5082 1 IN THE IOWA DISTRICT COURT FOR POLK COUNTY ----------------------------------------------- 2 JOE COMES; RILEY PAINT, ) 3 INC., an Iowa Corporation;) SKEFFINGTON'S FORMAL ) 4 WEAR OF IOWA, INC., an ) NO. CL82311 Iowa Corporation; and ) 5 PATRICIA ANNE LARSEN; ) ) TRANSCRIPT OF 6 Plaintiffs, ) PROCEEDINGS ) VOLUME XIX 7 vs. ) ) 8 MICROSOFT CORPORATION, ) a Washington Corporation, ) 9 ) Defendant. ) 10 ----------------------------------------------- 11 The above-entitled matter came on for 12 trial before the Honorable Scott D. Rosenberg 13 and a jury commencing at 8:30 a.m., 14 December 15, 2006, in Room 302 of the Polk 15 County Courthouse, Des Moines, Iowa. 16 17 18 19 20 HUNEY-VAUGHN COURT REPORTERS, LTD. 21 Suite 307, 604 Locust Street 22 Des Moines, Iowa 50309 23 (515)288-4910 24 25 5083 1 A P P E A R A N C E S 2 Plaintiffs by: ROXANNE BARTON CONLIN 3 Attorney at Law Roxanne Conlin & Associates, PC 4 Suite 600 319 Seventh Street 5 Des Moines, IA 50309 (515) 283-1111 6 RICHARD M. HAGSTROM 7 MICHAEL R. CASHMAN Attorneys at Law 8 Zelle, Hofmann, Voelbel, Mason & Gette, LLP 9 500 Washington Avenue South Suite 4000 10 Minneapolis, MN 55415 (612) 339-2020 11 ROBERT J. GRALEWSKI, JR. 12 Attorney at Law Gergosian & Gralewski 13 550 West C Street Suite 1600 14 San Diego, CA 92101 (619) 230-0104 15 KENT WILLIAMS 16 Attorney at Law Williams Law Firm 17 1632 Homestead Trail Long Lake, MN 55356 18 (612) 940-4452 19 20 21 22 23 24 25 5084 1 Defendant by: DAVID B. TULCHIN 2 STEVEN L. HOLLEY SHARON L. NELLES 3 JOSEPH E. NEUHAUS JEFFREY C. CHAPMAN 4 Attorneys at Law Sullivan & Cromwell, LLP 5 125 Broad Street New York, NY 10004-2498 6 (212) 558-3749 7 ROBERT A. ROSENFELD KIT A. PIERSON 8 Attorneys at Law Heller Ehrman, LLP 9 333 Bush Street San Francisco, CA 94104 10 (415) 772-6000 11 STEPHEN A. TUGGY HEIDI B. BRADLEY 12 Attorneys at Law Heller Ehrman, LLP 13 333 South Hope Street Suite 3900 14 Los Angeles, CA 90071-3043 (213) 689-0200 15 BRENT B. GREEN 16 Attorney at Law Duncan, Green, Brown & 17 Langeness, PC Suite 380 18 400 Locust Street Des Moines, IA 50309 19 (515) 288-6440 20 21 22 23 24 25 5085 1 RICHARD J. WALLIS STEVEN J. AESCHBACHER 2 Attorneys at Law Microsoft Corporation 3 One Microsoft Way Redmond, CA 98052 4 (425) 882-8080 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5086 1 (The following record was made out of 2 the presence of the jury at 8:28 a.m.) 3 MR. HOLLEY: Your Honor, while we are 4 waiting for the Jury, I don't want to argue it 5 at all, but can I take this opportunity to hand 6 up to the Court a memorandum that we prepared 7 overnight on the admissibility of evidence 8 concerning the value of Microsoft's products? 9 And we can take this up obviously at 10 some other time. 11 THE COURT: Great. Thank you very 12 much. 13 MS. CONLIN: That was really good, 14 Judge. 15 MR. GREEN: A little sarcasm. 16 THE COURT: I sincerely meant it. 17 MS. CONLIN: It sounded like it. 18 MR. TULCHIN: I thought you did. 19 MR. HAGSTROM: Do you want a gift from 20 us too? 21 THE COURT: Sure. You can bring it in 22 at any time. Other than sleeping this weekend, 23 I have no other plans. 24 MS. CONLIN: Judge, while we are 25 waiting also, we have pending before the Court 5087 1 Plaintiffs' motion to compel production of 2 withheld documents Requests 89 and 93, which we 3 filed on 10-27. 4 It is completely ready to argue and I 5 wonder if we could argue it like Monday after 6 court. 7 MR. HOLLEY: Yes, Your Honor. 8 MR. TULCHIN: Sure. 9 THE COURT: Okay. Great. We'll do it 10 then. 11 No. I appreciate this. And, of 12 course, if you want to, Mr. Hagstrom and 13 Ms. Conlin -- I brought this issue up 14 yesterday, if you want to present something, 15 that's fine. I'd like to look at it. 16 MR. HAGSTROM: You can be assured -- 17 THE COURT: So I wasn't being 18 sarcastic. 19 Did she tell you about this juror that 20 is not feeling well? 21 MS. CONLIN: Yes. 22 MR. TULCHIN: Yes. 23 (The following record was made in the 24 presence of the jury at 8:31 a.m.) 25 THE CLERK: All rise. 5088 1 THE COURT: Everyone else may be 2 seated. Thank you. 3 Good morning, members of the jury. 4 You may proceed. 5 MR. TULCHIN: Shall I proceed, Your 6 Honor? 7 THE COURT: Sure. 8 MR. TULCHIN: Good morning, ladies and 9 gentlemen. 10 We are on the home stretch, at least 11 the home stretch of the Defendant's opening 12 statement, but at least we are making some 13 progress. 14 And I want to tell you that, of 15 course, the Plaintiffs' opening was very 16 lengthy. It's possible that I may not have 17 covered every point or every allegation that 18 the Plaintiffs made in their opening statement. 19 Opening statements are not evidence. 20 If I missed something, and I may have, 21 we will get to it in the evidence. That is, 22 Microsoft will be submitting evidence on every 23 issue in the case. 24 And, of course, you've heard me say 25 this before. It will be quite a while before 5089 1 Microsoft gets to start its evidence. And we 2 ask you to be patient before making any 3 conclusions about any of the issues. 4 And in connection with the evidence, 5 you know already from what you've seen, there 6 will be some aggressive sounding e-mails that 7 you will see authored by people at Microsoft. 8 As both sides have told you, there's 9 nothing in and of itself wrong or illegal or 10 anticompetitive about being aggressive in 11 business. 12 And even e-mails that are rude or 13 impolite establish nothing in and of themselves 14 when it comes to the question of whether 15 conduct was legitimate business conduct, even 16 if aggressive, or anticompetitive conduct in 17 the manner in which Judge Rosenberg has 18 instructed you on the law. 19 You will also hear and see, perhaps 20 beginning today, a deposition of Bill Gates 21 that was taken in 1998 in the case brought by 22 the government. 23 The Plaintiffs, I believe, will play 24 that deposition just as soon as my opening 25 statement has concluded. 5090 1 We understand that the deposition will 2 take more than ten hours to play, or at least 3 something along those lines. 4 And the deposition is quite 5 contentious. The lawyer taking the deposition 6 and asking Mr. Gates questions was indeed 7 himself aggressive. And we think you'll see 8 that that lawyer was intent on getting under 9 Mr. Gates' skin. 10 He succeeded in that. And there are 11 times when Mr. Gates shows his annoyance. 12 In listening to the deposition, 13 Microsoft asks that you focus not on this 14 interaction between lawyer and witness, but on 15 the substance of Mr. Gates' testimony. 16 And, if you do, Microsoft believes 17 you'll see that Mr. Gates' testimony is 18 consistent with what I have told you 19 Microsoft's evidence at the trial will be. 20 And speaking of depositions in 1998, 21 there will be others, perhaps quite a number of 22 other depositions, taken eight years ago or 23 more. 24 And many of those depositions were 25 taken of witnesses who worked at companies that 5091 1 were competitors of Microsoft. 2 In that connection, we think that the 3 Jury should be asking itself is this testimony 4 from a competitor upset, maybe even bitter at 5 being unsuccessful in its competition with 6 Microsoft. Perhaps testimony from a witness 7 complaining about Microsoft in view of the 8 outcome of hard-fought competition. 9 We would ask you as well, when looking 10 at depositions, including those from 1998, or 11 even in some cases earlier, to consider whether 12 the conduct, the alleged conduct that the 13 witness is referring to explains Microsoft's 14 success in the market or whether other factors, 15 such as those that I've told you the evidence 16 will show, are the explanations for Microsoft's 17 high market share in the three markets at issue 18 in this case. 19 And I would ask you as well to be 20 asking yourself during these depositions 21 whether the conduct that the witness is 22 referring to and whether the allegations that 23 you may hear even pertain to the three markets 24 in issue or whether they pertain to other 25 markets in which the two companies competed. 5092 1 And I want to show you now a slide of 2 things that Microsoft asks you to remember. 3 These are points that you've heard from both 4 sides during the trial. 5 This goes back to something that we 6 talked about early this week. 7 The class period in this case, you 8 know the dates, May 18th, 1994, through June 9 30th, 2006. And that is the period in which 10 the Plaintiffs say they are entitled to damages 11 for purchases of the software at issue in this 12 case. 13 Secondly, as you've heard several 14 times, the conduct of Microsoft at issue in the 15 government case was from July 15, 1995, through 16 June 24, 1999. 17 Thirdly, the product markets that the 18 Plaintiffs allege here are first, 19 Intel-compatible PC operating systems; 20 secondly, word processing, word processing 21 software, of course; and, thirdly, spreadsheet 22 software. 23 And the last point on this first slide 24 today is that, as the Court also instructed 25 you, and you've been reminded several times, 5093 1 the conclusions of law and the findings of fact 2 in your notebooks from the government case 3 apply only to the first market, that is the 4 market for Intel-compatible PC operating system 5 software. 6 MR. HAGSTROM: Your Honor, I would 7 object that the last sentence of Instruction 8 Number 4 states that the facts are for all 9 purposes in this case. 10 THE COURT: The instruction speaks for 11 itself. 12 MR. TULCHIN: I'd be happy to go back 13 to that, Your Honor, if you want. 14 Next, what I'd like to remind you of 15 is a little bit of the history of Microsoft. 16 We saw a time line earlier that had 17 almost everything that you're looking at now. 18 What we've added here is the period of the 19 government case, and also this green bar, which 20 is the class period, the same dates that we 21 were talking about just a moment ago. 22 And I'm not going to go back through 23 all of it in any detail, but I do want to 24 remind you that Microsoft will present evidence 25 in this case -- it may not come in the next 5094 1 week or two or in the next month or two, but 2 Microsoft will present evidence in this case 3 about the very beginnings of the company from 4 the time that Bill Gates and Paul Allen 5 developed the basic programming language. 6 You will remember Mr. Gates looked at 7 that magazine article at the end of 1974 about 8 the Altair computer. 9 Mr. Gates and Mr. Allen formalized 10 their partnership in '77. 