NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
Pursuant to the Court's Order, dated June 25, 2004, the parties have conferred regarding definitions for the terms specified in the Court's Order and have reached agreed-upon definitions for nearly all the terms. Except as indicated below, the parties jointly stipulate to the definitions set forth below. Those definitions or comments as to which the parties have not agreed are separately indicated below.
1. High-function software: The parties could not agree upon the definition for high-function software.
Plaintiffs' separate definition:
As an initial matter, Plaintiffs note that the definition of "high-function software" presents a different issue than the other terms on the Court's list. For the other terms, the relevant question is how market participants generally use the word. "High-function software," however, is a term adopted by Plaintiffs in order to describe more precisely the features of a category of software products that industry participants call "enterprise" software, "up-market" software, or "Tier One" software." See, e.g., Tr. at 274:24-275:7 (Richard Bergquist testimony); Tr. at 1771:5-1772:1 (Phillip Wilmington testimony); Tr. at 1554:25-1555:7 (Curtis Wolfe testimony); Tr. at 2180:22-2181:5 (Marco Iansiti testimony).(1) Through the evidence presented at trial, Plaintiffs have identified the features of this software that distinguish it from products developed and sold by other industry players (e.g., mid-market, etc.). Plaintiffs describe these features below.
"High-function software" is a software product that is capable of executing a wide array of business processes at a superior level of performance. See, e.g., Tr. at 2035:5-17 (Marco Iansiti testimony). Thus,"high-function" software must have at least the following advanced performance capabilities, not all of which each user may demand:
Defendant's separate definition:
"High-function software" is a term coined by Plaintiffs as "shorthand" to "describe the phenomenon that . . . different customers have different requirements." (Tr. at 30:23-31:3 C. Scott).) The term has no independent, industry-standard, or generally accepted meaning (Tr. at 349:7-10 R. Bergquist), 2298:6-20 (K. Elzinga).), and the evidence offers no clear guidance on the aspects or dimensions of "high-function software" or the level of quality or performance that would qualify EAS software as "high-function software." (Compare Tr. at 394:17-395:12 R. Bergquist), 1612:3-7 C. Bass), 2089:14-21 (M. Iansiti).) "High-function software" does not in fact describe a kind of software (in contrast to "lower-function software"), but rather customer performance requirements that, in some cases, allegedly can only be met by products from Oracle, PeopleSoft or SAP. (Tr. at 3807:8-25 (J. Hausman); Amended Complaint ¶ 23(b) (defining "high function FMS software" as "Financial Management Services (FMS) software and accompanying services that meet[s] the demands of multifaceted organizations with high-level functional needs").)(5)
A function is a business process that can be performed manually and/or can be automated in whole or in part by enterprise applications software. Examples of business functions include paying payroll or preparing a general ledger. Function is related to functionality, but is not used interchangeably.
Functionality refers to the ability of enterprise applications software to automate particular business functions. Functionality can also be thought of as the capabilities of a software program.
Plaintiffs' separate comments:
Functionality is one means of distinguishing high-function software from basic software solutions. Tr. at 2039:2-2040:7 (Marco Iansiti testimony). A number of software solutions allow organizations to automate basic functions. For example, almost all organizations track basic information on their employees. Basic software packages allow the user to track employee names, addresses, salaries and job levels. In contrast, the high-function human resource capital management software sold by PeopleSoft, Oracle and SAP goes beyond the basics and allows an organization to track employees by skills, job classes, job codes, union affiliations, and any number of other criteria. Tr. at 1484:8-1485:20 (Mary Glover testimony). Thus in this example, the greater functionality of high-function human resource capital management software gives managers more information and allows an organization more efficiently and effectively to utilize its employees. As another example, "high functionality" can also be used to describe a software solution's ability to support international operations, such as the ability to make payments for and manipulate (e.g., track/report/convert/consolidate) transactions in multiple countries denominated in multiple currencies subject to multiple regulatory regimes i.e., such software would have "international functionality."
Defendant's separate comments:
As explained above, the term "high-function software" is a DOJ-constructed term and Defendant Oracle Corporation cannot, based on the record or otherwise, assess its relation, if any, to the term "functionality."
