Oracle Itanium Filing: "Weekend At Bernie'ss

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ATTORNEYS AT LAW

SAN FRANCISCO

ORACLE CORPORATION’S CASE MANAGEMENT CONFERENCE STATEMENT

CASE NO. 1-11-CV-203163

LATHAM & WATKINS LLP Daniel M. Wall (Bar No. 102580) Alfred C. Pfeiffer, Jr. (Bar No. 120965) Sadik Huseny (Bar No. 224659)

505 Montgomery Street, Suite 2000 San Francisco, California 94111-6538 Telephone: (415) 391-0600 Facsimile: (415) 395-8095 ORACLE CORPORATION Dorian Daley (SBN 129049) Deborah K. Miller (SBN 095527) 500 Oracle Parkway M/S 5op7 Redwood Shores, California 94065 Telephone: (650) 506-5200 Facsimile: (650) 506-7114 Attorneys for Defendant and Cross-Complainant ORACLE CORPORATION

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF SANTA CLARA

HEWLETT-PACKARD COMPANY, Plaintiff, v. ORACLE CORPORATION, Defendant.

ORACLE CORPORATION, Cross-Complainant, v. HEWLETT-PACKARD COMPANY, Cross-Defendant.

CASE NO. 1-11-CV-203163 Action Filed: June 15, 2011 Trial Date: February 27, 2012 ORACLE’S CASE MANAGEMENT CONFERENCE STATEMENT Date: November 22, 2011 Time: 10:00 AM Dept. 1C Assigned for all Purposes to The Honorable James P. Kleinberg

PUBLIC REDACTED VERSION

E-FILEDNov 18, 2011 3:29 PM

David H. YamasakiChief Executive Officer/Clerk

Superior Court of CA, County of Santa ClaraCase #1-11-CV-203163 Filing #G-36984

By S. Gancayco, Deputy

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CASE NO. 1-11-CV-203163

Defendant Oracle Corporation (“Oracle”) hereby submits this Case Management

Conference Statement for the Second Case Management Conference (“CMC”), scheduled for

November 22, 2011.

Oracle is filing this single-party Case Management Statement because HP refused to sign

on to a Joint Case Management Statement unless Oracle removed its own explanation for the

filing of its forthcoming Amended Cross-Complaint (set forth in Section I, below). HP’s

position is curious, at best, because a mere three days ago, HP took Oracle to task for not telling

the Court the basis for its Amended Cross-Complaint, only providing “mysterious” hints. Oracle

believes it necessary to preview the basis for the additional causes of action that Oracle will

bring in the amended pleading because those new claims contribute to the need for a new trial

date in this matter.

I. INTRODUCTION

Oracle asked for this Case Management Conference, over HP’s objection, to request that

the Court move the existing trial date. It did so for two reasons.

First, discovery in this matter has proven to be broader, more complex and more time

consuming than either party anticipated. Despite both parties’ intense and best efforts, it has

now become apparent that the discovery necessitated by the parties’ claims simply cannot be

completed in advance of the present trial date of February 27, 2012. HP claims that it can meet

the trial date notwithstanding the current discovery status and schedule, but this is completely

unrealistic. The parties are barely halfway through their initial document productions (having

produced hundreds of thousands of documents, with hundreds of thousands more to come), and

the scope of discovery remains contested and unsettled. The full scope of discovery will not

even be finalized for weeks or months to come. No depositions of any employees have been

conducted, and none will be able to be conducted effectively until weeks from now (particularly

given the approaching holiday season). Indeed, Oracle is the only party to have noticed any

depositions so far, and even for those—the two individuals who directly negotiated the alleged

“contractual obligation” underlying the bulk of HP’s claims in this case—HP has objected, and

the parties are simultaneously filing IDC briefs on that very issue. No third party depositions

E-FILED: Nov 18, 2011 3:29 PM, Superior Court of CA, County of Santa Clara, Case #1-11-CV-203163 Filing #G-36984

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SAN FRANCISCO


CASE NO. 1-11-CV-203163

have been scheduled so far, and discovery of Intel in particular is proving to be contentious. To

put all of this in context, the date the parties were required to have filed motions for summary

judgment given the February 27 trial date passed yesterday, before deposition discovery had

even begun.

Second, and critically, what discovery Oracle has received to date makes clear that the

scope of this case needs to expand in order for Oracle to fairly defend itself and present all

claims at once.

At the heart of this is something that—at great effort—HP has kept secret from the marketplace

for years but which in its filing two days ago objecting to this very CMC, HP has at last revealed:

“HP and Intel have a contractual commitment that Itanium will continue through the next two

generations of microprocessors….” HP’s Response to Oracle’s Notice of Intention To File

Cross-Complaint at 4:6-7, filed Nov. 16, 2011. As innocuous as HP tries to make that sound, the

market has never been told that Itanium lives on only because HP is paying Intel to keep it going.