11 In 1980 Microsoft knocked on Microsoft 12 -- sorry -- IBM knocked on Microsoft's door, 13 and the two companies entered into an agreement 14 for Microsoft to develop software, operating 15 system software for the very first IBM PC. 16 The first IBM PC came to market in 17 1981. 18 And Microsoft's MS-DOS was not only on 19 the IBM machines, but Microsoft succeeded in 20 licensing MS-DOS to a number of other OEMs, 21 companies that made IBM clone PCs. 22 You'll also remember the story of 23 Microsoft developing software that had a 24 graphical user interface. 25 Bill Gates first saw what Apple was 5095 1 doing when Apple showed Mr. Gates their first 2 GUI, and the story goes on and on. 3 You know about the release of Windows 4 3.0. You know what's happened since. We've 5 talked about the quality and prices of 6 Microsoft's products. 7 And in this 30-year, slightly more 8 than 30-year period, I draw your attention to 9 the fact that the conduct in the government 10 case pertained to just that period indicated on 11 that time line. 12 And as we go down the home stretch in 13 my opening statement, I want to remind you of a 14 number of points on which the parties agree. 15 And I think these points are important 16 because there will be lots of things that the 17 Plaintiffs and Microsoft disagree about. 18 That's what the trial is for. 19 But the framework that you can accept 20 or the things on which we do agree. Let's look 21 at the first one. 22 It isn't illegal to be successful. We 23 applaud that. It isn't illegal to grow your 24 company from little to huge. That's the 25 American dream. 5096 1 And in connection with what the 2 Plaintiffs have said, the Court's Instruction 3 Number 7 is right on point. 4 The mere possession of monopoly power, 5 if lawfully acquired and maintained, does not 6 violate the antitrust laws. 7 You heard me say it yesterday. 8 Professor Noll, the Plaintiffs' expert from 9 California, has said that he accepts that 10 Microsoft's high market share in 1986 and 1987 11 was lawfully acquired. 12 Microsoft had a monopoly in operating 13 systems that was lawfully acquired. 14 And you know, of course, that it is 15 the Plaintiffs' burden to prove that they were 16 injured as a result of some anticompetitive 17 conduct. That's Instruction 14, among other 18 places. 19 So let's look next at another point on 20 which the parties agree. A point that is 21 important, we believe, in evaluating whether 22 conduct is anticompetitive or pro-competitive. 23 This comes from way back on December 24 1st, exactly two weeks ago now. 25 The rules say that companies should 5097 1 compete as vigorously as they can, do 2 everything they can to win, make the best, the 3 most innovative, the most creative products, 4 get the best sales force, and try to win on the 5 merits. 6 You know that our evidence will be 7 that Microsoft has done each of those things. 8 And its success is attributable to what the 9 Plaintiffs themselves say a company can and 10 should do, compete as vigorously as you can. 11 Instruction Number 8 from the Court is 12 quite on point with respect to this same 13 agreement. 14 You should distinguish the acquisition 15 or maintenance of monopoly power through 16 anticompetitive acts from the acquisition or 17 maintenance of monopoly power by supplying 18 better products or services, possessing 19 superior business skills, or because of luck, 20 which is not unlawful. 21 When it comes to possessing superior 22 business skills, I just remind you of the 23 importance of Bill Gates' recognition very 24 early on that computing using a character-based 25 interface was not going to last. That the 5098 1 future of computing was in the graphical world. 2 And Mr. Gates made a bet, a big bet -- 3 one might say he bet the company. He bet the 4 future of Microsoft. It was a big bet with a 5 high risk. 6 Many people in the industry thought 7 that those who used computers liked the 8 character-based system and would not want to 9 change. 10 And as you know, many other companies, 11 including important companies, that competed 12 with Microsoft did not believe in the graphical 13 user interface as the future. 14 They made a different bet. Superior 15 business skills. High risk for Microsoft. 16 High risk to make the bet that Mr. Gates made. 17 And as you know, in business, and 18 sometimes elsewhere in life, when you make a 19 bet that has a high risk with it, the reward, 20 if your bet is successful, can be high as well. 21 And then let me point you to 22 Instruction -- also Instruction Number 8. 23 Instruction Number 8 is at pages 10 to 11 of 24 the Court's instructions. 25 This paragraph begins, the portion 5099 1 we've excerpted, it's the whole last paragraph, 2 it's from pages 10 to 11, and we put on the 3 screen the entire paragraph. 4 And it's long, but I think it's very 5 important as you listen to and see and hear the 6 evidence, this paragraph we think is important 7 for you. 8 The difference between anticompetitive 9 conduct and conduct that has a legitimate 10 business purpose can be difficult to determine. 11 This is because all companies have a desire to 12 increase their profits and increase their 13 market share. 14 These goals are an essential part of a 15 competitive marketplace. The antitrust laws do 16 not make these goals, or the achievement of 17 these goals, unlawful as long as a company does 18 not use anticompetitive means to achieve these 19 goals. 20 In determining whether Microsoft's 21 conduct was anticompetitive or whether it was 22 legitimate business conduct, you should 23 determine whether the conduct is consistent 24 with competition on the merits, whether the 25 conduct provides benefits to consumers, and 5100 1 whether the conduct would make business sense 2 apart from any effect it has on excluding or 3 harming competitors. 4 You've heard me talk for two or three 5 days about what we think our evidence will be, 6 and you've heard me tell you that Microsoft's 7 evidence will be that its conduct was 8 legitimate business conduct. 9 Now we will come to the conduct, and 10 you've heard me talk about it, that you must 11 accept was anticompetitive in the government 12 case. 13 But, remember, the Plaintiffs and 14 Microsoft agree, the Plaintiffs and Microsoft 15 agree, that companies should compete as 16 vigorously as they can and do everything they 17 can to win. 18 Next, still on the subject of 19 agreements between the two sides in this case. 20 Here's what Plaintiffs said, again, on 21 December 1st. 22 I want to stop for a moment and make 23 sure that I tell you as clearly as I can that 24 Iowa class members are not here to criticize 25 Microsoft for the popularity of its Windows 5101 1 GUI, the graphical user interface. 2 We think the evidence will be that 3 given the fact that there's no criticism of the 4 popularity of its Windows GUI, and given the 5 other evidence in this case, that you will 6 conclude ultimately that Microsoft's market 7 position results from this fact, plus the high 8 quality and low price of its software. 9 And then next. The Plaintiffs said, 10 if Microsoft had simply sold a good, quality 11 graphical user interface product at a 12 reasonable price, we'd be here applauding -- 13 well, actually, we wouldn't even be here, but 14 we would be applauding Microsoft rather than 15 suing it. 16 We think you will see that the 17 evidence is that an awful lot of people have 18 applauded. They've applauded in their conduct, 19 by their conduct. They've applauded by 20 recognizing the high quality and the good value 21 of Microsoft software. They've applauded by, 22 in the millions, choosing Microsoft software 23 when other choices have always been available 24 to them. 25 And I remind you what Professor Noll, 5102 1 the Plaintiffs' expert have said, there have 2 always been choices in each of these markets. 3 And then Plaintiffs' counsel, still 4 talking about GUIs, said, showing you a 5 picture, here is the first Apple GUI, GUI with 6 the icons. It was revolutionary. Yes, we 7 agree, that's what Mr. Gates perceived. 8 You remember he wrote to Mr. Sculley 9 in 1985 urging that Apple license its 10 technology to other companies so that the 11 Macintosh could become a standard. 12 Apple chose not to do that. Apple's 13 business decision was to keep its technology 14 proprietary, closed to itself, and it never 15 licensed its operating system to any other 16 company. 17 But Mr. Gates saw the GUI. He saw it 18 was revolutionary, and he made the business 19 decisions that we talked about at some length. 20 And, yes -- let's go to the next one. 21 Plaintiffs' counsel also said -- now 22 we are to May '90, July '90. This is -- during 23 this time DR-DOS 5.0 is released, and this is 24 when the real competition begins. 25 And, remember, Plaintiffs in their 5103 1 opening spent a lot of time, a lot of time, 2 talking to you about competition between 3 Microsoft in the operating system business and 4 Digital Research, DRI. 5 And the Plaintiffs had lots of 6 allegations about why one company was 7 successful and one was not. 8 But just when the Plaintiffs say the 9 real competition begins, out comes Windows 3.0. 10 And you'll remember -- and Microsoft 11 was the first to tell you -- Windows 1.0 and 12 2.0 were not very successful. 13 Windows 3.0, after David Weiss came up 14 with this way of using the protected mode 15 interface in '88, Windows 3.0 comes out in May 16 '90, just when the real competition begins. 17 And even Professor Noll for the 18 Plaintiffs says that that product was a 19 revolutionary technological leap. 20 So talk about competition on the 21 merits. There it is. 22 And, then again, with respect to 23 Digital Research, the Plaintiffs said on 24 December 4th, Microsoft also says that DRI 25 recognized that it was history if it wasn't 5104 1 able to develop Cutlass or some other 2 Windows-like product. 3 And you'll see in the DRI documents 4 very strong language to that effect. 5 And indeed I showed you some of that 6 very strong language from a number of internal 7 Digital Research documents. 8 You'll remember it. Documents showing 9 that DRI itself recognized that it was history. 10 It could not continue to compete successfully 11 in the operating system business without a GUI. 12 And DRI did what competitors often do. 13 They tried hard. They tried like heck to come 14 up with a GUI. 15 They had Cutlass and Star Trek and 16 Gem. They worked on projects to try to come up 17 with a graphical interface that would compete 18 with Windows. 19 They saw what was coming. 20 You remember the memo in '91 where the 21 fellow at DRI says if we don't come up with 22 something in four years, four years, we're 23 toast. I'm paraphrasing. He didn't use the 24 word toast. 