. And, 22 once again, the prejudice to Microsoft of this 23 sort of rant, which Mr. Lieven was fond of, 24 against its probative value, the balance is 25 totally out of kilter, Your Honor. He's 11356 1 already testified. He said it yesterday and 2 again this morning. He affirmed the testimony 3 that he had no basis to believe that Microsoft 4 did anything intentional to harm Vobis in 5 relation to Buhl. That's his testimony. This 6 document should not come into evidence, Your 7 Honor. 8 MS. CONLIN: Let me first address the 9 issue of whether or not this response was to 10 anything that was asked of him. 11 He was asked questions about this time 12 frame, the November 28, 29 time frame, and 13 about the audit and the likes. So this 14 definitely responds to Mr. Holley's cross. 15 Mr. Holley produced and had admitted 16 documents that were not made available to me 17 before, and this is a document that I was 18 unaware of the existence of this document until 19 just a day or so ago. 20 Having said that, Your Honor, I agree 21 with Mr. Holley. I don't want this to become a 22 habit. I think it would be appropriate to 23 redact the PS. The body of the document is 24 simply a notification to Microsoft that 25 something really bad has happened as a result 11357 1 of Microsoft's actions and he wants them to 2 stop it. I think that this is a business 3 record for that purpose. 4 We would redact the PS, and I think 5 it's perfectly admissible. It may also come in 6 under the McElroy standards to explain 7 subsequent conduct, but we're not quite there 8 yet. 9 The issue of prejudice, Your Honor. 10 Microsoft is prejudiced by what they did hear. 11 That, of course, is something that the jury is 12 entitled to know. What Microsoft did in 13 response to this man's attempt to declare 14 independence is a critical issue in this case. 15 And this is what -- this is a document that 16 proves or tends to prove what Microsoft did not 17 only to Vobis but to any company that attempted 18 to release itself from Microsoft's icy grip. 19 MR. HOLLEY: Well despite, Your 20 Honor -- 21 MR. GREEN: Is the jury here? 22 MR. HOLLEY: Despite the high drama, 23 Your Honor, Mr. Lieven testified yesterday that 24 he sent this letter and Microsoft, you know, 25 realized the mistake and authorized Buhl to do 11358 1 what Vobis needed. 2 He testified this morning that he had 3 no reason to believe that anything was done 4 intentionally. 5 I appreciate Ms. Conlin's agreement 6 that he must redact the PS. But even without 7 the PS, which is over the top, the letter is 8 still the sort of posturing that one company 9 which is angry with another one engages in. 10 And I don't -- I still don't think 11 it's admissible under the business records 12 exception, Your Honor. 13 THE COURT: Anything else? 14 MS. CONLIN: No, Your Honor. 15 MR. HOLLEY: No, Your Honor. 16 THE COURT: It's denied. 17 MS. CONLIN: What is denied, Your 18 Honor? 19 THE COURT: The entire document. 20 MR. HOLLEY: Thank you, Your Honor. 21 (The following record was made in the 22 presence of the jury AT 1:07 p.m.) 23 THE COURT: Very well. Exhibit 10045 24 is hereby denied. 25 The jury will disregard the remarks of 11359 1 defense counsel regarding discovery. 2 You may proceed. 3 MS. CONLIN: Thank you, Your Honor. 4 Q. I do want to talk about what you did 5 in connection with the situation of being 6 denied material from Buhl. 7 Do you recall that -- do you have 8 10045 there in front of you? 9 A. I have it in front of me. 10 Q. If you need to refer to it in order to 11 refresh your recollection so that you can 12 testify truthfully and fully, you may do so. 13 MR. HOLLEY: Your Honor, I object. I 14 mean until -- 15 A. I don't need it so -- 16 MR. HOLLEY: Okay, fine. 17 A. I don't need it. 18 I remember that day real well. I 19 wrote it at home, you know, because there was a 20 time difference of nine hours. And I think I 21 wrote it during night -- it's European time 11 22 o'clock -- and sent it by my home fax machine. 23 So this was a most critical point in the 24 company life of VOBIS and in my life. 25 Q. All right. Is it correct that you -- 11360 1 that Buhl had told you it had received an 2 E-mail from Microsoft on December 2nd? 3 A. I don't know whether there was an 4 E-mail or whatever, but they -- they were 5 waiting for go; that they could ship these 6 50,000 documentations, and this -- COAs, 7 certificates of authenticity, I don't know 8 whether they -- I don't look at that. 9 But either they have been told you may 10 not ship or they haven't given the verify for 11 that. So Buhl told me they are not allowed to 12 ship -- and they are not allowed by Microsoft 13 to ship those shipments to us. 14 Q. All right. 15 MS. CONLIN: May I approach the 16 witness, Your Honor? 17 THE COURT: Yes. 18 Q. I want to show you 10045 and point to 19 a portion thereof for the purpose of refreshing 20 your recollection. 21 Does that refresh your recollection? 22 A. Yes, but this information I must have 23 got from Buhl that they have got an E-mail -- 24 Q. Wait just a moment. I'll ask you a 25 question. 11361 1 Did you know at the time you wrote 2 this letter on December 5th, 1994, that 3 Microsoft had actually sent an E-mail to Buhl? 4 A. From what I know now, yes. 5 Q. All right. And the material that you 6 needed from Buhl in order to go ahead and sell 7 computers at Christmastime, the number of those 8 packages was what? 9 A. 50,000. 10 Q. And were you aware at the time you 11 wrote this letter of whether or not those 12 packages were completely prepared and ready to 13 go to -- 14 A. Yes, they were ready to go. That's 15 what Buhl told me; that they were ready and 16 also Buhl like to write the invoice. So they 17 on these pallets in their inventory and their 18 warehouse and they say but we can't ship. We 19 don't get any verify from Redmond. 20 Q. And the material that they were 21 shipping or were supposed to ship, was that 22 Word for Windows and Works for Windows 2.0, 23 both the CD and the manuals? 24 A. Yes. 25 Q. And you talked about the certificate 11362 1 of authenticity? 2 A. Yes. This was the most important 3 because this was the thing that you legally 4 needed for that. 5 Q. And after you sent your letter to 6 Microsoft, did Buhl then sometime after that 7 give you the 50,000 packages that you needed? 8 A. We got it. I don't know whether 9 immediately or time -- what time, but we got 10 the situation fixed with some delays. 11 We still did ran out of inventory. We 12 still had some, but, you know, this was 13 just-in-time business, and we needed that 14 50,000 for the whole December business. 15 So we got the situation fixed. I 16 think it was a little bit because of this 17 letter. Because I gave Mr. Duers my personal 18 opinion, and I thought this is really not -- 19 this is below the line, you know. This is one 20 step too far, you know. Because -- I said it 21 may be even criminal what he did, because this 22 was really cutting off the line. As I 23 explained yesterday with this electricity 24 plant. This was no more flickering or 25 something like that. They said we cut you off. 11363 1 MR. HOLLEY: Your Honor, I object to 2 the answer and move to strike it. 3 THE COURT: Overruled. 4 Q. Mr. Lieven, you have been very careful 5 not to say anything that you think you cannot 6 prove, but I want to ask you this. 7 The audit, this cutting off of supply, 8 the Plug Fest, did you believe -- how did you 9 feel about what was happening to VOBIS in this 10 time frame? 11 A. It was massive pressure, it was 12 immense pressure put on VOBIS and put on me. 13 Imagine you are the CEO and you own 14 still shares of 50 percent or something like 15 that of such a company, 3,000 people, and this 16 was pressure. And what did Mr. Kempin say? A 17 battle. 18 And so the question is who had the 19 better weapons? And who was that? Microsoft, 20 of course. They had the better weapons. They 21 had Windows 95 coming. They had the verify 22 from Buhl. They had the Plug Fest and all of 23 that. 24 We were only a small player in that 25 game. For Microsoft we were important, but we 11364 1 have been a small player. I thought. From 2 what I've seen here, we have been very 3 important. If I had known at that time, I had 4 played maybe another game with them, but I 5 didn't know that at the time. I thought we 6 were quite so important for them. 7 Q. You didn't know that Mr. Gates and 8 Mr. Ballmer were focused on you, did you? 9 A. No, I didn't know that. 10 Q. Okay. 11 A. I've seen something very interesting. 12 So it honors me, but it's too late. 13 Q. Well, Mr. Lieven, did you think this 14 was on purpose? Did you think it was payback? 15 A. Of course. Of course this was on 16 purpose. But I can't -- I've seen the county 17 jail there across the street, so I can't -- but 18 it's -- 19 Q. I don't think you're in any danger. 20 A. Thank you. 21 Q. Let me now show you Plaintiffs' 22 Exhibit 3632. 23 MS. CONLIN: May I approach, Your 24 Honor? 