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SUPERIOR COURT, STATE OF CALIFORNIA COUNTY OF SANTA CLARA

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HEWLETT-PACKARD Plaintiff,
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COMPANY,

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ORACLE CORPORATION, Defendant

) ) ) ) ) ) Case No.: 1~11~CV-203163 ) ) PROPOSED STATEMENT OF DECISION ) ) ) ) )

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NOTICE: IN ACCORDANCE WITH §632 OF THE CODE OF CIVIL PROCEDURE AND RULE 3.1590(g), CALIFORNIA RULES OF COURT, THE PARTIES HAVE 15 DAYS TO OBJECT TO THIS PROPOSED DECISION

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Hewlett Packard Company v. Oracle Corporation Superior Court a/California, County a/Santa Clara, Case No. l-11-CV-203163 Proposed Statement 0/ Decision

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I. INTRODUCTION
This case causes the Court to revisit the centuries-old issues of whether a contract exists and, if so, what does it mean. These questions are for the Court to decide, rather than a jury. (Greater Middleton Assn. v. Holmes Lumber Co. (1990) 222 Ca1.App.3d 980, 989-990.) When the Court denied the summary judgment motion brought by Hewlett-Packard Company ("HP") to declare there was indeed a contract with Oracle Corporation ("Oracle") and to further specify what it meant, there were factual issues that required a trial. (Order of May 14,2012 ["MSJ Order"]). For several weeks, the Court heard from business executives, lawyers, and computer engineers from both sides. In making this decision the Court has been guided by established principles such as these: "When a dispute arises over the meaning of contract language, the first question to be decided is whether the language is 'reasonably susceptible' to the interpretation urged by the party. If it is not, the case is over." (Southern Cal. Edison Co. v. Superior Court (1995) 37 Cal.AppAth 839, 847-848, citing Consolidated World Investments, Inc. v. Lido Preferred, Ltd. (1992) 9 Cal.AppAth 373,379). Should the Court decide the language is reasonably susceptible

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to the interpretation urged, the Court moves to the second question: what did the parties intend the language to mean? (Winetv. Price (1992) 4 Cal.AppAth 1159, 1165.) "Whether the contract is reasonably susceptible to a party's interpretation can be determined from the language of the contract itself (United Teachers of Oakland v. Oakland Unified Sch. Dist. (1977) 75 Cal.App.3d 322, 330) or from extrinsic evidence of the parties' intent (Winet v. Price, supra, 4 Cal.AppAth at p. 1165.)" (Southern Cal. Edison, supra, 37 Cal. App. 4th at pp. 847-848).1

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1 This is not the first time a dispute has arisen between two billion-dollar corporations as to whether a contract existed between them. The Court takes judicial notice of the Pennzoil/Texaco litigation of some years ago. In that case a handshake between the key executives became the focal point of the decision concerning the purchase of Getty Oil. (See Texaco v. Pennzoil (1987) 729 S.W.2d 768.)

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II. PROCEDURAL
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BACKGROUND

The bench trial of this case began on May 31,2012 and proceeded to trial through June 26,2012, totaling 12 trial days. Thirty witnesses testified in person or by way of selected deposition excerpts. Over 500 exhibits were introduced into evidence. The parties made detailed opening statements and closing arguments, and utilized the Court's evidence presentation equipment to emphasize evidence and issues as they saw fit. Both sides submitted their versions of statements of decision which the Court has carefully considered in making this ruling. Pursuant to California Rules of Court, rule 3.1590(g), "[a]ny party may, within 15 days after the proposed statement of decision and judgment have been served, serve and file objections to the proposed statement of decision or judgment." Thereafter, the Court shall issue its final decision as to this phase and a case management conference will be scheduled to determine the timing and course of further proceedings. III. FINDINGS OF FACT A. The Period Before the Hurd Lawsuit And Settlement For approximately three decades Oracle ported its database, middleware and key application software to HP's server platforms. It is undisputed that "porting" is the process by which software is made to run on a particular platform. In the context of this case porting is the essential step that enables Oracle software and HP hardware to connect. Throughout this period, HP and Oracle engaged in joint sales activities, with HP selling its hardware and Oracle selling its software, in tandem, to their mutual customers. (Livermore 6/4 pm 39:9-40:7; Ex. 200 at

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The relationship was profitable for both parties. (Livermore 6/4 pm 58:3-5; Fink 6/13 am 73:2575:8.).

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Footnotes refer to trial transcript by date (morning or afternoon), page(s) and line(s).

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In April 2009, Oracle announced that it would acquire Sun Microsystems, a leading computer hardware company. Sun sold Spare servers that competed directly with HP's Itanium servers. (Catz 6119 93:16~19; Livermore 6/4 pm 43 :12~15.) The acquisition was completed in January 2010. (Livermore 6/4 pm 43:2~5.) This was a potential sea change in the relationship between the parties. HP was concerned whether Oracle would continue to offer its software on HP's hardware platforms now that Oracle would be competing with HP in the server market. (Livermore 6/4 pm 43:9~20.) HP had "encouraged" its Itanium customers to use Oracle software and, as a result, approximately 80-90% of them ran Oracle's Database. (Fink 6/13 am 82:3-83:3; Livermore 6/4 pm 24:26-25:6; Donatelli 6114 pm 37:13-23.) Thus, at meetings among HP's and Oracle's senior executives after the
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acquisition, HP sought assurances that Oracle's software would continue

to be offered on HP's platforms (Livermore 6/4 pm 43:21-45:13; Donatelli 6/14 pm 26:2-14.) On February 26,2010, one month after the Sun acquisition was completed, David Donatelli ("Donatelli"), the executive in charge ofHP's enterprise server business, met with Thomas Kurian ("Kmian"), Oracle's most senior software executive, second only to Larry Ellison ("Ellison"). (Donatelli 6/14 pm 26:11-28:16; Kurian 6/20 pm 13:16-24,53:16-54:5.) The

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minutes of that meeting were prepared jointly by Oracle and HP. (Ex. 197; Hicks 6/20 am 52:911; Donatelli 6/14 pm 26:24-28.) They state that Kurian told Donatelli that Oracle remained committed to the HP-Orac1e partnership, and that new versions of Oracle software would continue to be released on HP-UXIItanium at substantially the same time as on Oracle's Solaris/Sparc and IBM's AIXlPower platforms (a practice known as "release parity"). Kurian also told HP that its HP-UXIItanium platforms would continue to enjoy functional parity. (Ex. 197 at 3; Donatelli 6114 pm 29:3-23, 30:1-10; Ex. 90 at 2.) Neither release parity nor functional parity is possible if new versions of a software program are not offered on a given platform. (Donatelli 6/14 pm 29:24-28.)

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Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. l-11-CV-203163 Proposed Statement of Decision

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On April 16, 2010, Oracle's President, Safra Catz ("Catz"), and other senior Oracle executives met with HP Executive Vice President Ann Livermore ("Livermore"), Donatelli, and others from HP. In advance of the meeting, Catz's staff told her that HP wanted to know whether, in view of the Sun acquisition, (1) Oracle would "continue to support a level playing field for timely enablement and optimization of Oracle software" on HP hardware, and (2) whether Oracle would "remain committed to ... supporting our partners['] operating systems . and hardware." (Ex. 81 at 16.) Further, immediately before the meeting, Livermore wrote to Charles Phillips, Oracle's then Co-President, and Catz, and said that what HP learned from Oracle regarding how it intended to partner with HP in light of the Sun acquisition would ''be key to [HP's] continued investments." (Ex. 156 at 1; Livermore 617 am 66:8-67:26.) Thus

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forewarned, Catz told Livermore at the April 16 meeting that "Oracle remains committed to [the] HP Alliance and [toJ ensuring [that] Oracle software [isJ optimized on HP hardware[,J and customer hardware platform choice." (Ex. 81 at 6; Livermore 6/4 pm 48:16-23,615 am 94:2-27; Catz 6/19 82:18-23.) Catz assured HP that Oracle was "committed ... to running Oracle software on HP Infrastructure." 97:3-10; Catz 6119 84:2-6,) In May 2010, HP reported "conflicting messages" from Oracle's sales force suggesting "that Oracle's commitment to HP-UX and HP Integrity is no longer available." (Ex. 199 at 5.) HP asked Oracle for an "updated drawer statement" that could be given to prospective customers "so we can refute these claims" (Id.) Oracle provided the requested letter, which stated, "Oracle is targeting to continue shipping upcoming Oracle infrastructure releases for HP-UX Integrity around the same timeframe as the other strategic UNIXes." (Idat 8.) Oracle provided similar assurances to HP in September 2010. (Ex. 200 at 4; Hicks 6120 am 73:19-74:26 [responding to customer request for a commitment on 12g].) Oracle specifically told HP in September 2010 that it intended to continue to offer new product releases on HP-UXlltanium, and that HP would (Ex. 81 at 1; Livermore 6/4 pm 45:9-47:21,48:5-11,615 am

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continue to have release parity with IBM and Sun. (Ex. 98 at 1; Vella Dep. 44:7-12; Hicks 6/20
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am 54:3-55:27.) B. The Negotiation of the Settlement Agreement Mark Hurd ("Hurd") was HP's CEO from 2005 until August 6, 2010, when he resigned at the request of HP' s Board of Directors. One month later, on September 6, 2010, Oracle announced that Hurd would be joining Oracle as its Co-President, responsible for all marketing and sales activities. (Holston 6/6 am 9:1-13.) Hurd had detailed knowledge ofHP's trade secrets and confidential business information that, if misused, would allow Oracle to compete unfairly with HP. (Livermore 6/4 pm 53 :3-54:11; Holston 6/6 am 9:19-12:5.) The next day, September 7, HP initiated a lawsuit against Hurd in an effort to protect its trade secrets. (Holston

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6/6 am 12:14-13:1; Ex. 255.) The filing of this suit brought this message from Ellison:
"Oracle has long viewed BP as an important partner"

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"By filing this vindictive

lawsuit against Oracle and Mark Hurd, the HP board is acting with utter disregard for that partnership, our joint customers, and their own shareholders and employees. The HP Board is making it virtually impossible for Oracle and HP to continue and work together in the IT marketplace." Oracle Press Release, September 7, 2010, Trial Exhibit 238.3 Then, on September 7, HP's General Counsel, Michael Holston ("Holston"), contacted Oracle's General Counsel, Dorian Daley ("Daley"), and BP's Ann Livermore spoke with Oracle's Safra Catz. In both of these conversations, each side expressed to the other the desire to "get this [lawsuit] behind us" as quickly as possible so as to preserve the relationship that each company valued. (Holston 6/6 am 15:2-8; Daley 6/1827:9-15; Catz 611919:13-25; Livermore

6/4 pm 59: 10-24.) ill an email sent the next morning Daley "emphasize[ d] that we at Oracleincluding Larry [Ellison ]-appreciate that." (Ex. 129; Daley 6/1829:17-28.) the value of the relationship with HP and want to preserve This message was somewhat at odds with Ellison's

