5384 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 XX 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., December 18, 14 2006, 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 5385 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 Attorney at Law Zelle, Hofmann, Voelbel, 8 Mason & Gette, LLP 500 Washington Avenue South 9 Suite 4000 Minneapolis, MN 55415 10 (612) 339-2020 11 ROBERT J. GRALEWSKI, JR. Attorney at Law 12 Gergosian & Gralewski 550 West C Street 13 Suite 1600 San Diego, CA 92101 14 (619) 230-0104 15 16 17 18 19 20 21 22 23 24 25 5386 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 12 BRENT B. GREEN Attorney at Law 13 Duncan, Green, Brown & Langeness, PC 14 Suite 380 400 Locust Street 15 Des Moines, IA 50309 (515) 288-6440 16 17 18 19 20 21 22 23 24 25 5387 1 RICHARD J. WALLIS Attorney at Law 2 Microsoft Corporation One Microsoft Way 3 Redmond, CA 98052 (425) 882-8080 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5388 1 (The following record was made out of 2 the presence of the jury at 8 a.m.) 3 MR. CASHMAN: Your Honor, first on the 4 issue that Mr. Tulchin mentioned, I'm not here 5 to argue that and I'm not prepared to argue 6 that, but I can advise that the Plaintiffs are 7 filing a brief on that issue, which we'll do 8 midday, and they'd be prepared to argue it 9 after Court today. 10 THE COURT: Did I not set it for 11 8 o'clock today? 12 MR. TULCHIN: It was, Your Honor. 13 MR. CASHMAN: I didn't know that it 14 was on today, and I don't think anybody on our 15 team had that understanding. 16 MR. TULCHIN: We certainly said this 17 on the record last week, Your Honor. 18 MR. CASHMAN: What I am here to 19 discuss, however -- 20 THE COURT: They're not ready to 21 discuss what you're discussing, I assume. 22 MR. CASHMAN: I think they are, Your 23 Honor, but we'll find out. 24 For the record, this relates to the 25 hearsay objections to -- that Microsoft 5389 1 asserted to Bill Gates' deposition on Friday. 2 We discussed providing additional 3 argument, and on Sunday morning or early Sunday 4 afternoon, Plaintiffs did supply their 5 additional argument, with copy to Microsoft, 6 but I was -- I learned later in the evening 7 that the Plaintiffs' response did not go 8 through to the Court E-mail address. 9 I've provided a copy to the Court of 10 those undeliverable notices. 11 And, further, after learning that our 12 response did not go through, the Plaintiffs 13 again tried to resend it at one o'clock last 14 night. And this morning I learned that again 15 the messages did not go through. 16 I'm giving a copy to Microsoft of what 17 I provided to the Court just before we went on 18 the record, which is a copy of the 19 undeliverable notices from this morning. Those 20 are pages 1 and 2 of what I provided to the 21 Court. 22 The third page of this submission is 23 my cover letter to the Court at 1 a.m. last 24 night with the resend and attachments of our 25 response and the earlier E-mail undeliverable 5390 1 notices. 2 As indicated here, the Plaintiffs 3 submit that all of the hearsay objections for 4 Mr. Gates' testimony should have been overruled 5 for various reasons, but the one that I wish to 6 focus on this morning is the fact that the 7 statements -- whether the statements were made 8 are direct evidence in this case. 9 And if the Court would turn to Exhibit 10 A, which is the response, and I'd direct the 11 Court's attention to the bottom of the first 12 page in particular. 13 THE COURT: Exhibit A of your brief? 14 MR. CASHMAN: Well, A is the response. 15 That was with my E-mail letter explaining why 16 -- that we got it returned. 17 THE COURT: I'm sorry, yeah, I got it. 18 Thank you. 19 Okay, I'm there. 20 MR. CASHMAN: Under the information 21 entitled fourth, Microsoft incorrectly 22 characterizes statements in these three 23 exhibits as hearsay. 24 I go on to point out -- or the 25 Plaintiffs go on to point out that the 5391 1 statements are direct evidence of relevant 2 facts, and that is why they are not hearsay. 3 And I point out that we state, for 4 example, and without limitation, it is clear 5 that all of the statements attributed to 6 Mr. Gates are direct evidence of (a) willful or 7 flagrant conduct by Microsoft; (b) exclusionary 8 conduct by Microsoft; (c) anticompetitive 9 conduct towards Netscape; (d) causation; and 10 (e) a course of conduct that is willful or 11 flagrant, exclusionary, and anticompetitive, 12 closed quote. 13 And I go on to provide some authority 14 there. 15 And in the next paragraph, Plaintiffs 16 point out why the statements -- underscore why 17 the statements are not hearsay because the 18 Plaintiffs are not concerned with whether any 19 of the statements in these three articles are 20 true. 21 And Plaintiffs point out that they're 22 not concerned with whether Microsoft had a 23 business model that worked even if Internet 24 software was free. 25 Plaintiffs are not concerned with 5392 1 whether Microsoft was still selling operating 2 systems. 3 Plaintiffs are not concerned with 4 whether Netscape's business model looked good 5 or not if Internet software was free. 6 Those are all the substance of what 7 was stated in those articles. 8 And Plaintiffs believe, consequently, 9 that all of the statements in the articles -- 10 in the cross-examination, I should say, the 11 testimony concerning the cross-examination of 12 Mr. Gates on those three articles are 13 appropriate. 14 Plaintiffs did receive the Court's 15 ruling which seemed to suggest that Mr. Gates' 16 equivocation about whether he had given the 17 interview in Business Week, for example, was a 18 basis for deeming the testimony inadmissible. 19 And Plaintiffs submit that if that 20 were the standard, then, any time a plaintiff 21 denied -- a party denied receiving or making a 22 statement, that would make the testimony 23 inadmissible, which Plaintiffs do not think is 24 the correct standard. 25 All of this testimony at issue, that's 5393 1 just cross-examination of Mr. Gates, standard 2 cross-examination, and whether or not he admits 3 making this statement doesn't make the 4 testimony inadmissible. 5 So Plaintiffs believe that all this 6 testimony is proper and should be allowed. 7 Furthermore, Plaintiffs submit that 8 even if denial of making a statement attributed 9 to Mr. Gates was the appropriate standard, 10 which Plaintiffs do not think is correct, but 11 even if that were the standard, it should apply 12 only to Exhibit 6156, the Business Week 13 article. 14 Mr. Gates did admit to making 15 statements to the Financial Times. And both of 16 the other exhibits, Plaintiffs' Exhibit 5783 17 and 5777A, concerned a Financial Times article, 18 and it was -- the testimony on both of those 19 exhibits was -- should be permitted because 20 Mr. Gates was just saying, in essence, that the 21 testimony was about which quotations were 22 correct. 23 So to put a finer point on that, even 24 if the standard was that somebody could deny 25 making a statement and make their testimony or 5394 1 cross-examination on that subject inadmissible, 2 the inadmissible testimony here should be 3 limited solely to 152, 20, to 153, 20, and 158 4 through 157, 22, which is the testimony about 5 6156 and 205, 19, through 206, 8. 6 That would be Plaintiffs' alternative 7 position again. 8 Our primary position is that because 9 whether or not these statements were made in 10 sum or substance by Mr. Gates in standard 11 cross-examination and whether or not the 12 statements were made and the statements 13 themselves are the relevant evidence, it is 14 admissible and should be permitted. 15 Thank you. 16 THE COURT: Thank you. 17 Anything further on this? 18 MR. TULCHIN: Yes, Your Honor, if I 19 may briefly. 20 Mr. Cashman is rearguing a motion on 21 which the Court heard I think hours of argument 22 last week. 23 As I understand things on Friday, 24 Mr. Cashman asked the Court for permission to 25 submit something to the Court, a further 5395 1 submission on Saturday. Nothing was submitted 2 on Saturday. 3 And, instead, Mr. Cashman now says 4 that he tried to submit something yesterday, 5 and apparently it bounced back. 6 But the Court has ruled on all these 7 issues, Your Honor. I don't think reargument 8 is now appropriate. 9 Nothing was submitted on Saturday when 10 Mr. Cashman said he would. 11 The rulings have been made, and I 12 think we ought to move on. 13 If the Court wants to hear on the 14 merits of this argument any further, I'm sure 15 Mr. Tuggy will address them, but I just think 16 we ought to resume at 8:30 as -- and not keep 17 the jury waiting and proceed. 18 MR. CASHMAN: Your Honor, if I may. 19 Mr. Tulchin, I believe, has the 20 circumstances incorrect, and he also fails to 21 acknowledge that it's Microsoft which failed to 22 raise these objections in a timely fashion and 23 tried to raise these objections, even though 24 there's a prior order stating that all of the 25 testimony by Mr. Gates in his deposition is an 5396 1 admission. 2 And their failure to raise and argue 3 these objections before the Special Master, 4 their failure to raise and argue these 5 objections when we argued the Gates' testimony 6 earlier, those matters are covered in my 7 submission to the Court, Exhibit A, the first 8 three points. 9 But, furthermore, what I do think is 10 important to point out, as I do in the cover 11 letter to the Court noting that the E-mail 12 didn't go through, that this is 13 cross-examination, and cross-examination is a 14 fundamental right to a fair trial. 15 And there is Iowa authority which 16 emphasizes that cross-examination such as this 17 on issues such as credibility, bias, motive, 18 specific acts of misconduct, et cetera, is 19 fundamental to a fair trial and that a party 20 which is denied that right to fair 21 cross-examination, as would be the case here if 22 this testimony is not permitted, is 23 prejudicial. 24 So Plaintiffs submit that all of this 25 testimony should be allowed, and the technician 5397 1 is capable of making that happen. 2 So I submit that Mr. Tulchin is just 3 incorrect and fails to acknowledge the real 4 course of events here. 5 Thank you. 6 THE COURT: Thank you. 7 MR. TULCHIN: Your Honor, I don't want 8 to drag this out, but Mr. Cashman ignored what 9 I said, which is just that this has been argued 10 and decided, and I don't think we should have 11 further argument on the merits. 12 THE COURT: Anything further? 13 MR. CASHMAN: Nothing, Your Honor. 14 THE COURT: The order issued by the 15 Court yesterday will remain the same. 16 Let's move on to the order of 17 witnesses and recalling witnesses. 18 MR. TULCHIN: Yes, Your Honor. 19 We have a brief and two affidavits on 20 this subject. If I could hand this up. 21 The affidavits are from Mr. Green and 22 Ed Remsburg, and the memorandum is short. 23 There are a couple of attachments to it. 24 Ms. Conlin did say last week that she 25 proposed to have a number of her witnesses, and 5398 1 she mentioned specifically Ronald Alepin, 2 A-l-e-p-i-n, testify in several segments which 3 she said she could divide up by subject matter 4 so that Mr. Alepin would be called once, 5 perhaps as early as this week, testify on one 6 subject matter, and then after he was excused 7 and other witnesses testify, she would recall 8 Mr. Alepin so that he could testify on a second 9 subject matter. 10 This was something that we hadn't 11 heard about before last Friday, and I think 12 when we discussed it then, we agreed to talk 13 about it this morning briefly. 14 The affidavits of Mr. Green and 15 Mr. Remsburg say similar things. 16 Both of these experienced Iowa 17 lawyers, who together have tried more than 150 18 cases in Iowa courts, say that they've never 19 heard of any such practice; that when a witness 20 is called to the stand, the uniform practice in 21 the Iowa courts is to examine that witness on 22 all subjects. He then may be cross-examined. 23 Perhaps there's redirect, et cetera. 24 But once that witness is excused, all 25 examination of that witness has ceased and the 5399 1 witness may not be recalled to testify about 2 other subject matters. 3 I want to say this, Your Honor. There 4 are cases, of course, where a party is 5 permitted to recall a witness based on 6 subsequent events. 7 For example, there are criminal cases 8 where a witness testifies, and after that 9 witness is excused, the prosecutor learns that 10 the witness perjured himself or herself, or 11 perhaps the defense attorney -- and there's a 12 case of this sort as well -- gets information 13 which could be used to impeach the witness, 14 information which was not available to that 15 lawyer at the time that the witness first 16 testified. 17 And in those special circumstances 18 where new information has come to light, there 19 have been cases where a witness may be recalled 20 to the stand. 21 But we have looked quite extensively 22 and found no case in any Iowa court where a 23 party has been permitted to engage in the 24 practice that Ms. Conlin suggested she would 25 like to adopt in this case; namely, to 5400 1 deliberately segment a witness into a number of 2 different pieces. 3 We've talked about the practical 4 difficulties of cross-examining a witness under 5 those circumstances. 6 It just isn't going to work well to 7 attempt to segment a witness that way. 8 For example, with an expert such as 9 Mr. Alepin, the principal purpose of an expert 10 report is to provide the other side with the 11 opinions and information on which the expert 12 will rely. That is the opinions that he will 13 deliver at trial. 14 We have an expert report from 15 Mr. Alepin. I think we have more than one. 16 The subject matters of his report are 17 actually quite intertwined and not capable of 18 being separated as cleanly as Ms. Conlin 19 suggested. 20 And as both Mr. Green and Mr. Remsburg 21 indicate, they know of no case where this has 22 ever been permitted. 23 I think Ms. Conlin acknowledged last 24 Friday that the usual normal practice is to do 25 things the way all of us normally do them, 5401 1 which is to call a witness. When he or she is 2 finished testifying, he or she is excused, and 3 absent some very special circumstances, for 4 instance, some really legitimate true rebuttal, 5 that witness' testimony has been concluded. 6 Thank you, Your Honor. 7 THE COURT: Response? 8 MS. CONLIN: Your Honor, Microsoft has 9 repeatedly asked for and received the 10 opportunity to argue matters at its 11 convenience. It seems like Plaintiffs should 12 have the same right. 13 We do not have our brief. The brief 14 will be filed this afternoon, or perhaps this 15 morning. But in any event, I will address the 16 issues, but there is no big rush. 17 We cannot get to Alepin this week, and 18 we want the opportunity to show the Court that 19 Microsoft has once again misled it. 20 In fact, in the Gordon case, as we 21 represented to the Court, there is an order 22 permitting us to offer our evidence in 23 chapters, a part of which was to recall 24 particularly expert witnesses. 25 That is a practice sanctioned by the 5402 1 Manual For Complex Litigation, and if there's 2 ever been a complex piece of litigation in the 3 history of litigation in Iowa, this is it, and 4 that's what we wish to do. 5 I would ask the Court for permission 6 to file the brief and to argue from the brief 7 at a time more appropriate, when I've had an 8 opportunity to thoroughly review what exists 9 and when the Court has had an opportunity to 10 review our brief. 11 THE COURT: Will we have your brief 12 soon? 13 MS. CONLIN: Today, Your Honor, as I 14 indicated. 15 THE COURT: After I receive it, we'll 16 take a recess. Then we'll discuss the issue 17 then. 18 MS. CONLIN: Thank you, Your Honor. 19 THE COURT: Anything else? 20 MR. TULCHIN: Not from us, Your Honor. 21 THE COURT: I have an adoption to do 22 at 8:30 so we won't start on time, 23 unfortunately. I apologize for that. 24 (A recess was taken from 8:21 a.m. to 25 8:54 a.m.) 5403 1 MS. CONLIN: Your Honor, we have this 2 question from the juror. 3 THE COURT: Sorry, Carrie. 4 Yes. I forgot about that. 5 MS. CONLIN: [Juror Name] asked what is 6 Blackbird. 7 And I think the parties can agree on a 8 definition of that term, but the issue is 9 whether or not we should be answering questions 10 in the course of the depositions. There will 11 be, I'm sure, a number of terms that the jurors 12 do not understand. 13 It would be -- I would think that we 14 should answer the questions, if we can, when 15 they come up. 16 I mean, these code names, Your Honor, 17 that's going to be a problem before the jurors, 18 and I believe that Ms. Nelles and I can 19 probably agree on a definition for the term 20 Blackbird, but the issue is what -- whether or 21 not that is what the Court wishes to do. 22 I believe that we should answer 23 questions from the jurors, if we can, about 24 things like definitions. 25 THE COURT: Okay. 5404 1 MS. NELLES: Your Honor, I'm just a 2 little bit concerned. 3 I think Ms. Conlin is correct that we 4 can probably come up with an explanation of 5 Blackbird that both sides agree on this 6 particular one. 7 Though, it's certainly -- this is not 8 an acronym like ISV, so it's not a simple 9 definition. 10 But what I'm more concerned about is 11 that we're straying very far from the Court's 12 Preliminary Instruction No. 28, which was 13 asking questions during trial, which very 14 specifically goes to evidence being presented 15 by live witnesses and whether the Court will 16 ask a live witness whether or not -- about a 17 question at the end of the examination. 18 And my concern here is, though I do 19 think we can probably work this particular one 20 out, we're basically, when we're dealing with a 21 deposition, if we're answering these questions, 22 it's the lawyers answering the questions and 23 the lawyers are not competent to give evidence 24 in this case, and perhaps we should, you know, 25 collect these questions as they come and both 5405 1 parties will have an opportunity to try to get 2 them addressed during a witness or collect them 3 and discuss with the Court giving some 4 additional definitions and explanation with the 5 final instructions, but -- 6 Well, this one doesn't concern me too 7 much, though it's definitely not a definition, 8 it's an explanation. 9 I don't think the lawyers should be 10 giving evidence in this case. 11 THE COURT: Anything else on this? 12 MS. CONLIN: Well, what I would 13 suggest, Your Honor, it wouldn't be the 14 lawyers, it would be us agreeing to something 15 and giving it to you. 16 If we can't agree, if there are 17 additional questions that come up that we can't 18 agree on or that are inappropriate, we can 19 handle them as they come, but this one is 20 pretty easy. 21 THE COURT: Anything else on this 22 issue? 23 MS. NELLES: Just that I think we 24 should have a standard procedure and not let 25 this start heading down the slippery slope. 5406 1 THE COURT: Any objection to the Court 2 stating to the jury, and particularly the 3 juror, that the question will be answered 4 during the course of the trial? 5 MS. NELLES: Not at all, Your Honor. 6 THE COURT: Ma'am? 7 MS. CONLIN: No, Your Honor. 8 THE COURT: You can get the jury. 9 MS. CONLIN: Parties have agreed just 10 to go back just a line or two, Your Honor, to 11 pick up. 12 THE COURT: Is that true, Ms. Nelles? 13 MS. NELLES: It is true, Your Honor. 14 (The following record was made in the 15 presence of the jury.) 16 THE COURT: Members of the jury, I 17 apologize for the delay. 18 I had an adoption I had to do at 8:30 19 which I promised to do several months ago. So 20 I had to do that. So I apologize. So, truly, 21 I am at fault here. 22 We'll continue with the deposition 23 testimony. 24 (Whereupon, the following video was 25 played to the jury.) 5407 1 Question: Did you personally devote 2 time, Mr. Gates, to studying Netscape and 3 trying to determine what their sources of 4 revenue were? 5 Answer: In what time frame are we 6 talking about? 7 Question: Well, do you recall doing 8 that at all? 9 Answer: I personally didn't make any 10 study of it. But I know that in late '95 when 11 we reviewed a bunch of different competitors, 12 one of those was Netscape, and there was some 13 revenue analysis done as part of that. 14 Question: I want to ask you about 15 Exhibit 353, and this is a December 1, 1996 16 E-mail from you to Mr. Nehru. 17 Do you recall asking Mr. Nehru in or 18 about December 1996 to collect for you 19 information about Netscape revenues? 20 Answer: No. 21 Question: Do you recall sending this 22 E-mail on or about December 1, 1996 to Mr. 23 Nehru? 24 Answer: No. 25 Question: Okay. 5408 1 Do you recall receiving from Mr. Nehru 2 the attached E-mail dated November 27, 1996? 3 Answer: From time to time we do 4 reviews of various competitors, and at least 5 one point in time Netscape was one of the 6 people that we looked at. 7 So it doesn't surprise me, but I don't 8 remember it specifically. 9 Question: On the second page of the 10 exhibit, which is part of Mr. Nehru's November 11 27, 1996 E-mail, he talks about browsers. 12 Answer: What page? 13 Question: Page 2. 14 Answer: Okay. 15 Question: He identifies their sources 16 of Netscape's revenue. He says, browser 17 revenue for the quarter amounted to $45 million 18 (a 32 percent increase over the last quarter) 19 representing 60 percent of total Netscape 20 revenue. 21 Do you have a reason to doubt the 22 accuracy of the information reported there? 23 Answer: Well, I know that Mr. Nehru 24 didn't work for Netscape, so I'm sure he didn't 25 have access to the figures directly. If you're 5409 1 interested in that, you should ask Netscape. 2 Question: Was this the best 3 information you had in December of 1996 as to 4 the proportion of Netscape's revenue that was 5 derived from browsers? 6 Answer: I don't know. 7 Question: Do you recall receiving any 8 other information than this on that subject? 9 Answer: I might have seen an analyst 10 report. It says here we're 70 percent 11 confident about our numbers. 12 Question: Do you recall why it was in 13 this time frame you had asked Mr. Nehru to 14 collect this information for you? 15 Answer: I don't think I did. I 16 already told you that. 17 Question: You have no recollection of 18 asking him for this information? 19 Answer: I'm quite certain I wasn't 20 the one who asked for the information. 21 Question: Do you have any 22 recollection as to who did? 23 Answer: Perhaps Steve. 24 Question: Steve, you mean Steve 25 Ballmer? 5410 1 Answer: Uh-huh. 2 Question: In your memo here -- strike 3 that. 4 In your E-mail here you say, what kind 5 of data do we have about how much software 6 companies pay Netscape. 7 Do you recall asking that question to 8 Mr. Nehru in or about December 1996? 9 Answer: It looks like I sent him that 10 question after he sent out one of these 11 competitive analysis reports. 12 Question: Do you recall -- strike 13 that. 14 Do you have any reason to believe you 15 didn't ask him for this information on December 16 1, 1996? 17 Answer: Now, wait a minute. Now, 18 you're confusing two things. There's the 19 information here enclosed which I didn't ask 20 him for. 21 Question: I understand. 22 Answer: And that's what you've been 23 asking me about earlier. 24 Question: No, sir. 25 Answer: Then there's the question 5411 1 here in my E-mail, I have no idea if he ever 2 responded to that, but that question certainly 3 looks like it came from me. But that's 4 different than -- 5 Question: I understand. I'm not 6 confused. 7 Answer: Okay. 8 Question: Let me straighten the 9 record out here. Your testimony, as I 10 understand it, is you believe that in all 11 likelihood the information initially collected 12 by Mr. Nehru was sought by Mr. Ballmer; is that 13 right. 14 Answer: I know it wasn't -- I'm 15 pretty sure it wasn't me who asked for it. 16 Question: Correct. And then you got 17 this E-mail from Mr. Nehru and you in turn 18 asked him what kind of data do we have about 19 how much software companies pay Netscape; is 20 that right. 21 Answer: That's part of the E-mail I 22 sent to him it looks like, yes. 23 MR. HOUCK: I would like to mark as 24 Exhibit 354 an E-mail from Mr. Gates to various 25 people dated May 19, 1996 on the -- and the 5412 1 subject is some thoughts on Netscape. 2 Question: Is Exhibit 354 a memorandum 3 you prepared on or about May 1996? 4 Answer: It looks like it is. I don't 5 have a specific recollection. 6 Question: On the second page under 7 the heading Netscape you say, during this think 8 week I had a chance to play with a number of 9 Netscape products. This reinforced the 10 impression that I think all of us share that 11 Netscape is quite an impressive competitor. 12 Do you recall what it was that led you 13 to the conclusion that Netscape was an 14 impressive competitor? 15 Answer: I think the memo speaks for 16 itself in terms of outlining that. 17 Question: On Bates number page 954 18 appears the heading browser war. Do you see 19 that? 20 Answer: Uh-huh. 21 Question: What did you mean by your 22 use of that phrase? 23 Answer: I think somebody -- I wasn't 24 the one who created that phrase. I think it 25 was a phrase that some people had used to refer 5413 1 to the competition in the browser space, 2 including that between us as the provider of 3 Windows and Netscape with Navigator. 4 Question: Under the heading of your 5 memo entitled browser war appears the following 6 statement: If we continue to have minimal 7 share in browsers, a lot of our other efforts 8 will be futile. 9 Do you recall what other efforts you 10 had in mind there? 11 Answer: Well, for example, our desire 12 to get advertising revenue from the Search 13 button and the Home Page in the browser. 14 Question: Do you recall anything else 15 you had in mind? 16 Answer: I don't know if Blackbird had 17 been canceled by this point or not. But since 18 it was a superset browser, it would have fit 19 that category. 20 Question: Anything else? 21 Answer: Well, MSN, our online 22 service, because of its dependency on the 23 Blackbird technology. 24 Question: Do you recall any other 25 efforts that you had in mind here? 5414 1 Answer: No. 2 Question: You go on to say, quote, by 3 the end of the year, we have got to get more 4 than 25 percent share so we are taken 5 seriously, close quote. 6 Do you recall why you came to that 7 conclusion? 8 Answer: I don't remember what I was 9 thinking at the time I wrote the memo. 10 Question: Do you recall who you had 11 in mind as taking you seriously? 12 Answer: At the time I wrote the memo? 13 Question: Yes. 14 Answer: No, I don't recall. 15 Question: Do you have any 16 understanding what Microsoft's 1996 revenues 17 were? 18 Answer: No. 19 Question: Do you have any estimate, 20 as you sit here today, as to what Microsoft's 21 after-tax profits were in 1996? 22 Answer: No. 23 Question: Were they on the order of 24 $2 billion approximately? 25 Answer: I told you I don't know. 5415 1 Question: What's your best estimate 2 of what the -- Microsoft's after-tax profits 3 were in fiscal year 1996? 4 Answer: I don't think it's good to 5 guess because it would be very easy to go get 6 the real figure. 7 Question: Isn't it a fact that 8 winning a browser share was a very important 9 goal for Microsoft in 1996? 10 Answer: We were measuring web usage 11 share to see how popular browser was. And we 12 had -- one of our goals was to increase that. 13 MR. HOUCK: I'd like to mark as 14 Exhibit 358 an E-mail from Mr. Gates to Joachim 15 Kempin dated January 5, 1996. 16 Question: Do you recall writing this 17 E-mail, Mr. Gates, on or about January 5, 1996? 18 Answer: No. 19 Question: Do you have any reason to 20 doubt you wrote it? 21 Answer: No. 22 Question: First sentence says, quote, 23 winning Internet browser share is a very 24 important goal to us, close quote. 25 Why did you believe that to be the 5416 1 case in January of 1996? 2 Answer: Are you asking me to 3 reconstruct my state of mind on January 5th? 4 Question: Do you recall why it was, 5 Mr. Gates, that in the beginning of 1996 you 6 came to believe that winning Internet browser 7 share was a very important goal for Microsoft? 8 Answer: I can't say for sure what I 9 was thinking at the time, but I can explain to 10 you why it makes sense to me that I would have 11 written this mail. 12 Question: Am I correct that you have 13 no present recollection of what it was 14 specifically that led you to this conclusion 15 back in January, 1996? 16 Answer: I don't remember my exact 17 thinking in January, 1996. 18 Question: Okay. 19 Answer: I can explain my general 20 recollection of that time period, but I can't 21 reconstruct what I was thinking when I wrote 22 the mail. 23 Question: What is your general 24 recollection of the time period? 25 Answer: We thought that people -- the 5417 1 usage of the Internet was increasing, and it 2 was important for us to build a browser with 3 better features including integration that 4 would be attractive enough that people would 5 choose to use it. 6 Question: Who was Microsoft's 7 principal competitor for browser share in 8 January of 1996? 9 Answer: I think at that stage, 10 Netscape had 80 to 90 percent usage share, 11 which is a particular way of measuring browser 12 hits. 13 Question: I'd like to mark as Exhibit 14 361 -- I'd like to mark as Exhibit 361 an 15 E-mail from Brad Chase to Bill Gates, Paul 16 Maritz, and Steve Ballmer dated September 8, 17 1997. 18 Does Exhibit 361 refresh your 19 recollection that Microsoft from time to time 20 conducts surveys of web professionals? 21 Answer: Do you want me to read this 22 thing? 23 Question: Just answer my question, if 24 you can. 25 You don't have to read the whole thing 5418 1 to answer my question, and I'll point you to 2 one particular page that I want to ask you 3 about. 4 Answer: I haven't seen the document 5 before, but it appears to be a specific case 6 where some information is gathered about what 7 the document seems to call web professionals. 8 I don't know what they mean by that term. 9 Question: That wasn't my question. 10 You have no understanding of what's 11 meant by web professionals, sir? 12 Answer: In the context of this 13 document, I don't. I can give you many 14 possible definitions for the term. 15 Question: Okay. 16 Do you have any understanding as to 17 the type of web professionals that were 18 surveyed here? 19 Answer: If I studied the document, I 20 could learn something about that. I haven't 21 read it. 22 Question: Do you have any reason to 23 believe that this document was not sent to you 24 on or about September 8, 1997? 25 Answer: No. 5419 1 Question: Do you recall receiving 2 information in or about April 1997 that many 3 users did not want to have a browser integrated 4 into the operating system? 5 Answer: No. 6 Question: I'd like to mark as Exhibit 7 362 -- do you recall receiving this memorandum? 8 Answer: I think I do. 9 Question: Back on Bates stamp page 10 130 under the heading desktop/web integration. 11 Answer: Yep. 12 Question: The memo states: The 13 concept of unifying the user's desktop and web 14 experience sounds good and reasonable, but it's 15 not clear that this is what users want and 16 certainly is not what they expect. 17 Do you know the basis of the statement 18 made here? 19 Answer: He's talking about how to 20 refine the Desktop/Win integration. 21 It says we need to do a better job. 22 And then he talks about how to do the 23 integration and what he thinks is a different, 24 better way. 25 Question: Do you know the source of 5420 1 the information he reports here to you? 2 Answer: I'm sorry? 3 Question: Do you know what the source 4 of his information was that he's reporting to 5 you here? 6 Answer: No. 7 Question: He says in the next line, 8 quote, many users expect to just get browser 9 improvements with IE4, and I've heard many a 10 remark from users that they don't want to view 11 their folders to look like web pages. 12 Do you know where he obtained that 13 information? 14 Answer: No. 15 Question: Would you agree that it's 16 fair to describe Windows 98 as not a vital 17 upgrade for PC users? 18 THE WITNESS: I'm not sure what you 19 mean by vital. I mean, it -- 20 Question: I'd like to mark as Exhibit 21 363 an E-mail from Brad Chase to Walt Mossberg 22 and Mr. Gates dated May 15, 1998. 23 The last portion of this document, 24 Mr. Gates, purports to be an E-mail from 25 yourself to Mr. Mossberg of the Wall Street 5421 1 Journal where you say -- referring to Windows 2 98 -- you are right that it is not a vital 3 upgrade. 4 Do you see that? 5 Answer: I see the paragraph there. 6 Question: Do you recall sending this 7 E-mail to Mr. Mossberg of the Wall Street 8 Journal? 9 Answer: It looks like the E-mail I 10 sent him. 11 MR. HOUCK: At this time I'm going to 12 turn the examination over to Mr. Boies. 13 Question: Now, at the time that, 14 according to you, reporters were suggesting 15 that Microsoft was on the edge of doom, 16 Microsoft had profits of over $2 billion in 17 after-tax profits; is that correct? 18 Answer: Well, I think it 19 mischaracterizes what I said completely to say 20 that I'm just suggesting it. That's really 21 quite a misstatement. 22 Question: Having heard the question, 23 do you want to change your answer? 24 Answer: I'll add to it if you want. 25 Question: No. Do you want to change 5422 1 your answer? 2 Answer: I'll be glad to add to it. 3 Question: My question, sir, is: Do 4 you want to change your answer? You can say 5 yes or no. 6 Answer: I don't see any reason to 7 change it. I'll be glad to add to it. 8 Question: Were reporters suggesting 9 to you in 1996 that Microsoft was on the edge 10 of doom, as you have used that phrase? 11 Answer: Many reporters suggested 12 that, yes. 13 Question: And in 1996 what were 14 Microsoft's revenues compared to Netscape's 15 revenues? 16 Answer: I don't know Netscape's 17 revenues. 18 Question: Approximately, sir? 19 Answer: Approximately what? 20 Question: Approximately what were 21 Netscape's revenues compared to Microsoft's 22 revenues? 