To the contrary, HP has made countless statements to the marketplace to the effect that Intel’s

commitment to Itanium is its own, based on Intel’s normal calculus of investing in

microprocessors that it believes have a future. That simply is not true with respect to Itanium.

Intel’s independent business judgment would have killed off Itanium years ago. But HP has

secretly contracted with Intel to keep churning out Itaniums so that HP can maintain the

appearance that a dead microprocessor is still alive. The whole thing is a remake of Weekend at

Bernie’s.

Because HP has claimed that Oracle has only made “mysterious hints” about its

forthcoming cross-claims, we take a moment to describe them in detail.

Oracle intends to add claims under California Business & Profession Code § 17500 and

the federal Lanham Act (over which California courts have concurrent jurisdiction) for falsely

representing material facts concerning the Itanium microprocessor family and in particular

Intel’s support for it. HP made these false statements—with the specific intent of taking server

business away from Oracle Sun and indeed attaining a duopoly in the high-end server business

with IBM. The strategy was also intended to permit HP to continue to reap lucrative revenues


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CASE NO. 1-11-CV-203163

from the locked-in Itanium customer base using HP’s HP-UX operating system on Itanium

servers. HP sued Oracle after Oracle announced it would stop developing new software for the

HP-UX operating system not because Oracle had said anything false about the lifespan of

Itanium—to the contrary, Oracle was so right that HP speculated that

—but rather because Oracle unknowingly foiled HP’s plan to

deceive its own customers into believing that HP’s Integrity line of Itanium servers is still within

its natural lifecycle.

The business foundation for HP’s plan was succinctly stated in an internal HP document

as follows: If that sounds

like an amplified version of something Oracle has itself stated in public, and in its filings in this

case to date, it is. That is exactly the point Oracle has been making and it is exactly those sorts

of statements that led HP to file this very lawsuit against Oracle and to file several complaints

with competition authorities in certain select jurisdictions. But in this and dozens of other,

similar statements, HP has recognized internally, for years,

:

First, a large portion of HP’s overall profit comes from the service and support of

computer servers that run the HP-UX operating system. HP achieves a far lower “attach rate”

(meaning it gets few service contracts) on the operating systems like Linux that are prevalent on

servers running x86 microprocessors. Thus when customers migrate to new platforms, HP loses

the service contract. This is a multi-billion dollar problem for HP.

Second, HP’s documents acknowledge that Itanium is

key to its

remaining competitive with IBM and Oracle Sun. HP determined that

. The basic business

dynamic, as HP put it in May 2010, is that


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These factors led HP to craft a top-secret plan to create a false perception that Itanium

still had a future. HP’s own words are once again succinct and damning: it

This began at least as early as

, when the documents reveal that

:

HP knew it had to override Intel’s ordinary business calculus in order for Itanium to

continue, and in , HP therefore

If that were all that happened, it would be an expensive business strategy and no more.

But HP’s documents reveal its awareness that the plan would fail if HP’s customers

understood that Itanium’s lifespan was extended artificially. HP understands that the future

prospects of IT products drive customer purchasing decisions. A buyer who knew that Intel saw

no future for Itanium, and was only continuing to invest in the line pursuant to a contractual

obligation, would devalue the future prospects of Itanium servers and be less inclined to buy.

Under those circumstances, the was as good as thrown away. And therefore HP

decided to keep the Intel agreement secret,

Numerous HP documents explicitly discuss the value of secrecy,


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CASE NO. 1-11-CV-203163

Since HP has lied to its customers about “long-term Itanium roadmaps,” and at the

very least it has concealed the highly material fact that Itanium exists today only because

The fraud continues

.

Oracle Sun has been a victim of this, and according to HP’s documents an intended

victim. So why is Oracle the defendant in this case? We now understand it is because Oracle’s

decision to stop making new versions of its software for the Itanium system was devastating to

HP because it undermined the rationale for paying Intel to sustain

the illusion of a long-term future for Itanium. Oracle had told too much of the truth. As HP’s

own documents show,

. HP’s documents further show that Oracle’s March announcements were absolutely

true—and that HP knew it. HP was struggling to keep the lie together,


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CASE NO. 1-11-CV-203163

. And yet HP proceeded to file this baseless lawsuit, in

bad faith, against Oracle anyway—knowing that Oracle had told the truth. Oracle’s Amended

Cross-Complaint—and the expanded discovery that Oracle is now clearly permitted to undertake

to reveal the full scope of HP’s wrongful conduct—will make all this explicit.

II. DISCOVERY AND TRIAL SCHEDULE

A. Statement Regarding Discovery Status

In an effort to provide the Court enough detail to understand the scope and issues

implicated, the parties jointly summarize the status of discovery to date, including the parties’

disputes and good faith efforts to address them without the Court’s intervention, and the parties’

plan for completing the necessary tasks in as timely a fashion as possible.