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public statement of a few days before. Nevertheless HP and Oracle began the process of resolving their differences, including (but not limited to) limits on Hurd's activities. On September 9 and 10 the parties exchanged terms sheets. (Exs. 131, 133, 146.) In Oracle's first proposed terms sheet Daley said that Oracle's proposal was made "in the spirit of continuing the mutually beneficial business relationship between Oracle and HP." (Ex. 133 at 1.) The proposal contemplated that if the parties were able to reach agreement, there would be a joint public statement referencing the continuation of their partnership, something that Daley had discussed with Holston. (Exs.133 at 2, 551 at 2; Daley 6/18 85:23-28; Holston 6/6 pm 17:8-18.) On Saturday, September 11, Livermore spoke again with Catz. Livermore told Catz that HP's Board wanted any settlement to include a contractual commitment to the continuation of the companies' historic partnership. Catz agreed. (Catz 6/19 21 :28-23:5,25:6-10; 6/4 pm 57:16-26,615 am 5:6-23,6:27-8:2,8:21-9:10,27:15-20.) Later the same day Daley sent to HP a terms sheet that "included a provision regarding the parties' commitment to their relationship." (Ex. 135 at 1.) Oracle's proposed provision said: Livermore

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"The parties re-affirm their commitment to their long standing strategic partnership as established under their existing contractual commitments and their mutual desire to continue to support their joint customers." (Id. at 2, italics added.) HP responded the next day, Sunday, September 12. (Ex. 43.) HP deleted the phrase "as established under their existing contractual commitments" from Oracle's proposed language. (Holston 6/6 am 24:7-17.) Daley acknowledged that "as a result of that [modification], the

expression of commitment to the parties' relationship was not to be bounded or restricted to the relationship as established by the parties' pre-existing contracts." (Daley 6/1896:18-22; see also

Livermore 6/5 pm 9:19-10:5 ["we explicitly deleted [the limitation] ... because we knew that that was way too narrow for what the basis of this agreement was"]; Holston 6/6 am 24:7-17.) HP's September 12 proposal also included a provision that (a) described what Oracle would do in the future-it would "continue to offer its product suite on HP platforms"-and

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(b) set forth the terms on which Oracle's products would be offered=-von terms that are as good as or better than any other platforms." (Ex. 43 at 2.) This latter term came to be referred to as a Most Favored Nation ("MFN'') provision. (Holston 6/6 am 25:2Nll; Daley 6/18 91:8N26.) Later that day Livermore and Catz spoke again by telephone. Catz expressed no reservations about the provision requiring Oracle to continue to offer its product suite on HP's platforms but said that Oracle would not agree to an MFN provision. (Livermore 6/5 am 14:9 15:3, 6/5 pm 39:27 40:23.)
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past, "not any better." (Livermore 6/5 am 20:1 I5.)

There was no mention of the future

"discretion" of Oracle to act with complete freedom. (ld.) Daley then attempted to draft a formal contract embodying the terms to which Livermore and Catz had agreed. Late in the evening of September 12 she sent a draft contract with an explanatory cover email to HP. Paragraph 1 of the Oracle draft contract accepted the first sentence--the reaffirmation sentence-from HP' s last terms sheet, which did not limit the

reaffirmation to the parties' existing contracts. That sentence then remained in all subsequent· drafts and is in the final version of the Agreement. (Holston 6/6 am 26:1-10; Ex. 61 at 1.) Oracle also adopted a part of the second sentence proposed by HP. (Daley 611897:20-26.) revised, it described what Oracle would do in the future-"Oracle product suite on HP platforms" and the terms that would apply-"in [the HP-Oracle] partnership." will continue to offer its a manner consistent with As

(Ex. 136 at 5) (emphasis supplied) .Daley testified that she chose

the word "will," and understood that words in a contract like "will" and "shall" impose mandatory obligations. (Daley 6118 97:27-98:8.) In her cover email Daley "clarif[ied] Oracle's position." (Daley 6118 101 :1-12; Ex. 136 at 1.) She rejected HP's MFN proposal as a "new contractual commitment" that would put HP in a better position than it had previously enjoyed. Daley then explained what Oracle intended by the language in the second sentence of Paragraph 1: Catz and Livermore did not discuss anything more than an agreement to continue to work together as the companies have-with Oracle porting its products to HP's
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platforms and HP supporting the ported products and the parties engaging in joint marketing opportunities=-for the mutual benefit of customers. (Ex. 136 at 1.) Thus, as "clariflied]" by Daley, the phrase "Oracle will continue to offer its product suite on HP's platforms," was intended to encompass "porting" (i.e., the process by which software is made to run on a particular platform); and the phrase "in a manner consistent with that partnership" referenced the parties' prior course of dealing (i.e., Oracle would port as it had in the past). Daley testified that her email accurately described her "understanding of what

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Catz and Livermore agreed to do." (6/18 101:18-103:5, 114:11-13, 121:2-17.) "Porting," Daley said, "had been part of our relationship. Absolutely." (Id. 107:27-108:6; Livermore 6/7 am 78:3-11 ["the core of the partnership had been the porting of products"]' 6/5 am 19:12-16 ["the words say that they are going to continue to offer the Product Suite, and that's porting"].) The next morning, Monday, September 13, Livermore and Catz spoke again. Livermore proposed adding specifics to the contractual obligation in Oracle's draft of the prior night. Catz resisted ..Livermore testified that she was persuaded that the "relationship was so big and so broad" that "once we tried to include specifics we were bound to leave something out." (6/5 am 18:3-19:7, 6/5 pm 49:6-50: 17.) As a result, she agreed that the contract need not include added specifics. (Id.) In her email to Daley describing this conversation, Catz wrote, "[s]he [Livermore] tried to add specifics on the relationship and I wasn't open." (Ex. 525.) Later on Monday, September 13, HP's lawyers sent a contract draft that did add specifics. (Ex. 137 at 5-6.) Oracle reacted angrily. (Jd. at 1.) Livermore called Catz, apologized, explained that the draft had gotten by her, and agreed that it was inconsistent with their conversation of earlier that day. (Livermore 6/5 am 22:3-23:27,6/5 pm 32:21-26; Catz 6/19 35:16-22.) The next day Oracle returned a draft that deleted HP's additional language (Ex. 149 at 3), but left in place the terms-e-t'Oracle will continue to offer ... "-that Daley had told HP

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reflected the Catz/Livermore "agreement to continue to work together as the companies havo-cwith Oracle porting its products to HP's platforms." (Ex. 136; Holston 6/6 pm 17:20-1S:1, 6/6 am 31:6-25; Daley6/1S 118:26-119:11.)
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A fair reading of the exchanges between the parties to this point was both Oracle and HP had requested further specific terms, and in both instances, this approach was rejected. On Wednesday, September 15, HP sent a draft to Oracle that added words at the end of Paragraph 1 so that it now referenced "the partnership as it existed prior to Oracle's hiring of Mark Hurd." (Ex. 44 at 5, italics added.) As Daley, Catz, and Holston each explained, this language made clear that the phrase "in a manner consistent with that partnership" was intended to mean the partnership as it existed before Hurd joined Oracle and "before this controversy erupted." (Daley 6/18 122:18-123:6; Catz 6/19 73:23-74:3~ Holston 6/6 am 31 :16-25.) The Settlement Agreement was executed by the parties on September 20,2010 (hereinafter referred to as the "Agreement"). Reaffirmation Paragraph 1 of the Agreement provides: Oracle and HP reaffirm their and their mutual

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of the Oracle-HP Partnership.

commitment to their longstanding

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desire to continue to support their mutual customers. Oracle will continue to offer its product suite on HP platforms, and HP will continue to support Oracle products (including Oracle Enterprise hardware Linux and Oracle VM) on its as it existed prior to

in a manner consistent with that partnership

Oracle's hiring of Hurd. (Ex. 61 at l.)(emphasis supplied)

Daley acknowledged that Paragraph 1 (referred to herein at times as the "Reaffirmation Provision") is binding on Oracle, and that her signature on the Agreement indicates Oracle's "agreement to ... the contractual commitments as expressed by the words" of the contract. (Daley 6/18 121:21-122:7,83:7-11; see also Ex. 61 at 9,,-r 24.)

The record shows that the Reaffirmation Provision developed at least in part in reaction to that widely-reported public statement made by Ellison threatening an end to all business collaborations between Oracle and HP. TE 238; Holston 6/6 AM 49:11-24; Livermore 6/5 PM 21 :25-22:14. HP was admittedly concerned that the litigation might permanently damage its
Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. J-ll-CV-203J63 Proposed Statement of Decision 10

relationship with Oracle. Holston 6/6 AM 47:24-28; Livermore 6/5 PM 21 :25-22:14,26:282 3
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27:4. In addition, HP's witnesses acknowledged that they were worried that Hurd individually would be angry and "vindictive," and that his personal feelings might further impede a rapprochement between Oracle and HP. Livermore, 6/4 PM 53:3-21; id. 6/5 PM 19:20-21:2~ Holston, 6/6 AM 46:25-47:2; Lesjak Dep. 72:17-73 :10, 77:22-80:2, 85:12-15. The Agreement also includes a negotiated press release. The press release states that the parties' "agreement ... reaffirms HP and Oracle's commitment to delivering the best products and solutions to our more than 140,000 shared customers." (Ex. 61 at 17.) It quotes Ellison as saying that "Oracle and HP will continue to build and expand" their partnership. (Jd.) Daley testified that she satisfied herself that this contemporaneous description of the meaning of the Settlement Agreement was consistent with Paragraph 1. (6/18 125:13-17.) Livermore

explained that it would be impossible to provide the "best products" or to "expand" the relationship without continued porting. (6/5 am 27:9-28:12.) C. The Partnership and Course of Dealing Referenced In the Agreement

As of September 2010, Oracle and HP had maintained a strategic, global partnership for thirty years and had thousands of joint customers. (Ex. 200 at 4.) The partnership involved product development and porting work, and joint sales and support activities. (Livermore 6/4 pm 19: 13-20: 1.) The porting of Oracle products to HP platforms was foundational to the relationship. (Livermore 6/5 am 27:17-28:12,6/7 22:12-17.) 1. HP Platforms HP-UX is the primary operating system for HP's Itanium-based servers. (Livermore 6/4 pm 13:4-10; Aylott 6/7 am 82:1-12.) As of September 2010, HP's Itanium-based server platforms were the only HP platforms to which Oracle was porting new versions of its software products. (Aylott 6/7 am 82:7-21.) Historically, Oracle had also ported its software products to HP's PA-RISe and Alpha server platforms, but as of September 2010 HP was no am 78:3-11,614 pm 42:7-9; Tucker 6/6 pm

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longer selling such servers, and Oracle was no longer porting new releases to those platforms
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(Aylott 617 am 81 :24-82:21; Ex. 104.) HP also sells x86 industry standard servers, but Oracle does not port its products to these servers specifically. (Aylott 6/7 am 82:22-26; Tucker 6/6 pm 30:28-31: 12.) Rather, Oracle develops its products to work on all industry standard servers that use Windows or Linux operating systems=-not for specific vendors, of which there are many. (Kurian 6/21 68:4-69:12; Livermore 6/5 am 97:25-98:3,617 37:6-18.) 2. Oracle's Product Suite There are nine Oracle software products that comprise the core of the Oracle product suite that was offered on HP-UXIItanium as of the time Oracle signed the Settlement Agreement. Oracle identified those core products and their porting history in response to HP's interrogatories. (See Ex. A hereto; Ex. 328, Am. Int. Resp. No.2.) Both parties testified that the am 63:28-64:24; Tucker 617 am