23 Answer: You want me to guess at 24 Netscape's revenues? 25 Question: I want you to give me your 5423 1 best judgment and estimate as a chairman and 2 CEO of Microsoft, sir. 3 If you call it guessing, you can call 4 it whatever you want. What I want is your best 5 estimate under both as you sit here. 6 Answer: I know that Microsoft's 7 revenues would be dramatically higher than 8 Netscape's, but I -- I really don't want to 9 hazard a guess at Netscape's revenue in 10 particular. 11 Question: As you sit here now, can 12 you give me any estimator range at all of what 13 Netscape's revenues were in 1996? 14 Answer: Zero to 200 million. 15 Question: As you sit here now, can 16 you tell me any estimator range of what 17 Netscape's revenues are today? 18 Answer: I think zero to 500 million. 19 Question: Can you be any more 20 specific than that; that is, can you narrow the 21 range at all? 22 Answer: Yeah. 200 million to 500 23 million. 24 Question: Can you narrow the 1996 25 range at all? 5424 1 The 1996 range you gave me was zero to 2 200 million. 3 Answer: 30 million to 200 million. 4 Question: Is that the best you can do 5 as you sit here now? 6 Answer: Well, the chance of my being 7 wrong goes up as I narrow the range. 8 Question: You've given me the very 9 best estimate that you can? That's your 10 testimony? 11 Answer: Well, it's all about 12 probability. I think it's highly probable that 13 their revenue fell into the range I gave you. 14 Question: Did you make any effort in 15 1996 to find out what Netscape's revenues 16 actually were? 17 Answer: Personally? 18 Question: Either personally or 19 through some of the many employees of 20 Microsoft? 21 Answer: Oh, I'm sure there were 22 people at Microsoft who looked at Netscape's 23 revenues during that year. 24 Question: Did they communicate with 25 you as to what those revenues were at all? 5425 1 Answer: Among the thousands and 2 thousands of E-mail messages I get, I'm sure 3 there were some that had for certain periods of 4 time information about that. 5 Question: Did you request any 6 information concerning Netscape's revenues in 7 1996? 8 Answer: I'm sure I was in meetings 9 where the information was presented, but I 10 don't think I was the one who specifically 11 asked for the presentation. 12 Question: Whether you specifically 13 asked for a presentation in a meeting or not, 14 did you ask people to provide you with 15 information concerning Netscape's revenues in 16 1996? 17 Answer: I may have asked some 18 questions about their revenue. 19 Question: Do you recall doing that, 20 sir? 21 Answer: No. 22 Question: Did you receive any answers 23 to your questions about Netscape's revenues? 24 Answer: Although I don't specifically 25 recall it, I'm sure that in most cases I did. 5426 1 Question: It would be usual within 2 Microsoft that if you asked a question, you 3 would receive an answer; is that fair, sir? 4 Answer: No. There's no -- there's 5 lots of questions I ask I don't get answers to. 6 But well over 50 percent I do. 7 Question: When you say that there are 8 lots of questions that you ask people of 9 Microsoft that you don't get answers to, do you 10 mean you don't get any answer at all, they just 11 ignore it? 12 Answer: That happens. 13 Question: Does it happen from people 14 with a sustained career within your company, 15 sir? 16 Answer: If they're busy enough on 17 priorities that I set for them, then, yes. 18 Question: You're the chief executive 19 officer of Microsoft. 20 Does Microsoft have a president? 21 Answer: Depends on the time period 22 that you're asking about. Some time periods, 23 yes; some time periods, no. 24 Question: Does it have one? 25 Answer: Today, yes. 5427 1 Question: Who is that? 2 Answer: Steven Ballmer. 3 Question: How long has Mr. Ballmer 4 been president? 5 Answer: About 30 days. 6 Question: What was his position 7 before that? 8 Answer: Executive vice president. 9 Question: How long had he held that 10 position? 11 Answer: That's a good question. 12 There's been an increase in the grand 13 nature of titles over a period of time. Steve 14 has been a very high level executive for a long 15 time. 16 But I don't think I came up with the 17 use of the term executive vice president until 18 something -- no -- I'm not sure when I started 19 using that term -- when we used that term for 20 his position. 21 Question: Is it fair to say that 22 Mr. Ballmer has been a very high executive, to 23 use your phrase, within Microsoft for several 24 years? 25 Answer: Yes. 5428 1 Question: Did you ever ask 2 Mr. Ballmer to provide you with information 3 concerning Netscape's revenues? 4 Answer: No. I don't remember doing 5 that. It would be a very unusual thing for me 6 to ask Steve. 7 He's -- as we discussed, he's a fairly 8 high level executive, so he doesn't generally 9 go out and work on my behalf gathering numbers. 10 Question: Let me ask you to look at 11 Exhibit 355 and, in particular, the second 12 paragraph of the third page, which reads, 13 quote, our business model works even if all 14 Internet software is free, close quote, says 15 Mr. Gates. Quote, we are still selling 16 operating systems, close quote. Netscape, in 17 contrast, is dependent on its Internet software 18 for profits, he points out. 19 You've testified as to the context in 20 which this statement was made. Did you 21 understand at the time that these words were 22 used, that the publication of these words might 23 well affect Netscape's business? 24 MR. HEINER: Asked and answered. 25 MR. BOIES: Don't think so. 5429 1 Answer: In this interview, I was 2 defending Microsoft in the work we were doing 3 to the reporter. And she was the one who was 4 bringing up Netscape in several of the 5 questions. 6 The -- you know, the last part there 7 doesn't even seem to be a quote, so I'm not 8 sure what I said, actually. 9 Question: When you were talking to 10 the reporter, you knew that it was likely that 11 the reporter would publish at least some of 12 what you told the reporter; correct, sir? 13 Answer: Yes. 14 Question: When you used the words 15 with this reporter that are set forth in here, 16 did you understand that if those words were 17 published, it might well affect Netscape's 18 business? 19 Answer: I've already testified I 20 don't remember using those words. So trying to 21 reconstruct my state of mind around using those 22 words when I don't remember using those words 23 is not going to be possible. 24 Question: Let me be sure I understand 25 your testimony. 5430 1 It's your testimony that you do not 2 remember making this statement to the reporter? 3 That's your testimony? 4 Answer: That's right. 5 Question: Do you have any reason to 6 doubt that you made this statement to the 7 reporter? 8 Answer: Well, it seems like we're 9 going over this again and again. 10 I think there were a series of 11 questions from her about -- you know, that 12 Netscape -- that Microsoft might not have the 13 future because of what was going on in the 14 Internet. And although I don't remember my 15 specific answer, I do remember her asking a lot 16 of questions along those lines. 17 Question: My question now, sir, is 18 not what the reporter asked you, my question is 19 whether you have any reason to doubt that you 20 said the words that the reporter attributes to 21 you? 22 Answer: Do you mean the ones in 23 quotes? 24 Question: Let's begin with the ones 25 in quotes, sir. 5431 1 Do you have any doubt or any reason to 2 doubt that you told this reporter in words or 3 in substance that Microsoft's business model 4 works even if all Internet software is free 5 because you were still selling operating 6 systems? 7 Answer: I don't remember saying that. 8 Question: Do you have any reason to 9 doubt that you said that in words or in 10 substance to this reporter in 1996? 11 Answer: I'd want to go back and look 12 at the transcript to find out if I did or not. 13 Question: My question is whether 14 sitting here you have any reason to doubt that 15 you said these words. 16 Answer: I don't remember saying those 17 words. 18 Question: I know that that's what you 19 said. 20 Now I'm asking you a different 21 question, which is whether you have any reason 22 to doubt that you said these words. 23 And if you don't understand the 24 question, you can simply tell me you don't 25 understand the question. 5432 1 Answer: I'm not sure what my memory 2 can hold except for knowing whether I remember 3 if I said it or not. I don't remember not 4 saying it. That's kind of unusual memory to 5 have. But I think that's what you're saying: 6 Is there a specific memory in my head when I go 7 look up my memory where it says I never said 8 these words. And I don't have a memory of that 9 either. 10 Question: Do you have a memory of 11 stating the substance of what is attributed to 12 you even if you don't remember saying the exact 13 words? 14 Answer: No. 15 Question: Do you have any reason to 16 doubt that you said the substance of what is 17 attributed to you? 18 Answer: I have no recollection of 19 saying what is in the substance of that quote. 20 Question: Is what is in the substance 21 of this paragraph inconsistent with what you 22 told people publicly in 1996? 23 Answer: I'm not sure what -- you're 24 asking me to recall everything I said during 25 that year and compare it for consistency with 5433 1 this particular sentence here? 2 MR. BOIES: Move to strike the answer 3 as nonresponsive. 4 THE WITNESS: And I did answer, which 5 is -- 6 MR. BOIES: Read the question back, 7 please. 8 (Requested portion of the record was 9 read.) 10 THE WITNESS: I think you're asking me 11 for -- to check for consistency with all the 12 statements I gave during that 12-month period, 13 and I'm not able to do that. 14 Question: Is what is stated in this 15 paragraph, the second paragraph on page 3 of 16 Exhibit 355, consistent with what you said 17 publicly in 1996? 18 THE WITNESS: Well, you'd have to 19 understand the context of what her question -- 20 what she defined the word Internet software to 21 be when she was asking these questions. 22 And sitting here right now, I don't 23 know when she was asking her questions how she 24 defined Internet software. 25 I'm sure I would have asked her what 5434 1 she meant by it in order to respond. 2 Question: But you don't remember what 3 you said; is that what your testimony is? 4 Answer: I don't remember what the -- 5 in this context, she had -- she had defined 6 what the term Internet software meant. 7 Question: Is it your testimony that 8 at the present time, you simply don't know what 9 this paragraph means, it's unclear to you? 10 Answer: I think to understand -- to 11 decide if that sentence taken out of the 12 context of the interview, if it's -- to 13 understand what it means, you have to decide 14 what you mean by the term Internet software. 15 So if you want to tell me a definition 16 of Internet software, then I can say to you, 17 yes, this seems correct to me or, no, it 18 doesn't seem correct to me. 19 Question: My question to you, sir, 20 is: As you sit here now, you don't have any 21 knowledge of what is meant by the term Internet 22 software in this quotation; is that what you're 23 telling me? 24 Answer: I'm not sure what it was 25 meant during -- what was meant by it during the 5435 1 interview. There are many definitions you 2 could have for that term Internet software. 3 Question: And as you look at this 4 paragraph, which says, quote, our business 5 model works even if all Internet software is 6 free, close quote, says Mr. Gates. Quote, we 7 are still selling operating systems, close 8 quote. Netscape, in contrast, is dependent on 9 its Internet software for profits he points 10 out. 11 Now, it's your testimony that in that 12 context you do not know what is meant by 13 Internet software? 14 Answer: Well, to give this statement 15 internal consistency, it must have been in this 16 interview I wasn't including operating systems 17 in the term Internet software, so the 18 interviewer must have defined it that way, and 19 I was including some products that Netscape was 20 working on in that definition. 21 Question: Browsers perhaps, do you 22 think? 23 Answer: Well, if you want to ask me 24 about browser revenue, I'd be glad to. I can't 25 comment on whether browse -- how browsers 5436 1 relate to this interview that I don't remember. 2 I'll be glad to answer any question about 3 browsers. 4 Question: Well, let me ask a question 5 about browsers, sir. 6 Do you have any doubt in your mind 7 that the reference to Internet software in this 8 paragraph is a reference to browsers? 9 Answer: Internet software -- I can't 10 think of a definition of it that would be 11 specifically just browsers. 12 Question: Would it include browsers? 13 Answer: Most definitions of it would, 14 yes. 15 Question: Would it be clear to you, 16 sir, that the reference to Internet software 17 here in this paragraph includes browsers? 18 Answer: Well, when you talk about 19 browsers, you have to think of different 20 revenue streams. And it's not clear if in this 21 interview that distinction had been drawn 22 between the different potential revenue streams 23 generated by a browser. 24 Question: When you say this 25 interview, you mean the interview of you? 5437 1 Answer: That's right. 2 Question: Right. 3 Let me try to put my question in a way 4 that maybe it will be more understandable. 5 Is it clear to you from the context 6 that's here that when a reference is made to 7 Internet software, that reference includes 8 browsers? 9 Answer: Well, outside of the quotes, 10 if you look what the author wrote, she seems to 11 have a very broad definition of Internet 12 software. She seems to be including electronic 13 mail and groupware, perhaps even database -- 14 looks like database is included in her 15 definition. 16 MR. BOIES: Move to strike the answer 17 as nonresponsive. 18 Question: Mr. Gates, with respect to 19 the quotation that is attributed to you, do you 20 have any doubt that Internet software, as used 21 there, includes browsers? 22 Answer: If the distinction had been 23 made about the revenue streams, then, yes, it 24 probably does. 25 Question: Probably does include 5438 1 browsers? 2 Answer: If the distinction had been 3 made about the different revenue streams. 4 Question: If the distinction had been 5 made in this interview of you you're saying? 6 Answer: That's right. 7 Question: And it's your testimony 8 that you just don't remember whether or not 9 that distinction was made? Is that your 10 testimony? 11 Answer: That's right. 12 Question: In 1996 did you tell people 13 publicly that Microsoft would do fine if 14 Internet software or browsers were free but 15 that Netscape would not do fine if Internet 16 software or browsers were free? 17 Answer: What do you mean by Internet 18 software? 19 Question: What I mean is what you 20 refer to as Internet software in these various 21 quotations. 22 Answer: I'm afraid we're not going to 23 be able to know what my state of mind was when 24 I gave that interview. If you want to define 25 it, I'll be glad to answer the question. 5439 1 Question: Do I take it that your 2 testimony is that you simply have no 3 recollection whatsoever as to what you meant by 4 these words in 1996? 5 Answer: No. It wasn't what I meant. 6 I responded to a reporter's question, and I've 7 already said to you that she must have given me 8 a reason to understand what she meant in her 9 questions in order for me to be able to answer 10 them. 11 Question: Do you remember asking her 12 what she meant by those terms? 13 Answer: I feel pretty sure I wouldn't 14 have used the term unless there was some 15 understanding of what she understood the term 16 to mean. 17 Question: Why is that, sir? 18 Answer: I'm just saying it's not 19 typical for me to use a term with a reporter 20 where it's a very open unended term that can be 21 used in a lot of different ways without any 22 understanding between myself and the reporter 23 of -- in that context, in that series of 24 questions, what's being referred to. 25 Question: Well, I'd like to draw a 5440 1 distinction, if I could, between having any 2 understanding at all, which could come from a 3 variety of sources, and asking the reporter for 4 a definition. 5 Did you ask the reporter for a 6 definition of what was meant by Internet 7 software? 8 Answer: All I can say, not recalling 9 the specifics in the interview is that it's 10 very unlikely I would make a statement like 11 that without some common understanding between 12 myself and the reporter of what that term, 13 which out of context is incredibly ambiguous, 14 what it meant in the context of her series of 15 questions. 16 Question: And just to be sure I 17 understand it. 18 What you're saying is that you don't 19 remember what the definition was and you don't 20 even remember that there was a definition, but 21 you believe there must have been a definition 22 or you wouldn't have been using these words. 23 Is that fair? 24 Answer: There must have been a common 25 understanding. I wouldn't say a definition. 5441 1 Question: How would that common 2 understanding have been arrived at other than 3 through a definition? 4 Answer: Well, somebody can give 5 examples. I'm just saying it doesn't have to 6 be a formal definition for two people to have a 7 context in a conversation of what a word means. 8 That is, neither one has to say I define the 9 word as follows. So maybe I interpreted your 10 use of the word definition too strictly. 11 Question: Okay. 12 Answer: So if you define definition 13 for this conversation in a loose way, then I'll 14 understand what you mean. 15 Question: That is, what you need in 16 order to understand the question is to have me 17 define what is meant by definition? 18 Answer: At least loosely. 19 Question: What I mean by definition 20 is what you meant by definition when you said 21 that you wouldn't have answered this question 22 unless you had a definition of the word. 23 Answer: Common understanding -- I 24 used the word common understanding, and I'll 25 stick with that. 5442 1 Question: In 1996 was there a common 2 understanding of what was meant by Internet 3 software? 4 Answer: In a context-free sense, 5 absolutely not. 6 Question: Was there a common 7 understanding of what was meant by an Internet 8 browser? 9 Answer: The whole notion of what the 10 browser -- what features it would contain or 11 what it would mean or all that was very 12 uncertain in 1996. 13 Question: Let me ask you a different 14 question. 15 Do you believe that the publication of 16 this article and, in particular, the 17 publication of a statement attributed to you, 18 whether accurately attributed to you or not, 19 that quote, our business model works even if 20 all Internet software is free, close quote, 21 says Mr. Gates. Quote, we are still selling 22 operating systems. What does Netscape's 23 business model look like if that happens? Not 24 very good, close quote. 25 Do you believe that the publication of 5443 1 that statement affected Netscape? 2 Answer: I know when people have been 3 quoted in the press, competitors, saying how -- 4 what trouble Microsoft is in and how much 5 better their products are, that it's rarely had 6 a direct effect on our business. 7 I think somehow people rely on more 8 analytical observers. 9 MR. BOIES: I'll move to strike the 10 answer as nonresponsive. 11 Would you read the question again, 12 please? 13 (Requested portion of the record was 14 read.) 15 THE WITNESS: What do you mean 16 affected Netscape? 17 Question: Are you telling me that you 18 don't understand the question, sir? 19 Answer: Yes, that's what I'm saying 20 to you. 21 Question: Okay. By affected 22 Netscape, I mean adversely affected Netscape. 23 Answer: Like hurt their feelings, 24 somebody cried, or somebody in reading the 25 article smiled? 5444 1 Question: Are you saying that you 2 don't understand what I mean by adversely 3 affected Netscape? 4 Answer: No, I don't know what your 5 criteria is. 6 I think it's likely somebody may have 7 read it and disagreed with it. 8 Question: Do you think it adversely 9 affected Netscape's business prospects? 10 Answer: I think the general work that 11 we were doing to do strong Internet software 12 had an effect on Netscape, but I don't think 13 quotations like that had any direct effect. 14 Question: Now, you putting in the 15 word direct effect, and I know that you're a 16 very precise person from the statement you've 17 already made today. 18 So I'm going to ask you what you mean 19 by the use of the word direct there that you 20 put in the answer that wasn't in the question. 21 What do you mean by direct? 22 Answer: Well, I said earlier that 23 there are analytical observers like analysts, 24 and they tend to look at technology companies 25 and deliver pronouncements about them. 5445 1 And, you know, some of them will be 2 positive about a company, and some will be 3 negative about a company. 4 It's possible in looking at the 5 general activities of Microsoft, one of those 6 analysts formed a certain conclusion about 7 Netscape and published that conclusion and that 8 that might have had an effect. 9 And so you could say that analysts may 10 have had an effect. And analysts look at what 11 Microsoft does, primarily in the products, not 12 as much what we say is what we do in shipping 13 our products. 14 Question: What I'm asking you about, 15 of course, right now is the effect of what you 16 were saying or what was attributed to you. 17 And I do want to come to the effect 18 that your products had on Netscape as well. 19 But right now I want to talk about the 20 effect of what was attributed to you. 21 And what I'm asking you is whether you 22 believe that the publication of statements like 23 this attributed to you adversely affected 24 Netscape's business prospects. 25 Answer: I'm not aware of any specific 5446 1 effect. And my general experience is that when 2 competitors have made statements about us, that 3 doesn't have an effect, rather that the people 4 who do analysis or the actual products get 5 shipped are what cause effects on our business. 6 Question: Do you think that the 7 effect on Microsoft's business of competitors 8 saying things about Microsoft is comparable to 9 the effect on Netscape's business of Microsoft 10 saying things like this about Netscape? 11 Answer: Are we now talking about what 12 was published or what was said? 13 Question: Well, we're talking about 14 what was published here. 15 Answer: Okay. Well, then, stick to 16 that. 17 Question: That's what I am, sir, 18 because I understand that your testimony is 19 that you just don't remember saying any of 20 these quotations that these publications have 21 attributed to you. 22 Answer: No. 23 Question: That's why I'm asking about 24 what is written here because there's no doubt 25 -- you have no doubt that this was actually 5447 1 published, do you, sir? 2 Answer: I believe it was published. 3 Question: Okay. So at least we know 4 that The Financial Times published, quote, our 5 business model works even if all Internet 6 software is free, close quote, says Mr. Gates. 7 Quote, we are still selling operating systems. 8 What does Netscape's business model look like 9 if that happens? Not very good, close quote. 10 Now, I asked you whether you thought 11 that the publication of that adversely affected 12 Netscape's business prospects. And you then 13 gave me an answer that talked about the effect 14 on Microsoft of criticism of Microsoft. 15 Do you recall that? 16 Answer: Well, that wasn't all that I 17 said. We can read back what I said. 18 Question: If you would like to have 19 it read back, it's okay with me. I don't need 20 to have it read back. But if -- I've got as 21 much time as I need to finish the examination, 22 sir, and I'm prepared to spend as many days 23 here as I have to to do that. 24 I think the record is quite clear as 25 to what your answer was, and I think it is 5448 1 quite clear that you kept going back to 2 Microsoft's experience, and that's the only 3 point I'm trying to get you to focus on. 4 Now, do you recall that enough to 5 answer the question, or do we need to go back? 6 Either way's okay with me. 7 Answer: Go ahead and ask a question, 8 and then I'll decide. 9 Question: Do you think -- because 10 you're the one that brought up the effect on 11 Microsoft of criticism. 12 Do you think that the effect on 13 Microsoft of criticism of it is comparable to 14 the effect on Netscape of a publication of 15 statements attributed to you like, quote, our 16 business model works even if all Internet 17 software is free, close quote, says Mr. Gates. 18 Quote, we are still selling operating systems. 19 What does Netscape's business model look like 20 if that happens? Not very good, close quote. 21 Answer: So you're supposing a case 22 where I personally criticized Microsoft? 23 Question: I'm not supposing anything 24 at all, sir. 25 Answer: That's what you suggested. 5449 1 Question: No. Sir, let me try to be 2 clear. And perhaps I'm not being clear. 3 Answer: Who's doing the criticism in 4 your hypothetical? 5 Question: Well, I think the only 6 person that has mentioned the word criticism 7 today is you; that I think it came out of your 8 answer when you were talking about criticism of 9 Microsoft. 10 Now, if I've misremembered your 11 testimony about that, I will stand corrected by 12 the record. 13 But my recollection is that I asked 14 you whether you thought the publication of 15 statements like this would adversely affect 16 Netscape's business prospects. 17 And my recollection is that you gave 18 me an answer, a substantial portion of which 19 included a statement that it had been your 20 experience that criticism of Microsoft didn't 21 really affect your business. 22 Answer: No, I didn't say that. I 23 said statements by competitors, whether 24 critical or otherwise, I didn't think explained 25 what happened to our business, but, rather, 5450 1 other factors could explain what happened to 2 our business. 3 Question: Okay. Let me use 4 statements. And if I misremembered the word 5 criticism, I apologize. 6 Do you think that the effect on 7 Microsoft's business of statements about 8 Microsoft by its competitors is comparable to 9 the effect on Netscape's business of the 10 publication of statements like, quote, our 11 business model works even if all Internet 12 software is free, close quote, says Mr. Gates. 13 Quote, we are still selling operating systems. 14 What does Netscape's business model look like 15 if that happens? Not very good, close quote. 16 MR. NEUKOM: If you read that one more 17 time -- that's seven times. Come on. 18 MR. BOIES: I wish this question had 19 been answered simply. I think it could have 20 been. 21 Answer: I gave you a very simple 22 answer that I was not aware of any effect on 23 their business by the publication. 24 Question: And that may have answered 25 my question, sir. 5451 1 But because I know that you're a 2 person that uses words very precisely, I need 3 to be sure that we haven't missed something 4 between the question and the answer. 5 My question was whether you believed 6 that this publication affected Netscape's 7 business prospects. 8 You said you didn't know of any 9 effect. 10 And I just wanted to be sure that your 11 answer was meant to apply to the full breadth 12 of my question. 13 Answer: The full breadth of your 14 question? 15 Question: Yes, sir. And if that's 16 confusing to you, as I say, I will put the 17 question as many times as I need to to be sure 18 that I get it clear to you. 19 My question -- and unfortunately, I'm 20 going to have to quote it again. 21 MR. HEINER: There's no need. There's 22 really no need. 23 Question: But my question, sir, is 24 whether you believe that the publication of 25 statements like the statement in The Financial 5452 1 Times that, quote, our business model works 2 even if all Internet software is free, close 3 quote, says Mr. Gates. Quote, we are selling 4 operating systems. What does Netscape's 5 business model look like if that happens? Not 6 very good, close quote, adversely affects 7 Netscape's business prospects. 8 Answer: I told you, I'm not aware of 9 any effects on Netscape by the publication of 10 that statement. 11 Question: Have you finished your 12 answer? 13 Answer: Yes. 14 THE COURT: At this time -- could you 15 stop it, please? 16 There's a problem with her real time, 17 so she has to work on that. 18 So it's probably a good time for a 19 break. 20 We'll take a 10-minute recess and 21 we'll come back. 22 If you could start it a few lines, if 23 you want. 24 Remember the admonition. 25 All rise. 5453 1 (A recess was taken from 10:03 a.m. 2 to 10:21 a.m.) 3 THE COURT: Ladies and gentlemen, 4 there was a question by one of the jurors and I 5 neglected to address it in regard to Blackbird. 6 The question will be answered during 7 the course of the trial, okay? 8 Now, we're back. 9 (Whereupon, the following video was 10 played to the jury.) 11 Question: Do you believe that the 12 publication of that statement adversely affects 13 Netscape's business prospects, whether you are 14 aware of precisely what those effects are or 15 not? 16 Answer: Well, I'm not absolutely 17 sure, but I did explain to you that in the 18 analogous situation the effect has not come 19 from that but from other factors. 20 Question: And what is the analogous 21 situation that you refer to? 22 Answer: Statements by competitors 23 about Microsoft. 24 Question: And do you believe that 25 statements by competitors about Microsoft are 5454 1 analogous in terms of their effect on Microsoft 2 to statements like this about Netscape? 3 Answer: I'm not absolutely sure what 4 you mean by like this, but in general, yes. 5 Question: By like this, I mean the 6 quotation The Financial Times article. 7 Answer: I don't know what it means to 8 be like that. 9 Question: Is that because you don't 10 understand the word like or because you don't 11 understand what it means to be like something? 12 Answer: Neither. 13 Question: What is it then? 14 Answer: I stated in quite a broad way 15 that statements by competitors about us have 16 not been a factor to explain future 17 developments in our business prospect, but 18 rather other factors explain any changes in our 19 business prospects. And I'll say that broadly 20 about competitive statements by competitors. 21 Question: Statements by competitors 22 about Microsoft? 23 Answer: That's right. 24 Question: Now, what I'm asking about 25 is not statements about Microsoft by 5455 1 competitors. But I'm asking about statements 2 about Netscape. And the question that I most 3 recently asked that I thought was simpler than 4 it is turning out to be is whether you believed 5 that statements about Microsoft by its 6 competitors would have an analogous effect on 7 Microsoft to statements like the one published 8 in The Financial Times in 1996 in June that 9 we've been looking at. 10 MR. BOIES: Let me see if I can bring 11 it to a close because I don't think this should 12 be as difficult as it appears to have become. 13 And let me see if I can identify what I think 14 we're in agreement on. 15 Question: The statement was published 16 in The Financial Times, correct? 17 Answer: I think it was. 18 Question: You have said that 19 statements that have been published about 20 Microsoft by its competitors do not, in your 21 view, adversely affect Microsoft's business; 22 correct? 23 Answer: Yeah. I've said that other 24 factors like what happens with products or 25 other observers less directly involved in my 5456 1 view explain whatever change in our business 2 prospects happen. 3 Question: Now, my question is whether 4 you believe that that is true for Netscape as 5 well; that is, that statements about Netscape 6 by its competitors, including Microsoft, do not 7 affect Netscape's business prospects. 8 Answer: Well, I think it's pretty 9 hard -- you know, you don't have a world where 10 you can say hold everything else the same; the 11 analysts' comments, what happens with products 12 and just take out one thing. 13 So your whole notion here that I'm 14 supposed to ascribe to you as certain 15 cause-and-effect relationships is really quite 16 absurd. 17 Question: Well, let me ask you a 18 question, Mr. Gates. Do you have any doubt 19 that the publication of this statement 20 attributed to you in The Financial Times 21 adversely affected Netscape's business 22 prospects? 23 Answer: In the world I live in, 24 people look to unbiased observers to judge 25 things about products and financial prospects 5457 1 and things of that nature. 2 But we're not going to be able to run 3 the experiment of keeping everything the same 4 and having the world with some statement and 5 the world without some statement and determine 6 the ultimate cause and effect. 7 Question: Would you read the question 8 back, please. 9 (Requested portion of the record was 10 read.) 11 Question: May I have an answer to 12 that, please, sir? 13 Answer: I told you before I'm not 14 aware of any effect on Netscape's business 15 prospects by that statement. 16 Question: My question right now is 17 whether you have any doubt that there were such 18 effects; that is, do you have any doubt that 19 regardless of whether you can identify them as 20 you sit here now and tell me what they are, do 21 you have any doubt that your being said to have 22 said these words hurt Netscape's business 23 prospects? 24 Answer: I think while we can't run 25 the experiment that held everything else the 5458 1 same, that is, the comments of analysts, the 2 quality of products, all those things going on, 3 and didn't have that comment published, that 4 their business prospects would have been the 5 same. 6 That's my belief, but we don't get to 7 run that experiment. 8 Question: Do you believe that the 9 publication of statements like this by you or 10 statements like this attributed to you affected 11 what analysts wrote about Netscape? 