4163 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 XVI 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 12, 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 4164 1 A P P E A R A N C E S 2 Plaintiffs by: ROXANNE BARTON CONLIN 3 Attorney at Law Roxanne Conlin & Associates, PC 4 Suite 600 319 Seventh Street 5 Des Moines, IA 50309 (515) 283-1111 6 RICHARD M. HAGSTROM 7 JAMES S. REECE MICHAEL R. CASHMAN 8 Attorneys at Law Zelle, Hofmann, Voelbel, 9 Mason & Gette, LLP 500 Washington Avenue South 10 Suite 4000 Minneapolis, MN 55415 11 (612) 339-2020 12 DOUGLAS J. ROVENS Attorney at Law 13 Zelle, Hofmann, Voelbel, Mason & Gette, LLP 14 550 South Hope Street Suite 1600 15 Los Angeles, CA 90071 (213) 895-4150 16 ROBERT J. GRALEWSKI, JR. 17 Attorney at Law Gergosian & Gralewski 18 550 West C Street Suite 1600 19 San Diego, CA 92101 (619) 230-0104 20 KENT WILLIAMS 21 Attorney at Law Williams Law Firm 22 1632 Homestead Trail Long Lake, MN 55356 23 (612) 940-4452 24 25 4165 1 Defendant by: 2 DAVID B. TULCHIN STEVEN L. HOLLEY 3 SHARON L. NELLES JOSEPH E. NEUHAUS 4 JEFFREY C. CHAPMAN Attorneys at Law 5 Sullivan & Cromwell, LLP 125 Broad Street 6 New York, NY 10004-2498 (212) 558-3749 7 8 ROBERT A. ROSENFELD 9 Attorney at Law Heller Ehrman, LLP 10 333 Bush Street San Francisco, CA 94104 11 (415) 772-6000 12 STEPHEN A. TUGGY HEIDI B. BRADLEY 13 Attorneys at Law Heller Ehrman, LLP 14 333 South Hope Street Suite 3900 15 Los Angeles, CA 90071-3043 (213) 689-0200 16 BRENT B. GREEN 17 Attorney at Law Duncan, Green, Brown & 18 Langeness, PC Suite 380 19 400 Locust Street Des Moines, IA 50309 20 (515) 288-6440 21 RICHARD J. WALLIS STEVEN J. AESCHBACHER 22 Attorneys at Law Microsoft Corporation 23 One Microsoft Way Redmond, CA 98052 24 (425) 882-8080 25 4166 1 (The following record was made out of 2 the presence of the jury.) 3 THE COURT: You wanted to take up the 4 issue of reseller? 5 MR. GRALEWSKI: Yes, Your Honor. 6 THE COURT: Exhibits or depos? 7 MR. GRALEWSKI: Depositions. 8 Good morning, Your Honor. May I 9 approach? 10 THE COURT: Yes. 11 MR. GRALEWSKI: I have a copy of our 12 brief that we filed yesterday, I believe, and 13 I'm not sure that we'll need all the paper, but 14 copies of the depositions just in case. 15 THE COURT: Thank you. 16 MR. GRALEWSKI: Your Honor, let me 17 provide some context to this motion and briefly 18 explain or remind the Court what these 19 depositions are about and why the Plaintiffs 20 have a concern about certain portions of them 21 being used in Mr. Tulchin's opening statement. 22 The two deponents, Mr. Erickson and 23 Lowan, are people that own businesses within 24 the state of Iowa. 25 And the reseller name that we've given 4167 1 them basically simply means that their 2 businesses are ones in which they put computers 3 together and help people with computer 4 problems. 5 Both Mr. Erickson and Mr. Lowan also 6 purchased for their own personal use the 7 products that are subject to this lawsuit. 8 Mr. Erickson has not opted out of the 9 class. Mr. Lowan has opted out of the class. 10 So Mr. Erickson is a class member; Mr. Lowan is 11 no longer a class member. 12 When these depositions were taken, 13 Your Honor may recall that there was much 14 debate between the parties about whether 15 Microsoft could depose absent class members and 16 ask them questions about stability, quality, 17 security, value, innovation, and choice. 18 And, ultimately, on July 5, Your Honor 19 denied Microsoft's attempts to depose class 20 members to ask them those kinds of questions. 21 Now, in the process of that dispute 22 being worked out, Microsoft subpoenaed these 23 two individuals for deposition prior to your 24 Court's order, Your Honor's order. 25 By agreement of the parties, we 4168 1 decided to allow the depositions to go forward 2 because we received a communication from 3 Microsoft that said these depositions will 4 basically be limited to economic issues and 5 decertification issues. 6 What's been at issue in all of these 7 cases, and certainly in Iowa, is pass-through 8 and overcharge. 9 And so essentially there was a letter 10 agreement between the parties that the 11 depositions would be limited to those types of 12 questions. 13 Well, we showed up to take these 14 depositions in Cedar Falls in July, the end of 15 July, and after a few questions about 16 pass-through and overcharge, Microsoft asked 17 the balance of their questions about the issues 18 of stability, quality, security value, 19 innovation, and meaningful choice. 20 We -- I'm going to skip ahead a little 21 bit. 22 We made objections to the Special 23 Master. 24 The objections we're here to talk 25 about today are by agreement of the parties not 4169 1 objections that should have been brought to the 2 Special Master, by and large. 3 They are relevance and collateral 4 estoppel, and we'll get into those if we need 5 to. 6 The reason that this issue has now 7 reached a head is that on December 4th, about a 8 week ago, we received a communication from 9 Microsoft that added a chunk of testimony from 10 the Erickson deposition to their designations, 11 which by our agreement they had the right to 12 add lines. We certainly had the right to 13 object. 14 And the lines they wanted to add, they 15 said we may be using these in opening 16 statement. That was on December 4. 17 On December 6, that was two days 18 later, I sent an E-mail to Mr. Tuggy and 19 Mr. Chapman, and I gave them specific notice 20 that we intended to contest their use of 21 anything in Erickson and Lowan on this subject 22 in their opening statement. 23 We don't take issue with whether they 24 can use the economic testimony necessarily for 25 decertification purposes, but we did provide 4170 1 them notice on December 6 that we intended to 2 bring this up. 3 Now, we believe -- that's the 4 background of the dispute. 5 We believe that this motion can be 6 decided on a simple ground, and that is 7 hearsay. 8 These resellers both are Iowans under 9 the subpoena power of the Court. They're not 10 unavailable. And as a result, their 11 depositions are hearsay. 12 There are -- there is an argument that 13 Microsoft makes in its papers that I got this 14 morning. They're essentially arguing that we 15 waived that objection because we didn't make it 16 to the Special Master, and I want to respond to 17 that now as opposed to later. 18 We didn't make the objection to the 19 Special Master for a couple reasons. 20 One, we believe that unavailability -- 21 and this is in the Iowa Practice Guide on 22 Evidence. 23 Unavailability is a matter for the 24 Court under 5.104(a), and unavailability also 25 seems to revolve around whether the witness is 4171 1 unavailable or not at the time of the proffer 2 of the evidence. 3 So, in other words, someone could be 4 available or unavailable in June or August and 5 that situation could change in December. There 6 are a lot of moving parts in the trial. 7 Consistent with this understanding, 8 Your Honor, on December 3rd, I received a 9 communication from Microsoft adding in a global 10 hearsay objection to the deposition of Phil 11 Barrett. 12 They believe that because Mr. Barrett 13 was coming live to trial, that the prior 14 testimony became hearsay. 15 That situation was mooted when I told 16 them that Mr. Barrett is not able to come to 17 trial and won't be coming to trial, so that 18 objection fell away. 19 But the point of the matter is, Your 20 Honor, subsequent to the Special Master process 21 and at the time of trial is when Microsoft 22 decided that it was appropriate to lodge a 23 global hearsay objection on the availability 24 issue, and that's all we're doing now. 25 I don't want to reargue the sanctions 4172 1 motion, and I don't intend to, that the 2 Plaintiffs brought several months ago. 3 But if we also are talking about 4 waiver, which, of course, is an equitable 5 concept, I think we need to look at the 6 totality of the situation here. 7 And what is going on is that Microsoft 8 is attempting to use testimony that Your Honor 9 has already decided on July 5th is improper on 10 the issues that I discussed earlier; 11 innovation, choice, things of that nature. 12 I will tell you, and we'll get to this 13 maybe, that the chunk of testimony that they 14 added on December 4th, the question is from 15 Mr. Chapman to Mr. Erickson, Mr. Erickson, do 16 you agree with Finding of Fact 412? Which we 17 have collateral estoppel on. 18 He asks the witness, a lay witness, if 19 he agrees with Finding of Fact 412. 20 Now, not surprisingly, this is the 21 reason they've designated it. 22 Mr. Erickson says, I disagree with 23 Finding of Fact 412, and then he goes on to 24 explain why he disagrees with Finding of Fact 25 412. 4173 1 If we're going to talk about the 2 equities -- 3 THE COURT: Is that the portion they 4 want to offer? 5 MR. GRALEWSKI: That's the portion. 6 MR. TULCHIN: No, it's not, Your 7 Honor. 8 We're not using this in the opening 9 just to moot this and move this along. 10 THE COURT: Are you going to use it at 11 any time in the trial? 12 MR. TULCHIN: No. 13 THE COURT: Any time in the trial? 14 MR. TULCHIN: We're certainly not 15 using it in the opening which is the -- 16 THE COURT: I asked you a question. 17 Are you using it any time during trial? 18 MR. TULCHIN: I have no intention of 19 doing that. 20 THE COURT: Because you're not going 21 to. Denied. 22 You cannot attack the findings of 23 fact, period. 24 MR. TULCHIN: And we're not doing 25 that, Your Honor. 4174 1 THE COURT: Good. It's not going to 2 happen. Go ahead. 3 MR. TULCHIN: If that's the basis of 4 this motion, Your Honor, you know, it's just 5 not happening. It's not in my opening. I have 6 no intention of playing that. 7 THE COURT: Okay. Move on. 8 What's next? 9 MR. GRALEWSKI: Your Honor, at this 10 point, I think for efficiency, and I know that 11 it's our motion and we should proceed as we see 12 fit. 13 I have arguments to make, other 14 arguments with respect to collateral estoppel 15 and relevance, but I believe that the most 16 efficient way to deal with this is to look at 17 the hearsay issue. 18 If Your Honor rules in favor on the 19 hearsay issue, there's no reason to spend 20 another 15, 20 minutes on the other issues. 21 If you don't, then I think we should 22 look at the other ways in which the testimony 23 involves the findings and relevance issues. 