25 THE COURT: Yes. 11365 1 MS. CONLIN: This may also be one, 2 Your Honor, that we may need to have a 3 discussion about, but this is an internal 4 Microsoft E-mail string, the first of which is 5 dated Friday, December 9th. It is from Mr. 6 Heiner to Brad Cole, Brad Silverberg himself, 7 Steve Ballmer, Weggener Edstrom, and the 8 subject is WSJ story on Windows OEM agreement. 9 And we would offer Plaintiffs' Exhibit 10 3632 at this time. 11 And, Your Honor, if I may also say 12 further with respect to this exhibit that we do 13 not offer paragraph 3 -- no, I'm sorry, Your 14 Honor -- yes. Paragraph 3, 4, and the first 15 sentence of paragraph 5 for the truth of the 16 matter asserted, but rather, to show 17 Microsoft's subsequent action after the E-mail 18 that is at the bottom of the page, which we 19 likewise do not offer for the truth of the 20 matter, but rather to explain the subsequent 21 conduct, which is contained in the top E-mail. 22 And I've just handed Mr. Holley a 23 highlighted copy, Your Honor, with respect to 24 the embedded hearsay, which I can also provide 25 to the Court if that would be helpful. 11366 1 THE COURT: Okay. 2 MS. CONLIN: Did I offer that, Your 3 Honor? I think I did. 4 THE COURT: I'm waiting for a 5 response. 6 MR. HOLLEY: I'm sorry. I was waiting 7 for the Court to read it. 8 I object to the admission of this 9 document which is replete with hearsay 10 statements by a reporter about what third 11 parties told him and therefore -- if they want 12 to offer the second paragraph, no objection to 13 that. But the rest of the document should be 14 redacted, Your Honor. 15 And finally, Your Honor, I should have 16 said this earlier -- and I apologize -- there 17 is no subsequent action described in paragraphs 18 1 or 2 that the rest of the document could 19 explain. 20 So McElroy doesn't apply. 21 MS. CONLIN: If I may respond just to 22 that aspect, Your Honor. 23 The bottom one, of course, came first, 24 and the second one is the top one. And it does 25 in the very first sentence express what the 11367 1 subsequent action was. 2 THE COURT: Very well. The Court 3 finds that paragraph 1 and 2 are admissible. 4 Paragraphs 3, 4, and 5 are 5 inadmissible. 6 Six is okay. The bottom paragraph is 7 all right. Top of the second page okay. 8 Paragraphs starting with issues on down are not 9 admissible. 10 MS. CONLIN: Thank you, Your Honor. 11 THE COURT: Any further record? 12 MR. HOLLEY: Your Honor, just with 13 reference to the bottom paragraph of the page, 14 the second sentence that begins OEMs are saying 15 that, I'm wondering if the Court would 16 reconsider as to that sentence. 17 THE COURT: That's redacted. I'm 18 sorry. 19 MR. HOLLEY: Thank you, Your Honor. 20 THE COURT: The rest is admissible. 21 MS. CONLIN: Well, Your Honor, I'm 22 going to withdraw the exhibit because I don't 23 like the rest of it. 24 THE COURT: Very well. The exhibit is 25 withdrawn. 11368 1 MS. CONLIN: Thank you. 2 Q. Let me ask you if there was an article 3 that appeared in the Wall Street Journal 4 concerning your negotiations with Microsoft? 5 A. Right. 6 Q. And those negotiations I think you 7 told us yesterday began in August? 8 A. Yes. Right after this consent decree 9 we were very much interested in getting a new 10 contract after the -- once the terms and 11 conditions had ended. 12 Q. Did you make public through the Wall 13 Street Journal and other publications what 14 Microsoft had represented to you you would need 15 to do in order to get Windows 3.1 and MS-DOS 16 6.2 for $28? 17 A. Yes. I had to explain that to the 18 journalist. Otherwise he didn't understand the 19 problem. 20 Q. Well, in -- well, explain to the jury 21 what you understood you had to do with your 22 entire run of computers in order to get the $28 23 price. 24 MR. HOLLEY: Objection, Your Honor. 25 Leading. 11369 1 THE COURT: Sustained. Rephrase. 2 Q. State whether or not it was necessary 3 for you to load Windows -- I beg your pardon. 4 Let me start again. 5 State whether or not it was necessary 6 to use or pay for Windows 3.11 and MS-DOS 6.0 7 on your entire run of computers in order to pay 8 only $28? 9 A. That was my understanding. 10 Q. And then if you did not agree to use 11 or pay for MS-DOS 6.2 and Windows 3.11, what 12 would your price have been? 13 A. 63.50. This was again the old 14 situation for me for processor versus per copy 15 license. And that is what I explained to the 16 Wall Street Journal. 17 It is a difficult issue, and you have 18 to really -- even to journalists who normally 19 know everything, you had to explain that to 20 them. And I needed this figures for that, to 21 show them this -- I think 480,000 if you put it 22 on all the machines, you get 28. If you think 23 it's less and we should count copies later, it 24 is I think -- what was that? -- 27 plus 34 or 25 something like that. It's -- the sum was 11370 1 63.50. 2 Q. Of the two products together? 3 A. Yeah, together the sum. 4 Q. So if you didn't agree to load or pay 5 for every computer? 6 A. That's how I understood it. So I 7 couldn't believe it, you know. Did I 8 understand something wrong? Because that's the 9 old situation before the consent decree. 10 Q. So this was after? 11 A. This was after August, yes. 12 Q. And from your standpoint as an OEM, 13 was that practically -- was that any change? 14 A. For me, no. This -- at this point all 15 the problems began. 16 Q. And in speaking to the Wall Street 17 Journal, I assume that you were aware that 18 someone at Microsoft might read what you said? 19 A. Yes. I think they read the Wall 20 Street Journal, some of them. 21 Q. Let me show you what I have marked as 22 Plaintiffs' Exhibit 10040. 23 MS. CONLIN: May I approach, Your 24 Honor? 25 THE COURT: Yes. 11371 1 Q. This is a letter from Deloitte & 2 Touche to Nell Miller of Microsoft Corporation. 3 The date is not on the front. It's under the 4 signature. And it's February 24th, 1995. This 5 bears Bates stamp MSC 008003938 through 3941. 6 MS. CONLIN: And, Your Honor, at this 7 time we would offer 10040 as a Microsoft 8 business record. 9 THE COURT: Any objection? 10 MR. HOLLEY: No objection, Your Honor. 11 THE COURT: It's admitted. 12 Q. I know -- is it correct that until I 13 showed you this document, you had never seen 14 it? 15 A. No. I have heard about what is in 16 there, but I've never seen it. 17 Q. You heard about what was in there from 18 me? 19 A. To be honest, yes, you told me. 20 Q. When you were in this audit process 21 with Microsoft, did Microsoft ever show you the 22 audit? 23 A. I have never seen the audit. I don't 24 know whether my FCO, my financial -- my chief 25 financial, my CFO has got it. He was in 11372 1 contact with Deloitte. If I had this here, I 2 hadn't paid $3 million. 3 MS. CONLIN: And let's put up, please, 4 if you would, the first page, second paragraph. 5 Q. And that says that Deloitte & Touche 6 came to Germany and to your offices and other 7 places from January 9th through January 20th; 8 correct? 9 A. Yes. 10 Q. And again from February 13th through 11 the 24th. They were there at your offices in 12 Germany; correct? 13 A. Right. 14 Q. And then turn, if you would, to the 15 second page and the first and second 16 paragraphs. 17 MS. CONLIN: And perhaps, Darin, you 18 could also include the contract number so we 19 would know that we're dealing with the same 20 contract number. 21 Q. And in the first paragraph on the 22 second page, Microsoft accounting department is 23 told by Deloitte & Touche that VOBIS has 24 properly reported total systems sold with the 25 exception of eight system article numbers which 11373 1 were identified as having been omitted from the 2 total systems reported for royalty purposes, 3 and that resulted in underreported royalties of 4 $94,560. 5 A. Right. 6 Q. All right. The second paragraph, 7 however, it's the one of some interest in it. 8 It says, royalties for MS-DOS were 9 reported on a per copy basis during part of the 10 fourth calendar quarter. 11 Is it true, Mr. Lieven, that in fact 12 you were only paying royalties to Microsoft on 13 a per copy basis in the fourth calendar quarter 14 of 1994? 15 A. Of course. The time had come, you 16 know, we had the consent decree. And we said 17 okay, now we pay, we report on a per copy 18 basis. 19 Q. In other words, you were only paying 20 Microsoft for the copies of the Microsoft 21 products you shipped? 22 A. Yes. 23 Q. And the reason for that was what? 24 A. Because I thought we are not anymore 25 under this per processor license. 11374 1 Q. All right. 2 Were you aware that that was the basis 3 for Microsoft's attempt to collect from you the 4 sum of $849,288? 5 A. Now I know. 6 Q. Did you know then? 7 A. Then I didn't have paid $3 million to 8 them. 9 Q. Did you ever ask Microsoft to see the 10 evidence that supported their claim against 11 you? 12 A. I didn't do -- you know, at that time 13 my considerations were 3 billion or $2 billion 14 company, and this 3 million were peanuts -- not 15 peanuts, but I said -- what I am considering is 16 the whole company. The whole company is in 17 danger, and to pay this 3 million -- if I had 18 knew that, so I had never paid 3 million, of 19 course not. 20 Q. The audit was based in part, according 21 to the exhibit, on your failure to pay 22 Microsoft for products you didn't ship; right? 