12 Answer: Analysts do their own 13 thinking and come to their own conclusions. 14 They might look at statements in order to 15 consider various hypotheses. But they're 16 particularly good at ignoring statements made 17 about one company who's competing with another 18 company. 19 Question: Does that mean that it's 20 your testimony that you believe that analysts 21 analyzing Netscape would have ignored this 22 statement attributed to you? 23 Answer: No. I didn't say that. I 24 said it might get them to consider. I said the 25 opposite. In fact, I said it might get to 5459 1 consider certain hypotheses, but they would do 2 their own thinking and come to their own 3 conclusions based on factors completely 4 independent of that. 5 They're in the business of talking 6 about objective analysis. 7 Question: Is one of the objective 8 analyses that they're in the prospect or 9 business of doing -- is figuring out what the 10 effect of Netscape is going to be if certain 11 actions that Microsoft takes? 12 Answer: A financial analyst who's 13 assigned to Netscape would have that as one of 14 the things they would do. 15 Question: And did you in 1996 make a 16 conscious effort to try to affect what 17 financial analysts analyzing Netscape did and 18 thought? 19 Answer: I personally didn't, no. 20 Question: Did Microsoft? 21 Answer: Microsoft, I'm sure, made 22 analysts aware of what we were doing with our 23 products, including the innovative work we were 24 doing. And I'm sure that had an effect. 25 Question: Did you or others at 5460 1 Microsoft, to your knowledge, do things with 2 the purpose of affecting what analysts 3 analyzing Netscape wrote or thought? 4 Answer: Well, our primary focus is 5 going out and talking about our products and 6 what they do for customers. 7 If the customer or the analyst asks us 8 a question about Netscape or asks for a 9 comparison, it's not unusual to give them an 10 answer. 11 Question: Did you or, to your 12 knowledge, others at Microsoft, do things for 13 the purpose of affecting what analysts 14 analyzing Netscape wrote or thought? 15 Answer: We certainly let people know 16 about the good work we were doing. The primary 17 purpose of that wasn't to affect Netscape, but 18 certainly one of its effects would have been to 19 affect how they viewed the competition between 20 Microsoft and Netscape. 21 Question: In addition to talking 22 about your good works, was one of the purposes 23 of talking about giving away Internet software 24 for free to affect the way analysts looked at 25 Netscape? 5461 1 Answer: Well, I doubt you can ascribe 2 too much effect purely to the talking about it. 3 Question: I would certainly agree 4 that the fact that you did it and talked about 5 it was a lot more effective than just talking 6 about it. 7 But right now I am focusing on the 8 talking about it. 9 Answer: That's again one of these 10 experiments we can't run where you say what if 11 we refuse to answer all questions about 12 Netscape, but we did what we did. My view is 13 that the work and the products and everything, 14 that the talking is not the key element in how 15 our business prospects or other people's 16 involved. 17 Question: Do you think, Mr. Gates, 18 that Microsoft's giving away of its Internet 19 Explorer browser for free adversely affected 20 Netscape's business? 21 Answer: Well, as I've said earlier, 22 we don't give away all the aspects of the 23 browser. 24 We do let Windows users have the 25 browsing functionality as part of Windows, but 5462 1 we derive significant revenue from things like 2 the search button and the home page. 3 Question: Have you told people that 4 Microsoft was going to give the browser away 5 for free and that indeed it would be forever 6 free? 7 Answer: I said that it would be a 8 feature of Windows and available to people who 9 used Windows. In that sense, yes. 10 Question: Well, you may have said 11 that. But what I'm now asking you about is 12 whether you also said that Microsoft was going 13 to give the browser away for free and that it 14 would be forever free. 15 Did you say that, sir? 16 Answer: When I was talking about 17 Windows and the future of Windows, I did say 18 that was one of the features that would come in 19 Windows at no extra charge and that it wouldn't 20 become an extra charge feature. 21 Question: You may very well have said 22 that, and I accept that you said that. 23 But my question to you, sir, is 24 whether you said that Microsoft was going to 25 give the browser away for free and it would be 5463 1 forever free. 2 Did you say that? 3 Answer: I don't know why -- what 4 distinction you're drawing. 5 Question: I'm talking about the 6 statement. 7 Answer: The word the browser when I 8 talked about it being free and forever free was 9 talking about the browser functionality of 10 Windows. 11 Question: Okay. 12 But when you talked about it, you used 13 the word browser not browser functionality; 14 correct, sir? 15 Answer: I don't remember the exact 16 words. It's very possible I used that 17 shorthand. 18 Question: And you talked about the 19 browser being forever free, did you not, sir? 20 Answer: Are you asking me about exact 21 words? 22 Question: Yes. I'm asking you about 23 exact words. 24 Answer: Or are you asking me to 25 explain what I said? 5464 1 Question: I'm asking you about the 2 exact words. Did you say the exact words that 3 the browser was going to be forever free? 4 Answer: If you're asking me about 5 exact words, I don't recall the exact words 6 that were used. 7 Question: Is it your testimony that 8 you do not, as you sit here now, recall saying 9 that the browser would be forever free? 10 Answer: Those exact words? 11 Question: Those exact words. 12 Answer: I would want to see the 13 context and be reminded about that. I don't 14 remember using those exact words. 15 Question: Okay. 16 Do you remember using the words 17 forever free, those exact words? 18 Answer: Those two words? 19 Question: Yes. 20 Answer: I'm sure I used those before 21 I was five years old. 22 Question: Really? With respect to 23 what? 24 Answer: Forever free. I wanted to be 25 forever free. 5465 1 Question: All right. Did you ever 2 use those with respect to the browser? 3 Answer: If you're asking is there a 4 sentence that if you did a string search would 5 have exactly those words in it, I'm not sure. 6 I did say that we would keep -- I did deliver 7 that intent; that is, that the browsing 8 functionality in Windows was not something that 9 we intended at some time in the future to 10 charge extra for. 11 Question: And what you're telling me 12 is you don't remember whether you just used the 13 words forever free? That's what you're saying? 14 Answer: I may have. 15 Question: You may have? 16 Answer: The general notion of the 17 Windows browser functionality staying free in 18 the future was certainly communicated by me. 19 Question: Okay. Thank you. 20 In 1996 did you believe that Netscape 21 posed a serious threat to Microsoft? 22 Answer: They were one of our 23 competitors. 24 Question: Were they a serious 25 competitor in your view, sir? 5466 1 Answer: Yes. 2 Question: Did you believe that 3 Netscape's browser was a serious threat to your 4 -- that is Microsoft's -- operating system's 5 business? 6 Answer: Well, you have to think about 7 what work we were going to do to improve our 8 software and then what Netscape and others were 9 going to do to improve their software. You 10 can't just look at it statically. It's more 11 the work than -- the new things you do than the 12 history. 13 Question: Did you believe that by 14 1996, that Netscape and Netscape's Internet 15 browser was a serious alternative platform to 16 the platform represented by Microsoft's Windows 17 operating system? 18 Answer: Well, as was articulated by 19 Marc Andreessen and other people from Netscape, 20 if we didn't do new product work, that was a 21 very likely outcome. 22 Question: What was a very likely 23 outcome? 24 Answer: That the value of the Windows 25 platform would be greatly reduced. 5467 1 Question: Did you believe that it was 2 in Microsoft's interest to convince financial 3 analysts that Netscape was not going to be 4 financially viable? 5 Answer: I never had a goal to do 6 that, and my only comments about Netscape's 7 business would have come in response to direct 8 questions about that topic from reporters. 9 Question: Well, let me ask you to 10 look at what has been previously marked as 11 Exhibit 354, which is a memorandum from you in 12 May of 1996. And the last paragraph begins, 13 quote, at some point financial minded analysts 14 will begin to consider how much of a revenue 15 stream Netscape will be able to generate, 16 closed quote. 17 Why was that important to you in this 18 internal memorandum, which, obviously, is not 19 something which you're merely responding to a 20 reporter's inquiry, but it is something that is 21 involved in your internal deliberations within 22 Microsoft? 23 Answer: Who said it was important? 24 It doesn't say -- I mean, it's one of many 25 sentences in the memo. 5468 1 Question: Is it your testimony that 2 this is an unimportant sentence, sir? 3 Answer: I don't think it's any more 4 important than any of the other sentences in 5 here. 6 Question: Is it any less important 7 than any of the other sentences? 8 Answer: Yeah. It's not germane to 9 the primary topic of the memo. 10 Question: If it wasn't germane to the 11 primary topic of the memo and if it wasn't 12 particularly important, why did you include it, 13 Mr. Gates? 14 Answer: It's merely an observation 15 that I put into this rather extensive memo that 16 talks about our plans in doing innovative 17 products and, it's tacked on as the last 18 paragraph. And you didn't read the whole 19 paragraph, but it says at some point. So it 20 seems to be a prediction about that. 21 Question: Yes, I agree, it seems to 22 be a prediction. And I think I did read the at 23 some point. 24 But my point to you is this is a 25 memorandum that you were sending to a number of 5469 1 the top executives of Microsoft; correct, sir? 2 Answer: All product people. 3 Question: Well, let's see. We have 4 Mr. Ballmer. 5 Answer: It's not to him. 6 Question: He's getting a copy? 7 Answer: That's right. 8 Question: Okay. 9 And what was Mr. Ballmer's position in 10 May of 1996? 11 Answer: Executive vice president. 12 Question: How many executive vice 13 presidents did Microsoft have at that time? 14 Answer: One, two, three, four. 15 Question: And who were the others? 16 Answer: Bob Herbold, Pete Higgins, 17 and Paul Maritz -- no, no, no. Maybe -- no, I 18 think it's just four. 19 Question: So that this memorandum 20 went to all four of the executive vice 21 presidents; correct, sir? 22 Answer: It went to Paul Maritz. It 23 was copied to the other people there. 24 Question: It was either addressed or 25 copied to all four of the executive vice 5470 1 presidents? 2 Answer: They're among the recipients, 3 yes. 4 Question: Let's go through who the 5 other recipients are. 6 It is addressed to executive vice 7 president Paul Maritz. And below you at this 8 time, was executive vice president the highest 9 position in the company? 10 Answer: Yes. 11 Question: Okay. And beneath 12 executive vice presidents, what was the next 13 level? 14 Answer: Senior vice presidents. 15 Question: And how many senior vice 16 presidents were there? 17 Answer: I couldn't tell you. I could 18 -- we could do the range thing if you want. 19 Question: Okay. That would be good. 20 Answer: About three to nine. 21 Question: Okay. 22 Can you be any more -- 23 Answer: I'd say six to nine. 24 Question: Okay. Let's go through the 25 people who got this memo. It's addressed to 5471 1 executive vice president Paul Maritz. 2 Answer: Actually, his name is 3 misspelled, but yes. 4 Question: What was Brad Silverberg's 5 position? 6 Answer: I think he was a senior vice 7 president, but he worked for Paul and did a lot 8 of the development of software that went into 9 Windows. 10 Question: And he was one of the 11 addressees of this memo. 12 Answer: That's right. It goes 13 Maritz, and then he's the second person on the 14 to line. 15 Question: And the third person to 16 whom it's addressed is Jim Allchin; is that 17 correct? 18 Answer: That's right. 19 Question: What was his position? 20 Answer: Senior vice president of the 21 core Windows development. 22 Question: And the next person to whom 23 it's addressed is Brad Chase. And what is his 24 position? 25 Answer: At that time or at this time? 5472 1 Question: At that time. 2 Answer: At that time he worked for 3 Brad Silverberg managing our relationships with 4 ISVs broadly defined and some of the marketing 5 activities. 6 Question: Did he have a position like 7 vice president? 8 Answer: Oh, I'm sorry. He was a vice 9 president. 10 Question: The next person to whom 11 it's addressed is Rich Tong. 12 Answer: He was a vice president with 13 an analogous person to Brad Chase, but working 14 for Jim Allchin. 15 Question: And the next person is John 16 Ludwig. 17 Answer: He was a -- I'm pretty sure 18 he was a vice president at this time working 19 for Brad Silverberg. 20 Question: Now, copies of the memo go 21 to executive vice presidents Ballmer, Herbold, 22 and Higgins; is that correct? 23 Answer: If I've got those titles 24 right. 25 Actually, now that I think about it, I 5473 1 think Paul and Pete were actually called group 2 vice presidents. And -- yeah, they're called 3 group vice presidents, which maybe nobody but 4 me knows this, but actually numerically that's 5 one number lower than executive vice president. 6 Question: Okay. We'll keep this 7 highly confidential. 8 And then it goes to a variety of other 9 people that, I assume, hold at least in the 10 main significant positions in the company; is 11 that fair? 12 Answer: No. 13 Question: Okay. Then let's go 14 through them. 15 The copies are Steve Ballmer. He was 16 an executive vice president? 17 Answer: Yeah. If you want, I'll just 18 go through it. 19 Question: Okay. That would be great. 20 Answer: Herbold, executive vice 21 president; Jeff Raikes, senior vice president 22 of -- involved in U.S. activities working for 23 Steve; Bernard, who at the time ran some of the 24 sales in Europe working for Steve; Joachim -- 25 Question: And if you could, just give 5474 1 his title. 2 Answer: Bernard actually had an 3 exciting title. He was the chairman of Europe 4 and also senior vice president. But he liked 5 -- on his card he carried the one that said 6 chairman of Europe. Joachim Kempin, senior 7 vice president; Pete Higgins, group vice 8 president; Nathan -- Nathan's also a group vice 9 president at this time, I think. Aaron is a -- 10 Question: You need to give the full 11 name just for the record. 12 Answer: I'm sorry. Aaron Contorer is 13 an assistant. Steve Sinofsky was an assistant. 14 Actually, I don't know which of those was an 15 assistant working for me at the time. And Ben 16 Slivka and Chris Jones were two developers. 17 Question: When you say they were 18 assistants, they were assistants to you? 19 Answer: Yeah. 20 Question: Is it fair to say that you 21 meant this memorandum to be taken seriously by 22 the people to whom it was sent? 23 Answer: No more seriously than other 24 E-mail and memorandums I sent them, but yes, 25 seriously. 5475 1 Question: Well, now, again, because I 2 know that you're a very precise in your use of 3 words, you've drawn distinctions before between 4 E-mails and memoranda; correct, sir? 5 Answer: That's right. 6 Question: In fact, you did so today 7 several times when you were being questioned; 8 correct, sir? 9 Answer: I drew a distinction between 10 E-mail being called memoranda. 11 Question: Right. You didn't like 12 E-mails being called memoranda because you 13 thought E-mails didn't rise to the level of 14 memoranda; is that right? 15 Answer: I didn't suggest a hierarchy, 16 I just suggested a distinction. 17 Question: Is there a hierarchy in 18 your mind? 19 Answer: No. But there's a 20 distinction. 21 Question: Are memoranda more formal 22 and more serious than E-mails? 23 Answer: No. I'd say they're longer 24 and more thoughtful than most E-mail. 25 Question: Now what we're looking at 5476 1 here is one of the longer, more thoughtful 2 documents, that is, a memorandum; correct? 3 Answer: Right. 4 Question: And in that longer, more 5 thoughtful memorandum in the final paragraph 6 you write, at some point financial minded 7 analysts will begin to consider how much of a 8 revenue stream Netscape will be able to 9 generate. 10 Now, what was the significance of that 11 to you at the time, sir? 12 Answer: It was a fact that I stated 13 in the memo. 14 Question: Well, it clearly is a fact 15 that you state in the memo. But my question to 16 you, sir, is: What was the significance to you 17 of that fact? 18 Answer: I'm not sure what you mean by 19 that. 20 Question: In 1996 at the time that 21 you wrote this memorandum, what was the 22 significance to you of the fact that, quote, at 23 some point financial minded analysts will begin 24 to consider how much of a revenue stream 25 Netscape will be able to generate? 5477 1 Answer: I think it must have referred 2 to the fact that Netscape was at this point a 3 public company. 4 Question: And can you explain what 5 you mean by that? 6 Answer: Well, usually you don't have 7 financial analysts for private companies. 8 THE COURT: Ladies and gentlemen, 9 we're going to take our recess for lunch. 10 Please remember the admonition 11 previously given. We'll resume at noon and 12 we'll see you then. 13 All rise. 14 (A recess was taken from 10:53 a.m. to 15 11:57 a.m.) 16 (The following record was made out of 17 the presence of the jury.) 18 MS. NELLES: I think we were supposed 19 to receive a further update on the status of 20 the expert materials. You had asked Mr. 21 Gralewski to provide that this morning, and we 22 still haven't received it so I'm hoping we can 23 get that from Plaintiffs before we leave today. 24 THE COURT: Okay. 25 MS. CONLIN: I can do that very 5478 1 briefly, Your Honor. 2 Everything except for one or two will 3 be done today, and the one or two that are not 4 done today will be done tomorrow. 5 THE COURT: Do you know which ones? 6 MS. CONLIN: I do not, Your Honor. 7 I'm sorry. I just spoke with Mr. Hagstrom on 8 the telephone. 9 MS. NELLES: I think we were 10 specifically supposed to get a report on 11 volume. 12 MS. CONLIN: On what? 13 MS. NELLES: The volume, volume of 14 materials. 15 MS. CONLIN: I'm sorry that I cannot 16 provide that. 17 THE COURT: At the break, we'll get in 18 touch with Mr. Whoever, Gralewski or Hagstrom, 19 and we'll find out. 20 MS. CONLIN: Yes, Your Honor. 21 MS. NELLES: Thank you, Your Honor. 22 THE COURT: Anything else? 23 MS. CONLIN: I have provided the Court 24 with two things. 25 One is our motion to allow the 5479 1 presentation of evidence to the jury in a 2 logical issue-by-issue order and the other is 3 something else. 4 Do you have something else up there, 5 Your Honor? 6 THE COURT: Where did you put it? 7 MS. CONLIN: Right on top of your 8 stuff. I wish I could remember what it was. 9 THE COURT: Anthony Speakman? 10 MS. CONLIN: I beg your pardon? 11 THE COURT: Something about Anthony 12 Speakman? 13 MS. CONLIN: Yes. 14 THE COURT: And there was another 15 motion, too, another -- 16 MS. CONLIN: Yes, Your Honor. I gave 17 it to Carrie. 18 Let me just give it to Your Honor. 19 I've got plenty of copies. And I've given one 20 to Sharon. 21 This is the issue of whether or not we 22 are going to be allowed to split the testimony. 23 MS. NELLES: Did you give me the 24 Speakman motions, Roxanne? You gave me the 25 other one but not the Speakman one. I only 5480 1 received -- 2 MS. CONLIN: I think I only had one 3 copy of that I assumed that you already had it. 4 THE COURT: Speakman one? 5 MR. TULCHIN: Maybe it was served in 6 the office. 7 MS. NELLES: Unless it was served in 8 the office, but we haven't seen it. 9 THE COURT: Do you want Carrie to make 10 you a copy? 11 MS. CONLIN: Whoever is doing it, no 12 doubt has it. 13 THE COURT: I could have her make a 14 copy. 15 MS. NELLES: Okay. That would be 16 great. 17 And, Your Honor, I gave Carrie our 18 opposition papers on two outstanding motions. 19 One came in a binder. 20 THE COURT: Oh, it's up there. This 21 has got exhibit tab. I guess you can just mark 22 on there what they are. I don't know if that 23 will go through the copier. 24 THE CLERK: All rise. 25 (The following record was made in 5481 1 the presence of the jury.) 2 THE COURT: Everyone else may be 3 seated. 4 Carrie is going to get the lights. 5 (Whereupon, the following video was 6 played to the jury.) 7 Question: I'm not sure I understand 8 your answer. 9 In this memorandum, you say, at some 10 point financial minded analysts will begin to 11 consider how much of a revenue stream Netscape 12 will be able to generate. 13 What is the significance of that fact 14 to you, or what was the significance of that 15 fact to you in 1996? 16 Answer: Well, I can't reconstruct my 17 state of mind in 1996. But I think it's a fact 18 of almost no significance at all. 19 Question: Why would you have put a 20 fact that you say has no significance at all? 21 Answer: I didn't say that. 22 Question: What did you say? 23 Answer: I said almost. 24 Question: Almost no significance at 25 all. 5482 1 Why would you put a fact that, 2 according to you, had almost no significance at 3 all in what you have described as this longer, 4 more thoughtful memorandum to what looks to me 5 to be like most of the very top executives of 6 your company? 7 Answer: I wrote a memo about our 8 products and some of the good things we were 9 doing in our products. 10 I think you can point to a lot of 11 different sentences in here and try and drill 12 in on it and overstate its -- the significance 13 of an individual sentence. 14 Question: And I am, as you say, I'm 15 drilling in on this particular sentence. But 16 what I'm asking you is if this particular 17 sentence has, as you put it, almost no 18 significance at all, why would you put it in 19 this memorandum that you describe as one of the 20 longer, more thoughtful type of communications 21 within your company addressed to the very top 22 executives of your company? 23 Answer: I write lots of things that 24 we would call memoranda. And I'm sure we can 25 pick a lot of sentences in a lot of my 5483 1 memoranda, and you can say to me, isn't it 2 awful that that sentence doesn't have more 3 significance, and I'll say fine. That -- you 4 know, I don't require that every sentence in 5 every memoranda I write have deep significance. 6 Question: Does that complete your 7 answer to my question? 8 Answer: Yes. 9 Question: In 1996, regardless of what 10 significance you attribute to this particular 11 sentence, was it significant to you how 12 financial analysts viewed Netscape? 13 Answer: Well, the thing -- that's not 14 what we thought about when we thought about the 15 competition with Netscape or the emerging 16 demands for Internet capabilities coming from 17 our customers. 18 Question: My question to you, sir, 19 was, did it matter to you what financial 20 analysts thought of Netscape? 21 Answer: I'm sure there were people 22 here who read what the financial analysts 23 wrote, or some of them, in order to learn more 24 about Netscape. 25 Question: Yes. I will accept that 5484 1 that is so. 2 Answer: So we would learn from them. 3 Question: Was it significant to you 4 what they thought not for the purpose of 5 learning things from them, but was it 6 significant to you what they thought about 7 Netscape? 8 And just to be clear, because I know 9 you're very precise with words, was it 10 significant to you what financial analysts 11 thought about Netscape? 12 Answer: Well, I'd say the thing -- 13 I'd say if we're trying to say what is -- rank 14 things in terms of significance, I'd say that 15 would be about the most insignificant thing I 16 can think of. 17 Question: Did you ever tell anybody 18 within Microsoft that you thought it was 19 important what financial analysts thought about 20 Netscape? 21 Answer: No. I don't think I've ever 22 said anything like that. 23 Question: Not in words or in 24 substance. 25 Answer: Well, you keep trying to draw 5485 1 the distinction. I did think it was important 2 for us to learn about Netscape from different 3 sources, and analysts would have been one of 4 those sources. And somehow you've -- you've 5 thrown that away, the fact that that was a 6 source of learning. 7 Question: I didn't mean to throw it 8 away. I'm simply focusing on a different 9 issue. 10 Answer: How can you separate out the 11 two issues? 12 Question: Let me try to be clear. 13 Perhaps my question has not been clear, and I 14 need to be clearer about it. 15 In 1996, did you want, desire, 16 financial analysts to have a poor or 17 pessimistic or negative view about Netscape? 18 Answer: Well, as we, during 1996, 19 were improving our product and demoing our 20 products and talking about what we thought 21 customers were interested in, there were 22 several elements of feedback that we'd get, 23 including what customers were saying about our 24 Internet strategy and our Internet products, 25 and the analysts, likewise, were a form of 5486 1 feedback. And so they were saying -- or 2 customers were saying, jeez, we think your 3 efforts aren't what customers want and we think 4 Netscape or some other company has a strong 5 strategy that matches what they want, that 6 would be a piece of feedback to us to go back 7 and work on aspects of our software products. 8 So in that sense, we were interested 9 because it might help us see where we were in 10 terms of meeting those customer needs. 11 Question: Let me try again. 12 My question does not relate to what 13 you wanted to learn from financial analysts. 14 My question is whether you wanted to affect 15 what financial analysts thought to make 16 financial analysts think in a negative or 17 pessimistic way about Netscape. 18 Did you want that, sir, in 1996? 19 Answer: Well, in order to get 20 feedback from customers and analysts, we would 21 show them our products, demonstrate them or 22 show the ones we were shipping. 23 And we felt, you know, showing 24 customers or demonstrating what we were doing 25 to them or analysts was a valuable way to 5487 1 benchmark where we were. 2 And so if their response was, wow, 3 that's so incredible, that's the best thing 4 I've seen, then that was a valuable piece of 5 feedback. 6 Or if they said, that's quite 7 inferior, that was a valuable piece of 8 feedback. And so in that sense, it was useful. 9 Question: Let me try to see if I can 10 clarify my question because I may not be being 11 clear. 12 First, I'm not talking about customers 13 now. I'm talking about financial analysts. 14 Second, I'm not talking about your 15 desire to get feedback about your products. 16 What I'm talking about is whether you 17 wanted to make financial analysts feel negative 18 or pessimistic about Netscape's business 19 prospects. 20 Did you want that in 1996? 21 Answer: I don't have any control over 22 what analysts think. As far as I know, they -- 23 they take the facts about the products and they 24 go out and talk to customers and look at what's 25 going on in order to form their opinions. 5488 1 So it seems like a really bizarre 2 question. 3 They do their own thinking and form 4 their own opinion. They might meet with 5 Microsoft to get our view on what we're doing 6 in products and how customers are responding to 7 that. 8 I personally basically don't meet with 9 financial analysts or talk with financial 10 analysts with the sole exception of the 11 once-a-year analysts day that Microsoft has 12 had. 13 Question: My question, sir, is what 14 you wanted to accomplish with financial 15 analysts. It's not about whether you did it 16 personally or whether Microsoft did it with 17 somebody else. It is what you wanted to 18 accomplish. 19 And what I'm asking you is: Did you 20 want to bring about a state of affairs where 21 financial analysts developed a negative or 22 pessimistic view about Netscape's business 23 prospects? 24 Answer: Our focus was doing great 25 software products. And that focus might have 5489 1 had the indirect effect of influencing those 2 people's opinion. But our focus was building 3 those products and getting feedback to guide us 4 in doing a good job in building those products. 5 Question: Now, my question now is not 6 about what your focus was and it's not about 7 indirect effects. 8 It is about what you wanted. It is 9 about your intent. It is about what you were 10 trying to accomplish. 11 Were you in 1996 trying to get 12 financial analysts to develop a more negative 13 and more pessimistic view about Netscape's 14 business prospects? 15 Answer: Except through the indirect 16 effect of them seeing how customers received 17 our products and our product strategies, that 18 was not a goal. 19 Question: If that was not a goal, 20 sir, why did you say in substance that the 21 Internet browser would be forever free? 22 Answer: That was a statement made so 23 that customers could understand what our intent 24 was in terms of that set of technologies and 25 how it would be a part of Windows and not an 5490 1 extra cost item, and so people would have that 2 information in making their decisions about 3 working with us on Windows. 4 Question: Now, is it your testimony 5 that when Microsoft told the world that its 6 browser would be forever free, that the desire 7 to affect financial analysts' view of Netscape 8 played no role in that decision? 9 Answer: I can be very clear with you. 10 The reason we told people that it would be 11 forever free was because that was the truth. 12 That's why we told them that, because it was 13 the truth. 14 Question: Now, Mr. Gates, my question 15 to you -- 16 Answer: That's the sole reason we 17 told them. 18 Question: And my question to you is 19 whether whether or not the truth was, in part, 20 due to your desire to adversely affect 21 financial analysts' view of Netscape. Did that 22 play any role, sir? 23 Answer: You've been asking me a 24 question several times about why did we say 25 something. We said it because we thought our 5491 1 customers would want to know and because it was 2 the truth. And that explains our saying it 3 completely. 4 Question: And what I'm asking you, 5 sir -- and it may be that the answer to my 6 question is, no, it played no role. But if 7 that's your answer, I want to get it on the 8 record. And my question -- 9 Answer: Are you talking about saying 10 it? 11 Question: Yes. 12 Answer: Or how we came up with our 13 decision about how to price our products? 14 Question: Let's take it each step at 15 a time, one step at a time, so that your 16 counsel doesn't say I'm asking you a compound 17 question, okay? 18 And first let's talk about saying it. 19 I know you're telling me it was the truth. In 20 addition to it being the truth, did the fact 21 that this would, in your view, adversely affect 22 the view of financial analysts of Netscape play 23 any role at all in your decision to announce 24 that your browser would be forever free? 25 Answer: I actually think that came up 5492 1 in response to some questions that people asked 2 in an event we had on December 7, 1995. So it 3 wasn't so much a question of our saying, okay, 4 we're going to go make this a headline, but 5 rather, that there were questions that came up 6 during that including our future pricing plans. 7 Question: This was a meeting on 8 December 7 of what year? 9 Answer: 1995. 10 Question: And was it attended by 11 people outside of Microsoft? 12 Answer: It was a press event. 13 Question: And prior to attending that 14 press event, had you made a decision that it 15 would be forever free? 16 Answer: Well, if you really want to 17 probe into that, you'll have to get into the 18 different ways that we made Internet technology 19 available. 20 In terms of what we were doing with 21 Windows 95 and its successors, yes. 22 In terms of some of the other ways 23 that we offered the Internet technologies, 24 there was some -- there hadn't been a clear 25 decision about that. 5493 1 Question: When you refer to other 2 ways that you offer Internet technologies, 3 would you explain for the record what you mean? 4 Answer: Oh, we created an offering 5 that ran on the Macintosh OS that offered some 6 but not all of the capabilities that we put 7 into Windows and used a common branding for 8 that. And we came up with a package that ran 9 on a previous version of Windows, Windows 3.1, 10 and made an offering of that. 11 Subsequently, I mean, not on that day, 12 but subsequently. 13 Question: And those were charged for; 14 is that what you're saying. 15 Answer: I'm saying that before the 16 December 7th event, it was clear to everyone 17 that in the Windows 95 and its successors, that 18 the browser technology would be free for those 19 users. 20 But it was unclear to people what we 21 were going to do with the other ways that we 22 packaged up the technologies. 23 Question: Would you read the question 24 back, please? 25 (Requested portion of the record was 5494 1 read.) 2 THE WITNESS: Well, they weren't 3 available. So if we're talking about December 4 7, 1995, it's not a meaningful question. 5 Subsequently, those products were made 6 available to the customer without charge, but 7 I'm saying that there was some lack of clarity 8 inside Microsoft even up to the event itself 9 about what we were going to do with those other 10 ways we were providing Internet Explorer 11 technology. 12 Question: Uncertainty as to whether 13 you would charge for them; is that what you're 14 saying? 15 Answer: That's right. 16 Question: Okay. 17 Prior to the December 7, 1995 meeting, 18 had a decision been made to advise the world 19 that not only would the browser be free, but it 20 would be forever free? 21 Answer: Well, it's always been the 22 case that when we put a feature into Windows, 23 that it remains part of Windows and doesn't 24 become an extra cost item. 25 So it would have been kind of a silly 5495 1 thing for anyone to ask including about that 2 particular feature. And by this time, of 3 course, browsing is shipping with Windows 95. 