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products in Exhibit A include the "major" or "primary" products that were offered on HPUXiItanium. (Aylott 617 am 86:1-12; Vella Dep. 192:4-17; Ex. 158; Kurian 6/2126:16-29:7.) Once one of these major products was ported to Itanium, then all future releases ofthe same product were consistently ported to Itanium, and this practice continued without exception through September 2010. (Kurian 6/21 31 :6-14; Aylott 6/7 am 86:23-88:21; Ex. 328.) For example, the first full release of the Database product was offered on Itanium in February 2003 (Aylott 617 am 87:3-12), and each subsequent version of the Database was then ported to and offered on the Itanium platform through September 2010. (Id.; Ex. A; Kurian 6/2131:6-14.) 3. Porting Contracts The parties are in accord that over 99% of all porting to HP-UXIItanium was done without any written contracts. (Livermore 6/4 pm 35:9-13; Daley 6/18 130:4-17; Oracle Opening Stmt. 6/4 am 50:15-21.) Ofthe 53 ports reflected in Exhibit A, only three ports of one product-c-E-Business Suite=occurred with porting contracts, (Kurian 6/21 34:3-9; Aylott 617

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am 88:25-89:10; Vella Dep. 48:17-49:4.) In the few instances where porting contracts were

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entered, the contract covered an initial port to HP-UXIItanium of a product that had not previously been ported to the platforms, (Livermore 6/4 pm 31 :27-32:5,34:10-28; pm 32:11-28,35:7-26; Aylott 6/7 am 90:17-91:23,92:19-26.) Tucker 6/6

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product were ported to Itanium without further contracts. (Livermore 6/4 pm 31 :27-32:5, 34:5-9; Aylott 6/7 am 92:14-18,93:4-6.) 4. Payments For Porting. Ordinarily, HP has not paid Oracle to port its products to HP's platforms (Kurian 6/21 34:3-9; see also Ex. 310.) In the handful of cases where HP did pay for an initial port, the payments were made to offset Oracle's out-of-pocket costs for the porting work. (Ex. 78 at 5.) The course of conduct was that HP would provide servers to Oracle to be used in the porting process, where necessary. (Aylott 617 am 89:17-21; Livermore 6/4 pm 32:24-33:9.) The parties each contributed their software personnel in order to effectuate the porting process. (Fink 6/13 am 83:4-21, 6/14 pm 22:10-23:3; Tucker 6/6 pm 27:10-28:19; Aylott 617 am 89:17-21.) 5. Platform Support Oracle's course of conduct prior to its hiring of Hurd was to continue supporting a particular HP server line even after HP stopped selling that line. The predecessor platforms to Itanium were HP's PA-RIse and Alpha platforms (Livermore 6/4 pm 11:14-12:4.) HP stopped

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selling PA-RISe servers in December 2008. (Aylott 6/7 am 96:2-11.) Oracle continued to port new products to PA-RIse for years after HP stopped selling the servers. (Id. 96:12-17; Ex. 251;

Livermore 6/4 pm 37:14-27.) Likewise, Oracle continued to port new products to Alpha after HP stopped selling Alpha servers in 2007. (Id. 12:2-4,38:6-11.) In the past Oracle never

discontinued all software development for any microprocessor architecture while servers based on that architecture were still being sold to customers. (Ex. 328, Int. Resp. Nos. 34,35.) D. Oracle's Response In response to the foregoing recitation of evidence and law, in short Oracle maintains the following points determine the outcome: the Agreement was the result of an employment issue

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regarding Hurd, Paragraph 1 amounts to window dressing and nothing more, the language of the
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Agreement is too broad and vague to impose a porting obligation on Oracle, there is an absence of detail that makes it impossible to be a binding obligation, and the negotiating history shows HP, in the words of Oracle's counsel, "is using litigation to create a contract" where none exists.

E. The Post-Agreement Period
Following the execution of the Agreement, the parties continued to engage in product development and porting work. Oracle's work to port Database version 12g (now called 12c) to the Itanium platforms began in May 2010 and did not cease until June 2011, a few months after Oracle's March 2011 Itanium announcement, (Chatterjee Dep. 111:7-13, 111 :16-20; Tucker 6/6 pm 38:13-39:7, 43:4-44:26, 45:14-47:7; Sukumaran Dep. 362:14-363:9, 365:4-366:12; Ex. 27; Ex. 126; Ex. 328, Am. Int. Resp. No.7; Ex. 335.) In. September 2010, HP provided additional servers to Oracle to facilitate this porting work. (Aylett 617 am 90:4-11.) Further, Oracle continued to port other major products to the Itanium platforms after September 2010-including Enterprise Manager, E-Business Suite, Siebel, and PeopleSoft Tools. (Ex. 328, Am. Int. Resp. No.7.) All of this work was done without separate porting contracts or payments including, Aylott

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according to Oracle, for the E-Business Suite product. (Vella Dep. 272:13-16,272:18-24; Tr. 617 AM 88:26-89:16.) For its part, HP continued to work with Oracle to ensure that Oracle's product suite

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would run on HP's servers. (Aylett 617 pm 8:28-9:5, 6/13 am 42:20-43:2.) HP also increased its level of support for Oracle Enterprise Linux ("OEL") on HP's servers. (Aylott 617 pm 9:610:28,6/13 am 43:3-14.) In the fall of 201 0, Oracle announced that it was making material changes to its OEL product. (Aylott 6113 am 43:15-28; Screven Dep. Vol. II 82:5-22; Hicks 6/20 am 76:3-77:13.) HP engaged with Oracle to understand the changes made by Oracle so that HP could continue to support it. (Aylott 6/13 am 43: 15-28; Ex. 307 at 2.) By December 2010, Oracle was "very pleased" with HP' s efforts to support 0EL. (Ex. 313 at 1; Hicks 6120 am 81 :26-84:26.) The parties continued, and continue today, to participate in bi-weekly meetings to

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ensure that Oracle Linux is properly supported on HP's servers. (Aylott 617pm 10:12-22; Screven Dep. Vol. II 63:9-24; Vol. I 116:20-23.) In the period following the execution of the Agreement, Oracle undertook actions, including the doubling of the core factor used to set the price for Oracle software running on HPUXiItanium that strained the partnership. (Livermore 6/5 am 33 :25-34:28; Fink 6/13 pm 11:2512:21; Aylott 6/13 am 38:27-39:6, 44:3-23.) However, both companies' witnesses testified that the core partnership between the two companies, including the joint certification and porting work, continued throughout this period and up until the time of Oracle's March 2011 announcement. (See supra; Vella Dep. (Reb.) 135:10-136:7 [the worldwide engineering

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partnership did not change until the March 2011 announcement]; Ex. 295 at 1; Hicks 6/20 am 85:26-86:24 ["it remains business as usual between HP and Oracle"]; Tucker 6/6 pm 46:1447:1.) Cooperative engagements also continued at the executive level. (Livermore 6/5 am 34:20-36:9; Ex. 3.) On March 18,2011, four days before Oracle's Itanium announcement, Livermore and Catz participated in an amicable phone call to discuss partnership issues. (Livermore 6/5 am 32:4-33:8, 37:25-38:4; Ex. 3.) F. Oracle's March 2011 Itanium Announcement Six months after signing the Agreement, on March 22,2011, Oracle issued, without warning to HP, a press release stating that it had "decided to discontinue all software development" for BP's Itanium-based servers. (Ex. 249.) The press release was issued the night before HP's annual shareholders' meeting. As part of the announcement, Oracle identified on its website the current versions of its major products that were available on Itanium and the next versions of those products that would not be available on Itanium. (Ex. 235; Kurian 6/21 28:217, Ex. 328, Am. lnt. Resp. No.3.) Although eaeh of these new versions will not be made

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available on Itanium, they will be made available on IBM Power and Sun Spare. (Id.; Kurian 6/21 73:3-6.)

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. 1-11-CV- 203163 Proposed Statement of Decision

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Oracle understood that the March 2011 Itanium decision was a ''big deal" and a "major
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announcement."

(Kurian 6121 73:28-74:4.) Notwithstanding, Oracle did not tell HP about the (Livermore 6/5 am 37:9-38:4.) When Catz and

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decision in advance ofthe announcement.

Livermore spoke four days before the March 22, 2011 announcement, Catz gave HP no warning regarding the impending announcement.

(Id.; Catz 6/19 112:13-27.)

The Itanium decision was both inconsistent with the parties' course of dealing and unprecedented in Oracle's history. (Kurian 6/21 72:18-73:2; Ex. 328, lnt. Resp. Nos, 34,35.) As of September 2010 and until the announcement, HP-UXIltanium remained a significant platform for Oracle and a focus of Oracle's porting efforts. (Kurian 6/2167:18-21, 70:3-6; Vella

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Dep. 23:14-25 [As of September 2010, "HP-UX was very important. It was a very important or significant platform much like AIX is, much like Linux is, much like Windows is."].) Oracle's Senior Vice President of Database Development testified that his group had not even considered ceasing software development on Itanium because it "was still, in our opinion, a platform that a significant number of customers were using, and so we didn't think there was a business reason to consider not supporting it." (Mendelsohn Dep. 103: 14-104:3.) Although Oracle witnesses testified that Oracle continues to support existing customers on current products (Catz 6/19 124:13-125:13), Oracle conceded that, in light ofits March 2011 announcement, "customers who run the Oracle software on Itanium will now have to choose another hardware platform" (Kurian 6121 78:5-8). Immediately following Oracle's March 22,2011 Itanium announcement Livermore called Catz to tell her that Oracle's decision was a violation ofthe Agreement. (Livermore 6/5 am 38:18-39:11,617 am 61:15-18.) At her deposition Catz testified that she could not recall what

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was said in the conversation, but at trial she professed to have ''been thinking about it" and said that she now recalled that Livermore did not say that Oracle was in breach of the Settlement Agreement. (6119118:7-119:3.) HP hoped that pressure from customers would cause Oracle to

reverse its decision. (Donatelli 6/14 pm 49:5-51 :10; Livermore 6/5 am 41 :5-22.) However,

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. l-1l-CV-203163 Proposed Statement of Decision

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when that did not happen, HP sent a demand letter to Oracle (Donatelli 6/14 pm 51 :11-52:19~ Ex. 526), and on June 15,2011, filed this lawsuit against Oracle (Donatelli 6114 pm 52:20-51). IV. DISCUSSION AND CONCLUSIONS OF LAW

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A. The Controversy Between The Parties Is Ripe For Declaratory Relief The parties' dispute over whether Paragraph 1 of the Agreement obligates Oracle to continue to offer its product suite on HP's platforms is ripe for declaratory relief because it meets the "actual controversy" requirement of Civil Procedure Code section 1060 by presenting "concrete legal issues" within a "particular" and "fully developed" "factual context." (Stonehouse Homes v. City of Sierra Madre (2008) 167 CaLAppAth 531, 542.) The Court can therefore issue a declaration in accordance with the trial evidence. "[I]n an action for declaratory reliefthe rights ofthe parties are to be determined upon the facts found and are not limited by the issues joined or by claims of counseL" (Amerson v. Christman (1968) 261 Ca1.App.2d 811,824; Cal. Canning Peach Growers v. Corcoran (1936) 14 Cal.App.2d 264, 267.) B. Interpretation of the Agreement

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1. Standards Governing Contract Formation and Interpretation California recognizes "the objective theory of contracts" (See Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.AppAth944,956). Under that theory, "[a] contract must be interpreted to give effect to the

mutual, expressed intention of the parties." (Beard v. Goodrich (2003) 110 Cal.AppAth 1031, 1038). "[T]he courts are not interested in the subjective intent of the parties, but only in their objective intent-that is[,] what would a reasonable man believe from the outward

manifestations of consent." (Quantification Settlement Agreement Cases (2011) 201 Cal.AppAth 758,816; Brant v, Cal. Dairies, Inc. (1935) 4 Cal.2d 128, 133 ["the undisclosed intentions ofthe parties are ... immaterial; ... the outward manifestation or expression of assent is controlling"]')

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"[W]hen a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone,

if possible."