24 THE COURT: Are you done with your 25 hearsay objection then? 4175 1 MR. GRALEWSKI: Pardon me? 2 THE COURT: Are you done with your 3 hearsay objection? 4 MR. GRALEWSKI: Yes, Your Honor. 5 Thank you. 6 THE COURT: Response? 7 MR. TUGGY: Yes, Your Honor. 8 May I approach with submission? 9 THE COURT: Yes. 10 MR. TUGGY: Thank you, Your Honor. 11 Microsoft's position on Plaintiffs' 12 motion relating to resellers is that Plaintiffs 13 serving me with this motion at 1:49 a.m. on the 14 day that Microsoft was to begin its opening 15 statements for the purpose of disrupting our 16 preparation for providing those opening 17 statements was inexcusable. 18 To understand why it was inexcusable 19 that this motion was filed or E-mailed to me at 20 1:49 a.m. requires that we take a look at the 21 context of the filing and the testimony at 22 issue, the reseller testimony at issue. 23 And in examining that context, we will 24 directly address the hearsay objection 25 Plaintiffs have just asserted. 4176 1 So by taking a look at the -- the way 2 this motion was submitted and our position that 3 it ought not to be heard because it's 4 inexcusably delayed. We'll also take a look at 5 this hearsay issue. 6 And if I may request as I go through 7 this argument, that if we have line by line 8 issues to go through, it seems to me we might 9 be able to address those this afternoon, but as 10 to these overarching issues whether this is 11 inexcusably delayed and ought not to be heard, 12 and then the substantive hearsay objection 13 they've asserted, I think we can have time to 14 address those this morning without creating an 15 inconvenience for the jury. 16 As for the context for this filing, 17 the submission I just provided to you is a 18 memorandum I prepared after I received the 19 filing yesterday that sets forth the history, 20 the relevant history of the objections and 21 designations and the Special Master's rulings 22 relating to the reseller deposition and also 23 separately relating to a second motion that 24 Plaintiffs E-mailed me relating to deposition 25 testimony by Mr. Sculley and Mr. Peterson. 4177 1 With respect to the reseller 2 depositions, Microsoft, under the Special 3 Master's scheduling order, designated the 4 reseller deposition testimony on August 4 of 5 this year. 6 The Plaintiffs had a two-week period 7 to review it under the Special Master's 8 scheduling order, and on August 18 the 9 Plaintiffs submitted their objections to the 10 testimony of Mr. Erickson and Mr. Lowan. 11 In the submission I provided to you 12 the Plaintiffs objections are in Tab 1, and in 13 Tab 1 the Plaintiffs list their objections to 14 the deposition, both global objections to the 15 deposition as a whole and individual objections 16 to lines of testimony. 17 And in this set of objections the 18 Plaintiffs asserted, the Plaintiffs did not 19 assert a hearsay objection to the deposition. 20 Then what occurred is on September 22, 21 under the Court's pretrial scheduling order, 22 the parties were required to submit motions in 23 limine, and the Plaintiffs and Microsoft 24 submitted various motions in limine. 25 The Plaintiffs did not submit a motion 4178 1 in limine to attempt to exclude the Erickson 2 and Lowan testimony either because they thought 3 it was unduly prejudicial or because it was 4 hearsay or for any other reason. That was just 5 not among their motions in limine. 6 On September 22, under the Court's 7 scheduling order, Microsoft submitted its list 8 of live witnesses, and because the Plaintiffs 9 hadn't asserted a hearsay objection to the 10 deposition testimony we had designated, 11 videotaped testimony we had designated of 12 Erickson and Lowan, those witnesses cannot 13 appear on our live witness list. 14 On October 10, Special Master ruled on 15 the Plaintiffs' line-by-line objections to the 16 testimony of Mr. Erickson and Mr. Lowan. 17 The Special Master's rulings are in 18 Tab 3 of the submission I provided to Your 19 Honor this morning, and it is -- it was a huge 20 amount of work for the Special Master to go 21 through the line-by-line objections, which 22 would, of course, have been unnecessary had 23 Plaintiffs asserted a global hearsay objection 24 back in -- on August 18, or even thereafter, 25 through a motion in limine. 4179 1 There was just no need for a 2 line-by-line review if it wasn't going to be 3 used at trial. 4 But the Plaintiffs submitted this to 5 the Special Master for ruling, and the Special 6 Master went through all this material and made 7 his rulings on it. 8 That was on October 10. 9 On November 29, the Special Master 10 ruled on the Plaintiffs' objection that when 11 Microsoft took these depositions, it was acting 12 beyond the scope of the parties' agreement on 13 the scope of the depositions, and what the 14 Special Master had before him was the 15 sanction papers, your ruling on that motion, 16 Mr. Neuhaus' letter, the arguments of the 17 parties. 18 And in Tab 5 of what I provided to you 19 is the Special Master's, Justice McCormick's 20 reasoned opinion on why it was these 21 depositions were not beyond the scope that 22 Microsoft was permitted to ask at that time. 23 The Plaintiffs have said they're not 24 appealing the Special Master's rulings, and so 25 presumably this ruling is not being appealed, 4180 1 even though it was argued at some level by 2 Mr. Gralewski in his argument. 3 So the Special Master ruled on all the 4 line-by-line designations on October 10 because 5 that was when the parties had submitted those 6 matters for him for ruling, but waited till 7 November 29 for this last issue because he was 8 waiting for Your Honor's ruling on the 9 sanctions motion and a report by the parties on 10 the status of that ruling. 11 So that's why that occurred on 12 November 29. 13 Now, on December 4, as Mr. Gralewski 14 said, Microsoft made a small set of additional 15 designations, including one additional one for 16 Erickson which is not at issue for the opening, 17 and as discussed earlier, it's not going to be 18 at issue for this trial. 19 On December 6, in an E-mail which is 20 attached here, the Plaintiffs E-mailed me 21 telling me that they intended to file a motion 22 relating to the resellers and that on December 23 7th or 8th, I would receive the briefing. 24 So December 7th passed, December 8th, 25 December 9th, December 10th. I received 4181 1 nothing and assumed that either nothing was 2 going to happen or -- I actually just had no 3 idea where the Plaintiffs were with this until 4 from an airport on Sunday night while I was 5 readying myself for bed I received a call from 6 Mr. Gralewski saying later that night I would 7 be receiving briefing for a hearing they wanted 8 before our opening statement. 9 And at the time Mr. Gralewski 10 predicted for me that Mr. Hagstrom would be 11 finishing the following day, and they wanted it 12 heard the following day before our openings 13 began. 14 I informed Mr. Gralewski that this was 15 late; that I was not agreeing to a hearing on 16 Monday morning or any hearing at all. 17 And Mr. Gralewski, when he sent to me 18 the briefing at 1:49 a.m., sent an E-mail with 19 it, and in the E-mail Mr. Gralewski said, as we 20 discussed tonight, we will not argue this issue 21 tomorrow morning, but Plaintiffs do wish to 22 have these matters decided before David starts 23 his opening, as Microsoft probably does too. 24 Kindly let me know when you would like 25 to argue this motion. 4182 1 Okay, so that's the history of the 2 submission of the filing that you have. 3 And now as you take a look at this 4 history and the hearsay objection that 5 Plaintiffs did not assert on August 18, 6 Plaintiffs' argument ought to remind us of what 7 occurred with respect to the Department of 8 Justice testimony by Mr. Gates. 9 If the Court will recall, with respect 10 to that testimony, back in April 2006, 11 Microsoft did not assert a hearsay objection 12 because in April 2006 when the Plaintiffs 13 designated that testimony, Mr. Gates was 14 residing in the state of Washington, not within 15 the subpoena power of this Court, and Microsoft 16 did not assert a hearsay objection at that 17 time. 18 In November of 2006, Microsoft -- the 19 Plaintiffs obtained an order from the Court 20 that since Mr. Gates was coming in Microsoft's 21 case in chief, he would be ordered to appear in 22 the Plaintiffs' case in chief, and Microsoft at 23 that time asserted a hearsay objection because 24 he was available. 25 The Plaintiffs must have submitted at 4183 1 least three letter briefs to this Court arguing 2 vociferously that Microsoft had waived its 3 hearsay objection because it didn't assert the 4 hearsay objection in April 2006. 5 The Plaintiffs' argument was the mere 6 possibility that Mr. Gates might be available 7 trigger an obligation on the part of Microsoft 8 to assert a hearsay objection back in April 9 2006. 10 Contrast that with Mr. Erickson and 11 Mr. Lowan. 12 Mr. Erickson resides in Cedar Falls, 13 Iowa. Mr. Lowan resides in Waterloo, Iowa. 14 At the time their depositions were 15 taken, and for every moment thereafter, the 16 Plaintiffs knew these individuals were within 17 the subpoena power of the Court. 18 There is, of course, an outside chance 19 that at the time of trial one of them might be 20 unavailable, sickness. It's just hard to 21 predict. 22 But certainly when comparing the 23 probability that they would be available for 24 use at trial, Gates and Erickson and Lowan, 25 it's quite clear that Plaintiffs should have 4184 1 asserted their hearsay objection on August 18, 2 2006, if they really intended that these 3 witnesses should not appear by videotape 4 deposition. 5 And their failure to do -- and then to 6 require the Special Master and Microsoft to 7 work through all the individual objections on 8 the -- on those witnesses in reliance on the 9 fact that they hadn't asserted a hearsay 10 objection, for Microsoft to submit a witness 11 list on reliance on the fact that the 12 Plaintiffs had not asserted a hearsay 13 objection, and now without any notice to 14 Microsoft at 11:49 a.m. on the date the 15 openings were to begin, I'm told they're going 16 to add a hearsay objection. 