4 Question: Exactly sort of the point I 5 wanted to come to, Mr. Gates. 6 When you put things into the operating 7 system generally, you don't announce that 8 they're going to be forever free, do you? 9 Answer: Yes, we do. If anybody -- 10 Question: You do? 11 Answer: If anybody asks, that's 12 obviously the answer we give. 13 Question: Have you finished your 14 answer? 15 Answer: Yes. 16 Question: Okay. Okay. 17 Could you identify for me the products 18 other than browsers that Microsoft has 19 announced that they would be forever free, 20 expressly said, these are going to be forever 21 free? 22 Answer: As I said to you, I think 23 that actually came up only in response to some 24 questions. So it's not proper to ask me and 25 suggest that we announced it like it was some, 5496 1 you know, press release announcement or 2 something of that nature. 3 Question: Well, let me come back to 4 that aspect of it and just ask you for the 5 present. What products has Microsoft said 6 publicly, whether in response to a question or 7 otherwise, that these would explicitly be 8 forever free? 9 Answer: I've said that about the 10 broad feature set that's in Windows. 11 Question: When did you say that, sir? 12 Answer: Well, I remember an analyst 13 talking to me about that once at an analyst 14 meeting. 15 Question: When was that? 16 Answer: It would have been one of our 17 annual analysts meetings. 18 Question: When? 19 Answer: Not this year. Either last 20 year or the year before. 21 Question: Is there a transcript of 22 that analyst meeting? 23 Answer: Not with the conversation 24 with that analyst, no. 25 Question: There are transcripts of 5497 1 analysts meetings, aren't there, Mr. Gates? 2 Answer: Only of the formal Q and A, 3 not of the -- most of the Q and A, which is 4 where people are mixing around with the press 5 and analysts who come to the event. 6 Question: And this question that you 7 say happened happened after the transcript 8 stopped being taken; is that what you're 9 saying? 10 Answer: That's my recollection, yes. 11 Question: Is that the testimony this 12 happened in a cocktail hour? 13 Answer: I'm saying yeah in the 14 informal Q and A, not the formal Q and A. 15 Question: This was at a cocktail 16 hour? 17 Answer: Or a dinner or a lunch. 18 Question: Well, which was it. 19 Answer: I'm certain that it was in 20 the informal part of the Q and A. Exactly was 21 it on the way to the bathroom or the cookie 22 table or the dinner or the cocktail hour, I 23 can't say. 24 Question: Sir, sometime on the way to 25 the bathroom or the cookie table or the 5498 1 cocktail hour -- 2 Answer: Or lunch or dinner. 3 Question: -- or lunch or dinner, some 4 analyst, whose name you do not recall, asked 5 you a question. Is that what you're testimony 6 is? 7 Answer: Yes. 8 Question: And what was that question? 9 Answer: They asked about were there 10 parts of Windows that would become separate 11 products and we'd charge separately for in the 12 future. 13 Question: And what did you say. 14 Answer: I said no. 15 Question: Other than this 16 conversation that you say took place on the way 17 to the bathroom or the cookie table or a 18 cocktail party or lunch or dinner, was there 19 ever any other time that Microsoft publicly 20 explicitly asserted that something would be 21 forever free. 22 Answer: I'm sure that if anybody ever 23 asked about an operating system feature, we 24 would have made that clear to them. I don't -- 25 beyond the one I've talked about, I don't -- I 5499 1 don't recall that. 2 Then, again, you know, in the case of 3 the browser, you have the case where another 4 company had -- it had been free and so, you 5 know, the fact that people were asking about 6 that feature in some ways is not surprising. 7 Question: Well, you say another 8 company had a browser that had been free. What 9 company was that, sir? 10 Answer: Well, certainly Mosaic was 11 free. And there are a number of other free 12 browsers. The Netscape browser in its early 13 days was also free. 14 Question: In 1996 was the Netscape 15 browser free? 16 Answer: I'm not sure of the exact 17 chronology, but I'm pretty sure that in 1996, 18 anybody who wanted to use the Netscape browser 19 could download it and use it in any way they 20 would want without Netscape coming and asking 21 them to pay them. 22 Question: Mr. Gates, in 1996 what was 23 Mosaic's market share? 24 Answer: I don't know. 25 Question: Approximately? 5500 1 Answer: I really don't know. 2 Question: Can you give me any 3 estimate or range? 4 Answer: By 1996, probably under 10 5 percent. 6 Question: Under 5 percent? 7 Answer: Well, now you're going to 8 have to answer what the word Mosaic means. 9 For example, if you get low enough, 10 get really low, we're going to get into 11 Internet Explorer. Internet Explorer, until we 12 shipped IE3, actually had quite a bit of code 13 in it that derived from Mosaic; that is, the 14 code went from University of Illinois to 15 Spyglass to our development team who used some 16 of that code in creating both IE1 and IE2. So 17 if you get low enough, I'll have to ask you, do 18 you consider IE1 or IE2 a form of Mosaic? 19 Question: Not for purposes of this 20 question, if it will help you. 21 Answer: Okay. Then you can get down 22 below 5. 23 Question: Okay. In 1996 Netscape was 24 charging OEMs who it licensed to distribute its 25 browser; correct, sir? 5501 1 Answer: I don't know that. 2 Question: Do you know one way or the 3 other? 4 Answer: I think they were charging 5 some, but I'm not sure they were charging all. 6 Question: Did you ever try to find 7 out? 8 Answer: I know we were always unclear 9 what the nature of those deals were. 10 Question: Okay. 11 Did you ever try to find out how much 12 of Netscape's revenue came from charging for 13 the browser? 14 Answer: Well, we from time to time 15 looked at the revenue of broad sets of 16 competitors. And so I'm sure at some point 17 when we did -- the people in the company, not 18 me, but when people did analysis of Netscape, 19 that's one of the issues they would have looked 20 at. 21 Question: Did anyone ever inform you 22 of approximately how much of Netscape's revenue 23 was accounted for charging for the browser? 24 Answer: I'm sure I was present in a 25 presentation where that was one of hundreds of 5502 1 facts presented to me. 2 Question: Do you recall it? 3 Answer: The number? No. 4 Question: Or approximately how much 5 of Netscape's revenue was accounted for by 6 charging for the browser. 7 Answer: When we say charge -- well, I 8 don't remember the number, so I won't plaque 9 you with the question that I always have to ask 10 about that, which is, which revenue source are 11 we talking about? But even if you tell me, I 12 won't remember the specific number. 13 Question: I'm going to ask you 14 whether you remember approximately what the 15 range of the number is. And to be absolutely 16 clear, what I'm talking about is charging for 17 the browser. I'm not talking about advertising 18 revenue, you know, or revenue from the search 19 button or the home page. 20 Answer: But that's charging for the 21 browser. I mean, it's like saying NBC has no 22 revenue. 23 Question: No, it's not like saying it 24 has no revenue. It's like saying NBC doesn't 25 charge for its programs to the public. It may 5503 1 charge advertisers, and I'm not saying that 2 there might not be advertising revenue but what 3 I'm talking about is charging for the use of 4 the product, charging OEMs or charging end 5 users who buy it at retail or download it, 6 although I understand that your position is 7 it's downloaded for free. 8 But I'm trying to distinguish between 9 charging for the product and whatever 10 advertising revenue they get. 11 Answer: Okay. 12 Question: Now, with respect to 13 charging for the product, charging for the use 14 of the browser, do you have any idea -- any 15 approximation or range how much of Netscape's 16 revenue was attributed to that? 17 Answer: If you give me a time period, 18 I can narrow it down from the zero to 100 19 percent range. 20 Question: 1996. 21 Answer: Around 20 to 50. 22 Question: Today. 23 Answer: Today the advertising revenue 24 from browsers -- 25 Question: No, not advertising. We're 5504 1 talking about the revenue from the use of the 2 browser, not the advertising. We're just 3 talking about -- 4 Answer: I know, that's right. But 5 let me complete my sentence. 6 Question: Okay. 7 Answer: Today the -- what you would 8 call the nonuser revenue sources are very 9 substantial, and, you know, more than cover 10 what people are doing with browser. So that's 11 become the primary revenue source that you get 12 specifically related to the browser. 13 Question: Indeed today the amount of 14 Netscape's revenue that's attributed to 15 charging people for the use of the browser is 16 zero; right, sir? 17 Answer: I don't know that. 18 Question: Because they don't charge 19 for the browser, right? You know that, don't 20 you? 21 Answer: No, I don't know. If, you 22 know, they had some commitment contracts with 23 various people. You can do special things with 24 browser and understand they -- you know, they 25 do lots of different deals that include various 5505 1 special things, and so I don't think it's fair 2 for me to sit here and tell you what Netscape's 3 revenue are from a particular source. If you 4 want to ask me about Microsoft, that would be a 5 different thing, but I'm not an expert on 6 Netscape revenue. 7 Question: And so you just don't know 8 is your answer as you sit here now. 9 Answer: Yeah. It may have dropped 10 down to zero. I don't know. 11 Question: Okay. 12 Was it part of your intent in taking 13 the actions that Microsoft took to drive that 14 down to zero? 15 Answer: We price our product, 16 Windows. That's the only thing we do relative 17 to pricing. The most important thing we do is 18 we create the features of a product, including 19 improved versions. 20 Question: Let me be sure my question 21 is clear. 22 Was any part of Microsoft's actions 23 with respect to its browser or, as you 24 sometimes refer to it, browser technology, 25 motivated by desire to drive Netscape's 5506 1 revenues from users of Netscape's browser down 2 to zero? 3 Answer: Well, I think you're getting 4 a little bit psychological there. 5 Question: No. I'm asking what you 6 intended. 7 What was the purpose of what you were 8 doing? 9 Answer: My purpose was to make 10 Windows a better product and maintain and 11 increase the popularity of Windows. 12 Question: Was that the only purpose? 13 Was that the only purpose. 14 Answer: That was the purpose on 15 which the decision was made. 16 Question: I just want to be clear. 17 It's your testimony that an intent to 18 deprive Netscape of revenue played no role in 19 any of the decisions that Microsoft made with 20 respect to browsers or browsing technology? Is 21 that your testimony? 22 Answer: Well, our decision to have 23 the browser be a feature of Windows was in no 24 way motivated by something to do with Netscape. 25 We had chosen that that was a logical 5507 1 evolution of the in Windows feature set before 2 Netscape was a factor at all. 3 Question: Mr. Gates, if your answer 4 is that it played no role, that is your answer. 5 But I need to get on the record what 6 your answer is. 7 And my question is whether an intent 8 to deprive Netscape of revenue played any role 9 in any of the decisions that Microsoft made 10 with respect to its browser or browsing 11 technology. 12 Answer: We decided that it was a 13 logical improvement of Windows to put the 14 browser into Windows before we had much 15 awareness of there even being a Netscape. 16 So the decision that that would be a 17 feature -- and as I've said, when we make 18 something a feature of Windows, that means that 19 it's available along with all the other 20 features and the license fee, that decision had 21 been made very early on. 22 We also had a very early recognition 23 of the potential revenue sources from things 24 like the search button and the home page and 25 that those would become quite substantial. 5508 1 MR. BOIES: Can I have the question 2 back? 3 (Requested portion of the record was 4 read.) 5 Question: If your answer's no, we'll 6 simply go on. If your answer is yes, then I'm 7 going to ask what role it was. But I'm just 8 trying as a predicate to find out whether it 9 played any role in any of your decisions. 10 Answer: I don't know what you mean 11 any of our decisions. Now, that is the vaguest 12 thing I've ever heard. 13 Question: Okay. Any of your 14 decisions with respect to the browser or what 15 you have referred to as your browsing 16 technology. 17 Answer: Wait a minute. Have you 18 completely changed the question? 19 Question: I don't think so, but let's 20 go back and reread the question. And when you 21 read it this time, type it into the record 22 again so it appears so that a reader of the 23 transcript doesn't have to go back and find it. 24 (Requested portion of the record was 25 read.) 5509 1 Answer: Let's say we decide to put a 2 new feature in, is that included in what you're 3 asking about? 4 Question: A new feature in what? 5 Answer: In our Internet browser 6 technology. 7 Question: If the purpose is to 8 deprive Netscape of revenue, if that's why you 9 put it in, yes, it is included, sir. 10 And if you don't understand the 11 question, if my question is not clear, I will 12 rephrase it. You can tell me the answer is 13 yes, you can say the answer is no, you can say 14 the answer is I don't recall, you can say your 15 question is so confusing to me, I can't answer 16 it. 17 But all I'm trying to do is find out 18 what your answer is. 19 Do you have the question in mind? 20 Answer: I think it's quite a vague 21 question. 22 Let me just give you a hypothetical to 23 understand. 24 Let's say we think users want a 25 feature, and it can be a feature that we're 5510 1 doing first or it's a feature that Netscape has 2 done first. 3 When we decide to put that feature in, 4 our primary goal is to make Windows more 5 popular and build momentum for Windows. 6 But certainly there is -- let's say 7 it's a feature that Netscape's done first, then 8 we are thinking, okay, will users be interested 9 in our browser? If it's a feature we've done 10 first, we're thinking will users be interested 11 in our browser? 12 So you can't say that, you know, as 13 you get into 1996 that we're unaware of 14 Netscape. 15 And even though what we're primarily 16 doing is related to making better experiences 17 for customers and all that, the fact that we'll 18 be compared with them in terms of how people 19 choose browsers, we're aware of that. 20 Question: I didn't mean my question 21 to suggest that you might have been unaware of 22 Netscape in 1996, Mr. Gates. I assume that you 23 were aware of Netscape in 1996. 24 My question is whether an intent to 25 deprive Netscape of revenue played any role in 5511 1 any of the decisions that you made about 2 browsers or browsing technology. 3 I'm not talking about a decision where 4 you say, I understand this would have an effect 5 on Netscape but I don't care, I'm going to do 6 it any way. I'm talking about a situation in 7 which, at least in part, you take an action 8 with the intended purpose of depriving Netscape 9 revenue. 10 Did you do that? 11 Answer: Well, the original decision 12 to include the browser into Windows as a 13 feature of Windows was not taken in response to 14 some thinking about Netscape. But once you get 15 out into a period where we're looking at 16 Netscape as one of our competitors, it's very 17 hard to say, you know, did that influence our 18 decisions or not. 19 To me, that's a very vague question. 20 It's one of the facts we are aware of. 21 Our primary goal, of course, is to 22 make Windows better for customers. And we were 23 doing a lot of great stuff there and were 24 actually very successful once we got past a 25 certain point in doing a product that people 5512 1 did decide to choose. 2 But, you know, how can you -- how can 3 you say, you know, when every person at 4 Microsoft makes any decision -- you know, we 5 don't get to run it where there's no thought 6 about Netscape and there is a thought about 7 Netscape. So you're asking me to reach into 8 people's minds and do something that I think is 9 strange. 10 MR. BOIES: Would you read back my 11 question one more time and again incorporate 12 it, the original one? 13 (Requested portion of the record was 14 read.) 15 Question: Have you answered that 16 question now to the fullest extent that you 17 can, Mr. Gates? Because if you can't, we'll 18 just stop. 19 Answer: I find the question unclear 20 enough, that I'm afraid I won't be able to do 21 any better than I already have. 22 Question: Okay. Mr. Gates, before 23 the break, you said that Microsoft recognized 24 early that there would be browser revenue from 25 advertising revenue from the search button and 5513 1 the home page. 2 Do you recall that? 3 Answer: That's right. 4 Question: When did Microsoft first 5 project what its revenue would be from browser 6 advertising from the search button and/or home 7 page? 8 Answer: Well, we actually didn't have 9 enough share with IE1 or IE2 that we built that 10 much value at all because we just didn't have 11 much traffic. 12 When it came to IE3, we had a 13 discussion about how we would take that asset 14 and what we would do with that traffic. 15 And we actually chose at that stage 16 instead of charging for it, to build some 17 partnerships by working with people who we 18 directed traffic to. 19 And I don't know if anybody had done 20 -- I know there was discussions. I don't know 21 if there's a formal document, but we discussed 22 the notion of licensing that out versus just 23 using it to build partnerships. 24 In terms of actually having people pay 25 us large amounts of money, that's really gotten 5514 1 big in the last year. 2 MR. BOIES: Would you read the 3 question back, please? 4 (Requested portion of the record was 5 read.) 6 Question: Do you understand the 7 question, Mr. Gates? 8 Answer: Yeah. The answer is: 9 Probably as part of that decision what to do 10 with the IE3 traffic, we would have looked at 11 the choice of charging or using it in 12 partnerships. 13 Question: Could you tell me, just for 14 the record, when you're talking about? 15 Answer: Oh, during the planning cycle 16 for IE3. 17 Question: Which was when? 18 Answer: That would have been sometime 19 in '96. 20 Question: Okay. 21 So at some time in '96, according to 22 your testimony, Microsoft made a projection of 23 how much money it could expect to receive from 24 browser advertising from the search button 25 and/or the home page. Is that what you're 5515 1 saying? 2 Answer: Advertising in the very broad 3 sense. The principle that there would be that 4 revenue predated that. That was an insight we 5 had quite a bit before that. 6 But the first time we looked at, okay, 7 what should we do with this traffic would have 8 been when we were thinking that IE3 would 9 garner significant traffic. 10 Question: When you say the first time 11 we looked at what we would do about the 12 traffic, I want to be sure again that the 13 question and answer is meeting because I know 14 you use words very precisely. 15 What my question is, is when did you 16 first make a projection -- when did Microsoft 17 first make a projection of how much money 18 Microsoft would receive from advertising 19 revenue in connection with the browser? 20 Answer: We looked at charging as part 21 of the IE3 planning during 1996. 22 Question: I'm not asking when you 23 looked at charging. I'm asking when did 24 Microsoft first make an estimator projection of 25 how much money it would receive? 5516 1 Answer: Oh, when we looked at the 2 issue of whether we -- it was a better idea to 3 charge or not as part of the IE3 planning. 4 Question: And that would have been in 5 1996; is that correct? 6 Answer: Uh-huh. 7 Question: You have to say yes or no 8 for the record. 9 Answer: Yes. You don't get uh-huh's? 10 Question: She does, but it doesn't 11 always come out exactly the way you think. 12 And who made that estimate or 13 projection? 14 Answer: I know there was a discussion 15 with Pete Higgins and Peter Neupert and myself 16 about that, and each of us would have hazarded 17 some view of the value there. 18 Question: And what was the projection 19 or estimate that you made as to how much money 20 Microsoft would receive from browser 21 advertising and when? 22 Answer: I don't recall the exact 23 number. 24 Question: Approximately. 25 Answer: I honestly don't recall the 5517 1 number. 2 Question: Can you give me any 3 approximation or range at all? 4 Answer: It would have been -- in this 5 period Netscape had done a deal to sell their 6 search button traffic, some portion of it, for 7 something like $15 million. 8 And, of course, they had a much higher 9 usage of their browser than we did of ours. 10 And so depending on what you thought 11 our usage would be, you could prorate in and 12 look at what Netscape was getting on their 13 search deals and other deals and do the 14 estimate based on that. 15 Question: Let me distinguish between 16 two things. One is you're sitting here right 17 now and doing a logical estimate. And the 18 second is whether you remember what your 19 estimate was back in 1996. 20 Answer: I don't remember what the 21 estimate is. But I think I'm being quite 22 helpful to you in telling you facts that went 23 into making that estimate back in 1996 because 24 Netscape had already monetized some portion of 25 their search button traffic. 5518 1 Question: I appreciate your help, but 2 what I'd like to do, if I could, is approach it 3 my way because for me it's easier to understand 4 it my way if I take it question by question. 5 And the first question is: Do you now 6 recall anything at all about the estimate that 7 you made back in 1996 as to how much 8 advertising revenue Microsoft would receive 9 from the browser? 10 Answer: And my answer is directly 11 related to that, which is I would have taken -- 12 I don't recall the number, but I would have 13 taken the revenue Netscape was getting and used 14 that to come up with what the number might look 15 like for us proportional to our traffic. 16 That's what I recall about that. 17 Question: What you're saying is you 18 don't recall what the number was? 19 Answer: No. 20 Question: But you do recall the 21 methodology that would be used to arrive at the 22 number? 23 Answer: That's right. 24 Question: Now, focusing on the 25 number, I want to ask you the question that I 5519 1 always do in these circumstances which is: Do 2 you recall any estimate or range of what the 3 number was? I know you've given me a 4 methodology, and that is helpful and I 5 appreciate it. But I also want to know whether 6 you recall anything at all about approximately 7 what the number actually was that you came up 8 with or what the range would be. 9 Answer: Right. There's several 10 variables, and nobody can just say a number. 11 You have to decide how much the Internet's 12 going to increase in popularity, you have to 13 decide over what period of time you're trying 14 to estimate this number, you have to decide 15 what the traffic share of IE will be, and then 16 you sort of take the Netscape traffic at that 17 point in time and use that, you know, and say 18 is the monetized traffic sort of per hit going 19 to become equally valuable, less valuable, or 20 more valuable. 21 Question: And is that what you did 22 back then? 23 Answer: That's what I recall we did. 24 Question: Okay. 25 Now, what I'm trying to find out is if 5520 1 you recall at all what was the approximate 2 number that you came up with, or what was the 3 range within which the number, in your 4 terminology, with a high degree of probability 5 would fall? 6 Answer: I'm sure that we came up with 7 different numbers with the different 8 assumptions, but I don't recall any of those 9 numbers. 10 Question: Okay. 11 Do you recall approximately what any 12 of those numbers were. 13 Answer: I could only do it by going 14 back to the algorithm I've described to you and 15 sort of using that data now and computing 16 numbers. In terms of a recollection of any 17 numbers based on the various assumptions that 18 have to be made back in that time frame, no. 19 Question: Do you recall any of the 20 estimates that came up -- that were come up 21 came up with by anybody else? 22 Answer: No. 23 Question: Okay. 24 Do you recall, approximately, what the 25 estimates were that anybody else came up with? 5521 1 Answer: I knew Neupert was more 2 optimistic, but not about the algorithm, just 3 about the assumptions. 4 Question: That is, you don't recall 5 approximately what his number was, but you 6 recall his number would have been somewhat 7 higher than your number; is that fair? 8 Answer: That's right. 9 Question: Okay. 10 Now, did they all share your view of 11 what the right algorithm was to use? 12 Answer: Who is all? 13 Question: All the people you were 14 talking to about these estimates. 15 Answer: Well, one thing I need to 16 make sure you have the background on is there's 17 the Windows people who never really thought 18 about it numerically and just wanted to use the 19 traffic for partnerships mostly. 20 I can't characterize all of them that 21 way. And then there were the people involved 22 in our Internet sites and online activities who 23 thought of it as something that could be a 24 major revenue source. 25 And they were clearly right. But 5522 1 there was a choice to be made there and some 2 discussion about which was the right thing for 3 the company. 4 Question: Okay. 5 The people who were trying to do an 6 estimate of how much advertising revenue 7 Microsoft would get from browsers, did all of 8 those people use the same algorithm that you 9 have described in order to come up with their 10 estimates? 11 Answer: As far as I know, yes. 12 Question: Okay. 13 When is the first estimate or 14 projection of the revenue that Microsoft might 15 obtain from browser advertising, that you 16 recall what that estimate was or approximately 17 what it was? 18 Answer: The only number that I'm -- I 19 know is that we recently sold a portion of 20 search traffic, not home page traffic, but a 21 portion of the search traffic for a 12-month 22 period for something over $50 million. 23 Question: When was that? 24 Answer: In the last month or two. 25 Question: And to whom did you sell 5523 1 it? 2 Answer: A group of companies. We 3 sold different slices. So I think InfoSeek got 4 part, Excite got part; and AltaVista got part. 5 And I'm not certain exactly, but I know they 6 were talking to those people and got various 7 bids, and I'm pretty sure they split it up 8 amongst multiple people. 9 Question: And the search traffic that 10 you're referring to there is the search traffic 11 generated by what? 12 Answer: Two things: The search 13 button, which is part of the browser. There's 14 a button that says search on it. And then on 15 the default page, there's a fill-in, which is a 16 blank fill-in, which they only sold 20 percent 17 of that traffic. 18 That is also essentially a search 19 field that you can type into. 20 Question: Prior to this sale, had 21 Microsoft made any projections of advertising 22 revenue that you recall, either the amount of 23 or the approximate amount of? 24 Answer: I already talked about that, 25 didn't I? 5524 1 Question: Well, we talked about 1996, 2 and then we talked about today, and I was just 3 really talking about the intervening period as 4 to whether there were any estimates or 5 projections in that intervening period that you 6 recall. 7 Answer: As I said, for IE3, we 8 decided to use it for working with partners. 9 And so there was probably a period there wasn't 10 much estimating going on because I was -- I had 11 made that decision we would work with partners 12 on it. 13 They may have been doing some 14 estimating, but I don't know because 15 essentially they didn't get to go seek revenue 16 for that. 17 Question: When you refer to a 18 decision to use the browser for purposes of 19 working with partners, can you explain what you 20 mean by that? 21 Answer: I didn't say use the browser. 22 I said use the traffic. 23 Question: Use the traffic from the 24 browser? 25 Answer: That's right. 5525 1 Question: This is all browser traffic 2 you're talking about; right? 3 Answer: It's traffic that's generated 4 by using the browser. I guess you can say 5 that, yes. 6 Question: Okay. 7 And when you say you decided to use 8 that for purposes of working with partners, 9 would you explain what you mean? 10 Answer: Well, I mean that in return 11 for directing some of the traffic from people 12 using Windows browsing, we agreed on things 13 they would do to show off various Microsoft 14 products and highlight the work they were doing 15 or do advertising of various types on their 16 sites about Microsoft products. 17 Question: Let me make sure I 18 understand what you're saying. 19 What you're saying is that you would 20 go to what you refer to as partners and you 21 would give them some of the traffic that the 22 browser was generating, and in return, they 23 would do certain things that you want them to 24 do? 25 Answer: That's right. 5526 1 Question: And who did you include in 2 what you refer to as partners? 3 Answer: Well, the search engine guys 4 would be the ones who got most of the traffic. 5 Question: And what did the search 6 engine guys, as you describe them, do for you? 7 Answer: Exactly what I said. They 8 did things that took advantage of our 9 innovations to show off the work we had done in 10 our Internet Explorer technologies, and they 11 gave us rather large amounts of banner ads to 12 promote our new products and innovations. 13 Question: What new products and 14 innovations were promoted in these banner ads? 15 Answer: Oh, a broad set of products, 16 Microsoft products. 17 Question: You were asked some 18 questions earlier about a June 21, 1995 meeting 19 with Netscape. And that's a meeting you did 20 not attend; am I correct? 21 Answer: I've never met with Netscape. 22 Question: And did you know that 23 Microsoft people were meeting with Netscape 24 before they actually met? 25 Answer: I don't recall knowing in 5527 1 advance. 2 Question: You did know after the fact 3 because you got the E-mails that we saw; 4 correct? 5 Answer: Yeah, that's right. I recall 6 getting those E-mails, at least the Thomas 7 Reardon/Silverberg one. 8 Question: You are aware that it has 9 been asserted that at that meeting there was an 10 attempt to allocate markets between Netscape 11 and Microsoft; correct, sir? 12 Answer: My only knowledge of that is 13 that there was an article in the Wall Street 14 Journal very recently that said something along 15 those lines. 16 Otherwise, no. 17 Question: Is it your testimony that 18 the first time that you were aware that there 19 was an assertion that there had been a market 20 allocation meeting or an attempt to allocate 21 markets at a meeting between representatives of 22 Microsoft and Netscape was a recent Wall Street 23 Journal article? 24 Answer: I'm not sure how to 25 characterize it. The first I heard anything 5528 1 about that meeting and somebody trying to 2 characterize it in some negative way was an 3 Andreessen quote that was in the Wall Street 4 Journal very recently. 5 And it surprised me. 6 Question: Are you aware of any 7 instances in which representatives of Microsoft 8 have met with competitors in an attempt to 9 allocate markets? 10 Answer: I'm not aware of any such 11 thing. And I know it's very much against the 12 way we operate. 13 Question: It would be against company 14 policy to do that? 15 Answer: That's right. 16 Question: Now, subsequent to being 17 apprised that Mr. Andreessen, at least, was 18 asserting that this had happened, did you make 19 any effort to find out what had actually 20 happened at that meeting? 21 Answer: Well, first of all, I don't 22 want to be involved in characterizing what 23 Mr. Andreessen said because I -- I -- all I 24 know is something about a quote about a dead 25 horse head or something like that. That was 5529 1 what I recall from the Wall Street Journal 2 article. 3 I did, after the Wall Street Journal 4 article, see some E-mail that Andreessen had 5 sent our people after the meeting saying it was 6 a great meeting, and I did see the Reardon mail 7 that I deleted, but somebody gave back to me 8 and some Reardon notes from the meeting. 9 Now, I think we're talking about the 10 same meeting. I think there may have been more 11 than one. But in any case, I think we're 12 talking about the same meeting. 13 Question: I think the record may show 14 that there was a meeting before the June 21 15 meeting. 16 Answer: That sounds right. 17 Question: But the meeting that I was 18 particularly asking about was the June 21 19 meeting. And I think that that probably was 20 what was in the Wall Street Journal. 21 Answer: No. You can't really say 22 because the Wall Street Journal talked about a 23 May meeting, and May is not June, not by a long 24 shot. 25 Question: You're right. May is not 5530 1 June. I agree that May is not June. And maybe 2 there were two such meetings. 3 Answer: Well, I'm not aware of any 4 meeting between us and Netscape in May. So 5 that seems very strange. And that confused me 6 about that Wall Street Journal article. 7 Question: Let me ask you: Did you -- 8 when you saw the Wall Street Journal that 9 talked about a May meeting in terms of 10 allegedly market dividing conduct, did you try 11 to find out whether there had been a May 12 meeting between representatives of Microsoft 13 and representatives of Netscape? 