Oracle Itanium Filing: "Weekend at Bernie'ss

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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
E-FILED
Nov 18, 2011 3:29 PM
David H. Yamasaki
Chief Executive Officer/Clerk Superior Court of CA, County of Santa Clara Case #1-11-CV-203163 Filing #G-36984 By S. Gancayco, Deputy
SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SANTA CLARA HEWLETT-PACKARD COMPANY, Plaintiff, v. ORACLE CORPORATION, Defendant. ORACLES CASE MANAGEMENT CONFERENCE STATEMENT Date: Time: Dept. November 22, 2011 10:00 AM 1C CASE NO. 1-11-CV-203163 Action Filed: Trial Date: June 15, 2011 February 27, 2012
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ATTORNEYS AT LAW SAN FRANCISCO
ORACLE CORPORATION, Cross-Complainant,
Assigned for all Purposes to The Honorable James P. Kleinberg
HEWLETT-PACKARD COMPANY, Cross-Defendant. PUBLIC REDACTED VERSION
ORACLE CORPORATIONS CASE MANAGEMENT CONFERENCE STATEMENT CASE NO. 1-11-CV-203163
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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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). HPs 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 HPs 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 thosethe two individuals who directly negotiated the alleged contractual obligation underlying the bulk of HPs claims in this caseHP has objected, and the parties are simultaneously filing IDC briefs on that very issue. No third party depositions 1
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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 thatat great effortHP 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. HPs Response to Oracles 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 Intels commitment to Itanium is its own, based on Intels normal calculus of investing in microprocessors that it believes have a future. That simply is not true with respect to Itanium. Intels 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 Bernies. 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 Intels support for it. HP made these false statementswith 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 2
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from the locked-in Itanium customer base using HPs 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 Itaniumto the contrary, Oracle was so right that HP speculated that but rather because Oracle unknowingly foiled HPs plan to deceive its own customers into believing that HPs Integrity line of Itanium servers is still within its natural lifecycle. The business foundation for HPs 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 HPs 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, HPs 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. HPs 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 Intels 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 HPs documents reveal its awareness that the plan would fail if HPs customers
understood that Itaniums 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 decided to keep the Intel agreement secret, was as good as thrown away. And therefore HP
Numerous HP documents explicitly discuss the value of secrecy, 4

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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 HPs documents an intended victim. So why is Oracle the defendant in this case? We now understand it is because Oracles 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 HPs own documents show,
. HPs documents further show that Oracles March announcements were absolutely trueand that HP knew it. HP was struggling to keep the lie together,
1 2 3 4 5 6 . And yet HP proceeded to file this baseless lawsuit, in 7 bad faith, against Oracle anywayknowing that Oracle had told the truth. Oracles Amended 8 Cross-Complaintand the expanded discovery that Oracle is now clearly permitted to undertake 9 to reveal the full scope of HPs wrongful conductwill make all this explicit. 10 11 A. 12 In an effort to provide the Court enough detail to understand the scope and issues 13 implicated, the parties jointly summarize the status of discovery to date, including the parties 14 disputes and good faith efforts to address them without the Courts intervention, and the parties 15 plan for completing the necessary tasks in as timely a fashion as possible. 16 Following several weeks of negotiation, in late September the parties reached agreement 17 18 from 30 custodians identified by the opposing party based on a set of 45 broad search terms. In 19 addition, each party must produce as appropriate additional responsive noncustodial documents, 20 on a rolling basis. The custodial productions and search terms are subject to amendment in the 21 event a party in good faith believes that additional terms or custodians become necessary based 22 on the evolution of the case and/or prior discovery. So far, the parties have made a few 23 amendments that have narrowed the scope of the search terms. 24 The discovery protocols existing to date set forth a schedule requiring productions almost 25 every week ending in early January. As of November 17, 2011 the parties have exchanged over 26 27 28
II.
DISCOVERY AND TRIAL SCHEDULE
Statement Regarding Discovery Status
on a set of discovery protocols.1 Under these protocols, each party must produce documents
The parties simultaneously negotiated a Stipulated Protective Order which the Court signed and entered on October 18, 2011. 6
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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 Courts 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 HPs First Set of Special Interrogatories, HP raised numerous concerns regarding Oracles 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 partys 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 re2
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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 CrossComplaint on December 2, 2011. B. Oracles 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 HPs 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 Courts 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 2012if there are no more delays. Oracle could agree to that, but under no circumstances can Oracle agree to HPs proposal to proceed to trial in February or March 2012.
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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.
Oracles 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 Courts recent order. Once filed, Oracles 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 HPs efforts to keep from its customers, Oracle and the market an agreement
Oracles 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 ones interestnow that the scope of discovery is expanding, and still unresolvedto 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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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 /// See above. V. IV. None at this time.
III.
ADDITIONAL PARTIES
SUMMARY OF DISCOVERY TO DATE
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
GIBSON, DUNN & CRUTCHER LLP Robert E. Cooper, rcooper@gibsondunn.com Samuel Liversidge, sliversidge@gibsondunn.com 333 South Grand Avenue Los Angeles, California 90071-3197 Telephone: (213) 229-7000 Facsimile: (213) 229-7520 BARTLIT BECK HERMAN PALENCHAR & SCOTT LLP Philip S. Beck, philip.beck@bartlit-beck.com Mark Ferguson, mark.ferguson@bartlit-beck.com 54 West Hubbard Street, Suite 3000 Chicago, Illinois 60654 Telephone: (312) 494-4400 Facsimile: (312) 494-4440
For Defendant Oracle Corporation

