8323 1 IN THE IOWA DISTRICT COURT FOR POLK COUNTY ----------------------------------------------- 2 JOE COMES; RILEY PAINT, ) 3 INC., an Iowa Corporation;) SKEFFINGTON'S FORMAL ) 4 WEAR OF IOWA, INC., an ) NO. CL82311 Iowa Corporation; and ) 5 PATRICIA ANNE LARSEN; ) ) TRANSCRIPT OF 6 Plaintiffs, ) PROCEEDINGS ) VOLUME XXXI 7 vs. ) ) 8 MICROSOFT CORPORATION, ) a Washington Corporation ,) 9 ) Defendant. ) 10 ----------------------------------------------- 11 The above-entitled matter came on for 12 trial before the Honorable Scott D. Rosenberg 13 and a jury commencing at 8 a.m., January 16, 14 2007, in Room 302 of the Polk County 15 Courthouse, Des Moines, Iowa. 16 17 18 19 20 HUNEY-VAUGHN COURT REPORTERS, LTD. 21 Suite 307, 604 Locust Street 22 Des Moines, Iowa 50309 23 (515)288-4910 24 25 8324 1 A P P E A R A N C E S 2 Plaintiffs by: ROXANNE BARTON CONLIN 3 Attorney at Law Roxanne Conlin & Associates, PC 4 Suite 600 319 Seventh Street 5 Des Moines, IA 50309 (515) 283-1111 6 MICHAEL R. CASHMAN 7 MICHAEL E. JACOBS Attorneys at Law 8 Zelle, Hofmann, Voelbel, Mason & Gette, LLP 9 500 Washington Avenue South Suite 4000 10 Minneapolis, MN 55415 (612) 339-2020 11 ROBERT J. GRALEWSKI, JR. 12 Attorney at Law Gergosian & Gralewski 13 550 West C Street Suite 1600 14 San Diego, CA 92101 (619) 230-0104 15 16 17 18 19 20 21 22 23 24 25 8325 1 Defendant by: DAVID B. TULCHIN 2 STEVEN L. HOLLEY SHARON L. NELLES 3 JOSEPH E. NEUHAUS Attorneys at Law 4 Sullivan & Cromwell, LLP 125 Broad Street 5 New York, NY 10004-2498 (212) 558-3749 6 STEPHEN A. TUGGY 7 HEIDI B. BRADLEY Attorneys at Law 8 Heller Ehrman, LLP 333 South Hope Street 9 Suite 3900 Los Angeles, CA 90071-3043 10 (213) 689-0200 11 BRENT B. GREEN Attorney at Law 12 Duncan, Green, Brown & Langeness, PC 13 Suite 380 400 Locust Street 14 Des Moines, IA 50309 (515) 288-6440 15 16 17 18 19 20 21 22 23 24 25 8326 1 (The following record was made out of 2 the presence of the jury at 8 a.m.) 3 THE COURT: Okay. We have a motion 4 this morning? 5 MS. CONLIN: Yes, Your Honor. 6 May it please the Court, because this 7 is a difficult and complex area of the law and 8 involves interplay between the rule regarding 9 experts, Rule 703 and 803.18 concerning learned 10 treatises, I want to be sure our position is 11 clear on the record and that we move to strike 12 pages 7753, line 11, through page 7768, line 13 13, and Defendant's Exhibit 3165. 14 This includes Mr. Holley's reading 15 back of testimony, his accusation that Sun 16 rigged the test, his discussion of the award 17 and compatibility in the article and of Ziff 18 Davis. 19 The Court's original ruling at page 20 7288, line 7, was correct in all respects. 21 In reversing that ruling on page 7524, 22 line 4, the Court pointed to testimony, and the 23 Court said, quote, where he, Mr. Alepin, says 24 the trade press is a source of information 25 about current events and he did rely on it, end 8327 1 quote. 2 The Court also indicated that it was 3 admissible testimony if he relied on it or upon 4 reading it decided not to rely on it. 5 That is at page 7748, lines 6 through 6 8. 7 That is not a proper use of trade 8 press under either 803.18 or 703. 9 Trade press can come before the jury 10 in only two ways because there is no question 11 but what it's hearsay. 12 803.18 says that trade press can be 13 learned treatises, but a proper foundation must 14 be laid for it and it cannot go to the jury. 15 It must be identified as a, quote, 16 reliable authority by the expert or by another 17 expert. Here the article is not authenticated. 18 At page 7281, line 14, Mr. Alepin was 19 asked in forming your opinion, did you rely on 20 trade press. 21 That is the -- virtually, the full 22 foundation for this, did you rely on trade 23 press. 24 It would be like asking a doctor did 25 you rely on medical books or asking an engineer 8328 1 did you rely on engineering books. 2 Did you rely on trade press does not 3 lay a foundation for this or any other 4 testimony. 5 And then he says -- Mr. Alepin -- he 6 relied on some articles in PC Week and PC 7 Magazine. And again, Your Honor, that does not 8 lay foundation for this testimony. 9 Some articles in some magazines does 10 not provide authentication. That's like saying 11 that -- you know, you get a big treatise and 12 there are several different articles by several 13 different authors. You have to authenticate 14 the different articles. 15 Then he is asked if he read and 16 considered this article, but that is not a part 17 of the foundation for authentication of a 18 learned treatise. 19 He believes -- he, Mr. Alepin, said he 20 believed that he was probably aware of it at 21 the time, meaning contemporaneously. And, of 22 course, he wasn't in the process of forming any 23 opinions in this case at the time he read the 24 article back in the mid '90s. 25 He says he may agree that some article 8329 1 in some magazines -- I beg your pardon, Your 2 Honor -- that he says he may agree that some 3 article in some trade press is authoritative 4 does not establish that all articles in each of 5 these magazines are authoritative and that he 6 read it has nothing whatsoever to do with 7 whether the article is authenticated. 8 He may read mysteries, but that does 9 not give them authentication. 10 If you try to lay a proper foundation 11 for learned treatises and you can't, that is 12 the end of it. 13 Then the examining attorney may ask 14 his own expert about that article, but he may 15 not continue to question the person who does 16 not recognize or authenticate that particular 17 piece of learned treatise. 18 The second way by which a piece of 19 trade press may come into the record is under 20 703 if the expert -- if, quote, the expert 21 bases an opinion or inference on it. 22 There was no attempt to establish a 23 proper foundation under 703. Indeed, it was an 24 attempt to confuse the Court and the jury. 25 The proper questions are did you read 8330 1 it and did you rely on it. What was asked here 2 was not even close to that. 3 Starting at page 7281, he was asked, 4 in forming your opinion in this case, did you 5 rely on trade press? And once again he says he 6 did. And that does not establish that he read 7 this article and relied on it in terms of his 8 opinion. 9 He was asked at page 7765, line 14, 10 did you explore the following statement. 11 It's also important, Your Honor, to 12 note that what he says with respect to trade 13 press and how he uses it is to figure out where 14 to go for reliable information. That is at 15 page 7765, line 4. 16 And to get an awareness of what is 17 going on contemporaneously, that is at page 18 7765, line 14. 19 And then at page 7765, line 14, he was 20 asked did you explore the following statement? 21 But Mr. Holley does not get an answer 22 to that question. He goes on for several lines 23 and does not actually ask the did you explore 24 part of the question. 25 That is objected to at page 7767, 8331 1 lines 9 and 10. 2 And that, Your Honor, is it for the 3 foundation for this piece of trade press and 4 for this extensive testimony. 5 It does not come close to 6 authenticating the article under 703 or 803.18. 7 The -- assuming that considering is 8 also not relying on. 9 I looked, Your Honor, in the Microsoft 10 thesaurus on my computer, and it lists three 11 synonyms for consider: To think, to think 12 about, or to bear in mind. 13 For rely, it lists depend on and 14 trust. 15 Those are not -- consider is not the 16 same as relying, and there is no foundation for 17 the admissibility of the testimony or the 18 exhibit. 19 The words Mr. Holley uses also were 20 take into account. Again, insufficient for 21 foundation for the article. 22 That he happened to have read the 23 article years ago or took it into account does 24 not establish foundation to admit the testimony 25 or the exhibit on which it was based. The 8332 1 expert must use it to form the basis of his 2 opinion or inference, and he must rely on it. 3 He didn't rely on it for his opinion, 4 even if he explored it or took it into account 5 or considered it. Even were there foundation, 6 the testimony and the exhibit are not 7 admissible. 8 In City of Dubuque versus Fauncher, 9 F-a-u-n-c-h-e-r, at 590 N.W. 2d 493, at 496, 10 the Supreme Court tells us that underlying 11 facts and data reasonably relied on by the 12 expert in the field which are disclosed to the 13 jury cannot be considered for their truth. 14 Both the testimony and the exhibit 15 were offered for their truth, or at least no 16 distinction was made. 17 In Bruner versus Brown, 480 N.W. 2d 18 233, at page 37, the Court states, the evidence 19 may be considered solely as a basis of the 20 expert's opinion and not as substantive 21 evidence. 22 Considerations of unfair prejudice -- 23 I'm sorry, Your Honor, that ends the cite. 24 Considerations of unfair prejudice and 25 confusion of the issues misleading the jury and 8333 1 must also inform the Court's discretion, and 2 all of those mitigate against the admission of 3 this document and of this testimony. 4 The party conducting the 5 cross-examination should not be allowed to use 6 the questioning as a vehicle for the admission 7 of unreliable and inadmissible evidence to 8 strengthen its own underlying case under the 9 guise of scrutinizing the facts and data which 10 underlie the expert's opinion. 11 There are only two ways to impeach an 12 expert with a learned treatise or a piece of 13 hearsay, and the two ways are: One, explicitly 14 authenticated learned treatise; or two, a 15 treatise relied upon by the expert himself. 16 So in order to use the trade press as 17 impeachment of the expert, one, he or another 18 credentialed expert must identify that article, 19 that specific article and that specific 20 publication as reliable, and/or, two, even if 21 not reliable, if he relied on it himself, it 22 can come in under the learned treatise 23 doctrine. 24 It otherwise may not be admitted and 25 the testimony with respect to it must not be 8334 1 admitted. 2 Looking at the articles, reading them, 3 memorizing them does not authenticate the 4 article nor lead to the admissibility of the 5 testimony. 6 He can find it interesting. He can 7 even find that it is helpful, but it is an 8 out-of-court statement offered for the truth 9 and can therefore not be used to impeach the 10 expert unless and until one of the two methods 11 set out by the rules of evidence is 12 established. 13 They cannot argue their case -- 14 Microsoft cannot argue its case and use 15 miscellaneous evidence to bolster it within 16 their examination. 17 It cannot be used at all with an 18 expert under 703 unless the expert himself or 19 herself had used it as a basis for his opinion. 