17 That's just late, and it's 18 inappropriate. It's improper. It's a sharp 19 business practice. 20 If they're going to submit motions 21 like this, they need to give me some time. I 22 will bend over backward for them to make -- to 23 do the work, but this is just late. It's 24 inappropriate. 25 So the Plaintiffs have waived their 4185 1 hearsay objection because they didn't assert 2 it. 3 Now, alternatively, in the event this 4 Court is inclined to allow Plaintiffs to add 5 the hearsay objection, it seems to me that in 6 fairness several things ought to happen. 7 First, Microsoft ought to be permitted 8 to add these witnesses to its witness list, 9 live witness list. 10 Second, Microsoft ought to be 11 given permission by this Court to contact 12 Mr. Erickson regarding testifying at this 13 trial, notwithstanding the fact that he has not 14 opted out of Plaintiffs' class. 15 And third, Microsoft ought to be 16 permitted to show the prior testimony 17 nonetheless in opening statements because we 18 have a good faith reason to believe that those 19 statements will be testimony offered at trial, 20 whether by videotape or live. 21 The final point I'd like to make, Your 22 Honor, is that the Special Master has ruled on 23 the exact issues the Plaintiffs are presenting 24 to this Court. 25 The Plaintiffs are claiming we're 4186 1 submitting 403 objections, and those were not 2 addressed by the Special Master. 3 This is the nature of the Plaintiffs' 4 403 objection. 5 Mr. Erickson didn't have foundation to 6 make the statements that he made in his 7 deposition, and as a result, those statements 8 are irrelevant or unduly prejudicial. 9 Before the Special Master, every one 10 of the designations that is being put before 11 you this morning had a foundation objection 12 except one that's not going to be used in the 13 opening. Every one at issue. 14 Every one of those foundation 15 objections the Special Master overruled. 16 This is a wolf in sheep's clothing. 17 This is an appeal of the Special 18 Master's rulings. It is not some sort of 19 brand-new motion under 5.403. 20 And as we go through these 21 line-by-line, you'll be able to see comparing 22 the Special Master's -- what they submitted to 23 the Special Master. 24 And the Special Master's ruling with 25 what they're arguing here, that it's the same 4187 1 argument. They're simply appealing what they 2 already lost, which brings me to the final 3 point. 4 Unfortunately, and I'm hoping that all 5 the arguments the last few days about 6 agreements between the parties don't interfere 7 with our ability to have discussions with each 8 other, but I'd like to hand up to the Court an 9 agreement that is in writing and signed by me 10 and signed by Mr. Cashman. So there shouldn't 11 be any dispute about the nature of the 12 agreement or its terms. 13 This is a complicated agreement 14 covering three different subjects, and we 15 entered into this agreement because we wanted 16 to make it possible for openings to run 17 smoothly. 18 THE COURT: Is this the agreement 19 that's been argued over and over again and no 20 one can agree on? Everyone has different 21 interpretations? It's not worth the paper it's 22 written on? 23 MR. TUGGY: I don't think so, Your 24 Honor. 25 THE COURT: We argued about this 4188 1 agreement, I don't know how many times now, by 2 both parties, and no one even seems to care 3 about the darn agreement. 4 MR. GREEN: That's a different 5 agreement, Your Honor. 6 THE COURT: No, it's the same one, 7 November 29. 8 MR. TUGGY: Microsoft's position has 9 been after clearing all -- 10 THE COURT: I mean, everyone -- you 11 guys don't even care about the darn agreement. 12 I've had this before me -- 13 MR. TULCHIN: Your Honor, we've tried 14 to abide by it. 15 THE COURT: I'm sorry, I was talking. 16 Did I interrupt you? 17 MR. TULCHIN: No. I'm sorry, Your 18 Honor. 19 THE COURT: Go ahead, Mr. Tuggy. I 20 guess I'm not allowed to speak. Go ahead. 21 MR. TUGGY: I'm sorry, Your Honor. 22 THE COURT: Go ahead. 23 MR. TUGGY: Microsoft's position is 24 that it's precleared all of its testimony 25 through the Special Master and has a good faith 4189 1 basis for believing that it can use the 2 testimony in its opening statements and on that 3 basis requests that the Court affirm the 4 Special Master's rulings, deny the Plaintiffs' 5 motions, and permit Microsoft to use the 6 testimony at issue in its opening. 7 And if it please the Court, Microsoft 8 would be willing this afternoon, so as to not 9 inconvenience the jury, to go through these 10 line-by-line. 11 THE COURT: I thought you said they're 12 too late for their appeal. 13 MR. TUGGY: Yes. 14 My primary argument is that submitting 15 this when they did was inappropriate and 16 improper. They should have submitted it 17 earlier. 18 THE COURT: Was there a time limit 19 from the appeal for the Special Master's 20 ruling? 21 MR. TUGGY: No. 22 THE COURT: Okay. Anything else? 23 MR. TUGGY: Nothing further on those 24 arguments. 25 THE COURT: Okay. 4190 1 MR. GRALEWSKI: Trying to confine my 2 response just to the hearsay points, Your 3 Honor. 4 I can understand the reason that Your 5 Honor is troubled -- 6 THE COURT: I'm not troubled. I'm 7 frustrated. 8 MR. GRALEWSKI: Frustrated. 9 THE COURT: You guys enter these 10 agreements and no one even cares about them. 11 Don't even bother with them anymore, okay? 12 Just bring your motions to me. 13 These agreements are just worthless. 14 You guys find every way to reinterpret them, 15 both of you. It just drives me crazy. 16 You guys -- make your argument on the 17 hearsay. 18 MR. GRALEWSKI: With respect to the 19 objection, Your Honor, all the Plaintiffs are 20 doing is trying to not inconvenience the Court 21 by -- we certainly have the right to object, as 22 Mr. Tulchin did, during the opening. We're 23 trying to bring the objection beforehand. 24 The substance -- aside from the 25 hearsay, the substance of our brief or our 4191 1 motion is not to reargue foundation and 2 improper opinion that the Special Master has 3 ruled on. 4 As I pointed out, the primary issue 5 now, aside from the hearsay, is relevance and 6 collateral estoppel, and those aren't issues 7 that the parties understand were before the 8 Special Master. 9 In terms of the waiver argument, Your 10 Honor, what I can say -- I'm not going to 11 repeat the context that this is in, but we -- 12 the Plaintiffs honestly believe in light of the 13 Court's July 5th order -- I mean, Microsoft 14 sought permission to depose class members -- 15 this is a quote -- about their experience in 16 using Microsoft's software and also whether 17 they had choices in their software purchases, 18 whether they believe innovation has been 19 stifled, and whether they suffered security 20 breaches. And Your Honor denied that motion on 21 July 5th. 22 We honestly believe that they would 23 not be here now at trial attempting to put on 24 the screen testimony by class members about the 25 very issues that you told them they couldn't. 4192 1 And when we realized that, we decided to bring 2 the issue to Your Honor's attention. 3 THE COURT: Was my order entered after 4 or before the deposition? 5 MR. GRALEWSKI: The depositions 6 occurred ten days before -- approximately ten 7 days before the order when Microsoft's motion 8 was pending. 9 THE COURT: Anything else? 10 MR. TUGGY: May I speak to that very 11 briefly? 12 THE COURT: Sure. 13 MR. GRALEWSKI: I hope I'm correct 14 with that. 15 MR. TUGGY: In the course of the 16 deposition, as we can see if we went into the 17 line-by-line analysis, Microsoft preceded its 18 questions with in your capacity as a reseller. 19 These individuals were -- their 20 business was to work with their customers to 21 build computer systems for them, and Microsoft 22 was asking them in their capacity not as class 23 members and users, but in their capacity as 24 resellers, people who as a business put 25 together computer systems for their customers. 4193 1 The questions that are at issue. 2 This was, again as I mentioned, all 3 argued before the Special Master. The Special 4 Master had ruled in Microsoft's favor, and 5 apparently this is now an appeal of the Special 6 Master's ruling based on the argument 7 Mr. Gralewski just made. 8 Even though you don't have before you 9 Mr. Neuhaus' letter, all the argumentation that 10 was before the Special Master, it was just 11 thrown in now. 12 Microsoft respectfully requests the 13 Special Master's ruling in its favor on this 14 issue be affirmed. 15 THE COURT: You want that done -- both 16 parties want this issue done before you present 17 the evidence in opening or -- 18 MR. TULCHIN: Yes, Your Honor. 19 I mean, I had intended to refer to the 20 deposition testimony of at least one of these 21 two resellers in my opening and to play a 22 portion of it. Not any portion where there was 23 some question about a finding of fact. I 24 promise you that we are not intending to play 25 anything -- 4194 1 THE COURT: I just wanted to know if 2 you wanted me to decide all the appeal issues 3 now prior to your opening. 4 MR. TULCHIN: On this issue of these 5 two resellers, Your Honor, I guess it's the 6 Plaintiffs who want you to do that to try to 7 block me. So I guess what I'm saying is yes. 8 And, Your Honor, as long as I have the 9 floor, I do apologize for interrupting the 10 Court. I'm sorry. It wasn't intentional. 11 Part of this is frustration on my part about 12 these same agreements, which, you know, we're 13 struggling with. 14 THE COURT: Plaintiffs? 15 MR. GRALEWSKI: Let me -- allow me to 16 respond to the potential problem with 17 Mr. Tulchin saying that he doesn't intend to 18 refer to questions that deal with the findings 19 of fact. 20 On direct when Mr. Chapman is 21 questioning, for instance, Mr. Erickson, he 22 asks him a question like, for example, 23 Mr. Erickson, do you believe Microsoft has 24 stifled innovation? 25 And Mr. Erickson responds, I think 4195 1 Microsoft has made innovation possible, and 2 then goes on and on and talks about the basis 3 for his answer. 4 Now, in that snippet, okay, the jury 5 is not going to see any reference to any 6 finding of fact. But, of course, that question 7 and that answer directly undermines and attacks 8 in this instance Finding of Fact 412, which I 9 don't have the text right in front of me, but 10 it is directly on point with the issue of 11 innovation. 