23 A. Yes, that's what they say. 24 They say they have reported correctly 25 under the assumption that they may report 11375 1 copies. But then they said no, they are still 2 under per processor license so they have to pay 3 at least this -- accepted this $849,000 more. 4 Q. All right. Let's look on the third 5 page just to clarify this if it's not clear. 6 Under reported MS-DOS quarter ending 7 December 31, 1994. Okay. 8 It says the total systems sold 9 $235,580. I think that's in -- I think there 10 are three zeroes after that. Would that be 11 right? 12 A. I think so, yeah. 13 Q. So this would be 23,558,000? 14 A. That's possible. 15 Q. And then less MS units reported 15 16 million eight hundred -- I wish they would 17 put the -- 18 A. I think the dollar is wrong or 19 something like that. Because that means 20 235,580 is the quantity. 21 Q. Yes. 22 A. And MS-DOS units reported were 23 158,372. And underreported computers we didn't 24 ship. We actually shipped them with OS/2 at 25 that time. I'm sure of. 70,208. And then we 11376 1 multiply that by $11. That makes $849. So 2 this would they think underreported, never 3 Microsoft product was shipped with. 4 Q. Okay. So this amount, $849,288 5 represents your -- their request for you to pay 6 money to them for product you never shipped? 7 A. Yes. 8 Q. And the reason you didn't pay them in 9 the first place was what? 10 A. Because I thought that's -- for the 11 copies we used 235,580 computers we sold in 12 that time. It was Christmas business. It was 13 very reasonable. We had to pay. We used the 14 copies of Microsoft DOS and Windows or DOS 15 here. But for the computers, the 158,372, we 16 haven't used any Microsoft. 17 Q. Wait, wait. You're on the wrong line, 18 I think. 19 The underreported MS-DOS units 77. 20 A. The underreported, yes. When we 21 reporter -- okay, sorry. So we reported 22 158,372 because we have sold 158,372 High 23 Screen computers including MS-DOS. 24 Q. Okay. But you didn't pay for 77,208? 25 A. No, because why? Because the per 11377 1 processor license is over. 2 Q. And the reason the per processor 3 license is over is? 4 A. Consent decree. 5 Q. But even under the per -- well, you 6 know, there's a third page of this that we 7 might take a look at -- oh, I'm sorry, fourth 8 page. 9 And this is about CD-ROMs, and that 10 indicates that these were -- this was a 11 different -- perhaps a different contract, but 12 do you understand this fourth page? 13 A. I think this has to do with the 14 applications. 15 Q. Okay. 16 A. And this would be what we partly -- 17 you know, this application, this contract was 18 crazy. 19 At the beginning you could ship two 20 out of three applications from Excel, Word or 21 -- Access, the database. If you ship with the 22 High Screen computer the CD-ROM drive, then you 23 could do that. Later we could do that, strange 24 enough, it was also allowed that we sell a 25 printer with the CD-ROM drive. I don't know 11378 1 what it does or what sense it makes. And then 2 we could choose one out of three. So this was 3 the terms of the agreement. 4 And it was very difficult to figure 5 that out from all the reports from our stores, 6 and I think this is because they have had this 7 page number 4, but I don't -- even I don't 8 understand how it worked at that time. 9 Q. All right. In this time frame, your 10 board -- now, is there a board of directors and 11 a supervisor? 12 A. Supervisor report, yes. 13 Q. Tell the jury, please, what the 14 difference is and which is higher and what each 15 does. 16 A. In Europe you have the board of 17 directors and you have three active board 18 members. This is the president, the CEO, and 19 the CFO. 20 Q. We call that the executive committee. 21 A. Right. And the board of directors in 22 Germany are all executives. And the others, 23 they have another board. It's called the 24 supervisory board. They are not executives. 25 Q. What are they? 11379 1 A. So they have the right to install the 2 executive board members. They plan the budget. 3 They agree to the budget. They take care 4 whether everything is right. It's a controlled 5 board, you know what I'm saying. Like a 6 control board. They control the boards. 7 The supervisory board has the right 8 and also the -- they have to do from the 9 shareholders, if they're asked by the 10 shareholders, to take control of the board 11 members, the CEO, CFO, and some others. 12 Q. Are they above the board of directors 13 in the German system? 14 A. I won't say above, but, of course, you 15 have to follow them because next time if you 16 don't follow, you will have been thrown out. 17 So that's how it works. So you better listen 18 to them. 19 Q. And at some point along in here they 20 get a little worried; right? 21 A. As I said yesterday, I think they have 22 got a letter from Mr. Kempin. I really don't 23 know, I've never seen that letter, but I have 24 been informed that Microsoft -- I got a message 25 that the board members of the supervisory board 11380 1 get concerned whether what I'm doing is good in 2 respect of the power of Microsoft, whether it 3 wouldn't be wise to step back. 4 But they let me the decision because 5 they knew if they push me too much, then -- so 6 I wanted to go through that time still. I 7 think it was February, something like that. 8 Q. Was your job ever threatened as a 9 result of what you were doing by the board of 10 supervisors? 11 A. No. We have very good relationship 12 until the last day, you know. We were able to 13 sell them our shares, and they paid a good 14 price. This is not usual all the time. So it 15 was nice relationship. 16 Q. And that -- when you say at the end, 17 you mean when you left? 18 A. Yes, 1996. 19 Q. Okay, but in this time frame, were 20 they critical of you? 21 A. Yes. We had discussions, of course. 22 Of course there was always -- every question is 23 asked twice and is it right, is it good for the 24 company, good for the shareholders, of course. 25 But there were no fights. 11381 1 I had the impression that if you ask 2 ten members from my board, from the board of 3 VOBIS, the executive board, and all of those 4 members of the supervisory board, they had 5 preferred not to make that trouble with 6 Microsoft. 7 MS. CONLIN: Your Honor, are we going 8 to have an afternoon break or should we press 9 on? 10 THE COURT: Please continue. 11 Q. Let me hand you, if I may, Plaintiffs' 12 Exhibit 10042. 13 MS. CONLIN: May I approach the 14 witness, Your Honor? 15 THE COURT: You may. 16 Q. This is an E-mail string that begins 17 with one from Mr. Kempin dated March 12th. It 18 is to Mr. Gates, and the subject is the VOBIS 19 agreement. 20 MS. CONLIN: We would offer 21 Plaintiffs' Exhibit 10042. 22 MR. HOLLEY: Just the objection that 23 this witness is being asked to speculate about 24 internal documents he's never seen. 25 THE COURT: It's admitted. 11382 1 MS. CONLIN: Darin, could you please 2 put up 10042? 3 Q. And let's begin with the E-mail from 4 Mr. Kempin dated March 8th, 1995. And that's 5 the day you reached agreement with Microsoft; 6 correct? 7 A. Yes. 8 Q. And Mr. Kempin reports that to 9 Mr. Gates and Mr. Ballmer. Do you see that? 10 A. Yes. 11 Q. And he says, we reached an agreement 12 with VOBIS today on a new contract and settled 13 the audit findings for $3 million. 14 VOBIS will continue to ship Windows 15 for Workgroups and MS-DOS on 95 percent of 16 their systems as well as MS Works. They will 17 pay $3 more than in the old contract. 18 That's what you agreed to? 19 A. I think so. Like I said, I have to 20 look at the contract, but it's -- 21 Q. We're going to. 22 A. -- quite reasonable. 23 Q. We managed to shut up Lieven as 24 planned and he behaved very well at his press 25 conference today. We hope everything will be 11383 1 back to normal in Germany after this. 2 And then Mr. Gates' response to 3 Mr. Kempin then that same day saying this is 4 great news, great work, and then Mr. Kempin on 5 March 12th tells Mr. Gates, at the same time 6 Lieven did not shut up. 7 Apparently you did continue your 8 struggle? 9 A. But not so strong. But maybe that I 10 was a little bit upset about that story. You 11 know, I gave up. I've lost. You know, do you 12 lose a battle like that? Do you like to lose a 13 battle like that? No. 14 Q. Well, why did you agree? 15 A. There was no other chance, not really. 16 If this fight had continued till the 17 time when Windows 95 came out, I couldn't dare 18 to do that. 19 Q. Let me show you Plaintiffs' Exhibit 20 1052. 21 MS. CONLIN: May I approach the 22 witness, Your Honor? 23 THE COURT: You may. 24 It says 10052; correct? 25 MS. CONLIN: I'm sorry, Your Honor. I 11384 1 just have never had this many numbers before. 2 Yes, 10052. 3 And, Your Honor, this is the Microsoft 4 contract effective March 16, 1995. 5 We would offer Plaintiffs' Exhibit 6 10052. 7 MR. HOLLEY: No objection, Your Honor. 8 THE COURT: It's admitted. 9 Q. Mr. Lieven, we'll take a look first at 10 the front page and the listing of the prices 11 and MS-DOS under this contract for 6.22. Now 12 we're not at Windows 95. It's not out yet; 13 right? 14 A. No, this has been the old operating 15 system. 