20 Mr. Alepin did not use the article 21 that Mr. Holley examined him on as a basis for 22 his opinion. 23 Again, Your Honor, they may use it 24 with their own expert and say he should have 25 relied on it, but they cannot continue to 8335 1 question the witness about it. 2 In our conference in chambers on 3 January 9, Your Honor, Mr. Holley said he was 4 not offering this exhibit at all. 5 That is at page 7285, line 17. 6 When it was offered, we did make an 7 appropriate objection. 8 We proposed an instruction at page 9 7750, lines 1 through 7. 10 If the Court adheres to its rulings, 11 we ask that the Court give an instruction that 12 Exhibit 3165 is hearsay and was not admitted to 13 prove the truth of what was stated. 14 In addition, Your Honor, and as a 15 separate grounds for striking both the exhibit 16 and the testimony -- and these issues were also 17 discussed with the Court -- - we say that the 18 Court's ruling on collateral estoppel is 19 undermined by this testimony, and specific 20 conclusions of law that this contravenes our 21 Conclusion of Law 11 and 12, and with respect 22 to the Findings of Fact 394, 396, 401, 402, and 23 404. 24 The Court may recall that the article 25 itself does not prove that Java implementations 8336 1 were compatible. That was the subject of the 2 questioning. They show that the Java 3 implementations of Microsoft were fast. 4 Alepin never testified that Java 5 implementations were slow. He said they were 6 incompatible with the industry standard. That 7 is perfectly in line with the findings of fact 8 on the subject. 9 Judge Jackson says that the Java 10 Virtual Machine was a high-performance JVM and 11 attractive on its technical merits. But that 12 is not what really happened here. 13 In this case, again, we have a straw 14 person and a red herring. 15 What matters, and what Mr. Holley was 16 seeking to do, was to undermine the findings of 17 fact by suggesting to the jury that the Java 18 Virtual Machine won on its merits. That, of 19 course, is not so, according to the findings of 20 fact. 21 The Java Virtual Machine won because 22 of all of Microsoft's anticompetitive acts to 23 which the Court has granted collateral 24 estoppel. 25 Microsoft deceived developers into 8337 1 using their Java in order to pollute it so it 2 would not be cross-platformed, and the write 3 once, run anywhere slogan would not work. 4 When developers used the attractive, 5 apparently fast, according to the trade press 6 unauthenticated, JVM of Microsoft, what they 7 did was destroy the very idea of cross-platform 8 Java. 9 Finally, Your Honor, we ask that the 10 portion of the testimony with respect to prices 11 of Quicken and other things be stricken -- 12 Quicken and Norton Internet Security because it 13 is uncontestable that these products are not in 14 the same market, not reasonable substitutes, 15 not products that compete with one another, and 16 not reasonably interchangeable, and the Court's 17 ruling on the motion in limine explicitly 18 specifically excluded that kind of testimony. 19 Thank you, Your Honor. 20 THE COURT: Thank you. 21 MR. HOLLEY: Your Honor, taking 22 Ms. Conlin's comments in order, as the Court 23 has now clearly held, and this is, I think, the 24 fourth time Plaintiffs are trying to reargue 25 the same point, there was a foundation laid for 8338 1 this testimony. And they opened the door to 2 this. 3 I think it's important to remember how 4 many times Mr. Alepin was allowed to testify to 5 the jury based solely on trade press. Not 6 learned treatises, but articles in magazines 7 about things that he says happened. 8 For example, at page 6592 of the 9 transcript, starting at line 19, Mr. Alepin 10 said, quote, by September of 1995, Netscape had 11 announced its next version of the Navigator and 12 its vision for the Internet, and it was a very 13 compelling vision, at least at the time, as 14 viewed in the trade press. 15 So that's an example of Mr. Alepin 16 saying something based on the trade press, not 17 as some sort of signpost for what he might go 18 investigate, which was what he was coached to 19 say later, but what he said on an untutored 20 basis before this issue arose. 21 Again, Your Honor, at page 6682, the 22 answer was, quote, well, it gets the idea out 23 there is a new product coming and that's the 24 comparisons that people might normally wait to 25 see from the trade press, which computer should 8339 1 I buy, which operating system should I buy. 2 That was his testimony about vaporware 3 based on his reading of trade press. 4 Here's another more glaring example, 5 page 6967. 6 He was looking at his time line, and 7 he said the last new version of Internet 8 Explorer shipped with Windows XP in October of 9 2001. 10 The reviews in the trade press and the 11 technical reviews is that the product did not 12 find much in the way of change or technological 13 improvements over previous versions Internet 14 Explorer 5.5 and 6.0. 15 He never did any tests. He was 16 testifying to the jury based on what he read in 17 the trade press. 18 And, finally, and this is all before 19 he ever had any occasion to modify what he said 20 about his use of the trade press. 21 When I was cross-examining him about 22 whether Mr. Maritz was telling the truth or 23 Mr. McGeady was telling the truth about what 24 occurred at a meeting at Intel in 1995, his 25 answer was based on, quote, contemporaneous 8340 1 press reports and other background stories, and 2 what have you, in the trade press that 3 discussed the subject. 4 So this is a man who on direct 5 examination was encouraged to testify based on 6 what he had read in the trade press. 7 And then in this particular instance, 8 he was asked whether he read PC Magazine and PC 9 Week. He offered that he had been a subscriber 10 since the very first issue. 11 And then I asked him, did you have 12 occasion, sir, to look in the trade press for 13 analyses of the relative performance of 14 different Java runtime environments, which is, 15 in fact, what Defendant's Exhibit 3165 is. 16 And he says, I did in particular given 17 the nature of my work on Java just-in-time 18 compilers at Fujitsu in the mid 1997 time 19 frame. 20 And I asked him the question, so you'd 21 had occasion to do that long before you ever 22 got retained as an expert in this case? 23 And his answer was quite -- yes, quite 24 well before that. 25 So they used trade press in exactly 8341 1 the way they say we're not allowed to, and that 2 -- so having opened the door, they have no 3 standing to now complain. 4 And the proper foundation was laid 5 that he looked at this analysis. 6 Ms. Conlin's effort to, you know, 7 parse words in an incredibly precise way to say 8 that taking into account and considering do not 9 equate to relying upon, I think is just too 10 clever by half. 11 He did look at this article and rely 12 upon it. That was quite clear from his 13 analysis during cross-examination. 14 On the question of collateral 15 estoppel, (a) this is a waived objection. 16 Secondly, it's wrong. 17 411 talks about deceiving Java 18 developers by not putting warnings in the 19 tools, and 412 talks about Microsoft 20 encouraging Intel to stop supporting Java. 21 There is a finding by the D. C. 22 Circuit Court of Appeals that Microsoft's 23 development of its Java Virtual Machine was not 24 anticompetitive. 25 That's the law, and there is nothing 8342 1 in the Court's findings or conclusions, given 2 collateral estoppel effect, that say anything 3 to the contrary. 4 So it is not a violation of the 5 collateral estoppel order to point out not only 6 was Microsoft Java Virtual Machine the fastest, 7 it was also the most compatible. And that's 8 the point that I was making, and there is 9 nothing that is collaterally estopped on that 10 point. 11 The only question is, were Java 12 developers deceived by the failure to put a big 13 warning in the tools that if you use the green 14 tunnels, you're going to be tied to Windows or 15 bound by that, even though we don't agree with 16 it, and was Microsoft wrongful in telling Intel 17 to stop developing Java. 18 This is a related, but not 19 collaterally estopped topic. 20 And in any event, it cannot be that 21 they can put on evidence on direct relating to 22 subjects that are covered by collateral 23 estoppel, make assertions, and then Microsoft 24 has to stand mute in the face of that. 25 If they want to rely on the 8343 1 collaterally estopped findings and conclusions 2 that have been read to the jury and are in the 3 jurors' notebooks, fine, but if they want to 4 bolster those findings, as they sought to do 5 with Mr. Alepin, it cannot be the case that 6 Microsoft is totally unable to respond. That 7 would not be fair, Your Honor. 8 And if the reason that they did the 9 bolstering was to show, in their words, 10 willfulness and intent, we have an equal 11 opportunity, Your Honor, or at least we should, 12 to show a lack of willfulness. 13 There were perfectly good business 14 reasons for what Microsoft did, and if the 15 question -- and obviously we can't dispute 16 because as to Java developer deception and 17 talking to Intel about its support of Java, we 18 can't undermine those findings and conclusions, 19 but we certainly can put on evidence in 20 response to evidence that they put on about why 21 Microsoft did what it did and what the good 22 business reasons were for that outside of 411 23 and 412. 24 Turning finally, Your Honor, to the 25 question of pricing. 8344 1 As the Court found the last time 2 this issue was raised, on direct examination 3 Mr. Alepin talked about prices, and so the 4 testimony elicited in response to his slides 5 about cheaper, better, faster, whatever his 6 slide was -- I can't remember right now -- was 7 perfectly appropriate. 8 The notion that these products have to 9 be in the same market in order to be relevant, 10 I do not understand. That would be a surprise 11 to Professor Mackie-Mason because his -- and 12 Janet Netz, their experts, they use companies 13 that have nothing to do with PC operating 14 systems and business productivity applications 15 in their groups of companies that they compare 16 in computing damages. 17 If Plaintiffs want to stipulate that 18 all of those analyses are invalid because in 19 many of the products that those two professors 20 use in their analysis are outside the markets 21 as defined by the Plaintiffs in their 22 complaint, then, we might consider that, but 23 that's not their position. 24 So there's no basis for arguing that 25 testimony about the relative value of narrow 8345 1 products like Norton Internet Security 2 vis-a-vis Windows XP Home and their relative 3 prices is out of -- is not admissible. It's 4 admissible. 