25 But he was right. He hit it right on 5105 1 the nose. 1995 was when Windows 95 came out. 2 And before we leave this one point, 3 just a quick reminder. 4 We saw three or four documents, they 5 will be in evidence in the trial, from 1991 and 6 into January of '92 showing that Digital 7 Research could not even answer telephone calls 8 from its customers. 9 Customer support calls coming in by 10 the thousands and reports that customers were 11 hanging up or being told we'll call you back in 12 three or four days. 13 And if you want to know about 14 competing on the merits in the marketplace, I 15 think we would all recognize that if you can't 16 answer the phone when a customer has a 17 question, your future is in question. 18 So, let's look at the next one. The 19 Plaintiffs also said, and with this we agree, 20 we are not saying that Microsoft has an 21 obligation to make its products compatible with 22 DR-DOS. 23 Microsoft did not have that 24 obligation. 25 DR-DOS, if there were 5106 1 incompatibilities, had the obligation to fix 2 them and to make a product that worked; that 3 worked with Windows running on top of it or 4 that worked with applications running on top of 5 it. 6 And I showed you over the last couple 7 of days a number of documents, internal 8 documents at Digital Research where the company 9 is acknowledging the technical problems that 10 they're having. 11 And you remember a report from an 12 independent lab that WordPerfect, at the time a 13 very important application, was not compatible 14 with DR-DOS. The two weren't running together. 15 They would break. 16 Let's go to another point at which the 17 parties agree -- on which the parties agree. 18 Intellectual property is just like any 19 other property. 20 Plaintiffs said that on December 7th. 21 We agree. Intellectual property, if it belongs 22 to Microsoft, trade secrets, copyrights, 23 patents, if it's Microsoft's property, 24 Microsoft has no obligation to give it away for 25 nothing to competitors so that a competitor 5107 1 like Lotus -- and you will remember 2 Mr. Mendelsohn asking for Microsoft property, I 3 need it, I want it, please give it to me, the 4 type of things that people do when negotiating 5 in business. 6 Microsoft had no obligation to give 7 Lotus, its competitor in the spreadsheet 8 business, its own technology, its own 9 intellectual property so that Lotus could beat 10 Microsoft over the head with it. 11 And then, of course, on the subject of 12 whether Microsoft had advantages, we will tell 13 you, yes, Microsoft had advantages. 14 Smart people writing great software, 15 working hard, very often well beyond the normal 16 work day. 17 And Microsoft had other advantages. 18 And I must say not the least of them is having 19 Bill Gates as the CEO. 20 But when it comes to the advantages 21 that the Plaintiffs say were somehow improper, 22 you know, Microsoft has an operating system and 23 it's writing applications, spreadsheets and 24 word processing software to run on its own 25 system. 5108 1 Is that an advantage? Well, maybe it 2 is. Is there anything wrong with it? We would 3 say no. 4 The Plaintiffs made allegations about 5 advantages they said were improper; that 6 Microsoft knows all about the operating system 7 and should have shared that information with 8 competitors. 9 But we think the evidence will show 10 you that the reason Microsoft's applications on 11 Windows were so successful is because Microsoft 12 made great software. 13 And what can you take from what 14 happened on the Macintosh? Microsoft had none 15 of those advantages. Microsoft competed, like 16 everyone else, including Apple, when it came to 17 writing applications like word processing 18 software, spreadsheet software, office suites 19 for the Macintosh. 20 Microsoft didn't have the source code 21 for the Mac operating system. Microsoft had no 22 internal secret information from Apple that it 23 shouldn't have had. Microsoft had none of 24 those advantages. 25 And how did Microsoft do on the 5109 1 Macintosh? 2 Well, remember we looked at this. The 3 evidence will be -- here's word processing -- 4 that Microsoft absolutely dominated the 5 competition, with no advantages, none, except 6 the legitimate advantages that I've told you 7 about, great software engineers working hard, 8 great products, good business decisions, all 9 the things that a company should do. 10 It's not illegal to be successful, to 11 grow your company. That's the American dream. 12 And on the Macintosh, over time -- 13 these are just three years, but you can look at 14 any year. 15 On the Macintosh, without these 16 advantages that the Plaintiffs say are improper 17 -- here's Microsoft's market share, almost 70 18 percent, over 70 percent, and by 1998 actually 19 getting close to 90 in word processing. 20 How about spreadsheets? Same thing. 21 It's actually even more dramatic. 22 Apple itself has a division called 23 Claris, C-l-a-r-i-s, and they're writing 24 applications to their own operating system, the 25 Mac OS. 5110 1 How do they do against Microsoft? 2 This is what customers want, the Microsoft 3 spreadsheet. 4 So when you're thinking about 5 causation, how is it that Microsoft became so 6 successful? Is it because of allegations of 7 anticompetitive conduct? Is it because of any 8 of this conduct that the Plaintiffs point to? 9 Is the conduct anticompetitive to begin with, 10 but, even if it is, does it explain Microsoft's 11 success? 12 We ask you to remember what Microsoft 13 did on the Macintosh. 14 And just a summary of what we think 15 the evidence will show. 16 Let's go back for a moment to the 17 operating system market. 18 I talked at some length to you about 19 lots of different evidence when it comes to 20 competition in operating systems. We talked 21 about DRI just a few moments ago. They never 22 developed a GUI that was released commercially. 23 IBM had OS/2. OS/2 was more expensive 24 and not as good. And you will remember when 25 the two companies were working together on OS/2 5111 1 and they had that blind evaluation, Ed 2 Lassettre from IBM, and Darrell Reuben of 3 Microsoft, and they looked at software code 4 that the two companies had written, but they 5 looked at it in a blind test. Neither knew 6 which code was written by which company. 7 And you remember that chart. IBM's 8 was fat and slow. Those are real insults when 9 spoken by a software engineer about source 10 code, fat and slow. 11 And Microsoft's was okay, okay plus, 12 or better. 13 And you remember those two bell 14 curves. And IBM's was all the way on the bad 15 side, and Microsoft's was all the way on the 16 plus side. 17 And, then, how would you explain this 18 other than by the fact that Microsoft's 19 software was better? 20 IBM itself, when it owned OS/2 in the 21 mid-'90s, competing hard against Microsoft, IBM 22 itself put on its PCs mostly the Windows 23 operating system. 24 I showed you this over the last two 25 days in those bar graphs. 5112 1 IBM sold in the mid-'90s millions of 2 PCs every year. And the PC company at 3 Microsoft -- sorry, at IBM -- my apologies. 4 Let me start again. 5 The PC company at IBM could not even 6 be convinced by the company as a whole, which 7 made OS/2, to put OS/2 on a majority of its 8 PCs. 9 Instead, what did they do? If they 10 wanted to sell PCs into the market, they had to 11 put on it the operating system that people 12 preferred. And that's why Windows, mostly 13 Windows even on IBM PCs. 14 And then let me give you a little bit 15 of a summary about the applications market. 16 And in the applications market, we 17 think the evidence will show that Microsoft 18 prevailed for all the same reasons we've talked 19 about. Superior software at low prices. 20 Lotus and WordPerfect missed the boat. 21 They decided they didn't want to write their 22 software to Windows. 23 And you remember we showed you 24 evidence that you'll see at trial from Steve 25 Crummey of Lotus, the worldwide VP of sales, or 5113 1 marketing, I forget which, and Pete Peterson, 2 the executive vice president of WordPerfect, 3 two very senior guys. 4 And you will remember both of them 5 said essentially the same thing. We didn't 6 write to Windows. We bet on other operating 7 systems, like OS/2. 8 Why? Because our companies did not 9 want to help Microsoft. 10 And you will remember Mr. Crummey 11 saying that Jim Manzi, the boss at Lotus, had a 12 case of Gates envy. He envied Bill Gates. 13 And those companies chose to go down 14 the wrong path. 15 So when Windows 3.0, that 16 revolutionary product, hit the market in May 17 '90 and when people in droves started adopting 18 Windows and the PC business is going way up. 19 People want Windows. People want the GUI. 20 These two companies were left behind. 21 And you also know that in the 22 applications market, Microsoft dropped its 23 prices steadily over the years. Even as market 24 share went up, the prices went down. 25 And just to go back one step. In 5114 1 operating systems, the price of Microsoft's 2 operating systems have always been very low. 3 And they stayed about flat throughout the 4 years. 5 But in applications, I showed you, I 6 believe it was yesterday, what the prices were 7 for the leading applications before Microsoft 8 became the market leader. 9 When Lotus was the market leader, 10 their prices for spreadsheets were, I think, 11 close to $300 in the late '80s. 12 And you know what happened when 13 Microsoft became the leader. Prices went down, 14 down, down. 15 And WordPerfect, same thing. Prices 16 in the 200s when WordPerfect was the leader in 17 the word processing market. 18 So prices coming down. 19 And you know that the Microsoft 20 products that have been released to the market 21 over time just get better and better. New 22 functionality added, new features. Things that 23 make these products, Microsoft believes, better 24 for consumers. 25 And I showed you a document or two 5115 1 which explained the lengths to which Microsoft 2 goes to try to make sure that their products 3 will be good for consumers. 4 Remember the kind of testing that's 5 done where someone comes into a lab and there's 6 a one-way mirror, and a Microsoft software 7 engineer watches the person use the software to 8 see whether or not 90 percent or more find it 9 easy to use? 10 And Microsoft is not commercializing 11 anything until it is satisfied that at least 90 12 percent of new users find it easy to use. 13 Exactly the sort of pro-competitive 14 conduct that explains success. Explains high 15 market share. 