16 Q. And so you pay $14 now? 17 A. Yes, from 9 to 14 within I think 18 18 months or something. 19 Q. And this contract, there is no minimum 20 commitments; correct? 21 A. I don't think so. There should be 22 not. 23 Q. And the reason that there should not 24 be any minimum commitments is the consent 25 decree? 11385 1 A. Of course. 2 Q. And then for the purpose of completing 3 the record with respect to the contracts, let 4 me now show you Plaintiffs' Exhibit 10049. 5 MS. CONLIN: May I approach the 6 witness, Your Honor? 7 THE COURT: You may. 8 Q. This is an amendment to that 9 contract, and it is dated December 1, 1995. 10 That is after Windows 95 is released? 11 A. Yes. 12 Q. And your signature appears on the 13 second page, December 29th, 1995? 14 A. Yes, together with the board member 15 Mr. Scherberich. I think -- how to spell this? 16 S-c-h-e-r-b-e-r-i-c-h. This was my member of 17 the board for purchasing purposes. 18 MS. CONLIN: Your Honor, we would 19 offer Plaintiffs' Exhibit 10049. 20 MR. HOLLEY: No objection, Your Honor. 21 THE COURT: It's admitted. 22 Q. Let's look at the third page of the 23 contract, which lists the Windows operating 24 system and lists a number of prices, both in 25 typewriting and in handwriting. 11386 1 And those prices vary with the number 2 -- well, let me ask you this. 3 Windows -- this says Windows 95 4 shipments as a percentage of shipments of 5 Windows product. 6 Do you understand what that means? 7 A. No, but here is something -- was as 8 defined in additional Provision B, the 9 contracts got more difficult and more difficult 10 all the time. 11 Q. All right. In any event, you signed 12 this contract? 13 A. Yes. 14 Q. And finally let me show you 15 Plaintiffs' Exhibit 10047. This is a contract 16 you entered into with Microsoft? 17 MS. CONLIN: May I approach the 18 witness, Your Honor? 19 THE COURT: You may. 20 Q. And we are going kind of backwards at 21 this time. 22 It bears an effective -- I beg your 23 pardon -- an amendment date of November 21, 24 1994, and the agreement bears an effective date 25 of January 1, 1994. 11387 1 MS. CONLIN: And, Your Honor, at this 2 time we would offer Plaintiffs' Exhibit 10047. 3 MR. HOLLEY: No objection, Your Honor. 4 But just for the record, this is the same 5 document as Defendant's Exhibit 6814. 6 THE COURT: Very well. It's admitted. 7 MS. CONLIN: Thank you, Your Honor. 8 Q. And you signed the document, as did 9 Microsoft, in May and June of 1995. 10 A. I signed in May and they signed it in 11 June. 12 Q. And this deals with the old operating 13 system, Microsoft MS-DOS operating system 14 Versions 6.2, Windows for Workgroups, and 15 Windows. Do you see that on page 4? 16 A. Yes. 17 MS. CONLIN: Your Honor, that 18 completes my redirect examination. 19 THE COURT: Any recross? 20 MR. HOLLEY: Yes, briefly. 21 RECROSS EXAMINATION 22 BY MR. HOLLEY: 23 Q. Mr. Lieven, you were shown a letter 24 from the accounting firm of Deloitte & Touche 25 to Ms. Nell Miller at Microsoft, and that's 11388 1 Plaintiffs' Exhibit 10040. 2 You are not aware, are you, sir, 3 whether there are other letters or reports from 4 Deloitte & Touche that are different or that 5 amplify what is contained in Plaintiffs' 6 Exhibit 10040; correct? 7 A. I don't know. 8 Q. And you did not participate, as you 9 said, in conversations between the chief 10 financial officer of VOBIS and Deloitte & 11 Touche; is that right? 12 A. Of course I ask him do we have to pay 13 something. They said, well, maybe cost $3 14 million. 15 Q. That's what your CFO told you? 16 A. And otherwise he would tell me I'm 17 stupid to pay them $3 million at the same time 18 when you don't have to pay anything. So we 19 talked the day many hours together, my CFO and 20 me. So he said are you stupid to pay 3 million 21 when we only owe them 800, and also those 800 22 we don't owe them because they are still 23 counting processors and we counted the copies. 24 Q. Okay. You said that several times on 25 redirect, but you're well aware, are you not, 11389 1 sir, that the consent decree says nothing about 2 per processor contracts being turned into per 3 copy contracts; right? 4 It says that they're turned into per 5 system contracts. 6 A. I thought only logical could be from 7 per processor to per copy because the per 8 system is the same as per copy. 9 Q. I know that's your -- 10 A. That's why I wrote to Ann Bingaman. 11 Q. Well, I know that you said that, but 12 let's look at what Plaintiffs' Exhibit 10047 13 says. This is Amendment Number 4 to the 14 agreement. Effective date January 1, 1994. 15 MR. HOLLEY: And maybe we can see this 16 up on the screen so that we can all follow 17 along. 10047. Maybe we can't. 18 Q. So I'd like to focus your attention 19 initially to the section entitled minimum 20 commitments on the first page. 21 What this agreement amendment says is 22 in Section 1(a), company shall be relieved of 23 its obligation to pay all minimum commitments 24 to MS-DOS Windows and Windows for Workgroups as 25 applicable commencing with the minimum 11390 1 commitment payment for the quarter ending 2 September 30, 1994. 3 So that's the provision you were 4 referring to which said no more minimum 5 commitments; right? 6 A. That's right. 7 Q. Okay. And let's turn to the top of 8 the second page, and there in bold type -- I 9 want to look at the entire bolded section here. 10 All the way down to the signatures, please. 11 Were you aware that the Department of 12 Justice specified this language for inclusion 13 in all Microsoft operating system agreements? 14 A. I don't know. Maybe. 15 Q. Okay. Well, let's look at what it 16 says. 17 It says notice, for MS-DOS, Windows, 18 Windows for Workgroups products specified in 19 Exhibit C as licensed under the per system 20 royalty calculation provisions, please note the 21 following. 22 And just to be clear, this Amendment 23 Number 4 that we looked at, Plaintiffs' Exhibit 24 10047, in Exhibit C lists a whole bunch of 25 system products; correct? 11391 1 It says, for example -- maybe we 2 should turn there. 3 MR. HOLLEY: Can we go two pages in to 4 page 4? And just highlight that entire block, 5 if you could, please. 6 Q. So what this says is that there are 7 products that are being licensed to VOBIS on a 8 per system basis; right? That's what this 9 says? 10 For example, it says MS-DOS operating 11 system Version 6.2, and then you look over and 12 it says custom -- customer system number. 13 A. Yes. 14 Q. And there are a bunch of references to 15 footnotes. 16 MR. HOLLEY: And if you can find them 17 -- and if we turn in to page 8 -- let me go to 18 page 8, to the list of the -- that is the key. 19 It's that long list there. 20 Q. So these are the systems that are 21 licensed by system name and number; correct? 22 A. The customer system number is the 23 first. 24 Q. Right. 25 A. Then it's the microprocessor was in 11392 1 there. 2 Q. Right. 3 A. Maximum number of microprocessors not 4 so important. And then got the system, the 5 High Screen model name D series. 6 Q. Right. Now so what this meant was 7 that after the consent decree, VOBIS's per 8 processor license was converted into a per 9 system license and VOBIS had an obligation to 10 pay Microsoft for every one of the machines 11 that was shipped here by model number and 12 series number; correct? 13 A. Right. 14 Q. And the beauty of this system was that 15 all you had to do was put a Q series 16 designation on the machines that you wanted to 17 ship with OS/2 or DR-DOS and they automatically 18 fell outside the scope of this license 19 agreement; correct? 20 A. Right. But it's not as easy as you 21 say. For us it was easy because with all these 22 systems -- we make a computer, customer System 23 Number 15, for instance, not by -- you look, we 24 have 24 systems. In fact, we didn't have 24 25 computers. We may have six or five. 11393 1 To have 24 computers in your 2 production line, this was very expensive. It 3 was a risk, I explained that, because I can't 4 have three computers with a difference of only 5 operating system to let choose the customer. 6 So what we did, we have -- I think we 7 have six computers, and we made it System 8 Number 15 because we could take this removable 9 hard disk drive and put it in the PC. And that 10 was the reason why we accepted that. 11 If we had to do it like all the others 12 to make the computer ready with the operating 13 system, put it in the box and put it in the 14 warehouse and then wait until the customer may 15 buy it, then we had not agreed to that. But 16 because we were able to reduce this complex 17 structure of the systems to a very easy 18 structure, we agreed to that. 19 Q. Now, you don't know, for example, what 20 Hewlett-Packard or Compaq or Dell did -- 21 A. Yeah, Dell I know. Dell I know what 22 they did. They made it their built to 23 customer, built to order. That was Dell's 24 answer to that. 25 They asked the customer what do you 11394 1 want? What operating system do you want? And 2 then they went to the factory and they built 3 the computer, built like -- asked the customer. 4 So then they didn't have any problem with their 5 inventory. 