14 Answer: Well, again, I wouldn't 15 characterize the article in that way. When I 16 read the article, what it said interested me 17 enough and concerned me enough, I did seek to 18 find out if there was a May meeting. 19 But I don't think the article is what 20 you're suggest -- said what you're suggesting. 21 I mean, we should get a copy of the article. I 22 don't remember it that way. I remember 23 Andreessen talking about how he had been in 24 fear that Don Corleone had come to see him. 25 And, you know, once I realized that 5531 1 there was no meeting in May and that it wasn't 2 -- you know, that he after the meeting said he 3 enjoyed the meeting and that it was, you know, 4 just a group of our guys down there trying to 5 talk about if there was any areas of 6 cooperation, it seemed -- the whole thing 7 seemed very strange to me. 8 Question: Did you talk to people to 9 find out whether there was a May meeting? 10 Answer: Yes. 11 Question: Who did you talk to? 12 Answer: I consulted with my lawyers. 13 Question: Other than consulting with 14 your lawyers, did you try to find out whether 15 there was a May meeting? 16 Answer: Well, my lawyers then talked 17 to all the people that might have met with 18 Netscape, and I made sure they did that pretty 19 broadly. 20 Question: And you were informed that 21 there was no May meeting; is that your 22 testimony? 23 Answer: That's the understanding I 24 was given, yes. And then I was given some of 25 the other information that I've already 5532 1 mentioned. 2 Question: But all that information 3 came from your lawyers, not from nonlawyer 4 employees of Microsoft; is that what you're 5 saying? 6 Answer: It came to me through my 7 lawyers. 8 Question: Did you ever have a 9 conversation with anyone in the last 12 months 10 other than your lawyers concerning whether 11 there were meetings in May or June of 1995 with 12 Netscape, and if so, what happened at those 13 meetings? 14 Answer: Well, there might have been a 15 point after I got all the data from the lawyers 16 where I said to some of the PR people what an 17 outrageous slander that article had been and 18 how unfair I felt it was. And so I may have 19 mentioned that to them. 20 Question: Did you have any 21 conversations in the last 12 months with any 22 person who was dealing with Netscape in 1995 23 about whether there were May or June meetings, 24 and if so, what happened at those meetings? 25 Answer: No. I relied on the lawyers 5533 1 to go and meet with those people and gather the 2 facts and educate me about was there a May 3 meeting and what was the agenda or what was 4 Andreessen's state of mind after the meeting, 5 what did the notes look like. 6 But that's all very recent. That is 7 after the journal article. 8 Question: Now, have you ever read the 9 complaint in this case? 10 Answer: No. 11 Question: Have you ever received a 12 summary of the complaint in this case? 13 Answer: I wouldn't say I've received 14 a summary, no. I've talked to my lawyers about 15 the case, but not really the complaint. 16 Question: Do you know whether in the 17 complaint there is an assertion -- I'm not 18 talking about the Wall Street Journal article, 19 I'm talking about the complaint that was filed 20 last May. 21 Do you know whether in that complaint 22 there are allegations concerning a 1995 meeting 23 between Netscape and Microsoft representatives 24 relating to alleged market division 25 discussions? 5534 1 Answer: I haven't read the complaint, 2 so I don't know for sure. But I think somebody 3 said that that is in there. 4 Question: Did you find that out 5 before or after the Wall Street Journal 6 article? 7 Answer: The first time I knew about 8 these allegations was the Wall Street Journal 9 article. 10 MS. CONLIN: Your Honor, that's the 11 first day. This would be a good time if we're 12 going to have an afternoon break. 13 THE COURT: Very good. Take a 14 15-minute recess. 15 Remember the admonition previously 16 given. See you in about 15 minutes. Leave 17 your notebooks here. 18 (A recess was taken from 1:06 p.m. 19 to 1:22 p.m.) 20 THE COURT: Everyone else may be 21 seated. 22 MS. CONLIN: Your Honor, this is a 23 continuation of the testimony of Mr. Gates on 24 August 28, 1998, in the government case. 25 THE COURT: Very well. 5535 1 (Whereupon, the following video 2 resumed playing to the jury.) 3 Question: Mr. Gates, when did you 4 first become concerned about the competitive 5 threat that Netscape posed to Microsoft? 6 Answer: I know by late '95 we were 7 thinking of Netscape as one of our many 8 competitors. So I think it would have been 9 around then. 10 Question: When did you first become 11 concerned about the competitive threat that 12 Java posed to Microsoft? 13 Answer: Well, Java as a computer 14 language does not pose a competitive threat to 15 Microsoft. There is some runtime work that 16 various people, companies are doing with 17 different IAP's APIs, including Sun, that 18 represent platform competition. So you have to 19 be careful about how you talk about Java. 20 Question: Do you talk about Java as a 21 competitive threat to Microsoft, Mr. Gates -- 22 Answer: There's a lot of documents 23 and understanding inside Microsoft that Java 24 the language, which if you take the term Java 25 on the face of it and then in some context that 5536 1 what it refers to, that that's not a 2 competitive threat. In fact, we are the 3 leading vendor of Java language development 4 tools. 5 Sometimes in the right context when 6 people use that term, they're talking about 7 various runtime activities. But, you know, you 8 have to look pretty carefully at the context. 9 Question: My question right now 10 doesn't go to what various people within 11 Microsoft have said or believe. 12 My question goes to what you have 13 said. Do you refer -- have you referred to 14 Java as a competitive threat to Microsoft? 15 Answer: The Java runtime activities 16 are a competitive threat to Microsoft. Java 17 itself is not. 18 So if I use the term Java that way, 19 I'm careful to make sure people know I'm 20 talking about the runtime piece. 21 Question: Have you sometimes as a 22 shorthand referred to Java, as opposed to what 23 you now say as the Java runtime activities, as 24 a competitive threat to Microsoft? 25 Answer: I may have if I made it clear 5537 1 what I meant. 2 Question: And by making it clear what 3 you meant, can you explain what you mean by 4 that? 5 Answer: To draw the distinction 6 between Java the language and the runtime 7 activities around Java, the APIs being created 8 thereby various companies. 9 Question: Have you received E-mail 10 from people that described Java as a 11 competitive threat to Microsoft? 12 Answer: Well, inside Microsoft the 13 context of the various pieces of Java, 14 including in a lot more detail than I've had a 15 chance to explain to you so far, is well 16 understood. 17 And so we use a lot of shorthands for 18 a lot of things that confuse people who just 19 look at the E-mails. 20 MR. BOIES: Can I have the question 21 read back, please? 22 (Requested portion of the record was 23 read.) 24 Answer: Under the scenario I 25 described, it's possible that people would do 5538 1 that in E-mail. 2 Question: When you say under the 3 scenario that I described, what scenario are 4 you talking about? 5 Answer: The scenario is people inside 6 Microsoft who have an understanding of the 7 various pieces of Java who are communicating 8 with each other. 9 Question: My question is not what are 10 the circumstances under which it is possible 11 that that happened. 12 My question is, have you received 13 E-mail from people in Microsoft that assert 14 that Java is a competitive threat to Microsoft? 15 Answer: It's possible there is 16 someone who, having the right context about the 17 pieces that are entailed in Java, may have used 18 that as a shorthand for the piece we consider a 19 competitive threat. 20 Question: My question is not what is 21 possible but what you recall. 22 If you don't recall ever receiving an 23 E-mail in which somebody from Microsoft 24 asserted that Java was a competitive threat, 25 that's an answer to my question. You can say 5539 1 yes, no, I don't recall, but -- 2 Answer: I don't recall a specific 3 piece of mail. I think there is a good chance 4 that I've received mail where somebody used 5 that kind of shorthand. 6 Question: Now, have you used that 7 kind of shorthand, that is, have you personally 8 asserted that Java is a competitive threat to 9 Microsoft? 10 Answer: Well, I always object to -- 11 you're acting like the assertion stands by 12 itself. There is a shorthand that I've told 13 you about. So no, I've never asserted that 14 statement. We use the term Java in a variety 15 of contexts and if you want to show me a 16 context, I'll answer. 17 But the assertion on the face of it is 18 wrong unless somebody is using the term Java in 19 a very special way. 20 Question: What I'm asking you, 21 Mr. Gates, is whether you have used Java in 22 what you described as the very special way to 23 refer, as a shorthand, to whatever it is that 24 you believe constitutes a competitive threat to 25 Microsoft? 5540 1 Answer: I don't remember a specific 2 document where I did, but I think it's quite 3 likely that with certain people I used that 4 shorthand. 5 Question: Okay. When you use Java as 6 a shorthand in describing Java as a competitive 7 threat to Microsoft, am I to understand that 8 what you mean in that context is to refer to 9 what you have described here as the Java 10 runtime activities? 11 Answer: If you want to get into what 12 we mean by the shorthand, you'll have to show 13 me a specific context because sometimes it 14 might mean EJB, sometimes it might just mean 15 the VM, sometimes it might mean AWT, sometimes 16 it might mean JFC. I mean, I'll be glad to 17 clarify any particular case. You have to have 18 the context. 19 Question: If necessary, we'll go 20 through each one context by context, although 21 that's obviously a lengthy procedure, but let 22 me see if I can try to get some general 23 principles. 24 When you refer to Java as a 25 competitive threat to Microsoft, what do you 5541 1 mean? 2 Answer: I've told you it depends on 3 the context. 4 Question: Why don't you list each of 5 the different things that you mean when you 6 describe Java as a competitive threat to 7 Microsoft. 8 Answer: I don't know what you mean. 9 You're asking me to recall every context where 10 I might have ever used that shorthand? 11 Question: Well, I'm asking you to 12 tell me every context that you do recall. 13 Answer: I've told you I don't recall 14 any specific document where I've used the 15 shorthand. I can give you several contexts 16 where it's very likely that I have. 17 Question: If that's the best you can 18 do, let's start with that. 19 Answer: Well, there's the context of 20 server middleware APIs and EJB discussion. 21 And people who write three-tier 22 applications, what APIs are they likely to 23 develop their applications against. 24 Question: And why does Java, in your 25 view, represent a competitive threat to 5542 1 Microsoft with respect to server middleware or 2 EJB's? 3 Answer: I've told you that Java 4 itself is not the competitive threat. I'm 5 telling you the thing that is the competitive 6 threat, so when you rephrase it to say Java is 7 the competitive threat, that's just the 8 shorthand term. The competitive threat is the 9 APIs and the EJB and the other middleware 10 layers that people are putting together. 11 Question: Well, Mr. Gates, in your 12 view, does Java play, itself, any role in what 13 you view as a competitive threat to Microsoft? 14 Answer: Java the language? 15 Question: Yes, let's start with Java 16 the language. 17 Answer: No. 18 Question: When you refer to Java as a 19 competitive threat, why do you use the word 20 Java as a shorthand for what you now say 21 doesn't relate to Java? 22 Answer: I didn't say that. It 23 certainly relates to Java. Java runtime 24 relates to Java. I mean, give me a break. 25 Question: Mr. Gates, you know 5543 1 perfectly well that you and lots of other 2 people within Microsoft describe Java, J-a-v-a, 3 without talking about runtimes or EMBs or 4 server middleware, but Java, J-a-v-a, as a 5 competitive threat. You know that, don't you? 6 Answer: I've told you that when we 7 talk about the Java runtime threat, we often 8 use Java as a shorthand for that. We haven't 9 come up with another term for the Java runtime 10 competitive threat in its various forms. 11 Question: When did you first become 12 concerned about the Java runtime threat to 13 Microsoft? 14 Answer: Well, there have been a lot 15 of changes in the strategies of Sun and various 16 people. I know there was talk about Java in 17 the second half of '95, but, you know, I don't 18 think we really understood what the various 19 people around were doing. 20 Sometime in '96 when Sun was doing its 21 promotion of writing applications strictly to 22 the Java runtime, to their Java runtime, which 23 is one of them, and in fact they have multiple, 24 then we would have looked at that as something 25 we needed to understand and decide how it 5544 1 affected our strategy. 2 Question: And my question is not when 3 you decided you needed to look at Java to 4 decide something. 5 My question is, when did you first 6 conclude that what you have referred to as the 7 Java runtime threat was a competitive threat to 8 Microsoft? 9 Answer: Well, it gets a little 10 complicated because there's some of the -- even 11 the runtime pieces of Java that we support, but 12 there are some things that people are doing in 13 those runtimes that we have a different 14 approach. But that's all, you know, more 15 recent in terms of understanding how -- what 16 our products are going to do. 17 Question: My question is when did you 18 first conclude that what you have described as 19 the Java runtime threat was a competitive 20 threat to Microsoft? 21 Answer: I think there was a lot of 22 discussion about what to do with Java and Java 23 runtime things and there was a part of what Sun 24 was doing that by late '96 we had decided not 25 -- there were some extensions they were doing 5545 1 in late '96 that we thought of as competitive. 2 Question: Do I understand that last 3 answer to be that it would not have been until 4 late 1996 that you considered what you have 5 described as the Java runtime threat as a 6 competitive threat to Microsoft? 7 Answer: Well, you use the word 8 conclude, and there's a long period of time 9 where there is a lot of thinking about Java 10 runtime inside Microsoft where people are going 11 back and forth. 12 And some people say, hey, this is 13 fine, it's not competitive. And then somebody 14 would say, hey, maybe it is competitive. So 15 there's a lot of going back and forth. 16 So when you use the term conclude, I 17 assume you're talking about a point at which 18 there is a clear opinion and not just a lot of 19 debate, you know, even -- you know, my view 20 being established. And so then I think you've 21 got to go as late as late '96 before there's 22 much clarity at all. 23 Question: I think you may have 24 answered the question, but I want to be sure 25 because my question relates not to what other 5546 1 people were saying within Microsoft, but what 2 you believed. 3 And what I'm trying to find out is 4 when you, Bill Gates, first believed that what 5 you have described as the Java runtime threat 6 was a competitive threat to Microsoft? 7 Answer: Well, you used the word 8 conclude and -- 9 Question: Actually, in this last 10 question I used the word believe. 11 Answer: So you're changing the 12 question? 13 Question: Well, if believe and 14 conclude is different for you, I'll ask it both 15 ways. 16 Answer: Yeah, it's very different. 17 In late -- 18 Question: Then let me ask the 19 question so the record is clear what you're 20 answering. 21 Answer: You don't want me to answer 22 the last one? 23 Question: If that's what you're going 24 to answer, let's read the question back. 25 Would you reincorporate the question 5547 1 so the record is clear that what follows is 2 intended to be a response to this particular 3 question? 4 (Requested portion of the record was 5 read.) 6 Answer: In the first part of '96 7 there were -- I was getting a lot of different 8 opinions about Java runtime and what Sun was 9 doing and what we should do. I wouldn't say 10 that I believed firmly that it was a 11 competitive threat because that all depended on 12 what Sun was doing, what other companies were 13 doing, and what we were going to do. 14 By late '96 I think we had -- or I had 15 a view that what Sun was doing was a 16 competitive activity. 17 Question: When you talk about having 18 a view that what Sun was doing was a 19 competitive activity, do you use the term 20 activity to mean the same thing that you meant 21 before when you used the term threat? 22 Answer: You were the one who used the 23 term threat. I'm not quite sure. It was 24 competitive. 25 Is something that is competitive 5548 1 always a competitive threat? I'm not sure. 2 Question: Mr. Gates, I think the 3 record will show, and if necessary we can go 4 back to it, that you used the term Java runtime 5 threat. Do you recall doing that? 6 Answer: Yes. 7 Question: Okay. Now -- 8 Answer: That's not the same as 9 competitive threat. 10 Question: Well, when you used the 11 Java runtime threat phrase, what did you mean 12 by threat? 13 Answer: I meant that it was 14 competitive. 15 Question: And so you were using, in 16 that context, threat and competitive to mean 17 the same thing? 18 Answer: Yes. 19 Question: Okay. Now, using threat in 20 the same sense that you were using it to mean 21 competitive, I want to ask what you said was 22 the different question from what you believed. 23 When did you conclude that the Java 24 runtime threat was a competitive threat to 25 Microsoft? 5549 1 Answer: By late '96, I thought of it 2 as competitive. 3 Question: And when you use the word 4 thought there, are you using it to mean what 5 you have said you meant by believe as well as 6 what you said you meant by conclude? 7 Answer: I mean by then it was pretty 8 clear to me it was another thing we had to 9 think of in terms of the list of the 10 competitors, as opposed to earlier where I 11 wasn't sure of that. 12 Question: What did you do to try to 13 respond to what you have described as the Java 14 runtime threat? 15 Answer: The same thing we always do, 16 just innovate in our products and use the 17 customer feedback to delight them so that they 18 choose to license our products. 19 Question: Did you do anything else to 20 try to respond to what you described as the 21 Java runtime threat? 22 Answer: Well, we try to understand 23 from customers what they're doing and how our 24 strategy might appeal versus someone else's 25 strategy and then go back and look at our 5550 1 strategy to see if we can make it better. 2 Question: Did you do anything else? 3 Answer: I'm not sure what you mean. 4 I mean, our whole activity here, everything we 5 do really comes under what I just described. 6 Question: Everything Microsoft does 7 comes under what you've described; is that your 8 testimony, sir? 9 Answer: Uh-huh. 10 Question: Well, sir, does trying to 11 undermine Sun come within the activity that 12 you've just described? 13 Answer: I don't know what you mean by 14 that. 15 Question: You don't? 16 Answer: No. 17 Question: Have you ever had 18 discussions within Microsoft about the 19 desirability of trying to undermine Sun because 20 of what Sun was doing in Java? 21 Answer: I said to you part of our 22 activity is to go out and work with customers 23 to see what it takes to have them choose to 24 license our products. 25 And that's in competition with many 5551 1 other companies, including Sun. 2 MR. BOIES: Would you read back the 3 question, please? 4 (Requested portion of the record was 5 read.) 6 Answer: We've certainly had 7 discussions about making our products better 8 than Sun's and other competitors in any area 9 that people might think of them as desirable. 10 MR. BOIES: Would you read the 11 question back, please? 12 (Requested portion of the record was 13 read.) 14 Answer: I answered that question. 15 MR. BOIES: Would you read back the 16 question and the answer. 17 (Requsted portion of the record was 18 read.) 19 Question: I'm not now talking about 20 what you do in competition with other products 21 or other companies. What I'm talking about is 22 whether or not you've had discussions with 23 people within Microsoft in which you talked 24 about the need to undermine Sun, using those 25 words, if that will help you, within Microsoft? 5552 1 Answer: I don't remember using those 2 words. 3 Question: You don't? 4 Answer: No. 5 Question: Do you think you did use 6 those words or you just don't know one way or 7 the other? 8 Answer: I don't know. 9 Question: Would it be consistent with 10 the way you felt about Java for you to have 11 told people that you wanted to undermine Sun? 12 Answer: As I've said, anything about 13 Java you've got to show me a context before I 14 can answer because just the term Java itself 15 can mean different things. 16 Question: Well, let me try to 17 approach it this way, Mr. Gates. 18 Have you ever told anyone, regardless 19 of what you meant by it, that you wanted to 20 undermine Java or undermine Sun or undermine 21 Java because of Sun, any of those? 22 Answer: I said I don't recall using 23 that word. 24 Question: Would it have been 25 consistent with the way that you felt about Sun 5553 1 and about Java for you to have used that word? 2 And if you don't understand the 3 question, I'll rephrase it. 4 Answer: Well, Sun's message to the 5 market and ours aren't the same and so there 6 is, as part of that competition, a desire to 7 get people to understand our message and what 8 we're providing versus their message and what 9 they're providing. 10 So in that sense, there could have 11 been a discussion around that topic. 12 But I still don't know if the word 13 undermine was ever used. 14 Question: Did you have discussions 15 with Apple that were directed towards 16 attempting to reduce or eliminate competition, 17 Mr. Gates? 18 Answer: No. 19 Question: Did you have discussions 20 with Apple in which you were trying to get 21 Apple to agree to help you undermine Sun? 22 Answer: There was some discussion 23 about what runtime APIs Apple would support, 24 whether they would support some of ours or some 25 of Sun's. 5554 1 I don't think I was involved in any 2 discussions myself with Apple about that. 3 Question: Well, let me show you a 4 document and try to probe what you mean by 5 being involved. Let me give you a copy of a 6 document that has been previously marked as 7 Government Exhibit 365. A portion of this 8 document is an E-mail message from you to Paul 9 Maritz and others and the portion I'm 10 particularly interested in, and you can read as 11 much of the three-line E-mail as you wish, is 12 the last sentence, which reads, do we have a 13 clear plan on what we want Apple to do to 14 undermine Sun? Did you send this E-mail, 15 Mr. Gates, on or about August 8, 1997? 16 Answer: I don't remember sending it. 17 Question: Do you have any doubt that 18 you sent it? 19 Answer: No. It appears to be an 20 E-mail I sent. 21 Question: You recognize that this is 22 a document produced from Microsoft's files, do 23 you not, sir? 24 Answer: No. 25 Question: You don't? 5555 1 Answer: Well, how would I know that? 2 Question: Well, do you see the 3 document production numbers down at the bottom? 4 Answer: I have no idea what those 5 numbers are. 6 Question: Do you recognize this as 7 the form in which E-mail has been printed out 8 by Microsoft? 9 Answer: I don't know what that means. 10 It's -- all E-mail printed by anyone looks just 11 like this. So the fact that it looks like this 12 doesn't give you any clue as to who printed it. 13 Question: Well, let's begin with 14 that, sir. E-mail printed out by other people 15 are not stamped with Microsoft confidential 16 stamps and Microsoft document production 17 numbers. You would agree with that, would you 18 not? 19 Answer: That has nothing to do with 20 printing out. 21 Question: Do you understand my 22 question, sir? 23 Answer: No. 24 Question: Okay. Do you see down at 25 the bottom where there are confidential stamps 5556 1 and a stamp that says attorneys only and 2 document production stamps? Do you see those? 3 Answer: I see the stamps. I can't 4 characterize whether they're document 5 production stamps. To me they look more like 6 you'd see on a prisoner's uniform. 7 Question: So that you don't have any 8 knowledge about these stamps; is that your 9 testimony? 10 Answer: I've never seen a stamp like 11 that. I've never used a stamp like that. 12 Question: Haven't you seen stamps 13 like that on every single one of the documents 14 you've been shown during this deposition? 15 Answer: Can you get me all the 16 exhibits? 17 Question: Yes. The one that has this 18 document production stamp and the confidential 19 stamp in the bottom right-hand corner; is that 20 the one you mean, Mr. Gates? 21 Answer: Is that a stamp? To me 22 that's not a stamp. 23 Question: Let me go back to the 24 E-mail, Mr. Gates. What did you mean when you 25 asked Mr. Maritz whether or not we have a clear 5557 1 plan on what we want Apple to do to undermine 2 Sun? 3 Answer: I don't remember. 4 Question: Did you personally 5 participate in any conversations with Apple in 6 1997 and 1998? 7 Answer: Of any kind? 8 Question: Let me be a little more 9 specific. Did you participate in any 10 conversations with Apple in 1997 or 1998 11 concerning what Apple would or would not do 12 that would affect Microsoft competitively? 13 Answer: Well, there were some 14 conversations with Steve Jobs about Microsoft 15 Office and some -- and a relationship we formed 16 around that and some other issues. 17 Question: And did you participate in 18 those conversations? 19 Answer: I talked to Steve Jobs on the 20 phone I think twice. 21 Question: And what was the nature of 22 your conversations with Mr. Jobs? 23 Answer: Well, Steve had -- Steve 24 called me up and said that he had become the 25 CEO of Apple, sort of, and that Gil Amelio 5558 1 wasn't the CEO of Apple. And he raised the 2 question of was there some beneficial agreement 3 that we could enter into different than we'd 4 been discussing with Gil. And it wasn't a very 5 long call, but the conclusion was that Greg 6 Maffei would go see Steve. 7 Question: What was Mr. Maffei's 8 title? 9 Answer: At that time? 10 Question: What is his title today? 11 Answer: His title today is CFO. 12 Question: Of Microsoft? 13 Answer: Uh-huh. 14 Question: Chief financial officer? 15 Answer: Uh-huh. 16 Question: And what was his title at 17 the time? 18 Answer: I think treasurer. 19 Question: When did Mr. Maffei go to 20 talk to Mr. Jobs? 21 Answer: I don't recall the date. 22 Question: Approximately? 23 Answer: Sometime in '97. 24 Question: This was after your 25 conversation with Mr. Jobs? 5559 1 Answer: Yes. 2 Question: Did you have any 3 conversation with Mr. Jobs or anyone else at 4 Apple after your 1997 conversation with 5 Mr. Jobs? 6 Answer: I had a brief conversation 7 with him again in '97, the night before a Mac 8 World speech that he was giving where I 9 appeared as part of that speech. But it was 10 about my role in his speech. 11 Question: I'm going to leave that 12 aside. 13 Answer: Well, it all relates to the 14 agreement with Apple. 15 Question: Okay, then I won't leave it 16 aside. 17 What did you say to him and what did 18 he say to you about the agreement with Apple? 19 Answer: I said, it's not signed yet. 20 What are we going to do about this presentation 21 if it doesn't get signed? And he said he hoped 22 it would be signed. And then we talked about 23 the logistics of appearing by video conference 24 in the middle of his speech. 25 Question: Have you completed your 5560 1 answer? 2 Answer: Yes. 3 Question: Other than the two 4 telephone -- or I guess one telephone 5 conversation, one in person -- was the brief 6 conversation you've just recounted the one in 7 person? 8 Answer: No, that was on the phone. 9 He was in Boston, I was in Seattle. That's why 10 I had to do a video conference to be in his 11 speech. 12 Question: So both of your 13 conversations with Mr. Jobs in 1997 were by 14 telephone; is that correct? 15 Answer: There may have also been some 16 E-mail between Steve and I. I don't think 17 there were anymore phone calls, but the two I 18 described were both phone calls. There were no 19 face-to-face meetings that I remember. 20 Question: Other than the two 21 telephone calls and leaving E-mail aside, did 22 you have any conversations either by telephone 23 or in person with any representative of 24 Microsoft in 1997 or 1998? 25 Answer: Yes. 5561 1 Question: Other than the two 2 telephone conversations with Mr. Jobs that you 3 have already identified, during 1997 or 1998 4 did you have any conversations by telephone or 5 in person with any representative of Apple? 6 Answer: I'm trying to think when 7 Heidi Roizen quit Apple. I think she had quit 8 by '97, but I'm not sure. 9 Yeah, I'm pretty sure she had quit by 10 then, so no. I don't think so. 11 Question: Do I take it from that 12 answer that you had a conversation with Heidi 13 Roizen? 14 Answer: At some point in time that I 15 can't remember, yes. 16 Question: Okay. Other than your 17 possible conversations during the period with 18 Heidi Roizen and the two telephone 19 conversations in 1997 with Mr. Jobs, did you 20 have any other conversations either by 21 telephone or in person with any representative 22 of Apple in 1997 or 1998? 23 Answer: No, I don't think so. 24 Question: To your knowledge, did any 25 representative of Microsoft have any meetings 5562 1 or telephonic discussions -- 2 Answer: Certainly. 3 Question: -- with any representatives 4 of Apple -- 5 Answer: Certainly. 6 Question: -- in 1998 concerning 7 competitive issues? 8 Answer: I don't know what you mean by 9 competitive issues, but there is an ongoing 10 contact with Apple. We're the largest 11 developer of software for the Apple Macintosh 12 and so there is constant discussion with Apple. 13 Question: And as the largest 14 developer of software for the Macintosh, is 15 what you do important to Apple? 16 Answer: Sometimes it doesn't seem 17 like it. We always think of it as important, 18 but sometimes they don't treat it that way, 19 sometimes they do. 20 Question: You mentioned discussions 21 with respect to Office. Would you explain for 22 the record what you're talking about there? 23 Answer: Microsoft Office. 24 Question: Microsoft Office for 25 Macintosh? 5563 1 Answer: Yes. 2 Question: And was it your 3 understanding that Microsoft Office for 4 Macintosh was believed by Apple to be very 5 important to them? 6 Answer: I really have a hard time 7 testifying about the belief of a corporation. 8 I really don't know what that means. 9 Question: Well, sir, in making the 10 decisions as to what you would ask of Apple, 11 did you believe that what you were offering 12 Apple with respect to Microsoft Office for 13 Macintosh was important enough to Apple so that 14 they ought to give you something for it? 15 Answer: I have no idea what you're 16 talking about when you say ask. 17 Question: Well, let me show you a 18 document that has been previously marked as 19 Government Exhibit 366. 20 This is a document bearing Microsoft 21 document production stamps MS98, 0110952 22 through 53. 23 The first part of this purports to be 24 a copy of an E-mail from Don Bradford to Ben 25 Waldman with a copy to you, Mr. Maritz, and 5564 1 others on the subject of Java on Macintosh/IE 2 control. 3 Did you receive a copy of this E-mail 4 on or about February 13, 1998? 5 Answer: I don't know. 6 Question: Do you have any reason to 7 doubt that you received a copy of this E-mail? 8 Answer: No. 9 Question: The first paragraph reads, 10 Apple wants to keep both Netscape and Microsoft 11 developing browsers for Mac -- believing if one 12 drops out, the other will lose interest (and 13 also not really wanting to pick up the 14 development burden). 15 Getting Apple to do anything that 16 significantly/materially disadvantages Netscape 17 will be tough. 18 Do you agree that Apple should be 19 meeting -- it reads, do agree that Apple should 20 be meeting the spirit of our cross license 21 agreement and that Mac Office is the perfect 22 club to use on them? 23 Do you have an understanding of what 24 Mr. Bradford means when he refers to Mac Office 25 as, quote, the perfect club to use on Apple, 5565 1 closed quote? 2 Answer: No. 3 Question: The second sentence of that 4 paragraph, the one that reads, getting Apple to 5 do anything that significantly/materially 6 disadvantages Netscape will be tough. Was it 7 your understanding in February of 1998 that 8 Microsoft was trying to get Apple to do 9 something that would disadvantage Netscape? 10 Answer: No. 11 Question: Do you know why Mr. 12 Bradford would have written this in February of 13 1998 and sent a copy to you? 14 Answer: I'm not sure. 15 Question: Did you ever say to 16 Mr. Bradford in words or in substance in 17 February of 1998 or thereafter, Mr. Bradford, 18 you've got it wrong, we're not out to 19 significantly or materially disadvantage 20 Netscape through Apple? 21 Answer: No. 22 Question: Did you ever tell 23 Mr. Bradford or anyone else in February, 1998, 24 or thereafter, that they should not be trying 25 to get Apple to do things that would 5566 1 significantly or materially disadvantage 2 Netscape? 3 Answer: No. 4 Question: What was Mr. Bradford's 5 position in February of 1998? 6 Answer: I think he had a small group 7 in California that worked -- I'm not sure who 8 he worked for. He probably worked for somebody 9 who worked for Silverberg or -- no. No, I'm 10 not sure who he worked for. 11 Question: Let's begin with what 12 company he worked for. He clearly worked for 13 Microsoft; correct, sir? 14 Answer: That's right. 