Following several weeks of negotiation, in late September the parties reached agreement

on a set of discovery protocols.1 Under these protocols, each party must produce documents

from 30 custodians identified by the opposing party based on a set of 45 broad search terms. In

addition, each party must produce as appropriate additional responsive noncustodial documents,

on a rolling basis. The custodial productions and search terms are subject to amendment in the

event a party in good faith believes that additional terms or custodians become necessary based

on the evolution of the case and/or prior discovery. So far, the parties have made a few

amendments that have narrowed the scope of the search terms.

The discovery protocols existing to date set forth a schedule requiring productions almost

every week ending in early January. As of November 17, 2011 the parties have exchanged over

1 The parties simultaneously negotiated a Stipulated Protective Order which the Court signed

and entered on October 18, 2011.


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CASE NO. 1-11-CV-203163

424,000 documents for 15 custodians each, in addition to noncustodial documents. Under the

discovery protocol, another 7 productions are scheduled with the parties’ last exchange of

documents from the initial 60 custodians due on January 6, 2012.

In addition to the productions scheduled under the discovery protocol, disputes as to

relevancy, a subsequent order by the Court, and the parties’ agreements have also required

separate productions. For instance, HP produced documents responsive to certain Oracle

requests yesterday, November 17 pursuant to the Court’s October 28, 2011 Order. Similarly, HP

has provided supplemental productions related to third party documents – specifically of

documents HP represented are subject to non-disclosure agreements with Intel. HP states that it

has now produced all of these documents from the relevant HP custodians and continues to

produce, on a rolling basis, Intel-HP agreements regarding Itanium.2

Several additional discovery disputes have further slowed down the discovery process.

For example, after Oracle responded to HP’s First Set of Special Interrogatories, HP raised

numerous concerns regarding Oracle’s responses. The parties met and conferred for several

hours on October 21, 2011 and again on November 11, 2011 to discuss these issues. As a result,

HP provided further specificity and Oracle has agreed to conduct further investigation and

provide a superseding response.

Another dispute involves each party’s second set of requests for production of

documents. The parties met and conferred for approximately five hours on November 3, 2011

and November 11, 2011 to discuss the dozens of objections asserted in each of their discovery

responses. Notwithstanding these efforts, numerous disputes remain outstanding. The parties

have agreed to exchange position statements next week regarding the outstanding issues, and will

meet and confer again. If the parties are unable to resolve these disputes, one or both will likely

file a motion to compel, necessitating briefing, a formal hearing and further extending the

discovery process. After these discovery disputes are resolved, the parties will likely need to re-

2


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review custodial documents to locate and produce responsive material not captured on first

review. Both parties will seek to minimize the delay in any such supplemental productions. The

parties anticipate that additional productions resulting from resolution of these discovery

disputes will continue through early 2012.

After the parties concluded that it made sense to agree upon a plan to take depositions in

an orderly and timely manner (similar to the document production protocol that the parties were

able to amicably agree upon), HP transmitted such a proposal to Oracle on November 4, 2011.

The parties are presently negotiating that agreement, and intend to commence the deposition

process as soon as possible subject to timely completion of the document productions. Oracle

anticipates propounding additional discovery requests subsequent to filing its Amended Cross-

Complaint on December 2, 2011.

B. Oracle’s Proposed Trial Schedule

Oracle requested this case management conference when it became apparent that the trial

date presently set for February 27, 2012, cannot be achieved. An extension would be necessary

even if the parties’ claims remained the same, because discovery is beyond the scale anticipated.

But an extension is even more necessary because discovery has disclosed facts that compel new

claims based on HP’s scheme to defraud consumers. Oracle intends to amend its cross complaint

to address this new information, and propound significant additional discovery requests to

account for these new claims. Given these realities, it is surely in the best interest of the parties

and the Court to agree upon a new trial schedule that can accommodate the rigors of discovery in

this case while causing the least future disruption to the Court’s busy calendar. As a result,

Oracle proposed a modest and manifestly reasonable extension of the trial date until June 2012,

which would provide the parties with enough time to resolve all discovery disputes and

adequately prepare their respective cases for trial. The earliest realistic trial date would be

sometime in late April 2012—if there are no more delays. Oracle could agree to that, but under

no circumstances can Oracle agree to HP’s proposal to proceed to trial in February or March

2012.