(Quantification, supra, 201 Cal.AppAth at p.

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817, italics added.) The "clear and explicit" meaning of these provisions, interpreted in their "ordinary and popular sense," ... controls judicial interpretation.' [Citations.]" (ASP Properties

Group v. Fard, Inc. (2005) 133 Ca1.AppAth 1257, 1269.) "[Ojbjective intent, as evidenced by the words of the contract, rather than the subjective intent of one of the parties, ... controls interpretation." (Founding Members, supra, 109 Cal.AppAth at 956.) "[S]tatements by those

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who signed the agreement about what they thought it meant" "cannot constrain [a court's] interpretation of the agreement." (Quantification, supra, 201 Cal.AppAth at p. 798, fn. 23, original italics.) This principle applies with particular force when a contract is unambiguousi.e., reasonably susceptible to only one interpretation-because "unless a contract is ambiguous,

its meaning must be determined from the words used." (Ede v. Ede (1962) 208 Cal.App.2d 718, 721.) The Witkin treatise on California law is in accord: "Every contract requires consenting parties. [Citation.] However, there need not be a subjective meeting of the minds; in the absence of fraud, mistake, etc. [citation], the outward manifestation or expression of consent is controlling. In other words, mutual consent is gathered from the reasonable meaning ofthe words and acts ofthe parties, and not from their unexpressed intentions or understanding. 'By the modern law of contract, the mere state of mind of the parties--with reference to the "meeting of the minds"--is not the essential object of inquiry, the terms of the promise-act being determinable by an external and not by an internal standard ... or by what distinguished writers have termed the objective rather than the subjective test. ' [Citation.] This fundamental rule is constantly restated by courts and commentators. [citing

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numerous cases and secondary authorities]" (1 Witkin Sum. Cal. Law (10th ed 2010) Contracts § 116, original italics.) In light of the overriding weight placed upon the words of a contract, the range of interpretations which are legally permissible is constrained by the actual language.

Hewlett Packard Company v; Oracle Corporation Superior Court of California, County of Santa Clara, Case No. J-1J-CV-203163 Proposed Statement of Decision

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"When a dispute arises over the meaning of [the] language, the first question to be decided is whether the language is 'reasonably susceptible' to the interpretation urged by the party. If it is not, the case is over." (Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th 1441, 1448.) "Whether the contract is reasonably susceptible to a party's interpretation can be determsined from the language of the contract itself." (Curry v. Moody (1995) 40 Ca1.AppAth 1547, 1554.) Further, contractual language "is not reasonably susceptible of an interpretation that attributes no meaning to" it. (Monterey/Santa Cruz etc. v. Cypress Marina Heights LF (2011) 191 Cal.AppAth 1500, 1516, original italics; see also Kashmiri v. Regents of U. of Cal. (2007) 156 Cal.AppAth 809, 834 [same].) Finally, "The whole ofa contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other." (Cal. Civ. Code, § 1641.) 2. The Plain Language Because the "primary guide" when interpreting a contract is "the language of the contract" (London Market Insurers v. Superior Court (2007) 146 Cal.AppAth 648,665), the Court begins its analysis with the language of Paragraph 1. The first sentence ofthe paragraph states that "Oracle and HP reaffirm their commitment to their longstanding strategic relationship and their mutual desire to continue to support their mutual customers." (Ex. 61 at 1.) This sentence is fully consistent with a continued porting obligation. As this Court previously held, if there was a "clear and consistent practice in which Oracle offered its product suite on all HP platforms without written porting agreements or payments, then the Court sees no inherent contradiction in 'reaffirming' that this arrangement will continue going forward." (See MSJ Order at 22.) The second sentence of Paragraph 1 states that "Oracle will continue to offer Us product suite on HP platforms ... in a manner consistent with that partnership as it existed prior to Oracle's hiring of Hurd." (Ex. 61 at 1.) As conceded by Daley who drafted the language, the sentence uses the terms "will" and thus speaks of mandatory future action. (Daley 6/1897:27-

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Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. J-II-CV-203J63 Proposed Statement of Decision

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98:8.) The sentence can only be reasonably interpreted as requiring Oracle to continue offering its product suite on HP's Itanium platforms, As this Court previously held, "the plain language is readily susceptible to that interpretation." (MSJ Order at 22.) And the phrase "in a manner

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consistent with th[e HP-Oracle] partnership as it existed prior to Oracle's hiring of Hurd" ties that future action directly to the parties' historic course of dealing, in which Oracle consistently and systematically ported new versions of its products to HP's Itanium-based servers. This interpretation is further confirmed by Recital B and the press release accompanying the Settlement Agreement. Recital B states that "HP, Hurd and Oracle recognize the mutual advantages of the continuation of the HP-Oracle partnership ... and now desire to further their business relationship." (Ex. 61 at 1.) The parties' business relationship could not

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possibly be furthered if Oracle could, on a whim, refuse to port new versions of everyone of its products to HP's Itanium-based servers=-the only servers to which it was then porting its products. (Supra Sections IILB-C.) Similarly, the incorporated press release states that HP and Oracle reaffirmed their "commitment to delivering the best products and solutions to [their] more than 140,000 shared customers." (Ex. 61 at 17.) The latest versions of Oracle's products are perforce its "best products." This statement would not have been truthful, or even make sense, if Oracle were free to refuse to port the latest versions of its products to HP' s platforms. Oracle offers two alternative interpretations-e-first, that Paragraph 1 was merely a "public hug" that imposed no obligations on either party and, second, that Paragraph 1 obligated Oracle to keep Hurd "out of decisions that directly dealt with HP," but in either case Oracle retained absolute discretion with regard to porting. (Oracle Closing Stmt. 6/2652:1-9; see also

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Oracle Opening Stmt. 6/4 am 61 :26-62:5; Catz Dep. Vol 1119:25-120:15, 122:18-123:3; Vol. II 295:5-21,292:24-293:16.) These interpretations conflict with the plain language of Paragraph 1.

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Oracle's "public hug" interpretation disregards the mandate in the second sentence of Paragraph 1 that states "Oracle will continue to offer its product suite on HP platforms" (Ex. 61 at 1.) Nor

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Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. 1-11-CV-203163 Proposed Statement of Decision

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does Oracle's "public hug" interpretation explain what this clear and direct language actually
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means. Indeed, Oracle has not offered an alternative meaning ofthe sentence, but instead asserts, as Daley testified at trial, that it has no meaning. (6/18 106:1-6 ["Q.... [I]s it your

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testimony that the second sentence of paragraph 1, as you drafted it here, adds nothing to the 'first sentence of paragraph I? A. I think I testified then and believe now that the second sentence does not add a lot substantively to the first sentence. I would agree."]; see also Catz Dep. Vol. I 122:18-123:3.) However, the law rejects an interpretation that renders contract language meaningless. (Monterey/Santa Cruz, supra, 191 Cal.AppAth at p. 1516; Kashmiri, supra, 156 Cal.App.4th at p. 834.) Oracle's "public hug" interpretation of Paragraph 1 also overlooks the fact that Paragraph 15 separately required the parties to issue a joint press release. If there was a "public hug" requirement, Paragraph 15 was it. Moreover, Paragraph 16 requires that the terms of the Agreement-including Paragraph I-remain confidential. It precluded public disclosure of

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Oracle's agreement "to continue to offer its product suite on HP platforms." Oracle apparently also relies on the title of Paragraph 1 to support its "public hug" argument. (See Daley 6/19 8:25-9:7.) But the parties agreed that the paragraph titles may not be used to construe their agreement. (Ex. 61 at 8, 1[20.) Oracle's proposed interpretation thus cannot be squared with the plain language of the Agreement. Oracle's other argmnent-that Paragraph 1 was intended to protect HP from Hurd

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but leaves Oracle with absolute discretion with regard to porting (see Oracle Closing Stmt. 6/26 52: 1-9 [" Hurd was actually kept out of decisions that directly dealt with HP ... honoring the contract as it actually was."])-also That was

draws no support from the language of

Paragraph 1. The phrase "in a manner consistent with [the HP-Oracle] partnership prior to Oracle's hiring of Hurd" cannot fairly be interpreted to address Hurd's role at Oracle. As Daley, Holston, and Catz all testified, Hurd is only mentioned in the paragraph to set a temporal

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. J-JJ-CV-203J63 Proposed Statement of Decision

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boundary on the Hl--Oracle "partnership"-the
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relevant time period being "prior to Oracle's Catz 6/19 73:23-74:3; Holston 6/6 am 31:16-25.)

hiring of Hurd." (Daley 6/18122:18-123:6;

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And to the extent the parties sought to restrict Hurd's conduct at Oracle, they did so in Paragraphs 3, 4, and 5, wherein Hurd himseif"agree[d] not to be involved in" certain activities. (See Ex. 61 at 2.) Oracle claims that the phrase "ina manner consistent with t[he HP-Orac1e] partnership" leaves it with absolute discretion and shows that it agreed only to an "approach." (See Catz Dep. Vol. I 122:18~123:3 [Oracle need only continue to offer its products "if it wants to"].) But the words of the contract say that Oracle "will continue to offer its product suite on HP platforms" (Ex. 61 at 1.) The phrase "in a manner consistent with t[he HP-OracleJ partnership" does not suggest that the mandatory phrase "Oracle will continue" actually means that Oracle "may continue" or "has the discretion not to continue" offering its products. Such an interpretation "flatly contradict]s]" the plain language and fails as a matter oflaw. iWinet, supra,

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4 Cal.App.4th at p. 1167.) Further, as this Court previously held, "an agreement to continue to work together consistent with the past that reserves the absolute discretion not to work together at all is essentially illusory and gives the Reaffirmation Provision no real meaning. Such an interpretation should be rejected." (MSJ Order at 24; see also Asmus v. Pacific Bell (2000) 23 Ca1.4th 1, 15-16 ["[O]ne who states 'I promise to render a future performance, if! want to when the time arrives,' has made no promise at all."].) Oracle has failed to offer a plausible interpretation of Paragraph 1. The only reasonable interpretation before the Court is HP's, which is founded on the plain language of Paragraph 1. Paragraph 1 is therefore unambiguous as a matter of law. (Penn-America Ins. Co. v. Mike's Tailoring (2005) 125 Cal.AppAth 884, 889 ["An ambiguity arises only if ... there [is] more than one construction in issue which is semantically permissible."J.) Thus, the Court

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should "give the plain language in ... the [paragraph] its plain meaning, and apply the facially clear language as it has been drafted." (Abers v. Rounsavell (2010) 189 Cal.App.4th 348, 357.)