12 So if Mr. Tulchin is willing to forego 13 putting snippets on the screen that deal with 14 the issues of choice, there's another finding 15 of fact, for example, that says that consumers 16 did not have meaningful choice; that Linux was 17 not a viable option. 18 But yet Mr. Erickson is asked do you 19 think that consumers have choice, and he says, 20 oh, of course, they have all kinds of choices. 21 They could use Linux. I know somebody that 22 uses UNIX. They can go buy an Apple program. 23 So these questions don't directly talk 24 about the findings of fact, but they do seem to 25 undercut it. 4196 1 MR. TULCHIN: Your Honor, what's 2 missing there, if I may, is any reference to 3 the time period. 4 The findings of fact, as we all know, 5 go from July of '95 to June of '99. 6 The questions that were asked of 7 Mr. Erickson were in the present tense. 8 And I'm sure the Plaintiffs agree that 9 it's open to Microsoft to contest issues in 10 this case pertaining to a time period outside 11 the period that the findings of fact applied 12 to. 13 And so -- and I think that's what's 14 missing from Mr. Gralewski's point there. 15 MR. TUGGY: If I may add, Mr. Erickson 16 and Mr. Lowan did not become resellers until 17 after the year 2000, and that's clear in the 18 prior testimony designation. 19 MR. GRALEWSKI: Your Honor, I'm very 20 happy that Mr. Tulchin has brought up the 21 absence of a time period. That is really what 22 this is all about. 23 Now, we're not going to say that 24 there's collateral estoppel with respect to XP, 25 but just, for example, there are times that 4197 1 Mr. Chapman confines his questions to XP, and 2 then there are times when that restriction is 3 blown wide open. 4 For example, one question is -- this 5 is Mr. Chapman -- do you have a view as to 6 whether the Microsoft operating systems 7 software that you acquire for resale, whether 8 it's gotten better or whether it stayed the 9 same or whether it's gotten worse? 10 He answers that question. 11 And then the next question is even 12 more telling. The question simply is: As a 13 reseller of Microsoft's software, do you 14 believe that Microsoft has stifled innovation? 15 I mean, this directly contradicts the 16 findings of fact on innovation, and there's no 17 restriction on -- this is just with respect to 18 post-2002 or post-2000 or just with respect to 19 XP. 20 The question is: As a reseller of 21 Microsoft's software, do you believe that 22 Microsoft has stifled innovation? 23 That cannot go on the screen, Your 24 Honor. 25 MR. TUGGY: Your Honor, as I mentioned 4198 1 in the argument I just made, these individuals 2 are not resellers until after the year 2000. 3 They're being asked in connection with 4 your reselling activity, did Microsoft's 5 products improve? Were they stable during -- 6 you know, during this period, did Microsoft 7 stifle innovation? 8 Those are not matters that are covered 9 by the findings of fact. The findings of fact 10 do not have prospective application. Their 11 application is to time period at issue in the 12 DOJ case, and Microsoft cannot be precluded 13 from offering evidence of what occurred 14 thereafter. 15 Plaintiffs in their opening made many 16 references to evidence as to which Microsoft 17 has arguments why it ought not to be -- why 18 that evidence has been taken out of context or 19 not properly used, and the Plaintiffs are 20 really at this point making argument about the 21 evidence rather than whether the evidence is 22 accurate and not misleading. The evidence is 23 not misleading. 24 THE COURT: So what portion do you 25 want to put up in regard to that? 4199 1 MR. TULCHIN: I'd have to find it in 2 my outline, Your Honor. 3 I don't intend to address it -- I 4 believe today it won't come up. It comes up 5 later in the outline. 6 Again, I mean, in some ways the 7 Plaintiffs are arguing not about admissibility, 8 but about the weight of this testimony and 9 whether or not they have testimony that 10 counters anything that occurred over the last 11 six years. 12 But if it's -- if the Court wants me 13 to, I will at an appropriate time, maybe over 14 lunch, try to get the pages and lines that I've 15 proposed to play and provide that to the other 16 side and to the Court. 17 THE COURT: I thought -- I had the 18 impression this was something you were going to 19 bring up today, but it's not going to be today? 20 MR. TULCHIN: No, Your Honor, it's in 21 my outline a little bit later, and I'm quite 22 sure I won't reach it today. 23 THE COURT: You just need to get an 24 answer on the waiver argument and all that 25 today on the hearsay? 4200 1 MR. GRALEWSKI: I'm sorry, Your Honor? 2 THE COURT: You just need an answer on 3 the hearsay and the waiver argument right now? 4 MR. GRALEWSKI: The hearsay would moot 5 everything. If Your Honor finds against the 6 Plaintiffs with respect to hearsay, we would 7 still have the relevance on collateral estoppel 8 objections. 9 THE COURT: I've got you. So you're 10 looking for an answer on that right now? 11 MR. GRALEWSKI: That would -- 12 THE COURT: That's fine. I'm ready to 13 do that if that's what you want me to answer. 14 MR. TUGGY: If I may say, in the event 15 the Court were to allow Plaintiffs to instate a 16 hearsay objection at this point, my request 17 respectfully is that we again be permitted to 18 add these witnesses as live witnesses; we be 19 permitted to contact Mr. Erickson, 20 notwithstanding the fact that he's a class 21 member; and that third, we still be permitted 22 in opening to use the testimony because it's 23 what we expect them to testify about. 24 THE COURT: Anything else on this 25 issue? 4201 1 MR. GRALEWSKI: Plaintiffs would have 2 no objection to their adding the two witnesses 3 to their witness list after the fact. 4 We would have an objection, Your 5 Honor, to contacting class members or showing 6 testimony. 7 THE COURT: Very well. Anything else? 8 MR. TUGGY: Nothing further. 9 THE COURT: The Court finds that 10 pursuant to the prior orders of the Court and 11 the Special Master order that the hearsay 12 objection has been waived. 13 When do you want to go through it? 14 This afternoon or tomorrow, or what? 15 MR. TUGGY: This afternoon, Your 16 Honor. 17 THE COURT: We have Mr. Reece coming 18 this afternoon, too. So we have to take that 19 up first, I think. 20 MR. TUGGY: Perhaps 3 o'clock. 21 THE COURT: Okay. 22 MR. GRALEWSKI: Your Honor, there's 23 one other opening issue. 24 THE COURT: Go ahead. 25 MR. GRALEWSKI: We don't have to argue 4202 1 it now. 2 I made clear with Mr. Tuggy that our 3 only interest is having it argued before 4 Mr. Tulchin refers to this testimony, if indeed 5 he will. 6 And that relates to certain testimony 7 by Apple's former president and CEO, John 8 Sculley, and a couple pages of testimony from 9 Willard Peterson, a former WordPerfect 10 executive. 11 And again I know that it's 8:39. 12 Plaintiffs only request is that we 13 have an opportunity to be heard before the 14 testimony is used. 15 MR. TULCHIN: Your Honor, again, this 16 is very, very, very late. 17 The Plaintiffs knew in March 2004 when 18 I referred to this same testimony in my opening 19 in Minnesota and played it to the jury in 20 Minnesota, that Microsoft might very well wish 21 to refer to the testimony of Mr. Sculley who 22 was at one point the CEO of Apple, and of 23 Mr. Peterson, who was, I think, executive vice 24 president of WordPerfect, but he was the person 25 in charge of the WordPerfect product. 4203 1 They've known all this time that it 2 was going to be played probably in my opening 3 here. And I just want to do my opening. 4 To bring this up in the middle of the 5 opening this way, rather than having it 6 adjudicated long ago, is just an effort to 7 disrupt. 8 And Mr. Tuggy will correct me if I'm 9 wrong, but I do believe, did we do this with 10 the Special Master? We did. I thought we did. 11 They did object to the testimony of 12 Peterson and of Sculley during the Special 13 Master process, and the Special Master ruled on 14 all their objections. 15 And my intent is to comply with those 16 rulings. That is, I will only play things that 17 the Special Master said were admissible. 18 MR. GRALEWSKI: Your Honor, the 19 Plaintiffs, as the Defendants do, have the 20 right to appeal. No one's going to contest 21 that. 22 The Special Master ruled on -- we're 23 only talking four designations. 24 The Special Master ruled on those on 25 November 28. November 28. I alerted Mr. Tuggy 4204 1 on December 4 that we intended to appeal those 2 rulings. 3 I mean, we should be permitted to 4 raise the issue. 5 THE COURT: When do you plan on 6 playing that? Is that today? 7 MR. TULCHIN: It could well be, Your 8 Honor. I'd have to check my outline. If it's 9 today, it certainly won't be before lunch. 10 THE COURT: Okay. 11 MR. TULCHIN: But, Your Honor, I just 12 again -- I hear what Mr. Gralewski is saying. 13 We've gotten along very well with him, 14 and I don't want to be difficult about this, 15 but, yes, the Special Master ruled on November 16 28, and they knew that openings were starting 17 on December 1st, as they did, and one would 18 think that Mr. Gralewski would have raised this 19 appeal before the middle of my opening, or 20 maybe not the middle, but during the portion of 21 these proceedings when I'm giving my opening 22 statement. 23 I have this all ready to go, and I do 24 think in some part this is an effort to disrupt 25 us. 4205 1 THE COURT: How big a portion is it? 2 MR. GRALEWSKI: It's very small, Your 3 Honor. 4 And I just want to be clear, I'm not 5 -- I am not intending to interrupt Mr. Tulchin. 6 And to prove that, I told his colleagues, 7 Mr. Chapman and Mr. Tuggy, five or six days 8 before he was to start that we intended to 9 appeal Sculley and Peterson. 10 I think Your Honor knows that we're 11 entitled to do that, and we can deal with the 12 issue in 15 to 20 minutes. 13 THE COURT: All right. 14 Well, we'll take it up after lunch, 15 then, before the jury comes back in. I'll just 16 -- if it's that small, we should be able to 17 take care of it. 18 MR. GRALEWSKI: I should be able to 19 confine my arguments to about five or ten 20 minutes total. 21 THE COURT: Mr. Tuggy, can you be 22 ready to do that? 23 MR. TUGGY: Yes, Your Honor. 