15 Question: And do you know what his 16 title was? 17 Answer: No. 18 Question: Do you know who Mr. Waldman 19 is? 20 Answer: Yes. 21 Question: What was his title in 22 February of 1998? 23 Answer: I don't know. 24 Question: What were his 25 responsibilities in February of 1998? 5567 1 Answer: He was -- he ran a group that 2 was doing Macintosh software. 3 Neither of these guys have a title 4 like vice president. That I can say for sure. 5 So, you know, they have a title like engineer 6 or software engineer, software engineer 7 manager, but I don't know their titles. 8 They're not executives. 9 Question: In addition to you and 10 Mr. Maritz, copies of this go to David Cole, 11 Dave Reed, Charles Fitzgerald, and Jon DeVaan. 12 Do you know what Mr. Cole's position 13 was in 1998? 14 Answer: Yes. 15 Question: What was it? 16 Answer: He was the VP -- actually, I 17 don't know VP of what, but he was a VP working 18 for -- I don't know if we reorganized by then. 19 He was in Maritz's organization somewhere. 20 Question: What was Mr. Reed's 21 position at that time? 22 Answer: I have no familiarity with 23 Mr. Reed. 24 Question: Do you have any familiarity 25 with Mr. Fitzgerald and Mr. DeVaan? 5568 1 Answer: Yes. 2 Question: What were their positions? 3 Answer: Charles Fitzgerald was in the 4 evangelism group working for Todd Nielson. 5 Question: And Mr. DeVaan? 6 Answer: Mr. DeVaan was managing the 7 overall Office development. 8 Question: Did you have any 9 conversations with anyone within Microsoft as 10 to what position Microsoft should take with 11 Apple in terms of what Microsoft should ask 12 Apple for in return for Microsoft developing 13 Mac Office? 14 Answer: What time frame are you in? 15 Question: 1997 or 1998. 16 Answer: Well, it actually makes a big 17 difference. We reached an agreement with Apple 18 in 1997 and there's no -- I'm not aware of any 19 agreement other than the 1997 one. 20 MR. BOIES: Could I have the question 21 read back? 22 (Requested portion of the record was 23 read.) 24 Answer: I'm not sure what you're 25 saying about Mac Office. We developed Mac 5569 1 Office because it's a profitable business for 2 us. 3 Question: Well, you threatened to 4 cancel Mac Office, did you not, sir? 5 Answer: No. 6 Question: You never threatened Apple 7 that you were going to cancel Mac Office; is 8 that your testimony? 9 Answer: That's right. 10 Question: Did you ever discuss within 11 Microsoft threatening Apple that you were going 12 to cancel Mac Office? 13 Answer: You wouldn't cancel -- no. 14 Question: Let me mark as Government 15 Exhibit 368 a document that bears document 16 production stamp 98 0113394 through 97. 17 Now, let me direct your attention to 18 the second item on the first page of this 19 exhibit. 20 And this purports to be an E-mail from 21 Mr. Waldman to you dated June 27, 1997; is that 22 correct, sir? 23 Answer: The second one, uh-huh. 24 Question: You have to answer audibly 25 yes or no, Mr. Gates. 5570 1 Answer: Yes, the second one. 2 Question: Now, in the second 3 paragraph of this E-mail to you, the second 4 sentence reads, the threat to cancel Mac Office 5 '97 is certainly the strongest bargaining point 6 we have, as doing so will do a great deal of 7 harm to Apple immediately. 8 Do you see that, sir? 9 Answer: Uh-huh. 10 Question: Do you recall receiving 11 this E-mail in June of 1997? 12 Answer: Not specifically. 13 Question: Do you have any doubt that 14 you received this E-mail in June of 1997? 15 Answer: No. 16 Question: Do you know why Mr. Waldman 17 wrote you in June of 1997 that the threat to 18 cancel Mac Office 97 is certainly the strongest 19 bargaining point we have, as doing so will do a 20 great deal of harm to Apple immediately? 21 Answer: Well, Mr. Waldman was in 22 charge of this update. 23 And the Mac Office product had been 24 shipping for over a decade by now. And there 25 was a financial question of whether to do this 5571 1 update and he felt it made good business sense 2 to do it. 3 Other people, irrespective of the 4 relationship with Apple, had said that it 5 didn't make sense to do the update. And so 6 there was some mail from Ben, including this 7 one, where he was saying he thought we should 8 go ahead and finish the product. 9 I'm not sure what he means about the 10 negotiations with Apple. I'm not sure what we 11 were negotiating with Apple at this point. 12 Question: Was this the time that you 13 were negotiating with Apple to try to find out 14 what you could get Apple to do to undermine 15 Sun? 16 Answer: Well, the only E-mail -- the 17 only thing you've shown me where that term was 18 used is after we reached a Mac Office agreement 19 with Apple. 20 Question: You're referring to your 21 E-mail dated August 8, 1997; is that correct? 22 Answer: That's right. 23 Question: That has been marked as 24 Exhibit 365; is that correct? 25 Answer: That's right. That's after. 5572 1 Question: Yes, that's August 8, 1997? 2 Answer: That's right. 3 Question: And it is clear from your 4 August 8, 1997 memo that you are still 5 attempting to get Apple to do additional 6 things, is it not, sir? 7 Answer: No. 8 Question: Well, sir, let's read it. 9 It's only three lines. 10 You write, quote, I want to get as 11 much mileage as possible out of our browser and 12 Java relationship here. 13 And when you talk about here, you're 14 talking about with Apple, are you not, sir? 15 Answer: I'm not sure. 16 Question: Well, the subject of this 17 is FW: Post-agreement; correct, sir? 18 Answer: Yeah. That's what makes me 19 think this was probably post-agreement. 20 Question: Post-agreement with Apple; 21 right? 22 Answer: Yes. 23 Question: So the subject is 24 post-agreement with Apple, and the very first 25 sentence says, I want to get as much mileage as 5573 1 possible out of our browser and Java 2 relationship here. 3 Second sentence says, in other words, 4 a real advantage against Sun and Netscape. 5 Third line says, who should Avie be 6 working with? Do we have a clear plan on what 7 we want Apple to do to undermine Sun? 8 Now, do you have any doubt that when 9 you talk about I want to get as much mileage as 10 possible out of our browser and Java 11 relationship here, you're talking about Apple? 12 Answer: That's what it appears. 13 Question: Okay. Do you have any 14 recollection of any discussions about the 15 subject matter of this E-mail in or about 16 August of 1997? 17 If the question is confusing, I'd be 18 happy to rephrase it, Mr. Gates. 19 Answer: Go ahead. 20 Question: Did you send this E-mail? 21 Answer: It appears I did. 22 Question: Did you discuss this E-mail 23 with anyone? 24 Answer: I don't remember that. 25 MS. CONLIN: Your Honor, this would 5574 1 probably be a good place. 2 THE COURT: It is 2:30. 3 Ladies and Gentlemen of the jury, 4 we'll get you your recess for the day. 5 Remember your admonition previously 6 given. Leave your notebooks here. 7 See you tomorrow at 8:30. Drive 8 carefully. 9 (A recess was taken from 2:30 p.m. 10 to 2:36 p.m.) 11 (The following record was made out of 12 the presence of the jury.) 13 MS. CONLIN: Your Honor, I think you 14 wanted a report from us. 15 THE COURT: Got my little sheet right 16 here. 17 MS. CONLIN: Your Honor, for most of 18 the experts, the number of pages is just a 19 couple of dozen, with the following exceptions: 20 Mr. Gautam Gowrisankaran and Mr. Smith and 21 Mr. Schulman, but let me first deal with the 22 first two, have produced both visited various 23 Internet sites and have printed out in 24 compliance with the Court's order the documents 25 from the Internet sites that they visited. 5575 1 None of the documents produced are 2 documents on which the expert relied; none are 3 documents which the expert reviewed. But there 4 are, you know, 1,200 or so pages for those two. 5 For Mr. Schulman -- oh, and Your 6 Honor, those two, as well as Applicon, will be 7 done tonight. 8 The only expert for which documents 9 will not be available till tomorrow is 10 Mr. Schulman, and what he reviewed were 11 documents in this case. And these again, Your 12 Honor, are documents not -- these are not 13 documents on which he relied, nor are they 14 documents which he reviewed, but they are 15 documents which he looked at. 16 So based on the Court's November 28th 17 order, they will be produced. 18 So that's kind of where we are, Your 19 Honor. 20 Everything will be available to the 21 Defendant tonight, with the exception of 22 Mr. Schulman, which will be available tomorrow. 23 THE COURT: Great. Excellent. Very 24 good. 25 MS. CONLIN: All right, Your Honor, 5576 1 then -- 2 THE COURT: What motion do you want to 3 take up first? 4 MR. TULCHIN: Your Honor, if we could, 5 I think the first order of business would be 6 the motion we started talking about early this 7 morning, about splitting witnesses into pieces. 8 THE COURT: Is that okay? 9 MS. CONLIN: Yes, Your Honor, we're 10 ready to discuss that. 11 If I may make just a very brief record 12 on the cross-examination of Mr. Gates. 13 The source of Mr. Boies' reference to 14 the precision with which Mr. Gates uses words 15 comes in significant part from the 16 cross-examination that has been excluded by 17 order of the Court. 18 The fact that the jury has been 19 deprived of the context of those questions 20 significantly affects the manner in which the 21 jury will perceive both Mr. Gates' testimony 22 and Mr. Boies' questions, and for that reason, 23 we assert that the Plaintiffs have been 24 prejudiced. 25 That's all I need to do with respect 5577 1 to that, Your Honor. 2 THE COURT: I think Mr. Tulchin 3 completed his argument this morning, did you 4 not or not? 5 MR. TULCHIN: More or less, Your 6 Honor. 7 THE COURT: If you want to continue, 8 go ahead. 9 MR. TULCHIN: What I would add to 10 that, Your Honor, if I may is that as the Court 11 knows, we did hand up our papers early this 12 morning, including two affidavits. 13 I did note that when the Plaintiffs 14 submitted their papers in the middle of the day 15 today they say nothing that contradicts our 16 showing that this procedure has never been used 17 in the courts of Iowa. They do make reference 18 to the Manual For Complex Litigation, which 19 pertains to Federal Court cases. 20 There is nothing said whatsoever which 21 would contradict the affidavits of Mr. Green 22 and Mr. Remsberg that the courts of Iowa have 23 never used a procedure where a single witness 24 is allowed by Court order to be divided in his 25 or her presentation into separate parts, 5578 1 apparently to be organized by subject matter. 2 It's never happened in Iowa. 3 Ms. Conlin said on Friday, at page 4 5149 of the transcript, quote, I can't count 5 the number of cases where witnesses have been 6 on more than once, unquote. 7 And I'm not quite sure what she was 8 referring to. If she means I can't count the 9 number of cases where this sort of procedure 10 has been adopted, I must say that the count as 11 far as we know is a flat zero. It's never 12 happened in the Iowa courts. 13 And for the reasons expressed in our 14 brief and that I mentioned this morning, we 15 think it would be a very bad idea for this case 16 to be the first in which that procedure is 17 adopted. 18 Thank you, Your Honor. 19 THE COURT: Response? 20 MS. CONLIN: Thank you, Your Honor. 21 There are really two issues or two 22 separate parts of this issue for the Court to 23 address. 24 The first is the issue of the 25 depositions, and the second is the issue of 5579 1 live witnesses, which will be in every case 2 experts. 3 The depositions are, of course, Your 4 Honor, self-contained and provided in a 5 particular case. 6 For example, in the case of Mr. Gates, 7 we are looking at the government case 8 deposition. 9 Mr. Gates testified in FTC proceedings 10 having to do with OEM licensing, and he 11 testified in Caldera having to do with DRI and 12 DR-DOS and several other cases. 13 Those are the two others that I recall 14 sitting here, Your Honor, from which we have 15 designated testimony. 16 There is no question about the scope 17 of cross-examination, Your Honor. In a case of 18 a deposition already in the can, already taken, 19 nothing else is going to happen, and that 20 cross-examination is confined to the issues 21 discussed with a witness in that deposition. 22 Because there is no question of the 23 scope of cross and no reason to require that 24 the testimony be presented all at once, we 25 think that issue is resolved. 5580 1 On the second issue, the question of 2 whether or not we can present expert testimony 3 by chapters, first of all, Your Honor, I 4 believe that we do contradict quite directly 5 what Mr. Tulchin contended in connection with 6 this matter on Friday. 7 Microsoft said that there was no order 8 concerning this matter in Gordon, Your Honor. 9 We have provided you with the Court's 10 order dated December 19th, 2003. 11 In paragraph two of Judge Peterson's 12 order in Gordon, he states as follows: 13 Plaintiffs request to present their case on an 14 issue-by-issue basis is granted. Witnesses may 15 be recalled to testify to different issues, if 16 necessary, but repetition of testimony will not 17 be permitted absent leave of Court. 18 So, Your Honor, the fact is that in 19 the Gordon case the Court did grant Plaintiffs, 20 consistent with the Manual of Complex 21 Litigation, the right to recall witnesses and 22 to present their case on an issue-by-issue 23 basis. 24 The Court should be aware, Your Honor, 25 that that did not actually happen in Gordon 5581 1 because we settled the case in the middle of 2 Dr. Noll's testimony. 3 He was the first expert to be called, 4 and as it happens, he was the last, and he was 5 -- he was being called at that time as the -- 6 he was the only expert that testified in 7 connection with the Gordon case prior to its 8 settlement. 9 And the multidistrict -- the Manual 10 For Complex Litigation, which was persuasive to 11 Judge Peterson, talks about -- and we've also 12 attached this, Your Honor, as Exhibit B -- what 13 the courts have been concerned about in complex 14 litigation of the sort that we are certainly 15 dealing with here is what can the jury 16 understand. How best can a case of this sort 17 with many issues, many products and a long time 18 period, how best can that be presented to the 19 jury to increase their comprehension? 20 And it is to that that Part 1, 21 Overview Section 12, Trial, Section 12.34 22 sequencing of evidence and arguments is 23 directed. 24 And the Manual of Complex Litigation 25 says, and I quote, jury recollection and 5582 1 comprehension in lengthy and complex trials may 2 be enhanced by altering the traditional order 3 of trial. 4 Sequencing techniques include the 5 following: Evidence presented by issues. 6 Organizing the trial in logical order issue by 7 issue, with both sides presenting their opening 8 statements and evidence on a particular issue 9 before moving to the next can help the jury 10 deal with complex issues and voluminous 11 evidence. 12 And they go on to caution, but may 13 result in inefficiencies if witnesses must be 14 recalled and evidence repeated. 15 Your Honor, we do not request the 16 opportunity to make sequential opening 17 statements, but we do request the right to 18 bring our experts back to testify about issues 19 that are different. 20 And Alepin is a good example because 21 he has a part of his expertise devoted 22 specifically to the question of security. 23 And the concerns expressed by 24 Microsoft about the scope of their 25 cross-examination are easily handled because 5583 1 the scope of cross-examination is under the 2 rules limited to the scope of direct 3 examination. 4 We do not seek to impede Microsoft's 5 cross-examination of our expert witnesses. 6 What we seek, Your Honor, purely and 7 simply, is a way to make this complex case 8 comprehensible to this lay jury, and we believe 9 that both Judge Peterson's order and the Manual 10 For Complex Litigation supports our effort to 11 do it in this manner, Your Honor. 12 And with respect to my statement about 13 countless times that witnesses have been 14 brought back, as I was sitting here, I was 15 thinking specifically of the case of Madison 16 versus IBP. 17 On further consideration, though, Your 18 Honor, I do think that many witnesses were 19 brought back in rebuttal. I don't -- I don't 20 recall that there were specific witnesses 21 brought back several times to testify on 22 direct. 23 However, in the case of Channon, 24 C-h-a-n-n-o-n, versus UPS, the plaintiff in 25 that case did take the stand several times 5584 1 during the course of the proceedings under -- 2 in the plaintiff's case in chief. 3 I'm sure that -- it's possible that 4 Judge Gamble does not remember all of that 5 case. I think he probably remembers some 6 significant part. And indeed, that was 7 necessary in the case of -- in the Channon 8 case. 9 But in this case, Your Honor, we are 10 not talking about lay witnesses, we're talking 11 explicitly about experts whose expertise 12 crosses various product categories or 13 categories with respect to the chapters. 14 So we would request that the Court 15 grant our request that we be allowed to do this 16 in the limited way in which we have suggested. 17 THE COURT: Will this be in regard to 18 deposition testimony too? 19 MS. CONLIN: Well, Your Honor, there 20 are two -- I want to deal with those two 21 separate things. 22 With respect to deposition testimony, 23 there can't be any issue of cross-examination. 24 Those depositions are done. There isn't going 25 to be any more cross-examination. 5585 1 Cross was accomplished during the 2 deposition and was, of course, more or less 3 within the scope of the deposition. 4 So that's really not -- that should 5 not present a problem, or at least the problem 6 that the Defendant have identified. 7 And as I said on Friday, any other way 8 of presenting evidence is truly ridiculous 9 because what we're trying to do here is present 10 our case in a comprehensible way, and to mix up 11 the contractual provisions with the binding of 12 Internet Explorer and the operating system is 13 not how we wish to accomplish that. 14 So I think the depositions is one 15 thing. And what we're talking about, Your 16 Honor, is not splitting the deposition in a 17 particular case, but rather, Microsoft says 18 that when we present the testimony of Jim 19 Allchin, a Microsoft executive, that we have to 20 present his testimony from all of the cases he 21 testified in. 22 This is just an example, Your Honor. 23 And Mr. Allchin testified in every case 24 Microsoft has ever had. 25 I can't remember what we've 5586 1 specifically designated, but, gosh, he 2 testified in Caldera, he testified in the 3 Department of Justice case, he testified in the 4 remedies part of the Department of Justice 5 case. I believe that he -- you know, he's just 6 testified a lot. 7 The same is true of Mr. Kempin. They 8 testified in several different cases and with 9 respect to different subject matters. 10 We are not saying that all of the 11 testimony of Mr. Allchin with respect to 12 remedies shouldn't come in at the same time. 13 That should come in at the same time, Your 14 Honor. 15 What we're saying is if we offer 16 testimony of Mr. Allchin in remedies, that 17 doesn't mean that we have to offer any 18 testimony of his in Caldera involving DR-DOS or 19 in Burst involving spoliation issues or any of 20 that other -- you know, any of the other 21 various cases in which he testified. 22 What we're saying is, when a -- when a 23 deposition is -- from a particular case is 24 offered, yes, of course we give that -- we 25 provide that whole deposition with the 5587 1 exception that the Court has not required of us 2 that we provide affirmative designations at 3 that time. 4 But what we are saying is there's 5 simply no reason at all for requiring of us 6 that we present deposition testimony all at 7 once just because it happens to come from the 8 same witness. There just isn't any reason to 9 do that. It will be confusing, and it's just 10 not necessary. 11 As I said to the jury, we're going to 12 try to present the case in much the same way 13 that I've presented my opening. That is to 14 say, you know, Caldera, DR-DOS, and then OS/2, 15 and then whatever was after that -- I'm sorry, 16 Your Honor, but there was -- there were several 17 other parts of that. I don't know why it won't 18 come to me. Oh, GO. 19 I think it was first DR-DOS, then GO, 20 then OS/2, and then applications, and so on. 21 That's how we wanted to present the 22 testimony to the jury because we think that 23 makes it easier to understand. 24 And with respect to depositions, that 25 doesn't seem to me at least to present any 5588 1 problem for Microsoft at all because the 2 cross-examination was done in that deposition 3 in that case. 4 With respect to live witnesses, the 5 only live witnesses that we may wish to recall 6 are experts and experts whose areas of 7 expertise cross the lines between the various 8 stories. 9 And the one that comes to mind is 10 Mr. Alepin. And he has general liability type 11 of testimony, and then a separate portion of 12 his testimony that deals with the security 13 issues. That's an example, Your Honor. 14 THE COURT: The deposition testimony, 15 is it also by subject matter, too? Is it 16 divided up? 17 MS. CONLIN: It's by case, so it's 18 automatically divided by subject matter, Your 19 Honor. 20 THE COURT: And is the 21 cross-examination in that also going to be 22 presented? 23 MS. CONLIN: Yes, Your Honor, of 24 course. Yes. 25 THE COURT: At the same time? 5589 1 MS. CONLIN: Yes. That's all in the 2 can, or will be all hopefully in the can. 3 So the question is do we have to 4 present the Caldera testimony and the DOJ 5 testimony at the same time. There's just no 6 reason to do that in terms of the depositions. 7 The issue of live testimony, I think, 8 should be as easily disposed of. And that is, 9 given the authority that we have presented to 10 the Court, I believe that it is clear that what 11 we are after here is not any effort to impede 12 Microsoft but rather an effort to make this 13 case comprehensible to the jury, and that is 14 something supported both by Judge Peterson's 15 order and by the Manual For Complex Litigation. 16 THE COURT: Okay. Thank you. 17 Anything else, Mr. Tulchin? 18 MR. TULCHIN: Yes, Your Honor. 19 I will be brief. 20 First, in Minnesota this procedure was 21 never used, but not for the reason Ms. Conlin 22 told the Court. 23 It was never used because Judge 24 Peterson's paragraph two, which is appended to 25 Ms. Conlin's paper, goes on to require the 5590 1 Plaintiffs a week before the commencement of 2 trial to provide a list with subject matters 3 divided up, et cetera, et cetera, and they 4 never did that. They decided for their own 5 reasons in Minnesota not to pursue this 6 procedure. 7 Secondly, I think Ms. Conlin has 8 conceded by her discussion that this has never 9 happened in an Iowa Court. 10 She mentioned a case in Federal Court 11 before Judge Gamble involving a plaintiff. 12 What she proposes here is to have 13 some, or perhaps all, of her 11 or 13, I forget 14 the number, of experts be divided by subject 15 matter to be excused from the witness stand and 16 then to come back at a later stage of the case 17 at the Plaintiffs' convenience. 18 It's never happened before in this 19 state, Your Honor, for very good reason. 20 It's never happened because it makes 21 no sense. It forces the other party to divide 22 cross-examination in an artificial and highly 23 confusing way. 24 Our cross of Mr. Alepin cannot be so 25 divided or segmented as we've shown in our 5591 1 papers. The subject matters he addresses are 2 intertwined and there are general lines of 3 cross-examination that we would have to do 4 twice if he came twice. 5 I don't think it makes any sense. 6 Lastly, Your Honor, on the subject of 7 depositions, I didn't know that that was 8 something that we were addressing today. 9 Ms. Conlin is correct that the 10 problems associated with using depositions are 11 quite different; and, of course, on this 12 subject, I think I feel less strongly. 13 We have offered our view that even 14 with depositions, if you call a person such as 15 Jim Allchin by deposition, you ought to play 16 all his deposition testimony from whatever 17 cases. 18 But clearly, to give Ms. Conlin her 19 due here, the problems are quite different. 20 She's correct the cross has already 21 been conducted and the difficulty for the other 22 party in that sense has been removed. I still 23 believe that it's more logical, more 24 traditional, and in accord with proper 25 practice, to call a witness once. 5592 1 But to go back to the main point, the 2 one I thought we were discussing today. 3 When it comes to live witnesses, 4 particularly experts, it's never happened in 5 this state, and this shouldn't be the first 6 time. 7 Thank you, Your Honor. 8 THE COURT: Do the parties concede 9 that the Court has broad discretion in the 10 order of witnesses and presentation? 11 MS. CONLIN: Yes, Your Honor. 12 MR. TULCHIN: Yes, sir, but I think 13 this is -- Your Honor, when it comes to the 14 question of live witnesses, particularly 15 experts, this is close to the line of the 16 Court's discretion. 17 I think it would be so unusual and in 18 our view unjustifiable because of the problems 19 it would create in cross-examination. That 20 while the Court has very broad discretion, of 21 course, you know, this one gets I think pretty 22 close to the line, if not over, Your Honor. 23 MS. CONLIN: And, Your Honor, if I may 24 just say one thing and note for the record that 25 Judge Gamble is not a Federal Court Judge. I 5593 1 don't suppose anyone who reads this will 2 believe that, but he is not a Federal Court 3 Judge. 4 The Channon case was tried on this 5 floor and in a tiny little courtroom at the 6 end, and it was, in fact, done in that case 7 with the plaintiff. 8 Mr. Kincade, who was my opponent of 9 that case, was in the back not very long ago, 10 but he appears to have gone. 11 But I would say to the case -- to the 12 Court, aside from the Channon case, which is 13 also complicated, but only lasted four weeks, I 14 don't know of another case and I do not know of 15 a case that involved experts. 16 The Defendant's argument that this has 17 never been done before, however, is not a very 18 good reason for not doing it in this case 19 because this is, as I think we have all 20 acknowledged, an unusual case and distinct and 21 unique in the annals of the courts of Iowa. 22 THE COURT: Very well. Anything else 23 on this motion? 24 MR. TULCHIN: Not from us, Your Honor. 25 THE COURT: The Court will enter a 5594 1 written ruling no later than tomorrow morning 2 on this. 3 MS. CONLIN: Thank you, Your Honor. 4 MR. TULCHIN: Thank you, Your Honor. 5 I'm going to run to another conference 6 call, if I may, Your Honor, on another matter. 7 So I'll just ask to be excused. 8 MS. CONLIN: And I think I don't have 9 any excuse, Your Honor, except I want to go 10 now. 11 THE COURT: Both valid reasons. 12 MR. GRALEWSKI: Your Honor, shall we 13 proceed or take a short break? 14 THE COURT: No. We can go. 15 Which one is first? 16 MR. GRALEWSKI: Just one witness 17 today, Tony Speakman. 18 We've provided Your Honor a hearing 19 memorandum earlier today, and we have a full 20 copy of the transcript for Your Honor right 21 here, if I may. 22 THE COURT: Great. 23 THE COURT: Does Mr. Tuggy have -- 24 MR. TUGGY: Have it all. 25 MR. GRALEWSKI: We all have all the 5595 1 papers. 2 THE COURT: Did you file something 3 too? 4 MR. TUGGY: No. Does the court have 5 the rulings chart? 6 MR. GRALEWSKI: The rulings chart, 7 Your Honor, is attached as Exhibit B to the 8 hearing memorandum. 9 THE COURT: Great. If I can just have 10 one second -- 11 THE COURT: Go ahead and get set up. 12 MR. GRALEWSKI: Thank you, Your Honor. 13 If I may proceed. 14 I do want to note for the record that 15 Plaintiffs appreciate the efforts that 16 Microsoft has undertaken to make this a 17 manageable appeal for Your Honor. And as I 18 noted last week, not on the record, I think 19 we've been able to limit the issues to a 20 manageable set of them. 21 We will see if that's the case. 22 But there are about nine blocks of 23 testimony to go through, and there's a document 24 associated with one of those blocks. 25 And, Your Honor, what I did was 5596 1 provided the Court with this hearing memorandum 2 today. 3 THE COURT: Okay. 4 MR. GRALEWSKI: In an effort to be 5 efficient with my argument, I identified in 6 column form for each block of testimony a 7 summary of the testimony in essence what 8 Mr. Speakman was testifying about. 9 And then my argument for why the 10 testimony is admissible is to the right. 11 THE COURT: Good. 12 MR. GRALEWSKI: Just a little bit of 13 background before we get into the first block 14 of testimony. 15 Mr. Speakman, as the hearing 16 memorandum indicates, was a salesman for DRI in 17 the early 1990s. And that fact is important in 18 the context of this appeal because in 19 connection with his job duties and 20 responsibilities, he met with all of the people 21 that are subject to this testimony in his 22 official duties as a salesperson. 23 He would meet with Opis and a number 24 of the other OEMs listed here -- 25 THE COURT: Opis? 5597 1 MR. GRALEWSKI: Yes. 2 THE COURT: Is that the penguin from 3 the comic? 4 MR. GRALEWSKI: I'm not familiar with 5 that. 6 THE COURT: It's a comic strip. 7 MR. GRALEWSKI: These in-person 8 interactions are really what we're going to be 9 talking about today and form the disagreements 10 that the parties have. 11 The first block of testimony, Your 12 Honor, is at page 65 and 66, specifically 65, 13 20, to 66, 3. 14 THE COURT: Okay. 15 MR. GRALEWSKI: And I will preview for 16 Your Honor that I'm not entirely certain why 17 the rulings were split up like this, but the 18 very next block of testimony to discuss follows 19 right on in 66, 4, to 67, 5. 20 And essentially it's just a follow on 21 question so it might make sense to handle them 22 together in the argument. 23 As my hearing memorandum indicates, 24 Your Honor, is that what's going on here is 25 while Mr. Speakman is testifying about his OEM 5598 1 customers' contractual relationships with both 2 DRI and Microsoft, Mr. Speakman testifies based 3 on his interactions with the OEMs that he got 4 the impression -- that's the word he uses -- 5 that he got the impression from dealing with 6 the OEMs that they were afraid or fearful of 7 what Microsoft would do if they acted in a 8 certain way. 9 For example, if they didn't go along 10 with what Microsoft wanted or if they went with 11 DRI or what have you. 12 As we argue, Your Honor, the testimony 13 we don't believe is hearsay because Mr. 14 Speakman is not repeating any out-of-court 15 statements. 16 He is only testifying about reflexes 17 that he himself observed, thought about, or 18 witnessed. 19 We cite the Mattingly case at 220 N.W. 20 2d 865 at 869. That's attached as Exhibit C. 21 And this first one is going to take a 22 little bit longer to go through, Your Honor, 23 but the others will speed up because we keep 24 coming back to these same issues. 25 There's another case, U.S. Supreme 5599 1 Court case, which is about Texas cattle fever. 2 On the surface doesn't seem very applicable to 3 this case, but I think it stands for the 4 general proposition that is applicable, which 5 is that information or knowledge that you gain 6 is not hearsay when it's part of your official 7 duties or responsibilities to obtain that 8 information. 9 And I would submit, Your Honor, that 10 what we're going to see time and time again 11 here is that Mr. Speakman is talking about 12 knowledge that he has or opinions that he has 13 come to in connection with his duties and 14 responsibilities in talking with these OEMs. 15 The final case, Your Honor -- I should 16 note that the Grayson case is attached as 17 Exhibit D to my hearing memo. 18 Then the final case, Your Honor, is 19 the Kehoe versus Anheuser-Busch case, 995 F. 2d 20 117 at 119. That's an Eighth Circuit case 21 attached as Exhibit E. 22 And the Kehoe case stands for the 23 proposition that summaries of impressions are 24 not hearsay so long as they're gained through 25 firsthand knowledge. 5600 1 Kind of reminds me as I was looking at 2 a lot of these materials, Your Honor, it 3 reminded me to go back to the testimony that 4 Mr. Tulchin showed the jury, I believe it was 5 Mr. Crummey, an employee of an OEM who 6 testified that his boss had Gates envy or that 7 his boss was jealous of Mr. Gates. 8 Apparently Mr. Tulchin at the time had 9 a good faith belief that this was admissible 10 testimony because these were opinions and not 11 hearsay that Mr. Crummey had come to possess 12 due to his firsthand interaction with his boss, 13 just like Mr. Speakman here testifies in this 14 chunk of testimony that he got the impression 15 that OEMs were fearful, just like Mr. Crummey 16 got the impression that his boss had Gates envy 17 or was jealous of Mr. Gates. 18 So in summary, Your Honor, Mr. 19 Speakman got the impressions that the OEMs were 20 fearful as a result of meeting with the OEMs as 21 part of his official job duties. 22 And to the extent the Court believes 23 the testimony at issue here is hearsay, it 24 would seem to qualify as state of mind 25 evidence. 5601 1 I believe it was Friday when Your 2 Honor recognized that fear is a state of mind, 3 and I believe that the person arguing on behalf 4 of Microsoft agreed with that at the time. 5 That's essentially what's going on 6 here. Mr. Speakman is recounting that same 7 state of mind of the OEMs. 8 Thank you, Your Honor. 9 THE COURT: Mr. Tuggy? 10 MR. TUGGY: Yes, Your Honor. 