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3. Extrinsic Evidence Because the contractual language is not reasonably susceptible to Oracle's interpretation, extrinsic evidence cannot be used to ascribe that interpretation to Paragraph 1. (See ASP Properties, 133 Cal.App.4th at 1267 ["extrinsic evidence is not admissible to ascribe a meaning to an agreement to which it is not reasonably susceptible"]; Thrifty Payless, Inc. v. Mariners Mile Gateway, LLC (2010) 185 Cal.AppAth 1050, 1061 ["unless the language is 'reasonably susceptible' to the proposed meaning, extrinsic evidence cannot even be considered to explain or otherwise shed light upon the parties' intent"]') But, in any event, the extrinsic evidence confirms that the paragraph requires Oracle to continue to offer its product suite on HP's Itanium platform. Livermore and Catz first discussed what ultimately became Paragraph 1 on September 11. Livermore testified that she told Catz that HP's Board of Directors sought "to add as part ofthe contract reaffirmation of the partnership" and "wanted a provision committing the parties to the relationship." (6/5 am 8:21-9:10.) Catz agreed to this request. (Catz 6/19

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21 :28-22:24; Section IlLB.) This conversation is consistent with the plain language of Paragraph
1.

Later on September 11, Oracle sent a proposal to HP that sought to limit the parties' commitment to existing contracts. (Ex. 135 at 2.) But HP deleted the "existing contractual commitments" limitation that Oracle had proposed, and Oracle accepted HP's version of what became the first sentence of Paragraph 1. (Supra Section IlLB.) This was a manifestation of the parties' intent not to be restricted to the relative few written contracts, Daley acknowledges that HP's rejection of the existing-contracts limitation meant that Paragraph 1 "was not to be bounded or restricted to the relationship as established by the parties' preexisting contracts," (6/1896:8-27.) HP proposed a second sentence that said that Oracle would "continue to offer its product suite on HP platforms" on MFN terms (Ex. 136 at 5; see also Livermore 6/5 am 14:9-

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15:3.) In its response, Oracle agreed that "Oracle will continue to offer its product suite on HP
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platforms," added that "HP will continue to support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware," and substituted for HP's MFN language a reference to the parties' past course of dealing-> "in a manner consistent with that partnership." (Ex. 136 at

5.) In her cover email, Daley explained that the proposal reflected the agreement between Catz and Livermore "to continue to work together as the companies have-with Oracle porting

products to HP's platforms and HP supporting the ported products and the parties engaging in joint marketing opportunities +for the mutual benefit of customers." (Id. at 1.) Daley's email communicated to HP Oracle's interpretation of the language that Oracle was proposing. (Id.; Daley 6/18 100:23-101 :27, 101 :1-27.) Oracle points to the fact that in her cover email Daley stated that "[tjhis was intended to reaffirm and continue the existing relationship and not to put HP in a better position tha[nJ it currently enjoys or result in the negotiation of a new contractual commitment." (Ex. and

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06 at

1.) Catz testified that she made similar comments to Livermore (6/1928:20-29:3),

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Oracle has cited Livermore's testimony that Catz, in explaining Oracle's proposal and the rejection ofHP's MFN, "said that she didn't think that Oracle was taking on any new obligations or work" (6/5 am 19:21-20:11). These statements do not help Oracle. As noted, Oracle's proposal accepted HP's demand, nearly word for word, that Oracle "will continue to offer its product suite on HP Platforms" (Compare Ex. 43 at 2 [HP: Commitment by "Oracle to continue to offer its product suite on HP Platforms" (italics added)J with Ex. 136 at 5 [Oracle: "Oracle will continue to offer its product suite on HP platforms" (italics added)]; see also Daley 6/18 97:20-98:6.) Oracle's proposal itselfincluded two specific "contractual commitmentlsj't=the commitment by Oracle to continue to offer its product suite on HP's platforms and HP's obligation to support OEL and OVM. (Ex. 136 at 5.) Catz's and Daley's statements that HP would not be in "a better position" and that there would be no "negotiation of a new contractual commitment" are reasonably interpreted as

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. J-J1-CV-203J63 Proposed Statement of Decision

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addressing HP's proposal for an MFN provision and the offer to negotiate its terms. As Livermore testified, Catz said "they were going to continue with the course of action that we had been doing in the past, not any better." (6/5 am 20:1-11.) Agreeing to continue porting was nothing new and was what the companies "had been doing in the past." (Id.) And it was consistent with "an agreement to continue to work together as the companies ha[d]." (Ex. 136 at 1.) By contrast, a Most Favored Nations provision would have put HP in "a better position."
(Id.) That is the "commitment" that Daley and Catz sought to avoid and what Catz was

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referencing when "she said that they weren't taking on any new obligations." (Livermore 6/5 am 19:21-20:15,19:8-20.) The following day, September 13, Livermore and Catz discussed whether "we could give some additional specificity to [Paragraph 1]." (6/5 am 18:3-19:7.) Catz said that "it was simpler and cleaner" to exclude specifics, and Livermore agreed-"the relationship was so

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big and Sobroad that it would be hard to add all of the specifics" and "the two sentences [Oracle proposed] really covered the core things." (Jd.) An email Catz sent to Daley regarding the conversation confirms Livermore's testimony. Catz wrote that Livermore "tried to add specifics on the relationship and I wasn't open." (Ex. 525.) Despite this agreement, HP lawyers sent Oracle a proposal later on September 13 that did include specifics. (See Ex. 39.) Livermore called Catz to apologize, and the specifics were deleted from the next draft pursuant to their prior agreement. (Livermore 6/5 am 22:323:27.)4 Oracle claims that the deletion of these specifics vitiates the broader porting commitment in the language that Oracle had advanced and that remained in the Agreement. But Livermore and Catz agreed only to exclude the specifics, not to void the obligation that had been agreed to the day before. (Id. 18:3-19:16.) If that were Oracle's intent, it needed to strike what is now the second sentence of Paragraph 1 and retract Daley's expressed interpretation of that

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4

Livermore's position is that HP's lawyers sent over this language when she was not available to review it. Her testimony is not substantiated by counsel. But this discrepancy is not determinative and the Court accords it no weight. 25

Hewlett Packard Company v. OracleCorporation Superior Court of California, County a/Santa Clara, Case No. 1"11-CV-203163 Proposed Statement of Decision

language. Oracle did neither. The words that remained in the contract-which
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should be the the

"primary guide" for the Court (London Market, supra, 146 Cal.App.4th at p. 665)-create obligation HP seeks to enforce. Catz testified that, during her September 13 call with Livermore, she told

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Livermore that Oracle would not "commit to continue to port to Itanium." (6/19 33 :25-34: 18.) Livermore testified to the contrary (6/5 am 19:8-20), and Catz's testimony is belied by other evidence that is not in dispute. Catz's email recounting the conversation, for example, mentions

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nothing of HP-UX, Itanium, or porting, but only that Livermore "tried to add specifics on the relationship and I wasn't open." (Ex. 525; Livermore 6/5 am 18:3-19:7.) Further, Catz testified that she told Daley about the refusal to port that she allegedly communicated to Livermore. (6/19 69: 19-70:17.) But it is undeniable that Daley-conceded lawyer-gave no indication to anyoneCatz or HP-that by all to be a careful and skillful

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the statement about porting in her

earlier email was incorrect. (Id.) In an apparent attempt to explain these omissions, Daley testified that her September 12 email in fact "made a reference to porting and joint marketing as examples of the kinds of things that would not become obligatory as a result of that reaffirmation provision." (611849:25-50:6, italics added.) This testimony is the precise opposite of what

Daley's email actually stated and is entitled to no weight. (See Ex. 136 at 1.)5 Oracle also contends that Livermore's statement that "porting" was first mentioned in her September 13 conversation with Catz somehow undermines the plain meaning of the contract. But Oracle ignores HP's proposal of September 12, which sought "a commitment from Oracle to continue to offer its product suite on HP Platforms" (Ex. 43 at 2.) As Livermore testified, "the words say that they are going to continue to offer the Product Suite,

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5 Daley also testified that at some time (she could not remember whether it was before or after her September 12 email), she said to an HP lawyer (she could not remember who) that Oracle would not make "new commitments" to HP. (6118103:10-105:5.) There is no note, memorandum, or email that records or references such a call and it is not mentioned in Daley's September 12 email. (Jd.) Therefore, this claim is not to be credited.

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. 1-11-CV-203163 Proposed Statement of Decision

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done in the past with respect to Oracle offering its products on HP's platforms. (Ex. 136 at 1.)
2 3 4 5
6

Moreover, Daley testified that her email accurately reflected what she understood to be the agreement between Catz and Livermore. (6118 100:23-28.) In sum, the extrinsic evidence, including the negotiation history, confirms what the plain language of the contract clearly states: Paragraph 1 obligates Oracle to continue to offer its product suite on HP's platforms. Even assuming that the parties' witnesses were all equally credible, it is undeniable that Oracle objectively manifested its intent to enter into an "agreement to continue to work together as the companies have-with Oracle porting products to

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

HP's platforms and HP supporting the ported products ... for the mutual benefit of customers." (Ex. 136 at 1.) This agreement was captured by the plain language of Paragraph 1. 4. No Subjective "Meeting of the Minds" Is Required Although the plain language of Paragraph 1 and the extrinsic evidence establish that the paragraph obligates Oracle to continue porting, Oracle contends that, unless HP and Oracle subjectively ascribed the same meaning to Paragraph 1, no contractual obligation arose. (See Oracle Tr. Br. 3 ["Absent a 'meeting of the minds'as to what the words mean, there is no contract at all." (original italics)]; Oracle Closing Stmt. 6/2644:26-45:3 ["it must be established

that both people understood [a contract] to create the same obligation in the same sense"].) Oracle's argument is inconsistent with the law. Contract formation does not require a subjective "meeting of the minds." (See Blumenfeld v. R. H Macy & Co. (1979) 92 Cal.App.3d 38, 46 ["Under the objective test of contract formation, a 'meeting of the minds' is unnecessary. A party is bound, even ifhemisunderstood the terms of a contract and actually had a different,

undisclosed intention."]; Atlas Assurance Co., Ltd. v.. McCombs Corp. (1983) 146 Cal.App.3d 135,144 [same]; Beard, 110 Cal.App.4th at 1039-1040 [rejecting plaintiffs '''no meeting of the minds'" argument because it was based on plaintiffs "subjective intent"]; Hedging Concepts, Inc. v. First Alliance Mortgage Co. (1996) 41 Cal.App.4th 1410, 1421 [a contract will not be set

26

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. 1-II-CV-203163 Proposed Statement of Decision

27

aside "because one of the parties claims to have been ignorant of, or to have misunderstood" its
2

terms].) Under the objective theory of contracts, the mere existence of a valid contract that is susceptible to a reasonable interpretation establishes an objective "meeting of the minds"regardless of what the parties may have subjectively intended, (See Quantification, supra, 201 Cal.AppAth at pp. 816-817.) Contract formation therefore does not require all parties to have subjectively understood the terms of a contract in the same manner, as Oracle contends. In Quantification, for example, the court rejected the same "meeting of the minds" argument Oracle is making and, in doing so, held that the contract itself established "mutual consent" and a "meeting of the minds":
" ..