6 Q. So Dell did exactly -- well, not 7 exactly, but Dell did something very similar to 8 what you did, which was just build the machine 9 to customer order and call it Q series and then 10 take it outside the scope of the Microsoft 11 agreement? 12 A. Right. 13 Q. Okay. Now, you don't know, for 14 example, whether Hewlett-Packard and Compaq 15 before they merged, because they weren't merged 16 at this time, how they dealt with this ability 17 to take systems outside the scope of the 18 Microsoft license simply by giving them a 19 different model designation? 20 A. Would be interesting to know, but I 21 don't know. 22 Q. You don't know? 23 A. No. 24 Q. Okay. And when it says in the audit 25 that you paid on a per copy as opposed to a per 11395 1 system basis, that was correct; right? 2 Because Plaintiffs' Exhibit 10047 is a 3 per system license and you were not complying 4 with its terms; correct? 5 A. This 10047 was effective what date? 6 Q. It says it's effect -- 7 A. This was '95. So in an audit February 8 '95. There couldn't be any audits about a 9 contract that was effective in May '95. 10 Q. Well, I don't want to argue -- 11 A. This what you showed me, this 12 contract had not -- 13 Q. Yes. I'd just like to direct your 14 attention, sir, to what it says at the top. I 15 appreciate the fact that it wasn't signed until 16 1995, but it is effective retroactive to 17 1-1-94. 18 A. Yes, but this was not in the audit. 19 This quote was not in the audit. 20 Q. Okay, fine, if you don't want to talk 21 about that agreement, then let's look at 22 Amendment Number 3, which was, I guess, under 23 your testimony in place at the time of the 24 audit. 25 MS. CONLIN: Your Honor. Excuse me, 11396 1 Mr. Holley. 2 I do move to strike Mr. Holley's 3 statement. 4 THE COURT: Overruled. Go ahead. 5 Q. Let's look at Amendment Number 3. 6 Now, that was also a per system 7 license by virtue of the automatic conversion 8 in the consent decree of per processor to per 9 system licenses; right? 10 A. Which amendment is that? Do we have 11 that there? 12 Q. I don't think Ms. Conlin showed it to 13 you so you're going to have to look at the 14 Defendant's version, which is 6813. 15 Do you have that one up there? And if 16 you don't, let me try to find another copy. 17 MR. HOLLEY: Your Honor, may I 18 approach the witness? 19 THE COURT: Yes. 20 Q. So I'd like to show you what's been 21 marked and it's actually been admitted into 22 evidence as Defendant's Exhibit 6813. 23 This is the immediately previous 24 amendment to the January 1, 1994 contract 25 between VOBIS and Microsoft; correct? 11397 1 It's called Amendment Number 3, and 2 the one we were just looking at is called 3 Amendment Number 4. 4 A. Yes, I see that. 5 Q. Okay. So this one, if you turn to the 6 third page -- 7 MR. HOLLEY: Can we look at this one, 8 please? 6813. Just so everyone can see it. 9 Q. So just so we're clear, on the front 10 it says Amendment Number 3. Date April 1, 11 1994. It's for operating system products. 12 That's your signature on the second page; 13 correct? 14 A. Yes. 15 Q. And then let's look at Exhibit C1 16 which talks about the scope of the royalty on 17 the very next page. 18 MR. HOLLEY: And, Chris, if you could 19 highlight that block again for us, please. 20 Q. So this looks just like what we saw in 21 Amendment Number 4. 22 There are products on the left, 23 Microsoft operating system products. 24 There are -- and then there are 25 customer system numbers, which is this key 11398 1 which refers back to the key, which appears on 2 page 6. 3 MR. HOLLEY: And, Chris, could we 4 please go to page 6 and look at the key? 5 Q. So once again, there is a 6 correspondence between the chart which lists 7 which systems are covered by the license and 8 this set of customer systems; correct? 9 A. Yes. 10 Q. Okay. So this is a per system 11 license; correct? 12 A. It's the name per system license. 13 Q. Right. And that was the license that 14 was in effect at the time that Deloitte & 15 Touche conducted the audit; correct? 16 A. Yes. 17 MR. HOLLEY: I have no further 18 questions, Your Honor. 19 THE COURT: Any further redirect? 20 MS. CONLIN: Yes. I'm sorry, Your 21 Honor, I do have just a couple of additional 22 questions. 23 FURTHER REDIRECT EXAMINATION 24 BY MS. CONLIN: 25 Q. In looking at Exhibit 10047, I believe 11399 1 that -- 2 MS. CONLIN: Could we put that up, 3 please, Darin? 4 And also if you would put up the 5 second page of the time line, please. 6 Q. Okay. It is the second page on which 7 you pointed out to Mr. Holley that you did not 8 sign this contract until after the audit and 9 after March 8th of 1995; correct? 10 A. Yes. 11 Q. All right. And the other contract 12 that he showed you -- there we go -- that is 13 10047. That though it bears a date on the 14 front saying agreement effective January 1, 15 1994, you do not see it or sign it until 16 May 16th, 1995; correct? 17 A. This was a procedure that those 18 contracts kept their old dates for a long, long 19 time. So this had nothing to do with the real 20 effective date. 21 Q. And this came after the audit, after 22 you paid your $3 million; correct? 23 A. Right. 24 Q. And the one he showed you that is 25 Defendant's Exhibit 6813 -- 11400 1 MS. CONLIN: Do you have that, Darin? 2 A. 6813, I have it. 3 MS. CONLIN: 6813. I don't know if 4 you have that or not? 5 MR. HOLLEY: Chris, can you put it up, 6 please? 7 MS. CONLIN: And it's the second page 8 I need. Okay. 9 Q. And that one shows your date of -- 10 that would be May 25th, 1994; correct? 11 A. Yes. 12 Q. And it's signed by Mr. Hannum for 13 Microsoft June 28th, 1994. 14 And if we look over at our time line, 15 we see that the consent decree was not filed 16 until after June 28th, 1994. That would be 17 July 15th, 1994; correct? 18 A. Right. 19 MS. CONLIN: No further questions, 20 Your Honor. 21 THE COURT: Anything else, sir? 22 MR. HOLLEY: Just one, Your Honor. 23 Not to prolong this. 24 FURTHER RECROSS EXAMINATION 25 BY MR. HOLLEY: 11401 1 Q. The contract that was in effect after 2 the consent decree was signed on July 15 of 3 1994 was either Amendment Number 3, which is 4 Defendant's Exhibit 6813, or you were shipping 5 without a contract; right? Because this was 6 the only contract that existed. 7 A. What I don't understand is that we 8 have two contracts, and both are effective 9 January 1st, 1994. I think we have some 10 confusion about dates here. 11 Do you see that this Amendment 3 is 12 effective January 1st, 1994, and the Amendment 13 Number 4 is also effective date January 1, 14 1994. How can that be? 15 Q. I appreciate that you pointed out that 16 fact. 17 My question is slightly different, 18 which is, either one of two situations was 19 correct. 20 As of July 16, 1994, the day after 21 Microsoft signed the stipulation agreement to 22 be bound by the consent decree pending its 23 approval, either this Amendment Number 3 was in 24 place and the contract because Amendment Number 25 4 wasn't signed until mid 1995, or you didn't 11402 1 have a contract; right? 2 A. Yes, that's right. 3 MR. HOLLEY: Thank you, Your Honor. 4 FURTHER REDIRECT EXAMINATION 5 BY MS. CONLIN: 6 Q. Well, Mr. Lieven, Exhibit Number 6811, 7 that's your contract that you signed right 8 before the consent decree, that agreement, as I 9 understand what you told us earlier, you 10 perceived to have been amended by the consent 11 decree; correct? 12 Do you understand what I'm asking? 13 A. Yes, I understand that. 14 Q. Okay. And so after -- you had this 15 contract, you had signed it, the term was 16 ongoing; correct? 17 A. Once again, please. 18 Q. You had already signed in June -- 19 actually May of 1994, you had signed Amendment 20 Number 3? 21 A. Yes. 22 Q. Okay. And it continued. The term 23 went on; correct? 24 A. Yes. 25 Q. And then on July 15th there was a 11403 1 consent decree, and you knew about that; 2 correct? 3 A. Yes, of course. 4 Q. Read it, studied it, looked at it at 5 least? 6 A. Yes. And I tried to understand it, 7 and what I understood is that we will now have 8 different contracts with Microsoft. 9 Q. But you continued to operate under 10 Amendment Number 3 until it was abrogated by 11 another contract that comes in between here and 12 paid on a per copy basis as you understood you 13 could do under the consent decree; correct? 14 A. That was my opinion, yes. My 15 understanding. 16 MS. CONLIN: Nothing further. 17 THE COURT: Anything else, Mr. Holley? 18 FURTHER RECROSS EXAMINATION 19 BY MR. HOLLEY: 20 Q. As shown in Amendment Number 4 -- 21 we're now back to Plaintiffs' Exhibit 10047 -- 22 whether you liked it or not, the United States 23 Department of Justice and Director of General 24 For Competition of the European Union converted 25 per processor licenses into per system 11404 1 licenses, not per copy licenses; correct? 2 That's what the consent decree did? 3 MS. CONLIN: Your Honor, I would 4 object to the question as calling on this 5 witness for a legal conclusion, which 6 Mr. Holley doesn't like when I do. 7 THE COURT: Sustained. 8 MR. HOLLEY: No further questions, 9 Your Honor. 10 THE COURT: You may step down. Thank 11 you, sir. 12 Take a ten-minute recess. Remember 13 the admonition. 