5 I just note for the record the sort of 6 irony of a case talking about an overcharge, 7 and every time the question of price comes up, 8 the Plaintiffs, who you think would be 9 delighted to talk about prices, run screaming 10 the opposite direction. 11 The jury is entitled to consider the 12 value provided by Windows XP relative to other 13 products in the market as to which there is no 14 allegation of market power or any 15 anticompetitive conduct, and the fact that they 16 charge prices which are almost equal to the 17 price of Windows XP. 18 That is something that the jury is 19 fully entitled to consider. 20 So, Your Honor, for that reason, we 21 object to the motion to strike any of this 22 testimony. 23 MS. CONLIN: Briefly, Your Honor. 24 I assume that Mr. Holley's remarks 25 that Mr. Alepin was coached to say things or 8346 1 whatever other words he used are not meant to 2 imply that we acted improperly because we did 3 not do so. He wasn't coached to say anything. 4 He's a long-term industry expert. He knows 5 what the facts are. 6 And again, Your Honor, the fact that 7 Mr. Alepin testified on the basis of trade 8 press about the fact -- both about the time 9 things happened and about notice to the 10 industry, a perfectly proper use of trade press 11 for notice that he -- that's what Mr. Holley 12 read into the record. Indicates that he may 13 have relied on the general trade press for 14 notice with respect to some matters. 15 But that is quite different, quite 16 distinct from relying on a specific article in 17 a specific piece of trade press for a specific 18 purpose. 19 The fact that he looked at it 20 contemporaneously, it makes it -- and not in 21 the process of forming his opinions, makes it 22 even a weaker basis for the admission of the 23 evidence or the testimony based on it. 24 Mr. Holley accuses us of parsing words 25 in a precise way, and that, of course, is 8347 1 exactly what both of these rules require. 2 They do not permit sloppiness. They 3 do not permit the use of words which, while not 4 synonyms, are almost or may seem to be close in 5 terms of the meaning attached to them. 6 That is not the purpose of the rule. 7 The rule provides an exception to the general 8 rule that hearsay is not admissible, and in 9 order to get hearsay into the record, one must 10 follow the rule. 11 It was not followed here. 12 In connection with Mr. Alepin's 13 testimony, he did not rely on the article that 14 makes it inadmissible under 703 and it is not 15 authenticated for purposes of 803.18. 16 With respect to collateral estoppel, 17 Your Honor, we were in the back room arguing 18 about collateral estoppel. We did, in fact, 19 make an objection with respect to it. 20 Microsoft thinks it's unfair that it 21 lost the government case, but that does not 22 permit the introduction of contrary evidence. 23 And Mr. Holley's argument that it 24 permits Microsoft to make again the argument 25 that it made in the government case that 8348 1 everything it did made good business sense, is 2 a business justification, which would mean that 3 in the balancing test, the acts were not 4 anticompetitive. 5 That, of course, is what they're going 6 for and that is what they cannot be permitted 7 to go for. 8 With respect to prices, once again, 9 there is a false analogy. 10 What Mackie-Mason does, he doesn't use 11 the prices of things in other markets. And I 12 don't even think he uses other markets, but I'm 13 not as familiar as others are with Mackie-Mason 14 -- Doctor Mackie-Mason's expert report. 15 But I can say this to Your Honor, the 16 very same arguments were made about this issue 17 in the past. They were not persuasive then, 18 and they should not be persuasive to the Court 19 in connection with this. 20 I do need to add, Your Honor, with 21 respect to the issue of the admissibility of 22 the evidence and the testimony on the article, 23 the Court already ruled that the only issue is 24 what Alepin said about whether he relied on the 25 article. But he never said he did rely on the 8349 1 article. He said only that he relied on trade 2 press in general. Or to extend the analogy on 3 books, I read some books. 4 That does not mean that any book that 5 they put up in front of him can be used to 6 impeach his testimony. 7 When we presented this issue to the 8 Court on Thursday morning, the Court adopted 9 the principal in the Brian case. 10 It's inadmissible hearsay, and it's 11 admissible only if the testifying expert relied 12 on the specific article. 13 That is -- that is the law. That is 14 the rule. Specific reliance is required. 15 So general reading of the trade press, 16 which is all that was proved here, does not 17 open the door. 18 That's all I have, Your Honor. 19 THE COURT: Thank you. 20 Court finds that the motion is denied 21 except that Court finds that the Plaintiff is 22 correct in regard to 3165. That exhibit shall 23 be withdrawn from the jury's consideration and 24 is denied as not admitted, and I will inform 25 the jury of that. 8350 1 Okay. Get the jury. 2 MS. CONLIN: Your Honor, in addition 3 to that, the Court is removing the exhibit -- 4 nothing further, Your Honor. 5 MS. NELLES: Your Honor, before we 6 begin, I asked on a couple of occasions what is 7 it that Plaintiffs are actually going to do 8 today. 9 I think I've now got it narrowed down 10 to two possibilities, but before the jury comes 11 in, could we be told what's about to happen so 12 we can have the right stuff ready? 13 MS. CONLIN: Your Honor, yes, indeed. 14 MS. NELLES: Thank you. 15 MR. CASHMAN: Anthony Speakman 16 deposition will be played, and then following 17 Speakman, we'll have Mark Chestnut. 18 THE COURT: Very well. 19 MS. CONLIN: Your Honor, and there is 20 one other thing. 21 The Court indicated it had an 22 engagement on the 22nd that could be moved. 23 David Bradford, who was general 24 counsel to Novell, is going to be testifying 25 that week, and I now recall that Ms. Murano is 8351 1 going to be gone on Friday. That's the week, 2 the 26th so I really do -- we really do need to 3 be in session on those days. 4 THE COURT: Thank you for telling me 5 that. I appreciate that. 6 THE CLERK: Ms. [Juror Name] informed me 7 this morning that her father-in-law passed away 8 and that the memorial is Thursday afternoon. 9 She wondered if she could stop at noon to go to 10 the memorial. 11 MS. CONLIN: I think that's fine, Your 12 Honor. This is a deposition week. 13 We have arguments on motions 14 scheduled. Microsoft has indicated they'll be 15 scheduled Wednesday and Thursday, but we would 16 like to do them Thursday and Friday because of 17 the necessity of getting testimony in the can, 18 so to speak, for this week of depositions. 19 THE COURT: Okay. We will let 20 Ms. [Juror Name] go to the memorial. 21 MR. CASHMAN: I'm handing up to the 22 Court a copy for the court reporter of the 23 testimony that we'll be playing for 24 Mr. Speakman and a copy for the Court. 25 (The following record was made in the 8352 1 presence of the jury.) 2 THE COURT: Good morning, ladies and 3 gentlemen of the jury. 4 Sorry for the delay. Had a matter of 5 law to take up. 6 An exhibit was admitted last week, 7 number 3165. The Court is reversing its 8 ruling, and I am not allowing its admission. 9 So 3165 will be withdrawn from the packet of 10 exhibits. 11 MS. CONLIN: Your Honor, that's 12 Defendant's. 13 THE COURT: I am sorry. Defendant's 14 Exhibit 3165. Not Plaintiffs, Defendant's 15 exhibit. I beg your pardon. 16 And if you'll stand easy for a minute, 17 we have to make a copy of something, okay? 18 You may proceed. 19 MS. CONLIN: Thank you, Your Honor. 20 May it please the Court. 21 Because Mr. Alepin's testimony was 22 extensive, Mr. Constant, who was scheduled for 23 this week, had to return to England and so -- 24 and he will be rescheduled later. So this week 25 will be testimony by depositions. 8353 1 As indicated, Mr. Hagstrom and I will 2 not be present for this, and I would like to 3 introduce the jury to Michael Cashman, who is 4 here, who is a Zelle partner, and Mr. Mike 5 Jacobs, who is also a partner in the Zelle 6 firm. 7 And, Your Honor, the first deposition 8 that we will present is that of Anthony 9 Speakman, which was taken on April 27, 1998, in 10 the case of Caldera versus Microsoft. 11 Do we want to turn down the lights? 12 THE COURT: Oh, yeah, sorry. Is that 13 okay, Darin? 14 You may proceed. 15 (Whereupon, the following video was 16 played to the jury.) 17 Question: Good morning, Mr. Speakman. 18 Answer: Good morning. 19 Question: Would you please state your 20 full name for the record? 21 Answer: My name is Anthony Vincent 22 Speakman. 23 Question: Mr. Speakman, are you 24 represented today in this deposition by 25 Mr. Susman? 8354 1 Answer: I am, yes. 2 Question: Could you please explain 3 your education after high school? 4 Answer: Sure. I did a degree in 5 economics, politics and sociology at Hull 6 University in the UK, graduating with a first 7 class degree. 8 Question: What year did you graduate? 9 Answer: 1978. 10 Question: Can you describe what 11 multiuser operating systems software is? 12 Answer: Sure. The purpose of 13 multiuser software is to allow multiple number 14 of users to access one central processing unit. 15 These were the early days of microcomputers, 16 and you were able to buy one PC unit and attach 17 a number of dumb screens to it and have several 18 people access the same piece of software. 19 Question: Why did you leave BBN? 20 Answer: I was approached by a 21 headhunter for Digital Research at a time when 22 BBN were restructuring their internal 23 divisions. And I was attracted by the 24 opportunity of a sales management position 25 within Digital Research. 8355 1 Question: You were approached for a 2 sales management position at Digital Research? 3 Answer: Yes. 4 Question: Did you begin work at 5 Digital Research in the end of '89? 6 Answer: Late '89, yeah. 7 Question: How many years did you work 8 at Digital Research? 9 Answer: In total, three. 10 Question: From late '89 to late '92? 11 Answer: Correct, yes. 12 Question: What positions did you hold 13 during that period? 14 Answer: I joined in the OEM 15 department as the OEM sales manager designate, 16 as there was already a couple of people already 17 in positions within the company. And the guy 18 who had been the OEM sales manager left shortly 19 after I joined the company. 20 Question: After Mr. Perkins left, you 21 became the OEM sales manager for the UK? 22 Answer: That's correct, yes. 23 Question: Did your position change at 24 all over -- 25 Answer: No. Sorry. Strictly 8356 1 speaking, it was probably described as Northern 2 Europe, which would be the UK, Scandinavia. 