3
4 5 6

7 8
9 10 11 12 13 14 15 16 17 18

.in a case like this involving a written contract, whether there was mutual be determined/rom the written contract itself, and

consent-v-i.e., a meeting of the minds-must

if a reasonable and lawful construction can be given to the contract, then that is where we must conclude the minds

0/ the parties

met ....

Under California law, the parties must be deemed to . .. That someone,

have mutually consented to the reasonable and lawful interpretation.

subjectively, might have had a different understanding of the agreement is of no moment. " (Id. atp. 817, italics added.) Oracle is erroneously conflating a dispute over contract interpretation with a dispute over contract formation. tPatel v. Liebermensch (2008) 45 Ca1.4th 344,352 ["few contracts would be enforceable if the existence of subsequent disputes were taken as evidence that an agreement was never reached"j.) Daley testified that she understood that by executing

19
20 21 22 23

the Settlement Agreement, the terms of Paragraph 1 became binding on Oracle. (6/18 121:21122:7.) That testimony alone establishes contract formation. All that remains is contract interpretation. Weddington and Merced County, the two cases relied upon by Oracle, do not suggest that a subjective "meeting ofthe minds" is necessary. (Oracle Tr. Br. at 3.) In

24 25 26

Hewlett Packard Company v. Oracle Corporation Superior Court of Califomia, County ofSania Clara, Case No. J-JJ-CV-203J63 Proposed Statement of Decision

28

Weddington, the court found that a settlement agreement was not a valid contract because it
2
3

incorporated a licensing agreement that had been expressly disavowed by one of the parties. (Weddington Productions, Inc. v. Flick (1998) 60 Cal.AppAth 793,805-807.) Thus, the

4 5 6 7
8 9 10 11
12

Weddington court held that "the parties had [not] objectively manifested a 'meeting of the minds." (Id. at pp. 814-815.) And in Merced County, the court voided a contract provision

because it was "contradictory on its face." (Merced County Sheriff's Employees' Ass 'noV. County of Merced (1987) 188 Cal.App.3d 662,675-676.) In light of such language, the court

stated that "the parties failed to reach a meeting of the minds; there was no objective manifestation of assent." (Id. at p. 676, italics added.) Oracle's subjective "meeting of the minds" argument therefore fails. Because Paragraph 1 can be given a "reasonable and lawful interpretation," "that is where [the Court] must conclude the minds of the parties met." (Quantification, supra, 201 Cal.App.4th at p. 817.) 5. The Post-Agreement Conduct

13
14 15 16 17 18 19 20 21 22 23 24

Oracle seeks to rely on additional extrinsic evidence--HP' s conduct after the parties executed the Settlement Agreement-to demonstrate that HP did not "underst[anJd the

Reaffirmation Provision to impose on Oracle any new" obligations. (Oracle Tr. Br. at 7.) However, as discussed, extrinsic evidence may only be considered if offered to support an interpretation to which the contract is reasonably susceptible (Tahoe National Bank v. Phillips (1971) 4 Ca1.3d 11, 22-23; Oceanside, supra, 56 Ca1.AppAth at p. 1449), and Oracle has not offered such an interpretation (supra Sections III.B.2-3). Further, courts may consider course-of-performance evidence "only when the acts of the parties were positive and deliberate and done in attempted compliance with the terms of the agreement." (US. Liability Ins. Co. v. Haidinger-Hayes, Inc. (1968) 263 Cal.App.2d 531, 538; Grove v. Grove Valve & Regulator Co. (1970) 4 Cal.App.3d 299,309.)6 Thus, in

25
26
6

In closing argument, Oracle cited City 0/ Hope National Medical Center v. Genentech, Inc. (2008) 43 Ca1.4th 375, 393 to argue otherwise. City of Hope involved a dispute over royalty payments. The Court found admissible postcontract evidence that the defendant affirmatively concealed information regarding the royalties defendant owed

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. 1-11-CV-203163 Proposed Statement of Decision

29

Oceanside, for example, the court considered evidence that the plaintiff, for five years, took
2

deliberate steps to comply with the disputed contract by making consistent payments to the defendant bank, (Oceanside, supra, 56 Cal.AppAth at pp. 1449-1451.) Here, none of the postsettlement conduct upon which Oracle relies relates to affirmative actions taken by HP in attempted compliance with the Agreement; to the contrary, Oracle focuses on HP's supposed failure to act. For example, in February 2011, Alcoa requested proof of contractual alliances between HP, Intel, and Oracle (Ex. 559; Donatelli 6114pm 60:26-61 :7). HP did not disclose the Settlement Agreement or any other contract in response to this request, including HP's existing collaboration agreement with Intel. (Livermore 6/5 am 31:12-32:3; Donatelli 6/14 pm 98:2399:9, 63:23-64:2, 98:9-22.) Similarly, although Alcoa was specifically interested in the EBusiness Suite product (Donatelli 6/14 pm 61:19-26; Ex. 559), and HP had a separate porting contract covering this specific product (Exs. 533, 632; Donatelli 6114 pm 41 :9-19,98:1-8), HP did not disclose this contract to Alcoa (Fink 6/13 pm 9:24-10:22; Donatelli 6/14 pm 98:9-99:20). HP's policy and practice was not to share with its customers its contracts with third parties. (Id. 98:9-99:9; Fink 6/13 pm 9:24-10:22,) In addition, the Settlement Agreement contained provisions that each side considered sensitive (see Ex. 61 at 2-5, ,-r 7 [standstill provision]; Daley 6/18 123:10-124:5 [Oracle's concerns over the "Allred letter"]), and included a confidentiality provision that precluded the disclosure of its terms (Ex. 61 at 6-7, 'j[16). Neither party even distributed the Agreement internally. (Livermore 6/5 am 29:2-16; Catz 6119 97:22-98:3 [''the whole Settlement Agreement is not the kind of thing I would distribute"]') And the disclosure of the Agreement to

3 4
5 6 7

8
9 10 11 12 13

14
15 16 17 18 19 20 21 22 23 24

a customer like Alcoa would have violated the confidentiality provision. (Livermore 6/5 am 31:26-32:3; Donatelli 6/14 pm 63:23-64:12, 99:10-20.)

25
26 plaintiff. The evidence was admissible to refute defendant's claims that it did not believe the contract required such royalty payments. The defendant thus had taken positive and deliberate steps showing that it interpreted the contract as plaintiff did. City of Hope thus does not support Oracle. Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. I-JJ-CV-203J63 Proposed Statement of Decision 30

1 2

Oracle also points to HP's failure to inform employees such as Martin Fink, Mike Crowsen and Tim Aylott of the specific terms of the Agreement. But HP's top executives with knowledge of the relevant terms of the Agreement directed their employees to continue the prior course of conduct with Oracle. (Livermore 6/5 am 29:17-30:22; Donatelli 6114 pm 43:17-45:17; Aylott 6/13 am 42:20-43:2, Fink 6/13 am 95:26-96:5.) The record is replete with evidence that, in fact, HP's personnel did, as instructed, "carryon with business as usual" after the execution of the Agreement, including specifically with respect to the core engineering and porting relationship. (See supra Sections III.E.) Oracle's Director of Global Alliances testified that the (Vella Dep.

3
4 5
6

7 8 9

HP-Oracle partnership did not change until Oracle's March 2011 announcement.

10
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

(Reb.) 135:10-136:7; Ex. 295 at 1; Hicks 6/20 am 85:26-86:24 (writing in January 2011 that "it remains business as usual between HP and Oracle.") Oracle also contends that HP failed to fulfill its obligation under Paragraph 1 to support Oracle Enterprise Linux ("OEL>!). Oracle's narrow complaint is that, for a brief period oftime, HP's website classified OEL as being "tested" on some ofHP's servers rather than "certified" or "supported." But Catz testified that she understood "tested" and "certified" to be synonymous. (6/1971 :20-27.) Further, there is no evidence that HP's efforts to support OEL diminished in any respect; indeed, the record is to the contrary: HP's support for OEL increased (Aylott 617 pm 10:9-28, 6/13 am 43:3-14), and only the description on HP's website changed (Ex. 307 at 2). In addition, the changes on HP's website were prompted by Oracle making material changes to its OEL product (Aylott 6/13 am 44:5-13), which Oracle acknowledged it made (Ex. 326; Screven Dep. Vol. II 82:5-22; Hicks 6/20 am 76:3-7, 76:21-77:13). HP immediately engaged with Oracle and, within weeks, Oracle said that it was "very pleased" with HP's efforts to support DEL and that HP "didn't change[,] and they deliver what they promised in the past." (Ex. 313 at 1; Hicks 6/20 am 84:5-26.) To this day the parties continue to have biweekly meetings to ensure that OEL is properly supported by HP. (Aylott 617 pm 10: 12-22; Screven Dep. Vol. II 63:9-24; Vol. I 116:20-23.)

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. J-IJ-CV-203J63 Proposed Statement of Decision

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1 2 3

Oracle also claims that HP's supposed failure to object to Oracle's contract shows that HP did not believe that Paragraph Livermore testified that she immediately 1 imposed any obligations

breach of on Oracle. But

notified Oracle that the March 2011 announcement

4
5

breached the Agreement. immediately a "positive so Oracle's Cal.App.2d following

(6/5 am 38:18-39:11, the announcement.

617 am 61:15-18.)

HP also retained counsel Regardless; silence is not

(Holston 6/6 am 32:8-27.) compliance

6
7

and deliberate"

act "done in attempted

with the terms of [an] agreement," (See Haidinger-Hayes, supra, 263

reliance on HP's supposed silence is misplaced. at pp. 538-539.)

8
9

C. The Agreement Is Certain And Enforceable
In its ruling on summary judgment, void for uncertainty." light ofthe parties' ascertain the parties' performed California this Court found that "the purported contract is not In

10
11 12

(MSJ Order at 27.) The trial evidence confirms the Court's holding. historic course of dealing, the contract is "sufficiently obligations and to determine definite ... to have been 613, 623.)

13
14 15

whether those obligations

or breached."

(Ersa Grae Corp. v. Fluor Corp. (1991) 1 Cal.App.4th
preference" for rejecting arguments

courts have a "pronounced

that challenge 164,

16
17 18 19 20 21 22 23 24

contracts due to uncertainty.