11 On the first designation at issue, 12 page 65, line 20, to 66, line 3, what is 13 occurring here in the deposition is at page 65, 14 line 12, the examiner asks Mr. Speakman about 15 whether Digital Research viewed its agreements 16 with OEMs as confidential -- and this is 17 testimony being designated by Plaintiffs -- and 18 Mr. Speakman answers that yes. 19 He says on page 65, line 15, I think 20 in so much as, you know, any two organizations 21 with a business relationship will state that 22 the terms of that agreement are confidential, 23 I'm sure Digital Research had that sort of 24 clause in it. 25 So he's agreeing that Digital Research 5602 1 had a confidentiality provision in its 2 contract. 3 Now, the rest of the examination that 4 we're dealing with, this designation and the 5 ones that follow, two or three that follow, all 6 focus on the confidentiality provision in the 7 agreements. 8 So this is not a situation like we've 9 dealt with on some other witnesses, including 10 Williams in particular, where the state of mind 11 at issue is whether a customer was going to 12 purchase a product from DRI or not. 13 This has to do with a confidentiality 14 clause in an agreement. 15 And what Mr. Speakman does after 16 giving an answer to the question is he launches 17 into an argument saying on page 65, line 20, 18 which is where the beginning of our objection 19 is -- we don't object to the designation by 20 Plaintiffs of the response to the question, but 21 to the argument where Mr. Speakman says, but 22 the difference was -- I always got the distinct 23 impression dealing with the OEM customers that 24 it wasn't so much that, you know, it was 25 confidential. 5603 1 It was more that they were absolutely, 2 you know, terrified of what would happen to 3 their business if they didn't go along exactly 4 with the way Microsoft wanted them to behave. 5 So with respect to that segment of the 6 answer, Microsoft had asserted a hearsay 7 objection arguing to the Special Master that 8 Mr. Speakman here was communicating regarding 9 statements made to him by OEMs, and the Special 10 Master sustained Microsoft's objection, and 11 that's what's on appeal. 12 Initially what Plaintiffs argue is 13 that it's not hearsay because Mr. Speakman is 14 simply communicating an impression that is 15 based on -- pardon me -- they say he's 16 communicating an impression, but the Plaintiffs 17 don't state what that impression is based upon. 18 Now, the Plaintiffs to support their 19 position cite three cases which they've 20 attached to their brief relating to 21 Mr. Speakman. 22 The first is the State of Iowa versus 23 Mattingly case. That's Exhibit C to the 24 materials the Plaintiffs provided to you. 25 And this was a case where hearsay 5604 1 issues arose regarding the observations made 2 by, I believe it's an informant in this 3 criminal law case, and on page 869 of the 4 opinion -- 5 THE COURT: Mattingly? 6 MR. TUGGY: Yes, in Mattingly. 7 THE COURT: Okay, 869. 8 MR. TUGGY: The Keynote Number 5. 9 THE COURT: Note 5, okay. 10 MR. TUGGY: There it begins, 11 Defendant's second assignment of error lists 20 12 instances in which it is claimed prejudicial 13 hearsay was admitted over proper objection. 14 I did take some comfort that there the 15 Court had to deal with 20 and we only have nine 16 here today. 17 There the Court at the end of that 18 paragraph states, without identifying the 19 statements at issue, on those several occasions 20 when defense counsel entered hearsay objections 21 to testimony, which only reflected what the 22 witness himself observed, thought or stated, 23 the objections were properly overruled. 24 Now, again, we don't have in this case 25 any description of what it was that the witness 5605 1 observed, thought, or stated, and that were the 2 subject of the hearsay objection. 3 For example, if Mr. Speakman had said 4 when I met with these OEMs, their palms were 5 sweaty, they would become short of breath, they 6 would lose color and become pale and from that, 7 I concluded or from that I concluded something, 8 that may be something he observed and an 9 impression that he comes to. 10 In that same case, in the next 11 headnote -- in the next Headnote 6 and 7 in the 12 opinion, the Court identifies other numerous 13 instances, it says, in which testimony was 14 improperly admitted over a hearsay objection. 15 And that testimony related to signals 16 that an informant was using or to general 17 knowledge of the presence of drugs in the 18 community. 19 And there, to the extent testimony is 20 given about what the witness learned from what 21 someone else said such as general knowledge of 22 the presence of drugs in the community, it 23 could be the subject of a hearsay objection 24 that's well taken. 25 I point the Court to these sections of 5606 1 the opinion because while Plaintiffs cite 2 Mattingly in support of their position that 3 Mr. Speakman's conclusions ought to be admitted 4 over our hearsay objection, this case does not 5 identify or describe the hearsay statements 6 made or how -- and in such a way as to allow 7 them to compare us to what Mr. Speakman does 8 here and make conclusions about what is hearsay 9 and what isn't. 10 The second case Plaintiffs cite is a 11 case decided in 1896 called Lynch -- pardon 12 me -- Grayson, G-r-a-y-s-o-n, versus Lynch, 13 L-y-n-ch. This is a -- this is Exhibit D to 14 the brief that Mr. Gralewski filed. 15 And the section of the opinion where 16 this is discussed begins at page 480 of the 17 U.S. Supreme Court volume. 18 So it's at page 480, and I believe 19 that would be probably 1069 of the Supreme 20 Court volume. 21 And at paragraph numbered five, the 22 Court identifies or states 14 assignments of 23 error are addressed to the admission of the 24 depositions of Salmon and Detmer -- and the 25 next line is quite important -- who testified 5607 1 as experts to the nature and symptoms of the 2 disease and to the fact that there were certain 3 districts infected with the fever. 4 So here we have two individuals who 5 are identified as experts, and they testify 6 about certain districts within Texas that have 7 a high incidence of -- I believe it's a cattle 8 disease. 9 Both of the experts as described in 10 that paragraph were in the service of the 11 United States government and in their capacity 12 were responsible for obtaining information 13 about the rates of disease in various districts 14 around the country. 15 And at the section of the opinion that 16 crosses over from page 480 to 481, the Court 17 states that in the nature of their business -- 18 that's these two experts -- in the 19 correspondence of the department and in the 20 investigation of such diseases, they would 21 naturally become much better acquainted with 22 the districts where such diseases originated or 23 were prevalent than if they had been merely 24 local physicians and testified as to what came 25 within their personal observation. 5608 1 The knowledge thus gained cannot 2 properly be spoken of as hearsay since it was 3 part of their official duty to obtain such 4 knowledge. 5 Mr. Gralewski's argument that whenever 6 it is part of an individual's official duty to 7 learn something, what they've learned cannot be 8 hearsay states the rule much too broadly. 9 This case deals with the ability of 10 experts to testify regarding knowledge they 11 have, specialized knowledge that may in part be 12 based on information they received from others. 13 That is a far cry from a lay witness being 14 permitted to testify regarding statements made 15 to the lay witness. 16 Finally, the third case Plaintiffs 17 identify is Kehoe versus Anheuser-Busch. Kehoe 18 is spelled K-e-h-o-e. And that's Exhibit E to 19 their brief. 20 This case involves an employee who was 21 terminated and brought an age discrimination 22 lawsuit. 23 And in Footnote 3 of the case, the 24 Court describes where the Defendant -- where 25 the plaintiff had used an affidavit of a 5609 1 coemployee of the plaintiff, and this 2 coemployee stated in the affidavit that the 3 plaintiff had been treated with disdain by the 4 supervisor. 5 And the objection interposed by the 6 Defendant was that the statement was merely 7 conclusionary, and therefore inadmissible, and 8 the Court determined over that objection that 9 it was admissible because there was foundation 10 provided in the testimony of this coemployee; 11 that he had opportunity to observe the way the 12 supervisor had treated the plaintiff and could 13 conclude and draw impressions and knowledge 14 about whether that person had in fact been 15 treated with disdain. 16 So these cases do not stand for the 17 proposition that simply because one derives 18 conclusions from what they're told by another, 19 that somehow because the deponent is 20 characterizing what they've been told by 21 others, it takes the statement out of the 22 hearsay rule. 23 So specifically with respect to the 24 testimony at issue, Mr. Speakman in this 25 deposition testified that the information he's 5610 1 providing here is based on statements that were 2 made to him by the OEMs with whom he dealt. 3 At page 68 of the deposition, which is 4 part of this group of testimony at issue, at 5 lines 8 to 12, the question is asked, is it 6 true your knowledge of Microsoft agreements 7 with OEMs is based entirely on what OEMs told 8 you about those agreements? 9 Answer: That's pretty much the case, 10 yes. 11 So based on that testimony, all we 12 know about the basis for Mr. Speakman's 13 conclusion that -- or impression that these 14 OEMs were, quote, terrified, unquote, with what 15 Microsoft might do with respect to the 16 confidentiality provision is what the OEMs told 17 Mr. Speakman. 18 That being the foundation for its 19 testimony, Microsoft asserted a hearsay 20 objection because Mr. Speakman's conclusions 21 are based upon what he was told. 22 There's no information in this 23 deposition to support any argument that he drew 24 this conclusion based upon, as I said before, 25 some physical characteristic exhibited by these 5611 1 OEMs. 2 Now the question is whether since this 3 is hearsay this is a statement made to Mr. 4 Speakman from which he draws this conclusion 5 about the statement. For example, the OEM may 6 have said I can't provide you this 7 confidentiality provision because I'm afraid to 8 do so. Then the question is does that satisfy 9 the state of mind exception to the hearsay 10 rule. 11 And the Special Master's ruling here 12 is consistent with what he's done in these 13 situations, which is he's not applied the 14 Callahan rule because the context for this 15 discussion is a specific negotiation between 16 Digital Research and in this case Opis, the 17 OEM. 18 That context is that Digital Research 19 offers a price to license the operating system. 20 The OEM says we can't pay that price 21 because of the fact that Microsoft has an 22 agreement with us that if we buy your system, 23 then we'll have to pay too much for both the 24 Microsoft license and your license. 25 And Digital Research wants the OEM to 5612 1 show Digital Research the contract so that 2 Digital Research can drill down into the 3 contract and negotiate from the contract 4 itself, telling the OEM this is really what the 5 contract means, don't interpret the contract 6 that way, you shouldn't think the way that 7 you're telling me because if you read the 8 contract our way, then you won't have the 9 disadvantage of which you speak. 10 So this is part of Digital Research -- 11 and I'll point it out in the record where 12 Digital Research is actually trying to get a 13 copy of the contract to negotiate from it 14 against the position of the OEM. 15 And then when Digital Research says we 16 want the contract for that purpose, the OEM 17 says, oh, well, we can't provide that to you 18 because of a confidentiality provision. So 19 that's the context of this negotiation. 20 Specifically at page 64, line 16, 21 which is just before the set of material that's 22 at issue, page 64, line 16, in the middle of an 23 answer, Mr. Speakman says, and the customers 24 were actually in a position of -- they were 25 effectively afraid of what Microsoft would do 5613 1 if they showed me that agreement, so I was in a 2 very -- it was very difficult to actually 3 compete with a license agreement you could 4 never even see a copy of. Because even though 5 the customer believed they understood it, I 6 didn't have the opportunity to drill into that 7 contract and see if there were ways I could 8 find around it for them so they could license 9 my product. 10 So clearly the OEM here is being asked 11 by Digital Research to show its hand. Show me 12 the contract that you're negotiating against 13 with me on. 14 And the OEM is saying I'm not going to 15 show you the contract because there's a 16 confidentiality provision, and Mr. Speakman 17 concludes from that conversation that the OEM 18 is terrified or afraid. 19 There is a significant lack of 20 reliability in the OEM's statement that I can't 21 show you this agreement because of a 22 confidentiality provision or because I'm afraid 23 because what the OEM is trying to do is keep 24 from playing his or her hand in the 25 negotiation. 5614 1 And there's -- it may or may not be 2 true that that's the OEM's state of mind, but 3 what's occurring is a negotiation where it's 4 not reliable, it's not trustworthy because the 5 OEM has an incentive to conceal his or her 6 state of mind about whether, in fact, that 7 person is afraid of showing the contract or is 8 willing to show the confidentiality provision. 9 THE COURT: A motive to conceal to 10 what, get a better price? 11 MR. TUGGY: Yes, because -- 12 THE COURT: Wouldn't the OEM want to 13 show them that in order to get a better price 14 then? 15 MR. TUGGY: The OEM is saying this 16 confidentiality provision is keeping me from 17 paying the price you're offering and rather 18 than -- and what Digital Research wants to do 19 is to argue about that, is to say I'd like to 20 take a look at that confidentiality provision 21 because I don't think it's the barrier that you 22 say it is. 23 THE COURT: Yeah, but the reaction, 24 then, not to give it could be argued that 25 they're so scared that they're not even going 5615 1 to try to benefit themselves by getting a lower 2 price by showing it to the competitor DRI. 3 MR. TUGGY: It could go either way, 4 which is why this situation doesn't lend itself 5 to a hearsay exception. 6 How is it that it is a reliable 7 reflection of the OEM's state of mind when it 8 could really equally be that the OEM is trying 9 to hide a weakness in the confidentiality 10 provision so that they maintain their 11 negotiating position or they might want to show 12 it to strengthen their negotiating position. 13 THE COURT: Couldn't it be argued, 14 though, it's just a summary of the conversation 15 that Speakman had with these people, that he 16 observed the conversation and heard what they 17 said and they may have said things like afraid 18 or fearful or something like that and he's just 19 summarizing saying yeah, they didn't want to 20 give it to me, they were scared. Isn't that an 21 appropriate summary? 22 MR. TUGGY: It is a summary of what he 23 was told, which makes it hearsay. And the 24 question is is it admissible as for the OEM's 25 state of mind. 5616 1 And Microsoft's first argument in 2 these contexts is that it's not admissible for 3 state of mind because it's not reliable. 4 Under the Naiden case, when state of 5 mind exception is at issue, there has to be 6 indicia of reliability. And in the negotiation 7 contracts, because the OEM has an incentive to 8 conceal its state of mind, there is not that 9 indicia of reliability. 10 So it is appropriate for Mr. Speakman 11 to draw conclusions and make a summary of what 12 he's been told by the OEM, but it's not 13 appropriate for that to get before the jury as 14 the truth of how the OEM felt. 15 For example, this particular OEM, 16 Opis, the representative with whom Mr. Speakman 17 dealt, Adam Harris, is the subject of 18 deposition designations by Plaintiffs and 19 cross-examination by Microsoft. 20 And if in his testimony he testifies 21 that I was afraid to provide this agreement to 22 Digital Research, that's his testimony of his 23 own state of mind, his own thinking, and it's 24 not hearsay. 25 So that we had an opportunity to 5617 1 cross-examine, and to the extent that testimony 2 is given in that deposition, they can offer it 3 up to the jury. 4 But here where Mr. Speakman is 5 speaking about what an OEM told him, that's 6 hearsay, and it has to have more indicia of 7 reliability than is provided here for it to be 8 offered for the truth to the jury. 9 The second argument we asserted on 10 this block of testimony is that the state of -- 11 whenever state of mind evidence is offered for 12 the jury to consider, the state of mind has to 13 be relevant. 14 Microsoft -- our contention on this is 15 that the state of mind that's being offered 16 here is not relevant. 17 It doesn't matter for any liability 18 issue in this case whether OEMs were afraid to 19 disclose a confidentiality provision. 20 What Plaintiffs want to offer this for 21 is simply that the OEMs were afraid of how 22 Microsoft might react if they violated a 23 confidentiality provision in a contract, but 24 the OEMs' fear relating to that provision is 25 not a relevant issue in this case. 5618 1 What's relevant or why or why not OEMs 2 purchased products, licensed products, not why 3 or why not they were afraid of a particular -- 4 of disclosing a particular provision in 5 violation of their contract. 6 So for those reasons, the statement by 7 Mr. Speakman is based on statements by the OEM 8 and is, therefore, hearsay. 9 And the state of mind reflected here 10 is in a negotiation context without indicia of 11 reliability, and based on that, and the fact 12 that the state of mind at issue is not 13 relevant, Microsoft respectfully requests that 14 the Special Master's ruling be sustained. 15 THE COURT: Thank you. 16 MR. GRALEWSKI: If I may respond, Your 17 Honor. 18 THE COURT: Yes. 19 MR. GRALEWSKI: Let me go in reverse 20 order. 21 State of mind, relevant, respectfully, 22 strenuously disagree. 23 Why OEMs chose Microsoft over DRI is 24 the central issue to the DRI story. 25 I was sitting in I think the first row 5619 1 watching Mr. Tulchin play excerpts from OEMs 2 one after the other where he was attempting to 3 persuade the jury that the reason OEMs went 4 with MS-DOS over DR-DOS was because there was 5 no customer demand and because DRI -- DR-DOS 6 had technical issues. 7 I mean, if you were to believe 8 Mr. Tulchin that that is why OEMs went with 9 Microsoft's products, this testimony couldn't 10 be more relevant. OEMs' state of mind about 11 being afraid of Microsoft and having to go with 12 Microsoft could not be more relevant. 13 Again, going in reverse order touching 14 briefly, and then I'll stop talking. 15 I believe that Mr. Tuggy made a 16 persuasive argument on several points, one of 17 which I believe was based on a false premise. 18 And that is -- and this is important and it 19 goes back to where I started -- Mr. Tuggy said 20 that -- said Mr. Speakman's conclusions are 21 based on what he was told. And that's not the 22 case. 23 Mr. Tuggy said, well, perhaps it would 24 be a different situation if -- and of course, 25 he was using hyperbole here -- Mr. Speakman saw 5620 1 the OEMs and they had sweaty palms and they 2 were, you know, sweating and things like that. 3 Well, that's why I started, Your 4 Honor, by telling you that Mr. Speakman's job 5 was to go visit these folks. And I guess 6 that's one problem when you just look at a 7 couple lines of testimony. 8 The deposition is replete with 9 testimony about Mr. Speakman being in the OEMs' 10 presence at 66, 24, to 67, 5, is just one of 11 those places where he talks about how he had 12 meetings with the OEMs, and that's where he 13 gets the knowledge which permits him to be able 14 to summarize what he thinks. 15 The testimony is important here. He's 16 not trying to repeat statements or put words in 17 the mouths of the OEMs. 18 The testimony at issue is that 19 Mr. Speakman personally got the impression that 20 the OEMs were fearful. So what we're talking 21 about here is Mr. Speakman's own impression, 22 which under the Mattingly case fits. 23 It also fits under the Kehoe case in 24 Footnote 3, which Mr. Tuggy referred the Court 25 to, which is really where the action is in that 5621 1 case. 2 There the Court said, to be sure, a 3 statement that one person treated another with 4 disdain is conclusionary in a sense, but it 5 represents the affiant's opinion stated in 6 summary form about one person's state of mind 7 with respect to another. 8 In our view, the statement is not 9 thereby rendered inadmissible. 10 If the affiant -- if the affiants have 11 personal knowledge, there is no reason why they 12 should not be permitted to summarize their 13 impressions. 14 Here the affiants do have personal 15 knowledge. They observed all of the principal 16 actors in the workplace. 17 That is all -- that is on all fours 18 with what happened here. 19 Mr. Speakman went to the workplace. 20 We'll see later on in the testimony he 21 testifies about being in Diamond Trading's 22 office. He talks about having meetings with 23 this particular OEM Opis. He was there. He 24 had personal knowledge. He was looking at the 25 OEMs and coming to these conclusions. 5622 1 The case, the Kehoe case continues, if 2 the view stated in the affidavits is vulnerable 3 -- and, again, we're getting into the 4 reliability issue here that Mr. Tuggy brings 5 up, basically saying if it's not reliable, 6 whether because of bias or because of their 7 limited opportunity to observe, 8 cross-examination can easily reveal these 9 defects. 10 And here that's exactly what's going 11 on, Your Honor. 12 These questions that we're talking 13 about here, the vast majority of them, and 14 certainly this one, is being asked by 15 Microsoft's attorneys. 16 Mr. Tuggy mentions that later in the 17 Caldera case, it was actually 20 months later, 18 and we'll talk about this specifically as we 19 go, Mr. Harris was deposed, and there again, 20 they had an opportunity to cross him on these 21 various impressions or feelings or statements. 22 THE COURT: This is a direct 23 examination by Microsoft attorneys here? 24 MR. GRALEWSKI: Yes. 25 I guess my final point, Your Honor, is 5623 1 that -- and it dovetails to what we were just 2 talking about and what you just asked at the 3 very beginning of Mr. Tuggy's argument. 4 He suggested that this witness -- he 5 didn't say this, but I think the implication 6 was the witness had an agenda, and I think the 7 words that Mr. Tuggy used was that he was 8 answering a question he just launched into 9 this. 10 And I think again, this is a problem 11 with just looking at five or ten lines of 12 testimony. 13 This block of testimony, if you go 14 back to 63 and 64, you'll see that Mr. 15 Pepperman, who is Mr. Tuggy's colleague on the 16 defense side, was asking Mr. Speakman about 17 Microsoft's contracts and the confidentiality 18 in Microsoft's contracts and what -- and how 19 the OEMs felt about those provisions. 20 I just want to finish by saying that 21 to the extent that this answer is not 22 responsive, and I think that it is entirely 23 responsive in the context of the line of 24 questioning, Mr. Pepperman, Microsoft's lawyer 25 did not move to strike the testimony, and what 5624 1 the parties have -- I don't want to use the 2 word agreed -- what the parties have practiced 3 through the course of this 10- or 11-month 4 process is that when that does not occur, when 5 the examining attorney does not move to strike 6 the question, we're really dealing with a 7 hearsay issue and not a -- unresponsive issue, 8 Your Honor, I'm sorry. Thank you. 9 THE COURT: Very well. Are the 10 majority of these designations for appeal today 11 have anything to do with exactly the same 12 issues, the impressions? 13 MR. TUGGY: The next two do. 14 The only difference is with the -- you 15 can see it on the very next question on page 16 66, line 4, which OEM said that they were 17 terrified. 18 So in Microsoft's view for that 19 designation, along with the following one, the 20 witness is specifically talking about what he 21 was told. So that would be the -- otherwise 22 the issues on these are the same. 23 MR. GRALEWSKI: And I agree that they 24 are similar issues, and I guess no matter how 25 thinly you slice the piece of bread, there's 5625 1 two sides, Your Honor. 2 The question is phrased, as Mr. Tuggy 3 states, but if Your Honor looks at 66, 13, and 4 66, 21, and you'll see this repeatedly, Mr. 5 Speakman testifies I know, I conclude, this is 6 how I feel, these are my impressions. 7 In the vast majority here we don't 8 have Mr. Speakman repeating out-of-court 9 statements to the OEMs. 10 We have him summarizing his own 11 feelings and as -- and that's a perfect 12 example, for example line 13 on 66, where he 13 says, I know that Viglen -- and then he 14 continues and he says, how do I know that? I 15 had numerous meetings. That's at line 24 on 16 page 66. 17 THE COURT: But what we're -- it looks 18 like the rest of the ones 322, 331, all have 19 the similar issues; is that right? 20 MR. GRALEWSKI: I think largely, Your 21 Honor, I agree. 22 THE COURT: Do you want to go to the 23 -- did we cover the first two, or do you want 24 to go to -- 25 MR. TUGGY: I think we've covered the 5626 1 first three. So we should be on 322. 2 THE COURT: Is that okay, Mr. 3 Gralewski? 4 MR. GRALEWSKI: Yes, I believe that is 5 absolutely okay. Other than, Your Honor, I 6 would say -- and I'll just note for the record, 7 and if Mr. Tuggy wants to respond, that's fine. 8 But there are certain circumstances 9 where it seems like a not-for-truth purpose 10 would also apply, and to the extent Your Honor 11 believed this was inadmissible hearsay, at 67, 12 15, through 66, 9, which is the third -- 13 THE COURT: 69, 6. 14 MR. GRALEWSKI: 67, 15, through -- I 15 misspoke. 67, 15, through 69, 6. 16 As my hearing memorandum indicates, 17 Your Honor. To the extent that Your Honor 18 believes it is hearsay, which we don't think it 19 is, there would be two different nonhearsay 20 purposes that we would offer the testimony for, 21 and I don't need to get into that. That's 22 contained in my hearing memorandum and my 23 argument is laid out. 24 MR. TUGGY: Well, because we received 25 this memorandum today, which is perfectly fine 5627 1 under the way we're operating dealing with 2 these witness-by-witness items, but I need an 3 opportunity to respond if -- 4 THE COURT: Go ahead. 5 MR. TUGGY: Asserting the nonhearsay 6 use. 7 THE COURT: You are talking about 67 8 then, 15 to 69, 6? 9 MR. TUGGY: Correct. 10 THE COURT: Go ahead. 11 MR. TUGGY: The first nonhearsay 12 purpose pressed by Plaintiffs is that this 13 testimony is offered to show that the 14 information concerning Microsoft tactics being 15 reported to DRI was consistent. 16 There is a portion of this testimony, 17 which is actually not the whole section that 18 Plaintiffs cite, where Mr. Speakman states at 19 lines 21 through 25 of page 68, it wasn't a 20 matter of me being misled by the OEMs. The 21 information we found throughout Europe, and 22 indeed the world, was extremely consistent in 23 terms of the obstructions that we faced. 24 And the nonhearsay purpose Plaintiffs 25 suggest is that this evidence showing that 5628 1 statement and then statements about other OEMs 2 within this particular range, Amstrad and 3 others, is consistent, is really to say that 4 Digital Research representative is testifying 5 that he consistently heard hearsay and that the 6 hearsay that was communicated to him was the 7 same across the OEMs with whom he had contact. 8 And the fact that hearsay is supported 9 by hearsay or supported yet by other hearsay 10 does not make the hearsay reliable or 11 admissible. 12 There isn't an exception to the 13 hearsay rule for -- of hearsay being 14 corroborated by other hearsay. So the fact 15 that they want to admit hearsay because it's 16 consistent with other hearsay does not create a 17 hearsay exception and is not a nonhearsay use 18 of the information. 19 It's really using it for its truth. 20 There is a hearsay statement, and they want to 21 offer other hearsay statements so that the jury 22 concludes that in fact the hearsay that's being 23 communicated is true. 24 So it's -- under McElroy, one of the 25 functions of the Court when considering a 5629 1 nonhearsay use is that the statement must be 2 not only purportedly offered for a nonhearsay 3 purpose, but the Court, quote, must still 4 determine if the parties' true purpose in 5 offering the evidence was, in fact, to prove 6 the statement's truth. 7 For some of these later segments, 8 Plaintiffs will be relying a great deal on 9 nonhearsay uses, and the Iowa Supreme Court's 10 decision in McElroy gave a very clear and 11 succinct set of guidelines for nonhearsay use. 12 If I may provide that to the Court 13 because I'll be referring to it frequently. 14 THE COURT: Thank you. 15 MR. TUGGY: The second nonhearsay use 16 proposed by Plaintiffs, and this infirmity 17 infects quite a few of the nonhearsay uses they 18 propose. 19 What Plaintiffs say is that they 20 intend to offer this evidence to explain why 21 OEMs subsequently chose MS-DOS over DR-DOS. 22 Now, to bring us back to where we 23 were, these are statements by OEMs -- I'm 24 ducking the sun. 25 THE COURT: If you want to move, go 5630 1 ahead. 2 MR. TUGGY: What's happening is the 3 OEMs are making statements that Mr. Speakman is 4 quoting in his deposition or is summarizing in 5 his deposition. 6 And it's being offered, according to 7 Plaintiffs, to show why OEMs chose MS-DOS over 8 DR-DOS. That's actually attempting to show it 9 for state of mind, which is a for truth use. 10 According to the Court in McElroy, and 11 this is in the section I -- I pointed you to, 12 which is on the last page of the opinion in the 13 version I've given you, and there starting at 14 the upper left-hand corner, the Court gives 15 basically four requirements for nonhearsay 16 uses. 17 The first is where the Court describes 18 where nonhearsay uses are acceptable. And the 19 Court says, for example, the statement may be 20 offered simply to demonstrate it was made, to 21 explain subsequent actions by the listener, or 22 to show notice to or knowledge of the listener. 23 Here, what Plaintiffs are doing is not 24 attempting to show that this information is 25 having an effect or subsequent actions by the 5631 1 listener. 2 They're offering it to show subsequent 3 actions by the declarant, and when that occurs, 4 it's quite clear that what the Plaintiffs are 5 doing is offering it for its truth because 6 they're offering it for the effect on the 7 declarant, not the effect on the listener. 8 And that's an improper nonhearsay use. 9 So for that reason, that section 10 should not be admitted as a nonhearsay use. 11 And as the Court will see in reviewing 12 this testimony, the witness when providing his 13 responses in the segments of testimony at issue 14 in the rulings chart number 2 and number 3, the 15 witness was pretty clear that he was thinking 16 of what was told him. 17 So, for example, at page 68, line 3, 18 when asked about other OEMs, then, Amstrad and 19 Opis and Viglen, the witness says in terms of 20 expressing the fear, probably not. 21 So there the witness is talking about 22 in this section what was expressed to him by 23 way of fear on the part of OEMs, and that 24 expression came in the form of what he was 25 told, and that's hearsay. 5632 1 THE COURT: Any response, sir? 2 MR. GRALEWSKI: Yes, three brief 3 things. 4 First, I said and I want to express 5 that we believe this -- these statements, 6 specifically the ones that we're talking about 7 at 67, 15, through 69, 6, are not hearsay for 8 the reasons I've already articulated. So I 9 don't want to get unnecessarily sidetracked by 10 Mr. Tuggy's argument with respect to McElroy. 11 But on that point, Your Honor, first 12 with respect to the Plaintiffs' first 13 nonhearsay purpose, we're certainly not 14 attempting to corroborate hearsay with hearsay, 15 and that does seem like it would be 16 inappropriate and that you would be offering it 17 for the truth, but instead, as I've asserted, 18 we're offering it to show, or we would be 19 offering it to show to the extent Your Honor 20 found that it was hearsay, the mix of 21 information available in the market, the mix of 22 information that DRI was being presented. 23 And that brings us back pretty much 24 full circle to the trade press position that 25 was advanced by Microsoft about ten days ago or 5633 1 so and that they won on. 2 The second nonhearsay purpose 3 explaining subsequent conduct, I agree that the 4 McElroy case and other cases in Iowa caution 5 against whether the issue has to be accepted 6 for its truth. I agree with that. 7 Here I think that we don't fall victim 8 to that because the issue here is perceived 9 fear on the part of OEMs, and whether it's true 10 or not that Microsoft was going to bring the 11 hammer down on the OEMs if they didn't go along 12 with Microsoft, whether that's true or not, 13 whether Microsoft was actually going to bring 14 the hammer down on them is not the issue. 15 The issue is what they perceived. So 16 truth is irrelevant and how they subsequently 17 acted. 18 Now, it's a tangled web, the evidence 19 stuff. 20 To the extent Your Honor believes that 21 it is really for the truth, you're back to 22 Callahan. 23 It almost reminds me of the Abbott and 24 Costello who's on first routine, but it's not 25 unlike that. 5634 1 Callahan, as you recall, Your Honor, 2 is a case where an OEM's motive can be offered 3 for the truth of why they acted in a certain 4 way. 5 And here you have, if Your Honor 6 believes it's for the truth of that, the state 7 of mind, here you have a situation explaining 8 why the OEMs did something, whether they -- you 9 know, towed the line and stuck with Microsoft 10 or whether they decided to venture off and 11 throw a little business to DRI. 12 Thank you. 13 THE COURT: Very good. Anything else? 14 MR. TUGGY: Nothing further. 