14 (A recess was taken from 2:08 p.m. 15 to 2:21 p.m.) 16 (The following record was made out of 17 the presence of the jury at 2:21 p.m.) 18 MS. CONLIN: We by way of offer of 19 proof with respect to the testimony of 20 Ms. Reichel, we have Offer of Proof 66, and 21 that is the financial background -- the 22 financial information. 23 The Court has, I believe, already 24 ruled on it, but we do present it by way of 25 offer of proof. 11405 1 It's 66, OP 66. 2 THE COURT: It will be kept in a 3 separate file as offer of proof exhibit. 4 MS. CONLIN: Yes, Your Honor. 5 Now, was there something -- the rest 6 of it we have to do in front of the jury. 7 THE COURT: I thought there was some 8 scheduling thing that Mr. -- 9 MR. TULCHIN: Your Honor, I'll be very 10 brief. 11 Three quick things, and I'm happy to 12 discuss these at 3, if you prefer. 13 But one is yesterday I understand 14 there was some discussion about when the motion 15 pertaining to a witness named McGeady or 16 McGeady would be argued, and our proposal is 17 that it be Thursday, tomorrow afternoon, at 18 3 o'clock. 19 Secondly, I want to hand up to the 20 Court a brief that we gave to Ms. Conlin at the 21 lunch hour. 22 This is on the subject that Ms. Conlin 23 has raised of whether Plaintiffs can contact 24 class members. 25 And we're happy to discuss that 11406 1 whenever it's convenient for the Court and 2 opposing counsel. 3 And thirdly, Your Honor, the issue 4 about the exhibits that pertained to 5 Mr. Bradford, there were nine exhibits offered. 6 We resolved 2266. The first paragraph 7 there is to be redacted. That was resolved I 8 think this morning. 9 And the only other exhibit as to which 10 we had a concern was PX 5473. 11 I had forgotten this morning, but our 12 concern was this: There were four pages 13 originally to that document. 14 Ms. Conlin when she used the document 15 agreed that only the first two would be used. 16 The other two should be out. 17 And I just want it clear that if that 18 document is admitted into evidence, it's only 19 the first two pages. I think there's no 20 controversy about that. 21 MS. CONLIN: Mr. Tulchin is right, 22 Your Honor. 23 We took this up before, and indeed the 24 exhibit as offered into evidence only contains 25 the first two pages. 11407 1 MR. TULCHIN: Then we have no 2 objection to that, or to the others, Your 3 Honor, which were all PXs, 1793, 1797, 2270, 4 2399A, 5305, 9052, and 9982. 5 Thank you, Your Honor. 6 THE COURT: Very well. I'll admit 7 them in front of the jury. 8 Anything else? 9 MS. CONLIN: Nothing else, Your Honor. 10 MR. HAGSTROM: Your Honor, in response 11 to a couple of things Mr. Tulchin brought up. 12 The argument on Mr. McGeady, we are 13 prepared to go forward today. 14 Mr. Cashman was going to be doing 15 that, but he has to be out of town the rest of 16 the week, as I understand it. So he's got a 17 meeting in another matter tomorrow. So we will 18 not be able to handle that then this week. 19 So as I understand it, he's talking to 20 Mr. Tuggy or someone on Microsoft's side about 21 rescheduling that. 22 THE COURT: Okay. 23 MR. TULCHIN: That's fine, Your Honor. 24 MR. HAGSTROM: And on the papers 25 regarding contacting class members, we'll 11408 1 obviously have to take a look at those. 2 And then finally, we were wondering on 3 the motion regarding the 2,843 exhibits that 4 Defendant has offered during our case, when 5 there might be a ruling on that. 6 THE COURT: I ruled on that this 7 morning. 8 MR. HAGSTROM: I didn't see it. 9 THE COURT: Didn't I give it to you? 10 Oh, I must not have. 11 MR. TULCHIN: I don't believe we've 12 seen it, Your Honor. 13 THE COURT: It's in my printer. 14 That's why I haven't. I am sorry. 15 MR. HAGSTROM: It was a timely 16 question. 17 THE COURT: I printed it up. I forgot 18 to give it to you. I apologize. 19 MR. GREEN: We'll just check your 20 printers from now on. 21 THE COURT: I ruled on three motions 22 yesterday, and I sent one via E-mail and I 23 think I thought I sent all of them. 24 MR. HAGSTROM: We did receive one. 25 THE COURT: I finished the other two 11409 1 this morning, and I thought I sent them E-mail 2 and I didn't. So I apologize. She's going to 3 give you a copy. 4 MS. HAGSTROM: Thank you. 5 THE COURT: They're done. 6 THE CLERK: I'm going to grab the jury 7 first. 8 (An off-the-record discussion was 9 held.) 10 THE COURT: Comments? 11 MS. CONLIN: Your Honor, we do not 12 have any difficulty with having Mr. Lieven 13 respond to the questions. 14 THE COURT: Defendant? 15 MR. TULCHIN: Your Honor, we don't 16 either, assuming as I do, but please tell me if 17 my assumption is incorrect, that there is to be 18 no follow-up examination by any of the lawyers. 19 THE COURT: Correct. 20 MR. TULCHIN: These questions are 21 given to the witness. He says whatever he 22 says, and then he's dismissed. 23 THE COURT: That's correct. 24 MS. CONLIN: Your Honor, I don't think 25 that's what the order says. I think that there 11410 1 can be follow-up questions. I could be 2 mistaken in my recollection, but at least -- 3 THE COURT: Well, let me look. 4 MS. CONLIN: My motion said that. 5 Maybe I didn't win. 6 THE COURT: Well, Instruction No. 28, 7 I don't see anything about asking more 8 questions. 9 MS. CONLIN: Well, Your Honor, I don't 10 think that it matters very much in this 11 context, but perhaps we should go back and look 12 at the Court's order, but not now. 13 I certainly want Mr. Lieven to be able 14 to leave and return to Belgium. So for the 15 purpose of these questions, if the Court would 16 just propound them and that will be fine. 17 THE COURT: We'll take up that matter 18 then another time. 19 MS. CONLIN: Yes, Your Honor, that 20 will be fine. We can all take a look at it at 21 our leisure. 22 THE COURT: Okay. It's an interesting 23 issue. We probably should have an 24 understanding on it. 25 All right. Bring them in. 11411 1 Mr. Lieven, would you take the stand 2 again, please. 3 MS. CONLIN: May I explain to the 4 witness what's going to happen? 5 THE COURT: I'll tell him. 6 MS. CONLIN: Okay. 7 THE COURT: We have a couple questions 8 from the jurors. I'm going to be asking you 9 the questions and you may answer. How is that? 10 THE WITNESS: I should come here and I 11 sit down here? 12 THE COURT: Sure. 13 (The following record was made in the 14 presence of the jury at 2:35 p.m.) 15 THE COURT: Everyone else may be 16 seated. 17 Mr. Lieven, would you have a seat, 18 please. You are still under oath. 19 There's two questions from jurors. 20 Were there any more questions or were these the 21 only two? 22 And remember the procedure. Raise 23 your hand at the end of all the examination and 24 so I know. But that's all right, we found out. 25 THE COURT: Mr. Lieven, can you 11412 1 explain the difference between per processor 2 and per system, if you know? 3 THE WITNESS: Well, every system has a 4 processor. I have System A, B, C or as we have 5 seen 1, 2, 3, 4, 5, 6, 7. 6 A system is a box. It's containing a 7 processor, hard disk drive, memory, and 8 whatever you need for a good computer to work. 9 Maybe monitor even. 10 So when you are counting -- let me 11 say, you count your inventory. Has nothing to 12 do with the contract of the royalty report. 13 You go to your inventory and you tell 14 your people, please count those -- count this 15 inventory by processors. Then they look at the 16 box and say this is Processor 286, 286, 386, 17 486, and then they make a list. Then they have 18 a list. We have 1,000 286's -- we have 1,000 19 computers with 286 processor, we have 2,000 20 with the 286, maybe 10,000 with the 386, and 21 15,000 with the Pentium or whatever. 22 Then you have covered your whole 23 inventory. This 45,000 or 40,000 computers. 24 That what I said is vertically. You 25 write on the top Processor 286, 386, 486, 11413 1 Pentium. 2 The other way what you can do you can 3 say count the systems. The systems have name, 4 and you don't look at the processor that is in 5 there. Then you have System 1, 2, 3, 4, 5, 6. 6 Say we have System 1 we have 500, 7 System 2 we have 2,000, and so on. 8 And then you have covered your whole 9 inventory. 10 The number that comes out is the same. 11 The per processor you count vertically and the 12 system you count horizontally. And that's why 13 I say it's the same. It results to the same 14 amount of your computers at the end. In the 15 bottom right corner at the end. 16 THE COURT: Okay. Next question, is 17 there a reason why some dates that you sign are 18 by date -- day month year and sometimes month 19 day year? 20 THE WITNESS: Month day year is the 21 American way to write it, and in Europe and 22 other countries we write -- so the only 23 confusion that could be is 1st January of this 24 year. That may be the year is -- the 1 can be 25 the month or the date. But in Europe we write 11414 1 let's say 15th of March. We write 15 period 3 2 period 2006, or whatever. 