16 And Microsoft's R and D, of course, we 17 looked at the extent to which Microsoft makes 18 investments in research and development to 19 improve its products. 20 And then one last time during the 21 opening statement, the four graphs that you 22 looked at several times about prices. 23 Just what we've been talking about. 24 In operating systems through the OEM 25 channel where most people get their Windows, 5116 1 consumer version, $50 or less; professional 2 version, around 100. 3 And in applications, those prices -- 4 we contend those prices for operating systems 5 have always been very low. 6 They're great bargains. 7 And then on applications, the dramatic 8 lines showing you all revenues from all 9 licenses and the average price showing 10 decreases. 11 And on the subject of price, I want to 12 play you a very short video clip from a man 13 named John Sculley. You've heard his name 14 before. 15 John Sculley from 1983 to 1993 was the 16 boss, the CEO of Apple Computer. And he's 17 asked a question about operating systems. 18 (Whereupon, the following video was 19 played to the jury.) 20 Question: Would there be any other 21 reasons that it would be difficult for a 22 competing operating system to enter the market, 23 given the large installed base? 24 Answer: If Microsoft would raise 25 their price, maybe a competing operating system 5117 1 would have a chance, but they kept their prices 2 very low. And they could make a lot of money 3 keeping them very low because they had such an 4 important position in the industry. It was a 5 very, very difficult way for anyone to even 6 consider, you know, coming into the PC 7 industry. 8 (Whereupon playing of video 9 concluded.) 10 MR. TULCHIN: So there is a man who 11 was the boss at Apple for ten years saying 12 Microsoft's prices in the operating system 13 field, in the operating system market, were 14 very, very low. 15 One more clip from Mr. Sculley. Here 16 he's talking about operating systems. And then 17 he talks about prices for Microsoft's 18 applications. 19 (Whereupon, the following video was 20 played to the jury.) 21 Answer: And the real power driver of 22 their profitability is built on the premise of 23 keeping prices as low as possible for the 24 Windows operating system in order to create the 25 largest platform of computers on which to sell 5118 1 his applications. 2 And then he's always been an extremely 3 aggressive marketer, from a price standpoint as 4 well as all standpoint, of selling his 5 application suite. 6 Question: It's your understanding 7 that Mr. Gates has been an extremely aggressive 8 marketer of productivity applications? 9 Answer: Yes. 10 Question: And he has been aggressive 11 on the price of those applications? 12 Answer: Absolutely. He's been 13 extremely aggressive, from a pricing 14 standpoint. He's always been that way. 15 Question: Excuse me. Will you 16 clarify what you meant by aggressive? 17 Answer: By aggressive, I mean that 18 Bill has continually kept his prices low for 19 what appears to be several reasons. 20 (Whereupon, playing of video 21 concluded.) 22 MR. TULCHIN: So, then again, there we 23 have again John Sculley. He's talking about 24 prices. 25 Remember, this case is principally 5119 1 about an overcharge. 2 And Mr. Sculley of Apple says the 3 words that we think are not just important, but 4 central to this case. 5 He talks about keeping prices as low 6 as possible for the Windows operating system. 7 That's the first thing he said in that 8 answer, that Bill Gates is keeping his prices 9 as low as possible for the Windows operating 10 system. 11 And then he goes on to say he's always 12 been an extremely aggressive marketer from a 13 price standpoint as well -- as well as all 14 standpoints of his applications suite. 15 And he's asked: He has been 16 aggressive on the price of those applications? 17 Answer: Absolutely. He's been 18 extremely aggressive from a pricing standpoint. 19 And then another lawyer says: Excuse 20 me, will you clarify what you meant by 21 aggressive? 22 And John Sculley, CEO of Apple for ten 23 years, from '83 to '93, answers as follows: 24 Answer: By aggressive, I mean that 25 Bill has continually kept his prices low for 5120 1 what appears to be several reasons. 2 Just what we think the evidence will 3 tell you. Microsoft's prices have been low. 4 Keeping your prices low is not 5 anticompetitive. It's the essence of 6 competition. 7 We really are on the home stretch. I 8 know it's very warm in here today. I'm 9 finishing up in just the next couple of 10 minutes. 11 The Plaintiffs have experts. Two of 12 them, you know, Professor Mackie-Mason and 13 Professor Netz are married to one another. 14 Their work is not independent. One depends on 15 the other for opinions and conclusions. 16 They hypothesize a but-for world, a 17 world that they say would have existed in the 18 absence of the conduct alleged to be unlawful 19 that we think is unreasonable, unrealistic. 20 It's a world that has never existed in 21 the three markets at issue. 22 And, Professor Mackie-Mason and 23 Professor Netz, who have been paid millions of 24 dollars directly and through their consulting 25 company that they mostly own, offer opinions 5121 1 such as the overcharge for Windows has been 2 $42.49. 3 In other words, you should have gotten 4 Windows for close to nothing. We think that's 5 unreasonable, and the evidence will not support 6 it. 7 And as you heard me say yesterday -- I 8 won't go back through all the economics -- the 9 methodologies used by the Plaintiffs' experts 10 are, we think the evidence will show you, 11 flawed from beginning to end, apples and 12 oranges. 13 Sort of the old saying that if you put 14 in invalid data, you are going to get out 15 invalid conclusions. 16 Okay. We ask you to keep in mind 17 during this trial ultimately three conclusive 18 questions. 19 First, did Microsoft engage in 20 anticompetitive conduct? 21 Now let me pause. You have been 22 instructed, and Microsoft accepts, that the 23 conduct in the government case to which the 24 Court has referred in the conclusions of law 25 supported by the findings of fact, that conduct 5122 1 was anticompetitive. 2 You're accepted to instruct it -- 3 sorry. You are instructed to accept it. 4 I am almost done. I guess I'm getting 5 tired, even though it's early in the morning. 6 You're instructed to accept it. 7 Microsoft has accepted that as well and moved 8 on. 9 But with respect to Question Number 1, 10 of course, there are many, many, many other 11 allegations. Many of them, you know, go back 12 15 years or more, that were not resolved in the 13 government case. Many, many. 14 And as to those, I remind you, as the 15 Court has instructed, as we talked about this 16 morning, competition can be aggressive. The 17 idea is to win all the business. And not all 18 conduct that injures competitors is 19 anticompetitive. 20 Winning the business by good business 21 practices, high-quality products or low prices 22 is the essence of competition. 23 That's the Question Number 1 that sort 24 of summarizes the whole first issue for you. 25 I ask you during this very long 5123 1 presentation by the Plaintiffs, maybe months, 2 during the videotape depositions of people who 3 testified in some cases six, eight, ten years 4 ago, and, obviously, testified about conduct 5 that took place prior to the date of the 6 deposition, I ask you to keep in mind this 7 Question Number 1. 8 Was the conduct anticompetitive in 9 accordance with the instructions that you've 10 had from the Court, and the agreements that the 11 Plaintiffs and the Defendant have, as we've 12 talked about them earlier this morning? 13 Perfectly fine to be aggressive in 14 competition. 15 And Question Number 2. Did any 16 anticompetitive conduct cause injury to any 17 class member in Iowa? 18 Now, again, I want to pause just for a 19 moment on this very, very important -- we think 20 ultimately conclusive -- question of causation. 21 In the government case, Microsoft's 22 anticompetitive conduct was directed 23 principally to two pieces of middleware. Sun's 24 Java software, Java technology, and Netscape's 25 Navigator. 5124 1 And I think the Plaintiffs, and 2 Microsoft have agreed as well, that most of the 3 findings of fact pertain to Navigator and 4 Microsoft's competition that the Court said 5 went over the line against Navigator. 6 Remember Finding of Fact 411 in 7 connection with this competition against 8 middleware, which you have been instructed to 9 accept. 10 And Finding of Fact 411, it's way back 11 towards the very back of your notebook, says 12 there's insufficient evidence to show that had 13 Microsoft not engaged in this conduct, genuine 14 competition in the operating system business 15 would have been ignited. 16 And we think that's important to 17 remember in thinking about causation. 18 And, of course, we've noted here on 19 Question Number 2, not all conduct that injures 20 competitors injures consumers. 21 You've seen that in the Court's 22 instructions. 23 And, then, of course, the Plaintiffs 24 make two different kinds of claims in this 25 case. You've heard about them. 5125 1 First, Plaintiffs must meet their 2 burden of proving to you that any Microsoft 3 conduct caused them injury in the form of 4 higher prices -- that's the overcharge claim -- 5 higher prices than they would have paid in the 6 absence of anticompetitive conduct. 7 And that's so important. Not just 8 some theoretical higher price that maybe 9 Microsoft's price could have been lower. Could 10 Microsoft have still made a profit if its price 11 were a little lower than what it charged? 12 The question is, as the Court has 13 instructed you, on the first claim, the 14 overcharge claim, in order to prevail, to win, 15 the Plaintiffs must prove -- they must meet 16 their burden of proof to show that any 17 Microsoft conduct caused them injury in the 18 form of higher prices than the prices they 19 would have paid in the absence of 20 anticompetitive conduct. 21 And as we discussed a day or two ago, 22 we think the evidence will be that Microsoft's 23 high market shares in all three of these 24 markets are a result of perfectly legitimate 25 pro-competitive business practices. 5126 1 If that's true, then the question for 2 you will be would any of these Plaintiffs have 3 paid higher prices had any unlawful conduct 4 occurred than they would have paid had it not? 5 If Microsoft's market share, if its 6 position in the market is attributable to good 7 business practices, and nothing would be 8 different in the absence of anticompetitive 9 conduct, nothing about its market share. 