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CASE NO. 1-11-CV-203163

1. The Status and Scope of Discovery Required for the Currently Pled Claims and Cross Claims Make a February 27 Trial Date Impossible

It is apparent to any objective observer that the status of the parties’ document

productions to date make it impossible to be properly prepared for trial by February 2012. The

unavoidable need for supplemental productions due to resolution of discovery disputes and other

issues has also foiled the parties’ original intent of completing early (and complete) production

for some custodians to enable staggered depositions. As a result, the parties will not be able to

undertake the majority of the party and third-party depositions until the first quarter of 2012, at

the earliest. Also in the first quarter of 2012, it will be necessary to allow for the exchange of

expert reports and subsequent expert depositions, as well as to build in a schedule for any

motions for summary judgment. Accordingly, despite the parties’ best efforts, the February 27,

2012 trial date is simply not feasible in light of the demands of such large, complex discovery, a

possibility this Court previously recognized. See Hearing Transcript, Motion to Seal/CMC

(Aug. 12, 2011) at 18 (“it may well turn out that that is too soon a date”). Even if the parties are

able to complete the productions scheduled under the protocols and immediately resolve all

discovery disputes and produce documents there from, it is increasingly likely that both parties

will request supplemental productions from additional custodians and/or amended search terms.

The parties anticipate that these requests would be served by mid-January 2012 with the hope

that all document productions would be complete by early March 2012. And none of this even

accounts for the significant third party discovery necessitated by this case, particularly from

Intel. Although Oracle has made great efforts to negotiate with Intel it is clear that the process of

third-party discovery cannot be accomplished by the end of this year and likely not before the

currently schedule February trial date.

The effect of all this, of course, is not borne simply by the parties or third parties, such as

Intel. Proceeding with a February trial date will cause great inefficiencies and undue burden on

the Court and the entire judicial process.


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2. Oracle’s Amended Cross-Complaint Will Require Expanded Discovery

Even if the present trial date were achievable given the status of discovery today, Oracle

will file an Amended Cross-Complaint on December 2, 2012, per the Court’s recent order. Once

filed, Oracle’s new claims will necessitate significant additional discovery; where this case

previously focused on a single contractual provision negotiated over three weeks, it will now

encompass HP’s efforts to keep from its customers, Oracle and the market an agreement

Oracle’s new claims will involve an additional measure of discovery that the parties have

not previously anticipated or undertaken.

* * *

HP has stated that it is amenable to an extension of 30-45 days, and absolutely no longer.

This simply will not work. Such a limited extension will not address the real difficulties facing

the parties and the Court in adequately preparing this case for trial. The parties and Court must

have adequate time to address their ongoing discovery disputes, and must have adequate time to

appropriately tee up the various issues for demurrer and summary judgment so as to maximize

judicial efficiency. Moreover, the parties must have time to adequately address the potential

deficiencies in each others’ productions and, at a minimum, process the additional material they

are each producing, in order for the parties to effectively and efficiently engage in the critical

depositions needed in this case prior to trial.

To be clear: Oracle wants to move this case forward to trial as quickly as humanly

possible. But it is in no one’s interest—now that the scope of discovery is expanding, and still

unresolved—to set a new trial date that will not appropriately allow the parties their due process

rights to fully prosecute and defend the claims in this action.

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CASE NO. 1-11-CV-203163

III. ADDITIONAL PARTIES

None at this time.

IV. SUMMARY OF DISCOVERY TO DATE

See above.

V. APPLICABILITY OF ARBITRATION CLAUSE

There is no applicable arbitration clause in the agreements at issue.

VI. RELATED PENDING LITIGATION

There is no related litigation pending in other courts.

VII. SETTLEMENT/ADR

The parties are open to any suggestions or instructions that the Court may have regarding

settlement discussions or alternative dispute resolution mechanisms. Given the early posture of

the case, however, the parties are of the view that meaningful settlement discussions may not be

possible at this time.

VIII. SERVICE LIST

For Plaintiff Hewlett Packard Company For Defendant Oracle Corporation

GIBSON, DUNN & CRUTCHER LLP Robert E. Cooper, [email protected] Samuel Liversidge, [email protected] 333 South Grand Avenue Los Angeles, California 90071-3197 Telephone: (213) 229-7000 Facsimile: (213) 229-7520

LATHAM & WATKINS LLP Daniel M. Wall, [email protected] Alfred C. Pfeiffer, Jr., [email protected] Sadik Huseny, [email protected] 505 Montgomery Street, Suite 2000 San Francisco, California 94111-6538 Telephone: (415) 391-0600 Facsimile: (415) 395-8095

BARTLIT BECK HERMAN PALENCHAR & SCOTT LLP Philip S. Beck, [email protected] Mark Ferguson, [email protected] 54 West Hubbard Street, Suite 3000 Chicago, Illinois 60654 Telephone: (312) 494-4400 Facsimile: (312) 494-4440

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ATTORNEYS AT LAW

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CASE NO. 1-11-CV-203163

Dated: November 18, 2011 LATHAM & WATKINS LLP

By: /s/ Daniel M. Wall Daniel M. Wall Attorneys for ORACLE CORPORATION


Oracle Itanium Filing: "Weekend At Bernie'ss

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