3 There weren't many OEM manufacturers in 4 Scandinavia. 5 Question: Was the Middle East 6 included in Northern Europe? 7 Answer: I think Middle East and 8 Africa was also included in Northern Europe. 9 Again, there weren't very many manufacturers in 10 the Middle East. 11 Question: At the time you left 12 Digital Research, had it merged with Novell? 13 Answer: It had, yes. 14 Question: So at the time you left, 15 you were actually leaving Novell rather than 16 Digital? 17 Answer: I left Novell 12 months after 18 the acquisition, yeah. 19 Question: What was the reason for 20 your departure from Novell? 21 Answer: I was unsure of the future of 22 my position in the OEM sales department. My 23 sales team had been merged under another sales 24 manager, and I felt that my role was possibly a 25 threat. 8357 1 I was offered a role by Dieter 2 Giesbrecht who had moved from Digital Research 3 to Lotus, so somebody I had worked with before 4 at DR, and he offered me a position in Lotus, 5 and I felt that was a more secure position. 6 Question: What did Microsoft 7 allegedly do to intentionally damage DR-DOS for 8 DRI? 9 Answer: It restricted the OEM 10 customers in their licensing agreements such 11 that they made it very difficult to sell 12 against them. 13 Question: Have you ever seen a copy 14 of a Microsoft licensing agreement? 15 Answer: I think I did actually see 16 part of a Microsoft agreement at a client's, 17 but I never had one in my possession and taken 18 it away. 19 Question: Which client was that? 20 Answer: That would have been at Opus. 21 I was probably shown perhaps one or two pages 22 related -- during a specific discussion. 23 Question: Do you recall what parts of 24 the contracts you saw? 25 Answer: Not in detail, no. I know I 8358 1 had a fairly detailed discussion with Adam 2 Harris from Opus at the point where he was very 3 interested in licensing DR-DOS from Digital 4 Research, but was consistently telling me that 5 he had problems with the contract with 6 Microsoft which wouldn't allow him to do what 7 he wanted to do. 8 I think during the course of that 9 discussion he possibly showed me one or two 10 pages, but I can't claim to recall the details 11 of what was on those pages. 12 Question: Do you recall anything that 13 was on those pages? 14 Answer: Not specific words, no. 15 Question: Do you recall anything 16 generally? 17 Answer: Yes, generally that Opus 18 under the circumstances were committed to a 19 contract of a specific time period, which was 20 at least two years, according to my 21 recollection, and also that they had to pay -- 22 Microsoft had to pay a licensing fee for every 23 processor they shipped regardless of whether 24 MS-DOS was on that processor or not. 25 Question: What did you do to prepare 8359 1 for this deposition? 2 Answer: Nothing other than the 3 meeting with Mr. Hill and Mr. Susman in London. 4 Question: And how long was that 5 meeting, approximately how many hours? 6 Answer: It was probably about an hour 7 and a half. 8 Question: During that meeting, did 9 you review any documents? 10 Answer: Yes, I was shown some copies 11 of letters that I had written and internal 12 memos. 13 Question: And these were letters and 14 memos that were shown to you by Mr. Susman and 15 Mr. Hill? 16 Answer: Correct, yes. 17 Question: Did you review any 18 documents of your own in preparation for this 19 deposition? 20 Answer: No, I haven't. 21 Question: Other than Mr. Susman, 22 Mr. Hill, and Mr. Griggs, have you talked with 23 anyone else about this deposition? 24 Answer: When I met Mr. Susman and 25 Mr. Hill in London, John Constant and -- 8360 1 Mr. Susman: Andy. 2 The Witness: Andy Wightman, thanks -- 3 Answer: Were also there. So we had a 4 brief corridor type discussion. 5 Question: Did Mr. Constant and 6 Mr. Wightman participate in the meeting? 7 Answer: They did, yes. 8 Question: Where is Mr. Constant 9 employed now, if you know? 10 Answer: I don't recall. He gave me 11 his business card, but I don't recall the name 12 of the company. So it's obviously not a large 13 company. 14 Question: How about Mr. Wightman, do 15 you recall? 16 Answer: I think he's at Caldera. Is 17 that correct? 18 Question: I don't know. 19 Mr. Susman: I think he is. 20 The Witness: I think he's at Caldera 21 I'm not sure. 22 Question: I believe you said when you 23 first started work for Digital Research, your 24 position was sort of an OEM sales manager 25 designate. 8361 1 Answer: Yes. 2 Question: As a sales manager, were 3 you responsible for sales only to OEMs? 4 Answer: That's correct, yes. 5 Question: Any corporate accounts? 6 Answer: No. 7 Question: Which software products 8 were you responsible for? 9 Answer: We were responsible for the 10 operating system products, so DR-DOS, 11 Multi-User DOS, and Concurrent DOS and also 12 FLEXOS, F-L-E-X-O-S. 13 Question: At what point in time did 14 people begin reporting to you? 15 Answer: Almost immediately after -- 16 within the same week Mr. Dunn left, I 17 officially -- I officially became OEM sales 18 manager, in that same week. And then I began 19 to recruit a sales team. 20 Question: Looking at the OEM sales 21 organization at Digital Research globally, was 22 it divided up according to certain geographic 23 regions? 24 Answer: Globally. 25 Question: Outside of Europe, did the 8362 1 sales organization, the OEM sales organization 2 for Digital Research, was it divided up so that 3 there was maybe a European organization, a 4 North American organization, an Asian 5 organization? 6 Answer: As far as I recall, the total 7 -- the sales operation from within, for 8 example, Europe was subdivided into Northern 9 Europe, Central Europe, or whatever the terms 10 would be. Within Northern Europe, which, as I 11 say, was UK, Scandinavia, Middle East, and 12 Africa, it was then subdivided into OEM and 13 distribution sales. 14 Question: You were responsible for 15 the OEM half? 16 Answer: That's right, yes. 17 Question: The distribution sales, is 18 that retail? 19 Answer: That was -- that's right. 20 They were selling through distributors down to 21 retail resellers. 22 Question: Who while you were employed 23 by DRI had primary responsibility for the Vobis 24 account, if you know? 25 Answer: I think that would have been 8363 1 Komol. 2 Question: When you were OEM sales 3 manager at Digital Research in Novell, were you 4 responsible for any specific OEM accounts 5 yourself, or did you just have overall 6 management responsibility? 7 Answer: I had overall management 8 responsibility, yes. 9 Question: Were there any specific 10 accounts for which you were primarily 11 responsible? 12 Answer: I worked very closely on the 13 Opus account. 14 Question: Any other account other 15 than Opus that you worked particularly closely 16 with? 17 Answer: During the total time that I 18 was there, I also worked with ICL and Elonex. 19 Question: Amongst your sales 20 executives, were they responsible for specific 21 OEMs? 22 Answer: They were, yes. 23 Question: Was responsibility divided 24 up geographically or on an OEM basis? 25 Answer: As far as I recall, it was on 8364 1 an account basis. 2 Question: How many people worked at 3 Digital Research's Newbury office while you 4 were there, approximately? 5 Answer: I would guess at about 40 or 6 50. 7 Question: Do you know when DRI began 8 selling DR-DOS at retail? 9 Answer: I believe they were already 10 selling it as a retail product when I joined 11 the company. So it was obviously sometime 12 prior to that. 13 Question: When you started work at 14 Digital Research, what was the current version 15 of DR-DOS? 16 Answer: They had just released 3.41. 17 Mr. Pepperman: It's 558. I believe 18 that's where we left off. It bears the Bates 19 number C 0532060 through 61. And it's a 20 memorandum from Mr. Giesbrecht to Mr. Williams 21 dated December 14, 1989. 22 Answer: I can't recall seeing this 23 document before, no. 24 Question: This document was written 25 in December of 1989. 8365 1 Answer: Uh-huh. 2 Question: That's not long after you 3 started work at Digital Research? 4 Answer: That's correct, yes. 5 Question: Upon starting work there, 6 did you have any views of why Northern Europe's 7 sales organization was performing below 8 expectations? 9 Answer: I think they just -- there 10 were challenges in the business in so much as 11 having the right people doing the right roles, 12 for one. And they put that right in the 13 restructure of the organization. 14 There was no doubt in my mind very 15 soon after I joined the company the biggest 16 single challenge was the competitive nature of 17 the marketplace. 18 Question: It was a very competitive 19 market? 20 Answer: It was very difficult to 21 compete with Microsoft. 22 Question: You mentioned when you 23 started work at Digital Research a view that 24 was held that the version of DR-DOS out in the 25 market then was superior to the competing 8366 1 MS-DOS version. Was that a view held by 2 Digital Research? 3 Answer: Certainly, yes. 4 Question: Skipping, the next sentence 5 reads, with the exception of NCR, there are no 6 large OEMs on our foreseeable prospect list. 7 What is NCR? 8 Answer: What is NCR? 9 Question: Yes. 10 Answer: NCR were a large computer 11 manufacturer, and specialized in the area of 12 point of sale computers, so cash registers and 13 associated technologies. 14 Question: Did NCR have a contract 15 with Digital Research at that time? 16 Answer: I think they were a prospect 17 at that time. 18 Question: Were any OEMs in Northern 19 Europe licensing DR-DOS at the time you started 20 work there? 21 Answer: I don't believe they were. 22 Question: Were they licensing MS-DOS 23 instead? 24 Answer: OEMs in Northern Europe? 25 Question: Yes. 8367 1 Answer: Obviously, almost 2 exclusively, yes. 3 Question: Or were some of the OEMs 4 shipping their machines without an operating 5 system? 6 Answer: I'm not aware that they were. 7 Question: When you were hired in 1989 8 at Digital Research, was there a view held 9 within the company that Digital Research had 10 inadequate selling resources in Northern 11 Europe? 12 Answer: When I joined them, they 13 believed that they could improve their sales 14 skills by recruiting new people and 15 restructuring their organization, yes. 16 Question: The sentence continues on, 17 lots of smaller OEMs shipping 1,000 to 5,000 18 units per year, but can't and won't commit to a 19 volume license agreement. 20 Why wouldn't the smaller companies 21 commit to a volume license agreement? 