3 So the only thing to avoid confusion 4 is if the second digit is more than 12, you 5 know that's the day because there are no more 6 than 12 months a year. 7 I sometimes confuse it. The American 8 date sometimes I confuse that. 9 THE COURT: How do you normally sign 10 your day month and year? Do you do it by day 11 month year or month -- 12 THE WITNESS: Day month and year. 13 It's also now changed when you have your Visas, 14 and even the American authorities changed that 15 for the Europeans because they always mix it 16 up. And they said okay, write day month year. 17 THE COURT: Okay. Those are the 18 questions. 19 You may step down. 20 THE WITNESS: Okay. 21 THE COURT: Thank you, sir. 22 I believe the next witness is by 23 videotape. 24 MS. CONLIN: It is, Your Honor, but I 25 do have the housekeeping matters. 11415 1 THE COURT: Yes, go ahead. 2 MS. CONLIN: Plaintiffs offer -- did 3 you want to admit exhibits on the record, Your 4 Honor, from Mr. Bradford? 5 THE COURT: Yes. I am sorry. 6 Exhibits during Mr. Bradford's 7 testimony are admitted. 9982, 5305, 5473 the 8 first two pages only, 9052, 1797, 2270, 2399A, 9 1793, and 2266. Is that correct? 10 MR. TULCHIN: Yes, Your Honor. Except 11 2266 has that one paragraph redacted. 12 THE COURT: Redacted. That's correct. 13 MR. TULCHIN: Thank you, Your Honor. 14 THE COURT: Now you have some 15 exhibits? 16 MS. CONLIN: I do, Your Honor. 17 Plaintiffs would offer the following 18 exhibits: The time line, which is Plaintiffs' 19 Exhibit 10033A, and also the following exhibits 20 which pertain to the VOBIS situation, but we 21 did not discuss, and they are Plaintiffs' 22 Exhibit 7695, Plaintiffs' Exhibit 410, 23 Plaintiff' Exhibit 3517, Plaintiffs' Exhibit 24 1332, Plaintiffs' Exhibit 1394, Plaintiffs' 25 Exhibit 1424, Plaintiffs' Exhibit 3799A, 11416 1 Plaintiffs' Exhibit 1421, Plaintiffs' Exhibit 2 8884, Plaintiffs' Exhibit 943, Plaintiffs' 3 Exhibit 1435A, Plaintiffs Exhibit 5513, 4 Plaintiffs' Exhibit 710, Plaintiffs' Exhibit 5 756, Plaintiffs' Exhibit 5168, Plaintiffs' 6 Exhibit 10051, and Plaintiffs' Exhibit 5185. 7 And, Your Honor, I would propose that 8 the Defendant be given an opportunity to 9 examine these and that we make a record at a 10 later date if there is one to be made. 11 THE COURT: What was the very first 12 one again? 13 MS. CONLIN: 10033A. 14 THE COURT: Do you want time to look 15 at those? 16 MR. TULCHIN: Yes, Your Honor, as per 17 our agreement. Thank you. 18 THE COURT: You're very welcome. 19 MS. CONLIN: And, Your Honor, at this 20 time the Plaintiffs call Stefanie Reichel by 21 way of deposition. 22 THE COURT: You may proceed. 23 (Whereupon, the following video was 24 played to the jury.) 25 Question: Good morning, Ms. Reichel. 11417 1 Would you please state your full name 2 for the record. 3 Answer: Yes. Stefanie Christina 4 Reichel. 5 Question: And where do you reside? 6 Answer: I reside in San Francisco. 7 Actually, in Sausalito, California. 8 Question: What is -- could you at the 9 outset give us a brief overview of your 10 educational background? 11 Answer: I have a bachelor's and arts 12 in international relations from the University 13 of Pennsylvania in the Wharton School there. 14 Wharton, W-h-a-r-t-o-n. 15 Question: What year did you get your 16 bachelor's degree from the University of 17 Pennsylvania? 18 Answer: In 1988. 19 Question: And do you have a graduate 20 degree as well? 21 Answer: No. The Wharton also has an 22 undergraduate program. 23 Question: And subsequent to your 24 graduation from Wharton, did you become 25 employed somewhere? 11418 1 Answer: I actually following 2 graduation had moved out to California and was 3 working for another software company, and soon 4 -- about two years after that I joined 5 Microsoft. 6 Question: Where -- who did you work 7 for in California? 8 Answer: Informix Software, 9 I-n-f-o-r-m-i-x. 10 Question: And was that your only 11 employer between college and joining Microsoft? 12 Answer: Between college and joining 13 Microsoft, I had done some consulting when I 14 first came out here before joining Informix. 15 Question: What was your job at 16 Informix? 17 Answer: I was an OEM account manager 18 and also a channel marketing specialist. 19 Question: What kind of products did 20 you sell? 21 Answer: It was database products to 22 hardware vendors. 23 Question: Are you multilingual? 24 Answer: Yes, I am. 25 Question: What language do you speak? 11419 1 Answer: I speak fluently English, of 2 course, and then also German and also some 3 Danish. 4 Question: What period of time were 5 you employed by Microsoft? 6 Answer: I was employed from the fall 7 of 1991 through the summer of '94. 8 Question: You joined Microsoft in the 9 fall of 1991? 10 Answer: Uh-huh. 11 Question: What was your first 12 position at Microsoft? 13 Answer: It was as an OEM account 14 manager. 15 Question: Who hired you to join 16 Microsoft? 17 Answer: I was hired by a gentleman by 18 the name of Juergen Huels, which is spelled 19 H-u-e-l-s. 20 Question: Can you explain the 21 circumstances of how you came to be employed by 22 Microsoft? 23 Answer: I was hired by Mr. Huels who 24 I knew from my prior employer which was 25 Informix. He had worked there out of their 11420 1 German office, and so he was familiar with my 2 work that I had done with Sun Microsystems and 3 so he brought me on board. 4 Question: I wanted to get a sense of 5 sort of the lay of the land in terms of 6 Microsoft personnel in Germany, who you 7 reported to and what the structure of the 8 organization was that you were part of. 9 Could you go ahead and describe that? 10 Answer: I reported to a gentleman by 11 the name of Juergen Huels, who was the -- I 12 believe his title was director of OEM sales for 13 Central Europe, which included Germany, 14 Switzerland, and Austria, and I think it may or 15 may not have included some of the eastern 16 European countries, but he reported in -- 17 actually, I'm not sure how it was done, but he 18 had two bosses. 19 He reported in to Jochen Haink who was 20 the GM of Germany, and he also reported to Jeff 21 Lum, who I'm not sure of his title, but I think 22 it was director of OEM sales for Europe. 23 Question: And then did Mr. Lum report 24 to Redmond to Joachim Kempin? 25 Answer: He reported directly to 11421 1 Mr. Kempin, yes. 2 Question: Do you know who Mr. Haink 3 reported to? 4 Answer: He reported in, as far as I 5 remember, in to Christian Wedell. 6 Q. And what was Christian Wedell's 7 position? 8 Answer: He was the -- I forget the 9 exact title, but he was certainly the head of 10 Central Europe. So the countries I mentioned 11 before that Mr. Huels managed, he was 12 responsible for the operations of those 13 countries. And each of those countries' 14 country managers reported in to him. 15 Question: Couple of other names I 16 wanted to run past you. Tell me where they 17 fit. One is Bengt Akerlind. 18 Answer: Uh-huh. 19 Question: What was his position? 20 Answer: When I first met Bengt 21 Akerlind upon joining Microsoft, he was Juergen 22 Huels' counterpart in Sweden and for the Nordic 23 countries. And later on when Mr. Lum moved 24 over to a different position handling the Far 25 East, Mr. Akerlind moved to the U.S. and 11422 1 assumed Mr. Lum's position. 2 Question: As director of OEM sales 3 for Europe? 4 Answer: Yes. 5 Question: Do you know when that 6 occurred? 7 Answer: I don't remember the dates. 8 I believe it was probably summer. 9 Question: Of '92? 10 Answer: Of '92, yes. 11 Question: Another name Bernard, I 12 believe it's Vergnes. 13 Answer: Vergnes. 14 Question: Vergnes. What was his 15 position? 16 Answer: He was -- once again, I'm not 17 sure of the exact title, but I believe he was 18 the president of Europe. 19 Question: And where did he and 20 Mr. Wedell stand in relation to each other. 21 Answer: Mr. Wedell, I believe, 22 reported in to Mr. Vergnes. 23 Question: Do you know when Mr. Huels 24 joined Microsoft? 25 Answer: It was shortly before I 11423 1 joined. I believe it was in September of 1991. 2 Question: And I think you previously 3 testified he replaced Manfred Schindler as head 4 of OEM sales for Central Europe? 5 Answer: Correct. 6 Question: And do you know -- were you 7 ever told what the reason was for that change? 8 Answer: No, I wasn't. 9 Question: And I believe you testified 10 your initial position was account manager for 11 Germany; is that right? 12 Answer: I was one of -- I was part of 13 a team of account managers who was assigned to 14 accounts in Germany. 15 Question: Was the team that you were 16 part of, did it include just Germany or all of 17 the territory that Mr. Huels was responsible 18 to? 19 Answer: It would have included all of 20 Central Europe, but most of the OEMs that were 21 being managed were, you know, be Austrians -- 22 the Austrian and the Swiss market weren't as 23 large as the German market, and there were 24 fewer OEMs, and what they would generally do is 25 because there were actually subsidiaries in 11424 1 each of those countries, those people would be 2 based out of there. 3 Question: How did VOBIS compare with 4 other accounts in Germany? Was it the largest 5 account in Germany. 6 MR. JARDINE: You mean by size of 7 sales? 8 Question: By size of its sales. 9 Answer: I don't know the exact 10 numbers, but it was one of the larger ones, 11 yes. 12 Question: Do you know -- can you give 13 us a little background of VOBIS? What was the 14 nature of its business? 