24 THE COURT: We'll take it up then. 25 Anything else? 4206 1 MR. WILLIAMS: Your Honor, there is 2 one additional matter that I'd like to bring to 3 the Court's attention, and this does directly 4 affect the opening, and it's something that we 5 need to get resolved before the opening 6 recommences. 7 If I could approach, Your Honor? 8 THE COURT: Yes. 9 MR. WILLIAMS: Your Honor, this is a 10 motion to prevent Microsoft from continuing to 11 challenge with its statements to the jury 12 certain of this Court's preliminary 13 instructions to the jury, as well as the 14 Court's conclusions of law and the matters that 15 were resolved in the government case, 16 specifically the determination that Microsoft 17 did monopolize the operating systems market in 18 the years 19 July 15, 1995, to June 24, 1999. 20 So far Your Honor has had the parties 21 tow the line very closely and not deviating 22 from the findings from the preliminary 23 instructions and the conclusions of law. And 24 this is often, I would point out, at 25 Microsoft's urging. 4207 1 But yesterday, within the first half 2 hour of his opening, Mr. Tulchin made several 3 remarks that were prejudicial to the 4 Plaintiffs. 5 Your Honor is, I'm sure -- I'm sure 6 Your Honor will recall that the jury was 7 instructed that it has been established that 8 Microsoft had a monopoly in the operating 9 systems market from July 15, 1995, through 10 June 24, 1999. 11 This is in Instruction No. 13, which 12 is appended to our motion, Your Honor. 13 And Your Honor also instructed the 14 jury that this monopoly was the result of 15 anticompetitive conduct and not by competition 16 on the price or quality of Microsoft's 17 products. 18 That was also in Instruction 13. 19 Furthermore, Conclusion of Law No. 4 20 sets forth the 12 different types of 21 anticompetitive conduct that caused Microsoft 22 to hold this monopoly. 23 Nevertheless, yesterday, in his 24 opening, Mr. Tulchin told the jury that 25 Microsoft's high market share in all three 4208 1 markets, including the operating systems 2 market, was the result of pro-competitive 3 conduct, using his words, good products at low 4 prices, beating the competition fair and square 5 on the merits. Clearly statements that 6 contradict Preliminary Instruction No. 13 and 7 Conclusion of Law No. 4. 8 And he didn't stop there, Your Honor. 9 He went on to say, the evidence will show there 10 was no anticompetitive conduct. A flat 11 statement that directly contradicts the 12 preliminary instructions. 13 And the full extent of the remarks are 14 set forth in our motion, Your Honor. 15 But he went on and said, but even 16 still, that conduct, even if you believe it 17 took place, and we'll show you does not explain 18 Microsoft's high market share. 19 And when we come to the key issue of 20 causation, causation, we'll talk a lot about 21 it, the question of how you explain Microsoft's 22 success. Is it true good business decisions, 23 good products, low prices? Or is it because 24 Plaintiffs say of anticompetitive conduct? 25 When we get to that, you will see 4209 1 Microsoft's success in every case is 2 attributable to pro-competitive conduct. 3 Now, Your Honor, these blanket 4 generalizations like this which sweep in 5 products for which we have collateral estoppel 6 and blurs that distinction is prejudicial to 7 the Plaintiffs because it contradicts the 8 specific findings and the specific 9 determinations that were made in the government 10 case. 11 And, Your Honor, if I may approach one 12 more time, we do set forth in our motion the 13 pertinent parts of the D. C. Circuit's 14 decision. I've flagged it. I will give a copy 15 to opposing counsel, as well. 16 But if you turn to the tabbed page, 17 Your Honor, the Court of Appeals for the D. C. 18 Circuit said, in short, causation affords 19 Microsoft no defense to liability for its 20 unlawful actions undertaken to maintain its 21 monopoly in the operating systems market. 22 So clearly these statements that were 23 made to the jury yesterday contradict that, 24 contradict the preliminary instructions and the 25 conclusion of law that I've recounted for Your 4210 1 Honor. 2 So in order to cure this, we need 3 several things. 4 First, we need you to order Microsoft 5 to stop contending that its so-called success 6 in the operating systems market for the time 7 period in question from July 15, 1995, to 8 June 24, 1999, was a result of anything but 9 anticompetitive conduct because that is what 10 Preliminary Instruction No. 13 says. 11 We further request that you order them 12 to stop contending that there was no 13 anticompetitive conduct. 14 Again, Preliminary Instruction No. 13 15 and Conclusion of Law 4 both make it very clear 16 that there was anticompetitive conduct. 17 Furthermore, Your Honor, we ask that 18 you instruct the jury that Microsoft must 19 accept that from July 15, 1994, to June 24, 20 1999, that Microsoft illegally monopolized the 21 operating systems market through 22 anticompetitive conduct and that Microsoft's 23 pro-competitive justifications were considered 24 and rejected in the government case, and that 25 this was affirmed on appeal and that Microsoft 4211 1 is not allowed to challenge this. 2 Because, Your Honor, we all know, and 3 Microsoft has made this point repeatedly, that 4 the jury is going to get confused if the 5 parties deviate from these very clear 6 instructions, and that's what's happened. 7 Now, Microsoft can argue about 8 applications. They can argue about and present 9 evidence on and dispute whether they 10 monopolized the market outside the time period 11 in question, but if they're going to bring in 12 pro-competitive justifications, they told us 13 yesterday that that's one of the central 14 defenses that they intend to put on in this 15 case, they have to make the distinction between 16 the products in the markets that are open to 17 dispute and those that are not. 18 If they keep blurring the line, the 19 jury is going to get totally confused. 20 Thank you, Your Honor. 21 THE COURT: Thank you. Response? 22 MR. TULCHIN: Yes, sir. 23 Your Honor, a couple of very important 24 points, if I may. 25 First, and most obviously, the 4212 1 Plaintiffs made no objection to any of these 2 statements when they were made. They made no 3 objection yesterday at all. 4 And I think Microsoft was held 5 properly to the standard during Plaintiffs' 6 opening of objecting at the time, or as the 7 Court at one point during the opening 8 mentioned, that if an objection is not made, 9 then it's waived. 10 On the merits, Your Honor, this 11 comment that I made to the jury yesterday is 12 exactly in line with the Court's instruction, 13 and it's interesting that Mr. Williams is the 14 person making this argument. 15 First, Your Honor, the high market 16 share that Microsoft had is not the result of 17 any anticompetitive conduct that was litigated 18 or determined in the government case. 19 As the Court knows, Microsoft's market 20 share in the operating system market, its 21 success, was above 90 percent before the time 22 period of the government case at all. 23 And so when I said to the jury that 24 it's Microsoft's contention that its high 25 market shares in all three of these markets has 4213 1 not been the result of anticompetitive conduct, 2 of course, that is our contention and it's open 3 for us to say so. 4 As the Court will also remember, 5 Professor Noll, the Plaintiffs' own expert, has 6 testified, and I think we've mentioned this in 7 the past, that Microsoft had a monopoly in the 8 1980s -- he said going back to '86 and '87. 9 That's as far back as he looked. 10 And that Professor Noll has said that 11 he makes no contention that Microsoft did 12 anything unlawful to obtain its monopoly in the 13 operating system market back at that time. 14 So the point here made to the jury is 15 exactly consistent with that and with the 16 findings of the government case. 17 Preliminary Instruction No. 13, this 18 Court's instruction, says you are further 19 instructed that Microsoft maintained that 20 monopoly power during the period of July '95 to 21 June '99. 22 And I do intend to go back to that in 23 my opening and tell the jury that, but our 24 contention that our success -- our high market 25 share is not attributable to any 4214 1 anticompetitive conduct is exactly what 2 Mr. Williams himself told the Court in October. 3 And I think Your Honor will remember 4 that on October 16 and October 17, both, 5 Mr. Williams made this exact distinction, and 6 he said that Plaintiffs do not contend in this 7 case that Microsoft acquired its monopoly in 8 operating systems unlawfully. 9 Indeed, Your Honor, the evidence will 10 be, I think from both sides, that Microsoft's 11 market share before the time period of the 12 government case was over 90 percent. And again 13 even going back to the mid to late '80s, it was 14 very, very high. 15 So I don't -- I think my comments are 16 consistent with what is open to us to contest; 17 that is, that high market shares were the 18 result of pro-competitive versus 19 anticompetitive conduct. 20 During this introduction, which is 21 only partially reproduced in the brief that I 22 was just handed, the Plaintiffs selectively 23 quote from a couple of comments. 24 I will talk about the government case, 25 and I think I will tell them exactly the sort 4215 1 of thing that is completely in accord with the 2 government -- with the Court's instructions 3 about the government case. 4 These comments, I believe, are in 5 accord, as well. 6 Furthermore, Your Honor, you will 7 recall that during the Plaintiffs' opening, 8 Ms. Conlin went behind the findings and pulled 9 out documents that were directly underlying 10 particular findings to argue about willfulness. 11 She said that the same evidence there goes to 12 willfulness. 13 Now, I don't think anything I said 14 here directly pertains to willfulness, but I 15 just wanted to make the point that, of course, 16 the Court ruled on that, and its ruling applies 17 to both sides. That one can go to facts 18 underlying the government case if the party 19 citing those facts believes that those same 20 facts go to the question of willfulness. 