10 Remember Finding of Fact 411 when it 11 comes to the government case. There's 12 insufficient evidence to show that genuine 13 competition would have been ignited through 14 those middleware products, Navigator and Java. 15 And, then, of course, there's this 16 second kind of claim that the Plaintiffs make. 17 I should pause here. On the first 18 claim, you know, there are three separate 19 markets. And they'll ask you to award damages 20 to them for all three. 21 We think the evidence will be that no 22 damages will be awarded; that you won't even 23 reach the question of damages because when you 24 think about Question 2, there's no way you'll 25 get past it. 5127 1 But the second claim is again, 2 Plaintiffs must beat their burden of proving 3 that caused them injury, anticompetitive 4 conduct by Microsoft, in the form of security 5 vulnerabilities that they would not have 6 sustained in the absence of anticompetitive 7 conduct. 8 Well, we don't need to spend any time 9 on security vulnerabilities. I've talked about 10 it. I think that claim is indicative of the 11 type of claims that the Plaintiffs have made in 12 this case asking you to compensate them for 13 their three minutes in installing patches that 14 they got for free. 15 And the last question in the case we 16 think -- we don't think you'll ever reach it. 17 Even if Plaintiffs could prevail on the first 18 two questions, can they prove damages? 19 And as the Court has instructed you, 20 damages may not be awarded based on speculation 21 or guesswork. 22 I thank you very, very, very much for 23 the attention you've given me since Monday 24 afternoon when I started at 1:15 or 1:30. 25 I thank you very, very, very much 5128 1 because you've all been so attentive and you're 2 all so interested and clearly intent on doing a 3 good job as jurors. 4 Microsoft is confident, I am confident 5 as well, that in the end, all of you will 6 perform superbly as jurors. 7 I thank you again. It will be a long 8 time before summations and I can speak to you 9 in this form again, but I look forward to it. 10 Thanks a lot. 11 THE COURT: Members of the jury, I'm 12 going to order a recess until 10 o'clock. 13 There are a few matters I want to take up. 14 So we will be in recess until 10:00. 15 At that time we will start with the evidence. 16 Remember the admonition previously 17 given. You may leave your notebooks here. 18 (The following record was made out of 19 the presence of the jury at 9:31 a.m.) 20 MS. NELLES: The parties, I 21 understand, Mr. Cashman apparently have been 22 working quite hard on it, and have been trying 23 to resolve many of the issues related to the 24 Gates deposition. I believe that's where we 25 are about to head. 5129 1 However, we did get the Plaintiffs' 2 final designations after midnight last night. 3 Mr. Tuggy is back at the office, I 4 believe, trying to go through them. I believe 5 he has been trying to reach Mr. Cashman, but, 6 obviously, he is here. 7 We do apparently have an issue with 8 some documents that are hearsay, and for which 9 Plaintiffs have absolutely no -- established as 10 far as I'm aware -- nonhearsay purpose. 11 And, apparently, what they are 12 intending to do is show them anyway on the 13 theory that they are not putting them into 14 evidence or, I guess, the alternative position 15 is they won't show the document, but they still 16 want to play the deposition and have the 17 colloquial about the document be played to the 18 Jury. 19 Now, I think that just is improper. 20 Now, I understand the first issue does 21 not come up until maybe two hours in. And if 22 Mr. Cashman wants to speak with Mr. Tuggy about 23 that, that would be -- we could take it up at 24 the lunch hour if it can't be resolved, but if 25 -- and I think that's correct, that we are 5130 1 about two hours before that first issue arises. 2 I think we resolved the issue about 3 the colloquial, the attorney colloquial. 4 Is that correct, Mr. Cashman, that has 5 been taken out? 6 MR. CASHMAN: When you are finished 7 with your comments, I'll address. 8 MS. NELLES: The second issue is 9 Plaintiffs intended to play the colloquial 10 between which is, obviously, not evidence. 11 Portions of it. Not all of it, but portions 12 they want to play. 13 I believe I am getting a report from 14 Mr. Tuggy that they have now removed all of 15 that. 16 But I think we either need to be clear 17 that we have a couple hours before these first 18 issues come up and make an attempt to resolve 19 them informally or we can take them up to the 20 Court. 21 THE COURT: Were these designations 22 that I looked at and neglected to rule on? 23 MR. CASHMAN: Your Honor, that's what 24 I was going to say. 25 This issue has been ruled long ago. 5131 1 You ruled that all the designations were 2 appropriate and all the objections to the 3 testimony were overruled. 4 So as far as the Plaintiffs are 5 concerned, that was resolved long ago. 6 We worked out a couple of minor issues 7 with Mr. Tuggy, but now Plaintiffs are trying 8 to come back -- or pardon me, Microsoft is 9 trying to come back and revisit issues that 10 have already been decided. 11 So the Plaintiffs' view is that this 12 has been resolved. You've ruled on it. There 13 is no issue. 14 MS. NELLES: Obviously, Your Honor, we 15 are spending a little bit too much time 16 together. We can't remember who is who, whom 17 is who. 18 But Mr. Tuggy is here so perhaps he 19 can address it with specific documents. It is 20 not my understanding that Your Honor ruled with 21 respect to documents that are inadmissible, 22 that he can show the documents and play the 23 testimony about the documents. 24 How can that be? That's Evidence 101. 25 MR. CASHMAN: Your Honor, Ms. Nelles 5132 1 has it wrong because the documents that they're 2 talking about are not being displayed. 3 What we're talking about is that 4 Microsoft is now trying to preclude some 5 testimony where you've already ruled that the 6 testimony designations from Gates are proper 7 and appropriate. 8 THE COURT: Why don't you get together 9 with Mr. Tuggy and see what these issues are. 10 It doesn't come up for two hours anyhow. 11 MR. TUGGY: Correct, Your Honor. This 12 won't come up until after lunch. 13 THE COURT: Why don't you guys confer 14 first and then we'll talk about it. 15 MS. NELLES: Thank you, Your Honor. 16 MR. HOLLEY: Your Honor, one last 17 matter. After the hearing that we had on 18 Microsoft's motion for sanctions for the 19 Plaintiffs' failure to produce documents 20 required by the Court's November 28th order, 21 the Court said -- and I'm at page 4505 of the 22 transcript, starting at line 32. 23 I want a status report on this 24 production by Friday. And at that time the 25 Court will decide what further action or 5133 1 sanctions or anything will be done, if at all, 2 at that time. 3 So now you are on notice to get it 4 done and get it done immediately. Anything 5 you've got now, turn it over. 6 Your Honor, as of 8 o'clock this 7 morning -- and I'm happy to be corrected that 8 something's happened in the last hour and a 9 half -- this is the status of the Plaintiffs' 10 production of documents in response to the 11 November 28th order. 12 And as you'll see, Your Honor, very, 13 very little has been done. 14 Microsoft asks, once again, that the 15 Plaintiffs be sanctioned for their ongoing 16 flouting of an order of this Court. 17 THE COURT: Okay. Do the Plaintiffs 18 have their status report for the Court? 19 MR. HAGSTROM: I am prepared to give 20 that, Your Honor. 21 THE COURT: Can you give it? 22 MR. HAGSTROM: We have been working 23 virtually nonstop, several people talking with 24 experts, and, as of currently, we have 25 completed Ronald Alepin, Paul Reagan, Joseph -- 5134 1 Doctor Joseph Stiglitz, and Doctor Rick Warren 2 Boulton. 3 With regard to Mr. Alepin, there was a 4 few extra documents. Mr. Reagan had already 5 produced everything. Mr. Stiglitz had already 6 produced everything. Mr. Rick Warren, Doctor 7 Rick Warren Boulton had already produced 8 everything. 9 We should have completed today Doctor 10 Gowrisankaran and Richard Smith. And, by 11 Monday or Tuesday, we should have Andrew 12 Schulman, Professor Roger Noll, Professor 13 Mackie-Mason, and Doctor Netz. 14 What we're finding, Your Honor, is 15 that as we go back through documents, then 16 we're having to check against Appendix B to 17 reports. Appendix B is listing, you know, 18 depending upon the report, hundreds or 19 thousands of documents. 20 And it's turning out that virtually 21 everything that we're coming up with has 22 already been listed and produced. 23 MR. HOLLEY: Your Honor, briefly. 24 I asked Mr. Reece when he was on the 25 witness stand under oath whether it was his 5135 1 understanding that the Plaintiffs had already 2 identified documents from Applicon, which is 3 the Netz/Mackie-Mason consulting firm that were 4 responsive to the November 28th order. 5 The answer was yes. 6 That is also my understanding of what 7 Mr. Reece has told Mr. Jurata. 8 If those documents are already in the 9 possession of the Plaintiffs, there is no 10 reason why they should not be produced on a 11 rolling basis. We are in trial. They are 12 about to start their case. 13 I don't know when these witnesses will 14 be called. But it's possible, Your Honor, as 15 Mr. Jurata told Mr. Reece, that whatever these 16 documents they are so desperate to avoid giving 17 us, are going to require us to ask the Court's 18 permission to reopen these depositions. 19 This is going to take time, Your 20 Honor. And every day that goes by causes 21 Microsoft more and more prejudice. 22 So, Your Honor, I again ask the Court 23 to do something, to sanction the Plaintiffs for 24 their failure to abide by this order. 25 THE COURT: Anything else? 5136 1 MR. HAGSTROM: And I find it rather 2 interesting, Microsoft just produced some 3 documents to us yesterday despite the fact that 4 they have represented to the Court on numerous 5 occasions in response to our resistances to 6 their motions that they've produced everything. 7 As I indicated, we'll have this 8 process completed by Tuesday. 9 You know, a lot of the stuff, like I 10 said, has already been produced. That's what 11 we're finding. 12 For instance, I got a whole bunch of 13 product review reports from Professor Noll, a 14 whole stack of them. We went through them. 15 They had already been on his Appendix B. 16 So, I mean, that's the process we are 17 going through. I mean, we are checking. 18 I mean, if Microsoft wants us -- I 19 don't think there's any sense in adding 20 additional documents into the record that have 21 already been produced. 