15 Answer: VOBIS was a -- it was kind of 16 an interesting business model. They were a PC 17 clone manufacturer that was based out of 18 Aachen, Germany, which was right on the border 19 of Germany and Holland, and they manufactured 20 these PCs which they then sold through a chain 21 of their own stores, similar to like an Egghead 22 type store or retail type storefront where they 23 would sell their PCs. 24 Sometimes they would sell components 25 from other companies such as HP printers and so 11425 1 on, and also sell some software. 2 They were operated out of a -- they 3 were owned by an organization called Metro, 4 which is a large conglomerate in Europe that 5 owns various businesses and department store 6 chains like Kaufhof, and so there are PCs under 7 the brand name High Screen would also be sold 8 in those stores as well. 9 Question: Was this a very strategic 10 account to Microsoft? 11 Answer: Yes. 12 Question: Did VOBIS advertise its 13 products widely within the German market? 14 Answer: Yes. 15 Question: Let me show you what has 16 previously been marked as Exhibit 604. 17 Exhibit 604 consists of a series of 18 advertisements Theo Lieven, the CEO of VOBIS, 19 produced at his deposition. I wanted to see if 20 you've seen these ads or these type of ads 21 before. 22 MR. GREEN: Your Honor, can we -- 23 THE COURT: Stop, please. 24 MR. GREEN: We've got a problem with 25 this exhibit. I didn't realize it until just 11426 1 now. 2 MS. CONLIN: Your Honor, the exhibit 3 is admitted. Exhibit came in with Mr. Lieven's 4 testimony, Your Honor. 5 THE COURT: Take it up back here, 6 please. Jury will stay put. 7 (An off-the-record discussion was held 8 out of the presence of the jury.) 9 THE COURT: I'm going to let you go 10 early -- well, two minutes, but Ms. Conlin 11 forgot to tell the date on the transcript. Go 12 ahead. 13 MS. CONLIN: It is 8-26-1998, and the 14 trial was -- or I beg your pardon. The case 15 was Caldera versus Microsoft, 8-26-1998. 16 THE COURT: Now, remember the 17 admonition. 18 Leave your notebooks here. 19 We'll see you tomorrow at 8:30 a.m. 20 Thank you. 21 (The following record was made out of 22 the presence of the jury at 2:57 p.m.) 23 THE COURT: You may be seated. I got 24 a transcript from yesterday. I'll take a look 25 real quick. 11427 1 MS. CONLIN: Your Honor, in addition 2 to the looking at this transcript, the Court 3 will recall that we had a process for dealing 4 with exhibits in the course of depositions. 5 And as the Court is also aware, it's 6 very frequent that neither Mr. Hagstrom nor I 7 are here during the course of depositions, and 8 all these matters were to be resolved in that 9 process. 10 It is not permitted under our process 11 for the Defendant in the middle of the playing 12 of a deposition to pop up and object to an 13 exhibit that has passed through the process. 14 MR. GREEN: That's just wrong, Your 15 Honor. And the Plaintiffs have done it 16 frequently, so I think that can be dispensed 17 with quickly. 18 But let's find out what the real facts 19 are about this. This exhibit came up in direct 20 testimony with the last witness, and we think 21 it was admitted for a limited purpose, but 22 we're getting the transcript now. 23 THE COURT: I'm getting it too. 24 MS. CONLIN: And, Your Honor, we 25 should also get the history of the exhibit in 11428 1 the course of the process through which this 2 was ultimately approved for use with this 3 witness at this time. 4 I wonder if we could have till 5 tomorrow morning to take a look at all of the 6 process. 7 THE COURT: Well, the thing you gave 8 me on the Special Master ruling and the 9 exhibits in regard to Ms. Reichel was that 10 Plaintiffs will not seek admission of this 11 exhibit through Reichel. So it had to be 12 admitted either before or after. 13 MS. CONLIN: Well, Your Honor, then it 14 is I who needs to be corrected. 15 MR. GREEN: Your Honor, the transcript 16 says this exhibit -- and Ms. Conlin said it. 17 Your Honor, we would offer Plaintiffs' Exhibit 18 4547 for the purpose of establishing the time 19 line and for no other purpose. 20 THE COURT: Okay. 21 MR. GREEN: Mr. Holley says with that 22 limitation no objection, Your Honor. 23 THE COURT: For what purpose are we -- 24 MR. GREEN: This is another purpose. 25 MS. CONLIN: You know, Your Honor, I 11429 1 need to check this. I don't see that exhibit 2 on my list either, so I'm a little bit 3 confused. I certainly want to do nothing that 4 is not correct, but -- 5 THE COURT: What page is this on the 6 transcript real quick? 7 MR. GREEN: 10965. 8 THE COURT: I mean on the Reichel. 9 MS. CONLIN: You mean, what page of 10 the Caldera transcript, Your Honor? 11 MR. GREEN: Page 7. 12 MR. TULCHIN: It should be page 31, 13 Your Honor. I'm sorry to correct Mr. Green. 14 I think it's 7 of the minuscript, but 15 it's page 31 of the transcript, if that makes 16 sense. 17 MS. CONLIN: 31, David? 18 MR. TULCHIN: I think so. 19 MR. GREEN: Mr. Tulchin is correct. 20 Page 31. Yeah, first referred to on 21 line 1 of page 31. 22 It was Exhibit 604 of the deposition. 23 THE COURT: So the whole conversation 24 about it just goes through the next page there? 25 MS. CONLIN: It looks like 32, line 11 11430 1 is the end of the discussion with respect to 2 Exhibit 604 there, and ours 4547. 3 MR. GREEN: Yes, I agree with that. 4 THE COURT: So based on that, does the 5 Defendant still object to it being shown? 6 MR. GREEN: Yes, Your Honor. 7 MR. HAGSTROM: Can I just -- I've just 8 got a clarification here that indicates that by 9 E-mail last evening from Dan Silverman around 10 8 p.m. Microsoft withdrew its relevance 11 objection to PX 1304. 12 And, quote, further we will permit 13 Plaintiffs to display but not admit the first 14 page of PX 4547. It's a direct quote. 15 And that was sent from Mr. Silverman 16 to Lindsey Davis. 17 MR. TULCHIN: Your Honor, let me just 18 say the following. 19 Assuming that to be true, and of 20 course I accept what Mr. Hagstrom says, we 21 interrupted without cause. I wasn't aware, and 22 neither was Mr. Green, that this E-mail was 23 sent. 24 It's the first I've heard about it, 25 and our records reflect as indicated, that this 11431 1 document is not in evidence and shouldn't have 2 been shown. 3 But given what apparently Mr. 4 Silverman said, we ought to -- I mean, assuming 5 this is correct, and as I say, I'm sure Mr. 6 Hagstrom is right, we ought to go back and 7 allow it to be shown because apparently we 8 agreed to that. 9 THE COURT: Well, I'll let you check 10 with Silverman tonight. We'll find out 11 tomorrow. 12 MR. HAGSTROM: But, see, that's the 13 process, Your Honor, is that -- 14 THE COURT: I understand. 15 MR. HAGSTROM: There's a lot of back 16 and forth between the parties in putting these 17 scripts together so -- 18 THE COURT: It's to be expected. No 19 one's at fault. 20 MR. HAGSTROM: But I mean the point 21 is -- 22 THE COURT: It happens. 23 MR. HAGSTROM: -- that, you know, when 24 we're putting up stuff we're preclearing it. 25 So I mean we wouldn't be putting things up if 11432 1 we didn't believe it was precleared. 2 THE COURT: Okay. All right. 3 Well, you can check with -- if that's 4 true what Mr. Silverman said, and I have no 5 reason to doubt Mr. Hagstrom, then it shouldn't 6 be a problem then. 7 Anything else on this? 8 MR. HAGSTROM: No, Your Honor. 9 MR. GREEN: Sorry, Your Honor. 10 THE COURT: Mr. Tulchin will check 11 with Silverman to make sure. 12 MR. TULCHIN: I certainly will. 13 MR. HAGSTROM: He's checking right 14 now. 15 MS. CONLIN: You know, Your Honor -- 16 MR. HAGSTROM: His thumbs don't work 17 that fast. 18 MS. CONLIN: As the Court says, this 19 -- we're going to have these little glitches. 20 There are a lot of people involved and 21 everybody's -- 22 THE COURT: Both sides have done an 23 excellent job and I commend you for it. So I 24 have no problem. Don't worry. 25 MR. TULCHIN: Luckily, it was two 11433 1 minutes of 3, so shouldn't have been a big -- 2 luckily it shouldn't be a big interruption. 3 THE COURT: You guys have done a great 4 job. 5 MR. TULCHIN: Thank you, Your Honor. 6 MR. HAGSTROM: Thank you. 7 THE COURT: I appreciate it. 8 All right. See you tomorrow. 9 (Proceedings adjourned at 3:04 p.m.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 11434 1 CERTIFICATE TO TRANSCRIPT 2 The undersigned, Official Court 3 Reporters in and for the Fifth Judicial 4 District of Iowa, which embraces the County of 5 Polk, hereby certifies: 6 That she acted as such reporter in the 7 above-entitled cause in the District Court of 8 Iowa, for Polk County, before the Judge stated 9 in the title page attached to this transcript, 10 and took down in shorthand the proceedings had 11 at said time and place. 12 That the foregoing pages of typed 13 written matter is a full, true and complete 14 transcript of said shorthand notes so taken by 15 her in said cause, and that said transcript 16 contains all of the proceedings had at the 17 times therein shown. 18 Dated at Des Moines, Iowa, this 31st 19 day of January, 2007. 20 21 22 ______________________________ Certified Shorthand Reporter(s) 23 24 25