21 So, Your Honor, the monopoly existed 22 before '95. Mr. Williams himself has made the 23 same point to this Court that I was making to 24 the jury yesterday. 25 Thank you, Your Honor. 4216 1 MR. WILLIAMS: Your Honor, if I could 2 briefly respond. 3 I believe I stated in my argument 4 today that we agree that Microsoft is free to 5 dispute its conduct outside the time period for 6 which we've been given collateral estoppel. 7 There's no question about that. 8 The problem, Your Honor, is that in 9 making these remarks he didn't make that 10 distinction. 11 You can see from the parts that we 12 quoted, and, yes, they are excerpted because 13 they're the relevant parts. They've done that. 14 That's been the practice. 15 There's no requirement that we put 16 Mr. Tulchin's -- the transcript of his entire 17 argument in front of Your Honor to make this 18 point. 19 The context is clear. It's clear what 20 he said. And it's clear that it's incorrect. 21 Because for a large part of the time 22 period in question in this case, they have been 23 collaterally estopped by Your Honor's 24 instructions and by Your Honor's rulings from 25 taking these positions. 4217 1 It doesn't matter, Your Honor, whether 2 the monopoly position was an acquisition or a 3 maintenance. It doesn't matter. It's 4 monopolization, Your Honor. That's what -- but 5 that is exactly what they are contradicting 6 with this statement. 7 I mean, Your Honor, he said the 8 evidence will show there was no anticompetitive 9 conduct. It's a flat statement. It doesn't 10 make the distinctions that he so eloquently 11 made for Your Honor today. He didn't make 12 those distinctions to the jury. 13 That's what we're complaining about. 14 That's the problem. 15 When he said, the question of how you 16 explain Microsoft's success, is it through good 17 business decisions, good products, low prices? 18 Well, Your Honor, for the time period 19 July 15, 1994, to June 24, 1999, we know the 20 answer. The jury's been given the answer. 21 The answer is it was a result of 22 anticompetitive conduct. 23 It's not just what Plaintiffs say; 24 it's what Your Honor has said. And that's the 25 problem. That's what's confusing to the jury. 4218 1 That's why we need Your Honor to give 2 the admonition that we're asking for and to 3 correct what is clearly a misstatement to the 4 jury. 5 THE COURT: Anything else? 6 MR. TULCHIN: Just very briefly, Your 7 Honor. 8 It's not a misstatement. I didn't 9 refer specifically to any particular time 10 period. What I said was that it's our 11 contention that Microsoft's success is the 12 result of pro-competitive conduct, it's high 13 market shares. 14 And again I think it's open for us to 15 contend that. I haven't contradicted the 16 Court's instruction, and I'm going to go and 17 remind the jury of it when I get there, that's 18 contained in Instruction No. 13 when talking 19 about that time period. 20 THE COURT: Well, this one sentence 21 says the evidence will show there was no 22 anticompetitive conduct. 23 MR. TULCHIN: Yes. And that was in 24 the context, Your Honor, of saying that it's 25 Microsoft's -- that it's Microsoft's contention 4219 1 that its success, its high market share did not 2 result from anticompetitive conduct. 3 Taking that one sentence out of that 4 context I think removes the meaning that I gave 5 to it. 6 Your Honor, this was just handed to me 7 now. This objection was not made yesterday at 8 any time. 9 But I do believe that in the context 10 of what I was describing to the jury, this was 11 completely accurate. 12 MR. WILLIAMS: Your Honor, if I could 13 point out again, the first part of the remarks 14 say in all three of these markets. 15 And just prior to that time Mr. 16 Tulchin had put up on the screen pricing charts 17 showing the three markets at issue, one of 18 which included the operating systems market, 19 and it had the years in question, the 1994 to 20 1999 time period. 21 So it's clearly something that's 22 misleading. 23 Furthermore, Your Honor, in the second 24 part that we quoted, the last sentence says, 25 again, Microsoft's success in every case. 4220 1 He's making these broad statements. 2 They're unlimited. And they need to be 3 limited, Your Honor. That's the problem. 4 We do not intend to challenge their 5 right to dispute the matters that we don't have 6 collateral estoppel on. 7 The problem is, we have to make the 8 distinctions, they have to make the 9 distinctions, Your Honor. And we ask that you 10 hold them to the same standard that we have 11 been held to. 12 And then one final matter, Your Honor, 13 in terms of objections and objections at the 14 time. 15 I'm sure the Court can recall times 16 when they came forward the next day after 17 remarks were made and raised objections. 18 I recall one instance in particular 19 when Ms. Nelles challenged some statements that 20 Ms. Conlin made about the so-called fairness of 21 Microsoft's prices. 22 Everybody's trying to do their best 23 here to make the objections, to try to be as 24 nondisrputive as possible, Your Honor. 25 I'm sure we can do a better job on 4221 1 objecting, and I'm sure we'll try, but this is 2 a matter that we're raising now, and we want it 3 addressed before Mr. Tulchin commences his 4 opening again. 5 THE COURT: Anything else? 6 MR. TULCHIN: No, sir. 7 MR. WILLIAMS: Not from us, Your 8 Honor. 9 THE COURT: The statements appear to 10 be broad covering the time period of the 11 collaterally estopped time, and that needs to 12 be distinguished. 13 I'm not going to allow evidence to 14 contradict the collaterally estopped findings 15 of fact, so the Defendant's opening remarks and 16 evidence must be for the proper time period as 17 shown by the collaterally estopped facts. 18 No evidence or argument will be 19 allowed challenging the collaterally estopped 20 findings of fact at all. So you got to make a 21 distinction. It's too broad. 22 MR. WILLIAMS: Thank you, Your Honor. 23 THE COURT: Anything else? 24 MR. WILLIAMS: Not from us, Your 25 Honor. 4222 1 THE COURT: Anything else? 2 MR. TUGGY: Nothing further. 3 THE COURT: Get the jury, please. 4 (The following record was made in the 5 presence of the jury.) 6 THE COURT: Ladies and Gentlemen of 7 the jury, I apologize for the 35-minute delay. 8 There was an issue that the Court needed to 9 take up with only the parties and the 10 attorneys. 11 Once again, do not blame any of the 12 parties or the attorneys. If you want to blame 13 someone, blame me. 14 Mr. Tulchin will continue with his 15 opening. 16 MR. TULCHIN: Thank you, Your Honor. 17 Good morning everybody. 18 Shall I proceed, Your Honor? 19 THE COURT: One juror wanted to use a 20 spiral notebook. Is that all right? 21 MR. TULCHIN: Sure. 22 THE COURT: Instead of the paper I 23 provided. My paper wasn't good enough. 24 MR. TULCHIN: Ladies and gentlemen, 25 good morning. 4223 1 When we broke for the day yesterday, I 2 think I had begun to tell you a little bit 3 about the founding of Microsoft in the 1970s. 4 I showed you this old slide rule from 5 back then, which people used to use to make 6 scientific calculations. 7 And we were talking a little bit about 8 the work that Microsoft and Bill Gates was 9 doing at the time to improve the basic 10 programming language. 11 And as I think you heard from the 12 Plaintiffs, in 1980, IBM, having heard about 13 Microsoft's success with the improvements it 14 made to the basic programming language, came to 15 Mr. Gates, to Microsoft, to ask it to write an 16 operating system for the very first IBM PC, the 17 first IBM personal computer, which wound up 18 coming out on the market in 1981. 19 Of course, this was a different 20 assignment, if you will, than what Microsoft 21 had done before. This was now a task of 22 providing IBM with an operating system. 23 And I know you may remember the 24 Plaintiffs mentioning during their opening 25 towards the outset that before IBM went to 4224 1 Microsoft, IBM actually went to Digital 2 Research, DRI, to Gary Kildall at DRI. But as 3 the Plaintiffs told you, DRI did not get the 4 deal done. 5 And you might say that this was the 6 biggest opportunity at the very beginning of 7 the age of personal computers. And you know 8 who did get the deal done. It was Microsoft. 9 No one in this case will say that 10 there's anything anticompetitive or in any way 11 wrongful about Microsoft landing that first 12 deal with IBM. 13 It was a great opportunity. One might 14 attribute it to good work or hard work by Bill 15 Gates up until then. 16 One might attribute it to luck. Luck, 17 of course, is always an element in life. 18 But whatever it was, it was a great 19 opportunity for Bill Gates. DRI missed the 20 boat there. 21 And I'll tell you a little bit later 22 about another very important boat that DRI 23 missed later. 24 I think you may already know that was 25 the move, the really very important move in the 4225 1 marketplace years later from character-based 2 computing to the GUI, the graphical user 3 interface. 4 We'll come to that story a little bit 5 later. 6 I want to take just a moment now when 7 we're talking now about 1980 and '81 and the 8 contract that Microsoft landed with IBM to just 9 tell you a little bit about what an operating 10 system is. 11 It is, in effect, like the brain and 12 the central nervous system of a computer. 13 In the same way that your brain gives 14 instructions to parts of the body, an operating 15 system gives instructions to internal parts of 16 the computer, things like the microprocessor, 17 which is very often made by Intel, or the hard 18 drive or the memory. 19 It also gives instructions, the 20 operating system does, to peripheral devices 21 that are plugged into the PC; printers, 22 monitors, modems. 23 And it gives instructions to what 24 we've all called applications, other software 25 programs that are installed on the computer. 4226 1 Those can include things like word 2 processors, spreadsheets. You've heard a lot 3 about those and you will. Applications can be 4 computer games. They can be E-mail type 5 programs, et cetera. 6 And the operating system besides 7 giving instructions to these other devices also 8 make sure that everything works together well; 9 that the components the peripheral devices and 10 the applications function well together. 11 And just one simple example. 