22 Answer: Primarily because they would 23 already have had agreements with Microsoft 24 which could have committed them to a two- or 25 three-year period. It also would have 8368 1 committed them to pay per processor. 2 So even though many of them were in 3 the process of evaluating DR-DOS and liked the 4 technology, they felt that it would cost them 5 additional money to ship it, because they had 6 to pay Microsoft anyway. 7 Question: Which OEMs are you thinking 8 of when you say that, sir? 9 Answer: I'm thinking of people such 10 as Opus and Viglen. These were probably the 11 larger of the indigenous PC assemblers and OEMs 12 in the UK at the time. 13 Question: Any other OEMs you're 14 thinking of? 15 Answer: As I say, there were some two 16 to 300 companies. There was a wide range of 17 organizations, from very small to very large. 18 At that point, we were beginning to 19 communicate to all of them. 20 Question: After the sentence I just 21 read to you, the next sentence reads, we need 22 to come up with a completely new type of 23 business proposal for these companies. 24 What business proposal did Digital 25 Research come up with? 8369 1 Answer: The idea was that as they 2 were committed to Microsoft and couldn't get 3 out of those agreements and therefore couldn't 4 get involved with larger volume licensing with 5 Digital Research, that we would try and come up 6 with this idea of a package product which was 7 effectively the complete product with the box 8 and the manuals, the whole thing shrink 9 wrapped, which you weren't at that time 10 necessarily always getting with a computer, and 11 enable them to supply that to those customers 12 who specified DR-DOS over MS-DOS. 13 Question: When did Digital Research 14 begin introducing this package product? 15 Answer: That was probably in early 16 '90, early 1990. 17 Question: Which OEMs are you 18 referring to that I think you said had 19 contracts with Microsoft and couldn't get out 20 of the contracts? Which OEMs? 21 Answer: Which OEMs? It was -- I 22 mean, obviously it was the larger organizations 23 such as IBM and Compaq and ICL, who were the 24 major players in the UK at the time. But 25 equally covered all of the sort of what I like 8370 1 to refer to as the second tier; in other words. 2 The largest of the UK indigenous people, and 3 these were Elonex, they were Viglen, they were 4 Opus, it was Amstrad, and dozens of other 5 smaller companies. 6 Question: And it's correct, sir, you 7 said that the only part of a Microsoft 8 licensing agreement that you might have seen 9 during the course of your employment at Digital 10 Research is part of an agreement from Opus? 11 Answer: It was very difficult to 12 actually compete with a license agreement you 13 could never even see a copy of, because even 14 though the customer believed they understood 15 it, I didn't have the opportunity to drill into 16 that contract and see if there was ways I could 17 find around it for them so they could license 18 my product. 19 So the confidentiality that they put 20 in place made it even more difficult. 21 Question: Did Digital Research permit 22 OEMs to show their contracts with Digital 23 Research to competitors? 24 Answer: I don't recall whether we had 25 any confidentiality clause in it preventing it, 8371 1 but I don't think we had any reason we would 2 have wanted to prevent that. 3 Question: Did Digital Research view 4 its agreements with OEMs as being confidential, 5 the terms of those agreements? 6 Answer: I think in so much as, you 7 know, any two organizations with a business 8 relationship will state that the terms of that 9 agreement are confidential, I'm sure Digital 10 Research had that sort of clause in it. 11 But the difference was, I always got 12 the distinct impression dealing with the OEM 13 customers that it wasn't so much that, you 14 know, it was confidential. 15 It was more they were absolutely, you 16 know, terrified of what would happen to their 17 business if they didn't go along exactly with 18 the way Microsoft wanted them to behave. 19 Question: Which OEMs said that they 20 were terrified of the effects Microsoft would 21 have on their business? 22 Answer: Terrified is probably a 23 fairly strong word, but I know that -- 24 Question: Or afraid. 25 Answer: I know that Opus were very 8372 1 much bound by their agreement and found it very 2 difficult to get around it. 3 I know that Viglen as an organization 4 believed their whole success was sort of 5 structured around being seen as a sort of 6 completely standard organization, and that if 7 they did anything to upset Microsoft, their 8 ability to license the products would be 9 affected, and that would affect their position 10 in the marketplace. 11 So I know on that particular instance 12 there was a feeling of fear, if you will, in 13 terms of how they conducted themselves. 14 I had numerous meetings with their 15 technical director, a gentleman by the name of 16 Diran Kazandjian. I know I always got the 17 feeling after those meetings that the guy was 18 actually -- he was just too scared to do 19 anything with us. 20 Question: Any other OEMs other than 21 Viglen and Opus? 22 Answer: I know that Amstrad had a 23 very strong feeling against the contract that 24 they had to sign with Microsoft, that they 25 would have liked to have seen that hold that 8373 1 Microsoft had ahold of them broken, but again, 2 always feared that if they were the ones that 3 took that step, that it would affect their 4 position in the marketplace. 5 Question: Why couldn't Digital 6 Research convince OEMs to license the DR-DOS 7 for its computers instead of MS-DOS so that 8 they wouldn't have any agreement with 9 Microsoft? 10 Answer: Quite simply they were locked 11 into agreements that had bound them to pay for 12 every processor they shipped for the remainder 13 of a two- or three-year period, and therefore 14 it was too costly to license an additional 15 operating system. 16 Question: What about when those 17 agreements expired? 18 Answer: Those agreements would expire 19 at some point in the future, but it made it 20 very difficult to create business in the 21 following three to six months. 22 Question: You said there were 23 approximately 300 OEMs in the UK? 24 Answer: Yes. 25 Question: It would seem to me that 8374 1 agreements would have to be expiring all the 2 time, they would be of varying lengths, and 3 every couple of months a licensing agreement 4 would expire. 5 Couldn't Digital Research then 6 convince the OEMs to license DR-DOS instead of 7 MS-DOS? 8 Answer: Certainly when an agreement 9 came to a point where it would be due to 10 expire, we would try and know of that and be 11 aware of the fact that there was an agreement 12 that was open to renegotiation. And indeed 13 that was the situation that prevailed in the 14 Opus account. 15 Typically what would happen is 16 Microsoft would have locked their customers 17 into not only a per processor license, not only 18 a fixed time period, but there would be minimum 19 volume commitment, and very often OEMs would 20 have overforecast the number of units they 21 would ship. 22 So, for example, if they committed to 23 ship 50,000 for two years, but they only 24 shipped 40,000 because they cannot -- because 25 they haven't performed -- because they haven't 8375 1 grown to the extent they expected to, they 2 would have to pay Microsoft for 10,000 units to 3 have them shipped. Come to the end of the 4 agreement, Microsoft would then use that as a 5 way to ensure that they didn't go anywhere 6 else. 7 So the basic line was, you lose 10,000 8 licenses, that's money that's just dead. 9 However, if you renew the contract, then, you 10 know, we'll let you carry that money. 11 So there was no ability for them to 12 use the license they had paid for unless they 13 committed for another two-year period. 14 Question: To your knowledge, did 15 Microsoft's per processor licensing agreements 16 affirmatively prohibit the OEMs from licensing 17 a competitive operating system also? 18 Answer: Absolutely certainly, yes. 19 Question: Did the license 20 affirmatively prohibit the OEMs from licensing 21 a competing operating system? 22 Answer: Commercially it prohibited 23 them, yes, absolutely. 24 Question: Was that a term of the 25 license agreement, this prohibition? 8376 1 Answer: I couldn't tell you. 2 Question: You discussed minimum 3 commitments and your impression of how those 4 affected the OEMs' decision-making. Is it your 5 understanding, though, that once the licensing 6 agreement had expired, the OEMs were 7 contractually free to license with -- license 8 operating systems from a competing operating 9 system seller? 10 Answer: Technically, there was 11 nothing to prohibit them once that license had 12 expired, but typically they would have unused 13 monies from a Microsoft agreement, and 14 Microsoft would prohibit them from using those 15 licenses despite the fact that they had paid 16 for them. 17 Question: What did Microsoft 18 prohibit? 19 Answer: The use of unused licenses in 20 the fixed period. 21 So if they licensed 50,000 units over 22 two years and only shipped 40,000, the 10,000 23 unused licenses they would have to pay 24 Microsoft for, but they couldn't ship them 25 because it was outside the period. 8377 1 Question: Outside the two years? 2 Their license to use the software had expired? 3 Answer: Their license -- well, it 4 wasn't license to use. It was a license to 5 ship. So effectively, they were buying the 6 product off Microsoft to ship on to customers, 7 yet they were prohibited from shipping it on to 8 customers because there was a time restriction 9 on the agreement. 10 Question: Because the licenses were 11 of a finite duration? 12 Answer: Yes. 13 Question: It was your impression in 14 starting work at Digital Research at the end of 15 1989 that its prior marketing efforts in 16 Northern Europe had been insufficient? 17 Answer: I think its prior marketing 18 activities were typical of a company of its 19 size. It was a small company, and they were 20 doing everything they possibly could with the 21 resources they had. 22 Question: But your proposal was to 23 expand those activities? 24 Answer: My proposal was to sort of 25 refocus them specific to the OEM marketplace, 8378 1 yes. 2 Question: Where were they focused 3 before? 4 Answer: I think they had had a fairly 5 generic -- they advertised in the computer 6 press. I can't say I had too many details of 7 exactly what the marketing activities were 8 prior to my engagement. 9 But I certainly felt that the very 10 good press that the product was receiving from 11 the computer press in the UK was something we 12 should be doing very much more with to put in 13 front of people who made decisions about those 14 products to help them make the decision we 15 wanted them to make. 16 MR. PATRAS: We'll mark as Exhibit 561 17 a document bearing the Bates numbers C 0501331 18 through 344. 