4. Core financial management services ("FMS") software:
The term "core financial management services ("FMS") software," as generally used in the software industry and by the parties in this case, refers to the software necessary to automate an organization's basic financial functions, including the following modules: General Ledger, Accounts Receivable, Accounts Payable, and Cash and Asset Management.
5. Core human resource management ("HRM") software:
The term "core human resource management ("HRM") software," as generally used in the software industry and by the parties in this case, refers to the software necessary to automate an organization's basic human resource management functions, including the following modules: Payroll, Employee Tracking and Benefits Administration business processes.
6. Legacy system; Incumbent system:
A legacy system refers to an installed software system that was never or is no longer available for purchase as a new product or platform. An incumbent system refers to whatever software system a customer currently has installed. Legacy systems are one subset of incumbent systems.
7. Enterprise resource planning ("ERP") software:
Enterprise resource planning ("ERP") software refers, at a minimum, to the set of business applications software that is designed to automate an organization's back-office functions, such as payroll, general ledger, accounts payable and receivable, benefits management, and employee recordkeeping. It traditionally encompasses HRM and FMS. Some also include one or more other pillars in the definition of ERP, such as Supply Chain Management (SCM) or Customer Relationship Management (CRM). It is Plaintiffs' position that the term ERP is not equivalent to high-function software; high-function software is a subset of ERP.
8. Enterprise application software ("EAS"):
In contrast to ERP, enterprise applications software ("EAS") refers to the broader universe of software applications that are used by an enterprise to automate its overall business processes. In addition to the Human Resource Management (HRM) and Financial Management Services (FMS) pillars that traditionally comprise ERP, EAS also encompasses the Supply Chain Management (SCM), Customer Relationship Management (CRM), Product Life Cycle Management, Student Information Systems (SIS), and Business Intelligence (BI) pillars. It is Plaintiffs' position that the term EAS is not equivalent to high-function software; high-function software is a subset of EAS.
In the context of this case, the term "integration" refers to the ability of a software application in one module to communicate with, work with and update software and data in another module. Most companies, particularly large ones, have a large number of software products that need to be integrated so they can communicate with each other.
Analytics is software that enables a company to use, analyze, report and aggregate data collected through one or more other business applications.
A module is software designed to automate one or more functions.
1. "High-function software" is also, however, how Plaintiffs have defined the relevant product market in this case. Market definition is, of course, a factual question, not a semantic one, and it is dependent on critical underlying facts about how a market operates. Rebel Oil Co., Inc. v. Atlantic Richfield Co., 51 F.3d 1421, 1434 (9th Cir. 1995) ("A 'market' is any grouping of sales whose sellers, if unified by a monopolist or a hypothetical cartel, would have market power in dealing with any group of buyers."). Thus, while Plaintiffs herein define "high-function software" as Plaintiffs use the term in this case, Plaintiffs will be addressing the term as it relates to market definition in this case, and how Plaintiffs' market definition is supported by the factual record of the trial, in the Proposed Findings of Fact and in the post-trial brief.
2. As an example, whereas high-function software can process and track virtually unlimited transactions across companies, Lawson software which Plaintiffs maintain is not high-function cannot track more than 10,000 transactions between entities. Tr. at 2050:19-23 (Marco Iansiti testimony).
3. For example, high-function software generally permits the customer to establish unlimited distinct units and employees within each unit that can share data seamlessly and can be moved -- or reconfigured -- easily (such as with a click and a drag) without causing the loss of historical data. In contrast, the Lawson products permit only 5 levels of organization in FMS and only 3 in HRM and do not enable extensive data sharing across entities. Tr. at 2046:23-2047:5 (Marco Iansiti testimony).
4. Examples include the ability (i) to accept thousands of invoices in different currencies and to remit payment in a different currency while automatically recalculating the exchange rates on a real-time basis; (ii) to create reports from hundreds of separate business units while permitting the user to quickly "drill down" to the underlying source data; (iii) to model reorganizations of the business and to generate forecasts; and (iv) to generate reports on costs associated with a product or component that may be drawn from dozens or even hundreds of distinct entities within the larger organization. Tr. at 2039:12-2040:7 (Marco Iansiti testimony).
5. Oracle does not believe the Court's Order contemplated argument on which products are or are not "high-function," and therefore will not respond to Plaintiffs' arguments on that score.