22 THE COURT: What time today are you 23 going to have the Gowrisankaran and the Smith? 24 MR. HAGSTROM: By the end of the 25 business day, I'm sure. 5137 1 THE COURT: And what -- out of these 2 people on this list that Defendant has -- and I 3 don't know if it comports with your list -- are 4 you proceeding in a manner where the ones that 5 -- the documents that relate to the witnesses 6 that you are going to call first are being 7 produced as soon as possible? 8 MR. HAGSTROM: Right. Ronald Alepin 9 is likely going to be on mid-next week, and, 10 you know, we focused on him first. 11 THE COURT: Okay. 12 MR. HAGSTROM: Doctor Gowrisankaran, I 13 don't expect -- well, we've completed, but he 14 won't be on, you know, I'm guessing February, 15 something like that. 16 THE COURT: Okay. 17 MR. HAGSTROM: Professor Mackie-Mason, 18 at the earliest, the end of January. 19 David Martin wouldn't be on for a 20 while. 21 Janet Netz, she would have to be after 22 Mackie-Mason. So the earliest she would be 23 would be February. 24 Roger Noll will not be until late 25 January. 5138 1 Paul Reagan is a rebuttal witness, so 2 he's -- you know, whenever we get there. 3 Andrew Schulman will not likely be 4 till, I would say, late January at the 5 earliest. Probably more likely February. 6 Richard Smith is part of the 7 technology issue. We think that's going to be 8 -- or I should say the security 9 vulnerabilities. And that probably won't be 10 till February. 11 Joseph Stiglitz, Doctor Stiglitz is 12 rebuttal. 13 Doctor Warren Boulton is generally 14 related to rebuttal and the security 15 vulnerability. 16 So other than Mr. Alepin, who we plan 17 to put on next week, it's going to be at least 18 four weeks before the next expert. 19 THE COURT: Okay. 20 MR. HAGSTROM: At least four to five 21 calendar weeks. 22 THE COURT: Very good. 23 Has the Defendant looked at the Alepin 24 documents? 25 MR. HOLLEY: I personally have not, 5139 1 Your Honor, but I understand that these 2 documents have been produced to us. And I'm 3 not contradicting that point. 4 I would like to know, if he's going to 5 be here next week, whether there's a 6 representation that the approximately 25 pages 7 that we have received is all that we're going 8 to receive. 9 THE COURT: Is that -- 10 MR. HAGSTROM: It is, Your Honor. 11 THE COURT: That's it? Okay. 12 Defendant will look at those and let 13 me know if they wish to have any further 14 deposition in regard to Mr. Alepin. 15 I'll rule on it at that time. 16 MR. HOLLEY: Your Honor, just one last 17 point, and it's my mistake. 18 We still have never gotten the list of 19 documents that existed at one time that were 20 destroyed. And I want to make clear that the 21 Court ordered the Plaintiffs to do that. 22 I'm not aware of any superseding order 23 that excused them from complying. And given 24 the importance of these documents, we would 25 like the Plaintiffs to comply with the Court's 5140 1 order that if documents were in existence and 2 they were looked at by experts, even if 3 rejected in forming their views, that those 4 documents be put on a list. 5 It's easy to see, Your Honor, that 6 those could be the most important documents for 7 purposes of cross-examination. 8 For example, if Professor Mackie-Mason 9 wrote an e-mail to Professor Noll laying out 10 why he thinks that the head fake theory is 11 correct, and Professor Noll decided that that 12 was ridiculous and threw it away, we need to 13 know that there was such an e-mail and that it 14 got thrown away. 15 That's a hypothetical example, but it 16 shows exactly why these sorts of documents are 17 so important, Your Honor. 18 And, therefore, I believe the Court 19 should instruct the Plaintiffs to produce the 20 list that they were ordered to produce. 21 MR. HAGSTROM: Your Honor, on the 22 e-mail point, we've talked to the experts. 23 They don't have records of those. 24 And with respect to e-mails between 25 Professor Mackie-Mason and Professor Noll, both 5141 1 of them have already testified to that issue. 2 That's where this whole e-mail issue 3 comes up. And both of them have testified if 4 they see like an article of interest by either 5 of them, they might shoot it back and forth. 6 There is no substantive conversation. 7 They don't have a record of those e-mails. 8 They have both testified that those 9 communications have nothing to do with this 10 case. 11 They have been colleagues for many, 12 many, many years, and they correspond with each 13 other. And they both testified that these 14 e-mails have absolutely nothing to do with the 15 case. 16 THE COURT: Are you preparing a list 17 of documents in earnest then? 18 MR. HAGSTROM: Well, so far there are 19 none. 20 I mean, with regard to these e-mails, 21 I mean, both of them have just basically said 22 just what I told you. 23 I mean, those would, obviously, not be 24 responsive to Your Honor's order. I mean, they 25 aren't -- they have nothing to do with the 5142 1 case. 2 So, I mean, they are both professional 3 professors. They are economists. They might 4 see an article of interest either on, you know, 5 economic principles, on, you know, some 6 particular story they might be working on. 7 They send it back and forth. That's it. 8 I mean, there's testimony in Professor 9 Mackie-Mason's deposition to that effect. 10 There's also testimony in Professor 11 Noll's deposition to that effect. 12 I've also double-checked with both of 13 them to confirm was there anything else. They 14 both say no. 15 So I don't know what I can possibly -- 16 what more I can possibly do. 17 THE COURT: What about those e-mails? 18 Have you produced those? 19 MR. HAGSTROM: They don't have them. 20 Because at the time -- I mean, you know, every 21 once in a while if I'm on CNN and I see an 22 interesting article, I might shoot it to 23 somebody. Well, I don't keep a record of that. 24 And, I think, actually when you do it 25 that way, you know, it's the CNN, if anything, 5143 1 that would have a record of it. 2 So, I mean, I just don't know what 3 more we can do on that. 4 THE COURT: Well, if they know what 5 they looked at and destroyed or deleted, that 6 should be produced. 7 MR. HOLLEY: Your Honor, and just for 8 clarity sake, we've just been discussing 9 communications that apparently occurred between 10 Professor Mackie-Mason and Professor Noll, but 11 the Court's order applies to each and every one 12 of the experts on the list that I've provided 13 this morning. 14 And I would like it to be clear that 15 that list should be produced not just for those 16 two gentlemen, but for all of the Plaintiffs' 17 experts. 18 THE COURT: I think they understand 19 that. 20 Anything else on this while I work on 21 something else? 22 MR. HOLLEY: No, Your Honor. 23 THE COURT: Anything else? 24 MR. HAGSTROM: I think the only other 25 thing is that, you know, like the drafts of the 5144 1 reports, Microsoft has said they're not 2 producing so we've not gone back to look for 3 those. 4 That was the agreement of the parties 5 in the original stipulation, so we are not 6 looking for those. 7 So I want to make that clear. 8 THE COURT: Okay. 9 MR. HAGSTROM: And I guess the other 10 question I should raise with the Court, 11 obviously, as we're preparing for trial, we are 12 going to be communicating with these experts, 13 getting them ready to testify. 14 We are assuming that those 15 communications are not part of this order. 16 THE COURT: I don't think they were 17 intended to be. 18 MR. HAGSTROM: Well, I didn't think so 19 either. 20 MR. HOLLEY: They were not, Your 21 Honor. 22 THE COURT: Otherwise -- 23 MR. HAGSTROM: Because, otherwise, we 24 are going to want all of their communications 25 as well. 5145 1 THE COURT: Yes. That's ridiculous. 2 MR. HOLLEY: Your Honor, we have never 3 suggested -- that's a wonderful application of 4 the goose and gander rule. We don't desire 5 those communications and there's never been a 6 dispute, Your Honor, between the parties about 7 drafts. So, obviously, we are not seeking 8 drafts. 9 We haven't produced them. They 10 haven't produced them. That was the deal. And 11 we're happy to abide by that, Your Honor. 12 THE COURT: Okay. 13 MR. HAGSTROM: Okay. So it's clear, I 14 can -- we can exchange documents with our 15 experts to prepare them for trial? 16 THE COURT: Yes. Yes. 17 And, before the end of the day, I want 18 a further update on what's gone on. 19 MR. HAGSTROM: You will probably have 20 to have Roxanne because I'm going to be leaving 21 now. 22 THE COURT: All right. Well, whoever. 23 MR. HAGSTROM: I'm trying to work -- 24 I'm going to be working on this issue, and then 25 I've got to go back to Minneapolis. 5146 1 THE COURT: To the warm weather. 2 Okay. Anything else? 3 MR. HOLLEY: Nothing further, Your 4 Honor, although we, obviously, have to have 5 Mr. Tuggy and Mr. Cashman consult. 6 THE COURT: Yeah. 7 MS. CONLIN: Your Honor, I do have one 8 further small matter, housekeeping matter. 9 The Plaintiffs expect to present their 10 evidence in sort of chapters as I did the 11 opening. And some witnesses will, therefore, 12 appear on more than one occasion. 13 For example, Mr. Alepin's first group 14 of testimony will be on sort of general 15 liability matters, industry matters, and then 16 he will be back in hopefully the proper order 17 on the issues of security. 18 I just wanted to alert the Court to 19 that, and I know that the Defendant -- I 20 believe the Defendants are aware that that is 21 how we expect and intend to proceed. 22 There won't be many witnesses who will 23 be here more than once, but there will be some. 24 MR. TULCHIN: Your Honor, we've 25 already informed the Plaintiffs that we object 5147 1 to that. We don't think it's proper at all. 2 Normally, in a trial -- and I don't 3 see any reason that this would be any 4 different -- you call a witness. And, when you 5 do, you put on all the testimony and evidence 6 of that witness at one time. 7 You don't call a witness and then 8 recall him, or her, and recall him a second or 9 third time. 10 Whenever -- otherwise what you have, 11 Your Honor, is a rolling issue, a rolling 12 problem where you can't ever be sure what the 13 witness has actually ultimately said. 14 And trying to compartmentalize 15 particular witnesses on issues is the 16 responsibility of each lawyer in summation. 