19 Question: Mr. Speakman, that's a 20 fairly long document. I'm going to direct you 21 to specific portions of it and ask you a couple 22 of questions. 23 It's entitled OEM software license 24 agreement. And on the left, there is a company 25 Tobar, T-o-b-a-r, UK Limited. 8379 1 Do you know what Tobar is or was? 2 Answer: Yes. 3 Question: What is it? 4 Answer: They were a small 5 organization who were both reseller of PC 6 components and also I believe also assembled 7 their own brand of computer. 8 Question: In the sense that they 9 assembled their own brand of computer, they 10 were an OEM? 11 Answer: Yes. 12 Question: And what is this document, 13 Exhibit 561? 14 Answer: This would appear to be an 15 agreement for them to use the DR-DOS product 16 with equipment that they sold. 17 Question: After the first page, there 18 is a -- it follows several pages which are 19 labeled Digital Research (UK) Limited, OEM 20 software license agreement, terms and 21 conditions. 22 Answer: Uh-huh. 23 Question: Were these terms and 24 conditions -- the next five or so pages, but 25 were they the standard terms and conditions of 8380 1 all OEM software license agreements coming out 2 of the UK? 3 Answer: They certainly appear to be 4 the standard agreement. However, I couldn't 5 say whether any particular text within them has 6 been changed specific to this agreement over 7 any other. 8 Question: Did you work from sort of a 9 standard set of terms and conditions? 10 Answer: Absolutely, yes. 11 Question: Were they varied at all in 12 specific accounts? 13 Answer: We tried to avoid varying the 14 contracts where possible, and the only person 15 -- the only people that were allowed to change 16 the terms were the contracts department, and 17 that had to be approved by I believe Robert 18 Gunn. So I personally was not allowed to 19 change the terms of any agreement without 20 approval. 21 Question: If you look at -- I think 22 it's the next to last page of this document, 23 the Bates number C 0501343, at the top it says 24 DR UK OEM agreement. 25 Looking at this page here, was this an 8381 1 agreement to license DR-DOS per copy, a license 2 for the product on a per copy basis? 3 Answer: This was a license for DR-DOS 4 for a number of copies, but there was no 5 restriction on Tobar, as I recall, for them to 6 be compelled to ship it. 7 Question: But it was a license for a 8 specific number of copies of DR-DOS? 9 Answer: This was indeed, yes. 10 Question: Were any of the other 11 licenses in the OEM on a different basis, not 12 for a specific number of copies, if you 13 understand my question? 14 Answer: I do understand the question. 15 I think this was fairly typical of 16 licensing a set number of copies. 17 One of the benefits that we did 18 provide to OEMs such as Tobar, who signed with 19 us was that -- was there was a payment schedule 20 for when they paid for those licenses. I don't 21 think it restricted them in any way as to when 22 they could use them. 23 Question: Are you aware of any OEM 24 license agreements with OEMs in Northern Europe 25 that were so a basis other than for a specific 8382 1 number of copies? 2 Answer: I believe we probably had 3 royalty reporting with certain customers where 4 we would agree on a price per copy based on a 5 projected number, and they would report on a 6 monthly or quarterly basis and pay us for the 7 copies they had shipped monthly. 8 Question: Did Digital Research 9 attempt with any OEMs to license DR-DOS on a 10 basis other than a specific number of copies? 11 Answer: I'm not sure I follow how 12 else you could do it. 13 Question: Well, for example, you 14 could say you could license them, give them a 15 right to use DR-DOS on their computers for a 16 set period and measured on a basis other than 17 the number of copies. I'm just trying to get a 18 feel if this was your standard way of doing it, 19 or were there any other ways you licensed the 20 product? 21 Answer: No, I think it's fair to say 22 that probably the majority of cases fell into 23 one of the two categories, i.e., either a 24 customer would license a specific number of 25 units and will use them as they ship them and 8383 1 would report to us the number of copies they 2 had sold, or, alternatively, there may be an 3 agreement where they would report on a royalty 4 basis and pay as they use them. 5 Question: This license agreement 6 here, is it for a specific term, can you tell? 7 Answer: I think -- let me see. I 8 guess there's probably somewhere in this 9 document a term that says when the agreement is 10 valid, because I think most legal agreements do 11 have a term in the contract. 12 However, there would not be a 13 restriction upon the customer in terms of when 14 they could use the copies they had purchased, 15 that's paid for them. 16 Question: Did your license agreements 17 have a typical or a standard term? 18 Answer: I'm not sure, to be honest. 19 Is there one mentioned in this document? 20 Question: Well, I mean, this document 21 is really just sort of a sample that I picked 22 sort of as a discussion piece. 23 More generally than this document, did 24 you enter into with OEMs one-year license 25 agreements, two-year license agreements? Was 8384 1 there a standard duration or a range of 2 duration? 3 Answer: I think the only term would 4 be regarding the validity of the actual 5 contract in terms of the relationship between 6 the two companies. 7 One of the things we were very 8 specific on in sales situations in my area of 9 responsibility was actually stressing to the 10 customer that we were a very much more flexible 11 organization to deal with, because that's 12 typically what they were looking for, having 13 been previously tied into agreements with 14 Microsoft. 15 Question: Did this license agreement 16 here require the OEM to make an up-front 17 payment for a certain number of copies of 18 DR-DOS that was licensed? 19 Answer: This license agreement 20 required a schedule of payments which were paid 21 on a monthly basis over a period of five 22 months. 23 So the number of copies in this 24 particular instance was 5,000 units. And 25 typically at that point, Microsoft would be 8385 1 requiring not only per license -- processor 2 licensing, they would also require payment in 3 advance for a year's worth of units. 4 What we were doing with this contract 5 was talking to -- reaching an agreement with 6 the organization on the basis they wanted to 7 ship about 5,000 units per month, and rather 8 than require -- sorry, a thousand units per 9 month. 10 And rather than require them to pay 11 for a full year up front, we asked them to 12 commit to five months' worth but still only pay 13 it on a monthly basis. 14 Question: But the OEM paid in advance 15 for the copies that it expected to use in any 16 given month? 17 Answer: In this particular instance, 18 they were paying monthly. And this was signed 19 on the 1st of November. The payment schedule 20 was monthly. And so they were effectively 21 paying for one month in advance. 22 Question: They were paying for one 23 month in advance? 24 Answer: Yes, that's all. 25 Question: Would most Digital 8386 1 Research's OEM agreements require advance 2 payments like this? 3 Answer: Of a month? 4 Question: A month or a quarter or 5 some other duration. 6 Answer: It was fairly typical to ask 7 a customer to make some level of commitment in 8 terms of the units they were going to ship. 9 And typically, we would be looking for 10 them to pay an amount at the beginning of the 11 contract. 12 The major difference between what we 13 were doing and what Microsoft was doing was we 14 were not requesting them to ship with every 15 machine they sold. 16 We weren't restricting them in terms 17 of the time period they were able to use the 18 licenses they pay for. 19 So it was very much a more flexible 20 business arrangement we had with those 21 customers. 22 Question: This agreement we've been 23 looking at here, the Tobar agreement, this is 24 not a license agreement for a package product, 25 is it, or can you tell? 8387 1 Answer: I'm pretty sure this would be 2 a licensing agreement rather than a package 3 product agreement. 4 Question: And through this licensing 5 agreement, Tobar paid for the right to use 6 5,000 copies of DR-DOS whether or not they 7 actually used them? They pay for the right to 8 ship 5,000 copies of DR-DOS without regard to 9 whether they actually did it? 10 Answer: It paid -- they paid for 11 5,000 units. I personally dealt with Martyn 12 Rolton, who is the owner of the Tobar company, 13 and I was very clearly aware of the volumes of 14 business that Martyn was doing. 15 And I was happy that this 5,000 units 16 represented -- represented a sensible business 17 commitment on his part, but one that he could 18 more than easily meet within, you know, a 19 12-month period. 20 So it was not -- not a matter of 21 paying for something he wouldn't ship. I was 22 working closely with Martyn and knew his 23 business. 24 Question: As a general matter, did 25 Digital Research offer volume discounts to its 8388 1 OEM customers? 2 Answer: We certainly had a pricing 3 scale where the per unit price was reduced 4 greater the number of copies purchased. 5 Question: As a general matter, the 6 greater the number of units that were licensed, 7 the lower the per unit price would be, is 8 that -- 9 Answer: That's correct, yes. 10 Question: And there's nothing wrong 11 with that method of licensing software? 12 Answer: It's fairly acceptable in I 13 think any business, software or any other, that 14 volume discounts apply. 15 What Digital Research was doing was 16 basically rewarding customers for business and 17 for commitment. 18 However, there was no implication at 19 any point that an OEM was being compelled to 20 ship on every system. 21 I know that there were certain 22 situations in the marketplace where customers, 23 if they committed to a large volume, they ended 24 up paying less for the total volume than they 25 would have done for half that number. 8389 1 Now, mathematically, there's always a 2 crossover point in terms of, you know, when you 3 go from 5,000 units to 5,001 units, where there 4 may be a few dollars difference. 5 But if we're referring to the sort of 6 situation where if you double the number of 7 copies you paid less than you would for the 8 original number, which I know is the sort of 9 thing that I think was occurring in the 10 marketplace, Digital Research didn't have any 11 sort of programs like that. 12 Our ambition was to give pricing that 13 was attractive and to build good relationships 14 with the clients. 