(Krantz v. BT Visual Images, L.L.c. (2001) 89 Cal.App.4th
of contracts because of

175.) "The law does not favor but leans against the destruction uncertainty." added.)

(Cal. Lettuce Growers, Inc. v. Union Sugar Co. (1955) 45 Ca1.2d 474,481,

italics

Thus, if "it appears that [the parties] intend to make a contract, the court should not

frustrate their intention if it is possible to reach a fair and just result, even though this requires a choice among conflicting meanings and the filling of some gaps that the parties have left." 805, 817;

(Okun v. Morton (1988) ,203 Cal.App.3d

Ersa Grae, 1 Cal.AppAth

at 623 [contract Even

should be enforced "even if, in the process, the court is required to fill in some gaps"].) "uncertainty

about the precise act ... to be done may be resolved in light of extrinsic evidence" 1054, 1066), and in particular, courts can rely on "the

25
26

(Byrne v. Laura (1997) 52 CaLAppAth

prior course of dealings of the parties" to supplement

or explain the contract.

(Cal. Lettuce,

Hewlett Packard Company v, Oracle Corporation Superior Court of California, County of Santa Clara, Case No. J-JJ-CV-203J63 Proposed Statement of Decision

32

supra, 45 Ca1.2d at p. 482.) In fact, the course of dealings "become]s] an element of the
2 3 4 5

meaning ofthe words used." (Cal. Law Rev. Com. com. to Code Civ. Proc., § 1856.) And if, as a result, the court can ascertain the parties' obligations and determine whether those obligations have been performed or breached, the contract is enforceable. (Ersa Grae, supra, 1 Cal.AppAth at p. 623; Bettancourt v. Gilroy Theatre Co., Inc. (1953) 120 Cal.App.2d 364, 367-368.) Here, the contract expressly incorporates the parties' prior course of dealing, and the evidence offered at trial explained that course of dealing in elaborate detail. It is undisputed that for years Oracle offered a well-defined suite of products on HP's HP-UXIItanium platforms. (See Ex. A; Aylott 6/7 am 86:1-88:17.) These products were being offered on HP-UXIItanium at the time Oracle signed the Agreement. (ld.) HP has made it clear that it does not contend that Oracle is required to port to Itanium products that have never been ported to the platforms. (HP Closing Stmt. 6/26 32:1-7.) Rather, HP contends that the contract obligates Oracle to continue to offer on Itanium those products that were offered on the platforms at the time Oracle signed the Agreement. (ld.) The evidence establishes that once one of these products was ported to Itanium, then all subsequent versions of the product were consistently ported to Itanium. (Kurian 6/21 31:6-14; Aylott 617 am 86:23-88:17.) This was the course of conduct prior to Oracle's hiring of Hurd, and the contract obligates Oracle to continue this course of conduct going forward. Without explaining the relevance to its interpretation of Paragraph 1, Oracle has asserted that it is continuing to "support" the versions of its products that were offered on Itanium as of the date of the Agreement, but that it is not required to offer new versions of those same products on Itanium. This conduct is not consistent with the course of conduct that existed prior to Oracle's hiring of Hurd, where once a product was ported to and offered on Itanium.the new versions of that product were always made available to customers. (ld.) Oracle conceded at trial that without new versions of the products being offered on Itanium, "customers who run the Oracle software on Itanium will now have to choose another hardware platform." (Kurian 6/21

6
7 8

9
10 11 12 13 14

15 16
17

18
19 20 21 22 23 24

25
26

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. ]-] J-CV-203J63 Proposed Statement of Decision

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1 2 3

78:5-8.) This result cannot be squared with the language of the contract or the expressed intent of the parties in entering the Agreement. Oracle also contends that the terms "HP platforms" is vague. However, the controversy before the Court concerns Itanium, and it is undisputed that Itanium was one of the HP platforms on which Oracle was offering its products when it signed the Agreement. Further, the evidence indicates that HP-UX/Itanium was the primary focus of the engineering partnership between the two companies. (Exs. 90 at 1-2,327 at 2-3, 197 at 3; Kurian 6/21 67:18-21, 70:3-6.) HP's Itanium-based server platforms were the only platforms to which Oracle was porting new versions of its products as of September 2010. (Aylott 617 am 82:7-21.) And Oracle was preparing to offer new versions of its products on Itanium when it signed the Agreement. (See supra Sections III.C-D.) Oracle's Director of Global Alliances testified that the partnership between the two companies changed dramatically once Oracle announced that it was discontinuing all software development on HP-UXIItanium, revealing the significance of the platforms to the partnership. (Vella Dep. (Reb.) 135:10-136:7.) With respect to duration, the law provides that if a contract lacks a duration terms, the duration must "be judicially determined" ... "from the nature of the contract and circumstances surrounding it." (Consolidated Theatres, Inc. v. Theatrical Stage Emp. Unions (1968) 69 Ca1.2d 713, 724-725.) If duration cannot be ascertained in that manner, then the law "implies that the terms of duration shall be at least a reasonable time." (Id. at p. 727; see also McCaskey v. Cal. State Auto. Ass'n. (2010) 189 Cal.AppAth 947, 967 ["the court [should] impose a.judicially determined 'reasonable time' limitation"].) Here, the evidence establishes that Oracle should

4
5 6 7 8 9 10 11
12

13 14 15 16 17 18 19 20
21

22 23 24

continue to offer its product suite on Itanium through the life of the platforms. That was the parties' past practice. Oracle continued porting to HP's PA~RISC and Alpha server platformsthe predecessors to Itanium-until well beyond the time that HP stopped selling those servers.

25
26

(Aylott 617 am 96:2-17; Livermore 6/4 pm 37:14-27, 38:6-11.) Oracle in fact has never stopped all software development for a hardware platform before the manufacturer stopped selling the

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. 1-11-CV-203163 Proposed Statement of Decision

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servers. (Ex. 328, lnt. Resp. No. 34.) It is of no significance that the contract may continue until
2
3 4 5 6 7

a predetermined condition for termination arises. (See SutlifJv. E. Seidenberg, Stiefel, & Co. (1901) 132 Cal. 63, 64 [enforcing contract lasting "as long as our goods find ready sale on this Coast"]; Haggerty v. Warner (1953) 115 Cal.App.2d 468, 473 [enforcing contract to "continue as long as 'billings' were made"]; Okun, supra, 203 Cal.App.3d at pp. 817~818 [enforcing contract giving plaintiff right to participate in "all future business opportunities"].) The evidence also establishes that "99 percent" of the porting to Itanium was accomplished without contracts or payments. There is nothing unfair or unreasonable about an interpretation that requires continued porting on these terms. HP is not asking Oracle to develop software that it otherwise would not, only that it continue to offer on Itanium those products that were already offered, including any new versions that Oracle elects to introduce. Oracle will earn substantial profit from the sale of this software to Itanium customers. (Ex. 292 at 7; Livermore 6/4 pm 57:16~58:5.) Oracle contends that in order to decide the declaratory relief claims, the Court must resolve a host of collateral issues-e.g., the "intellectual property rights in any resulting

8
9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

software" and how Paragraph 1 "affect]s] the parties' obligations regarding" existing contracts. But "[n]either law nor equity requires that every terms and condition of an agreement be set forth in the contract." (Burrow v. Timmsen (1963) 223 Ca1.App.2d 283,288.) Moreover, in a

declaratory relief proceeding, the Court can appropriately resolve only concrete, actual controversies involving facts that "have sufficiently congealed to permit an intelligent and useful decision to be made." (Stonehouse, supra, 167 CaLAppAth at pp. 540-542.) The issues raised by Oracle have not ripened into actual controversies, and the Court ''would have to imagine a myriad of hypo thetica Is" to assess the extent the parties might disagree over the issues and how

25
26

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. l-ll-CV-JO 3163 Proposed Statement oj Decision

35

1 2 3

to properly resolve them, (BKHN, Inc, v. Dept. of Health Servs. (1992) 3 CaLAppAth 301, 309310,) This would be inappropriate." Oracle argues that because 1% of all porting was performed under written porting agreements and because those agreements included liability limiting provisions, a similar provision should be read into Paragraph 1. This argument fails. Paragraph 1 ensures the continuation of the parties' prior course of dealing. It cannot be reasonably compared to a contract for the initial porting of an isolated product. It is neither plausible nor appropriate that a single specific provision of Oracle' s choosing now be read into the parties' contract. Finally, a complete waiver of a111iability would render Oracle's contractual promise meaningless and illusory. V. PROMISSORY ESTOPPEL The other cause of action addressed in this opinion is HP's claim of promissory estoppel. This claim is allegedly not based on the Settlement Agreement, on the press release issued pursuant to that agreement, or on any communications made in the course of negotiations related to that agreement. Rather, HP's promissory estoppel claim is based on the promises that were made by Oracle's executives separate and apart from the Settlement Agreement. Thus, it is necessary for the Court to separately analyze HP's estoppel claim irrespective of the Court's findings regarding HP's declaratory relief cause of action, The elements of a promissory estoppel claim are "(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance." (Aceves v.

4
5 6 7

8
9 10 11 12 13 14 15

16
17

18
19 20 21 22 23 24 25

us. Bank,

NA. (2011) 192 Ca1.AppAth 218,225.)

The evidence

presented by HP satisfies each of these elements and establishes Oracle's liability on the promissory estoppel claim.

26
7 The issue of specific performance is not before the Court. The Court bifurcated proceedings so that contract interpretation would be tried first and breach and remedy tried thereafter.

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No. J-JJ-CV-203J63 Proposed Statement of Decision

36

A. The Promises To DP
2 3
4 5 6 7 8
9

Shortly after Oracle completed its acquisition of Sun, HP sought assurances from Oracle that the HP-Oracle partnership would continue, even though HP's Itanium servers would now be competing with Oracle-Sun's Spare servers. At executive meetings in February and April 2010, Oracle gave such assurances, in the form of clear and unambiguous promises by two of Oracle's most senior executives, Catz and Kurian. Kurian committed that HP-UX would continue to enjoy release and functional parity. (Ex. 197; supra Section IILA.) This commitment is reasonably susceptible to only one interpretation-that Oracle would continue porting. (Supra

Section lILA; see also Ex. 90 at 2; Donatelli 6/14 pm 81 :28-82:12.) Functional and release parity are otherwise not possible. (Supra Section IILA.) Catz made a similar promise. She said that "Oracle [was] committed ... to running Oracle Software on HP infrastructure' and to

10 11 12 13 14 15 16 17 18 19
20

"ensuring Oracle software [is] optimized on HP hardware and [providing] customer hardware platform choice." (Ex. 81 at 2, 6; see also Ex. 98 at 1.) Because Catz was addressing the new competition between HP's Itanium servers and Oracle's Spare servers, a reasonable person would have understood that Catz was promising HP that Oracle was going to continue to port its software to the Itanium platform. These representations are sufficient to sustain a claim of estoppel. (See Rest.2d Contracts, § § 2, 90 [a "promise" is "a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made"]') Oracle argues that Kurian's and Catz's promises were not clear and unambiguous because HP's executives needed to rely on extrinsic evidence to understand them, citing Garcia v. World Savings, FSB (2010) 183 Cal.AppAth 1031, 1044. Promissory estoppel requires a promise that is "clear and unambiguous in its terms." (Garcia v. World Savings, FSB (2010) 183 Cal.AppAth 1031, 1044-1045.) "[U]nlike a party seeking to establish a promise in a pure breach of contract context, a party seeking to establish promissory estoppel cannot rely on extrinsic evidence to explain an ambiguous statement." (Jd.) But Garcia does not stand for the

21 22 23 24 25 26

Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No, l-Il-CV-203J63 Proposed Statement of Decision

37

proposition that, when interpreting the words of a promise, the Court=or
2

the promisee-are

forbidden from looking beyond the words themselves and must construe them in a vacuum. Indeed, the Supreme Court has rejected "[a] rule that would limit the determination of the meaning of a [promise] to its four-comers." (Pacific Gas & E. Co. v. G.