17 That's what summation is for. 18 I'm sure Ms. Conlin will take some 19 time in summation to do that. 20 But we have told the Plaintiffs on a 21 number of occasions that we think whether it's 22 a live witness or a witness by deposition, if 23 you call Alepin or Smith or Jones, you must 24 extract from that witness at that time all of 25 his evidence with the possible exception of 5148 1 genuine rebuttal after Microsoft's case is 2 done. 3 MR. HOLLEY: Your Honor, and as the 4 the lawyer who is going to be cross-examining 5 Mr. Alepin, you can see the sort of mischief 6 that can be created by this. 7 If I bring things to his attention 8 during round one of his examination, he has a 9 month to come back and try to rebut every point 10 that has been made. That isn't fair. 11 In every trial I've ever worked on, it 12 is, as Mr. Tulchin says, the job of the lawyer 13 in summation to piece it back together. 14 But the idea that they can take 15 account of our cross-examination and then bring 16 somebody back again and again isn't fair. 17 MS. CONLIN: This is a trial 18 management matter. This was also the way that 19 the witnesses were going to be presented in the 20 Gordon case. 21 Judge Peterson thought it was a great 22 idea. And the idea is to make this as clear as 23 possible. 24 I know of no rule of Iowa law that 25 says what the Defendant purports to believe is 5149 1 the rule. 2 I can't count the number of cases 3 where witnesses have been on more than once. 4 This is -- you know, they have the right to 5 cross-examine within the scope of our direct 6 examination. 7 And there will be a pretty clear 8 dividing line, Your Honor. And we believe that 9 this will make the case much clearer for the 10 Jury. 11 It is a complicated case. Let's not 12 pretend otherwise. It covers a long period of 13 time, covers a number of products, and covers a 14 number of issues. 15 And we have -- when we have an expert 16 who has expertise that cross more than one of 17 those boundaries, there is simply no reason 18 that I'm aware of, ever, that would prevent us 19 from doing this in a way that will be helpful 20 to the Jury, eliminate in so far as possible 21 confusion. 22 And, you know, they have the right to 23 cross-examine thoroughly within the boundaries 24 of our direct examination. I don't understand 25 their objection. 5150 1 MR. TULCHIN: Your Honor, if I may. 2 I'd be interested in seeing these authorities 3 that Ms. Conlin has for the proposition that 4 you can do this. 5 I'm not aware of any rule of Iowa 6 law -- and I think Mr. Green was going to say 7 the same thing -- that permits this piecemeal 8 presentation of a single witness. 9 Again, with the possible exception of 10 rebuttal in cases where rebuttal is genuinely 11 necessary and appropriate, one always puts on a 12 witness at the same time. 13 And if we have any deviation from that 14 rule, I think we all know these boundaries are 15 never quite as clear as Ms. Conlin is arguing 16 that they are. 17 Cross-examination -- I mean, imagine, 18 Your Honor, Mr. Alepin's on the stand and Mr. 19 Holley is cross-examining him. And Ms. Conlin 20 says I object, it's outside the bounds or the 21 scope of direct. 22 But it's squarely within -- whether it 23 is or not, within the scope of direct. It's 24 squarely within an issue that Mr. Alepin 25 directly offers an opinion about in his expert 5151 1 report. 2 Now, if the Court sustained that 3 objection, it's outside the bounds of direct, 4 although it's part of the report, what kind of 5 confusing mishmash will the Jury be left with? 6 And when Mr. Alepin returns a second 7 time, is that opinion that's part of his report 8 also going to be excluded because it's outside 9 the bounds of the second examination? 10 I think you've got to do this at one 11 time, Your Honor. And I don't know of any 12 authority that says that you can divide a 13 person up into several pieces. 14 MS. CONLIN: Well, we don't intend to 15 do that physically, Your Honor, but we do 16 intend -- we do -- I think this is a matter 17 within our right. 18 I don't think there is authority for 19 the proposition that Defendant offers, nor is 20 there particular authority in connection with 21 that that I offer. 22 I think this is merely a matter of 23 trying to present evidence in a way that is as 24 clear as possible to the Jury. 25 And the parade of horribles that 5152 1 Mr. Tulchin suggests, I think, will not come to 2 pass. It will be clear. We will be able to 3 make a boundary. 4 And it's just going to be easier for 5 the Jury to understand. And that's our goal, 6 is to help the Jury to understand. 7 MR. HOLLEY: Your Honor, can I bring 8 this down to brass tacks? 9 There are lines of cross-examination 10 that I intend to pursue with Mr. Alepin, which 11 I obviously do not intend to disclose now, 12 which apply to his qualifications, to his 13 motivation, to his bias. 14 Those lines of cross-examination are 15 equally applicable to everything that the man 16 says. 17 He is their omnibus expert on all 18 sorts of things. And what they are really 19 trying to do is use him to provide some sort of 20 interim summation or road map to their case. 21 If they want to do that, I may have 22 something to say about it at the time, but they 23 can't do that in little blocks. 24 And Ms. Conlin just said two things, 25 which I agree with completely. 5153 1 One is that this matter is in the 2 sound discretion of the Court; and, secondly, 3 that she is not aware of any authority for 4 doing which it is that she proposes to do. 5 The authority we have, Your Honor, is 6 the common practice in courts of this country. 7 People don't do this, and for a very 8 good reason. 9 MS. CONLIN: Your Honor, I'm told that 10 we do have authority for this, and it's in the 11 manual of complex litigation. 12 When this matter was contested in the 13 Gordon case, there was -- I believe that the 14 matter was briefed, and we can provide the 15 Court with additional authority, but I believe 16 that this is a perfectly appropriate way to 17 proceed, as did Judge Peterson. 18 And the idea is -- 19 MR. TULCHIN: Your Honor, I don't mean 20 to interrupt, but if there's a pause. 21 We didn't do this with Judge Peterson. 22 Unless my memory is faulty, we never did it and 23 he never authorized the Plaintiffs to do it. 24 Now, my memory may be imperfect. It 25 was two and a half years ago, but that's 5154 1 certainly my memory. I'd like to check on it. 2 MS. NELLES: Well, I was there. Mr. 3 Tulchin is correct. 4 MR. ROSENFELD: I was there as well. 5 It didn't happen. 6 MS. NELLES: It didn't happen. 7 MR. HAGSTROM: We can provide Judge 8 Peterson's order. 9 THE COURT: When's this going to be an 10 issue? 11 MR. HAGSTROM: It will be an issue 12 next week. 13 THE COURT: When next week? 14 MR. HAGSTROM: By Wednesday. 15 MS. NELLES: Your Honor, it's actually 16 probably an issue sooner because there are 17 several Gates depositions that they have 18 designated and they don't intend to play them 19 all. 20 And our position is they need to play 21 them all or they waive them. 22 MS. CONLIN: Well, Your Honor, they 23 come from different cases. They came from -- 24 they pertain to different subject matter. 25 This is just not -- it would be as 5155 1 though if someone came to court -- if a police 2 officer came to court to testify on one 3 particular car crash, that police officer would 4 have to also provide testimony at that time on 5 every other car crash that he or she was 6 involved in. That cannot be the law. 7 MR. TULCHIN: Your Honor, I think the 8 question of the depositions is really a 9 different question. It's a somewhat different 10 question. 11 I think with Mr. Alepin -- I almost 12 said professor, but he's not. Mr. Alepin, if 13 we could have till Monday so that both sides 14 perhaps will have a chance to look at Judge 15 Peterson's orders and whatever authority there 16 is, maybe we can take it up Monday morning if 17 that's convenient for you. 18 And I know your overburdened court 19 reporter is working like crazy through a 20 recess. 21 MS. CONLIN: Fine with us, Your Honor. 22 THE COURT: So you want to not take 23 evidence today? 24 MS. CONLIN: Oh, no, no, no. 25 MR. TULCHIN: No. 5156 1 MS. CONLIN: We're ready to proceed, 2 Your Honor. 3 THE COURT: Well, I'm hearing that 4 this is going to be piecemeal as far as -- 5 MS. CONLIN: No, Your Honor. 6 THE COURT: -- as far as the Gates 7 deposition. 8 MR. TULCHIN: Mr. Gates' deposition 9 will take something like 12 or 14 hours to 10 play. Just this one deposition from the DOJ 11 case. 12 So it will take up the rest of the 13 day. And, you know, through Monday and 14 Tuesday, I would think, or at least most of 15 Tuesday. 16 So we won't get to Mr. Alepin until at 17 least Wednesday is my guess. 18 THE COURT: No. What I thought I 19 heard her say was she was going to present that 20 piecemeal too. 21 MS. CONLIN: No, no, Your Honor. 22 MR. TULCHIN: No. 23 THE COURT: Okay. 24 MS. CONLIN: What I -- let me try to 25 be a little clearer. 5157 1 We have designated testimony from the 2 Department of Justice. In fact, we have 3 designated virtually every word in that 4 deposition so that the Defendant cannot say 5 that we've taken it out of context. 6 There are other -- there's a little 7 piece of the Caldera deposition that Mr. Gates 8 -- that was taken of Mr. Gates. There's an FTC 9 deposition. I can't remember. 10 None of those, frankly, Your Honor, 11 have been cleared either. So that's a 12 different problem. 13 But in terms of the Gates' deposition, 14 we are ready to proceed. We should proceed. 15 THE COURT: Okay. I misunderstood. 16 MS. CONLIN: And the Court will make 17 its decision at some time next week. 18 THE COURT: We'll take it up Monday 19 then. 20 MS. CONLIN: All right. Thank you, 21 Your Honor. 22 THE COURT: Give me some briefs or 23 whatever you want on it because I need more 24 paper. 25 MR. TULCHIN: Thank you, Your Honor. 5158 1 THE COURT: She needs ten minutes and 2 I do too. 3 MR. TULCHIN: Yes, of course. 4 (A recess was taken from 10:01 a.m. 5 to 10:16 a.m.) 6 (The following record was made out 7 of the presence of the jury at 10:16 8 a.m.) 9 THE COURT: I prepared an instruction 10 regarding deposition testimony in conversation 11 with counsel for both sides yesterday. 12 We are talking about deposition 13 testimony and the dates when they were given. 14 This was proposed by the plaintiff. 15 I've kind of done a proposed 16 preliminary instruction regarding date. 17 So any comments by Plaintiffs? 18 MS. CONLIN: No, Your Honor. This is 19 satisfactory to us. 20 THE COURT: Ms. Nelles? 21 MS. NELLES: Yes, Your Honor. 22 Microsoft takes exception to the instruction in 23 its current form. 24 I don't have any objection to the 25 language you are instructed not to give any 5159 1 more or less weight to deposition testimony 2 simply because of when the deposition was taken 3 -- was given. 