15 Mr. Pepperman: Let me mark as Exhibit 16 562 a document bearing the Bates numbers 17 C 0028659 through 663. 18 Question: This appears to be a 19 December 12, 1989 memorandum to you from Mike 20 Shelton entitled meeting with Peter Bondar at 21 Nixdorf on December 11th. 22 Mr. Speakman, have you seen this 23 document before? 24 Answer: Yes, I have. 25 Question: What is Nixdorf, the 8390 1 company? 2 Answer: Nixdorf was a German computer 3 manufacturer. Sometime shortly after this 4 period, they were acquired or merged with 5 Siemens and became Siemens Nixdorf. Now 6 they're just Siemens. 7 Question: Can you tell what this 8 memorandum discusses? 9 Answer: Yes. This was Mike feeding 10 back information to me after he had met with 11 Peter at Nixdorf regarding what they discussed 12 in relation to the Nixdorf business, how they 13 acquired DOS for their PCs, and how that may 14 affect our opportunity to do business with 15 them. 16 Question: Was Mr. Shelton passing 17 this on to you as sort of a sales tip that you 18 might want to attempt to market DR-DOS to 19 Nixdorf in the UK? 20 Answer: If I recall correctly, I had 21 probably asked Mike to go and visit with Peter 22 Bondar. 23 Peter is actually a very good personal 24 friend of mine, I've known him for several 25 years, and knew him already at this point. 8391 1 So I think I probably had a telephone 2 conversation with Peter and said, look, rather 3 than me come and try to sell to you as a 4 personal friend, why don't I send along our 5 product person. Peter was a very technical 6 product marketing person himself within 7 Nixdorf. 8 And so I think I asked Mike to go 9 along so they could speak as equals at a 10 technical level, which would be perhaps a 11 greater level of detail than I could personally 12 go into. 13 Question: If you look on the second 14 page of this document, the bottom half of the 15 second page, the next to the last paragraph 16 reads, the operating system strategy is defined 17 individually by each of the regions. 18 Answer: I'm sorry. 19 Question: I'm sorry. The next to the 20 last paragraph on the second page. 21 Answer: Yes. 22 Question: The operating system 23 strategy is defined individually by each of the 24 regions. 25 Answer: Uh-huh. 8392 1 Question: Was it -- looking at that, 2 was it your hope that you would be able to 3 license to DR-DOS to Nixdorf in the UK? 4 Answer: It was certainly our hope, 5 yeah. 6 Question: If you look at the last 7 sentence on that page, there is no contract 8 with Microsoft in the UK. 9 Answer: Uh-huh. 10 Question: To the best of your 11 recollection, did Nixdorf have an agreement 12 with Microsoft in the UK? 13 Answer: Not in the UK. They were 14 headquartered in the Paderbourne in Germany, 15 and to the best of my recollection they would 16 have had an agreement with Microsoft in 17 Germany. So they wouldn't require one in the 18 UK because the PCs were assembled in Germany. 19 The UK operation in Nixdorf was merely a 20 reselling operation. 21 Question: According to this, Nixdorf 22 was not shipping MS-DOS 4.01 in the UK, 23 correct? 24 Answer: According to that, yes. 25 Question: You were attempting to 8393 1 market DR-DOS to Nixdorf? 2 Answer: We were attempting to, yes. 3 Question: In the UK? 4 Answer: Yes. 5 Question: The reference there to OS/2 6 and to SCO XENIX, in your job as licensing 7 DR-DOS to OEM, did you compete against any 8 other operating products other than Microsoft 9 DOS? 10 Answer: No. OS/2 and XENIX and UNIX 11 were in the marketplace, but they were very 12 specific applications, operating systems, 13 rather, used in very sort of specialist and 14 specific sorts of environments. 15 And the general desktop PC 16 environment, it was a DOS environment. That 17 was what the majority applications, the Lotus 18 1-2-3 and so on were actually running on. 19 So on a daily basis, we weren't 20 positioned against them. Indeed, the FLEXOS 21 product, which was the other Digital Research 22 product, did compete with OS/2 and UNIX on a 23 daily basis, because that was a specialist 24 product, a realtime multitasking system that 25 was appropriate for environments such as cash 8394 1 registers. 2 And as I say, there we were competing 3 with UNIX. 4 But on the desktop, the DR-DOS 5 product, it was competing head to head with 6 MS-DOS. 7 Question: These high-end 80386 8 machines referred to there, were you attempting 9 to market DR-DOS to Nixdorf for those machines? 10 Answer: We certainly wanted Nixdorf 11 to look at DR-DOS as one of the operating 12 systems that it could ship with its machines. 13 If I recall, I think the majority of 14 Nixdorf's business tended to be large accounts 15 with large corporate customers. 16 And typically, those corporate 17 customers would dictate what the standard was. 18 So if their standard was UNIX, they 19 would want UNIX for Nixdorf. If it was MS-DOS, 20 they would want MS-DOS. 21 So my attempt with Nixdorf was simply 22 to have DR-DOS available on Nixdorf machines 23 for those customers that specified it. 24 Question: Turning to the next page, 25 the first half of the page, there's a 8395 1 discussion of issues in choosing an operating 2 system. 3 In your experience, what factors did 4 OEMs consider in selecting an operating system? 5 Answer: What factors did who 6 consider? 7 Question: OEMs consider, in deciding 8 which operating system to license. 9 Answer: I think the biggest single 10 factor that an OEM would consider would be what 11 its customers would perceive as the most 12 attractive solution. 13 Question: The customer preference? 14 Answer: Their customer, yes. 15 Basically it was a very competitive market for 16 the PC assemblers. 17 As I say, there were two or 300 of 18 those guys, smaller guys in the UK, and there's 19 obviously a worldwide market of the bigger 20 players as well, and they're all competing for 21 the same sets of customers. 22 So they would be trying to offer the 23 customer a system that was most attractive. 24 Question: What other factors would an 25 OEM consider? 8396 1 Answer: Overall price. 2 Question: Any other factors? 3 Answer: Well, I take it as a given 4 that they would want an operating system that 5 would be stable and perform to the standards 6 that they and their customers would expect. 7 Question: In that sense, 8 compatibility with applications software, would 9 that be an important factor? 10 Answer: Absolutely. 11 Question: How about technical 12 support, would that be an important factor? 13 Answer: It would be a factor to an 14 OEM. In terms of listing, it would come way 15 below functionality. It would come below 16 pricing. It would come below customer 17 expectation because typically these companies 18 were made up of technically very competent 19 people who were assembling PCs themselves and 20 therefore were very familiar with and very 21 happy with the technology, and therefore they 22 required some support. 23 It wasn't a thing -- it's different 24 from an end user support, who when he's stuck, 25 he's stuck, and the machine doesn't work 8397 1 anymore. 2 These were a bunch of guys who were 3 assembling machines, and once they've got the 4 things up and running and they're selling it, 5 they're relatively happy with the way that's 6 going to work. 7 Question: Point number 3 reads: As 8 DR-DOS is developed in the UK, we can offer far 9 superior support and after-sales support than 10 Microsoft could ever hope to do for DOS or 11 OS/2. 12 Answer: Uh-huh. 13 Question: And we can offer far 14 superior support and after-sales support is 15 underlined, and someone has written in 16 handwriting above it, can we really, though? 17 Is that your handwriting? 18 Answer: That's not my handwriting, 19 no. And I'm intrigued. I'm not sure whose 20 handwriting that is. It's a very good 21 question, and I can answer it. 22 Could we provide far superior support? 23 Without doubt. 24 The DR-DOS product was actually 25 engineered in the UK. The development team 8398 1 were there. I have ready access to the likes 2 of Glenn Stephens and John Constant, and they 3 were exceptionally responsive to our OEM 4 customers. At that time Microsoft had an 5 abysmal reputation for customer support in the 6 UK. 7 It was a well-known fact that a 8 customer would sit on the telephone line for 9 over an hour waiting for a response from their 10 customer support. 11 It was in that period that they 12 ultimately restructured all of their support to 13 try and improve it. But at this point, their 14 support both to OEMs and to end user customers 15 was renowned in the marketplace. 16 Question: Do you know why then 17 someone would write a question in handwriting, 18 can we really, though? 19 Answer: I think that was simply a 20 matter of -- and I think you'll see it in other 21 documents of mine, any claim we made to a 22 customer, we want to be absolutely sure we 23 could back it up 100 percent, because we were 24 competing with Microsoft, who would make 25 commitments and promises and not honor them in 8399 1 terms of the way they dealt with their 2 customers. 3 Those customers were very unsatisfied 4 with that business relationship. And we wanted 5 to make sure any commitments we made, we backed 6 it 100 percent, because that was going to be 7 our way of winning. 8 Question: I think you mentioned that 9 Microsoft, did you say, did not live up to its 10 contractual agreements? 11 Answer: I don't think I said that, 12 but I certainly said that they made -- sorry. 13 We wanted to make sure that the 14 business, the commitments we made, the 15 statements we made in our sales process were 16 backed 100 percent. 17 Question: On what did you base your 18 statement that Microsoft did not do that? 19 Answer: That their support that they 20 were providing to the customers was very 21 difficult for the customers to achieve. 22 Question: What is Locland Computers? 23 Answer: Locland were one of the 24 numerous OEMs based in the UK. 25 Question: Was Locland a small OEM? 8400 1 Answer: They were probably in the 2 sort of mid-range of the indigenous UK-based 3 OEMs. 4 Question: Did Digital Research focus 5 its marketing efforts on mid-range OEMs in the 6 UK? 7 Answer: I certainly had a strategy in 8 the UK of trying to win the smaller mid-range 9 customers -- sorry, small mid-range OEMs as 10 customers so that once we could -- because 11 typically they were less tied to agreements 12 than Microsoft were. 13 They were more flexible, they wanted 14 to be more competitive on price. So my 15 approach is to try and win as many of those 16 mid-range customers as possible so that when we 17 went to the larger customers, we could prove 18 that they were being successful in the 19 marketplace with as many people as possible. 