3 4
5 6 7

w: Thomas Drayage

&

Rigging Co. (1968) 69 Ca1.2d 33,37.) The promises here involved statements by executives in the same industry, employing frequently used terminology specific to that business. The mere fact that industry parlance is used does not deprive a statement of its character as a representation that may be relied upon by its intended recipient, nor does it render such a statement ambiguous. B. Reasonable and Foreseeable Reliance It was certainly foreseeable that HP would take Oracle at its word and make investments based upon a long-time partner's pledge of support. Any doubt as to that conclusion is removed by the email sent to Catz and another Oracle executive, just two days before the Apri12010 meeting, in which Livermore told Oracle that HP would "adjust our investments-s-up or down~ to optimize the outcome for HP" based on what Oracle said at that meeting. (Ex. 156 at 1; see also Livermore 617 am 66:8-67:26.) HP's reliance was entirely foreseeable. The parties had a long history of trust and collaboration, the promises made by the Oracle executives were clear and unambiguous, and the parties' relationship was very profitable for both companies. Further, even a large and sophisticated corporation like HP may reasonably rely on unambiguous statements made by executives of a long-time partner. Where, as here, business executives make commitments that meet the standards of estoppel, those commitments are binding, regardless of whether they are made to executives of another large corporation. (See, e.g., Signal Hill Av. Co. v. Stroppe (1979) 96 Cal.App.3d 627,632-634,637-638; Hilltop Prop.
8

8

9
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

v. St. of CaI. (1965) 233 CaLApp.2d 349, 362-364; US Ecology v, St. of Cal. (2001) 92

a Oracle claims that Pacific Gas is distinguishable because it involved a written contract. But California cases "have characterized promissory estoppel claims as being basically the same as contract actions, but only missing the consideration element." (US Ecology, Inc. v. State of California (2005) 129 Cal.AppAth 887,903.) Further, nothing in Pacific Gas suggests that its statements regarding language were limited to the language in Written contracts. Hewlett Packard Company v. Oracle Corporation Superior Court of California, County of Santa Clara, Case No.1 ·11-CV-203163 Proposed Statement of Decision 38

Cal.AppAth 113, 137.) Both the February 2010 Donatelli-Kurian and April 2010 Livermore2 3 4
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Catz meetings occurred months before the hiring of Hurd and the Agreement's drafting. Oracle makes much of the fact the assurances were not specific; but at those times there would have been no need for specifics as the parties were proceeding as they had for decades on an essentially informal basis. It would be odd indeed if the word of Oracle's most senior executives is not to be trusted. C. Detrimental Reliance In reliance on the promises made by Kurian and Catz, HP continued its substantial investment in the HP-UXIItanium platforms. From June to September 2010, for example, HP provided Oracle with close to $5 million ofltanium servers for porting and certification of Oracle software on HP-UX. (Ex. 310 at 1.) HP also invested in research and development, continued its joint engineering efforts with Oracle to optimize Oracle's software for Itanium, and made significant decisions regarding personnel and capital expenditures. (Livermore 6/4 pm 50:13-24; Fink 6114 am 24:14-25.) Further, in the latter half of2010, HP also decided to enter into the Itanium Collaboration Agreement ("leA") with Intel, which represented a $264 million investment by HP. HP executives testified that HP would not have entered into that contract absent the promises made by Oracle's executives. (Donatelli 6/14 pm 90:9-22, 37:13-28; Livermore 6/4 pm 51 :18-52:23.) Oracle's argument that HP has not yet made payments to Intel under the rCA ignores HP's other substantial Itanium investments. It is also of no significance that HP declined Intel's offer to allow HP to opt-out of the rCA. There was no evidence as to the scope or terms of Intel's offer, or its potential effect on other aspects ofthe HP/Intel relationship. Further, if Oracle is suggesting that HP has a duty to mitigate Oracle's damages by opting-out of the K'A, no such duty arises where "its effect would be to require the innocent party to sacrifice and surrender important and valuable rights." (Seaboard Music Co. v. Germano (1972) 24 Cal.App.3d 618,623.) Here, as explained by Donatelli, HP has declined to annul the ICA

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because, through this lawsuit, it is seeking to preserve its enormous investment in its Itanium
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business: "we were hoping that we could fix our relationship with Oracle, have Oracle port the
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software just as they always have done, so that we can go support our mutual customers." (Donatelli 6/14 pm 101: 11-16.) VI. SUMMARY OF DECISION For approximately three decades these two corporate giants dealt on an informal basis. Even when the financial consequences were in the billions, they shared resources, worked together, supported mutual customers, and with only a handful of exceptions did so without a written contract." HP's consistent themes throughout the trial were that HP had every reason to believe the Agreement was consistent with "business as usual" when the parties' long history of dealing without specific contracts was taken into account. The key promises contained in the Agreement are wholly consistent with the historical relationship. These written promises were underscored not only by the words of Daley and Catz, but by Ellison, the ultimate authority at Oracle. Oracle's opening theme is the Agreement was settling an employment dispute, nothing more.l" Beyond the detailed language regarding Hurd, the core argument of Oracle is that this dispute, like the Seinfeld sitcom, is about nothing. Oracle says that Paragraph 1 is nothing more than window dressing because there are no specifics. But Oracle's argument does not square with the law and the facts: As to the law as noted above, case authority dislikes a nullity and compels the Court to find a contract when possible. As for the facts, the Agreement says the following in language created and/or blessed by Daley and Catz:

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A word about Ann Livermore and Safra Catz: These extraordinarily successful business executives were the "goto" people when important questions needed to be answered between these companies. And so it was in this case. They apparently had a relationship of trust and confidence. This was wholly consistent with the broader history of the two companies working together.

10 That position is an oversimplification. For example, the "safe harbor" provision regarding a possible takeover of HP by Oracle would not appear in a routine employment contract.

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"Oracle will continue to offer its product suite on HP platforms" and the terms that would
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apply-"in supplied.)

a manner consistent with [the HP-Oracle] partnership." (Ex. 136 at 5, emphasis

The Court also finds it to be a crucial part of the Agreement and the joint press release particularly that the parties pledged to continue to support the customers who had relied on HP and Oracle for decades. Besides Paragraph 1 other portions of the Agreement make the intent clear: "[Recital] B. HP, Hurd and Oracle recognize the mutual advantages of the continuation of the HP-Orac1e partnership and its benefits to their joint customers and prospects and now desire to further their business relationship and resolve the Lawsuit without the further time and expense of litigation."

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"15. Joint Press Release. The Parties shall issue a joint Press Release regarding the settlement and dismissal of the Lawsuit in the form attached to this Agreement as Exhibit C. The Press Release shall announce the satisfactory resolution of this matter among Hurd, HP and Oracle and the continuation of the longstanding and mutually productive relationship between HP and Oracle." The joint press release of September 20, 2010 stated, in part: "The Agreement also reaffirms HP and Oracle's commitment to delivering the best products and solutions to more than 140,000 shared customers." "HP and Oracle have been important partners for more than twenty years and are committed to working together to provide exceptional products and service'to our customers," said Cathie Lesjak, Interim HP CEO and Chief Financial Officer." "Oracle and HP will continue to build and expand a partnership that has already lasted for over 25 years," said Oracle CEO Larry Ellison."

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From the beginning of this dispute the issue of a continuing relationship went beyond the specific Hurd employment issue. When Hurd was first sued, Ellison stated: "Oracle has long viewed HP as an important partner"

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"By filing this vindictive

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lawsuit against Oracle and Mark Hurd, the HP board is acting with utter disregard for that partnership, our joint customers, and their own shareholders and employees. The HP Board is making it virtually impossible for Oracle and HP to continue and work together in the IT marketplace." (Oracle Press Release, September 7,2010, Trial Exhibit 238.)

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But, Oracle argues, there is no evidence of a specific agreement for porting. Oracle maintains there was little if any talk about "product suite" or "Platforms," effect, timing, duration, or remedies. The HP response? HP and Oracle did not need to discuss these items because this was a continuation of past practices. Oracle focused on the words "reaffirmation" and "commitment." "new commitment." This is a false construct. The Court did not interpret the Agreement as a Yes, it was a new contract, but as stated by Livermore:

"I certainly agreed that Safra and 1had discussed and agreed that it wasn't to put us in a better position than we currently enjoyed. Though one issue, we were writing a contract, so it is a new contract. There aren't new items that are being committed to in terms of additional work or things that they hadn't already been doing in the past, but it was the negotiation and creation of the contract." (Livermore 6/5 17:8-14.) Oracle also adopted a part of the second sentence proposed by HP. (Daley 6/18 97 :2026.) As revised, it described what Oracle would do in the future. At trial, Catz tried to distance herself from this language, although Oracle's General Counsel Daley had not only inserted it but proclaimed it was approved by Catz herself. (See, generally, Daley's testimony 6/18 81-110.) Oracle has even suggested that Daley was somehow without authority, as she was "outranked" by Catz. This is a weak argument since Daley was on the front lines working on the Agreement's language and ultimately signed the Agreement on behalf of Oracle.

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The upshot of the intense negotiating period was each side made demands which were rejected by the other party. Whether it was HP seeking MFN treatment, or Oracle wanting to tie the future relationship to a limited number of specific contracts, both sides suffered some losses at the bargaining table. This is unremarkable behavior and of no probative value in this case. VII. ORDER For all of the above reasons, having reviewed the record, and being fully advised, the Court finds and declares as follows:

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1. In this action for declaratory relief, the Court finds in favor ofHP and against Oracle
on both the breach of contract and promissory estoppel causes of action brought by HP. 2. The Settlement and Release Agreement entered into by HP, Oracle and Hurd on September 20,2010, requires Oracle to continue to offer its product suite on HP's Itanium-based server platforms and does not confer on Oracle the discretion to decide whether to do so or not. 3. The terms "product suite" means Oracle software products that were offered on HP's Itanium-based servers at the time Oracle signed the September 20, 2010 Settlement and Release Agreement, including any new releases, versions or updates of those products. 4. Oracle's obligation to continue to offer its product suite on HP's Itanium-based server platforms lasts until such time as HP discontinues the sale of its Itanium-based servers.
5. Oracle is required to port its products to HP's Itanium-based servers without charge to

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HP. IT IS SO ORDERED Dated: August

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2012

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Honorable James P. Kleinberg Judge of the Superior Court

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