4 However, in its form, what this is 5 going to do, and what Plaintiffs want it to do, 6 is to confuse the Jury into believing that 7 testimony that was given 10, 12, 15 years ago 8 can relate to situations that are in the 9 current period, and the current period class 10 period. 11 And I would suggest we add a sentence 12 which is completely true. 13 THE COURT: Okay. 14 MS. NELLES: And that would obviate 15 any confusion to follow directly after the 16 instruction Plaintiffs ask for and that you 17 propose to give, which would be to add the 18 language I suggested yesterday. 19 Testimony, however, can only be taken 20 to apply to the period prior to the date of the 21 deposition. 22 THE COURT: Testimony, however, can 23 only -- 24 MS. NELLES: Can only be taken to 25 apply to the period prior to the date of the 5160 1 deposition -- or prior to the date the 2 deposition was given. To be parallel to the 3 first sentence. 4 THE COURT: Comments? 5 MS. CONLIN: Yes, Your Honor. Really 6 this is not a dumb jury. 7 They're going to pretty well be able 8 to understand that the testimony won't apply in 9 the future when the testimony is given in 1998. 10 We think it would be appropriate 11 perhaps for the Court to add this case was 12 filed in February of the year 2000. 13 Mr. Tulchin's emphasis on the length 14 of time is somewhat distressing given the fact 15 that a seven-year delay has been mostly 16 attributable to the Defendant, but I would 17 suggest that the Court give exactly what the 18 Court suggests and no more because it is simply 19 unnecessary and may well be offensive to the 20 Jury because they'll think we think they're 21 stupid. 22 MS. NELLES: Your Honor, there's 23 absolutely nothing in the sentence proposed 24 that is in any way condescending to this jury. 25 It's Plaintiffs who are trying to 5161 1 obscure that dates of depositions matter. 2 They want -- if this jury is not -- if 3 this jury understands what is going on, they 4 wouldn't have asked for the first sentence. 5 Now, let's just all be clear. Let's 6 be fair to both sides. Let's give them their 7 instruction about weight and let's give us -- 8 but time also goes to weight. This is 9 incomplete and confusing as given. 10 The second sentence should be added. 11 Ms. Conlin never argued it was wrong. She just 12 argued it was condescending. It's not. 13 Time periods are very relevant in this 14 case. 15 THE COURT: Well, I don't know how to 16 adjust it, so I'm going to delay it right now, 17 think about it some more. 18 Let's get the Jury. 19 (The following record was made in the 20 presence of the jury at 10:22 a.m.) 21 THE CLERK: Okay. 22 All rise. 23 THE COURT: Sorry we took longer. I 24 had to do some things and I apologize. You got 25 an extra break there. 5162 1 THE CLERK: Give me a few minutes to 2 pass out notebooks. 3 THE COURT: Everybody else may be 4 seated. 5 I guess Carrie has got new notebooks 6 for you or something. 7 MS. CONLIN: While she's doing that, 8 Your Honor, perhaps I can do a housekeeping 9 matter. 10 THE COURT: Sure. 11 MS. CONLIN: Plaintiffs offer into 12 evidence 3,760 exhibits to which there has been 13 no objection. These are exhibits that are free 14 of objection. 15 We offer them at this time, Your 16 Honor. We've provided to Court and to counsel 17 the list of those exhibits which we offer at 18 this time, as well as a disk with the images of 19 those exhibits on it. 20 MS. NELLES: First, Your Honor, first 21 of all, I'm not sure this is the proper time to 22 do this. 23 We do have objection to this being 24 done in this form, nor have we had an 25 opportunity to look at what's on this disk to 5163 1 know that it's accurate in any way. 2 Can we discuss it after? 3 THE COURT: Take a look at it and the 4 Court will rule on the admissibility of it. 5 MS. NELLES: Thank you. 6 THE COURT: Very well. Anything else 7 before we -- 8 MS. CONLIN: No, Your Honor. 9 Well, I guess I could go ahead and say 10 that we offer the deposition of Bill Gates 11 taken in the government case on August 27th, 12 1998, beginning on August 27th, 1998, over a 13 period of three days. 14 The quality of the video is not the 15 best. 16 MS. NELLES: Objection, Your Honor. 17 Could we have a sidebar, please? 18 (Off-the-record sidebar discussion was 19 held.) 20 MS. CONLIN: Well, let's approach 21 again, Your Honor. There was one additional 22 matter. 23 THE COURT: Okay. 24 (Off-the-record sidebar discussion was 25 held.). 5164 1 THE COURT: Would you give the date of 2 the deposition again, please? 3 MS. CONLIN: Yes, Your Honor. 4 The date of the deposition is August 5 27th, 1998. 6 THE COURT: Okay. The deposition has 7 in it references by the witness to exhibits. 8 The exhibits were given a different number at 9 the time the deposition was taken. 10 The number you should pay attention to 11 is the number of either the plaintiff or 12 defendant exhibit in this case and not the 13 exhibit, such as government exhibit number. 14 Did I make that clear enough? 15 MS. CONLIN: Yes. Well, Your Honor -- 16 MS. NELLES: Absolutely perfect, Your 17 Honor. 18 MS. CONLIN: The exhibit that counts 19 will be first displayed by Mr. Buckbinder. 20 THE COURT: That will have the exhibit 21 number that you are to pay attention to? 22 MS. CONLIN: Yes, Your Honor, when the 23 exhibit comes up. 24 THE COURT: Okay. Very well. 25 (Whereupon, the following video was 5165 1 played to the jury.) 2 Question: I understand that you are 3 one of the cofounders of Microsoft; is that 4 correct? 5 Answer: Yes. 6 Question: When was the company 7 founded? 8 Answer: 1975. 9 Question: What position have you held 10 with Microsoft since then? 11 Answer: Partner, chairman, CEO. 12 Question: What is your present title? 13 Answer: Chairman and CEO. 14 Question: Sir, are you familiar with 15 the Microsoft press computer dictionary? 16 Answer: No. 17 Question: You've never cracked it 18 open before? 19 Answer: No. 20 Question: Well, I'll introduce you to 21 it. 22 I have here the Microsoft press 23 computer dictionary. It's the third edition 24 dated 1997. It says -- it claims to be the 25 authoritative source of definitions for 5166 1 computer terms, concepts and acronyms from the 2 world's most respected computer software 3 company. 4 I'll give you a softball question. 5 Would you agree that Microsoft is the world's 6 most respected computer software company? 7 Answer: Some people would agree with 8 that. Some people wouldn't. 9 Question: What's your opinion? 10 Answer: I think we are the most -- if 11 you took it on a statistical basis, yes, we'd 12 be the most respected software company. 13 Question: This computer dictionary 14 defines operating system as follows: The 15 software that controls the allocation and usage 16 of hardware resources such as memory, central 17 processing unit, time, disk space and 18 peripheral devices. 19 Is that an accurate definition of an 20 operating system? 21 Answer: Well, the notion of what's in 22 an operating system has changed quite a bit 23 over time. So that definition is not really 24 complete in terms of how people think of 25 operating systems in the last decade or so. 5167 1 Question: So this definition in the 2 1997 dictionary is incomplete, in your 3 estimation? 4 Answer: What I said is that over 5 time, the number of things that are in 6 operating systems has increased. And so if you 7 want to look at operating systems in the last 8 decade, you'd say the definition is incomplete. 9 Question: Is it accurate? 10 Let me read it to you once again. The 11 software that controls the allegation and usage 12 of hardware resources such as memory, central 13 processing unit, time, disk space and 14 peripheral devices. 15 Answer: I said in terms of the 16 operating systems in the last decade, it's an 17 incomplete definition. 18 Question: In what respects is it 19 incomplete? 20 Answer: There are aspects of the 21 operating systems in the last decade that 22 aren't included in that definition. 23 Question: See if you agree with the 24 definition in the Microsoft dictionary of that 25 term. 5168 1 Application is there defined as a 2 program designed to assist in the performance 3 of a specific task, such as word processing, 4 accounting or inventory management. Is that an 5 accurate definition, Mr. Gates? 6 Answer: Could you read it again? 7 Question: Sure. A program designed 8 to assist in the performance of a specific 9 task, such as word processing, accounting or 10 inventory management. 11 Answer: I'd say it's a pretty vague 12 definition. 13 Question: Is it accurate, as far as 14 it goes? 15 Answer: I'd say it's vague, but 16 accurate. 17 Question: Another term I'm sure we're 18 going to be using throughout the course of the 19 deposition is web browser. 20 And let me read you the definition 21 from your company's dictionary and see if you 22 think that's accurate. 23 Web browser is defined by the 24 Microsoft computer dictionary as follows: A 25 client application that enables a user to view 5169 1 HTML documents on the World Wide Web, another 2 network for the user's computer, following the 3 hyperlinks among them and transfer files. 4 Is that accurate? 5 Answer: It's actually describing 6 browsing functionality. 7 Question: Is it an accurate 8 definition of browsing functionality? 9 Answer: It describes part of what you 10 do when you browse. 11 Question: What is your definition of 12 a web browser? 13 Answer: I'd say browsing technology 14 is what lets you navigate through -- typically 15 it means something that lets you do HTML 16 display and navigation. 17 Question: Is that what you mean when 18 you use the term web browser? 19 Answer: Well, software that lets you 20 do web-browsing is sometimes referred to as a 21 web browser. 22 Question: And Microsoft has marketed 23 a web browser under the trade name Internet 24 Explorer; is that correct? 25 Answer: We've used the term Internet 5170 1 Explorer to refer to the Internet technologies 2 in Windows, as well as some stand-alone 3 products we've done. 4 Question: Let me see if you agree 5 with this definition in the 1997 edition of 6 Microsoft's computer dictionary. The 7 definition is of the term Internet Explorer. 8 Internet Explorer is defined as 9 follows: Microsoft's web browser introduced in 10 October, 1995. 11 Is that an accurate definition of 12 Internet Explorer? 13 Answer: I'm not sure why they say 14 October. I don't think that's right. 15 Question: When is your recollection 16 that it was introduced? 17 Answer: Well, we shipped Windows 95, 18 including b