Oracle Corporation et al v. SAP AG et al Doc. 919 Att. 1 1 BINGHAM McCUTCHEN LLP DONN P. PICKETT (SBN 72257) 2 GEOFFREY M. HOWARD (SBN 157468) HOLLY A. HOUSE (SBN 136045) 3 ZACHARY J. ALINDER (SBN 209009) BREE HANN (SBN 215695) 4 Three Embarcadero Center San Francisco, CA 94111-4067 5 Telephone: (415) 393-2000 Facsimile: (415) 393-2286 6 [email protected] [email protected] 7 [email protected] [email protected] 8 [email protected] 9 BOIES, SCHILLER & FLEXNER LLP DAVID BOIES (Admitted Pro Hac Vice) 10 333 Main Street Armonk, NY 10504 11 Telephone: (914) 749-8200 Facsimile: (914) 749-8300 12 [email protected] STEVEN C. HOLTZMAN (SBN 144177) 13 FRED NORTON (SBN 224725) 1999 Harrison St., Suite 900 14 Oakland, CA 94612 Telephone: (510) 874-1000 15 Facsimile: (510) 874-1460 [email protected] 16 [email protected] DORIAN DALEY (SBN 129049) 17 JENNIFER GLOSS (SBN 154227) 500 Oracle Parkway, M/S 5op7 18 Redwood City, CA 94070 Telephone: (650) 506-4846 19 Facsimile: (650) 506-7114 [email protected] 20 [email protected] 21 Attorneys for Plaintiffs Oracle USA, Inc., et al. UNITED STATES DISTRICT COURT 22 NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION 23 ORACLE USA, INC., et al., CASE NO. 07-CV-01658 PJH (EDL) 24 EXHIBIT A TO THE DECLARATION OF HOLLY Plaintiffs, A. HOUSE IN SUPPORT OF MOTION NO. 1: TO 25 v. EXCLUDE TESTIMONY OF DEFENDANTS’ EXPERT STEPHEN CLARKE 26 SAP AG, et al., Date: September 30, 2010 Time: 9 a.m. 27 Defendants. Place: Courtroom 3 Judge: Hon. Phyllis J. Hamilton 28 FILED PURSUANT TO DKT. NO. 915 Case No. 07-CV-01658 PJH (EDL) Dockets.Justia.com 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 EXHIBIT A 19 20 21 22 23 24 25 26 27 28 Case No. 07-CV-01658 PJH (EDL) Oracle USA, Inc., et al v. SAP AG, et al Stephen K. Clarke Expert Report May 7, 2010 Subject to Protective Order Highly Confidential Information – Attorneys' Eyes Only Expert Report of Stephen K. Clarke, May 7, 2010 Oracle USA, Inc., et al v. SAP AG, et al 1.1. Allegations Oracle USA, Inc. (“Oracle USA”), Oracle International Corporation (“OIC”), Oracle EMEA (“OEMEA”), and Siebel Systems, Inc. (“Siebel”) (together, “Plaintiffs”) filed their Fourth Amended Complaint (“Complaint”) against TomorrowNow, SAP AG, and SAP America, Inc. (together, “Defendants”) on August 18, 2009.9 The Complaint includes a range of claims including, inter alia: 1. Copyright infringement of Oracle’s “Software and Support Materials” (“Subject“Subject IP”)IP”)101 2. Breach of contract 3. Unjust enrichment 4. Interference with prospective economic advantage However, the Court in this case (the Honorable Judge Hamilton) issued an order (“Court’s Order”)11 that precluded certain claims made in the Complaint (as discussed more fully later in this report). Plaintiffs’ allegations are referred to as the “Alleged Actions” in this report. Paul Meyer (“Mr. Meyer”) issued a report on November 16, 2009 (“Meyer Report”) in which he purported to quantify certain of the damages Plaintiffs allegedly suffered as a result of the Alleged Actions. The first Meyer Report contained many errors. Mr. Meyer issued a second report (with the same November 16, 2009 date) with numerous highlighted corrections to the errors in the first report. On February 23, 2010, Mr. Meyer issued a third report, expanding a section on Oracle’s database claims and correcting more errors made in his second report. I have addressed the third Meyer Report in my analysis and references to the Meyer Report are to his third iteration unless otherwise noted. 1.2. Scope of Engagement Counsel for Defendants asked me to review and analyze the Meyer Report and to quantify what Oracle’s damages would be if Defendants are found liable for the Alleged Actions. Although for purposes of this analysis I have assumed Defendants are liable for the Alleged Actions, the assumption is not an admission of liability by Defendants. I offer no opinion on liability in this matter. My resume and testimony experience are presented in Appendices A and B, respectively. In the course of my analysis I, or my staff acting at my direction, reviewed the documents listed in Appendix C. LECG has been compensated for the work done on this engagement at hourly rates 9 Complaint, pages 1-2. 10 I define Software and Support Materials consistently with Mr. Meyer: “application and database software, program updates, software updates, bug fixes, patches, customer solutions, and instructional documents for the PeopleSoft, J.D. Edwards,,pyp, Oracle Database and Siebel families of software products.” Meyer Report, pgpage 7, ,p paragraph g p 7. I define Subjectj IP as the poportionrtion of thethe Software andand Support MaterMaterialsials allegedlyallegedly infringed and actually used by TomorrowNow. 