20 Question: Did any customers ever 21 complain to you about the compatibility of 22 DR-DOS? 23 Answer: I wouldn't say anybody ever 24 complained about the compatibility. Any piece 25 of software will have technical issues 8401 1 associated with it. 2 And I know that there are obviously 3 issues with DR-DOS in certain very specific 4 pieces of software. 5 I know when we did some field testing 6 for Opus clients, we got some feedbacks of 7 issues they had found. 8 I always felt very happy and always 9 felt I could write a letter such as this with 10 no concern at all because I was aware of the 11 fact that there were technical issues with 12 running software. 13 Whether you were running MS-DOS or 14 DR-DOS, they were probably different technical 15 issues. But neither product was completely 16 free of technical problems. No software ever 17 is. 18 Question: You did receive complaints 19 from OEMs about technical problems in DR-DOS? 20 Answer: We received reports from OEMs 21 about specific issues in terms of the product 22 and the performance. 23 But these, as I say, were the sort of 24 thing that I've experienced throughout my 25 career in the software industry, regardless of 8402 1 whether it was an operating system or an 2 application product. 3 There will always be customers 4 reporting things that the product doesn't do 5 exactly the way they expected it to or exactly 6 the way they wanted it to, and that was true of 7 DR-DOS. 8 Question: Did you ever hear customers 9 express to you concerns about DR-DOS's 10 compatibility? 11 Answer: No. The vast majority, in 12 fact all of the people who evaluated the 13 software, were happy with it as a technically 14 competent operating system product. 15 It is fair to say that out of the 16 field trials that we did with customers, there 17 were issues that came up. But nobody ever 18 claimed to me that it was anything other than a 19 100 percent acceptable operating system in 20 terms of its technology. 21 Question: When you started work at 22 Digital Research, the current version of DR-DOS 23 was 3.41, correct? 24 Answer: Yes, that's correct, yes. 25 Question: While you were at Digital 8403 1 Research, it also shipped DR-DOS 5.0 and DR-DOS 2 6.0; is that correct? 3 Answer: That's correct, yes. 4 Question: Are you aware of any OEMs 5 that shipped over time all versions of DR-DOS, 6 DR-DOS 3.41, 5.0, and 6.0? 7 Answer: I can be fairly certain that 8 Qubie did, Q-u-b-i-e. Gandlake I think were a 9 customer that shipped more than one version. I 10 couldn't guarantee it was all three. 11 There were -- unfortunately, the TCL 12 company I referred to in Scotland actually went 13 out of business and restructured into two other 14 computer companies, which seemed to go on quite 15 a lot at the time. 16 So they shipped at least two versions, 17 but probably didn't ship all three. 18 But typically, any customer that was 19 shipping 3.41 was very happy to receive 5, 20 because they had had a good experience with 21 3.41, and 5 had even more features in it that 22 MS-DOS didn't have. 23 Question: I think you named four 24 specific OEMs. Other than those four, can you 25 name any other OEMs that shipped multiple 8404 1 versions of DR-DOS? 2 Answer: The biggest problem is 3 remembering the names, I'm afraid to say. 4 These were a lot of small companies 5 that we obviously dealt with quite some years 6 ago, and many of them have since gone out of 7 business. 8 But I know that the number 90, which 9 was the original question you asked, was based 10 on the fact that there was one point in the UK 11 when we had almost 30 small OEM customers who 12 were shipping to DR-DOS with some or all of its 13 PCs. 14 Question: What is it, DR-DOS 3.41 or 15 5.0? 16 Answer: It would have been 3.41 and 17 5.0. 18 Question: At the very last paragraph 19 above your signature, it says, if you already 20 have a Microsoft license, don't panic, call us 21 to learn how we can help. 22 Answer: Uh-huh. 23 Question: How could you help? 24 Answer: What we were looking to do 25 was actually -- we were aware of the fact that 8405 1 Microsoft would have the processor licenses 2 probably more than they would have a fixed time 3 period. 4 What we wanted to do was actually give 5 them an opportunity to ship DR-DOS, either to 6 specific customers who required better memory 7 management or who required facilities in DR-DOS 8 that didn't exist in MS-DOS, to make them more 9 competitive. 10 And this is a sales letter. I think 11 the Wave of Change Sweeps Europe title at the 12 top suggests this probably shipped with a 13 positive press review that went out at the 14 time. 15 I would have almost certainly 16 accompanied this sort of letter with some 17 independent report on the product to prove that 18 what I was claiming here was being said in the 19 marketplace. 20 And I think the wave of change was a 21 headline from a newspaper article at the time. 22 So the sales letter was to get them to 23 consider it. And my approach in terms of how 24 we could help was to basically find -- to go 25 and speak with them, find out what their 8406 1 business issues were and see where we could 2 help. 3 Question: Did you approach OEMs that 4 you knew had a license with Microsoft? 5 Answer: Yes, we did. 6 Question: Was it your understanding 7 that those licenses didn't prevent the OEMs 8 also from shipping DR-DOS? 9 Answer: It didn't prevent or did? 10 Question: Did not. 11 Answer: I was aware of the fact that 12 the majority of those licenses would require 13 them to pay per processor, and therefore 14 financially it prevented them from licensing 15 another operating system most of the time. 16 Question: It didn't prevent them 17 contractually though, correct? 18 Answer: I don't know the details. 19 Having never seen a full Microsoft agreement 20 and had the opportunity to read it, I was never 21 able to say 100 percent whether it did or it 22 didn't. 23 Question: As you said before, you 24 might have seen a portion of only one Microsoft 25 agreement? 8407 1 Answer: Yes. 2 Question: This is a January 11, 1991 3 memorandum from Richard Gibbs to Robert Gunn. 4 What was Mr. Gibbs' position? 5 Answer: I think Richard had come in 6 as product marketing, was working under John 7 Bromhead, was responsible for DR-DOS. 8 I can't clearly remember whether Mike 9 Shelton had left the company by this stage, but 10 if he had, Richard would have been his 11 replacement. 12 Question: The first sentence of this 13 memorandum reads, further, to your recent memo 14 of 10 January, I agree with the high priority 15 you attach to ISV endorsement. 16 And this memorandum is talking about 17 ISV endorsements of DR-DOS? 18 Answer: Yes. 19 Question: Why were such ISV 20 endorsements important? 21 Answer: We were attempting to get 22 DR-DOS known and supported in as many parts of 23 the industry as we possibly could. So in 24 addition to having OEMs who were shipping it, 25 OEMs that were happy with it, each looking to 8408 1 have corporate customers who were happy with 2 it, and we were obviously looking to have 3 independent software suppliers such as Lotus, 4 the major players in the market actually stated 5 they supported it, because if you looked on the 6 brochures for software products, you would find 7 there would be a section on the back of the 8 brochure that would state what the technical 9 requirements were to run their software. 10 We were keen to have those companies 11 include DR-DOS alongside the MS-DOS statement; 12 that that was one of the required or one of the 13 environments in which it would operate. 14 Question: Did Digital Research devote 15 resources to convincing software vendors to 16 write application software for DR-DOS? 17 Answer: We didn't need to get them to 18 write application software for DR-DOS, because 19 it was a 100 percent acceptable replacement for 20 MS-DOS. Anything written for MS-DOS should be 21 equally suitable. 22 Question: But operating system 23 vendors typically have to I think the term is 24 evangelize software developers to write 25 software for their operating system; isn't that 8409 1 correct? 2 Answer: No. Only if your operating 3 system is not compatible with the others on the 4 marketplace at that point. 5 Question: At a certain point an 6 operating system vendor has to convince someone 7 to write for its operating system, doesn't it? 8 Answer: No. You only need to 9 convince them to write for it if it's a 10 different technology. 11 Question: Well, Microsoft at some 12 point had to convince software developers to 13 write for MS-DOS, correct? 14 Answer: Yeah, I guess that's correct. 15 When MS-DOS was first launched, the 16 predominant operating system at that point was 17 CP/M. And although there are some similarities 18 in the base code of the two products in terms 19 of the way applications run on them, yes, they 20 would have had to evangelize that. 21 However, as Microsoft's first client 22 for MS-DOS, I believe, or first significant one 23 was IBM, they didn't particularly have to 24 evangelize because the software vendors saw 25 that as the direction the thing was heading 8410 1 anyway. 2 THE COURT: Take a recess at this time 3 for ten minutes. 4 Remember the admonition previously 5 given. You may leave your notebooks here. 6 Thank you. 7 (A recess was taken from 9:49 to 8 10:06 a.m.) 9 THE COURT: Everyone else may be 10 seated. 11 (Whereupon, the following video 12 resumed playing to the jury.) 13 Question: Did Microsoft have to 14 evangelize software developers to write for 15 Windows? 16 Answer: Yes, they did. 17 Question: But that's not a cost that 18 Digital Research incurred for its operating 19 system product, DR-DOS, correct? 20 Answer: The costs that DR incurred 21 were different ones, because what we had to do 22 was convince the marketplace that the product 23 we had was technically superior, that it was 24 100 percent compatible, and that they should 25 use it instead of the operating system that was 8411 1 on the market at the time, which was MS-DOS. 2 So although the evangelizing still had 3 to be done, it was just sort of focused in a 4 slightly different way. 5 Question: Did Digital Research invest 6 money to convince software developers to 7 optimize the performance of their software on 8 DR-DOS? 9 Answer: As I say, I don't think 10 there's any requirement to optimize it for 11 DR-DOS. DR-DOS was already a superior 12 operating system. It had the functionality 13 that MS-DOS didn't operate, which is why it was 14 being successful and why it ha