12 We're all used to these days clicking 13 on the print button to print a document, for 14 example, or even a piece of E-mail. And the 15 operating system when you click on the print 16 button will convey that instruction from the 17 mouse or the keyboard to the microprocessor and 18 then to the word processing program, and the 19 information is then delivered from the word 20 processing program to the printer. 21 And all of this takes place in a 22 second or less. It's very often very, very, 23 very prompt. But it really is a complex series 24 of tasks which requires interaction among all 25 these devices. And it's, obviously, something 4227 1 that we all take for granted as very simple to 2 do. 3 But that's just one of the many, many 4 things that an operating system will do. 5 Now, going back to 1980 to the history 6 of Microsoft. 7 Designing an operating system for the 8 initial -- the very first IBM PC, was really a 9 very much more difficult and complex task than 10 writing programming languages, which is what 11 Microsoft had done before. 12 And at the time Mr. Gates received the 13 request from IBM to work on an operating 14 system, Microsoft went out and licensed what 15 was called QDOS, quick and dirty operating 16 system, from a company called Seattle Computer. 17 And Microsoft, Mr. Gates and others, 18 worked around the clock, really, to improve and 19 alter QDOS and adapt it specifically to the 20 personal computer that IBM was planning to come 21 out with. 22 In fact, although the Plaintiffs said 23 in their opening that MS-DOS, the operating 24 system that Microsoft eventually licensed to 25 IBM, that MS-DOS was nothing more than a clone 4228 1 of DRI's CP/M operating system, and Microsoft 2 thinks that the evidence will show otherwise 3 that a man named Tim Paterson of Seattle 4 Computing had hugely improved CP/M from what 5 DRI had originally used. 6 When Microsoft entered into the deal 7 with IBM, I think it's worth noting that -- if 8 we can see the next slide, please. 9 This is 111. 10 This is the original 1980 contract 11 between IBM and Microsoft. 12 And one of the things that Mr. Gates 13 managed to do in this contract, which turned 14 out to be an awfully good decision, was to 15 license MS-DOS to IBM on a nonexclusive basis. 16 It's Section 8 of the contract. 17 And what that means, of course, is 18 that Microsoft retained, if you will, ownership 19 of MS-DOS. 20 It didn't sell the whole program to 21 IBM. IBM could use it in all of its PCs. But 22 Microsoft retained the right to license the 23 same operating system to other manufacturers of 24 personal computers. 25 And as it turned out, and as many of 4229 1 you may already know, shortly after IBM came 2 out with its PC in 1981, a number of other 3 companies, we've called them OEMs, original 4 equipment manufacturers, a number of other 5 companies came out with their own PCs for a 6 number of years in the 1980s. They were often 7 referred to as IBM clones. 8 And Microsoft very often successfully 9 was able to license the same operating system, 10 MS-DOS, to these other computer manufacturers; 11 companies like Hewlett-Packard, Compaq, and 12 Tandy that came out with PCs in the early 13 1980s. 14 So if you will, right at the dawn of 15 the personal computer age, what's occurring is 16 that MS-DOS, the Microsoft operating system, is 17 quickly becoming the standard operating system 18 used on almost a great majority of the PCs that 19 are sold in this country and elsewhere. 20 And what happens, of course, then, is 21 that as MS-DOS becomes very popular and used by 22 many OEMs on their PCs, including IBM, of 23 course, software developers, people who develop 24 applications, and we've often referred to those 25 as ISVs -- I know all this lingo can be a 4230 1 little confusing. 2 ISV stands for independent software 3 vendors. And sometimes you'll hear that phrase 4 used; ISVs. Other times you'll see people 5 refer to these writers of applications as 6 developers, software developers. Sometimes 7 independent developers. 8 But those companies and individuals 9 who are writing applications back in the early 10 '80s start writing them to the Microsoft 11 operating system, MS-DOS. Because MS-DOS is on 12 so many of the PCs, people making applications 13 are writing them so that they work with -- they 14 fit well with Microsoft's operating system. 15 And, of course, Microsoft right then 16 at the -- in the early '80s does the same 17 thing. 18 It starts getting into the business of 19 writing applications, software applications, 20 that will run on Microsoft's own operating 21 system. That includes word processing 22 software, Microsoft Word, and spreadsheets, 23 Microsoft Excel. 24 As we'll get to before long, and I 25 think you may already have picked up on by now, 4231 1 during much of the 1980s, WordPerfect was the 2 number one word processing program, and Lotus 3 1-2-3 was the number one spreadsheet. 4 And you also, I think, understand that 5 MS-DOS at the time was a character-based 6 operating system. 7 I'll show you a little bit more about 8 this later on. 9 But with a character-based system, the 10 user was required to type a precise line of 11 text onto the keyboard so that the operating 12 system would execute your command. 13 What it required was for users in a 14 sense to memorize what they had to type into 15 the computer. And looking back on it now, I 16 think many people would say that it was not a 17 very user friendly system. 18 Mr. Gates right from the outset -- and 19 Mr. Gates will be here and testify in this 20 case, sitting right in that chair. 21 Mr. Gates right from the outset, the 22 early, early years of Microsoft, had a vision. 23 It sounds like something that anyone 24 could have thought of when you think of it now 25 because we take for granted what the world is 4232 1 like. 2 But he had a vision even back then of 3 a computer on every desk and a computer in 4 every home. 5 And the character-based system being 6 somewhat, let's say, unfriendly to the users 7 was not the system that was going to accomplish 8 that. 9 And you will recall that the 10 Plaintiffs in their opening talked about GUIs, 11 the graphical user interface, as revolutionary. 12 We'll come to the first one that Apple 13 came out with. And we agreed with that. The 14 GUIs were revolutionary. 15 The people making slide rules ten 16 years before or more, perhaps didn't realize 17 what was happening to them when companies like 18 Texas Instruments came out with hand-held 19 calculators that could do complex scientific 20 calculations. 21 The companies making slide rules may 22 not have seen that their days were numbered and 23 that the slide rule business was sort of going 24 the way of the horse and buggy business. 25 And in some ways perhaps, and we think 4233 1 the evidence will show in this case, that those 2 that were writing and making applications to 3 character-based systems did not see the power 4 of the GUIs. They did not see what was coming 5 next. 6 In fact, Microsoft and Bill Gates 7 began working on a GUI, a graphical user 8 interface, in 1983, after seeing similar ideas 9 from Xerox. 10 And the Plaintiffs talked about the 11 Xerox Parc GUI. 12 You didn't hear then that Xerox 13 started selling computers with a GUI very early 14 on, but the Xerox computers cost in the 15 neighborhood of $16,000 each, and you had to 16 actually ordinarily get three or more of them 17 to accomplish anything. 18 So it was a very, very expensive 19 system. 20 But Apple, of course, came out early 21 on with the GUI, and when Bill Gates saw it, he 22 was very excited about the possible 23 implications for this dream he had as a young, 24 young man of a -- of computer on every desktop 25 and in every home. 4234 1 In fact -- and this is Defendant's 2 Exhibit 1348. 3 You'll see a letter that Mr. Gates 4 wrote in 1985, July 8, 1985, to John Sculley. 5 John Sculley was then the chief executive 6 officer, the boss at Apple Computer. 7 And, of course, these are two separate 8 companies. 9 But Mr. Gates was so excited about the 10 idea of a GUI, that he urged Mr. Sculley, Apple 11 Computer, to make Apple's GUI a standard by 12 licensing it to other OEMs, other companies 13 that made PCs. 14 Mr. Gates writes in 1985, Apple must 15 make Macintosh a standard, but no personal 16 computer company, not even IBM, can create a 17 standard without independent support. 18 It's an interesting -- some 19 interesting ideas very early on in this Exhibit 20 1348. 21 The first idea, of course, is that -- 22 and let's see another part of this same 23 exhibit. 24 In a memorandum, which is attached to 25 the letter, there's a recommendation to Apple 4235 1 from Microsoft that Apple should license 2 Macintosh technology to three to five 3 significant manufacturers -- and the evidence 4 will show that that's referring to 5 manufacturers of computers -- for the 6 development of Mac compatibles. Sort of 7 similar to the IBM compatible that we talked 8 about. 9 And what Mr. Gates is recommending to 10 Apple is that Apple start licensing its 11 operating system and its GUI to other 12 companies. 13 Now, Apple never took that advice. 14 Apple retained a closed system where the Apple 15 Macintosh operating system is used only on 16 Apple computers. They did not take Mr. Gates' 17 advice. 18 But again what Mr. Gates was urging 19 here as part of this vision he had early on, 20 was to get the GUI out very broadly by asking 21 Apple to license its operating system to other 22 companies. 23 And going back to the previous excerpt 24 from the letter, you'll remember -- if we can 25 go back just one, Chris. 4236 1 You'll remember Mr. Gates saying no 2 personal computer company, not even IBM, can 3 create a standard without independent support, 4 support from ISVs, independent software 5 vendors. 6 And this idea that in order to be 7 successful with an operating system, you need 8 support from lots of other companies who will 9 write applications to your operating system is 10 an idea that we will come back to. It's an 11 important concept for this whole case. 12 So again, Mr. Gates early on had this 13 belief in the future of computers being the 14 GUI, the graphical user interface. 15 He had a belief that the GUI would 16 make computers easier to use for all of us and 17 that the GUI was the future of personal 18 computing. 