11 Judge LaPorte issued an original order dated September 17, 2009 and Judge Hamilton affirmed that order on November 2, 2009. I refer to the two orders as the Court’s Order. Subject to Protective Order 2 Highly Confidential Information – Attorneys' Eyes Only Expert Report of Stephen K. Clarke, May 7, 2010 Oracle USA, Inc., et al v. SAP AG, et al ranging from $60 to $575 per hour. I may supplement my report should additional information become available. In addition to bringing my own knowledge and expertise to bear on the subject matter of my report, I also discussed the case with an industry expert engaged by SAP, Brian Sommer (“Mr. Sommer”). I also read and referenced the reports of Mr. Sommer and of the software valuation and technical experts retained by Defendants, David Garmus (“Mr. Garmus”), Donald Reifer (“Mr. Reifer”) and Stephen Gray (“Mr. Gray”), as required for my report. 2. Meyer Report – Overall Comments The Meyer Report presents Mr. Meyer’s opinion of damages in four categories as follows: …the fair market value of SAP’s actual use of Oracle’s intellectual property (copyrighted materials), Oracle’s lost profits related to support contracts, SAP’s infringer profits/unjust enrichment and Oracle’s additional costs caused by SAP’s alleged actions.12 2.1. Discretionary Claims Mr. Meyer adds that if he is “…allowed by the Court, [he] may also be asked to compute or provide opinions related to pre-judgment interest, attorney’s fees and costs and punitive damages.”13 Because such awards are generally at the discretion of the Court, I have no opinion on whether Mr. Meyer’s analysis and presentation of such claims would be appropriate in the context of a trial in this matter. If Mr. Meyer is allowed by the Court to testify about these discretionary claims, I will be prepared to address them at that time. 2.1.1. Contaminated Damage Claim The Court’s Order states that Oracle is precluded from presenting evidence of claims which include damages related to “(1) alleged lost profits relating to customers that did not become customers of TomorrowNow; (2) alleged lost profits relating to licensing revenue, as opposed to support revenue; and (3) alleged lost profits relating to products that were not supported by TomorrowNow” and that the “…precludedpg evidence will NOT be admitted through the back door…” [p[emphasis in original]. g ] I iinterpretnterpret tthehe CCourt’sourt’s OrOrderder to mean tthathat Mr. MeMeyeryer wwillill not bbee allallowedowed to testtestifyifyyp aboutabout thethe precludedprecluded damagedamag e claimsclaims even ifif hehe includesincludes themthem inin hishis “Value“Value of Use” claim or in other portionsportions ofof his overall damagedamage analysis.analysis. However, the Meyer Report does not differentiate between the damages he calculates for claims precluded by, and those not precluded by, the Court’s Order. Therefore, Mr. Meyer’s damage opinions include damages contaminated by precluded claims. 12 Meyer Report, page 14, paragraph 20. 13 Meyer Report, page 14, paragraph 20. Subject to Protective Order 3 Highly Confidential Information – Attorneys' Eyes Only Expert Report of Stephen K. Clarke, May 7, 2010 Oracle USA, Inc., et al v. SAP AG, et al acquisitionqp, of PeopleSoft and was, therefore,, one result of Oracle’s actions.23 Accordingly,Accordingly,gy, it wouldwould be a rreasonableeasonable busbusinessiness actionaction forfor SAP to capitalizep on the opportunity in the market to boost its chances of converting former PeopleSoft customers to SAP.24 Mr. Meyer is required by a code of standards to which he is bound to maintain objectivity, defined by the American Institute of Certified Public Accountants as: Objectivity is a state of mind, a quality that lends value to a member's services. It is a distinguishing feature of the profession. The principle of objectivity imposes the obligation to be impartial, intellectually honest, and free of conflicts of interest.25 In spite of the requirement that he maintain objectivity, Mr. Meyer tries to establish an aura of illegality around SAP’s efforts to compete with Oracle based solely on SAP’s efforts to attract customers from Oracle. However, the statements in the cited references do not indicate inappropriate activity on the part of SAP. Rather, the cited material references normal competitive efforts of a company in a competitive business. Typically, damages experts for plaintiffs and defendants assume liability on the part of the defendant26 which obviates the need for the expert to address a plaintiff’s liability arguments or the merits of a defendant’s actions. Many of Mr. Meyer’s statements characterize SAP’s behavior inappropriately. It is unclear what Mr. Meyer was trying to achieve by doing so. Because the material appears to be connected to Mr. Meyer’s calculation of SAP’s alleged Value of Use of the Subject IP, I address various additional elements of his treatment of these items below.