15 THE COURT: Do you want to move to 322 16 now? 17 MR. GRALEWSKI: Yes, Your Honor, 18 that's fine. 19 Here at 322 -- let me just move 20 forward -- you'll notice the conspicuous gap. 21 That is a sign of progress at Cafe Amici. 22 At 322, 21, through 323, 19, this 23 testimony is prompted by a memorandum that 24 Mr. Speakman had written summarizing 25 information that he had learned from Mr. Harris 5635 1 of Opis. 2 Essentially what he had learned was 3 that Microsoft was asserting financial pressure 4 to attempt to get Opis to reup their contract. 5 And as my hearing memorandum argues, 6 and I'm not going to belabor the point because 7 it is similar, we believe that these are not 8 out-of-court statements that Mr. Speakman is 9 repeating. Instead, he is testifying based on 10 information that he learned in connection with 11 his job duties. 12 THE COURT: Who's Harris? 13 MR. GRALEWSKI: Harris is the head 14 person of Opis, and Harris is the gentleman who 15 we mentioned earlier was deposed in the Caldera 16 case. About 20 months later Microsoft had an 17 opportunity to cross-examine Mr. Harris. And 18 we're going to actually refer to his deposition 19 in the next block or two of testimony. 20 And another reason why Mr. Harris is 21 relevant is that Mr. Speakman and Mr. Harris 22 got together in person in Europe on numerous 23 occasions. 24 And that, Your Honor, is what is 25 critically important to this testimony and many 5636 1 other lines of testimony, just like Mr. Crummey 2 who we saw on the screen, who Mr. Tulchin 3 offered to the jury, who opined and concluded 4 what his boss thought based on conversations 5 that he had with him, this testimony should be 6 admissible. 7 I would like to note, Your Honor, that 8 the statements at 323, 9 to 12, would be 9 Microsoft's owns -- or are Microsoft's own 10 statements so they would be admissions. 11 And we also advance the same 12 nonhearsay purposes for this testimony mix of 13 information in the market and explaining 14 subsequent conduct that I've advanced for the 15 other blocks of testimony to the extent Your 16 Honor thinks that the testimony is hearsay. 17 THE COURT: Harris wasn't Speakman's 18 boss, he was just a boss at Opis, right? 19 MR. GRALEWSKI: Yes, Your Honor. 20 We're going to see -- if Your Honor 21 would be so kind as to -- I don't mean to cut 22 off Mr. Tuggy's ability to respond to me, but 23 the next block of testimony also talks about an 24 exhibit, which is PX 1290, and there you get an 25 example of who Mr. Harris is. 5637 1 And PX 1290 is basically Mr. 2 Speakman's memorandum where he goes and visits 3 Mr. Harris at Opis and then comes back and 4 reports to other people at DRI about things 5 that he learned from his interactions with 6 Mr. Harris. 7 And I'd like to pause and give Mr. 8 Tuggy a chance to respond, if he wants, to the 9 testimony at 322 and 23 before I move on to 331 10 because I do have some things to say about 11 that. 12 MR. TUGGY: Yes, Your Honor. 13 At 322 through 23, Mr. Speakman is 14 asked what he was told by Mr. Harris who is the 15 OEM contact with whom Mr. Speakman was 16 negotiating. 17 And what Mr. Speakman does in his 18 answer is to communicate what it was Mr. Harris 19 told him. 20 And not only is that clear from the 21 context of the question, but immediately after 22 the answer to which we object, Mr. Pepperman 23 asks Mr. Harris in the deposition whether he 24 was speculating about what Mr. Harris thought 25 or whether this was what Mr. Harris told him. 5638 1 And the answer was, at page 323, line 2 24, I remember him telling me this. 3 All right. So this is information 4 that was told Mr. Speakman by Mr. Harris, and 5 so it's hearsay. 6 It's not evidence of state of mind 7 because it doesn't fall within that exception 8 to the hearsay rule because the statements that 9 are described here are statements by Mr. Harris 10 of memory or belief for the purpose of showing 11 the truth of that memory or belief. 12 In other words, he's not saying this 13 is my state of mind, this is something I 14 intended to do, this was a plan that I had. 15 This is just him saying what it was -- he is 16 saying Microsoft told him. 17 Now, the statements by Microsoft may 18 or may not be admissions, but that's not what's 19 at issue because it's not Mr. Speakman 20 reporting what Microsoft said. Mr. Speakman is 21 reporting what Mr. Harris said Microsoft said, 22 and so the statements by Mr. Harris are the 23 ones that are the hearsay to which we're 24 objecting. 25 And they do not communicate state of 5639 1 mind. 2 The reason why the proposed nonhearsay 3 uses are incorrect, the Plaintiffs have 4 proposed two. 5 First, they say they want to offer 6 this testimony to show that Digital -- how 7 Digital Research responded competitively. 8 So, in other words, this is a segment 9 where Mr. Harris is testifying about the 10 contract that Microsoft was asking Opis to 11 sign. 12 And Plaintiffs want to say that 13 they're going to offer this to show that 14 Digital Research responded competitively with 15 lower price or shorter contractual terms is 16 what was stated in their brief. 17 To show that this particular statement 18 had an effect on subsequent actions, Plaintiffs 19 must provide the foundation for that nonhearsay 20 use, which means that they have to point to 21 some testimony or some evidence that this 22 statement had that nonhearsay effect. And that 23 they can't do. 24 There's no indication in the record 25 that upon hearing this statement, Digital 5640 1 Research reacted in some way, that they engaged 2 in some subsequent conduct involving a 3 competitive response. 4 In fact, if the testimony had been 5 when I heard this about Microsoft's offer, we 6 lowered our price, you can imagine that this 7 would be testimony Microsoft would want to 8 offer itself because it shows that when 9 Microsoft was in the market, it caused prices 10 to go down because competitors had to reduce 11 their pricing to match Microsoft's pricing. 12 But that's not anywhere here. There's 13 no evidence here that in response to this 14 particular statement, Digital Research lowered 15 price or proposed any kind of a particular 16 contract term. 17 And without that link, there is not 18 subsequent conduct that can be used as a 19 justification for its nonhearsay use. 20 And without also that link, it is 21 clear under McElroy that the Plaintiffs are 22 really trying to offer this for its truth. 23 They want the jury to believe that 24 these are the specific things that Microsoft in 25 fact said to Adam Harris at Opis. 5641 1 It's not really being offered to show 2 subsequent conduct by Digital Research because 3 they don't identify what that subsequent 4 conduct might be with any evidence whatsoever. 5 The second nonhearsay purpose offered 6 by Plaintiffs in their brief is that they say 7 this statement explains why subsequently Opis 8 signed with Microsoft in the manner they did. 9 There, again, the Plaintiffs are using 10 McElroy upside down. 11 For a nonhearsay purpose to be used, 12 you have to show the effect of the statement on 13 the listener. If you're trying to show the 14 effect of the statement on the declarant, the 15 person who actually made it, you're really 16 trying to show it for its truth that you're 17 offering the statement to show why the 18 declarant did something or to show -- to 19 somehow explain why the declarant did 20 something, and that is a for-truth use and so 21 it would be hearsay. 22 Under the McElroy case, nonhearsay 23 uses are just to show if it's relevant, just 24 the fact that a statement was made, or its 25 effect on the listener by way of subsequent 5642 1 action, notice, or knowledge. 2 And this segment here doesn't satisfy 3 any of those nonhearsay uses. And for those 4 reasons, the Special Master's ruling should be 5 sustained. 6 MR. GRALEWSKI: Two points, Your 7 Honor, in response. 8 It doesn't seem like the state of 9 affairs that any of us should be operating 10 under if -- let's take the Manzi example; the 11 Mr. Crummey example talking about his boss, 12 Mr. Manzi. 13 And Mr. Manzi says, I think that Gates 14 -- I think that Manzi had a case of Gates envy. 15 And I think that what Mr. Tuggy is 16 promoting is that if in response to what the 17 examining lawyer said, did Mr. Manzi ever tell 18 you that, if Mr. Crummey says, yeah, he told me 19 that, oh, move to strike, inadmissible hearsay, 20 even though it's Mr. Crummey's own opinion, 21 which happens to be based on what Mr. Manzi 22 told him. 23 Now, let's take the opposite. Let's 24 say Mr. Crummey testifies, I think that Mr. 25 Manzi had a case of Gates envy, and the 5643 1 question is, well, did Mr. Manzi ever tell you 2 that? And Mr. Crummey says no, that's just my 3 opinion and observations based on interacting 4 with him in our business. 5 Then that's okay? 6 If that is okay and that's what the 7 record is, that's the Crummey testimony, that's 8 what he says, if that's okay, it certainly 9 should be okay and shouldn't undermine the 10 testimony if it's in addition to your personal 11 observations based on what someone tells you. 12 The second point, Your Honor, with 13 respect to the linkage that Mr. Tuggy suggests 14 is necessary, I think that the burden on 15 linkage in the context of subsequent conduct 16 that Mr. Tuggy and Microsoft suggests is too 17 high and isn't consistent with the case law. 18 However, with respect to that 19 foundation, I just want to quote one question 20 and answer from Mr. Harris's deposition. So 21 this is the foundation that Mr. Tuggy is 22 talking about. 23 On pages about 17 to 20 of the Harris 24 deposition, they're talking about the state of 25 contractual affairs between Opis and Microsoft 5644 1 and Opis and DRI around 1990, and what happens 2 is, which is what -- which is the area we're 3 talking about here. 4 What happens is, Opis signs a per 5 processor contract with Microsoft and does not 6 sign a contract for DRI 5.0 -- DR-DOS 5.0 -- 7 excuse me. And the question is, did -- this is 8 to Harris, okay. 9 Question: Did the fact you signed a 10 per processor license with Microsoft affect 11 what you were willing to pay for DR-DOS? 12 Answer: Yes. 13 So there is the linkage and the 14 foundation to show that the subsequent conduct 15 is absolutely relevant to the issues and is 16 connected up. 17 Going back to our hearing memorandum, 18 I assert there, Your Honor, that the subsequent 19 conduct that we're talking about is why Opis 20 signed with Microsoft and in the manner that 21 they did. 22 And as Mr. Tuggy talked about, the 23 other nonhearsay purposes about the effect on 24 price. 25 And here we have Mr. Harris saying 5645 1 that the fact that they signed a per processor 2 contract affected what they were willing to pay 3 to DR-DOS. 4 Now, I'm not going to respond to the 5 specifics and the issues about lower price. I 6 mean, it's certainly Plaintiffs' -- 7 Well, I'll stop there, Your Honor. I 8 think that I've made my argument. 9 THE COURT: Move on to page 331, then. 10 MR. GRALEWSKI: 331, Your Honor, you 11 should also in connection with that look at 12 Exhibit F to the hearing memorandum, and that 13 is a -- that's a document. 14 And basically the only issue and 15 what's going on in the line of questioning at 16 331, 7 to 19, is the examining lawyer, 17 Microsoft's Mr. Pepperman, directs the witness, 18 Mr. Speakman, to the first paragraph there and 19 says, who said that to you? And the answer is 20 Adam Harris. 21 Now, I do want to note for the record, 22 and this is contained in Footnote 1, that this 23 document, 20 months later, was shown to Mr. 24 Harris in his deposition I believe it was -- I 25 don't know which lawyer showed it, that's 5646 1 irrelevant, but it was shown to Mr. Harris in 2 his deposition. 3 And he was asked if this paragraph was 4 accurate, and he responded, quote, 100 percent 5 accurate, closed quote. 6 And then the questions proceeded. 7 Question: Microsoft told you that you 8 had to renew your MS-DOS license on a per 9 processor basis? 10 Answer: Yes, and they also told me 11 that was the same as every other customer. 12 Question: Sandy Duncan, he was with 13 Microsoft, told you that every other OEM in the 14 world shipped MS-DOS on a per processor basis? 15 Answer: Correct. 16 That's at Adam Harris' deposition at 17 40, 41. 18 So to the extent there's any extent of 19 reliability here, all of the facets of that 20 aspect or issue, I should say, are dealt with. 21 Because, Your Honor, there is a 22 sustained embedded hearsay objection to this 23 document, which Plaintiffs do not intend to 24 reargue presently, we are offering the 25 testimony and the embedded hearsay in PX 1290 5647 1 for a nonhearsay purpose. 2 And that nonhearsay purpose is to 3 explain why Opis subsequently renewed its 4 license with Microsoft or MS-DOS and also 5 signed a contract with DRI, but only for a very 6 short term. 7 Basically what they did -- we're 8 jumping ahead a few years. There's another 9 version of DR-DOS out, 6.0, and there's another 10 version of MS-DOS out, it's 5.0. 11 And what happens is Opis decides to 12 throw a little bit of business to DRI's way. 13 But all they do is they sign up for 12 months, 14 and they pay DRI only two pounds. 15 So essentially what's going on here is 16 because of the contract that they have with 17 Microsoft, they can't afford to pay a lot more 18 money to DRI. 19 And as my hearing memorandum 20 indicates, Your Honor, it makes no difference 21 -- this is with respect to the truth issue. 22 It makes no difference whether 23 Microsoft actually required Opis to renew and 24 sign up for a per processor contract or whether 25 every OEM in the world actually had that type 5648 1 of contract. 2 All that mattered is what Opis 3 perceived, which is its state of mind and how 4 it responded. 5 To the extent that that's something 6 that's for the truth, the Callahan case would 7 apply and the testimony would be admissible for 8 the truth on that issue of motive or state of 9 mind. 10 Thank you, Your Honor. 11 THE COURT: Mr. Tuggy? 12 MR. TUGGY: Yes, to reiterate what 13 Mr. Gralewski said, this particular paragraph 14 in the memorandum that's quoted here in this 15 section of the brief is the subject of a 16 hearsay objection that was sustained by the 17 Special Master and not appealed by Plaintiffs 18 so that's final. It can't be offered for its 19 truth for Plaintiffs. 20 What Plaintiffs say is we're going to 21 offer it for a nonhearsay purpose, which is to 22 show why Opis did what it did in entering into 23 a contract with Microsoft. 24 Well, again, under McElroy, they can't 25 use a statement by Opis to show its effect on 5649 1 Opis. 2 That's actually using the statement 3 for its truth. 4 If they want to use a nonhearsay 5 purpose, it has to be a statement by Opis and 6 its effect on the listener, whether it's 7 Digital Research or anyone else who might have 8 heard the statement. 9 Plaintiffs here are saying we want to 10 offer this statement by Opis to explain why it 11 was it entered into a particular contract with 12 Microsoft or Digital Research. 13 That is attempting to offer this for 14 state of mind for its truth, and that's not 15 permitted under McElroy, and it's not permitted 16 under our procedures in this case. 17 This, as Mr. Gralewski acknowledges, 18 is -- cannot be offered for its truth in the 19 place that we are now. 20 And attempting to offer a statement by 21 a declarant to show why that declarant did 22 something is just -- it's just offering it for 23 state of mind, which is a hearsay exception, 24 offering it for its truth, and that Plaintiffs 25 can't do. 5650 1 If they want to offer it for a 2 nonhearsay purpose, it has to be for the 3 purpose of the effect on a listener, and there 4 is no bona fide nonhearsay purpose to use this 5 statement for that purpose. 6 What Plaintiffs want to get before the 7 jury is a statement that every OEM in the world 8 has this type of agreement with Microsoft, and 9 that is just rank hearsay being offered for its 10 truth, and there is no justification for some 11 nonhearsay purpose as an excuse to get a 12 statement like that in front of the jury. 13 And for that reason, the Special 14 Master's ruling both on the testimony should be 15 affirmed and it is basically required by the 16 ruling on the exhibit, which has not been 17 appealed and is final. 18 THE COURT: Anything else on this one 19 before we move on? 20 MR. GRALEWSKI: Well, Mr. Tuggy 21 focused on -- I would submit, one nonhearsay 22 purpose was effect. 23 Not to repeat, but Your Honor has now 24 seen as a result of Mr. Tulchin's opening 25 statement that an important issue in the case 5651 1 is going to be why OEMs went with MS-DOS 2 instead of DR-DOS. Was it because there was no 3 customer demand or because DRI -- DRI's product 4 had technical issues or was it something else? 5 And this is one piece of the puzzle. 6 It explains subsequent conduct. It explains 7 relevant subsequent conduct under McElroy and 8 the Iowa practice series and other cases. 9 It should be admitted because it 10 offers -- it's the antidote. It's why did an 11 OEM choose MS-DOS over DR-DOS? It wasn't 12 necessarily customer demand and it wasn't 13 necessarily technical issues with DR-DOS. 14 It was because there was a per 15 processor contract in place and the OEM 16 couldn't afford to pay for the DR-DOS product. 17 THE COURT: Page 335. 18 MR. GRALEWSKI: 335, 2, to 336, 10. 19 Here we have Mr. Speakman testifying 20 based on direct in-person communications that 21 he had -- we're switching OEMs here to Viglen, 22 and their lead person Mr. Kazandjian, 23 K-a-z-a-n-d-j-i-a-n. 24 And here we have testimony like we 25 looked at in the very beginning of the 5652 1 deposition. We have Mr. Speakman summarizing. 2 He says that he was confident that Viglen had a 3 per processor contract. 4 And what we have here is a switch 5 where Mr. Speakman is actually meeting with and 6 speaking with Mr. Kazandjian to come to those 7 personal conclusions. 8 Callahan also is implicated in this 9 testimony to the extent Your Honor believes 10 that there are out-of-court statements here. 11 The testimony may also be offered for 12 the truth to explain Viglen's state of mind and 13 motive for not purchasing DRI. 14 Like the customers in Callahan that 15 we've spoken a lot about, Mr. Kazandjian, it 16 can be seen, was deciding how to act based on 17 pricing considerations. 18 If he purchased DR-DOS, his prices for 19 Microsoft products, or at least he believed 20 that his prices for Microsoft products, would 21 go up, and that's exactly the kind of 22 testimony, repeating customer statements about 23 their motive for acting or not acting that the 24 Callahan case found was admissible. 25 It also, to the extent necessary, 5653 1 implicates the same nonhearsay purposes that 2 we've been talking about, and those are 3 contained in the brief. 4 THE COURT: Mr. Tuggy? 5 MR. TUGGY: Yes. 6 This line of testimony does not fit 7 with the initial group where what's at issue is 8 conclusions Mr. Speakman was drawing about fear 9 or intimidation. 10 This has to do with whether Viglen had 11 a per processor agreement and what concerns 12 Viglen had in dealing with Digital Research in 13 light of that agreement. 14 And in reviewing this testimony, it is 15 clear that in the main, the witness is 16 reporting statements of belief or memory for 17 the purpose of showing that that belief or 18 memory is true. 19 For example, at page 335, lines 5 and 20 6, Mr. Speakman testifies, I am confident that 21 they had a per processor agreement. They 22 referring to Viglen. 23 That is not a state of mind statement. 24 That's a statement of fact, one way or the 25 other. I am confident that they had a per 5654 1 processor agreement. 2 And later in the answer, Mr. Speakman 3 confirms, for example at lines 15 to 18, and 4 also lines 336, lines 8 to 10, that all of this 5 information he's testifying about is what was 6 told him by a representative from that company. 7 So the representative of that company 8 is stating facts, not state of mind, and those 9 are not admissible under the state of mind 10 exception, and they are not admissible for 11 nonhearsay purposes, and that Mr. Gralewski in 12 his brief identifies the same nonhearsay 13 purposes we've just been discussing. 14 He can't use it as a nonhearsay 15 purpose to show what Viglen planned to do. 16 That's a for-truth use and that's a state of 17 mind use, and this testimony doesn't satisfy 18 the state of mind exception. 19 And secondly, he uses it -- he says 20 that it's admissible for the purposes of 21 showing how DRI responded in a competitive 22 manner upon learning this, but they don't link 23 it up with anything DRI did. 24 And finally, this testimony is 25 classically within the problem with relying on 5655 1 Callahan, which is it's in the negotiation 2 context and as a result, lacks reliability. 3 And Justice McCormick was consistent 4 in testimony of this type where he sustained 5 the hearsay objection because there is a lack 6 of reliability in the statements of the OEM 7 because they were made in a negotiation 8 context, and for those reasons we ask that the 9 Special Master's ruling be affirmed. 10 THE COURT: Anything else on 11 designation on 335? 12 MR. GRALEWSKI: Briefly, Your Honor. 13 We agree that the statement I am 14 confident that they had a per processor 15 agreement is a statement of fact, and under 16 Mattingly it should be admitted as not hearsay. 17 It's testimony that reflects what the witness 18 himself observed, thought, or stated. 19 Doesn't matter that it came from 20 conversations. He's not repeating out-of-court 21 statements, so it's not hearsay. 22 We're, obviously, not past the 23 Callahan issue of reliability. 24 I believe it was Footnote 11 in that 25 case, Your Honor, that dealt with the issue of 5656 1 reliability and said that in this context, in 2 the context of an antitrust case, the only 3 issue is whether the statements are statements 4 of customers. 5 Reliability is not an issue. If the 6 statement is one by a customer, that's the end 7 of the analysis. 8 And, in fact, in Callahan, if the 9 Court remembers, one of the statements was an 10 obvious posturing or statement in the context 11 of negotiation where one of the customers was 12 trying to get beer from the Plaintiffs at a 13 lower price and said, hey, you know, I'd buy 14 your beer if you could give me the same deal. 15 And then the plaintiff says I can't do 16 that. 17 And nonetheless, even though that 18 customer was trying to get a better deal from 19 the plaintiff, the Court still admitted those 20 statements. 21 And I think we should pause for a 22 second and think about reliability here. 23 So far, the -- I don't know if the 24 phrase the shoe -- I don't know if that works 25 here, but so far the Plaintiffs have been on 5657 1 the defensive about the reliability issue, and 2 let me attempt to explain why the Callahan test 3 in Footnote 11 is the right analysis, and here 4 we're talking about reliability. 5 Again, going back to Mr. Tulchin's 6 opening statement, Mr. Tuggy repeatedly has 7 suggested that Plaintiffs OEM's statement lack 8 reliability because they were in the context of 9 the negotiations, and we say all that matters 10 is that it's statements by OEMs. 11 And that should be the rule, and 12 here's why. 13 You saw statements by Gateway, Dell, 14 Compaq, on that big screen, and they were asked 15 by Microsoft's lawyers why did you go with 16 MS-DOS, and they said, oh, because DRI had 17 technical issues and there was no demand. 18 Now, where is the reliability in that 19 statement? 20 Those people testifying are beholden 21 to one of the most powerful companies in the 22 world. 23 They are involved in a contract, and 24 if Microsoft gets upset with them and decides 25 not to sell them Windows, they are out of 5658 1 business. 2 Out of business. 3 Now, we have been on the defensive 4 because of reliability issues? I would submit 5 that if any statement is unreliable, it's the 6 statement by an OEM saying, oh, Microsoft's 7 product was great and DRI's product was 8 terrible, had technical issues, had this, that, 9 and the other thing. 10 But really, Your Honor, when it boils 11 down to it, that's why Callahan got it right. 12 That's why Footnote 11 is there. 13 That's why in an antitrust case, the 14 decision has been made that all that matters 15 for both sides is that the statement is one by 16 an OEM or a customer, and so long as that is 17 the case, the statement comes in to demonstrate 18 what that customer's motive was in deciding how 19 to act, whether to go with one company over 20 another. 21 THE COURT: Are those statements in 22 the opening -- I allowed him to use in opening, 23 but that I think I left the door open for 24 objection at trial, did I not? 25 MR. GRALEWSKI: Absolutely, Your 5659 1 Honor, absolutely and -- I'd just like to say 2 that to the extent, you know -- well, I strike 3 my comment. 4 MR. TUGGY: Your Honor, we do live 5 under the rule of law, and under the law there 6 is a hearsay exception for former testimony. 7 These are OEMs testifying about why 8 they did what they did. They can be 9 cross-examined. Plaintiffs can make the 10 arguments he just made. In the -- 11 When instead you have one of the 12 companies that sued Microsoft testifying about 13 what OEMs told them, the law requires that 14 there be a hearsay exception that applies to 15 the OEMs' statements. 16 Now, Plaintiffs have Adam Harris who 17 you'll hear from later testifying as an OEM to 18 some of these facts. Some of it has been 19 quoted to you already. That gets in because 20 the former testimony exception applies, and his 21 testimony comes in. 22 But if they're trying to get the same 23 information from statements by a DRI employee, 24 it can't come in because the statements don't 25 satisfy the state of mind exception to the 5660 1 hearsay rule. 2 And the analysis never ends just with 3 this is what a customer said. 4 It's clear under the cases that 5 reliability is an element of that exception to 6 the -- the state of mind exception to the 7 hearsay rule. 8 That's consistently what the Special 9 Master ruled. That's what's been done in the 10 Williams testimony thus far, and that's the 11 problem with this testimony he's provided. 12 Now, the examples that they give in 13 the cases they provide to you are retail 14 customers who made comments about their 15 purchasing behavior, and those -- and in that 16 situation, the Court in Callahan and some other 17 courts have said when it's a retail customer 18 making a comment of that nature, we're going to 19 allow it to be admitted for state of mind. 20 A retail customer making a comment to 21 a store, if I go into Ralph's and say, you 22 know, if your prices were cheaper I might buy 23 from you: I don't have any expectation that in 24 that negotiation I'm going to get a better 25 deal. They have their prices. 5661 1 The context that we're dealing with in 2 this testimony is sophisticated negotiation 3 between sophisticated parties where both have 4 an incentive to conceal their state of mind, 5 and it is based on that Microsoft has, and 6 consistently in these situations, taken the 7 position that when it's Digital Research or 8 companies in that position reporting on what 9 OEMs told them, that the OEMs' statements have 10 to satisfy the hearsay exception, and where the 11 OEMs have incentive to prevaricate, to be 12 biased, to conceal their state of mind, there 13 isn't sufficient indicia of reliability for 14 that testimony to be admitted. Plaintiffs need 15 to get the information from the OEMs. 16 MR. GRALEWSKI: Your Honor, it's about 17 4:30 and we have -- 18 THE COURT: I was going to suggest -- 19 what were you going to suggest? I'm sorry, I 20 didn't mean to cut you off. 21 MR. GRALEWSKI: Please. I -- 22 THE COURT: Go ahead. 23 MR. GRALEWSKI: I was going to suggest 24 for the -- to show some mercy on the court 25 reporter because I've been talking too much, 5662 1 that we reconvene in the morning, or we could 2 do the afternoon as well. 3 MR. TUGGY: Do you have a problem with 4 submitting on the last two? Are the issues 5 that different? 6 MR. GRALEWSKI: I don't. 7 THE COURT: Do you want to submit them 8 all on the last two? 9 MR. TUGGY: We'll just submit to -- 10 we'll submit without further argument for you 11 to review and rule. 12 MR. GRALEWSKI: There might be three, 13 but that's fine. 14 THE COURT: Is that okay with the 15 parties? 16 MR. TUGGY: Yes. 17 THE COURT: Very well. 18 MR. TUGGY: There's one more issue, 19 which is the exhibit. 20 Do we have more to argue on 1290? 21 Then we would be done with this witness after 22 you rule. 23 THE COURT: 1290 is part of the 24 testimony; right? 25 MR. TUGGY: Correct. 5663 1 THE COURT: We already discussed that, 2 I think, but if you want to do it some more, go 3 ahead, we'll do it tomorrow. 4 MR. GRALEWSKI: Nothing more on 1290 5 from Plaintiffs, Your Honor. 6 MR. TUGGY: Or from Microsoft. I 7 think we're ready for -- 8 THE COURT: I'll look at these tonight 9 and rule on them. 10 MR. GRALEWSKI: Thank you, Your Honor. 11 THE COURT: I have -- I don't know 12 what we have tomorrow for motions. I know this 13 one was given to me last week, Plaintiffs' 14 renewed motion to compel Microsoft to produce 15 documents responsive to Plaintiffs's request 16 for production an interrogatory. 17 Do you know anything about that, 18 Mr. Gralewski? 19 MR. GRALEWSKI: I believe I do. Are 20 those the numbered ones? Are there two -- 21 THE COURT: 30, 41, 43, 45, 47, 48, 22 interrogatory number 15. 23 MR. GRALEWSKI: I believe that 24 Mr. Neuhaus from Microsoft and Mr. Reece from 25 the Plaintiffs have been speaking about a 5664 1 motion to compel and have agreed to continue to 2 negotiate and not have hearing. 3 THE COURT: On this one? 4 MR. GRALEWSKI: That's the thing. 5 Can you tell me, and I will -- if it's 6 okay with Mr. Tuggy, I'll send you an E-mail 7 promptly and let you know if that's going to be 8 on for the morning. 9 THE COURT: Yeah. 10 MR. GRALEWSKI: What were the numbers 11 again? 12 THE COURT: I don't know if we can get 13 it done tomorrow morning or not. Probably have 14 to do it in the afternoon. 15 Plaintiffs' renewed motion to compel 16 Microsoft produced documents. They are 30 to 17 41, 43, 45, 47 to 48 and Interrogatory Number 18 15. 19 MR. GRALEWSKI: I do have information 20 on that, Your Honor. I was confused by a 21 different motion. 22 That one I do believe the Plaintiffs 23 want to argue tomorrow. 24 I believe, Your Honor may recall on 25 Friday, Mr. -- Ms. Conlin and Ms. Nelles 5665 1 discussed that, and Ms. Nelles -- we wanted to 2 argue it today, and Ms. Nelles said can I at 3 least have until at least Tuesday -- 4 THE COURT: This is for Tuesday then? 5 MR. GRALEWSKI: That is I believe the 6 information -- 7 THE COURT: Tomorrow afternoon? 8 MR. GRALEWSKI: -- that we believe is 9 responsive to post -- 10 THE COURT: Post-judgment. 11 MR. GRALEWSKI: Post-judgment conduct, 12 and I'm completely talking without any 13 information so I hope neither Your Honor or 14 Microsoft will hold me to anything if I'm 15 misspeaking, but I do believe that's on 16 tomorrow. 17 THE COURT: Before I let Tammy go, is 18 there any other motions we need to get to? 19 MR. TUGGY: The -- we expect based on 20 the time left that Mr. Gates' testimony will 21 last through Wednesday. 22 THE COURT: Really, okay. 23 MR. TUGGY: And so what we're -- we 24 don't know exactly what will happen with 25 Mr. Alepin, but we would like to try to clear 5666 1 out a couple more witnesses to make sure 2 Plaintiffs have what they need to play on 3 Thursday if they're going to use prior 4 testimony, and there were two, Mr. Chestnut and 5 Mr. Silverberg that I will be meeting and 6 conferring with Mr. Gralewski tonight. 7 I think there are some remaining 8 testimony based on inadmissible document 9 issues, and if we don't resolve those tonight, 10 I think we'd like to bring those tomorrow 11 afternoon just to make sure we finish those -- 12 THE COURT: Before the interrogatory 13 and production one or -- 14 MR. GRALEWSKI: I don't think that Mr. 15 Tuggy or I will be able to convince the parties 16 to allow us to argue the other things first, so 17 I think we would go second. 18 THE COURT: Okay. 19 MR. TUGGY: Then I think until after 20 the break -- we won't need to be coming here 21 for more line-by-line work. 22 THE COURT: Okay. 23 MR. TUGGY: Now, there's also and 24 we'll have to -- I'll meet and confer with 25 Mr. Gralewski on this. 5667 1 Both parties filed Phase 7 appeals on 2 the Special Master rulings, and so we'll confer 3 and then let the Court know if there's some 4 urgency to that, but at this point, it's just 5 submitted. 6 THE COURT: Phase 6 is done, right? 7 MR. TUGGY: Yes. 8 THE COURT: Okay. All right. 9 MR. TUGGY: Thank you, Your Honor. 10 THE COURT: See you tomorrow. We have 11 nothing at 8, right? 12 MR. TUGGY: Correct. 13 THE COURT: Nothing at 8, unlike 14 today, I'm sorry. 15 See you at 8:30. 16 (Proceedings concluded at 4:35 p.m.) 17 18 19 20 21 22 23 24 25 5668 1 CERTIFICATE TO TRANSCRIPT 2 The undersigned, Official Court 3 Reporters in and for the Fifth Judicial 4 District of Iowa, which embraces the County of 5 Polk, hereby certifies: 6 That she acted as such reporter in the 7 above-entitled cause in the District Court of 8 Iowa, for Polk County, before the Judge stated 9 in the title page attached to this transcript, 10 and took down in shorthand the proceedings had 11 at said time and place. 12 That the foregoing pages of typed 13 written matter is a full, true and complete 14 transcript of said shorthand notes so taken by 15 her in said cause, and that said transcript 16 contains all of the proceedings had at the 17 times therein shown. 18 Dated at Des Moines, Iowa, this 18th 19 day of December, 2006. 20 21 22 ______________________________ Certified Shorthand Reporter(s) 23 24 25