19 Not everyone at the time shared that 20 belief. 21 Now, Windows 1.0, the first Microsoft 22 GUI, was released in the same year, 1985, later 23 on, November 1985. 24 And as the Plaintiffs mentioned, that 25 product was not very successful. 4237 1 Microsoft worked on a new version 2 called Windows 2.0, and that was released two 3 years later, in November 1987. 4 Again, Windows 2.0 was not very 5 successful. 6 At the time, we're speaking of 1987, 7 GUIs required more computing power and memory 8 than most computers had available at that time. 9 So in comparing Windows 2.0, for 10 instance, in 1987 with a character-based system 11 such as MS-DOS, Windows applications would run 12 more slowly on Windows than applications 13 written to MS-DOS would run at the time because 14 the GUIs required this extra amount of power 15 and memory. 16 So Windows 1.0 and 2.0 did not do very 17 well. As it turned out, they were not what 18 customers wanted -- then wanted. 19 Windows 3.0 was released in May 1990, 20 as we discussed yesterday, and Windows 3.0 -- 21 this is a picture of what the screen then 22 looked like. 23 You can see it's a graphical user 24 interface. 25 It looks a little outmoded to us in 4238 1 2006, but this is what it looked like in 1990. 2 And rather than giving commands, you 3 could just click on an icon and bring up an 4 application. 5 You could bring up, for instance, 6 something called Pack Rat, which I believe was 7 a game. 8 You could bring up Microsoft Word for 9 Windows on this particular computer. You could 10 bring up other accessories such as a calendar, 11 a calculator, et cetera. 12 And it's Windows 3.0 that the 13 Plaintiffs own expert, Professor Noll, referred 14 to as a revolutionary technological leap. 15 Now, what happened? What explains 16 this leap, and what became the huge popularity 17 of Windows 3.0? 18 First, by 1990, gradually over time, 19 PCs were becoming more and more powerful, 20 meaning that the average PC that was available 21 on the market was better able to run GUI 22 programs to run them faster than was previously 23 possible. 24 Second, and maybe more importantly, 25 there was an important innovation, invention in 4239 1 July 1988. 2 This was a discovery by a young 3 Microsoft programmer named David Weiss. I 4 believe at the time he was 22 or 23 years old 5 and just recently out of college. 6 And this David Weiss of Microsoft 7 discovered a way to allow Windows, the Windows 8 GUI, to access much more computer memory than 9 had been previously been possible. 10 And this was done by running Windows 11 in something called protected mode. You heard 12 about DPMI from the Plaintiffs. That stands 13 for DOS protected mode interface. So this is 14 all related. And we'll come to DPMI. 15 So the protected mode discovery that 16 David Weiss made in 1988 allowed Windows to run 17 much faster than was previously possible. 18 And the third thing to be said about 19 the success of Windows 3.0 is that Microsoft 20 had been working for years to develop its own 21 set of applications that ran on top of a GUI. 22 First, the Macintosh beginning in '85 23 and then Windows. 24 And these applications, Word and 25 Excel, worked very, very well written for 4240 1 Windows. Worked very, very well with Windows. 2 So by the time Windows 3.0 was 3 released in May of 1990, consumers had 4 available to it -- to them, excuse me, 5 applications that ran very well on Windows, 6 important applications like a word processor 7 and a spreadsheet. 8 I'm going to tell you a little bit 9 more about this story of Microsoft's efforts to 10 write applications for the GUI and the contrast 11 between what Microsoft was doing in those 12 years, around '85 to '90, and what other major 13 ISVs were doing. 14 They were stuck in that old sort of 15 slide rule world, the character-based world, 16 and missed this huge change in the market for 17 PCs and operating systems. 18 The Windows 3.0 operating system, 19 along with applications that were available for 20 it, not just from Microsoft, but applications 21 written by other ISVs as well, really changed 22 the nature of computing. Windows made 23 computers easier to use. 24 Prior to this time, for some people 25 using computers was almost like dealing with a 4241 1 foreign language. 2 And Windows 3.0, I think it's fair to 3 say, in many ways for many people provided a 4 way to translate, if you will, from that 5 strange foreign language of the character-based 6 system into something that all of us are 7 familiar with using. 8 Of course, Microsoft's innovation 9 didn't stop with David Weiss's invention of 10 protected mode, or discovery I should say. It 11 didn't stop with the release of Windows 3.0. 12 Each version, the evidence will show, 13 of Windows, each release of Windows was better 14 and better. 15 The product got faster. It had more 16 features, better features, and was always 17 priced at about the same. 18 And you saw a little bit of that 19 yesterday, and we'll talk more about prices 20 later on in my opening statement. 21 And with Windows 95, which, of course, 22 came out five years after Windows 3.0, 23 Microsoft for the first time integrated the 24 Windows GUI into DOS to form one integrated 25 operating system that made the operating system 4242 1 easier to install and easier to use. 2 And the evidence will be that in 3 August 1995, when Windows 95 was first 4 available for sale, people all around the 5 country stood in line outside retail stores 6 waiting for the store to open so that they 7 could get a copy of Windows 95. 8 That's how exciting it was at the 9 time, this new operating system. 10 And even after Windows 95, of course, 11 Microsoft will show you that it continued to 12 add features and functionality to its operating 13 systems, making them better and better. 14 And indeed over time, I think we can 15 say, as did the Plaintiffs, that Windows became 16 ubiquitous. Windows is pretty much everywhere. 17 Let's look at a little bit of a time 18 line. 19 This has a whole bunch of the 20 information that we've already talked about 21 going back to 1975 when Bill Gates and Paul 22 Allen improved the basic programming language 23 for the Altair 8800. 24 You see reference to the formal 25 partnership that Mr. Gates and Mr. Allen 4243 1 entered into in 1977. 2 In 1980 there's the contract with IBM. 3 And I know you heard the Plaintiffs, I think 4 last Friday morning, refer to the strength of 5 IBM. 6 In 1982, and I think I said to you a 7 moment ago that it was in the early '80s -- I 8 had forgotten the exact year. But in 1982, the 9 evidence will show Microsoft begins developing 10 applications for the Apple Macintosh operating 11 system. That is, writing applications to a 12 GUI, a graphical system, that was very early on 13 compared to other software developers. 14 And 1983, Microsoft begins doing work 15 on Windows 1.0, which eventually came out in 16 1985. You'll see November 1985. 17 In 1989 and 1990, this time chart has 18 reference to the release of other products Word 19 for Windows, the first version of Word written 20 to Windows, and then May, 1990, the 21 revolutionary technological leap of Windows 22 3.0. 23 So with that early history in mind, 24 and I'm going to come back and continue with 25 the history of the company later, but I want to 4244 1 stop here and go back and talk a little bit 2 about what this case is about and what the 3 issues are in this case. 4 As you know, and I will talk not too 5 long from now, a little bit later, I know it 6 will be today, a little bit more about the 7 government case. 8 And the government case -- in the 9 government case the courts determined that 10 Microsoft, in the operating system market, had 11 engaged in anticompetitive conduct for the 12 period you've heard about, July of 1995, 13 July 15 to June 24, 1999. 14 Of course, that is an accepted fact in 15 this case. 16 But we think the evidence will show 17 you that Microsoft's market share even in the 18 operating system business was very high even 19 before 1995. 20 In fact, we think that the Plaintiffs' 21 experts will agree with us that even in the mid 22 to late 1980s, Microsoft had a very high market 23 share in the operating system market, a market 24 share of 85 or 90 percent. 25 So that market share, we think the 4245 1 evidence will show; in fact, I think Professor 2 Noll will testify, that Microsoft's very high 3 market share in operating systems was not -- he 4 will not contend, Professor Noll even will not 5 contend that was not the result of 6 anticompetitive conduct. That Microsoft's high 7 market share, call it a monopoly share, was the 8 result of good business practices and the 9 original contract with IBM. 10 Some might say that Bill Gates was 11 just lucky that IBM came knocking on his door 12 in 1980. 13 Other people would say that DRI maybe 14 should have gotten that first contract when IBM 15 went to see Gary Kildall before going to see 16 Bill Gates. 17 But whether it was luck or whether it 18 was just Mr. Kildall's error in not signing a 19 deal, it was Microsoft, Bill Gates, that got 20 that contract. 21 And, of course, you know well that the 22 principal claim, the most important claim in 23 the case that the Plaintiffs make is that 24 Microsoft overcharged members of the class in 25 Iowa for its operating systems software and 4246 1 also for word processing software, Word, 2 spreadsheet software, that's Excel, and the 3 office suite, which Microsoft calls Office. 4 And the issues for you to decide with 5 respect to this claim for an overcharge -- 6 remember there's also this claim for security 7 vulnerabilities that I'll talk about a little 8 later -- the issues for you to decide is did 9 Microsoft engage in anticompetitive conduct? 10 And then there's causation, as you 11 know from the instructions. Did any 12 anticompetitive conduct result in overcharges? 13 And three, did Plaintiffs in Iowa 14 suffer actual injury? Did they pay prices 15 higher than they would have paid in the absence 16 of any anticompetitive conduct? 17 You know that for question number one, 18 you are bound to accept, and Microsoft accepts, 19 that the courts ruled in Washington, D.C., that 20 Microsoft did in the operating system market 21 only engage i