LATHAM & WATKINS LLP Daniel M. Wall, Dan.Wall@lw.com Alfred C. Pfeiffer, Jr., Al.Pfeiffer@lw.com Sadik Huseny, Sadik.Huseny@lw.com 505 Montgomery Street, Suite 2000 San Francisco, California 94111-6538 Telephone: (415) 391-0600 Facsimile: (415) 395-8095
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Dated: November 18, 2011
LATHAM & WATKINS LLP
By:
/s/ Daniel M. Wall Daniel M. Wall Attorneys for ORACLE CORPORATION
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Oracle Itanium Filing: "Weekend at Bernie'ss

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ORACLE CORPORATION, Cross-Complainant,

Assigned for all Purposes to The Honorable James P. Kleinberg

HEWLETT-PACKARD COMPANY, Cross-Defendant. PUBLIC REDACTED VERSION

ORACLE CORPORATIONS CASE MANAGEMENT CONFERENCE STATEMENT CASE NO. 1-11-CV-203163

. The basic business dynamic, as HP put it in May 2010, is that

ORACLE CORPORATIONS CASE MANAGEMENT CONFERENCE STATEMENT CASE NO. 1-11-CV-203163

Numerous HP documents explicitly discuss the value of secrecy, 4

ORACLE CORPORATIONS CASE MANAGEMENT CONFERENCE STATEMENT CASE NO. 1-11-CV-203163

DISCOVERY AND TRIAL SCHEDULE

Statement Regarding Discovery Status

ORACLE CORPORATIONS CASE MANAGEMENT CONFERENCE STATEMENT CASE NO. 1-11-CV-203163

ORACLE CORPORATIONS CASE MANAGEMENT CONFERENCE STATEMENT CASE NO. 1-11-CV-203163

ORACLE CORPORATIONS CASE MANAGEMENT CONFERENCE STATEMENT CASE NO. 1-11-CV-203163

Oracles Amended Cross-Complaint Will Require Expanded Discovery

ORACLE CORPORATIONS CASE MANAGEMENT CONFERENCE STATEMENT CASE NO. 1-11-CV-203163

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 /// See above. V. IV. None at this time.

SUMMARY OF DISCOVERY TO DATE

APPLICABILITY OF ARBITRATION CLAUSE

There is no related litigation pending in other courts. VII. SETTLEMENT/ADR

For Defendant Oracle Corporation

ORACLE CORPORATIONS CASE MANAGEMENT CONFERENCE STATEMENT CASE NO. 1-11-CV-203163

Dated: November 18, 2011

LATHAM & WATKINS LLP

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

ORACLE CORPORATIONS CASE MANAGEMENT CONFERENCE STATEMENT CASE NO. 1-11-CV-203163

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